We review the powers of the Singapore courts to make orders authorising the sale of liened cargo and how these have been applied, making this a relatively favourable jurisdiction for owners.
Most charterparties and bills of lading (BLs) allow owners to exercise a possessory lien over cargo for sums due to them under the respective charterparty or BL. However, unless expressly provided for under the charterparty or BL, owners do not usually have the right to sell the cargo. This can place owners in a difficult position, particularly where the cargo has been abandoned or is deteriorating while storage costs are mounting.
Owners wishing to sell the cargo would first have to apply for a court order authorising the sale. In Singapore, they can do so in one of two ways.
Singapore Rules of Court
Where the Singapore court has jurisdiction over the owners’ claim, Order 29 Rule 4 of the Rules of Court provides that the court may exercise its power to order the sale of:
“any movable property which is the subject-matter of the cause or matter or as to which any question arises therein and which is of a perishable nature or likely to deteriorate if kept or which for any other good reason it is desirable to sell forthwith.”
In Emilia Shipping Inc v State Enterprise for Pulp and Paper Industries , the High Court found that it had jurisdiction over the owners’ claim against cargo interests, as the owners had discharged the cargo in Singapore, although the contractual discharge port was in Iraq. The Court allowed the sale of the cargo as:
- The market price for the cargo was falling.
- It had become legally impossible to deliver the cargo to the cargo interests.
- Cargo interests had not provided security for the owners’ claim.
- The owners had incurred heavy charges storing the cargo.
Singapore International Arbitration Act (IAA)
The IAA gives the Singapore courts powers to assist international arbitrations, even where the seat of the arbitration is outside Singapore and before arbitration proceedings have been commenced.
Section 12A IAA, read with section 12(1)(d), empowers the courts to order the “sale of any property which is or forms part of the subject-matter of the dispute” in urgent cases where the order is “necessary for the purpose of preserving evidence or assets.”
In Five Ocean Corporation v Cingler Ship Pte Ltd , the disponent owners were owed money by charterers under a charterparty. The head owners exercised their right of lien over the cargo under the BL as trustees for the disponent owners. They detained the cargo off the discharge port, Paradip, India.
Disponent owners commenced arbitration proceedings against the charterers in Singapore but received no response. After a few months’ delay, the disponent owners applied to the Singapore High Court for an order to sell the cargo.
The Court exercised its power under the IAA and allowed the owners to sell the cargo. The Court also ordered that the sale proceeds be held in court until further order by the arbitration tribunal. The Court noted that where the seat of the arbitration was in Singapore, it could order the sale of cargo situated outside Singapore.
In its judgment the Court explained that the application for sale was sufficiently urgent as at the time of the application:
- Some crew members were ill and others had to be repatriated.
- Fresh food, water and medical supplies were lacking.
- The coal cargo was overheating and could self-ignite.
- The monsoon was exacerbating the vessel’s situation.
In addition, the order for sale was necessary as no other alternatives for securing the owners’ lien were reasonably available:
- Discharge into a warehouse was not viable as local law at the discharge port would not preserve the owners’ lien.
- There was a risk that the sums due to the disponent owners would eventually exceed the cargo value (the cargo was deteriorating but cargo maintenance expenses were increasing).
- The charterers appeared unable to pay.
- Cargo receivers had no intention of taking delivery of the cargo or of providing security in exchange for the cargo.
The cases highlighted above demonstrate that Singapore is a relatively favourable jurisdiction for an owner to obtain an order for sale of liened cargo. The Singapore courts are willing in appropriate circumstances to take a practical view and to assist owners with the preservation of a cargo lien by ordering a sale of cargo.
Also, the Singapore courts have shown a willingness to assist in ordering the sale of cargo situated outside Singapore in cases where the underlying charterparty or BL provides for arbitration seated in Singapore. This is a feature which owners may wish to bear in mind when deciding whether to agree to Singapore arbitration.