CASE OF STANKIEWICZ  v. POLAND
Violation of Art. 6-1;Not necessary to examine under P1-1;Pecuniary damage - financial award;Non-pecuniary damage - financial award;Costs and expenses award - Convention proceedings
Christos Rozakis;Françoise Tulkens;Lech Garlicki;Loukis Loucaides;Peer Lorenzen;Snejana Botoucharova
8. On 9 November 1992, at an auction organised by the Bolesławiec District Office, the applicants, who were the only participants in the bid, purchased real property owned by the District Office for 202,000 zlotys (PLN). 9. On 2 August 1996 the Bolesławiec District Prosecutor, acting on behalf of the State Treasury and relying on the 1991 Law on unjustified enrichment at the expense of the State Treasury, sued the applicants in a civil court, seeking payment in the amount of PLN 111,046. The prosecuting authorities referred to Article 7 of the Code of Civil Procedure (see paragraph 31 below) and invoked their powers as the guardians of the legal order. They submitted that the applicants had purchased the property concerned under a compensatory scheme for persons who had abandoned their property on territories beyond the Bug River that had belonged to Poland before the Second World War. Under this scheme, governed chiefly by the provisions of the Land Administration and Expropriation Act of 29 April 1985 (“the Land Administration Act” – see paragraphs 38-44 below), the applicants had a “right to credit”, that is, the right to count the price of the abandoned property towards the price of the property to be purchased from the State Treasury. 10. The prosecuting authorities further argued that the purchase price, which partly comprised compensation for the property left by the applicants’ legal predecessors in Trembowla, in the former Polish territories beyond the Bug River, had been calculated wrongly. They averred in that respect that the value of the property, as assessed by expert A.Ż., amounted to PLN 125,130. Later, a month before the contract was concluded, the same expert had assessed the value of the same property at PLN 218,985. The prosecuting authorities, harbouring certain doubts as to the soundness of the estimates, had instituted investigations and appointed a new expert, who had estimated the value of the abandoned property at only PLN 90,953. Consequently, as the value of the house that the applicants’ legal predecessors had abandoned in Trembowla was much lower than the price the applicants had paid for the property in Bolesławiec, the State had sold them the latter property at a considerable loss. The plaintiff prosecuting authority further argued that the first expert, A.Ż., had had regard to the market value of the Trembowla property, whereas under the relevant legislation he should have taken the technical value of the property into account. As the applicants had refused to comply with the Bolesławiec District Office’s demand to pay PLN 111,046, the prosecuting authorities claimed that the applicants should repay that amount to them. 11. The applicants argued in their pleadings that the State Treasury, which had sold them the property in Bolesławiec under the provisions of the Land Administration Act, had had the expert estimates at its disposal and had not put forward any objections at that time. They submitted that the estimate relied on by the prosecuting authorities in their statement of claim was based on the assumption that the property in Trembowla was in a rural location, which was incorrect as it was situated in a town. 12. On 18 December 1997 the Nowy Sącz Regional Court dismissed the prosecutor’s claim against the applicants, considering it to be unfounded. 13. The court first observed that the applicants had bought the property at a public auction organised by the Bolesławiec District Office under the compensation scheme for former owners of properties in the former Polish territories. For the purposes of the auction they had submitted to the authorities two successive expert opinions concerning the value of the property owned by their legal predecessors in Trembowla, prepared by expert A.Ż. He had estimated the value of the property abandoned in Trembowla at PLN 218,985. As the value of the property they had purchased from the Bolesławiec Municipality amounted to PLN 202,000, the applicants had not been obliged to pay anything to the municipality. 14. The court considered that the crux of the legal issue it had to resolve lay in the determination of the methods and criteria to be used when assessing the value of properties abandoned in the pre-war Polish territory. It referred to the Land Administration Act, applicable to the compensatory scheme at that time, and to the Cabinet’s ordinance issued on the basis of section 81 of said Act. Under section 6 of the ordinance, the value of the abandoned land was to be assessed with reference to the current market price of land, and the value of houses with reference to their so-called reconstruction value. 15. The court further observed that the relevant legislation did not lay down any other criteria for the valuation of the properties concerned. The properties therefore had to be valued on a case-by-case basis, with reference to all the factors relevant to a particular case. In such circumstances, the court had to make a choice relying on the conclusions of the experts commissioned to submit their reports to the court. 16. Accordingly, the court took account of expert opinions prepared by experts W.A. and A.M. for the purposes of the investigations conducted by the prosecuting authorities in connection with the purchase of the property. It also had regard to the findings and estimates made for the purpose of the civil proceedings by experts A.D., J.K. and T.L., who had been assigned to the case by the court. The court further noted the conclusions of an opinion prepared at the applicants’ request by expert S.S. 17. The court concluded that, in the light of the various arguments advanced by the experts, the price paid by the applicants in 1992 corresponded to the value of the property abandoned in Trembowla. 18. Lastly, the court had regard to the fact that the applicants had, in the meantime, sold the property in question and obtained PLN 180,992 for it. This, in the court’s view, confirmed its finding that the price for the property, fixed by the District Office in 1992 at PLN 202,000, had been excessive. 19. The court further ordered the Bolesławiec District Office of the State Treasury to repay to the applicants the litigation costs they had borne in the proceedings, in the amount of PLN 14,177.26. The court referred to Article 98 of the Code of Civil Procedure, taken in conjunction with Article 106. 20. The prosecuting authorities appealed, claiming that the Regional Court, in estimating the value of the properties concerned, had failed to take into account all the relevant expert opinions. In addition, the Regional Court’s decision to award the legal costs borne by the defendants had been ill-founded. They argued that, since the plaintiff in the case had been the prosecutor, the general principle whereby the unsuccessful party in a civil case bore the litigation costs, enshrined in Article 98 of the Code of Civil Procedure, was not applicable. 21. The applicants, in reply to the appeal, submitted that the assessment of the value of the abandoned property had been thorough and had been based on five expert opinions prepared by seven experts. 22. As to the litigation costs, they argued that the prosecuting authorities, while acting on behalf of the District Office, had in fact been seeking to protect the financial interests of the State Treasury rather than to act as the guardian of the legal order. Hence, the prosecution had not been acting under Article 7 of the Code of Civil Procedure, that is, to protect the rule of law or citizens’ rights, or in the public interest. 23. In such a situation, had the prosecution been exempted from operation of the general principle of responsibility of the unsuccessful party for the litigation costs, they would have been placed at an unfair advantage vis-à-vis the other party. 24. Hence, Article 106 of the Code of Civil Procedure should be applied to their case in the manner advanced by the Supreme Court, which had stated that the term “State Treasury” used in Article 106 of the Code of Civil Procedure should by no means imply that an award of costs for or against the State Treasury was ruled out in situations in which the prosecuting authorities acted in a civil case representing the financial interests of the State Treasury (decision of 6 July 1966, I Cz 62/66 OSP 1967/6/140). 25. On 7 April 1998 the Cracow Court of Appeal dismissed the prosecutor’s appeal in so far as it related to the price of the property concerned. The court noted that the first-instance court had had regard to expert opinions prepared by seven experts. It had carefully examined their conclusions and explained convincingly, with reference to the detailed findings of their reports, why it had found the price paid by the applicants for the property to be correct. 26. The court also partly amended the first-instance judgment by refusing to award the applicants their legal costs. The court considered that the situation of a prosecutor bringing a civil action on behalf of a third party represented a special case. He or she could not be regarded as a mere party to civil proceedings. This singular nature of the prosecutor’s role in a civil case was reflected in the rule on costs contained in Article 106 of the Code of Civil Procedure. Under that provision, the participation of the prosecutor in a civil case did not entail for the other party a right to reimbursement of the litigation costs. Article 106Therefore, and in view of the fact that the Bolesławiec District Office had not joined the proceedings as a plaintiff, all litigation costs, including the costs borne in connection with the appellate proceedings, had to be borne by the defendants. 27. Under Polish law all persons, with the exception of public authorities and institutions, are obliged to pay a court fee when lodging a statement of claim with the competent civil court. As the case proceeds, a party is obliged to pay additional court fees when lodging any further appeals. 28. Under Article 98 of the Code of Civil Procedure, the costs of litigation necessary for the effective conduct of a case are borne by the unsuccessful party to the proceedings. The costs of litigation comprise the court fees referred to above, legal fees paid to professional legal representatives and various other items of expenditure incurred in connection with the proceedings, such as transport costs and loss of salary as a result of participation in the hearings. 29. An exception to this general principle is provided for in Article 101 of the Code. Pursuant to this provision, the court may not order the losing defendant to pay the costs of litigation if he or she did not cause the proceedings to be instituted and acknowledged the claim at a first hearing. 30. The scope of operation of the general principle whereby the unsuccessful party bears the litigation costs, referred to above, is also mitigated by Article 102 of the Code. This provision enshrines the principle of equity in respect of litigation costs and stipulates that the court may order the losing party to pay only a part of the litigation costs, or may exempt it altogether from the obligation to pay these costs, where the 31. Under Article 7 of the Code of Civil Procedure, the public prosecutor may participate in civil proceedings whenever it is necessary to protect the rule of law or citizens’ rights, or in the public interest. Pursuant to Article 55 of the Code, the prosecuting authorities are obliged to indicate the person or institution on behalf of which they have instituted the proceedings. Under Article 111 of the Code, the prosecuting authorities are exempt from the general obligation to pay court fees. 32. The court serves of its own motion the statement of claim on this person or institution, which is authorised to join the proceedings as a plaintiff. 33. Article 106 of the Code reads: “The participation of the prosecutor in a civil case shall not give rise to reimbursement of litigation costs either to or from the State Treasury.” 34. According to the case-law of the Supreme Court, Article 106 of the Code of Civil Procedure is applicable only if the prosecutor joined a party in the course of the proceedings and not if he instituted them himself (decision of 17 June 1966, I Cz 54/66). 35. The Supreme Court further held: “Article 106 of the Code is applicable only to cases in which the prosecutor participates in civil proceedings for the purposes indicated in Article 7 of the Code, that is, to protect the rule of law or citizens’ rights, or in the public interest. The term ‘State Treasury’ used in Article 106 of the Code of Civil Procedure in no sense implies that an award of costs for or against the State Treasury is ruled out in situations in which the prosecuting authorities act in a civil case representing the financial interests of the State Treasury in connection with its acts.” (decision of 6 July 1966, I Cz 62/66 OSP 1967/6/140) 36. In its judgment of 12 June 2002, the Constitutional Court of Poland, examining the compatibility with the Constitution of certain provisions of civil procedure applicable in competition proceedings, observed: “... exemption from the obligation to pay court costs, in particular costs other than the court fees, cannot be automatic in nature, that is to say, it cannot create a situation in which the successful party would not have any claim to have his or her costs reimbursed. In the Court’s view, the particular circumstances of one of the parties or the particular character of the case may be such that the creation by law of a mechanism allowing for such a situation cannot be ruled out from the outset ... nevertheless, it may not result in a state of affairs in which a successful private party is obliged to bear the full financial cost of his or her participation in the proceedings. In some situations such an outcome might even lead to the economic benefit deriving from the ruling in the party’s favour being cancelled out. If the legislature, having regard to circumstances militating in favour of such a solution, adopts an approach which allows the losing party to be completely exempted from the obligation to pay costs, it should at the same time create a separate legal mechanism enabling the successful party to obtain reimbursement of the costs it incurred from another source. ... Exemption of the losing party from any obligation to pay costs, without the successful party having any possibility of having his or her costs compensated, amounts to a restriction of the right of access to a court.” 37. In its judgment of 6 September 2001 (P/3/01), the Constitutional Court observed that the principle of equality before the law which manifested itself in, among other things, the right of equal access to the courts and the right to a fair hearing, was also applicable to issues concerning litigation costs. Hence, the principle that the successful party should have its costs reimbursed, and the unsuccessful party bear the financial cost of the proceedings, must be regarded as consistent with the principles of equality and equity. 38. Since 1946 Polish law has provided that persons repatriated from the territories beyond the Bug River which belonged to Poland before the Second World War are entitled to have the value of the property abandoned as a result of the Second World War deducted either from the fee for the right of “perpetual use” or from the price of immovable property purchased from the State Treasury. 39. These provisions were repeated in several successive statutes. At the material time, the Land Administration Act governed the legal situation of persons entitled to such compensation. 40. The obligation to compensate repatriated persons was laid down in section 81 of the Act, the relevant parts of which provided that persons who, in connection with the war that began in 1939, abandoned real property in territories not at present belonging to the Polish State and who, by virtue of international treaties concluded by Poland, were to obtain equivalent compensation for the property abandoned abroad, would have the value of the abandoned real property offset against the fee for the right of perpetual use of land or against the price of a building plot and the State-owned buildings or premises situated thereon. 41. At the material time in the present case, the procedure for implementation of section 81 of the Land Administration Act was laid down in the Cabinet’s Ordinance of 16 September 1985 on the principles applicable in connection with offsetting the value of real property abandoned abroad against the price of a title to real property or against the fee for perpetual use. 42. Rules concerning the determination of the value of the abandoned property were set out in the Cabinet’s Ordinance of 16 September 1985 (as amended) on the offsetting of the value of real property abandoned abroad against the fee for perpetual use or against the price of a building plot and buildings situated thereon (Rozporządzenie Rady Ministrów w sprawie zaliczania wartości mienia nieruchomego pozostawionego za granicą na poczet opłat za użytkowanie wieczyste lub na pokrycie ceny sprzedaży działki budowlanej i położonych na niej budynków – “the 1985 Ordinance”). 43. Paragraph 3 of the 1985 Ordinance provided, in its relevant parts, as follows: “If the value of the property [abandoned abroad] exceeds the price of the real property that has been sold ..., the outstanding amount can be offset against the fee for the right of perpetual use, or against the price of an industrial or commercial plot of land and any commercial or small-business establishments, buildings designated for use as workshops or ateliers, holiday homes or garages situated thereon.” 44. Paragraph 5 provided that a first-instance body of the local State administration competent to deal with town and country planning should issue the decisions on offsetting the value of property abandoned abroad. Paragraph 6 laid down certain general rules relating to the valuation of such property.