We successfully represented the Rakvere city government in a dispute with Virumaa Kompetentsikeskus (Virumaa Competence Centre). The bankruptcy trustee of Virumaa Kompetentsikeskus initiated an action against the Rakvere city government, challenging the validity of certain agreements related to the right of superficies and establishment of usufruct. The bankruptcy trustee sought for the court to annul the agreements burdening the bankrupt foundation and to leave in force the agreements that did not burden the foundation, claiming that it was a situation where the different agreements constituted a single, comprehensive transaction.

The Tartu Circuit Court agreed with the city government of Rakvere, finding that it was the bankruptcy trustee’s duty to prove the divisibility of the concluded transaction. The circuit court determined that the city government of Rakvere had proven that without the disputed agreements, the transaction as a whole would not have been concluded, and that it was not a divisible transaction. This is a significant ruling, as the circuit court thoroughly explained the purpose of the action for the avoidance of a transaction in bankruptcy proceedings, the identification of the nullity of the transaction, the harm to the interests of the creditors, and the prerequisites for determining the gift nature of the transaction.

Tartu Circuit Court partially upheld the client’s appeal and sent the case back to the county court for a new hearing. However, the circuit court found that Virumaa Kompetentsikeskus’s claim to declare a part of the transaction null and void must be dismissed, as the transaction was not divisible in the manner argued by the plaintiff.

Our client team

Our partner Allar Jõks, head of Insolvency & Restructuring Dr Mari Agarmaa and associate Jaanika Alevi advised the Rakvere city government.