Our Dispute Resolution team represented a transportation company in a dispute regarding the recognition of set-off in the Court of Appeal of Lithuania.
Recovery proceedings were initiated against our client on the basis of a writ of execution submitted to the bailiff. The writ of execution had been issued following the approval of a settlement agreement between the client and the creditor (a bankrupt company). The client did not agree with the recovery and argued that his obligation arising from the settlement agreement had ended with a set-off of reciprocal monetary claims. The client applied to the court for recognition that his obligation under the settlement agreement had ended by a set-off.
The court of first instance dismissed the client’s claim on the ground that the obligations of both parties were not equivalent in terms of enforceability and certainty. The court also noted that the obligation of an insolvent company cannot be set off.
The Court of Appeal dismissed the first decision and upheld the claim. The Court of Appeal found that at the time of the set-off the defendant did not contest the client‘s claim, and the set-off itself had been made before the defendant’s insolvency proceedings were initiated. The Court of Appeal also found that both parties‘ claims were to be considered equivalent in terms of enforceability and certainty, as well as recognized that the client‘s obligation had ended by a set-off.
On the basis of this decision, the recovery proceedings against our client were terminated, the enforcement of the previous decision was reversed and, finally, the litigation costs were reimbursed.