Scottish Court of Session Decisions

The pursuers are the owners of the Braefoot Service Station, 226 Willowbrae Road, Edinburgh. On 4 December 1995 they entered into a Partnership Licence Agreement relative to the operation of the service station with the defender. The pursuers claim to have terminated that agreement with effect from 31 October 1998. In this action they seek (1) declarator that they were entitled to terminate the agreement forthwith by notice dated 31 October 1998, (2) declarator that the defender has no lawful claim to enter upon or remain in the service station, (3) interdict against the defender by himself or by others acting on his instructions or at his request entering upon the service station, and interdict ad interim and (4) an order upon the defender to restore to the pursuers possession and occupation of the service station, and such an order ad interim.

The action was signetted on 4 November. The defender had lodged a caveat, and accordingly, when the pursuers' motion for interim interdict and for an interim order for possession came before me on 5 November, both parties were represented by counsel.

The Partnership Licence Agreement bears to confer on the defender a personal licence to use the service station for the purposes and on the terms set out in the agreement. According to its terms the licence was granted for a period of three years, terminating on 30 November 1998 (Clause 3 and the First Schedule). By letter dated 28 August 1998 the pursuers gave notice to the defender that they had decided not to renew the licence when its term expired. The provisions regulating the termination of the agreement before expiry of its term are contained in Clause 9 and the Eighth Schedule. Part III of the Eighth Schedule is in inter alia the following terms:

The pursuers aver that by letters dated 28 and 28 October 1998 the defender instructed his bankers to reject two direct debits presented for payment by the pursuers, and that the defender's bankers acted on those instructions. It is not disputed that that is so, although payment was made by other means of a substantial part of the amount due, and the balance was also subsequently paid. In light of the fact that the pursuer had countermanded the direct debits in respect of two payments, the pursuers conceived that they were entitled to terminate the agreement, and determined to do so.

The notice of termination which was served on the defender by hand on Saturday 31 October 1998 was in inter alia the following terms:

What happened on Saturday 31 October was that employees of the pursuers attended in the morning at the service station to resume possession of it. The defender was not himself present, but the position was explained to his staff, and they complied with a request that they shut the service station down. When the defender attended some time later, the letter quoted above was handed to him. The pursuers' employees arranged for a stocktaking to be carried out. Independent stocktakers were brought in. The process involved opening lockfast cabinets. The defender's cashier dealt with the cash and the taking of readings of the fuel tank levels. Locks were changed, as were electronic cash registers. Trading was resumed on the afternoon of Tuesday 3 November, under the control of an agent appointed by the pursuers.

Although it is not mentioned in the pursuers' pleadings, because they were unaware of it at the time when the pleadings were drafted, it should be noted that on Monday 2 November a motion for interim interdict and for an order for interim possession in an action at the instance of the present defender was enrolled. No caveat had been lodged by the present pursuers, and accordingly I heard the motion ex parte. Having heard counsel, I took the view that it was inappropriate in the circumstances to grant the orders sought ex parte, and therefore refused the motions in hoc statu, indicating that they could be re-enrolled once the present defender's summons had been served on the present pursuers. When the present motion came before me on Thursday 5 November, I was informed that the motions for interim orders in the action at the instance of the present defender had been re-enrolled, but that on his express instructions those motions had then been dropped.

As is averred by the pursuers in the present action, the defender returned to the service station at about 1 a.m. on Wednesday 4 November accompanied by about seven others. They took possession of the shop at the service station, and the pursuers' staff were obliged to close the station. The police were called, and through their mediation it was agreed that the defender might remain in occupation of the shop, provided he "did not touch anything". That was how matters stood when the present motion came before me on 5 November.

Mr Haddow for the pursuers submitted that the pursuers had a clear prima facie case that events had occurred which entitled the pursuers on 31 October forthwith to terminate the licence, bringing to an end the defender's entitlement to possession of the service station. There were two branches to Mr Haddow's submissions, of which one was set out in the summons, but the other, although foreshadowed in the termination notice, was not the subject of averment.

The case made in the pleadings was that the defender had instructed his bank not to implement the direct debits for consignments of fuel delivered on 23 and 26 October, and that in accordance with those instructions his bankers had not paid those direct debits. That, it was submitted, constituted failure on two occasions to honour direct debits presented for payment by the pursuers. That was, in terms of the part of paragraph 6 of Part III of the Eighth Schedule to the Partnership Licence Agreement highlighted above, an event entitling the pursuers forthwith to terminate the licence. Once it was terminated, as it had been, the defender had no entitlement to remain in possession or occupation of the service station. Ground for interdict and for an order for possession in terms of the third and fourth conclusions therefore existed.

The alternative case was somewhat more complicated. In terms of paragraph 1(a) of Part III of the Eighth Schedule, the pursuers were entitled to terminate the licence forthwith if:

Paragraph 1 of the Fifth Schedule provides:

1. The Licensee's total requirement of motor fuels for resale at the Service Station at the price defined in paragraph 4 below ..."

Paragraph 4 provides:

By not allowing the direct debits to be implemented, and instead tendering by other means a lesser sum (as he did), the defender, so it was argued, contravened paragraph 1(a) of the Fifth Schedule, and thus gave ground for termination under paragraph 1(a) of Part III of the Eighth Schedule.

Mr Brailsford for the defender drew attention in the first place to the fact that the pursuers had taken possession of the service station on 31 October before they had served the notice of termination on the defender. He submitted that the pursuers' possession of the service station was initially obtained unlawfully, but he accepted that while that might perhaps give ground for a claim for damages for breach of contract against the pursuers, it did not vitiate their claim for possession as now maintained, if (contrary to his further submissions) an event justifying termination had occurred.

So far as the ground of termination based on paragraph 1(a) of the Eighth Schedule and paragraph 1(a) of the Fifth Schedule was concerned, Mr Brailsford's submission was that in the absence of reference to it in the summons it was not properly before the court.

So far as the ground for termination based on paragraph 6 of the Eighth Schedule was concerned, Mr Brailsford accepted that the defender had indeed instructed his bankers not to implement the direct debits in respect of the fuel delivered on 23 and 26 October, and that they had acted on those instructions. He submitted, however, that it did not follow that the direct debits had been "dishonoured". He explained that the practice was for Esso to operate the direct debits two days after delivery. He drew attention to paragraph 34 of the Seventh Schedule which provides that:

There existed a genuine dispute between the defender and the pursuers about what was the "maximum recommended retail price". (Mr Haddow's understanding was that the dispute was as to the amount of the licence margin.) It was as a result of that dispute that part of the payments had been withheld. What had been withheld was not, the defender claimed, "properly due". All but the disputed amount had been paid by other means (CHAPS), and indeed even the disputed amount had subsequently been paid by those means. The intention to pay by CHAPS instead of by direct debit had been intimated to an employee of the pursuers who, the defender understood, did not demur. In all these circumstances, Mr Brailsford submitted, the direct debits had not been "dishonoured", there was therefore no ground for termination, and the pursuers did not have a prima facie case for the interim orders sought.

In my opinion the pursuers have averred a good prima facie basis for terminating the licence under paragraph 6 of Part III of the Eighth Schedule. That paragraph covers three situations, and this case is concerned with the second of the three, namely failure to honour direct debits on two or more occasions. I am of opinion that it is eminently arguable that that provision is concerned to protect the pursuers against precisely the sort of behaviour on the part of the licensee that is admitted to have occurred in this case. So far as this part of paragraph 6 is concerned (unlike the first part) there are no days of grace. All that need happen to justify termination is dishonour of the direct debits on two occasions. In my opinion the pursuers have an arguable case that the instructions which the defender gave to his bankers, when implemented by them, amounted to dishonour of the direct debits. Whether payment was made by other means seems to me to be a different matter. The defender may be able to establish eventually that where there is immediate payment by other means, non-payment under the direct debits does not amount to "dishonour", but the pursuers have in my opinion an arguable prima facie case to the contrary. In any event, it was not until Tuesday that the shortfall was made good. It does not seem to me that the existence of a dispute between the parties as to the amount due is of any avail to the defender for the purpose of negating the proposition that the pursuers have a prima facie case, when regard is had to (a) the fact that the maximum recommended retail price is a matter for the pursuers to fix (see paragraph 3 of the Fifth Schedule), (b) the fact that the licence margin is set in the First Schedule, and (c) the terms of paragraph 34 of the Seventh Schedule, which seem expressly designed to disable the licensee from withholding disputed payments.

That is sufficient to lead to the result that the pursuers are entitled to the interim orders sought if the balance of convenience favours their being granted. Since the pursuers' other asserted ground for termination, based on paragraph 1(a) of Part III of the Eighth Schedule and paragraph 1(a) of the Fifth Schedule, is not focused in averment in the summons, I do not base my decision on it.

In support of the proposition that the balance of convenience favoured the granting of the interim orders sought, Mr Haddow pointed out that it was in both parties' interests that the service station should continue to trade. The turnover figures mentioned in the summons are substantial. The pursuers, if restored to possession, were in a position to operate the station. The defender could not do so without supplies of fuel. Fresh supplies were required every two days or so. Restoration of the service station to a condition in which the defender could resume trading would in any event take a few days, during which turnover would be lost. If the pursuers were restored to possession, but it turned out that they had not been entitled to terminate the licence, the defender would have a remedy in damages, which the pursuers, as a substantial company, would plainly be able to meet. On the other hand, if the defender remained in possession, but was ultimately found not to have been entitled to do so, his ability to meet a potentially very substantial claim for damages was problematical. Finally, even if he were restored to possession, the pursuer's licence would have less than a month to run.

Mr Brailsford made no submissions on the balance of convenience.

In the circumstances I am satisfied that for the reasons put forward by Mr Haddow the balance of convenience clearly favours restoring the pursuers to possession ad interim.

I have accordingly granted the pursuers' motion for interim interdict in terms of the third conclusion, and for an interim order in terms of the fourth conclusion, which is made under section 47(2) of the Court of Session Act 1988.