Seizure of ex-franchisee by franchisor not automatically permitted

Within a franchise relationship, disputes about money claims are unfortunately the order of the day. This often concerns a (former) franchisee who has left the necessary invoices from the franchisor unpaid. In order to be sure that this monetary claim is still present with the debtor after legal proceedings, a prejudgment attachment can be imposed. This is also possible on the salary of the (former) franchisee. In franchise relationships, however, there must be a situation in which the (former) franchisee has taken up employment elsewhere after his franchise agreement. 

In view of the far-reaching nature of attachment of wages, the garnishee is given the opportunity to be heard in the event of a prejudgment attachment. In doing so, the preliminary relief judge reviews the following aspects:

– A summary investigation must show that the claim   present and that it is sound;

– No other, less far-reaching measures may be possible to obtain security for the claim (proportionality and subsidiarity requirement);

– In a weighing of interests, the creditor’s interest in garnishment should prevail over the debtor’s interest in retaining full disposal of his wages.

In the decision of 24 November 2014 with case number C/16/379034, the preliminary relief judge of the District Court of Utrecht has also set out the conditions for prejudgment attachment of a debtor’s wages. In this case, a former franchisee left his franchisor with significant payment arrears. This franchisee had meanwhile taken up employment with a competing organisation. The franchisor had a prejudgment attachment on the franchisee’s property, home, bank account and securities. However, this was not enough to cover the entire claim: the home of the former franchisee was “under water” and the balance on the bank account was insufficient. The securities were pledged to the bank. That is why the franchisor deemed it necessary to also garnish the wages. The former franchisee subsequently requested to be heard.

During the oral hearing, the franchisee took the position that the attachment would be unjustified, since the claim is disputed. In addition, attachment would deprive him of the opportunity to conduct legal (substantive) proceedings, since he would no longer be able to pay the court fee if his wages were attached. In addition, he needs his full wages to support his family. Attachment of his wages would have such far-reaching consequences for him that a weighing of interests would have to be in his favour.

Franchisor has disputed this. Attachment of wages would be necessary to provide security for the outstanding claim. The attachment levied so far is by no means sufficient to obtain security for the entire claim. The claims are not contested, as the former franchisee claims, but the franchisee claims to have a counterclaim. This is fundamentally different from disputing the outstanding claim. Whether and to what extent this counterclaim is also due and payable cannot be determined in the present proceedings. Moreover, the former franchisee is free to arrange a bank guarantee as an alternative security, after which the wage garnishment can be lifted by the franchisor.

The preliminary relief judge considers as follows. In principle, leave for a prejudgment attachment is granted if, after a summary investigation, it appears that the claim is present and that, moreover, after a summary investigation, it has not turned out to be unsound. In this case, the preliminary relief judge ruled that the claim was not defective. Refusal of the requested leave is therefore only appropriate if a weighing of the interests of the franchisor on the one hand and the former franchisee on the other gives reason to do so. According to the preliminary relief judge, this is also not the case. The provisional relief judge considers it relevant here that the former franchisor does not dispute the claim, at least in part, whereby the size of this disputed part has not been stated nor made plausible. The remainder of the claim has been recognized in full. In view of the size of the claim in relation to the amount affected by the attachments already levied, the franchisor has a sufficient interest in the requested leave to be able to levy an attachment against the former franchisee. The preliminary relief judge proceeds to grant leave for garnishment of wages.

It should be stated first and foremost that the garnishment of wages is an ultimum remedium. If there are other options, this will often lead to rejection of the attachment. In addition, it is important that the claim is firm: there may be no discussion about the correctness and indebtedness of the claim. If there is, there is a risk that the request for wage garnishment will be rejected.

Mr D. Uijlenbroek – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Mail to uijlenbroek@ludwigvandam.nl