If there is sufficient guarantee, a precautionary warrant may be removed

The First Hall of the Civil Courts removed a garnishee order after a bank deposited in court the sum sought by the plaintiff. This was decided by Mr Justice Joseph R Micallef on 14 August 2013 in Joseph Tabone v Capece Construction Limited.

Capece Construction Limited had filed in the acts of the garnishee order an application asking the court to remove the precautionary warrant, in accordance with articles 836(1)(c), (e) and (f) of the Code of Organisation and Civil Procedure. The company also requested the court to order Tabone to pay a penalty and that if the court rejected the request for the removal of the warrant, then it should ask Mr Tabone to give an adequate guarantee for payment of damages.

The court pointed out that this action is based upon article 836 of the Code of Organisation and Civil Procedure, which deals with counter-warrants. From the evidence produced on 19 October 2012, Tabone had applied and was granted a garnishee order against the company for the sum of €17,435.60 - which represents work that he claims to have carried out for the company and was not paid for. Five banks were notified with the garnishee order. On 8 November 2012, Tabone formally instituted an action against the company, asking the court to order it to pay the sum. On 13 November 2012, HBSC Bank Malta plc deposited the sum in the precautionary warrant in court.

The court pointed out that at this stage when warrants are filed, the court examines the claim on a prima facie level. The merits of the case are examined by the court in front of whom the action was instituted. Therefore, the court will not examine the merits of the case when it is asked to revoke the garnishee order, but merely examine whether the precautionary warrant was issued correctly.

The Court further analysed whether there existed another sufficient guarantee to satisfy Tabone's claim against the company. In fact the bank deposited in court the whole amount being claimed in the warrant. Tabone insisted that this sum should remain in court until the civil action was decided. If another guarantee was to be given it had to be given by the party against whom the garnishee order was issued and, therefore, from its own assets. A guarantee issued by a third party is not deemed to be a sufficient guarantee. However, an alternative guarantee may be accepted to make sure that the debtor fulfils its obligations, and the court may order that the third party not use the asset which is in guarantee. It is the alleged debtor that has to prove to the court that the alternative guarantee is sufficient. It must exist and be such that the creditor may make use it to satisfy its claim, if the need arises.

In this particular case the sum deposited by the bank belonged to the company and covered the total amount claimed. Accordingly, the precautionary warrant could be removed.

The warrant was justified, and even if the court decided against the claim for payment by the company, this garnishee order was still justified. The fact that a claim is eventually turned down does not necessarily mean that the precautionary warrant was issued capriciously. Furthermore, the law also implied that after a warrant is issued and there is a change of circumstances, this does not mean that it was not justified when it was issued. In this case a bank deposited the sum following the garnishee order and, therefore, created a sufficient guarantee to Tabone's claim.

Since the court was ordering a counter-warrant, it will not ask Tabone to make a guarantee himself for the eventual claim of damages that may be raised by the company.

The court then dealt with the request by the company to condemn Tabone for issuing the precautionary warrant. The court explained that this is within its discretion, but the party requesting this must prove that one of the circumstances listed in the law to impose a penalty actually exists. The court, however, will impose a penalty in extreme cases where justice demands it. The penalties are of a public order nature in order to insure against those who file futile precautionary warrants. The law provides that the debtor must be called upon before a warrant is issued, unless there are urgent reasons not to. The request need not be formal and may be verbal. In this particular case, Tabone chased the money for some time and made various requests for payment. The company did not prove that the application for the warrant had been filed for futile reasons. Therefore, the court would not impose a penalty.

The court concluded that once it removed the garnishee order, it did not accede to the request that it impose a penalty.

Malcolm Mifsud is a partner at Mifsud & Mifsud Advocates