The High Court determined whether a number of transactions gave rise to liability for the board of directors, including a loan granted in May 2008, which was subsequently re-granted, concerning a property project at Østerbro in Copenhagen. Finansiel Stabilitet had made an aggregate claim concerning the transactions of DKK 375 million against a number of board members who had been on the board for a long period prior to the loan grant in May 2008, while a claim of DKK 285 million was made against the persons appointed to the board after May 2008.
LOAN GRANTS GIVING RISE TO LIABILITY
The High Court found that the entire board was liable for the re-granting of the loan's currency account in December 2009 and for maintaining the loan until the end of June 2010. The re-grants took place despite the client’s substantial exceeding of a loss limit of DKK 100 million at a time when Amagerbanken was facing significant liquidity challenges. The re-grant of the currency account was subject to significant risks, which subsequently led to a substantial loss for the bank.
LIABILITY IN DAMAGES, ALLOCATION OF RESPONSIBILITY AND RELAXATION
The Court ruled in favour of one executive officer as Finansiel Stabilitet had re-employed the executive officer without making a reservation for compensation, while the court also ruled in favour two employee-elected board members based on the general rule of mitigation in the Liability in Damages Act when liability is considered unreasonably burdensome.
In allocating the mutual responsibility, the Eastern High Court attached importance to any existing insurance. The chairman of the board had taken out a directors and officers liability insurance with a cover of DKK 100 million. However, it had not been confirmed whether the insurance would provide cover. In the grounds, the Eastern High Court took into account that if there was insurance cover, the chairman should indemnify the other board members who were found to be liable.
The High Court judgment may be interpreted as being fundamental in relation to the assessment of the liability of board members in financial companies as the High Court decided on the board’s assessments and decisions in a number of specific transactions, in which connection eight board members were liable in damages for the loss in connection with one loan grant, including currency account. The judgment may be seen as strict, especially on the board members appointed in May 2008 just before the meeting when the loan was re-granted. The High Court judgment was delivered in continuation of the Supreme Court judgment of 19 January 2019 where three board members of Capinordic Bank were subject to liability in damages for negligent lending.