England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR JUSTICE JAY)

		Royal Courts of Justice Strand London, WC2A 2LL
		8 February 2016

1. LORD JUSTICE DAVID RICHARDS: This is a renewed application for permission to appeal against the refusal by Jay J to grant an interim mandatory injunction against the Defendant pending trial. The judge refused permission to appeal, as did Christopher Clarke LJ on the papers.
2. The dispute arises out of a supply contract whereby the Defendant supplies bespoke rubber sealing parts for the engines in cars manufactured by the Claimant. In late 2015 the Claimant gave notice that its requirements for the parts would reduce over the following months.
3. The Defendant responded by giving notice that it would not accept any further orders and that their contract would terminate on 8 January 2016. It did, however, say that it was prepared to continue supplies, at any rate, for a period, but only on terms that the prices would increase by nine times. It explained that this was business it no longer wished to do at the reduced volumes proposed by the Claimant, but it would, at least temporarily, continue supplies on those terms.
4. In late December 2015 the Claimant issued proceedings claiming relief in respect of what it alleged to be a breach of contract by the Defendant. Its case is that the contract is terminable or terminates in 2020 or alternatively is terminable on reasonable notice, which it accepts would be six months. For the purposes of the application for an injunction, which I will mention in a moment, the Claimant accepted that the contract is terminable on six months' notice.
5. The Claimant applied for an interim order pending trial requiring the Defendant to continue to supply parts in the quantities specified by the Claimant at the existing price. The matter was heard by Jay J on 5 January 2016 as a matter of urgency. Evidence had been filed by the Claimant I think on 23 December and the Defendant responded to that evidence at the end of December and shortly before the hearing.
6. Jay J held that there was a serious issue to be tried. He held that damages were unlikely to be an adequate remedy for either party, but his impression, he said, was that the Claimant's losses were likely to be greater and more difficult to quantify than the Defendant's.
7. In those circumstances, he went on to consider which course would cause the least irremediable prejudice. He felt unable to reach a conclusion on that point. He concluded that he could not have a high degree of assurance that an interim injunction would be found to have been rightly granted and on that basis, he refused to grant the mandatory injunction sought by the Claimant.
8. He also took into account an offer which the Defendant made, which was that it would supply the parts ordered by the Claimant on terms that the Claimant paid the higher price demanded by the Defendant, which was now seven times the existing price, but on condition that the Defendant would pay the amount of the increase into an escrow account to abide the outcome of the trial.
9. Christopher Clarke LJ refused permission to appeal on the grounds that this was an exercise of discretion by the judge and within the bounds of his discretion and the result achieved substantial justice and was an adequate remedy.
10. Since then the Defendant has made a revised offer that the Claimant need pay at the time of supply only the existing contractual price, but must pay the balance of the increased price if the Claimant fails at trial. Alternatively, if the Claimant succeeds at trial, it will not have to pay the increased price, but will have received the supplies it requires in the meantime at what I might call the December contractual price.
11. The trial is fixed to start on 1 May 2016 in the Queen's Bench Division with an estimate of three days. It is a reasonable assumption that the judgment in the case will be delivered within a few weeks, say by the end of May 2016. It is against that background that the present application is made for permission to appeal.
12. Mr Tozzi QC, in his able argument on behalf of the Claimant, has submitted, by reference to evidence filed on this application for permission to appeal on behalf of the Claimant, that the new offer made by the Defendant does not adequately protect the position of the Claimant pending trial.
13. The evidence in question comprises, first of all, a witness statement made by Mark Cooke on 7 January 2016 at a time when the Defendant had not made its new offer. That evidence states that being required to pay the amount of the increased price (which, if I have not mentioned it already, is likely to amount to about £6 million over a period of six months until to the end of June 2016) into an escrow account would have significant adverse effects on the Claimant. It was concerned about the effect of making those payments on its cash flow, the likely need to borrow the funds and the impact that that would have on its other activities.
14. Insofar as those concerns are directed at tying up the cash by paying it into an escrow account and borrowing for that purpose, those are concerns which no longer arise in the light of the Defendant's new offer. Mr Tozzi submits that there is still significant prejudice which would be suffered by the Claimant if it was required, in effect, to accept the new offer.
15. Mr Cooke says this in his witness statement of 7 January 2016:

i. "Paying [for which I can read "providing for"] such amounts would have a significant effect on Bentley's ability to make the required profits that are required of brands and subsidiaries of the VW group."

16. I pause to mention that Bentley is a subsidiary of Volkswagen:

i. "In each year Bentley is set a profit target which it must achieve. If Bentley has to pay the seven times price increase, then this will impact significantly on Bentley's ability to meet this target. The consequence of this is that savings will have to be made elsewhere, such as in overhead staff costs, research and development, talent development and graduate development programmes. Whilst as I understand that Bentley would recover the money paid into the proposed escrow account if it is successful at trial, the steps referred to above will have to be put in train immediately."

17. In the light of the renewed offer, Mr Cooke made a third witness statement on 21 January 2016 in which he says that:

i. "The practical implications for Bentley of this alternative offer are exactly the same as having to pay the money into escrow. Bentley will have to make provision for the risk of losing the trial by making provision on a weekly basis in its own accounts. As such, the money will have to be ring fenced and will therefore not be available for Bentley to use for other purposes. GTI's offer will still, therefore, have the same ramifications as set out in my second witness statement."

18. Then he goes on to say that:

i. "The alternative offer does not deal at all with the likely encouragement that any such order might well give to other suppliers of Bentley to try a similar approach."

19. The effect of the new offer made by the Defendant is that on the one hand it preserves the right of the Defendant to offer such terms as it thinks appropriate to Bentley, leaving it to Bentley to accept those terms if it sees fit, on the basis that the Defendant succeeds at trial. If the Defendant succeeds at trial, then it was entitled in December to give notice of termination of the contract having effect on 8 January 2016 and was entitled to make such offer as it thought fit to Bentley and Bentley was free to reject or accept such an offer. The offer made by the Defendant preserves that position of the Defendant. It means that if it succeeds at trial, Bentley having accepted further supplies, Bentley will have to pay the increased price.
20. On the other hand, so far as Bentley is concerned, it does not have to pay an increased price if it succeeds at trial. If it succeeds at trial, it will have established that at least for a period of six months from December 2015 the Defendant was obliged to continue to supply parts to Bentley at the existing prices. Bentley will have paid no more than the existing prices and Bentley will not have to pay anything further.
21. The extent of the prejudice suggested by Bentley, as set out in the witness statement of Mr Cooke, is that although Bentley will be under only a contractual obligation to pay the increased price in June, it is nonetheless required to set aside and ring fence that increased price in the meantime.
22. I do not accept that evidence. If a company is required to make a provision against a contingent liability in its accounts, clearly that has an impact on its accounts, but it does not require the company to ring fence or put into escrow the funds required.
23. The most that is suggested in the evidence of Mr Cooke that the offer of the Defendant might have is that over the period pending trial it puts in doubt what the profits of Bentley for the year 2016 will be. I pause here to say that with a trial taking place in May and a decision known by, let us say, the end of May, Bentley will know well before the end of its current financial year whether or not there is any impact on its profits.
24. But in his evidence Mr Cooke says that there could be this further problem. Bentley is currently developing new cars, in particular a car that it showed at the Geneva Motor Show in 2015. He says that if Bentley does not get the requisite authority in the next six months, that is to say by the end of June or early July in 2016, Bentley may miss the opportunity to produce this model, which will have a significant impact on Bentley's future business. This, I may say, is the one concrete example that Mr Cooke gives of the impact of having to deal on the terms of the Defendant's offer.
25. As I see it, the evidence does not demonstrate a prejudice to Bentley because the result of the trial will be known within the relevant six-month period and before the end of that period it will know whether or not its profits have been impacted by the increased price.
26. The task of the court on an application for an injunction pending trial where each side may suffer loss is to arrive at a result which, as near as can be achieved, holds the ring for the parties in the meantime. In this case, having regard to all the circumstances of the case, in my judgment, the new offer made by the Defendant adequately protects the position of both parties.
27. Mr Tozzi helpfully referred to the decision of the Privy Council in National Commercial Bank Jamaica Limited V Olint Corporation Ltd [2009] 1 WLR 1405 where Lord Hoffmann, giving the judgment of the board, analyses the circumstances in which injunctions, both mandatory and prohibitory, will be granted. Lord Hoffmann had himself in previous cases, particularly Films Rover v Cannon Film Sales to which he refers in his judgment, dealt specifically with the problems which arise in a case of mandatory injunctions.
28. In paragraph 21 of his judgment he emphasised that the court should not adopt a box ticking approach that does not do justice to the complexity of a decision as to whether or not to grant an interlocutory injunction. It is, as he remarked in paragraph 19, a matter where the court must examine what, on the particular facts of the case, the consequences of granting or withholding an injunction are likely to be.
29. The present case is very much a paradigm of a case in which a box ticking exercise would not be appropriate and where, as I have said, the position is adequately protected for both parties by the Defendant's offer over the relatively short period between now and the trial and judgment in the trial.
30. I do not consider in the circumstances that there is any real prospect of success on an appeal against the judge's decision. In those circumstances, I refuse permission to appeal.