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FOURTH
SECTION
CASE OF
KANALA v. SLOVAKIA
(Application
no. 57239/00)
JUDGMENT
STRASBOURG
10
July 2007
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 Kanala v. Slovakia,
The
European Court of Human Rights (Fourth Section), sitting as a Chamber
composed of:
Sir Nicolas Bratza,
President,
Mr G. Bonello,
Mr K. Traja,
Mr S.
Pavlovschi,
Mr L. Garlicki,
Ms L.
Mijović,
Mr J. Šikuta, judges,
and
Mr T.L. Early, Section Registrar,
Having
deliberated in private on 19 June 2007,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The
case originated in an application (no. 57239/00) against the Slovak
Republic lodged with the Court under Article 34 of the Convention for
the Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by a Slovak national, Mr Ivan Kanala (“the
applicant”), on 6 March 2000.
- The
applicant, who had been granted legal aid, was represented by Mr I.
GaZík, a lawyer practising in
Prievidza. The Government of the Slovak Republic (“the
Government”) were represented by their Agent, Mrs A.
Poláčková, succeeded by Mrs
M. Pirošíková.
- The
applicant alleged, in particular, that his rights under Article 1 of
Protocol No. 1 had been violated as a result of the manner of
enforcement of his debt.
- By
a decision of 7 February 2006 the Court declared the application
partly admissible.
- The
applicant and the Government each filed further written observations
(Rule 59 § 1). The Chamber having decided, after consulting the
parties, that no hearing on the merits was required (Rule 59 § 3
in fine), the parties replied in writing to each other's
observations.
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
- The applicant was born in 1964 and lives in RoZňava.
He is a businessman.
- In
1991 the applicant acquired, at an auction held in the context of
denationalisation of State property, real property located in the
centre of RoZňava town. The opening price at the auction had
been fixed at 245,000 Czechoslovak korunas (Kčs) in accordance
with the relevant price regulation. The applicant purchased the
property for Kčs 560,000.
- The
applicant took out a bank loan with a view to paying the purchase
price. Subsequently, in the course of 1992, he took out further loans
including one for 190,000 Slovakian koruans (SKK) for the purpose of
reconstructing the buildings.
- In
1993 the District Court in Spišská
Nová Ves determined that the applicant had acquired the
above real property in association with his partner Mr T., and that
they each owned one half of the property. As a result, Mr T. started
running his business in the re-constructed part of the premises.
Since he was not able to benefit from the use of a part of the
premises, the applicant submitted that he was unable to pay the
instalments to the bank.
- On
17 February 1997 the RoZňava District Court ordered the
applicant and a third party who had guaranteed the applicant's debt
to pay a sum to the creditor bank. The judgment became final on 20
August 1997. On 11 August 1997 the RoZňava District Court issued
a payment order against the applicant and the guarantor ordering them
to pay different parts of the debt. The payment order became final on
4 November 1997.
- On
12 March 1998 the RoZňava District Court, at the creditor's
request, authorised an executions officer to execute the above
decisions. The creditor bank agreed to the recovery of the debt by
selling the applicant's share in the above real property. Both
executions were carried out simultaneously as they concerned the same
persons.
- The
applicant submitted that the executions officer and the applicant's
brother had reached an agreement under which the latter would start
paying off the debt and that no sale of the property would be
ordered.
- On
8 June 1998 the applicant filed an objection to the execution on the
ground that he had requested the re-opening of the proceedings
concerning the ownership of the property. On 16 June 1998 the
District Court dismissed the objection.
- On
24 July 1998 the executions officer ordered the sale of the
applicant's share in the real property in issue. On 18 August 1998
the applicant requested that the execution be adjourned. On 17
September 1998 the District Court dismissed the request.
- On
14 October 1998 the executions officer informed the applicant that an
expert had valued the whole property at SKK 390,590 on 30 September
1998.
- Both
the applicant and the creditor bank objected to the valuation. In
particular, in a letter of 19 October 1998 the bank's representatives
referred to an expert opinion of 11 January 1992 elaborated for the
purpose of the applicant's loan request. In it the expert had valued
the property, in accordance with the relevant price regulations
including Regulation No. 465/1991, at Kčs
656,679. The bank's letter further stated that the value of
real property had increased several times in the meantime and that
the applicant had reconstructed the property. Reference was made to
the loan of SKK 190,000 and the relevant bills. The property was
situated in the centre of the town whereby its value was increased.
- The
executions officer asked for a second expert opinion. In it a
different expert assessed the value of the property at SKK 439,280 on
23 November 1998. The property was valued pursuant to Regulation
No. 465/1991. That valuation did not reflect the market value of the
property.
- On
21 December 1998 the executions officer announced that the
applicant's share in the property would be sold at an auction on
22 January 1999. The opening price was to be SKK 219,640
which corresponded to half of the value of the whole property as
determined by the second expert.
- On
28 December 1998 the other co-owner of the property availed himself
of his pre-emption right and deposited SKK 219,640 with the
executions officer.
- On
15 January 1999 the executions officer informed the District Court
and the applicant that the real property would not be sold at an
auction as the co-owner of the property had deposited a sum
corresponding to its value. Reference was made to section 166(2) of
the Executions Order.
- On
25 January 1999 the applicant filed objections to the execution. He
complained that an auction had been scheduled in disregard of the
fact that his brother had undertaken to pay off the debt and that
three payments had been made between September and December 1998. The
applicant further objected that the value of the property as
determined by experts was disproportionately low. In particular, the
applicant argued that a different expert had established a report, in
1992, according to which the value of the property had been Kčs
656,679 at that time, and that more than SKK 400,000 had subsequently
been invested in the building. The applicant submitted that the
actual value of the property was approximately double the sum
established by the experts. He requested that another expert assess
the value of the property.
- On
26 March 1999 the RoZňava District Court judge informed the
executions officer that he had proceeded erroneously. The letter
stated, in particular, that the market value of the property should
have been established for the purpose of the execution. Reference was
made to section 144(4) of the Executions Order. The judge requested
the executions officer to have the assessment modified by an expert
accordingly.
- On
15 July 1999 the executions officer informed the District Court that
experts were bound by Regulation No. 465/1991 and that they could
not, therefore, take into account the market value of the property in
issue.
- In
a decision of 13 September 1999 the RoZňava District Court
confirmed that the co-owner had acquired the applicant's share in the
property in that he had deposited the above sum of SKK 219,640 with
the executions officer. The District Court further dismissed the
applicant's objections concerning the valuation of the property. It
held that the experts had been bound by Regulation No. 465/1991. The
fact that the executions officer had disregarded the above agreement
according to which the applicant's brother would start paying off the
debt was irrelevant as such agreement was subject to approval by the
creditor. No such approval had however been given. No appeal lay
against the District Court's decision.
- Subsequently
the applicant's brother claimed the sum of money which he had paid to
the executions officer in order to pay off the applicant's debt. On
11 February 2002 the District Court in RoZňava
dismissed the action holding that the money paid had been
transferred to the applicant's creditors with a view to paying off
the latter's various debts.
- On
14 March 2006 the Government requested an expert to determine the
market value of the property in issue as of December 1998. In an
opinion comprising 16 pages and dated 20 March 2006 the expert found
that the general value of the whole property had been SKK 518,047 at
the relevant time. The fact that the property had been co-owned by
two persons could have affected its value. At that time similar real
property had been sold at a price between SKK 500,000 and 550,000.
- On
5 May 2006 a different expert valued the property at the applicant's
request of 9 April 2006. His opinion indicates that, in December
1998, the general value of the property in issue had been SKK
1,758,727. On 9 April 2006 it amounted to SKK 2,451,179.
II. RELEVANT DOMESTIC LAW AND PRACTICE
A. The Executions Order of 1995 (Act No. 233/1995, as
amended)
1. Provisions in force at the relevant time
- Section
139(1), as in force until 8 November 1999, provided for the value of
property to be established in an expert opinion.
- Pursuant
to section 142(2), as in force until 8 November 1999, the lowest bid
at a sale by auction of real property equalled the price as
established in an expert opinion.
- Section
144(4) provides, inter alia, that the purchase price of
property obtained as a result of its sale at an auction is not
limited by price regulations.
- Pursuant
to section 157(4), where the proceeds of the sale exceed all claims
to be satisfied in the context of the execution, the executions
officer shall, after having satisfied all justified claims, transmit
to the debtor the remainder of the proceeds of the sale.
- Under
section 166(2), a co-owner of an object which is to be sold in the
context of an execution can prevent its sale if he or she deposits
with the executions officer, prior to the start of the auction, a sum
corresponding to the value of the share which is to be sold. The
executions officer shall use the sum thus obtained as income from the
sale.
2. Amendments enacted with effect from 9 November 1999
- As
from 9 November 1999, section 139(1) was amended in that an expert
opinion on the value of real property should comprise both the price
established pursuant to the relevant price regulation and the market
price of the real property in question.
- Pursuant
to amended section 142(2), the lowest bid at a sale by auction of
real property equals the market value of the property as determined
by an expert under section 139(1).
B. Regulation No. 465/1991 (as amended)
- Regulation
No. 465/1991 of 25 October 1991 governed, inter alia, the
valuation of buildings and of plots of land. It was repealed with
effect from 1 January 2004.
- Section
1(a) provided that the Regulation extended, inter alia, to the
determination of the opening price for the purpose of the sale of
property at public auctions unless the law otherwise provided.
C. Regulation No. 86/2002 (as amended)
- Regulation
No. 86/2002 governs the determination of the general value of
property and became operative on 31 December 2003.
- Section
1(2) provides that it applies to determining the general value of
property in the context of proceedings under, inter alia, the
Executions Order.
- Pursuant
to section 3(2)(a) and (b), the general value of property is its
final value determined in an objective manner by an expert and
corresponding to a price for which the property could be realised in
normal circumstances at a given place and time. It should include, as
a rule, value-added tax. The state of the property, influence of the
market, economic situation and other specific factors should be taken
into account.
D. Domestic courts' practice
- In
opinion Cpj 30/97 of 20 October 1997 the Civil-law Section of the
Supreme Court held that courts should take into account the general
value of property (that is the price for which it could actually be
sold) when deciding on the dissolution of joint ownership and on
adequate compensation for a part of such property. Such general value
of property could not be determined on the basis of the price
regulations in force. The opinion stated that the general value
should also be applied where a co-owner availed himself or herself of
the pre-emptory right to buy the property. The constitutional
principle of equality of rights was thereby respected.
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1
- The
applicant complained that his property had been sold at a price
substantially lower than its market value without any relevant
justification. He relied on Article 1 of Protocol No. 1 which
provides as follows:
“Every natural or legal person is entitled to the
peaceful enjoyment of his possessions. No one shall be deprived of
his possessions except in the public interest and subject to the
conditions provided for by law and by the general principles of
international law.
The preceding provisions shall not, however, in any way
impair the right of a State to enforce such laws as it deems
necessary to control the use of property in accordance with the
general interest or to secure the payment of taxes or other
contributions or penalties.”
A. The arguments of the parties
1. The applicant
- The
applicant argued that he had bought the property alone in 1991 and
that he had subsequently invested considerable sums in its
reconstruction. His property had been sold far below its real value
in 1998.
- The
applicant relied on the opinion which an expert had submitted at his
request on 5 May 2006 (see paragraph 27 above). He contested the
method of proceeding and the conclusion reached by the other expert
who had valued the property at the Government's request on 20 March
2006.
- The
applicant's brother had undertaken to pay the sums owed by the
applicant. In those circumstances, the interference in issue had not
been justified.
- The
interference with his rights under Article 1 of Protocol No. 1 had
therefore been clearly disproportionate and unjustified.
2. The Government
-
The Government argued that the execution of the judicial orders had
pursued the legitimate aim of ensuring compliance with the
applicant's contractual obligations. Thus it had been in the public
interest. The execution had been carried out in accordance with the
law then in force. In the circumstances of the case, the interference
had not been disproportionate to the legitimate aim pursued.
- As
regards the fact that the property had not been sold at a price
corresponding to its market value, the Government argued, with
reference to the expert opinion of 20 March 2006 (see paragraph 26
above), that the difference between the market value of the
applicant's share in the property and the price which the co-owner
had paid on the basis of the expert opinion of 30 September 1998 was
negligible.
- In
any event, the applicant should have foreseen that his failure to
comply with his obligations in respect of the creditor would result
in a forced sale of his property. Nothing guaranteed that the
property would have been sold at a price equal to or above its market
value had the co-owner not made use of his pre-emption right. In
particular, the fact that the property had been co-owned by two
persons could have had a dissuasive effect on potential buyers.
- The
Government expressed doubts as to whether the expert who had
submitted the opinion on 5 May 2006 had correctly assessed the value
of the property as of 1998.
- By
selling the applicant's property the State had complied with its
positive obligation to protect the rights of the persons under its
jurisdiction. The Government concluded that Article 1 of Protocol No.
1 had not been violated.
B. The Court's assessment
- The
applicant's ownership share in the real property in issue was
transferred to the other co-owner in the context of execution
proceedings brought with a view to obtaining sums of money which the
domestic courts had earlier ordered to be paid to the applicant's
creditor. Even if the interference in question did not involve an
expropriation by the State, the contested measure resulted in
deprivation of the applicant of his property. The Government have not
contested that there was a deprivation of property within the meaning
of the second sentence of Article 1 and the Court will accordingly
examine it under the “rule” set out in that provision, it
being understood that the three rules set out in that provision are
not “distinct” in the sense of being unconnected (see,
for example, Bruncrona v. Finland, no. 41673/98, § 65, 16
November 2004 or Beyeler v. Italy [GC], no. 33202/96,
§§ 108-14, ECHR 2000-I).
- Article 1 of Protocol No. 1 requires that such
deprivation of property must comply with the principle of lawfulness,
be in the public interest and pursue a legitimate aim by means
reasonably proportionate to the aim sought to be realised (see, for
example, Jahn and Others v. Germany [GC], nos. 46720/99,
72203/01 and 72552/01, §§ 81-94, ECHR 2005). In particular
a “fair balance” must be struck between the demands of
the public or general interest of the community and the requirements
of the protection of the individual's fundamental rights.
Compensation terms under the relevant legislation are material to the
assessment of whether the contested measure respects the requisite
fair balance and, notably, whether it does not impose a
disproportionate burden on the applicant (see Former King of
Greece and Others, [GC], no. 25701/94, § 89, ECHR
2000-XII).
- The
taking of property without payment of an amount reasonably related to
its value will normally constitute a disproportionate interference
that cannot be justified under Article 1 of Protocol No. 1. This
provision does not, however, guarantee a right to full compensation
in all circumstances, since legitimate objectives of “public
interest” may call for less than reimbursement of the full
market value (see, among other authorities, Papachelas v. Greece
[GC], no. 31423/96, § 48, ECHR 1999-II). A deprivation of
property without compensation can, in certain circumstances, be
compatible with Article 1 (see the Jahn and Others v. Germany
[GC], judgment referred to above, § 117).
- In
the present case the sale of the applicant's property was carried out
in accordance with the relevant provisions of the Executions Order of
1995 and Regulation No. 465/1991. As to the applicant's argument that
the execution should have been stopped after his brother had started
paying off his debt, the RoZňava District
Court, on 13 September 1999, noted that the creditor had not
approved of this arrangement as required by the relevant law. The
Court finds no indication that the interference complained of was not
lawful.
- The
purpose of the interference was to execute courts' decisions ordering
the applicant to pay sums which he owed to his creditor. It thus
pursued the aim of ensuring legal certainty through enforcement of
judicial orders, which undoubtedly is in the public interest.
- The
applicant argued that, as a result, the co-owner had obtained the
property at a price which was far below its actual value. The Court's
task is therefore to examine whether or not a disproportionate burden
was imposed on the applicant in that context contrary to the
requirements of Article 1 of Protocol No. 1.
- The
executions officer decided to enforce the relevant judicial decisions
by selling the applicant's share in the property at a public auction.
The proceeds of the sale were to reimburse a part of the applicant's
debts. Both the applicant and the creditor bank had therefore a
genuine interest in having the property sold at a price which was as
high as the circumstances permitted.
- The
property was valued by an expert at SKK 439,280 in accordance with
Regulation No. 465/1991. Pursuant to section 1(a) of that Regulation,
the value of the applicant's share thus determined was to be the
opening price for the public sale of the property. However, the
public sale was annulled after the other co-owner had made use of his
pre-emption right in that he had deposited with the executions
officer the sum which corresponded to the opening price. As a
result, the co-owner acquired the applicant's share in the property
at a price which had been fixed in disregard of its actual market
value (see also paragraphs 23 and 47 above).
- The
opening price at the auction at which the applicant had acquired the
property in 1991 had been fixed, in accordance with the relevant
price regulation, at Kčs 245,000.
The applicant had purchased the property for Kčs
560,000. He contracted another loan with a view to making
further investments in the property. The Court cannot overlook the
fact that the general value of real property in Slovakia has
substantially increased following the country's transition to a
market-oriented economy. The above facts indicate that the market
value of the property, at the time of its sale to the co-owner in
1998, was higher than the price determined pursuant to Regulation No.
465/1991. This has not been disputed between the parties who
submitted two expert opinions elaborated at their request in 2006. In
particular, in those opinions the market value of the property, as of
December 1998, was assessed at SKK 518,047 by the Government's expert
and SKK 1,758,727 by the applicant's expert.
- Admittedly,
the Court cannot speculate as to the price at which the property
would have been sold at a public auction had the co-owner not made
use of his pre-emption right. However, by permitting the co-owner to
acquire the applicant's share in the property at a price which was
below its market value the domestic authorities deprived the
applicant of a reasonable chance of having the property sold at its
actual value and reimbursing a greater tranche of his debts.
- The
fact that the other co-owner of the property had the possibility of
acquiring the applicant's share by pre-emption is not subject to
criticism as such. However, there is no apparent public interest
justification for such a financially advantageous transaction to have
been permitted by the domestic law at the time in disregard of the
actual value of the property and hence of the applicant's and the
creditor's legitimate interests. In the Court's view, striking a fair
balance between the competing interests required that the applicant
should have been allowed an opportunity to have his property sold at
a price corresponding to its market value. This could have been
realised, for example, if the co-owner had been allowed to make use
of his pre-emption right only after the close of the public auction.
- It
is also to be noted that the Supreme Court of the Slovak Republic in
a different context, namely dissolution of joint ownership in civil
proceedings, held that courts should take into account the general
value of property, that is the price for which it could actually be
sold. Such general value of property could not be determined on the
basis of the price regulations then in force. The constitutional
principle of equality of rights required that the general value
should also be applied where a co-owner availed himself or herself of
the pre-emption right (see paragraph 40 above).
- The
Supreme Court's reasoning is in line with the Court's view expressed
in paragraph 61 above. Furthermore, the relevant
law was subsequently changed to the effect that the lowest bid
at a sale by auction of real property had to be equal to its market
value (see paragraphs 33 and 34 above). This cannot, however, affect
the position in the present case.
64. In
these circumstances, the Court is not satisfied that a “fair
balance” was struck between the demands of the public
interest and the requirements of the protection of the applicant's
rights in the context of the above execution proceedings.
- There
has accordingly been a breach of Article 1 of Protocol No. 1.
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. Submissions of the parties
1. Damage
- The
applicant claimed SKK 1,422,497 plus default interest in respect of
pecuniary damage. That sum comprised SKK 1,157,497 corresponding to
the applicant's investments in the property minus the proceeds of its
sale to the co-owner. It also comprised SKK 265,000 which his brother
had paid to the executions officer on behalf of the applicant.
The
applicant further claimed SKK 5 million in respect of non-pecuniary
damage.
- The
Government argued that there was no link between the pecuniary damage
claimed and the alleged violation of Article 1 of Protocol No. 1. The
claim related to damage of a non-pecuniary nature was manifestly
ill-founded.
2. Costs and expenses
- The
applicant, whose representative had been paid 886 euros under the
legal-aid scheme of the Council of Europe, claimed SKK 184,728 which
he had paid to his advocate.
- The
Government objected, with reference to the documents submitted by the
applicant, that the amount claimed was excessive. It comprised sums
which were unrelated to the subject-matter of the present
application.
B. The Court's assessment
- In
the circumstances of the case, the Court considers that the question
of the application of Article 41 is not ready for decision. It is
therefore necessary to reserve the question, due regard being had to
the possibility of an agreement between the respondent State and the
applicant (Rule 75 §§ 1 and 4 of the Rules of Court).
FOR THESE REASONS, THE COURT UNANIMOUSLY
- Holds that there has been a violation of
Article 1 of Protocol No. 1 to the Convention;
- Holds that the question of the application of
Article 41 is not ready for decision;
accordingly,
(a) reserves
the said question in whole;
(b) invites
the Government and the applicant to submit, within three months from
the date on which the judgment becomes final in accordance with
Article 44 § 2 of the Convention, their written
observations on the matter and, in particular, to notify the Court of
any agreement that they may reach;
(c) reserves
the further procedure and delegates to the President of the
Chamber the power to fix the same if need be.
Done in English, and notified in writing on 10 July 2007, pursuant to
Rule 77 §§ 2 and 3 of the Rules of Court.
T.L. Early Nicolas Bratza
Registrar President
