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26 October 2005
Another shipping judgment on actions in rem (actions against the vessel) and debts incurred by bareboat charterers has recently been published. The judgment is diametrically opposed to two earlier decisions relating to the vessel Poker: Granges Metalock v MV Poker and Metaltrade v MV Poker.
There is no law in Malta which clarifies whether one can arrest a vessel and commence an action in rem for debts incurred by a bareboat charterer when, by the time the action is filed, the charterer is no longer the charterer of the vessel. In addition, until Granges Metalock and Metaltrade, no cases had previously ruled on the issue (for further details please see "Actions In Rem and Debts Incurred by a Bareboat Charterer").
The two cases came before different judges, but both agreed with the argument put forward by the defendant vessel that, while the grounds upon which a court can exercise jurisdiction are one thing, whether an action can be taken against a vessel in rem in such circumstances is another altogether. Both judges appreciated and commented substantially on the need to make a distinction between the right of the court to exercise jurisdiction over a case and the right (or otherwise) of a plaintiff to commence an action against a vessel in rem for debts incurred by a bareboat charterer.
The plaintiffs stated that it was totally unnecessary to make such a distinction. They argued that once it has been established that a court has jurisdiction over the merits of a case (because its nature falls within the in rem jurisdiction of the court), the plaintiff has the right to file an in rem action against the vessel.
However, both judges accepted the defendant's view that the purpose behind the ability to sue the vessel in rem is for the judgment creditor to be able to sell the vessel in the eventuality that the owner refuses to settle the judgment debt. Therefore, a solution that allows the plaintiff to commence an action against a vessel would be inequitable, as it could potentially lead to the sale of the vessel when the person who would lose out (ie, the owner) in fact had nothing to do with the creation of the debt.
The two decisions were considered to be landmark judgments and to have settled an issue which had been brewing for some time. However, the April 22 2005 decision in International Paint Ltd v MV Plopeni altered the situation.
Following an order placed by the vessel's bareboat charterers, the plaintiffs supplied the vessel with a quantity of paint. The bareboat charterers never paid for the paint. Subsequently, the bareboat charterparty was terminated and the bareboat chartered out to new charterers.
In this case the court disregarded the issues raised by the defendant vessel and its attempt to make a distinction between the grounds on which courts can exercise jurisdiction and the right (or otherwise) of a plaintiff to file an action against a vessel in rem for the debts of a bareboat charterer. The court concluded that for an action in rem to be validly instituted, it is necessary to ascertain only that the merits of the case fall within those heads of claim contained in the Admiralty Court Acts of 1840 and 1861, and the vessel is present in Malta. The court ruled that in this case these criteria were satisfied. The court further held that the advantage of the action in rem was that, once the debt due had been established, it was immaterial and irrelevant as to who was personally responsible and who had ordered the paint.
Therefore, the court rejected outright the vessel's defence that an action in rem cannot be filed against a vessel when the debt was incurred by the former bareboat charterer, and ordered the vessel to pay the amount claimed.
However, no reference was made to the two previous and extremely detailed judgments.
The vessel MV Plopeni immediately filed an appeal against the judgment and the matter is before the Court of Appeal, which has not yet fixed a first hearing date.
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