Challenges of Representation and Distribution
Edited by Jenny Steele and Willem H. van Boom
Chapter 9: Dealing with Damages in Insolvency: The Insolvency Administrator’s Collective Claim for Damages versus Individual Claims of Creditors
9. Dealing with damages in insolvency: the insolvency administrator’s collective claim for damages versus individual claims of creditors Frank M.J. Verstijlen INTRODUCTION 1. Insolvency law is – at least in part – aimed at distribution.1 In order to prevent the chaos of individual creditors taking recourse against separate assets of the debtor, insolvency law provides for a collective procedure through which the proceeds of the entire estate of the debtor are distributed among the creditors according to the order of their priority.2 Liability law is aimed at compensation of damage caused by the wrongful act of an injuring party. In principle the victim is put in the position where he would have been, had the wrongful act not taken place. Liability law has a role to play in insolvency situations. This is the case when the wrongful act causes damage to the creditors. Particular problems arise when the debtor himself does not have a claim against the wrongdoer, e.g. when he himself has initiated the wrongful act. In these cases the insolvency administrator – at least in some legal systems – may have a claim against the wrongdoer regarding his duty to represent the interests of the creditors. In these cases the distributional principles of insolvency law and liability law may collide. When the recovered amount flows into the insolvency estate and is distributed to the creditors according to the order of their priority, the result may be that some creditors receive more than the amount of their actual damage, e.g. because a creditor...
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