Obligations must be performed

Victor Ragonesi has commented (June 2) on the recently published Bill that proposes the introduction of new rules which allow a creditor who is due a determined sum of money (up to Lm5,000) to demand the sum by judicial letter and if the debtor fails to react within 30 days, the judicial letter becomes an executive title, equivalent to a judgment. Dr Ragonesi considers this to be contrary to the constitutional right to a fair trial relating to the determination of a person's rights and obligations.

I am sure there is much technical analysis that can be made of the proposals and the meaning of the Constitution on the matter. However, I would like to avoid the legal technicalities of that specific debate and ask: Does a person have the right not to fulfil his legal obligations, disregard the contract he has entered into, leave his creditor unpaid and unsecured and then use the shield of the courts to drag the issue of a simple obligation, to pay a determined sum of money, which is "certain, liquidated and due", for several years while the courts consider plea after plea, including those of a procedural nature?

In my opinion, the reply is obviously "no". No one has the right to disregard one's obligations and, indeed, should not be protected by the existence of the legal system in doing so. Otherwise the very intention of my colleague will be stultified for the justice system will really become a system to perpetrate the violation of legal obligation.

The observance of obligations is the cornerstone of any juridical and social system: pacta sunt servanda is one of the oldest legal maxims. Indeed, I would go so far as to suggest that the whole system is based on the assumption that we have rights because we fulfil our obligations; our rights are conditional on the performance of our obligations.

Our civil law recognises that parties are free to agree in advance that a contract can come to an end if a party does not fulfil his obligations and this is usually done as it is logical. Thus, for example, if you do not pay rent, you lose your lease. In commercial agreements, where the economic impact is given more weight, the parties do not even need to agree that in case of breach of obligations the contract ends. The law states that it happens automatically.

As rights are conditional on the performance of one's obligations, no one should be able to claim the absolute right to be entitled to court hearings if one has failed in his obligations.

The proposed claim (which must be detailed) in a judicial letter plus a 30-day period for the debtor to set the record right, is ample time to ensure suitable protection of debtors.

If they have fulfilled their obligations and the sums are not due, or are in any way contested, all the proposed law requires is that the debtor responds and objects to the assumption that he is in default.

When that happens, the creditor must sue and the courts will hear the case. So there is no negation of the right to a fair hearing where it is justified. There is a system that ensures that creditors can avoid unnecessary litigation and cost in situations where their debtors do not wish to contest the case. This will also save costs for the debtors themselves and avoid many unnecessary proceedings.

This new measure is but a small step in the right direction. It should be made referable to a higher threshold than Lm5,000, as the higher the sums due the more you need efficiencies.

We need to adjust the balance of our system's pro-debtor bias and render it less debtor-friendly. At the same time, we could impose more duties on creditors who will then have more effective rights.

Thus, sending a judicial letter to a debtor under the new rules when one knows that the sum is not due or is contested should be treated as an abusive act and the creditor should be penalised. And so should his lawyer if the lawyer did not adequately verify the facts before sending the judicial claim.

Lawyers are not mere executioners of their clients' whims and dishonesty and must be a buffer against abusive use of the legal rights - both as creditors and as debtors.

Likewise, debtors who contest claims unnecessarily must be penalised by having to pay double costs, otherwise there is no incentive to be honest about one's obligations.

It must be made to hurt if one abusively fails to perform obligations. The payment of ordinary court costs is no penalty and the payment of interest at eight per cent on the sums due is less than what the debtor would pay his bank!

Unless judgment interest is set at, say, 15 per cent we will continue to see debtors use the courts as a method of extending credit. The proposed method of sending a judicial letter can, at least, solve part of the problem because a creditor can send it for selected non-contested items and if the debtor wants to contest part but not all of a claim, then his response will refer only to that.

Speaking about a right to a fair hearing in a vacuum is not good. Claiming rights without considering obligations is not good either. Rights are only part of the story and it seems we have gone too far with our rights. We need to shift the focus and seek a balance between rights and obligations.