Damages on botched Flower Power sale climb to €1.5 million

The Court of Appeal has increased – by a multiple of over 23 – the amount of contractual damages awarded to a company over the sale of land at Ta’ Qali.

On 10 June 1998, plaintiff FourX Limited had bought half of a parcel of land in Ta’ Qali from defendant Mediterranean Flower Products Limited. On the same contract, defendant Flower Power (Sales) Limited had been the tenant of the land.

Amongst the things agreed on the contract, was that the lessee and the vendor had obliged themselves to vacate the property entirely if there was a possibility of transferring the properties at a price of not less than Lm2,000,000 (€4,658,746). If that was the case, the premises would be vacated within one year. Failing to do so would incur a penalty of Lm1,000 (€2,329.37) per day of non-compliance, payable to Four X Limited.

In December 2007, Four X and MFP entered into a promise of sale with third parties and bound themselves to sell the land at more than Lm2 million. Therefore Four X called upon the defendants to vacate the land, but this came to naught as Flower Power (Sales) Limited had not complied and had stayed put.

Four X Limited consequently filed a court case against the defendants, in which it was awarded just €65,000, after the court noted that MFP had also unsuccessfully tried to evict Flower Power (Sales) and held that it was impossible for MFP to comply.

Both Four X and MFP appealed, one on the amount awarded and interests, while the other argued that it should not have been made to pay at all.

The court ruled that the contractual obligation of a company to vacate the property did not imply the obligation to procure the property with regards the other company. Neither could there have been collusion in bad faith between the defendants to disrupt the sale, as it was in the interest of MFP that the sale went through and it had applied for the eviction of Flower Power (Sales).

It upheld the appeal filed by MFP and declared that no penalty was to be incurred. But the court said the second defendant had done absolutely nothing to fulfil its obligations.

The consequences on the creditor were drastic, with the court noting that it had disrupted a sale worth millions of euro, leaving the creditor holding land that he could not do anything with.

The court observed that it had no evidence as to when the land was abandoned by Flower Power (Sales), aside from a newspaper article in the acts of the case which indicated that on 3 October 2010, the site was open and abandoned.

Judges Giannino Caruana Demajo, Tonio Mallia and Anthony Ellul ruled that as the contractually agreed penalty for failing to vacate the property was Lm1,000 per day, and the penalty had applied for 654 days between December 2008 and October 2010, the amount payable was Lm654,000 (€1,523,410.20) together with interest.