1. Recently, the E.M. Meijers Institute of the Leiden University published a treatise - A.G. Castermans et al, De maatman in het burgerlijk recht, Deventer: Kluwer 2008 - on the legal concept of the 'reference person'; i.e., the hypothetical rolemodel used by Dutch courts in personal liability proceedings to decide whether certain conduct was up-to-standard (or not). A typical manifestation of this reference person is the 'reasonably acting and reasonably competent' practitioner, like a lawyer or a medical doctor. As to corporate management, the Supreme Court has referred - in passing - to the 'reasonably acting and reasonably competent officer' in its decision of April 8, 2005 re Laurus and to (the knowledge and care that can be expected from) 'the managing director who is up to his task and performs this task conscientiously' in its decision of January 10, 1997 (NJ 1997, 360) re Staleman/Van de Ven Automobielbedrijf Venlo. One of the interesting contributions to the treatise comes from Prof. Bob Wessels, who writes - in short - about the personal liability of a trustee in bankruptcy for continuation of the company's enterprise. In it, he touches upon the question whether it is desirable to introduce a business judgment rule inspired type of judicial review in this particular setting, which he seems to answer in the negative. Below, I offer some thoughts about this issue.
2. Pursuant to existing Dutch law, a trustee in bankruptcy can be personally liable (i.e., pro se) - as opposed to being liable in capacity of trustee (i.e., q.q.), which is in effect a liability of the estate - to a third party who has suffered a loss due to the trustee's conduct in that capacity, if the trustee has acted contrary to the specific and objective care standard that 'a trustee should act in a way that can be reasonably expected of a sufficiently knowledgeable and experienced trustee who performs his task conscientiously and with dedication' (see, e.g., the Supreme Court's ruling of April 19, 1996, NJ 1996, 727, s. 3.6 re Société Nouvelle Textile Saint Maclou/G.). In Dutch:
Een curator behoort te handelen zoals in redelijkheid mocht worden verlangd van een over voldoende inzicht en ervaring beschikkende curator die zijn taak met nauwgezetheid en inzet verricht.
In 1933, the Supreme Court had used different and more general wording, by explaining that the trustee is only then indemnified against personal liability, if he has looked after the interests entrusted to him in a 'proper manner'.
3. The legal basis of such personal liability of the trustee vis-a-vis a third party is tort. One could say that the reference person in this standard - often referred to as the Maclou standard - is the sufficiently knowledgeable and experienced trustee who performs his task conscientiously and with dedication. At least semantically, this reference person differs somewhat from the typical 'reasonably acting and reasonably competent' reference person referred to above. It is subject of debate whether the 'Maclou' reference person is a bit more lenient. In any event, by framing such a care standard tailored to the position of the trustee, the Supreme Court intended to do justice to the reality:
By doing so, the Supreme Court has added certain contours to the care analysis to be applied to a trustee in bankruptcy in liability proceedings. 4. Perhaps, and somewhat similar to personal liability of a corporate director in tort towards a third party (like a creditor of the company), it may be analytically helpful to qualify this personal liability of the trustee - in addition to the estate's liability - based on violation of the Maclou standard as secondary liability (the estate's liability being the primary one). This would emphasize more clearly that liability in tort of the estate, caused by conduct of the trustee that is attributed to the estate, does not automatically lead to liability in tort of the trustee personally; the latter requires a separate analysis. At least in the setting discussed below (in short: the trustee making business decisions), it would stand to reason that this secondary liability generally implicates a higher personal liability threshold, compared to the general tort mechanism laid down in section 6:162 DCC (that affects the position of the estate, but not necessarily that of the trustee personally). In colloquial terms, in that approach the trustee must have made a sufficiently serious mistake (i.e., have acted grossly carelessly) in his capacity as trustee in order to be personally liable in tort, depending on the circumstances of the case at hand. See also Advocate-General Timmerman in his 2004 opinion sub 2.2 re Van Dooren/Interplan Import-Export Woontextiel, who touches upon the difference of 'q.q.' and 'pro se' liability. This could also be framed in terms of the actual personal liability standard (i.e., a gross lack of care) under the Maclou standard diverging from the trustee's standard of conduct as laid down in the Maclou standard (i.e., reasonable or normal care under the circumstances); such a divergence needs a justification, which may be that subject of discussion is whether the trustee should be personally liable for a business decision that turned out badly for the estate, for acting outside the margins of appreciation afforded to him. 5. When it comes to continuation of the company's enterprise, a trustee in bankruptcy is often confronted with the choice between pursuing: In that challenging setting, the trustee has to make pretty complex choices, often based on incomplete information and under time-pressure, while taking into account/balancing several - and not seldom: competing - interests, that eventually can turn out good but also bad for the estate (and thus for the creditors). See Wessels at pages 90-91. Generally a trustee in bankruptcy - typically a lawyer - is not in the same position as a corporate director, who is primarily an entrepreneur (see Prof. Van Schilfgaarde's annotation sub 5 to the Supreme Court's ruling of November 27, 1998 (NJ 1999, 685) re K./Het Land der Nederlandse Antillen), but one could say that in those specific situations the trustee has to make risky decisions that come close to - or even fall within - the business judgment realm in which corporate directors are normally active. It makes sense for a reviewing court in a personal liability proceeding against the trustee, to adopt a reticent attitude when scrutinizing the trustee's conduct in this setting (assuming the case has no self-dealing/self-enrichment type of elements); in more practical terms, this can be translated in requiring prove of egregious conduct by the trustee for a finding of personal liability in this setting. 6. Although this does not appear to be in conflict with the general Maclou standard, that standard does not provide a reviewing court - let alone a trustee - with any significant guidance as to what exactly would be a proper level of review in this setting. More generally, the general Maclou standard in itself does not appear to be a useful analytical tool that actually helps the court to answer the personal liability issue, but more likely serves a formal role in the general introductory and/or conclusory statements of the court's judgment, in order to show an appellate court that the court intended to apply the proper legal standard. Would it make sense then, also in view of the rationale of the business judgment rule that seems of relevance here (think of the risk of hindsight bias and of the reality that courts are ill-fitted to attempt to judge ex post 'approriate' degrees of business risk), to use a specific standard of review inspired by the business judgment rule when the focus is on the trustee's conduct in the business judgment realm, that essentially provides more substance to the 'sufficient serious mistake' threshold for personal liability - that, in my view, may well apply in this situation - under the general Maclou standard? This would involve questions like: I touched upon this before, when I suggested it makes more sense to bring certain standards of judicial review for certain trustee conduct in line with certain standards of judicial review for certain corporate director conduct, than vice versa (see Ondernemingsrecht 2005-11/12). I explained elsewhere that there is a difference between irrationality and unreasonableness, as the latter test is considerably stricter for the person whose conduct is under review (see, e.g., Ondernemingsrecht 2005-11/12 and Judicial Review of Director Conduct - Under Dutch and Delaware Corporate Law, Deventer: Kluwer 2007, no. 4.d, 38). As ex post review in personal liability proceedings of business decisions that turned out badly is inherently tricky, I would be inclined to answer this question in the affirmative. 7. Wessels' conclusion on page 97 is that the general Maclou standard is sufficiently 'fluid' to protect the trustee against 'unfair liability', in part because 'responsible' risk-taking based on 'due deliberation and documentation' should not lead to personal liability and the use of the term 'reasonably' implies a margin of appreciation afforded to the trustee. That may be correct, but this does not provide any guidance, as it doesn't answer the 'How?' question. That's why I suggest a different tack. A nuancing of the personal liability analysis under the general Maclou standard along the above lines (i.e., inspired by the business judgment rule concept) would provide an ex post reviewing court with a specific standard of review that can actually be used - in a functional sense - to reach a decision, and thus with more doctrinal guidance in cases that center around continuation of the company's enterprise that a prima vista appear to be a 'close call' under the general Maclou standard. Such an approach, in turn, would help preventing personal liability of a trustee on dubious grounds. That seems reason enough to me to suggest serious exploration of developing the general Maclou standard in this direction; which does not require codification, as one or more representative court rulings could do the trick just as well.
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