IMSML Website Article 42/2025: New World P&I Service Co Ltd v The Disponent Owner and/or The Demise Charterer of The Ship and/or Vessel “Es Valor” of The Port of Monrovia, Liberia (Huihong (Tianjin) Lease Co Ltd, intervener) [2024] MLJU 3653 - Jurisdictional Challenges and Allegations of a Sham Transaction in a Charterparty Dispute

New World P & I Services Co Ltd (the P, incorporated in the British Virgin Islands) entered into a time charter party with Eversea Valor Co Ltd (EVCL). The charter party document (ie the Eversea CP) was executed on 21 February 2024 for the Vessel ‘ES Valor’ (IMO No. 9843625) registered at the Port of Monrovia, see Paragraph [5]. At the time when the Eversea CP was entered into, EVCL was the demise charterer of the ‘ES Valor’. The demise charter arose when EVCL entered into a financing arrangement with Huihong (Tianjin) Shipping Lease Co Ltd (hereinafter referred to as ‘HuiHong’) who was the registered owner under the Demise Charter. The Demise Charter was in the form of an amended Barecon 2001, with rider clauses, entered into on 25 August 2021, see Paragraph [6].

On 17 May 2024 (three months after the execution of the Eversea CP), New World entered into a voyage charter party (the Phoenix CP) with Phoenix Further Marine Co Ltd (ie Phoenix Marine). On 20 May 2024 (just three days after the Phoenix CP was executed), , EVCL gave repudiatory notice that it would not be able to perform its obligations under the Eversea CP. This notice was given by one Gu Feng, purporting to act as a director of EVCL. No details were given about the notice, except that the notice was given ‘because of our own reasons’, see Paragraph [7].

On 2 June 2024, New World cancelled the Phoenix CP. On 4 June 2024, New World this action and arrested the Vessel on 5 June 2024 as security for their claim against EVCL. The claim was subject to arbitration which New World had commenced in Singapore, see Paragraph [8]. New World argued that it had an action in rem for ‘a claim arising out of an agreement relating to the carriage of goods in a ship or to the use or hire of a ship’ under the UK Senior Courts Act 1981, Section 20(2)(h). Huhong and EVCL disputed that the Eversea CP was valid and enforceable, arguing that the charter party was a sham transaction. Huihong and EVCL also contended that when the P’s writ in rem was filed, the Demise Charter had been terminated. Hence, the Vessel was no longer chartered by demise to EVCL, see Paragraph [10].

What Occurred After EVCL entered the Demise Charter?

On 20 June 2023, EVCL entered into a time charter party with Cargill International Trading Pte Ltd (ie Cargill). The expiry date for the time charter party (the Cargill CP) was 20 June 2024, see Paragraph [12].

What Happened to EVCL’s Sole Director?

Zhou Chang was EVCL’s sole director. Together with one You Min Jun, Zhou Chang was formally indicted for offenses of bribery and embezzlement of the funds of Eversea Shipping Pte Ltd (ESPL). Note that ESPL was the commercial manager of EVCL’s shipping business. Therefore ESPL handled EVCL’s monies, which included income from charter hires for the Vessel, see Paragraph [13].

What were the Implications of the Criminal Charges?

Huihong issued a notice of default as both Zhou Chang and You Min Jun were personal guarantors for EVCL’s obligations under the Demise Charter. Huihong notified EVCL that this was a breach of covenant under Clause 48.1 of the Demise Charter. Huihong said that if the breach is not remedied with 10 business days, that would constitute ‘a termination event’ under the Demise Charter, see Paragraph [14].

Were there Serious Internal Disputes between the Shareholders of EVCL?

There were two suits. The first was one Zhu June filing proceedings in Hong Kong and obtained an injunction against Zhou Chang in Hong Kong. The second one was also in Hong Kong, filed against Associate Reserve Pte Ltd (Associative Reserve), which was the registered owner of the entire shareholding of EVCL. Note that Zhou Chang and You Min Jun held 70 percent and 30 percent of the shares of Associative Reserve respectively, see Paragraph [15]. The objective of the Hong Kong proceedings were to preserve the assets of EVCL and to retrain Zhou Chang from dissipating his assets, see Paragraph [16].

The saga continued on 17 October 2023, when Gu Feng (Zhou Chang’s wife) was purportedly appointed as director of EVCL, replacing Zhou Chang who had resigned earlier that day, see Paragraph [17]. Later on 21 February 2024, Gu Feng purported to appoint Sea Shipping Co Ltd (SSCL) to replace ESPL as the ship manager of EVCL. Later that same day, Gu Feng executed the Eversea CP, purportedly in her capacity as director of EVCL, see Paragraph [18].

On 29 February 2024, Huihong objected to SSCL’s appointment as ship manager of EVCL. Under the terms of the Demise Charter, the appointment of EVCL’s ship manager required the consent of Huihong, which was obviously not forthcoming, see Paragraph [19].

On 19 April 2024, the Hong Kong Court appointed receivers for EVCL. The powers of the receivers were two fold, see Paragraph [20]:

[1] Retake possession of the Vessel;

[2] Take control of, exercise or refrain from exercising all of any rights in respect of the Vessel as they deem fit.

What was the Impact of Termination of the Demise Charter?

Appointment of the Receivers constituted a termination under the terms of the Demise Charter, eg Clause 47 and 49. On 11 May 2024, Huihong issued a notice terminating the Demise Charter, see Paragraph [21]. The termination sum was never paid to Huihong. For almost a month, from 11 May 2024 to 4 June 2024, there was no communication from EVCL on the redelivery of the Vessel. A Seasearcher Vessel Report from Lloyd’s Intelligence showed that the Vessel had called at five ports, ranging from Kandla Anchorage to Port Klang, Anchorage, see Paragraph [22].

At the time of the arrest, the Vessel was laden with cargo belonging to third parties. At that time, the Vessel was still subject to a time charter under the Cargill CP. Under the terms of the time charter, the master and crew were still employed by EVCL, and these personnel were still taking orders from EVCL, see Paragraph [23].

What did the Receivers Actually Know?

The Receivers had no knowledge of the following, see Paragraph [24]:

[1] The Eversea CP;

[2] Gu Feng’s Repudiation Notice on 20 May 2024.

What did Huihong Know?

Huihong was not in the dark as the Receivers, but only came to know about matter much later:

[1] Consolidate Orders from Hong Kong dated 19 April 2024 were only known about on 13 May 2024 by ReedSmith Richards Butler LLP (Hui Hong’s solicitors), see Paragraph [25];

[2] Notice from Messrs Tsui and Co (solicitors acting for EVCL in the HK suit) that Huihong (and its solicitors ReedSmith) should ‘refrain from taking further steps, including selling the Vessels or taking possession thereof until the determination of the discharge application (under the Hong Kong lawsuits), see Paragraph [27].

What did ReedSminth do for Huihong after the Vessel was arrested in this Writ in Rem action?

On 17 June 2024, Huihong reiterated its demand for immediate redelivery of the Vessel through ReedSmith. Huihong also demanded through ReedSmith that EVCL procure the immediate release and redelivery of the Vessel to Huihong. If EVCL failed to do so, EVCL would be held fully liable for the resulting loss and damage, see Paragraph [29].

What were Huihong’s Contentions as Registered Owner of the Vessel?

Huihong challenged the validity of New World’s writ in rem that the jurisdiction of the Court had not properly been invoked against the Vessel. New World’s case was that at the time the cause of action arose and the action brought, EVCL was the charterer of the Vessel under a charter by demise. However, Huihong contended that the evidence showed that EVCL ceased to be the demise charterer of the Vessel. The Demise Charter between Huihong and EVCL had been terminated on 11 May 2024, via its Notice of Termination. New World’s cause of action arose much later on 20 May 2024 when Gu Feng issued the Repudiatory Notice. Further, the action in rem was only instituted on 4 June 2024, see Paragraph [33]. Huihong also contended that both the Eversea CP and the Phoenix CP were sham transactions, see Paragraph [34].

What were the Contentions of the Charterer and Receivers?

The Receivers also contended that the Eversea CP was a sham transaction. In particular, Gu Feng was never validly appointed as a director of the company and had no power to sign the Eversea CP on behalf of the EVCL, see Paragraph [35]. The Receivers also agreed that the Demise Charter was effectively terminated with the Notice of Termination. Therefore, the Vessel was no longer demise chartered to EVCL at the time when the cause of action arose and when New World commenced this Court action, see Paragraph [36].

What were New World’s Contentions?

New World argued that the Eversea CP was a a genuine transaction. New World pointed to the fact that the Eversea CP was entered into on 21 February 2024. This was 2 months prior to the appointment of the Receivers over the assets of EVCL, which only occurred in the Hong Kong Proceedings on 19 April 2024, see Paragraph [37].

New World contended that Gu Feng had the authority to transact on behalf of EVCL based on the following, see Paragraph [38]:

[1] New World had known that Gu Feng was the sole director of EVCL from 17 October 2023 from information that was available publicly;

[2] There was no reason for New World to question Gu Feng’s authority to act;

[3] New World had no knowledge of the injunctions issued by the Hong Kong Court;

[4] New World was unaware of the challenge to Gu Feng’s authority in the Hong Kong proceedings.

New World also had no knowledge of the following, see Paragraph [39]:

[1] The Cargill CP;

[2] Huihong’s Notice of Termination.

New World ( via Jin Jiaxian, its General Manager) also did not dispute the following, see Paragraph [39]:

[1] Wang Bn Qin had worked with ESPL until his termination on 31 July 2023;

[2] Wang Bin Qing had joined New World as its ship or chartering manager since 1 December 2023;

[3] Wang Bin Qing had informed New World that he did not receive the Notice of Termination that HuiHong had sent to his old email address with his previous employment with ESPL;

[4] Wang Bing Qing was not a puppet under Gu Feng’s control;

[5] The Phoenix CP was not a sham transaction.

New World argued it was entitled to arrest the Vessel as EVCL was at all material times the demise charterer. The Vessel had not been physically redelivered to Huihong. Without physical redelivery, there could be no termination of the demise charter, see Paragraph [40].

Did New World Properly Invoke Admiralty Jurisdiction to Arrest the Vessel?

Mr Justice Ong Chee Kwan applied the test in The ‘Bunga Melati 5’ [2012] SGCA 46, which is trite law on the test for invoking Admiralty Jurisdiction. Under this test, the P must show the following 5 steps are satisfied, see Paragraph [42]:

STEP 1 - The P had a claim under the UK SCA 1981, Section 20(2) (Note, in this case under Section 20(2)(h) that the claim arose out of a charter party);

STEP 2 - The Claim arises in connection with a ‘ship’;

STEP 3 - The relevant person liable in the claim would incur liability in an action in personal;

STEP 4 - When the cause of action arose, the relevant person was the owner or charterer of, or in possession or in control of, the ship;

STEP 5 - The relevant person was, at the time the action was brought, either:

[a] The beneficial owner of the offending ship (in respect of all the shares in it) or the charterer of that ship under a demise charter; OR …

[b] The beneficial owner of the sister ship (as respects all the shares in it).

In The ‘Bunga Melati 5’, Mr Justice VK Rajah at Para [107] explained that the 5 STEPS could be classified into:

[1] ‘Jurisdictional Fact’ - to be proven on a balance of probabilities by the P;

[2] ‘Jurisdictional Question of Law’ - to be established by the P that there was a good arguable case;

[3] ’Non-Jurisdictional Matter of Fact or Law’ - the truth of which is to be assumed in the P’s favour at the jurisdictional stage.

Based in The ‘Bunga Melati 5’ principles, New World must discharge the following burden of proof, see Paragraph [45]:

[1] Prove on a balance of probabilities, that the jurisdictional fact the P is relying on under Section 20(2)(h) exist, ie there is an agreement relating to the use or hire of the Vessel; AND …

[2] Show an arguable case that the P’s claim is of a type and nature required by Section 20(2)(h) of the UK SCA 1981, ie the type or nature of the claim is one arising from a breach of the charter party.

At this stage of the case, Mr Justice Ong Chee Kwan reminded that when considering the invoking of Admiralty Jurisdiction, the Court will NOT consider the merits of the claim at all, see Paragraph [46]. To establish jurisdictional fact in the case, his Lordship said that all is needed from New World would be to produce before this Court a copy of the Eversea CP, as this would establish that a charter party actually exists between New World and EVCL. His Lordship explained that this would suffice to satisfy ‘on a balance of probabilities’ that the ‘jurisdictional fact’ exists in respect of New World’s claim based on Section 20(2)(h), see Paragraph [47]. There was also no dispute that New World’s claim arose in connection with a ‘ship’, namely the Vessel ‘ES Valor’. New World had also identified EVCL as the person who would be liable on the claim if the action in personam were proceed, see Paragraph [48]. New World would have to discharge the burden of proving that EVCL had remained in law as the demise charterer of the Vessel, notwithstanding the Notice of Termination issued by Huihong. Otherwise, if New World fails to meet its burden of proof, the Writ in rem would have to be struck out on the ground that admiralty jurisdiction of the Court was not properly invoked, see Paragraph [49]. This is known as the ‘Jurisdictional Challenge’. By contrast, New World would also have to show a ‘good arguable case’ to defat the ‘Merits Challenge’. Huihong and EVCL are trying to show that ‘on a balance of probabilities’ that Gu Feng had not authority to act, and the Eversea CP was a sham, see Paragraph [51].

Is Physical Redelivery of the Vessel Required for Termination of the Demise Charter?

This is one of the cornerstone of the Jurisdictional Challenge to New World’s case. In order to decide this point of law, several dates are important:

[1] 19 April 2024 - Hong Kong Court appointed receivers for EVCL (which is a termination event under the demise charter);

[2] 24 April 2024 - Huihong (through solicitors ReedSmith) issued a Notice of Default to EVCL. This was not contested.

[3] 25 April 2024 - The Receivers unconditionally and irrevocably admitted that the Termination Events referred to in the Notice of Default had occurred, and that Huihong was entitled to terminate the Demise Charter at any time in its absolute discretion;

[4] 11 May 2024 - Huihong (through ReedSmith) issued the Notice of Termination to EVCL, terminating the Demise Charter and demanded payment of the termination sum (under Clause 41 of the Demise Charter);

[5] 20 May 2024 - The cause of action arose when Gu Feng issued the Repudiation Notice;

[6] 11 May 2024 - Notice of Termination issued;

[7] 4 June 2024 - New World commenced the Writ in rem.

In summary, this was Huihong’s arguments with respect to the end of the Demise Charter. The Notice of Termination contained a demand for payment of a termination sum within 5 days of receipt of the notice. Should there be a failure of EVCL to make payment, the Vessel was to be re-delivered to the Owner, and the Master and Crew to follow all orders of the Owner with respect to the Vessel, see Paragraph [57]. After the five days, there was no communication between EVCL and Huihong until this Writ in rem was filed, see Paragraph [58]. Huihong contended that EVCL was holding the Vessel as a gratuitous bailee as EVCL was no longer authorized to have possession and control of the Vessel under the demise charter, see Paragraph [59]. Under the repossession clause (see Clause 29 of the Demise Charter), the Owner had the right to repossess the Vessel at her current or next port of call, or at a port convenient to the Owner, without hinderance or interference by the Charterer, courts or local authorities. Pending the repossession by the Owner, the Charter held the ship as a gratuitous bailee under the terms of the Charter, see Paragraph [59]. Therefore, physical delivery is not a legal requirement for the termination to be valid, see Paragraph [61]. Even though EVCL had continued to use the Vessel to perform its obligations under the Cargill CP in breach of their obligation to redeliver possession and control of the Vessel. However, this does not alter EVCL as a gratuitous bailee of the Vessel, see Paragraph [62].

What were the views of Mr Cooper KC on Termination of the Demise Charter?

The Learned King’s Counsel expressed the view that the English Courts would most likely follow the decision of Steven Chong J in The Chem Orchid [2015] SGHC 50 where the learned judged said by way of obiter dicta that a notice of termination will not be sufficient on its own to terminate a demise charter without physical redelivery of the Vessel to the Owner. Steven Chong J also took the view that the parties cannot contract out of the need for a physical redelivery of the Vessel. As the demise charter was based on possession and control of the Vessel, the Demise Charter was till subsisting at the time of the arrest under the Writ in rem if physical delivery had not occurred, see Paragraph [68]. This situation was very different from time charters, see Paragraph [69]. In The Turakina (1998) 154 ALR 666, Timberlin J pointed out that physical redelivery was not necessary for a time charter that has been terminated, unlike for Demise Charters, see Paragraph [69]. The view of Timberlin J were endorsed and applied by Giles J in The Rangiora [2000] 1 Lloyd’s Rep.36, see Paragraph [69].

Mr Cooper KC, however, acknowledged that there were views to the contrary. For example the Federal Court of Australia in The Socofi Stream [1999] FCA 1419, Moore J held that the the charterer had ceased to be a demise charterer from the time of the termination notice based on a clear contractual right to terminate. However, Moore J pointed out that the contractual provisions in the case before him was different from that in The Turakina, see Paragraph [70]. By contrast, Steven Chong J in The Chem Orchid expressed the view that there was not material difference in the clauses found in the demise charters in both The Turakina and The Scoff Stream. This was a view which was also adopted by Mr Cooper KC, see Paragraph [71]. Under both clauses, the demise charterer continued to enjoy actual possession and control of the Vessel after the termination. In reality there was practical difficulty for the Owners to retake possession of the Vessel as the notice of termination was usually received when the Vessel was at sea, see Paragraph [71]. Mr Cooper KC therefore did not consider it helpful to introduce the doctrine of constructive redelivery when considering if a demise charter had been terminated, see Paragraph [73].

What were the Opinions of Mr Timothy Young KC?

By contrast, the Learned King’s Counsel too the view that a physical handover is not required to achieve the determination of the charter. After termination, even when the Demise Charterer remains with possession of the Vessel, it is in the capacity of a gratuitous bailee, not as a Demise Charterer. The outcome of this termination is expressly provided for in the termination clause of the demise charter, ie expressly agreed to between the parties, see Paragraph [75]. The demise charter very clearly and expressly stipulates that the demise charterer’s legal possession of the Vessel ceases on termination of the demise charter. Therefore, any claims against the former demise charterer is not within the terms of the UK SCA 1981, Section 21(4), see Paragraph [75]-[76].

Mr Timothy Young KC expressed the view that the Australian Federal Court case of Dan-Bunkering (Singapore) Pte Ltd v The Ship ’Yangtse Fortune (No.3)’ [2024] FCA 219 was the more persuasive authority as it is the more recent decision, see Paragraph [78]. In the Dan Bunkering case, once notice of termination had been served, the charter party terminated even without some other act of repossession. Even though the demise charterers remained in possession of the Vessel, they did not do so as contractual demise charterers, but rather a gratuitous bailees. The Dan Bunkering case relied on two previous cases, see Paragraph [79]:

[1] The Ship Hako Endeavour v Programmed Total Marine Services Pty Ltd [2013] FCAFC 21; AND …

[2] Taxidiortiki - Touristiki Natuiliaki v MV Columbus [2021[ Lloyd’s Rep Plus 67.

The Dan Bunkering case is preferred by Mr Timothy Young KC for the following reasons, see Paragraph [80]:

[1] The Demise Charter is the document which provides for amounts to ‘possession and control’ and the Barecon 2001 from BIMCO was intended to strengthen the hand of the owner with Clause 29;

[2] After termination the fundamental relationship between the parties is no longer one of owner and charterer, but rather changed contractually to one of owner and bailee;

[3] The gratuitous bails relationship only governs the ‘short term’ relationship post-termination and the re-possession of the ship where there may be an obstacle to re-possession of the ship. It is premised being short and the obstacle being transient.

[4] If the notice of termination is effective to bring the demise charter to an end, a third party that has an in rem claim should not be deprived of it. The question that should always first be asked is whether the third party had indeed an in rem claim in the first place;

[5] There is no reason why the rights of third parties should have priority over the rights of shipowners. It is unlikely that any third party would bother to inquire into the contractual relationship between the owners / charterer and between master / crew, before entering into a transaction, The unattractive result is that a defaulting charterer can unlawfully retain possession and unlawfully confer the benefits upon a third party (even if the third party knows of the unlawfulness). The odd result is that the innocent party must, by definition, have in personam rights which remain enforceable;

[6] In respect of the Cargill CP, just because the Vessel was engaged in offloading a cargo tells one nothing about who is in possession of, or ‘trading’, the Vessel. The only thing that is obvious is that the Vessel’s staff were effecting the discharge so as to render the vessel cargo free. It does not establish that the Vessel was under a demise charter with EVCL.

What were the Views of Henry Byam-Cooke KC?

Relying on The Munster [1983] 1 Lloyd’s Rep.370, the learned King’s Counsel took the view that the Owner’s acceptance of a repudiatory breach of the charterparty was sufficient to bring the demise charter to an end, see Paragraph [81]. There was also reliance on The Guiseppe where the Court had decided that the rights of the Charterer are to determined by the contractual terms of the demise charter, and what happens in the event of a repudiatory breach, see Paragraph [82].

Mr Byam-Cooke KC confined the views of Steven Chong J in The Chem Orchid as merely obiter. Once Huihong gave notice of termination, the demise charter came to an end. Therefore EVCL ceased to be a demise charterer from that point on, see Paragraph [85]. There was also no evidence of acquiescence by Huihong to the continued possession and control of the Vessel by EVCL, see Paragraph [88].

Which view was Preferred by Mr Justice Ong Chee Kwan?

His Lordship said that he was inclined to follow the approach taken by Steven Chong J in The Chem Orchid which Mr Cooper KC had accepted as the position that most likely represents English Law on the termination of a demise charter in the context of the jurisdictional issue, see Paragraph [91]. Where the owner has served notice of termination and asserted its right to take possession of the Vessel, but the charterer is permitted to continue with possession and control of the Vessel, the nature of the relationship between Owner and Demise Charterer not been altered at all. The Demise Charterer continues to assume the debts and liabilities as it trades with third parties. These third parties have no knowledge of the termination, see Paragraph [93].

Mr Justice Ong Chee Kwan also added that the Court should strike a balance in favour of third parties. This enables third parties to deal with the Vessel, safe in the knowledge that they can arrest the Vessel for their claims regardless of whether the party they are dealing with is the Owner or the Demise Charterer. Otherwise observed his Lordship, a third party may be exposed to the possibility of having no remedy at all, see Paragraph [94].

Steven Chong J in The Chem Orchid also opined that the question of repossession goes to the heart of whether a bareboat charter remains in force. The mere constitution of the charterer as a gratuitous bailee under the terms of the charter, cannot without anything more, transfer the possession and control of the Vessel back to the Owner. In reality, despite the characterisation of the demise charterer as a gratuitous bailee, it is the demise charterer that retains actual possession of the Vessel as well as still mans and supplies the Vessel, see Paragraph [96].

As for the view that the obstacles for the delivery the demise charterer’s own unlawful refusal, Mr Justice Ong Chee Kwan explained that the very refusal of redelivery by the demise charterer’s must surely be anathema to the status of gratuitous bailee, see Paragraph [97]. There are two very obvious reasons for this, see Paragraph [98]:

[1] A third party dealing with the Vessel is unlikely to inquire about the contractual relations concerning the Vessel before entering into a transaction;

[2] It is unclear how the third party could be said to be dealing unlawfully with the Vessel operator, ie the demise charterer’s. After all, the Vessel continues to be employed by the demise charterer’s must and the master continues to be employed. Surely the master cannot be taken to be treated as an agency of the owner.

The rights of the charterparty signatories inter se cannot and ought not to override the right of third parties to invoke admiralty jurisdiction, Third parties can still obtain security for its claim, so the reasons forwarded for protection of third party rights is not supported by legal principles, see Paragraph [99]. The Munster is not strong authority for the proposition that a physical redelivery of a demise chartered Vessel is required for termination of the demise charter. In The Munster, the issue of redelivery of the Vessel was moot because the charterer informed the owners via telex that they were not able to pay for hire anymore, and had relinquished possession as well as control to the Vessel Owners, see Paragraph [101]. The Court of Appeal in The Munster was only considering whether there was an acceptance by the Owners of the repudiation by the Charterers. The Munster proceeded on the basis that redelivery had indeed taken place. The Munster supports Steven Chong J’s view in The Chem Orchid as physical delivery had been effected, see Paragraph [102].

Mr Justice Ong Chee Kwan also explained that there was no necessity for a written contract for a demise charter. All that is needed is for the legal owner of the Vessel to give the demise charterer sufficient rights of possession and control (in real property terms such as a lease) of the ship (eg The Guiseppe di Vittorio), see Paragraph [103]. Where an agreement exists, the Court should consider the terms of the Charter to see what the charterer’s rights are, and whether they are sufficient to amount to a letting of the ship to qualify as a demise charter, see Paragraph [104].

Was EVCL a Gratuitous Bailee?

No. Mr Justice Ong Chee Kwan held that there constitution of the charterer as a ‘gratuitous bailee’ under the charterparty, cannot without more, as mount to a transfer of possession and control of the Vessel back to the owner. Even assuming that Barecon 2001, Clause 29 can turn EVCL’s position from that of a demise charterer to a demise charterer, the facts of the case show that EVCL never treated itself as a gratuitous bailee of the Vessel at all, even after receiving Notice of Termination from Huihong, see Paragraph [107]. His Lordship explained that as a gratuitous bailee under Clause 29, the charterer holds the Vessel for the sole use and benefit of the Owners, whereas as a charterer by demise, the charterer holds the Vessel for its own use and benefit (eg The Hako Endeavour per Rares J), see Paragraph [108].

On the facts of this case before the Court, EVCL continued to use the Vessel for trading as if there was no termination at all of the Demise Charter, despite receiving the Notice of Termination from Huihong. At the time when the Vessel was arrested, she was on a time charter to Cargill until 20 July 2024, and had cargo laden on board, see Paragraph [109]. At no point in time did EVCL attempt to communicate with Huihong on the redelivery of the Vessel. Right until the arrest, EVCL was the employer of the Master and crew on board the Vessel, remaining under the orders of EVCL, see Paragraph [110].

There is further evidence of EVCL performing the time charter with Cargill. EVCL did not terminate the Cargill CP, even though it purported to terminate the Eversea CP. EVCL went so far to ask Huihong to withhold termination of the Demise Charter, see Paragraph [111]. In addition, there were no instructions from Huihong to EVCL (or to the Master of the Vessel) to redelivery the possession of the Vessel to Huihong, see Paragraph [112]. The Demise Charter continued for EVCL with Huihong acquiescing by its failure to give any instructions for redelivery of the Vessel, see Paragraph [113].

Was there a Successful Challenge on the Merits of the Case?

The first thing pointed out by learned counsel for New World was that since the parties were relying solely on affidavit evidence at this stage, coupled with the fact that no application had been made by EVCL and/or Huihong in the proceedings to cross examine the deponents of the affidavits filed, the Court should not determine the factual issues on a balance of probabilities. Learned counsel submitted that the matter should proceed to full trial where there would be discovery of documents and cross examination of witnesses, see Paragraph [115]. Learned counsel cited the case of The Bunga Melati 5 in support of this contention. Learned counsel added that issues such as Gu Feng’s authority as a director of EVCL and whether the Eversea CP was a sham transaction, was based on conflicting and contested affidavits. Thus the Court should allow the matter to proceed to trial where New World would have to prove its case on a balance of probabilities, see Paragraph [117].

This submission was rejected by Mr Justice Ong Chee Kwan as that outcome is confined to the circumstance where there is insufficient undisputed and/or unrebutted evidence from the conflicting evidence that the requisite jurisdictional fact is established or otherwise. His Lordship pointed out that there have been many instances where the Court had made determination of jurisdictional facts based only on affidavit evidence in respect of application challenging the Court’s invocation of its Admiralty Jurisdiction, for example I Congress del Partido at p 535-536; The Aventicum [1978] 1 Lloyd’s Rep. 184 at p 186 and 190; and Vostok Shipping Co Ltd v Confederation Ltd [2000] 1 NZLR at para 21, see Paragraph [120]. His Lordship stressed that where the determination of the jurisdictional facts based only will effectively be dispositive of the entire action, the Court should proceed to make that determination for that application, see Paragraph [121].

Did Gu Feng have the Authority to Sign the Eversea CP?

The only ‘public document’ announcing that Gu Feng was director of EV*CL was Form ND2A. However, Mr Justice Ong Chee Kwan pointed out that this was a self-serving document as it was signed and presented by Gu Feng to them Hong Companies Registry. His Lordship ruled that Gu Fong could not appoint herself as Director as Form ND2A was not signed by any person authorised authorised by EVCL, see Paragraph [125]. Further, there was no entry in the Register of Directors of EVCL registering Gu Feng as Director. There was also no resolution of Zhou Chang (the sole director of EVCL at that time) to appoint Gu Feng as director of the company, see Paragraph [126].

New World either knew or was recklessly indifferent to the fact that Gu Feng had no actual authority, see Paragraph [134]. New World ought to have made reasonable inquiries to verify whether Gu Feng had authority to act for EVCL, see Paragraph [135]. There was no evidence adduced before the Court that New World had in fact made the inquiries to justify relying on Gu Feng’s ostensible or apparent authority in this case. There was an absence of any correspondence from New World to Gu Feng seeking confirmation of her authority to act, see Paragraph [141]. This means that the Eversea CP was not a document that was binding on EVMCL, as Gu Feng simply had no authority to sign the Eversea CP for and on behalf of EVCL, see Paragraph [143].

Was the Eversea CP a Sham Transaction?

Yes. This was the view of Mr Justice Ong Chee Kwan, see Paragraph [144]. His Lordship was guided by the views of the Court of Appeal in AG Securities and Vaughan [1990] 1 AC 417 per Lord Bingham at p 444 that a written agreement is a sham where it incorporates clauses which neither party intends to be bound and which is obviously a smokescreen to cover the real intention of both contracting parties.

There were several reasons why his Lordship reached this conclusion:

[1] New World metered into the Eversea CP cognizance of the fact that EVCL was still bound by the Cargill CP, see Paragraph [146];

[2] New World were curiously not concerned at all with the possibility that the Eversea CP would potentially expose the Vessel to be arrested by Cargill and/or that EVCL would be incapable of performing the Eversea CP, see Paragraph [147];

[3] Wang Bin Qing, in his capacity as representative of SSCL purporting to act as EVCL’s chartering manager, was actively misrepresenting to third parties about the existence of the Cargill CP, see Paragraph [147];

[4] SSCL was related to New World and its is no coincidence that the Eversea CP was entered into after ESPL was purportedly replaced by SSCL in February 2024, see Paragraph [148];

[5] Huihong’s consent was never sought for the purported substitution of ESPL by SSCP as EVCL’s chartering manager as was required under the terms of the Demise Charter, see Paragraph [149];

[6] Gu Feng’s purported appointment as director of EVCL in place of her husband (Zhou Chang) was never communicated dot Huihong, and Huihong never consented to this as was required under the terms of the Demise Charter, see Paragraph [149];

[7] After the Receivers were appointed, Gu Feng did not disclose to the Receivers about the Eversea CP, and she also did not inform the Receivers of her decision to cancel the Eversea CP, see Paragraph [150].

[8] Gu Feng gave no reasons for her cancellation of the Eversea P and yet New World made no attempt to enquire the reasons for the cancellation, see Paragraph [153].

Based on the facts above, Mr Justice Ong Chee Kwan struck out the Writ in rem and set aside the Warrant of Arrest, see Paragraph [157].

Was Material Non—Disclosure Another Reason for the Warrant of Arrest to be Set Aside?

It is trite law that the High Court has no Admiralty Jurisdiction to arrest a Vessel as security for an award that may be made in arbitration proceedings, see Section 24(b) of the Court of Judicature Act 1964, read together with the UK SCA1981, Sections 20 and 21. The High Court is only empowered under the Arbitration Act 2005, Section 11(1)(c) to grant interim measures to preserve the asset pending the determination of arbitration proceedings related to a maritime arbitration claim, see Paragraph [158] and [159]. Under Section 11(1)(c), the issuance of a warrant of arrest is subject to the discretion of the Court and the P i required to make full and frank disclosure, see The Alpine Mathilde per Mr Justice Ong Chee Kwan, see Paragraph [160].

Therefore, New World was under a duty to make full and frank disclosure of its knowledge of the termination of the Demise Charter (via Wang Bin Qing), or at the very least of Wan Qing Bing’s close connection with Gu Feng (by virtue of his previous employment with EVCL, and his affiliation or role in SSCL, which was the company that took over management of he Vessel at Gu Feng’s behest, see Paragraph [162].

Mr Justice Ong Chee Kwan concluded that New World had not shown that it came to the Court with candour and with full and frank disclosure in seeking to arrest the Vessel as security for its claim in Singapore, see Paragraph [163]. His Lordship explained that a P who fails to disclose all material facts supporting its claim, even if granted a warrant of arrest initially, will subsequently have that set aside and be liable for wrongful arrest, see Paragraph [163].

Was New World Liable for Wrongful Arrest?

As New World was party to a sham transaction, it must follow that the arrest of the Vessel was clearly wrongful and was brought with so little colour or so little foundation that it necessarily implies malice on the part of New World. As the demise charterer, EVCL would have sustained losses arising from the wrongful arrest, see Paragraph [168]. In reach this conclusion, Mr Justice Ong Chee Kwan applied the test which his Lordship formulated in Unicious Energy Ptd Ltd v Owners and/or Demise Charterer of the Ship or Vessel ‘Alphine Mathilde’ (No.2) [2024] 1 AMR 898.

Thank you for reading IMSML Website Article 42/2025

Stay tuned for the next IMSML Website Article 1/2026: Resolution MSC.549(108) - Amendments to Chapter II-1 of the International Convention for the Safety of Life at Sea 1974

Signing-off for today,

Dr Irwin Ooi Ui Joo, LL.B(Hons.)(Glamorgan); LL.M (Cardiff); Ph.D (Cardiff); CMILT

Professor of Maritime and Transport Law

Faculty of Law

Universiti Teknologi MARA Shah Alam

Selangor, Malaysia

Tuesday, 21 October 2025

Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my