Who fails to present statement of defence on time, may do so only in exceptional circumstances

If a defendant to a court case fails to present a statement of defence within twenty days, the court may allow it to be presented only in exceptional circumstances.

This was held on 17 February 2022 in Evelyn Farrugia et -v- Global Capital Financial Management Unit Limited. The judgement was delivered by the Court of Appeal, presided by Judges Giannino Caruana Demajo, Tonio Mallia and Anthony Ellul.

The plaintiffs filed an action by means of a sworn application, wherein they explained that in 2008 they invested sums of money in Lifemark SA Secure Income Bond and until 2010 they were receiving interests on these investments.

In 2010 the investments were not doing well and the plaintiffs discovered that the package of investments were intended for experienced investors due to the complexity on how the investments were distributed. The defendant company has described this investment as safe and secure. It turned out that the regulator in Luxemburg had engaged administrators to take over the management of Lifemark SA and in 2012, the company was being sold to refund the investors. The plaintiffs were offered a minute sum as compensation compared to what they had invested and made considerable financial losses. The plaintiffs accused the defendant company of acting fraudulently because it did not explain the risks involved in these investments and gave the impression that they were safe. In order works they did not act diligently.

The Plaintiffs felt that they were taken advantage of because they told that the investments were reliable.

The plaintiffs asked the court to declare that the company acts incorrectly and not according to the Malta Financial Services Authority’s guidelines. They also asked the court to order the company to pay compensation for their loss,

The defendant company did not file a statement of defence and the Court upheld the Plaintiffs’ requests.

The company filed an appeal on two grounds. The first being that it should have been allowed to file a statement of defence and the second is that the Court did not decide the merits of the case correctly.

With regard to the first ground of appeal, the company explained that there was a technical problem with the emails. The acts of the case was notified to a new employee of the company, who immediately emailed the documents to the lawyer. It resulted that the email did not arrive to its destination. When the company officials spoke to the lawyer, they noticed that was a “delivery failure notification”, which was not noticed. The First Court held that the email was copied to other company officials. The notification failure message was only sent to the person who sent the email.

The Court of Appeal held that according to caselaw the authorisation to file a statement of defence beyond the 20 day period is given in exceptional circumstances. This should never become a rule. The authorisation should be given if the failure to file the statement of defence was not voluntary or due to negligence.

The justification must be accepted by the Court and must include an legitimate impediment for not filing the statement of defence. This impediment must be independent from the will of the defendant and a gross error. The authorisation may be given is there was a situation of impossibility.

The evidence showed that the error was invincible. The acts of the case was notified on 20 October 2015. On the same day the company’s employee sent the copies of the documents by email to the lawyer and marked it as “importance high”. Immediately received an email that the email’s size was too large.

Therefore, the company should have noticed that the email was not sent. The email was copied to two other company officials, and it was presumed that they had received the email. The company should have also noticed that there was something wrong when their lawyers did not reply to the email. Nobody from the company enquired with the lawyers nor asked for an update. The case is of the parties to the case and therefore, the defendant company should have adopted internal procedures to make sure that it follows up with the lawyers to make sure that the statement of defence is filed. Since the company did not this was a massive failing from its part.

The employee explained that he thought that the reply to the case should have been filed a day before the first sitting, however, the court had nothing of this and the Court of Appeal commented that there was a notice on the acts of the case, specifically saying that the statement of defence should be filed within 20 days.

The email in question also read “Please let me know how we should proceed with this”. Therefore, once a reply was not received why did the company not follow up. It was only on 19 ta’ November 2015, did the company find out that the lawyers never received the email.

The Court therefore, turned down this ground of appeal. The Court turned down the appeal also on the merits of the case.