FIFTH SECTION
DECISION
AS TO THE ADMISSIBILITY OF
Application no. 26461/06
by James VALENTIN
against Denmark
The European Court of Human Rights (Fifth Section), sitting on 22 January 2008 as a Chamber composed of:
Snejana Botoucharova, President,
Peer Lorenzen,
Volodymyr Butkevych,
Margarita Tsatsa-Nikolovska,
Rait Maruste,
Javier Borrego Borrego,
Renate Jaeger, judges,
and Claudia Westerdiek, Section Registrar,
Having regard to the above application lodged on 15 June 2006,
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
The applicant, Mr James Valentin, is a Danish national who was born in 1944 and lives in Copenhagen. He is represented before the Court by Mr Anders Ørgaard, an Associate Professor Ph.D. at the University of Aarhus. The Danish Government (“the Government”) are represented by their Agent, Mrs Nina Holst-Christensen.
A. The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
The applicant was a partner in a commercial partnership, a banking and stockbroking firm called Vekselerfirmaet Hugo Petersen I/S (hereafter “the Partnership”). In addition to the applicant, the Partnership had five other partners: VL, FVM, CHN, and two private limited companies, namely, Hugo Petersen Børsmæglerselskab A/S and Kejpe A/S. Subsequently, in legal proceedings it was established that a further partner, CEN, had not formally resigned from the Partnership and therefore was also to be considered a partner.
On 29 March 1988, due to financial difficulties, proceedings were initiated before the Bankruptcy Court (Skifteretten under Sø- og Handelsretten) concerning the Partnership and the partners for suspension of payments. In accordance with section 10(1) of the Danish Bankruptcy Act (Konkursloven), the applicant declared that he was not in a position to pay his debts and that he was therefore insolvent.
On 29 August 1988, the Bankruptcy Court decided to discontinue the suspension of payments. At the same time, having heard two bankruptcy petitions against the applicant, who did not object to the claim that the bankruptcy conditions had been met, the Bankruptcy Court commenced bankruptcy proceedings against his estate. A trustee in bankruptcy was appointed to sort out the estate and to settle the accounts and the applicant was divested of the right to administer or to deal with his assets.
The Bankruptcy Court formally commenced the examination of claims on 17 November 1988, but found that it was appropriate to wait until the claims against the Partnership had been notified and examined.
On 8 December 1988, bankruptcy proceedings commenced against the Partnership and by the end of 1988 bankruptcy notices regarding all the co‑partners had been issued as well. The Partnership’s assets, including the individual partners’ assets, were estimated at about 8 million Danish kroner (DKK), while its liabilities were estimated at DKK 15 million. The
Partnership estate was closed on 5 December 1995 with distribution of dividends.
In the meantime, as regards the applicant’s bankruptcy estate, in the period between 1988 and 1990 various court sessions were held with a view to determining the applicant’s assets and considering creditor claims.
In the beginning of 1991 a new trustee was appointed. Court hearings were held in April and December 1991.
No court hearings were held in 1992.
During 1993 and 1994 it appears that no court hearings were held. The Government maintained nevertheless that the Bankruptcy Court and the trustee regularly examined claims in this period.
In a report of 9 February 1995, the trustee stated, inter alia, that the applicant’s estate could not be dealt with until the closure of the Partnership estate.
Court sessions were held on 6 November, 6 and 21 December 1995, 14 February and 17 April 1996. On the latter date, the Bankruptcy Court adjourned the proceedings pending the preparation of accounts.
In a report of 5 November 1996, the trustee stated that full coverage for the Partnership creditors was expected in connection with the closing of the partners’ estates. He was therefore endeavouring to obtain a compulsory composition so that the bankruptcy proceedings could be finalised pursuant to section 144 of the Bankruptcy Act. The accounts of the applicant’s bankruptcy estate could not be prepared, however, until formal accounts were available in the estates of the co-partners Hugo Petersen’s Børsmæglerselskab A/S, CHN and FVM. At the relevant time, those accounts were being prepared, but could not be completed until, inter alia, the outcome of proceedings initiated by the Ministry of Taxation against Hugo Petersen’s Børsmæglerselskab A/S in bankruptcy was known.
On 4 April 1997, the trustee informed the Bankruptcy Court that the draft accounts and report had been prepared and sent to the applicant for his comments. On 29 August 1997 the trustee reminded the applicant that his comments were awaited.
On 2 September 1997, a hearing was held at the Bankruptcy Court during which a representative for the applicant stated that before the accounts could be approved, the applicant needed to examine certain matters in detail, for example whether the current trustee ought to have claimed damages from the previous trustee for unjustified filing of a bankruptcy petition, and whether the bankruptcy estate could be closed with full or partial payment on account. Accordingly, the Bankruptcy Court decided to postpone the approval of the accounts. Moreover, it appointed a lawyer as counsel for the applicant to help him with the matters raised.
In a letter of 22 September 1997 to the creditors, the trustee stated that the approval could not be given pending the review of various matters by the applicant’s counsel and clarification of the applicant’s tax affairs.
By 1997 the bankruptcy proceedings against the other partners of the Partnership were terminated.
On 6 February 1998, having received several reminders, the applicant’s counsel replied that it would be very difficult to establish whether a claim for damages could be raised against the current or the previous trustee. He recommended that resources be applied to seek a settlement with both the creditors of the bankruptcy estate and the tax authorities.
By letter of 4 March 1998, the trustee requested that the Bankruptcy Court schedule another meeting of creditors to close the estate. He referred to the facts that no objections had been filed against the accounts and that the applicant’s dispute with the tax authorities did not affect the assets available for distribution.
On 26 March 1998, the Bankruptcy Court declared that the estate would be closed.
At a hearing on 5 May 1998, the Bankruptcy Court approved the accounts of the applicant’s bankruptcy estate. Thereafter, the proceedings were adjourned pending the preparation of draft distribution accounts to be presented at a meeting of creditors on 14 July 1998. On that day, due to lack of agreement between the trustee and the Bankruptcy Court, the proceedings were adjourned. Another hearing was held on 22 July 1998.
Pursuant to the draft distribution accounts, preferential claims would be fully covered. Moreover, an amount of approximately DKK 5.4 million remained for distribution to so-called section 98 claims (section 98 of the Bankruptcy Act, which included deferred claims for interest).
On 25 August 1998, a distribution on account was made in respect of the ordinary claims.
Before the ultimate deadline for notifying claims in the estate, which the Bankruptcy Court fixed at 1 October 1998, thirty-two Partnership creditors lodged claims for interest in the estate. The applicant’s counsel negotiated with the creditors with a view to reaching a settlement on the claims for interest, but in vain.
Thus, on 30 August and 5 October 1999 hearings were held at the Bankruptcy Court. On the latter date the deferred claims for interest were examined. The creditors, who appeared before the court, objected to the trustee’s recommendation concerning the calculation of the claims for interest, and the parties therefore concluded a litigation agreement on the filing of a pleading to the Bankruptcy Court by 6 December 1999 at the latest.
In addition, the applicant objected to the trustee’s recommendation concerning certain claims. He and the trustee therefore concluded a litigation agreement to select one or more suitable lead cases.
The examination of the other claims, which were not objected to by the creditors, but contested by the applicant, was adjourned pending the outcome of the lead cases. Eight creditors then issued a writ against the bankruptcy estate, and the applicant intervened as a third party.
On 2 May 2001, the Bankruptcy Court passed judgment in the eight lead cases, and at a meeting of creditors on 22 May 2001 the creditors declared that they did not wish to appeal against the judgments unless the applicant did so. The applicant subsequently appealed against the judgments to the High Court of Eastern Denmark (Østre Landsret).
On 26 June 2001, the Bankruptcy Court invited the applicant and the creditors to consider whether the estate could be closed under section 144 of the Bankruptcy Act by setting aside funds to cover the contested claims pursuant to section 149. According to the former provision, the estate could be finalised and the surplus assets handed over to the debtor if the creditors had obtained full payment. The latter provision, however, provided for the possibility of finalising the estate even though there were disputed claims, if an amount equal to those claims had been set aside. At the relevant time it was not legally possible to combine section 144 and section 149, unless the parties agreed to do so.
On 20 November 2001, at a hearing at the Bankruptcy Court, the trustee recommended that final distribution accounts be prepared in respect of the deferred claims comprised by section 98 of the Bankruptcy Act, which were not the subject of the pending appeal proceedings. In respect of the disputed claims, the distribution could be postponed until after the closing of the estate, as provided for by section 149 of the Bankruptcy Act. The Bankruptcy Court approved this recommendation and scheduled a meeting of creditors.
At the scheduled meeting of creditors, which took place on 29 January 2002, the applicant objected to the Bankruptcy Court closing the estate. In support thereof he argued that “the length of the proceedings had been unreasonable [anyway] and that therefore the closing of the estate ought to await [also] the outcome of the appeal proceedings before the High Court of Eastern Denmark”. Despite the applicant’s objection, the Bankruptcy Court decided to approve the accounts and to make contributions in respect of the claims, which were not the subject of the pending appeal proceedings. It was also decided to pay the applicant the amount of DKK 100,000 pursuant to section 106 of the Bankruptcy Act, then applicable. Finally, in accordance with section 149 the estate was finalised by setting aside the remaining funds to cover the disputed claims.
The applicant appealed against the finalisation of the estate in accordance with section 149 to the High Court of Eastern Denmark, which found against him on 22 March 2002. It appears that the applicant failed to request leave to appeal against this decision to the Supreme Court (Højesteret).
On 24 January 2003, in the appeal proceedings concerning the disputed deferred claims for interest, the High Court of Eastern Denmark passed judgment against the applicant.
On 27 March 2003 the Bankruptcy Court held a meeting of creditors to produce additional distribution accounts concerning the disputed deferred claims for interest. However, since the applicant had requested that the Appeals Permission Board (Procesbevillingsnævnet) grant him leave to appeal to the Supreme Court, the Bankruptcy Court adjourned the proceedings.
On 14 October 2003, the Appeals Permission Board informed the parties that the applicant would be granted leave to appeal against the judgment to the Supreme Court.
On 19 September 2005, the Supreme Court passed judgment. The following résumé of the judgment was published in the Danish Weekly Law Reports, 2005, p. 3427 (Ugeskrift for Retsvæsen 2005.3427):
“A number of creditors, C, had proved their claims in [the applicant’s] bankruptcy estate without any reservation of the right to claim interest on the debts for the time after the date of the bankruptcy order in December 1988 as deferred claims, cf. section 98(1)(i) of the Bankruptcy Act. In the cases in which the debts carried interest before the bankruptcy, C had calculated their claims for interest until the bankruptcy and proved them together with the principal. In the cases in which the debts did not carry any interest before the bankruptcy, C had not mentioned the matter of interest in the proof of claim. At a meeting of creditors in May 1998, accounts of the income and expenses of the estate were approved, but the closing of the estate was adjourned pending the preparation of distribution accounts. It appeared from an advertisement for outstanding claims from July 1998 that 1 October 1998 was the ultimate deadline for proving claims, including deferred claims for interest. C proved their deferred claims for interest before the deadline. The Supreme Court established that it was not a condition for retaining the right to coverage of deferred claims for interest that they had been proved separately or that a reservation had been made about proving the claims later during the administration of the estate if relevant. Proof of the claims interrupted the limitation period, also for claims for interest. The claims for interest were not barred by any failure to prove before approval of the accounts of the income and expenses of the estate. There was no inactivity. There was no basis for awarding compound interest. Relative to [the applicant], proof of the claims in the estate could not be considered legal proceedings, cf. section 3(4) of the Danish Interest Act (renteloven), and as no demand pursuant to section 3(2) of the Interest Act had been made of him, one of the claims against him in his personal capacity was dismissed.”
On 20 December 2005, concluding that all creditors had been satisfied, the Bankruptcy Court closed the estate and approved the handing over of the remaining assets of the estate, minus the costs of administration of the estate, to the applicant pursuant to section 144 of the Bankruptcy Court. In addition, an amount of DKK 1,237,042, equal to approximately 165,000 euros (EUR), was deducted, since pursuant to the Bankruptcy Tax Act (Konkursskatteloven), in force at the relevant time, the applicant was found liable to pay taxes on the interest that his estate had earned during the bankruptcy proceedings.
It appears that during the bankruptcy proceedings, in total, an amount of approximately DKK 1,734,000, equal to EUR 231,200, had been paid in fees to the trustees in bankruptcy.
Before the Court, the applicant alleged that as a consequence of the bankruptcy proceedings, pursuant to the Bankruptcy Tax Act, he incurred tax debts in the total amount of DKK 3,573,275, equal to approximately EUR 476,436.
The applicant also submitted that on numerous occasions, in vain, he requested that the bankruptcy proceedings be expedited. He maintained that only the courts and the trustee in bankruptcy had influence thereon and that he did not have any remedies in this respect.
By letter of 12 October 2006 the Ministry of Justice (Justitsministeriet) invited the applicant to raise his complaints about the length of the bankruptcy proceedings before the court, where the case was pending.
B. Relevant domestic law and practice
1. The Bankruptcy Act
The Bankruptcy Act (Konkursloven), Consolidation Act no. 588 of 1 September 1986, which comprised the rules relevant to the administration of the applicant’s bankruptcy estate, stated in as far as relevant:
Section 10
(1) A debtor who finds that he is not in a position to pay his debts may present a notice of suspension of payments.
(2) ...
Section 16d
(1) The Bankruptcy Court shall decide that the suspension of payments shall come to an end:
(i) if the suspension of payments serves no reasonable purpose;
(ii)...
Section 17
(1) Where a debtor is insolvent, his estate must be administered in bankruptcy upon petition made by the debtor or a creditor.
(2) A debtor is insolvent when he is incapable of paying his debts as they fall due unless such inability to pay may be deemed to be of temporary character only.
Section 18
Where the debtor admits to being insolvent, or where a debtor suspends payment of his debts, or where no coverage has been obtainable from a debtor upon execution levied within the three months immediately preceding the presentation of a bankruptcy petition, insolvency is generally deemed to exist.
Section 29
Upon the pronouncement of the bankruptcy order, the debtor is deprived of his right to assign or to abandon his property, to accept payments and other services rendered, to accept terminations, complaints and similar declarations, to incur debts or to deal in any other way with his property with any effect as regards the estate.
Section 61
(1) Notwithstanding that a longer notice or non-terminability may have been agreed upon, the estate may by customary or reasonable notice terminate an agreement concerning long-term contractual interrelations. This does not apply where a longer notice is secured to the debtor’s creditors through registration, or other similar public records.
(2) The other contracting party may, in regard to the estate, likewise terminate the agreement by giving customary or reasonable notice. This does not apply where the debtor had the possibility of assigning his rights.
(3) Where specific reasons are in favour thereof, the party terminating the agreement pursuant to subsection (I) or (2) hereof may be ordered to pay compensation for such losses as are caused by the termination at a shorter notice. In the estate of the debtor, such claim ranks as an ordinary bankruptcy claim.
Section 93
Prior to any other debts, the following must be paid in equal proportions:
(i) Costs and expenses at the commencement of bankruptcy.
(ii) Costs and expenses of the administration of the estate.
(iii) Debts incurred by the estate during its administration.
Section 98
After all other claims, the following claims must be paid in the order of priority given below:
(i) Claims for interest accrued after the bankruptcy order. This does not apply to interest accrued on the claims referred to in sections 92 to 94.
(ii)...
Section 106
(1) Where the debtor is unable to provide for his own and his family’s necessities by his own work, the estate may award maintenance to the debtor or to his dependents.
2) The estate may grant the debtor a right of use to real property or chattels.
Section 113
...
(3) Where specific grounds so justify, the Bankruptcy Court may reject the election of a trustee or remove him later. ...
Section 128
Where the trustee or meeting of creditors acts to the detriment of the estate, or where rights vested in mortgagees, the debtor or other parties are infringed upon, the Bankruptcy Court may set aside the decisions made, give directions to the trustee, and take any other requisite steps.
Section 129
(1) When a trustee has been elected, the bankruptcy court shall insert a notice in the Danish Official Gazette (Statstidende) containing:
(i) An invitation to any person who may have a claim of any kind against the debtor to prove such claim to the trustee within four weeks of the notice. The deadline may be fixed at eight weeks where special grounds so justify. ...
(ii) A summons to a meeting of creditors for examination of the claims, if possible, within four weeks from the end of the period for proving claims.
(2) A copy of the notice should promptly be sent to all creditors known to the trustee then or later.
Section 131
The trustee shall prepare a list of the claims proved and of any known, specifically secured claims, with recommendations as to whether or not they should be approved. ...
Section 132
(1) The debtor must be summoned to the meeting of creditors for examination of the claims and be invited to make a statement on the trustee’s recommendation.
(2)...
Section 133
(1) Where no objections are filed against the recommendation, the latter is deemed to be finally approved.
(2) Where a decision on the recommendation cannot be made at the meeting of creditors, the examination of the relevant claim is postponed until another meeting of creditors is called...
(3) Where an objection is raised and sustained against the recommendation, the Bankruptcy Court must make a decision by judgment cf. section 246.
Section 134
(1) Claims proved after the expiry of the deadline fixed pursuant to section 129(1)(i) will be examined at a subsequent meeting of creditors.
(2) Claims which are not proved until after the approval of the statement of accounts will not be taken into consideration. The Bankruptcy Court may fix an ultimate date for submission of proof. Any such decision must be published in the Danish Official Gazette with at least two weeks’ notice.
Section 144
(1) Where the debtor obtains a compulsory composition, cf. section 196, and where the creditors of the bankruptcy estate who, under section 158(2), are not comprised by the composition have been satisfied or adequately secured, or where the debtor, after the expiry of the period allowed for proof of claims, produces a consent from all creditors or proof of their having been satisfied, the bankruptcy proceedings must be finalised promptly, and the assets of the estate must be handed over to the debtor, subject to deduction of any costs inclined in connection with the bankruptcy proceedings.
(2) Where the debtor, after the bankruptcy proceedings have been completed, substantiates that the creditors have been satisfied or have waived their claims, the Bankruptcy Court shall issue a certificate to such effect to him.
Section 147
(1) Any distribution of dividend is effected without regard to the date on which the claim falls due.
(2) At the distribution of dividends, the means required for subsequent payments of dividends on claims, which are still disputed or claims contingent upon an event which has not yet occurred, must be set aside.
Section 149
On the basis of a recommendation from the trustee, the bankruptcy court may decide that the preparation of the final accounts, and distribution, if any, of an amount not yet collected, of any amount set aside pursuant to section 147(2), or of any other specifically limited parts of the estate, will be deferred to the period after finalisation of the bankruptcy proceedings.
Section 239
(1) The Bankruptcy Court shall determine the fee payable to trustee, interim receiver, bankruptcy court assistant, auditor, supervisor, fiduciary appointees, court witnesses and valuers with due regard to the scope of the work involved and the nature of the estate.
(2) ...
(3) The fees are payable by the estate.
Section 245
The Bankruptcy Court may assign a counsel to a party when it is deemed necessary that such party should have legal assistance and provided that he satisfies the financial requirement laid down in section 330(1)(ii) of the Administration of Justice Act. Concerning legal fees and compensation for outlays to the assigned counsel, the same rules apply as in cases where free legal aid has been granted, cf. part 31 of the
Administration of Justice Act.
Section 106 of the Bankruptcy Act (Consolidation Act no. 118 of 4 February 1997, subsequently amended), read in its relevant part:
1) The Bankruptcy Court may assign a counsel to a personal debtor to safeguard such debtor’s interests where he is deemed to be in need thereof.
(2) The Bankruptcy Court decides on the defraying of expenses in relation to the assigned counsel. Concerning legal fees and compensation for outlays, the same rules otherwise apply as in cases where free legal aid has been granted, cf. part 31 of the Administration of Justice Act.
(3) The Bankruptcy Court may limit the assignment of a counsel to specific issues only.
Section 127(a) of the Bankruptcy Act (Consolidation Act no. 1259 of 23 October 2007), now in force, reads as follows:
The debtor or a creditor may demand that the Bankruptcy Court make use of its authorities set out in section 16, subsection 2, and that it fix a hearing pursuant to section 143 or 150 [with a view to finalising the estate], if such proves necessary due to the requirement in Article 6 of the Convention concerning a fair trial within a reasonable time.
2. Partnerships (I/S)
A partnership is an association formed by several natural or legal persons for the purpose of promoting the partners’ (members’) financial interests through business activities.
A partnership is a form of business enterprise in which all members are liable personally, without limitation and jointly and severally for the obligations of the enterprise (see section 2(1) of Consolidation Act no. 651 of 15 June 2006 on certain business enterprises). This implies that the members are liable with their entire personal property, that the individual member is liable for the entire debt, and that the creditors of the partnership have a direct claim against the individual member without first having to raise a claim against the partnership.
The partnership and its members are liable to the creditors of the partnership. Under applicable Danish law, it is therefore a prerequisite for administration of the bankruptcy estate of a partnership that all partners are subject to bankruptcy proceedings. A co-partner’s bankruptcy estate is thus of importance to the closing of the other co-partners’ bankruptcy estates.
By contrast, the partnership is not liable to the partners’ personal creditors. Hence, personal creditors cannot seek satisfaction from partnership assets, but only in the surplus distributed to the partners.
There are few rules of law regulating partnerships. In the absence of a rule of law regulating the matter, the legal position depends on an interpretation of the partnership agreement and on what may be inferred from non-mandatory rules.
If a member of a partnership is declared bankrupt, section 61 of the Bankruptcy Act applies. This provision enables the estate to release the relevant partner’s share of the net assets of the partnership with a suitable notice so that all his assets are applied to satisfy his creditors.
COMPLAINTS
The applicant complained under Article 6 § 1 of the Convention that the bankruptcy proceedings were not terminated within a reasonable time and under Article 13 of the Convention that there was no remedy under Danish law whereby he could have obtained redress for the alleged violation.
Furthermore, taking into account the length of the proceedings during which the applicant was divested of the right to administer or to deal with his assets, the outcome of the proceedings, the fees paid to trustees and the subsequent imposition of tax on the interest on his estate, the applicant maintained that the proceedings were also in breach of Article 1 of Protocol No. 1 to the Convention.
THE LAW
I. The applicant complained about the length of the bankruptcy proceedings during which he was divested of the right to administer or to deal with his assets. In this respect he invoked Article 6 § 1 of the Convention and Article 1 of Protocol No. 1 to the Convention which read as follows:
“In the determination of his civil rights and obligations ..., everyone is entitled to a ... hearing within a reasonable time by [a] ... tribunal...”
“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.”
A. The Government’s preliminary objection
The Government contended that the complaint should be declared inadmissible due to non-exhaustion of domestic remedies because the applicant had failed to rise, either in form or substance, the complaint made to the Court. The only statement that could be interpreted in that direction was the applicant’s statement at the hearing on 29 January 2002, at which, however, he objected to the Bankruptcy Court finalising the bankruptcy proceedings and requested that they be adjourned.
The applicant disagreed.
The Court reiterates that the purpose of Article 35 § 1, which sets out the rule on exhaustion of domestic remedies, is to afford the Contracting States the opportunity of preventing or putting right the violations alleged against them before those allegations are submitted to the Court (see, for example, Selmouni v. France [GC], no. 25803/94, § 74, ECHR 1999-V). It considers that the question whether the requirement to exhaust domestic remedies has been satisfied in the instant case is closely linked to the complaint concerning the existence of an effective remedy within the meaning of Article 13 of the Convention. It therefore considers that this preliminary objection raised by the Government should be joined to the merits of the case for examination at a later stage.
B. Merits of the complaint
In the Government’s view the bankruptcy proceedings against the applicant commenced on 29 August 1988, and ended on 29 January 2002, when the Bankruptcy Court finalised the estate in accordance with section 149 of the Bankruptcy Act by setting aside the remaining funds to cover the disputed claim. Hence, the relevant period was thirteen years and five months. Subsequently, the Bankruptcy Court reopened the estate and approved the handing over of the remaining assets of the estate less the costs of administration of the estate to the applicant pursuant to section 144 of the Bankruptcy Act, but the reopening of the estate had to be viewed as a second set of proceedings. Should the Court find that the bankruptcy proceedings ended on 20 December 2005, the relevant period would be considered to have lasted almost seventeen years and four months.
The Government found, notably due to the particularly complex nature of the case and the applicant’s conduct during the proceedings, that no violation of Article 6 § 1 of the Convention had occurred. They noted that the applicant himself had chosen to enter into a partnership, which would render any bankruptcy proceedings complex because it was a prerequisite for the administration of the partners’ estates that the partnership estate was administered and closed. Moreover, for some time the applicant contemplated whether or not to initiate compensation claims against the previous trustee and wanted to have the cases on the deferred claims reviewed by both the High Court and the Supreme Court. Thus, the proceedings were prolonged by at least five years, which could not be attributed to the authorities. In fact, since 1997 when the other partners’ estates were closed, the Bankruptcy Court tried to close the applicant’s bankruptcy estate, but the applicant repeatedly objected to that. Nevertheless, the Bankruptcy Court did close the administration of the estate to the widest possible extent at several stages, first in 1998 and formally in 2002, so that distribution was effected in respect of the undisputed claims, and funds were set aside for the disputed claims for interest.
The applicant maintained that the bankruptcy proceedings commenced on 29 August 1988 and ended on 20 December 2005, and thus lasted seventeen years and four months, which he found excessive.
In addition, he contended that there was a significant inactive period from the change of trustees on 31 January 1991 until the examination of claims on 6 November 1995. In addition, he stated that there was an inactive period from 17 April 1996, when the proceedings were adjourned pending the preparation of accounts, until the hearing on 2 September 1997, when accounts were produced. Finally, the applicant submitted that the period from 5 October 1998, when it was decided to institute certain lead cases about the deferred claims for interest, until the Supreme Court judgment of 19 September 2005 was also an inactive period.
In the applicant’s view, the bankruptcy proceedings were not complex at all and they were not delayed due to his conduct.
The Court considers, in the light of the criteria established in its case-law on the question of “reasonable time” (the complexity of the case, the applicant’s conduct and that of the competent authorities) and the related case-law on Article 1 of Protocol No. 1 to the Convention (see, among others, Luordo v. Italy, no. 32190/96, ECHR 2003‑IX), and having regard to all the information in its possession, that an examination of the merits of this complaint is required.
The Courts concludes therefore that this complaint is not manifestly ill‑founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmissible has been established.
II. The applicant further complained that he had not had an effective remedy in respect of his complaint about the excessive length of the proceedings at the Bankruptcy Court. He relied on Article 13 of the Convention, which provides:
“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.”
Referring to its preliminary objection above under Article 6 § 1 of the Convention, the Government contended that the applicant could not be considered to be a victim of a violation of Article 13 of the Convention. In the alternative, the complaint should be declared inadmissible as being manifestly ill-founded, because the applicant had access to an effective remedy as required by Article 13 of the Convention, but chose not to make use of it. The Government noted in this respect that the Bankruptcy Court had a supervisory duty and could set aside decisions made, or give the trustee directions, or do whatever else was necessary if the debtor’s rights were infringed, (see section 128 of the Bankruptcy Act then applicable). Thus, the Bankruptcy Court could have given the trustee directions about the administration of the estate, ordered the trustee to complete the accounts, or removed the trustee pursuant to section 113(3) of the Bankruptcy Act then applicable, inter alia, due to slow or otherwise incompetent administration of the estate. It could also have fixed an ultimate date for the final meeting of creditors in the estate or decided to apply section 144 of the Bankruptcy Act at an earlier stage of the proceedings, even if all the parties to the case, including the applicant, objected. Accordingly, regardless of whether the courts could have provided the applicant with adequate redress for delays that had already occurred, the remedies which could have expedited the decisions taken during the proceedings had to be considered “effective”.
The applicant disagreed and submitted that as a rule he had not been summoned to the meetings at the Bankruptcy Court. Nevertheless, several times he had complained orally against the excessive length of proceedings, but in vain, notably because at the relevant time the Bankruptcy Act did not contain a provision equivalent to section 127 (a), now to be found in the act currently in force, according to which a debtor may demand that the Bankruptcy Court make use of specific measures in order to comply with the reasonable-time requirement set out in Article 6 of the Convention. The Bankruptcy Act applicable during the applicant’s bankruptcy proceedings did not grant a debtor any rights of that kind or any powers to influence the administration of his estate. Nor could he bring such a complaint before the relevant appeal instance, namely, the High Court of Eastern Denmark.
The Court considers, in the light of the parties’ submissions, that the complaint under Article 13 of the Convention raises serious issues of fact and law under the Convention, the determination of which should depend on an examination of the merits. The Courts concludes therefore that the complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmissible has been established.
III. The applicant also maintained that there had been a breach of Article 1 of Protocol No. 1 to the Convention due to the fact that his estate turned out to be solvent at the closure of the bankruptcy proceedings.
The Government submitted that this part of the application should be declared inadmissible due to non-exhaustion of domestic remedies or in the alternative declared inadmissible as being manifestly ill-founded
The applicant disagreed.
The Court reiterates that the applicant considered himself to be insolvent when he filed for suspension of payments on 29 March 1988 and that on 29 August 1988 he did not object to the two bankruptcy petitions filed against him.
In addition, the applicant’s bankruptcy estate was closely connected to the Partnership estate, in which an estimate had been made in 1988 showing that the Partnership assets, including the partners’ assets, amounted to about DKK 8 million, while the liabilities amounted to about DKK 15 million.
At the relevant time there was thus reason to presume that the applicant was unable to satisfy his creditors; that bankruptcy proceedings presupposing administration of the estate by a trustee were necessary; and that the statutory bankruptcy conditions were met.
In these circumstances, and in so far as the criteria set out in Article 35 § 1 have been complied with, the case does not disclose any indication that the decision to declare the applicant bankrupt was erroneous (see, for example Stockholms Försäkrings- och Skadeståndsjuridik AB v. Sweden, no. 38993/97, §§ 53‑54, 16 September 2003) or that the matter complained of discloses any appearance of a violation of the rights and freedoms set out in the invoked provision.
It follows that this part of the application must be rejected in accordance with Article 35 § 4 of the Convention.
IV. The applicant further claimed that since the costs of the bankruptcy proceedings were paid by his estate he was deprived of his property in violation of Article 1 of Protocol No. 1. More specifically, he alleged that he lost DKK 1.734,000, equal to the amount paid by the estate to finance legal fees approved by the Bankruptcy Court in connection with the bankruptcy proceedings.
The Government submitted that this part of the application should be declared inadmissible due to non-exhaustion of domestic remedies or, in the alternative, declared inadmissible as being manifestly ill-founded.
The Court reiterates that Article 1 of Protocol No. 1 contains three distinct rules. They have been described thus (in James and Others v. the United Kingdom, judgment of 21 February 1986, Series A no. 98, pp. 29-30, § 37; see also, among other authorities, Belvedere Alberghiera S.r.l. v. Italy, no. 31524/96, § 51, ECHR 2000-VI):
“The first rule, set out in the first sentence of the first paragraph, is of a general nature and enunciates the principle of the peaceful enjoyment of property; the second rule, contained in the second sentence of the first paragraph, covers deprivation of possessions and subjects it to certain conditions; the third rule, stated in the second paragraph, recognises that the Contracting States are entitled, amongst other things, to control the use of property in accordance with the general interest ... The three rules are not, however, ‘distinct’ in the sense of being unconnected. The second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property and should therefore be construed in the light of the general principle enunciated in the first rule.”
The Court considers that bankruptcy proceedings constituted interference within the meaning of Article 1 of Protocol No. 1 and that the second rule covering deprivation of possessions is applicable to the costs resulting from those proceedings.
Pursuant to section 239 of the Bankruptcy Act the Bankruptcy Court fixed the remuneration for the trustee with due regard to the scope of the work involved and the nature of the estate. The remuneration was defrayed by the estate, and such costs were paid prior to other debts pursuant to section 93 of the Bankruptcy Act. It was thus in accordance with the law that the applicant’s bankruptcy estate paid the trustees’ fees upon approval by the Bankruptcy Court.
Moreover, placing the liability for bankruptcy costs on the bankruptcy estate generally contributes to efficient bankruptcy proceedings and the Court accepts, also having regard to the margin of appreciation generally afforded to Contracting States under Article 1 of Protocol No. 1, that the deprivation of the applicant’s possessions can be considered to have been pursued “in the public interest” within the meaning of that Article.
Finally, as to the question of whether the interference struck a fair balance between the demands of the general interest of the community and the requirement of the protection of the individual’s fundamental rights, the Court notes that on 2 September 1997 the Bankruptcy Court appointed a counsel to the applicant, among others things, to examine whether the trustee appointed at the relevant time ought to have claimed damages from the previous trustee. No such claim was ever raised. Nor is there any information that counsel objected to the work performed by the trustee appointed at the relevant time or to the legal fee regularly paid on account to the trustee.
In these circumstances, despite the issue in dispute as to the length of the bankruptcy proceedings, the Court finds that the applicant has failed to substantiate that the amount paid to the trustees in the particular case was excessive or imposed an individual and excessive burden on him.
Accordingly, in so far as the criteria set out in Article 35 § 1 have been complied with, the matter complained of does not disclose any appearance of a violation of the rights and freedoms set out in the invoked provision.
It follows that this part of the application must be rejected in accordance with Article 35 § 4 of the Convention.
V. Finally, the applicant’s complaint under Article 1 of Protocol No. 1 to the Convention related to the fact that tax on the interest earned on his assets during the bankruptcy proceedings was subsequently imposed on him.
The Government submitted that this part of the application should be declared inadmissible due to non-exhaustion of domestic remedies. More specifically, they submitted that the question of taxation was a separate issue not relating to the bankruptcy proceedings before the Bankruptcy Court. It was thus an issue that the applicant should have taken up with the tax authorities and ultimately sought to be clarified by separate judicial review.
The applicant disagreed.
The Court notes that the applicant failed to lodge an appeal against the imposition of tax on the interest earned on his assets before the tax authorities or to initiate proceedings before the ordinary courts invoking a violation of his property rights.
It follows that this part of the application is inadmissible for non‑exhaustion of domestic remedies within the meaning of Article 35 § 1 of the Convention and must be rejected in accordance with Article 35 § 4 of the Convention
For these reasons, the Court unanimously
Decides to join to the merits the preliminary objection concerning non‑exhaustion of domestic remedies as to the applicant’s complaint about the length of the bankruptcy proceedings;
Declares admissible, without prejudging the merits, the applicant’s complaints under Article 6 § 1 and Article 1 of Protocol No. 1 to the Convention about the length of the bankruptcy proceedings as well as the applicant’s complaints under Article 13 of the Convention about the lack of an effective remedy in this respect;
Declares inadmissible the remainder of the application.
Claudia WesterdiekSnejana Botoucharova
RegistrarPresident
Full & Egal Universal Law Academy