J. LAUTIER COMPANY LIMITED v Malta - 37448/06 [2008] ECHR 1885 (2 December 2008)

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The European Court of Human Rights (Fourth Section), sitting on 2 December 2008 as a Chamber composed of:

Nicolas Bratza, President,
David Thór Björgvinsson,
Ján Šikuta,
Päivi Hirvelä,
Ledi Bianku,
Nebojša Vučinić, judges,
Justice Geoffrey Valenzia, ad hoc judge,
and Fatoş Aracı, Deputy Section Registrar,

Having regard to the decision to examine the admissibility and merits of the case together (Article 29 § 3 of the Convention).

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant company,

Having regard to the fact that Mr G. Bonello, the judge elected in respect of Malta, withdrew from sitting in the case (Rule 28) and that the respondent Government accordingly appointed Mr G. Valenzia to sit as an ad hoc judge (Article 27 § 2 of the Convention and Rule 29 § 1),

The applicant, J. Lautier Company Limited, is a limited liability company registered in Malta. It was represented before the Court by Dr T. Comodini Cachia and Dr Pio Valletta, lawyers practising in Valletta. The Maltese Government (“the Government”) were represented by their Agent, Dr Silvio Camilleri, Attorney General.

The facts of the case, as submitted by the parties, may be summarised as follows.

In 1995 the applicant company acquired a piece of land measuring 3,008 sq.m in Msida. The land is situated in an area where both commercial and residential properties are to be found. It adjoins on one side a public main road. However, the land in question is currently situated outside development zones and its development is subject to strict limitations.

By a declaration published in the Government Gazette of 29 September 2003, under the Land Acquisition Public Purpose Ordinance (“LAPPO”), Chapter 88 of the Laws of Malta, it was stated that a portion of the land measuring approximately 486 sq.m was to be directly expropriated by the State by way of outright purchase. The declaration did not state the aim of the expropriation but only the sum offered as compensation, 47,600 Maltese Liras (MTL – approximately 114,240 euros (EUR)).

According to the information provided by the applicant company on 19 September 2006, by that date the sum offered in compensation had not been deposited. Consequently, according to law (see relevant domestic law), it was prohibited from commencing proceedings before the Land Arbitration Board (“LAB”), the competent authority, to assess the amount of compensation payable.

According to the Government and as evidenced by the documents submitted, the amount of compensation was deposited in an interest-bearing bank account on 3 October 2003, four days after the official declaration. By a letter of 8 October 2003 the applicant company was informed of the said acquisition. However, the applicant company did not take steps to prove its ownership or to withdraw the said compensation. In August 2007 the amount of compensation plus interest stood at MTL 51, 370 (approximately 119,660 euros (EUR)), an amount which the applicant could freely withdraw. This procedure is still open to the applicant company.

On an unspecified date the applicant company instituted proceedings before the Civil Court (First Hall) asking it to declare that the expropriation was in violation of its rights under Article 1 of Protocol No. 1 to the Convention. It claimed that the expropriation had not been effected for a public purpose since the land was to be used for the building of stables for the commercial use of other private persons. Moreover, the applicant company had been made to suffer an excessive burden, since the land in question offered the only means of access to the rest of its land. Consequently, the expropriation had not been proportionate vis-a-vis the aims pursued.

On 7 April 2005 the Civil Court rejected the applicant company’s claims. It held that the expropriation had been needed for a public purpose, namely the redevelopment of slum housing and the construction of a new system of flood relief. The fair balance principle had been maintained since construction for social housing was in the public interest and it had not been proved that an alternative area of land in the vicinity could be used.

On an unspecified date the applicant company appealed, claiming that the project could have been restructured differently in order to limit the individual and excessive burden suffered by the applicant company and that the taking had been necessary solely for the benefit of third parties.

By a judgment of 20 March 2006 the Constitutional Court rejected the applicant company’s appeal. It held that slum clearance was a social housing project which fell within the definition of public interest. The residents of the slum area kept animals for commercial purposes and it was thus understandable that the new redeveloped area would provide stables and that for public health reasons it had been subsequently decided to locate the stables on the periphery of the residential area. As indicated by the court of first instance, it had not been proved that there was other land which could have been used for this purpose. It was not correct to say that more land had been taken than was necessary, or that the land expropriated blocked access to the remainder of the land owned by the applicant company. Moreover, the applicant company would have received compensation for the land expropriated and the adequacy of the compensation had not been contested. Thus, it could not be said that the applicant company had been made to bear a disproportionate burden.

The relevant sections of the Land Acquisition (Public Purposes) Ordinance (Chapter 88 of the Laws of Malta), read as follows:

“The President of Malta may by declaration signed by him declare any land to be required for a public purpose.”

“No person shall require any proof of the public purpose referred to in articles 3 and 4 and in article 8(1) other than the declaration of the President of Malta.”

“ (1) Whenever the President of Malta declares that any land is required for a public purpose, the competent authority shall cause a copy of such declaration, ... to be published in the Government Gazette ...”

“(1) If the competent authority and the owner agree on the amount of compensation for any land, the Board, on the application of either of the parties, shall make an order putting the agreement into effect ...

(3) Within fifteen working days from the publication of the President’s Declaration as referred to in sub-article (2) in the Gazette, the Government shall deposit in an interest-bearing bank account (which will guarantee a minimum of interest per annum as the Minister responsible for lands may by regulation under this sub-article prescribe) a sum equal to the amount of compensation offered in the President’s Declaration ...

(6) Where the person entitled to compensation does not accept that the amount deposited is adequate, such person may apply to the Board for the determination of the compensation in accordance with the provisions of this Ordinance ...

(7) Such application shall be filed with the Registry of the Board within twenty-one days from the date of notification of the judicial act by the competent authority... The Board shall determine such compensation and shall give all necessary orders and directives in accordance with this Ordinance.

(10) Where the compensation payable in respect of land acquired by the absolute purchase thereof is determined, whether by agreement or by decision of the Board, any sum due as compensation over and above any sum deposited in accordance with this article together with interest thereon in accordance with article 12(3), shall be paid to the person entitled thereto by the competent authority not later than three months from the date on which such compensation was determined as aforesaid.”

An agreement on the compensation could be reached at any time. Sections 13(1) and 22 of the Ordinance in issue provided that:

“The amount of compensation to be paid for any land required by a competent authority may be determined at any time by agreement between the competent authority and the owner ...”

The Board mentioned in Section 22 was the LAB. According to Section 25(e), it was competent to:

“... assess the amount of compensation payable under any of the provisions of this ordinance and for that purpose to declare whether any area is a building site or agricultural or waste land.”

“the value of the land shall,... be taken to be the amount which the land if sold on the open market by a willing seller might be expected to realise.”

The applicant company complained under Article 1 of Protocol No. 1 to the Convention, that the expropriation of its land had not been effected in the public interest and that it did not respect the principle of proportionality. Furthermore, the sum offered in compensation, which allegedly had not yet been paid, was unfair and inadequate.

The applicant company relied on Article 1 of Protocol No. 1 to the Convention, which reads as follows:

“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 applicant company submitted that the expropriation had not been motivated by public interest considerations and that it did not respect the principle of proportionality. The expropriation had been done in the interest of third parties, without any thorough consideration of the applicant company’s interests. Furthermore, it alleged that the area of land expropriated for the purpose of building stables provided access to the whole area from a public road, thus rendering the burden on the applicant company heavier. Domestic sanitary rules made it illegal to keep animals within the vicinity of residential buildings. Thus, the remaining part of the land which had not been expropriated had been rendered less favourable for development, thereby affecting also its value and potential. This minimisation of property rights fell within the definition of possessions and the loss of value and of development potential also fell within the definition of deprivation, but no weight had been given to these elements.

The applicant company further complained that the sum offered in compensation, which to its knowledge had not yet been paid, was unfair and inadequate. It submitted that it had not been made aware of the deposit, but even if this had been done, receipt of a payment it deemed inadequate would have been a tacit acceptance of the expropriation conditions, and would have prejudiced its claim that the expropriation had not been done for a public purpose.

The Government submitted that the purpose of the expropriation was to provide stables for animals which were kept in old sub-standard buildings earmarked for demolition and reconstruction as part of a slum clearance and flood relief project in a part of town prone to flooding by rain water. These animals constituted the means of livelihood for their owners, most of whom lived in the same area. For sanitary reasons, an alternative site for the stables was needed in the vicinity and the applicant company’s land, which was outside the development zone and subject to very limited development, had been identified. The applicant company had been granted compensation at a generous price assessed by an independent architect.

The Government submitted that the expropriation of the land had had no effect on the development of the ancillary land, which could not in practice be developed according to the laws in force at the time. Moreover, the applicant company had had the opportunity to seek compensation for such devaluation through domestic remedies and in so far as this matter had been brought before the domestic courts, the latter found that the claim that devaluation of the land resulted from deprivation of access to a public road, was unjustified.

The Government submitted that the Government’s offer of compensation had been published in the Government’s Gazette of 22 September 2003, and was thus in the public domain and presumed to be known by all. Moreover, the applicant company had been sent a letter on 8 October 2003, which the applicant company claimed it had never received. It would stand to reason that before commencing domestic proceedings the applicant company would have done the required research to determine whether such a deposit had been made as provided for in law.

Had the applicant company made contact with the relevant department it would have been informed of the deposit in the bank account which could have been withdrawn, together with accrued interest, upon proof of ownership title. This was clearly stated in the section 22 of the LAPPO (see relevant domestic law), with which the applicant company should have been familiar. Such a procedure would not have prejudiced the applicant company’s right to contest by means of a constitutional complaint the expropriation on the basis of the Constitution or the Convention. Indeed the applicant company had not submitted any proof of the veracity of its statement that withdrawal of compensation implied a renunciation of the right to challenge the expropriation on fundamental human rights grounds. On the contrary, the Government made reference to domestic case-law where the merits of a complaint were pending before the domestic courts notwithstanding that compensation proceedings were pending before the LAB.

Consequently, in respect of the devaluation and the amount of compensation the Government submitted that the applicant company had failed to exhaust domestic remedies, namely proceedings before the LAB and if necessary before the constitutional jurisdictions, both remedies being to date available to it.

The Court reiterates that Article 1 of Protocol No. 1 guarantees, in substance, the right to property and comprises three distinct rules (see, for example, Sporrong and Lönnroth v. Sweden, judgment of 23 September 1982, Series A no. 52, p. 24, § 61). The first, which is expressed in the first sentence of the first paragraph and is of a general nature, lays down the principle of peaceful enjoyment of property. The second rule, in the second sentence of the same paragraph, covers deprivation of possessions and subjects it to certain conditions. The third, contained 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 or to secure the payment of taxes or other contributions or penalties. However, the rules are not “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. They must be construed in the light of the general principle laid down in the first rule (see, for example, Air Canada v. the United Kingdom, judgment of 5 May 1995, Series A no. 316-A, p. 15, §§ 29 and 30).

A taking of property within this second rule can be justified only if it is shown, inter alia, to be “in the public interest” and “subject to the conditions provided for by law”. Moreover, any interference with the property must also satisfy the requirement of proportionality. As the Court has repeatedly stated, a fair balance must be struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights, the search for such a fair balance being inherent in the whole of the Convention. The requisite balance will not be struck where the person concerned bears an individual and excessive burden (see Sporrong and Lönnroth, cited above, pp. 26-28, §§ 69-74, and Brumărescu v. Romania [GC], no. 28342/95, § 78, ECHR 1999-VII). The Court also reiterates that in the area of land development and town planning the Contracting States should enjoy a wide margin of appreciation in order to implement their town and country planning policies. Nevertheless, in the exercise of its power of review the Court must determine whether the requisite balance was maintained in a manner consonant with the applicant’s right of property (see Abdilla v. Malta (dec.), no 38244/03, 3 November 2005). Compensation terms under the relevant legislation are material to the assessment as to whether the contested measure respects the requisite fair balance and, notably, whether it imposes a disproportionate burden on the applicants (see Jahn and Others v. Germany [GC], nos. 46720/99, 72203/01 and 72552/01, § 94, 30 June 2005). In this connection, the Court has already found that the taking of property without payment of an amount reasonably related to its value will normally constitute a disproportionate interference (see The Holy Monasteries v. Greece, judgment of 9 December 1994, Series A no. 301-A, p. 35, § 71).

The Court will assume the lawfulness of the interference as it is not an issue of which the applicant company has complained.

The Court reiterates that any interference with the enjoyment of a right or freedom recognised by the Convention must pursue a legitimate aim (see Beyeler v. Italy [GC], no. 33202/96, § 111, ECHR 2000 I). The Court recalls that, while deprivation of property affected for no reason other than to confer a private benefit on a private party cannot be “in the public interest”, the compulsory transfer of property from one individual to another may, depending on the circumstances, constitute a legitimate means for promoting the public interest (see James and Others v. the United Kingdom, 21 February 1986, § 40, Series A no. 98). In this regard, a taking of property affected in pursuance of legitimate social, economic or other policies may be in “in the public interest”, even if the community at large has no direct use or enjoyment of the property taken (ibid., § 45). The Court, like the domestic courts, considers that the slum clearance and flood relief project in the present case, which was intended to improve the living conditions of local residents, served a legitimate social policy. The legitimacy of measures in not affected by the fact that, as part of the slum clearance plan, the former slum residents benefited from the fact that part of the redeveloped area was used to provide stables in which they could keep animals for commercial purposes.

The Court accordingly finds that the deprivation of the applicant’s property was “in the public interest” for the purposes of the second rule.

In respect of the issue of compensation, the Court notes that the applicant company has not kept itself informed about the situation which is the substance of its complaint. As a result, it also failed to institute proceedings before the LAB in respect of the amount offered by the Government. Moreover, the issue of compensation has never been debated before the domestic courts, the Constitutional Court noting that the adequacy of the compensation offered had not been contested by the applicant company. In this respect, the applicant company has failed to exhaust domestic remedies, with the consequence that the Court is precluded from determining the question whether the compensation offered was sufficient to preserve a fair balance between the demands of the general interest and the requirements of the protection of the applicant company’s rights.

It follows that the application must be rejected for non-exhaustion of domestic remedies pursuant to Article 35 §§ 1 and 4 of the Convention.

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You are here: BAILII >> Databases >> European Court of Human Rights >> J. LAUTIER COMPANY LIMITED v Malta - 37448/06 [2008] ECHR 1885 (2 December 2008) URL: http://www.bailii.org/eu/cases/ECHR/2008/1885.html Cite as: [2008] ECHR 1885