Communicated on 16 May 2017
FIFTH SECTION
Applications nos 41299/09 and 11132/10
Radostina Venelinova BOYADZHIEVA against Bulgaria
and GLORIA INTERNATIONAL LIMITED EOOD against Bulgaria
lodged on 21 July 2009 and 29 January 2010 respectively
STATEMENT OF FACTS
The applicant in application no. 41299/09, Ms Radostina Venelinova Boyadzhieva (“the first applicant”), is a Bulgarian national who was born in 1954 and lives in Sofia.
The applicant in application no. 11132/10, Gloria International Limited EOOD (“the second applicant”), is a Bulgarian limited liability company, registered in 1992, its registered place of business being in Sofia.
The applicants are represented before the Court by Mr M. Ekimdzhiev and Ms K. Boncheva, lawyers practising in Plovdiv.
A. The circumstances of the case
The facts of the case, as submitted by the applicants, may be summarised as follows.
The main commercial activity of the applicants (the first of them is registered as a sole trader) is trade in medicaments.
In February and March 2006 the first applicant sold medicaments to a company called K., which paid her 22,043.23 Bulgarian levs (BGN) in total.
Between December 2005 and April 2006 the second applicant also sold medicaments to K., receiving in total BGN 33,344.05 by way of payment.
In September 2006 two other companies, E. and S., which were creditors of K., applied for the commencement of insolvency proceedings against the latter. Their request was allowed in a judgment of 17 November 2006 delivered by the Plovdiv Regional Court, which noted that K. had in practice ceased its payments to E. and S. after October 2005 and therefore held that the initial date of the company’s insolvency was 30 October 2005.
Within the framework of the insolvency proceedings, in April and May 2007 the company E. brought proceedings under section 646(2) of the Commerce Act (see below, “Relevant domestic law”) against the applicants, seeking to have the payments K. made to them during the so‑called “suspect period” (between the initial date of insolvency and the commencement of insolvency proceedings) declared null and void and the sums received returned to the insolvency estate.
The claims were allowed – in respect of the first applicant in judgments of the Plovdiv Regional Court and the Plovdiv Court of Appeal of 31 October 2007 and 12 March 2008 respectively and in a subsequent decision of the Supreme Court of Cassation of 21 January 2009 refusing to accept for examination her appeal on points of law; in respect of the second applicant in judgments of the Plovdiv Regional Court and the Plovdiv Court of Appeal of 23 January and 25 April 2008 respectively and in a subsequent decision of 29 July 2009 of the Supreme Court of Cassation refusing to accept for examination its appeal on points of law. In both cases the courts confined themselves to verifying whether K. had made payments to the applicants during the “suspect period”. Finding that this was so, they declared these payments null and void and ordered the applicants to return the sums received. In the proceedings concerning the second applicant the Plovdiv Regional Court acknowledged additionally that “it was not disputed” that the company’s transactions with K. had not damaged the latter’s interests, as the applicant company had delivered goods in exchange for the payments at issue, but pointed out that this was irrelevant under section 646(2) of the Commerce Act.
Both applicants complied with the aforementioned judgments and paid to the insolvency estate the entirety of the sums they had received, plus interest.
The insolvency proceedings against K. continued until 2014, when the company was wound up. The majority of its assets were distributed among its creditors between November 2007 and October 2008. In two decisions delivered in November and December 2008 the trustee in bankruptcy added the State to the list of creditors, with claims exceeding BGN 5,000,000. As the State was a privileged creditor, almost all payments from the insolvency estate after that were made to it, but a substantial proportion of K.’s obligations towards it nevertheless remained unpaid. Two companies in a situation such as the applicants’ − which joined the insolvency proceedings on the basis of section 648 of the Commerce Act (see below, “Relevant domestic law”) − received nothing for the sums owed to them. The applicants did not make use of the possibility given to them by section 648.
B. Relevant domestic law
Insolvency proceedings are regulated by the Commerce Act 1991. Avoidance provisions are in particular contained in its sections 646 and 647.
At the relevant time, section 646(2) provided the following:
“The following actions and transactions, carried out by the debtor after the initial date of insolvency ... shall be null and void with respect to the bankruptcy creditors:
1. fulfilment of a monetary obligation, regardless of the manner of payment.”
In 2013 the text was amended and currently provides:
“The following actions and transactions, carried out by the debtor after the initial date of insolvency ... may be considered voidable with respect to the bankruptcy creditors:
1. fulfilment of a non-exigible obligation, regardless of the manner of payment ...”
The explanatory note attached to the bill proposing this amendment pointed out that the rules in force until then had resulted in abuse and had proved to be deficient, in particular in the following ways:
“– lack of proper balance between the requirements of the insolvency proceedings and those of legal certainty;
– lack of any legal protection for the defendants to the respective legal actions;
– extensive possibilities to invalidate ordinary daily transactions, which in no way damage the creditors’ interests ...”
Section 648 of the Commerce Act deals with the situation of persons who have had their transactions with an insolvent company invalidated under section 646 and have been ordered to make payments to the insolvency estate. They are entitled to receive back the goods they have delivered, or if this is not possible, are entitled to join the insolvency proceedings as unprivileged creditors.
COMPLAINTS
The applicants complain, relying on Article 1 of Protocol No. 1 and Article 6 § 1 and Article 13 of the Convention, that they were unfairly deprived of their property. They point out that they had in no way damaged the interests of K.’s creditors, as they had delivered goods in exchange for the invalidated payments. Moreover, they had been bound by the initial date of insolvency, as set by the Plovdiv Regional Court, without having had a say in the matter. Lastly, the applicants consider that they had no chance to recover the sums paid by them, pointing out that even if they had joined the insolvency proceedings, they would not have received anything because K.’s assets were insufficient to pay all of its debts and they would have been unprivileged creditors.
QUESTION TO THE PARTIES
Did the court orders, based on section 646(2) of the Commerce Act, for the applicants to return the sums they had received from company K., without any alleged ill faith on their part or any apparent damage to the interests of K.’s creditors, and without any reasonable chance for them to recover these sums, in particular in application of section 648 of the same Act, mean that the applicants were made to bear an excessive individual burden? Does this therefore mean that there was a violation of Article 1 of Protocol No. 1?
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