The Maltese legal system recognizes two types of garnishee orders (mandati ta’ sekwestru): precautionary and executive.

The filing of proceedings against a debtor is not enough and it is the practice that a precautionary garnishee order is filed simultaneously with proceedings against the debtor for the amount claimed.

The precautionary garnishee order is used to avoid a situation where the creditor would be unable to execute a successful judgment against the debtor. This would reduce the court’s judgment to a mere declaration. The precautionary garnishee order is acquired by an application to the courts requesting that the amount claimed by the creditor be secured from the debtor’s bank accounts.

Given that the precautionary garnishee order is a robust tool with severe consequences, as it attacks the bank accounts of the debtor, the creditor must have solid ground upon which his or her claim rests. If the creditor files a frivolous or vexatious precautionary garnishee order, this may result in the claimant being liable to pay a penalty of up to €6,988.12.

Executive garnishee order can be sought from the courts after the creditor is awarded a successful judgment (and the judgment is not appealed). The creditor becomes able to convert the precautionary garnishee order into an executive garnishee order and it is only at that stage that the creditor would be able to recover his dues from the assets of the debtor.

Faced with this situation the debtor must act, and the solution to counter such an executive garnishee order lies in Article 281 of Chapter 12 of the Laws of Malta.

Article 281 stipulates that the person against whom an executive act has been issued or any other person who has an interest may file an application to the court issuing the executive act asking that the executive act be revoked, either totally or partially, for any reason valid at law. The court must decide on the application after hearing the parties and receiving such evidence as it may deem fit, by not later than one month from the filing of the said application. Therefore, the law allows the debtor to attack an executive garnishee order for ‘any reason valid at law’.

This was the subject matter of several applications filed by the same company (the debtor) against different individual creditors before the First Hall of the Civil Court presided by Mr Justice Toni Abela, upon which a decree was issued on December 11, 2023.

Summary of facts

TSG Interactive Gaming Europe Ltd, which is registered in Malta, provides online gaming services duly licensed by the Maltese Gaming Authority. On the basis of this licence it provided online gaming services to its customers in Austria.  Mr Nils Heinrich had a claim against the company and successfully filed proceedings against it in Austria.

He then proceeded to enforce the judgment in Malta and requested the Maltese court to grant an executive garnishee order against the company. The application by Mr Heinrich was rejected by the First Hall of the Civil Court in Malta in July 2023.

Following this negative result, Mr Heinrich proceeded to file a second identical application. This time, the First Hall of the Civil Court, presided by a different judge, acceded to the application and through a decree granted the executive garnishee order against the Maltese gaming company.

Consequently, the Maltese company had no other option but to file an application to revoke the said executive garnishee order on the basis of Article 281 of Chapter 12 of the laws of Malta. The company filed its request to revoke such decree in the acts of the first application that was filed by Mr Heinrich; i.e., before the same judge that had presided over the first application and rejected it.

In its application to revoke such decree, TSG Interactive Gaming Europe Ltd pleaded that Mr Heinrich, after his application was rejected, tried to carry out forum shopping by filing a second identical application before a different judge in order to get a favourable result. The company argued that once the first application filed by Mr Heinrich was rejected he could not file a second identical application with the same merits before the same court presided by a different judge.

The court’s considerations

The court noted that Article 281 of Chapter 12 of the Laws of Malta should not be applied restrictively to situations: (i) where the executive act is issued by the wrong court; or (ii) to situations where there is some defect in form. This  because the legislator specifically made use of the words 'for valid reasons according to law' which certainly foresaw broader situations.

In this regard, the court referred to the pronouncements of the Court of Appeal in the case of Vincent Gauci vs Dr. Albert Fenech delivered on 27 March 2020, where it was made clear that it was departing from the restrictive and narrow position taken by the First Hall of the Civil Court in the case of Edward Pace et vs Michael Sultana on 5 May 2005.

The court argued that the facts of the case were relatively straightforward and in describing the difference between the provisions concerning precautionary garnishee orders and executive garnishee orders, it noted that the applicant had to show that there is a valid reason at law to request the revocation of the executive garnishee order. The court argued that once the elements of Articles 375 and 376 of Chapter 12 of the Laws of Malta are satisfied, it must decide upon the issuance or otherwise of the garnishee order.

However, Mr Justice Abela held that these provisions should not be applied automatically out of context. The second application by Mr Heinrich was being sought on the same grounds as the first rejected application.

When the first application was rejected and the second application was successfully filed by Mr Heinrich, this amounted to ‘forum shopping’ in its purest of forms and was totally inappropriate for the proper administration of justice, the court said.

The court also referred to the reply by Mr Heinrich whereby he had acknowledged that the second application for a garnishee order against the Maltese gaming company was ‘almost identical’ to the first application.

From the records of the acts of the proceedings, it was clear that what was being requested in the second application did not present any new substantial facts or circumstances from those used to obtain the initial warrant. The court argued that had it been informed that another application had already been filed and rejected, it would have undoubtedly refrained from acceding to the second application. There could not be inconsistencies and contradictory court orders as this would run counter to upholding the principles of justice and certainty of rights.

On this basis, the court revoked the executive garnishee order that was granted on the strength of the second application and ordered the issuance of a counter-warrant.

Recommendations for changes to the law

Interestingly, in its decision, the court made several recommendations to amend the legislation and referred its decree to the Commissioner of Laws.

Amongst its recommendations, the court held that the timeframe of one month to decide such matters (where the one month starts running from the date when the application is filed) did not make sense.  

The court recommended that as in other situations (such as in the case of a warrant of prohibitory injunction) the one month should run from the date when the other party is notified.

The court also pointed out that whilst the debtor had an expedient remedy to request the revocation of the garnishee order, the law did not seem to provide for a speedy procedure granting relief to the creditor in cases where an application for the execution of a garnishee order was rejected. This was notwithstanding the fact that the creditor had a general remedy under Article 32(2) of Chapter 12 of the Laws of Malta, whereby the Civil Court, as a Superior power, has the ultimate residual power of guaranteeing that wherever there is a prejudice of rights, a remedy should be provided.

At the time of writing the court's decree was subject to an appeal. 

Dr Clive Gerada is a senior associate at Azzopardi Borg and Associates.