C21 London Estates Ltd v Maurice Macneill Iona Ltd & Anor

The Century 21 brand is an estate agency brand which is particularly well known in America. The brand, which operates by way of franchises, has been present in the United Kingdom estate agency market since 2005. The Defendant ('•WIMI") has, at all relevant times, held what I understand to be the master franchise fol the brand in lhe United Kingdom and the Channel Islands.

In February 2006, MMI, under a franchise agreement, ^I granted to C".l Estate Ltcl., as franchisee, the right to operate the Century 21 brand in Ilfore. The franchise agreement was renewed in May 2012. ² In due course, in circumstances which are not relevant to the claim, the franchisee of the Ilford territory became Essex Real Estate Ltd. ("EREL"). The Third Party ("Mr Noorkhan") is EREL's sole shareholder. Mr Noorkhan was also a shareholder of C21 Estate Ltd. In practice, Ml' Noorkhan operated the Century 21 brand in Ilford, mainly through corporate vehicles, from 2()()6 until January 2017.

On 20 December 2013 MMI, under a franchise agreement ("the Chelsea Agreement"), granted to the Claimant, then called The Real Estate & Property Management Co. Ltd., as franchisee, the right to operate the Century 21 brand in Chelsea. Mr Noorkhan is a shareholder in the Claimant and was understood, by the parties to this dispute, to be the Claimant's controlling mind, at least för the purpose of the issues which I have to resolve.

The written standard terms of the Ilford Agreement and the Chelsea Agreement are identical:

On the same day as the Chelsea Agreement was entered into, Mr hloorkhan entered into a pergonal guarantee with MMI by which he guaranteed:' the Claimant's obligations under the Chelsea Agreement ("the Personal Guarantee").

There is noidispute that, before the Chelsea Agreement was entered into, EREL was not complying with the payment obligations in the Ilford it had nol complied with the payment obligation's in the earlier (2006) franchise agreement relating to the Ilford territory in two respects:

Nor is it disputed that. after the making of the Chelsea Agreement, EREL did not pay PM Fees.

At the time of the making of the Ilford Agreement, MMI knew tha EREL was not paying PM Fees.

It was contqnded on behalf of the Claimant and Mr Noorkhan that, by or at about the time of the making of the Ilford Agreement, there was an agreement between Mr Noorkhan, on EREL's behalf, and Stuart White, on MMI's behalf, that EREL would not have toⁱ pay PM Fees. I have concluded, for the following rea,sons, that, whilst MMI did not make any agreement as contended, it did, when the company was under Mr White's control, effectively turn a blind eye to EREL's non-payment of PM Fees. Mr Noorkhan said in cross-examination' that Mr White turned a blind eye to the nonpayment. In cross-examination, Mr Noorkhan also contended that he deduced, from Mr White's body language at a meeting when the Ilford Agreement was signed, that Mr White went further and agreed that PM Fees did not need to be paid. However, the clear impression with which I was left, from observing Mr Noorkhan's crossexamination, is that there was no such agreement. Mr Noorkhan made a contemporaneous note of the meeting when the Ilford Agreement was signed. The language of that note is not obviously consistent with MMI and EREL having agreeci that PM Fees need not be paid. The language of that note is much more •consistent with a scenario in which MMI knew about EREL's non-payment but in which it was not intending to actively press for payment. Further, in an email dated 5 November 2013, Mr Noorkhan wrote of the previous arrangement (effectively between him and Mr White) as being ambiguous. In my view, Mr Noorkhan is unlikely to have used such language if, in fact, there had ever been an agreement between EREL and MMI that PM Fees would not be paid. Also, one of the witnesses called on lhe Claimant's behalf, Darren Hicks, made clear, in his cross-examination, that whilst Mr White knew about the non-payment of PM Fees, Mr White said to Mr Hicks, on several occasions, that he was unhappy about ,that but that he and Mr N0Qt•khan were in a "stalemate situation". Indeed, it is to be borne in mind that, whilst IMMI knew about the non-paiment PM Fees, when the company was under Mr W nite's control no active steps [were apparently taken in respect of this.

In 2()13, precisely when is not clear, blit certainly by about the summer, there was a change of leadership at MMI; in particular, Robert Clifford was in control of MMI by then.

Mr Noorkhan was interested in acquiring the right to operate the Century 21 brand in Chelsea. In October 2013 he sent MMI a business plan to encourage the company to grant him the franchise of its Chelsea territory. The business pian appears 10 show Ihat Mr Noorkhan expected a franchise of the Chelsea territory to generate a profit, after the payment of Royalty Fees and tax, of about E675,000 p.a. Mt Noorkhan's interest in the Chelsea territory is, therefore, entirely understandable and pephaps gives some context to the discussions which took place, in the autumn of 2013, relation to thal territory. Indeed, Mr Noorkhan told me in cross-examination th•c' Lt 'llford was a stepping stone to Chelsea/central London. This was always the case".

It was principally in those discussions that the concerns of the new leadership team at MMI about EREL's non-payment of PM Fees most clearly manifested themselves.

Mr Noorkhan explained, in cross-examination, that it was a "condition", for the acquisition of the franchise of the Chelsea territory, that all Royalty Fees, due under the Ilford Agreement, were paid in the future. He said that Mr Clifford had made il clear to him that, if this "condition" was not agreed, there was no prospect of Mr Noorkhan acquiring the Chelsea franchise. Mr Noorkhan said that it was made clear to him that there would be no Chelsea Agreement if EREL did not pay all Royalty Fees when they fell due. Mr Noorkhan also said that, as part and parcel of being offered the franchise of the Chelsea territory, he assured MMI that all income due under the Ilford Agreement would be declared and that EREL would pay all Royalty Fees. He later said that, at the time the acquisition of a franchise of the Chelsea territory was being discussed, he made a commitment to MMI that :ÄII Royalty Fees, due under the Ilford Agreement, would be paid. He explained that, 'by December 2013, he was prepared to do whatever MMI wanted in order to obta in a franchise of the Chelsea territory. He also accepted, in cross-examination, that? at that time, he appreciated that, if the Royalty Fees due under the llford Agreeme!'lt were not paid, the Chelsea Agreement could be terminated. (Footnote: ¹)

Mr Noorkhan's evidence is consistent with that given on behalf of IMMI. For example, Mr Clifford said, in cross-examination, that Mr Noorkhan and he •discussed a commitment to pay all Royalty Fees due under the Ilford Agreement and that Mr Noorkhan confirmed that he would comply with the terms of the llford Agreernent including as to payments. Mr Clifford said of Mr Noorkhan: "He agreed to bring the business into line and to comply with the franchise agreement'

There was an exchange of emails between Mr Clifford and Mr Noorkhan on I l and 13 December 2013, when the discussions about the acquisition of the franchise of the Chelsea territory were advanced. The content of those-emails reflects MMI's concerns about EREL's non-payment of PM Fees, Mr Noorkhan's recognition of this and his desire to acquire a franchise of the Chelsea territory. The emails were entitled -'re: Century 21 Chelsea Business Plan formed by existing Century 21 1}ford office"* and read:

As I have noted, clause 17.1 of the Chelsea Agreement limited tl:e way in which amendments could be made to its written terms, Further. as Mr Clif Ford's December email made clear, that EREL would pay all Royalty Fees due under the Ilford Agreement on time (and otherwise in accordance with the flford Aggeement), was to be a term of the Chelsea Agreement. Against this background, on 20%December 2()13, at the same meeting at which the Chelsea Agreement was signed, •what the parties have called. a side letter ("the side letter") was entered into. Thq side letter was marked "Strictly Private & Confidential" and was addressed tip Mr Noorkhan personally at the Claimant's Chelsea premises. The side tetter began. "this letter is an agreement for Century 21 UK and the parties above and is an^s acceptance and authorised addition to the Estate Agency Franchise Agreement that has been entered into and executed by the parties. Please find detailed below the points raised and your subsequent agreement;". The side letter then set out a large part of the December 2013 emails to which I have already referred and, in particular, contained the following text:

In cross-examination Mr Noorkhan told me that the purpose of the Gide teller was [0 insert into the Chelsea Agreement an additional "condition" dealing Wilh the paynoent of Royalty Fees due under the llford Agreement. Mr Noorkhan also told me thal he signed the side letter on the Claimant's behalf.

As I have said, it is not disputed that, after the making of the Che Isea Agreement, EREL defaulted in paying PM Fees. The amount in question has not been agreed. On MMI's case the amount in question, for the period after .the making of the Chelsea Agreement, must be about E2,620 (exc. VAT). The Claimant and Mr Noorkhan accept this figure as the approximate amount of PM Fees outstanding In 14. On the available evidence I am also satisfied that, by the time of the service of the default notices to which I now refer, EREL was aiso in default ill the payment of Royalty Fees on other income after December 2013, which default amounted to about €940 (exc. VAT).

It is broadly MMI's case, as articulated by Mr Clifford in cross-examination, that EREI-:s non-payment of PM Fees, after the Chelsea Agreement was made, was nol inadvertent but was a deliberate decision.

It is broadly the case of the Claimant and of Mr Noorkhan that EREZ's non-payment of PM Fees was a non-deliberate error. Miss Rooprai is EREL's compliance and accounts manager. She explained that she had the Way to day lespon.sibility for submitting, to MMI, monthly billing reports which formed the basis for the calculation of the amount of Royalty Fees, including PM Fees, payoble from time 10 time by EREL. She explained that, in practice, the monthly bilhng reports were compiled and submitted by Disha Luhar; a former employee of ERE L. Miss Rooprai said that, on the day the Chelsea Agreement was made, Mr Noorkl%an informed her that EREL •,vould, henceforth, need to show, on the monthly billing reports, income derived from property management (so causing, in practice, the payment of PM Fees). She said that the day the Chelsea Agreement was made (20 Decembpr 2013) was the last Friday and last working day before the Christmas 2013 break. She. said that her conversation with Mr Noorkhan took place late ir the clay (after 4 p.m.) at a time when she was distracted and that, in any event, she. was much more interested ig the fact that the Chelsea Agreement had been made. She said that (i) she did not tell Disha Luhar about the requirement for property management income to be shown on the monthly billing reports, so that Disha Luhar •could not have implemented that change, (ii) the only person who would have completed the monthly billing reports in 2014 other than Disha Luhar was her and (iii) she could not recall having completed any monthly billing report in 2014. It is said that it was because the monthly billing reports did not show property management income (as a result of the failure of communication to which I have referred which, it is also said, was a nondeliberate error), so that PM Fees were not calculated, that PM Fees were (nondeliberately) not paid in 2014.

On 22 October 2014, MMI served two default notices:

Thereafter Mr Noorkhan took steps to, in his own words, "salvage" the Chelsea Agreement and so he visited MMI's office on 27 October 2014 "to persuade [MMI] not to terminate the Chelsea Agreement" and, thereafter, he and MM] 's leadership team exchanged emails. Mr Noorkhan's eff01is were to no avail and, after sonle months, the Claimant debranded its Chelsea premises.

The Claimant contends that the service the Default Notice and the termination or purported termination thereby of the Chelsea Agreement by MMI Was a repudiatory breach of the Chelsea Agreement by MMI. It Contends that, on 2 March 2015, it accepted or purported to accept that repudiatory breach. It therefore began this claim, for damages, for loss of profits (alternatively for wasted expenditure), for repudiatory breach.

MMI defends the claim and brings an additional claim against Mr Noorkhan.

MMI does not contend that; prior to 2 March 2015, the Claimant had, in the face of any repudiatory breach of the Chelsea Agreement by MMI, affirmed the agreement or otherwise waived any such repudiatory breach.

MMI contends, in defence of the claim, that it was entitled to serve tne Default. Notice and thereby to terminate the Chelsea Agreement, and so it cannot have been in repudiatory breach, because:

By the additional claim, MMI contends that, because it lawfully terminated lhe Chelsea Agreement by service of the Default Notice, under the personal guarantee Mr Noorkhan is liable to pay Lost Future Profits. By his Defence to the additional claim, Mr Noorkhan contended that the obligation to pay Inst Future ProfitS amounted to an unenforceable penalty so that, on any basis, he could not be liablé, for Lost Future Profits under the personal guarantee. At trial, he abandoned that defence. He also contended that, because MMI was in repudiatory breach of the Ché.lsea Agreement, which repudiatory breach was accepted by the Claimant, any liability under the personal guarantee fell away. It is not disputed that, if MMI was in repudiatory breach of the Che\sea Agreement, in the circumstances of this case any liability of Mr Noorkhan under the personal guarantee did fall away. In short, therefore, the outcome of the additional claim will be determined by the outcome of the mail* claim.

On 9 August 2016, the District Judge ordered a trial on liability bnly. This is the judgment following that trial.

In the context of this case it is helpful to consider first whether, by Ike side letter, the Claimant promised, as a term of the Chelsea Agreement, that EREL would pay PM Fees ("the Guarantee").

The language of the side letter which I have already quoted (see paragraph 19 above) makes clear, to my mind, and I conclude that the parties to the Chelsea Agreenent intended that it would contain a promise by the Claimant that EREL would pay PM Fees.

The Claimant contends that the Guarantee was not a term of the Clielsea Agreement because the side letter was not entered into by Mr Noorkhan behalf of the Claimant.

I am satisfied that the side letter was effective to incorporate the Guarantee Into the Chelsea Agreement because the side letter was made, contrary to the Claimant-s contention, by Mr Noorkhan on behalf of the Claimant, because (even putting aside Mr Noorkhan's own evidence to that effect):

In this context there is a further construction dispute between the parties; as to whether the Guarantee covered only future PM Fees or whether it extended also to arrears of past PM Fees. In my view the language of the side letter does not obviously extend to arrears. Indeed, that language suggests, in my view, that tye Guarantee was to cover only future PM Fees because it was expressed "to take effec: upon signing of the new Chelsea agreement". I am also satisfied that the föcus of t le discussions in the autumn of 2013 was on bringing about a situation in which, for future, EREL would be paying PM Fees. This was particularly important to MMI's new leadership team because, for the future, they would be responsible, in practice, for accounting for income to the master franchisor in relation to the UK territory. It; is reasonable to suppose that they were therefore less concerned about arrears of past PM Fees but were concerned that, in the future, PM Fees were paid. Further, in cross-e.xamination, Mr Clifford, eventually accepted thatfthe Guarantee was only to covet' future PM Fees. Taking all (hese matters into account, I. am satisfied that, on its prcper construction, the Guarantee covered only future PM Fees.

I turn now to consider MMI's contention that Mr Noorkhan's December email contained a misrepresentation. MMI goes further and contenclS lhe side letter contained a misrepresentation. If Mr Noorkhan's December email did not contain a misrepresentation then the side letter could not have done so. I will therefore consider this issue by reference to Mr Noorkhan's December email.

The first issue i need to consider is whether, by Mr Noorkhan's December email, he made the Representation. Such a representation would be an implied representation because the express words of Mr Noorkhan's December email speak only of, as I have found, a proposed term of the Chelsea Agreement.

It is not disputed that whether or not a representor makes an implied representation (ancl what the content of any such representation is) depends at 'least on what a reasonable person would have inferred from the representor's wordS and conduct in

I am satisfied, on the facts of this case, that, by Mr Noorkhan's December email, [he Representation was made, because:

Mr Neaman and Mr Feld contended that a representation will only implied if also the reasonable representee would have concluded that the of such a representation was the necessary inference from the words actually used. There is no authority to support such a proposition but, in any event, I do pot see how this contention can be right. If, on the balance of probabilities, a court determines that a reasonable representee would have concluded that the represen':or had made a representation by the words actually used in the context in which they were spoken or written, then, inevitably, the court will have determined that the implication of a representation is the only correct result. If the court determines, on balance, that the implication. of a representation is the only correct result, it wbuld be odd if, neverthelesS, the court might conclude that an implied representation,Was not made.

The Claimant contends that, even if Mr Noorkhan made the Representation, it was nol false.

A representation as to intention is only false if; at the lime the representation is madc and/or continues to have effect, there is no intention to do thal which is represented or, to the knowledge of the representor, there is no ability to do that which is represented (see Chitty on Contracts (32^nd ed); paragraph 7-012). Indeed, Mr Weaver accepted that MMI could only succeed in establishing that the Representation was false, and so could amount to a misrepresentation, if EREL never genuinely intended to pay PM Fees at the time the Represpntation was made (or, presumably, at a time after it was made but before the Chelsea Agreement was made). In short, MMI accepted that, for the Representation to have been false, in this case it must have been fraudulently made.

When considering whether the Representation was fraudulently madé, it IS illiportant to bear in mind what Lord Millett said in Three Rivers DC v. Bank of England [2003] 2 AC 1:

In its Defence, MMI contends that it is proper to infer that [he Re Dresentation was false and that EREL, at a material time, did not intend to pay PM Fee ; because:

The matters pleaded in the Defence are all consistent with a scenario in which there was an •intention, at the material times, to pay PM Fees bul either there was a change of intention,thereafter or, as the Claimant and Mr Noorkhan contendö a non-deliberate failure to pay PM Fees after the Chelsea Agreement was made. In such circumstances, MMI's contention that the Representation was false must fail.

I go further. In my view, that EREL did not pay PM Fees before the making of the

That, in fact, EREL did not pay PM Fees (or, indeed, other Royally Fees) after the Chelsea Agreement was made is not sufficient, in my view, to qstablish that the Representation was false. As the authors of Spencer Bower & Handlzy on Actionable Misrepresentation (5 ^1h ed) explain, at paragraph 2.08:

This is enough to dispose of MMI's case that the Representation was false. Nevertheless, because further matters going to the falsity or otherwise of the Representation were the subject of cross-examination, I do consider them now.

It was contended, by Mr Weaver on MMI's behalf, that the conversation between Ml' Noorkhan and Miss Rooprai on 20 December 2013 ("the Conversation") did not take place. He contended that, if I found that the Conversation (lid not take place, such a finding would support MMI's case that the Representation was false.

I am not satisfied that the Conversation did not take place.

{f the Conversation did not take place, I would have to conclude, as Mr Weaver accepted, that, either (i) Mr Noorkhan and Miss Rooprai individuaPy resolved to lie on affirmation or (ii) they conspired together to lie on affirmation,j when they each asserted that the Conversation did take place.

I am of the view that it is even more, inherently improbable than' a single person making a representation fraudulently, that two people might separately make or together re$olve to make the same untruthful assertion in evidence given under affirmation.

In support of his contention that the Conversation did not take place (and, perhaps, as freestanding grounds for supporting MMI's case that the Representation was false), Mr Weaver relied on the following matters:

I turn to consider these matters.

I have found that it is not true that there was an agreement, between Mr Noorkhan and Mr White, that EREL was not required; to pay PM Fees, contrary Mr Noorkhan's contention.

I am also satisfied that Mr Noorkhan, as a witness, could not be relied on as a dispassionate historian. I give two examples. First, after some cross-exalnination on the subject, I am satisfied, from the tenor of his evidence taken togelher Wilh his email dated 5 November 2013, that Mr Noorkhan appreciated that, in truth, there was no

I am clear that, by her 12 November 2014 email, Miss Rooprai intended to lay the blame for the failure, by EREL, to declare property management income in the monthly billing reports on EREL's accountants. To my mind, (hat is the only reasonable construction to place on the text of the email which I have quoted above. I am also satisfied that Miss Rooprai, who was admittedly responsiblé in for the completion of the monthly billing reports, knew that there was no l'41Sis for blaminlj the accountants. In cross-examination -and in questions from me, Miss Rooprai gave no coherent, let alone convincing, explanation for why she sought to blame t.he accountants. I bear in mind that, by November 2014, Mr Noorkhan had already blamed the accountants for EREL's failure to show property management incolne in the monthly billing reports. Further, by his own admission Mil Noorkhan was desperate to keep the Chelsea franchise. I think the most likely ex}lanation for the content of Miss Rooprai's 12 November 2014 email is that she and Mr Noorkhan agreed, beforehand, that she was going to blame the accountants. Whilst this cloes not reflect well on either of them, that they were prepared to act in this way at a time when Mr Noorkhan was desperate to keep the Chelsea franchise has no bearing, in my view, on whether, almost 12 months beföre, EREL intended to pay PM Fees. Indeed, it may be said that, that they were prepared to say something which was not true in October/November 2014, shows how important the Chelsea franchise was and so, il may be said, how unlikely it Was that Mr Noorkhan made the Representation fraudulently.

It is not disputed that Mr Noorkhan did not tell any member of staff other than Miss Rooprai that it was necessary for EREL to show properly managelnent income in the monthly billing reports, but that is entirely unsurprising. The completion of lhe monthly billing reports was Miss Rooprai's responsibility.

In my view, these matters are insufficient to overcome the inherent improbability that the Conversation, attested to by Mr Noorkhan and Miss Rooprai or: affirmation, did not take place. Put shortly, I am not satisfied that MMI has establishéd, to a sufficient degree or at all, that the Conversation did not take place.

Nor has MMI satisfied me that these matters (that is, those I have identificd in paragraphs 56(i)-(iii) above), which do not go directly to the issue cf whether or not the Representation was false, establish (or significantly help to etitablish) that the Representation was false.

It follows, therefore, that MMI has not established that there was a material misrepresentation in the application for the franchise of the Chélsea territory or otherwise with respect to the acquisition of that franchise and sov MMI could not lawfully terminate the Chelsea Agreement on that ground.

I have already found that the Guarantee was a term of the Chelsea Agreement. I must now consider MM['s case that (i) EREL's failure to pay PM Fees led to a terminable breach, by the Claimant, of the Chelsea Agreement and (ii) by the service of the Default Notice, it accepted that terminable breach, and the consequent (purported) termination of the Chelsea Agreement by it was not a repudiatory breach of that agreement.

In this context the first issue I must consider is whether the Guarantee was a condition of the Chelsea Agreement.

In cross-examination, Mr NOorkhan accepted that it was fundamental, to [he acquisition of the franchise of the Chelsea territory, that EREL duly paid PM Fees. Indeed, Mr Noorkhan described this requirement as a "condition" for the acquisition of that franchise. He also accepted that he appreciated, at the t•me the Chelsea Agreement was made, that, if PM Fees were not paid, the Chelsea Agreement could be terminated.

As Tettenborn et al helpfully explain in Contractual Duties: Perfcrmance, Breach, Termination and Remedies (2^nd ed), at paragraph 10-036, a contiactual term is a condition in• the following circumstances:

In •this case, only the fifth situation might apply. Although Mr Noorkhan appreciated that a failure, by EREL, to pay PM Fees could lead to a terminaticn of the Chelsea Agreement, I am not satisfied that the Claimant and MMI explicitl%• agreed that any default in payment, by EREL, of PM Fees could bring about the términation of the Chelsea Agreement. Indeed, that there was no such explicit agr ement seems to follow from Mr Clifford's evidence in oaragraph 55 of his witness statement, where he says:

I turn then to consider the fifth situation.

In Compagnie Commerciale Sucres el Denrees v. C. Czarnikow Ltd. (The Naxos) [1990] 1 WLR 1337, Lord Ackner said, at pages 1346-1347:

In Carter's Breach of Contract, at paragraph5-04, it is suggested thc:, in deternlining whether a contractual term is a condition, consideration ought to• be given 10 lhe following non-exhaustive factors:

In determinmg whether the Guarantee was a condition of the Chelsea: Agreement, I do not place any weight on the use, by Mr Noorkhan in cross-examination, of the word "condition". I have no reason to believe that he, as a lay person, woWd understand the distinction between contractual conditions and intermediate terms.

To my mind, that it was or might be a "condition", for the acquisition of the franchise of the Chelsea territory, that EREL paid PM Fees, in other words that it was a precondition for thé making of the Chelseau\greement that EREL so acted7 of itself does not make the Guarantee a condition of the Chelsea Agreement; although I accept that the importance the Claimant and MMI placed on EREL's obligation and the Guarantee is an important factor that is to be taken into account in determining whether the Guarantee was a condition of the Chelsea Agreement.

What weight shoulcfthe court place on the fact that both the Claimant and MMI

It is to be remembered that, by clause 15.2.4.15 of the Chelsea Agre •ment, MMI was able to terminate the Chelsea Agreement for any material breach of kt (which was nol specified, in the Chelsea Agreement, as a noncurable default).

Tettenborn et al explain, at paragraphs 9-038-9-039:

In Mid Essex Hospital Services NHS Trust v. Compass Group UK and Ireland Ltd. [2013] EWCA Civ 200 at [126], Jackson LJ said in relation to the clause under consideration in that case:

I have concluded that MMI could have taken steps to terminate the Chelsea Agreement under clause 15.2.4.15, by the service of a curable default notice, following at least certain failures, by EREL, to pay PM Fees. It follows thal it would not only be by designating the Guarantee a condition of the Chelsea: Agreement Ihal MMI could {have terminated the Chelsea Agreement after EREL had 'failed 10 pay PM Fees — so that the weight the fact that both the Claimant and MMI Oppreciated that a failure, by 'EREL, to pay PM Fees could cause the termination of the Chelsea Agreement is not as great as MMI contends.

On the one hand, I have borne in mind (i) the importance, in particular, to MMI of the Guarantee and that it would not have entered into the Chelsea Agreement had it not been satisfied that EREL would pay PM Fees and (ii) the appreciatioh of lhe Claimant and MMI that, if EREL did not pay PM Fees, the Chelsea Agreement could be terminated.

On the other hand, I have borne in mind:

Taking all these matters into account I have concluded that the Guarantee was not a condition of the Chelsea Agreement. When set against the main purpose of the Chelsea Agreement, I do not regard the Guarantee as commercially significant. More than that, when MMI was in a position to exercise a contractual termination clause in relation to at least certain breaches of the Guarantee, it would, to my mind (for the reasons I have already given), be unreasonable to designate the Guarantee a condition so that even a trivial breach of it would entitle MMI to bring the Chelsea Agreemenl to an end.

It may be that this conclusion is consistent with the view MMI held before the triat because:

In these circumstances, in order for MMI to have lawfully termimted the Chelsea Agreement, I the failure by EREL to pay PM Fees would have hacl%to have led to a repudiatory breach of the Chelsea Agreement. It is that issue which I gow consider.

Tettenborn et al explain, at paragraph 8-01:

The test postulated for example by Arden LJ in Valilas may be too onerous a test of what amounts to a repudiatory breach of contract. In Telford Homes (Creekside) Ltd.

It is to be remembered that, in this case, MMI complains that, after the making of lhe Chelsea Agreement, EREL repeatedly did not pay PM Fees and, so, it must contend that there have been repeated breaches of the Guarantee. In deciding whether the Claimant was in repudiatory breach of the Chelsea Agreement, it is appropriate for Ille to consider repeated breaches of the Guarantee as a whole. In Force India Forntula

Although not expressly addressed by MMI in its submissions, I ought to consider whether, even though not in repudiatory breach of the Chelsea Agreement, the Claimant nevertheless renounced it. As Popplewell J said in Spar Shipping AS v. Grand China Logistics Holding (Group) co. Ltd. [201 2 Lloyd's LR 407 at [2091:

I can deal with this matter briefly. I have already found that MMI has not established that, by the time the Default Notice was served, the Claimant had resolved to breach the Guarantee in the future. It follows therefore that I am not satisfied Ihat the Claimant intended, at the time the Default Notice was served, not to perform the Chelsea Agreement in the future and so no renunciation of the Chelsea Agreement by the Claimant is made out.

Although not pleaded by MMI, I have considered whether EREL's fidditional failure to pay other Royalty Fees due under the Ilford Agreement, after tf4e making of the Chelsea Agreement, might have led to a terminable breach of the Ch Asea Agreernent. The non-payment of these other Royalty Fees was a matter more oeripheral to the Chelsea Agreement than the non-payment of PM Fees (about which there had been particular express discussion before the making of the Chelsea Agre The total amount of taese other Royalty Fees was very small indeed. Taking into account these factors and„ also, for the same reasons that I have concluded that any breach of the Chelsea Agreement in relation to the non-payment of PM Fees was r on-repudiatory, I have concluded that the non-payment of these other Royalty Fees is capable of, in effect, turning any otherwise non-repudiatory breaches of the Chelsea Agreement by the Claimant into a repudiatory breach of the Chelsea Agreement by it.

As the Claimant was not in terminable breach of the Chelsea Agreement in the ways contended for by MMI, when it served the Default Notice MMI was not lawfully entitled to terminate the Chelsea Agreement. It follows, therefore, having regard 10

HONOUR KLEIN ('21 1.1d. N'latn LVlacNeiil l.id.

In the light of the conclusions I have reached, it seems to •me (i) that there musl be judgment for the Claimant for damages to be assessed and (ii) that the additional claim against Mr Noorkhan must be dismissed, but I will hear further from counsel as to (i) what are the consequences of my conclusions, (ii) the proper form of order in the light of my conclusions and (iii) further directions for the assessment of damages.