PORTSMOUTH v ALLDAYS FRANCHISING Ltd and Others
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE PATTEN |
| Judgment Date | 22 March 2005 |
| Neutral Citation | [2005] EWHC 1006 (Ch) |
| Court | Chancery Division |
| Docket Number | CH/2004/APP/0694 |
| Date | 22 March 2005 |
[2005] EWHC 1006 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Mr. Justice Patten
CH/2004/APP/0694
MR. D. ALLISON (instructed by Shoosmiths) appeared on behalf of the Appellant.
MR. N. BRIGGS (instructed by Blake Lapthorn Linnell, Southampton) appeared on behalf of the Respondents.
This is an appeal by Mr. Portsmouth the debtor in these proceedings, against the order of District Judge Derbyshire dated 18 th October 2002, dismissing his application to set aside three statutory demands served on him by the respondents.
The demands in question total some £259,366.66p and relate to a business which Mr. Portsmouth operated at premises at 38 London Road, Andover, under a franchise agreement with the first respondent. The first demand is for some £22,765.55 due to Alldays Franchising Ltd (the first named respondent) which is said to represent outstanding fees due from Mr. Portsmouth under a franchise agreement dated 4 th December 2002. This is the franchise agreement in respect of the London Road premises.
The second statutory demand, which is in the sum of £63,881.12p was served by the second respondent, Alldays Stores Ltd. and is made up of three amounts. First, £45,000 in respect of goods sold and delivered under a supply agreement dated 8 th April 2003, again in respect of the London Road shop, £3,687.87 in respect of some unpaid video rental charges, and £14,193.25p in respect of rent owing as at 25 th March 2004 in respect of the underlease of the London Road premises.
The third statutory demand, which is in the sum of £173,719.99p, served by the third respondent, the Co-operative Group (CWS) Ltd, represents the balance of a trading account in respect of goods sold and delivered to the debtor, again for sale at the London Road premises. The first two companies are respectively, as their name suggests, the franchising arm and the retail arm of the Alldays franchising operation. They were taken over later during the period with which these proceedings are concerned by the third respondent, the “Co-op” as I will call it, hence the indebtedness of some £173,000 to which I have referred in respect of goods supplied by that respondent to the appellant debtor.
The background to the statutory demands and to the application to set them aside really begins in May 1998 when the appellant took an underlease of the shop premises at 38 London Road, Andover from the second respondent, and entered into the franchise agreement with the first respondent to trade as an Alldays franchise convenience store. It is I think common ground that in early 2002 Mr. Portsmouth identified an alternative location for his business in the form of premises at 14 Bridge Street, Andover. It seems that he initially entered into discussions with Spa but those were subsequently discontinued in favour of negotiations with the respondents to open the Bridge Street premises as a new Alldays store.
Before I come to the detail of what followed, it is perhaps as well that I should summarise at the opening what the real issues between the parties are. In February 2003 Mr. Portsmouth took a lease of the Bridge Street premises and proceeded to fit them out as an Alldays store at a cost of some £145,000 or more. He did so, according to his evidence, on the basis of representations or promises which had been made to him by employees of the respondents to the effect that he should go ahead, take the lease and prepare to open the store on the basis that he would be granted a new franchise to operate those premises as an Alldays convenience store.
It appears from the evidence that the costs involved in carrying out those refurbishment and refitting works were on Mr. Portsmouth's own admission provided from moneys received from the sale of goods at the London Road store supplied by the third respondent. The consequence of that was that during the course of 2003 Mr. Portsmouth indebtedness to the respondents increased dramatically.
It is said that by the summer/early autumn 2003, as a result of discussions which took place, and which to some extent are evidenced by contemporaneous correspondence, the Co-op did in fact grant to Mr. Portsmouth a new franchise agreement in respect of the Bridge Street store. It is also said that that agreement, (which according to its terms can only be terminated by notice in the court of certain specified events of default), was repudiated by the respondents and that they are therefore liable to pay Mr. Portsmouth damages either for loss of profits or, alternatively, representing the cost of the works that were carried out by him in order to perform the contract comprised in the franchise agreement. Those would, of course, be the costs of fitting out and certain ancillary costs, which I am told are estimated in the sum of approximately £212,000.
Alternatively, it is said that as a result of representations made at that time, and perhaps earlier on in 2003, the respondents were estopped from calling in the debts on the trading account and the other liabilities relating to the London Road store unless and until the Bridge Street premises were trading under a new franchise agreement as an Alldays store. Had that been done it is said that Mr. Portsmouth would have been presented with an opportunity of paying off the arrears in respect of the London Road operation by disposing of that business and that he was denied that opportunity by the actions of the respondents in refusing to sanction the franchise of the Bridge Street store, and in calling in the debts in the Autumn of 2003. There is also a claim, made essentially on the same basis, for damages relying on the same representations as misrepresentations.
Before I come to examine the various causes of action relied on, it is worth, I think, emphasising what test needs to be applied. The District Judge was referred to, and in his judgment makes reference to a number of decisions in this court and in the Court of Appeal where judges have had to consider either in the context of winding-up proceedings or sometimes in relation to applications for summary judgment, allegations that the defendant (or the debtor) has a cross-claim, or counterclaim, equal to the alleged indebtedness, which will operate as a set-off and therefore a defence to the claim. In Re A Company 006685 of 1996 [1997] B.C.C. 30 Chadwick J. (as he then was) referred to some earlier remarks by Lord Greene, Master of the Rolls in Re Welsh Brick Industries Ltd where he said this:
“I do not think that there is any difference between the words “bona fide disputed” and the words “disputed on some substantial ground”. I cannot accept the proposition that merely because unconditional leave to defend is given that of itself must be taken as establishing that there is a bona fide dispute, or that there is some substantial ground of defence. The fact that such an order is made is no doubt a matter which the winding-up court will take into consideration and to which the winding-up court will pay respect. I cannot regard it as in any way precluding a winding-up judge from going into the matter himself on the evidence before him, and considering whether or not there is some substantial ground for defending the action.”
The learned judge also referred to the judgment of Oliver L.J. in Re Claybridge Shipping Company S.A where Oliver L.J. observed that it was, to quote Chadwick J's words:
“…only too easy for an unwilling debtor to raise a cloud of objections on affidavits and then to claim that because a dispute of fact cannot be decided without cross-examination the petition should not be heard at all but the matter should be left to be determined in some other proceedings.”
For the purposes of this appeal it seems to me that I have to be satisfied that on the material before the court the debtor, Mr. Portsmouth has established the existence of a good and substantial cross-claim or counterclaim, which he is able to set up against the indebtedness to the respondent companies. That will necessarily involve a consideration, as it did by the District Judge, not only of the evidence itself, but also of the legal consequences which Mr. Portsmouth seeks to attribute to what he said occurred.
So far as the evidence is concerned the mere fact that a party in proceedings not involving oral evidence or cross-examination asserts that certain things did or did not occur, is not sufficient in itself to raise a triable issue. That evidence inevitably has to be considered against the background of all the other admissible evidence and material in order to judge whether it is an allegation of any substance. Once the court considers that the evidence is reliable in that sense, and not some attempt to obfuscate the real issues by raising a series of hopeless allegations then it does, of course, become necessary to consider what the legal consequences of it are.
The factual history, which the District Judge had to go into can I think be summarised in this way. Starting at the beginning of 2002 the respondents wrote to Mr. Portsmouth on 23 rd January in the form of a letter from Mr. Criddle, the franchise manager, referring to certain franchise fees that were due and then saying this in relation to what is referred to as “Bottoms-Up” which is, in fact, the Bridge Street shop:
“It would also be opportune to discuss Bottoms-Up and other plans you wish to progress at the same time, although with the continuing failure on your part to pay our account normal terms Jim and I will have difficulty in supporting any new venture at the moment....
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