FIRST SECTION

CASE OF BALDACCHINO AND FALZON v. MALTA

(Application no. 30806/19)

JUDGMENT

STRASBOURG

14 October 2021

This judgment is final but it may be subject to editorial revision.

In the case of Baldacchino and Falzon v. Malta,

The European Court of Human Rights (First Section), sitting as a Committee composed of:

Krzysztof Wojtyczek, President, Erik Wennerström, Ioannis Ktistakis, judges, and Attila Teplán , Acting Deputy Section Registrar,

Having regard to:

the application (no. 30806/19) 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 two Maltese nationals, Ms Marie Louise Baldacchino and Mr Sergio Falzon (“the applicants”), on 6 June 2019;

the decision to give notice to the Maltese Government (“the Government”) of the application;

the parties’ observations;

Having deliberated in private on 21 September 2021,

Delivers the following judgment, which was adopted on that date:

INTRODUCTION

1. The present application concerns a breach of Article 1 of Protocol No. 1 to the Convention in relation to the disproportionate amount of rent received by the applicants, and the effectiveness of the available remedies in this regard.

THE FACTS

2. The applicants were born in 1962 and 1964 respectively and live in Luqa and Tarxien. They are represented before the Court by Dr M. Camilleri, a lawyer practising in Valletta.

3. The Government were represented by their Agents, Dr C. Soler, State Advocate, and Dr J. Vella, Advocate at the Office of the State Advocate.

4. The facts of the case, as submitted by the parties, may be summarised as follows.

5. The applicants, siblings, co-own a property, ‘Marserg’ St. Thomas Street, Fgura, which they inherited from their parents.

6. On 8 July 1968, the applicants’ mother rented (under title of temporary emphyteusis) the property to a third party, for seventeen years, at 80 Maltese liras (MTL) (approximately 186 euros (EUR)) per year. In 1974 the third party rented the property under title of sub-emphyteusis to another third party (Couple F.) until the end of the concession which was meant to expire on 7 July 1985.

7. On an unspecified date, Couple F. relied on Act XXIII of 1979 amending Chapter 158 of the Laws of Malta, the Housing (Decontrol) Ordinance (hereinafter “the Ordinance”), to retain the property under title of lease, at the rent according to law. Thus, in line with the law, in 1985 the rent was increased to MTL 160 per year (approximately EUR 373) and was to increase again in fifteen years’ time. In the year 2000 the rent being paid was MTL 320 (approximately EUR 745) (which was more than that allowed by law which should have amounted to approximately EUR 519).

8. With the introduction of Act X of 2009 the rent increased every three years according to the cost of living index. In 2015 the rent payable was EUR 720.50. Following a failed attempt to reach an agreement on a new lease the owners refused to accept the rent, and the tenants (Couple F.) started depositing in court EUR 1,000 per year in rent.

9. In 2017 the applicants instituted constitutional redress proceedings claiming that the provisions of the Ordinance as amended by Act XXIII of 1979 which granted tenants the right to retain possession of the premises under a lease imposed on them as owners a unilateral lease relationship for an indeterminate time without reflecting a fair and adequate rent, in breach of, inter alia , Article 1 of Protocol No. 1 to the Convention. They requested the court to award compensation for the damage suffered and to order that the tenants no longer be able to rely on the above-mentioned law to retain possession of the property.

10. During these proceedings the tenants offered to pay EUR 3,567 annually on condition that no further increase of rent be imposed. The tenants were also ready to enter into an obligation that their children would not inherit the lease as allowed by law, once they died. The applicants noted that the court-appointed expert had considered the rental value to be EUR 4,350 and that until they instituted proceedings the tenants had only offered to pay EUR 1,000.

11. According to the Government’s expert, at the time of the drawing up of the report (2018), the property had a sale value of EUR 130,000 and had a rental value of EUR 3,300 annually bearing in mind the improvements made by the tenants.

12. According to the court-appointed expert the sale value of the property in 2016 was EUR 146,000 and the annual rental value was estimated as being in 1985 EUR 863, in 1990 EUR 1,269, in 1995 EUR 1,827, in 2000 EUR 2,610, in 2005 EUR 4,002, in 2010 EUR 4,220, in 2015 and 2016 EUR 4,350. Thus, the total rental value between 1985 and April 2016 was EUR 93,217, on the basis of improvements made by the tenants (amounting to EUR 4,360), while the total rent paid for that period had been EUR 16,765.50.

13. By a judgment of 30 January 2018 the Civil Court (First Hall) in its constitutional competence found a violation of the applicants’ property rights, awarded EUR 15,000 in compensation and declared that the tenants could no longer rely on the impugned law to maintain title to the property. No costs were to be paid by the applicants.

14. In particular, the court rejected the Government’s objection of non-exhaustion of ordinary remedies, as it considered that the Rent Regulation Board (“the RRB”) was not an effective remedy as it would not have allowed the eviction of the tenants who were protected by law. Nor could the negotiations between the parties, who were not on an equal footing, be considered as an alternative remedy. The court was also satisfied that the applicants, sole heirs of their parents, had proved their title to the property.

15. On the merits, the court found a violation in line with European and domestic well-established case-law noting in particular the less weighty legitimate aim today in comparison to 1979 (especially in view of the liberalisation of the rental market in 1995 which however, and without justification, did not affect leases such as those in the present case) and the discrepancy between the rent established by law and that on the open market, irrespective of any improvements done by the tenants which both by law and by contract had to remain to the advantage of the owners.

16. As requested by the applicants, the court ordered that the tenants be prohibited from relying on the relevant law in any future eviction proceedings to be instituted. As to compensation – noting that the courts of constitutional competence did not need to award the market value of the property – in view of the damage caused since 1985, which should however cease in light of the above-mentioned order, it considered that EUR 15,000 plus 5% interest until date of payment would be sufficient compensation.

17. The parties appealed. The applicants appealed solely in relation to the award of compensation.

18. By a judgment of 14 December 2018, the Constitutional Court rejected both appeals and confirmed the first-instance judgment. Costs of the appeal were to be shared by the parties.

19. Act XXVII of 2018 which entered into force on 1 August 2018 provided that despite a judgment in favour, it shall not be lawful for the owner to proceed to request the eviction of the occupier without first availing himself of the new procedure provided by that law (see Relevant domestic law below).

20 . Thus, in 2019 the applicants instituted proceedings before the RRB as required by Article 12B of the Ordinance introduced by Act XXVII of 2018. However, they considered that this procedure, which was still pending, was a lengthy one, leading to a continued status quo for the applicants.

21. On 3 March 2020 the applicants also instituted a fresh set of constitutional redress proceedings complaining that Article 12B of the Ordinance introduced by Act XXVII of 2018, was in breach of their rights under Article 6 and Article 1 of Protocol No. 1 to the Convention. The proceedings are still pending.

RELEVANT LEGAL FRAMEWORK

22. The relevant domestic law is set out in Amato Gauci v. Malta (no. 47045/06, § 19-22, 15 September 2009); Apap Bologna v. Malta (no. 46931/12, § 25, 30 August 2016); and Cauchi v. Malta (no. 14013/19, § 22, 25 March 2021).

THE LAW

23. The applicants complained that that they were still victims of the violation of Article 1 of Protocol No. 1 upheld by the domestic courts given the low amount of compensation awarded as well as the fact that there had been no order to evict the tenants. The provision reads as follows:

“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.”

24. The Government did not explicitly raise an objection as to the applicants’ victim status. However, the Court has already held that it is not prevented from examining of its own motion an applicant’s victim status since it concerns a matter which goes to the Court’s jurisdiction (see Buzadji v. the Republic of Moldova [GC], no. 23755/07, § 70, ECHR 2016 (extracts), and Unifaun Theatre Productions Limited and Others v. Malta , no. 37326/13, § 64, 15 May 2018).

25. The Court reiterates its general principles concerning victim status as set out in Apap Bologna , §§ 41 and 43, cited above).

26. In the present case, the Court notes that there has been an acknowledgment of a violation by the domestic courts. As to whether appropriate and sufficient redress was granted, the Court considers that even though the market value is not applicable and the rent valuations may be decreased due to the legitimate aim at issue, a global award of EUR 15,000 covering pecuniary and non-pecuniary damage for a breach which has persisted since 1985 in relation to a property with a rental value of, for example, EUR 4,350 in 2015, is insufficient.

27 . That is enough to find that the redress provided by the domestic court in the present case did not offer sufficient relief to the applicants, who thus retain victim status for the purposes of this complaint (see, mutatis mutandis , Portanier v. Malta , no. 55747/16, § 24, 27 August 2019).

28. The Court notes that the complaint is neither manifestly ill-founded nor inadmissible on any other grounds listed in Article 35 of the Convention. It must therefore be declared admissible.

29. The applicants submitted that on the termination of the concession in 1985 an excessive and disproportionate burden was put on them due to the extension of the tenants’ rights at law for an inconsequential rent. Moreover, there had been no procedural safeguards available to them. They relied on the general principles and conclusions established in the Court’s case-law concerning such cases. The also considered that the new Article 12B did nothing to ameliorate the situation and only continued to perpetrate the breach of their rights, so much so that the proceedings under this provision they instituted in 2019 were today still pending before the RRB.

30. The Government submitted that there had been no violation of Article 1 of Protocol No. 1. This was even more so given that apart from the rent received by the applicants they had also obtained EUR 15,000 from the domestic courts. They also noted that in so far as in their submissions the applicants had challenged the new Article 12B, the matter was still pending before the domestic courts.

31. The Court refers to its general principles as set out, for example, in Amato Gauci (cited above, §§ 52-59).

32. Having regard to the findings of the domestic courts relating to Article 1 of Protocol No. 1, the Court considers that it is not necessary to re ‑ examine in detail the merits of the complaint. It finds that, as established by the domestic courts, the applicants were made to bear a disproportionate burden. Moreover, as the Court has already found in the context of the applicants’ victim status (see paragraph 27 above), the redress provided by the domestic courts did not offer sufficient relief to the applicants.

33. Furthermore, the Court considers that it need not address the amendments introduced by Act XXVII of 2018 - a complaint which is currently before the domestic courts - because in any event these had no bearing on the situation suffered by the applicants until the introduction of these amendments in 2018, and have had no impact to date.

34. There has accordingly been a violation of Article 1 of Protocol No. 1 to the Convention.

35. The applicants complained that constitutional redress proceedings had not been an effective remedy for the purposes of Article 13. This was even more so given the introduction of Act XXVII of 2018. The provision 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.”

36. The Court notes that the complaint is neither manifestly ill-founded nor inadmissible on any other grounds listed in Article 35 of the Convention. It must therefore be declared admissible.

(a) The applicants

37. Relying on the Court’s case-law, particularly Apap Bologna (cited above), which applied equally to the present case, the applicants submitted that they had not had an effective remedy in relation to the breach of their property rights, as required by Article 13 of the Convention. In particular, the domestic courts had systemically failed to prevent the continuation of the violation and provide adequate redress, as had happened in their case. They emphasized that when eviction was ordered by the first instance-court it would be revoked by the Constitutional Court.

38. As to a declaration that a tenant could no longer rely on the impugned law, they noted that in the case of Brian Psaila vs Attorney General et al , decided by the Constitutional Court on 27 March 2020, the latter had upheld the part of the judgment of the first-instance court stating that the tenants could not rely on – in that case – Article 12 of the Ordinance to continue residing in the property, considering however that they could have title under the new Article 12B of the Ordinance. In the applicants’ view, this was contradictory because title under Article 12B was dependent on title acquired under the principal Article 12 of the Ordinance. Be that as it may, the situation as it stood was one where the Constitutional Court would find that the law in question did not apply between the parties, but would not order eviction. It opted instead to open the door for applicants to initiate eviction proceedings – at least on paper – knowing, however, that in practice and in law such an eviction could not be successful because the RRB would reject the claim in line with the newly enacted Article 12B (11) of the Ordinance, which did not allow for such action, as shown by the decision in her own case.

39. Furthermore, they considered that the introduction of Article 12B of the Ordinance in 2018 showed a continued reluctance by the State to provide an adequate remedy.

(b) The Government

40. The Government submitted that the Constitutional Court had awarded adequate compensation and prevented the continuation of the violation, as it had confirmed the declaration that the tenants could no longer rely on the impugned law. They further considered that eviction would not always be necessary, and that it would be draconian to evict a tenant, outside of the context of an Article 6 compliant procedure to that effect. The Government was of the view that the most reasonable remedy would be monetary compensation which remedies the past violation and prevents any future violation.

41. Moreover, the Government argued that even if constitutional remedies were deemed to be insufficient, the aggregate of the remedies available to the applicants satisfied the requirements of Article 13. They referred to the new Article 12B of the Ordinance, which provided the applicants with the possibility of evicting the tenants and requesting an increase in rent. They submitted examples of cases where the RRB increased the rent to 1.2 to 2 % of the market value.

42. The Court reiterates its general principles as set out in Apap Bologna (cited above, §§ 76-79).

43. The Court has repeatedly found that although constitutional redress proceedings are an effective remedy in theory, they are not so in practice in cases such as the present one. In consequence, they cannot be considered an effective remedy for the purposes of Article 13 in conjunction with Article 1 of Protocol No. 1 concerning arguable complaints in respect of the rent laws in place, which, though lawful and pursuing legitimate objectives, impose an excessive individual burden on applicants (see Portanier , cited above, § 53). No domestic case-law has been brought to the Court’s attention to dispel those conclusions, relevant to the material time.

44. In so far as the Government relied on the new procedure introduced under Article 12B of the Ordinance, the Court notes that this new procedure introduced in 2018 was only available to the applicants after they lodged their constitutional application and a few months before it was decided by the Constitutional Court. Its effectiveness is thus to be examined as a remedy following the finding of a violation by a domestic court. Indeed, the Court has also already found that this was not effective in circumstances similar to those of the present case (see Cauchi , § 85, cited above). Moreover, in the present case those proceedings do not appear to have had any consequence on the applicants’ situation. In particular, in the applicants’ case, it does not appear that a decision has yet been taken (see paragraph 20 above), and more than two years after the domestic judgment they continue to be victims of the violation found.

45. The foregoing considerations are sufficient to enable the Court to conclude that the aggregate of the remedies proposed by the Government did not provide the applicants with an effective remedy.

46. There has accordingly been a violation of Article 13 of the Convention.

47. Lastly, the applicants complained that the introduction of Act XXVII of 2018 impeded the execution of the judgment in their favour, as a result of which the applicants consider that they suffered a breach of Article 6 § 1 of the Convention.

“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”

48. The Government submitted that the applicants had brought a new set of constitutional redress proceedings in relation to this complaint, and that those proceedings were still pending. Thus, the Maltese constitutional jurisdictions had not yet had the opportunity to assess whether Article 12B of the Ordinance complied with the Convention, thereby denying the Court the benefit of the views of the domestic courts.

49. The applicants considered that in such a situation they should not be required to restart constitutional redress proceedings to seek to put an end to the breach of his rights under Article 1 of Protocol No. 1 which had persisted over so many years, as would have been the case for a complaint under Article 13. Furthermore, they noted that Act XXVII of 2018 introducing Article 12B had entered into force in April 2018, that is, while the constitutional redress proceedings had been underway. At the time, they had had a legitimate expectation, based on case ‑ law, that following the judgment in their favour they would be able to start proceedings to evict the tenants. However, Article 12B (11) had put a stop to that expectation.

50. The applicants noted that what the Government was expecting was that the applicants await a number of years for the second set of constitutional redress proceedings to come to an end, and only then bring a new case before the Court, which they considered was inappropriate given the repeated findings of the Court that the Constitutional Court was not an effective remedy.

51. In Cauchi (cited above, § 96), concerning the same complaint, the Court considered that there was no suggestion that the constitutional jurisdictions would not be an effective remedy for the purposes of this type of complaint, and the Court found that there were no special circumstances absolving the applicant in that case from the requirement to exhaust domestic remedies in this regard. In the present case, nothing has been brought to the Court’s attention capable of altering that finding.

52. It follows that the complaint is inadmissible for non ‑ exhaustion of domestic remedies, pursuant to Article 35 §§ 1 and 4 of the Convention.

53. 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.”

54. The applicants claimed 80,000 euros (EUR) in respect of pecuniary damage for all the violations complained of, which persisted beyond 2018, in view of the rental value of the property as determined by the expert in the domestic proceedings. They also claimed EUR 15,000 in non ‑ pecuniary damage.

55. The Government submitted that there had been no explanation as to the applicants’ calculation in respect of pecuniary damage. Moreover, the applicants had already received around EUR 18,000 in rent from the tenants and EUR 15,000 by the domestic courts. In any event, they considered that simply adding up the alleged loss of rent would yield the applicants an unjustified profit for the following reasons: (i) they were only estimates, and not amounts that the applicants would certainly have obtained; (ii) it could not be assumed that the property would have been rented out for the whole period if the tenants had not been protected by the Ordinance ‑ particularly given the boom in property prices over recent years; (iii) the tenants had had to maintain the property in a good state of repair and in the present case had spent EUR 4,380 in that respect; and (iv) the measure had been in the public interest and thus the market value was not called for. The Government also considered that the claim for non-pecuniary damage was excessive.

56. The Court will proceed to determine the compensation to which the applicants are entitled for the loss of control, use and enjoyment of the property which they have suffered as of 1985.

57. It notes that quite apart from relying generally on the expert valuations the applicants have not explained their calculation.

58. In any event the Court has made all the considerations applicable in this type of case as set out in Cauchi (cited above, §§ 102-07).

59. Noting in particular that the award of the domestic court remains payable if not yet paid and that the sums deposited in court by the tenants remain retrievable, the Court awards the applicants jointly EUR 28,000 in pecuniary damage.

60. It also awards the applicants EUR 8,000, jointly, in respect of non ‑ pecuniary damage, plus any tax that may be chargeable.

61. The applicants also claimed EUR 8,962.62 (of which, inter alia , EUR 5,000 represent non-itemised extrajudicial fees and other not specifically quantified amounts refer to outstanding payments from the Government) for the costs and expenses incurred before the domestic courts.

62. The Government submitted that the costs attributed to the Government had already been paid (as shown by the documents submitted) and that any costs claimed which do not result from a judicial taxed bill of costs were not due. Thus, the applicants should not be awarded more than EUR 1,000.

63. 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 were 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, as well as the sums already paid by Government and a lack of clarity in respect of the different sums claimed by the applicants, the Court awards them EUR 1,000, jointly, in costs and expenses, plus any tax that may be chargeable to the applicants.

64. 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,

(a) that the respondent State is to pay the applicants, jointly, within three months:

(i) EUR 28,000 (twenty-eight thousand euros), in respect of pecuniary damage;

(ii) EUR 8,000 (eight thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;

(iii) EUR 1,000 (one 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;

Done in English, and notified in writing on 14 October 2021, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Attila Teplán Krzysztof Wojtyczek Acting Deputy Registrar President