Abolition of the quasi-immunity of the auxiliary person

Important increase of the personal liability of directors, subcontractors and employees!

On 1 February 2024, Book 6 of the New Civil Code was approved by parliament. This new book reforms Belgian extra-contractual liability law. The increase of the liability of 'auxiliary persons', such as directors of companies and associations, subcontractors and employees, is particularly striking. For these individuals, it is crucial to proactively take measures to protect against potential future claims that may be brought against them.

We briefly explain the consequences for practice below and also propose a number of protective measures that can (partially) contain these consequences. 

What is an 'auxiliary person'?

An 'auxiliary person' (in current practice called an 'execution agent') is a natural or legal person who is entrusted by the debtor of a contractual obligation with the full or partial performance of that obligation, regardless of whether he performs this obligation on his own behalf and in his own name, or on behalf and/or in the name of the debtor.

Directors of companies and associations, subcontractors, but also employees are 'auxiliary persons'.

Some common examples: 

• The plasterer who, on behalf of the main contractor, carries out plastering work for the client who has only contracted with the main contractor. There is no contract between the client and the plasterer, which means that the latter can be regarded as the auxiliary person of the main contractor who has the contract with the client.
• The directors of a legal entity are a subsidiary of the legal entity they control.
• Employees are auxiliary persons of their employer.
• Physical persons working through a management company, are personally considered to be an auxiliary person of this company towards the co-contractor of the management company.

In the following, 'principal' refers to the person for whom the auxiliary person works, and the contracting party of the 'principal' is referred to as 'co-contractor', with whom the auxiliary person therefore has no direct contractual relationship.

Current law: elaborate protection of the person

Under current law, the auxiliary person ('execution agent') has an elaborate protection vis-à-vis the co-contractor of his principal: as a rule, the co-contractor cannot hold the auxiliary person accountable for the latter's defective performance of the agreement between the principal and its main co-contractor. This is established case law (of Belgium’s highest civil court) and is in practice referred to as the 'quasi-immunity of the auxiliary person/execution agent'.

The auxiliary persons are therefore extensively protected against non-contractual claims by the contracting parties of their principal pursuant to the wrong, late or non-performance of the principal's contractual obligations.

Some common examples: 

• Under current law, if the plasterer has carried out its plastering work completely incorrectly, the co-contractor can only turn to his main contractor (with whom he has an agreement) for compensation and cannot hold the plasterer liable for damage resulting from this fault.
• The customer of a company whose directors refuse to perform a contractual obligation of the company cannot hold the directors personally liable for the damage resulting from this refusal.
• An employer's customer cannot hold the former’s employee liable for the damage he has suffered as a result of an employee's fault in the performance of his employment contract.
• The principal of which the CFO is a management company cannot turn to the natural person behind the management company for an error made by the natural person in the performance of the service agreement.

The only exception to this immunity under current law is that auxiliary persons can be held liable if the fault attributed to them constitutes a criminal offence (e.g. involuntary assault and battery, bribery, abuse of trust, forgery, fraud) or if this fault relates not only to the contractual obligation, but also to the general duty of care incumbent on them. In addition, that fault must have caused damage that was not solely attributable to the poor performance of the main contract, meaning, in practice, only in very exceptional circumstances such event gives rise to liability on the part of the auxiliary person.

Change is coming...

The new Civil Code[1] puts an end to the quasi-immunity of the auxiliary person:

'Unless otherwise provided by law or by contract, the provisions of law on non-contractual liability shall apply between the damaged party and the auxiliary person of his or her co-contractors.'

On the basis of the aforementioned article, an auxiliary person can henceforth be held directly (non-contractually) liable by the co-contractor of his principal.

Some common examples: 

• If the above-mentioned plasterer has carried out his plastering work completely incorrectly, the owner of the building can therefore not only turn to the main contractor (with whom he has an agreement) for compensation, but he can also sue the plasterer (with whom he does not have an agreement) for damage resulting from this error.
• The customer of a company whose directors refuse to perform a contractual obligation of the company may, in addition to the company, also hold the directors personally liable for the damage resulting from this refusal (of course to the extent this refusal constitutes a fault on the part of these directors).
• From now on, an employer's customer can hold the former’s employee liable for the damage he has suffered as a result of an employee's fault in the performance of his employment contract. However, there is an important legal restriction for employees, which we will return to below. 
• The client whose CFO is a management company may turn to the natural person behind the management company for an error made by the natural person in the performance of the service agreement.

Some key nuances 

First and foremost, of course, it must still be proven that the auxiliary person has actually committed a foul that has caused damage to the principal's co-contractor.

It is also important to note that the provisions of Book 6 are, in principle, of supplementary law: the contracting parties can therefore deviate from them contractually, for example by stipulating that a co-contracting party shall refrain from bringing non-contractual liability claims against the auxiliary persons of its contractual partner (i.e. the principal).

Moreover, the provisions of Book 6 are without prejudice to other legislation that regulates the non-contractual liability of certain actors. For example, employees will also be protected in the new situation by Article 18 of the Employment Contracts Law, meaning that also in the future, they can only be held liable by third parties, including their employer's co-contractor, for gross faults or repeatedly occurring minor faults. This is evident from various passages in the parliamentary preparations. 

In our opinion, the foregoing should apply in a similar way to the limitations of liability laid down in the Code of Companies and Associations[2] (CCA) with regard to directors' liability. This means that directors can still invoke the restrictions provided for in the CCA[3] for errors committed in the performance of their mandate as directors. However, in the opinions published to date, we also find divergent views (see below).

Also in our opinion, there is certainly no doubt that, on the basis of Book 6, directors can be held liable on non-contractual grounds for their faults that have nothing to do with the performance of their directorship mandate, without them being able to invoke the limitations of Article 2:57 of the CCA (after all, this is no case of 'directors' liability'). 

The new Civil Code[4] also provides that the auxiliary person “may invoke the same means of defence as" the defences that his principal can invoke against his co-contracting party on the basis of the latter’s (main) agreement with the principal. Limitations of liability stipulated by the principal in the (main) agreement with the co-contracting party will therefore apply to claims brought by the co-contracting party against the auxiliary person.

• Example: If the main contractor has stipulated in the agreement with the owner of the building that his liability is limited to €25,000, this limitation of liability can also be invoked by the plasterer against the owner of the building.

The same article also provides that the auxiliary person “may also invoke [against the co-contractor] the means of defence which he himself may invoke in this regard against his [own principal]” on the basis of their contract, which thus acquires third-party operation (‘derdenwerking’). Limitations of liability stipulated by the auxiliary person in his contract with his principal will therefore apply to claims brought by the co-contracting party against the auxiliary person.

• Example: If the plasterer has stipulated in the agreement with the main contractor that his liability is limited to €25,000, this limitation of liability can also be invoked by the plasterer against the owner of the building.

Auxiliary persons may also make use of defences arising from the legislation on special contracts (e.g. the rules on purchase and sale, rent, deposit, hotel contracts, etc.), including the limitation rules applicable to the contract. 

It is important to note that the Belgian Civil Code[5] stipulates that the possibility of invoking the aforementioned defences never applies to damage resulting from (i) a violation of the physical or psychological integrity of the injured co-contracting party of his principal or (ii) a fault committed by the auxiliary person with the intention of causing damage.  

In the opinions published to date, it is sometimes stated that the invocation of the aforementioned defences for damage resulting from a violation of the physical or psychological integrity of the injured party, also applies to damage that is the result of a fault that falls under the directors' liability (as a result of which in such cases the limitations[6] might be exceeded). We do not share this view because we believe that Article 2:57 of the CCA is a statutory regulation comparable to Article 18 of the Employment Contracts Act and we see no reason to allow these two statutory regulations to interact differently with Book 6 of the Civil Code. Hopefully, the legislator or the case law will soon provide more clarity on this matter.

Entry into force

The new rules will enter into force on the first day of the sixth month following the month in which the law is published in the Belgian Official Gazette. Since this has not yet happened, we do not yet know the exact date on which the new rules will enter into force, although we assume that the aim is for them to enter into force on 1 January 2025.

The law introducing the new Book 6 explicitly stipulates that the new rules will only apply to facts that occur after the law enters into force. 

Thus, if the harmful event occurs before the entry into force, the auxiliary person will still be able to benefit from quasi-immunity, even if the claim for damages is brought to court after the entry into force of the new rules.

Conversely, if the harmful event occurs after the entry into force, the auxiliary person will no longer be able to benefit from quasi-immunity, even if his contractual relationship predates the entry into force of the new rules. In this way, the new rules also have an impact on the performance of existing contracts.

Possible protection measures

The foregoing makes it clear that immediate action is required to protect the auxiliary persons. The following measures can be considered:

• In order to protect your auxiliary persons, you can include a clause in your general terms and conditions and customer contracts that your customers/clients declare that they waive their right to bring liability claims against your agents (clause for the benefit of a third party).
• If you yourself act as an auxiliary person/subcontractor for a principal, you can include in your agreement with your principal:
• (i) a clause stating that you cannot be sued for damages twice for the same fault: either you compensate your principal or his client, but never both ('non bis in idem');
• (ii) the obligation for your principal to integrate a clause in its commercial agreements that its co-contractors (e.g. its customers/clients) declare to waive their right to bring liability claims against its auxiliary persons or at least to reproduce the limitations of liability from your agreement with your client as a perpetual clause in its contracts with its own clients, and to provide evidence of this before you start the provision of your services;
• (iii) a clause pursuant to which your principal will indemnify you against any extra-contractual claim by a third party (read: your principal's co-contractor). 
• It is also possible to discuss with your insurer the extent to which you or your auxiliary persons are protected against such claims on the basis of your current insurance policies.  If necessary, the coverages should be extended to include these cases. 

Conclusion

The above shows that the abolition of the quasi-immunity of the auxiliary person increases the liability risk of many actors in the business world (and beyond). After all, most of us qualify as 'auxiliary person' in one way or another relationship, be it in a director's mandate, as consultant, employee, subcontractor,... 

Good contractual provisions, in combination with comprehensive insurance, can protect you against this to a large extent. It is therefore important to prepare yourself for this new reality as soon as possible by reviewing your commercial toolbox (customer contracts, consultancy agreement, general terms and conditions, etc.) and your insurance policies and adapting them where necessary.

 
[1] Article 6.3, § 2
[2] Article 2:57
[3] Article 2:57
[4] Article 6.3, § 2
[5] Final sentence of Article 6.3, §1 in fine
[6] Article 2:57 of the CCA