Issue link: https://maltatoday.uberflip.com/i/1531100
8 maltatoday | SUNDAY • 5 JANUARY 2025 LAW Law Report A judicial liquidation is aimed at pro- tecting creditors and is done by a col- lective procedure. This was held in a judgment given by Mr Justice Ian Spiteri Bailey in Dr Michael Psaila noe vs X be- fore the Civil Court in its commercial jurisdiction. Dr Psaila was representing a BVI com- pany, Mediterranean Overseas Holding Limited and Corinthia (Malta) Staff Ser- vices Limited. The judgment was deliv- ered on 3 January 2025. The request was being made by Kevin Camilleri, who asked the court to con- tinue with an action he had instituted against the liquidator of Azure Services Limited in terms of Article 224(2) of the Companies Act. The Official Receiver objected to this since, he held that this discretion of the court should be used in exceptional cir- cumstances. The facts of the case concern the liq- uidation of Azure Services Limited, following an extraordinary resolution in which a liquidator was appointed in April 2020. The liquidator resigned in May 2023. The Applicants had institut- ed an action against the liquidator. The Court case is still ongoing. The action was to see whether Azure Services Lim- ited had breached a contract and there- fore, was responsible for damages. Article 224(2) of the Companies Act reads: "(2) Where a winding up order has been made or a provisional administra- tor has been appointed in accordance with the provisions article 228, no ac- tion or proceeding shall be proceeded with or commenced against the compa- ny or its property except by the leave of the court and subject to such terms as the court may impose." This article of law is based on the UK, Insolvency Act, 1986. Article 130(2) states: "When a winding up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property ex- cept by leave of the court and subject to such terms as the court may impose." In The Law of Insolvency, Ian Fletch- er says that the "fundamental principle upon which winding up is based is the collective nature of proceedings". The court quoted from the UK courts in Aro Limited dated 1980. The court held that "In determining whether, in a compulsory liquidation, leave should be given to proceed with a claim, the court has an extensive discretion, it is free to do what is right and fair in the circum- stances." In another UK judgment David Lloyds & Co delivered in 1877, the court ex- plained: "There are several circumstances where, generally, the court will allow the action to proceed. One is when the plaintiff is seeking to enforce his securi- ty, because a secured creditor is in a po- sition where he can fairly claim that he is independent of the liquidation, since he is enforcing a right, not against the company, but to his own property." The Court held that the judicial liqui- dation is a special procedure regulated by a special law. In Antonio Caruana et vs Joseph Debono decided by the Com- mercial Court on 7 July 1960, the Court held that a liquidation is in fact a series of operations intended to liquidate a company. The liquidator is chosen by the com- pany or by court, who is to bring to close the company's activities. A judi- cial liquidation is not to be compared to a court case, where a judgment is deliv- ered at the end. The liquidation is a col- lective procedure used for the benefit of the creditors. For these reasons the court turned down Kevin Camilleri's request, al- though held that his rights against Azure Services Limited remained un- touched and the court case could con- tinue against the other defendants. Judicial liquidation of a company kicks off a series of measures aimed at protecting creditors LAW REPORT MALCOLM MIFSUD Mifsud & Mifsud Advocates