COLUMN | Lessons from the end of Ezion: Mean Luck as liftboat Teras Lyza goes to court [Offshore Accounts]

This week we return to a story that exposes many of the themes we have covered previously:

1. The importance of flag states for the regulation and governance of global shipping, especially in this era of the sanction-busting Dark Fleet of aged tankers;

2. The value of transparency and strong regulation in public listed companies, where minority shareholders are vulnerable to incomplete reporting, or even abuse by the management;

3. How lengthy legal processes drag out costs and justice, but also often provide visibility into unsavoury events that would have otherwise been hidden – the Bourbon bribery scandal, for example, or the convictions of Swiber’s directors for malfeasance.

Accidents happen all the time, usually unnecessarily and preventably. What happened six years ago to Teras Lyza, a two-year old modern liftboat built by Triyards, has never been properly explained in public.

Now the case comes to court in Singapore, with the insurers at odds with the owners of the ill-fated jackup and their lenders.

Teras Lyza lost at sea in 2018; incident report still missing

On June 5, 2018, the Ezion-owned liftboat Teras Lyza turned over “unexpectedly” whilst under tow by an Ezion-owned tug, Teras Eden, between Vietnam and Taiwan. Fortunately, the liftboat was unmanned when the accident occurred, so nobody was killed or injured.

The stricken jackup was later towed away and its bunkers were pumped off, then it was scuttled and sunk in deep water off the Philippines by Resolve Marine, its salvors, in August 2018. 

Noting that the capsize of a modern liftboat was a high-potential incident that could result in the loss of life if it occurred again (which it tragically did in 2021 when Seacor Power rolled over and sank with the loss of 13 lives), we published a column in December 2019 (here) querying why the Singapore Ministry of Transport (MOT), as flag state authority, had not published an investigation to help the industry learn from this unfortunate event.

We received a reply from a spokesperson for the Singaporean authorities, complaining that our articles were "inaccurate," and explaining why the MOT had not published an investigation report:

"MOT wishes to clarify that MOT's Transport Safety Investigation Bureau (TSIB) received notification in 2018 that the Philippines Maritime Industry Authority (MARINA) would conduct the marine safety investigation, being the Coastal State of Occurrence. In accordance with internationally accepted protocols, MARINA subsequently accepted TSIB's interest as a Substantially Interested State (in TSIB's capacity as the flag state's safety investigation authority) to participate in MARINA's investigation."

Since then, there have been some new developments in the case, which led us to return to the MARINA website to see what MARINA had eventually published about the loss.

At the time of writing on November 3, 2024, we looked on the MARINA website and searched its publications and announcements, and… we drew a blank. So, we then made a general search that produced the following:

Despite the prominently displayed Philippines Transparency Seal, it seems that MARINA is perhaps not as transparent in producing accident reports as perhaps it could be.

Or maybe I am just not looking in the right place on the site, or that somehow Google, Bing and DuckDuckGo all have a glitch that prevents the report from being found online.

Singapore MOT reported on ASL Osprey towage incident

What’s interesting about the position of the Singaporean MOT is that it has published investigation reports into the losses of other tows involving Singapore-flagged vessels off foreign states. For example, you can read its 2022 report into the loss of the barge CB100-01 whilst under tow by the 73-tonne bollard pull, Singapore flag tug ASL Osprey off the coast of India.

We still don’t understand why MARINA got jurisdiction of this case.

Odd circumstances of Teras Lyza ownership; sold not sold

But the whole circumstances of the ownership of Teras Lyza were “murky”. According to the Ezion annual report for 2017, half of the owning company and half of another liftboat had been sold to a third party.

This turned out to be a company called Sea Explorer, whose ownership was never disclosed, which had entered into a share purchase agreement to acquire a 50 per cent stake in Teras Conquest 8 Pte Ltd and Teras Lyza Pte Ltd from Ezion Holdings for $10 million on August 10, 2017. The type of dollars was not explicitly stated in the press release, but it matters not.

Unfortunately, after the liftboat sank, 364 days after the share purchase agreement was signed (on Singapore National Day, August 9, 2018, which is a public holiday), Sea Explorer “unexpectedly” cancelled the purchase. It is not clear why the sale could be announced by Ezion in mid-2017, when in fact Sea Explorer appears not to have paid for the shares in the companies it was purchasing and could then back out of the entire transaction, seemingly without any consequences.

What exactly was going on here was never explained by Ezion’s crack team of directors, headed by Dr Wang Kai Yuen, the chairman of Ezion at the time, and its then CEO Chew Thiam Keng.

Later questions over disclosure

In 2021, we had highlighted some unusual announcements by Ezion, which involved a hitherto unknown Taiwanese company called Teras Marine Technology Service and a large windfarm contract. If the Teras name seems familiar, it should be, as this was the prefix for Ezion’s tugs and liftboats. We queried what was going on.

In light of the malfeasance discovered at Swiber by Singapore regulators and prosecuted, what happened at Ezion might also warrant some scrutiny by regulators in Singapore.

Liquidation for Ezion in 2022

It mattered not, for on February 18, 2022, Ezion went into liquidation. Burdened by weak management and bad decisions, the company had accumulated losses of US$2.3 billion by the end of 2020, and owed US$1.5 billion in debt and securities that were in default. It was insolvent and bust, and its remaining assets were put up for sale, except one.

Teras Lyza Pte Ltd did not file for bankruptcy until February of this year when its director, Mr. Ramalingam son of Ramalingam, made a statutory declaration as the director stating that the company could not “by reason of its liabilities continue its business.”

End of the line for a failed enterprise, it would seem…

See you in court!

Except that on October 24, there was a pre-trial hearing at the Supreme Court in Singapore, between Teras Lyza Pte Ltd, its associated Ezion sister company, Teras Offshore, and their lenders, Singapore bank, Overseas-Chinese Banking Corporation as appellants, against those whom we believe to be the hull and machinery insurers for the lost barge. Thank you to our alert reader who informed us of this case.

The defendants are Argoglobal Underwriting Asia Pacific, China Taiping Insurance (Singapore), the implausibly named Great American Insurance Company, MS First Capital Insurance, and QBE Insurance (Singapore), all represented by Incisive Law.

This pre-trial conference clearly did not result in a settlement, as on November 6, the case comes before the Supreme Court of Singapore in Court 3B at 10:00 local time as a civil trial scheduled to run for three days, in front of a judge with the most ominous name in the Lion City’s judiciary.

Justice Mean Luck presides

Move over, fictional Judge Dredd. The Teras Lyza case will be heard by none other than Justice Kwek Mean Luck, who is a real-life judge. Unfortunately, we don’t have a court reporter in Singapore, but we will do our best to update you on the outcome of the case.

Unlike marine accident investigations, judgements in Singapore judicial cases at the Supreme Court are published in a most timely manner. You could not ask for more clarity and transparency. Click here after the trial closes to see if there is a published verdict.

It may throw light on events that should have been in the public domain a lot earlier. Let’s see.

What can we learn?

The sinking of Teras Lyza shows why flag states, port states, and coastal states are the front line defence of the shipping industry. Accidents happen, but strong regulation means that the findings of dangerous incidents can be shared and disseminated to prevent recurrence. MARINA in the Philippines could do much better in this respect.

Secondly, vigilant stock market regulation is required to prevent odd situations arising, such as the Sea Explorer joint venture situation, where a company claims it has sold half a subsidiary containing considerable assets, only for shareholders to belatedly realise that the sale was cancelled a year later and the funds were never received.

Finally, open, fair and transparent court hearings are necessary for cases to be brought to the public's attention. Where wrongdoing has been found to have occurred, it should be publicised, whether civil or criminal. Similarly, where a party is acquitted of a charge, the public record should reflect this so that its name stands cleared.

Justice Kwek will be doing the whole offshore industry a favour when he publishes his judgement. Lucky or not, the sad and expensive saga of Ezion as a whole and Teras Lyza in particular needs to be closed for good.

Background reading

We commend the MOT for the quality of the reports that it does produce. Its index of investigation reports is a depressing litany of seafarers’ and stevedores’ lives predictably and unnecessarily lost to bad weather, falls from heights, and entry into hazardous enclosed spaces, but they should be read and studied by all in the industry.

The horrible accident in November 2022 on the jackup West Courageous, where the whole crane and the operator’s cabin literally peeled off the vessel and fell into the sea due to a failure of its structural integrity, killing the unfortunate crane driver, was not widely covered at the time by the offshore media. Again, the findings of the MOT report into this awful accident should be shared as widely as possible to prevent recurrence.

The most recent previous litigation featuring one wholly owned Ezion subsidiary suing its 19 per cent owned affiliate in America, Teras Cargo Transport, in 2017 is worth a read (here). It is not clear if Ezion ever recovered the funds it claimed in the case, nor why Teras Cargo Transport was unable to collect the funds from its end user customer, Bechtel.

I think it is fair to say that the more you learn about Ezion, the more questions you have.