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October 27, 2022

Are Damages Arising Out of Termination of an Agreement “Determinable Debt”?

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Under Thai bankruptcy law, a creditor can file a request for a debtor to be placed under an absolute receivership order and bankruptcy judgment. However, the debtor must be insolvent, and the debt owed to the creditor or creditors must be at least THB 1 million (for a debtor who is a natural person) or THB 2 million (for the debtor who is a juristic person). In order to know whether the latter requirement is met, the debt must be “determinable”—that is, known and monetarily quantifiable.

More specifically, determinable debt is debt (up to the filing date) in an amount that can be calculated, whether the debt is payable immediately or in the future. The debt can be under a loan agreement or under a sale-and-purchase agreement.

One question that sometimes comes up is whether damages arising out of termination of such an agreement are considered determinable debt. According to a number of Supreme Court precedents, if the debt (e.g., rent, fine or penalty) can be calculated as referred to in the agreement, the debt is determinable. Three of these cases are described below.

Supreme Court Case No. 2653/2526

In this case, the defendant made a partial delivery of oil (i.e., not the amount fully expected) to the plaintiff, who claimed that the defendant owed them a fine of almost THB 14.9 million, calculated in accordance with the sale-and-purchase agreement for the oil. The defendant argued that the debt was not determinable because the plaintiff did not prove whether they suffered damage or not. The Supreme Court noted that the agreement for sale and purchase of oil stated clearly that if the defendant could not deliver oil to the plaintiff in full, the plaintiff had the right to terminate the agreement and fine the defendant 25 percent of the price of the oil that was not delivered. The court therefore ruled that the plaintiff was not obligated to prove whether they suffered any damage, and that the debt in question was determinable under the Bankruptcy Act.

Supreme Court Precedent No. 2763/2551

This case concerned outstanding rent payments. The plaintiff claimed that the defendant failed to pay the rent specified in the lease agreement, with the cumulative amount due reaching almost THB 6.9 million. The Supreme Court concluded that since the defendant did not prove otherwise, it was concluded that the defendant did in fact owe this amount to the plaintiff, in accordance with the lease agreement, and confirmed that this was determinable debt.

Supreme Court Precedent No. 6068/2558

The plaintiff in this case claimed that the defendant had breached a lease agreement by failing to pay the rent, withholding tax, land and building tax, and billboard tax as set out in the lease agreement. The plaintiff then terminated the lease agreement and submitted a claim to the Bankruptcy Court for damages of approximately THB 13.5 million. One of the defendant’s arguments was that the plaintiff should have filed a civil court case before filing a bankruptcy claim. The Supreme Court ruled that under the Bankruptcy Act, the plaintiff is not obliged to file a civil action or obtain a civil court judgment prior to filing a bankruptcy claim. In addition, the rent, withholding tax, land and building tax, billboard tax, and fine for breach of the agreement which was specified in the lease agreement were confirmed to be determinable debt.

Conclusion

These three Supreme Court precedents are examples of how a creditor can file a claim at the Bankruptcy Court to request an absolute receivership order and bankruptcy judgment for damages arising out of termination of an agreement. Thus, whether damages arising out of termination of an agreement are considered determinable debt likely depends on whether the claimed damages were debts in accordance with terms in an agreement, and were able to be calculated up to the filing date.

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