When Is Your Intermediary Liable for Your Financial Loss?

By mr. Vincent Besters

The Role of the Intermediary in Business Practice

Entrepreneurs engage intermediaries on a daily basis: financial advisers, business consultants, tax advisers, or insurance brokers. You rely on their expertise, and rightly so — after all, you are not a specialist in every field. But what if that intermediary provides you with incorrect information, overlooks a risk, or fails to disclose crucial information? You may then be left as a business owner with considerable financial loss. The central question then becomes: when is that intermediary liable, and how do you claim compensation for your loss?

The Duty of Care of the Intermediary

An intermediary owes a duty of care to their client. That duty of care arises from the contract for services (overeenkomst van opdracht) (Article 7:401 of the Dutch Civil Code), under which the service provider is obliged to exercise the care that a reasonably competent and reasonably acting professional peer would observe. This is no light standard. The intermediary is not only required to carry out the assignment as literally requested, but must also proactively warn of risks that they, as a professional, ought to recognise.

Consider the following practical example. A financial adviser assists with the sale of a business. In the context of that transaction, they advise on the structuring, without drawing their client's attention to a specific tax clause in the purchase agreement that could give rise to a substantial additional tax assessment in the event of a future reorganisation. The business owner signs, the transaction is completed, and years later an additional tax assessment follows. The adviser ought to have identified this risk. If they fail to do so, there is in principle a breach of their duty of care and consequently an attributable failure to perform under the contract for services, or alternatively an unlawful act (onrechtmatige daad).

Liability for Future and Latent Loss

A particularly important point concerns liability for loss that only becomes apparent at a later stage, such as a subsequent tax assessment or a latent liability risk that only materialises years after the transaction. Dutch liability law provides scope for this: future loss is also eligible for compensation, provided that the loss is sufficiently plausible and stands in a causal relationship with the intermediary's error. In cases of uncertainty as to the extent of the loss, the court will make an estimate, as follows from Article 6:97 of the Dutch Civil Code.

The Amsterdam Court of Appeal, in its judgment of 19 March 2024 (ECLI:NL:GHAMS:2024:860), confirmed the liability of a financial intermediary in a situation where incomplete and incorrect disclosure of information had caused financial detriment to the client. The court emphasised that the intermediary is not only obliged to carry out the client's wishes, but also bears an independent duty to inform and to warn. Failure to comply with this duty may — even in the absence of intent or gross negligence — give rise to full liability for the loss suffered by the client as a consequence.

Indemnification and Damages: How to Proceed

As a business owner who has suffered loss due to the actions or omissions of an intermediary, several legal avenues are open to you. In the first instance, you may hold the intermediary liable on the grounds of non-performance (wanprestatie) (Article 6:74 of the Dutch Civil Code) or unlawful act (Article 6:162 of the Dutch Civil Code). To do so, you must demonstrate the error, the loss, and the causal link. Written evidence, email correspondence, reports, and advisory documents are crucial in this regard.

If the intermediary was involved in an agreement with a third party — and you assert that they fell short in that capacity — you may also seek indemnification (vrijwaring). Indemnification entails that the intermediary compensates you for claims brought against you by third parties as a result of their error. This is particularly relevant in cases of indirect loss that flows back to you through a contractual chain.

From a practical standpoint, it is important that you place the intermediary in default promptly and in writing, that you substantiate and document the loss as thoroughly as possible, and that you additionally investigate whether the intermediary holds professional indemnity insurance. The limitation period for such claims is in principle five years from the moment of awareness of the loss and the liable party, though this always warrants careful assessment on a case-by-case basis.

Conclusion

The duty of care owed by an intermediary is far-reaching. A breach thereof may give rise to liability for direct loss, but also for loss that only becomes apparent in the future. As a business owner, it is advisable to have any financial detriment assessed promptly from a legal perspective, in order to determine whether and to what extent your adviser or intermediary may be held responsible.

Do you have questions about agency or contractual liability?

Mr. Vincent Besters advises entrepreneurs on contract law, agency arrangements and liability issues. Feel free to get in touch for an initial consultation.

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