Juridical interest in the context of insurance claims

On the 22 June 2022, in the case of ‘A. Pace Balzan v Citadel Insurance p.l.c.’, the Court of Appeal in its inferior jurisdiction, presided over by Judge Lawrence Mintoff, delved into the concept of juridical interest in the context of an insurance claim.

Facts of the Case

The case was brought before the Court of Appeal by the appellant, following an arbitral decision granted on the 10 November 2021, wherein the Malta Arbitration Centre had rejected the pleas made by the plaintiff against Citadel Insurance p.l.c. (“Citadel”).

The case concerned a claim made by the plaintiff in respect of damage caused to his yacht due to bad weather conditions between the 23 – 24 February 2019 while the yacht was berthed at the Gzira Strand. The yacht in question was covered by an insurance policy issued by Citadel, who refused to honour the claim made by the plaintiff.

The plaintiff proceeded to institute proceedings at the Malta Arbitration Centre, whereby he requested the recovery of costs in relation to damages caused to his yacht amounting to €14,317.68, together with interest at the rate of 8% (the maximum percentage permitted by Maltese law), to be incurred from the date on which the judicial letter had been served upon Citadel.

Citadel rebutted the claims stating that the plaintiff had failed to prove (by means of a survey report or other similar documentation) that he had carried out the necessary actions on his yacht as required by the insurance endorsement issued by Citadel. Furthermore, Citadel stated that this amounted to a breach of warranty of the insurance policy, and that consequently, the insurance policy was not deemed to have come into effect yet. Citadel therefore stated that they should not be held liable to honour the claim made by the plaintiff.

The Arbiter noted that the plaintiff instituting the proceedings at the Malta Arbitration Centre had the obligation to prove that he had a juridical interest in the case, and that he did, in fact, suffer a loss as a result of the damage caused to his yacht. The Arbiter referred to the testimony made by the plaintiff’s son, who had stated that he (the plaintiff’s son) had directly incurred all the costs to remedy the damage caused to his father’s yacht. The Arbiter stated that despite the plaintiff being the owner of the yacht, the expenses incurred to repair the yacht had been settled by the plaintiff’s son and not by the plaintiff, and hence the plaintiff could not be deemed to have had a juridical interest in these proceedings.

The Court’s Considerations

Following the Arbiter’s decision, the plaintiff (on appeal referred to as the “appellant”) instituted proceedings in the Court of Appeal on the 26 November 2021, requesting the Court of Appeal to revoke the arbitral decision in its entirety.

The Court of Appeal proceeded to consider the appellant’s requests. The first claim made by the appellant was that the Arbiter’s decision had not been based on the facts of the case, and that the decision was motivated by ‘parameters’ that went beyond those raised by the parties, namely that Arbiter’s decision had been based on the notion of juridical interest, when such a defence had not been raised by the defendant during the arbitral proceedings.

The second claim made by the appellant concerned the testimony made by the appellant’s son, which testimony the appellant said had been intended to prove that his son used to take care of the yacht on the appellant’s behalf, and hence, that the appellant should indeed be deemed to have had a juridical interest in the case. The appellant made reference to his son’s testimony, who had stated what had happened. The appellant’s son had opened the claim with Citadel on behalf of his father. Citadel had asked the appellant’s son for copies of invoices and receipts. The appellant further explained to the Court that an agreement had not been reached between his son and Citadel regarding the amount offered by Citadel, and the appellant’s son had asked Citadel for an explanation regarding the amount being offered, to which Citadel did not provide an explanation. The appellant explained that his son had provided a copy of his (and his father’s) bank statements, which clearly indicated the expenses incurred in repairing the yacht. The appellant’s son had furthermore stated in his testimony that he had carried out some repairs himself, at his own expense.

The appellant furthermore pointed out to the Court of Appeal that at no point during the arbitral proceedings did Citadel’s representative contest the claim made by the plaintiff or raise the defence of lack of juridical interest. In fact, Citadel’s representative had confirmed that the receipts provided by the appellant’s son had amounted to €3,254.80. The appellant stated that the arbitral proceedings had been instituted since the sum of €3,254.80 was not sufficient to cover the expenses that had been incurred by his son in repairing the yacht. The appellant also referred to the cross-examination of Citadel’s representative which had taken place during the arbitral proceedings, whereby Citadel’s representative had stated that the dispute was merely about the quantum of the claim, and not about the plaintiff’s right of cover. The appellant furthermore insisted that despite the fact that his son took care of his yacht, carried out certain repairs, knew of the facts, filed the claim, and was involved in the negotiations with Citadel, the fact remained that the name appearing on the policy was that of the appellant and not of his son. The appellant reiterated that the claim was a contractual one, i.e. arising out of the policy entered into between Citadel and the appellant, and that the Court of Appeal should therefore revoke the Arbiter’s decision. The appellant stated that the reimbursement (or lack of reimbursement) from the appellant to his son was an issue extraneous to this case, and should not affect the outcome of the judgement, and that in any case, it was impossible for the appellant’s son to institute proceedings against Citadel, since there was no juridical relationship between them.

Citadel rebutted the appellant’s claims, quoting the Latin maxim of ‘semper necessitas probandi incumbit ei qui agit’ (meaning that he who alleges must prove). Citadel also stated that the fact that the dispute related to the quantum, did not in any case mean that Citadel had accepted that there indeed was a juridical interest.

After considering the facts of the case, the Court of Appeal concluded that the determining factor in deciding the dispute between the parties was indeed the issue of juridical interest. The Court of Appeal stated that in order for the appellant to succeed in his action, it was fundamental for the appellant to prove that he had directly suffered the damages being claimed from the defendant.

The Court of Appeal proceeded to deny the appellant’s claims, while confirming in its totality the decision of the Arbiter.