FACTS On 25 th February 2020, the vessel The Five Eyes owned by a one-ship company, The

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Question:

FACTS

On 25 th February 2020, the vessel The Five Eyes owned by a one-ship company, The Five Eyes Company Limited, in the British Virgin Islands, ran aground near Singapore. It was successfully re-floated by a tug The Eternal Happiness on the same day. On 12 th August 2020, the salvage arbitrator determined the salvage award to be in the amount of US$2,000,000.

It was not until 25 th March 2021 that the mortgagee bank of The Five Eyes, namely the China Construction Bank Limited came to be aware that the Five Eyes Company Limited, has been in financial difficulty and it has not yet paid the salvage award to the company who owns the tug The Eternal Happiness. Upon deeper investigation, China Construction Bank Limited found that the Five Eyes Company Limited has failed to pay a number of likely creditors.

The China Construction Bank is heard of the news that The Five Eyes will soon be in the port of Melbourne, Australia, to discharge the cargo. It is suspecting that the owner of the tug The Eternal Happiness may attempt to arrest The Five Eyes

in Australia. If this happens, other creditors will also come forwards. This will affect the only security for the loan. The China Construction Bank is now consulting you as its in-house legal team who is familiar with the admiralty law in Australia with the following information:

The estimated value of The Five Eyes if it is sold by the judicial sale in Australia (after deducting the estimated bailiff expenses and the estimated expenses of the arresting party)

US$25,000,000

Loan outstanding to the China Construction Bank Limited

US$12,000,000

The salvage award to The Eternal Happiness

US$2,000,000

Golden Gate Repair Services for the repair services rendered to The Five Eyes on 1 st April 2020. The repair agreement was governed by the law of the United States of America

US$5,000,000

The likely claim by the owner of The Red Carpet for damages caused by collision with The Five Eyes on 19 th December 2019 while at the relevant time The Five Eyes was still owned by the previous owner, The Global Ambition Limited.

US$20,000,000

The likely claim by Kai Bo Food Supermarket of Hong Kong, as the consignee of the goods, for damages to frozen chicken during the carriage on The Five Eyes on 12 th May 2019 while The Five Eyes was owned by the previous owner, The Global Ambition Limited

US$3,000,000

Likely claims by 4 crewmen on board who suffered leg injuries during the grounding near Singapore on 25 th February 2020

US$500,000

TASK

Considering the above information, with reasoning and sound authorities in support, explain to the China Construction Bank Limited whether it is likely to be able to recover any amount from the distribution of the proceeds of sale of The Five Eyes in the event that it is sold by the judicial sale in Australia.