HUNGARIAN SUPREME COURT ON RES JUDICATA – TEST CASES ON HORIZON?

09 June 2023

When a plaintiff decides to litigate only part of his claim, the question arises whether the ‘res judicata’ effect of the final judgment precludes a new lawsuit for the unclaimed part of the claim? The Hungarian Supreme Court’s recently issued a uniformity decision on this question. What will be the impact of this ruling? We address the question by analysing the uniformity decision

1. Previous contradictory decisions

In recent years, the Hungarian Supreme Court has issued contradictory decisions regarding the question whether the preclusive effect of res judicata (re-litigation of the same subject matter between the same parties) of the final judgment applies to that part of the claim which was not pursued in the litigation by the plaintiff.

In a case decided in 2019, the Supreme Court ruled that a final judgment decides the legal basis of the entire claim arising from the same legal relationship between the same parties, irrespective of the fact that the plaintiff has not claimed his entire claim.

However, in a 2021 decision, another chamber of the Supreme Court ruled that, in a case like the above, a new action may be brought for a claim that was not previously sought by plaintiff as the preclusive effect of the judgment extends only to the claim sought and adjudicated in the “first” procedure.

2. Uniformity Decision of the Supreme Court

Due to the diverging case law, the Hungarian Supreme Court delivered a uniformity decision on this matter.[i]

The Supreme Court laid down that according to the provisions of the Hungarian Civil Procedure Code (“CPC”), the res judicata effect of a judgment relates to the right enforced in the action, and the diverging court decisions interpreted this concept in a different manner.

According to the Supreme Court the problem shall be approached in the light of the “principle of free disposition” which is a fundamental principle of litigation.

Based on this principle, the plaintiff determines the extent of the legal protection he seeks from the court in connection with the enforced right. According to the CPC, the court may (and must) decide on the right enforced in the procedure within the limits of the Plaintiff’s action.

Based on the above, the res judicata is related to the judicial decision, consequently, if a party decides to enforce only part of his claim in a litigation, the res judicata effect of the judgment extends to the amount of the claim sought by the plaintiff, however, it cannot extend to that part of the claim which was not subject matter of the litigation.

3. Minority Opinion

According to the minority of the judges of the Supreme Court, based on the principle of free disposition, it is the plaintiff’s choice to pursue its claim partially, consequently, he shall bear the consequences of that decision.

Besides, the minority opinion also highlighted the majority decision may lead to longer legal uncertainty and it allows starting "test cases”.

Furthermore, based on the majority decision, the plaintiff may bring several actions for each of the individual claims at the same time, even before separate courts in case of an alternative jurisdiction.

Finally, the majority decision may raise the risk of conflicting decisions in cross-border situations, for example because the defendant changes his place of residence, and the court of another Member State has jurisdiction over the subsequent action.

4. Comments on the decision

It can be concluded that uniformity decision is favourable to would-be plaintiffs, who plan to launch test cases in Hungary, by litigating only a smaller portion of the claim with a view to mitigate court cost exposure.

For example, when the legal basis of a given claim is doubtful, the plaintiff can opt to start litigation for only a symbolic amount (eg, €1) to mitigate the risk of losing the case and paying a huge amount of court costs.

In case the Supreme Court establishes the legal basis of the claim in a “precedent judgment”, the plaintiff can pursue the bigger part of their claim on the same legal basis with reduced risk in a second litigation, since the lower courts will have to follow the precedent judgment under the same factual basis.

Even if the recent uniformity decision brings a potential risk to the good administration of justice as it can fuel bad-faith litigation tactics, however, it is out of question that due to this uniformity decision restricting the res judicata effects of judgments, the right to court, which is a fundamental right under Article 6 of the European Convention of Human Right will be better enforced.