Revocation of precautionary warrants
The First Hall Civil Court, presided over by Madam Justice Jacqueline Padovani Grima on the 9 May 2018 in the case Dooga Limited vs. Pay Secure Online Limited inter alia held that although the Court could only review applications for the revocation of a precautionary warrant on a prima facie basis, it could not base its decision on mere assumptions, allegations or conjecture.
Dooga Limited and Pay Secure Online Limited were parties to a Merchant Agreement relating to the sale of Bitcoins. A dispute arose among the parties following an alleged hack and theft of Bitcoins from three of Dooga Limited’s clients’ virtual wallets. Arbitration proceedings were instituted further to the Merchant Agreement, following which Dooga Limited filed an application for the issue of a garnishee order against Pay Secure Online Limited.
The proceedings in question relate to the application filed by Pay Secure Online Limited for the revocation of the abovementioned precautionary warrant. In its application, Pay Secure Online Limited alleged that the hack in question had been caused by Dooga Limited itself and/or its representatives or employees. Pay Secure Online Limited further argued that the garnishee order had been issued for the sole purpose of putting pressure on Pay Secure Online Limited in view of the pending proceedings between the parties and that it should be thereby revoked on the grounds that the amount claimed was prima facie excessive and that it given the circumstances, it was unreasonable for the precautionary act to be maintained in force and/or that this was no longer necessary or justifiable in terms of Article 836(1)(d) and (f) of the Code of Organisation and Civil Procedure (the “COCP”) respectively. The defendant also requested the Court to liquidate damages in its favour on the ground that issuance of the garnishee order by Dooga Limited was malicious, frivolous or vexatious.
Dooga Limited on the other hand argued that the grounds set out in the aforementioned articles of the COCP did not exist. Aside from denying the claims raised by Pay Secure Options Limited, the applicant inter alia alleged that the circumstances surrounding the hack were suspicious, and that it had reason to believe that it might have been the result of collusion between the clients and Pay Secure Online Limited. In any case, Dooga Limited argued that, in terms of local jurisprudence, the Court could only engage in a prima facie assessment of the facts and that issuance of the precautionary warrant was made in accordance with the requirements set out in the relevant articles of law.
The judgment of the First Hall clearly sets out the principles established through local jurisprudence relating to the revocation of precautionary warrants. First, the Court noted that in coming to this decision, a Court can only engage in a prima facie analysis of the facts and that there were “significant limitations” to the assessment which it could undertake at such preliminary stages of the proceedings. With reference to a number of judgments including PJ Sutters Company Limited vs. Concept Limited (decided by the First Hall on the 10 May 2001) the First Hall also stated that Courts could not delve into the merits of the case, but had to determine whether the applicant for the precautionary warrant had a right at law to request the issuance of the precautionary warrant, independently as to whether or not the underlying claim is founded or otherwise.
In this regard, local jurisprudence has long established that in issuing a precautionary warrant the following requisites must be satisfied, namely:
the applicant must have a legal claim against the person being the subject of the warrant;
the applicant must institute legal proceedings with the aim of settling the legal claim;
the warrant must satisfy the requirements set out at law for its issuance; and
the warrant is issued and executed at the responsibility of the applicant thereof.
To the extent that a Court is tasked with evaluating the revocation of a precautionary warrant or otherwise, it should be guided by the principle that the right to judicial action should not be disturbed or set aside lightly. Similarly, one should also bear in mind a person’s right to safeguard his interests to the fullest extent possible until such time as the merits of a dispute are resolved.
The Court here noted that Pay Secure Online Limited was basing its request for the revocation of the precautionary warrant on allegations of fraud being carried out by its counterparty but failed to substantiate such allegations by submitting any proof to this effect. While it is true a Court is only entitled to carry out a prima facie examination of the dispute, the Court’s decision cannot be based on mere allegations and conjecture, particularly given the severity of the allegations brought forward and the extent and value of the alleged fraud. The defendant, it was noted, failed to even produce a witness who would confirm suspicions of fraud on oath. The Court was prima facie convinced of the fact that following a preliminary analysis of the facts, Dooga Limited could prove a legitimate claim on the basis of which it would need to safeguard its rights. In light of the above, the Court ruled that the issuance of the garnishee order was justified and that this should remain in force.
Finally, the Court also addressed Pay Secure Online Limited’s request for damages, noting that an award of damages in terms of Article 836(8) is discretionary and may only be imposed by the Court if it is satisfied any one of the “extreme cases” specifically set out in the law has in fact manifested itself. The Court held that the relevant article had been enacted for the purpose of guaranteeing the genuineness of judicial proceedings and ensuring that the institute of precautionary warrants is not abused. In this case, basing itself on the principle that good faith should always be presumed and that malice or frivolousness on an applicant’s part must be proven, the Court was unconvinced that the garnishee order had been issued maliciously or frivolously and did not liquidate any damages with respect to Dooga Limited.