Issue link: https://maltatoday.uberflip.com/i/1535025
THE interest on the refund of a deposit paid on a promise of sale (POS) agree- ment for a property may commence only when the POS falls through. It is deemed that before that date the deposit was be- ing held in accordance with the law. This was the substance of a decree delivered on 29 April 2025 in Kevin Camilleri et. vs Alex Mercieca. The court was presided by Mr Justice Aaron Bugeja. The Plaintiffs of this case, Kevin and Moira Camilleri explained in their sworn application that in August 2018 they en- tered into a POS to buy property in Pi- età. They paid a deposit of €35,000 on the POS. There were two extensions to the POS, which eventually expired in Ju- ly 2022. However, the Defendant, Alex Mercieca, failed to turn up for the con- tract. As such the POS fell through. The Plaintiffs asked the court to order the De- fendant to refund their €35,000 deposit. Mercieca failed to reply and raise any pleas. The Court went through the POS and one of the clauses stated that the deposit was to be paid directly to the seller and it was to be considered as part of the price. Article 1357(2) of the Civil Code states: "(2) The effect of such promise shall cease on the lapse of the time agreed between the parties for the purpose or, failing any such agreement, on the lapse of three months from the day on which the sale could be carried out, unless the promisee calls upon the promisor, by means of a judicial intimation filed before the expiration of the period applicable as aforesaid, to carry out the same, and un- less, in the event that the promisor fails to do so, the demand by sworn applica- tion for the carrying out of the promise is filed within 30 days from the expiration of the period aforesaid." The Court quoted from a previous judgment Maria Bianchi et vs JM Devel- opments Limited, decided by the Court of Appeal on 26 May 2006 wherein the Court held that once a judicial act is filed, the POS is extended by a month. In an- other judgment, Carmel Chricop et vs John Vella et ,decided by the Court of Appeal on 5 October 2001, for the POS not to fall through, the party to the POS must follow the two elements mentioned in the Article 1357(2) of the Civil Code. A POS falls through if the Parties to it do not sign a final contract or else if one of the Parties fails to file a judicial act against the other Party. Therefore, the Parties return to the same position as they were before the POS. This was the position the First Hall of the Civil Court took in Spiridione Bartolo et vs Esther, widow of Carmel Abela, decided on 14 July 2016. As a consequence the deposit has to be returned to the purchaser. It is irrelevant if any of the parties were responsible for the failure of the POS. Since the depos- it is a part payment on the price and the transaction did not take place, the depos- it has to be returned. This is the legal position in the case at hand. The POS between Camilleri and Mercieca did not materialise, which meant Mercieca must give the €35,000 back to Camilleri. This was also stipulat- ed in the POS itself. Mr Justice Bugeja then went on to de- termine the issue of whether interest was due. He quoted from Momtcheva vs Danseller Co. Limited decided by the Court of Appeal on 27 May 2016. In this judgment the Court held that the deposit was paid in terms of the POS and that the Parties to that case agreed to extending the POS. Therefore the Vendors were holding on to the deposit lawfully. When the POS fell through, the Vendors should have returned the deposit and therefore, they were no longer holding the money lawfully. The Court of Appeal quoted from Article 1141(2) of the Civil Code, which states that interest starts from the filing of a judicial act. Therefore, interest was due from when the POS expired and the Defendant did not have any right to retain the deposit. The Court then moved to uphold the Plaintiff's requests and ordered that the interest should be charged from February 2025 when the sworn application was le- gally notified to the Defendant. LAW Law Report Interest on deposit starts when promise of sale falls through LAW REPORT MALCOLM MIFSUD Mifsud & Mifsud Advocates MALCOLM MIFSUD Mifsud & Mifsud Advocates maltatoday | SUNDAY • 4 MAY 2025 8 File photo