Contractual fraud against client successfully prevented
As a result of the work of attorneys and lawyers of the LUMOS office, the client has managed to receive the payment due from the customer within the framework of the construction contract. Turning to the law firm LUMOS, the client had found himself in an unenviable situation – on the basis of a construction contract, construction works had been performed on the real estate owned by the customer, but no payment had been received.
Examining the circumstances of the case, it was concluded that the customer had acted fraudulently by deliberately not paying the builder for the work performed without any reasons or justification. By the time the client realized the situation, the customer had already disposed of part of its real estate to a company indirectly controlled by the customer, while the remaining real estate had already been pledged in favor of third parties.
Entrepreneurs in the field of construction often face situations in which the customer not only abusively and knowingly fails to pay for the work performed, but also performs pre-planned actions with the aim of encumbering or alienating the customer’s assets for the benefit of persons close to him. As the Senate of the Republic of Latvia has pointed out in its judgment of 9 November 2017 in case No. SKC-340/2017, in such a situation a company is “cleaned” of assets, leaving its creditors no hope of receiving the payment due to them.
When starting to provide legal assistance to the client, LUMOS attorneys and lawyers immediately took action to protect the client’s interests by filing a claim in court against the customer and securing the claim – arresting the real estate remaining in the customer ‘s possession, as well as seizing the customer’s funds. Considering that such assets were insufficient to satisfy the client’s claims, LUMOS asked the court to invite as a co-defendant in the case the company related to the customer, to whom the customer had already sold real estate before the proceedings. The said application included a detailed legal argumentation based on the judgments of the Senate of the Republic of Latvia and the Court of Justice of the European Union.
The Riga City Vidzeme Suburb Court upheld the arguments and evidence gathered in LUMOS application for securing the claim, concluding that the transfer of the company’s assets in the case may indicate a transaction in which the creditor does not need to protect his interests, as the transferor and buyer are controlled by the same persons. Evaluating the conditions for the transfer of assets indicated by LUMOS sworn advocate Aleksandrs Locans, the court found that there are grounds to believe that a transfer of the company has taken place between the customer and the capital company controlled by its participant within the meaning of Article 20 of Commercial Law of Latvia, paving the way for solidary recovery of debt both from the customer and its newly made company.
As a result, within the framework of legal proceedings, both the real estate owned by the customer and the property alienated to its related person were seized in the Land Register, effectively preventing the customer’s participant from foreclosing assets and avoiding obligations to the contractor. In view of the above, the controlling persons of the customer immediately agreed to a settlement and out-of-court resolution of the dispute, within which the LUMOS customer received the funds due to him the next day after signing the agreement.
LUMOS office provides legal assistance and support to Latvian and foreign entrepreneurs in conducting business, ensuring the preparation of all types of agreements and effective representation of clients’ interests in courts.