A Landmark Judgment For Secured Creditors

BNF Bank plc Obtains the Release of Property from the Effects of a Seizing and Freezing Order

This appears to be the first instance in Malta in which the Civil Court (Asset Recovery Section) released property from the effects of a seizing and freezing order(the “Order”), to enable a banking institution to enforce pre-existing security rights. The judgment delivered on the 14th of May 2026 in the names BNF Bank plc vs Uffiċċju għall-Irkupru tal-Assi (Asset Recovery Bureau) by the said Court as presided by Mr. Justice Henri Mizzi, has now become res judicata and represents an important development in the Maltese asset recovery sphere and in the protection of bona fide secured creditors.

The case arose in the wake of the More Supermarkets saga, after the Order was issued under applicable anti-money laundering law against Ryan Schembri, Cassar & Schembri (Marketing) Ltd. and Food World Ltd., prohibiting the transfer, disposal or burdening of their assets, pending the on-going criminal proceedings. Meanwhile, BNF Bank plc (the “Bank”) held executive titles and registered security interests over immovable property belonging to Ryan Schembri, together with a pledge over a related life insurance policy, which also formed part of the Bank’s security package. As a result, the Bank sought relief under Article 39 of the Proceeds of Crime Act, Chapter 621 of the Laws of Malta, arguing that its rights were acquired in good faith, through ordinary commercial lending transactions, before the Order was issued. Hence, the Bank maintained that the immovable property and the insurance policy ought to be released from the effects of the Order.

The principal legal issue in the case was whether Article 39 is available only to third-party owners of property subject to the Order, or whether it also protects secured creditors. The Asset Recovery Bureau argued that the remedy was confined to persons who owned the property and that the Bank could not rely on the provision merely because it held security rights. The Court rejected that argument.

In doing so, the Court gave importance to the statutory definition of “owner” in Chapter 621, which includes a person having ownership or a secured interest in property. The Court held that the Bank, as a secured creditor, fell within the protection contemplated by Article 39. It also noted that the Bank had rights over the relevant property in any event. This interpretation is significant because it confirms that an entity such as the Bank, holding hypothecs, privileges or other secured interests is treated as a party with a legally protected proprietary interest.

The Court further accepted that the Bank had acquired its rights through bona fide commercial transactions, at arm’s length, and for fair value. The Bank had advanced the loans in good faith and had no reason to believe that the property would later become subject to confiscation or seizing and freezing. These findings were essential because Article 39 is designed to protect legitimate third-party rights without undermining the public function of asset preservation in criminal proceedings.

The practical outcome of the case was substantial. The Court released the relevant immovable properties of Ryan Schembri from the effects of the Order, allowing the Bank to proceed with a judicial sale by auction. It also clarified that the eventual sale proceeds would also be released from the Order up to the extent necessary to satisfy the Bank’s secured claims, while any surplus remaining after payment of the Bank would continue to be subject to the Order. This clarification avoids uncertainty at the enforcement stage and preserves the balance between protection of the secured creditor and asset recovery objectives.

The Court also released the life insurance policy pledged in favour of the Bank from the effects of the Order, recognising it as part of the bank’s security. However, it declined to issue a direct authorisation compelling the insurer to accept further premium payments as initially demanded by the said Bank, leaving that matter to the insurer’s own assessment or, if necessary, to the determination by the competent Criminal Court following a demand made by the Bank.

The judgment is therefore noteworthy not only for its result, but also for the principle it establishes. It confirms that seizing and freezing orders do not automatically override legitimate pre-existing security rights acquired by banking institutions in good faith. In practical terms, it provides Maltese lenders with an important route to protect and enforce secured rights where assets are affected by asset recovery measures. For the banking sector, the decision offers legal certainty. For asset recovery, it demonstrates that the statutory regime can balance the State’s interest in preserving assets connected to criminal proceedings with the rights of innocent secured creditors. The case is likely to serve as a reference point in future disputes where banking institutions or other secured creditors seek to reconcile enforcement rights with freezing, seizure or confiscation measures.

You can find the judgement here.