Rest assured: reassuring statements may delay the limitation period

The Supreme Court ruled in two recent judgments that reassuring statements by defendants may cause that the injured party does not yet have the necessary knowledge and insight for the (short) limitation period of Art. 3:310 (1) of the Civil Code to start.[1] The judgment is important for legal practice, as reassuring statements are regularly issued by parties that have committed wrongful acts, and often, therefore, the limitation period will start to run later than was assumed. 

Background

In one of the cases the situation was the following. The plaintiff and a bank had a credit relationship from 1992 to April 2016. The plaintiff took out an account overdraft and a roll-over-loanat a variable interest rate. To hedge the interest rate risk, the plaintiff also purchased two interest rate swaps and later renewed these products. Ultimately, these financial products were disadvantageous for the plaintiff: the plaintiff suffered financial losses.

The plaintiff filed a claim against the bank arguing that the bank did not properly advise it on the risks of the interest rate swap and its renewal. The district court and the court of appeal both dismiss the claim. The court ruled that there was no breach of duty of care by the bank. The court of appeal ruled that the plaintiff’s claims were barred by the expiry of the five-year limitation period of Art. 3:310(1) of the Dutch Civil Code. That judgment was appealed to the Supreme Court by the plaintiff.

Supreme Court

The Supreme Court first outlined the established rules and case law on limitation periods under Dutch law:

• a claim for compensation is time-barred five years after the injured party actually became aware of the damage and the person liable for it.
• the mere suspicion on the part of the injured party of what the damage is and who is liable for it is not enough for the limitation period to start running. The injured party must have all of the information necessary in order to be able to bring a legal action. This requires that the injured party has obtained sufficient certainty that the damage was caused by deficient or wrongful acts of the liable person in question. Sufficient certainty need not to be an absolute certainty. When the injured party has obtained sufficient certainty depends on the circumstances of the case.[2] It should also be taken into account whether the injured party had the knowledge and understanding to assess the legitimacy of the act.[3] That does not require that the injured party is aware of the precise scope of the duty of care. Even without such awareness, the injured party can have sufficient certainty that the damage was caused by deficient or wrongful actions.[4]

The Supreme Court then evaluated the relevant circumstances in the judgment. It held that reassuring statements from the liable person may lead to the injured party not having the knowledge and insight to assess the legitimacy of the actions. At the same time, the absence of reassuring statements does not ensure awareness of the damage and the liable person.[5] With this guidance, the Supreme Court sent the case back to the court of appeal for further consideration.

Impact on legal practice

The judgment is of great importance for legal practice, for example in claims in relation to financial products and other products where the buyer does not have specialized knowledge. When the buyer – often a consumer – buys such products,  the seller regularly gives explicit advice. That advice is often focused on selling the (financial) product and less on informing the consumer. In that situation, there may be too little warning and too much reassurance. Just as often, the existence of wrongful acts and damages are vehemently contested by defendants. With its ruling, the Supreme Court attaches  possible consequences to such statements to injured parties: a postponement of the starting date of the limitation period.

[1]                Supreme Court 12 January 2024, ECLI:NL:HR:2024:18 and Supreme Court 12 January 2024, ECLI:NL:HR:2024:19.

[2]                Supreme Court 12 January 2024, ECLI:NL:HR:2024:18, para 3.5.

[3]                Ibidem, para 3.6.

[4]                Ibidem, para 3.7.

[5]                Ibidem, para 3.9 and Supreme Court 12 January 2024, ECLI:NL:HR:2024:19.