The ‘Turtle Bay’

• Jurisdiction: Singapore
• Judgment Date: 30 August 2013
• Date: 30 August 2013
• Docket Number: Admiralty in Rem No 37 of 2013 (Summons No 1036 of 2013) and Admiralty in Rem No 44 of 2013 (Summons No 1040 of 2013)
• Court: High Court (Singapore)

The ‘Turtle Bay’

[2013] SGHC 165

Belinda Ang Saw Ean J

Admiralty in Rem No 37 of 2013 (Summons No 1036 of 2013) and Admiralty in Rem No 44 of 2013 (Summons No 1040 of 2013)

High Court

Admiralty and Shipping—Practice and procedure of action in rem—Judicial sale of vessel—Mortgagee contracting with named purchaser to sell vessel at price above mortgagee's valuations—Insolvency administrator of shipowner consenting to direct sale of vessel—Arrested vessel incurring weekly maintenance expenses—No other in rem claimants appearing before court—Whether court should approve private direct sale of vessel in place of commissioning Sheriff to appraise and sell vessel

The registered mortgagee bank arrested two vessels in Singapore and commenced in rem proceedings against the defendant shipowner. The defendant shipowner was in liquidation in Germany and did not enter an appearance.

The bank obtained default judgment and filed applications seeking the court's approval of a private direct sale of each vessel on the terms of contracts entered into with named purchasers for a specified price each. Prior to the arrest of the vessels, the bank obtained written consent to the private direct sale of the vessels from the insolvency administrator. There were no other in rem claimants before the court.

In support of both applications, the bank provided one page memoranda summarising the steps taken to bring each vessel to the market and the process by which the eventual purchasers was selected. There was little information about another serious bidder who was initially considered but eventually dropped from the sale process. The bank also provided two valuations for each vessel and an estimate of the weekly expenses of maintaining both vessels under arrest. The named purchasers had agreed to buy the vessels at prices which were above, but not significantly higher than, the valuation prices.

Held, dismissing the application:

(1) An admiralty judicial sale extinguished all in rem claims that were attached to the vessel prior to the sale. The concomitant transfer of maritime claims from a vessel to the proceeds of sale in court was the raison d'etre of the principle that a judicial sale was for the protection and benefit of all persons interested in the res; it was not only for the interest of the arresting party alone: at [11] and [15] .

(2) To protect the interests of all persons with in rem claims against the vessel including the defendant shipowner, the court had to have entire control over the sale process thereby safeguarding the propriety and integrity of the sale process and, ultimately, instilling confidence and standing of the judicial sale from Singapore: at [17] .

(3) An applicant who sought to obtain the court's sanction of a private direct sale was essentially seeking to depart from the comprehensive judicial sale procedure set out in the Rules of Court. Any substitute method of sale (and its propriety) had to be weighed against the purpose to be achieved by a judicial sale order granted in the normal way. More often than not, court-sanctioned private sales were advanced for the applicant's own purpose and benefit and was prima facie unfair. As mortgagee in possession, the bank wanted the court's sanction of the private direct sale to obtain the perceived advantages of both judicial and private sales for its own benefit. The divergence in the interest of the Sheriff acting pursuant to a commission for appraisement and sale and such an applicant necessarily required the court to exercise caution when dealing with this sort of hybrid sale application and to carefully scrutinise each application. It was clear that the direct sale in this case was a private arrangement that the bank had entered into to suit its own purposes. Such a sale could not be lightly sanctioned as a matter of admiralty jurisprudence: at [23] , [26] and [33] .

(4) The applicant had to identify ‘powerful special features’ or ‘special circumstances’ before the court would be prepared to depart from the normal course of commissioning the Sheriff to appraise and sell the vessel. What constituted ‘powerful special features’ or ‘special circumstances’ depended on the facts of each case. Cogent evidence of exceptional circumstances had to be adduced by an applicant seeking judicial confirmation of a private direct sale: at [29] and [32] .

(5) In relation to the memoranda provided by the bank, leaving aside the lack of any ‘powerful special features’ or ‘special circumstances’, one would have expected the bank to provide more detailed evidence of the steps it took to bring the sale of the arrested vessel to the attention of the market at large. The prices offered by the named purchasers were not significantly higher than the appraised values of the vessels. It was not enough to simply state that the highest amounts that other potential purchasers on the market were willing to pay were below the bank's appraised values: at [35] and [36] .

(6) While the expenses for maintaining the vessels under arrest were not insignificant, having regard to the potential value of the vessels, these expenses did not constitute ‘powerful special features’ or ‘special circumstances’ that justified the court departing from the usual course of ordering the appraisement and sale of the vessels: at [37] .

(7) Just because no other claimants with in rem claims against the vessels stepped forward was not a reason to approve the private sale as an admiralty judicial sale. The priority of competing in rem claims to the proceeds from the sale of an arrested vessel was a matter for consideration after the vessel had been sold and the sale proceeds paid into court: at [38] .

[Observation: Although a party was clearly in contempt of court if it arranged a private sale after the court commissioned the Sheriff to sell a vessel, it did not necessarily follow that this party was never in contempt of court if it arranged a direct sale before the court so commissioned the Sheriff. Much depended on the circumstances of the case. For instance, a sale could potentially constitute contempt of court in the light of evidence that impropriety had occurred in connection with the sale to the possible detriment of in rem creditors of the arrested vessel. It made no difference to the legal enquiry that a direct sale of an arrested vessel was made expressly subject to the court's approval: at [6] .

Since the admiralty judicial sale extinguished all in rem claims that were attached to the vessel prior to the sale and the vessel was no longer subject to arrest by virtue of those claims, the Sheriff should be able to sell an arrested vessel at the market price of the vessel rather than at a ‘forced sale’ price: at [11] .]

Acrux, The [1962] 1 Lloyd's Rep 405 (folld)

APJ Shalin, The [1991] 2 Lloyd's Rep 62 (refd)

Aro Co Ltd, Re [1980] Ch 196 (refd)

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

Bank of Scotland plc v The Owners of the MV ‘Union Gold’[2013] EWHC 1696 (Admlty) (folld)

Cerro Colorado, The [1993] 1 Lloyd's Rep 58 (folld)

Convenience Container, The [2007] 3 HKLRD 575 (refd)

Den Norske Bank ASA v Owners of the ship ‘Margo L’ [1997] HKEC 767 (folld)

Honshu Gloria, The [1986] 2 Lloyd's Rep 63 (refd)

Hull 308, The [1991] 2 SLR (R) 643; [1991] SLR 304 (refd)

International Marine Banking Co v Dora [No 2] [1977] 1 FC 603 (folld)

Jarvis Brake, The [1976] 2 Lloyd's Rep 320 (refd)

Oriental Baltic, The [2011] 3 SLR 487 (refd)

Readhead v Admiralty Marshal, Western Australia District Registry (1998) 87 FCR 229 (folld)

Silia, The [1981] 2 Lloyd's Rep 534 (folld)

Tremont, The (1841) 1 W Rob 163; 166 ER 534 (folld)

Westport (No 2) , The [1965] 1 WLR 871; [1965] 1 Lloyd's Rep 549 (refd)

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 70;O 70 r 21 (2)

Mark Tan Chai Ming and Low Yi Yang (Asia Practice LLP) for the plaintiff

Chong Chin Chin for the Sheriff, Supreme Court, Singapore.

Belinda Ang Saw Ean J

Introduction

1 The plaintiff as registered mortgagee (‘the Bank’) of the Turtle Bay and the Tampa Bay commenced Admiralty in Rem Nos 37 and 44 of 2013(collectively, ‘the ADM Actions’) and arrested the Turtle Bay and the Tampa Bay(collectively, ‘the Vessels’) in Singapore on 29 January 2013 and 5 February 2013 respectively.

2 The ADM Actions were commenced after the defendant shipowner had gone into liquidation in Germany. I should imagine that the effect of the defendant's insolvency on the ADM Actions would be governed by German insolvency law. As to whether there were any insolvency issues arising under German law from the defendant's liquidation, none were identified and explained in the Bank's affidavits. The principles in In re Aro Co Ltd[1980] Ch 196 followed in The Oriental Baltic[2011] 3 SLR 487, The Hull 308[1991] 2 SLR (R) 643 and The Convenience Container [2007] 3 HKLRD 575 that deal with the commencement of in rem proceedings either before and after the insolvency of a defendant came to mind, and I had wondered whether those cases differed from the facts of the present case before me. Be that as it may, in the affidavits supporting the arrest of the Vessels, the Bank disclosed that the German insolvency administrator was aware of the Bank's intention to enforce the mortgages and gave written consent to the direct sale of...