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Judgment in franchise dispute; Dwyer (UK) Franchising Ltd v Fredbar Ltd & Bartlett

Judgment was handed down last week in the case of Dwyer (UK) Franchising Ltd v Fredbar Ltd & Bartlett [2021] EWHC 1218 (Ch). David E. Grant acted for the Defendants in this expedited trial on liability and injunctive relief between a franchisor and ex-franchisee.

Judgment was handed down in this franchise dispute on 11 May 2021. The First Defendant was a franchisee of the “Drain Doctor” brand licensed by the Claimant, Dwyer (UK Franchising) Ltd, which claimed to be the UK’s largest full-service network of emergency plumbing and drainage operations and part of the world’s largest home service franchise.

The case raised issues of misrepresentation, undue influence, repudiatory breach, affirmation and the reasonableness of the post-termination restrictive covenants. The Defendants purported to terminate the Franchise Agreement by reason of the Claimant’s conduct, including a decision not to exercise a force majeure clause in late March/early April following the intervention of covid.

Insolvency and Costs Judge Jones, sitting as a Judge of the Chancery Division, held that the Claimant was in repudiatory breach of the force majeure clause and a clause specifying how a marketing fund was to be applied. In the first, the Judge held that the Claimant did not take into account the need for the Second Defendant to isolate because of his infant son’s vulnerability. While the Judge held that each breach justified termination, he also concluded that the Defendants affirmed the Franchise Agreement. In consequence, the Defendants had no basis in seeking to terminate in July 2020 and the Franchise Agreement terminated when the Claimant accepted this breach in August 2020. The Judge held to be unenforceable the restrictive covenants preventing the Defendants from working in a competing or similar business within the exclusive market territory for a period of twelve months. In consequence, the Defendants were permitted to carry on their business for the remaining 3 ½ months.

Key issues

The 310 paragraph judgment will be interesting to practitioners and those in the business community for several reasons including:

  • The application of the implied Braganza term (from Braganza v BP Shipping Ltd [2015] UKSC 17; [2015] 1 WLR 1661) to a force majeure clause so that the unilateral power of designating an event as a “force majeure” event be exercised honestly, in good faith and genuinely, taking into account matters which are relevant and excluding those which are irrelevant
  • The application of force majeure clauses to covid and the need to consider the basis upon which it is said that (in the words of the Agreement in question) “a party is prevented or hindered from complying with their respective obligations under any part of an agreement”
  • The test of affirmation of a repudiatory breach and, in particular, whether a party needs to know not only the facts behind the termination but, also, the right to terminate
  • The approach to assessing the reasonableness and enforceability of restrictive covenant clauses in franchisor/franchisee cases

David first acted for the Defendants via the Chancery Litigants in Person Scheme on 17 September 2020 when Nugee J was persuaded not to grant an interim injunction but to list the matter for an expedited hearing.

The Judgment

Read the full judgment here.

Find Out More

David E Grant practises primarily in commercial law and particularly pensions and employment. He regularly appears in the Court of Appeal, High Court and specialist Tribunals. His clients have included many leading business including the Atos Group, British Airways, BT, ITV, the Royal Bank of Scotland, Lloyds Bank, Aegon and Transport for London. He has also acted for the Pensions Protection Fund, the Pensions Regulator and the Pensions Ombudsman as well as leading professional service companies such as Aon, Mercer and Barnett Waddingham as well as various high net worth individuals.

David has been recommended in Chambers and Partners and the Legal 500 since 2007 and is currently ranked as one of only two Band 1 pensions juniors.

To find out more about David, contact Matt Sale on +44 (0)20 7427 4910 or Peter Foad on +44 (0)20 7427 0807 for a confidential discussion.

Covid-19, Commercial during Covid-19, Commercial, News 18 May, 2021

Authors

David E Grant

Call: 1999

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