The Court of Appeal, composed of Mr Justice Silvio Camilleri, Mr Justice Raymond Pace and Mr Justice Tonio Mallia on November 30, 2012, in the case ‘Carmelo and Rita Schembri vs Prince Properties Ltd’, held, among other things, that the final contract under a promise-of-sale agreement (konvenju) had to take place by October 1, 1999, well before November 1, 2004. The fact that notice was not given to the Commissioner of Inland Revenue in terms of article 3 (6) of Chapter 364 did not invalidate the agreement.

The facts in this case were as follows.

Lack of notice to the Commissioner of Inland Revenue should not be prejudicial to buyer

On September 3, 1999, Carmelo and Rita Schembri signed a promise-of-sale agreement (konvenju) to purchase apartment 12, Land’s End Apartments, in St Paul Street, St Paul’s Bay, from Prince Properties Ltd for the price of Lm44,000 (€102,492).

The flat, together with their share of the common parts, had to be sold in a finished condition. The konvenju was valid for five months and subsequently extended up to October 1, 1999. As the works were not completed on time, the final contract was never concluded. In total the Schembris had paid Lm36,000 (€83,857) on account of the purchase price, leaving an unpaid balance of Lm8,000 (€18,634).

On September 30, 1999, Schembri intimated the company to appear for the contract of sale. But the company cancelled the appointment with the notary because it wished to extend the konvenju, to gain more time to finalise the works.

Faced with this situation, the Schembris proceeded to file a lawsuit on October 29, 1999, requesting the court to condemn the company to appear for the final contract of sale within a short time limit and, if it failed to attend, to appoint curators to represent the company.

The company, in reply, disputed the Schembris’ claims. It submitted that they had forfeited their rights under the konvenju.

Allegedly they were not ready to appear for the final contract under the terms agreed, as they wished to add another condition to the final contract. It said that the Schembris had to prove that they had acted within the stipulated time and that they had fulfilled the procedures required by law in the situation.

On June 30, 2009, the First Hall of the Civil Court condemned the company to appear for the publication of the contract in order to sell the apartment to the Schembris for the price and for the conditions agreed in the konvenju dated September 3, 1998. The contract was to be published by Notary P. Cassar in the building of the Law Courts, Valletta, on September 17, 2009, at 10am. A curator was also nominated to appear for any party who did not attend the publication of the contract.

The company was ordered to pay the judicial costs. The costs for the public-ation of the contract and the tax had to be paid according to law. However, any additional amount in tax owing to the delay or increase in value between October 1, 1999, and the date of the contract had to be suffered by the company.

The first court considered that on February 11, 2002, this same court had dismissed Carmelo Schembri’s requests as it had not been satisfied that he had sent a judicial letter before the expiry of the konvenju in terms of article 1357 (2) of the Civil Code, which provides that:

“The effect of such promise shall cease on the lapse of the time agreed between the parties for the purpose or, failing any such agreement, on the lapse of three months from the day on which the sale could be carried out, unless the promisee calls upon the promisor, by means of a judicial intimation filed before the expir-ation of the period applicable as aforesaid, to carry out the same, and unless, in the event that the promisor fails to do so, the demand by sworn application for the carrying out of the promise is filed within 30 days from the expiration of the period aforesaid.”

Schembri appealed and on April 11, 2005, the Court of Appeal cancelled the decision of the first court, ordering the acts of the case to be remitted to the first court.

The company pleaded in addition that the konvenju dated September 3, 1998, was no longer valid, as it had not been registered in terms of article 3 (6) Tax on Documents and Transfers Act of Chapter 364. Article 3 (6) of Chapter 364 provides:

“Notwithstanding the provisions of any other law, a promise of sale or of a transfer of immovable property or any real right thereon. shall not be valid unless notice thereof is given to the Commissioner within such time and in such manner, and containing such particulars, as may be prescribed. Such notification shall be accompanied by a provisional payment equivalent to 20 per centum of the amount chargeable in terms of articles 32 and 40.”

The company argued that the konvenju was no longer valid once no notice had been given to the Commissioner of Inland Revenue.

Schembri, on the other side, retorted that, as the contract had to be published before November 1, 2004, there was no need to give notice. In this case, the contract had to be published by October 1, 1999, and this had not been done, as a result of the company’s failures. In this respect, Schembri said that the konvenju was still valid even if the notice had not been given to the Commissioner of Inland Revenue. Reference was made to M. Frendo et vs A. Agius dated October 7, 2008.

The Court of First Instance held that in the circumstances, it was not necessary to give notice under Chapter 364. The problem had arisen because the company had failed to complete the works on time, it said.

Schembri was justified to request the company to carry out its obligations under the konvenju. It felt that the opposition of the company was not genuine and that it had tried to avoid its oblig-ations. The company should not be allowed to take advantage of its own failures, the court pointed out.

Aggrieved by the decision of the first court, the company entered an appeal, calling for its revocation.

On November 30, 2012, the Court of Appeal gave judgment by dismissing the appeal and by confirming the decision of the first court. The following reasons were given for the court’s decision.

The court noted that the final contract under the konvenju had to take place by October 1, 1999, before November 1, 2004. The fact that notice had not been given to the Commissioner of Inland Revenue should not be prejudicial to Schembri, re: M. Frendo et vs A. Agius et (CA) dated October 7, 2008. Agreeing with the first court, it said there was no obligation to register the konvenju in this case.

The court said it should not reopen the appreciation of facts by the first court, save for serious and grave reasons. The first court was of the opinion that the final contract had not taken place owing to the non-completion of the works, as obliged by defendant company. It did not result that Schembri wanted to impose new conditions which were not included in the konvenju. It was also established that the works had not been finalised.

In addition, as the company was to blame for the non-conclusion of the contract, the court held it to be liable to pay the additional costs.

Dr Karl Grech Orr is a partner at Ganado Advocates.