Limitation on actions for latent defects

In its judgment of 16 December 2014, delivered in the names of Vincenza Cassar vs. Jessica and Clinton Busuttil, the Court of Appeal noted inter alia, that the time period for bringing forward actions in relation to a latent defect following a contract of sale, was one of limitation and could not be extended.

Plaintiff, Cassar, instituted action in the Small Claims Tribunal against the defendants after purchasing from them a second hand vehicle which developed a serious fault within its control unit within a few weeks following the final payment of the vehicle. Plaintiff relied on the applicable provisions of the Civil Code in terms of which the seller of a thing is bound to warrant the thing sold against any latent defects which render it unfit for the use for which it is intended or which diminish its value to such an extent that the buyer would not have bought it, or would have tendered a smaller price for the thing, had he been aware of the defect at the time of the sale. In the event of a latent defect following a contract of sale, the law envisages two specific remedies to which a purchaser is entitled, namely the actio redhibitoria, which, if successful would have the effect of rescinding the contract of sale in its totality, or the actio aestimatoria, by virtue of which the purchaser would be able to claim a reduction in the purchase price of the asset forming the subject of the sale. There was no doubt, in this case, that the plaintiff had instituted an action for the reduction of the purchase price of the vehicle.

Plaintiff argued that she had purchased the second hand car from the defendant in July 2009, although she had paid the defendant a deposit a few weeks before that date. A few weeks following the sale of the car, the vehicle developed a series of faults for which the defendant did not wish to assume any responsibility.

The defendant inter alia argued that the action had been subject to prescription in terms of the civil Code which stipulates that actions for the rescission of a contract of sale of movables shall be barred by the lapse of six months from the date of the contract. The Tribunal noted however, that the provisions of the Civil Code also stipulate that where it was not otherwise possible for the buyer to discover the latent defect of the thing, the period of limitation would run only from the day on which it was possible for such defect to be discovered, and not from the date of contract.

In coming to its decision, the Tribunal noted at the outset that it had long been a matter of contention under local jurisprudence whether the six month period set out in Article 1361(1) of the Civil Code was one of prescription, capable of being interrupted and extended or whether it was intended to set out a time-limit, which would result in the action being barred following the lapse of the initial six month period. While the Tribunal noted that historically, the Courts intended interpreted this provision to mean that the legislator intended to set out a period of prescription, it continued by making extensive reference to a series of more recent judgments delivered by the Maltese over the years, such as Emmanuele Camilleri noe vs Anthony Calascione noe (decided 29 October 1954), whereby it was confirmed that the prevailing opinion in matters relating to the actio redhibitoria and actio aestimatoria, is that the term imposed by the law for the exercise of those actions is a time-limit (“terminu ta’ dekadenza”), and not one of prescription. It therefore followed that therefore no form of dealing or negotiation taking place between the contracting parties during the lapse of such time would have the effect of interrupting the lapse of such time. The only manner in which such period may be suspended is via the clear, formal, unconditional and explicit recognition of the defect on the part of the seller.

In coming to its decision the Tribunal relied heavily on the technical evidence heard by an expert witness who concluded that the fault was neither attributable to use or to a collision. As such, following an examination of the merits of the case and the timings

of filing of the action, the Tribunal declared that it was unable to determine whether the defect existed at the time of the sale and proceedings to proceeded to deliver judgment in the defendant’s favour.

Following an appeal lodged by the Plaintiff, the Court of Appeal, noted at the outset that while the parties did not agree on the nature of the defect exhibited by the car, there was no doubt on the fact that the car had been sold as “second hand”. This, the Court, noted, was relevant when assessing the state of the thing being sold, although it of course, did not mean that second hand items could not still have latent defects, or that the seller of a second hand item is divested of his obligation to make good for latent defects in terms of Article 1378 of the Civil Code (see here Joseph Bonanno et vs Raymond Dimech, 12 January 2005).

Regardless of any other factor, the Court’s examination must in any case be limited to identifying the following three matters:

whether the defect in question – should there be any defect- existed at the time of the sale;

whether such defect was apparent or latent; and

if the defect was, indeed, latent, at what point in time it would have been possible for plaintiff to discover it.

Reference was made to the decision set out in David Grech vs.

Roger Debono (23 October 2009) whereby the Court of appeal reiterated that the main piece of evidence that a Purchaser must bring forward in any such action is adequate proof that the defect pre-existed the sale or arose from a pre-existing condition which pre-dated the contract of sale. The Court also noted that the actio aestimatoria or “quanti minoris” is intended to safeguard the economic balance between the contracting parties, in the event that the purchaser is not able to, or does not wish to resort to an action for rescission of the contract of sale. To the extent that the Purchaser is able to reach the abovementioned threshold to the satisfaction of the Court, it is in his absolute discretion to determine whether to institute an action for the reduction in the sale price of the object or for the complete rescission of the contract (see in this respect Benedetto Axias vs. Carmelo Galea, First

Hall, 6 December 1957).

The Court of Appeal also reiterated the well-established principle, albeit en passant, that as a rule, if the First Hall’s appreciation of the facts appears to be adequate and is uncontested, the court of second instance must rely on such findings as made by a court or tribunal of First Instance. Insofar as that the findings of the Tribunal were duly substantiated by means of technical proof, the Court of Appeal upheld the Tribunal’s decision and delivered judgment in Busuttil’s favour.