Times of Malta, Monday, October 8, 2012 by Karl Grech Orr  

The Court of Magistrates in Malta, presided over by Magistrate Consuelo-Pilar Scerri Herrera, on September 19, 2012, in the case “Atlas Insurance PCC Limited et noé vs BAS Limited” held, among other things, that the carrier was liable to pay for all damages as a result of the short-shipment of goods from Holland to Malta. The court further declared the carrier’s sub-contractor to be non-suited as there existed no juridical relationship between the latter entity and the consignee.

The facts in this case were as follows.

The carrier shall be liable for the total or partial loss of the goods and for damage thereto occurring between the time when he takes over the goods and the time of delivery, as well as for any delay in delivery.

The company Intercomp Marketing Ltd engaged BAS Ltd to transport merchandise, consisting of laptops and speakers, from the premises of the manufacturers, Dell in Holland, to the premises of Intercomp in Malta.

BAS subsequently subcontracted Fahrenheit Freight Forwarders Ltd to carry the goods from the warehouse of DHL Danzas Air & Ocean in Schiphol, Holland, to Malta by trailer.

When the consignment was delivered, Intercomp reported that six laptops had gone missing in transit. Intercomp obtained reimbursement from its insurer, Atlas Insurance, which therefore got subrogated in Intercomp’s rights.

It later proceeded by filing legal proceedings in Malta against BAS for payment of €5,048, the value of the goods paid to Intercomp, including the survey costs and the excess cost due to Intercomp under the insurance policy. In reply, BAS disputed responsibility for the loss of the missing merchandise.

It submitted in defence that the laptops had gone missing outside its area of responsibility, and that it could not be held accountable as it was not to blame in any way for the loss.

BAS maintained that Atlas Insurance had failed to notify it within the period of seven days stipulated in article 30 of the convention on the Contract of Inter-national Carriage of Goods by Road (CMR) and article 30 of chapter 486 of the Laws of Malta, the International Carriage of Goods by Road Act.

BAS further held that in case it were to be held liable, its liability was limited under the CMR Convention. It however pleaded that the subcontracting company, Fahrenheit, should be called into suit and be held liable for the damages. Fahrenheit, however, denied having any legal relationship with Intercomp and requested the court to declare it to be nonsuited.

It also stated in its defence that:

• any legal action against it was time-barred under article 32 (1)(a) CMR;
• it was not liable for the loss of the cargo as it had delivered the goods in the same state as it had received them, and if any items were lost, this had allegedly happened when the goods were outside its sphere of responsibility;
• besides, it said that the amount claimed was excessive and if at all, its liability should be limited within the para-meters of the CMR Convention.

On September 19, 2012, the Court of Magistrates (Malta) gave judgment by declaring BAS, which was engaged to transport the merchandise from Holland to Malta, fully liable for all damages suffered by Intercomp and Atlas Insurance as a result of the loss of the laptops not delivered to it.

It considered that BAS was responsible to deliver the consignment safely to Malta irrespective of any subcontracting agreement. The court upheld Fahrenheit’s legal argument that there existed no juridical relationship between Fahrenheit and Intercomp and declared Fahrenheit to be non-suited.

The court also declared that there was no evidence to show any contributory fault by Fahrenheit. The court’s decision was based on the following arguments:  The contract of carriage between Intercomp and BAS was regulated by CMR Rules.  BAS had failed to honour its contractual obligations, as Intercomp had not received the full consignment as agreed.  The court held that under Maltese Law, a debtor was responsible for any failure to perform his contractual obligations, unless he could prove force majeure or any “fortuitous event” to extenuate his responsibility. Reference was made to case law: Reginald Micallef nomine vs Godwin Abela nomine (A.K. March 16, 1992 – LXXV.11.430) and Marianno Saré vs Antoine Ellul (AC June 12, 1953 XXXVII.1.197).

The court also considered these principles in the context of the CMR Rules, in particular articles 3, 17 and 18.

Article 3

“For the purposes of this convention, the carrier shall be responsible for the acts of omissions of his agents, servants and of any other persons of whose services he makes use for the performance of the carriage, when such agents, servants or other persons are acting within the scope of their employment, as if such acts or omissions were his own.”

Article 17

1. The carrier shall be liable for the total or partial loss of the goods and for damage thereto occurring between the time when he takes over the goods and the time of delivery, as well as for any delay in delivery.

2. The carrier shall, however, be relieved of liability if the loss, damage or delay was caused by the wrongful act or neglect of the claimant, by the instructions of the claimant given otherwise than as the result of a wrongful act or neglect on the part of the carrier, by inherent vice of the goods or through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent.

3. The carrier shall not be relieved of liability by reason of the defective condition of the vehicle used by him in order to perform the carriage, or by reason of the wrongful act or neglect of the person from whom he may have hired the vehicle or of the agents or servants of the latter.

Article 18

1. The burden of proving that loss, damage or delay was due to one of the causes specified in article 17, paragraph 2, shall rest upon the carrier.

The court held that the relationship between BAS and Fahrenheit was not relevant to Intercomp (res inter alios acta). Intercomp had no dealings with Fahrenheit and accordingly could not be held liable.

Fahrenheit was engaged exclusively by BAS and without Intercomp’s consent; re: Benjamin Bonnici nomine vs Francis Vella et nomine (PA) dated October 30, 2000; Albert Abela vs S. Mifsud & Sons Ltd (PA) (RCP) dated October 23, 2001; Mamo vs Abela nomine (AC) dated February 4, 2000.

Under CMR Rules (article 3) BAS was responsible for the safe consignment of the goods to the agreed destination. It was immaterial that it appointed subcontractors for any part of the voyage. The court said that the goods went missing in Holland, and that Fahrenheit was not in a position to control or verify the goods which it carried to Malta. Nor did BAS prove that Fahrenheit acted negligently and that the goods were lost owing to Fahrenheit’s lack of care.

In the light of a number of court decisions, the court held that BAS’s failure to take all necessary steps to ensure that the merchandise was not stolen constituted ‘gross negligence’ or wilful misconduct.

In this respect the limitation of liability provisions under the CMR Convention were not applicable; re: Paul Musu vs Frances Vella (AK) dated December 4, 1998; Joseph Bowman noé vs Anthony Mizzi et noé et (PA) dated March 20, 2003; Atlas Insurance Agency Ltd noé vs Express Trailers Ltd (AIC) (PS) dated October 3, 2007.

The court found that Intercomp had notified BAS within the period under article 30 of the CMR, and in this respect the insurance company’s lawsuit was not time-barred. For these reasons the court concluded that BAS was solely liable for the damages and condemned it to pay the full amount claimed by the insurance company, together with all judicial expenses.

---

 

Dr Grech Orr is a partner at Ganado & Associates

ILO – Contributed by Fenech & Fenech Advocates August 29 2012

---

In a recent judgment the Maltese courts rejected a foreign liquidator’s application to have a precautionary warrant of arrest lifted on the basis of the EU Insolvency Regulation (1346/2000).

Facts

In 2006 a German shipowner entered into a shipbuilding contract with a Chinese yard for the construction of a vessel (later named the MV Beluga Sydney). The following year, the shipowner assigned all rights and obligations to another German legal entity. The latter was consequently scheduled to accept delivery of the vessel as its new registered owner. The delivery took place in 2010.

However, it transpired that despite several agreements between the owners and the yard, a large sum due for the construction of the vessel had allegedly remained unpaid. In June 2011 the Chinese builders filed a request before the Maltese civil courts to obtain a precautionary warrant of arrest against the MV Beluga Sydney to secure their claim in rem, for an amount of $5,162,206.57. This represented the outstanding balance for construction of the vessel. The Maltese courts acceded to this request and the vessel, which was already within Maltese territorial waters, was immediately arrested.

One month later, the local courts of Bremen in Germany ordered the commencement of insolvency proceedings against the shipowner. The courts appointed a provisional administrator to look after the company’s affairs. The administrator was subsequently also appointed as liquidator of the company when the Bremen courts ordered its liquidation in November 2011.

Later that month, the appointed liquidator filed an application before the Maltese courts demanding that the precautionary warrant of arrest be lifted, or alternatively that the arresting creditor put up a counter-security. Among the various arguments raised to support the request to have the arrest lifted, the liquidator sustained that the precautionary arrest was invalid in accordance with the EU Insolvency Regulation.

The liquidator argued that, in terms of Article 4 of the regulation, German law should be the applicable law determining the validity or otherwise of any judicial proceedings affecting the ranking of creditors in the courts of any member state, including precautionary warrants of arrest. Accordingly, the liquidator argued that under Article 88 of the German Insolvency Code, the arrest of the vessel (which took place one month before insolvency proceedings were commenced) was invalid.

The liquidator attempted to link the above argument with one of the grounds in the Maltese Code of Organisation and Civil Procedure under which a precautionary warrant can be lifted – in cases where it would be unreasonable to maintain the precautionary act in force or where the precautionary act is no longer necessary or justifiable.

Decision

The court decided that none of the arguments put forward in the liquidator’s application merited lifting of the precautionary warrant. Likewise, the court held that there was no justifiable reason as to why the arresting creditor should be forced to put up a counter-warrant.

With respect to the argument raised in terms of the regulation, the court accepted that the regulation had direct effect in Malta and that it was therefore directly applicable in proceedings before the Maltese courts. However, the court also highlighted that the aforementioned European regulation differentiates between different classes of claim brought against insolvent parties.

The court referred to Paragraph 25 of the regulation’s preamble, which explicitly states that different rules should be followed in the case of rights in rem. The basis, validity and extent of every right in rem should normally be determined according to the lex situs (ie, the law of the place in which the property in question is situated) and should therefore be unaffected by the opening of insolvency proceedings in another member state. The court also referred to Regulation 5(1), which expressly states that the opening of insolvency proceedings shall not affect the in rem rights of creditors over both movable and immovable assets belonging to the debtor which are situated in the territory of another member state at the time of the opening of insolvency proceedings.

The court therefore decided that the mere fact that insolvency proceedings had been opened in Germany should not mean that legal proceedings already instituted by creditors in Malta to secure their rights in rem against the vessel should be stopped.

Comment

This judgment is to date the only judgment delivered by the Maltese courts in which the effects of the EU Insolvency Regulation on legal proceedings instituted in Malta to secure maritime claims in rem have been discussed. The court’s conclusions with respect to the effects of insolvency proceedings on claims in rem also complement the relevant provisions in the Merchant Shipping Act.

The act, and more specifically Article 37A(1), acknowledge that when dealing with actions and claims in rem, ships and other vessels constitute a particular class of moveable that should be treated as separate and distinct assets from the rest of the estate. Moreover, the same article expressly provides that where a shipowner goes bankrupt, any action or claim in rem against the ship enjoys preference in relation to the ship, over any other creditors of the shipowner’s estate.

Similarly, Article 37C(1) of the act provides that any registered mortgage, special privilege, action or claim in rem against a vessel will not be affected by bankruptcy of the shipowner that takes place after the date on which the claim arose, even if the shipowner was the owner or in possession of the vessel at the commencement of the bankruptcy. Article 37C(1) also reiterates that rights in rem enjoy a preference in relation to the ship in question, over all other debts of any other creditor of the bankrupt shipowner.

---

For further information on this topic please contact Adrian Attard at Fenech & Fenech Advocates by telephone (+356 2124 1232), fax (+356 2599 0645) or email adrian.attard@fenlex.com.