The Impact of Establishing Contributory Negligence on Determining the Amount of Compensation

The Law on Compensation for Damages Caused by State Administrative Institutions (Compensation Law) grants a private individual the right to compensation for pecuniary loss or non-pecuniary harm in administrative proceedings caused by an unlawful administrative act or unlawful actual action of a state administrative institution. In judicial practice, there are several cases where the court delivered a positive judgment for the applicant, deciding to order the institution to compensate for pecuniary losses or non-pecuniary harm. However, even when an unlawful administrative act or unlawful actual action of a state administrative institution is established, losses or non-pecuniary harm are not always compensated, or are only partially compensated. This is related to the need for the private individual to prove the losses and non-pecuniary harm incurred (regarding non-pecuniary harm, determining the amount of compensation for moral harm depends largely on the court’s discretion), as well as the causal link between the institution’s unlawful administrative act or unlawful actual action and the losses or non-pecuniary harm. Namely, it is important to prove that specifically the institution’s action or decision was the main and decisive factor that caused the losses.

However, when deciding on the compensation for pecuniary loss and its amount, no less a role should be assigned to establishing the person’s contributory negligence, which is regulated by Section 10 of the Compensation Law. In the case of compensation for moral harm, the court takes all circumstances into account in their entirety and does not specifically separate contributory negligence considerations, as determining the amount of compensation for moral harm depends largely on the court’s discretion. Conversely, regarding pecuniary losses, if it is established that the person has not done everything possible to prevent or reduce the losses, this is grounds for fully or partially reducing the amount of compensation depending on the nature and impact of the person’s actions. This finding follows from the February 16, 2024 judgment of the Department of Administrative Cases of the Senate of the Republic of Latvia 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 ownership rights to real estate belonging to his father, consisting 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 a real estate property with a plot of land belonging to the Jūrmala City Municipality for the maintenance of the residential house to be privatized. Despite this, a decision was later made to sell both the said residential house and the land necessary for its maintenance within the framework of privatization. By a court judgment, the decisions of the Jūrmala City Council were recognized as unlawful. The applicant turned to the Jūrmala City Council with an application for compensation for losses and non-pecuniary harm caused to him by the Council’s unlawful decisions, as the applicant no longer has the right to recover the property belonging to his father because of 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, satisfied the application in part. The court ordered the Jūrmala City Council to compensate the applicant for losses 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 during the privatization process. As a result, the applicant can no longer acquire the property and has suffered losses equivalent to the value of the respective real estate. Regarding the amount of losses, the court recognized that the value of the real estate on March 1, 2018, when the judgment recognizing the municipal decisions as unlawful entered into force, should be taken into account.

The judgment states that, according to judicial practice in similar cases, the amount of losses 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 is based on information about the real estate market in 2012, and more objective information about the property value is provided by the real estate appraisal 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 losses; namely, the applicant had not actively inquired about the review of his application at the municipal land commission and about what additional actions should be taken and documents submitted for the application to be satisfied.

Accordingly, the Administrative Regional Court recognized that the applicant was contributorily negligent for the occurrence of the losses, and this, according to Section 10, Paragraph one of the Compensation Law, is grounds for reducing the amount of losses to be compensated to the applicant. The court recognized half of the market value of the property determined in the real estate appraisal as appropriate compensation in the circumstances of the specific case.

In Case No. SKA-60/2024, the Senate has drawn attention to Section 10, Paragraph one of the Compensation Law, according to which the victim is not entitled to receive full or partial compensation for loss if they have not, using their knowledge, abilities, and practical possibilities, done everything possible to prevent or reduce the loss. A distinction must be made between establishing the existence of a causal link and establishing a person’s contributory negligence. Establishing the existence of a causal link, as explained by the Senate, allows for the conclusion of whether the losses caused to the person arose directly as a result of the action or decision of a specific state administrative institution. Conversely, establishing a person’s 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 losses, this is grounds for fully or partially reducing the amount of compensation depending on the nature and impact of the person’s actions. In this case, the court has established a causal link between the Council’s unlawful decisions and the circumstance that the applicant can no longer recover the real estate for which he had requested the restoration of ownership rights. Namely, the Council’s decisions were the main and decisive factor that affected the applicant’s possibilities to restore ownership rights to the property belonging to his father. In turn, establishing the applicant’s contributory negligence was the basis for reducing the amount of compensation.

In Case No. SKA-60/2024, the Senate did not find errors in the Administrative Regional Court’s judgment regarding the interpretation and application of Section 10, Paragraph one of the Compensation Law. The fact that the said legal norm allows not only for reducing the amount of losses to be compensated but also for not granting compensation at all does not mean that the court had to choose the second option in any case. In the specific case, the court has taken the applicant’s contributory negligence into account and precisely for that reason has not granted the applicant compensation in an amount corresponding to the property value in 2019, but only half of it.

It follows from Case No. SKA-60/2024 that establishing that a person has suffered losses arising directly as a result of the action or decision of a specific state administrative institution is not yet sufficient for the court to order the institution to compensate them. The court must also evaluate the applicant’s contributory negligence. When evaluating the applicant’s contributory negligence, if the court does not find that the applicant has done everything possible to prevent or reduce the loss, it may reduce the amount of losses to be compensated or not grant compensation at all.

To the author, the findings of Case No. SKA-60/2024 and the purpose of the legal institute of contributory negligence in Section 10 of the Compensation Law recall another legal institute provided for in civil law, namely, the victim’s duty to mitigate or prevent losses. According to Section 1776 of the Civil Law, the victim has the right to claim compensation only for those losses which it was not possible for them to avoid by taking such measures as are reasonable under the circumstances. In both cases, the law imposes an obligation on the person who has suffered from an infringement of rights to act in a way that reduces or excludes the infliction of losses.