Issue link: https://maltatoday.uberflip.com/i/920426
46 maltatoday SUNDAY 31 DECEMBER 2017 A bank guarantee is intended to allow comfort for the bank to be paid for a service given. This was held in a court judgement delivered by Mr Justice Joseph Micallef in Clarosa Hotels Limited v APS Bank Limited, Bank of Valletta for any interest it may have and Rosario Tabone and Claudia Spiteri Sacco. In their application, the plain- tiff company, Clarosa Hotels Limited asked the court to de- clare null and void a bank guar- antee given to APS and also a bank guarantee issued by BOV. The company asked the court to declare that the payment of 23048.09euro to APS was not required and the sum should be returned. APS filed a statement of de- fence where it pointed at the fact that it was the plaintiff company that agreed that BOV should issue the guarantee in its favour and in fact APS asked to be paid. The guarantee was not dependent on any of the obliga- tions made by Tabone and Spi- teri Sacco. BOV also replied to the appli- cation by saying that the guar- antee is valid at law and that it was issued at the company's re- quest. The condition was that it should be paid to APS at its request without BOV having to make any verifications and that is exactly what took place. Tabone and Spiteri did not file the application. Mr Justice Micallef analysed the facts that surrounded the case in that Tabone and Spiteri Sacco were shareholders of the plaintiff company, which ran a hotel. They sold their shares to Marco Sammut. One of the con- ditions was that the company had to pay the outstanding debt to APS. This was financed by BOV. Another debt emerged of 24,000euro owed to APS by the former shareholders. In order for APS to cancel a hypothec it had on the company, APS asked for a guarantee for the sum of 24,000euro. Clarosa agreed to this and the guarantee was is- sued by BOV in favour of APS. Clarosa argued that it agreed to the guarantee as long it was not for more than two years, but this was not written as it was a verbal agreement. This guaran- tee was extended four times, but on the last occasion the com- pany objected, and APS asked BOV to pass on the payment in June 2013. The Court looked at the le- gal considerations, namely the pleas raised by the banks. Mark Sammut had signed subrogation documents. Also that Sammut had participated in a number of meetings and therefore can- not argue that the situation was sprung on him. APS denied that there was any further verbal agreement. BOV argues that if there was any verbal agreement, it is of no concern. Furthermore, the Court commented that the tes- timony from the plaintiff 's side was not credible and applied the rule that no evidence should be produced against written evi- dence, if not for serious and ex- ceptional reasons. Furthermore, Clarosa did not claim that the guarantee was issued on condi- tions it did agree to. The Court then accepted the Banks' pleas. The Court then dealt with the merits of the case, first being whether the guarantee issued by the BOV to the APS constituted a contract. The law considers a guarantee as a contract, be- tween the creditor, who had to fulfil his obligations to another party. The guarantee is valid for the principal obligation and an- cillary debts. Guarantees must be written. Therefore, the Court had to examine whether the guarantee was secondary to the obligation that Tabone and Spiteri Sacco had with APS or else was it an autonomous obligation that Cla- rosa entered into with APS. The Court held that the guarantee cannot be considered as obliga- tion that Tabone and Spiteri Sac- co had with APS. From the evi- dence produced the guarantee was required for what Clarosa required from APS for banking services. The bank guarantees are bank services offered to rest assured that the bank will be paid. These bank guarantees are considered as autonomous and different from the other type of guarantees. Chorley & Giles wrote in their book Slater's Mer- cantile Law: "A guarantee is to be distinguished from a contract involving a primary obligation to the creditor, e.g. an indem- nity... The essential point of an indemnity, or other primary un- dertaking, is that it is a distinct, autonomous undertaking which is in no way dependent for its content or enforceability on the terms or validity of the under- taking given by the debtor... To be a guarantee, an undertaking must be truly accessory to that of a principal debtor and must be an undertaking triggered by the principal debtor's default" The Court pointed out that in this particular case APS re- quested that BOV pay the guar- antee, when the guarantee was still valid. Therefore, the ob- ligation was not ancillary, but was an autonomous obligation. Therefore, BOV fulfilled its ob- ligations and was authorised by Clarosa itself. The Court then moved to turn down the plaintiff company's claims. Dr Malcolm Mifsud Partner Mifsud & Mifsud Advocates Opinion A development planning application for the conversion of an open courtyard to a catering outlet was refused by the Planning Commission. The premises are located next to an old Chapel in Rabat which was recently restored. To support its decision, the Commission gave the following reasons: 1. The proposed development does not ensure an accessible environment for all its users and visitors and hence runs counter to policy P11 of the Development Control Design Policy, Guidance and Standards 2015 and to Urban Objective 4 of the Strategic Plan for Environment and Development, which aim for the integration of the requirements of people with special needs in the design of buildings and facilities; 2. The proposed development would have an adverse impact on an important cultural heritage site and would therefore conflict with Thematic Objective 8 of the Strategic Plan for Environment and Development which aims for the safeguarding and enhancement of cultural heritage; 3. The proposed signage is incompatible with the urban design and environmental characteristics of the Urban Conservation Area. It would not maintain the visual integrity of the area and so does not comply with Urban Objectives 2 and 4 of the Strategic Plan for Environment and Development; 4. The proposed development runs counter to the provisions of policy P53 of the Development Control Design Policy, Guidance and Standards 2015 which specifies that air purification systems should discharge back into the cooking area. The proposal therefore also runs counter to the Urban Objective 3 of the Strategic Plan for Environment and Development which aims to protect and enhance the character and amenity of urban areas; 5. The proposal does not comply with the provisions of Legal Notice 227 of 2016: Development Planning (Health and Sanitary) Regulations, 2016, in that a light and ventilation report with a detailed report of the automated retractable awning from the engineer is required. Applicant felt aggrieved by the said decision and filed an appeal before the Environment and Planning Review Tribunal. In his submissions, applicant (now, appellant) held that accessibility requirements were met whereas the Superintendent's concerns had been addressed in the most recent drawings that were submitted directly to the Planning Commission. With regard to the retractable canopy, appellant maintained that this was meant to be 'free standing' and 'not be fixed to the existing surrounding building fabric in any manner'. In reply, the case officer representing the Planning Authority warned that 'the roofing of the whole open space, albeit with awning' was deemed unacceptable due to the proximity to the Chapel, adding that fresh drawings may not be presented during deliberations before the Planning Commission. After taking cognizance of the parties' submissions, the Tribunal assessed that the main concern was the impact that the size of the canopy could have on the recently restored chapel. For this reason, the Tribunal held that the proposal was deemed acceptable, however subject to the canopy being reduced in size in order to safeguard the side views of the Chapel. Dr Robert Musumeci is an advocate and a perit with an interest in development planning law • robert@robertmusumeci.com Robert Musumeci Malcolm Mifsud A bank guarantee is an autonomous obligation Development next to chapel reduced in scale Tribunal ignores Planning Authority's arguments stating that fresh drawings may not be presented during deliberations before the Planning Commission