The High Court has rejected a claim by the purchaser of a ship sold at judicial auction in Belgium, finding that the lender was not required to voluntarily remove its mortgage entry from the Korean shipping register.
The case concerned the MN Sam Dragon, formerly the Pretty Flourish. The plaintiff, SPV Sam Dragon Inc., bought the vessel for US$17 million at a court-ordered auction in Ghent in October 2009. The defendant, GE Transportation Finance (Ireland) Limited, had held a mortgage over the ship after lending US$35 million to its former owner, South Korean company Samsun Logix Corporation.
The Belgian judicial sale extinguished the mortgage over the vessel and transferred the lender’s claim to the sale proceeds. But the mortgage remained recorded in Korea until August 2010. The buyer said the delay caused additional registration costs and expenses. It had obtained temporary registration in Hong Kong and later registered the ship temporarily in Panama before securing permanent Hong Kong registration after the Korean entry was deleted.
The court had to decide which country’s law governed the claim that the lender should have removed the mortgage entry. Justice Brian McGovern held that Korean law applied because the alleged failure concerned the Korean register and the vessel’s prior registration there. He treated consequences in other countries as indirect consequences for this choice-of-law issue.
The judge heard conflicting expert evidence on whether Korean law required the lender to remove the entry after a judicial sale abroad. He preferred the evidence of a Korean lawyer who said there was no such obligation where the sale proceeds did not fully meet the lender’s claim. The judge also noted that the auction conditions placed responsibility for registration formalities on the purchaser. He found no duty under Belgian law either, and said the buyer’s allegations of misrepresentation and abuse of right were not established.
The lender consented to deletion after the Belgian court’s final distribution order and the expiry of the appeal period. The mortgage entry was subsequently removed. The claim for damages and expenses failed. The judgment did not award damages to the buyer; the earlier requests for injunctions had become moot after deletion and full Hong Kong registration.