Insights

In its judgement on the 1 June 2022, delivered in the names of Carol Anne Bingham (the “Plaintiff”) vs John Edwin Seddon (the “Defendant”), the First Hall Civil Court (the ‘Court’), presided over by Madame Justice Miriam Hayman identified those instances when a party is not bound to appear for the signing of a public deed, following the non-performance of obligations by the other party in terms of a promise of sale agreement.

The Plaintiff, through a sworn application dated 26 February 2021 stated that on the 3 September 2020, had entered into a promise of sale, whereby the defendant bound himself to purchase and acquire from the Plaintiff, who in turn bound herself to transfer and sell the temporary utile dominju remaining from a period of one hundred and fifty years in relation to an apartment situated within the Portomaso Development.

The Plaintiff further highlighted that the Defendant failed to appear on the publication of the said deed without any valid reason at law and despite being called upon to do so by means of an official letter and requested that the Court declares that the Defendant failed to honour his contractual obligations under the convenium and to condemn and order the Defendant, to appear for the signing of the public deed in terms of the condition of the promise of sale.

Through a sworn reply dated 13 April 2021, the Defendant declared that the Plaintiff’s pleas were unfounded in fact and law and should thus be rejected, given that it was not possible for the final deed of sale to be signed and published by the date agreed upon in the promise of sale, since the Plaintiff did not have the required permits according to law of the said property. It was further highlighted that the promise of sale clearly indicated that the property is to be sold subject to the necessary planning permits. However due to some structural changes (which were not in accordance with the approved plans), approval from the respective authorities was required, and the property remained without the valid permits by the date of expiration of the promise of sale agreement.

The Defendant ultimately held that it was the Plaintiff who did not adhere to the obligations stipulated in the promise of sale and that they could not sell that which was promised in the promise of sale agreement by the date of expiration agreed upon and therefore have forfeited any right to enforce the said promise of sale agreement.

In deciding the case at hand, the Court noted that Article 1357 (1) and (2) of the Civil Code of Malta, state as follows:

“1357.(1) A promise to sell a thing for a fixed price, or for a price to be fixed by one or more persons as stated in the foregoing articles, shall not be equivalent to a sale; but, if accepted, it shall create an obligation on the part of the promisor to carry out the sale, or, if the sale can no longer be carried out, to make good the damages to the promisee.

(2) The effect of such promise shall cease on the lapse of the time agreed between the parties for the purpose or, failing any such agreement, on the lapse of three months from the day on which the sale could be carried out, unless the promisee calls upon the promisor, by means of a judicial intimation filed before the expiration of the period applicable as aforesaid, to carry out the same, and unless, in the event that the promisor fails to do so, the demand by sworn application for the carrying out of the promise is filed within thirty days from the expiration of the period aforesaid.”

The court noted how soon after the signing of the promise of sale agreement, preparations commenced to gear up for the signing of the final deed including a handing over of the duties relative to the maintenance of the apartment, corrections of typographical error in plaintiff’s deed of acquisition and the replacement of the air-conditioning system of the apartment as requested under the promise of sale agreement. The bone of contention related to Clause 8 of the promise of sale, which held that:

“the property being transferred is to be in full accordance with an approved development or building permit and that it conforms fully with all approved plans and drawings and with the conditions on the permit”

It was further noted that the Defendant held that he was “concerned about the progress of the outstanding issues” and that the timeline would extend past the closing date of the promise of sale agreement. He received a reply indicating that if he intended to wait until the regularisation process was fully approved, then it would take some time given the backlog the Planning Authority had.

At this point, the Defendant held that he was not prepared to extend the validity of the promise of sale agreement beyond the initial end date, which ultimately led to the Plaintiff filing the judicial letter calling upon the Defendant to appear for signing and publication of the contract of sale with regards to the premises once the end date had lapsed.

The court referred to some jurisprudence, the principles of which were relevant for the case in hand.

In the case Martin Frederick Searle et vs Jonathan Wayne Marks et (2018) the Court stated as follows –

“when the promise of sale agreement was set to expire, the remedial works had still not yet been carried out. At that point in time the plaintiffs had definitely a valid reason at law to renounce signing the final deed of sale.”

In Emanuel Bezzina et v. Edward Psaila (2016), it was held that:

“When a party has a just motive to rescind a promise, the other party cannot oblige the other party to adhere to such promise as agreed, based on such motive being adhered to after the stipulated date.

Similar views were highlighted in George Xuereb v Carmelo Pace (1964), whereby the Court said that:

“It is also an accepted principle that purchasers on a promise of sale agreement have the right to purchase the property in a good state and condition, and not repaired. Purchasers would be paying good money expecting the immoveable property to have been built according to prescribed technical standards, and not one that is in need of repair. Even if the object of the agreement could be repaired, purchasers have still a right not to purchase the same as the nature of the object is to be determined at the moment of conclusion of the promise of sale agreement, and not on a subsequent date.”

The Court held that in the present case, through the promise of sale agreement, both parties had bound themselves with several obligations towards each other, obligations which had to be respected and which had to be fulfilled by the date agreement.

Whilst the Plaintiff held that the irregularities were minor, and although it is true that they did not appear to be major irregularities, they still required approval from the respective authorities, and the court held that the assessment to be undertaken was not from an architectural point of view (whereby approval would have been granted), but from a legal point of view, were the situation was quite different.

For the purposes of the law, what matters is that in the promise of sale in question, the Plaintiff had clearly and unequivocally warranted and guaranteed that the property being transferred was in full compliance with an approved development or building permit and that it conformed fully with all approved plans and drawings and with the conditions on the permit. A guarantee which, the Plaintiff was not able to honour by the closing date because the sanctioning of the irregularities found in the premises were still pending before that Planning Authority.

The Court held that (basing itself on principles resulting from jurisprudence), the Plaintiff had no right to insist that the parties proceed with the sale, or that they extend the promise of sale for a period of time. Once the Plaintiff’s obligations could not happen for reasons beyond the Defendant’s control, it was legitimate for him to refuse to appear to sign the final deed on the property in question. The fact that ultimately, the sanctioning of the development was published a few weeks later, does not change the above legal repercussions already explained.

This article was first published in the Malta Independent.