Cancellation of purchase and sale due to a state authorities error. Violation of the right to respect of property

JUDGMENT

Arzamazova v. Democracy of Moldova 04.08.2020 (app. no, 38639/14)

see here

SUMMARY

Cancellation of building purchase and sale and peaceful enjoyment of property. Cancellation of the purchase and sale of a building on the grounds that it belonged to the public sector. A refund was ordered to the applicant, but the courts ruled that the applicant should initiate a new set of proceedings to seek compensation for the renovation work carried out on the building in question. On the contrary, her bad faith was not proven, nor was her guilt in pending criminal proceedings.

According to the ECtHR, the risk of any error by the state authority should be borne by the state and the errors should not be attributed to the detriment of the person concerned. Strasbourg held that the authorities had failed to strike a fair balance between the applicant ‘s public interest and the right to the peaceful enjoyment of her possessions. Violation of Article 1 of the First Additional Protocol. Award of 160,000 euros as compensation and 5,000 euros for non-pecuniary damage.

PROVISION

Article 1 of the First Additional Protocol

PRINCIPAL FACTS

The applicant, Elena Arzamazova, is an Australian and Moldovan national, who was born in 1950 and
lives in Queensland, Australia.

The case concerned the applicant’s complaint that she had been abusively deprived of a building she
had bought from the local council in Pojăreni, without compensation.

Ms Arzamazova bought the building, formerly used for village festivities, in 2004. The sale was
organised by the local council and mayor, and approved by the county council. The contract of sale
was signed before a public notary and registered by the cadastral authority.

However, in 2007 the Prosecutor’s Office sought the annulment of the transaction on the grounds
that the price obtained for the building had been too low and that it had been sold without holding
an auction, in breach of the law.

After the first-instance court rejected the action twice for being lodged out of time, in 2013 the
Court of Appeal annulled the contract, finding that the public authorities had made a mistake when
selling the building and approving and registering its sale because it had been part of the public
domain and should never have been sold to anyone in the first place.

The applicant lodged an appeal on points of law, which was dismissed by the Supreme Court in 2014.
A submission by her concerning a failure by the Court of Appeal to order compensation for her
investment in the renovation of the building was declared inadmissible.

She brought a civil action against the local council and the Prosecutor’s Office to recover the money
invested in the building, which was also dismissed in 2019.

After the applicant initiated this action, criminal proceedings were brought against her for collusion
with the former mayor of Pojăreni, but they have since been suspended.

Relying on Article 1 of Protocol No. 1 (protection of property) to the Convention, the applicant
submitted that she had been deprived of her building and the land under it through no fault of her
own, without compensation. She alleged moreover that the criminal proceedings brought against
her had been intended to intimidate and discourage her from pursuing her compensation claim.

THE DECISION OF THE COURT…

The Court considered that the applicant had “property” within the purposes of Article 1 of the First Additional Protocol to the Convention, as she had a valid title deed in the building until the national courts annulled it on the acceptance of the Prosecutor ‘s action. The annulment of the title constituted an interference with her right to property, which must be regarded as a deprivation of property, to which the second rule of Article 1 of the First Additional Protocol to the Convention therefore applies.

The applicant ‘s complaint concerned the legality of the interference with the right to property. The Court held that non-compliance with legal requirements relating to, for example, guarantees to bona fide buyers and the time-limit for bringing an action could lead to a finding that the intervention was “not in accordance with the law”. However, in the present case it found that the question of practical compliance with the law was closely related to whether intervention was “necessary in a democratic society” and therefore considered this issue first. Similarly, the Court considered it unnecessary, for the purposes of the present case, to determine the question of the legitimate aim pursued by the intervention. It left these issues open and focused on the issue of proportionality.

The Court reiterated that when a matter of general interest is at stake, it is up to the public authorities to act in a timely manner, in an appropriate manner and with the utmost consistency. The Court then proceeded to examine whether the national authorities and the courts complied with those principles.

The ECtHR pointed out that in the Action of 31 July 2007, the Prosecutor’s Office requested the cancellation of the contract for the sale of the building in question on the grounds that the price charged for it was too low and that the procedure was not in accordance with the law. The trial court twice dismissed the action after finding, inter alia, that it had been brought out of time.

The Court of Appeals appears to have exceeded the scope of the prosecutor’s jurisdiction by annulling the contract itself on the grounds that the Prosecutor did not rely on it, namely that the building was part of the public sector and could not be sold to anyone.

In the above context, it should be noted that according to Article 296 of the Civil Code, all assets belonging to the State or local government are presumed to be part of the private sector, unless they have been transferred to the public sector by law or legal procedure. The Court of Appeal failed to clarify the legal framework under which this building is considered to be part of the public sector. Nor has the Government presented such a legal basis in their observations before the Court.

The ECtHR also noted that the sale of the building in question was organized by the Pojăreni Local Council and the Mayor of Pojăreni and was later approved by the Ialoveni County Council. In addition, the contract was registered by a notary and was registered by the Land Registry. According to the decision of the Court of Appeal of December 17, 2013, all the above public authorities made a mistake in the sale, approval and registration of the sale of the building because the building belonged to the public sector. The ECtHR reiterated that the mistakes or omissions of state authorities must be resolved in the best interests of those concerned, especially when no other conflicting private interest is at stake. In other words, the risk of any error by the state authority must be borne by the state and the errors must not be attributed to the detriment of the person concerned.

The applicant was also deprived of her property without compensation. The domestic courts only ordered the municipality of Pojăreni to compensate her for the price she had paid for the dilapidated building sold to her, without taking into account her claims of investment in the renovation of the building. In that way, the courts ruled that the applicant should initiate a new set of proceedings to seek compensation. The Court initially noted that such an approach appears to be contrary to national law and the practice of national courts requiring restitution without further action.

The Government relied on the idea that the applicant had purchased the building as a result of collusion with the former Mayor of the village of Pojăreni. It also pointed out two new criminal investigations against her. The Court noted that the applicant had never been found guilty of criminal collusion with former Mayor Pojăreni and noted with concern the fact that criminal proceedings had been instituted against her in 2014 following the filing of her action against the Community and the Prosecutor for the demand of compensation regarding the renovation. These proceedings do not appear to have been terminated and the Court therefore does not consider them relevant in this case. In any event, the fact that the applicant was not a bona fide purchaser within the meaning of Article 219 3 3 of the Civil Code had not been proved by an irrevocable decision.

Those considerations were sufficient for the Court to conclude that the conditions under which the applicant was deprived of her title deed in the building placed an individual and excessive burden on her and that the authorities failed to strike a fair balance between the public interest on the one hand, and the applicant ‘s right to the peaceful enjoyment of her possessions on the other.

Consequently, there was a violation of the right to respect for property (Article 1 of the First Additional Protocol to the Convention).

Just satisfaction: 160,000 euros (EUR) (pecuniary damage), EUR 5,000 (non-pecuniary damage) and
EUR 2,000 (costs and expenses)


ECHRCaseLaw

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