Case Study – Litigation Derived from Court of Auditors Control: Dismissal of the Claim for Recovering Prejudice
Factual Background
A legal entity entered into a contract with a public authority to provide site supervision (“dirigenție de șantier”) for a limited period of 8 months, at a fixed price. Later, an addendum extended the initial contract by another 3 months due to the contractor’s delay in completing rehabilitation works.
Subsequently, between the same contracting parties, a second contract for related services was concluded, with an object closely connected to, but different from, the first contract.
During a control by the Cluj Chamber of Auditors, it was found that, for the first contract, three months’ worth of payments had been made beyond the contractual term. Further, the second contract was deemed unjustified because its services should have been covered by the first contract, since the price of that contract was fixed per investment objective and not per month. The auditors concluded that these extra payments caused a prejudice to the contracting authority, and that the sums should be recovered.
As a consequence of that audit report, the public authority sued the company (represented by Brisc Legal attorneys specializing in litigation arising from Court of Auditors controls) requiring recovery of the allegedly improper payments.
Defense Strategy by Brisc Legal
In defense, we requested rejection of the lawsuit primarily on the ground of incorrect legal basis. We also challenged the Court of Auditors’ interpretation of contract clauses as abusive. On the merits, we argued that the company was entitled to receive those sums, since valid contractual relations existed between the parties and were not contested. We showed that the addenda increasing price and period were justified by the delay of the executing contractor. Because the company provided site supervision services—which require oversight and approval—the extension was legally justifiable as long as rehabilitation works remained unfinished.
Decision of Cluj Tribunal (Court of First Instance)
The Tribunal of Cluj, at first instance, gave an unfavorable outcome for our client. It upheld that the auditors properly determined that for the first contract the three extra months were unjustified under the addendum. Regarding the second contract, the court agreed with the Court of Auditors’ view: the services covered by it should have been included in the first contract because that contract’s price was based on the investment objective, not on monthly performance.
We appealed that decision to the Cluj Court of Appeal, arguing among other things that the lower court failed to consider arguments presented in the first instance, rendering its judgment inadequately reasoned.
Position of the Cluj Court of Appeal
The Cluj Court of Appeal prioritized our criticisms of illegality and found that the first instance judgment did not respond (not even implicitly) to arguments we made during the trial. It concluded that the lower court violated Article 425(1)(b) of the Civil Procedure Code (which requires that the judgment of first instance set out the reasons for rejecting each party’s requests), and thus ordered re-evaluation of the case.
Upon re-examination, the Court of Appeal held that the public authority’s lawsuit was grounded on the institution of tortious civil liability but failed to prove the existence of an unlawful act by the company. Therefore the Court rejected the claim and held that the company assisted by specialized administrative & Court of Auditors litigation attorneys was not required to return any amounts.