The "Songa Venus"

• Jurisdiction: Singapore
• Judge: Pang Khang Chau J
• Judgment Date: 15 April 2020
• Neutral Citation: [2020] SGHC 74
• Plaintiff Counsel: Tan Boon Yong Thomas and Josiah Fong (Haridass Ho & Partners)
• Docket Number: Admiralty in Rem No 275 of 2016 (Summons No 1213 of 2019)
• Date: 15 April 2020
• Hearing Date: 15 April 2019,09 April 2019,08 April 2019
• Subject Matter: Admiralty and Shipping,Practice and procedure of action in rem,Priorities
• Year: 2020
• Defendant Counsel: Liang Junhong Daniel (Allen & Gledhill LLP)
• Court: High Court (Singapore)
• Citation: [2020] SGHC 74
• Published date: 18 April 2020

Pang Khang Chau J: Introduction

Where a claimant has a possessory lien over an arrested ship in respect of a claim which, but for the possessory lien, would have priority only as a statutory lien in admiralty, should the claimant’s costs in enforcing the claim be accorded the same priority as the possessory lien or the statutory lien? For the reasons given below, I decided that costs incurred in enforcing a claim protected by a possessory lien should be accorded the same priority as the possessory lien.

Background

The plaintiff, Keppel FELS Ltd (“Keppel FELS”), provided various services to the vessel, Songa Venus (“the Vessel”), including repairs, modifications, supply of materials and equipment as well as berthing. Having failed to obtain payment for the said services from the owner of the Vessel, Keppel FELS commenced the present proceedings, arrested the Vessel, and obtained an order for the Vessel to be appraised and sold pendente lite “without prejudice to [Keppel FELS’] possessory lien over the Vessel, if any”. Pursuant to the order, the Vessel and the bunkers on board were sold by the Sheriff for US$3,749,463.14.

Thereafter, Keppel FELS obtained final judgment in default of appearance for the sum of US$1,169,370 with interest. In granting the final judgment, Belinda Ang Saw Ean J also declared that Keppel FELS had a possessory lien over the Vessel in respect of the portion of its claim relating to repair and modification works, as well as supply of various materials, equipment and services. This portion amounted to US$328,723. Belinda Ang J also awarded Keppel FELS the costs of its action, fixed at S$10,000 in addition to reasonable disbursements (“Costs of the Action”).

The intervener, Songa Offshore SE (“Songa Offshore”), commenced a separate in rem action against the Vessel for sums outstanding under a seller’s credit agreement which was secured by a second preferred mortgage over the Vessel. Songa Offshore obtained final judgment in default of appearance for the sum of US$34,200,000.

The present application

Keppel FELS then filed the present application for determination of the priority of the relevant claims and payment out of the proceeds of sale. The only other party that appeared at the hearing of the application was Songa Offshore.

The parties were not in dispute that the priority of claims should be in the following order: Sheriff’s commission, costs and expenses. Costs of the producer of the fund (ie, Keppel FELS’ costs of and incidental to the arrest, appraisement and sale of the Vessel and bunkers on board, as well as the costs of the present application). Keppel FELS’ judgment debt in respect of the portion of its claim for which it had a possessory lien, amounting to US$328,723. Songa Offshore’s judgment debt of US$34,200,000 in respect of its claim as mortgagee. The remainder of Keppel FELS’ judgment debt in respect of the portion of its claim for which it had no possessory lien.

The dispute between the parties was over the treatment of the Costs of the Action.

Keppel FELS submitted that the Costs of the Action should be prioritised in the following manner: costs attributable to the portion of Keppel FELS’ claim for which Keppel FELS had a possessory lien should be accorded the same priority as limb (c) of [6] above (“the Disputed Costs”); costs attributable to the portion of Keppel FELS’ claim for which there was no possessory lien should be accorded the same priority as limb (e) of [6] above; and an appropriate apportionment would be 40-60, with the result that 40% of the Costs of the Action should be accorded the same priority as limb (c) of [6] above, while the remaining 60% of the Costs of the Action should be accorded the same priority as limb (e) of [6] above.

Songa Offshore objected to the Costs of the Action being prioritised in this manner. Instead, Songa Offshore submitted that all of the Costs of the Action should be accorded the same priority as limb (e) of [6] above. Since Songa Offshore’s judgment debt (limb (d) of [6] above) exceeded the amount that would remain from the sale proceeds after payment out of Keppel FELS’ judgment debt in respect of the portion of its claim for which it had a possessory lien (limb (c) of [6] above), the practical effect of giving all of the Costs of the Action the same priority as limb (e) of [6] above was that Keppel FELS would not receive a single cent of the Costs of the Action.

As for the quantum of apportionment, Songa Offshore accepted that, if the court were to find in favour of Keppel FELS on the issue of priority as set out at [8(a)–8(b)] above, the 40-60 apportionment proposed by Keppel FELS at [8(c)] above would be reasonable.

Parties’ submissions

Keppel FELS referred to Nigel Meeson & John A Kimbell, Admiralty Jurisdiction and Practice (Informa, 4th Ed, 2011) (“Meeson & Kimbell”), which contained the following passage (at para 6.78):

The costs of the action will normally be afforded the same priority as the substantive claim out of which they arise, except in so far as they have priority as being the costs of the producer of the fund.

The authority cited in Meeson & Kimbell for the foregoing proposition was The “Margaret” (1835) 3 Hag Adm 238 (“The Margaret”), a decision of the High Court of Admiralty of England concerning a claim for crew’s wages, where the court held, at 240, that:

The ship is liable for wages and costs. The costs are as much due as the sors principalis.

Although The Margaret did not involve competing claimants with claims of different priorities, it was cited and followed by the Federal Court of Australia in Patrick Stevedores No 2 Pty Ltd and others v Proceeds of Sale of the Vessel MV Skulptor Konenkov (1997) 144 ALR 394, which was a case involving competing claims of different priorities. In that case, after dealing with the validity and priority of various claims, Sheppard J remarked, at 404, that:

There is a question in relation to costs. Although costs are discretionary, the general rule is that in actions against the proceeds of sale of property arrested in rem, costs have the same priority as the claim in respect of which they have been incurred: see The Margaret (1835) 3 Hag Adm 238 and The William F Safford (1860) Lush 69 and also Meeson, supra, p 167. I propose to treat costs in accordance with the ordinary rule. There was no submission that I should do otherwise. [emphasis added]

The case of The “William F Safford” (1860) Lush 69 referred to in the above quotation was a decision of the Right Honourable Dr Lushington in the High Court of Admiralty of England. After dealing with the priorities of various claims against the arrested ship, Dr Lushington held, at 71, that:

The costs in each action will be paid with the principal sums in the order I have named.

Songa Offshore did not dispute that the foregoing cases stood for the general rule that costs incurred in enforcing a particular maritime claim should enjoy the same priority as the substantive claim. Instead, Songa Offshore submitted that the proper application of this rule should result in the Disputed Costs being afforded only the priority of a statutory lien. Songa Offshore put forward two lines of arguments in support of this submission.

First, the common law possessory lien is a passive remedy which confers no right of action. There is no legal provision that permits the invocation of the admiralty jurisdiction of the High Court for the purpose of enforcing a possessory lien. Where a maritime claimant who enjoys a possessory lien wishes to invoke the admiralty jurisdiction of the court to enforce his claim, he would need to commence an action to enforce the underlying maritime claim by invoking a statutory right of action in rem. Therefore, Songa Offshore submitted that any costs incurred in such an action should be classified as costs incurred to enforce a statutory lien, and not as costs incurred to enforce a possessory lien. Consequently, such costs should only be afforded the priority of a statutory lien, and not the priority of a possessory lien.

Secondly, the common law possessory lien is accorded a high priority by the admiralty court as part of the admiralty court’s undertaking to protect the possessory lien in return for the possessory lien holder giving up possession of the vessel. This is so that a judicial sale can be conducted for the benefit of all parties having in rem claims against the vessel. This...