The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Giannino Caruana Demajo and Mr Justice Noel Cuschieri, in the case ‘Dr Michael Zammit Maempel on behalf of Cassone Sabrina vs European Insurance Group Ltd’ on January 25, 2013, held, among other things, that while there was nothing to impede the foreign court decision to be declared enforceable in Malta, as the company was now in a state of dissolution, Sabrina Cassone could not request its enforcement by the issuance of warrants, under the Code of Organisation and Civil Procedure.

The facts in this case were as follows:

Although defendant company was today in a state of dissolution, this did not mean that a foreign decision could not be legally recognised in Malta

On November 18, 2010, Sabrina Cassone filed legal proceedings in Malta requesting the courts to declare enforceable a decision given by the courts of Lecce, Italy, dated February 18, 2010, in the case ‘Cassone Sabrina vs European Insurance Group Ltd (EIG)’.

In this decision, the company, European Insurance Group Ltd, was declared to be liable to pay Cassone €80,000, with costs (€1,248) and interests.

Cassone asked the Malta Courts to order the enforcement of this decision in Malta, in order to allow her to obtain payment.

On April 7, 2011, the Court of First Instance accepted her requests. It resulted, however, that on August 6, 2010, an administrator was appointed by the Malta Financial Services Centre. Deloitte was nominated by the MFSA to administer the affairs of the company in terms of article 28 (1) (C) and (D) chapter 403 of the laws of Malta.

In February, 2011, the administrator concluded that there were no reasonable prospects for the company to avoid insolvent liquidation. With effect from September 29, 2011, a liquidator was appointed to wind up the liquidation of European Insurance Group Ltd in terms of article 28 of chapter 403.

European Insurance Group Ltd was aggrieved by the decision of the first court, and entered an appeal. It pleaded that before the Court of First Instance gave judgment, the administrator had concluded in February 2011 that there was no reasonable prospect for it to avoid insolvent liquidation. Subsequently, while the appeal was still pending, a liquidator was appointed to liquidate it. This meant that the foreign decision of the Italian courts could not now be enforced on the basis of the principle par condicio creditorum (all creditors to have equal conditions).

Cassone, on the other side, stated that the conclusions of the administrator were not brought to the cognisance of the first court. In addition, when this fact was brought to its attention, no document was produced to support this fact. Cassone maintained that the company had not yet been dissolved nor did it result that proceedings had been initiated to liquidate the company.

On January 25, 2013, the Court of Appeal gave judgment by accepting the appeal in part, by revoking that part of the judgment which ordered the enforcement of the foreign decision. The remaining part of the judgment was confirmed. The following reasons were given for the court’s decision:

• It did not result that the report of the administrator which was available in February 2011, was brought to the cognisance of the first court.

• It appeared that Cassone was not notified of the appointment of the liquidator, who was appointed by the MFSA on September 29, 2011. The present position was that the company was in the process of dissolution, and the principle par condicio creditorum (requiring that creditors should be treated equally) impeded the enforcement of the foreign court decision.

• The court made reference to ‘Dr Mark Refalo nomine vs European Insurance Group Ltd (App 163/2012)’ dated November 9, 2012, where the court declared null, with reference to article 222, of the Companies Act, the garnishee order against the company, on the grounds that at the time the warrant was issued, the decree to order the dissolution of the company was already issued and a liquidator had already been appointed by the authority.

Article 222 by the Companies Act provides:

“When a company is being wound up by the court, any act or warrant, whether precautionary or executive, other than a warrant of prohibitory injunction, issued or carried into effect against the company after the date of its deemed dissolution, shall be void.”

The court noted the provisions of article 34 (1) and (2) as well as article 41 EU Council Regulation 44/2001.

The court made the following observations:

Although defendant company was today in a state of dissolution, this did not mean that a foreign decision could not be legally recognised in Malta. In particular, in view of the fact that this recognition did not violate public order as well as the public strategy of Malta.

The court said that a distinction had to be drawn between recognition and the enforcement of the court’s decision from the order, for the enforcement of the decision to take place.

While there was nothing to impede the foreign court’s decision to be declared enforceable in Malta, as the company was now in a state of dissolution, Cassone could not request its enforcement by the issuance of warrants, under the Code of Organisation and Civil Procedure.

The Court of Appeal said that the Court of First Instance was correct to accept Cassone’s request to declare the foreign court decision to be enforceable in Malta, but it could not order its enforcement.

In the first place, this was not the procedure contemplated by our law and, secondly, as the Company European Insurance Group Ltd was in a state of dissolution.

Dr Karl Grech Orr is a partner at Ganado Advocates.