Peculiarities of the National precedent

11/ 05/ 2018

Judicial precedent is the unshakable part of the Anglo-Saxon legal system, which forms a source of law. He is not only dictated by the need in some way to consider a similar argument, but imperatively establishes mandatory for all the rule of law. Despite the apparent conservatism of the Anglo-Saxon legal system, it is subject to review There is a precedent: in view of its falsity or not in line with current social realities. For example, in the US (and not only) there is such an institution as «overruling», the disclosure of which is not relevant for this article, but its essence eloquently tell legally correct translation of the term: «overruling» - «to reject the decision of the previously considered case with the creation of new case law. National system of law precedent in its classical meaning, not typical: are mandatory only conclusions on the application of the rule of law as set out in the decisions of the Supreme Court. At the same time, the 1st and the 2nd instance courts are not entitled to depart from these findings - in fact, the right to deviate from the position of the Supreme Court only in the Supreme Court, but in a different composition (chamber combined Chamber, the Grand Chamber). Thus, any current position of the Supreme Court has a direct impact on the practice of the lower courts. In this article, we will look at several positions of the Supreme Court, which, in our opinion, are able to change the current practice of consideration of disputes in bankruptcy cases. Costs associated with the maintenance, preservation and sale of the collateral Until 2018 the Supreme Economic Court of Ukraine categorically treated normal part 4 of Article 42 of the Law of UkraineOn restoring the debtors solvency or recognizing it as a bankrupt: the money received from the sale of collateral, could be used exclusively to repay the debt to the creditor whose claim is secured by a pledge sold. Courts rarely retreated from that position and agree that due to these money can compensate for the costs associated with the maintenance and protection of the collateral. This position often causes conflicts among parties to the bankruptcy proceedings. The liquidator was obliged to compensate the costs of preservation of the collateral, at the expense of the money received from the sale of no collateral. For obvious reasons, this caused dissatisfaction among the unsecured creditors who did not agree with the fact that the deposit is actually retained at their expense. The Supreme Court in its decision of 02.14.2018 (Case 927/1191/14) presented a more progressive stance on the use of funds received from the sale of collateral. According to the Supreme Court, with funds from the sale of collateral may not only pay off the secured creditor, but also the costs associated with the maintenance, preservation and sale of the collateral. Status lender Person who has the money to the debtor receives the status of the production of a participant in the bankruptcy case, namely the lender only after the declaration of its cash requirements in the established order - the position of the Supreme Court set out in the regulations of 27.02.2018 (case 908/1671 /16) and 03.01.2018 (case 7/98-Б). This position is of great importance for unifying jurisprudence on this issue and this is due primarily to the fact that it was from the receipt of the creditor status of the person, he appeared and rights. For example, the right to appeal against judgments in the framework of the bankruptcy proceedings, etc. It is important to note that before making these decisions, there was no uniform practice on the date of receipt by the person of the creditor status: more common was the position, according to which a person receives creditor status only after the court recognizes its cash requirements, and up to this point in any way to influence the bankruptcy procedure can not. Unfortunately, the unity of approaches of different boards of the sun to the definition of the status of the creditor in the bankruptcy case concerned only the ordinary creditors - legal entities and individuals, but not the fiscal authorities. Regarding the latest status, the court did not come to the same conclusion: in the already mentioned decision of 01.03.2018 (Case 7/98-Б), the Supreme Court formed a position that fiscal authorities do not automatically acquire the status of the creditor - it is acquired through the procedure, under the Law on bankruptcy (application creditors claims). Other cases of participation of the fiscal authorities in the bankruptcy law does not provide. Consequently, the fiscal body that has no monetary claims against the debtor or not said them, has no right to appeal against decisions in the bankruptcy case; in the judgment of 14.3.2018 (Case 927/557/17), the Supreme Court formed a different view: the legal status of a tax inspection, as the supervisory authority, provided the rules of civil and tax law, in connection with which the latter has the right to appeal. The consequences of the sale of the mortgaged property The Supreme Court of Ukraine has repeatedly stated its position (case 3-137гс16 and 6-1685цс16) regarding the consequences of the sale of the mortgaged property in bankruptcy. The essence of the APU position was to ensure that the sale of the mortgaged property in the bankruptcy procedure does not stop the mortgage and the buyer of the property all rights and obligations of the mortgagor. The position was justified by the fact that in this case the Law of Ukraine About the mortgage is special, and does not include such grounds for termination of the mortgage, as the sale of mortgage object in bankruptcy. There were exceptions to the position of the APU. Thus, in its decision of 03.30.2016 (Case 6-2684цс15) the Court concluded that the person to whom transferred ownership of the mortgaged property, which was sold in bankruptcy proceedings with the termination of complications, does not acquire the status of the mortgagor. A similar conclusion was reached by the Supreme Court in its judgment of 03.12.2018 (case 640/19896/13-ц). Committee or a meeting of creditors On bankruptcy law contains conflict between two rules governing the powers of the creditors committee: Article 26 - attributes decision to move to the next bankruptcy and to determine candidacy arbitration manager to the powers of the creditors committee, and Article 27 - requires exactly the creditors meeting to decide on following procedure. In his practice SECU often adhered to the position that it is the creditors meeting shall decide on the transition to the following procedure. This position, though based on the rule of law, but in fact created an absurd situation: the creditors meeting decides on the transition, for example, in liquidation, but the candidacy of a liquidator shall determine the creditors committee. The Supreme Court expressed different views on this issue. The position reflected in the decision of 27.02.2018 (Case 910/21939/15) the court has taken into account the expiry of the procedure disposition of property and pointed out that the decision to move to the liquidation procedure may be adopted as a result of the decision of the creditor committee. In our opinion, this is a reasonable and logical position, at least due to the fact that in most cases, the committee consists of the creditors with the largest number of votes. Therefore, it seems unlikely situation in which the Assembly and the committee may adopt different solutions. Outlined in this article, examples of positions of the Supreme Court gives the opportunity to talk about the development of the vector of the Supreme Court - vector cautious and sometimes controversial rejection of the position of SECU, SCU and the formation of a new legal practice.

Despite the apparent conservatism of the Anglo-Saxon legal system, it is subject to “review” There is a precedent: in view of its falsity or not in line with current social realities. For example, in the US (and not only) there is such an institution as «overruling», the disclosure of which is not relevant for this article, but its essence eloquently tell legally correct translation of the term: «overruling» – «to reject the decision of the previously considered case with the creation of new case law.

National system of law precedent in its classical meaning, not typical: are mandatory only conclusions on the application of the rule of law as set out in the decisions of the Supreme Court. At the same time, the 1st and the 2nd instance courts are not entitled to depart from these findings – in fact, the right to deviate from the position of the Supreme Court only in the Supreme Court, but in a different composition (chamber combined Chamber, the Grand Chamber). Thus, any current position of the Supreme Court has a direct impact on the practice of the lower courts.

In this article, we will look at several positions of the Supreme Court, which, in our opinion, are able to change the current practice of consideration of disputes in bankruptcy cases.

Costs associated with the maintenance, preservation and sale of the collateral

Until 2018 the Supreme Economic Court of Ukraine categorically treated normal part 4 of Article 42 of the Law of Ukraine”On restoring the debtor’s solvency or recognizing it as a bankrupt”: the money received from the sale of collateral, could be used exclusively to repay the debt to the creditor whose claim is secured by a pledge sold. Courts rarely retreated from that position and agree that due to these money can compensate for the costs associated with the maintenance and protection of the collateral.

This position often causes conflicts among parties to the bankruptcy proceedings. The liquidator was obliged to compensate the costs of preservation of the collateral, at the expense of the money received from the sale of no collateral. For obvious reasons, this caused dissatisfaction among the unsecured creditors who did not agree with the fact that the deposit is actually retained at their expense.

The Supreme Court in its decision of 02.14.2018 (Case 927/1191/14) presented a more progressive stance on the use of funds received from the sale of collateral. According to the Supreme Court, with funds from the sale of collateral may not only pay off the secured creditor, but also the costs associated with the maintenance, preservation and sale of the collateral.

Status lender

Person who has the money to the debtor receives the status of the production of a participant in the bankruptcy case, namely the lender only after the declaration of its cash requirements in the established order – the position of the Supreme Court set out in the regulations of 27.02.2018 (case 908/1671 /16) and 03.01.2018 (case 7/98-Б).

This position is of great importance for unifying jurisprudence on this issue and this is due primarily to the fact that it was from the receipt of the creditor status of the person, he appeared and rights. For example, the right to appeal against judgments in the framework of the bankruptcy proceedings, etc.

It is important to note that before making these decisions, there was no uniform practice on the date of receipt by the person of the creditor status: more common was the position, according to which a person receives creditor status only after the court recognizes its cash requirements, and up to this point in any way to influence the bankruptcy procedure can not.

Unfortunately, the unity of approaches of different boards of the sun to the definition of the status of the creditor in the bankruptcy case concerned only the ordinary creditors – legal entities and individuals, but not the fiscal authorities. Regarding the latest status, the court did not come to the same conclusion:

in the already mentioned decision of 01.03.2018 (Case 7/98-Б), the Supreme Court formed a position that fiscal authorities do not automatically acquire the status of the creditor – it is acquired through the procedure, under the Law on bankruptcy (application creditors’ claims). Other cases of participation of the fiscal authorities in the bankruptcy law does not provide. Consequently, the fiscal body that has no monetary claims against the debtor or not said them, has no right to appeal against decisions in the bankruptcy case;
in the judgment of 14.3.2018 (Case 927/557/17), the Supreme Court formed a different view: the legal status of a tax inspection, as the supervisory authority, provided the rules of civil and tax law, in connection with which the latter has the right to appeal.

The consequences of the sale of the mortgaged property

The Supreme Court of Ukraine has repeatedly stated its position (case 3-137гс16 and 6-1685цс16) regarding the consequences of the sale of the mortgaged property in bankruptcy. The essence of the APU position was to ensure that the sale of the mortgaged property in the bankruptcy procedure does not stop the mortgage and the buyer of the property all rights and obligations of the mortgagor. The position was justified by the fact that in this case the Law of Ukraine “About the mortgage” is special, and does not include such grounds for termination of the mortgage, as the sale of mortgage object in bankruptcy.

There were exceptions to the position of the APU. Thus, in its decision of 03.30.2016 (Case 6-2684цс15) the Court concluded that the person to whom transferred ownership of the mortgaged property, which was sold in bankruptcy proceedings with the termination of complications, does not acquire the status of the mortgagor. A similar conclusion was reached by the Supreme Court in its judgment of 03.12.2018 (case 640/19896/13-ц).

Committee or a meeting of creditors

On bankruptcy law contains conflict between two rules governing the powers of the creditors’ committee: Article 26 – attributes decision to move to the next bankruptcy and to determine candidacy arbitration manager to the powers of the creditors’ committee, and Article 27 – requires exactly the creditors’ meeting to decide on following procedure.

In his practice SECU often adhered to the position that it is the creditors meeting shall decide on the transition to the following procedure. This position, though based on the rule of law, but in fact created an absurd situation: the creditors’ meeting decides on the transition, for example, in liquidation, but the candidacy of a liquidator shall determine the creditors’ committee.

The Supreme Court expressed different views on this issue. The position reflected in the decision of 27.02.2018 (Case 910/21939/15) the court has taken into account the expiry of the procedure disposition of property and pointed out that the decision to move to the liquidation procedure may be adopted as a result of the decision of the creditor committee.

In our opinion, this is a reasonable and logical position, at least due to the fact that in most cases, the committee consists of the creditors with the largest number of votes. Therefore, it seems unlikely situation in which the Assembly and the committee may adopt different solutions.

Outlined in this article, examples of positions of the Supreme Court gives the opportunity to talk about the development of the vector of the Supreme Court – vector cautious and sometimes controversial rejection of the position of SECU, SCU and the formation of a new legal practice.