A judicial sale by auction will not be suspended unless there is a legitimate impediment warranting such suspension.
This was held in Kroll Trustee Services Limited vs M/V JAY 2 decided on the 16th September 2024, presided over by Judge Doreen Clarke.
On 29 December 2022, a charter-party agreement was signed between Degroma Trading Inc, as Charterers, and Dreter 2 Ltd as the owners of the vessel. This charter-party agreement was subsequently terminated by Dreter 2 Ltd and Degroma Trading Inc. invoked their right to purchase the vessel in accordance with the charter-party agreement. Degroma Trading Inc made a swift transfer of USD 9,886,091.12 for the acquisition of the vessel.
On 21 February 2024, the company Goldfinch Shipping 2 Limited acquired the vessel from Dreter 2 limited and entered into a loan facility agreement with Kroll Trustee Services Limited to be able to purchase the vessel. On 29 February 2024, Degroma presented a precautionary warrant of arrest against JAY 2 where it alleged that it had paid the price of the vessel but the vessel was never delivered to them.
On 21 March 2024, Kroll Trustee Services Limited presented a precautionary warrant of arrest against JAY 2 for a credit of USD 65,742,893 owed to it by Goldfinch 2 Ltd because Goldfinch 2 Ltd was not honouring the loan facility agreement. On the 7 May 2024, Kroll Trustee Services Limited presented a note in the acts of the precautionary warrant of arrest to render the warrant executive in terms of article 838B of Chapter 12 of the Laws of Malta. Subsequently, a fresh warrant of arrest of the vessel was presented by Kroll Trustee Services Limited and a decree was given stating that the vessel is to be sold by a judicial sale by auction.
As a result, Degroma Trading Inc presented a court application in terms of Article 281 of Chapter 12 of the Laws of Malta asking for the executive warrant of arrest presented by Kroll Trustee Services Limited to be revoked. It subsequently filed a court application in the acts of the judicial sale of the vessel, requesting the court to suspend the judicial sale by auction of the vessel because there was a legitimate impediment. It stated that its application filed in terms of Article 281 of Chapter 12 of the Laws of Malta attacking Kroll Trustee Services Limited’s executive title had not yet been decreed and this caused a legitimate impediment.
The Court explained that according to Article 326 of Chapter 12 of the laws of Malta a judicial sale by auction can only be stopped if a legitimate impediment exists. However, the law refrains from explaining what constitutes a legitimate impediment and this is left to the discretion of the adjudicator to determine in each particular case whether circumstances exist which can legitimately impede the sale. The Court reiterated that it cannot enter into the substance of the claim for the revocation made by Degroma Trading Inc in terms of Article 281 of Chapter 12 of the Laws of Malta because it will be decided in separate and distinct proceedings by the same Court.
Nevertheless, the Court held that the reasons given by Degroma Trading Inc to suspend the judicial sale did not refer to any defect in the executive act in itself (the warrant of arrest) but to surrounding circumstances. Therefore, in light of the circumstances the Court stated that the claim Degroma Trading Inc. filed according to Article 281 of Chapter 12 of the Laws of Malta to attack the executive title of Kroll Trustee Services Limited cannot be regarded as a legitimate impediment to justify the judicial sale of auction of the vessel to be suspended, and it ordered the sale to continue.
Av. Jodie Darmanin
Junior Associate
Mifsud & Mifsud Advocates
