Bank that kept property it had released owes damages

The Court of Appeal (Superior Jurisdiction) on 17 February 2026 held HSBC Bank Malta p.l.c. liable in damages for keeping and neglecting a showroom it had released years earlier. Chief Justice Mark Chetcuti, Mr Justice Robert G. Mangion and Madam Justice Simone Grech set the damages in Tyre Services Limited vs Hsbc Bank Malta Plc at €1,443,649.84, with legal interest from the filing of the claim. The court held that a prohibitory injunction the bank had obtained did not shield it from liability.

The facts

The bank bought the company’s showroom at a judicial sale on 24 May 2005, setting off the price against its own claim. The property was burdened with hypothecs in favour of other creditors.

On 27 March 2007 the bank filed a note releasing the property without reserve under article 2071 of the Civil Code, rather than pay the hypothecary debts. It nevertheless kept treating itself as owner. In 2016 it obtained a warrant of prohibitory injunction that stopped the company from letting the property, and it sued for a declaration of ownership.

On 26 February 2020 the First Hall of the Civil Court rejected the ownership claim of the bank, and that ruling became final on 30 March 2022. On 5 December 2023 the First Hall awarded the company €851,884 for lost rent and repairs. The bank appealed, and the company cross-appealed that the award was too low.

What the court held

The court started from the rule that a person who exercises a right is not liable for the harm that follows. Losing a case does not by itself make a litigant liable. Liability arises only in exceptional cases of bad faith or grossly negligent conduct.

The bank, however, had released the property itself. It then kept possession and kept the injunction in force despite clear signs that its claim was unfounded, including a First Hall judgment of 15 May 2019 against it. The court found that the bank had not acted in good faith and rejected its first ground.

On the injunction, the court held: “Ma jfissirx b'daqshekk li r-rikorrent huwa eżentat minn kwalunkwe responsabilita' jekk eventwalment fil-kawża in sostenn ta' tali mandat, jirriżulta li kien jaf jew seta' kien jaf li qatt ma kellu raġun fil-pretensjonijiet tiegħu” (It does not follow that the applicant is free of all liability if, in the suit backing the warrant, it emerges that he knew or could have known his claims were never right).

The second ground of the bank, that the company was its debtor and had acted in bad faith, also failed. Being a creditor did not entitle the bank to act as it did, and the conduct of the company was the subject of a separate case.

On lost rent, the First Hall had deducted the whole period from May 2015 to August 2019, when the company held the premises. The court held that from 14 April 2016 the injunction barred the company from letting. Only the 11 months from 18 May 2015, worth €71,011.93, were deducted.

The First Hall had cut the rental figure by 30% because a tenant might not always be found. The court kept the deduction but set it at 20%, in line with the European Court of Human Rights (25 March 2021). Lost rent came to €1,094,826.46.

On repairs, the court split responsibility 80% to the bank and 20% to the company, instead of equally. The bank held the property for most of the period, and a surveyor it engaged found water damage in 2015 that a 2004 valuation had not recorded.

The court also corrected the arithmetic of the court-appointed expert. Repairs came to €436,029.22 with a 20% contingency, of which the bank owes €348,823.38. The court rejected the appeal of the bank, allowed the cross-appeal of the company and ordered the bank to pay all costs.

Why it matters

A party that holds on to property after its own title has gone is exposed to damages once the signs against it are clear. An injunction granted on a prima facie view is no defence if the applicant knew, or could have known, that its claim would fail. Damages for lost rent will run for the whole time the injunction blocked letting.

Where it sits

The claim rests on fault under articles 1031 to 1033 of the Civil Code, measured by the care of a bonus paterfamilias (a prudent person), and on article 1045 for actual loss. The maxim qui suo iure utitur, non videtur damnum facere (one who uses a right is not taken to cause harm) protects litigants, but it gives way where the right to sue is abused.

The court drew the abuse test from the Court of Magistrates (Gozo) (30 November 2011), the First Hall (10 January 1992), the First Hall (29 November 2001) and the Court of Appeal (Inferior Jurisdiction) (12 September 2008). Those judgments hold that malice or gross negligence, not defeat alone, grounds liability.

For the 20% rental contingency the court followed the European Court of Human Rights (25 March 2021), noting that the facts there were different. The split of repair costs follows article 1051 on contributory fault, which the First Hall had applied.

Source

Court of Appeal (Superior Jurisdiction), 432/2020/1, 17 February 2026: 432/2020/1