Feisty dispute within childcare

1. PREFACE

Some time ago an interesting dispute came before the Enterprise Chamber of the Amsterdam Court of Appeal. It is possible to start so-called inquiry proceedings before the Enterprise Chamber. The proceedings make it possible to improve bad policies and/or affairs within companies. In this dispute, an attempt was made to use these inquiry proceedings.

2. THE DISPUTE

In the opinion of among others, the supervisory board and works council of a childcare company, its executive director did not function well. The executive director was amongst others blamed for lack of leadership and a factor was also that the director got angry when criticised for his functioning. The supervisory board was also dissatisfied with the poor preparation of meetings by the director and his failure to take important topics seriously.

3. FAILED DISMISSAL

Because there was no improvement and it proved not possible to terminate the agreement with the executive director amicably, the supervisory board resolved to dismiss the director in a meeting. Under Dutch law, such a dismissal is subject to various formalities and this often goes wrong in practice. Similarly in this case. Among other things, the supervisory board had not observed the convocation term for the meeting and had not asked the works council for advice in time. The executive director therefore succeeded to reverse his resignation through interlocutory proceedings. The childcare company immediately appealed this decision and also announced its intention to again resolve the dismissal of the director, this time in accordance with the formalities.

4. EXECUTIVE DIRECTOR GOES QUICKLY TO ENTERPRISE CHAMBER

In an apparent attempt to prevent his own dismissal, the executive director subsequently quickly started inquiry proceedings for the Enterprise Chamber. He requests, among other things, an investigation into the policies and affairs within the childcare company and to suspend the supervisory board. The director's request is based, among other things, on the arguments that the supervisory board did not comply with the formalities in respect of the previous dismissal and the supervisory board tried to force the dismissal of the director, without the director knowing the reasons for his dismissal. The supervisory board rebutted, among other things, by arguing that the director apparently deliberately had not presented the relevant facts truthfully and completely and abused the inquiry proceedings solely to serve his own interests.

5. THE DECISION OF THE ENTERPRISE CHAMBER

The Enterprise Chamber decides that the executive director requests in the inquiry proceedings are admissible, despite the apparent fact that these requests seem to serve only his own interests. The Enterprise Chamber subsequently decides that the director has not fully and truthfully presented the relevant facts of the case. Pursuant to Dutch procedural rules, parties are obliged to present the relevant facts truthfully and completely. Not complying with this obligation can lead to loss of the proceedings. The executive director did not meet this obligation, as he argued in the proceedings that he allegedly was not aware of the grounds for his dismissal. The facts however proved otherwise as they clearly showed that the director had been confronted many times by the supervisory board with his bad performance. Not a very smart procedural strategy of the director. Nevertheless, the violation of this obligation did not lead to any serious consequences in this case. However, it did not help the executive director much as his requests were rejected by the Enterprise Chamber for other reasons. According to the Enterprise Chamber’s decision, the supervisory board indeed had failed to comply with the formalities in the dismissal procedure. However, the Enterprise Chamber nevertheless decides that there are no good reasons to doubt the correctness of the company's policies and affairs, since the Supervisory Board had in the meantime corrected or was in the process of correcting its errors.

6. THE RULE OF LAW

This case is interesting because it appears that a director on his way out is still authorized to make inquiry requests in inquiry proceedings. Even if it turns out that he has a personal interest in respect of the requests.

7.       LEGAL ASSISTANCE IN DISPUTES WITHIN COMPANIES

The inquiry proceedings before the Enterprise Chamber are, under certain circumstances, suitable for correcting bad policies and/or affairs within companies and determining who should be held responsible for this. Moreover, provisional measures can be taken within a reasonably short term that can prevent (further) damages as much as possible.

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