Challenging Inventive Creditor Defences!

A recent R3 technical bulletin drew my attention to a Luxemburg case (Van Buggenhout and Van De Mierop v Banque Internationale Á Luxemburg SA, Re Grontimmo SA) which involved the European Court of Justice analysing Article 24 of the EC Insolvency Regulation.

Article 24 provides:

“1. Where an obligation has been honoured in a member state for the benefit of a debtor who is subject to insolvency proceedings opened in another member state, when it should have been honoured for the benefit of the liquidator in those proceedings, the person honouring the obligations shall be deemed to have discharged it if he was unaware of the opening of proceedings.

2. Where such an obligation is honoured before the publication provided for in Article 21 has been effected, the person honouring the obligation shall be presumed, in the absence of proof to the contrary, to have been unaware of the opening of insolvency proceedings; where the obligation is honoured after such publication has effected, the person honouring the obligation shall be presumed, in the absence of proof to the contrary, to have been aware of the opening of proceedings.”

In this case the debtor’s bankers had apparently made payment to creditors of the debtor shortly after insolvency. The liquidators demanded repayment to them (in other words, given they had been appointed prior to the payment being made, the creditor had no right to receive such payment). The bank defended its position based on Article 24. However, the Court decided that the protection extended only to a debtor making payments in good faith, and did not cover payments made at the behest of a debtor to a creditor.

Again, there is perhaps limited application in Scotland, but if an IP ever finds such a defence advanced this might be a useful decision to have a look at!

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