Mr Justice Joseph R. Micallef, sitting in the First Hall of the Civil Court, yesterday upheld an action filed against three companies and ruled that a notarial deed of transfer of property was null and void as it was in violation of other persons' rights.

The action, known as an actio pauliana, was filed by Carmelo and Carmen Magro against Mixer Ltd and Mixer Concrete Works Ltd. F & A Quarries Ltd was called into the suit at a later stage.

The Magros asked the court to revoke a deed that was entered into between the first two companies and to declare that the deed was fraudulent in their regard.

The court heard that plaintiffs claimed they were owed Lm19,443.70 by Mixer Limited and that they had filed a court case against the company. While they were waiting for the case to be decided, Mixer Ltd entered into a contract with Mixer Concrete Ltd and transferred all its assets to the second company.

According to plaintiffs this was done in order to defraud them of their rights as Mixer Ltd now had no other assets that plaintiffs could enforce against so as to be paid the money they were owed.

The court heard that Mixer Ltd had sold to Mixer Concrete Works Ltd a batching plant and land in the locality known as Ta' San Martin in Zebbug for Lm700,000.

On the same day, the property was hypothecated in favour of the banks to secure an overdraft of Lm100,000 in respect of which Mixer Ltd was the principal debtor and Mixer Concrete Works Ltd was a guarantor. Another hypothec was also registered on the said property to secure a loan of Lm737,460 by Mixer Ltd, as principal debtor, while Mixer Concrete Works Ltd was again a guarantor.

It further resulted that by a decree issued by the courts in July 1998 a request filed by Hardrocks Ltd for the judicial sale by auction of the property was upheld.

Mr Justice Micallef noted that Mixer Ltd was registered in September 1988 and its shares were divided equally between Paul Zammit and Joseph Gaffarena. In July 1995 their shares were transferred to Asset Investments Ltd, save for one share that was transferred to Maria Dalli, wife of Sebastian Dalli.

Assets Investments Ltd was registered in 1993. Its shareholders were Sebastian Dalli and his wife.

Mixer Concrete Works Ltd was registered in 1995 and its shareholders were Asset Investments Ltd and Mr Dalli. Mixer Concrete Works Ltd had pleaded it had no juridical relationship with plaintiffs.

However, this plea was dismissed by the court on the basis that if plaintiffs' writ was upheld, then the deed entered into between Mixer Concrete Works Ltd and Mixer Ltd would be annulled and revoked. Mixer Concrete Works Ltd had therefore an obvious interest in this case.

Mr Justice Micallef declared that three elements were necessary in order for this actio pauliana to be successful. Plaintiffs had to prove they had a credit against defendants, that the defendants had caused them to sustain damage and that the defendants had intended to act fraudulently.

In this case plaintiffs had proven the existence of a credit against defendants. It was not necessary in terms of law for the credit of plaintiffs to result from a court judgment, the court noted. Neither was there any doubt that the actions of defendants had caused plaintiffs to sustain damages for, as a result of their actions, plaintiffs' chances of enforcing their claim against Mixer Ltd had been weakened.

Mr Justice Micallef said that in this case Mixer Ltd, with a studied plan of restructuring its commercial situation, had in effect weakened the guarantees it could offer to its creditors.

Mixer Concrete Works Ltd had been aware of what Mixer Ltd was planning to do and was aware of the effects this transaction would have on the company's creditors.

The court therefore upheld plaintiffs' writ and ordered the revocation of the notarial deed whereby the property had been transferred to Mixer Concrete Ltd.

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