Insights

On 4th March 2025,   the Civil Court (Commercial Section), presided by Madame Justice Audrey Demicoli, in the case “Advocate Joseph Mizzi as Special Attorney of Iurii Degtiar and Mykhailo Tretiak vs MB Shipping Limited (C 40945) and Tetiana Tyspkunova in her capacity as director of MB Shipping Limited, revoked the issuance of a warrant of prohibitory injunction, on the basis that claimants had other legal remedies available.  It also held that the loss to be suffered by claimants was pecuniary in nature and did not constitute “irreparable” harm.

Two majority shareholders of MB Shipping Limited claimed that Tetiana Tyspkunova in her capacity as director, abused her position of trust, in a manner, harmful to the company. She allegedly followed the instructions of another shareholder, with conflicting interests, who had set up his own competing company, to misappropriate the business of their company.

Claimants protested that this competing company was actively taking over the operations, clientele, and revenue streams of their company.

To prevent further financial loss, the claimants, on 5th February 2025, requested the Court to issue a precautionary warrant of prohibitory injunction under Article 873 of the Code of Organisation and Civil Procedure (Chapter 12 of the Laws of Malta), to prohibit any transfer of property, and any payments from MB Shipping Limited’s accounts, with various foreign banks. This injunction, they said, should be kept effective until an extraordinary general meeting of the shareholders of MB Shipping was convened to remove Tetiana Tyspkunova as director.

On the very same day, the court upheld their request and issued the precautionary injunction.

On February 28, 2025, MB Shipping and Tetiana Tyspkunova  submitted their pleas of defence, and raised objections to the issuance of the injunction. They pleaded that:

• The claimants failed to show what right they wished to safeguard by the precautionary warrant.
• They based their application on mere allegations that the director Tetiana Tyspkunova was acting, in a manner, prejudicial to the interests of the company. A claimant had to prove a prima facie right and it was not acceptable to base a request on unfounded conjectures.
• Any loss suffered by the claimants was  not in its nature irremediable.
• Our Companies Act (Chapter 386 of the Laws of Malta) provides other remedies for shareholders to obtain redress against any unfair prejudice which they may suffer by the acts of the directors.

In addition, the company disputed being a legitimate defendant in these proceedings.

The Court considered article 873 of the Code of Organization and Civil Procedure (Chapter 12 of the Laws of Malta).

This provision states that the purpose of a warrant of prohibitory injunction is to prevent a person from doing anything which might cause harm to a claimant. Such warrant has to be necessary to protect any right of the claimant, and prima facie, the claimant  has to appear to have such right.

Three elements have to subsist to the satisfaction of the Court, mainly that:

1. claimants must have a prima facie right;
2. the warrant has to be necessary to safeguard claimants’ vaunted rights; and
3. claimants will suffer irreparable harm if the warrant is not granted.

Under Maltese law, a warrant of prohibitory injunction may only be granted if all three criteria are proven.

1. Prima Facie Right

The Court has to be satisfied that claimants have a prima facie legal right before it cam issue a precautionary warrant.

Reference was made to case law: Victor Sultana v Julian Sultana (Court of Magistrates (Gozo) (Superior Jurisdiction), 17th February 2020) and Helen Mercieca et v Eng. Joseph Bajada (First Hall of the Civil Court, 12th December 2016), which emphasized that:

• A prima facie right must be objectively evident. It must not a subjective matter which depends on the discretion of the judge.
• the warrant can be issued if it can be shown that the claimant “appears” to have a “right”, meriting protection.  As the warrant of prohibitory injunction is a precautionary act, the Court need not engage in a deep analysis of the merits.  It only has to ensure that the claimants appear to have a prima facie right that is plausible and credible. This excludes any claim which is frivolous.

In this case, the court accepted that the claimants, as majority shareholders, did have a prima  facie right, to ensure that the company’s funds were used for a proper purpose. For any loss which the company would incur, impacted them, as well, in their capacity as shareholders.

The Court rejected the company’s plea of not being a legitimate defendant.

2. Irreparable Harm

The second criteria to be established is whether the claimants will suffer irreparable harm if the injunction is not granted. It has to be shown that the “loss” is irremediable and that claimants do not have any other adequate remedy.

Under Maltese case law, financial harm alone is not sufficient to justify an injunction unless it is impossible to remedy through financial compensation. Monetary loss is not “irreparable” if other legal avenues exist to recover the funds:  re: J. Farrugia Properties Ltd v Annalise Farrugia (First Hall of the Civil Court, 30th December 2019).

Considering the facts, the Court did not consider that claimants would suffer an irreparable loss, to justify the issuance of an injunction. Claimants sought to prevent a financial loss, which they eventually could recover by other legal means.

3. Necessity of the Injunction

The third criteria is whether the injunction is necessary to protect the claimants’ rights. Here, the court ruled against the claimants, citing the availability of several other remedies under our Companies Act in particular:

• a shareholder can apply for protection against unfair prejudice. Under article 402, a shareholder can request the Court to issue orders to, inter alia, regulate the future conduct of the company’s affairs and/or to restrict or prohibit the carrying out of any proposed act.
• The claimants did not explain why these other available remedies were insufficient.

A warrant of prohibitory injunction should only be granted in the absence of any legal remedy. Since other remedies were available, the warrant was deemed unnecessary in the circumstances: re Santumas Shareholdings Ltd v Aquarius Properties Ltd (First Hall of the Civil Court, 3rd April 2007).

For these reasons, in its decision, the Court revoked its provisional order granted on 5th February 2025.

Though the claimants did have a prima facie right, it concluded the issuance of a warrant of prohibitory injunction was not strictly necessary. Besides having other remedies, the Court was not satisfied that their loss was “irreparable” if the warrant was not issued.

This judgment re-affirms the three elements necessary for the issuance of a warrant of prohibitory injunction. It highlights the importance of exhausting alternative legal remedies before seeking the issuance of such a warrant and clarifies that monetary loss alone does not constitute irreparable harm.

The decision serves as a reminder to shareholders that disputes over company funds and governance should generally be resolved through company law mechanisms. In this case, the claimants should have exercised their statutory rights under the Companies Act rather than pursuing an exceptional remedy.