London Business House Ltd v Pitman Training Ltd
| Jurisdiction | England & Wales |
| Judge | Worster |
| Judgment Date | 09 May 2023 |
| Neutral Citation | [2023] EWHC 1077 (Comm) |
| Docket Number | Case No: CC-2021-BHM-000024 |
| Court | Queen's Bench Division (Commercial Court) |
[2023] EWHC 1077 (Comm)
HHJ Worster
(sitting as a Judge of the High Court)
Case No: CC-2021-BHM-000024
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BIRMINGHAM
CIRCUIT COMMERCIAL COURT (KB)
Birmingham Civil Justice Centre
The Priory Courts, 33, Bull Street, Birmingham B4 6DS
The 2 nd Claimant appeared in person representing both Claimants
Ali Tabari (instructed by Hamilton Pratt) for the Defendants
Hearing dates: 28–31 March 2023
Judgment Approved by the court for handing down
(subject to editorial corrections)
If this Judgment has been emailed to you it is to be treated as ‘read-only’. You should send any suggested amendments as a separate Word document.
This judgment is handed down remotely at 10.30pm on 9 May 2023 by email to the parties and by publishing a copy on the website of the National Archives.
Introduction
The 1 st Claimant (“LBH”) is a company owned and controlled by the 2 nd Claimant (“Mr Rehman”), who is the Director of the 1 st Claimant. Their claim arises out of a written Franchising Agreement dated 11 March 2015 (“the agreement”) made between the Claimants and the 1 st Defendant. The Claimants seek a Declaration that the agreement has been rescinded, and damages.
The Claimants also pursue their claims against the 2nd Defendant. The reason for that is that the 1 st Defendant is a dormant company. It has no assets and according to its filed accounts, has not traded since 2018. It is wholly owned by the 2 nd Defendant. The Claimants understanding was that the 2 nd Defendant also owned the intellectual property rights attaching to the “Pitman” brand and licenced their use to the 1 st Defendant for the purposes of franchising. The concern was that the real party to the agreement was the 2 nd Defendant. That belief was bolstered by the fact that the Claimants paid the deposit and other monies due under the agreement into the 2 nd Defendant's bank account. There was also a practical concern for the Claimants. If they succeeded against the 1 st Defendant alone, they would be left with a judgment against a company with no assets.
The Defendants position is that the agreement was made between the Claimants and the 1 st Defendant, and that the 2 nd Defendant was not a party to the agreement. Money received by the 2 nd Defendant was received as the agent of the 1 st Defendant. The express terms of the agreement are clear. The agreement begins by stating that it is made between (1) Pitman Training Limited as the Franchisor, London Business House Limited as the Franchisee, and Faisal Rehman as “the Individual”. The agreement is professionally drafted, initialled by the parties on each page, and signed.
On the face of it, it does seem odd that the Pitman franchise is traded by a dormant company, whilst its parent company acts only as its agent. However, that is the clear effect of the agreement, and is the way that the Defendants have arranged their business. The reason for that structure was dealt with by Claire Lister in her witness statement at paragraph 4, and I raised it with her again at the end of her evidence. Ms Lister is the former owner and Managing Director of the 2 nd Defendant. Her evidence was that the 2 nd Defendant had two dormant wholly owned subsidiaries, the 1 st Claimant which entered into all the UK franchise agreements, and a second company which held all the trademarks and international agreements. These arrangements were devised to facilitate restructuring (in her oral evidence she referred to management buy outs) without having to novate all of the agreements. She had some personal experience of that. The explanation made sense, and it removes any suspicion that this was some sort of deliberate tactic to avoid liability under the terms of the agreement.
Moreover, it is apparent that all UK “Pitman” franchise agreements are with the 1 st Defendant. Consequently, the Claimants and the Court can be confident that if the Claimants obtained a judgment against the 1 st Defendant, there would be an economic imperative for the 2 nd Defendant to ensure that it was satisfied. If it did not, and the 1 st Defendant was wound up as a result, it would have the potential to bring all the UK Pitman franchise agreements to an end, with serious and direct consequences for the overall business of the 2nd Defendant. On the evidence I concluded that the issue was academic, and I approach the matter on the basis that the agreement was made with the 1 st Defendant, whom I shall refer to as “Pitman”.
The Claimants were initially represented by lawyers. The Particulars of Claim and the Reply were drafted by Counsel, and Mr Rehman had assistance from his solicitors with disclosure and the preparation of his witness statement. Consequently his case has been properly formulated, and his witness statement is well-structured and detailed. At trial, Mr Rehman represented himself and his company without the benefit of legal assistance. In doing so he demonstrated a detailed knowledge of the factual background, and whilst he would not claim any great knowledge of the law, I should record that he cross examined Ms Lister with some skill. He had obviously spent a considerable time preparing his case. Given that he was not represented, I raised a number of issues with Mr Tabari in the course of his closing submissions to test the arguments which arose on the Claimants case. The fact that Mr Rehman did not raise some of those matters directly does not prevent me from considering them.
I heard oral evidence from Mr Rehman for the Claimants, and from Claire Lister, Kerry Bentley (a director and shareholder of Derby), Stewart Howard (a former Franchise Development Manager with the Claimants) and Yowie Roberts (then a Senior Franchise Development Manager). The parties also called expert accounting evidence in relation to the Claimants' losses; Professor Barnes for the Claimants and Mr Woodward for the Defendants. They had met and produced a joint statement, and were both called to give oral evidence and to be cross examined. There was a soft copy trial bundle. References to numbers in square brackets are to the pages of that bundle unless otherwise indicated.
The Defendants had also intended to call Nichola Haythorne to give evidence. She made a full witness statement, a copy of which was exchanged as directed, and provision was made for her to give evidence in the trial timetable. However, on 15 March 2023 she emailed the Defendants ‘solicitor to say that her mother had been taken into hospital two weeks before and had suffered a cardiac arrest. Whilst she had been resuscitated, she was left with severe brain damage. She had been taken off life support and Ms Haythorne was with her waiting for her to die, Her email refers to the stress of giving evidence in such circumstances, and to the fact that she is concerned for the health of her unborn child. There were some further email exchanges in which the Defendants’ solicitor sought to speak with Ms Haythorne, and explore whether the trial should be adjourned. On 19 March 2023 Ms Haythorne replied to say that her mother had died, and that she was “categorically not able and willing” to attend the trial because of her emotional turmoil and the additional stress it would cause. She asked not to be contacted again.
The Defendants made an application on 20 March 2023 to rely upon Ms Haythorne's witness statement at trial and for the court to give it “full weight” as if a hearsay notice had been served at exchange. Mr Tabari's submission is that given the compelling reasons for Ms Haythorne not attending court to be cross examined, the statement ought to be given more than minimal weight. Ms Haythorne was an important witness, particularly in relation to the claim in misrepresentation. Mr Rehman would undoubtedly have had a number of questions to ask her. He submitted that I should not take her statement into account. He relied upon the opening words of her email of 15 March 2023 which said:
Sorry but I am going to have to withdraw from being a witness.
Mr Rehman interpreted that as Ms Haythorne withdrawing her witness statement. That is not how I read Ms Haythorne's intention. She is not saying that the statement cannot be relied upon. Indeed, the penultimate paragraph of her email of 19 March 2023 begins with this:
You have my witness statement and are able to present that to the court …
I indicated at the start of the trial that I would rule on the application when I gave judgment. Having the benefit now of hearing all the evidence, I grant the application. The effect of doing so is limited. It means that the Defendants may rely upon the witness statement as hearsay, and avoids the potential consequences of a failure to serve a hearsay notice at the time provided for the exchange of witness statement in accordance with CPR Part 33. Section 2(4) of the Civil Evidence Act 1995 provides that the failure to serve such a notice does not go to the admissibility of the evidence, but may go to weight.
Mr Rehman made the point that I have no independent evidence to establish the truth of what Ms Haythorne says in her emails. That is true, but the content and tenor of the emails she sent to the Defendants' solicitor satisfy me that I can rely upon the veracity of what she says. It would be an extraordinary story to invent. There is a “good reason” for the purposes of the relief from sanctions test, and in all the circumstances of the case it is just to make the order sought. The weight I actually give to the statement is dealt with in the discussion of the evidence.
The other pre trial application was made by Mr Rehman on 23 March 2023. This was an application for permission...
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