UCO Bank v. Golden View Maritime

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DMC/SandT/04/26
UCO Bank v .Golden View Maritime Pte Ltd:
[2003] SGHC 271
Singapore High Court: Belinda Ang J: 31 October 2003
Shook Lin & Bok for UCO Bank
Rajah & Tann for Golden View Maritime Pte Ltd
CIVIL PROCEDURE: MAREVA INJUNCTION 
AGAINST DISPOSAL OF VESSEL: RISK OF 
DISSIPATION OF ASSETS
Summary
UCO Bank, as holders of bills of lading, sued 
Golden View Maritime, a one-ship company and the registered owners of the vessel "Asean Unity", for delivering certain consignments of logs to receivers in India without production of the original bills of lading. Some 16 months later, UCO Bank sought and obtained a Mareva injunction to restrain Golden View from dealing with or disposing of the "Asean Unity". Golden View successfully applied to set aside the injunction on the grounds that UCO Bank had not established that there was any risk that assets would be dissipated.

DMC Rating Category: Developed

This Case Note was contributed by Ang & Partners, the Website’s International Contributors for Singapore

Facts
UCO Bank provided trade finance to their customer SOM International Pte Ltd ("SOM") who would ship goods financed by UCO Bank on vessels managed by Glory Ship Management Pte Ltd. SOM defaulted on their payments to UCO Bank and UCO Bank, as holders of bills of lading issued for the shipments, then commenced 5 actions against the owners of the vessels involved in the shipments.

In one of the actions, UCO Bank, as bill of lading holders, sued Golden View Maritime Pte Ltd ("Golden View"), the registered Owners of the vessel "Asean Unity", on 21 February 2002 for breach of contract and conversion by releasing two shipments of Sarawak round logs to receivers in India without the production of the original bills of lading. Golden View’s defence was that they had, with the knowledge and consent of UCO Bank, delivered the cargo of Sarawak round logs at Kandla to receivers against the presentation of switched bills of lading.

On 25 June 2003, 16 months after the suit was commenced, UCO Bank sought and obtained a ‘Mareva’ injunction to restrain Golden View from dealing with or disposing of "Asean Unity". Golden View applied to set aside the injunction obtained on grounds that UCO Bank had not established any risk of dissipation of assets and that there was delay in applying for the injunction.

UCO Bank relied on the sale of the vessel "Asean Ranger" by her Owners, Golden Star Maritime Pte Ltd ("Golden Star") in July 2002 to infer that there was a risk of dissipation of Golden View’s assets. UCO Bank had sued Golden Star in a separate action on 16 January 2002 and Golden Star sold "Asean Ranger" as scrap in July 2002.

Golden View and Golden Star were one-ship companies and they had some common shareholders and directors. Three of the four directors of Golden View were also directors of Golden Star. Two of the three shareholders of Golden View were also shareholders of Golden Star. The two vessels were operated by Glory Shipmanagement, which was controlled or managed by the same people.

UCO Bank argued that the sale of "Asean Ranger" was an attempt to avoid any attachment or enforcement of any judgment which might be obtained against Golden Star and believed that there was therefore a real risk of dissipation of Golden View’s assets in these proceedings.

Judgment
The Judge held that UCO Bank had not demonstrated that there was a real risk of dissipation of assets by Golden View and the Mareva injunction should accordingly be set aside.

2. The Judge found that although Golden Star and Golden View had some common shareholders and directors, the sale of "Asean Ranger" was insufficient to show a real risk of dissipation of assets by Golden View. Golden Star explained that "Asean Ranger" was sold as she was at the end of her trading life. She was a 25 year-old vessel and her condition would entail expensive repairs if she were to continue trading. Golden Star had operated "Asean Ranger" till the last possible moment before she was sold as scrap. The Judge was of the view that "Asean Ranger" was sold in the usual course of business and it was not intend ed to deprive the claimants of the fruits of their judgment.

3. In contrast, "Asean Unity" was still trading and her trading certificates were extended to 2005, evidencing an intention on the part of Golden View to continue operating her.

4. Further, the audited accounts for financial year ending 30 June 2002 showed that Golden View had net current assets of S$929,114.00 and the book value of the vessel was S$1.88 million. The claim quantum was relatively small in comparison and the company had adequate resources to satisfy the claim. Besides, Golden View was a Singapore company and the "Asean Unity" was a Singapore registered vessel. Only companies properly capitalized as required under the Merchant Shipping (Registration of Ships) Regulations would be allowed to register their ships in Singapore.

5. The Judge distinguished the current case from Guan Chong Cocoa Manufacturer Sdn Bhd v Pratiwi Shipping SA [2003] 1 SLR 157, on grounds that the owners in that case were a Panamanian company and nothing was known about them. The use of bearer shares provides shareholders with advantages and convenience but they may suffer the disadvantage of a Mareva injunction being granted against them as the corporate structure "itself invites comment".

6.The Judge also found the fact that Golden Orient Maritime Pte Ltd, the registered owners of "Asean Success" and Golden Shore Maritime Pte Ltd, the registered owners of "Asean Pioneer" (two other companies with common directors and shareholders) had counter-sued the cargo receivers and SOM in India, was evidence in favour of Golden View. If they had intended to make the company judgment proof, they would not have bothered to take these steps.

Comments
The Judge had regard to the fact that Golden View was a profitable Singapore company, and they had evinced an intention to continue trading with the Singapore-registered vessel "Asean Unity", which was a profitable asset. Even though Golden View was a one-ship company and its sole asset could – arguably - be disposed of easily and the sale proceeds dissipated, the Judge was of the view that these factors were not sufficient to demonstrate a real risk of asset dissipation.

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