The Court of Appeal, presided over by Chief Justice Silvio Camilleri, Mr Justice Tonio Mallia and Mr Justice Joseph Azzopardi, in the case ‘Richard Curmi and Antonia Curmi v Liaco Ltd’ held, among other things, that the car agents were obliged under the manufacturer’s guarantee to warrant the car against defects for three years. The breach of such warranty entitled the buyer to cancel the sale, once the car could not be repaired.

The facts in this case were as follows:

Richard and Antonia Curmi on March 15, 2005, bought a Subaru Impreza registration number GSC789 from the agents Liaco Ltd for the price of Lm10,500 (€24,485). The car was registered with Transport Malta on August 2, 2005. It was covered by a commercial guarantee against defects for a period of three years from the date of purchase.

After a few weeks, the car developed faults. It lost power and failed to accelerate as expected. As soon as Curmi noticed the defect, he informed Liaco Ltd and complained several times. Liaco Ltd tried to repair the car but the vehicle still did not function properly.

Curmi asked Liaco Ltd to change the car, however, the company insisted that the car had to be fixed.

In the meantime, Curmi regularly serviced the car. Finally, he decided to deposit the car with the courts and file legal proceedings against the company. He requested the court:

(1) To declare that the company failed to honour its obligations under the contract of sale dated March 15, 2005, as it resulted that the car was defective and not in accordance with the manufacturer’s guarantee, which formed an integral part of the contract of sale;

(2) To rescind the contract dated March 15, 2005, on grounds of the company’s non-performance of its obligations;

(3) To order it to take back the car and to refund €24,458 and other expenses.

In reply, the company contested the legal proceedings. It disputed failing to perform its obligations under the contract of sale dated March 15, 2005. It was not correct, it said, that that the car had defects.

It maintained that to file the actio redhibitoria, the object of sale had to be unfit for the use intended, and had to have a latent defect. Liaco Ltd maintained further that it was not responsible under the manufacturer’s guarantee, as it was given by a third party.

The fact that Curmi changed the tyres did not cancel the guarantee, pointed out the court. The court said that not every change affected the warranty. To disturb the warranty, the change had to be the cause of the damage. It noted that the technical expert found no connection between the defect in the engine and the change of tyres

On November 30, 2010, the First Hall of the Civil Court dismissed all pleas of the company and accepted Curmi’s requests. It declared that the company did not perform its obligations under the contract dated March 15, 2005, as the car was defective, and not as agreed, in the manufacturer’s guarantee.

The court cancelled the contract of sale and ordered Liaco Ltd to take back the car. It condemned it to refund €24,458 with interests from the date of payment to the date of refund of the price as well as to pay all judicial expenses.

The first court made the following considerations:

It appointed a technical report on the condition of the car. It was found that the engine was faulty. The car lost power which rendered the car unfit for the use intended. The manufacturer’s warranty guaranteed “Liaco Ltd (Subaru Malta) warrants that your new Subaru is free from defect in material and workmanship…” and in this respect, Liaco Ltd was bound under this warranty.

The fact that Curmi changed the tyres did not cancel the guarantee, pointed out the court. The court said that not every change affected the warranty. To disturb the warranty, the change had to be the cause of the damage. It noted that the technical expert found no connection between the defect in the engine and the change of tyres.

This case was filed as Liaco Ltd refused to accept that the car was defective and attempted to avoid its obligations.

Aggrieved by this decision of the first court, the company entered an appeal, calling for its revocation. It also raised the plea of prescription in terms of article 1431 of the Civil Code.

Liaco Ltd put forward the argument that Curmi’s legal action was the actio redhibitoria which lapsed if action was not taken within six months from delivery or from when the buyer noticed the defect. It argued that it was not proven that the defect existed before the sale.

In addition, it was stated that if Curmi’s legal action was based on the manufacturer’s warranty, such action did not bring about the rescission of the sale.

The court said that Curmi’s legal action was not the actio redhibitoria and was based on the manufacturer’s warranty. It explained that in a sale, the buyer only had a remedy granted by the law regulating sale (save for some special remedies available to the buyer under relative law). It was possible for the parties to give more rights to each other.

In this case Curmi was granted special rights whereby the company guaranteed that the car could be expected to remain free of defects for at least three years from the date of purchase (August 2, 2005). As Liaco’s legal action was not the actio redhibitoria, its plea of prescription could not be accepted, stated the court.

The court concluded that Liaco Ltd was obliged to ensure that the car was free from defects for at least three years and was also obliged to repair the defect. It was evident, it said, that Liaco Ltd did not honour this obligation.

The car had serious defects and its engine lost power especially up hills. This defect was never eliminated. The performance of the car was not normal and although the defect was noted, no solution was found. Repairs were done, but the defect remained.

In this respect, the court felt that the company violated the guarantee, as it was not capable of repairing the car. It followed that once Liaco Ltd was in breach on basis of general provisions regulating contracts, the buyer had the right to cancel the contract.

Under the contract of sale, the parties entered into reciprocal relations, and the seller obliged himself to keep the car free of defects for three years.

The seller, Liaco Ltd, clearly failed in its obligations and Curmi was entitled to request the dissolution of the contract according to article 1069(1) of the Civil Code. The effect of the guarantee was to provide a contractual remedy and the failure of the seller entitled the buyer to request the dissolution of the contract.

For these reasons, on June 27, 2014, the Court of Appeal gave judgment by confirming the decision of the Court of First Instance dated November 30, 2010, and by dismissing the appeal of Liaco Ltd. As the court found the appeal to be frivolous, it condemned the company Liaco Ltd to pay a penalty of €1,000 to the Registrar of Superior Courts.

Dr Karl Grech Orr is a partner at Ganado Advocates.