Armchair Answercall Ltd v People in Mind Ltd [2016] EWCA Civ 1039

Case No B2/2014/3887[2016] EWCA Civ 1039
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MAYOR'S AND CITY OF LONDON COURT
HIS HONOUR JUDGE COLLINDER QC
2YM25736
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 26/10/2016
Before
LORD JUSTICE MOORE-BICKLORD JUSTICE RYDERLORD JUSTICE CHRISTOPHER CLARKE
Between
Armchair Answercall LimitedAppellantPeople in Mind LimitedRespondent
Matthew Hardwick QC (instructed by Bonallack & Bishop) for appellantLawrence McDonald (instructed by Seth Lovis & Co) for respondentHearing Hearing date: 11 th October 2016
JudgmentLord Justice Christopher Clarke :
[1]The question in this appeal is whether the one-year contract for services between Armchair Answercall Limited, the Appellant (“AA”), and People in Mind Limited, the Respondent (“PIM”) was frustrated during its term.[2]Kendlebell Ltd (“Kendlebell”) ran a franchise business offering telephone answering services. It had 10 franchisees who, between them, had about 1800 customers. The franchisees would recruit customers and provide premises, equipment and call handlers in places or centres across the country. They would also invoice customers and receive payments. The customers of the franchisees would enter into arrangements with the franchisees by which telephone calls made to the customers which they were not able to answer would be diverted to the franchisee. The franchisee would have on a computer screen details of the customers’ business and would be able, hopefully, to deal with questions from the customer and give help in relation to the business whose call was taken.[3]Kendlebell, as franchisor, provided the necessary “know-how”, hardware and software, an operational manual, training, a brand name, and other services in return for a commission of 8-10% of the gross turnover. Mr Stephen Beasley (“Mr Beasley”) was its managing director from 2010 until 31 August 2011. He had been involved with it since 2005, becoming its full-time Operations Director in 2009.[4]The franchisees varied in size. One might be a small concern where husband and wife operated from a front room in their home. Others were larger operations with separate premises, a number of call handlers, and a large customer base. There were problems with this method of operation. It was in reality a set of individual businesses. There were few economies of scale and difficulties had arisen between Kendlebell and the franchisees.[5]Kendlebell made overtures to AA with a view to a possible takeover of Kendlebell by AA. AA was a competitor of Kendlebell and specialised in providing telephony services. It was a much larger, centralised business. Mr Gerry Budd (“Mr Budd”) was its Commercial Director and Mr Neil Murphy (“Mr Murphy”) its Chief Executive.

The Services Agreement

[6]AA was not prepared to take over Kendlebell. Instead, on 14 July 2011 Kendlebell and AA entered into an agreement (“the Services Agreement”) under which AA was to take over the management of Kendlebell’s business. The business was to be carried out by a new method (“the New Method”). Under the New Method the call centres would be centralised at AA’s headquarters in Andover. The franchisees would, in effect, become sales branches for services to be carried out in Andover. They would be responsible for servicing existing customers and recruiting new ones; but not for operating the day to day call centre business. AA would bill the customers and collect the income but the franchisees would receive 25% of the gross revenue.[7]The contractual arrangements in place in relation to those using the services of the franchisees (“the customers”) are not wholly clear. There appear to have been, at least in some cases, standard terms in force applicable between the franchisee and the customer. There were also agreements between Kendlebell and some customers, as was reflected in the Services Agreement (see [8] and [35] below), although, as we were told, this was not so in every case. The terms of the agreements between the customers and Kendlebell and/or the franchisees were not before us nor, it would seem, the judge. Quite how both contracts would work together is obscure. In evidence Mr Beasley said that “Kendlebell really owned the clients, not the franchisees. They had a licence to manage them”.[8]The Services Agreement, pursuant to which Mr Murphy was appointed as Chief Executive of Kendlebell for the purpose of enabling him on behalf of AA to take action in the name of Kendlebell had two Recitals which provided as follows:
“A Kendlebell wishes to restructure their franchised telephone answering business to allow it to operate more efficiently so that a secure income stream can be generated from the operation. Kendlebell no longer wishes to fund its own management staff and infrastructure to manage the day to day operation of the franchise network so seeks a contractual relationship with Armchair to take over the management of the network on its behalf and to effect the changes necessary to allow network and it’s clients companies to operate within a more robust and efficient business model. B Armchair Answercall Limited (Armchair) is experienced in the telephone answering business and has the necessary skills and management resource to provide Kendlebell with a permanent solution to its requirement to restructure and manage its business.”
[9]Clause 3 provided: “The Services provided by [AA] to Kendlebell will change the Method [being the existing ‘plan or system used by Franchisees’] from the Implementation Date [being no later than 6 weeks after the date of the Services Agreement]. Kendlebell authorises [AA] on its behalf to ensure that the amendments to the Method which are necessary in the sole discretion of [AA] as a result of this Agreement are documented in the Manual and circulated to the Franchisees”.[10]By clause 4.7 AA agreed:
“…to contract directly with Stephen Beasley from 1st September 2011, once his employment contract with Kendlebell ceases on 31st August 2011, as an independent contractor not as an employee of Armchair, to assist the Personnel with any aspect of the Transition for an initial 12 month contract for the equivalent of 3 days per week at a rate of £3,000 per month. Stephen Beasley may request for this payment to be billed through a separate limited company if he prefers. Stephen Beasley will be responsible for paying his own tax, national insurance and any other costs he incurs in relation to the contract, except that his reasonable travelling expenses will be reimbursed by Armchair. Should Kendlebell wish to enter into any new contractual relationship with Stephen Beasley for work beyond that contracted with Armchair then this will be Kendlebell’s own responsibility.”
I consider the definition of “Transition” below.[11]Clause 15.3. provided that:
“[AA] shall be entitled to terminate this Agreement immediately, on written notice to Kendlebell, if there are no Franchise Agreements remaining in force.”
Schedule 2 noted:
“Under the revised method [AA] will, following the agreed Transition Period(s), handle all telephone calls and other services generated under the Kendlebell Customer Agreement in connection with Existing Customers and New Customers and will be entitled to receive all the set up fees, subscriptions, call charges and other fees levied from these clients under the Kendlebell Pricing, which will all be collected by [AA] into a bank account it controls.”
In Schedule 3 the following was noted:
“Both parties to this Agreement accept that the Transition is unlikely to be effected without issues arising with individual Franchisees and Existing Customers which could result, directly or indirectly, in some loss of Existing Business” notice to Kendlebell, if there are no Franchise Agreements remaining in force.”

notice to Kendlebell, if there are no Franchise Agreements remaining in

[12]Thereafter AA began communications with the franchisees to outline the changes it proposed to make to Kendlebell’s business mode.[13]On 26 August 2011 AA emailed the existing franchisees to notify them that AA would now collect all monies due from franchisees. On 31 August 2011 Mr Beasley left Kendlebell.

The Contractor Agreement

[14]By an agreement dated 1 September 2011 (“the Contractor Agreement”) between AA and PIM, a company which was in effect a nominee for Mr Beasley, AA agreed to engage PIM to provide services for a year. The Recitals to the Agreement were as follows:
“(1) The Company has identified the need for expert help and assistance in the performance and completion of the services as defined in this agreement, Schedule 1 and as laid out in the services agreement between Armchair Answercall Limited and Kendlebell Limited dated 14th July 2011, clause 4.7 (“Services Agreement”). (2) The Contractor has the required level of expertise and has agreed to provide the required assistance subject to the terms of this agreement.”
[15]Under the Contractor Agreement PIM agreed to provide the “Service” as detailed in Schedule 1 subject to the terms of the Agreement. By clause 2 the duration of the Agreement was to be from 1 September 2011 to 31 August 2013. By clause 3 PIM agreed that it would for the duration of the Agreement:
“3.1. perform the Contractor’s Services described in Schedule 1 to this Agreement 3.2. make themselves available to [AA] at such times and such locations as [AA] and [PIM] shall agree from time to time; 3.3. perform their obligations in an expert and diligent manner and to the best of their ability.”
[16]Schedule 1 defined the “Services to be performed” as follows:
“Advice on Kendlebell history and practices, acquisitions, systems development, bid compilation and franchisee recruitment. Support, in whatever capacity is agreed between [AA] and [PIM], in understanding the current Kendlebell franchise operational performance and in the management of the transition of operating model as set out in the Services Agreement. Such other services as [AA] and {PIM] may agree upon from time to time during the Duration of this Agreement”
. The Schedule also provided that the agreed rate was £3,000 per calendar month and the number of working days was to be the equivalent of 3 working days per week.

Events after 1 September 2011

[17]The process of seeking to bring into effect the New Method did not go well. Kendlebell and AA had hoped that the New Method could successfully be sold to the franchisees, particularly since it was accompanied by a more generous commission arrangement. But the franchisees raised objection to the loss of control of invoicing and payment and to the removal from them of the call handling function.[18]After the signing of the Services Agreement considerable correspondence passed between AA and the franchisees to some of which the judge referred. I shall not set it out again. It is sufficient to say that on 23 September 2011 Chris Munro, one of the franchisees, in an email to Mr Murphy, copied to all the others, requested unequivocal confirmation that Kendlebell/AA was not going to centralise functions then operated or controlled by franchisees such as call handling and invoicing, whether upon renewal of franchise agreements or at any time in the future. On 26 September Mr Murphy replied saying that the short answer was “No”. His letter then set out a number of “concerns and disappointments with some individual franchises”, numbering eight in all, and said that standards of uniformity of operation and in some cases good business practice had slipped badly.[19]On 28 September 2011 a solicitor’s letter was written to AA on behalf of the remaining UK franchisees. The letter(a) expressed the view that this was the “last chance saloon” if AA wished to retain the franchisees;(b) complained that the approach taken by AA gave a clear indication of the lack of respect shown to franchisees in keeping them in the dark about the arrangements that had been entered into; and(c) claimed (i) that AA did not have the right to make the changes proposed and (ii) that the franchise agreements were void and unenforceable under EC law. The letter required a response by no later than noon on 5 October 2011;[20]On 5 October 2011 Mr Thurley, one of the franchisees, emailed Kendlebell. In his email he(a) asserted that the franchise agreements were (with one exception) null and void because they prohibited the franchisee having an independent website as a result of which the franchise agreements were nullities under EC law; and(b) purported to accept what he contended was Kendlebell’s repudiatory breach of the agreement because of, inter alia, the arrangements between Kendlebell and AA. Similar emails were sent by the other franchisees.[21]AA denies that any of the franchise agreements were void or that Kendlebell had been in repudiatory breach of them. Neither it nor Kendlebell treated the emails of 5 October 2011 as a repudiatory breach by the franchisees of the franchise agreements or accepted it as such.[22]AA claims that 5 October 2011 was the date on or by which the Contractor Agreement was frustrated because by their emails of that date the franchisees had made it entirely plain that they regarded the franchise agreements as either void or terminated or both, and by that date they had set up a rival telephone answering business.[23]AA did not claim that the Contractor Agreement had been frustrated immediately. It continued to pay PIM until up to and including December 2011. After 5 October 2011 attempts were made to persuade Mr Hopgood, one of the franchisees to stay with Kendlebell. He agreed to do so but afterwards changed his mind. As between Kendlebell and the franchisees an impasse was reached. On 6 October 2011 Kendlebell served on the franchisees notice that they were in breach. On 20 October 2011 Kendlebell served notices of termination of the franchise agreements. Thereafter the impasse, under which each side asserted that the franchise agreements were not in force and that the other side was to blame, was resolved by Deeds of Termination and Release which were executed between 19 December and January 2012.[24]On 17 February 2012 Mr Murphy sent an email to Mr Beasley seeking to give notice to terminate the Contractor Agreement on 16 March 2012. The first half of that email read as follows:
“Steve, following our telephone discussion I agreed to set out our thoughts in an e-mail. Our Current Agreement As you know the ex franchisees have now all paid the last instalment under the Deeds of Termination so this means we no longer have any relationship with any franchisees. Clearly we will keep the Kendlebell brand and website going to pick up switch business from the campaigns we will keep going and any new referrals but that will become business as usual for us now but will have no future franchisee contract. I think we now need to face the fact that the purpose of our agreement as set out has now terminated as there are no longer any relevant services that can be provided in relation to the franchise agreements or franchisees. Obviously this has been winding down considerably over the past months from what we had envisaged when the agreement was drawn up. Can I suggest that you invoice for your fees another 30 days and that we allow the current agreement between us to terminate on 16th March 2012.”
The email went on to propose a new agreement for Mr Beasley to become “an Our Current Agreement introducer for the Armchair and Kendlebell brand.”

Our Current Agreement

[25]After further correspondence, on 13 March 2012 Mr Budd emailed to Mr Beasley to contend that the:
“….purpose behind both the Armchair/KBL Agreement and the agreement with yourself have been ‘frustrated’ by the course of events arguably either on 5th October 2011 when the UK franchisees departed or on 16th January 2012 when all franchisees had left”
. The other franchisees were in Ireland and this case is not concerned with them.[26]On 3 October 2012 PIM brought proceedings to recover the £3,000 per month plus VAT for the balance of the contract down to 31 August 2012. AA claimed that the contract had been frustrated on or by 5 October 2012.[27]In a judgment handed down on 30 October 2014 HH Judge Collender QC, sitting in the Mayor’s and City of London County Court, decided that the Contractor Agreement had not been frustrated and gave judgment in favour of PIM for the amounts claimed plus interest.

The authorities

[28]The judge referred to a number of the leading authorities on frustration including National Carriers Limited v Panalpina (Northern) Limited [1981] AC 675 in which Lord Simon confirmed the test laid down in Davis Contractors Limited v Fareham Urban DC [1936] 696 in these terms:
“Frustration of a contract takes place when there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case the laws declares both parties to be discharged from further performance.”
[29]He referred also to the observation of Lord Roskill in Pioneer Shipping v BTP Tioxide Limited [1982] AC 724 that the doctrine of frustration “is not lightly to be invoked to relieve contracting parties of the normal consequences of imprudent commercial bargains” and to the five propositions identified by Lord Bingham in J.Lauritzen AS v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyd’s Rep 1 of which the last two are: “(4) The essence of frustration was that it should not be due to the act or election of the party seeking to rely on it ...A frustrating event must be some outside event or extraneous change of situation… (5) A frustrating event must take place without blame or fault on the side of the party seeking to rely on it”.[30]As the judge also observed “an event that is actually foreseen cannot ordinarily found a claim of frustration”. On this topic it is material to note that in Edwinton Commercial Corp v Tsavliris (Worldwide Salvage & Towage) Ltd [2007] EWCA Civ 547 this Court approved the following passage in Chitty (now at 23-060):
"Event foreseeable but not foreseen. When the event was foreseeable but not foreseen by the parties, it is less likely that the doctrine of frustration will be held to be inapplicable. Much turns on the extent to which the event was foreseeable. The issue which the court must consider is whether or not one or other party has assumed the risk of the occurrence of the event. The degree of foreseeability required to exclude the doctrine of frustration is, however, a high one: "
'foreseeability' will support the inference of risk-assumption only where the supervening event is one which any person of ordinary intelligence would regard as likely to occur, or…the contingency must be 'one which the parties could reasonably be thought to have foreseen as a real possibility.' "

AA’s submissions

[31]Mr Matthew Hardwick QC for AA submits that the present case was a clear case of frustration. The frustrating event was the assertion by the franchisees in their emails of 5 October 2011 that the franchise agreements were void or, if not, that they had come to an end by the franchisees accepting what they asserted was AA’s repudiatory breach of them. The franchisees thereby communicated their entire rejection of the New Method. In addition, they had themselves set up an alternative answering service. There was in effect a premeditated mass exodus of the UK franchisees.[32]The effect of these actions was, he submits, that there was no realistic prospect of Kendlebell/AA securing the acceptance of the New Method by the franchisees. The whole purpose of the Contractor Agreement, as Recital (1) to it showed, was to give help and assistance in the performance of the services laid out in clause 4.7 of the Services Agreement. These consisted of assisting the Personnel with any aspect of the Transition of the franchisees to the New Method. The services to be performed enumerated in Schedule 1 of the Contractor Agreement started with “Advice on Kendlebell history” in the respects mentioned which advice was needed in order to effect that transition. The second paragraph of the Schedule referred to support in (i) understanding the current Kendlebell franchise and (ii) in the management of transition of operating model (i.e. the transition to the New Method referred to in clause 4.7 of the Services Agreement), the former being needed for the latter. Whilst the third paragraph referred to such other services as the parties might agree upon from time to time that took the matter no further because such a provision is an unenforceable agreement to agree.[33]Further, whilst Schedule 3 to the Services Agreement recognised that issues might arise with individual franchisees, the concern had been as to the potential loss of existing business from customers; and the total refusal of all of the franchisees to entertain the New Method was neither foreseen nor foreseeable as either likely or possible. Clause 15.3 which gave an entitlement to terminate if there were no Franchise Agreements remaining in force should not be taken to indicate that what happened was foreseen. It was simply a provision inserted in a contract of indefinite duration which recognised that a time might come when the franchise agreements, which were for fixed terms of years, typically six, might all come to an end without renewal.

Conclusions

[34]I do not accept this analysis. Clause 4.7 of the Services Agreement required AA to contract with Mr Beasley “to assist the Personnel with any aspect of the Transition”. “Transition” was defined as:
“… all aspects of the implementation process involved in ensuring that the Franchise Operations (the Franchisees, the Existing Customers, the New Customers and the operation of the Existing Business and the New Business) work in accordance with the revised Method, as a result of the provision of the Services as set out in this Agreement”
. The words in brackets are the definition of “Franchise Operations”.[35]“Existing Business” was defined as “the specific telephone answering or related services provided at the Commencement Date to an Existing Customer”. “Existing Customer” was defined as “any person who at the Commencement Date has a Kendlebell Customer Agreement in force”. A “Kendlebell Customer Agreement” was defined as “the contract comprising terms and conditions and other information which forms the basis of the agreement between Kendlebell and its customers for the provision of its services”,[36]“New Customer” was defined as “any person who is not an Existing Customer, who enters into a contract for Services with Kendlebell or [AA] under the Trade Name”. “New Business” was defined as “Services provided to individuals or businesses under contract by Kendlebell or Armchair under the Trade Name which is not Existing Business.”[37]It seems to me clear that the Transition extended to applying the New Method to the provision of telephone answering services to, inter alios:(i) a customer who was contracted to Kendlebell at the Commencement Date and for whom an existing franchisee was providing the services i.e. an Existing Customer;(ii) a customer who was not contracted to Kendlebell at the Commencement Date and for whom an existing franchisee was providing the services;(iii) a customer who was not contracted to Kendlebell at the Commencement Date and for whom no franchisee was providing answering services but who entered into a new contract with Kendlebell after that date.[38]Persons in categories (ii) and (iii) are not Existing Customers but they could be New Customers. Mr Hardwick told us that New Customers were only contemplated as being acquired by the efforts of existing franchisees. It was intended, as Mr Beasley’s evidence showed, that the franchisees would bring any New Customers acquired after the Commencement Date with them when they accepted the New Method. However, the Services Agreement contains no provision limiting New Customers or New Business to customers introduced by the franchisees, and, if the franchisees rebelled, New Customers and New Business would have to come via alternative routes, which might include new franchisees. I note that in his email of 5 October 2012 at 1612 Mr Murphy explained that it was Kendlebell’s intention actively to recruit new franchisees. There had also been talk of Kendlebell/AA operating a 24/7 operation. The basic aim of Kendlebell/AA was, as it seems to me, to service as many end customers as possible by the New Method: see paragraph 3 of Mr Murphy’s email of 17 February 2011 cited at [24] above.[39]If the franchisees refused to accept the New Method AA might seek to recruit customers in all three of the above categories to take telephone answering services provided in that way. For those purposes it was entitled under the Contractor Agreement to call upon the Services of PIM. These would be particularly useful given that Mr Budd had no personal expertise in managing a business of this kind. Because we do not have before us any of the agreements with customers I cannot tell to what extent, if at all, AA might be restricted in proposing to provide answering services using the New Method to existing customers of franchisees on the grounds that this would amount to procurement of a breach of contract between franchisee and customer at any rate in relation to those in category (ii). Nor have we explored the extent to which that might constitute a derogation from the grant contained in the franchise agreements. But any such difficulty could not apply to persons in category (iii).[40]The services to be provided under the Contractor Agreement include “support … in the management of the transition of operating model as set out in the Services Agreement”. Mr Hardwick accepted that this was a reference to the “Transition” provided for in that agreement. In view of the width of the definition of “Transition” therein it seems to me impossible to say that, after the franchisees had rejected the New Method, there was no scope for support from PIM under the Contractor Agreement. On the contrary, in those circumstances there was work for PIM to do in attracting business using the New Method with Existing, or, at any rate, New Customers. In agreement with the judge [83] I do not accept that the services to be provided under the Contractor Agreement were limited to procuring the acceptance by the franchisees of the New Method of operating proposed by AA.[41]That that should be the position tallies with the evidence of Mr Budd referred to by

the judge at [62]:

“[AA]’s plan was to grow the business by increasing revenue from existing business and to get new customers from new franchisees. He accepted that Mr Beasley’s role was not solely focused on relations with the existing franchisees and that he had a role to play in developing new business from both new and existing customers. He accepted examples of advice provided by Mr Beasley relating to matters beyond relations with franchisees such as relations with suppliers, proposals to develop the business, dealing with IT and software issues. He further accepted that in the course of the Defendant’s acquisition of Kendlebell there would be things that would crop up unexpectedly and the Defendant wanted to have Mr Beasley around in order to deal with such matters. He accepted that it would have been absurd for Mr Beasley to refuse to agree any reasonable location in which to provide his services.”
[42]That conclusion renders it unnecessary to decide whether the first paragraph of the description of the services to be provided in the Schedule to the Contractor Agreement, relates entirely to Mr Beasley’s knowledge of historical matters relating to Kendlebell business. The judge was satisfied that that was not so and that the “first section” (by which I take him to mean the words “Advice on Kendlebell history and practices”) was to be read disjunctively with the second (“acquisition …franchisee recruitment”). In the light of the width of the “Transition” in relation to which PIM was to provide management support it seems to me that the words are apt to cover not only advice about how Kendlebell dealt with the matters enumerated in the past (which might, itself, be a guide as to how they should be dealt with in the future) but also advice as to how to deal with the question of acquisitions, systems development, bid compilation and franchisee recruitment in the future. This could relate to Existing or New Customers and existing or future franchisees.[43]The judge took the view that the second paragraph of the description of services in Schedule 1 of the Contractor Agreement did not refer to clause 4.7 of the Services Agreement and was, thus, not limited to what was provided by that clause. Mr Beasley, he held, was obliged to provide more services under this paragraph than those set out in clause 4.7 and, in particular, support which went beyond matters relating solely to the specific franchisees in place at the time of the agreement. AA submits that the judge had lost sight of the fact that clause 4.7 is expressly referred to in the first recital (although that is after a reference to the “services as defined in this agreement, Schedule 1”).[44]I agree that the Contractor Agreement provided for support which went beyond those matters; although it seems to me that it did so principally because “transition” in the second paragraph refers to “Transition” in clause 4.7 which, itself, goes beyond those matters. Thus read there is no contrast between clause 4. 7 of the Services Agreement and the first two paragraphs of the description of services in the Schedule to the Contractor Agreement. “Transition” extended beyond getting the franchisees to subscribe to the New Method and encompassed matters such as the securing of New Business from New Customers, which might or might not be via existing franchisees. The advice referred to in the first paragraph is not limited to informing AA of the history in order to get the franchisees to accept the New Method; nor is the support referred to in the second paragraph limited to securing that end.[45]It is also unnecessary to decide whether the judge was right to hold, as he did, that the fact that the parties agreed the third paragraph “means that the parties have rights and obligations under that paragraph” or whether, as AA claims, the third paragraph, being an agreement to agree, is devoid of legal content. It seems to me that the judge was treating this paragraph as if it referred to such services as AA might reasonably require. It does not do so in terms but I incline to the view that it was implicit that PIM would do what was reasonably required of it. Foresight, action of AA and fault.[46]The judge considered it very difficult for AA to argue that the events of 5 October were not foreseen. AA submits that, in order for an event which would otherwise be a frustrating event not to amount to one there must have been a realistic possibility that it would occur (see the passage from Chitty quoted at [30] above) and there was none.[47]I look at the matter on a somewhat broader canvas. One part of the services to be provided was management support in relation to persuading the franchisees to accept the New Method. It was recognised that franchisees might have objections to the move. There was no basis upon which they could be compelled to do so; and whether they did do so was dependent on the success or otherwise of the negotiations that AA had with them. As it happened, although matters seemed to be progressing well enough at the beginning when a softly-softly approach was adopted, and some early signs were positive, the negotiations soon faltered. It is apparent from the correspondence that part of the reason for that was attributable to the way in which, in their view, the franchisees were mistreated. As the judge observed the correspondence “was never less than polite but it was not placatory, indeed it was to a degree confrontational” [100] and the “departure of the franchisees was promoted by the acts of [AA]”. [105]. As he found [105] the supposed frustrating event was, at least in part, the result of the acts of AA, whether or not they can be said to amount to “fault”.[48]It does not seem to me right to regard AA’s abject failure to persuade the franchisees to accept the New Method as a supervening outside event which the parties could not reasonably be thought to have foreseen as a real possibility. It was the result of actions which AA and PIM took pursuant to the Services Agreement and the Contractor Agreement. Negotiation was always going to be a delicate and complex process, in relation to which AA needed help, because the New Method had features - in particular the loss of the operational role and of control over the money coming in - which could be unacceptable to franchisees (as, in the event they were) and their customers; and there was no means of compelling the franchisees to accept the New Method. In those circumstances inability to persuade all of them was a real possibility; especially since the attitude taken by one or more franchisees might have a significant impact on all the rest. The Contractor Agreement, placed in its context, must be taken to have contemplated that the franchisees might not be persuaded. That was at AA’s risk.[49]It is helpful to consider what the position would be if the franchisees had in fact all signed up to the New Method within, say, six months. It would be surprising if, in those circumstances, the Contractor Agreement should come to an end. It would, in effect, catch with its success surcease. Even if the services to be provided by PIM were restricted in the manner for which AA contends, could AA then claim that the agreement had been frustrated? I think not. It seems to me that, pursuant to the Contractor Agreement, PIM/Mr Beasley were required to hold themselves available to provide the services for which that agreement called. These included advice in the terms of paragraph 1 and support in understanding as contained in the first half of paragraph 2 and making themselves available to PIM: see clause 3.2. That availability was to be at such times and locations as might be agreed but it does not seem to me that the agreement could be said to be frustrated because no call had been made by AA for the services so that no question of agreeing a time or location arose. The same analysis applies when the answer, within less than six months, was that the franchisees were not prepared to adopt the new method.[50]If therefore, contrary to my view, the services in the Contractor Agreement were confined in the manner suggested, I would not have regarded the Agreement as having been frustrated in the events which happened.[51]Frustration, if it occurs, is a definite event. Whether any given event is a frustrating event is, once the facts said to constitute the event have been determined, a question of law. If it was, the fact that the parties did not immediately treat it as such does not alter the position. What the parties did or did not do after the event may, however, be a pointer to whether the event was in truth a frustrating one. In this respect it is a striking fact, as the judge observed, that AA did not treat the contract as frustrated until some five months after 5 October 2011. Meanwhile they sought to negotiate with Mr Hopgood until at least 20 October. AA did not treat the franchise agreements as validly terminated on 5 October and their termination appears in fact to have occurred either by AA’s notices of Termination or by the Deeds of Termination. Although Mr Hardwick characterised this as, in effect, a mopping up operation after the franchisees’ renunciation of the New Method, those franchisee agreements continued in existence (on AA’s case) after 5 October. Moreover, as the judge found, acting on the face of it pursuant to the Contractor Agreement, Mr Beasley from October 5 until February 2012 assisted and continued to assist AA in the continuing takeover of Kendlebell’s business by AA, without demur on AA’s part or comment from Mr Budd or Mr Murphy [32] for which PIM was paid until December. All these matters are consistent with the conclusion, which, for the reasons stated above, I have reached that there was no frustrating event.[52]I would, therefore, dismiss the appeal.

Lord Justice Ryder:

[53]I agree.

Lord Justice Moore Bick:

[54]I, also, agree.

Cited in 1 later judgment