Hard Rock case "immensely important" for Jersey contract law

Wednesday 31 July 2019

The latest twist in a long-running legal battle involving a Jersey-registered business and the Hard Rock group of companies has been described as an immensely important case for the future direction of Jersey’s contract law.

In June 1999, HRCKY Limited signed a franchise deal with the Hard Rock group, and another branch of the company that leases memorabilia, to set up a branch in the Cayman Islands.

Hard Rock Limited, which is registered in Jersey and deals with franchise agreements for the Hard Rock Group, and Hard Rock Café International (STP) Inc, which deals with memorabilia leasing agreements, terminated the franchise in 2013. They later took HRCKY to Court, claiming that they were owed $120,000, with the Court ruling that HRCKY should pay back £90,000.

But HRCKY made several counter claims, including one arising out of a Restaurant Franchise Agreement (RFA) from 11 June 1999, which allowed them to operate a Hard Rock Café in Grand Cayman.  

Pictured: The Royal Court, presided over by the Deputy Bailiff, Tim Le Cocq, dismissed the counter claim in February 2018.

The counter-claim was dismissed in February 2018 by the Deputy Bailiff, Tim Le Cocq - sitting with Jurats Nicolle and Ronge – as they considered HRCKY had"no realistic prospect of succeeding."

Leave to appeal the decision was then refused by the Deputy Bailiff in July 2018 before succeeding before James W McNeil, Judge of Appeal, the following month. 

Earlier this month, the Bailiff, Sir William Bailhache, John Vandeleur Martin and Robert Logan Martin, granted the appeal. 

HRCKY was represented by Kevin Doyle, Director, with Advocate Timothy Hanson defending, while Hard Rock Limited and Hard Rock Café International (STP) were defended by Jeremy Garrood. 

Pictured: The Court of Appeal said the appellant hadn't seen all of the evidence.

“...It would be wrong not to recognise that in effect the Appellant has, in the language of some of the older cases, been driven from the judgment seat without all the evidence having been produced to the Court of trial,” the Court of Appeal wrote in its judgment.

They found that the Royal Court had “erred in relying upon the joint experts’ report as not supporting the Appellant’s complaint, thereby taking into account a matter it should not have taken into account.”

They noted that HRCKY’s complaint was that he was told there would be 15 to 30% profits which were not achieved. The fact that the company achieved the same profits in Cayman as many other of the franchises did not address the complaint that he did not achieve the level of profit which he said he was promised, the Court of Appeal concluded.

Pictured: The Court of Appeal said the Royal Court erred when dismissing the counter claims. 

The judgment also notes the Royal Court erred “in exercising its discretion to grant the application for summary dismissal of the counter-claim.” They added that a trial will be necessary to investigate factual areas which haven’t been looked over since disclosure ordered by the Royal Court still hasn’t taken place. 

“Until the facts have been properly established, it seems to us that the expert opinion is not as persuasive as [Hard Rock Limited and Hard Rock Café International] would contend,” the Court of Appeal wrote.

Furthermore, they noted that the Royal Court erred because it “misdirected itself as to the principles to be applied,” adding that a trial should decide how an “entire contract” clause could be undermined in appropriate circumstances.

Pictured: The Court of Appeal recommended the case be examined during a trial.

“It is clear that there is discovery yet to be performed, and it seems to us that some amendment of the pleadings may also be necessary. It would be desirable if such amendments as might be allowed take place after discovery,” the Court of Appeal said, adding that the decision on what evidence to accept as part of the trial will be up to the Master and/or the Royal Court.

Advocate Timothy Hanson commented: “This is an immensely important case for the future direction of Jersey’s contract law that may further assist any future codification or restatement. I have found it a privilege to have been involved.”