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Friday, 19 October 2012

Ontario Court Rules Automotive Dealership May Not Be A Franchise Under Ontario Franchise Legislation

Here's an interesting article by Rebecca Hamovitch of Canadian lawyers, Cassels Brock, about a case (Butera et al. v. Mitsubishi Motors et al.) on 31 August in which the Ontario Superior Court of Justice granted a motion for summary judgment brought the defendants and dismissed the action brought by the plaintiffs. The Court held that the dealer agreement in this case did not give rise to a franchise relationship, so the Arthur Wishart Act (Franchise Disclosure), 2000 did not apply.

The long title of the Act (if that's the correct name for the statement of what it's all about in Canada) describes this piece of legislation as:
"An Act to require fair dealing between parties to franchise agreements, to ensure that franchisees have the right to associate and to impose disclosure obligations on franchisors."
What an extraordinary idea! Imagine interfering with the free operation of market forces like that. It would give the European Commission palpitations.

The story is that in 2002, Butera submitted an application to acquire a Mitsubishi dealership. He included sales forecasts which he based on figures from the United States and the defendants' predictions of expanded sales in both the United States and Canada (in the case of Canada, expanded from nothing, as Mitsubishi cars were not being sold there at the time). Those predictions later formed the basis of the claim, which alleged misrepresentation, breach of collateral warranty and failure to comply with the Arthur Wishart Act.

The judge threw out the claim and allowed the defendants' counterclaim. There was no evidence that the figures of sales in the United States were not accurate, nor was there any evidence to suggest that the defendants' agents did not honestly believe their predictions of success. So there was no misrepresentation. The facts that there was an entire agreement clause in the dealer agreement, and the dealer was himself a lawyer, also appear to have been persuasive. As for the Act, because the dealer was not required to pay the manufacturer the agreement fell outside the definition of "franchise". Even if that were wrong, the Act would not be any help to the dealer because it largely codified the common law, on the basis of which the plaintiff's claims had already been thrown out.

We still use the word "franchise" rather loosely over here. There isn't the same degree of statutory protection for franchisees in the EU as there is in Canada, so there's little to be gained by trying to argue that a dealer agreement is in fact a franchise, but the likelihood is that it would be doomed to failure ... When it comes to trying to extend dealer protection in the EU, the commercial agents directive is a much more promising starting point.

Saturday, 13 October 2012

McLaren allowed deduction from corporation tax for governing body fine

The normal principle is that you cannot set a fine against your liability to tax. The public polisy reasons for that rule are not difficult to appreciate. However, McLaren have been permitted to deduct the amount of penalties imposed by the FIA from corporation tax (after they obtained confidential technical information about Ferrari's car) because the penalty was sufficiently "connected with the trade" of the business, and related to "activities so closely associated with mainstream of McLaren's trade" that the judge could not say "that they were not a part of it". The first-tier tribunal's judgment is here.
That is not to say that all civil penalties (as opposed to criminal fines) will be tax-deductible - breaches of competition law may give rise to civil penalties, but I cannot imagine that they could be set against corporation tax liability. In any case, I am surprised that the judge was prepared to hold that the penalties were close enough to McLaren's mainstream business to be allowable: that could be seen as a rather damning view of the way McLaren conduct themselves, which I am sure is not intended.

Singapore: motor traders breach competition rules

The Competition Commission Singapore has proposed to take action (and, presumably, soon will do so) against 13 traders who have been caught bid-rigging at auctions: CCS Issues Proposed Infringement Decision Against Motor Vehicle Traders - Competition Commission Singapore. A pretty heinous breach of competition law just about everywhere in the world.

Challenge to Tesla's "Apple Store"-style distribution model in US

Dealers call Tesla factory stores illegal, says Automotive News: the gist of the story is this:

Dealer associations in a handful of states, and state regulators in at least one case, say Tesla's stores violate state franchise laws that prohibit factory ownership of dealerships. 

From a legal perspective, that explains a lot - and also serves to show that it could never happen in the same way over here.

Former Chrysler dealers sue manufacturer in New York

Another item from Automotive News (I have been catching up on my reading after a week that allowed for little reading time): the fall-out from Chrysler's woes continues, and in the latest development two former dealers are taking action alleging that they were wrongly terminated back in 2009. Another illustration of the huge difference in the protection afforded to dealers in the States compared with what the block exemption (and domestic legislation) offers over here.

Volvo Group to reorganise EMEA dealer networks

Automotive World (subscription required) reports Volvo Group has announced its intention to introduce a new organisation for its truck dealer network in Europe, the Middle East and Africa. It often surprises me to see those three areas being lumped together - but it is pretty common these days. Dealer agreements that comply with the block exemption might seem pretty odd in the middle of the dark continent ...

OFT urges top retailers to change their websites

"The OFT has written to 62 of the top online retailers ahead of the busy Christmas period after a sweep of 156 websites found signs that many may not be fully complying with consumer protection law", according to a press release from the Office. They were looking for for breaches of the Distance Selling Regulations and other consumer protection laws. The press release goes on the detail some of the areas of concern:

  • 33 per cent of sites that provided information on cancellation appeared to impose unreasonable restrictions on customers' rights to a refund. Most common was requiring that the product must be in the original packaging or in the original condition, which can infringe on consumers' rights to reasonably inspect/ assess the product.
  • 60 per cent provided a web contact form rather than an email contact address, as required by the E-Commerce Regulations. Two per cent provided no electronic contact details at all.
  • While 60 per cent of sites indicated upfront that compulsory charges would be added to the first price shown, 24 per cent of these sites went on to add further unexpected charges at the check-out.
  • However, the sweep also found that the majority of sites were compliant with the DSRs in providing other required information to the consumer. For example, 99 per cent of sites provided details on when the goods would be delivered or the service would start and 95 per cent provided a full geographical address when payment was required in advance.

Huge numbers of websites fail miserably to comply with the fairly simple legal requirements, and it is not just retailers such as those the subject of this OFT initiative (though their failings are likely to have particular effects on consumers). Dealers should watch out too.

For the full story, follow the link to the press release.

Wednesday, 10 October 2012

BMW Financial Service (GB) Ltd v Hart [2012] EWCA Civ 1959 (10 October 2012)

When does a cause of action relating to an HP agreement accrue? It depends on the wording of the agreement itself. Sometimes the failure to make an instalment payment will create a cause of action: sometimes it will only be when notice of termination has been given. If proceedings have to be brought, they must be brought within the limitation period - the courts show no sympathy for claims issued late, even by just a day. For most motor finance claims, the limitation period is six years from when the action accrues, which is why it is so important to know when that happens. And it is not always easy to know.

It can even need the assistance of the Court of Appeal, as in BMW Financial Service (GB) Ltd v Hart [2012] EWCA Civ 1959 (10 October 2012), to work out when the clock starts to run. Mr Hart had agreed to pay monthly instalments, and a final balloon payment at the end of the agreement. The agreement said that BMW could only claim from him after serving a notice of termination on him, or when he had repudiated the agreement and they had communicated their acceptance of his repudiation.

Mr Hart failed to pay two instalments, which amounted to repudiation, and on 26 August 1999 BMW sent him a letter accepting his repudiation and giving notice of termination. Nothing happened for six years after that, when BMW sued on 26 August 2005. Mr Hart had moved abroad, so it was a simple matter for BMW to obtain judgment in default. The first that Mr Hart knew about the judgment was when he returned home in 2011. He applied to have the judgment set aside, arguing that the claim had been issued outside the six-year limitation period.

At first instance, the court agreed with him, holding that the limitation period started to run from when he first missed an instalment payment (July 1999).But the Court of Appeal decided that the wording of this particular contract meant that BMW could only make a claim once a termination notice had been given, or it had communicated its acceptance of Hart's repudiatory breach, both of which it had done. Only then did the money became due, and until then all that was due from Mr Hart was the outstanding instalments.

The agreement said that service of the notice was deemed to take effect two days after it was sent, which meant the key date was 28 August 1999. The claim form had been issued (just) within the limitation period.

Wednesday, 3 October 2012

New National Minimum Wage rates

From 1 October 2012, the national minimum wage will be (previous rates shown for comparison):   
1 October 2011 to 30 September 20121 October 2012 to 30 September 2013
Standard Adult Hourly Rate (workers aged 21 and over)£6.08£6.19
Development Hourly Rate
(workers aged between 18 and 20 inclusive)
Young Workers Hourly Rate
(workers aged under 18 but above the compulsory school age who are not apprentices)
Apprentices Hourly Rate£2.60£2.65
Accommodation Daily Offset£4.73£4.82