THIRD SECTION
 
 
 
 
 
 
CASE OF GRECH AND OTHERS v. MALTA
 
(Application no. 62978/15)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
JUDGMENT
 
 
 
 
STRASBOURG
 
4 June 2019
 
 
 
This judgment is final but it may be subject to editorial revision. In the case of Grech and Others v. Malta,
The European Court of Human Rights (Third Section), sitting as a Committee composed of:
 Branko Lubarda, President,
 Vincent A. De Gaetano,
 Alena Poláčková, judges,
and Fatoş Aracı, Deputy Section Registrar,
Having deliberated in private on 14 May 2019,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1. The case originated in an application (no. 62978/15) 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 three Maltese nationals, Mr David Grech, Ms Mary Josephine Grech, and Ms Dorothy Higgins and three British nationals Ms Gitali Melvin, Ms Joyoti Mary Grech Cato and Mr Christopher Grech (“the applicants”), on 15 December 2015. 2. The applicants were represented by Dr F. Vassallo, a lawyer practising in Valletta. The Maltese Government (“the Government”) were represented by their Agent, Dr P. Grech, Attorney General. 3. On 8 February 2017 notice of the application was given to the Government. 4. The British Government did not make use of their right to intervene in the proceedings (Article 36 § 1 of the Convention). 5. The Government objected to the examination of the application by a Committee. After having considered the Government’s objection, the Court rejects it. THE FACTS
THE CIRCUMSTANCES OF THE CASE
6. A list of applicants is set out in the Appendix. Background to the case
7. The applicants are joint owners of the property at number 204, High Street, Mosta, Malta (hereinafter referred to as “Property A”) having a ground floor footprint of 505 sq.m. and a first floor of a little more than 100 sq.m., with roof terraces, located in the primary town centre. Property A is located adjacent to another property that is also jointly owned by the applicants, namely Villa Grech‑Mifsud, High Street, Mosta (hereinafter referred to as “Property B”). The applicants became owners either through inheritance or donation from their parents on various dates between 1991 and 2011. 8. In 1923, the applicants’ ascendants entered into a rent agreement with Nicolò Isouard Band Club Association (hereinafter referred to as the “Band Club”), whereby they willingly rented Property A to the Band Club for twenty pounds sterling annually (approximately 23.84 euros (EUR)). In 1947 the rent was increased to twenty‑four pounds sterling annually (around EUR 28.62). 9. In 1970, L.G., one of the applicants’ ascendants, filed an application before the Rent Regulation Board (hereinafter referred to as “the Board”), on behalf of all the joint owners at the time, whereby he requested that the annual rent be raised. On 15 December 1970 the Board upheld the request and increased the rent to sixty pounds sterling annually (approximately EUR 71.60), to be paid six months in advance. 10. On 14 August 1978 the applicants’ ascendants entered into a new lease agreement with the Band Club, whereby they willingly rented Property A and part of the garden of Property B (hereinafter, jointly referred to as “the rented property”) to the Band Club for 120 Maltese liras annually ((MTL) – approximately EUR 279.52), to be paid six months in advance. 11. L.G., who died during the constitutional redress proceedings (see hereunder), gave evidence before the Civil Court (First Hall), in its constitutional competence, to the effect that the annual rent due to the applicants was that of MTL 136 (approximately EUR 316), and that the Band Club was actually paying MTL 130 annually (approximately EUR 302). These amounts did not correspond to those agreed upon within the rent agreement of 14 August 1978. In the mentioned proceedings the court concluded that, on an unspecified date, the applicants and the Band Club had entered into a verbal agreement, whereby the annual rent due was increased because the Band Club had requested the use of a further part of the garden of Property B. 12. On 28 October 1980 and again on 10 January 1983 L.G. complained with the Band Club about its use of the rented property as a discotheque and as a restaurant. 13. In 2004 and 2005 the Band Club had requested that it be able to rent a further part of the garden of Property B and for it to purchase the part of the property that was being utilized as the seat of the club. The applicants refused. 14. On 8 August 2009 the applicants appointed an architect who estimated that the rented property ought to at least attract a rental income of EUR 36,700 yearly. Constitutional redress proceedings
15. On 12 February 2010 the applicants or their ascendants (as owners, hereinafter referred to as “the owners”) filed an application before the Civil Court (First Hall) in its constitutional competence. They claimed, inter alia, that their right to peaceful enjoyment of their property, as protected under Article 1 of Protocol No. 1 to the Convention, had been violated. They referred to Article 4 in conjunction with Article 3 of the Reletting of Urban Property (Regulation) Ordinance (hereinafter referred to as ‘the Ordinance’), which precluded them from increasing the rent to reflect the market value of the rented property. 16. On 15 July 2015 the Civil Court (First Hall), in its constitutional competence, inter alia, found that the owners had suffered a violation of their rights as protected under Article 1 of Protocol No. 1 to the Convention, and awarded them the sum of EUR 50,000 in compensation. 17. The court noted the Attorney General’s arguments against the owners whereby he contended that: the owners’ ascendants had not been forced to enter into the rental agreement with the Band Club ‑ they had willingly entered into the agreement which at the time they deemed just; when the owners’ ascendants had entered into the agreement the special legal dispositions regulating the renting of a property as a club (introduced through the enactment of the Reletting of Urban Property (regulation) Ordinance) were already in place and therefore the owners’ ascendants had entered into the agreement with full knowledge of the consequences it would lead to; therefore they had brought the situation upon themselves and could not allege a violation of their rights, nor should the owners be resorting to the courts to alter their situation. 18. The court noted that, in 1923, when the owners had entered into the first rental agreement with the Band Club, the laws enacting the special dispositions concerning renting a property as a club had not yet come into force. The special dispositions came into play between the first rental agreement (1923) and the second rental agreement (1978). The court considered that the rental agreement of 14 August 1978 was an extension of the first rental agreement - the first agreement having been entered into before the special dispositions had come into force. Therefore, the court rejected the Attorney General’s arguments. 19. The court accepted that clubs play a social role in Maltese society, even to date. With this social interest the State was permitted a level of interference. The legality of such interference had not been contested. However, when comparing the circumstances in which the rent agreement had originally been entered into, to the present day circumstances, the element of proportionality had not been respected and thus the applicant’s rights had been breached. 20. As to the owners’ request for the court to establish a raise in the rent payable to them, the court considered that it was not its role to take on functions that the Constitution granted to another organ of the state, just as much as it could not “erase” (tħassar) laws unless it found that they had “no effect” (ma jiswewx). Thus, it was not competent to give the remedy requested by the applicants. This decision was reinforced by the introduction of the new laws in 2014 which updated the rents payable. 21. The court considered that the estimate provided by the ex parte architect did not suffice due to the criteria used and the approximate manner in which the calculations had been done. However, some form of compensation was due. Taking all the circumstances of the case into consideration, the evidence presented before it and the applicable laws, the court awarded compensation in the sum of EUR 50,000. 22. On 26 June 2015 the Constitutional Court, upheld the Attorney General’s appeal and concluded that the owners had not suffered a violation of their rights as protected by Article 1 of Protocol No. 1 to the Convention and therefore no compensation was due. The costs of proceedings at both instances were to be paid by the owners. 23. The Constitutional Court observed that the complaint concerned two rental agreements that were entered into in 1923 and 1978 respectively, between which special legal dispositions concerning properties rented as clubs were introduced. Unlike the first-instance court, the Constitutional Court concluded that the agreement of 14 August 1978 amounted to novation (see relevant domestic law). It was a new rent agreement concerning a larger property and a higher annual rent payable. The intentions of the parties in the original agreement were set aside, and were now regulated by means of a new agreement. The court considered that on 14 August 1978 Articles 3 and 4 of the Ordinance were already in force. Thus, the parties had willingly entered into the agreement with full knowledge of the consequences it would lead to. Therefore the owners could not allege a violation of their rights. The principle volenti non fit injuria applied. The court concluded that the case of the owners did not concern the renunciation of a human right, but rather the exercise on the part of the owners to dispose of their property as they desired. From the evidence presented before it, the Constitutional Court concluded that the agreement of 14 August 1978 established clearly that the owners wanted to enter into a rental agreement for a larger property, with a higher rent to be paid by the Band Club, and had done so. Therefore the owners had not suffered a violation of their property rights. RELEVANT DOMESTIC LAW
24. The relevant domestic law concerning leases of band clubs is set out in Bradshaw and Others v. Malta (no. 37121/15, §§ 21-24, 23 October 2018). 25. In so far as relevant Article 1179 of the Civil Code, Chapter 16 of the Laws of Malta, reads as follows:
“Novation takes place -
(a) when the debtor contracts towards his creditor a new debt, and this is substituted for the old one which is extinguished;”
THE LAW
ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1
26. The applicants complained about the ongoing interference with their property rights in breach of Article 1 of Protocol No. 1 to the Convention which 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.”
27. The Government contested that argument. Admissibility
28. The Court notes that the application is not manifestly ill‑founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. MeritsThe parties’ submissions

(a)   The applicants
29. The applicants submitted that the fact that the agreement could not be terminated impacted the value of the rented property, and their ability to ever enjoy it as its owners. Thus, the legislative measures introduced failed to meet the “foreseeability” requirement since the law did not provide a termination date for the lease in question and no fair balance had been established. While being bound to renew the lease automatically on a yearly basis, up until 2014 they were prohibited from increasing the rent. Following the introduction, in 2014, of the Conditions Regulating the Leases of Clubs Regulations, there was a possibility for a raise in rent which was nevertheless very limited and could not be considered sufficient. In this connection they noted that a 5% payment on annual profits (even assuming a band club acted transparently) was too low and there was no reason to continue burdening owners when by law band clubs were allowed to make an income of more than EUR 200,000 annually. Indeed, in the present case the band club used a significant area within the ground floor for clearly commercial and profit making purposes falling outside the usual band club operations. 30. This burden had been accrued as from 1978 and continued. Relying on the immovable Property Price Index Notice, and the rate of inflation, the applicants considered, contrary to that alleged by the Government, that EUR 302 could not be considered as fair rent up to 2004. This was even more so after that. The applicants submitted that in 2017, the rental value of their rented property was EUR 75,000 annually, thus the rent they were actually being paid placed a disproportionate burden on them, and no procedural safeguards were available to protect their interests. (b)   The Government
31. The Government submitted that the applicants had not suffered an interference as their ancestors had freely entered into the agreement, knowing what the consequences would be. Without prejudice to the above, any interference would have been lawful, in accordance with Chapter 69 of the Laws of Malta (former Chapter 109). It also pursued a legitimate aim, namely the protection of the cultural identity of Maltese citizens. In the Government’s view, band clubs played a very important role in Maltese culture in order to increase and stimulate the local musical talents and thus a public interest persisted even though such a cultural service was given by a private entity as in the present case. 32. In the Government’s view in 1978 and until 2004, EUR 302 annually was a considerable rent and it could still not be said to be a low rent unless it was compared to rents charged to commercial entities or to Maltese persons who struggled to pay high rents. The Government emphasised that the rental valuation presented by the applicants (EUR 36,700 annually) was excessive given the age of the premises (pre second world war), their dimension, and the expenses incurred by the band club to maintain the premises in good condition. Moreover, the applicants had not shown that there had been anyone willing to pay that amount. Furthermore, the Government submitted that in cases where there was a public interest for the measure owners were not due market values. Thus, the applicants had not suffered a disproportionate burden relative to the amount of rent payable until 2014. 33. Following the Regulations introduced in 2014, the rent payable increased by 10% (from the one applicable the year before) every year until 2016 (i.e. according to law, in 2015 the rent payable to the applicants was EUR 317 annually and in 2016 EUR 332.85 annually). As from 1 January 2016 the rent increased by 5% and will continue to do so until 2023, following which it will increase every year according to the index of inflation. As from 2015 the tenant also had to pay an additional rent calculated at the rate of 5% on the annual income (as declared on their financial statement) derived by the club. Indeed in 2015 the total annual rent paid to the applicants by the band club was EUR 702.82 and in 2016 EUR 723.72, which in the Government’s view was a considerable increase to the rent paid prior to the 2014 amendments. Thus, a fair balance had been reached. 34. Lastly, the Government insisted that there was no arbitrary or unforeseeable impact on the applicants given that their ancestor had known the applicable conditions and limitations when he signed the contract in 1964. In any event the Government considered that there existed procedural safeguards, but that the Court should not look into the matter given that the ancestors were aware of the applicable regime in 1964.

Outcome for Article P1-1: violation