Building regained but units sold
Decision to sell units in a building covered by the Warsaw Decree: A source of injury in pursuing claims for damages
In claims for damages related to the Warsaw Decree of 1945, claims by former owners or their legal successors for injury caused by loss of ownership of units in the regained building play a major role.
Even if the decision issued under the Warsaw Decree is held invalid (or unlawful), the owner of the regained building will not regain ownership of units that were previously sold by the administrative authority. Such sales occur through an administrative decision, on the basis of which a sale contract is made in the form of a notarial deed, followed by entry in the land and mortgage register. The buyers of the units are then protected by the warranty of public reliance on the land and mortgage register (resolution of 7-judge panel of the Supreme Court of Poland of 15 February 2011, Case III CZP 90/10).
In that situation, the owner is left with pursuing claims for damages, which are generally governed by Art. 160 §§ 1, 2, 3 and 6 of the Administrative Procedure Code rather than the comparable rules from Art. 4171 of the Civil Code (en banc resolution of the Civil Chamber of the Supreme Court of 31 March 2011, Case III CZP 112/10).
In the trial for damages, the claimant must prove a causal connection between the harmful event and the injury. Under Civil Code Art. 361 §1 this means that the injury is a normal consequence of the event causing the loss.
There has never been any doubt in the case law that there is a causal connection between the injury in the form of loss ownership of units in a regained “decree” building and the source of the loss in the form of the decree decision unlawfully refusing to establish temporary ownership (perpetual usufruct) of the land covered by the Warsaw Decree. Following an unlawful decree decision, decisions were often issued to sell units in the decree building. The decree decision must first be found by the competent authority to be invalid (under Administrative Procedure Code Art. 156 §1) or unlawful (under Administrative Procedure Code Art. 158 §2).
However, it was disputed in the case law whether a decision on sale of a unit in a “decree” building whose invalidity or unlawfulness was previously confirmed by the competent authority can also be the source of injury. Recognising such decision as the source of injury is particularly helpful in a case where a claim based on the invalid decree decision has become time-barred because the three-year period provided in Administrative Procedure Code Art. 160 §6 for pursuit of the claim has passed.
The courts have given various reasons for questioning the causal relationship between the decision to sell the unit and the injury in the form of loss of the right of ownership of the unit in a building covered by the decree.
For example, the courts have held that the unlawful decision to sell the unit is just one link in a long chain of cause and effect, and therefore cannot be treated as a sufficient source of the loss in and of itself (Warsaw Court of Appeal judgment of 27 September 2011, Case I ACa 348/11).
The courts have also held it is not the decision to sell the unit that prevents the former owner of the building from obtaining perpetual usufruct, but the warranty of public reliance on the land register, which protects a good-faith purchaser acquiring rights from an unauthorised seller who is entered in the land and mortgage register (Warsaw Court of Appeal judgment of 17 May 2011, Case I ACa 786/10).
Meanwhile, other courts have admitted the existence of a causal relationship in this situation, reasoning that refusal to award temporary ownership in any case increased the likelihood of issuance of a decision to sell the units, while issuance of such decisions always increased the likelihood of loss of the right of perpetual usufruct of the land and ownership of part of the building (Warsaw Regional Court judgment of 18 March 2011, Case I C 2116/04).
It has also been held that when the administrative authority refused to award ownership of units or perpetual usufruct to a portion of the land associated with the units to the legal successor of the former owner of the real estate, because the units were sold to third parties in whose favour perpetual usufruct to the relevant portion of the land was also established, this clearly indicates the existence of a normal causal connection between the decision to sell the units and the injury to the legal successor (Warsaw Court of Appeal judgment of 26 March 2013, Case I A Ca 1165/12).
The Supreme Court, in turn, has upheld the concept of an indirect causal connection, where the effect falls within the bounds of “normalcy” (see Supreme Court judgment of 21 January 1946, Case C I 318/45, Zbiór Orzeczeń 1/1945-46, item 27; M. Kaliński, “O normalności powiązań kauzalnych” [“On the Normalcy of Causal Connections”], Przegląd Sądowy, Nov.–Dec. 2007, pp. 25 and following). The Supreme Court has referred to a causal connection with several elements, where the event initiating the chain of causation (i.e. creating the conditions for other events to occur) can be distinguished from the subsequent (or ultimate) event that became the immediate cause of the injury. Thus, in the view of the Supreme Court, the existence of a sufficient (normal) causal connection between decisions on sale of units to other parties and the injury to the claimants who have lost a portion of the units and the right of perpetual usufruct associated with the units cannot be excluded (Supreme Court judgment of 15 February 2013, Case I CSK 332/12).
It seemed that some stability in the case law would be achieved following the Supreme Court’s adoption of the resolution dated 21 August 2014 (Case I CZP 49/14). Under that resolution, if the administrative decision refusing to award temporary ownership to the former owner pursuant to Art. 7 of the Warsaw Decree of 1945 has been held to be invalid, then an unlawfully issued decision permitting sale of units in the building located on the property can also be the source of injury to the former owner (or legal successors).
But just a few weeks after that resolution was adopted, when the Supreme Court was considering a cassation appeal by the State Treasury (via the governor of Masovia province), the court issued an order on 14 November 2014 (Case I CSK 5/14) referring the following legal issue for a ruling by an expanded 7-judge panel of the Supreme Court: “Can an unlawfully issued decision permitting the sale of units in a building located on real estate affected by an unlawful administrative decision refusing to award the right of temporary ownership to the former owner of the real estate, issued pursuant to Art. 7 [of the Warsaw Decree] also be the source of injury to the former owner?”
In the justification for that order, the Supreme Court pointed out that the conception under which the decision to sell units in a “decree” building can also be the source of injury (alongside the decree decision as such) raises doubts. In the court’s view, because the possibility of pursuing a claim for damages arises on the basis of the decision holding the decree decision to be defective, causing the limitations period on that claim to begin running, it appears that this type of claim covers all subsequent consequences of the defective decree decision. It thus also covers the State Treasury’s disposal of elements of the property which it took title to under the decree decision subsequently held to be defective. In the court’s view, defective decisions to sell units do not essentially cause the injury connected with loss of ownership of the units, but render the consequences of the decree decision irreversible. (The expanded panel of the Supreme Court has not yet issued a resolution on these issues.)
For former owners of real estate, it would be incredibly helpful to obtain a consensus in the case law concerning the existence or non-existence of a causal connection between the decision to sell units in a “decree” building and the injury suffered by the former owners. Reprivatisation litigation is extremely difficult and complicated even for the most seasoned lawyers, and for the former owners of properties covered by the Warsaw Decree (or their legal successors), pursuing rightful claims for damages can be an agonising process. Inconsistencies and instability in the case law make it worse. This is why a clear ruling on this issue by the Supreme Court will be so important for litigants.
Dr Magdalena Niziołek, Wardyński & Partners
