Pepe’s Piri Piri Ltd & Anor v Junaid & Ors

Posted on 10/06/2020 · Posted in Expert Witness, Financial Litigation

This case arose out of a dispute concerning a termination of fast food franchise agreement in Northampton. The facts of the case are unremarkable, but the case is a cautionary tale on two counts: poor record keeping and documentation will undermine any legal claim, and the pitfalls of employing an expert who may not be fully conversant with their role and duties to the court under the Civil Procedure Rules (CPR) Part 35.

The Claimants sought to recover, under various tortious heads of damages, a sum of over £500,000 for alleged losses arising out of the Defendant’s conduct in connection with two fast food chicken shops.

The Claimants, Pepe’s Piri Piri, are owners of over 75 fast food franchises who control the Pepe’s franchise business and its branding. The Defendants were the owners and investors of the Pepe’s Gold Street franchise. This franchise was operated under the terms of a franchise agreement signed between Food Trends (a company now dissolved) and Pepe’s Piri Piri. The dispute arose after Food Trends terminated its franchise agreement with Pepe’s, and subsequently Food Trends shareholders entered into another franchise agreement with a competing franchisor, Rio’s Piri Piri and opened up a Rio’s Piri Piri chicken shop at the same premises formerly run as Pepe’s Piri Piri. The multiple Defendants were all at some time or another involved, either as investors, directors or managers in either one or the other of the fast food chicken shops or both.

Before anything else, preparation is the key to success.”
Alexander Graham Bell

The Gold Street franchise commenced trading in 2011 and was financed by various loans from family and friends who had little or no knowledge of the fast food business or commercial acumen. In 2014 the franchisee’s investors set up a company, OSI (the third Defendant), to be the investment vehicle which would invest in Food Trends. By this time, the franchise had accumulated large debts, unpaid management fees and rental arrears on the shop premises at Gold Street. When investors requested repayment of the debts the First Defendant approached the rival business, Rio’s Peri Peri, about setting up a second franchise business, in Wellingborough Road which would compete with Pepe’s in Northampton.

Food Trends financial difficulties continued into 2016 when the sixth Defendant initiated meetings and advised that Food Trends should be dissolved. OSI then purchased all the assets of Food Trends, except the lease, for a pound. Around the same time deed of surrender for the lease was signed and a new 25-year lease was issued for the premises signed by the ninth Defendant, Optifoods.

The Claimants then issued proceedings against the Defendants under three heads of claim: (i) Procurement of breaches of the franchise agreement by Food Trends, (ii) Unlawful interference with the Claimants interests by causing, encouraging, permitting or facilitating breaches of the franchise agreement, The Rio’s shop and or the termination of the Franchise agreement and (iii) conspiracy amongst the Defendants to cause, encourage , permit or facilitation Food Trends breaches of the franchise agreement and/or the Rio’s shop.

The Claimants alleged 11 breaches of terms of the franchise agreement resulting in serious financial harm to the Claimants’ business. Both parties relied on expert witness evidence of chartered accountants. The Defendants’ expert witness was criticized by the Claimant’s counsel for his partisan approach in both his written and oral evidence and contended that his evidence, rather than that of objective expert was more in the nature of critical commentary on the Claimant’s business practices. The judge agreed with this contention and further criticized the expert’s approach, by seeking to put the party’s case “in the most favorable light” as being inconsistent with his duties to the court under CPR Part 35.

Red Hot Chillis

The Claimant’s expert also did not escape criticism; however, this was related to the amount of speculative evidence adduced, owing mainly to the lack of documentary proof available to quantify the Claimants’ losses. Further evidential problems were highlighted by the judge namely the differing versions of the franchise agreement relied on by the parties, which could not be adequately explained by either party. The judge considered that this sought to further undermine the evidential weight that could be placed on the Claimants’ documentary evidence and in addition the Claimants failed to establish the extent of their financial losses. The judge drew attention to the fact that despite the fact the Claimant’s accountant’s evidence that financial records were in existence for the entire period of the operation of the franchise, neither party produced documentary evidence that could shed light on the financial position of Pepe’s franchise.

The Claimants failed to prove the first two heads of claim but were successful on the third head of claim, the tort of procuring a breach of contract, as a result of the surrender of the lease of the Gold Street premises. This resulted in a recovery of damages of the sum £2,523.07 plus interest, a tiny proportion of their original claim. This disastrous outcome occurred as a result of a complete failure of the Claimants to produce full and accurate financial records to prove alleged and future losses.

Costs are not simple when part of the claim is successful and some defendants are found not to be liable. The parties were unable to agree costs and hence it came before the court to make a ruling. This resulted in a second judgement where it was decided that the costs of the Claimants application of 5 March 2019 will be in the case and as to the costs of the claim generally the Claimants will pay the costs of Mrs Razi and of Infiniti and 80 per cent of the Judgment Defendants’ costs. However there were competing pressures and the judgement noted “… a factor in the balance against relief was the serious delay of two months in making the application for permission to rely on the witness statements after those statements had been prepared and served on the Defendants. There was no good reason for that delay. There is no reason in principle why egregious and unexplained delay on the part of a litigant in making an application might not at the third stage of the Denton analysis outweigh the first two factors which are otherwise in favour, even strongly in favour, of the grant of relief.

Link: Pepe’s Piri Piri Ltd & Anor v Junaid & Ors [2019] EWHC 2097 (QB) (31 July 2019)

Link: Pepe’s Piri Piri Ltd & Anor v Muhammad Ali Junaid Food Trends Ltd (Now Dissolved) & Ors[2019] EWHC 2769 (QB) (29 October 2019) re Costs

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