(Delivered in Parliament on 6 August 2018)
I declare my interest as a shipping lawyer.
Mr Speaker, the main thrust of today’s Companies Amendment Bill provides that a shipowner’s lien for bill of lading freight, sub-freights, sub-hires or for any amount due under any charter, no longer requires registration under Section 131 of the Companies Act. Under the proposed amendments, a shipowner includes a registered owner, a disponent owner or a bareboat charterer of a ship.
Simply put, the shipowner can intercept income due to charterers in the form of bill of lading freight, sub-freight under a voyage charter or sub-hire under a sub-charter.
Today’s Bill for the proposed amendment of Section 131 of the Companies Act stems from the recent Court of Appeal case of Diablo Fortune v Duncan Lindsay and another  SGCA 26, the Court of Appeal, with 5 judges hearing the appeal, affirmed the decision of Judicial Commissioner Audrey Lim in the High Court below.
Diablo Fortune Inc are the owners of the cargo vessel V8 Stealth II. Diablo Fortune bareboat chartered the vessel to Siva Ships International Pte Ltd. The charterers entered into a pooling agreement with another company by which the charterers earned charterhire. The charterers then went into liquidation and the shipowners sought to enforce a lien over subhire pursuant to clause 18 of the bareboat charterparty by serving a lien on the pool. The pool withheld hire payments to the charterer. The liquidators applied to the High Court directing payment of the charterhire to the charterer.
In the High Court decision below, the honourable Judicial Commissioner held that the lien over sub-hire created by a charterparty was registrable pursuant to Section 131(3)(f) of the Companies Act as a book debt or pursuant to Section 131(g) as a floating charge.
The decision in July 2017 last year generated a strong reaction from the maritime community in Singapore. Although it can be said that the decisions of the Court of Appeal and the High Court are not surprising given that they are, in some respects, consistent with English law on the registrability of liens on sub-hire and sub-freights, the recent decisions are none the less the first local judicial pronouncements on the effect of the non-registration of such liens. The shipping community led by the Singapore Shipping Association bemoaned the “onerous” and “administrative burden” of having to register all such liens and pleaded for a “statutory carve out”.
The reaction from the shipping community is perhaps hardly surprising, at least to those in the community. And I am in total agreement. Such a lien clause is very common in standard charterparties all over the world, not just in bareboat charterparties which is the subject of the Diablo case but also in time and even voyage charterparties; in many of these commonly used charterparty forms we will use a variant of a lien clause allowing lien over hire, freight, sub-freights or sub-hire. Parties all over the world enter into charterparties on an everyday basis. Singapore is of course a major maritime hub in the world with many shipping businesses setting up companies, subsidiaries and operations in Singapore. Moreover, many charterparties and fixture notes have Singapore or Singapore law as part of their jurisdiction or arbitration or governing law clauses.
I agree that it is wholly impractical to require all liens for freights, hire, sub-freights or sub-hire to be registered as charges under Sections 131(f) or (g) of the Companies Act.
If the law is not amended, businesses may be compelled to register charges for such liens and failure to do so may even lead to penalties under the Companies Act.
Besides being impractical, it is inconvenient and the legal fees for registration are unnecessary expenses for businesses. Notwithstanding the recent judicial pronouncements of there being a need to register a charge under Section 131 (3) (f) or (g), the reality is that the practice of registering was never part of our commercial landscape in Singapore.
It is notable that the Court of Appeal made comparisons with the corresponding laws in the United Kingdom and Hong Kong, respectively. I would suggest that the comparisons with UK and Hong Kong are not merely of jurisprudential significance. Whether as admiralty jurisdictions, legal or maritime centres, England and Hong Kong are arguably two of Singapore’s closest rivals.
While it may be a slight exaggeration to say that maintaining status quo will put Singapore in a distinct disadvantage compared to Hong Kong, it is important that we continue to make our maritime and legal hub as competitive as possible and minimize or avoid any unnecessary shortfalls that may make us less sensitive to the views and needs of the business community. The amendments should, in my view, now place our law on shipowners’ lien in a better position than Hong Kong or the UK.
The proposed amendments under this Amendment Bill are also timely in that Singapore is also aiming to be one of the leading international debt restructuring centres in Asia especially with the amendments to the Companies Act provisions brought in May 2017 with the introduction of the UNCITRAL Model Law on Cross-Border Insolvency. In recent years, insolvency cases involving internationally well-known companies have been started or filed in our courts for various reasons such as insolvency protection and debt restructuring. They include companies in shipping or oil and offshore industries too. The proposed amendments will bring about some certainty to the interpretation of Section 131(f) and 131(g) of the Companies Act while the amendments themselves will not necessarily put any party in a position of great disadvantage.
Mr Speaker, for the above reasons, I support this Amendment Bill. The Court of Appeal was certainly right to recommend the proposed changes to Parliament.