Liability accountant for prepared prognosis?

By mr. A.W. DolphijnPublished On: 17-07-2017Categories: Dispute settlement, Forecasting issues, Franchise Agreements, Statements & current affairsTags: franchise, franchise agreements, franchisee, label10, label3, Prognosis, tag2

In a judgment of the Court of Appeal of ‘s-Hertogenbosch of 11 July 2017, ECLI:NL:GHSHE:2017:3153, it was discussed that franchisees accused the franchisor’s accountant of being liable for an unsatisfactory forecast.

The franchisor’s accountant had drawn up an investment budget on behalf of the franchisees, which provided a forecast of the expected financial results of operating a franchise establishment under the franchisor’s formula. The allegations related to the presence of a conflicting interest of the accountant, but also to some omissions in the prognosis. These omissions related, among other things, to the omission of negative effects, while positive effects were included.

The court has appointed an expert. The expert has come to the conclusion that the prognosis is understandable and has been drawn up in accordance with the usual working method. The expert also pointed out that differences between the forecast and the actual figures are limited. Furthermore, the expert pointed out some shortcomings of the fact that the conflict of interest has not been recorded and some shortcomings are not such that the prognosis would be unreliable.

In line with this, the Court of Appeal ruled that the accountant acted as may be expected from a reasonable acting and reasonably competent accountant.

The question of whether the prognosis is sound is assessed by the Court of Appeal on the basis of the standard for professional liability. Liability of a franchisor for a faulty forecast could also be assessed by whether the franchisor acted as would be expected of a reasonable and reasonably competent franchisor in recruiting franchisees.

mr. AW Dolphijn – Franchise lawyer

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

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