When a Bill of Exchange is due for payment

The First Hall of the Civil Courts in its judgment delivered on 19 September 2013, held in 240 Contracting Limited –v– Marsaxlokk Football Club, that a bill of exchange is enforceable, even if there were indications that it may have already been paid.

Mr Justice Joseph R Micallef, was asked by Marsaxlokk Football Club, in an application to block the enforcement and execution of a bill of exchange. The action was instituted in terms of section 253(e) of the Code of Organisation and Civil Procedure, after they were notified with a judicial letter which made the bill of exchange enforceable.

They examined the facts concerning the bill of exchange, when it was issued on 10 December 2009 in favour of Allfix Limited (today 240 Contracting Limited) for the sum of €47,430.92. The bill of exchange matured on 15 March 2010. The President and the Treasurer represented the Club in a private agreement between the two parties regarding the placing of turf in their football pitch. When the bill of exchange was signed the sum was due to the company. Today, Marsaxlokk Football Club are claiming that this sum is no longer owed.

Mr Justice Micallef pointed out that a bill of exchange becomes an executive title, and therefore, enforceable, when a judicial letter is served on the party who is to pay. That party then has a right to file an application within 20 days to object to the execution. The football club raised the issue that they were not validly notified with the judicial letter, because he was handed to the barman at the club. The Court did not accept this plea on the grounds that although the barman was not a member of the committee, at law he was at service to the club. The bar was within the premises of the club and therefore, it gives a service to the same Club. Furthermore, Marsaxlokk FC filed its objection within the timeframe mentioned in the law.

The Court then, moved on to the merits of the application. The law provides the execution of a bill of exchange may be blocked under two circumstances. The first is when the signature of the bill of exchange is not of that person who is to pay and the second is when it is proved that there exists a grave and valid reason. On the second element the law does not explain further. The Court held that on this second ground there should be a restrictive interpretation of what is held in the Commercial Code and neither examine the obligations that brought about the bill of exchange. As an example, the Court held that it would uphold the request if there is evidence that the bill of exchange was signed due to violence or else the judicial letter was filed against the wrong person.

In this particular case, there is no contestation on the signatures on the bill of exchange and therefore, it was concluded that the Club was basing its request on the grounds that there existed a serious and valid reason for the bill not to be enforced. Marsaxlokk FC held that it had received a voucher from the Ministry of Finance that superseded the value of the bill of exchange and was handed to the company as payment of the same bill. The Court pointed out that the bill of exchange was not returned to the football club, and retained in the hands of the company. The Court did not accept this argument on the grounds this would mean a delay in payment and that if this voucher was meant to be a payment, then the football club was bound to ask for the bill of exchange together with a receipt. Such an omission had legal consequences, as decided in previous Court of Appeal judgments. If the bill of exchange is left in the hands of that person who is to receive payment, then this is done at their own risk. The evidence shows that no receipt was asked for by the Club, since the bill of exchange remained in the possession of the Company, which entitled it to file a judicial letter against Marsaxlokk FC.  

The Club argued that according to the statute there is need of three signatures and not two. This point was not raised in the application, but raised only in the note of submissions presented by Marsaxlokk FC. According to Mr Justice Micallef this point could not be examined further.

The Court therefore turned down the Club's request and declared the bill of exchange enforceable.

Malcolm Mifsud is a partner at Mifsud & Mifsud Advocates

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