Lawyer's liability. Inadequate advising. Conditions for protection of the buyer of tangible assets towards the seller's creditors.
Supreme Court judgment 18 November 2021, HR-2021-2248-A, (case no. 21-046524SIV-HRET), civil case, appeal against judgment.
Aurstad Maskinutleige AS (Counsel Hallgrim Fagervold) v. Advokatfirma DLA Piper Norway DA (Counsel Sven Eriksrud), Zurich Insurance Plc, Norway Branch (Counsel John Gjermund Flatabø)
Justices: Webster, Normann, Noer, Arntzen, Høgetveit Berg
In connection with the reorganisation of a group in the construction industry, parts of the machinery were sold from one group company to another, and leased back to the seller company. The machines were not moved. The seller company went bankrupt shortly after the sale. The buyer company entered into a settlement with the bankruptcy estate and demanded the loss as a result of the settlement compensated by the law firm that had advised in the transaction. Unlike the Court of Appeal, the Supreme Court's majority of four justices found that the buyer company did not have legal protection for the ownership of the sold machines at the time of seizure. The seller's bankruptcy estate could therefore seize them. It was assumed that as a general rule, the seller must be deprived of the disposal of movable property in order for the buyer to obtain legal protection against the seller's creditors. There was no basis for making exceptions to this general rule for sale and leaseback agreements. The minority of one justice had a different view on the legal protection issue, but found that the law firm was liable nonetheless due to inadequate advice. The Court of Appeal's ruling was set aside.