THE SUPREME COURT OF RUSSIA CLARIFIED WHO SHOULD BE CHARGED WITH A BURDEN OF PROVING WHEN CHALLENGING A DEBT

The Supreme Court considered the case on the inclusion of claim of one of the creditors into the Register of creditors’ claims. The debt was based on a loan agreement and formed a controversial attitude of the lower courts to the legal situation. The claim was satisfied in the first and cassation instances, but the appeal has rejected it.

The Supreme Court of Russia canceled all three decisions, sending the case for reconsideration.

The disputed claim was based on a multimillion-dollar loan, which was taken from the company by an individual debtor.

In the opinion of the courts of the first and cassation instances, the applicant confirmed both the fact of receipt and expenditure of funds by the debtor, and the absence of any evidence of the parties' bad faith.

The appeal, in turn, indicated that the parties to the transaction had not disclosed the circumstances prior to the conclusion of the agreement. In addition, at the time of signing the agreement, the borrower already had obvious financial problems, but the lender was not confused by this fact. Having considered these actions of the parties as intention to create fictitious accounts payable, the court rejected the claims.

Canceling all three resolutions, the Supreme Court of Russia Forces agreed with the position of the bankruptcy trustee, who pointed to the affiliation of the parties to the transaction, which, by the way, had been previously proven in another case.

What is more, the trustee drew attention to the fictitiousness of the concluded agreement and the lack of economic feasibility of legal relationship.

A peculiarity of the burden of proof in such cases was noted by the Supreme Court of Russia: competing creditors and the bankruptcy trustee representing their interests are obliged to provide substantial doubts about the existence of a debt, but the task of refuting these doubts falls on the applicant.

The reason for this distribution of roles is that the parties to the transaction have a large amount of information regarding the circumstances of the conclusion of the agreement and are entitled to provide evidence of the reality and expediency of the obligation, which in this case was not done (determination of July 8, 2021 in case No. 307-ES20-19667 ).