How can franchisees ‘Win’ their claims yet be unsuccessful?
Now that the dust has settled following the judgment in London Business House Limited & Faisal Rehman and Pitman Training Limited & Pitman Training Group Limited 2023, Beyond Corporate Dispute Resolution Partner, Alistair Gregory, looks at how the Court addresses these types of claims and what lessons can be learned, especially in regard to the legal concept of causation and loss.
The case involved, in outline, the Claimants seeking a declaration that their franchise agreement had been rescinded (i.e., cancellation of a contract due to the other party’s breach) and a claim for damages. Their claim was twofold, first that Pitman’s dealings were in breach of contract in regard to the exclusivity clauses in the agreement, and second that there had been misrepresentations by Pitman. Pitman resisted the claims and the High Court considered various factors in arriving at a judgment which, whilst making findings against Pitman, dismissed the claim. The judgment is interesting and a lesson to any Claimants that whilst a finding of a breach of contract can be made by the Court, it is essentially worthless unless the loss and damage suffered can be directly linked to the contract breach. The legal principle here is called ‘causation’ and unless Claimants can show that the breach of contract actually caused the harm, their claim will effectively fail.
So, a gentle reminder to all franchisees (or indeed any other people) that are considering bringing claims- just because you have been wronged (and the Court may well agree with you) and are out of pocket, does not mean that you can recover all those losses. ‘Causation’ is an important legal concept that restricts the amount of compensation that can be awarded and acts as a filter to see that an opponent is only responsible for loss which they are legally responsible for.
Beyond has a specialist franchising team which focusses on advising franchisees as well as franchisors at all stages, from the pre-contract advisory stage, through to conclusion of the relationship and any disputes that may surface. If you have any questions or require any further advice on this topic, get in touch with our specialist teams today at firstname.lastname@example.org
[This blog is intended to give general information only and is not intended to apply to specific circumstances. The contents of this blog should not be regarded as legal advice and should not be relied upon as such. Readers are advised to seek specific legal advice.]