Winkworth Franchising Ltd v Nicholas Goble
[2023] EWHC 2883 (Comm)
The Burke Partnership (a firm) v The Body Shop International Limited
16 November 2023
[2023] EWHC 2897 (Ch)
High Court
Two old franchise agreements between The Body Shop and a partnership caused a fight about whether they could be renewed again and again. The judge decided the agreements *could* be renewed. The Body Shop also tried to argue for a way out of the agreements, but the judge said there was already a way to end the agreements in the existing contract, so there was no need to add a new rule.
Key Facts
- •The Burke Partnership (TBP) and The Body Shop International Limited (TBSI) dispute the interpretation of two franchise agreements (Norwich and Cambridge Agreements) dating back to 1981 and 1982.
- •The core dispute centers on whether the agreements are automatically renewable for 5-year periods or terminable by TBSI on reasonable notice.
- •Both agreements contain a clause allowing for five-year extensions (Clause 3(b)) but are silent on the possibility of repeated extensions.
- •TBSI argues that only one five-year extension was intended, while TBP contends for repeated five-year extensions.
- •Both parties have a history of extending the agreements for successive five-year terms until the recent dispute.
- •TBSI served notices of termination on TBP for both agreements in 2021, citing the agreements as unfit for purpose.
- •The agreements were drafted in a time when franchising was in its early stages, with the parties having limited experience of franchise agreements.
Legal Principles
Contractual interpretation involves identifying the intention of the parties by reference to what a reasonable person would understand.
Rainy Sky SA v Kookmin Bank [2011] UKSC 50, Arnold v Britton [2015] UKSC 36, Wood v Capita Insurance Services Ltd [2017] UKSC 24, ABC Electrification Ltd v Network Rail Infrastructure Ltd [2020] EWCA Civ 1645
Construction of a contract should be done before implication of terms; a term cannot be implied if it contradicts an express term.
Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 71
A term will only be implied if necessary to give business efficacy to the contract and/or it's obvious.
Yoo Design Services Limited v Iliv Realty PTE Limited [2021] EWCA Civ 560
Where a contract is silent on termination, a power to determine on reasonable notice may be implied; however, this is difficult if the contract already contains express termination terms.
Staffordshire AHA v South Staffordshire Waterworks Co. [1978] 1 WLR 1387; Kirklees Metropolitan BC v. Yorkshire Woollen District Transport Co Ltd (1978); Jani-King (GB) Ltd v. Pula Enterprises Ltd [2007] EWHC 2433 (QB); Harbinger UK Ltd v. GEI Information Services Ltd [2001] 1 All ER (Comm) 166; Jani-King at [64]; ServicePower Asia Pacific Pty Ltd v. ServicePower Business Solutions Ltd [2009] EWHC 179 (Ch); Colchester & East Essex Co-op Ltd v. Kelvedon Labour Club & Institute Ltd [2003] EWCA Civ 1671
Outcomes
The court granted the declarations sought by TBP.
The court held that clause 3(b) of the agreements, on its true construction, allows for repeated five-year extensions, not just one.
The court dismissed TBSI's counterclaim.
The court rejected TBSI's argument that a term should be implied allowing termination on reasonable notice, finding that the existing express termination clauses (3(a) and 11) preclude such an implication. The agreements were not found to lack business efficacy or coherence without the implied term.