DA HUI SHIPPING (PTE.) LTD. (IN CREDITORS' VOLUNTARY LIQUIDATION) v AN RONG SHIPPING PTE. LTD. (IN LIQUIDATION)

Facts

Da Hui Shipping (Pte) Ltd and An Rong Shipping Pte Ltd, both in liquidation and both subsidiaries of Xihe Capital (Pte) Ltd, were jointly and severally liable under a 2018 loan from Bank of America NA, Singapore Branch (BOA). The loan was secured by mortgages over Da Hui's vessel, the Sea Equatorial, and An Rong's vessels, the Ocean Goby and the Ocean Jack. The Sea Equatorial was sold by agreement in October 2020 and part of its proceeds paid down An Rong's share of the loan. BOA then arrested and had the Ocean Goby and the Ocean Jack judicially sold in HC/ADM 92/2021 and HC/ADM 94/2021, and priority orders were made over the proceeds, with the balance going to other in rem judgment creditors, PetroChina International (Singapore) Pte Ltd and Societe Generale, Singapore Branch, whose own claims arose from cargo misdelivery.

Da Hui did not sue in rem. Instead it brought HC/OA 418/2023 against An Rong in the ordinary civil jurisdiction, seeking a declaration that it was subrogated to BOA's extinguished mortgages so as to claim the balance proceeds ahead of others. The Judge accepted Da Hui had a claim in contribution in principle but refused subrogation and dismissed the substantive relief. Da Hui appealed in Civil Appeal No 62 of 2024; PetroChina appeared as a non-party.

Issues

1. Whether the Court of Appeal should hear on the merits a subrogation claim to vessel sale proceeds brought outside admiralty jurisdiction
2. Whether a claimant without a judgment in rem can obtain payment out of sale proceeds or a re-ordering of priority orders
3. Whether an in personam declaration of subrogation could later be used to vary the priority orders in the admiralty actions

Holding

The Court of Appeal declined to hear the appeal on its merits, in the exercise of its power to control proceedings, and dismissed the appeal. It directed that if PetroChina sought costs incidental to the dismissal and the parties could not agree, written submissions limited to five pages be exchanged within 14 days.

Reasoning

The court said the subrogation question concerned a proprietary right to proceeds of a judicial sale of arrested ships, which belongs to the court exercising admiralty jurisdiction under the High Court (Admiralty Jurisdiction) Act 1961. Once a ship is sold, claims that are or could be brought in rem pass to the proceeds, which are distributed among claimants with judgments in rem according to admiralty priorities. OA 418 was a non-admiralty claim against a company in liquidation that tried to reach into those proceeds, so none of the admiralty processes had been engaged. Da Hui's case for subrogation should have been advanced in an action in rem before a court seised of admiralty jurisdiction, and that alone was enough to dismiss the appeal.

Without a judgment in rem, Da Hui had no effective priority. O 33 r 22 of the Rules of Court 2021 lets only a party with judgment against the ship or its proceeds seek a determination of priorities, and Da Hui had merely intervened to state its interest, citing The "Euroexpress" [1988] 2 SLR(R) 232. The proceeds were not affected by An Rong's liquidation, and Da Hui, having filed a proof of debt, was trying to improve its position.

The record showed Da Hui's counsel had deliberately avoided the admiralty route, believing subrogation to an extinguished mortgage might not fall within s 3(1)(c) of the Act, planning to use an in personam declaration to re-order the priorities later. The court held that approach impermissible. It added that a court may reopen priority orders to avoid injustice, but would weigh Da Hui's conduct, including allowing the October 2023 order to be made while its counsel was present and failing to ask for priorities to be deferred while it proceeded to judgment in rem, against the rights of the in rem judgment creditors.

From the judgment