The same employees who struck the final nail in the coffin of the Sea Malta privatisation deal by refusing conditions offered by Grimaldi have won precedence over other creditors when it comes to the allocation of proceeds from the sale of Maltese Falcon, the ship at the centre of much controversy last year.
Bank of Valletta is one of Sea Malta’s major creditors but along with other creditors, the bank will only be able to recuperate its dues if bidders offer more than Lm1 million (Euro 2.3 million) to buy the 27-year old Maltese Falcon.
The former Sea Malta workers are set to recover Lm929,803 in termination benefits after the court established that the opening bid should be not less than Lm1,000,000 (Euro 2.3 million).
The first Lm1 million recovered from the court ordered auction will be allocated to pay wages and termination benefits due to the 47 former seafarers, who had taken their case to court after government declared the company bankrupt.
Since the ships are Sea Malta’s only substantial assets, the other creditors have little chance to recover their dues.
The court case was decided on 6 April and the auction is slated for 1 June at the law courts.
Article 64 of the seafarers’ collective agreement stated that in the event that Sea Malta is liquidated, workers are entitled to substantial liquidation damages amounting to full redundancy payments.
But the former employees had no guarantee that enough money would have been left to cover these claims if other creditors were paid before them from the proceeds of the sale of Sea Malta’s two ships.
The liquidators appointed by Sea Malta, planned to dispose of the ships privately according to the Company Act which does not give precedence to anyone in particular.
But fearing that other creditors would have gained precedence over their claims, the former sea based employees took their case to the courts were they succeeded in blocking the liquidator’s attempt to sell the ships privately. The court also affirmed their precedence over any other creditor.
The seafarers based their claim of precedence over other creditors on article 37 of the Merchant Shipping Act.
The Merchant Shipping Act states that wages due to master, officers and other members of the vessel’s complement are to be considered as privileged credits.
The article also distinguishes between vessels and the other assets belonging to the same company. In case of bankruptcy by the owner of the ship, vessels are considered as forming a separate and distinct category of assets when it comes to claims to which the vessel is subjected.
The court concluded that had the liquidator proceeded to sell the ships together with the other assets of the company, creditors could have prejudiced the seafarers’ privileged rights by issuing garnishee orders on the sum recovered by the liquidators.
The liquidators appointed by Sea Malta unsuccessfully argued that the Merchant Shipping Act did not apply in this case as the former employees had no direct claim on or over the vessel.
They also unsuccessfully argued that the court should make the seafarers liable for any damages and costs suffered by Sea Malta and its creditors.
The MV Maltese Falcon was controversially valued at EUR5.5 million by the French, brokers Barry Rogliono Salles in June 2005. Yet back then the Investments Minister had expressed doubt on the valuation arguing that ships, like cars do not appreciate in value.
The appreciation of the Maltese Falcon resulted in Sea Malta registering a profit, much to the consternation of Minister Austin Gatt, who had often described Sea Malta as a loss-making relic of the past.
Valuations conducted by Grimaldi have put the ship’s value at just USD5 million, about Lm1,700,000.
According to the 'in-house' inquiry on the appreciation of MV Falcon, the valuations carried out were declared on the vessel's theoretical price and the ship-broking firms refrained from inspecting the physical condition of the vessel and also the class records held at the Head Office of Sea Malta.
Ironically, now the government as major shareholder in BOV can only hope that bidders would have more trust in Barry Rogliano Salles’ valuation than Austin Gatt had in August.