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Publication date: 01.05.2024
The Supreme Court ruled that the provision containing grounds for nullity must be in force at the time of the transaction
If the wording of Article 38 of the Law of Ukraine "On the Individual Deposit Guarantee System" regarding the criteria for voidability of a transaction was not in force at the time of the transaction, its provisions cannot be applied to qualify the transaction as void.
To qualify transactions (including contracts) of an insolvent bank as void, the grounds for voidability contained in Article 38 of the Law of Ukraine "On the Individual Deposit Guarantee System" at the time of their execution should be taken into account.
The provision containing the grounds for nullity must be in force at the time of the transaction. If the wording of this article, in particular its provisions on the criteria for nullity, was not in force at the time of the transaction, its provisions cannot be applied to qualify such a transaction as null and void.
The absence of grounds for recognizing such a transaction as void does not deprive the plaintiff of the right to raise the issue of invalidity of the said agreement on general grounds and to prove the existence of circumstances that indicate its invalidity at the time of its execution.
This conclusion was made by the Grand Chamber of the Supreme Court in its decision of March 13, 2024 in case No. 757/23249/17 (proceedings No. 14-95цс22) on the bank's claim for invalidation of the mortgage agreement.
According to the circumstances of the case, the shareholder, who held the position of the chairman of the bank's supervisory board, received funds from an individual under a preliminary agreement. To secure the fulfillment of its obligations under this agreement, in April 2014, the bank mortgaged an apartment owned by the bank on the basis of a mortgage agreement to an individual.
In the same year, the liquidation procedure of the bank was initiated by a resolution of the Board of the National Bank of Ukraine. During the inspection of contracts (other transactions), the Deposit Guarantee Fund identified mortgage agreements entered into by the bank to secure the fulfillment of the obligations of the bank's Supervisory Board Chairman, which met the criteria for nullity of transactions provided for in paragraphs 1 and 5 of Part 3 of Article 38 of the Law of Ukraine "On the System of Guaranteeing Individual Deposits" (as amended from July 11, 2014 to August 12, 2015). The Supervisory Board did not make a decision to enter into the disputed mortgage agreement.
At the same time, the mortgagee foreclosed on the mortgaged property, registered its ownership of the apartment and alienated it in favor of a third party, an LLC.
The court of first instance, whose conclusions were upheld by the court of appeal, sustained the claim.
In the cassation appeal, the mortgagee under the disputed mortgage agreement noted that the courts of previous instances in their contested decisions referred to Article 38 of the Law of Ukraine "On the Deposit Guarantee System" as amended on July 4, 2014, while the disputed mortgage agreement was entered into on April 23, 2014.
Having considered the dispute, the Grand Chamber of the Supreme Court noted that on July 11, 2014, the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine on Prevention of Negative Impact on the Stability of the Banking System" came into force, which amended, in particular, Article 38 of the Law of Ukraine "On the Deposit Guarantee System".
A comparative analysis of the two versions of the Law of Ukraine "On the Deposit Guarantee System" (dated April 20, 2014 and July 11, 2014) shows that the second (later) version significantly expands and clarifies the list of grounds for nullity of contracts entered into by insolvent banks.
In the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine on Prevention of Negative Impact on the Stability of the Banking System", the Final and Transitional Provisions do not contain any retroactive provisions.
According to paragraphs 1 and 5 of part 3 of Art. 38 of the Law of Ukraine "On the Individual Deposit Guarantee System" (as amended from July 11, 2014 to August 12, 2015), transactions of an insolvent bank were recognized as void on the following grounds the bank alienated property free of charge, assumed obligations without establishing the counterparty's obligation to perform the relevant property actions, waived its own property claims; the bank assumed obligations (pledge, surety, guarantee, retention, factoring, etc.) to ensure the fulfillment of monetary claims in a manner other than credit operations in accordance with the Law of Ukraine "On Banks and Banking Activities".
However, as of the date of the disputed mortgage agreement, Article 38 of the Law of Ukraine "On the Deposit Guarantee System" did not contain the grounds for nullity referred to by the plaintiff.
Therefore, the plaintiff's references to the nullity of the mortgage agreement based on the criteria established by the said provision, effective as of July 11, 2014, are groundless.
The plaintiff's references to the nullity of the transaction were not confirmed, and therefore, if the relevant requirements of the statement of claim were met, the grounds for invalidity of the transaction on which the claim was filed were subject to verification.
Having established that the disputed mortgage agreement was entered into in the absence of a decision of the bank's management board, which is authorized by the bank's charter to resolve issues related to the conclusion of agreements, the courts of previous instances correctly concluded that there were grounds for invalidating such a transaction, since its conclusion was not based on the bank's will to mortgage its own property to secure the obligations of another person. However, the courts partially erred in the grounds for its invalidity, as well as in their conclusions in applying the provisions of Part 3 of Article 38 of the Law of Ukraine "On the Individual Deposit Guarantee System".
Thus, we can see that the adopted amendments to the current law were adopted taking into account the changes in the requirements of the time and the imposed martial law in Ukraine, as well as the fact that a Legal analysis of the situation, a analysis of the situation by a lawyer, legal analysis of the situation by a lawyer, a legal analysis of the situation and a Legal opinion were conducted.
