The First Hall of the Civil Court, presided over by Mr Justice Mark Chetcuti, on June 18, 2013, in the case “Malta Property Auctioneers Ltd vs Visual & Sound Communications Ltd” held, among other things, that not every type of misrepresentation in a contract constituted deceit under Maltese law. In this respect, Visual & Sound Communications Ltd was obliged to observe the agreement.

The facts in this case were as follows.

(Since) a buyer had been found, there was no need to advertise the property (again)

Malta Property Auctioneers Ltd was engaged by Visual & Sound Communications Ltd as exclusive agents to sell No. 6, Kiki, Old Mill Street, Mosta, by an agreement dated June 23, 2010. The reserved price for the property was €270,000.

Clause 2 of the agreement stipulated that: “During the period of exclusive right, upon receipt of a simple request in writing from the auctioneer, the seller will be liable to immediately pay to the auctioneer as compensation for services rendered the equivalent amount as stated in clause 1C mentioned above, on the agreed reserve price and will also be responsible and liable for any expenditures incurred for any legal obligations in any one of the following situations:

(a) If the lot is sold or in any manner transferred under any title whatsoever, or the seller enters into any agreement for the sale, rent, transfer or promise of sale or transfer of the lot or part thereof, or of any real or personal rights over the lot, without the presence or without written consent of a representative of Malta Property Auctioneers and the final deed of sale is to be signed before or after the expiry of the period of exclusive right.

(b) If any act or omission of the seller which prevents in any manner whatsoever the sale of the lot by the auctioneer in accordance with this agreement, or any withdrawal of the lot from the auction by the seller in any manner and for any reason whatsoever.”

It resulted that during the period when Malta Property had exclusive rights, Grace Borg, on behalf of defendant company, had signed a konvenju with the assistance of another estate agent, Frank Salt Estate Agents.

At this point, Grace Borg had instructed Malta Property Auctioneers to remove the property from their list. Malta Property claimed that this was a breach of theagreement, and that under clause 2 it was entitled to a commission of 4.5 per cent of the purchase price (€14,337).

Faced with this situation, Malta Property proceeded to file legal proceedings requesting the court to declare Visual & Sound Communications Ltd to be responsible for violating the contract dated June 23, 2010, and to order it to pay damages (€14,337) or such other sum.

In reply, defendant company Visual & Sound Communications Ltd submitted that Malta Properties had deceived them by telling them that it had an agreement with other estate agents to the effect that in case the sale was concluded through the assistance of such other agents, the brokerage commission would be split between them.

In point of fact there was no such arrangement in place, and as Visual & Sound Communications Ltd wished to sell the property quickly, it had contacted another estate agency.

It was further stated that Malta Property had not observed the agreement. Malta Property was to have held two auctions, one in September 2010 and another in January 2011. Instead, it had held only one auction, in October 2010. Allegedly, Malta Property had failed in its contractual obligations and had no right to payment.

Visual & Sound Communications stated that Malta Property had failed to assist it to sell its property and this was why it had had to use other estate agencies.

The court considered that Malta Property had exclusivity for two auctions, one auction to be held in September 2010 and another in January 2011.

Frank Salt Estate Agents, on the other side, denied having any agreement with Malta Property Auctioneers to share their commission. Frank Salt had no connection with other agencies and would not have accepted to act as agents if they had to share their commission.

In view of the fact that Malta Property Auctioneers produced a copy of the agreement signed by both parties, and in view of the fact that no action was taken to attack the validity of the agreement, the court considered the agreement to be binding in the circumstances.

Under the agreement, Malta Properties had a right to change the date of the auction. It had held the first auction within the period of the agreement. As regards the second auction, once Malta Properties had been informed that a buyer had been found, there was no need to advertise the property for the second auction. In this respect, the court was of the opinion that Malta Properties had advertised the property according to the agreement.

As for exclusivity, in this case the property had been sold with the assistance of another estate agent in the period when Malta Property Auctioneers had exclusive rights.

The court felt that even if there was some misrepresentation by Malta Property Auctioneers, this did not constitute deceit under Maltese law. Reference was made to Alberto Trabucchi: “The dolo which vitiated contracts was the dolus malus, which was different from ordinary misrepresentation. The latter type was less harmful and was tolerated and accepted in business, and did not bring about the nullity of contracts.”

In the court’s opinion, Visual & Sound Communications Ltd had violated the agreement with Malta Property Auctioneers when it engaged other agents to sell its property during the period of exclusivity.

Defendant company was aware that there was no agreement between the estate agents for the sharing of their commission.

The court said that Visual & Sound Communications Ltd was obliged to observe the agreement. It should have notified Malta Property Auctioneers that it had appointed Frank Salt Estate Agents and should have tried to find a solution.

Visual & Sound Communications Ltd could not claim to have been deceived. As it was aware that there was no such arrangement between estate agents, it had still chosen to ignore the agreement with Malta Property Auctioneers. The court noted that it had made no claim of having been deceived before proceeding with the sale of its property.

For these reasons, the First Hall of the Civil Court gave judgment by declaring that Malta Property Auctioneers had every right to invoke clause 2 of the agreement. Clause 10 did not apply as there was no agreement between Malta Property Auctioneers and Frank Salt Estate Agents. The court held Visual & Sound Communications Ltd to be responsible for violating the agreement dated June 23, 2010, and condemned it to pay €14,337 in damages.

Dr Karl Grech Orr is a partner at Ganado Advocates.