Communicated on 14 November 2018
FIFTH SECTION
Application no. 68946/10
FORTETSYA, MPP
against Ukraine
lodged on 17 November 2010
STATEMENT OF FACTS
The applicant company, MPP Fortetsya, is a private company registered in Ukraine. It is represented before the Court by Mr A. Filipyev residing in Ostrog.
A. The circumstances of the case
The facts of the case, as submitted by the applicant company, may be summarised as follows.
On 23 November 2004 the applicant company bought, for 55,455 Ukrainian hryvnias (at the time about 7,800 euros), a crane lorry at a public auction organised by the Bailiff’s Service as part of enforcement proceedings against third persons. The applicant company transferred the lorry’s value to the bailiff’s account on 3 December 2004.
Given that it was not able to get the lorry from the previous owner (company “N.Z.”), the applicant company initiated commercial proceedings against the latter claiming the transfer of the lorry into its possession. Company “N.Z.” lodged a counter-claim seeking invalidation of the public auction. That counter-claim was subsequently pursued by five individuals, former shareholders of company “N.Z.”, who claimed the title to the lorry in question as an equivalent to their shares’ value.
On 21 December 2005 the Ostrog Town Court declared the public auction null and void, and recognised the five individuals’ title to the lorry. It was established that the head of the Bailiff’s Service had conducted the auction in breach of a judicial ruling of 15 November 2004 staying the enforcement proceedings.
On 16 April 2009 the applicant company lodged a commercial claim against the local Bailiff’s Service seeking the recovery of the amount paid for the lorry. It relied on Articles 661 and 1212 of the Civil Code, as well as Article 11 of the Law “On enforcement proceedings” (see “Relevant domestic law” below).
On 16 July 2009 the Rivne Regional Commercial Court found against the applicant company. It held that at the time of the payment the public auction had not been invalidated. Furthermore, the Bailiff’s Service had not kept the money for itself, but had immediately transferred it to the creditors in the enforcement proceedings.
The applicant company appealed. It maintained that it had fully complied with its obligations under the sales contract of 23 November 2004 and that it was entitled to get back what it had paid at the public auction after that had been declared null and void. Relying on Article 11 of the Law “On enforcement proceedings”, the applicant company submitted that the damage caused by a State bailiff to individuals or legal entities in the course of enforcement proceedings was to be compensated by the State.
On 19 January 2010 the Lviv Commercial Court of Appeal upheld the judgment of 16 July 2009. It stated that, indeed, damage caused by a State bailiff to a physical person or legal entity in the course of enforcement proceedings was to be compensated by the State in accordance with Article 1174 of the Civil Code. It observed, however, that the applicant company had not relied on that provision. Nor had it made a clear claim against the State. The appellate court therefore rejected the applicant company’s appeal. It also observed that Article 11 of the Law “On enforcement proceedings” relied on by the applicant company did not concern the issue of compensation for damage caused by a State bailiff.
The applicant company appealed on points of law. It argued, in particular, that it was for the courts to provide legal classification of the impugned facts and that, if it omitted certain legal provisions, it should not prevent the courts from adjudicating on the merits of its claim.
On 25 May 2010 the Higher Commercial Court upheld the lower courts’ decisions. It noted that the applicant company had wrongly relied on Articles 661 and 1212 of the Civil Code alleging the failure of the Bailiff’s Service to comply with its contractual obligations, whereas the damage caused stemmed from its non-contractual obligations and were regulated by Article 11 of the Law “On the State Bailiff’s Service” and Article 1173 of the Civil Code. The Higher Court emphasised that the courts could not overstep the scope of the claim made.
B. Relevant domestic law
The relevant provisions of the Civil Code 2003 (as worded at the material time) read as follows:
Article 661. The seller’s responsibility in case of the property
alienation from the buyer
“1. In case of alienation, under a judicial order, of the sold property from the buyer in favour of a third person on the grounds that emerged prior to the sales, the seller shall reimburse the damage to the buyer if the latter did not or could not know about the existence of those grounds. ...”
Article 1173. Compensation for damage caused by a State authority ...
“1. Damage caused to a private person or legal entity as a result of an unlawful decision, action or omission of a State authority ... shall be indemnified by the State irrespective of the guilt of that authority.”
Article 1174. Compensation for damage caused by a State official ...
“1. Damage caused to a private person or legal entity as a result of an unlawful decision, action or omission of a State official ... shall be indemnified by the State irrespective of the guilt of that official.”
Article 1212. General provisions on the obligations stemming from acquisition and retention of property without valid legal grounds
“1. A person who has acquired or retained property at the expense of another person (victim) without valid legal grounds shall return that property to the victim.
2. The provisions of this chapter shall apply regardless of whether the ungrounded acquisition or retention of property resulted from the conduct of the acquirer, the victim or other persons, or were consequences of certain events.
3. The provisions of this chapter shall also apply to the requirements regarding:
1) recovery of what was [done or paid] under a transaction [eventually] declared null and void;
2) recovery of property by the owner from unlawful possession;
3) recovery of what was done by one of the parties under an obligation; and
4) reimbursement of damage by a person, who acquired or retained property unlawfully at expense of another person.”
Article 11 of the Law “On Enforcement Proceedings” 1999 (as worded at the material time) listed the parties in enforcement proceedings. Its Article 86 stipulated that damage caused by a State bailiff to individuals or legal entities were to be compensated in accordance with the procedure established by law.
Article 11 of the Law “On the State Bailiffs’ Service” 1998 (as worded at the material time) concerned the liability of bailiffs. It stated that damage caused by a State bailiff to individuals or legal entities during enforcement proceedings were to be compensated in the manner established by law at the expense of the State.
COMPLAINT
The applicant company complains under Article 1 of Protocol No. 1 that it was deprived of its property due to the fault of the State Bailiff’s Service and that it was not compensated for it.
QUESTIONS TO THE PARTIES
Has there been an interference with the applicant company’s peaceful enjoyment of possessions under Article 1 of Protocol No. 1?
If so, was it in accordance with the conditions provided for by law, within the meaning of Article 1 of Protocol No. 1, and did it impose an excessive individual burden on the applicant company?
The Government are invited to submit examples of domestic practice on claims under Articles 1173 and 1174 of the Civil Code at the material time, if available in similar situations to the present case.
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