On 18 November 2016, the Dutch Supreme Court ruled that a decision given by the Netherlands Enterprise Court at the Amsterdam Court of Appeal (“the Enterprise Court”) in the Meavita-proceedings is void (ECLI:NL:HR:2016:2607 and ECLI:NL:HR:2016:2614). The Supreme Court ruled that the decision was not given by the number of judges required by law and also addressed several complaints on the reimbursement of the costs of inquiry submitted by former directors and supervisory directors of Meavita.
Inquiry proceedings (“enquêteprocedure“) before the Enterprise Court
Home care organization Meavita was declared bankrupt in 2009. After Meavita’s bankruptcy, the trade union FNV brought inquiry proceedings before the Enterprise Court (“Ondernemingskamer“). The Enterprise Court may order an investigation into the affairs of a company if it has “well-founded reasons to doubt the correctness of the policy or the conduct of the company” (article 2:350 DCC). The Enterprise Court approved FNV’s request and ordered an inquiry in 2011.
After the inquiry was concluded in 2013, the Enterprise Court determined the costs amounted to € 1 million. In principle, the corporate entity (or the trustee in bankruptcy) has to bear the costs of the inquiry (article 2:350 (3) DCC). In the Meavita-proceedings the trustees contributed € 950,000 to the costs and FNV € 50,000. Article 2:354 DCC entitles the corporate entity to request recovery of the costs of the inquiry, being the entity that has to advance these costs pursuant to article 2:350 (3) DCC. The trustees and FNV requested the Enterprise Court to be allowed to recover the costs of the inquiry from former directors and supervisory directors. Such recovery is allowed if it appears from the inquiry report that they are responsible for the incorrect policy of the company or unsatisfactory conduct of its business. In November 2015, the Enterprise Court awarded this request (ECLI:NL:GHAMS:2015:4454), ruling that the (supervisory) directors were responsible for mismanagement and had to reimburse the costs of the inquiry to both the trustees and FNV.
The nullity of the decision of the Enterprise Court
When the Enterprise Court delivered its decision on the recovery of costs, one of the judges involved in the case had resigned from his post because of retirement. Under Dutch law, a decision that has not been given by the number of judges required by law is void. A party seeking to invoke the nullity of a decision has to appeal against this decision. The former (supervisory) directors did so and argued before the Supreme Court that a decision can only be considered to be ‘given’ when the final text is approved by all the judges handling the case. The Supreme Court endorsed this argument. A judge that has resigned his/her post is no longer a judge under the Dutch Judiciary Act (“Wet RO“). Since the decision of the Enterprise Court was postponed twice after the retirement of the aforementioned judge, he could not have approved the final text of the decision in his function as a judge. According to the Supreme Court, the decision was not therefore given by the number of judges required by law and is void.
The standard for recovery of the costs of an inquiry
The former (supervisory) directors subsequently complained that the Enterprise Court had not correctly assessed whether the costs of the inquiry could be recovered from them. According to the Supreme Court, the Enterprise Court should have determined individually and made concrete whether each (supervisory) director was responsible for mismanagement. It is required that personal blame can be apportioned. The Supreme Court ruled that the decision of the Enterprise Court insufficiently assessed the personal culpability of the (supervisory) directors involved.
The costs of the inquiry paid by FNV
The former (supervisory) directors further argued that FNV was not allowed to request recovery of the costs it had paid, since article 2:354 DCC only entitles the corporate entity to request recovery of the costs. The Supreme Court ruled that the law does not make provision for a situation in which the corporate entity is not able to fully advance the costs of the inquiry, as occurred in the Meavita case. A reasonable explanation of the law implies that besides the corporate entity, the applicant of an inquiry is also allowed to request recovery of the costs on the basis of article 2:354 DCC. The Enterprise Court had reached a similar conclusion.
This judgment of the Supreme Court expands the group of (legal) persons allowed to file a request for recovery of the costs of an inquiry. It also elucidates the standard for reimbursement of these costs from (supervisory) directors. Ultimately, it underlines the boundaries of judicial power in the Netherlands.