The First Hall of the Civil Court, presided over by Mr Justice Joseph Zammit McKeon, on September 17, 2013, in the case “Avv Ian Vella on behalf of Antoine Hayem vs Alistair Robert Clifford Tulloch” held, among other things, that the Maltese courts had jurisdiction on the basis of article 5 (3) of EU regulations 44/2001 as the harmful act occurred in Malta; even though both claimant and the defendant were not present, resident or domiciled in Malta.
The facts in this case were as follows.
Antoine Hayem together with APV Ltd and Jean-Christophe Touret set up a Maltese company, Privajet Holdings Ltd. APV Ltd had the majority of shares in Privajet Holdings Ltd.
Privajet Holdings Ltd was a shareholder of all shares save for one share in Privajet Ltd, which had a licence from the Malta Transport under the control of the European Joint Aviation Authority.
One condition was, that the majority of the shares were owned and controlled by an EU member state or a citizen of an EU member state (article 4 (2) and article 4 (4) EU Regulations no 2407/92).
At the time Privajet Holdings was formed, Alistair Tulloch, who was a director of APV Ltd, notified Hayem that he was the ultimate economic beneficiary of APV Ltd. Hayem, as the CEO of Privajet Holdings and Privajet Ltd, requested and obtained necessary authorisation from US authorities for Privajet Ltd to be approved as a foreign operator under the Federal Aviation Administration Part 129, to obtain necessary authorisation. For this purpose, Privajet Ltd had to provide information regarding the final economic beneficiaries, having more than five per cent of shares.
Hayem wrote to Tulloch requesting details on the economic beneficiaries of APV Ltd as a member of Privajet Holdings Ltd.
Tulloch was very evasive and failed to provide details. Subsequently it transpired that the ultimate economic beneficiary of APV Ltd was not Tulloch, but some Russian national.
Hayem feared that Privajet was at serious risk of losing its licence to continue operating in the aircraft industry, as the economic beneficiaries was not a national of an EU member state and since the application which it filed with the US authorities was not correct.
In view of this threat, Hayem transferred his shares in Privajet Holdings to third parties at a lower price and allegedly suffered damages.
Thereafter he held Tulloch responsible for the damages and proceeded to file legal proceedings in Malta against Alistair Turlock. He asked the court:
• to declare that he suffered damages by the acts of Tulloch;
• to declare Tulloch to be responsible for the damages and to liquidate/condemn Tulloch to pay damages.
In reply Tulloch pleaded that the Malta courts had no jurisdiction under article 742, chapter 23 and under Regulation 44/2001. Tulloch said that he was not Maltese; not present in Malta, not domiciled in Malta and nor did the damages take place in Malta.
He denied having any legal relations with Hayem, the claimant. As regards the merits, it was stated that Hayem’s claims were frivolous, false and unfounded both at law and in fact. It was stated that Hayem was aware that Tulloch was not the beneficial owner of APV Ltd and that Tulloch occupied the post of company secretary. He said that the allegations were wholly unfounded in fact and law. There was no evidence that Hayem suffered damages. Hayem bore the burden of proof.
The court considered Regulation 44/2001 and article 742, chapter 12. Article 742 (6) provides: “Where provision is made under any other law, or, in any regulation of the EU making provision different from that contained in this article, the provisions of this article shall not apply with regard to the matters covered by such other provision and shall only apply to matters to which such other provision does not apply.”
In Typeset Company Ltd vs Norddeytsche Seekabelwerke Gmbh dated April 20, 2012, it was held that chapter 12 was the general procedure law and Regulation 44/2001 was the lex specialis. It was possible for the courts to have jurisdiction under EU Regulation 44/2001 but not under article 742, chapter 12. The court noted that both Tulloch and Hayem were not Maltese citizens, and not present, nor domiciled and resident in Malta.
Privajet Holdings Ltd and Privajet Ltd were Maltese companies and the transfer of shares by Hayem was executed outside Malta. There was no agreement, pointed out the court, where the cause of damage took place. The court did not agree that article 742 (1) (c) was applicable. The sub-article provides that the Maltese courts had jurisdiction in respect of “any person, in matters relating to property situate or existing in Malta”. The case concerned the act of the defendant which allegedly harmed Hayem, and not strictly on the shares as such.
In Mehmet Sendar Koca vs Dr Simon Micallef Stafrace noe et dated May 12, 2011, it was held that to have jurisdiction, the object had to be in Malta. The courts had no jurisdiction if the object was in Malta but the case concerned actions which took place outside Malta.
In this case, as the dispute was not solely relating to the shares but to the acts of the defendant, the court accepted the plea that it had no jurisdiction under article 742, chapter 12. Regulation 44/2001 was however applicable, once the dispute was to be considered a civil matter and not excluded by the regulations. Article 2 of the regulations required, save as otherwise provided, that person domiciled in a member state shall, whatever their nationality, be sued in the courts of that member state.
One exception where persons domiciled in a member state may be sued in the courts of another member state was per article 5(3) of the regulations, where in matters relating to tort, delict or quasi-delict, a person could be sued in the place where the harmful event occurred or may occur
Article 3 provides: “persons domiciled in a member state should be sued in the courts of another member state, only subject to the provisions of these regulations: re sections two to seven of this chapter”. On October 12, 2008, in ‘Nicole Hassett vs South Eastern Health Board and Cheryl Doherty vs North Western Health Board’ it was held:
“…jurisdiction based on the defendant’s domicile – in accordance with the general rule – must always be available, save in a few well-defined situations in which the subject matter of the litigation or the autonomy of the parties warrants a different liking factor. Such situations must accordingly be interpreted strictly.
“One exception where persons domiciled in a member state may be sued in the courts of another member state was per article 5 (3) of the regulations, where in matters relating to tort, delict or quasi-delict (the merits of this case fell within this category), a person could be sued in the place where the harmful event occurred or may occur.”
The court said that without deciding the merits of the case, it was of the opinion that it had jurisdiction on the basis of article 5 (3) of the regulations, as the harmful event happened in Malta and the Maltese courts had jurisdiction. The court was aware of regulation 2407/1992 (EU) and the obligations therein. It said that Tulloch had obligations as a director of APV Ltd, the majority shareholder of Privajet Holdings, in particular when the company Privajet Ltd was set up.
The court observed that the satisfaction of the nationality test of the majority shareholder depended on Tulloch, who was obliged to ensure compliance with the regulations in the establishment of the holding and the trading company under Maltese law.
The holding company, as well as its subsidiary, was regulated by Maltese law. The future operations of both companies depended on the information provided by Tulloch, as he acted on behalf of the majority shareholder of the holding company and the information furnished by him was crucial for the Maltese authorities to issue the relative licences.
On this basis, this court had jurisdiction to hear the case and to decide the claims of Hayem: as the information was given by Tulloch in Malta, to establish the companies and to apply for permission for a licence to operate from the Maltese authorities. This was the main issue, pointed the court.
For these reasons on September 17, 2013, the court decided that it had jurisdiction under article 5 (3) of regulation 44/200, but not under article 742, chapter 12. The court ordered the case to be continued.
Dr Karl Grech Orr is a partner at Ganado Advocates.