Three board members acquitted of directors’ liability by the Supreme Court

The Supreme Court acquitted three board members of liability in a damages claim brought by a corporate creditor, holding that the board members’ negligence had not caused the creditor any financial loss.

The Court of Appeal had found that the board members had negligently failed to inform the creditor—a subcontractor engaged in an ongoing contractual relationship—about the company’s weak financial position. The question of whether a basis for liability existed had already been finally determined by the Court of Appeal.

The damages awarded by the Court of Appeal corresponded to the remuneration earned by the creditor after the negligence arose and which the creditor had not received from either the company or the bankruptcy estate.

The Supreme Court held that the damages had to be assessed differently. Compensation should correspond to the increase in the creditors’ unpaid claims against the company during the period from the time the negligence first arose until the company’s bankruptcy. Because the total amount of outstanding claims had in fact decreased during that period, the board members were not liable for damages and were therefore acquitted.

The judgment provides guidance on the assessment of financial loss in cases where board members are held liable in damages to a corporate creditor.

Source: Supreme Court

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