Failure to adopt principles of natural justice nullifies administrative acts

In the case Midi plc (C 15836) vs Transport Malta and Melita Limited (C12715), decided by Hon. Toni Abela presiding over the First Hall Civil Court on the 16 November 2017, the Court was asked to examine whether an order issued by a public authority went beyond the scope of its power making it ultra vires and therefore null.

This case concerned an order issued by Transport Malta (the “Authority”) under the Utilities and Services (Regulation of Certain Works) Act (the “Regulations”) in April 2007 to pass cables and wires in Tigne Point, owned by the plaintiff company, in order to provide residents with services provided by the defendant company Melita Limited. Midi plc contested this order on the grounds that Transport Malta, as a public authority, failed to observe the principles of natural justice, in particular the principle of audi alteram partem which requires that a party is given an opportunity to be heard before forced to comply with an order that affects it.

During the merits of the case, the Court considered that the Authority’s administrative act affected the plaintiff company’s property right, and that in terms of Article 321 of the Civil Code ‘no person can be compelled to give up his property or to permit any other person to make use of it, except for a public purpose, and upon payment of a fair compensation.’ However, it is possible to impose limitations on ownership if:

• The limitations are sanctioned by law;

• The scope of such limitations must be clear;

• The limitations must be for a public interest;

• The owner should be given adequate compensation that reflects the diminished use or value of his property; and

• The law that provides for the limitation of ownership rights must provide an efficient legal mechanism that gives the owner the opportunity to contest both the limitation of his rights as well as the adequacy of the compensation given for such limitation.

In this case, the passage of cables and wires for the provision of services is a servitude which amounts to a partial expropriation of the plaintiff company’s private property. The Court held that in this case, the expropriation would be indirect because although members of the public will benefit from the services, a private entity is ultimately making profit from the provision of said services.

The plaintiff company contested the validity of the Authority’s order for the partial expropriation of its property under Article 469A(1)(b)(ii) of the Code of Organisation and Civil Procedure and claimed that the Authority’s act should be declared null on the grounds that it is ultra vires as it failed to observe the principles of natural justice or mandatory procedural requirements in performing the administrative act or in its prior deliberations.

The Authority claimed that the Regulation under which the order was issued did not oblige it to request the interested parties involved to express their views, and therefore applied the reasoning ‘ubi lex voluit dixit.’ This legal maxim dictates that if the law wanted to allow parties to express their views, it would have expressly said so. The Court ruled that a public authority should not apply rules that are less favourable to a private party when exercising its discretion and furthermore it must ensure that it not only conforms with the substance of the law but also with procedural norms when exercising its power. This includes respecting principles of natural justice, such as that a person is given the opportunity to be heard. This should be regarded as a minimum requirement for administrative authorities in the exercise their discretion.

The Court noted that the contested order was issued on the request of Melita Limited and that the plaintiff company was not only not asked to express its views before the order was given but was not even notified of the order until a meeting with the defendant company. Had the Authority consulted the plaintiff company, it would have known that the plaintiff had already taken infrastructural considerations for the provision of these services. The Court ruled that the failure t give proper notice of a decision is tantamount to denying the interested party the opportunity to be heard.

The Court held that the law does not need to expressly state that the principles of natural justice apply, as these principles are not founded in the letter of the law but emerge from a sense of what is correct and just. An administrative body may not derogate from observing principles of natural justice when these must objectively be adhered to. Therefore, although the particular rule under which the Authority issued its order did not require it to ask the affected party for its views on the decision, as a public authority the Authority still had to abide by the principles of natural justice and mandatory procedural requirements imposed by Article 469A(1)(b)(ii) of the Code of Organisation and Civil Procedure.

The Court, in quoting Lord Diplock, found that the Authority’s order constituted a procedural impropriety or ‘a failure to act with procedural fairness towards the person who will be affected by this decision’. This made the order subject to judicial review, and if the Court deems that the administrative act violated principles of natural justice, the administrative act must be nullified, irrespective of whether the same decision would have taken place had the proper procedures been followed. In this case, the Court concluded that the Authority’s decision failed to follow the mandatory procedural requirements in that it did not allow the plaintiff company the opportunity to be heard. The procedures which led to the issuance of the order lacked transparency. In exercising its discretion when making decisions under the Regulations, the Authority failed to exercise this discretion on reasonable grounds, according to the legal standard of reasonableness that imposes a respect for the rules of natural justice. The standard of reasonableness on administrative authorities is determined according to objective criteria, and therefore even if this requirement is not expressly stated by law, this does not exonerate the administrative authority from adopting what should be minimum standards.

On the basis of the above, the Court ruled in favour of the plaintiff company and found the order issued by the Authority to be ultra vires, and therefore null, on the ground that it failed to observe principles of natural justice and the mandatory procedural requirements.