The Court held that although there is a difference between the valuation of a damaged item, if there is no fraud, then the court is to apply the best evidence rule and choose the more convincing valuation. This was held by the Court of Appeal, on 26 January 2018 in Mediterranean Trading Shipping Company Limited and Dr Cedric Mifsud on behalf of Atwood Oceanics Australia Pty Limited -v- Tristar Freight Services Limited.
The plaintiffs filed an action asking the court to declare that Tristar did not fulfil its obligations according to a bill of lading and therefore, asked to be compensated for damages. They explained that Atwood Oceanics engaged Mediterranean Trading Shipping company to transport a piece of drilling equipment from Malta to Perth in Australia. Mediterranean Trading took the equipment to the stores of Tristar and a bill of lading was issued. It was meant to leave Malta on 6 August 2011, and an invoice was issued. On 19 August 2011 Mediterranean Trading was informed that the equipment was lost in a fire that took place at Tristar’s stores in Cospicua.
The defendant company filed a statement of defence and amongst other pleas, it held that it had no judicial relationship with Atwood Oceanics. The company held that the Waybill sent is not binding since it was not signed and that it was not responsible for the fire. The company also held that value declared by Mediterranean Trading is for less than that being claimed.
In the judgement of the first Court, the claim of €185,99.99 in damages was awarded to Atwood. In its statement of 14 October 2013, the court analysed the case and pointed out that the equipment was not sent on the day it had said it would. The defendant company argued that since the Waybill was not signed, the order was not finalised. The Court disagreed in that the lack of a signature does not mean that an agreement was not made.
The Court was provided with written correspondence where first the equipment was to leave on the 6th and then there was a confirmation that it would leave on the 9th August 2011. There was no contestation that the equipment was destroyed in a warehouse in Bormla and from a technical report, it resulted that the cause was arson. However, it was argued that it was Tristar’s legal responsibility to keep the equipment safe and it was asked what safety precautions existed at the time of the fire. Furthermore, Tristar had a legal obligation to take care of the equipment entrusted to it, though it belonged to the company. The Court was sceptic on whether these obligations were fulfilled and even went a step further to say that there were serious flaws.
With regard to the value of the equipment, the defendant company pointed out that Mediterranean Trading when filling in the customs forms, marked the value as €2,000, when it is claiming that in actual fact the value is €18,599.99. Mediterranean Trading explained that the €2,000 value was only meant for statistics and a figure was just put down, because the true value was not known.
The defendant company filed an appeal, asking the court to uphold its pleas.
The Court of Appeal, composed by the Chief Justice, Silvio Camilleri and Justices Tonio Mallia and Joseph Azzopardi, dealt with the grounds of appeal, the first being whether Atwood had any place in the action. Dr Cedric Mifsud had a power of attorney to represent the Australian company and the fact that one of the directors of Mediterranean Trading took the oath on behalf of two plaintiff companies, falls within the parameters of Article 56(5) of the Code of Organisation and Civil Procedures.
On a similar point Tristar held that it had no judicial relationship with Atwood Oceanics, since all dealings were done with Mediterranean Trading and it did indicate when it was acting on behalf of anybody else. The Court of Appeal pointed out that a judicial relationship may be created out of a contract or else from damages. In this case the action is a mix from both, meaning that the defendant did not fulfil its contractual obligations and following the fire accident, the defendant company was responsible for negligence. The Australian company basis for a claim is based on the second, that of damages, as stipulated in Articles 1031,1032 and 1033 of the Civil Code. In a previous judgement Vassallo -v- Mizzi decided on 9 April 1949, the court held that the courts do not make a rigid distinction between actions on contractual responsibility and those which are mixed with tort, known as actio acquliana. Atwood would have to prove to the court that it had suffered the damages.
The defendant company criticised the first court, for saying in its judgement that it had to prove that when it accepted the equipment, the warehouse was adequately secure, especially when it was shown that the cause of the fire was arson. The Court of Appeal backed the first court’s findings and in turn found that Tristar was negligent, in that the equipment should have left for Perth, when the fire broke out and that it should have used diligence as the safe keeper of the equipment.
With regard to the value of the equipment, from the evidence, Mediterranean Trading did declare the equipment to have a value of €2,000. It was explained that this was not the actual value, but used to fill in a form for the Customs Department. The defendant company argued that this was tantamount to fraud and should only have been awarded €2,000 in damages. The Court quoted Article 987 of the Civil Code, which reads:
“An obligation without a consideration, or founded on a false or an unlawful consideration, shall have no effect.”
In this case the allegation, is that Mediterranean Trading filed a false declaration to the Customs, with the intention to defraud the government from paying tax. In such a situation, the perpetrator cannot find the protection of the law. However, if fraud is not proved, then the court must apply the best evidence. In this case, the plaintiffs did present invoices showing that the value is over €18,000.
The Court, then moved to dismiss the appeal.
Av. Malcolm Mifsud
Mifsud & Mifsud Advocates
This article may also be accessed on Malta Today.
For more information you can contact one of our Team Members at Mifsud & Mifsud Advocates.