In its ruling of 17 December 2015, in case no. IV.ÚS 3216/14, the Constitutional Court (hereinafter “CC”) examined the question of whether the submission of a petition for an execution order could be considered as an abuse of rights that justifies the discontinuation of execution. The CC examined this issue in a situation where, although the debtor was ready to pay its debt, this was not until the debt was past due.
In the considered case, the debtor was to pay the creditor a debt by 31 July 2011. The debtor arranged a bank loan to pay the debt. However, the debtor required a statutory declaration from the creditor for the disbursement of funds, indicating the account number to which the funds were to be transferred. At the creditor’s request, the statutory declaration explicitly stated that the funds were to be transferred by no later than 31 July 2011. The creditor signed this declaration, but due to a clerical error when notarising the signature, the declaration had to be signed again. With regard to this error, the bank was unable to transfer the funds by 31 July 2011, and therefore the deadline for the transfer of funds specified in the declaration was changed to 7 August 2011. The creditor therefore had confirmation from the bank that the relevant funds would be transferred to its account by the designated deadline provided it signed the statutory declaration.
The creditor, however, refused to sign the declaration and instead filed a petition for an execution order on 16 August 2011 (i.e. after the deadline by which it would have already had the money on its account, had it signed the declaration). In its defence, the debtor filed a motion for the discontinuation of execution on the grounds the debt had not been paid due to insufficient cooperation by the creditor.
The court of first instance and the court of appeal both concluded the creditor had no obligation to sign the declaration and to accept payment after the due date (i.e. by 7 August instead of 31 July 2011). The Supreme Court then rejected the debtor’s appellate review on the grounds the debtor had failed to explain how the conditions for the admissibility of an appellate review had been met.
The debtor therefore filed a constitutional complaint and the case was reviewed by the CC in terms of the fundamental rights and freedoms guaranteed by the constitutional order.
When considering the case, the CC had to answer the key question of whether the submission of a petition for an execution order could be qualified as an abuse of rights, and if so, if this was an eligible reason for the discontinuation of execution proceedings.
The CC stated that the prohibited abuse of rights also applied to procedural rights, in particular malicious petitions or actions characterised by the petitioner’s intent to cause the counterparty damage/harm (for example, the need to pay for its procedural defence in relation to conducted proceedings), or to “abuse” judicial protection for purposes that do not correspond to its true mission, i.e. the protection of rights.
The purpose of execution proceedings is to recover funds awarded to the creditor in an enforceable judgement, which the debtor refuses to pay voluntarily. It is widely known that the enforcement of payment through execution proceedings is a relatively complicated process, the length of which can be in the order of months, or even years. Therefore in a situation where, for example, the creditor is virtually assured the debtor will fulfil its obligation in the near future (in the order of days), a petition for an execution order would typically be in the nature of a malicious petition, as its submission is not primarily motivated by the creditor’s effort to obtain payment, but rather to encumber the debtor with the costs of execution proceedings.
If the creditor filed a petition for an execution order under such circumstances, it could be formally considered as legally justified, though ethically indefensible in the given situation. A malicious petition for an execution order represents a course of action that runs counter to the purpose of execution proceedings, by which it fulfils another reason for which execution is not permissible and should be discontinued pursuant to Section 268 (1) h) of the Code of Civil Procedure.
From the above, it can therefore be concluded that the creditor is not entitled to file a petition for an execution order in a situation where it has evidence the debtor is ready to pay its debt, but requires the creditor’s cooperation to do so. This also applies in situations where the debt would be paid within a reasonable time after its due date (naturally, this does not preclude a claim for late interest).
The submission of a petition for an execution order in the above situation, i.e. a situation where it is clear the debt would be paid in the event of the creditor’s cooperation, and what’s more quicker and more economically than in execution proceedings, could therefore be considered an abuse of rights in light of the Constitutional Court’s ruling and execution could therefore be discontinued on these grounds.
It is therefore recommended creditors do not refuse to provide their debtors with cooperation without due cause. In fact, if such cooperation leads to the effective payment of the debt, creditors should accommodate debtors wherever possible.
On the other hand, it is recommended that debtors file a petition for discontinuation of execution in their defence, if they are refused such cooperation without justification, thereby frustrating the effective payment of their debt. It is important to bear in mind that the creditor must be demonstrably shown the debt will be paid in the event of its cooperation and an unsubstantiated promise to pay the debt will not suffice.
For more information, please contact our office’s partner, Mgr. Jiří Kučera, e-mail: jkucera@kuceralegal.cz ; tel.: +420604242241.