Short Reads

Failure to appeal a judgment by one of the debtors with joint and several liability has clear-cut consequences in external relationships with other parties but uncertainty prevails in internal relationships between the debtors themselves

Failure to appeal a judgment by one of the debtors with joint and several liability has clear-cut consequences in external relationships with other parties but uncertainty prevails in internal relationships between the debtors themselves

25.04.2016 NL law

On 18 December 2015 the Supreme Court decided (ECLI:NL:HR:2015:3637) that if debtors with joint and several liability are ordered to pay damages to a party in the first instance, the joint and several debtor that does not appeal the original decision cannot profit from a successful appeal brought by the other debtors with joint and several liability against that decision.

In this case, the District Court of Amsterdam ruled that the partners A,B and C of a law firm (in the form of a partnership) were jointly and severally liable for the damages suffered by one of their clients. This liability was the consequence of an attributable breach of contract by the law firm against that client.

The law firm and the lawyers B and C appealed the decision of the District Court of Amsterdam on the basis that the client was negligent (eigen schuld-verweer). The Court of Appeal of Amsterdam decided that the client had indeed been negligent and therefore needed to bear responsibility for part of the damages claimed. The Amsterdam Court of Appeal  thus reduced the client’s claim for damages by 70% and ordered the law firm and the lawyers B and C to pay the remaining 30% .

Lawyer A had not participated in the appeal proceedings. As a result, the original decision of the District Court of Amsterdam became final and binding as far as he was concerned.

The client subsequently appealed to the Supreme Court and argued, among other things, that the law firm and lawyers B and C no longer had an interest in the appeal proceedings as the decision of the District Court was already final and binding in respect of lawyer A. Because the liability established in that decision was a joint and several, this decision was – according to the client – also final and binding against the law firm and the lawyers B and C.

This raised two questions regarding the external liability of the law firm and lawyers A, B and C:

  1. If a judgment about the liability and the extent of damages against one of the jointly and severally liable debtors becomes final and binding, do the other joint and several debtors still have an interest in challenging that judgment?
  2. Does the more favourable judgment on appeal also apply to the debtor with joint and several liability that omitted to appeal the original judgment?

The Supreme Court decided that the fact that the judgment of the District Court of Amsterdam was final and irrevocable between the client and lawyer A, did not preclude the other defendants from filing an appeal to decide the extent of their own relationship with the plaintiff. The court confirmed that a debtor with joint and several liability has an independent relationship with the creditor and therefore has a legitimate interest in establishing the extent of this relationship independent of the other joint and several debtors .

The Supreme Court also decided that the more favourable judgment on appeal did not apply to the relationship between lawyer A and the plaintiff. The principle of final judgments is leading. As a result, the claim of the client to lawyer A is set at 100% of the damages incurred by the client and the claim of the client to the law firm, lawyer B and lawyer C is set at 30% . In this case lawyer A was liable for 100% of the damages to the client.

This raises the interesting question of what happens in the internal relationship between the law firm, lawyer A, B and C. Can lawyer A take action to recover the excess amount of 70% paid to the client against the partnership, lawyer B and lawyer C? The Supreme Court’s decision does not address this subject.

Under Dutch law, partners in a partnership are liable (draagplichtig) in equal proportions for claims that concern the partnership, unless the mutual agreement between the partners provides otherwise. However, in the absence of such arrangements,  what is the situation following  the Supreme Court’s decision?  On appeal, the  partnership itself was held  liable for 30% of the damages only. If the partnership has no assets then this 30% may be recovered from lawyer A, B and C. If you apply the principles under Dutch law in respect of the internal relationship between the partners, each lawyer is liable for one third of this 30%.

The initial decision of the District Court that was annulled in relation to the claim to the partnership, lawyer B and lawyer C, was maintained with regard to lawyer A. This means that 70% of the 100% awarded to the client under that District Court decision is a claim of the client against lawyer A only. However, that does not detract from the fact that the claim involved is one that concerns the partnership. This means that the partnership, including lawyer B and C, should in principle bear 70%.

Taking into account the circumstances of this case, and in particular the fact that the different court decisions were caused by lawyer A omitting to appeal against the District Court’s decision together with the other defendants, it is conceivable, that lawyer A alone will have to accept responsibility for this 70% because lawyer B and C could equally argue that even in the context of their internal relationship the 70% is imputable to lawyer A’s omission to appeal against the decision of the District Court.

To avoid possible conflicts and legal uncertainty regarding the internal recourse of a partnership and its partners,  when the partnership and/or the individual partners are held jointly and severally liable for claims that concern the partnership, it is advisable that all co-defendants appeal against any judgment in favour of the plaintiff.

The post Failure to appeal a judgment by one of the debtors with joint and several liability has clear-cut consequences in external relationships with other parties but uncertainty prevails in internal relationships between the debtors themselves is a post of www.stibbeblog.nl

 

Related news

18.01.2018 NL law
Aandacht voor de bescherming van vennootschappen tegen ongewenste biedingen

Short Reads - Mede naar aanleiding van een reeks van (pogingen tot) ongewenste overnames van buitenlandse bieders op Nederlandse beursgenoteerde vennootschappen zoals PostNL, Unilever en AkzoNobel is er in Nederland – maar overigens ook in Europees verband – aandacht voor de bescherming van vennootschappen tegen ongewenste biedingen en de bescherming van vitale sectoren. In deze Corporate Update behandelen we de laatste ontwikkelingen op dit gebied.

Read more

11.01.2018 NL law
Witness examination and the withdrawal of a judge

Short Reads - In its decision of 24 November 2017 (ECLI:NL:HR:2017:3016), the Dutch Supreme Court confirmed that a judge is allowed to critically interrogate a witness and remind a witness of his oath. Such action is not an indication that a judge is not impartial or independent.

Read more

16.01.2018 NL law
Overview of Legislative Proposal on Collective Action (NL) - As amended by the Amendment Bill of 11 January 2018

Articles - In the Netherlands, it is possible for a representative entity to bring a "collective action" on an "opt-out basis" under article 3:305a of the Dutch Civil Code (the "DCC"). However, under the current provisions in Dutch law, the representative entity is not entitled to claim monetary damages. This limitation is likely to be removed in the not too distant future. This publication has been amended by the Amendment Bill of 11 January 2018. Read the updated publication.  

Read more

10.01.2018 NL law
Fire, furniture and strict liability for buildings used for business

Short Reads - Persons using a building in the course of running a business might be liable for damage caused by a defect in the building on the basis of strict liability. Such liability exists if there is a link between the origin of the defect and the running of the business. In its decision of 24 November 2017 (ECLI:NL:HR:2017:3016), the Dutch Supreme Court clarified how to ascertain whether there is such a link.

Read more

05.01.2018 BE law
Wie bewaakt de bewakers? Vlaanderen schaft substitutierecht inwoners van gemeente af

Articles - Het Decreet Lokaal Bestuur van 21 december 2017 schaft het substitutierecht voor inwoners om namens hun gemeente in rechte op te komen, af. De Vlaamse regering en de Vlaamse decreetgever achten het substitutierecht "weinig zinnig en democratisch verantwoord". Een dergelijke verantwoording van de afschaffing van het substitutierecht lijkt problematisch in het licht van het beginsel van de scheiding der machten. Daarmee rijst de onvermijdelijke vraag: wie bewaakt de bewakers? Wellicht het Grondwettelijk Hof.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy and Cookie Policy