Malta Archives - Page 13 of 18 - Malta Maritime Law Association

Compensation for Salvage

January 11, 2016 Leave a Comment

The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Tonio Mallia and Mr Justice Joseph Azzopardi in the case ‘Charles Grech and Brian Galea v Paul Azzopardi’ on December 15, 2015, held, among other things, that compensation for salvage was due even if no notice was given to the ‘receiver of the wreck’.

On September 22, 1996, Charles Grech and Brian Galea discovered a boat called Ray Jay underwater in the limits of Mellieħa. They performed salvage works to resurface the boat, with the assistance of divers, a cabin cruiser and inflatable buoys and towed it to Għajn Tuffieħa. They also obtained the assistance of third parties against payment.

Grech and Galea demanded compensation for the salvage operation from the owner of the boat who refused to pay them. Faced with this situation, Grech and Galea proceeded to file legal proceedings against Paul Azzopardi, the owner, requesting the court:

To declare that they were entitled to payment for their services for salvage;
To liquidate the compensation due to them; and
To condemn Azzopardi to pay such sum so liquidated together with legal interests.

In reply, Azzopardi contested the legal proceedings. He claimed that Grech and Galea’s motives were to appropriate the boat for themselves. Instead of notifying the owners of the salvage operation, they resurfaced the boat allegedly with the intention of keeping it and it was only by accident that he intervened to recover his boat.

Azzopardi claimed that Galea and Grech had caused damage to the boat, in respect of which there was a separate lawsuit.

It was not relevant that they did not give the police the registration number of the boat. They voluntarily tried to save the boat. If there was a valid reason, it was not necessary to notify the ‘receiver of the wreck’

It resulted that Azzopardi was the owner of the boat. On September 15 to 22, 1996, the boat, which was moored in Ġnejna Bay, broke loose and was later found underwater in the limits of Mellieħa.

Salvage had to be a voluntary act whereby a person rescued a seacraft in distress not out of any contractual relations nor to take the boat for himself.

Article 332 of Chapter 234 provides:

Where any person finds or takes possession of any wreck within the limits of Malta, or finds or takes possession of any wreck outside such limits and brings such wreck within the said limits, he shall:

(a) if he is the owner thereof, give notice to the receiver of wreck that he has found or taken possession of the same, and describing the marks by which the same may be recognised;

(b) if he is not the owner thereof, as soon as possible, deliver the same to the receiver of wreck;

And if any person fails, without reasonable cause, to comply with this article he shall for each offence be liable to a fine not exceeding 200 units and shall, in addition, forfeit any claim to salvage.

The court noted that compensation was due even if the wreck had sunk, or if it was a danger to navigation. It said that it did not appear that Grech and Galea failed to deliver the boat to the receiver of the wreck.

Article 343(1) Chapter 234 provides:

Where any vessel, whether Maltese or foreign, is wrecked, stranded or in distress at any place on or near the coasts within the territorial jurisdiction of Malta and services are rendered by any person in assisting that vessel or saving the cargo or apparel of that vessel or any part thereof, or where any services are rendered by any person other than a receiver of wreck in saving any wreck, they shall be payable to the salvor by the owner of the vessel, cargo, apparel, or wreck, a reasonable amount of salvage limited to the amount of the property saved.

The elements in a salvage operation were as follows:

Rendering licit service to the boat or to its merchandise;
The service had to be voluntary;
The boat had to be in distress;
The assistance had to consist in salvage work;
The assistance had to be successful.

The court had no doubt that Grech and Galea had rescued the boat with their hard work. It did not result that they tried to steal the boat nor did they carry out the operation in hiding. They acted in broad daylight, in the presence of onlookers. Their intention was to recover the boat from the bottom of the sea; to raise it to the surface and to take it ashore and this constituted salvage.

The court said that the boat was in danger even if it sank. A boat could still be salvaged even if sunk, in order to prevent it from suffering greater damage.

The boat was in a reasonable condition despite what happened to it. It was shown that Grech and Galea had incurred expenses to resurface the boat from the bottom of the sea.

In absence of any agreement, compensation had to be liquidated by the court. Compensation had to be large and liberal if there existed all elements to claim salvage at the time when the vessel was in distress or passing through such danger. Compensation was due even if not requested.

Article 346(2) of Chapter 234 provides:

In determining the amount or the apportionment of salvage, the court shall have regard to:

the measure of success obtained and the efforts and deserts of the salvor;
the danger run by the vessel saved, by her passengers, crew and cargo;
the danger run by the salvor and the salving vessel;
the time expended, the expenses incurred and the losses suffered, and the risks of liability and other risks run by the salvors, and also the value of the property exposed to such risks, due regard being had to the special appropriation (if any) of the salvors vessel for salvage purposes;
the value of the property saved.

In view of the value of the boat (€11,650) and the damage (€7,000-€8,000), the value of the boat after it was rescued was €4,500. The court awarded €2,000 compensation to be divided equally between each claimant, Grech and Galea.

Aggrieved by the decision of the First Hall of the Civil Court, Azzopardi entered an appeal calling for its revocation.

He reiterated his claim that Grech and Galea carried out such operation not to salvage it but to take it for themselves. They should have notified the receiver of the wreck and as they failed to do so, they forfeited their right to salvage, he claimed.

The Court of Appeal maintained that save for serious reasons it would not disturb the first court’s appreciation of facts.

As a general rule, each time a vessel was in danger and given assistance, there was a ground for compensation. In Chorley & Giles’s Shipping Law, the situation was explained by the English courts (Kennedy case 1985

“On the one hand, [the danger] must not be either fanciful or only vaguely possible or have passed by the time the service is rendered. On the other hand, it is not necessary that distress should be actual or immediate or that the danger should be imminent, it will be sufficient if, at the time at which assistance is rendered, the subject-matter has encountered any misfortune or likelihood of misfortune which might possibly expose it to loss or damage if the services were not rendered… [T]here must be such reasonable, present apprehension of danger that, in order to escape or avoid the danger, no reasonably prudent and skilful person in charge of the venture would refuse a salvor’s help if it were offered to him upon the condition of his paying a salvage reward.”

In this case the vessel sank and under article 343(1) of Chapter 234 the right for salvage existed even if the boat sank.

This Court of Appeal agreed with the first court, as regards the elements to qualify for salvage. The danger need not be absolute.

The court said that Grech and Galea carried out salvage work. They had no obligation to assist and did so voluntarily with the intention of either keeping the boat or to request compensation.

This was an issue which had to be determined in the discretion of the court, hearing the case. In this case the first court found that there was justification for this failure.

Grech and Galea cooperated with Azzopardi and the police. They agreed to release the boat immediately to Azzopardi and demanded compensation.

This court said that the first court exercised its discretion reasonably and it agreed with its decision.

Article 345(2) of Chapter 234 was considered by the first court when it liquidated compensation to amount to €2,000. The court agreed with the liquidation of damages by the first court.

For these reasons, on December 15, 2015, the Court of Appeal dismissed the appeal of Azzopardi and confirmed the decision of the first court of July 7, 2011.

by Dr. Karl Grech Orr, shipping partner at Ganado Advocates and member of the MMLA

Source: The Times of Malta, 11 January 2016

Wrongful Arrest of Ships (2)

October 25, 2015 Leave a Comment

In May of this year I wrote about the case of the MV Dadayli (February 12, 2015 per Madam Justice Jaqueline Padovani), where the court upheld the application of the vessel Dadayli which claimed that the arrest of the vessel was illegal given that the conditions stipulated in section 742 (b) of our Code of Organisation and Civil Procedure were not satisfied. (See: Wrongful Arrest of Ships (1))

As I stated then, the effects which an arrest of a vessel have on the owners or charterers can be disastrous. This makes arrest an exceptionally effective and powerful tool which a genuine creditor has every right to use provided the law is observed. It is equally important that the procedure is not abused and not used for the purposes of putting illegitimate and illegal pressure on owners. As a result it is in the interest of the rule of law and of ensuring the maintaining of high standards that the parameters established by the law are observed.

Otherwise it could easily lead to a ‘free for all’. This ‘free for all mentality’ is however raising its ugly head in Malta and overseas to the extent that the Comité Maritime International (CMI) has deemed it necessary to form an International Working Group to study the frequency of illegal arrests and how various jurisdictions, members of the CMI, deal with them. It is significant that the CMI, the international body which drafts the majority of international maritime conventions prior to their approval by the IMO or the UN, has put this item on its agenda.

The judgement in the case related to the MV Dadyli was not the only time this year that the court in Malta pronounced itself on the failure of arresting parties to follow the law which is there to safeguard against abuse.

On May 20, in another case the court agreed to the issuing of a warrant of arrest against the MV Blue Rose. The arresting party filed a sworn application stating that the vessel was in Maltese territorial waters outside harbour and that the claim could be prejudiced with the departure of the vessel. It is important to underline the fact that the jurisdiction of our courts extends over Malta’s 12 mile territorial sea.

Maltese courts do not have jurisdiction and therefore cannot grant warrants of arrest of vessels outside its territorial sea which is why the law provides that the applicant must swear a declaration as to the location of the vessel within Maltese territorial waters. Unlike the situation 20 years ago today every person with access to a computer can on a 24/7 basis find out exactly whether or not a vessel has entered Maltese territorial waters.

It is important for our judiciary to ensure, as they have already, that the law of the jungle does not become a reality

The warrant was served on Transport Malta which immediately realised that the vessel was not even in Maltese territorial waters. This meant that the warrant of arrest was null thus rendering the arrest of the vessel illegal. Transport Malta immediately filed a note before the court informing the court of this and Mr Justice Joseph Zammit McKeon quite correctly and promptly revoked ‘contrario imperio’ the warrant of arrest which he had granted a few hours earlier .

The case indicates that a system which works perfectly when the law is respected can so easily be abused which can lead to a loss of trust in the system. This would be a great shame. One of the things that makes arrests in Malta most efficient is the fact that an arresting party can obtain an arrest ex parte, meaning that it is not an application which is served on the defendant. If that were the case it would defeat the object of the exercise with the element of surprise being the most important part of the procedure.

However, precisely because a duty judge is obliged to accept the ex parte declarations made by the arresting party he needs to have the comfort of knowing that those declarations are correct and honest. If they are not correct and honest then that puts into jeopardy the entire system which we cannot afford to forfeit. Of course the legislator tried to safeguard against abuse by stating that such declarations by applicants need to be sworn.

Sadly, however, we are seeing an increasing number of what are essentially declarations taken in the most superficial of manners without verification of what they are supposed to be swearing to. Therefore the immediate action taken by the court on this occasion was extremely important sending out the message that misinformation

on a document which must represent the truth indicating that a vessel is in Maltese territorial waters when in fact it is not will not be tolerated.

This was not the first time that a warrant of arrest was issued when the vessel in question was not even in Maltese territorial waters. The exact same thing happened in the case of the Madara. This is the case which is repeatedly cited by the media as the vessel which ‘escaped’ from arrest. In fact the vessel never ‘escaped’ from arrest at all.

Like the case of the Blue Rose the arresting party swore that the vessel was in Maltese territorial waters and obtained the warrant when the vessel in fact was not in Maltese territorial waters at the time and was never served with the warrant.

This meant that the arrest of that vessel was an illegality and the warrant of arrest null and void and would have been revoked had it come before our courts as in the case in the Blue Rose.

The fact that the vessel was not in Maltese territorial waters when the arrest warrant was issued was established by the report published by Brigadier Carmel Vassallo who had been commissioned to conduct an investigation into the ‘escape’ of the vessel. Regrettably the author of the report missed this point completely and focused on who had the responsibility of keeping the vessel from ‘escaping’ when in fact it had not escaped in the first place.

The moral of the story of course is that the parameters and conditions which the law provides must be religiously and meticulously observed otherwise what we will have in reality would be the law of the jungle. Malta has worked exceptionally hard to develop into a maritime nation of repute and we cannot allow a deterioration of standards or the anything goes mentality reflected in the application of the law.

Our legal system not only needs to be serious and solid but needs to be seen as serious and solid. It is therefore even more important for our judiciary to ensure, as they have already, that the law of the jungle does not become a reality and that persons abusing the system are taken to task.

by Dr. Ann Fenech, managing partner at Fenech and Fenech Advocates and President of the MMLA.

Source: Sunday Times of Malta, 25 October 2015

Proceedings following Escape of Arrested Vessel

September 30, 2015 Leave a Comment

Notwithstanding the advances made in the automated tracking systems used to identify and monitor vessels’ movements, arrested vessels still occasionally manage to abscond from the territorial waters of the particular jurisdiction in which they were arrested. Unfortunately, this is an inherent risk linked to the mobile nature of ships.

Maltese law tries to circumvent such occurrences by imposing penalties to dissuade unscrupulous shipowners from ordering ships to flee. Article 865 of the Code of Organisation and Civil Procedure provides for one of these deterrents. This article states that when a vessel that is subject to an arrest warrant escapes Maltese waters, the owner, bareboat charterer or other person in possession of the ship or vessel at the time of the breach will be jointly liable to pay a €116,470 penalty.

A Maltese civil court recently examined the application and nature of this remedy in Cassar Fuel Limited v MV Madra.(1)

Facts

The proceedings revolved around the arrest and subsequent escape of the vessel MV Madra.

Following the issuance of an arrest warrant by a Maltese court against the MV Madra, the vessel, together with the relevant local authorities, were duly served with the arrest papers. Following the arrest, the master and crew of the MV Madra decided to switch off the ship’s automatic identification system and fled from Maltese waters. Consequently, the arresting creditor, a Maltese bunker supplier, effectively lost the only security it had for its claim.

The bunker supplier commenced proceedings in rem against the vessel MV Madra requesting payment of the penalty stipulated in Article 865 of the code. Curators were appointed to represent the interests of the vessel in these proceedings. One of the key issues was whether an action of this nature could be brought against the vessel.

Decision

The court analysed Article 865 and explained that it affords an aggrieved creditor a partial remedy where a vessel absconds. An arrest warrant against a vessel can be considered as a form of security granted by the courts pending final determination of the action on the merits. The law seeks to offer the creditor a form of compensation where a vessel breaches a court order and escapes Maltese waters. Further, the court noted that the right to claim the penalty outlined in Article 865 is without prejudice to the creditor’s other rights to pursue its claim. Payment of the penalty by the liable party does not reduce or affect the outstanding principal debt.

The court also examined whether such an action could be commenced in rem directly against the vessel. The court stressed that the wording used in Article 865 presupposes that any such action is purely personal in nature and is brought against whichever party violated the court order. As such, the court concluded that the creditor must commence proceedings in personam against the owner, the bareboat charterer or any other person in possession of the vessel at the time of the alleged breach. The law therefore implies that the action can be commenced only against persons (both legal and natural), and not against a vessel in rem.

The plaintiff argued that since it had a claim in rem against the vessel, an action of this nature could likewise be brought in rem against the vessel. The court disagreed with this interpretation and correctly confirmed that the right to claim the penalty under Article 865 is completely independent and separate from the underlying claim, as such proceedings are commenced against a person or persons that removed the vessel from Maltese waters in violation of the court order.

Comment

The court’s conclusions are seemingly correct, as proceedings commenced under Article 865 must be brought in personam against any of the individuals mentioned in the article. However, arguably, the court’s analysis stopped short, as it should have addressed the requirements for jurisdiction in rem, which would have illustrated how jurisdiction is diametrically opposed to an action for penalties commenced under Article 865.

The Maltese courts have consistently held that a prerequisite for Maltese courts to have jurisdiction over a claim in rem is the physical presence of the defendant vessel in Maltese waters.(2) The only exception to this cornerstone rule is where the owner of the vessel deposits the claim amount in court as alternative security in lieu of the vessel.(3) In such cases the vessel will be free to leave and the courts will still have jurisdiction in rem due to the physical presence of the alternative security in Malta.

On the other hand, proceedings under Article 865 are commenced following the escape of an arrested ship. As such, no deposit will have been made (as otherwise the vessel would have been released). Therefore, an action of this nature presupposes that the vessel is no longer within Maltese waters. Accordingly, one of the fundamental elements for jurisdiction in rem is missing. It is thus clear that a claim for penalties under Article 865 cannot be commenced against a vessel in rem.

For further information on this topic please contact Adrian Attard at Fenech & Fenech Advocates by telephone (+356 2124 1232) or email (adrian.attard@fenlex.com). The Fenech & Fenech website can be accessed at www.fenechlaw.com.

Contributed by Fenech & Fenech Advocates

Source: ILO – September 30 2015

Best in Shipping & Maritime Award

July 5, 2015 Leave a Comment

Ann Fenech, managing partner and head of the Marine Litigation Department at Fenech and Fenech Advocates, has won Best in Shipping and Maritime at the fifth annual European Women in Business Law Awards 2015, organised by Euromoney Legal Media Group Europe at The Grosvenor in London. This is the third time she has won this award.

Other nominees were: Elizabeth Blackburn from Stone Chambers, London; Siobhan Healey, from 7 King’s Bench Walk, London; Marie Kelly from Norton Rose Fulbright, Athens; Vivien Pitroff from Holman Fenwick Willan, London; and Vasanti Selvaratnam from Stone Chambers, London. Fenech & Fenech Advocates also won Best Law Firm in Malta. The Right Honourable Lady Justice Hallett attended to receive the Lifetime Achievement Award. In February 2013, she was assessed as the eighth most powerful woman in Britain by Woman’s Hour on BBC Radio. Judith Gill from Allen & Overy, London was presented the Outstanding Practitioner award.

The keynote speaker for the evening was Nicky Moffat, who was in the British Army for 27 years and was the most senior serving woman in the force when she left in 2012. Ann Fenech is currently president of the Malta Maritime Law Association and in June last year she was elected to serve on the executive council of the Comité Maritime International. The CMI is the international organisation which has, over the last 100 years, been responsible for the drafting of the vast majority of international maritime conventions. She is the first Maltese person to have been elected to serve on the council.

Source: Times of Malta, 5 July 2015

Wrongful Arrest of Ships (1)

May 6, 2015 Leave a Comment

The arrest of vessels is an important and powerful weapon. In Malta, vessels can be arrested in order to achieve two objectives. The first is through a precautionary arrest warrant in order to secure a claim which has not yet been decided. The other is through an executive arrest warrant, which seeks to enforce a favourable judgment already obtained where the creditor refuses to pay the debt. The arrest of a vessel can eventually lead to the sale of the vessel in order to satisfy a judgment debt. In the meantime, the vessel is taken away from the owner and thus the owner can no longer earn an income from the vessel.

As a result, arrests usually have serious financial consequences for owners. Arrests are typically unannounced, often when a vessel is trading under charter and loaded with cargo. Having a vessel arrested puts an immediate stop to this activity, opening the owner up to other claims and losses. Therefore, the arresting party must be on the right side of the law and it is crucial that when arresting a vessel, the criteria permitting the arrest and the safeguards provided by the law are followed meticulously. If they are not – or if the law allows for a trigger-happy arresting party to proceed despite having no real grounds for arrest – there could be an increase in lawlessness. For example, it would give rise to an attitude of ‘might is right’ and increase the number of unscrupulous persons with suspect claims arresting vessels erroneously in the hope that the arrest will cause such chaos that the owner will simply give in to pressure and pay up. This would be wrong and illegal.

Facts
A recent case highlighted both the importance of this subject and a loophole in the law. Cassar Fuel Ltd v the MV K Dadayli was decided on February 12 2015 by Jacqueline Padovani Grima. Cassar arrested the MV K Dadayli for unpaid bunkers. The vessel was arrested long after it had been sold and the persons responsible for the payment no longer owned vessel. This was in breach of Article 742(D) of the Code of Organisation and Civil Procedure. Under Article 724(D), which was introduced into law in 2006, vessels may be arrested in rem only when the party that is liable for the claim in personam is the owner or bareboat charterer of the vessel when the action is brought or, in case of arrest, when the arrest is affected. This amendment was based on principles of equity and justice because it is neither equitable nor just to allow a vessel belonging to X to be sold in order to satisfy a judgment for a claim for which A (the previous owner of the vessel) is responsible.

The vessel owners filed an application primarily requesting that the court revoke the arrest warrant on the basis that the criteria stipulated in Article 742(D) were not satisfied. The vessel owners also requested the court to order the plaintiffs to pay for the expenses and damages that they suffered as a result of the illegal arrest (eg, extra bunkers consumed during the arrest, agency fees, port dues, pilotage fees, mooring costs during the arrest and a loss of time in relation to its chartering activities (by virtue of Article 836 (9)). Finally, the vessel owners requested that the court impose a penalty on the plaintiffs on the basis that the arrest was malicious, frivolous and vexatious in relation to Articles 836(8) and 861 of the Code of Organisation and Civil Procedure.

Decision
The court clearly stated that the criteria established in Article 742(D) must be followed religiously; therefore, a vessel cannot be arrested in support of an action in rem if the party that is liable for the claim in personam when the cause of action arose is no longer the owner or bareboat charterer of the vessel on arrested. Therefore, in this case, the arrest was illegal and the arrest warrant was revoked.

Comment
The judgment stopped short of making reparations to the vessel and its owners, which suffered damages as a result of the abusive arrest. This is because in the court held that the arrest of the vessel notwithstanding, the defendants’ failure to satisfy the criteria established by Article 742(D) was not malicious, frivolous or vexatious. Given that the court came to this conclusion, no penalty was applied and no award for damages could be sought as, according to Article 836(9), damages can be awarded only in cases which attract a penalty.

It could be argued that the court was incorrect in finding that the arresting parties’ actions were not malicious, frivolous or vexatious. Regardless, this case has highlighted a weakness in Maltese law, insofar as the right to damages resulting from an illegal arrest appears to be inextricably linked to the vessel owners proving that the arresting party should be ordered to pay a penalty.

In fact, the two should be separate and distinct. Vessel owners should be entitled to damages arising out of an illegal arrest as a natural and automatic consequence of a declaration that the arrest was illegal or wrongful because the necessary criteria were not followed. This right to damages once an arrest is declared illegal should have nothing to do with the court’s right to impose a penalty on an arresting party where Article 836(8) applies.

The fact that a party may arrest a vessel without satisfying the criteria for arrest and without paying for damages resulting from the illegal arrest merely because the court is unconvinced that the circumstances fit the criteria for which it could impose a penalty on the arresting party is not good news. It is something which the next round of amendments to the Code of Organisation and Civil Procedure must address.

Contributed by Fenech & Fenech Advocates,

Published in ILO, 6 May 2015

Member of the Comité Maritime International