This case arose from a collision between the Thor Achiever and the Global Vanguard on 8 March 2017. The plaintiff (the owner and operator of the Thor Achiever) commenced a limitation action and, on 25 July 2017, obtained a limitation decree in respect of loss or damage arising from the collision pursuant to s 136 of the Merchant Shipping Act (Cap 179, 1996 Rev Ed) [which at the time gave domestic effect to the LLMC 1976 in Singapore]. The limitation decree also granted the plaintiff leave to constitute a limitation fund by depositing an LOU in court.

The operative paragraphs of the LOU, which was deposited on 15 August 2017, read:

We, The Britannia Steam Ship Insurance Association Limited, pursuant to the Order of Court dated 25 July 2017, do hereby irrevocably undertake to the Court and to each of the Defendants in the above captioned action, to pay forthwith to each of the Defendants in respect of its claim of such sums adjudged and ordered in the Limitation Action by way of distribution of the Limitation Fund constituted by this Letter of Undertaking, against all and any of the above-named Plaintiffs.

Always provided that the total of our liabilities under this Undertaking shall not exceed the aggregate of the Singapore Dollar equivalent of 5,463,125 SDRs at the date of this Letter of Undertaking in the sum of SGD 10,501,983.71 (Ten Million Five Hundred and One Thousand Nine Hundred and Eighty-Three Singapore Dollars and Seventy-One Cents) plus interest thereon at the rate of 5.33 percent per annum from the 8th day of March 2017 up to the date of this Letter of Undertaking, and thereafter interest thereon at the rate of 2% per annum up to the date of each payment hereunder.

This Undertaking shall continue and be in place until further Order of the Court with respect of this Undertaking.

This Undertaking shall be governed by and construed in accordance with Singapore law and we hereby submit irrevocably to the jurisdiction of the Singapore Courts in relation to any matter arising out of or in connection with this Undertaking (including, but not limited to, for the purpose of enforcement of this Undertaking).

Further, we undertake to abide by any order of the Court made in connection with this Undertaking.

Four defendants brought claims against the limitation fund within the time limit fixed by the limitation decree. These four defendants entered into a settlement agreement with the plaintiff on 20 January 2020 in respect of all their claims arising out of the collision.

The plaintiff sought:

1. A declaration that the limitation fund be deemed exhausted and that no further claims be brought against the plaintiff in this action and/or against the limitation fund.

2. That the LOU be returned by the Sheriff to the plaintiff's solicitors for cancellation.

3. Leave be granted to the plaintiffs for the limitation action to be discontinued with no order as to costs.

Held: The LOU is to be discharged and returned for cancellation.

In the present case, the LOU (and the limitation decree) provided that post-constitution interest would continue to accrue until payment is made. Thus, notwithstanding the parties' agreement for payment to be made based on the value of the limitation fund as at 31 December 2019, post-constitution interest continued to accrue in accordance with the terms of the LOU and the limitation decree until the date of payment (ie 30 January 2020). Therefore, when a sum equivalent to the value of the limitation fund as at 31 December 2019 was paid out on 30 January 2020, there remained in the limitation fund an amount equivalent to roughly one month's worth of post-constitution interest (about SGD 17,000). In other words, when payment was made to the defendants on 30 January 2020, the limitation fund was not exhausted and has not since been exhausted.

Had the parties taken a different approach, and agreed to a specific future payment date while factoring in the post-constitution interest accruing till that future payment date to arrive at the sum to be paid out, it would have been open to the Court to declare the limitation fund exhausted by such payment. This is because the limit of liability under the LOU, which represents the value of the limitation fund, is specified in the second operative paragraph of the LOU. Once payment pursuant to the LOU is made up to that limit, there would be no further liability under the LOU. In that event, the LOU would be spent and the limitation fund would be exhausted.

The time limit for bringing claims against the limitation fund expired more than two and a half years ago and no claimants have emerged in the meantime to seek an extension of time to claim against the limitation fund. Therefore, the defendants may be considered the only parties (besides the plaintiff) with an interest in the limitation fund. By agreeing in the settlement agreement to accept payment based on the value of the limitation fund as at 31 December 2019, the defendants have forgone their claim to the post-constitution interest accruing between 31 December 2019 and 30 January 2020. No party would suffer injustice or prejudice if the LOU were returned for cancellation.

Having decided that the Court cannot declare the limitation fund exhausted, a declaration that the limitation fund 'be deemed exhausted' is not appropriate. A simple declaration that the limitation fund is exhausted amounts to a concrete finding that the limit of liability under the LOU has been reached and no further liability exists under the LOU. A declaration that the limitation fund 'be deemed exhausted' does not appear to be a concrete finding of any sort, and is of uncertain legal and practical effect. The Court therefore declines to make such a declaration.

However, as the LOU provides that it 'shall continue and be in place until further Order of the Court', and as a function of the Court's authority over the limitation fund, it would be open to the Court, by order, to discharge the LOU. For good measure, such an order should be made in addition to ordering the return of the LOU for cancellation.