3.2.5 Formalising ‘serious reproach’

Directors’ liability litigation may be based on different legal grounds (art. 2:9, 6:162, 2:138/248 DCC). In the preceding paragraphs, I assumed nonetheless that Dutch courts apply ‘serious reproach’ as the basis of an analytical framework to review the distinct liability claims. Under the analytical framework of ‘serious reproach’, courts are obliged in each given case to consider all relevant circumstances. I have argued that this open and flexible approach to review directors’ liability may not be problematic. Moreover, I have argued that the integrated approach to judge directors’ liability litigation by applying the standard of ‘serious reproach’ allows courts to construct and maintain a simple legal decision model while managing the complexity of contextualised case-by-case judgment. In paragraphs 3.2.2-3.2.4, I outlined the pattern of legal reasoning during such deliberations: first and foremost, courts identify norms that may have been violated; second, they objectively assess the degree to which these violations can be reproached. In so doing, they consider all relevant circumstances with respect to the defence advanced by the director concerned (paragraph 3.2.1).

Accordingly, based on the analysis in paragraphs 3.2.2-3.2.4, I presume that the simple legal decision model involves ‘serious reproach’ at the base and formalise ‘serious reproach’ as involving a violation of a norm – on the condition that the norm was specifically addressed to a director – for which a director can be reproached, in view of the severity of the violation and all relevant circumstances at issue.

In the following quantitative part of the research, I intend to test the aforementioned simplified model. For this purpose I assume that it is very likely that courts deliberate on directors’ liability whenever one of the categories of litigious actions under (1) and/or (2) are in play:

It is important to note that foreseeable damage (with regards to the company, or company’s creditors or shareholders), if raised by litigants, may be a relevant circumstance for judicial review, regardless of the legal ground on which a claim is based (art. 2:9, 6:162, 2:138/248). The importance of foreseeable damage is not solely reserved for directors’ liability to creditors in the context of art. 6:162 DCC. I argued for its relevance in the context of liability during bankruptcy.1 In the case of a 2:9 claim, such a claim generally depends on violations of norms relating to a director’s duty.2 It goes without saying however, that if well pleaded, foreseeable damage to the company may be an important circumstance for holding a director personally liable to the company in any given case.3

As we now move forward to the quantitative part of the research requiring the coding of court decisions and construed legal circumstances involving measurable legal case factors, I will speak of ‘norm violation’ when referring to the actions under (1), and ‘foreseeability of damage’ when referring to the actions under (2). Importantly, when I code a case as involving a director’s ‘foreseeability of damage’, I implicitly recognise that a director has violated a specific norm addressed to him or her. Finally and in accordance with the foregoing, I understand the factor of ‘foreseeability of damage’ to involve damage to the company and/or the company’s creditors.