The First Hall of the Civil Court, presided over by Mr Justice Joseph R. Micallef in the case ‘Vincent Curmi and others v the Prime Minister and others’ on February 6, 2014, held, among other things, that declared claimants suffered a breach of their human right to enjoy private property under article 37 of the Constitution. The failure to pay fair compensation placed a disproportionate burden upon claimants.
The facts in this case were as follows.
A group of shareholders of the former National Bank of Malta (NBM) who did not agree to transfer their shares, filed a human rights action, claiming to have suffered a breach of their property rights under article 37 of the Constitution and a deprivation of their right to free assembly under article 42 of the Constitution as well under article 11 of the First Schedule of Act XIV of1987, by the transfer of the assets of NBM without payment and without their consent to Bank of Valletta. They asked the court to declare Act IX of 1974 and legal notice 27 of 1974 to be invalid and to provide them with an adequate remedy.
Article 37 (1) Constitution provides: “No property of any description shall be compulsorily taken possession of, and no interest in or right over property of any description shall be compulsorily acquired, except where provision is made by a law applicable to that taking of possession or acquisition.”
Act XLV of 1973 and Act IX of 1974 vested the administration of NBM and Tagliaferro Bank in the Council of Administration, which passed the assets of NBM to Bank of Valletta.
The government in reply contested the legal proceedings. It defended Act XLV of 1973 and Act IX of 1974, as justified under article 37 (2) of the Constitution. They denied from preventing the claimants from forming an association, as safeguarded by article 42 of the Constitution. They also requested the court to use its discretion under the proviso to article 46 (2) of the Constitution and refrain from hearing this case. The government denied that the claimants suffered any human rights violation. It put forward the argument that it acted in the interest of deposit holders and employees at the time.
It resulted that on December 12, 1973, Parliament unanimously passed Act XLV of 1973 as amended by Act IX of 1974 to provide on a temporary basis that the administration of NBM and Tagliaferro Bank be vested in a Council of Administration. There was no need for the approval of NBM’s shareholders and directors.
On March 22, 1974, there was an agreement for the assets and liabilities of NBM to be transferred to Bank of Valletta, in the acts of notary Maurice Gambin. Subsequently by legal notice 27 of 1974, the provisions of Act XLV of 1973 ceased to have effect on March 24, 1973.
The claimants were aggrieved by virtue of the provisions of Act XLV of 1973 and Act IX of 1974, which vested full control of the bank to the Council of Administration.
Act XLV provided as follows:
Art 4 (3) – “Any powers conferred in the council by this act shall be exercisable by the council free from any control by the board of directors, any director of the banks or any shareholder of the banks.”
Act 9 – “It shall not be obligatory on the council to convene general meetings of the banks or meetings of their board of directors.”
Act 10 – “All acts and things done by the council or by any person or persons duly authorised or appointed by the council, in pursuance of the powers conferred upon the council by this act shall have the same effect and shall be binding on the banks to the same extent as if those acts and things had been done by their board of directors.”
In the circumstances, no compensation was even considered, pointed out the court. This case did not come within the exception permitted under the Constitution and was disproportionate. The court said that the assets of the bank were private property. The transfer of NBM’s assets to Bank of Valletta constituted a deprivation of possession and enjoyment of private property in favour of a public authority, without compensation
The claimants stated that in 1973, the policy of the government was to control and dominate the economy. Allegedly, the government orchestrated the takeover of NBM.
Right to private property: the court declared that the claimants did indeed suffer a violation of their right to property under article 37 of the Constitution for the following reasons.
It expressed no doubt that ‘shares’ of the claimants were protected by article 37 of the Constitution. The transfer of NBM’s assets denied the claimants of the rights and powers attached to those shares. Even if the shares did not have a commercial value at the time of the transfer, NBM did have substantial assets, which were passed on to Bank of Valletta, without payment.
It noted that the transfer was compulsory, and there was no law which provided shareholders protection and guaranteed payment of due compensation.
The fact that the measures taken by the government were intended to avoid greater harm, to protect deposit holders, employees, the Malta economy, and purportedly to salvage the NBM, the government was still obliged to act proportionally and not disproportionately against the shareholders. The court pointed out that the failure to pay fair compensation placed a disproportionate burden upon the claimants.
“The taking of property without payment of an amount reasonably related to its value will normally constitute a disproportionate interference. However, legitimate objectives of ‘public interest may call for less than reimbursement of the full market value’. A total lack of compensation can be considered justifiable only in exceptional circumstances. Such a lack of compensation does not make a deprivation eo ipso wrongful, provided that the interference in question satisfies the requirement of lawfulness and is not arbitrary. Decisive is, whether in the context of a lawful expropriation a disproportionate and excessive burden has been imposed on the individual. This requires an overall examination of the various interests in issue, b(e)aring in mind that the convention is intended to safeguard rights that are ‘practical and effective’. Therefore, it is necessary to look behind appearances and investigate the realities of the situation complained of. The assessment may involve not only the relevant compensation terms, but also the conduct of the parties. In that context uncertainty is a factor to be taken into account in assessing the State’s conduct. Public authorities have to act in good time as well as in an appropriate and consistent manner, re: Van Dijik’s Theory and Practice of the European Convention on Human Rights (4th edition 2006).”
In the circumstances, no compensation was even considered, pointed out the court. This case did not come within the exception permitted under the Constitution and was disproportionate. The court said that the assets of the bank were private property. The transfer of NBM’s assets to Bank of Valletta constituted a deprivation of possession and enjoyment of private property in favour of a public authority, without compensation. Nor did the act of Parliament protect shareholders and made no provision for the payment of compensation.
The court was of the opinion that although the shares in NBM did not have much commercial value at the time of the transfer, it was amply clear that the assets of NBM were substantial, in excess of its liabilities.
Right of free assembly: The claimants felt aggrieved that Act XLV of 1973 denied them the right to free assembly. The court held that once the bank as a judicial entity with separate personality was not dissolved, the interest of its shareholders still existed. The right of free assembly was not limited to trade unions participation, industrial action, political movements or the staging of peaceful protests and demonstrations in the public streets and squares.
“An autonomous meaning is to be assigned to the word ‘association’. The legal form chosen and the legal consequences attached thereto by national law cannot be decisive here, since otherwise the guarantee of article 11 might be rendered illusory by the national legislature. The most important aspect of the right to freedom of association is that citizens should be able to create a legal entity in order to act collectively in a field of mutual interests. Without this, the right would have no meaning. An association is a legal entity, intended to operate as such in a specific area. The right to freedom of association implies the right to form once and it includes the right not to be forces to be a member of an association, re: Van Dijik.”
The court expressed doubt whether entities, the purpose of which is profit, would fall within the ambit of article 42 of the Constitution. While Act XLV of 1973 disturbed the claimant’s rights as shareholders and interfered with their rights of association, the court felt that important element was lacking to warrant a declaration that the claimants suffered a violation of their right to free assembly as understood under the Constitution and the European Convention of Human Rights. In this respect it did not declare a breach of article 42 Constitution – right of free assembly.
For these reasons, on February 6, 2014, the First Hall of the Civil Court gave judgment by declaring that the claimants suffered a breach of their property rights under article 37 of the Constitution, by the deprivation of their property without compensation. It found, however, no violation of their right of free assembly under article 42 of the Constitution and article 11 of the European Convention. It accepted the government’s fourth preliminary plea, stating that claimant John Gilbert had no legal interest in these proceedings and the defendants were not responsible in his regard. All other pleas of the government were rejected, with costs. The case was to be continued.
Dr Karl Grech Orr is a partner at Ganado Advocates.