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FOURTH
SECTION
CASE OF ELCOMP SP. Z O.O. v. POLAND
(Application
no. 37492/05)
JUDGMENT
STRASBOURG
19 April
2011
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 Elcomp sp. z o.o.
v. Poland,
The
European Court of Human Rights (Fourth Section), sitting as a Chamber
composed of:
Nicolas Bratza, President,
Lech
Garlicki,
Ljiljana Mijović,
Sverre Erik
Jebens,
Zdravka Kalaydjieva,
Nebojša
Vučinić,
Vincent A. de Gaetano, judges,
and
Lawrence Early, Section
Registrar,
Having
deliberated in private on 29 March 2011,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The
case originated in an application (no. 37492/05) against the Republic
of Poland lodged with the Court under Article 34 of the Convention
for the Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by Elcomp sp. z o.o. (“the applicant
company”), a limited liability company with its seat
in Warsaw, on 7 October 2005. The applicant company was
represented by the president of the management board, Mr Feliks
Sujkowski.
- The
Polish Government (“the Government”) were represented by
their Agent, Mr J. Wołąsiewicz of the Ministry of
Foreign Affairs.
- The
applicant company alleged that it had been deprived of its right
of access to a court.
- On
31 August 2009 the President of the Fourth Section decided to give
notice of the application to the Government. It was also decided
to rule on the admissibility and merits of the application at
the same time.
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
- On
10 March 2003 the applicant company lodged a claim for payment of
153,977.48 Polish zlotys (PLN) (EUR 38,500) against a company R. with
the Warsaw Regional Court. The case was to be examined by way of
a summary procedure.
- On
18 March 2003 the court ordered the applicant company to pay PLN
2,337.30 (EUR 580) in court fees for lodging its claim.
- On
25 March 2003 the applicant company filed a motion for exemption from
court fees. It argued that its revenue in previous years had
decreased significantly and that it had had to pay overdue taxes and
debts to its creditors. The applicant company further indicated
that it did not own any property of significant value. On 1 April
2003 it submitted to the court its financial report for 2002, tax
declarations CIT-8 for 2001 and CIT-2 for 2002, its bank account
statements and information concerning its property and the number of
employees.
- On
25 April 2003 the Warsaw Regional Court dismissed the application for
exemption. It found that the applicant company had generated
substantial gross income (przychód) in 2001 (PLN
4,892,956.09) and 2002 (PLN 1,144,221.34) and would be able to pay
PLN 2,300 in court fees.
- On
15 May 2003 the applicant company appealed. It submitted that on 13
February 2003 it had filed a motion for insolvency. However, the
motion had been rejected because the company had insufficient assets
to cover the costs of the insolvency procedure.
- On
17 October 2003 the Warsaw Court of Appeal dismissed the appeal. It
underlined that the documents produced by the applicant company
indicated that from January to April 2003 it had spent the amount
of approximately PLN 800,000 and it had still possessed cash in
its cash desk. The court also stressed that commercial entities
should have set aside the resources necessary to fund potential
litigation.
- On
30 December 2003 the applicant company paid PLN 2,337.30 in court
fees.
- On
19 January 2004 the Warsaw Regional Court issued an order for payment
as sought by the applicant company. The defendant company filed an
objection to the order and subsequently the applicant company’s
claim was to be examined by way of the ordinary procedure.
- On
13 February 2004 the Regional Court ordered the applicant company to
pay a further PLN 7,011.70 (EUR 1,750) in supplementary court fees.
- On
11 March 2004 the applicant company filed an application for
exemption from supplementary court fees. It submitted copies of the
following documents concerning its financial situation: a financial
report for 2003, a tax declaration CIT-2 for 2003, bank account
statements, VAT-7 declaration for 2003, cash reports for 2003 and
information on its property and the number of employees.
- On
18 March 2004 the Warsaw Regional Court dismissed the application for
exemption. It found on the basis of the documentary evidence that
from 1 January to 30 November 2003 the applicant company had
generated PLN 5,611,522.45 in gross income. The court noted that the
applicant company had sustained a loss, but that that was not a
sufficient ground to exempt it from court fees. It emphasised that as
the applicant company had carried out commercial activity on a large
scale, it should have earmarked funds for litigation purposes. On 5
April 2004 the applicant company appealed.
- On
19 May 2004 the Warsaw Court of Appeal dismissed its appeal,
concurring with the reasons given by the Regional Court. It found
that in 2003 the applicant company had generated gross income
and had possessed enough funds to pay court fees. The Court of Appeal
underlined that the applicant company had not demonstrated that it
had been in a difficult financial situation; on the
contrary, in its appeal it admitted to having funds to pay its
debts to the State Treasury.
- On
29 June 2004 the applicant company paid PLN 7,011.70 in court fees.
- On
8 November 2004 the Warsaw Regional Court gave judgment. It dismissed
the applicant’s company claim against the company R. on the
grounds that the relevant limitation period had expired.
- On
6 December 2004 the applicant company lodged an appeal against the
Regional Court’s judgment. On 16 December 2004 it applied for
exemption from court fees for pursuing its appeal in the amount of
PLN 9,348.90 (EUR 2,330). The applicant company submitted that
the current state of its accounts had proved its disastrous financial
situation.
- The
Warsaw Regional Court instructed the applicant company to submit,
on pain of dismissal of its motion, copies of the following
documents: the financial report for the period from 1 January to 31
October 2004, the tax declaration CIT-9 for 2003, the tax declaration
CIT-2 for the period from 1 January to 30 November 2004, information
about all bank accounts of the applicant company and extracts
thereof, information on all transactions made on each account within
the last three months, tax declaration VAT-7 for the period from 1
January to 30 November 2004 and information on its property and the
number of employees.
- On
10 January 2005 the applicant company submitted the following
declarations: tax declaration CIT-2 for the requested period,
declaration CIT-8 for 2003, extract from a bank account of 12 August
2004 and a declaration of the Cooperative Bank in Wyszków
of 24 November 2004. It also stated that it did not own any real
property.
- On
11 January 2005 the Warsaw Regional Court dismissed the application
for exemption. It found that the applicant company had failed
to substantiate its assertion that it had been unable to pay the
court fees. It noted that the applicant company had failed to
submit all requested documents concerning its financial standing. The
court stressed that the applicant company had still carried out its
commercial activity on a large scale and that in the period between 1
January and 30 November 2004 it had generated a significant gross
income in the amount of PLN 632,655.34 (EUR 158,163).
- Moreover,
the court noted that the applicant company had produced only the cash
report for one day (30 November 2004) despite the court’s
request to submit all reports for the period between 1 January and
30 November 2004. In the court’s view, that failure might
indicate the applicant company’s intention to hide profits that
had been actually made. The court had also regard to the declaration
of the Wyszków Cooperative Bank that for a long period of time
there had been no financial operations on the applicant
company’s bank account. In this connection, the court found
that the applicant company must have carried out its financial
operations in cash since it had been obliged to keep a record of all
income and expenses. The court underlined that a commercial entity
should not claim that the refusal to exempt it from payment of court
fees had constituted a limitation of its rights when it had not
earmarked any funds for potential litigation and had carried out its
financial operations in such a manner as to avoid the payment of
court fees.
- On
27 January 2005 the applicant company appealed. It argued that the
losses in the relevant period had exceeded the company’s gross
income and pointed to a significant debt owed to the tax office.
- On
6 April 2005 the Warsaw Court of Appeal dismissed the appeal. The
court found that the applicant company had incurred substantial costs
and expenses exceeding its generated gross income, which showed that
it had not been properly managed. It also found that since the
beginning of the proceedings the applicant company should have
put aside money for the costs of future proceedings as it had been
still carrying out its commercial activity.
The
Court of Appeal noted that the applicant company had failed
to produce all the requested documents (inter alia, the
financial report for the period from 1 January to 31 October 2004 and
the VAT-7 declaration for the relevant period). In this connection,
it stressed that it was impossible to evaluate the financial
situation of the applicant company. Furthermore, the cash report
concerned one day only (30 November 2004), while the Regional Court
had specifically requested a report for the period between 1 January
and 30 November 2004. In respect of the declaration of the
Cooperative Bank, the court noted that the company must have carried
out its operations in cash or have had accounts in other banks.
- On
13 July 2005 the Warsaw Regional Court rejected the applicant
company’s appeal against the first-instance judgment of 8
November 2004 for failure to pay court fees required for proceeding
with its appeal.
Other facts as submitted by the applicant company
- According to the certificate of the tax office of 24
June 2005, the applicant company owed PLN 300,000 to the tax office.
- On
29 July 2005 the applicant company was exempted from court fees
in civil proceedings instituted against it by another company.
- On
24 April 2003 and 8 March 2005 the Warsaw District Court dismissed
the applicant’s company’s requests to institute
insolvency proceedings because its assets had been considered
insufficient to cover the costs of proceedings, not to mention the
debts that the company had accumulated. In the most recent of these
decisions the court established that the applicant company had owed
money to four companies and the tax office. The liabilities due from
its creditors were unenforceable in spite of several sets of
proceedings instituted by the applicant company. The company’s
assets deposited in its bank account amounted to PLN 2,000;
in addition, the company owned old forms for production of
vacuum cleaners worth a total amount of PLN 1,300. In sum, the
court considered that the applicant company would not be able to
satisfy any of its debtors; thus, the insolvency proceedings would be
devoid of purpose.
II. RELEVANT DOMESTIC LAW AND PRACTICE
- The
legal provisions applicable at the material time and questions
of practice are set out in paragraphs 23-33 of the judgment
delivered by the Court on 19 June 2001 in the case of Kreuz
v. Poland (no. 28249/95, ECHR 2001-VI; see also the judgment
delivered by the Court on 10 January 2006 in the case of
Teltronic-CATV v. Poland, no. 48140/99, §§ 20-33).
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE
CONVENTION
- The
applicant company complained under Article 6 § 1 of the
Convention that the court fees required for pursuing its appeal
against the Regional Court’s judgment had been excessive and in
effect had deprived it of the right to a court. The
relevant part of Article 6 § 1 provides:
“In the determination of his civil rights and
obligations ... everyone is entitled to a fair ... hearing
... by [a] ... tribunal ...”
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 applicant company’s submissions
- The
applicant company argued that it had had no funds to pay PLN 9,348.90
in court fees for pursuing its appeal and that it had duly presented
to the courts its financial situation. It indicated that there had
been no operations on its bank account since the account had been
attached by the Tax Office. In respect of gross income in the amount
of PLN 632,655.34 reported for 2004, the applicant company
submitted that its gross income should have been distinguished from
net profits. Having regard to the amount of losses for the same
period, the net profits of the applicant company at the relevant time
had been nil.
- The
applicant company submitted that the possibility of exemption from
court fees provided by the domestic law had been illusory. The
domestic courts had not examined the financial situation of companies
or had done so improperly. The judges had had no training in the
area of accountancy and finance, and had not called experts in
order to properly examine their financial situation, which meant that
requests for the exemptions had been decided arbitrarily. In this
connection, the applicant company submitted that the Warsaw Regional
Court ruling at about the same time and on the basis of identical
documents, had dismissed its application for exemption in the present
case and had exempted it from court fees in the amount of PLN 40 for
lodging an interlocutory appeal in respect of a different case.
- The
applicant company disagreed that companies should secure funds in
advance for business-related litigation as part of the risk involved
in running a business as it was impossible to know beforehand the
level of the necessary funds.
2. The Government’s submissions
- The
Government submitted that the applicant company had been required to
pay court fees for pursuing its appeal. The fees were determined
pursuant to the Ordinance of the Minister of Justice of 17 December
1996 and were calculated according to the value of the claim. It was
hardly probable that the applicant company would have problems to pay
the fees at issue considering that its gross income between 1 January
and 30 November 2003 had amounted to PLN 5,611,522.45 (EUR
1,402,880).
- Pursuant
to Article 113 of the Code of Civil Procedure a court which examined
a motion for exemption from court fees enjoyed a margin of discretion
and it was incumbent on a party seeking exemption to prove that it
was unable to pay court fees. The Government argued that the domestic
court had rightly concluded that the applicant company had been in
fact able to pay the court fees and that it had not submitted all the
requested documents concerning its financial situation. By doing so
the applicant company had tried to misuse the institution of
exemption from court fees. The Government underlined that parties to
judicial proceedings had an obligation to cooperate faithfully with
the courts.
- The
Government underlined that each company should have secured in
advance funds for potential business-related litigation and that
standards in relation to possible exemption from court fees in
respect of commercial companies should have been more demanding by
comparison to natural persons. Concurring with the domestic courts’
position, the Government submitted that court fees could be regarded
as inevitable expenditure since resolving disputes was part of the
commercial risk.
As
the applicant company was engaged successfully in a commercial
activity, inter alia, on the growing real estate market, the
amount of court fees complained of should not be seen as
disproportionate. There was no risk of winding-up or any
serious, long-term perturbation of the applicant company’s cash
flow (contrast Teltronic-CATV v. Poland, no. 48140/99,
10 January 2006).
- The
Government strongly disagreed that the amount of court fees had
prevented the applicant company from pursuing its claim or had
deprived it of the right of access to a court. They argued that the
domestic courts, when refusing the exemption from court fees for
pursuing the applicant company’s appeal, had not exercised
their power of appreciation in an arbitrary manner. The relevant
court decisions had been given in accordance with the law, had
pursued a legitimate aim and had been proportionate. The Government
concluded that there had been no violation of Article 6 § 1.
3. The Court’s assessment
- The
Court observes that in its judgment in Kreuz v. Poland (cited
above, § 60) it dealt with the question of whether the
requirement to pay substantial fees to civil courts in connection
with claims could be regarded as a restriction on the right of access
to a court. In this connection the Court held that the amount of the
fees assessed in the light of the particular circumstances of a given
case, including the applicant’s ability to pay them, and the
stage of the proceedings at which that restriction had been imposed
were factors which were material in determining whether or not a
person had enjoyed his right of access and had “a ... hearing
by [a] tribunal”.
- The
Court has to determine whether, in the particular circumstances of
the present case, the fees actually required constituted a
restriction that impaired the very essence of the applicant company’s
right of access to a court. It notes that in the instant
case the applicant company appeared to have sustained losses
resulting from a breach of contract and had been obliged to seize a
civil court to enforce payment from another business entity (see,
Teltronic-CATV v. Poland, cited above, § 7).
The Court considers that a party seeking exemption from
court fees should act with requisite diligence when presenting to the
courts evidence concerning his financial standing and is under an
obligation to cooperate faithfully with the courts in this matter.
The level of diligence expected from an entity engaged in a
commercial activity may be higher than that required from a natural
person.
- The
Court firstly notes that at the early stages of the civil proceedings
the applicant company filed two applications for exemption from court
fees totalling PLN 9,349 (EUR 2,337). The first application was filed
on 25 March 2003 and eventually dismissed on 17 October 2003. The
second application was lodged on 11 March 2004 and ultimately
dismissed on 19 May 2004. In both applications the applicant company
claimed that it did not have sufficient funds to pay the
necessary fees. However, the domestic courts refused both
applications on the grounds that the applicant company had not proved
that it had been unable to pay the required court fees. The Court
notes that following those negative decisions the applicant company
did in fact pay the court fees at issue and its claim was examined on
the merits by the Warsaw Regional Court. It considers that such
conduct of the applicant company casts doubt on the credibility of
its assertions about its difficult financial standing.
- Secondly,
the Court observes that on 6 December 2004 the applicant company
applied for exemption from court fees in the amount of PLN 9,348.90
for pursuing its appeal against the Warsaw Regional Court’s
judgment. That application was dismissed on the grounds that the
applicant company had not demonstrated that it had been unable to pay
those fees (see paragraph 22 above). The principal reason for the
refusal was the applicant company’s failure to produce to the
courts all requested documents which made it impossible to evaluate
comprehensively its financial situation. For the Court that decision
indicates that the applicant company fell short of the requisite
diligence when applying for exemption from court fees. In this
connection, the Court sees no reason to contest the domestic
authorities’ assessment of the applicant company’s
financial standing which was based on the incomplete material
produced by the applicant company (see, mutatis mutandis,
Felix Blau sp. z o.o. v. Poland, no. 1783/04, § 38, 19
January 2010).
- In
the circumstances, and with regard being had to the foregoing
considerations, the Court finds that the amount of fees required from
the applicant company to pursue its appeal in the present case cannot
be considered as disproportionate and therefore the applicant
company’s right of access to a court was not impaired.
- The
Court concludes that there has been no violation of Article 6 §
1 of the Convention.
FOR THESE REASONS, THE COURT UNANIMOUSLY
- Declares the application admissible;
- Holds that there has been no violation of
Article 6 § 1 of the Convention.
Done in English, and notified in writing on 19 April 2011, pursuant
to Rule 77 §§ 2 and 3 of the Rules of Court.
Lawrence Early Nicolas Bratza
Registrar President
