The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Tonio Mallia and Mr Justice Joseph Azzopardi, on June 28, 2013, in the case “Charles Grech & Co. Ltd vs Karl Vella Petroni and Joseph John Azzopardi in their own name and in representation of PBA Ltd”, held, among other things, that even if the board resolutions of the claimant company for the purpose of authorising its judicial representative were passed after the presentation of this lawsuit, the claimant company was entitled to ratify and to consider as valid all that was done in its name.

The facts in this case were as follows:

Charles Grech & Co. Ltd had an outstanding claim of €11,934 against PBA Ltd for work rendered as well as against Karl Vella Petroni and Joseph Azzopardi as guarantors.

Vella Petroni and Azzopardi, by a private agreement dated September 28, 2006, accepted to guarantee personally the debt of PBA Ltd in favour of Charles Grech & Co. Ltd. In terms of article 115 of Chapter 13 of the Companies Act, any person who guaranteed a commercial debt was bound jointly and severally with the principal debtor.

As this amount remained unpaid, Charles Grech & Co. Ltd proceeded to file legal proceedings requesting the court:

• To decide without a hearing in terms of article 167 of Chapter 12; and

• To condemn defendants to pay the outstanding balance.

In reply, Azzopardi contested the legal action. He pleaded the nullity of the sworn application on the basis of article 789 of Chapter 12 of the Civil Code, which provides that “the plea of nullity of judicial acts is admissible –

“(a) if the nullity is expressly declared by law;

“(b) if the act emanates from an incompetent court;

“(c) if the act contains a violation of the form prescribed by law, even though not on pain of nullity, provided such violation has caused to the party pleading the nullity a prejudice which cannot be remedied otherwise than by annulling the act;

“(d) if the act is defective in any of the essential particulars expressly prescribed by law:

“Provided that such plea of nullity as is contemplated in paragraphs (a), (c) and (d) shall not be admissible if such defect or violation is capable of remedy under any other provision of law.

“(2) The plea of nullity of an act, under sub-article (1)(c), shall not be admissible if the party pleading such nullity has proceeded, or has knowingly suffered others to proceed, to subsequent acts, without pleading such nullity.’’

As regards to the merits, he argued that the claims of Charles Grech & Co. Ltd were unfounded in fact and at law and should therefore be dismissed.

Azzopardi maintained that the sworn application of the claimant lacked an essential requisite required by law in terms of article 789(1)(a) of Chapter 12.

It resulted that Charles Grech & Co. Ltd’s application was filed on August 5, 2008, and was sworn the same day by Deandra Zammit.

At issue was whether Zammit was authorised to represent the claimant company.

The first court decided that Zammit was authorised to appear on behalf of the claimant company and that, in any event, it had ratified all her acts, which were perpetuated on its behalf.

Article 181A(2) of Chapter 12 provides that “any declaration or pleading to be sworn in terms of law shall in the case of a body having a distinct legal personality, be sworn by the person or persons vested with the legal or judicial representation thereof or by any company secretary or by any person authorised in writing by such body to file judicial acts on its behalf or to make any such declaration, sworn reply or sworn pleading”.

Charles Grech & Co. Ltd maintained that it had authorised Zammit.

Azzopardi, on the other side, challenged the authority of Zammit to represent the claimant company.

Reference was made to “Edwin and Josephine Zammit vs Group 9 Ltd” dated July 10, 1997, where the court gave defendant company a period of time to ratify the position. In this latter case, the court was requested to discard the statement of defence, as it was not allegedly sworn by the person vested with judicial representation of the claimant company, and nor was there a ratifying resolution of defendant company.

In terms of article 1857 of chapter 16 of the Civil Code, mandate did not have to be in writing. It could be granted verbally or even tacitly.

Article 1857(2) provides that “subject to any other special provision of the law, a mandate can be granted by a public deed, by a private writing, by letter, or verbally, or even tacitly”.

The claimant company could even authorise Zammit verbally to file a lawsuit on its behalf and could give such mandate tacitly, without issuing any documents.

Aggrieved by the decision of the first court, Azzopardi asked the court to revoke, cancel and annul this decision.

The official receiver and liquidator of PBA lodged an incidental appeal, whereby he submitted that the approval of the court had to be obtained in terms of article 224(2) of the Companies Act, as the company PBA was in liquidation. It was stated that these legal proceedings against the company PBA were null and without effect.

A court of appeal could not decide issues which were not already decided upon by the first court

The court considered that this lawsuit was filed on August 5, 2008, and was sworn by Zammit on behalf of Charles Grech & Co. Ltd. It resulted that it was only on August 6, 2008, that Zammit was appointed as judicial representative of Charles Grech & Co. Ltd.

This court did not accept Azzopardi’s submissions.

Zammit was authorised verbally to file this lawsuit and that the board of directors also passed a resolution to appoint her as its judicial representative for purpose of these proceedings.

Even if the board resolutions were passed after the presentation of this lawsuit, the company was entitled to ratify and to consider as valid all that was done in its name; re: “Vella Camilleri et vs Micro Technology Consultancy Ltd” dated October 29, 2012, (PA) where it was held that “our courts had already said in other cases that this was an internal matter. A third party could not involve such discrepancies to revoke an agreement which he entered with the company even if the company’s articles did not permit such representative to do such an act”.

A third party should not interfere in an internal matter of the company and, if the company ratified the act which was done in its name, such act was deemed to have been validly made on its behalf. Re: “Borg noe vs Fenech et noe”, dated November 14, 2012 (PA).

The court could not consider the incidental appeal to be valid. The law by way of article 240 of chapter 12 permitted incidental appeals from that part of the decision of the first court against which there was no appeal. It was not possible to appeal nor file an incidental appeal from an issue which was not decided by the inferior courts.

It noted that the first court had not considered the issue of whether its approval was necessary under article 224(2) of the Companies Act, in particular as this issue had not been raised before it and nor decided by the first court.

A court of appeal could not decide issues which were not already decided upon by the first court.

In this respect, it was not possible to file an incidental appeal on this issue, as it was not decided upon by the first court.

For these reasons on June 28, 2013, the Court of Appeal gave judgment by dismissing Azzopardi’s appeal and by abstaining from considering the incidental appeal of the official receiver and liquidator of PBA Ltd.

It ordered the acts of the case to be referred to the first court for it to continue to hear the case according to law.

The right of the official receiver and the liquidator of the company was left unprejudiced.

Dr Karl Grech Orr is a partner at Ganado Advocates.