SECOND SECTION
PARTIAL DECISION
AS TO THE ADMISSIBILITY OF
Application no. 17350/03
by Lars REY and Others
against Sweden
The European Court of Human Rights (Second Section), sitting on 26 September 2006 as a Chamber composed of:
MrJ.-P. Costa, President,
MrA.B. Baka,
MrI. Cabral Barreto,
MrsA. Mularoni,
MrsE. Fura-Sandström,
MsD. Jočienė,
MrD. Popović, judges,
and Mrs S. Dollé, Section Registrar,
Having regard to the above application lodged on 26 May 2003,
Having deliberated, decides as follows:
THE FACTS
The first and second applicants, Mr Lars Rey and Ms Inger Rey, are Swedish nationals who were born in 1935 and 1944 respectively and live in Klippan. The third applicant, Pulverbränsle Summa AB (hereinafter “the company”), was a limited liability company wholly owned by the first two applicants. They are represented before the Court by Mr J. Thörnhammar, a lawyer practising in Stockholm.
The facts of the case, as submitted by the applicants, may be summarised as follows.
On 28 October 1992 the company concluded a contract with a municipal energy company, Drefviken Energi AB, concerning deliveries of wood-powder fuel.
On 3 December 1992 a bank, Skandinaviska Enskilda Banken, and two other investors granted the company loans to construct a plant for the production of wood-powder fuel. The bank’s loan, amounting to 5.8 million Swedish kronor (SEK), was to be paid in instalments. In December 1992 and January 1993, 3.8 million SEK of the loan was paid to the company.
In March 1993, at a first testing of the completed plant, it was discovered that certain modifications had to be made. In March and April, the company therefore requested the bank to pay the remaining 2 million SEK of the loan. However, the bank refused to do so.
In April 1993, Drefviken Energy AB cancelled the fuel delivery contract, apparently due to the fact that the company had not concluded the construction of the plant and it was therefore very doubtful whether it would be able to deliver the agreed amounts of fuel for the 1993/94 season.
Subsequently, the company tried to find other customers and reiterated its request to the bank to receive the remainder of the loan. It was paid to the company on 28 June 1993.
The bank’s payment, together with an additional loan from another investor, enabled the company to uphold a limited production capacity for a time. However, on 7 September 1994 it was declared bankrupt.
The bank instituted proceedings against the first and second applicant, claiming their joint liability for 1.1 million SEK of the company’s loan in accordance with the personal guarantees they had signed. In February 1995, in a different action, the applicants claimed compensation from the bank in the amount of 37 million SEK for the damage allegedly caused the company by the bank’s initial refusal to pay the last instalment of the loan. They claimed that that refusal had violated the terms of the loan contract and, in any event, that the bank had incurred liability for damages due to negligence, since the project in question had depended on the loan being paid out on demand. The first and second applicants further requested that their personal guarantees be declared invalid or be modified.
On 3 October 1995 the Supreme Court (Högsta domstolen) ordered that the proceedings should be examined jointly by the District Court (tingsrätten) of Stockholm.
Throughout the subsequent proceedings, the parties lodged several supplementary arguments and procedural requests and submitted documentary evidence to the court. It further appears that the judge in charge of the proceedings was replaced on several occasions.
An oral preparation with the parties was held by the District Court on 18 September 1995. By a decision of 10 June 1996, the court rejected the bank’s request for the applicants’ action to be dismissed due to lack of standing. A further oral preparation, scheduled for 16 December 1996, was cancelled due to the illness of the applicants’ counsel. In February 1997, the applicants asked the court to rule on the alleged breach of contract in a partial judgment. In June 1997, they requested it to order the bank to produce the files concerning the loan. An oral preparation was held on 7 April 1998. On 29 September 1998 the court sent a summary of the cases to the parties and, by a decision of 30 September 1998, it rejected the request for a partial judgment. On 29 June 1999 it ordered the bank to produce the loan files, which it did on 23 July 1999. On 5 July 2000 the court delivered another summary of the cases and gave the parties the opportunity to make comments. On 26 and 27 March and 2 April 2001 an oral hearing was held.
By a judgment of 27 April 2001, the District Court found in favour of the bank. It noted that 2 million SEK of the bank loan had been pledged by the company at the time when the loan contract had been concluded through the deposit of that amount on a blocked bank account. It found that, in the absence of any other clauses or agreements with regard to the bank loan or the pledge, this measure showed that the amount, like any other pledge, was only available for withdrawal if so approved by the bank. Consequently, the bank had not breached the loan contract by its initial refusal to pay the amount in question. Moreover, a memorandum concerning the loan negotiations from September 1992 indicated that the parties had anticipated that the amount in question would not be necessary until July 1993. In the meantime, the fuel production should have started and begun to yield profits, which, in turn, would have increased the value of the bank’s mortgage in the company and enabled it to lift the blockage of the pledged amount. However, in March 1993 the company had already failed to deliver on the contract with Drefviken Energy AB and several technical difficulties – greater than the problem acknowledged by the company – had been discovered at the fuel plant. Furthermore, in early April 1993 the company had not been able to pay its consultant, which had led him to cancel his assignment. In these circumstances, the court considered that the bank had had good reasons to be cautious and not make available the disputed amount earlier than the date originally projected. The bank could not therefore be held liable for negligence towards the company. The court further found that there was no reason to invalidate or modify the first and second applicants’ personal guarantees.
The applicants appealed to the Svea Court of Appeal (Svea hovrätt), which on 5 February 2002 agreed with the District Court’s reasoning and upheld its judgment.
On 29 November 2002 the Supreme Court refused the applicants leave to appeal.
COMPLAINTS
1. The applicants complain that they did not have a fair hearing or an effective remedy in the Court of Appeal, as the court’s reasoning was vague and incomprehensible. They rely on Articles 6 § 1 and 13 of the Convention.
2. They further claim, under Article 1 of Protocol No. 1 to the Convention, that the courts failed to properly consider the economic consequences of the bank’s initial refusal to pay the remainder of the loan, which allegedly caused the company’s bankruptcy and involved an arbitrary and disproportionate deprivation of its property.
3. Finally, the applicants complain under Article 6 § 1 of the Convention that they did not have access to a court within a reasonable time.
THE LAW
1. The applicants complain that the Court of Appeal did not provide them with a fair hearing and an effective remedy, as its reasoning was vague and incomprehensible. They rely on Articles 6 § 1 and 13 of the Convention, which read as follows:
Article 6 § 1:
“In the determination of his civil rights and obligations ..., everyone is entitled to a fair ... hearing within a reasonable time by [a] ... tribunal...”
Article 13:
“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.”
The Court reiterates that the Court of Appeal, in its judgment of 5 February 2002, agreed with the reasons given in the District Court’s judgment of 27 April 2001. Noting that the District Court’s reasoning thus formed part of the appellate court’s judgment, the Court cannot find that the grounds given for the rejection of the applicants’ claims in the case were vague or incomprehensible. On the contrary, extensive and clear reasons were given for the finding that the bank had neither breached the loan contract nor acted in a negligent way towards the applicants. Considering, furthermore, that the domestic courts ruled on the case in its entirety, the Court finds no evidence that the applicants did not have a fair hearing or an effective remedy, within the meaning of the invoked Convention provisions.
It follows that this complaint is manifestly ill-founded and must be rejected pursuant to Article 35 §§ 3 and 4 of the Convention.
2. The applicants further claim that the company was deprived of its possessions in breach of Article 1 of Protocol No. 1 to the Convention. They consider that the courts were responsible for this breach by failing to properly consider the economic consequences of the bank’s initial refusal to pay the remainder of the loan. Article 1 of Protocol No. 1 provides the following:
“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.”
The Court notes that the domestic courts considered that the payment of the last instalment of the bank loan had been subject to certain conditions. They found, inter alia, that the withdrawal of the corresponding amount deposited on a blocked bank account required the bank’s approval and that the parties, when concluding the loan contract, had anticipated that the amount would not be necessary until July 1993. In these circumstances, it is questionable whether the amount in question could be considered to have been the company’s possession within the meaning of Article 1 of Protocol No. 1 already in March – June 1993, when the request for payment was refused by the bank. In any event, as noted above, the courts found that the bank had not breached the loan contract or acted negligently by refusing to make the amount available. Moreover, the bank cannot be said to have been under an obligation to release the disputed amount earlier than planned as a consequence of the economic difficulties of the company. The Court notes, in this connection, that the amount was paid to the company on 28 June 1993, apparently in compliance with the original agreement between the bank and the applicants. In these circumstances, there is no indication that the courts failed to properly consider the applicant’s situation in finding that the bank was not liable to damages.
It follows that this complaint is also manifestly ill-founded and must be rejected pursuant to Article 35 §§ 3 and 4 of the Convention.
3. The applicants finally complain that the length of the proceedings was in breach of the “reasonable time” requirement laid down in Article 6 § 1 of the Convention.
The Court notes that the proceedings began in February 1995 and ended on 29 November 2002 with the Supreme Court’s decision to refuse leave to appeal. They therefore lasted approximately seven years and nine months.
The Court considers that it cannot, on the basis of the file, determine the admissibility of this complaint and that it is necessary, in accordance with Rule 54 § 2 of the Rules of Court, to give notice of this part of the application to the respondent Government.
For these reasons, the Court unanimously
Decides to adjourn the examination of the applicants’ complaint concerning the length of the proceedings;
Declares the remainder of the application inadmissible.
S. DolléJ.-P. Costa
RegistrarPresident
Full & Egal Universal Law Academy