Principles of law in the practice of the Supreme Court: a thorny path from the letter to the spirit

Can you show me where it is written?

The question presented in the epigraph to this article is capable of “killing” the law. But this question can “kill” the law or significantly harm it only if the person who has to answer it really starts looking for a direct answer. And when they do not find that it is written somewhere, they will raise the white flag and admit the defeat in the legal dispute because it is not written anywhere.

The phrase “pardon impossible to execute,” sometimes used by literally to describe the legal profession, may be an illustration applicable only to the study of punctuation but certainly not to demonstrate what law is and what it is for. Likewise, this textbook phrase is not an illustration of how laws should be written and why judges are needed. It seems that judges should always assess the wider context and not just focus on the correct reading of a phrase depending on a single punctuation mark. In the modern world, the parliament and the court should not only be representatives of different branches of power, which restrain but at the same time balance each other. In addition, they must be subjects that create and implement the rules of the game, which will comply with the principle of the rule of law.

During the five years of operation of the Supreme Court, it can be argued that the principles of law have passed from the category of only a theoretical concept (from among those that are associated with one of the first university lectures on any branch of law and are not remembered at all) to a rather powerful system-changing tool, which in some places is of decisive importance in changing approaches to the consideration of one or another category of cases.

Undoubtedly, the existing achievements are only a beginning, but the beginning that is rather a foundation that will give an impetus to the development of those principles that are already applied as well as to a bolder application of other principles of law.

What prevents this? Absolute belief in the sanctity of the law, as well as a classic approach to defining the legal system of Ukraine as a continental one, in which the court must mechanically apply the written law and is not capable of creating it. However, the legal reality more and more confidently begins to hint that the law is not only the law and it is created not only by the legislator but also by the court. And it is not only in the Anglo-Saxon legal system.

Considering this, it is clear that the time has come to recognize the erroneous approach that places a high insurmountable barrier between the continental and common (Anglo-Saxon) legal systems. The concept of stare decisis established for the last system, according to which similar cases should be treated in the same way, is universal and cannot be called a feature only of the common law system.

It is also quite debatable, referring to the principle of distribution of power proposed by the man of letters Montesquieu, to deny the very existence of judicial creativity. It is this principle that many scientists consider as denying the very essence of the judge as a subject of law creation. At the same time, denying the recognition of a judge as a subject of law-making would mean denying the recognition and operation of the principle of the rule of law.

The presented and, perhaps, very pretentions thesis can be explained in plain words. Any professional lawyer, especially in Ukraine, at least once in their life has encountered an illegal law or, to put it simply, an unconstitutional law. Or cases when two legal norms directly contradict each other. If we are guided by the fact that the role of the judge is only to apply the law, then the judge, even realizing that their actions will give life to unconstitutional law, has only one option — to apply it. Why? Because of Montesquieu. Instead, the analysis of the works of this man of letters shows that he would hardly be happy with such an explanation.

Undoubtedly, the court should not play on the parliament’s half of the field and cannot replace the legislator, but even in such conditions, there is a lot of room for judicial activism, which exists, as they say, “between the raindrops”. Of course, first of all, we are talking about the presence of conflicts, overcoming which is possible only if there is a certain amount of judicial activism. Also, such activism receives the green light in case of legislative gaps. These are the cases when hardly anyone can accuse the judge of excessive activism.

More complicated are the cases when there are more chances to accuse the judge of excessive activism: when the norm regulates relations in a certain way but does so in an illegal (for example, unconstitutional) way.

Let’s look at the example when it was justified. The criterion of justification, in this case, is the practice of ECtHR. For a long time, in accordance with civil procedural legislation, a person who was deprived of civil legal capacity could not apply to the court to renew their legal capacity. The motives of such regulation were to impose the classic provisions on procedural (in)capacity in this case. As it turned out in the end, such a classical approach contradicts the Convention on the Protection of Human Rights and Fundamental Freedoms, which led to the decision of the European Court of Human Rights (hereinafter referred to as the ECtHR) v. Ukraine (“Nataliya Mikhaylenko v. Ukraine”). The ECtHR’s position in this context was reduced to the fact that a person deprived of civil legal capacity really cannot have procedural legal capacity. But there is one legitimate exception to this rule, namely, an appeal to the court with an application for restoration of the legal capacity of such a person. In other words, the court, of course, is not obliged to satisfy such an application, but it must consider it, even if it is submitted by a person recognized as incompetent and not by this person’s representative.

As of now, the legislation in this part has undergone some changes and this nuance is settled and regulated. At the same time, even before the implementation of such changes, but already after the appearance of the decision of the ECtHR, national courts began to consider relevant applications submitted by persons recognized as incapable. Obviously, in this case, the impetus for judicial activism was the ECtHR’s decision. But could the national court implement the appropriate approach even without the decision of the ECtHR? Obviously, yes, it could. The methodological instrumental basis of such an approach is precisely the principles of law.

Ronald Dworkin, in his writings in the criticism of positivism, defines the concept of a “principle” as a standard that must be observed, and not because it will contribute to economic, political, or social situation (or support it) that is considered desirable because it is the requirement of justice, or fairness, or some other dimension of morality (author’s italics)

To illustrate, he cites the following example from court practice in the United States. The year of 1889. The New York court, in the famous case of Riggs v. Palmer, had to decide whether an heir named in his grandfather’s will could inherit property under that will, even if he had killed his grandfather in order to inherit. The court began its reasoning with the following assumption: “It is quite true that statutes regulating the making, proof and effect of wills, and the devolution of property if literally construed, and if their force and effect can in no way and under no circumstances be controlled or modified, give this property to the murderer.” But then the court noted that “all laws, as well as all contracts, may be controlled in their operation and effect by general, fundamental maxims of the common law. No one shall be permitted to profit by his own fraud, or to take advantage of his own wrong, or to found any claim upon his own iniquity, or to acquire property by his own crime.” The murderer didn’t become an heir.

Probably, this is exactly what is expected from the court — to find out what approach to the consideration of the case is fundamentally fair and reasonable and to apply it, regardless of whether there is a direct rule of law that reflects such an approach. Below we will give examples of how a similar vision is implemented in the practice of the Supreme Court. Within the scope of this article, it is hardly possible to highlight every example of the Supreme Court’s application of the principles of law; however, we aim to demonstrate how the tool of application of the principles of law works methodologically when considering individual court cases.

Written and unwritten principles of law

The Grand Chamber of the Supreme Court in case №522/9893/17 regarding the nullity of the will articulated the principle of freedom of the will and the need to take into account and implement the free will of the testator despite the claimant’s alleged formal violations of the requirements for the notarization of the will, namely its certification in violation of the requirements for notarial districts.

In particular, in the resolution of May 25, 2021, in case №522/9893/17, it is stated that the will, as the last will of a person, concerns his orders in the event of death and is therefore called upon to resolve important issues for a person regarding the appointment of heirs, the deprivation of heirs by law of the right of inheritance, determining the amount of inheritance to be inherited under the will, establishing other dispositions that correspond to the will and the requirements of the law on inheritance. In addition, it is indicated that the freedom of the will involves the testator’s personal exercise of the right to a will through free expression of will, which, being properly expressed, is subject to legal protection even after the death of the testator. At the same time, it was established that the invalidity of the will due to the expanded understanding of the requirements for the form and procedure of its certification, which is mentioned in the first part of Article 1257 of the Civil Code of Ukraine, will result in a violation of the principle of freedom of the will.

In turn, in the decision of the Civil Court of Cassation as part of the Supreme Court (hereinafter referred to as the Civil Court of Cassation) dated July 20, 2022, in case №461/2565/20, the panel of judges made a conclusion that in the absence of defects of the will and the manifestation of the will of the testator when drawing up, the latter’s qualification as invalid on the grounds that are not directly provided for either by this article or generally by the rules of Chapter 85 of the Civil Code of Ukraine, essentially cancels the free expression of the will of the testator without the possibility of expressing his will by making another will in connection with his death.

In another case, the Civil Court of Cassation drew attention to the fact that private law is a priori inherent in dispositiveness, which manifests itself, in particular, in the fact that a person, taking into account the principle of freedom of deed, himself decides to commit or not to commit a certain deed (including in relation to the refusal of a unilateral deed)d. Debt relief is understood as the release by the creditor of the debtor from the fulfillment of the obligation that rests on him, in whole or in part. As a general rule, debt relief is embodied in a unilateral deed. Although the parties to the contract are not deprived of the opportunity to conclude a debt relief agreement. If the debt relief is embodied in a unilateral deed, then such a unilateral deed is, in its essence, administrative since it is aimed at disposing of rights, and abstract, which is not characterized by a legal connection between the grounds for its execution and its validity or effectiveness.

In this case, the creditor, in view of the principle of freedom of the transaction, did not commit such a unilateral deed as a refusal to relieve the debt. The court of appeal, having established that there is no debt under the contract, made a well-founded conclusion about the satisfaction of the claims, albeit erroneously on several grounds (see the decision of the Civil Court of Cassation as of July 6, 2022, in case №303/2983/19).

When considering disputes, the issue of their interpretation often arises. The interpretation of a deed is the clarification of the content of a valid unilateral deed or contract (bilateral or multilateral deed) from the text of which it is impossible to establish the true will of the party (parties). The rule of favor contractus is not provided for by civil law. Although its application is not excluded, taking into account the general principles of private law (Article 3 of the Civil Code of Ukraine). In view of the principle of interpretation of favor contractus (interpretation of the contract in favor of validity), doubts regarding the validity, effectiveness and enforceability of the contract (deed) must be interpreted by the court in favor of its validity, effectiveness and enforceability (see the resolution of the Civil Court of Cassation as of March 10, 2021 in №607/11746/17).

On good faith

One of the fundamental principles of civil legislation is good faith (Clause 6 of Part 1 of Article 3 of the Civil Code of Ukraine), and the actions of participants in civil legal relations must be in good faith, i.e. meet a certain standard of behavior characterized by honesty, openness and respect for the interests of the other party to the contract or the relevant legal relationship (see the resolution of the Civil Court of Cassation as of May 16, 2018 in case №449/1154/14).

On the basis of good faith, the court of cassation, in particular, formulated the construction of fraudulent transactions, the doctrine of uberrima fides (most in good faith), the inadmissibility of creating the appearance of bona fide acquisition of property rights.

In Ukrainian legislation, fraudulent deeds (deeds committed by the debtor to the detriment of creditors) are regulated only in certain areas. At the same time, it is necessary to distinguish between competitive and non-competitive contestation of fraudulent deeds. Competitive contestation has a fairly detailed regulation: in bankruptcy (Article 42 of the Code of Ukraine on Bankruptcy Procedures); in case of bank insolvency (Article 38 of the Law of Ukraine “On the system of guaranteeing deposits of natural persons”). Instead, out-of-competition disputes are regulated only fragmentarily in enforcement proceedings (part 4 of Article 9 of the Law of Ukraine “On Enforcement Proceedings”). At one time, the Supreme Court of Ukraine, in an out-of-competition dispute, carried out an expansive interpretation of Article 234 of the Civil Code and qualified the contract concluded with the purpose of avoiding the fulfillment of a monetary obligation as fictitious (Decisions of the Supreme Court of Ukraine as of 19 October 2016 in case №6–1873цс16, as of 23 August 2017 in case №306/2952/14-ц, as of 9 September 2017 in case №359/1654/15-ц).

In a separate opinion, it is stated that “a civil law contract (including a donation contract) cannot be used by participants in civil relations to avoid paying a debt or executing a court decision on debt collection that has entered into force. The debtor (donator), against whom legal proceedings for debt recovery have been initiated, and his children (donatees), who enter into a donation agreement, act in obvious bad faith and abuse their rights in relation to the creditor. Because they enter into a donation agreement that violates the creditor’s property interests and is aimed at preventing a foreclosure on the debtor’s property. Therefore, the legal order cannot leave unresponsive such actions, which, although they do not violate specific imperative norms, are clearly unscrupulous and amount to an abuse of law” (see the separate opinion of Supreme Court judge Krat dated February 14, 2018, in case no. 379/1256/15-ц).

Quite a variety of transactions can be classified as fraudulent. For example, the court of cassation indicated that a contract that is made to the detriment of creditors (fraudulent contract) can be both a paid contract and a free contract. The application of the concept of “fraudulence” in a payment civil law contract has a certain specificity, which is manifested in the circumstances that make it possible to qualify the payment contract as one made to the detriment of the creditor. Such circumstances, in particular, include the moment of concluding the contract; the counterparty with whom the debtor enters into the disputed contract (for example, a relative of the debtor, a stepchild of the debtor, a related or affiliated legal entity); price (market / non-market); presence / absence of payment of the price by the debtor’s counterparty (see the resolution of the Civil Court of Cassation as of October 7, 2020 in case №755/17944/18).

The doctrine of uberrima fides is also a manifestation of good faith. In particular, the Civil Court of Cassation indicated that the pre-contractual obligation of the insured to provide the insurer with reliable information about the objects of insurance and risk factors is related to the risky nature of the insurance contract. Essentially, the insurer needs information to assess the insurance risk. The nullity of the second insurance contract is associated with failure to fulfill a pre-contractual obligation, which is essential for the execution of the future insurance contract. Civil law does not provide guidance as to what standard of disclosure by the prospective insured should be applied. Taking into account the principles of civil law, it should be concluded that for the disclosure of information by the prospective insured, the construction of “reasonable notice of risk” must be applied, that is, the future insured must provide information that he knows or should know about the insured object. The Civil Court of Cassation noted that in the case under review, according to the data from the centralized database of the Motor (Transport) Insurance Bureau of Ukraine, as of the time the insurance contract was concluded, it contained information about various BMW X5 cars and various policyholders. Obviously, a reasonable and prudent person cannot allow a situation in which different vehicles (“BMW X5”) belonging to different owners have the same state license plates. Taking into account precisely such circumstances and applying the construction of “reasonable notification of risk”, it should be stated that the insured could not inform the insurer that other insurance contracts were concluded in relation to his insured object (see the resolution of the Supreme Court of Ukraine as of March 10, 2021, in the case №753/731/16-ц).

Quite often, participants in civil deeds try to use private law constructions to make it impossible to claim property from someone else’s illegal possession. It is obvious that for private law, it is unacceptable to use the construction of a legal entity (in particular, the addition of real estate to the authorized capital of a legal entity, the withdrawal of a participant from a legal entity and receipt upon withdrawal), other legitimate means of private law (in particular, the division of real estate) with the aim of creating the appearance of bona fide acquisition of the right of ownership to make it impossible to apply a vindication claim. The use of private law constructions in order to create the appearance of bona fide acquisition of property rights to make it impossible to apply a vindication claim is inherently dishonest and indicates abuse by participants in civil turnover. Circumstances that may indicate that the participants create the appearance of bona fide acquisition of property rights in order to make it impossible to apply a vindication claim include, in particular: the moment of committing the deed or other actions; subjects who commit or with whom deeds are committed; the counterparty with whom the debtor enters into the contested contract (for example, relatives, quasi-relatives, related or affiliated legal entity, related or affiliated groups of legal entities) (see the resolution of the Civil Code of Cassation as of November 30, 2022, in case №522/14900/ 19).

On venire contra factum proprium

The Civil Code of Ukraine does not provide for the doctrine of prohibition of contradictory behavior, although taking into account the fact that it is a manifestation of good faith, its application is permissible on the basis of general principles of private law (Article 3 of the Civil Code of Ukraine).

In the practice of the court of cassation, the possibility of applying venire contra factum proprium was established for the first time in 2018. In a separate opinion dated August 22, 2018, in case №596/2472/16-ц, it is stated that the judicial practice in the field of declaring a land lease agreement invalid on the grounds that it was not signed by the lessor (landlord) needs to be changed. This conclusion is due to the fact that in most situations, the lessor (landlord) receives payment for the use (rent) of the land plot from the lessee. And in such a situation, it is obvious that the construction of invalidity of the contract cannot be applied in the case when the lessor (landlord) receives the rent specified in the contract and the lessee uses the land plot. That is, obligations are fulfilled by both parties. The doctrine of venire contra factum proprium is based on the Roman maxim “non concedit venire contra factum proprium” (no one can act contrary to his previous behavior). The doctrine of venire contra factum proprium is based on the principle of good faith. For example, Article I.-1:103 of the Principles, Definitions, and Model Rules of European Private Law states that conduct contrary to good faith and fair business practice is, in particular, conduct inconsistent with the party’s prior statements or conduct, provided that the other party acting to his own detriment reasonably relies on them. It is obvious that the lessor (landlord) took advantage of the fact that, for various reasons, he did not personally sign the land lease agreement. Of course, in such a case, the lessor’s (landlord’s) contesting the land lease agreement contradicts his previous behavior (receiving payment for the use of the land plot) and is in bad faith.

Over time, at the level of decisions of the court of cassation, the formation of guidelines in the application of the doctrine of the prohibition of contradictory behavior began.

According to the circumstances of one of the cases (decision of the Joint Chamber of the Supreme Court of Ukraine as of April 10, 2019, in case №390/34/17), the plaintiff: a) entered into an additional agreement to the land lease agreement; b) subsequently appealed to the court with a claim to declare this contract unconcluded. The Joint Chamber of the CCS of the Supreme Court noted that conduct contrary to good faith and fair business practice is, in particular, conduct inconsistent with a party’s previous statements or conduct, provided that the other party acting to its detriment reasonably relies on them. It is obvious that the actions of the plaintiff, who concluded an additional agreement to the land lease agreement and later filed a lawsuit to declare the land lease agreement unsigned, contradict his previous behavior (conclusion of an additional agreement and receiving payment for the use of the land plot) and are in no good faith.

The application of the doctrine of venire contra factum proprium is a means of preventing the invalidity of the disputed deed contrary to the principle of good faith and not a reason for its invalidation (see the decision of the Supreme Court of Ukraine dated July 30, 2020, in case №357/7734/18).

Conduct inconsistent with good faith and fair business practice includes, among other things, conduct inconsistent with a party’s prior statements or conduct, provided that the other party acting to its detriment reasonably relies on them. If a person who has the right to challenge a document (for example, a certificate of the right to inheritance) or a legal fact (in particular, a deed, a contract, a decision of a body of a legal entity) expressed directly or by his behavior made it clear that he will not exercise his right to challenge, then such a person is bound by his decision and has no right to change it later. An attempt by a person to subsequently exercise the right to dispute will contradict his previous behavior and should lead to the termination of the said right (see the resolution of the Civil Court of Cassation of October 7, 2020, in case №450/2286/16-ц).

If a person who has a subjective right (for example, a property right) has expressed directly or by his behavior made it clear that he renounces the right of ownership, then such a person is bound by his decision and has no right to change it later. An attempt by a person to subsequently exercise the right will contradict the previous behavior of such a person and should lead to the termination of the specified right (see the decision of the Civil Court of Cassation dated December 14, 2022, in case №126/2200/20).

In case №126/2200/20, the person who had the right of ownership (the plaintiff) expressed both directly (in a statement in January 2004 about renunciation of the right to ownership of a plot of land intended for commercial agricultural production) and by his behavior (in 2012, PERSON_1 received ownership of a plot of land in the amount of a land lot (share) for commercial agricultural production), which will not exercise his right of ownership. Therefore, the plaintiff’s behavior contradicts good faith, as it does not correspond to the previous statements and behavior of the party, and other subjects reasonably relied on them.

The Grand Chamber of the Supreme Court in a case (decision dated November 16, 2021, in case №904/2104/19), which resolved an interesting question regarding the application of foreign law norms in the consideration of a dispute, also applied another doctrine of venire contra factum proprium. In this case, the Grand Chamber of the Supreme Court saw a contradiction in behavior in that the debtor, by entering into the contract, actually and legally agreed to the application of English law in their legal relationship with the creditor and therefore agreed that the surety is an unlimited obligation. Appealing to the court, he appealed the term of the bail according to the national legislation of Ukraine.

On reasonableness

The fundamental principle, which should be applicable in the consideration of court cases, is the principle of reasonableness, and it is to this principle that the vision regarding the consideration of this or that legal conflict should be subordinated. Of course, it is not always simple because the same reasonableness can be seen differently by different representatives of legal professions. Especially if it concerns the opposite sides of the conflict. And sometimes, this reasonableness can be found in finding a compromise between opposing positions.

A principle such as reasonableness is characteristic of private law a priori. Reasonableness is characteristic both for assessing / taking into account the behavior of participants in civil transactions, the interpretation of substantive private law norms, which is carried out in the resolution of disputes and for the interpretation of procedural norms (see the resolution of the Civil Court of Cassation of June 16, 2021, in case №554/4741/19, resolution of the Joint Chamber of the Supreme Court of Cassation as of April 18, 2022, in case №520/1185/16-ц, the decision of the Grand Chamber of the Supreme Court dated February 8, 2022, in case №209/3085/20).

In particular, in case №554/4741/19, too formal interpretation of the provisions of the civil legislation, which regulate the terms, almost cost the person his inheritance. According to the notary office, courts of first instance and appeals, the last day to apply to the notary with an application for acceptance of inheritance was April 27, 2019. According to the heir, it was April 28, 2019, but given that this day fell on the Easter weekend, the first working day was May 2, 2019, when the person applied to the notary and was refused due to missing the deadline. That is, the essence of the dispute actually came down to one day, namely, the day from which to start calculating the expiration of the term: from the day on which the event occurred (actually, the death of the testator) or from the next day. The Supreme Court stated that the period starts from the next day after the corresponding calendar date or the occurrence of the event, which is connected with its beginning. That is, the day on which the moment of the start of the term directly occurred is not taken into account when calculating the latter.

The principle of reasonableness is also the basis of a well-known case in which the child’s parents could not agree on what the child’s first and last name should be. They came to court with this dispute. The Court of Cassation, taking into account the equality of parents’ rights and the principle of reasonableness, concluded that the child’s first and last name should be double. By giving a child a double name and a surname, the Supreme Court takes into account the equality of rights and interests of both parents, who, in connection with the dispute regarding the child’s name and surname, asked the court to determine them. Providing a double name and surname is consistent with the second part of Article 145, the second part of Article 146 of the Family Code of Ukraine and corresponds to the principles of reasonableness and justice (Article 7 of the Family Code of Ukraine) (see the resolution of the Civil Court of Cassation dated June 29, 2022, in case №753/7395/20).

In another case, the Civil Court of Cassation noted that, taking into account the principle of reasonableness, it is obvious that a lawsuit to recognize a contract as valid on the basis of the second part of Article 220 of the Civil Code of Ukraine is a way of protecting the civil rights and interests of participants in private relations. It is a manifestation of reasonableness that the legislator does not associate the possibility of recognizing a valid contract with the involvement of a tax or other authority that controls the payment of taxes, fees or other mandatory payments by an individual. It is clear that there are appropriate mechanisms for monitoring the payment of taxes, fees or other mandatory payments by an individual in public law, which are not at all related to an appeal in the appellate procedure and the cancellation of a court decision on the recognition of a valid contract. The civil court decides a civil dispute based on a claim to recognize a contract as valid on the basis of the second part of Article 220 of the Civil Code of Ukraine, and does not determine the amount and procedure for paying taxes, fees or other mandatory payments (see the decision of the Civil Court of Cassation of December 7, 2022, in case no. 142/119/20).

Instead of conclusions

A number of existing legal disputes, for their reasonable and fair resolution, require a rethinking of the approaches that are used to find an answer to the key question that is in the case. Such a solution requires a departure from the use of a positivist approach, which involves searching for an answer in an imperfect law or its literal (philological) interpretation. Instead, such an interpretation should be carried out through the prism of general principles — principles of law: which principle is applicable to this case; how to fairly and reasonably apply this principle to this case.

At one of the recent joint events held between the Ukrainian and Latvian Supreme Courts, the President of the Supreme Court of Latvia (Aigars Strupišs) shared his country’s European integration experience. His key point was that the integration of the legal sphere, the sphere of justice, is no longer about changing legislation but about changing thinking. It seems that getting to know the way of thinking of Europeans means getting to know the principles and doctrines on which the resolution of legal conflicts in any area of the judiciary is based and implementing such thinking in the law of Ukraine.

✍️ Vasyl Krat, Rasim Babanly