On 8 May 1974, Bankers Trust International Ltd (the appellant) registered a mortgage in London (dated 27 April 1973) on a British ship, the Halcyon Isle. In March 1974, Todd Shipyards Corp (the respondent) repaired the ship at its Brooklyn shipyard in New York, USA. Under US law, a ship repairer is entitled to a maritime lien for the price of repairs done to a ship.

On 5 September 1974, the appellant arrested the ship in Singapore in an action in rem. On 6 March 1975, the ship was sold by order of the Singapore High Court. The proceeds of the sale were insufficient to satisfy the creditors' claims. The High Court decided that the respondent was not entitled to a maritime lien under Singapore law and gave priority to the appellant's mortgage. The Singapore Court of Appeal reversed the decision and ruled in favour of the respondent. The appellant appealed to the Privy Council.

Held by a majority: Appeal allowed (Lords Salmon and Scarman dissenting).

Lords Diplock, Elwyn-Jones, and Lane:

The admiralty jurisdiction of Singapore is statutory, but the order of the priorities in the distribution of the proceeds of sale of a ship in an action in rem or in a limitation action is not. It is a matter of practice and procedure of that Court in the exercise of its admiralty jurisdiction; and in practice and procedure as well as the substantive law which it administers there is no relevant difference between the law of Singapore and the law of England.

The priorities as between claimants to a limited fund which is being distributed by a court of law are matters of procedure which, under English law, are governed by the lex fori. In English law, mortgagees take priority over 'necessaries men'.

In the case of a ship, the classification of claims against an owner for the purpose of determining priorities may raise a problem of conflict of laws since claims may have arisen because of events that occurred not only on the high seas but also within the territorial jurisdictions of a number of different foreign States. So the lex causae of one claim may differ from the lex causae of another, even though the events which gave rise to the claim in each of those foreign States are similar in all respects, except their geographical location. The proper law under English conflict rules would be that of different States and may assign different legal consequences to similar events.

The choice would appear to lie between, on the one hand, classifying by reference to the events on which each claim was founded and giving to it the priority to which it would be entitled under the lex fori if those events had occurred within the territorial jurisdiction of the distributing court; or, on the other hand, applying a complicated kind of partial renvoi by (i) first ascertaining in respect of each foreign claim the legal consequences (other than those relating to priorities in the distribution of a limited fund) that would be attributed under its own lex causae to the events on which the claim is founded; and (ii) giving the foreign claim the priority accorded under the lex fori to claims arising from events, however dissimilar, which would have given rise to the same or analogous legal consequences if they had occurred within the territorial jurisdiction of the distributing court.

The first alternative, classification by reference to events, appears to be preferable in principle. In distributing a limited fund that is insufficient to pay all the debtors, a court is concerned in doing evenhanded justice between competing creditors whose respective claims to be a creditor may have arisen under a whole variety of different and, it may be, conflicting national laws. Every creditor whose claim is based on contract must have known that in so far as the legal consequences of its claim under its own lex causae included rights to priority over other classes of creditors in the distribution of a limited fund resulting from an action in rem against a ship, that particular part of the lex causae would be compelled to yield to the lex fori of any foreign court in which the action in rem might be brought. The respondent would have been aware of this when they allowed the Halcyon Isle to leave and thereby relinquished their possessory lien.

In the The Bold Buccleugh 7 Moo PCC, Sir John Jervis explained that any charge that a maritime lien creates on a ship is initially inchoate only; unlike a mortgage, it creates no immediate right of property. It is devoid of any legal consequences unless and until it is 'carried into effect by legal process, by a proceeding in rem'. If and when a maritime lien is carried into effect by legal process, the charge dates back to the time that the claim in which it is founded arose. This characteristic of a maritime lien is one that is unique in English law. It extends the classes of persons who can bring a claim against a ship to those who have no claim against the owner but against their predecessor. The question of who is entitled to bring a particular kind of proceeding in an English court, like questions of priorities in distribution of a fund, is a question of jurisdiction. Under English conflict of laws rules it falls to be decided by English law as the lex fori. Therefore, the question as to the right to proceed in rem in the Singapore High Court falls to be determined by the lex fori as if the events that gave rise to the claim had occurred in Singapore.

In The Tolten [1946] P 135, Scott LJ referred to the 'general law of the sea amongst western nations' out of which he stated that our own maritime law grew. That case was concerned whether the existence (or non-existence) of a maritime lien was to be determined by English law as the lex fori as to whether the existence of jurisdiction of English courts to enforce against a ship which had come into English territorial waters, what was unquestionably recognised by English law as a maritime lien. Scott LJ had participated in the conferences which resulted in the International Convention for the Unification of Certain Rules of Law relating to Maritime Liens and Mortgages 1926 (the MLM 1926) which the United Kingdom never ratified, because it required member States to create and recognise maritime liens in favour of necessaries men.

The statutory source of admiralty jurisdiction of the Singapore High Court is the High Court (Admiralty Jurisdiction) Act. It is in the same terms as the Administration of Justice Act 1956, which confers upon the High Court of England its current admiralty jurisdiction in rem and in personam. The English statute was passed to enable ratification of the Arrest Convention 1952. The Singapore Act was probably passed for the same purpose, although Singapore never ratified the Arrest Convention 1952.

The maritime claims in the list in the Arrest Convention 1952 and the English and Singaporean statutes fall into three classes: (1) claims in respect of mortgages or charges on a ship; (2) maritime claims which in English law give rise to a maritime lien on a ship for the amount claimed; and (3) maritime claims which give rise to the right to arrest of a ship but in English law do not give rise to a maritime lien. Apart from questions of priorities, which the Arrest Convention 1952 does not deal with at all, an essential difference between the claims in classes (2) and (3) is that claims which give rise to a maritime lien on a ship may be enforced in rem against that ship notwithstanding that it has subsequently been sold to a bona fide purchaser for value without notice of the claim. This is expressly provided for in art 8 of the MLM 1926 which says: 'Claims secured by a lien follow the vessel into whatever hands it may pass.'

This makes the recognition of types of claims as giving rise to maritime liens of considerable commercial importance to the market for the purchase and sale of ships and in the provision of finance for their construction and acquisition.

Article 9 of the Arrest Convention 1952 is important. At the time of the Arrest Convention 1952 there was no uniformity of recognition of what categories of maritime claims gave rise to maritime liens. The UK policy, reflected in its refusal to ratify the MLM 1926, had been to keep down to a minimum the number of maritime liens that should be recognised so as to prevent what can be described as 'secret charges'.

Article 2 of the Arrest Convention 1952, which confers the right of arrest for claims other than those arising under mortgages, hypothecations, and other similar charges, says nothing about change of ownership of the particular ship between the time the claim arose at the time of the arrest. This is dealt with by art 9 which provides:

Nothing in the Convention shall be construed as creating a right of action, which, apart from the provisions of this Convention would not arise under the law applied by the court which had seisin of the case, nor as creating any maritime liens which do not exist under such law or under the Convention on Maritime Mortgages and Liens, if the latter is applicable.

The English and Singapore statutes, of which the subject matter is the 'jurisdiction' of the Court, comply with the requirements of arts 2 and 9 of the Arrest Convention 1952 by the provisions appearing in ss 4(2), (3) and (4) of the Singapore statute. In general, subss (2) and (4) confine the jurisdiction of the Court to entertain actions in rem, and consequently the right of arrest, to ships belonging to the person who was owner of the ship in respect of which the claim arises at the date when that claim arose; but subs (3) extends the jurisdiction of the Court to entertain actions in rem against the particular ship in respect of which there is a 'maritime lien or other charge' on it for the amount claimed regardless of who is currently that ship's owner. 'Maritime lien' as used in s 4(3) should thus be understood in the same sense as the same expression in art 9 of the Arrest Convention 1952.

In principle, in accordance with long-established English authorities and consistently with international comity as evidenced by the wide acceptance of the Arrest Convention 1952, the question whether or not in this case the necessaries men are entitled to priority over the mortgagee claim depends upon whether or not if the repairs had been done in Singapore, the repairers would have been entitled under the law of Singapore to a maritime lien on the Halcyon Isle for the price of them. The answer to that question is that they are not. The mortgagee is entitled to priority.

Lords Salmon and Scarman (dissenting):

The one question for the appeal is the effect within the jurisdiction of a maritime lien conferred by the lex loci contractus. In The Tolten [1946] P 135, 144, Scott LJ described the maritime lien as 'one of the first principles of the law of the sea, and very far-reaching in its effects'. The Singapore Court of Appeal accepted the classic definition of a maritime lien to be found in the English cases (notably The Bold Buccleugh 7 Moo PCC 267) and refused to treat a maritime lien as a mere procedural remedy. Wee Chong Jin CJ said:

Apart from authority, we are of the opinion that in principle the courts of this country ought to recognise the substantive right acquired under foreign law as a valid right and to give effect to that recognition when determining the question of priorities between the ship-repairers and the mortgagees of the res.

The issue in this appeal should be approached on the basis of principle, and great weight is given to the view of the Singapore Court of Appeal as to what the law of Singapore ought to be. The Court of Appeal narrowed the issue to the question: does the law of Singapore recognise a foreign maritime lien as a substantive right of property vested in a claimant who can show that it enjoys that right under the law of the place where it performed the services? The law gives effect to a validly established foreign mortgage, recognising that the mortgage is an essential element of the claim. Is a validly established foreign maritime lien to be treated in the same way as part of the claim? Or is it a remedy made available by the lex fori?

The law of Singapore follows English law in restricting maritime liens arising under its domestic law to only a few cases. For all practical purposes, they are limited to salvage, crew wages, master's disbursements and liabilities incurred on behalf of the ship, and damage done by the ship. The answer to the question, 'does English and Singapore law recognise a foreign maritime lien, where none would exist, had the claim arisen in England or Singapore?' is unsatisfactory either way. If in the affirmative, maritime States may be tempted to pass 'chauvinistic' laws conferring liens on a plurality of claims so that the claimants may obtain abroad a preference denied to domestic claimants; if in the negative, claimants have given the ship credit in reliance upon their lien may find themselves deceived. If the law of the sea was truly a universal code, these problems would disappear. Unfortunately, the maritime nations have failed to secure uniformity in their rules regarding maritime liens: specifically the MLM Convention 1926 and the MLM Convention 1967. The United Kingdom signed these Conventions but has not ratified them. Singapore signed neither of them.

The basic submission of the appellant is that in determining priorities the lex fori looks to the nature of the claim, and has no regard to the existence, or absence, of a maritime lien. The nature of the claim determines priority of the judgment debt founded upon it. The respondent's claim is that of a necessaries man and, by the lex fori, ranks after the claim of a mortgagee.

The respondent's submission is that a maritime lien is a substantive property right given by the law as a security for the claim and attaches to the claim as soon as the cause of action arises, though it does not take effect until legal proceedings are brought against the ship. The respondent submits that it is as absurd in characterising a claim to which the law attaches the security of a maritime lien, to ignore the existence of the lien as it would be to characterise a mortgagee's claim as merely one for the repayment of money lent.

The repairs were carried out by the ship repairers in the United States under a contract with the then owners of the ship. This contract was governed by the lex loci contractus, as both parties to the contract must have known. This law conferred a maritime lien on the ship repairers in respect of their repairs to the ship or they would never have allowed the ship to leave their yard without payment. These repairs must have added to the value of the ship and therefore to the value of the security of the appellant mortgagee. Contracts governed by English law differ. Repairers of a ship in England do not acquire any maritime lien over a ship which they have repaired, and accordingly they rarely allow the ship to leave their yard until they are paid, or have arranged other security for the repairs.

In England the lex fori decides the priority of the rights which exist against a ship. For example, the rights conferred by a maritime lien take precedence over the rights of a mortgagee. In circumstances such as these, English law, on the balance of authorities, the comity of nations, private international law, and natural justice would recognise the maritime lien created by the law of the United States. The lex fori (English law) give the maritime lien created by the lex loci contractus precedence over the mortgage. If it were otherwise injustice would prevail. The ship repairers would be deprived of their maritime lien, valid as it appeared to be throughout the world, and without which they would obviously never have allowed the ship to sail away without paying a dollar for important repairs from which the mortgagees obtained substantial advantages.

The importance which the ship repairers attached to their maritime lien is clearly shown by the ship repair contract which included the term: 'Nothing herein shall be deemed to constitute a waiver of our maritime lien.' In many countries, the lex loci gives priority to maritime liens over mortgages. The ship-repairers clearly relied upon the fact that overseas the lex loci and the maritime lien which it created would be respected, and the lien would be given the priority it rightly received from the Singapore Court of Appeal. It must be remembered that nations have failed to introduce a uniform code governing maritime liens. The two international Conventions on which the majority places great weight cannot affect this appeal. They have not been ratified by the United Kingdom nor signed by Singapore.

English law must be seen as having been settled in favour of paying regard, in appropriate cases, to the lex loci contractus. A neat example is The Colorado [1923] P 102, where the Court looked to the lex loci to determine the nature of the claim. Having established its nature, the Court applied the priorities of its own law, the lex fori. The approach taken in The Colorado is correct in principle. A maritime lien is a right of property given by way of security for a maritime claim. If the Admiralty Court has jurisdiction to entertain the claim, it will not disregard the lien. A maritime lien validly conferred by the lex loci is as much part of the claim as is a mortgage similarly valid by the lex loci. The lien travels with the claim, as does the mortgage; and the claim travels with the ship. It would be a denial of history and principle, in the present chaos of the law of the sea governing the recognition and priority of maritime liens and mortgages, to refuse the aid of private international law.