The UK high court has ruled that Xylas family-controlled Pyrsos Shipping of Greece must repay debts owed to HSBC on two bulkers.
Andrew Henshaw QC said the case dates back to loans granted in 2009 and 2010 by the lender to single-ship companies controlled by Pyrsos, which is owned 50/50 by sisters Katerina and Doris Xylas, who were both surnamed as Xyla in the judgement.
The bank advanced $31.5m for the 33,000-dwt newbuildings Antaeus (built 2009) and Apellis (built 2010).
Guarantees were given by Pyrsos and Katerina Xylas, but not by Doris Xylas, who was not a party to the proceedings. Katerina Xylas did not appear in court.
HSBC said there were a series of defaults, followed by notices of acceleration of the loans in July 2016, and judicial sales of the vessels to Greece's Interunity Management.
The judge said that by mid-2015, shipping markets had fallen considerably, and HSBC agreed a waiver of the minimum liquidity covenant on the Antaeus loan until December.
The covenants reverted to normal in December 2015, putting the single-ship company Antaeus Shipping in breach.
It then failed to pay interest falling due and missed a $525,000 repayment of principal on 8 June 2016.
Breach admitted
A letter written by Katerina Xylas on behalf of Pyrsos on 7 June 2016 with reference to both loans stated: “The loans are until June 8, 2016 both current in relation to original repayment schedule.
"However, one interest payment on both loans has been delayed, and, considering the present condition of the dry bulk shipping market, original covenants are not presently complied with.”
She emailed HSBC on 22 June 2016 advising that Antaeus was lying off Vizag, India, unfixed, with crew owed an estimated $60,000 unpaid wages and local port agents owed about $13,000.
HSBC had the ship arrested and sold in 2016.
Apellis was arrested in Malaysia in October 2015 at the request of time charterers seeking compensation for the vessel’s detention in Australia the previous month apparently due to non-payment of crew.
In December 2015, it was arrested in China on account of a liability arising from collision with a fishing vessel, the court said.
The arrest was lifted against the provision of a $295,000 letter of undertaking by HSBC.
It required a cash collateral of $295,000 for the letter by 16 May 2016.
"Failure to perform this requirement constituted a non-payment event of default," Henshaw said.
In June 2016, Apellis was arrested in Fangcheng, China, at the behest of Zhoushan Changhong International Shipyard, which was seeking security in respect of a claim against the vessel for an unsettled $166,400 drydocking invoice.
Katerina Xylas emailed HSBC on 23 June 2016 advising that the crew were owed $141,567 unpaid wages.
Crew rebel
Consequently, the seafarers refused to discharge the cargo of sulphur and threatened to arrest the vessel for unpaid wages.
At Katerina Xylas’ invitation, HSBC entered into correspondence directly with the master and arranged to settle the unpaid wages.
In July, HSBC sent a notice of acceleration, with Apellis Shipping, the owning company, liable for $10.17m.
HSBC proceeded to enforce its mortgage security, installing its own manager and crew and directing Apellis to Hong Kong for arrest and judicial sale.
A total of $0.54m is still owed on Antaeus and $2.07m for Apellis.
The judge said the defence that the defendants would have been likely to have advanced, had they appeared or been represented at the trial, was that Pyrsos and/or Katerina Xylas were exonerated from their obligations by reason of fault by HSBC that made its satisfaction by Antaeus and/or Apellis impossible.
Arguments dismissed
They were also likely to have argued that the exercise of rights by HSBC under Greek law obviously exceeded the limits imposed by good faith or morality or by the social or economic purpose of the right.
But Henshaw dismissed these arguments and ruled that the defendants were in default of their respective obligations under the loans, and the corporate and personal guarantees.
"The claimant is entitled to judgment against each of the defendants in the sums set out earlier in this judgment, together with subsequent interest from the date of acceleration of the loans to the date or dates of payment," he concluded.
