The case concerns the fairness of civil proceedings between private parties regarding the payment of a sum of money.
CASE OF CVETKOVIĆ v. CROATIA
(Application no. 28539/16)
22 September 2022
This judgment is final but it may be subject to editorial revision.
In the case of Cvetković v. Croatia,
The European Court of Human Rights (First Section), sitting as a Committee composed of:
Péter Paczolay, President,
Davor Derenčinović, Judges,
and Liv Tigerstedt, Deputy Section Registrar,
Having regard to:
the application (no. 28539/16) against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 18 May 2016 by a Croatian national, Ms Ivanka Cvetković (“the applicant”), who was born in 1964 and lives in Biograd na Moru, and was represented before the Court by Mr L. Brčić, a lawyer practising in Biograd na Moru;
the decision to give notice of the complaint concerning the applicant’s right to a fair hearing to the Croatian Government (“the Government”), represented by their Agent, Ms S. Stažnik, and to declare the remainder of the application inadmissible;
the parties’ observations;
Having deliberated in private on 30 August 2022,
Delivers the following judgment, which was adopted on that date:
SUBJECT MATTER OF THE CASE
1. The case concerns the fairness of civil proceedings between private parties regarding the payment of a sum of money.
2. On 8 July 2011 the applicant signed a preliminary contract for the sale of her flat for 107,000 euros (EUR) to L.K. In accordance with Article 3 § 2 of the contract, L.K. paid the applicant EUR 11,000. The relevant provision reads as follows:
“In drawing up this preliminary contract, the buyer shall pay the seller a deposit [kapara] in the amount of EUR 11,000 …, which the seller shall confirm by signing this preliminary contract.”
3. L.K. was required to pay the remaining amount of EUR 96,000 within three months from the signing of the preliminary contract.
4. As provided in section 303(1) of the Civil Obligations Act, if at the signing of a contract one of the parties gives an amount of money as a deposit (kapara; arrha) indicating that the contract has been agreed with the other party, the contract is to be deemed binding from the moment the deposit is given, unless otherwise agreed. Furthermore, in accordance with section 304 of the Civil Obligations Act, where the depositing party is liable for the non‑performance of a contract, the other party is entitled to accept the deposit as satisfactory compensation. On the other hand, where a party that has received a deposit is liable for non-performance of a contract, the depositing party is entitled to request the recovery of double the amount of the deposit.
5. On 15 July 2011 L.K. informed the applicant that the flat had defects because it had insufficient insulation. He considered that this constituted a hidden defect, as a result of which he refused to sign the main contract. He asked the applicant to return to him the amount paid. The applicant did not agree and asked for the execution of the preliminary contract.
6. On 7 September 2011 L.K. brought a civil action against the applicant, seeking reimbursement of the amount paid and stating that he was terminating the contract. The applicant contested the claim, arguing that she had not hidden any relevant information and asking for the contract to be executed.
7. During the proceedings, L.K. argued that, although the preliminary contract had stated that the buyer was to pay a deposit (arrha), the payment in question was in fact a portion of the purchase price (an advance payment), while the remainder of the price was to be paid within three months. Furthermore, had a deposit been agreed in the legal sense of the term, it would have been necessary to specify in the contract the consequences for both parties in the event of default. Accordingly, as his primary claim L.K. requested reimbursement of EUR 11,000, and, alternatively, that the applicant pay him double the amount of the deposit because it had been the applicant’s fault that the main contract had never been signed.
8. At the hearing held on 31 March 2014, the applicant stressed that the sum of EUR 11,000 had been a deposit, as explicitly stated in the preliminary contract, and that she should not be obliged to pay it back because it was not her fault that the main contract had never been signed.
9. On 8 May 2014 the Municipal Court dismissed L.K.’s civil claim in its entirety in accordance with section 304 of the Civil Obligations Act. Since the contract had not contained a requirement for any special insulation, the court did not find any hidden defects in the flat which would justify termination of the contract.
10. L.K. appealed, arguing that the first-instance court had wrongly concluded that the parties had agreed on a deposit, since the amount paid had only been an advance payment. The applicant did not file a reply to the appeal.
11. On 25 November 2014 the Zadar County Court reversed the first‑instance judgment and ordered the applicant to pay L.K. EUR 11,000. The relevant part of that judgment reads as follows:
“In this legal matter, the following facts are undisputed:
– that the parties … signed a preliminary contract … and that, in accordance with Article 3 § 2 [thereof], the plaintiff, as buyer, paid the defendant, as seller, the amount of EUR 11,000, while undertaking to pay the remainder of the purchase price in the amount of EUR 96,000 within three months following the date of the signing of the preliminary contract and …
– that, by simple notice of the plaintiff dated 15 July 2011, the preliminary contract was terminated.
From the facts of the case as presented in the claim, as well as the allegations of the plaintiff during these proceedings, by which the court is bound in accordance with section 186(1) of the Civil Procedure Act, it follows that this constituted a preliminary contract; however, the decisive circumstance in this legal matter is that there was a termination of the legal transaction within the meaning of section 360 of the Civil Obligations Act, so the question arises as to the legal consequences of such termination.
This appellate court finds that the provisions of section 368(2) of the Civil Obligations Act should be applied to this specific case, namely that in a situation where one party has fulfilled the contract in full or in part, that party has the right to receive what it has given – in this instance, EUR 11,000 …”
12. On 2 January 2015 the applicant lodged a constitutional complaint, arguing that the second-instance judgment had violated her right to a fair trial. On 18 November 2015 the Constitutional Court dismissed the applicant’s complaint as ill-founded. That decision was received by the applicant on 8 December 2015.
13. The applicant complained, under Article 6 § 1 of the Convention, that the second-instance court’s judgment had lacked adequate reasoning and had been contrary to the Supreme Court’s case-law on the matter.
THE COURT’S ASSESSMENT
14. The Government submitted that the applicant had failed to exhaust domestic remedies in that she never lodged a reply to L.K.’s appeal or an extraordinary appeal on points of law. In that connection, the Court notes that, according to section 359 of the Civil Procedure Act, the parties are not required to submit a reply to the appeal and there are no legal consequences if they fail to do so. Moreover, the Court has already held that an extraordinary appeal on points of law is not an effective remedy capable of addressing complaints which do not concern divergent domestic case-law (see Mirenić-Huzjak and Jerković v. Croatia, no. 72996/16, § 54, 24 September 2019). In any event, the Constitutional Court did not declare the applicant’s constitutional complaint inadmissible for non-exhaustion of legal remedies but held that her complaint was manifestly ill-founded. By doing so, the Constitutional Court implicitly accepted that the applicant’s complaint had satisfied the formal criteria of exhaustion of remedies, and the Court sees no reason to hold otherwise (see Bjedov v. Croatia, no. 42150/09, § 48, 29 May 2012).
15. The Court thus rejects the Government’s objections. It further notes that the applicant’s complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It also notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.
16. The general principles concerning the obligation for the courts to give sufficient reasons for their decisions have been summarised in Anđelković v. Serbia (no. 1401/08, § 24, 9 April 2013), and Petrović and Others v. Montenegro (no. 18116/15, § 41, 17 July 2018).
17. The Court reiterates that Article 6 of the Convention cannot be understood as requiring a detailed answer to every argument (see Van de Hurk v. the Netherlands, 19 April 1994, § 61, Series A no. 288). If, however, a submission would, if accepted, be decisive for the outcome of the case, it may require a specific and express reply by the court in its judgment (see Hiro Balani v. Spain, 9 December 1994, §§ 27-28, Series A no. 303‑B, and Ruiz Torija v. Spain, 9 December 1994, §§ 29-30, Series A no. 303‑A).
18. The parties agree that it was decisive for the outcome of the present case to determine the legal nature of the amount paid by L.K. In that connection, L.K. argued that it was an advance payment and that the amount paid formed part of the negotiated price. The applicant, on the other hand, relying on the express wording of Article 3 § 2 of the preliminary contract (see paragraph 2 above), maintained that it was a deposit within the meaning of section 303(1) of the Civil Obligations Act (see paragraph 8 above).
19. The Court further notes that the first-instance court ruled in the applicant’s favour, whereas the second-instance court overturned that judgment and granted L.K.’s claim. In doing so, it disregarded the applicant’s clear and precise submissions made throughout the proceedings and contained in the case file (see paragraph 8 above) as well as the explicit stipulation in the preliminary contract (see paragraph 2 above), and it provided no answer as to the legal nature of the amount in question.
20. As to whether the silence of the appellate court can be construed as an implied rejection of the applicant’s argument (see Ruiz Torija, cited above, § 30), the appellate court stated that it had based its judgment on the “facts as they were presented in the claim, as well as the allegations of the plaintiff during the proceedings” (see paragraph 11 above). The court made no reference to the applicant’s arguments which she maintained throughout the proceedings, leading it to an erroneous conclusion that the crucial facts of the case had not been disputed between the parties (see paragraphs 8 and 11 above). In such circumstances, it is impossible to ascertain whether the second-instance court simply neglected to deal with the applicant’s arguments concerning the nature of the sum in question or whether it intended to dismiss them and, if so, what were the reasons for that decision (compare Hiro Balani, cited above, § 28).
21. It is not the Court’s task to examine whether the payment at issue in the present case was indeed a deposit or a simple advance payment, it being for the national courts to determine questions of that nature (see Hiro Balani, cited above, § 28). However, in these circumstances, the Court cannot but conclude that the second-instance court made assertions which were palpably incorrect, without giving any reply to the central legal argument in the case, with the result that the impugned proceedings fell short of the requirement of a fair hearing.
22. There has accordingly been a violation of Article 6 § 1 of the Convention.
APPLICATION OF ARTICLE 41 OF THE CONVENTION
23. The applicant did not submit a claim for just satisfaction. Accordingly, the Court considers that there is no call to award her any sum on that account.
FOR THESE REASONS, THE COURT, UNANIMOUSLY,
1. Declares the application admissible;
2. Holds that there has been a violation of Article 6 § 1 of the Convention.
Done in English, and notified in writing on 22 September 2022, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Liv Tigerstedt Péter Paczolay
Deputy Registrar President