Court orders payment for unjustified enrichment

Mallia instituted an action against Camilleri and Portelli, after they entered in a promise of sale agreement to purchase a flat in St Paul’s Bay. After this agreement Mallia carried out works in the apartment, however, the sale fell through and the final purchase deed was never concluded. The defendants then sold the same apartment to a different buyer at a high price. The plaintiff held that this constituted unjustified enrichment and therefore the defendants should pay the plaintiff the costs of those works he had carried out in the apartment.

The court of first instance in its judgement held that the promise of sale had been extended a number of times, but in that period the plaintiff had ordered that works be carried out which were different from the specification given and the defendants knew of this. The plaintiff argued that he had intended to purchase the property, and in fact the works he carried out in the apartment would not have been executed had that not been the intention.

The first court in its judgement listed the elements of the de in rem verso action, which are: (a) the object given to the defendant is to his/her advantage; (b) there is a connection between the plaintiff’s work and the defendant’s advantage; (c) the defendant became richer without being entitled to it from the plaintiff’s work. These are listed in previous judgements such as Said -v- Testaferrata Bonnici (16 June 1936) and Blye Engineering Co Limited -v- Victor Balzan (23 June, 2004). The jurisprudence indicates that it is wrong for one to make a profit from another and if such profit is made, then that person who received the profit should pay compensation.

The first court agreed with the plaintiff, who argued that it is irrelevant why the final sale contract took place, especially when the defendants failed to take action to enforce the promise of sale. Since the promise of sale lapsed, the parties should be put in the same position as they were prior to the agreement. As a consequence the plaintiff should be paid for the works carried out in the defendants’ apartment. It resulted that these works were to their advantage.

As for the amount of compensation, the first court held that the defendants were not in bad faith, but they received an improvement of the property and therefore, should refund the plaintiff the expenses incurred. The Court appointed a technical expert and held that the amount mentioned by Mr Mallia of €3,946.79 should be reduced by only Lm48.90, together with interest.

In their appeal Camilleri and Portelli asked that the judgement be overturned.

The first ground of appeal criticised the judgement since it took into consideration only the expenses for the works that the plaintiff incurred and not the actual advantage that the defendants had benefitted. They held that certain works were done for nothing and should not have been included. The plaintiff rebutted this since the works were carried out with the defendants’ consent.

The Court of Appeal presided by Chief Justice Silvio Camilleri and including Mr Justice Giannino Caruana Demajo and Mr Justice Noel Cuschieri, observed that the action was not based on possession but on unjustified enrichment under Article 1028A of the Civil Code and it seemed that the ground of appeal did not attack that this particular case did not have the elements of the action, but the court computation for compensation.

The Court of Appeal observed that the works ordered and carried out were done according to the plaintiff’s tastes and he agreed to pay for them and the defendants did not object. In fact the apartment was sold Lm3,000 higher than the price which the plaintiff was to pay to purchase it. The defendants failed to prove that the increase in price was not thanks to the improvements the plaintiff financed. For the court this was a clear indication, that the plaintiff had increased the value of the apartment. As such the court did not rule in favour of this ground of appeal.

The second ground of appeal concerned the interest calculated and held that it should have started from the date of the judgement and not from the date of notification of this action. The appellants held that they were not in bad faith and therefore the interest is not part of the profits mentioned in the law. The plaintiff rebutted by saying that the action was not asking for a liquidation of damages but a specific sum. The Court of Appeal also agreed with Mr Mallia, since he was asking for a sum he had actually spent on the property and therefore, interest should have started when the claim commenced in court.

The appeal court then moved to confirm the first court’s judgment.

Malcolm Mifsud, Partner, Mifsud & Mifsud Advocates