The Hungarian Supreme Court has ruled that in a lawsuit initiated by an insolvent debtor, a creditor’s claim arising after the commencement date of the liquidation cannot be enforced as a set-off claim against the debtor.

Background

After the opening of insolvency proceedings, the debtor suspended its contractor activity under a contracting agreement with the creditor, its customer. The agreement related to the construction of an investment project and the integrated development of a city centre. The liquidator informed the creditor that the debtor would not continue the works due to non-payment of an invoice issued under the contracting agreement, and the creditor terminated the contracting agreement with immediate effect.

The debtor brought a claim against the creditor to pay the contractor’s fee and the creditor asked for a counter-claim to be set-off against the fee. 

Decision

The Hungarian Supreme Court overruled the Court of Appeal which had held that a claim arising after the commencement date of the liquidation, could be settled by set-off. The Supreme Court found that after the beginning of the insolvency proceedings, the pecuniary claim of the creditor could not be enforced as a set-off claim in the lawsuit initiated by the debtor because the creditor's claim did not exist at the beginning of the liquidation.

Hungarian Supreme Court No. Pfv.20455/2023/6

Find out more

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.