The Court of Appeal, composed of Chief Justice Vincent De Gaetano, Mr Justice Joseph A. Filletti and Mr Justice Geoffrey Valenzia, on May 28, held, among other things, that if a lease agreement imposed a solemn procedure to terminate the lease, such as the service of a judicial act, within a certain period, this had to be followed to rescind the lease. In this case, the lease agreement had imposed a particular procedure which had to be observed to terminate the lease and an informal letter to the owners was not considered to be sufficient.

The facts in this case were as follows:

Owners Diedre Cachia and her husband, John, leased premises in Valley Road, Msida, including a garage and drive to the company, Gaba Diamonds Company Ltd by way of a private agreement dated June 17, 1996.

The company wished to expand their business and acquired this property, with the intention of inter-connecting it with their main Valley Road premises.

It was stated in the agreement per article 6 that: "The lessee declares that he knows and is aware that the tenement has not been licensed by the competent authorities for the operation therefrom of any commercial enterprise whatsoever. The lessor authorises the lessee to apply for the issue by the competent authorities unto the lessee of the licenses and permits necessary for the commercial operation of the tenement by the lesee in the manner set out in Article 3 of this agreement."

Article 12 (2) and (3) of the agreement stipulated that: "Where in terms of this agreement either party is entitled to determine this lease, such determination shall be deemed to have occurred by the simple act of service of a judicial letter filed by the party determining the lease on demanding the dissolution or determination of the lease. Upon determination of the lease by either party, the lessee shall vacate the tenement and surrender same unto the lessor."

Gaba Diamonds had the right to terminate the five-year lease, during the first year, before October 1, 1997 "provided that the lessee shall have the right during the first year of the lease to terminate and return the premises to the lessor... in the eventuality that the necessary permits from the competent authorities are not issued by October 1, 1996".

It resulted that after the Planning Authority refused to issue the relative permit, Gaba Diamonds lost interest in the premises.

Despite wishing to terminate the lease, the company had not followed the procedure for termination in terms of articles 12 (2) and (3) of the agreement. Instead of serving a judicial letter to demand the termination of the lease, they claimed to have informed the owners informally. Their argument was that the word "determination" in clause 12 (3) of the lease agreement had a different meaning to "termination".

Owners Mr and Mrs Cachia considered the lease to have remained in vigore, and demanded full payment of rent.

The company, had not paid rent instalments, amounting to Lm12,000, representing the rent due for two years.

Faced with this situation, Mr and Mrs Cachia filed legal action against the company requesting the court:

(1) To declare that the lease was not validly terminated; and

(2) To condemn the company to pay them Lm12,000, two years, rent, payable in advance for the period September 1997 to September 30, 1999.

In reply, Gaba Diamonds contested liability. It submitted in its defence that:

(1) The lease agreement was not binding upon it as the signature of two directors was necessary. One director did not have legal representation.

(2) It had validly terminated the lease by its letter dated August 13, 1996, and in this respect no rent was outstanding.

It resulted that their first judicial letter was sent on April 7, 1998. Gaba Diamonds had deposited the keys in custody of the courts on November 18, 1997. Mr and Mrs Cachia withdrew the keys at the end of the lease.

The company insisted in their negotiations that they had reserved the option to cancel the lease if the permit was not obtained.

On March 5, 1998, the Court of First Instance decided against Gaba Diamonds. It said that the lease had not been validly terminated and condemned the company to pay the owners Lm12,000. It noted that as matter of principle, where there was an agreement in writing, the agreement contained all that the parties agreed upon.

It was assumed that if the agreement was silent on an issue, it was either because the parties had not reached an agreement or that one party renounced it: Frendo vs Caruana (CA) dated January 28, 1999.

Oral evidence could be produced to clarify certain issues; however, it was not admissible to rebut what was already clear in the agreement: A. Brincat vs A. Saliba dated November 14, 1983. Article 1002 of the Civil Code provides "where by giving to the words of an agreement the meaning attached to them by usage at the time of the agreement, the terms of such agreement are clear, there shall be no room for interpretation".

The cardinal rule was that documentary evidence could not be used to change what the parties agreed in writing, save for good reasons: Grech Sant noe vs Farrugia noe (App Civ) dated February 28, 1997.

The first court could not accept the Gaba Diamonds' argument that the word "determination" in the agreement had a different meaning to "termination".

In the context of the agreement, the two words had the same meaning.

It was of the opinion that Gaba Diamonds' letter dated August 13, 1996 did not have the effect of terminating the lease.

Aggrieved by the decision of the first court, the company, Gaba Diamonds entered an appeal, calling for its revocation. It reiterated its pleas that no rent was due the and that it had informed the owners of its intention not to terminate the lease.

On May 28, 2010, the Court of Appeal gave judgment by dismissing the appeal and by confirming the decision of the first court.

The following reasons were given for its decision:

(1) In this case, a judicial act was necessary. Agreeing with the first court, it held that the word "determination" in the lease agreement had the same meaning as "termination". This was understandable, pointed out the court, as the termination of a lease was a serious act, which warranted a formal procedure to ascertain when the notice was sent and received. In this respect, it was not proven that Gaba Diamonds gave proper notice to terminate the lease, as required by the lease agreement.

(2) Gaba Diamonds' letter of August 13, 1997 was not adequate to terminate the lease. In addition no proof was brought to establish when the notice was sent and received.

Gaba Diamonds retained the keys and only deposited the keys in court on November 18, 1997, well over one year from when they had the right to terminate the lease in good time, so concluded the court.