MGB Printing and Design Ltd v Kall Kwik UK Ltd [2010] EWHC 624 (QB)

Case No HQ08X05122

[2010] EWHC 624 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 31/03/2010

Before

THE HON MR JUSTICE PENRY-DAVEY

Between

MGB Printing and Design LimitedClaimant

Kall Kwik UK LimitedDefendant

Michelle Stevens Hoare (instructed by Owen White for Claimant

Graham Cunningham (instructed by Hamilton Pratt for Defendant

Hearing Hearing dates: 15 – 19 February 2010

Judgment

THE CLAIM

[1]The Claimant seeks damages for negligent advice and breach of contract in relation to a franchise and a marketing agreement. The claim encompasses advice given to the Claimant by the Defendant when the Claimant was considering buying an existing franchise business from one of the Defendant’s franchisees and negotiating the purchase thereof and breaches of the franchise agreement and a marketing agreement entered into shortly afterwards. The Defendant denies that there was any duty of care, negligence or breach of contract. This is a trial on liability only, with issues of causation and quantum to be tried separately if appropriate.

[2]There is a fundamental conflict as to the nature of franchising between the Claimant and the Defendant. The Claimant submits that the Defendant was intent on moving away from its history as a copy shop to reposition itself as a design led business and it was this desire which led to the rebranding of its image, a process which was confirmed by David Ivall the Defendant’s head of sales and operations in evidence. Thus in purchasing a franchise the franchisee buys the opportunity to build its own business for a fixed period by the leasing of good will in a superior brand like the Defendant, gaining access to an established business framework, approach and procedures and accompanied by a contractual obligation to advise from time to time given by a franchisor whose motto is “Centre Owners Are In Business For Themselves But Not By Themselves.” The Defendant views the matter very differently. Franchising is not it is suggested in any sense a joint venture but a situation where the franchisee’s independent business is backed by the overall business package offered by the Defendant. It may be unnecessary for the purposes of this claim to resolve those issues of principle but it is necessary to consider the course of events in this case and the relationship between the parties in determining this claim. It is clear in my judgment that although franchised businesses operate with a large degree of independence, there is as part of the framework the offer of assistance and services to franchisees for the benefit both of franchisee and franchisor. The franchisee has the benefit of the association with a well known name and of access to an established business framework, and the franchisor inevitably benefits from a business run successfully which reflects well on its brand name.

THE BACKGROUND

[3]The Defendant carries on business as a franchisor selling franchises which license others to conduct the business of print copy design and ancillary services under the name “Kall Kwik”. The Defendant has operated a method of serving the needs of the business community and others for stationery, marketing and business services based upon core skills in producing print copy and design solutions and material and complementary and ancillary services used in connection with the operation of the Kall Kwik business and equipment, service format, standards of quality, uniformity of services offered and procedures for accounting inventory and management control ( “the System”) which is the subject matter of its franchises. It has a network of franchisees in the United Kingdom.

[4]In about 1987 the Defendant granted a franchise agreement to Edmund Kazmierski and Vanat Ltd who carried on the Kall Kwik business as a franchisee of the Defendant from premises at 19B St Petergate, Stockport, Cheshire pursuant to a franchise agreement. In May 2007 Michael Bibby, the Claimant ’s sole shareholder, was interested in purchasing an existing franchise business as a going concern and contacted the Defendant to enquire about the prospect of purchasing the business of one of the Defendant’s existing franchisees. The Defendant introduced Bibby to Kazmierski and Vanat Ltd on the basis that the latter was interested in selling its franchise business and in the event of the business being purchased by Bibby’s company (the Claimant) the Defendant would for a fee grant the Claimant a franchise agreement. On 12 October 2007 the Defendant, Bibby and the Claimant entered into a franchise agreement and the same parties with the vendor Vanat Ltd and Kazmierski entered in to a sale agreement for the Stockport business and premises. Subsequently on 4 November 2007 the Defendant and the Claimant entered in to a Marketing Launch Plan agreement. THE HISTORY

[5]The first meeting between Bibby and 2 employees of the Defendant took place on 16 May 2007. Bibby was assessed to be a good candidate to take over a franchise. On the same day Caroline Joyce, the Defendant’s franchise development manager wrote to Bibby about the need for independent advice and due diligence. In his application form Bibby expressed interest in taking over an existing franchise as distinct from starting a new one on his own. On 24 May 2007 Bibby visited a franchisee in Leeds who when asked to evaluate Bibby as a potential franchisee described him as a very high calibre candidate and most suitable for Kall Kwik. On 13 June Bibby was emailed the first cash flow document by the Defendant which contained a figure of £10,000 for shopfitting. On 14 June Bibby consulted Nyman Libson Paul, and on 22 June, Grant Thornton. On 26 June he visited the premises at Stockport and concluded that the premises had not been fully maintained or re fitted for some considerable time. During the following days he discussed the matter with John Anderson the Defendant’s head of franchise sales and Caroline Joyce, franchise development manager, concerned that £10,000 was insufficient to meet the Defendant’s shopfitting standards. Anderson assured him that the average refit was between £10,000 and £20,000. It was agreed between them that £15,000 would be put in to the cash flow document and on the basis of Anderson’s advice Bibby assumed that that figure would be more than adequate. On 9 July Caroline Joyce emailed Bibby the second cash flow document, which included £15000 for shopfitting. It stated that the next step was to produce Bibby’s business plan by the end of the week so as to be in a position to visit banks. She stated that she was more than happy to have a look at the plan and provide feed back before it was forwarded to the banks. On 24 July Bibby copied to Anderson an email sent that day to Kazmierski the owner of the vendor company which included the suggestion that a fall in net profits over the previous 4 years was eroding the value of the goodwill in the business. It continued as follows:

“Secondly there are a number of initial set up costs that the new owner will have to incur to bring the centre up to current Kall Kwik “Design to Delivery” specifications ? a cost underestimated on my part initially and a detailed review of the fixed assets leads me to believe that the current value set out in my offer letter is a fair reflection of the value of fixed assets in the centre and in fact there is the prospect of considerable investment in upgrading and/or replacing some of the key equipment in the not too distant future which will impact significantly on both return on investment and the centre’s future net profits.”

[6]That email contained an increased offer of £180,000 for the business, £170,000 having been offered the previous day. Anderson’s response to the email copied to him was “This looks fine.” On 25 July an offer of £185,000 was accepted by Kazmierski and on 3 August a funding presentation was submitted by the Defendant to the banks. The letter enclosing the presentation contained the following:

“Mike has undertaken our standard recruitment procedure which includes extensive profiling and testing and has proved himself to be an ideal candidate for the resale opportunity that we have in Stockport.”

[7]On 6 August when solicitors were instructed on behalf of the Defendant the trading status of the purchaser was described as “Limited ”with the name to be confirmed. Bibby’s evidence was that he always intended to carry on business through a limited company and the Claimant was incorporated on 7 September. Meanwhile on 15 August Bibby sent Anderson Kazmierski’s list of top 20 customers and on 28 August there was an email from Andy Maddocks the Defendant’s information technology director to Terblanche of the Defendant’s IT/Technical department pointing out that Marlin (the Defendant’s proprietary management information system) was not in the Stockport centre, but that Sage was used “so we need to get some of the info out of Sage Link 50 such as customers into Marlin.” The email requested Terblanche to look at preparing Marlin with the information from Sage during a couple of days in October. On 19 October Terblanche responded as follows:

“Managed to read the CD and created an import file…. There are however quite a number of items they will have to capture on the spreadsheet themselves. They will also need to know that Marlin imports the very basic information about the customer, name address etc. The outstanding balance will have to be entered manually for each and every customer. The spread sheet I created is attached.”

[8]In relation to that Bibby’s evidence was that he was trying to get the customer data onto Marlin and did expect the Defendant to put it on. He wanted the Defendant to take the data on Sage and put it onto Marlin and he said he made that clear to Dewsbury the managing director of the Defendant. In relation to the October email he said that he had not withdrawn from Marlin and had the Defendant told him that it was possible for the data to be input he would have been inclined to use it. He said he was told that it could not be done and eventually the Defendant paid for an alternative accounting system called MYOB to be installed. Bibby said that he was never told how it was possible for it to be done. In his evidence on behalf of the Defendant, Ivall, the Defendant’s head of sales and operations, gave the reason for the information not being put on as a degree of confusion following on constant requests from Bibby and the suggestion that Bibby did not want Marlin. Ivall agreed that the contact data was always put on Marlin for new clients and this was the only occasion when it did not happen. They had the data but it was not made available on Marlin or in Destination Delivery for the Claimant he said. In September there was an agreement between Bibby and Kazmierski to reduce the purchase price by £5,000. On 19 October Terblanche emailed Kazmierski suggesting a meeting on 25 October to discuss the export of the customer data from Sage into a format that could be used to import to Marlin. It appears that there was a meeting on 25 October to discuss the export of the customer data from Sage to a format the Defendant could use to import on to Marlin but that did not succeed in solving the problems. Caroline Joyce’s evidence was that the Defendant undertook to try to input information without being specific about what could be done. It appears on the basis of the Terblanche email of 19 October that it had been possible to create an input file and that Marlin could import the basic information about the customer, name and address and so on but the outstanding balance would have to be entered manually for every customer.

[9]Bibby’s evidence was that he was assured by Anderson that the data would be transferred onto Marlin prior to the launch of the business and that he made it clear to Anderson that he would not proceed with the purchase if he was left without the historical client data. In October 2007 the vendor’s bookkeeper confirmed to him that she had sent the client data to the Defendant for them to install on Marlin. At the planning meeting on 1 November to discuss the launch of the Stockport centre Bibby spoke to Anderson who confirmed verbally that the work on Marlin was being progressed and did not indicate any problems. The first sign of a problem was when Bibby discussed the matter with Russell Codd an academy support executive of the Defendant who said that he did not think it was possible to put the relevant data onto Marlin but that he would look into it. Later in November 2007 when Bibby was provided with a training version of Marlin he had reservations about its functionality but it was still his expectation during his training week in November that the existing client data together with the data he had acquired during a walkabout in November and December would be entered onto Marlin as soon as possible. Meanwhile on 12 October the franchise agreement between the Defendant, the Claimant and Bibby and the sale agreement between the vendor Vanat Ltd, Kazmierski, the Claimant, Bibby and the Defendant were entered into. That was followed in early November by the marketing launch plan agreement. On 2 November an email from Anderson to other employees of the Defendant set out Bibby’s concerns about Marlin particularly that the customer history could not be inputted to show records of previous orders. It included the words “He sees this as a major issue and wants us to work a solution.”

[10]On 16 November a computer was ordered by the Defendant for the Claimant to enable a Marlin database to be created. That was followed on 7 December by an email to Bibby about getting the Claimant set up with a computer for Marlin and getting it installed. Meanwhile on 30 November Terblanche emailed Russell Codd as follows:

“If you can please get us a copy of the current Sage backup from Margaret (if possible) so that I can export the customer’s file from which we can build a Marlin import file (the same format as the imports we do for walkabout data). We won’t be able to load history or even outstanding customer balances, but we can at least give Mike the customer names and addresses on Marlin.”

. As set out above, Bibby’s evidence was that the first he knew of any problem was from Russell Codd at the planning meeting on 1 November. As to a later email from Terblanche to Codd on December 14 stating that Terblanche had changed the customer data he obtained from the vendor’s bookkeeper into a format suitable for a Marlin import and had created a data base that could be used in Stockport containing 587 prospects, Bibby said that was never transferred to him from the Defendant any more than the client and historical data was. A completion date for the sale agreement was 21 December and computers were installed at Stockport for Marlin the day before. On 9 January Bibby emailed Ivall and others; “I would be grateful if we could arrange for a conference call later today or at latest first thing tomorrow to discuss and resolve the ongoing issues regarding the installation of and data input to the Marlin system at the Stockport centre. At this point in time we do not have a fully functioning system and little progress if any is being made in adding the historical data to the system. I have raised the issue of the historical data constantly with various individuals at Kall Kwik, yourselves included and explained that I cannot have an effective or efficient centre without the relevant support. The relevant support has as yet not been forthcoming despite reassurance both before and after the signing of the resale agreement back in October. To say that the goodwill built up during the acquisition process is being rapidly eroded is an understatement. I look forward to hearing from you ASAP.”

[11]That email resulted in somewhat of a flurry of activity by email and a conference call on 22 January came to the conclusion which was that the Defendant declined to import the historical data saying that it would have to be done manually, that it would take far too long and that they had not agreed to do it. Following that, it is common ground that the Defendant agreed to pay for an alternative accounting package called MYOB but Bibby’s evidence was that the historical customer data had still not been imported into Marlin despite the months of reassurances that it would be done and despite an email which first came to his attention on disclosure in these proceedings of 11 January 2008 from Terblanche to Maddocks to advise that the price to set up a procedure to import all the historical data on to Marlin would cost £1,885. Bibby was told nothing of that.

[12]On 10 April 2008 Bibby sent a long email to Laurence Knott , the Defendant’s head of marketing, as follows:

“I have a couple of queries about when and how we are moving forwards with new data and telemarketing suppliers. Direct Dial for some unknown reason stopped calling our clients in mid March. Is this something that has been initiated by Kall Kwik in relation to new suppliers or have we only paid for a limited service from Direct Dial? If the latter is the case please see my comments below. This morning I attended another meeting organised by Broadley Speaking that was a no show. The information provided by Broadley Speaking prior to the meeting was misleading and having spent 5 minutes with the sales clerk at the location, I found out more about the job than Broadley Speaking did in a reputedly long conversation. P*ss poor preparation leads to p*ss poor performance and frankly we can’t deliver a good performance if the information we receive is wrong. Our experience with Broadley Speaking over the last 3 months is nothing short of disastrous. When will Kall Kwik be bringing new telemarketing suppliers on line because we cannot work with this poor service delivery. Fundamentally our marketing campaigns are based around the data relating to our existing clients, the walkabout prospects and the prospects supplied by Kall Kwik. Over the last 6 months Kall Kwik have failed to deliver in at least 2 areas. I discussed the matter of the existing client data with John Anderson back in July/August 2007 and said then that I would not proceed with the purchase of the franchise if all the data walked out of the centre in the previous owner’s head and was reassured that something would be done about it. Accordingly we went ahead with the purchase. Nothing was done. I raised the issue again with David Ivall and Mike Dewsbury in November and was reassured that something would be done. Again nothing was done. We supplied our client data to Kall Kwik via Adrian Gloss and Russell Codd on more than one occasion and still nothing was done with the data. We have now spent a couple of months trawling through old job bags to get the data and verify it (we probably have about 60% correct data entries) a job that Kall Kwik should have done prior to the sale. We have not been able to market effectively to our existing clients because of the incompleteness of the data and accordingly our marketing plan has slipped to the detriment of all. If Kall Kwik are unable to deliver a professional effective service with respect to marketing system and telemarketing suppliers, I would like the full amount of our first year’s marketing budget returned to us so that we can take control of how the money is spent. Even if the performance improves substantially we have effectively lost 4 months of our first year’s marketing and I want this either credited back to us or the first year’s budget needs to be extended to 16 months.”

[13]There was a response by Dewsbury on 18 April seeking to deal with the matters raised which Bibby in his email 18 April described as disappointing and wholly inadequate. Bibby proposed that the Claimant should be given an additional 6 months free marketing support from Kall Kwik and that if the telemarketing did not perform against agreed performance criteria after 6 months the first year’s marketing spend would be returned. In addition he suggested a 50% contribution to the refurbishment of the centre which had been allowed to fall into disrepair damaging the local branding. The cash flow prepared by Kall Kwik he alleged had a totally inadequate refurbishment budget and there was reliance on Kall Kwik property department’s expert knowledge which was an error as there was no property department. There followed a meeting on 21 April which itself was followed by an email from Ivall on 23 April. That confirmed discussion about a wide range of issues and promised a complete response the following week. What was described as immediate feedback was the undertaking that Russell Codd would be the Academy Business Development Manager to complete validation of the client data, for which the Defendant would pay, transfer to a new telemarketing agency called Fluent, assistance with establishing a digital price guide for the business and investigations into concerns on Marlin, a review of the new centre owner briefing document on which Ivall was to respond separately, and the suggestion that the scope of works with regards to the refitting of the centre went beyond Anderson’s estimate for cash flow purposes. A further meeting on 12 May was followed by a long letter from Bibby to Dewsbury dated 12 June and an absence of reply to that letter prompted a letter before action from the Claimant’s solicitor .

[14]There are two main heads of claim in this case, identified as the premises claim and the marketing claim. THE PREMISES CLAIM

[15]The essence of the claim is that whilst the Claimant was negotiating with the vendor for the purchase of the business the Defendant held itself out as able to provide advice about shop fitting for the purpose of the premises associated with its franchise businesses, confirmed that certain works were required to the premises prior to the opening of any franchise business therein following the purchase of the business, and offered to advise the Claimant as to the extent of the work required and the costs. It is submitted on behalf of the Claimant that in the circumstances the Defendant owed the Claimant a duty to exercise reasonable skill and care in giving advice, and did not do so. In July 2007 the Claimant advised the Defendant by email that the cost of the works would be in the region £15,000, but the Defendant failed to exercise reasonable skill and care in advising the Claimant because the true cost of the works it is submitted was at least £30,000 and up to about £45,000. In reliance on that advice it is suggested that the Claimant arranged to purchase the business for £160,000, but had the true costs of the works been known to the Claimant he would have negotiated a reduction in the purchase price to £130,000. Accordingly the Claimant has suffered loss. The claim is resisted on a number of bases. The Defendant: (a)denies that it owed the Claimant any duty of care, more particularly before it existed, incorporation being on 7 September 2007; and asserts: (b) that a briefing document provided to the Claimant was not intended to have any legal effect or to give rise to any rights or obligations between the parties; (c) that in any event the briefing document recommended that the Claimant carry out a full property survey of the premises prior to acquisition and the Claimant engaged its own surveyor; (d) that the cash flow forecast document which included the figure of £15000 contained a no responsibility or warranty clause, (e) that the figure of £15,000 was not based on any survey of the premises and was the Defendant’s estimate of the works required to upgrade the front of house area.

[16]On 7 June, 2007 Bibby (whose intention I accept was at all material times to carry on business through a limited company the Claimant of which he was sole shareholder) signed Heads of Agreement in relation to his application for a franchise from the Defendant and was sent a copy of a briefing document called the New Centre Owner Briefing Booklet. The accompanying letter identified the booklet outlining the processes, setting out the steps and time table leading to the takeover of the centre. It contained inter alia the following:

“The transaction you are about to commence is the purchase of a business from an existing franchisee which you will then operate as your own business within the Kall Kwik franchise network. This means that you must check and confirm all information and take independent advice from both an accountant and a solicitor experienced in franchising. It is important that this process of due diligence is completed thoroughly before you commit to a particular transaction…. Kall Kwik UK is here to ensure that the process works, but the ultimate success of your Kall Kwik Centre will depend upon you fully participating in the training programme, preparing diligently the marketing launch data and adhering to the rigid legal and financial time table which leads to the opening date.”

Under the heading “ Minimum Equipment Standards” “One of the things that Kall Kwik UK insist upon with any Centre resale is that following a sale, the production equipment and shopfit should meet the company’s minimum standards……… The cost of any required upgrades following sale will be borne by you and allowed for within your cashflow, and, therefore , this should be borne in mind prior to making any offer for the business.” Under “Shopfitting” “All resale Centres must open with the latest corporate image in the front of house area. Many centres are fully complete in this area and so will require little upgrade. Some however will need work done and we will advise you of the costs involved. The work must be finished at the time of your opening.” Under “ Equipment” “It may be possible to agree with the selling centre owner that any improvement to the property or equipment be carried out prior to the sale. If this is not the case then the appropriate costs will be added to the equipment list when we prepare your cash flow forecast with you. Kall Kwik will not vary this rule of Centre upgrades as it is essential that all Kall Kwik Centres reflect the high standards of presentation and performance in order to maximise the strength of the brand and add value to your future business.” Under “Cash Flow and Funding” “Once your offer for the purchase of your centre has been accepted and copies of these letters lodged with the Franchise Development Team the next stage is to secure funding. We will put together with you your five year cash flow forecast for the business. This will be based on the cost of the business provided by the vendor, any shopfitting requirements, any equipment upgrades and any changes you are proposing. Into this we will also add your cash injection and establish a borrowing requirement. The important factor here is that you are comfortable with your cash flow forecast and are confident you can achieve the levels of performance it illustrates.” Under the heading “ Minimum Equipment Standards” Under “Shopfitting” “Once your offer for the purchase of your centre has been accepted and copies of these letters lodged with the Franchise Development Team the next stage is to secure funding. We will put together with you your five year cash flow forecast for the business. This will be based on the cost of the business provided by the vendor, any shopfitting requirements, any equipment upgrades and any changes you are proposing. Into this we will also add your cash injection and establish a borrowing requirement. The important factor here is that you are comfortable with your cash flow forecast and are confident you can achieve the levels of performance it illustrates.” Under “Specialist Support Departments” 17. “Kall Kwik Property Department”:

“The property department provides advice to Kall Kwik Centre owners on property matters relating to their particular Kall Kwik Centre. For new centre owners, they provide advice, or introduce suppliers who can provide assistance, on the various elements of a re-sale including: Shopfitting Lease Transfer Property Condition and Repair Centre Owner’s on-going liabilities…………… Shopfitting Lease Transfer Property Condition and Repair Centre Owner’s on-going liabilities…………… The property department’s role in the above is to provide professional and timely advice to Centre Owners and, where required recommend external agents, who are able to provide expert service in the relevant fields.”

Under “Specialist Support Departments”

[17]Bibby’s evidence was that the briefing document that was presented to him was a distillation of the knowledge that Kall Kwik had acquired over many years in assisting new franchisees to take over existing franchise businesses. He said it was made clear to him both in the briefing document and by John Anderson and Caroline Joyce that they would advise him of the costs and that he would be responsible for paying them. The first version of the cash forecasts prepared by the Defendant was dated 13 June, 2007 and was emailed to Bibby. Although he was accustomed to dealing with financial forecast and spreadsheets and indeed was qualified as a chartered accountant, he had never owned a small business before and had no experience in the printing sector. He says that he relied on the Defendant’s knowledge and understanding as to what costs including initial expenditure would be needed to support the business he was taking on. The course of events is set out above, but was essentially as follows: on the first draft of the cash flow there was a provision of £10,000 for shopfitting. Although he had not at that stage visited the premises in Stockport, he assumed that as franchisor the Defendant would have regularly viewed or inspected the Centre when in attendance providing support or advice to the franchisee. He did visit the premises on the 26 June, 2007 and concluded the premises had not been fully maintained or refitted for a considerable period of time. In the days following, he had a number of discussions with Anderson and Joyce regarding the cash flow figures and in particular the refurbishment of the centre. He concluded that £10,000 was an inadequate provision and insufficient to meet the Defendant’s shop fitting standards. Anderson assured him he says that the average refit was between £10,000 and £20,000 and accordingly Bibby says that it was agreed between them that a revised refitting cost of £15,000 would be put into the cash flow. Again, Bibby assumed that he could rely on that figure Anderson having advised him that it was more than adequate. Anderson recalls discussion relating to £10,000 figure but says that as far as he was concerned Bibby was aware that the figure in the cash flow forecast related only to the re-branding in the front of house of the premises. He provided reassurance to Bibby that the average cost for re-branding the front of house was between £10,000 and £20,000 although in fact the average costs were lower than that. There is a clear divide between the Claimant and the Defendant as to what the shopfitting figure in the cash flow forecast was intended to cover. The Claimant says that it was refitting, refurbishment, shop fitting to comply with the minimum standards specified by the Defendant whereas the Defendant says that the figure related only to the re-branding of the front of house of the premises.

[18]Bibby’s evidence was that during the negotiations in July and August, 2007 it became clear that completion of the re-sale and re-launch of the centre would take place around Christmas, but it was agreed that the refurbishment would be delayed until early 2008. Bibby commissioned a full structural survey as recommended by the briefing document. That survey indicated that the buildings were in a state of disrepair and would need approximately £20,500 including VAT to improve the external appearance of the building and to undertake basic repairs that met statutory obligations. That was clearly separate from the refitting of the shop itself. In September, 2007 Mr Bibby persuaded the vendor to reduce the price on the basis of the work that would have to be done. Further negotiations resulted in a significant reduction in the purchase price sought to £160,000. Completion of sale and purchase was on 21 December, 2007 and early in 2008 Bibby downloaded a copy of a document entitled “ Kall Kwik Centre Shopfit Scheme” from the Defendant’s web site. That specified a defined reception area to the front of the Centre using the optimum floor space for the purpose, space within the reception area for the display of point of purchase material, a dedicated design area apparent to visitors but adequately screened to provide privacy to the designers, a dedicated meeting room or area which was apparent to visitors to the centre but would provide adequate privacy during consultations, and adequate storage facilities to allow a clean efficient and tidy appearance to be maintained; finally, complete screening of print production areas from public view. Bibby assumed that the shopfitting budget prepared by Kall Kwik reflected those expectations as they were detailed in the guidelines. On 9 April, 2008 he met Rod Bennett the Defendant’s preferred supplier to go through the specifications for refurbishment based on the elements set out in the Kall Kwik Shopfit Scheme. It was Bennett’s view and was agreed that given the limited space within the premises, some equipment would have to be relocated upstairs to free up sufficient space for the creation of a dedicated meeting area on the ground floor. The equipment concerned was a large format printer, a plan printer, a numbering machine and a folding machine. Relocating that equipment gave rise to a number of issues in that there were no heating facilities, inadequate lighting, no networking facilities and inadequate power supplies upstairs. That had a significant impact on the budget for refurbishment and in the result, the estimate excluding upgrading the IT and telephone system to accommodate the changes was for the sum of £45,000. Bibby said he was horrified at that figure, three times the amount agreed in the cash flow and four and a half times the amount in the estimate in the initial cash flow forecast. He said that he felt extremely let down and disappointed in that he was committed to spending more money on refurbishment which he could ill afford. At about that time he discovered in conversation that the Defendant did not have a property department as set out in the briefing document and it appeared that nobody had visited this centre from the Defendant to undertake a survey to establish the cost of refurbishing the centre to the standard set out in the shopfit scheme. He also concluded that the estimate provided by Anderson in the cash flow forecasts was based on average costs and not on the specific assessment of the requirements for Stockport. When he asked Anderson by e mail on 18 April, 2008 if he had consulted anyone in the property department at Kall Kwik, the request was originally ignored but when pressed he admitted that he had visited Stockport to discuss the vendors exit plan and he also stated that the £15,000 estimate was based on a ground floor refit only and not ground and first floor. Bibby suggests that Anderson had not taken account of Kall Kwik’s own guidelines laying out space for meeting areas to determine whether a refit could be carried out satisfactorily using the ground floor only. He says he felt badly let down by the Defendant on this issue and that had he known about the actual scope and likely cost of the refit he would have negotiated a further price reduction from the vendor or withdrawn from the purchase. Given that the vendor wanted to retire and that he was the only interested buyer as far as he was aware, he was confident that a further reduction would have been agreed. On 21 April, 2008 there was a meeting to discuss some of the issues and problems that had arisen. He said that at that meeting it was accepted on the behalf of the Defendant they did not have a property department and that a full assessment of the refurbishment requirement for Stockport could not have taken place. At a later meeting Bibby said that Dewsbury the Defendant’s managing director had said that Anderson was the head of the property department although Bibby points out that in the literature he is described as the head of franchise sales.

[19]Anderson, head of franchise sales at the time, had some recollection of talking to Bibby about the £10,000 figure. He identified what in his view was within the process of re-branding, indicating that it was confined to front windows, front door and the inside front area of the premises with the counter, branding on the walls, something to block off the rear area of the premises, either a stand alone divider or a wall. He says that he provided reassurance to Bibby that the average cost for re-branding front of house was £10,000. He agreed however, that there could be a range of cost depending on the size of the premises and other factors. He says that Bibby did not tell him that he wanted to increase the forecast because he wanted to undertake substantial refurbishment of the premises. When referred to the Centre Shopfit scheme document he pointed out that it would not have become available to Bibby until he became a franchisee (which Bibby accepts) but he also said that the minimum requirements in that document and what he referred to as minimum standards were the same. That he subsequently said was not right but he was unable to refer to any document setting out what he described as minimum standards. Bibby said that he asked Anderson whether £15,000 would meet their specification and Anderson assured him that it would. As for Bennett’s estimate, that involved the moving of equipment upstairs so that a meeting space and a design area could be incorporated downstairs and for which there was otherwise not sufficient room. Bibby’s evidence was that what they proposed to do had to comply with the shop fit scheme. Bennett was asked for alternatives because of the amount of the quote, but could not find any practical alternative. He did produce a reduced estimate in the region of £30,000 which he achieved by revising the budget figures for the first floor to allow only for the minimum required. Although there were meetings to attempt to resolve the matter, they failed and in the result none of the work had been done.

[20]With regard to the briefing document first of all, although the Claimant concedes that it was not intended to have legal effect in the sense of giving rise directly to rights and obligations between the parties, it is clearly on its face a document intended for those who are contemplating embarking on a significant business venture and it sets out information likely to be of significance to such people and on the basis of which they would be expected to act.

[21]Also relied on by the Defendant in relation to the cash flow document is a purported no warranty clause in these words “Important Notice. The information contained in this document has been prepared from information supplied by the centre owner. Kall Kwik Printing (UK) does not in the absence of fraud by it, accept responsibility for the contents of this document and gives no warranty, whether express or implied, in relation to it. Recipients of this document should carry out their own verification of its contents.” The Claimant submits that reliance on this clause is misconceived in that it is not the cash flow per se that is relied on, but the discussions that took place about the cost of the shopfit and were accepted by Anderson as his advice in his role as head of the property department, as the briefing document contemplated. Further, it is submitted that the notice is directed to third parties who are provided with the document and who may rely on it rather than to the Claimant as a party to the creation of the document and who would then present it to third parties. It is also clear that the information as to the cost of work to be done was not prepared from information supplied by the centre owner. It was in the first place Anderson’s estimate of cost.

[22]The Defendant also relies on clause 19 of the franchise agreement as excluding liability. It is in the following terms:

“19.1 In this clause 19 the expression “pre-contractual statements” includes written or oral pre-contractual statements or agreements, financial statements, profit projections representations warranties inducements or promises whether or not made innocently or made negligently 19.2 The franchisee’s waiver contained in this clause 19 shall be irrevocable and unconditional but it is expressly provided that such waiver shall not exclude any liability of the franchisor for pre-contractual statements made by it fraudulently. 19.3 The franchisee acknowledges that it has been told that if there are any pre-contractual statements which it considers have been made to it which have induced it to enter into this Agreement it is obliged to submit particulars thereof to the franchisor so that any misconceptions or misunderstandings can be resolved after which an agreed form of pre-contractual statements on which the franchisee has relied may be annexed to and form part of this agreement. The franchisee having been given the opportunity to provide to the franchisor particulars of such pre-contractual statements which he considers have been made it which has so induced it to enter into this Agreement shall be deemed not to have relied upon any pre-contractual statements made or given or purportedly made or given by the franchisor unless such a written statement is annexed hereto. The Agreement together with the Deed of Option and any other document entered into between the parties pursuant to this Agreement therefore contains the entire Agreement between the parties and accordingly no pre-contractual statements shall add to or vary this Agreement or be of any force or effect and unless such pre-contractual statements are either contained in this Agreement or in an annexure franchisee waives any right it may have to sue for damages and / or rescind this Agreement.”

[23]There are further provisions as to waiver.

[24]The Claimant submits that clause 19 does not have the effect of excluding liability in the situation which obtained in this case. The claim made has nothing to do with entry into the franchise agreement, and it is not a claim for misrepresentation. It relates to negligence causing loss in connection with the sale agreement. It is submitted that as a standard exclusion clause it should be construed strictly against the offeror in this case the Defendant. There is no basis it is suggested for extending the scope of the exclusion beyond the words used to the relationship between the Claimant and the Defendant outside the Franchise Agreement. As to the submission that the Defendant owed no duty of care to an organisation that did not exist at the time the cash flow figures were agreed in that the Claimant was incorporated only on 7 September 2007, the Defendant acknowledges Bibby’s intention to conduct the business through a corporate vehicle, but asserts that it was Bibby’s right to change his mind and conduct his business through a partnership or as a sole trader. In my judgement that submission is unrealistic. At all times the Defendant knew and contemplated that a company would be incorporated and the franchise acquired by the company. In advising and dealing with Bibby the Defendant always knew and contemplated that the company ultimately created to pursue the transaction would have the benefit of the knowledge and advice it had given to Bibby in person. Accordingly the fact that the incorporation took place after the advice was given but before the ultimate reliance on the advice with loss being suffered does not prevent a duty of care arising in relation to the ultimate vehicle.

[25]A duty of care arises between Claimant and Defendant where: i) There is a sufficiently close and proximate relationship between them. ii) It was reasonably foreseeable the Claimant would suffer the damage alleged if negligently advised and iii) It is fair just and reasonable the Defendant should owe a duty of care [Caparo Industries plc v Dickman

(1990) 2 AC 831

]. In considering whether such duty arises the court should focus on the detail of the case and the particular relationship between the parties in the context of their legal and factual situation taken as a whole [Customs & Excise Commissioners v Barclays Bank PLC

(2007) 1 AC181

] . The Claimant relies on the principle that a person who voluntarily assumes responsibility for another in a particular respect, owes a duty of care, and it is submitted that the statement that A will give professional advice on a specific point followed by the provision of that advice is the clearest possible voluntary assumption of responsibility as an adviser to B who is expected to rely on the advice. On this issue in addition to the evidence of Bibby the Claimant relies on the following: a) That the Defendant explicitly held itself out in the briefing document as offering professional advice to potential franchisees purchasing existing franchises in relation to the cost of meeting the Defendant’s shop fitting requirements; b) The Defendant explicitly stated in the briefing document that it would have met with the vendor and discussed how the business might be valued, the price that the vendor could expect to attain and the cost of any upgrades which would be relevant to a potential franchisee’s offer, helping to put the prospectus together thereby indicating it would be in a position to advise; c) The Defendant explicitly stated in the briefing document that its shopfitting minimum standards would have to be met whilst as Ivall and Anderson accepted, not providing potential franchisees with those requirements or information about preferred suppliers thereby encouraging reliance on the Defendant’s knowledge and expertise; d) The Defendant explicitly acknowledged that the costs of an upgrade in shopfit to meet its minimum standard would be borne by the purchasing franchisee and accordingly relevant to offers that would be made; e) Anderson accepted that he was advising about the cost of the shopfit on behalf of the Defendant; f) At all times the Defendant was aware and contemplating that the franchise Bibby was applying to the Defendant for and negotiating with the vendor about was to be acquired by single venture corporate entity; g) Given the fact that the Defendant’s approach was not to disclose its minimum standards at any point nor its preferred suppliers and they were not disclosed to Bibby, the Defendant was aware that independent advice on much of the shopfit would simply not be possible for the Claimant to obtain. h) The Defendant’s advice was not amended or updated at any point prior to the completion of the sale agreement and the Claimant as the Defendant must have contemplated, had the benefit of that advice from the date of its incorporation on 7 September over a month before the sale agreement was concluded.

[26]In the circumstances it is submitted the Defendant assumed responsibility for advising the Claimant having encouraged the Claimant to accept and rely on its advice and at its own election having created a situation where the Defendant was the Claimant’s only source of such advice. Accordingly there was a close and proximate relationship and one that included the Defendant in the role of adviser. As expressly acknowledged by the Defendant the advice was relevant to and would have impacted on the negotiation of the purchase price for the franchise and accordingly it was foreseeable that negligent advice could cause damage. Given the Defendant’s role in creating the situation and its explicit statements as to what it expected it is fair just and reasonable that the Defendant should owe a duty of care to the Claimant.

[27]As to the issue of breach, the Claimant relies on the following in addition to the evidence of Bibby: i) Bennett was acknowledged by Ivall and Anderson as the preferred supplier of shopfits for the Defendant and the person most experienced in advising on layouts to comply with the Defendant’s requirements and the costs of implementing the same. ii) Anderson confirmed that Bennett was in reality the expert in specifying such layouts; iii) Anderson and Ivall both accepted that the Defendant’s minimum shopfit requirements meant more than change in logos and included the whole environment that customers would experience or go into in the store except for the production areas; iv) Bennett advised the Claimant than in order to comply with the Defendant’s requirements equipment would have to be moved to the first floor and given the condition of that first floor work would be necessary to enable that to happen. He talked of there being only one option, others being flawed. v) Bennett initially advised a cost of £45,000 plus data and communications but when asked to keep the work on the first floor and production areas to a minimum advised £30,000 plus data and communications. vi) Anderson’s initial explanation of how he arrived at £10,000 in the first instance did not suggest that he had taken account of the particular needs of Stockport and any defined minimum standard that he at times suggested existed; vii) At no point in discussion with the Claimant following the complaint about the shopfit advice did the Defendant raise the question of whether its requirements could be met without equipment being moved, how they could be met with a budget of the order of £15,000, or how its requirements might be modified to limit the cost to around £15,000

[28]In those circumstances the Claimant invites the conclusion that the Defendant’s minimum requirements for front of house shopfitting, re-branding and installation of the latest corporate image are as per level 1 in the shop fit scheme document, that compliance with that scheme at Stockport necessarily involved the moving of equipment to the first floor and therefore work to the first floor; and that the costs of complying with the Defendant’s minimum requirements at Stockport were in excess of £30,000. The Claimant was advised first that £10,000 would be an adequate budget for the shopfit and later that £15,000 was certainly sufficient. Although the Defendant was in a position to evaluate the cost by reference to its own minimum standards and having regard to the state of the premises at Stockport the advice given was without reference to or consideration of either and accordingly was negligent.

[29]In my judgment the Claimant’s submissions on this aspect of the claim are well founded and for the reasons stated I conclude that the Defendant did owe the Claimant a duty of care, that the advice given to the Claimant was negligent and in breach of that duty of care. Accordingly the Claimant succeeds on liability on the premises claim.

THE MARKETING CLAIM

[30]On 12 October, 2007 the Claimant entered into an agreement with the vendor, Mr Kazmierski the owner of the vendor, and the Defendant for the purchase of the vendor’s business including an assignment of the vendor’s lease of the premises for £160,000. (“the sale agreement”). Secondly the Claimant entered into a franchise agreement with the Defendant for the grant of a franchise for ten years for a payment of £20,000. Clause 13.2 of the sale agreement provided as follows:

“Kall Kwik is only a party to this agreement to receive the benefits expressly set out in this agreement. Kall Kwik does not give any warranties or make any representations nor are there to be implied any warranties, representations, terms, covenants or conditions affecting or on the part of Kall Kwik”

[31]Paragraph 14.1 of the sale agreement provided as follows:

“14.1 The vendor will conduct the business diligently and in the ordinary course and pursuant to the franchise agreement and the vendor shall not enter into any capital commitment between the date hereof and the completion date without the prior written approval of the purchaser. 14.2 The vendor agrees to use its best endeavours to introduce the purchaser to the customers identified in the fourth schedule in such a manner as to maintain the customers’ relationship with the business and shall comply with any further reasonable requests by the purchaser to maintain the value of the relationship with existing customers.”

[32]The Claimant relies on the following terms of the franchise agreement:

“Franchisor’s Initial Obligations to assist the franchisee in opening for business the franchisor will (in addition to training to be provided pursuant to the provisions in that respect herein after contained) provide to or make available to the franchisee the following services and /or goods… 5.2 Consultation and advice with regard to alteration refurbishment renovation or other work necessary for the conversion of the said premises into a Kall Kwik business. 5.3 The provision of the standard shopfitting guidelines for the Kall Kwik business. 5.4 The provision of a project manager whose work scope is detailed in the standard shopfitting guidelines. Provided however that if this agreement is entered into by the franchisee in connection with the purchase of the Kall Kwik centre from a former franchisee the franchisee shall be responsible for the payment of the project management fees…. 5.6 Consultation (including consultation with the designated officers and general management of the franchisor) and advice with a view to enabling the franchisee to commence the said business including advice and consultation with regard to the purchase of materials the selection training and supervision of staff accounting bookkeeping advertising and the day to day operation of the said business. 5.7 Advice on the stocking requirements and any merchandising which in the franchisor’s opinion is advisable for the said business prior to its opening. 5.8 Advice on the initial marketing and promotion related to the opening of the said business. 5.9 Arrange at the franchisee’s expense for the supply of the initial equipment fixtures and fittings provided by the franchisor in its then current standard equipment package (“The Equipment Package”) FRANCHISOR CONTINUING OBLIGATIONS The franchisor shall at all times during the subsistence of this agreement …. 6.3 provide the franchisee from time to time with advice know-how and guidance in such areas as management finance marketing and methods of operation to be employed in or about the system. 6.4 provide the franchisee with a continuing service which subject to the provision by the franchisee to the franchisor of such information as the franchisor may require will enable the franchisor to monitor the performance of the said business and to offer guidance to assist in the achievement and maintenance by the franchisee of standards of operation service and product.” to assist the franchisee in opening for business the franchisor will (in addition to training to be provided pursuant to the provisions in that respect herein after contained) provide to or make available to the franchisee the following services and /or goods… 5.2 Consultation and advice with regard to alteration refurbishment renovation or other work necessary for the conversion of the said premises into a Kall Kwik business. 5.3 The provision of the standard shopfitting guidelines for the Kall Kwik business. 5.4 The provision of a project manager whose work scope is detailed in the standard shopfitting guidelines. Provided however that if this agreement is entered into by the franchisee in connection with the purchase of the Kall Kwik centre from a former franchisee the franchisee shall be responsible for the payment of the project management fees…. 5.6 Consultation (including consultation with the designated officers and general management of the franchisor) and advice with a view to enabling the franchisee to commence the said business including advice and consultation with regard to the purchase of materials the selection training and supervision of staff accounting bookkeeping advertising and the day to day operation of the said business. 5.7 Advice on the stocking requirements and any merchandising which in the franchisor’s opinion is advisable for the said business prior to its opening. 5.8 Advice on the initial marketing and promotion related to the opening of the said business. 5.9 Arrange at the franchisee’s expense for the supply of the initial equipment fixtures and fittings provided by the franchisor in its then current standard equipment package (“The Equipment Package”) The franchisor shall at all times during the subsistence of this agreement …. 6.3 provide the franchisee from time to time with advice know-how and guidance in such areas as management finance marketing and methods of operation to be employed in or about the system. 6.4 provide the franchisee with a continuing service which subject to the provision by the franchisee to the franchisor of such information as the franchisor may require will enable the franchisor to monitor the performance of the said business and to offer guidance to assist in the achievement and maintenance by the franchisee of standards of operation service and product.”

[33]Clause 19 provides as follows:

“ENTIRE AGREEMENT; FAILURE TO EXERCISE RIGHTS NOT TO BE A WAIVER 19.1 In this clause 19 the expression “Pre-Contractual Statements” includes written or oral pre contractual statements or agreements, financial statements, profit projections representations warranties inducements or promises whether or not made innocently or negligently. 19.2 The franchisee’s waiver contained in this clause 19 shall be irrevocable and unconditional but it is expressly provided that such waiver shall not exclude any liability of the franchisor for pre-contractual statements made by it fraudulently. 19.3 the franchisee acknowledges that it has been told that if there are any pre-contractual statements which it considers to have been made to it which have induced it to enter into this agreement it is obliged to submit particulars thereof to the franchisor so that any misconceptions or misunderstandings can be resolved after which an agreed form of pre-contractual statements on which the franchisee has relied may be annexed to and form part of this agreement. The franchisee having been given the opportunity to provide to the franchisor particulars of such pre-contractual statements which it considers to have been made to it which has so induced it to enter into this agreement shall be deemed not to have relied upon such pre-contractual statements made or given or purportedly made or given by the franchisor unless such a written statement is annexed hereto………….” 19.1 In this clause 19 the expression “Pre-Contractual Statements” includes written or oral pre contractual statements or agreements, financial statements, profit projections representations warranties inducements or promises whether or not made innocently or negligently. 19.2 The franchisee’s waiver contained in this clause 19 shall be irrevocable and unconditional but it is expressly provided that such waiver shall not exclude any liability of the franchisor for pre-contractual statements made by it fraudulently. 19.3 the franchisee acknowledges that it has been told that if there are any pre-contractual statements which it considers to have been made to it which have induced it to enter into this agreement it is obliged to submit particulars thereof to the franchisor so that any misconceptions or misunderstandings can be resolved after which an agreed form of pre-contractual statements on which the franchisee has relied may be annexed to and form part of this agreement. The franchisee having been given the opportunity to provide to the franchisor particulars of such pre-contractual statements which it considers to have been made to it which has so induced it to enter into this agreement shall be deemed not to have relied upon such pre-contractual statements made or given or purportedly made or given by the franchisor unless such a written statement is annexed hereto………….”

[34]The Claimant’s case is that it was an implied term of the franchise agreement in order to give it business efficacy that in providing advice and services to the Claimant the Defendant would exercise reasonable skill and care.

[35]In October, 2007 the scheme operated by the Defendant included a programme for the launch for the franchise of a franchisee.

[36]On 4 November, 2007 the Claimant entered into an agreement with the Defendant called the marketing launch plan agreement. That consisted of: i) Creating a data base of contacts some of which would be collected on a marketing walk about week; ii) Providing the data base to the Defendant to enable the Defendant to implement a programme of intensive centralised direct marketing; iii) Press release by the Defendant relating to the franchisee’s business iv) Establishing a website and e mail address on the Defendant’s system, on the first day of opening; v) A sustained mailing to the database of contacts including a combination of quarterly news letters and monthly awareness postcards produced by the Defendant; vi) Personalised mailings by the Defendant to the bottom thirty of the top fifty clients or potential clients; vii) Mailings of the Defendant’s “Winning Kombination” announcement cards during the first year of the franchisee’s business; viii) Telemarketing follow up on mailings by operator assigned to the franchisee’s business; ix) Monitoring and evaluation of the marketing activity for the franchisee’s business by the Defendant; x) The use of brochures including CD rom business cards.

[37]It is in essence the Claimant ’s case that it was required to use a system known as Marlin which was supplied by the Defendant as part of its standard equipment package on the basis that the Defendant would train the franchisee and its staff to use it. There was also a web based marketing system called Destination Delivery and an academy support team was to be provided by the Defendant to the Claimant to work with the Claimant providing advice and assistance to ensure a successful launch and the achieving of business objectives, including the creation and implementation of an academy support plan.

[38]The following breaches are relied upon by the Claimant :(a) (A) Marketing, Promotion and Advertising i) The Defendant advised that the Claimant should follow and rely upon the marketing launch plan and provided no other advice or suggestions as to marketing, promotion or advertising of the business in advance or during its first year; ii) The Defendant despite numerous requests failed to provide the materials and services referred to above and by reason of such default the advice was in consequence negligent.

(b) (B) Management, finance and methods of operation a) The Defendant has not completed the installation of the Marlin System in that the customer data supplied to the Defendant has not been entered. onto Marlin b) The Academy Support Team have not worked with the Claimant as agreed despite numerous requests, nor did they produce an Academy Support Plan until July 2007 and they have not provided advice or assistance on management, marketing or methods of operation as set out in the briefing document and the Academy Executive Manual.

[39]As a result of the breaches of the franchise agreement and the marketing launch plan agreement it is the Claimant s case that: i) The business was not properly marketed and promoted prior to opening. ii) The business has not been properly marketed during its first year. iii) The Claimant was unable to cost and price jobs properly from the outset as Marlin was limited to offset litho and job costing. The Claimant is unable to cost and price large format printing jobs effectively as no support was offered in Marlin nor any user manual supplied to the Claimant. iv) The Claimant is unable to cost large format printing jobs and digitally printed jobs effectively as no support was offered in Marlin nor any user manual supplied to the Claimant. v) The Claimant is unable to cost and price variable data printing jobs and direct mail services effectively as no support was offered in Marlin nor user manual supplied to the Claimant. In the result turnover has suffered and profit has been adversely affected. MARLIN.

[40]In June 2007 Bibby met Kazmierski and asked him about his data base and marketing. Much of that Kazmierski kept in his head according to him or in his business cards folder. However Kazmierski did have client related data available in his Sage accounting package and Bibby having worked with Sage previously assumed that it would be possible to transfer data from Sage onto Marlin. Bibby discussed his concerns with Anderson after talking to Kazmierski and Anderson assured him that the data would be transferred onto Marlin prior to the launch of the business. Bibby made it clear at the time that he would not proceed with the purchase if he was left without historical data. On 1 November 2007 Bibby attended the Defendant’s offices to go to a planning meeting to discuss the launch of the resale centre in Stockport. Anderson was present at the meeting and confirmed that work on Marlin was being progressed; he mentioned no problem with it. However when Bibby met Russell Codd the Defendant’s Academy Support executive for the first time they discussed Marlin and Marketing Walkabout, Codd mentioned that he did not think it was possible to put the relevant data onto Marlin but said that he would look into it. Anderson’s response was similar, namely that Maddocks, the Defendant’s IT director would look into it. During his training week Bibby raised the matter again this time with Ivall and was told it was being dealt with. At that time it was his expectation that the walkabout data to be collected in November and December and the existing client data would be entered onto Marlin as soon as possible. When a personal computer was delivered to the Stockport centre before Christmas by the IT installer recommended by the Defendant so that Marlin could be installed on it Bibby still took it that the customer data history taken from the Sage account data would be imported onto Marlin. However, by 2 January 2008 when the centre reopened it was discovered that Marlin had not been installed and it took 8 working days for the installation of the software. Bibby had reservations about the effectiveness of Marlin and in particular was of the view that its functionality was limited to lithographic printing without job costing or pricing functionality for design, large format printing, direct mail, digital and variable data printing, which represented a direction in which the business was hoping to move. His main complaint remained that the historical customer data had not been installed, despite assurances from the Defendant’s senior management that it was being dealt with. On 16 January 2008 Bibby emailed Codd to inform him that he would not be using Marlin for accounting purposes expressing the view that it was not fit for purpose. However, he agreed that he would use it for lithographic job costing and raising sales invoices so that the franchise fee calculations could be put on the system and again requested that the historical customer information be imported on to the system. Subsequently the Defendant refused to import the historical data saying that it would have to be done manually, not electronically, and this would take far too long and neither had they agreed to do it. As to the contact data, the picture that emerges is that Bibby was led to believe on a number of occasions that the contact data would be installed. There was equally no reason why it should not have been, but it is equally clear that it was not so installed. As to the marketing launch plan agreement of 1 November, an agreement which has as part of it the graphical plans at 3.717 and 3.718, Ivall accepted that that document explicitly provided for the Defendant to provide the spreadsheet, ask the vendor for its “top 200” and install the contact data from both sources onto Marlin, Ivall also accepted that the Claimant could only install contact data as individual manual entries and only the Defendant could arrange for the uploading of electronic data into Marlin. Joyce admitted those matters in her evidence, whilst acknowledging she was not qualified on IT systems. Relevant also to this aspect of the matter is the fact that the Defendant requested and obtained the vendor’s contact data, worked it into a form in which it could be loaded onto Marlin and synchronized with Destination Delivery, but equally it was the fact that it never was uploaded and there appears to be no reason even suggested for that not happening, save for confusion and Bibby’s reservations about Marlin neither of which in my judgement has any relevance to this issue.

[41]The Defendant submits that albeit that it was accepted that it was agreed to install Marlin insofar as it was possible, there was in fact no contractual basis which imposed any requirement on the Defendant so to do, and even the briefing document mentioned Marlin only in the context of installing it providing training and supporting it. The Claimant relies on Bibby’s evidence the effect of which was that the Defendant would provide him with the marketing launch plan, subject to his undertaking the walkabout, that he was told that the contact data would be installed as well as given assurances about the historic data, and upon the graphic plan which constituted part of the marketing launch plan explicitly provided, as Ivall accepted , for the Defendant to provide the spreadsheet, ask the vendor for its “Top 200” and install the contact data from both on to Marlin and Destination Delivery. The evidence also establishes in my judgment that the Defendant did ask for and obtain the vendor’s contact data, get it into a form in which it could be uploaded on to Marlin, uploaded it on to a Marlin scheme and arranged for synchronisation with Destination Delivery. There was in my judgment a contractual obligation on the Defendant arising out of the marketing launch plan agreement to complete the installation on Marlin for the Claimant’s benefit of the vendor’s customer data supplied to the Defendant including the data relating to the vendor’s top 200 clients. The Defendant was in breach in failing to complete the installation on Marlin and Destination Delivery of that data. Accordingly in my judgement the Claimant succeeds on this aspect of the claim.

[42]ACADEMY SUPPORT The Claimant’s case is that the academy support team did not work with the Claimant despite numerous requests, failed to produce an academy support plan until July 2008 , seven months late and failed to provide advice or assistance with management marketing or methods of operation as set out in the briefing document and the academy executive manual. Bibby’s evidence was that Anderson and Joyce both explained during the first year of the business that the Claimant would be fully supported by an academy support executive who would open the centre and support the business throughout the year. Bibby was told that Russell Codd was an experienced academy support executive and had been part of the academy team for 5 years. Adrian Gloss however was an inexperienced development manager who had joined the Defendant at the same time as the Claimant became a franchisee. He had no experience of the design and print business and a CV primarily in retail. The purpose of the academy support team as set out in the briefing document “is to ensure you achieve a successful launch and help you achieve your business objectives” . It continued as follows:

“During the opening 10 days they will install the current Kall Kwik Operating System and will review all aspects of the business, agreeing with you key short medium and long term objectives. The Academy Team member will work closely with you advise you on how your staff are running the Centre and assist in implementing best practice.. They will also install your Centre’s new Marlin system and deliver training within the centre on its operation to you and your team. The Academy launch processes are structured in detail for each day of the ten day process and a copy of this process will be provided to you during your training programme. It is the objective of this part of the Academy support process to have you fully functioning and operating efficiently as smoothly and as swiftly as possible. Your MLP commences at the point of opening so much of the launch activity will involve making sure that you are meeting clients and securing new business. It is vital that you work closely with your Academy team member during this launch period because this will provide you with your best opportunity to learn and implement the Kall Kwik operating system. The marketing launch provides the basis for your future business growth and your adherence to the Kall Kwik system will ensure the business functions in an efficient and effective manner. Having identified your objectives during the opening period your Academy Support plan will be compiled and this will form the basis of your ongoing relationship with the Academy Team.”

Bibby’s evidence was that the Kall Kwik resale action plan was a 10 day plan of tasks to be completed by the Academy Support executive (Codd) and the Business Development Manager (Gloss) in handing over the resale centre to the new owner but no single day of the plan was completed, and it was only 50% complete at the end of the 8 days that Codd and Gloss attended the Centre. Gloss was tasked with giving price comparisons from local competitors in accordance with the academy handbook but when he supplied the price comparison some 3 weeks late comparisons were not those from the academy handbook and comparison was impossible. The Claimant never received a completed price comparison and Bibby’s evidence was that this very basic error was indicative of the subsequent quality of support received from Gloss. In addition, with delays involved in setting up Marlin, there was almost no opportunity to meet clients and secure new business. Within the first 2 weeks an Academy Support Plan was to be agreed to include various aspects in addition to the implementation of the marketing launch plan. None of that was completed during the opening of the Centre and the support plan was not finally agreed until 7 months later in July, following meetings in April and May 2008 and subsequent follow up letters. Bibby’s evidence was that they were left to monitor their own performance without any feedback or support from the operational team, and albeit that Bibby understood from his initial meeting with Russell Codd that Russell Codd was to be their Academy Support executive, he did not see Codd for three and a half months after the initial opening of the centre and they received inadequate support from Adrian Gloss for the first 4 months. He visited the centre once a month but Bibby’s evidence was that he clearly had no experience in the industry, could not answer simple questions about print or design production, could not explain how to use Marlin and provided very limited sales support. Eventually in March 2008 when Gloss had been asked to look into a particular discrepancy and failed Bibby contacted Ivall who was Gloss’s line manager, complained about Gloss’s general performance and attitude and asked Ivall to chat to Gloss about being more structured in his approach. Eventually he asked Gloss not to return to the centre as he was clearly out of his depth. In the subsequent meeting on 18 April Dewsbury agreed that Codd would take on the support role and confirmed by email on 23 April that Codd would be their support for 2 days per month following the academy process to a pre-agreed agenda, that the Defendant would pay for the data validation of the remaining customer data that had not yet been validated, prospecting activity would be transferred to a new agency called Fluent Incorporate and the Defendant would fund the activity for a further 6 months , Codd would put together a digital pricing guide and investigate the discrepancy with Marlin’s franchise fee report. The briefing document would be reviewed and there would be a separate response, and property issues would be investigated. Following that there was a further meeting on 12 May with Dewsbury and Ivall backtracking on a number of issues previously agreed. The commitments in the email of 23 April were agreed. However the pattern of not being able to obtain assistance continued. In July 2008 Bibby looked to Codd for support and advice in a direct mail project, but none was forthcoming. Codd failed to attend the centre for 2 days a month as agreed save on 2 occasions, and Bibby never received the formal written feedback or advice from either his academy support executive or his business development manager, contrary to the instructions set out in the academy handbook. Codd did not put together a digital pricing guide as had been agreed nor did he complete the work that he was doing on it.

[43]In my judgment the above evidence establishes breach of Clause 6 (3) of the franchise agreement that the Defendant would provide the Claimant from time to time with advice, know how and guidance in such areas as management finance marketing and methods of operation to be employed in or about the Kall Kwik business. Such advice, know how or guidance in respect of which there was the obligation to exercise reasonable skill and care, was either deficient or entirely lacking in the respects set out.

[44]THE MARKETING LAUNCH PLAN AGREEM,ENT The marketing launch plan was incorporated into a contract signed on 4 November 2007 by Bibby on behalf of the Claimant and it is admitted in the defence that it included substantially the same elements and covered the same obligations as those set out in the Marketing Launch Plan in the briefing document. The Marketing Launch Plan is pleaded in the re-amended particulars of claim as consisting of the following: a) Creating a new data base of contacts some of which would be collected on a marketing walkabout week; b) Providing the data base to the Defendant to enable the Defendant to implement a programme of intensive centralised direct marketing; c) A press release by the Defendant relating to the franchisee’s business; d) Establishing a web site and email address on the Defendant’s system from the first day of opening; e) A sustained mailing to the data base of contacts including a combination of quarterly newsletters and monthly awareness postcards produced by the Defendant. f) Personalised mailings by the Defendant of the bottom 30 of the top 50 clients or potential clients; g) Mailings of the Defendants “Winning Kombination” announcement cards during the first year of the franchisee’s business; h) Tele marketing follow-up on mailings by a tele-marketing operator assigned to the franchisee’s business; i) Monitoring and evaluation of the marketing activity for the franchisee’s business by the Defendant; j) The use of brochures including CD Rom business cards. It is to be noted that although the contract provides for additional marketing activity based on the new owner’s experience creativity and enthusiasm, it equally emphasises the advantages of “sticking to a detailed plan,” strongly advising that the new owner take advantage of all the activity detailed in the marketing plan within the agreed time scales. It is equally clear in my judgement that the contract involved activity by both parties as set out in the graphical plans and as accepted by Ivall in his evidence. The graphic plan for implementing the marketing launch plan provided for Bibby to do the walkabout, put the data in the spreadsheet and make selections by Destination Delivery . Equally it was the duty of the Defendant to provide the spreadsheet, ask the vendor for its top 200 contacts and install the contact data from both sources onto Marlin and Destination Delivery. On the evidence, the Defendant did ask for and obtain the vendor’s contact data, get it into a form in which it could be uploaded onto Marlin, but then failed then to make it available to the Claimant. That equally had the result of preventing the implementation of a programme of intensive centralised direct marketing and was in breach of the Marketing Launch Plan contract, as set out above.

[45]Bibby’s evidence was that he was unaware of any press release by the Defendant distributed to the trade and local press to announce the change of ownership. It is accepted by the Defendant that there was no press release, but Ivall’s evidence was that that was because no refitting or refurbishment had taken place.. That was not in my judgment reason for delaying the press release and was in consequence a breach of the agreement.

[46]As to the establishing of a web site and email address on the Defendant’s system from the first day of opening, Bibby’s evidence was that the web site was launched with no details about the change of ownership and additionally the email address was incorrect and not changed until he discovered that fact in July 2009 when a prospective customer who had sent an email had followed it up by phone. In addition, the briefing document had indicated that the web site would contain an e-commerce option for valued clients, and again Bibby’s evidence was that it did not and does not.

[47]As to the sustained mailing, Bibby undertook the marketing walkabout in and around Stockport in late November and early December 2007 collecting 157 prospect contact details. Although the target was 200 he was told by Gloss and Codd that 157 was fine to work with because a lot of the initial marketing effort was focussed on existing clients and making sure they stayed with the business. When however the Claimant opened for business on 2nd January 2008 because of the difficulties about Marlin they were unable to send out the first month’s marketing material using the Destination Delivery online tool because that interfaced with Marlin and the physical transmission or delivery of the marketing material was carried out by the Defendant not the sale centre. What the Centre did was to activate the automated delivery through options on Destination Delivery. Thus the Defendant was not able to send out via Destination Delivery the full number of new owners arrival cards to the top 200 customers due to the delays in setting up Marlin and because the customer data was not available on Marlin. New owner’s arrival cards were sent out to only 69 customers in early February, those being customers who had done business with the centre in January 2008, and had had their details inserted into Marlin as the work came in. Bibby and his wife spent the next following 2 to 3 months seeking to put customer data on to Marlin which they could only do on a piecemeal basis. From February to August 2008 confirmatory emails were received that their data had been processed and that awareness cards and the D2D magazines where being sent out to existing clients. However on 21 August 2008 in conversation with Sheri White in the Defendant’s marketing department, Bibby discovered that the Defendant contrary to earlier assertions had not in fact sent out any of the awareness cards or D2D magazines during the whole of that year to date. In the later exchange of emails, when Bibby requested details of what had actually been sent out, Ivall confirmed that nothing other than 1 awareness card to clients had been issued for the whole of 2008. Delays and failures in relation to the awareness cards and D2D magazines are accepted by Caroline Joyce though she contends that the likely impact on the Claimant’s business was minimal.

[48]Provision was also made for personalised mailings by the Defendant to clients 21 to 50, that is the bottom 30 of the top 50 clients or potential clients, but the position on the evidence is unclear and insufficient to establish this aspect of the claim. Similarly, the allegation set out in paragraph 14g of the re-amended particulars of claim relates to mailings of the Defendant’s “Winning Kombination” announcement cards during the first year of the franchisee’s business. That was an element which did feature in the briefing document but Bibby’s evidence was that it was absent from the Marketing Launch Plan contract. The evidence is insufficient in my judgment to establish any breach in relation to this matter.

[49]As to telemarketing on the evidence the position was very unsatisfactory. A company called Broadley Speaking was appointed by the Defendant as preferred supplier for telemarketing. Bibby’s evidence was that he expected them to be up to the job and have a track record of success. The commitment was that for 9 months Broadley Speaking were committed to making 12 hours of calls on the Centre’s behalf and as suggested by the destination delivery material guaranteeing four appointments. Russell Codd advised that those appointments should only be with customers who had clearly advised the telemarketer of a specific need that could be fulfilled by the centre. In January 2008 Broadley Speaking reported making 6 appointments from 9 hours of calls. 2 of those appointments were requests for information, one did not turn up and with one that was followed up he was not expecting to see Bibby. The remaining 2 did not have any immediate requirements. Bibby complained to Adrian Gloss expressing his dissatisfaction. In February, Broadley Speaking reported making a further 6 appointments but they were equally unsatisfactory, one of them failing to turn up, another had a request for information, another was a client of another Kall Kwik centre. One was a commercial printer and direct competitor, and the last one was not expecting to see Bibby on the day of appointment and had no requirements. Bibby spoke both to Gloss and to Codd to seek their assistance in improving the performance of the telemarketing company, Gloss spoke to Broadley Speaking in February but there was no improvement. In March 2008 a further 6 appointments were reported only 2 of which turned out to be appointments that met the Kall Kwik criteria. In April Bibby wrote twice to Laurence Knott regarding an appointment made by the prospecting company where the person had not turned up and of another occasion when a prospect had cancelled a meeting , not having sought one and having only asked for some information. He also contacted both Adrian Gloss and Russell Codd to seek their assistance in approving the performance of the telemarketing company but in June 2008 no calls were made at all. In July August and September the company did not deliver the number of hours required nor the number of appointments averaging only 3 per month and the quality of the meetings continued to be poor given that few of them had any specific design or print requirement. From October 2008 Bibby was told that the Claimant would have to pay for the continued use of Broadley Speaking’s services but as the results for October and November were as bad as before the agreement was terminated. Ivall’s evidence was that Broadley Speaking had changed the person making the calls on behalf of the Defendant when complaints were made but that had not improved the quality of the appointments. In the result the relationship with Broadley Speaking ended when there was a switch to a company called Fluent from 1 June 2008, but contrary to Dewsbury’s letter of 26 June 2008, the Claimant was not transferred to Fluent nor was the telemarketing spend extended for an additional 6 months. The Defendant concedes that the position was On the evidence, in my judgement the telemarketing follow up was seriously deficient and effectively so acknowledged by the Defendant in the company change that took place in June 2008.

[50]The requirement for monitoring and evaluation of the marketing activity of the Claimant by the Defendant appears to relate to quarterly meetings with the first such meeting taking place in May 2008. The Defendant accepts that such operational review is part of the MLP contract and that it did not happen, though the further submission is made that would not be directly causative of lost business. The allegation in paragraph 14 i of the Particulars of Claim is in my judgement made out, having regard to the concession made by the Defendant.

[51]As to the matters set out in paragraph 14j, relating to the use of brochures and CD Rom business cards, again no breach is established on the evidence. Ivall’s evidence was that in accordance with the graphic plan, brochures and referral packs were provided.

[52]It follows from the above that in breach of the marketing launch plan agreement the Defendant failed to provide materials or services referred to in paragraph 42 a),b),c),d),e),h) and i) above.

[53]Accordingly on liability under both heads of claim there will be judgment for the Claimant, with issues of causation and quantum of damage to be tried separately as ordered.

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