Judgment

[Please note that this case has not been edited in accordance with the current Singapore Law Reports house style.]                                                                                                                                                           

S Rajendran J:

1           In 1992 and early 1993, the plaintiffs carried out certain repairs on the vessel ‘Dwima 1’ (the vessel). As the plaintiffs’ charges for the repairs were not settled in full, the plaintiffs retained the vessel at their yard pending full settlement.

2           From late 1993, there were negotiations relating to the release of the vessel between the owners of the vessel and the plaintiffs. As part of the terms of the release the plaintiffs wanted to enter into a tripartite agreement with the owners and the first mortgagees of the vessel whereby the plaintiffs would secure their outstandings by taking a mortgage on the vessel which would rank pari passu with the first mortgage. In this connection the plaintiffs wrote, in early 1994, to Tokyo Leasing, the agents of First Leasing (Panama) SA (the interveners), the first mortgagee, but Tokyo Leasing asked the plaintiffs to discuss the matter direct with the owners. The negotiations came to nought as the owners could not get the agreement of Tokyo Leasing to the proposals. Thereafter, there was some attempts by the owners to sell the vessel, but this too did not materialize.

3           On 28 October 1994, the plaintiffs commenced an admiralty action in rem for the recovery of the outstanding amounts. On 1 November 1994, they caused the vessel to be arrested. By notice of motion (No 265/94) the plaintiffs moved the court for judgment in default of appearance for the sum of $1,377,545 and contractual interest thereon at 1% per month. The motion also sought an order for appraisement and sale, such appraisement and sale to be without prejudice to the possessory lien of the plaintiffs. In the affidavit filed in support of the motion, the plaintiffs stated that the vessel had been at their yard since 2 February 1993 and that so long as the vessel remained there she would deteriorate and continue to deteriorate physically and substantial costs and expenses will have to be incurred in preserving the vessel.

4           On 13 January 1995, Lai Siu Chiu J heard the motion and granted the orders sought. On 2 June 1995, on the application of the sheriff, an order of court approving the sale of the vessel was granted and the vessel was duly sold.

5           On 6 February 1995, the defendants filed memorandum of appearance. On 10 February 1995, the interveners filed a caveat against payment out of the proceeds of sale and on 17 February 1995 the interveners were granted leave to intervene in this action. At about this time the parties again commenced negotiations with a view to an amicable settlement. To facilitate the negotiations the plaintiffs, on 16 February 1995, filed an application for the order of sale made on 13 January 1995 to be set aside. Negotiations, however, broke down and on 17 March 1995 the plaintiffs withdrew their application for the order of sale to be set aside.

6           The plaintiffs commenced these proceedings for the determination of priorities with respect to the sale proceeds. The issue for determination was whether, after payment of the sheriff’s expenses in connection with the sale, the plaintiffs’ claim to the balance had priority over the claim of the interveners. The shipowners, although represented in court, did not participate in the proceedings. The interveners did not dispute that if the plaintiffs had a possessory lien, that lien would have priority over their mortgage. It was their case, however, that by causing the vessel to be sold the plaintiffs had lost their possessory lien.

7           Mr Jude Benny, on behalf of the interveners, submitted that a possessory lien was a self-help remedy that only entitled the repairer to hold on to the vessel until paid and that if the repairer sought the alternative remedy of obtaining judgment and enforcing it by arresting and selling the vessel, he must take all the disadvantages that go with that, namely, the loss of possession of the vessel and consequently the loss of his possessory lien. He submitted that an essential ingredient of the common law possessory lien was that it existed only so long as the lien holder retained possession of the goods in respect of which the lien was claimed. In support of these submissions, Mr Jude Benny referred to Tappenden v Artus & Anor [1964] QB 185 where at p 195 Diplock LJ in discussing the nature of a common law lien said:

The common law remedy of a possessory lien, like other primitive remedies such as abatement of nuisance, self-defence or ejection of trespassers to land, is one of self-help. It is a remedy in rem exercisable upon the goods, and its exercise requires no intervention by the courts, for it is exercisable only by an artificer who has actual possession of the goods subject to the lien. Since, however, the remedy is the exercise of a right to continue an existing actual possession of the goods, it necessarily involves a right of possession adverse to the right of the person who, but for the lien, would be entitled to immediate possession of the goods. A common law lien, although not enforceable by action, thus affords a defence to an action for recovery of the goods by a person who, but for the lien, would be entitled to immediate possession.

8           It is now an established proposition of law that the arrest of a vessel over which a repairer had a lien would not, by itself, result in the loss of the repairer’s lien. In The Acacia (1880) 4 Asp Mar Cas 254, it had been argued that the arrest of a vessel by a Marshal was akin to the seizure of goods by a sheriff under a writ of fi fa and that, as in the case of seizure by fi fa, arrest by the Marshal would result in possession being lost and hence the lien being lost. Townsend J rejected this submission and held that arrest was consistent with the lien holder’s possession. The position was further clarified by Atkin LJ in The Arantzazu Mendi [1939] AC 256 at p 257 where he said:

A ship arrested does not by the mere fact of arrest pass from the possession of its then possessors to a new possession of the Marshal. His right is not possession but custody. Any interference with his custody will be properly punished as a contempt of the court which ordered the arrest, but, subject to his complete control of the custody, all the possessory rights which previously existed continue to exist, including all the remedies based on possession.

9           Mr Jude Benny did not seek to challenge that proposition. He accepted that the arrest of the vessel at the instance of the lien holder would not affect the lien but submitted that if the lien holder went further and obtained a sale of the vessel, his possessory lien would necessarily be lost because the sheriff, in order to be able to sell the vessel, must first be in possession. This was also the view expressed by Nigel Meeson in his book on Admiralty Jurisdiction and Practice where at p 158 the learned author says:

There appears no reason why the holder of a possessory lien should be held to have waived his right to the security afforded by his possessory lien simply by invoking the Admiralty jurisdiction in rem and arresting the vessel. However, it is arguable that if he were to go further than this and move the court for an order for appraisement and sale, he may then be taking a step inconsistent with his possessory lien, as the Marshal must have possession when the vessel is sold. A possessory lien is not a right to be enforced by action, but simply a self-help remedy. The court will not grant an injunction in support of a possessory lien, and it is, therefore, difficult to see upon what ground the court can sell the ship while maintaining the possessory lien. It is suggested that there comes a stage when the creditor must choose whether to persist in his possessory lien, or whether to give up possession to enable the ship to be sold by the court. If he chooses the latter course, he must at the same time lose the protection afforded by reason of the possessory lien, and his only priority is that arising by reason of his action in rem. [Emphasis added.]

10       Mr Jude Benny adopted the Nigel Meeson approach.

11       Mr Jude Benny submitted that where the repairer, having a lien on a vessel, proceeds to apply for the sale of the vessel, the repairer’s position would be akin to the position of a lien holder of goods who loses his lien when he proceeds to obtain execution of the goods under a writ of fi fa. There was, he submitted, no reason why a ship repairer having a possessory lien should be in a better position from any other person (such as a warehouser or innkeeper) who levies execution on his judgment by way of fi fa. He submitted that were this court to give recognition to the possessory lien of the plaintiffs in spite of the fact that the sheriff had, for the purposes of the sale, taken possession of the vessel, the court would be recognizing the concept of a ‘notional’ lien — a concept which Mr Jude Benny submitted had been disavowed in The Gaupen (1925) 22 Lloyd LR 57 and The Ally [1952] 2 Lloyd’s Rep 427.

12       In The Gaupen, the repairer of a vessel had a possessory lien over the vessel for the cost of repairs of the vessel which was in their dry dock. The vessel had a full crew on board. To save costs and to free their dry dock for other work the repairer sought to have the vessel removed from their dock to a public wet dock whilst retaining their lien. Towards this end they applied for the arrest of the vessel on terms that the Marshal should arrest and hold the vessel in the wet dock subject to their possessory lien. Lord Merrivale, the president of the admiralty division, highlighted the difficulty in creating a possessory lien where there was no possession. The report of the case records his decision in the following words:

The president dismissed the motion. He said what was sought was that the court should exercise its powers to turn a genuine lien on the property into a notional lien. There was no authority for such a procedure, and it seemed to his Lordship that he could not make such a departure as that in the absence of parties who might have rights against the vessel.

13       In The Ally, the vessel whilst it was undergoing repairs in the applicant’s dry dock was arrested by the cargo-holders alleging breaches of contract against the owners of the vessel. The repairer, having a lien over the vessel for unpaid repair charges, intervened in the action by filing a caveat against removal of the vessel. With the support of the shipowners, the repairer sought the leave of court to have the vessel removed from their yard and transferred to the public wet dock so that she could be prepared for further charter. The repairer sought to achieve this without loss of their lien. Willmer J referred to the similarity between this case and The Gaupen and in rejecting the application said:

I do not think it is any part of the duty of the court to assist somebody who is engaged in what I have described as a species of self-help; the most the court can be asked to do is not to prejudice the rights of the party who is seeking to do that. It seems to me that it would be creating a situation quite unknown to the law if I were to sanction the removal of this ship from the de facto possession of the possessory lien holders and at the same time preserve some kind of notional lien over a chattel no longer in their possession. If continued possession of the ship is an embarrassment to the dry dock owners, it is within their power to let the ship go and to pursue the alternative remedy which they have under s 22(1)(a)(x) of the Supreme Court of Judicature (Consolidation) Act 1925. It may be that their position would not be so favourable if they pursued that remedy as it would be if they continued to exercise their possessory lien. But I do not see how they can expect to have the best of both worlds; they must choose what they want to do. [Emphasis added.]

14       Where a vessel subject to a possessory lien, is arrested and sold at the instance of a third party, the courts in ordering the sale of the vessel have recognized and preserved the rights of the holder of the possessory lien. This the courts have done by transferring the lien holder’s rights from the vessel to the proceeds of sale of the vessel. Thus in The Tergeste [1903] P 26 at p 32 Phillimore J stated:

The view which the Admiralty Court took with regard to conflicting claims by shipwrights having a possessory common law lien, and claims which have been sustained by process in the admiralty court, has been well established, and has been accepted by this division of the High Court of Justice. It is that it is the duty of the material man not to contend with the admiralty marshal; to surrender the ship to the officer of the court, and let the officer of the court, under the order of the court, remove and sell her; but when he has done that, the court undertakes that he shall be protected, and that he shall be put exactly in the same position as if he had not surrendered the ship to the marshal.

15       In British Shipping Laws (Vol 14), on ‘Maritime Liens’, DR Thomas puts the position thus:

By the common law the possessory lien was good against the world. The position of the Admiralty Marshal was therefore an issue of some delicacy.

The evolved position has been to recognise the superior claim of the Admiralty Marshal subject to an effective judicial protection of the interest of the possessory lienee. It is the duty of the possessory lienee to surrender his possession of the res to the Admiralty Marshal whereupon the court undertakes to protect both his interest and priority against the res or any fund in the hands of the court which represents the res. The possessory lienee is thereby in no way prejudiced by being compelled to part with possession. [Emphasis added.]

16       Mr Jude Benny submitted that it is only when the sale by the sheriff is effected at the instance of a third party that the lien holder’s interest is protected by the court. He submitted that that protection was not available where the vessel was sold, not by compulsion at the instance of a third party, but by the choice of the lien holder himself. He submitted that in such a situation the lien holder had, by initiating steps to sell the vessel, voluntarily done something destructive of the lien. MrJude Benny submitted that there was a paucity of authority on this point and he drew my attention to the judgment of Lai Kew Chai J in The ‘Honey 1’ ex ‘Cassio’; Singapore Slipway & Engineering Co (Pte) Ltd v Owners of ‘The Honey 1’ ex ‘Cassio’ [1987] 2 MLJ 427 at p 428 where the learned judge also noted: 

... the question whether the repairer with a possessory lien can himself arrest the vessel and yet retain the possessory lien has not been settled. It was not decided in either Jacobs v Latour nor was the nettle grappled with in The Andrea Ursula. 

17       In the present case, whilst it was true that the plaintiffs had voluntarily parted with the vessel for the vessel to be sold, such parting was nevertheless pursuant to the order of Lai Siu Chiu J, where the sale was to be without prejudice to the possessory lien of the plaintiffs. Such an order was in terms similar to orders of sale made at the instance of third parties procuring the arrest and sale of vessels that are subject to possessory liens. Mr Jude Benny submitted that Lai Siu ChiuJ could not have made an order that the possessory lien of the plaintiffs was good against all claimants as she had not, prior to the order, heard the claim of the interveners, the interveners having intervened only on 10 February 1995. Relying on the judgment of Willmer J in The Ally quoted above, Mr Jude Benny submitted that at best all that the order of Lai Siu Chiu J did was not to prejudice the right of the party seeking to argue that it had a lien and, accordingly, it was open for the interveners to appear in this court and claim priority over the plaintiffs.

18       Mr Haridass Ajaib, appearing for the plaintiffs, submitted that full effect must be given to the order of Lai Siu Chiu J. He submitted that the vessel was a wasting asset and as the interveners had, for so long, shown no interest in arriving at any settlement with the plaintiffs to procure the release of the vessel, the plaintiffs were entitled to relief from the courts. He submitted that the order made by Lai Siu Chiu J effectively meant that when the vessel was sold the plaintiffs would rank first as their possessory lien would now attach on to the sale proceeds. He submitted that if the interveners had not been happy with the order of Lai Siu ChiuJ, they, as interested parties, should have made the necessary application to have the order set aside. Having elected not to do so they could not now complain about the order.

19       There is merit in this submission. The interveners were aware (or if they were not they clearly ought to have been) that the vessel had been arrested by the plaintiffs. Even if they were not aware of the application before Lai Siu Chiu J there was nothing to stop them from applying that the order be set aside when they became aware of it. They chose not to do so. That being so, they cannot, in my view, in this application seek to challenge that order or seek to restrict its ambit on the ground that they were not before the court at the time the order was made. The order having been made and the interveners not having taken steps to set aside the order, the order would be binding on the parties to these proceedings. It is to be noted that even if the court were to interpret the effect of Lai Siu Chiu J’s order in the manner suggested by the interveners, the interveners could, at best, only submit that prior to and at the time the order was made the plaintiffs had no possessory lien over the vessel. It is to be noted that the interveners have not, at any time, sought to challenge the validity of the plaintiffs’ possessory lien prior to the order of Lai Siu Chiu J.

20       A possessory lien would be lost if the lien holder waives it, abandons it or obtains alternative security of a kind that is inconsistent with the lien. Although the plaintiffs parted with possession of the vessel for the purpose of the sale, that parting, by the terms of the court order applied for by the plaintiffs, was to be without prejudice to their possessory lien. This indicated that the plaintiffs had no intention whatsoever of abandoning their possessory lien. If the court had, at the behest of the interveners or otherwise, refused to order the appraisement and sale on those terms, the plaintiffs would still have possession of the vessel. In my view, the plaintiffs, in applying for the order of appraisement and sale ‘without prejudice to their possessory lien’, were not taking any step that derogated from the lien; to the contrary, their conduct was consistent with their wanting to preserve their lien.

21       Under common law, a repairer would lose his possessory lien if he parts with possession of the vessel. But the harshness of this rule has been mitigated in cases such as The Tergeste where upon a third party invoking the assistance of the court in having the vessel sold, the court protects the lien holder’s interest by transferring that interest from the vessel to the proceeds of sale of the vessel. I can see little distinction between that situation and the present situation where the holder of the possessory lien (albeit as a result of his own initiative) parts with the vessel under a court order which protects his possessory lien. In both cases the lien holder parts with possession of the vessel. If the courts can protect the lien in the former case by attaching the lien to the proceeds of sale of the property, I cannot see any reason why the courts cannot in the latter case do the same.

22       A party desiring to object to any application to court for a sale ‘without prejudice to the possessory lien’ should do so at the time the order is applied for, or, if he was not then a party to the action, he should take steps to set aside that order. The interveners, although they made themselves a party to this action, took no steps to have the order of sale made by Lai Siu Chiu J set aside. The order not having been set aside, this court, in my view, is bound to recognize and give effect to the order.

23       In British Shipping Laws Series (Vol 1) on ‘Admiralty Practice’ by Kenneth C McGuffie, there is a reference in para 378 to the case of The Berriz. The original report (in the Shipping Gazette of 12 February 1906) was not produced to me but at para 378, McGuffie say:

In The Berriz the plaintiffs had a possessory lien over a vessel lying in their premises. The instituted an action in rem against the vessel for necessary repairs and served the writ upon the vessel. The plaintiffs obtained judgment by default of appearance to the writ and the court ordered not only the appraisement and sale of the vessel, as is usual in default cases, but, as a prelude thereto, the arrest of the vessel, without prejudice to any rights accruing or accrued to the plaintiffs from their possessory lien.

24       Mr Haridass Ajaib highlighted the fact that in The Berriz the court had, as early as 1906, extended its protection to a repairer taking proceedings against the vessel to recover his repair charges by declaring that appraisal and sale of the vessel would be without prejudice to the possessory lien of the repairer.

25       The Opal 3’ ex ‘Kuchino’ [1992] 2 SLR 585, was a similar case. The plaintiffs therein had asserted a possessory lien over certain vessels on the ground that they had not been paid for repairs done to the vessels. In order to recover the repair charges, the plaintiffs commenced an admiralty action in rem against the ships and caused them to be arrested. They then moved the court for orders that the ships be appraised and sold pendente lite without prejudice to their possessory lien. At the hearing of that application, a third party intervener, claiming to be the beneficial owner of the ships, appeared and applied for the writ and the warrant of arrest to be set aside on the grounds that the court had no jurisdiction under s 4(4) of the High Court (Admiralty Jurisdiction) Act to deal with the matter. GP Selvam JC [as he then was] dismissed the interveners’ challenge on jurisdiction and allowed the plaintiffs’ application for the vessel to be sold pendente lite without prejudice to the possessory lien of the plaintiffs.

26       Mr Jude Benny submitted that little reliance should be placed on The Berriz and on The Opal 3 as in both cases the question whether the court can, at the instance of the repairer, order the sale of the vessel without prejudice to the possessory lien of the repairer, had not been argued. With regard to The Opal 3 Mr Jude Benny raised the additional point that although GP Selvam JC had referred to 26 cases in his judgment, there was no reference to The Gaupen and The Ally, which, according to Mr Jude Benny, were the two most significant cases. It is not possible to say from the short report on The Berriz quoted to me from McGuffie whether in that case the point had been raised but, in respect of The Opal 3, it is apparent from the report that GP Selvam JC was acutely conscious that the application for the appraisement and sale ‘without prejudice to the possessory lien’ was being made by the lien holder himself. I refer to the following passage at p 588E of the judgment:

The plaintiffs claimed that they were not paid and asserted a possessory lien over the ships. The possessory lien by itself afforded no means of satisfaction to the plaintiffs as they did not have a right of sale. Further, no one else had arrested the ships. It, therefore, became necessary for them to invoke the statutory right of arrest and have the ships sold to enforce their claim.

27       In The Gaupen and in The Ally the court was invited to declare that the possessory liens were still attached to the vessels even when the vessels were no longer in the possession of the lien holders. The court, as is apparent from the judgment of Willmer J quoted earlier, refused to create so novel a proposition as a possessory lien over a vessel that was no longer in the possession of the lien holder. Both those cases do not go further than to restate the common law rule that you cannot part with possession and yet retain the possessory lien. There was no question, in the two cases, of the vessels being sold and the respective possessory liens, by sanction of the court, being transferred to the sale proceeds. The distinction between the two situations was recognized by Willmer J in The Ally when he said:

As I pointed out during the course of the argument, the exercise of a possessory lien is a form of self-help; the person in possession may continue to exercise his lien so long as he has possession, and nobody can interfere with him if he does so. Even the court, if it has occasion to arrest the ship in an admiralty action in rem through the Admiralty Marshal, must protect the rights of the possessory lien holders: that is to say, if it orders the sale of the ship, it must hold the proceeds of sale subject to the same rights as the possessory lien holders had over the ship herself. That was decided in The Tergeste, [1903] P 26, to which I was referred.

28       In my view, those two cases were of no assistance to the interveners. Indeed, the dicta of Willmer J quoted above can be said to be consistent with the position taken by the plaintiffs in this case.

29       The plaintiffs’ right of action in rem against the vessel for the recovery of the repair charges is a right that the plaintiffs have by virtue of statute. Section3(1)(m) of the High Court (Admiralty Jurisdiction) Ac (Cap 123), specifically gives our courts admiralty jurisdiction to hear and determine any claim in respect of the construction, repair or equipment of a ship. What the plaintiffs did in this case was to pursue the right given to them by statute to bring proceedings against the vessel itself for the recovery of the repair charges. I would in passing note that in The Acacia (supra), Townsend J, having held that the possessory lien was not lost by arrest of the vessel, went on to say at p 256:

If I felt myself coerced to follow Jacobs v Latour, I should be bound to hold that the possessory lien was gone, and if the possessory lien be gone this case cannot be distinguished from The Aneroid (L Rep 2 P Div 189); but I am reluctant to decide for the first time that the effect of an Admiralty arrest is to destroy the lien for the active enforcement of which it was sued out, or that a party having a valid claim up to that moment can be deemed to forego it by asking the statutory aid of the court to make it effectual. [Emphasis added.]

30       I echo those sentiments. The plaintiff here was pursuing a remedy given to him by statute. To achieve his objective the vessel must necessarily be sold. All that the plaintiff effectively asked of the court was that, when the vessel was sold, his rights as holder of the possessory lien be attached to the sale proceeds. In seeking such an order the plaintiff, far from doing something in derogation of his possessory lien, was in fact seeking to preserve it, not as against the vessel as the vessel needs be sold, but as against the proceeds of sale of the vessel.

31       Even if it be the case that the point was not fully canvassed before GPSelvamJC in ‘Opal 3’, I am respectfully of the view that GP Selvam JC was acting correctly when he allowed the application before him by the repairer that the vessel be sold pendente lite without prejudice to the possessory lien of the repairer. Equally, Lai Siu Chiu J, in granting the application in this case that the vessel be sold without prejudice to the possessory lien of the plaintiffs, was, in my respectful view, acting on correct principles.

32       Emilia Shipping Inc v State Enterprise for Pulp & Paper Industries [1991] 2 MLJ 379, is another instance of a case where the severity of the rule that the holder of a common law lien would have to retain possession of the goods if he wished to retain his lien, was mitigated by the court permitting the lien to attach on to the proceeds of sale of the goods. In that case, a cargo of wood pulp, being carried on board the plaintiffs’ vessel destined for a port in Iraq, was off-loaded by the plaintiffs in Singapore as the plaintiffs were unable to unload the cargo at any port in Iraq because of the Iraqi/Kuwait war. The plaintiffs were not paid their freight charges and they applied for and obtained (ex parte) an order for sale under O 29 r 4 of the Rules of the Supreme Court. The owners of the cargo applied to set aside the order of sale. Chan Sek Keong J held that, in the circumstances of the case, it would be more prudent that the cargo be sold as soon as possible and rejected the application. In the course of his judgment, the learned judge referred to the following passage from 28 Halsbury’s Laws of England (4th Ed) para 542:

At common law, a legal lien merely conferred on the holder of the articles in respect of which it was claimed a passive right to detain the articles until the debt was paid. Such liens could not in the absence of statutory powers be enforced by sale although there might be expense incurred in the retention of the property. Accordingly, a person who chose to insist on his right of retainer might do so, but would have no further right and must put up with any inconvenience which the retention might entail. However, the harshness of this rule is mitigated by the court’s discretion to order the sale of perishable goods.

33       And then went on to say:

In my view, the common law rule is subject to O 29 r 4. The cargo falls within its terms as it is the subject matter (the lien) of the plaintiffs’ claim for freight. This court has the power to order the sale of the cargo in terms of that Rule. The question is whether it should exercise its discretion.

34       For the above reasons I was of the view that the terms of the order made by Lai Siu Chiu J had the effect of transferring the interests of the plaintiffs in the vessel to the proceeds of sale of the vessel. Accordingly, I gave judgment for the plaintiffs with costs.

Order accordingly.

Reported by S Surenthiraraj