The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Tonio Mallia and Mr Justice Joseph Azzopardi, on December 15, 2015, in the case ‘Dr Josette Sultana on behalf of VOF Vastgoed B&B v Maray & Grant Ltd and Raymond Buhagiar’, held, among other things, that under article 34(2) of Regulation 44/2001, the Maltese courts still had to make an independent investigation as to whether the defendants were duly notified and whether they were given sufficient notice to prepare their defence. The courts ordered the enforcement of the Dutch decision in Malta.
The company VOF Vastgoed B&B of Holland applied to enforce the decision of the Courts of Assen, Holland, dated July 17, 2012, in the case ‘ VOF Vastgoed B&B v Maray & Grant Ltd and Raymond Buhagiar’ in Malta in accordance with EU Regulation 44/2001.
The Dutch courts ordered Maltese company Maray & Grant Ltd to honour its agreement with VOF Vastgoed B&B and imposed a penalty of €25,000 for each day of default. The penalty was capped at a maximum of €1 million.
According to article 38(1) of Regulation 44/2001, a decision delivered in one member state could be enforced in another member state on the application of an interested party. The decision of the Dutch courts dated July 17, 2012, was declared enforceable in terms of a certificate in the form of Annex V of Regulation 44/2001, issued in the Dutch courts.
In reply, defendants Maray & Grant Ltd and Raymond Buhagiar claimed that they had not been notified and this was contrary to Article 34(2) of EU Regulation 44/2001.
In addition, it was stated that the decision could not be enforced against Ray Buhagiar as the decision imposed an order only on the defendant company.
On December 11, 2012, the First Hall of the Civil Court declared that it should recognise the decision given by the Courts of Assen, Holland, dated July 17, 2012, v Maray & Grant Ltd and Buhagiar; and that the decision was enforceable against the defendant company, pursuant to Regulation 44/2001.
Aggrieved by the decision of the first court, both defendants entered an appeal, requesting the courts to declare that the decision of July 17, 2012, was not enforceable in Malta.
The Appeals Court considered that, after the Dutch courts delivered the decision of July 17, 2012, the defendants did not appeal in Holland. Subsequently, VOF Vastgoed B&B invoked article 38(1) of Regulation 44/2001 to enforce the decision in Malta.
The decision was declared provisionally enforceable by the Courts of Assen and a certificate was issued under Regulation 44/2001.
The court said that EU Regulations prevailed over domestic law in case of conflict, and Maltese domestic law applied only insofar as not inconsistent.
The Dutch courts ordered the Maltese company, Maray & Grant Ltd, to honour its agreement with VOF Vastgoed B&B and imposed a penalty of €25,000 for each day of default. The penalty was capped at a maximum of €1 million
It was not the function of the Maltese courts to reopen a case which was already decided by the courts in another member state on its merits.
Maray & Grant based their appeal upon article 34(2) of Regulation 44/2001 which provides that a judgment can be challenged “where it was given in default of appearance, if the defendant was not served with the document which instituted the proceedings or with an equivalent document in sufficient time and in such a way as to enable him to arrange for his defence, unless the defendant failed to commence proceedings to challenge the judgment when it was possible for him to do so”.
Under article 34(2), the Maltese courts still had to make an independent investigation whether the defendants were duly notified and whether they were given sufficient notice to prepare their defence. Reference was made to ‘Trade Agency Ltd v Seramico Investments Ltd’, dated December 6, 2012.
In order to satisfy article 34(2), Regulation 44.2001, three conditions had to exist:
• That the decision was given in the defendant’s absence;
• The defendant was not notified of the act in order to prepare his defence; and
• The defendant failed to initiate proceedings to contest the decision which was delivered in another member state, when this was possible.
If one of these elements were lacking, the decision could not be enforced.
In this case, Maray & Grant Ltd did not show why it failed to appeal from the Dutch decision.
Reference was made to ‘Apostolides v Orams’, dated April 28, 2009, where it was held that “article 34(2) of Regulation No. 44/2001, unlike article 27(2) of the convention, does not necessarily require the document which instituted the proceedings to be duly served, but does require that the rights of the defence are effectively respected...
“Under article 34(2) and 45(1) of Regulation No. 44.2001, the recognition or enforcement of a default judgment must be refused, if there is an appeal, if the defendant was not served with the document to enable him to arrange for his defence, unless the defendant failed to commence proceedings to challenge that judgment before the courts of the member state of origin when it was possible for him to do so.”
The court ruled that “it is clear from the wording of those provisions that a default judgment given on the basis of a document instituting proceedings which was not served on the defendant in sufficient time and in such a way as to enable him to arrange for its defence must be recognised if he did not take the initiative to appeal against that judgment when it was possible for him to do so”.
Maray & Grant Ltd made reference to article 19 of Regulation 1393/2007 on the service of judicial documents.
Both article 34(2) of Regulation 44/2001 and article 19 of Regulation 1393/2007 provided a remedy if a decision was taken in absentia, provided the defendant filed proceedings to attack the decision and had a prima facie defence. In this case, the defendant company did not utilise its remedy to appeal before the Dutch courts and in this respect the court felt that Maray & Grant Ltd was not justified to invoke article 19.
The court noted that the procedure mentioned in article 256 of Chapter 12 was not applicable in the circumstances, once Regulation 44/2001 did not impose any such formality. The court said that VOF Vastgoed B&B had observed the provisions of Regulation 44/2001 and this regulation prevailed in case of any inconsistency with domestic law.
Reference was made to ‘ASML Netherlands BV v Semiconductor Industry Services GmbH (SEMIS)’, dated December 14, 2006:
“20. By contrast, Article 34(2) of Regulation NO.44/2001 does not necessarily require the document which instituted the proceedings to be duly served, but does require that the rights of the defence are effectively respected.
“21. Finally, Article 34(2) provides an exception to ground for refusal of recognition of enforcement of a judgment, that is to say, in the case where the defendant has failed to commence proceedings to challenge the judgment when it was possible for him to do so...
“43. It is service of the document instituting proceedings and the default judgment, as provided for in article 34(2), in sufficient time and in such a way as to enable the defendant to arrange for is defence which afford it the opportunity to ensure that his rights are respected before the courts of the state in which judgment was given.
“44. Therefore, the broad logic of Regulation 44/2001 does not require service of a default judgment to be subject to conditions more stringent than those provided for in article 34(2) as regards service of the document instituting proceedings.”
It was contended further that the Dutch decision could not be enforced against Ray Buhagiar as he had not been held liable. The Dutch courts had only ordered Maray & Grant. In this respect the decision of the first court was correct and it was not necessary to revoke its decision, pointed out the Appeals Court.
For these reasons, on December 15, 2015, the Court of Appeal gave judgment by dismissing defendants’ appeal and declaring that the decision of the Dutch courts dated July 17, 2012 to be enforceable against defendant company Maray & Grant Ltd.
Dr Karl Grech Orr is a shipping partner at Ganado Adovates.