Diablo Fortune Inc v Duncan: Lien on Sub-Freights & Sub-Hires - Registrable Charges under Companies Act

In Diablo Fortune Inc v Cameron Lindsay Duncan and Luke Anthony Furler, the Singapore Court of Appeal addressed whether liens on sub-freights and sub-hires are registrable charges under the Companies Act. The court dismissed the appeal, holding that such liens are registrable as floating charges. The court acknowledged the commercial inconvenience of requiring registration but stated that it is for Parliament to determine whether such liens should be excluded from the existing scheme.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeal Dismissed

1.3 Case Type

Insolvency

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal held that liens on sub-freights and sub-hires are registrable charges under the Companies Act, impacting shipping companies.

1.7 Decision Date

20 May 2018

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Luke Anthony Furler	Respondent	Individual	Judgment for Respondent	Won	Cheryl Chong of Shook Lin & Bok LLP Debby Lim Hui Yi of Shook Lin & Bok LLP
Diablo Fortune Inc	Appellant	Corporation	Appeal Dismissed	Lost	Felicia Tan May Lian of Incisive Law LLC Justin Seet An Xiang of Incisive Law LLC Samantha Kong Hui Yan of Incisive Law LLC
Cameron Lindsay Duncan	Respondent	Individual	Judgment for Respondent	Won	Cheryl Chong of Shook Lin & Bok LLP Debby Lim Hui Yi of Shook Lin & Bok LLP

3. Judges

Judge Name	Title	Delivered Judgment
Sundaresh Menon	Chief Justice	No
Andrew Phang Boon Leong	Judge of Appeal	No
Judith Prakash	Judge of Appeal	No
Tay Yong Kwang	Judge of Appeal	No
Steven Chong	Judge of Appeal	Yes

4. Counsels

Counsel Name	Organization
Cheryl Chong	Shook Lin & Bok LLP
Debby Lim Hui Yi	Shook Lin & Bok LLP
Felicia Tan May Lian	Incisive Law LLC
Justin Seet An Xiang	Incisive Law LLC
Samantha Kong Hui Yan	Incisive Law LLC

4. Facts

Siva Ships International Pte Ltd (the Company) was wound up on 6 January 2017.
Diablo Fortune Inc (Diablo) sought to exercise a lien on sub-freights due from V8 to the Company.
The lien was pursuant to cl 18 of the Bareboat Charter between Diablo and the Company.
The sum of US$563,999 was due and owing from V8 to the Company for the month of December 2016.
V8 did not make the payment to the Company in light of Diablo’s lien notice.
The Liquidators sought a determination that the Lien is void for want of registration, pursuant to s 131(1) of the Companies Act.
The Judge found that the Lien was a registrable charge within the ambit of s 131 of the Companies Act.

5. Formal Citations

Diablo Fortune Inc v Duncan, Cameron Lindsay and another, Civil Appeal No 151 of 2017, [2018] SGCA 26

6. Timeline

Date	Event
2008-06-06	Bareboat Charter entered into between Diablo Fortune Inc and Siva Ships International Pte Ltd.
2010-03-10	Ship Management Agreement entered into between Siva Ships International Pte Ltd and V Ships (Asia) Pte Ltd.
2011-02-09	Pool Agreement entered into between Siva Ships International Pte Ltd and V8 Pool Inc.
2016-12-19	Siva Ships International Pte Ltd filed a winding up application in Singapore.
2016-12-21	Diablo Fortune Inc notified of winding up application.
2016-12-30	Diablo Fortune Inc sent a lien notice to V8 Pool Inc.
2017-01-06	Siva Ships International Pte Ltd was wound up.
2017-01-16	Vessel arrived at Cartagena.
2017-01-18	Settlement Agreement executed between V8 Pool Inc and Siva Ships International Pte Ltd.
2017-01-19	Vessel completed discharge of its cargo.
2017-01-19	Diablo Fortune Inc sent a notice of arbitration to Siva Ships International Pte Ltd.
2017-01-24	Payment to relevant parties under the Settlement Agreement was due.
2017-01-24	V8 Pool Inc paid US$232,931.87 to Diablo Fortune Inc.
2017-01-25	Diablo Fortune Inc obtained injunctive relief from the Madrid Court of First Instance No 101.
2017-02-28	Liquidators obtained an order from the Chancery Division of the English High Court.
2018-03-05	Appeal dismissed with costs.
2018-05-21	Grounds of decision delivered.

7. Legal Issues

Registrability of Liens on Sub-Freights and Sub-Hires
- Outcome: The court held that liens on sub-freights and sub-hires are registrable as floating charges under s 131(3)(g) of the Companies Act.
- Category: Substantive
- Sub-Issues:
  - Characterisation of lien as equitable assignment
  - Characterisation of lien as contractual right of interception
  - Lien as a floating charge
  - Lien as agreement to create a charge
- Related Cases:
  - [2014] 1 SLR 733
  - [2017] SGHC 172
  - [1986] 1 Ch 471
  - [2001] 2 AC 710
  - [2012] 2 Lloyd’s Rep 163
  - [1983] 1 QB 1005
  - [1988] 1 Lloyd’s Rep 45
  - [1979] AC 757
  - [1988] 1 Lloyd’s Rep 439
  - [2012] EWHC 2107
  - [2000] 2 Lloyd’s Rep 319
  - [1903] 2 Ch 284
  - [2018] 1 BCLC 291
  - [1903] 1 KB 391
  - [1990] 1 SLR(R) 413
  - [2005] 2 AC 680
  - [2011] 3 SLR 337
  - [2012] EWHC 2997
  - [1988] 1 SLR(R) 220
  - [1999] 3 SLR(R) 976
  - (1992) 5 BPR 11,734
  - [2002] 1 AC 336
  - [1999] 2 SLR(R) 671
  - [2004] EWHC 1517
  - [1910] 2 KB 979
  - [1904] AC 355
  - [2017] WASC 152
  - [2003] 1 SCR 666
  - [2011] 4 SLR 948

8. Remedies Sought

Declaration that the lien is void for want of registration

9. Cause of Actions

Avoidance of unregistered charge

10. Practice Areas

Commercial Litigation
Insolvency Litigation
Shipping Litigation
Maritime Litigation

11. Industries

Shipping

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Media Development Authority of Singapore v Sculptor Finance (MD) Ireland Ltd	High Court	Yes	[2014] 1 SLR 733	Singapore	Cited for the principle that the liquidator is the proper plaintiff to bring proceedings to avoid a charge for non-registration.
Duncan, Cameron Lindsay and another v Diablo Fortune Inc and another matter	High Court	Yes	[2017] SGHC 172	Singapore	The Judge followed the conventional English approach that liens operate as a charge on the company and would be void against the liquidator in the absence of registration.
In re Welsh Irish Ferries Ltd	Chancery Division	Yes	[1986] 1 Ch 471	England and Wales	Discusses the 'contractual right of interception' theory regarding shipowner's lien, which the court ultimately rejects.
Agnew and another v Commissioner of Inland Revenue	Privy Council	Yes	[2001] 2 AC 710	United Kingdom	Discusses the characterization of a charge over book debts and references a shipowner's lien over sub-freights, but the court's comments are obiter and not definitively held.
Western Bulk Shipowning III A/S v Carbofer Maritime Trading APS and others (The “Western Moscow”)	High Court of Justice	Yes	[2012] 2 Lloyd’s Rep 163	England and Wales	Adopted the 'equitable charge' theory instead of the 'contractual right of interception' theory.
Care Shipping Corporation v Latin American Shipping Corporation	Queen's Bench Division	Yes	[1983] 1 QB 1005	England and Wales	Interpreting the word “sub-freights” in the lien clause of the head charter to include all sub-freights payable down the chain of charters.
Annangel Glory Compania Naviera SA v M Golodetz Ltd, Middle East Marketing Corporation (UK) Ltd and Clive Robert Hammond (The “Annangel Glory”)	High Court of Justice	Yes	[1988] 1 Lloyd’s Rep 45	England and Wales	The 'agency' explanation was expressly rejected where Saville J reasoned that the parties intended to give the owners a right which the owners could exercise on their own behalf – not on behalf of the charterers.
Federal Commerce & Navigation Co Ltd v Molena Alpha Inc and Others (The “Nanfri”)	House of Lords	Yes	[1979] AC 757	United Kingdom	States that liens on sub-freights give rise to an equitable assignment by way of floating charge.
G & N Angelakis Shipping Co SA v Compagnie National Algerienne de Navigation (The “Attika Hope”)	High Court of Justice	Yes	[1988] 1 Lloyd’s Rep 439	England and Wales	States that liens on sub-freights give rise to an equitable assignment by way of floating charge.
Dry Bulk Handy Holding Inc and another v Fayette International Holdings Ltd and another (The “Bulk Chile”)	High Court of Justice	Yes	[2012] EWHC 2107	England and Wales	States that liens on sub-freights give rise to an equitable assignment by way of floating charge.
Tradigrain SA and others v King Diamond Shipping SA (The “Spiros C”)	High Court of Justice	Yes	[2000] 2 Lloyd’s Rep 319	England and Wales	States that such an assignment would not be an out-and-out assignment, but one by way of security.
In re Yorkshire Woolcombers Association Ltd	Court of Appeal	Yes	[1903] 2 Ch 284	England and Wales	Defines the characteristics of a floating charge.
Re Property Edge Lettings Ltd	High Court of Justice	Yes	[2018] 1 BCLC 291	England and Wales	To date, the factors in Re Yorkshire Woolcombers Association factors remain authoritative.
Tagart, Beaton & Co v James Fisher & Sons	Court of Appeal	Yes	[1903] 1 KB 391	England and Wales	The shipowner could not trace into sub-freights after they had been paid to the charterer or its agents.
Re City Securities Pte	High Court	Yes	[1990] 1 SLR(R) 413	Singapore	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.
In re Spectrum Plus Ltd (in liquidation)	House of Lords	Yes	[2005] 2 AC 680	United Kingdom	The chargee has a proprietary interest, but its interest is in a fund of circulating capital, and unless and until the chargee intervenes (on crystallisation of the charge) it is for the trader, and not the bank, to decide how to run its business.
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	A two-step approach is to be employed to determine whether rights conferred can properly be characterised as a charge.
Re Lehman Brothers International (Europe) (in administration)	High Court of Justice	Yes	[2012] EWHC 2997	England and Wales	A two-step approach is to be employed to determine whether rights conferred can properly be characterised as a charge.
Re Lin Securities (Pte) Ltd; Chi Man Kwong Peter and others v Asia Commercial Bank and others	High Court	Yes	[1988] 1 SLR(R) 220	Singapore	There is no magic in any particular set of words. A floating charge may be created without resort to such classical words and expressions as ‘present or future property’ or ‘undertaking’.
The Asiatic Enterprises (Pte) Ltd v United Overseas Bank Ltd	Court of Appeal	Yes	[1999] 3 SLR(R) 976	Singapore	An agreement to grant security on a contingency – such agreement not being specifically enforceable immediately – was found to grant no present security (whether by way of an equitable charge or otherwise).
Murphy v Wright	Court of Appeal	Yes	(1992) 5 BPR 11,734	Australia	The language of the clause “is not the language of charge by the guarantors of their assets”, and that the guarantors could not be taken to have expressly or impliedly charged their assets.
Smith (Administrator of Cosslett (Contractors) Ltd) v Bridgend County Borough Council	House of Lords	Yes	[2002] 1 AC 336	United Kingdom	A charge expressed to come into existence on the occurrence of an uncertain future event and then to apply to a class of assets that cannot be identified until the event has happened would, if otherwise valid, qualify for registration as a floating charge.
United Overseas Bank Ltd v The Asiatic Enterprises (Pte) Ltd	High Court	Yes	[1999] 2 SLR(R) 671	Singapore	An agreement to charge on a contingent event was registrable within 30 days of the acceptance of the facility letter.
Ashborder BV v Green Gas Power Ltd	High Court of Justice	Yes	[2004] EWHC 1517	England and Wales	For a brief summary of the applicable propositions, see Ashborder BV v Green Gas Power Ltd [2004] EWHC 1517 at [227].
Evans v Rival Granite Quarries, Limited	Court of Appeal	Yes	[1910] 2 KB 979	England and Wales	A floating security is not a future security; it is a present security, which presently affects all the assets of the company expressed to be included in it.
Illingworth v Houldsworth and Another	House of Lords	Yes	[1904] AC 355	United Kingdom	A floating charge is ambulatory and shifting in its nature, hovering over and so to speak floating with the property which it is intended to affect until some event occurs or some act is done which causes it to settle and fasten on the subject of the charge within its reach and grasp.
Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liquidation) (Receivers and Managers appointed)	Supreme Court of Western Australia	Yes	[2017] WASC 152	Australia	The phrase “proprietary interest” has different meanings in different contexts, and it would be “delusive exactness” to come up with a universal definition.
Caisse populaire Desjardins de Val-Brillant v Blouin	Supreme Court of Canada	Yes	[2003] 1 SCR 666	Canada	Registration “adds nothing to publicity and the protection of third persons”, and exempting such liens from registration would “[make] sense”.
DBS Bank Ltd v Tam Chee Chong and another (judicial managers of Jurong Hi-Tech Industries Pte Ltd (under judicial management))	High Court	Yes	[2011] 4 SLR 948	Singapore	DBS Bank Ltd v Tam Chee Chong and another (judicial managers of Jurong Hi-Tech Industries Pte Ltd (under judicial management)) [2011] 4 SLR 948 at [20]–[27].

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 131	Singapore
Companies Act (Cap 50, 2006 Rev Ed) s 131(1)	Singapore
Companies Act (Cap 50, 2006 Rev Ed) s 131(3)(f)	Singapore
Companies Act (Cap 50, 2006 Rev Ed) s 131(3)(g)	Singapore
Companies Act (Cap 50, 2006 Rev Ed) s 137	Singapore
Companies Act (Cap 50, 2006 Rev Ed) s 4	Singapore
Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed) s 2(3)	Singapore
Companies Ordinance (Cap 622) (HK) s 334(4)	Hong Kong
Companies Act 1989 (c 40) (UK) s 93	United Kingdom
Companies Act 1985 (c 6) (UK) s 396	United Kingdom

15. Key Terms and Keywords

15.1 Key Terms

Lien on sub-freights
Sub-hires
Registrable charge
Companies Act
Floating charge
Bareboat Charter
Winding up
Liquidation
Equitable assignment
Contractual right of interception
Crystallisation
Security interest

15.2 Keywords

Lien
Sub-freights
Sub-hires
Charge
Registration
Companies Act
Floating charge
Insolvency
Shipping
Maritime

17. Areas of Law

Area Name	Relevance Score
Insolvency Law	95
Avoidance of transfer	90
Lien over sub-freights and sub-hires	80
Shipping Law	70
Unregistered charges	70
Company Law	50
Contract Law	30

16. Subjects

Insolvency
Shipping
Maritime
Company Law
Commercial Law
Liens
Charges
Registration