AS TO THE ADMISSIBILITY OF
by Thomas ALBERTSSON and CARINA AHLSTRÖM
The European Court of Human Rights (Third Section), sitting on 24 March 2009 as a Chamber composed of:
Boštjan M. Zupančič,
Luis López Guerra,
Ann Power, judges,
and Santiago Quesada, Section Registrar,
Having regard to the above application lodged on 9 September 2007,
Having deliberated, decides as follows:
The applicants are Mr Thomas Albertsson, a Swedish national who was born in 1966 and lives in Uppsala, and Carina Ahlström Förvaltning AB, a Swedish limited liability company solely owned by the first applicant. The applicants are represented before the Court by Mr P. Mosten, a lawyer practising in Uppsala.
A. The circumstances of the case
The facts of the case, as submitted by the applicants, may be summarised as follows.
In July 2003 a bank filed a bankruptcy petition against the second applicant before the Stockholm District Court (tingsrätten). After having failed to serve the second applicant in any other way, the petition and summons were served on the company’s auditor (registrerad revisor). At the bankruptcy hearing, held on 1 September 2003, the auditor appeared but no representative for the second applicant. The District Court found that the second applicant had been legally served through its auditor and that, therefore, there existed no impediment to proceeding with the hearing. In a decision later the same day, the District Court declared the second applicant bankrupt and appointed an official receiver (konkursförvaltare) for the bankruptcy estate.
The second applicant appealed against the decision to the Svea Court of Appeal (hovrätten), requesting in the first place that the declaration of bankruptcy be quashed and the case be remitted back to the District Court for re-trial or, in the alternative, that the decision be reversed. It submitted, inter alia, that it had not been correctly served with the summons to appear before the District Court. In this respect, it argued that it had been incorrect to serve the summons on the auditor since the company had a board of directors (styrelse) at the time and since the auditor had been dismissed from his mandate.
On 2 October 2003 the Court of Appeal found, inter alia, that no board of directors had been registered with the register of limited companies (Aktiebolagsregistret – hereafter “the register”). Similarly the register did not show that the auditor had been dismissed from his mandate. The Court of Appeal, which found that the second applicant had not been able to prove its objections, found that the summons to appear before the District Court had been correctly served and upheld the lower court’s decision in full.
The second applicant appealed against the decision to the Supreme Court (Högsta domstolen) before which it maintained its claims. The Supreme Court granted leave to appeal and, in a decision of 18 March 2005 (see NJA 2005 p. 175), found that it was not possible to serve a limited liability company without a registered board of directors through its auditor. Consequently, the Supreme Court found that the second applicant had not been correctly served with the summons to the bankruptcy hearing and consequently quashed the declaration of bankruptcy and remitted the case back to the District Court for re-trial.
On 9 January 2006, a new bankruptcy hearing, at which the second applicant was represented, was held before the District Court. On 13 January 2006 the court rejected the bankruptcy petition, obliged the bank to reimburse the second applicant’s legal costs and decided that the bankruptcy costs amounting to 866,428 Swedish kronor (SEK)1 should be paid by the State.
The second applicant claimed that, during the time it had been declared bankrupt (from 1 September 2003 to 18 March 2005), the official receiver had caused it economic damage by, inter alia, selling a restaurant business that was worth SEK 10,000,000 for only SEK 2,800,000, despite the fact that the second applicant’s own representatives had offered to buy the restaurant business for SEK 3,000,000. The second applicant also claimed that the receiver had sold the restaurant’s entire inventory, some of which was bought subject to the seller being entitled to repossess the object if the purchaser defaulted on his obligations under the document of transfer (äganderättsförbehåll), and some of which was borrowed or rented.
The second applicant signed over its claim for damages from the State to the first applicant. Thereafter, the first applicant sued the State before the Supreme Court, requesting the court to declare that the State was liable for the damages incurred by the District Court’s and the Court of Appeal’s erroneous declaration of bankruptcy. The first applicant claimed that the State was obliged to pay compensation to him, firstly in accordance with Chapter 3, section 2 of the Tort Liability Act (Skadeståndslagen, SFS 1972:207), since the District Court and the Court of Appeal had been guilty of wrongful acts or omissions in connection with the exercise of public authority. Secondly, he requested that the Supreme Court should create a general legal principle (rättsgrundsats) giving a right to compensation in cases like the instant one. He, inter alia, referred to the Convention and its protection of property rights.
The State disputed that there had been any wrongful acts or omissions in connection with the exercise of public authority which had given rise to an obligation for the State to pay compensation. It further stated that the question of how to serve summonses on limited liability companies had not been made clear until the decision by the Supreme Court in the second applicant’s case. There existed neither any previous case-law on the matter, nor any comments in the preparatory works that could be construed in a way that precluded the possibility of serving a limited liability company through its auditor. Finally, there was no guidance to be found in the doctrine. Therefore, the State argued, the decisions by the lower courts had not constituted a clear breach of the law, such as it could be construed prior to the Supreme Court’s decision.
In a judgment of 22 March 2007, the Supreme Court rejected the claims. It stated that now, after its decision in the case NJA 2005 p. 175, it was clear that a limited liability company could not be served through its auditor and that, consequently, the lower court’s decisions had been wrong. However it then observed that, when the State was held liable for alleged errors concerning legal and evidentiary issues, a faulty assessment by a court was not sufficient for liability for damages; only manifestly erroneous assessments could be grounds for liability. In this respect, the Supreme Court found that it had not been obvious how the relevant provisions should have been applied and that no such neglect as to cause liability had occurred. The Supreme Court also rejected the first applicant’s second ground of appeal.
B. Relevant domestic law and practice
References in this section are made to the Bankruptcy Act (konkurslagen, SFS 1987:672), unless otherwise indicated.
By means of bankruptcy, all creditors collectively and compulsorily take the total assets of an insolvent debtor for payment of their claims. During bankruptcy, the bankruptcy estate takes care of the debtor’s assets on behalf of the creditors (Chapter 1, section 1).
The administration of a bankruptcy estate is managed by one or more official receivers appointed by the District Court (Chapter 1, section 3, and Chapter 7, section 2). The official receiver must have regard to the common rights and best interests of the creditors and shall take all necessary measures to promote an advantageous and expeditious winding-up of the estate (Chapter 7, section 8). The property of the bankruptcy estate shall, as a main rule, be sold as soon as possible (Chapter 8, section 1).
Bankruptcy decisions are immediately enforceable (Chapter 16, section 4). Thus, following the declaration of bankruptcy of a debtor, the District Court must promptly appoint an official receiver who shall start his or her work immediately, regardless of whether an appeal has been lodged against the declaration of bankruptcy. In the event of a higher court quashing the bankruptcy decision, all administrative measures are to be interrupted forthwith and the case referred back to the District Court for concluding measures. Measures taken by the official receiver during the time the debtor was declared bankrupt (for example, the sales of property belonging to the bankruptcy estate) remain valid even after the quashing of the bankruptcy decision.
In the case where a higher court quashes the bankruptcy decision, the assets of the estate are restored to the debtor to the extent that they are not required for the defrayal of the bankruptcy costs and other costs that the estate has incurred (Chapter 2, section 25). Thus, as a main rule, the estate is liable to pay the bankruptcy costs even if a declaration of bankruptcy is later quashed for being factually erroneous.
However, by decision of the Supreme Court of 6 April 1998 (NJA 1998, p. 214), it has been established that the State may be held liable to pay the bankruptcy costs when the declaration of bankruptcy is quashed due to a grave procedural error. In the above case, the District Court had summoned the debtor to its hearing in an incorrect manner. Following the hearing, at which the debtor did not appear, the debtor was declared bankrupt. After the Supreme Court had quashed the declaration of bankruptcy, the District Court, in determining the official receiver’s fee, pointed out that the bankruptcy costs were to be paid out of the estate. The Court of Appeal upheld the decision. The Supreme Court, however, found that the State should pay the bankruptcy costs, as the debtor, on account of the erroneous service of the summons, had been deprived of his right to take part in the proceedings.
It follows from Chapter 3, section 2 of the Tort Liability Act (skadeståndslagen, SFS 1972:207) that the State is liable to pay compensation, inter alia, for financial loss caused by a wrongful act or omission in connection with the exercise of public authority.
However, in a judgment of 21 November 1994 (NJA 1994, p. 654), the Supreme Court examined whether the State was liable to pay damages on account of an appellate court’s allegedly incorrect assessment of legal and evidentiary issues in connection with its examination of an application for provisional attachment (kvarstad). The Supreme Court made the following general observation:
“When, as in the present case, legal and evidentiary issues are concerned, it is not sufficient for liability for damages that a court has made an assessment that may be called into question. Considerations on such issues may vary to such an extent that it is rather rare that one can speak about culpa or, in other words, a wrongful act or omission within the meaning of Chapter 3, section 2 of the Tort Liability Act. Only manifestly erroneous assessments can be considered as culpable.”
The Supreme Court has in subsequent judgments upheld this principle (see, for example, NJA 2003 p. 285 and NJA 2003 p. 527).
The applicants complain under Article 1 of Protocol No. 1 to the Convention that they were deprived of their possessions on account of the erroneous decision on 1 September 2003 to declare the second applicant bankrupt and that they should have been granted compensation for this erroneous decision.
They further complain under Article 13 of the Convention that the State, by limiting the right to compensation to certain qualified situations of wrongful acts or omissions, has violated their right to an effective remedy.
Furthermore, the applicants complain under Article 6 of the Convention that the second applicant was deprived of a fair trial on 1 September 2003, since the District Court declared it bankrupt in proceedings of which it had not been notified. This had led to irreparable damage which was not sufficiently redressed through the Supreme Court’s decision and the subsequent decision by the District Court.
“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 Court first notes that the second applicant had signed over its claim for damages against the State to the first applicant and that, consequently, the first applicant alone sued the State for compensation. It follows that, as regards the second applicant, this part of the application is inadmissible for non-exhaustion of domestic remedies within the meaning of Article 35 § 1 of the Convention and must be rejected pursuant to Article 35 § 4.
As regards the first applicant, the Court considers that it cannot, on the basis of the present state of the case file, determine the admissibility of this part of application, and that it is therefore necessary, in accordance with Rule 54 § 2 (b) of the Rules of Court, to give notice of it to the respondent Government.
2. The applicants further complain that the State, by limiting the right to compensation to certain qualified situations of wrongful acts or omissions, has violated their right to an effective remedy in violation of Article 13 of the Convention, which reads as follows:
“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”
As regards the first applicant, the Court reiterates that Article 13 of the Convention requires the provision of a domestic remedy allowing the competent “national authority” both to deal with the substance of the relevant Convention complaint and to grant appropriate relief (see Soering v. the United Kingdom, 7 July 1989, § 120, Series A no. 161). The effectiveness of a remedy within the meaning of Article 13 does not depend on the certainty of a favourable outcome for the applicant (see Kudła v. Poland [GC], no. 30210/96, § 157, ECHR 2000-XI).
The Court notes that the first applicant had access to, and indeed also availed himself of, a remedy in respect of the alleged violation of Article 1 of Protocol No. 1 to the Convention, namely the right to sue the State before the Supreme Court. It further notes that the Supreme Court had full jurisdiction to rule on the complaints and that it duly examined them. Having regard to the above, the Court finds that there is no appearance of a violation of Article 13 of the Convention.
Turning to the second applicant, the Court notes that there was a domestic remedy available, as stated above, which the second applicant failed to avail itself of. It follows that the second applicant’s complaint in this regard is unfounded.
Consequently this part of the application is manifestly-ill founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
3. Lastly, the applicants complain that the second applicant was deprived of a fair trial on 1 September 2003, when the District Court declared it bankrupt in proceedings of which it had not been notified, and that this led to irreparable damage for them. They rely on Article 6 of the Convention, which in relevant parts reads as follows:
“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”
The Court notes that the Supreme Court quashed the bankruptcy decision and referred the case back to the District Court for a new trial because the second applicant had not been properly served with the summons to appear before the District Court.
The Court thus considers that on 18 March 2005the Supreme Court acknowledged a violation of the second applicant’s rights, indicating that it had not been afforded a fair trial before the District Court. It further finds that following the Supreme Court’s judgment, the applicants were afforded redress in the form of a re-trial before the District Court and that such redress was sufficient and adequate, having the effect of rendering the applicants “no longer victims” of the alleged violation under Article 6. The question as to whether the applicants was afforded sufficient redress for the damage that occurred during the time which the second applicant was declared bankrupt is part of the applicants’ complaints under Article 1 of Protocol No. 1 to the Convention, a question which has been adjourned by the Court.
It follows that the present complaint should be rejected pursuant to Articles 34 and 35 §§ 3 and 4 of the Convention.
For these reasons, the Court unanimously
Decides to adjourn the examination of the first applicant’s complaint concerning the lack of compensation for damages caused by the erroneous bankruptcy decision;
Declares the remainder of the application inadmissible.
Santiago Quesada Josep Casadevall
1 On 8 January 2009, SEK 10.63 roughly corresponded to 1 euro.