Alert - Judgment No. 3976 of 10 March 2023 Court of Rome

Grimaldi Alliance

Knowledge Management

Mar 23 2023

I would like to point out the recent judgment no. 3976 filed on 10/03/2023 (rg no. 13405/2020) whereby the Ordinary Court of Rome – X civil section rejected in its entirety the request by a company against which a bankruptcy order (hereinafter referred to as “Bankruptcy”) had been made for the payment of substantial sums to a company controlled by the Ministry of Economy and Finance, which I assisted, as Principal, by way of consideration for the services under the relevant tender contract, plus default interest pursuant to Legislative Decree no. 231/2002.

First of all, the objection raised ex adverso, contested by our defence, concerning the alleged impossibility for my client, as Principal, to oppose to the Receivership the non-performance of the remuneration obligations of the company in bonis, with specific regard to the contract in question, was rejected.

In this regard, in upholding our defence, it was held that “bankruptcy does not entail a subjective change of the bankrupt, let alone its extinction, but rather represents a mode of administration entrusted to bodies responsible for managing the crisis and realising the aims that the bankruptcy law proposes. Among these, the main ones are the increase of the assets aimed at satisfying the creditors’ claims and the safeguarding of existing assets. It follows that, albeit with some exceptions, pending bankruptcy proceedings, the bankrupt, in the person of the trustee, remains subject to the unexhausted relationships that arose prior to the filing. With respect to public contracts, the rule of continuity of legal relationships must be balanced against the nature of the activity. Firstly, Art 81(2) of the bankruptcy law specifies that, in the event of the bankruptcy of the contractor, if its subjective quality was a determining reason for the contract, the contract is dissolved, unless the principal nevertheless consents to the continuation of the relationship without prejudice to the rules on public works contracts. In this sense, there is no doubt that, in the context of a public tender, where the other party is an RTI, its qualities are decisive for the award. However, the Public Contracts Code itself, as amended in 2019 and applicable to the case at hand, is concerned with the continuity of the service, providing in Article 104 that the judge, in the judgment declaring bankruptcy, may authorise the receiver to temporarily exercise the undertaking if serious harm may result from the interruption. Moreover, the aforementioned provision states that, during the provisional exercise, pending contracts shall continue unless the liquidator intends to suspend or dissolve them.”

That being said, in the present case, it was found that “the taking over of the bankruptcy for a limited period of time does not exclude liability for the obligations arising from the pending relationships of the company in bonis both because of the aforementioned principle of continuity and because the continuation of the company’s activity appears to have been the subject of the specific will of the receiver and judicial authorisation and the same acted to be excluded only following the taking over of the new agent. This circumstance, which testifies to an effective continuation of the contractual services, makes it possible to further emphasise that, with reference to the employment relationships existing at the date of the declaration of bankruptcy, the regulatory system, in the absence of a specific provision, is oriented towards considering that the employment relationships continue with the company as such. Article 2119, paragraph 2, of the Civil Code, which provides that the bankruptcy of the entrepreneur does not constitute just cause for termination of the employment contract precisely by virtue of the survival of the entity at the declaration of bankruptcy, an institution appointed to manage it for liquidation purposes. Moreover, as pointed out by case law (see Cass. Civ. Sez. I, no. 18779/2019), even if the trustee does not opt for the provisional exercise of the company pursuant to Article 104 of the Bankruptcy Law, the legal asset of the company, understood as the set of material and legal elements organised for the purpose of running a business, remains because the mere cessation of the activity, for a more or less long period, does not in itself imply the disappearance of the company organisation”.

On the basis of these premises, therefore, the Court held that the Trustee in Bankruptcy was identifiable as the debtor of the salary, contribution and social security obligations towards the former employees, as sustained by the defence of the Defendant assisted by me.

In view of the legal framework referred to in Article 1676 of the Civil Code and Article 29 of Legislative Decree 276/2003, considered applicable to the case at hand, the Court also found that the defendant’s self-defence and good faith behaviour as a precautionary measure was legitimate, by suspending the flow of payments to the bankruptcy in the face of the bankruptcy’s failure to fulfil its obligations in respect of the former employees’ wages, contributions and social security contributions.

In this perspective, it was considered that the aforesaid breach by the performing contractor first and by the bankruptcy afterwards constituted, according to the will expressed by the parties, a hypothesis of serious breach. Moreover, although the client was entitled to proceed with payment by deducting the amounts paid from the amounts due to the other party, this right was not exercisable in practice since, as the Court correctly ascertained, it was apparent from the documents produced that there had been numerous unsuccessful requests for clarification as to the real extent of the unpaid salary and social security credits to the employees, nor had the plaintiff in its defence made this fact known or justified its failure to reply. The suspension of payments by the Principal was therefore not only lawful, but was also deemed necessary by the Judge in view of the concrete risk of claims against the Principal and the need to use public resources in addition to the amounts determined in the contract.

Country

Italy

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