Insights

On March 11, 2025, the Maltese Court of Appeal delivered a landmark judgement in Associated Supplies Limited vs. Joseph Mizzi, clarifying the scope of fiduciary duties under Maltese law. The court emphasised that such obligations extend beyond directors and trustees to include employees in key managerial positions or high-responsibility roles. The Court held that such duties arise from the nature of one’s role and the trust reposed in the individual, not merely from formal titles.

Facts of the Case

The defendant, Joseph Mizzi (“Mizzi”) was employed as General Technical Manager at Associated Supplied Limited (“ASL”) under an indefinite contract. Among his duties as General Technical Manager, Mizzi was negotiating with Burmeister and Wain Scandinavian Contractor (“BWSC”), regarding a consultancy opportunity for a power station project in Delimara. Although ASL had done substantial ground work with BWSC, the latter insisted on Mizzi’s continued involvement in the project. ASL rejected this condition, leaving the Advisory and Cooperation agreement unsigned.

During his tenure, Mizzi fell ill and subsequently resigned. Following his departure, it was discovered that Mizzi had independently pursued the tender project with BWSC, acting as its representative through his own company, Typeset Company Limited. ASL alleged that Mizzi had manipulated the situation for personal gain, utilising confidential information obtained during his employment. Consequently, ASL initiated legal proceedings against Mizzi, claiming a breach of his employment contract and fiduciary duties.

By order of the First Hall Civil Court on 12 November 2019, Typeset Company Limited was called in as a ‘kjamata in kawza’, recognising that the company played a significant role in the disputed transactions.

On October 4, 2023, the First Hall Civil Court ruled that Mizzi had breached his fiduciary duties, awarding damages of €1,697,658.25 to ASL, equivalent to the commission Mizzi earned from BWSC. Following this judgement, Mizzi appealed on the grounds that the Court of First Instance had erred in its application of the law concerning fiduciary duties.

Decision of the Court of Appeal

The Court of Appeal upheld the lower court’s ruling, confirming Mizzi’s breach of fiduciary obligations under Article 1124A of the Civil Code. Crucially, the Court held that fiduciary obligations are not exclusively limited to directors, trustees or formal fiduciaries, but may extend to employees holding positions of trust and influence. The Court determined that Mizzi had breached his fiduciary duties as General Technical Manager by misusing confidential information and exploiting business opportunities gained during his employment with ASL for personal benefit.

Specifically, the court noted that Mizzi had used his former position at ASL to divert business opportunities for his personal gain, he had replicated the Advisory and Cooperation Agreement negotiated between ASL and BWSC when later signing a nearly identical agreement through Typeset Company Limited, and he remained bound by fiduciary obligations even after resigning from ASL, as he exploited confidential knowledge obtained during his tenure. With regards to the latter, the Court emphasised that fiduciary obligations continue to apply beyond the termination of employment when confidential information and client relationships are exploited post-resignation.

The Court of Appeal further remarked that Typeset Company Limited was instrumental in the breach of fiduciary duties and therefore held it jointly liable for the damages. The court reaffirmed the damages of €1,697,658.25, representing the unjust enrichment resulting from the breach.

Relevant Considerations: The Advisory and Cooperation Agreement

One of Mizzi’s defences was that no binding Advisory & Cooperation Agreement was ever signed between ASL and BWSC hence, any claim for lost opportunity or profits was unfounded. The Court rejected this argument, noting that Mizzi, while still in employment, had negotiated the essential terms of the agreement with BWSC and later replicated these terms almost identically when signing the agreement through Typeset Company Limited. The Court noted:

“L-abbozz tal-Advisory and Cooperation Agreement li kien ser jiġi ffirmat bejn ASL u BWSC huwa identiku bħal l-Advisory and Cooperation Agreement li ġie ffirmat bejn Typeset u BWSC“.

Furthermore, despite being seriously ill, and whilst still employed with ASL, Mizzi found the time to discuss his work prospects with a representative of BWSC. In view of this, it was underscored that the absence of a signed agreement between ASL and BWSC did not absolve Mizzi of his fiduciary obligations. Instead, it emphasised that Mizzi had misused confidential information and commercial contacts acquired during his employment with ASL for personal benefit in his dealings with BWSC.

Additionally, Mizzi’s argument that ASL voluntarily abandoned the agreement by refusing to sign it was dismissed. The Court highlighted that ASL’s refusal to sign stemmed from BWSC’s insistence that Mizzi be exclusively involved in the project, raising concerns over conflicts of interest, which Mizzi later exploited.

Relevant Considerations: Tax Deduction

Mizzi contended that the First Court failed to deduct income tax allegedly paid by Typeset Company Limited on the sums received from BWSC. He argued that the damages imposed should have reflected this tax payment. The Court of Appeal found this grievance to be unfounded. It ruled that:

“Is-sub inċiż 5 tal-Artikolu 1124A jipprovdi illi persuna soġġetta għall-obbligazzjonijiet fiduċjarji li tikser dawk l-obbligazzjonijiet tkun marbuta li trodd lura kull proprjetà flimkien mal-benefiċċji l-oħra kollha miksuba minnha, sew direttament sew indirettament”.

The Court reiterated that the obligation to return benefits derived from a breach of fiduciary duties is comprehensive and unaffected by any tax payments made. The fiduciary’s duty is to restore the principal to the position they would have been in before the breach. Whether Typeset Company Limited might seek tax refunds is a matter external to ASL’s rightful claim for full restitution.

Legal Considerations in the Judgment

Fiduciary Duties

The Court of Appeal, in its reasoning, relied heavily on Article 1124A of the Civil Code, which defines fiduciary obligations. The Court’s interpretation in this case broadened the traditional scope of fiduciary duties. In fact, the Court ruled that by exploiting his unique knowledge and diverting a business opportunity, Mizzi committed a clear breach:

“Il-kariga ta’ General Manager timponi doveri u obbligazzjonijiet li jmorru lil hinn mill-obbligazzjonijiet kontrattwali bejn il-general manager u l-prinċipal tiegħu”.

It also emphasised that Mizzi’s role endowed him with substantial autonomy and influence:

“Huwa evidenti mill-atti li Mizzi kellu livell għoli ta’ diskrezzjoni fix-xogħol tiegħu u kellu mano libera biex jikkomunika mal-klijenti u jagħmel dak li kien l-aħjar, dejjem fl-interess ta’ min iħaddmu”.

i. Fiduciary Duties Apply Beyond Directors and Trustees

The Court emphasised that fiduciary obligations arise not from formal titles, but from the nature of the duties and the level of trust placed in an individual. Mizzi, as a General Technical Manager, had access to confidential information and key business dealings of ASL, placing him in a position of trust. Quoting Professor Andrew Muscat, the Court reaffirmed:

“The duties of loyalty comprise the duty to avoid any conflict of interest, the duty not to receive undisclosed or unauthorized profit from his position or functions, and the duty to act impartially”.

The Court also cited the UK Supreme Court’s FHR European Ventures LLP ruling, which underlined the “no conflict rule” and “no profit rule”, stating:

“An agent owes a fiduciary duty to his principal because he is someone who has undertaken to act for or on behalf of his principal in a particular matter in circumstances which give rise to a relationship of trust and confidence”.

Additionally, the Court applied Recovery Partners GP Ltd v Rukhadze, observing that a fiduciary breaches their duties even if the principal was unlikely to secure the opportunity:

“A fiduciary may be in breach by diverting an opportunity even if it is unlikely that the principal will be able to secure that opportunity”.

Ultimately, the Court ruled that even though Mizzi was not a director, his role carried fiduciary responsibilities because he was entrusted with confidential company information, had influence over business decisions, and his position gave him access to opportunities that should have benefited ASL. The Court concluded that the decisive factor should not be the title of an individual, but rather the relationship of trust, confidence and the role played by such individual:

“Relazzjoni fiduċjarja, min-natura intrinsika tagħha, ma hix relazzjoni ordinarja imma għandha karattru straordinarju… il-fiduċjarju ma hux liberu illi, direttament jew indirettament, ifittex l-interessi personali fil-ħidma tiegħu milquta bl-obbligazzjoni fiduċjarja”.

ii. Fiduciary Duties Extend Beyond Employment

Another key aspect of the judgment was the Court’s assertion that fiduciary duties do not necessarily end the moment an employee resigns. The Court recognised that Mizzi had already left ASL when he finalised the deal with BWSC. However, because the opportunity arose while he was still employed, and because he used knowledge and connections gained during his employment, he remained accountable for his actions even after resigning under Article 1124A of the Civil Code.

Conclusion

The Court’s reasoning reinforces that fiduciary duties are determined by the level of responsibility and trust placed in an individual, rather than their job title alone. This judgment also establishes that employees and managers in positions of trust owe fiduciary duties regardless of whether a formal contract explicitly states them. The law imposes fiduciary obligations based on conduct, reliance, and trust, ensuring that individuals in key roles cannot evade responsibility by pointing to technical contract formalities.

By affirming who owes fiduciary duties, this judgement marks a significant step forward in strengthening corporate governance principles in Malta. As the Courts continue to develop this area of law, it is important to keep in mind the principle of auctoritas rerum similiter iudicatarum, ensuring that progress is not undone by reverting to overly traditional interpretations.

Disclaimer: Ganado Advocates is responsible for contributing to this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report. This article was first published in ‘The Malta Independent’ on 16/04/2025.

This Law Report was co-authored by Emma Attard