Client Success before the Court of Appeal in Warsaw – no justification for the claim in the case of debt covered by arrangement proceedings.

The Court of Appeal in Warsaw overturned a security order previously granted to a bank against the law firm’s client. The case concerns a *paulian* action filed by one of Poland’s largest banks against the client. The bank’s debtor is a company undergoing restructuring proceedings. Before the restructuring began, the debtor sold one of its assets to the firm’s client. The bank challenged the transaction, claiming it was a fraudulent transfer made to the detriment of creditors, including the bank, to which the debtor allegedly owes approximately PLN 700,000.

In its lawsuit and motion for security against the client, the bank argued that the fact several creditors appealed the court’s approval of the restructuring plan was evidence of creditor harm. Notably, the bank also stated that it was not a party to the arrangement because it held a registered pledge on goods worth PLN 1.7 million and had not consented to being included in the plan—remaining passive during the restructuring.

The client argued that since the value of the security exceeded the bank’s claim against the debtor, there were sufficient assets to satisfy the bank’s claim, which alone should justify dismissing the lawsuit. In response, the bank claimed that the value of the pledged assets had fallen to PLN 60,000 and that there were no longer sufficient assets to satisfy its claim. However, if the secured portion of the debt dropped to PLN 60,000, then the remaining PLN 640,000 (PLN 700,000 – PLN 60,000) became unsecured—and thus was automatically included in the restructuring plan.

Meanwhile, the restructuring court dismissed all complaints against the approval of the plan, which became final and binding. As a result, the unsecured part of the bank’s claim (PLN 640,000) was covered by the arrangement and reduced by 90%.

Taking the above circumstances into account, the Court of Appeal revoked the security granted to the bank.

The main proceedings are still ongoing, and the court will issue a final judgment in due course. Commenting on the bank’s conduct, it’s worth noting that banks often avoid taking over pledged assets or selling them themselves. It is much easier and faster to exert pressure on the debtor or a third party. However, this case shows how such a strategy can backfire. Once restructuring proceedings are initiated, the bank should first take over and liquidate the collateral; if insufficient, it should then engage in the restructuring process—negotiating better terms or voting against the plan—instead of immediately pursuing third parties (like the law firm’s client), who at the security stage have no opportunity to present evidence of fair value in the transaction.

It should also be noted that if the bank does not exercise its right to take over the pledged asset, any drop in its value—due to aging, depreciation, or other factors—is solely the bank’s risk, not the third party’s.

The firm’s client is represented in both the main and interlocutory proceedings by legal counsel Wojciech Bokina.