Cyprus: Are You Really Interested? Court Considers Limits To Registered Shipowners' Rights

Last Updated: 15 April 2014
Article by Vasileios Psyrras

Introduction

In a recent case1 the Supreme Court in its admiralty jurisdiction considered an application under Section 30 of the Merchant Shipping (Registration, Sales and Mortgages of Ships) Law 1963 for an order prohibiting the respondents from dealing with the two vessels registered in their name and ownership. Section 30 empowers the Supreme Court, on the application of any interested person, to make an order prohibiting any dealing with a ship or any share in a ship, and requires the registrar of Cyprus ships to comply with any such order.

Facts

The applicants based their application on a loan agreement entered into in 2008 between the applicants as lenders and the respondents as borrowers. The original agreement was subsequently amended with the signing of three addendums. No mention was made in the original loan agreement of the scope or the purpose of the loan and all three addendums were principally concerned with the extension of the repayment period.

However, the preamble to the third addendum contained a recital that the loan was granted for the purpose of repairing the vessels that the respondents owned. Furthermore, Clauses 3 and 4 of the addendum stipulated that the borrowers' obligations under the loan were to be considered as marine debts and that the borrowers2 had every right to protect their interests under the loan agreement in case of a claim being filed or arrest proceedings being initiated against the vessels.

On this basis, the applicants considered that they qualified as an 'interested person' for the purposes of Section 30 of the law, and applied for an order prohibiting the owners from selling, transferring, assigning, mortgaging or in any way alienating or encumbering the vessels or any part of them.

No provision in any of the loan documents referred to security being provided for the loan; nor was there any encumbrance or mortgage registered on the vessels.

Section 30

Section 30 of the law reads as follows:

"30. The Supreme Court may, if it thinks fit (without prejudice to the exercise of any other power of the Court), on the application of any interested person make an order prohibiting for a time specified any dealing with a ship or any share therein, and the Court may make the order on any terms or conditions it may think just, or may refuse to make the order, or may discharge the order when made, with or without costs, and generally may act in the case as the justice of the case requires; and the Registrar, without being made a party of the proceedings, shall on being served with an official copy thereof obey the same."

Interpretation of 'interested person'

In order to have the right to apply under Section 30 of the law, the applicant must be an 'interested person'. The term is not defined in the law and it falls to the courts to interpret what constitutes an 'interested person'.

Previous case law

Two leading cases in the appellate jurisdiction of the Admiralty Court deal with the interpretation of Section 30, and the definition of 'interested person' in particular.

The first case, Pastella Marine Co Ltd v National Iranian Tanker Co Ltd,3 concerned the sale of a vessel. The sale agreement required the buyer to deposit 10% of the purchase price with the seller's solicitors. Having paid the deposit, the buyer subsequently sought to withdraw from the contract for alleged failure on the part of the seller to implement two of the contractual terms, and demanded the return of the deposit. The buyer also filed court proceedings for an order under Section 30 of the law.

On appeal, the Admiralty Court held that for the purposes of Section 30, the expression 'interested person' is not synonymous with 'plaintiff', 'petitioner' or 'litigant'; if the intention was to extend the remedy conferred by Section 30 to every creditor of the ship's owner, the legislature would have adopted a term other than 'interested person'. The court further stated that it is necessary for a person seeking an order under Section 30 to have an interest in the ship; the status of creditor or claimant of damages is not sufficient.

The second case, Constantinos Athanasiou Gerasakis v Waft Shipping Co Ltd,4 concerned the ownership of a vessel. The applicant claimed that he was the beneficial owner of the shares in the company that owned the vessel. The court again concluded that an 'interested person', within the meaning of Section 30 of the law means a person that has an interest in the ship, not merely a creditor or a person with a claim for damages. Since, on the facts of the case, it was obvious that the dispute between the parties was a monetary dispute, the court decided that the applicant was not an interested person and rejected the appeal on that basis.

These cases confirm the decision reached at first instance in several other cases, of which the following are particularly relevant.

In Ocean Corporation Ltd v Novorossijskrybprom Co Ltd (No 1)5 the claimant's claim was for damages for breach of charter agreement and for committing an offence. The court held that only a person with a direct interest in the ship itself or in a share in the ship is eligible to apply for a prohibitory order under Section 30 of the law. A mere creditor, whose interest concerns only the security of a claim through the ship, may not apply.

In Camrex (Realisations) Ltd v Freewind Shipping Co Ltd6 the applicants had a claim for unpaid value of paints sold and delivered on various occasions to the ship owned by the defendants. The court held that a person that has a money claim against a ship is not an interested person.

These decisions are generally consistent with the use of the term 'interested person' elsewhere in the law, which often suggests an ownership or mortgage interest.

Decision

Given that the application was based on a monetary claim that the applicants allegedly had against the respondents on the basis of the loan agreement, as amended by the addendums, the court decided that the applicants were merely creditors of the company that owned the vessels and did not meet the requirements for being treated as interested persons. Unless the applicants could demonstrate a direct interest in the vessels themselves, being mere creditors of the owning company did not qualify them as interested persons for the purpose of Section 30 of the law. The court therefore rejected the application.

Comment

An order under Section 30 of the law is a far-reaching measure which severely limits the registered owner's ability to deal with a vessel that is subject to the order. Unsurprisingly, the court has limited its availability to the small number of persons that have an actual interest in the vessel. Otherwise, it would be possible for anyone to step in and interfere with the vessel and its operations.

If a creditor, particularly a lender, wishes to secure the debt owed to it for money or services provided for or in connection with a vessel, security must be negotiated and agreed in advance, and in any case no later than the provision of the services or the lending of the money. If a creditor fails to take the necessary steps, the court will not make good the omission by issuing a Section 30 order.

Originally published by International Law Office.

Footnotes

(1) Civil Application 168/2013, judgment issued on December 5 2013.

(2) While this appears to be illogical, it is what the addendum stated.

(3) (1987) 1 CLR 583.

(4) (1989) 1E AAD 393.

(5) (1996) 1B AAD 1184.

(6) (1986) 1 CLR 420.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Vasileios Psyrras
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions