Unfair €45,000 guarantee on boat that smuggled 500 cigarette packs

A man’s Hobson’s choice between being prosecuted for smuggling, or effectively losing his €45,000 boat over €1,541 in unpaid taxes has resulted in a Constitutional court declaring a breach of his rights.

Businessman Michael Zammit is the owner of the ‘Jane S’, a boat which was stopped by the AFM on 14 December 2008 in the Grand Harbour on suspicion of smuggling cigarettes.

The ‘Jane S’ was later registered as a work boat by Zammit’s fuel bunkering company Go Fuels Ltd.

The police and Comptroller of Customs insisted that the man was carrying some 500 packets of untaxed cigarettes on board and that he had thrown them into the sea when the authorities approached.

The cigarettes were worth a total of €290, with unpaid taxes amounting to around €1,541.

But the ‘Jane S’ was also seized by the authorities, under a law which confiscates the property or vehicle in which the contraband is found. In 2009, Zammit had asked the courts to return his boat and it was released some time later – albeit against a guarantee of €45,000, which was the vessel’s market worth.

After four years of uncertainty, he was finally prosecuted for cigarette smuggling.

Criminal proceedings in cases of evading up to €2,000 in tax can be avoided by paying a penalty, but if he opted to pay that penalty, he would automatically forfeit his €45,000 guarantee.

Zammit’s lawyers, Cedric Mifsud and Catherine Mifsud, then filed Constitutional proceedings against the Director General (Customs), the Commissioner of Police and the Attorney General, arguing that it was unjust that if he opted to pay an administrative penalty he would end up losing the equivalent of 20 times the value of taxes allegedly due and 10 times the penalty payable at law.

Talks with the Customs Department were fruitless, with Zammit’s lawyers saying that although they had agreed on a way forward, he would lose his customs licence as he would no longer be deemed a fit and proper person to hold it.

The defendants argued that Zammit had not even attempted to bring any exculpatory evidence to justify his actions. But the civil court in its Constitutional jurisdiction, presided by Madam Justice Jacqueline Padovani Grima, pointed out that Zammit’s responsibility or otherwise was entirely irrelevant to the case at hand, in which the court was being asked to decide whether the State had honoured its obligations under the European Convention of Human Rights and the Constitution, and not whether Zammit was guilty or not.

The court noted that Zammit’s principal complaint was that it took so long for the defendants to begin criminal proceedings against him, and that there was no ordinary remedy for him to seek redress by.

On their part, the Director General (Customs), the Commissioner of Police and the Attorney General argued that the legislator had created a deterrent to safeguard the public purse and honest commerce and to avoid the country’s economy from being threatened by smuggling.

The court observed that the State had a right to legislate and take the necessary measures to ensure tax compliance, however there remained the obligation of the Courts to ensure that the legislation adopted by the State for these reasons did not exceed the limits laid down in the European Convention and the Constitution.

The appellant had not contested the legality of the sanctions but attacked their proportionality, and the court accepted this, saying that the automatic confiscation of the boat – in the particular circumstances of the case – lacked proportionality.

This meant that there were no procedural guarantees for the person as the law did not contemplate any method for him to obtain the release of the vessel.

Aside from this, considering the low value of the untaxed cigarettes and the amount in penalties he would have to pay if he used the legal options available to him, the court said that the €45,000 penalty was “entirely disproportionate”. In this case, the confiscation was mandatory and automatic, and does not take into account any particular individual circumstance.

Zammit had also taken issue with the amount of time it took for the case to be prosecuted. However, on this topic, the court noted that this was in part due to an expected change in the law, which was very favourable to the accused.

But the court did find a breach of equality of arms, as the automatic confiscation of the boat meant that the moment the applicant chose to avail himself of the fine, he would have no way of defending himself in a civil case.

Noting that the law, as it stood, left the Civil Courts with their hands tied and with no legal procedure which offered a remedy led to the breach of a fundamental right, the court declared that the law, as it stood in the current circumstances, breached Zammit’s rights to enjoyment of his personal property, a fair hearing and an effective legal remedy.

The court also ordered that should the parties reach an out-of-court settlement, the €45,000 bank guarantee was to be released to the plaintiff.