The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Tonio Mallia and Mr Justice Joseph Azzopardi, in the case ‘Maltrad (Holdings) Ltd v Norbert Coll’, on March 27, 2015, held among things, that the fact that an agreement indicated Maltese law as the applicable law, in the choice of law clause, did not mean that the Maltese courts were automatically vested with jurisdiction to hear disputes.

Maltrad (Holdings) Ltd, a Maltese-registered company, gave a loan of €25,000 to Norbert Coll, a French citizen, who was not resident or domiciled in Malta, according to a private agreement dated April 14, 2006. He visited Malta for three days as a tourist in 2003.

This private agreement was regulated under Maltese law, but the agreement did not include a jurisdiction clause.

Coll did not pay within the time limit under the agreement.

Faced with this situation, the company filed legal proceedings against Coll in Malta requesting the Maltese Courts of Justice to condemn him to pay the €25,000 loan.

Coll, in reply, pleaded that the Maltese courts lacked jurisdiction.

In addition, he contested the validity of the agreement, on grounds of vitiated consent. He denied ever borrowing from the company and claimed he only became aware of the loan from these proceedings against him.

The court limited its decision to decide Coll’s preliminary plea: that is, whether it had jurisdiction to hear this case.

On June 10, 2014, the First Hall of the Civil Court dismissed the plea of jurisdiction and confirmed that it was competent to hear and decide this case.

The company maintained the plea of jurisdiction should be determined in terms of the Council Regulation No. 44/2001, as elaborated by Council Regulation No. 1215/2012.

According to the EU regulation, the jurisdiction of the courts was based on the domicile of the person. However, this principle was not absolute. The regulation established that effective jurisdiction was based on a clear connection between the court and the legal action.

“The existence of a close connection should ensure legal certainty and avoid the possibility of the defendant being sued in a court of a member state which he could not reasonable have forseen.”

The regulator contemplated the possibility of a person domiciled in one member state to be sued in another member state (Article 7 II section of the regulation).

The first court referred to Clause 9 of the private agreement which provided:

“The parties hereto agree that the terms and conditions of this contract shall be governed under the laws of Malta.”

It followed, therefore, that the Maltese courts had jurisdiction to hear this case; otherwise Maltese law, the choice of law of the contract, would not be interpreted correctly, the court said.

Aggrieved by the decision of the First Hall of the Civil Court, Coll entered an appeal, calling for its revocation and for the court to accept his plea that the Maltese courts lacked jurisdiction.

Once the company wished to establish the jurisdiction of the Maltese courts, it had the burden of proving that there were sufficient assets in Malta to enforce, in the event that it obtained a favourable decision in Malta

The company, on the other side, asked the court to dismiss the appeal, and to confirm the decision of the First Hall of the Civil Court dated June 10, 2014.

It resulted that the matter was regulated by the EU regulation of December 22, 2000, No. 44/2001 – the regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

This regulation had direct effect and was directly applicable in Malta and, in case of conflict with domestic law, this regulation prevailed.

Reference was also made to Regulation No. 1215/2012 of December 12, 2012, which revoked the preceding regulation and amended the earlier regulations. This last regulation came into effect on January 10, 2015 and applied to all pending cases.

Article 7 of Section II of the revised regulation and article 5 of the original regulations were similar, pointed out the court.

It noted that the agreement was concluded in Malta, when it was signed by the company, as lender. An agreement had to be signed by both parties in order to be valid and binding. The parties need not sign contemporaneously but had to sign the same document. Re: ‘Vella v Cassar’ dated April 24, 1967 (PA).

The court maintained that the agreement failed to specify where payment had to be made.

There was no doubt that the Maltese courts did not have ordinary jurisdiction once the defandant, Coll, was not Maltese, nor domiciled in Malta.

The company put forward the agreement that the Maltese Courts of Justice were vested with special jurisdiction and were competent to hear the case.

Under Maltese law, article 1159 (3) and (4) of the Civil Code provides:

“(3) Where the thing to be given in payment is a sum of money or any other thing which can, without expense, be carried or sent, and both the creditor and the debtor reside in the same island, payment must be made at the house of the creditor.

(4) In any other case, payment must be made at the place of abode of the debtor.”

Payment, therefore, had to be made where the debtor resided, the court concluded. As Coll did not live in Malta, the loan did not have to be repaid in Malta.

The Maltese courts did not possess special jurisdiction under the EU regulations, as the place of performance was not in Malta.

In terms of the preamble to the regulation, a case should be heard by the State having “close connection”. Although the preamble was not binding, it could not be stated that there was some particular connection with Malta.

It was true that the agreement was concluded in Malta. However, the loan could be repaid outside Malta, by a person having no connection with Malta.

The debtor’s place of residence was France. The loan had no connection with Malta, and there was nothing to vest our courts with jurisdiction, concluded the court.

Choice of law clause: The court distinguished the choice of law clause from the jurisdiction clause.

The choice of law clause was different from the jurisdiction clause. In absence of a jurisdiction clause in a contract, the choice of law clause was only one factor to be taken into account.

Maltese courts often decided cases where the ‘proper law’ was not Maltese law. Re: ‘Mifsud noe v Lemor noe’ dated November 20, 1959 (CA); and ‘Carmelo Caruana Freeport Operations Ltd v V. Medoffshore Ltd et’ dated November 30, 2012 (CA).

The fact that Maltese law was the law regulating the contract did not mean that the Maltese courts automatically had jurisdiction, in particular when the debtor had no connection with Malta and the obligation to repay was outside Malta.

The court said that article 742 of Chapter 12 was not applicable as the EU regulation applied.

The regulation stipulated that a person domiciled in a member state could be sued in the courts of another member state, in certain cases. But this case was not one of those cases, said the court.

The court did not feel that the company had proven that there were sufficient elements to establish the jurisdiction of the Maltese courts. There was no agreement that payment had to be made in Malta and, although the obligation was in favour of a company which was registered in Malta, there was no proof that future decisions had to be executed in Malta.

Once the company wished to establish the jurisdiction of the Maltese courts, it had the burden of proving that there were sufficient assets in Malta to enforce, in the event that it obtained a favourable decision in Malta.

The company failed to do so and, besides, Coll did not agree voluntarily to submit to the jurisdiction of the Maltese courts.

For these reasons, the Court of Appeal gave judgment by dismissing the appeal and by revoking the decision of the First Hall of the Civil Court.

The Court of Appeal declared that it had no jurisdiction to hear the case and freed Coll from these proceedings.

Dr Karl Grech Orr is a partner at Ganado Advocates.

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