The First Hall Civil Court presided by Mr Justice Lawrence Mintoff on 21 January 2019, in the case 'Vinco Limited vs Josephine Cilia u Mary Dingli' held among other things that a condition regarding the number of rock strata to be excavated for the purpose of building foundations does not, of itself, amount to a suspensive condition as envisaged in Article 1063 of the Civil Code.
On 13 May 2017, the parties had entered into a contract of sale, whereby the plaintiff company, Vinco Limited, had purchased from the defendants, Josephine Cilia and Mary Dingli, two building sites in Santa Venera for the total sum of EUR 230,000. While EUR 73,000 was paid by Vinco Limited upon execution of the contract, the remaining EUR 157,000 was to be settled by 15 May 2018. However, the contract of sale further stated that if the plaintiff company failed to pay off the remainder within the stipulated timeframe, it would incur interest at a rate of 5% as from 15 May 2018 onwards. Payment was also guaranteed by way of special privilege in favour of the defendants over one of the properties which Vinco Limited was developing on the land acquired.
In this case, the plaintiff company failed to honour its payment obligations under the contract of sale. Consequently, the defendants filed a judicial letter dated 1 November 2018, duly notified to Vinco Limited, whereby they called upon the plaintiff company to settle the outstanding amount within 2 days of the date of the letter. The defendants argued that, in terms of Article 253(b) and 256 of the Code of Organisation and Civil Procedure, Chapter 12 of the Laws of Malta, they were entitled to enforce the contract of sale entered into on 13 May 2017 as an executive title. While the former provision stipulates that contracts received before a notary public constitute executive titles, the latter provision stipulates that such contracts may only be enforced, 'after the lapse of at least two days from the service of an intimation for payment made by means of a judicial act'.
As a result, Vinco Limited instituted proceedings under Article 281 of the Code of Organisation and Civil Procedure in order to attack the enforceability of the notarial contract in question. Article 281 allowed the plaintiff company to 'make an application [...] to the court issuing the executive act praying that the executive act be revoked, either totally or partially, for any reason valid at law'. It relied on Clause 10 of the contract of sale, which stipulated that the depth of rock below ground level should not exceed 18 strata. Otherwise, the plaintiff company would have to incur additional expenses in order to carry out the excavation works necessary to lay down the foundations.
In this case, Vinco Limited argued that the amount due in terms of price was not liquid and certain as the law requires, for the additional expenses incurred would have to be reflected in a reduction of the purchase price paid for the acquisition of the 2 building sites.
On the other hand, the defendants argued that the condition stipulated in Clause 10 had nothing to do with the payment of the remaining EUR 157,000. Moreover, the purchase price agreed to by both parties had not been made subject to set-off or the expenses incurred for excavation works. Therefore, the amount stipulated in the contract of sale was certain, liquid, and due.
The First Hall Civil Court examined the plaintiff company's claim that the contract of sale had been made subject to the suspensive condition contained in Clause 10. Reference was made to Article 1063 of the Civil Code, Chapter 16 of the Laws of Malta, which states that,
'(1) A suspensive condition is that which makes the existence of the obligation depend upon a future and uncertain event.
(2) An obligation under a suspensive condition does not exist before the event happens.'
However, the Court noted that the payment of the remaining EUR 157,000 had not been made subject to the confirmation that the depth of the foundations would not exceed 18 layers of rock below ground level. The balance due had to be settled by 15 May 2018, independently of the number of rock strata to be excavated in order to build the said foundations. Clause 10 of the contract of sale did not partake of the nature of a suspensive condition at law, and the perfection of the contract of sale did not rest upon the confirmation of the depth of the foundations.
The purchase price to be paid for the acquisition of the 2 building sites had been agreed upon by both Vinco Limited and the defendants. Moreover, the plaintiff company had already assumed absolute possession of the building sites acquired as a result of the contract of sale, so much so that construction works were already under way. Indeed, the Court noted that while Vinco Limited was now in a position to sell off certain property on plan, the defendants were still seeking payment for property they had transferred to the company a year and a half before the institution of these proceedings. The plaintiff company should have therefore honoured its obligations, and effected payment of the remaining EUR 157,000, together with the interests due as of 15 May 2018, to the defendants.
The condition in Clause 10 regarding the depth of the soil was separate to the agreement as to purchase price. Moreover, the Court noted the existence of other legal remedies which the plaintiff company had at its disposal, which remedies would have been more suitable to address the alleged breach of a contractual clause.
Additionally, the Court did not consider the contract in question to be subject to the suspensive condition that the depth of the excavations could not exceed 18 layers of rock. As stated in Article 1063(1) of the Civil Code, 'a suspensive condition is that which makes the existence of the obligation depend upon a future and uncertain event'. Therefore, in order to subject the sale to a suspensive condition, Vinco Limited should have incorporated an additional clause in the contract. Such clause would have provided for the termination of the contract, or alternatively, the payment of penalties, in case the rock depth below ground level exceeded 18 strata. In this case, the contract did not cater for any consequences which would have been triggered as a result of a breach of Clause 10.
The Court remarked that therefore, the consideration agreed upon by the parties was certain and liquid. The existence of the principal obligation of payment, including the payment of the remaining EUR 157,000 due, had not been made subject to any suspensive condition whatsoever.
Consequently, the Court concluded that the effects of the judicial letter dated 1 November 2018 was to render the notarial contract enforceable by the defendants as an executive title. Based on the above, the Court upheld all of the defendant's pleas, and ordered the plaintiff company to pay for all the judicial expenses incurred as a result of the bringing of proceedings.
Dr Calvin Calleja is a Trainee Advocate at GANADO Advocates
from The Malta Independent http://bit.ly/2RWeogx
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