Fraser and Another v Great Gas Petroleum Ireland Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 07 December 2012
• Neutral Citation: [2012] IEHC 523
• Court: High Court
• Date: 07 December 2012

[2012] IEHC 523

THE HIGH COURT

[No. 10116P/2012]

Fraser t/a Fraser Oil v Great Gas Petroleum (Irl) Ltd

BETWEEN

JOHN FRASER AND LIAM FRASER TRADING AS FRASER OIL

PLAINTIFFS

AND

GREAT GAS PETROLEUM (IRELAND) LIMITED

DEFENDANT

KIRWAN INJUNCTIONS: LAW & PRACTICE 2008 438

BRESLIN & SMITH BANKING LAW 2ED 2007 PARA 12.09

BOLIVINTER OIL SA v CHASE MANHATTAN BANK NA & ORS 1984 1 WLR 392 1984 1 AER 351

HAPGOOD & ORS PAGETS LAW OF BANKING 13ED 2007 PARA 34.11

GROUP JOSI RE (FORMERLY GROUPE JOSI REASSURANCE SA) v WALBROOK INSURANCE CO LTD & ORS 1996 1 WLR 1152 1996 1 AER 791

UNITED TRADING CORP SA & MURRAY CLAYTON LTD v ALLIED ARAB BANK LTD & ORS 1985 2 LLOYDS 554

UNITED CITY MERCHANTS (INVESTMENTS) LTD & GLASS FIBRES & EQUIPMENTS LTD v ROYAL BANK OF CANADA 1983 1 AC 168 1982 2 WLR 1039 1982 2 AER 720

AMERICAN CYANAMID CO v ETHICON LTD (NO 1) 1975 AC 396 1975 2 WLR 316 1975 1 AER 504

CAMPUS OIL LTD & ORS v MIN FOR INDUSTRY & ORS (NO 2) 1983 IR 88 1984 ILRM 85

LINGHAM v HEALTH SERVICE EXECUTIVE 2006 17 ELR 137 2005/36/7565 2005 IESC 89

ALLIED IRISH BANK PLC & ORS v DIAMOND & ORS UNREP CLARKE 14.10.2011 2011/3/547 2011 IEHC 505

GPA GROUP PLC v BANK OF IRELAND & EUROPEAN ORGANISATION FOR THE SAFETY OF AIR NAVIGATION (EUROCONTROL) 1992 2 IR 408 1992/11/3675

BAMBRICK v COBLEY 2006 1 ILRM 81 2005/3/573 2005 IEHC 43

HAPGOOD & ORS PAGETS LAW OF BANKING 13ED 2007 PARA 34.14

INJUNCTIONS

Interlocutory injunctions

Payment on foot of guarantee - Bank guarantee of payment for goods supplied - Sums due - Claim of over-charging - Demand to bank to pay out on guarantee - Balance of convenience - Disclosure in seeking interim relief ex parte - Whether entitled to injunction restraining enforcement of guarantee - Whether validity of guarantee challenged - Whether fraud alleged - Whether honest belief in validity of demand on bank - Whether adequate disclosure in seeking interim relief ex parte - Whether freezing order on funds paid out available - Whether freezing order would address concerns - Bolivinter Oil SA v Chase Manhattan Bank [1984] 1 All ER 351, Deutsche Ruckversicherung v Walbrook [1996] 1 All ER 791, UCM v Royal Bank of Canada [1983] 1 AC 168 and United Trading Corp SA v Allied Arab Bank [1985] 2 Lloyd's Rep 554 approved - Allied Irish Banks v Diamond [2011] IEHC 505, American Cyanamid v Ethicon Ltd [1975] AC 396, Bambrick v Cobley [2005] IEHC 43, [2006] 1 ILRM 81, Campus Oil v Minister for Industry (No 2) [1983] IR 88, GPA Group Plc v Bank of Ireland [1992] 2 IR 408 and Maha Lingam v Heath Service Executive [2005] IESC 89, [2006] 17 ELR 137 considered - Injunction refused (2012/10116P - Laffoy J - 7/12/2012) [2012] IEHC 523

Fraser v Great Gas Petroleum (Ireland) Ltd

Facts: The plaintiffs had entered into a contract with the defendant regarding the purchase of petroleum. As part of the commercial agreement the plaintiffs had entered into a guarantee with a Bank (AIB) whereby the defendant could seek the payment of €130,000 from the plaintiffs' account. Difficulties had arisen with the plaintiff contending, inter alia, that they had been overcharged by the defendant and had instituted proceedings seeking compensation from the defendant. The defendant denied the claims of the plaintiff, claimed that monies were outstanding and sought to enforce the terms of the guarantee. An interim injunction had been granted prevention the enforcement of the guarantee and the plaintiff brought the present application seeking an interlocutory injunction against the enforcement of the guarantee. On behalf of the defendant it was submitted that a court would not intervene to restrain payment on foot of a contract such as a guarantee unless exceptional circumstances arose and no such exceptional circumstances had arisen in this case.

Held by Laffoy J in refusing the application for an injunction: It was the plaintiffs who had requested the bank to give the guarantee to the defendant. The plaintiffs had not challenged the validity of the guarantee. A letter of demand having been made for payment under the guarantee the bank was entitled to treat that letter as conclusive evidence that the sum demanded was due by the plaintiffs to the defendant. The court should not restrain the bank from making payment to the defendant, nor should the court direct the defendant to countermand the demand for payment. The court could see no basis in equity on which the court could make an order which would be akin to a temporary attachment of the sum of €130,000 in advance of judgment, and not merely a freezing of that sum in a manner akin to a mareva injunction. There would be an order dismissing the application for an interlocutory injunction.

1 Judgment of Ms. Justice Laffoy delivered on 7th day of December, 2012.

The proceedings and the application

2 1. These proceedings were initiated by a plenary summons which was issued on 10 ^th October, 2012. The defendant's solicitors accepted service of the proceedings on 23 ^rd October, 2012. The primary relief claimed on the general endorsement of claim on the plenary summons is damages for breach of contract and/or negligence and/or breach of duty and/or misrepresentation. There is also a claim for a declaration that the plaintiffs were entitled "to terminate contract and/or relationship with" the defendant.

3 2. The application before the Court is an application for interlocutory injunctive relief in the following terms:

4 (a) an order restraining the defendant its servants or agents howsoever acting from acting on foot of or enforcing the terms of the Guarantee from Allied Irish Bank Plc dated 3 ^rd August, 2010 (the Bank Guarantee) pending the determination of the proceedings;

5 (b) an order restraining the defendant its servants or agents howsoever acting from acting on foot of or enforcing the demand for payment on foot of the Bank Guarantee (in the amount of €130,000) made on or about 15 ^th October, 2012 pending the determination of the proceedings;

6 (c) an order directing the defendant its servants or agents howsoever acting to countermand the demand for payment on foot of the Bank Guarantee (in the amount of €130,000) made on or about 15 ^th October, 2012 pending the determination of the proceedings; and

7 (d) if necessary, an order restraining Allied Irish Bank Plc its servants or agents howsoever acting from making payment and/or releasing any of the monies to the defendant its servants or agents on foot of or in accordance with the demand for payment on foot of the Bank Guarantee (in the amount of €130,000) made on or about 15 ^th October, 2012, or at all, pending the determination of the proceedings.

8 3. On 1 ^st November, 2012 an application was made on behalf of the plaintiffs to the Court for interim injunctive relief. By order of the Court (Gilligan J.) made on that day orders in the terms of paragraphs (1) and (4) of the notice of motion were made until 5 ^th November, 2012 or until further order. The plaintiffs were given liberty to serve short notice of motion for an interlocutory injunction returnable for Monday, 5 ^th November, 2012.

9 4. The interim orders have continued in force, as I understand it, with the consent of the defendant.

10 5. On the hearing of the application for an interlocutory injunction, counsel for the plaintiffs indicated that an order in the terms of paragraph (3) of the notice of motion would satisfy the plaintiffs' needs.

The Contract and the Bank Guarantee

11 6. The plaintiffs operate a number of fuel stations under the style and title of "Fraser Oil". They commenced trading at Tullow, County Carlow in early 2007 and expanded the business to Graiguecullen, County Kildare (September 2007), Kilcullen, County Kildare (December 2007) and Newbridge, County Kildare (May 2009).

12 7. The defendant is a supplier of fuel products.

13 8. The contract referred to in the endorsement of claim in the plenary summons is a contract which bears the date 1 ^st May, 2009 (the Contract), although the plaintiffs contend that it was entered into on or about July 2009. In any event, the Contract was expressed to be made between the defendant and the plaintiffs, as customers. In the Contract, the plaintiffs agreed to purchase all fuel for its sites exclusively from the defendant for a term of five years or until 50m litres of product had been purchased from the defendant. The issue which arose between the parties prior to the initiation of these proceedings relates to the price for the product. That was to be determined in accordance with Schedule 1, which was headed "Pricing Formula for Motor Fuels". It provided:

"The [defendant's] fuel prices to the [plaintiffs] will be based on a wholesale margin per tonne of fuel plus delivery costs to the Site/s. This will be based on Platts plus 2.25 cent ( sic) (this excludes Government Duty, NORA and applicable rack charges). Prices will change twice weekly only in line with movements in the previous two - three days, of the international oil price as published by Platts European Marketscan, and the Euro/Dollar exchange rate, as published by the European Central Bank.

Each Wednesday morning we will issue the [plaintiffs] with a price that will be valid for Thursday and Friday which will be based on Platts and exchange rate movements from the previous Friday, Monday and Tuesday. Each Friday morning we will issue the customer with a price valid for Saturday, Sunday, Monday, Tuesday and Wednesday which will be based on Platts and exchange rate movements for the previous Wednesday and Thursday."

14 Schedule 1 contained two further paragraphs dealing with the eventuality of a different pricing formula existing in the Irish market and the possibility of alterations to the formula.

15 9. The provisions of the Contract dealing with payment by the...