The "Chem Orchid" and another matter

JudgeSundaresh Menon CJ
Judgment Date20 January 2016
Neutral Citation[2016] SGCA 4
Plaintiff CounselHeng Gwee Nam Henry, Poh Ying Ying Joanna and Lee Zhen Ying Darius (Li Zhenying) (Legal Solutions LLC)
Date20 January 2016
Docket NumberOriginating Summons No 21 of 2015 and Civil Appeals Nos 58, 59, 60 and 62 of 2015
Hearing Date26 October 2015
Subject MatterPractice and procedure of action in rem,Admiralty and Shipping,Writ in rem,Civil Procedure,Striking out
Citation[2016] SGCA 4
Defendant CounselYogarajah Yoga Sharmini, Subashini Narayanasamy and Lai Kwan Wei (Haridass Ho & Partners),Tay Twan Lip Philip and Yip Li Ming (Rajah & Tann Singapore LLP),The second respondent in Originating Summons No 21 of 2015 and the respondent in Civil Appeal No 58 of 2015, as well as the third respondent in Originating Summons No 21 of 2015 and the respondent in Civil Appeal No 60 of 2015 absent.
CourtCourt of Appeal (Singapore)
Published date16 March 2016
Chao Hick Tin JA (delivering the grounds of decision of the court): Introduction

The Chem Orchid (“the Vessel”) is a vessel built to carry oil and chemicals. It was leased by Han Kook Capital Co, Ltd (“HKC”) to Sejin Maritime Co Ltd (“Sejin”) on a demise charter. Due to certain unpaid debts owed by Sejin to the four respondents in the present proceedings (collectively, “the Creditors”), the Vessel was arrested in Singapore. The Creditors then filed four separate in rem writs against the Vessel. By way of separate summonses, HKC sought to set aside the Creditors’ in rem writs on the basis that the court’s admiralty jurisdiction under the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (“the HCAJA”) had not been properly invoked; in the alternative, it sought to have the in rem writs struck out pursuant to O 18 r 19 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“the ROC”) and/or under the court’s inherent jurisdiction.

HKC contended that the court’s admiralty jurisdiction had not been properly invoked because at the time the Creditors’ in rem writs were issued (“the Relevant Time”), Sejin, the party who would be liable on the Creditors’ claims in an action in personam, was no longer the demise charterer of the Vessel, and thus, the condition specified in s 4(4)(i) of the HCAJA was not satisfied. In support of this argument, HKC relied on a notice issued by its subsidiary, HK AMC Co Ltd (“HKA”), to Sejin on 4 April 2011 (“the 4 April 2011 Notice”) terminating Sejin’s demise charter of the Vessel. HKC submitted that in view of that notice, there was no basis for the Creditors to invoke the court’s admiralty jurisdiction under any of the grounds in s 3(1) of the HCAJA.

In the court below, the assistant registrar (“the AR”) set aside the Creditors’ in rem writs (see The Chem Orchid [2014] SGHCR 1), but the High Court judge (“the Judge”) allowed the Creditors’ appeals and reversed the AR’s decision (see The Chem Orchid [2015] 2 SLR 1020 (“the HC Judgment”)). As four different in rem writs were involved, four separate appeals were filed by HKC against the Judge’s decision. Two of the Creditors – namely, Mercuria Energy Trading SA (“Mercuria”), the respondent in Civil Appeal No 59 of 2015 (“CA 59/2015”), and Winplus Corporation Co, Ltd (“Winplus”), the respondent in Civil Appeal No 62 of 2015 (“CA 62/2015”) – objected to HKC’s appeals on the grounds that HKC needed leave from the Judge before it could appeal, but had not obtained such leave. HKC then applied to this court via Originating Summons No 21 of 2015 (“OS 21/2015”) for either: (a) a declaration that it did not need leave of court to appeal against the Judge’s decision; or (b) in the event that leave of court was needed, an extension of time to apply for leave and the grant of such leave retrospectively.

We heard OS 21/2015 together with the four appeals by HKC against the Judge’s decision. At the conclusion of the hearing, we dismissed OS 21/2015 and, as a corollary, also dismissed all four of HKC’s appeals. In our view, given the way in which the case was presented, HKC’s appeals against the Judge’s decision were in substance akin to appeals against the dismissal of an application to strike out a writ action. Therefore, the appeals fell within s 34(1)(a) of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) (“the SCJA”) read with para (e) of the Fourth Schedule thereto. These two provisions entail that no appeal can be brought to the Court of Appeal where (inter alia) a judge makes an order refusing to strike out “an action or a matter commenced by a writ of summons or by any other originating process”. In these grounds, we explain our decision in greater detail.

The facts

HKC was the owner of the Vessel. On 1 February 2010, it entered into an agreement to lease the Vessel to Sejin on a demise charter for a period of 108 months (“the Lease Agreement”).1 The Lease Agreement was governed by South Korean law. Pursuant to the Lease Agreement, Sejin was obliged to pay HKC monthly rental on the third day of each month.2 All was well until 4 October 2010, when Sejin made its last payment to HKC.3 Thereafter, no further rental payments were received by HKC from Sejin.4

In December 2010, HKA was incorporated by HKC specifically to deal with the recovery of bad debts owed to HKC. HKC issued a Notice of Credit Transfer (“the NCT”) to Sejin, in which Sejin was informed of the following arrangement:5

We hereby give a notice that we transfer following credit (hereinafter referred to as the “Transfer Credit”, the amount as of November 30 2010, applicable exchange rate of 1,157.30 won/US$) in full to HK AMC Co., Ltd (hereinafter referred to as the “Transferee”) as of December 29, 2010. Obligor: Sejin Maritime Co Ltd, Principal sum of credit: W15,504,035,200 Interest (Including delay interest) W68,671,492 Occurrence date: February 3 2010 Expiry date: February 3 2019 In addition to the Transfer Credit, we transferred the right or status in our possession or management out of personal or physical security, right to profit or the other rights incidental to the Transfer Credit. In spite of the above transfer of Credit, the right, obligation or status of yours based on the relating contract, agreement, security agreement or the other contract shall remain unchanged and the right, obligation or the other status of ours based on the above contracts shall be succeeded by the Transferee to the extent of the transfer. We, as the creditor of the Transfer Credit, hereby give a notice to you on the transfer of the Transfer Credit.

Subsequently, on 27 December 2010, HKC and HKA signed an Asset Transfer Agreement (“the ATA”) under which HKC agreed to sell HKA, for a consideration of W143,489,658,294 (per Art 5(1) of the ATA), certain credits which HKC had obtained in the course of its business.6 The credits owed by Sejin to HKC under the Lease Agreement were included in the sale.7

By early April 2011, Sejin had failed to make any rental payments under the Lease Agreement for a period of six consecutive months. According to the affidavit filed on 6 March 2012 by Mr Sejun Kim (“Mr SJ Kim”), HKC’s representative, there was no sign that Sejin would be able to make further payments as the value of the Vessel had depreciated significantly and the prevailing market conditions were very poor.8 Mr SJ Kim stated in his affidavit that HKC had grave concerns about Sejin’s ability to perform its obligations under the Lease Agreement, and thought that it was entitled to terminate that agreement by giving Sejin notice in accordance with Art 24(2) of the agreement.

HKA thus sent the 4 April 2011 Notice to Sejin informing it that it had “lost all the benefit of time”9 for repaying its outstanding debts. The relevant parts of the notice read as follows:10

This is about the facility rent (lease) contract … between your company and [HKC], the credit of which was assigned to us on DDec. 29, 2010. According to paragraph 2 of article 24 of the above lease contract, your company lost all the benefit of time of debt against our company. Therefore, please pay immediately all outstanding principal, period interest, overdue principal and interest, delayed compensation. If the above point 3 is not implemented, in order to secure the remaining credit, our company will do the following: Demand an immediate repayment of the full amount of the credit Retrieve the leased object, consider an auction and register the information about the overdue payment according to the regulation of credit information management Take legal actions such as placing the collateral and other assets under distraint attachment and request for auctioning them. And we also let you know that you are responsible for enforcement cost when we do the above.

[underlining in original]

The overdue lease payments as at 4 April 2011 amounted to W289,460,562, and the total sum that was to be paid for the remainder of the lease was W16,934,476,554, or approximately US$15,019,200.11 The parties disagreed on whether or not the NCT conferred on HKA, who was not a party to the Lease Agreement, the right to terminate that agreement.

Sejin did not give any formal reply to the 4 April 2011 Notice.12 According to Mr SJ Kim’s affidavit of 6 March 2012, sometime around mid-April 2011, he (Mr SJ Kim) received a call from Mr Keunhyuk Park (“Mr Park”), Sejin’s chief executive officer, asking for a meeting. During the meeting, Mr Park asked whether the termination of the Lease Agreement could be revoked and the Lease Agreement revived. Mr SJ Kim informed him that the Lease Agreement had been terminated and its termination could not be revoked with just a mere promise to pay the outstanding sums.13 Instead, HKC would only consider revoking the termination of the Lease Agreement with an actual payment of those sums.14

After the meeting, Mr Park asked HKA to send Sejin a notice of the overdue payments which it owed HKC.15 Following that request, a list of overdue payments as at 25 April 2011 was emailed to Sejin.16 The amounts due were stated to comprise W135,853,436 and US$149,015,17.17

On 9 May 2011, HKA issued a further formal notice to Sejin emphasising that Sejin had “lost all the benefit of time” for paying the rental arrears. HKA continued to demand the immediate payment of the full amount which was outstanding, but indicated that it was prepared to desist from taking steps to secure the amount owed if payment was made by 13 May 2011.18

On 23 May 2011, Sejin responded to HKA’s 9 May 2011 notice. It explained that it had been unable to fulfil its monthly payment obligations as the Vessel had broken down frequently.19 It also informed HKA that freight...

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