The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Tonio Mallia and Mr Justice Joseph Azzopardi, in the case ‘John Camilleri v Philip Attard’ on June 27, held, among other things, that a receipt of payment was only evidence of payment but not of the contract. The fact that the prospective buyer used the truck for several years was immaterial.

At the time of a sale, a contract in writing is necessary to transfer a vehicle and in its absence, there is no sale. The facts in this case were as follows.

In 1990, John Camilleri (now deceased), wished to purchase a Volvo truck from Philip Attard for Lm5,000. No private writing was entered into, yet Camilleri in February 1990 paid Attard the full price for the truck.

Camilleri took delivery of the truck and used it for many years in his business of transporting merchandise to and from Malta. However, there were problems to register the transfer. The logbook and its registration plates were not authentic and as Camilleri could not register the transfer of the vehicle in Malta, he returned it to Attard, demanding the full refund of the price.

Attard accepted the truck back. It so happened, however, that the truck was stolen while in Attard’s possession.

On October 13, 1993, Camilleri filed a judicial letter against Attard and in 1995, he filed a lawsuit for a refund of the price – which case was struck off the list of suits on March 5, 1997.

In February 1998, Camilleri proceeded to institute these proceedings. He asked the court:

• to declare that the sale of the Volvo truck could not take place as the vehicle could not be registered in terms of law and;

• to condemn Attard to pay the sum of Lm5,000 with legal interests.

In reply, Attard contested the proceedings, pleading prescription, two years (under article 1222 (1) of the Civil Code) and five years (Article 1224 of the Civil Code). He disputed that the sale could not take place and maintained that the sale had in fact been concluded.

Attard submitted that Camilleri had used the truck for many years and that the Lm5,000 refund was not due.

On July 15, 2010, the First Hall of the Civil Court found in favour of Camilleri. It declared that in absence of a private writing, which was essential in 1990, there was no sale of the Volvo truck and condemned Attard to pay Camilleri €11,646 with interests.

The first court was not of the opinion that the receipt which Attard gave Camilleri was tantamount to a sale agreement of the truck, but only evidence of receipt of payment. The alleged sale agreement of the truck was inexistent, said the court. The negotiations between the parties did not create any contract of sale as an important element was missing.

This was different to a rescission of a contract – in the case of rescission, the contract was valid but legally deficient. In the case of the termination of a contract, the contract was also valid, but subject to cancellation.

The first court maintained that, in view of the fact that there was no contract in writing, there was no sale and the price was paid for nothing. In this respect, prescription could not run in absence of a contract. The price of the truck had to be returned (re: article 1147 (1) of the Civil Code). It was not in dispute that Camilleri paid €11,644 for the truck.

Attard, on the other hand, argued that once Camilleri had used the truck, he had a right to retain the price. The first court disagreed. It said that the fact that Camilleri used the truck did not change the legal position: that the sale did not take place and there was no reason to justify Attard to keep the price.

In addition, it was not proven that Attard acted in bad faith. He was only obliged to return the capital. Interests only accrued, said the court, from when Camilleri officially demanded payment.

Aggrieved by the decision of the first court, Attard entered an appeal, calling for its revocation. He submitted that there was a private agreement dated February 20, 1990, which was proof of the sale.

In addition, it was stated that Camilleri could not repudiate the sale after he had kept and used the truck for several years. Attard further claimed that he was not in possession of the truck and pleaded prescription under the Civil Code.

The first court maintained that, in view of the fact that there was no contract in writing, there was no sale and the price was paid for nothing. In this respect, prescription could not run in absence of a contract

The Court of Appeal agreed with the First Hall of the Civil Court. Once it resulted that between the parties there was no agreement to transfer the car, the court could not proceed as if there was a sale when, legally, there was no sale.

In 1990 a private writing was necessary, and in its absence, there was no contract. A receipt of payment was only evidence of payment but not of the sale (re: ‘Magri v Spiteri’ dated July 16, 2012 PA). This deal required a private writing for its existence – a receipt was not sufficient.

In addition, a private writing according to law required the signature of both parties (re ‘Spiteri v Buhagiar’ dated January 20, 1961, and ‘Pace Bonello v Malta Hotels and Restaurants Association’ dated May 21, 2010, CA INF). The court noted that there was only one signature – Attard’s – on the receipt.

Given that the sale did not take place, the price had to be repaid, pointed the court (article 1147 (1) of the Civil Code). It was immaterial whether Camilleri had used the truck once there was no sale between the parties.

Camilleri had returned the truck and it resulted that Attard had accepted it back. Attard had in fact promised to refund the price after selling the truck. The risk passed to Attard and it was not an excuse for him to say that, as the truck was not in his possession, he was not obliged to return the price.

The provisions on prescription which was raised by Attard did not apply in this case. The situation was different in the context of a rescission of contracts – when a contract could be annulled owing to some defect. In this case, the contract was not voidable but inexistent. Camilleri did not ask to terminate the sale contract but sought a declaration that the sale did not take place.

For these reasons, on June 27, 2014, the Court of Appeal gave judgment by dismissing the appeal and by confirming the decision of the first court. It held further that interests accrued from the date when Attard made an official request for payment on October 15, 1993.

Dr Karl Grech Orr is a partner at Ganado Advocates.