The legal title of loan for use

In the case ‘ Company A vs. Individuals A and C’, the Court of Appeal, in its superior jurisdiction, was required to meticulously analyse the First Hall Civil Court’s interpretation of the civil law concept of commodatum (loan for use) upon the appeal of the Company A.

Commodatum “is a contract whereby one of the parties delivers a thing to the other, to be used by him, gratuitously, for a specified time or purpose, subject to the obligation of the borrower to restore the thing itself.” ( Article 1824 of Chapter 16 of the Laws of Malta)

The facts of the case are as follows. Company A was the sole owner of an apartment situated in Malta, which was occupied by Individual A. Company A purchased the property in question in 2003. Company A requested the First Hall Civil Court to evict Individual A from the property as Individual A did not have any rights of ownership over said property. In response to Company A’s action, Individual A claimed that she was living in the property at the will of Company A and that she enjoyed a title of commodatum over the property. Individual A further claimed that the house was purchased by the Company to satisfy both the interests of the Company and Individual A’s.

It transpired that the shareholder of the Company (for the purposes of this article will be referred to as ‘Individual B’) and Individual A were involved in an extra-marital relationship with each other. In the early stages of their relationship, both parties involved were married, and thus Individual B would rent out the property in question to engage such relationship. After a couple of years, Individual B decided to purchase the property through Company A, whereby the parties lived together as though the pair were married. During this period, Individual A moved into the apartment permanently with her children (one of which is Individual C). When their relationship broke down, Individual B requested Individual A to move out of the property that both parties lived in along with her children for numerous years. Individual A refused to do so and claimed that Individual B always promised her that the apartment would remain her home and that no person would evict her.

Taking the above facts into consideration, the First Hall Civil Court was required to analyse whether the property was given to Individual A by way of a loan for use or not. The First Court quoted Article 1835 (1) of Chapter 16 of the

Laws of Malta which summarily states that the person lending the thing shall not take back the thing until after the expiration of the time agreed upon, or where no time frame was agreed or stipulated, until the thing has served the purpose for which it was borrowed. Therefore, the First Court noted that the law clearly communicates that in order for the contract to be one of commodatum, the lending of the thing must be gratuitous, meaning that the thing is delivered to a person to be used by him and such thing shall be delivered for a specified time or purpose. It added that in the case ‘Mercieca vs Mercieca’ (Collection Vol. LXXXIV.ii.1595), the Court stressed on the fact that the abovementioned elements for commodatum to be satisfied may exist independently of each other and they may not necessarily be linked to each other. Thus, the parties can then agree on a time period in which the loan was to last, without agreeing on what particular use should be made of the thing delivered for the purposes of a loan and vice versa.

Upon applying the law to the case at hand and after taking all facts into consideration, the First Court reached the conclusion that the both requirements for commodatum were satisfied. The court found that the fact that Company A purchased the property for Individual A to live in after she left the marital home to pursue a relationship with Individual B, was deemed sufficient to establish that Individual B lent the property to Individual A for a specific purpose in terms of law and consequently ruled against Company A.

Aggravated by the First Hall Civil Court’s decision, Company A filed an application of appeal requesting the Court of Appeal to revoke the First Hall Civil Court’s decision and uphold the Company’s initial claim of the Company A to evict Individual A from the property.

The grounds of appeal of Company A were as follows: firstly, it claimed that the First Court misappreciated the evidence at hand when it relied on Individual A’s statement that Individual B had promised her that the Sliema property would remain her home, and they also argued that the First Court had misinterpreted the law as the parties did not enter into any public act or private writing as is required at law. Secondly, despite the First Court determining that the property was granted to Individual A for a specific purpose, it failed to ascertain the duration that the property will be used for. Therefore, in the absence of a stipulated time period and a contract between the parties, the appellant argued that this was to be treated as a precarious loan in terms of Article 1839 of the Laws of Malta, meaning that the lender has the power to take back the thing when he pleases. Lastly, Company A stated that there was no scope or causa behind the loan of the property, since Individual A and B’s relationship broke down and they no longer lived together.

Taking into account the grounds of appeal of Company A, the Court of Appeal stated that the facts brought forward by Individual A were consistent and accurate and it appeared that Individual A had clearly moved into the apartment after her previous marriage had broken down, in order to pursue the relationship she had with Individual B. It further stated that it is not required for a physical contract to exists between the parties in this case and the contractual link actually arose as soon as the delivery of the thing took place due to the fact that the delivery testifies the willingness of Individual B to create a legal relationship with the person to whom the property was lent. Taking into account the above, the Court of Appeal quashed the appellant’s first ground of appeal as a whole.

With regards to the second ground of appeal, the Court quoted ‘ Cassar vs. Cassar’ (7.7.2003) (Court of Appeal-Inferior Jursidiction) (Collection Vol. LXXXVII.ii.1017) which held that in terms of law it is adequate to specify either that the loan was for a determined period of time or for a specific purpose. The Court highlighted that the absence of a determined time period would not indicate that the loan was tantamount to a precarious loan in terms of law and could be retrieved and reinstated in his possession at any given time. Reference was made to ‘ Mercieca vs. Mercieca’ (Collection

Vol. LXXXIV.ii.1595), whereby the Court stated that if an object is loaned to a person for a specific purpose, then it shall remain the scope of the specific purpose until the use of the object continues to be made – in the case at hand, the specific purpose was for Individual A to live in the apartment. The Court of Appeal went on to mention that if on the other hand it is clear that the property loaned to the person for use was no longer being used for the specific purpose, then it is at that time that the person loaning the property would be authorized in terms of law to have the property returned. The Court of appeal stated that this was not the case in this instance as the property was loaned to Individual A by Company A for her to use and live in for a permanent period with her children. On a side note, the Court of Appeal further held that the use of the premises by Individual C was dependent on the right of commodatum of Individual A. For these reasons, the Court of Appeal duly rejected Company A’s second ground of appeal.

The closing ground of appeal of the Company A was also thrown out by the Court of appeal as upon analysis of this ground, the Court of Appeal opined that the scope behind the loan of the property was clear and this was that she was to move in the property in order to live with her children. In light of the above, the Court of Appeal concluded that the First Hall Civil Court’s decision was to be upheld.