On the 13th June 2018, the Court of Magistrates (Malta) (Civil Jurisdiction) presided over by former Magistrate Dr Consuelo Scerri Herrera decided that prescription constitutes a grave and valid reason to suspend the execution of bills of exchange. The case in the names of United Acceptances Finance Ltd. (C360) vs. Kenneth Ruggier (Court Application Number 335/17) concerned a set of five bills of exchange having a total value of €1,397.60 which were issued on the 1st February 2007 and each became due on the first day of the consecutive months between April and August of the year 2010.

United Acceptances Finance Ltd. (the “Respondent”) filed a judicial letter on the 16th November 2010 (Judicial Letter Number 4674/2010) (the “Judicial Letter”), a few months after the most recent bill of exchange became due, in accordance with article 253(e) of the Code of Organisation and Civil Procedure, Chapter 12 of the Laws of Malta (the “Code of Organisation and Civil Procedure”). Nonetheless, the Judicial Letter was not served upon Mr Kenneth Ruggier (the “Applicant”) in due time, and instead the Applicant was notified of the said Judicial Letter almost seven years later, on the 26th October 2017. Upon notification, the Applicant availed himself of the rights awarded to persons called to settle a bill of exchange through article 253(e) of the Code of Organisation and Civil Procedure. This provision provides that when a person is served with a judicial letter sent for the purpose of rendering a bill of exchange executable, the person being served may, within twenty days from the date of service, file an application before the competent Court to contest or oppose the execution of such bill of exchange on either one of the following grounds: the signature on the bill of exchange is not of the said person or of his mandatory, or there are grave and valid reasons to oppose the execution of the said bill of exchange.

The Applicant filed an application with the Court of Magistrates on the 13th November 2017 opposing the execution of the five bills of exchange for the following reasons:

each bill of exchange was barred by prescription subsequent to the lapse of five years from the date of maturity of the bill of exchange in accordance with article 542 of the Commercial Code, Chapter 13 of the Laws of Malta (“Commercial Code”);

each bill of exchange was also barred by prescription by virtue of article 2156(f) of the Civil Code, Chapter 16 of the Laws of Malta which states that any action for the payment of a debt arising from commercial transactions or other causes, shall be barred by the lapse of five years; and

as a result, there were grave and valid reasons to oppose the execution of the five bills of exchange through the referred Judicial Letter.

In its reply filed on the 18th December 2017, the Respondent claimed inter alia that the Judicial Letter alone rendered the bills of exchange executable and these should have already been considered executive titles; such Judicial Letter is unlike other judicial letters which are intended to interrupt prescription but is a judicial letter designed to create an executive title in accordance with article 256(2) of the Code of Organisation and Civil Procedure; and the action would have been prescribed if the Judicial Letter was filed following the lapse of the prescriptive period of five years from the date of maturity of the bills of exchange.

Whilst there was no doubt as to the authenticity of the Applicant’s signature included in the bills of exchange, the Court of Magistrates examined the facts of the case in light of the second limb of article 253(e) of the Code of Organisation and Civil Procedure to determine the presence or otherwise of grave and valid reasons to oppose the execution of the bills of exchange. The Court of Magistrates considered that article 256(2) of the Code of Organisation and Civil Procedure (quoted by the Respondent), makes specific reference to the delivery of the judicial act, rather than the simple filing of such act, since a bill of exchange issued under the Commercial Code is an executive title but may only be enforced “after the lapse of at least two days from the service of an intimation for payment made by means of a judicial act”.

The Court of Magistrates acknowledged that the most recent bill of exchange became due on the 1st August 2010, and although the Judicial Letter was filed in November 2010, it was only served on the Applicant in October 2017. Since more than five years lapsed from the date when the most recent bill of exchange became due, the Court of Magistrates determined that all the bills of exchange are prescribed in terms of article 542 of the Commercial Code.

The Court of Magistrates proceeded to examine and make reference to various judgements on the intrinsic elements of a bill of exchange. The Court of Magistrates remarked, amongst other things, that a bill of exchange is nothing short of a credit instrument which provides evidence of the relationship between the drawer and drawee and creates a legal presumption of the creditor’s right as recorded in the bill of exchange. The presiding Magistrate observed that since by means of a bill of exchange, the drawer binds himself to pay the drawee the sum indicated therein on the specific date indicated in the instrument, then the debtor should not expect to avoid settling the outstanding payment once the bill of exchange becomes overdue.

The Magistrate deduced that in such cases the law requires the Court to simply assess whether the requirement of the signature is satisfied and whether there are satisfactory reasons to suspend the execution of the bills of exchange. The former element was concluded earlier on when the Applicant confirmed he personally signed the bills of exchange in 2007. With regards to the latter issue, the Court of Magistrates observed that Maltese law does not elaborate on or specify the “grave and valid reasons” for opposing the execution of a bill of exchange as identified in article 253(e) of the Code of Organisation and Civil Procedure, but intentionally leaves it up to the discretion of the competent Court.

The Court of Magistrates considered that the “grave and valid reasons” should not extend beyond those reasons listed in the Commercial Code and other applicable law which suspend payment of a bill of exchange. By highlighting the fact that article 542 of the Commercial Code emphasises a prescriptive period of five years from the date of maturity of a bill of exchange, the said Court explained that as a result, the right of action will be lost if such action is not instituted during the period prescribed by law.

By quoting previous judgements on the prescriptive period of actions relating to bills of exchange, such as Carmel sive Charles Grech vs. Philip Degiorgio et al. decided by the Court of Appeal (Superior Jurisdiction) on the 28th March 2014, the Court of Magistrates emphasised that the judicial act to render a bill of exchange enforceable must be filed within five years from the date of maturity of such bill of exchange.

In the present case, although the Judicial Letter was filed before the termination of five years, the Applicant was notified long after the prescriptive period had lapsed, and therefore the Court of Magistrates concluded that this scenario constituted a grave and valid reason for the suspension of the execution of the five bills of exchange.

 

Dr Emma Cassar Torreggiani is a Trainee Advocate at GANADO Advocates.