Burger King v King Franchises

On an application for summary judgment, the defendant must show a realistic, rather than fanciful, prospect of success. The court must avoid a mini-trial, but may analyse factual assertions and reject claims lacking evidential substance, particularly where contemporaneous documents contradict them.

Lawful economic duress requires pressure which the law regards as illegitimate. Reliance on existing contractual rights to drive a hard bargain will not ordinarily suffice. In a commercial franchise relationship, the circumstances must be sufficiently striking to establish immoral or unconscionable pressure.

Waiver requires clear evidence of unequivocal acceptance of a breach with knowledge of the relevant facts. Ratification or estoppel may prevent a party denying contractual enforceability where it has adopted an agreement and taken its benefits.

Burger King Corporation and Burger King Europe sought summary judgment in a dispute concerning the termination of franchise and development agreements relating to restaurants in Cyprus. The parties had entered into development and franchise agreements and later concluded a settlement agreement under English law.

The defendants alleged, among other matters, lack of authority, economic duress, undue influence, waiver, breaches by the claimants, and the existence of related proceedings in Cyprus. They also sought permission to amend their defence and counterclaim.

The central issue was whether the defendants had any real prospect of successfully defending the claim for declarations concerning termination and related relief.

1. The application was treated as one for summary judgment. The claimants succeeded because the defendants had no real prospect of successfully defending the claim. The court could not conduct a mini-trial, but was entitled to scrutinise witness evidence and reject unsupported assertions, especially where contemporaneous documents provided no support.

2. The lack-of-authority defence had no real prospect of success. The defendants had entered into the later development agreement, taken its benefits by opening restaurants, and adopted the settlement agreement. They were therefore either bound by ratification or estopped from denying enforceability.

3. The economic duress defence also had no real prospect of success. Lawful act duress requires pressure which the law regards as illegitimate. A party does not ordinarily commit duress merely by relying on existing contractual rights to obtain a hard bargain. In a commercial context, lawful act duress is relatively rare and requires immoral or unconscionable pressure. The evidence did not support such pressure, and the settlement agreement contained relaxations of existing obligations.

4. The allegations of undue influence, contractual breaches by the claimants, and waiver were insufficient. The parties were commercial companies, the alleged claimant breaches were not linked clearly to the termination rights, and waiver required clear evidence of unequivocal acceptance of breaches. The correspondence and evidence did not establish that requirement.

5. Related proceedings in Cyprus did not justify declining jurisdiction or postponing determination. The possibility of inconsistent judgments was improbable and, in any event, did not displace the court’s duty to decide the claim on its merits.

First-instance decision. No earlier appellate decision is stated in the judgment.