Hotelier must repay €650,000 ‘friend’ loaned him at above legal interest rate

A judge has refused to halt the court auction of properties to repay over €650,000 in accumulated loans between two friends, holding that the series of undocumented loans did not constitute usury.

Ms Justice Anna Felice on Friday handed down judgement in a 2005 civil case filed by hotelier Ronald Azzopardi, his wife Mariella and HD Holdings Ltd against the late Mario Galea Testaferrata and his heirs, in which the latter was accused of lending money at an interest rate above the legal maximum of 8%.

The parties had been friends and would meet regularly. In 2000, Azzopardi had found himself in dire financial straits and needed money, which his friend had lent him and which he had repaid without any problems.

However some time later, Azzopardi had started borrowing further amounts from Galea Testaferrata and had continued to do so over an extended period of time, on each occasion, issuing a post-dated cheque for the capital sum plus interest. Although Galea Testaferrata had claimed that no repayments were made, he had continued to lend money to his friend until the sum borrowed had exceeded Lm200,000 (€465,875).

In October 2003 Azzopardi had entered into a constitution of debt with the defendant, but subsequently failed to honour its terms.

In June 2004, Galea Testaferrata filed a garnishee order against the debtor, also seizing a Sliema apartment belonging to Azzopardi and his wife as well as farmhouses in Xaghra, Gozo.

The plaintiffs had requested the court to declare that in lending money to Azzopardi, Galea Testaferrata had acted as an unlicensed financial institution, in violation of the Financial Institutions Act and argued that this had rendered the constitution of debt null and void. Failing this, they asked the court to declare the amounts they were asking for as inclusive of an illegal interest rate which exceeded the legal maximum.

Galea Testaferrata had denied wrongdoing, insisting that all arrangements and private writings had been made legally.

The court had no hesitation in declaring that it found the defendant’s testimony to be “untruthful in places”, saying that it was very hard to believe that several transactions, involving considerable amounts of money, had taken place between the parties and that none of them had noted the exact amounts loaned and repaid.

Neither did it believe Galea Testaferrata who had, over a period of less than four years, handed out nearly Lm300,000 (€698,000) to Azzopardi without receiving any payment on account from him. It noted that he had presented satisfactory proof that Azzopardi had been paid Lm285,000 (€663,000) of which Lm5,400 (€12,570) had been repaid and which therefore had left a balance of Lm279,000 (€650,000) due.

The court turned down a request that it declare the garnishee orders and subsequent judicial sales by auction as irregular and null, and allowed them to continue.

However, the judge partially upheld the plaintiff’s submissions, holding that the amounts indicated in the private writings did include an illegal interest rate, and in view of the payments made, reduced the amount due to Lm279,000 (€651,293).

Debtor’s troubles at law

Ronald Azzopardi – a former MEPA board member, and victim of a shooting by a former business partner – has already in the past unsuccessfully tried to get the courts to revoke orders over some €1.32 million he owed in social security payments. The social security payments, spanning 10 years between 1995 and 2005, had to be paid back to the Commissioner of Inland Revenue (CIR) in monthly instalments.

The social security payments were owed by Azzopardi in the name of Sovereign Hotels, operator of the Windsor Hotel, which he once co-owned with Giosue Gauci.

Azzopardi was allegedly shot on 8 February, 2005 in Sliema by Gauci, father of former Priceclub supermarket director Chris Gauci. Azzopardi resigned from the MEPA board three weeks after the shooting. Gauci’s company Taormina Holdings is still listed as a shareholder in Sovereign Hotels.

The shooting had taken place in Azzopardi’s office. In court Gauci claimed he had loaned Azzopardi Lm30,000 (€70,000) which had not been honoured, and that Azzopardi had first produced the gun before he shot him.

An appeal against a six-year jail term handed down to Giosue Gauci in 2008 for the attempted murder was refused in 2009. Gauci was found guilty with six votes against three. The Appeals Court upheld the conclusions of the original court arguing there must have been some intent as a semi-automatic pistol had a safety catch that had to be released, and as a second shot had been fired.