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The Hard Rock Café group has been given one final chance to disclose documents for their long-running dispute with a Jersey-registered company, after the island's Royal Court found their failure to divulge information was a serious abuse of process.
Despite the Court ruling that the Hard Rock’s failure was a ‘serious breach’ and a ‘flouting of a court order’, they gave the group another opportunity to disclose any relevant documents for the case.
The judgement is the latest in a ongoing dispute that began in 2013 between the Hard Rock group and HRCKY Limited.
HRCKY Limited signed a franchise deal with the Hard Rock group, and another branch of the company that leases memorabilia, in June 1999 to set up a branch in the Camyman Islands.
Pictured: The Royal Court said that failure to disclose a PowerPoint document was "clearly a serious breach".
Hard Rock Limited (which deals with the franchise agreements) and Hard Rock Café International (STP) Inc (which deals with memorabilia leasing agreements) terminated HRCKY’s franchise in 2013.
They later took HRCKY to Court, claiming that they were owned $120,000. The Court ruled that HRCKY should pay back £90,000 but HRCKY made several counter claims, including disputes that Hard Rock had fraudulently misrepresented the anticipated profits of the restaurant business.
In an earlier case, the Court of Appeal outlined HRCKY’s counterclaim (HRCKY v Hard Rock Limited & Anor [2019] JCA 123) stating that “had HRCKY been aware of the true likely position, or indeed even of the risks having regard to the worldwide experience of Hard Rock Café franchises, it would never have entered the Franchise agreement in the first place.”
In this latest case (Hard Rock Café International (STP) Inc and Ancor v HRCKY Limited [2022] JRC055), HRCKY applied to strike out Hard Rock’s defence for deliberate concealment of relevant documents.
HRCKY was defended by Advocate Richard Holden, while Hard Rock Limited and Hard Rock Café International (STP) were defended by Advocate Ian Jones.
The Hard Rock group disclosed a PowerPoint on 15 December 2021, which Advocate Matthew John Thompson, Master of the Royal Court said was “clearly a relevant document”.
Pictured: Master of the Royal Court stated that failure to produce the PowerPoint was not accidental and was an abuse of process.
In a written judgement, the Master stated: “This is because the document refers to the profitability of the corporate cafés between 1997 and 2004 in numerous places as referred to by Advocate Jones.
“Advocate Holden was therefore entirely correct not to seek to persuade me that the PowerPoint presentation was not a relevant document.
“As I put to him in argument it was plain as a pikestaff that it was relevant.”
“The argument that the PowerPoint was only created in 2006 was not a reason not to disclose the document.”
Advocate Thompson went on to say: “I also do not see how a report that is referred to in a witness statement to be relied upon at trial has not been disclosed due to some form of accidental mistake or some oversight.”
He concluded that the failure not to produce the PowerPoint (that has now been disclosed) was not accidental or an oversight but was a conscious or deliberate decision.
“The failure to disclose is therefore clearly a serious breach,” he stated.
He said, however, that the Hard Rock group did show a “willingness to engage in the litigation process on an equal footing” and they had spent “significant sums” on reviewing back-up tapes, engaging in an e-discovery provider and searching or researching for documents.
Pictured: The Royal Court gave the Hard Rock group another opportunity to disclose any relevant documents.
“Other than the application for one document, namely the strategic report, the defendant has also not otherwise challenged the approach taken by the plaintiffs.
“Although the PowerPoint disclosed contains more references to the profitability of the corporate cafes, it does not fundamentally alter the question of what inferences can be drawn about knowledge of key executives between 1997 and 2004 based on an analysis carried out in 2006.”
While the failure to produce the document until December 2021 was, in the Master’s judgment, an abuse of process and a flouting of a court order, he concluded that now that the PowerPoint has been produced and subject to the remaining parts of this judgment, this breach of the December 2019 and May 2020 orders do not render further proceedings unsatisfactory.
The Master ordered Hard Rock Limited and Hard Rock Café International (STP) Inc to file an affidavit disclosing the PowerPoint and further disclose any source material which refers to the profitability of the cafes for 1997 to 2004.
Given that the failure was not accidental, the Master stated it was “fully understandable why the defendant asked for the answer to the counterclaim to be struck out.”
Although the application to strike out was refused, the Court expressed its “displeasure about conduct that was a deliberate breach of court orders” and the Hard Rock group was also asked to pay the costs of the application so HRCKY Limited would not be “out of pocket”.
The case is due to go to trial in June this year.
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