Bill to reform operation of court warrants

A Bill which will reform the operation of executive and precautionary warrants and modernise the system of judicial sales by auction started being debated in Parliament yesterday.

Parliamentary Secretary Carmelo Mifsud Bonnici said the main focus of the Bill, which amends the Code of Organisation and Civil Procedure, was to enable creditors to recover their debts faster, without the debtors losing from the value of their assets.

He explained that the Bill was part of a series of laws aimed at giving the people new or easier means to resolve disputes.

Three new forms of warrants were being introduced, the first being the warrant of seizure of a commercial going concern.

At present, companies against which a warrant was issued were fragmented and sold off in parts, causing an immediate and substantial loss in value.

In terms of the Bill, a commercial company would be preserved and would continue to operate, although the courts could appoint an administrator to run it until it was sold or payment of the outstanding amount is made.

In this way, it retained the company its value and the workers will keep their jobs.

Overdraft facilities could not be the subject of a warrant since that too could kill off a company. This prohibition excluded credit cards.

The creditor could, however, benefit from the assets of the company against which the warrant was issued.

There were cases where companies had a small asset base but their products had a high value and yielded substantial profits, or the other way around. The court could decide what was best for the company to pay off its creditors in a system that protected the rights of both creditors and debtors.

Dr Mifsud Bonnici said the second warrant, called the warrant in procinctu would enable the courts to issue orders when other warrants could not be used for the execution of a judgment, thus avoiding a legal impasse.

The third warrant was aimed at facilitating the arrest of aircraft or ships. Dr Mifsud Bonnici said many debtors went to court in an attempt to postpone payments, hoping to discourage the creditors through the various legal obstacles they faced.

This was a situation which the government was committed to correct - the first step having been the successful introduction of a system where uncontested debts could be recovered through an official executive letter.

Speaking on warrants of seizure, Dr Mifsud Bonnici explained how items seized by the court marshal were currently sold by court auction after their value was estimated by the marshal. This system was too time consuming.

In terms of the amendments, the value would no longer be established by the marshal. The creditor could request a court to appoint a day, place and time for the judicial sale by auction and the subsequent seizure and removal of the articles which were the subject of a warrant of seizure or he could request the seizure of such articles and the judicial sale by auction. Under this system, items would not be kept in court storage for months on end, often losing their value before the auction took place.

The list of items which could be seized was being extended to include shares in commercial partnerships, licences, insurance policies, credit securities and any intellectual or industrial property rights. Court marshals could no longer receive part settlement of debts and could not be intermediaries between creditors and debtors.

Dr Mifsud Bonnici said that in the case of the judicial sale of immovable property, the court experts who established the value would be paid according to a flat tariff which was not related to the value of the property involved.

Court auctions of both movable and immovable properties would be handed by public auctioneers and carried out like other auctions.

At all times, no item could be sold at less than 60 per cent of its estimated value. At present, whenever an item remained unsold, it was disposed of at whatever price. There had been situations where, for example, a property worth Lm100,000 was sold at Lm20,000. In this way, the debtor lost the value of his assets, often without fully paying the creditor.

The debtor or creditor could, at the initial stage, contest the original estimation of the value of the property. The 15-day cooling off period existing in the current system would be removed, making for a faster and more certain auction process.

Once a property was sold by auction, the new owners would no longer need to file a new application to evict tenants without title and a warrant for eviction would be issued automatically.

Dr Mifsud Bonnici said that once a property was sold, there was often a situation where several people were due part of the proceeds. Instead of each person having to file an application for those funds, the court itself would allocate the funds according to the established mechanism, thus providing for faster settlement.

The government would also ensure there was better publicity of judicial sales by auction so that more people would take part, Dr Mifsud Bonnici said.

Dr Mifsud Bonnici said that in terms of this Bill, a precautionary warrant would be transformed into an executive warrant once a case was decided, on the basis of what the court decided. This too was a measure which saved time and costs.

He said a warrant of seizure could not be issued against house loans. At present, the issue of such warrants meant that contractors or workers were not paid, and a house was not completed. Yet a house which was completed had a higher value than one which was not. Having a higher value would benefit both the creditors and the debtors, Dr Mifsud Bonnici said.