MMP GmbH v Antal International Network Ltd

For a continuing business deprived of a contractual franchise, damages are ordinarily measured by the profits lost as a result of the breach, comparing performance with and without the franchise. A valuation of the business at the breach date is a proxy available only where the breach has effectively put the business out of operation. A claimant must establish its pleaded measure of loss with reliable evidence; the court will not substitute an unpleaded, speculative alternative. Immediate termination for damage to a franchisor’s brand requires evidence of actual adverse effect, not merely apprehended harm.

MMP operated a Swiss recruitment consultancy under a 15-year franchise agreement with Antal London. Antal London terminated the agreement immediately after receiving a complaint about harassment by MMP’s employee of a recruitment candidate. MMP claimed damages for repudiatory breach, valuing the company by a discounted cash flow method rather than claiming loss of profits.

The issues were whether the employee’s conduct was attributable to MMP, whether it breached the franchise agreement, whether immediate termination was justified, and whether the claimed valuation was the proper measure of loss.

1. Liability. The employee’s conduct was attributable to MMP. She had engaged with the complainant as a recruitment consultant and had misused information from his CV. The conduct was therefore connected with her employment and was not a private frolic.
2. “Name” and “Intellectual Property” in clause 16.2(l) included Antal London’s brand and associated goodwill. However, because breach of that substantial term permitted immediate termination, the clause required evidence that the conduct had in fact adversely affected the brand. Fear or concern that damage might occur was insufficient. No actual damage was proved.
3. The alternative case under clause 16.2(k) also failed. Antal London could not establish actual prejudice to the operation or reputation of its business. In any event, absent prejudice sufficiently serious to go to the root of the contract, a breach would not be repudiatory and could not justify immediate termination.
4. Antal London’s purported termination was therefore wrongful and amounted to a renunciatory breach.
5. Quantum. Since MMP continued trading as a recruitment consultancy, the proper measure was the net profits lost during the remaining contractual period, subject to appropriate discounting. A valuation at the breach date was appropriate only where the breach had put the business out of operation, so that ordinary future-profit comparison was impossible.
6. MMP had pleaded and pursued only the discounted cash flow valuation. The court would not replace it with an unpleaded loss-of-profits claim requiring further disclosure and evidence. The proposed valuation was also speculative and unsupported by the company’s historical performance. MMP therefore failed to establish substantial loss and was entitled at most to nominal damages.

Not stated in the judgment.