4.4.1 Interpreting directors’ ‘subjective good faith’ in Ellem Beheer v. De Bruin and De Rouw v. Dingemans

Although not directly addressed in Dutch case law to date, the best explanation for why courts deny discharge of directors when ‘subjective bad faith’ actions are involved may lie in the legal constraints imposed by good morals and public order (art. 3:40 DCC) and the standard of reasonableness and fairness (art. 2:8 DCC). Within this ‘method’, courts may take their own initiative either ex officio or on the request of the litigant in ruling the discharge resolution void (art. 3:40[1] DCC) or inapplicable (art. 2:8[2] DCC).1

The method might or could have been applied in two landmark cases, Ellem Beheer v. De Bruin2 and De Rouw v. Dingemans.3 In my view, the following two legal questions might or should have been addressed in both cases in cassation before the Supreme Court4:

The first question involves the legal validity of the discharge decision. If the discharge is legally valid, the second question subsequently turns to the issue of applicability of the discharge decision, given the circumstances and the demands of reasonableness and fairness. In the next paragraphs, I will show how art. 3:40(2) and 2:8(2) DCC may function as important corrections to the legal logic of ‘known’ action. The legal standards enable courts to do justice to all the relevant circumstances in a given case, including a director’s ‘subjective good faith’, in order to protect the interests of the company by preventing a discharge from covering directors’ ‘subjective bad faith’ actions. In so doing, I will apply the method described above to the arguments in Ellem Beheer and De Rouw. The result is a reinterpretation of these two cases, which I will refer to as Ellem Beheer 2.0 and De Rouw 2.0.