Contract Rescinded due to MEPA Enforcement Notice

The First Hall of the Civil Court decided on 13 January 2014 that a contract of sale of a property will be rescinded after it was concluded that the buyer’s consent was violated by fraud, since the property was subject to a MEPA enforcement notice.

Michael Denis Newton in his name and on behalf of his son Paul Howard Newton filed an action against Joseph and Alexandra sive Sandra Camenzuli and Michael and Maria Lourdes Spiteri. In his writ, Newton claimed that he had purchased a flat in Qawra on 15 June 2005. After the sale he learned that the apartments were built without the building permits. He claimed that this was tantamount to a latent defect and that his and his wife's consent at the time of sale was vitiated due to the defendant's fraud.

The Camenzulis defended the action by invoking prescription in terms of Article 1222 & 1431 of the Civil Code.

Mr Justice Anthony Ellul commented that the plaintiffs were asking for two conflicting claims. The first was to rescind the contract due to fraud and the second was to invoke the guarantee granted by law for latent defects. The claim of latent defect depended on the fact that the contract was valid at law. 

The Court examined the pleas that the actions was time barred. The property was purchased on 15 June 2005 and the plaintiff had signed an agency agreement with Dhalia Real Estate Services on 28 April 2006. Dhalia had informed the plaintiffs that there was an enforcement order against the property in June 2006. The lawsuit was filed on 15 May 2008. The defendants Spiteri were notified on the action on 27 April 2011, after they were ordered to join the action as defendants. Article 1222 allows a prescriptive period of two years from the date when the fraud was discovered. Since the evidence indicated that the plaintiff knew of the MEPA problem in June 2006 and the action was filed in May 2008, the two years had not elapsed.

On the other hand an action based on the guarantee for latent defect had to take place within one year, as according to Article 1431(2) of the Civil Code. This was in fact time barred.

The evidence further showed that the enforcement notice was issued on 5 May 2004 and addressed to Joseph Camenzuli. Although he claimed that he never received it, it appears that his wife had signed for the registered post containing the notice. It does not result that the plaintiff carried out any enquiries on the building permits before purchasing the property and they were not informed of it upon the signing of the contract. Mr Justice Ellul held that the Camenzulis had deliberately not informed the purchasers of the irregularities and therefore, they were not bone fide vendors. The Court held that the defendants Camenzuli had a legal obligation to inform the purchasers and did not need to wait for specific questions or have them verify with MEPA. They misrepresented the sale when in the contract they declared that the property was built according to laws and building permits. In a previous judgment delivered C Barbara -v- J Camenzuli, the Court had held that who purchases needs not to verify with the competent authorities, because the purchaser should presume that the object of the sale is good for use.

The Court explained that during the lawsuit there were attempts to regularise the permits with MEPA, however the Court appointed expert held that there were some issues that "might not be sanctioned by MEPA..." and parts would have to be demolished, something that the plaintiff refused to do.

The Court moved on to the claim for damages. The Court appointed expert valued the property to €112,000. The purchase price was €93,174 and therefore the difference was €18,826. However the Court held that the action was based on a breach of an express warranty given by the vendor and those damages that the plaintiffs were entitled to claim what was in fact suffered by the illegal conduct of the defendant and this did not include the loss of profits. The damages were limited to the price of the value and the expenses of the sale such as duty and notary's fees.

The Court ordered that the contract be rescinded and that the Camenzuli's pay €93,174.94 and a further €5,567.20 to Newton.

Malcolm Mifsud is a partner at Mifsud & Mifsud Advocates

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