Brightoil Petroleum (Holdings) Limited is a Hong Kong-listed company engaged in oil trading and marine transportation. Its shares have been suspended from trading on the Hong Kong Stock Exchange (HKEX) since October 2017, following which HKEX imposed a number of conditions, including a forensic investigation and the addressing of any audit qualifications. At the beginning of 2019 Brightoil commenced restructuring proceedings in Singapore, and in April its CEO and founder Dr. Sit Kwong Lam was made bankrupt in Hong Kong.
Brightoil's shipowning division comprised a fleet of 15 vessels, including the "Brightoil Glory", a VLCC i.e. supertanker. The vessel had been idle in the Persian Gulf for a number of months, before it was repossessed and sailed to Hong Kong for arrest, with a bunkering stop en route at Sri Lanka. On 4 February 2019 the Hong Kong admiralty court granted an Order for Sale of the vessel on the application of the mortgagee bank.
Brightoil then attempted to stay the court order for sale of the vessel so as to enable it to proceed with refinancing proposals and to seek a private sale. Relying on The Myrto  1 Lloyd's Rep 243, Brightoil cited the observations of Brandon J that:
"The question whether such an order should be made normally only arises where there has been default of appearance or defence. In such a case, the court will commonly make an order for sale on the ground that, unless such order is made, the plaintiffs' security for their claim will be diminished by the continuing costs of maintaining the arrest, to the disadvantage of all those interested in the ship.
Where the action is defended, and the defendants oppose the making of such an order, the court should examine more critically than it would normally do in a default action the question of whether good reason for making an order exists or not."
The Hong Kong Court of Appeal noted that in the present case the Order for Sale had not been made on the basis of default in acknowledgment or defence, and that, similarly, the fact that this was not a default situation was immaterial. The application for sale had been made in circumstances where the Brightoil group had collapsed and where the level of outgoings and expenses in respect of the vessel was such that the interest of the parties would be served if the vessel were sold without delay.
Brightoil had placed in evidence a draft umbrella agreement, MOA and bareboat charter for a proposed sale and leaseback relating to all 15 vessels within the group but – as the Court of Appeal observed - there was nothing binding or executed, and completion was contingent upon "a host of conditions precedent".
The Court of Appeal also took into account the interests of prospective buyers who had expended time and money in responding to the court's invitation to tender. A further factor noted by the court was the volatility in the shipping markets.
In rejecting Brightoil's arguments, the Court of Appeal in a robust and commercial judgment described the choice faced as being "between a certain, orderly court sale process and a private sale riddled with uncertainties and potential mishaps".
The "Brightoil Glory" was subsequently sold by the Hong Kong court on 27 May 2019 for over US$58 million.
The Court of Appeal decision thus reinforces Hong Kong's role as an admiralty court sale jurisdiction in which mortgagees and other claimants can reliably realise their security.