A company has failed to obtain rescission of the sale of a Paceville property to late businessman Hugo Chetcuti despite claiming in court that the transfer was tinged by fraud.

The case stemmed from a promise of sale signed between Marcus Development Company Limited (MDCL) and Olive Gardens Investments Limited (OGIL) back in February 2004 concerning some 712 square metres of airspace overlying two blocks of flats on St George’s Bay, Paceville.

Marcus Development was to sell the said airspace at Lm65,000, equivalent to €151,409.27, to Olive Gardens which paid Lm5,000, equivalent to €11,646.87, by way of deposit.

Upon the express wish of the purchaser, represented by former businessman Joseph Baldacchino, the final sale was subject to the issue of “permits” to build two additional storeys over the two blocks, namely St George’s Flats block A and B.

Once the necessary permits were obtained, the final deed was to be signed within two months.

Nine years down the line, in May 2013 the vendor wrote to Olive Gardens Limited saying that rights and obligations arising from that agreement no longer had any effect “both because of the expiration of its validity as well as because of prescription.”

MDCL also returned the deposit paid on the promise of sale.

OGIL refused to accept that and reacted by filing a judicial letter in September 2013 to force the sale.

Meanwhile the disappointed buyer discovered that MDCL had sold the property to Hugo’s Hotel Limited by means of a contract signed by the former entertainment mogul himself on July 30, 2013, transferring not only the airspace but also the land on which the flats had been constructed in Upper St Augustine Street.

In March 2014, Olive Gardens filed separate civil proceedings against MDCL and Hugo’s Hotel Limited, claiming that the sale was fraudulent and requesting the court to order its rescission.

In January 2017 the First Hall, Civil Court concluded that the promise of sale had expired in November 2006 and thus the vendor was no longer bound in terms of that agreement.

The case landed before the Court of Appeal, presided over by Chief Justice Mark Chetcuti together with Justices Giannino Caruana Demajo and Anthony Ellul.

OGIL argued that an outline development permit approved in principle the proposed development but specified reserved matters to be included in a full permit application.

Moreover, the promise of sale had mentioned “permits,” possibly implying that the parties were referring to both outline and full development permits.

The court observed that there was no doubt that an outline development permit was not sufficient to proceed with the development.

But what was relevant in this case was to determine the intention of the parties when signing the promise of sale in 2004.

Both parties had since passed away and therefore the court needed to base itself on an analysis of the document itself together with testimonies of other parties involved in the negotiations leading up to that agreement.

When the promise of sale was signed there was a pending request to reconsider the outline development permit application.

However since that date up to the filing of the court case in 2014 there was no evidence that either of the parties had applied for a full development permit.

When filing its judicial letter against MDCL in 2013, OGIL had informed the vendor that it was renouncing to the condition regarding the permits which Baldacchino had insisted on including in the promise of sale.

In fact, an outline development permit was issued in September 2006.

The court observed that the original buyer was a businessman familiar with property deals and who well knew the difference between outline and full development permits.

Once the outline development permit was approved, there was no evidence that Baldacchino had sought to obtain a full development permit.

All he wanted was assurance that he would be allowed to construct two additional storeys and in principle the outline development permit allowed “an additional level floor and an overlying penthouse level.”

Nor had the buyer flagged any issues in this regard with his trusted lawyer, observed the court.

Although the promise of sale spoke of ‘permits’ the use of the plural form did not mean that the sale depended on both types of permits, said the court, confirming the decision of the first court that the agreement had expired two months after the outline development permit and that OGIL had no juridical interest to sue the respondents.

Lawyer Richard Sladden assisted Hugo’s Hotel Limited.

Lawyers Richard Camilleri and Louise Sant Fournier assisted MDCL.