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Tuesday, 29 November 2011

Equality cases can go to High Court

The Court of Appeal has today held that equality claims do not have to be brought in the employment tribunal, but may be brought in the High Court. The significance lies mainly in the time within which claims have to be brought: six months in the Tribunal, six years in the court.
The Court of Appeal, which expressed surprise that this was the first time in 40 years that the question had come before the courts, declined to allow an appeal to the Supreme Court - saying that although it was a matter of considerable importance, which could affect many other claims, it was right that the Supremes should make the decision about whether to hear a further appeal or not.
Birmingham City Council v Abdulla & Ors [2011] EWCA Civ 1412 (29 November 2011).

When a contract has been repudiated

The doctrine of repudiatory breach in contract law is notoriously difficult. It is not always clear which party is in breach and which has accepted the other's breach, which means it is then released from its obligations under the contract. The end result is that both parties are not doing what they agreed to do: which one started it?
The Court of Appeal considered just such a difficult case earlier this year, in DRLLimited v Wincaton Group Limited [2011] EWCA Civ 839. Wincanton provided logistics services to DRL and would invoice them weekly, deducting certain matters such as damage and stock loss liability. The invoices were to be agreed and signed off by both parties, and the agreement required DRL to pay without deduction, set-off or counterclaim although it was entitled to withhold payment of any sum subject to a bona fide dispute, provided it paid any sums not in dispute. A dispute did arise, and the parties agreed to suspend their respective positions to enable DRL to find another supplier. They would pay a lump sum to Wincanton, who would continue to perform the services, but shortly afterwards Wincanton threatened to stop deliveries unless sums relating to some old disputed invoices were paid. Later the threat was repeated and payment of one invoice demanded the same day. DRL refused to pay a current invoice, Wincanton stopped deliveries, and both parties claimed the other was in repudiatory breach.
The judge held that Wincanton's conduct had been improper and unjustified, but not repudiatory. DRL had committed the repudiatory breach by refusing to pay the current invoice, and Wincanton had accepted the repudiation when they stopped deliveries. The Court of Appeal disagreed.
Lloyd LJ, giving the leading judgment, said that Wincanton's demand for payment of the old invoices was a flagrant breach of the compromise that the parties had reached, especially given that under that agreement DRL had paid them a cool million pounds. He also referred to other things Wincanton had done: asserting a lien over goods held by them and diverting goods that were supposed to have gone to the new logistics company. He took the view that Wincanton were already
in breach before DRL's refusal to pay the invoice, notwithstanding that it was still delivering goods to customers day-to-day. Finally, its ultimatum to make no further deliveries unless payments were received the same day amounted to a repudiation of all its obligations under the compromise, and DRL accepted the repudiation when it said that it would not make any more payments.
Once this happened, the original agreement as a whole and the variations agreed in the compromise came to an end. DRL was not prevented from setting off amounts against the latest invoices, and it could assert cross-claims as reasons for not paying them: that meant that its refusal to pay the latest invoice was not a breach.

Romania: Ford face fine for underproduction

At first sight, it could be a throwback to the era of centrally-planned economies: why on earth might the authorities in Romania be threatening to fine Ford for not making enough cars at its plant at Craiova?

The answer, as Bloomberg (along with several other websites) reports, is that the manufacturer received state aid to set up the factory in the first place, and the production targets form part of the agreement supporting the financial help. 250,000 was the contractual volume this year, and going by the reports Ford haven't missed it very narrowly - so far they have manufactured only 7,600 units. €14 million is the fine being mooted, even though Romania isn't yet in the Eurozone (and might be wondering whether it really wants to join next year, as it plans).

Saturday, 26 November 2011

Rogue salesman: where does the loss lie?

A case that's only recently come to my attention - Quinn v CC Automotive Group Ltd (t/a Carcraft) [2010] EWCA Civ 1412 (16 December 2010) - concerns the classic situation that arises when a finance agreement is not cleared on a car taken in part exchange. The buyer ends up with a new car, but still has to pay for the one he just gave away - and to make matters worse, the dealer's salesman was, as the court put it, a rogue.

The rogue, being the dealer's salesman, had express authority to do certain things on behalf of his employer: the court (both the trial judge and the Court of Appeal) was clear about that. He also had ostensible authority, so he could bind the dealer even if he had gone beyond what he was actually supposed to do. The question on appeal was whether the customer should have been put on enquiry when strange things happened - like meetings being held at a motorway service station, and being told by the salesman that part of an additional deposit that was suddenly asked for could be paid sometime later. What the salesman had done were all things that salesmen commonly do, and it was wrong for the judge to import an "inquiry" test, not to mention a reasonableness test.

In situations like this, the court has to decide which of two innocent parties bears the loss (because the rogue is unlikely to be able to compensate anyone). After an interesting review of the authorities on the point, the Court of Appeal concluded that the answer lay in the principle stated by Holt CJ in Hern v Nichols (1700) 1 Salk. 289:
Seeing somebody must be a loser, by this deceit, it is more reason that he that employs and puts a trust and confidence in the deceiver should be a loser, than a stranger.
That passage was described, with approval, by Diplock LJ (as he then was), in Morris v Martin (at p.733), as expressing an "old, robust and moral principle". By allowing the customer's appeal, and holding the dealer liable, the Court of Appeal considered that it was following that principle. But it's still a rough form of justice, and one that certainly requires dealers to be on their guard.

Forfeiture of deposit in business purchase

When a deposit has been forfeit, and when it should be returned, is not always an easy question. The chances are that the parties involved will have different views about the matter, but a recent High Court case sheds light on the question.
A purchaser failed to complete the purchase of a business from a company in administration. Frequently a sale as a going concern will be the best way to maximise the value of the insolvent company. Because cash reserves to keep the business going are likely to be small and the timetable for the sale will be tight, the administrator might insist on a non-refundable deposit to provide comfort that the purchaser will complete. It might be very difficult to find another purchaser if the first one pulls out.
Here, the buyer was not in a position to complete immediately. The administrator agreed that the buyer could occupy the leasehold premises from the date of exchange of contracts, and to operate the business, on payment of a deposit of 10 per cent of the value of the leasehold property and 50 per cent of the value of processing equipment. The deposit would be forfeit if the buyer did not complete in accordance with the contract.
When it did not complete, the administrator applied for a court order permitting him to distribute to the secured creditors such funds as had been realised. He expressly sought permission to distribute the buyer's deposit, but the buyer challenged this on the basis that the amount of the deposit was unreasonable. On the basis of Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] UKPC 7, a contractual clause permitting the forfeiture of a deposit could amount to an unlawful penalty, and the buyer argued that this was the case here. The court declined to follow that case, though, and held that a deposit could not be challenged in this way. It was not compensation for loss that might be sustained as a result of a failure to complete: it was to demonstrate to a seller that the buyer had a genuine commitment to complete. The court had power to order the return of the deposit - which it said amounted essentially to a discretion to order relief from forfeiture -  at common law or under section 49 of the Law of Property Act 1925. It might be appropriate to make such an order if the deposit were unreasonably large, although in this case the evidence on this point did not suffice to enable the court to decide one way or the other.
Amble Assets LLP and another v Longbenton Foods Ltd [2011] EWHC 1943 (Ch) (21 July 2011).

Tesco Cars' impact on used car market

Tesco Cars has been in operation for six months, and a report from Bryan Consulting (reported here in Automotive Management Online) concludes that it is able to offer used car prices 9 per cent lower than franchised dealers. The report also says that Tesco can source 2,000 cars a week - less than Tesco's original estimate of 3,000, but equivelant to a stock turn of at least once a week, which encourages customers to grab teh car they like when they see it.
The report is based on observations of the Tesco Cars website, and the author points out that it is impossible to say how many of the cars disappearing from the site are sales and how many are being remarketed due to lack of interest. But he concludes that Tesco Cars will succeed where Virgin Cars and Autoquake failed, party because of Tesco's 15 million loyalty card holders.
Tesco's success has major implications for the trade. Dealers will have increasing difficulty getting their hands on quality ex-fleet cars under five years old, and if Tesco get closer to their target volume it will become a great deal harder. On the other hand, Tesco do not offer part exchange and consumers are still relucatant to buy online, so the effect might be limited. Even so, with the changes being wrought by the changes to the block exemption, dealers are going to have to give serious thought to the shape of their business plans.