When a Debt Receipt Cannot Be Treated as a Simulated Transaction

On 22 June 2026, the Joint Chamber of the Civil Court of Cassation of the Supreme Court clarified, in case No. 523/13382/21, the limits of applying Article 235 of the Civil Code of Ukraine to a debt receipt. The dispute concerned two documents executed on the same day. One recorded the receipt of UAH 170,000 as a loan and set out a repayment schedule; the other imposed an obligation to transfer a car after the same amount had been paid in full. When the sale did not take place, the creditor sought repayment, while the debtor maintained that no money had been received and that the receipt merely secured the prospective purchase of the car.

Why the courts reached opposite conclusions

The first-instance court allowed the debt recovery claim. The receipt specified the amount, date and repayment procedure and expressly acknowledged that the money had been borrowed. The defendant produced no evidence that the loan was unfunded or that another agreement displaced the written document.

The Odesa Court of Appeal considered the two receipts together and treated them as an agreement for the future sale of the car by instalments. It relied on the identical date, amount and performance deadline, as well as the debtor’s use and subsequent return of the car, and dismissed the debt claim while declaring the loan invalid.

The Supreme Court set aside the appellate judgment and reinstated the first-instance decision. The Joint Chamber stressed that another economic or proprietary connection between the parties is not the same as simulation. Article 235 requires proof that both parties shared an intention to execute one transaction outwardly in order to conceal another. The agreement concerning the car had not been concealed: it was expressly recorded in a separate receipt. An openly documented obligation could not simultaneously be treated as a concealed transaction without further legal and evidential justification.

What constitutes a simulated transaction

Under Article 235, a simulated transaction is executed to conceal another transaction that the parties actually intended to conclude. Its defining feature is a deliberate discrepancy between the parties’ outward declaration and their shared internal intention: they document one transaction while seeking the legal consequences of another, for example to circumvent a prohibition, special procedure or moratorium.

It is therefore insufficient to show that documents are connected, were executed simultaneously or specify the same amount. The claimant must prove the ostensible and concealed transactions, the parties’ shared intention to disguise their relationship and the consequences they actually sought. Open use of lawful arrangements — a loan, an instalment sale or novation — does not justify applying Article 235.

The procedural consequence also matters. A simulated transaction is not automatically invalid. Once simulation is established, the court must identify the transaction that the parties actually concluded and apply the rules governing it. Invalidity becomes a separate issue only if the concealed transaction itself contravenes the law.

A receipt as evidence that money was transferred

A loan is a real contract and is concluded when the funds are transferred. Under the Supreme Court’s established case law, a receipt in which the debtor acknowledges receiving a specific amount as a loan and undertakes to repay it proves both the conclusion of the agreement and the transfer of funds. This approach is reflected, among other decisions, in the judgment of 7 October 2022 in case No. 686/16244/21.

The document’s title is not decisive. A court examines its substance, wording, connection with other evidence and the parties’ conduct. A document need not be headed “loan agreement” if it identifies who received what amount from whom, on what terms, and when it must be repaid.

A bare assertion that no money was transferred does not rebut a written receipt. The debtor must prove that the loan was unfunded with admissible and reliable evidence. An allegation of a different oral arrangement, unsupported by correspondence, payment records, audio recordings or a combination of objective circumstances, will generally not outweigh an express written acknowledgment that the funds were received.

When a debt arising under another contract becomes a loan

Simulation must be distinguished from novation. Article 1053 of the Civil Code permits the parties to replace a debt arising from a sale, lease or another legal basis with a loan obligation. In its judgment of 26 September 2018 in case No. 483/1953/16-c, the Supreme Court held that expenses for the repair and maintenance of a vessel could be replaced by a loan obligation. In such circumstances, the receipt does not conceal the earlier relationship; it records a new legal arrangement expressly permitted by law.

Possession of the original document is also significant. In case No. 544/174/17, the Supreme Court applied the presumption under Article 545: possession of the debt instrument by the debtor may confirm performance, whereas its retention by the creditor indicates non-performance unless the contrary is proved.

Practical significance of the Supreme Court’s position

The ruling in case No. 523/13382/21 does not prevent a court from finding that a document called a “receipt” in fact concerns a sale, payment security or another obligation. It requires the court to select the correct legal characterisation: determine the content of each document, whether funds were transferred, the sequence of the parties’ conduct and the function of their connected arrangements, and only then decide whether the relationship involved a loan, novation, an agreement for a future sale or deliberate concealment of one transaction behind another.

For a creditor, this means that a receipt should clearly state that the funds were received, their amount and currency, the repayment deadline and procedure, the parties’ identifying details and any connection with other agreements. For a debtor disputing the loan, an alternative account of events is insufficient; evidence of the parties’ shared arrangement and the document’s true function will be decisive.

The Supreme Court’s central conclusion is that a connection between several receipts does not by itself establish simulation. Article 235 applies where the parties’ deliberate concealment of one transaction behind another has been proved, not whenever a debt document forms part of a more complex proprietary relationship.

Sources: Judgment of the Joint Chamber of the Civil Court of Cassation of the Supreme Court dated 22 June 2026 in case No. 523/13382/21; Supreme Court judgments in cases Nos. 523/2697/21, 686/16244/21, 483/1953/16-c and 544/174/17; Olha Rozghon, “Debt Receipt and Simulated Transaction: The Limits of Applying Article 235 of the Civil Code of Ukraine.”