CASE OF JGK STATYBA LTD v. LITHUANIA

FORMER SECOND SECTION

CASE OF JGK STATYBA LTD v. LITHUANIA

(Application no. 3330/12)

JUDGMENT

(Just satisfaction)

STRASBOURG

27 January 2015

FINAL

27/04/2015

This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision.

In the case of JGK Statyba Ltd v. Lithuania,

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

Guido Raimondi, President,
Işıl Karakaş,
Dragoljub Popović,
András Sajó,
Paulo Pinto de Albuquerque,
Helen Keller,
Egidijus Kūris, judges,
and Stanley Naismith, Section Registrar,

Having deliberated in private on 16 December 2014,

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

PROCEDURE

1. The case originated in an application (no. 3330/12) against the Republic of Lithuania lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by JGK Statyba Ltd and Mr Jurijus Guselnikovas, on 21 October 2005. The first applicant is JGK Statyba Ltd (“the applicant company”), a private construction company registered in Lithuania. Mr Jurijus Guselnikovas (“the second applicant”) is a Lithuanian national, who was born in 1952 and lives in Vilnius. Mr Guselnikovas is a shareholder and a member of the board of the applicant company.

2. In a judgment delivered on 5 November 2013 (“the principal judgment”), the Court held that the applicant company’s rights guaranteed by Article 6 § 1 and Article 1 of Protocol No. 1 had been breached as a result of two separate civil proceedings and the prolonged seizure of two houses belonging to the applicant company (see JGK Statyba Ltd and Guselnikovas v. Lithuania, no. 3330/12, §§ 80, 87 and 145, 5 November 2013). The complaints concerning the rights of the second applicant were declared inadmissible.

3. Under Article 41 of the Convention the applicant company sought just satisfaction composed of 296,703 euros (EUR) for pecuniary damage and EUR 21,450 for costs and expenses.

4. Since the question of the application of Article 41 of the Convention was not ready for decision as regards pecuniary damage and costs and expenses, the Court reserved it and invited the Government and the applicant company to submit, within six months, its written observations on that issue and, in particular, to notify the Court of any agreement they might reach (ibid., § 162, and point 4 of the operative provisions).

5. After the parties’ unsuccessful attempt to conclude a friendly settlement, in August 2014 the applicant company filed its updated claims for just satisfaction. On 10 October 2014 the Government filed comments on those claims.

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

7. The applicant company did not claim non-pecuniary damage. As stated in a letter of 5 August 2014 the applicant company claimed 271,125 euros (EUR) for pecuniary damage, of which EUR 55,805 was for damage suffered as a result of its failure to fulfil obligations under a loan agreement with a bank, EUR 69,777 for loss of rent (as concerns the house no. 57-1 with a floor area of 292 square metres) and EUR 145,543 for loss of rent (as concerns the house no. 57-2 with a floor area of 306 square metres). In support of the amounts for the loss of rent and the market value of the houses the applicant company submitted a report prepared in 2014 by an expert valuer, a company certified to deal with the valuation of immovable property in Lithuania.

8. The report estimated the amounts which the applicant company could have obtained in rent if it had leased out those houses during the whole period June 1996 – April 2006, or alternatively, May 1997 - April 2006 (as concerns the house no. 57-1) and January 1995 – July 2010, or, alternatively, January 1999 – July 2010 (as concerns the house no. 57-2), stating that they had been calculated on the basis of the market prices during that period. It transpires from this report that the average rent per square metre per month for the houses during those years was EUR 2,80. The expert multiplied the number of square metres by that amount taking into account the average rent per square metre for each year, and then multiplied the result by the number of months the applicant company was allegedly unable to use the houses. The report, based on the official data collected by the expert valuer, also stated that both buildings were suitable for use (living): the house no. 57-2 as early as in 1995, the house no. 57-1 in May 1997 at the latest.

9. In reply, the Government contested those claims. In particular, the Government considered the amount for pecuniary damage to be excessive and rejected the findings of the expert’s report as lacking objectivity. However, the Government did not submit any alternative assessment in support of those arguments.

10. Furthermore, the Government submitted that no causal link existed between the alleged damage and the alleged violations of the Convention. The applicant company’s failure to fulfil its financial obligations vis-à-vis the commercial bank was already obvious in early 1996, that is, before the start of both sets of civil proceedings. The Government further contended that as concerns the loss of income from rent for the houses, the calculations submitted by the applicants were hypothetical and subjective and not supported by reliable evidence; moreover, the seizure orders had not prevented the applicant company from renting out its property. In addition, according to the Government, the applicant company could have first sought compensation through the domestic courts for the loss of rent resulting from its inability to let the houses.

11. The Court recalls that a judgment in which it finds a breach imposes on the respondent State a legal obligation to put an end to the breach and make reparation for its consequences in such a way as to restore as far as possible the situation existing before the breach (Brumărescu v. Romania (just satisfaction) [GC], no. 28342/95, § 19, ECHR 2001‑I).

12. Furthermore, if the nature of the breach allows restitutio in integrum, it is for the respondent State to implement this. If, on the other hand, national law does not allow – or allows only partial – reparation to be made for the consequences of the breach, Article 41 empowers the Court to afford the injured party such satisfaction as appears to it to be appropriate (see Papamichalopoulos and Others v. Greece (Article 50), 31 October 1995, § 34, Series A no. 330-B).

13. Turning first to the alleged damage caused by the failure to fulfil obligations under the loan agreement with the bank, it appears that the applicant company had failed to comply with the obligations as early as February 1996, that is, before the initiation of the civil proceedings in question. Therefore, the Court does not discern any causal link between the violations found and the pecuniary loss alleged. Even assuming that the civil proceedings could have had any influence on the applicant company’s ability to fulfil its contractual obligations vis-à-vis the bank (and reducing the debt), the applicant company failed to prove that the income from the property in question was the company’s only or at least the main means of generating the income and thus repaying the company’s debt of almost EUR 400,000 to the bank. The Court therefore rejects this claim.

14. The Court reiterates that in the principal judgment it held that the seizure orders in both civil cases in question imposed an excessive burden on the applicant company, although those measures, in general, when used carefully, ensure the proper conduct of court proceedings (see § 125 of the principal judgment). The seizure of that property prohibited transfer of ownership for over ten years while the civil proceedings lasted almost ten and fourteen years respectively (see §§ 71, 81, 143, 144 of the principal judgment).

15. With regard to the house no. 57-1, it had been returned in April 1996 to the applicant company, which could presumably make use of it since then, respecting the restrictions imposed by the seizure order. Having regard to the fact that those restrictions did not include a prohibition on putting the house up for lease, the Court is of the opinion that the applicant company cannot claim the loss of profits in so far as the lease of the house no. 57-1 is concerned and therefore rejects this claim.

16. However, contrary to the latter situation, the use of the house no. 57‑2 for the applicant company was restricted to such an extent that it could neither sell nor let it since it had been seized by the domestic courts and occupied by a third party until the end of the proceedings in which one of the applicant company’s claims concerned the eviction of the occupant from the house. Despite the existence of a final court decision of 5 September 1995 favourable to the applicant company, that situation continued for at least fourteen years, from July 1996 to 28 July 2010, and only then did the applicant company regain control of its property (see §§ 7, 8, 29, 30 of the principal judgment). The Court thus holds that as concerns the house no. 57-2 the applicant company during that period could neither make use of it (for example, putting the house up for lease), nor transfer ownership (as of 21 January 1999).

17. The Court holds that the applicant company must have clearly suffered pecuniary damage due to its lack of control over its possessions (see Popov v. Moldova (no. 1) (just satisfaction), no. 74153/01, § 10, 17 January 2006). Without speculating on the profits which the applicant company would have achieved if the violations of the Convention had not occurred, the Court observes that the company suffered a real loss of opportunities (see, mutatis mutandis, Gawęda v. Poland, no. 26229/95, § 54, ECHR 2002-II) and Centro Europa 7 S.r.l. and Di Stefano v. Italy [GC], no. 38433/09, § 219-220, ECHR 2012). Where a loss of earnings (lucrum cessans) is alleged, it must be conclusively established and must not be based on mere conjecture or probability. In those circumstances, the Court considers it appropriate to award a lump sum in compensation for the loss of earnings resulting from the impossibility of renting the house in question. It considers reasonable to award the applicant company compensation in respect of the pecuniary damage directly related to this violation of its rights from July 1996 until the end of the violation in July 2010 when the house in question was returned. As to the alleged unsuitability of that house for renting, the expert found that it had been suitable for use (living) as early as 1995 (see paragraph 8 above).

18. In making its assessment, the Court considers the approach based on the loss of rent reasonable. Contrary to the arguments of the Government, it has no doubts as to the objectivity of the expert’s report: it was carried out by an independent and certified valuer, and contains a comprehensive assessment of the characteristics of the particular property and an estimation of rent market prices. However, at the same time the Court takes into account the fact that the applicant company would inevitably have experienced certain delays in finding suitable tenants and would have had to make repairs to the house and incurred certain maintenance expenses in connection with the house and with taxation (see, among many authorities, Kirilova and Others v. Bulgaria (just satisfaction), nos. 42908/98, 44038/98, 44816/98 and 7319/02, § 31, 14 June 2007; Dacia S.R.L. v. Moldova (just satisfaction), no. 3052/04, § 47, 24 February 2009; and Kunić v. Croatia, no. 22344/02, § 76, 11 January 2007). The proceeds from the rent must also be based on the economic realities in the country and take account of inflation during the fourteen-year period (see Zlínsat, spol. s r.o. v. Bulgaria (just satisfaction), no. 57785/00, § 44, 10 January 2008). It follows that the claimed amount of EUR 145,543 for the loss of rent of the house no. 57-2, which appears was not adjusted taking into account the above factors, cannot be awarded in full.

19. Having regard to the above circumstances, to the fact that in the present case interrelated violations of Article 6 § 1 and Article 1 of Protocol No. 1 to the Convention have been found, and deciding on an equitable basis, as required by Article 41 of the Convention, the Court awards the applicant company the total sum of EUR 70,000 for pecuniary damage on account of the loss of rent, plus any tax that may be chargeable on that amount.

B. Costs and expenses

20. The applicant company claimed reimbursement of EUR 26,979 for fees and costs incurred before the domestic courts and in the preparation and presentation of its case before the Court. This sum included EUR 21,036 for work done by its lawyers; EUR 3,504 for the expert’s report; EUR 2,014 for translation costs and EUR 424 for postal expenses.

21. The Government contested these claims as excessive and unsubstantiated. In addition, they argued that some payment receipts and the sums therein presented by the applicant company could not be attributed to the proceedings at hand because the applicant company has been involved in a number of other proceedings before the domestic courts.

22. According to 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 documents in its possession and the above criteria, the Court considers it reasonable to award the sum of EUR 10,000 covering costs under all heads, plus any tax that may be chargeable on that amount.

C. Default interest

23. 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 applicant company, 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 70,000 (seventy thousand euros), plus any tax that may be chargeable, in respect of pecuniary damage;

(ii) EUR 10,000 (ten thousand euros), plus any tax that may be chargeable to the applicant company, 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;

2. Dismisses the remainder of the applicant company’s claim for just satisfaction.

Done in English, and notified in writing on 27 January 2015, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

              Stanley NaismithGuido Raimondi
RegistrarPresident

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