OREXIM TRADING LIMITED v MAHAVIR PORT AND TERMINAL PRIVATE LIMITED & 2 Ors

Facts

Orexim Trading Limited (OTL), a Maltese commodities trader, chartered the vessel Bon Vent from Mahavir Port and Terminal Private Limited (MPT), an Indian shipowner, in late 2013 to deliver crude sunflower seed oil it had sold to Atlantis Middle East FZE. Unknown to OTL, MPT had already agreed to sell the cargo to another buyer, and the goods were released to a final buyer without OTL's instructions. Zen Shipping and Ports India Private Limited (Zen), an Indian ship manager, acted as MPT's agent aboard the vessel. MPT and Zen were controlled by a father and son, and the Singapore company Singmalloyd Marine (S) Pte Ltd (SML) had links to both through one of its directors. OTL later obtained a judgment from the High Court of England and Wales on 7 October 2019 against MPT for breach of a settlement agreement, which remained unsatisfied.

In Suit No 443 of 2020, OTL challenged back-to-back transfers of two MPT vessels, the Bon Chem and the Bon Vent, from MPT to SML and then from SML to Zen, made under memoranda of agreement while MPT was in financial difficulty. OTL sought to have the transfers set aside under s 73B of the Conveyancing and Law of Property Act 1886, declarations that they were shams, an order that the vessels or their value be made available to MPT's creditors, and recognition of the English judgment. The defendants did not appear, but at OTL's request the suit went to trial on the merits. OTL called a beneficial owner, its Ukrainian counsel and a ship sale-and-purchase broker as an expert.

Issues

1. Whether the English judgment against MPT should be recognised in Singapore.
2. Whether the transfers of the vessels were made with intent to defraud creditors and were voidable under s 73B of the CLPA at OTL's instance.
3. Whether the transfers were sham transactions.
4. Whether Zen should restore the vessels or their equivalent value, and on what basis costs should be awarded.

Holding

The High Court allowed the claim and granted the orders sought: it recognised the English judgment, declared the conveyances of both vessels from MPT to SML and then to Zen void under s 73B of the CLPA and as shams, and ordered Zen to restore the vessels or their equivalent value of US$4,717,000 for the Bon Chem and US$2,400,000 for the Bon Vent to MPT. Costs were awarded to OTL against the defendants jointly and severally on the standard rather than indemnity basis.

Reasoning

The English judgment was final and conclusive, the English court had jurisdiction because MPT took part and the settlement agreement had English law and jurisdiction clauses, and no defence such as public policy or breach of natural justice applied, so it was recognised.

Under s 73B, the court found a conveyance made with intent to defraud creditors. MPT was in poor financial shape with a motive to put assets out of reach, and the expert identified highly unusual features: no evidence of delivery to SML or Zen, no repair work by SML, freely varied terms, use of the Mongolian registry that permits provisional registration despite foreign encumbrances, and close links between the parties. OTL need not have been a creditor targeted at the time; it was a person prejudiced, as it could not enforce its judgment against the vessels.

Applying the test that a sham exists where the parties did not intend the legal relations their documents suggest, the court found the transfers were shams. There was no chain of delivery, required repairs were not carried out, payment terms were disregarded, and the facts matched recognised indicators of sham ship transfers.

Avoidance restores the parties to their prior position. Since Zen had disposed of the vessels in breach of a Mareva injunction, restoration in value was appropriate, consistent with the equitable roots and purpose of s 73B, using the expert's valuations. Indemnity costs were refused because the defendants' conduct went to the merits and their non-appearance alone was not enough, though higher-range pre-trial costs were justified by the long-running proceedings.

From the judgment