In a case handled by Wardyński & Partners, the firm has obtained a favourable ruling from the Warsaw Regional Court awarding damages for loss caused by inaction of the authorities and wrongful acts and omissions in administrative proceedings.
Application for compensation for real estate taken for a public road
The facts of the case were as follows. In 2004 the claimant applied for compensation under Art. 73 of the Act of 13 October 1998—Provisions Introducing the Act Reforming Public Administration of Real Estate Taken for Public Roads, which states: “Real estate in the control of the State Treasury or a territorial governmental unit on 31 December 1998 and not owned by it, taken up by public roads, shall become the property of the State Treasury or the relevant territorial governmental unit by operation of law on 1 January 1999, for compensation.” An application for compensation had to be asserted by 31 December 2005 or the claim for compensation would be extinguished.
Undervaluation of the property
After the proceeding for compensation was commenced, the administrative authority began to gather evidence and hired an appraiser to prepare a valuation of the real estate taken by the State Treasury. The appraisal appeared to understate the value of the land. The claimant decided to commission a private appraisal, and that showed that the appraisal in the administrative proceeding reflected only a small fraction of the value of the land.
The claimant presented critical remarks on the original valuation, arguing that its quality was so poor that it was disqualified as evidence. The claimant applied for another valuation to be conducted by another appraiser, but this request was denied, as was a request to seek an opinion on the correctness of how the previous appraisal was prepared from the Arbitration Committee of the Polish Federation of Valuers’ Associations.
So in 2009 the claimant applied on its own to the arbitration committee. In early 2010 the arbitration committee issued an opinion finding that the valuation should not be used for the purpose for which it was prepared because it had disqualifying errors affecting the determination of the value of the property, and did not meet legal and professional standards. This led to exclusion of the appraiser from further involvement in the administrative proceeding.
New appraisal and delay in issuing decision
In May 2010 the administrative authority hired another appraiser to value the property. The new appraisal was issued in June 2010 and was not disputed by the claimant. This meant that all of the material necessary to issue a decision on compensation had been gathered in the case, and the administrative authority notified the claimant accordingly in writing.
But the authority delayed issuance of a decision, notifying the claimant several times that it did not have funds to pay the compensation yet and was waiting for its annual grant from the province for realisation of these tasks. The authority promised that a decision on the merits would be issued within two months after receiving funds from the province.
Because of the delay, the claimant pursued measures to obtain issuance of the decision, filing a complaint with the province governor for failure to resolve the matter on a timely basis. The complaint was ruled on in February 2011, with an order finding administrative inaction and setting an additional period for the authority to resolve the matter. The order stated that the delay was attributable to the administrative authority and not the party.
In June 2011 the administrative authority awarded compensation for taking of the property and subsequently paid the compensation.
Additional compensation for overlong proceedings
The claimant then sought additional compensation from the administrative authority equal to statutory interest, representing the loss incurred as a result of the delay in considering the case and failure to issue a decision by the statutory deadline.
Under the Administrative Procedure Code, an administrative authority is required to resolve a matter without undue delay. A matter requiring explanatory proceedings should be decided within one month, or two months in particularly complicated cases (Art. 35).
In this case, the authority stretched the case over several years, dragging its feet in gathering evidence. Even after drafting the decision, the authority avoided formal issuance of the decision for several months, despite its statutory obligation to issue the decision.
Delay in issuance of decision as an attempt to avoid paying interest
The inaction by the administrative authority in issuance of the administrative decision was an attempt to avoid paying statutory interest for failure to pay the compensation awarded by the deadline stated in a timely decision. According to case law from the administrative courts and the Supreme Administrative Court, in the case of delay or default in payment of compensation for expropriated real estate, the party may demand payment of statutory interest in an administrative proceeding. Consequently it was more advantageous for the authority to delay issuance of the decision, because as long as the decision had not been issued the claimant could not pursue an administrative proceeding seeking default interest.
Case before the regional court
Instead, the claimant had to resort to the courts for payment of damages for inaction of the administrative authority, where the amount of the damages would equal the amount of statutory interest.
Damages were due for the period between the hypothetical date when in accordance with the regulations the decision awarding compensation should have been issued and the date of actual payment of compensation under the late decision. In this case, the decision should have been issued as soon as the authority had all of the evidence before it necessary to issue the decision.
The legal basis for the claim was Civil Code Art. 417 in connection with Art. 4171 §3, providing that if injury is caused by failure to issue a final ruling or decision which was legally required to be issued, redress of the injury may be sought after it is found in the relevant proceeding that the failure was unlawful.
This tort-based liability of an administrative authority depends on fulfilment of three statutory conditions: the unlawfulness of the authority’s act or omission, injury, and a causal connection. These conditions were met here, and the claimant had obtained a ruling by the province governor finding that the authority had unlawfully failed to act on the original application.
The Warsaw Regional Court agreed with the reasoning presented in the claim and awarded damages. The judgment is not yet legally final.
It should be pointed out that the Administrative Procedure Code governs the issue of the timeliness of actions by administrative authorities, as well as their other obligations in the administrative proceedings they conduct. Any wrongful act or omission by an administrative authority may cause an injury to the participants in the proceeding, including actual loss (damnum emergens) as well as lost benefits (lucrum cessans).
But for the injured party to obtain damages, it is necessary to take certain measures of diligence in the administrative proceeding, and all the grounds for award of damages must be proved in court.
Leszek Zatyka, Reprivatisation Practice, Wardyński & Partners