The First Hall of the Civil Court, presided over by Mr Justice Joseph Zammit McKeon, on September 15, 2014, in the case ‘Lombard Bank Malta plc v RJ Attard & Company Ltd, Richard Attard, and his wife Tania Attard’ held, among other things, that the fact that the bank was aware that some payments were not made directly by Richard Attard or the company, but by Herman Depasquale, did not render Depasquale in any way an obligor towards the bank. Attard and the company remained bound to repay the outstanding amount under the loan account and no third party, including Depasquale in his own name or on behalf of the firm R. Attard & Co., assumed the debt in their place.
The facts in this case were as follows.
The company RJ Attard & Company Ltd took out a loan facility from Lombard Bank, accumulating a debt of €41,395 with interests. Richard Attard and his wife Tania stood as guarantors, jointly and severally for the repayment of this loan, and granted a general hypothec over all their assets as well as a special hypothec over two properties.
As the balance on loan account was not repaid, the bank proceeded to file legal proceedings against them, requesting the court to condemn them jointly and severally to pay it €41,395 together with interests.
In reply, the defendants, the company and Richard Attard, disputed liability and asked the court to call Herman Depasquale into the proceedings. It was stated that, when Depasquale became a partner in the audit firm RJ Attard & Co., it was agreed that he would pay all debts of the company, including the loans with Lombard Bank.
As regards the merits, they contested the quantum of the outstanding amount. Tania Attard claimed that she should not be condemned to pay the outstanding balance as, under their contract of separation, her husband was solely responsible.
The court considered that Depasquale had no legal relations with the bank. The bank only had relations with Richard Attard and his company. It was not involved in the agreement between the gentlemen. Depasquale did not formally assume the debt nor did he accept to be co-guarantor.
During the proceedings, Depasquale testified that he would pay the bank, with funds of the partnership. He had not signed any loan agreement with the bank nor was he involved in any sanction letter issued by Lombard Bank.
Attard, on the other hand, pleaded that Depasquale should be called into the proceedings, as the bank had accepted payment from him and was aware of the agreement, which he had with him. In ‘Eric Mamo et v Cheryl Wismayer et’ dated December 12, 2001 (JRM), it was held that any party could make a request to call a person into the proceedings. A person who was called into the proceedings was different from a person who joined the proceedings in statu et terminis. The former was deemed to be a defendant, who could be freed or be condemned by the court.
The institute of ‘calling a person into the suit’ served the purpose to avoid a multiplicity of lawsuits regarding the same merits, and with the same persons. It was important that such person to be called into the proceedings had juridical interest, required by law, and that he could be sued and/or oppose the legal action. The institute should not be used to substitute a defendant who should not have been sued from the start. Although the request to call a person into the suit was in practice made by the defendant, it could also be made by a claimant.
At one time, it was not permissible if a claimant could or should have known of the existence or interest of persons in the merits of this case and if such other person should have been sued from the beginning. Now it appeared that emphasis was on whether such other person to be called had juridical interest rather than on the knowledge of the claimant before the suit.
However, it was not possible to call a person into the suit to replace the original defendant who should not have been sued: re: ‘Cassar v Ciantar noe et ( Vol: XXIX.ii.359)’ (PA), dated February 26, 1935; ‘Buick noe v Agius et’ (PA) PA dated May 31,1954 (Vol: XXXVIII.490); App. Civ. October 1937: ‘Cassar v Mirabelli et’ (Vol: XXIX.I.1107); App. Civ. dated November 23, 1898: ‘Stepton v Spiteri’ (Vol: XVI.i.117).
The court could not agree that these proceedings were not integral in the absence of Depasquale. It said that the proceedings were fully integral for the purposes of law.
It was true that between Attard and Depasquale there was an agreement that Depasquale would pay the debts of the company, but the bank was not party to this agreement
To appear as a claimant/defendant in the proceedings, a person had to have (a) judicial interest – the request had to be based on the existence of a right or its violation; (b) the interest had to be direct and personal; (c) as well as actual: it had to arise from the actual violation of the right or infringement of the law (‘Muscat v Buttigieg’ Vol. LXXIV.II.481).
In this case, the court noted that Depasquale’s interest was not direct and personal. Depasquale had never assumed the debt. It was irrelevant for the bank who paid the loan. The bank always sent its statement to the company, irrespective if payments were made by a third party. It was true that between Attard and Depasquale there was an agreement that Depasquale would pay the debts of the company, but the bank was not party to this agreement. In fact, as far as the bank was concerned, this agreement was a res inter alios acta and not binding upon it.
The fact that the bank was aware that some payments were not made directly by Attard or the company but by Depasquale, did not render Depasquale in any way an obligor towards the bank. Attard and the company remained bound to repay the outstanding amount under the loan account and no third party including Depasquale in his own name or on behalf of the firm R. Attard & Co assumed the debt in their place.
In ‘Carmelo Mamo v Brian Abela noe’, dated February 4, 2000, the Court of Appeal held that the institute of kjamata fil-kawża (calling a person into the suit) was intended ‘per integrare il procedimento coll’aggiunta di un individuo si riconosce avere interesse nello stesso (‘Zahra v Scicluna’ CA dated January 21, 1919). If it results that a person who was to be called into the proceedings could not be condemned as he had no judicial interest, he was not a legitimate defendant, and the claimant’s action could not be made against him.
For these reasons, on September 15, 2014, the First Hall of the Civil Court dismissed the plea to call Depasquale into these proceedings and ordered the case to be continued.
Dr Karl Grech Orr is a partner at Ganado Advocates.