Peart Stevenson Associates Ltd v Holland, Court of Appeal - Queen's Bench Division, July 30, 2008, [2008] EWHC 1868 (QB)

Issuing Organization:Queen's Bench Division
Actores:Peart Stevenson Associates Ltd v Holland
Resolution Date:July 30, 2008
 
FREE EXCERPT

Neutral Citation Number: [2008] EWHC 1868 (QB)

Case No: HQ07X03235

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 30/07/2008

Before :

HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.

(Sitting as a Judge of the High Court)

- - - - - - - - - - - - - - - - - - - - -

Between :

- - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - -

David Wicks (instructed by Leathes Prior) for the Claimant

Michelle Stevens-Hoare (instructed by Owen White) for the Defendant

Hearing dates: 9, 10, 11, 14 July 2008

- - - - - - - - - - - - - - - - - - - - -

JudgmentHIS HONOUR JUDGE RICHARD SEYMOUR Q.C.:

Introduction

1. The claimant, Peart Stevenson Associates Ltd. (``the Franchisor'') carries on business, amongst other things, as a provider of inspection services in relation to gas and electrical appliances, and a repairer of such appliances, in the area of Potters Bar, Hertfordshire and North London. In this judgment I shall refer to that business as ``the Home Business''. The Home Business is, and was at all times material to this action, carried on under the style or title ``The Power Service''. I shall call that name in this judgment ``the Trade Name''. It was the case for the Franchisor that it had developed a distinctive system (``the Method'') of operating the Home Business under the Trade Name.

2. The Franchisor also carries on business as a grantor of franchises to others to carry on business under the Trade Name in accordance with the Method.

3. By an agreement (``the Agreement'') in writing in a standard form utilised by the Franchisor, dated 27 October 2005, the Franchisor granted a franchise to ``Holland & Co'' to carry on a business similar to the Home Business under the Trade Name in accordance with the Method in parts of Staffordshire designated by particular post-codes (``the Territory''). ``Holland & Co'' was in fact a trading style of the defendant, Mr. Brian Holland.

4. By a letter dated 16 June 2006 the Franchisor terminated the Agreement in accordance with the provisions of clause 13.1(a), (c), (k) and (l) thereof. It was not contended in this action that the Franchisor had not been entitled to terminate the Agreement by the letter of 16 June 2006, although it was disputed that some of the matters relied upon as justifying such termination were correct.

5. By the time it came to trial the Franchisor claimed in this action a sum which was alleged to be due to it from Mr. Holland in respect of fees which had become payable prior to the termination of the Agreement, damages for the breaches of the Agreement which led to it being terminated, and damages for alleged breaches of clause 15.1 of the Agreement. In the course of the trial it was agreed that the sum which was due to the Franchisor, subject to the counterclaim of Mr. Holland, in respect of fees which had become payable prior to the termination of the Agreement was £875.

6. Mr. Holland contested the allegation that he was liable to pay damages for the breaches of the Agreement which led to it being terminated. However, he also sought to set off against any damage which might be proved so much as was necessary of the sums found to be due to him in respect of his counterclaim. That counterclaim was for damages for misrepresentation.

7. It was the case for Mr. Holland that the provisions of clause 15.1 of the Agreement were not enforceable against him because they were, on proper construction, in unreasonable restraint of trade. It was also contended on his behalf that in any event his breaches of that provision were minor and that it had not been proved that the Franchisor had suffered damage as a result of the breaches which he admitted. Again, Mr. Holland sought to set off against any sum which was found to be due to the Franchisor as damages for any breach of the provisions of clause 15.1 so much as was necessary of the amount found to be due to him in respect of his counterclaim.

8. In terms of the time occupied at the trial the most significant issues were those which arose in respect of the counterclaim of Mr. Holland. However, before turning to those issues it is convenient to notice the material provisions of the Agreement and to consider the issues which arose in relation to the outstanding claims of the Franchisor.

The terms of the Agreement

9. By clause 3.1 of the Agreement it was provided that:-

``This Agreement shall commence on the Commencement Date [5 December 2005] and shall continue in force thereafter unless and until determined in accordance with its terms for an initial period of five (5) years ending on the Expiry Date and subject to the Franchisee's right of renewal contained in the next following sub-clause.''

10. The expression ``the Expiry Date'' was defined in clause 1 of the Agreement as ``the date specified in Schedule 1''. ``The Expiry Date'' specified in Schedule 1 to the Agreement was in fact ``5th December 2011''. Given the terms of clause 3.1 of the Agreement, providing for an initial period of five years, in my judgment the specification of ``The Expiry Date'' in Schedule 1 must have been a mistake and the intended date must have been 5 December 2010.

11. What were described in the Agreement as ``Franchisee's Obligations'' were set out in clause 5. They included:-

``5.25 Sales reports

To supply to the Franchisor by first class mail from time to time upon request sales reports and other information in the form stipulated by the Franchisor in the Manual concerning the Business.

5.26 Customer list

To keep a list of actual and potential customers for the Business and to supply a copy of it to the Franchisor upon request.''

12. Clause 7 of the Agreement was concerned with the question of the sums to be paid by Mr. Holland under the Agreement. For present purposes the material provisions of that clause were:-

``In consideration of the grant of the right and licence to operate the Business according to the Method the Franchisee shall pay to the Franchisor without demand deduction or set off (save where the amount the subject of the said demand deduction or set off has been acknowledged as due and owing by the Franchisor and/or the Franchisor has acted fraudulently) on or before the relevant Payment Dates (time being of the essence)

(a) The Initial Fee [£23,000] together with VAT thereon

(b) The Continuing Fees together VAT thereon and in accordance with the provisions set out below:

(i) On or before the seventh (7th) day of each month during the Term the Franchisee shall supply to the Franchisor full particulars of the Gross Turnover for the previous month and upon receipt of such information the Franchisor will issue an invoice to the Franchisee to the value of the Continuing Fees together with VAT thereon

(ii) Except as otherwise provided on the Franchisor's invoice the Franchisee shall pay to the Franchisor on or before the fourteen (14th) day of each month all monies that have accrued and are due to the Franchisor in respect of the immediately preceding month and calculated with reference to the immediately preceding monthly invoice that has been submitted in accordance with the provisions of sub-clause 7(b)(i) above''

13. In clause 1 of the Agreement the expression ``Continuing Fees'' was defined as meaning:-

``the ongoing management service fees calculated as follows:

(a) ten percent (10%) of the first five thousand pounds (£5,000) of Gross Turnover per month and

(b) thereafter five percent (5%) of Gross Turnover over five thousand pounds (£5,000) per month.''

The expression ``Gross Turnover'' was also defined in the same clause. For present purposes it is sufficient to say that it amounted to the gross amounts receivable each month by the Franchisee.

14. The claim of the Franchisor against Mr. Holland in respect of fees unpaid at the date of the termination of the Agreement was founded upon the provisions of clause 7.

15. Clause 7 was also relevant to the claim for damages for termination of the Agreement. It was said, obviously correctly, that, but for the termination of the Agreement, Mr. Holland would have been liable to pay ``Continuing Fees'' for the term of the Agreement.

16. The termination of the Agreement was provided for in clause 13. For present purposes the material provisions of that clause were:-

``.1 The Franchisor may terminate this Agreement immediately by giving notice in writing to the Franchisee in any of the following events:

(a) if the Franchisee shall at any time fail to pay any amounts due to the Franchisor

...

(c) if the Franchisee shall fail to operate the Business in accordance with the terms of this Agreement the Manual or the Franchisor's reasonable instructions

...

(k) if the Franchisee shall be in breach of any of the terms of this Agreement except those set out above and the Franchisor shall have notified the Franchisee in writing of any such breach and the Franchisee shall have failed to rectify such breach within twenty-eight (28) days from the date of the notice.

(l) in the event of any persistent breach of any of the Franchisee's obligations under this Agreement and for the purpose of this clause a persistent breach shall be interpreted as two or more breaches of any of the Franchisee's obligation during any calendar year.''

17. As I have noted, the other outstanding claim of the Franchisor against Mr. Holland depended upon the provisions of clause 15.1 of the Agreement. That sub-clause provided, so far as is presently material, that;-

``Upon termination of this Agreement for any cause (which shall include its expiry) the Franchisee shall not for a period of one (1) year thereafter whether itself or together with any person firm or company in any capacity whatsoever save as authorised hereunder directly or indirectly:-

(a) From the Location nor within the Territory (except as a holder of not more than five percent (5%) of the issued shares of a quoted company) be engaged or interested or concerned in the supply of products and services similar to the Services or...

To continue reading

FREE SIGN UP