This case was an appeal to a judgement which declared a contract of datio in solutum (a settlement) to be in actual fact a simulated donation, All the parties to the case in question felt aggrieved by the judgement of the Court of First Instance and both appealed.

The plaintiffs’ appeal

The plaintiffs felt that the Court of First Instance was wrong since it:

Declared that the true contract was that of donation of a sum of money rather than the donation of an immovable.

Declared that the contract in question was partially a datio in solutum (i.e. in settlement of the services rendered by the Defendant) and partially a simulated donation of the sum of Lm5000 when it is a known doctrinal fact that a contract can be either wholly valid or simulated.

Plaintiffs therefore requested the Court to declare the entire contract as one of a simulated donation and hence null as an onerous contract of datio in solutum.

Defendants’ reply and appeal

Defendants stated that:

Plaintiffs’ appeal was unfounded in fact and in law.

The Court of First Instance was correct in declaring that the property in question did not form part of Maria Vella’s (the parties’ mother) estate on the grounds that the same property was transferred to him by a contract of datio in solutum. The Court was however incorrect in stating that the contract was really a means of disguising Lm5,000 given as a donation.

The value of the property in question at the time of the transfer was relevant only in relation to the stamp duty that was due under the duty on documents regulations. Even if the value of the property attributed by the parties to the contract was modest, it was only the authorities who had a right to file an action due to the possible evasion of stamp duty and certainly not the plaintiffs in an action for nullity of the contract in question.

Plaintiffs’ reply

Plaintiffs commented that the defendants’ main ground for appeal was the fact that the value attributed to the property in the contract was of marginal importance and only relevant in ascertaining the amount of stamp duty due. Plaintiffs rebutted this plea stating that the value of the property as stipulated in the contract did not merely represent the value of the property itself but furthermore represented the value of the services rendered by the defendant.

The Court of Appeal

The Court noted that while plaintiffs based their appeal on a point of law, the defendants based their appeal on the appreciation of facts by the Court of First Instance which led to the judgement by the same court.

Plaintiffs essentially argued that the whole contract which apparently was a contract of datio in solutum was in actual fact entirely a simulated donation in favour of defendant. Defendants claimed that the contract could not be deemed a simulated donation since it resulted that defendant Michael Vella had rendered services to his mother Maria Vella. Plaintiffs did not deny the fact that their mother actually wanted to transfer the house to defendant. However, they were adamant that this transfer was made as a donation and not as compensation for services rendered. They claimed that he had not rendered services to their mother and the situation was quite the opposite in that his mother had cared for him!

The Court noted that a simulation may be absolute or relative. Absolute simulation takes place when a person does not want to enter into a contract, but apparently gives his consent to it. In this case you have nothing, but there is the appearance of something. Relative simulation is when a person wants to enter a contract, but apparently consents to a different type of contract. In this case, you have something but there is the appearance of something different. The plaintiffs were claiming the latter type of simulation in that they claimed that what was made to appear as a datio in solutum i.e. in settlement for services rendered, was in reality a donation. Plaintiffs were not claiming a complete inexistence of the contract but rather claimed for the restoration of the true nature of the contract i.e. one of a donation.

The Court of Appeal further emphasised the fact that whoever claims simulation must prove it directly or indirectly. It also stressed the fact that the intention to simulate a contract must be unequivocally proven.

Plaintiffs based their claim on the fact that the cause behind the datio in solutum contract i.e. for services rendered, was untrue. Plaintiffs told the court that their brother never carried out any household chores and it was more correct to state that it was their mother who cared for defendant since she remained in good health until she passed away. Defendants however rejected this claim stating that the causa of the contract was indeed compensation for services rendered and hence there was no simulation. The court hence concluded on the basis of all the evidence that the contract was in no way simulated. It agreed that the Lm2,000 evaluation in the contract was rather unrealistic, however, the court felt that since the parties to the contract were not legal experts. The court also stated that despite the amount being a relevant aspect in the examination of the case, it was not sufficient evidence to fulfil the high level of proof required by the Courts.

The Court of Appeal disagreed with the Court of First Instance’s judgement and agreed with the claim that a contract is or is not simulated as was stated in the judgement Mifsud v. Mifsud et (1961) where the Court stated that the action for simulation is indivisible.

The Court of Appeal hence rejected the plaintiffs’ appeal and accepted the Defendants’ appeal overturning the judgement of the Court of First Instance, declaring the disputed contract to be valid and not simulated.

The appealed judgement of the Court of Magistrates (Gozo)

delivered on the 26 November 2004, was reported last Wednesday