Bear Necessities Daycare Ltd v Lancashire Fuels 4 U Ltd

This is an application by the Applicant for interim delivery up and preservation by the First Respondent of two cars which are currently in the First Respondent’s possession. I heard oral submissions on the application on 2 March 2015 and gave my decision, reserving my written reasons which I now give.

The Applicant is a limited company which specialises in childcare. The First Respondent is also a limited company dealing in, amongst other things, the manufacture, sale and supply of biodegradable fuels. Miss Claire Smith is the sole shareholder and director of the Applicant and is also a 25% shareholder and director of the First Respondent. The Second Respondent, Mr Peter Ogg, is a director of the First Respondent. The Applicant is only one of Miss Smith’s business interests. She is, or has formerly been, a director of several other companies. In particular, she is or was a director of a company known as Ace Waste. The Second Respondent was, at least at one time, also a director of and a consultant to Ace Waste.

This application relates to a claim for damages made by the Applicant in the sum of £145,833.63 in respect of monies and expenses which it alleges are owed to it by the First Respondent, together with £3,506.19 said to be owed by the Second Respondent. It is contended by the Applicant that, for reasons that are unclear, Miss Smith, through the Applicant, agreed to assist the business endeavours of the First Respondent by providing it with, amongst other things, a company credit card, two loaned motor cars, a funding circle loan, direct loans to cover certain expenditure and the payment of the First Respondent’s initial expenditure. The Applicant alleges that agreements to provide these facilities were made between Miss Smith, acting on its behalf, and the Second Respondent, as director of the First Respondent, and that those agreements were then breached.

For these purposes, only one of the agreements referred to is relevant. That relates to the provision of two motor cars, a Volkswagen Touareg (“the VW”) and an Audi Q7 (“the Audi”) to the First Respondent. The Applicant alleges that it obtained the cars on lease, then handed them over to the First Respondent for the use of the Second Respondent and another director of the First Respondent in their capacities as directors. The Applicant alleges that the First Respondent failed to comply with its agreement that it would reimburse the Applicant for the payments made by the Applicant to VW Financial Services (VWFS) for the lease of the cars and other relevant expenses. In its Particulars of Claim, the Applicant claimed damages for £6,391.08 in respect of payments outstanding for the VW and £4,051.98 for the Audi. In their Defence, the Respondents denied that any payments were outstanding.

There is no dispute that the Applicant and the First Respondent signed two written contracts in respect of the First Respondent’s use of the cars. On 20 November, 2013, Miss Smith on behalf of the Applicant and Mr Ogg and Mr Baison (another director of the First Defendant) on behalf of the First Respondent signed a document described as an “informal contract” whereby the First Respondent agreed that it would “undergo (sic) to pay against monthly invoice from the Applicant contract hire for the VW”. The contract was agreed to start on 25 April 2013 and to end on 25 April 2016. The Applicant alleges that, from April 2013, the VW was provided by it to the Second Respondent for use in his capacity as director of the First Respondent. The Respondents contend that the VW was initially provided for the Second Respondent to use in connection with his directorship of Ace Waste, not the First Respondent. There appears to be agreement that, from November 2013 (when, according to the Respondents, the First Respondent started in business), the VW was transferred to the First Respondent.

Also on 20 November 2013, a contract was signed in respect of the Audi. That contract was identical to the first, save that, in the case of the Audi, it was agreed that the contract should start on 28 November 2013 and end on 28 November 2017. It is agreed that the Audi was acquired for the use of the First Respondent.

What happened thereafter is in issue. The Applicant alleges that the First Respondent did not pay the monthly invoices in full. It is alleged that there were no payments in respect of the VW during the periods from July 2013 until October 2013 or from 1 February 2014 until 1 July 2014. Thus, it is said, a total of £6,391.08 remains outstanding. In relation to the Audi, it is said that invoices totalling £4,051.98 remain outstanding, representing non-payment for the period from 1 February 2014 until 1 July 2014. The First Respondent denies that there has been any non-payment. It is common ground that, as from 1 July 2014 until the present time, the monthly payments have been made regularly.

By September 2014, it seems that the relationship between the Applicant and the Respondents had deteriorated. Solicitors were involved (certainly on the Applicant’s side) and it appears that the Applicant was contemplating making a claim for defamation against the First and/or Second Respondent, as well as the claim for monies owing. In a letter from the Applicant’s solicitors, McHale and Co. (McHales), to the First Respondent, dated 17 September 2014, the solicitors referred to the alleged failure by the First Respondent to make regular payments for the cars, and indicated that the Applicant was seeking payment of the outstanding monies, together with interest. They referred also to the fact that the Applicant had made previous requests for the return of the cars on account of the arrears, which had been refused.

McHales’ letter dated 17 September 2014 also raised another issue, namely the terms on which the Applicant had leased the two cars. The letter stated:

The provisions of the leasing agreement between the Applicant and VWFS referred to in the letter were as follows:

all unpaid rentals and any unpaid maintenance charges and other payments due (which shall include interest, where applicable); plus

as compensation or agreed damages on our acceptance of your repudiation, or as a debt on our termination, the total amount or rentals payable during the Hiring Period (excluding VAT) less the amount of rentals paid or which have become due (excluding VAT) less also an amount (if any) equal to a rebate of rentals calculated at the rate of 4% per annum on the rentals (excluding VAT) which have not become due; …”

The Applicant’s solicitors repeated their previous requests for immediate return of the cars. They indicated that, failing such return, they would make an urgent application for delivery up of the cars. After some further communications between the parties, Mr Baison made clear that, so far as the First Respondent was concerned, there were contracts in place which it intended to “see out to the finish”. In other words, the First Respondent was not prepared to return the cars.

The Applicant issued a Claim Form on 3 October 2014 and Particulars of Claim some time later, on 16 October 2014. I have not seen a copy of the original pleading, but am told that it contained no claim for delivery up of the cars. As I understand the position, the Applicant claimed the monies owing to which I have already referred and also contained a claim for defamation against one or both the Respondents.

On receiving the Particulars of Claim, the First Respondent’s solicitors, Clarke Willmott LLP (Clarke Willmott), had written to McHales, complaining at the lack of particularisation in the Particulars of Claim and identifying the difficulty the Respondents would have in responding in their Defence to the allegations made against them. The Applicant’s solicitors replied by setting out in a letter details of the Applicant’s claim in respect of the use of the credit card and of the defamation claim. They proposed that any further particularisation of the Applicant’s pleadings should be dealt with by way of a Reply to the Respondents’ Defence, rather than by Amended Particulars of Claim filed before the Defence was filed. They observed that, if the Respondents wished the Applicant to file Amended Particulars of Claim, they should inform the Applicant’s solicitors so that a consent order giving permission to do so could be agreed. In a letter dated 6 November 2014, Clarke Willmott responded that it was a matter for the Applicant to decide whether it wished to make an application to amend its Particulars of Claim. They observed:

On 27 October 2014, despite the absence of any claim for delivery up in the Particulars of Claim, the Applicant filed an application for an interim delivery up and preservation order in respect of the two cars against both Respondents. The Applicant’s application was listed for hearing on 18 November 2014. On 7 November 2014, the Respondents’ solicitors were served with the application. They wrote to the Applicant’s solicitors the same day, pointing out that the application for delivery up pursuant to the 1977 Act was wholly inconsistent with the contents of the Particulars of Claim which contained no such claim.

On 14 November 2014, Mr Greg Saunders, Partner of Clarke Willmott, made a witness statement in response to the application. In it, he recounted the history of the proceedings as it was then and suggested that, since the application bore no relation to the Applicant’s case as pleaded in its Particulars of Claim, the application was “fundamentally flawed”, did not comply with CPR25.1.24 and should therefore be dismissed.

Shortly after service of Mr Saunders’ witness statement, the Applicant’s solicitors sent a draft Amended Particulars of Claim to the Respondents’ solicitors. That document was in wholly different terms from the Particulars of Claim originally served. The defamation claim was no longer pursued. More importantly for these purposes, however, the document now alleged wrongful detention of and/or interference with goods, contrary to the 1977 Act and sought delivery up of the cars. The claim in respect of the cars was made against the First Respondent alone and, although the Applicant’s application had been directed at both Respondents, in fact the application against the Second Respondent has not been pursued.

By 18 November 2014, when the Applicant’s application came before Parker J, the Applicant had still made no application for permission to amend its Particulars of Claim. It was not therefore entitled to rely on the amended pleading at that hearing. Moreover, because of the inadequacy of the original Particulars of Claim, the Respondents had not yet filed their Defence. The time for doing so had been extended by consent. In the circumstances, Parker J decided to adjourn the hearing and made the following Order:

By a Consent Order dated 5 December 2014, the Applicant was given permission to rely on its Amended Particulars of Claim. The Respondents then filed a Defence dated 23 December 2014, in which they denied any liability to the Applicant.

The hearing of the Applicant’s application for delivery up and preservation had been adjourned to 9 February 2015. By a Consent Order of the same date, however, the parties agreed that the hearing listed for that day should be adjourned and re-listed for 2 March 2015. It appears that the purpose of that Order was to afford the First Respondent time to adduce further evidence if it so wished. The Consent Order of 9 February 2015 provided that the First Respondent should have permission to adduce a further witness statement with exhibits and that the Applicant should have permission to adduce further evidence in response. In the event, the First Respondent did not avail itself of the opportunity to file further evidence. The Applicant had of course been given permission to file further evidence only in response to any evidence filed by the First Respondent. In the absence of evidence from the First Respondent, that opportunity was not available to the Applicant.

However, on 23 February 2015, the Applicant made an application to adduce further evidence in support of its application dated 17 October 2014. That further evidence consisted of a witness statement from Mr Bell, Director of McHales, to which was appended a copy of a bank statement showing payments in and out of a bank account belonging to the Applicant. The statement covered the period between 1 May 2013 and 30 April 2014. It showed various payments made by the Applicant in relation to the VW and the Audi. The payments included the initial deposits, monthly lease repayments and insurance payments. It was decided that the Applicant’s application for permission to adduce this further evidence would also be dealt with at the hearing on 2 March 2015. The two applications therefore came before me on that date.

The grounds of the application for delivery up and preservation were stated to be that:

CPR 25.1(1) sets out the Court’s power to make Orders for interim remedies. CPR 25.1(1)(c)(i) provides that the Court may grant an interim order for the detention, custody or preservation of relevant property. The Applicant seeks a preservation order under that provision. CPR 25.1(1)(e) permits the Court to grant an interim order to deliver up goods under section 4 of the Torts (Interference with Goods) Act 1977 (the 1977 Act). For these purposes, it seems appropriate to deal with the two types of relief separately. For ease, however, I shall refer to the Applicant’s request merely as for “a delivery up order”.

Section 4 of the 1977 Act provides:

At the hearing before me, the Applicant relied on two factors which, it was said, made it entitled to an order for delivery up of the cars. First, it contended that the First Respondent was in breach of the contracts of 20 November 2013 because of its failure to honour its obligation to meet the monthly invoices for payments in respect of the two cars. The Applicant contended that the failure amounted to a repudiatory breach, which breach had been accepted by the Applicant. Thus, it was said, the Applicant’s obligations under the lease agreement were discharged and it was no longer required to provide the cars to the First Respondent. Having refused all previous requests to return the cars, the First Respondent was, the Applicant contended, wrongly interfering with goods in breach of the 1977 Act.

The Applicant’s argument relied, of course, upon its contention that the First Respondent had breached its obligations under the 20 November 2013 contracts by failing to make the monthly payments for the cars. In its Defence, the First Respondent denied that was the case. It contended that, until November 2013, the VW was used for the purposes of another company, Ace Waste, so that, during the first period when it is alleged there was non-payment (i.e. July-October 2013), it was Ace Waste, not the First Respondent, which was liable to make the monthly payments. Indeed, the First Respondent contended that it (i.e. the First Respondent) did not start operating until about November 2013, so the VW could not have been used for its purposes before that time. As for the remaining periods during which it was alleged that there was non-payment in relation to the two cars, the First Respondent averred that all contractual payments had been made.

In support of its contention that there had been a breach of contract, the Applicant sought to rely on the evidence provided by Mr Bell. In his witness statement, Mr Bell made assertions about factual matters relating to the payment and non-payment of monies by the First Respondent. These are not matters within his personal knowledge and, if evidence of this kind were to be provided, it would have been more appropriate for it to have come from Miss Smith, as director and sole shareholder of the Applicant. Attached to Mr Bell’s witness statement was the Applicant’s bank statement. Counsel for the Applicant, Mr Taskeen, argued that the transactions shown on the bank statement demonstrated that the Applicant had paid the expenses associated with the lease of the two cars. He suggested that, since the First Respondent had chosen not to produce any documentary evidence of payments made for the purposes of the application, I could properly infer that it had no defence to the Applicant’s case in relation to the cars. I could not accept that contention. The case is not as straightforward as was suggested. It is clear that the financial arrangements between Miss Smith, the Second Respondent and the various companies with which the two of them were involved were somewhat unusual, not entirely clear and probably quite complex. An example of this is the transfer of the VW, which the First Respondent said occurred, from being used first for the purposes of Ace Waste, then later for the purposes of the First Respondent. That may or may not have happened, but it suggests that this is not necessarily a case where one can expect to see clear and direct bank transactions passing between the Application and the First Respondent. In any event, my function in determining this application is not to conduct a mini-trial. The dispute between the parties relates to whether the First Respondent paid the money it owed. It would be quite wrong of me to determine that issue at this stage of the proceedings. In the circumstances, I refused permission to rely on the evidence of Mr Bell.

Mr Taskeen submitted also that, even absent the repudiatory breach, the Applicant was entitled to possession of the cars. He acknowledged that title in the cars remains with VWF. However, he contended that it was now evident that, under the terms of its agreement with VWF, the Applicant was not entitled to sub-let the vehicles to the First Respondent. Accordingly, the First Respondent was not entitled to remain in possession of them. The Applicant, which is making the lease payments, is, he said, plainly entitled to possession. That being the case, he suggested, the First Respondent’s act in refusing to return the cars must amount to a wrongful interference of goods within the meaning of s4 of the 1977 Act.

Mr Taskeen submitted that these factors would justify an order for the immediate delivery up of the cars. He argued that damages would not be an adequate remedy for the failure by the First Respondent to return them. If no order for delivery up was made, it would mean that the First Respondent would continue in possession of the cars until determination of the substantive claim or, possibly, until the expiration of the agreements, in April 2016 (the VW) and November 2017 (the Audi). During that time, the First Respondent would be deprived of their use.

Furthermore, Mr Taskeen suggested, there is the risk that VWFS might take action in relation to what he argued was a breach by the Applicant of the contract between it and VWFS. The Applicant would then be at risk of having to return the cars to VWFS and of having to pay the rental for the whole period of the contracts with the First Respondent, less the amounts already paid and other reductions. He pointed out that, if the Applicant could not return the cars on demand, it would be in danger of a wrongful interference with goods claim by VWFS. He argued that it was “patently obvious” that damages would not be an adequate remedy and that the cars must be returned to the Applicant and/or made the subject of a preservation order.

For the First Respondent, Mr Caplan argued that it had not yet been determined whether the Applicant’s action in entering into an agreement with the First Respondent amounted to a breach of the Applicant’s contract with VWFS. VWFS have not issued any complaint, nor have they alleged any breach of contract. Moreover, even if there has been a breach by the Applicant of its contract with VWFS, that fact would not, Mr Caplan contended, make the Applicant’s contracts with the First Respondent void ab initio. It may be said that it was an implied term of the agreements between the Applicant and the First Respondent that the Applicant had the right to transfer the cars. However, such a breach would not render the agreements void ab initio. Mr Caplan argued that it would be absurd if a contractor had a right in law to determine an agreement by virtue of his own breach. Moreover, even if he had such a right, the resultant loss would be compensatable in damages without the need for interim relief.

The Applicant is seeking interim relief from the Court. The decision as to whether to grant interim relief is a matter for judicial discretion and relief is not granted save in a case where there are compelling reasons for doing so.

In this case, there is no suggestion that the First Respondent would seek to dispose of the cars. At one point during his oral submissions, Mr Taskeen appeared to suggest that there was a risk that the First Respondent might not keep the cars in good repair and condition or might cause damage to them, thus exposing the Applicant to the possibility of a breach of paragraph 4.6 of its contract with VWFS. However, there is no evidence at all that the First Respondent has failed to care for the cars properly in the past, or that it would do so in the future.

It is true, as Mr Taskeen pointed out, that, in the case of Howard E. Perry & Co Ltd v British Railways Board [1980] 2 All E R 579, Sir Robert Megarry, V-C, made clear that the fact there was no danger that goods would be disposed of, lost or destroyed was not necessarily a bar to the making of an order for delivery up. However, the facts of that case were very specific and the observation does not affect the usual position that a risk of disposal, destruction or damage will be necessary before such an order will be made. In the present case, no such risk has been demonstrated and the Applicant does not appear to have had any fears about the safety of the cars at the time of drafting its Particulars of Claim, when no delivery up was sought. It is difficult to see what made it change its mind. It is accepted that the First Respondent is making monthly payments regularly and it is not suggested that those payments are likely to cease in the future.

Moreover, in the present case, it is difficult to see how the Applicant’s position will be materially disadvantaged by the cars remaining with the First Respondent. The Applicant does not appear to intend to inform VWFS of the fact that it sub-let the cars. It has evinced its willingness to have the cars delivered up to a third party of the Court’s own choosing, so presumably does not intend to make use of the cars itself. It will still be obliged to make the lease payments, but will no longer be reimbursed by the First Respondent. I am satisfied that, insofar as any loss is caused to the Applicant as a result of the First Respondent’s continued possession of the cars, it can be fully compensated by damages. By contrast, the Respondent would plainly be disadvantaged by the loss of the cars. It would have to find substitute vehicles and, depending on its financial position, that may not be a straightforward matter. Furthermore, if the Applicant decided to inform VWFS what had occurred, the cars might be re-possessed by VWFS. Then, even if the Respondent succeeded at the trial, it would have lost the benefit of its contracts with the Applicant.

It is true that, if the cars remain with the First Respondent, the Applicant will be under the continuing risk of the VWFS seeking their delivery up. However, the contracts between VWFS and the Applicant have been in existence for more that a year and no such event has yet occurred. The reality is that the breach of its contract with VWFS (if such a breach has indeed occurred) is the fault of the Applicant and I cannot accept that it would be just or proportionate to make an order for delivery up, and thus deprive the First Respondent of the benefit of the contracts made between it and the Applicant in November 2013. I consider that the balance of convenience clearly lies in leaving the cars in the possession of the First Respondent.

The two applications are therefore dismissed.

I dealt with the summary assessment of costs at the conclusion of the hearing. The Order I made was that the Applicant should pay the First Respondent’s costs of the two applications, inclusive of the costs reserved by Parker J on 19 November 2014. I summarily assessed the costs at £4,332.