An owner may find that their property was disposed of without their involvement and then acquired by a third party. For example, a car, real estate or other property may be sold by someone who had no right to dispose of it.

In such a situation, the owner usually seeks to have the transaction by which the property left their possession declared invalid and to get it back. But if the property has already been acquired by someone who paid for it and did not know that the owner's rights had been violated, the dispute will be resolved under special rules protecting good-faith purchasers.

What matters is not only whether the original transaction was defective but also how the property left the owner's possession: whether this happened with or against the owner's will. Below we look at when an owner can recover property and what the parties to the dispute must prove.

When property can be recovered

As a general rule, an owner may recover their property from another person's unlawful possession. If the property was acquired for consideration from a person who had no right to dispose of it, and the purchaser did not and could not have known of this, the owner can recover the property only in the cases expressly provided for by Article 302(1) of the Civil Code.

In particular, property can be recovered from a good-faith purchaser if it:

• Was lost by the owner or by the person to whom the owner entrusted it;
• Was stolen from the owner or such person;
• Left the possession of the owner or a person authorised by them in some other way against their will.

Thus, where property is acquired for consideration, the law protects not only the original owner but also the good-faith purchaser. The decisive factor is whether or not the owner intended to transfer possession of the property to another person.

For example, if property was stolen or disposed of under a forged power of attorney, the owner did not intend to transfer it. In such circumstances, they may demand the return of the property even if the current purchaser paid for it and did not know that the owner's rights had been violated.

A different approach is possible where the owner voluntarily handed the property to another person for sale and gave them documents and authority to dispose of it, but did not receive the money from the sale. In that case, the property may be considered to have left the owner's possession with their consent, which prevents its recovery from a good-faith purchaser for value.

Why the invalidity of the transaction is not enough

The invalidity of the transaction under which the property was transferred does not in itself mean that the property left the owner's possession against their will. The court must establish the actual circumstances of the transfer of possession and determine whether the owner intended it (paragraph 39 of Joint Resolution No. 10 of the Plenum of the Supreme Court and No. 22 of the Plenum of the Supreme Arbitrazh Court of 29.04.2010).

For example, the owner may have entered into an agreement with an intermediary or issued a power of attorney to dispose of the property. The intermediary's subsequent breach of its obligations, including failure to pay the owner the proceeds, does not in itself show that the property left the owner's possession against their will.

A claim to invalidate the original transaction and a claim to recover property from a subsequent purchaser therefore require proof of different things. For a vindication claim, it is not enough to prove that the transaction was defective: it must be shown that the owner did not intend the property to leave their possession.

What the owner and the purchaser need to prove

An owner seeking the return of property must prove their right to it and the fact that the defendant has it. If the defendant relies on having acquired it in good faith and for value, it is also important for the owner to provide evidence that the property left their possession against their will.

Depending on the circumstances, such evidence may include:

• Documents confirming the absence of any contractual relationship with the person who transferred the property;
• Evidence of the loss, theft or unlawful seizure of the property;
• Information about a forged power of attorney, signature or other documents;
• Documents confirming that the owner did not hand over keys, technical documentation or other accessories of the property;
• Materials from a criminal case, if they confirm how the property left the owner's possession.

A purchaser contesting the claim needs to prove that the transaction was for value and that they acted in good faith. Relevant evidence includes the contract, payment documents, information from public registers and the results of checks for restrictions, attachments, pledges, wanted-property notices and third-party claims as at the date of the transaction.

A purchaser cannot be considered to have acted in good faith if, at the time of the transaction, they knew of third-party claims to the property and those claims were later found to be justified. A dispute therefore assesses not only what the purchaser actually knew but also whether they should have exercised due care given the nature of the property and the circumstances of the transaction.

Recommendations from the C Cases team

When preparing a claim to recover property, first determine exactly how it left the owner's possession. If the property was transferred to another person with the owner's consent — under a contract, power of attorney or other arrangement — the prospects of a vindication claim against the subsequent purchaser should be assessed separately, along with the possibility of bringing other claims against the person who breached their obligations to the owner.

A purchaser, conversely, should check the seller's authority, third-party rights and information on pledges, attachments and other restrictions before entering into the transaction. In a dispute, documents confirming payment for the property and circumstances showing a good-faith acquisition will be particularly important.

If you intend to recover property from another person's unlawful possession, or need to protect a purchaser's rights against such a claim, the C Cases team is ready to assess how the property left the owner's possession, build the necessary evidence and develop a strategy tailored to your situation.

Sources

• Civil Code of the Russian Federation (Part One) No. 51-FZ of 30.11.1994;
• Joint Resolution No. 10 of the Plenum of the Supreme Court and No. 22 of the Plenum of the Supreme Arbitrazh Court of 29.04.2010 "On Certain Issues Arising in Judicial Practice When Resolving Disputes Related to the Protection of Ownership and Other Property Rights";
• Ruling of the First Cassation Court of General Jurisdiction No. 88-16264/2022 of 23.06.2022 in case No. 2-13/2021;
• Ruling of the First Cassation Court of General Jurisdiction of 18.05.2022 in case No. 88-12429/2022;
• Ruling of the First Cassation Court of General Jurisdiction No. 88-9123/2022 of 30.03.2022;
• Appeal ruling of the Moscow Regional Court of 01.12.2021 in case No. 33-33005/2021.