Lawyer Koos V. from Roden, who was suspected of bankruptcy fraud, has been acquitted by the Overijssel court. The public prosecutor had demanded a year in prison.
The lawyer has been assisting an entrepreneur running a sole proprietorship for years. That had a dispute with three foundations over the payment of pension contributions and collective bargaining fees. In 2014, the subdistrict court (North Netherlands District Court) ordered him to pay those amounts, totalling €296,984.
Sufficient assets
Meanwhile, the entrepreneur had accumulated a debt with the lawyer’s office (€ 154,596) and with the Tax Administration. The latter concluded a settlement agreement with the entrepreneur stating that the Tax Authorities would not take any further recovery measures. With this, a claim of almost €1.5 million lapsed. According to the lawyer, there were then sufficient assets (including real estate) to satisfy the claims of the foundations and the law firm.
Assignment
The entrepreneur had assigned a claim of €170,984 – which he had against a third party – to the lawyer’s office. The purpose of the assignment was to satisfy the claim the firm had on the entrepreneur. A year later (2018), the entrepreneur went bankrupt. According to the Overijssel District Court, this assignment, as payment of a claim, is not allowed (Article 19 of the Code of Conduct for the Legal Profession and the disciplinary rulings based on it), unless consultation with the dean took place to that end. However, the court was not concerned with the ‘possibly behaviourally reprehensible’ act, but with whether the lawyer could foresee the entrepreneur’s bankruptcy. According to the prosecution, he could; the prosecutor demanded a one-year prison sentence.
Intent
For a paulian act to be proven, it must be established that a suspect had the intention to harm creditors. Conditional intent is sufficient here. This implies that at the time of the charged acts, there must have been a substantial chance of bankruptcy, or that as a result of those acts, a reasonable likelihood of bankruptcy arose. In short: at the time of the acts charged, the entrepreneur’s bankruptcy must have been foreseeable to the lawyer.
Not foreseeable
And that was not the case, the court ruled. The lawyer could not and did not have to foresee that the entrepreneur would continue to refuse to pay the foundations’ claim, which ultimately led to his bankruptcy. Moreover, the lawyer argued without dispute that the entrepreneur was capable of paying the foundations’ claim. Similarly, it has not been established that the lawyer acted with intent to harm creditors. Lawyer Koos V. was acquitted.
