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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Irish Shell Ltd. v. JH McLoughlin (Balbriggan) Ltd. [2005] IEHC 304 (4 August 2005) URL: http://www.bailii.org/ie/cases/IEHC/2005/H304.html Cite as: [2005] IEHC 304 |
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Neutral Citation No: [2005] IEHC 304
HIGH COURT NO. 2005 2023P
Applicant
Respondent
THE JUDGMENT COMMENCED, AS FOLLOWS, ON THURSDAY, 4TH AUGUST 2005:
In these proceedings the plaintiffs seek interlocutory injunctions in the follow terms:
(1) an injuction restraining the defendant, its servants and/or agents from removing, dismantling or in any way interfering with the signage, branding, livery and trademarks of the plaintiff at the filling station known as Sail Inn Service Station situate at Drogheda Street, Balbriggan in the county of Dublin and:
(2) an injunction restraining the defendant, its servants and/or agents from causing or permitting any brand of motor fuel other than Shell brands of motor fuel to be sold or offered for sale from any of the pumps at the filling station known as Sail Inn Service Station, situate at Drogheda Street, Balbriggan in the county of Dublin.
An interim order in those terms has been in place since 10 June 2005.
Many of the facts surrounding the issues between the parties are not in dispute. The plaintiffs were the former owners of a filling station known as the Sail Inn Service station at Balbriggan, Dublin. The property was sold by the plaintiffs to the defendant by auction on 22 December 2004.
Insofar as material to these proceedings the contract provided as follows: General condition 6 provides in material part for the following:
"The documents specified in the documents schedule of copies thereof have been made available for inspection by the purchaser of his solicitor prior to the date of sale. If any or all of the subject property is stated in the particulars or in the special conditions to be subject to any covenants, conditions, rights liabilities or restrictions and the document containing the same is specified in the documents schedule the purchaser, whether availing of such opportunity of inspection or not, shall be deemed to purchase with full knowledge of the contents thereof, notwithstanding any partial statement of such contents in the particulars or in the conditions."
The document schedule referred to included at item four "sales agreement" ("the sales agreement") and letter of offer ("the letter of offer").
Special condition 9(a) required as follows:
"The purchaser shall contemporaneously with the completion of the sale execute in form of each of the drafts referred to at entry four of the document schedule the sales agreement and letter of offer providing for fuel supply from the vendor to the purchaser. Each of which in duplicate shall be handed over to the vendors solicitors with the balance purchase monies. The vendor thereafter, strictly subject to the provisions of paragraph (b) of this special condition, to execute the sales agreement and letter of the offer and to return one part thereof to the purchaser."
It is common case that contrary to what was envisaged in clause 9(a) neither of the documents referred to were executed prior to closing. There is a significant dispute between the parties as to at least some of the circumstances surrounding that failure. There is also a dispute between the parties as to the legal consequences of such failure.
The plaintiff claims orders which require the execution of the relevant documents and consequential reliefs. The interim and interlocutory injunctions are brought, it is said, to secure the position in the interim.
As is well established I must address three questions:
1- are there fair issues to be tried: 2- if so would, in the event of the plaintiff succeeding at trial, damages be an adequate remedy; and 3- if not where does the balance of convenience lie?
I will deal with each in turn.
The defendant quite properly accepts that the plaintiff has established that there is a fair issue to be tried as to its entitlement to enforce the terms of the contract. However, as the plaintiff has argued that the defendant has failed to establish an arguable defence it is necessary to address the issue.
In simple terms, the plaintiff's case is that by virtue of the combined effect of the provisions of the contract referred to above the defendant is obliged to comply wit the terms of what it says were the sales agreement and the letter of offer. The effect of those documents would be to bind the defendant to the supply of only Shell products for a period of three years on certain terms. It is those terms that caused the difficulty.
It is the defendant's case that it sought, through a representative, copies of the documents. It was undoubtedly given initially a draft but one which left certain key matters, such as opening hours, blank in the sense that "TBA" was all that appeared. There is a dispute as to whether the defendant's agents were given, or at least had available to them, a full version prior to the auction.
I do have to say that given the fact that the defendant was represented by a solicitor at the auction and given the clear wording of general condition 6 it may well prove difficult for the defendant to satisfy the Court that he was not, in any event, bound. However, I cannot hold that the defendant has no chance of success. It may be that the Court of trial, having had the opportunity to assess all the evidence, will conclude that in all the circumstances of the case, there was a failure to communicate the necessary details, despite request, to the defendant, so as to leave the contract amounting to an agreement to agree.
In those circumstances, it is possible that the Court might be persuaded by the argument of counsel for the defendant that the failure to raise or agree the details prior to closing amounted to a waiver.
I must therefore, with some reluctance, conclude that the defendant has established a fair issue to be tried.
As to the adequacy of damages it seems to me that that issue should be assessed by asking the question as to what the Court should do if the plaintiff succeeds as trial. In Dublin Port and Docks Board –v- Britannia Dredging Company Limited, 1968, IR 136 Ó Dálaigh CJ said:
"Secondly, counsel for the defendant submitted that on the balance of convenience of the parties and in the absence of proof by the plaintiff of irreparable loss the Court should make the order sought.
The answer made on behalf of the plaintiffs is that it is not necessary in the circumstances of this case of the Court to consider either balance of convenience or the question of irreparable loss since here there is an express negative covenant and that the observation of Lord Kearns LC in Doherty –v- Allman (3 App. Cas. 709) are in point. At page 720 of the report the Lord Chancellor said: "If parties for valuable consideration with their eyes open contract that a particular thing shall not be done all that a court of equity has to do is to say by way of injunction that which the parties have already said by way of parties have already said by way of covenant that the thing shall not be done. In such case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is nor a question of the balance of convenience or inconvenience or the amount of damage or injury, it is the specific performance by the Court of that negative bargain which the parties have made with their eyes open between themselves."
The observation of Lord Kearns has been applied in a number of cases to which the Court has been referred. Formby -v- Baxter, Ediston –v- Reacher and Marco Productions Limited –v- Bagola. It is to be noted that the order made in Doherty –v- Allman was made on the trial of the action and the position was similar in each of the other cases cited. No case has been brought to he notice of the Court in which the principle stated by Lord Kearns have been applied on the granting of an interlocutory injunction."
On the facts of that case that Court was not satisfied that the defendant had established any basis for contending that they were not bound by the clause sought to be enforced. What would the position be if the plaintiff succeeds in establishing at trial that the defendant is bound by the provisions of clause 9(a), should the Court then decline an injunction because damages are more appropriate.
In those circumstances, the Court would have held that the defendant either knew of the clause and its precise terms or if it did not that it signed a contract binding it to such clause without having satisfied itself of any material terms. In those circumstances, the principle in Doherty –v- Allman would arguably apply so as to entitle the plaintiff to an injunction rather than damages.
As it is arguable that the plaintiff may succeed in obtaining a permanent injunction at trail, or at least an injunction which would last to the intended end of the contract in three years time, it seems to me that I should go on therefore to consider the balance of convenience.
If the plaintiff fails to obtain an injunction but succeeds at trial it may well be the case that a permanent injunction would by that time be of little benefit as the filling station would have operated outside the Shell brand for some significant time and there might well be only a relatively short period of the contract left to run.
Furthermore, it is necessary to address the reason for exclusive purchasing agreements of the type involved here in the first place. As part of the promotion of the brand, major petrol companies will frequently wish to provide a comprehensive coverage of territory so that customers can choose their product without significant inconvenience. While many arrangements entered into by such companies where they do not own the station concerned would only be for a specified period and will therefore be liable to a periodic possibility of termination, the existence of contracts allows for the orderly management of the business so as to maintain a desired level of coverage.
Failure to grant an injunction at this stage would potentially lead not only to the possibility that a permanent injunction might, despite success, be impracticable but also to a significant impairment of the ability of the plaintiff to manage its territorial coverage.
On the other hand, the defendant has the benefit of the plaintiff's undertaking as to damages. If the defendant is subject to an injunction at an interlocutory stage but succeeds at trial it will be entitled to recover any losses which might flow from its inability in the intervening period to trade on more favourable terms with a competitor of the plaintiff.
In those circumstances, I am satisfied that the balance of convenience favours the plaintiff.
I should also note that the defendant has relied as part of its case on arguments under the Competition Act 2002. It is obviously true to state that agreements of the type sought to be enforced here are prima facie anti-competitive and can, therefore, only be valid if complying with the licence of the competition authority. In cases such as this, compliance with the motor fuels category licence is therefore necessary. It is also clear that in order to comply with the category licence requirements as to minimum delivery or minimum opening hours the same are only permitted where agreed.
However, it does not seem to me that this advances the case one way or the other. If the plaintiff succeeds he will have established that the defendant has agreed the relevant terms and no competition issue would arise. If the plaintiff cannot establish agreement then competition law is irrelevant.
Therefore for the reasons stated above, I would propose continuing the interim injunction in this case on the same terms as already ordered.
I had indicated that given it was unlikely that counsel would be present that I would be prepared to put the matter back for mention if that is what the parties wish me to do.
MR. CREGAN: May it please the Court.
MR. JUSTICE CLARKE: I clearly should make the interlocutory order that I have indicated –
MR. CREGAN: Yes, my Lord.
MR. JUSTICE CLARKE: --because if I don't then there isn't an order in being. I leave any consequential matters over for consideration.
MR. ALEXANDER: May it please the court.
MR. CREGAN: Yes, my Lord.
MR. JUSTICE CLARKE: Perhaps to the first Tuesday of next term.
MR. CREGAN: Yes, my Lord.
MR. JUSTICE CLARKE: Very good. Other than making a simple order continuing the interim injunction in its existing terms, I leave over any further consideration of the matter until Tuesday, 4 October.
MR. CREGAN: May it please the Court.
MR. ALEXANDER: May it please the Court.
MR. JUSTICE CLARKE: Given that the matter is still pending, I will retain the papers.
MR. CREGAN: May it please the Court.
MR. JUSTICE CLARKE: I have arranged that there is a stenographer's note of the judgment. I would like to have a chance to look at it before it goes out to the parties, so it may be early September before copies are available. As soon as I have had chance to be sure it represents what I think I said I will arrange to have the court services send both sets of solicitors a copy of the approved text.
MR. ALEXANDER: May it please the Court.
MR. CREGAN: I am obliged to your Lordship.
MR. JUSTICE CLARKE: Thank you.
THE JUDGMENT THEN CONCLUDED