JOINT COURT OF APPEAL OF THE NETHERLANDS ANTILLES AND ARUBA RULES ON BANKRUPTCY ISSUES
Claim of post-bankruptcy creditor denied
The case: Instead of waiting for final judgments in several validation proceedings, the trustees in bankruptcy entered in a settlement agreement with several creditors. In case the agreement is left out of consideration, the winding up of the bankrupt estate will result in a surplus of some millions of guilders. All the creditors in the bankruptcy will therefore be paid for 100%. If following the winding up of the bankrupt estate there are still assets remaining, as will be the case with this bankrupt, then these must be used in the first place to pay the debts still existing.
In essence the agreement, insofar as relevant here, amounts to the trustees recognizing initially contested claims and this up to the amount of the balance remaining after the other (recognized) creditors have been paid, as also to the claims instituted by the trustees being withdrawn. The consequence of the agreement is that plaintiff no longer can assert his post-bankruptcy claim for interest: for the money has then disappeared. Therefore, plaintiff initiated proceedings on the merits to get the agreement nullified and asked for preliminary relief, in the sense that the court should order the trustees not to execute the agreement as long as there is no final judgment on the merits. No preliminary relief was granted by the Court in first instance and neither by the Appeal Court in its decision of 8 August 2006.
The core of the argument on which plaintiff has based his claim is that by entering into and executing the settlement agreement of May 26, 2004, the trustees have acted and will act fraudulently [pauliana acting: having to do with legal act(s) non-compulsorily performed by a debtor, as a result whereof his creditors are prejudiced] and wrongfully as against the bankrupt and as against those having a post-bankruptcy claim against the bankrupt, among whom plaintiff. For if that agreement is executed, then following the winding up of the bankrupt estate there will no longer be any surplus remaining with the bankrupt, so that plaintiff will not be able then to enforce his claim for interest, whereas in the other case he would have been able to do so, says plaintiff.
According to the Court in its 8th August 2006 decision (preliminary relief proceedings), the effecting and executing of the agreement are not acts of the bankrupt itself but of its trustees. Such acts are not annullable pursuant to the bankruptcy pauliana nor pursuant to the pauliana of article 3:45 Netherlands Antilles Civil Code. If the execution of the agreement is wrongful as against a party or parties other than plaintiff, plaintiff cannot put this up as a defense. The Court, therefore, leaves that point out of consideration.
The Court also rules that the interests that a bankruptcy trustee ought to promote in a bankruptcy in principle comprise not the interests of an individual creditor in being able to enforce post-bankruptcy claims. The promotion of those interests falls outside the bounds of the instruction to be given to the trustee in article 64 paragraph 1 of the Bankruptcy Order 1931 (“Faillissementsbesluit 1931”), while also otherwise no basis can be found for this in the Bankruptcy Order 1931.
Nevertheless it is not ruled out that a trustee will injure such interests so seriously that there is a question of wrongful acting as against the creditor in question. This will be the case less quickly if the trustee’s mode of procedure must be deemed to be in the interest of a sound administration and a sound winding up of the estate, inasmuch as the promotion of that interest is indeed his instruction.
According to the Court, the avoiding of delay, costs of litigation and litigation risks in the winding up of bankrupt estates is an interest of the joint creditors to be reckoned with. The (settlement) agreement serves that interest.
Plaintiff also argued that the Bankruptcy Order 1931 provided no legal basis for entering into an agreement as the present one. However, the Appeal Court for the moment holds the view that the authority of the trustees to enter into such an agreement, under the supervision of the bankruptcy judge, issues from the instruction given them in article 64 paragraph 1 of said Order.
Moreover, plaintiff put up as a defense that the trustees of the bankrupt erred at the realization of the agreement. Insofar as this must be interpreted as invoking annullability on account of error, plaintiff is not so entitled because he is not a party to the agreement and has not erred.
Also a weighing up of interests is adverse to plaintiff, according to the Court. The avoidance of further delays in the winding up of the bankrupt estates is in the interest of the joint creditors. If in the judicial proceedings on the merits instituted by plaintiff versus the trustees it is determined that the last-mentioned parties have acted wrongfully as against him, he will have the possibility of claiming indemnification from said trustees. To be continued.
Karel Frielink
Attorney (lawyer) / Partner
