Duncan v Diablo Fortune: Lien on Sub-Freights, Non-Registration of Charges, and Arbitrability in Insolvency
In Originating Summons No 287 of 2017, the liquidators of Siva Ships International Pte Ltd sought a determination that Diablo Fortune Inc's lien over sub-freights was void due to non-registration under Section 131 of the Companies Act. Diablo Fortune Inc filed Originating Summons No 307 of 2017 for an extension of time to register the lien and Summons No 1317 of 2017 to stay the proceedings in favor of arbitration. The High Court of Singapore, presided over by Audrey Lim JC, held that the lien was a registrable charge under Singapore law, dismissed the stay application, and refused to grant an extension of time for registration, allowing the liquidators' application and dismissing Diablo's applications.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Application in Originating Summons No 287 of 2017 allowed; applications in Originating Summons No 307 of 2017 and Summons No 1317 of 2017 dismissed.
1.3 Case Type
Insolvency
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Liquidators sought a determination that Diablo Fortune's lien was void due to non-registration. The court held the lien was a registrable charge and dismissed Diablo's applications.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Cameron Lindsay Duncan | Plaintiff, Respondent | Individual | Application Allowed | Won | Debby Lim |
| Luke Anthony Furler | Plaintiff, Respondent | Individual | Application Allowed | Won | Debby Lim |
| Diablo Fortune Inc | Defendant, Applicant | Corporation | Applications Dismissed | Lost | Felicia Tan, Justin Seet |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Audrey Lim | Judicial Commissioner | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Debby Lim | Shook Lin & Bok LLP |
| Felicia Tan | Incisive Law LLC |
| Justin Seet | Incisive Law LLC |
| Matthew Teo | Rajah & Tann Singapore LLP |
4. Facts
- Siva Ships International Pte Ltd (the Company) entered into a Bareboat Charter with Diablo Fortune Inc (Diablo) on 6 June 2008.
- The Bareboat Charter contained a lien clause (Clause 18) granting Diablo a lien on sub-hires and sub-freights.
- The Company was wound up on 6 January 2017.
- Diablo sent a notice to V8 Pool Inc (V8) on 30 December 2016 purporting to exercise its lien under Clause 18 of the Bareboat Charter.
- The liquidators of the Company applied for a determination that Diablo's lien was void against them for want of registration under s 131 of the Companies Act.
- Diablo applied for an extension of time to register the lien under s 137 of the Companies Act and a stay of proceedings in favor of arbitration.
- The winding up order was made on the Company's application.
5. Formal Citations
- Duncan, Cameron Lindsay and another v Diablo Fortune Inc and another matter, , [2017] SGHC 172
6. Timeline
| Date | Event |
|---|---|
| Bareboat Charter entered into between Siva Ships International Pte Ltd and Diablo Fortune Inc. | |
| Standard Ship Management Agreement entered into between Siva Ships International Pte Ltd and V Ships (Asia) Pte Ltd. | |
| Pooling arrangement entered into between Siva Ships International Pte Ltd and V8 Pool Inc. | |
| Charter period extended to 4 May 2017. | |
| Winding up application filed by Siva Ships International Pte Ltd. | |
| Diablo Fortune Inc. notified of winding up application. | |
| First Lien Notice sent by Diablo Fortune Inc. to V8 Pool Inc. | |
| Next bareboat hire installment due from Siva Ships International Pte Ltd to Diablo Fortune Inc. | |
| Siva Ships International Pte Ltd wound up. | |
| Liquidators informed Diablo Fortune Inc.'s lawyer of sub-charter and voyage to Cartagena. | |
| Second Lien Notice sent by Diablo Fortune Inc. to Repsol Petroleo SA. | |
| Vessel arrived at Cartagena. | |
| Settlement Agreement executed between V8 Pool Inc. and Siva Ships International Pte Ltd. | |
| Cargo discharge completed; Diablo Fortune Inc. notified Liquidators of arbitration proceedings. | |
| Payment to relevant parties under the Settlement Agreement was due. | |
| V8 Pool Inc. paid US$232,931.87 to Diablo Fortune Inc. | |
| Spanish Injunction obtained by Diablo Fortune Inc. | |
| Recognition Order obtained by the Liquidators from the London High Court. | |
| Court hearing. | |
| Parties appeared before the court. | |
| Court hearing. | |
| Judgment reserved. |
7. Legal Issues
- Arbitrability of Dispute
- Outcome: The court held that the dispute was not covered by the arbitration clause and was non-arbitrable due to public policy considerations related to insolvency.
- Category: Procedural
- Sub-Issues:
- Scope of arbitration clause
- Public policy considerations
- Governing Law on Registration of Charges
- Outcome: The court held that Singapore law governs the registration of charges and priorities in insolvency matters for companies incorporated in Singapore.
- Category: Substantive
- Sub-Issues:
- Lex fori concursus
- Law of incorporation
- Lien over Sub-Freights as a Charge
- Outcome: The court held that a lien over sub-freights or sub-hire is a charge within the meaning of s 131 of the Companies Act, either as a floating charge or a charge on book debts.
- Category: Substantive
- Sub-Issues:
- Equitable assignment
- Floating charge
- Charge on book debts
- Extension of Time to Register Charge
- Outcome: The court refused to grant an extension of time to register the lien, as the company had already been wound up, and an extension would prejudice unsecured creditors.
- Category: Procedural
- Sub-Issues:
- Inadvertence
- Discretion of the court
- Prejudice to unsecured creditors
8. Remedies Sought
- Declaration that lien is void
- Extension of time to register lien
- Stay of proceedings in favour of arbitration
9. Cause of Actions
- Avoidance of Charge
- Application for Extension of Time to Register Charge
- Application for Stay of Proceedings
10. Practice Areas
- Commercial Litigation
- Insolvency Litigation
- Arbitration
11. Industries
- Shipping
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore) | Court of Appeal | Yes | [2011] 3 SLR 414 | Singapore | Cited for the principle that avoidance claims are unlikely to be contemplated within the scope of an arbitration agreement. |
| Ng Wei Teck Michael and others v Oversea-Chinese Banking Corp Ltd | High Court | Yes | [1998] 1 SLR(R) 778 | Singapore | Cited to support the point that the issue of the validity of the lien as against the Liquidators was only triggered after the Company’s management was displaced by the Liquidators. |
| Media Development Authority of Singapore v Sculptor Finance (MD) Ireland Ltd | Court of Appeal | Yes | [2014] 1 SLR 733 | Singapore | Cited for the principle that on liquidation of a chargor, the proper plaintiff to bring proceedings to avoid a charge for non-registration is the liquidator. |
| Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals | Court of Appeal | Yes | [2016] 1 SLR 373 | Singapore | Cited for the principle that the essential criterion of non-arbitrability is whether the subject matter of the dispute is of such a nature as to make it contrary to public policy for that dispute to be resolved by arbitration. |
| Ex parte Melbourn | Court of Appeal in Chancery | Yes | (1870) LR 6 Ch App 64 | England and Wales | Cited for the principle that the question of priority of the different creditors inter se must be governed by the law of the country where the bankruptcy takes place, and where the assets of the debtor are being administered. |
| Beluga Chartering GmbH (in liquidation) and others v Beluga Projects (Singapore) Pte Ltd (in liquidation) and another (deugro (Singapore) Pte Ltd, non-party) | Court of Appeal | Yes | [2014] 2 SLR 815 | Singapore | Cited for the principle that once insolvency proceedings are commenced in a particular jurisdiction, the courts in that jurisdiction would generally apply the statutory insolvency scheme of that jurisdiction to matters arising from the insolvency. |
| In re Welsh Irish Ferries Ltd | Chancery Division | Yes | [1986] Ch 471 | England and Wales | Cited for the principle that a lien on sub-freights is the creature of an express contract and creates an equitable charge on the sub-freights. |
| Annangel Glory Compania Naviera SA v M Golodetz Ltd, Middle East Marketing Corporation (UK) Ltd and Clive Robert Hammond (The “Annangel Glory”) | Queen’s Bench Division of the English High Court | Yes | [1988] 1 Lloyd’s Rep 45 | England and Wales | Cited for the principle that a lien clause in the charter contained a charge created by the charterers within the meaning of s 395(1) of the UK Companies Act 1985. |
| Western Bulk Shipowning III A/S v Carbofer Maritime Trading APS (The “Western Moscow”) | High Court | Yes | [2012] 2 Lloyd’s Rep 163 | England and Wales | Cited for the principle that the lien clause created a charge over sub-freights and sub-hire. |
| Agnew v Commissioner of Inland Revenue | Privy Council | No | [2001] 2 AC 710 | United Kingdom | Cited for Lord Millet’s dicta on the nature of a lien on subfreights. |
| Jurong Data Centre Development Pte Ltd (provisional liquidator appointed) (receivers and managers appointed) v M+W Singapore Pte Ltd and others | High Court | Yes | [2011] 3 SLR 337 | Singapore | Cited for the definition of book debts. |
| Paul & Frank Ltd v Discount Bank (Overseas) Ltd | Chancery Division | Yes | [1967] Ch 348 | England and Wales | Cited for the test of whether something is a book debt. |
| Malaysia National Insurance Bhd v Suruhanjaya Syarikat Malaysia | High Court | Yes | [2004] 4 MLJ 472 | Malaysia | Cited for the test of whether something is a book debt. |
| In re Law Car and General Insurance Corpn Ltd | High Court | Yes | [1911] WN 91 | England and Wales | Cited for the principle that the debt must be enforceable by action by the creditor directly against the debtor. |
| Tradigrain SA v King Diamond Shipping SA (The “Spiros C”) | Court of Appeal | Yes | [2000] 2 Lloyd’s Rep 319 | England and Wales | Cited for the principle that a lien over sub-freights gives the shipowner a right to step in and claim payment of such sub-freights to himself, provided that they have not already been paid. |
| Care Shipping Corporation v Latin American Shipping Corporation (The Cebu) | Court of Appeal | Yes | [1983] 1 QB 1005 | England and Wales | Cited as an English case that treated a Contractual Lien as an equitable assignment. |
| Dry Bulk Handy Holding Inc v Fayette International Holdings Ltd (The “Bulk Chile”) | High Court | Yes | [2012] 2 Lloyd’s Rep 594 | England and Wales | Cited as an English case that treated a Contractual Lien as an equitable assignment. |
| Electro Magnetic (S) Ltd (under judicial management) v Development Bank of Singapore Ltd | Court of Appeal | Yes | [1994] 1 SLR(R) 574 | Singapore | Cited for the meaning of security. |
| In re Spectrum Plus Ltd (in liquidation) | House of Lords | Yes | [2005] 2 AC 680 | United Kingdom | Cited for the principle that under a floating charge, the chargee has a proprietary interest, but its interest is in a fund of circulating capital. |
| Re City Securities Pte | High Court | Yes | [1990] 1 SLR(R) 413 | Singapore | Cited for the principle that the grantee of a floating charge does not have a proprietary right to or an interest in the property subject to the charge as his rights do not attach to any specific property but only hover over the class of property subject to the charge. |
| Daebo Shipping Co Ltd v Ship Go Star | Federal Court of Australia | Yes | (2012) 294 ALR 635 | Australia | Cited for the principle that a Contractual Lien has been acknowledged as a form of security. |
| Samsun Logix Corporation v Oceantrade Corporation | High Court | Yes | [2008] 1 Lloyd’s Rep 450 | England and Wales | Cited for the principle that to be effective, the notice must be given before the sub-hire or sub-freights is paid, otherwise the lien fails to bite on anything. |
| The Asiatic Enterprises (Pte) Ltd v United Overseas Bank Ltd | High Court | Yes | [1999] 3 SLR(R) 976 | Singapore | Cited for the principle that where an agreement creates a floating security, parties are free to designate any event they choose as causing the charge to crystallise. |
| In re The Mendip Press (Limited) | Chancery Division | Yes | (1901) 18 TLR 37 (Ch D) | England and Wales | Cited for the principle that not being aware of the requirement for registration suffices as inadvertence for the purposes of s 137 of the CA. |
| In re Heathstar Properties Ltd | High Court | Yes | [1966] 1 WLR 993 | England and Wales | Cited for the principle that not being aware of the requirement for registration suffices as inadvertence for the purposes of s 137 of the CA. |
| In re Resinoid & Mica Products Ltd | Court of Appeal | Yes | [1983] 1 Ch 132 | England and Wales | Cited for the principle that in cases where time is extended before the winding up has commenced, it is the invariable practice of the court to insert words saving the rights of parties acquired prior to the time when registration is in fact made. |
| In re Ashpurton Estates Ltd | Court of Appeal | Yes | [1983] 1 Ch 110 | England and Wales | Cited for the principle that where the company has been wound up, an order extending time would not ordinarily be made save in an exceptional case, such as fraud. |
| Waller v New Zealand Bloodstock Ltd | Court of Appeal | Yes | [2006] 3 NZLR 629 | New Zealand | Cited for the background to the PPSA in New Zealand. |
13. Applicable Rules
| Rule Name |
|---|
| Order 88 Rule 2 of the Rules of Court |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap. 50) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) s 131(1) | Singapore |
| Companies Act (Cap. 50) s 137 | Singapore |
| Arbitration Act 1996 | England |
| International Arbitration Act (Cap 143A, 2002 Rev Ed) s 11(1) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Lien on sub-freights
- Bareboat Charter
- Winding up
- Registration of charges
- Arbitration clause
- Liquidators
- Companies Act
- Floating charge
- Book debts
- Insolvency regime
15.2 Keywords
- Lien
- Sub-freights
- Charge
- Registration
- Insolvency
- Arbitration
- Companies Act
- Singapore
16. Subjects
- Insolvency
- Company Law
- Maritime Law
- Arbitration
17. Areas of Law
- Insolvency Law
- Conflict of Laws
- Arbitration Law
- Company Law
- Maritime Law