A recent judgment (German FCJ, 10 September 2015, IX ZR 215/13) deals with the question whether the recipient of a payment may be subject to a clawback claim if he returned the received amount to the debtor before the opening of insolvency proceedings.
A debtor had guaranteed the loan liabilities of a German limited liability company. When the bank made demand on the debtor, he transferred money to his wife’s bank account. He also terminated a life insurance contract and required the insurance to pay the amount disbursed into his wife’s account.
His wife then withdrew the amounts received and handed them back to the debtor as cash payments in order to make it more difficult for the creditors to access the debtor’s funds. After insolvency proceedings over the debtor’s assets were opened, the insolvency administrator sued the wife for restitution of the money received.
Clawback claims succeed when creditors have been disadvantaged by the action being challenged.
Here, the defendant argued that creditors had suffered no detriment because the amounts received were returned to the debtor right away. The FCJ, however, held to the contrary. Creditors can seize monies in bank accounts relatively quickly, but cash is not easy to get hold of and easily dissipated.
The underlying facts of the judgment show a ‘creative’ attempt to withdraw assets from the (prospective) insolvency estate by collusive actions between a ‘trustee’ and the debtor.
This FCJ judgment limits debtors attempting to circumvent legitimate claims by creditors, and thus upholds the principle of insolvency proceedings regarding equal treatment of creditors.