KB-2021-000741 - [2025] EWHC 2096 (KB)

Some of the franchisees gave evidence to the effect that the business model did not work in that they were bound to fail. This was for a number of reasons, namely:

There is not sufficient evidence for this to give rise to a breach of a contractual term of good faith. The terms of the agreement provide for annual increases in the franchise fees: some were £18 per week, and some were £9 per week. There was no provision about exclusivity and so a franchisee did not have a right to a territory. If the market was saturated, there was no evidence to prove that this was the case other than the assertions of franchisees. There were provisions of the franchise agreement requiring leafleting and the like. There was no guaranteed turnover or guaranteed income.

Despite the above, there are serious concerns about the business model which is based on the experience of these Claimants struggling to make ends meet, and having to endure the lack of sympathy to their plight. The Claimants were far from alone as is evidenced by the number of defaulting franchisees and by the large number of people who were either sued or entered into settlement agreements. The precise number has not been shown, but if it were a small number, JBL had immediate access to the information, and they could have demonstrated this. The suggestion that everyone else must have succeeded is not a sensible inference since it has not been demonstrated and the financial and emotional dangers of taking on JBL were considerable.

There was hard-sell to get in new franchisees without sufficient concern as to whether or not the franchisees had the ability to succeed. If they did not succeed, JBL appeared to show mercy of a kind, but this involved tying the franchisees into very long-term contracts. Whilst this might have provided temporary respite, it locked the franchisees to JBL for many years and in many cases has been the source of the counterclaims of very large sums. Mr Benson said that they did not have to enter into longer terms, whereas the franchisees said that they did so because there was nowhere else to go to avoid immediate failure. If they did not succeed, there was factored in to the model that there would be a liability for lost profits and the ability to go after the property of the franchisee or of their guarantor. All of the above provided the context in which the seriousness of the established breaches of contract have to be assessed.

Both before and after the foregoing, there were communications regarding prices for the lessons. The franchise agreements provided a term in Annex 2 to the Particulars of Claim at clause 5(g) that “you will charge for driving tuition only such fees as are prescribed by the Franchisor”. Many franchisees believed that the amounts prescribed by the Franchisor were beneath the market rate or lower than they could expect to charge if allowed to fix their own price. This was supported by the evidence of witnesses who believed that they were therefore not getting as much money as they would have earned if they had chosen the price. That mattered particularly in circumstances where they need to increase earnings in order to pay what they regarded as heavy fixed franchise fees and then to have money left over to afford the essentials of maintaining themselves. The pleaded case at para 10(vi) of the Particulars of Claim is that the prices quoted 2 pupils by JBL “remained fixed at £25 from June 2018 regardless of inflation, increases in the cost of petrol and annual increases in the franchise fees payable by the claimants to JBL. The consequence was that the claimants businesses became less profitable with each passing year.”

There is reason to be critical of the lack of specificity of some of this evidence. The evidence as to what other driving schools were charging was anecdotal rather than supported by solid evidence.

In the course of closing submissions, the Court questioned the lawfulness of Clause 5g, whereby the franchisee had to fix its prices as set by the franchisor. This was not a point that has been relied upon either in the pleadings or in evidence or in argument. Since it potentially affected the lawfulness of the contract, it was raised by the Court. The parties were given permission to serve further written argument in this regard. The JBL consulted with a competition law specialist, Mr Adam Aldred whose opinion, dated 15 April 2025 was an appendix to further submissions of Counsel dated 17 April 2025. Further, the Claimants have also taken advice from counsel who had a limited previous involvement in the case, namely Mr Callum Reid-Hutchings dated 22 April 2025.

The following is apparent from this further advice, namely:

From the documents provided, I have reached the following conclusions:

In these circumstances the case must be determined as if there was no issue of unlawfulness. It may be said that if there had not been such a clause that the franchisees would have obtained higher prices, but there is no evidence to make out such a case. The only case which is before the Court is that until January 2020, when the prices were fixed, JBL failed to adjust the prices.

There are specific alleged breaches in the Particulars of Claim which now arise for consideration. First, it is said that the prices were set too low, failing to take into account the expenses incurred by the Claimants, when travelling to and from a pupil’s home: see Particulars of Claim para. 10(5) . Further it is said that the prices quoted remained fixed from June 2018 without regard to inflation and increasing franchise fees, affecting the profitability of the Claimants’ businesses.

The position of the franchisees in making these allegations is completely understandable. This is because of the difficulty of the business model in which JBL had so much control and which rendered the Claimants so vulnerable. That said, if price fixing was not in the contract or was lawful, there is nothing to indicate that the position of the franchisees would be significantly better. There is no evidence beyond the most generalised anecdotal evidence to the effect that the turnover of franchisees would have been greater. Nor is there evidence to show that if JBL had increased the fees that the franchisees would have done better. It is always a balance between increasing the fees to increase turnover and raising fees with a consequence that pupils go elsewhere. It appears to have been a very competitive market. The Court does not have the evidential material to make a judgment in this regard.

Whilst the Court has sympathy for the submissions that:

There was evidence that increases of prices took place on 29 September 2020 and much later there were much larger increases in the prices. That does not prove or indicate that there was necessarily a breach of contract at the relevant time.

As regards the requirement that the Claimants could not publish the cost of their services under threat of sanctions, I accept that that was a requirement which was arbitrary or capricious or unreasonable in a Wednesbury sense. The reason given by JBL for requiring that the prices should not be communicated was in order that an interested potential pupil should telephone Head Office. That would provoke a conversation in which an experienced receptionist might be able to persuade a prospective pupil to make a booking and not to be put off by the price. That theory has to be balanced against the effect of the policy which is to prevent the franchisee from being able to have a meaningful communication with the potential pupil, so as to be able to advertise for themselves. Any conversation would quickly come to an end if upon being asked the price, the franchisee would have to refer the person making the enquiry to Head Office.

It is apparent from the communications at paras. 10(9), 10 (10), and 10(11) of the POC that this was no casual requirement. These paragraphs read as follows:

The prohibition about publication of the prices of lessons was one that carried with it a sanction of removal from Facebook promotions, and such removal did occur. I am satisfied that just as there was no reasonable basis for imposing such a requirement, and that the sanction was capricious and arbitrary and/or in breach of the implied terms of good faith.

The sanction was disproportionate even if there was a reasonable basis for the requirement. The ability to communicate on Facebook was of importance for franchisees to be kept up to date about the franchise. JBL’s case to each of the Claimants was that one of the features of being a franchisee was to have access to “a network providing professional and social support.” A part of that network was the Facebook pages and removal of that was to remove some of that support.

The reasoning here is of the same or a similar kind to the refusal to permit franchisees to display their telephone numbers on their vehicles. The effect of withholding the permission was to prevent in a major respect the franchisee, supposed to be running a business of their own, from having the ability to market themselves in a fundamental way. So too was the prohibition about publishing the cost of the lessons. Without that, any marketing would come to an abrupt end.

I therefore conclude that this prohibition and the enforcement of the same by sanctions comprised an arbitrary and/or capricious restriction. The ostensible purpose was so that negotiation would take place from head office. If that was a purpose at all, it was overshadowed by the purpose or effect of the same of restricting the franchisees’ ability to market themselves. In my judgment, that amounted to a breach of the implied terms about not exercising their discretion to permit the franchisee to market themselves in these ways and/or it was a breach of the other implied terms including undermining the terms of the bargain and/or a breach as to trust and confidence and/or it was conduct which was commercially unacceptable by reasonable and honest people.

The result of the clamour for change was that in January 2020, JBL did allow franchisees to fix the prices of their lessons. The case of JBL is that any wrong in respect of fixing prices was addressed and corrected months prior to the termination of the franchise agreements. It is therefore said to be irrelevant. However, the Particulars of Claim also allege that within less than 2 months of the removal of the fixed prices, on 19 March 2020 Mr Benson publicly criticised an instructor for increasing his lesson fee to £26.50 leading to his losing his pupil who asked for a different instructor, saying that he had lost £750 “how stupid”. This substantially undermined the change in January 2020. Further, in the context of a relatively small network, it would have been a humiliation to one franchisee in particular, and although not named, it seems inevitable to have induced speculation as to who was the object of the ire of Mr Benson. The language was typically disrespectful and undermining of the confidence of the franchisee.

The above allegations have been proved. It remains to consider other allegations which have been proved, but where the fact that the allegations were understandable in the light of the way in which the franchisees were treated.

The only instance in the evidence where this was alleged was in respect of Haverhill. This was referred to in respect of the first of the allegations of Mr Stubbings for the reasons there set out. Mr Benson was determined to increase the numbers in Haverhill to prevent another driving school from coming into Haverhill. There was a meeting with franchisees, but this was more to tell them what was going to happen rather than to listen their concerns. In the context of a network where there were concerns as to the viability of their work for many of the franchisees, it was insensitive without necessarily amounting to a proved breach of contract.

The franchise agreements contained a provision that the franchisee must make efforts to promote their business. Promotion may include leaflet delivery of 10,000 leaflets per annum as a minimum requirement per franchisees to deliver, shop or similar site advertising, boot sale and all market stall promotion days and similar. The agreement did not refer to promotion outside the area of the franchisee. Nevertheless, franchisees were expected to attend promotion events not limited to within their area. JBL's case is that in the main JBL franchisees were required to attend promotional events which were local to them. Leaflets delivered by franchisees were in the Claimants' interests. Upon request, JBL prepared personalised leaflets and posters bearing a franchisee’s name. A complaint was that there was no space on the leaflets to advertise their own contact details and the type of paper with such that it would cause any ink applied to them to rub off.

The impression from the evidence was that from time to time there were demands to attend promotion events some way from the locality of the franchisee, and the franchisees were too scared to complain for fear of offending Mr Benson. The real problem for the franchisees was that they found it difficult to make ends meet due to the criticisms of the model referred to above. Thus, any time spent in monthly leaflet days seemed at the expense of teaching. These concerns were understandable in the context of the concerns about the viability of the business, but I have not found proved the allegations of specific breaches of contract arising out of these activities.

There are several allegations made by claimants to the effect that:

It is not necessary to identify each and every allegation in the witness statements. It suffices to provide a broad summary. The allegations include the following:

In respect of the £50 notes, inevitably it led to suspicion that Mr Benson was hoarding cash to keep it away from the tax authorities. That is a not unreasonable suspicion because that is a usual reason for wanting to have cash whether such money was to be stored or spent. Mr Benson had an explanation to the effect that somebody had once advised him to convert any cash which he had into £50 notes. It was recommended as a way to make sure that he was not spending all his receipts at once. There was also a pride about the tangible demonstration that his cash flow was good.

It was also said that people paid for the training sessions on the bus in cash. This led to a suspicion that payment was in cash and without receipts because it was not intended to be declared to HMRC. JBL’s case was that this was a convenient way of collecting the relatively small sums of money, and it was up to recipients to declare such money.

In respect of the purchase of the car in part for cash, Mr Benson says that he was declaring his purchase through his books of account. He received an invoice from the seller which was for the full amount including the cash. He regarded the question of the accounting for cash received as an issue solely for the seller. There may have been other reasons why the seller wanted cash and was prepared to provide a discount in order to receive cash, but this was not his concern. He simply wanted to obtain the best possible price, and he did so.

In respect of the accountant, Mr Benson accepts that he advised franchisees to have a good accountant and that good accountants can save taxpayers considerable amounts of tax. That was not unlawful in that there is a difference between tax avoidance and tax evasion. To pay the least tax lawfully due was legitimate tax avoidance. There is an issue of fact as to whether Mr Benson did tell franchisees to keep two books of accounts. Mr Benson vehemently denies it.

In considering such evidence, the Court should consider the matter in line with the guidance of the House of Lords in In re H (Minors)(Sexual Abuse: Standard of Proof) [1996] AC 563, 586D-H per Lord Nicholls and in Re B (Children) [2008] UKHL 35 per Lord Hoffmann at paras. 13 and 15 to the effect that the more serious the allegation (e.g. fraud), the stronger the evidence required to prove that it more probably occurred, albeit that the burden of proof is the civil standard of proof.

In considering whether the franchisees were advised to evade tax, it is easy to understand how the allegations came to be made. Mr Benson’s emphasis on cash being king, pride of having £50 notes, boasting how he obtained a discount for cash on the purchase of a vehicle only incited suspicion about tax evasion or encouraging it. Despite this, there is no hard evidence to prove that Mr Benson or JBL was involved in tax evasion. It would seem unlikely that JBL would pay its taxes whilst at the same time encouraging the franchisees to evade their taxes. No franchisee said that they evaded tax on the advice of Mr Benson.

Although I do not conclude that the allegations about a second set of books have been made up, I am not satisfied that this serious allegation is made out to the standard of the balance of probabilities. It seems more likely than not that in connecting the advice to pay as little tax as possible by using a good accountant and in reflecting upon the repeated emphasis by Mr Benson on cash that the franchisees may have come to a misunderstanding about how far the advice of Mr Benson went. An example of the potential for misunderstanding is the language of Mr Dzierzanowski that Mr Benson is alleged to have said that “when you are keeping “50s” and “the readies” or something like that, mentioning about as a “self-employed person you are taking cash and then the accountant will help.” The term “readies” could have a connotation of tax evasion, but it does not always have that connotation, and could mean accessible money. In the context of an accountant helping, it may be less likely to mean to evade tax.

If there has been misunderstanding, it has been contributed to by the emphasis on and prominence of cash in the culture of JBL and in the words and conduct of Mr Benson. Nonetheless, I am not satisfied that the allegations of breach of contract as regards illegal taxation activity and/or advice are proven. In the circumstances, this part of the case against JBL is not proven.

There has been pleaded by way of individual breaches the pressure placed on the franchisees to enter into longer contracts, but there is no plea of duress or misrepresentation such as to seek to avoid these contracts. JBL’s answer to the alleged breaches of good faith in connection with the drafting of the longer agreements is that there is no implied term of good faith in English law in connection with the negotiation of a contract. There is an exception in respect of certain contracts uberrimae fidei (such as insurance) or involving fiduciaries, which has no application in this case. Even assuming that there is no proved breach of contract in pressure to extend the contracts and entering into onerous extensions, this still has an effect on the overall analysis. The extended agreements only added to the relationship between the parties being unbalanced and to the franchisees being at a substantial disadvantage or particularly vulnerable in the prevailing context. The creation or perpetuation of a business model in which franchisees frequently had difficulty in servicing the agreements and they would be provided with only temporary respite in the form of an extended agreement. This added to the existing inequality of bargaining power and to the vulnerability and hardship of the franchisees.

In the light of the foregoing, I conclude that there were breaches as regards each of the Represented Claimants. It will therefore be necessary to go on to consider whether the breaches found were cumulatively repudiatory. If so, there is the question as to whether the Represented Claimants were entitled to treat themselves as discharged from their respective agreements. These will be the subject of the third preliminary issue.