The Existence of a Possessory Lien in respect of a Claim would Affect the Priority to be Given to the Costs Incurred in Enforcing that Claim in an Admiralty Action in Rem

It is well settled 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. However, it remains uncertain whether the proper application of this rule should result in costs being accorded the same priority as a possessory lien or a statutory lien 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. In the recent case of Keppel FELS Ltd v Owner of the vessel “SONGA VENUS” and Songa Offshore SE (The Songa Venus) [2020] SGHC 74, the Singapore High Court addressed this issue.

The claimants, Keppel FELS Ltd, provided various services to the vessel Songa Venus, including repairs, modifications, supply of materials, equipment and berthing. The owners of the vessel failed to pay for the said services, and so Keppel FELS Ltd commenced these proceedings, arrested the vessel, and obtained an order for the vessel to be appraised and sold without prejudice to their possessory lien over the vessel, if any. After the vessel was sold for US$3,749,463.14, Keppel FELS Ltd obtained final judgment for the sum of US$1,169,370 with interest. The court also held that Keppel FELS Ltd had a possessory lien over the vessel in respect of the portion of its claim relating to repairs, modifications, supply of various materials, equipment and services. The sums amounted to US$328,723 plus costs. The intervener, Songa Offshore SE, commenced a separate in rem action against the vessel for sums outstanding under a seller’s credit agreement which was secure by a second preferred mortgage over the vessel. Songa Offshore SE obtained a final judgment for the sum of US$34,200,000.

Against this backdrop, Keppel FELS Ltd filed an application to determine the priority of the relevant claims and payment out of the proceeds of sale. The parties were not in dispute as to the priority of the substantive claims. The dispute revolved around the costs of the claims. Keppel FELS Ltd argued that costs attributable to the portion of their claim for which they had a possessory lien should be accorded the same priority, ranking before the mortgage. However, Songa Offshore SE contended that all costs of Keppel FELS Ltd’s claim should be granted the priority of a statutory lien and rank below the mortgage.

The court found in favour of Keppel FELS. It explained that ‘considerations of justice and equity required the court to accord the disputed costs the same priority as the portion of Keppel FELS’ claim for which it had a possessory lien’. Particular emphasis was placed on the fact that, for the possessory lien holder to surrender the ship to the admiralty court, the admiralty court has to give an undertaking to put the possessory lien holder ‘exactly in the same position as if he/she had not surrendered the ship’. In principle, a possessory lien holder retains possession of the res until he/she has been paid in full, in return for its release. He/she does not have to initiate any legal proceedings to enforce the possessory lien and, thus, does not incur any legal costs. However, whenever the possessory lien holder has to surrender the ship to the admiralty court, he/she would have to initiate in rem proceedings to satisfy his/her claim through the judicial sale of the vessel. This implies that, for the admiralty court to fulfil its undertaking to put the possessory lien holder ‘exactly in the same position as if he/she had not surrendered the ship’, the admiralty court should protect the costs incurred by the possessory lien holder when bringing a claim in rem to the same extent as the possessory lien itself.

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Dr Zoumpoulia Amaxilati

I am a lecturer in shipping and trade law at the Institute of International Shipping and Trade Law at Swansea University where I teach Admiralty law, Charterparties: law and practice, Carriage of goods by sea, land and air, and Tort law. I am a graduate of the Aristotle University of Thessaloniki, and hold an LLM degree in Maritime Law from the University of Southampton. I also completed my PhD degree in maritime law with emphasis on seafarers’ rights at the University of Southampton in 2019. Before joining the Institute, I worked as a lecturer in law at Queen Mary, University of London where I taught tort law. I was also a tutor in law at the University of Southampton. I am a qualified lawyer in Greece and prior to her PhD studies I worked as a lawyer at the Ministry of Justice, Transparency and Human Rights of Greece. My primary research focuses on international maritime labour law and seafarers’ rights, international maritime law, public international law, including international law of the sea, and tort law. I have recently published a book chapter in Baris Soyer and Andrew Tettenborn (Ed), Disruptive Technologies, Climate Change and Shipping (Informa Law from Routledge) on the human element in autonomous shipping. I am a Fellow of the Higher Education Academy. I am also a member of the Society of Legal Scholars and the Women in Shipping and Trading Association.

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