CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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BOUVERIE NO. 1 LIMITED |
Claimant |
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- and - |
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DE VERE HOTELS & LEISURE LIMITED |
Defendant |
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Mr John Baldwin QC, Mr Adrian Speck and Mr Henry Ward (instructed by Berwin Leighton Paisner LLP) for the Defendant
Hearing dates: 9, 12, 13, 14, 15, 16, 19, 20, 22, 23, 26 June 2006
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Crown Copyright ©
MR JUSTICE RIMER :
Introduction
Background: De Vere's re-branding proposals
Quinn buys The De Vere Belfry
The De Vere re-branding continued
Use of the"De Vere at The Belfry" hotel logo
(a) The Planner Brochure
(b) The Mini Hotel Directories
Guest Satisfaction Surveys
The Leisure Breaks Brochure
The De Vere website
The Saga brochure
Golf Leisure Breaks Brochure
Use of "De Vere at The Belfry" in caption form
Material specific to The Belfry
Any other use of the new hotel logo in relation to The Belfry?
"As a form of words it [the hotel logo] is capable of being a name of a hotel, yes, but it is not and the reason it is not I mean, it is very clear to me that it is not because in all of the script, all of the text, we do not refer to it in that way and the reason that it is not referred to in that way is it is not the name of the hotel and I am very happy that it is not the name of the hotel because it is a mouthful."
Communication between De Vere and Quinn about the re-branding
" absolutely committed to proving to you that De Vere is the right brand and operating partner for The Belfry. We are well progressed on putting into place a first class management team to provide the leadership and direction needed to address the operational issues that you have identified. As you know we had initiated this process ahead of your acquisition of the hotel and I appreciate your support in giving the new team the time that they will need to drive standards across the business."
"Thank you for the presentation at our most recent trading review meeting of the De Vere Brand and Touchpoints. It was both interesting and useful. As part of the presentation you mentioned that De Vere have produced a new logo and the intention was to roll this out across all the De Vere properties shortly. This will obviously have an impact on the Belfry property. Before any changes to the current signage, stationery etc are implemented we would obviously wish to get a clear proposal from De Vere so we can consider it fully before we can agree to any changes. We would obviously be very interested in every detail of the proposed changes from logos, stationery, signage and cost etc.
When would you be in a position to make a detailed presentation to the Quinn Group on De Vere's proposal in this regard?
" decided that we could no longer tolerate the behaviour of De Vere in this regard. I was shocked by the proposals and by De Vere's failure to keep us informed of them. It was clear to me that the proposed re-branding would be damaging to The Belfry name, logos and trade marks. The re-branding accentuated the De Vere brand at the expense of The Belfry brand and made the name of the Hotel appear as 'De Vere' with 'The Belfry' tacked on as a mere address. We had not been consulted by De Vere on any of this and they appeared to be taking advantage of Quinn. Sean's [Mr Quinn's] reactions and thoughts regarding the 're-branding' were very similar to mine."
"In short, it was my view that De Vere Group did not possess the competence to manage this property to any level of recognised standard. However, in recognition of the fact that this was your only management contract and that it may take you some time to develop this arm of the business, I agreed with Liam [Mr McCaffrey] that he would negotiate a contract with Carl [Mr Leaver] to allow your Group to develop necessary competences and allow the relationship space and time to develop.
You can imagine my surprise when I discovered that during negotiations on the revised contract De Vere Group were in the course of finalising a complete re-branding. This re-branding as regards the Belfry hugely enhances the De Vere brand at the expense of the Belfry brand including for example the removal of the bell from the Belfry signage. This was not pointed out to us during contract re-negotiation, and we have subsequently discovered it was approved by your Board and presented to the City without any consultation with our Group.
As we are a major partner in what has, over the past few months, been a sensitive relationship, I find this incredible. I know that all of our team also feels that this is a huge breach of trust. Any relationship must be founded on open communication, mutual respect and trust. Unfortunately these appear to be totally lacking.
There appears to be a deficit in the standards and level of professional leadership in your Group which means that we are no longer prepared to continue to overlook the inability of De Vere Group to manage this property. I am therefore suggesting that we terminate the Management Contract and while we could consider some form of financial compensation to your Group it could not be at the levels previously indicated.
I would appreciate if you could respond to this letter by 13th January 2006. If we cannot reach an agreement at this point I will be instructing our solicitors to issue proceedings to seek the termination of the agreement. I look forward to hearing from you."
Secondly, and much more importantly, Quinn have reacted very strongly against the new brand logo. They regard it as giving prominence to the De Vere brand at the expense of The Belfry brand. They are furious that we did not consult them ahead of signing the logo off at the Board and regard this as demonstrating a complete lack of respect for their position. The long-and-short is that they believe they should have an input into (even right of veto over) our brand strategy. Remember that the context for this is that they would prefer that the De Vere brand was not in evidence at all at The Belfry! In any case, they feel 'betrayed' and do not believe that there is now any prospect of an effective working relationship going forward.
It is also very obvious from recent conversations that they see the nature of the relationship very differently from that set out in the contract [the management agreement]. The contract is written around a passive property owner and brand operator with extensive rights of control. Although this is what they signed, they describe the relationship as a 'partnership', where the dividing line between the responsibilities of each party is much more blurred."
"De Vere as a whole and The Belfry in particular has a strong track record for growing revenues ahead of the market over many years and this can only be achieved by giving customers what they want. Our performance in this regard is clearly demonstrated by impartial external customer surveys, the most recent of which showing that our customer satisfaction is the highest of any hotel brand in Europe (jointly with Hyatt). This survey was based on 8,500 customer responses."
The issues
"3.2 Except as otherwise specifically provided in this Agreement, the Operator shall have exclusive control and discretion in the operation, direction, marketing, management and supervision of the Hotel during the Operating Term.
3.3 Without limiting the rights otherwise provided to the Owner under this Agreement, the Owner shall not interfere in the day-to-day operation of the Hotel during the Operating Term and acknowledges the Operator's total control of operational activities during the Operating Term."
Has De Vere changed the name of the hotel or designated it by an additional name?
"5.1 As of the Effective Date and throughout the Operating Term the Hotel shall be known and designated as 'The De Vere, Belfry' or such other name as may be designated by the Operator from time to time with the consent of the Owner. Notwithstanding the previous sentence, the Operator may from time to time alter the name of the Hotel without the consent of the Owner, provided that any such change is limited to inserting, removing or altering a word or words with which the Operator intends to identify the Hotel as part of the Chain, providing that such change is made to all Chain Hotels."
The online survey
Is De Vere's use of the printed captions saved by the second sentence of clause 5.1?
Has De Vere breached clause 6.2.4.2 of the management agreement?
"It will not use the trade marks within the Hotel Marks in a manner which is reasonably likely to cause material harm to the goodwill attaching to those trade marks and shall not do anything which is reasonably likely to prejudice [Quinn's] rights in and to those trade marks."
" is created, grown or diminished through the individual 'experiences' that customers have with a 'brand' including advertising, press coverage, contact with employees, signage, environments, visiting a website and actual experience using a branded product or service."
"In the short term, golf enthusiasts and those familiar with the hotel may not be affected by the change in the brand as its name and reputation probably remains strong enough to remain foremost in their minds. However, over time, with the increased level of emphasis on the De Vere brand, awareness of The Belfry brand, and consequently its value, will certainly diminish."
" we live in a much more transparent economy where devices such as the internet, proliferation of the media, the exploration of interest in marketing and brands has made us all incredibly savvy; we understand how marketing works, we are not just blind consumers the hotel brand is at the forefront of an experience economy because you are not buying a car or a can of beans that largely performs through its product formulation, you are buying the way you are treated, you are buying the way people speak to you, you are buying the heat of the food on the plate, you are buying the comfort of the bed but not just the comfort of the bed but the way the bed was turned down that night, the way the loo roll was folded in the bathroom. So all of these things add up to a sensory impression and experience of the brand. That in a very short summary is the experience economy. You can have an experience at Claridges and the Dorchester and The Belfry tonight and have another one next week and you will update your opinion of the brand. Your impression or your goodwill towards it can be radically different one week to another. That is my point about it is only really as good as the last experience it provided to its most recent consumer, and I was saying this because I believe there was an over-emphasis in a lot of material that I was provided with on the look of the logo as being the driver of opinion and goodwill in relation to the brand. So whilst it represents that brand, it is actually the experience, the time, the stay the guest has at the property that is actually the dominant driver of that reputation and therefore in time of the goodwill. My point being that of much greater influence to the long-term goodwill of The Belfry brand is the quality of the stay that people have at the hotel on an ongoing basis. It is of much greater importance and influence on that impression of the brand than the logo and the relative size of the words 'The Belfry' and the words 'De Vere' Again [in reference to the new hotel logo] I can see no precedent in my experience of branding at all, let alone in this industry, where this arrangement of graphics could be deemed to have been calculated to transfer equity. It is just not how equity is created. Brand equity is not created by choice of typeface and relative size between chain brand and property name ."
Has De Vere breached clause 7.3.5 of the management agreement?
"keep [Quinn] informed and advised of all material financial and other matters concerning the operation of the Hotel."
"I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing , though there may be no express words to that effect."
Has De Vere breached clause 7.1.1 of the management agreement?
Has De Vere infringed any registered trade marks?
Is Quinn entitled to terminate the management agreement?
"the failure of either the Owner or the Operator to perform, keep or fulfil any of its material covenants, undertakings, obligations or conditions set out in this Agreement, and (where such material default is remediable) the continuance of such material default for a period of twenty one (21) days after written notice is given by the other specifying the material failure and requiring it to be remedied "
"any party has committed any material breach of this Agreement and/or any other agreement between the relevant parties which is not capable of remedy and/or any material breach which, although capable of remedy, is a persistent breach."
Result