Legal Know-How
it – having prepared all of the sauce himself, in secret, during the years in which they used it for their Carnival stall food.
Mr. Roots’s position was that the recipe for the sauce used at the Carnival was never a secret, they had always prepared it together, and that although he had used Mr. Bailey’s kitchens in 2006 this was only a loan of space and facilities for him to develop a recipe that was entirely his own. There had been no joint venture, and Mr. Bailey was not entitled to any share in the equity or profits of the resulting business.
Court proceedings
Clearly there had been an agreement here of some kind – Mr. Roots had been given access to Mr.
Bailey’s
café kitchen, so there must have been some agreement between the men as to why. In court, in the absence of
any written agreement, it was up to the court to determine what the terms of their arrangements had been. Was this a joint venture, or simply a free loan of some facilities?
Had there been any written evidence from the time of their collaboration, this would have been very influential – even short of an agreement, any correspondence or a description of the arrangements to another person at the time would likely have tipped the scales in favour of their argument. In the absence of that, the judge could really only weigh one man’s recollection of events against the others.
The statements made by both men to the court were lengthy, confused, and at times self-contradictory. The judge was in fact forced to conclude that neither man was a reliable or credible witness, and the only facts he could accept were those where the parties agreed. From what little common ground there was, and in the absence of anything written, the judge then had to decide on what arrangements had existed between the parties – making liberal use of assumption and commercial common sense.
Fortunately for Mr. Roots, the judge found that it was unlikely that the agreement claimed by Mr. Bailey had ever existed. He felt that it would have
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made no sense for Mr. Bailey to enter an agreement whereby he revealed his secret recipe, only to have Mr. Roots acting as both the public face and the chef in the ensuing business. The judge accordingly determined that Mr. Bailey’s claim should not succeed, and Mr. Roots kept his shares.
This case demonstrates how vital it is to keep a written record of any dealings you may have with another party in regard to your business. Of course an agreement, signed by both parties, will always be the ideal – but in the absence of a written agreement the courts presiding over a dispute will attempt to reconstruct the terms of the agreement between the parties from whatever evidence is available. Written records from the time at which the arrangement was made will always be very persuasive evidence in that situation.
In this particular case, had Mr. Roots or Mr. Bailey insisted upon a written record of whatever the agreed position was, this case may not even have ended up in court - saving both parties costs, worry and reputational damage. If it had gone to court, such record would likely have been impossible to argue against.
In the event, a claim that could have severely impeded Mr. Roots’s return from the business that he built was decided on nothing more than the judge’s opinion as to what was probably agreed between two people, assuming they
were being commercially
sensible. No entrepreneur should be comfortable with the idea that the fate of the business that they have worked to build could be decided on such slim margins. Whilst it may be unrealistic to expect fully-documented agreements in all of a business’s early-stage dealings, written evidence of the terms of the verbal contract may be worth a lot more than the paper it’s written on.
David Willbe is counsel in the Corporate Group in the London Office of Crowell & Moring, an international law firm. Follow them on Twitter @CrowellLonCorp
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