In advance of the new year, it may be of interest to see what lessons can be learned from rulings by the Supreme Court (HD) and the Supreme Administrative Court (HFD) in 2022. Lindahl’s dispute resolution group has therefore summarised a few of last year's most interesting cases. See the summaries below. At the end of each summary is an indication of any practical take-aways.
– issue of obligation to notify and passivity (NJA 2022 p. 3)
A consumer engaged a construction company to carry out refurbishments, including bathroom and kitchen. The parties did not agree on a fixed price, rather, the consumer was going to pay a reasonable price in accordance with section 36 of the Consumer Services Act. After about three years the consumer took the construction company to court, demanding repayment of the part of the payment that the consumer felt exceeded a reasonable price. The construction company contested the case, arguing among other things that there was an obligation to notify in the question of the price's reasonableness and that the consumer had lost the right to take legal action due to passivity.
The HD initially found that the typical claim concerns a notification to make a claim due to breach of contract and that failure to make a claim often means that the right to cite breach of contract, or the right to enforce certain consequences, is lost. The HD also found that there can be an obligation to provide notification in cases other than breach of contract in order to ensure that rights are not lost. Despite this, HD the found that the consumer relationship does not imply any obligation to make a claim when it concerns repayment of an unreasonably high price.
The HD then moved to the issue of passivity. The HD pointed out that, in certain aspects of significance for the contract, contracting parties generally have an obligation to provide each other with information or clarify their opinion in various respects, and that failure to do so can mean that the party's right is lost. When it comes to a demand for repayment, the HD found that parties have a longer period than when claiming a breach of contract, but that the right to repayment can be lost if the counterparty has been given the impression that the party has waived its right, if over a long period it neglected to exercise its right or when the counterparty had grounds for its opinion that the parties' dealings had been finally settled. The HD found in particular that a faster reaction can be demanded from a business than from a consumer.
In conclusion, the HD found that there was no obligation to make a claim regarding the reasonableness of the price according to section 36 of the Consumer Services Act, but that passivity in the question of filing for recovery of the payment can mean that the right to repayment is lost after a certain time.
Take-aways: According to the Consumer Services Act, when the price is not specified in the contract, a consumer shall pay a reasonable price. A consumer who has already paid the requested price for the service can subsequently claim that the price was too high, even though nothing was said about it in connection with the payment. However, the consumer should not wait too long, but rather in such a case request repayment as soon as a legitimate demand is deemed to exist. There is otherwise a risk of losing the opportunity.
"THE TAX ADVISOR'S LIMITATION OF LIABILITY”
– question of adjustment of a limitation of liability in a commercial contract regarding advice with support of section 36 of the Swedish Contract Act (NJA 2022 p. 354)
A property ownership group engaged a tax advisor to investigate the conditions for an intra-group property transfer at undervalue. The tax advisor was instructed to investigate whether the transfer could be performed without adverse consequences, particularly in a tax context. The tax advisor considered that the conditions for an undervalue transfer were met and that Lantmäteriet (the Swedish Mapping, Cadastral and Land Registration Authority) would grant a deferral of payment of the title registration fees that should be paid by the acquirer.
The client followed the advice and implemented the undervalue transfer. Lantmäteriet rejected the application for deferral of the title registration fees. The District Court upheld Lantmäteriet's decision and the Court of Appeal did not grant leave to appeal. The client brought proceedings against the tax advisor and sought damages corresponding to the stamp duty that the client had to pay as a result of the transfer, about SEK 1.5 million.
Initially the HD considered that the tax advisor had acted negligently and caused damage for the client. The HD also found that the tax advisor's general terms and conditions applied between the parties.
The question for the HD was subsequently whether the limitation of liability in the general terms and conditions should be considered unreasonable and therefore be adjusted according to section 36 of the Swedish Contract Act. According to the limitation of liability, the tax advisor's liability was limited to 10 price base amounts, which at the time of the advice corresponded to about SEK 444,000. The HD initially found that the reasonableness assessment presupposes an overall evaluation of the particular situation, and also that it requires substantially more to adjust a contract in commercial relations between parties of equal strength than in consumer relationships. What is decisive in examining whether a contractual clause is reasonable or not is what effect it produces in the situation that has arisen. The HD then stated that when the assessment concerns a limitation of liability, the advisor's legitimate interest to be protected against careless mistakes and oversights is of significance. In that context, it is primarily the degree of negligence, but also what possibilities for insurance cover there are for both parties and how central the neglected undertaking is. Another circumstance that can play a role is how the limitation of liability relates to the remuneration agreed for the service.
In the case in question, the HD concluded that in an overall assessment – and in particular in view of the fact that the tax advisor's negligence was deemed to be relatively limited – there was no reason to adjust the limitation of liability.
Take-aways: In terms of limitation of liability, the circumstances are weighed against each other, in this case the following. On the one hand: The tax advisor was well paid for the advice, SEK 100,000, and knew how expensive it would be for the customer if it was incorrect, namely SEK 1.5 million. On the other hand: the tax advisor's advice was actually correct, but it was impossible to be sure how the registration authority would handle the matter. This made the mistake in the advice not so serious. Discharge from liability applies. Two out of five judges at the HD thought differently, so it was close. So: When you disclaim liability: consider potential damage in connection with any errors and whether discharge from liability is reasonable.
– question of whether the standard contract NSAB 2015 constitutes commercial practice (NJA 2022 p. 574)
A forwarding agent carried out transportation, warehousing and other services on behalf of a client. At the time the client was declared bankrupt, the forwarding agent was storing goods belonging to the bankruptcy estate. In the proof of debt procedure, the forwarding agent registered a claim against the bankruptcy estate. Part of the forwarding agent's claim was attributable to services relating to goods that were in the warehouse when the bankruptcy petition was filed, while another part of the forwarding agent's claim was attributable to expenditure for services attributable to goods that the forwarding agent had in its possession as a result of previous assignments.
The forwarding agent invoked preferential right for its entire claim, even though the parties had not explicitly agreed on it. Grounds for the proceedings cited by the forwarding agent included the fact that such a right derives from general legal principles and that the extended preferential right pursuant on section 14 in the General Conditions of the Nordic Freight Forwarders Association (NSAB 2015) constitute commercial practice and shall therefore be applied between the parties, even though the parties have not explicitly referred to NSAB 2015 in their contract.
The bankruptcy estate contested the preferential right for the part of the claim that concerned expenditure for services that were attributable to goods that the forwarding agent no longer had in its possession.
The question that the HD had to consider was whether a forwarding agent's claims in respect of completed assignments have a special preferential right in all goods that a forwarding agent is holding for a customer, without the parties having agreed on this. More precisely, the question was whether such a preferential right can arise through commercial practice or another customary practice.
The HD started by presenting what is required for a standard contract to be deemed to constitute commercial practice, and noted that it is significant how generally used and well-known the standard contract is within the industry. If a standard contract has achieved stability and is widely deployed, it suggests that the standard contract constitutes commercial practice. If only individual provisions have achieved such stability and wide deployment, these provisions can individually constitute commercial practice.
Further, the HD found that the lack of competing standard contracts in the industry suggests that commercial practice is in place. If there are competing standard contracts, commercial practice can be in place for certain regulations if it it is found in other standard contracts. It is also of significance how the standard contract has come about. If the standard contract is well-balanced and meets both parties interests, it suggests that the standard contract should be viewed as commercial practice. The same applies if the standard contract meets a need that is not satisfied in any other way.
To summarise, the HD concluded that NSAB 2015 was applicable as commercial practice and that specific circumstances would have been required for NSAB 2015 not to be considered binding for the parties. The freight forwarder thus had preferential right for its entire claim, despite the fact that no reference to NSAB 2015 had been made in the contract between the parties.
Take-aways: The HD considers that the standard contract NSAB 2015 constitutes commercial practice within the freight forwarding and logistics industry, i.e. applies between the parties even though they did not agree on it; unless the parties actively agreed on something else. The equivalent can therefore apply within other fields as well, e.g. within the contracting industry where there are standard contracts such as AB or ABT.
”THE CHINESE INVESTMENT”
– question regarding right to repayment of funds that have been paid to a third party in accordance with the contracting party's instruction, when there is an alignment of interests between the beneficiary and the contracting party (NJA 2022 p. 311)
The plaintiff commissioned a company to make certain investments with the plaintiff's funds. The plaintiff paid the company's parent company as instructed by the subsidiary. The plaintiff received confirmation for the payments which in part described what the payments were to be used for, in part contained information that any surplus should be repaid to the plaintiff. The parent company owned the entire subsidiary. One and the same physical person was sole director in the two companies and also represented them in the discussions with the plaintiff.
The investments were not executed. The plaintiff instigated proceedings against the parent company (the payee) and against the director, but not against the subsidiary (the plaintiff's contracting party). The plaintiff claimed repayment of the transferred funds, arguing that the parent company was accountable in relation to him and thereby also obliged to repay the funds received. The parent company and the director contested the plaintiff's action, arguing, among other things, that any claim for repayment of funds received should be directed against the subsidiary.
The issue in the case was whether the parent company and the director had a repayment liability in relation to the plaintiff. The HD found that the accountability did not necessarily entail a repayment liability. The HD subsequently emphasised that the principal rule is that a contracting party that has a claim arising from a contract can only direct demands against the other party in the contract and not against third parties. The constellation of parties in the case was that the plaintiff and the subsidiary were contracting parties, while the parent company was the third party.
According to the HD, there are a number of exceptions to the principal rule. Third parties can either enter into the parties' contract or make a separate undertaking concerning obligation to pay in relation to one of the parties to the contract. Both situations presuppose an explicit declaration of intent from a third party or other contractual circumstances. The HD did not consider that the conditions were such that the parent company had entered into the contract between the plaintiff and the subsidiary, and neither that the parent company had taken on an obligation to pay in relation to the plaintiff.
In the context, the HD also emphasised that the principles that apply concerning the so-called direct claim right, i.e. a creditor's possibility of directing claims not just against the counterparty (the "lead" debtor) but also against this party's debtor (the "secondary" debtor). A right to make a direct claim may be present if it is stipulated by law or in certain specific situations, however, as a point of departure, the creditor does not have such a right. According to the HD, the plaintiff did not have any direct claim right in the contract situation in question.
The HD also addressed the circumstance that there was a strong alignment of interests between the subsidiary and the parent company, including taking into account the ownership constellation and the sole director. The HD found that the presence of alignment of interests cannot in principle have the consequence that one company has to be accountable for the other company's debts. Such accountability can only be justified if the circumstances are very specific, which the HD deemed not to be the case in this context.
The HD dismissed the plaintiff's action against the parent company and the director and accordingly applied the principal rule that the plaintiff can only bring proceedings against a contracting party with a claim based on the contract.
Take-aways: In relations with limited companies or other companies in groups represented by a single person, it is easy to (erroneously) regard the deputy as the contracting party. The boundaries between companies and the company for which the person is acting are not always clear. Be sure to check who is the formal contracting party. Ensure to have clear contractual terms that regulate the practical management of obligations and rights, such as payments and repayments. If it is your perception that something should be undertaken by or in relation to a particular party, it is important to make that known as early as possible.
”THE RESTAURANT PREMISES ON GUNNARSÖ”
– question of whether a tenant has foregone the right to damages when the landlord did not provide notification regarding the right (NJA 2022 p. 159)
A landlord gave its tenant notice of termination of a rental contract for a non-residential premises. The document giving notice of termination contained no information on the fact that the tenant was obliged to refer the dispute to the Regional Rent and Tenancies Tribunal for mediation if the party did not agree to vacate the premises without receiving compensation. Some six months later, the tenant filed a claim for damages against the landlord as a result of the notice of termination. The landlord contested the proceedings, arguing among other things that the tenant had foregone the right to damages in that the dispute had not been referred to the Regional Rent and Tenancies Tribunal within two months from the notice of termination.
The question at the HD was whether the tenant had lost its right to damages despite the landlord not having provided notification of the statutory obligation to refer the dispute to the Regional Rent and Tenancies Tribunal within two months from the notice of termination, which, according to chapter 12, section 58 (3) of the Swedish Code of Land Laws, the landlord is obliged to notify the tenant. The consequence of the landlord's failure to provide information is that the notice of termination is void. However, in this case, the tenant had already moved out. The HD found that the relevant rule is in place to protect the tenant and to ensure that the landlord is not able to derive benefit from its own mistake. The HD therefore concluded that the tenant had not lost its right to damages.
Take-aways: Rental legislation contains numerous formal rules that it is important to follow, not least in connection with termination notices. Landlords frequently use a standard form produced by the industry organisation, Fastighetsägarna (the Swedish Property Federation), to issue notice of termination and which includes the information. However, landlords do produce their own termination notices and it is then important to check that these contain all necessary information.
The decision is also an important reminder of the principles that reasonability in the legal system must have an impact and that a party should not be able to derive benefit from its own mistakes.
”THE APARTMENT IN FÄLTSKÄREN”
– question of right to reduction in rent due to obstacles or detriment to the right of use while ban on use is in force (NJA 2022 p. 188)
In connection with notifiable reconstruction work, a landlord and two tenants entered into an agreement that entailed the tenants personally arranging evacuation accommodation and a one hundred per cent reduction in the rent during the reconstruction period. A starting clearance was announced in July 2015 and final notification in May 2017. Despite the fact that the final notification had not been provided, in March 2016 the landlord notified the tenants that the apartments were ready for possession as early as 1 July 2016. The tenants did not move in and neither did they pay any rent for the period after 1 July 2016. In November 2016, the tenants made an application to the Regional Rent and Tenancies Tribunal that it should prohibit the landlord from undertaking improvement works to the property. The landlord argued that their rights of tenancy were forfeited due to unpaid rent from 1 July 2016, making the tenants unauthorised applicants. The Regional Rent and Tenancies Tribunal found that the rights of tenancy were forfeited and rejected the application.
The landlord subsequently brought proceedings against the tenants, claiming that they should be ordered to pay unpaid rent from 1 July 2016 until such time as the rights of tenancy ended, and damages corresponding to the rent for a certain period thereafter. The main question at the HD was whether the ban on use resulting from the lack of final notification according to the Swedish Planning and Building Act after a reconstruction meant that a tenant is entitled to a rent reduction due to obstacles or detriment to the right of use, despite the fact that the landlord considered the apartments to be ready for occupation.
The HD found that, according to the Planning and Building Act, a ban on use applies from when starting clearance is submitted until final notification is in place. According to the HD, this means that an apartment that is subject to reconstruction work that is covered by a starting clearance cannot be put into use before a final notification has been provided. A tenant is entitled to reduction in rent when an extensive reconstruction or refurbishment takes place during the ongoing tenancy that entails obstacles or detriment to the right of use. If the reconstruction work requires planning permission or registration, the landlord cannot decide when the apartment can be put into use again. An apartment shall therefore not be regarded as ready for occupation before final notification has been provided, unless the local planning committee decides otherwise. The tenant is then entitled to a rent reduction due to obstacles or detriment to the right of use until such time as final notification has been provided and the ban on use no longer applies. In the case in question, the HD found that the apartments were not ready for occupation before final notification was provided in May 2017. This meant that there were obstacles or detriment to the right of use until then, and that the tenants were not in any way able to utilise the apartments for accommodation purposes. The HD considered that the tenants were therefore entitled to a reduction of the entire rental amount for the period that the request covered.
Take-aways: In connection with notifiable reconstruction work, a landlord cannot decide itself when an apartment can be returned to use and a tenant is entitled to rent reduction until such time as the apartment can be utilised again and final notification submitted.
”THE AMBIGUOUS NOTICE OF TERMINATION”
– question of how clear a notice of termination for amendments to the terms and conditions must be in the case of rental of non-residential premises in order not to be void (NJA 2022 p. 388)
A contract for rental of non-residential premises ran for three years with a period of notice of twelve months. According to the contract, if notice of termination was not received by the end of the contract period, it was renewed for a further three year period. At the turn of the year 2016/2017, the tenant sent the landlord a message entitled ”Notice of termination of rental contract”. According to the message, the tenant wished to terminate the contract one year later, on 31 December 2017, for amendments to the terms and conditions . The amendment that the tenant requested was a shorter contract term of two months (1 January 2018 - 28 February 2018) with a rolling period of notice of three months.
Notice of termination for amendment to the terms and conditions is regulated in chapter 12, section 58 in the Code of Land Laws. The provision states that a tenant that wishes to terminate a rental contract for extension on amended terms and conditions shall notify the landlord in the notice of termination of the amendment in the contractual terms that is requested. If the tenant does not do this, the notice of termination is void.
The background to the dispute in the case was that the tenant moved from the rental premises in January 2018. The landlord filed for a summons and claimed compensation for rent as termination had not taken place. The landlord argued that the proposed amendment to terms and conditions had been too ambiguous to be implemented.
The question in the case was how clear a notice of termination for amended terms and conditions needs to be. The HD found that the tenant's proposal is not required to be so complete that the landlord shall simply be able to straightforwardly accept or refuse it through a simple ”yes” or ”no”. On the other hand, it must be sufficiently concrete and clear that it can constitute the basis for further negotiation. A minimum requirement should be that the tenant has specified which rental level and period is desired. If this is not the case, and there is concomitantly significant ambiguity regarding what the tenant wants, the termination shall not be put into effect.
In the case in question, the amendment to terms and conditions requested by the tenant was judged to be characterised by such ambiguity that it was void.
Take-aways: When a tenant gives notice to terminate a rental contract to amend terms and conditions, it is important to bear in mind that it must at least set out the proposed rental level and period that should apply. However, the amended terms and condition must not be specified to the extent that it has the form of an offer to the landlord.
”The apartment on Sibyllegatan”
– question of under which conditions a subtenant can exercise its right according to the rental agreement directly in relation to the property owner (HD's case no. T 7236-21)
A company entered into a rental agreement for an apartment with the property owner. On the same day that the primary lease was signed, the company sublet the apartment to another company. Shortly thereafter, the property owner and the the primary tenant entered into an agreement on waiver of security of tenure. After a number of years, the property owner terminated the rental agreement with the primary tenant, which in turn terminated the rental agreement with the subtenant. The subtenant brought proceedings against the property owner and requested that it should be established that the subtenant had the same right in relation to the property owner as if the property owner had leased the the tenancy directly to the subtenant.
The question at the HD concerned the conditions for a subtenant to a property to be able to exercise its right according to the rental agreement directly in relation to the property owner.
The HD initially found that for such a right to be present, requires (i) that there is an alignment of interests between the property owner and the lessor and (ii) that with respect to this and to the circumstances in general, it can be assumed that the legal relationship is utilised in order to circumvent any legal provision that is to the benefit of the subtenant.
Based on chapter 7, section 31 of the Swedish Code of Land Laws, the HD considered that there was an alignment of interests between the property owner and the primary tenant with respect to the fact that the intention behind the primary lease was not that a physical person with a link to the primary tenant should live in the apartment. It also emerged from the investigation that the primary tenant's business model was to enter as primary tenant in order to subsequently sublet the apartment. The primary tenant was thereby not considered to have any need for the apartment itself.
The HD also considered that it could be assumed that the legal relationship was utilised in order to circumvent provisions on security of tenure and reasonable rent in the rental legislation. In this judgement, the HD ruled that the property owner had no acceptable reason that the tenant utilising the property did not have security of tenure. The HD also took into consideration the fact that the legal relationship had existed for almost seven years when the property owner terminated the primary lease, that the subtenant at the time had security of tenure in relation to the primary tenant and that the primary tenant had waived its security of tenure to the disadvantage of the subtenant. The HD also found that the primary tenant's rent was significantly higher than reasonable rent and that the property owner must have realised that the primary tenant in turn intended to charge an even higher rent to the subtenant.
To sum up, the HD determined that the subtenant had the same right in relation to the property owner as the subtenant would have had if the property owner had leased the tenancy directly to the subtenant.
Take-aways: ”Arrangements” with the aim of circumventing a tenant's security of tenure will not be upheld. If a company that has no need of its own for an apartment enters as primary tenant in order to sublet the apartment and, furthermore, there are circumstances that suggest a circumvention of provisions in the rental legislation, a subtenant (tenant to the primary tenant) can exercise its rental agreement directly in relation to the property owner.
The question at the HD concerned a residential apartment, however, the relevant provision also includes rental of non-residential premises, which means that it should be possible to apply the case for premises, potentially with respect to the fact that a tenant of a premises has another, indirect, security of tenure.
"THE CEILING VOLUME JUDGEMENTS”
– question regarding inadequate information concerning ceiling volume and damage assessment in connection with review of a public procurement (HFD 2022 ref. 4 I and II)
In HFD 2022 ref 4 I and II, the HFD examined two framework agreements for procurements from two different procurements. The first case concerned a framework agreement for flooring works. The procurement document indicated an approximate annual volume for the framework agreement. In addition, there was information on how questions could be asked during the tender period. No questions concerning the framework agreement's maximum scope were received during the tender period. After the award decision was announced, the tenderer that was ranked in second place chose to review the procurement. The tenderer's statement included the fact that there was no information regarding ceiling volume, i.e. the maximum quantity that could be called off in total through the framework agreement. The supplier considered that it had suffered, or risked suffering, damage due to the shortcomings in the procurement, as, according to its own statement, the company would have been able to give a lower price and been able to achieve a better position in the procurement if a ceiling volume had been specified in the procurement.
In the second case, it was a question of a framework agreement concerning printing services. The procurement document gave historic volumes for the service and an estimate of the purchaser's future needs with an indication that the needs might vary and consequently be higher or lower. Here too, the opportunity was available to ask questions of the procuring authority, which were not utilised in relation to the framework agreement's volume. A tenderer that was not accepted as supplier in the procurement applied for a review. The company considered that it had not been able to submit its most competitive tender due to the lack of information on the framework agreement's volume.
With the support of the European Court of Justice's judgement in case C-23/20 Simonsen & Weel, the HD found that in procurement of a framework agreement, there must be an indication of the largest quantity or the highest value that the framework agreement shall encompass (celling volume). The requirement applies regardless of whether a framework agreement shall be signed with one or a number of suppliers. As the requirement to specify ceiling volume was not met in any of the documents, both of the procurements had been executed contrary to the principles of openness and equal treatment.
The HFD (Supreme Administrative Court) then adopted a position on whether the shortcomings in the procurements had caused damage or risk of damage for the suppliers and whether they had done what could be required to avoid damage arising. In the damage assessment, the HFD established that a supplier that considers that the information provided in the procurement documents is incomplete or unclear should ask questions and also request supplements and clarifications from the procuring authority as early as during the tender period. As such actions were not taken by the suppliers in any of the cases and there were no acceptable reasons, the shortcomings were not considered to have caused the suppliers to suffer, or risk suffering, damage. The lack of specified ceiling volumes consequently did not constitute a reason for intervention when the suppliers could not demonstrate damage.
Take-aways: Through the judgements, the HFD introduced a duty for suppliers to point out issues during the tender period. If the tender documentation is incomplete or unclear, suppliers should therefore be proactive in preventing damage as early as during the tender period. For example, it might be a question of shortcomings in relation to ceiling volume, the object of the procurement, the framework agreement's duration or evaluation model. A supplier should not wait to put forward objections concerning such shortcomings until a potential review. In certain cases, legal consultation can consequently be particularly important as early as during the tender period. A supplier that has not drawn attention to a shortcoming, needs to have acceptable reasons in connection with a review to be regarded as having suffered, or risked suffering, damage. What constitutes acceptable reasons has not yet been clearly established. It might conceivably be if the procuring authority applies a seemingly clear criterion in a different way than suppliers might have expected in the competition outreach phase.
QUESTION OF AN INDIVIDUAL'S RIGHT TO COMPENSATION FOR COURT COSTS IN ADMINISTRATIVE PROCEEDINGS
(HFD 2022 ref. 10)
A woman applied to the Swedish Tax Agency to change her name and was rejected. After the Administrative Court of Appeal had approved the change of name, the Tax Agency appealed to the HFD (Supreme Administrative Court). The woman opposed the change and requested compensation for her court costs. The HFD rejected the Tax Agency's appeal and the woman was able to change her surname. She then claimed compensation for her court costs. The question then arose: Does the right to a fair trial in accordance with the European Convention mean that an individual, who has won against the state, in an administrative process, must be granted compensation for court costs?
In distinction from what generally applies for cases in a general court, there are no regulations for the administrative process concerning compensation for court costs (with the exception of tax procedures). The reasons for this include the justifications that the administrative process is free of charge, that the counterparty is usually an authority that must act objectively, and also that the administrative courts have an obligation to investigate.
The HFD found that the European Court and the Court of Justice of the European Communities have established that under certain conditions it is incompatible with the right to a fair trial that individuals are refused compensation for court costs. Furthermore, the HFD found that the HD has made a similar judgement when it comes to the right to compensation in such judicial matters that are decided by a general court according to the Court Matters Act.
The HFD concluded that the administrative process is designed in such a way that it regularly meets the requirements that can be set to ensure that a trial shall be regarded as fair, but that it cannot be excluded that exceptional situations can arise where the circumstances are such that it would not be compatible with the right to a fair trial if an individual party cannot obtain compensation for legitimate court costs. The HFD thereby proceeded to examine whether the right to a fair trial means that court costs must be granted within the framework of the actual administrative process, or whether protection of rights can be maintained in that the individual can obtain damages in a subsequent procedure.
The HFD found that the European Court's case law sets out that the latter system is compatible with the right to a fair trial and that corresponding provisions in RF and EU's Bill of Rights may be regarded as having the same implication. The HFD therefore came to the conclusion that the right to a fair trial does not mean that compensation for court costs must be granted in the actual administrative case.
Take-aways: Individuals will not be able to obtain compensation for their costs in an administrative case in the future either. If such a claim is presented, it will be rejected, i.e. not even examined. For an individual to be able to obtain compensation for such costs, requires an action for damages against the state, based on the fact that it has not been possible to fulfil the right to a fair trial within the framework of the administrative case.
For now, it is not clear whether the right to damages requires that an individual has first tried to obtain compensation for representation expenses in the administrative case, i.e. claimed compensation and had the claim rejected, or whether it is sufficient in the subsequent action for damages against the state to show that the costs were legitimate. The woman who wanted to change her name is currently bringing a lawsuit for damages against the state, and the outcome of the case will probably provide clarity.