The judicial review under Article 469A of the Code of Organisation and Civil Procedure, Chapter 12 of the laws of Malta (the "Code"), is a staple judicial remedy that grants natural or legal persons the ability to request the Maltese courts of justice of civil jurisdiction to "enquire into the validity of any administrative act or declare such act null, invalid or without effect". This legal provision is often resorted to by natural or legal persons that believe to have been unjustly prejudiced by an administrative act carried out by a public authority within the Maltese jurisdiction. As stated in sub-article (1)(b) of article 469A, the prejudiced party requesting this judicial remedy is required to prove that the administrative act being contested was either carried out in violation of the Constitution of Malta, or that the public authority was acting beyond its legal authority and powers, or ultra vires, on any of the grounds listed therein.

The remedy provided under this article 469A formed the basis of the legal action instituted by TCV Management and Trust Services Ltd (hereinafter referred to as the "Plaintiff") against the EOI Penalties Committee and the Commissioner for Revenue (hereinafter collectively referred to as the "Defendants") on the 12 August 2020.

By way of background, the Plaintiff is an entity which is locally licensed to act as a trustee on a number of trusts established in Malta, one of which is called "Dama Trust". On the 11 March 2020, the Defendants issued a default notice to Dama Trust, thereby charging said trust with a fine of €5,900 for submitting a report which trusts are required to submit under article 41 of the Cooperation with Other Jurisdictions on Tax Matters Regulations (the "Regulations"), 34 days beyond the deadline imposed by said regulations.

The Plaintiff contested the fine, arguing that, as the trustee, it did everything in its capacity to collate, assess, and submit the report within a timeframe which adheres to the deadline stipulated by the Regulations. In fact, the Plaintiff claimed that the late submittal of the report was solely due to their total dependence on Dama Trust's settlor, protector, and beneficiaries to provide them with ancillary documents which were required to be annexed to said report. On this front, the Plaintiff requested the Commissioner for Revenue to remit the penalty imposed on Dama Trust, given that the late submission was not due to negligence or tort committed by the entity being charged. On the 22 July 2020, the Commissioner for Revenue issued a demand notice to the Plaintiff, informing it that its appeal was refused and that the penalty was still due. This, in turn, led to the Plaintiff resorting to Article 469A of the Code to initiate legal action against the Defendants.

Following the above, a court order entitled "TCV Management and Trust Services Ltd vs. EOI Penalties Committee Et" was delivered on 16 September 2021 by the First Hall Civil Court (the "Court"), presided over by Justice Dr. Toni Abela. This court order was delivered in response to a preliminary plea raised by the Defendants in the above-mentioned legal action.

In response to the Plaintiff's legal action, the Defendants claimed that the Plaintiff was legally precluded from resorting to article 469A of the Code because it had failed to firstly exhaust all the ordinary remedies that were available to it prior to utilising article 469A, as is required under sub-article (4) of said article. The Defendants elaborated that, upon the Plaintiff's notification of the demand notice issued by the Commissioner for Revenue, which according to it, was the 24 July 2020, the Plaintiff had fifteen (15) days to contest the demand notice in front of a court of law, and that, given the fact that the Plaintiff did not contest this notice within the stipulated time frame, the Defendants now possess an executive title over the €5,900 charged from their end in accordance to article 40 of the Income Tax Management Act, Chapter 372 of the laws of Malta.

Within the above-mentioned court order, the Court firstly delved into the rationale behind Article 469A and its subsidiary nature. It explained that the legislator's intention with Article 469A was to create a last resort remedy which persons who felt aggrieved by an administrative act and were not able to find a mode of contestation against said act, could rely on to ensure that they have access to an effective mode of appeal. The Court, whilst referring to the Civil Court First Halls judgment in "Garden of Eden Garage Limited vs. Transport Authority", emphasised that the mode of contestation which the aggrieved person must exhaust prior to resorting to article 469A must not only exist and be available, but must also provide an effective and efficient remedy that is reasonably accessible for the persons seeking appeal.

In fact, the legislator's intentions whilst drafting sub-article (4) was to ensure that this judicial remedy does not become an option that legal or natural persons abuse by resorting to immediately without attempting to identify whether there are alternative remedies available to their specific circumstances. With the above in mind, the Court then proceeded to examine the penalty charged and the mode of appeal which, according to the Defendants, was available to the Plaintiff and wilfully refrained from using.

The Court first noted that the Commissioner for Revenue, when issuing the default notice on 11 March 2020, was evoking article 44(1)(d) of the Regulations. This article states that; "where a Reporting Malta Financial Institution fails to report the information required to be reported in terms of regulation 41 within the time stipulated in the guidelines published on the website of the Commissioner for Revenue under the provisions of article 96(2) of the Income Tax Act, to a penalty of:

  1. two thousand five hundred euro (€2,500); and
  2. one hundred euro (€100) for every day during which the default existed, provided this penalty shall not exceed in total twenty thousand euro (€20,000)"

In light of article 96(2) of the Income Tax Act referred to within the above-mentioned article, which states that "Any guidelines, explanations or instructions relating to the Income Tax Acts ... contained in a publication or circular published by or under the authority of the Commissioner of Revenue and distributed or made available to taxpayers in general, shall be read and construed as one with such rules and shall have the same effect as the rules...", the Court strived to examine every set of guidelines, explanations and instructions that emanate from this sub-article. Once the Court concluded its examination of what it described as a "legal labyrinth", it held that, in relation to trusts, it could not find any form of guidance, and so it was not possible to understand the statutory limits imposed to successfully contest a default or demand notice.

In fact, the only time frame which the Court could refer to was a 10-day period listed on the default notice sent by the Commissioner for Revenue to the Plaintiff back on 11 March 2020, which was listed in light of article 35(1) of the Regulations, which states that "where a person comes within the scope of the penalties as set out in these regulations, the Commissioner shall advise such person by means of a notice in writing which penalty the Commissioner intends to impose, the reason for its imposition and the time within which such penalty is to be paid." On this front, the Court went on to refer to article 35(3) of the Regulations, which states that "where the penalty is not paid within the time specified in the notice referred to in sub-regulation (1), the Commissioner shall inform the person referred to in sub-regulation (1) and serve him with a demand notice advising that person that, unless the latter notice is contested in a court of law within thirty days from its date of service, it shall constitute an executive title in terms of article 40(1)(d) of the Income Tax Management Act."

Considering the above-mentioned sub-article, the court established that the Defendants were not correct in stating that the Plaintiff had fifteen (15) days to contest the demand notice, since it clearly transpires that the law allows for thirty (30) days for the charged person to contest said notice. Contrary to the Defendants' claims and as the witness statements collected for this case prove, the Court further established that the Plaintiff was notified with the demand notice on the 28 July 2020 and not the 24 July 2020. Taking all the above into account, the Court affirmed that, even if the applicable deadline allowed under law was fifteen (15) days as the Defendants have claimed, the Plaintiff would have still submitted their appeal in time, given the fact that their legal action was tabled on the 12 August 2020.

In view of the above, the Court found the Defendants' preliminary plea to be both legally and factually unfounded and ordered for the Plaintiff's legal action based on Article 469A to proceed as planned.

This article was first published in the Malta Independent.

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