An efficient tool for the creditor to ensure payment is the precautionary garnishee order (mandat ta’ sekwestru kawtelatorju). This involves the garnishee/s which is typically a bank, depositing the funds of the debtor in court up to the amount claimed by the creditor.
These funds may not be withdrawn by the creditor and must remain in court until a court decides the creditor’s claim.
Such tool may be seen as too good to be true, or that anyone can simply file a precautionary garnishee order at will. While administratively this is possible, one cannot simply file precautionary warrants without caution. Indeed, if this is done, consequences will ensue upon the supposed creditor.
The Civil Court, First Hall, in a decree delivered on June 27, 2022, in the names of 'IAS Limited vs Diane Elizabeth Vella', dealt precisely with this issue.
On February 14, 2022 Vella was served with a precautionary garnishee order by IAS Limited for the amount of €60,000. The garnishee order was acceded to by the court. Then, on February 23, 2022, Bank of Valletta plc deposited the full amount of €60,000 in court.
This meant that the money was taken from Vella’s account with BOV and placed in court for safekeeping. Now, by law, the creditor (IAS Limited) was bound to file a lawsuit within 20 days from the date of accession of the garnishee order. Such deadline may only be extended by the agreement of this parties. In this case, there was no such agreement.
So, what are the consequences of not filing the lawsuit within the stipulated time-period? The person who issued the garnishee order may be forced to pay the other party i.e. the party against whom the garnishee order was issued, a penalty. This penalty can range from €1,164.69 to €6,988.12.
In the present case, IAS Limited failed to file a lawsuit within the stipulated timeframe and the twenty-day window was not extended in any way whatsoever.
Vella therefore sought – among other things – for IAS Limited to pay her the penalty stipulated by law. She claimed this via an application (rikors) filed on the April 7, 2022.
To make matters worse, IAS Limited failed to file a reply to Vella’s application within the deadline stipulated by law, i.e. seven days. The Civil Court, First Hall explained that the deadline of seven days is a peremptory term, meaning that it cannot be suspended, interrupted, or extended in any way. If the seven calendar days elapse, then that is it. Any reply filed after this date is deemed inadmissible. And that is exactly what happened in this case. The court could not consider the reply filed by IAS Limited.
The court delved into why the legislator contemplates a penalty in such case. It held that such penalty exists and is imposed by law as a measure of public order so that it is ensured that the seriousness of the judicial process is respected. It is also a mode of ensuring that the institution of precautionary warrants is not abused of and is not used with the mere intention of bothering the alleged debtor.
It continued that the only defence that the alleged creditor has for filing a precautionary warrant and not following it up with a lawsuit as stipulated by law, is when the deadline for doing so was either expressly or tacitly extended by the consent of the alleged debtor. In no uncertain terms, it was not the case here.
The court further remarked that not only was no lawsuit filed after twenty days from the accession of the garnishee order, but that in addition to this, IAS Limited had not up until that point filed any lawsuit against Vella at all. Notably, this was more that four months from the issuing of the precautionary garnishee order.
This helped the court conclude that the alleged creditor had not acted with a sense of good will when issuing the garnishee order. Indeed, it was issued with a sense of maliciousness, held the court. It continued by holding that the fact that no lawsuit was filed goes to show that the alleged creditor did not actually need to file the precautionary garnishee order in the first place.
Therefore, the court concluded that the penalty stipulated by law was due, and this in the amount of €3,000. One must therefore not file precautionary warrants frivolously and must utilise them diligently and cautiously.
Such decree may not be appealed.
Celine Cuschieri Debono is a junior associate at Azzopardi, Borg and Associates Advocates