Terracore vs TACA — Leave to Sue Denied During Liquidation

Court refuses ST Hotels Ltd permission to continue civil proceedings against a company in compulsory winding-up under Article 224(2) of Chapter 386.

Civil Court, Commercial Section · The Honourable Judge Ian Spiteri Bailey LL.M. LL.D. · 04 May 2026

TACA Insaat Ve Ticaret A.S. (OC 1225) was placed into compulsory winding-up by the Civil Court, Commercial Section, with effect from 15 November 2024, and the Official Receiver was appointed as liquidator. As part of the ongoing winding-up proceedings registered as case 16/2021, a creditor — ST Hotels Limited — filed an application on 9 April 2026 seeking the court's permission to continue separate civil proceedings it had instituted against TACA in the First Hall of the Civil Court (case 653/2020GG). ST Hotels argued that it should be allowed to present further evidence in the separate case so that the First Hall could reach a definitive judgment on the merits. The Official Receiver opposed the request, arguing that while the court's discretion under Article 224(2) of Chapter 386 of the Laws of Malta is broad, leave should only be granted in exceptional circumstances and in the collective interest of all creditors. The Official Receiver also dismissed the applicant's reliance on a similar prior request having been granted in a different case. The court anchored its analysis in Article 224(2) of Cap 386, which mirrors Section 130(2) of the UK Insolvency Act 1986, and prohibits any action or proceeding from being commenced or continued against a company in liquidation except with the court's leave. Drawing on English case law — including In Re Aro Ltd (1980), In Re Exchange Securities (1983), and In Re David Lloyd & Co (1877) — the court reiterated that leave is generally granted only where a question arises that cannot properly be resolved within the winding-up itself, or where a creditor is enforcing a security right rather than a personal claim. Applying these principles, the court found no exceptional circumstances justifying leave. It emphasised the fundamental collective nature of winding-up proceedings: once a winding-up order is made, the procedure operates for the benefit of all creditors collectively, not for the advantage of any individual creditor who moves fastest. To allow individual creditors to pursue separate litigation during a winding-up would undermine this collective principle. The court accordingly refused ST Hotels' application and ordered costs against the applicant.

The court (a) rejected the application of ST Hotels Limited filed on 9 April 2026 for leave under Article 224(2) of Chapter 386 to continue civil proceedings in case 653/2020GG pending before the First Hall of the Civil Court; and (b) ordered the Registrar of the Civil Courts to insert a copy of this decree in the records of case 653/2020GG. Costs of the application were awarded against the applicant, ST Hotels Limited.

• Under Article 224(2) of Chapter 386 of the Laws of Malta, once a compulsory winding-up order is made, no legal action may be started or continued against the company or its property without the express leave of the court — failure to obtain this leave renders proceedings a nullity.
• The court's discretion to grant leave is wide but should be exercised sparingly: English case law adopted by Maltese courts holds that leave is generally appropriate only where the issue cannot be resolved within the winding-up itself, or where a secured creditor is enforcing rights to their own property rather than a general claim.
• The collective nature of winding-up proceedings is a cornerstone of Maltese insolvency law — individual creditors cannot gain a procedural advantage over fellow creditors by pursuing separate litigation; the assets of the insolvent company must be preserved and distributed equally according to priority.
• The fact that leave was granted to the same applicant in a different related case does not create a precedent or entitlement; each application is assessed on its own facts and circumstances.
• Winding-up proceedings under Cap 386 are governed by lex specialis — special rules that override ordinary procedural law; arguments valid in ordinary civil proceedings do not automatically apply in the context of a compulsory liquidation.

Companies Act, Chapter 386 of the Laws of Malta — Article 224(2) (stay of proceedings during winding-up); modelled on Section 130(2) of the UK Insolvency Act 1986