Husband ordered to pay damages for mismanagement of family’s business

There was no reason for Reno Grech to transfer the matrimonial home to Merger Enterprises Limited - he did not act in the family’s best interest

In a judgment delivered on 21 March 2014 by Mr Justice Anthony Ellul, in the names of Mary Grech –v- Anthony Grech and Reno Grech, the husband was ordered to pay his estranged wife damages for deliberately mismanaging the business that was their source of income.

Mary Grech filed an action against her husband Reno Grech and her brother-in-law Anthony Grech, who died during the court case, and asked the courts declare that the registration of Merger Enterprises Limited was a simulation and Reno Grech acted fraudulently and that he and his brother should be held responsible for damages and should be ordered to pay her damages.

Mrs Grech explained that the defendants had registered this company on 21 September 1984 and Anthony Grech had 499 shares and Reno Grech had one share. In a previous judgement dated 26 June 1988, the Court had declared that the set up of the company was a simulation and prejudiced the plaintiff since it was set up with the sole purpose of defrauding her from her share of the community of acquests of the commercial activity. Merger Enterprises Limited had acquired all the immoveable property of the community of acquests with the result that Mrs Grech lost all authority over that property. Mrs Grech further claimed that the company was badly run and ran into losses.

Reno Grech defended his position by stating that his wife was not prejudiced and the loans were used for commercial operations.

Mr Justice Ellul examined the facts of the case and found that Mary and Reno Grech married on 23 March 1980. Reno Grech and his brother Anthony had registered the company in 1984. Reno Grech was appointed director of the company. Mrs Grech testified that her husband was in the importation business and since their marriage, the business flourished. She knew of Merger Enterprises Limited. In 1985 Reno Grech transferred their matrimonial home to the company at a price of Lm8000 and it is not clear if the company actually paid this. The company had acquired also a garage in Qormi. 

Separation proceedings commenced in 1996 and in 2001, Mrs Grech was allowed by the court to administer the community of acquests, including the company, and Reno Grech was prohibited from entering into any debts without the court’s approval. In 1998 Mary Grech won a court case, which stated that the shares Anthony Grech held were actually part of the community of acquests. In 2004 Merger Enterprises Limited was ordered to pay Bank of Valletta €69,881 and in 2010 a further €241,886.46.

The Court held that Mrs Grech knew of the existence of the company and trouble started when she discovered how the shares were distributed. This fact alone brought about a favourable judgement in 1998. She had explained in those proceedings that she knew that her husband’s brother was involved, but not that all the shares, except one, were in his name. She discovered this when she and her husband were going through matrimonial problems. This company was a source of income for the family. The case was instituted and in other proceedings, the court had held the deceit existed to how the shareholding was distributed and therefore, in that judgement the court order a redistribution of the shares and not the company’s liquidation. 

The Court held that Anthony Grech was not involved in the running of the company, but this was not the case with Reno Grech. In another court judgement of 27 April 2001, the court had pointed out that Reno Grech was totally negligent in the company’s affairs and showed no interest in improving the situation. So much so that the court had ordered, on 27 April 2001, that Mary Grech was to run the show, although it was already in trouble with the bank.

Mr Justice Ellul stated that there was no reason for Reno Grech to transfer their matrimonial home to Merger Enterprises Limited and that he did not act in the family’s best interest. At the time of the transfer, as the husband, he could have transferred the property without the wife’s signature. 

Furthermore Merger Enterprises Limited owes the bank €241,886 and it seems that a property would be sufficient to pay this debt.

The Court then ordered that Reno Grech pay his wife in damages €41928.50 as half of the value of the matrimonial home, and gave her the right to seek a payment of €69,881, which is the personal guarantee she gave to the bank if the bank proceeds against her.

Malcolm Mifsud is a partner at Mifsud & Mifsud Advocates

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