A man, whose tour-operating business allegedly went bankrupt following a decision by the Central Bank of Malta, had a personal juridical interest to pursue his breach of rights claim, the Constitutional Court has declared.
This pronouncement spelt a partial victory for Lawrence Borg who filed constitutional proceedings both in his own personal capacity as well as in the name of Cerviola Hotel Limited and Cerviola Holidays Limited, years after a twist of events allegedly brought his business to its knees.
It all started off from a scheme introduced by government in 1986, known as Special Guaranteed Pound Sterling Rate or Forward Buying Rate, managed by the Central Bank and aimed at securing a more favourable exchange rate for tour operators ferrying tourists to Malta.
Through his UK-based company, Cerviola Holidays Limited, Borg benefited through this scheme when booking chartered flights with Air Malta and bringing over tourists from the UK.
Borg’s other Malta-registered company, Cerviola Hotel Limited, also operated in the tourism industry.
Matters took a negative turn when the Central Bank flagged certain irregularities in Borg’s business, which even led to criminal action against the businessman.
In 1994, he was acquitted of all alleged wrongdoing linked to the handling of the scheme and that acquittal was confirmed two years later by the superior court presiding over an appeal filed by the Attorney General.
Yet, Borg’s situation in so far as the Central Bank scheme was concerned remained unchanged.
His lucrative trade faltered, his companies suffered “enormous” financial losses since several chartered flights had to be cancelled and operations dwindled, while bank accounts were frozen by the bank.
Finally in 2016, Cerviola Hotel Limited was struck off as ‘defunct’ while Cerviola Holidays Limited was dissolved.
Borg, who owned a “substantial” amount of shares in both companies, lost his shareholding and value.
Complex and lengthy saga
The issue was the subject of a complex and lengthy saga played out before the local courts, which also reached the ECHR where Borg claimed his rights were breached through the length of proceedings, the low compensation awarded and the lack of an award for non-pecuniary damages.
That court rejected his complaints partly in view of a declaration by government in 2011 which acknowledged the unreasonable delay in criminal proceedings against Borg and thus offered to pay €1,500 by way of a friendly settlement.
Borg persevered by filing an application before the First Hall, Civil Court in its constitutional jurisdiction in 2019, claiming that his rights were breached when he was slapped with “a penalty in disguise” and also because he was allegedly discriminated against.
Borg claimed that other participants who benefited from the scheme had continued to do so after their irregularities “were forgiven.”
Not so in his case, Borg claimed.
The first court threw out those claims, observing that he was not the sole shareholder and moreover, both companies had been struck off before the case was filed.
The issue with the Central Bank dated back to 1990 and Borg had sufficient time throughout all those years to seek a remedy for the alleged breach of rights, said the court, concluding that neither Borg nor his companies had a juridical interest in the proceedings.
Borg appealed and the dispute landed before the Constitutional Court which declared the appeal was null in so far as the non-existent companies were concerned but valid with respect to Borg in his personal capacity.
The appellant’s lawyer argued that his client was a victim since he was “the only person affected by the measures and [one] who had a direct, actual and personal interest” in the matter.
His companies went bankrupt and he lost all his shares along with the money invested.
The Constitutional Court, presided over by acting President Giannino Caruana Demajo and Mr Justices Anthony Ellul and Grazio Mercieca, made extensive reference to ECHR case law which held that it was only in exceptional circumstances that a breach of company rights was tantamount to a breach of shareholder’s rights.
Such circumstances were deemed to exist when the company and its shareholders were “so intrinsically entwined that it would be artificial to distinguish one from the other”.
The State Advocate, when replying to Borg’s claims, argued that shareholders did not have indirect victim status “unless the damage impacted their personal possessions.”
And that was precisely the issue at stake, observed the judges, pointing out that the applicant’s claim concerned the loss of shares he had suffered.
Although the merits of his claim with respect to the alleged breach of rights were still to be decided upon, at this stage it sufficed to say that Borg had a juridical interest to pursue his grievances in court.
And even if the court could not tell whether he was sole shareholder nor the actual number of shares, Borg’s “substantial” stake in the business was not contested.
Arguing that the companies ought to have taken legal action before being struck off, was irrelevant since the issue of prescription had never been brought up, said the court.
Once the companies no longer existed, Borg could only seek a remedy in his own personal capacity, concluded the court, thus upholding the appeal in his regard and directing the records back to the first court for proceedings to continue.
Lawyer Tonio Azzopardi is assisting the appellant.