Legal Alerts / 18 Apr 2013

Legal Alert – New Supreme Court Ruling: All Claims Based on the Same Defects in a Purchased Real Estate Must Be Presented by One Action

The Finnish Supreme Court has recently rendered a precedent regarding the binding effect (Res Judicata) of a legally valid and non-appealable judgment in a civil dispute pertaining to a transaction of a real estate.

In the case at hand, person A had acquired a real estate from B and C in 2004. After the acquisition A considered the real estate defective because of moisture damages due to water leaks through roof covering.  He filed a claim with the court demanding that the real estate transaction had to be annulled. A’s claim was unsuccessful and dismissed. The Court’ decision to dismiss A’s claim became legally valid and non-appealable in 2010. In his claim A had demanded the annulment of the real estate transaction based on defects detected after the purchase; he had not filed any secondary claims, such as, reduction to the purchase price based on said defects. Later, after the first judgment had become non-appealable, A filed a new claim now demanding a reduction to the purchase price. In the later process A’s claim was based on the same facts, events and evidence as in the first trial.

A’s later claim was dismissed without considering the merits by the District Court which decision was later confirmed by both the Court of Appeal and the Supreme Court. The decision not to examine the later claim was based on the binding effect of the legally valid judgment rendered in the first process.

The Supreme Court found that Res Judicata is not stipulated in the Finnish legislation, but it is an established principle that a claim which is based on the same grounds cannot be examined twice. The Court reasoned that both A’s claims were based on the same facts, events and grounds. There were no reasons why A could not have made the demands included in the latter claim in the first process. The Court reasoned that the effectiveness of judicature and expediency require that all claims, and grounds for a claim, must be presented in the pending case (here a pending case refers to the first process regarding the annulment of the transaction) and in as early stage as possible. As A had not acted as required the courts did not examine the merits of his later claim.

In its decision the Supreme Court also referred to its previous precedents regarding the same issue, KKO:2001:136 and KKO:2008:43. The issue has also been discussed in the Finnish legal literature in line with the precedents, both this recent issue and the previous ones. It can be argued that the principle of binding effect of a legally valid judgment is rather established in the Finnish legal praxis, at least in the current situation.

The principle of Res Judicata emphasizes the need to fully and thoroughly examine all the merits and facts of a case before finally “locking” the claims. Any and all claims considered feasible should be presented in order to avoid the risk of losing the possibility to do so at a later stage.

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