The Impact of Establishing Personal Contributory Negligence on the Determination of Compensation Amount

The Law on Compensation for Damages Caused by State Administration Institutions (Compensation Law) grants a private person the right to compensation for material damage or non-material harm in administrative proceedings, caused by an unlawful administrative act or unlawful factual action of a state administration institution. There are several cases in court practice where the court rendered a judgment favorable to the applicant, deciding to oblige the institution to compensate for material damage or non-material harm. However, even when an unlawful administrative act or unlawful factual action of a state administration institution is established, damages or non-material harm are not always compensated, or are only partially compensated. This is related to the need for the private person to prove the damages and non-material harm incurred (regarding non-material harm, the determination of the amount of compensation for moral damage largely depends on the court’s discretion), as well as causation between the institution’s unlawful administrative act or unlawful factual action and the damages or non-material harm. Namely, it is important to prove that precisely the institution’s action or decision was the main and decisive factor that caused the damages.

However, when deciding on compensation for material damage and its amount, no less important role is given to the establishment of personal contributory negligence, which is regulated in Article 10 of the Compensation Law. In cases of compensation for moral damage, the court considers all circumstances in their entirety and does not separately distinguish considerations of contributory negligence, as the determination of the amount of compensation for moral damage largely depends on the court’s discretion. In contrast, regarding material damages, if it is established that the person has not done everything possible to prevent or reduce the damages, this is a basis to fully or partially reduce the amount of compensation, depending on the nature and impact of the person’s actions. This finding stems from the judgment of the Department of Administrative Cases of the Senate of the Republic of Latvia of February 16, 2024, in case No. SKA-60/2024 ( Case No. SKA-60/2024).

In this case, the applicant submitted an application to the Jūrmala City Land Commission for the restoration of property rights to real estate owned by his father, which consisted of a residential house and land. The Jūrmala City Land Commission did not make a decision regarding the applicant’s application. The residential house was included in the list of residential houses for privatization, and it was also decided to create real estate with a plot of land, belonging to the Jūrmala City Municipality, for the maintenance of the privatized residential house. Despite the foregoing, a decision was later made to sell both the mentioned residential house and the land necessary for its maintenance within the framework of privatization. By court judgment, the decisions of the Jūrmala City Council were recognized as unlawful. The applicant approached the Jūrmala City Council with an application for compensation for damages and non-material harm caused to him by the council’s unlawful decisions, as the applicant no longer had the right to recover the property owned by his father due to them. The council rejected the applicant’s application, and the applicant filed a corresponding application with the administrative court.

The Administrative Regional Court, by its judgment of December 23, 2021, partially granted the application. The court obliged the Jūrmala City Council to compensate the applicant for damages in the amount of 36,776 euros. The judgment recognized that the unlawful municipal decisions were the main reason why the real estate was alienated to other persons in the privatization process. As a result, the applicant can no longer acquire the property, and he has suffered damages equivalent to the value of the respective real estate. Regarding the amount of damages, the court recognized that the value of the real estate on March 1, 2018, when the judgment recognizing the municipal decisions as unlawful came into force, was to be taken into account.

The judgment stated that, in accordance with court practice in similar cases, the amount of damages is usually determined based on the cadastral value of the property. However, as the court concluded, the cadastral value determined by the State Land Service in 2018 was based on information about the real estate market in 2012, and a more objective information about the property’s value is provided by the real estate valuation prepared by SIA “Latio”, which determined the market value of the real estate in 2019.

At the same time, the Administrative Regional Court’s judgment recognized that the applicant had not done everything possible to prevent the occurrence of damages; namely, the applicant had not actively inquired about the consideration of his application by the municipal land commission and about what additional actions should be taken and documents submitted for the application to be granted.

Accordingly, the Administrative Regional Court recognized that the applicant was contributorily negligent for the occurrence of damages, and this, in accordance with the first paragraph of Article 10 of the Compensation Law, is a basis to reduce the amount of damages to be compensated to the applicant. The court considered half of the property’s market value determined in the real estate valuation to be appropriate compensation under the specific circumstances of the case.

In Case No. SKA-60/2024, the Senate drew attention to the first paragraph of Article 10 of the Compensation Law, according to which the injured party is not entitled to full or partial compensation for damages if they have not, using their knowledge, abilities, and practical opportunities, done everything possible to prevent or reduce the damages. It is necessary to distinguish between establishing the existence of causation and establishing personal contributory negligence. Establishing the existence of causation, as explained by the Senate, allows concluding whether the damages incurred by a person resulted directly from the actions or decisions of a specific state administration institution. In turn, establishing personal contributory negligence affects the determination of the amount of compensation; namely, if it is established that the person has not done everything possible to prevent or reduce the damages, this is a basis to fully or partially reduce the amount of compensation, depending on the nature and impact of the person’s actions. In this case, the court established causation between the council’s unlawful decisions and the fact that the applicant can no longer recover the real estate for which he had requested the restoration of property rights. Namely, the council’s decisions were the main and decisive factor that affected the applicant’s ability to restore property rights to the property owned by his father. In turn, the establishment of the applicant’s contributory negligence was the basis for reducing the amount of compensation.

In Case No. SKA-60/2024, the Senate found no errors in the judgment of the Administrative Regional Court regarding the interpretation and application of the first paragraph of Article 10 of the Compensation Law. The fact that the mentioned legal norm allows not only reducing the amount of compensable damages but also not granting compensation at all does not mean that the court necessarily had to choose the second option. In the specific case, the court took into account the applicant’s contributory negligence and precisely for this reason did not grant the applicant compensation in the amount corresponding to the property’s value in 2019, but only half of it.

It follows from Case No. SKA-60/2024 that merely establishing that a person has suffered damages directly resulting from the actions or decisions of a specific state administration institution is not sufficient for the court to oblige the institution to compensate them. The court must also assess the applicant’s contributory negligence. When assessing the applicant’s contributory negligence, if the court does not find that the applicant has done everything possible to prevent or reduce the damages, it may reduce the amount of compensable damages or not grant compensation at all.

For the author, the findings of Case No. SKA-60/2024 and the purpose of the legal institution of contributory negligence in Article 10 of the Compensation Law resemble another legal institution provided in civil law, namely, the injured party’s duty to mitigate or prevent damages. According to Article 1776 of the Civil Law, the injured party is entitled to claim compensation only for those damages that could not have been avoided by taking measures that are reasonable under the given circumstances. In both cases, the law obliges a person who has suffered a violation of rights to act in such a way as to reduce or exclude the infliction of damages.