Kuwait Court of Cassation principle number 545

Summary: - A creditor’s exercise of his debtor’s rights in the latter’s name. Its condition: the creditor claiming his debtor’s right must bring an action in the debtor’s name and in his capacity as the debtor’s creditor, so that what is awarded is a right belonging to the debtor and forms part of his assets generally. Reason therefor: to secure his creditors’ rights and enable them to share it proportionately among creditors. A creditor bringing the action in his own name, seeking an award for himself and not for his debtor. Its effect: it is a direct action brought by the former in his own name and interest. Articles 308 and 309 of the Civil Code. - A creditor exercising his debtor’s rights is considered a representative of that debtor. - The creditor company bringing an action to oblige the appellant and respondents, jointly and severally and in solidum, to pay a sum of money and to release the bank guarantee issued in favour of the second respondent against the bank, on the basis that it supplied materials and equipment to sites belonging to the appellant pursuant to two supply contracts concluded with the latter as subcontractor, which refused to pay the value of what was supplied, being the amount claimed. Its effect: it is a direct action in the plaintiff’s name and interest. The challenged judgment’s departure from this view and characterization of it as an indirect action intended to protect the rights of its latter debtor. An error in understanding and applying the law requiring it to be quashed. Rule: The provision in Article 308 of the Civil Code, contained in Chapter 2 concerning creditors’ general security and means of preserving it, that: 1- Every creditor, even if his right is not due for payment, may exercise in his debtor’s name that debtor’s financial rights, except those specifically connected with his person or not subject to attachment, if it is established that the debtor has not exercised those rights and that his failure to exercise them would cause or increase his insolvency. 2- Exercise by a creditor of his debtor’s rights does not require formal notice to that debtor, but if an action is brought in his name, he must be joined therein, otherwise it shall be inadmissible. And in Article (309) of the same Code that a creditor, in exercising his debtor’s rights, is considered his representative. These indicate that the legislature, in permitting every creditor to exercise in his debtor’s name all that debtor’s rights except those connected with his person or not subject to attachment, required the creditor claiming his debtor’s right to bring the action in the debtor’s name so that what is awarded is a right belonging to that debtor and forms part of his assets generally, securing his creditors’ rights and enabling them to share it proportionately among creditors. If he does not bring it in his capacity as creditor but rather in exercise of a direct right of his own and seeks an award in his own interest rather than that of his debtor, it is a direct action brought in his own name and interest. The first respondent company brought the original action against the appellant and the second through fourth respondents seeking a judgment obliging them, jointly and severally and in solidum, to pay it ................. Kuwaiti dinars and to release bank guarantee No. (212766/5-02533-01-21), issued in favour of the second respondent company against the Commercial Bank, on the basis that it supplied ready-mixed concrete and four cranes to the sites of two projects belonging to the appellant pursuant to the two supply contracts it concluded with the second respondent company on 11/11/2000 and 27/4/2002, the latter being the subcontractor, which refused to pay the value of what was supplied, being the amount claimed, and that the bank guarantee secured the supply of the equipment (cranes) covered by the contract dated 27/4/2002. Thus, the first respondent company brought the action in its own name, not as representative of its debtor, the second respondent company, and its action is direct, not indirect. As the challenged judgment departed from this view and characterized the action as an indirect action through which the first respondent sought to protect the rights of its debtor—the second respondent—against the appellant, it erred in understanding the facts of the action, which led it to err in applying the law, requiring it to be quashed.