2002/04/30 - Pl. ÚS 18/01: Liability of State for Damage

30 April 2002

HEADNOTES

Civil

law, which includes Act No. 82/1998 Coll., defines damage as property

detriment which can be objectively expressed in a general equivalent,

i.e. money. True damage is considered to be property detriment

expressible in money, which consists of reduction, lowering or other

devaluation of the injured party’s already existing property, as well as

in the outlay of expenses for the removal of this devaluation. It is

apparent from this very definition that damage can also be the expenses

actually incurred by parties to proceedings for the proceedings, and

that the state is also liable for damage thus arising, provided, of

course, that other conditions for this liability relationship to arise

have been fulfilled, i.e. the existence of a causal relationship between

the creation of the damage and the statutorily presumed damaging event,

i.e. with the issuance of an unlawful decision or with an incorrect

official procedure. The legislature itself, as indicated by § 31 para. 1

of Act No. 82/1998 Coll., expressly includes proceedings costs in the

damage which is compensable under this Act; nonetheless, as is evident

from comparing the following two paragraphs, it does not maintain the

same approach to all entities which come into consideration. It sets

different conditions under which incurred proceedings costs can be

compensated under the Act when, in relation to those damaged by

incorrect official procedure it sets as the only condition a causal

relationship between the incurring of proceedings costs and the

procedure in question (para. 2), while in relation to those entities

which were damaged by an unlawful decision (apart from the condition

that the proceedings costs have not yet been awarded under procedural

regulations, which is acceptable), conditions further compensation of

incurred expenses on the existence of damage which arose through the

decision. In the words of the explanatory report, “proceedings costs can

be paid as part of compensation of damages caused by the decision, but

they may not be the only damage”. In this way the contested provision

then de facto divides those entities to which it applies who incurred

property detriment in connection with the issuance of an unlawful

decision into two categories. One consists of those who incurred damage

consisting “only” of the incurred proceedings costs, and the other of

those who at the same time incurred other damage, and only this

second-named group, under para. 3, is entitled to compensation of

proceedings costs as part of damage compensation (assuming that

compensation of theses expenses was not awarded under procedural

regulations). In the Constitutional Court’s opinion, the legislature is

thus making differences which can not be justified on legal grounds, as

in both cases there is a reduction in the injured party’s property, and

there is therefore damage in the above-mentioned sense, the right to

compensation of which is guaranteed by Art. 36 para. 3 of the Charter.

Under Art. 4 para. 2 of the Charter, limitations can be placed upon

fundamental rights and freedoms under the conditions prescribed by this

constitutional document only by law, and in employing the provisions

concerning limitations upon the fundamental rights and freedoms their

essence and significance must be preserved, and such limitations may not

be misused for purposes other than those for which they were laid down

(Art. 4 para. 4 of the Charter). Thus, if everybody is entitled to

compensation for damage caused to him by an unlawful decision by a

court, other state body or public administrative body or by incorrect

official procedure, and the conditions and details of exercise of this

right are set by law (Art. 36 para. 3, para. 4 of the Charter), then

such a law, issued on the basis of constitutional authority, may not

completely annul (negate) the right to compensation of damage arising as

a consequence of such conduct and thereby deny, even if only in certain

cases, a constitutionally guaranteed fundamental right. Thus, in the

cases of persons who incurred damage consisting “only” of proceedings

costs, the procedure projected by the legislature in the contested

provision led to the complete exclusion of this category of entities

from the right to compensation of damages caused by the unlawful

decision of a court, other state body or public administrative body.

Such a procedure is in sharp conflict with the constitutional order of

the Czech Republic and does not respect the principle of minimizing

interference in the fundamental rights in the form of possible

limitation and maximizing the preservation of the substance of a

fundamental right. Therefore, the Constitutional Court annulled the

contested provision due to conflict with Art.36 para. 3, in connection

with Art. 1 para. 1, Art. 3 para. 1 and Art. 4 para. 4 of the Charter.

 

 

CZECH REPUBLIC

CONSTITUTIONAL COURT
JUDGMENT


IN THE NAME OF THE CZECH REPUBLIC

 


The

Plenum of the Constitutional Court decided on the petition from the

District Court for Prague 10 to annul § 31 para. 3 of Act No. 82/1998

Coll., on Liability for Damage Caused During the Exercise of State Power

by a Decision or Incorrect Official Procedure and Amending Czech

National Council Act No. 358/1992 Coll., on Notaries and Their

Activities (the Notarial Code) as amended by Act No. 120/2001 Coll.,

with the participation of the Chamber of Deputies and the Senate of the

Parliament of the Czech Republic as parties to the proceedings, as

follows:

 

Provision

of §  31 para. 3 of Act No. 82/1998 Coll., on Liability for Damage

Caused During the Exercise of State Power by a Decision or Incorrect

Official Procedure and Amending Czech National Council Act No. 358/1992

Coll., on Notaries and Their Activities (the Notarial Code) as amended

by Act No. 120/2001 Coll., is annulled as of the day this judgment is

published in the Collection of Laws.


REASONING

 

On

28 June 2001 the Constitutional Court received a petition from the

District Court for Prague 10 in which that court seeks the annulment of §

31 para. 3 of Act No. 82/1998 Coll., on Liability for Damage Caused

During the Exercise of State Power by a Decision or Incorrect Official

Procedure and Amending Czech National Council Act No. 358/1992 Coll., on

Notaries and Their Activities (the Notarial Code) as amended by Act No.

120/2001 Coll., basically with the claim that this provision is in

evident conflict with the principle enshrined in Art. 36 para. 3 of the

Charter of Fundamental Rights and Freedoms (the “Charter”), under which

everyone is entitled to compensation of damage caused to him by an

unlawful decision of a court, other state body or public administrative

body or by an incorrect official procedure. The District Court for

Prague 10 thus used the opportunity given it by § 64 para. 4 of Act No.

182/1993 Coll., on the Constitutional Court, as amended by later

regulations, on the basis of which a court is entitled to file a

petition to annul a law or its individual provisions in connection with

its decision making activity under Art. 95 para. 2 of the Constitution

of the Czech Republic (the “Constitution”).

The petitioner, by

resolution file no. 9 C 6/2001 of 25 June 2001, interrupted, under § 109

para. 1 let. c) of Act No. 99/1963 Coll., the Civil Procedure Code, as

amended by later regulations, proceedings opened on a complaint from E.

H., V. H. and J. Š. versus the Czech Republic, represented by the

Ministry of Justice of the CR, in the matter of compensation of damages,

claimed on the basis of Act No. 82/1998 Coll., and submitted the matter

to the Constitutional Court. In that case, the above mentioned

plaintiffs based their claim for compensation of damage on the fact

that, on the basis of a filed accusation, criminal prosecution was

opened and conducted against them for the crime of evasion of taxes and

similar payments under § 148 para. 1, para. 4 of the Criminal Code [in

the case of the last named, § 148 para. 1, para. 3 let. c) ditto],

committed as accomplices (§ 9 para. 2 ditto). However, criminal

prosecution of all the defendants was subsequently stopped, as it was

not proved that they committed the act for which an accusation was filed

against them [§ 172 para. 1 let. c) of the Criminal Code]. As

proceedings in the cases concerned a crime for which the law provides a

prison sentence with a maximum exceeding five years, they were required

to already have defense counsel in the preparatory proceedings, for

required defense, based on § 36 para. 3 of the Criminal Procedure Code.

In the complaint for compensation of damage, the plaintiffs then

expressed the opinion that disclosure of the accusation is considered,

in the event criminal prosecution is stopped, to be incorrect official

procedure, and if damage arises as a result, which happened in this

case, the state is liable for it, and compensation of damage which was

caused by the indicated incorrect official procedure is also considered

to include the amount expended for costs related to defense, which the

plaintiffs enumerated in detail and documented. They also stated and

documented that, in accordance with § 6 para. 1, para. 2 let. a) of Act

No. 82/1998 Coll. they turned to the defendant – the Ministry of Justice

of the CR, damage compensation department. The defendant informed them,

by letter of 5 April 2000, file no. Odšk. 136-8/2000, that the right to

compensation of damage under § 7 of Act No. 82/1998 Coll. had arisen,

but it that their application for payment of compensation could

nevertheless not be granted. In this regard, it stated that under § 31

para. 3 of this Act, the right to compensation of proceedings costs as

part of compensation of damages arises only if other damage also arose

by the decision (as the disclosure of accusation was characterized for

purposes of Act No. 82/1998 Coll.). In support of this position, it

pointed to the explanatory report for the proposal of the Act. In view

of this fact, the plaintiffs, who persisted in their decision to claim

damages only for the amount of the standard prescribed rates for the

expenses of legal representation, presented their complaint to the court

and argued that this opinion was not correct, as this conclusion could

not be unambiguously concluded from the cited provision. They pointed to

the fact that the finding of a right is a matter solely for the court,

and that they considered relying on the explanatory report to be

unsuitable. They also argued that the Act can not be interpreted so as

to be in conflict with the Charter, in their matter specifically with

Art. 36 para. 3 of this constitutional document. They believe that

evaluation of entitlement to compensation of damages arising during the

exercise of state power by a decision or incorrect official procedure

must always be subject to this article, which generally prescribes state

liability for causing damage, on the basis of constitutional Act No.

23/1991 Coll., i.e. a regulation of higher legal force. In connection

with these deductions, in relation to the arguments presented by them,

they also relied on Constitutional Court judgment file no. I. US 245/95

of 22 September 2000. Finally, they also emphasized that this

restrictive interpretation, followed through ad absurdum, could

basically lead to the rejection of any claim exercised independently,

even despite the fact that damage was clearly caused by the exercise of

state power and was proved. Apart from that, they are convinced that

such an interpretation is in conflict with general principles of justice

and good morals, as it was not their fault that an accusation of crimes

requiring mandatory defense counsel was filed against them and they had

to pay the defense counsel from their own means.

As was

already stated, the District Court for Prague 10 interrupted the

proceedings and submitted the matter to the Constitutional Court for

evaluation. In the grounds for its petition it stated that it was

capable of interpreting the provision in question in favor of the

plaintiffs, but it systematically could not, nor did it wish to, ignore

the text of the explanatory report to Act No. 82/1998 Coll., which, in

connection with the formulation of the contested provision, paragraph 3

of § 31, poses a problem of interpretation as regards para. 1 of § 31 of

the Act. If costs of legal representation are clearly defined as damage

in paragraph 1, then subjecting this claim to the existence of other

damage is not justifiable in terms of Art. 36 para. 3 of the Charter.

The sudden restrictive concept of an indisputable obligation of the

state power to compensate damage is not in accordance with the cited

norm of the Charter, and it is not even interpreted by the cited

explanatory report. That report contains nothing more than a terse

statement in this regard. The Act itself contains internally

inconsistent provisions in para. 1 and para. 3 of § 31, whose

inconsistency the explanatory report tries to remove by using the phrase

“other damage”, which, however, § 31 does not contain at all. The

petitioner thus concludes that it is appropriate to fundamentally

resolve the conflict with the constitutional principle under Art. 36

para. 3 of the Charter, and therefore it proposes annulling para. 3 of §

31 of the cited Act.

Upon affirmatively answering the question

whether the submitted petition meets formal requirements, in particular

whether it was filed by an entitled party under conditions provided in §

64 para. 4  of Act No. 182/1993 Coll., on the Constitutional Court, as

amended by later regulations, whether conditions of admissibility under §

66 para. 1 were met and whether there are no grounds to reject it under

§ 43, or for stopping proceedings under § 67, the petition was sent, in

accordance with § 69 of the same Act, to the Chamber of Deputies and

the Senate of the Parliament of the Czech Republic for their comments.
 


II.
 

Under

§ 68 para. 2 of Act No. 182/1993 Coll., on the Constitutional Court, as

amended by later regulations, the Constitutional Court first reviewed

whether the legal regulation in question had been passed and issued

within the bounds of constitutionally prescribed jurisdiction and in a

constitutionally prescribed manner. The Constitutional court stated that

the law was passed and issued within the bounds of constitutionally

prescribed jurisdiction and in a constitutionally prescribed manner.
 


III.
 

In

the substantive review of the petition, the Constitutional Court took

as its starting point, among other things, the fact that it is not

limited by the reasoning of the petition, but only by its statement of

claim, and therefore it also reviewed the contested provision in terms

of its consistency with other constitutional norms. After reviewing the

petition and the positions of parties to the proceedings, it then

reached the conclusion that there were grounds for the petition. In

doing so, it took into account the following considerations.

The

Act containing the contested provision went into effect on 15 May 1998

and replaced the previous legal regulation, implemented by Act No.

58/1969 Coll., when the legal regulation contained in that Act ceased to

fit the changing social situation. It had been established on the

principle of a single exclusive bearer of liability for damage, which

was the state, but in connection with the application of the principle

of local government in our legal order the state ceased to be the sole

holder of public power. Therefore, the new legal regulation had to take

this fact into account, just like other changes in the existing legal

order, i.e. in particular the changes in the structure of state bodies,

to which the definitions of bodies, office holders or other entities

which could cause damage for which the state is liable had to be

adapted. Generally, it is now the state and local government entities

which are liable for damage on the Act on Liability for Damage. The

legal regulation contained in this Act applies to damage which was

caused under conditions provided in the Act by the public law activities

of the state; local government entities are liable for damage caused

within the exercise of those independent jurisdiction powers which are

entrusted to local government entities by law. Under the Act on

Liability for Damage, liability for damage is construed as objective

liability; no grounds for liberation from it are prescribed in the Act.

The Civil Code is in a subsidiary relationship to the Act (§ 26). In

contrast to the previous legal regulation, contained in Act No. 58/1969

Coll., the new Act contains detailed regulation of conditions concerning

the compensation of proceedings costs incurred in proceedings in which

unlawful decisions or incorrect official procedure occurred. This

regulation is implemented by § 31 of Act No. 82/1998 Coll., in the joint

and transitional provisions in the part labeled manner and scope of

compensation of damage, whose text reads as follows:

"§ 31
(1)  

 Compensation of damages includes compensation of proceedings costs

which the injured party incurred in proceedings in which an unlawful

decision or decision on custody, punishment or protective measures was

issued or in proceedings in which an annulling or absolving decision was

issued, a decision in which criminal proceedings were stopped, or a

decision in which a matter was assigned to another body.
(2)  

 Compensation of damages includes compensation of proceedings costs

which the injured party incurred in proceedings in which incorrect

official procedure occurred, if these costs are related to the incorrect

official procedure.
(3)    The entitlement to compensation of

proceedings costs as part of compensation of damages arises only if the

decision caused damage and if compensation of costs has not already been

awarded under procedural regulations.
(4)    Legal representation

costs are part of proceedings costs. They include the actual

expenditures incurred by an attorney and compensation for

representation. The amount of this compensation is determined according

to provisions of a separate regulation on non-contractual compensation.
(5)  

 The injured party is not entitled to compensation of legal

representation costs which arose in connection with the handling of the

exercised entitlement before the appropriate body."

The

petitioner’s petition contests para. 3 of the above cited norm basically

because, while para. l states that compensation of damage which arose

through the issuance of an unlawful decision includes compensation of

proceedings costs, the contested paragraph, on the other hand,

conditions the creation of the entitlement to compensation of damage

caused by paying proceedings costs on another – additional damage. It is

convinced that this concept is narrowing, as the entitlement concerning

proceedings costs is tied to the existence of other damage, and can not

be satisfied by itself, independently of the existence or non-existence

of other damage, and it considers this concept to be in conflict with

Art. 36 para. 3 of the Charter.

Article 36 para. 3 of the

Charter provides that everybody is entitled to compensation for damage

caused him by an unlawful decision of a court, other state body or

public administrative authority or by an incorrect official procedure.

The Act on Liability for Damage is precisely the statute whose issuance

is presumed by para. 4 Art. 36 of the Charter, and it should therefore

implement the fundamental right to compensation of damage caused by

unlawful or incorrect interference by the public power.

Civil

law, which includes Act No. 82/1998 Coll., defines damage as property

detriment which can be objectively expressed in a general equivalent,

i.e. money. True damage is considered to be property detriment

expressible in money, which consists of reduction, lowering or other

devaluation of the injured party’s already existing property, as well as

in the outlay of expenses for the removal of this devaluation. It is

apparent from this very definition that damage can also be the expenses

actually incurred by parties to proceedings for the proceedings, and

that the state is also liable for damage thus arising, provided, of

course, that other conditions for this liability relationship to arise

have been fulfilled, i.e. the existence of a causal relationship between

the creation of the damage and the statutorily presumed damaging event,

i.e. with the issuance of an unlawful decision or with an incorrect

official procedure. The legislature itself, as indicated by § 31 para. 1

of Act No. 82/1998 Coll., expressly includes proceedings costs in the

damage which is compensable under this Act; nonetheless, as is evident

from comparing the following two paragraphs, it does not maintain the

same approach to all entities which come into consideration. It sets

different conditions under which incurred proceedings costs can be

compensated under the Act when, in relation to those damaged by

incorrect official procedure it sets as the only condition a causal

relationship between the incurring of proceedings costs and the

procedure in question (para. 2), while in relation to those entities

which were damaged by an unlawful decision (apart from the condition

that the proceedings costs have not yet been awarded under procedural

regulations, which is acceptable), conditions further compensation of

incurred expenses on the existence of damage which arose through the

decision. In the words of the explanatory report, “proceedings costs can

be paid as part of compensation of damages caused by the decision, but

they may not be the only damage”. In this way the contested provision

then de facto divides those entities to which it applies who incurred

property detriment in connection with the issuance of an unlawful

decision into two categories. One consists of those who incurred damage

consisting “only” of the incurred proceedings costs, and the other of

those who at the same time incurred other damage, and only this

second-named group, under para. 3, is entitled to compensation of

proceedings costs as part of damage compensation (assuming that

compensation of theses expenses was not awarded under procedural

regulations). In the Constitutional Court’s opinion, the legislature is

thus making differences which can not be justified on legal grounds, as

in both cases there is a reduction in the injured party’s property, and

there is therefore damage in the above-mentioned sense, the right to

compensation of which is guaranteed by Art. 36 para. 3 of the Charter.

The Constitutional Court interprets the constitutional principle of

equality enshrined in Art. 1 of the Charter, under which people are

free, have equal dignity, and enjoy equality of rights, and

complementarily expressed in article 3 of the Charter, as well as the

principle forbidding discrimination in the recognized fundamental rights

in its case law from two perspectives (e.g. judgments file no. Pl. US

16/93, file no. Pl. US 36/93, file no. Pl. US 5/95, file no. Pl. US

9/95, file no. Pl. US 33/96, Pl. 9/99 and others). The first comes from

the requirement of ruling out arbitrariness in the legislature’s

procedures in distinguishing groups of subjects and their rights, the

second by the requirement of constitutionally admissible grounds for

distinguishing, i.e. the inadmissibility of affecting one of the

fundamental rights and freedoms by distinguishing subjects and rights on

the part of the legislature. In this regard, the Constitutional Court

did not find any reason which would justify the inequality in the

approach to individual groups of injured parties as they are described

above. The legislature also did not justify in any way the procedure

establishing this inequality. The Constitutional Court therefore

concluded that the contested provision has as a consequence an

unjustified inequality between subjects who were caused damage during

the exercise of public power. The postulate of equality does not lead to

a requirement that everyone be equal to everyone else, but it does lead

to a requirement that the law not give an advantage or disadvantage one

group over another groundlessly. In this case it is indisputable that

the requirement of providing the same rights under the same conditions

without groundless differences is not respected by the text of the

contested provision, as the legislature, without constitutionally

admissible grounds, disadvantaged those subjects who sustained damage

only in the form of incurred proceedings costs.

In connection

with the foregoing, we cannot overlook the fact that under Art. 4 para. 2

of the Charter, limitations can be placed upon fundamental rights and

freedoms under the conditions prescribed by this constitutional document

only by law, and in employing the provisions concerning limitations

upon the fundamental rights and freedoms their essence and significance

must be preserved, and such limitations may not be misused for purposes

other than those for which they were laid down (Art. 4 para. 4 of the

Charter). Thus, if everybody is entitled to compensation for damage

caused to him by an unlawful decision by a court, other state body or

public administrative body or by incorrect official procedure, and the

conditions and details of exercise of this right are set by law (Art. 36

para. 3, para. 4 of the Charter), then such a law, issued on the basis

of constitutional authority, may not completely annul (negate) the right

to compensation of damage arising as a consequence of such conduct and

thereby deny, even if only in certain cases, a constitutionally

guaranteed fundamental right. Thus, in the cases of persons who incurred

damage consisting “only” of proceedings costs, the procedure projected

by the legislature in the contested provision led to the complete

exclusion of this category of entities from the right to compensation of

damages caused by the unlawful decision of a court, other state body or

public administrative body. Such a procedure is in sharp conflict with

the constitutional order of the Czech Republic and does not respect the

principle of minimizing interference in the fundamental rights in the

form of possible limitation and maximizing the preservation of the

substance of a fundamental right. Therefore, the Constitutional Court

annulled the contested provision due to conflict with Art.36 para. 3, in

connection with Art. 1 para. 1, Art. 3 para. 1 and Art. 4 para. 4 of

the Charter.
 

For the sake of

completeness we must add that the contested provision was annulled in

full, despite the fact that, insofar as it further excludes from the

opportunity to seek incurred proceedings costs as part of compensation

for damage those subjects to whom compensation of costs was awarded

under procedural regulations, then this is a condition which is not

unconstitutional but is completely superfluous, because in such cases

the fundamental prerequisite of liability for damage, i.e. the existence

of damage itself, is completely lacking.

Instruction: Decisions of the Constitutional Court can not be appealed.

Brno, 30 April 2002