Supreme Court: is compensation for non-material damage available also for legal persons

15 January 2024 | Knowledge, News

In its Resolution of 3 October 2023 (ref.: III CZP 22/23), the Supreme Court stated that legal persons also have the right to claim compensation for an infringement of their personal interests. The question of whether traders whose personal interests have been infringed have the same rights as natural persons, remains open.

Infringement of traders’ personal interests

A case involving an infringement of personal interests is a dispute in which both natural and legal persons seek to protect their intangible assets. The list is open and described in Article 23 of the Civil Code Act of 23 April 1964 (i.e. Journal of Laws of 2023, item 1610; the ‘Civil Code’), while Article 43 of the Civil Code imposes an obligation to apply the provisions on the protection of personal interests of natural persons to legal persons accordingly. One of the claims that may be asserted in the event of an infringement of personal interests is a claim for monetary compensation pursuant to Article 448 of the Civil Code. The Supreme Court and the Commissioner for Civil Rights share the same view on this claim.

Doubts about this arose in the case of a trader whose customer published an unfavourable comment on the quality of the products it sold. The heat pump vendor filed a lawsuit demanding the removal of the comment, correction and damages of PLN 22 000. The dispute was based on the provisions concerning the protection of personal interests.

The Court of Appeal in Gdańsk, which heard the case at second instance (ref.: I AGa 196/22), questioned whether traders have the right to claim compensation for non-material damage suffered and referred the question to the Supreme Court of whether a legal person may claim payment of compensation for non-material damage suffered from a person who has infringed its personal interests on the basis of Article 448 of the Civil Code read together with Article 43 of the Civil Code.

Inconsistent case law and different interpretations

In its earlier Judgment of 24 September 2008 (ref. II CSK 126/08), the Supreme Court held that Article 448 of the Civil Code could be applied to protect the personal interests of legal persons.

The Court argued that non-material damage is not limited to physical or mental suffering, which only affects natural persons. Legal persons suffer non-pecuniary damage as a result of having their personal interests infringed, which cannot be expressed in monetary terms. The later resolution of 9 November 2017 (ref. III CZP 43/17) confirmed that claims for monetary compensation for non-material damage, although seemingly not applicable to legal persons, have a compensatory, gratuitous, repressive, preventive and educational function.

However, there is also another position, expressed, for example, by the Court of Appeal in Kraków in its Judgment of 28 September 1999 (ref. I ACa 464/99), which stated that legal persons do not have the right to claim monetary compensation for non-material damage.

This was argued on the basis that the provisions on the protection of personal interests of natural persons apply accordingly to legal persons, leading to the conclusion that legal persons are not entitled to monetary compensation for non-material damage suffered. The Court of Appeal in Gdańsk shared this view.

In the course of the Supreme Court’s consideration of the legal issue, the Commissioner for Civil Rights joined the discussion and supported the position of the Court of Appeal in Gdańsk, arguing that a legal person cannot claim compensation for non-material damage, as non-material damage does not manifest itself in the case of legal persons, who do not experience negative feelings in the same way as natural persons. The Commissioner further argued that it would be unjustified to award compensation on the basis of a compensatory, gratuitous, repressive or preventive and educational function.

Nevertheless, the Supreme Court held that a legal person may claim compensation for non-material damage suffered as a result of an infringement of its personal rights. Despite the lack of reasons for this resolution, there is still a lack of uniformity in case law on this matter.

The Commissioner’s reasoning seems understandable. It simply implies that a legal person, as an organisational and legal creation, is incapable of suffering non-material damage, i.e. pain, sorrow and suffering, leading to the conclusion that Article 448 of the Civil Code does not provide a basis for awarding compensation to a legal person for non-material damage suffered.

Companies can bring reputational damage claims

It is important to note, however, that this does not mean that legal entities cannot claim monetary compensation for an infringement of their personal interests. Nevertheless, to have their claims awarded, companies must demonstrate how the infringement in question has affected their goodwill, i.e. whether they have lost customers, profits or goodwill. If this is properly documented, they will be able to have their monetary claims for such an infringement awarded.

Source: Business Insider

Date: 9.12.2023

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