Kudos Catering (UK) Ltd v Manchester Central Convention Complex Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tomlinson,Lord Justice McCombe,Lord Justice Laws |
| Judgment Date | 07 February 2013 |
| Neutral Citation | [2013] EWCA Civ 38 |
| Docket Number | Case No: A2/2012/1070 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 February 2013 |
[2013] EWCA Civ 38
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
His Honour Judge Seymour QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Laws
Lord Justice Tomlinson
and
Lord Justice Mccombe
Case No: A2/2012/1070
Jeffrey Gruder QC and James Stuart (instructed by Javed Taher, Company Solicitor) for the Appellant
Stephen Phillips QC and Adam Kramer (instructed by Pannone Solicitors) for the Respondent
Hearing date: 11 December 2012
The Respondent/Defendant operates a conference centre and exhibition venue in the centre of Manchester formerly known, until 2007, as the "G-Mex" and the Manchester Convention Centre. The ultimate beneficial owner of the Defendant is Manchester City Council. The conference venue is the largest facility of its type in the north-west of England.
The Appellant/Claimant is as its name suggests a professional catering company involved in the provision of catering services.
By a detailed but undated written agreement concluded in April 2007 the Respondent appointed the Appellant the exclusive supplier of catering services at these two venues for a five year period beginning on 1 April 2007. The services to be provided were defined within the agreement as:—
"Catering Services and includes the whole of the service to be performed, including without limitation any employees, equipment, goods or materials to be supplied by the Contractor in accordance with the Service Level Agreement and the other Contract Documents and involves any modification thereto made pursuant to these Conditions and the Contract Documents".
The structure of the arrangement was that the Respondent permitted the Appellant to cater for events at the venues and thereby to earn revenue from third party event organisers and those attending the events, the Appellant paying the Respondent a share of its turnover (21% of retail sales paid for at point of sale by attendees and 23% of hospitality sales paid for by organisers or in advance), subject to a minimum guaranteed annual figure. Various clauses in the Agreement provided that it was for the Appellant to acquire and pay for staff, food, equipment and utilities. However, the Appellant was entitled pursuant to the Agreement to use equipment belonging to the Respondent which was on site, and listed in an Equipment Inventory, and in particular was entitled, indeed bound, to use the on-site facilities such as kitchens and the normal ancillary facilities associated therewith.
Clause 7.5 of the Agreement obliged the Appellant, therein called the Contractor, to invest an initial £50,000 in the provision of the services and to use such investment to purchase further equipment for use exclusively in the provision of those services. By the same clause the Contractor was also obliged to invest a further sum of £300,000 in the same way, although this latter "Write Down Investment" was to be written down on a straight line basis by the Contractor over ten years and, in the event that the Respondent, therein called the Company, did not offer the Contractor an extension of the Agreement after the term of five years, the amount not written down was recoverable by the Contractor from the Company.
The Agreement was performed for over three years but unhappily dispute thereafter arose. On 1 July 2010 the Respondent wrote to the Appellant purporting to terminate the Agreement either contractually, on one month's notice, pursuant to certain entitlements afforded it by the contract or, and with immediate effect, at common law. The Appellant in turn wrote to the Respondent on 8 July 2010 purporting to treat the Respondent's actions as a repudiatory breach of the contract and to accept the same as terminating the Agreement.
The Appellant has a claim against the Respondent which includes a claim for £1.3 million "damages for substantial financial losses in respect of lost profits" that would have been earned during the remaining 20 months of the five year term of the Agreement. The Respondent denies having repudiated the Agreement and has brought a substantial counterclaim.
The Respondent also alleges that its liability in respect of the claim for lost profits is precluded by Clause 18.6 of the Agreement which provides, inter alia:—
"The Contractor hereby acknowledges and agrees that the Company shall have no liability whatsoever in contract, tort (including negligence) or otherwise for any loss of goodwill, business, revenue or profits …"
The Appellant denies that Clause 18.6 formed part of the Agreement since on its account the parties agreed to delete this clause during the pre-contractual drafting negotiations. However the Appellant also denies that on its true construction the clause is apt to exclude the Respondent's liability as alleged. If necessary the Appellant seeks rectification of the Agreement.
Master Eyre directed the trial of the following preliminary issue:—
"On the proper construction of Clause 18.6 of the Agreement, (and ignoring any allegation of rectification) is any or all liability for the Claimant's loss of profits (claimed and particularised in paragraph 10 of the Particulars of Claim) excluded."
In the absence of any agreed or assumed facts, the trial of that preliminary issue requires the assumption that on 1 July 2010 the Respondent repudiated the Agreement and that on 8 July the Appellant accepted that repudiation as terminating the contract.
On 19 April 2012 His Honour Judge Seymour QC, sitting as a Deputy Judge of the Queen's Bench Division, tried the issue and determined that Clause 18.6 is apt to exclude the Respondent's liability for the Appellant's claimed loss of profit. Hence the appeal to this court, brought with permission of Longmore LJ.
The judge directed himself by reference to several of the modern authorities which give guidance as to the manner in which the court should construe a commercial contract including, in the order in which he cited them:— Photo Productions Limited v Securicor Transport Limited [1980] AC 827; Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896; Chartbrook Limited v Persimmon Homes Limited [2009] 1 AC 1101; Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900; Co-operative Wholesale Society Limited v National Westminster Bank plc [1995] 1 The Estates Gazette Law Reports 97 and Antaios Compania Naviera SA v Salen Rederierna AB (The Antaios No 2)) [1985] AC 191.
The judge thought that the only words relevant to his task of construction were those words from Clause 18.6 of the Agreement set out in paragraph 8 above. The judge did not, at any rate overtly, look at those words either in the context of the clause in which they appeared or in the context of the contract as a whole, save perhaps to the extent that he regarded the context as "an ordinary commercial contract" whereunder the benefit that the Appellant anticipated was making profits. However the judge seems to have thought, [53], that "The issue of construction only arises if there are at least two alternative interpretations of the form of words used". The judge thought that the words which he regarded as relevant were "perfectly clear … Their effect is that in any case in which there might otherwise be a liability in contract to pay damages in respect of loss of profits there is not one. It is as simple as that." [54]
The judge went on to say, [55], that it was neither necessary nor appropriate "for the court to consider what the parties could possibly have intended if what they have actually stated is clear and unambiguous". The judge nonetheless went on to deal with counsel for the Claimant, Mr Stuart's, submission that the judge's approach to the clause "could not possibly be what the parties had intended". The judge was not persuaded by that submission, principally because he regarded it as impossible for the Defendant alone to bring about the situation which Mr Stuart submitted the parties could not have contemplated, one in which the Agreement was terminated prematurely without the Claimant having a claim for substantial damages for loss of profits. This was because the Claimant was not bound to accept the repudiation and that it "had potentially other remedies available to seek to enforce the contract" if it wished to continue its performance and to continue to secure the performance of the contract by the Defendant. Presumably the judge had in mind an order for specific performance or, as Mr Stephen Phillips QC for the Respondent in this court preferred to put it, a negative injunction restraining the Respondent from excluding the Appellant from the venues or, perhaps, a negative injunction to prevent the Respondent from employing any other caterer, in breach of its obligation under Clause 3.1 of the Agreement to grant exclusivity to the Appellant.
I put on one side the point that none of these suggested remedies would be of any utility to the Appellant in the event that the Respondent decided, for whatever reason, to discontinue use of the venues. That may be an unlikely hypothesis albeit it is one which demonstrates that, if the judge is right, the Appellant could be left without any remedy in the event of premature termination of the Agreement by the Respondent. My difficulty with the argument is more fundamental. In his skeleton argument prepared for this appeal Mr Phillips submitted that "the Appellant could always refuse...
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