Price Club directors liable for debts - appeals court
'First company had no assets to speak of'
A court yesterday confirmed that three directors of the bankrupt supermarket chain Price Club were personally liable for the debts incurred, lining them up to face claims said to exceed €20 million.
The First Hall of the Civil Court had found Victor Zammit, Christopher Gauci and Wallace Fino guilty of wrongful trading when they kept doing business despite knowing that the company was going under. The court had established that the company that operated the supermarkets did not have any assets but paid the debts on the property of other companies within the Price Club group.
However, the supermarket's creditors only had a legal relationship with the first company, which went bankrupt without having any assets to speak of.
Moreover, the directors asked for more credit from the supermarkets' suppliers when they knew there was no possibility of repayment being made.
In the circumstances, the court ruled that the three directors were to be held together unlimitedly responsible for all debts incurred, as had been requested by the lawyer appointed as liquidator, Andrew Borg Cardona.
The directors, however, appealed to the Court of Appeal composed of Chief Justice Vincent Degaetano, Mr Justice Joseph Filletti and Mr Justice Geoffrey Valenzia.
They submitted that the first court had incorrectly interpreted the law and that it had not made a proper appreciation of the evidence produced.
The appeals court disagreed, saying the first court had interpreted the law correctly and had identified the factors which led to fraudulent and wrongful trading.
The three judges also agreed with the first court that, due to the way in which the company was structured, capitalised and managed, the three directors had led the company to a situation where, after June 1999, they could not have honestly believed that they could meet their debts.
Instead of taking action to save the company, they defrauded their creditors by taking actions that actually led to its bankruptcy.
The Court of Appeal therefore confirmed the first court's judgment and held all three directors unlimitedly liable towards Price Club's creditors.
The Price Club business had originally been established by Frans Gauci, who made a reputation for himself for paying on time. He was bought out in 1998 by Mr Zammit, Mr Fino and Mr Gauci.