Director’s liability of a franchisee after failing to rely on an unsound prognosis.

On 11 July 2017, the Court of Appeal of ‘s-Hertogenbosch ruled on whether the franchisor could successfully sue the director of a BV for non-compliance with the franchise agreement. 

Shortly after the start of the term, the franchisee stopped executing the franchise agreement because it believed that there was a difference of opinion between the parties, including the accusation that the franchisor had presented it with an unsatisfactory prognosis. 

The franchisor claimed payment of the damage resulting from non-compliance with the franchise agreement by the BV and the director of the BV. It had already been established in the first instance that the franchise agreement had only been concluded with the BV. The question was therefore whether the director had acted unlawfully towards the franchisor. The court held that this was the case.

The Court of Appeal considers that if a director has caused or allowed the BV to fail to comply with a (franchise) agreement it has entered into and thereby causes damage to the other party (in this case the franchisor), the director may be personally liable. Such liability will in any case arise if it is established that the director knew or should reasonably have understood that the damage would arise and also that the BV would offer no recourse for the damage. 

The franchisor argued that the director in question was the only person acting within the BV and that she was the one who entered into the franchise agreement for the BV and who would perform the work. The director stated that she was obliged to serve the interests of the BV and to terminate the franchise agreement in view of this. After all, with the execution of the franchise agreement, the BV would only incur a loss. 

The Court of Appeal ruled that it is not allowed to conclude directors’ liability on the basis of an unlawful act too quickly and that the alleged facts are insufficient. The conclusion is that, according to the court, the director, contrary to the opinion of the court, is not personally liable to the franchisor. 

mr. AW Dolphijn – Franchise lawyer 

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .