C-65/97

OPINION OF MR SAGGIO — CASE C-65/97

OPINION OF ADVOCATE GENERAL SAGGIO delivered on 26 November 1998 *

1. In the present case, the Commission has entered into a contract ( No BM 5/89 IT; 'the brought an action under Article 181 of the contract') with Cascina Laura, Gariboldi and Treaty to recover from two Italian companies Servizi Agroalimentare ed Ambiente Srl — Cascina Laura Sas di Aldo Delbò & C. ('SAA'), acting jointly and severally ('the con­ ('Cascina Laura') and Gariboldi Engineering tractor'). Company Srl ('Gariboldi') — monies paid for completion of a project under a contract which it terminated unilaterally for non­ performance. Specifically, the Commission claims reimbursement of ECU 479 134 together with interest payable at the rate set by the European Monetary Cooperation Fund for its transactions in ecus, which is published 3. The contract was for completion of 'a in the Official Journal of the European Com- project to produce electricity and heat from munities on the first working day of each biomass consisting of rice production residue month. It also claims compensation for damage (straw and husks)'. As such it fell within the suffered as a result of non-performance, plus class of 'demonstration projects and indus­ costs. It has formally withdrawn its claims trial pilot projects in the energy field' with 1 against Cascina Laura, in view of the latter's which Regulation (EEC) No 3640/85 is con­ bankruptcy, but maintains its application for cerned (Article 1(1)). costs.

Facts 4. Under the contract, the Community under­ took to provide the contractor with financial support equal to 40% of the project's actual cost, but subject to a ceiling of ECU 680 103 The contract (Clause 3). The contractor, on the other hand, was responsible for technical and financial matters relating to the project (Clause 4.1). In addition to its primary obligation — comple­ tion of the project — the contractor assumed other contractual obligations such as adher- 2. On 1 June 1990 the European Economic Community, represented by the Commission,

7. On 5 July 1990 the Commission made a payment of ECU 204 031 (30% of the max­ imum contribution) into Current Account No 2007/1 at the Banca Popolare di Intra (Novara Branch), which had been opened in the name of Cascina Laura. On the latter's 5. Clause 8 of the contract provided that the instructions, the bank then transferred the Commission could unilaterally terminate the entire amount, together with interest as at 12 contract in the event of the contractor's non­ September 1990, in Italian currency to SAA performance of any of its obligations there­ and Gariboldi. By cheque dated 10 July 1990, under, 'in particular if it fail[ed] to comply SAA received LIT 15 360 000; by banker's with the stipulations made in Clause 4.3 order of 26 September 1990, Gariboldi thereof'. If non-performance persisted, termi­ received LIT 297 038 483. nation was to take effect 'on expiry of a period of one month after notice [was] served by registered letter with acknowledgment of receipt'. Clause 8 further provided that, in such circumstances, 'the Contractor [was to] immediately repay to the Commission any amounts advanced by way of financial assis­ tance, together with interest payable from the 8. After receiving the first report required date of receipt of such funding'. Interest was under the contract in December 1990, the to be payable at the rate set by the European Commission made a further payment to Cas­ Monetary Cooperation Fund for its transac­ cina Laura on 20 February 1991 in the amount tions in ecus, which is published in the Offi­ of ECU 275 103. However, it did not receive cial Journal on the first working day of each the subsequent reports stipulated by Clause month. 4.3.2 of the contract. The Commission there­ fore sent reminders to Cascina Laura on 9 July and 13 August 1991. On 25 October 1991 it informed Cascina Laura that if a tech­ nical and financial report were not forth­ coming by 15 November 1991 it would ter­ minate the contract. By letter of 12 November 1991, Cascina Laura replied that financial dif­ 6. Clause 13 contained the arbitration clause ficulties were to blame for its failure to pro­ under which reference was to be made to the vide the reports but that, thanks to a new Court in the event of any dispute concerning partnership into which it would be entering the validity, interpretation or application of in the near future, these difficulties would the contract. Clause 14 provided that the shortly be resolved. However, that assertion contract was to be governed by Italian law. was not borne out by later events.

12. On 26 November 1993, after the extended deadline had expired with no successful con­ clusion, the Commission served formal notice on Cascina Laura and Gariboldi to comply with the contract. Pursuant to Clause 8, this 10. On 2 September 1992 the Commission meant that, failing performance within one wrote to Cascina Laura repeating its request. month, the contract would be terminated. In In reply, Cascina Laura once again cited finan­ response, Gariboldi maintained that it had cial difficulties, adding that it was imperative fully discharged its own contractual obliga­ not to take legal action against it as that would tions; Cascina Laura made no reply. On 27 cause irreparable damage. On 20 October April 1994 the Commission sent both com­ 1992 the Commission received a further com­ panies confirmation that the contract had been munication from Gariboldi reiterating its com­ terminated and demanded repayment of plaints about Cascina Laura's conduct and ECU 608 647 in capital and interest. It issued

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COMMISSION v CASCINA LAURA AND GARIBOLDI

reminders by letters of 2 May, 26 May and 16 monthly instalments of ECU 4 206 as November 1994. Gariboldi alone replied, again from 20 April 1991 — until the date of maintaining that it was not responsible for final settlement; the non-performance, this being attributable solely to the conduct of Cascina Laura.

2. order Cascina Laura and Gariboldi 13. So far as concerns the legal situation of jointly and severally to pay damages to the contractors, SAA was declared insolvent the Commission in the amount of by the District Court of Novara on 18 January ECU 100 000 or such sum as the Court 1994. Cascina Laura was placed under arrange­ may deem appropriate; ments with its creditors on 29 November 1994 and declared insolvent on 23 June 1997 by the same court. On 2 June 1994 Gariboldi entered into voluntary liquidation by deci­ sion of the general meeting of its shareholders.

in the alternative, declare that the defen­ 16. The Commission and Gariboldi lodged, dant's signature on Contract BM 5/89 respectively, a reply on 10 July 1997 and a IT signifies, as the applicant itself has rejoinder on 8 October 1997, in which they confirmed, that the defendant undertook both confirmed the forms of order sought in to stand guarantor, and that it falls there­ the above documents. fore within the scope of Article 1955 of the [Italian] Civil Code;

17. Cascina Laura failed to appear before the court. On 21 April 1998, following the bank­ confirm that, pursuant to Article 1955 of ruptcy order made by the District Court of the Civil Code, the defendant's obliga­ Novara, the Commission, acting in accor­ tion of guarantorship was extinguished dance with Article 78 of the Court's Rules of by the applicant's misconduct; Procedure, partially withdrew its claims, that is to say, those put forward in respect of Cas­ cina Laura. However, pursuant to Article 69(5) of those Rules of Procedure, the Commission requested that the Court order Cascina Laura to pay its share of the costs; the Commission also confirmed that it maintained its claims consequently, dismiss all the claims put against Gariboldi. forward by the applicant against Gari­ boldi, declaring them to be unfounded in fact or in law;

Substance

2. In the' further alternative, should the Court of Justice find that the defendant is in any way liable under the contract de quo, declare that henceforth {inci- 18. The Commission's claim for reimburse­ denter tantum) Orzya Sri is neither con­ ment, together with interest, is well founded cerned nor liable in that it was not the and must be upheld. Its claim for damages, defendant's sole shareholder during the however, should be rejected. period in which the obligation in ques­ tion arose;

pleted in good time or in accordance with the lows that the relationship committing the desired arrangements. The failure to complete companies to joint and several liability was the project is evident from the report fol­ never perfected, because from the outset the lowing the inspection on 21 and 22 June 1993 Commission conducted contractual relations (appended to the application). The Commis­ exclusively with Cascina Laura. sion was right, therefore, to take action under Clause 8 of the contract, pursuant to which 'the Commission may unilaterally terminate the contract in the event of the contractor's non-performance of any of its obligations 21. Alternatively, Gariboldi contends that the thereunder', particularly in the case of non­ Commission's conduct was a sign that it compliance with Clause 4.3 concerning the regarded Gariboldi's role merely as one of preparation and communication to the Com­ guarantorship in respect of the performance mission of interim progress reports containing by Cascina Laura — the company which statements of expenditure. actually received the funds — of the principal contractual obligation (completion of the project). That legal situation would be gov­ erned by Article 1955 of the Italian Civil Code, under which the guarantor's liability is extinguished where unlawful conduct on the part of the creditor makes it impossible to Clause 8 also provided that, should the con­ bring proceedings for recovery against the tract be terminated on those grounds, the party for whom the guarantor is answerable. contractor was immediately to repay to the In the present case, the Commission failed to Commission any amounts advanced by way show due diligence in monitoring Cascina of financial assistance, together with interest Laura's compliance with its contractual obli­ payable from the date of receipt of such gations, notwithstanding repeated requests funding. The interest was to be payable at the and complaints from Gariboldi. Gariboldi rate set by the European Monetary Coopera­ was unable, therefore, to defend its interests tion Fund for its transactions in ecus. by recovering the materials supplied and finding a new partner capable of bringing the project to completion. To sum up, the obliga­ tions incumbent upon the guarantor (Gari­ boldi) in undertaking to be answerable for the principal debtor (Cascina Laura), in respect of the latter's performance of contractual obli­ 20. However, Gariboldi denies liability. It gations, were extinguished by conduct attrib­ maintains that it is not required to reimburse utable to the creditor (the Commission) which the funds which the Commission paid directly precluded the guarantor from bringing pro­ and exclusively to Cascina Laura, since nei­ ceedings for recovery against the principal ther the latter nor its legal representative was debtor. empowered under the contract to receive that money on behalf of the other companies. Throughout the contractual relationship and up until the notice to comply, Gariboldi had not been involved in any of the correspon­ dence concerning the fulfilment of contrac­ Gariboldi adds that the Commission itself tual obligations. In Gariboldi's view, it fol­ implicitly acknowledged this in its applica-

23. The failure to complete the project con­ tracted for inevitably triggers the obligation on the part of 'the contractor' to refund the monies received from the Commission (Clause 8). Since the companies concerned were jointly and severally liable in this connection, it was 22. To my mind, Gariboldi's arguments are open to the Commission to enforce its rights not convincing. In its introductory section, against all the debtors as a body, or against the contract defines 'the contractor' as the only one or two of them. Proceedings were three companies — Cascina Laura, Gariboldi accordingly brought against the two compa­ and SAA — and specifies that they are 'act­ nies still in business at the time when the ing jointly and severally'. Thus it was the contract was terminated (Cascina Laura and express and unambiguous intention of the Gariboldi) and then, following Cascina contracting parties that the obligations entailed Laura's entry into liquidation, against Gari­ were to be binding on all three companies, boldi alone. jointly and severally. The situation is there­ fore covered by Article 1292 et seq. of the Italian Civil Code, which govern joint and several Lability and, in particular, by Arti­ cle 1292. This provides that 'in the case of joint and several liability, the same obligation 24. I shall now weigh the objections raised is binding upon a number of debtors, such by Gariboldi. It should be made clear at the that any one of them may be compelled to discharge that obligation in full, thereby relieving the other debtors thereof'. As the 2 — Judgment No 2623 of 13 March 1987.

outset, however, that Gariboldi's liability, trary, the Commission was free to call on any which arose upon its signature of the con­ single one of the companies concerned to per­ tract, is not extinguished merely because the form the contractual obligations. However, as Commission paid the funds into an account Gariboldi has repeatedly emphasised, Cascina opened exclusively in the name of Cascina Laura had fallen short of fulfilling its own Laura; nor because the correspondence con­ obligations under the arrangements agreed cerning performance of the contract was ini­ between the companies themselves. Conse­ tially sent to Cascina Laura alone. In fact, the quently, it is not clear how the outcome contract did not require the Commission to would have been any different if the Com­ pay the funds into an account opened in the mission had acted otherwise (by sending names of all three companies. Annex II to the reminders to Gariboldi, too). The end result contract, which contains the financial clauses, would in any event have been termination of merely requires the money to be paid into 'an the contract, triggering the obligation on the interest-bearing account opened for that pur­ part of the companies jointly and severally 3 pose by the contractor'. In any case, the liable to repay the money. monies paid by the Commission were then transferred to Gariboldi, as it acknowledged (thereby amending its initial position) in its rejoinder. This shows that the companies con­ cerned recognised between themselves that the fact that the account was in the name of only one of them was of no importance. It also shows that Gariboldi was aware that the 26. Thus it cannot be said that the relation­ funds were going to be lodged in the account ship of joint and several liability was frus­ bearing the name of Cascina Laura. Indeed, it trated ab initio because of the way in which is possible that this was decided upon, quite the Commission handled contractual rela­ simply, for reasons of practicality. However, tions. Nor do I agree with Gariboldi that the in the absence of any express provision in the effect of the Commission's conduct was to contract, it is not a circumstance which in any alter the nature of the obligations involved way diminishes the companies' joint and sev­ from those of joint and several liability (merely eral liability. the nomen iuris) to those of guarantorship.

them voluntarily assumed an obligation assumed merely the obligations attaching to towards the Community to comply in full guarantorship, suffice it to note that none of with the terms of the contract, there being no the statements made in the Commission's external indication as to how they might have pleadings can be construed to that effect. It is allocated responsibilities between themselves common case that the whole point of joint under an internal arrangement. The fact that and several liability is to provide the creditor the Commission conducted contractual rela­ with a guarantee in the sense that he is there­ tions exclusively with Cascina Laura cannot fore sure of being able to enforce his rights fundamentally alter the express intention man­ easily. Joint and several liability per Article ifested by the parties. It should also be noted 1292 of the Italian Civil Code subsumes the that, far from merely standing guarantor for role of the guarantee in so far as the debtor is the other companies' fulfilment of the obliga­ also bound by the obligations of his fellow tion, Gariboldi made a contribution of a very debtors. practical nature: it supplied the machinery necessary for the project contracted for. That being so, it is reasonable to assume that the three companies each assumed different responsibilities under internal arrangements in order to achieve a common objective. 29. Once the possible existence of guarantor- ship has been dismissed, there is no need to consider the applicability in the present case of the provisions relied upon by Gariboldi in support of its argument that the creditor's conduct extinguished the guarantor's obliga­ tion. The allegation that the Commission was too slow, despite Gariboldi's warnings, in Of course, Gariboldi could have played a dif­ checking to see whether Cascina Laura had ferent part in the contractual relationship, discharged its contractual obligations and in confining its role to that of a supplier of the terminating the contract is therefore irrel­ necessary equipment. But this was not the evant. Indeed, Gariboldi's sole purpose in case. It voluntarily agreed to share with the mentioning this was to demonstrate that the other companies an obligation expressed to guarantorship had been extinguished, pur­ the Commission as joint and several liability. suant to Article 1955 of the Civil Code, on Gariboldi certainly cannot blame the Com­ account of the creditor's conduct. mission if, in the course of contractual rela­ tions, the companies which it had freely chosen as its partners in a particular project fell short of their obligations under internal arrange­ ments. 30. In view of all the foregoing consider­ ations, I believe that the Commission's claim must be upheld. Gariboldi must therefore be ordered to pay the Commission the capital sum of ECU 479 134, together with interest payable at the rate set by the European Mon­ etary Cooperation Fund for its transactions 28. As for the alleged admission on the part in ecus, which is published on the first working of the Commission that Gariboldi had day of each month. The dates relevant for

31. The Commission also claims that the On those grounds, the Commission seeks Court should order Gariboldi to pay dam­ damages in the amount of ECU 100 000, unless ages for non-performance of contractual obli­ the Court of Justice should set a different gations. The legal basis of this claim is Article figure, considering it to be more equitable. 1453 of the Italian Civil Code, which pro­ vides that 'in contracts for reciprocal perfor­ mance, where one of the contracting parties fails to fulfil its obligations, the other may demand performance or terminate the con­ tract, without prejudice to its right to claim damages'. As regards calculation of damages, 33. The Commission's claim should not be Article 1226 of the Civil Code provides that upheld. Even though, in the abstract, the con­ 'if no precise figure can be ascribed to the siderations listed above could be regarded as damage, the courts may set an amount deemed ample grounds for holding the contractor to be equitable'. liable, I do not believe that the Commission has sufficiently discharged the burden of proof incumbent on a party claiming damages under the general rules of Italian law governing 6 delict or tort. Consistent with the general principle set out in Article 1223 of the Italian 32. The Commission maintains that the con­ tractor's non-performance in the present case has caused it to suffer damage in the following 6 — The Italian Court of Cassation has consistently held that 'the award of damages necessarily presupposes — even though the figure set is an equitable amount — proof of the existence of damage, it being incumbent upon the party purporting to 4 — OJ 1990 C 163, p. 1. have suffered such damage to discharge the evidentiary bur- 5 — OJ 1991 C 86, p. 1. den'.

35. By way of conclusion, it is my view that 34. On the basis of the Commission's asser­ the Commission has not discharged the burden tions — which, to tell the truth, are rather of proof attaching to its claim for damages in general — it is impossible to tell whether the respect of loss suffered as a consequence of above criteria are met in the present case. The the contractor's non-performance; accord­ information given is insufficient to disclose ingly, that claim must be rejected. whether or not the alleged damage exists, or whether there is a causal link between the alleged damage and the contractor's non­ performance. As regards the first criterion, in particular, it is not clear why the failure to accomplish the project — hence the impos­ sibility of directing the funds to other under­ Costs takings under the same programme — should have caused the Commission to suffer damage. It should be added that it is the Commission itself which chooses the contractor, on the basis of its own appraisal and taking into account any guarantees of reliability offered by the prospective contractor vis-à-vis its 36. Since the Commission has applied for timely performance of contractual obliga­ costs, should Gariboldi be unsuccessful in its tions. As regards the second criterion, the pleadings it must be ordered to pay the costs Commission does not explain which resources of the proceedings pursuant to Article 69(2) were 'wasted' in conducting contractual rela­ of the Rules of Procedure. As regards Cas­ tions with Cascina Laura and Gariboldi, or in cina Laura, in view of the fact that the claims what way its 'efforts' to ensure that the con­ against it were partially withdrawn solely on tractor complied with its obligations had account of its conduct, I believe that the caused damage to the institution. Lastly, even Commission's application for an award of assuming that the Commission is capable of costs against it should be upheld pursuant to suffering non-material damage because of non­ Article 69(5) of those Rules of Procedure.

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