For the Court of Cassation (ruling of the Commercial Chamber of 23 September 2020 n°18-23221 and n°19-12542), The creditor’s liability is only limited by Article L650-1 of the French Commercial Code when granting a credit. This text does not apply to the withdrawal or termination of credit.
In the first file, a bank had granted a loan to the Company CHERY BURO. Two persons had personally guaranteed this loan.
BURO CHERY BURO was placed in receivership and then in liquidation.
The bank then summoned the guarantors to obtain payment of the sums owed by the Company.
The guarantors claimed that the bank was liable for the breach of credit.
The NANCY Court of Appeal (25 July 2018) did not accept the bank’s liability for the breach of the credit agreement. The Court of Appeal ordered the guarantors to pay an amount of €94,436.29.
The Court of Appeal ruled that Article L650-1 of the Commercial Code limited the liability of creditors in the event of the withdrawal of a loan or credit.
The guarantors appealed.
In the second file, an action for wrongful termination of credit was initiated by the liquidator of a company and its shareholder who had seen two banks terminate the bank loans granted to the company. The company was then placed in judicial liquidation.
The Bourges Court of Appeal (22 November 2018) dismissed the banks’ liability on the basis of Article L650-1 of the French Commercial Code. For the Court of Appeal, this article prevented banks from being held liable.
The liquidator and the shareholder appealed.
The question raised by these appeals was to determine whether Article L650-1 of the Commercial Code also applied to the termination of withdrawal of a credit.
Article L650-1 of the French commercial code provides that :
“Creditors may not be held liable for losses suffered as a result of the credit facilities granted, except in cases of fraud, gross interference in the management of the debtor or if the guarantees taken in return for the credit facilities are disproportionate to them.
If a creditor’s liability is recognized, the guarantees taken in return for its assistance are null and void.”
This text therefore introduced protection for creditors in the context of bankruptcy proceedings. Creditors cannot be held liable because of the credit granted.
Did the wording of Article L650-1 of the Commercial Code also limit the liability of creditors for withdrawing their loans?
The Court of Cassation ruled that « as Article L. 650-1 of the Commercial Code only concern the liability of the creditor when it is sought on account of the loans he has granted, only the granting of such loans, and not their withdrawal, can give rise to the application of this text, the Court of Appeal has, by misapplication, infringed it. »
The Court of Cassation therefore has limited the scope of application of Article L650-1 of the Commercial Code.
This text limits liability only when a credit is granted and not when it’s withdrawn.
A bank which abruptly terminates a credit could therefore be held liable without being able to invoke the protection of Article L650-1 of the Commercial Code.
This clarification by the Court of Cassation thus opens up the possibility for companies in insolvency, receivership or liquidation to bring an action for liability against a creditor, potentially a bank, which has abruptly terminated a loan.
The guarantors, and in particular the guarantors, will also be able to invoke this liability if a bank abruptly breaks its credit.
By Olivier VIBERT, IFL AVOCATS