Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/3.7.1:3.7.1 Introduction

Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/3.7.1

3.7.1 Introduction

Documentgegevens:

mr.drs. T.M.C. Arons, datum 07-05-2012

Datum: 07-05-2012
Auteur: mr.drs. T.M.C. Arons
JCDI: JCDI:ADS363585:1
Vakgebied(en): Ondernemingsrecht (V)

If the aforementioned hurdles with respect to liability are taken, the amount of damages to be awarded to the claimants depends on the presence of causation between the publication and distribution of a misleading prospectus and the acclaimed losses of the investors Unlike the causation element in the misleading norm, the pure causation question is of an individual nature, which means that this question has to be answered in view of the facts and circumstances of the individual investor.

The prevailing doctrine with respect to causation distinguishes two steps: at first the condicio sine qua non element and subsequently attribution (toerekening). The condicio sine qua non element means that it has to be plausible that if the litigated act or omission on which the liability is acclaimed had not taken place, the claimant would not have suffered his losses. In principle, the claimant has to demonstrate in court the condicio sine qua non element.1

When the condicio sine qua non element is established,2 the subsequent question is whether the attribution requirement of section 6:98 DCC has been fulfilled: the losses need to be closely connected to the event(s) on which the liability is based to such an extent that the losses can reasonably be attributed to the defendant. First, the defendant needs to argue that the losses are so loosely connected to the events on which the liability is based that the attribution of all the losses is unreasonable.3 The term 'to argue' instead of 'to prove' is used deliberately in order to demonstrate clearly that the question whether the losses can be attributed to the defendant is, in principle, a question of law and not a question of fact. Therefore, the court's decision with respect to attribution is primarily based on juridical standards. As a consequence, there is in principle no need to give evidence. However, the defendant may bear the burden of proof for alleged facts used in the defendant's argument. Notice that the two steps condicio sine qua non and attribution are related in such a way that if the alleged losses incurred by the claimant are connected condicio sine qua non to the violated standard of behaviour, the attribution-criterion of section 6:98 DCC may, in principle, serve as a restriction to the defendant's liability. As one can imagine many harmful effects are connected condicio sine qua non to the violated norm, however, the defendant should only be held liable for the losses which are reasonably attributable to him on the basis of the standards of section 6:98 DCC.4

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World Online judgment, para. 4.11.1: 'The sections 6:194-195 leave unaffected the application of the ordinary rules with respect to the duty to claim and burden of proof with respect to the question whether the losses are in such a connection to the misleading statement that it can be attributed to the person who published the misleading information. In principle, the investor has the duty to claim and bears the burden of proof with respect to the condicio sine qua non-connection.'

In its decision of 31 March 2006 in Nefalit v Karamus (NJ 2011 (250) with commentary from T.F.E. Tjong Tjin Tai), the Supreme Court accepted that in a case where it is impossible to establish the true cause for an employee's illness, either the exposure to asbestos or his personal smoking habit, the employer may be liable for all losses with a deduction for the assessed contribution of the employee's behaviour to his own losses (para. 3.13). It is important to note that the Supreme Court in Fortis Bank (Nederland) BV v Bourgonje (JOR 2011 (54) with commentary from A.C.W. Pijls) emphasised that application of the ruleas formulated in Nefalit v Karamus should be applied restrictively and that the court has to give arguments that the purport and nature, including the nature of the losses, of the violated standard of behaviour justifies its application (para. 3.8). In the case at hand, the violated standard's nature is the portfolio manager's duty to wam his client and its purport is the prevention of economic loss. Therefore, the Court annulled the Court of Appeal's judgment, because it failed to recognise that a necessary precondition to the application of s. 6:98 DCC is the establishment of a condicio sine qua non-connection between Fortis' violation of the standard of behaviour and the losses incurred by Bourgonjé (para. 3.10). Because of its unclear distinction, the Supreme Court in Fortis v Bourgonje rejected the ground for appeal in cassation that application of this ruleis restricted to exceptional circumstances in which proof of causation is problematic in general ant that it cannot be applied in circumstances in which the claimant is unable to meet the standard of proof in regard to causation due to the particular circumstances of the case at hand. Furthermore, the court held that the distinction between cases in which the uncertainty in causation is related to either losses incurred in the past or losses to be incurred in the future, cannot be applied for the same reason (para. 3.9). From the latter consideration, it may be concluded that the Supreme Court does not reject the loss of chance as category of losses that may be compensated for. However, the Supreme Court emphasises the importance of giving evidence for the condicio sine qua nonconnection between the liability constituting behaviour and the loss of chance. For an overview of Dutch case law in which this doctrine has been applied, I refer to Asser/ Hartkamp/Sieburgh 6-11 (2009), No. 80. In my opinion, the definition of loss of chance should be restricted to the deprivation of an opportunity to obtain a benefit. If the avoidance of a loss is defined as a loss of chance, there is a risk of overcompensation, i.e. compensation of losses of which the condicio sine qua non-connection with the tortious behaviour is uncertain. In case of prospectus liability claims, the claimant asserts that he was deprived of the opportunity to make an informed investment decision as a result of the tortious dissemination of misleading information. The difficulty remains that it is uncertain whether he would have invested differently. See also: Advocate General Wissink in his Conclusion to Fortis v Bourgonje, para. 3.72.3. In French law, the chance that the investor would have invested differently is compensated. In my opinion, in Dutch law there is no fundamental objection against a similar application of the loss of chance doctrine.

For further information: Asser/Hartkamp/Sieburgh 6-11 (2009), Nos. 76 and 82 and Dutch Supreme Court, 2 October 1998, NJ 1998 (831), para. 3.10 and paras 3.30-3.36 of the Conclusion of Advocate General Spier to this judgment.

Especially, the foreseeability of the particular losses incurred by the claimant serves as a criterion to determine the reasonableness of the attribution. Asser/Harticamp/Sieburgh 6-11 (2009), No. 69.