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If a debtor claims that the debt is paid through a set-off then it is the debtor who has to prove this and not the creditor. This was held in a judgement delivered by Magistrate Marse-Ann Farrugia in Mannarinu Limited -v- Peter Muscat on 19 June 2020.

The plaintiff company filed an action against Muscat claiming a debt of €4,980.64, which is a balance of a pending ARMS invoice of €13,301.97 left by the former tenant, after deducting improvements to a shop and equipment left behind after the lease was terminated.

The defendant filed a statement of defence which argued that the claim was illicit because the lease was not declared for tax purposes and further claimed that he does not owe any money to the company.

Magistrate Farrugia examined the evidence and saw that the plaintiff company had rented to the defendant a shop in Hamrun. In 2011 the defendant asked for permission to carry out some works at the shop, such as new shelving, a new electrical system and works to the façade.

All this meant a considerable investment for the defendant.

However, a few months later the lessor and the lessee fell out and the lease was terminated.

The parties agreed that the defendant should leave all improvements to the shop, which amounted to €8,321.33.

The company argued that this had to be deducted from a pending ARMS bill of over €13,000. When the company asked for payment of the difference the defendant argued that his bill was higher than originally stated.

The Court explained the first plea that the claim was derived from an illicit transaction, as the defendant claimed that the rent was not declared for income tax purposes.

The Court disagreed, since the evidence produced did not show this.

Even if this was the case, this does not have any bearing on the validity of the lease.

Furthermore, the claim is not for unpaid rent but for a part refund on an unpaid ARMS bill.

As to the merits of the case, the Court observed that the defendant was also claiming that the agreement entailed him leaving all improvements to the shop, and that the company would pay the water and electricity bills.

The company disagreed that it would pay any amount to ARMS. The Court quoted Article 1196 and 1997 of the Civil Code which reads:

“1196. (1) Where two persons are mutual debtors, a set-off takes place between them;

(2) 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.

1197. (1) Set-off shall only take place between two debts both of which have for their subject-matter a sum of money or a determinate quantity of fungibles of the same kind, and which are both for a liquidated amount and exigible.

(2) A debt shall be deemed to be for a liquidated amount if it is certain even with respect to the quantity thereof.”

The Court pointed out that from the record of the case, there is no agreement, as the defendant is stating.

When the agreement was made, the company did not know how much was owed to ARMS, because the invoice was issued a month later.

Such an agreement had to be proved by the defendant and the Court felt that it should not rest on what the defendant said, but needed concrete evidence.

The Court found it hard to believe that the company would accept that it would pay any water and electricity bill for the improvements that were made.

The tenant took the readings before vacating and therefore, could have made the necessary verification.

The Court then moved to order the defendant to pay the plaintiff company €4,980.64.

Av. Malcolm Mifsud


Mifsud & Mifsud Advocates 

This article is accessible on Malta Today

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