Judgment

from : 33 1 45013133 PARIS COURT OF APPEAL 16th chamber, section A JUDGMENT OF 9 DECEMBER 1998 (No. 403, 24 pages) General register entry number: 1998/14119 No joinder Decision under appeal: Judgment delivered on 18/05/1998 by the COMMERCIAL COURT of PARIS è Ch. RG no.: 1997/62466 Date of closing order: 30 September 1998 Nature of the decision: ADVERSARIAL Decision: EXPERT REPORT APPELLANT: S.A. SEBOL acting through its legal representatives having its registered office at the "CARREPOUR" shopping centre, Chemin de Sain Claude - 06600 ANTIBES represented by Maitre PAMART, avoué assisted by Maître JEAN-PAUL CLEMENT, Toque B405, Avncatat Barreau of PARIS APPELLANT: S.A.R.L. B. & O. priso en la personne de ses représentants légaux having its registered office at Rond Point Weisweller, Rome de Grasse 06600 ANTIBES représchiéc by Maître PAMART, avoué assisted by Maitre JEAN-PAUL CLEMENT, Toque B409, Avozal as Bancau Fax regi of PARIS APPELLANT: Monsieur COLLORAFI Bernard decuran: 21 B, chomin de l'Esterelle - 06100 LE CANNET ROCHEVILE represented by Maître PAMART, avoué assisted by Maine JEAN-PAUL. CLEMENT, Toque B405, Advocate at the Paris Bar APPELLANT: S.A.R.L. LES PINS acting through its legal representatives having its registered office at 32 avenue de Cannes - 06160 JUAN LES PINS represented by Maitre PAMART, avoué assisted by Maîre JEAN-FAUL CLEMENT, Toque B405, Advocate at the Barrear: of PARIS RESPONDENT: STE MAC DONALD'S FRANCE acting through its legal representatives having its registered office at 1, rue Gustave Eiffe! - 78045 GUYANCOURT CEDEX represented by SCP FISSELIER-CHILOUX-BOULAY, avoué assisted by Maitre JEAN-MARIE LELOUP, Advocate at the Bar of POITIERS, Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1998 RG No.: 1998/14119 - 2nd page Py: 4 COMPOSITION OF THE COURT: at the hearings, Münsieur DUCLAUD, President, heard the oral arguments, the lawyers not having objected. He reported on them to the Court in its deliberation; at the deliberation, Monsieur DUCLAUD, President, Monsieur MAIN, Presideni and Madame COLLOT, Conseilier • HEARINGS: At the public hearing of 30 September 1998 REGISTRAR: At the hearings and at the delivery of the judgment: Madame NGUYEN JUDGMENT i Delivered publicly by Monsieur DUCLAUD, President, who signed the original with Madame NGUYEN, Registrar - The Court rules on the appeal lodged by the company SEBOL, the company B et O, the company LES PINS and Mr Bernard COLLORAFI against a judgment of the Paris Commercial Court of 18 May 1998 which, among other things: - dismissed these parties of all of their claims directed against the company MÁC DONALD'S FRANCE, - found that the lease-management (location-gérance) and licence agreements -concluded between the company MAC. DONALD'S FRANCE on the one hand, and the company SEBOL and Mr Bernard COLLORAFI on 31 acit 198?, the company B et O and him on [Declobre] 1996, the company LES PINS and him on 18 June 1997, had been terminated by operation of law on 2 January 1998 by the effect of the termination clause inserted in each of the agreements, • ordered the eviction of all the companies, tenant-managers, and of Mr Bernard COLLORAFI from the business premises, Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 198 RG No.: 1948/14119-3rd page Py: 5 - ordered the handing over of the keys, the list of staff and the files relating to each employee and the operating accounts, subject to penalties of 32,000 francs per day payable by the company SEBOL and Mr COLLORAFI (Antibes 1), 37,000 francs per day payable by the company B et O and N. COLLORAI (Antibes 2), and 26,390 francs per day payable by the company LES PINS and Mr COLLORAFI (les Pins), after ten working days from its service, limited to 30 days. - appointed Maitre ZONINO, bailiff at Cagnes-sur-Mer, as officer to record, with both parties present, in each restaurant, the inventory of stock of goods and consumables, operating items, furniture and equipment of the business and the state of the cash holdings, - ordered, jointly and severally, to pay to the company MAC DONALD'S FRANCE: * the company SEBOL and Mr COLLORAFI the sums of 1,867,247.84 F as unpaid fees (royalties) with interest at the legal rate, from 1 August 1997 on 1,206,300 F from 1 December 1997 on 361,800 F from 1 January 1998 on 239,147.84 F and 16,000 F as an occupation indemnity per day from 2 January 1998 until the day of the bailiff's record, whose appointment is requested above, with interest at the legal rate, * the company B & O and Monsieur Bernard COLLORAFI the sum of 1,533,548.87 F as unpaid fees (royalties) with late-payment interest at the base bank rate plus 3 points for each instalment from the date on which it should have been paid, and 24,000 F as an occupation indemnity per day from 2 January 1998 until the day of the record by the bailiff, whose appointment is requested above, with interest at the legal rate, * the company LES PINS and Mr Bernard COLLORAFI the sums of 504,474.42 francs as unpaid fees (royalties) with late-payment interest at the base bank rate plus ? points for each instalment from the date on which it should have been paid, and 16,000 F as an occupation indemnity per day from 2 January 1998 until the day of the record by the bailiff, whose appointment is requested above, with interest at the legal rate, - held that the interest due to SA Mu DONALD would itself bear interest in accordance with article 1154 of the Civil Code, - took note that SA Me DONALD'S reserved the right to perfect ser claims in view of the conditions of return of the businesses occupied unlawfully by Monsicur Berard COLLORAFI and his three companies and to claim all damages justified for the losses that Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMURE 1008 R:N°: 1988/14119-4th pag Py: 6 might appear, - dismissed SA Me DONALD'S of its claim for damages for abuse of process, - ordered provisional enforcement of the decision to be made, subject to the provision by SA Me DONALD'S of a bank guarantee equal to the sums awarded as unpaid fees (royalties), - ordered, jointly and severally, the companies SEBOL, B et O, LES PINS and Minsicur Bernard COLLORAF to pay to SA Mo DONALD'S the sum of 50,000 F under article 700 of the New Code of Civil Procedure, dismissing the remainder, and the costs. By order of 3 July 1998, the First President of this Court stayed the provisional enforcement of the provisions of this judgment relating to the monetary awards. The facts and the procedure may be summarised as follows: 1°) By agreement of 5 August 1987, the company Me DONALD'S France granted to Monsieur Bernard COLLORAFI under a lease-management agreement (location-gérance), for a period of twenty years, a fast-food business located at the Carrefour shopping centre, chemin Saint-Claude in Antibes, in return for • - a base fee of 12% of the turnover excluding tax achieved by the restaurant, with a minimum of 1,800,000 F per year, - a service fee of 5% of the turnover excluding tax. By rider of 31 August 1987, Monsieur COLLORAFI assigned and transferred to a company SEBOL, of which he holds almost all of the shares, all of the rights and obligations arising from the agreement of 5 August 1987. This restaurant experienced rapid and continuous growth until 1993, both in terms of activity and results, followed by a stabilisation in 1994. In this last year, the company SEBOL achieved a turnover of 27.1 million francs and a net result after corporation tax of 1.3 million francs. These figures were in line with the forecasts presented to Monsieur COLLORAFI by Me DONALD'S at the signing of the agreement, namely, once the cruising rhythm was reached (third year, therefore 1990), a turnover of 19 million, actually exceeded that year (21.4 million francs). Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1998 RG No.: 1998/14119. Sense paer Py: 7 2°) In July 1995, a competing restaurant under the QUICK brand, including a drive-through service allowing customers to be served in their vehicles, opened a few hundred metres from the restaurant operated by SEBOL, on a roundabout of the road leading from the Antibes conurbation to the A8 motorway toll. This competition would rapidly affect the development of SEBOL's activity, whose turnover fell from 27.1 to 24.8 million francs in 1995 and whose net result fell to one million francs. In order to counter this establishment, Mc DONALD'S decided in 1996 to open, opposite the QUICK restaurant, and consequently not far from the restaurant operated by SEBOL, a Me DONALD'S restaurant fitted out with a drive-through. The lease-management of this new restaurant, known as "Antibes Nord" *, was entrusted to Monsieur COLLORAFI for twenty years from 9 October 1996, in return for: - a base fee of 20% of the turnover excluding tax with a minimum of 2,940,000 F per year, reduced, for 1997 only, to 17% of the turnover with a minimum of 2,160,000 F - a service fee of 5% of the turnover excluding tax. By an assignment rider, the rights and obligations of this agreement were transferred to an EURL named B et O of which Monsicur COLLORAFI is the sole partner. The results forecasts drawn up by the services of Mc DONALD'S showed a turnover of 20 million francs from the first year, identical for the following nine years, and a net result of 161,000 F in the first year, expected to reach on average 791,000 F over the first ten years of activity, and finally a gross self-financing margin after repayment of the capital of the loans, of 452,000 F and then 891,000 F respectively. For 1997, the first full year of operation, the company B et O achieved a turnover of only 13.5 million francs, less than two thirds of the forecasts, and should record a net loss of 1.2 million francs. 3°) Shortly afterwards, Mo DONALD'S pursued its policy of establishment by deciding in particular to open a third restaurant in Antibes (known as "Antibes Ouest") and another nearby point of sale in Vallauris. These restaurants are respectively less than five and seven kilometres from the sites of Antibes/Carrefour shopping centre and Antibes Nord. Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMNRE 1998 RG No.: 1998/14119 - 6th page Pg: 8 Monsieur COLLORATI asked Mö DONALD'S to be granted the lease-management of these two new businesses, but only that of the Antibes Quest restaurant was granted to him by agreement of 18 June 1997 This agreement, whose term was fixed at 28 April 2000, with the possibility for the tenant-manager to extend it until 28 April 2017, stipulates: - a base fee of 15% of the turnover excluding tax with a minimum of 1,200,000 F. - a service fee of 5% of the turnover. - an equipment fee of 4.5% of the turnover, in return for the financing of the fittings and equipment of the restaurant, the purchase and financing of which were provided, unlike the two other lease-management agreements, by the owner company and not by the tenant-manager. By rider of the same day, Monsieur COLLORAFI transferred to the SARI Les Pins, of which he owns the entire capital, all of the rights and obligations of this agreement. The operating forecasts supplied by Me DONALD'S to Monsieur COLLORAFI were as follows: - an initial turnover of 13 million francs, expected to increase by 2% per year, - a net profit of 133,000 F in the first year, expected to reach on average 861,000 F per year over the first ten years of operation, - a gross self-financing margin of 426,000 F in the first year and of 937,000 F per year on average over the first ten years, Eight months after its opening, at 31 December 1997, the company Les Pins (Antibes Ouest) had achieved a turnover of 6.4 million francs, that is an annual trend of 9.3 million francs, the loss suffered for the first eight months of activity being 440,000 F. Invoking the collapse of the turnover of the company SEBOL (from 24.7 million francs in 1995 to 18.3 million in 1996 and to 11.7 million francs in 1997), the large gaps between the operating forecasts provided by the company Mo DONALD'S at the openings of the restaurants (Antibes Nord and Antibes Ouest) and the actual figures, the lack of profitability of the three restaurants, the company SEBOL, the company B et O, and Monsicur Bernard COLLORAFI, by writ of 20 June 1997, summoned the company Mr DONALD'S France before the Paris Commercial Court with a view to Court of Appeal of Paris 16th chamber, section 4 JUDGMENT OF DECEMRRE 1998 RG No.: 1998/14119- 7th page Pg : 9 having it ordered to pay, in compensation for the loss suffered by each of the claimants: • the sum of 30,000,000 F to the company SEBOL, subject to increase, - the sum of 5,000,000 F to the company B et O, subject to increase, - the sum of 10,250 F to Monsieu: COLLORAFI, subject to increase, • the sum of 50,000 F to each of the claimants, under article 700 of the New Code of Civil Procedure, and the payment of the costs. By writ of 9 January 1098 and subsequent written submissions after joinder, the company MC DONALD'S summoned the company les Pins with a view in particular to having it found that the termination by operation of law that occurred on 2 January 1998 of the three disputed lease-management agreements, and to order jointly and severally: a) the company SEBOL, and Monsieur COLLORAFT to pay it, as fees (royalties), the sums of: - 1,867,247.84 F with interest at the legal rate from 1 August 1997 on 1,266,300 F. - 361,800 F with interest at the legal rate from 1 December 1997, - 239,147.84 F with interest at the legal rate from 1 January 1998 and 16,000 F as a daily occupation indemnity from 2 January 1998, mane de 153 54607 e il ce de selon at taur bancaire eren de of three points for each instalment (article IX-2-3 of the agreement), - 24,000 F as a daily occupation indemnity from 2 January 1998 with interest at the legal rate. c) the company Les Pins and Monsieur COLLORAFI to pay it the sum of: - 504,474.425 as unpaid fees (royalties) with late-payment interest at the base bank rate plus three points for each instalment (article IX-2-3 of the agreement), - 16,000 F as a daily occupation indemnity our il'Appel de Pari bè chambre, section JUDGMENT OF D DECEMERE 1908 RG No.: 1998/14119-8ck page from 2 January 1998 with interest at the legal rate. - and this, with anatocism. The defendant parties supplemented their initial claims by inviting the Court to: - suspend the effects of the termination clause and grant them a period of two years to settle their debts, - "set the bearable fee" at 252,000 F excl. tax for SEROL, 794,000 F excl. tax for B e! O, and 934,000 F for Les Pins, - order the company Me DONALD'S to pay as damages in compensation for the loss suffered as at 1 January 1998 the sums of: - 2,000,000 F to the company SEBOL, - 2,500,000 F to the company Be: D, - 2,500,000 F to the company Les Pins, * in the alternative, as a very subsidiary claim, - declare the judicial termination of the agreements at the exclusive fault of the company Mc DONALD'S and order it to pay: - 9,600,000 F to the company SEBOL, - 22,200,000 F to the company B et O. - 200,000 F to the company Les Pins. It is in these circumstances that the judgment under appeal was delivered, which, it should be recalled, essentially found that the three disputed lease-management agreements had been terminated by operation of law on 2 January 1998, and ordered each of the companies that were tenant-managers, jointly and severally with Monsieur COLLORAFI, to pay to the company Me DONALD'S the arrears of fees (royalties) that they had ceased to pay during the year 1997. The company SEBOL, the company B ct O, the company Les Pins and Monsieur Bernard COLLORAFI, appellants, ask the Court to: - reverse in its entirety the judgment delivered by the Paris Commercial Court on 18 May 1998, except insofar as it ordered the joinder of the Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1998 RO No.: 1998/14119 907x 1ag0 proceedings 97/062466 and 97/0100823 and dismissed the company Me DONALD'S of its claim for damages for abuse of process. - declare and rule that the lease-management agreements signed between the company Mu DONALD'S and the companies SEBOL, B et O, and Les Pins, succeeding to the rights of Monsieur Bernard COLLORAFI, must be requalified as commercial lease agreements or commercial lease agreements with a trademark licence as a shop sign, - declare and rule accordingly that the company Me DONALD'S could not terminate the agreements, - in the alternative, declare and rule that the lease-management agreements are void for failure to apply the law of 20 March 1956, for fraud, mistake or lack of cause, - By way of compensation, order the company Mc DONALD'S to reimburse the amount of the fees (royalties) paid by the three companies, being the sum of 42,276,000 F with interest at the legal rate from the various payments made, and this possibly as damages for the additional loss caused by the requalification of the agreement or its nullity, • order the company Me DONALD'S to pay to Monsicu: Bernard COLLORAFI the sum of 7,740,000 F in compensation for his material loss, which corresponds to the amount of the salaries he would have received if the agreements had been performed until their term, namely 430,000 P before tax over 18 years, and that of 2,000,000 F in compensation for his moral loss, In the very alternative, - declare and rule that the company Me DONALD'S did not perform in good faith its obligations arising from the agreements signed with the companies SEBOL, B et O and Les Pins, - declare and rule that the companies SEBOL, B et O and Les Pins were entitled in law to raise the defence of non adimpleti contractus, the agreements not having been performed in good faith by the company Mc DONALD'S, - declare and rule that the company Mc DONALD'S is entirely responsible for the partial non-payment of the fees (royalties) in 1997 and cannot invoke this ground to terminate the agreements by operation of law, - declare and rule that the company Me DONALD'S wrongfully terminated the lease-management agreements, the partial non-payment of the fees (royalties) being due to its own fault, - dismiss it purely and simply of its claim for Court of Appeal of Paris 1è chamber, section A JUDGMENT OF 9 DECEMBRD 190% RONº. 1998/14:19 - 10th page 19-1k termination, - suspend in any event the application of the termination clause and grant the concluding companies two years to settle their debts on the basis of a reasonable fee, set if need be as damages at: - 252,000 F excl. tax per year for the company SEBOL. - 932,0U0 F excl. tax per year for the company B er 0, - 934,000 F excl. tax per year for the company les Pins. - or appoint such expert as the Court sees fit to designate to provide it with the elements enabling it to rule on the reasonable fee, - declare and rule that Monsicur Bernard COLLORAFI and the companies SEBOL, B et O and Les Pins must be reinstated in the restaurants they operated until 10 June 1998, - in the very alternative, declare and rule that the faults committed by the company Mo DONALD'S are tortious in nature, consequently, and whatever liability regime is applied, order the company Mc DONALD'S to make good the loss suffered by ordering it to pay: - to the company SEBOL, the sum of 9,600,000 F, - to the company B et O the sum of 22,200,U0DF. - to the company Les Pins the sum of 13,250,000 F. with interest at the legal rate from the various payments made, - order in any event the company Me DONALD'S • to pay, for the additional loss suffered as a result of the forced enforcement carried out by the company Mo DONALD'S at its own risk - 2,000,000 F to the company SEBOL, - 2,000,000 F to the company B et O. - 2,000,000 F to the company Les Pins, - 2,000,000 F & Monsieur Bernard COLLORAFI. dornée - order in any event and whatever the outcome of the dispute, the company Me DONALD'S to pay to Monsicur Court of Appeal of Paris 16th chamber, section A JUDGMENT IX! O DECEMBER 1998 RGN°: 1998/14119. 1ême pago COLLORAFI the sum of 7,740,000 F as damages for the material loss caused and the sum of 2,000,000 F as damages for the moral loss caused, - in the very further alternative, if the Court considered that an expert report is necessary to determine the loss, order the company Mo DONALD'S to pay: - to the company SEBOL the sum of 5,000,000 F, • to the company E el O the sum of 10,000,000 F. - to the company Les Pins the sum of 7,000,000 F, • Monsieur Bernard COLLORAFI the sum of 5,000,000 F as an interim payment, - order the company Me DONALD'S to pay to each of the companies and to Monsicur Bernard COLLORAFI the sum of 100,000 F under article 700 of the New Code of Civil Procedure, - state that the indemnity under this head shall be increased by the amount of the proportional bailiffs' fee provided for by article 10 of the tariff of these ministerial officers, if the decision to be made is not voluntarily complied with, thus requiring recourse to a bailiff for the recovery of the collection of the sums due, - order the company Me DONALD'S to pay the entire costs. The company Me DONALD'S France, respondent, asks the Court, after referring to articles 554 and 565 of the New Code of Civil Procedure, together with 1244 of the Civil Code and article 29 of the decree of 30 September 1993 as amended on 3 July 1972, to: • declare inadmissible, as new on appeal, the claims of Monsieur COLLORAFI and the companies SEBOL, B et o, les Pins seeking a ruling that the lease-management agreements are void for failure to apply the law of 20 March 1956, for fraud, mistake or lack of cause, - dismiss Monsienr COLLORAFI and the companies SEBOL, B et O and Les Pins, of all their claims, - uphold the judgment under appeal in all its provisions, - order, jointly and severally, the companies SEBOL, B et O, Les Pies and Monsieur COLLORAFI to pay it the sum of 200,000 F pursuant to Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 199H RG No.: 1998/14119 - 12th page article 700 of the New Code of Civil Procedure. - order them further to pay the costs. The appellants, in view of the heads of the written submissions of the respondent asking for the declaration of inadmissibility of part of their claims on the ground of their novelty on appeal, filed new written submissions with a view to having it ruled that "the arguments raised on appeal by them do not constitute new claims but are a response to the counterclaim and seek the same ends as those submitted to the Commercial Court of HAVING SET OUT THE FOREGOING, THE COURT I.- On the objections of new claims: Considering that the company Me DONALD'S raises the inadmissibility of two heads of claim made by the appellants as being new: firstly that seeking the rejection of the counterclaim for a declaration of termination of the disputed lease-management agreements on the ground that they are in reality commercial leases, and this by a "requalifying" decision of the Court by virtue of article 12 of the New Code of Civil Procedure; secondly, that according to which the said agreements are void, for fraud, mistake or lack of cause, or for failure to apply the law of 20 March 1936; Considering that the appellants submit that these objections should be rejected, arguing that "the arguments put forward on appeal by them in their (earlier) pleadings do not constitute new claims and seek to respond to the counterclaim" and to the same ends as those submitted to the Paris Commercial Court; Considering that the Court, firstly, notes that the terms of the dispute at first instance are as follows: that, firstly, the company SEBOL, the company B et O and Monsiear COLLORAFI, by writ of 26 June 1997, summoned the company Me DONALD'S with a view to having it ruled that it had not performed its obligations in good faith and to having it ordered to pay each of them damages for partial non-performance of the agreements or the suspension of the termination clause or judicial termination at the exclusive fault of the company Mo DONALD'S; that, secondly, the Court notes that by writ of 30 January 1998 and written submissions of 9 February 1998, the company Me DONALD'S brought the matter before the same Paris Commercial Court with a view in particular to having it found that the disputed lease-management and licence agreements had been terminated by operation of law on 2 January 1998: Court of Appeal of Paris J0è chamber, section A JUDGMENT OF 9 DECEMBER 1098 RON°: 1998/14119- :Земе рада Considering that it follows, as regards the claims for nullity of the agreement, that even if these are aimed at defeating the counterclaim for termination by operation of law of the disputed lease-management agreements by making the termination clause disappear, they must be declared inadmissible as new, because they are in contradiction with the claims on the merits made at first instance, both the principal ones and the alternative ones, in this case; that indeed these (damages for partial non-performance, or suspension of the termination clause, or termination at the fault of the company Mo DONALD'S) all presuppose recognition by the tenant-managers and Monsieur COLLORAFI of the validity of the said lease-management agreements: whether they reproach the company Mo DONALD'S with having performed them badly (hence the claim for damages or judicial termination) or they seek to suspend the effects of one of these clauses (hence suspension of the termination clause): That it follows that the appellants' claim seeking to have the nullity of the three lease-management agreements in question declared, whatever its basis: failure to comply with the law of 20 March 1956 on the lease-management of businesses, or fraud, mistake or lack of cause, will be declared inadmissible as new; Considering that, as regards the other new claim, that seeking to have the Court "requalify" the disputed agreements as commercial leases with a trademark licence used as a shop sign, by virtue of the power afforded to it by article 12 of the New Code of Civil Procedure, the Court notes once again that even if it may possibly have first instance, both the principal one for damages for partial non-performance and the alternative ones for suspension of the termination clause or for judicial termination of the disputed lease-management agreements, - All claims which, for the reasons set out above, imply the validity of the agreements as lease-management agreements; That, accordingly, this claim too will be declared inadmissible as new; Considering that the following principal claims of the company SEBOL, the company B et O, the company LES PINS and Monsieur COLLORAFI remain admissible, the others being consequential to them: °- declare that the company Me DONALD'S wrongfully terminated the disputed lease-management agreements, - the partial non-payment of the fees (royalties) was cu Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1908 RG No.: 199814119 - 14th page due to its own fault, and dismiss it purely and simply of its claim for termination 2°) - suspend the effects of the termination clause and grant them two years to settle their debt on the basis of a reasonable fee, set if need be as damages, the details of which are given above, or appoint an expert to enable the court to rule on the setting of a "reasonable fee":; 3°) - rule that the faults committed by the company Me DONALD'S are tortious in nature and order it, in compensation for the loss suffered, to pay them various sums, the details of which are given above; II: On the merits: On the claim for termination based on article of the Civil Code at the fault of the company Me DONALD'S FRANCE and on the claim seeking to have declared without effect the termination by operation of law of the disputed agreement on account of the bad-faith implementation of the termination clauses A - On the issues arising from these claims Considering that acceptance of either of these claims presupposes that the causes of the formal notices (non-payment of fees (royalties) in 1997) on which the termination by operation of law is based are ineffective by reason of the faulty non-performance by the company Mo DONALD'S FRANCE of its obligations as franchisor (which is accused of having opened, in the catchment area of a first restaurant, three other establishments and of not having helped it to bear the resulting losses), such that this non-performance would be capable of paralysing any claim for termination whether the latter seeks the pronouncement of a judicial termination (such is the appellants' first claim, which can only be ineffective since there is a termination clause stipulated in each of the disputed agreements) or the finding of termination by operation of law, - the company Me DONALD'S FRANCE then being accused of having implemented the termination clauses in bad faith; That the Court observes that if it were to find that the company ME DONALD'S FRANCE had applied in bad faith the termination clauses or one of them, it would nonetheless draw the consequences, taking into account the "intuitu personae" nature (Article IV - "Intuitu personae agreement" of the general conditions of the lease-management agreements) of the agreements; that the rupture that occurred is irreversible so that, Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1998 RG No.: 1998/14119 - 15th page 10r ki/ 20 there would also arise the problem of the date on which the termination to be made should be fixed: B. On the obligations of the company Me DONALD'S FRANCE Considering that the legal mechanism of the rupture between the parties must be recalled: the company Mo DONALD'S FRANCE gave the appellants formal notice to pay the arrears of fees (royalties) due in 1997, and, not having been paid the sums thus claimed, terminated the said agreements by invoking the termination-by-operation-of-law clause inserted in each of them, as at 2 January 1998; Considering that, according to the appellants, this termination is wrongful because the company Me DONALD'S FRANCE could only rely on the termination clause provided for by the lease-management agreements in bad faith ; that indeed, they maintain that it is the company Mo DONALD'S FRANCE itself that is at the origin of their default in the payment of fees (royalties), by reason of its "strategic and unilateral decision to open restaurants in the primary catchment area of the company SEBOL," such that "it is the one that caused the collapse of the turnover and profitability of the company SEBOL, then subsequently of the company B et O": that still according to the appellants, "it was impossible within the one-month period allowed by the termination-by-operation-of-law clause to pay the sum of 3,500 F fees (royalties), which the company Mo DONALD'S FRANCE knew perfectly well since it received the accounts of the three companies every month, and could see that the companies had accumulated in fifteen months more than 3,200,000 F of losses, as a result of the establishment of three new restaurants (Autibes Nord, Antibes Ouest and Vallauris), which is the company Me DONALD'S FRANCE's own fault": that consequently, according to the appellants, the principle must apply according to which a party cannot seek termination of an agreement where the debtor's non-performance of the obligation is the consequence of its own fault; Considering that, in order to assess the merits of the grounds supporting the claim currently under examination, it is first appropriate to determine the extent of the obligations of the company Me DONALD'S FRANCE as franchisor, it being observed that for each restaurant the parties concluded two agreements simultaneously: a lease-management agreement and a licence agreement; That the latter results essentially from the licence agreement (operating licence agreament), - which is translated from English -: Court of Appeal of Paris 16th chamber, section A JUDGMENT OF DEO DECEMBER 1998 RG No.: 1998/14119 - 160m: page whereby the licensor grants the "licensee" for 20 years "the authorisation and franchise ("licence") to adopt and use, but solely in connection with the sale of the food products and drinks designated by the Licensor at the Restaurant, the trade names, trademarks and service marks that the licensor will designate from time to time as forming part of the Me DONALD'S system"; That, concerning the franchise situation (called "licensee" in the agreement), the monthly sending of the accounts by the franchisee to the company Me DONALD'S FRANCE is intended to enable the latter to ensure that the franchisee's financial management is sound; that an "interrogative" procedure for checking the accounts is stipulated: undertaking by the licensee to allow his chartered accountant to give all useful explanations to the company Me DONALD'S FRANCE concerning the profit and loss account and the year-end balance sheet, right for that company to carry out inspections to "verify the accounts, records and tax returns of the licensee, at any reasonable time"; That, however, the fact that the franchisee is required to pay, - in addition to a base fee (12% of turnover excl. tax in the 1987 agreement, 20% in the Antibes Nord agreement of 9 October 1996 and 15% in that of 18 June 1997, with respectively an annual minimum of 1,800,000 francs, 2,940,000 francs and 1,200,000 francs) -, a service fee of 5% on the gross turnover necessarily has the purpose, at least partial but certain, of remunerating, besides the advisory service relating to the restaurant technique proper, the services of financial control and assistance with the decisions to be taken by the franchisee for the proper running of his restaurant business, it being observed that the latter retains his freedom of financial choices, for the setting of his remuneration and that of his wife at an amount that the company Mc DONALD'S FRANCE has not ceased to criticise; That, as regards the three agreements in question, the company Mo DONALD'S FRANCE supplied a study of forecasts of the profitability of each restaurant over 10 years: that the parties disagree on the characterisation of this document: pre-contractual according to the appellants, a mere piece of information according to the company Mc DONALD'S FRANCE, a point which the Court will assess in the judgment to be delivered after reopening of the hearings; That for the two agreements, that of October 1996 and that of 18 June 1997, the company Me DONALD'S FRANCE supplied a stapled document entitled "Pre-contractual information", of which it points out that it contains Court of Appeal of Paris 16th chamber, section A JUDGMENT OF DIY DECEMBER 1998 RG No.: 1998/14119 - 170ne pae no forecast data on the profitability of the restaurants in question; C - On the need for additional information for the Court: Considering that the Court intends to pursue the following approach: a) concerning the period prior to 1 July 1997 Considering that during this period two lease-management agreements were in effect under which the company SEBOL operated from 5 August 1987 the restaurant located near the shopping centre, chemin Saint Claude in Antibes, and, from 9 October 1996, the restaurant known as "Antibes Nord"; That, contrary to what Mr COLLORAFI keeps maintaining, the opening of this second restaurant, the management of which was entrusted to him, - 500 metres from the first, is not due to a decision of the company Mc DONALD'S FRANCE dictated by its own interest alone and taken at the risk of endangering the first restaurant; that indeed, in order to fight the formidable competition of a Mc QUICK restaurant, including service in vehicles (known as "drive" service), which set up in July 1995 a few hundred metres from the Mc DONALD'S CARREFOUR restaurant, the company Mo DONALD'S FRANCE found itself obliged to open an establishment opposite it; that the figures show that it was right to take this decision, otherwise the SEBOL restaurant would run the greatest risks of closure; That the Court notes that for the financial year from 1 January to 31 December 1996, the company SEBOL made a profit of 352,308 francs and the company B et O (Mac Donald's Carrefour) recorded a loss of 766,141 francs: that consequently, the "impact" (in market-study terminology) of the opening of the "Antibes Nord" restaurant (to fight the competition of Mac QUICK, on 9 October 1996) did not result in a loss-making result for the company SEBOL; That, on the other hand, for the following financial year from 1 January to 31 December 1997, the company SEBÓL suffered a loss of 971,112 francs and the company B et O a loss of 1,228,484 francs: That this result is not logical since it does not reflect the "communicating vessels" effects that were to be expected given the catchment area common to the Me DONALD'S Carrefour and Antibes Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1998 RG No.: 1998/14119 - 18th page Nord restaurants and that the company SEBOL itself, in a document entitled "Results SA SEROL shopping centre" (document communicated no. 69), which appears to have been drawn up in early 1997, reports an impact of 35% to its detriment from the "Antibes Nord" restaurant; That in these circumstances, if the deficits of the company SEBOL in 1996 and 1997 can be explained, those of the company B et O in 1990 (when it had only opened the "Antibes Nord" restaurant on 9 October 1996) and in 1997 defy logic: Considering that the Court accordingly judges it necessary to know the following points in order to assess the possible breaches by the company Me DONALD'S FRANCE of its obligations for the period prior to 1 July 1997, a date which is not fixed arbitrarily but which corresponds approximately to the simultaneous opening of the restaurants of Antibes-Ouest (allocated to the company LES PINS) and of Vallauris (entrusted to another franchisee, despite Mr COLLORAFI's request): Considering that the fact that, prior to these two latter openings of establishments, the company SEBOL and the company B et O were already in deficit, calls for questions which will be entrusted to two experts; That one must start from two findings as to unusual management acts by one and the other party during this period: 1°) independently of the fact that the company Me DONALD'S decided to open the "Carrefour" restaurant entrusted to the company SEBOL, it concluded a rider to the lease-management agreement binding it to the company B et O, on 10 June 1997, that is eight months after the opening of the Antibes-Nord restaurant that it was managing; under the terms of this document, the minimum fee went from 235,000 francs excl. tax to 180,000 francs excl. tax for the period from 1 January 1997 to 31 December 1997 and to 245,000 francs excl. tax from 1 January 1998 to 8 October 2016; that the "standard fee" went to 17% excl. tax or 20% from 1 January 1997 to 31 December, returning to 20% excl. tax from 1 January 1998 to 8 October 2016; 2°) according to the report on the assignment of the S.E.P.T. drawn up by Mr Alain DUMONTIER, a former court-appointed expert in finance and management, during the financial years 1995 and 1994, Mr and Mrs COLLORAH drew in salaries and dividends the sum of 4,483,820 francs, that is 2,242,910 francs per year, from the company SEBOL: The same Mr DUMONTIER also makes the following observation: "even though he pays himself 1,000,000 francs in dividends, Monsieur Court of Appeal of Paris 160 chamber, section A JUDGMENT OF 9 DECEMBER 1998 RON°: :998/14119-19th page 1=*- COLLORAFI carries out a particular transaction on 28 January 1997. He borrows 350,000 francs over three years in the name of the company SEBOL at a rate of 4.625% per year, which leads him to further reduce the financial means of the company SEBOL, while favouring his personal interests." That it should be specified that he seems to have concomitantly reduced to 0 the balance of his current account opened in the said company SEBOL, which was precisely 350,000 francs: That, on that basis, the experts designated below will have to answer the following questions concerning the period prior to 1 July 1997: 1°) whether, if Monsieur COLLORAFI had halved his salary in 1995 and 1996 and had left in current account all or part of the dividends received those years in the company SEBOL, and if, in the company B et O (the Court having no information on the salaries possibly received by Monsieur COLLORAFI and his wife from this company) he had made a contribution to current account in 1997, this would not have enabled these two companies to reach the annual break-even point, which is the turnover making it possible to balance the operation, in 1996 and 1997. 2°) to state whether the rider to the agreement of the aforementioned company B et O was made at the right time or too late and was sufficient if Monsieur COLLORAFI reduced his salary in the company B et O, if indeed he received any from that company, 3°) whether the opening of the "Antibes Nord" restaurant made it possible to partially transfer fixed costs from the company SEBOL to the company B et O as Mr GANDUR asserts in his annual report drawn up at the request of Monsieur COLLORAFI (cf. page 24); That finally the said court-appointed experts will be invited to present a summary of the operation of the companies SEBOL and B et O considered as an economic unit by reason of the parties' common interest in seeing them operate as such for the period considered; b) Concerning the period after 1 July 1997: Considering that it should be recalled that by agreement of 18 June 1997, the company Me DONALD'S concluded a lease-management agreement for its new Antibes-Ouest restaurant, - the term of which was fixed at 28 April 2000 with the possibility for the tenant-manager to extend it until 28 April 2017 -, with the company LES PINS whose manager is Monsieur COLLORADI ; that it is not irrelevant to the case to know that on the same day, the company Mc DONALD'S opened a second new restaurant at VALLAURIS, the Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1998 RET": 1998/14119 20th page lease-management of which Monsieur COLLORAFI, despite his insistence, did not obtain; that the first restaurant, Antibes Ouest, is five kilometres from the "Carrefour", "Antibes Nord" group, and the second, "Vallauris", seven kilometres from the same group: That the opening of these two new restaurants, unlike that of Antibes Nord, does not result from a decision dictated by the imperative need to fight a recently established competitor, but forms part of the strategy of the company Me DONALD'S; Considering that, having regard to the terms of the present dispute, the Court wishes the designated experts to give their opinion on the following points: 1°) whether the new "Antibes Ouest" restaurant was viable in itself or whether, as the company Me DONALD'S opened it at the same time as that of Vallauris, which is no coincidence but shows that it had envisaged a "synergy" between the two restaurants, its profitability had not been assessed a priori within an "Antibes-Ouest" - "Vallauris" group, the lease-management of which the company Mc DONALD'S entrusted, contrary to what seems to have been its forecasts, to two different persons, - the "Antibes Ouest" restaurant being initially only the complement of the locomotive "Vallauris": 2°) whether, given the financial situation of the "Carrefour" group, Mc DONALD'S gave a "poisoned gift" to Monsieur COLLORAFI, as he seems to claim, or whether on the contrary it wanted to give him an additional chance to get by; Considering that the experts will have to give their opinion on the consistency of Monsieur COLLORAFI's overall financial management in the three companies until 1 January 1998; Considering that the experts will give their opinion on the accounts of the companies SEBOL, B et O and LES PINS, between 1 January 1998 and 10 June 1998, the date of their eviction; Considering that it is deliberately that the Court does not give the designated experts the task of determining the "impact" of the opening of the "Antibes-Ouest" restaurant on the "Carrefour-Antibes Nord" group because it Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1908 RG No.: 1998/14:14-21st page : 33 1 45013135 emerges from the application file submitted by Monsieur COLLORATI on behalf of the company SEBOL and the company B et O to the company Mc DONALD'S in order to obtain the lease-management of the "Antibes-Ouest" restaurant, that he had a very precise idea of the said "impact", and, moreover also of the impact of the "Antibes-Nord" restaurant on the same "Carrefour" restaurant; that indeed, to be convinced of this it suffices to read the following extract, entitled "The Impacts": "With the successive openings of Grasse, Cannes and Cagnes sur Mer, the impacts do not allow an increase in turnover in the immediate term. It can be estimated that the opening of the DRIVE (Antibes-Nord restaurant) had an impact on the shopping centre restaurant (Carrefour) of approximately 35%. With the forthcoming openings, Mougins, Vallauris, Antibes-Ouest, it may be considered that an additional impact of 20% will have to be borne in the first year."; Considering that, on the other hand, the designated experts will have to give their opinion on another assertion contained in this document: "Objective 12"3: Making the Restaurants Profitable With the allocation of administrative costs over several restaurants, we will reduce administration costs", it being recalled that Monsieur COLLORAFI managed three restaurants and that he maintains in his written submissions, not without relevance, that, if with three establishments he achieved a total turnover equivalent to that of the company SEBOL in 1993, the total of the three fees was infinitely higher than that which SEBOL had paid in 1993; that, in other words, the experts will have to say whether the increase in the cumulated fees of the three restaurants could be offset by the reduction in their administration costs; Considering finally that in this application file of the companies SEBOL and B et O, Monsieur COLLORAFI announced as one of his four objectives: "Objective no. 2: Increase in turnover Our current concern is to increase turnover very quickly in order to reach the minimum profitability thresholds"; That, consequently, the company Me DONALD'S will have to explain on the basis of what forecast calculations it thought that by allocating the "Antibes-Ouest" restaurant to Monsieur COLLORAFI, it would enable him to achieve his "objective no. 2" Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1998 RG No.: 1998/14119 - 22nd page Considering that Monsieur COLLORAFI will be invited to conclude on the following point: why, whereas he signed the lease-management agreement for the "Antibes-Ouest" restaurant on 18 June 1997, he summoned the company Me DONALD'S for payment of damages on the following 26 June: Considering that a ruling will be made on all the claims of the parties in the judgment to be delivered after filing of the expert report: FOR THESE REASONS Declares inadmissible: - the claim of the company SEBOL, the company B et O, the company LES FINS and Monsicur COLLORAFI, seeking the requalification of the disputed lease-management agreements as commercial leases possibly supplemented by a trademark licence agreement as a shop sign, - the claim of the same appellant parties for the pronouncement of nullity of the said lease-management agreements either for failure to apply the law of 20 March 1956, or for fraud, mistake or lack of cause, Before ruling on the merits, Appoints Monsieur Jean-Luc DUMONT, expert, 15, rue Beatjon, 75008 PARIS and Monsieur Alain MARTIN, expert, 101, rue de Prony, 7518 PARIS, Court of Appeal of Paris 16th chamber, section A JUDGMENT OF DUD DECEMBER 1998 RON 1998114119 . 23rd page Far received from i with a view to, having reviewed the amicable reports GANDUR and DUMONTIER (company SEPT) and the documents they consider useful to have communicated by the parties, answering the questions that the Court puts to them in the grounds of this judgment concerning both the period prior to 1 July 1997 and the later one: Rules that the company Me DONALD'S on the one hand, and the companies SEBOL, B et D, LES PINS and Monsieur COLLORAFI, on the other hand, shall respectively be required, as advances on the remuneration of the experts, to pay the sum of 20,000 francs, that is 10,000 francs each, to the department of the Régie d'avances et de recettes of the Paris Court of Appeal, 34, quai des Orfèvres (75055) Paris Louvre SP, making a total of 40,000 francs, and this within the month following the delivery of this judgment: Rules that the experts must file their report within five months of their appointment; Reserves the costs. The Registrar The President Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 9 DECEMBER 1998 RG No.: 1998/14019 - 24th page