IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
33 Bull Street
Claim Nos. 3BM90158 & 3BM90159
Wednesday, 23rd April 2014
HIS HONOUR JUDGE ROBERT OWEN QC
Sitting as a Judge of the High Court
GATEWAY HOMES NATIONWIDE FRANCHISE LIMITED
GATEWAY HOMES UK LIMITED
MR STUART BROWN
Counsel for the Claimants: MR M RICHARDSON
Counsel for the Defendant: MISS OMAR
Transcribed from the Official Tape Recording by Apple Transcription Limited
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Number of Folios: 638
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1. THE JUDGE: This is the judgment following the final hearing of two separate though related claims for permanent injunctions brought by the claimants, Gateway Homes Nationwide Franchise Limited and Gateway Homes UK Limited and their directors or principal shareholders, Mr Nick Statman and Mr Malcolm Statman, in respect of the alleged conduct of the defendant, Mr Stuart Brown.
2. The first claim is brought by the companies referred to and concerns a non-disclosure injunction permanently to prevent the defendant from publishing confidential information about the claimant’s companies in the first claim, pursuant to the express term of a franchise agreement or implied at common law. The defendant is a disgruntled ex-franchisee.
3. The second claim is brought by Mr Nick Statman and his father Mr Malcolm Statman and concerns an application pursuant to the provisions of the Protection from Harassment Act 1997 for a permanent injunction to prevent the defendant from pursuing or continuing a course of conduct against them which, it is alleged, constitutes harassment within the meaning of the Act.
4. In his closing submissions on behalf of the claimants in both actions, Mr Matthew Richardson submitted that the defendant’s conduct in both actions demonstrated that he, the defendant, is and was fixated with the desire to harm the Statmans and their companies and that he had been engaged in a campaign of hatred. ‘Robust’ steps, as Mr Richardson put it, invoking the legal process were necessary and justified and that the only appropriate and effective remedy available in both claims is that of a permanent injunction.
5. Miss Omar, counsel for the defendant, submitted that, on the contrary, the claimants have grossly misused the legal process, including the use of ex parte injunctions, applications to commit for contempt and the procuring of the unlawful arrest by the police of the defendant. She submitted that the claimants have used these proceeding as a means of oppression and that the claimants have each failed to establish any grounds capable of supporting the granting of an injunction. In any event, given the claimants’ conduct and the fact that the court is concerned with the granting of an equitable remedy, the court should not grant the injunctions sought.
6. In both actions, ex parte injunctions were subsequently replaced by undertakings or further order pending the outcome of this final hearing. The claimants have not suggested (by way of compromise) a permanent undertaking in the terms already in existence. The defendant has not offered the continuation of his undertakings. Thus, the battle lines have been drawn for some time and the final hearing has been vigorously contested before me. Given the history of these proceedings and the content of the allegations it will be necessary to set out those allegations, which comprise 25 allegations in each claim relied on by the claimants and which are all challenged.
7. In the course of these proceedings, the master directed that the claims should not be consolidated but that they should be heard consecutively before the same court. I have heard evidence from the main witnesses. That is, Mr Nick Statman and Mr Malcolm Statman for the claimants and the defendant, Stuart Brown. I shall deal with the non-disclosure claim first.
8. Between 10th October 2011 and 24th February 2012, it became evident that the business relationship between the first claimant and the defendant had broken down. The nature of the defendant’s complaints was that he had been induced by promises or representations to the effect that if he entered into a franchise agreement with the claimant he could expect a certain level of remuneration and that, in fact, the remuneration capable of being generated under the franchise agreement was very much less and that he had been sold short and left out of pocket in substantial sums. For their part, the claimants rejected that complaint and suggested that with appropriate and continued effort, he could and should have made his franchise a success. It was evident that at the meeting which the parties had, in an endeavour to resolve their dispute, on 10th October 2011, the parties remained at odds. The loss summarised by Mr Nick Statman came nowhere near the claim or expectations of the defendant.
9. So far as the non-disclosure injunction claim is concerned, by a claim form issued on 1st March 2012, the claimants, Gateway Homes Nationwide Franchise Limited and Gateway Homes UK Limited claimed damages and an injunction against the defendant, Mr Stuart Brown, for alleged breach of contract and/or breach of confidence. By the particulars of claim filed on 27th March 2012, the claimants claimed a permanent injunction restraining the defendant from revealing to any third party:
(a) all information in any form or medium obtained or received by him including that relating to the business or affairs of the claimants, any franchisee of the claimants, himself and the intellectual property of the claimants;
(b) all information relating to the system, including:
(i) the know-how and methods used in or in connection with the provision of the services and sale of the products under the tradename.
(ii) the format, standards of quality and uniformity of products and services offered by the claimants.
(iii) the procedures for accounting, administration and management used by the claimants.
10. The contract which the claimants alleged had been breached and which provides the basis for the claim for a permanent injunction is a franchise agreement entered into by the first named claimant and the defendant dated 10th May 2010 relating to the geographical areas around Peterborough, Cambridgeshire, Northampton and Lincoln and a similar franchise agreement entered into by those parties on 17th June 2010 relating to the geographical areas around Stoke-on-Trent and Wolverhampton. The agreements provided for the establishment of the franchises conferred upon the defendant by the first claimant in consideration for the defendant agreeing to pay an initial agreed franchise fee by way of deposit and subsequent discharge of the balance as the franchise progressed which enabled him to act within the geographical areas, in effect as agent of the first claimant. In relation to each completed purchase or transaction by a house seller to the claimant, the defendant would receive a fixed fee for introducing the house seller to the claimants. The franchisee would provide to the prospective house seller ‘an indicative valuation’ arrived at in accordance with the claimant’s business model. In relation to a seller who had entered into an initial agreement with the first claimant in light of his indicative valuation the defendant would receive a modest percentage of the fixed fee in the event that the transaction did not proceed.
11. The claimants operated in the quick house sale market or ‘below market value’ (BMV) sector. This sector has been the subject of critical scrutiny by the press and media prior to the events complained of in these proceedings. The sector is subject to high competition from other BMV businesses. The claimants contend that they have devised a business model which provides for them the optimum advertising, marketing and promotion of their business in this highly competitive sector and which accounts for their claimed success over the years in this market.
12. According to the franchise agreement, the relevant parts for present purposes are as follows: Preamble (b) :
“The system is the exclusive property of the franchisor and with the exception of the methods of advertising, marketing and promoting the Gateway Homes Nationwide Franchise Limited is secret and confidential.”
“The trade names associated with a uniformly high standard of service and quality of products.”
“You desire to obtain the benefit of the franchisor’s knowledge, skill and expertise and the right to sell the products and provide the services using the intellectual property at the venues.”
13. By clause (1) [“Definitions and interpretation”] it is provided that:
“Confidential information means all information in any form or medium obtained or received by you, including that relating to the business or affairs of the franchisor, any franchisee of the franchisor, you and the intellectual property.”
Miss Omar submitted that this definition clearly shows that it was not intended that the internal communications between franchisees relating to their business or the business could be considered to be a breach of confidence. That is, one franchisee could not reveal to third parties the business details or terms of agreement of another franchisee but the agreement itself did not extend to confidential discussions or communications between the franchisees themselves. Miss Omar pointed out, as had the defendant in his written case, that each of the franchisees was subject to a duty of confidentiality and the information in question could not go beyond them in any event. Mr Richardson submitted that, on the contrary, the true meaning of the definition within the context of the whole agreement, was that a franchisee could not reveal any information relating to the claimant’s business or, indeed, the franchisee’s own business or affairs in any respect and to do otherwise would be to act in breach of confidence. In this respect, Miss Omar drew attention to internal emails passing between the franchisees over the company’s intranet, including emails which were copied to and, on occasions, contributed to, by Mr Nick Statman, without any suggestion of improper or inappropriate disclosure or breach of agreement. She submitted that clearly it was not in the minds of the parties at that time or when the agreements were entered into that any such disclosure of information as between franchisees could reasonably be regarded as being in breach of confidence. Whatever maybe the position the ultimate question is whether the information complained of was material and necessitated or justified the granting of a permanent injunction in any event.
14. The definition clause continued so as to define “intellectual property”, “operations manual” and “the system” as follows. As for “intellectual property” that is defined as follows:
“All or any of the following:
(a) the trademarks;
(b) the trade name;
(b) copyright and design copyright held by the franchisor and any material printed in writing or in computer code, including but not limited to the operations manual and software, designs or other work relating to the system;
(d) [Not relevant];
(e) the system and the know-how relating to it.”
15. Under “operations manual”:
“A manual or manuals which contain details of the intellectual property including but not limited to the products and the services as may be updated by the franchisor from time to time.”
“Meaning: literature, training material and other such products in addition to or in substitution of them as may be specified in the operations manual from time to time.”
“All of the following which are more particularly described in the operations manual:
(a) the know-how and methods used in or in connection with the provision of the services and the sale of the products under the tradename;
(b) the format and standards of quality and uniformity of products and services offered via Gateway Homes UK Limited; and
(c) the procedures for accounting, administration and management used in the (sic) Gateway Homes UK Limited.”
17. Accordingly, the terms of the permanent injunction sought by the claimant are derived from the definition and ambit of “confidential information” as appears from paragraph 14(a) of the particulars of claim, and “system” and, in particular, see subparagraphs (a), (b) and (c) recited at paragraph 14(b) of the particulars of claim.
18. By paragraphs 6 and 7 (and again at paragraph 11) of the particulars of claim, the claimants asserted the basis for seeking an injunction. Thus:
“ 6. In particular, on 24th February 2012, Mr Brown sent an email to numerous GHNFL franchisees and investors with the subject line, ‘Franchisee’s bankruptcy notification’ and headed ‘Without prejudice’. Within this email, Mr Brown threatens ‘The details surrounding Gateway Homes, Gateway Homes Franchise and Gateway Homes people and operation and my bankruptcy will not go unreported in the press. I think it best to warn you in advance’.
7. On several other occasions, the defendant has emailed other franchisees to reveal confidential information including, on 13th, 15th and 19th February 2012.”
19. By order dated 28th June 2013, the court directed that the claimants do file a Scott schedule identifying each occasion on which it was alleged that the defendant had revealed confidential information and to identify the facts relied on to show that such information was, in fact, confidential. The defendant was required thereafter to file a response identifying, in particular, the information which he asserted within his defence was already in the public domain; that is, it was generally known or easily accessible otherwise than by virtue of his alleged breach of contract.
20. The schedule was filed on 26th July 2013 and has been signed with a statement of truth on behalf of the claimants by their instructing solicitor Miss Emily Slater, dated 24th February 2014, and countersigned by the defendant. The schedule contains 25 allegations with particulars of the substance of the claim, the complaint and ‘the quality or nature of the confidence’ (so as to show that such was, in fact, confidential) by reference to the relevant confidentiality clause within the agreement.
21. In his closing submissions, Mr Richardson submitted that each of the allegations had been proved and that whether taken individually or cumulatively, they provided the firm basis for the permanent injunction sought. Mr Richardson stressed the cumulative nature of these allegations. Miss Omar submitted that there was no merit in any of the allegations for there had been no such disclosure or breach of agreement and that, in any event, given the claimants’ conduct complained of in these proceedings the court should decline to grant the equitable remedy sought in any event.
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Mr Nicholas Charles Statman aka Nick teflon-coat Statman
Mr Malcolm Robert Statman aka Malcolm bully-boy Statman
Gateway Homes Nationwide Franchise Ltd / Whitehall Franchise Ltd (in liquidation from August 2014)
Gateway Homes UK Ltd
(Other trading companies / names in operation –
CXI 92 LIMITED
KINGSBRIDGE AND CARTER LTD
SPEEDY PROPERTIES LTD
TOM CRAVEN LIMITED
ROBERT CHARLES PROPERTY LIMITED
GATEWAY HOMES RENTALS UK LIMITED
GATEWAY HOLDINGS (UK) LIMITED
GATEWAY HOMES RENTALS UK LIMITED
PROP BUY LTD
ROOST UK LIMITED)
Claimants Legal Team (upto end July 2014) –
Miss Kaye Longhorn – Cohen Cramer Solicitors(apparently now departed employment)
Miss Emily Slater – Cohen Cramer Solicitors(apparently now been fired) aka Miss Emily I-am-the-law Slater
Miss Gemma Bowkett – Cohen Cramer Solicitors(apparently now departed employment)
Mr Michael McDonnell – Cohen Cramer Solicitors
Mr Matthew Richardson – Barrister @ Henderson Chambers aka Mr Matthew tweedledum Richardson (Ex-UKIP General Secretary … that didn’t last long!)
Mr Adam Richardson – Barrister @ Warwick House Chambers aka Mr Adam tweedledee Richardson
Claimants Legal Team (post July 2014) –
Miss Clare Painter – Group Manager, Gateway Homes UK Ltd aka Jane Wood (trying to act as a McKenzie Friend)
Mr Nick Statman – acting as a Litigant In Person
Mr Stuart Brown – acting as Litigant In Person, represented at Trial by Miss Omar