Claim for security in connection with judgment declared enforceable in advance

By means of an incidental claim, the defendant seeks to ensure that the plaintiff must provide security that it would repay the claim paid by the defendant if the court's judgment were later overturned. The Supreme Court granted this incidental claim in part. The remainder of this blog will discuss the background of the dispute between the parties that led to this judgment. It will then explain the specific question before the Supreme Court. Finally, the judgment of the Supreme Court and the considerations that led to this judgment will be discussed.

The background of this case

The judgment that is the focus of this blog concerns a case that goes back quite a long way and has already seen several courts. The case in question originated in 2008, when an unnamed seller sold her company to health and safety service provider Zorg van de Zaak. Zorg van de Zaak immediately pays a large portion of the purchase price and, by agreement, will pay the balance at a later date. Some time after the sale, but before payment of the remaining amount, it appears that Zorg van de Zaak is of the opinion that at the time of the sale there was a misrepresentation of the facts and that it therefore erred in entering into the agreement. As a result, according to Zorg van de Zaak, an excessively high purchase price was agreed upon. The seller disagrees, after which Zorg van de Zaak goes to court.

Before the Central Netherlands District Court, Zorg van de Zaak claimed a reduction of the purchase price for error. In turn, the seller claimed payment of the remaining amount. The Central Netherlands District Court subsequently ruled that there was no question of error and that Zorg van de Zaak must pay the remaining amount. The Court of Appeal of Arnhem-Leeuwarden upheld this ruling on appeal. However, Zorg van de Zaak is not satisfied with this. It appealed to the Supreme Court. The Supreme Court is more in favor of the Zorg van de Zaak story. The judgment of the Arnhem-Leeuwarden Court of Appeal is annulled by the Supreme Court and the case is referred to the Court of Appeal of 's-Hertogenbosch.

The 's-Hertogenbosch Court of Appeal subsequently set aside the judgment of the Central Netherlands District Court and ruled that the purchase price should indeed be reduced. The seller must thus pay Zorg van de Zaak an amount equal to the purchase price paid by Zorg van de Zaak (including the residual amount paid in the meantime) and the new purchase price determined by the 's-Hertogenbosch Court of Appeal. The judgment of the 's-Hertogenbosch Court of Appeal has been declared provisionally enforceable. In short: Zorg van de Zaak has an immediate claim against the seller.

The seller disagrees with the judgment of the 's-Hertogenbosch Court of Appeal and (again) appeals in cassation.

The specific dispute and the Supreme Court's considerations

It transfers the claim Zorg van de Zaak has on the seller to a new entity: Serra. The seller must therefore pay the amount of money she owed to Zorg van de Zaak to Serra. The seller is not happy about this. She is afraid that Serra has insufficient assets, which means that if the Supreme Court rules in its favor in cassation, the seller will not be able to recover the amount she paid to Serra. For this reason, the seller brought an incidental claim, by which it hoped to make enforceability conditional in advance on Serra providing security for any repayment. Serra defends against this claim by arguing that it does have significant equity and that providing security will harm its interests.

The Supreme Court ruled that in order to conclude whether security is required, the relevant interests of both parties must be weighed against each other. On the one hand, the Supreme Court takes into account that Serra has not sufficiently substantiated that it has sufficient assets, as a result of which a substantial restitution risk for the seller must be assumed. On the other hand, the Supreme Court weighs Serra's interest in not having to face a multitude of costs. Weighing these interests against each other, the Supreme Court ruled that Serra did not have to provide security for that part of the payment that the seller first received from Zorg van de Zaak as a result of the judgment of the Central Netherlands District Court (the residual amount). Indeed, with respect to that amount, the seller did not have these funds at its disposal prior to going through the courts. The seller's risk in this respect is therefore limited, which means that Serra's interest prevails with respect to this amount.

For the remaining part of the amount that the seller must pay Serra, there is a change in the parties' equity position compared to the equity position of the parties prior to going through the courts. Serra must therefore provide security for that part. 

Conclusion

When a judgment is declared provisionally enforceable without conditions being attached, this can entail risks for the party that has to comply with that judgment. After all, if it has to pay a sum of money to the other party but is vindicated at a later point in the proceedings, it is possible that the other party will have no recourse. The parties can ask for a security deposit to prevent the realization of this risk. The Supreme Court ruling shows that in order to conclude whether collateral is appropriate, the relevant interests of both parties must be weighed against each other. This assessment must, of course, be made on a case-by-case basis. Questions about this? Please contact our colleagues Suzanne Poutsma or Lars Boer.