Aircraft repossession and enforcement of security in Singapore

Enforcement measures

Outline the basic repossession procedures following lease termination. How may the lessee lawfully impede the owner’s rights to exercise default remedies?

Aircraft leases customarily provide that on the occurrence of default, the lessor may at its option terminate and take possession of and remove the aircraft. Though self-help remedies may be available under the lease in practice, it may be difficult to do so without a court order unless the lessee is agreeable to the repossession of the aircraft. 

There are no statutory provisions that specifically relate to the taking of possession of an aircraft. The procedure for the taking of possession of an aircraft is therefore similar to that of any claim in respect to personal chattels. Proceedings will be commenced by way of a service of a writ. The body of the writ may contain, inter alia:

• a claim by the lessor for the rentals and other monies owing under the lease, interest and costs;
• a claim for the delivery up of possession of the leased aircraft;
• a claim for injunction when necessary; and
• a claim for further or other relief as the court may order.

Where the Cape Town Convention applies, the lessor can take possession or control of any aircraft object without a court order on the occurrence of an event of default. However, if the lessee is not willing to allow the lessor or owner to repossess the aircraft, a court order will be necessary.

If the aircraft lease does not expressly allow the lessor to take possession of the aircraft, article 12(2) of the consolidated text of the Cape Town Convention (found in the Third Schedule of the International Interests in Aircraft Equipment Act (Chapter 144B)) provides that the lessor can apply to court for an order authorising or directing the lessee to transfer possession and/or control of the aircraft to the lessor.

Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?

While a mortgagee may exercise self-help remedies, it is recommended that the mortgagee obtain a court order in such matters. A court action may be commenced by way of an originating summons with a supporting affidavit. The application may be made by way of an ex-parte application. However, the court hearing the application has the discretion to order that the other party be served and may order that the matter be heard inter partes.   

Which liens and rights will have priority over aircraft ownership or an aircraft security interest? If an aircraft can be taken, seized or detained, is any form of compensation available to an owner or mortgagee?

The right to detain an aircraft in respect of unpaid levies or service charges is provided for in Sections 89 to 94 of the Civil Aviation Authority of Singapore Act (Chapter 41) (CAAS Act). Under section 89 of the CAAS Act, if any levy or service charge imposed in respect of an aircraft is not paid in full by the due date for payment, the CAAS may make an entry in the Register of Statutory Liens. However, there is no register of statutory liens.

Upon the making of an entry, a statutory lien on the aircraft will vest in the CAAS and this will have effect as a security interest in respect of the aircraft ranking in priority after any security interest (other than a floating charge) in respect of the aircraft created before the time of registration of the statutory lien, to the extent that the security interest covers a debt incurred before that time.

Any aircraft that is subject to a statutory lien cannot be removed from Singapore or be dismantled without prior approval of the CAAS, and any person doing so will be guilty of an offence and shall be liable on conviction to a fine not exceeding S$200,000 or to imprisonment for a term not exceeding 12 months or to both.

Where the amount covered by a statutory lien remains unpaid at the end of nine months, the CAAS may seize and keep possession of the aircraft until all outstanding amounts covered by the statutory lien are paid. If so, the CAAS must take reasonable steps to give notice of the seizure to persons having an interest in the aircraft.

Where an aircraft is to be seized under sections 89 to 94 of the CAAS Act, the CAAS has to insure the aircraft against the loss of or damage to the aircraft during its seizure or while it is in the custody, possession or control of the CAAS or its agents. However, the CAAS is entitled to recover any premium paid on the insurance policy in court as a debt due by the person who is liable to pay the amounts covered by the statutory lien on the aircraft.

Alternatively, where the amount covered by a statutory lien remains unpaid at the end of nine months, the CAAS may, only after taking reasonable steps to give reasonable notice of the sale or disposal to persons having an interest in the aircraft, sell or otherwise dispose of the aircraft, whether or not the aircraft has been seized.

Order of priority for liens will be statutory liens, contractual liens, possessory liens, registered International Interests and unregistered interests.    

How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?

Singapore is a party to the 1958 New York Convention. The arbitral awards made by contracting states to this Convention may be enforced in Singapore.

In respect of foreign judgments, in 2019, Singapore: (1) passed a bill to repeal the Reciprocal Enforcement of Commonwealth Judgments Act (RECJA); and (2) amended its Reciprocal Enforcement of Foreign Judgments Act (Chapter 265) (REFJA) to consolidate the RECJA framework under it and to expand the scope of judgments covered by reciprocal arrangements between Singapore and foreign countries. While the amended REFJA came into effect on 3 October 2019, at the time this chapter was written the RECJA had yet to be repealed.

Be that as it may, presently, the REFJA and RECJA cover 11 jurisdictions:

• the United Kingdom;
• Australia;
• Hong Kong;
• New Zealand;
• Sri Lanka;
• Malaysia;
• India (except the State of Jammu and Kashmir);
• Pakistan;
• Brunei Darussalam;
• Papua New Guinea; and
• Windward islands.

The amendments made to the REFJA expanded the scope of the REFJA to recognise and enforce non- money judgments, interlocutory judgments, judicial settlements, consent judgments, and consent orders. However, REFJA does not apply to the Choice of Court Agreements Act 2016 (Chapter 39A). Singapore passed the Choice of Court Agreements Act 2016 (Chapter 39A) in June 2016 as part of its obligations under the Hague Convention.

Choice of court agreements confine disputes to the courts of one jurisdiction as chosen by the parties.

It is notable that the United States of America, although a signatory to the Hague Convention, has yet to ratify it.

Where the REFJA and Choice of Court Agreements Act 2016 (Chapter 39A) do not apply, foreign judgments may be enforced under common law. Under common law, the party seeking both recognition and enforcement would have to commence a fresh action on the judgment.