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Even a simple suspension of proceedings may turn into a legal battle in the Czech Republic

A lawsuit by a tenant is pending against you, who defends themselves by saying the termination of their lease was unlawful. In your counterclaim, should you seek payment of outstanding rent or the surrender of unjust enrichment? Even a layperson may come up with the correct answer: “let’s wait and see” or, in legal parlance, ask to suspend the proceedings. However, the courts are apparently able to throw a spanner in the works even in a straightforward situation such as this one.

Tenants of rental apartments who have been given notice of termination have essentially only one option for defending themselves against unfair eviction: suing for nullification of the termination. However, if such a tenant continues to occupy the apartment after having been served notice (and after the notice period having lapsed), declaring their willingness to challenge the cancellation of the lease in court and – as is not entirely uncommon – suspending their payments of rent in the meantime, the landlord is faced with a delicious dilemma. Should you demand that the tenant pay rent for the relevant period, in the belief that you may in fact not have been entitled to terminate their lease? If you do so, you undermine your very own line of argument in the lawsuit brought by the tenant for nullification. Or should you sue the tenant for surrender of the unjust enrichment they attained by continuing to use the apartment, because you believe you were in your right to terminate them? In that case, you take a gamble on winning the other proceeding.

If the landlord actually becomes compelled to sue for performance by the tenant, this is a real problem. The landlord does not know what exactly to sue for: performance of the lease agreement? Unjust enrichment? The wrong choice means to risk dismissal of the claim.

In such a situation, the landlord ought to file their claim in court and at the same time ask for a suspension of proceedings until the dispute over the potential nullity of the cancellation of the lease has been resolved. This is a straightforward and logical solution: once a decision has been handed down on the tenant’s declaratory action, the legal situation is clear. At the same time, such declaration actions preclude the possibility that the issue of whether the termination of the lease was valid and lawful might be decided in another proceeding. In other words, another court which may require the answer to this question cannot give the answer itself in a preliminary ruling but must wait until the decision in the erstwhile procedure has been handed down.

Consequently, when we were faced with precisely this kind of situation, we took the proper course of action and sought suspension of the procedure on our claim for payment. Imagine our surprise when the appellate court amended the decision of the the first-instance court (whereby the procedure had been suspended, as expected) and decreed that the procedure would not be suspended. The appellate court’s convoluted argument ran as follows: as long as a plaintiff does not know whether they should sue for performance or for surrender of unjust enrichment, it is impossible to say whether or not the outcome of the procedure on nullification of the termination of the lease is of relevance for the proceedings, and the statutory grounds for suspending the proceedings are therefore absent. This is truly a circular argument: the plaintiff needs to know the outcome of proceedings in order to know what to sue for – but unless and until they know what to sue for, it is not possible to say whether they 'truly' need the outcome of that other proceeding. This is clearly a rhetorical trick and a logical fallacy, of the kind which does not behoove a court of appeals.

Given all this, it was self-evident that we would prevail before the highest court in the land. The Supreme Court did state that when a court is faced with the situation in which we found ourselves, it must suspend proceedings, and has no leeway whatsoever to do otherwise. To cite the relevant decision: "In the case at hand, insofar as the legal assessment of the brought claim for payment for the use of the apartment owned by the claimant (either in the form of outstanding rent or in the form of compensation for the unjust enrichment attained by the tenant by their unauthorized use of the apartment) is dependent upon the answer to the question whether the cancellation of the apartment lease was legitimate (…), the statutory conditions for the obligatory suspension of proceedings pursuant to Sec. 109 (1) (b) of the Code of Civil Procedure are clearly met. The conclusions drawn by the appellate court as to the absence of the statutory grounds for a suspension of proceedings are therefore indefensible."

In this manner, the Supreme Court had to become involved in resolving an otherwise banal legal question, and confirm a simple rule which everyone had already been aware of.

Source:
Supreme Court resolution 28 Cdo 2879/2020 of 21 October 2020