The “Chem Orchid” and another matter [2016] SGCA 04

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”). 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. All was well until 4 October 2010, when Sejin made its last payment to HKC. Thereafter, no further rental payments were received by HKC from Sejin.

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:

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. The credits owed by Sejin to HKC under the Lease Agreement were included in the sale.

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. 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” for repaying its outstanding debts. The relevant parts of the notice read as follows:

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. 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. 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. Instead, HKC would only consider revoking the termination of the Lease Agreement with an actual payment of those sums.

After the meeting, Mr Park asked HKA to send Sejin a notice of the overdue payments which it owed HKC. Following that request, a list of overdue payments as at 25 April 2011 was emailed to Sejin. The amounts due were stated to comprise W135,853,436 and US$149,015,17.

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.

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. It also informed HKA that freight earnings from a charter dated 13 May 2011 with Frumentarius Ltd (“Frumentarius”), the respondent in Civil Appeal No 58 of 2015 (“CA 58/2015”), for a voyage from Belawan, Indonesia to Taman, Russia would generate revenue of about US$1,700,000, and it would ensure that Frumentarius deposited the charter payment due directly into HKA’s account. However, Sejin stated, it needed time to make the necessary arrangements, and requested HKA to grant it an extension of the lease payment deadline to 17 June 2011. Sejin further stated:

No response was given by either HKC or HKA until 14 June 2011. In the meantime, Sejin continued using the Vessel to trade. Mr SJ Kim stated that during this period, HKA was very upset by Sejin’s refusal to return the Vessel. On 25 May 2011, Sejin sent HKA an email stating that Mr Park would notarise a promissory note in favour of HKA if the Lease Agreement was revived, so that Sejin’s interest burden on the overdue lease payments could be minimised.

On 31 May 2011, Sejin provided HKA with a written update that the Vessel had entered Belawan, Indonesia and was in the process of loading palm oil cargo. Sejin also stated that there was an opportunity for the Vessel to ship sunflower oil, and that it intended to enter into long-term charters after three to five spot transactions shipping sunflower oil on behalf of its major trading partners.

HKA was not convinced by Sejin’s plans and continued to press Sejin for the return of the Vessel. On 14 June 2011, HKA wrote to Sejin in these terms:

Sejin neither returned the Vessel to HKC nor paid the arrears due under the Lease Agreement. Instead, the Vessel sailed from Dumai, Indonesia to Singapore, where it arrived on 16 June 2011.

Upon learning of the Vessel’s presence in Singapore through Mr SJ Kim on 29 June 2011, HKA sent Sejin a final notice for the Vessel’s redelivery. On 30 June 2011, the Vessel took on more bunkers, which were supplied by Winplus, the respondent in CA 62/2015 (see [3] above). Sejin replied to HKA’s final notice on 4 July 2011 stating that it was not intentionally delaying the return of the Vessel; instead, it wanted to return the Vessel safely through its normal sailing route.

On 15 July 2011, Sejin sent a further letter to Mr SJ Kim informing him that it would do its best to return the Vessel to South Korea as soon as possible. This did not, however, come to pass because on 28 July 2011, Winplus filed Admiralty in Rem No 184 of 2011 (“ADM 184/2011”) against the Vessel and arrested it in Singapore. Subsequently, three further in rem writs – namely, Admiralty in Rem No 197 of 2011 (“ADM 197/2011”), Admiralty in Rem No 198 of 2011 (“ADM 198/2011”) and Admiralty in Rem No 201 of 2011 (“ADM 201/2011”) – were filed against the Vessel by, respectively: (a) Frumentarius, the respondent in CA 58/2015; (b) KRC Efko-Kaskad LLC (“KRC”), the respondent in Civil Appeal No 60 of 2015; and (c) Mercuria, the respondent in CA 59/2015.

In brief, the claims made in the in rem writs were as follows:

(a) In ADM 184/2011, Winplus claimed for unpaid bunkers which were supplied to the Vessel in Dumai, Indonesia and Singapore.

(b) In ADM 197/2011, Frumentarius claimed for loss or damage arising from the breach of the charterparty dated 13 May 2011 which it had entered into with Sejin (see [14] above).

(c) In ADM 198/2011, KRC claimed for non-delivery of cargo which it had shipped to Taman, Russia on board the Vessel.

(d) In ADM 201/2011, Mercuria claimed for non-delivery of cargo which it had shipped to Huelva, Spain on board the Vessel.

HKC entered an appearance in all four in rem actions as the Vessel’s registered owner. Sejin did not enter an appearance at all. With the court’s approval, the Vessel was sold on 23 December 2011 below its appraised value. As mentioned earlier, HKC subsequently filed applications in all four admiralty actions seeking, in the main, to set aside the in rem writs and all subsequent proceedings that had been instituted (referred to hereafter as “the Setting-Aside Applications”) on the grounds that the court’s in rem jurisdiction had not been properly invoked because at the Relevant Time, the Vessel was no longer leased to Sejin on a demise charter.

The Judge’s decision

As mentioned at [3] above, the Setting-Aside Applications first came before the AR, who allowed the applications. However, on appeal, the Judge reversed the AR’s decision for four reasons.

First, the Judge held that the 4 April 2011 Notice was invalid since neither the ATA nor the NCT had transferred to HKA the right to terminate the Lease Agreement. Instead, the ATA had only transferred to HKA the credits payable by Sejin to HKC under the Lease Agreement, while the NCT had merely served as “a notice to Sejin of the intended credit transfer and could not transfer more rights than [the rights] transferred under the ATA” [emphasis in original] (see the HC Judgment at [44]). As such, the Judge held, only HKC could have issued a notice to terminate the Lease Agreement. The Judge further ruled that even if HKA were authorised to terminate the Lease Agreement on HKC’s behalf, the 4 April 2011 Notice would still have been ineffective to effect such termination. This was because according to Art 24(2) of the Lease Agreement, a condition precedent to the right of termination was that HKC must have formed an opinion that Sejin was “facing difficulties in continuing its normal business activities”, and there was no evidence to this effect. Furthermore, the “cause” for termination had to bear some relation to Sejin’s inability to operate as a going concern. In this regard, the Judge considered that Sejin’s mere inability to keep up with the monthly rental payments due under the Lease Agreement could not, on its own, amount to such “cause”. In any case, the Judge pointed out, the issue of a notice of termination had to be preceded by a rectification notice, and there was no evidence that Sejin had been issued with such a notice (see the HC Judgment at [46]–[48], [55] and [58]).

Second, the Judge held that physical redelivery of the Vessel was necessary to terminate the Lease Agreement since the defining feature of a demise charter was the complete transfer of possession and control of the vessel concerned from the shipowner to the charterer (see the HC Judgment at [72]). Accordingly, the parties to a demise charter could not contract out of that requirement – until physical redelivery was effected, the demise charterer continued to enjoy full rights of control and possession over the vessel, and third parties would be entitled to continue to deal with the demise charterer based on the latter’s actual control and physical possession of the vessel. In the Judge’s view, allowing a shipowner to contract out of the general requirement of physical redelivery would be unfair to third parties because in the absence of such redelivery, the change in the legal status of a vessel upon the termination of a demise charter would not be known to third parties (see the HC Judgment at [72]–[76] and [82]).

Third, the Judge held that even if it were in theory possible to contract out of the general requirement of physical redelivery to terminate a demise charter, there was in effect no such contracting out and no attempt to contract out in this case. This was because Art 26(3) of the Lease Agreement provided that hire continued to be payable by Sejin until the Vessel was redelivered, and thus “reinforced the general requirement of physical redelivery at common law” [emphasis in original] (see the HC Judgment at [98]). Therefore, Sejin continued to be the demise charterer of the Vessel at the Relevant Time (see, likewise, [98] of the HC Judgment).

Fourth, the Judge held that there was no need for the creation or acceptance in Singapore law of the doctrine of constructive redelivery vis-à-vis the termination of demise charters. More importantly, he stated, such a doctrine would result in significant injustice to third parties, who would have no way of knowing whether the demise charterer with whom they were transacting had lost that status on account of a constructive redelivery. The Judge added that even if the doctrine of constructive redelivery were applicable in Singapore, such redelivery had not been made out on the facts of this case as the 4 April 2011 Notice and Sejin’s letters of 4 July 2011 and 15 July 2011 were all insufficient to evince “a clear intention to redeliver the Vessel” (see the HC Judgment at [104] and [111]–[112]).

OS 21/2015

As mentioned earlier, HKC appealed against the entirety of the Judge’s decision. However, Mercuria and Winplus objected to HKC’s appeals, contending that HKC needed leave from the Judge before it could appeal, but had not obtained such leave. HKC then filed OS 21/2015 on 14 September 2015 seeking, in the main:

(a) a declaration that it did not need leave of court to appeal against the Judge’s decision; or

(b) alternatively, in the event that leave to appeal was needed: (i) an extension of time to apply for such leave; (ii) the grant of such leave retrospectively or otherwise; and (iii) an order that the documents already filed in the respective appeals were to stand in the appeals.

The parties’ arguments on the issue of leave to appeal

HKC did not address the issue of leave to appeal in its Appellant’s Case in any of its four appeals. It appeared from the documents disclosed by Mercuria in its Supplemental Core Bundle for CA 59/2015 that HKC took the view that it did not need leave of court to appeal against the Judge’s decision. HKC’s position seemed to be that the Setting-Aside applications, being applications to set aside the Creditors’ in rem writs due to the wrongful invocation of the court’s admiralty jurisdiction under s 4(4) of the HCAJA, were not interlocutory applications as they had the effect of making a final disposal of the parties’ substantive rights; hence, no leave of court to appeal was required. In this regard, this court had held in The Nasco Gem [2014] 2 SLR 63 (at [16]) that an application for a warrant of arrest fell within para (e) of the Fifth Schedule to the SCJA, such that leave of court was needed to appeal against an order refusing to set aside a warrant of arrest. From the documents, it appeared that HKC’s position was that The Nasco Gem could be distinguished as it concerned an application to set aside a warrant of arrest, as opposed to an in rem writ; furthermore, the setting-aside application in that case was based on an alleged abuse of process (specifically, non-disclosure of material facts on the part of the arresting party). HKC submitted that the present case was different since the Setting-Aside Applications turned on “a crucial jurisdictional fact in the entire proceeding[s]”, viz, whether Sejin was the demise charterer of the Vessel at the Relevant Time. A ruling on this jurisdictional fact, HKC contended, would be determinative of the parties’ substantive rights because if the court determined that Sejin was not the demise charterer of the Vessel at the Relevant Time, the admiralty proceedings could not be sustained and the court would have to dismiss all four in rem actions. On this basis, HKC submitted that it did not need leave to appeal as this court had also stated in The Nasco Gem (at [11]) that “an appeal to the Court of Appeal should remain as of right in respect of an order made in an interlocutory application that could affect the final outcome of the action” [emphasis added].

Our decision

The jurisdictional requirements in admiralty proceedings

In The Bunga Melati 5 [2012] 4 SLR 546 (“The Bunga Melati (CA)”), this court, in the main judgment delivered by V K Rajah JA, held (at [106]; see also [112]) that in order to invoke the court’s admiralty jurisdiction under s 4(4) of the HCAJA, the plaintiff had to satisfy the following five requirements:

(a) first, prove on the balance of probabilities that the jurisdictional facts under the particular limb of ss 3(1)(d) to 3(1)(q) which it was relying on existed, as well as show an arguable case that its claim was of the type or nature required by the relevant statutory provision;

(b) second, prove on the balance of probabilities that its claim arose in connection with a ship;

(c) third, identify, without having to show in argument, the person who would be liable on the claim in an in personam action (“the relevant person”);

(d) fourth, prove on the balance of probabilities that the relevant person was, when the cause of action arose, the owner or charterer of, or in possession or in control of the ship; and

(e) fifth, prove on the balance of probabilities that the relevant person was, at the time when the action was brought, either: (i) the beneficial owner of the ship in respect of all the shares in it or the charterer of that ship under a demise charter; or (ii) the beneficial owner of a sister ship in respect of all the shares in it.

The present appeals concerned the fifth of the requirements laid down in The Bunga Melati (CA) (referred to hereafter as “Step 5”). The parties’ diametrically opposed positions bring into sharp focus the debate on how rules of civil procedure should apply in relation to admiralty proceedings which operate in rem. In the present case, the question of whether the Creditors’ in rem writs, as well as the arrest of the Vessel, should be set aside was dependent on the core factual issue of whether Sejin was the demise charterer of the Vessel at the Relevant Time. How should this factual issue be determined? What would be the standard of proof if the issue were to be decided purely on the basis of affidavit evidence? Should the defendant in such a situation be entitled to take up the issue on appeal if the issue were decided against it wholly on the basis of conflicting affidavit evidence? If the defendant is not so entitled, will it be permitted to revisit the same factual issue at the trial of the substantive claim?

We begin by observing that in The Bunga Melati (CA), this court in effect endorsed Belinda Ang Saw Ean J’s ruling in the court below that disputed jurisdictional facts had to be proved on “a balance of probabilities” (see The Bunga Melati 5 [2011] 4 SLR 1017 (“The Bunga Melati (HC)”) at [108]–[109]). Notwithstanding this endorsement, we note that concerns were in fact raised by Belinda Ang J as to whether it was appropriate to use the standard of “a balance of probabilities” in the case of an interlocutory application to set aside an in rem writ on the basis of affidavit evidence. At [86] and [98] of The Bunga Melati (HC), Belinda Ang J observed:

Similar concerns were expressed in The Bunga Melati (CA) by Chan Sek Keong CJ, who delivered a separate judgment of his own even though he agreed with the court’s main judgment (delivered by Rajah JA) in that appeal. Chan CJ expressed his concerns at [127] of The Bunga Melati (CA) while commenting on The Jarguh Sawit [1997] 3 SLR(R) 829. The facts of The Jarguh Sawit are as follows. The respondent in that case, Navigation Maritime Bulgare (“NMB”), agreed under a memorandum of agreement (“the MOA”) to sell a ship to Oxford Jay International Pte Ltd (“OJ”) as a Lloyd’s Register Class vessel. OJ paid NMB 10% of the purchase price as a deposit, and NMB advanced a loan for the remaining 90% of the purchase price, which loan was repayable in six monthly instalments commencing six months after the date of drawdown at an interest rate of 6% per annum. The loan from NMB was secured by a mortgage over the ship to be sold.

NMB commenced legal proceedings and arrested the ship on 6 October 1994. JH applied to set aside the writ and the warrant of arrest on the basis that it was a bona fide purchaser of the ship without notice of the mortgage, which had never been registered. It failed before the assistant registrar. JH appealed to the High Court based on a different ground, namely, that the court’s admiralty jurisdiction had been wrongly invoked as JH was not the party who would be liable in personam on NMB’s claim. JH failed before both the High Court and the Court of Appeal.

Thereafter, NMB applied for summary judgment; it also sought to strike out those paragraphs in JH’s defence and counterclaim which alleged that the court lacked jurisdiction. The applications were granted by an assistant registrar, after which OJ assigned all its rights, title and interest under the MOA to JH on 5 August 1996. JH took the view that as a result of the assignment, it was entitled to raise against NMB all the defences which would have been available to OJ in an in personam action against OJ. JH appealed to the High Court against the assistant registrar’s decision on this basis, but the High Court affirmed the assistant registrar’s decision to strike out the said paragraphs alleging the court’s lack of jurisdiction.

JH then appealed to the Court of Appeal, arguing that it should not be precluded from pleading a defence of no jurisdiction at the trial even though it had already been decided at the interlocutory stage that the court had jurisdiction. This was because the question of jurisdiction was a substantive one. JH contended that the burden at the interlocutory stage was simply for NMB to prove that there was an arguable case that the court had jurisdiction as the question of jurisdiction would be re-tried at the final hearing, where NMB would have to prove its case on the balance of probabilities; in other words, it was “implicitly understood that in addition to the hearing on jurisdiction at the interlocutory stage, there would be a second hearing on the issue at the trial stage” (see The Jarguh Sawit at [28]). For these reasons, JH submitted, those paragraphs of its pleadings alleging the court’s lack of jurisdiction had been wrongly struck out. The Court of Appeal disagreed and held (at [29]–[32]):

The paragraphs cited above may give the impression that all jurisdictional questions are settled with finality at the interlocutory stage. However, that is not necessarily so in every case. In our view, the paragraphs quoted above have to be read in their proper context and together with the subsequent paragraphs, ie, [40]–[44] of The Jarguh Sawit. It is apparent that the Court of Appeal’s remarks were made in the context of interlocutory challenges to the court’s exercise of admiralty jurisdiction. The Court of Appeal took pains to distinguish “the issues of jurisdiction and substantive liability” in the context of “the peculiar nature of admiralty actions in rem” (at [40]), while acknowledging at the same time that “for some of the grounds [in s 3(1) of the then equivalent of the HCAJA], … there is some similarity in the questions posed to determine jurisdiction and substantive liability”’ (at [41]). As we see it, what this means is that once an applicant’s interlocutory challenge to jurisdiction has been dismissed with finality, the applicant cannot, at the trial, mount another challenge to jurisdiction based on the same standard of proof as that applicable to its interlocutory challenge to jurisdiction since, at the trial stage, the court would not be deciding whether there was good cause to assume jurisdiction, but rather, would be deciding whether there was good cause for judgment to be given to the plaintiff. We set out below the relevant paragraphs from The Jarguh Sawit (viz, [40]–[44]) for good measure:

It is therefore not the case that the question of jurisdiction will never arise subsequently at the trial. Instead, it is clear from the above paragraphs from The Jarguh Sawit that the issue of jurisdiction can arise again at the trial, but would fall to be determined based on a different standard of proof due to the different nature of the subsequent inquiry at the trial. Instead of being a procedural matter to be decided on the basis of a good arguable case, the issue of jurisdiction would, at the trial, be a substantive one to be decided on the balance of probabilities. In any event, we note that the Court of Appeal’s observations in The Jarguh Sawit were made in the context of JH (the appellant in that case) having already submitted to the court’s jurisdiction. Besides having filed a defence and counterclaim, JH had also failed to apply for leave to withdraw its appearance. This meant that pursuant to O 12 r 7(6) of the then equivalent of the ROC, it had consented to the Singapore courts’ jurisdiction to decide the matter (see [37]–[38] of The Jarguh Sawit). That being the case, JH could no longer raise the issue of lack of jurisdiction at the substantive trial of the action. It was therefore correct for those paragraphs in JH’s pleadings alleging the court’s lack of jurisdiction to be struck out since any contention at the trial that the Singapore courts lacked jurisdiction over the dispute would have been doomed to fail.

Chan CJ’s dicta in The Bunga Melati (CA) lends further weight to our analysis of The Jarguh Sawit. He was of the view that the Court of Appeal’s comments at [40]–[44] of The Jarguh Sawit (cited at [38] above) constituted a piece of “somewhat elliptical dicta” which partly resulted in the procedural problems concerning jurisdictional challenges to ship arrests involving factual disputes at the interlocutory stage (see The Bunga Melati (CA) at [126]). He commented (at [127]):

The problem with the present case was precisely this – how could a disputed jurisdictional fact (viz, whether Sejin was still the demise charterer of the Vessel at the Relevant Time), which also involved the application of foreign law (namely, South Korean law), be proved conclusively on the balance of probabilities at the interlocutory stage when HKC (the applicant seeking to set aside the Creditors’ in rem writs, and, in turn, the arrest of the Vessel) did not apply to the court to have the relevant witnesses examined orally? In our view, by relying wholly on affidavit evidence to decide the point on jurisdiction, the Judge could only have determined the disputed jurisdictional fact on a prima facie basis, and this would be non-conclusive of the jurisdiction issue. Indeed, given the manner in which HKC made the Setting-Aside Applications (viz, with striking out being the alternative relief to setting aside and without any oral evidence being adduced), the disputed jurisdictional fact could only be conclusively determined at the trial itself after cross-examination of the witnesses, especially the experts on South Korean law. In this regard, the dicta of Chan CJ in The Bunga Melati (CA) is helpful. He placed importance on how the parties ran the proceedings, and referred to the decision of the New Zealand Court of Appeal in Vostok Shipping Co Ltd v Confederation Ltd [2000] 1 NZLR 37 (“Vostok Shipping”) as a case in point.

In Vostok Shipping, the vessel concerned was arrested in New Zealand waters by the appellant, Vostok Shipping Co Ltd (“Vostok”), based on an in personam claim against a Russian company, Primorskaya Rybopromyshlennaya Kompaniya “Orka” (“Orka”). Confederation Ltd (“Confederation”), the respondent, sought to set aside the arrest on the ground that it had acquired ownership of the vessel by the time the in rem action was brought, and thus, the New Zealand High Court had no jurisdiction over the action under s 5(2)(b)(i) of the Admiralty Act 1973 (No 119) (NZ) (“the New Zealand Admiralty Act”), which is in pari materia with s 4(4) of the HCAJA.

Counsel for Vostok submitted that where there was a challenge to the court’s jurisdiction before the trial, the challenge should be dealt with “on the same footing as any other peremptory attack on the plaintiff’s case” (at [16]). He analogised such a challenge to a striking-out application (likewise at [16]), and submitted that Confederation had to show that Vostok did not have any arguable case on the jurisdictional issue. As such, counsel contended, the issues of: (a) whether the person who would be liable on the claim in an in personam action was the owner of the ship at the time the cause of action arose; and (b) whether that person was the beneficial owner of the ship at the time the writ was issued should be determined at the interlocutory stage by asking whether Vostok had no arguable case, with the onus on Confederation to show this (at [16]). This position, Vostok’s counsel asserted, made sense as (at [17]):

Counsel for Confederation, on the other hand, urged the court to follow the approach laid down in an earlier case, Baltic Shipping Co Ltd v Pegasus Lines SA [1996] 3 NZLR 641, which adopted the same approach as that taken in England, Australia and Singapore – namely, that the plaintiff needed to prove on the balance of probabilities that the proceedings were within the in rem jurisdiction of the court. He pointed out that the effect of establishing jurisdiction in rem was to allow the plaintiff to arrest and detain a vessel without any undertaking for damages, and there was no real protection for the shipowner and the party who would be liable on the claim in an in personam action against a claim which later proved to be ill-founded, considering, especially, that urgency was required in ship arrests (see Vostok Shipping at [18]). Moreover, counsel submitted, as the factual issues arising under s 5(2) of the New Zealand Admiralty Act went to jurisdiction only and had no relevance to the substance of the claim, they were not defences and should be decided at the outset (see Vostok Shipping at [18]).

The New Zealand Court of Appeal accepted Confederation’s arguments and held that:

(a) It was well-established practice in England, Australia and Singapore that when faced with an application to set aside a ship arrest, the plaintiff had to prove on the balance of probabilities that the proceedings were within the in rem jurisdiction of the court (at [19]).

(b) Even allowing for considerations of urgency, the court should, in appropriate circumstances, adjourn an application to set aside a ship arrest so that there would be sufficient time for the parties to adduce the necessary evidence, and for the court to determine important questions of ownership or facts establishing jurisdiction without undue haste and consequent prejudice to a party which might not have immediate access to all the relevant factual materials (at [21]).

(c) Vostok had to establish, on the balance of probabilities based on the evidence placed before the court by the parties, that its claim was within the New Zealand High Court’s jurisdiction, and that Orka was both the legal and the beneficial owner of the vessel at the time legal proceedings were commenced (at [23]).

It is pertinent to note that in Vostok Shipping, the New Zealand Court of Appeal cited the following holding of Robert Goff J (as he then was) in I Congreso del Partido [1978] QB 500 (at 535–536):

Returning to Chan CJ’s dicta in The Bunga Melati (CA) at [126]–[127] (see [40] above), Chan CJ went on to approve the holding in Vostok Shipping (see The Bunga Melati (CA) at [128]). He expressed the view that the New Zealand Court of Appeal’s approach met the requirements of procedural justice in determining factual challenges under the first step of the five-step process laid down in The Bunga Melati (CA) (at [129]–[130]):

We agree with the views of Chan CJ, which make eminent sense in the context of a ship arrest. A ship arrest can sometimes (and, indeed, may often) take place under urgent conditions, with the ship spending only a fleeting moment within the waters of Singapore – in such a situation, the arresting party may often be able to obtain only a limited amount of information which sufficiently supports the grant of an in rem writ and the issue of a warrant of arrest. The defendant may wish to set aside the in rem writ and the warrant of arrest, and it can choose to do so relying only on affidavit evidence. If it so chooses, findings made by the court on disputed facts based only on affidavit evidence at an interlocutory hearing, which facts impinge on the court’s admiralty jurisdiction, will necessarily be prima facie non-conclusive as the requirements of procedural justice would not have been fully complied with. The issue of jurisdiction will then merge with the plaintiff’s substantive claim at the trial, which will have to be proved by the plaintiff on the balance of probabilities. This, in our view, is consistent with The Jarguh Sawit, which (at [43]–[44]) made the very same distinction (see [38] above). This element of choice was also alluded to by Steven Chong JC (as he then was) in The Catur Samudra [2010] 2 SLR 518 at [23], where he cited the same passage by Goff J in I Congreso del Partido (at 535–536) that we referred to earlier (see [46] above). On the other hand, if the defendant seeks a conclusive finding on jurisdiction and opts to have a full hearing on the jurisdictional issue replete with all the requirements of procedural justice, the court can decide the jurisdictional issue conclusively based on the standard of proof enunciated in The Bunga Melati (CA), which we have set out at [30] above.

Section 34(1)(a) of the SCJA read with para (e) of the Fourth Schedule thereto

The present case would appear to be one where the defendant seeks to set aside an in rem writ based solely on affidavit evidence. The Creditors instituted the four in rem writs on the basis that Sejin, the party who would be liable on their claims in an in personam action, was at the Relevant Time the demise charterer of the Vessel. This was a necessary jurisdictional fact for the invocation of the court’s admiralty jurisdiction. There was also the question, which was very much in dispute, of whether the communications which took place between HKC/HKA and Sejin (see [9]–[18] above) sufficed to terminate the demise charter under South Korean law. It was undisputed that at the Relevant Time, HKA had communicated the termination of the Lease Agreement to Sejin, but the Vessel was still in Sejin’s physical possession. Thus, the critical question was whether Sejin was still the demise charterer of the Vessel at the Relevant Time, and the answer to this question would have a bearing on Step 5 of the analysis set out in The Bunga Melati (CA). Also directly relevant to the question of jurisdiction is the concept of constructive redelivery in relation to the termination of demise charters, which concept has yet to be accepted in our law.

If HKC had succeeded on its jurisdictional challenge, the four in rem writs filed by the Creditors would have had to be set aside. But, on the basis of how the case was run before the AR and the Judge, there was no way in which a conclusive finding on disputed facts going to the court’s admiralty jurisdiction could be made until the full trial of the admiralty actions, with cross-examination of the witnesses. In the circumstances, HKC’s jurisdictional challenge could only be determined on a non-conclusive prima facie basis, ie, based on affidavit evidence alone.

To recapitulate, before the AR and the Judge, the Setting-Aside Applications were dealt with in chambers based solely on affidavit evidence. There was no cross-examination of the parties’ factual witnesses or the expert witnesses testifying on the content of South Korean law, which governed the Lease Agreement. This meant that HKC had chosen to take a course of action under which the court could only make a finding on jurisdiction on a non-conclusive prima facie basis. Such a finding would not be conclusive on the jurisdictional issue, and clearly, HKC should not be precluded from subsequently addressing this issue again at the liability stage.

Before us, HKC argued that it was entitled to lodge these appeals because the Singapore courts had no in rem jurisdiction over the Vessel. It contended that the Vessel was no longer leased to Sejin on a demise charter at the Relevant Time as the demise charter had earlier been brought to an end by either express termination of the Lease Agreement or the constructive redelivery of the Vessel. Mr Heng Gwee Nam Henry, counsel for HKC, contended that since the entire proceedings would come to an end if the Creditors’ in rem writs were set aside, the issue of jurisdiction was a substantive one as it could have a substantive impact on the rights of the parties. While we agreed with Mr Heng to the extent that the entire admiralty proceedings could have ended had the Judge determined that Sejin was not the demise charterer of the Vessel at the Relevant Time and, consequently, set aside both the in rem writs and the warrant of arrest, the fact of the matter was that the Judge did not in fact rule that way. Had the Judge done so, we would have had no hesitation in holding that the Creditors would have a right of appeal against that decision, which would effectively have brought the proceedings to an end; and no leave of court would have been required for the Creditors to appeal against that decision. But, given that the Judge’s decision was the converse, ie, that Sejin was still the demise charterer of the Vessel at the Relevant Time, no substantive rights of either HKC or the Creditors were affected. The consequence of the Judge’s ruling, although he also proffered his view on a number of legal issues, was that the jurisdictional issue was to be deferred and decided definitively at the trial.

We would reiterate that before us, HKC was appealing against the Judge’s refusal to set aside the Creditors’ in rem writs. In view of the fact that there were factual disputes which related to the court’s jurisdiction, and given that no application was made to the court to hear oral evidence and subject witnesses to cross-examination, there was no way in which those factual disputes could be resolved definitively. In our view, the Setting-Aside Applications were in substance a request to the court to strike out the in rem actions on a basis similar to that which underlies O 18 r 19 of the ROC. We also note that the grounds relied on by HKC to challenge the court’s jurisdiction were the same as the grounds which could defeat the Creditors’ substantive claims in the in rem writs. As the Judge declined to set aside the in rem writs on the basis of the affidavit evidence before him, the present admiralty proceedings continue to be afoot, with no conclusive finding made yet on the jurisdictional point. HKC can therefore raise the jurisdictional issue again at the trial; and the trial judge would be entitled, at that stage, to rule on jurisdiction based on all the evidence, including oral evidence, and the arguments placed before him. Nothing said by the Judge or by us in the present proceedings would have a bearing on how the trial judge should decide the jurisdictional issue at the trial. And whatever the trial judge’s ruling on jurisdiction may be, any party who is dissatisfied would have an automatic right to appeal against that decision. For these reasons, we held that s 34(1)(a) of the SCJA read with para (e) of the Fourth Schedule thereto precluded HKC from appealing against the Judge’s decision, and this court in turn had no jurisdiction to hear the present appeals.

Section 34(2)(d) of the SCJA read with para (e) of the Fifth Schedule thereto

At this juncture, we turn to s 34(2)(d) of the SCJA read with para (e) of the Fifth Schedule thereto, which were relied on by Mercuria and Winplus in arguing that HKC had no right to appeal against the Judge’s decision without first seeking the court’s leave (see [28] above). They contended that pursuant to these provisions, HKC had to first obtain leave of court before it could appeal against the Judge’s decision. This was because the Setting-Aside Applications were interlocutory applications, and no appeal could be brought against any order made on an interlocutory application unless leave of court was first obtained, with such leave to be sought from the High Court first. This was, Mercuria and Winplus submitted, by virtue of s 35 of the SCJA, which provides that where an application “may be made either to the High Court or to the Court of Appeal, it shall be made in the first instance to the High Court”. Therefore, Mercuria and Winplus argued, a leave application had to be made by HKC to the High Court first, and it was only if the High Court refused to grant leave to appeal that HKC could apply for leave from the Court of Appeal.

Given our decision that HKC had no right of appeal to begin with by virtue of s 34(1)(a) of the SCJA read with para (e) of the Fourth Schedule thereto (see [53] above), it is not necessary for us to deal with the submissions of Mercuria and Winplus on the issue of leave to appeal. Be that as it may, assuming HKC could have appealed against the Judge’s decision with the court’s leave (in other words, if, as Mercuria and Winplus submitted, s 34(2)(d) of the SCJA read with para (e) of the Fifth Schedule thereto were applicable), we agree with Mercuria and Winplus that HKC should have sought leave to appeal from the Judge first. As HKC did not do so, even if it could have brought the present appeals with the court’s leave, it would be out of turn for us to grant HKC such leave. This was a second reason why we dismissed OS 21/2015 and why, as a result, HKC’s appeals (assuming s 34(2)(d) of the SCJA read with para (e) of the Fifth Schedule thereto applied) could not be allowed to proceed.

Order 57 r 16(4) of the ROC

HKC also made an argument that O 57 r 16(4) of the ROC entitled the Court of Appeal to grant it leave to appeal despite its failure to obtain leave from the Judge if there were “special circumstances” which made it “impossible or impracticable” for HKC to seek leave to appeal from the Judge. It submitted that such “special circumstances” had been established on the facts as the issue of leave to appeal was raised only after the Notices of Appeal and the various Appellant’s and Respondent’s Cases had been filed. Furthermore, none of the Creditors had applied to strike out the Notices of Appeal, and thus, there was no prior opportunity for the issue to be determined by the High Court.

In our view, this contention was unmeritorious. The correspondence between HKC’s solicitors and the respective solicitors for Mercuria and Winplus showed that HKC’s solicitors had been informed of their client’s failure to seek leave from the Judge before filing its appeals. HKC’s solicitors were, however, adamant in their position that HKC did not need leave of court to appeal. That being the case, the proper approach for HKC to take (assuming HKC had a right of appeal to begin with) would have been to seek a declaration from the Judge that it did not need leave of court to appeal; alternatively, in the event that the Judge ruled that leave to appeal was needed, HKC should have sought leave from the Judge before lodging its appeals. We did not think that HKC’s failure to take these measures could constitute “special circumstances” so as to bring them within the scope of O 57 r 16(4) of the ROC.

Conclusion

Closing observations: O 12 r 7 and O 14 r 12 of the ROC

In closing, we wish to refer to two sets of provisions in the ROC. First, pursuant to O 12 rr 7(1) and 7(4), a defendant who wishes to dispute the court’s jurisdiction may apply to set aside the writ issued against it; and the court is empowered, on such an application, to make such orders as it thinks fit or give such directions as may be appropriate, including directions for the trial of the jurisdictional dispute as a preliminary issue. Second, O 14 rr 12(1) and 12(2) provide that the court may determine “any question of law or construction of any document arising in any cause or matter” if it appears that: (a) the question is “suitable for determination without a full trial of the action”; and (b) such determination will “fully determine (subject only to any possible appeal) the entire cause or matter or any claim or issue therein”. On determining such a question, the court can “dismiss the cause or matter or make such order or judgment as it thinks just”.

At the conclusion of the oral hearing before us, we indicated to the parties that they were free to bring an application under O 14 r 12 for a ruling on: (a) any points of law which could be determinative of the issues in the in rem actions and which did not require any evidence; or (b) any points of law which could be determined on the basis of agreed or undisputed facts. A ruling by the High Court pursuant to such an application could then, if any of the parties was dissatisfied, be brought before us on appeal. We underscored the fact that the process under O 14 r 12 could only be invoked if there were no factual disputes relating to the point of law in question.