Malayan Banking v Bakri Navigation: Floating Charge Crystallization & Priority Dispute
In Malayan Banking Berhad v Bakri Navigation Company Ltd and Red Sea Marine Services Ltd, the Court of Appeal of Singapore addressed a dispute over the crystallization of a floating charge and the priority of interests in a vessel (Hull 1118). Malayan Banking Berhad (MBB) claimed its interest in Hull 1118 was superior to that of Red Sea Marine Services Ltd, arguing that the floating charge created by a debenture had crystallized before Red Sea acquired title. Alternatively, MBB claimed conspiracy to deprive it of its security. The court dismissed the appeal, finding that the floating charge crystallized after Red Sea gained title and that conspiracy was not proven.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Appeal Dismissed
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court addresses floating charge crystallization over Hull 1118 and priority dispute between Malayan Banking and Red Sea Marine Services.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Malayan Banking Berhad | Appellant, Plaintiff | Corporation | Appeal Dismissed | Lost | Prem Kumar Gurbani, Wu Lennon Leong Chong |
| Bakri Navigation Company Ltd | Respondent, Defendant | Corporation | Appeal Dismissed | Won | Bazul Ashhab bin Abdul Kader, Nora Jessica Chan Kai Lin, Wesley Aw Ming Xuan |
| Red Sea Marine Services Ltd | Respondent, Defendant | Corporation | Appeal Dismissed | Won | Bazul Ashhab bin Abdul Kader, Nora Jessica Chan Kai Lin, Wesley Aw Ming Xuan |
| ASL Shipyard Pte Ltd | Defendant | Corporation | Suit Discontinued | Dismissed | |
| PT ASL Shipyard Indonesia | Defendant | Corporation | Suit Discontinued | Dismissed | |
| NGV Tech Sdn Bhd | Other | Corporation | Not Applicable | Neutral |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Judith Prakash | Judge of Appeal | Yes |
| Steven Chong | Judge of Appeal | No |
| Woo Bih Li | Judge | No |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Prem Kumar Gurbani | Gurbani & Co LLC |
| Wu Lennon Leong Chong | Gurbani & Co LLC |
| Bazul Ashhab bin Abdul Kader | Oon & Bazul LLP |
| Nora Jessica Chan Kai Lin | Oon & Bazul LLP |
| Wesley Aw Ming Xuan | Oon & Bazul LLP |
4. Facts
- MBB extended credit facilities to NGV, secured by a debenture creating a floating charge over NGV's assets.
- The debenture contained an automatic crystallisation clause triggered by NGV encumbering assets.
- NGV entered into shipbuilding contracts with Bakri, later novated to Red Sea, for the construction of Hulls 1117 and 1118.
- NGV and Red Sea entered into agreements to reduce the purchase price of Hulls 1117 and 1118.
- NGV transferred title to Hulls 1117 and 1118 to Red Sea while retaining possession.
- NGV defaulted on its repayment obligations to MBB, leading MBB to enforce the debenture.
- MBB claimed its interest in Hull 1118 was superior to Red Sea's due to the crystallisation of the floating charge.
5. Formal Citations
- Malayan Banking BhdvBakri Navigation Co Ltd and another, Civil Appeal No 87 of 2019, [2020] SGCA 41
6. Timeline
| Date | Event |
|---|---|
| MBB extended credit facilities to NGV | |
| Bakri entered into shipbuilding contracts with NGV for Hulls 1117 and 1118 | |
| Shipbuilding contracts novated to Red Sea | |
| NGV assigned proceeds of shipbuilding contracts to MBB | |
| NGV assigned proceeds of shipbuilding contracts to MBB | |
| NGV and Red Sea agreed to reduce the purchase price of Hulls 1117 and 1118 | |
| NGV entered into Agency Agreements with QIM | |
| NGV and Red Sea executed Completion Contracts | |
| NGV transferred legal title of Hulls 1117 and 1118 to Red Sea | |
| NGV informed Red Sea it could not complete construction of Hulls 1117 and 1118 | |
| Hulls 1117 and 1118 transferred to shipyards in Singapore and Batam | |
| NGV owed MBB in excess of RM698m | |
| MBB notified Red Sea that all sale proceeds of Hull 1118 had been assigned to it and demanded payment | |
| Hulls 1117 and 1118 de-registered from ship registry of Saint Vincent and the Grenadines | |
| MBB served notices on NGV to crystallise its floating charge | |
| MBB notified ASL that the vessels had been charged to it by NGV | |
| Hulls 1117 and 1118 re-registered in the ship registry of Saudi Arabia | |
| NGV ordered to be wound up in Malaysia | |
| MBB commenced High Court Suit No 673 of 2013 against the two ASL companies, Bakri and Red Sea | |
| Court hearing | |
| Judgment reserved |
7. Legal Issues
- Crystallisation of Floating Charge
- Outcome: The court held that the floating charge only crystallised after the second respondent gained title to the vessel.
- Category: Substantive
- Sub-Issues:
- Automatic crystallisation clause
- Ordinary course of business
- Cessation of trading
- Related Cases:
- [2015] 1 LNS 1017
- [2018] 2 SLR 129
- Priority of Interests
- Outcome: The court found that Red Sea's interest in Hull 1118 was superior to MBB's.
- Category: Substantive
- Sub-Issues:
- Bona fide purchaser for value without notice
- Breach of debenture restrictions
- Related Cases:
- [2018] 2 SLR 129
- Conspiracy to Deprive Security
- Outcome: The court found that the alleged conspiracy was not proven.
- Category: Substantive
- Sub-Issues:
- Intention to cause damage
- Unlawful means
- Lawful means
- Related Cases:
- [2014] 4 SLR 1208
- Interpretation of Debenture Clauses
- Outcome: The court interpreted the automatic crystallisation clause and the definition of 'encumbrance' in the debenture.
- Category: Substantive
- Sub-Issues:
- Definition of 'encumbrance'
- Automatic crystallisation clause
8. Remedies Sought
- Declaration of Superior Interest in Hull 1118
- Damages for Conspiracy
9. Cause of Actions
- Enforcement of Debenture
- Conspiracy to Deprive Security
10. Practice Areas
- Commercial Litigation
- Banking Law
- Security Law
- Civil Litigation
11. Industries
- Banking
- Shipping
- Construction
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Malayan Banking Bhd v ASL Shipyard Pte Ltd and others | High Court | Yes | [2019] SGHC 61 | Singapore | Cited as the decision under appeal, providing the factual background and the Judge's rulings on the floating charge, priority of interests, and conspiracy claim. |
| Diablo Fortune Inc v Duncan, Cameron Lindsay and another | Court of Appeal | Yes | [2018] 2 SLR 129 | Singapore | Cited for the applicable priority rules depending on whether the transaction was outside or within the chargor’s ordinary course of business. |
| NGV Tech Sdn Bhd (receiver and manager appointed) (in liquidation) and another v Ramsstech Ltd and others | High Court of Malaya at Kuala Lumpur | Yes | [2015] 1 LNS 1017 | Malaysia | Cited by the appellant as a binding precedent on the interpretation of the automatic crystallisation clause in the debenture, but the Judge declined to follow it. |
| Malaysian International Merchant Bankers Bhd v Highland Chocolate and Confectionary Sdn Bhd & Anor (No 2) | High Court of Malaya | Yes | [1998] 4 CLJ Supp 32 | Malaysia | Cited in Ramsstech for the principle that an attempt to sell a charged asset would cause the floating charge to crystallise immediately. |
| Pacific Recreation Pte Ltd v S Y Technology Inc and another appeal | Court of Appeal | Yes | [2008] 2 SLR(R) 491 | Singapore | Cited for the principle that foreign law is an issue of fact which must be proved and that foreign judgments are relevant for the determination of foreign law. |
| Wong Kai Woon and another v Wong Kong Hom and others | High Court | Yes | [2000] SGHC 176 | Singapore | Cited for the principle that it would be difficult for the Singapore courts to competently interpret on their own such raw sources of foreign law. |
| The “Bunga Melati 5” | Court of Appeal | Yes | [2012] 4 SLR 546 | Singapore | Cited for the principle that no issue of issue estoppel arises where there is no identity of parties in the two sets of proceedings. |
| Ashborder BV v Green Gas Power Ltd | High Court of Justice | Yes | [2004] EWHC 1517 (Ch) | England and Wales | Cited for the two-stage test to determine whether a transaction is outside the ordinary course of business. |
| Fire Nymph Products Ltd v The Heating Centre Pty Ltd (in liq) and others | Supreme Court of New South Wales | Yes | (1992) 7 ACSR 365 | Australia | Cited by the appellant for the principle that a dealing with assets subject to a floating charge otherwise than with a view to carrying on the chargor’s business is a crystallising event, but the court distinguished it. |
| Hubbuck v Helms | Court of Chancery | Yes | (1887) 56 LJ Ch 536 | England and Wales | Cited for the principle that the right of the chargee to intervene and realise its security was available as much in the situation of a cessation of the company as a going concern as it would be in the situation of winding up of the company. |
| Reynolds Bros (Motors) Pty Ltd & ors v Esanda Ltd | New South Wales Court of Appeal | Yes | (1983) 8 ACLR 422 | Australia | Cited for the principle that a transaction will be within the ordinary course of business even if it is extraordinary or exceptional in character. |
| In re Automatic Bottle Makers, Limited | High Court of Justice | Yes | [1926] Ch 412 | England and Wales | Cited for the principle that the expression “in the ordinary course of business” of the company “should be construed in a commercial sense, that is to say in the ordinary course of carrying on the manufacturing and commercial transactions [which are] the object of its incorporation”. |
| In re Borax Company | High Court of Justice | Yes | [1901] 1 Ch 326 | England and Wales | Cited for the principle that the chargee is entitled to seek judicial remedies to restrain the transaction, such as by an injunction. |
| SH Cogent Logistics Pte Ltd and another v Singapore Agro Agricultural Pte Ltd and others | High Court | Yes | [2014] 4 SLR 1208 | Singapore | Cited by the appellant for the principle that where the acts are not a necessity, the defendants should be held to have acted with the predominant intention to injure the plaintiff, but the court distinguished it. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Evidence Act (Cap 97, 1997 Rev Ed) | Singapore |
| Rules of Court (Cap 322, R 5, 2014 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Floating Charge
- Crystallisation
- Debenture
- Encumbrance
- Ordinary Course of Business
- Bona Fide Purchaser
- Priority
- Shipbuilding Contract
- Hull 1118
- Agency Agreement
- Completion Contract
- Direct Payments
- Malaysian Law
15.2 Keywords
- floating charge
- crystallisation
- priority
- shipbuilding
- debenture
- encumbrance
- conspiracy
- Malayan Banking
- Bakri Navigation
- Red Sea Marine
16. Subjects
- Security Interests
- Company Law
- Commercial Law
- Civil Procedure
- Shipping Law
17. Areas of Law
- Credit and Security
- Charges
- Floating Charges
- Tort
- Conspiracy
- Civil Procedure
- Pleadings
- Evidence
- Principles
- Foreign Law
- Company Law
- Contract Law
- Commercial Law