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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		12/01/2012

Mr Justice Eder :

1. These proceedings concern the scope and operation of two franchise agreements entered into between the claimant and the defendant in 2007 and 2008 respectively, one in respect of estate agency business and the other in respect of lettings agency business. It is common ground that the material terms of the two agreements are essentially identical in relevant respect for present purposes.
2. The defendant was formerly known as Countrywide Franchising Limited ("Countrywide") and was the franchisor under both agreements. In summary, Countrywide operated a business whereby it granted rights to franchisees to use the well-known "Bairstow Eves Countrywide" trade name and trademarks together with a business model at a specified location for an initial term together with renewal and onward sale rights, in return for an initial and ongoing fees. Although not directly relevant, I should mention that the defendant never in fact owned the "Bairstow Eves Countrywide" trade marks (and perhaps the trade name) but had, in effect, obtained the necessary licence(s) to grant franchises of estate agency and lettings agency services using that trade name and trade marks. In all, there are, I understand, approximately 90 outlets making up the defendant's franchise network (some franchisees operating more than one outlet) operated by franchisees under franchise agreements substantially similar to those between the claimant and the defendant.
3. The claimant is one of those franchisees and operates its business in Orpington, Kent. I was told that the claimant's solicitors act for around 50-60 of these other franchisees although it is important to note that these proceedings are brought solely in the name of the claimant and not in the name of or on behalf of any of these other franchisees.
4. The present claim arises as a result of the sale of the shares in the defendant by the defendant's parent company to another company, Hunters Franchising Ltd, which operates its own estate agency and lettings agency business under the name "Hunters". This sale occurred in the course of last year. Following the sale, the name of the defendant was changed to Hunters Partners Limited and in the course of correspondence and certain meetings various statements were made by Hunters to the effect that the defendant's franchisees, including the claimant, would have to rebranded as "Hunters", ceasing to use the trade name and marks of "Bairstow Eves Countrywide" and in effect relinquishing the goodwill franchisees have in that brand. According to the claimant, the rebranding has become necessary because in the sale agreement the defendant loses the right to use the "Bairstow Eves Countrywide" name and associated marks by 6 March 2012 at the latest.
5. It is the claimant's case that the defendant is not entitled to insist on this rebranding and that such conduct is or will constitute a derogation of grant and repudiation of the franchise agreements which (at least if such insistence continues) the claimant would be entitled to accept and bring the franchise agreements to an end. I should mention that it is said on behalf of the defendant that in the latter part of 2011, attempts were made by them to meet representatives of the claimant to seek a commercial resolution of the differences which had arisen and that such attempts were rebuffed by the claimant. Be that as it may, the claimant issued a Claim Form on 7 November 2011 under CPR Part 8 seeking the following three declarations:

(1) that on a true construction of the estate agency and the lettings agency franchise agreements, the defendant does not have the right to instruct or otherwise require the claimant to cease using or being associated with "Bairstow Eves" trade names or trade marks and/or to rebrand as "Hunters" or change its trade name to "Hunters" or use one more of the "Hunters" trade marks;

(2) that on a true construction of the estate agency and the lettings agency franchise agreements, instructing or otherwise requiring the claimant to cease using or being associated with "Bairstow Eves" trade names or trade marks and/or to rebrand as "Hunters" or change its trade name to "Hunters" or use one or more of the "Hunters" trade marks would amount to derogations from each grant in those franchise agreements and repudiatory breaches, entitling the claimant to elect to terminate each franchise agreement should it wish to do so;

(3) that on a true construction of the estate agency and lettings agency franchise agreements, on the expiry of 5 March 2012 of the defendant's license under the SPA to use trade names such as "Bairstow Eves" and/or trade marks including the words "Bairstow Eves" the defendant will be in repudiatory breach of and/or will significantly derogate from the grants in the estate agency and the lettings agency franchise agreements which will entitle the claimant to terminate its franchise agreements as a result.

6. The claimant served Particulars of Claim on 7 November 2011 together with the 1^st witness statement of David Thomas in support of the relief sought. Thereafter, the Defendant served two witness statements of James Barrett and a witness statement of Edward Jones. This was followed by a further witness statement of David Thomas. In summary, the claimant's position was that the resolution of this dispute was urgent: it was important, said the claimant, that there should be an early hearing date and this was duly fixed for 19 December 2011. As I understand, the Defendant applied earlier to vacate that hearing date but such application was refused by Master Kay QC at a hearing on 7 December 2011.
7. In the usual way, the parties exchanged written skeleton arguments prior to that hearing. As to the substance of the dispute, it was, in essence, the defendant's position that it was perfectly entitled to change the name as provided for in clause 2.1.2 of the franchise agreements which grants the right to use the trade name which is the name referred to in recital A of the franchise agreements (i.e. "Bairstow Eves Countrywide") "as the same may be amended from time to time by the Franchisor…." This gave rise to a debate as to the meaning of this phrase including, in particular, the word "amended". This was the core issue as a matter of construction of the franchise agreements. In effect, it was the defendant's case that this phrase provided the defendant with an unlimited right to replace or to substitute the name "Bairstow Eves Countrywide" by any other name. This was disputed by the claimant. In particular, it was submitted on behalf of the claimant that there was no such unlimited or unfettered right; that the word "amend" was more limited in scope; that, both as a matter of ordinary language and, specifically, in the commercial context of the franchise agreements, any change of name which did not have some "correlation" or "link" with the original name was impermissible; that the new name "Hunters" had no such "correlation" or "link" with the name "Bairstow Eves Countrywide"; and that therefore the defendant was in breach of the franchise agreements and that the defendant's insistence on such change constituted an impermissible derogation of grant and, indeed, repudiation of such agreements.
8. However, it was the defendant's position that regardless of the substantive dispute between the parties, the Court should not grant any of the declarations sought. In particular, the defendant submitted that the claims for such declarations were both theoretical and premature and that the Court had no jurisdiction to grant such declarations or, at the very least, should not grant such declarations as a matter of discretion. In summary, the defendant submitted that the Court was in effect being asked to provide legal advice to the claimant as to what options it might have in the future (i) in circumstances which have not yet arisen and (ii) where it is not stated what purpose that legal advice might be put to; that the declarations sought by the claimant are all theoretical and the Court should reject any attempt by the claimant to seek them; that they are moot points based upon possible future facts which do not determine issues between the parties; and that the Court is not here to debate the possible meanings of a contract in a vacuum. Moreover, as to the last of these points, it was the defendant's case that the Court could not determine whether or not to grant any of the three declarations without considering relevant factual evidence including both pre-contractual factual matrix evidence (which the defendant said was, in particular, relevant to the first declaration) and other evidence relating in particular to the seriousness or otherwise of the alleged breach by the defendant and its consequences (which the defendant said was relevant to the second and third declarations). For all these reasons, it was the defendant's position that the procedure adopted by the claimant under CPR Part 8 was inappropriate and that in any event the hearing should be vacated in order to permit the defendant to collect and to deploy further evidence.
9. In addition, the defendant raised a threshold issue relying upon clause 35.4 of the franchise agreements which provides as follows:

"35.4 If any dispute arises out of this Agreement which cannot be resolved in accordance with the clause 5.3, the parties will attempt to settle it by mediation in accordance with the Centre for Dispute are Resolution's Model Mediation Procedure."

10. At the hearing on 19 December, I heard argument as to the enforceability and scope of this clause and, in that context, I was referred to a number of authorities including Cable v Wireless v IBM [2002] CLC 1319. It is unnecessary to rehearse those arguments but, in the event, I decided to adjourn the hearing until 11 January 2012. That hearing was fixed to commence at 2 pm on that day. However, shortly before the hearing was due to take place, I was notified by way of a supplemental skeleton argument served by the defendant that in the interim period a mediation had taken place between the claimant and the defendant and that, although such mediation had not led to any resolution of the dispute between the claimant and the defendant, the defendant's position had in effect changed such that, in effect, the dispute between the claimant and the defendant had become academic and that the claim by the claimant against the defendant had no further utility regardless of its underlying merits. This change of position was summarised in the defendant's supplementary skeleton as follows:

"4. While nothing can or will be said about the conduct of the mediation the following can and should be reported to the Court. However, in preparation for and in the days immediately following the mediation the Defendant has been able to negotiate a solution entirely without prejudice to its defence of the Part 8 claim and all the submissions made in that defence. As the Court knows the Claimant wishes to continue to trade using the Bairstow Eves name. Countrywide continues to trade through its corporate branches using the Bairstow Eves name. The Defendant has reached agreement with Countrywide for the Claimants' two franchises to be transferred to a Countrywide company (under the powers in clause 27 of the agreements) which will then permit the Claimant to continue to use the Bairstow Eves name. The Defendant has agreed with Countrywide that the Defendant will be responsible for the management of the new franchisor's obligations under the franchise agreements. This agreement was finalised this morning and the transfers effected."

11. I should make plain that the claimant was unaware of these developments until about the same time as the Court. I should also mention that when the hearing resumed at 2 pm on 11 January, there was no evidence to support what was stated with regard thereto. Given the importance of these new developments and at my insistence, a further witness statement was prepared by Edward Jones on behalf of the defendant confirming these matters. Importantly, that further witness statement also confirmed under a signed statement of truth what Mr Jones QC on behalf of the defendant told the Court orally at the commencement of the resumed hearing namely: "In consequence of that transfer the defendant will not be entitled to and will not require the claimant to cease using the name Bairstow Eves Countrywide". For the avoidance of any doubt, Mr Jones QC, confirmed on behalf of the defendant that this statement by the defendant was unlimited in time and applied to the defendant whether acting in its own capacity or as manager or agent.
12. As a result of these developments, Mr Evans-Tovey on behalf of the claimant informed the Court that it was no longer necessary to pursue the claims for the second and third declarations at least at this stage and submitted that such claims should, in effect, be adjourned or stayed for the time being. However, Mr Evans-Tovey maintained his claim for the first declaration although, again in the light of the new developments, he applied for permission to amend the wording of the first declaration as follows: "On a true construction of the estate agency and the lettings agency franchise agreement, the Defendant Franchisor does not have the right to instruct or otherwise require the claimant to cease using or being associated with "Bairstow Eves Countrywide" trade names or trade marks and/or to rebrand as "Hunters" or change its trade name to "Hunters" or use one more of the "Hunters" trade marks". The first proposed amendment (replacing the word "Defendant" with the word "Franchisor") is straightforward and, despite objections by the defendant, is, in my view, unobjectionable. The second proposed amendment is more controversial because it goes to the substance of the dispute.
13. In support of his continued pursuit of the first declaration, Mr Evans-Tovey made three main points. First, he submitted that regardless of the new developments referred to above and the defendant's change of position, the Court still had jurisdiction to grant the declaration. Second, he submitted that for the detailed reasons set out in his original opening submissions, the claimant was right on the main substantive issue as to the proper construction of the franchise agreements. In that context, he relied, in particular, on the decision of the Court of Appeal in Stone v Fleet Mobile [2006] EWCA Civ 1209 and the passage at paragraphs 54-55. Third, he submitted that notwithstanding the new developments referred to above and the defendant's change of position, the relief sought by way of the first declaration should be determined as a matter of discretion because it would serve a real purpose in declaring the parties' rights and obligations under the franchise agreements which was important both as the far as the claimant and also the many other franchisees are concerned. In that context, Mr Evans-Tovey placed particular reliance on a number of authorities viz Rajbenback v Mamon [1955] 1 QB 283, Litchfield-Speer v Queen Anne's Gate Syndicate No 2 Limited [1919] 1 Ch 407, Pharmaceutical Society of Great Britain v Dickson [1970] AC 403, Greenwich Healthcare v London and Quadrant Housing Trust [1998] 1 WLR 1749 and Rolls Royce v Unite [2010] WLR 318.
14. As to these submissions, CPR Part 40.20 provides that a Court can make binding declarations whether or not any other remedy is claimed; and I am prepared to assume in the claimant's favour that the Court has the necessary jurisdiction to grant the first declaration.
15. With regard to the substantive merits of the underlying dispute, I have already indicated that Mr Jones QC submitted that as a matter of construction of the franchise agreements, the defendant was entitled to require the claimant to cease using "Bairstow Eves" and rebrand as "Hunters" for the reasons briefly stated above. Insofar as may be necessary, it was also Mr Jones QC's submission that Stone v Fleet Mobile was distinguishable. Further, Mr Jones QC emphasised that the claimant did not, at least originally, seek any declaration about the use of the name "Countrywide" and that it would at least appear to be accepted by the claimant that it could be required to cease using that name. It was in the light of that submission that Mr Evans-Tovey applied for permission to amend to widen the scope of the first declaration. In the event, it seems unnecessary and indeed undesirable for me to express any views as to these matters because, for the reasons set out below, I do not consider that it is appropriate as a matter of the Court's discretion to grant the first declaration and, as I indicated at the end of the oral argument, I decline to do so.
16. My reasons for declining to grant the first declaration are, in summary, as follows. First, whether or not a Court should grant any declaration is always in the discretion of the Court. There is no entitlement as of right to any declaration: see CPR 40.20.2. As I understood, the claimant did not suggest otherwise. Second, in considering whether or not to grant a declaration as to the proper construction of a contract, it seems to me that the Court should, at the very least, proceed with caution and in accordance with the principles referred to in the notes and authorities referred in CPR Part 40.20.2. Third, given the new developments as referred to above and the change of the defendant's position, I am not persuaded that the determination of the substantive issues in relation to the first declaration would serve any or any sufficient useful purpose. In particular, in light of the unequivocal statement in Mr Jones' most recent witness statement and the confirmation given orally by Mr Jones QC on behalf of the defendant, it seems to me that there is no longer any existing dispute between the claimant and the defendant; or at least that any dispute has now been rendered academic and theoretical. In response, Mr Evans-Tovey submitted that this did not necessarily mean that there would not be a dispute in the future and that, given such possibility, the Court should not refrain from dealing now with the claim for the first declaration. I do not agree. It seems to me that Mr Evans-Tovey's submission is one which in effect requests the Court to provide a binding decision on what has become an academic point and although the Court may have jurisdiction to do so, there is in my view no compelling reason, at least so far as the present parties are concerned, for taking that course in the circumstances of the present case as they now exist.
17. Mr Evans-Tovey then submitted that the determination of the first declaration would serve a useful purpose at least so far as the other franchisees are concerned: the new developments and the change of the defendant's position only concern the present parties and do not affect these other franchisees. In particular, there is no statement or undertaking by the defendant not to require these other franchisees to cease using the name "Bairstow Eves Countrywide" and to rebrand as "Hunters". I have much sympathy with the position of these other franchisees to the extent that their position remains, as I understand, uncertain. However, they are not parties to these present proceedings and there is no agreement that they are to be bound by any decision that the Court might make in these proceedings. Further, although any decision that the Court might make would or at least might, I assume, have some persuasive value, it would not be binding as a matter of precedent on any future Judge of the High Court; and I do not consider that any possible persuasive value of a determination of the issue in the present proceedings is sufficient to warrant the Court making such determination. On the contrary, it seems to me that the fact that these other franchisees have chosen not to be parties to these present proceedings (despite the fact that many of them are, as I have said, represented by the claimant's solicitors) is an important consideration against making a determination in the present proceedings at least absent an agreement to be bound. If the Court were to hold in favour of the claimant's construction of the franchise agreements these other franchisees would presumably seek to rely on such determination in their favour; and if the Court were to hold in favour of the defendant's construction, then there is at least a distinct possibility if not probability that these other franchisees would seek another bite at the proverbial cherry. These other franchisees have not suggested otherwise and I cannot exclude that possibility which, on the contrary, seems inherently probable. In such circumstances, I do not accept Mr Evans-Tovey's attempts to pray in aid the position of the other franchisees with a view to persuading me to exercise the Court's discretion to determine whether or not to grant the first declaration in its proposed amended form.
18. For all these reasons, I decline to grant the first declaration as I indicated previously. At the end of the oral argument, I also indicated that the proper course was to make an order refusing all three declarations but giving the claimant liberty to apply although I am willing to consider the precise form of the order (including the order as to costs) in light of any further submissions which might be made.