When Consent Isn’t Consent: First Hall Civil Court declares contract void due to fraud

Introduction

In a recent judgment delivered on 3 October 2025, the First Hall Civil Court (the “FHCC”) presided by Madame Justice Audrey Demicoli examined what makes a contract invalid due to error or fraud. The case was instituted by Building Energy Technologies Ltd (the “Claimant”) against Magri Bathrooms Limited, St. John Developments Ltd, Simon Grixti, Carmelo sive Charles Vella, Ali Alaawer & Hamza Alaawer (the “Respondents”).

The Claimant requested the FHCC to declare a final contract signed on 16 October 2020 (the “Contract”) null and void, claiming its consent was given in error or obtained through fraud.

The Background

Mr. Giuseppe Capodici (“Capodici”) on behalf of the Claimant entered into a promise of sale with St. John Developments Limited (“St. John”) to purchase a property for €500,000. However, two of St. John’s directors, namely Carmelo Vella and Ali Alaawer claimed that the Contract was signed without their authorisation and that payment was never received. In view of this, they initiated proceedings seeking to declare the promise of sale null – these are still pending.

To complicate matters, the same property was also subject to another promise of sale between St. John and Magri Bathrooms Limited (“MB”). The Claimant filed separate proceedings against St. John, requesting the Court to order St. John to appear on the final contract. These proceedings are also still pending.

St. Johns Developments Limited, in its sworn reply held that:

1. That the Contract was lawfully entered into by the Claimants and any allegation of fraud or bad faith is being denied.
2. That every contract is presumed to be made in good faith. Anyone alleging otherwise must produce strong evidence in support of his claim.
3. That the Claimant’s own application shows that there was no fraud or bad faith against its directors – he willingly signed the Contract and is now attempting to change his version of events.
4. That after signing the Contract, the Claimant performed acts that confirmed acceptance, actions that contradict and undermine its present attempt to annul the Contract.
5. That the Contract was voluntarily concluded and clearly explained to Capodici, as confirmed in the Contract itself.
6. That without prejudice to the above, it is for the Claimant to adequately prove its case.
7. That without prejudice to the above, the Claimant’s claims are unfounded and should be dismissed.

Ali Alaawer, Hamza Alaawer and Rosanne Vella in her capacity as heir of Carmelo sive Charles Vella held that:

1. That the defendant Carmelo sive Charles Vella passed away before these proceedings began and therefore the acts must be legitimized in the name of Rosanne Vella.
2. That the Claimant is seeking to rescind the Contract on two incompatible grounds, fraud and error. Fraud implies consent was given because of deceit, while error means the parties agreed on different matters. The Claimant must therefore choose one legal basis.
3. That under Articles 1730 and 1731 of the Civil Code, a contract can be rescinded for error only if the mistakes consider the identity of the person, the object of the Contract or the validity of title. The alleged error does not fall within these limits making the claim unfounded.
4. That the Claimant’s allegations are unfounded in fact and law, as not fraud or error vitiating consent will be proven.
5. That the Claimant subsequently ratified the Contract, confirming its validity.

Magri Bathrooms Limited, in its sworn reply held that:

1. That the defendant Carmelo sive Charles Vella passed away before these proceedings began and therefore the acts must be legitimized.
2. That the Claimant’s allegations are unfounded in fact and in law. Capodici, who signed on the Claimant’s behalf, fully understood the Contract, which was explained to him in Italian in the presence of at least six witnesses.
3. That the Claimant must clarify whether its action is based on fraud or error, as these are distinct legal grounds.
4. That the respondent company remains committed to honouring the sale, but this has not yet occurred because the necessary permits are still pending, making it difficult to precisely identify the property.
5. That without prejudice to the above, the respondent company always acted in good faith and that no claim brought forward by the Claimant concern its conduct.
6. That MB has never acted fraudulently toward the Claimant and had no prior dealings with Capodici before the Contract was signed.

Simon Grixti in his sworn reply held that:

1. That the legal requirements to declare the Contract null are not satisfied, as the Claimant’s consent was not vitiated by either error or fraud.
2. That the Contract’s contents were clearly explained to the Claimant by a lawyer in a language the Claimant understood, as confirmed by the Claimant’s own signature on the document.
3. That for the Claimant’s case to succeed, it must provide evidence of a defect in consent, specifically concerning the declaration it made within the same Contract.
4. That the Claimant accepted and ratified the Contract’s validity, demonstrated by its encashment of cheques referenced in the Contract.
5. That in any event, the Claimant’s action remains unfounded both in fact and in law.

Key Issues Before the Court

In brief, the FHCC was presented with a claim alleging that the Claimant’s consent to the Contract had been vitiated by fraud and/or error, on the basis of three main arguments:

1. The final version of the Contract differed from the draft it had reviewed, Capodici, who did not understand Maltese or English claimed he was advised not to seek bring a lawyer ;
2. The Contract wrongly stated that €332,500 of the €500,000 payment had already been made; and
3. The property to be transferred was not clearly identified and MB had not followed through on the promise of sale.

On the other hand, the Respondents rejected the Claimant’s claims by stating that:

1. There was no fraudulent action or bad faith, however it was Capodici who chose to sign the Contract and who then had second thoughts;
2. The Claimant carried out actions as an acceptance of that stipulated in the Contract, by cashing cheques for the amounts mentioned in the Contract;
3. The Contract was explained to Capodici in the Italian language.

The FHCC proceeded to address the following:

A. Error as a vice of consent

Article 976 of the Maltese Civil Code provides that a contract is invalid only if it “affects the substance itself of the thing which is the subject-matter of the agreement.”

The Claimant argued that it had made a mistake when agreeing to (a) a clause declaring that €332,500 had already been received and (b) another clause stating that a promise of sale would be entered into for a property, even though this was not to happen together with the Contract.

The Court held that these matters did not concern an “error of fact” as understood by law. Instead, they related to the manner in which the agreed compensation was to be given. These essential objects of the contract – (1) the payment of compensation and (2) the withdrawal of legal proceedings – remained unchanged. In view of this, the FHCC does not find that that the allegation by the Claimant was tantamount to an error as contemplated by law.

B. Fraud as a vice of consent

The FHCC then turned to whether the Claimant’s consent was obtained by fraud, as defined in Article 981 of the Civil Code.

i. The clause dealing with the payment of €332,500

The Claimant’s director, Capodici testified that he did not understand English, the language in which the contract was drafted, and that he relied entirely on others to explain its content. He said that although lawyer Dr. Franco Galea was present, who explained most parts of the Contract in Italian, most discussions during the meeting were held in Maltese and he was not given a full translation of what he was signing on behalf of the Claimant.

Dr. Galea confirmed that he had explained the contents of the Contract to Capodici in Italian and had written this declaration on the Contract itself. This was supported by witnesses Simon Grixti, Andrew Magri and Hamza Alaawer. However, the Court noted inconsistencies in the evidence, particularly regarding the payments.

According to Capodici, the earlier draft stated that €332,500 was to be paid on the date of signing. In the final version however, the clause had been changed to state that the amount had already been paid. However, Capodici states that Simon Grixti told him not to worry and that the issue would be resolved.

When asked in court, Grixti claimed the payments had already been made before the contract was signed and that supporting documents existed, but he failed to produce any proof of such payments. The Court observed that this failure to present evidence was significant. It also noted that Grixti had unilaterally decided to “set off” money he said was owed to him against the compensation due to the claimant, without clear agreement or documentation.

The Court concluded that Grixti had taken advantage of the trust Capodici placed in him and acted in bad faith. The judge emphasized that Capodici was at a disadvantage throughout the process: the contract was in English, he only understood Italian, and communication during the meeting was a confusing mix of English, Maltese, and Italian. In such circumstances, the Court said, it was easy for him to fall victim to deception.

The Court therefore found that the claimant’s consent to the payment clause had been obtained through fraud, as Simon Grixti’s conduct misled the claimant into agreeing to terms he did not fully understand or intend.

ii. The clause dealing with the promise of sale

As for the clause concerning a promise of sale, the Court found no fraud. The company MB maintained that it still intended to honour the promise once separate property disputes were resolved. The Court also noted that this clause had appeared in the earlier draft of the Contract, which the Claimant had time to review and even had translated into Italian. As such, the Claimant knowingly accepted that clause and could not later claim deception.

In conclusion, the Court rejected the claim of error but upheld that the Claimant’s consent was vitiated by fraud in relation to the payment clause due to the misleading conduct of Simon Grixti.

Decision

The FHCC upheld the Claimant’s first claim and declared that the Claimant’s consent to the Contract was vitiated by fraud and therefore declared the Contract null and void at law.

The FHCC attributed the issued to the conduct of Simon Grixti and ordered that all costs be borne by him. The judgment has since been appealed.

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 22/10/2025.