A ship was arrested in Malta after a creditor obtained a Maltese court order claiming a judicial sale by auction of the ship in Jamaica was ignored. Jebmed SRL were first ranking creditors of the 22,988-tonne bulk carrier Bright Star, which at the time was called Trading Fabrizia, by virtue of a mortgage registered in Malta, where the ship was registered, in 2017. As the vessel went into financial distress while in Haiti and Jamaica, it was arrested by many creditors, such as Jebmed.
Yet, Jamaica wasn’t aware that Jebmed’s mortgage gave them the right to be the first creditors to be paid by virtue of the mortgage. After discussions with a Maltese legal firm, the Jamaican courts reserved $3,000,000 for Jebmed to advance their judicial claim in Jamaica.
As a result, the vessel was sold to Bluefin Marine Limited by means of a judicial sale in Jamaica on 9 January 2018 for $10.3 million.
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After that, the ship was registered in Liberia under the name Bright Star. After the renaming, Jebmed filed a request for the arrest of the vessel with the Maltese authorities.
The vessel was arrested on June 19,2018 on the basis of mortgage as it was bunkering in Maltese territorial waters. The ship’s lawyer, Ann Fenech, opposed to the arrest, sating that the vessel was sold free and unencumbered in Jamaica back in January and that if Jebmed wanted to get paid there were $3 million reserved for them in Jamaica.
She argued that the hypothec was over the proceeds of the judicial sale by auction and not the vessel itself.
Moreover, the First Hall of the Civil Court had decided against Jebmed. Yet, the company’s lawyers didn’t accept that they had to undergo new judicial proceedings in Jamaica, as they thought it would put their credit at risk.
Therefore, they did not institute new proceedings in Jamaica since they argued that by virtue of the mortgage registered in Malta they had already satisfied all the requirements to be paid.
Continuing, on February 8, 2019 Malta’s Superior Court of Appeal decided that the arrest was valid and correct since Jamaica had not recognised the effects that the mortgage registered in Malta placed on the ship and the rights of the creditors, and that therefore Malta cannot recognise the sale of the vessel in Jamaica as having been made free and unencumbered.
In addition, chief Justice Joseph Azzopardi, Mr Justice Giannino Caruana Demajo and Mr Justice Noel Cuschieri noted that under Jamaican law a maritime hyporthec is a proof of credit that must then be made official by a Jamaican court and which has no executive effect or effect on the ranking of creditors from the sale of the ship.
Therefore, the provision of the Merchant Shipping Act which would have released the ship from its hypothec was not satisfied.
Also, the court noted that the $3 million that were to secure Jebmed’s claim didn’t change anything as they were used only to secure.
Furthermore, there was no reassurance that there were no higher ranking creditors were the ship to be sold in Jamaica, once that Jebmed did not have precedence on the proceeds of the sale deposited in Jamaica, as the Maltese hypothec was not recognised in that country.
The Court of Appeal ruled that the Jamaican court’s decision to nullify a Maltese hypothec could not be recognised in Malta.
This is a first case in the international scene where a vessel was arrested following a judicial sale by creditors on the basis of a mortgage registered prior to that judicial sale.
The judgment is being interpreted in legal circles as delivering a statement to all courts in the international scene that Malta will not accept judicial sales if the rights of the mortgagee are not safeguarded during such sales.
