England and Wales High Court (Queen's Bench Division) Decisions

IN THE HlGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		18/07/2007

1. This is the trial of preliminary issues ordered by Master Rose on 2 May 2007. The issues arise out of alleged inducement by the Defendant of breach of contract on the part of various customers of the Claimants in the following circumstances.
2. The Claimants operate a business of supplying photocopying services to the public. They do this by installing photocopying machines in sub-post offices and shops by agreement with the operators of those businesses ("Retailers") on the terms of agreements known as "Location Agreements". The main supplier of the photocopiers was the First Claimant and, for the purposes of the preliminary issues, it is not necessary to distinguish between the Claimants, to whom I will refer compendiously as "TRM". TRM does not own the photocopiers but leases them from Barclays Mercantile Business Finance pursuant to a Master Lease Agreement, under which TRM pays a monthly rental for the lease of all the machines.
3. There are two forms of Location Agreement before the Court, the June 2002 form of agreement and an earlier document dating from some time in 1999, described as the TRM Premier Club Addendum, which contains an incentive scheme designed to bring some earlier form of Location Agreement into line with what became the June 2002 location agreement. Unfortunately, it has not proved possible to find a copy of that earlier form of agreement, as ownership of TRM has recently changed.
4. Under the Location Agreements, the Retailer agrees to the installation of a photocopier on his premises, which he also agrees to install in a visible and accessible place. Customers of the Retailer may use the photocopier and if they do, they are charged the copy rate provided in the Location Agreements. The Retailer then accounts to TRM for the sums collected, but is entitled to deduct from those sums commission (or as it is described in the Premier Club Addendum, "business profit") which increases as a greater number of copies are made. Such accounting takes place monthly. The Location Agreements are for an initial period of 36 or 60 months. Thereafter, unless notice of termination is given, they automatically renew for successive periods of 12 months, subject to a right of termination on 90 days' written notice.
5. The Defendant operates a business which competes with that of TRM, but it is structured in a completely different way. It supplies photocopiers to leasing companies which lease them to third parties, such as the retailers. The Defendant then enters into a maintenance agreement with the Retailer. Under this business model, the Retailer may have the option to purchase the photocopier at the end of the lease term but during that term is committed to make regular payments to the owner of the equipment; in other words, the rental payments must be made whether or not the photocopier is used. In contrast, under the Location agreements, there is no obligation to make rental payments as such and, indeed, no obligation on the Retailer to pay anything to TRM unless the photocopier is used. If the photocopier is used the Retailer must account for sums collected less his commission. He does not buy the machine.
6. These proceedings were commenced when TRM discovered that the Defendant had removed TRM's photocopiers from the premises of a number of Retailers who were bound by subsisting Location Agreements and had replaced them with equipment supplied by the Defendant. This was done without reference to TRM and without terminating the Location Agreements. TRM applied for injunctive relief. In the event no Order was made on that application, on the Defendant giving a series of undertakings as set out in the Order of Mr Justice Keith on 13 December 2006.
7. TRM's case is that the Defendant's actions constitute the tort of inducing the Retailers to breach their Location Agreements with TRM. In its Defence and Counterclaim, the Defendant contends that the Consumer Credit Act 1974 applies to the Location Agreements and relies on certain provisions relating to termination of agreements governed by that Act. Alternatively, the Defendant alleges that the Location Agreements must be construed as giving the Retailers a right of termination at any time. Against that background, it was very sensibly agreed that preliminary issues should be formulated to enable the early resolution of those issues.
8. The preliminary issues ordered by Master Rose to be tried are as follows:

i) Whether a Location Agreement made between TRM and a Retailer who is an individual is a regulated hire agreement for the purposes of section 15 of the Consumer Credit Act 1974;

ii) Whether on its true construction a Location Agreement in the form of 1 June 2002 Location Agreement is terminable at any time at the instance of the Retailer pursuant to clauses 5 and 8 or pursuant to an implied term that the agreement is terminable at any time at the instance of the Retailer such an implied term being necessary to give effect to the words "in the event of termination of the Agreement by the Business before the expiry of the term" in clause 8;

iii) Whether on its true construction a Location Agreement in the form of or incorporating the TRM Premier Club Addendum is terminable at any time at the instance of the Retailer pursuant to clause 6 or pursuant to an implied term that the agreement is terminable at any time at the instance of the Retailer such an implied term being necessary to give effect to the words "If I have or want to terminate my Location Agreement any time prior to the time set forth in Section 1 of this Addendum" in clause 6.

9. Before considering these issues in turn, I will set out the main provisions of the Location Agreements which are relevant to the issues. The June 2002 Location Agreement provides as follows:

"UK COPIER LOCATION AGREEMENT

TRM and the Business [i.e the Retailer] desire to allow TRM to locate a TRM owned photocopy machine and related products (the "Equipment") and proprietary promotional material at the retail locations owned and operated by the Business. The Equipment will be available for use by the Business and its customers. TRM and the Business agree as follows:

l.TRM's Obligations. During the term of this Agreement, TRM will:

1.1 deliver and install the Equipment and promotional material to the Business' locations owned and operated by the Business as set out in the Schedule 1 of this Agreement (Stores Sites) and such other additional locations as TRM shall agree;

1.2 supply the Business with all the paper, toner and supplies necessary for the operation of the Equipment

1.3 provide repair and maintenance services for the Equipment and promotional material; and

1.4 provide appropriate training to the Business for the operation of the Equipment

2 The Business' Obligations. During the terms of this Agreement, the Business will:

2.1 accept all the supplies necessary to operate the Equipment;

2.2 provide electrical power to operate the Equipment;

2.3provide a clean, safe and orderly location for the Equipment, which is easily visible and accessible by the Business' customers;

2.4 provide adequate space for promotional material provided by TRM;

2.5 collect all sums paid for copies made on the Equipment and account to TRM for all monies received from customers using the Equipment, less the Business' commission in accordance with Schedule 2 below;

2.6 oversee the use and operation of the Equipment by the Business' customers making best efforts to maximise copier uptime by the timely refilling of supplies, removal of paper jams when possible, and contacting TRM promptly in the event of copier malfunction;

3 Ownership of Equipment. The Business acknowledges that the Equipment and all promotional material supplied by TRM is owned by TRM and that the Business will not obtain any rights or interests in the Equipment or any part of it or the promotional material under this agreement.

4. Retail Price and Commission Schedule. In

consideration of TRM carrying out its obligations set out in this Agreement, the Business will pay TRM monthly for all copies made on the Equipment times the retail price specified in Schedule 2 (the Monthly Revenue), less the appropriate commission applied to all monthly copies as described in Schedule 2, together with VAT thereon.

5. Duration of Agreement. Subject to the rules of early termination set out in clauses 7, 8 and 9, this Agreement will continue in effect for thirty six (36) months from its date. Equipment installed at locations after the date of this Agreement shall be placed for a minimum period of 36 months commencing upon the date of installation at each site.

7 Termination. TRM shall have the immediate right to terminate this Agreement, without notice, and retake possession of the Equipment and promotional material if the Business shall be in default of any of the terms of this Agreement, or if the Equipment is at risk of being damaged or vandalised, or if any court proceedings shall be issued in any action or proceedings against the Business where the Equipment faces the risk of being seized, taken or distrained, or if any proceeding in bankruptcy, receivership, administration or insolvency or anything analogous thereto shall be instituted by or against the Business or its property. For the purposes of the foregoing, TRM may enter upon the Business location during normal business hours or any premises of the Business to remove the Equipment or promotional material. Upon termination, the Business shall make the Equipment and promotional material available for pick up by TRM. The termination of this Agreement and the retaking of the Equipment shall not prejudice any rights or claims which TRM may have against the Business for damage to the Equipment or otherwise under this Agreement.

8. Remedy. The Business agrees that in the event of termination of this Agreement by the Business before the expiry of the term, or the removal of the Equipment from a location at the request of the Business before the expiry of the relevant term, or the early termination of this Agreement by TRM in accordance with the provisions of clause 10 when the Business is in default, the Business shall pay to TRM, as liquidated damages, in addition to any other amounts due to TRM under the terms of this Agreement, an amount equal to the number of full months remaining to the expiry of the relevant term multiplied by either the average monthly payments made to TRM over the 12 months immediately proceeding termination or the number of complete months since the date of installation of the photocopy machine, whichever shall be the shorter.

9. Copy Price Changes. TRM further reserves the right to increase or decrease the price per copy at any time during the term on giving to the Business 30 days prior notice in writing provided that if the price so notified shall have increased by more than 40% from that prevailing at the date of this Agreement the Business shall be free to give 30 days notice to TRM terminating this Agreement without payment of the sums referred to in clause 8.

14 Assignment and Transfer of Business. If the

ownership of the Business shall be transferred to any other person, firm or company, the Business will immediately inform TRM in writing, giving full details of the transferee, and will ensure that the transferee receives copies of this Agreement, and any modification agreement attached, (and the last six months invoices from TRM) and that the Equipment and all accompanying maintenance and supplies, records and promotional' materials provided by TRM remain -in position on the Business location at completion of the transfer. This Agreement may be assigned by the Business to any transferee of the Business at the Business location and the transferee will be deemed to have accepted its substitution for the Business as a party to this Agreement with the effect from the transfer. TRM may assign this Agreement to any other company within the TRM Corporation Group or to any other person or legal entity that may carry on or thereby commence to carry on a business similar to that of TRM in the United Kingdom, provided that the assignee agrees with TRM to assume TRM's obligations under this Agreement.

18 Indemnification. The Business and its successors and assigns shall indemnify and hold harmless TRM and its successors and assigns from all claims or liability for all loss, damage, injury, or other casualty to persons or property occasioned in any manner by the installation of the Equipment or promotional material at the Business location, or by the use or maintenance of the Equipment and promotional material by the Business or its agents, employees or customers. The Business shall maintain and TRM shall have the right to audit insurance in the amount of at least One Hundred Thousand Pounds Sterling (£100.000.00) for personal injury and property damage throughout the terms of this Agreement."

10. The TRM Premier Club Addendum provided as follows:

"1 Three Year, auto-renewing Agreement

My ability to terminate the Location Agreement, in Section Nine "Termination," will be amended as follows:

This Agreement will be/continue in effect for a minimum period of thirty-six (36) months commencing on the date of signature below. Before ninety (90) days prior to the end of this period I may meet with TRM to decide whether to renew this Agreement. In default of any Agreement then reached to the contrary, this Agreement will automatically stand renewed for an additional twelve (12) months. Such renewals shall continue automatically until such time as I decide to terminate this Agreement by giving TRM written notice ninety (90) days prior to the end of the current renewal period. TRM will then remove the Equipment, supplies and signs by the end of that period.

I understand that TRM reserves the right to terminate this Agreement and retain its equipment, supplies and signs due to this shop's default, insolvency etc., as outlined in my original Location Agreement, without prejudicing any of its rights or claims.

6. Consequences for terminating Agreement in mid-term

If I have to or want to. terminate my Location Agreement any time prior to the time set forth in Section 1 of this Addendum (excepting the termination of this Agreement arising from the complete closure of this shop location) or if I fail to remedy any default of my Location Agreement, including late payment, within ten days of written notice, I shall be in default and agree that the damages would be difficult or impossible to calculate. Therefore, I agree that in this event I will pay TRM as liquidated damages, in addition to any other amounts that may be due TRM under this Location Agreement, an amount equal to the number of full months remaining in the term of this Addendum multiplied by my average monthly payments made to TRM over the past year or the months to which the photocopier has been installed, whichever is shorter."

The first issue: applicability of the Consumer Credit Act

11. This issue concerns whether the Location Agreements (i.e. both the Premier Club Addendum and the June 2002 Location Agreement to which I will refer compendiously as "the Location Agreements") are "consumer hire agreements" within the meaning of section 15 the Consumer Credit Act 1974 as amended. That section provides:

"(1) A consumer hire agreement is an agreement made by a person with an individual (the "hirer") for the bailment or (in Scotland) the hiring of goods to the hirer, being an agreement which—

(a) is not a hire-purchase agreement, and

(b) is capable of subsisting for more than three months, and

(c) does not require the hirer to make payments exceeding £25,000.

(2) A consumer hire agreement is a regulated agreement if it is not an exempt agreement."

11. Section 189 includes a somewhat circular definition of "hirer", as follows:

""hirer" means the individual to whom goods are bailed or (in Scotland) hired under a consumer hire agreement, or the person to whom his rights and duties under the agreement have passed by assignment or operation of law, and in relati'on to a prospective consumer hire agreement means the prospective hirer;"

12. As a preliminary to this issue, the question arises whether it is a necessary precondition of a consumer hire agreement that some consideration for the hire is paid by or on behalf of the "hirer" i.e. in this situation the Retailer. It seems to me that section 15 (1) (c) of the Consumer Credit Act is predicated upon there being some payment by the "hirer" as consideration for the hire, as one of the preconditions of a "consumer hire agreement". Hence the reference to not requiring the hirer to make payments exceeding £25,000, which in my view does not encompass the situation where no payment at all is due.
13. I have reached this conclusion notwithstanding section 79(2) of the Act which, on one view, contemplates that there may be a consumer hire agreement even if no payments are ever due from the "hirer" at all. It does not seem to me that such a result could have been intended by Parliament. Rather, the section is focusing upon what the position is at the time that the hirer makes a written request for information, not the position at the time that the contract was made. To the extent that the decision in the Epsom County Court in Proudfoot v Cheam High School [2001] CLY 902 (referred to by Professor Guest in the Encyclopaedia of Consumer Credit Law) relies on section 79(2) to support a conclusion that it is not necessary under a "consumer hire agreement" for there to be any payment at all, it seems to me that the case was wrongly decided.
14. The other cases in the County Courts referred to by Professor Guest are not authority for such a result. They simply establish that it is not necessary for the consideration to have been paid by the hirer. It is enough if it is paid on his behalf by a third party, in those cases by an insurer. However, there must still be a payment of "hire" on behalf of the "hirer".
15. The Defendant does not really seek to argue the contrary, it being accepted that a gratuitous bailment, in the sense of a bailment under which no consideration is provided by or on behalf of the bailee, could not amount to a consumer hire agreement. That must be a proper concession, for were it otherwise, every bailment would potentially be a hire agreement for the purposes of the statute, a conclusion which is inconsistent with what was said by Sir Andrew Morritt V-C in Britax International v Commissioners of Inland Revenue [2001] STC 1652 at paragraph 24: "It is not disputed that it is possible to have a contract of bailment which is not one of hire". This also accords with the view of Professor Goode in Consumer Credit Law and Practice. He concludes (at IC[23.75]) that despite the wide wording of parts of the Act, it is limited to bailment by way of hire, that is bailment under which the person receiving possession is to pay for the use of the goods during the period of his lawful possession.
16. What is said by Mr Bredemear on behalf of the Defendant is that, provided it is contemplated that some consideration may be provided by the bailee in the position of the Retailer under the Location Agreements, for the use of the photocopier (by way of whatever sums are collected from customers or from the Retailer itself for making copies, less the commission which the Retailer would be entitled to deduct), it does not matter whether any payment is ever in fact made to TRM (because for example no-one ever uses the photocopier).
17. Mr Bredemear seeks to argue that this analysis is supported by the decision of the Court of Session in Eurocopy (Scotland) pic v Lothian Health Board [1995] SLT 1356. In that case, suppliers of a photocopier to the Health Board did so on terms that the copier itself was free, but the Board undertook to purchase a minimum amount of blank photocopying paper from the suppliers. It was held that the contract was one of hire of the equipment. The Lord President (Lord Hope) said as follows at 1360E-L:

"Common sense tells us that what this agreement was really designed to do was to regulate the terms and conditions upon which the pursuers were to supply the defenders with the photocopiers....

We agree with senior counsel for the pursuers that it would be to turn the agreement on its head to regard it as a contract for the supply of unused paper. Prima facie it is a contract for the hire of the equipment which the pursuers have agreed to supply and service.

In cl 3(a) the user is taken bound to purchase the agreed minimum monthly copy volume quarterly in advance at an agreed price. This is in effect a standing charge, measured by a formula which assumes that a minimum volume of copies each month will be produced by the use of the equipment. The fact that the pursuers' return is calculated by an assumed throughput is consistent with their argument that this is the consideration for the supply of the photocopiers, and that the contract should be interpreted as one for the hire of these machines."

18. Mr Bredemear contends that Eurocopy is analogous to the present case (even though it is not a case on the scope of section 15 (1) of the Consumer Credit Act) and demonstrates that the fact that payment for the right to possession and use of particular goods (here the photocopiers) is calculated by reference to a formula based on use, does not mean that the agreement is not a hire agreement. He accepts that Eurocopy does not deal with the situation where the formula may result in no payment being due, but submits that in principle that should make no difference. Although he also accepts that that could theoretically be the case under the present Location Agreements, he submits that, in the light of the obligation imposed on the Retailer by clause 2.3, it would not be commercially realistic to say that this is a situation where the parties envisaged that nothing would be payable by the Retailer for the use of the photocopier.
19. Miss Williamson for TRM challenges that analysis. She submits, relying upon the judgment of Sir Andrew Morritt V-C (albeit in a completely different statutory context) in Britax International v Commissioners of Inland Revenue [2001] STC 1652, that it is a necessary aspect of a "hire" or "hiring" that the "hirer" is liable to make a "stipulated payment" to the supplier. The relevant part of the judgment provides as follows:

"26 In Frazer v Trebilcock (1964) 42 TC 217 one issue was whether the car acquired for use in a driving school was provided wholly or mainly for hire to or for the carriage of members of the public. The Commissioners considered that it was. Buckley J disagreed. He referred to the definition of a hire of chattels in Halsbury's Laws of England namely:

"a contract by which the hirer obtains a right to use the chattel hired in return for the payment...The proprietary interest in the chattel is not changed, but remains in the owner. But upon delivery the hirer becomes legally possessed of the chattel hired, so that if it is lent for a time certain, even the true owner is debarred during that time from resuming possession against the will of the hirer..."

He concluded (page 227) that there was no contract of hire because the pupil

"never obtained any right or interest in the car of a kind which could be said to amount to a hiring."

I agree with counsel for Lloyds UDT that this case is of relevance in demonstrating that one element of a contract of hire is the right to exclusive possession against the true owner/hirer. But it does not, in that respect, advance the submissions for Britax.

27 The normal meaning of hire is, in my judgment, to obtain from another the temporary use of a chattel for a stipulated payment. See New Shorter Oxford English Dictionary (1993) Ed. The concept involves obtaining the right to possession of the chattel for the period of the hire to the exclusion of the hirer. See the definition quoted in paragraph 26. I can see nothing in the terms of Chapter III of Part II of Capital Allowances Act 1990 to suggest that the concept of hiring to which s.35(2) applies is so limited as to give rise to any of the exclusions for which Britax or Standard Chartered contend."

20. The Court of Appeal in that case upheld the Vice-Chancellor's approach by concluding that there was no distinction to be drawn between the legal concept of hiring and the commercial concept of hiring and endorsed his construction of "hiring": see per Jonathan Parker LJ at [2002] EWCA Civ 806 at paragraphs 69 to 75. I also note in passing that the Oxford Dictionary defines "stipulated" as "laid down in the terms of an agreement". This suggests both that the amount of payment or the formula by which the payment to be made is calculated must be set out in the contract and that some payment must in fact be made.
21. Miss Williamson submits that Eurocopy is distinguishable from the present case, pointing out that, under clause 3 of the agreement in that case, a minimum amount was payable by the Health Board to Eurocopy for the availability of the photocopier, even if no copies were in fact made in the relevant period. In contrast, in the present case, although the formula by which payments may be made if the photocopier is used is set out in the contract, the critical difference is that if it is not used, nothing is payable at all. She referred to a later passage in Lord Hope's judgment at 1361G-H where he refers to the commercial purpose of clause 3 as:

"to preserve the integrity of the standing charge, represented by the user's undertaking to purchase the agreed minimum monthly copy volume quarterly in advance at the agreed price. The importance to the supplier of preserving its integrity, and by this means to preserve a steady and predictable cash flow, can be seen from the supplier's entitlement in terms of cl 9(c) to vary the price per copy at any time in the appropriate circumstances." (emphasis added)

22. As Miss Williamson rightly submitted and as is confirmed by the phrases I have emphasised, the effect of clause 3 in that contract was an allocation of commercial risk that ensured that the supplier obtained a consistent revenue stream, with the risk of very few copies being made having been transferred to the Health Board. In contrast, in the present case, the risk that the machines would not "earn their keep" was entirely on TRM and the Location Agreements did not impose any performance criteria on the Retailer to ensure that a minimum number of copies were made. Clause 2.3 (which merely imposed an obligation to ensure that the machines were "visible and accessible" could hardly be described as imposing "performance criteria"). Accordingly, there was nothing in the Location Agreements which guaranteed payment to TRM from anybody for the use of the machines.
23. I agree with Miss Williamson's submission that the copy rates set out in the Location Agreements do not constitute a "stipulated payment" for the hire of the photocopier, for the simple reason that there is no obligation on the Retailer to make any payment at all, in the sense that if no-one uses the photocopier, then nothing will require to be paid. It seems to me that, in a very real sense, this is the antithesis of the position under a hire agreement, where the hirer pays for the hire of the goods which come into his possession, even if he does not use them at all.
24. The payment which is made if a customer (or the Retailer himself) uses the machine is not "stipulated" in the agreement but, as Miss Williamson points out is "accidental", in the sense that the payment only comes to be made at all because the person in question chooses to use the machine. There is no question of any guaranteed income or standing charge, which the concept of a "stipulated payment" conveys.
25. Furthermore, it does not seem to me that the analysis is any different because, if a customer makes off without paying, the Retailer will still have to account to TRM for the copy charges. That is not a payment stipulated by the agreement by way of primary obligation, but is in fact a liability which the Retailer has because, in breach of clause 2.5, he has failed to collect all sums paid for copies made. It is thus a liability in damages, a secondary obligation, not a payment stipulated in the agreement.
26. Standing back from the detail of these agreements, I ask myself the question whether they are within the category of agreement under which a party in the position of the Retailer is intended to be protected by the Consumer Credit Act and related legislation such as the Supply of Goods (Implied Terms) Act 1982? It seems to me that, unless it can be said that every bailment to an individual is a consumer hire agreement (which for the reasons I have already set out is a conclusion which I reject), then there must be a serious question mark as to whether the legislation was intended to protect someone in the position of a Retailer who had no real financial liability to TRM (save in respect of copies it might make itself, which was its choice) other than passing on money collected from the users of the machine, since there was no minimum level of photocopies which was guaranteed by the Retailer.
27. Unless the photocopier was used, at most the Retailer's obligation was a non-financial one under clause 2.3 of the Location Agreement, to ensure that the photocopier was located in a prominent place on the Retailer's premises and not hidden somewhere. However, that obligation was not one which one would naturally associate with the obligations of a hirer under a hire agreement. It seems to me that unless one gives an all-embracing construction to the concept of a "consumer hire agreement" (an approach which I have rejected for the reasons given above), it is a complete distortion of language and commercial common sense to describe the Location Agreement as a hire agreement.
28. I accept Miss Williamson's submission that the Location Agreement is an agreement under which both parties potentially derive benefit from the use of a piece of equipment, TRM gets access to members of the public who will use its photocopiers, without having to purchase or rent the retail premises. The Retailer, without committing himself to any payment, is given the opportunity to earn commission by agreeing to house the photocopier. In my judgment the Location Agreements are not consumer hire agreements within the meaning of the Consumer Credit Act.
29. Furthermore, the Location Agreements are not contracts "for the hire of goods" within the meaning of section 6 of the Supply of Goods and Services Act 1982. Such a contract is defined in section 6(1) as "a contract under which one person bails...goods to another by way of hire". In my judgment, the concept of hire is one which entails a stipulated payment or payments by the hirer as the consideration for the hire, a feature which these contracts lack for all the reasons I have already given.
30. In these circumstances, it is not necessary to consider in detail the other provisions in the Location Agreements on which Miss Williamson relies as pointing away from these being consumer hire agreements. All I need add is that I agree that the Assignment provision in clause 14 is inconsistent with these being hire agreements. Such a provision (which permits assignment by the Retailer without the consent of TRM) would be unusual in a hire agreement, where the supplier is concerned about the identity and creditworthiness of the hirer.
31. On this basis, there was no entitlement on the part of the Retailers to terminate the Location Agreements under the Consumer Credit legislation and any entitlement to do so must depend exclusively upon what is the correct construction of the Agreements. Unless the Retailers were contractually entitled to terminate when they purported to do so, the Defendant was committing the tort of inducing breach of contract by seeking to persuade Retailers to terminate their Location Agreements early in circumstances which amounted to breach of contract.

The second and third issues: Is there a contractual right of early termination

32. These issues can be dealt with together. So far as the June 2002 Location Agreement is concerned, Mr Bredemear submits that clause 5 contemplates that clause 8 is one of the provisions dealing with early termination and that clause 8 itself anticipates the contractual entitlement of the Retailer to terminate early. In my judgment, there is an insuperable obstacle in the way of the Defendant's argument that the clause is giving the Retailer a contractual entitlement to terminate early. This is that clause 8 refers in terms to the Retailer agreeing to pay "liquidated damages" in the event of early termination. The whole concept of liquidated damages is one of a liquidated sum to be paid as damages for breach of contract or default on the part of the person paying such damages, not one of the consideration for a contractual entitlement. It is no answer to this point to say as Mr Bredemear did, that the sum required by way of such consideration would be exactly the same whether there was a breach or not. This ignores the use of the phrase "liquidated damages" and, as Miss Williamson pointed out, the heading of clause 8 is "Remedy". A remedy is only needed in respect of a wrong. If this clause were intended to give the Retailer a right to terminate early, it would surely have had some neutral heading to that effect.
33. Mr Bredemear also contended that the reference to early termination in the opening words of the clause cannot be to a situation which amounts to a repudiatory breach by the Retailer, since any such renunciation of the contract would require to be accepted by TRM. It seems to me that there are two answers to that contention. First, this is almost certainly one of those cases where, in practical terms, TRM would have no alternative but to accept the Retailer's purported early termination as a repudiation, bringing the Agreement to an end. Second and conversely, as Miss Williamson pointed out, if the argument were right that there could be no early termination without an accepted repudiation, it would follow that there was no need for a liquidated damages provision, because TRM could insist upon the contract continuing. It is precisely because the reality is that TRM could not do so, that a liquidated damages provision is needed.
34. The position is even clearer under clause 6 of the TRM Premier Club Addendum. This states in terms that if the Retailer wants or needs to terminate early, he will be in default, an express reference to such termination amounting to a breach of the Agreement. I must confess that I found Mr Bredemear's argument on this point very difficult to follow. He asserted that the clause gave the Retailer an ability to terminate early if he wanted to, because there was nothing in the clause to indicate that TRM could otherwise hold the Retailer to the Agreement. However this ignores completely the express acknowledgment that such early termination will put the Retailer in "default". To the extent that Mr Bredemear was also contending (as seemed to be the case) that wanting to terminate (as it were, having the thought) was a default but actually terminating was not, I agree with Miss Williamson that that would be an absurd construction, which this clause will not bear.
35. Furthermore, even if the word "default" did not appear in this clause, the further express acknowledgment that, in the event of early termination "damages would be difficult or impossible to calculate", is itself an express recognition that early termination sounds in damages, from which it necessarily follows that it is a breach. Those words are also the classic formulation of when a provision is a liquidated damages clause and not a penalty clause, a further recognition that this provision is looking at the consequences of an early termination by the Retailer which is a breach of contract, in the same way as under clause 8 of the June 2002 Location Agreement.
36. I should add that the alternative argument advanced in relation to both the second and third preliminary issues that a term should be implied into clause 8 of the June 2002 Location Agreement and clause 6 of the Premier Club Addendum to the effect that the agreement in question should be terminable by the Retailer at any time, is wholly unsustainable. Not only is such an implied term neither obvious nor necessary, but in each case it would be completely inconsistent with the express terms of the contract as I have construed them.
37. In conclusion on both these preliminary issues, whichever form of Location Agreement is being considered, early termination by the Retailer in circumstances such as occurred here was not permitted and was in breach of contract.