A Dutch Court of Appeal recently upheld a lower court’s decision that a liquidator has the right to access data concerning the administration of a bankrupt company, the data of which are kept by a third party. It also held that this right, however, does not imply that the third party must provide the data in an orderly manner without being adequately compensated for it.
In this case, the bankrupt company stored its administration documents and data in the cloud of a service provider that also provided data structuring services. The service provider terminated its services for the company when payments became overdue and the company went bankrupt. Because the service contract between the bankrupt company and the service provider had been terminated, the liquidator could not access any data related to the administration of the bankrupt company. The service provider proposed a solution to the liquidator, suggesting the latter to re-engage the service provider so it could re-start its services including re-installing the computing systems, and requested the liquidator to pay adequate compensation for this service. The liquidator refused to accept the service provider’s proposal and brought the case before court. The liquidator basically sought the following: (i) unrestricted access to the bankrupt company’s administration data which is kept by the third party service provider; (ii) that those data must be provided in an orderly manner; and (iii) the third party service provider must not be entitled to compensation from the liquidator.
The liquidator based its claim on the Bankruptcy Act which lays down far-reaching rights for a liquidator when those rights concern the access to a bankrupt undertaking’s administration documents and data. The Court of Appeal recognised this access right but held that even though the liquidator is entitled to access the administration data, this right was limited to the wording of the Act’s provision.
The Court of Appeal noted that the bankrupt company’s data could only be sufficiently structured through the software of the third party service provider. Without this software’s performance of data structuring, the company’s data as such would be comparable to shredded telephone books and thus rather useless to the liquidator. Providing the liquidator with the administration data in an orderly manner would require the service provider’s time and effort. The Court held that if the liquidator wants the administration data in an orderly manner, then the liquidator must pay for it, meaning that the service provider is entitled to be compensated on a commercial basis for its services. The liquidator’s motion to have the service provider submit the administration data in an orderly manner without compensation to the service provider was therefore dismissed.
This decision, in bankruptcy situations, could affect the position of software providers when compared to that of other creditors. Most software agreements contain clauses which allow for the contract’s termination in the event of nonpayment or bankruptcy. However, termination of a software provider’s services, where a company depends on these services for its administration, could cause continuity issues. A lot has been said in this respect concerning the termination of services by cloud computing service providers. But what makes the outcome of this case’s decision interesting is that the service provider was able to be in an advantageous position in a bankruptcy case because the bankrupt company depended on the service provider’s software. The service provider was therefore compensated for the services it rendered to the liquidator because it had created an indispensable position for itself.
Court of Appeal ‘s-Hertogenbosch, 26 March 2013, LJN-number BZ5770