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Grounds publishedDecided 18 Feb 2015
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High Court

The “Chem Orchid”

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[2015] SGHC 50Case no. Admiralty in Rem No 184 of 2011 (Registrar's Appeal No 426 of 2013), Admiralty in Rem No 197 of 2011 (Registrar's Appeal No 1 of 2014), Admiralty in Rem No 198 of 2011 (Registrar's Appeal Nos 2 and 8 of 2014), Admiralty in Rem No 201 of 2011 (Registrar's Appeal Nos 6 and 7 of 2014)

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  1. Steven Chong J:

  2. Introduction

  3. [1] These appeals concern four separate in rem writs issued against the Chem Orchid (“the Vessel”). Each writ was filed pursuant to a different cause of action each plaintiff had against the demise charterer of the Vessel. In the court below, the defendant (the owner of the Vessel) applied to set aside all of the writs on the basis that the court’s admiralty jurisdiction had not been properly invoked under s 4(4) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (“HCAJA”) because the Vessel was no longer on demise charter at the time the writs were issued. The Assistant Registrar found for the defendant and set aside the writs. Two of the in rem writs also contained separate in personam claims against the defendant as owners of the Vessel. Those claims remain alive as the Assistant Registrar found that there was no legal basis to justify their striking out at this stage of the proceedings. The plaintiffs now appeal against the Assistant Registrar’s decision to set aside the writs while the defendant appeals against the Assistant Registrar’s decision not to strike out the claims brought by two of the plaintiffs.

  4. [2] The key question in these appeals is whether the charter of the Vessel had already been terminated at the time of the issuance of the writs. This necessitates an examination of an important legal point, viz, the requirement of redelivery in the termination of a bareboat charter. This is not merely a matter of contract but has, in the context of admiralty law, crucial implications on the court’s jurisdiction to order the arrest of bareboat or demise chartered vessels (the terms are used interchangeably in this judgment).

  5. [3] The right to arrest and the risk of a vessel being arrested are normal incidents arising from the operation and management of any vessel. Typically, parties dealing with vessels do not transact directly with the registered owner of the vessel but with managers and/or agents of the vessels which may vary from port to port. In the case of bareboat charters, this is almost invariably the case because the effect and essence of any bareboat charter is to grant the bareboat charterer complete control and possession of the vessel. Given that there is no public registry of bareboat charters available for inspection, third parties dealing with bareboat charterers have no way of finding out if the vessel is on bareboat charter and may well assume that they are in fact dealing with the owners of the vessel.

  6. [4] This point assumes critical significance when one considers that, until the 1980s, vessels on bareboat charter were insulated from arrest for most claims save for a limited class of maritime liens. Thus, third parties could not arrest a vessel to satisfy debts owed to them by the bareboat charterers. This placed third parties who transacted with bareboat charterers at a significant disadvantage for they could, unbeknownst to them, be left without security for their claims. In recent decades, many common law jurisdictions such as the United Kingdom, Hong Kong, Australia, Malaysia, Canada, and New Zealand have amended their laws to permit the arrest of the bareboat chartered vessel if, at the time the action is brought, the vessel still remains on bareboat charter to the party liable in personam. The laws in these jurisdictions are largely uniform save for that of New Zealand, which permits not only the arrest of the specific bareboat chartered vessel implicated in the cause of action but also the arrest of any other vessels which are on bareboat charter to the party who is liable in personam.

  7. [5] To bring our laws in line with the other maritime nations, Singapore amended the HCAJA on 1 April 2004 to permit the arrest of bareboat chartered vessels (see High Court (Admiralty Jurisdiction) (Amendment) Act 2004 (Act 2 of 2004) (“the 2004 Amendment”)). Following this amendment, s 4(4) of the HCAJA now reads:

  8. [6] The hearings before the Assistant Registrar stretched over a long period of 14 calendar days with the first hearing date on 11 October 2012 and the last almost a year later in September 2013 (see The “Chem Orchid” [2014] SGHCR 1 (“the Judgment”)). Unfortunately, much time and effort was expended on proof of Korean law (which was the governing law under the bareboat charter), to little end because none of the parties suggested that an application of the Korean “rules” of contractual interpretation would have yielded a different result from the application of Singapore law in this case. Thus, the introduction of expert evidence only served as a distraction and contributed to the protracted nature of the proceedings. To avoid a recurrence, I have included a coda on the use of expert witnesses in the proof of foreign law in this judgment. Hopefully, this will provide guidance on the circumstances when proof of foreign law is necessary and on the proper role of expert witnesses in that regard.

  9. The background facts

  10. The Lease Agreement between HKC and Sejin

  11. [7] The registered owner of the Vessel at all material times prior to its court-ordered sale in Singapore was Han Kook Capital Co Ltd (“HKC”), a Korean incorporated company. On 1 February 2010, HKC entered into an agreement to lease the Vessel to Sejin Maritime Co Ltd (“Sejin”), another Korean company, for a total period of 108 months (“the Lease Agreement”).

  12. [8] Under the Lease Agreement, Sejin was to pay monthly rental to HKC on the third day of each month. Sejin was also responsible for the employment and payment of the crew and for the repair and maintenance of the Vessel. Sejin was effectively in possession and control of the Vessel and it is common ground that the Lease Agreement is in substance a charter of the Vessel by demise. The Lease Agreement also provided that, in the event of any disagreement as to its interpretation, Korean law shall apply.

  13. The Asset Transfer Agreement and the Notice of Credit Transfer

  14. [9] Sejin complied punctually with its payment obligations during the initial months of the Lease Agreement but defaulted soon after. HKC’s representative, Mr Sejun Kim, filed an affidavit in these proceedings stating that reminders were sent but no rental payments were received from Sejin after its last payment in October 2010.

  15. [10] In December 2010, a new corporate entity known as HK AMC Co Ltd (“HKA”) was established to deal with the recovery of bad debts owed to HKC. On 27 December 2010, HKC and HKA executed an Asset Transfer Agreement (“ATA”) in which the former agreed to sell certain credits which it had obtained in the course of its business to the latter at a fair price. The credits under the Lease Agreement were included in this transfer.

  16. [11] To be clear, the ATA did not effect a transfer of ownership of the Vessel – HKC remained the registered owner of the Vessel at all times. Further, the ATA did not purport to transfer the entire Lease Agreement to HKA – it only purported to transfer the credits thereunder. These points are not disputed by the parties but I should highlight that their experts disagree on the question of whether the ATA had validly transferred the lease credits (see [145]–[146] below).

  17. [12] I should also mention in this connection that, prior to the ATA, on 24 December 2010, HKC had issued a Notice of Credit Transfer (“NCT”) to Sejin in which it informed Sejin of the arrangement. There was, however, some dispute as to whether the NCT had transferred more rights than the ATA. This dispute centred on paras 3 and 4 of the NCT, which reads:

  18. [13] The parties’ experts disagreed on whether the NCT – in notifying Sejin that HKC had transferred its “right” or “status” under the Lease Agreement – conferred upon HKA the right to terminate the Lease Agreement. The experts’ respective opinions dealt with this point extensively because, as will become clear, it was HKA (and not HKC) which had issued the purported termination notice.

  19. The 4 April Notice

  20. [14] By early April 2011, Sejin had failed to make any rental payments under the Lease Agreement for a period of six consecutive months. Mr Sejun Kim described in his affidavit that, at the time, there was no sign that Sejin would be able to make further payments since the value of the Vessel had depreciated substantially and the prevailing market conditions for trading the Vessel were very poor. In his affidavit, Mr Sejun Kim explained that HKC had “grave concerns” about Sejin’s ability to perform its obligations under the Lease Agreement and was thus entitled to terminate it by giving notice to Sejin in accordance with Art 24(2) of the Lease Agreement, which reads:

  21. [15] On 4 April 2011, a formal notice with the heading “Lease contract termination notice” was thus sent to Sejin (“the 4 April Notice”), informing the latter that it had “lost all the benefit of time” for repaying its outstanding debts. As the content of the 4 April Notice is of some importance, I reproduce the material portions here in full:

  22. [16] HKC claimed that the 4 April Notice validly terminated the Lease Agreement in accordance with Art 24(2). However, it is important to note that the 4 April Notice was issued by HKA rather than HKC. This, as mentioned earlier, led the parties’ experts to examine the ATA and NCT more closely to determine whether HKA, despite being a non-party to the Lease Agreement, had nevertheless acquired the right to terminate it. A further source of disagreement among the experts concerned whether (assuming, arguendo, that HKA had the right to terminate the Lease Agreement) that right was properly exercised in accordance with Art 24(2) of the Lease Agreement. Chiefly, the disagreement concerned the question of whether the 4 April Notice was defective in failing to specify the “cause” of the termination towards Sejin. According to some of the experts, the 4 April Notice did not state the cause for termination and this omission cannot now be cured by the explanations given by Mr Sejun Kim in his affidavit.

  23. Subsequent correspondence and the continued trading of the Vessel

  24. [17] There was no formal written response from Sejin to the 4 April Notice. Instead, Mr Sejun Kim stated that he had a meeting with the Chief Executive Officer of Sejin, Mr Keunhyuk Park (“Mr Park”), sometime in mid-April 2011 to discuss matters. According to Mr Sejun Kim, Mr Park asked him whether the termination could be revoked and the Lease Agreement revived. In response, Mr Sejun Kim replied that the Lease Agreement had been terminated and that this termination could not be revoked with a mere promise by Sejin to pay the outstanding rental.

  25. [18] On 9 May 2011, the Chief Executive Officer of HKA who signed off on the 4 April Notice, Mr Jaejeong Yoo (“Mr Yoo”), issued a further notice to Mr Park reiterating that Sejin had “lost all the benefit of time” for payment of the rental arrears. In the notice, Mr Yoo demanded immediate payment of sums due as well as the return of the Vessel by 13 May 2011. However, Sejin failed to do either.

  26. [19] On 23 May 2011, Sejin wrote in response to HKA’s 9 May letter. Sejin explained that it had been unable to discharge its monthly payment obligations because frequent breakdowns of the Vessel had affected her normal sailing schedule. However, Sejin went on to inform HKA that it “finally … [had] the opportunity to pay the entire overdue lease amount” out of freight earnings under certain prospective sub-charters which it had entered into. The details of these fixtures were provided to HKA and included a charterparty dated 13 May 2011 which Sejin had entered into with the plaintiff in Admiralty in Rem No 197 of 2011 (“ADM 197/2011”), Frumentarius Ltd (“Frumentarius”), for a voyage from Belawan, Indonesia to Taman, Russia. Sejin stated that the freight earnings from these fixtures would amount to roughly US$1.7m and requested that the deadline for repayment of the outstanding rental sums be changed to 17 June 2011. I pause to observe that the charter-hire arrears at this stage only amounted to 289,430,562 Korean Won (approximately US$261,445.52 at the current exchange rate). Sejin concluded its letter with the following statement: “If our company cannot keep the above payment promise, we promise that our company will agree to all the actions your company will take, and will implement all the instructions related to the ship retrieval.”

  27. [20] Sejin did not receive any written response from either HKC or HKA until 14 June 2011. Sejin continued to trade using the Vessel in the intervening period and, on 31 May 2011, provided HKA with a written update that the Vessel had entered Belawan and was in the process of loading palm oil cargo. Sejin also stated that the Vessel would proceed next to Dumai, Indonesia for additional loading before heading towards the Mediterranean Sea and then the Black Sea for discharge. Neither HKC nor HKA reacted to Sejin’s advice on the Vessel’s loading schedule in spite of the purported termination of the Lease Agreement.

  28. [21] In accordance with the itinerary outlined in Sejin’s letter, the Vessel completed loading three parcels of palm oil cargo at Belawan on 4 June 2011. The cargo was owned by the plaintiff in Admiralty in Rem No 198 of 2011 (“ADM 198/2011”), a Russian company known as KRC Efko-Kaskad LLC (“KRC”). KRC had sub-chartered the Vessel from Frumentarius for carriage of its goods to Taman. The Vessel then proceeded to Dumai, where she completed loading an additional parcel of palm oil cargo on 11 June 2011 owned by the plaintiff in Admiralty in Rem No 201 of 2011 (“ADM 201/2011”), a Swiss company known as Mercuria Energy Trading SA (“Mercuria”), to be shipped to Huelva, Spain. On 13 June 2011, while at Dumai, the Vessel also stemmed bunkers which were supplied by the plaintiff in Admiralty in Rem No 184 of 2011 (“ADM 184/2011”), Winplus Corporation Co Ltd (“Winplus”).

  29. [22] On 14 June 2011, HKA issued a formal written response to Sejin’s letter dated 23 May 2011. In this response, HKA made reference to the 4 April Notice and its letter of 9 May 2011 and stated that, in light of Sejin’s non-compliance with the demands for payment and return of the Vessel, Sejin’s conduct was “an embezzlement and subject to criminal penalty”. HKA further stated that it could not fully accept Sejin’s request to postpone the deadline for repayment and then set out a number of conditions which Sejin had to fulfil if it wanted to revive the Lease Agreement. Despite HKA’s position, however, the Vessel was neither redelivered nor was payment of the arrears made by Sejin. Instead the Vessel proceeded from Dumai to Singapore where she arrived on 16 June 2011. On 30 June 2011, the Vessel took on more bunkers, which were also supplied by Winplus.

  30. [23] In his affidavit, Mr Sejun Kim stated that he had learnt of the Vessel’s presence in Singapore from Mr Park on 29 June 2011 and HKA immediately sent out a final notice for its redelivery. Sejin responded in a letter dated 4 July 2011 stating, inter alia, that it was not intentionally delaying the return of the Vessel and elaborating, “[w]e wanted to return the ship safely through the ship’s normal sailing route, but the situation does not allow us to do that so far”. On 15 July 2011, Sejin sent a further letter to Mr Sejun Kim which, while pertaining mostly to the description of certain transhipment arrangements, also contained the following statement: “we will do our best to return the ship to Korea as soon as possible.”

  31. The arrest and sale of the Vessel

  32. [24] Despite Sejin’s express desire to eventually redeliver the Vessel to HKC, that was never in fact done because, on 28 July 2011, Winplus filed an in rem writ against the Vessel to commence ADM 184/2011 and arrested her in Singapore on the same day. Winplus’ invocation of the court’s admiralty jurisdiction was based on its claim solely against Sejin, the demise charterer of the Vessel, for the unpaid bunkers which were supplied in Dumai and in Singapore.

  33. [25] On 8 August 2011, three further in rem writs commencing ADM 197/2011, ADM 198/2011 and ADM 201/2011 were issued against the Vessel by Frumentarius, KRC, and Mercuria respectively. All three writs named the owners and/or demise charterers of the Vessel as defendant. Frumentarius’ claim was for the loss or damage arising from the breach of the charterparty entered into with Sejin, while KRC and Mercuria’s claims arose from the non-delivery of their cargoes to Taman and Huelva respectively.

  34. [26] Between 22 and 23 August 2011, HKC entered appearances in all the in rem actions as the registered owner of the Vessel. Sejin did not enter any appearances.

  35. [27] On 7 October 2011, after the parties with cargo remaining on board the Vessel had arranged for their transhipment, the court ordered the Vessel to be appraised and sold. As the bids received did not meet the Vessel’s appraised value, the court approved of its sale below the appraised value on 23 December 2011.

  36. The applications by HKC

  37. HKC’s setting aside applications

  38. [28] On 29 February 2012, HKC filed similar applications in all four admiralty actions seeking, inter alia, to set aside the writs and all subsequent proceedings taken in these actions on the basis that the court’s in rem jurisdiction had not been properly invoked.

  39. [29] The crux of HKC’s case both here and below was that the Lease Agreement had been terminated by the 4 April Notice prior to the issuance of the in rem writs in all the actions. If HKC’s submission is correct, the plaintiffs would fail in establishing a crucial jurisdictional fact under s 4(4)(b)(i) of the HCAJA, viz, that Sejin, as “the relevant person”, was the bareboat charterer of the Vessel at the time when the various actions were brought. If that is so, the writs must be set aside on the basis that the court had no jurisdiction.

  40. [30] The plaintiffs strenuously denied that the Lease Agreement had already been terminated at the time their respective actions were commenced. Their arguments (both here and below) proceeded along the following lines:

  41. (a) First, HKA had merely been transferred a right to claim the credits under the Lease Agreement and had not, whether by way of the NCT or the ATA, acquired a right to terminate the same. Thus, the 4 April Notice issued by HKA was ineffective in purporting to terminate the Lease Agreement.

  42. (b) Second, even if HKA had the right to terminate the Lease Agreement, the 4 April Notice was nevertheless ineffective because it failed to comply with certain requirements under Art 24(2), such as the specification of the relevant “cause” for termination.

  43. (c) Third, the plaintiffs further submitted that a bareboat charter could generally be brought to an end only upon physical redelivery of the vessel. Thus, the Vessel in this case, having never been physically redelivered, still remained on bareboat charter to Sejin when the in rem writs were issued.

  44. HKC’s striking out applications

  45. [31] As mentioned earlier, two of the four writs contained alternative claims brought directly against HKC as the registered owner of the Vessel. These were the writs issued by the cargo interests, KRC and Mercuria, in ADM 198/2011 and ADM 201/2011 respectively. They claimed that (even if the Lease Agreement had been terminated by the 4 April Notice) in personam liability attached to HKC, who, in permitting cargo to be loaded and in permitting the master to issue bills of lading for the same, had clothed the master with ostensible authority to bind HKC as the registered owner of the Vessel. If this is correct, then the court’s admiralty jurisdiction would have been properly invoked as against HKC since there is no question that HKC, as “the relevant person” in this alternative claim, remained the registered owner of the Vessel at the time when these actions were brought.

  46. [32] In its applications filed in ADM 198/2011 and ADM 201/2011, HKC sought to strike out these alternative claims under O 18 r 19 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“ROC”) and/or the inherent jurisdiction of the court.

  47. The decision below

  48. [33] The Assistant Registrar’s decision may be summarised as follows:

  49. (a) In respect of HKC’s setting aside applications, the Assistant Registrar held that the Lease Agreement was terminated prior to the issuance of the writs. Hence, the court’s admiralty jurisdiction was wrongly invoked insofar as they were based on Sejin’s in personam liability. She reasoned thus:

  50. (i) First, although the ATA and/or the NCT did not transfer HKC’s right to terminate the Lease Agreement to HKA, HKA was nevertheless impliedly or apparently authorised to issue the 4 April Notice for and on behalf of HKC based on the conduct of the parties (see the Judgment at [42], [46]–[48]).

  51. (ii) The 4 April Notice complied with Art 24(2) of the Lease Agreement (see the Judgment at [64]). In particular, the “cause” for termination, viz, Sejin’s non-payment of rental arrears, was sufficiently clear from the 4 April Notice and this was borne out by, inter alia, the background against which this notice had been sent and the parties’ subsequent correspondence which showed that Sejin did not question or challenge the termination (see the Judgment at [67]–[69]).

  52. (iii) The 4 April Notice was not sufficient on its own, however, to terminate the Lease Agreement. At common law, a bareboat charter was brought to an end only when the vessel had been physically redelivered and even though this general rule could be contracted out of by the parties, the terms of the Lease Agreement in this case made it clear that physical redelivery of the Vessel was required for effective termination (see the Judgment at [112] and [122]).

  53. (iv) Notwithstanding the need for physical redelivery, a bareboat chartered ship could be constructively redelivered if there was “some step or acknowledgment by the charterer to give effect to the redelivery” (see the Judgment at [126]). In this regard, Mr Park’s acknowledgment at his meeting with Mr Sejun Kim in mid-April 2011 that the 4 April Notice was a notice of termination constituted constructive redelivery of the Vessel (see the Judgment at [129]). Alternatively, Sejin’s declarations of intent to redeliver the Vessel on 4 and 15 July 2011 were also sufficient to effect constructive redelivery. The Lease Agreement had therefore terminated on 15 July 2011 at the latest (see the Judgment at [136]–[137]).

  54. (b) In respect of HKC’s application to strike out KRC and Mercuria’ s alternative claims in ADM 198/2011 and ADM 201/2011, the Assistant Registrar found that these claims were not so legally and factually unsustainable as to warrant being struck out. If it were accepted that the Lease Agreement had been terminated by mid-April 2011, then HKC could have made it clear that Sejin no longer had the authority to load further cargoes and issue bills of lading. It was also open to HKC to take steps to recover possession of the Vessel but it did not do so. In light of the foregoing, HKC indirectly represented to shippers (such as KRC and Mercuria) that Sejin had the authority to bind HKC to the bills of lading which were issued at the material time (see the Judgment at [153]).

  55. The present appeals

  56. [34] The plaintiffs all appealed against the Assistant Registrar’s decision to set aside their respective in rem writs. They argued that Sejin was still the demise charterer at the time their actions were commenced. Their appeals are as follows:

  57. (a) Registrar’s Appeal No 426 of 2013 (“RA 426/2013”) is Winplus’ appeal in ADM 184/2011;

  58. (b) Registrar’s Appeal No 1 of 2014 (“RA 1/2014”) is Frumentarius’ appeal in ADM 197/2011;

  59. (c) Registrar’s Appeal No 2 of 2014 (“RA 2/2014”) is KRC’s appeal in ADM 198/2011; and

  60. (d) Registrar’s Appeal No 6 of 2014 (“RA 6/2014”) is Mercuria’s appeal in ADM 201/2011.

  61. [35] HKC also cross-appealed against the dismissal of its striking out applications against KRC and Mercuria’s alternative claims:

  62. (a) Registrar’s Appeal No 7 of 2014 (“RA 7/2014”) is HKC’s appeal in ADM 201/2011; and

  63. (b) Registrar’s Appeal No 8 of 2014 (“RA 8/2014”) is HKC’s appeal in ADM 198/2011.

  64. The plaintiffs’ appeals

  65. [36] I begin by considering the plaintiffs’ appeals against the Assistant Registrar’s decision to set aside their in rem actions on the basis that Sejin was no longer the demise charterer at the commencement of these actions. The Court of Appeal has made clear in The “Bunga Melati 5” [2012] 4 SLR 546 (“The Bunga Melati”) at [112] that when there is a challenge to the invocation of the court’s admiralty jurisdiction, the onus is on the arresting party to discharge the following burdens under s 4(4) of the HCAJA:

  66. [37] In the context of the plaintiffs’ appeals, all parties agreed that the “relevant person” under step 3 is Sejin and that the dispute centres only on step 5: was Sejin, on a balance of probabilities, still the demise charterer of the Vessel at the time the four in rem actions were brought?

  67. [38] The parties’ arguments on appeal were broadly similar to what they had advanced below and may be briefly summarised. On one hand, HKC submitted that the 4 April Notice issued by HKA constituted a valid and sufficient termination under Art 24(2) of the Lease Agreement. Thus, HKC argued that Sejin was not the demise charterer of the Vessel at the time the writs were brought. On the other hand, the plaintiffs submitted that the 4 April Notice was invalid because, inter alia, HKA did not have the right to terminate the Lease Agreement. They also submitted, in the alternative, that physical redelivery of the Vessel was essential for the termination of the Lease Agreement and yet this was never done. The plaintiffs also submitted that the doctrine of constructive delivery, which the Assistant Registrar had recognised and applied, ought not to be a part of our law. In the result, they argued that Sejin was still the demise charterer of the Vessel at the time the writs were brought.

  68. [39] These arguments raise the following sub-issues, each of which I will deal with in turn:

  69. (a) Was HKA’s issuance of the 4 April Notice a valid contractual termination of the Lease Agreement under Art 24(2) (“the contractual termination issue”)?

  70. (b) Was physical redelivery of the Vessel further required to bring about effective termination (“the physical redelivery issue”)?

  71. (c) If so, should Sejin nonetheless be regarded as having constructively redelivered the Vessel (“the constructive redelivery issue”)?

  72. The contractual termination issue

  73. [40] Before proceeding to examine the merits of the contractual termination issue, there is a preliminary point that needs to be disposed of. Sejin, in its correspondence with HKC/HKA, did not appear to challenge the validity of the termination under Art 24(2) of the Lease Agreement and has not entered appearance in these proceedings to do so. This raises the question of whether the plaintiffs, as strangers to the Lease Agreement, can question the validity of its termination given that this has not been challenged by Sejin.

  74. [41] As I have stressed at the outset, the question of termination is not merely a contractual issue affecting the immediate contracting parties, ie, Sejin and HKC. It has a pivotal bearing on the jurisdiction of this court in respect of the four in rem writs issued against Sejin. There is no dispute that questions affecting the jurisdiction of the court are to be determined by the lex fori (see The “Kapitan Temkin” [1998] 2 SLR(R) 537). HKC’s reliance on the bald opinion of its expert witness (Prof In Hyeon Kim (“Prof Kim”)) that “the Korean court is unlikely to accept any objection from a third party such as Winplus where the parties to the Lease Agreement and the Notice of Transfer are not questioning the same” is unhelpful. In my view, on issues that go to the root of the court’s jurisdiction, it is entirely appropriate for the court to examine the objective evidence in order to be satisfied as to whether jurisdiction has been made out.

  75. [42] The admiralty jurisdiction of the High Court is conferred by statute and exists where the requisite statutory conditions have been satisfied; it cannot be conferred by the agreement or waiver of the parties if it does not exist under the HCAJA (see The “Ohm Mariana” ex “Peony” [1992] 1 SLR(R) 556 at [15] and The “Alexandrea” [2002] 1 SLR(R) 812 at [10]–[11]). Similarly, the admiralty jurisdiction of this court exists in this case only if the requisite statutory conditions have been satisfied (ie, if Sejin was the demise charterer at the time the writs were brought). HKC’s submission that the doctrine of privity of contract would preclude the plaintiffs from challenging the termination, with respect, misses the point. The issue here is one of jurisdiction and not one of contract. The plaintiffs were not seeking, as non-parties, to sue on the Lease Agreement (which is a purely contractual point). Rather, they were seeking to show that the court has jurisdiction in this matter because the Lease Agreement was still valid when the in rem writs were issued – that is a jurisdictional issue. I agree that it is open to the plaintiffs to challenge the validity of the termination so as to establish jurisdiction in aid of the enforcement of their respective claims notwithstanding Sejin’s apparent acceptance of the termination.

  76. [43] Counsel for Winplus, Ms Yogarajah Sharmini (“Ms Sharmini”), helpfully drew my attention to two cases where the validity of the termination of the bareboat charters was examined by the court on points not pursued by the bareboat charterers. In Ships “Hako Endeavour”, “Hako Excel”, “Hako Esteem” and “Hako Fortress” v Programmed Total Marine Services Pty Ltd (2013) 296 ALR 265 (“The Hako Fortress”), the arresting party (not the bareboat charterer) argued that the notice of termination was invalid as it was served at an address different from that specified in the bareboat charter. Similarly in ASP Holdings Ltd v Pan Australia Shipping Pty Ltd (2006) 235 ALR 554 (“ASP Holdings”), the arresting party attacked the validity of the termination notice on points which were not raised by the administrator of the bareboat charterer. In both cases, the court nonetheless examined the points raised by the arresting parties to determine whether the bareboat charters had been validly terminated pursuant to the notices. In the case of The Hako Fortress, the court held that the notice was valid while in ASP Holdings, the court accepted the argument raised by the arresting party and found the notice to be invalid. These cases illustrate that the validity of a termination notice – which has a material impact on jurisdiction – can and must be examined by the court notwithstanding the fact that the bareboat charterer might have accepted the termination as being valid.

  77. (1) HKA did not acquire the right to terminate the Lease Agreement under the ATA and/or the NCT

  78. [44] The contractual termination issue received much attention by the experts. Much ink was spilled on the question whether the right to terminate the Lease Agreement had been transferred under the ATA and/or the NCT. On this issue, I agree with the Assistant Registrar that the ATA did not purport to transfer the right of termination from HKC to HKA and that the only asset which was transferred thereunder was the credit payable to HKC under the Lease Agreement. On this score, there can be no dispute that the right to terminate was not transferred under the ATA. I also agree with the Assistant Registrar that the NCT could not be relied on by HKA to terminate the Lease Agreement since it served merely as a notice to Sejin of the intended credit transfer and could not transfer more rights than was transferred under the ATA. In this context, it is pertinent to note that the NCT was served prior to the execution of the ATA. Accordingly the operative instrument which dealt with the transfer of the “assets” was the ATA and no more.

  79. (2) The requisite opinion under Art 24(2) must have been formed by HKC

  80. [45] The Assistant Registrar, having arrived at the above finding, then proceeded to find that HKA had implied and/or apparent authority to issue the 4 April Notice on behalf of HKC. This is where I part company with the Assistant Registrar’s reasoning. I am of the view that this inquiry is premature. Instead, I am of the view that a more fundamental question arises from the plain wording of Art 24(2) of the Lease Agreement. Article 24(2) was set out earlier but I reproduce it again for ease of reference:

  81. [46] It is clear that there are two conditions precedent to the exercise of the right of termination under Art 24(2). First, it is necessary for HKC to form an opinion that Sejin is unable to carry on with its normal business activities. Second, HKC must specify the cause for the formation of the opinion in the notification sent to Sejin. I shall deal with the second condition later. For now, I observe that the first condition premises the right to termination on the formation of a subjective, bona fide opinion by HKC regarding Sejin’s circumstances and the viability of the Lease Agreement. However, there was simply no evidence by any of the experts (whether under Korean law or otherwise) that this requirement could be satisfied upon proof that HKA (and not HKC) had formed the requisite opinion.

  82. [47] The Privy Council’s decision in Loke Hong Kee (S) Pte Ltd v United Overseas Land Ltd [1981–1982] SLR(R) 424 (“Loke Hong Kee”), which arose on appeal from a decision of the Court of Appeal in Singapore, is apposite. In that case, the court had to consider a clause in a building contract which entitled the respondent employer to determine the appellant contractor’s employment if, inter alia, the works were “in the opinion of the [respondent’s] architect unsatisfactory”. Lord Keith of Kinkel (delivering the judgment of the Board) interpreted this particular provision at [11] as follows:

  83. [48] The lack of any evidence to suggest that HKC had formed the requisite opinion when the 4 April Notice was issued is therefore an insuperable barrier to HKC’s present claim that the Lease Agreement was validly terminated by HKA in accordance with Art 24(2). I note that Mr Sejun Kim filed an affidavit on HKC’s behalf in these proceedings to state that HKC had indeed been gravely concerned about Sejin’s continued performance of the Lease Agreement at the material time (see [14] above). He elaborated that several factors were responsible for HKC arriving at this view, viz, (a) Sejin’s failure to make rental payments for a period of six months; (b) the Vessel’s substantial depreciation in value; and (c) the extremely bad worldwide market conditions for trading the Vessel. However, apart from the non-payment of rental arrears, the two other points were not stated in the 4 April Notice. Further, Mr Sejun Kim’s assertions were not supported by any sort of contemporaneous evidence: there was, for example, no email or other written evidence showing that HKC had formed and communicated such opinion to HKA before the latter proceeded to issue the 4 April Notice. This may be usefully contrasted with Loke Hong Kee where there was clear evidence at [6]–[7] that the respondent had only exercised its right to terminate the appellant’s employment after receiving a letter from its architect explaining the basis of his opinion that the progress of the works was unsatisfactory. Mr Sejun Kim’s assertions, it should be added, were also not supported by any affidavit from Mr Yoo of HKA confirming that the purported termination by HKA had indeed been exercised on the basis of HKC’s opinion.

  84. [49] I observe that Prof Kim had stated in his first opinion that, given the circumstances described by Mr Sejun Kim, there was “enough for HKC to form its view” to terminate the Lease Agreement under Art 24(2) (see [139] below). Whether or not Sejin’s circumstances were serious enough to warrant termination in HKC’s opinion is irrelevant. The pertinent question is whether HKC did, in fact, form such an opinion. This point is, self-evidently, something which only HKC can know and which therefore only HKC can make good through the evidence of its authorised representatives. Prof Kim had been offered as an expert witness. He was not a factual witness who had been called to give evidence on HKC’s behalf. Accordingly, it was entirely out of bounds for Prof Kim to express his own opinion as to what would constitute circumstances serious enough for HKC to form an opinion that the Lease Agreement should be terminated. I further observe that Prof Kim had also gone on to express in his second opinion that even if HKA did not have the express right to terminate the Lease Agreement in issuing the 4 April Notice, HKA was nevertheless authorised to do so for and on behalf of HKC (see [142] below). It bears repeating that this is a matter which Prof Kim has no personal knowledge of. In fact, his opinion on this issue was completely without foundation because there is nothing on the face of the 4 April Notice to suggest that HKA was issuing it on behalf of HKC. Ultimately, Prof Kim’s apparent zeal to cover all bases in support of HKC’s position here has, in my assessment, served only to compromise his standing as an expert.

  85. [50] In summary, even if HKA were authorised to terminate the Lease Agreement (as the Assistant Registrar had gone on to find), it could only do so under Art 24(2) if HKC had formed the requisite opinion, but there is no evidence on which I am able to conclude that it did. Thus, the 4 April Notice did not validly terminate the Lease Agreement under Art 24(2). Nevertheless, before I leave this point, I should express some views on the Assistant Registrar’s finding of HKA’s apparent authority to issue the 4 April Notice (see [33(a)(i)] above). She correctly cited relevant authority to demonstrate that, for apparent authority to arise, there must be: (a) a representation by the principal to a third party that the agent had the authority to enter into the transaction on its behalf; and (b) reliance by the third party on the principal’s representation.

  86. [51] However it must be emphasised that the doctrine of apparent authority is typically relied on by a third party to prevent the principal from resiling from transactions entered into by the agent. The doctrine is not open to be invoked by the principal as a means of retrospectively legitimising or validating the otherwise unauthorised acts of its agent in the absence of ratification. The doctrine of apparent authority has therefore been described in G E Dal Pont, Law of Agency (LexisNexis Butterworths, 3rd Ed, 2014) (“Dal Pont”) at para 20.3 as having a “negative” as opposed to “positive” impact. This can be traced to the widespread judicial acceptance of its theoretical underpinning in the doctrine of estoppel (see, eg, Rama Corporation Ld v Proved Tin and General Investments Ld [1952] 2 QB 147 at 149; Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd and another [1964] 2 QB 480 at 503; ING Re (UK) Ltd v R&V Versicherung AG [2006] 2 All ER (Comm) 870 at [99]). Hence, the doctrine of apparent authority has erstwhile been referred to as “agency by estoppel” (see The Law of Contract in Singapore (Andrew Phang Boon Leong gen ed) (Academy Publishing, 2012) (“The Law of Contract in Singapore”) at para 15.040). Once it is recognised that apparent authority is based on estoppel, the uni-directional manner of its operation becomes clear: it may be called in aid by a third party to prevent the principal from denying the authority of his agent which he has represented to be genuine but, crucially for present purposes, it does not allow the principal to positively assert or rely on the apparent authority of his agent to improve his position. Many commentators have therefore stated that a principal may not rely on the apparent authority of its agent to enforce a contract which the latter has entered into (see Peter Watts and F M B Reynolds, Bowstead and Reynolds on Agency (Sweet & Maxwell, 20th Ed, 2014) at para 8-029; Roderick Munday, Agency: Law and Principles (Oxford University Press, 2nd Ed, 2013) at para 4.49; The Law of Contract in Singapore at para 15.044; Dal Pont at para 20.3). I do not see why the outcome should be any different where the principal seeks to rely on the same to argue that such a contract has been terminated to his advantage.

  87. [52] For the reasons stated above, I find that, with respect, the Assistant Registrar erred in her application of the doctrine of apparent authority. HKC (the apparent principal) cannot rely on HKA’s apparent authority to issue the 4 April Notice to assert that the Lease Agreement had been validly terminated.

  88. (3) Sejin’s non-payment of rental simpliciter is a cause for termination under Art 24(1) and not Art 24(2)

  89. [53] In my view, there is a further difficulty with HKC’s argument that the 4 April Notice validly terminated the Lease Agreement under Art 24(2). According to para 3 of the 4 April Notice, it appears that HKA relied on the fact that Sejin had “lost all the benefit of time of debt” as the basis for asserting its right of termination under Art 24(2) against HKA (see [15] above). The experts disagreed as to whether this sufficiently specified the “cause” of termination as required under Art 24(2). That dispute led the Assistant Registrar to consider the conduct of the parties prior to and subsequent to the issuance of the notice to determine whether Sejin was under any confusion as to the cause for the termination. However, I consider that the 4 April Notice is beset with a more fundamental problem. It appears to me that the purported reason given, viz, Sejin’s non-payment of rental arrears simpliciter, cannot even trigger the right to terminate under Art 24(2) to begin with. Let me explain.

  90. [54] Article 24(2) is a general provision which allows for the termination of the Lease Agreement. It is preceded by Art 24(1), which sets out a separate procedure for terminating the Lease Agreement predicated on the occurrence of certain clearly defined events. Article 24(1) is a lengthy provision but it suffices for me to reproduce only the following portion:

  91. [55] Article 24(1) of the Lease Agreement sets out a clear schema for an exercise of the right of termination. It lists a total of 14 specific events. If the first seven are present, it is unambiguously stated that HKC shall issue a rectification notice to Sejin and it is only if Sejin fails to make the necessary rectification after the expiry of a ten day period that the right to termination arises. For the next seven, HKC has the right to immediate termination without needing to give Sejin a period of time to make rectification.

  92. [56] Sejin’s failure to make its monthly rental payments timeously falls within the former category of events. In my view, the comprehensive list of events as set out in Art 24(1) of the Lease Agreement shows that the parties had painstakingly addressed their minds to the situations in which termination should be preceded by the issuance of a prior rectification notice and those which should give rise to an immediate right of termination. The failure to make timely payment of rental belongs to the former category. Holding that this same ground, without more, can nevertheless provide cause for immediate termination without prior notice under Art 24(2) would render Art 24(1) otiose and would remove from Sejin a contractual safeguard against immediate termination which – on a proper construction of the termination regime in Art 24 – it appears the parties intended for Sejin to have.

  93. [57] This begs the question: what, then, is the ambit of Art 24(2)? Article 24(2) appears to be worded quite broadly: it states that the Lease Agreement may be terminated in the event that HKC is “of the opinion that [Sejin] is facing difficulties in continuing its normal business activities due to any reason whatsoever… [HKC] may terminate this contract with notification specifying the cause towards [Sejin]” [emphasis added]. However, one must be careful not to place undue emphasis on this italicised phrase or divorce it from the rest of the clause. The “cause” (which Sejin must be notified of) is not any reason underlying the termination at large. Instead, on my interpretation of Art 24(2), the “cause” must specifically refer to the reason why HKC has formed its opinion that Sejin “is facing difficulties in continuing its normal business activities”. And, in this connection, it is of some significance that Art 24(2) has enumerated by way of illustration a list of events that might make it difficult for Sejin to continue its normal business activities, eg, application of bankruptcy, compulsory composition, and company rehabilitation procedure. While these reasons are expressly stated to be non-exhaustive, their collocation discloses the parties’ intentions that the particular reason relied on for termination under Art 24(2) without prior notice must bear some relation to Sejin’s ability to operate as a going concern. Properly construed, Sejin’s mere inability to pay its debts to HKC simpliciter does not fall within this category. Instead, that event is governed by Art 24(1) which specifically provides that termination on this ground must be preceded by a rectification notice.

  94. [58] For completeness, I will add that there is no evidence before the court that, at any time prior to the 4 April Notice, Sejin had been sent any notices to effect immediate rectification. Thus, there is no basis for concluding (and neither did HKC raise such a point) that the Lease Agreement had been terminated under Art 24(1).

  95. (4) Conclusion

  96. [59] In summary, I find that the 4 April Notice was invalid for three reasons. First, HKA had not been transferred the right of termination and therefore could not have terminated the Lease Agreement under Art 24(2). Second, a valid termination under Art 24(2) is premised on HKC having first formed an opinion that Sejin could not continue its normal business activities. On the facts, HKC had not formed such an opinion. Third, the non-payment of rental arrears simpliciter is not a “cause” that gives rise to a right of immediate termination under Art 24(2). In the premises, I am satisfied on a balance of probabilities that Sejin remained the demise charterer under the Lease Agreement at the time the plaintiffs’ respective in rem actions were commenced. Hence I allow the plaintiffs’ appeals against the Assistant Registrar’s order to set aside the four in rem writs. There is strictly no need for me to consider the remaining two issues which I had outlined earlier at [39] but, as I heard extensive submissions on both these matters, I will proceed to express my views on them.

  97. The physical redelivery issue

  98. [60] Assuming that the 4 April Notice constituted a valid notice of termination, the question then arises as to whether the notice itself was sufficient to terminate the Lease Agreement or whether Sejin was nevertheless additionally required to physically redeliver the Vessel to bring the Lease Agreement to an end. In more general terms, is physical redelivery necessary to terminate a bareboat charter?

  99. [61] This is a novel question of law insofar as Singapore is concerned but it has been judicially considered in several other Commonwealth jurisdictions, notably, in Australia (see Patrick Stevedores No 2 Pty Ltd v MV “Turakina” (1998) 154 ALR 666 (“The Turakina”), CMC (Australia) Pty Ltd v The Ship “Socofl Stream” [1999] FCA 1419 (“The Socofl Stream (jurisdiction)”), ASP Holdings, The Hako Fortress), New Zealand (see The “Rangiora”, “Ranginui” and “Takitimu” [2000] 1 Lloyd’s Rep 36 (“The Rangiora”)) and Hong Kong (see Gulf Marine and Industrial Supplies Inc v The Demise Charterers of the Ship or Vessel MV ‘Trident Dawn’ (Qatar Flag) [1992] HKCFI 273). The Assistant Registrar undertook an extensive survey of these cases and eventually arrived at the following view on the state of the law regarding the need for physical redelivery (see the Judgment at [112]):

  100. [62] According to the Assistant Registrar, two clear propositions emerge from the cases. First, as a general rule, physical redelivery is necessary to terminate a bareboat charter and, second, parties may contract out of this rule through the use of specific provisions in the bareboat charter itself. I agree with the first but not the second.

  101. [63] I should mention that in their submissions on the physical redelivery issue, the parties relied on the common law and not on Korean law. Counsel for HKC, Mr Henry Heng (“Mr Heng”), argued that, on a proper reading of the relevant clauses in the Lease Agreement, it is clear that the parties have contracted out of the general common law rule requiring physical redelivery. However, according to counsel for the respective plaintiffs, the Lease Agreement did not have such effect and in fact contained a clause which reinforced the requirement of physical redelivery.

  102. [64] Before analysing the parties’ submissions, I will first explain why I agree with the Assistant Registrar’s views on the general common law requirement for physical redelivery.

  103. (1) The general rule at common law

  104. [65] The requirement of physical redelivery is intrinsically tied to the distinctive nature of a bareboat charter.

  105. [66] A bareboat charter essentially operates as a lease of the vessel to the charterer. The services of the master and crew may or may not be superadded but, ultimately, what is critical is that they are for all intents and purposes the servants of the charterer, and, through them, the possession and control of the vessel is vested in the charterer (see Sir Bernard Eder et al, Scrutton on Charterparties and Bills of Lading (Sweet & Maxwell, 22nd Ed, 2011) (“Scrutton”) at para 4-002). It has therefore been said that the hallmark of a bareboat charter is the transfer of possession and control of the vessel from the owner to the charterer (see The “Guiseppe di Vittorio” [1998] 1 Lloyd’s Rep 136 at 156). A bareboat charter does not transfer legal or beneficial title in the vessel to the charterer but, because possession and control of the vessel resides in him for the duration of the charter, it is not incorrect to speak of him as having temporary ownership of the vessel or as being its owner pro hac vice (see Medway Drydock & Engineering Co Ltd v MV Andrea Ursula [1973] 1 QB 265 at 269). This semblance of ownership explains why I stated at the outset of this judgment that third parties may well believe or assume, in their dealings with the bareboat charterer, that they are in fact dealing with the vessel’s true owner.

  106. [67] It is useful, for present purposes, to observe how the key elements of a bareboat charter, viz, the transfer of possession and control, are absent in other forms of charters. As explained in Scrutton at para 4-003, under a charter which is not by demise, the owner agrees to render services by his master and crew to carry goods put on board his ship by or on behalf of the charterer. In these situations, control and possession remains with the owner at all times through the master and crew who continue to be his servants. This is so notwithstanding the temporary right of the charterer to have his goods loaded and conveyed in the vessel.

  107. [68] The fundamental difference between a bareboat charter and other forms of charters is described succinctly in Tan Lee Meng, The Law in Singapore on Carriage of Goods by Sea (Butterworths Asia, 2nd Ed, 1994) at p 219, where the learned author states:

  108. [69] With these general observations in mind, I turn now to consider the cases on physical redelivery. I begin with The Turakina which, as the Assistant Registrar observed at [77] of the Judgment, has been referred to in almost every case which has dealt with the point of law that concerns us here. In that case, the ship, Turakina, was sub-demise chartered from Deli Shipowners BV (“Deli”) to South Pacific Shipping Ltd (“SPS”) on the standard form known as Barecon 89. She was arrested in Sydney by the plaintiff stevedoring company pursuant to a claim for services rendered. The owner then applied for a release of the vessel on the basis that the court’s admiralty jurisdiction had been improperly invoked. The owner’s case was that the vessel was no longer on demise charter at the time when the proceedings for arrest were instituted because Deli had validly terminated it by issuing to SPS a notice of termination the day before. As in the present case, the crucial question which arose in The Turakina was whether the notice of termination was adequate to terminate the demise charter or whether physical redelivery was additionally required for this purpose. In this regard, the shipowner sought to rely on several cases involving the effective cancellation of time charters by the issuance of withdrawal notices to argue that Deli’s notice was sufficient for terminating the demise charter. Tamberlin J was not persuaded by this approach. He rightly recognised at 675 that there was a “significant distinction” between a time or voyage charter and a demise charter before going on to observe as follows:

  109. [70] The logic applied by Tamberlin J is simple and, in my view, sound. A bareboat charter commences only when the twin ingredients of possession and control have been transferred from owner to charterer. It is therefore brought to an end only if there is, by the same token, a transfer back of possession and control. It is difficult to see how that can be effected without a physical redelivery of the bareboat chartered vessel. Applying that reasoning, in the absence of physical redelivery, the demise charter was found to have remained valid in The Turakina and the owner’s application for the vessel’s release was accordingly dismissed. This finding was further reinforced by the terms of the bareboat charter which, at Cl 10(a), expressly stipulated that hire shall continue to be payable until the day and hour of redelivery of possession of the vessel. Tamberlin J then went on to observe at 677 that there was also no step or acknowledgment by the bareboat charterer to “give effect to the redelivery”. This observation, as will be elaborated below, became the source of inspiration for the doctrine of constructive redelivery.

  110. [71] The subsequent case of The Rangiora involved the arrest of three of Turakina’s sister ships in Auckland, New Zealand. These vessels were also demise chartered by SPS from Deli on the Barecon 89 form. Deli had issued termination notices prior to the commencement of various in rem actions against the vessels and, again, the question arose as to whether or not the court’s in rem jurisdiction had been properly invoked. Giles J noted at 52 that the question of whether redelivery was necessary to terminate the demise charters constituted “the fulcrum of the case” and, on this crucial question, he agreed with Tamberlin J’s views in The Turakina. The following passage from Giles J’s judgment at 55 is relevant:

  111. [72] In summary, the complete transfer of possession and control from the shipowner to the charterer is the very quintessence of a bareboat charter. Thus, physical redelivery (which effects a reversion of the transfer of possession and control) is necessary for its termination.

  112. (2) Can one contract out of the general rule?

  113. [73] Mr Heng submitted that the parties in the instant case had contracted out of the general rule requiring physical redelivery. He referred me to several provisions of the Lease Agreement to make good his submission. Before dealing with the factual analysis whether the contractual provisions were sufficient to allow the parties to contract out of the general requirement for physical redelivery, I should state that I have serious reservations whether this could be done as a matter of law.

  114. [74] The mere issuance of termination notices in The Turakina and The Rangiora were held to be insufficient to terminate the respective bareboat charters in the absence of physical redelivery. However, in The Rangiora, Giles J went on to observe that it is open for maritime parties to make specific provision as to how redelivery is to be effected upon early termination. On the facts, however, Giles J held at 56 that the Barecon 89 form used in The Turakina and The Rangiora did not provide for termination in the absence of physical delivery:

  115. [75] It is correct that the Barecon 89 form contains a particular provision that is wholly consistent with the continuation of the bareboat charter up to the point of physical redelivery. This is found in Cl 10(a), the relevant portion of which prescribes that the bareboat charterer’s obligation to pay hire shall “continue until the date and hour when the Vessel is redelivered by the Charterers to her Owners” [emphasis added]. As Giles J noted in The Rangiora at 55, the fact that the contract recognises the continuing obligation to pay charter-hire until redelivery supports the view that redelivery is indeed necessary to terminate the bareboat charter. Tamberlin J also recognised at 676 of The Turakina the importance of Cl 10(a) when he stated that this clause was a sufficient answer to the shipowner’s submission that SPS had, upon issuance of the termination notice by Deli, been reduced to a mere involuntary bailee of the vessel.

  116. [76] However, I fail to see how parties can contract out of the requirement of physical delivery. If it is accepted that the requirement for physical redelivery as a requirement for termination stems from the unique nature of a bareboat charter (viz, that it effects the complete transfer of possession and control), I do not see how parties can simply contract out of its performance. Until physical redelivery is achieved, the bareboat charterer continues to enjoy the full rights of control and possession of the vessel. Perhaps more crucially, third parties will continue to deal with bareboat charterers on the basis of their actual control and physical possession of the vessel.

  117. [77] It may be queried whether the view which I have preferred here is unduly prejudicial to shipowners. Damien J Cremean has, for instance, expressed the opinion in Admiralty Jurisdiction: Law and Practice in Australia, New Zealand, Singapore and Hong Kong (The Federation Press, 3rd Ed, 2008) at p 185 that “there will occur cases where one would want to say a demise charter is over even though possession has not been able to be retaken – perhaps the demise charterer has put it out of the owner’s power to do so”. The concern articulated here seems to be one of fairness – why should a shipowner, who may experience difficulties securing the immediate or prompt redelivery of his vessel upon valid contractual termination, continue to be exposed to the risk of having his vessel arrested in the intervening period as a result of the charterer’s unauthorised trading of the same? There is no doubt some attraction in this view but, to my mind, it fails to take into account the position of third parties in the overall calculus of competing interests.

  118. [78] It is pertinent to stress that third parties who provide services to or load cargo on vessels will often be unaware that the particular vessel is on bareboat charter. Previously, this placed them in an acutely vulnerable position because bareboat chartered vessels were insulated from arrest. Following legal reforms in many jurisdictions, this is no longer the case (see [4] above). The consultation paper prepared by the Attorney-General’s Chambers which preceded the 2004 Amendment in Singapore noted that, although allowing a bareboat chartered vessel to be arrested might, at first blush, appear rather “startling” as it effectively allowed recovery against the shipowner for the liabilities of the charterer, this was nevertheless internationally acceptable and, on the whole, desirable because “an effective admiralty regime should not cast the burden of determining ownership or other relationship with the vessel on the person dealing with the vessel” (see Admiralty Jurisdiction of the High Court: Arrest of Ships on Demise Charter to Secure the Obligations of the Demise Charterer (Consultation Paper) (24 April 2003) LLRD No 1/2003 at paras 4.3–4.4 and 4.8). The legislative scheme in Singapore today – as it is the case across many leading maritime jurisdictions – therefore appears to have struck the balance in favour of third parties who can now deal with a vessel safe in the knowledge that, regardless of whether the party with whom they directly transact is the owner or bareboat charterer, they can arrest the vessel as security for their claims.

  119. [79] In my judgment, holding that a valid contractual termination suffices to bring a bareboat charter to an end in the absence of physical redelivery may upset the aforementioned balance. This is because third parties will find that it is no longer safe to assume that they have contracted with either the owner or bareboat charterer of a vessel in all circumstances. If they deal with the vessel after contractual termination but before redelivery, it is possible that they may have in fact dealt with neither – the owner certainly does not have control and possession of the vessel during this curious period where she is in “limbo” whereas the party in full possession and control is no longer the bareboat charterer following contractual termination. In that event, the third party will have no basis for arresting the vessel and is thus left without security for its claim. This appears to me to cut against the spirit of the 2004 Amendment which, as I have stated, was aimed at lifting third parties from the burden of determining the true state of the relationship between owners and charterers.

  120. [80] I recognise, however, that it may still be possible for third parties to arrest the vessel in certain limited situations notwithstanding the contractual termination of the bareboat charter. This is where it is shown that the master had acted with the ostensible authority of the owner in dealing with third parties, in which event the court’s admiralty jurisdiction may yet be validly invoked on the basis of the owner’s in personam liability. This was found to be so in the case involving the Socofl Stream (discussed below) which is, unsurprisingly, also the principal authority relied on by KRC and Mercuria to resist the striking out of their alternative claims against HKC in ADM 198/2011 and ADM 201/2011. On this view, one may argue that allowing a shipowner to contract out of the general rule may not be as harsh on third parties as it appears.

  121. [81] I am not persuaded by this argument. It is important to appreciate that the Socofl Stream exception does not arise automatically by operation of law. Instead, it is a fact-specific finding limited to circumstances resembling that in the Socofl Stream as discussed at [117]–[121] below. If it were otherwise, it would entirely defeat the shipowner’s purpose in terminating the bareboat charter to begin with (which is to prevent the vessel from being arrested in satisfaction of in personam claims against the bareboat charterer). The Socofl Stream exception remains only of limited application and, with that being so, I am not convinced that it affords sufficient protection to third party interests.

  122. [82] Therefore, in my view, allowing a shipowner to contract out of the general rule requiring physical redelivery works unfairness on third parties because, ultimately, in the absence of such redelivery, it is difficult to see how the change in legal status of the vessel can be made apparent to them. A shipowner is fully aware that, by executing a bareboat charter, he vests complete possession and control of his vessel in the charterer who, as the vessel’s owner pro hac vice, can incur liabilities in respect of the vessel’s use vis-à-vis third parties (even to the extent of exposing the vessel to the possibility of arrest). In other words, an owner who lets his vessel out on bareboat charter does so with his eyes wide open: he knows the risks attendant to such an arrangement and has made a considered commercial decision to proceed. By contrast, a third party has little way of knowing whether the vessel he is dealing with is on bareboat charter, let alone that the bareboat charter has been terminated.

  123. [83] When I examine the balance of competing interests in this context, it seems eminently fair to me that the risk ought to fall on the shipowner. I therefore consider the better position to be that parties cannot contract out of the general common law rule which requires physical redelivery to bring an end to a bareboat charter.

  124. [84] I should point out, however, that the position which I have stated here has not been shared elsewhere. A case illustrating the proposition that parties can contract out of the general rule is The Socofl Stream (jurisdiction). There, the court had to deal with an application by Sovremenniy Kommercheskiy Flot (“Sovcomflot”) to strike out the in rem proceedings commenced by CMC (Australia) Pty Ltd (“CMC”) against the ship Socofl Stream in February 1999 on the basis that the court lacked jurisdiction. The relevant persons named in the writ issued by CMC were Sovcomflot, Kamchatka Shipping Company (“Kamchatka”), and Aurora Navigation SA (“Aurora”). Sovcomflot had demise chartered the vessel from its owners, Aurora, in 1990 and, in turn, sub-demise chartered it to Kamchatka in 1993. On 15 December 1998, Sovcomflot issued a notice purporting to terminate the sub-demise charter on the basis that Kamchatka had failed to make two quarterly payments of hire. Sovcomflot subsequently demanded redelivery of the vessel but Kamchatka did not comply and continued to trade the vessel by loading cargo (which was the subject of the proceedings) in Singapore and Port Klang, Malaysia in early January 1999. The Socofl Stream was finally arrested by Sovcomflot on 25 January 1999 after it had entered the Port of Brisbane. In its striking out application, Sovcomflot argued that its 15 December 1998 notice was effective in terminating the sub-demise charter, notwithstanding Kamchatka’s failure to redeliver the vessel. Thus, Sovcomflot argued, the court had no in rem jurisdiction over the vessel since Kamchatka was no longer the demise charterer at the date of commencement of the proceedings by CMC in February 1999.

  125. [85] One of the central questions which arose in The Socofl Stream (jurisdiction) was the nature of the relationship between Sovcomflot and Kamchatka at the commencement of CMC’s action. Did Kamchatka remain the sub-demise charterer given its continued possession and control of the vessel? Or had Sovcomflot’s termination notice brought an end to the sub-demise charter at an earlier time? Moore J held that the latter view was correct. A key plank of his reasoning concerned Art 11(2)(a) of the sub-demise charter, which read (see [9]):

  126. [86] In Moore J’s view at [27]–[28], this provision conferred on Sovcomflot a “clear contractual right” to terminate the sub-demise charter by giving a telex notice and, in such circumstances, it was “difficult to avoid a conclusion that … the charterer ceased to be a demise charterer from the time of termination at least in the absence of provisions in the charterparty that suggested some other result”. Moore J distinguished The Turakina by observing as follows at [27]:

  127. [87] With respect, I do not find the distinction drawn by Moore J to be entirely convincing. Why should the contractual right to withdraw the vessel and to terminate by telex make such a significant difference? In my view, the latter is no different from the contractual right to withdraw the vessel for non-payment and to claim damages as was the case in The Turakina. Neither clause changes the fact that the bareboat charterer continues to enjoy actual control and possession of the vessel pending actual physical redelivery.

  128. [88] It is worth noting that the revised Barecon 2001 form, which succeeded Barecon 89, was introduced to address the practical difficulties faced by owners in retaking possession of their vessels when the bareboat charter is terminated while the vessel is on the high seas. Clauses 28 and 29 of Barecon 2001 provide as follows:

  129. [89] The decision of Rares J in The Hako Fortress is instructive in explaining how Cll 28 and 29 are intended to operate (see [61], [63] and [64]):

  130. [90] While the intention behind Barecon 2001 might have been to address the redelivery issue, it is not clear to me how making the bareboat charterer a gratuitous bailee, on paper, can dispense with the general requirement for physical redelivery. While it appears to be a neat legal solution that seems to notionally re-vest possession and control in the shipowner, it does not change the reality on the ground (or at sea, as is the case here). Third party rights and liabilities arise from the actual operation of the vessel by the bareboat charterer by reason of the actual transfer of complete control and possession of the vessel to the bareboat charterer. Similar concerns were expressed in ASP Holdings where Cll 28 and 29 of Barecon 2001 came up for consideration. For the sake of comity, Finkelstein J felt constrained to rule at [13] that, consistent with Moore J in The Socofl Stream (jurisdiction), Cll 28 and 29 entitled an owner to terminate a demise charter by merely issuing such notice. However, Finklestein J nonetheless expressed reservations about the notion that one could contract out of the requirement for physical redelivery at [13]–[15]:

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