In December 2022, the claimant (Welten Group B.V.) purchased the shares in Welten Holding B.V. (the Group, which runs a staffing business in the financial sector) from One Two Work B.V. In these proceedings the Purchaser argues that the Seller breached certain warranties in the Share Purchase Agreement (SPA), with the intent to defraud the Purchaser and induce it to enter into the SPA and complete the Transaction. The Purchaser was insured, for breaches of warranties, by insurers in Dublin, Frankfurt and Brussels (the Underwriters). The Underwriters (who were represented by a Dutch lawyer and a lawyer who was a member of the Paris bar) joined these proceedings on the Purchaser's side.

The Court finds in favour of the Purchaser (and the Underwriters). The Group CFO improperly approved certain cost deferrals and a provision for holiday accruals, intending to conceal the Group's lower profitability in 2022. The lower profitability would, if disclosed, jeopardise the transaction. In the Court's opinion, the CFO's actions are attributable to the Seller, as the CFO was the one performing the actions and having the knowledge of the subject-matter for which the Seller is held liable. The CFO had a duty to communicate her actions and knowledge to the Seller. Also, the Seller had a duty to enquire regarding the information needed to uphold the warranties. 

The CFO’s actions constitute fraud under Dutch law (Article 3:44(3) Dutch Civil Code). This in turn means that the Seller breached certain warranties and that the limitation and exclusion of liability in the SPA do not apply. Therefore, the Seller is fully liable for any damages resulting from these breaches. The Court allows the parties to elaborate on the quantification of damages.

The Court's judgment also concerns Seller's motion for disclosure of documents. The Court finds that the disclosure obligation in the earn out annex to the SPA - construed on the basis of the most obvious text-based meaning  - is limited to documents which are relevant to the review of the earn out calculation performed by the Purchaser. It does not extend to the assessment as to whether the Purchaser breached any earn out covenants. Also, the documents requested by the Seller do not fulfil the contractual requirement of “reasonably requested". The wide scope of the motion may lead to the Purchaser having to sift through thousands of documents at substantial cost. Furthermore, the document requests cannot be awarded on the basis of Article 843a Dutch Code of Civil Procedure. According to well-established case law, the party requesting access or a copy of a document or range of documents must state and substantiate facts and circumstances, and submit any available evidence which justifies the conclusion that it is sufficiently likely that the alleged breach of contract (or tort) actually occurred.

This standard enables the Court to strike a balance between the interests of the claimant in being able to discover the truth and strengthen the claimant's evidentiary position, and the interests of the defendant in not having to disclose confidential information and in being spared the drastic burdens that disclosing evidence often entails.

The Seller could and should have done more to substantiate its argument that the 2023 EBITDA would have been more than EUR 14 million if the Purchaser had calculated the earn out correctly and had not breached any Earn Out Covenants. Therefore, the motion is denied.