In cases seeking to declare a transaction invalid, all parties to the transaction must be named as defendants – SC CommCC

In cases concerning the invalidation of a transaction, all parties to that transaction must be named as defendants. Failure to involve a party to the contract as a co-defendant in the presence of mandatory procedural joinder constitutes an independent ground for dismissing the claim. Determining the composition of defendants is the right of the claimant, but verifying their proper status is the duty of the court.

The Chamber for Cases on Land Relations and Property Rights of the Commercial Cassation Court of the Supreme Court considered the cassation appeal filed by the State Property Fund of Ukraine (SPFU) in a case initiated by a prosecutor in the interests of the state, represented by the Ministry of Education and Science of Ukraine and the Poltava Regional Military Administration, against a private entrepreneur (FOP) and the SPFU. The claim sought to declare invalid a lease agreement for non-residential premises on the balance sheet of a vocational and technical school (VTS) and to oblige the return of the property. The VTS was involved in the case as a third party.

The courts established that the original lease agreement was concluded between the Regional Branch of the State Property Fund of Ukraine (lessor) and the private entrepreneur (lessee). The term of the agreement was subsequently extended multiple times by additional agreements. After the Law of Ukraine No. 157-IX “On Lease of State and Communal Property” of October 3, 2019, entered into force, the agreement was extended following an electronic auction and, on January 27, 2021, was re-executed in a new version as a tripartite agreement — between the lessor, the lessee, and the balance sheet holder (VTS).

The Commercial Cassation Court of the Supreme Court noted that the object of judicial protection is a violated or disputed right or interest (Article 15 of the Civil Code of Ukraine), and the method of protection must be effective and aimed at full restoration of the violated right; determining the defendants is the claimant’s right, but the court is obliged to verify the proper composition of the parties to the dispute; in cases seeking to declare a transaction invalid, all parties to the transaction must be named as defendants.

After the agreement was extended in 2021 under the procedure established by Law No. 157-IX and the relevant Procedure for Leasing Property, the VTS acquired the status of a party to the contract as the balance sheet holder and therefore must have the procedural status of a co-defendant in the case; failure to involve all proper defendants, in particular the VTS as a co-defendant, where mandatory procedural joinder is required, precludes the court from resolving the dispute on the merits of the declared claims and is an independent ground for dismissing the claim without examining other arguments regarding the legality or illegality of the disputed agreement.

The Court also noted that the defendant, during the new consideration of the case, had raised the need to involve the VTS as a co-defendant, but the prosecutor did not exercise their procedural right to change the composition of the defendants and objected to such involvement.

The Commercial Cassation Court of the Supreme Court overturned the decisions of the previous instance courts and dismissed the claim due to the improper composition of the defendants.

Resolution of the Commercial Cassation Court of the Supreme Court dated October 16, 2025, in case No. 917/1173/22 — https://reyestr.court.gov.ua/Review/133719376.

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