FIFTH SECTION
DECISION
Application no. 43203/09
Christian MAVRODIJSKI
against Bulgaria
The European Court of Human Rights (Fifth Section), sitting on 30 April 2019 as a Committee composed of:
Ganna Yudkivska, President,
Síofra O’Leary,
Lado Chanturia, judges,
and Milan Blaško, Deputy Section Registrar,
Having regard to the above application lodged on 3 July 2009,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,
Having deliberated, decides as follows:
THE FACTS
1. The applicant, Mr Christian Mavrodijski, is a German national, who was born in 1974 and lives in Germany. He was represented before the Court by Mr B.S. Valchev, a lawyer practising in Sofia.
2. The Bulgarian Government (“the Government”) were represented by their Agent, Ms K. Radkova, from the Ministry of Justice.
3. On 24 May 2017 the application was communicated to the Government. On the same day the German Government were informed of their right to intervene in the proceedings in accordance with Article 36 § 1 of the Convention and Rule 44 § 1 of the Rules of Court. They chose not to avail themselves of this right.
A. The circumstances of the case
4. In March 1996, A., who was the son of a business partner of the applicant’s father, bought a plot of land in central Sofia. In October 1996 A. and the applicant registered a limited-liability company, called “Royal Centre” Ltd, in Bulgaria. On 10 December 1996 A. sold the plot of land mentioned above to the company in which he and the applicant held an equal share (дял) – 50% of the company’s capital. The company was to be managed and represented jointly by the applicant’s father and A.
5. The company was registered as having its seat at 145 Rakovski Street, Sofia. The address for the applicant, indicated in the company’s articles of association and in the court’s decision registering the company, was his personal address in Germany.
6. The company had no activities besides owning a plot of land.
1. Expulsion of the applicant from the company
7. In December 2003, a lawyer acting for the father of the applicant learned that on 5 March 2003 the applicant had been expelled from “Royal Centre” Ltd by a decision of A. who had taken over the applicant’s share in its capital. A. had also undertaken to pay back to the applicant the monetary equivalent of his share of the company’s capital as per the accounts’ balance of the company at the end of March 2003. The decision to expel the applicant had followed several invitations for him personally to take part in a shareholders’ meeting. All invitations had been sent to the company’s address at 145 Rakovski Str. The decision expelling the applicant had been registered by the Sofia City Court on 13 March 2003. On 21 March 2003 A. had sold the plot of land to a third party for the price of 40,000 euros (EUR), and thereafter the plot had been further resold a couple of times.
2. Civil proceedings brought by the applicant to vindicate his property rights
8. Having become aware at the end of 2003 of his exclusion from the company, in March 2004 the applicant brought three separate sets of proceedings: one against “Royal Centre” Ltd under section 74 of the Commerce Act 1991 (see paragraph 20 below); a second one against A. under Article 97 § 3 in conjunction with Article 431 § 2 of the Code of Civil Procedure 1952 (“the CCP 1952”; see paragraphs 21 and 22 below); and, a third one against “Royal Centre” Ltd under the two last-mentioned CCP provisions. These claims were rejected by courts at three levels of jurisdiction. The courts found as follows: in the first set of proceedings that the claim had been submitted out of time and that the applicant had no standing as he was no longer a shareholder in the company; in the second set of proceedings, that the applicable procedure was under section 74 of the Commerce Act 1991, and not the CCP; and, in the third set of proceedings that, as the shareholders’ decisions registered by the company court on 13 March 2003 were not null and void, they could not be challenged under the CCP on the basis of their procedural irregularity.
3. Criminal proceedings against the applicant’s former business partner
9. Upon a complaint by the applicant, a criminal investigation was opened on 5 March 2004 against A. who was charged with embezzlement.
10. In April 2008, the applicant brought a civil claim (for tort, under section 45 of the Contracts and Obligations Act, see paragraph 24 below) within the criminal proceedings. He sought damages in the amount of half of the value of the plot of land owned by “Royal Centre” Ltd. On 29 April 2008 the Sofia City Court, observing that a possibility remained open at the time for the applicant to bring a separate civil claim, refused to consider his claim for damages as it would substantially interfere with the criminal trial. The court found A. not guilty in 2009.
11. On appeal, the Sofia Court of Appeal found A. guilty of embezzlement. The court established that, in order to circumvent a legal prohibition on foreign citizens owning land in Bulgaria (see paragraph 23 below), in 1996 A. and the applicant had set up a company, “Royal Centre” Ltd, which did not carry out any business activity, its only asset being a plot of land owned jointly by the two partners. Between October 2002 and February 2003 A. had invited the applicant to a shareholders’ meeting by knowingly sending invitations to an address where the applicant could not be found. A. had done this with the intention of acquiring exclusive property rights over the plot of land and of selling it for personal gain, as he had done subsequently. A. was sentenced to a suspended sentence of three years. The final judgment is by the Supreme Court of Cassation (“the SCC”) of 19 October 2010.
12. The applicant did not bring a separate claim for damages, under section 45 of the Contracts and Obligations Act, before the civil courts.
4. Further proceedings brought by the applicant
(a) Proceedings for declaration of nullity of the company’s decisions
13. In March 2012 the applicant brought a claim under Article 124 § 1 of the CCP 2007 (see paragraph 28 below) before the Sofia City Court. He unsuccessfully asked the court to declare null and void the decisions taken by the company’s shareholders on 5 March 2003 and to find that on 13 March 2003 the judge had registered the decision expelling the applicant from “Royal Centre” Ltd.
14. On appeal, the Sofia Court of Appeal overturned the first-instance judgment and the decision entered in force on 23 June 2014. The court found in particular that A. had failed to demonstrate that a shareholders’ meeting had taken place. Consequently, the decisions reflected in the record of that meeting were null and void. The applicant’s claim was thus upheld.
(b) Proceedings for registration of change of circumstances in the company
15. Referring to the final decision of the Sofia Court of Appeal mentioned in the paragraph immediately above, the applicant twice asked the Registration Agency (“the Agency”) to re-establish him as a shareholder in the company. The Agency refused both times, observing that, subsequently to the null and void decision of 5 March 2003, other valid decisions had taken place and they continued to produce effects. The applicant challenged these refusals in court without success.
(c) Tort proceedings for vicarious responsibility
(i) At first instance
16. On 25 March 2016 the applicant brought proceedings before the Sofia Regional Court, under section 49 of the Obligations and Contracts Act, against the Sofia City Court as the entity vicariously responsible for the actions of the judge who sat at that court and who had registered the decision expelling the applicant on 13 March 2003 (see paragraph 7 above). He claimed initially about EUR 13,000 in damages, later increased to EUR 50,000. The applicant submitted that the loss he had sustained could not be remedied, given that all legal events which had taken place subsequently to the registration decision could not be affected, as shown by his unsuccessful attempts to be re-registered as a shareholder in the company (paragraph 15 above). The Sofia Regional Court rejected his claim on 5 April 2017.
(ii) At second instance
17. That decision was upheld on appeal by the Sofia Court of Appeal on 22 March 2018. The appellate court found in particular the following. Assuming that the judge had been tasked by the court with carrying out her duties, her registering the changes in the company as requested by A. could be considered unlawful, given that she had not exercised due diligence when establishing whether the applicant had been correctly summoned to the shareholders’ meeting. That act had led to pecuniary damage as the applicant had been prevented from receiving the money corresponding to his share in the company’s capital, and fault was presumed under the law. However, the causal link between the act of registration by the judge and the damage caused to the applicant could not be established. In particular, the sale by A. of the company’s asset, the plot of land, his failure to pay back to the applicant his share, and the pocketing of all the proceeds of that sale instead, had all taken place after the judge’s decision on registration. Therefore, the damage had not been the direct result of the judge’s decision but had unquestionably been caused by A.’s actions.
(iii) At cassation (third) instance
18. On 27 December 2018 the SCC accepted the cassation appeal brought by the applicant against the decision of the Sofia City Court of 22 March 2018. The proceedings are pending.
B. Relevant domestic law and practice
19. The statutory provisions concerning the rights of shareholders in limited liability companies and relating to the register of companies have been set out in the case of Shesti Mai Engineering OOD and Others v. Bulgaria (no. 17854/04, §§ 49-51 and §§ 55-57, 20 September 2011).
20. In particular, according to section 74(1) of the Commerce Act, every partner or shareholder may bring a claim before the district court at the company’s seat, seeking the repeal of a resolution of the general assembly when such resolution is inconsistent with a mandatory provision of the law or with the articles of incorporation or the statutes of the company.
21. At the time of the events, the registration proceedings concerning companies were non-adversarial court proceedings in which only one party requested the court to issue a certain decision. The court’s decision granting the request was not subject to appeal (Article 431 § 1 of the CCP 1952, in force at the time). If the decision affected the rights of a third party, such party could assert his or her rights in general adversarial proceedings brought under Article 431 § 2 of the CCP 1952. The respondent in those proceedings was the one who had benefitted from the registration decision. If the courts allowed a claim for a judicial declaration that an entry in the register was inadmissible or void, or that the details registered did not correspond to actions which had in fact been taken, the registering court had to erase the entry of its own motion or pursuant to a request by an interested party (Article 498 of the CCP 1952).
22. Under Article 97 § 3 of the CCP 1952, an individual could bring a claim to establish the veracity of a document.
23. According to section 29 of the Property Act, as worded at the time of the events, foreign citizens and foreign legal entities could not acquire property over land in Bulgaria.
24. The general rules of the law of torts are set out in sections 45 to 54 of the Obligations and Contracts Act of 1951 („Закон за задълженията и договорите“). Its section 45(1) provides that everyone is obliged to make good the damage which they have, through their fault, caused to another. Section 49 provides that a person who has entrusted another with performing a job is liable for the damage caused by that other person in the course of or in connection with the performance of the job. The limitation period for tort is five years, from the moment the perpetrator is discovered.
25. According to Article 63 § 1(b) of the CCP 1952, which was reproduced in Article 83 § 2 of the CCP 2007, individuals – who the court has established are indigent – are exempt from the obligation to pay state and court fees to bring proceedings under this Code. In establishing eligibility for this exemption the court takes into account people’s income, the worth of their estate, their family and health circumstances, whether they are employed or not and how old they are. According to Article 64 § 1 of the CCP 1952, court fees paid by the claimant, and expenses for one lawyer, are to be reimbursed by the respondent in proportion to the upheld part of the claim.
26. According to Article 222 of the CCP 1952, reproduced in Article 300 of the CCP 2007, the final judgment of a criminal court is binding on the civil court which examines the civil consequences of the criminal act in relation to the points whether the act was perpetrated, whether it was unlawful, and whether the perpetrator was guilty of it. Civil courts are bound by the facts relevant for the criminal responsibility of the perpetrator, as established by the criminal court (see, among many others, реш. № 668 от 20.12.2018 г. на ОС Пловдив по т. д. № 426/2018 г).
27. Under the Legal Aid Act 2005, individuals can seek legal aid in civil (among other) cases, the aim of the Act being to guarantee equal access to justice to all.
28. According to Article 124 § 1 of the CCP 2007, an individual could bring a claim, seeking to have his or her right vindicated or to establish the existence or not of a legal relationship or of a right, if he or she has an interest in that.
COMPLAINTS
29. The applicant complained under Article 1 of Protocol No. 1 to the Convention, and under Article 13 of the Convention in conjunction with the previous provision, that the State has failed to protect his right to property, given that he had not had procedural guarantees providing for effective protection of that right, nor an effective domestic remedy in this connection.
THE LAW
A. Alleged violation of Article 1 of Protocol No. 1 to the Convention
30. In respect of his complaint that the State has failed to protect his right to property, the applicant relied on Article 1 of Protocol No. 1 to the Convention which provides so far as relevant:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
1. The parties’ submissions
(a) The Government
31. According to the Government, the application had to be dismissed for failure to exhaust domestic remedies. The applicant had failed to bring tort proceedings under section 45 of the Contracts and Obligations Act 1951 (see paragraph 24 above), seeking damages from A., the individual at fault. Given that A. had been indicted for embezzlement, the most logical, standard and non-controversial legal means for claiming back the losses incurred would have been a tort claim against him.
32. In addition, the relevant legal provisions provided sufficient protection against arbitrary interference with the right to property and the authorities in the present case had complied with their related obligations. The applicant had not demonstrated the standard of pater familias care expected from all individuals involved in a company as he had not participated effectively in the company’s governance, contrary to the company’s own articles of association. Furthermore, contrary to the shareholders in the case of Shesti Mai, cited above, who had sought to challenge a decision of the general assembly almost immediately after it had been registered, the applicant had delayed that claim by about a year as compared both with the legal applicable limitation period and the provisions on convening a general assembly in the company’s articles of association.
(b) The Applicant
33. The applicant disagreed. He submitted that he had brought a civil claim against his ex-business partner in the criminal proceedings against the latter and the court had refused to examine it (see paragraph 10 above). Also, he had attempted a civil claim for vicarious responsibility against the court, without success (see paragraphs 16-18 above). Effective protection of his right to property had to include procedural guarantees for either restitution or compensation of a stolen property.
34. The applicant further emphasized that the company had not had any other property apart from the plot of land, and had never had commercial activity of any kind. Thus the company could be identified with the plot of land. The aim of the perpetrator had been specifically to take over the land. Consequently, the focus had to remain on examining the applicant’s deprivation of his property and not be displaced to examining his right to his share in the company. Even if there were a possibility under national law to have him regain his participation in the company, it would be futile as the company no longer owned the plot of land in question.
35. In addition, the procedure under section 74 of the Commerce Act was not effective and the finding by the national courts that the 13 March 2003 decision had been null and void (see paragraph 14 above) could not restore the status quo.
36. He had not pursued separate tort proceedings in respect of the perpetrator because those would have been futile. In particular, he would have had to wait for years as his claim could only be examined once the criminal proceedings had ended. He would have had to pay dearly for lawyers’ fees, as well as a flat court fee of 4% of the amount of damages he sought (in his case around EUR 40,000), that sum to be paid up front. Finally, even if he had been successful in such a separate tort claim, he would not have been able to obtain anything, given that A. had transferred his two apartments to third parties prior to stealing the company. Thus, he had not had at his disposal a rapid and effective domestic remedy for protection not only of his share in the company, but of his real property too.
2. The Court’s assessment
37. The Court notes that under Article 1 of Protocol No. 1 to the Convention the State must ensure in its domestic legal system that property rights are sufficiently protected by law and that adequate remedies are provided whereby the victim of an interference can seek to vindicate his rights, including, where appropriate, by claiming damages in respect of any loss sustained (see Blumberga v. Latvia, no. 70930/01, § 67, 14 October 2008, and Chadzitaskos and Franta v. the Czech Republic, nos. 7398/07, 31244/07, 11993/08 and 3957/09, § 48, 27 September 2012). However, it is also a well-established part of the Court’s case-law that States are dispensed from answering before an international body for their acts before they have had an opportunity to put matters right through their own legal system, and those who wish to invoke the supervisory jurisdiction of the Court as concerns complaints against a State are thus obliged to use first the remedies provided by the national legal system (see Vučković and Others v. Serbia (preliminary objection) [GC], nos. 17153/11 and 29 others, § 70 and the authorities cited therein, 25 March 2014).
38. In an earlier case against Bulgaria related to a company hijacking at the origin of which was a State interference in the form of an arbitrary decision by a judge (see Shesti Mai, cited above, § 81), the Court examined whether domestic law afforded the applicants procedures for protecting themselves and, concluding that the available procedures were ineffective in those circumstances, found a breach of Article 1 of Protocol No. 1 to the Convention (ibid., § 91).
39. Importantly, in the present case, the company “Royal Centre” Ltd had never had any business activities or other assets, apart from the plot of land, and the applicant had not been active in the company (see paragraphs 6, 11 and 34 above). The impossibility for him to collect the monetary value of half of the company’s plot of land was at the core of his grievances before the Court (see paragraph 34 above). He likewise emphasised before the Court that, even if there were a possibility under domestic law for him regain his participation in the company, that would be futile as the company no longer owned the plot of land (ibid.).
40. Consequently, the Court finds that the specific circumstances of this case distinguish it from the situation in Shesti Mai where the applicants had been active shareholders who had aimed at preventing the decrease in value of their company shares and at having their shareholder rights restored. The various civil proceedings pursued by the present applicant domestically, in particular for declaring null and void the decision to exclude him and for his reinstatement in the company (see paragraphs 8, 14 and 15 above), do not appear, as the applicant had himself submitted (see paragraph 35 above), to have been able to provide him with adequate redress. The reason for this was that the property, which was at the centre of the applicant’s complaint, had long been taken out of the company’s capital. In addition, the Court observes that the Government have not argued that the proceedings for vicarious responsibility of the respective court, even if ultimately successful (and they are still pending, see paragraphs 16-18 above), would be sufficient to make good for the applicant’s loss, and thus can be an effective remedy in this case. It is not necessary to examine, therefore, whether these proceedings represent a remedy to be exhausted in the particular circumstances of the present case (see, similarly, Bevacqua and S. v. Bulgaria, no. 71127/01, § 58, 12 June 2008).
41. Accordingly, given that the applicant was effectively deprived of his property, and this is the core of his complaint, the Court has to establish whether adequate remedies existed at the national level for him to seek to vindicate his rights, including by claiming damages in respect of any loss sustained (see paragraph 37 above). In particular, once he found out that he had been a victim of fraud, he should have had the means in law and in practice to seek compensation for his loss.
42. Proceedings for tort directed against the individual allegedly at fault are the classic way for claiming damages from non-State parties in Bulgaria and the State has provided for them (see paragraph 24 above). Crucially, the applicant omitted to bring a classic tort claim against his former business partner, under section 45 of the Contracts and Obligations Act, outside of the criminal proceedings against the latter (see paragraph 12 above). This was despite the explicit observation by the criminal court that a possibility remained open to bring a separate civil claim (see paragraph 10 above).
43. The applicant submitted that pursuing a separate tort claim would have represented an excessive individual burden on him for the reasons advanced in paragraph 36 above.
44. In respect of his argument about the length of such proceedings, the Court finds it unconvincing, given that he waited a number of years before bringing other proceedings domestically (see paragraphs 13 and 16 above) and he did not complain in that respect.
45. Furthermore, under Bulgarian law the final judgment of a criminal court is binding on the civil court which examines the civil consequences of the criminal act (see paragraph 26 above). Therefore, having to wait for the end of the criminal proceedings in which the person who defrauded him was found guilty, before a separate civil claim against that person could be examined, would in effect have benefitted the applicant.
46. As regards the argument about elevated costs in such proceedings, the Court observes that Bulgarian law allows for a waiver of the 4% court fee in cases of indigent claimants (see paragraph 25 above). And as for the need to pay for a lawyer’s fee in order to bring tort proceedings, such expenses are to be covered by the respondent at the end of the proceedings, in proportion to the upheld part of the claim (ibid.). Moreover, claimants can apply for legal aid (see paragraph 27 above).
47. Finally, as regards the argument that he would not have been able to collect any money from his former business partner A., even assuming that at the time when the applicant learned about the fraud A. had no immovable assets, a judgment debt against A. would have been enforceable under domestic law also against any other property, including bank accounts, other assets, or future income. Thus, it cannot be concluded on the basis of the material before the Court that a civil judgment debt in favour of the applicant would have remained unenforced.
48. In view of the above, the Court finds that the available domestic remedy – a tort claim against the individual at fault – was capable of remedying directly the impugned state of affairs, seeing that the applicant’s core grievance concerned his impossibility to receive the monetary value of half of the company’s asset. That remedy was not obviously futile and the applicant failed to make use of it. In view of the importance of the principle of subsidiarity (see Burmych and Others v. Ukraine (strike-out) [GC], nos. 46852/13 and next, § 218, 12 October 2017), the Court finds that he has not exhausted the available domestic remedies and there do not appear to be any exceptional circumstances capable of exempting him from the obligation to do so.
49. It follows that his complaint under Article 1 of Protocol No. 1 must be rejected under Article 35 §§ 1 and 4 of the Convention for non-exhaustion of domestic remedies.
B. Alleged violation of Article 13 of the Convention
50. The applicant also complained that he had not had an effective domestic remedy for his complaint examined above. The relevant provision of Article 13 of the Convention reads as follows:
“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”
51. The Court has already found that there was an effective remedy at the applicant’s disposal (see paragraphs 48 above). Consequently, his complaint under Article 13, taken in conjunction with Article 1 of Protocol No. 1, is manifestly ill-founded.
52. It follows that this complaint must be rejected in accordance with Article 35 §§ 3 (a) and 4 of the Convention.
For these reasons, the Court, unanimously,
Declares the application inadmissible.
Done in English and notified in writing on 23 May 2019.
Milan BlaškoGanna Yudkivska
Deputy RegistrarPresident
Full & Egal Universal Law Academy