WHAT IS THE EXTENT OF THE JUDGE’S DISCRETIONARY POWERS IN HUNGARY?

15 February 2023

What can the judge do if the facts support the claimant's claim, but the party incorrectly stated the legal title of the claim? Can the court award the claimant's claim on the correct legal title? The Civil Procedure Code, which has been in force since 2018, provides a clear answer to this question, and in our short article we will explore the issue of the limits of action by legal title through a recent decision of the Supreme Court.

1. Facts

The claimant („Claimant”) worked at the defendant („Defendant”) in a church school as a teacher, she was the principal of the school.

In 2018, the bishop of the diocese, who exercised the employer’s rights, took a measure to pay jubilee bonuses to employees in educational institutions maintained by the diocese, including the Defendant, under the conditions set out in the Act on the Status of Public Servants (“PSA”)[i].

The Claimant included her own jubilee bonus as an item in the Defendant’s budget for the year 2020 which was approved by the diocese as the controlling body. However, a few months later, the trustee of the diocese took an economic decision not to support the payment of the jubilee bonus to the Claimant.

The representative of the controlling body justified the decision on the grounds that the Claimant should not receive the jubilee bonus since she has not acted in the manner expected by the diocese towards the Defendant’s employees.

2. The Claimant’s claim and the Defendant’s defence

The Claimant started a litigation and requested the payment of the jubilee bonus. As the legal tile of her claim, on the one hand, based on article 64 (1)-(2) of the act on the national public education[ii] (“NPEA”), she referred to the fact that since she worked as a teacher, she is entitled to the jubilee bonus with the conditions set forth in the PSA.

On the other hand, as the legal basis of her claim, she also invoked article 6 of the Labour Code[iii] („LC”) according to which the employer shall act in a manner consistent with the principles of good faith and fairness.

The Defendant requested the court to dismiss the Claimant’s claim because in his viewpoint the Claimant’s performance was not satisfactory. Furthermore, he also claimed that no other employee received the jubilee bonus, although the conditions set out in the PSA were met.

3. The first instance procedure

As a starting point, the first instance court established that the provisions of the PSA on the jubilee bonus are not applicable to the Claimant based on the NPEA. However, apart from the Claimant and one other retiring employee, the controlling body of the Defendant has paid the jubilee bonus set out by the PSA to all employees since 2018.

In the first instance court’s view, the Defendant undertook a unilateral commitment in accordance with article 16 of the LC to pay jubilee bonus to the employees with the conditions set out in the PSA. The Defendant did not implement a written policy but made the commitment to the employees by his implicit conduct.

Since the Defendant did not make the payment of the jubilee bonus conditional, the Claimant is entitled to this amount, thus the first instance court upheld the Claimant’s claim.

4. The second instance procedure

The regional court of appeal also found that the bishop as the person exercising the employer’s rights made a commitment to pay jubilee bonus to the employees of the diocese with the conditions set out in the PSA. According to the second instance court, the action of the bishop constitutes a commitment based on the article 16 of the LC, the performance of which may be demanded by the person entitled to it.

The regional court of appeal further agreed with the first instance court that the bishop’s commitment did not include a clause that the payment was conditional on the performance of work deemed satisfactory by the employer.

Based on the above, the second instance court upheld the judgment of the first instance court.

5. The decision of the Supreme Court

The Defendant filed a request for review against the final judgement in which he claimed that the courts went beyond the scope of the Claimant’s claim, thus the judgement infringes the relevant provisions[iv] of the Civil Procedure Code[v] („CPC”). In fact, as the legal title of her entitlement to the jubilee bonus, the Claimant only referred to article 64 of the NPEA, but the legal title defined by article 16 of the LC was mentioned by the Claimant neither during the preliminary phase of the procedure, nor during the hearing on the merits.

The Supreme Court shared the Defendant’s view that the Claimant failed to claim that the employer should be obligated to pay the jubilee bonus based on his unilateral commitment (article 16 of the LC).

The Supreme Court recalled that the legal literature and the well settled case-law significantly changed the principle of the limits of action by legal title which was based on the article 215 of the act III of 1952 on the civil procedure code (“OCPC”). According to the ministerial explanatory memorandum to the CPC, the court shall respect the private autonomy of the parties and may not uphold the claimant’s claim on a legal basis that differs from the legal allegations of the party, even if the party may have wrongly stated the legal title by mistake and the different (correct) legal title is established by the facts alleged and proved in the procedure.

The concept of a tripartite cause of action of the CPC requires the plaintiff to state in his action on what legal basis, on what facts and what judgement he is seeking from the court. The court's decision on the merits may not extend to a right which the party has not alleged in the action, i.e. it may not base its decision on a right which has not been pleaded by the parties and which was not enforced in the procedure.

Given that the Claimant failed to allege the unilateral commitment of the Defendant (Art. 16. of the LC) as the legal basis of her claim, the court could not consider the employer’s respective conduct as a governing factor in the resolution of the legal dispute.

Thus, the Supreme Court changed the final decision and dismissed the Claimant’s claim.

6. The analysis of the decision

This decision is an excellent illustration of the consequences of the institution of the limits of action by legal title introduced into the Hungarian civil procedure law by the CPC.

In the judicial practice that emerged from the application of the OCPC which was in force until 2018, the limits of action by legal title was not consistently applied; if the factual basis put forward and proved by the party supported the claim, the courts awarded the claim on the basis of what they considered to be the correct legal title, even if it was not stated at all or was wrongly stated. As the court's decision could thus be based on a legal basis which was not even claimed by the parties, "surprise judgments" were often given.

The elimination of "surprise judgments" was an important objective of the codification process of the CPC, which the legislator wished to achieve by clearly stating in article 342 (3) of the CPC that, with narrow exceptions, the court’ decision may not extend to a right which was not alleged by the party in the procedure. In other words, in cases brought after the entry into force of the CPC, the court in not only bound by the parties’ claims but also by the legal titles alleged by the parties.

This limitation applies throughout the whole proceeding, including the appeal procedures. At the preliminary phase, with the court's intervention, the parties must identify the exact right they wish to enforce and the legal title of their claim, after which the party may only change its claim within a limited range[vi].

Thus, for example, in a decision, the court dismissed the claimant’s appeal, since it was based on the infringement of the provisions on liability for contractual damages, whereas as the legal basis of his action the claimant referred to the liability for non-contractual damages, which constituted an unauthorized modification of the claim[vii]. In another case, the court refused to grant the claimant's request for the deletion of reference data because the claimant had stated as the legal title of his claim the law on the deletion of data supplied in case of default, but the database did not contain any default data concerning the claimant, who was only on the so-called positive list[viii].

While the codification of the principle of the limits of action by legal title may indeed reduce surprise judgements, it is questionable to what extent it will help the enforcement of rights. It is no coincidence that several European legal systems, in particular the German and Swiss procedural law, follow the two-part concept of a cause of action and reject the principle of the limits of action by legal title[ix]. The logic of the German procedural law is that the claimant may declare a specific right or rule of law, but he has no right to limit his action to a specific right by declaring the law, thus limiting the judge's decision[x].

Since, unlike in the German legal system, in Hungary the judge is bound by the legal allegations of the parties, claimants seeking legal remedies should proceed carefully when filing their claims and pay particular attention to the correctness of the legal title of their claim. In fact, even if the facts otherwise support the claimant's claim, the court may not uphold the claim on a different legal title.