Pat O'Leary v Volkswagen Group Ireland Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice Moriarty |
| Judgment Date | 04 July 2013 |
| Neutral Citation | [2013] IEHC 318 |
| Court | High Court |
| Date | 04 July 2013 |
[2013] IEHC 318
THE HIGH COURT
BETWEEN
AND
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LINGHAM v HEALTH SERVICE EXECUTIVE 2006 17 ELR 137 2005/36/7565 2005 IESC 89
High court - Interlocutory relief - Contract law - Termination of contract - Breach of contract - Car dealership - Bona fide case - Damages - Balance of convenience - EC Regulation 1400 of 2002
Facts: The plaintiff was the sole proprietor of O”Leary”s Garage of Lissarda, Co. Cork which was a business that was primarily involved in the sale of farm machinery and cars, as well as offering mechanical repairs and services for vehicles of various kinds. In September 1989, the plaintiff was appointed as an authorised dealer of Audi and Volkswagon vehicles in Ireland by the manufacturer of the vehicles. In September 2003, the plaintiff signed new agreements to this effect following the passage of EC Regulation 1400 of 2002. On the advice of the manufacturer, the plaintiff”s eventually ceased to sell farming machinery. In June 2007, the distribution rights for the vehicles were transferred to the defendant but the plaintiff opted to continue to sell their vehicles exclusively following assurances that the contractual relationship with the manufacturer was secure. However, at a National Dealer”s meeting on the 15th April 2011, the defendant announced that the number of dealers nationwide was to be reduced. Three days later, the plaintiff received a letter from the defendant which gave notice that the agreements between the parties would be terminated in accordance with their provisions on the 30 th April 2013. The plaintiff”s subsequent efforts to persuade the defendant to reverse the decision were unsuccessful. The plaintiff issued proceedings on the 25 th April 2013 contending the termination was in breach of EC Regulation 1400 of 2002.
This application was brought by the plaintiff who sought interlocutory relief restraining the defendant from terminating the dealer contracts until the conclusion of the substantive proceedings. It was argued that the plaintiff fulfilled all criteria for the relief sought as there was a bona fide issue to be tried, damages would be inadequate to compensate the plaintiff if the relief sought was refused but he was ultimately successful in the proceedings, and the balance of convenience was in his favour.
The defendant argued that the application should be refused as the contracts were cancelled with two years notice which was in accordance with the relevant provisions of the agreements. It was also argued that the plaintiff”s proceedings could only hope to delay the inevitable termination of the contracts, which was evidenced by the delay in them being issued. On that basis, it was argued that there wasn”t a bona fide issue to be tried.
Held by Moriarty J that the court was satisfied that on consideration of the vintage of the relevant dealer contracts, the potential consequences to the employees of the plaintiff, and likely future losses to the plaintiff”s business, the plaintiff”s assertion that damages would be an inadequate remedy if the relief sought was refused but he was ultimately successful was correct. Likewise, it was held that the balance of convenience was in the plaintiff”s favour.
In determining whether there was a bona fide issue to be tried, it was held that on consideration of the arguments this had been demonstrated. However, it was also said the plaintiff had to show a strong case likely to succeed at the hearing of the action. The inclusion of this extra criterion was due to the fact that the relief sought was mandatory in nature instead of prohibitory as it required the defendant to maintain a contractual relationship that was said to have ended. On consideration of the arguments advanced, it was held that this step had not been fulfilled by the plaintiff.
Relief sought refused.
JUDGMENT of Mr. Justice Moriarty delivered on the 4th day of July, 2013
1. In this strenuously contested interlocutory injunction application, heard last week, the Plaintiff primarily seeks an Order restraining the Defendant from terminating, or taking any steps to terminate, some three Volkswagen Dealer Contracts held by him, until the determination of the substantive proceedings. He sought further like injunctive relief, restraining the Defendant from contacting customers of the Plaintiff without his prior consent, but this aspect formed only a limited part of what was agitated at the hearing. The importance of the interlocutory hearing to the parties was shown by the swearing of approximately 65 pages of Affidavits, two from each of the Plaintiff and Mr. Simon Elliott, the Defendant's Managing Director, together with volumunious Exhibits appended.
2. Both written and oral submissions were also furnished, and whilst some relatively limited conflicts of fact arose on the respective Affidavits, the area of controversy primarily related to the legal consequences arising from extensive dealings had been the parties. Two matters in particular arose, firstly, the repercussions of European Commission Regulations on what had hitherto been the largely uncontroversial content of the relevant Dealership Agreements and secondly, the nature and scope of national measures taken by the Defendants to its dealers, in response to plummeting Volkswagen car sales in the wake of the financial crisis besetting this country from in or around late 2007. It will suffice at this juncture to set forth only a very abbreviated summary of the principal events involved in and preceding the controversies that have arisen.
3. The Plaintiff, as sole proprietor of O'Leary's Garage at Lissarda, Co. Cork, had succeeded his parents in the early 1980s in running the business, selling farm machinery and various makes of cars, in addition to maintaining the repairs and servicing that had always been provided. The premises were conveniently situated on the main road from Cork to Killarney and were within five minutes of Macroon and twenty of Cork City by car. About 1989, the Plaintiff was approached with a view to undertaking the local franchise for Audi cars, and for both Volkswagen cars and commercial vehicles, and following negotiations was in September, 1989, appointed as an authorised dealer for Audi and Volkswagen in Ireland. Matters prospered in the dealership, with the focus shifting from farm machinery to promotion, sale and service of Audi and Volkswagen cars and it is not in issue that, as sales nationally of both makes grew dramatically, so also did the Plaintiff's, whose sales performance and other endeavours seen at all times to have been held in high esteem. Construction of an improved and expanded showroom, sufficient to accommodate twelve cars of either make, was completed in 2002, although the Plaintiff later that year evinced some disappointment that, after complying with that capacity for both makes as instructed, he was then informed that dealers of stand-alone Audi showrooms were being given contracts of indefinite duration, whereas he was only then accorded five more years with the Audi brand.
4. At para. 3 of his first Affidavit, the Plaintiff stated that, prior to the introduction of EC Regulation 1400 of 2002, he and other dealers had concerns that the expected provisions in this could enable manufacturers to terminate dealership contracts more easily. In any event, what his existing 1996 contract provided for by way of termination was for:-
(a) two years notice on either side, described as ordinary termination;
(b) one year's notice in the event of a need to reorganise the whole or a significant portion of the dealer network; or
(c) Immediate or summary termination for ten specifically listed causes.
In this context, dealers experienced considerable relief when it was learned that the 2002 Regulation required suppliers wishing to terminate a dealership contract to give notice of termination in writing, and that such notice must include "detailed, objective and transparent reasons for the termination". That same article provided at 3(b)(g) that either party could refer the issue of whether termination was justified by the reasons given in the notice to an independent expert or arbitrator; this in addition was stated to be without prejudice to the right of either party to make an application "to the competent national court".
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...to restrain termination of agreements analogous to the alleged agreement here. 61 However, in O'Leary v Volkswagen Group Ireland Limited [2013] IEHC 318, Moriarty J in the context of an application to restrain the termination of three Volkswagen dealer contracts, concluded that insofar as Ó......