The end of the receivership is a critical phase. It involves the custodian's liability and raises complex legal issues. Anticipating these risks can avoid costly litigation.
The various reasons for ending the receivership
Natural expiry: dispute resolution
The receivership ends when the dispute is "over" (article 1956 of the Civil Code). There are two possible situations:
- A final court decision resolves the dispute
- Out-of-court settlement puts an end to the dispute
As the item is no longer in dispute, the sequestration loses its raison d'être. The interim relief judge may order the release of the sequestration once the dispute has been resolved.
Cancellation by agreement of the parties
The parties may terminate the receivership even if the proceedings continue. This procedure is not a matter of public policy and remains at their discretion.
Conventional sequestration obliges the depositary to return the item to the person designated by the judge, even if the depositary is in receivership (Com. 13 November 2001).
Obligations of the receiver at the end of his mission
The receiver must ensure that his assignment is completed in accordance with the conditions laid down. If he fails to do so, he is liable.
In a notarised promise of sale, the notary who holds the immobilisation indemnity may only return it after verifying that the suspensive conditions have not been fulfilled. The Court of Cassation has ruled against a notary who has returned the sum without such verification (Civ. 1re, 13 November 1997).
Settlement of accounts and reporting
Ending the receivership involves a number of operations:
- Return of the confiscated property, including an examination of repairs and damage
- Settlement of the management account (rents collected, charges paid)
- Payment of the receiver's fees
- Discharge and discharge from liability
If the property produces fruits, the depositary is liable for them from the date of his formal notice (Civ. 1re, 7 March 1979).
Judicial release
Release requests
There are three situations in which legal release is required:
- The conditions of the receivership are no longer met
- The escrow agreement has expired
- The property is at risk of deteriorating
The application is made to the court that ordered the sequestration.
Applicable procedure
The procedure requires the presence of all interested parties, including the receiver.
The judges of the court of first instance have full discretion to decide whether to uphold or release (Civ. 1re, 31 March 1971).
A court of appeal may order the total lifting of a sequestration order even if only partial lifting is requested (Civ. 1re, 20 May 2009).
Effect on interest on escrowed sums
The court-appointed receiver is liable for the capital of the sum deposited, but not for interest.
A receivership bank appointed by court order is not liable for interest from the date of the receivership (Com. 29 April 1997).
Conventional sequestration may be governed differently depending on how the contract is interpreted (Com. 3 June 2003).
The receiver's liability
Legal foundations of liability
The liability of the receiver varies according to its nature:
- Contractual escrow: contractual liability (article 1231-2 of the Civil Code)
- Legal or judicial sequestration: liability in tort (Civ. 1re, 14 February 2018)
The receiver is not liable in the event of force majeure, unless he has been given formal notice to return the goods (article 1929 of the Civil Code).
Cases where liability is triggered
Loss of or damage to property
The sequestrator must prove that he has taken "the same care with the item as he would with items belonging to him" (article 1927 of the Civil Code).
This liability is assessed according to "the nature of the property and the scope of his mission" (Civ. 1re, 21 February 1995).
The receiver is liable for the poor conservation of the wine entrusted to him if he does not prove that the goods were not of fair quality at the time of delivery (Civ. 1re, 15 May 2008).
Incorrect return of funds
The receiver must verify the legitimate recipients of the funds.
A barrister, who was the court-appointed receiver of sums from a company set up by two spouses, was convicted of having handed over the funds to the husband without the agreement of the ex-wife (Civ. 1re, 7 May 2002).
Failure to meet management obligations
The receiver of the sale price of a business must inform the registered creditors of the transfer. Failure to do so gives rise to liability in tort (Com. 28 April 2004).
A receiver who releases funds without complying with the conditions set out in the authenticated deed commits culpable negligence (Civ. 1re, 20 January 2021).
Impact of insolvency proceedings affecting the receiver
Collective proceedings against the receiver modify his obligations.
A conventional bank in receivership cannot be "discharged" from its mission. The return of funds requires a declaration of claim in the collective proceedings (Com. 4 March 1997).
A receiver in compulsory liquidation is still obliged to return the goods in dispute to the designated person, without any competition between his creditors (Com. 23 September 2020).
Special liability of lawyers drafting documents
Lawyers who draw up deeds have a duty to advise all parties.
A lawyer who drew up a deed of sale was held liable for failing to draw the purchaser's attention to the risks of appointing a receiver, even though he was aware that an investigation had been opened into the vendor company (Civ. 1re, 20 March 1987).
A lawyer who draws up a deed creating a sequestration obligation must take all measures to ensure its effectiveness (Civ. 1re, 8 July 1994).
Ending a receivership requires vigilance and rigour. Errors and negligence expose the depositary to liability. To prevent these legal risks, our firm offers you personalised support. Contact us to protect your interests.
Sources
- Civil Code, articles 1927, 1929, 1956, 1231-2
- Commercial Code, article L. 145-29
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