Complaining to the bank
The Dutch civil code imposes upon the creditor a ‘duty’ to complain in good time about a defect in the performance of the debtor. But when does a client complain in good time about a bank violating its duty of care?
As if complaining isn’t already their national sport, the Dutch civil code in Article 6:89 additionally imposes upon the Dutch a ‘duty’ to complain. That is, a creditor who fails to complain in good time to a debtor about a defect in the performance of that debtor, forfeits any right based on that defect. Thus the creditor’s duty to complain potentially provides the debtor with a powerful defence. In the eyes of the legislator this is justified by the debtor’s interest to know quickly whether his performance measures up to the underlying obligation and if not, to be able to make up for the defect or to collect evidence in anticipation of a claim.
But when is a complaint made in good time? Although the duty to complain was introduced in 1992, with the advent of the new civil code, it was only over the past few years that this question became the subject of extensive litigation. In a series of cases, the Supreme Court has consistently refused to formulate any general rule or even an indication. The timeliness of a complaint is to be determined on a case-by-case basis. Not only the debtor’s interest the duty to complain was originally meant to protect is to be taken into account, but also the creditor’s interest not to easily lose all remedies.
This year, the Supreme Court has continued its efforts to take the edge off the duty to complain. Interestingly, three new cases do not concern the sale of a (defective) good, but the performance of a bank in view of its duty of care to inform and warn clients about the risks of financial instruments. In one of these cases, a farmer challenged Rabobank because, amongst other things, the bank had not warned him sufficiently about the risks of stocks and options trading. The District Court and the Court of Appeal agreed with Rabobank that the farmer was late in lodging his complaint, as three years had passed since the losses kicked in, and did not go into the merits of the case.
Graduate students, who wrote an annotation, agreed with the Supreme Court quashing the decision of the Court of Appeal. Indeed the latter court rather easily jumped to the conclusion that three years was a substantial period of time and that therefore, in the absence of ‘particular circumstances’, the farmer had forfeited his rights. The Supreme Court decided that the term for making a complaint to the bank commences only if the client is aware of the duty of care of the bank and has a reasonable suspicion that the bank has violated this duty. Merely suffering losses, therefore, does not suffice, all the more so if the bank ascribes these to market circumstances or otherwise reassures the client.
Some students were critical, though, about the requirement that the client is to be aware of the duty of care of the bank for the term for making a complaint to commence in the first place. I agree with them. Obviously, the duty of care of the bank is not as self-evident a concept as that of conformity with respect to, for instance, the sale of a pair of trousers. Clients can be supposed to be acquainted with the concept, however, through the general banking conditions applicable to their contract with the bank. Moreover, neither the diffuse nature of the bank’s duty of care nor its purpose to balance the information asymmetry between bank and client warrants abandoning the law’s cornerstone axiom that we are all simply supposed to know the law. Even if in fact we don’t (always).
Many thanks to the students of Group 1 of the 2013-2014 Practicum civil law course.