The "Songa Venus"

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

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...