Written submissions — McDonald's

Py: 4 II - THE MAIN CLAIM The main claim of Monsieur COLLORAFI, and of the two companies he manages, is tainted by multiple inconsistencies which will appear when the case is placed back in its exact factual course, before showing the total lack of legal basis of the claim of Mr COLLORAFI and of his companies. A. THE FACTS. MCDONALD'S offers one of the most high-performing training programmes in the world in the field of fast food. Mr COLLORAFI benefited from this training, for 10 months, from October 1986 to July 1987. In August 1987 FRANCE and located, in the shopping gallery of the Carrefour store, in Antibes (document A). On 31 August, with the agreement of MCDONALD'S FRANCE, he transferred the whole of his rights and obligations arising from the lease-management agreement to the company SEBOL, with a capital of 250,000 Frs, of which he personally holds 249 shares out of 2,500 (document B). The turnover of the restaurant progressed regularly: 1987 (5 months) • 18,310,712 .21,184,987 .. 22,290,561 .25,422,882 .27,422,009 Having reached this point in the account of the facts, it is appropriate to re-read the summons, in which one can read on p 4, 3rd and 4th paragraphs, "Whereas the year 1994 saw a stagnation of turnover (27,372,000 francs) and of net result -77:l SI.3I 06/78/56 Atti-te NOTET SAUSONE NO WI2T8BABFE : red siwa x0j Py: 5 (1,330,000 francs), the year 1995 was the start of a decline (24,754,000 francs of turnover and 1,010,000 Frs of net results after tax)". It was necessary to react against this establishment and from 1995, MCDONALD'S FRANCE prepared the establishment of a new restaurant, close to the QUICK restaurant. Mr COLLORAFI wished to take this restaurant on lease-management. Satisfaction was given to him by MCDONALD'S FRANCE Consequently, there was signed, on 9 October 1996, between McDONALD'S FRANCE and Mr COLLORAFI, a lease-management agreement relating to the Antibes-Nord restaurant (document C). cote 8 80, Ell, drace de 5000 Fr, con ce AL 5, COLLORAFI (document D). This restaurant, from October to 31 December 1996, achieved a turnover of 3,388,837 Frs. A. Mr COLLORAFI then wished to continue to take part in the densification of the network of MCDONALD'S restaurants, by requesting to become lessee- manager of a business planned, at Antibes-Ouest. His letter of 16 December 1996 is clear: "I met Isabelle Kuster concerning the forthcoming opening of the Antibes-Ouest restaurant for which MCDONALD'S obtained the building permit. I told her of my motivation and of my ability to take this restaurant on lease-management" (opponents' document 4, 1st paragraph). On 10 January 1997, Mr COLLORAFI reiterated his request for Antibes-Ouest and made the same request for a project at Vallauris, writing to the President of MCDONALD'S FRANCE "I thank you for having been kind enough to receive me in the presence of Isabelle Kuster concerning the forthcoming opening of the two restaurants of Antibes-Ouest and Vallauris for which MCDONALD'S obtained the building permit and for which I am a candidate for lease-management". (opponents' document 6, 1st paragraph). MCDONALD'S FRANCE agreed to give him the operation on lease-management of the Antibes-Ouest business, which brought to 3 the restaurants managed by him in the town of Antibes. It was planned to give him this lease-management under an agreement called "straight license" (see opponents' document 12). In this type of agreement, the lessee- manager must, for an opening other than that of a first restaurant, 51:97 40/14/68 red sIuo xeJ Py: B. finance out of own funds (not borrowed) 25% of the pre-opening costs, equipment, furniture and signage, and benefits from a 20-year agreement. Yet, Mr COLLORAFI refused this financing, so that MCDONALD'S had to modify the type of agreement proposed and grant him an agreement of the BFL type (Business facilities lease) in which these costs are borne by MCDONALD'S FRANCE, the duration of the agreement being 3 years (see opponents' document 14: agreement on the BFL agreement with an option, for the benefit of the lessee-manager until 31.12.1997 to convert it into a "straight license"). The lease agreement granted by McDONALD'S FRANCE to Mr COLLORAFI for a third business was therefore signed on 30 April 1997 for the Antibes Ouest restaurant, the agreement being immediately transferred by Mr COLLORAFI to the EURL "Les Pins", with a capital of 50,000 Frs, of which he is the manager and sole partner (see documents E and F) Mr COLLORAFI would have wished, as seen from his letter of 10 January 1997, to obtain also the lease-management of a fourth business, at Vallauris. But the impossibility of covering out of own funds (not borrowed) 25% of the equipment costs of Antibes-Ouest made it impossible to satisfy him, whereas the companies SEBOL and B & O were ceasing to honour their current financial commitments towards McDONALD'S FRANCE SEBOL was indeed leaving unpaid the invoices: S 140490 of 02.01.97 for S 144382 of 03.02.97 for S 148918 of 03.03.97 for i.e. at 19 March an arrear of .. 180,900 F incl. VAT 180,900 F incl. VAT 180,900 F incl. VAT 542,700 F incl. VAT to which were added: • invoice S152561 of 01.04.97 for : bringing the debt at 15 April to ....... . 180,900 F incl. VAT .723,600 F incl. VAT - invoice S156384 of 02.05.97 for : bringing the debt at 25 May to : 180,900 F incl. VAT . 904,500 F incl. VAT - invoice S160482 of 02.06.97 for bringing the debt at 25 June to : 180,900 F incl. VAT . 1,085,400 F incl. VAT S1:98 B6/1A/68 Di-DO FT2T89GEEE : red sIt? xel 45 27 62 13 Pg: 7 • invoice S164296 of 1 July for bringing the debt at 22 July to .. 180,900 F incl. VAT 1,286,300 F incl. VAT The company SEBOL did not seek to remedy this situation, since a financial review, that is to say an examination of the lessee-manager's accounts, planned for 15 May, could not take place, the documents presented by SEBOL lacking precision and reliability, which is quite surprising when one knows that Mr COLLORAFI was previously manager of a bank branch Ce a rault 17 CoL. 097 en cet en ses neis a regins eu to the detriment of the performance of the commitments entered into by the companies of which he is the master. SEBOL persisting in its attitude of non-performance of the lease-management agreement, by default of payment of the fees since the beginning of 1997 (see documents 48 to 51), as well as by refusal to collaborate with the neighbouring lessee-managers (see document d), it became necessary to resort to sending a formal notice on 27 November 1997 (see document 15). This formal notice complies with article 11.2. (b) of the lease-management agreement worded as follows: "11.2. In addition, this agreement shall be terminated and the lease-management shall come to an end: b) At the initiative of the Lessor Company and without any judicial formality one month after a simple formal notice to pay any sum or to perform any obligation which has remained without effect and indicating the intention of the Lessor Company to invoke the benefit of this clause in the event of non-compliance by the Lessee-Manager with any stipulation whatsoever of this agreement and, notably, default in payment of the fees at the agreed due dates" SEBOL did not comply with this formal notice received on 1 December 1997 and on 2 January 1998, the lease-management agreement therefore came to an end automatically. Notification of this was given to it on 2 January 1998 (document 43). " Mr COLLORAFI adopted the same negative attitude within the company B and O, deliberately ceasing payments to McDONALD'S FRANCE since 1 January 1997. : 6J 57:0% 85/58/58 8K-34 BILIBREVEC : Py: 8 B & O was indeed leaving unpaid the following invoices: • 458743 of 20.12.96 for ........................... - S 145424 of 03.02.97 for • S 149359 of 03.03.97 for .... i.e., at 19 March 1997, an arrear of : .. to which were added: - invoice S 153742 of 31.03.97 for : • invoice S 153001 of 01.04.97 for • invoice 492712 of 07.04.97 for :. and from which should be deducted: - credit note 491854 of 31.03.1987 for • credit note 491632 of 09.04. 1997 for : i.e., at 15 April, an arrear of• ...301,500 F incl. VAT ..283,410 F incl. VAT 283,410 F incl. VAT . 868,320 F incl. VAT ...........35,418.26 F incl. VAT 217,080.00 F incl. VAT 411,867.08 F incl. VAT .. - 5,054.31 F incl. VAT 149,358.77 F incl. VAT 1,428,272.27 F incl. VAT (document 10) B & O having paid invoice 458783 of 20.12.96 for but having to pay invoice S 160926 of 02.06.87 for the arrear at 25 June amounted to: - 301,500.00 F incl. VAT 217,080.00 F incl. VAT 1,343,852.27 F incl. VAT (document 12) Despite the registered letter sent on 22 July 1997 jointly to B & O as to SEBOL, the account of B & O remained in debit. It was therefore necessary to proceed in respect of B & O, as seen previously for SEBOL, and to send B & O a formal notice for 1,409,184.01 F incl. VAT, on 27.11.1997 (document 16), in accordance with article XI.2.2 of the lease-management agreement worded as follows: X.2.2 Non-compliance with contractual provisions / Events affecting the operation of the business that is the subject of these presents: The notification by the Lessor Company, sent to the Lessee-Manager by registered letter with acknowledgment of receipt, made one month after a formal notice that remained fruitless and indicating the intention of the Lessor Company to rely on this clause, shall suffice to put an end to the "Agreement", automatically and without any judicial formality, in any of the following cases: 91# : 5d 51:9T 96/18/58 7Ue 40 NOTAT SINON HES Py: 9 a) Non-compliance by the Lessee-Manager with any of the contractual provisions, notably : i - non-payment of the fees to the Lessor Company or of any sum due, on the occasion of this "Agreement" as well as to a natural or legal person whom the Lessor Company would have substituted for itself. • non-compliance with any of the obligations arising from the Licence annexed hereto (Annex A) notably, any acts or omissions of the Lessee-Manager by virtue of which the Lessor Company and/or McDonald's Corporation would be entitled to terminate the Licence, ......" B & O did not comply with this formal notice, received on 2 December, and the lease-management agreement with B & O therefore came to an end automatically. Notification of this was given to it on 2 January 1998 (document 44) 8. Mr COLLORAFI therefore led his companies to the termination, at their own fault, of the lease-management agreements, by adopting a policy guided by The study of the accounting documents of the company SEBOL shows this. SEBOL, with a capital of 250,000 F.F., was created in 1987 by Mr COLLORAFI who holds 2494 shares of 100 Frs out of 2500 securities. Mr COLLORAFI did not • one of 915,283.33 F on 14 December 1988 * the other of 415,283.33 F on 1 October 1990 (document 1) (document 2) Monsieur COLLORAFI drew a significant remuneration from the company SEBOL, amounting over 9 years and 5 months, from August 1987 to the end of 96, to 5,039,600 F.F., as follows from the table below. i 91/6 :bd S1:91 46/10/60 658-4 d:013T SIUSONU SUD VTLIBBSTEE ted syme zet Fax received from : 01 45 27 67 13 Pg: 1 REMUNERATION OF MR COLLORAFI (gross remuneration, benefits in kind declared included) Year 1987 (5 months) Cumulative Remuneration 625,000 5,039,500 It suffices to note that at the moment when the company SEBOL neglects to pay the lessor of its business, its Chairman, Mr COLLORAFI, does not neglect to increase his remuneration. 10. But the distributions of dividends must be added to the remuneration of Mr COLLORAFI. These appear in the table of changes in shareholders' equity. CHANGE IN SHAREHOLDERS' EQUITY - SEBOL S.A. Year Start of financial year Cumulative Increase (results) = 1,602,959 Decrease (dividends) End of financial year +TLIBOGREE red sive xe1 Pg: z It is noted that the policy of Mr COLLORAFI is wholly devoted to his personal interest and not to that of SEBOL: the dividends of the last ten financial years - the distributions of dividends peaked in 1995, the year in which, according to him, the company allegedly experienced difficulties, - related to the ten financial years analysed, these distributions amount to 415,000 F per year, - added to the gross remuneration received since the opening of the restaurant of SEBOL, Mr COLLORAFI benefited from substantial income: Gross remuneration 5,039,500 = 536,117 Frs per year over number of years 9.4 dividends = 415,000 Frs per year average annual income: 951,117 Frs 11. It must also be noted that the profitability of the operation of the Antibes 1 restaurant by its lessee-manager SEBOL was fruitful. After remuneration of Mr COLLORAFI, whose lot, as has just been noted, is not miserable, the profitability of SEBOL over these ten financial years is excellent, as appears from reading the table of net result for each year: PROFITABILITY AFTER REMUNERATION OF OPERATOR - ANTIBES 1 Year 5 months 1987 Cumulative Net result - 1,602,969 i.e. annually: 4,587,280 9.4 488,009 Frs 61218867E€ SI: 91 86/10/68 AUX-00 Fax received from : 01 45 27 67 13 i Py: 3 This average net result over 9.4 years, related to the share capital (250,000), gives an annual profitability of 195% It must then be noted that the S.A. SEBOL is a profitable business whose manager, for personal reasons, takes advantage of it, without regard for the corporate interest, at the moment when management should have been tighter owing to the repercussions of the so-called mad cow phenomenon and of the local competition from QUICK. 12. It is significant in this respect to note that in 1997, at the moment when he decided to no longer pay the fees due to the lessor of the business, he took back a personal current account of 350,000 Frs and had SEBOL borrow exactly the same sum from Crédit du Nord It is understood, in such circumstances, that the attitude of Mr COLLORAFI, absolute master of the companies SEBOL and B & O, cannot rest on any legal basis. B. The absence of legal basis for the action of Mr COLLORAFI and his companies. 1. The opposing summons evokes contractual faults but does not specify in any way what fault(s) would have been committed by McDONALD'S FRANCE. It is remarkable to note: • that the summons does not contest the validity of the agreements concluded with MCDONALD'S FRANCE (this is moreover understandable when one knows the profits that Mr COLLORAFI drew from them, see above, II, B. 6 to 12). • that the summons articulates against MCDONALD'S FRANCE no breach of these agreements, • that at the moment when Mr COLLORAFI claims not to be able to honour his commitments towards MCDONALD'S FRANCE, he offers another lessee-manager, Mr Daufes, to buy out the operation of another catering unit in Grasse, by a letter of 5 December 1997 (document 74), three days after receipt of the formal notices from MCDONALD'S. This is indeed proof of the bad faith of Mr COLLORAFI. The summons refers to article 1134 of the Civil Code and it is quite right to do so, for the claimant companies, and their manager Mr COLLORAFI, did not perform the agreements in good faith: пт ,тт • Б1 DIZIBAGICE : red 51wa x=3 Py: • whereas the letters reported above (A, 3 to 6) expressly contain, and emphatically, the wish to become lessee-manager of the Antibes-Nord and Antibes-Ouest businesses, the summons now claims that Mr COLLORAFI would have acted “against his will”, which is inconceivable on the part of a company head with the experience of Mr COLLORAFI: the file shows on the contrary his insistence on increasing the number of his units. • Mr COLLORAFI seems to have felt spite at not being retained, despite his pressing requests, as lessee-manager of the restaurant of Vallauris. But how could he claim it in good faith when: • the agreement initially proposed for Antibes-Ouest had to be modified, because Mr COLLORAFI failed to make the planned contribution (see above II, A. 5), • his other companies owed respectively, at the opening date of Vallauris: SEBOL B&O 723,600.00 F incl. VAT (see above II.A. 6) 1,428,272.27 F incl. VAT (see above II, A. 7) It is inconsistent to ask for new agreements without performing the previous ones. It is also inconsistent to complain of the development policy of French, in 1997, its main competitor, which would have allowed Mr COLLORAFI to maintain in 1997 the overall turnover of the three companies of which he is the absolute master, since 1997 shows a consolidated turnover of 31,556,286 F.F. for the three restaurants. No fault can therefore be attributed to McDONALD'S FRANCE. On the contrary, SEBOL, B & O and their manager, Mr COLLORAFI, preparing his voluntary exit from the network, deliberately breached their commitments since the beginning of 1997. III - THE COUNTERCLAIM OF MCDONALD'S FRANCE The unpaid sums that the companies SEBOL and B & O allowed to accumulate have already been set out (above II. A. 6 and 7) 41: 9[ ET TRAGEEE Fax received from : 01 45 27 6Z 13 89/01/28 19:21. au Py: 6 The Court will kindly also order the capitalisation of interest, which cannot be refused, once it is requested (Cass. soc., 29 June 1996, Gaz. Pal. 1896, II, 20 and 21 Dec. 1996 p. 12). 4. Provisional enforcement is necessary, given the size of the debt, and the circumstances of its origin. The costs must be borne by Mr COLLORAFI and his companies Article 700 must be applied in favour of MCDONALD'S FRANCE, in the terms of the operative part below. 1) in these names. Dismiss the S.A. SEBOL, the SARL B & O, and Monsieur Bernard COLLORAFI from all their claims, purposes and submissions. Granting the S.A. MCDONALD'S FRANCE its counterclaim, order: jointly and severally the S.A. SEBOL and Monsieur B. COLLORAFI to pay it the sum of 1,867,217.84 Frs with statutory interest: • from 1 August 1997 (registered letter with acknowledgment of 22.07) on : .. 1,266,300.00 Frs • from 1 December 1997 (registered letter with acknowledgment of 27.11.) on: .. 361,800.00 Frs • from 1 January 1998 (art. 11.4.) on : .239,147.84 Frs jointly and severally the SARL B & O and Monsieur B. COLLORAFI to pay it the sum of 1,535,548.87 Frs with default interest at the base bank rate increased by 3 points for each instalment from the date on which it should have been paid (art. XI 2 3. of the agreement). rule that the interest due to MCDONALD'S FRANCE shall itself bear interest, in accordance with article 1154 of the Civil Code. order the provisional enforcement of the decision to be given, notwithstanding any appeal. 01AT : 61 41:91 8610/68 bue tu BIZTHUGHEE ; sed siwa xej Fax received from : 01 45 2? 6? 13 Pg: These unpaid sums led to the formal notices sent to the companies of Mr COLLORAFI, and, for lack of payment, to the termination of the agreements. At no time has the principle, or the amount, of the debts been contested. Mr COLLORAFI wrote on 5 January 1998 (document 75): "The sums that the Commercial Court will not fail to award me can only be infinitely greater than the fees you claim": The debt is therefore acknowledged Mr COLLORAFI is personally bound, jointly and severally with each company, as follows from the amendments transferring the lease-management to the companies SEBOL and B & O (documents B, D, F). As regards SEBOL, there is therefore due: • at the date of the formal notice: - since then: i.e. to date: 1,628,100.00 F incl. VAT ..239,147.84 F incl. VAT 1,867,247.84 F incl. VAT with statutory interest: • from 1 August 1997 (registered letter with acknowledgment of 22.07) on : • from 1 December 1997 (registered letter with acknowledgment of 27.11.) on • from 1 January 1998 (art 11.4) on : 1,266,300.00 Frs 361,800.00 Frs 239,147.84 Frs As regards B & O there is therefore due: - at the date of the formal notice:....... - since then: 1,409,184.01 Frs 128,364.66 Frs i.e. to date 1,535,548.87 Frs with default interest at the base bank rate increased by 3 points, for each instalment from the date on which it should have been paid (art. XII. 2.3. of the agreement). ST: 91 86/10/68 ANTET SINON END Py: order jointly and severally the companies SEBOL, B & O and Monsieur B. COLLORAFI to pay to the S.A. McDONALD'S FRANCE the sum of 80,000 F.F. under article 700 of the N.C.P.C rule that the indemnity under article 700 of the N.C.P.C. shall be increased by the amount of the proportional fee of bailiffs provided for by article 10 of the Lastly, take note for the company MCDONALD'S FRANCE that it reserves the right to increase its claims in view of the conditions of return by SEBOL and B & O of the businesses that had been leased to them. WITHOUT PREJUDICE TO ALL RIGHTS. _il dun #T21886+EE