The decision of the Supreme Court of 20 April 2017, No. 9983 confirms that the bank can be held jointly liable with the directors towards the company, on different grounds from those making the bank accountable to individual creditors

The case The bankruptcy receiver of a company claimed damages against the company’s directors and some banks based on their joint liability for the formers’ reckless resort to credit lines at a time when the company was insolvent, with respect to the ensuing increase in the indebtedness of the company. The Court of Monza ruled that the receiver was not entitled to claim damages against the bank on these grounds and rejected also the claim against the directors. The Court of Appeals of Milan confirmed the decision, arguing that the claim against the banks was not pertaining to the bankruptcy estate, but rather to individual creditors. The Court noted in particular that banks cannot simultaneously be creditors and liable for damages as a consequence of loans made in favour of the company.

The issue The case law of the Court of Cassation is steady in ruling (since the decision of the Joint Chambers of 28 March 2006, No. 7029) that the bank can be held liable towards individual creditors, on the grounds that continuing to finance a company, being aware that it is insolvent, can deceive the suppliers of the company inducing them to rely on an apparent solvency and thus to continue their trade relationship. According to the Supreme Court, this is an action (so-called “abusive granting of credit”) that is based on each individual creditor position and, therefore, does not pertain to the company, nor is the receiver entitled to bring it in the interest of the generality of creditors. Art. 218 IBL provides for a criminal offense by directors who continued to resort to credit, concealing the state of insolvency of the company (so-called “abusive resort to credit”). The issue is therefore whether the bank could be jointly liable with the directors for the correspondent claim in tort for damages.

The decision of the Court The Court of Cassation confirms a previous decision of 1 June 2010, No. 13413 and distinguishes the different grounds regarding abusive granting of credit and abusive resort to credit: the former is a fault by the bank to the detriment of individual creditors, whereas the latter is a fault by the directors to the detriment of the company, of which the bank could be held jointly liable based on general principles of the law of tort. The Court of Cassation reversed the decisions of the local Court and of the Court of Appeals, which wrongly qualified the action brought by the receiver as based on abusive granting of credit instead of abusive resort to credit. Damages shall be calculated based on criteria which are well defined in the case law of the Court of Cassation with respect to claims against directors, i.e. on the basis of a precise causal link or, when this is not possible, also according to equitable criteria including that of the decrease of the net assets value of the company considering the time of the offence and the time of the declaration of bankruptcy.

Commentary Bankruptcy receivers’ chances to recover damages from banks seem to be significantly increased based on the grounds now reaffirmed by the Court of Cassation. As it is well known, until the IBL was amended in 2005, receivers very often resorted to claw-black actions against banks in order to recover assets for the benefit of creditors. Faced with the wide limitations and exemptions now in place with respect to this traditional tool available to them, receivers now tend to resort instead to other actions such as that based on abusive direction and coordination by a holding companies or individuals. The action for joint liability of the bank with the directors for abusive resort to credit can be brought by the receiver, acting on behalf of the company and not of the creditors, thus staying clear of limitations regarding the action for abusive granting of credit. In order to correctly file this action, the receiver needs to precisely indicate the relevant grounds at the outset, because shifting from one action to the other is not allowed during the proceeding (this was indeed the case considered by the above-mentioned decision of the Supreme Court No. 13413 of 2010). Evidence of the grounds for the action can be found in a criminal judgment convicting the directors and the bank’s officer for the corresponding bankruptcy crime (as it was in the case of the decision commented here), otherwise the receiver shall meet its own burden of proof according to general procedural rules.