Buyer, a German legal entity, bought a mare from Seller, a Dutch legal entity, for € 320.000. The rider of the horse acted as the agent in the sale.
The purchase agreement implied, that the horse was bought with the intention to use it as a competition horse.
Shortly after purchase the horse turned out to be lame and the veterinarian noticed that the horse had been de-nerved, (A.k.a. Neurectomy, which is a type of nerve block involving the severing or removal of a nerve) and the horse could no longer be used as a competition horse.
Buyer annulled the purchase agreement on grounds of mistake and the court in first instance (2011), ordered Seller to take back the horse and to refund the purchase price within 48 hours after judgment.
Seller first declared she would pay back the purchase price however ultimately she did not fulfill her payment obligation and nine months later informed Buyer that she was not able to refund the purchase price because there are no assets left in the company.
Court of Appeal – Director’s liability
Since Seller was unable to effect the payment to Buyer, the refund was claimed from the director of Seller, The Company,
The court indicated that the director of a legal entity (even a limited liability company) can, if the claim of a creditor remains unpaid, be held liable for compensation if he has acted carelessly.
The Court of Appeal therefore ruled that The Company, Management Company B.V. and [Seller 3], as (indirect) directors of Seller, acted negligently towards Buyer in such a way that they can be personally blamed for this, because:
– either, Seller still has sufficient assets or financing capacity to fulfill its obligations to refund, but have failed to use these assets to fulfill her obligation,
– or, while the capital required for the fulfillment of its obligations to Buyer was still present in Seller in 2011, they as directors, had withdrawn it from Seller and thus ensured that this capital was no longer available to refund Buyer.
With regard to the agent, the Court of Appeal ruled that he had acted unlawfully against Buyer by giving incorrect and / or incomplete information to the vet about the medical history of the horse during the horse´s pre-purchase inspection and ordered the agent to pay damages amounting to € 36,212.54.
This is because when the veterinarian asked about the medical history of the horse, the agent did not disclose information about the treatment and lameness of the horse. The Court argued that an agent who has relevant information about the horse is expected to share this information with the buyer, at least if asked about it.