3.7.3 Three possibilities to substantiate the second claim

The investors claiming damages based on reliance on the misleading prospectus, i.e. they allege that the misleading prospectus was connected condicio sine qua non to their investment decision, can substantiate their claim in different ways. Three of these possible claims will be discussed.1 At first, the investors can base their claim on the fact that they themselves actually read the prospectus and that they actually based their investment decision on the prospectus. On this basis the investors claim to have directly relied on the prospectus.2

Secondly, the investors can base their claim on the fact that they made their investment decision after consultation with an investment adviser.3 In that case, the investors do not allege that they themselves took notice of the misleading prospectus but that the investment adviser took notice of the prospectus on their behalf. In this line of argument, the reliance on the prospectus by the investment adviser has to count as a reliance on the misleading information by the investors. As a result, the adviser will take the place of the investor with respect to the need to provide evidence for the claim of the investor that he was indirectly misled by the prospectus. In order to establish the condicio sine qua non element, the court has to establish whether the adviser was actually or reasonably allowed to be misled by the prospectus. The later requires a separate test whether the prospectus was misleading by taking into account the knowledge and experience of a professional investor.

Finally, investors claiming that they based their acquisition on the positive market sentiment caused by the misleading prospectus. The misleading prospectus is connected condicio sine qua non to their acquisition not because they themselves read the prospectus, but for the reason that they relied upon the "market" to read it instead. Consequently, they base their decision on the positive (misleading) sentiment developed in the market. It has to be emphasised that it is not sufficient to demonstrate the positive market sentiment was caused by the misleading prospectus. In order to prove the condicio sine qua non connection the investors need to demonstrate that they based their decision to acquire the securities on the (misleading) positive market sentiment.

On the assumption that the investors in all abovementioned cases can prove their claim that they were misled, the establishment of causation depends on the defence of the defendant. One has to take into account that the defendant in the last two cases could make the following logical defence: because the investors did not themselves take direct notice of the prospectus the tosses incurred are so weakly connected to the event on which the liability is based, i.e. the distribution of a misleading prospectus, that they can no longer reasonably be attributed to the defendant. In other words, the indirect reliance on the prospectus has interrupted the causal link.

The question whether this defence can be accepted is a matter of attribution4 and whether it has to be judged in accordance with the standards of section 6:98 DCC. Except for a defence based on attribution, there is also a possible defence with respect to the condicio sine qua non.5 After all, for the investors who were directly or indirectly misled by the prospectus there is a possibility that they would have incurred a loss even if the prospectus had not been misleading. These losses would have been incurred if one had invested in an alternative investment project of which the securities price would also have been affected by the same negative market sentiment. The publisher 's or distributor's defence could be that the investors would have incurred the losses as a result of the fall in the securities price anyway.6 Even though we do not have any dogmatic objection against the acceptance of this kind of defence, there is a difficulty with respect to the division of the burden of proof. Which party bears the burden of proof with respect to the claim that in the hypothetical situation in which the investor had not invested in the securities onder dispute, the investor would have incurred the same losses due to the fall in the securities price of the alternative investment project? Does the investor have to prove that in the absence of the misleading prospectus he would not have invested in another loss making investment project? Or does the publisher or distributor have to prove that the investor would also have incurred losses on the alternative investments in any case?

In accordance with the principle tule of section 150 of the Dutch Code of Civil Procedure, the investor has to prove the condicio sine qua non connection and the losses incurred. There is no reason to change this tule with respect to the abovementioned defence. Therefore, the investor has to prove that in the hypothetical situation without misleading prospectus he would not have invested in another investment project that was also subject to a fall in its securities price. However, one could argue that the requirements with respect to this evidence should not be too strict. The first reason is that the investor would be in a very difficult position to prove how he would have profitably invested in a hypothetical situation. It is impossible to establish with complete certainty these kinds of hypothetical facts. Secondly it is rather undesirable to render it difficult for the investor to refute the claim that he would have made a loss making investment decision even without the misleading prospectus. It is no different from stating that the investor was unable to have made an investment decision that avoided the general market sentiment. For these reasons this defence may not be accepted too leniently.

In its decision about this defence, the court has to consider primarily the past investment experience of the individual investor. If the investor has a track record of high-risk investments or if the track record shows that he follows movements in the general securities market, the publisher 's or distributor 's defence is more acceptable. The other circumstances of the case will determine whether it is likely that the investor was not inclined to follow the market trend this time. If the investor can demonstrate that he has a risk-averse investment profile7 and/or that in the past he saved all his money in a savings deposit account instead of investing in securities, the claimant has sufficiently refuted the defendant's argument, taking into account the lenient assessment of the evidence we argued for.