Liquidation of damages in case of breach of contract

Paul Radmilli and Cedric Mifsud

Mifsud and Mifsud Advocates

The Appeal Court in its judgment pronounced on 30 April 2026, in the case Aspider Solutions Malta Limited vs Redtouch Fone Limited, partially upheld the appeal filed by Aspider. The court ordered the liquidation of damages awarded by the Court of First Instance to be increased considerably from €6,659 to €158,257.04.

The basis for the claim for damages was a breach of contract by Redtouch Fone in a contract providing mobile telephony services. The contract forming the merits of the case was signed between Aspider and Redtouch for a term of three years with tacit and automatic renewals for two-year periods. The last time the said contract was renewed was on 25 October 2017 and therefore the contract remained valid for a further two years following this date.

Notwithstanding the clarity in the contract as to its validity, Jason Micallef in his capacity as chief executive officer of Redtouch Fone had informed Aspider that Redtouch was to terminate the contract by the end of 2018.

The Court of First Instance described the difference between a renewal of contract, which requires express consent for such renewal, and an automatic renewal which results from tacit consent. Legally, in the latter case the express communication is required only where there is no consent for such renewal. Under the terms of the contract, which was the merit of this case, the express termination had to be communicated by one year from the termination of the current term.

Following the communication from Micallef, the two companies attempted to reach an out of court settlement which did not reach a positive conclusion. Aspider proceeded to formally informs Redtouch that the contract is to be terminated according to the terms stipulated in the contract.

In view that this was a telecommunications contractual relationship whereby Aspider was the Mobile Virtual Network Enabler, the profits for the plaintiff depended on the customer base of Redtouch. During the period where Redtouch decided to unilaterally and in breach of contract, terminate its obligations, it was not acting to the degree of good faith which it was legally bound to, particularly when it started advising its customer base to shift to another mobile telephony service provider. In commercial terms this constituted what is known as porting out.

Such porting out resulted in a loss of earnings for Aspider. This loss of earnings formed the basis of their court claim. The court of first instance found Redtouch’s action in bad faith and illegal in terms of Article 993 of the Maltese Civil Code which states that contracts are to be binding not only in regard to the matter therein expressed, but also in regard to any consequence which, by equity, custom, or law, is incidental to the obligation, according to its nature.

As always happens in cases where damages are sought, it is not enough for the plaintiff to successfully demonstrate that there was fault on the part of the defendant, which fault resulted in a loss of earnings—known in legal jargon as the nexus between the action and the damages suffered. The plaintiff needs to quantify the damages which in this case constitute a loss of earnings resulting from the actions in bad faith of Redtouch. Such an exercise is as important as apportioning fault and finding a direct link between the fault and the damages suffered in view that the court has to place the plaintiff back into the position they would have been had they not suffered such prejudice. Maltese jurisprudence observes that this principle has to be observed rigorously. On this point, the court of first instance quoted the French professor of civil law and authority on the subject, Gabriel Baudry-Lacantinerie, who stated in his Trattato Teorico Pratico di Diritto Civile, Delle Obligazioni, “Il risarcimento dei danni, qualunque sia la loro fonte, deve mettere colui che ha diritto alla riparazione nella situazione in cui si sarebbe trovato se non avesse subito il pregiudizio”.   

When calculating damages, the Court of First Instance made an accounting error when it awarded the meagre sum of €6,659. For this reason, Aspider filed an appeal with its main grievance being that the court incorrectly calculated the liquidation of damages in view that it decreased from the sum of lost profits the amounts which Aspider paid to Vodafone. These amounts were already accounted for in the calculation of lost profits and this resulted in double accounting—inputting a cost twice when calculating lost profit will give a faulty result. The Appeals Court upheld this grievance.

This case teaches us that all three elements of an action for damages, in this case damages ex contractu, are important. Firstly, a breach of contractual obligation has to be established; secondly, the prejudice suffered as a direct result of such breach has to be shown; and thirdly, the liquidation of losses suffered has to be defined. In this case, an appeal was required to rectify the error committed when the court of first instance miscalculated the losses suffered.