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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Stone & Anor (t/a Tyre 20) v Fleet Mobile Tyres Ltd [2006] EWCA Civ 1209 (31 August 2006) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2006/1209.html Cite as: [2006] EWCA Civ 1209 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
OF JUSTICE
CHANCERY DIVISION
His Honour Judge Eccles Q.C. (sitting as a Deputy Judge of the High Court)
TLQ/06/0350
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE WALL
and
LORD JUSTICE WILSON
____________________
(1) Jeffrey Stone (2) Lynn Ashwell (trading as "Tyre 20") |
Appellants |
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- and - |
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Fleet Mobile Tyres Limited |
Respondent |
____________________
Nigel Jones QC & Graham Cunningham (instructed by Borneo Linnells, MK40 2SY) for the respondent
Hearing date: Thursday 17th August 2006
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Crown Copyright ©
Lord Justice Keene:
INTRODUCTION
THE AGREEMENT
"The Franchisor hereby grants to the Franchisee during the continuance of this Agreement and subject to and in accordance with the terms and conditions herein contained the right to:-
2.1.1 operate the System under the Trade Name;
2.1.2 use the Trade Marks;
2.1.3 use the Software;
In the Territory and only for the purposes of the Franchisee's Business."
It is important that most of the terms used in that clause are defined in the agreement. The "System" is defined as
"practical business knowledge and experience and skill in establishing and developing the Business" (clause 1.1 and Recitals).
"that part of the Business operated by the Franchisee under the terms of the Agreement."
Clause 2.2 prevents the claimant from granting the right to any other person to operate the System under the Trade Names within the Territory, i.e., the area franchised to the defendants.
"Permit the Franchisee to operate and promote the Business under the Trade Name and the Trade Marks in accordance with the terms of this Agreement."
The franchisee, in the present case the defendants, is placed under a number of obligations. By clause 8.3.3, he is required to
"Continuously operate the Franchisee's Business upon such days and during such hours as the Franchisor shall reasonably determine."
By clause 8.3.5, he must
"Operate the Franchisee's Business promptly and strictly in accordance with the System and with the rules, regulations, standards and operating procedures set down in the Manual and with the Franchisor's reasonable instructions and in particular:-
8.3.5.1 use only the Trade Name and the Trade Marks in connection with the Franchisee's Business;
8.3.5.2 if so required by the Franchisor place in a prominent position upon all letter headings, invoices, receipts and other documents or literature employed by or in connection with the Franchisee's Business in such manner and in such places as the Franchisor may require the words "A Fleet Mobile Tyres Franchise owned and operated under licence by" followed by the Franchisee's name;
8.3.5.3 comply with the requirements of the Business Names Act 1958 or any re-enactment or amendment thereof;
8.3.5.4 use only such letter headings, invoices, signs, display materials, promotional literature, equipment and other items in connection with the Franchisee's Business as shall have been first approved in writing by the Franchisor and immediately to desist from the use or display of any signs, materials or objects as the Franchisor directs."
"8.3.6 Consult with the Franchisor as to the prices to be charged in the Franchisee's Business but the Franchisee shall at all times be free to determine the sale prices of the Products and Services."
I should add that "Products" means tyres and certain other products; "services", according to clause 1.1, means
"the supply and fitting of tyres and all other services briefly described in the Manual."
"The Franchisee shall pay, or allow the Franchisor to deduct from monies due to the Franchisee from the Franchisor, the Management Service Fee and Marketing Levy in the manner set out in the Manual."
The "Management Service Fee" is defined by clause 1.1 as five per cent of gross sales; the "Marketing Levy" as one per cent of "Gross Sales"; and "Gross Sales" is said by that same provision to mean
"the gross sales of the Franchisee's Business arising directly or indirectly from its conduct by the Franchisee during each four (4) week period that this Agreement is in force including all cash or credit transactions of whatever nature (and including the full amount of credit card transactions and transactions with customers outside the Territory and sales to the Franchisor) whether or not invoiced and all Services and Products supplied whether or not invoiced in each month BUT shall exclude Value Added Tax ("VAT")."
"shall pay to the Franchisee for his provision of Products and Services to National Account Customers in the manner set out in the Manual …"
It seems, therefore, that it was envisaged that, in the case of National Account Customers, it would be the Franchisor who would receive payment from the customer and who would then pay the Franchisee.
"The Franchisee shall conduct the Franchisee's Business strictly in accordance with the Manual. In the event of any conflict between the terms of this Agreement and the terms of the Manual the terms of this agreement shall prevail."
"This Agreement therefore contains the entire agreement between the parties and accordingly no pre-contractual statements shall add to or vary this Agreement or be of any force or effect and unless such pre-contractual statements are either contained in this Agreement or in an annexure the Franchisee waives any right he may have to sue for damages and/or rescind this Agreement."
That was a provision relied on by the judge below as part of his reasoning for rejecting claims by the defendants of misrepresentation: see paragraphs 94 and 95 of the judgment. Misrepresentation is no longer a live issue.
"outlining the tyre size and location."
Nothing is said about price.
THE DISPUTE BETWEEN THE PARTIES
"the claimant became increasingly insistent that they commit themselves to eTyres by accepting the claimant's branding strategy that involved changing the van livery to identify eTyres as the principal brand, with similar changes to business cards, stationery and promotional material where eTyres, indeed, was to be the only branding."
THE ISSUES
Issue 1: Wrongful Deduction
"ad hoc eTyres sales to the franchisor do not count as gross sales because they are not 'under terms of the agreement'": paragraph 104.
Discussion of First Issue
"the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract": per Lord Hoffmann in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896 at 912 H.
The surrounding circumstances are therefore relevant. Nonetheless, the presumption is that the parties have intended what they have in fact said: see Lord Wright in Inland Revenue Commissioners v. Raphael and Ezra [1935] A.C. 96 at 142.
Issue 2: "Derogation from Grant"
"If the franchisor requires the franchisee to desist entirely from using a trade name granted to him in any circumstances at all, I would think that to be such an extreme act as to involve a non- (sic) derogation from grant. So too if the franchisor insisted on the franchisee carrying in its business in accordance with a system that on objective analysis was bound to deprive it of the chance of trading profitably. In this case however, and essentially for the reasons advanced by Mr Cunningham for the claimant, I am not persuaded that the measures upon which the claimant insists have on objective analysis that extreme effect."
"The doctrine of derogation from grant is usually applied to sales or leases of land, but it is of wider application. It is a general principle of law that, if a man agrees to confer a particular benefit on another, he must not do anything which substantially deprives the other of the employment of that benefit: because that would be to take away with one hand what is given with the other."
The test there of substantial, rather than total, deprivation is emphasised by Miss Andrews. It is one which was endorsed by this court in Johnston and Sons Ltd v. Holland [1988] 1 EGLR 264 at 267M, in a judgment by Nicholls LJ, with whom the other two members of the court agreed.
Discussion of Second Issue
"not based on some ancient technicality of real property. As Younger LJ observed in Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] Ch 200 at pp 225, it is a principle which merely embodies in a legal maxim a rule of common honesty. It was imposed in the interest of fair dealing."
Indeed, it is a principle which has been applied in the case of the sale of a car, where the House of Lords has held that the purchaser obtained a right to repair which prevented the manufacturer (not the vendor) from enforcing its copyright in the design of exhausts, because that would detract from the car owner's right: British Leyland Motor Corporation Ltd v. Armstrong Patents Co. Ltd [1986] AC 577. It seems to reflect, therefore, a broad principle of fair dealing, to use Younger LJ's words.
"even accepting that the principle of derogation from grant is, as Lord Denning suggested, one of general application, the nature and scope of the licensee's obligation is a matter to be determined by reference to the contract as a whole having due regard to its commercial context. Accordingly, I do not think that the doctrine has any direct application to the present case, though it is no doubt a useful reminder that in the absence of clear words, parties to a contract are unlikely to have intended to make significant derogations through the operation of a subsidiary clause from the primary benefits intended to be conferred under it."
"to operate and promote the Business under the Trade Name and the Trade Marks." (clause 7.1).
Conclusion
Lord Justice Wall
Lord Justice Wilson