Malaviya Seven — ensuring a satisfactory end to a complex and unusual case

Imagine being away from your family for 18 months; stuck on a vessel detained in a foreign port; dependent on the charity of others for food and supplies; wondering if you’ll be paid the wages you’re due.

That’s exactly what happened to the crew of the Malaviya Seven supply ship, detained in Aberdeen since 2016: an incident that attracted considerable media attention from local, national and international outlets alike.

Working with the International Transport Workers’ Federation (ITF), the Ledingham Chalmers team — which included me, and partners Tim Thomas and Jody Mitchell — helped resolve the situation, and secured wages for the crew so they were able to return home.

But it was a lengthy and complex process.

So, let’s take a look at this unusual case, which was new territory for many of those involved.

What is arrestment?

Parties usually look to arrest a ship to cover an outstanding debt.

Here in Scotland, there is no specialist admiralty court, but the sheriff courts have jurisdiction over specific areas, and actions can be raised in the Court of Session in Edinburgh for vessels anywhere in the country.

There are two types of arrestment —

  • The more common, is an action ‘in personam,’ which is essentially security for a debt allegedly owed by the vessel’s owner
  • The second — which applied in this case — is ‘in rem.’ Directed at the vessel itself as well as its owners, it enforces a maritime lien (a right to keep possession of property until a debt is discharged) covering, in this case, the crew’s wages

As a maritime lien, wages have priority over other monies owed including mortgages and securities, with the exception of sums due to HMRC and the harbour.

What happened in this case?

The crew of the vessel remained on board when it was seized after the owner went into liquidation, believing if they left they’d never get paid.

We acted for the ITF (initially being instructed by an Irish legal firm) throughout this case. The process was challenging due to the liquidation of the vessel’s owners in India, and later, the potential involvement of the Union Bank of India, the vessel’s security holders.

We raised an action seeking payment and a warrant for arrestment, which was considered and granted by the sheriff at Aberdeen Sheriff Court.

A number of hearings was required, but we eventually reached a point where the court ordered the sale of the vessel by auction: all to be arranged and overseen by the court appointed reporter, Dominic Daly.

This auction was held in October last year, but despite a big turnout and considerable prior interest, no buyer was found, so we had to seek a further court order to sell the vessel by private bargain.

We then negotiated a deal, and Jody worked closely with the reporter to prepare the terms and conditions and bill of sale. This was an unusual procedure too given the court was selling the vessel, so we had to consider how this was best reflected in the documents.

In the end, the sale was completed; the proceeds received, and parties with a claim to these funds were notified they had to make their claims at a hearing on 31 January. Here, funds were ordered to be released to the crew.

Under new ownership, the vessel — now called Sartor — set sail from the north east at the start of this year.

A cautionary tale

This is a lengthy and often complex procedure, so those considering instigating it ought to do so as soon as an issue arises.

And, of course, seeking legal advice is vital, in particular to minimise the risk of claims for ‘wrongful arrestment’ which can be sizeable, especially if vessels are detained for a long time.

In this case though, the firm was naturally delighted to have achieved this result, with the co-operation of the harbour board. Importantly too, the crew received considerable financial and pastoral care from local charities and the public, assisting them during a very difficult time.

Rebecca Walker

Rebecca specialises in commercial litigation, with a particular focus on both personal and corporate insolvency. She holds a prestigious certificate of proficiency in insolvency (CPI) qualification. She also handles a wide range of commercial disputes, debt recovery and is experienced in planning and environmental law.

Posted, 27 March 2018 by Rebecca Walker
Categories: Debt recovery | Maritime law