Legal News [April 2023]: The Supreme Court commented on the legitimate expectation of a non-profit subsidy

Can an employer and employee validly conclude an agreement to extend the notice period at a time when the notice period is already running? The Supreme Court has analysed this question in its judgment No. 21 Cdo 2861/2022. Read about this and other court decisions that have caught our attention in the current Legal News.

  • In its judgment No. 29 ICdo 32/2021, the Supreme Court deals with the question of whether an inchoate bill that has not yet been filled in can be registered as a contingent claim in insolvency proceedings against the property of a bill guarantor. An inchoate bill becomes a promissory note by filling in the missing particulars with ex tunc effects. The origination of the promissory note claim is therefore retroactive to the completion of the inchoate bill. The Supreme Court therefore concluded that the holder of an inchoate bill may register their claim for the debtor, who is signed on the inchoate bill as a guarantor, in the debtor’s insolvency proceedings as a claim conditional upon the inchoate bill being completed with the missing particulars and thus becoming (with ex tunc effects) a full promissory note.
  • The question of the possibility of the establishment of a legitimate expectation by the beneficiary of the subsidy that they will receive the subsidy before the legal force of the decision on the allocation of the subsidy is addressed by the Supreme Court in its judgment e No. 30 Cdo 1529/2022. The provisions of the Budgetary Rules (Section 14), which expressly determine the condition of the decision of the provider, and also the essentially non-profit nature of the subsidy, do not allow room for an interpretation according to which the applicant could acquire a legitimate expectation of receiving the subsidy before the decision on the non-profit subsidy is issued. Otherwise, in the Supreme Court’s view, there would be a complete negation of at least those provisions of the Budgetary Rules. The legitimate expectation of the applicant (or beneficiary) for a non-profit subsidy can only be said to exist after the decision of the provider to grant the subsidy is made. The uncertain position of the applicant for a subsidy is entirely justifiable in view of the fact that the subsidy constitutes a good turn from the provider for which the applicant is applying.
  • The Supreme Court addressed the issue of compensation for damage caused to the underground electronic communications network in its judgment No. 25 Cdo 627/2022. The Supreme Court concluded that the electronic communications cable network is not part of the land but is part of a linear construction within the meaning of Section 509 of the Civil Code and cannot be (or part thereof) transferred without disrupting its basis. Therefore, it is an immovable object. Section 2926 of the Civil Code thus applies to the case under consideration, where the electronic communications network was damaged by excavation work using a bulldozer. This represents a case of strict liability where liberation is not possible. This strict type of an obligation to pay damages in a certain limited range of circumstances (i.e. damage to real estate by construction activity) is justified by the social interest in sufficient protection of the owner against the technical effects of the operator’s activities, which have the potential to cause damage even with increased care.
  • In its resolution Case No. 21 Cdo 2861/2022, the Supreme Court addressed the question of whether (according to the legal regulation effective from 1 January 2014) an employer and an employee may validly conclude an agreement to extend the notice period at a time when the notice period is already running. Referring to the nature of the current Civil Code, which places greater emphasis on the principle of autonomy of will and allows for a greater degree of contractual freedom, the Supreme Court reached a different conclusion from that reached under the old Civil Code. It held that it was possible to conclude an agreement to extend the notice period under Section 51(1) of the Labour Code during the notice period. However, the content of such an agreement must clearly indicate when (on which date) the employment relationship of the parties to the agreement is to end. At the same time, the notice period must be agreed in such a way that its length after extension is proportionate to the circumstances of the particular case. Otherwise, it would be a (relatively) invalid legal act within the meaning of Article 580(1) of the Civil Code.
  • In its judgment No. 25 Cdo 3497/2021, the Supreme Court deals with the determination of whether a person is a consumer in a situation where in a business relationship between two persons, one of them is not acting in the course of his or her business. The Supreme Court, referring to the case law of the Constitutional Court and academic literature, confirmed that the consumer protection provisions are to be applied also to relationships in which a natural person who has a business licence acts but does not behave like an entrepreneur in those relationships. Therefore, an arrangement that restricts or excludes the consumer’s rights to compensation for damage is disregarded even if the entrepreneur has entered into a contract with another entrepreneur outside the scope of his or her business. In light of the facts, the Supreme Court added that the question of ownership (in this case of the horse) was not relevant to the assessment of the nature of the claimant as a party to the contract. A horse may be entrusted for stabling under a contract either by its owner or by a person authorised by the owner to do so, and the person who concluded the contract has active standing to claim damages under section 2944 of the Civil Code. For the purpose of assessing whether an arrangement by which a contracting party has limited its rights to compensation for damage may be taken into account, it is not relevant whether the contracting party is the owner of the thing to which the contract relates, but whether he or she entered into the contract in the course of his or her business.
  • The following is a summary of last year’s decision of the Regional Court in Ústí nad Labem No. 141 Af 14/2022-14 regarding the legal nature of a notice of the imposition of default interest pursuant to Section 251a(3) of the Tax Code. The Court held that this notice is not a decision of an administrative authority within the meaning of Section 65(1) of the Code of Administrative Justice. It reached this conclusion despite the existence of the judgment of the Supreme Administrative Court of 20 July 2022, ref. no. 10 Afs 128/2022-37, according to which ”the decision on objections (Section 159(3) of the Tax Code) against the notice of tax arrears (Section 153(3) of the Tax Code) is not a decision within the meaning of Section 65 of the Code of Administrative Justice, as it does not affect the rights and obligations of the taxpayer.” The Regional Court considers, however, that a distinction must be made between a notice of tax arrears and a notice of the imposition of default interest. As such, the tax itself must have been finally decided by a (supplementary) payment assessment against which an appeal may be lodged before the notice was issued, thereby obtaining a decision that is independently reviewable in the administrative courts, whereas no decision on default interest had to be taken at all before the notice was issued. The Court is therefore convinced that it is appropriate to allow a judicial review of the notice on the imposition of default interest pursuant to Section 251a(3) of the Tax Code, on the basis of an action against the decision on the objections pursuant to Section 159 of the Tax Code lodged against that notice.
  • The unlawful conflict of interests between a member of the statutory body of the company and the company in the context of the Commercial Code is dealt with by the Supreme Court in its judgment No. 27 Cdo 2863/2022. The Court held that since the general meeting of the company was not quorate due to the absence of the majority shareholder, it could not validly give its consent to the conclusion of the loan agreements required under Section 196a of the Commercial Code. The then legislation (unlike the current legislation) strictly required the activity of the shareholders in the form of prior approval of the general meeting. Mere informing the shareholders was not sufficient. If a member of the statutory body acted in an unlawful conflict of interest, the claimant was not bound by the loan agreements unless the agreements were approved additionally without undue delay.
  • In its judgment No. 27 Cdo 2292/2022, the Supreme Court addressed the determination of the court’s subject matter jurisdiction over disputes between shareholders concerning contractual relations by which shares are transferred. The Supreme Court confirmed that, notwithstanding the fact that the Civil Procedure Code does not explicitly includes disputes between shareholders (members) among the disputes referred to in Section 9(2), if the disputes concern relations arising from contracts by which shares in a business corporation are transferred, such disputes (even after the amendment made by Act No. 293/2013 Coll., effective as of 1 January 2014) fall within the subject matter jurisdiction of regional courts.
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