CASE OF S.L. AND J.L. v. CROATIA
Preliminary objection joined to merits and dismissed (Article 35-1 - Exhaustion of domestic remedies);Violation of Article 1 of Protocol No. 1 - Protection of property (Article 1 of Protocol No. 1 - Positive obligations);Pecuniary damage - reserved (Article 41 - Just satisfaction)
Dmitry Dedov;Elisabeth Steiner;Erik Møse;Linos-Alexandre Sicilianos;Paulo Pinto De Albuquerque;Ksenija Turković
5. The applicants are sisters who were born in 1987 and 1992 respectively and live in P. 6. In June 1997 the applicants, represented by their mother V.L., concluded a real estate agreement with B.P. in which they expressed their intention of buying a villa of 87 square metres and the adjacent courtyard of 624 square metres in V., a seaside neighbourhood of P. (hereinafter: the “house”). The agreement stated that the house was in poor condition as certain individuals had lived there for several years without any legal basis and had ruined the furniture and installations. 7. The agreement was formalised in a real estate purchase contract of 17 December 1997 by which the applicants acquired ownership of the house for an amount of 450,000 Croatian kunas (HRK). 8. On 26 November 1999 the applicants registered their ownership of the house and the plot of land in the land register in equal shares. 9. On an unspecified date V.L. requested from the relevant Social Welfare Centre (hereinafter: the “Centre”) the authorisation to sell the house owned by the applicants, such authorisation being required under the relevant domestic law in cases where a parent wishes to dispose of a child’s property (see paragraph 39 below). 10. As a result of that request, on 10 April 2000 V.L. and her husband Z.L. (the father of the second applicant) were interviewed at the Centre. They stated that they had bought the house in 1997 for HRK 450,000 and that they had already spent approximately 80,000 Deutsche marks (DEM) renovating it. However, the house required some further investment for which they lacked the necessary means and thus they intended to sell it and to live with one of their parents. They further explained that they owned a retail business and that they had no problems with their children, who both had excellent marks at school. V.L. and Z.L. also promised that they would open a bank account on behalf of their children, into which they would deposit the money from the sale of the house. They pointed out that they had contacted a real estate agency, which was looking for a potential buyer. They also agreed that V.L. would conclude the sale contract once they had managed to find a buyer. 11. In February 2001 Z.L. was arrested and held in detention in connection with a suspected attempted murder and the unlawful possession of firearms. He was later indicted on the same charges in the P. County Court (Županijski sud u P.), which on 10 October 2001 found him guilty and sentenced him to six years’ imprisonment. During the criminal proceedings his defence lawyer was M.I, a lawyer practising in P. 12. On 15 October 2001 M.I. submitted a request to the Centre seeking authorisation for a real estate swap agreement between the applicants and a certain D.M., who was in fact M.I.’s mother-in-law. He provided powers of attorney signed by V.L., Z.L. and E.B. (the father of the first applicant) authorising him to obtain the Centre’s consent to a swap real estate agreement. 13. Together with his request, M.I. provided a draft swap agreement stipulating that D.M. would transfer to the applicants her four-room flat of 78.27 square metres, situated on the fourth floor of a residential building in P. (hereinafter: the “flat”), while the applicants would transfer their ownership of the house to D.M. The draft swap agreement also stated that the values of the properties to be exchanged were the same and that the parties waived their right to object that they had sustained damage as a result of giving the exchanged property away at below half of its real value. M.I. also submitted another document, a supplement to the swap agreement, in which the parties to that agreement acknowledged that V.L. and Z.L. had invested significant sums of money in the house and that, on the basis of the amounts shown on certain available invoices, D.M. would compensate them for those investments. 14. V.L. was invited to the Centre for an interview on 23 October 2001 in connection with M.I.’s request. She stated that her husband had meanwhile been imprisoned and that their retail business had started to go badly, leading her to close it in August 2001. She also explained that she was unemployed and that this situation had affected the applicants, who were no longer doing so well at school. She further stated that she had been obliged to borrow money to pay the bills for the house and that the overall situation had prompted her and Z.L. to exchange the house for a flat in P. with the additional obligation on the part of the flat-owner to pay them the difference in value between the two properties, amounting to some 100,000 DEM according to her estimate. Lastly, V.L. pointed out that E.B., the father of the first applicant, had given his consent to the swap agreement. She also undertook to register the ownership of the flat in the applicants’ names. 15. On 13 November 2001 the Centre gave its authorisation for the swap agreement, whereby the applicants would transfer their ownership of the house to D.M. while the latter would transfer her ownership of the flat and a garage to the applicants. The decision drafted by the Centre specified that V.L. was obliged to provide the Centre with a copy of the swap agreement. 16. In its statement of reasons behind the decision, the Centre pointed out that it had taken note of the powers of attorney provided to M.I. by the applicants’ parents, V.L.’s statement of 23 October 2001, birth certificates for the applicants and land registry certificates for the properties, and the draft swap agreement. It had also noted the fact that Z.L. had been convicted at first-instance of the offence of attempted murder and unlawful possession of firearms. Based on this information, the Centre concluded that the swap agreement was not contrary to the best interests of the applicants since their property rights would not be extinguished or reduced as they would become the owners of a flat which would provide fully suitable living accommodation. 17. On the same day, the Centre gave its authorisation for the supplementary document to the swap agreement by virtue of which D.M. would pay the applicants 5,000 DEM each on account of the difference in value between the exchanged properties. As a condition of this decision, V.L. was obliged to provide the Centre with a bank statement attesting that the payment had been made. In its statement of reasons, the Centre referred to a request made by V.L. for the conclusion of a supplement to the swap agreement and the statement she had given to the Centre. The Centre also found that this would not be contrary to the interests of the applicants. 18. The above two decisions issued by the Centre on 13 November 2001 were forwarded to the lawyer M.I. 19. On 16 December 2001 the applicants, represented by V.L., concluded the real estate swap agreement with D.M. before a Public Notary in P., and the applicants thereby transferred their ownership of the house to D.M. while the latter transferred her ownership of the flat and the garage to the applicants. The swap agreement contained a clause under which the parties agreed that there was no difference in the value of the exchanged properties, and that they had no further claims on that account. It also set down the value of the properties at some HRK 400,000. 20. Based on this contract, the applicants and D.M. duly registered their ownership of the properties with the land registry. 21. On 28 December 2001 lawyer M.I. submitted to the Centre a certificate from the land registry showing that the applicants had registered their ownership of the flat and bank statements showing that they had received the amount of 5,000 DEM each. 22. On 2 and 12 March 2002 the P. Tax Office (Ministarstvo financija, Porezna uprava) declared a tax obligation of HRK 20,000 for each of the parties ‒ based on the declared value of the transaction involved in the swap agreement ‒ which was divided by half in respect of the applicants, who were thus obliged to pay HRK 10,000 each. 23. On 17 November 2004 the applicants, represented by Z.L. as their legal guardian, brought an action against D.M.in the P. Municipal Court (Općinski sud u P.), asking the court to declare the swap agreement null and void (ništav). 24. During the proceedings the applicants argued that the swap agreement had effected the exchange of the ownership of the house ‒ which comprised two flats, each measuring 87 square metres, was only five minutes’ walk from the sea and was worth approximately 300,000 euros (EUR) ‒ for a flat and a garage worth in total no more than EUR 70,000. Given that at the time when the contract was concluded they were only fourteen and nine years old, the Centre should have defended their rights and should not have given its consent to a swap agreement of that kind. In this respect they pointed out that section 265 § 1 of the Family Act listed specific instances in which the property of a minor could be disposed of, and that no such instance had existed in their case. Moreover, the Centre had failed to carry out an on-site inspection or to commission an expert report which would have allowed it to estimate the value of the house and adopt a proper decision concerning the request for authorisation of the swap agreement. The applicants therefore considered that, by failing to take such vital measures, the Centre had allowed an unlawful and immoral property exchange to be executed. In their view, this had resulted in ab initio invalidity of the exchange. The applicants also pointed out that their legal guardian Z.L. had not been party to the discussions concerning the swap agreement. They therefore proposed that the trial court examine several witnesses, including the participants to the swap agreement, the employees of the Centre, the first applicant ‒ who was by that time already seventeen years old ‒, and commission an expert report establishing the value of the properties. 25. On 1 March 2005 the P. Municipal Court dismissed the applicants’ request to take any of the proposed evidence on the grounds that the case could be decided on the basis of the documents from the case file. 26. On 15 April 2005 the P. Municipal Court dismissed the applicants’ civil action. It argued that it was not in a position to re-examine the Centre’s decision to authorise the swap agreement, since that was an administrative decision which could only have been challenged in administrative proceedings. Thus, given that such a decision existed, the P. Municipal Court could not find the swap agreement to be unlawful or contrary to the morals of society. It also pointed out that the swap agreement could possibly be only a voidable contract (pobojan) but no claim to that effect had been made by the applicants. 27. The applicants challenged that judgment by means of an appeal lodged before the P. County Court, arguing that the first-instance court had failed to examine any of their arguments and had thus erred in its decision concerning the validity of the swap agreement. 28. On 19 March 2007 the P. County Court dismissed the applicants’ appeal as ill-founded, endorsing the reasoning of the first-instance court. 29. The applicants then lodged an appeal on points of law before the Supreme Court (Vrhovni sud Republike Hrvatske) on 8 June 2007. The second applicant was represented by V.L., and the first applicant, having in the meantime reached the age of majority, was able to conduct the legal action herself. 30. In their appeal on points of law the applicants argued, inter alia, that the P. had negligently allowed the swap agreement to be concluded without taking into account the value of the properties and the nature of their family circumstances at the time, namely the fact that Z.L. was in detention and that V.L. was known as a person with a problem of drug abuse. 31. On 19 December 2007 the Supreme Court dismissed the applicants’ appeal on points of law as ill-founded and endorsed the decisions of the lower courts, which found that the civil courts were not in a position to re-examine the Centre’s final administrative decision allowing the conclusion of the swap agreement. Moreover, it did not appear to the Supreme Court that the Centre had failed in its protection of the best interests of the applicants. 32. The applicants then lodged a constitutional complaint before the Constitutional Court (Ustavni sud Republike Hrvatske) reiterating their previous arguments before the lower courts. The second applicant was represented by V.L. 33. On 9 June 2010 the Constitutional Court declared the applicants’ constitutional complaint inadmissible as manifestly ill-founded. 34. A report by the Ministry of Social Policy and Youth (Ministarstvo socijalne politike i mladih) of 30 January 2014 submitted to the Court suggests that the Centre was not aware of V.L.’s drug abuse problem nor had it been alerted concerning M.I.’s conflict of interest. 35. According to a report by the Ministry of Health (Ministarstvo zdravlja) of 7 February 2014, V.L. started her drug addiction therapy on 12 December 2003 and terminated it in 2004. She then started again in 2007 and she was still undergoing therapy at the present time. 36. The information available from the e-land registry concerning property in Croatia shows that the house and the land on which it is located measure 225 square metres with an adjacent courtyard of 476 square metres, all of which is registered in the name of D.M. as owner.