The First Hall of the Civil Court, presided over by Mr Justice Mark Chetcuti, on March 5, 2015, in the case Dr Jotham Scerri Diacono on behalf of ‘Aqua Marine Navigation & Shipping Company SA v Pol-Euro Lines Shipping plc’, held, among other things, that no counter-security will be required in the absence of a valid reason for the issuance of a section 37 injunction under chapter 234 of the Laws of Malta.

Foreign company Aqua Marine Navigation & Shipping Company SA requested the court to issue a ‘section 37 injunction’ against the Malta-registered vessel Sider Lipari (official No. 911907

• to prohibit any dealing and sale in the ship;

• to preserve its rights;

• that no deletion certificate would be issued; as well as

• to notify the Registry of Shipping of its order, in terms of section 37, Merchant Shipping Act.

Aqua Marine took the vessel on time charter from Pol-Euro Lines Shipping, the owner.

It was stated that the vessel was not capable of travelling at the speed agreed and of reaching a specific consumption rate in violation of the charter party and, as a consequence, it suffered damages. In addition, the vessel had to undergo repairs and was not operational for 21 days.

Aqua Marine claimed that it suffered damages and had to cancel the time charter prematurely.

It had to pay for the unconsumed bunkers, and suffered further damages, which it liquidated as $823,000.

Aqua Marine stated that it intended to present a counterclaim against the owner, Pol-Euro Lines, in the arbitration proceedings, presently under way in London. The dispute related to use and chartering of the vessel under a charter party as contemplated in article 742(B)(1) chapter 12.

It maintained that its claim was actionable as an action in rem in terms of article 742D of chapter 12 which was a right over the vessel in terms of article 37(10)(a)(v) of chapter 234.

This court had power to prohibit any dealings over the vessel or its shares in terms of article 37(1) of chapter 234.

The vessel was the only asset of Pol-Euro Lines and, if Pol-Euro Lines sold or transferred the vessel or share therein, its rights would be prejudiced.

Pol-Euro Lines, in reply, contested Aqua Marine’s application.

Identity of Aqua Marine: It argued that the charter party dated May 30, 2014, was with Aqua Marie of Tripoli and not of Panama. Allegedly Aqua Marine of Panama did not exist and did not have any right to file this legal action.

Failure of Aqua Marine to file a case on the merits and to present its counterclaim: It said that it had a claim against Aqua Marine and in fact it had referred the dispute to arbitration in London. Aqua Marine failed, it said, to reply within 28 days, by November 8, 2013, and to present its counterclaim.

The court noted that the alleged sale was between two entities, both belonging to the Polish government, and it appeared unlikely that the same ultimate owner would sue itself

Pol-Euro Lines added that Aqua Marine failed to make such claim on the merits and that its claims were totally vexatious. It alleged that Aqua Marine made this request to apply illegitimate pressure upon it.

It was stated that the Italian courts had revoked the arrest of the vessel in the absence of clear proof and ordered the charterers to pay all judicial expenses.

Pol-Euro Lines also strongly contested the amount of damages which were claimed by Aqua Marine.

The court considered the claim of Aqua Marine to request a ‘section 37 injunction’ over the vessel Sider Lipari, in security of its claims for damages under a time charter. Aqua Marine contended that it has an action in rem in terms of article 742D chapter 12 and that this constituted a right over the vessel according to article 37(1)(a)(4) of chapter 234.

The Maltese court had power to prohibit dealings over the vessel in terms of article 37(1) as requested, pending the outcome of the dispute between the parties on the merits. The court had to see if Aqua Marine had, on a prima facie basis, rights meriting protection at law.

Aqua Marine presented to the court an agreement and it claimed that this agreement was not honoured, as the vessel was not capable to cruise at the agreed speed and this was prejudicial to it. In addition, the vessel had to be repaired and remained idle for 21 days.

As a consequence, Aqua Marine terminated the time charter agreement and demanded damages as well as the costs of the bunkers, which were not consumed as a result of a premature termination of the time charter.

The court said there was nothing in the acts to show that the claim of Aqua Marine did not merit protection. Further, as the vessel was the sole asset of Pol-Euro Lines, and as the amount of Aqua Marine’s claims was considerable, the vessel was its only guarantee for payment, pointed out the court. In this respect the court felt that Aqua Marine’s claims were justifiable.

On March 5, 2015, the First Hall of the Civil Court issued the ‘section 37 injunction’ over the vessel and ordered that the Registry of Shipping be notified in terms of article 37 of chapter 234.

Pol-Euro Lines, thereafter, requested a counter-security to make good any damages which it might suffer, if Aqua Marine’s claims proved to be unfounded.

Pol-Euro Lines maintained that it was prevented from selling the vessel, to repay its loan, and that there was good reason for the court to impose a counter-security.

The court noted that, under article 37 of chapter 234, it had wide discretion to request a counter-security. Article 37 provides: “The Commercial Court may, if it thinks fit,... on a demand by a sworn application of a person claiming a right in or over a ship make an order prohibiting for a specified time,.... and the court may make the order on any terms and conditions it thinks just ... Including... the imposition of an obligation to provide appropriate security for damages, interests and costs.... And generally may act in the case as the justice of the case requires.”

It concluded, however, that no counter-security was necessary in the circumstances in its decree of March 5, 2015. It was not shown that Aqua Marine acted abusively, or that its claims were frivolous or lacking of legal basis.

Nor did the court feel it to be appropriate to impose a counter-security upon Aqua Marine. The court had to be convinced that a valid reason existed for it to request a counter-security. Pol-Euro Lines bore the burden of proof in this regard.

The court noted that the alleged sale was between two entities, both belonging to the Polish government, and it appeared unlikely that the same ultimate owner would sue itself. Besides, it was also stated that there was another buyer, and this weakened Pol-Euro Lines’s argument.

In the meantime, the court said that Pol-Euro could continue operating the vessel. The deposit paid under the MoA was only a payment on account, which was not part of its patrimony and, if the deposit had to be returned, there was no loss.

Any depreciation of the vessel could not be calculated with certainty, provided the period was not considerable. While the market value of the vessel fluctuated, the vessel generated regular income from its operations, underlined the court.

Dr Karl Grech Orr is a partner at Ganado Advocates.