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Analysis of the Regulations on Aircraft Liens and Sale

Under the Civil Aviation Act 1969, Regulation 140 interprets several terms where “airport charges” mean any charges payable to a licensed company and a “charge” is (a) a charge for a service or a facility provided by the Director-General; or (b) a fee for other charge in respect of any matter specified in these Regulations. Importantly, the term “outstanding amount” includes reference to a statutory lien: it “means, in relation to an aircraft in respect of which an aircraft lien is in effect, in relation to a particular time, (a) the amount of any charge payable in respect of the aircraft that is unpaid at that time; (b) the amount of any penalty that is unpaid at that time, and (c) the amount of any debt payable under Regulation 156 in respect of the aircraft that is unpaid at that time, to the extent that any such amount has not been remitted, waived or written off.”

The power to detain any aircraft is vested in the Director-General of Civil Aviation. Under Regulation 141 where an owner or operator of an aircraft has defaulted in the payment of any charge incurred by virtue of these Regulations, the Director-General “shall not” detain or continue to detain an aircraft under these Regulations by reason of any alleged default in the payment of any charge where the owner or operator of the aircraft or any other person claiming an interest therein disputes that charge or that it was incurred in respect of that aircraft. This Regulation requires the payment of a sufficient security to be given to the Director-General, pending the determination of the alleged dispute. Regulation 142 refers to the Director-General’s duties upon detaining an aircraft. One such mandatory duty is to enter such detention in the Aircraft Register; and take all reasonable steps to give notice of detention to the concerned person who in his opinion, has a security interest in the aircraft; or to any owner, operator, lessee, hirer, charterer or pilot-incommand of the aircraft.

Regulation 143 also mandates the Director-General on the nature of the particulars to be entered in the Aircraft Register under Regulation 141, such as:

(a) the description and amount of the charge due and from whom it is due;

  • (b) the date on which and the time at which the aircraft was detained; and
  • (c) the date on which and the time at which the entry is made.

Regulation 144 deals with a statutory aircraft lien which emphasises the possessory nature of the holding and it is vested in the Director-General. It ranks lower than a legal mortgage. An aircraft lien shall be vested in the Director-General and he may keep possession of the aircraft until all outstanding amounts referred to above are paid.

Regulation 145 provides for consequences following a de-registration of Malaysian aircraft for default of payment of a secured amount where an aircraft lien has been entered. If a Malaysian aircraft is involved in default of payment, this regulation provides that “where an outstanding amount is secured by an aircraft lien is unpaid at the end of six months after the day on which it became an outstanding amount or the day on which the aircraft lien was registered, whichever is the later, the Director-General may, having regard to all the circumstances, including the steps, if any, taken by any person to pay the whole or part of outstanding amounts secured by the aircraft lien, cancel the certificate of registration of the aircraft in the Aircraft Register.” Subsection (2) further provides: “If the certificate is cancelled, the aircraft shall not be registered until the aircraft lien ceases to have effect.” For the aircraft lien to cease having effect, payment must be made or it will be subject to a sale.

Regulation 146 requires aircraft liens to be settled within a month of the aircraft lien registration. This Regulation empowers the Director-General to sell an aircraft, with the leave of the High Court, where the outstanding amount secured by an aircraft lien is unpaid at the end of 1 month after the date on which the aircraft lien was registered. The High Court is in turn instructed that such leave for the sale of the impugned aircraft should only be granted against proof that a sum is due to the Director-General for any charge; a default in payment has occurred and that the Director-General is in compliance with Regulation 147(1). The Director-General has to observe Regulation 147 on Notice of Application for locus standi purposes of bringing the matter to the notice of interested parties and for announcement in the newspapers. What this requires of the Director-General to do before applying to the High Court for leave to sell an aircraft, is to take the necessary steps required under this regulation “for bringing the proposed application to the notice of any interested person and for affording them an opportunity of becoming a party to the proceedings”. The Director-General has to, at least 21 days before applying to the High Court, publish this matter in one or more national newspapers circulating in Malaysia.

Where it is impracticable to publish as aforementioned, then a notice must be served on interested parties, namely, (a) the registered owner of the aircraft; (b) the operator of the aircraft; (c) any charterer or hirer of the aircraft; (d) any registered mortgagee of the aircraft; and (e) any other person with a priority interest in the aircraft. Such notice shall include details on the nationality and registration marks of the aircraft; its type; statement of the default sum and requirement to make payment within a period of sixty days from the date when the detention began, or within twenty-one days of the date of service of the notice, whichever shall be the later, after which the application will be made to the High Court for sale of the aircraft; and invite such person to inform the Director-General within fourteen days of the service of the notice if he wishes to become a party to the proceedings.

It mandatory to cause this notice to be served by any one of the following processes, for example, by delivery to the person to whom it is to be sent; or by leaving it at his usual or last known place of business or abode. Other forms include “sending by post in a prepaid registered letter addressed to him at his usual or last known place of business or abode; or if the person to whom it is to be sent is a company or body corporate, by delivering it to the registered address or principal office address of the company or body corporate or by sending it by post in a prepaid registered letter.”

Regulation 148 outlines the Notice of sale where the High Court has given the Director-General leave to sell the aircraft subject to any additional notice that the Court deems just. Then a notice to sell the aircraft shall be published in one or more national newspapers circulating in Malaysia and the aircraft is to be sold for the best price that can be reasonably obtained. Regulation 149 deals with the Proceeds of sale which are to be applied in the following order: (a) payment of any customs duty for bringing the aircraft into Malaysia; (b) payment of the Director-General’s expenses incurred in detaining, keeping and selling the aircraft, including its expenses in connection with the application to the High Court and its insurance required under Regulation 156; (c) payment of any charge in respect of any aircraft which the High Court has found to be due; (d) payment of any airport charge due from the operator to the owner or manager of the aerodrome under Regulation 141. If there is a surplus, such shall be paid to those whose interest have been divested by the aircraft sale.

Regulation 150 regulates Equipment, store and aircraft documents. The power of the Director- General to detain and sell an aircraft also extends under this Regulation to aircraft equipment and any equipment and stores carried in the aircraft, irrespective of whether it is the property of the operator.

Regulation 151 gives the Director-General power to recover charges or any part by civil action.

Regulation 152 provides for cessation of aircraft lien where

  • (a) there is no outstanding amount secured by the aircraft lien;
  • (b) the aircraft is sold under this Part; or
  • (c) the Director-General directs in writing that the aircraft lien ceases to have effect, ...

An entry to this effect shall be made by the Director-General in the Aircraft Register.

Regulation 153 mentions the duty of the Director-General to state on a Certificate the amount unpaid either as charge or as penalty in respect of an aircraft and its accompanying details where a prescribed person requests such information in writing.

Where such a certificate has been issued by the Director-General, any aircraft lien does not secure (a) any such charge or debt in respect of the aircraft that was payable and unpaid as at that time but was not specified in the certificate; or (b) any penalty relating to any such charge.

Prescribed persons refer to:

  • (a) the registered holder of the certificate or registration of the aircraft;
  • (b) a person with security interest in the aircraft;
  • (c) the owner, or the agent of the owner, of the aircraft; and
  • (d) an authorised person by writing referred to in paragraph (a), (b) or (c).

Regulation 154 criminalises anyone who dismantles or detaches an aircraft or its parts or equipment under lien without the prior permission of the Director-General. But if this is done pursuant to these Regulations, such act is not criminal in nature.

Regulation 155 provides for protection against an action against the Director- General for any loss of or damage to an aircraft during its detention or arrest or for any economic loss suffered by a person as a result of an arrest, unless wilfully or negligently caused by the Director-General.

Regulation 156 deals with compulsory payment of insurance of an aircraft where it is detained by or in the custody or possession of the Director-General. Such insurance shall be for the benefit of the prescribed person. Where a premium amount is paid by the Director-General, “an equivalent becomes a debt payable to the Director- General by the person by whom amounts secured by the aircraft lien in respect of the aircraft are payable.” Prescribed persons refer to (a) the Director-General; (b) a person who has a security interest in the aircraft; and (c) the owner of the aircraft.

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