Insights

In matters of co-ownership, individuals cannot be compelled to remain in such a state indefinitely and may request the partition of the property, provided this is easily divisible. This principle was underscored in the judgment delivered on the 30th January 2024 in the case William Gatt, Claire Gatt et al. vs George Mangion et al., presided over by Honorable Judge Dr. Joanne Vella Cuschieri, which judgment was subsequently confirmed by the Court of Appeal on the 30th January 2025. Case Background The plaintiffs sought judicial intervention to dissolve co-ownership of the roof of a block of apartments, which was held in common between four apartments, in equal, undivided shares. The plaintiffs presented an architect’s report demonstrating that the property was divisible without undue harm. Despite sending a formal legal letter and a judicial letter, the defendants consistently opposed any division. Consequently, the plaintiffs requested a court order to terminate the co-ownership and permit partition. Defendant's Arguments Inapplicability of Civil Code Provisions: The defendants argued that Article 4 of the Condominium Act (Chapter 398, Laws of Malta) excludes the application of the Civil Code to property held pro indiviso in condominium common areas. They also cited Article 7 of Chapter 398, which requires unanimous consent for division. Competence of the Court: They contended that disputes regarding condominiums must be resolved through arbitration under the Arbitration Act. Potential Prejudice: The defendants claimed that division would reduce usability and diminish the property’s value due to limited development potential. They also alleged disproportionate benefits and prejudice against smaller portions. Court’s Analysis and Decision The court had already dismissed the defendants’ preliminary pleas regarding the admissibility of the action, the requirement for unanimous consent, and the jurisdiction of the court to decide the case. The Court, in its partial judgment delivered on the 23rd of February 2021, affirmed its competence and allowed the case to proceed to the merits. In its judgment on the merits, the court focused on whether the property could be easily divisible or partitioned without difficulty. The Architect’s Report played a pivotal role, confirming that the property- in this case, the roof - was divisible without diminishing usability for any of the apartment owners. Under Article 496 of the Civil Code, no individual can be forced to remain in co-ownership, and partition can be demanded unless explicitly prohibited by a valid agreement or will. Notably: Agreements preventing partition are valid only for up to five years and can be renewed. Even where partition is prohibited, the court may allow it under "serious circumstances" as outlined in Article 497 of the Civil Code. The court affirmed that the law prioritizes enabling partition unless there are compelling reasons to maintain co-ownership. It dismissed the defendants’ concerns about reduced usability, stating that each party’s right to use their portion of the roof would remain intact post-partition. Regarding potential value reduction, the court emphasized cooperative development planning to enhance the property’s overall value. It advised the parties to collaborate in managing the airspace, benefiting all stakeholders. Final Judgment The court granted the plaintiffs’ request, ordering the property’s partition. It rejected the defendants’ arguments and claims, affirming the plaintiffs’ right to terminate co-ownership. This case demonstrates the fundamental principle enshrined in law that no individual can be compelled to remain a co-owner against their will. The plaintiffs were represented by Dr. Joseph Mizzi.  

On the fifteenth (15th) of November 2024, the First Hall Civil Court presided over by Judge Ian Spiteri Bailey, delivered its judgement in the case Dr. Joseph Mizzi noe vs. M.V. Sea Patron. This decision, emerging from facts which the Court describes as complex and extraordinary, significantly contributes to local jurisprudence on the nature of charterparty agreements, the charterer’s duty of care and the War Risk Clause. The case was initiated by Sovereign Fuels Limited, owner of the M/V Sovereign M (the “Vessel”), which had been chartered to Patron Group Limited under a Time Charterparty Agreement. The proceedings were instituted against M/V Sea Patron, owned by Patron Group Limited, following its arrest in Maltese waters under the domestic court’s in rem jurisdiction established by Article 742D of the Code of Organisation and Civil Proceedings (Cap. 12, Laws of Malta). The charterparty agreement limited the Vessel's operation to offshore activities involving the carriage of liquid cargo in the central Mediterranean. This was supplemented by a verbal agreement between the parties, prohibiting navigation within 80 nautical miles of Libya due to regional political instability. Patron Group Limited violated this agreement by directing the Vessel to operate within 40 nautical miles of Libya. While awaiting further instructions, the Vessel was intercepted by Libyan naval forces leading to the detention of the Vessel and its crew at Tripoli under harsh conditions. This led to significant financial losses for Sovereign Fuels Limited, including costs related to the Vessel and the crew’s release from detention. Patron Group Limited also failed to fulfil its payment obligations under the Charterparty. As a starting point, the Court meticulously analysed the nature of the Time Charterparty Agreement in place to identify the rights and obligations binding on each party. Citing the judgement Avukat Max Ganado noe vs Kaptan Sebastiamo Pizzimenti, delivered by the Court of Appeal on the 30th of November 2007, the Court distinguished between a bareboat charter, where the charterer assumes full control and possession of the vessel, and other types of charters, highlighting that it is only in the former case that the charterer, for all practical purposes, takes on rights and obligations akin to a temporary owner of the vessel. In other cases, the shipowner retains the exclusive responsibility to ensure that the vessel and the crew can fulfil their engagements. The Court concluded that the charterparty in place between the parties fell outside the scope of a bareboat charter, as the Vessel was leased together with its master and crew, but nonetheless recognized that the Vessel was under Patron Group Limited’s control throughout the charterparty for all navigation and operational purposes. The Court addressed the damages resulting from the Vessel’s detention by referring to several safeguards within the charterparty agreement, including the charterer’s clear obligation to avoid exposing the Vessel to risk. It also highlighted the proven agreement between the parties that specifically prohibited navigation close to the Libya. The Court determined that Patron Group Limited instructed the vessel’s Master to navigate the Vessel within forty (40) nautical miles of the Libyan coast, and thus exposed the vessel to substantial danger which materialised upon the vessel and crew’s detention. The Court emphasised that, as an experienced operator in the shipping industry, Patron Group Limited should have foreseen the risks of unsafe conditions and potential detention when navigating near Libya, especially considering that Libya was experiencing serious political unrest and that there were several reported occurrences of vessels being detained, even arbitrarily, in the area. This was classified as a clear breach of the standard war risk clause established within the charterparty, which strictly forbids operations exposing the Vessel to war risks without the shipowner’s prior written consent. Consequently, the Court liquidated and awarded financial damages to Sovereign Fuels Limited for the actual losses incurred. The Court also upheld Sovereign Fuels Limited’s claim for unpaid charter fees, ordering Patron Group Limited to pay €100,000 in arrears. In doing so, it relied on a private writing wherein the charterer recognized its defaulting status and expressly agreed to settle the balance due by way of charter fees. It dismissed claims that the debt acknowledgement was obtained under duress, citing insufficient evidence. This judgement is notable in that it reinforces the high standard of care required from charterers in ensuring vessel safety, particularly in high-risk regions. It also confirms that prudent decision-making is required from charterers irrespective of the nature of the charterparty in place, shedding light on the balance of rights and responsibilities between shipowners and charterers. Sovereign Fuels Limited was represented by Dr Joseph Mizzi and Av Ylenia Busutill from Muscat Mizzi Advocates and Dr Larry Gauci from Gauci and Partners Advocates.

Real estate is the world’s most important and largest asset class, and is purchased both as a utility as well as an investment. It is largely perceived to be a safe investment, ostensibly due to its tangibility but also historically, at least here in Malta, the downside risk appears to be contained, although not necessarily so in the future. For instance, the global financial crisis of 2007-8 has revealed the correlation between real estate performance and credit cycles, and the systemic risks that arise when debt obligations exceed anticipated returns on real estate investment. When purchasing real estate off-plan (or “on plan”, as it is sometimes referred to in Malta), purchasers are not only assuming market risks associated with the asset class, but are heavily exposed to other risks which they ought to be informed about before parting with their savings. Purchasing a property off-plan refers to the instance where a purchaser agrees to acquire a property that has not yet been developed, or is currently in the process of being developed. When purchasing off-plan, developers typically offer attractive prices in order to incentivise them for the additional risk they are assuming in the transaction. Perhaps the most pronounced of all such risks is referred to as “counterparty risk” or, in other words, the probability that the vendor may default on contractual obligations which would typically be set out in the promise of sale agreement. For instance, the vendor may default in delivering the promised specifications in respect of the structure or finishing of the property. The vendor may also fail to deliver the property within the promised time frame. In both such instances, it is common for purchasers to engage in non-contentious negotiations with the vendor in order for any default to be rectified.  Where such negotiations fail, however, purchasers may be left with no choice but to rescind the promise of sale, or to keep on extending the promise of sale until the property is delivered in accordance with the promise of sale agreement, thereby losing critical time and incurring additional expenses. Another risk, no less critical, associated with purchasing real estate off-plan is “insolvency risk”, that is to say, the risk that that the vendor becomes bankrupt or insolvent during the period in which the property was being developed or finished. In the best case scenario, where the deposit is kept by the notary or an escrow, purchasers may elect to obtain a refund. The situation is, however, radically different where deposits are paid directly to vendors, who later become bankrupt or insolvent. In this scenario, purchasers may find themselves in the position of an unsecured creditor of a bankrupt or insolvent counterparty. Not only will they have to pursue costly litigation in order to obtain redress, but the probability of recovering the deposit in its entirety becomes very low. This is due to the presence of other creditors, such as banks, employees and other secured and privileged creditors who will have a right to be paid first from the liquidation proceeds of the bankrupt or insolvent vendor. For this reason, purchasers must be extremely careful when paying deposits directly to vendors in an off-plan property acquisition because the reduced price rarely compensates purchasers for the actual risks they are assuming. The practice of using deposit money to part-finance real estate projects should be closely monitored by lawmakers and regulators, and careful considerations should be made on whether to regulate such practices. This is because the risks of using deposits to finance the development of real estate can be associated with the investment risks arising from offering securities to the public, which latter endeavour is otherwise a heavily regulated practice. In general, companies offering securities to the public (be it bonds or shares) must go through a rigorous approval process before the Listing Authority, and any such offer must conform with all requirements laid out in the Prospectus Regulation, as well as specific regulations applicable to public companies. One of such requirements is that investors are made fully aware of the risks they are assuming in the investment, and this is done through full disclosure of financial and commercial information. Such requirements do not arise when developers use deposits to part-finance the development of real estate. Looking at off-plan real estate transactions in isolation may not lead to particular concern in terms of systemic risks, but collectively the situation can be critical, especially in an unanticipated market downturn. And with emerging stories such as that of the potential collapse of Evergrande in China, perhaps it is time to re-think policies around such practices. 

Persons seeking to retrieve a sum of money that is owed to them may run into difficulties collecting the debt if it transpires that their debtor’s assets are held in a country other than the one where a court has passed judgement in their favour. It takes time and money to start proceedings that lead to a foreign court recognising the original judgement and then enforcing it within their jurisdiction.   To make it easier for creditors to collect debts across borders, EU Member States have adopted a common framework for the recognition and enforcement of civil or commercial judgments within the EU.   By eliminating the legal hurdles that typically arise in these cross-border cases, creditors can have judgements passed elsewhere in the EU recognised automatically in Malta - without requiring additional formalities.   Collecting debts across borders Although the Brussels I Recast[1] (the "Regulation”) deals primarily with rules through which the courts of the Member States of the EU determine whether they have jurisdiction to hear cases having a cross-border dimension, it is also the instrument par excellence for the cross-border enforcement of civil and commercial claims within the EU.   The entry into force of the Brussels 1 Recast has brought about the abolition of the exequatur [2] - which had hitherto required judgment creditors to initiate intermediary proceedings within the Member State of enforcement for the recognition of a judgment given in another Member State, before proceeding with enforcement measures against the judgment debtor.   Although recognition proceedings are still possible under the Regulation, they are no longer necessary - since any judgment obtained within a Member State of the EU is now automatically recognised across the EU, subject to certain limited exceptions.   A judgment creditor seeking to enforce their claim against a judgment debtor in another Member State of the EU must provide the competent authorities in the Member State of enforcement with the following:   a certificate from the court of origin issued in accordance with Article 53 of the Regulation; a copy of the judgment satisfying the criteria necessary to establish its authenticity; and in certain instances, a translation of the certificate and/or judgment.   In the event of unconstested claims, rather than proceeding under the Brussels 1 Recast, creditors may instead obtain a European Enforcement Order (EEO) - which is regulated by means of Regulation (EC) No 805/2004.   Defending cross-border claims A judgment debtor seeking to oppose the recognition and enforcement of a foreign judgment under the Brussels 1 Recast, may only do so on one of the grounds stipulated in Article 45(1) of the Regulation, namely:   if its recognition is manifestly contrary to public policy in the Member State of enforcement; where the judgment was given in default of appearance, if the defendant was not served with the document which instituted the proceedings or with an equivalent document in sufficient time and in such a way as to enable them to arrange for their defence, unless the defendant failed to commence proceedings to challenge the judgment when it was possible; if the judgment is irreconcilable with a judgment given between the same parties in the Member State of enforcement; if the judgment is irreconcilable with an earlier judgment given in another state involving the same cause of action between the same parties, provided that the earlier judgment fulfils the conditions necessary for its recognition in the Member State of enforcement; if the judgment conflicts with the special or exclusive jurisdictional rules contained within the Regulation;   Should any of the abovementioned grounds be applicable to the judgment in question, the debtor may proceed by filing an application before the courts of the Member State of enforcement for the refusal of recognition and enforcement of the judgement, in accordance with Articles 45 and 46 of the Regulation.   [1] Regulation (EU) No 1215/2012 o of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [2] Which was required under the original Brussels I Regulation - Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters  

The practice of law is a privilege that carries with it the responsibility to serve our community whenever it is possible for us to do so.  It is our duty to defend those rights that we tend to take for granted: the right to free speech, work, privacy, family and property, but also other rights such as fair competition between businesses. Our judicial system has shown itself to be a resilient pillar of democracy during challenging times. It is precisely for this reason that we are delighted to join the Public Interest Litigation Network, led by the Daphne Caruana Galizia Foundation, and to play a role in providing wider access to justice within our community.   Read more on the Times of Malta