Accountant blocks sale of Jerma Palace Hotel

Sciriha, an accountant by profession, asked the court to block the sale, or other mode of transfer, of the Jerma Palace Hotel and the surrounding properties. He explained that he was engaged in November 2009 by JefPet as a consultant and represented it when solving various financial difficulties, and in order to represent the company in negotiations in the sale of the hotel and the properties. The accountant submitted that when the negotiations for the sale of the hotel reached an advanced stage, his contract was terminated, after JetPet accused him of abandoning his contractual duties. Sciriha denied this. He claims that he still has to be paid in accordance with his engagement contract of €3.5 million.

JefPet Limited replied to this application by claiming that the application is null and void, in accordance with Art 831 and 832 of the Code of Organisation and Civil Procedure, since the application did not mention the sum claimed by Mr Sciriha.

Another plea was with regard to the merits of the case in that there is no prima facie claim. JefPet agreed that the parties entered into an engagement agreement on 15 November, 2009 and Mr Sciriha’s return was to be 5% of the selling price of the property, and other considerations, which amounts to €3,525,000, excluding VAT. This will be due when the sale of the hotel takes place and not before. In fact, the property has not been sold nor is there a promise of sale.

According to the engagement agreement there were two ways how it could be terminated, either by mutual agreement or unilaterally by any of the parties. In fact JefPet had written to Sciriha and gave six months’ notice. Sciriha replied that there was no need for that notice.

The Court examined the evidence, where Sciriha testified that JefPet Limited was purposely set up to purchase and sell the Jerma Palace Hotel. The company owes the banks €9 million, but has the hotel and the surrounding lands as assets. As their consultant he had spoken to a number of potential investors without any compensation and currently negotiations are being carried out with a particular investor, however, his contract was cut short. He also agreed that his compensation was a success fee, however, if the contract is terminated they would have to agree on the amount of compensation.

Geoffrey Montebello for JefPet testified that he thought that their accountant did a good job and wanted to pay him.

Ms Justice Padovani Grima held that the law on warrants provides for two elements. The first is that the warrant must protect a pretended right and that the court must be satisfied prima facie that the right exists. Therefore the right claimed must exist prima facie and not be merely be a difficulty. The Court quoted a previous judgement Grech -v- Manfred decided on 14 July, 1988, which held that the court must use the objective test and therefore, the court should not have any discretion in establishing whether there is a prima facie right. In fact this procedure is an extraordinary procedure and should be used only to protect a right which may be irremediably lost. 

The court held that in this particular case, it is clear that Sciriha has a prima facie right to be paid. The Court disagreed that the application is null because it did not mention a figure, since it mentioned circa €3.5 million. The Court also quoted Montebello, who held that he would like to pay Sciriha.

The court moved to uphold the request to issue a warrant of prohibitory injunction against JefPet Limited.

Malcolm Mifsud, Partner, Mifsud & Mifsud Advocates