Ophthalmologists unemployed after relaunch hospital

When a bankrupt company is relaunched there are many issues. Is the entire company taken over or does the buyer only take over certain (healthy) components? What happens with current contracts? And are the aggrieved parties entitled to damage compensation? These issues were addressed in recent proceedings about the aftermath of the bankruptcy of a hospital. Insolvency lawyer in The Netherlands Marco Guit explains.

Termination contract due to bankruptcy of counterparty

The reason for the proceedings was the following. Two ophthalmologists conducted the ophthalmology department of the Ruwaard van Puttenziekenhuis [Hospital] (SRPZ), based on an accreditation agreement. This agreement includes, among others, the clause that, on termination, the specialists are entitled to goodwill for the work conducted in the hospital. At a certain time the hospital goes bankrupt. The trustee reaches an agreement with the Spijkenisse Medisch Centrum [Medical Centre] (SMC) about a relaunch with a sales and purchase agreement. This agreement states that the SMC shall inform the trustee which current contracts it wants to take over. The SMC did not take over the contracts of the ophthalmologists. Instead the SMC entered into an employment contract with them for 6 months. These employment contracts were not renewed after expiry by the SMC.

Relaunch company with an assets/liabilities transaction

In legal proceedings, the ophthalmologists claim damage compensation from the SMC for breach of contract. The court finds however that there is no breach of contract because the accreditation agreements were not honoured by the SMC. In principle, the ophthalmologists can only claim compliance from the (bankrupt) SRPZ. The ophthalmologists’ statement that the (entire) company is transferred (including the accreditation agreements), and not just certain assets The assets of a Dutch company reflect the value of all that the company possesses
» Meer over assets assets, is dismissed by the court. A relaunch of practically the entire company can also have the form of an assets transaction.

Relaunching party no obligation towards ophthalmologists

Also, according to the court, there is no wrongful act by the SMC. As relaunching party, the SMC was in principle free to enter (again) into a contract with the ophthalmologists or not. A party willing to take over components is not obliged to take over all components of the bankrupt company. Also, there was no obligation for the SMC to enter into an employment contract with the ophthalmologists, let alone continue such a contract. The SMC could therefore decide (even without stating the reason) not to employ the ophthalmologists after expiry of their temporary contracts.

Insolvency lawyer in The Netherlands

Finally, according to the ophthalmologists there was unjust enrichment. This can result in damage compensation equal to the enrichment. Allegedly, the SMC took over their practice and thereby profit from the goodwill they acquired without paying any compensation for this. The court considers that the loss of the ophthalmologists (loss of goodwill) was the result of the bankruptcy, not of actions by the SMC. It is probable that other parties profited from the bankruptcy of the SRPZ, in the sense that patients who would have gone to the SRPZ, had it not been bankrupt, now go to other hospitals/specialists. This does not make this enrichment unjust. Third parties are entitled to profit from the bankruptcy of a competitor. This can change if there are special circumstances, for example if a third party actively encourages the bankruptcy. This is not the case here. The ophthalmologists are not entitled to damage compensation and the claims are denied.