The Great Franchise Fraud

As a bit of an aside from my regular blogs about many of the issues I see with the Franchising Sector in the U.K., I thought it worth sharing an audacious fraud that came about during my legal battle with Dream Doors, part of the Neighbourly (Neighborly) group of franchises, that might blow your mind, like it did mine. The reason for sharing is because there may be some learnings from this for other Franchisors and for that matter any business leader.

This is how the fraud came about;

• Our claim against Dream Doors for breach of contract was processed by the County Court Money Claims Centre (CCMCC) but was not responded to within the required timeline and therefore we proceeded with an application for a default judgment (total amount of £66,778), as per our legal right.
• We were told by the CCMCC that the default judgment would take about a week to process so we called them on the Thursday and they confirmed that the default judgment had been granted and they would be sending out the formal paperwork the following day, the Friday
• We received notification of the default judgment in the post on the Saturday and expect that Dream Doors & / or their solicitors also received it that day, although they likely only saw it on the Monday morning 
• On the Tuesday morning, Dream Doors’ solicitors wrote to us via email and stated that their “client has obtained a temporary suspension order [TSO] to prevent you from enforcing this judgment until our client has had the opportunity to apply to the court to set aside the judgment”
• We had not previously heard of a TSO and found it strange that something could be processed so quickly by the court system (i.e. within 24 hours of receiving notice of the default judgement)
• After a little bit of research, we decided that the best course of action was to contact the CCMCC, who told us that they were not aware of any TSO being granted
• As belt and braces we also decided to contact the county courts that were local to both Dream Doors and their solicitors but both courts confirmed that no such application had been received and in any case if one had been granted it would be recorded in the central system that all courts, including the CCMCC, had access to.
• Subsequent to the above, we made an application to and were granted a 3rd Party Debt Order against Dream Doors by Stockport County Court
• Following the award of the Debt Order, we wrote to Dream Doors’ solicitors where, amongst other matters, we informed them that “we submit that it is irrefutable that [the solicitors] were dishonest and untruthful when they claimed the above [that “your client has obtained a ‘TSO’ to prevent you from enforcing this judgment until our client has had the opportunity to apply to the court to set aside the judgment”] and it was an act by [the solicitors] to attempt to circumvent CPR”.
• After Dream Doors successfully moved our hearing for the default judgment from Stockport County Court to London, it resulted in a major delay to our proceedings 
• Two months after writing to their solicitors we received a letter from them where they proffered an explanation for their ‘clients’ claim of having obtained a TSO, which was that “their client was the target of a judgment fraud and were informed by the fraudsters that a temporary suspension order had been obtained upon payment of 50% of the judgment debt” (which equates to £33,389)
• After requesting evidence of the fraud from their solicitors we were told that their “client is not required to provide you with any further information concerning the fraud” and “if requested by the Court, our client will provide the Court with copies of the correspondence with the fraudsters, the Court and the bank”.
• In a later communication from Dream Doors’ solicitors, they stated that the ‘fraud was a sophisticated fraud, which had access to the details of the judgment and information concerning the parties’ and we wondered whether they were suggesting that we or someone close to us was the ‘fraudster’ 🤷🏼‍♂️

It is worth noting the following;

• The cost of applying to the courts to stop the enforcement of judgments was in the region of £135 (one hundred and thirty five pounds) at the time 
• There was an incredibly small window of approximately 24 hours from receipt of the default judgment in the post to then being defrauded by the ‘fraudster’
• Dream Doors has used the same solicitors since the company was first franchised in 1999

Although we are still none the wiser about the finer details of the fraud, it is clear that the fraudsters must have been extremely brazen to persuade a company to hand over £33,389 for something their solicitors could have obtained for £135. I believe there are some basic learnings that any organisation can take from this experience, which are as follows;

• As part of any corporate Manual of Authority (MOA), companies should implement a two step (person) verification process for new vendors so that it minimises the risk of payments being made to inappropriate vendors, such as a ‘fraudster’
• As part of any corporate MOA, companies should implement a two step (person) approval process for payments to new vendors and also for any £ amounts over and above an agreed threshold, which would be relative to the size of the business 
• Ensure that any legal matters are first channeled through your own internal legal team to ensure that any legal requests being made of the company are legitimate.
• Where external legal counsel has been engaged for a specific legal case, channel all communications regarding the case through them to ensure that any legal requests being made by a third party, in return for a large sum of money, are legitimate.
• Lawyers, both internal and external, need to acquaint themselves with the CPR (Court Procedure rules), whereby, I believe, it is only those parties officially registered as representing their client that can apply to the court for any orders.

I would be really interested to hear from anyone, especially anyone in the legal profession, that has encountered a similar issue and is willing to share details of the issue either here or in a DM to me. I would also very much welcome if Dream Doors, its parent company, Neighbourly (Neighborly), or anyone that worked for them at the time, would share further details behind the fraud.

@Scott English, maybe this is an article that you should include in your next edition of Elite Franchise magazine so that other Franchisors don’t suffer the same fate?