Sus­pen­sion of ex­e­cu­tion of a bill of ex­change

First Hall, Civil Court Mr Jus­tice Lawrence Mintoff 21 Oc­to­ber, 2016

Malta Independent - - LAW REPORT - Facts: Y X The Court

This was a case that en­sued fol­low­ing a ju­di­cial let­ter filed in the First Hall Civil Court on 10 April 2014 by X against Y call­ing upon him to pay within three days the sum of €6,506, the bal­ance of a larger sum of €38,803 in a bill of ex­change signed on 15 June 2012, to­gether with in­ter­est un­til ef­fec­tive date of re­pay­ment, and this so as to ren­der the bill of ex­change an ex­ec­u­tive ti­tle.

X had lent Y the sum of €37,029 to pay for mer­chan­dise he had im­ported for sale. By virtue of a pri­vate writ­ing, it was agreed that this amount would be paid within a year with in­ter­est ac­cru­ing at 8%. The par­ties added on the in­ter­est of a year to the sum lent by X to Y and had drawn up a bill of ex­change for €38,803. X had pur­chased items amount­ing to €18,040 from Y. Y was, in the mean­time, pay­ing X from pro­ceeds earned in sales. Even­tu­ally the par­ties started dis­agree­ing on the amounts paid and the cal­cu­la­tion of in­ter­est. X claimed that he was still due €6,506 by Y, while Y held that he had a bal­ance in his favour of €2,090, as con­firmed by his ac­coun­tant.

de­nied X’s claims for the ex­e­cu­tion of the sum of €6,506 claim­ing (i) the ju­di­cial let­ter was null as it was not pre­sented be­fore the com­pe­tent court in terms of the value of the bal­ance of the bill of ex­change; (ii) with­out prej­u­dice to the above, Y was not a debtor of X as he had paid the amount stip­u­lated in the bill of ex­change in full, part in en­dorsed cheques, part in cash and part in the form of mer­chan­dise. There­fore, Y op­posed to the ex­e­cu­tion of the bill of ex­change for the sum claimed in terms of Ar­ti­cle 253 of the Code of Or­gan­i­sa­tion and Civil Pro­ce­dure (Chap­ter 12 – Laws of Malta).

claimed that the ju­di­cial let­ter was pre­sented be­fore the right Court. It is the en­tire value of the bill of ex­change that de­ter­mines the com­pe­tence of the Court and not the bal­ance pend­ing pay­ment since it is the en­tire bill of ex­change that is be­ing ren­dered an ex­ec­u­tive ti­tle and not only the bal­ance. If any­thing, the Court could then limit the en­force­abil­ity of the bill of ex­change to the bal­ance claimed.

Case-law has shown that com­pe­tence of the Court is de­ter­mined by the orig­i­nal sum due as the Court would have to con­sider the whole amount to con­clude whether the bal­ance claimed is ac­tu­ally due. Re­gard­ing the claim that Y had paid in full, X con­tended that if this were so, Y would have re­quested to be given the bill of ex­change. In any case, Y had to prove that pay­ment was ef­fected. Y even­tu­ally with­drew his claim of in­com­pe­tence of the Court.

re­ferred to Ar­ti­cle 253(e) of the COCP which states that “…the court which is com­pe­tent ac­cord­ing to the value of the bill of ex­change … may, by de­cree which shall not be sub­ject to ap­peal, sus­pend the ex­e­cu­tion of such a bill of ex­change …in whole or in part and with or with­out se­cu­rity, upon an ap­pli­ca­tion of the per­son op­pos­ing the ex­e­cu­tion of such bill of ex­change … to be filed within twenty days from the ser­vice of the ju­di­cial let­ter sent for the pur­pose of ren­der­ing the same bill of ex­change … ex­e­cutable, on the grounds that the sig­na­ture on the said bill of ex­change…is not that of the said per­son or of his manda­tory or where such per­son brings for­ward grave and valid rea­sons to op­pose the said ex­e­cu­tion and in such case any per­son de­mand­ing the pay­ment of the bill of ex­change… shall file an ac­tion ac­cord­ing to the pro­vi­sions of the Com­mer­cial Code”. The Court noted that the Court does not spec­ify what are ‘grave and valid rea­sons’. The leg­is­la­tor left it up to the Courts to de­ter­mine this. Cer­tainly, the rea­sons can­not be friv­o­lous nor capri­cious. Fur­ther­more, the Court noted that the grave and valid rea­sons could not be wider than those con­tem­plated by the Com­mer­cial Code in con­sid­er­ing the non-pay­ment of a bill of ex­change.

The Court re­ferred to a num­ber of cases on the is­sue and made a num­ber of ob­ser­va­tions. Amongst other things, the Court noted how a sus­pen­sion due to un­cer­tainty as to the amount due is not a valid nor grave rea­son in terms of law and is sim­ply a means to pro­long pay­ment. It noted how the bill of ex­change is an ad hoc obli­ga­tion, au­ton­o­mous and in­de­pen­dent from any other debt or com­mer­cial trans­ac­tion that may have pre­ceded it.

The Court high­lighted the fact that the pro­ce­dure con­tem­plated by Ar­ti­cle 253(e) is in­tended to cover cases of re­quests for sus­pen­sion of ex­e­cu­tion of the bill of ex­change and not claims of the in­va­lid­ity or re­vo­ca­tion of such bill of ex­change that would re­quire the in­sti­tu­tion of a Court case.

The Court re­ferred to a num­ber of court cases which delved into the mean­ing of ‘grave and valid rea­sons’. Amongst oth­ers, the Court noted the fol­low­ing rea­sons (a) prima fa­cie, it ap­pears that the bill of ex­change was ex­torted by vi­o­lence or was is­sued for il­le­gal pur­poses; (b) when it re­sults that many of the bills of ex­change re­gard­ing which the sus­pen­sion is re­quested have been paid; (c) when the Court has se­ri­ous doubts whether there is an el­e­ment of usury.

The Court held that it need not go into all the mer­its, but must see whether prima fa­cie there ex­ist rea­sons in terms of Ar­ti­cle 253(e) of the COCP to al­low for the debtor to con­test the case. There is no doubt that the amend­ments to the law ren­der­ing a bill of ex­change an ex­ec­u­tive ti­tle were in­tro­duced to avoid un­nec­es­sary court pro­ce­dures with very limited claims be­ing avail­able to the de­fen­dant. There­fore, the Court has to ex­am­ine whether there are in­deed rea­sons grave and valid which could suc­cess­fully be raised as pleas by the De­fen­dant.

In these pro­ceed­ings, the bill of ex­change was not en­dorsed in favour of third par­ties and there­fore, Y could pro­ceed with his claim that the amount was set­tled. The Court had to de­ter­mine whether his al­le­ga­tion was prima fa­cie jus­ti­fied.

In the Court’s opin­ion, there were se­ri­ous doubts whether the amount men­tioned in the bill of ex­change was still due or not. This amounted to a grave rea­son why the ex­e­cu­tion of the bill of ex­change should be sus­pended in terms of Ar­ti­cle 253(e) above.

The Court there­fore up­held Y’s re­quest and or­dered the sus­pen­sion of the ex­e­cu­tion of the dis­puted bill of ex­change.

A sus­pen­sion due to un­cer­tainty as to the amount due is not a valid nor grave rea­son in terms of law

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