November 2023

Decisions of the Athens Single-Member Court of First Instance on the Suspension of the Enforcement Procedure of approximately EUR 3.5 million

Recently published were the 6467/2023 and 6468/2023 decisions of the Athens Court of First Instance, which suspended the enforcement proceedings against our clients - borrowing companies, as well as allegedly co-responsible natural persons - guarantors, for amounts of 1.203.258,58€ and 2.230.674,72€ respectively. In particular, the suspension of execution, which was accelerated on the basis of notified amounts, in satisfaction of an alleged loan claim by a Servicer, was ordered. The judge presumed the validity of the main remedy of the borrowing companies, namely their opposition under Article 933 of the CCP, and in particular the relevant ground of opposition concerning the improper acceleration of enforcement sheets against the abovementioned applicant companies. More specifically, it was held that the Servicer of the outstanding debt had abused its right to initiate enforcement by activating enforceable instruments which had been suspended by agreement of the parties under debt settlement agreements. The above because the enforcement procedure in question was accelerated even though:

(a) there was an obligation to renegotiate the payment of the balloon instalment of 2,000.000 at the expiry date of the relevant agreements, with a view to extending their duration and continuing to pay the debt in instalments (the parties' true intention to renegotiate was mainly based on the following facts: (i) an e-mail sent by the opposing companies, through their attorney, on the day the arrangement was drawn up, pointing out the impossibility of paying the balloon payment at the time of its expiry; (ii) a letter from the lender sent at an unsolicited time confirming the need to review the arrangement agreement),

(b) there were attempts by the borrowing companies to reach a viable settlement of the debt and offer to pay a high amount of money to avoid enforcement action, without any substantial continuation of negotiations by the defendant lender,

(c) the claim was fully secured by the registration of first-class mortgages on the debtor companies' real estate and the assignment to the lender of a large amount of the debtors' rent claims.

The passage in question in the judgments at issue is worded as follows: "Notwithstanding this and although (a) the first applicant had duly and punctually fulfilled its obligations under the private settlement agreement up to October 2021, (b) the first applicant and {..... } were willing to pay the substantial amount of ...€ in one lump sum in order to split the balance of their debts into instalments, c) under the lease receivable from {....}, an amount of ... (d) the claims under the loan agreement were secured by the registration of a mortgage on properties of considerable value, the defendant, which became involved in the management of the claim under the contract in question in December 2021, very soon submitted the above proposal to the first applicant, although it knew in advance that this proposal was in fact unfeasible and impossible to be implemented by the first applicant - debtor {... } Under the above circumstances and taking into account the consequences of the accelerated enforcement for the applicants (serious risk of termination of other loan agreements of the applicant company with other credit institutions, possible seizure of bank accounts, lack of liquidity for the applicant company and rapid deterioration of the financial situation of the applicants and the natural persons), it is likely that the service of the charge of payment is abusive because it manifestly exceeds the principles of good faith, morality and the socio-economic purpose of the right'.

In fact, what is special about this case is that before the issuance of these decisions, a temporary injunction prohibiting enforcement actions had been issued, which was violated by the Servicer by proceeding with the seizure of real estate of the borrowers. To this end, a criminal complaint has already been lodged against the relevant Servicer officials for accessory to misconduct in office on the part of the bailiff.