Maritime liens explained – the case of the Echo Star

Maritime liens explained – the case of the Echo Star

A maritime lien is a special creature that appears only in admiralty law and there are no equivalents in other branches of the common law.  It is a creature of some antiquity and its precise origin is unclear.  Its creation was partly due to the legal fiction that a ship is an animate object that is capable of and responsible for its own wrongs.

Whatever its origin, the concept of maritime lien is now well established as part of Singapore’s admiralty law and practice.

The recent Singapore High Court decision in the case of The Royal Arsenal v The Echo Star [2020] SGHC 200 took the opportunity to provide some guidance on the concept of maritime liens.

Facts of the case

This case arose from the collision between two vessels, the Royal Arsenal and the Echo Star, off the Straits of Hormuz in April 2019.  At the time of the collision, the Echo Star was owned by a company called Sea Dolphin.  After the collision occurred, the Echo Star was sold to a company called Cepheus in July 2019.  The owners of the Royal Arsenal commenced an action in rem in the Singapore High Court against the Echo Star in November 2019.

As seen from the above, by the time the action was commenced against the Echo Star, the vessel was already owned by her present owner, who was not involved at the time the collision took place.

The Echo Star was arrested in the Singapore action in rem.  Cepheus, the current owner of the vessel, entered appearance in the Singapore High Court and provided security for the release of the vessel.

In January 2020, Sea Dolphin sought to enter an appearance in the action and Cepheus applied for leave to withdraw the appearance that it had entered previously.  The argument that was raised was that Sea Dolphin was the owner of the vessel when the collision took place and should be the proper defendant, whereas Cepheus was not the owner of the vessel at that time and therefore had no in personam liability.

Eventually the Court allowed Cepheus leave to withdraw its appearance and for Sea Dolphin to enter an appearance in the action.  The focus of this article however is the discussions in the judgment on the nature of a maritime lien.


The Court’s Decision

 In coming to its decision, the Court made the distinction between a maritime lien and a statutory lien.  A statutory lien arises when Section 4(4) of the High Court (Admiralty Jurisdiction) Act is satisfied.  Therefore, a statutory lien only accrues and crystallises at the point in time when the writ in rem is issued.

A maritime lien however is quite different.  The Court explained at paragraph [28] of the judgment as follows;

28.     A maritime lien is an encumbrance on a ship or other res which accrues simultaneously with the cause of action. It is not a claim per se but exists as a form of security for an underlying claim. The maritime lien is enforceable through an action in rem, and entitles the claimant to be paid out of the sale proceeds of the res in priority to other classes of creditors…

The Court goes on to explain the characteristics of a maritime lien as follows;

(a)      First, a maritime lien travels secretively and unconditionally with the res. It survives changes of ownership (otherwise than via a judicial sale), even if the res is transferred to a bona fide purchaser without notice (The Halcyon Isle at [9] citing The Bold Buccleugh ([4] supra)). Further, the offending ship may be validly arrested by an injured claimant to obtain security to enforce its claim despite the change in ownership, and to compel appearance by the wrongdoers (The Father Thames at 368 per Sheen J). The new owner would not be able to set aside the in rem writ or the arrest simply on account of the change of ownership. I shall refer to this as the “Procedural Aspect” of the maritime lien.

 (b)        Second, the maritime lien accrues simultaneously with the cause of action but lies inchoate until it is carried into effect by an action in rem. When the in rem action is  commenced, the maritime lien crystallises and relates back to the period when it first arose (see The Halcyon Isle at [9] citing The Bold Buccleugh). …  I refer to this as the “Crystallisation Aspect” of the maritime lien.

  1. Focusing on the damage lien, it is well-established that the lien is based on, or arises as a result of the fault or negligence on the part of the servants of the offending ship, as attributable to its owner. In this regard, the description “owner” is wide enough to include a demise charterer, if any, at the time of the incident giving rise to the damage lien (The Father Thames at 368 col 2). In other words, the personal liability of the shipowner is a necessary requirement for the accrual of the damage lien. … I refer to this as the “Fault Aspect” of the damage lien.

The Court went on to cite the Privy Council (on appeal from the Vice-Admiralty Court of Gibraltar) in The Utopia [1893] AC 492 (“The Utopia”) at 499:

“… the foundation of the lien is the negligence of the owners or their servants at the time of the collision, and if that be not proved no lien comes into existence, and the ship is no more liable than any other property which the owners at the time of the collision may have possessed. …”

Our Comments

This decision does not purport to create any new law or legal principle.  It is however a very helpful summary on the characteristics of a maritime lien and would no doubt be essential reading for any student of admiralty law from now on.

The other important reminder that we have from this case is the effect of entering appearance in an action which is subject to a maritime lien.

The Court explained that in an action in rem commenced against a ship, it is an action against the ship itself.  If nobody enters an appearance to defend the claim and judgment is obtained, it can only be enforced against the ship, and even then, it is up to the realizable value of the ship following a judicial sale.

However, if appearance is entered by the defendant, the defendant submits himself personally to the jurisdiction of the court and renders himself liable in personam such that if judgment is obtained, it can be enforced both against the ship and against the defendant personally.

This is an important point to note, especially during a depressed shipping market where the value of the ship may be lesser than the liabilities owed.  If the owner chooses not to enter an appearance after his vessel is arrested, the claimant’s ability to recover might be limited to the value of the vessel following a judicial sale, and even then, the amount that a claimant may recover would depend on the priority of claims against the ship.

Please do not hesitate to contact us should you have any queries relating to the above. 

Photo by Andrew Preble on Unsplash

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