The Court of Appeal, composed of Chief Justice Vincent De Gaetano, Mr Justice Albert J. Magri and Mr Justice Tonio Mallia, on July 30, 2010, in the case John Patrick and Mary Carmen Hayman et vs Fal-Con Limited, held, among other things, that any doubt that payment was made went in favour of the debtor.
The facts in this case were as follows:
Fal-Con Ltd wished to purchase a garage in Żebbuġ from Alfano Company Ltd for the price of Lm70,000.
Upon signing the promise of sale agreement (konvenju) on July 5, 2000, Fal-Con Ltd issued a cheque of Lm7,000, made out in favour of Notary John Hayman (now deceased) as part-payment of the total price.
Notary Hayman passed away on April 23, 2001.
It so happened that this cheque of Lm7,000 was not cashed in time. When, after the Notary’s death, his heirs presented it to the bank, the cheque was not honoured and was referred to drawer.
The heirs of notary John Hayman put forward the argument that, once sellers had confirmed receipt of the Lm7,000 deposit on the contract, it was to be assumed that Notary John Hayman must have paid the sellers from his own personal account.
It resulted that there was no clear evidence that the Dr Hayman had actually paid the Lm7,000 deposit to the sellers
However, although in the contract of sale of September, 2000, the sellers acknowledged receipt of this Lm7,000 deposit; the notary had to keep the deposit until full searches were carried out.
Subsequently, the parties reduced the final price to Lm69,550. A deed of correction was entered into before notary Mary Grech Pace on April 11, 2001. The parties agreed that the Lm7,000 deposit would be paid directly to Alfano Company Ltd after deducting Lm550, representing the cost of waterproofing works. The balance of Lm6,450 had to be paid by December 20, 2001. The deed allowed the buyer to stagger payments until December 20, 2004.
On October 2, 2002, Alfano Company Ltd declared receiving the sum of Lm6,450, in accordance with the contract published before Dr Hayman dated September 4, 2000 as amended by the contract published by Dr Grech Pace dated April 11, 2001. Finally, on October 28, 2002, by a contract in the acts of notary C. Falzon, all hypothecs inscribed over the garage in favour of the seller, to secure payment of the price, were cancelled, as seller had declared full receipt of the purchase price.
Faced with this situation, the heirs of Dr Hayman filed legal proceedings against Fal-con Ltd, requesting a refund of Lm7,000.
The company in reply contested liability. It submitted in its defence that:
(1) The heirs of Dr Hayman did not have juridical interest. The payment of the deposit was intended as a deposit of the purchase of property which sum, if it all, was due to the seller and not to the notary’s heirs. In this respect they asked to be freed from the proceedings.
(2) This amount was no longer due to the seller, and/or to the heirs, as shall be proven during these proceedings.
Fal-con Ltd in addition rebutted having any liability towards Dr Hayman’s heirs.
On June 28, 2007, the court of first instance decided in favour of the heirs and condemned Fal-Con Ltd to pay Lm7,000 with interests.
Fal-con Ltd explained to the first court that, although on the contract the seller had acknowledged receipt of the Lm7,000 deposit, no payment had in fact been effected. Payment had to be made at a later stage, directly to the sellers.
The first court was, however, not satisfied with the credibility of Fal-Con Ltd’s version of events.
It said that Fal-Con Ltd was obliged to pay the estate of the late Dr Hayman Lm7,000. It felt that Fal-Con Ltd conjured a scheme to avoid paying the notary.
Fal-con Ltd had to honour the cheque which it had issued in favour of Dr Hayman and in this respect his heirs had juridical interest to present this case.
As proof of payment by the late Dr Hayman, the first court referred to a declaration in the contract published on September 4, 2000 where the seller acknowledged receipt of this amount. It considered that the subsequent acts to correct or cancel what was originally stated in the first contract were deemed to be fraudulent vis-à-vis Dr Hayman.
Aggrieved by the decision of the first court, Fal-Con Ltd entered an appeal, calling for its revocation. The company pleaded that the heirs had to prove that Dr Hayman had paid Lm7,000 to the sellers.
On July 30, 2010, the Court of Appeal gave judgment by accepting their appeal and by revoking the decision of the first court.
The following reasons were given for the court’s decision:
(1)The heirs were duty bound to prove on a balance of probabilities that the late Dr Hayman had paid the sellers Lm7,000. Any doubt went in favour of the debtor: re: Abela Fitzpatrick vs Web Trading Ltd dated November 24, 2003. In this case, the court was not satisfied with the evidence produced by the heirs. It was not proven that Dr Hayman had paid the sellers. Despite the fact that the sellers may have declared in the contract to have received payment, in reality there was no evidence that payment was in fact made. Nor did this amount have to be paid on the contract. After Dr Hayman’s death, a deed of correction was entered into on April 11, 2001. It was stated that Fal-Con Ltd had to pay Lm6,450 instead of Lm7,000. On October 2, 2002, Fal-Con Ltd issued another cheque for Lm6,450 which was cashed by the sellers. Thereafter, October 28, 2002 the sellers agreed to cancel the hypothecs over the property.
If Dr Hayman had paid the sellers Lm7,000, it was expected that he would have taken immediate action to recover this amount, particularly if he faced problems to cash the cheque.
For these reasons the court concluded that it was not satisfied that the late Dr Hayman had paid sellers the deposit of Lm7,000.