THIRD SECTION
CASE OF GRECH AND OTHERS v. MALTA
( Application no. 62978/15 )
JUDGMENT
STRASBOURG
4 June 2019
This judgment is final but it may be subject to editorial revision.
In the case of Grech and Others v. Malta ,
The European Court of Human Rights ( Third Section ), sitting as a Committee composed of:
Branko Lubarda
,
President,
Vincent A. De Gaetano,
Alena Poláčková,
judges,
and
Fatoş Aracı
,
Deputy Section
Registrar
,
PROCEDURE
1. The case originated in an application (no. 62978/15) 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 three Maltese nationals, Mr David Grech, Ms Mary Josephine Grech, and Ms Dorothy Higgins and three British nationals Ms Gitali Melvin, Ms Joyoti Mary Grech Cato and Mr Christopher Grech ("the applicants"), on 15 December 2015. 2. The applicants were represented by D r F. Vassallo , a lawyer practising in Valletta. The Maltese Government ("the Government") were represented by their Agent, Dr P. Grech, Attorney General. 3. On 8 February 2017 notice of the application was given to the Government . 4. The British Government did not make use of their right to intervene in the proceedings (Article 36 § 1 of the Convention). 5. The Government objected to the examination of the application by a Committee. After having considered the Government ' s objection, the Court rejects it.THE FACTS
7 . The applicants are joint owners of the property at number 204, High Street, Mosta , Malta (hereinafter referred to as "Property A") having a ground floor footprint of 505 sq.m . and a first floor of a little more than 100 sq.m ., with roof terraces, located in the primary town centre. Property A is located adjacent to another property that is also jointly owned by the applicants, namely Villa Grech - Mifsud, High Street, Mosta (hereinafter referred to as "Property B") . The applicants became owners either through inheritance or donation from their parents on various dates between 1991 and 2011.
8. In 1923, the applicants ' ascendants entered into a rent agreement with Nicol ò Isouard Band Club Association (hereinafter referred to as the "Band Club"), whereby they willingly rented Property A to the Band Club for twenty pounds sterling annually (approximately 23.84 euros (EUR)). In 1947 the rent was increased to twenty - four pounds sterling annually (around EUR 28.62). 9. In 1970, L.G., one of the applicants ' ascendants, filed an application before the Rent Regulation Board (hereinafter referred to as "the Board"), on behalf of all the joint owners at the time, whereby he requested that the annual rent be raised. On 15 December 1970 the Board upheld the request and increased the rent to sixty pounds sterling annually (approximately EUR 71.60), to be paid six months in advance. 10. On 14 August 1978 the applicants ' ascendants entered into a new lease agreement with the Band Club, whereby they willingly rented Property A and part of the garden of Property B (hereinafter, jointly referred to as "the rented prop erty") to the Band Club for 120 Maltese liras annually ((MTL) - approximately EUR 279.52), to be paid six months in advance.11 . L.G., who died during the constitutional redress proceedings (see hereunder), gave evidence before the Civil Court (First Hall), in its constitutional competence, to the effect that the annual rent due to the applicants was that of MTL 136 (approximately EUR 316), and that the Band Club was actually paying MTL 130 annually (approximately EUR 302). These amounts did not correspond to those agreed upon within the rent agreement of 14 August 1978. In the mentioned proceedings the court concluded that, on an unspecified date, the applicants and the Band Club had entered into a verbal agreement, whereby the annual rent due was increased because the Band Club had requested the use of a further part of the garden of Property B.
12. On 28 October 1980 and again on 10 January 1983 L.G. complained with the Band Club about its use of the rented property as a discotheque and as a restaurant. 13. In 2004 and 2005 the Band Club had requested that it be able to rent a further part of the garden of Property B and for it to purchase the part of the property that was being utilized as the seat of the club. The applicants refused. 14. On 8 August 2009 the applicants appointed an architect who estimated that the rented property ought to at least attract a rental income of EUR 36,700 yearly.19 . The court accepted that clubs play a social role in Maltese society, even to date. With this social interest the State was permitted a level of interference. The legality of such interference had not been contested. However, when comparing the circumstances in which the rent agreement had originally been entered into, to the present day circumstances, the element of proportionality had not been respected and thus the applicant ' s rights had been breached.
20. As to the owners ' request for the court to establish a raise in the rent payable to them, the court considered that it was not its role to take on functions that the Constitution granted to another organ of the state, just as much as it could not "erase" ( t ħ assar ) laws unless it found that they had "no effect" ( ma jiswewx ). Thus, it was not competent to give the remedy requested by the applicants. This decision was reinforced by the introduction of the new laws in 2014 which updated the rents payable.21 . The court considered that the estimate provided by the ex parte architect did not suffice due to the criteria used and the approximate manner in which the calculations had been done. However, some form of compensation was due. Taking all the circumstances of the case into consideration, the evidence presented before it and the applicable laws, the court awarded compensation in the sum of EUR 50,000.
22. On 26 June 2015 the Constitutional Court, upheld the Attorney General ' s appeal and concluded that the owners had not suffered a violation of their rights as protected by Article 1 of Protocol No. 1 to the Convention and therefore no compensation was due. The costs of proceedings at both instances were to be paid by the owners. 23. The Constitutional Court observed that the complaint concerned two rental agreements that were entered into in 1923 and 1978 respectively, between which special legal dispositions concerning properties rented as clubs were introduced. Unlike the first-instance court, the Constitutional Court concluded that the agreement of 14 August 1978 amounted to novation (see relevant domestic law). It was a new rent agreement concerning a larger property and a higher annual rent payable. The intentions of the parties in the original agreement were set aside, and were now regulated by means of a new agreement. The court considered that on 14 August 1978 Articles 3 and 4 of the Ordinance were already in force. Thus, the parties had willingly entered into the agreement with full knowledge of the consequences it would lead to. Therefore the owners could not allege a violation of their rights. The principle volenti non fit injuria applied. The court concluded that the case of the owners did not concern the renunciation of a human right, but rather the exercise on the part of the owners to dispose of their property as they desired. From the evidence presented before it, the Constitutional Court concluded that the agreement of 14 August 1978 established clearly that the owners wanted to enter into a rental agreement for a larger property, with a higher rent to be paid by the Band Club, and had done so. Therefore the owners had not suffered a violation of their property rights."Novation takes place -
( a ) when the debtor contracts towards his creditor a new debt, and this is substituted for the old one which is extinguished;"
THE LAW
"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."
27. The Government contested that argument.(a) The applicants
29. The applicants submitted that the fact that the agreement could not be terminated impacted the value of the rented property, and their ability to ever enjoy it as its owners. Thus, the legislative measures introduced failed to meet the "foreseeability" requirement since the law did not provide a termination date for the lease in question and no fair balance had been established. While being bound to renew the lease automatically on a yearly basis, up until 2014 they were prohibited from increasing the rent. Following the introduction, in 2014, of the Conditions Regulating the Leases of Clubs Regulations, there was a possibility for a raise in rent which was nevertheless very limited and could not be considered sufficient. In this connection they noted that a 5% payment on annual profits (even assuming a band club acted transparently) was too low and there was no reason to continue burdening owners when by law band clubs were allowed to make an income of more than EUR 200,000 annually. Indeed, in the present case the band club used a significant area within the ground floor for clearly commercial and profit making purposes falling outside the usual band club operations. 30. This burden had been accrued as from 1978 and continued. Relying on the immovable Property Price Index Notice, and the rate of inflation, the applicants considered, contrary to that alleged by the Government, that EUR 302 could not be considered as fair rent up to 2004. This was even more so after that. The applicants submitted that in 2017, the rental value of their rented property was EUR 75,000 annually, thus the rent they were actually being paid placed a disproportionate burden on them, and no procedural safeguards were available to protect their interests.(b) The Government
31. The Government submitted that the applicants had not suffered an interference as their ancestors had freely entered into the agreement, knowing what the consequences would be. Without prejudice to the above, any interference would have been lawful, in accordance with Chapter 69 of the Laws of Malta (former Chapter 109). It also pursued a legitimate aim, namely the protection of the cultural identity of Maltese citizens. In the Government ' s view, band clubs played a very important role in Maltese culture in order to increase and stimulate the local musical talents and thus a public interest persisted even though such a cultural service was given by a private entity as in the present case. 32. In the Government ' s view in 1978 and until 2004, EUR 302 annually was a considerable rent and it could still not be said to be a low rent unless it was compared to rents charged to commercial entities or to Maltese persons who struggled to pay high rents. The Government emphasised that the rental valuation presented by the applicants (EUR 36,700 annually) was excessive given the age of the premises (pre second world war), their dimension, and the expenses incurred by the band club to maintain the premises in good condition. Moreover, the applicants had not shown that there had been anyone willing to pay that amount. Furthermore, the Government submitted that in cases where there was a public interest for the measure owners were not due market values. Thus, the applicants had not suffered a disproportionate burden relative to the amount of rent payable until 2014. 33. Following the Regulations introduced in 2014, the rent payable increased by 10% (from the one applicable the year before) every year until 2016 (i.e. according to law, in 2015 the rent pa yable to the applicants was EUR 317 annually and in 2016 EUR 332.85 annually). As from 1 January 2016 the rent increased by 5% and will continue to do so until 2023, following which it will increase every year according to the index of inflation. As from 2015 the tenant also had to pay an additional rent calculated at the rate of 5% on the annual income (as declared on their financial statement) derived by the club. Indeed in 2015 the total annual rent paid to the applicants by the band club was EUR 702.82 and in 2016 EUR 723.72, which in the Government ' s view was a considerable increase to the rent paid prior to the 2014 amendments. Thus, a fair balance had been reached. 34. Lastly, the Government insisted that there was no arbitrary or unforeseeable impact on the applicants given that their ancestor had known the applicable conditions and limitations when he signed the contract in 1964. In any event the Government considered that there existed procedural safeguards, but that the Court should not look into the matter given that the ancestors were aware of the applicable regime in 1964.40 . In relation to the rent which the applicants received, the Court notes that the situation in the present case might be said to involve a degree of public interest which is significantly less marked than in other cases and which does not justify such a substantial reduction compared with the free market rental value (see, mutatis mutandis , Zammit and Attard Cassar , cited above, § 75, and Bradshaw and Others , cited above, § 58). As to the rent payable from 1978 to 2013 (prior to the 2014 Regulations) the applicants were being paid EUR 302 annually, that is a rent of approximately EUR 25 per month for a two - storey property in the primary town centre of Mosta . The Court considers that while this must have been an appropriate rent in the 1978 when the ancestors entered into the agreement voluntarily and possibly also in the 1980s and 90s, it could not be said to be so decades later (compare the analysis in Bradshaw and Others , cited above, § 59) . Thus, the Court considers that, as found by the first - instance constitutional jurisdiction which examined the proportionality of the measure, the rent received by the applicants could not be considered in any w ay proportionate (see paragraph 19 above).
41 . As for the period following 2014, and the introduction of the Regulations, the Court notes that in practical terms the ameliorated formula translated into the following rents for the applicants: EUR 702.82 in 2015 and EUR 723.72 in 2016. Thus, while the Regulations allowed for a little more than double the rent previously received, it still amounted to around 2% of the rental value estimated by the applicants ' ex parte architect during the domestic proceedings, namely EUR 36,700 yearly. Even assuming the ex parte report is inflated, it is evident that the situation following 2014 remained disproportionate, and without any action by the legislature, it is likely to remain so indefinitely (see Bradshaw and Others , cited above, § 62) . These elements must be weighed against the interests at play in the present case, which are not those of avoiding homelessness but of enhancing social and cultural activities, comprising those of a commercial nature (ibid. § 63). While the Court has accepted above that the overall measure was, in principle, in the general interest, the fact that there also exists an underlying private interest of a commercial nature cannot be disregarded. In such circumstances, both States and the Court in its supervisory role must be vigilant to ensure that measures, such as the one at issue, do not give rise to an imbalance that imposes an excessive burden on landlords while allowing tenants to make inflated profits. It is also in such contexts that effective procedural safeguards become indispensable (ibid. § 64). From the information available to the Court, there were no avenues - other than constitutional redress proceedings - which the applicants could pursue to ameliorate their situation (if circumstances so required). Consequently, the application of the law itself lacked adequate procedural safeguards aimed at achieving a balance between the interests of the tenants and those of the owners (ibid.) .
42. Having assessed all the elements above, and notwithstanding the margin of appreciation allowed to a State in choosing the form and deciding on the extent of control over the use of property in such cases, the Court finds that, having regard to the use made of the property, the extremely low rent of the premises and the lack of procedural safeguards in the application of the law, a disproportionate and excessive burden was imposed on the applicants, who have had to bear and continue to bear a significant part of the social and financial costs of supporting a local custom by supplying the band club with premises for its activities, including commercial activities. It follows that the Maltese State failed to strike the requisite fair balance between the general interests of the community and the protection of the applicants ' right to the enjoyment of their property.43 . There has accordingly been a violation of Article 1 of Protocol No. 1 to the Convention.
"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."
45 . The applicants claimed 2,005,902 euros (EUR) , plus 8% interest, in pecuniary damage representing lost rent. In substantiation they submitted an updated ex parte architect report reflecting recent steep increases in the market value. According to the report, bearing in mind that the property ' s finishing was synonymous to improvements carried out during the years and are in good condition, as well as its potential for three floors and one recessed floor and a considerable commercial value, the rented property had (in 2017) an estimated sale value of one million euro and a minimum rental value of EUR 75,000 annually. According to that report and working backwards, the applicant submitted that they sustained losses of EUR 2,018,532 from which had to be deducted the rents already received (EUR 12,630). They further claimed EUR 50,000 in non-pecuniary damage.
46. The Government submitted that there was a boom in property prices only in around 2004 and that in any event the expert valuations submitted by the applicants were exorbitant and unrealistic. Indeed according to the applicants ' submissions, if one had to take the rent of EUR 75,000 in 2017 and work backwards, it would mean that the rent payable in 1978 was EUR 26,405. This result was in stark contrast with the EUR 302, annually, willingly agreed by the applicants ' ancestors in the same year. 47. In the Government ' s view, it would have been more realistic to work forward based on the basic figure of EUR 302. Thus, in their view an award of EUR 10,000 sufficed to cover the years from 2004 to 2014 and that no interest was due on that amount as Convention proceedings should not be a kin to domestic claims for damage. They also considered that an award of EUR 5,000, jointly, sufficed as non - pecuniary damage. 48. The Court must proceed to determine the compensation the applicants are entitled to in respect of the loss of control, use and enjoyment of the property which they have suffered. The Court has already found that while the rent paid to the applicants might have been an appropriate rent until the 90s (see paragraph 40 above) it was not so decades later, it also found a violation for both the period before and after 2014, consequently the applicants are due compensation until the date of this judgment. 49. On the one hand, the Court notes the absence of any expert valuation from the Government and the fact that the pecuniary award they suggest is not based on any calculation or on any criteria. On the other hand, the Court considers that, similar to that held by the domestic court in relation to the report submitted by the applicants during those proceedings (see paragraph 21 above), the recent valuation submitted to this Court is of little use in so far as it has taken into account criteria which have frustrated the result, such as its development and commercial potential when in reality it was rented out only as a two - storey building mainly for cultural purposes and its commercial use was only ancillary to its main function. Similarly, its good state is attributable to the maintenance carried out by the band club. More importantly, given the exceptional steep increases in property prices in the immediate past years, as also admitted by the applicants (see paragraph 45 above), it is inappropriate to consider the sale and rental value in 2017 as a starting point to calculate rents dating back decades. Indeed, as pointed out by the Government, such a calculation has brought about the startling result of a rental value of EUR 26,405 for the year 1978, when in that same year the applicants ' ancestors willingly entered into a contract they considered satisfactorily, for an annual rent of EUR 302. It is surely unlikely that the applicant ' s ancestors would have been satisfied with a little more that 1% of the market price at the time. The Court therefore considers that such an estimate has no reasonable foundation in the reality of the time (see, mutatis mutandis , Bradshaw and Others , cited above, § 91). Thus, in assessing the pecuniary damage sustained by the applicants, the Court has considered the estimates provided in as far as appropriate and has had regard to the information available to it on rental values on the Maltese property market during the relevant period (ibid.). 50. The Court reiterates 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 than reimbursement of the full market value (see Ghigo v. Malta (just satisfaction), no. 31122/05, § 18, 17 July 2008). In the present case however, the Court keeps in mind that the property was not used for securing the social welfare of tenants or preventing homelessness (compare, Fleri Soler and Camilleri v. Malta (just satisfaction), no. 35349/05, § 18, 17 July 2008). 51. Furthermore, the sums already received by the owners for the relevant period must be deducted and a one-off payment of 5% interest should be added to the above amount (see Bradshaw and Others , cited above, §§ 93 - 94 ). 52. Hence, the Court awards the applicants, jointly, EUR 226,000 under this head. 53. The Court considers that the applicants must have sustained feelings of frustration and stress, having regard to the nature of the breaches. It thus awards the applicants, jointly, EUR 8,000 under this head.FOR THESE REASONS, THE COURT, UNANIMOUSLY,
(a) that the respondent State is to pay the applicants , within three months the following amounts:
(i) EUR 226,000 (two hundred and twenty - six thousand euros), jointly, in respect of pecuniary damage;
(ii) EUR 8,000 (eight thousand euros), jointly, plus any tax that may be chargeable, in respect of non - pecuniary damage;
(iii) EUR 19,705 (nineteen thousand seven hundred and five euros), jointly, plus any tax that may be chargeable to the applicants , in respect of costs and expenses;
(b) t hat 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 perio d plus three percentage points;
Done in English, and notified in writing on 4 June 2019 , pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Fatoş
Aracı
Branko
Lubarda
Deputy
Registrar
President
No. |
Applicant ' s Name |
Birth date |
Nationality |
Place of residence |
1 |
David GRECH |
18/04/1957 |
Maltese |
Attard |
2 |
Christopher GRECH |
25/02/1960 |
British |
Washington DC |
3 |
Mary Josephine GRECH |
01/11/1924 |
Maltese |
Mosta |
4 |
Joyoti Mary GRECH CATO |
20/03/1963 |
British |
Brighton |
5 |
Dorothy HIGGINS |
15/12/1952 |
Maltese |
County Down |
6 |
Gitali MELVIN |
14/07/1965 |
British |
Surrey |
ANNEX