In the Merchant Shipping Act (Chapter 234 of the Laws of Malta) the legislator provided a tool for creditors to secure specific debts by a special privilege upon a vessel and proceeds from any indemnity arising from collisions and other mishaps and insurance proceeds.
Amongst the secured debts, the legislator listed expenses incurred for the preservation of the ship including supplies and provisions to the crew after the last entry into port.
The case in the names of Dr Ann Fenech as a special mandator of Deutsche Bank Luxembourg S.A. vs the MY Golden Odyssey decided by the First Hall Civil Court, presided by Mr Justice Spiteri Bailey on November 7, 2022 dealt precisely with this matter.
Deutsche Bank was a hypothecary creditor of the ship Golden Odyssey and had a mortgage (ipoteka navali) registered in its favour on the ship.
The owners of the ship (a foreign company) had not been paying their dues in relation to the said mortgage and on this basis, the bank sought to arrest the ship in Malta and enforce its mortgage through a sale by licitation (subbasta – court approved sale).
On October 14, 2022, the court authorised the sale of the ship to a prospective buyer against an identified price. However, in the months before the arrest of ship and during the arrest of the ship, the owners failed to honour their obligations towards the crew and other creditors.
The ship owners also failed to settle invoices due by the ship, other administration fees including fees due to the flag authorities, crew wages and insurance. As a result, Deutsche Bank had to intervene to safeguard the maintenance and preservation of the ship and to ensure that the crew did not end up in a state of abandonment in Malta.
The bank paid the dues owed to the captain and crew so that they could return to their country and not be stranded in Malta. In turn the bank was subrogated in the position of the crew members against the ship and its owners.
The ship owners' failure to pay insurance policies meant that the vessel would have been in a state of illegality and in serious danger of de-registration from its flag state of Bermuda. Once again the bank entered the fray and covered the debts.
All the debts were deemed to fall under the category of expenses incurred for the preservation of the ship and of her tackle (equipment) including supplies and provisions to her crew incurred after her last entry into port.
The bank argued that all these dues (amounting to €3,221,733.95) which it paid on behalf of the ship owners, were claims in rem (claims against the vessel) covered by special privilege in accordance with Article 50 (g) of Chapter 234 of the Laws of Malta and that the debts were certain, liquid and due.
It, therefore, instituted proceedings via a summary procedure where it requested the court to decide the matter without entering the merits of the case, given that the ship owners did not have any defence to raise. Indeed, the ship and its owners did not raise any defence and accepted all of the claims raised by the bank.
After taking into consideration the matters above, the court decided in favour of the bank without the need to enter the merits of the case and condemned the ship to pay the total amount of €3,221,733.95.
Dr Clive Gerada, Associate at Azzopardi, Borg and Associates Advocates.