FIRST SECTION

CASE OF S.L. AND J.L. v. CROATIA

(Application no. 13712/11)

JUDGMENT
(Just satisfaction)

STRASBOURG

6 October 2016

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 S.L. and J.L. v. Croatia,
The European Court of Human Rights (First Section), sitting as a Chamber composed of:
	Mirjana Lazarova Trajkovska, President,
	Kristina Pardalos,
	Linos-Alexandre Sicilianos,
	Aleš Pejchal,
	Ksenija Turković,
	Robert Spano,
	Pauliine Koskelo, judges,
and Abel Campos, Section Registrar,
Having deliberated in private on 13 September 2016,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1.  The case originated in an application (no. 13712/11) against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by two Croatian nationals, Ms S.L. and Ms J.L. (“the applicants”), on 7 January 2011.
2.  In a judgment delivered in 2015, (S.L. and J.L. v. Croatia, no. 13712/11, 7 May 2015 ‒ “the principal judgment”), the Court held that there had been a violation of Article 1 of Protocol No. 1 with regard to the domestic authorities’ failure to take the necessary measures to safeguard the applicants’ proprietary interests in a detrimental real estate swap agreement and to give them a reasonable opportunity to effectively challenge the said agreement.
3.  In their initial application the applicants requested the Court, under Article 41 of the Convention, to order restitutio in integrum and, if that proved impossible, claimed the amount of “at least” 300,000 euros (EUR) in respect of pecuniary damage. They did not claim any costs and expenses.
4.  Since the question of the application of Article 41 of the Convention concerning the pecuniary damage was not ready for decision, the Court reserved it and invited the Government and the applicants to submit, within three months, their written observations on that issue and, in particular, to notify the Court of any agreement they might reach (ibid., § 94, and point 4 of the operative provisions).
5.  The applicants and the Government each filed observations.
THE LAW
6.  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.”
Section 1.01	A.  Damage
(a)	1.  The parties’ submissions
(i)	(a)  The applicants
7.  In their initial application to the Court the applicants requested that the Court order restitutio in integrum and, alternatively, claimed the amount of “at least” EUR 300,000 in respect of pecuniary damage sustained as the result of the disadvantageous real estate swap agreement. They did not claim any costs and expenses or compensation in respect of non-pecuniary damage.
8.  In their updated claims of 12 January 2016 the applicants submitted that at the time the swap agreement was concluded, the difference in value between their house and the flat and the garage had amounted to EUR 263,920. They accepted that this amount should be reduced by EUR 5,128.20, which corresponded to the amount which they had received on the date of conclusion of the swap agreement. This resulted in a new figure of EUR 258,791.80. However, they then claimed EUR 261,355.90 in respect of pecuniary damage, together with interest and any tax chargeable, as being the difference between the value of the house and the amount which they had received on the date of conclusion of the swap agreement. Alternatively, the applicants claimed EUR 332,631.80, together with statutory interest and any tax chargeable, this being the difference between the values of the respective properties on the date of delivery of the Court’s judgment, namely 7 May 2015. This sum represented the difference between the value of the properties (EUR 337,760) reduced by the aforementioned sum of EUR 5,128.20. The applicants based their claim on an expert report assessing the value of the properties produced by B.I.V. d.o.o. in December 2015.
9.  Lastly, the applicants contended that an award by the Court in respect of pecuniary damage would be the only appropriate form of compensation. In their view the option of reopening the domestic proceedings on the matter would protract the procedure unnecessarily. 
(ii)	(b)  The Government
10.  The Government argued that it was impossible to establish conclusively the difference in the value of the exchanged properties without a thorough assessment of all the relevant circumstances of the case by the competent domestic courts. This was particularly true given that such an assessment needed to take into account a number of complex factors determining the value of real properties in a particular market at the relevant time. The Government therefore considered that the best means of remedying the situation would be to reopen the case before the competent domestic courts, which were best placed to assess the complex matters related to the applicants’ property claim. This would also allow for restitutio in integrum and thus an equitable resolution of the applicants’ case. In any case, the Government considered the applicants’ claim for compensation in respect of pecuniary damage excessive and unfounded. The Government further submitted that there had been negligence on the part of the applicants’ parents when the real estate swap agreement was concluded and that their parents should therefore bear some responsibility for compensating the applicants for the damage sustained. In the Government’s view, there was also liability on the part of D.M., who had benefited from the unjust real estate swap agreement.
11.  With regard to the expert report submitted by the applicants, the Government considered that only the difference in value between the exchanged properties when the real estate swap agreement was concluded was of relevance and not the value on the date of adoption of the Court’s judgment. The Government pointed out that they had asked another expert, Z.P., to review the expert report submitted by the applicants and he had identified several crucial errors in the methods used by the applicants’ expert to determine the values of the exchanged properties, in particular the fact that the state of repair of the properties in 2001 had never been established, the exact date of construction of the house had not been established, the method used for measuring the surface area had been unclear, and incorrect index values for the measurements had been used. The Government also pointed out that the findings by the expert Z.P. proved that it was impossible to estimate the value without a proper examination of the properties, which could not be done because other private parties were now living in the house and it was impossible to disturb their rightful enjoyment of their home without a corresponding court order. Thus, in the Government’s view, the only solution was to reopen the proceedings and to have the relevant matters examined by the competent court.
(b)	2.  The Court’s assessment
12.  The Court reiterates that a judgment in which it finds a breach imposes on the respondent State a legal obligation to put an end to the breach and make reparation for its consequences in such a way as to restore as far as possible the situation existing before the breach (see, amongst many others, Vistiņš and Perepjolkins v. Latvia (just satisfaction) [GC], no. 71243/01, § 33, ECHR 2014).
13.  Contracting States that are parties to a case are in principle free to choose the means whereby they will comply with a judgment in which the Court has found a breach. This discretion as to the manner of execution of a judgment reflects the freedom of choice attaching to the primary obligation of the Contracting States under the Convention to secure the rights and freedoms guaranteed (Article 1). If the nature of the breach allows restitutio in integrum, it is for the respondent State to effect it, the Court having neither the power nor the practical ability to do so itself. If, on the other hand, national law does not allow – or allows only partial – reparation to be made, Article 41 empowers the Court to afford the injured party such satisfaction as appears to it to be appropriate (see Iatridis v. Greece (just satisfaction) [GC], no. 31107/96, § 33, ECHR 2000‑XI, and Kurić and Others v. Slovenia (just satisfaction) [GC], no. 26828/06, § 80, ECHR 2014).
14.  With regard to the Government’s argument that it would be possible for the applicants to seek restitutio in integrum before the national courts following a reopening of the civil proceedings under Section 428a of the Civil Procedure Act on the basis of the Court’s principal judgment (see § 41 of the principal judgment), the Court firstly notes that under the cited provision of the Civil Procedure Act it is not fully clear what would be the time-limit for seeking the reopening of the proceedings on the basis of the Court’s judgment concerning the applicants’ just satisfaction claim and whether that possibility is still open to the applicants.
15.  In any event, the Court reiterates that as a rule, the requirement that domestic remedies should be exhausted, including the option of reopening the proceedings, does not apply to just satisfaction claims submitted to the Court under Article 41 (see, for instance, Barberà, Messegué and Jabardo v. Spain (Article 50), 13 June 1994, § 17, Series A no. 285‑C; Jalloh v. Germany [GC], no. 54810/00, § 129, ECHR 2006‑IX; and a/s Diena and Ozoliņš v. Latvia, no. 16657/03, § 93, 12 July 2007). Indeed, requiring the applicants who have exhausted the domestic remedies without success before bringing a complaint before it to exhaust further domestic remedies in order to be able to obtain just satisfaction from the Court would protract the procedure instituted by the Convention in a manner scarcely in keeping with the idea of the effective protection of human rights (see, for instance, Papamichalopoulos and Others v. Greece (Article 50), 31 October 1995, § 40, Series A no. 330‑B, and Erbey v. Turkey (just satisfaction), no. 29188/02, § 25, 26 October 2010). Accordingly, the Court is not prevented from making an award on that account.
16.  The Court notes in the case at hand that at the origin of the violation found lies in the State’s failure to take adequate account of the best interests of the applicants and to protect their property rights pursuant to a disadvantageous real estate swap agreement concluded on their behalf by their parents with a certain D.M. By this agreement the applicants became owners of a flat and a garage in Pula whereas D.M. became the owner of their house (see §§ 64-83 of the principal judgment).
17.  The Court considers in the circumstances of the present case that the measure which would put the applicants as far as possible in a situation equivalent to the one in which they would find themselves if there had not been a breach of Article 1 of Protocol No. 1 is the payment to the applicants of the current value of the house, representing the pecuniary damage sustained. From this amount the current value of the flat and the garage, plus the amount which they received from D.M. upon conclusion of the real estate swap agreement should be deducted (compare, for instance, Brumărescu v. Romania (just satisfaction) [GC], no. 28342/95, § 23, ECHR 2001‑I).
18.  The Court notes that, according to an expert report submitted by the applicants, the resulting difference in the value of the properties amounts to EUR 337,760, from which the amount of EUR 5,128.20 ‒ namely the sum received from D.M. upon conclusion of the swap agreement ‒ should be deducted; this produces an amount of EUR 332,631.80 (see paragraph 8 above).
19.  The Government did not submit their own expert report but rather challenged the findings of the applicants’ expert. They substantiated their arguments with an assessment of the applicants’ expert report provided by another expert, Z.P. Although Z.P. did not provide his opinion on the current values of the exchanged properties, he raised a number of objections concerning the applicants’ expert report, most notably related to the impossibility to estimate the value of the properties without their direct examination (see paragraph 11 above).
20.  Taking account of all the evidential material in its possession, the Court finds that in general there is no reason to doubt the validity of the expert report obtained by the applicants, particularly in view of the failure of the Government to provide their own expert assessment of the relevant values of the exchanged properties (compare Dacia S.R.L. v. Moldova (just satisfaction), no. 3052/04, § 44, 24 February 2009).
21.  However, the Court accepts that certain aspects of the assessment of the value of the properties remain unclear and thus, making an overall assessment of the relevant considerations on the basis of the material available to it, the Court finds that the applicants should be awarded jointly, as compensation for the pecuniary damage sustained, a lump sum of EUR 300,000, plus any tax that may be chargeable on that amount.
22.  On the other hand, the Court notes that the applicants did not claim compensation in respect of non-pecuniary damage and it therefore makes no award in that respect (see Toșcuță and Others v. Romania (just satisfaction), no. 36900/03, § 14, 3 March 2015, and Rasidescu v. Romania (just satisfaction), no. 39761/03, § 15, 7 April 2015).
Section 1.02	B.  Costs and expenses
(a)	1.  The parties’ submissions
23.  The applicants did not claim any costs and expenses in either their initial application or in the subsequent submissions before the adoption of the principal judgment. However, in their updated submission of 12 January 2016 the applicants claimed EUR 9,530 for costs and expenses incurred in the proceedings before the domestic courts and EUR 4,360 for the costs and expenses incurred in the proceedings before the Court.
24.  The Government invited the Court to reject the applicants’ claim for costs and expenses as not being lodged within the time-limit imposed by the Court. In any event they considered the applicants’ claim for costs and expenses excessive and unsubstantiated.
(b)	2.  The Court’s assessment
25.  According to the Court’s case-law, an applicant is entitled to reimbursement of his 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 (see, for instance, Musci v. Italy [GC], no. 64699/01, § 150, ECHR 2006‑V extracts).
26.  In view of the relevant principles following from its case-law (see, for instance, Brezovec v. Croatia, no. 13488/07, § 80, 29 March 2011), and given that the applicants did not submit a claim for costs and expenses before the adoption of the principal judgment as required by Rule 60 of the Rules of Court, the Court considers that there is no call to award them any sum in respect of the costs of the proceedings before the Court preceding the adoption of the principal judgment.
27.  On the other hand, in so far as the applicants’ claim for the costs and expenses of the present proceedings and the proceedings before the domestic courts is itemised and substantiated, the Court awards them in total EUR 6,000, plus any tax which may be chargeable.
Section 1.03	C.  Default interest
28.  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 to the applicants jointly, within three months, the following amounts:
(i)  EUR 300,000 (three hundred thousand euros), plus any tax that may be chargeable, in respect of pecuniary damage;
(ii)  EUR 6,000 (six thousand euros), plus any tax that may be chargeable to the applicants, 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;

2.  Dismisses the remainder of the applicants’ claim for just satisfaction.
Done in English, and notified in writing on 6 October 2016, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
	Abel Campos 	Mirjana Lazarova Trajkovska
	Section Registrar	President