Re Ocean Tankers: Judicial Management Expenses & Priority of Claims
In the matter of Ocean Tankers (Pte) Ltd, the Singapore High Court addressed an application by the judicial managers of Ocean Tankers for directions regarding claims arising from the charter of 76 vessels owned by subsidiaries of Xihe Holdings. The court, presided over by Justice Kannan Ramesh, considered whether these claims constituted judicial management expenses to be paid in priority to unsecured debts. The court held that the judicial management expenses principle generally did not apply to the claims, subject to certain exceptions related to the use of specific vessels.
1. Case Overview
1.1 Court
General Division of the High Court of the Republic of Singapore1.2 Outcome
The court held that the judicial management expenses principle generally did not apply to the claims arising out of the vessels that were the subject of SUM 2085, subject to certain exceptions.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore High Court addresses priority of claims in Ocean Tankers' judicial management, focusing on vessel charter expenses and judicial management expenses.
1.7 Decision Date
2. Parties and Outcomes
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Kannan Ramesh | Judge of the High Court | Yes |
4. Counsels
4. Facts
- OTPL was under judicial management.
- OTPL chartered vessels from subsidiaries of Xihe Holdings.
- OTPL JMs sought directions on whether claims arising from vessel charters were judicial management expenses.
- OTPL JMs issued Notices of Non-Adoption for most vessels.
- Xihe JMs retracted Termination Notices and affirmed bareboat charters.
- OTPL JMs filed SUM 4257 to disclaim bareboat charters.
- The Xihe JMs refused to take redelivery of vessels from the OTPL JMs.
5. Formal Citations
- Re Ocean Tankers (Pte) Ltd, Originating Summons No 452 of 2020 (Summons No 2085 of 2021), [2022] SGHC 55
6. Timeline
| Date | Event |
|---|---|
| HLT filed an application for judicial management | |
| OTPL filed an application for judicial management | |
| The OTPL JMs were appointed as interim judicial managers | |
| The OTPL JMs met with the Xihe Group | |
| Termination Notices were issued by the relevant vessel-owning subsidiaries | |
| Termination Notices were issued by the relevant vessel-owning subsidiaries | |
| Time charters for Ocean Princess and Ocean Pride were terminated | |
| The relevant vessel-owning subsidiaries filed HC/OS 652/2020 | |
| OTPL JMs issued report to the court | |
| Pre-trial conference directed applicants to obtain consent from mortgagees | |
| The OTPL JMs were appointed as judicial managers | |
| Xihe Holdings and four of its vessel-owning subsidiaries were placed under interim judicial management orders | |
| The OTPL JMs sent notices to the vessel owners, electing not to adopt the bareboat charters | |
| The OTPL JMs sent notices to the vessel owners, electing not to adopt the bareboat charters | |
| The Xihe JMs issued notices to the OTPL JMs retracting the Termination Notices | |
| The Xihe JMs issued notices to the OTPL JMs retracting the Termination Notices | |
| The Xihe JMs issued notices to the OTPL JMs affirming the bareboat charters | |
| The Xihe JMs issued notices to the OTPL JMs affirming the bareboat charters | |
| Leave was granted to discontinue OS 652 | |
| The OTPL JMs filed HC/SUM 4257/2020 | |
| The Xihe JMs were appointed judicial managers | |
| The court heard SUM 4257 and granted leave for the OTPL JMs to disclaim the bareboat charters | |
| WongP wrote to Straits Law | |
| The OTPL JMs wrote to OTPL’s creditors | |
| Straits Law responded to the 2 December Letter by e-mail | |
| The Xihe JMs, on behalf of the vessel owners, filed proofs of debt | |
| WongP wrote to Straits Law | |
| Straits Law responded stating that the OTPL JMs did not agree that the claims in the proofs of debt amounted to priority claims | |
| First Creditors’ Meeting | |
| The Xihe JMs emailed the OTPL JMs stating that they agreed to pay certain crew wages that OTPL had claimed for November and December 2020 | |
| The Xihe JMs emailed the OTPL JMs stating that they agreed to pay certain crew wages that OTPL had claimed for November and December 2020 | |
| WongP wrote to Straits Law to demand immediate payment by OTPL of further repair costs incurred by the Xihe JMs and the vessel owners in respect of ten vessels | |
| A representative from the same auditing firm as the Xihe JMs e-mailed the OTPL JMs on behalf of the Xihe JMs on OTPL’s claims for operational expenses | |
| The OTPL JMs filed SUM 2085 | |
| Xihe JMs tendered aide-mémoire | |
| Court gave guidance on which of the claims were judicial management expenses | |
| Hearing date | |
| Hearing date | |
| Parties wrote in with the agreed Scotts Schedule | |
| Judgment date |
7. Legal Issues
- Judicial Management Expenses
- Outcome: The court held that the judicial management expenses principle generally did not apply to the claims arising out of the vessels that were the subject of SUM 2085, subject to certain exceptions.
- Category: Substantive
- Sub-Issues:
- Priority of claims
- Retention of vessels for benefit of estate
8. Remedies Sought
- Directions from the court regarding the priority of claims
- Determination of whether claims are judicial management expenses
9. Cause of Actions
- Breach of Charterparty
- Claims for charterhire and ancillary liabilities
10. Practice Areas
- Judicial Management
- Shipping
- Commercial Litigation
11. Industries
- Shipping
- Oil and Gas
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Re Swiber Holdings Ltd | High Court | Yes | [2018] 5 SLR 1358 | Singapore | Cited for the judicial management expenses principle, stating that certain debts or liabilities may be treated as expenses of the judicial management to be paid in priority to other unsecured debts. |
| Chee Kheong Mah Chaly and others v Liquidators of Baring Futures (Singapore) Pte Ltd | Court of Appeal | Yes | [2003] 2 SLR(R) 571 | Singapore | Cited for the rationale for extending priority to expenses arising out of the retention and continued use of property by a liquidator or judicial manager. |
| In re Oak Pits Colliery Company | Court of Chancery | Yes | In re Oak Pits Colliery Company (1882) 21 Ch D 322 | England and Wales | Cited for the principle that expenses contracted for the purpose of the winding up of a company should be afforded priority. |
| In re ABC Coupler & Engineering Co. Ltd. (No. 3) | High Court of Justice | Yes | [1970] 1 WLR 702 | England and Wales | Cited for the principle that the inquiry is not simply whether property was retained by the liquidator or judicial manager, but whether it was retained for the benefit of the estate. |
| In re Downer Enterprises Ltd | High Court of Justice | Yes | [1974] 1 WLR 1460 | England and Wales | Cited for the principle that the purpose of retention is objectively assessed by the conduct of the liquidator/judicial managers. |
| MK Airlines Property Ltd v Katz | High Court of Justice | Yes | [2014] BCC 103 | England and Wales | Cited for the principle that the judicial management expenses principle would apply even where a company is in interim judicial management. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| Companies Act | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Judicial management
- Judicial management expenses principle
- Bareboat charter
- Time charter
- Notices of Non-Adoption
- Termination Notices
- Redelivery
- Vessel-owning subsidiaries
- Charterhire
- Ancillary liabilities
- Period of use
- Carve-Out
15.2 Keywords
- Judicial management
- Ocean Tankers
- Xihe Holdings
- Charterhire
- Vessels
- Priority of claims
- Insolvency
- Singapore
- Companies Act
17. Areas of Law
16. Subjects
- Insolvency
- Shipping
- Company Law
- Commercial Law