A Guarantor Must Have Paid Part of the Debt Before Taking Legal Action Against the Debtor
A guarantor to a bank loan must have at least paid back part of the sum due instead of the main debtor before taking legal action against the debtor.
This was held in a judgement in the case George Catania and Maria Catania personally and as representatives of Tarcam Company Limited vs Martin Cachia and Liberty Fishing Co. Limited. The judgement was delivered by the First Hall of the Civil Court on 12 February 2026, presided by Judge Rachel Montebello.
The plaintiffs filed a sworn application in December 2013, wherein they explained that Banif Bank (Malta) plc had given a loan to Liberty Fishing Co. Limited. The plaintiffs were sureties to that loan through another contract signed in October 2010 and corrected in March 2011.
Liberty Fishing Co. Limited was accused of breaching the default clauses of the loan contract and in fact it received a letter in November 2013 from the bank. The plaintiffs were also notified with this letter, since they were the guarantors for the loan. The plaintiffs asked the court to declare that Liberty Fishing failed to pay the bank and as a result, Liberty Fishing and Martin Cachia were now creditors of the plaintiffs. The plaintiffs asked the court to order the defendants in solidum to pay €136,469.
The defendants filed their reply late and therefore it was not accepted.
The court analysed the loan agreement, which stated that if the principal debtor, Liberty Fishing, failed to pay the loan, the plaintiff had to pay in their stead and a penthouse would be sold by judicial sale. On the other hand, the defendants had provided the vessel by the name Liberty V as a guarantee.
The court criticised the plaintiffs for not producing the correct and relevant evidence, such as the loan contract, specifically the clauses that dealt with defaults. Neither was the guarantee contract of March 2012 filed in the proceedings. The judgment BNF Bank plc vs Liberty Fishing did quote from these contracts, however still they were not produced in these acts. The Court of Appeal confirmed that the defendants were debtors to the bank.
Judicial proceedings in the case under review started after the plaintiffs received a letter from the bank, informing them that they had become debtors of the bank. The plaintiffs asked the court to declare that they were the creditors of the defendants. However, the court thought differently in that the acts of the case did not show that the defendants in December 2013 were bound to pay the bank together with the plaintiffs as guarantors. In fact, at the time, the plaintiffs did not pay the bank.
The plaintiff’s claim was based on Article 1942 of the Civil Code, which reads:
“(1) A surety who has paid has a right to relief against the principal debtor, whether the suretyship has been contracted with the consent of the debtor or without his knowledge.”
In order to make use of this article of the law, the guarantor must pay at least part of the debt. In fact, Article 1943(1) allows that interest may be charged on the sum paid. However, the plaintiffs failed to show that they paid any of the debt, therefore they could not take action to be refunded unless they showed that they did pay a sum of money. It is essential that there is evidence of payment.
The court then moved to uphold the first request to declare that due to the judgement BNF Bank plc vs Liberty Fishing of 30 April 2024, the parties were all debtors of the bank. However, it rejected the subsequent claims made by the plaintiffs.
