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FOURTH
SECTION
CASE OF KALLIO v. FINLAND
(Application
no. 40199/02)
JUDGMENT
STRASBOURG
22 July
2008
This
judgment will become final in the circumstances set out in Article 44
§ 2 of the Convention. It may be subject to editorial
revision.
In the case of Kallio v. Finland,
The
European Court of Human Rights (Fourth Section), sitting as a Chamber
composed of:
Lech
Garlicki,
President,
Giovanni
Bonello,
David
Thór Björgvinsson,
Ján
Šikuta,
Päivi
Hirvelä,
Ledi
Bianku,
Mihai
Poalelungi,
judges,
and Fatoş Aracı,
Deputy Section
Registrar,
Having
deliberated in private on 1 July 2008,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The
case originated in an application (no. 40199/02) against the Republic
of Finland lodged with the Court under Article 34 of the Convention
for the Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by a Finnish national, Mr Pentti Antton Kallio
(“the applicant”), on 6 November 2002.
- The
applicant was represented by Mr J. Pelkonen, a lawyer practising in
Kaarina. The Finnish Government (“the Government”) were
represented by their Agent, Mr Arto Kosonen of the Ministry for
Foreign Affairs.
- The
applicant alleged a violation of Article 6 § 1 and § 3 (d)
of the Convention on account of the lack of an oral hearing, the
refusal to hear his evidence and that of four witnesses and the
refusal to stay the proceedings.
- On
25 April 2007 the President of the Fourth Section of the Court
decided to give notice of the application to the Government. It was
also decided to examine the merits of the application at the same
time as its admissibility (Article 29§ 3).
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
- The
applicant was born in 1953 and lives in Kaarina.
- The
applicant is the sole answerable partner in a limited partnership
company called Porin West-Print Ky. At the material time its line of
activities was, inter alia, car repair and painting services,
restaurant services and metal work.
A. The pre-trial investigation into alleged tax fraud
- The
National Bureau of Investigation carried out a pre-trial
investigation into the business activities of Porin West-Print Ky.
The applicant, who was questioned as a suspect in an alleged tax
fraud, proclaimed his innocence. In his closing statement, he
expressed the view that other companies, represented by two other
named individuals, had carried out the business activities which were
the subject of the investigation and were therefore liable to pay
tax. The file does not disclose whether anyone was charged with and
convicted of the alleged offence.
B. The tax inspection and the subsequent appeal
proceedings
1. The tax inspection
- In
1999 the south-west Finland Tax Office carried out a tax inspection
into Porin West-Print Ky. It found that during the period from July
1998 to 20 December 1999 over 840,000 Finnish marks (FIM)
(approximately 141,278 euros (EUR)) had been credited to the
company's account. The money had been paid in by several companies
but most of the funds had not been recorded in the company's books as
income.
- Basing himself on those transactions, the tax inspector
considered that there was evidence of a sub-contracting relationship
between Porin West-Print Ky and another company, R. Porin West-Print
Ky's line of activities had to be considered to include the sale of
sub-contracting services to R. Formally this activity had been
carried out in the name of another company T./Porin West-Print Ky and
company F. For this reason, the tax inspector considered that Porin
West-Print Ky was liable for the deduction of tax and social-security
contributions in respect of the salaries paid to identified and
unidentified employees. The total amount of the salaries was
estimated on the basis of a list of hours worked found in the
book-keeping records of R. and the bank statements of Porin
West-Print Ky and the applicant. The salaries paid to identified
employees ran to FIM 324,681 for the year 1998 and 53,000 in 1999. An
additional FIM 50,000 was added in respect of unidentified employees
to the estimated salaries for 1998.
2. The south-west Finland Tax Office's decision
- Based
on this reassessment, the Tax Office increased the tax liability and
ordered the payment of FIM 359,609 in respect of 1998 and FIM 59,913
in respect of 1999. The file does not disclose the amounts of the tax
surcharges.
- Following
a rectification request, the first amount was reduced to FIM 354,952.
3. The proceedings in the Turku Administrative Court
- Porin
West-Print Ky appealed to the Turku Administrative Court
(hallinto-oikeus, förvaltningsdomstolen), requesting an
oral hearing and that the court hear testimony from the applicant and
four other persons, Mr E.N., Mr A.L., Mr M.V. and Mr H.S. Porin
West-Print Ky also requested a stay of enforcement until the case had
been examined. According to the application form lodged with the
Court, the amount in dispute was by then equivalent to EUR 33,885.
- Porin
West-Print Ky argued that Mr H.S. or companies T. and F., both
controlled by Mr H.S., were responsible for social-security
contributions. Although he had given Mr H.S. use of the Porin
West-Print Ky bank card, the applicant had had nothing to do with the
sub-contracting activities of Mr H.S. and his companies. As the
sub-contracting work had been invoiced using the names and business
indexes of the companies of Mr H.S., Porin West-Print Ky could
not be considered liable to taxation.
- The
Administrative Court received the written statements of the Tax
Office and the tax inspector and the observations of the Tax
Ombudsman and Porin West-Print Ky. The latter requested a stay of
proceedings until the alleged tax fraud had been examined by the
District Court.
- In
its decision of 22 May 2002 the Administrative Court noted that the
company had requested an oral hearing to hear testimony about its
business activities, about the identity of the employer in the
sub-contracting jobs, about the sub-contracting invoiced on behalf of
companies T., E. and F. and about the negotiations and
sub-contracting jobs for R. It found an oral hearing manifestly
unnecessary having regard to the tax inspection report, the other
documents on the file and the fact that the applicant and three of
the witnesses proposed had made statements on these issues during the
pre-trial investigation. It did not comment on the request for a stay
of proceedings.
- The
Administrative Court referred in evidence to, inter alia, the
statements of the applicant and three of the witnesses proposed given
during the pre-trial investigation and the tax inspection. It
rejected the appeal and gave the following reasons:
“...
Conclusions
The Administrative Court considers, in particular on the
basis of the statements of Mr H.S. and Mr M.V., the use of the
preliminary taxation register of company T. ... and the transactions
on the bank account, that it has been shown that the applicant has
operated actively within Porin West-Print Ky. Therefore, the
allegation that he did not have knowledge of the sub-contracting
invoicing but only functioned as an employee of the companies owned
by Mr H.S. is not credible. The applicant, as the answerable partner,
is responsible for those using the company's bank account and for the
purposes of this use. The fact that Mr H.S. has used the company's
bank card does not show how the money withdrawn has been used.
The Administrative Court finds that Porin West-Print Ky
has carried out sub-contracting jobs for R. and that the invoicing
has gone through companies T. and F. as dummies, as explained by the
applicant himself in his reply at the preparatory stage of the tax
inspection. Therefore the company is, as an employer, liable for the
deduction of the tax and social–security contributions in
respect of the salaries paid to its employees. As the estimation of
the amounts of the salaries has not been shown to be incorrect, there
is no reason to amend the decision to order payment.”
4. The proceedings in the Supreme Administrative Court
- Porin
West-Print Ky appealed again, renewing at the same time its request
either for an oral hearing in the Supreme Administrative Court or for
the case to be referred back to the lower court.
- On
27 September 2002 the Supreme Administrative Court refused leave to
appeal. It reasoned:
“The question in this case is whether Porin
West-Print Ky is to be considered responsible as an employer for the
deduction of tax and social-security contributions in respect of the
employees considered to have worked for it, that is, whether Porin
West-Print Ky is rightly considered to be liable to pay for the
sub-contracting jobs in respect of which the contract invoicing and
salaries have gone through the company's books and bank accounts.
There is no reason to bring the case before the Supreme
Administrative Court in the interests of the application of the law
in other, similar cases or the uniformity of legal practice. Nor has
there been any manifest error in the examination of the case. There
are likewise no pressing economic reasons to grant leave to appeal.”
II. RELEVANT DOMESTIC LAW AND PRACTICE
- Section
38(1) of the Administrative Judicial Procedure Act
(hallintolainkäyttölaki, förvaltningsprocesslagen;
as amended by Act no. 433/1999) provides that an oral hearing
must be held if requested by a private party. An oral hearing may,
however, be dispensed with if a party's request is ruled inadmissible
or immediately dismissed, or if an oral hearing is clearly
unnecessary due to the nature of the case or other circumstances.
- In
this regard, the explanatory report of the Government Bill
(no. 217/1995) for the enactment of the Administrative Judicial
Procedure Act states that an oral hearing contributes to a focused
and immediate procedure but since it does not always bring any added
value, it is important that the flexibility and cost effectiveness of
the administrative procedure is not undermined. An oral hearing is to
be held when it is necessary for the clarification of the issues and
the hearing can be considered beneficial for the case as whole.
- During
the period from 2000 to 2006 the Supreme Administrative Court did not
hold any oral hearings in tax matters. As to the eight administrative
courts, appellants requested an oral hearing in a total of 603 cases.
The courts held an oral hearing in 129 cases. There is no information
as to how many of these taxation cases concerned the imposition of a
tax surcharge. During the first six months of 2006, the
administrative courts held a total of 20 oral hearings in tax
matters.
- Witnesses
who have been called by a party or by the administrative authority
that made the decision, or whose oral testimony the appellate body
considers necessary, may be heard in an oral hearing. A party may be
heard under oath concerning circumstances of special relevance to the
resolution of the matter. Chapter 17, sections 18-39, of the Code of
Judicial Procedure (oikeudenkäymiskaari, rättegångsbalken)
apply to the hearing of witnesses (section 39 of the Administrative
Judicial Procedure Act).
- Testimony
must be oral. A witness must not refer to a written statement.
However, the witness may use written notes as a memory aid (Chapter
17, section 32(1)). A statement that a witness has previously given
to the court, to the public prosecutor or to the police may be read
out in connection with the hearing of the witness only if, in his or
her testimony, the witness retracts his or her earlier statement, or
explains that he or she cannot or will not testify (section 32(2)).
- A
written statement of a private nature, a pre-trial investigation
record or a statement entered or stored in another document must not
be admitted as evidence unless otherwise provided in an Act (Chapter
17, section 11(1), of the Code of Judicial Procedure; Act no.
690/1997). Section 11(2-3) lists exceptions to the prohibition
on using written preliminary investigation material, For example, if
a witness cannot be questioned in the main hearing or outside the
main hearing, the court may allow the pre-trial investigation record
or another document or statement to be taken into account in a
hearing. The Administrative Judicial Procedure Act contains no
restriction on the use of pre-trial investigation material in the
consideration of a case.
- The
said Act provides that the statement of reasons must indicate which
facts and evidence have affected the decision and on which legal
grounds it is based (section 53).
- The
employer is responsible for the deduction of tax and the remittance
of tax deducted and employer's social-security contributions to the
tax authority (section 14 of the Prepayment Act (ennakkoperintälaki,
lagen om förskottsuppbörd; Act no. 1118/1996). If an
employer has, in part or in full, failed to deduct tax from an
employee's income or to remit the amount deducted, the tax office
must order payment of the amount not deducted or not remitted without
prejudice to section 39 (section 38(1)). Deducted tax may be ordered
to be paid at the maximum rate of 40 %, if the deduction has not been
carried out in the case referred to in subsection 1 (section 38(2)).
An order may be waived, if the failure to deduct has been
insignificant as concerns the circumstances or the total amount
unpaid. An order of payment may also be carried out by assessment on
the grounds laid down in section 41 (section 39). An employer who has
failed to deduct and to remit the deducted tax must also be ordered
to pay, in addition to the amount unpaid, a tax surcharge as provided
in section 3 of the Act on Tax Surcharges and Penalty Interest (laki
veronlisäyksestä ja viivekorosta, lag om skattetillägg
och förseningsränta; Act no. 1556/1995) (section
43(1)). A surcharge must be ordered to be paid even though the amount
not deducted or remitted has subsequently been paid (section 3(2)). A
surcharge is not imposed where the order of payment of the deducted
tax is waived due to the insignificance of the amount (section 3(4)).
The tax office may increase tax deduction liability twofold at most
where the person responsible for carrying out the deduction has, due
to gross negligence, failed to observe his obligation to provide the
relevant information or has submitted a return or some other piece of
information or document with essential inaccuracies (section 44).
Where a return or some other piece of information or a document is
not submitted, or is submitted with essential inaccuracies referred
to in paragraph 1(4) for the purpose of fraud, the tax deduction
liability must be increased by 50% at least and threefold at most
(section 44(2)). A surcharge is imposed in respect of the tax
deduction liability only as concerns the deficiencies in the
information referred to in paragraphs 1 and 2 (section 44 (3)).
- The
Employer's Social Security Contribution Act (laki työnantajan
sosiaaliturvamaksusta, lagen om arbetsgivares socialskyddsavgift;
Act no. 66/1963) provides that if an employer who is liable to
pay the said contribution fails, in part or in full, to pay it, the
provisions of the Prepayment Act are applicable to the redress and
the recovery from the employer of the amount not paid (section 10).
- In
the Income Tax Act (tuloverolaki, inkomstskattelagen; Act
no. 1535/1992), the term “business consortium”
refers, inter alia, to a limited partnership company (section
4). A business consortium is not an independently taxable unit.
However, a level of expected return is established for a consortium
for its business activities and, deductions having been made to cover
any losses sustained during previous fiscal years, the return is
distributed to shareholders as revenue to be taxed according to the
share they have in the revenue of the consortium (section 16). The
answerable partner of a limited partnership company is equally
responsible for paying the taxes imposed on the business liable to
pay taxes and contributions as he or she is for paying his or her
personal taxes (section 39(1) of the Taxation Act
(veronkantolaki, lagen om skatteuppbörd; Act no.
609/2005).
THE LAW
I. ALLEGED VIOLATIONS OF ARTICLE 6 OF THE CONVENTION
- The
applicant complained that the proceedings had been unfair as the
courts had refused to hold an oral hearing and to hear his testimony
and that of four witnesses proposed by him. He also complained that
the Administrative Court had refused his request that the proceedings
be stayed.
Article
6 § 1 and 6 § 3 (d) of the Convention, in their relevant
parts, read as follows:
“1. In the determination of ... any
criminal charge against him, everyone is entitled to a fair ...
hearing ... by [a] ... tribunal...
...
3. Everyone charged with a criminal offence
has the following minimum rights:
...
(d) to examine or have examined witnesses
against him and to obtain the attendance and examination of witnesses
on his behalf under the same conditions as witnesses against him;
...”
- The
Government contested that argument. They conceded, however, that
Article 6 under its criminal head was applicable to the tax surcharge
proceedings.
A. Admissibility
- The Court notes that the application is not manifestly
ill-founded within the meaning of Article 35 § 3 of the
Convention. It further notes that it is not inadmissible on any other
grounds. It must therefore be declared admissible.
B. Merits
1. The parties' submissions
The applicant
- The
applicant argued that he had requested an oral hearing on the
following grounds. The tax inspector had misinterpreted testimonies
given in a pre-trial investigation and the applicant's view regarding
the contents of those testimonies differed from that of the inspector
and the tax authority. In the applicant's view, it was clear from the
pre-trial statements of Mr J.J., Mr H.S, Mr R.K and Mr M.V., the
managing director who had ordered the sub-contracting work, that Mr
J.J. and Mr H.S were liable to pay tax. The applicant had also asked
the Administrative Court not to examine the case until the conclusion
of the criminal case or at least until the consideration of charges
had been completed. Furthermore, an oral hearing had been necessary
to clarify the case and the applicant's right to due process required
that the case should not be decided solely on the basis of pre-trial
testimonies since the reliability of those had to be ascertained by
further questioning before the court.
- The
applicant argued that the tax surcharge was very substantial. The
person liable for tax payable on the sub-contracting work performed
continuously for the same client company had to be identified. The
invoices for sub-contracting work had been sent in the name of three
different companies: companies A., T. and F. The applicant had stated
that neither he nor his company Porin West-Print Ky was liable for
tax, because the sub-contracting work had not been part of his or his
company's business operations. The liability for tax could not lie
with him and his company simply on the grounds that the company's
bank account was used in the invoicing, as he had given Mr. H.S. the
right to use the bank account. The tax liability had actually fallen
on Mr H.S. and the companies he used in invoicing.
- The
tax inspector considered in his report that the party liable for tax
payable on the sub-contracting work was Porin West-Print Ky and the
applicant as its responsible partner. The applicant considered the
inspector's assessment, which was based on the pre-trial testimonies,
erroneous. In addition, he had contested the credibility of the
testimonies of Mr H.S. and Mr M.V. An oral hearing would also have
provided information of relevance for the determination of the issues
to be decided. The Administrative Court had based its findings on
those testimonies.
- The
applicant took the view that the present case was different from the
case of Jussila v. Finland ([GC], no. 73053/01) in which the
tax surcharge at stake had been minor. In the applicant's case the
amount of the tax surcharge had been more than 100 per cent of the
tax imposed. Furthermore, in the case of Jussila there had
been no issue of credibility whereas the present case had turned on
an assessment of the credibility of the pre-trial statements, which
were conflicting.
The Government
- The
Government submitted that the Administrative Court had found an oral
hearing manifestly unnecessary having regard to the tax inspection
report, the other documents on the file and the fact that the
applicant, Mr M.V., Mr H.S. and Mr E.N. had made statements
on these issues during the pre-trial investigation. The reasons for
the decision referred, inter alia, to the pre-trial statements
of the applicant, Mr H.S, Mr M.V., Mr E.N. The applicant
held Mr H.S. and Mr J.J., who were heard as suspects in the pre-trial
investigation, fiscally and criminally responsible. The applicant
further considered that, due to the lack of an oral hearing, the
reliability of the pre-trial statements could not be checked. The
Government observed that in his application the applicant submitted
that, in the pre-trial investigation, he as an active partner as well
as H.S. had been heard as suspects and M.V. and E.N. as witnesses.
- The
Government observed that in the Administrative Court's decision the
pre-trial investigation records were referred to under the item
“Statements as reported in the pre-trial investigation reports
and in the tax inspection”. The court stated as follows:
“In the criminal pre-trial investigation, Mr H.S.
stated that the invoices addressed to [company R.] had mainly, from
July 1998, been made out by [the applicant]. According to Mr H.S., it
was at the initiative of [the applicant] that invoices started to be
made out in the name of [company T.]/West-Print. Mr H.S. said that he
was told by [the applicant] in autumn 1998 that [company F.] was the
new invoicing company that would be used. According to Mr H.S., he
and the applicant had both worked independently hiring help for sites
without being each other's employers. Both of them had worked for the
Finnish State Railway and Perno Shipyard. Mr H.S. has stated,
however, that he was responsible for less than two-thirds of the
invoices sent to [company R.] in the name of [company T.]. As regards
[company F.] he has not stated any amounts in FIM but has admitted to
being responsible for some of the invoicing. According to Mr M.V.,
heard as a witness in the pre-trial investigation, Mr H.S. assumed a
smaller role in sub-contracting negotiations ever since [the
applicant] took up sub-contracting activities. Mr H.V. noted that the
switch had taken place with the change of invoicing companies in July
1998. Mr E.N., heard as a witness in the pre-trial investigation,
said that in early spring 1998 he had gone to work at a [company R.]
site at the machine workshop of the State Railway having been
contacted either by Mr J.J., the owner of [company A.] or Mr H.S.
without knowing specifically by which company he had been hired. Mr
E.N. said he had received his salary in cash from either Mr J.J. or
Mr H.S. He also stated that he knew that [the applicant] was also
working at the [company R.] site and that he was the owner of
West-Print. Mr E.N. did not know that West-Print and [company F.] had
anything to do with the payment of his salary.”
- The
Government observed that the court had made use of pre-trial
investigation material apparently submitted to it by the tax
authority. The conclusions disclosed, on the other hand, that the tax
inspection report concerning the company and other tax inspection
reports were used in addition to the pre-trial investigation
material. In the light of the statement of reasons, it could not be
excluded that pre-trial material had been used at the tax inspection
stage as well. On the basis of the statement of reasons, it was
somewhat difficult to determine on which set of materials each
conclusion was based. It was not possible to infer whether the
observations on the entries in the accounts and the invoicing had
been based solely on the tax inspection, or on the pre-trial material
as well. In the decision it was observed that the inspection had
disclosed that the cheque account of the company had, during the
period July 1998 to 20 December 1999, been credited with over FIM
840,000 (EUR 134,214) by a number of different companies, with
the majority of the funds not having been entered in the company's
books. In any event, evidence relying on invoicing and entries on the
account could be regarded as objective and incontestable, proving the
fact that considerable sums of money had been credited to the account
of the company controlled by the applicant.
- Furthermore,
from the point of view of fiscal law, the nature of the relationship
between company R., the applicant and the company controlled by him
had also been an important consideration. These two considerations
had been decisive, which became evident in the Administrative Court's
statement of reasons.
- The
case of Jussila v. Finland (cited above) differed somewhat
from the present case which involved an assessment of the credibility
of the accounts presented. Unlike the former, the present case also
involved quite considerable tax surcharges. The Government emphasised
that even if the applicant was not afforded an oral hearing, he had
been given an opportunity which, moreover, he had used, to provide
replies and comments to all memoranda and written statements by the
tax authorities throughout the proceedings.
- The
administrative courts had no obligation to stay the consideration of
the tax proceedings due to the fact that a criminal pre-trial
investigation of the case had not been completed. Administrative
courts had exclusive competence to resolve questions of
interpretation of fiscal law within the scope of application of the
Prepayment Act, for example, who must be regarded as an employer and,
consequently, liable to make the payments of deducted taxes. As far
as the unpaid taxes were concerned, they also had exclusive
competence to determine the amount ordered (that is, deduction of
taxes and the social-security contribution). Furthermore, the
assessment of the responsibility of the employer under fiscal law was
not binding on a criminal court in assessing whether the employer was
also guilty of illegally evading tax prepayment liability or of a tax
offence under the threat of a fine or a tax prepayment offence. The
consideration of charges and the imposition of tax sanctions were two
different matters and were considered separately. In considering
charges it was possible to arrive at a decision to drop or dismiss
charges whereas determining tax penalties left considerably less
leeway for discretion. Moreover, bringing the tax proceedings to an
end before the completion of the pre-trial investigations or the
consideration of charges would have unnecessarily prolonged the
proceedings.
2. The Court's assessment
42. Article
6 is applicable under its criminal head to tax surcharge proceedings
(see Jussila v.
Finland, cited
above, § 38). Regarding the parties' differing views as to the
role or impact of the taxation procedure as regards criminal
proceedings, the Court notes that under Finnish practice, the
imposition of a tax surcharge does not prevent criminal charges being
brought for the same conduct. That is, however, done in separate
proceedings before a criminal court.
- As
to the right to an oral hearing, the applicable principles are
outlined in the judgment in the above-cited case of Jussila v.
Finland (§§ 40-45). The Court does not doubt that
checking and ensuring that the taxpayer has given an accurate account
of his or her affairs and that supporting documents have been
properly produced may often be more efficiently dealt with in writing
than in oral argument (see Jussila v. Finland, § 47).
- In
the present case the applicant requested an oral hearing of his
evidence and that of the witnesses Mr E.N., Mr A.L., Mr M.V. and
Mr H.S.
- This
case can be distinguished from the case of Jussila in which
Mr Jussila's purpose in requesting a hearing was to challenge
the reliability and accuracy of the report on the tax inspection by
cross-examining the tax inspector and obtaining supporting testimony
from his own expert since, in his view, the tax inspector had
misinterpreted the requirements laid down by the relevant legislation
and given an inaccurate account of his financial position. The
reasons for requesting a hearing in the case of Jussila
therefore concerned in large part the validity of the tax assessment,
which as such fell outside the scope of Article 6, although there was
the additional question of whether the applicant's book-keeping had
been so deficient as to justify a surcharge. The Administrative
Court, which took the measure of inviting written observations from
the tax inspector and a statement from an expert chosen by the
applicant, found in the circumstances that an oral hearing was
manifestly unnecessary as the information provided by the applicant
himself formed a sufficient factual basis for the consideration of
the case. For those reasons, the Court in the Jussila case
found that the lack of an oral hearing did not give rise to a breach
of Article 6.
- In
its decision of 22 May 2002 the Administrative Court rejected the
present applicant's request for an oral hearing, finding this
manifestly unnecessary considering the tax inspection report, the
other documents on the file and the fact that the applicant, Mr M.V.,
Mr H.S. and Mr E.N. had made statements on these issues during
the pre-trial investigation.
- The
applicant argued that there were issues of credibility which required
oral presentation of evidence to prove that his company was not an
employer as regards the sub-contracting jobs. The applicant's purpose
in requesting a hearing was to prove that he had had nothing to do
with the sub-contracting activities of Mr H.S. and his companies. The
applicant had been hired by Mr H.S. and an employee of the companies.
As the sub-contracting work had been invoiced using the names and
business indexes of the companies of Mr H.S., Porin West-Print Ky
could not be considered liable to taxation. The applicant wished to
give testimony about the business activities of Porin West-Print Ky
and for the other witnesses to give testimony as follows: Mr E.N. and
Mr A.L. about their employer in the sub-contracting jobs; Mr M.V.
about the sub-contracting invoiced on behalf of companies T., E. and
F.; and Mr H.S. about the negotiations and sub-contracting jobs for
company R.
- The
Court will therefore examine whether the protection of the
applicant's interests required the holding of an oral hearing before
the Administrative Court.
- The
Court observes that, pursuant to section 38(1) of the Administrative
Judicial Procedure Act, an oral hearing must be held if requested by
a private party. An oral hearing may, however, be dispensed with if a
party's request is ruled inadmissible or immediately dismissed or if
an oral hearing is clearly unnecessary due to the nature of the case
or other circumstances. The explanatory report of the relevant
Government Bill states that an oral hearing contributes to a focused
and immediate procedure but since it does not always bring any added
value, it is important that the flexibility and cost effectiveness of
the administrative procedure is not undermined. An oral hearing is to
be held when necessary for the clarification of the issues and the
hearing can be considered beneficial for the case as whole.
- In
the present case the Administrative Court was called upon to examine
the case as regards both the facts and the law. The applicant
disputed the facts upon which the imposition of tax surcharges was
founded, requesting an oral hearing of witness evidence in order to
elucidate the relevant events. The Administrative Court had to make a
full assessment of the case. The crucial question concerned the
clarification of the facts and the credibility of the statements of
the applicant and the four witnesses who had allegedly been involved
in the relevant activities. Nevertheless, the Administrative Court
decided, without a public hearing, to uphold the decision. The Court
finds that, in the circumstances of the present case, the question of
the credibility of the written statements could not, as a matter of
fair trial, have been properly determined without a direct assessment
of the evidence given in person by the applicant and by the witnesses
proposed.
51. There
has accordingly been a violation of Article 6 § 1 of the
Convention as regards the refusal to hold an oral hearing in the
Administrative Court.
- In
view of the Administrative Court's firm conclusion that an oral
hearing could be dispensed with, the Court considers that it is not
necessary to examine separately whether the rights of the defence
were violated by reason of the court's refusal to hear oral evidence
and the use as evidence of the statements of the applicant and three
witnesses that had been given during the pre-trial investigation and
the tax inspection. Nor is it necessary to examine separately whether
the Administrative Court's decision to go ahead with the proceedings
disclosed a violation of Article 6.
II. APPLICATION OF ARTICLE 41 OF THE CONVENTION
- Article 41 of the Convention provides:
“If the Court finds that there has been a
violation of the Convention or the Protocols thereto, and if the
internal law of the High Contracting Party concerned allows only
partial reparation to be made, the Court shall, if necessary, afford
just satisfaction to the injured party.”
A. Damage
- Under
the head of non-pecuniary damage the applicant claimed 30,000 euros
(EUR) for mental suffering.
- The
Government considered that the award should not exceed EUR 2,500.
- The
Court accepts that the lack of guarantee of a fair trial has caused
the applicant non-pecuniary damage, which cannot be made good by the
mere finding of a violation. The Court, making its assessment on an
equitable basis, awards the applicant EUR 3,000.
B. Costs and expenses
- The
applicant claimed EUR 9,666.67 (inclusive of value-added tax) for
costs and expenses incurred before the Court plus EUR 2,458.54
(exclusive of VAT) for translation costs.
- The
Government considered that the hourly rate charged by counsel was
excessive. The award should not exceed EUR 4,900 (inclusive of VAT).
They questioned whether the applicant had produced the requisite
documentation as regards the translation costs and considered that
the award regarding these should not exceed EUR 1,000.
- The
Court reiterates that an award under this head may be made only in so
far as the costs and expenses were actually and necessarily incurred
in order to avoid, or obtain redress for, the violation found (see,
among other authorities, Hertel v. Switzerland, judgment of 25
August 1998, Reports 1998-VI, p. 2334, § 63).
- In
the present case, regard being had to the information in its
possession, the above criteria and the fact that the application was
examined under the joint procedure provided for under Article 29 §
3 of the Convention, the Court awards EUR 5,000 (inclusive of VAT)
for the proceedings before the Court. As to the translation costs,
the Court notes that sufficient documentation as required by Rule 60
of the Rules of Court has not been submitted. This claim must
therefore be rejected.
C. Default interest
- The
Court considers it appropriate that the default interest should be
based on the marginal lending rate of the European Central Bank, to
which should be added three percentage points.
FOR THESE REASONS, THE COURT UNANIMOUSLY
- Declares the application admissible;
- Holds that there has been a violation of Article
6 § 1 of the Convention on account of the refusal to hold an
oral hearing in the Administrative Court;
- Holds that it is not necessary to examine
separately the applicant's complaints under Article 6 § 1 on
account of the refusal to stay the proceedings and under 6 § 3
(d) of the Convention;
- Holds
(a) that
the respondent State is to pay the applicant, within three months
from the date on which the judgment becomes final in accordance with
Article 44 § 2 of the Convention, the following
amounts:
(i) EUR
3,000 (three thousand euros), plus any tax that may be chargeable, in
respect of non-pecuniary damage;
(ii) EUR
5,000 (five thousand euros), plus any tax that may be chargeable to
the applicant, in respect of costs and expenses;
(b) that
from the expiry of the above-mentioned three months until settlement
simple interest shall be payable on the above amounts at a rate equal
to the marginal lending rate of the European Central Bank during the
default period plus three percentage points;
- Dismisses the remainder of the applicant's claim
for just satisfaction.
Done in English, and notified in writing on 22 July 2008, pursuant to
Rule 77 §§ 2 and 3 of the Rules of Court.
Fatoş Aracı Lech Garlicki
Deputy Registrar President
