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Remaining Factors: Limits on the Existence and Extent of Liability of Investment Firms to Compensate for Investment Losses

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EU Investor Protection Regulation and Liability for Investment Losses

Part of the book series: Studies in European Economic Law and Regulation ((SEELR,volume 20))

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Abstract

This chapter analyses a number of remaining private law factors that can restrict the existence and the extent of liability to compensate for investment losses. In particular, the chapter analyses whether these factors raise significant obstacles to investors in obtaining redress and how investors might benefit from the MiFID and MiFID II conduct of business rules in clearing those obstacles. Analysed are the category of damage recoverable in contract or in tort, contributory negligence, limitation periods and the duty to protest. The chapters discusses how investors can recover not only investment losses suffered, but also potentially the profits they could have made if the firm had not acted in breach of a duty for which it is held liable. The chapter shows that German law offers a more straightforward way of compensating for investment losses, while investors could be entitled to a higher award of investment profits in Dutch and English law. The chapter also demonstrates that there is generally limited room to reduce the award of damages under contributory negligence on account of the investor’s dependency on the advice provided and the firm’s position of trust in investment advisory relationships. The chapter furthermore analyses how investors can escape the short general limitation period in English law by basing a claim for damages in the tort of negligence under the Latent Damages Act of 1986. In addition, particular attention is paid to the duty for investors to protest which exists alongside limitation periods in Dutch law.

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Notes

  1. 1.

    CJEU 16 December 1976, ECLI:EU:C:1976:188, C-33/76 (Rewe-Zentralfinanz); CJEU 16 December 1976, ECLI:EU:C:1976:191, C-45/76 (Comet).

  2. 2.

    See with further references to both literature and case law Lang and Loy (2018), no. 798; Hannöver and Walz (2017), no. 100; Grundmann (2016), no. 47; Nobbe and Zahrte (2014), no. 314. See also: Ekkenga (2019), no. 473.

  3. 3.

    The investor is, therefore, unable to claim protection of his positive (or expectation) interest, i.e. to be put in the state as if the contract had been duly performed. Nevertheless, there are those who argue that the measure of damages extends to the positive interest in case the breach of a private law standard that serves as the basis for liability occurs during the contractual phase of the investment advisory relationship. See Spindler (2016), no. 55 and 212; Edelmann (2015), no. 123, with further references to case law.

  4. 4.

    BGH 19 November 2019, XI ZR 575/16, no. 26; BGH 26 February 2013, XI ZR 498/11, no. 25, more recently in the same sense BGH 21 May 2019, XI ZR 340/18, no. 14; BGH 26 March 2019, XI ZR 372/18, no. 13. See also Hannöver and Walz (2017), no. 98; Dieckmann (2011), p. 1153.

  5. 5.

    Nobbe and Zahrte (2014), no. 314; Ekkenga (2019), no. 479.

  6. 6.

    Spindler (2016), no. 212; Braun et al. (2011), no. 508.

  7. 7.

    See in more detail Ekkenga (2019), no. 479 et seq.; Lang and Loy (2018), no. 799; Spindler (2016), no. 212; Nobbe and Zahrte (2014), no. 314; Weller (2011), p. 193; Schäfer (2011), no. 1490.

  8. 8.

    Lang and Loy (2018), footnote 809; Spindler (2016), no. 212.

  9. 9.

    Ekkenga (2019), no. 479 et seq.; Hannöver and Walz (2017), no. 100; Spindler (2016), no. 212; Schäfer (2011), no. 1490.

  10. 10.

    Benicke (2006), p. 835.

  11. 11.

    Lang and Loy (2018), no. 799; Nobbe and Zahrte (2014), no. 316; Schäfer (2011), no. 1494. See about this more in general: Looschelders (2016), p. 1047.

  12. 12.

    Lang and Loy (2018), no. 799; Nobbe and Zahrte (2014), no. 316.

  13. 13.

    Looschelders (2016), p. 1047; Schäfer (2011), no. 1494. See also Sprockhoff (2005), p. 1746, who discusses the difficulty with regard to assessment of the extent to which lost profits can be recovered and how civil courts, under § 287 ZPO, can estimate the height of compensation having regard to generally available sources.

  14. 14.

    In addition, legal literature has made a distinction between three elements of damage. First, a reduction or devaluation. Second, this reduction or devaluation affects an object, be it assets or a person’s physical or mental health. Third, there is a person suffering the reduction or devaluation of an object.

  15. 15.

    Sieburgh (2017), no. 25.

  16. 16.

    Sieburgh (2017), no. 21 and 31; Lindenbergh (2014), no. 6.

  17. 17.

    See also: HR 3 February 2012, ECLI:NL:HR:2012:BY4914 (Rabobank Vaart en Vecht v. X), para. 3.9.1 and 3.9.2; HR 10 July 2009, ECLI:NL:HR:2009:BI3402 (Vos v. TSN), para. 3.2.3.

  18. 18.

    See also Vandendriessche (2015), p. 141.

  19. 19.

    Sieburgh (2017), no. 26; Lindenbergh (2014), no. 44. See also: HR 9 July 2011, ECLI:NL:HR:2011:BQ1684 (G4 v. Hanzevast), para. 3.3.4; HR 10 July 2009, ECLI:NL:HR:2009:BI3402 (Vos v. TSN), para. 3.2.2.

  20. 20.

    The retail investor, nevertheless, will have to overcome the difficulties relating to the issue of causation and the burden of proof with regard to the exact amount of profits he missed out on. See on this Klaassen (2013), p. 157.

  21. 21.

    Sieburgh (2018), no. 641; Sieburgh (2017), no. 26; Lindenbergh (2014), no. 44; Nieuwenhuis (1998), p. 156.

  22. 22.

    Sieburgh (2018), no. 641. See also Lindenbergh (2014), no. 44.

  23. 23.

    See in more detail: Boonekamp (2017), art. 6:97 BW; Sieburgh (2017), no. 34.

  24. 24.

    Under 150 Rv, the duty to adduce facts and the burden of proof rest with the retail investor that brings a claim for damages against the investment firm.

  25. 25.

    HR 8 July 2016, ECLI:NL:HR:2016:1483 (Tennet c.s. v. ABB c.s.), para. 4.4.4.

  26. 26.

    Art. 6:97 BW.

  27. 27.

    Illustrated in: HR 30 November 2007, ECLI:NL:HR:2007:BA4604, in particular para. 4.3 and 5.3.

  28. 28.

    Klaassen (2017), no. 9; Lindenbergh (2014), no. 36; Krans (1999), pp. 72 et seq.

  29. 29.

    See in general Beatson et al. (2016), p. 564; Beale et al. (2015), no. 26.001; McGregor (2014), no. 2.001. The ground rule of this reparatory function of damages was expressed in Livingstone v The Rawyards Coal Company (1880) 5 App. Cas. 25. In the classic decision, Lord Blackburn considered at 9 that the general rule of damages was: “(…) that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the part who has been injured, or who has suffered, in the same position he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.” See also: Powell and Stewart (2017), no. 3.002. That the principal aim of damages is indeed compensatory, or in other words reparatory, was confirmed by Lord Diplock in Albacruz v The Albazero [1977] A.C. 774, at [841] where he described the function of damages as: “to put the person whose right has been invaded in the same position as if it had been respected so far as the award of a sum of money can do so”.

  30. 30.

    Beale et al. (2015), no. 26.002.

  31. 31.

    In more detail and including further references Harder (2010), pp. 77 et seq.

  32. 32.

    Robinson v Harman (1848) 1 Ex 850, at 855. See also Beatson et al. (2016), p. 570; including further references to reaffirmations and restatements of the general principle McGregor (2014), no. 2.003.

  33. 33.

    McKendrick (2013), p. 334. See in more detail about the theoretical underpinnings of compensation for breach of contract: Burrows (2004), pp. 34 et seq.

  34. 34.

    Rubenstein v HSBC Bank [2011] EWHC 2304, as per HHJ Havelock-Allan QC at [116].

  35. 35.

    Burrows (2004), pp. 37 et seq.

  36. 36.

    McKendrick (2013), p. 239.

  37. 37.

    Including further references Harder (2010), p. 74. See also Bristol and West Building Society v Mothew [1998] Ch. 1, at 17, where it was held more in general that there is no reason why the common law measure of damages should not be applied in analogy to equitable compensation for breach of the equitable duty of care and skill.

  38. 38.

    Swindle v Harrison [1997] P.N.L.R. 641, at [650]; Bristol and West Building Society v Mothew [1998] Ch. 1, at 18. In the light of this measure it has been argued that equitable compensation should be regarded as largely restitutionary, rather than compensatory, see: Avgouleas (2005), p. 435. Nevertheless, as mentioned, in the light of the fact that the remedy of equitable compensation is contingent on the existence of factual causation, the aim has been argued to be compensatory, similar to the aim of damages at common law: Harder (2010), p. 77.

  39. 39.

    Powell and Stewart (2017), no. 3.002, footnote 4, including further references.

  40. 40.

    Powell and Stewart (2017), no. 15.086. Similarly Cooke and Oughton (2000), p. 326.

  41. 41.

    For more general information, see: McGregor (2014), no. 2.001.

  42. 42.

    See about this in more detail Alleyne and Seager (2015), pp. 143 and 144.

  43. 43.

    See in extensive detail including further references Walton et al. (2014), no. 5.01; Glover and Murphy (2013), p. 77.

  44. 44.

    Walton et al. (2014), no. 5.01; Glover and Murphy (2013), p. 78; Burrows (2004), p. 53.

  45. 45.

    The approach used by Touljon LJ in Parabola Investments Ltd v Browallia Cal Ltd [2010] EWCA Civ 486, at [22] suggests that civil courts might treat the retail investor’s claim for lost profits more flexibly, not applying the standard of balance of probability to the measurement of the loss.

  46. 46.

    [2010] EWCA Civ 486, at [23]. See also Alleyne and Seager (2015), pp. 143 and 144.

  47. 47.

    BGH 8 July 2010, III ZR 249/09, no. 21; BGH 13 January 2004, XI ZR 355/02, NJW 2004, 1870. Including further references to case law, see Ekkenga (2019), no. 488; Lang and Loy (2018), no. 809; Edelmann (2015), no. 119; Nobbe and Zahrte (2014), no. 420.

  48. 48.

    In this respect Spindler (2016), no. 211; Nobbe and Zahrte (2014), no. 420; Edelmann (2015), no. 119.

  49. 49.

    In the light of: § 242 BGB. Nobbe and Zahrte (2014), no. 420; Edelmann (2015), no. 320.

  50. 50.

    Edelmann (2015), no. 119. See also BGH 13 January 2004, XI ZR 355/02, NJW 2004, 1870.

  51. 51.

    BGH 13 May 1993, III ZR 25/02, NJW-RR 1993, 1115 resp. BGH 13 January 2000, III ZR 62/99, NJW-RR 2000, 1000. See about this also Lang and Loy (2018), no. 808; Rödel (2015), p. 227; Nobbe and Zahrte (2014), no. 321.

  52. 52.

    Rödel (2015), p. 227.

  53. 53.

    Oetker (2016), § 254, no. 145.

  54. 54.

    Art. 6:101 BW.

  55. 55.

    HR 14 January 1983, ECLI:NL:HR:1983:AG4522, para. 3.6. See also on this Boonekamp (2017), art. 6:101 BW.

  56. 56.

    Krans (1999), p. 177.

  57. 57.

    See on this Sieburgh (2017), no. 114.

  58. 58.

    Opinion of Deputy Procurator General C.L. de Vries Lentsch-Kostense for HR 6 September 2013, ECLI:NL:PHR:2013:CA1725 (Van Uden v. NBG Finance), para. 11; Sieburgh (2017), no. 108 et seq.; Krans (1999), pp. 189 et seq.

  59. 59.

    Sieburgh (2017), no. 114.

  60. 60.

    See also: Krans (1999), p. 190.

  61. 61.

    Art. 6:101(1) BW. See in more detail: Krans (1999), pp. 191 et seq.

  62. 62.

    This became most apparent by imposing on a financial institution the obligation to effectively refuse to execute an option order in case of shortfall on the available margin: Van Zuylen v. Rabobank, para. 3.6.4. On account of that it was deemed amounting to an inordinate patronising and paternalistic approach sacrificing the investor’s own responsibility on the altar of investor protection, the approach received criticism in legal literature, see Hartlief (2003), pp. 929, 929 and 937. Maybe having taken some of the criticism to heart, the Hoge Raad reined in on the implications of the special duty of care’s far-reaching protective aim in Dexia v. De Treek. The Hoge Raad restricted, save under exceptional circumstances, the obligation to refuse an order in the event of shortfall on the required margin, underlining the retail investor’s own responsibility, see Dexia v. De Treek, para. 5.2.1.

  63. 63.

    HR 23 May 1997, ECLI:NL:HR:1997:AG7238 (Rabobank v. Everaars), para. 3.3.

  64. 64.

    Rabobank v. Everaars, para. 3.3. Confirmed in: Hoge Raad 11 July 2003, ECLI:NL:HR:2003:AF7419 (Van Zuylen v. Rabobank), para. 3.6.3. Although legal literature initially placed it in the second test of art. 6:101 BW influencing what is considered fair, the Hoge Raad seems to have decided in Dexia v. De Treek (para. 4.16.2) that the general rule impacts on the first test to determine the distribution on the basis of the balancing of causation.

  65. 65.

    X v. ABN Amro, para. 3.3.3; Rabobank Vaart en Vecht v. X, para. 3.6.2; Fortis v. Bourgonje, para. 3.4.

  66. 66.

    Van Boom (2003), p. 563, resp. HR 11 July 2003, ECLI:NL:HR:2003:AF7419 (Van Zuylen v. Rabobank), NJ 2005/103, annotated by du Perron and Hartlief (2003), p. 936.

  67. 67.

    Including further references, see opinion of Advocate General Wissink HR 3 February 2017, ECLI:NL:HR:2017:164, para. 1.2. HR 5 June 2009, ECLI:NL:HR:2009:BH2815 (Dexia v. De Treek), para. 5.7; HR 29 April 2011, ECLI:NL:HR:2011:BP4003 (Bouwhuis/Dexia), NJ 2013/41, annotated by J.B.M. Vranken, sub 5; HR 5 June 2009, ECLI:NL:HR:2009:BH2811 (Levob Bank v. Bolle), NJ 2012/184, annotated by J.B.M. Vranken, sub 16. With a view to ensuring a justified solution, the Hoge Raad explicitly held in Dexia v. De Treek (para. 5.6.1 et seq.) that in the event a csqn relationship is established using the ad hoc reversal rule (see in more detail about this instrument: Sect. 7.5.3.1), the mechanism of contributory negligence would have to be applied. See on this opinion of Advocate General Wissink HR 24 December 2010, ECLI:NL:PHR:2010:BO1799, para. 3.4 (Fortis v. Bourgonje), para. 3.62 and 3.76; Schild (2009), pp. 263. See also Pijls (2009), p. 172, who argues that alleviating the procedural position regarding proof of a csqn relationship combined with the application of contributory negligence (art. 6:101 BW) will lead to overcompensating the retail investor. Dismissive of this argument is opinion of Advocate General Wissink Fortis v. Bourgonje, para. 3.79.

  68. 68.

    HR 6 September 2013, ECLI:NL:HR:2013:CA1725 (Van Uden v. NBG Finance), para. 3.4.2, confirmed in HR 12 October 2018, ECLI:NL:HR:2018:1935, para. 3.6.3. See also HR 12 April 2019, ECLI:NL:HR:2019:590, para. 4.3.3 where the Court specifies the relationship central in Van Uden v NBG Finance as one between a (retail) client and a firm providing independent investment advice.

  69. 69.

    Referring to HR 8 February 2013, ECLI:NL:HR:2013:BY4600 (Van de Steeg v. Rabobank), para. 4.3.1 and 4.3.2.

  70. 70.

    HR 6 September 2013, ECLI:NL:HR:2013:CA1725 (Van Uden v. NBG Finance), para. 3.4.2.

  71. 71.

    In the same vein conclusion Attorney General M.H. Wissink ECLI:NL:PHR:2016:1165, no. 3.11.

  72. 72.

    See on this: opinion of Attorney General D.W.F. Verkade ECLI:NL:PHR:2006:AX3202, no. 4.3; Van Luyn and Du Perron (2004), pp. 179 et seq.

  73. 73.

    McGregor (2014), no. 7.001; Harder (2010), pp. 129 et seq.; Burrows (2004), pp. 129 et seq.

  74. 74.

    McGregor (2014), no. 7.003.

  75. 75.

    Including further references Jones (2018), no. 3.65; Harder (2010), pp. 131 and 132.

  76. 76.

    For more general information, see McGregor (2014), no. 7.004. See also Haider Abdullah v Credit Suisse [2017] EWHC 3016, at [244].

  77. 77.

    Owens v Brimmell [1977] Q.B. 859, as per Watkins J at 864. See also Jones (2018), no. 3.97; Harder (2010), p. 131.

  78. 78.

    McGregor (2014), no. 7.006 et seq.; Harder (2010), pp. 135 et seq.

  79. 79.

    [1949] 2 K.B. 291, at 326. See also about this decision: McGregor (2014), no. 7.007.

  80. 80.

    About this in more detail Harder (2010), p. 135.

  81. 81.

    [1940] A.C. 152, at 165.

  82. 82.

    Nance v British Columbia Electric Railway Company [1951] A.C. 601, as per Viscount Simon at 611.

  83. 83.

    Powell and Stewart (2017), no. 5.172.

  84. 84.

    Powell and Stewart (2017), no. 5.172.

  85. 85.

    Jones (2018), no. 3.75; McGregor (2014), no. 7.009.

  86. 86.

    [1986] 2 All E.R. 488, at 508.

  87. 87.

    [1988] 3 W.L.R.565, as per O’Connor LJ at 578, as per Neill LJ at 586 and as per Sir Roger Ormrod at 590. Although application of the mechanism of contributory negligence to concurrent claims in tort and contract appears to be settled law, its wisdom has been questioned, and, as of yet, the matter has not been finally solved by the Supreme Court. See in more detail about this including further references: Powell and Stewart (2017), no. 5.175; McGregor (2014), no. 7.010 et seq. and 22.004.

  88. 88.

    For more general information, see: Powell and Stewart (2017), no. 5.176.

  89. 89.

    Jones and Dugdale (2010), no. 3.61.

  90. 90.

    Harder (2010), p. 173.

  91. 91.

    The provision was a peculiar one indeed, considering the discussion in German law regarding the nature of the conduct of business implemented in the WpHG, in the sense that while the provision was contained in the public law financial supervision framework, it set the time limit for damages claims rooted in private law. Some proponents of the dual nature (“Doppelnatur”) of MiFID and MiFID II conduct of business rules based this characterisation on this peculiarity, see in more detail Sect. 4.7.2.2.

  92. 92.

    See in more detail Schäfer (2011), no. 1497.

  93. 93.

    About this in more detail, see Hannöver and Walz (2017), no. 95; Nobbe and Zahrte (2014), no. 418; Braun et al. (2011), no. 521; Schäfer (2011), no. 1497. When an investor brings a claim for a firm’s intentional breach of duty and the firm argues the investor’s is barred in accordance with the special limitation period, the firm bears the burden to prove that it did not act in breach with the duty in question intentionally, see BGH 5 June 2018, XI ZR 388/16, no. 18.

  94. 94.

    BGH 8 March 2005, XI ZR 170/04. See also Schäfer (2011), no. 1498.

  95. 95.

    BGH 19 December 2006, XI ZR 56/05, no. 13 et seq.; BGH 8 March 2005, XI ZR 170/04. In the same sense Nobbe and Zahrte (2014), no. 418.

  96. 96.

    BGH 19 December 2006, XI ZR 56/05, para. 14. See Nobbe and Zahrte (2014), no. 419.

  97. 97.

    Schuldverschreibungsgesetz, BGBl. I, 2512, 2518.

  98. 98.

    Ekkenga (2019), no. 492; Grundmann (2016), no. 51; Spindler (2016), no. 213 et seq.; Nobbe and Zahrte (2014), no. 421. See also in general with further references BGH 21 May 2019, II ZR 340/18, no. 13 et seq.

  99. 99.

    See in more detail: Spindler (2016), no. 214b; Nobbe and Zahrte (2014), no. 434.

  100. 100.

    BGH 23 September 2014, XI ZR 215/13, no. 34; BGH 8 April 2014, XI ZR 314/12, no. 27.

  101. 101.

    BGH 20 January 2009, XI ZR 504/07, no. 47; BGH 3 June 2008, XI ZR 319/06, no. 27.

  102. 102.

    BGH 20 January 2009, XI ZR 504/07, no. 47. See also: Spindler (2016), no. 214b.

  103. 103.

    With further references to case law: Spindler (2016), no. 214a. See also Nobbe and Zahrte (2014), no. 425 et seq.

  104. 104.

    Grundmann (2016), no. 51; Nobbe and Zahrte (2014), no. 423.

  105. 105.

    Art. 3:310(1) BW.

  106. 106.

    In more detail including further references Sieburgh (2017), no. 411 and 415.

  107. 107.

    HR 6 April 2001, ECLI:NL:HR:2001:AB0900, para. 3.4.2, more recently: HR 31 March 2017, ECLI:NL:HR:2017:552, para. 3.3.2. In more detail including further references Sieburgh (2017), no. 415.

  108. 108.

    HR 20 February 2004, ECLI:NL:HR:2004:AN8903, para. 3.9.

  109. 109.

    HR 26 November 2004, ECLI:NL:HR:2004:AR1739, para. 3.4.

  110. 110.

    See in further detail including further references Lock (2018), art. 3:310.

  111. 111.

    In the context of investment advisory relationships: HR 11 June 2010, ECLI:NL:HR:2010:BL8297 (Kortenhorst v. Van Lanschot).

  112. 112.

    See HR 8 February 2013, ECLI:NL:HR:2013:BY4600 (Van de Steeg v. Rabobank), para. 4.2.2. Similarly De Jong (2014), no. 213; Van Boom (2013), p. 758.

  113. 113.

    Van de Steeg v. Rabobank, para. 4.2.1; HR 23 November 2007, ECLI:NL:HR:2007:BB3733 (Ploum v. Smeets I), para. 4.8.2, referring to HR 21 April 2006, ECLI:NL:HR:2006:AW2582, para. 4.3.

  114. 114.

    HR 29 June 2007, ECLI:NL:HR:2007:AZ7617 (Pouw v. Visser). See also De Jong (2014), no. 213; Hijma (2013), p. 955.

  115. 115.

    Van de Steeg v. Rabobank, para. 4.3.2–4.3.3. See about the overlap and difference with art. 7:23 BW: De Jong (2014), no. 213; Hijma (2013).

  116. 116.

    Van de Steeg v. Rabobank, para. 4.3.2. Confirmed in: HR 2 September 2016, ECLI:NL:HR:2016:2012 (Oerlemans v. Beckers), para. 5.6.2; HR 6 September 2013, ECLI:NL:HR:2013:CA1725 (Van Uden v. NBG Finance), para. 3.4.2.

  117. 117.

    Van de Steeg v. Rabobank, para. 4.3.2.

  118. 118.

    Van de Steeg v. Rabobank, para. 4.3.3.

  119. 119.

    Art. 3:37(1) BW.

  120. 120.

    HR 11 June 2010, ECLI:NL:HR:2010:BL8297 (Kortenhorst v. Van Lanschot), para. 3.5.

  121. 121.

    HR 29 June 2007, ECLI:NL:HR:2007:AZ7617 (Pouw v. Visser), para. 3.3.2.

  122. 122.

    Van de Steeg v. Rabobank, para. 4.2.5.

  123. 123.

    Van de Steeg v. Rabobank, para. 4.2.6. See also: Van de Steeg v. Rabobank, NJ 2014/497, annotated by Jac. Hijma, sub 10.

  124. 124.

    Van de Steeg v. Rabobank, para. 4.2.6.

  125. 125.

    HR 25 March 2011, ECLI:NL:HR:2011:BP8991 (Ploum v. Smeets II), para. 3.3.2.

  126. 126.

    Considering its limited relevance, the (nevertheless very interesting) discussion following the Hoge Raad’s decision in Ploum v. Smits I is not considered further detail, see HR 23 November 2007, ECLI:NL:HR:2007:BB3733 (Ploum v. Smeets I), in particular para. 4.8.4, seemingly siding with Asser (1992), no. 43.

  127. 127.

    HR 12 December 2014, ECLI:NL:HR:2014:3593 (Far Trading v. Edco II). See also HR 8 February 2013, ECLI:NL:HR:2013:BX7195 (Kramer v. Lanschot), para. 3.6, where it held that a retail investor is required to state and, if necessary, prove that the protested against defective performance as well as at what time that protest was expressed in the event a firm mounts a defence on the basis of art. 6:89 BW to dismiss the investor’s claim for damages.

  128. 128.

    Far Trading v. Edco II, para. 5.6.3.

  129. 129.

    Birmingham City Council v Abdulla [2012] UKSC47, as per Lord Sumption at [42].

  130. 130.

    See also Powell and Stewart (2017), no. 5.034.

  131. 131.

    Knox v Gye (1871–72) L.R. 5 H.L. 656, at 674; Cia de Seguros Imperio v Heath (REBX) [2001] 1 W.L.R. 112, as per Waller LJ at 123 and 124. See in more detail Powell and Stewart (2017), no. 5.145 et seq.; McMeel and Virgo (2014), no. 23.70 et seq.

  132. 132.

    Powell and Stewart (2017), no. 5.038; Beatson et al. (2016), p. 638; Law Commission, ‘Limitation of Actions’, Law Commission No. 270, London: 2001, no. 2.2.

  133. 133.

    See in more detail including further references: Powell and Stewart (2017), no. 5.040.

  134. 134.

    McMeel and Virgo (2014), no. 23.07 and 23.62; Law Commission, ‘Limitation of Actions’, Law Commission No. 270, London: 2001, no. 2.4. See also: Martin v Britannia Life Limited [2000] Lloyd’s Rep PN 412, at [9.1] and [9.2].

  135. 135.

    Powell and Stewart (2017), no. 5.040 and 5.064. See also: Martin v Britannia Life Limited [2000] Lloyd’s Rep PN 412, as per Parker J at [9.16].

  136. 136.

    Cartledge v E. Jopling & Sons [1963] A.C. 758, at 784; Fiona Trust & Holding Corporation v Yuri Privalov [2010] EWHC 3199 (Comm), at [135]. In considerably more detail including further references to case law Burrows (2015), pp. 314 et seq., who is critical of the approach to the burden of proof and argues that the law might have taken a wrong turn in this respect.

  137. 137.

    Powell and Stewart (2017), no. 5.040; McMeel and Virgo (2014), no. 11.02.

  138. 138.

    Powell and Stewart (2017), no. 5.040 and 5.088.

  139. 139.

    See also Powell and Stewart (2017), no. 5.089.

  140. 140.

    Jacobs v Sesame [2014] EWCA Civ 1410, as per Tomlinson LJ at [4]; Roger Ward Associates Limited v Britannia Assets (Uk) Limited [2013] EWHC 1653 (QB), as per Coulson J at [18]; Haward v Fawcetts (A Firm) [2006] UKHL 9, as per Lord Mance at [106]. Also about the burden of proof being on the claimant to show that his claim was brought within the special limitation period and more in general about what knowledge is required for the time to start running, see Powell and Stewart (2017), no. 5.091 et seq.

  141. 141.

    Roger Ward Associates Limited v Britannia Assets (Uk) Limited [2013] EWHC 1653 (QB), as per Coulson J at [22], referring to the decision by the House of Lords in Haward v Fawcetts.

  142. 142.

    [2006] UKHL 9, at [10], referring to the decision in Wilkinson v Ancliff [1986] 1 W.L.R. 1352, as per Slade LJ at 1365.

  143. 143.

    Nash v Eli Lilly & Co [1993] 1 W.L.R. 782, at 792.

  144. 144.

    Nash v Eli Lilly & Co [1993] 1 W.L.R. 782, at 799; Haward v Fawcetts (A Firm) [2006] UKHL 9, at [10] and [90]. See also: Roger Ward Associates Limited v Britannia Assets (Uk) Limited [2013] EWHC 1653 (QB), as per Coulson J at [22].

  145. 145.

    See about this in general: Henderson v Merrett Syndicates Ltd [1995] 2 A.C. 145, at 163.

  146. 146.

    Also in this regard Stanton (2017), p. 169; McMeel and Virgo (2014), no. 11.02.

  147. 147.

    However, the retail investor can also choose to hold on to the financial instrument and bring a claim for compensation of additional expenses incurred in the execution of the investment. If the retail investor has already disposed of the investment and this has caused financial losses, the investor can bring a claim for compensation for the difference between his initial investment and the realised loss including any additional expenses.

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    Marnix Wallinga

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Wallinga, M. (2020). Remaining Factors: Limits on the Existence and Extent of Liability of Investment Firms to Compensate for Investment Losses. In: EU Investor Protection Regulation and Liability for Investment Losses. Studies in European Economic Law and Regulation, vol 20. Springer, Cham. https://doi.org/10.1007/978-3-030-54001-2_8

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