Shot by both sides? Interpleader proceedings in the OWB saga.

 

The bankruptcy of OW Bunkers in November 2014 has led to many shipowners facing competing claims for the supply of bunkers from ING as assignee of OWB and from physical bunker suppliers. In Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading LLC, http://law.justia.com/cases/federal/appellate-courts/ca2/15-97/15-97-2016-02-24.html, an interpleader was filed on behalf of shipowners and an injunction obtained preventing the imminent arrests of three of vessels by U.S. Oil Trading LLC, the physical supplier of bunkers. The Second Circuit has now rejected U.S. Oil Trading’s appeal. This contrasts with the position in Singapore last year where the Court of Appeal denied interpleader proceedings in similar circumstances. It reasoned that the suppliers’ in rem claims did not compete with ING’s contractual, in personam, claims. In the UK the shipping world awaits with bated breath the decision of the Supreme Court on whether the Sale of Goods Act applies to contracts for the supply of bunkers.

In rem jurisdiction and ‘damage done by a ship’.

In The “Vinalines Pioneer the High Court of Singapore [2015] SGHC 278 has held that a claim for loss of containers on board a vessel did not constitute ‘damage done by a ship’ within the meaning of s.3(1)(d) of Singapore’s the High Court (Admiralty Jurisdiction) Act which is identical to s. 20(2)(e) of the UK Senior Courts Act 1981. Belinda Ang Saw Ean J adopted the externality test applied by Clarke J in The Rama [1996] 2 Lloyd’s Rep 281, to the maritime lien for damage by a ship. To fall within this heading the damage had to be sustained by a person or property external to the ship. Here the total loss of the containers was the result of damage done to the carrying vessel.

Keep right on to the end (of the charter). No constructive redelivery under bareboat charter.

The termination of a demise charter pursuant to the shipowner’s right of withdrawal is a more complex process than with an ordinary time charter. The charterer still has its crew on board the vessel and some time may elapse before the shipowner is able to retake physical possession of the vessel. In the interim charterers may have entered into commitments with bunker suppliers and with cargo owners, pursuant to bills of lading.

In The Chem Orchid Lloyd’s Law Reports , [2014] 1 Lloyd’s Rep. 520, the High Court of Singapore had to decide whether the bareboat charterer, the “relevant person” who would be liable in personam, was the demise charterer when the cause of action arose, so as to found jurisdiction under s.4(4) of the Singapore High Court (Admiralty Jurisdiction) Act, which is in identical terms to s.21(4) of the UK Senior Courts Act 1981. The Assistant Registrar struck out the writs in rem on the grounds that the charter had been terminated prior to the issue of the writs. Accordingly, the vessel could not be arrested in relation to claims arising in the interim between the notice of termination being given and physical redelivery of the vessel to the shipowners.

The decision has now been reversed by Steven Chong J, [2015] 2 Lloyd’s Rep. 666, who held that the charter had not been validly terminated, but even it had, there was no concept of constructive delivery applicable to the termination of bareboat charters which continue until physical redelivery. Therefore, at the time the in rem writs were issued by the bunker suppliers and the cargo claimants, the vessel was still in the possession of the charterers.

On 20 January 2016 the Singapore Court of Appeal held that it had no jurisdiction to hear an appeal from this decision. [2016] SCGA 04.