Facts

Plaintiff Company (PC) had leased a tower crane to Defendant Company (DC). This lease was terminated unilaterally by DC in April 2003. DC owed PC the sum of Lm 21, 137.50 representing a balance of a larger amount owed by DC for the lease of the crane for the period from 15 June 2000 to 2 April 2003.

PC claimed that:

• DC never paid their dues despite various requests by PC, particularly by virtue of a judicial letter sent in September 2003 and also a garnishee order

• the amount was certain, liquid and due.

PC hence requested the Court to condemn DC to pay the sum in question together with interest and expenses incurred for the judicial letter and the garnishee order.

DC claimed that

• The requested amount was not all due since DC carried out various works for PC for which DC was not yet paid. Hence DC claimed set-off for such amount due.

• The companies had decided that DC carry works for PC in return.

The Court

The Court examined all the evidence produced by both parties and considered the following evidence in particular:

• An agreement was reached by virtue of a private writing between PC and DC on the 15 February 2000 for the lease of the tower crane by the PC to DC.

• This agreement was not contested by DC, however the latter felt that the amount was not all due since the value of works carried out by DC had to be reduced from the amount claimed by PC. The amount due for such works allegedly amounted to Lm10,000.

• The representative of DC claimed that there was actually an agreement between PC and DC to have such a set-off.

The Court could not accept DC claims since they were not credible for various reasons, particularly because the witnesses produced by DC did not agree on the amount due to such DC that had to be set off.

The inconsistency in DC’s claims was also obvious when the same company alleged that an agreement had taken place for such a set-off.

The onus of proof for this allegation was completely on DC. The Court did not feel that DC satisfied its obligation in producing enough evidence to prove the existence of this alleged agreement allowing a set-off between PC and DC. The Court noted the great inconsistencies in the witness’ testimonies particularly in the claims for the value of the work carried out by DC. (From DC’s witnesses alone, at least three different values were claimed.) It was also ambiguous as to who actually agreed on this alleged set-off. The witnesses all claimed that the works were carried out for the family of a PC representative and NOT for the PC itself. Hence, the claim of this alleged agreement to set-off could not hold water simply due to the lack of evidence and also due to the fact that the concept of set-off could come into action between the same parties, which did not seem to be the case.

As was stated in the cases “Macpherson Mediterranean Limited vs J. Lautier Company Limited” (2002) and “Mifsud vs Camilleri Fava nomine” (2001), set-off takes place in accordance with Article 1196 of the Civil Code where two persons are mutual debtors. The Law goes on to state that “Set-off operates ipso jure, and even without the knowledge of the debtors. The moment two debts exist simultaneously, they are mutually extinguished to the extent of their corresponding amounts.”

Article 1197 states that “Set-off shall only take place between two debts both of which have for their subject-matter a sum of money …and which are both for a liquidated amount and exigible. A debt shall be deemed to be for a liquidated amount if it is certain even with respect to the quantity thereof.”

Applying the law and case-law to this case, the Court stated that the DC’s allegations could not lead to acceptance of the claim for set-off. The main reason given by the Court was that the debts due for the works claimed by DC were not in fact due by PC but by third parties. Hence DC could not reap the benefits of set-off in this case because as the law claims, the debtors must be mutual debtors.

PC was consistent in its pleas always stating that the lease of the crane was due to be paid. In fact, the lease agreement dated 15 February 2000 actually contained a clause stating:”Under no circumstances shall any rent or other payments chargeable under this agreement, be subject to any reduction or set-off by the lessee”.

Other clauses also strengthened PC’s claims in stating that any changes to the main agreement had to be done in writing and agreed upon by both parties.

The Court felt that DC did not even produce enough evidence to prove a verbal agreement to this effect, let alone a written agreement. Also, in essence, the elements required by Law in Article 1197 were in no way present in this case.

The Court hence rejected the pleas of DC and upheld those of PC. It condemned DC to the payment of the Lm21,137.50 representing the balance due for the lease of the tower crane together with interests and expenses requested by PC.

This case may be the subject of an appeal.