Court declares commercial agreement as time barred

The first hall of the civil courts on 4 May, 2015 in Edward Pavia & EMA Ltd v Austin Camilleri and GC&A Company Ltd held that an agreement for the sale of shares signed in May 2002 was time barred after the court action commenced in March 2012.

The plaintiffs in their application explained that defendant Austin Camilleri owned GC&A Company Ltd, which rents property in Madliena from the government. Since 1997 the parties discussed for the plaintiffs Edward Pavia & EMA Ltd to purchase the business of GC&A Co Ltd.

There were various agreements, however, the most important was that of 7 May, 2002, where Camilleri was to sell to Pavia 999 shares of GC&A Co Ltd for the price of Lm22,000. According to the agreement there was a time scale on how payments were to be made and which in fact were made. The plaintiffs explained that on this deal they had invested heavily and notwithstanding this the shares were never transferred. The plaintiffs asked the court to declare that the agreement between the parties was not implemented and to order the defendants to refund the amounts paid.

The defendants replied by stating that the action is time barred according to Article 2156(f) of the Civil Code. On the merits of the case, the defendants blamed the plaintiffs for non-performance and that they had a right to retain the money received.

Mr Justice Mark Chetcuti, who delivered judgement, considered that in essence this is a damages case following the May 2002 agreement. The agreement dictated that the defendant was to sell his 999 shares for Lm22,000, which was already paid and the company had a number of debts which were to paid, including a dispute on the rent which was to be paid to the government.

The transfer had to take place within a year once the purchaser, Edward Pavia satisfied a number of conditions. The court pointed out that the plaintiff failed to fulfil all the conditions listed and pay all the debts of the company. Therefore, the Court examined the first plea as to whether the action was time barred. The plaintiff argued that the agreement was extended beyond the one year, because he continued to effect payments after the lapse of a year. In fact a bill of exchange was drawn up but kept by the lawyer to guarantee payment. The bill of exchange was subject to a separate court case where the execution of this bill was blocked by means of a judgement of 26 November, 2010. 

On the other hand, although the share transfer form was signed, it was held by the lawyer in accordance to the 2002 agreement and that Pavia became the director of GC&A Company Limited, but he was removed in 2005, when the action on the bill of exchange was to start. 

From the evidence produced it was evident in 2006 that the 2002 agreement was not to be executed, after a series of incidents, and this was when the plaintiffs could take action to force a refund of the money they had paid.

Mr Justice Chetcuti held that the word “creditor” used in Article 2156(f) of the Civil Code includes the same rights as mentioned in other paragraphs of the same article of law. Article 2156 caters for obligations or debts of payment for an obligation to do something, such as to complete the transfer of shares. The Court found that there was no evidence that the prescription period was interrupted in accordance to Article 2133 of the Civil Code.

This is apart from the fact that the agreement held that no compensation is given if the conditions are fulfilled. The right of action starts when the plaintiff can exercise his right and this was in the beginning of 2006, but the action took place in 2012. 

The Court then upheld the plea of prescription and declared that the action was time barred.

Malcolm Mifsud, Partner, Mifsud & Mifsud Advocates

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