Extension to a promise of sale agreement must be registered with Inland Revenue

In the case Darren and Sharon Cuschieri et vs. Jane Muscat et, the First Hall Civil Court, presided over by Honourable Madame Justice Jacqueline Padovani Grima, on 9 April 2014, was faced with the decision as to whether the defendants were to appear on a deed of sale due to a particular clause that was included in the promise of sale agreement signed by the same parties a few months prior. 

In their sworn application, the plaintiffs stated that on 19 December, 2005, they had entered into a promise of sale agreement with Jane Muscat, who had bound herself to sell a property situated in Senglea and in return, the plaintiffs had paid the sum of one thousand Maltese Pounds as a deposit.

The plaintiffs, on 24 May 2006, had summoned the defendant with a judicial letter to enter into the final deed of sale. Jane Muscat, however, did not appear on such deed and as a result, the plaintiffs asked the Court to order the defendant to appear on the final deed of sale and to appoint a Notary Public to publish such deed according to law.

Jane Muscat, who had appeared on the promise of sale agreement in her name and on behalf of her sisters, on the other hand stated that the promise of sale agreement is not valid at law and therefore the pleas of the plaintiffs are legally and juridically unsustainable.

The First Hall Civil Court, after listening to the evidence of the case, made reference to Article 1357 of the Civil Code, which holds that:

“The effect of such promise shall cease on the lapse of the time agreed between the parties for the purpose or, failing any such agreement, on the lapse of three months from the day on which the sale could be carried out, unless the promisee calls upon the promisor, by means of a judicial intimation filed before the expiration of the period applicable as aforesaid, to carry out the same, and unless, in the event that the promisor fails to do so, the demand by sworn application for the carrying out of the promise is filed within thirty days from the expiration of the period aforesaid.”

The defendant stated that the promise of sale agreement is not valid at law

From the facts of the case, it resulted that the promise of sale was valid for a period of three months, a period that had to be automatically extended for a further three months in the event that the final contract could not be finalised. The plaintiffs had sent a legal letter on 24 March 2006 and asked Jane Muscat to register her sisters with the Inland Revenue Department and provide their foreign income tax number to the Department as required by law. Jane Muscat replied to such letter and stated that the promise of sale was not valid and she sent a cheque of one thousand Maltese Pounds representing the deposit paid by the plaintiffs.

The plaintiffs subsequently sent a judicial letter on 24 May 2006 and asked Jane Muscat to appear on the final deed of sale and to obtain the income tax number of her sisters, who were residing in the United Kingdom. Jane Muscat again refused to appear on the final deed and stated that the promise of sale had expired after three months, as an extension of such promise of sale was never registered with the relevant departments. Furthermore, the defendants also held that the judicial letter was submitted after the promise of sale had expired and Article 1357(2) of the Civil Code requires it to be submitted before the expiration of the period applicable. 

The Court noted that the Notary who registered the promise of sale did in fact fail to register the extension as required by Legal Notice 7 of 2004. The Court considered that even though the promise of sale held that the term of three months was automatically extendable, the Legal Notice aforementioned requires such extension to be notified with Commissioner of Inland Revenue.

Judge Padovani Grima held that the Notary in the application filed with the Inland Revenue Department indicated that “the promise of sale is valid up to 19/03/2006” and therefore it clearly emerged that the intention of the parties was to sign a final deed of sale within three months.

The defendants also held that the judicial letter was submitted after the promise of sale had expired and Article 1357(2) of the Civil Code requires it to be submitted before the expiration of the period applicable

The Court said that the judicial letter had to be filed before the first three months expired, while the sworn application had to be filed before 30 April 2006. In view of this fact, the plaintiffs did not observe Article 1357(2) of the Civil Code and as a result the Court decided to reject the pleas of the plaintiffs.