In July 2017, the client transferred an advance as a prepayment for the purchase of rights to a public service facility. After transferring the advance, the client sought advice from the legal team

The lawyer found that instead of corporate rights to the company, pre-agreed object of purchase is a “ready business” (authentic wording of the seller).

It turned out that the “ready business” don’t have formal rights to the trademark, don’t own the property rights to the non-residential premises in which it was located, and the staff of the enterprise worked without registration of employment. The seller did not provide documents for accounting and legal audit.

Taking into account the established circumstances, negotiations of the purchase of rights to the public service enterprise were suspended and a demand for a refund of the advance was made.

The seller of the enterprise refused to return the amount of prepayment, citing the fact that this amount, in his understanding, is a deposit and is non-refundable. The pre-trial settlement did not yield the desired result.

Advance or deposit?

Rostislav Salamakha’s legal position in the Obolonskiy District Court of Kyiv based on the fact that the transferred prepayment amount was an advance, as it performed only a fiscal function. If this amount was a deposit within the meaning of Part 2 of Article 570 of the Civil Code of Ukraine, the relevant legal nature of the funds would be defined in the Preliminary Purchase Agreement, subject to the requirements of Article 547 of the Civil Code of Ukraine.

The advance does not perform the function of security, but performs the function of prepayment. As the Preliminary Agreement was not concluded between the parties to the dispute, and the law does not give the prepayment the legal force of the deposit, the specified amount is subject to return in favor of the client in full.

The position of the team was strengthened by the legal conclusions and positions of the courts of cassation:

  • Decision of the Supreme Court of Ukraine of February 18, 2009 in case 6-23108sv08;
  • Resolution of the Supreme Court of Ukraine of 13.02.2013 in case 6-17tss12;
  • Decision of the Supreme Court of Ukraine of July 10, 2013 in case 6-11081sv13;
  • Resolution of the Civil Court of Cassation of the Supreme Court of 16.02.2020 in case 479/974/17.

It should be noted the methods of abuse of procedural rights, which resorted to the defendant. Filing a fictitious counterclaim, changing the registration of residence in order to change the jurisdiction of the case, repeated intentional failure to appear in court and filing motions to postpone the trial allowed the defendant to delay the trial for more than three years.

The court fully satisfy the claim and recovered the amount of the advance.

During the interrogation of the defendant as a witness, the Lawyer recorded that the court had given false testimony of the witness. As of today, the issue of initiating criminal prosecution of the defendant under Article 384 of the Criminal Code of Ukraine is being resolved.

December 2020