This is an unofficial translation of the Lithuanian court judgment, provided for information only. The Lithuanian original is authoritative. Read the original (Lithuanian)

Civil case No [anonymised]

Judicial proceedings No [anonymised]

Categories of the procedural decision: 2.6.8.9, 2.6.9.2, 2.6.20.1.

VILNIUS REGIONAL COURT

JUDGMENT

IN THE NAME OF THE REPUBLIC OF LITHUANIA

13 November 2024

Vilnius

[…]

has established:

1. UAB “[anonymised]” (hereinafter also the claimant or the Company) applied to the court with a claim asking the court to oblige [anonymised] (hereinafter also the defendant) to return to the claimant €139,750, to award from the defendant to the claimant annual interest of 5 per cent on the unjustly received amount of €139,750 from 17 July 2023 until the date the amount is returned, and to award procedural interest of 12.5 per cent and litigation costs.

[…]

13. The defendant does not agree with the claim. He states that the claimant and the defendant were in a legal relationship for services from 14 November 2017, when the 2017 agreement was concluded. The parties agreed that the claimant would submit detailed service requirements to the defendant electronically by giving access to the system at [anonymised]. The claimant also created an email account and gave the defendant access to the claimant’s entire system. After the 2017 agreement expired, the 2018 agreement was signed between the claimant and the defendant on 19 November 2018, in which the nature of the work and the means remained the same as in the previous service agreement.

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The court

finds:

25. The dispute between the parties to the proceedings arose from the legal relations under a service agreement (Articles 6.716–6.723 of the CC) and the legal relations of unjust enrichment or acquisition of property (Articles 6.237 and 6.242 of the CC).

26. The following factual circumstances relevant to the dispute have been established from the written evidence collected in the case:

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27. First of all, it should be noted that the data submitted to the case by the claimant (the work rules of UAB “[anonymised]”, the statement of UAB “[anonymised]” of 24 July 2023 “[anonymised]”, the permission of the Vilnius territorial division of the State Labour Inspectorate under the Ministry of Social Security and Labour of the Republic of Lithuania to terminate the employment contract with the defendant, etc.) concerning possible breaches of job duties by the defendant as an employee of a third party do not fall within the subject matter of the present case (the obligation to return funds acquired without legal basis and/or the assessment of the performance of the 2017 agreement and the 2018 agreement), and therefore they will not be assessed and will not be addressed in this procedural judgment of the court (Articles 176 and 180 of the CCP).

28. The method of defending allegedly infringed rights chosen by the claimant in the present case (Article 1.137 of the CC) is to recover funds allegedly transferred to the defendant without lawful basis. Legal relations of unjust enrichment or acquisition of property are regulated by the provisions of Chapter XX of the CC.

29. Article 6.237(1) of the CC lays down the obligation of a person who, without a legal basis, by his actions or otherwise, intentionally or through negligence acquired what he could not and should not have received, to return all of it to the person at whose expense it was acquired, except for the exceptions laid down in this Code.

30. In the case law of the cassation court, in interpreting the prerequisites for applying the rules of Article 6.237 of the CC, it has been stated that, for an obligation to return property acquired without basis to arise, first of all a person must have acquired property without a legal basis, that is, receipt of a thing or money cannot be justified either by law or by a transaction. If the acquisition of property can be justified by a legal act, a transaction or another ground for the emergence of civil rights (Article 1.136 of the CC), it is presumed that such property was acquired lawfully and, on the basis of the legal institution in question, the property cannot be reclaimed. The institution of the obligation to return property acquired without basis is an expression of the general principle of law “[anonymised]” (Latin ex iniuria ius non oritur). Where a claim is made to recover property acquired without basis, it is important to legally classify the legal relationship at issue, that is, to establish on what basis the property was received and from what (if at all) the obligation to return it arises. On the other hand, unjust enrichment without legal basis is regarded as arising not only where there is absolutely no legal basis and, despite that, a person unjustifiably and dishonestly receives a direct material benefit, but also where a person has a legal basis to demand and receive certain material property or funds but receives more than he should have under the legal basis. In that case the amount received in excess of what is due under the legal basis is regarded as received without legal basis, that is, as unjustified, dishonest enrichment (ruling of the Supreme Court of Lithuania of 13 February 2019 in civil case No e3K-3-25-695/2019, paragraph 25, and the cassation case law cited therein).

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34. There is no dispute between the parties to the proceedings in the case that from 14 November 2017 until 28 April 2023 the parties were in a legal relationship for the provision of services on the basis of the 2017 agreement and the 2018 agreement. Although the claimant maintains that the defendant has provided the claimant with no services under those agreements (it asks the court to award not some part but all of the funds the claimant paid to the defendant under the invoices issued by the latter), that is, it essentially disputes the reality of the contractual service relationships, it does not claim that the 2017 agreement and/or the 2018 agreement be declared invalid on the basis of Article 1.86 of the CC as a sham transaction and that restitution be applied by returning to the claimant everything the defendant received on the basis of an invalid transaction.

35. Under a service agreement, one party (the service provider) undertakes, on the order of the other party (the client), to provide the client with certain services of an intangible (intellectual) nature or other services not related to the creation of a material object (to perform certain actions or carry out certain activity), and the client undertakes to pay for the services provided (Article 6.716(1) of the CC). The case does not raise the question of improper performance of the 2017 agreement and/or the 2018 agreement either, for example: the methods and means of performing the agreements chosen by the defendant as the service provider (Article 6.717 of the CC); whether the services provided by the defendant as the service provider complied with good faith and reasonableness and with the priority interest of the claimant as the client under the service agreements, and whether that interest was infringed (Article 6.718(1) of the CC); failure to follow established practice and the standards of the relevant profession (Article 6.718(2) of the CC); failure to follow the terms of the agreement or the client’s instructions (Article 6.718(3) of the CC), and the like.

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37. The claimant bases its claim that the funds paid to the defendant be regarded as transferred without legal basis on the factual circumstance that the defendant did not provide it with reports under the 2017 agreement and the 2018 agreement (paragraphs 26.59 and 26.63 of this judgment), which, in the claimant’s assessment, means that the agreements were not being performed and the claimant did not receive the services paid for. That position of the claimant is partly refuted by the work certificates submitted to the case by the claimant itself: for the period from 15 November 2017, for the period from 1 December 2017 to 30 December 2017, for the period from 1 April 2018 to 30 April 2018, and for the period from 16 March 2018 to 4 May 2018. It is relevant to note that in the 2017 agreement the parties did not lay down a form for the acceptance and transfer certificate of services (clause 4.2 of the 2017 agreement). And although the certificates of work performed submitted to the case are not signed by the parties (clause 4.3 of the 2017 agreement), it is obvious that they were provided to the claimant by the defendant (they were submitted to the case by the claimant itself). And the fact established in the case that the invoices issued by the defendant for the work specified in the certificates were paid by the claimant allows a reasonable conclusion that the services provided by the defendant were assessed by the claimant as performed without deficiencies (clauses 3.4–3.10 of Annex 1 to the 2017 agreement). Although no acceptance and transfer certificates (certificates) for the other periods of performance of the 2017 agreement were submitted to the case, taking into account the detailed description of the services in the invoices, which, incidentally, coincides with the services ordered by the claimant as specified in Annex 1 to the 2017 agreement, taking into account the parties’ conduct (all the invoices submitted by the defendant were paid), and in the absence of any objective data that the claimant had no possibility of checking the quality of the services provided, it must be concluded that the parties treated the description of the services in the invoices as equivalent to acceptance and transfer certificates, on the basis of which the claimant decided to accept the services and pay for them. The claimant neither proved nor argued in the case any other purposes of the payments made, and did not argue fraud by the defendant or a malicious agreement with the claimant’s former management. All this allows the conclusion that the 2017 agreement was actually performed by both parties. As mentioned earlier, the claimant did not argue deficiencies in the quality or scope of the services performed and accepted by it as a ground for regarding the payments made as an overpayment.

38. The 2017 agreement between the parties was concluded having regard to the defendant’s experience, knowledge and competence in preparing and implementing export strategies for technology companies, seeking business contacts and organising business meetings with companies in the financial sector of the Grand Duchy of Luxembourg (preamble of the agreement). The claimant did not deny in the case that it had business interests in the market of the Grand Duchy of Luxembourg and did not prove that it was represented by other persons in that market.

39. In assessing the invoices submitted by the defendant to the claimant under the 2017 agreement, attention should be drawn to the fact that the services described in them in most cases coincide fully with the services specified in Service Order No 1 in Annex 1 to this agreement (for example, the invoices described in paragraphs 26.2–26.6, 26.8, 26.11–26.13, 26.15 and 26.16 of this judgment). Clause 3.3 of Annex 1 to the 2017 agreement and the content of the table of ordered services allow the conclusion that the parties agreed only on a preliminary scope of services (calculated in hours). The parties agreed that, where they cannot determine the total price of the services in advance, the claimant pays the defendant for the services provided, applying hourly rates, according to the number of hours actually spent as stated by the defendant. Therefore, the circumstance that the number of hours stated by the defendant in the invoices discussed in this paragraph does not coincide exactly with the number of hours stated in the order (a preliminary scope of services of 360 hours, whereas according to the invoices indicated earlier in this paragraph plus the first and second items of invoice series JK, No 18/12 of 20 September 2018 – 362 hours) cannot be regarded as refuting the reality of the services provided by the defendant.

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49. Since it has been established in the case that the parties were in a legal relationship for services (the 2017 agreement and the 2018 agreement), in which the defendant undertook to provide the claimant with consulting, client search and business development services in the field of banking technologies, and the claimant undertook to pay for the services provided, and since the claimant brought a claim for the recovery of funds allegedly paid to the defendant without lawful basis, the claimant bore the burden of proving the circumstance of unjustified acquisition of property, and the defendant bore the burden of proving that it received the funds on a justified basis.

50. The claimant, without essentially denying the contractual relationship, states that the invoices submitted by the defendant were paid without the claimant having received the services stated in them. It should be noted that the claimant neither proved nor argued that the funds had been transferred to the defendant by mistake, or that poor-quality services had been provided, or that the services stated in the invoices had been unnecessary for it (the claimant), or that those services had been provided to it not by the defendant but by another person. Thus the claimant did not substantiate in any way that it transferred the funds to the defendant not for services received under the agreements but for some other reasons.

51. In defending against the claim made against him, the defendant argued in the case and, in the court’s inner conviction, proved that he received all the funds from the claimant for the proper performance of his obligations under the 2017 agreement and the 2018 agreement. Some of the written evidence submitted to the case has been addressed in detail earlier in this judgment (paragraphs 37 and 39–46). Given that by its claim the claimant does not challenge the scope of the services provided by the defendant, that is, does not make arguments on the content of each invoice, but denies altogether the real performance of the contractual relationships, in the court’s assessment it is not appropriate to address in this judgment the position on each invoice and/or the service stated in it. On the basis of the reasons discussed earlier in this judgment, the court draws the general conclusion that in the present case the defendant properly discharged his burden of proof and substantiated his position with sufficient evidence that does not contradict any other evidence collected in the case. That assessment by the court was also determined, among other things, by the circumstances regarding the specific nature of the services provided by the defendant. Under the service agreements the claimant ordered from the defendant services of a non-material nature, which are objectively more difficult to prove. In the court’s conviction, the defendant’s explanations during the hearing, which are as detailed as possible in the context of circumstances spanning about six years, the testimony of the witnesses examined by the court, and, in part, the circumstances admitted by the claimant itself concerning the final result of some of the services provided by the defendant (contracts concluded with clients attracted by the defendant and still being performed), are sufficient to decide that both service agreements concluded between the parties to the proceedings were actually performed and that the claimant transferred the disputed funds to the defendant precisely on the basis of those agreements. Therefore, contrary to the position the claimant maintains in the case, the reality of the provision of services is proved not by invoices alone but also by other admissible, appropriate and sufficient evidence. It should be recalled once again that the claimant did not argue or put forward arguments in the case on an improper scope of services and/or rates.

52. As regards the claimant’s essentially main argument that the claimant has no objective data on the services having been provided to it, it should be noted that, although on a literal interpretation of the agreements the parties were to document the performance/acceptance of services by acceptance and transfer certificates, the conduct of the parties to the agreements over about 6 years, when the services provided and their scope were disclosed by the defendant by describing them in invoices (stating the service itself, its scope (in hours) and the agreed rate), and the claimant, having a real opportunity to assess such services before payment and to submit comments on them to the defendant, paid them, clearly proves that such conduct was tolerable and acceptable to both parties to the agreement (Article 6.193(5) of the CC). Each party to an agreement, being in a contractual relationship, must act in good faith (Article 6.158(1) of the CC). The claimant’s conduct, when, after doubts arose about the reality of the services provided by the defendant and before making a claim, it removed the defendant’s ability to connect to the access granted to him under the agreements to the claimant’s electronic and information programs (email, telephone number, Slack, wiki, etc.), that is, it prevented the defendant from objectively operating with the data accumulated there, while itself having the possibility of selectively choosing the data to be declared, clearly contradicts the principles of good faith and fair business practice.

53. Neither the defendant’s employment contract with the third party submitted to the case by the claimant nor the service agreement 1/2018 of 27 April 2018 between the claimant and the third party in itself proves that from 2021 the defendant provided the services stated in the disputed invoices not on the basis of service agreements but under an employment contract. Although under clause 2.2 of the employment contract the third party had the right to prepare a detailed list of the defendant’s job functions (tasks) and/or job descriptions and subsequently to amend those documents unilaterally, no such documents that would allow the defendant’s job functions to be compared with the services provided to the claimant under the service agreements were submitted to the case. It was established from the evidence submitted to the case that in 2021, after the employment contract with the third party, the defendant submitted no invoice to the claimant. During 2022 the defendant submitted eight invoices to the claimant, under which the defendant provided services to the claimant for 1 340 hours (if the rate of €25 was applied) or 1 117 hours (if the rate of €30 agreed in the 2018 agreement was applied). That is slightly more than half of official working time in 2022 (in 2022 there were 251 business days, or 2001 working hours, working five days a week). The declaration submitted by the defendant to the tax administrator for 2022 confirms that the defendant received no other additional income from operating on the basis of individual activity apart from what he received for the services provided to the claimant. Given that the defendant provided the services to the claimant on the basis of individual activity, that is, the defendant was free to choose the time for providing such services, there is no basis for concluding that the defendant, working for the third party in the regime stated in the employment contract (40 working hours per week), would objectively not have had the possibility (time) to provide services to the claimant as well. The declaration submitted by the defendant to the tax administrator for 2022 confirms that the defendant received no other additional income from operating on the basis of individual activity apart from what he received for the services provided to the claimant.

54. On the basis of the reasons set out earlier in this judgment, the court concludes that, since the defendant has proved the reality of the services provided and, at the same time, the legal basis for receiving the disputed funds, the claim for the return of funds acquired without basis is to be regarded as legally unfounded and must therefore be dismissed.

55. Since the main claim for the return of funds acquired without basis is dismissed, the derivative claim to award interest from the defendant must also be dismissed.

Litigation costs

56. Under Article 93(1) of the CCP, the court awards to the party in whose favour the judgment is made its litigation costs from the other party. Since the claim is dismissed, the claimant did not acquire the right to compensation of the litigation costs it incurred, but the defendant did acquire that right.

57. The defendant asks for €3,760.31 of litigation (representation) costs to be awarded to him from the claimant.

58. Article 98 of the CCP, which regulates compensation of the costs of paying for the assistance of an advocate or advocate’s assistant, provides that the court awards to the party in whose favour the judgment is made, from the other party, the costs of the assistance of the advocate or advocate’s assistant who took part in the examination of the case, as well as for assistance in drafting procedural documents and providing consultations. For the award of these costs the party submits to the court a written request with a calculation and justification of the costs. A party’s costs relating to the assistance of an advocate or advocate’s assistant, having regard to the complexity of the particular case and the advocate’s or advocate’s assistant’s work and time spent, are awarded in an amount not exceeding that laid down in the recommendations on the amount of fees approved by the Minister of Justice together with the President of the Lithuanian Bar Association.

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61. The litigation costs incurred by the defendant are of a reasonable amount and properly substantiated, and are therefore to be awarded to him from the claimant

The court, guided by Articles 93, 270 and 307 of the Code of Civil Procedure,

rules:

To dismiss the claim of UAB “[anonymised]” against the defendant [anonymised] for the return of funds acquired without basis.

To award to the defendant [anonymised] (personal ID No [anonymised]) from the claimant UAB “[anonymised]” (legal entity code [anonymised]) €3,760.31 (three thousand seven hundred and sixty euros and 31 cents) of litigation costs.

The judgment may be appealed to the Court of Appeal of Lithuania within 30 days of the date it was made, with the appeal submitted through Vilnius Regional Court.

Judge [anonymised]