Social and Health Insurances SZV.
PHILIPSBURG--The High Court of the Netherlands in The Hague has referred the cassation case of E’s Solutions ABV (ES) against Social and Health Insurances SZV back to the Joint Court of Justice for a new hearing and a decision. In its verdict issued Friday, February 4, the High Court said it found the Joint Court’s conclusions in this case “incomprehensible”.
In its verdict of February 14, 2020, the Joint Court had ordered ES to repay the maximum amount of NAf. 1,757,550 to SZV, with interest. The Appellate Court stated this in the appeal filed by SZV against a decision of the Court of First Instance of June 12, 2018.
The case involves the termination of an agreement between SZV and ES for advice and support in the areas of governance, risk (management) and compliance, to which effect parties had signed a so-called master agreement (“mantelovereenkomst”) on July 10, 2015.
On ES’ initiative, parties agreed on an engagement letter, which was signed on March 1, 2016. In the letter it was stated that “contrary to the right to terminate at any time as mentioned in the master agreement, the services and/or activities referenced herein will be provided for a minimum period of 36 months commencing on March 1, 2016. Early termination on the part of SZV for any reason will require payment of a penalty equal to the total minimum number of remaining hours over the remainder of the agreement multiplied by the hourly rate of the lead consultant.”
By letter of July 6, 2016, SZV’s lawyer sent a letter to ES’ legal representative informing that the situation was no longer deemed tenable, as ES’ director kept sending invoices for considerable amounts of money without SZV having any control over the work performed and the amounts involved. Therefore, SZV concluded that four projects which had to be carried out had become “unworkable and redundant.”
SZV informed the company that it would terminate the agreement and call on the court to allow termination of the agreement without any compensation.
The Joint Court arrived at the conclusion that the master agreement had been cancelled by SZV by letter of July 6, 2016, in which the insurer had also announced that it would initiate a dissolution procedure pertaining to the engagement letter.
The court stated that the termination clause and a fine were put in place to provide surety in case SZV were to one-sidedly terminate the agreement “for any reason.” In SZV’s opinion, it did have a reason, as it believed that ES had failed to meet its obligations as mentioned in the agreement. For that reason, it did not want to cancel the agreement but to have it dissolved by a court of law, based on Article 6:265 of the Civil Code.
All of this led the Appeals Court to the conclusion that ES could not invoke the cancellation clause and demand a fine.
As parties had no longer been in contact with each other since July 6, 2016, and ES no longer performed any work for SZV, the court found it proven that the agreement was terminated with mutual consent and that the parties were reciprocally relieved of their obligations as laid down in the engagement letter.
The High Court agreed with ES’ legal representative that, “without further motivation” the Joint Court’s conclusion that ES could not claim the penalty as stipulated in the engagement letter because the agreement was terminated by mutual consent and without the fine being due, was incompatible with the fact that SZV cancelled the master agreement, and with the fact that no shortcomings on the part of ES were found, and with ES’ statement that SZV had unilaterally and prematurely terminated (sub)projects as referred to in the engagement letter, and that ES has declared its willingness to comply with the agreement.
As the losing party in the cassation case SZV was ordered to pay the legal costs involved with these procedures, which were estimated at 9,571.34 euros.
