14.09.2020

News

NJORD Lithuania: The right of the creditor to claim damages against the person because of whom the debt has not been recovered in the enforcement proceedings

Under the Lithuanian Code of Civil Procedure, the creditor has the right to bring an action in court against a person whose fault it is that a debt has not been recovered in the enforcement proceedings. On 27 August 2020, the Supreme Court of Lithuania brought some clarity to the application of this norm and explained that it should not be interpreted as establishing an alternative right of the claimant to choose the person from which the debt recovery is easier in the event of longer recovery proceedings from the original debtor or other circumstances impacting the enforcement proceedings.

In the case, a debtor X was indebted to creditor Y, and creditor Y was indebted to other creditors. The bailiff adopted an order under which debtor X had to pay the debt to the bailiff’s escrow account. Debtor X did not transfer the amount of debt to the bailiff's escrow account but paid it directly to creditor Y. Creditor Y, who was indebted to other creditors, did not use the received money to cover his debts. The case addressed the question of whether the debtor X could be held liable for the damage suffered by Y's creditors because the other creditors’ ability to recover the debt from Y had become very difficult.

The case law interpreting the norm of the Lithuanian Code of Civil Procedure allowing debt recovery from the person whose fault it is that the debt has not been recovered started to be established with the decision of the Supreme Court of Lithuania of 13 March 2007. In that case, the Court noted that the possibility to recover the debt from the person whose fault it is that the debt has not been recovered can be implemented only after the enforcement proceedings have ended. In the course of development of the case law in this matter, the Court outlined that the general principles of civil liability shall be observed when implementing this norm. The incurred losses have to appear as the result of the unlawful acts committed, and the damage caused by the person at fault's actions must be substantiated and identified.

In the case of 27 August 2020, the panel of judges ruled that the factual circumstances did not constitute grounds for finding that the recovery from debtor's Y property had become impossible as a result of the actions of debtor X or that the real possibility of recovery from debtor's property had become very difficult. The Court also clarified that the possibility of claiming damages in enforcement proceedings could not be interpreted as an alternative right of the claimant to choose the person from whom the debt recovery is easier in the event of longer recovery proceedings from the original debtor or other circumstances having an impact on the enforcement proceedings. Therefore, it seems that the implementation of the right to get the compensation from the person whose fault it is that the debt has not been recovered in the enforcement proceedings is rather restrictive and can be used only after the recovery of the debt from the original debtor has effectively failed.

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