Ventures Food Limited v Little Dessert Shop Limited

After the franchise agreement was terminated in September 2020, Ventures Food stayed in occupation. It then brought proceedings saying the franchisor held the lease on trust for it. The claim relied heavily on an email said to show that the lease was being secured on Ventures Food’s behalf and could later be changed into its name.

The franchisor disputed that version of the email and relied on a shorter version. That turned the case into both a property dispute and a document authenticity dispute.

The second stage came later. After the claim failed, the franchisor applied for non-party costs orders against the two brothers behind Ventures Food. That later application did not re-run the whole trial. It asked whether, despite the company being the formal claimant, those individuals should personally pay costs because of the way they controlled and then abandoned the litigation.

That procedural point matters. The published judgment is the costs decision, but it records and relies on the earlier trial findings.

Before trial, Ventures Food’s solicitors applied to come off the record because they had no instructions, fees and disbursements were unpaid, and the client was no longer responding. The court removed them from the record in January 2022.

The franchisor then applied to remove Ventures Food’s permission to rely on expert evidence because Ventures Food’s expert had repeatedly said he was without instructions and could not progress the joint statement required by the case management order.

Ventures Food did not attend the pre-trial review. The court rescinded its permission to rely on expert evidence and warned that failure to attend trial put the claim at risk. The court also allowed the franchisor to pursue a counterclaim seeking a declaration that Ventures Food occupied under a contractual licence that had been terminated.

Ventures Food later sought a short stay to try to settle, but that application was refused shortly before trial.

When the trial began on 22 March 2022, Ventures Food again failed to attend and was not represented. The trial therefore concluded on the first day. In the findings quoted in the later costs judgment, the court accepted the franchisor’s evidence and found that Ventures Food’s version of the disputed email was not genuine and had been manipulated.

That finding was central because the trust case depended heavily on that email.

The court also said the trust argument made little commercial sense on the facts. Evidence showed that in the franchisor’s model some sites were held directly by franchisees and some by the franchisor and then sub-let. The court noted that Ventures Food had requested a sub-lease in February 2019, which sat awkwardly with its argument that it was already beneficially entitled to the lease.

The judge also accepted evidence that retaining some control over premises was important to the franchisor’s business model and brand protection.

Having rejected the trust claim, the court held that Ventures Food occupied the premises under an express contractual licence granted by the franchisor. The court found that the occupation right was linked to the franchise agreement and ended when that agreement was terminated. In the alternative, the court said such a licence would have been implied if necessary.

The court dismissed the claim, granted judgment for the franchisor on its counterclaim, ordered Ventures Food to vacate the premises by 19 April 2022, and ordered it to pay costs on the indemnity basis with an interim payment on account.

The court refused to make a non-party costs order on the alleged conspiracy basis. The reason was procedural fairness. Although the trial judge had found that Ventures Food’s version of the email was not genuine and had been manipulated, no specific allegation had been pleaded in the main action that the brothers themselves had conspired together to fabricate it.

The court held that they had not been given a proper opportunity to consider their personal positions, deny the allegation and put in evidence in their own defence.

That part of the judgment is important for a different reason. Even where the court is highly critical of the underlying conduct, it still looks carefully at whether a personal allegation was properly put. A later costs application is not a shortcut around basic fairness.

So the court did not simply convert a finding against the company into a personal fraud finding against the individuals.

The court did, however, make non-party costs orders for serious litigation misconduct. It found that the brothers controlled Ventures Food and the litigation. The court also found that they had effectively abandoned the proceedings by 13 December 2021, being four weeks before the solicitors applied to come off the record.

The judge relied on the evidence already before the court and on the findings made in the course of the proceedings.

The court relied on a series of failures. They did not give instructions to their expert to prepare the joint statement required by the case management order. They did not attend the pre-trial review. They did not attend the trial. They did not formally discontinue the claim or otherwise bring the proceedings to an orderly end.

Instead, the defendant and the court had to prepare for hearings and a four-day trial in a case the individuals no longer intended to contest.

The court rejected the explanations put forward for those failures. It was not satisfied there was good reason for non-attendance at the pre-trial review. It also found the claimed belief that they could not attend trial without legal representation was inconsistent with the fact that they had made an application to the court on behalf of the company shortly before trial.

The judge also relied on evidence from the creditors’ meeting after the company went into liquidation, where the decision to abandon the litigation was linked to lack of funds.

The case also shows the danger of relying on one disputed communication to support a major commercial claim. If your business expects to have a beneficial interest in premises, or a right to take over a lease later, that position should appear clearly in the formal documents and the surrounding transaction record.

Where the commercial model is mixed, with some sites held by the franchisor and some by franchisees, consistency and clear drafting matter even more.

For owner-managed businesses, the litigation lesson is just as important. If your company starts proceedings, you need to keep giving instructions, comply with case management orders and attend hearings. If funding becomes a problem, you should deal with that directly and procedurally. Simply disengaging can create serious costs consequences.

The company structure still matters, but it is not a safe hiding place for exceptional misconduct in litigation. That is the real message of the costs ruling.

The second feature is conduct once litigation is underway. The court was particularly concerned that the individuals behind the company did not bring the case to an orderly end when they no longer intended or were no longer able to pursue it. They let the process continue, with the other side and the court still preparing for key hearings and trial.

That was a major reason why the court treated the case as exceptional.