Is the arresting party entitled to stop the judicial sale of the vessel as of right?

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Introduction

In the recent case of The “Long Bright” [2018] SGHC 216, the Singaporean High Court had to decide on whether the arresting party who wishes to discontinue the action is entitled to release the arrested vessel and stop the judicial sale as of right even after bids from potential buyers have been received.

The facts

The Plaintiff claimed against the owner of the vessel “Long Bright” (the “Vessel”) for wharfage and related charges. The Plaintiff applied for arresting the Vessel and an order for sale. The Vessel was subject to a mortgage in favour of the 1st intervener. There were also other interveners and caveators having claims against the Vessel. The sale order was eventually granted and the Vessel was put on advertisement for sale.

Shortly after that, the Plaintiff reached a settlement with the 1st intervener. By signing the settlement agreement, the 1st intervener wished the existing sale order to be discharged and so it could start its own in rem action against the Vessel. This was because the 1st intervener’s claim was of a larger amount of money compared with the Plaintiff’s. The 1st intervener believed that it was more eager to bargain for a higher selling price of the Vessel for the benefit of all interested parties including itself.

As a result of the settlement, the Plaintiff filed an application for release of the Vessel and discharge of the sale order.

Release of vessel

It was the Plaintiff’s case that the settlement agreement already settled the Plaintiff’s in rem claim against the Vessel and so the Vessel must be released. However, the Court, without the benefit of knowing the terms in the settlement agreement which was confidential, was of the view that the settlement agreement would only bind the Plaintiff and the 1st intervener. The settlement agreement would not extinguish the Plaintiff’s claim against the Vessel/ the Defendant. At most, it amounted to a promise made by the Plaintiff to the 1st intervener that the Plaintiff would no longer pursue its claim against the Defendant.

Even if the Plaintiff’s claim was extinguished by the settlement agreement, it did not follow that the Vessel must be released as the Plaintiff’s arrest of the Vessel (the res) in an action in rem affects all other parties having an in rem claim against the res. The Court found that once the sale order was granted, the Sheriff was under a duty to act for the benefit of all interested parties not limited to the Plaintiff. Thus, the sale order should not be discharged merely because the Plaintiff wished to discontinue its claim against the Vessel. There must be a discharge of the sale order before the Vessel could be released.

Discharge of sale order

The fact that the applicant for a discharge of sale order is the arresting party in the first place does not warrant the discharge. The Courts take into account of the interest of all persons with in rem claims against the vessel.

In this case, although there would be a delay in time if the sale process was re-started, the Court found that the costs would be nominal as the Plaintiff would bear the expenses incurred before the discharge of the sale order. Besides, since the Vessel was relatively new, its selling price should not drop significantly during the period of delay due to its relatively slow deterioration rate. More importantly, the Court found that the other interested parties would not be significantly disadvantaged if the sale process restarted as their priority would not be changed.

Conclusion

For the above reasons, the Court decided to discharge the order for appraisement and sale and allowed the release of the Vessel on the condition that the Plaintiff would undertake to pay the Sheriff’s expenses before the discharge of the sale order and return any deposits received from the bidders of the Vessel.

This case shows that where the plaintiff has no further claims against the defendant ship-owner after the vessel is arrested and the sale order is granted, the Court may still proceed to the completion of the judicial sale of the vessel if it is in the interest of all other persons with in rem claims against the vessel. The party who wishes to release the arrested vessel and discharge the sale order must show to the courts that such release and discharge do not have prejudicial impact on other interested parties.

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.
Published by ONC Lawyers © 2018