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Claims for damages for administrative inaction

Failure to consider a decree application can be grounds for public entities to make up the loss for depriving the owners of rights to land in Warsaw.

Persons deprived of rights to Warsaw property under the Decree on Ownership and Usufruct of Land in Warsaw of 26 October 1945 (known as the “Warsaw Decree” or the “Bierut Decree”) can now pursue measures to regain their property in kind or to obtain compensation. We wrote more broadly about the procedure in the article “Seeking damages under the Warsaw Decree.” But not all former owners have the same rights or the same chances for enforcing their rights.

The former owners in the worst position are those who failed to file an application under the decree for establishment of temporary ownership (now perpetual usufruct). Such persons essentially cannot count on regaining property in kind, unless they filed the appropriate application under the Act on Administration of Land and Expropriation of Real Estate of 29 April 1985.

Paradoxically, those in the best situation are the former owners whose application for establishment of temporary ownership was denied by a decision of the state authorities under the regime of the People’s Republic of Poland. They can apply through administrative proceedings for a finding of the invalidity of those decisions, and based on that review decision (as a preliminary finding) can then seek to regain their property in kind (if it has not been disposed of in the interim) or demand compensation.

Former owners who did file decree applications but whose applications were never considered, and are only now going to be considered, taking into consideration the intervening changes in the factual and ownership circumstances affecting the given property, are in a difficult position.

Currently, establishment of perpetual usufruct for such persons is denied in most cases solely because of irreversible legal effects from transfer of rights to the real estate to third parties or because of changes to the property (such as construction of a road).

In such instances, an injury to the former owners arises as a result of defective actions by the public administrative authorities, who through their inaction and failure to consider the decree application on a timely basis brought about a situation in which the administrative proceeding commenced several decades earlier was never finally completed, and completion of the proceeding now would require refusal to establish rights in favour of the former owners.

Pursuing claims for damages for a failure to act is much more complicated and requires much greater effort than in the case of claims connected with issuance of a preliminary finding. It also carries high risk.

Entity responsible for inaction

Firstly, it is problematic to determine the entities against which the claim for damages for inaction should be directed. The failure to consider decree applications occurred many decades ago, when various different entities were competent to consider the applications. Originally the decree applications were considered by the State Treasury through its bodies, and in the early 1990s this competence was assumed by the City of Warsaw as a local governmental unit.

The issue of the standing to be sued in this area has never been uniformly resolved in judicial rulings.

Under one approach, the party required to redress the loss may be both the State Treasury and the City of Warsaw—each of them for the period in which it held the competence to consider decree applications, as well as each of them for its own failure to act.

Under another approach, it must be clarified whether under the Regulations Introducing the Territorial Government Act and the Territorial Government Employees Act (Act of 10 May 1990), the City of Warsaw assumed the liability for obligations arising out of the State Treasury’s failure to act, along with the assets, obligations and competencies of the State Treasury. In that situation, the city would be the only entity with the standing to be sued in such proceedings, whether for its own inaction or for the inaction of the State Treasury.

Thus the joint liability of both of these entities for the loss caused by failure to consider a decree application cannot be ruled out. Considering the overall circumstances affecting the injured former owners, this solution deserves to be upheld.

Issue of the limitations period

Another issue that must be clarified is the limitations period on claims for damages, and more specifically when the limitations period begins to run.

Pursuant to Civil Code Art. 4421, a claim for redress of loss caused by an impermissible act becomes time-barred three years after the date when the injured party learned of the injury and of the person required to redress it. However, this period cannot be longer than 10 years after the date when the event causing the injury occurred.

The case law of the courts is not consistent on the issue of commencement of the limitations period.

Some courts find that the time when the injured former owner learns of the loss and the person required to redress the loss is the time when the decision refusing to establish the right of perpetual usufruct becomes legally final—as it is only then that the failure to consider the decree application ceases. This solution appears to be the most valid.

Other courts take the position that the limitations period begins to run at the time a public entity disposes of the real estate through a civil transaction.

Yet other courts, analysing the limitations period on claims against the State Treasury, hold that the limitations period on claims for inaction began to run at the time the State Treasury lost the competence to consider decree applications, that is in 1990. Adopting this interpretation would mean that all claims against the State Treasury for inaction became time-barred long ago.

Connection between the inaction and the loss

Another element examined in cases seeking damages for inaction is the causal connection between the failure to act on the decree application and the resulting loss. In such cases involving alleged inaction by state or local government authorities, the causal connection is extensive and made up of several parts.

In the judicial proceedings, the former owners must demonstrate that for the entire period, i.e. from the time the decree application was filed (typically in the 1940s, or in the early 1950s at the latest) down to the present, it was possible to establish the right of temporary ownership in accordance with the regulations in force over the years and this should have been done. This requires a legal analysis of planning, construction, civil, administrative and other regulations changing over a period of many years, and submission of evidence and opinions.

In this context, it is also crucial to determine the moment at which irreversible legal effects occurred which now prevent establishment of the right of perpetual usufruct. Depending on whether these effects occurred before or after 1990, the liability of the State Treasury or the City of Warsaw is presented differently in terms of the standing to be sued, the causal connection, and the time limitation of claims.

Lack of established case law

The injury in reprivatisation cases typically arises in connection with the state’s unlawful taking over of private property, but it can also arise from the failure to award property rights at a time when it was possible and feasible.

But pursuing redress of reprivatisation loss arising in connection with administrative inaction is complicated, which is undoubtedly not helped by a lack of established case law from the courts, which is only now developing.

The Supreme Court of Poland and the lower courts are now resolving more and more cases arising out of defective actions by state authorities, not necessarily related to reprivatisation. It is expected that judicial rulings in reprivatisation cases will help establish and develop the case law of the Supreme Court across the broader area of the liability of public entities for their defective acts and omissions.

Leszek Zatyka, Reprivatisation Practice, Wardyński & Partners