News 1
Understanding Debt Prescription in Malta
10th October 2024
In Malta, the concept of "prescription" serves as a legal mechanism to release individuals from certain debts after a set period of time has passed. This should not be confused with "acquisitive prescription," which deals with acquiring property rights through long-term possession. Instead, the focus of this article is on how debts can expire through prescription.
According to Article 2107(2) of the Maltese Civil Code, prescription is "a mode of releasing oneself from an action when the creditor has failed to exercise his right for a time specified by law." In simple terms, this means that if a creditor does not act to recover the debt within a certain number of years, the debtor can no longer be legally required to repay it.
The reason prescription exists is practical: It would be unreasonable to expect a debtor to keep track of debt documents indefinitely. It also protects the courts from being overwhelmed with old cases regarding debts that may have been forgotten or difficult to prove over time.
Prescriptive Periods for Different Types of Debts
In Malta, the Civil Code outlines several prescriptive periods for different types of debts, which determines the period of time within which a creditor must take legal action to recover the debt. Below is a breakdown of the four main prescriptive periods as per the Civil Code.
1-Year Prescription (Article 2147)
Certain types of debts have a prescription period of just one year, meaning that if the creditor does not pursue legal action within this timeframe, the debtor is released from the obligation to pay. These include:
• Lessons given by masters and teachers on a daily or monthly basis.
• Lodging and board furnished by innkeepers, taverns, or lodging houses.
• Wages and salaries of domestic servants, artisans, or day-labourers paid by the month.
• Payment of hire or wages for carriers by land or water.
18-Month Prescription (Article 2148)
Certain other debts prescribe after 18 months. These debts include:
• Tradesmen and artisans such as tailors, carpenters, masons, and others, for the price of their work, labour, or materials supplied.
• Retail creditors for the price of goods or merchandise sold.
• Educational establishments for unpaid fees.
• Brokers for brokerage fees and persons owed salary payments.
• Hire of movable things (e.g., rented equipment).
2-Year Prescription (Article 2149)
Debts that prescribe after two years are generally tied to more complex or professional services. These include:
• Builders of ships or contractors for construction or repairs.
• Medical professionals such as physicians, surgeons, or pharmacists for services or medicines provided.
• Legal professionals like advocates, notaries, and architects, for fees and disbursements.
• Attorneys or mandataries for remuneration, expenses, indemnities, and advances.
5-Year Prescription (Article 2156)
Finally, certain debts prescribe after five years, the longest general period for debt prescription in Malta. These include:
• Ground-rent, annuities, and interest on loans or periodic payments.
• Maintenance allowances and rent for property.
• Loans that do not result from a public deed.
• Debts arising from commercial transactions, unless barred by a shorter period.
• Government claims for judicial fees, customs, or dues, unless a special law provides otherwise.
5-Year Prescription for Rendering of Accounts (Article 2157)
In addition to the general 5-year prescriptive period, Article 2157 of the Civil Code specifies that any action for the rendering of accounts against individuals such as tutors, curators, mandataries, or other administrators is also subject to prescription. This means:
• The action must be taken within five years from the day the management ended, or
• If the individual in question has passed away, the action is barred by one year from the date of their death.
The 2017 Amendments to Article 2160
An important update to Malta's Civil Code came into effect in 2017, shifting the way prescriptive periods are pleaded in court. Article 2160 now establishes that the burden of proof falls more heavily on the debtor. The provision states:
“The prescriptions established in articles 2147, 2148, 2149, 2156, and 2157 shall not be effectual if the parties pleading them do not of their own accord declare on oath, during the cause, that they are not debtors, or that they do not remember whether the thing has been paid.”
This amendment means that a debtor wishing to plead prescription cannot simply rely on the passage of time to escape their obligations. They must explicitly declare under oath that:
- They are not debtors—they do not owe the money claimed, or
- They do not remember whether the debt has been paid.
If a defendant merely argues that enough time has passed, without denying the debt itself, they risk acknowledging the existence of the debt. This could lead to their prescription plea being rejected, as it would not meet the legal requirements under Article 2160. This shift ensures greater accountability, preventing debtors from escaping liability solely through the passage of time without a clear declaration of non-indebtedness.
As an example of how prescription pleas work, it would be interesting to look at the case Rado Limited vs Steelshape Limited.
In this case, Rado Limited filed a claim against Steelshape Limited on June 14, 2018, seeking payment of €4,776.23. The claim arose from materials supplied and services rendered by Rado Limited, as per a contract for specialized flooring works at the AFM Hangar at Malta International Airport. The defendant, Steelshape Limited, contended that the claim was time-barred under multiple provisions of the Civil Code, including the 18-month prescription period (Article 2148(a)), the 2-year prescription period (Article 2149(a)), and the 5-year prescription period (Article 2156(f)).
The Tribunal examined the defence based on prescription and emphasized that under the amended Article 2160(1) of the Civil Code, the burden of proof for such a defence now lies with the defendant. The law, amended in 2017, requires defendants to declare on oath that they are not debtors or do not recall whether the debt has been paid, which Steelshape Limited’s director, Iomar Vella, did in this case.
The Tribunal rejected the defence based on Article 2148(a) (18-month prescription), which applies to artisans, and found that the relevant prescription period was the 2-year period under Article 2149(a). This provision applies to contractors who supply both materials and labour for a specific project, as was the case here. The Tribunal determined that the prescriptive period began on December 15, 2012, after the defendant made a partial payment of €9,751.00, which interrupted the prescription.
However, Rado Limited filed the claim well beyond the 2-year prescriptive period, nearly five years later, on March 1, 2018. As a result, the Tribunal upheld Steelshape Limited’s plea that the claim was time-barred under Article 2149(a) and dismissed the plaintiff’s action. The judicial costs were assigned entirely to Rado Limited.
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News 2
Article Published on Times of Malta 13th March 2020 - The writing on the wall that collapsed - Sabine Agius Cabourdin
Buildings ought to collapse when there are earthquakes, tsunamis, hurricanes and other natural disasters. Yet, in Malta, buildings have been collapsing because standard procedures are not being followed. As a property lawyer mainly dealing with foreign clients seeking redress from Maltese developers, I have had to deal with several hardened bullies who have taken over this country.
The situation in the construction industry has now deteriorated to the extent that it has become a racket run by several cowboys. Of course, the flip side to this are the morally upright developers, who have contributed more than their fair share to the sector and to the Maltese economy. We cannot put all and sundry in the same basket.
I should point out that I am married to a property developer, which makes it more difficult for me to write this piece. However, he is one of the few with a social conscience. In this age of anything goes, everyone seems to be operating as a property developer. This has led to many amateur quality constructions, propelling disasters that should have been avoidable.
In June of last year, Legal Notice 136/2019 was hastily enacted carbon copying previous legal notices with a few exceptions, notably the introduction of the site technical officer (previously project manager) further requiring the STO to be an architect. This new legal notice was implemented to give the impression that something was being done to rectify the building situation that spiralled into total anarchy that culminated in the collapse of two buildings.
A five-day consultation process made a mockery of highly important policy decisions that were in dire need of a total overhaul. NGOs and some MPs from the opposition tried to submit opinions, but these were totally ignored.
Fast forward eight months, and the government has done nothing to enforce the LN regulations – it has done nothing to inspire a sense of responsibility or respect within the development community to adhere to rules and regulations. With the way practices have been neglected, the writing was on the wall, and tragic accidents such as the recent catastrophe became not a matter of if, but when.
Politicians have expressed anger and hurt, but words are cheap. They are responsible for this mess. How do you think Mr Pace and his family are feeling right now? That seat that they cling to in that building called parliament, where they are supposed to promulgate laws in the best interests of us citizens, was bestowed upon them by the electorate. That parliamentary seat was granted to them because they were given a mandate by the voting population to run our country in our best interests.
How can they be trusted to do this job when they have not safeguarded the sacred fundamental right to one’s own property/home? What have they done to prevent this? Three buildings collapsed in less than eight months. They have failed us, and above all, they have failed Miriam Pace and her family. No wonder several people were irked by politicians’ appearances in the aftermath of this tragedy.
Although the Malta Developers Association has no onus in bearing responsibility, the association has, in tandem with the government, given rise to, or encouraged, a cowboy-style approach. While we do not expect this lobby group to promote citizens’ rights, the very least it could do is compile a code of ethics on the way developers ought to carry out their business on a day to day basis. Failure to comply should result in expulsion.
A blasphemous practice that is not legally prohibited which features prominently in the Pace tragedy, is that the architect who certified the construction site is a shareholder in the company behind the development. How can an architect make an unbiased assessment of a site or a building, of its foundations and its fabric, when s/he has a clear divested interest in sugar coating a method statement or prioritising cost cutting at the detriment of third-party property owners?
When all is said and done, however, we can review laws and promulgate new ones but without proper enforcement we are wasting our time and, worse still, waiting for another tragedy to happen. Hefty fines proportionate to the magnitude of the development in question for noncompliance is the only viable solution.
As the country’s initial shock at the outrageous events subsides, we will all probably forget what happened and carry on with our lives. Yet this time we cannot. We must send a message to politicians. We have had enough. They have raped our country and she is bleeding so severely that she’s about to die. This injustice cannot end here. Our country is crying for a complete paradigm shift of consciousness.
Image credit - from the Times of Malta 13th March 2020 article The writing on the wall that collapsed - Sabine Agius Cabourdin
