On some issues of the invalidity of transactions and the application by the courts of the consequences of their invalidity
Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated July 7, 2016 No. 6.
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For the purposes of uniform and correct application in judicial practice of certain norms of the legislation of the Republic of Kazakhstan on the invalidity of transactions and the application of the consequences of their invalidity, the plenary session of the Supreme Court of the Republic of Kazakhstan
Decides:
According to the norms of the Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code), a transaction may be invalid on the grounds established by law, by virtue of its recognition as such by a court (disputed transaction) or independently of such recognition by virtue of a direct indication of its invalidity in the law (void transaction).
Claims for invalidation of the disputed transaction and the application of claims about its consequences may be submitted by an interested person, an appropriate state body or a prosecutor.
The invalidity of the transaction established by law does not prevent the interested party from demanding judicial recognition of the invalidity of such a transaction.
A claim for the application of the consequences of the invalidity of a void transaction may be made by any interested person, regardless of whether a claim for invalidation of a void transaction has been made.
The court has the right to apply the consequences of the invalidity of the transaction on its own initiative in the cases provided for in paragraphs 2, 3, 4, 5, 6, 7 and 8 Articles 157-1 of the Civil Code.
The footnote. Paragraph 1 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
According to paragraph 1 of Article 9 of the Civil Code, the recognition by a court of a disputed transaction as invalid and the application of the consequences of its invalidity, the application of the consequences of the invalidity of a void transaction are one of the ways to protect civil rights.
Disputes related to the protection of civil rights by invalidating a transaction are considered by the courts in compliance with the rules of jurisdiction and jurisdiction of cases established by the Civil Procedure Code of the Republic of Kazakhstan (hereinafter – CPC).
The footnote. Paragraph 2 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
If the claim is related to the subsequent return of property received under an invalid transaction, the price of the claim is determined and indicated in the statement of claim in accordance with subparagraph 13) of the first part of Article 104 of the CPC.
According to this provision of the law, in cases of invalidation of contracts related to the subsequent return of all received property, the price of the claim is determined by the market value of the property on the day the claim is filed in court.
The price of the claim is determined and indicated in the statement of claim in accordance with subparagraph 1) of the first part of Article 104 of the CPC, if the claim is related to the reimbursement of the value of the property to be returned, the cost of using the property, work performed or services rendered in monetary terms in the event of the impossibility of returning the property in kind under an invalid transaction.
In these cases, the state duty on applications for invalidation of transactions submitted to the court is charged as on property claims (subparagraph 1) of paragraph 1 of Article 610 of the Code of the Republic of Kazakhstan "On Taxes and Other Mandatory Payments to the Budget" (Tax Code)).
In the case of a claim for the invalidity of a transaction that is not related to the return of property or to the reimbursement of its value, the state fee is charged as for non-property claims (subparagraph 7) of paragraph 1 of Article 610 of the Tax Code).
If, at the stage of accepting a claim for invalidation of a transaction, the court finds that the statement of claim does not specify the requirement to apply the consequences of invalidating the transaction, then this circumstance cannot be a reason for refusing to accept the statement of claim or returning it. The norms of subparagraph 3) of the first part of Article 152 of the CPC are inapplicable in this case, since the absence of this requirement in the statement of claim does not relate to an irremediable defect entailing the return of the statement of claim on the basis of Article 152 of the CPC. The requirement to apply the consequences of the invalidity of the transaction is clarified by the court at the stage of preparing the case for trial.
The footnote. Paragraph 3 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 04/20/2018 No. 7 (effective from the date of the first official publication).
In accordance with Article 163 of the CPC, at the stage of preparing a case for trial, the court must clarify the circumstances relevant to the proper resolution of the case, determine which legal relationship the dispute arose from and which legal norms should be applied in resolving the case.
When resolving the issue of the invalidity of transactions and applying the consequences of their invalidity, the courts should be guided by the legislation in force at the time of the emergence of these legal relations.
A regulatory legal act providing for amendments to the previous procedure for regulating relations on an invalid transaction and the application of the consequences of its invalidity applies to legal relations that arose after its entry into force. An exception is made in cases where the retroactive effect of a regulatory legal act or part of it is provided for by itself or by an act on its enactment.
When resolving disputes arising from legal relations that arose after March 10, 2017, the courts apply the norms of the Civil Code as amended by the Law of the Republic of Kazakhstan dated February 27, 2017 No. 49-VI "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on improving civil, banking legislation and improving business conditions."
The footnote. Paragraph 5 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 04/20/2018 No. 7 (effective from the date of the first official publication).
When considering cases in this category, courts should proceed from the fact that, by virtue of Article 147 of the Civil Code, transactions are recognized as actions of citizens and legal entities aimed at establishing, changing or terminating civil rights and obligations.
When considering cases on invalidation of transactions and the application of the consequences of their invalidity, the courts must determine the subject and basis of the claim for which the plaintiff applies to the court, which circumstances relevant to the case have been established and which have not been established, what are the legal relations of the parties, and, depending on this, apply the substantive law that governs the dispute legal relationship, and on the basis of these norms to resolve the claim (part one of Article 225 of the CPC).
This circumstance is consistent with the requirements of Article 4 of the CPC, according to the rules of which the tasks of civil proceedings are to protect and restore violated or disputed rights, freedoms and legitimate interests of citizens, the state and legal entities, respect for the rule of law in civil traffic, ensure full and timely consideration of the case, promote peaceful settlement of disputes, prevent offenses and create a respectful relations to the law and the court.
The footnote. Paragraph 6 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
When clarifying the grounds for the invalidity of a transaction, as well as the persons entitled to demand its invalidation, the courts should proceed from the fact that, according to paragraph 2 of Article 157 of the Civil Code, they are established not only by the Civil Code (Articles 158, 159, 160, 337, 411 and others), but also by other legislative acts.
Norms on the invalidity of transactions are contained in the Codes of the Republic of Kazakhstan "On Marriage (Matrimony) and Family" (Article 43), "On Subsoil and Subsoil Use" (paragraph 4 of Article 44), Laws of the Republic of Kazakhstan dated May 13, 2003 No. 415-II "On Joint Stock Companies" (paragraph 1 of Article 74), No. 574-II dated July 6, 2004 "On Inland Waterway Transport" (paragraph 2 of Article 82), No. 176-V dated March 7, 2014 "On Rehabilitation and Bankruptcy" (Article 7) and other legislative acts.
These norms of the Civil Code and other legislative acts are applied both when considering cases of invalidation of transactions, and when considering other categories of cases where courts evaluate certain transactions (which the parties refer to in support of their claims and objections) for their validity or invalidity.
If, when considering a dispute in which the parties refer to certain transactions as evidence in the case, the court finds that the transaction was made in violation of the requirements for the form, content, participants in the transaction, as well as for the freedom of their will, the court determines whether this transaction should comply with the requirements of the law. to be recognized by the court as invalid at the request of an interested person (disputed transaction) or it is invalid by virtue of a direct indication of the law, that is, regardless of such recognition (void transaction).
If the court finds that the transaction is contested, it must explain to the parties their right to apply to the court with an independent claim to invalidate the transaction.
If it is established that the transaction is invalid by virtue of a direct indication of the law (for example, a transaction made by a person under the age of fourteen (a minor) is invalid, except for transactions provided for in Article 23 of the Civil Code (paragraph 3 of Article 159 of the Civil Code), the court evaluates the transaction as invalid in whole or in part of its individual terms, establishes the invalidity of the transaction and applies the consequences of its invalidity. In such circumstances, an application to the court for invalidation of such a transaction is not required.
The footnote. Paragraph 7 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
Consequences in the form of the obligation of one of the parties to return to the other all received under the transaction (bilateral restitution), and if it is impossible to return in kind (including when the received is expressed in the use of property, work performed or services provided), compensation for the value of the returned property, the cost of using the property, work performed or services rendered in monetary terms They are applied only if other consequences of the invalidity of transactions are not provided for by the Civil Code.
Other consequences of the invalidity of the transaction are provided for in paragraphs 5 and 6 of Article 157-1 of the Civil Code (confiscation), Article 260 (vindication) and other provisions of the Civil Code.
The footnote. Paragraph 8 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
To explain to the courts that the seizure of property by the owner from someone else's illegal possession (vindication) according to Article 260 of the Civil Code in some cases can be used as protection of property rights without invalidating the transaction due to its absence, and in other cases – as the consequences of an invalid transaction, taking into account the existing circumstances.
In order to correctly apply the consequences of the invalidity of the transaction, the courts need to establish the parties to the transaction, whether one of the parties is the owner of the property, what specific consequences have occurred for the invalid transaction and, based on this, determine which norm of the Civil Code regulates the application of such consequences.
If the transaction is made by a person who had no right to make it, then the consequences of the invalidity of the transaction, as a general rule, come in the form of the owner's claim of property from someone else's illegal possession on the basis of Article 260 of the Civil Code (vindication).
In cases where the property is claimed by the owner from other persons, the application of the consequences in the form of vindication depends on the presence or absence of the following circumstances: whether the transaction on the alienation of property is remunerated or gratuitous; on the good faith or bad faith of the acquirer; the method of disposal of property from the possession of the owner: against the will of the latter or at his will.
In accordance with paragraph 2 of Article 261 of the Civil Code, if the property was acquired free of charge from a person who had no right to alienate it, the owner has the right to claim the property in all cases.
An unscrupulous buyer is someone who could have known or assumed from the current situation, the place of the transaction, the price and other similar factors that the seller did not have the right to dispose of this property. In such circumstances, the owner has the right to vindicate his property in all cases.
A bona fide acquirer is a person who, prior to the transfer of property to him under a paid transaction, did not know or should not have known that the person from whom this property was acquired had no right to alienate it (paragraph 1 of Article 261 of the Civil Code).
The acquirer cannot be considered in good faith if, at the time of the commission of the retaliatory transaction, there were legal claims of third parties in respect of the disputed property, of which he was aware, and if such claims were subsequently recognized as legitimate in accordance with the established procedure.
When the courts consider the consequences of the invalidity of the transaction, the defendant's counterclaims for recognition of the person as a bona fide acquirer are not required, since the resolution of this issue is the responsibility of the court when evaluating evidence in the case.
The recognition of the acquirer in good faith by the court is not a ground for refusing to satisfy the claim filed by the owner for the recovery of property from the bona fide acquirer.
The owner's claim of property from a bona fide acquirer is possible only if there are grounds provided for in Article 261 of the Civil Code (gratuitous acquisition of property by a bona fide acquirer, loss of property by the owner or the person to whom the property was transferred by the owner into possession, or theft from one or another person, or disposal from their possession in another way against their will).
Examining the grounds that give the right to claim property from a bona fide acquirer, the courts should clarify the circumstances of their occurrence in order to establish the fact of the disposal of property against the will of its owner. This fact must be established by the court in each specific case separately, taking into account the circumstances and the evidence provided by the parties.
When resolving the issue of reclaiming property from a bona fide acquirer in the event of loss of property by the owner or the person to whom the property was transferred by the owner into possession, the courts should take into account and assess the circumstances and reasons that led to the loss.
The basis for the transfer of property by the owner into the possession of another person (under lease agreements, gratuitous use, storage, etc.) must be lawful and lawful.
Other ways of disposing of property include, in particular, such cases as transactions under the influence of deception, violence, threats, malicious agreement between the owner's representative and another person, under the influence of delusion, and others.
The interests of a bona fide acquirer who has shown reasonable care, good faith, and prudence are subject to protection only if the owner does not prove in court that the property was lost by the owner or the person to whom the property was transferred by the owner into possession, or stolen from one or the other, or disposed of in another way against their will.
When applying the consequences of the invalidity of a transaction, the courts should take into account that bilateral restitution cannot be applied as a consequence if the court finds that as a result of one (first) invalid transaction, the disputed property was again alienated to new purchasers on the basis of subsequent transactions.
The court's recognition of the first transaction as invalid by virtue of paragraph 2 of Article 157-1 of the Civil Code does not entail any legal consequences, except for those related to its invalidity, and is invalid from the moment of its commission, unless otherwise provided by the Civil Code, legislative acts of the Republic of Kazakhstan or follows from the substance or content of the transaction.
As a result of invalidation of the transaction, the plaintiff has the right to claim property from someone else's illegal possession from a bona fide acquirer in accordance with Articles 260 and 261 of the Civil Code or to apply other consequences for invalid transactions.
The footnote. Paragraph 4 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
To explain to the courts that restitution and vindication, applied as consequences of the invalidity of transactions, have similar goals, the return of lost property.
In the case of restitution, the requirement to return the received property under an invalid transaction, as a general rule, entails the return of a counter-provision for the received property. In vindication, due to the absence of a binding relationship between the plaintiff and the defendant, the latter cannot make any claims against the plaintiff (vindicant).
The application of vindication, as a consequence of the invalidity of the transaction, does not deprive the defendant of the right to file an independent claim against the person who sold the disputed property to him for the return of funds or other property received under the invalid transaction, as well as to demand compensation for the damage caused.
The norms of the Civil Code provide for cases of restrictions on the recovery of property from a bona fide acquirer.
By virtue of Article 262 of the Civil Code, money, as well as bearer securities, cannot be claimed from a bona fide acquirer.
In accordance with paragraph 3 of Article 261 of the Civil Code, the claim of property on the grounds specified in paragraph 1 of this Article is not allowed if the property was sold in accordance with the procedure established for the enforcement of court decisions. Such legal regulation meets the objectives of ensuring the stability of the execution of judicial acts and protecting a bona fide acquirer.
The footnote. Paragraph 16 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
To draw the attention of the courts to the fact that questions about the invalidity of the transaction and the application of its consequences are applied not only in the consideration of civil, but also administrative (considered in accordance with the procedure of the CPA), and criminal cases.
In particular, when considering a criminal case, the courts that have established the fact that the defendants have obtained property benefits must evaluate transactions that are legitimate in form but fictitious in purpose and content, which do not indicate an intention to engage in entrepreneurial activity (cashing out funds, intermediary services, etc.) and are invalid by virtue of the law (void) because they were committed with a purpose that is obviously contrary to the principles of law and order or morality (paragraph 1 of Article 158 of the Civil Code).
In the event that the court, when considering a criminal case, finds that the property owned by the defendant was obtained by criminal means or acquired with funds obtained by criminal means, issued to third parties, then considering such transactions, the court should also be guided by paragraphs 1, 2 of Article 158 of the Civil Code, assessing them as invalid (insignificant) according to the law.
The court, having established that the transaction is aimed at achieving criminal goals and, if there is intent on both sides, on the basis of paragraph 5 of Article 157-1 of the Civil Code, decides to apply the consequences of the invalidity of the transaction in the form of confiscation of all property received by the parties under the illegal transaction or intended for receipt.
Upon execution of such a transaction by one party, everything received by the other party and everything owed by it under the transaction to the first party is subject to confiscation. In the event that none of the parties has begun execution, everything provided for in the execution of the transaction is subject to confiscation.
If the court finds that only one of the parties has intent to achieve a criminal goal, then everything received by her under the transaction is subject to return to the other party, and what was received by the latter or owed to her under the transaction is subject to confiscation (paragraph 6 of Article 157-1 of the Civil Code).
Courts need to keep in mind that confiscation of property as a consequence of an invalid transaction is applied in the case of unilateral restitution, as well as in the absence of restitution, when the property of the party responsible for the invalidity of the transaction is recovered from the State income, or all property received by the parties under the invalid transaction is recovered, if there is intent on both sides.
Confiscation of property, applied in the form of compulsory gratuitous seizure of all or part of the property owned by the convicted person, as well as property that is an instrument or means of committing a crime, is an additional type of punishment in cases provided for by the Criminal Code of the Republic of Kazakhstan (hereinafter referred to as the Criminal Code).
Unlike the confiscation of property used in criminal proceedings, confiscation as a sanction in civil law relations is a consequence of the invalidity of the transaction, including in criminal proceedings, in cases where the norms of the Criminal Code do not establish confiscation in the form of additional punishment.
The footnote. Paragraph 17 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 04/20/2018 No. 7 (effective from the date of the first official publication); dated 09/29/2022 No. 8 (effective from the date of the first official publication).
Taking into account the specific circumstances of the case, the court has the right not to apply partially or completely the consequences provided for in paragraphs 5 and 6 of Article 157-1 of the Civil Code regarding the confiscation of property received or to be received under an invalid transaction. Then, in this part, the consequences provided for in paragraph 3 of Article 157-1 of the Civil Code occur.
The footnote. Paragraph 18 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
In accordance with paragraphs 2 and 3 of Article 157 of the Civil Code, in case of violation of the requirements for the form, content and participants of the transaction, as well as for the freedom of their will, the transaction may be declared invalid at the request of interested parties, a proper government agency or a prosecutor.
In this case, an interested party is a person whose rights and legitimate interests have been violated or may be violated as a result of the transaction.
If an interested person who is not the owner of the disputed property has applied to the court with a claim for invalidation of the transaction, then the property rights of these persons are subject to protection when deciding on the application of the consequences of the invalidity of the transaction.
Within the meaning and content of Article 265 of the Civil Code, the rights provided for in Articles 259, 260, 261, 262, 263 and 264 of the Civil Code also belong to a person who, although not the owner, legally owns the property. This person has the right to defend his possession also against the owner.
The footnote. Paragraph 19 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
In accordance with paragraph 1 of Article 160 of the Civil Code, a transaction made only for appearance, without the intention to create appropriate legal consequences (an imaginary transaction), is declared invalid by a court at the request of an interested person, an appropriate government agency or a prosecutor.
The lack of will of the parties to the transaction to have certain legal consequences, which may be confirmed by the presence or absence of certain actions (inaction) the parties and other evidence in the case (for example, the absence of a transfer of property, etc.) entails the invalidity (nullity) of imaginary transactions.
The footnote. Paragraph 20 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
When considering cases of fraudulent transactions, the courts must proceed from the meaning of paragraph 2 of Article 160 of the Civil Code. According to the rules of the aforementioned rule of law, the category of transactions in question consists of two types: covering (pretended) and covered (for example, a purchase agreement is covered by the issuance of a power of attorney, a loan agreement and a subsequent pledge agreement by the registration of gift agreements, purchase and sale, a will - a gift agreement, and the like).
A fake transaction made to cover up another transaction is invalid (void). Therefore, the courts need to apply the rules related to the transaction that the parties really had in mind, taking into account the nature of the transaction.
In accordance with article 33 of the Law of the Republic of Kazakhstan dated July 26, 2007 No. 310-III "On State Registration of Rights to Immovable Property", the cancellation of entries in the registration sheet of the legal cadastre is carried out by the registering authority on the basis of a court decision that has entered into force.
The presence of encumbrances should not prevent the execution of a judicial act declaring a transaction or other title document invalid.
In case of cancellation of the record of registration of the right to immovable property in the presence of encumbrances, the registering authority must, within seven working days from the date of receipt of the judicial act, notify the pledgee or the relevant authorized body, by whose decision the restriction was imposed, of the cancellation of the entry in the registration sheet of the legal cadastre.
In this regard, the plaintiff's claims for invalidation, illegal state registration of rights to immovable property, and cancellation of entries in the registration list of the legal cadastre are not subject to satisfaction.
The footnote. Paragraph 22 as amended by the regulatory resolution of the Supreme Court of the Republic of Kazakhstan dated 09/29/2022 No. 8 (effective from the date of the first official publication).
According to article 4 of the Constitution of the Republic of Kazakhstan, this regulatory resolution is included in the current law, is generally binding and enters into force from the date of the first official publication.
Chairman
The Supreme Court
Republic of Kazakhstan
Judge of the Supreme Court
Republic of Kazakhstan,
Secretary of the plenary session
K. MAMIE
© 2012. RSE na PHB "Institute of Legislation and Legal Information of the Republic of Kazakhstan" of the Ministry of Justice of the Republic of Kazakhstan
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