The registration of a mortgage over a Malta-flagged vessel in favour of an individual, corporate lender or security trustee (the mortgagee) requires the filing of a statutory mortgage instrument (the deed) at the Maltese Ship Registry. Once the mortgage has been registered and the time and date of registration has been recorded in the vessel’s register and annotated on the deed, the registered deed is released in its original form to the mortgagee and certified true copies thereof are released to the registered shipowner (the mortgagor).
Maltese law also permits the transfer or assignment of registered mortgages pursuant to Sections 44 and 44A of the Merchant Shipping Act (Cap 234 of the Laws of Malta), which require the completion of an instrument of transfer or assignment. Once the same has been filed with the Registry of Ships, the mortgage may be transferred in favour of a new mortgagee.
Once the underlying obligation has been extinguished, the mortgage securing such obligation must also be discharged. The discharge of the security will require the filing of the original deed with the Ship Registry and a duly completed instrument of transfer or assignment. Thereafter, following the mortgagee’s instructions, the mortgage will be discharged with the time and date of discharge being recorded in the vessel’s register and on the deed.
However, what happens if the original mortgage instrument is misplaced?
Maltese law affords two remedies in instances where the original deed has been lost. The chosen remedy will depend on the remaining duration of the registered security.
Available remedies for lost deeds
Reconstitution of lost mortgage instrument
Section 48 of the Merchant Shipping Act provides that a lost mortgage instrument can be reconstituted on the mortgagee’s request alone or together with the mortgagor.
A sworn declaration (affidavit) referencing the loss of the original deed, together with a copy of the lost deed, must be filed at the Ship Registry.
The registrar will then make a note in the vessel’s register that a reconstituted mortgage instrument has been issued and annotate the copy of the lost deed.
The annotated copy of the lost deed will be deemed to be the reconstituted mortgage instrument and, should the security registered over the vessel eventually be transferred or discharged, the reconstituted mortgage instrument must be completed overleaf and filed at the Ship Registry. The transfer or discharge will be registered pursuant to the reconstituted mortgage deed.
If a deed is lost shortly before the security is scheduled to be transferred or discharged, the mortgagee may issue a sworn declaration (affidavit) indicating that it is the holder of the mortgage and that the original instrument has been lost.
On filing the sworn declaration, the registrar will treat such sworn declaration as the mortgage instrument.
Any mortgage transfers or discharges will be registered by virtue of the sworn declaration; a note to that effect will be entered in the vessel’s register and the sworn declaration will be annotated accordingly.
The above mechanisms afford mortgagees added protection should their original deed be lost. They not only confirm the continued validity of the mortgage despite the loss of the original deed, but also provide mortgagees with peace of mind and remedies should their mortgage need to be transferred or discharged.
by Lara Saguna Axiaq and Charlotte Spiteri, members of the MMLA and maritime lawyers within the Ship Registration & Finance Department of Fenech & Fenech Advocates