Norddeutsche Landesbank Girozentrale, Singapore Branch v. The Owners of the Ship or Vessel “Brightoil Glory” (Hong Kong Flag)

CAMP 49/2019

[2019] HKCA 395

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 49 OF 2019

(ON AN INTENDED APPEAL FROM HCAJ NO 4 OF 2019)

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REASONS FOR JUDGMENT

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Hon Kwan JA (giving the Reasons for Judgment of the Court):

1.This is an urgent application for leave to appeal brought by the plaintiff in respect of an order made by Peter Ng J on 27 March 2019, wherein he ordered that the sale pendente lite of an oil tanker “Brightoil Glory” (“the Vessel”), which tender process was due to close at 2 pm on 28 March 2019, be stayed until 24 April 2019. Ng J declined to hear the application for leave to appeal in the afternoon of 27 March. In view of the urgency, the plaintiff sought leave to appeal from the Court of Appeal directly, asking for the intended appeal to be heard at the same time if leave to appeal were to be granted.

2.After hearing counsel for the plaintiff and the defendants, we dismissed the application with costs to the defendants.  These are the reasons for our judgment.

3.The plaintiff is the mortgagee of the Vessel, which is valued at approximately US$60 million.  Its claim is about US$33.8 million.  There is therefore substantial equity in the Vessel of over US$20 million, even taking into account the costs of maintaining the arrest estimated at US$345,000 a month.

4.The Vessel was arrested by the bailiff on 21 January 2019.  The plaintiff issued a notice of motion dated 25 January 2019 for appraisement and sale pendente lite of the Vessel for hearing on 4 February 2019.  The defendants, which are the owners of the Vessel, did not attend the hearing.  Anthony Chan J made an order as sought.

5.Pursuant to the order, an invitation to tender was issued by the registrar on 27 February 2019 and published on 13 March 2019 in newspapers and tenders are to be submitted by 2 pm on 28 March 2019 with completion to take place on 4 April 2019.

6.It was only on 26 March 2019 that the defendants issued a summons for an order that the sale of the Vessel pendente lite be stayed for three months until 27 June 2019.  Ng J did not accede to that application but granted instead a stay until 24 April 2019.

7.The main reason urged by the defendants for a stay is that the Brightoil group of companies, which are in grave financial difficulties, have reached an “advance stage” in the process of re-financing and signed a non-binding term sheet with Oakhill Advisors, a global investment firm.  Oakhill sent a letter dated 12 March 2019 to the plaintiff requesting a standstill agreement in respect of its action against the Vessel but the plaintiff had remained silent.  The defendants sought a stay as the refinancing is based on a defined list of assets and the Vessel is included in the list.  If the assets of the group should change due to the sale of the Vessel, the defendants are afraid that might prejudice the proposed refinancing.

8.Miss Rachel Lam advanced a number of reasons opposing a stay before Ng J and repeated her submissions in this court.  In essence, she submitted that the defendants are potentially in contempt of court in including the Vessel in the refinancing negotiations and thereby attempting to interfere with the court ordered sale process.  She emphasised that to grant a stay in these circumstances would set a poor precedent in that a defendant who is potentially in contempt could, for a “thin reason”, throw the court ordered sale process into disarray by seeking a stay at the eleventh hour.  She submitted this would have an impact not just on the parties but on all those who have submitted tenders for the Vessel and this would reflect poorly on the jurisdiction of the Hong Kong court.  She also stressed the safety concerns of the Vessel in view of the coming typhoon season.

9.These matters have been weighed by the judge in the exercise of his discretion to grant a stay.  We are asked to interfere with the exercise of his discretion.  We are not persuaded there is any valid basis to do so on the well-established principles governing an appeal against the exercise of discretion.  The judge declined to grant a three-month stay as sought and granted a stay short of one month to give a limited opportunity to the defendants to pursue the proposed refinancing.  The defendants have provided an undertaking to the court to pay the costs for maintaining and preserving the Vessel during this period.  The outstanding principal and default interest that will continue to accrue will be secured by the Vessel under arrest with a substantial equity.  It cannot be said that the judge is plainly wrong to take a realistic and pragmatic route and suspend the sale process for a short period.

10.We are not satisfied the proposed appeal would have reasonable prospect of success, nor is there some other reason in the interests of justice it should be heard.  We therefore refused leave to appeal and dismissed the plaintiff’s application.

11.Ng J adjourned paragraphs 2 and 3 of the defendant’s summons regarding directions for re-advertisement by the Chief Bailiff.  To save the parties a further visit to the court and to minimise the delay in the sale process arising from the stay, we invited the parties to provide draft directions for our consideration.  The defendants’ counsel Mr Jonathan Ah‑Weng provided the court with draft directions with feedback from the bailiff.

12.We have varied the second of the undertakings provided by the defendants to the judge so this reads:

“And Upon the Defendants’ undertaking through Counsel to pay the costs for maintaining and preserving the vessel until the sale of the vessel within 7 days upon the issue of an invoice by the Bailiff to the Defendants”.

13.There will be an additional undertaking provided by the Defendants regarding advertisement costs as per the draft submitted by their counsel.

14.In place of paragraph 2 of Ng J’s order, we have made an order in these terms:

“Prior to 24 April 2019, the Bailiff is to contact “The Sing Tao Daily” and “Lloyd’s List” to give advance notice of advertisement to be placed on 2 and 3 May 2019, with final instruction to be provided by the Bailiff by 25 April 2019. The Defendants undertake to pay the advertisement costs.

The advertisement is to run on 2 and 3 May 2019 in the absence of other order.

Tenders are to close on 20 May 2019 at 2 pm.

Sealed bids are to be opened by the Registrar at 2:15 pm on 20 May 2019.

Execution of the sale and purchase with any successful buyer is to take place on 27 May 2019.”

Ms Rachel Lam, instructed by Mayer Brown, for the Plaintiff (Applicant)

Mr Jonathan Ah‑Weng, instructed by Lau, Horton & Wise LLP, for the Defendant (Respondent)