Francotyp-Postalia Ltd v The Mailing Room Ltd & Ors

The claimant is the UK subsidiary of a German group of companies whose ultimate holding company is Francotyp-Postalia GmbH which manufactures postal franking machines enabling the customers of such machines to frank their postage. The claimant supplied the machines to customers in the United Kingdom through a network of franchisee distributors from the late 1990s. Two of these franchisee distributors are the first and second defendants, which were such distributors until 27^th October 2014. The third defendant, George William Bevan, is a director and beneficial owner of both the other defendants.

The franchisees identified a potential customer. The claimant would then sell the machine to the franchisee who would sell or lease it to the customer. The claimant would then deliver the machine to the customer. The franchisee would obtain the signature of the customer to a “Maintenance and Teleset” agreement made with the claimant.

This was a contract whereby the claimant agreed for a set price per annum to maintain the machine. That was an open-ended agreement running until it was terminated. Attached to the agreement was a direct debit form enabling the customer to pay for its postage by remitting the necessary sum to the claimant which then sent the money to the Royal Mail. The claimant would also supply ink, labels and envelopes to the franchisees for on-sale to the customer.

In October 2014 the franchise agreement with the first and second defendants came to an end but that did not cause the customers’ agreements with the claimant to come an end.

Nevertheless the defendants began to circularise the customers with statements to the effect that their franking machine licences and agreements needed updating and required renewal, their current machines were not Royal Mail Smart approved, and the customers should fill in new direct debit forms whereby sums were no longer to be payable to the claimant but to the defendants or at their direction. That was said not to affect the customer’s current contract (the maintenance contract) and to have no cost implication; but it is alleged that the true position was likely to be that the customer would in fact have two concurrent contracts, the cost implications of which would be very considerable unless the defendants bought out the existing maintenance contracts which the customers had with the claimant.

In those circumstances the claimant applied for and obtained an interim injunction in remarkably wide terms that the defendants must not make or cause or authorise any person to make any false, misleading or inaccurate statement relating to the claimant’s business or any contract made by the claimant or any product or service supplied by the claimant.

There is now an appeal; the defendants complain that the order as made is too wide. They are, however, prepared to submit to an order in the following form:

“Pending trial or further order, the defendants and each of them shall not by any means whatsoever, including, without prejudice to the generality of the foregoing, by email, facsimile (fax), letter or telephone call or direct speech publish to customers the following statements about the claimant and the claimant’s business:-

(1)

That customers of the claimant have been supplied with a franking machine that is not Royal Mail Smart approved and as a result it is necessary for them to take urgent action to renew their franking licence;

(2)

That there is an urgent need for customers of the claimant to update any existing contract or any franking machine produced by the claimant because the defendants are rebranding from FP Executive to The Mailing Room or because the defendants are using a new postage platform with which any franking machine produced by the claimant is incompatible.”

The claimant accepts that the order made by the judge is wider than appropriate but says it is entitled to more relief than is acknowledged by the defendants and that the prohibited statements should include the following:-

“(3)

That the claimant is perpetrating a scam by posing as the defendants’ customers’ franking machine supplier;

(4)

That the services provided by the claimant would suffer disruption if customers do not sign new agreements with the first or second defendants;

(5)

That the signing of new agreements would not affect customers’ current contracts with the claimant; and

(6)

That companies using “FP” in their names who approached customers were “copy cats”, posing as franking machine suppliers when, in fact, they were perpetrating scams.”

At the end of the hearing we announced our decision to reject the claimant’s additions to the form of order which the defendants accepted should be made, and these are my reasons for so concluding.

The claim is for malicious falsehood. If injunctive relief is granted, it would affect the defendants’ exercise of their right to freedom of expression under Article 10 of the European Convention on Human Rights. Section 12(3) of the Human Rights Act 1998 provides:-

“No such relief is to be granted so as to restrain publication before trial unless the court is satisfied that the applicant is likely to establish that publication should not be allowed.”

This sub-section has been held not to change the well-known principle of the law of defamation that an interim injunction will not be granted to restrain publication of allegedly defamatory material if the defendant proposes to justify the publication at trial, unless it is plain that the plea of justification is bound to fail: see Greene v Associated Newspapers Ltd [2004] EWCA Civ 1462, [2005] QB 972. It is accepted that this principle applies to claims for malicious falsehood as held by Oliver J in Bestobell Paints Ltd v Bigg [1975] F.S.R. 421.

I turn therefore to the additional relief which the claimant now wants.

Perpetrating a scam by posing as the Defendants’ customers’ franking machine supplier

The point here is that the defendants propose to justify this allegation. The particulars are set out in the defence that has now been served and they are supported by evidence from Mr Bevan which was not before the judge but which we admitted without opposition from the claimant. Mr Hugh Tomlinson QC for the claimant submitted that the word “scam” was not used in the defence and that the evidence produced by Mr Bevan of what the claimant’s employees are alleged to have done did not show that those employees posed as suppliers of the machines to the defendants’ customers. But it is, on any view, arguable that the evidence adduced does show that the claimant’s employees were doing just that and, for this purpose, arguability is enough. It is true that the word “scam” does not appear in the defendants’ pleading but if the defendants can establish that the claimant’s employees were indeed posing as the defendants’ customers’ supplier that does, at any rate arguably, constitute a “scam” both on the defendants and their customers.

Claimant’s services would suffer disruption if new agreements are not signed with the defendants

The defendants say that this is adequately covered by the terms of the injunction to which they are prepared to submit. Provided they do not state that it is necessary for the customers to take urgent action to renew their machines or their licence because the machine is not approved by or is incompatible with Royal Mail it must follow that there is no threat of disruption if new agreements are not signed. Mr Tomlinson submitted that the terms of the first circular published by the defendants under the heading “What do you need to do?” said this:-

“To renew your agreement and receive the upgrade so there is no disruption to your service please complete the attached forms …” (my emphasis)

Accordingly the disruption was associated not merely with the upgrade but also with the renewal. I would not accept this rather technical argument; if the defendants comply with the terms of the injunction to which they are prepared to submit, the threat of disruption can no longer be said to be a serious issue.

Signing new agreements will not affect the customers’ current contracts with the claimant

The defendants say that to state this is true because current contracts cannot, in law, be affected. Mr Tomlinson submitted that, while that may be the position in law, so to state engendered confusion for the customer especially when the statement was coupled with the further statement that there will be no cost implications for the customer. He accepted that, in any event, the word “agreements” was too wide and, after some attempts at redrafting on his feet, he said he would be prepared to confine it to the maintenance agreements made between the claimant and the customers. Mr Jonathan Adkin QC for the defendants was in any event able to point to evidence that the documentation being proposed to customers by the defendants included a promise to buy out the claimants’ maintenance contracts if that was what the customer wished.

I would reject the need for this further order. It is still not clear precisely what the terms of this proposed paragraph should be and it is not appropriate to start redrafting in this court. It is arguable that the statement is not in any event incorrect and as such should not be the subject of any injunction.

Companies using “FP” were copy cats perpetrating scams

Both parties admit that this stands or falls with our decision on (3) above.

I conclude, therefore, that the defendants have offered terms which adequately protect the claimant pending trial. I add that I cannot, for my part, say that the claimant is at all “likely” to establish at trial that any injunction in the terms sought by it would be granted.

The defendants have submitted to an order for disclosure of the names and addresses of the persons to whom the circulars have been sent. The claimant wants a further order for disclosure of the names and addresses of persons to whom the defendants have sent:

“any written material other than the circulars making statements to the same or similar effect as [the statements contained in those circulars].”

I do not consider that such an order should now be made as ancillary relief to the interim injunction. Standard disclosure has already taken place in the action. If the documents requested are relevant to the action, an application can be made for specific disclosure in the action. If they are not relevant to the action, it would not be right for us to make any order now.

I would therefore allow this appeal to the extent indicated and as already formulated by counsel in the draft order of the court submitted after the hearing.

I agree.

I also agree.