The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Giannino Caruana Demajo, and Mr Justice Noel Cuschieri in the case ‘Albert Mallia v Albert Camilleri and Harold Portelli’ on December 1, 2014, held, among other things, that a person was entitled to compensation for unjustified enrichment made by another. In this case, the claimant made improvements in a property according to his taste and specifications after signing the promise of sale (konvenju) but the final contract was never concluded.

Albert Mallia had signed a promise of sale agreement on July 5, 1989, with Albert Camilleri and Harold Portelli, undertaking to purchase a flat in Xemxija Heights, limits of St Paul’s Bay. Camilleri and Portelli were the owners of the property.

Immediately after the konvenju, Mallia carried out certain finishing works at his own expense. As the works in the property had not been completed, he asked to extend the konvenju. The konvenju was extended twice.

It resulted that the owners refused to extend it a third time, and eventually proceeded to sell the flat to a third person. The contract was never concluded.

Faced with this situation Mallia filed legal proceedings against the owners for unjustified enrichment.

The Court of First Instance decided on March 10, 2011, in favour of Mallia, condemning the owners to pay him €9,079, with legal interests from the date of notice of writ of summons.

In order to plead unjustified enrichment, the action de in rem verso, three elements had to be proven:

1. The enrichment, the advantage reaped by the defendants;

2. The nexus between the added value provided by the claimant and the advantage enjoyed by defendant re: ‘Said v Testaferrata Bonnici’ dated June 16, 1936;

3. That the defendant obtained a benefit from the claimant without justification.

It was established under case law that it was not licit for someone to make a profit at the expense of another. A person was entitled to compensation equivalent to the value of the improvements: re: ‘Emanuel Bartolo v Victor Micallef’ dated October 28, 2004.

It resulted that in this case no action was taken to enforce the konvenju in terms of article 1357 of Chapter 16. The konvenju expired and the parties returned to their position before they signed it.

The first court felt that Mallia should be reimbursed for the improvements made in the flat, in particular when the owners knew that he was carrying out such works, which were useful to them. They could not be allowed to take advantage without paying for it: re: ‘George Sladden v Albert Mais et’ (PA) dated January 27, 2005.

“The amount recoverable is limited on the one hand by the value of the enrichment; ...(not)... at the time of the intervention but at the date of action. If at the date the value of the benefit has disappeared, the action will fail. The amount recoverable is limited on the other hand by the amount of the claimants’ own expenditure: it is immaterial that at the time of the action the value of the benefit enjoyed is considerably higher.” – Amos & Walton, op. Cit., page 199.

‘Richard Azzopardi v Isabel Cassar’ (PA) dated March 1, 2001: to determine the value of the benefit, the court had to consider the amount of the costs incurred, as well as other factors which could affect the value of the works such as good or bad faith of the person obtaining the advantage.

The first court did not feel that there was bad faith in the circumstances. The improvements still existed and the owners obtained a benefit.

It assessed the value of the improvements to be Lm3,897, with legal interests from May 19, 1992, from the date when the owners were notified of Mallia’s writ of summons.

Aggrieved by the decision of the first court, the owners entered an appeal requesting its revocation.

Their appeal was based on two grievances: the sum liquidated and the date when interest accrued. It was stated that interest should commence from the date of the court’s decision.

The court said that the owners were aware that Mallia would carry out the works according to his taste. They did not object to these works once Mallia was footing the bill

Amount: the sum should be reduced in view of the fact that the works were carried out according to the taste of Mallia and that the costs would have been less had they done the works. In fact, several expenses were not required, they said.

The court noted that the agreement was that the owners reduce the price of the flat up to the value of the improvements.

It was of the opinion that the fact that the improvements were carried out according to the specifications of Mallia did not reduce their value. Nor was there proof that the value of the flat increased substantially owing to capital appreciation and not as a result of the improvements made by Mallia.

The court maintained that the value of the flat increased because of the improvements. On May 19, 1992, the owners sold the flat for Lm16,500 ­– Lm3,000 more than they had agreed with Mallia in the konvenju of July 5, 1989.

Mallia’s action was for unjustified enrichment, de in rem verso which today was stipulated in article 1028A (Chapter 16) which provides:

“(1) Whosoever, without a just cause, enriches himself to the detriment of others shall, to the limits of such enrichment, reimburse and compensate any patrimonial loss which such other person may have suffered.”

The court said that the owners were aware that Mallia would carry out the works according to his taste. They did not object to these works once Mallia was footing the bill.

Interests: Mallia requested a fixed sum and the amount fixed by the court was very close to what Mallia sought. The court had the discretion to order interests from the date of the writ of summons and if the debtor did not wish to pay interest, he could deposit the sum in the Registry of the Courts. – (CA) ‘Mario Sacco v Peter Muscat Scerri’ dated January 31, 2003; ‘Saviour Ellul noe v AIC Joseph Ellul Vincenti’ (PA) dated January 21, 2005.

The fact that the court reduced the amount did not mean that interests could not accrue from the date of the request: ‘(App.Inf.) Fogg Insurance Agencies Ltd noe v Paul Tabone’ dated February 17, 2003.

A debtor should not take advantage of the fact that he had not yet been condemned by a court and avoid paying interests until a decision was delivered.

For these reasons, on December 1, 2014, the court gave judgment by dismissing the owners’ appeal.

It held that the owners could easily verify the value of the improvements.

It declared that interest accrued from the date of the notice of the writ of summons as the amount condemned by the first court was similar to what was claimed in Mallia’s writ of summons.

Dr Karl Grech Orr is apartner at Ganado Advocates.