High Court 

Michael Byrne Motors Limited v Rover Ireland Limited

1998/8986 P 

15 December 1998 

MORRIS J: 

This matter comes before the Court pursuant to a Notice of Motion dated the 27 October, 1989 in which the Plaintiff seeks a number of reliefs. However, the Motion has proceeded on the basis that the reliefs which the Plaintiff seeks are those set out in paragraph (2), (3) and 4 of the Notice of Motion that is to say:- 

(2) An order directing sequestration of the corporate property of the Defendant for its wilful disobedience of the undertaking and order made on the 19 August 1998 in the proceedings herein. 

(3) An Order attaching the Directors and Officers of the Defendant and in particular David Harpur for his wilful disobedience of the Undertaking and Order made on the 19 August 1998 in the proceedings herein. 

(4) An Order directing the sequestration of the property of the Directors and Officers of the Defendant and in particular David Harpur for his wilful disobedience of the Undertaking and Order made on the 19 August 1998 in the proceedings herein. 

The relevant background to this case can be summarised as follows: 

The Plaintiff is a "Dealer" within the meaning of an agreement made between the parties the effect of which was to appoint the Plaintiff a Dealer in Rover Cars from the 5 August, 1994. A second and similar agreement exists in respect of another product which the Defendants manufacture namely Range Rovers. The Parties rights and obligations towards one another are embodied in these and an additional agreement entitled "Vehicle finance agreement" made between the Parties. 

Prior to the 19 August 1998 disagreements had arisen between the Parties arising from these contracts as a result of which the Plaintiff instituted proceedings against the Defendant. It would appear that the Defendants had discontinued supplying Rover cars to the Plaintiff as a result of which his business was adversely affected. As a result a Notice of Motion was issued as a matter of extreme urgency seeking interlocutory relief and this came on for hearing on the 19 August 1998 during the long vacation. In this Notice of Motion the Plaintiff sought inter alia 

(1) An Order being an interlocutory injunction restraining the Defendants from breaching the terms of two agreements entered into between the Parties on the 5 October 1995 whereby the Plaintiff was appointed to sell the Defendant's vehicles. 

(2) In particular an Order being an interlocutory injunction directing the Defendants to continue to supply the Plaintiff vehicles subject to the usual terms and conditions as applicable between the Parties. 

Prior to the hearing of this Application on the 19 August, 1998 the Parties entered into an Agreement which provided, inter alia, 

(1) That the Defendants undertook to recommence with immediate effect the supply of parts and vehicles to the Plaintiff herein in accordance with existing or future Rover terms 

(2) Such vehicles and parts to be paid for by direct debit (or such other means as may be agreed in the interim between the parties herein) 

(3) The Plaintiff to be allowed: 

(a) £40,000 (net of VAT) credit for all vehicles comprising "sold orders" subject to Rover Dealer terms; 

(b) £100,000 (net of VAT) for all vehicles for stock purposes subject to Rover Dealer terms; 

(c) £20,000 (inclusive of VAT and VRT) credit for courtesy/demonstration models (R2 vehicles not including a Range Rover or five door discovery estate, whichever is the greater subject to Rover Dealer terms) 

(4) Order and delivery of vehicles as per existing agreement. 

(5) The Plaintiff to maintain an overdraft facility of £50,000 with AIB Longford and to notify the Defendant of any variation therein. 

(6) The Plaintiff's Director Michael Byrne to execute a personal guarantee to cover all vehicles and parts supplied pursuant to the agreement herein, prior to recommencement of delivery by the Defendant herein of the vehicles and parts referred to herein. 

(7) The Plaintiff to pay by Bank Draft (without admission of liability) to the Defendant the sum of £10,000 within seven days of this agreement to the account for parts received to date. The Defendant to furnish a detailed account of all sums due for parts to the Plaintiff and the balance (if any) to be paid by the Plaintiff within 14 days. In the event of a dispute between the Parties herein, existing procedures to apply. 

(8) All parts supplied under this agreement to be paid for within 30 days by direct debit. 

(9) The Plaintiff to forthwith have access to the full parts file. 

(10) The Defendants to replace the four existing vehicles at present held in stock by the Plaintiff upon the terms of existing agreements. 

(11) The Plaintiff to furnish the Defendants with its audited accounts up to date within 4/6 weeks of today's date and in the event of the accounts up to June 1998 not being certified, final and management accounts to be furnished for that period. 

(12) The Plaintiff to deliver a statement of claim within five weeks of the date hereof, the Defendant to thereafter file a defence within a period of four weeks from the receipt of the statement of claim, both Parties thereafter to use all reasonable speed and diligence to bring these matters to a hearing. 

(13) Liberty to apply to both Parties on three working days notice to the other side. 

(14) Registration by the Plaintiff of sold orders to be made within seven days. 

(15) Costs reserved. 

(16) Without prejudice to the foregoing the dealer agreement, rover agreement and finance agreement continued to apply and the dealer trading terms apply. 

(17) The above matters (1) to (16) to be made a Rule of Court. 

The said matter came before Kelly J on the 19 August 1998 and by consent an Order was made staying the proceedings save as may be necessary to enforce the consent, upon the terms set out in the consent. Liberty to apply was reserved (so as to enforce the terms of the consent) and the Court made the following Order "the Court doth note the Undertaking given by said Counsel for the Defendant on behalf of the Defendant in the terms of Paragraph (1) of the Consent namely that the Defendant undertakes to recommence with immediate effect the supply of parts and vehicles to the Plaintiff herein to include the supply of vehicles for stock purposes as well as sale in accordance with existing or future Rover terms." The said Order went on to provide for the delivery of the statement of claim within five weeks. 

Notwithstanding this Agreement I am satisfied that thereafter the Parties failed to achieve a comfortable trading relationship with each other. For the Plaintiffs part he alleges that while he fully complied with the terms in relation to payment, the Defendant's failed to supply him with Rover motor cars and he alleges that they effectively set about driving him out of business by starving him of supplies. The Defendants dispute this assertion and say that within the terms of the Rover Dealership agreement they always supplied ordered vehicles save in circumstances where there was a breach by the Plaintiff of the terms of the agreement. 

The ongoing dispute came to a head on or about the 8 October, 1998 when two letters of that date were received. The first was received by the Plaintiff from the Defendant and the second by the Defendant's Solicitors. These letters formally notified the Plaintiff of "the immediate termination of your dealership with Rover Ireland Limited." The grounds for this termination are set out in the letter of the 8 October, 1998 from the Defendant's Solicitor to the Plaintiffs Solicitor. 

There are six grounds and they can be summarised as follows: 

(a) The Defendants complained that there was a failure on the part of the Plaintiff to provide them with accounts as he was required to do, within six weeks from the date of the settlement. 

(b) The Defendants allege that on the 30 September 1998 they carried out a stock take on the Defendant's premises and this disclosed that of the 13 cars which were forwarded to the Plaintiff 8 were not present and they had not been notified that these vehicles were no longer in the Plaintiffs possession. 

(c) The Defendants point out that the Statement of Claim has not been delivered. 

(d) The Defendants complain that the names and addresses of customers who had purchased vehicles from the Plaintiff had not been furnished to them and say that this was of importance as they required to maintain a manufacturer/customer relationship with these purchasers. 

(e) The Defendants say that "the gravest of all concerns" was the fact that it has come to their attention that Mr Michael Byrne had been arrested and charged with a criminal offence relating to stolen goods, that the premises had been sealed off by the National Bureau of Criminal Investigation, that the DPP had a file in relation to insurance fraud which contained Mr Michael Byrne's name and that the above gave substantial adverse publicity. 

(f) That there was a failure on the part of the Plaintiff to concern himself with his locality and that he had failed to sell vehicles in that locality. 

In the course of debate with Counsel I indicated to counsel that it was my view that irrespective of the validity of the complaints which the Defendants make of the Plaintiffs conduct, that the Defendants had no right to unilaterally disregard and ignore the Order made by the Court and the Undertaking given to the Court and I expressed the view that if it were their intention to resile from the agreement reached on the 19 August 1998 that they could do so only with the approval and consent of the Court and by varying the Order made on the 19 August. I also expressed the view that I would be prepared, by consent of the Parties, to treat this motion, in addition to a motion for committal for contempt, as a motion by the Defendants to seek to be relieved of the obligations which they undertook by reason of the Order of the Court of the 19 August. Counsel on behalf of each Party agreed to this procedure. 

I am satisfied on the authority of Irish Commercial Society Limited and Others v Peter Plunkett and Others [1986] ILRM 624 that there is vested in the Court a jurisdiction to reconsider interlocutory Orders made by consent. In the course of his Judgment, Costello J in that case said "The first issue for decision is whether the Court has jurisdiction to make an Order, pursuant to the present interlocutory motion, to set aside the Consent Order of the 22 May 1984, the Defendants submitting that such an Order could only be made (in) a substantive action to set aside the contract into which the Parties had entered. This submission, it seems to me, fails to take into account the distinction between final orders made on consent and interlocutory orders so made. As pointed out by Lord Denning in Purcell v Trigell Limited [1971] 1 QB 358, the Court always has control over interlocutory orders and it may in its discretion vary or alter them even though made originally by consent. Whether or not it should exercise it in a given case will largely depend on the circumstances in which the consent order was made and the reasons advanced for its discharge. (See also Ainsworth v Wilding [1896] 1 CH 673 and Mullins v Howell (1879) 11 CHD 763). 

In considering whether the Defendants should be allowed to resile from the agreement which they entered into I am of the view that they should only be allowed to do so if it is established to the satisfaction of the Court that there has been a fundamental breach on the part of the Plaintiff of his obligations under the contract of the 19 August. 

On that basis I now turn to consider the six grounds upon which the Defendants claim to be entitled to terminate the Plaintiffs dealership. This in effect means an entitlement to discontinue providing him with Rover motor cars in accordance with the terms of the Dealership Agreement and accordingly an entitlement to resile from the contract of the 19 August 1998. 

(a) (Failure to provide accounts) 

I am satisfied that as a matter of fact there was a failure on the part of the Plaintiff to furnish the accounts within the time limit provided for in the agreement (4/6 weeks). I am also satisfied that prior to the agreement of the 19 August the Defendants had considerable concern about the solvency of the Plaintiff company. However I am of the view that at no stage did the fact that the Plaintiff had failed to comply with his obligations to furnish the accounts assume the proportions and importance now attributed to this fact by the Defendants. In the Plaintiff's Affidavit he says that the failure to supply the accounts in time arose from the fact that his accountant, who is dealing with this item, had been on holidays for two weeks during the month of September. He says "the Defendant company has been made aware of that fact and we have at all times facilitated the Defendant company in its enquiries and have undertaken to furnish such accounts as soon as same are produced." I am satisfied that the failure to provide the accounts did not, in the circumstances of this case, constitute a fundamental breach and I believe that the reason for the Defendants terminating the Plaintiff's distributorship in no way related to this fact. I am of the view that the Plaintiff now seeks to rely on this as a reason for the termination when in fact it was not. The criticism which they now make of the matters disclosed in the accounts are of no relevance as this information only became available to them after the 8 October, 1998. 

(b) With regard to the second ground (the absence of eighteen cars on the stocktaking of the 30 September, 1998) in his Affidavit at paragraph (8) the Plaintiff gives a full explanation for the fact that the apparent absence of the cars relates to the fact that retail sales cards in respect of the vehicles may not have been noted by the Defendants. 

I accept the submission on behalf of the Defendants that it is of vital importance to the Defendants that they should be made aware of the name and address of the purchaser of their vehicles so that they may maintain a good customer relationship with the person and so promote the sales network and for other reasons and I consider a failure on the part of the Plaintiff to comply with his obligations in relation to the returning of this documentation to the Defendant would be of importance. However I am of the view that it was not the fact that the retail sales cards had not been returned to the Defendant that concerned the Defendants at that time but the fact that they believed that a number of vehicles had disappeared from the Plaintiffs premises. I am satisfied that the Defendant's Managing Director wrote to the Plaintiff on the 5 October saying "In the light of the stock take on the 30 September which disclosed the absence of eight vehicles out of thirteen that were purportedly in your possession, we are reserving our position in relation to any Orders". 

I am satisfied that in the circumstances it is not reasonable to consider the vehicles as "absent". The circumstances in which the Defendants may not have had full knowledge concerning these vehicles are set out in the Plaintiff's Affidavit. I am unable to say if these facts are correct. However, I am satisfied that an explanation for the problem was readily available to the Defendants if they had chosen to seek and consider it. Accordingly I do not regard this as a fundamental breach and I do not consider that the Defendants were justified in coming to the conclusion that the reason that the cars were absent from the Defendant's premises resulted from the Plaintiff's improper behaviour without at least seeking an explanation from him. 

(3) (Failure to deliver the Statement of Claim) 

I do not regard this as a fundamental breach nor do I believe that it in any way concerned the Defendants. 

(4) (Failure to provide customers names) 

I can well understand that serious consequences flow from an inability by the Defendants to have a record of the purchasers of their vehicles. The most obvious problem would of course arise in that if there was a failure on the part of the customer to pay for the vehicle then it would be impossible to follow up the transaction. However, this is not a relevant factor in this case because of the trading arrangements, which the Plaintiff observed, for payment by direct debit on sale of the vehicle. In paragraph (10) of his Affidavit the Plaintiff explains the circumstances in which a change of purchaser may take place between the placing of the order and the ultimate purchase of the vehicle. I am satisfied that with the smallest good will on the part of the Defendant any problem arising in this area could have been overcome by the simple expedient of making an enquiry. The Defendant has not satisfied me that any problem of significance arises under this heading such as would promote the problem to the status of a fundamental breach. 

With regard to item 5 described as (the gravest of all concerns from our clients point of view) relates to the charge of Mr Michael Byrne with a criminal offence. 

I am satisfied that under Clause 8A(e) of the Dealership Agreement it is provided that either party may by notice forthwith terminate the agreement in any of the following events: 

. . . if any person concerned in the direction, control or ownership of the business of the dealer shall be convicted of a criminal offence or shall commit a fraudulent act or gross misconduct which may in the opinion of the company adversely affect the ownership operation, business reputation or interest of either the dealer or the company. 

If it were the case that this information had come to the knowledge of the Defendant subsequent to the 19 August then I would be satisfied that they were perfectly within their rights to terminate the agreement in accordance with the foregoing section. However, I am satisfied that they were aware of the existence of the accusation against the Plaintiff at the time when they chose to enter into the out of court arrangement of the 19 August. It is submitted that they did not know the detail of these allegations. I do not consider this to be of significance. In the circumstances and since they knew of the existence of this problem prior to the 19 August, it is my view that it is not open to the Defendant to introduce this fact now as a ground for resiling from the interlocutory arrangement. 

(6) (Failure to sell vehicles in the Plaintiffs locality) 

The complaint which the Defendant makes under this heading is that the Plaintiff was appointed to a given area, namely Longford and Roscommon and while this is not expressly stated in his Dealership Agreement the Defendant says that it is well recognised that he and other dealers are appointed to a locality and they are required to promote sales in that locality. They say that if there is a failure on the part of the Plaintiff to do so then they should be free to appoint somebody that will. They make another point and that is that if the Plaintiff sells outside the Jurisdiction then this generates a variety of trade difficulties particularly where the sales are to a company in England which is apparently without resources. 

It may well be that these difficulties do arise. However I am unable to identify any term in the Dealership Agreement which makes the sale of vehicles in Northern Ireland or in the UK a fundamental breach of the Agreement and I am satisfied that it is not. It may be that where vehicles are to be sold on to a customer outside of the Jurisdiction that in these circumstances there might be justification on the part of the Defendant for refusing to supply the said vehicles. However, I am not prepared to hold that on the state of the contractual relationship between the parties that it constituted a fundamental breach of the contract to sell vehicles outside the Jurisdiction. Moreover I am satisfied that if there was a failure on the part of the Plaintiff to sell a sufficient number of vehicles within his "area" this arose to a significant extent by the failure on the part of the Defendant to maintain amicable trading relationships with him. 

In general I am satisfied that after the 19 August 1998 the Defendant became disenchanted with the Plaintiff and regretted their decision in coming to the out of court settlement. I am satisfied that they determined to terminate his dealership and sought a justification for so doing. I am satisfied that they have not made out any fundamental breach on the part of the Plaintiff such as would justify their resiling from the agreement of the 19 August nor should move the Court to amend the Order made on that date. 

Accordingly insofar as the Defendant's motion is concerned I will refuse the relief sought. 

It now remains to consider the Plaintiffs motion. 

I am satisfied that whatever may be the Defendant's attitude towards the Plaintiff, there was no intention on their part to disregard the Order of the Court. Counsel on behalf of the Defendant has apologised to the Court and explains the occurrence as arising from a misunderstanding of the position. I am prepared to accept that explanation and in the circumstances I propose to adjourn Judgment on the Plaintiffs motion so as to enable the Defendants to recommence trading with the Plaintiff in accordance with the terms of the agreement or until further Order.