Jersey Unreported Judgments

Companies - application by the Plaintiffs for summary dismissal of the counter-claim of the Defendant.

[2018]JRC026

Royal Court

(Samedi)

1 February 2018

Before     :		T. J. Le Cocq, Esq., Deputy Bailiff, and Jurats Nicolle and Ronge.
Between	Hard Rock Limited		First Plaintiff
	Hard Rock Café International (STP) Inc		Second Plaintiff
And	HRCKY Limited		Defendant

Advocate J. D. Garrood for the Plaintiffs.

Mr Kevin Doyle as Director of the Defendant.

judgment

the deputy bailiff:

1.        This is an application by Hard Rock Limited (the First Plaintiff) and Hard Rock Café International STP Inc (the Second Plaintiff) (collectively called the Plaintiffs) for summary dismissal of the counter-claim of HRCKY Limited (the Defendant). The only part of these proceedings that remain is the Defendant's counter-claim and if the Plaintiffs succeed in the present application the proceedings will accordingly be at an end.

2.        The claim is brought pursuant to rule 7/7(1) of the Royal Court Rules 2004 (as amended).  This is a relatively new rule having come into force on 1^st June, 2017. 

3.        Rule 7/7(1) is in the following terms:-

"(1) The court may in any proceedings give summary judgment against a plaintiff or defendant on the whole of the claim or on a particular issue in any pleadings if -

(a)       It considers that -

(i) The plaintiff has no real prospect of succeeding on the claim or issue;

(ii) The defendant has no real prospect of successfully defending the claim or issue; and

(b)      There is no other compelling reason why the case or issue should be disposed of at a trial."

4.        This test was considered by the Court in MacFirbhisigh and Ching v CI Trustees and others [2017] JRC 130A when Hunt, Commissioner, at paragraphs 16 - 19 of the judgment says as follows:-

"16.    Since the wording of Rule 7/1(1)(a)(i) mirrors that of the English CPR Part 24.2(a)(i), it seems to me that the Royal Court should, when applying Rule 7/1(1)(a)(i), follow the principles which have been developed in the English courts in relation to Part 24.2(a)(i).  This approach reflects that adopted by the Royal Court in AG v. Contractors Plant Service Ltd. [1967] JJ 785 where the Deputy Bailiff said (at p.786):

"The Solicitor General has drawn our attention to the fact that the provisions of the [Scaffolding (Jersey) Regulations, 1960] follow closely those of the Building (Safety, Health and Welfare) Regulations 1948, made under the Factories Act 1947, and other enactments of the Parliament of the United Kingdom, and he has therefore sought to support his case against the defendant company by quoting from judgments given in the English Courts on matters affecting the interpretation of those regulations.  Although, as has often been said in this Court, the Courts of this Island are not bound by judgments of the English Courts, we feel that in this instance, we should have close regard to the judgments in question ..."

Both Advocate Gleeson and Advocate Scholefield agreed with this approach.

17.      In Trilogy Management Ltd. v. Harcus Sinclair [2017] EWHC 1164 (Ch), Rose J. said as follows (at para.32):

"The principles to be applied are those set out by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at paragraph 15.  The correct approach on applications by defendants is as follows:

"(i)      The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 2 All ER 91;

ii)        A "realistic" claim is one that carries some degree of conviction.  This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];

iii)       In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman;

iv)       This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court.  In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED& F Man Liquid Products v Patel at [10];

v)        However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;

vi)       Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;

vii)      On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case maybe.  Similarly, if the applicant's case is bad in law, the sooner that is determined, the better.  If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success.  However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals& Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."

18       Since neither counsel had referred in their skeleton arguments to the Easyair or Trilogy cases, the Court notified all parties of my provisional view that the principles quoted above were those which I should follow in the present case, giving them the opportunity to challenge my provisional view if they wished.  Advocate Gleeson indicated his agreement with my intended approach.  Advocate Scholefield likewise did not seek to challenge my provisional view but referred me to the judgment of Master Thompson in Holmes v. Lingard [2017] JRC 113, delivered on 21 July 2017.

19.      At para.160 of his judgment in Holmes, Master Thompson said as follows:

"This is the first occasion upon which Rule 7 introduced by Royal Court (Amendment No.20) Rules 2017 has been considered.  The wording of Rule 7 is based extensively on Rule 24 of the Civil Procedure Rules (ACPR"). As there is no material difference between the wording of Rule 7 of the Royal Court Rules and Rule 24 of the CPR, I have followed the relevant English jurisprudence as to how the power contained in Rule 7 should be interpreted and applied."

His judgment does not refer to either Easyair or Trilogy but the principles which he deduced from Civil Procedure 2017 Vol.1 (the White Book) and from the authorities upon which he relied are, it seems to me, entirely consistent with those in Easyair, as approved in Trilogy, which I have quoted in para.17 above.  Accordingly I propose to follow the principles in Easyair."

5.         These are the principles that we will follow in this application. 

Background

6.        The Plaintiffs are affiliates of Hard Rock Café International (USA) Inc which is the worldwide controller and promoter of the 'Hard Rock Café' brand which it does by way of franchising.  The Defendant is a company incorporated in the British Virgin Islands. At the time of the hearing, the Defendant was not legally represented (although it had been at earlier parts of the proceedings) and Mr Kevin Doyle, a director of the Defendant, represented the Defendant before us.  It is right to say that Mr Doyle had the benefit of a skeleton argument prepared by the Defendant's previous lawyers in response to the Plaintiffs' application. 

7.        The Defendant's counter-claim arises out of a Restaurant Franchise Agreement (RFA) which was executed on the 11^th June, 1999, and which permits the Defendant to operate a Hard Rock Café in Grand Cayman. 

8.        The franchise agreement was operated for a number of years.  It is of note that in 2004 an extreme weather event, namely Hurricane Ivan, occurred.  This led to a three month closure of the restaurant in Cayman and in 2006 a repositioning of the cruise terminal from a position that was near to the restaurant to being some distance away. 

The Restaurant Franchise Agreement

9.        There are a number of terms of the RFA which we view as relevant to the present application.  These are:-

(i)        The recitals in the RFA contain the following:

"I.  Franchisor has developed the system (as herein after defined), for operating theme establishments that provide to the public food and beverage (as herein after defined), and merchandise (as herein after defined) of a distinctive character and quality under the name "Hard Rock Café" and has publicised such name and related trademarks, tradenames, service marks, logos, and commercial symbols of franchisor in connection with the operation of the system at establishments throughout the world. 

II.  Franchisor licences the use of the name "Hard Rock Café" and certain other trademarks, tradenames, service marks, logos, and commercial symbols (herein after defined more fully as the "licenced rights") in connection with the restaurant/merchandise establishments operated in conformity with the system to selected persons who will comply with the franchisor's uniformity requirements and quality standards. 

...

VII. The franchisee has had a full and adequate opportunity to read and review this agreement, and to be thoroughly advised of the terms and conditions thereof, and has, to franchisee's satisfaction, evaluated and investigated the system, or financial requirements thereof, and the risks associated with the operation of a Hard Rock Café establishment in accordance with the system." 

(ii)       Paragraph A of Section 2 of the RFA provides as follows: 

"Grant.  Franchisor hereby grants to the franchisee, upon and subject to the terms and conditions contained in this agreement, and franchisee hereby accepts, the exclusive right and licence to operate at retail one restaurant; to use the licence rights in the operation thereof; and to sell therefrom food and beverage and merchandise, at a specific location selected as provided for herein within the area as specified in section 2(b) hereof." 

(iii)      Section 18 of the RFA contains amongst others the following provisions:

"...

(G) No warranties or guarantees.  The franchisor makes no warranties or guarantees upon which franchisee may rely, and assumes no liability or obligation to franchisee, by providing any waiver, approval, consent, or suggestion to franchisee in connection with this agreement, or by reason of any delay, or denial of any request therefore.  Franchisee, in executing this agreement, has not relied upon any representation or warranty of franchisor that the business operations to be conducted at the restaurant will be successful, or that any specific level of profit will be achieved. 

...

(K) Entire agreement.  This agreement, the documents referred to herein, and the attachments hereto, if any, constitute the entire, full, and complete agreement between the franchisor and franchisee concerning the subject matter hereof; and supersede all prior agreements, no other representations having induced franchisee to execute this agreement.  No representations, inducements, promises, or agreements, oral or otherwise, not embodied in this agreement (as defined in the preceding sentence) or attached hereto (unless of subsequent date) were made by either party and none shall be of any force or effect with reference to this agreement or otherwise.  Except as otherwise provided in this agreement, no amendment, change or variants from this agreement shall be binding on either party unless mutually agreed to by the parties and executed by their authorised officers or agents in writing."      

(iv)      The RFA is governed by Jersey law. 

10.      Until Hurricane Ivan in 2004 the restaurant was a profitable enterprise. 

The nature of the Defendant's counter-claim.

11.      In essence the Defendant's counter-claim in respect of which the Plaintiffs seek summary disposal, comprises four elements.  The first element is that the RFA contained an implied term of good faith and the Plaintiffs were in breach of that term; the second is that a dol was committed by a Mr Sam Marable of the Plaintiffs and, thirdly, that there was a 'dol par reticence' in which the Defendant claims that the Plaintiffs remained silent when they ought to have notified the Defendant that the restaurant part of the business was not typically profit making.

12.      There are two elements to the business covered by the RFA.  The two operate together and are complementary.  The first is the restaurant element which, as the name suggests, is that part of the business in which food of the type associated with the Hard Rock Café is provided in a café/restaurant environment. The second is the merchandise element in which Hard Rock Café merchandise is sold to customers of the restaurant/café (or indeed others).  The two elements are almost invariably linked and dealt with conceptually under the RFA as a single business. 

13.      The fourth element of the application before us is an argument by the Plaintiffs that, in any event, the Defendant's claim is prescribed by the passage of time. 

The good faith claim

14.      As we have stated one of the Defendant's claims is that the Plaintiffs are in breach of an implied term of good faith.  The first question to be considered in connection with this part of the claim is whether or not a term of good faith can be an implied term in a commercial contract of this nature. 

15.      In Minister for Infrastructure v Parish of St Helier [2016] JRC 153 in which this Court stated at paragraph 97:-

"The leading case on implied terms is Grove v Baker [2005] JLR 348, where it was held that a party seeking to persuade the Court that a term should be implied into a contract, must show either that the term is customarily included in contracts of the kind in question or that it is necessary to imply the term in order to ensure that the contract is not futile, inefficacious or absurd."

16.      It is argued by the Plaintiffs that given that Grove v Baker [2005] JLR 348 cited with approval the English principles applicable at that time we should have regard to developments of common law in England as useful in guiding us as to the position in Jersey.  In particular the Plaintiffs rely on Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72 in which Lord Neuberger said at paragraph 18:-

"In the Privy Council case of BP Refinery (Western Port) Pty Limited v Shire of Hastings 1977 180 CLR 266 Lord Simon ... said that:

'For a term to be implied, the following conditions (which may overlap) must be satisfied:

1. It must reasonable and equitable

2. It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

3. It must be so obvious that it goes without saying;

4. It must be capable of clear expression;

5. It must not contradict any express term of the contract.'"

17.      In the case of Sutton v Insurance Corporation of the Channel Islands Limited [2011] JRC 027 Bailhache Deputy Bailiff (as he then was) considered an insurance contract but, in considering the applicability of the principle of utmost good faith, made the following observations about implied terms of good faith in general in Jersey contracts:-

"14.    It is often said - and indeed said by this defendant - that insurance contracts are uberrimae fides - of the utmost good faith.  The adoption of uberrima fides imposes a very high duty on a person and renders him liable for any concealment or deception however slight.  Any material misrepresentation made by the insured to the insurer at the time of entering into the contract will entitle the insurer to avoid liability under the contract. 

15.      Whatever may be the position elsewhere, it appears to us that if an insurer in relation to a contract which is governed by Jersey law, as this one is, wishes to assert that the principle of uberrima fides applies, there must be either some specific language in the contract which shows that this is what the parties agreed or some other feature from which that agreement can be necessarily inferred.  Such a feature may arise out of established market practice and understanding generally or though not expressed in the contract, by examination of all the circumstances.  See for example Domat L (1745 edition) Les Loix Civiles Liv I Titre I Section IX:-

"Si l'intention commune des parties ne se découvre pas par l'expression, et qu'on puisse l'interpréter par quelque usage des lieux, ou des personnes qui ont fait la convention, ou per d'autres voyes, il faut s'en tenir à ce qui sera de plus vrai semblable, selon ces vues."

We hold that as a matter of principle, all insurance contracts governed by Jersey law are subject to uberrima fides because this is the established market understanding of such contracts and because, as a practical matter, insurance contracts, of all contracts, require that the parties act with good faith towards each other. 

16.      It may well be that an obligation of good faith on both sides is a common understanding in all contracts governed by Jersey law, though we do not decide that in this case as it is unnecessary to do so and we have not had full argument on the point.  There are certainly references to the requirement for good faith in Domat op cit at Sections XII and XIII and at page 350 of Le Gros, Traité du Droit Coutumier (1943) when considering "De la clameur révocatoire ou deception d'outre moitié du juste prix" there appears this passage:-

"C'est un principe en quelque sorte sacré que la convention fait la loi des parties, mais la bonne foi est une condition essentielle et sine qùa non de la convention.

La raison en est évidente: c'est un principe commun à tous les contrats que les contractants se doivent franchise, sincérité sans voile ..."

17.      Although it may be that the extract deals only with the issue of good faith in relation to the claim for deception d'outre moitié, the judgment of the majority of the Privy Council in Snell-v-Beadle [2001] JLR 118 at paragraphs 42 - 46 in particular may lend some support to the view that the requirement for good faith in the negotiation or performance of a contract under Jersey law may be of wider application than simply such claims.  Increasingly, European legislation contains provisions based on the concept of good faith and it is interesting to note that Article 5 of the Supply of Goods and Services (Jersey) Law 2009 introduces a definition of good faith for the purposes of that legislation. 

18.      On the other hand, it is clear that the English law does not recognise the principle of good faith as having any general application, not least perhaps because English judges have been anxious to avoid creating uncertainty.  In Interfoto Pichers Library Ltd-v-Stiletto Visual Programmes Ltd [1998] 1 QB 433 at p 449 Bingham LJ, as he then was, put it this way:-

"In many civil law systems, and perhaps in most legal systems outside the common law world, the law of obligations recognises and enforces an overriding principle that in making and carrying out contracts parties should act in good faith.  This does not simply mean that they should not deceive each other, a principle which any legal system must recognise; its effect is perhaps most aptly conveyed by such metaphorical colloquialisms as "playing fair", "coming clean" or "putting one's cards face upwards on the table."  It is in essence a principle of fair open dealing... English law has, characteristically, committed itself to no such overriding principle but has developed piecemeal solutions in response to demonstrated problems of unfairness."

19.      Into this mixture would need to be introduced consideration of the doctrine of réticence dolosive, and its impact upon the issue.  At all events, this issue of any general obligation of good faith is reserved to another day when the facts of the case call for the law on this point to be decided." 

18.      In the judgment of the Master given as part of these proceedings in Hard Rock Limited and another v HRCKY Limited [2013] JRC 244B of the term of good faith alleged by the Defendant the Master says, at paragraph 59:-

"For the purposes of this application I accept it is arguable that an obligation of good faith on both sides can form part of the understanding of the parties in contracts governed by Jersey law.  However, it is not appropriate to determine that question on a summary judgment application without full argument on the point (of the remarks in Sutton at paragraph 16).  It is not therefore appropriate for me to consider whether the observations of Mr Justice Leggatt in Yam Seng P.T.E. Limited v International Trade Corporation Limited [2013] EWHC 111 should form part of the law of Jersey." 

19.      In essence the Defendant argues that the position in Jersey with regard to implied terms of good faith is, at the very least, unclear and without full argument after the finding of facts should not be determined at a summary level. 

20.      For their part, the Plaintiffs argue that such an implied term is quite simply unnecessary because the RFA is effective without it.  As put in the Plaintiffs' skeleton argument there could be no question that absent an implied term of good faith the contract would lack as to commercial practical coherence.

21.      Moreover, so the Plaintiffs argues, it would be impossible to say that such an implied term, namely of good faith, would 'go without saying'.  Furthermore an implied term importing duties of good faith, so the Plaintiffs argue, is uncertain, vague or ambiguous. In the case of Minister for Treasury v Harcourt Developments Limited [2014] JCA 179 the Jersey Court of Appeal at paragraph 73 stated:-

"... Nevertheless, in the present case the necessary certainty cannot be found simply in the indication that the negotiations are to be in good faith and with due diligence, as the meaning of "good faith" in negotiations is itself inherently uncertain. 

74. As to the second, the problem is that the addition of the requirement of due diligence as an additional feature of the required negotiations does not remove the inherent uncertainty which is present through the negotiations having also to be in good faith." 

22.      The Plaintiffs criticise Sutton, above, on the basis that the Court did not there consider the proper mechanism by reference to which a term may be implied into a contract.

23.      Furthermore, as we observed above, the RFA contains a whole agreement provision which, it might be argued, is anathema to any implied term. 

24.      With some caution, because we think there may be material difficulties with the Defendant's claim in law, we cannot say that, the questions of whether every Jersey contract should be seen as containing an implied term of good faith; the ambit and reach of such a term, whether it can be removed or obviated by the express terms of a contract; or, (in the circumstances, the RFA) are matters that have been decided definitively.

25.      We think that there may be, in terms of certainty and perhaps general business efficacy, some significant problems with the Defendant's argument in connection with the implied term of good faith.  We cannot however, say that the Defendant could have no real argument to make in that regard on the law. 

26.      However, consideration of this element of the claim does end there.  It is clear that the complaints relied on by the Plaintiffs under the heading of the implied term of good faith are those set out at paragraphs 19 and 20 of the Re-Amended Counter Claim which we take to be particularised, at paragraphs 92 and 94 of the statement of Mr Doyle.  Paragraphs 19 and 20 of the Re-Amended Counter Claim are in the following terms:

"19.  That in breach of the implied duty of good faith and co-operations set out in paragraph 2 above, the First Plaintiff required the Defendant to operate the franchise business in accordance with the First Plaintiff's model and consistently refused to accede to the defendant's reasonable requests, made repeatedly since 2002, to be permitted to implement changes to the operation of the restaurant business so as to reduce the year by year losses that were being incurred on the restaurant business including, inter alia, requests to reduce the portion sizes of food served to customers (as specified by the First Plaintiff's guidelines for franchisees) and to reduce the prescribed menu by removing poor selling items, notwithstanding the First Plaintiff's awareness that the restaurant side of its franchisees' business is structurally loss-making and requires cross-subsidy from retail sales (as set out in its "Strategic Plan for 2006" acknowledging that "without merchandise sales HRC's restaurant sales per unit is much lower than its competitors").  The Defendant has thus been prevented from taking steps to reduce or prevent the huge losses which it has continually suffered on the restaurant side of its operation or to repay and/or recoup its investment in the Grand Cayman franchise. 

20.  That in further breach of the implied duty of good faith and co-operation, the First Plaintiff has failed to accede the Defendant's repeated and reasonable requests to be allowed to reduce its opening hours in the evenings, after the departure of the cruise ship passengers who make up the vast majority of the customers of the Grand Cayman franchise.  The First Plaintiff has thus forced the Defendant to incur unnecessary costs by applying a rigid corporate policy as to opening hours and failing to have due regard to the particular local characteristics of the Defendant's operation."  

27.      The allegations contained at paragraphs 92 and 94 of Mr Doyle's statement of 12^th January, 2017, set out in a number of bullet points a list of approaches made by Mr Doyle to the Plaintiffs asking for variations to the operating arrangements.  We have been referred to correspondence by the Defendants which illustrates that with regard to some requests, for example the change of menu requested in May 2002, the Plaintiffs agreed and with regard to others, specifically a request to change opening hours, the Plaintiffs refused but set out a reasoned case for the refusal although it refers to the franchise also operated by Mr Doyle in Nassau. 

28.      Taken as a whole or indeed individually, there does not appear to us to be the evidence to suggest that there was a breach of any term of good faith, should one exist in this contract.  In our view the evidence shows that there were a number of requests made by Mr Doyle, some of which were acceded to and some of which were refused.

29.      A term of good faith, even were one to exist, cannot it seems to us be used to qualify the general purpose and commercial rationale of an agreement.  To act in good faith, expressed as its corollary, must be not to act in bad faith.  Could it be said that a party to a commercial contract was acting in bad faith where on the evidence it acceded to some requests from the counter party and did not accede to others for its own commercial reasons?  We cannot think that such could amount to bad faith or an absence of good faith in any event. 

30.      It is difficult to see that given the express terms of the RFA a simple refusal to vary the franchisor's requirements to protect the integrity of its franchise or to meet its commercial aims generally could be seen as a lack of good faith. 

31.      Furthermore, there does not appear to us to be any causal link established on the pleadings to point to losses incurred by the Defendant as a result of any supposed want of good faith on behalf of the Plaintiffs.  Indeed the expert evidence is to the contrary.  In his report of 10^th February, 2017, Cosimoo Borelli, the Defendant's expert, says at paragraph 91:-

"The restaurant appears to effectively have acted as a loss leader for many of the Hard Rock Cafes and it is unlikely that cost cutting measures alone would have materially improved the profitability of HRCKY.  I understand that HRCKY took some steps to reduce costs but such measures were, unable to improve profitability.  As the restaurant was a low margin business, its operating and financial costs were too high to enable the restaurant to break even or make a profit, a substantial restructure of the restaurant operations would have been required to maintain HRCKY's profitability.  Such a restructuring likely require the adoption of smaller premises, less staff, adjustments to the menu and opening hours, changes in supplier contracts, and other cost cutting measures.  The restrictive nature of the Franchise Agreement required that any such restructuring proposals be approved by Hard Rock."

32.      It would not be possible, on the case as pleaded or on the evidence as we understand it and have seen it, to establish what if any loss flowed from the alleged breach of a term of good faith.

33.      In our view, on the case as we understand it, the Defendant has no real prospect of success of recovering any damages under the alleged breach of term of good faith and we grant the Plaintiffs' application for summary dismissal of that part of the counter-claim.

Dol

34.      In the case of Steelux Holdings Limited v Mary Martine Edmonstone née Hall [2005] JRC 062 Sir Philip Bailhache, Bailiff, said at paragraph 10:-

"Fraudulent conduct, including the making of a fraudulent misrepresentation, can be a "moyen de nullité", or a cause of the nullity of an agreement.  The underlying principle of fraud, which we may say embraces both "dol" and "fraude" is bad faith.  Fraud is a "vice du consentement", that is to say, a defect which nullifies the apparent consent between the parties and allows the defrauded party to treat the contract as void.  If therefore a party knowingly makes a false statement which induces the other party to sign a document and thereby to enter a contract, there is a defect of consent which allows the other party to treat the contract as void.  It may not be necessary that the statement is, at the time it is made, knowingly false; if the statement is in fact false, and the other party acts upon it, there is nonetheless a defect of consent ("vice du consentement") because the other party enters the contract under the mistaken impression that the statement or representation was true.  It may be seen therefore, that the distinction between mistake ("erreur") and fraud ("dol") as defects of consent may sometimes be blurred.  There is in either event a defect of consent which allows the injured party to treat the contract as void.  The burden of proof lies upon the party who asserts that there is in law a defect of consent. 

And at paragraph 13:-

"As a matter of general principle, under the law of Jersey, the parties to a contract are expected to defend their own interests.  The maxim is "La convention fait la loi des parties".  But fraud is a flexible notion.  Silence can, in certain circumstances, amount to fraud.  If one party, particularly a party who is more experienced and worldly-wise than the other, is silent as to a material fact which, if it had become known to the other party, would have led to a refusal to enter into the contract, that may well amount to fraud which may lead to a setting aside of the contract.  In French law, the concept is known as "réticence dolosive".  We would characterise it as dishonest or fraudulent silence.  Although Poingdestre did not expressly refer to dishonest silence, he did state that, in the context of a contract between persons of unequal bargaining power, "tout contract ou transaction extorqué par ... persuasions indirectes est presumé fraudeux principallement quand la personne induite est foible de jugement ou d'age" (Poingdestre, Les Lois et Coutumes de L'ile de Jersey, pub. J T Bigwood Ltd, 1928, page 206).  In this case, it is unnecessary to decide whether or not there was dishonest silence, but if there had been, the obligation to pay interest would have been set aside."

35.      Although generally referred to as a claim in "dol" in fact the Defendant has pleaded the claim as a misrepresentation.  In any event the nature of the representation is set out at paragraph 24D of the Re-Amended Counter Claim in the following terms:

"24D In order to persuade the Defendant to enter into the Franchise Agreement the Plaintiffs made the following representation which was expressly or impliedly based on their actual experience or knowledge.  The Plaintiffs represented that if the Defendant entered into the Franchise Agreement it could expect to make returns of 15-30% per annum and that its outlay/investment could be paid back within three years but, at the latest, five years."  

36.      In paragraph 24F of the Re-Amended Answer and Counter Claim the Defendant pleads: 

"In truth and in fact the Plaintiffs were aware at the time of making the representations and thereafter that the restaurant business was only profitable in a very few locations and in the majority of locations it was unprofitable and loss making.  Where the restaurant business had high outgoings - as in the Cayman Islands a matter of which the Plaintiffs were well aware - it would be unprofitable if run in accordance with the Plaintiffs' business model which it required as a term of the Franchise Agreement.  Had the Defendant been aware of this fact, it would never have entered into the Franchise Agreement or expended the very substantial sums it has expended which have been lost."    

37.      The first point to make is of course that there is a disconnect between what is alleged in paragraph 24D, which refers to the return to be made on the franchise agreement, and that made in 24F which refers to the profits of the restaurant business.  The business covered by the franchise agreement, of course, is not only the restaurant business but also the merchandise business.  It is clear from the terms of the RFA that these two elements are connected and part of the same single business.  Reference to the profitability of the restaurant business says nothing about the profitability of the business covered by the RFA as a whole.

38.      Even were this to be capable of curing by way of an amendment to the pleadings the evidence of the joint experts produced by order of the Master dated 24^th January, 2017, does not support the factual allegation.  After identifying the nature of the Defendant's claim in section B1 of the report in section B2 the joint experts express agreement on aspects of the financial performance in the following terms:

"Experts agree that HRCKY's Actual Results are broadly consistent with Scenario 2 of the Amended Projections prepared by Sam Marable of Hard Rock in March 1999 ("Projections").  The Projections separately categorise Sales and Cost of Sales (i.e. up to Gross Profit) as belonging to either the restaurant and retail divisions.  The projections do not separately categorise those costs that fall below the gross profit line, and so the Experts have categorised these costs based on their respective assessments of the Actual Results.  On either basis, at a consolidated level, the Projections in respect of the Net Trading Profit are also comparable with Actuals."  

39.      Furthermore, at paragraph B3 of the joint report the joint experts say: 

"The Experts agree that the Comparable Cafes followed the same model as HRCKY and the actual financial results of HRCKY for the period 2001 to 2005 are consistent with the results achieved by the Comparable Cafes during 1999 to 2003."   

40.      Furthermore it was difficult to see Mr Marable's projections as other than forecasts being an estimate of future performance.  We have seen no evidence that Mr Marable did not or could not have believed the forecasts were accurate. 

41.      In addition we refer back to the entire agreement provision in the RFA which expressly provides that "... no other representations have induced Franchisee to execute this Agreement.  No representations, inducements, promises, or agreements, oral or otherwise, not embodied in this Agreement ... were made by either party, and none shall be of any force or effect with reference to the Agreement or otherwise."  On a straightforward analysis of this provision the contractual position agreed by the Defendant is that it did not rely on any fact or matter not recorded in the RFA itself. 

42.      It seems to us that we cannot ignore the Jersey law maxim of "la convention fait la loi des parties".  It is true that there can be exceptions to this (see Steelux quoted above) but we are here dealing with a voluntary obligation taken on by a businessman under the terms of the RFA on which both sides were legally advised and which contained, as we have noted, the entire agreement provision.  Had the Defendant sought to rely on specific representations then those representations should have been contained in the RFA or reference to them made within the RFA such as to take them outside the entire agreement provision.  It is suggested to us, on the evidence, that Mr Doyle was very familiar with the figures but whether or not this is the case he was undoubtedly a person of business experience who should, had he wished to rely on them, have ensured that any representations were embodied in contractual provisions. 

Dol par réticence

43.      In considering the matter of dol par rétience it is useful, in addition to the words of the Court in Steelux cited above to note that in Sutton (referred to above), the Court at paragraph 48 of the judgment says this:

"... We have considered the court's hesitation in Toothill as to whether the doctrine of réticence dolosive is part of the law of Jersey.  In our view, the doctrine is useful in a case such as the present because it forms part of that package of principles which go to identify whether the parties to a contract of insurance, being a contract of uberrima fides, have that common will or volonté to make it, and thus provide a proper basis for an assertion that la convention fait la loi des parties.  Not all silences will have the effect of providing grounds for the claim in nullity.  The party making that claim has to relate the alleged réticence dolosive to a material particular of the contract and its actual impact upon his will or volonté to make the contract in order to discharge the burden of showing that the claimed ground of nullity has been established." 

44.      The claim of réticence dolosive appears to be set out at paragraph 24H of the Re-Amended Answer and Counterclaim which is in the following terms: 

"Alternatively, the Plaintiffs induced the Defendant to enter into the Franchise Agreement and made certain express or implied representations and/or failed to provide full and accurate information concerning the financial success (or lack thereof) of other franchises.  In particular, the Plaintiffs being a more experienced party than the Defendant in respect in particular of the operation of Hard Rock Café franchised businesses, failed to provide material facts to the Defendant (i.e. that the restaurant business was only profitable in a very few locations and in the majority of locations it was unprofitable and loss making) deliberately or recklessly which would have otherwise led the Defendant to refuse to enter into the Franchise Agreement had it known the material facts." 

45.      It seems to us that the thrust of this argument entirely depends upon whether the Defendant was entitled to treat the two elements of the franchise business, namely the restaurant business and the merchandise business, as something separate in respect of which separate representations should have been made. 

46.      It seems to us, however, that it is clear that the RFA is an agreement that relates to one business, one franchise, and the fact that the franchise may have had two elements does not stop it from being a single and entire franchised operation. 

47.      It does not appear to us on the evidence that we have seen that in fact the franchise business was unprofitable until, as we have indicated above, in 2004 external factors caused material difficulty to the business.  This could not have been foreseen by either the Plaintiffs or the Defendant. 

48.      Should the Plaintiffs, then, dealing with someone who was holding themselves out as being able to operate a franchise in the form that the Plaintiffs offered, have assumed that a distinction should be made between parts of the franchised operation (which were to be carried out together) and provided that information to the Defendants?  It seems to us to be difficult to suggest that they should. 

49.      We have had regard to the correspondence between Mr Doyle and the Plaintiffs and this does not suggest that Mr Doyle was unaware generally of the financial position.  For example in his letter of 17^th December, 1998, to Mr Marable of the Plaintiffs he provides financial projections for new premises and asks for Mr Marable's assistance in making adjustments to them because Mr Doyle believed that his figures were "overstated".  He appears to be fully au fait with the figures involved in operating the restaurant business. 

50.      Furthermore, we remind ourselves that the RFA contained a no warranties or guarantees provision and specifically says that the franchisee "in executing this agreement, has not relied upon any representation or warranty of Franchisor that the business operations to be conducted at the Restaurant will be successful, or that any specific level of profit will be achieved." 

51.      In our view the evidence suggests strongly that the Plaintiffs and the Defendant entered into the RFA in good faith and believed that the business overall would be profitable.  Although the Defendant now wishes to make a distinction between elements of the business that distinction does not to us seem to be borne out by the RFA itself nor the way the business was conducted.  We do not think that the Defendant can succeed in a claim of dol par réticence. 

Prescription

52.      The last argument put before us was that of prescription. 

53.      It is trite law that the prescription period for a breach of contract under Jersey law is that of 10 years.  A number of arguments are advanced relating to prescription including when it arises (either at the date of the breach or the date on which the breach was reasonably discoverable) and whether it was interrupted by practical impossibility.  These areas are open for discussion and argument and we do not in an application for summary dismissal seek to determine them.  In our view there are real arguments that may be had on the question of prescription but, for the reasons we have set out above, even were its claims not to be prescribed we do not think that the Defendant has a realistic prospect of succeeding and accordingly we grant the Plaintiffs' application for summary dismissal. 

Authorities

Royal Court Rules 2004 (as amended). 

MacFirbhisigh and Ching v CI Trustees and others [2017] JRC 130A. 

Minister for Infrastructure v Parish of St Helier [2016] JRC 153. 

Grove v Baker [2005] JLR 348. 

Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72. 

Sutton v Insurance Corporation of the Channel Islands Limited [2011] JRC 027. 

Hard Rock Limited and another v HRCKY Limited [2013] JRC 244B. 

Minister for Treasury v Harcourt Developments Limited [2014] JCA 179. 

Steelux Holdings Limited v Mary Martine Edmonstone née Hall [2005] JRC 062