SECOND SECTION

CASE OF PÁKOZDI v. HUNGARY

(Application no. 51269/07)

JUDGMENT

STRASBOURG

25 November 2014

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 Pákozdi v. Hungary,
The European Court of Human Rights (Second Section), sitting as a Chamber composed of:
	Guido Raimondi, President,
	András Sajó,
	Nebojša Vučinić,
	Helen Keller,
	Paul Lemmens,
	Egidijus Kūris,
	Jon Fridrik Kjølbro, judges,
and Stanley Naismith, Section Registrar,
Having deliberated in private on 15 April and 21 October 2014,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1.  The case originated in an application (no. 51269/07) against the Republic of Hungary lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Hungarian national, Ms Ildikó Pákozdi (“the applicant”), on 21 November 2007.
2.  The applicant was represented by Mr Z. Gál, a lawyer practising in Székesfehérvár. The Hungarian Government (“the Government”) were represented by Mr Z. Tallódi, Agent, Ministry of Public Administration and Justice.
3.  The applicant alleged that she had not received a fair hearing in the proceedings in which a tax surcharge was imposed on her.
4.  On 4 December 2012 the application was communicated to the Government.
THE FACTS
I.  THE CIRCUMSTANCES OF THE CASE
5.  The applicant was born in 1976 and lives in Igar.
6.  Between 25 April 2004 and 3 December 2004 the Fejér County Regional Centre for Taxes (the “Tax Authority”) carried out a tax audit of the applicant for the assessment of the years 1999-2001. The Tax Authority drafted an audit report on which the applicant submitted comments.
7.  Having regard to the audit report, the testimonies of the applicant and her father and the applicant’s comments, the Tax Authority levied on her additional personal income tax in the amount of 10,961,884 Hungarian forints (HUF) (approximately 39,100 euros (EUR)), tax surcharges in the amount of HUF 5,480,808 (EUR 19,500) and interest in the amount of HUF 6,551,884 (EUR 23,300). The Tax Authority dismissed the testimonies of the applicant and her father to the effect that the disputed funds, invested in her company as an equity loan, had been given to her by her father as personal credit. Relying on a targeted tax inspection (célvizsgálat) of the father, the Tax Authority observed that, despite an invitation to do so, the applicant’s father had failed to provide any documentary evidence of the fact that at the material time he had been in possession of the disputed amount.
8.  On appeal, the second-instance tax authority upheld the first-instance decision on 5 May 2005. It stressed that the applicant’s father had only alleged but not proven in any manner the origin of the disputed amount and noted that since the tax scrutiny had been carried out to investigate the absence of an adequate source of revenue on the taxpayer’s side (adózói forráshiány), it was for the applicant to prove the origin of the amount in question. The Tax Authority also noted that it was implausible that the applicant’s father had provided a large loan to his daughter so that she could provide a financial service to a cooperative whose majority shareholders were her own parents.
The applicant sought judicial review of these decisions.
9.  On 28 February 2006 the Fejér County Regional Court sitting as a single judge held an oral hearing and then overturned the decisions of the Tax Authority. The court based its decision essentially on testimony given by the applicant’s father as to the origin of the money in question. The court noted that, contrary to the findings of the Tax Authority, the applicant’s father was under no obligation to prove the existence and origin of his income and property which had served as personal credit for his daughter.
The Tax Authority filed a petition for review with the Supreme Court, insisting in particular that the applicant’s allegations should have been supported by bookkeeping evidence, an argument already developed in the tax administration proceedings.
In reply to these arguments, the applicant submitted, in a memorandum to the Supreme Court, that, in her view, her father’s statement was of as good probative value as any bookkeeping evidence would have been. She did not request an oral hearing, a possibility provided under section 274(1) of the Code of Civil Procedure.
10.  On 12 April 2007 the Supreme Court, sitting as a three-judge panel, granted the Tax Authority’s petition for review, without holding an oral hearing.
The Supreme Court observed that in the circumstances – that is, because the plaintiff was required to refute the Tax Authority’s tax estimate – the burden of proof lay, statutorily, with the applicant to prove, providing credible evidence (hitelt érdemlő bizonyíték), the origin of the amount (as per leading case no. 2006/104). It found the testimony given by the applicant’s father implausible, given that it was not accompanied by any bookkeeping evidence demonstrating any transfer of funds, any bank statement, any contract or the like. It held, in particular, that although the applicant had made a statement about her father’s assets at the time of the alleged transaction, she had never produced any evidence about the availability of a sufficiently large amount of money on his side. It further noted that “it seems to be very implausible ... for a father to lend a large amount of money to his daughter so that she can provide financial services to a cooperative owned (mostly) by her parents. He could have done this ... directly, without his daughter’s involvement”. The Supreme Court noted that the applicant could not give any reasonable explanation for this complicated scheme and held that although the applicant attempted to refute the Tax Authority’s findings, the evidence proposed, consisting of a mere statement made by her father, was insufficient.
In sum, the Supreme Court concluded that the applicant’s assertions fell short of being supported by “credible evidence” within the meaning of section 109(3) of Act no. XCII of 2003 on the Rules of Taxation. Consequently, it reversed the Regional Court’s decision and found for the Tax Authority, relying on section 275(4) of the Code of Civil Procedure.
No further remedy lay against this decision. This decision was served on the applicant on 21 May 2007.
II.  RELEVANT DOMESTIC LAW
11.  Section 73/A of the Code of Civil Procedure, as in force in the relevant period, provides as follows:
“(1) Legal representation shall be mandatory:
a) ... in [review] proceedings conducted before the Supreme Court...”
Section 274 of the Code of Civil Procedure, as in force in the relevant period, provides as follows:
“(1) Petitions for review shall be determined by the Supreme Court without holding a hearing, unless a party has requested the Supreme Court to hold a hearing or the latter finds it necessary ...”
Section 275 of the Code of Civil Procedure, as in force in the relevant period, provides as follows:
“(1) In review proceedings evidence shall not be taken. The Supreme Court shall decide on the petition for review on the basis of the documents available to it.
(2) The Supreme Court shall review a final and binding decision within the confines of the petition ...
(4) If the decision violates the law... the Supreme Court shall quash the decision in its entirety or in part; and if the facts necessary for taking [a new] decision can be established, it shall render a new decision that complies with the laws; otherwise it shall remit the case to the first or second instance court ...”
12.  Act no. XCII of 2003 on the Rules of Taxation provides as follows:
Tax fine
Section 170
“(1) An overdue tax debt shall be sanctioned by a tax fine. Unless otherwise provided for under this Act, the tax fine shall be 50 per cent of the amount of the overdue tax debt. The tax fine shall be 200 per cent of the amount of the overdue tax debt if it has arisen in relation to concealment of revenues, falsification or destruction of receipts, books or records. A tax fine shall also be imposed by the tax authority on taxpayers having claimed subsidies or tax refunds or tax reimbursements or having filed returns on refunds, subsidies or reimbursements without eligibility and the lack of eligibility is established by the tax authority before disbursement. In such cases the basis of the fine shall be the amount claimed without eligibility.”
Section 171
“(3) The levying of a tax fine shall not affect a payment obligation related to a default surcharge.”
THE LAW
I.  ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION
13.  The applicant complained that she had not had a fair trial before the domestic courts in respect of the tax surcharges that had been imposed on her. She relied on Article 6 § 1 of the Convention, which, in so far as is relevant to the complaint provides as follows:
“In the determination of his civil rights and obligations or any criminal charge against him, everyone is entitled to a fair and public hearing ... by an independent and impartial tribunal established by law.”
14.  The Government contested that argument.
A.  Admissibility
15.  As a matter of incompatibility with the provisions of the Convention, the Government questioned the applicability of Article 6 under its criminal head. They pointed to certain aspects of the Hungarian tax surcharges that suggested that their imposition did not amount to a “criminal charge” within the meaning of Article 6. Firstly, under the Hungarian legal system, the surcharges belonged to administrative law, and a tax fine carried no criminal record. Secondly, their purpose was not primarily deterrent or punitive, as demonstrated by the fact that they did not reach a substantial level and their amount was low, 50 per cent of the overdue tax. Furthermore, the imposition of tax surcharges required fault to be proved, and the extent to which fault was proved might even entail a reduction of the penalty, on the basis of equity.
16.  The applicant submitted that the tax surcharges imposed on her constituted a “criminal charge” within the meaning of Article 6 § 1. She pointed to the fact that a penalty of considerable severity had been imposed on her. In her view, the application is not incompatible ratione materiae with the provisions of the Convention.
17.  The Court notes that the present case concerns proceedings in which the applicant, following errors in her tax return and the establishment of a tax debt, was found liable to pay personal income tax, an additional 50 per cent surcharge and interest. The Court has consistently held that the assessment of tax and the imposition of surcharges fall outside the scope of Article 6 under its civil head (see Ferrazzini v. Italy [GC], no. 44759/98, § 29, ECHR 2001–VII; and Jussila v. Finland [GC], no. 73053/01, § 29, ECHR 2006–XIII). The issue therefore arises in this case whether the proceedings were “criminal” within the autonomous meaning of Article 6 and thus attracted the guarantees of this provision under that head.
18.  The Court’s established case-law sets out three criteria to be considered in the assessment of whether or not there was a “criminal charge” within the meaning of Article 6 of the Convention. The first criterion is the legal classification of the offence under national law, the second is the very nature of the offence, and the third is the nature and degree of severity of the penalty that the person concerned risked incurring (see Engel and Others v. the Netherlands, 8 June 1976, Series A no. 22). The second and third criteria are alternative and not necessarily cumulative. This, however, does not exclude a cumulative approach where separate analysis of each criterion does not make it possible to reach a clear conclusion as to the existence of a criminal charge (see, in particular, Janosevic v. Sweden, no. 34619/97, § 67, ECHR 2002‑VII; and Jussila, cited above, §§ 30-31).
19.  As regards the domestic classification of surcharges, the Court notes that they there are not applied under criminal-law provisions but as part of the fiscal regime. Furthermore, under the Hungarian legal system the surcharges are not characterised as criminal penalties but rather as administrative sanctions, not entailing a criminal record. Consequently, surcharges cannot be said to belong to criminal law under the domestic legal system. However, this consideration is not decisive.
20.  Turning to the second criterion, namely the nature of the conduct imputed to the applicant, the Court notes that the Tax Authority imposed tax surcharges on the applicant for having supplied incorrect information concerning her personal income tax, and this based on the general tax legislation (see paragraph 12 above) directed towards all persons liable to pay tax in Hungary and not towards a limited group with a special status.
Furthermore, it is apparent that the tax surcharges are not intended as pecuniary compensation for damage but as a punishment to deter reoffending and to punish breaches of tax payment obligations. It may therefore be concluded that the surcharges were imposed by a rule the purpose of which was deterrent and punitive.
21.  As regards the severity of the potential penalty (see paragraph 12 above), tax surcharges are imposed in proportion to the amount of the tax avoided, normally fixed at 50 per cent, without any upper limit. Indeed, in the present case the surcharges imposed by the Tax Authority were very substantial and totalled to HUF 5,480,808 (EUR 19,500). Since there is no indication that the judicial review could lead to the imposition of surcharges of a higher amount, it is the surcharges actually imposed that indicate what was at stake in the judicial proceedings.
22.  In the Court’s opinion, the general character of the legal provisions on tax surcharges and the purpose of the penalties show that the applicant was charged with a criminal offence for the purposes of Article 6 of the Convention, further evidenced by the severity of the penalty imposed on the applicant. Article 6 was therefore applicable to the review proceedings.
Thus, the application is not incompatible ratione materiae with the provisions of the Convention.
23.  The Court further notes that the application is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.
B.  Merits
1.  Arguments of the parties
24.  Assuming Article 6 was applicable, the Government maintained that the obligation under Article 6 § 1 to hold a public hearing was not an absolute one. A hearing in the present case was not necessary, since the impugned conduct did not constitute a serious offence falling under the narrower scope of criminal law. Moreover, the case raised no questions of fact or law which could not be resolved by written submissions, thus the holding of a hearing would have not added any new element to the applicant’s defence. Furthermore, the Supreme Court’s decision was only dealing with questions of law, and not with the establishment of facts.
Finally, the Government stressed that the applicant had not requested a hearing, although she could have obtained one under the law (see paragraph 11 above). She had had a lawyer, as mandatory under the Code of Civil Procedure, and that lawyer should have been aware of the rules governing the Supreme Court’s procedure, including the possibility that it might change the previous decision to the applicant’s detriment. It would have been only normal as a precaution to ask for a hearing, in order to secure the possibility to make oral representations in an attempt to pre-empt any such possibility.
25.  The applicant pointed out that her case would have required benefiting from the criminal-head procedural guarantees of Article 6 of the Convention. By qualifying her case as an administrative dispute, the authorities deprived her of the fair trial rights applicable to criminal proceedings.
Moreover, she submitted that the Supreme Court had proceeded unlawfully when reassessing the key evidence in the matter; and the right course of action would have been to remit the case to the lower-instance court, if it considered that more or other evidence was necessary. Prior to the Supreme Court’s decision, she had had no opportunity to find out that there was a risk of the Supreme Court’s ignoring her father’s testimony, that there was a risk of its reassessing the evidence, or that consequently there was a need to request an oral hearing.
2.  The Court’s assessment
26.  The Court recalls that an oral and public hearing constitutes a fundamental principle in Article 6 § 1 (see, among many authorities, Malofeyeva v. Russia, no. 36673/04, § 105, 30 May 2013). It is an important element of the fairness of the criminal proceedings, though not the only one. The Court’s primary concern under Article 6 § 1 is to evaluate the overall fairness of the criminal proceedings (see Taxquet v. Belgium [GC], no. 926/05, § 84, ECHR 2010, with further references therein). In making this assessment the Court will look at the proceedings as a whole having regard to the rights of the defence but also to the interests of the public and the victims that crime is properly prosecuted (see Gäfgen v. Germany [GC], no. 22978/05, § 175, ECHR 2010).
27.  The Court agrees with the Government in that the obligation to hold a hearing is not absolute. There may be proceedings in which an oral hearing may not be required, for example where there are no issues of credibility or contested facts which necessitate a hearing and the courts may fairly and reasonably decide the case on the basis of the parties’ submissions and other written materials (see Döry v. Sweden, no. 28394/95, § 37, 12 November 2002).
28.  It has further acknowledged that the national authorities may have regard to the demands of efficiency and economy and found that the systematic holding of hearings could ultimately prevent compliance with the reasonable time requirement of Article 6 § 1 (see Fredin v. Sweden (no. 2), 23 February 1994, §§ 21-22, Series A no. 283‑A). It is also true that in the Jussila case the Court reasoned that tax surcharges differed from the hard core of criminal law; consequently, the criminal-head guarantees would not necessarily apply with their full stringency (see Jussila, § 43, cited above). In that case it was found that an oral hearing had been unnecessary since the applicant had been given ample opportunity to put forward his case in writing, comment on the submissions of the tax authorities, and any issues of fact and law could have been adequately addressed in writing (see Jussila, § 47, cited above).
29.  Furthermore, it is also to be recalled in this context that the admissibility of evidence is a matter for regulation by national law and the national courts and that the Court’s only concern is to examine whether the proceedings have been conducted fairly (see Al-Khawaja and Tahery v. the United Kingdom [GC], nos. 26766/05 and 22228/06, § 118, ECHR 2011). The Court’s task under the Convention is to ascertain whether the proceedings as a whole, including the way in which evidence was taken, were fair (see Elsholz v. Germany [GC], no. 25735/94, § 66, ECHR 2000-VIII). All relevant information, particularly regarding the purported suspicions about the applicant’s previous conduct, should be put openly before the trial court or tested in an adversarial manner (see Malininas v. Lithuania, no. 10071/04, § 36, 1 July 2008).
30.  In the present case, the Court notes at the outset that a public hearing was held by the first-instance court. This court heard the applicant’s witness, that is, her father (compare and contrast Jussila, cited above). In this regard it remains to be examined whether a departure from the principle of oral hearing in the proceedings before the Supreme Court could, in the circumstances of the case, be justified (see, mutatis mutandis, Suuripää v. Finland, no. 43151/02, § 42, 12 January 2010).
31.  The Court reiterates at this juncture that where domestic law provides for a right of appeal, the appeal proceedings will be treated as an extension of the trial process and accordingly will be subject to the guarantees contained in Article 6 (see Delcourt v. Belgium, 17 January 1970, § 25, Series A no. 11; and Gurov v. Moldova, no. 36455/02, § 33, 11 July 2006).
32.  However, even where the court of appeal has jurisdiction to review the case both as to facts and as to law, Article 6 does not always require a right to a public hearing, still less a right to appear in person (see Fejde v. Sweden, 29 October 1991, § 31, Series A no. 212‑C).
33.  In order to decide whether there should be a hearing, regard must be had, among other considerations, to the specific features of the proceedings in question and to the manner in which the applicant’s interests were actually presented and protected before the higher-instance court, particularly in the light of the nature of the issues to be decided by it (see Helmers v. Sweden, 29 October 1991, §§ 31-32, Series A no. 212‑A) and of their importance to the applicant (see Hermi v. Italy [GC], no. 18114/02, § 62, ECHR 2006‑XII). In circumstances where the higher-instance court’s judgment is based on an overall assessment of the evidence, altering the applicant’s acquittal (which had taken place after a full hearing and receipt of evidence before the lower-instance court), fairness requires that the applicant be secured an opportunity to contest the charge (see Laaksonen v. Finland, no. 70216/01, § 32, 12 April 2007) and give evidence in person (see Suuripää, cited above, § 47). Moreover, the fact that an appellate court overturns an acquittal of a first-instance court without hearing the applicant in person does not of itself infringe Article 6 § 1 of the Convention (see Botten v. Norway, 19 February 1996, § 48, Reports of Judgments and Decisions 1996‑I). Regard must be had in assessing these questions to, inter alia, the special features of the proceedings involved and the manner in which the defence’s interests are presented and protected before the appellate court, particularly in the light of the issues to be decided by it and their importance for the applicant (see Kremzow v. Austria, 21 September 1993, §§ 58-59, Series A no. 268-B; and Belziuk v. Poland, 25 March 1998, § 37, Reports 1998-II).
34.  The Court observes that the applicant did not ask for a hearing to be held. The question therefore arises whether she should be regarded as having waived her right to a hearing (see Malhous v. the Czech Republic (dec.) [GC], no. 33071/96, § 58, ECHR 2000‑XII).
35.  As appears from the decision of the Supreme Court, it did not examine whether the circumstances of the case, in particular the new assessment of the evidence, necessitated a hearing, and the applicant was not aware of the fact that the review of her case would entail that reassessment. In these circumstances, the Court cannot attach decisive importance to the applicant’s not requesting a hearing, but has to proceed to an independent evaluation of the question of overall fairness of the proceedings, having the requirements of Article 6 as the point of reference. As it has been pointed out above, the Court has to examine whether a departure from the principle that there should be such a hearing could, in the circumstances of the case, be justified at the appeal stage by the special features of the domestic proceedings viewed as a whole. In order to decide on this question, regard must be had to the nature of the national appeal and revision system, to the scope of the Supreme Court’s powers and to the manner in which the applicants’ interests were actually presented and protected before the Supreme Court particularly in the light of the nature of the issues to be decided by them (see, mutatis mutandis, Ekbatani v. Sweden, 26 May 1988, § 28, Series A no. 34; and Keskinen and Veljekset Keskinen Oy v. Finland, no. 34721/09, § 36, 5 June 2012).
36.  The Court observes that in the present case the decision of the Supreme Court, ordering the applicant to pay a large amount of tax surcharges, was essentially based on the reassessment of the probative value attributed to the testimony of her father. The Supreme Court held that the explanation given by him as to the origin of the applicant’s revenue was implausible and insufficient; and therefore the applicant had failed to provide credible evidence for the difference between her revenue stated in her tax return and the taxable amount estimated by the tax authorities (see paragraph 10 above).
37.  For the Court, the issue of plausibility of the father’s testimony was a question which would have justified the Supreme Court’s benefiting, in contradictory procedure, from the personal impression obtainable from that witness and from the oral explanations obtainable from the applicant and/or the witness at a hearing – even if the applicant had presented her relevant arguments in a memorandum to the Supreme Court. It is true that the Supreme Court’s main reason to reject that evidence was the absence of any other, documentary evidence, customary in similar transactions. However, the Court considers that – since it appears from the information available to it that there are no formal rules of evidence at play in this case and the courts were at liberty to accept any form of evidence – the hearing in person of the applicant and, potentially, her father would have been desirable, as a matter of fair trial, so as to enable the defence to exercise its rights to the fullest.
38.  The Court considers that in case of reversal of the burden of proof (see paragraph 10 above) the fairness of the procedure requires particular care in allowing the charged person to be tested in an adversarial manner, which in the particular case was guaranteed only in written procedure (compare and contrast Dallos v. Hungary, no. 29082/95, § 52, ECHR 2001‑II).
39.  This is so in particular because the review apparently addressed not only issues of law but also important factual questions and extended to the assessment of whether the evidence had been correctly assessed by the lower-instance court, and this without giving the applicant a reasonable opportunity to present in person her arguments concerning this aspect, apparently of crucial importance for the outcome of the case. The Court further observes that the proceedings before the Supreme Court were at the final instance for determining the merits of the “criminal charges” brought against the applicant and no further remedy lay against its decision. Without questioning the Supreme Court’s conclusion that the evidence had been erroneously assessed by the lower-instance court and correctly by the tax authorities, the Court considers that Article 6 § 1 required an oral hearing before a tribunal, taking into account what was at stake for the applicant.
In conclusion, the Court is of the opinion that in a procedure, of a character tantamount to criminal prosecution, where there is a statutory reversal of the burden of proof to the detriment of the applicant and where an unforeseeable reassessment of the relevance of certain factual elements takes place, the decision on the merits of the case without holding an oral hearing falls short of the requirements of a fair trial (see paragraph 26 above). Indeed, the circumstances of the present case bear a remarkable resemblance to those in Suuripää (cited above, § 44) in which the Court found a violation of Article 6 § 1, although in a purely criminal, rather than tax, context (see also, mutatis mutandis, Sigurþór Arnarsson v. Iceland, no. 44671/98, § 36, 15 July 2003; and Igual Coll v. Spain, no. 37496/04, § 37, 10 March 2009.)
40.  Consequently, the Court holds that there has been a breach of Article 6 § 1.
II.  APPLICATION OF ARTICLE 41 OF THE CONVENTION
36.  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
41.  The applicant claimed 125,460 euros (EUR) in respect of pecuniary damage. This amount corresponds to the tax surcharges levied on the applicant and interest rates. Moreover, she claimed EUR 300,000 in respect of non-pecuniary damage.
42.  The Government contested these claims.
43.  The Court does not discern any causal link between the violation found and the pecuniary damage alleged, nor can it speculate about the outcome of the case had there been an oral hearing before the Supreme Court; it therefore rejects this claim. On the other hand, it considers that the applicant must have suffered some non-pecuniary damage and awards her, on the basis of equity, EUR 7,500 under this head.
44.  The Court reiterates that in the event of a violation of Article 6 § 1 of the Convention the applicant should, in so far as possible, be put in the position that she would have been in had the requirements of that provision not been disregarded (see Piersack v. Belgium (Article 50), 26 October 1984, § 12, Series A no. 85). The specific remedial measures, if any, required of a respondent State in order to discharge its obligations under Article 46 of the Convention must depend on the particular circumstances of the individual case and be determined in the light of the terms of the Court’s judgment in that case (see Öcalan v. Turkey [GC], no. 46221/99, § 210, ECHR 2005‑IV). In this regard, bearing in mind the criminal nature, under the Convention, of the proceedings conducted against the applicant, the Court also refers to its related case-law under Article 46 of the Convention (see among others, Gençel v. Turkey, no. 53431/99, § 27, 23 October 2003; and Somogyi v. Italy, no. 67972/01, § 86, ECHR 2004‑IV).
B.  Costs and expenses
45.  The applicant also claimed EUR 4,700 in respect of the costs sustained in the domestic proceedings and before the Court, combined.
46.  The Government contested this claim.
47.  According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. In the present case, regard being had to the documents in its possession and the above criteria, the Court considers it reasonable to award EUR 2,000 for all costs incurred.
C.  Default interest
48.  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
1.  Declares, unanimously, the application admissible;

2.  Holds, by five votes to two, that there has been a violation of Article 6 § 1 of the Convention;

3.  Holds, by five votes to two,
(a)  that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts, to be converted into Hungarian forints at the rate applicable at the date of settlement:
(i)  EUR 7,500 (seven thousand five hundred euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;
(ii)  EUR 2,000 (two thousand euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses;
(b)  that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

4.  Dismisses, unanimously, the remainder of the applicant’s claim for just satisfaction.
Done in English, and notified in writing on 25 November 2014, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
	Stanley Naismith	Guido Raimondi
	Registrar	President
In accordance with Article 45 § 2 of the Convention and Rule 74 § 2 of the Rules of Court, the following separate opinions are annexed to this judgment:
(a)  Concurring opinion of Judge Lemmens joined by Judge Vučinić;
(b)  Joint dissenting opinion of Judges Keller and Kjølbro.
G.R.A.
S.H.N.

CONCURRING OPINION OF JUDGE LEMMENS,
JOINED BY JUDGE VUČINIĆ
1.  I voted with the majority to find a violation of Article 6 § 1 of the Convention. However, my reasons for reaching that conclusion are not the same as those of my colleagues.
2.  The complaint concerns the proceedings before the Supreme Court, following a petition by the Tax Authority for review of the judgment of the Fejér County Regional Court. The first-instance court had found for the applicant on the basis of testimony given by the applicant’s father who had declared that the disputed funds were a loan which he had granted the applicant. The court found that no further evidence, in particular with respect to the origin of the father’s income, was necessary (see paragraph 9 of the judgment).
In its petition for review, the Tax Authority insisted “in particular that the applicant’s allegations should have been supported by bookkeeping evidence” (ibid.). This is an argument in law.
The applicant, as the adverse party in the proceedings before the Supreme Court, replied that “her father’s statement was of as good probative value as any bookkeeping evidence would have been” (ibid.).
The Supreme Court began by examining the complaint directed against the decision of the regional court. It found that the burden of proof lay on the applicant, who had to support her challenge to the Tax Authority’s decision with “credible evidence”. It found that the testimony given by the father was “implausible, given that it was not accompanied by any bookkeeping evidence demonstrating any transfer of funds, any bank statement, any contract or the like”. It concluded “that the applicant’s assertions fell short of being supported by “credible evidence””, and on that basis quashed the decision of the regional court (paragraph 10 of the judgment).
The Supreme Court could have sent the case back to the regional court for a reassessment of the applicant’s claim in light of its holding. However, it did not do so. Making use of its powers under section 275 (4) of the Code of Civil Procedure, which provides that the Supreme Court can render a decision on the merits of the case “if the facts necessary for taking [a new] decision can be established”, it held that the applicant had not met the burden of proof and therefore dismissed her opposition to the Tax Authority’s decision (ibid.).
3.  The question raised by the present application is whether the applicant had a fair opportunity to defend herself in the proceedings before the Supreme Court, having regard to the nature of the issues presented to that court.
In this respect it should be remembered that the right to a fair trial encompasses a right to adversarial proceedings. That right means in principle the opportunity for the parties to have knowledge of and to comment on all evidence adduced or observations filed with a view to influencing the court’s decision (see Lobo Machado v. Portugal, 20 February 1996, § 31, Reports of Judgments and Decisions 1996‑I, and Vermeulen v. Belgium, 20 February 1996, § 33, Reports 1996‑I). The court itself has to respect the adversarial principle, for instance when it decides the case on grounds invoked on its own motion (see Čepek v. the Czech Republic, no. 9815/10, § 45, 5 September 2013).
The decisive issue therefore is whether the applicant was not taken by surprise when the Supreme Court decided not only to examine the legality of the decision challenged before it, but also to dispose of the case on the merits (see, mutatis mutandis, Dallos v. Hungary, no. 29082/95, § 48, ECHR 2001‑II; Laaksonen v. Finland, no. 70216/01, § 32, 12 April 2007; Suuripää v. Finland, no. 43151/02, § 46, 12 January 2010; and Čepek, above, § 48; compare and contrast Keskinen and Veljekset Keskinen Oy v. Finland, no. 34721/09, § 40, 5 June 2012). Special scrutiny is called for in situations where the proceedings appear to have taken an unexpected turn, in particular when this was a matter left to the discretion of the relevant court (see Čepek, cited above, § 48).
4.  In the present case, the petition for review was limited to a question in law, namely whether the regional court could base its decision on the testimony of the applicant’s father alone, in other words whether that testimony could constitute credible evidence. By deciding, on the basis of an assessment of that testimony, that it was in fact not credible evidence, and by disposing of the merits of the case on that ground, the Supreme Court extended of its own motion the limits of the dispute before it. In my opinion, the applicant could not be expected to foresee that the Supreme Court would proceed in that way. It is important to note in this regard that the fact of disposing of the merits of the case was rather an exception to the general rule, which provided for quashing the decision of the lower court and remitting the case to it.
The right to adversarial proceedings could not be respected in this case without the Supreme Court either explicitly inviting the parties to give their views on whether the testimony given by the applicant’s father actually constituted credible evidence (see Čepek, cited above, § 57), in which case an oral hearing would also become inevitable (see paragraph 37 of the judgment), or remitting the case to the regional court for an assessment of the credibility of the father’s testimony in light of any other elements to be adduced by the applicant.
5.  In short, I consider that the question whether the Supreme Court could decide the case without an oral hearing is not relevant in this case. The main question is whether the proceedings had been fully adversarial. One of the means of ensuring the adversarial character of the proceedings was to hold an oral hearing after having invited the parties to give their views on the credibility of the witness evidence. Another means would have been for the Supreme Court to limit itself to addressing the question in law raised by the petition for review, and to leave the assessment of the facts to the regional court. By not adopting any of these means and by immediately deciding on the merits of the case, the Supreme Court violated the applicant’s right to a fair trial.

JOINT DISSENTING OPINION OF 
JUDGES KELLER AND KJØLBRO
1.  We agree with the majority as regards the application of Article 6 § 1 of the Convention in this case. However, we regret that we cannot agree with the majority’s finding that Article 6 § 1 has been violated, for the reasons set out below.
I.  The right to a public hearing
2.  According to the Court’s well-established case-law, the right to a public hearing under Article 6 § 1 entitles individuals to an oral hearing in proceedings before a court of first and only instance absent exceptional circumstances that justify dispensing with such a hearing (see Allan Jacobsson v. Sweden (no. 2), 19 February 1998, § 46, Reports of Judgments and Decisions 1998‑I, and Göç v. Turkey [GC], no. 36590/97, § 47, ECHR 2002‑V).
3.  However, while the right to an oral hearing is an essential element of the right to a fair trial, we note that it is not an absolute right (see Döry v. Sweden, no. 28394/95, 12 November 2002, cited in paragraph 27 of the present judgment). In the interests of procedural efficiency and economy, the highest courts in several Member States of the Council of Europe may decide cases without holding oral hearings, at least absent particular reasons to the contrary. For example, the Icelandic Supreme Court can decide to hear cases in writing if appropriate, while the Albanian Constitutional Court decides whether to hear cases orally or in writing “according to the nature of the case”. Comparable approaches also apply under, for example, Swiss, Finnish, and Austrian law. While there seems to be no common standard among Member States in this regard, the above shows that, far from being aberrant, the respondent State’s approach to the holding of oral hearings on appeal is certainly a tenable alternative.
4.  The requirement of a public hearing under Article 6 § 1 is applied less strictly in civil proceedings than in criminal ones. In civil cases, Article 6 § 1 does not necessarily require oral hearings on appeal (see K. v. Switzerland, no. 10807/84, Decision of the Commission (Plenary) of 1 December 1984, D.R. 41, p. 242). In cases falling under the criminal head of Article 6 § 1, the Court’s case-law does not necessarily require a further oral hearing on appeal (see Seliwiak v. Poland, no. 3818/04, § 56, 21 July 2009, and Sibgatullin v. Russia, no. 32165/02, § 36, 23 April 2009). An oral hearing before the court of appeal is necessary if that court must assess the facts, the question of guilt or innocence, or the character of the accused (see Axen v. Germany, 8 December 1983, § 28, Series A no. 72; Seliwiak, cited above, § 56; and Sibgatullin, cited above, § 36).
5.  Although tax surcharges fall under the criminal head of Article 6, the Court has previously held that they “differ from the hard core of criminal law; consequently, the criminal-head guarantees will not necessarily apply with their full stringency” (see Jussila v. Finland [GC], no.  73053/01, § 43, ECHR 2006-XIV). In addition, the specific features of the proceedings in question and the presentation and protection of the applicant’s interests before the court of higher instance are significant for determining whether an oral hearing is required before the court of higher instance (see Helmers v. Sweden, 29 October 1991, §§ 31-32, Series A no. 212-A, cited in paragraph 33 of the present judgment). The nature of the proceedings in question here must be kept in mind when considering whether the requirements of Article 6 § 1 have been met.
6.  Furthermore, we note that a tacit waiver of the right to a public hearing under Article 6 § 1 of the Convention can be inferred if it is “shown that [the applicant] could reasonably have foreseen what the consequences of his [or her] conduct would be” (see Hermi v. Italy [GC], no. 18114/02, § 74, ECHR 2006-XII). In the past, the Court has inferred a tacit waiver of the right to an oral hearing where applicants failed to avail themselves of the legal possibility to request such a hearing (see Håkansson and Sturesson v. Sweden, 21 February 1990, §§ 67-68, Series A no. 171-A).
7.  We note that, in the present case, it was open to the applicant to request an oral hearing under section 274(1) of the Code of Civil Procedure, but she did not do so. The applicant submitted that she “had had no opportunity to find out that there was a risk of the Supreme Court’s ignoring her father’s testimony, that there was a risk of its reassessing the evidence, or that consequently there was a need to request an oral hearing” (see paragraph 25 of the judgment). We do not consider the arguments advanced by the applicant in this regard convincing: at the material time, based on the statutory regulation of the matter in the Code of Civil Procedure and the nature of the dispute, her legal representatives should have known what could potentially be at stake in the proceedings before the Supreme Court. We also observe that the Supreme Court was acting as a court of third instance in the present case, and that the proceedings before it did not involve any new facts or information. As a result, the failure of the applicant and her representatives to avail themselves of the possibility to request an oral hearing in this case amounts, in our opinion, to a tacit waver of entitlement to such a hearing.
I.  Overall fairness of the proceedings
8.  We would reiterate that the Court’s only concern under Article 6 § 1 is to examine whether the domestic proceedings were conducted fairly (see paragraph 29 of the present judgment, citing Al-Khawaja and Tahery v. the United Kingdom [GC], nos. 26766/05 and 22228/06, § 118, ECHR 2011). We consider that, overall, the proceedings in the present case cannot be considered unfair.
9.  We note that the applicant was represented by legal professionals, who must have been aware both of the possibility of requesting an oral hearing and of the fact that such a hearing would not be held without a corresponding request (see section 275 of the Code of Civil Procedure). The applicant and her legal representatives ought to have known what was at stake in the proceedings before the Supreme Court, as the tax authorities had previously made clear that the applicant was expected to submit bookkeeping evidence in support of her allegations (see paragraph 9 of the judgment).
10.  We note that the Supreme Court did not disregard the testimony of the applicant’s father, but rather considered that testimony insufficient proof of the origin of the funds in question. This finding concerned the testimony’s value as evidence, and not the concrete statements it contained; repeating the testimony of the applicant’s father before the Supreme Court would not have altered this outcome.
11.  The nature of the Supreme Court’s judgment is in accordance with its powers under the Code of Civil Procedure and its role as a court of third instance in this case. Under section 275(4) of the Code of Civil Procedure, the Supreme Court has a right to render a new decision where it quashes that of the lower court if the necessary facts have been established. Considering that no new facts were raised in the proceedings before the Supreme Court in the instant case, its final judgment was one of several foreseeable outcomes; the applicant’s legal representatives should have been aware of this possibility.
12.  Given the above, we conclude that the proceedings in question were not, as a whole, unfair, and are therefore unable to agree with the judgment of the majority that there has been a violation of Article 6 § 1 in this case. While the applicant may have failed to avail herself of the possibility to request a public hearing, the potential ramifications of this decision should have been clear to her and her legal representatives.