Stream Healthcare (London) Ltd v Pitman Education and Training Ltd

The defendant (“PETL”) is a member of the Pitman Group of companies. The business of that group, or part of it, is the granting of franchises to conduct the business of secretarial and associated training. In October 2005 the claimant (“Stream”) entered into a franchise agreement pursuant to which it was entitled to conduct the franchise business in five countries in West Africa. It never opened any training centres, or granted any sub-franchises, under that agreement. Stream claims that PETL has repudiated that agreement and claims damages in the amount of wasted expenditure – something over £100,000. PETL denies repudiation and counterclaims for the sum of £40,000, being part of the unpaid franchise fee. It originally asserted its claims via insolvency claims against Stream and its principal director (Mr Salau) but those claims have not been pursued for the time being because of Stream’s own alleged claims. This action is the vehicle for determining whether or not Stream is entitled to assert those claims.

I heard from the following witnesses.

At this stage it will be useful to put a little more flesh on the bones of the claims in order that the more detailed factual narrative, to which I will come, has a context and so that I can at that point make some relevant findings in relation to the legal claims that are made.

As I have indicated, the Pitman Group granted franchises to operate the business of secretarial schools. In cross-examination it transpired that PETL was the subsidiary that granted franchises for overseas territories; another company in the group granted franchises for the UK. Both those latter companies were treated as being dormant companies in their respective accounts despite the fact that it was those companies that granted the franchises and which were, prima facie, entitled to the franchise payments. In fact the position was that the relevant goodwill and the relevant trade marks were all held by PTG, the holding company. Because the subsidiaries did not have any assets or relevant employees, in practice PTG complied with any supply obligations under the franchises (whether for physical products or for advice), and all monies payable by franchisees were channelled up to PTG. Whether or not it is right to describe the subsidiaries as “dormant” in these circumstances is not a matter I have to decide. There were no formal agency or authorisation arrangements in place as between PTG and its franchising subsidiaries. This gives rise to a claim of total failure of consideration by Stream.

Immediately prior to the grant of the franchise agreement which is in issue in this case, Mr Salau owned another company (Stream Healthcare Limited) which had taken three franchises for UK cities – one for Reading, one for Birmingham and one for London (Shoreditch). He came to the conclusion that it would be a good proposition to set up franchises in West Africa. In Nigeria at least, the Pitman name behind a qualification was a valuable one, and the Pitman qualification was sought after. He negotiated with the Pitman group and the result was the franchise agreement.

The relevant clauses of the franchise agreement are as follows.

The parties are PETL, Stream and Mr Salau (as guarantor). The following recitals are relevant and relied on:

“(A)

The Franchisor as a result of extensive research and practical commercial experience has developed and operates a successful business in the provision of training courses and associated publications (‘the Business’).

(B)

The Franchisor has established substantial goodwill and demand for the Business under the name ‘Pitman Training Centre’ (the ‘Trade Name’).

(C)

The Business operates under the Trade Name and various trade marks which are owned by Pitman Training Group plc (‘PTG’) who is the owner of the Franchisor.

(D)

The Franchisor has acquired practical business knowledge and experience and skill in establishing and developing the Business (‘the System’). The System includes methods of tuition including the use of software packages used or in connection with the operation of the Business and a recognised design, décor and colour scheme for the business premises, equipment and furniture layout, standards of quality, uniformity of products, related services, awards of a recognised Pitman Training certificate and accounting and management control procedures. The System is secret, substantial and confidential and is the exclusive property of the Franchisor.”

PETL is the Franchisor and Stream is described as the Master Franchisee under this agreement. Under clause 2.1 PETL granted to Stream the sole right to use and license the use of the System and the Services and the Trade Name in order to facilitate the opening of Pitman Training Franchises within what is described as the Development Area. The Development Area is described in the first schedule as being Ghana, Nigeria, Sierra Leone, Gambia and Liberia. The Trade Mark is “Pitman Training”. Clause 2.3 provided that Stream would operate a pilot franchise by the date set out in the first schedule (15^th November 2005) and would not enter into any further franchise agreements until that pilot had been operating for six months.

Clause 4 provided that the Franchisor should train a senior manager and two nominated representatives of the Master Franchisee and the operation of the system. This was never invoked by Stream in relation to the present franchise.

Clause 6 dealt with duration and renewal. The term of the franchise agreement was ten years commencing from the “Commencement Date”. The Commencement Date was to be set out in the schedule, but it was in fact left blank.

Clause 7 contains the “Franchisor’s obligations”. This is relied on by Stream so I need to set it out:

“7.

Franchisor’s obligations.

The Franchisor shall provide or make available at no cost to the Master Franchisee (except where otherwise stated):

7.1

Initial obligations:

7.1.1

The training set out in clause 4;

7.1.2

A copy on loan of the Franchisor’s Manual and Franchisee Manuals;

7.1.3

Advice on the adaptation of the System and the Manual having regard to the conditions prevailing within the Development Area which may affect the System and Manual…

7.1.4

Advice in the establishing of the first three Pitman Training Franchises to be established by the Master Franchisee including (at the Master Franchisee’s expense where a visit to the Development Area specifically for such purpose is required) the provision for such period as the Franchisor considers appropriate of a suitably qualified member of the Franchisor’s staff to assist the Master Franchisee;

7.1.5

A copy on loan of artwork or other printed material, Stationery, brochures and other items related to the operation of the System.”

7.2 provided for “Continuing Obligations”. They included the provision of advice, know how and guidance about the future operation of the System, advice and assistance for staff, details of changes or improvements to the System in the form of Manual Updates, and a supply of Work Books and other products.

Clause 8 contained obligations on the Master Franchisee:

“In order to maintain the common identity and reputation of the network and to maintain uniformly high standards amongst Franchisees, the Master Franchisee shall:

….

8.8

Only use the Trade Name and Trade Mark in connection with the Master Franchisee’s business and not, without the Franchisor’s prior written consent, register any company name or trade mark or make use of any business name incorporating the Trade Name or Trade Mark or incorporating any similar sounding name.”

Clause 10 dealt with fees. I do not need to set it out verbatim. It provided for the Master Franchise Fee to be paid as to £20,000 on the execution of the agreement, £20,000 on 20^th November 2006 and £20,000 on 20^th November 2007.

Clause 12 is entitled “Trade Marks” and is said to contain one of the principal terms in respect of which PETL is said to be in breach. The relevant clauses read:

“12.1

The Master Franchisee shall render to the Franchisor all reasonable assistance to enable the Franchisor to obtain registration of the Trade Mark in the Development Area. In no circumstances will the Master Franchisee apply for registration as a proprietor of the Trade Mark or any other trade mark, nor will the Master Franchisee use the Trade Name or any part of it as part of a corporate name unless so requested by the Franchisor.

…..

12.7

No warranty express or implied is given by the Franchisor with respect to the validity of the Trade Marks. If it is not possible for the Franchisor to secure registration of the Trade Marks in the Development Area and it shall be considered inadvisable to use the Trade Name, the Franchisor shall at its own expense but in co-operation and in consultation with the Master Franchisee devise an alternative trade name as similar as possible to the Trade Name and Trade Marks.”

Clause 18 deals with “Termination”. So far as relevant, it provides:

“18.1

The Franchisor may terminate this Agreement by fourteen days’ notice in writing to the Master Franchisee in any of the following events:

18.1.1

If the Master Franchisee fails to commence the Master Franchisee’s Business within 12 months from the date of this Agreement;

…..

18.1.6

If the Master Franchisee shall neglect or fail to perform or observe any of the agreements or conditions on the Master Franchisee’s part to be performed or observed under this Agreement or any Franchise Agreement, or shall fail to operate the Master Franchisee’s Business to the standards required by the Franchisor as set out in the Manual, and such default, neglect or failure:

….

18.1.6.2

is a failure promptly to make any payments of any sums owing by the Master Franchisee to the Franchisor or any supplier on the due date….and the Master Franchisee shall fail to remedy such default, neglect or failure (where capable of remedy) to the Franchisor’s satisfaction within 14 days after written notice from the Franchisor;

OR in the case of any other default, neglect or failure within 28 days after written notice from the Franchisor.”

Stream paid the first instalment of the fee on time but never did pay the second or third. There were agreed extensions for payment of the second instalment, including a post-dated cheque arrangement, but it was still never paid. It is Stream’s case that the agreement was that the second payment, and by implication the third, did not have to be paid until it opened the Nigeria franchise training Centre.

A statutory demand was served on Stream for the outstanding £40,000 on 8^th August 2008. That prompted an application for an injunction restraining the presentation of a winding up petition on the basis that Stream had its own claim for breach of contract. That application failed in front of Morgan J. Stream appealed and it seems that appeal was compromised on terms which involved the non-presentation of the petition and the commencement of these proceedings.

The claims arising out of that agreement, so far as Stream is concerned, are claims for breaches of clauses 7 and 12. So far as clause 12 is concerned, it is said that in the circumstances to which I will come, PETL was under an obligation to devise an alternative name when the use of the name “Pitman Training” or “Pitman Training Centre” is said to have been rendered impossible or “inadvisable” in Nigeria. Pitman did not do so and thereby repudiated the agreement. It is said that later events, when PETL sought to insist on compliance with obligations under this agreement and under the English franchise agreements, amounted to a repudiation on the footing that PETL was saying that it would not comply with the terms of the franchise agreement, and by a letter dated 13^th November 2008 Stream purports to have accepted that repudiation and brought the agreement to an end. There is also said to be a misrepresentation claim arising out of the above recitals because PETL did not have any of the goodwill, Trade Names or Trade Marks referred to, and that absence is also said to found a claim for total failure of consideration.

I therefore turn to the detailed factual narrative, making certain findings germane to the above claims on the way. In what follows, any recitation of a fact should be taken as being a finding of fact by me unless the contrary appears.

I can take up the story with the conclusion of the franchise agreement on 24^th October 2005. The parties agreed that Nigeria would be the pilot. Mr Salau set about implementing that (indeed he had carried out some investigations before then) and (despite the stated opening date in the agreement) it was not opened in November 2005, and not much progress seems to have been made towards opening it for the rest of that year either. Mr Salau identified a building, and on 14^th June 2006 he emailed Mr Knights to tell him that he needed to update him on the development overseas. He said that they had “completed the Pitman Building in Nigeria”. In fact he had not built the building himself. What he had done was to identify a building built by others in relation to part of which he would take a lease and conduct a Pitman franchise business there. The building required partitioning, but that was not done by this date. On 17^th July 2006 Mr Salau told Pitman that “the construction of the Nigeria Pitman office has been completed. We are just awaiting final inspection by the Ministry of Education and the relevant documentation is in progress.” Again, the partitioning had not in fact been complete. He told me that the Ministry of Education had to approve matters such as classroom sizes before he could use it. Judging from the evidence as a whole, Mr Salau was not in fact even close to being able to open at this point. He still did not have a lease by November 2006, but in this month apparently some advertisements were placed to advertise the coming of the training centre.

In February 2007 Mr Salau signed a lease of the relevant premises, taking it in the name of Stream. The lease is dated 3^rd January 2007, but it was actually signed in February. It was for a two year term, and provided for one up front payment. Mr Salau was still not close to starting. By now the second payment had fallen due under the franchise agreement but it was not tendered. Mr Salau’s evidence was that he believed that there was an understanding it would not be payable, but there is absolutely no basis for that in terms of dealings between the parties. I think that his view about that, and his failure even to contemplate paying it, demonstrates a somewhat cavalier approach to the matter. He did not think it through. It demonstrates that he is capable of looking at a transaction through his own particular prism, which is not necessarily the same as the agreed prism. There is no evidence that Pitman chased immediately, but on 15^th February 2007 Mr Knights said that they needed to meet about “long outstanding Franchise Fee Debt for Nigeria”. He pressed further on 1^st March and again on 2^nd March (responding to an email of Mr Salau which did not directly address the point). In the face of those emails, it is hard to see why Mr Salau can have had an understanding that the sum should not be paid. Mr Knights had asked for a meeting, but it did not take place at this time. During this period, Mr Salau was paying various sums of money in order to further the Nigeria project.

It appears that in or about May 2007 Mr Salau sought to register a couple of company names with “Pitman” in the name. The first was Pitman Training Nigeria Limited; the second was Pitman Nigeria Limited. There was already a company with the latter name, and the request was therefore denied. There was no company with the former name, but there was one with the name Pitman Education and Training Limited, and apparently registration of Pitman Training Nigeria Limited was refused on that basis. In connection with this activity, Mr Salau received a letter from Nigerian solicitors (Sandra Abiola Oyero Chambers) dated 22^nd May in which they said as follows:

“Re: registration of incorporation of Pitman Nigeria Limited.

This is further to your instructions in respect of the aforementioned matter.

The company Pitman Nigeria Limited was not available for registration. A copy of the Notice of Denial is herewith attached for your attention.

In view of the above, we have reapplied to the Corporate Affairs Commission for the availability of the name: Pitman Training Nigeria Limited. We will keep you informed of further developments.”

As has already appeared, the alternative company name was not available either. According to Mr Salau, he thought that according to the advice that he was given it was not possible either to use a company containing the name Pitman, or to use Pitman as a trading name for the business. Mrs Simmonds also suggested that she too thought that the information coming from Nigeria, and the inability to use the two company names that they had sought, meant that the trade name “Pitman Training” or “Pitman Training Centre” could not be used.

On 18^th June 2007 Mr Salau (and Mrs Simmonds) at last met with Mr Knights at the Gatwick Hilton Hotel. According to his witness statement, Mr Salau told Mr Knights that the name Pitman Training Centre was not available for registration and use in Nigeria, and that that prevented him from operating the franchise in Nigeria. He went on to explain that it seemed to be impossible to register anything using the word “Pitman” in the title because it was too similar to other already registered names. He claims to have shown Mr Knights a copy of the letter of 22^nd May from the Nigerian solicitors. Mr Salau’s cross-examination evidence was rather more equivocal. He claims to have shown Mr Knights the letter from the solicitors, but on two or three occasions said that he did not state to Mr Knights that it meant he could not open the Pitman Training Centre. On another occasion he said it was “potentially” stopping him from operating. According to Mr Salau, Mr Knights said he would look into the matter (whatever it was) and would get back to Mr Salau, but he was quite dismissive. He ended his evidence on this point by saying that when he left the meeting he thought he could start to operate. If there was a problem Mr Knights would get back to him. He did not think there would be a problem in the future.

Mrs Simmonds also attended the meeting. She does not give much detail of it in her witness statements, but in her cross-examination she gave quite detailed evidence. She explained how they sat around a coffee table and she told Mr Salau that he should show him the documents about registering the Pitman Training name. She went to the other side and gave the document (presumably the solicitors’ letter and perhaps the certificate of rejection) and asked him what he thought about it. She says that he said it was interesting and wrote certain details in a black diary. Mr Knights said it was possible that Pitman did do some dealings in Nigeria some time ago; he would look into the matter and get back to Stream.

I need to make some findings about the question of the name and what was and was not said to Mr Knights, because part of Stream’s case depends upon it. At least at some parts of the case, Stream seemed to be saying that Mr Knights knew there was a problem about the use of the very name which the franchise agreement provided for, and that being aware of the problem PETL should have done something to resolve the matter under clause 12.7 of the franchise agreement.

The first point to note is that the documents coming out of Nigeria say absolutely nothing about the use of Pitman Training or Pitman Training Centre as a trade name. They relate to the use of company names. If Mr Salau did think that those documents prevented the use of the trade name, then he was seriously misunderstanding the situation. Furthermore, he was seeking to register company names which were forbidden by the terms of the franchise agreement which barred the use of the trade name in a local company name. I do not think that Mr Salau made that mistake at the time.

Mr Knights denied that he was shown any such document or that any problems with the trade name were ever discussed at the meeting.

The main reasons for not accepting the evidence of Mr Salau and Mrs Simmonds on the point are the probabilities and what happened over the ensuing 18 months. If there were a problem about using the trade name, then that would have been a show-stopper. As Mr Salau rightly observed (on many occasions), the use of the trade name was vital to the franchise agreement. If he had really thought that the inability to register company names meant that he could not trade under that name, then it seems to me that it would have been inevitable that he would have raised the matter straight away, and continued to press the Pitman Group to do something about it so that in due course he could use the name when the Centre (for which he had by now taken a lease) opened. Furthermore, if he had said anything like that to Mr Knights, then I think it inevitable that Mr Knights would have reacted and done something about it, or at least some record would appear in Pitman’s records. It would not be the sort of thing that Mr Knights would simply let lie.

As the narrative below will show, the point never surfaced in dealings between the parties until it was raised in evidence provided in support of the application to restrain the winding up petition. Mr Salau had two or three important meetings with Mr Knights and Mrs Lister, and such records as there are of those meetings do not demonstrate that the point was taken up at all. It was never mentioned in any of the correspondence passing between the parties. It is not possible to suppose that, if Mr Salau believed there was a show-stopper lurking in the background, he would not have mentioned it at some stage after the meeting at the Gatwick Hilton. He asserts that he mentioned it at one meeting with Mrs Lister, and I will deal with that in due course, but suffice it to say for present purposes there is no corroborative evidence of that. PETL was never pressed, or even asked, to address the problem. Furthermore, when Mr Salau did refer to local difficulties in opening, he never identified the trading name as being one of them. I therefore find that Mr Salau did not believe that he could not use the Pitman Training name, and he did not raise that point, or anything like it, with Mr Knights. I do not accept the evidence of Mr Salau and Mrs Simmonds to the contrary.

One relevant matter was, however, raised and agreed at the Gatwick Hilton meeting. There was discussion about the outstanding second instalment of £20,000 due under the franchise agreement. Mr Knights says, and I accept, that Mr Salau told Mr Knights he was going to open the Centre “soon” (he could not remember exactly when it was that Mr Salau said it would open), and accordingly Mr Knights agreed that the outstanding instalments would be held “pending its opening”. By this he must have meant that it would be paid on or shortly after the opening. There was therefore an agreed postponement of this debt.

There was technically an issue between the parties as to whether this agreement was supported by consideration. Mr Althaus, for PETL, said that the agreement was not binding. I do not need to make any determination about that. There was no serious investigation of the facts on the point, or of any alternative estoppel claim, but I do not think that that matters in the light of subsequent events. The important point, in my view, is that the postponement was on the footing that the Centre would be opening soon. The agreement was not, as Mr Sinai for Stream asserted, an agreement that the sum would only become due when the Centre opened, whenever that might be. I prefer Mr Knights’ evidence on the point, and it coincides with commercial common sense. It is one thing for a helpful Franchisor to agree to postpone a payment until an income, promised soon, becomes available. It is another to allow the payment to be postponed to such date as Stream might propose to open the Centre in the future, whether “soon” or not. I do not believe that Mr Knights would have accepted an agreement in the latter sense, and the parties did not make one. If it matters, I do not believe that Mr Salau thought that he had made one either. This is demonstrated by later events in which he gave a post-dated cheque for the second instalment.

This conclusion also deals with a further submission made by Mr Sinai about the third instalment. He submitted that the agreement to postpone the second instalment by implication carried with it an agreement to postpone the third instalment, because it made little sense to postpone the second but not the third. No express arrangement governing the third payment was alleged in this respect. I find that the arrangement that was made in respect of the second instalment did not carry the implication suggested by Mr Sinai. I expect that the “soon” date would be one arising before, or probably no later than, the third payment became due. The parties were simply not addressing their minds to the third payment. Mr Salau was seeking a concession as to a significantly overdue payment, and he got it. It is not necessary to imply anything about the third instalment into that arrangement, and I do not do so.

Over the next few months, a few emails passed between Mr Salau and Mr Knights about various matters, including an outstanding debt due from the English Centres. On 19^th August 2007 Mr Knights referred to a need to speak about, inter alia, the outstanding Nigeria payment and on 3^rd September he wrote:

“I do feel Ladi that there is some confusion here about what was agreed. When we met at Gatwick we agreed to hold the £20,000 debt pending the opening of the Nigeria Centre.”

On 24^th September Mr Knights and Mr Salau met at the Institute of Directors. An email of 26^th September from Mr Knights contains some reference to that meeting. In relation to Nigeria, it says:

“With regards Nigeria! You explained your cash flow situation with regards Nigeria and that payment would be late December or even early January, you would be opening mid November and would need the Décor Pack and be in a position to buy opening stock with Centre Copies. This is really in conflict with our Company Policy with regards Centre openings, BUT there is a simple solution to this. Please will you send me a post-dated cheque, for the £20,000 outstanding, dated 7^th January 2008. This will give the PTG the comfort that they need (especially as we have never had a refused payment cheque from you), I can then send the Décor Pack to you via Shoreditch free of charge, you can buy the required opening stock, it fits in with your payment schedule and gives some comfort room and open your [sic] Nigerian Centre on schedule.”

I find this to be the most reliable account of what happened at that meeting in relation to Nigeria. It will be noted that there is no reference there to the inability to use the Pitman Training name or any block that that might put on opening the Centre. Mr Salau did not suggest at any time that he raised the point with Mr Knights. That is another compelling reason for holding that Mr Salau did not hold the belief that there was a problem about that.

The décor pack requires a little explanation. That pack is a collection of large semi-rigid poster-like articles with Pitman publicity material on them – logos, slogans and the like. They are intended to be placed in the Centre to reinforce the Pitman brand. At times it seemed to be part of Stream’s case that the arrangement proposed by Mr Knights somehow involved wrongful activity on his part. I find that it was no such thing. What the parties were doing at this meeting was agreeing certain aspects of the conduct of their future relationship. Mr Knights had been told that the Centre would be opening “soon” and that the second instalment would be paid then. At the meeting at the IOD Mr Salau put some sort of date on that opening – November. Mr Knights proposed, therefore, that the payment obligation should be fulfilled in January and proposed the mechanism of a post-dated cheque for payment of this long-outstanding debt. In the light of the uncertainties, it seems to me he was entirely justified in saying that he would not supply the décor pack unless he had the comfort of knowing he would have payment. But be that as it may, Mr Salau agreed, as a matter of negotiation, that that was how matters should be arranged. That agreement was as binding, and as justifiable, as the agreement by Mr Knights to postpone the outstanding monies until the Centre opened, if not more so. It was all part of a negotiation as to how the parties would take their relationship forward. Mr Salau duly provided the post-dated cheque, and PETL (or PTG) provided the décor pack. It is not wholly clear whether the proposal for the post-dated cheque was agreed at the IOD meeting or in subsequent emails, but it is plain that it was agreed.

It appears that the Nigeria Centre did not open in November as indicated. On 10^th December 2007 Mr Salau sent an email to Paul Crompton of PTG apologising for not having sent other cheques and stating that his cash flow had been drastically affected by some outstanding Inland Revenue and Customs & Excise payments. He went on:

“We are awaiting some large amount of income by our debtors, who have promised the first week in new year. Please bear with us as I will be sending the cheques in the First week of the new year.

Meanwhile, do not Bank the £20,000 cheque for Nigeria. I will advise you accordingly in Jan 08.”

Pitman complied with his request, but it should be noted that the basis on which the décor pack had been provided had been falsified.

On 4^th February Mrs Lister emailed Mr Salau and said that her colleague had updated her about the situation as to arrears of tax in the UK. She said she would appreciate a call to give her an update. Mr Salau responded on 6^th February saying:

“Things have taken much longer than expected in Nigeria. We have some problems with our system and networking installations and other minor issues.

….I will call you as soon as I return to UK to arrange a meeting. I will be able to brief you in detail our 2008 strategies for both UK and overseas operations.”

It will be noted that no mention was made in this email of any difficulties posed by the unavailability of any particular trade name. That supports the conclusion that Mr Salau did not think that there were any such difficulties.

Mrs Lister and Mr Salau met on 17^th March. No note of that meeting survives, but it is recorded in an email from Mrs Lister to Mr Salau dated 27^th March. The following material points emerge from that email and the meeting:

The email closes with various items under the heading “overall PTG requirements”. It reads:

“Ladi – I must once again summarise PTG’s position – and I must request that you look at things from my viewpoint in this as well – as I said at the conclusion of our meeting:

•

2 of your three Centres are out of agreement;

•

The third is in breach of its franchise agreement for non-payment of amounts due to PTG;

•

West Africa franchise is not complete until payment has been received in full;

•

With the greatest respect, you must appreciate that financially PTG are making nothing from you currently.

I would love nothing more than to continue to work with you via a combination of:

•

Support to your UK centres;

•

Development of both your UK businesses and your business in West Africa.

To do this you must:

•

Obtain premises in Reading and present an acceptable business plan within 6 weeks and

•

Settle debts as follows:

(1)

UK debt in full of £16,816.22 by 11^th April (the amount must have cleared our account by this date).

(2)

West Africa £20k to be settled by 11^th April (ditto).

(3)

End stop date on final £20k re West Africa.

You can of course choose not to continue with the Reading Centre.

I have reflected on the above and cannot move on this due to two factors:

•

The Reading debt relates to MSF audit arrears going back years!

•

You were originally anticipating to pay the £20k in January of this year, and we have been very patient and trustworthy on this – your reaction now shows me that ‘giving you space’ has got me absolutely nowhere – we are now a full three months further down the line and you are now not only saying you can’t pay the next £20k but the final £20k isn’t payable when it very clearly is as per the agreement. In addition to needing the £20k paying in the next couple of weeks, I need a firm commitment on when the final £20k will be paid. As you know, we don’t do franchise openings on payment plans. I understand your considerable financial investment – but this is not a joint investment – I don’t own part of the centre in Lagos – nor would it be right to do so.

I look forward to hearing from you as a matter of the utmost urgency either over the weekend or early next week on your intended payments under (1), (2) and (3) above.”

That email is important, because it is part of the foundation of Stream’s case that PETL repudiated the franchise agreement, which repudiation Stream was entitled to, and ultimately did, accept. I shall consider the merits of the claim in due course.

Mr Salau responded on 3^rd April in an email. He said that he would not be able to pay the English debt by 11^th April, and would need six weeks. He asked if he could be given until 9^th May. On West Africa he said as follows:

“Nigeria/West Africa:

There have been delay [sic] for this take off due to various government requirements which I discussed in the last meeting with you.

We would like to arrange two payments. The first payment for £10,000 will be by 30^th June 2006. The second payment of £10,000 will be by 30^th July 2008.

Last payment of £20,000.

We will notify you of our arrangement once all aforementioned financial commitments have been settled in July ending.”

Again, he did not refer to any problems in relation to use of trade names. If he had had any such problems, particularly if he expected the Pitman Group to do something about them, I think it is inevitable he would have referred to it in this email. The purpose of this email was to explain why he was not able to comply with various outstanding obligations, and I think that he would have then listed every possible reason for not doing so. If he was prevented from opening then I think he would have said that. In his cross-examination Mr Salau said he mentioned the problem to Mrs Lister at their meeting of 17^th March. Mrs Lister was quite plain that it was not mentioned. I have no hesitation in preferring the evidence of Mrs Lister on this point. She said, and I accept, that when she understood that it was being said that there was a problem (in September 2008) she was so surprised she almost fell off her chair. I think that that would have been her reaction in March. Some reference to it would have been made in the correspondence. It was not; I think that that plainly reflects that the point was not alluded to.

On 8^th April Mrs Lister responded to Mr Salau. She counter-proposed by saying that she would agree to move forward on the following terms:

“Payment of UK debt by 9^th May – please forward a post-dated cheque to me for £20k by return – I undertake not to bank this until 9^th May. [This debt represented the trading debt, interest and certain work books supplied.]

Payment of the West Africa Debt as indicated below – please forward two post-dated cheques as detailed.” [The reference to ‘indicated below’ is a reference to Mr Salau’s previous email, which in the normal way appeared below Mrs Lister’s response]

At the trial, the approach of Mrs Lister was criticised as being illegitimate. It was said that Mrs Lister was illegitimately linking the English and Nigerian debts. This was part of the repudiation picture that Stream sought to build up.

Mr Salau responded by rejecting that approach. On 14^th April he emailed to say that he was unable to send the post-dated cheque (that is to say the £20,000 cheque for the English operation) at present. He wanted to have a meeting to ensure that all fund transfers had been arranged before issuing cheques. He said he was in the process of taking a bank facility and he was confident that by the end of April or the first week in May all bank arrangements would have been concluded.

“In short, I would like you to schedule an appointment for me either on 9^th May 08 or when it is convenient in May.

The payment/cheques for W Africa will be equally dealt with at the future meeting in May.”

Mrs Lister’s email had effectively accepted Mr Salau’s payment terms. She wanted them backed up by post-dated cheques. Mr Salau rejected that overture.

In the trial bundle there was a letter dated 15^th April 2008 from the landlord (and letting agent) of the Lagos premises. It said:

“Thank you for updating us about various government statutory issues regarding your registration.

We do request that you remove the above signage within 14 days from the above date.”

The letter was headed “Pitman Signage”. In his witness statement Mr Salau said he had advised his landlord of “the various difficulties I was experiencing in getting the business operational”. The position of that paragraph in his witness statement suggests that he might have been referring to trade names. However, that is not clear from his witness statement, and I doubt if it was the case. I do not think he is likely to have been saying one thing to his landlord about this and another to Pitman. The expression “government statutory issues” is not really apt to describe the trade name problem.

On 21^st April 2008 Mrs Lister said she was happy to meet and suggested 6^th May. On 29^th April Mr Salau responded that 6^th May was not convenient. He also raised the question of whether he could have the Pitman work books for the English operation on a “cash with order” basis, which he understood had been agreed. In an email of 30^th April Mrs Lister indicated why she was no longer going to allow that. The relevant parts of the email said:

“The reason for changing the conditions on supply of work books was that you have not supplied post-dated cheques or payment in full of all outstanding debt as I originally requested. The terms therefore of my original email of 8^th April do not therefore stand in full.

We have to move forward separately. Until you have shown good faith and we have either had a meeting and you have settled all current debt for the UK and agreed a way forward for overseas debt, then we cannot move forward with supplies for either the UK or Nigeria.

I trust that we will be able to meet up in the next week or so – my diary is very full – I am in Birmingham on 6^th and London on the 8^th, so unless you can make either of these dates, I really think that we will have to revert to posting the cheques (please note that I expect the cheques not to be further post-dated).”

Again, this was criticised as being an illegitimate linking of the English and Nigerian franchises. It was relied on as being another aspect of repudiation by Pitman because Mrs Lister was not entitled to insist on payment of the English debt as a condition of “moving forward” with supplies for Nigeria. Nor, as a matter of contractual analysis, was she entitled to treat payment of the outstanding Nigerian debt as a condition precedent to providing supplies (work books) for either the UK or Nigeria.

No meeting took place. There was some communication from PTG’s solicitors and solicitors acting for Stream. On 20^th August Stream’s solicitors wrote suggesting that the £40,000 was not due because of the agreement reached at Gatwick between Mr Salau and Mr Knights. The letter also referred to “constraints” including the allegation that the trade name was not available for use. Mrs Lister says, and I accept, that this was the first that she had ever heard of such an allegation. It was this which caused her such great surprise. The response of PETL was to serve a statutory demand on Stream. That is what led to the proceedings before Morgan J and the Court of Appeal.

The evidence in support of the application by Stream to restrain the presentation of a winding up petition was provided by Mrs Simmonds in the absence of Mr Salau. On 9^th September 2008 she signed a witness statement stating that Stream:

“…could not exercise any rights under the agreement as the applicant later discovered that the Trade Name of the respondent to which the applicant ought, under the agreement, to have had the ‘sole right’ of use was not, and has not been, available in Nigeria for the applicant’s use.”

She exhibited a further letter from Nigerian lawyers which she said confirmed the position. That letter is dated 29^th August 2008 and is headed “Pitman operations in Nigeria”. It reads:

“This is further to your instructions and our previous correspondences in respect of the above subject matter.

As we had earlier indicated, the above name is not available for your use. There are similar names, there is ‘Pitman Nigeria Limited’, secondly and most importantly there is ‘Pitman Education and Training Limited’.

Our findings in respect of the company known and registered as Pitman Education and Training Limited are as follows [then follows details of the registered office, directors and main object, the latter being ‘to establish and operate a college for the purpose of Training Secretarial Business and Allied staff.]

As a result to the above, it is practically impossible for you to register and operate any training programme with the name Pitman. We advise you consider the use of other names.

However, if you have the permission or agreement to use the name Pitman Training, you may need to forward the above information to the parent company. It is the responsibility of the Parent Company to take legal steps against the illegal or unauthorised use of its name. Until that is done, you cannot use the name ‘Pitman Training’ as a business name.

Our laws do not permit the use of a company name, by two different and separate entities, with the same or similar business objects, in that it is capable of confusing members of the public.”

It is Stream’s case that this letter ought to have triggered an attempt by Pitman to sort out the trade name problem pursuant to clause 12.7 of the franchise agreement. It is said that it alerted Pitman to the problems, and whether the letter was right or wrong, Pitman ought to have set about doing something about it. On reading this letter, Stream was justified in considering that it was inadvisable to trade under the Pitman Training name. PETL came under an obligation to devise an alternative name. It did not do so, and that is a further repudiation of the franchise agreement.

On 29^th September 2008 Mr Salau wrote another letter to Mrs Lister setting out his version of some of the history. Amongst other things, he said:

“I have since tried to register Pitman in Nigeria. However, I have incurred a lot of money on research, trying to locate, and securing the most appropriate building for Pitman in Nigeria. I thought registration was only a trivial matter, however this was not the case. After approaching a law firm in Nigeria to register your good name, to my surprise it was already registered. I have tried registering other closely related names in accordance with the terms of your agreement, but have been unsuccessful. Furthermore, I have been legally advised that I will be in breach of Nigerian laws if I am to register and do any form of training using the name Pitman.

I would like to appeal to your good name to assist us.

…..

Now I am at a crossroad and would like to appeal to your good name and in the name of justice that you provide me with some assistance and do not go down the line of entering a statutory demand against my company.

…..

I am therefore appealing for you to suspend demanding further payments in accordance with this contract or any subsequent arrangement, until either myself or with your help I am able to resolve the issues relating to the registration.”

On 30^th November 2008 Stream’s solicitors wrote saying:

“As you know, our client was informed by its Nigerian solicitors around May 2007 that the name Pitman was unavailable for use in Nigeria.

Since 2007, our client has brought the unavailability of his trading name to your client’s attention on several occasions. Despite the assurance of assistance, your client has not taken any steps to assist out client or to register the Trade Mark or alternatively to devise a suitable alternative.”

It then refers to the letter from Nigerian solicitors of 29^th August and Mr Salau’s letter to Mrs Lister of 29^th September, and goes on:

“Your client responded on 30^th September 2008 in effect refusing any assistance and without providing any solutions to the unavailability of the Trade Name.

Your client by its actions and inactions has placed itself in repudiatory breach of the Agreement, in particular clauses 7 and 12 thereof. Our client hereby accepts your client’s repudiation and terminates the agreement.”

Thus Stream claims to be able to avoid payment of the outstanding £40,000 by accepting a repudiation. It will be apparent from the findings that I have made hitherto that Stream’s solicitors were inaccurate in saying that the trade name point was raised on various occasions in the past. The first time it was raised at all was in August 2008, as appears above. Much of the stated basis of repudiation therefore is inaccurate. However, other ways of putting the repudiation claim were advanced at the hearing and I shall have to deal with them. I therefore turn to the various claims made by Stream, including that one.

Stream claims that PETL has repudiated the franchise agreement in various ways. First, it is said that there is a breach of clause 7 in that relevant and necessary assistance has not been given. It is pleaded that PETL “has failed to perform any of its obligations under the Agreement including but not limited to the obligations contained in clauses 7 and 12 of the Agreement”. A more refined version of this emerged at the trial. It was said that Mrs Lister’s email of 30^th April 2008 was an anticipatory breach. Second, it is said that PETL was in breach of its obligations under 12.7 (or alternatively in breach of an obligation not to derogate from grant) in not taking steps to clear away the position in relation to the trade name, particularly when told in 2008 that there was a problem.

It seems that essentially Stream is saying that breaches by PETL were repudiatory, and also that it renounced the contract in the sense of indicating that it did not intend to perform the contract. The latter analysis applies to the email. The former analysis would seem to apply to the other alleged breaches. I will deal first with whether or not there were any breaches.

The allegation that PETL was in breach of the obligation under clause 7 seems to me to be completely unfounded. No particular time is given for the provision of any of the services or materials referred to in that clause, but on its true construction it seems to me that they ought to have been provided when it was reasonably apparent that they were needed, or when reasonably requested. The only material that was requested was the décor packs, and they were provided. The remaining things were not provided, and that is because they were neither asked for nor had the time come for them to be provided. Even the décor packs might be said to have been premature. As Mrs Lister pointed out, they are only required when a building is opened, and the Lagos centre never was opened. With hindsight, it seems that there is no evidence it was going to be opened within a reasonable time of it being provided. The obligations in 7.2 are applicable to a continuing operation. An operation that has not started cannot be continuing. At no time was it apparent that any of the other materials or services were required. The work books were discussed, but were not yet actually required. I must confess to having some difficulty in seeing how the allegation of non-compliance with clause 7.1 can ever have been properly made.

I turn next to the point which seems to have been the most material point pervading this litigation ever since the application to restrain presentation of the petition. That is the complaint that PETL did not do anything, or did not do enough, when told that the trade name was not available for use in Nigeria. This is said to be a breach of clause 12.7.

Before turning to that clause, I need to give a little more consideration to the evidence. In the course of narrative I have already found that no reference was made to any relevant difficulty at any time prior to August 2008. I have found that Mr Salau did not convey that there was any such difficulty, and furthermore I do not believe that he thought there was any such difficulty. If he had thought that there was, he would have been likely to have drawn it to the attention of Mr Knights or Mrs Lister. In May 2007 his attention was focused on registering a company name. That is different from the use of a trade name. Nothing that happened at that time, so far as one can tell, pointed to there being any problem with the use of the name Pitman Training, or Pitman Training Centre.

Stream then points to the letter of 20^th August 2008 from Stream’s solicitors. In that letter they referred to certain restrictions arising from certain (Nigerian) government legislations, including those applicable to education:

“Perhaps the most significant of these constraints is that the Franchisor’s Trade Name, which our client was entitled to use in the trading under the franchise agreement, was not even available for use! He informed us that the Franchisor, through their MDs, assured that the complaint was being looked into.”

I think that what was happening at this time was that Mr Salau was casting around for some justification as to why, after almost three years, the Nigerian centre had still not opened. He was seeking to resist a claim for payment of £40,000. He may have started to convince himself that his problems with the company name led to problems over using the trade name, and that is why his solicitors said what they said. For present purposes, it is sufficient to note that this was a bald allegation and, so far as PETL was concerned, this was the first time it had been voiced.

The next that PETL saw in relation to this was the letter from the Nigerian solicitors dated 29^th August 2008. I have quoted the relevant passages above. That letter starts by ostensibly dealing with the registration of company names. As I have already pointed out, it would have been a breach of the franchise agreement actually to register any of the names which it turned out were not available to Mr Salau. Mr Sinai said that this letter was sufficient to bring to the attention of PETL the problems which existed in using the trade name. Having drawn attention to a difficulty, it was then up to PETL to investigate the problem and to fix it under clause 12.7. I shall deal with the proper construction of 12.7 shortly, but for the moment my finding is that that letter is a confused and confusing document. As I have just said, it starts by referring to the inability to register a company name. It is said that “as a result [of] the above, it is practically impossible for you to register and operate any training programme with the name Pitman”. It is impossible to see why that follows. The letter concerns the registering of a company name. It has never been suggested, and is not in fact suggested in this letter, that trade names themselves need some separate form of registration. It is true that the next paragraph seems to contain a clearer assertion that the name “Pitman Training” cannot be used as a business name. However, as piece of legal reasoning, the letter is very confused and does not, in my view, amount to a clear indication that there is a problem in Nigeria which needs to be fixed. It amounts to an indication that there is a potential confusion between company and trading names, and no more. It should also be borne in mind that this letter was not sent as part of an exercise by Mr Salau in trying to get PETL to address a problem. It was served as part of the evidence in an application to restrain the presentation of a winding up petition. That, too, is relevant in considering its proper impact.

Last is Mr Salau’s letter of 29^th September 2008, which I have quoted above. That letter continues the confusion between corporate names and trading names. When he refers to a name already being registered, he is referring to a corporate name. When he refers to trying to register other names, he is, as far as the evidence goes, referring to attempts to register different company names. Nothing he says in that letter gives any real credence to the idea that use of the trading name would pose any difficulties.

In the light of all that, I turn to consider the provisions of clause 12.7. They are set out above. The important provision is the second sentence. Mr Sinai starts his submissions by drawing attention to paragraph 12.1 and saying that that clause contains an obligation on PETL to register the Trade Mark in Nigeria. If it matters to the argument (and I doubt that it does) I find that it does not contain any such obligation. It refers to the obligations of the Franchisee should the Franchisor decide to obtain registration of the trade mark. It is not a necessary implication of that clause that the Franchisor should be under any obligation to do so. Turning to clause 12.7, the important provision is the second sentence. As Mr Althaus pointed out, that provision contains two prior requirements which have to be fulfilled before the Franchisor is under an obligation to devise an alternative trade name. The first is that it should not be possible for the Franchisor to secure registration of the trade marks. That has not been demonstrated. Indeed, as a result of an application for disclosure by Stream, it has become apparent that it is likely to be possible to register trade marks. In December 2008 Mrs Lister gave instructions to the Pitman trade mark agents to try to register the mark “PITMAN” in Nigeria. They had not bothered hitherto, because enforcement of such marks was apparently difficult. An application was duly made, and no objection has been received. Although full registration had not yet been obtained, it very much looks as though it will be possible to obtain it. So the first requirement of the second sentence of paragraph 12.7 is not fulfilled.

Nor is the second requirement fulfilled. It has to be considered to be inadvisable to use the trade name. The agreement does not elaborate on who it is who has to consider it to be inadvisable to use the trade name, but the provision probably means that it is reasonable to take the view that it is inadvisable to use the trade name. The condition would be fulfilled if Stream could have established that it was “inadvisable”. That would not require it to be demonstrated that it was impossible, but a case against its use with an appropriate degree of cogency, backed up by appropriate local advice, would be required. For reasons which will appear from my analysis above, Stream did not demonstrate that. The May 2007 events (which were not drawn to PETL’s attention until the application to restrain the winding up petition) did not demonstrate that the trade name could not be used (as opposed to certain corporate names); and the letter of 29^th August 2008 from the Nigerian lawyers did not demonstrate the point either. Accordingly, at no stage was it demonstrated with any degree of cogency that it was “inadvisable” to use the trade name.

Accordingly, there was no breach of clause 12.7. I should also observe that the obligation relied on by Mr Sinai in his final speech, namely an obligation on PETL to investigate and fix any problems arising, is not an appropriate encapsulation of the obligation under clause 12.7. They were under no obligation to investigate problems which appeared to be merely potential problems, especially when developed in as confusing a way as they were developed in this case. The obligation in 12.7 is more circumscribed, and more clearly defined, than that.

It follows, therefore, that there was no breach of clause 12.7 in this case.

I would add one further point in relation to the trade name matter. It appears from correspondence between trade mark agents in connection with the Nigerian registration that Mr Salau was indeed barking up the wrong tree if he thought that problems with company names meant that he could not use the trade name. In a letter dated 18^th December 2008, Messrs Spoor Fisher, patent agents in Jersey, wrote to Messrs Urquhart-Dykes & Lord LLP, UK trade mark agents, confirming the results of a search. The last paragraph of that letter reads:

“It is also confirmed that there is no provision in the Trade Marks Act which would prevent the registration of a trade mark which is either similar or identical to a registered company name. However, a third party who has been using an identical or similar mark (without obtaining a trade mark registration) would be entitled to institute proceedings based on prior use.”

That emphasises what seems to me to be an intelligible distinction in this case, a distinction which seems to have been largely ignored on Stream’s side of the action. It therefore looks very much as though there would have been no problem in Mr Salau opening under the name “Pitman Training Centre”.

The next basis for a repudiation claim is said to be the email from Mrs Lister of 30^th April. It is said that that demonstrates an intention not to be bound by the contract, manifested in part by an impermissible linking of English and African obligations.

For this to have amounted to a repudiation, it must have been a clear indication that PETL did not intend to perform its obligations under the contract. I do not consider that it was any such thing. It must be placed in its context. Stream had not paid the second instalment in time. It had been given time to do so, on the assumption that the Nigerian operation was going to start in November 2007, but that had not happened. Then there was an agreement that Stream would provide a post-dated cheque, as a result of which the décor pack was sent out. A décor pack makes sense only in the context of an operation that was about to open; yet still it did not open. Furthermore, PETL was asked not to cash the cheque. It did not do so. By now the third payment under the franchise agreement was overdue, and no proposals were made for paying it. PETL were demonstrating great patience, in my view, despite a breach of the clear obligation to pay the franchise agreements, and it was trying to see a way through. In that context the meeting between Mrs Lister and Mr Salau took place on 17^th March. Stream’s sister company, running the English franchises, was also apparently in breach of obligation. Mr Salau needed some form of agreed way forward with PETL if he were to retain his agreements. PETL was in a position in which it could have moved to a determination of the Nigerian franchise, and (at the very least) made life difficult for his other company by taking a harder line on payment of outstanding debts in respect of the English franchise (I have not seen the English franchise agreements so do not know their precise terms). Mr Salau needed a negotiation, and something like that took place at the 17^th March meeting. As a result of that meeting, Mrs Lister proposed terms for continuing the relationship. When she did so, she was effectively stating to Mr Salau the price of PETL’s continued co-operation. She was, at that point, not indicating a refusal to comply with PETL’s obligations under the agreement; she was in substance indicating what PETL’s proposed terms were for keeping the whole relationship live. There was at that stage no impermissible linking of the English and West African obligations. Mr Salau, in the light of Stream’s breaches and apparent financial position, was not realistically in a position in which he could say he was about to comply fully with the terms of the agreement, and so was at the mercy of PETL. On 8^th April Mrs Lister proposed some more terms. She did so firmly, but she was not clearly indicating in that email any repudiatory stance. She was legitimately setting out the terms of future co-operation under both agreements. Her line had hardened by the time she sent her 30^th April email, but she was in essence doing the same thing. Being in a legal position to take a hard line in respect of both franchises, she indicated the price of keeping them both alive. This was not a renunciation of the contract; it was her terms for keeping them alive in circumstances when she was likely to be in a position to terminate at least one of them (the West African franchise) if they were not agreed. Alternatively, she was certainly in a position to sue in respect of the West African fees.

In those circumstances it is plain that Mrs Lister was not repudiating (renouncing) the West African franchise agreement. This is simply not a proper analysis.

Mr Sinai relied on the fact that the obligations to pay the franchise fees were not conditions precedent to compliance by PETL with its obligations under clause 7, and in particular its obligations to provide work books. In those circumstances he said that a refusal to supply the work books could not be justified by a failure on the part of Mr Salau to pay the franchise fees. Accordingly, in adopting that stance it is said that Mrs Lister was acting in breach of the franchise agreement and was repudiating it. As a small isolated piece of analysis, divorced from the real facts of this case, Mr Sinai’s analysis of the relationship between the two obligations is correct. However, it does not then simply follow that insisting on payment of the fees before the provision of work books was a repudiation of the contract. The parties were essentially trying to negotiate a way forward. PETL had a strong hand in that Mr Salau had clearly not paid money, and did not seem to be capable of doing so. PETL would have been entitled to take the view that it was ultimately going to be able to terminate the franchise agreement in the absence of the money being paid, and in those circumstances was indirectly in a position in which it could insist on payment before any work books were supplied. Mrs Lister was certainly not renouncing the agreement when she took that stance. She was trying to achieve a form of compliance on the part of Mr Salau. If he had complied, so would she. I therefore reject Mr Sinai’s way of analysing the situation too.

In the circumstances the whole repudiation case propounded by Stream fails.

I think that this was put forward as another reason for Stream’s not having to pay the outstanding franchise fees, and as a reason for its being able to recover the £20,000 which was paid. It is based on an assertion that PETL never provided anything under the agreement, and was not in a position to provide any right to use the trade name or the trade mark because, as it subsequently transpired, PETL did not have any rights to the name, goodwill or the marks (or so it is said). They were all vested in PTG. It is therefore said that Stream did not get any of the rights under the agreement that it sought to acquire under the franchise agreement; hence the claim for total failure of consideration.

There is probably one very short answer to this point. Stream did get something under the agreement, namely a décor pack. This cost PTG over £500. Mr Sinai said that that was de minimis in the circumstances. In my view it was not. If one is looking for some sort of consideration, even if nothing else was provided, then at least that was. That seems to me to be a complete and short answer to the total failure of consideration point.

However, there are probably other answers as well. The relationship between PETL and PTG was not gone into any detail in evidence, but Mrs Lister did give some evidence on the point. As its accounts show, PETL is, and at all material times has been, a dormant company. It is shown as having no assets and no liabilities. Its accounts certainly do not show that it had anything valuable in the nature of goodwill, trade names or trade marks. The present structure of the Pitman Group arose out of a management buy-out in 1998. On that occasion the general setup was that the principal assets were held by PTG, and franchises were granted by PETL in the case of foreign franchises and another wholly owned subsidiary in the case of English franchises. That English subsidiary was a dormant company as well. As foreshadowed earlier in this judgment, PTG actually took the franchise fees and provided everything that had to be provided under the franchise agreements. As I have observed, whether it would be right in those circumstances to describe the subsidiaries as truly dormant is not a matter I have to decide. What seems plain enough from the outline given by Mrs Lister is that the subsidiaries were impliedly authorised by the holding company to enter into their respective agreements. The whole setup would otherwise not have worked. In those circumstances I do not see how it can be said that PTG could somehow assert that the franchisees did not have the rights provided in those agreements. The nature of that agreement does not have to be gone into here. It is clear enough that there must have been some such rights. In those circumstances, it cannot be said that the absence of the relevant goodwill, trade names or trade marks in the granting subsidiaries somehow means that the franchisees had no rights and can therefore complain about a failure of consideration. They got sufficient rights to enable them to do what the agreement allowed them to do. To that extent as well, therefore, the total failure of consideration argument fails.

It can also be said that the other promises of PETL to provide assistance and materials amounted to good consideration. They were perfectly valid promises. If they had been broken (because PTG did not itself provide the relevant means for fulfilling the obligation) then PETL would have to pay damages. Those promises amounted to consideration.

There are therefore all sorts of reasons for saying that there was not a total (or indeed any) failure of consideration. Accordingly, this argument fails too.

This was advanced as an alternative argument to the claims under clause 12.7. It is said that the franchise agreement amounts to a grant of certain rights by PETL, and the principle of non-derogation from grant meant that, when it was alerted to a problem over the use of the name, and therefore as to the effectiveness of some of those rights, PETL was required to take steps to clear up the problem.

I shall assume for these purposes that the principle, or an analogous principle arising by way of implied term, is capable of applying to the grant under the franchise agreement. In Platt v London Underground Limited [2001] WL 172012, Neuberger J pointed out the close connection between the principle of non-derogation from grant and an implied term in a contract. What that principle means was summarised by Neuberger J in that judgment:

“1.

It is well established that a landlord, like an grantor, cannot derogate from his grant. To put it in more normal language, as has been said in a number of cases, a landlord cannot take away with one hand that which he has given with the other.”

He went on to point out:

“5.

The terms of the lease will inevitably impinge on the extent of the obligation not to derogate. Express terms will obviously play a part, possibly a decisive part, in determining whether a particular act or omission constitutes a derogation.”

It must be borne in mind in the present case that the alleged derogation amounts to an omission – a failure to take steps to sort out the potential problem which is said to have arisen in relation to the trade name. As Mr Sinai pointed out, Chartered Trust plc v Davies [1998] 76 P&CR 396 is authority for the proposition that a failure to act can amount to a derogation from grant. It was accepted in that case that a landlord could come under a duty to act in certain circumstances. In that case, landlords had granted a tenancy to a pawnbroker whose business had an effect on the business of a previously granted tenancy in favour of the claimant. There came a point of time at which the conduct of the pawnbroker’s business, which the landlord was in a position to control, was, coupled with the failure of the landlord to control it, such as to amount to a derogation from grant.

That, however, is rather different from the present case. The present case is not one in which PETL granted, or purported to grant, a right, and then failed to act against someone else who was apparently exercising the same rights on the same territory. The present case is different. PETL granted certain rights and Stream (in the summer of 2008) made some assertions about difficulties in utilising one of those rights. That is as far as the evidence went. There is no evidence at all that anyone was exercising the right in competition with Stream. Stream raised the question in a confusing way – see above. In my view none of that imposed any duty on PETL to act. Furthermore, the contract expressly dealt with this point. It dealt with it in clause 12.7. That clause clearly spelled out the circumstances in which the Franchisor had to do something. To imply further obligations would be contrary to this express term, and would therefore be in appropriate. In my view it is that that governs the position in this area, and non-derogation from grant has no relevance.

In the circumstances this argument, too, fails.

Last, I should deal with a misrepresentation case which was advanced in the pleadings, though not much was said about it by the time of final speeches at the end of the trial. Stream’s Particulars of Claim rely on the recitals which I have set out above as being misrepresentations of the whereabouts of the goodwill, trade name and trade marks. It was said that recitals (A), (B) and (D) were misrepresentations. The pleading did not go on to allege any reliance by Stream on those misrepresentations, and the point was not addressed at all in the evidence. Even if they were misrepresentations, reliance was not proved. There was no significant argument on the extent of their falsity in the light of the apparent arrangements between PTG and PETL. In the light of those arrangements I think there would be serious difficulties in demonstrating that they were in fact materially false, but I do not need to go into that in the absence of the crucial factor of reliance. The fact of the matter is that in every relevant sense Stream got (or would have got had it performed its own obligations) everything that PETL promised to provide, whether or not PETL was technically the owner of any aspect of the franchise business.

It follows, therefore, that the misrepresentation claim fails too.

It follows from the foregoing that the claimant has no claim to damages. I merely need to record that, had there been a valid claim for damages for breach of the franchise agreement, the amount of those damages was effectively accepted at the trial by PETL as being Stream’s wasted expenditure. There was some evidence of that wasted expenditure. Stream had only sought to claim expenditure which it could prove with documents, notwithstanding Mr Salau’s factual case that far more than that was spent. The final sum, not challenged by PETL, was something over £100,000, but I do not need to make any further findings about that.

For its part, PETL counterclaimed for the unpaid franchise fee. There was no extant agreement to postpone it. The only other defences were the repudiation claim and the counterclaims, all of which fail. In those circumstances PETL succeeds on its counterclaim for £40,000. Any claim for or dispute over interest will be determined after delivery of this judgment.

Accordingly, the claim in this action fails and the counterclaim succeeds. The claim will be dismissed and the counterclaim will be allowed in the sum of £40,000.