CHENGELYAN AND OTHERS v. BULGARIA - 47405/07 (Judgment : Pecuniary damage - award (Pecuniary damage Just satisfaction)) [2017] ECHR 1036 (23 November 2017)

In the case of Chengelyan and Others v. Bulgaria,

The European Court of Human Rights (Fifth Section), sitting as a Chamber composed of:

          Angelika Nußberger, President,
          Erik Møse,
          André Potocki,
          Yonko Grozev,
          Síofra O’Leary,
          Mārtiņš Mits,
          Lәtif Hüseynov, judges,
and Claudia Westerdiek, Section Registrar,

Having deliberated in private on 31 October 2017,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1. The case originated in an application (no. 47405/07) against the Republic of Bulgaria lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by seven Bulgarian nationals, Ms Madlen Magardich Chengelyan, Ms Viktoria Takvor Chengelyan, Mr Eduard Takvor Chengelyan, Mr Manuk Garo Chengelyan, Ms Anaiys Hampartsum Shirin, Mr Ehisapert Ardavast Hintyan and Ms Asthig Hampartsum Bedrosyan (“the applicants”), on 24 September 2007. Ms Anaiys Hampartsum Shirin passed away on 19 January 2014. Her heirs, Mr Barkev Kamer Shirin, Mr Kamer Barkev Shirin and Ms Araksi Barkev Shirin-Junglas, expressed a wish to continue the application in her stead.

2. In a judgment delivered on 21 April 2016 (“the principal judgment”), the Court held that the re-examination and dismissal of claims by the applicants concerning the restitution of a house with a plot of land formerly owned by their legal predecessors, which had already been allowed in a final court judgment, breached the principle of legal certainty under Article 6 § 1 of the Convention. The Court further found that the ensuing interference with the applicants’ property rights had been unlawful and thus contrary to Article 1 of Protocol No. 1 (see Chengelyan and Others v. Bulgaria, no. 47405/07, 21 April 2016).

3. The applicants sought just satisfaction under Article 41 of the Convention.

4. Since the question of the application of Article 41 was not ready for a decision as regards pecuniary damage, the Court reserved it and invited the Government and the applicants to submit their written observations on the matter within four months of the principal judgment becoming final, and in particular to notify the Court of any agreement they might reach (ibid., § 56 and point 4 of the operative provisions).

5. The applicants and the Government each filed observations. They informed the Court that they had failed to reach an agreement.

THE LAW

6. 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

1. The parties’ submissions

(a) The applicants’ claims

7. The applicants claimed an amount equal to the market value of the property which they had claimed in the domestic proceedings. The property was a two-storey house with a basement measuring 160 square metres, and a plot of land measuring 246 or 250 square metres, situated in the historical centre of Plovdiv.

8. In support of that claim, the applicants presented a statement from an expert who in March 2014 had prepared the valuation report which they had submitted during the initial examination of the case by the Court (see § 54 of the principal judgment). The expert confirmed her previous conclusions as to the property’s market value, explaining that prices in the area had not substantially changed in the meantime. The March 2014 report was based on information about recent actual sales of similar properties in the area, the possible revenue from rent, and, to a lesser degree, the costs that would be incurred were the same house to be reconstructed.

9. On the basis of information about recent sales of similar properties, the expert calculated that the value of the land was 660.55 euros (EUR) per square metre (for 246 square metres in total) and the value of the house was EUR 839.83 per square metre (for 480 square metres in total, given that it had two storeys and a basement). Following adjustments based on other methods of calculation, the “just market value” of the whole property was EUR 587,000.

10. The applicants next claimed for lost profit, as they had been unable to use the property at issue between 2 October 1998, the date of the final domestic judgment allowing their restitution claim (see § 9 of the principal judgment), and December 2016. Under that head, the applicants claimed market rent for the property for the period in question and submitted another expert report calculating the total amount of rent, plus default interest, at 1,483,452 Bulgarian levs (BGN - approximately EUR 756,860).

11. The applicants asked that any award for pecuniary damage made by the Court be distributed among them in accordance with their shares of the inheritance.

(b) The Government’s position

12. The Government pointed out that, for tax purposes, the property at issue was valued at BGN 375,318.70 (the equivalent of EUR 191,489).

13. The Government also submitted an expert report on the property’s market value, commissioned in September 2016 by the Plovdiv municipality. That report was based on sale offers for similar properties in the area, as it was noted in the report that no actual sales had been registered in the preceding year. The expert considered that the value of the land was EUR 449 per square metre, which had to be reduced to EUR 270 per square metre to account for factors such as “location”, “construction possibilities” and “co-ownership”. As to the house, its market value was EUR 907 per square metre. According to the expert, the whole property’s market value thus calculated was BGN 943,000 (the equivalent of EUR 481,122).

14. The Government submitted another expert report concerning improvements made to the property by the authorities after its expropriation in 1966. That document noted that in 1966 the applicants’ house, a cultural monument since 1949 (see § 7 of the principal judgment), had been in an “unsatisfactory” state and badly maintained. In the years following the expropriation, this had necessitated large-scale restoration works, including, most notably, the construction of a new roof, fortification of the building, replacement of the windows and the electrical and plumbing systems, and restoration of the internal and external decoration. Between 1971 and 1974 the basement of the house had been transformed into a restaurant. After a fire in 1978, which had largely destroyed the second floor and the roof of the house, its previously wooden structure had been replaced with a reinforced concrete structure, and further restoration works had been carried out. The house had been constructed in 1850-56, and the restoration works had aimed to maintain, in so far as possible, its authentic look. According to the report at issue, the current value of all restoration and reconstruction works carried out by the State was BGN 1,138,481 (the equivalent of EUR 580,857); those works had increased the property’s market value by BGN 363,396 (the equivalent of EUR 185,406).

15. The Government submitted numerous documents related to the property’s expropriation and restoration by the State. In particular, a 1965 report by the then-existing Cultural Monuments Institute had described the house’s state at the time as “unsatisfactory” and the result of “years of intensive unreasonable use” by the many people living in it, coupled with “almost no efforts to maintain it”.

16. The Government specified that the house, registered as public municipal property, was currently being used by a municipal body. It was part of the “Ancient Philippopolis and Old Plovdiv” historical and architectural complex, declared a cultural monument of national significance in 1998.

17. The Government argued that the property claimed by the applicants had to remain publicly owned, and proposed that the Court award the applicants monetary compensation. As to the amount of compensation, the Government submitted that this could equal the property’s valuation for tax purposes (BGN 375,318.70, the equivalent of EUR 191,489, see paragraph 12 above), and that, in any event, it should not exceed BGN 579,604 (the equivalent of EUR 295,716). The latter sum was the property’s market value according to the expert report presented by the Government, BGN 943,000 (the equivalent of EUR 481,122, see paragraph 13 above), reduced by the value of the improvements made by the State after 1966, BGN 363,396 (the equivalent of EUR 185,406, see paragraph 14 above). The Government pointed out that, at the time of its expropriation, the applicants’ property had been in a very bad state of repair, and that it had been restored and reconstructed as a result of the authorities’ efforts.

18. In support of their argument that any compensation for the property’s value had to be reduced by the value of the improvements made after 1966, the Government submitted in particular a judgment of the Supreme Court of Cassation (hereinafter “the Supreme Court”) given on 2 July 2015 (Решение № 122 от 2.07.2015 г. на ВКС по гр. д. № 291/2015 г., I г. о., ГК). The case examined by the Supreme Court concerned claims by a municipality for compensation for improvements made to a property between its expropriation in 1972 and its restitution in 2008 under the same restitution legislation, namely the 1992 Restitution of Property Expropriated under Building Planning Legislation Act (hereinafter “the Restitution Act”), relied on by the applicants in their restitution application (see §§ 8 and 15-17 of the principal judgment).

19. The Supreme Court was of the view that the municipality was, in principle, entitled to such compensation. This was so because the defendants’ property had been expropriated for urban development in return for just compensation, unlike the nationalisations carried out after 1945, which had mostly been punitive in character and for which the former owners had received no compensation. In respect of the latter category of owners, in an interpretative decision of 1995, the Supreme Court held that, following the restitution of formerly nationalised properties, people who had become owners by virtue of restitution could not be held liable to compensate the State for any improvements made by it; in exchange, they could not claim compensation for having been unable to use their properties following the nationalisation. However, the situation was different under the Restitution Act, which concerned expropriations in the context of urban development, and the same special rules did not apply. On the contrary, the general rules of civil law required the payment of compensation for any unjust enrichment. This was so even though, as a rule, the Restitution Act was only concerned with properties which had remained unchanged after an expropriation, as it nevertheless remained possible that certain improvements had been made by the State or the municipalities prior to any restitution decision.

20. Lastly, the Government urged the Court not to make an award to the applicants regarding any lost profit, pointing out that the property’s special status as a cultural monument meant that its maintenance was costly and that its use was subject to restrictions.

21. In their response, the applicants contested the expert report on the property’s market value presented by the Government (see paragraph 13 above), firstly since it did not take into account any possible revenue from rent, and also because the expert had “arbitrarily” reduced the value of the land from EUR 449 to EUR 270 per square metre.

22. The applicants also contested the Government’s argument that any compensation for the value of the property had to be reduced to account for the improvements made to it after the expropriation. They asserted that this was against the logic of the restitution legislation adopted in Bulgaria, which in principle precluded any liability of people who had become owners by virtue of restitution for compensation for improvements. In addition, the applicants argued that some of the improvements to their property had been unnecessary, and that much of the expense had been incurred by the State after the 1978 fire, which had been due to the authorities’ “negligence” and the basement’s “unconventional” use as a restaurant.

(d) The Government’s comments on the applicants’ claims

23. The Government pointed out once again that the high current value of the property was due to the State’s efforts to reconstruct and restore it. The applicants’ claims concerning that value did not take this into account.

24. The Government considered the applicants’ claims for compensation for lost profit (see paragraph 10 above) unjustified and ill-founded. They contested the manner in which such profit had been calculated, based on rent payable during the period in question. They pointed out once again that maintenance of a building declared a cultural monument was costly, and that its possible uses were limited. They relied on the Court’s findings in a similar situation in Debelianovi v. Bulgaria ((just satisfaction), no. 61951/00, § 17, 27 November 2008).

2. The Court’s assessment

25. The Court reiterates that, in principle, a judgment in which it finds a violation of the Convention imposes on the respondent State a legal obligation to make reparation for its consequences in such a way as to restore as far as possible the situation existing before the breach (see Iatridis v. Greece (just satisfaction) [GC], no. 31107/96, § 32, ECHR 2000-XI).

26. In the case at hand, in its principal judgment the Court found, in particular, that the interference with the applicants’ property rights had been unlawful and thus contrary to Article 1 of Protocol No. 1 (see § 49 of the principal judgment).

27. With regard to just satisfaction, in previous cases concerning similar circumstances, the Court has ordered restitutio in integrum and, in the event of a failure on the part of a respondent State to effect this, payment of a sum reflecting the value of the property at that point in time (see, for example, Papamichalopoulos and Others v. Greece (Article 50), 31 October 1995, § 34, Series A no. 330-B). Such an approach was also adopted in a Bulgarian case similar to the present one (see Kehaya and Others v. Bulgaria (just satisfaction), nos. 47797/99 and 68698/01, §§ 20-22, 14 June 2007).

28. In the case at hand, the Government argued that the property at issue, a historical monument, had to remain publicly owned (see paragraph 17 above). Seeing that the applicants did not claim restitutio in integrum (see paragraphs 7-9 above), the Court holds that the respondent State is to pay them monetary compensation related to the market value of their property (see Dimitrovi v. Bulgaria (just satisfaction), no. 12655/09, § 21, 21 July 2016).

29. The Court reiterates that the property at issue is a house with a plot of land in the historical part of Plovdiv (see § 7 of the principal judgment).

30. In setting the amount of compensation to award, in view of the parties’ arguments, the Court has to analyse two questions. Firstly, it has to assess the current market value of the property at issue. In this regard, it sees no justification for awarding the applicants the value set for the purposes of taxation, referred to briefly by the Government (see paragraphs 12 and 17 above). Secondly, the Court has to decide on any possible reduction of the market value, accounting for the extensive improvements made by the authorities after the property’s expropriation in 1966.

31. Regarding the current market value of the property, the Court observes that both parties submitted valuation reports prepared by experts (see paragraphs 8-9 and 13 above).

32. With rather small variations, the parties’ experts seemed to be unanimous as to the value of the house itself. In the report submitted by the applicants, that value was assessed, on the basis of information about previous sales of similar properties in the area, at about EUR 840 per square metre, and in the report presented by the Government, it was EUR 907 per square metre. On the basis of the documents submitted to it, the Court accepts, as a point of departure for its own assessment, a price of EUR 850 per square metre. This makes the current market value of the house about EUR 410,000, as it has two storeys and a basement, each floor measuring 160 square metres; that makes 480 square metres in total.

33. The differences between the two reports were, however, significant as regards the value of the plot of land. In the report presented by the applicants, that value was set at about EUR 660 per square metre, and in the report presented by the Government, the value was initially set at EUR 449 per square metre and then reduced to EUR 270 to account for “location”, “construction possibilities” and “co-ownership”. The Court considers the application of similar criteria justified and relevant in the present case. On the basis of the documents provided to it, the Court accepts, as a point of departure for its own assessment, a price of EUR 350 per square metre for the land. This makes about EUR 87,000 for the whole plot of 246 or 250 square metres.

34. On the basis of the above calculations, the Court considers that the current market value of the whole property is EUR 497,000.

35. The Court must also decide whether this amount should be reduced to account for the improvements made by the State after 1966, as argued by the Government (see paragraph 17 above). The applicants contested the proposed reduction, arguing that their liability for unjust enrichment was contrary to the logic of the restitution legislation adopted in Bulgaria (see paragraph 22 above). However, in a recent similar case the Supreme Court found that, while this was indeed the case when it came to the restitution of properties nationalised after 1945, mostly for punitive purposes, the general rules of civil law applied when it came to properties expropriated for urban development, such as the one in the case before it. This meant that people who had become the owners of such properties by virtue of restitution were liable to compensate the authorities for any substantial improvements made before the restitution (see paragraphs 18-19 above). The Court sees no reason to consider such interpretation of national law arbitrary. In addition, it notes that the applicants did not contest the evidence showing that the improvements to their house had been substantial. Accordingly, the Court finds that it should reduce the current market value of the property, as assessed by it, to account for those improvements.

36. The Government submitted an expert report stating that the improvements made by the authorities after 1966 had increased the property’s value by the equivalent of about EUR 185,000 (see paragraph 14 above). The applicants appeared to disagree with that conclusion (see paragraph 22 above), but did not present any alternative calculation. The Court cannot accept the applicants’ argument that some of the improvements were unnecessary (ibid.), as this allegation has not been proved, and in any event it cannot justify absolving the applicants from their liability for unjust enrichment. Nor has it been shown that the 1978 fire in the building, which necessitated extensive restoration and reconstruction works (see paragraph 14 above), was indeed caused by some fault on the part of the authorities, as argued by the applicants (see paragraph 22 above); in any event, this is irrelevant, since the Government only proposed that the Court reduce the market value of the applicants’ property by the amount representing the actual increase in the property’s value (see paragraph 17 above).

37. Accordingly, the Court sees no reason not to apply the reduction proposed by the Government, namely EUR 185,000.

38. The final amount to be awarded to the applicants in respect of the property’s value is thus EUR 312,000.

39. As to the applicants’ claim for compensation for lost profit, the Court observes that it was based on the rent the applicants claimed they could have received had they rented out the property after 1998, plus default interest. The total amount claimed under this head was EUR 756,860 (see paragraph 10 above).

40. However, the Court considers that amount highly exaggerated. Assuming the applicants had rented out their property, they would likely have experienced certain delays in finding suitable tenants. In addition, they would have incurred expenses in relation to maintaining the property (see Kirilova and Others v. Bulgaria (just satisfaction), nos. 42908/98 and 3 others, § 31, 14 June 2007). This is even more likely in the light of the fact that the house had been declared a cultural monument and was part of a larger historical and architectural complex (see paragraph 16 above), which inevitably would have affected the options for renting it out or using it, and the expenses necessary for its maintenance (see Debelianovi, cited above, § 17). Lastly, the applicants would have to have paid tax on any revenue (see Decheva and Others v. Bulgaria, no. 43071/06, § 70, 26 June 2012).

41. Having regard to the large number of imponderables involved and the impossibility of quantifying exactly the loss sustained by the applicants, the Court must decide in equity. It considers it appropriate to award the applicants EUR 150,000 to compensate for any loss of profit sustained by them since the date of the final domestic judgment allowing their restitution claim, 2 October 1998 (see paragraph 10 above).

42. The final award for pecuniary damage is thus EUR 462,000. As requested by the applicants (see paragraph 11 above), it should be distributed among them in accordance with their shares of the inheritance.

B. Costs and expenses

43. Lastly, the applicants claimed reimbursement of the cost of the valuation reports submitted in support of their claims in respect of pecuniary damage. They submitted invoices showing that they had paid BGN 120 (the equivalent of EUR 62) for their expert’s second opinion on the market value of their property, and BGN 1,200 (the equivalent of EUR 613) for her report on the rent payable on the property (see paragraphs 8 and 10 above). The applicants requested that any amount awarded under this head be paid directly to Mr Kamer Barkev Shirin (one of the heirs of Ms Anaiys Hampartsum Shirin, see paragraph 1 above).

44. The Government contested the claims.

45. In accordance with the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. In the present case, regard being had to the circumstances of the case and the above criteria, the Court awards the amounts claimed, totalling EUR 675, in full. As requested by the applicants, this sum is to be paid solely to Mr Kamer Barkev Shirin.

C. Default interest

46. The Court considers it appropriate that the default interest rate 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,

1. Holds

(a) that the respondent State is to pay the applicants, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts, to be converted into Bulgarian levs at the rate applicable at the date of settlement:

(i) EUR 462,000 (four hundred and sixty-two thousand euros), plus any tax that may be chargeable, in respect of pecuniary damage, to be distributed among the applicants in accordance with their shares of the inheritance;

(ii) EUR 675 (six hundred and seventy-five euros), plus any tax that may be chargeable to the applicants, in respect of costs and expenses, to be paid to Mr Kamer Barkev Shirin;

(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;

2. Dismisses the remainder of the applicants’ claim for just satisfaction.

Done in English, and notified in writing on 23 November 2017, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Claudia Westerdiek Angelika Nußberger
Registrar President

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You are here: BAILII >> Databases >> European Court of Human Rights >> CHENGELYAN AND OTHERS v. BULGARIA - 47405/07 (Judgment : Pecuniary damage - award (Pecuniary damage Just satisfaction)) [2017] ECHR 1036 (23 November 2017) URL: http://www.bailii.org/eu/cases/ECHR/2017/1036.html Cite as: ECLI:CE:ECHR:2017:1123JUD004740507, [2017] ECHR 1036, CE:ECHR:2017:1123JUD004740507