THE BOTTOM LINE
- A Dutch court has blocked bankruptcy curators from using estate funds to sue a bank and a former director on behalf of a select group of 118 creditors.
- The court ruled that a curator’s primary duty is to the bankruptcy estate as a whole (i.e., all creditors collectively), and actions that primarily benefit a sub-group at the estate’s risk are not permissible.
- This decision reinforces a key limitation on insolvency litigation in the Netherlands, pushing creditors with specific claims against third parties to pursue them individually or through other funding mechanisms, rather than through the curator.
THE DETAILS
The curators in the bankruptcy of a bankrupt company devised a plan to recover damages for a specific group of 118 creditors. They argued that Rabobank and a director had wrongfully continued the company’s operations while it was insolvent, causing these creditors to incur €2.4 million in unrecoverable claims. The proposed structure was novel: the curators would sue based on a mandate from these 118 creditors. The bankruptcy estate would front the litigation costs, estimated at over €150,000. If successful, the estate would be reimbursed for its costs and receive a success fee, while the net proceeds would be paid directly to the 118 creditors, bypassing the general distribution to all creditors. To proceed, the curators needed authorization from the court.
The District Court of Midden-Nederland upheld the supervisory judge’s refusal to grant this authorization. The core of the decision rests on the curator’s role under Dutch law. The court referenced established Supreme Court precedent (Peeters/Bannenberg and Butterman/Rabobank), which holds that a curator’s authority to act is for the benefit of the joint creditors. Acting on behalf of a limited, self-selected group falls outside the curator’s statutory mandate, even if they have an explicit agreement (a “lastgeving” or mandate) to do so. The court deemed the legal risk of the curators’ claim being dismissed on these grounds to be “high.”
From a commercial standpoint, the court performed a stark risk-reward analysis for the bankruptcy estate. It concluded that the arrangement exposed the estate to significant downside risk—fronting substantial legal fees and facing a potential adverse costs order if the case failed. The potential upside for the estate was limited to a success fee, which was uncertain and dependent on a full recovery. The court decided that this was not a prudent use of the estate’s limited funds, especially as it would further delay the conclusion of a bankruptcy that has been ongoing since 2017. The interests of the estate as a whole—achieving a swift and certain conclusion—were prioritized over a speculative lawsuit for a select group.
SOURCE
Rechtbank Midden-Nederland
