This appeal concerned the validity of the arrest of the MV Nereus Progress (the vessel) and admiralty jurisdiction. The appellant was the registered owner of the vessel, and the respondent was a creditor of Nereides Marine Services (Nereides). Nereides was the demise charterer of the vessel under a charterparty with the appellant. Contemporaneously and independently, the respondent demise chartered its own vessel, the MV Bharadwaj, to Nereides. Nereides defaulted on both charterparties.

The respondent sought arrest of the vessel on the basis that Nereides continued to be its demise charterer, rendering the vessel liable in rem by way of sister-ship arrest under s 5(2) of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017 (the AA). The appellant sought recall of the arrest order. The Single Judge dismissed this application, sustained the arrest, and held that the respondent had made out a prima facie case for the continuation of the arrest. In doing so, reliance was placed on the decisions of the Singapore High Court in The Chem Orchid 2015] SGHC 50, and the Sri Lankan Court of Appeal in Navi-Bunkering Corp v MV Evangeli, CA Case No CA/REM/02/2018, holding that a demise charterer’s status under a bareboat charter does not stand extinguished merely on issuance of a termination or repossession notice, but rather continues until actual physical repossession of the vessel is handed over to the owner.

The appellant appealed to the Division Bench of the High Court. The Court dismissed the appeal and refused to vacate the arrest. The appellant appealed to this Court.

Held: Appeal upheld.

The issue was whether Nereides continued to be the demise charterer of the vessel on the date of the arrest, ie 4 December 2025, without physical repossession of the vessel by the appellant. The Singapore High Court in The Chem Orchid and the Sri Lankan Court of Appeal in Navi-Bunkering Corp took the view that a demise charterer's status is not extinguished by the mere issuance of a notice of termination or of repossession, and that such status subsists until actual physical possession of the vessel is handed over to the owner. According to this line of authority, the demise charterer continues to bear the liabilities attached to that status for so long as it remains in physical control of the vessel, notwithstanding any notice purporting to terminate the charter.

The Federal Court of Australia in Programmed Total Marine Services Pty Ltd v The Ships Hako Fortress, Hako Endeavour, Hako Excel, and Hako Esteem [2013] FCAFC 21 (The Hako Fortress) (CMI588) and the Hong Kong Court of First Instance in Gulf Marine and Industrial Supplies Inc v Demise Charterers of the Ship or Vessel MV 'Trident Dawn' [1992] HKEC 460 (The Trident Dawn) have taken the contrary view, holding that a termination clause of this nature is capable of operating of its own force upon the happening of the stipulated default and the service of notice. According to this approach, termination and repossession are treated as distinct incidents - the former is complete upon service of notice, and the latter is merely the mechanism by which the owner thereafter recovers physical control.

This Court was confronted with two divergent streams of persuasive authority, neither of which is binding on it. The Division Bench of the High Court placed express reliance on The Chem Orchid and Navi-Bunkering Corp, and treated the reasoning in those decisions as determinative of the question. However, that Court does not appear to have engaged with the contrary view taken in The Hako Fortress or The Trident Dawn. Nor did that Court consider the specific language of cl 32 of the charterparty, which directly addresses the character in which a charterer holds a vessel after termination but before the owner's physical repossession. In Chem Orchid and Navi-Bunkering Corp, those Courts were not dealing with a BIMCO BARECON bareboat contract containing cl 32, which unequivocally states that upon the termination of the contract, the owner shall have the right to repossess the vessel and, pending physical repossession, the charterers shall hold the vessel as a gratuitous bailee to the owner, and not as a demise charterer. The High Court failed to consider this vital distinguishing fact, and incorrectly relied on the aforesaid authorities to return an erroneous finding that the respondent continued to be the demise charterer of the vessel at the time of the arrest.

The respondent's maritime claim arose under its charterparty with Nereides in respect of the MV Bharadwaj and not under any charter of the vessel. The respondent invoked s 5(1)(b), read with s 5(2) of the AA.

For the arrest of the vessel to be sustained, the respondent was required to demonstrate: (i) that Nereides was the demise charterer of the vessel, as distinct from the MV Bharadwaj, at the time the respondent’s maritime claim arose; and (ii) that Nereides continued to be the demise charterer of the Vessel on 4 December 2025, the date on which the arrest was effected.

The Respondent’s claim falls short on the second count for two reasons. The validly issued notice of termination under cl 31(a) was sufficient to bring the demise charter to an end, and physical repossession thereafter operated only to complete the practical transfer of control of the vessel. The validity of the termination notice, coupled with the demonstrably bona fide conduct of the appellant in pursuing repossession, is sufficient to establish that Nereides had ceased to be the demise charterer of the vessel well before the date of arrest. It follows that the foundational premise on which the arrest of the vessel had proceeded at the behest of the respondent, namely, that Nereides continued to be the demise charterer of the vessel on 4 December 2025, stands displaced. As a logical corollary, the order of arrest resting on a contrary and unsustainable footing cannot be sustained and is liable to be vacated.