Defrauding a judgement creditor

Defrauding a judgement creditor

by George Coucounis

“If there is an act of defraud, the Court will issue an order for the payment of the due installments as monetary penalty”

Failure of the judgment debtor to pay the amount of the installments he was ordered to pay, for a reason other than financial or physical weakness, constitutes an act of defrauding the judgment creditor. In order to prosecute the judgment debtor, he must fail to pay at least three installments, and in the event that the remaining installments to pay off the debt are less than three, criminal prosecution may be instituted if he fails to pay any installment. In case of conviction, the Court will issue an order for the payment of the due installments as monetary penalty and may order the suspension of its execution for a period of up to six months. The Court may decide to give the opportunity to the judgment debtor to pay his debt by instalments at such times and in such amounts as it may think proper within the debtor’s financial capabilities. Unjustified failure by him to pay the installments in compliance with the order of the Court it is an offense of willful disobedience and is severely punished.

The Law on Defrauding of Judgment Creditors, L.60(I)/2008, provides the possibility for a judgement creditor to request that the judgement debtor be ordered to pay his due instalments as a monetary penalty, and also defines the offenses of defrauding judgement creditors and the prescribed penalties.

The Supreme Court, in its judgement issued in Criminal Appeal C.A.102/2021, on 18.10.2022, examined the two appeals filed by a judgment debtor who complained that the Court of first instance incorrectly applied the provisions of article 24(1) of the Courts of Justice Law 14/1960 and article 91B(1) of the Civil Procedure Law, Cap. 6 and that its decision to issue compensation order was erroneous in law and substance. It was his position that the Court had no power to issue such orders under article 24(1) of Law 14/1960.

The Supreme Court in its judgement referred to the position of the judgment debtor that the purpose of article 24 is to avoid the multiplicity of procedures for the settlement in the context of the criminal case, if possible, and the parallel civil dispute. In this case, the Supreme Court emphasized, that there was no possibility of filing another lawsuit to compensate the creditors. The order for payment in monthly installments constitutes an enforcement measure and does not create an actionable right so that the expediency of avoiding a new action for damages arises. In relation to this position, the Supreme Court held that the purpose of article 24 is indeed to avoid multiple proceedings and to save Court’s time and costs. In fact, the Supreme Court states, as indicated by the jurisprudence, every opportunity provided by the arsenal of the Law in this direction must be used by the Courts with readiness, always respecting the obligation to ensure the recognized rights of the defendant.

Regarding the substance of the matter under consideration, the Supreme Court held that the Court of first instance, without the judgment creditors defining the Law they had in mind under which it could proceed to issue “any order”, itself resorted to the provisions of article 24(1) which the Court applied without exception. It did not consider that it had not been asked for a compensation order, but for a payment order. The Court did not ask the creditors to set out the legal basis of their request in order to consider it. The Supreme Court concluded that the possibility to collect due instalments is provided by article 4(3) of Law 60(I)/2008, which provides remedies for defrauding of judgement creditors. For this reason, it ordered the annulment of the compensation orders erroneously issued by the Court of first instance, but not the penalties.

Regarding the penalties, the Supreme Court emphasized that severe and deterrent penalties are expected when persistent unwarranted non-compliance with the monthly installment order is found. There was no such strictness in this particular case, since the record reveals an unacceptably persistent failure of the judgement debtor to comply with his obligations, as well as with the Court’s orders. Today, as the Supreme Court stated, more than 11 years later, the judgment creditors are still continuing their efforts to collect their claim, which has been recognized and awarded in Court, with the judgment debtor continuing to trouble them and the justice system.