General manager and parent company must pay litigation costs for a subsidiary

I. A, Nettforsk AS (Counsel Per Conradi Andersen) v. SinkabergHansen AS (Counsel Ida Espolin Johnson)
II. SinkabergHansen AS (Counsel Ida Espolin Johnson) v.
Nettforsk AS, A (Counsel Per Conradi Andersen)

A company had transferred its patent rights to a method for treatment of salmon lice to a wholly owned subsidiary. Another subsidiary was responsible for the licensing of the patent. The latter brought an infringement action against a salmon farmer that, in turn, brought a validity action against the subsidiary that had been assigned the patent rights. The subsidiaries lost the cases and were ordered to pay considerable costs. After bankruptcy proceedings had been initiated in both subsidiaries, the salmon farmer demanded the costs covered by the parent company and the person that was sole director/general manager in all three companies, see section 20-7 of the Dispute Act. The Supreme Court found that the general manager and the parent company were liable for the costs imposed on one of the subsidiaries. By transferring the patent to a newly-established company with insufficient capital in a situation where he had to anticipate the validity action, the general manager had exposed the opposite party to an apparent risk of loss that the latter would not have incurred if the transfer had not taken place. Since there had been a fair hope of winning the patent case, the general manager and the parent company were not held liable for their arrangements related to the other subsidiary.

Read the whole judgment (Norwegian only)

Areas of law: Tort law, company law, civil procedure

Key paragraphs: 61

Justices: Øie, Bull, Kallerud, Falch, Høgetveit Berg