How to invalidate a deal with the debtor's foreign real estate

The Arbitration Court of the Moscow District considered the case based on the complaint of a debtor, whose transaction, at the request of a bankruptcy trustee, was declared invalid by the lower authorities.  The trustee considered the rights of creditors violated in a situation of alienation of the bankrupt’s house in Cyprus in favor of his young daughter.

Considering the application, the court of first instance indicated that the disputed agreement was concluded in a situation of insolvency of the debtor and in favor of the person concerned, and the court of appeal agreed with this argument.

Thus, according to the judges, the goal was to hide part of the property from creditors in order to cause a material harm to them.

The debtor retorted that the property located in Russia wad sufficient to pay off all the stated claims. He also argued that, when considering the disputed issue, the courts intentionally did not involve the guardianship authorities into the case.

Considering the complaint, the district court listened to the arguments of the cassator, pointing out the need to cancel the decisions made by the lower instances.

The board noted that the relevant agreement on the alienation of real estate was not submitted to the court.

In addition, the case file contained an untranslated into Russian information extract from the company that was engaged in the search for property. The district court noted that this document could have shed light on the situation. Three judges also agreed on the necessity to involve guardianship authorities into the case and independently request the documents necessary in the Republic of Cyprus if the debtor evades requesting them.

As a result, the decisions of the courts of first and appeal instances were canceled, the issue of challenging the donation of a foreign house will be reconsidered (decision in case No. A40-181425/18 of March 15, 2022).