GER: BGH on Creditors’ Unfavourable Intentions

Mar 23, 2024 Benn-Ibler Rechtsanwälte

A creditor’s mere hope that their debtor will be able to pay all open debts in the near future is not sufficient to prove the opposite of the debtor’s presumed intention to disadvantage the creditor, according to the German Federal Court of Justice (Bundesgerichtshof, hereinafter BGH). Only facts can rebut the presumption that the creditor was aware of their debtor’s intention to disadvantage the creditor.

In the case at hand, to finance the purchase of shares in a company that owned a property, a creditor had granted the insolvent debtor a loan of EUR 550 000, repayable on 1 March 2015. Interest was to be charged on the loan at 12% per annum if it was not repaid on time. The debtor’s intention was to subdivide the property into residential units and then sell them at a profit. 50% of the profit from the sale was to be shared with the creditor. However, the repayment of the loan was not made in due time. Pressed by the creditor, the debtor subsequently repaid the loan in four instalments.

The debtor’s insolvency administrator has now sued the creditor for the return of the four payments totalling approximately EUR 378,000, because if the debtor’s action, in this case the full repayment of the loan, reduces the ability of the insolvency creditors to satisfy their claims, and the satisfied creditor had been aware of the debtor’s intention to disadvantage the creditor, then the amount paid should be recoverable.

Unfortunately for the liquidator, the lower courts ruled in favour of the creditor. The lender had failed to see that the debtor intended to disadvantage the creditors. The debtor’s intention to disadvantage creditors cannot be inferred from the recognition of solvency alone; the debtor’s intention to disadvantage creditors cannot be inferred from the recognition of solvency alone.

The BGH took a different view. In particular, there was a lack of findings on the intention to disadvantage others and on whether the presumption under the German Insolvency Code applied. Therefore, there had to be a presumption that the debtor had been aware of the intention to disadvantage him.

According to the BGH, if knowledge of the intention to disadvantage creditors is presumed, the opposing party must provide evidence to the contrary. This is the case if the opposing party can convince the court that the debtor will satisfy his other existing and foreseeable creditors in full within the time available. This requires a sufficiently reliable basis for assessment. A mere hope that the other creditors will be satisfied cannot suffice.

BGH IX ZR 112/22 (26 October 2023)