Judgment of 8 March 2000 — Paris Court of Appeal

U145018109 ....89/83/00 Ne PAMART AVOUE PARIS COURT OF APPEAL 16th chamber, section A JUDGMENT OF 8 MARCH 2000 (Y° , pages) General register entry number: 1998/14119 No joinder Decision under appeal: Judgment delivered on 18/05/1998 by the COMMERCIAL COURT of PARIS 1st Ch. RG I°: 1997/62466 Date of closing order: 13 December 1999 Nature of the decision: ADVERSARIAL Decision: PARTIAL REVERSAL APPELLANT: S.A. SEBOL having its registered office at the CARREFOUR SHOPPING CENTRE, Chemin de Saint Claude 06600 ANTTRES represented by Maitre PAMART, avoué assisted by Maître JEAN-PAUL CLEMENT. Toque B405, Advocate at the Paris Bar of PARIS APPELLANT: S.A.R.L. B. & 0. acting through its legal representatives having its registered office at Rond-Point Weiseller - Route de Grasse 06600 ANTIBES represented by Maire PAMART, avoué de PAR de Mais CLEMENT JEAN PAUL: Toque B40S, Advocate at the Bar He PAMART AVOUE APPELLANT: Monsieur COLLORAFI Berzard residing at 21 b, Chemin de l'Estelie 06110 LE CANNET ROCHEVILLE represented by Maître PAMART, avoué assisted by Maitre CLEMENT JEAN-PAUL, Toque B405, Advocate at the Bar of PARIS 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 Maître PAMART, avoué assisted by Mattre CLEMENT JEAN-PAUL, Toque B405, Advocate at the Bar of PARIS RESPONDENT: STE MAC DONALD'S FRANCE acting through its legal representatives having its registered office at 1 rue Gustave Eiffel 78045 GUYANCOURT CEDEX FRANCE represented by SCP FISSELIER-CHILOUX-BOULAY, avoué assisted by Mattre JEAN-MARIE LELOUP, Advocate at the Bar of POITIERS COMPOSITION OF THE COURT: At the hearings and the deliberation Monsieur DUCLAUD, President Madame CONTENT, Conseiller Madame COBERI, Conseiller Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 2nd page De PALARI AVOUE HEARINGS: At the public hearing of 14 December 1999 REGISTRAR: At the hearings and at the delivery of the judgment: N. ESTEVE JUDGMENT: Delivered publicly by Monsieur DUCLAUD, President, who signed the original, assisted by N. ESTEVE, Registrar. The Court has already been seised of the appeal lodged by S.A. SEBOL, SARL B & O, SARL LES PINS, and Monsieur Bernard COLLORAFI against the 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 MAC DONALD'S FRANCE, - found that the lease-management 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 August 1987, the company B & O and him on 9 October 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, - 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 E & O and M. COLLORAFI (Antibes 2), and 26,350 francs per day payable by the company LES PINS and Mr COLLORA.FI (les Pins) and this, after ten working days from its service, limited to 30 days, - a gommé 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: • JUDGMENT OF 8 MARCH 2000 RO No.: 1998/14119 - 3rd page V140019133 He PANART AVOTE * 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 1,266,300 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 bailiff's record whose appointment is requested above, with interest at the legal rate, * The company LES PINS and Mr Bernară COLLORAFI the sums of 504,474.42 francs 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 16,000 F as an occupation indemnity per day from 2 January 1998 until the day of the record by the bailiff of justice, whose appointment is requested above, with interest at the legal rate, - held that the interest due to SA Mc DONALD'S would itself bear interest in accordance with article 1154 of the Civil Code, - took note that SA Mc DONALD'S reserved the right to perfect its claims in view of the conditions of return of the businesses occupied unlawfully by Monsieur Bernard COLLORAFI and his three companies and to claim all justified damages for the losses that might appear, - dismissed SA Mc 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 & O, LES PINS and Monsieur Bernard COLLORAFI to pay to SA Mc 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. 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 4th page fax received: =-IN 118A V140019139 Me PAMART AVOUE 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 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 conurbation 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 JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 5th page ....99/03/00 Fax received from: 8145236713 :av.dd FAi V145619133 He PANART AVOUE 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 & O of which Monsieur 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 & 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. Monsieur COLLORAFI asked Mc DONALD'S to be granted the lease-management of these two new businesses, but only that of the Antibes Ouest 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 SARL Les Pins, of which he owns the entire capital, all of the rights and obligations of this agreement. The operating forecasts supplied by Mc DONALD'S to Court of Appeal of Paris 16th chamber, section A -- JUDGMENT OF $ MARCH 2000 RG No.: 1998/14119 - 6th page 10.40 tAX 0143819155 -'au He PANART AVOUE 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 957,000 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 supplied by the company Mc 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 & O, and Monsieur Bernard COLLORAFI, by writ of 26 June 1997, summoned the company Mc DONALD'S France before the Commercial Court of Paris with a view to 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 & O, subject to increase, - the sum of 10,250 F to Monsieur 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 1998 and subsequent written submissions after joinder, the company Mo DONALD'S summoned the company Les Pina 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 agreements of disputed lease-management agreements and to order, jointly and severally: a) the company SEBOL, and Monsieur COLLORAFI 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, Court of Appeal of Paris 16th chamber, section A JUDGMENT OF & MARCH 2000 -RÓ No.: 1998/14118 - 7th page Ariar an V140018133 NE PANART AVOUE - 239,147.84 F with interest at the legal rate from 1 January 1998 and 15,000 F as a daily occupation indemnity from 2 January 1998, b) the company B & O and Monsieur COLLORAFI to pay it the sum of 1,533,548.87 F with late-payment interest at the bank rate plus three points for each instalment (article IX-2-S 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 sums of: - 504,474.42 F as unpaid fees (royalties) with late-payment interest at the base bank rate plus three points for each instalment (article IX-1-3 of the agreement), • 16,000 F as a daily occupation indemnity from 2 January 1998 with interest at the legal rate, - and this, with anatocism. javial 10 Tribuna The defendant parties supplemented their initial claims and • 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 SEBOL, 794,000 F excl. tax for B & D, and 934,000 F for Les Pias, • order the company Mc DONALD'S to pay as damages in compensation for the loss suffered as at 1 January 1998 the sums - 2,000,000 F to the company SEBOL, - 2,500,000 F to the company B & O, - 2,500,000 F to the company Les Pins, in the very alternative - declare the judicial termination of the agreements at the exclusive fault of the company Mo DONALD'S and order it to pay: - 9,600,000 F to the company SEBOL, - 22,200,000 F to the company B « O, Court of Appeal of Paris 1e chamber, section A JUDGMENT OF 8 MARCH 2000 -RG No.: 1998/14119 - 8th page Ґ'AMAKI AVOUE - 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 Mc DONALD'S the arrears of fees (royalties) that they had ceased to pay during the year 1997. The Court, by judgment of 9 December 1998: - declared inadmissible: - the claim of the company SEBOL, the company B & O, the company LES PINS and Monsieur 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 the nullity of the said lease-management agreements either for failure to apply the law of 20 March 1955, or for fraud, mistake or lack of cause. Before ruling on the merits, - appointed Monsieur Jean-Luc DUMONT, expert, 15 rue Beaujon 75008 PARIS and Monsicur Alain MARTIN, expert, 101 rue de Prony, 75017 PARIS, 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 put to them in the grounds of the judgment concerning both the period prior to 1 July 1997 and the later one, - ruled that the company Mc DONALD'S on the one hand, and the companies SEBOL, B & O, 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, making a total of 40,000 francs. The experts Alain MARTIN and Jean-Luc DUMONT filed their report on 15 October 1999. In their summary written submissions after the expert report, the company SEBOL, the company B & O, the company LES PINS, and Monsieur COLLORAFI, appellants, ask the Court to: - receive the companies SEBOL, B & O and LES PINS as well as Monsieur Bernard COLLORAFI in their appeal, and declare it well founded, 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 9th page Fax received from: 145276713 UD:V -1 Tel TI . 99/83/08 13:16 P$: 10 - 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 proceedings 97/062466 and 97/0100823 and dismissed the company MC DONALD'S of its claim for damages for abuse of process. Ruling anew in the light of the report filed by Messrs Alain MARTIN and Jean-Luc DUMONT, Experts, - declare and rule that the company MC DONALD'S did not perform its contractual obligations and did not perform in good faith the obligations arising from the agreements signed with the companies SEBOL, B & O and LES PINS, - declare and rule that the companies SEBOL, B & O and LES PINS were entitled in law to raise the defence of non adimpleti contractu, 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 non-payment of the fees (royalties) in 1997 and could not invoke this ground to terminate the agreements by operation of law - declare and rule that the company MC 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 termination, - in the very alternative, declare and rule that the faults committed by the company MC 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 francs as well as that of 1,540,868 francs, amounts of its losses (including carry back) - to the company B & O the sum of 22,200,000 francs as well as that of 2,743,103 francs, in respect of its losses - to the company LES PINS the sum of 13,250,000 francs as well as that of 567,568 francs for its losses with interest at the legal rate from 2 January 1998, the date of termination, - order in any event the company MC DONALD'S to pay for the fixed assets at their book value, to each of the companies, that is globally 4,528,333 francs, as the company MC DONALD'S acknowledged in the two sets of written submissions constituting a judicial contract, Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 10th page TwiniNarde * 7+ 1 etait - order in any event the company MC DONALD'S to pay, as additional loss suffered as a result of the forced enforcement carried out by the company MC DONALD'S at its own risk: - 2,000,000 francs to the company SEBOL. - 2,000,000 francs to the company B & O • 2,000,000 francs to the company LES PINS - 2,000,000 francs to Monsieur Bernard COLLORAFI - order the company MC DONALD'S in any event and whatever the outcome of the dispute, to pay Monsieur COLLORAFI as damages for the material loss caused the sum of 7,740,000 francs and the sum of 2,000,000 francs as damages for the - in the very further alternative, if the Court considered that an expert report is necessary to determine the loss, order the company MC DONALD'S to pay: - to the company SEBOL the sum of 5,000,000 francs as an interim payment - to the company B & O the sum of 10,000,000 francs as an interim payment - to the company LES PINS the sum of 7,000,000 francs as an interim payment - to Monsieur Bernard COLLORAFI the sum of 5,000,000 francs as an interim payment • order the company MC DONALD'S to pay to each of the companies and to Monsieur Bernard COLLORAFI the sum of 100,000 francs under article 700 of the N.C.P.C. - order the company MC DONALD'S to pay the entire costs of first instance and of the appeal, the recovery of which shall be effected directly by Me PAMART, Avoué, under the conditions of article 699 of the N.C.P.C. The company MAC DONALD'S France, respondent, asks the Court to: - dismiss Monsieur COLLORAFI, and the companies SEBOL, B & O and LES PINS, of all their claims, purposes and submissions. - uphold in all its provisions the judgment of the Commercial Court of PARIS of 18 May 1998. - order, jointly and severally, the companies SEBOL, B & O and LES PINS and Monsieur COLLORAFI to pay to S.A. MC DONALD'S FRANCE a sum of 200,000 francs pursuant to article 700 of the N.C.P.C. - order them to pay all costs, which shall include in particular the costs Court of Appeal of Paris — 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 11th page _Fax received from: 8145276713 of the expert report, and authorise SCP FISSELIER - CHILLOUX - BOULAY to apply article 699 of the N.C.P.C. HAVING SET OUT THE FOREGOING, THE COURT Considering that, these being lease-management agreements carrying exceptional constraints for their beneficiary (obligations ranging from the obligation of residence to that of payment of the movable investments, including compliance with opening hours and days) and the duration necessary to benefit from the "return on investment", the Court can only assess in the most attentive manner possible the implementation of the termination clauses and must examine whether or not the terminations occurred wrongfully by reason of the faulty conduct of the company MAC DONALD'S, which would itself have knowingly let the three companies of Monsieur COLLORAFI fall into a state of insolvency; - On the wrongful nature of the termination that occurred through the operation of the termination clause inserted in the three lease-management agreements in question 2) On the termination of the lease-management agreements binding the companies SEBOL (Carrefour) and B & O, to the company MAC DONALD'S FRANCE: Considering that the first of these agreements was concluded on 5 August 1987 and gives the company SEBOL, the entire capital of which is held by Monsieur COLLORAFI, the lease-management of a fast-food business located at the Carrefour Shopping Centre in ANTIBES on the following financial terms: 100,000 francs excl. tax. - initial payment (file fees): - base fee (monthly): a minimum of 150,000 francs excl. tax. - service fee (monthly): 120,000 francs excl. tax. 12% of the turnover excl. tax with 5% of the turnover excl. tax. That the second of these lease agreements, binding the company MAC DONALD'S FRANCE and the company B & O, an E.U.R.L. owned by Monsieur COLLORAFI, was concluded on 9 October 1996, is located five hundred metres from the restaurant operated by the company SEBOL with a "drive" (service of MAC DONALD'S products directly to drivers who remain at the wheel of their car), just opposite a QUICK restaurant which had opened a few months earlier; that this second restaurant is called by the parties "ANTIBES NORD"; that the financial terms of this lease-management agreement are the Court of Appeal of Paris md 16th chamber, section A JUDGMENT OF 8 MARCH 2000 _RG No.: 1998/14119 - 12th page Fax received from: 8145276713 TON 16:28 FAX 0145619137 et labridie Me PANART AVOUE ... 09/83/80 following: - security deposit: - initial payment (file fees): - base fee (monthly): a minimum of 235,000 francs excl. tax. - service fee (monthly): 100,000 francs excl. tax 250,000 francs excl. tax. 20% of the turnover excl. tax with 5% of the turnover excl. tax. That this agreement was the subject of a rider dated 10 June 1997 as regards the fees for the year 1997 only: - base fee (monthly): * from 01/01/97 to 31/12/97: 17% excl. tax with a minimum of 180,000 francs excl. tax. *from 01/01/98 to 08/10/2016: 20% excl. tax (unchanged) with a minimum of 245,000 francs excl. tax (thus an increase of 10,000 francs compared to the initial agreement) - service fee (monthly): 5% of the turnover excl. tax (unchanged); That it should be noted here that a third lease-management agreement will be signed on 18 June 1997 but came into force on 30 April 1997; that it will relate to a restaurant which will open on 1 May 1997 also in ANTIBES, and which the parties designate under the name ANTIBES-OUEST, its management being provided by the company LES PINS of which Monsieur COLLORAFI holds almost all of the shares; Considering that the Court will say, for the reasons that follow, that the termination of the three disputed agreements through the operation of the termination clauses that they That this is not the case; Considering indeed that the first two lease-management agreements, the only ones currently examined, were concluded in a context that the experts called "economic war"; that the lease-management relating to "ANTIBES NORD" was the result of the construction by the company MAC had opened its doors in July 1995, located opposite, and of avoiding the foreseeable effects of a loss of customers for the "Carrefour Shopping Centre" restaurant following the arrival of this competing establishment in the Court of Appeal of Paris 16th chamber, section 4 : JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 13th page dE FAKA AYUUE catchment area of the first; That this is why the Court says that the "Carrefour Shopping Centre" restaurant (Company SEBOL) and the "ANTIBES NORD" restaurant (Company B & O) form an economic entity, both having been designed to work in synergy against the "common enemy", QUICK; That while the company MAC DONALD'S FRANCE cannot therefore be reproached with having decided in its own interest alone to establish the second restaurant, it also owed it, in the logic of its strategic response to the "QUICK" restaurant, to help the company SEBOL ("Carrefour") temporarily in the event that the "communicating vessels" effect between the company SEBOL and the company B & O were insufficient to restore the profitability conditions of the company SEBOL: That admittedly, it is not contractually provided, as it is in oil-company agreements - fuel distributors, agents of the former -, that the company MAC DONALD'S pay aid to its tenant-managers in the event of losses -, article 2000 of the Civil Code not being applicable here -, - the said company MAC DONALD'S having on the contrary inserted a number of clauses aimed at exempting it from any liability or joint liability as to the consequences of the management of the tenant-manager (Example: Article I - 4 of the lease-management agreement: "The lessor company guarantees neither the value nor the present or future profitability of the said business"); That, however, the provisions of article 1156 of the Civil Code should be applied, according to which "in agreements one must seek what was the common intention of the contracting parties, rather than stopping at the literal meaning of the terms"; That the aforementioned clause (article I - 4 of the lease-management agreement) and those which exclude any participation of the company MAC DONALD'S in the profitability losses of the lease-management are stipulated only with a view to application in normal times and not, as in this case, in the presence of a case of typical "economic war"; That the company MAC DONALD'S FRANCE necessarily accepted this analysis since, whereas, holding strictly to the terms of the lease, nothing obliged it to do so, on 10 June 1997 it signed a rider with the company B & O providing for a reduction in the fee rate for the year 1997; That it must also be borne in mind that, admittedly, if the tenant-manager "operates the business for his own account as an independent trader" (article IV - 4 of the lease-management agreement), he does so for twenty years; that at the end of this period, he has not capitalised the value of the business, not being the owner although he was required to invest in the fittings and equipment; that the economics of this agreement therefore imply that the profits drawn from the operation of the said business allow him both to remunerate Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RÓ No.: 1998/14119 - 14th page Fax received from: 9145276713 No PAMART AVOUE his work and to ensure him a "return on investment"; That the experts MARTIN and DUMONT have, with precision, dismantled the mechanism that led the companies SEBOL and B & O to a lack of cash, and, beyond that, even more seriously, to the absence of their profitability, in 1997; That they concluded that the companies SEBOL and B & O were well managed by Monsieur COLLORAFI; that the company MAC DONALD'S claims in vain that he would have done better to create a "holding company" rather than a G.I.E. (economic interest grouping), on the ground that this would have allowed him to lighten the financial charges; that indeed, the experts, who do not repeat their remark on this subject in their conclusions, asked themselves about it but without showing the possible effects in the present case, it being observed that the company MAC DONALD'S strongly advises its managers against creating a holding company: That the said experts consider, in answer to the Court's first question, that even if an additional cash amount of 3,323,000 francs could have been drawn from keeping the dividends in the company and from the saving resulting from halving Monsieur COLLORAFI's salaries, this sum of 3,323,000 francs would have been insufficient to cover the fees (royalties) of the three companies (SEBOL, B & O and LES PINS) at 31 December 1997, which were 3,905,270 francs; that more seriously, the experts specify that at the rate of the losses recorded by the SEBOL-B & O group for the first six months of the year 1997, this additional cash would not have enabled Monsieur COLLORAFI to face the subsequent losses either and that "it would have taken significantly more than the measures mentioned (by the Court in its first question) for these companies to durably regain their break-even point"; Considering that, faced with this situation, the company MAC DONALD'S, after numerous and pressing demands from Monsieur COLLORAFI, finally agreed to the rider of 10 June 1997 which contained an adjustment of the fees of the company B & O for the year 1997 only, which went from 20% to 17% with a minimum going from 235,000 francs excl. tax to 180,000 francs; that a first observation is called for: it is incomprehensible that, given the "economic war", the company MAC DONALD'S asked for a rate of 20% whereas that of the company SEBOL was 12%; that the second remark is that the company MAC DONALD'S made up for its "gesture" since from 1 January 1998, the minimum base fee went from 235,000 francs excl. tax (initial figure) to 245,000 francs excl. tax. That the company MAC DONALD'S FRANCE, which had the accounts of the company communicated to it at least once a month (on the 5th of each month), could not have failed to foresee that on 30 June 1997, - the rider having been signed on the preceding 10 June - the loss of the company B & O would be approximately 955,000 francs, that of SEBOL 850,000 francs (and that of ANTIBES OUEST 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RO No.: 1998/14119 - 15th page _Fax received from: 0145276713 1VV, au 1 abide 590 = opened in May 1997 approximately 90,000 francs): That it therefore knew from the outset that the temporary reduction of 3 points in the fee rate of the company B & O was out of all proportion to the remedies necessary for the survival of the companies SEBOL and B & O; that indeed, the experts MARTIN and DUMONT estimated that the impact of the rider between 1 January and 30 June 1997 resulted in a reduction of the fees of the company B & O of only 265,656 francs (that is a fee of 1,181,736 francs instead of 1,447,392 francs): Considering that as to what the company MAC DONALD'S FRANCE should have done immediately in June-July 1997, the Court considers that: 1°) It should, instead of sending almost constantly dilatory replies to Monsieur COLLORAFI (using the informal "tu" form, perhaps "partnerial", in any case questionable since the problems raised involved the professional future of a tenant-manager, - such a situation having to prevent the head of a large company from playing on such a register, even if he otherwise has personal ties with his interlocutor) should have, during July 1997 at the latest, on account of the losses then known at 30 June, proposed to (of three points) of the 1997 fee rate for the company B & O, but an overall plan valid until 31 December 1998: reduction of the fees for that period by applying a very low and abnormal rate (since according to the experts it was necessary to go below 12% for the companies SEBOL and B & O to "return to profitability" (because at 12%, the lowest rate normally applied, there would have been a saving of only 608,000 francs in 1997 (report page 41 in fine)): That the possible application of a very low rate "outside the range of 12 to 13% for STRAIGHT LICENCE agreements" is moreover envisaged in article 2 - I of VIII "The lease-management agreement" in the document entitled "Pre-contractual information": "the fee rate determined according to the respective investments of the company MAC DONALD'S FRANCE, in order to guarantee a fair return on investment for both parties, could consequently be taken outside this range"; that in this case, the return on investment was no longer ensured for the companies SEBOL and B & O; 2°) This eighteen-month plan would admittedly have led the company MAC DONALD'S to advise Monsieur COLLORAFI to give up part of his salary and to agree to a reduction of the financial costs of his companies, - "recommendations" that this company could all the more easily give since, in order to comply with the Franchise Charter, it itself directly manages more than 10% of the restaurants and therefore knows perfectly well their management arrangements: 3°) This plan should have provided for what would happen at the end of eighteen months (1 Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 16th page July 1997 - 31 December 1998) in view of the results of the recovery measures taken, which were to be envisaged from a twofold angle: replenishing the cash position and releasing profit margins to ensure a fair "return on investment" Considering further that the legal analysis thus made by the Court of the breach by the company MAC DONALD'S of its obligations under the lease-management agreement agrees with the financial observations of the experts MARTIN and DUMONT who write at page 64 of their report, after noting that the overall net result of the three restaurants (thus including "ANTIBES OUEST"), was in 1997 in deficit by 2,700,000 francs and that in 1998 it was 1,400,000 francs, that "this analysis highlights the fact that in a context of improving profitability of the restaurants, efforts on the part of the parties (adjustment of the fees and financial advice on the part of MAC DONALD'S to control fixed costs more, waiting for an improvement in the situation of its restaurants with, on the part of Monsieur COLLORAFI, acceptance of a temporary loss of remuneration) could have enabled the companies to get through the "difficult patch" caused by the opening of a QUICK restaurant in July 1995 and by the strategic response of MAC DONALD'S (opening of ANTIBES NORD in October 1996)"; that the Court recalls that it considered that it was for the company MAC DONALD'S to propose to Monsieur COLLORAFI that he reduce his salary in an overall proposal over eighteen months; Considering that in these circumstances, the orders to pay referring to the termination clause were therefore served in bad faith by the company MAC DONALD'S FRANCE; that the termination by operation of law of the lease-management agreements could not follow; b) On the termination of the company LES PINS: Considering that the experts MARTIN and DUMONT point out that the ANTIBES OUEST restaurant (LES PINS) is viable "if not in itself, at least within the group made up of the two other restaurants Carrefour Shopping Centre and ANTIBES NORD, in any case without VALLAURIS" (restaurant not allocated to Monsieur COLLORAFI but which he had wished to manage) Considering that the economically indivisible nature of the three companies of Monsieur COLLORAFI is thus underlined; That by that very fact, the termination of the related lease-management agreement is therefore just as wrongful as that of the SEBOL and B &O lease-management agreements; Court of Appeal of Paris 16th chamber, section A - JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 17th page Fax received from: 014522223 II - On the losses arising from the wrongful nature of the terminations Considering that the only obligation in the performance of which the company MAC DONALD'S failed, consisting in presenting to Monsieur COLLORAFI an eighteen-month plan with "sacrifice" on both sides, did not entail a guarantee of restoring the profit-making situation of the companies but was intended to leave loyally a chance to Monsieur COLLORAFI and his companies to aim for that goal; Considering that the loss that Monsieur COLLORAFI suffered as a result of this absence of an "observation period" is very limited: That he cannot invoke the loss of the chance to operate his companies profitably until their term since the measures that the company MAC DONALD'S should have proposed appear, with hindsight, ineffective; That indeed the three companies of Monsieur COLLORAFI have been, from his forced departure from the premises on 10 June 1998, managed by a 100% subsidiary of the company MAC DONALD'S FRANCE; that at 31 December 1998, that is at the expiry of the eighteen-month period of the plan that the company MAC DONALD'S FRANCE should have proposed, despite drastic savings in administration costs and a reduction in the number of "managerial" salaries, which the "plan" would not have failed to provide for, the company SEBOL still shows a loss of 132,042 francs, the company B & O one of 412,107 francs (an increase of 136% compared with the result of the 2nd quarter of 1997) and the company LES PINS (ANTIBES OUEST) is profitable by only 129,728 francs; that in total the pre-tax result of the three companies is a deficit of 414,421 francs instead of 549,950 francs at 31 December 1998; That Monsieur COLLORAFI therefore did not lose any chance of seeing his companies become profitable again within the eighteen months following 1 July 1997; That, on the other hand, Monsieur COLLORAFI unduly lost his salary from 10 June to 31 December 1998, which was, after tax, 430,000 francs per year 430,000 x 204 = 240,328.77 sum rounded to 240,330 francs; that the company MAC DONALD'S FRANCE will therefore be ordered to pay him this sum as damages; riguran dans foiera du et lier par du en biais co ce Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 8 MARCH 2000 - RG No.: 1998/14119 - 18th page SARARI ARULE SODEVA for a net book value of 4,528,333 francs and which the company MAC DONALD'S "recovered", the latter owes payment to Monsieur COLLORAFI and his companies: That in total, the company MAC DONALD'S FRANCE will be ordered to pay Monsieur COLLORAFI the sum of 4,768,663 francs; II - On the claim for compensation of the additional loss suffered by the three companies as a result of the forced enforcement Considering that the appellant companies reproach the company MAC DONALD'S with having proceeded to their forced eviction when it knew of the introduction of the summary proceedings brought before the First President of the Court of Appeal with a view to suspending the provisional enforcement: that "this eviction carried out in totally unlawful conditions caused very great loss, both to the three companies and to Monsieur Bernard COLLORAFI"; that the four appellants estimate their loss at 2,000,000 francs each That the appellants maintain that the company MAC DONALD'S is thereby guilty of violating article 31 of the decree of 31 July 192 which prescribes the suspension of proceedings until the delivery of the summary order; But considering that this text refers only to the seisin of the First President with a view to staying the enforcement of measures ordered by the Enforcement Judge; that the Enforcement Judge of the Regional Court (TGI) of GRASSE, by order of 9 June 1998, rejected the request for a grace period; - that no appeal was lodged against that decision; that the fact that the First President of the Court of Appeal had been seised on the basis of article 524 of the New Code of Civil Procedure of the stay of provisional enforcement of the heads of the judgment under appeal before the eviction, although the date of his seisin is not mentioned in the order itself, was not a legal obstacle to the implementation of the eviction measures; that it follows that, given the respective legal situation of the parties at the time, the company MAC DONALD'S did not commit the fault of which it is accused; That the appellants will therefore be dismissed of their claim on this head; IV - On the personal loss of Monsieur COLLORAFI Considering that Monsieur COLLORAFI maintains that he suffered a material loss of his own on the ground that he was driven out in Court of Appeal of Paris JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 19th page Fax received from _: 0145276713 ...99/03/88 13:56 Me PAMAKI AVOUE odious conditions from these restaurants after having devoted eleven years of his life to them; that this "notion" is in no way "foreign to business relations" as the company MAC DONALD'S FRANCE maintains; Considering, this being so, that the Court has sanctioned the abusive conduct of the company MAC DONALD'S FRANCE in its implementation of the termination clause; that it has drawn the consequences in particular by awarding damages as compensation for the temporary loss of his salary; that Monsieur COLLORAFI does not establish any other specific material loss; That, on the other hand, he rightly invokes a moral loss; That the Court will award him the sum of 100,000 francs as damages in compensation for his moral loss; V - On the establishment policy of the MAC DONALD'S restaurants: Considering that for the remainder, the Court will not accept That it follows that the Court will draw no pecuniary consequence from this argument, which it rejects; VI - On the sums owed by Monsieur COLLORAFI and the companies SEBOL, B & O and LES PINS to the company MAC DONALD'S FRANCE Considering that the Court, saying that the terminations that occurred on 2 January 1998 occurred wrongfully, the obligations of the appellants towards Court of Appeal of Paris 16th chamber, section A -JUDGMENT OF 8 MARCH 2000 - 2G No.: 1998/14119 - 20th page """. Latter Lu. Vé IMA He PANART AVOUE the company MAC DONALD'S FRANCE continue to be governed by the lease-management agreements to the extent that their operation of the premises leased continued until 10 June 1998; that no fee is due, on the other hand, for the period from 11 June to 31 December 1998, the relations having ceased between the parties as a result of the eviction that occurred on 10 June 1998; Considering that the company SEBOL and Monsieur COLLORAFI are indebted to the company MAC DONALD'S FRANCE for the sum of: - 1,867,247.84 francs as unpaid fees (royalties) prior to 2 January 1998 with interest specified below, - 1,272,000 francs as fees (royalties) after 2 January 1998: to 9 June 1998 on the basis of 8,000 francs per day as fees calculated on the 1997 turnover, that is 159 days (8,000 x 159 = 1,272,000): Considering that the company B & O and Monsieur COLLORAFI must also pay to the company MAC DONALD'S FRANCE the sums of: - 1,533,548.87 francs as unpaid fees (royalties) at 2 January 1998 with interest to be specified in the operative part, - 1,113,000 francs as fees (royalties) from 2 January 1998 to 9 June 1998 on the basis of 7,000 francs per day calculated on the 1997 turnover; Considering that the company LES PINS and Monsieur COLLORAFI will be ordered to pay to the company MAC DONALD'S FRANCE the sums - 504,474.42 francs as unpaid fees (royalties) at 2 January 1998 with interest specified below, - 1,272,000 francs as fees (royalties) from 2 January 1998 to 9 June 1998 on the basis of 8,000 francs per day as fees calculated on the 1997 turnover; VII - On the parties' claims relating to the application of article 700 of the New Code of Civil Procedure Considering that it does not appear inequitable that each of the parties bear the burden of the irrecoverable costs it has incurred; Court of Appeal of Paris - 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 21st page Me PAMART AVOUE FOR THESE REASONS Having regard to the judgment of this Court of 9 December 1998, Reverses the judgment under appeal except in its principle of ordering the companies SEBOL, B & O, and LES PINS and Monsieur Bernard COLLORAFI to pay the fees (royalties) due before 2 January 1998. Ruling anew, Rules that the termination of the leases binding the aforementioned companies and the company MAC DONALD'S FRANCE through the operation of the termination clause is wrongful, Rules that it could only take place at the end of a period of eighteen months from 1 July 1997 in the event of failure of the measures that the company MAC DONALD'S FRANCE was under an obligation to implement in order to work towards the return to a profit-making situation of the aforementioned companies in keeping with the spirit of the economics of the lease-management agreements, Rules accordingly that the said agreements continued to be in force until 30 December 1998 with different effects depending on the periods, I - Period from 2 January 1998 to 10 June 1998 Rules that for the period which continued from 2 January to 10 June 1998, the date of departure from the premises, the lease-management agreements continued to produce their full effects, Consequently, Orders, jointly and severally, the company SEBOL and Monsieur Bernard COLLORAFI to pay to the company MAC DONALD'S FRANCE the sums of: * 1,867,247.84 francs as unpaid fees (royalties) prior to 2 January 1998 with interest at the legal rate: from 1 August 1997 on 1,266,300, from 1 December 1997 on 361,800, from 1 January 1998 on 239,147.84 francs, * 1,272,000 francs as fees (royalties) from 2 January 1998 to 9 June 1998 on the basis of 8,000 francs per day calculated on the 1997 turnover, Orders, jointly and severally, the company B & O and Monsieur COLLORAFI to pay to the company MAC DONALD'S FRANCE the sums of: * 1,533,548.87 francs as unpaid fees (royalties) at 2 January 1998 with Court of Appeal of Paris 16th chamber, section A JUDGMENT OF B MARCH 2000 RG No.: 1998/14119- 22nd page Te:V4ly iV.R4.544 Me rAMARI AVULE late-payment interest at the base bank rate plus three points per instalment, * 1,113,000 francs as fees (royalties) from 2 January 1998 to 9 June 1998 on the basis of 7,000 francs per day calculated on the 1997 turnover. Orders, jointly and severally, the company LES PINS and Monsieur COLLORAFI to pay to the company MAC DONALD'S FRANCE the sums of: * 504,474.42 francs as unpaid fees (royalties) prior to 2 January 1998 with late-payment interest at the base bank rate plus three points per instalment, * 1,272,000 francs as fees (royalties) from 2 January 1998 to 9 June 1998 on the basis of 8,000 francs per day calculated on the 1997 turnover, II - Period from 10 June 1998 to 31 December 1998: Rules that no fee is due by the companies SEBOL, B & O and LES PINS for this period, they having been evicted from the premises, Rules that the companies in question, showing very substantial losses at 10 June 1998, cannot claim to invoke a loss arising from the loss of the chance to make profits had they operated during this period of time, On the loss of the companies SEBOL, B & O and LES PINS: Orders the company MAC DONALD'S FRANCE to pay to Monsieur Bernard COLLORAFI the sum of 240,330 francs as damages in compensation for his loss of the chance of having this salary income during this period, Rules that the interest due for more than a year at 16 March 1998 and on each anniversary date thereof shall itself bear interest, for the benefit of the company MAC DONALD'S FRANCE, On the tangible fixed assets: Orders the company MAC DONALD'S FRANCE to pay to the companies SEBOL, B & O, LES PINS and Monsieur COLLORAFI the sum of 4,528,333 francs under this head with interest at the legal rate from 13 December On the personal loss of Monsieur COLLORAFI: Orders the company MAC DONALD'S FRANCE to pay him the sum of 100,000 francs as damages in compensation for his moral loss, Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 23rd page Me rAMAKI AVULE On the claims based on article 700 of the New Code of Civil Procedure: Dismisses the parties of their claim for reciprocal orders based on article 700 of the New Code of Civil Procedure for payment of their costs both of first instance and of appeal, - the judgment under appeal being reversed insofar as it ordered the companies SEBOL, B & O, LES PINS and Monsieur Bernard COLLORAFI to pay to the company MAC DONALD'S FRANCE the sum of 50,000 francs under article 700 of the New Code of Civil Procedure Orders the company MAC DONALD'S FRANCE to pay 3/4 of the costs of first instance and of appeal, and Monsieur Bernard COLLORAFI 1/4; authorises the avoués of the parties to recover them in this proportion in accordance with article 699 of the New Code of Civil Procedure. The Registrar Court of Appeal of Paris 16th chamber, section A JUDGMENT OF 8 MARCH 2000 RG No.: 1998/14119 - 24th page