APPROVED JUDGMENT (contd… Pages 16 to 20 of 75)
67. The defendant relied upon the report to show that not only were the claimants part of the particular sector which was investigated by the OFT but that they were one of four companies which were expressly interviewed by the OFT. The defendant’s contention is that this report reiterates matters already in the public domain traceable to the articles of April and September 2011 and also in the BBC television programme which had been televised prior to this report.
68. So far as that report is concerned, in April 2013, the OFT launched a study into the UK’s quick house sale sector. The report summarised the purpose of its study thus:
“By carrying out the study, we wanted to find out whether this sector works well for home sellers. We had particular concerns about the risks to sellers in vulnerable situations, such as older people, for example when they need to move due to declining health, or those who need to clear debts and/or avoid possession. We also noted that where sellers get a bad deal, they could lose a lot of money.”
69. The report noted that the quick house sale sector was a very small part of the overall housing market in the UK, representing 0.5 percent to 1 percent of all UK residential property sales, generating sales in the region of £0.5 billion to £0.9 billion, based on an average quick sale estimate of around £100,000. The study found that the house sellers typically completed a quick sale, foregoing between 10 to 25 percent of the market value of the property, though much higher percentage reductions were revealed during the study.
70. The report identified the advantages to a house seller whose circumstances were such that they wished to secure a quick sale in the knowledge that he would forego a substantial part of the market value. The report also identifies a number of practices operating within the sector which gave cause for concern as being substandard and possibly unlawful. The report stated that the practices of most concern relate to:
Home sellers are not given enough information about the status of the initial offer price and that factors such as an adverse survey may cause it to be reduced later on. Last minute and often significant reductions in the offer prices raises concerns that providers may be exploiting sellers’ circumstances, especially where providers do not give the reasons for reduction in the offer price.
Speed of service
On their websites and in other marketing, providers tend to stress the fastest possible time to completion, for example, within seven days, rather than the more typical time (three to four weeks). Few explain deals on the basis that [their claims?] or the factors that may lengthen timescales. There are also concerns when providers require home sellers to sign long-term exclusivity agreements. We cannot see how lengthy tie-ins square with the promise of a quick sale. Home sellers who want a speedy sale should question why quick house sale agreements should last any longer than four weeks.
The identity of the actual buyer
Not all providers are being clear with home sellers about their service. Are they going to buy, find a buyer or pass on details to another provider?
How the purchase will be paid for
Not all providers are explaining clearly the buyer’s financial position. Does the buyer have cash funds available or must they borrow or raise finance first?”
71. The report found how the quick sale transactions operated, based on enquiries made in the study. Thus it continued:
“Once the home owner has given the provider the details of the property to be sold, an initial valuation is undertaken by the provider. This seeks to assess the property’s market value. That is the best price that a seller might hope to achieve in current market conditions. Valuation methods used by providers varied. Having assessed the property’s market value, the provider makes their first offer. They would already have a BMV percentage in mind, for example 80 percent of the full market value, but may offer more or less than this depending on the property’s location and condition. These offers are usually made subject to survey and contract and/or other conditions such as inspection of the property.”
72. The report emphasised that these initial offers were not firm offers, merely indications of what the sale price might be assuming various conditions were met. The ‘initial offer’ is important because of the way house sellers frame their decisions.
73. The report expressed the concerns held by the OFT about the degrees of transparency shown by providers around their initial valuations and their first offers and deficiencies in the information in fact provided to the home seller. In respect of the latter part of the quick sale transaction, the OFT found that with any house sale, the surveyor’s report, said to have been obtained by the provider, may identify factors which may cause the provider to lower their offer or pull out. The OFT did not ascertain how often that occurred and it stated:
“However, from consumer complaints, it seems that the surveyor’s valuations can lead to significant reduction in final offer prices. We have seen price drops ranging from 7 percent to 53 percent of the initial offer, noting already that the offer was lower than the full market value, and averaging 22 percent across the range of complaints we have received.”
74. The report continued:
“When the offer price is dropped, some house sellers walk away from the deal, not always without cost though. If they paid for the survey or incurred legal costs, then they may not be reimbursed. If they sign an exclusivity agreement with the providers, they remain tied to it until it expires. Some house sellers accept the reduced offer. We are seeing examples where sellers have accepted offer prices that were tens of thousands of pounds lower than the initial offer which was already below market value price. These tend to be sellers with an urgent reason to sell, for example because they have already committed to a purchase of another property, have debts to pay off or are in poor health. In due course, when the offer is reduced at the last minute, often near the exchange of contracts, without any good explanation, these are the circumstances which gave rise to particular concern to the OFT and which may be the cause of exploitation of the seller’s circumstances.”
75. The report identified a concern arising out of the exclusivity agreements or tie-ins into which house sellers enter at the outset of their dealings with such providers:
“It is noted that sellers may be liable for costs if they pull out of exclusivity agreements, sometimes called ‘Option to purchase agreements’. These agreements appear to be more commonly used by providers that broker or buy house properties and broker others. In the enquiries we have seen, the costs for withdrawal can run into several thousands of pounds. They also tend to lock in the seller for long periods of time, six months or even twelve months. During this time, the exclusivity agreements tend to state that the seller cannot sell to or through anyone other than the provider but offer no guarantee that their property will be sold or, at the end of the term, will sell.”
76. The report concluded:
“We cannot see how these long tie-ins square with the promise of a quick house sale.”
77. On 7th August 2013, the OFT report was published. It was given coverage by the media including BBC News/Business on their website. The report was heralded by an official press release from the OFT on 7th August 2013. The press release stated that the OFT had opened formal investigations into three quick house sale firms for alleged unfair practices that may have led to some customers losing tens of thousands of pounds. The advantages to owners and the concerns about certain practices were both highlighted.
78. On 17th December 2013, the OFT issued a further press release to which both parties have referred in their evidence. The claimants emphasised the fact that they cooperated with the OFT, that no adverse criticism had been made of them by the OFT and that they had willingly offered the undertakings to the OFT to set an example and to help others meet the high standards which they believed they, the claimants, provided.
79. The defendant emphasised the fact that serious concerns over identified bad practices relating to some complaints by home owners, including those made against the claimants, were found and that the undertakings constituted an admission by the claimants. As I have said, I reject that particular observation made by the defendant for the offer of an undertaking in such circumstances could not reasonably be regarded as an admission, no more than the defendant’s undertaking in these proceedings imply an admission on his part.
80. Mr Richardson submitted that the court should be slow to accept any of the defendant’s assertions or denials in the defendant’s lengthy witness statement and in the witness box. Whilst the defendant now claims to be on a crusade for the protection of consumers there is a marked absence within the material presented to the court [extending to over 4,000 pages] of any suggestion by the defendant that he was acting in the interests of consumers. Rather, he, the defendant, was engaged in his own personal attack on the claimants, submitted Mr Richardson. There is something to be said in relation to that particular submission of Mr Richardson, that is, being wary of the defendant’s claimed altruism. In this context, it is not to be overlooked that it was the defendant who secured the agreements to sell from the sellers in the first place and which he now alleges formed the basis of a trap for those sellers. In that context, the defendant was writing under a conflict of interest; that is, on the one hand, it was in his financial interest to secure these agreements to sell and to sign up the vendors subject to the claimants’ method of operating and the criticisms he then made (that is, to ensnare them) whilst on the other hand it was in his interests, given his personal dispute with the claimants to associate the claimants with the bad practices referred to in the OFT report and the media reports to which I have referred.
81. It is, therefore, necessary to exercise caution when considering the defendant’s testimony in these circumstances, particularly as he did appear to be evasive when dealing with Mr Richardson’s straightforward questions as to whether or not the concluding paragraphs of the email of 24th February 2012 (see paragraph 28 above which appeared to be the only allegation of any substance then capable of justifying an injunction pending the known position of the defendant) were open to the interpretation, at least, that the email could be seen to constitute a threat to reveal confidential information. The defendant was unimpressive in his response. He was unwilling to accept that that email was capable of that interpretation. That said, the defendant readily made concessions elsewhere in his evidence.
82. Before I deal with the evidence of the two principal witnesses, I should refer to the schedule of allegations in relation to the non-disclosure injunction. There are 25 in number.
83. Allegation (1) is the email dated 13th February 2012 sent by the defendant to all franchisees and, it is alleged, to claimants’ employees. I have already recited that email. It was not relied on originally. It is not necessary for me to recite it again. The substance of the claimants’ allegation is that in referring to “Increasing the deals signed would only increase the disappointment factor” the defendant revealed information to third parties which relates to the operation of his own or the claimants’ business and, in particular, also as to the success or not of his own franchise and was, thus, confidential within the meaning of the clause. It is alleged that this is information which should be kept confidential directly between franchisee and franchisor. It is also asserted that the operation of each franchise and the terms of the individual franchise agreements are confidential to the individual franchisee and franchisor. Thus, in asserting, “By increasing the number of deals signed, this would only increase the disappointment factor when Gateway failed to convert contract signature to completion, in my case by a factor of over 60 percent so for every ten further signatures I achieve at least six will fail (statistics based on operational evidence from 22 months of operating a six area loss-making gateway franchise)” the claimants contend that that part of the email constitutes a freestanding breach of the confidentiality clause.
84. So far as the defendant was concerned, his response was that franchisees openly and commonly and openly discussed the quantity of ‘failures’, reasons for such failures, timescales and so on, whether by phone calls or email, and, indeed, in franchise meetings and that comments of the kind now complained of were not, and were never considered to be contrary to the confidentiality clause. The defendant argued that he had not disclosed anything which was not known to others and that, in any event, this was information which was in-house, and remained confidential between the franchisees, each of whom were bound by the same clause. It was in those circumstances that the allegation was denied both as a breach in itself of the franchise confidentiality clause or, in any event, as being so insubstantial as to not justify the granting of a permanent injunction.
85. Allegation (2) is an email dated 15th February 2012 sent by the defendant to Mr Barber, then a franchisee. The offending part of the email is as follows:
“Sorry for wasting a £100,000 I didn’t have and nearly two years of working without a penny.”
The complaint is that that statement contains the necessary ‘quality of confidence’ which brings it within the ambit of the confidentiality clause or the pleaded implied duty, in that the defendant has disclosed information to third parties which concerns the operation and success and terms of his business. That is the defendant was in breach of the clause by referring in an email to another franchisee that he had personally ‘wasted £100,000’ after two years with the agreement.
86. The defendant’s initial response was that his comments (or ‘information’) made to Mr Barber were made in confidence. Furthermore, the claimant, through Mr Nick Statman, was well aware of the practice of franchisees communicating conversations of this kind via email and that there was no question of there being a breach of confidence in any event.
87. Allegation (3) arises out of the email of 15th February 2012 sent to Mr Barber by the defendant who wrote that:
“There will be no doubt a lot more to come but not internally. It depends on how Mr Statman wants to act. Unfortunately for the current franchisees, it may well harm the value of their investment on a permanent basis and affect the leads that come through the internet.”
The claimants complain that, as I understood it, this email contained a threat to reveal confidential information and that it concerned information or knowledge about the claimants’ business system.
88. In his response, the defendant asserted that the system was undefined and his comments were not capable of being interpreted as a wrongful disclosure or as a threatened breach. Miss Omar pointed out that this statement could not reasonably be described as a threat. All that was being said was that whether anything else followed (not necessarily confidential) would depend, in any event, on Mr Statman’s future conduct. Miss Omar submitted that this allegation was simply not capable of being interpreted as a breach or threatened breach of the clause and, in any event, it (like the preceding allegations) was not of sufficient substance or clarity to justify either the initial ex parte injunction or a permanent injunction.
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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