Local authorities had not acted negligently in their administration of ...

Case no. 160/2012
Judgment of 10 February 2016

In 2003, a private provider of language courses entered into an operating agreement with the City of Copenhagen, according to which the language school was to provide Danish language instruction which local authorities were required to offer under the Danish Language Instruction Act. The Act and the operating agreement entered into force on 1 January 2004. With the Act, new payment rules were introduced, stipulating that the local authorities were to extend grants providers of language instruction based on tariffs per module.

The City of Copenhagen then proceeded to set a module tariff for the language school that was lower than the recommended module tariffs according to the Appropriation Act and lower than the tariffs paid to other language schools. In addition, the City of Copenhagen paid the same tariff to the language school for instruction provided to non-local participants as for the local citizens, although it charged the recommended higher module tariff from the neighbouring municipalities for the courses.

In 2006, the language school started to invoice the neighbouring municipalities directly for instruction provided to non-local participants, which it was not entitled to in the opinion of the City of Copenhagen. As the language school was not able to refund the payments made by other municipalities and also could not pay a claim raised by the City of Copenhagen for repayment of on-account grants for 2006, the City terminated the operating agreement and filed a police report against A for violation of section 279 of the Penal Code on fraud. The police did not consider that a criminal offence had been committed and thus rejected the case. The language school was then declared bankrupt.

In the hearing of the case, the language school claimed that the City of Copenhagen had acted negligently in its administration of the grant rules, which had caused the school to suffer a loss. In addition, A claimed that the City had committed an unlawful violation of A’s freedom, peace, honour or person, cf. section 26 of the Liability for Damages Act, by filing the police report, and that it was liable to pay compensation for injury to A.

The Supreme Court found that it had not been satisfied that the operating agreement on the module tariffs was in contravention of the Danish Language Instruction Act, as it followed from the explanatory statement accompanying the bill that there was nothing to prevent the City from agreeing on a tariff that was higher or lower than the recommended tariff for the module, depending on the level of expenditure. Accordingly, the language school was not entitled to receive a higher module tariff than the one agreed with the City of Copenhagen.

In addition, the Supreme Court found that, according to the Danish Language Instruction Act, a course provider/the language school was not entitled to make separate payment agreements with other municipalities than the municipality/municipalities with whom the provider/language school had entered into an operating agreement. As the language school had no operating agreements with other municipalities, it was thus not entitled to make separate agreements on payment of grants with other municipalities.

The operating agreement did not in itself prevent the language school from entering into operating agreements with other municipalities; however, for the sake of ensuring the capacity required to provide instruction under the Danish Language Instruction Act, it did require the City of Copenhagen’s consent. The condition was thus objectively justified, and another reason why the City had not acted negligently.

The Supreme Court also found that it had not been proven that the operating agreement was in contravention of the Competition Act or public administrative law principles.

In its decision, the Supreme Court attached particular importance to the fact that the language school had actually entered into the operating agreement if its own accord.

With regard to the claim for compensation, the Supreme Court found that the police report represented the facts behind the City of Copenhagen’s claim that A had committed fraud. For that reason, the Supreme Court was not satisfied that the City had committed an unlawful violation against A.

The High Court had reached the same conclusion.