The Supreme Court will explain how to hold notaries accountable for illegal actions

The Supreme Court of the Russian Federation (SC) will explain how to prosecute a notary for his illegal actions. The case is related to the executive inscription on the contract, which allowed the bailiffs to write off the money of Trio LLC in favor of the collection agency. The debtor was not notified of the upcoming write-off, and, as it turned out later, the signature of his director on the contract was forged. But the courts refused to recover damages from the notary and his insurer in favor of the company. According to statistics, only a few disputes with notaries reach the court, and there is no well-established practice on them. Lawyers say that the courts are often loyal to notaries, but if the Supreme Court supports the plaintiff, the chances of victims of payments will increase.

The Supreme Court will consider the dispute on the recovery of damage caused by the illegal actions of the notary. On July 3, 2020, notary Evgenia Arbuzova, at the request of the St. Petersburg collection agency Karat (now not in the FSSP register), made an executive inscription on the agency’s contract with Trio LLC, on the basis of which 6.84 million rubles were written off without acceptance from LLC 13 days later.

In February 2021, Trio succeeded in opening a criminal case on fraud. Six months later, the Arbitration Court of St. Petersburg and the Leningrad Region, at the suit of LLC, invalidated the contract with Karat due to the signature forgery established in the criminal case. In October 2021, the Vyborgsky District Court canceled the notary’s executive inscription, recognizing the failure to notify the debtor as illegal. The decision states that, in violation of Art. 91.1–91.2 of the Fundamentals of Notary Legislation, a 14-day notice from the recoverer was “actually not sent to the debtor” (incorrect track number), the notary also did not notify the debtor within three days after the inscription. The City Court upheld the verdict.

AlfaStrakhovanie (which insured the notary’s liability) ignored Trio’s application for payment, and the company filed a lawsuit against the notary and the insurer for compensation for the illegally written off amount. The Moscow Arbitration Court dismissed the claim, finding it unproven that there was a causal relationship between the actions of the notary and the losses. In addition, the court noted, the verdict in the criminal case has not yet been passed.

The appeal supported the decision, and the cassation added that there was no judicial act confirming the violations of the notary, and evidence that the event was recognized as an insured event.

The LLC complained to the Supreme Court, insisting that the arbitration courts did not take into account the facts established in the decision of the district court. According to the company, it was the executive inscription that “served as the basis for direct debiting of funds,” and the lack of notification prevented “preventing illegal collection.”

The case was referred to the economic board, consideration is scheduled for September 6. This is the first dispute in the Supreme Court on the recovery of damages for illegal actions when a notary makes an executive inscription on a contract, says Ekaterina Tokareva, partner at the Pen & Paper Bar Association.

Practice in cases against notaries is generally small, lawyers emphasize. This is confirmed by the statistics of the Ministry of Justice. In 2022, notary chambers received 6,169 complaints, 126 were recognized as justified, and another 232 were not considered. The courts received 62 lawsuits on material liability of notaries. In total, according to court decisions, notaries reimbursed 3.28 million rubles. damage, another 5.09 million rubles. insurers paid out in 18 cases.

The small number of disputes may, in part, be due to the short appeal period. Before recovering damages, it is necessary to recognize the actions of the notary as illegal in court, the deadline for filing a claim is ten days from the date when the person became aware of the notarial action, Ms. Tokareva clarifies. Susana Kirakosyan, an adviser to the BVMP Law Office, says that “executive inscriptions are most often disputed due to the disagreement of debtors with write-offs of funds under loan agreements.” Lack of notification is a serious violation and may be the basis for the cancellation of the inscription, said Ruslan Petruchak, adviser to the BGP Litigation dispute resolution practice.

However, in practice, courts “extremely rarely invalidate the inscription,” Ms. Kirakosyan notes. According to the experience of Ms. Tokareva, “conscientious notaries are more likely to be prone to so-called over-compliance”, violations of the procedure are “quite rare”. But even in case of violation, it is difficult to recover damages or insurance payment. Elena Gladysheva, managing partner of RI-consulting, says that problems arise precisely when proving the illegality of the actions of a notary and their connection with causing damage.

Ekaterina Tokareva adds that the courts are “very loyal to notaries.” “If the question arises about the ambiguity of the interpretation of the norms to which the notary was supposed to obey, the court will most likely take his side,” she believes. So, the lawyer clarifies, it follows from the logic of the courts in the Trio case that the verdict in the criminal case is the only admissible evidence for recovering damages from the notary, although this is not the case. From the judicial acts already issued, “it directly follows that the notary committed obvious violations that caused damage,” Ms. Gladysheva agrees.

The clarifications of the Supreme Court will be important for both notaries and insurers, adds Mr. Petruchak. According to Ms. Tokareva, if the panel supports the plaintiff, the position of the Supreme Court will simplify the process of proof for other victims as well.

Anna Zanina, Ekaterina Volkova