Film studio says eviction case should go for retrial

Mediterranean Film Studios (MFS), the operators of the two water tanks at the film facilities in Rinella, are not ruling out legal action to challenge a court eviction after the company failed to pay its annual dues.

The Court of Appeal upheld an eviction order issued by the Lands Department against MFS, which has held the Rinella facilities since 1995.

The company had been ordered to pay arrears of ground rent of €803,000, accumulated over some 12 years of non-payment. According to court documents, the film studios were €5.4 million in debt as early as 2006.

But the company is now claiming it has grounds for a retrial of the case, because in its decision the Appeals Court mistook a bank guarantee deposited by third-party investors in December 2013, as having been deposited by MFS.

“The Court of Appeal erroneously declares three times that MFS deposited a bank guarantee in court, when in reality the bank guarantee was deposited by third-party investors who have no connection with MFS.

“It then argued that since MFS had the funds necessary to obtain a bank guarantee, it should have proceeded to pay up rather than deposit a bank guarantee in court – yet again disregarding completely the fact that the funds never belonged to MFS but were provided conditionally by the same third party investors,” the company said.

Studio manager Cornelia Azzopardi Schellman said that the erroneous presumption was “an obvious mistake on the face of the record”, providing ground for retrial.

The ministry for home affairs, under which the Malta Film Commission falls, is eager to see the film facilities vacated.

“The vision is to create a sustainable film industry with back to back projects all year long,” a spokesperson for the Malta Film Commission told MaltaToday yesterday.

“The Rinella facilities are an integral part of the government’s strategy for the film industry. To remain competitive there needs to be more investment both in infrastructure and also in human resources.”

The action against Mediterranean Film Studios was commenced under the previous administration, when the company failed to pay its dues to the Lands Department under a lease agreement.

But MFS’s owners claim the home affairs ministry was incorrect in saying that they had left the facilities in a “state of disrepair” that had been detrimental to the film industry. “The facilities are in constant use and in continuous maintenance and no such issue was ever raised in court proceedings or by any of the countless international productions who have successfully filmed under the present company administration, using its facilities, water tanks and services over the past 15 years,” Azzopardi Schellman said.

MFS took issue at Labour Party television One News interviewing a government official on the eviction, at the dilapidated entrance gate of a fort at Rinella, that has nothing to do with the MFS facilities.

“This is clearly aimed at discrediting MFS, as is the comment by the government that ‘the facility had been neglected and a lot of business lost as a result’ – a completely unfounded and false statement,” Azzopardi Schellman said.

In a statement on Sunday, the PN called on the government to ensure that it allows the private sector to invest at the Rinella Film Facilities. Francis Zammit Dimech, the PN spokesperson for Culture and Communications, called for the government to take the “necessary initiative to rehabilitate a site which has huge potential.”

MFS also insisted that it was former minister John Dalli in 2004 who supported the company in postponing its ground rent payments until it restores its finances. When the facilities passed under minister for IT and investment Austin Gatt, the company said, he “refused to consider payment of the arrears and instead opted to file eviction proceedings.”

MFS claimed that in 2012, Anthony Sammutl, then chairman of the film commission, “promised to drop proceedings against payment of arrears in instalments” - but MFS’s two proposals for repayment were eventually not accepted.

Then in June 2013, a letter of commitment from the director of the Lands Department was issued to Bank of Valletta, after prospective investors seeking to refinance the company were told that MFS would not be evicted if all arrears and legal expenses were paid. “Within hours, an e-mail addressed to the various parties involved, but not to MFS, informed them that the letter was being suspended pending advice from the Attorney General’s Office.”

The company said that the investors even proceeded to deposit a bankers’ guarantee covering all pending dues in December 2013, subject to the eviction proceedings being stopped.

Background

As company records presented in court show, Mediterranean Film Studios is wracked with banking debt, but studio owner Jost Merten claimed there was interest from investors to secure the studios’ future – a Russian company with various interests in filming, based in Malta, is known to be interested in the company, but MFS is prohibited by the government’s emphyteutical concession to just sell off.

Unlike the operators of the Café Premier – the Valletta coffee house that went bust and could not pay its government arrears and taxes – Merten’s MFS will not get a ‘bailout’ like Cities Entertainment Ltd did under the Labour government.

The Lands Department made that clear in its reply to Merten’s appeal, saying the emphyteutical contract gives the government the right to reclaim the land when ground-rent is not paid for two years. The bill now has accumulated to some €1.5 million with interest.

“There is little chance that this money will be paid, when in the current circumstances the land can be put to better use so as to give the government an income,” the department said in its appeal.

Even in its first decision, the Civil Court said that it was “more than evident” that Mediterranean Film Studios was not generating enough work to be economically strong to honour its commitments.

“To this court it is unacceptable that the emphyteuta can just sit on a fence without honouring its principal obligation to pay its emphyteusis with the excuse that other potential investors were waiting for the outcome of this case alone,” the first court said.

On his part, Mediterranean Film Studios owner Jost Merten claimed that the government wanted to evict the company due to plans for the construction of SmartCity in the adjacent Ricasoli estate.

Merten said that in 2005, the Lands Department started refusing its payments, and that then investments minister Austin Gatt was refusing to entertain the prospect of new investors in the studios. “The government did not evict the company over the non-payment of the emphyteutical dues, but because it was refusing to accept the payments in the first place.”

Merten and the Lands Department had agreed to a payment schedule as early as 2002, when it was made clear that Mediterranean Film Studios was unable to pay its annual rent. Merten claimed MFS’s debts were inherited losses from previous government administrations, incurred due to excessive staffing and a slump in film business during the 1990s.

Merten said he “accepted an invitation” to acquire MFS’s majority shareholding in 1999.

But by 2003, the company was facing over Lm2 million (€4.6 million) in banking debts, and finance minister John Dalli refused to have the studios shut down “because the government was committed to incentivise the film industry”.

Merten claims he poured over €1.1 million of his own resources into the company. “There are still investors, to this day, who are ready to pay all arrears to the government, as long as the emphyteusis does not get rescinded.”