The 'Chem Orchid': Is Physical Redelivery Necessary To Terminate A Bareboat Charter?

The Singapore High Court, in the recent judgment of The “Chem Orchid” [2015] SGHC 50, considered the requirement of redelivery in the termination of a bareboat charter. This is important in the context of admiralty law, given the crucial implications on the court's jurisdiction to order the arrest of bareboat or demise chartered vessels.

Facts

By a Lease Agreement (Agreement) on 1 February 2010, owners Han Kook Capital (Owners) leased the "Chem Orchid" (Vessel) to Sejin (Charterers) for a period of 108 months. Charterers defaulted on their payment obligations shortly after, and made no payments to Owners from October 2010.

In December 2010 Owners incorporated a new entity HK AMC (HKA) to recover bad debts and transferred to HKA the credits that had accrued under the Agreement.

In April 2011, Owners purported to terminate the Agreement by giving notice to Charterers in accordance with its terms. The termination notice dated 4 April (Notice) was issued by HKA.

Although Charterers did not formally respond to the Notice, there was further communication between parties following its issuance. Of significance is a 15 July letter from Charterers to Owners which stated, inter alia, "we will do our best to return the ship to Korea as soon as possible."

Despite Charterers' express intention to redeliver the Vessel to Owners, that was never done because the Vessel was on 28 July 2011 arrested by bunkers suppliers in Singapore. The arrest was based on a claim against Charterers as the demise charterer of the Vessel. Three further in rem writs were issued against the Vessel on 8 August 2011, by sub-charterers and cargo interests respectively.

Owners' setting aside applications

Owners entered appearance in all the in rem actions and applied to set aside the writs on the basis that the court's in rem jurisdiction had not been properly invoked. Owners' case was premised on the fact that the Agreement had been terminated by the Notice prior to the issuance of the in rem writs. If this was correct, the plaintiffs would fail in establishing a crucial jurisdictional fact under section 4(4)(b)(i) of the High Court (Admiralty Jurisdiction) Act, namely that Charterers, as "the relevant person", were the bareboat charterers of the Vessel at the time the various actions were brought. If that were so, the writs would have to be set aside on the basis that the court had no jurisdiction.

The plaintiffs denied that the Agreement had already been terminated at the time...