Dakota Packaging Ltd. v. APH Manufacturing BV t/a Wyeth Medica Ireland [2003] IEHC 73 (4 November 2003)

THE  HIGH  COURT

Record Number: 2003 No. 8739P

Between:
Dakota Packaging Limited
Plaintiff

And

APH Manufacturing BV, trading as Wyeth Medica Ireland

Defendant

Judgment of Mr Justice Michael Peart delivered the 4th day of November 2003:

This judgment is supplemental to the judgment already delivered by me herein on the 10th October 2003, and should be read in conjunction therewith. 

Following the delivery of the said judgment I heard further submissions from the parties on matters arising therefrom on the question of what order should follow.

The first matter was one raised by the defendants. They sought clarification of one matter which was not addressed in my judgment, namely what price would apply to goods which were required to be purchased by the defendants from the plaintiffs during the notice period, especially in view of the fact that the defendants were currently in a position to source those goods at a price substantially below that charged by the plaintiffs. In the light of my judgment and my finding that if the notice period of twelve months was to have any reality it must mean that the plaintiffs should be in the same position during that period as if notice of termination had not been given, it follows therefore in my view that the applicable prices of products to be ordered during that period would be the prices applying at the date on which the notice was served - in other words Dakota's then existing prices, and not the price at which the defendants say that they can now source the products. 

The other matter addressed in submissions was the form of order that should follow my findings. The plaintiffs sought a mandatory order as sought in the Notice of Motion directing the defendants to purchase products from the plaintiffs during the notice period. This order in effect would be an order akin to an order for specific performance. The defendants resisted this application on the basis that the court ought to allow the plaintiffs' remedy to sound in damages only in view of the fact that there could be no question of the defendants not being a mark for damages, and in view of the courts' traditional reluctance to grant mandatory orders by which parties would be ordered to do or continue to do, business together. 

The question of the courts attitude to this question has been recently and comprehensively addressed in the House of Lords in the judgment of Lord Hoffmann in Co-operative Insurance v. Argyll Stores Limited (1998) A.C. 1.  Mr Murray on behalf of the defendants in the present case relied on this decision as the basis for submitting that this court should not direct specific performance in this case or make any order of a mandatory nature.

In that case the defendants "Argyll" decided to close one of its supermarkets which was located in a Shopping Centre in Hillsborough in Sheffield, England because it was losing money. In doing so they were in breach of one of the covenants in its lease of the premises which created a positive obligation to keep the premises open for retail trade during the usual hours of business. The breach of covenant was admitted by Argyll and at first instance, consented to an order for damages to be assessed. The Court of Appeal, reversing the trial judge, ordered that the covenant be specifically performed, ordering that Argyll trade on the premises for the remainder of the term of the lease or until an earlier subletting or assignment. That order was reversed by the House of Lords which held that the settled practice of the court not to grant a mandatory injunction requiring the carrying on of a business was soundly based, bearing in mind, in particular, the difficulty of drawing the order with sufficient precision to avoid wasteful litigation regarding compliance with it, and that the defendant might suffer far greater loss by having to comply with the order than the plaintiff would suffer from the contract being broken, thus putting the plaintiff in an unjustly unfavourable bargaining position; and that the grant or refusal of specific performance remained a matter for the discretion of the judge, and the settled practice might be departed from in exceptional circumstances, which was not the case in the matter before that court.

In his judgment, Lord Hoffmann traced the history of what he describes as "the settled practice" and referred to the following words of Slade J. in Braddon Towers Ltd v. International Stores Ltd (1987) 1 E.G.L.R. 209, 213:

"Whether or not this may be properly described as a rule of law, I do not doubt that for many years practitioners have advised their clients that it is the settled and invariable practice of the court never to grant mandatory injunctions requiring persons to carry on business."

He also refers to the fact that at Common Law a successful plaintiff was always entitled to damages as of right, whereas specific performance was an exceptional remedy which gradually became part of the discretionary jurisdiction of the Court of Chancery "to do justice in cases in which the remedies available at Common Law were inadequate."

But he also points out that the reluctance to order specific performance is not merely because damages might be an adequate remedy. There is also the difficulty very often that the making of an order to carry on a business would require the constant supervision of the court to ensure that its order would be complied with. Such supervision would not be that taken in its literal sense, but in the sense that the court might frequently be called upon by way of motions for attachment and committal to determine whether from time to time there was a breach of the order in question. Such a difficulty does not arise where the order for specific performance is in respect of a single act - for example that a builder complete a contract to construct a house. In such a case the court's supervision is simple. It is confined to a single question as to whether the house has been built or not. But where a court orders a party to do business or continue to do business with another party, matters are far more complicated. For example the question might arise, as in this case, as to the level of business to be transacted, and what range of products were to be included in the order and so on. That is one very practical reason, apart from any question of settled practice or precedent, as to why it makes sense that a court will allow the plaintiff's remedy to sound in damages. That might in the present case have to await the end of the notice period in order to see what level of business was transacted during the notice period and whether the defendants did in fact order from the plaintffs the products which they would have ordered if notice of termination had not been given. That question would also involve discovery of documents in order to elicit information as to whether products were in fact required during the period, and which may have been ordered from new suppliers, or whether there has been any artificially or deliberately reduced need for products, which the defendants might say meant that they did not require product from the plaintiffs. These are all matters which make it highly undesirable in the present case that there should be an order for specific performance. It is far better that the court be asked, if necessary, at some later time, to determine the question of damages. While that task can be a difficult one, it is nevertheless one that is frequently undertaken, and the court has all necessary powers to ensure that all necessary information and documentation is provided in order to carry out its task.

Another matter identified by Lord Hoffmann and which is an important one, is that the consequence of non-compliance with an order of specific performance is a contempt of court. Of this consequence, he states at page 12:

"This is a powerful weapon; so powerful, in fact, as often to be unsuitable as an instrument for adjudicating upon the disputes which may arise over whether a business is being run in accordance with the terms of the court's order. The heavy-handed nature of the enforcement mechanism is a consideration which may go to the exercise of the court's discretion in other cases as well, but its use to compel the running of a business is perhaps the paradigm case of the disadvantages………"

In the present case, such an order would not be compelling the running of a business as such, but would be restricted to how a portion of the business of the defendant is conducted with the plaintiff. That distinction is not of sufficient significance, if any at all, to take it outside the scope of Lord Hoffmann's thinking. The court would be interfering with how the defendants conduct themselves with the plaintiffs in a way that would first of all require the constant supervision of the court at the behest of the plaintiffs every time the latter felt that the defendants were breaching the terms of the order, and the officers of the defendants would be susceptible to orders of attachment and committal, and indeed the company itself could be liable to orders of sequestration for its contempt and soforth. That in my view would be no way for parties to be doing business during admittedly a relatively short period of time in the present case, and such an implement would be very blunt indeed, and entirely disproportionate to the result to be achieved, which can more easily be achieved by way of an award of damages, if that should arise.

Apart from all of these considerations, there is the additional difficulty identified by Lord Hoffmann, which would arise in how such an order of specific performance would be worded. Any imprecision in the wording of the order would inevitably result in further applications to the court in order to seek clarification as to the terms of the order, before any motion for attachment could be brought for alleged breach. In relation to this matter he referred to the words of Lord Upjohn in Morris v. Redland Bricks Ltd (1970) A.C. 652, 666:

"the court must be careful to see that the defendant knows exactly in fact what he has to do and this means not as a matter of law but as a matter of fact, so that in carrying out an order he can give his contractors the proper instructions."

Matters of business must be approached as a matter of common-sense, and not simply as matters of law. Practical considerations enter into relationships of a business character, and there could be no question in the present case of the defendant being mandated by this court to carry on its business with the plaintiff in a particular way, under a sword of Damacles which could fall at any moment at the behest of the plaintiff by way of a motion of attachment. This court was asked to determine one question, namely whether the defendants were obliged to give any notice of termination of its purchasing relationship with the plaintiff, and if so what was the appropriate length of such notice. The court has made its decision in that regard and has gone on in fact to state some further matters which it believes is in the best interests of the parties and of this litigation, namely what the notice period should look like, so to speak. Having done that, it is now up to the parties and in particular the defendants, to work out what should happen during that period, and it will be a matter for the plaintiffs to come back to this court in due course if, after the termination of the notice period which I have found to be reasonable, they consider that the defendants have not complied with the notice requirement which I have considered to be reasonable.

Since it is not reasonable at this stage to make any assumption that the plaintiffs will have any cause for complaint, and that this question may need to await the out-turn at the end of the notice period, I will adjourn this matter generally with liberty to re-enter in due course, if necessary, so that directions can be sought at that stage as to the most appropriate method of proceeding further. Questions of further pleadings may arise, as well as matters of discovery and case management generally.

In relation to the question of the costs of this issue which I have determined, Mr Shipsey on behalf of the plaintiffs sought all his costs of the proceedings to date. Mr Murray on the other hand, while conceding that the plaintiffs had succeeded on the issue substantially, nevertheless pointed out that the court's further consideration of what order should follow had been resolved in a way favourable to his submissions, namely that no order of specific performance should be made, and he submitted that the costs related to that argument should be awarded to the defendants. As far as I am concerned, the plaintiffs have succeeded in the substantive matter, and it follows that they should get their costs of that matter, which necessarily must include any further consideration of what type of order should follow. The nature of that order needed to be debated in any event as a consequence of my first judgment, and the fact that I favour not making an order of specific performance does not mean that the plaintiff's should not receive their costs of that debate also. I therefore make an order for costs of the proceedings to date in favour of the plaintiffs.