Canon Medical Systems Limited v The Imaging Centre Assets Limited & Ors

A written joint venture agreement is construed objectively from its language, read as a whole and in its commercial context. Where the agreement appointed a joint venture vehicle as the exclusive distributor of transportable scanning units, the supplier had to account fully for rental income earned from those units. A related minimum-rental obligation operated on a “Last Six” basis: payment was due for unrented units up to six at a time.

The agreement also required the supplier to meet a reasonable request for additional units at the contract price, to consult on revisions to the rental price list, and not to facilitate competing rentals. A final injunction was appropriate to restrain continuing and anticipated breaches of express non-competition covenants.

The claimant and the defendants operated a joint venture for the sale, ownership, management and rental of mobile and relocatable MRI and CT units under a Master Agreement dated 17 March 2017. The claimant sought declarations, damages and injunctive relief concerning rental income, payments for unrented units, warranty and servicing charges, the supply of additional units, and alleged competition by the supplier and its group company.

The court determined whether the non-signatory joint venture company was privy to the Master Agreement, how the principal payment and supply provisions were to be construed, whether contractual breaches had occurred, and what relief should follow.

1. Privity. Properly construed, the Master Agreement was entered into by the supplier and the holding company, but the joint venture vehicle was also a party to it. Its rights therefore arose from contractual privity, not from the Contracts (Rights of Third Parties) Act 1999.
2. Rental income and unrented units. The supplier managed the renting out of the joint venture’s units for the benefit of the joint venture vehicle. It had to account to that vehicle for all rental income earned from rented First Fleet units. Clauses 8 and 9 instead concerned units made available to the supplier itself. They created a Golden Six obligation on a Last Six basis, requiring payment at £17,333 per MRI unit or £14,083.50 per CT unit, subject to a maximum of six unrented units at any one time.
3. Other contractual obligations. The supplier breached the continuing consultation obligation concerning the rental Price List by ignoring a proposed 2021 revision, although no loss was proved. The warranty and servicing charge was 6.5% per annum of the current recommended selling price for the Canon equipment inside each unit, rather than the Salesforce data labelled “List Price” or the historical invoice price. Clause 3 required the supplier to sell additional units where the joint venture vehicle made a reasonable request under the Agreement, at the contractually defined best price. The supplier breached that obligation by refusing to supply two CT units requested in March 2020; only nominal damages were awarded.
4. Competition. The supplier breached Clause 7 by using a non-First Fleet MRI unit for a rental when an available First Fleet unit should have been used. It also breached Clauses 17 and 41 by facilitating the rental of group-company units in the United Kingdom and by pursuing a strategy to develop a competing fleet. The court rejected a substantial damages claim that had not been properly particularised or proved.
5. Relief. Judgment was entered for £966,495.56 for unpaid rental income up to 31 July 2023. Further sums concerning unrented units and later months required assistance from counsel. Damages for the unit-supply and competition breaches were nominal, subject to the separate Living Care calculation. A final injunction was granted, with limited transitional exceptions for servicing and decommissioning existing group-company rentals.