The Court of Appeal, presided over by Mr Justice Silvio Camilleri, Mr Justice Tonio Mallia and Mr Justice Joseph Azzopardi, on October 31, 2014, in the case ‘Diane Holdings Ltd and Cassar Fuels Ltd vs Comptroller of Customs” held, among other things, that although the decision of the Criminal Court was final, the companies who were not a party in the criminal proceedings should not be penalised and had a right to pursue their claims in the civil proceedings save for their second plea, as the merits in relation to the claim were exhausted.

Diane Holdings Ltd was the owner of the vessel Sacro Cuor 1, registered in Valletta. The vessel was operated as a barge for the supply of gas fuel by Cassar Fuels Ltd.

On January 24, 2008, the vessel was berthed at the Malta Freeport to shelter from bad weather and loaded with a cargo of 212,256 litres of gas oil (diesel). On that day, the police and custom officials searched the vessel.

The master of the vessel was arrested and brought before the Court of Magistrates. He was charged with violating the Customs Ordinance. The Comptroller of Customs requested the seizure of the vessel and all its contents. This affected the property of Diane Holdings and Cassar Fuels, that were not involved in the criminal proceedings against the master for breach of the Customs Ordinance.

The companies claimed they were not aware that the vessel was used in violation of the Customs Ordinance. They also disputed the seizure of their assets, which they said was arbitrary and unjust.

They said that they suffered damages as a result. Their activities were brought to a halt, costing them loss of income, damage to their goodwill and considerable financial loss.

Faced with this situation, the companies proceeded to file legal proceedings, requesting the court:

• To declare that the warrant of seizure no. 18/2008 and 19/2008 was issued unfairly, in an arbitrary way and without justification and should be revoked;

• To order that the Comptroller of Customs released all objects in his possession which belonged to the companies and order the release of the vessel and its fuel;

• To declare the Comptroller responsible for all damages suffered by the companies; and

• To liquidate the damage and to condemn the Comptroller to pay the damages, so liquidated.

The Comptroller of Customs, in reply, submitted that the vessel was arrested after a quantity of contraband cigarettes was found, in breach of the Customs Ordinance Chapter 37.

The Comptroller contested the companies’ pleas to be held responsible for damages. In addition, it was stated that the provisions of article 469A of Chapter 12 should apply. According to this article, the Comptroller could not be held liable for damages unless the court declared that he acted in mala fede.

On March 14, 2011, the First Hall of the Civil Court declared that the merits of this case were exhausted in view of the decision of the Court of Criminal Appeal, as regards the vessel and its cargo of fuel – re the decision of the Court of Criminal Appeal dated February 12, 2009, in ‘Police v Murman Tsiteladze’.

The Comptroller argued that the vessel and its cargo were confiscated by the State; and as the companies were no longer the owners of the vessel and cargo of fuel, he could not be condemned.

It was evident that once the Criminal Court ordered all confiscation of the vessel and cargo, some of the companies’ pleas could not be accepted

On the other side, the companies pleaded that under Maltese law, civil proceedings could not be prejudiced nor exhausted by the outcome of criminal proceedings. They contended that the merits in their civil case could not be declared exhausted as a result of a decision of the Criminal Court.

The First Hall of the Civil Court made reference to ‘Michael Bharwani v the Comptroller of Customs’ (CA) dated October 6, 2000.

It was stated that the Civil Court could not give an order which was incompatible with the confiscation order, that was validly given by a competent court and that had now become res judicata.

The first court held that as a result of the confiscation, the vessel and its cargo passed to the government of Malta. The companies were no longer the owners. The Civil Court could not give an order which was incompatible with the confiscation order of a competent court and which had become res judicata.

It maintained that the Comptroller was no longer in possession of the vessel and that the merits of this case were exhausted. The Civil Court had no power to decide this case and to order the return of the objects – concluded the First Hall of the Civil Court.

Aggrieved by the decision of the first court, the companies entered an appeal, calling for its revocation.

They reiterated that they were not party in the criminal proceedings and should not be prejudiced by this decision.

It was stated that the decision of the first court was based on the decision of the Court of Appeal in ‘Bharwani v Comptroller of Customs’ dated October 6, 2000. However, in the latter case, Bharwani was actually involved in the criminal proceedings.

There was no doubt that a court should not give a decision to render ineffective the res judicata decision of another court, re: ‘Binlington Ltd v Enemalta’ dated June 27, 2014.

The Court of Appeal noted that the first court rightly said that if it were to accept the companies’ request, it would render ineffective part of the decision of the Court of Criminal Appeal. This case was, however, filed by third parties who were not involved in criminal proceedings.

The companies requested a remedy under the Customs Ordinance and claimed that the Comptroller of Customs was wrong to seek the seizure of their property.

It was evident that once the Criminal Court ordered all confiscation of the vessel and cargo, some of the companies’ pleas could not be accepted. However, this did not mean that all the claims of the company should be dismissed as a result of the decision of the Criminal Court.

The Court of Appeal maintained that while the First Hall of the Civil Court was correct to declare exhausted the merits insofar as it related to the companies’ second plea, whereby they requested that the property should be returned by the Comptroller of Customs, this did not mean, however, that the companies could not pursue their other pleas.

Although the decision of the Criminal Court was final, the companies who were not a party in these proceedings should not be penalised. This court said that it would not consider at this stage whether the Comptroller of Customs was justified to request the confiscation and seizure nor whether the defence pleas of the Comptroller of Customs were justifiable.

The case had to be first determined by the First Hall of the Civil Court and only if an appeal was made, would the Court of Appeal decide such pleas.

For these reasons, on October 31, 2014, the Court of Appeal accepted the companies’ appeal and revoked the decision of the First Hall of the Civil Court, save for the companies’ second plea once the merits relating to this claim had been exhausted.

The court ordered that the case be remitted to the First Hall of the Civil Court for a decision of the other pleas of the company.

Dr Karl Grech Orr is apartner at Ganado Advocates.