CONTRACT

Hospitality and leisure and fundamental breach - hotels - management contracts - termination - trade marks - terminating agreements - no material breach of agreement

Bouverie No 1 Ltd v De Vere Hotels & Leisure Ltd: ChD (Mr Justice Rimer): 7 September 2006


The claimant company (B) sought a declaration that it was entitled to terminate a management agreement that its parent company had entered into with the defendant company (D).


D owned and managed hotels. It had sold a hotel to B's parent company, but had signed a management agreement under which D had been appointed to operate the hotel.


A dispute had arisen because D had engaged in a rebranding exercise in relation to the hotels in its chain, including the hotel that it had sold, which was given a new hotel logo, namely 'De Vere at The Belfry'. D had used the logo in various brochures, publications, hotel directories and on its Web site. D had also made use of the logo in caption form in advertisements and in a calendar sent to D's business contacts and customers.

The parties fell out, and B sought to terminate the agreement because of D's alleged material breaches of the agreement. B argued that: the new logo had either changed the hotel's name or at least had designated it by a name other than its permitted one, namely 'The De Vere, Belfry', under the agreement, and that the new name was either 'De Vere at The Belfry' or 'De Vere'; D's rebranding exercise involved a use of trade marks incorporating the words 'The Belfry' in a manner likely to cause damage to the goodwill and reputation attaching to those marks; and D's rebranding exercise was a matter covered by a duty under the agreement to inform and advise of all material financial matters and other matters concerning the operation of the hotel, and D had failed to discharge that duty.

Held, none of the brochures and publications, other than the calendar and advertisements, provided any basis for a conclusion that D had changed the name of the hotel to, or designated it as, De Vere at The Belfry or, simply, De Vere. Furthermore, the hotel directories and D's Web site did not designate the hotel as either De Vere or De Vere at The Belfry.



Although D had introduced the new logo as part of its rebranding exercise, it was not part of that rebranding to change the hotel's name. No ordinary reader of the brochures and publications would, in the circumstances, have concluded that the hotel's name had been changed.



However, D's use of the logo in caption form, in respect of the calendar and the advertisements, had involved a designation of the hotel as bearing a name other than its permitted name. The agreement, which permitted D to change the name of the hotel without consent provided that any change was limited to alteration by which D intended to identify the hotel as part of D's chain of hotels, did not permit the designation of the hotel as De Vere at The Belfry in the captions in the calendar and advertisements. Therefore, there had been a breach of the agreement. But the use of the logo in caption form was not part of any overall strategy to change the hotel's name; there was no such strategy.



B had failed to establish that D's rebranding exercise involved a use of trade marks incorporating the words 'The Belfry' in a manner likely to cause damage to the goodwill and reputation attaching to those marks.

B had failed to prove any breach of D's duty to inform and advise in respect of material financial and other matters concerning the operation of the hotel. D was under no obligation to inform or advise about its proposal and decision to rebrand itself across its chain of hotels, or to publish new chain collateral reflecting such rebranding and include its new logo, since that exercise could not be regarded as a matter concerning the operation of the hotel.

However, D had a duty to inform and advise B's parent company about its proposal to introduce any material hotel specific changes, including the introduction of new signage at the hotel, which would relate to the operation of the hotel. On the evidence, D had properly discharged that duty. There was nothing in the agreement as to the time by which such information and advice had to be given.



D had committed no material breaches of the agreement that entitled B's parent company to terminate the agreement.

Judgment for the defendant.


Michael Bloch QC, Anna Carboni, Nikki Singla (instructed by CMS Cameron McKenna) for the claimant; John Baldwin QC, Adrian Speck, Henry Ward (instructed by Berwin Leighton Paisner) for the defendant.