When a promise of sale may not be honoured

Mr Justice Lino Farrugia Sacco on 16 December 2013 decided in the lawsuit between Patricia Degiorgio –v– Ramel u Zrar Limited that a promise of sale agreement may not be enforceable if one or more of the conditions listed in the agreement cannot be met.

Patricia Degiorgio filed an action in court where she held that she had entered into a promise of sale agreement with the defendant company to purchase an apartment in St Paul's Bay on 28 October 2003. The agreement was registered with the tax authorities and the agreement was valid until 31 December 2004. On 21 December 2004, the plaintiff filed a judicial letter against the company calling upon them to appear on the final deed. From the searches it resulted that the apartment was subject to a temporary emphyteusis and not freehold as mentioned in the agreement. However, the plaintiff was prepared to purchase this property all the same. Apart from this, there was another condition where the company bound itself to finish off the works, however, no works had taken place. The plaintiff asked the court to order the defendant company to appear of the deed of sale. 

Ramel u Zrar Limited defended the action by stating that the some of the conditions mentioned in the promise of sale agreement could not be fulfilled and therefore, they were not in a position to sell her the property. 

Mr Justice Farrugia Sacco examined the evidence brought before the Court as, for example, Stephen Vella, the property consultant who testified that he was present for the signing of the agreement, which states that the apartment was to be finished with electricity, water supply, gypsum and aluminium doors windows and the front door. However, these works were not completed by December 2004. There was another issue that the property was not freehold. There were attempts to extend the agreement but this did not take place.

The plaintiff testified that the directors of the company had promised and bound themselves to complete the finishing of the apartment and that it was freehold. It transpired that there was a temporary emphyteusis of 83 cents per annum for a hundred years, since the owners were the government and the Church. Notwithstanding this temporary emphyteusis, Ms Degiorgio still wanted to purchase the property. She mentioned that she wanted an extension of the agreement for the company to finish the works.

Gaetano Abdilla, on behalf of the defendant company had presented an affidavit stating that he was under the impression that the emphyteusis was perpetual and not temporary. The company intended to redeem the ground rent, and this was why they mentioned in the promise of sale that the property will be sold freehold. According to Mr Abdilla, Ms Degiorgio had a problem with this. 

It was impossible for him to redeem the ground rent and therefore, did not want to extend the promise of sale agreement with the same conditions, once he knew of this legal problem. On Christmas Eve of 2004, he received a judicial letter demanding that the property be sold freehold and that the company should effect the sale. He replied to the judicial letter explaining what had taken place, but the plaintiff had already instituted this action. Other witnesses testified that Ms Degiorgio was insisting to purchase the apartment with the original conditions.

The Court examined the law and quoted Article 1357 of the Civil Code on the effects of the promise of sale. Then Mr Justice Farrugia Sacco examined the judicial letters sent by the plaintiff where in fact it mentioned that she was aware that there was a temporary emphyteusis and was interested in purchasing the property freehold. The parties agreed that on 31 December 2004, the apartment was not freehold and that the finishing was not complete. 

The Court quoted from previous judgement, as Spettur S Camilleri -v- E & C Contractors Limited of 3 May 2012 which had stated that if the purchase contract cannot contain the conditions of the promise of sale agreement, the parties should be placed in the same position as they were prior to signing the agreement. This was echoed in other previous judgement such as R Micallef -v- C & C Contractors Limited decided on 4 October 2012 and A Bonnici -v- M Muscat et decided on 11 May 2012.

The Court then upheld the defendant company pleas and turned down plaintiffs claim.

Malcolm Mifsud is a Partner at Mifsud & Mifsud Advocates


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