Paulian Action – Effective Protection of the Creditor Against the Disposition of Assets by the Debtor
In practice, it often happens that the debtor, before initiating or during enforcement proceedings, makes a donation of real estate to a family member, sells assets at a reduced price, or transfers valuable assets to third parties. The Paulian action allows the creditor to challenge such actions and have them deemed ineffective concerning the creditor.
It is important to note that a judgment acknowledging the Paulian action does not invalidate the contract. The action remains valid between its parties; however, the creditor gains the ability to enforce against the assets that have been removed from the debtor’s estate.
When Can One Use the Paulian Action?
The creditor must demonstrate the following prerequisites:
- existence of a claim against the debtor,
- the debtor’s legal action with a third party,
- the third party receiving a benefit,
- the injury to the creditor due to this action,
- the debtor’s action with awareness of harming the creditor,
- the third party’s knowledge of such action or the possibility of gaining this knowledge with due diligence.
Harming the creditor should be understood as a situation in which, as a result of the action taken, the debtor has become insolvent or more insolvent than before.
Evidence Facilitation for the Creditor
The legislator has provided a number of presumptions that significantly strengthen the position of the creditor.
If the material benefit was received by a person closely related to the debtor (e.g., spouse, child, parent), it is presumed that they were aware of the debtor’s action with the knowledge of harming the creditors.
The protection of the creditor goes even further in the case of gratuitous actions, especially donations. In such a case, the creditor can demand that the action be recognized as ineffective even when the person receiving the gift was unaware of the intention to harm the creditors.
What Can Be Challenged?
The subject of the Paulian action can involve various types of legal actions, in particular:
- donations of real estate or movable property,
- sale of assets at a price deviating from the market value,
- partition agreements of common property,
- establishment of limited property rights,
- transfer of assets between affiliated entities.
The Supreme Court’s jurisprudence consistently emphasizes that the Paulian action is to serve the real protection of the creditor against the depletion of the debtor’s assets, regardless of the legal form used to achieve this goal.
Against Whom Is the Lawsuit Directed?
As a rule, the lawsuit is filed against a third party who has obtained a material benefit as a result of actions taken by the debtor.
However, if that person further disposes of the obtained benefit, the creditor may, in certain cases, also act against the subsequent acquirer. This particularly applies to situations where they knew of the circumstances justifying the Paulian action or obtained the benefits gratuitously.
What Is the Deadline for Filing the Action?
The lawsuit must be filed within 5 years from the date of the contested legal action.
This deadline is strict, meaning that after its expiry, the creditor loses the ability to effectively seek protection under the Paulian action.
Effects of Acknowledgment of the Action
A final judgment recognizing the action as ineffective concerning the creditor enables enforcement against the object that has been removed from the debtor’s assets. The creditor can thus seek satisfaction as if the contested action had never occurred.
Summary
The Paulian action is an effective tool for protecting creditors against attempts to hide assets by debtors. It is particularly significant in cases involving donations to family members, the transfer of real estate, and other actions taken to thwart enforcement. Given the need to demonstrate statutory prerequisites and the five-year deadline for filing a lawsuit, a prompt analysis of the legal situation and appropriate preparation of the litigation strategy are crucial for the effective pursuit of claims.
