Court judgment

Judgment of the Supreme Court on 28 September 2022 in Case No. 24/2022: The bankruptcy estate DV ehf. against the Icelandic state. The bankruptcy estate D filed a lawsuit against Í, claiming rescission of two payments made by a third party to Í, owing to D's debts, totalling 125,946,684 krónur. The payment was, firstly, in the amount of 85,000,000 krónur and secondly, in the amount of 40,946,684 krónur. Request D for an appeal licence was limited to a resolution on rescission of the payment in the amount of 85,000,000 krónur, and the licence was granted on the points on which the licence request was based. In the appeals policy and the counter-review policy, on the other hand, the subject matter was not demarcated in that way, but covered both requirements. With reference to Article 177 (3) of the Civil Procedure Act, No. 91/1991, the authorisation for a review was not considered to be restricted, irrespective of the possible restriction of an appeal to a principal cause on the basis of an appeal licence. Claims for both payments were therefore taken into consideration. In the case, the bankruptcy estate based the fact that the payments in question had significantly impaired D's ability to pay and were therefore rescindable on the basis of Article 134 of Act No. 21/1991 on Bankruptcy etc. It was also based on the fact that the payments had been improperly made in favour of Í at the expense of others, resulting in D's assets not being available for the enforcement of the claims of creditors and therefore rescindable on the basis of Article 141 of the same Act. The Supreme Court judgment stated that when assessing the conditions of rescission under Chapter XX of Act No. 21/1991, the primary consideration would be given to whether, and to what extent, the measure would have affected the financial position of the bankrupt and thus the interests and equality of his creditors. It would then be necessary to show that the value at which the disposal would have accrued would otherwise have accrued to the debtor. The burden of proof that the above circumstances existed rests on the estate of D. The Supreme Court held that the payment of 85,000,000 krónur had fallen outside the time limit of paragraph 1 of Article 134 of Act No. 21/1991, and therefore rescission of the payment on the basis of that article would not be considered. As regards rescission of the payment on the basis of Article 141 of Act No. 21/1991, the court stated that D had not proved that the payment financed by the increased share capital in P had been received by D, nor was it otherwise available or available to the company. It would not have been demonstrated that the payment or its proceeds would have accrued to D had it not been made available in the manner in question. It would not be possible to provide a basis for the improper disposal of the claim which would have resulted in the absence of the assets of D for the satisfaction of the claimants of the company or resulted in the raising of the claims for damage, cf. the resolution of Article 141. As for the payment of 40,946,684 krónur, it was unquestionable that it had been received in the bank account of P, the parent company of D, and subsequently entered as a debt of D to P in the accounts of the latter. A few days later, two payments from the bank account D would have been received into the bank account of the parent company, totalling 40,339,542 krónur. It was founded, whatever the arrangements for the payment, that P had lent the sum to D and D had repaid the largest part of that loan. Thus, the payment of the debt would have reduced D's cash by the same amount, with a corresponding effect on its ability to pay, but it was undisputed that the payment had been made when there were less than six months to the reference date. With reference to the grounds of the appeal, the court confirmed its conclusion that the conditions of paragraph 1 of Article 134 of Act No. 21/1991 were met in order for the payment to be rescinded. It was also confirmed that on the basis of Paragraph 1, Article 142 of Act No. 21/1991, the Insolvency Court would be required to refund to the bankruptcy estate D funds corresponding to a payment to P or 40,339,542 krónur, provided that no higher amount was paid by DV ehf.