The ‘Sea Urchin’

• Jurisdiction: Singapore
• Judgment Date: 07 February 2014
• Date: 07 February 2014
• Docket Number: Admiralty in Rem No 355 of 2013 (Summons No 6520 of 2013)
• Court: High Court (Singapore)

The ‘Sea Urchin’

[2014] SGHC 24

Belinda Ang Saw Ean J

Admiralty in Rem No 355 of 2013 (Summons No 6520 of 2013)

High Court

Admiralty and Shipping—Practice and procedure of action in rem—Judicial sale of vessel—Sale pendente lite—Mortgagee seeking court order to sell vessel to named buyer at certain price—Whether there were special circumstances for court to approve direct sale in place of commissioning Sheriff to appraise and sell vessel

The bank applied as mortgagee for the vessel to be sold pendente lite to a named buyer and at a stated price. The alternative application was for the vessel to be sold pendente lite by the Sheriff by public auction or private treaty. By the time the application was listed for hearing, the shipowner of the vessel was no longer challenging the propriety of the bank's claim or the arrest.

At the time of her arrest, the vessel was fully laden with a cargo of soya beans and was in Singapore for bunkers en route to Qingdao, China. The purpose of the direct sale pendente lite was for the named buyer to carry and discharge the cargo in Qingdao so as to avoid incurring costs of discharging the cargo in Singapore or transhipping the cargo.

In support of its application, the bank argued that there were special circumstances in this case that warranted a departure from the normal practice of commissioning the Sheriff to appraise and sell the vessel, in that the costs relating to the transhipment and discharge of the cargo were significant. The bank's application for a direct sale was supported by the time-charterers, the voyage charterers and the sub-voyage charterers. The sub-voyage charterers also argued that the cargo was losing commercial value and had started to deteriorate. According to the bank, the named buyer was also willing to sign on the existing crew members under new ownership for the voyage to Qingdao. In addition, the bank submitted that the named buyer's offer of US$17.5 m was US$1.5 m more than the value of the vessel which the bank claimed to be US$16 m based on a valuation certificate submitted by it. The bank also identified ongoing expenses of maintaining the vessel under arrest.

Held, dismissing the application:

(1) The court would not normally order a direct sale to a buyer found by the arresting party at a pre-determined price. For a direct sale to be approved, the applicant must identify the existence of ‘powerful special features’ or ‘special circumstances’: at [7] and [10] .

(2) The bank's application for a judicial sale was made before judgment and on the basis that the vessel would be a wasting asset if she remained under arrest. Although ongoing expenses were identified, the evidence before the court remained incomplete without a proper valuation of the vessel, and this undermined the bank's application: at [16] to [18] .

(3) It was not clear from the evidence that there was a buyer ready and willing to commit to a purchase of the vessel on the Sheriff's usual terms and conditions. There was also no evidence and it was not the bank's case that it had searched for more interested parties in order to attract the best price for the vessel: at [19] and [20] .

(4) The alleged special circumstances in this case such as costs of discharge and transhipment were a typical consequence of an arrest of a cargo-laden vessel. Since the cargo was not under arrest, the cargo interests would have to off-load or tranship the cargo at their expense, and not at the Sheriff's expense. These costs were, in principle, claims for breach of contract of carriage against the vessel owner and/or the charterers and were irrelevant to the determination of whether to grant a direct sale because such costs could not be deducted from the sale proceeds of the vessel: at [30] , [32] and [34] .

(5) The present case did not concern a very old vessel and therefore there was no urgency to recoup the value of the vessel: at [35] .

Bank of Scotland plc v The Owners of the M/V ‘Union Gold’[2013] EWHC 1696 (Admlty) (distd)

Bank of Scotland v ‘Nel’ (The) (1997) 140 FTR 271 (distd)

Cameco Corp v ‘MCP Altona’ (The) (2013) 225 ACWS (3 d) 292 (refd)

Dharamdas & Co (Nigeria) Ltd v The Owners of the Ship or Vessel ‘Mingren Development’ [1979] HKCU 19 (refd)

Jogoo, The [1981] 1 WLR 1376 (refd)

Nagasaki Spirit, The [1994] 2 SLR (R) 165; [1994] 2 SLR 621 (folld)

Royal Bank of Scotland plc v ‘Kimisis III’ (The) [1999] FCJ No 300 (refd)

Turtle Bay, The [2013] 4 SLR 615 (folld)

Frustrated Contracts Act (Cap 115, 1985 Rev Ed) s 3 (5) (a)

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 70

Winston Kwek, Joseph Tang and Lim Ruo Lin (Rajah & Tann LLP) for the plaintiff

Lawrence Teh (Rodyk & Davidson LLP) for the defendant

Kelly Yap (Oon & Bazul LLP) for the interveners

KMuralitherapany and Edward Koh (Joseph Tan Jude Benny LLP) for Swissmarine

Wendy Tan and Kang Yixian (Stamford Law Corporation) for Pacific Bulk

Jacqueline Lee for the Sheriff, Supreme Court, Singapore.

Belinda Ang Saw Ean J

Introduction

1 The plaintiff, Alpha Bank SA (‘the Bank’), applied as mortgagees on 20 December 2013 vide Summons No 6520 of 2013 (‘SUM 6520’) for the vessel, Sea Urchin,of the port of Limassol, Cyprus (‘the Vessel’) to be sold pendente lite to a named buyer and at a stated price (ie, prayer 2 of SUM 6520). As an alternative to a direct judicial sale, the Bank's fall-back application was for the Vessel to be sold pendente lite by the Sheriff in the usual way by public auction or private treaty (ie, prayer 2 a of SUM 6520).

2 In this case, the Bank arrested the Vessel fully laden with a cargo of soya beans in bulk. At the time of the arrest, the Vessel was in Singapore for bunkers en route to Qingdao, China where the cargo was to be discharged and delivered to receivers. The purpose of the direct sale pendente lite was for the Vessel under new ownership to carry and discharge the cargo in Qingdao. The question to be decided is whether the facts of this case constitute special circumstances to warrant a direct judicial sale to a named buyer at a specified price (see The Turtle Bay[2013] 4 SLR 615 at [29]).

Chronology of proceedings leading to the application for a direct sale

3 The Vessel, a bulk carrier fully laden with a cargo of soya beans, was arrested by the Bank on 30 October 2013 after the defendant shipowner, Keel Marine Company Limited (‘the Defendant’), a company incorporated under the laws of Cyprus, defaulted on a loan agreement that was secured by a first priority mortgage of the Vessel. The Defendant entered an appearance to the Bank's in rem action on 31 October 2013. On 18 November 2013, the Defendant applied vide Summons No 5874 of 2013 to, inter alia, (a) set aside the warrant of arrest; and (b) stay the action in favour of the Greek courts, including a temporary release of the Vessel to enable her to continue her voyage to China and to discharge the cargo on board. By the time the Bank's application in SUM 6520 was listed for hearing on 6 January 2014, the Defendant had reached a private arrangement with the Bank. Mr Lawrence Teh for the Defendant thus informed the court that the Defendant was not opposing the Bank's application for a direct sale. Before this court, the Defendant was no longer challenging the propriety of the Bank's claim or the arrest.

4 There were three other interested parties supporting the Bank's application for a direct sale. It was made known at the outset by counsel representing those interests that their support did not extend to prayer 2 a in SUM 6520. Mr Kelly Yap (‘Mr Yap’) represented the intervener, Qingdao Bohi Agricultural Development Co Ltd (‘the Intervener’), which was granted leave to intervene in these proceedings on 6 January 2014, and entered an appearance on 17 January 2014.

5 Ms Wendy Tan (‘Ms Tan’) represented Pacific Bulk Shipping (Cayman) Ltd (‘Pacific Bulk’) which trip-chartered the Vessel from Swissmarine Services SA (‘Swissmarine’), the time charterers of the Vessel. Pacific Bulk in turn sub-chartered the Vessel to the Intervener. The Intervener is asserting rights of ownership to the cargo of soya beans. Pacific Bulk claims ownership of the bunkers on board. Swissmarine was represented by Mr KMuralitherapany (‘Mr Murali’). Mr Edmund Koh stood in for Mr Murali at the adjourned hearing on 27 January 2014. For convenience, Pacific Bulk and Swissmarine are collectively referred to as ‘the Charterers’.

6 The Charterers had not intervened but through their counsel undertook to do so on...