The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Tonio Mallia and Mr Justice Joseph Azzopardi in the case ‘Application of Francis Mifsud and Anthony Mifsud’ on February 27, 2015, held, among other things, that it was possible to revive a partnership en nom collectif.

On July 7, 1973, Francis and Anthony Mifsud set up a partnership en nom collectif Chez Francis Hotel, partnership no. P341. On July 9, 1980, this partnership was converted to a limited liability company and on May 14, 1998, it was reconverted to a partnership en nom collectif.

Later, on May 6, 2002, its name was changed to A. F. Enterprises & Co. This partnership acquired certain immovable property in its name. In 2010, the partners agreed to dissolve the partnership, and on February 7, 2011, the partnership was dissolved and struck off.

The partnership failed to transfer certain immovable property of the partnership for the formal transfer to be effected.

It was argued that article 325 of the Companies Act should not be construed to prevent the court to revive a partnership en nom collectif. Article 325 made express provision to reinstate a limited liability company but was silent in the case of other commercial partnerships.

The partners submitted that they would suffer a serious prejudice as they would not be recognised as the lawful owners of the property.

It was stated that it was necessary that the partnership A. F. Enterprises be revived, and restored on the Companies Register. Its liquidation should be reopened to rectify the error.

For this purpose, Francis and Anthony Mifsud requested the court to order the revival of the partnership, and for the liquidation to be reopened under such conditions as the court deemed to be appropriate.

The Registrar of Companies, in reply, pointed out that the Companies Act made no provision for the reinstatement of a partnership after its striking off. The Registrar did not wish to create any abusive precedent, that any error could be rectified by a partnership’s revival. It maintained that the partners of a partnership should proceed with care when dissolving a partnership. It should not be used to rectify any act of negligence committed during the liquidation process.

The Registrar added that if notwithstanding, the court still felt it necessary to provide a remedy, it should be satisfied that there existed serious and just reasons and provided further that there was no other remedy available. Such remedy should be seen as exceptional and extraordinary and should not be granted lightly.

If at all, the reinstatement of the partnership should be limited to complete the formalities and for no other reason, and if the court felt it proper to grant this extraordinary remedy, it should only do so on very clear terms to avoid any abuse and prejudice to third parties, pointed out the Registrar.

The court decision should lay down ad hoc procedures in order to complete all steps, and thereafter, the Registrar could definitively cancel the partnership without any unnecessary delay.

On June 17, 2014, the First Hall of the Civil Court dismissed her requests.

It said it was clear that in the light of article 325 of the Companies Act, our legislator did not intend to make it possible to revive a partnership en nom collectif, after it was struck off the register.

When the courts gave a remedy and the legislator intervened and regulated only a part, in absence of an express provision, this did not mean that the courts were no longer in a position to provide such remedy to certain cases not covered expressly by legislation

The court said that it was precluded by the legislator itself. The legislator had provided expressly for limited liability companies, and by not extending article 325 of the Companies Act, to partnerships en nom collectif, it was clear that it was not intended for such remedy to be granted to partnerships.

It was irrelevant what the court thought to be fair. It said that the role of the court was based on the rule of law, and not to legislate, as this was Parliament’s function. The court had to interpret the wish of the legislator and to apply the law.

The Mifsuds, aggrieved by the first court’s decision entered an appeal, calling for its revocation.

The Court of Appeal maintained that, in principle, the argument of the First Hall of the Civil Court was correct. However, there existed case-law where our courts had granted this remedy to partnerships and our legislator had not thereafter cancelled the application of this remedy to partnerships. In, ‘Abela v Cachia’ dated March 20, 2003, (PA), a request was made for a partnership en nom collectif to be restored on the register, although struck off, and the application was accepted.

Reference was made to case law. The court held that it was possible to reinstate a company in ‘Mayflower Co. Ltd. et v Registry of Companies’ dated January 22, 1999. Likewise, in ‘Migdal Insurance Co. Ltd vs Paul Mizzi noe’ dated May 18, 2001, it was stated that a company could be restored on the register in the interest of creditors, even if struck off.

The possibility of reviving a company was acknowledged by the Court of Appeal in ‘Barbara v El-Ferghani’ dated October 5, 2001, where it was declared that if a merger of two companies could be declared null, the same two companies could be restored to its original condition.

In the case, ‘Migdal Insurance Co. Ltd v Mizzi noe’ dated (PA) May 18, 2001, it was held that in the court’s opinion, the fact that the law did not expressly provide a remedy did not mean that the remedy should not be granted, if it was shown that there existed all necessary elements.

This was also the position in Italy, upon which our law regulating dissolution and winding up was based.

The Court of Appeal noted that this remedy was already provided by local case law and it was not abrogated by our legislator. When the law was clear, there was no room for interpretation and the law should not be subject to hypothetical theories on the meaning of words.

When the courts gave a remedy and the legislator intervened and regulated only a part, in absence of an express provision, this did not mean that the courts were no longer in a position to provide such remedy to certain cases not covered expressly by legislation.

The Court of Appeal held that article 325 of the Companies Act should not be interpreted to exclude “the reinstatement remedy” to partnerships. It did not result that the parties acted fraudulently.

They had erroneously not formally transferred the property of the partnership. This was not a case of abuse, and if the parties failed to look after their affairs before the cancellation of the partnership, this should be reflected in the judicial expense and not in the remedy to be granted.

For these reasons, on February 27, 2015, the Court of Appeal accepted the appeal and revoked the decision of the First Hall of the Civil Court.

Dr Karl Grech Orr is a partner at Ganado Advocates.