FOURTH SECTION

CASE OF SALIBA AND OTHERS v. MALTA

(Application no. 20287/10)

JUDGMENT

(Just satisfaction)

STRASBOURG

22 January 2013

This judgment will become final in the circumstances set out in Article 44 § 2 of the Convention. It may be subject to editorial revision.

In the case of Saliba and Others v. Malta,
The European Court of Human Rights (Fourth Section), sitting as a Chamber composed of:
	Ineta Ziemele, President,
	David Thór Björgvinsson,
	Päivi Hirvelä,
	George Nicolaou,
	Ledi Bianku,
	Zdravka Kalaydjieva, judges,
	Lawrence Quintano, ad hoc judge,
and Lawrence Early, Section Registrar,
Having deliberated in private on 18 December 2012,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1.  The case originated in an application (no. 20287/10) against the Republic of Malta lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by eighteen Maltese nationals, Dr Philip Saliba, Sr Maria Saliba, Ms Josanne Galea, Ms Doreen Vella, Mr Mario Sammut, Ms Janine Vella, Ms Mary Anna “Miriam” Saliba, Ms Carmela Saliba, Ms Jane Chadwich, Ms Mariella Holmes, Ms Cynthia Drury, Ms Magdalene Manley, Ms Isabella Grainger, Mr Pio Saliba, Mr Philip Saliba, Mr Joseph Saliba, Ms Veronica Mifsud, and Ms Bernardette Dimech (“the applicants”), on 5 April 2010.
2.  Mr V. De Gaetano, the judge elected in respect of Malta, was unable to sit in the case (Rule 28 of the Rules of Court). The President of the Chamber accordingly appointed Mr Lawrence Quintano to sit as an ad hoc judge (Rule 29 § 1(b)).
3.  In a judgment delivered on 22 November 2011 (“the principal judgment”), the Court found a violation of Article 1 of Protocol No.1 to the Convention. Having regard to the applicants’ uncertainty as to whether they would ever recover their property, which had been subject to successive regimes (possession and use and subsequently public tenure) for sixty years, the meagre amount of acquisition/recognition rent received by the applicants throughout this period, but particularly over the most recent decades, the rise in the standard of living in Malta over these decades and the diminished need to secure social housing compared to the post-war era, the Court held that a disproportionate and excessive burden had been imposed on the applicants, who had been required to bear most of the social and financial costs of supplying housing to third parties. Thus, the Maltese State had failed to strike the requisite fair balance between the general interests of the community and the protection of the applicants’ right of property (Saliba and Others v. Malta, no. 20287/10, § 67, 22 November 2011). The Court also found a violation of Article 6 of the Convention (ibid, § 88).
4.  Under Article 41 of the Convention the applicants sought just satisfaction of 712,500 Euros (EUR) in respect of pecuniary damage: EUR 475,000 for their half of the value of the property (estimated at EUR 950,000 according to an architect’s report) and EUR 237,500 in rent over the years, calculated at 50% of their share of the value of the property. They further claimed EUR 100,000 in just satisfaction for non-pecuniary damage.
5.  Since the question of the application of Article 41 of the Convention in so far as it related to the adequate amount of rent was not ready for decision, the Court reserved it and invited the Government and the applicants to submit, within three months from the date on which the judgment became final, their written observations on that issue and, in particular, to notify the Court of any agreement they might reach (ibid., § 99, and point 5 of the operative provisions). The Court awarded EUR 3,000 to each applicant, plus any tax that may be chargeable, in respect of non-pecuniary damage and EUR 4,800 jointly, plus any tax that may be chargeable to the applicants, in respect of costs and expenses. It dismissed the remainder of the applicants’ claim for just satisfaction.
6.  The applicants and the Government each filed observations.
THE LAW
7.  Article 41 of the Convention provides:
“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”
A.  Damage
1.  The parties’ submissions
8.  The applicants reiterated that the Government had demolished the previous building on the property without keeping any record of its layout and dimensions. Their architect’s valuation had therefore been based on the information which had transpired during the domestic proceedings in relation to the number of rooms and dwellings and their sizes, together with the layout of the building. In accordance with the architect’s valuation, the applicants claimed EUR 333,080 between them, reflecting the loss of an adequate rent which they stated they would have otherwise received from 1967 to 2011.
9.  The architect’s report considered the property to have a land area of 386 square metres (sq. m), a minimum frontage of approximately 23 metres and a minimum depth of plot of approximately 17 metres. It consisted of five dwellings at ground floor level with backyards (320 sq. m in total), four upper floors with five flats each (800 sq. m in total), a common basement below the dwellings, common areas, and a common roof area on top (500 sq. m in total). Thus, it estimated the overall floor area to be 1620 sq. m. Following changes in the decades that had passed, the property had become a corner site and thus, according to the architect, its value had increased substantially. Bearing in mind the rate of inflation between 1967 and 2011, the average rent over the years was estimated to be EUR 12 per sq. m per annum in respect of dwellings, EUR 11 per sq. m per annum in respect of flats and EUR 5 per sq. m per annum in respect of common parts, amounting to EUR 15,140 per annum for the entire property. The applicants owning half an undivided share, the rent due to them was thus EUR 7,570 per annum for forty-four years.
10.  The Government submitted that on 3 June 2010 title to the property had been acquired by the Government by means of absolute purchase.
11.  The Government considered that in determining an adequate amount of rent the Court had to bear in mind the legitimate interests and the public interest involved, namely that the taking had been a measure designed to provide social accommodation, which called for reimbursement of less than the full market value. Moreover, the building currently standing on the applicants’ land had been rebuilt by the Government, which had also incurred the expense of removing debris that might have been dangerous as a result of unexploded bombs. They further noted that until 1995 the premises had been occupied by protected tenants and that, according to law, the applicants could only have received the same amount of rent as had been paid by the Government.
12.  The Government were of the view that the property comprised approximately 220 sq. m, as had been established by the court-appointed architect during the domestic proceedings. The Government expressed surprise that the same court-appointed architect was now acting for the applicants and that he now considered that the property had a land area of 386 sq. m. The valuation prepared by the Government’s architect estimated that a fair and reasonable current selling price for the property, taking into account its maximum development potential, would be EUR 650 per sq. m, bearing in mind the low attractiveness of the property given the quality of its surroundings (views of a shipyard, industrial estate and rusted shed).
13.  The Government submitted that according to the Rent Restriction Ordinance 1944 the rental value of a dwelling was established at 3% of the value of the site and 3.25% of construction costs. Thus, since the applicants had received EUR 102.50 in rent (half of EUR 205, as mentioned in the principal judgment), the value of the property in 1946 was EUR 3,417. Bearing in mind the rate of inflation and averaging out the rent every ten years, the Government considered that the rent to be paid should amount to:
(i)  EUR 235 per year for the period 1967-1977;
(ii)  EUR 367 per year for the period 1978-1987;
(iii)  EUR 513 per year for the period 1988-1997;
(iv)  EUR 595 per year for the period 1998-1999; and
(v)  EUR 16,858 in total for the period 2000-June 2010, calculated on the basis of the Property Price Index.
Thus, the total amount of rent for the applicants’ share of the property according to the Government would amount to EUR 29,200. They considered that a further 20% should be deducted for maintenance which the applicants had not incurred (and which would have been deducted from their rental income for tax purposes) and another 25%, representing the sum which would have been chargeable in tax, should also be deducted. In addition, the Government noted that the applicants had already been paid a certain amount of rent which required to be deducted, but stated that as a goodwill gesture they were ready to ignore the fact that lower succession duty had been paid precisely because of the low rent which was being received.
14.  In conclusion, the Government considered the applicants’ pecuniary damage, comprising the net rental income due to them, to be EUR 13,112.
2.  The Court’s assessment
15.  For the purposes of Article 41, the Court must determine the compensation to which the applicants are entitled in respect of the loss of enjoyment of their property which they have suffered since 1967, when the Convention and the relevant protocol entered into force in respect of Malta, to June 2010, as the Government have now confirmed that on 3 June 2010 they acquired the property by outright purchase. As stated in the principal judgment, such compensation should consist of a sum representing an adequate amount of rent which the applicants should have received over the years.
16.  The Court notes the striking difference between the sum claimed by the applicants and that considered appropriate by the Government, the latter being twenty-five times lower than the former.
17.  On the one hand, it notes the irregularity of the applicant’s valuation, given that the same architect, during the domestic proceedings, estimated the land area of the property to be nearly half of what has been submitted as its area before this Court for the purposes of Article 41. While it is true that the applicants explained that this assessment was based on what had emerged from the domestic proceedings (given that no plans of the demolished building had been kept), the Court does not find it convincing that any information brought to light during the domestic proceedings could have entailed such a huge increase in the land area of the property. Moreover, while the Court considers that it was indeed unfortunate for the Government to demolish and rebuild a building of which they were not owners without keeping any records of its dimensions, the Court considers that the applicants also had a responsibility to keep their own records in respect of the property they owned. Furthermore, the Court considers that it is not ideal to make such a calculation on the basis of an average rent over forty-four years, particularly since the average rental rates submitted appear entirely speculative and do not give any detail as to actual and realistic rental values over the years.
18.  On the other hand, the Court cannot consider the Government’s proposal meritorious. The Court notes that no detailed valuation has been submitted by the Government, their architect having limited his report to estimating the current sale value of the land per sq. m in view of the specific location of the property. As to their calculation, the Court notes that in order to evaluate the rent payable to the applicants for the initial period, the Government took as a starting point the estimated value of the land in 1946, which they calculated precisely on the basis of the rent paid to the applicants. The Court observes that this is a circular argument. The Court notes that again no details were submitted as to actual and realistic rental values and no comparative material has been submitted. Thus, the Government’s consideration that, after multiple deductions, EUR 17,519 ((EUR 13,112) + (EUR 102.50 x 43 years = 4,407 already paid)) is appropriate rent for half an undivided share of twenty-five apartments over forty-four years cannot be accepted.
19.  Lastly, the Court considers that the Government’s argument that according to Maltese law the property would have been subject to the same amount of rent as had been paid by the Government cannot favour the Government’s case. Indeed, the Court has on various occasions held that various pieces of legislation regarding controlled rents in Malta were in breach of Article 1 of Protocol No. 1 (see Ghigo v. Malta, no. 31122/05, §§ 69-70, 26 September 2006; Edwards v. Malta, no. 17647/04, §§ 78-79, 24 October 2006; Fleri Soler and Camilleri v. Malta, no. 35349/05, §§ 79-80, ECHR 2006-X; and Amato Gauci v. Malta, no. 47045/06, § 62, 15 September 2009). Indeed, in its principal judgment the Court found a violation of the applicants’ right of property precisely because of the meagre amount of rent received by them, and not because of the entity that had paid that rent.
20.  In assessing the amount due to the applicants the Court has, as far as appropriate, considered the parties’ submissions and had regard to the information available to it concerning rental values on the Maltese property market over the past years. It has further considered the legitimate purpose of the restriction imposed, recalling that legitimate objectives in the “public interest”, such as those pursued in measures of economic reform or measures designed to achieve greater social justice, may call for less reimbursement than that of the full market value (see, inter alia, Ghigo v. Malta (just satisfaction), no. 31122/05, § 18, 17 July 2008).
21.  Furthermore, the Court notes that the sum of EUR 4,407 has already been paid to the applicants, and must therefore be deducted. It has further taken account of the fact that the Government incurred expenses to rebuild the property, albeit no details have been submitted in this respect, and that the applicants did not incur any maintenance costs throughout the period in question. Moreover, the Court finds no reason to exempt the pecuniary award, which covers the rental income the owners would have earned, from any applicable tax. However, no such deductions are to be made by the Court and tax remains payable once the applicants receive the established amount.
22.  Lastly, the Court reiterates that an award for pecuniary damage under Article 41 of the Convention is intended to put the applicants, as far as possible, in the position they would have been in had the breach not occurred. It therefore considers that interest should be added to the award to reflect the fact that the applicants were prevented from receiving an appropriate amount of compensation.
23.  Bearing in mind the above, the Court awards the applicants EUR 70,000 jointly.
C.  Default interest
24.  The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.
FOR THESE REASONS, THE COURT UNANIMOUSLY
1.  Holds
(a)  that the respondent State is to pay the applicants jointly, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, EUR 70,000 (seventy thousand euros) in respect of pecuniary damage;
(b)  that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amount at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points.

2.  Dismisses the remainder of the applicants’ claim for just satisfaction.
Done in English, and notified in writing on 22 January 2013, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
	Lawrence Early	Ineta Ziemele
	Registrar	President