The First Hall of the Civil Court presided over by Mr Justice Joseph R. Micallef on October 3, 2012, in the case “Maritime Services International (Malta) Limited vs Dr Leslie Grech and PL Luisa Tufigno as curators to represent Norbert Kriegel, Dr Friedrich Strube and Joachim Scholz” held among other things that there was no reason why an escrow amount of $100,000 should be released to the plaintiff. The court in addition refused to declare that one of the defendants had no right to withdraw the escrow amount.

The facts in this case were as follows.

Once Mr Barfuss was paid, there was no reason why the escrow amount should be released to him

The company Maritime Services International (Malta) Ltd filed a lawsuit in Malta to reclaim the sum of $100,000 (€77,300) which was deposited in an escrow account with Deloitte and Touche Nominee Ltd, as allegedly the reason why the funds were placed in escrow no longer existed.

Subsequently, Ulrich Barfuss continued the case in his own name after acquiring the rights of the company in July 2006.

It was stated that the money was placed in escrow in order to pay for services to be rendered by Joachim Scholz and his German company under a crew management agreement and that, since Mr Scholz failed to perform his obligations, he had no right to demand payment of this amount deposited in escrow.

Maritime Services International (Malta) Limited proceeded by filing legal action requesting the court:

(1) to declare that, as a result of his failure to perform his part of the crew management agreement, Mr Scholz had no right to claim payment of $100,000 which was deposited in the escrow account with Deloitte and Touche Nominee Ltd; that they had a right to withdraw this amount from Deloitte;

(2) to order, within a short and peremptory time limit, the defendants to give their consent for it to withdraw such amount; and

(3) to authorise it to withdraw directly from Deloitte such sum, in case the defendants would not give their consent within the stated time period.

Norbert Kriegel, Friedrich Strube and Mr Scholz, as the defendants, contested the action against them, raising three preliminary pleas that. They claimed that:

(1) They were not the legitimate defendants;

(2) The court should stay proceedings until arbitration proceedings in London were finalised;

(3) The action was time-barred.

As regards the merits, they argued that it would be a breach of the escrow agreement if the funds were returned to Mr Barfuss. In addition, Mr Kriegel and Dr Strube disputed having any connection with the crew management agreement, which allegedly had been violated, while Mr Scholz claimed that he was not a party to the escrow agreement.

The court noted that on July 10, 2002, an escrow agreement was signed between Deloitte and Mr Kreigel and Dr Strube. Maritime Services International (Malta) Limited had paid Deloitte $100,000 to be held in escrow in accordance with the terms of the agreement.

In 2002, Mr Barfuss and Mr Scholz split their business. Mr Scholz acquired all the shares in the German company and transferred all his shares in Maritime Services International (Malta) Limited to Mr Barfuss. Despite the split, the German company continued to cooperate with Maritime Services International (Malta) Limited, under certain crew management agreements.

The court considered that the escrow agreement was entered into to grant compensation to Mr Scholz for services to be rendered by his German company in providing crew management services under a BIMCO standard crew management agreement, as well as for payment of Mr Scholz’s shares in the company. The sum of $100,000 was deposited in an escrow account for the benefit of Mr Scholz, on the completion of the contract and provided Mr Scholz performed his part of the contract.

A dispute later arose between Maritime Services International (Malta) Limited and the German Company, which dispute was referred to arbitration. In December 2004, an award in parte was given which found that the German company had no right to claim payment from Maritime Services International (Malta) Limited and nor did it have the right to set off the amount due to the company under other contracts still in vigore.

The company felt that Mr Scholz violated the agreement and demanded the return of the escrow amount. As Mr Scholz and Mr Kniegel refused to give their consent to the escrow agent, Maritime Services International (Malta) Limited filed this lawsuit in March 2006.

In February 2008, Mr Barfuss obtained a garnishee order to freeze assets of Mr Scholz held by Deloitte.

Deloitte, on its part, deposited the escrow funds in court.

On October 3, 2012, the First Hall of the Civil Court gave judgment by rejecting Mr Barfuss’s claim to recover the escrow amount, now held in the custody of the court.

The following reasons were given for the court’s decision.

Preliminary pleas: It found no reason to stay the proceedings, nor did it accept the plea of prescription. It held, however, that defendants Mr Kriegel and Dr Strube had no judicial interest to remain in these proceedings and liberated them from this suit.

Mr Scholz was considered to be a legitimate defendant, even though he was not a party to the escrow agreement.

The court noted that the arbitration award declared that Mr Scholz did not perform his contractual obligations under the crew management agreement. In the light of the circumstances, the court felt that Mr Scholz expressly guaranteed that his German company observed its commitments towards Maritime Services International (Malta) Limited and, in this respect, Mr Scholz was personally obliged as guarantor of his German company, the principal debtor.

It resulted, however, that after the arbitration award Mr Scholz settled all outstanding dues by his German company. Therefore, once Mr Barfuss was paid, there was no reason why the escrow amount should be released to him. This would be prejudicial to Mr Scholz, since he had made good the amounts due by his German company and, to date, had not been paid for his shares.

For these reasons, the court refused to declare that Mr Barfuss had no right to withdraw the escrow amount of $100,000.

It freed defendants Mr Kriegel and Dr Stube from the proceedings, as they were not legitimate defendants.

It concluded that there was no good reason why Mr Scholz should lose his right to claim the escrow amount of $100,000.

Mr Barfuss was condemned to pay judicial costs.

Dr Grech Orr is a partner at Ganado & Associates.