creditor protection | In Principle

In a recent resolution, the Supreme Court of Poland addressed the legal situation of a creditor bringing a fraudulent transfer claim against a third party, compared to other creditors of the third party.

The effectiveness of pursuing claims for damages for a tort (a wrongful act) often depends on whether the injured party brings an action against a sufficiently wide range of defendants who can be held jointly and severally liable for damages. This range includes those who can be found to have knowingly assisted in causing injury.

In its judgment of 10 February 2021 (case no. I CSKP 33/21), the Supreme Court of Poland considered a cassation appeal by a claimant seeking to prove that it was wronged as a creditor in a fraudulent transfer claim against a third party (governed by Art. 527 and following of the Civil Code). The Supreme Court raised important issues in this debatable decision from the point of view of the safety of participants in commerce, including creditors. Among other things, the court pointed out that the assessment of whether a creditor was harmed within the meaning of Art. 527 §2 is affected by whether the consideration obtained by the debtor was used to satisfy other creditors.

A claim to set aside fraudulent transfers to a third party (Art. 527 et seq. of the Civil Code) must precisely identify both the parties and the subject matter in the demand for relief set forth in the statement of claim. It is a mistake to assume that the trial court will seek out the missing elements in the justification for the statement of claim.

From August 2019, the fee for an application for interim relief to secure a monetary claim (e.g. for payment of a specific sum of money) made before a legal action is brought to court has increased significantly. Instead of PLN 100, the fee is equal to one-fourth of the fee that would be payable in a suit on the claim (maximum PLN 50,000). Under certain conditions, the fee for an application for interim relief will be set off against the fee on the document instituting the principal proceeding (statement of claim). However, the provisions allowing for this possibility may give rise to problems of interpretation, and thus the need to incur additional costs.

During a crisis, the risk of running a business increases, and not just for “natural” reasons. There is also a growing number of unlawful behaviours by businesses, from incurring obligations they cannot honour to evading their existing liabilities. Too many businesses treat hard times as a great opportunity to shift the risk of their operations to counterparties who aren’t as “clever.”

A creditor has a chance to obtain satisfaction through a fraudulent transfer claim even if the debtor disposed of its assets before the claim arose. The intention to injure future creditors is demonstrated by the foreseeability of insolvency, and thus the debtor’s expectation of becoming insolvent with respect to potential creditors.

The possibility of seeking damages from a person who has knowingly benefited from a wrong done to another may offer the victim the only practical chance of obtaining even partial recompense. Often the immediate wrongdoer is insolvent, while someone else gains from the unlawful act.

If execution or bankruptcy proceedings are commenced against the owner of leased or tenanted real estate, the lease or tenancy contract may be terminated early by the administrator or trustee. Rent paid in advance may then be deemed ineffective. How should lessees and tenants protect themselves when entering into a contract with an owner in poor financial condition?

The Supreme Court has held that in exceptional cases, the creditor’s conduct in enforcement proceedings will constitute an abuse of law justifying denial of the creditor’s right to execute an order. Therefore, the creditor’s inappropriate attitude may make it impossible to enforce a claim awarded by a final court decision.

Liability for money laundering in the case of persons assisting in actions taken by dishonest debtors to the detriment of creditors.

Less than two weeks ago the Act of 13 April 2018 Amending the Civil Code and Certain Other Acts reached the desk of the President of Poland. The act has become the subject of debate, as it calls for shortening of the general limitations periods for claims and modifies the ability of enterprises to pursue claims against consumers after the limitations period expires. There is also a change in execution procedure affecting the ability to conduct electronic attachment of the debtor’s bank account.