In a judgement delivered by the First Hall of the Civil Court on 14 October 2025 in the names Dr John Bugeja nomine vs Petroplus Ltd, the Maltese Court affirmed the first-ranking creditor status in a complex Competition of Creditors procedure concerning funds seized and deposited by Petroplus Ltd in the Maltese Court Registry.
The case revolved around funds seized by virtue of a precautionary garnishee order and subsequent competing claims lodged by separate creditors.
Competition Proceedings
Article 416 et seq of the Maltese Code of Organisation and Civil Procedure (Chapter 12 of the Laws of Malta) establishes the ad hoc Competition Proceedings initiated when two or more creditors claim rights of preference or priority over the same funds or property deposited in court. The purpose of these proceedings is to determine the ranking order among creditors, ensuring that payments are distributed according to each creditor’s lawful entitlement, such as through valid hypothecs, privileges, or executive titles. In essence, a competition of creditors is a formal judicial mechanism to resolve disputes between multiple creditors seeking to enforce their claims against a common debtor’s assets.
Three competing creditors brought their claims forward before the Court, all of which were covered by court judgements or arbitration awards.
Ranking
When deciding on the ranking of Creditors, the Court recognised the validity of the general judicial hypothecs and considered the claims advanced by the three creditors competing for the funds held in the Court Registry. In ranking them, the Civil Court held that:
- Only general judicial hypothecs could validly attach to the funds in question, since special hypothecs cannot be constituted over movable property.
- The maritime privilege claimed by another creditor under Article 50 of the Merchant Shipping Act was inapplicable, as the funds were not proceeds from a vessel sale but the result of a precautionary garnishee order.
- The general hypothec, registered on 20 December 2021, predated the other creditors’ registrations and therefore ranked first in order of preference.
Relying on Article 2033(1) of the Civil Code, which provides that hypothecs take effect from the date of registration, the Court concluded that the timely registration secured its precedence over all other claimants.
The Court ordered that the Plaintiff be paid first and in full from the deposit, with no remaining funds available to the lower-ranked creditors. It further held that Defendant must bear all procedural costs of the Competition of Creditors.
Legal and Practical Significance
This decision underscores the determinative role of timing in registering judicial hypothecs under Maltese law.
By ensuring its general hypothec was duly registered immediately after the foreign arbitral award was recognised and enforced in Malta, the Plaintiff secured an unassailable first-ranking position once competing claims arose.
Vassallo Associates assisted the Plaintiff.
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