Flogas v Warrington (t/a Robin Sutton Gases) [2007] EWHC 1303 (QB)

Case No HQ07X01408

[2007] EWHC 1303 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

Venue The Royal Courts of Justice

Date 18 th May 2007

Strand

London WC2A 2LL

Before

HIS HONOUR JUDGE SEYMOUR QC

B E T W E E N:

Between

FlogasClaimant

Warrington (t/a Robin Sutton Gases)Defendant

FLOGAS

and

(1) VINCENT WARRINGTON T/A ROBIN SUTTON GASES

(2) CALOR GAS LTD

Transcript from a recording by Harry Counsell & Co

Venue Cliffords Inn, Fetter Lane, London EC4A 1LD

Tel: 020 7269 0370

MR SINGLA (instructed by Wright & Lord) appeared on behalf of the First Defendant.

MISS MCCAFFERTY (instructed by HBJ Grately Wareing) appeared on behalf of the Claimant.

JUDGMENT

[1]This is an application on the part of the claimant, Flogas UK Ltd, for interim injunctions against the first defendant, Mr Vincent Warrington. The application is based upon the terms of an agreement dated 14 January, 2005, made between Flogas and Mr Warrington, by which Flogas appointed Mr Warrington, who trades as Robin Sutton Gases, from premises in Morecombe, Lancashire, to be a dealer supplying liquefied petroleum gas in cylinders provided by Flogas, and other items of equipment compendiously described as Flogas-approved equipment.

[2]For the purposes of the agreement, the expression ‘the initial period’ was defined as meaning a term of one year. The agreement included the following terms, which are presently material:

“Article 3, ‘Undertakings by the dealer. The dealer agrees and undertakes: 3.1. Actively to promote and extend the sale of Flogas and Flogas-approved equipment to customers, from the dealers Premises. 3.2. Not to sell Flogas from any premises other than the dealer’s premises, and not to buy or offer for sale, either solely or jointly with any person or firm or company, or as an agent for a person, firm or company, and either directly or indirectly any gas competitive with Flogas, during the continuance of this agreement. 3.3. To order its requirements of Flogas and Flogas-approved equipment from the company. 3.4. To stock and display a comprehensive range of Flogas-approved equipment, and not to buy or offer for sale any gas appliances, accessories or fittings other than Flogas-approved equipment, or knowingly to sell Flogas for use in connection with any such appliances, accessories or fittings. 3.5. To identify the dealer’s premises as those of a Flogas dealer, in accordance with the company’s reasonable requirements”

. Then, Article 6, ‘Term of agreement and termination.’ “6.1. This agreement shall remain in force for the initial period, and thereafter for a period of one year, unless and until terminated by either party giving to the other not less than six months written notice, to expire upon an anniversary of the date of this agreement, and not earlier than the date upon which the initial period ends, provided always that the term of this agreement shall not, in any circumstances, extend beyond a total of five years.” Lastly, Article 12, ‘Charges’. “12.2. The prices of Flogas and Flogas-approved equipment, and the cylinder and regulator licence fees shall be as notified by the company to the dealer from time to time, and do not include any duties, levies, taxes or charges of any description, including VAT, which will be added to the price to be paid by the dealer for Flogas delivered hereunder. The company shall be entitled to vary the prices at any time or times during the period of this agreement”.

The dealer agrees and undertakes:

[3]On the face of Article 12.2, it would seem that the determination of the prices at which goods were to be supplied by Flogas to Mr Warrington was a matter exclusively for Flogas. But I think that it was accepted on behalf of Flogas, by Miss Lynn McCafferty who appeared on its behalf, that some kind of limitation to the effect that the prices charged should have some reasonable relationship to acquisition costs or prevailing market rates should be implied.

[4]At all events, it seems to me that it is well arguable that some sort of limitation should be implied. Liquefied petroleum gas is a homogeneous product. The liquefied petroleum gas sold by each competitor in the market is precisely equivalent to the products of each of the others, and so the only means of competition between suppliers of different brands is price.

[5]What in fact happened, as from the middle of March, 2007, was that Mr Warrington ceased to sell the liquefied petroleum gas supplied by Flogas, and transferred his affections to a competitor, Calor Gas Ltd, the second defendant. Before taking that step, Mr Warrington had sent a notice to the Burnley depot manager of Flogas. This notice was dated the 14 February, 2007, and in it Mr Warrington said this:

‘I wish to inform you that, as of the 14 March, 2007, I will be no longer purchasing gas from Flogas. I do not believe Flogas has the price structure or marketing backup to help me sustain a successful business. I am therefore giving you one month’s notice.’

[6]Calor Gas Ltd did not appear on the application before me, and was not represented, because it had been agreed between it and Flogas that it would not supply Mr Warrington pending the determination of the application before me.

[7]By this application, Flogas seeks, against Mr Warrington, the following relief:

“1.Until final judgment in this claim, the first defendant must: a. Actively promote and extend the sale of the claimant’s LPG and the claimant’s approved equipment to customers from its premises, in accordance with clause 3.1 of the dealer agreement entered into between the claimant and the first defendant on the 14 January, 2005 (“the dealer agreement.”) b. Order its requirements of LPG and approved equipment from the claimant, in accordance with clause 3.3 of the dealer agreement. c. Stock and display a comprehensive range of the claimant’s approved equipment, in accordance with clause 3.4 of the dealer agreement.’ d. Identify its premises as those of a claimant dealer, in accordance of clause 3.5 of the dealer agreement.”

And then “2.Until final judgment in this claim, the first defendant must not, a. Buy and/or offer for sale, either solely or jointly with any person or firm or company, or as an agent for a person, firm or company, and either directly or indirectly, LPG competitive with the claimant’s LPG, whether from the second defendant or any other competitor to the claimant. b. Order its requirements of LPG and/or approved equipment from any supplier other than the claimant, whether from the second defendant or any competitor to the claimant. c. Stock and/or display approved equipment of any supplier other than the claimant, whether from the second defendant or any competitor to the claimant. d. Buy and/or offer for sale gas appliances, and/or accessories, and/or fittings other than the claimant’s approved equipment. e. Identify its premises as those of a dealer of any supplier other than the claimant, whether the second defendant or any competitor to the first claimant.”

[8]The relief sought comprised in part mandatory interim relief; in part prohibitory interim relief, reflecting negative covenants in the agreement between Flogas and Mr Warrington; and, in part, injunctions framed in prohibitory terms which in fact reflect positive covenants in the agreement. The injunctions framed in prohibitory terms, which in fact reflect positive covenants in the agreement, are those in paragraph 2, sub paragraphs b, c and e.

[9]It was common ground before me that, in relation to the prohibitory injunctions sought, the principles applicable were those articulated in the well-known case of American Cyanamid Company v Ethicon Ltd

[1975] AC 396

. Those principles essentially are that the claimant should demonstrate that there is a serious question to be tried in relation to the claim or claims of the claimant. Second, that damages should not be an adequate remedy in respect of those claims. And, third, that the balance of convenience should favour the claimant.

[10]It was also common ground that, in considering those principles in relation to an application for an interim mandatory injunction, it is necessary for the claimant to demonstrate a strong case. The need for that was considered by Mr Justice Megarry in Shepherd Homes Ltd v Sandham

[1971] 1 Ch 340

. In his judgment in that case, at page 348, starting between letters d and e, Mr Justice Megarry said this:

‘As it seems to me, there are important differences between prohibitory and mandatory injunctions. By granting a prohibitory injunction, the court does no more than prevent for the future the continuance or repetition of the conduct of which the claimant complains. The injunction does not attempt to deal with what has happened in the past; that is left for the trial, to be dealt with by damages or otherwise. On the other hand, a mandatory injunction tends, at least in part, to look to the past, in that it is often a means of undoing what has already been done, so far as that is possible. Furthermore, whereas a prohibitory injunction merely requires abstention from acting, a mandatory injunction requires the taking of positive steps, and may, as in the present case, require the dismantling or destruction of something already erected or constructed. This will result in a consequent waste of time, money and materials if it is ultimately established that the defendant was entitled to retain the erection. As Vice-Chancellor Kindersley said in Gale v Abbott [1862] 10 WLR 748, 750, an interlocutory application for a mandatory injunction was one of the rarest cases that occurred, for the court would not compel a man to do so serious a thing as to undo what he had done, except at the hearing. Even if, today, the degree of rarity of such applications is not quite so profound, the seriousness of such an order remains as an important factor. ‘Another aspect of the point is that, if a mandatory injunction is granted on motion, there will normally be no question of granting a further mandatory injunction at the trial. What is done is done, and the plaintiff has, on motion, obtained once and for all the demolition or destruction that he seeks. Where the injunction is prohibitory, however, there will often still be a question at the trial whether the injunction should be dissolved or continued. Except in relation to transient events, there will usually be no question of the plaintiff having obtained on motion all that he seeks. I may add that I do not think that any question arises of the court refusing to grant an injunction on motion merely because that, in effect, constitutes the sole relief claimed, for there is no rule against making such a grant – see Woodford v Smith [1971] WLR 806, 817, 818. The subject is not one in which it is possible to draw firm lines or impose any rigid classification, nevertheless it is plain that, in most circumstances, a mandatory injunction is likely, other things being equal, to be more drastic in its effect than a prohibitory injunction. At the trial of the action, the court will, of course, grant such injunctions as the justice of the case requires, but at the interlocutory stage, when the final result of the case cannot be known, and the court has to do the best it can, I think the case has to be unusually strong and clear before a mandatory injunction will be granted, even if it is sought in order to enforce a contractual obligation.’

[11]It is material to refer also to a later passage in the judgment of Mr Justice Megarry, at page 351, between letters e and g. There the learned judge said this:

‘I may summarise my conclusions as follows: First, Lord Cairns’ statement of principle prima facie applies to mandatory injunctions, but it does not apply in its full width. The matter is tempered by a judicial discretion which will be exercised so as to withhold an injunction more readily if it is mandatory than if it is prohibitory. Even a blameless plaintiff cannot, as of right, claim at the trial to enforce a negative covenant by a mandatory injunction. Second, although it may not be possible to state in any comprehensive way the grounds upon which the court will refuse to grant a mandatory injunction in such cases at the trial, they at least include the triviality of the damage to the plaintiff, and the existence of a disproportion between the detriment that the injunction would inflict on the defendant and the benefit that it would confer on the plaintiff. The basic concept is that of producing a fair result, and this involves the exercise of a judicial discretion. Third, on motion, as contrasted with the trial, the court is far more reluctant to grant a mandatory injunction than it would be to grant a prohibitory injunction. In a normal case, the court must, inter alia, feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted, and this is a higher standard than is required for a prohibitory injunction.’

[12]A further consideration which was urged upon me by Mr Nikki Singla, who appeared on behalf of Mr Warrington, as being relevant, was the attitude of the court to the granting at trial of orders which might require continuing supervision by the court, or might provide the occasion for frequent resort to the court on the question whether the order had been complied with. That matter was considered extensively by the House of Lords in the case of Cooperative Insurance Society Ltd v Argyle Stores Holdings Ltd

[1998] 1 AC 1

. The leading speech in the House of Lords was that of Lord Hoffman. In his speech, starting at page 11d, Lord Hoffman said this:

‘There is no dispute about the existence of the second practice to which the judge,’ that is a reference to the circumstances of the case before him, ‘Referred. It is sufficient for this purpose to refer to Braddon Towers Ltd v International Stores Ltd [1987] 1 EGLR 209, 213, where Mr Justice Slade said, “Whether or not this may be properly described as a rule of law, I do not doubt that for many years practitioners have advised their clients that it is the settled and invariable practice of this court never to grant mandatory injunctions requiring persons to carry on business.” But the practice has never, so far as I know, been examined by this House, and it is open to CIS to say that it rests upon inadequate grounds, or that it has been too inflexibly applied. Specific performance is traditionally regarded in English law as an exceptional remedy, as opposed to the common-law damages to which a successful plaintiff is entitled as of right. There may have been some element of later rationalisation of an untidier history, but by the 19th century it was orthodox doctrine that the power to decree specific performance was part of the discretionary jurisdiction of the court of chancery to do justice in cases in which the remedies available at common law were inadequate. This is the basis of the general principle that specific performance will not be ordered when damages are an adequate remedy. By contrast, in countries with legal systems based on civil law, such as France, Germany and Scotland, the plaintiff is prima facie entitled to specific performance. The cases in which he is confined to a claim for damages are regarded as the exceptions. In practice, however, there is less difference between the common law and civilian systems than these general statements might lead one to suppose. The principles upon which English judges decide the discretion to grant specific performance are reasonably well settled, and depend upon a number of considerations, most of a practical nature, which are of very general application. I have made no investigation of civilian systems, but a priori I would expect that judges take much the same matters into account in deciding whether specific performance would be appropriate in a particular case. The practice of not ordering a defendant to carry on a business is not entirely dependent upon damages being an adequate remedy. In Dowty Boulton Paul Ltd v Wolverhampton Corporation [1971] 1WLR 204, Sir John Pennycuick Vice Chancellor refused to order the Corporation to maintain an airfield as a going concern because it is very well established that the court will not order specific performance of an obligation to carry on a business – see page 211.’

He added, ‘It is unnecessary, in the circumstances, to discuss whether damages would be an adequate remedy to the company – see page 212. Thus, the reasons which underlie the established practice may justify a refusal of specific performance, even when damages are not an adequate remedy. The most frequent reason given in the cases for declining to order someone to carry on a business is that it would require constant supervision by the court. In JC Williamson Ltd v Lukey & Mulholland

[1931] 45 CLR 282

, 297-298, Mr Justice Dixon said, flatly, “Specific performance is inapplicable when the continued supervision of the court is necessary in order to ensure the fulfilment of the contract.” There has, I think, been some misunderstanding about what is meant by ‘continued superintendence’. It may at first sight suggest that the judge, or some other officer of the court, would literally have to supervise the execution of the order. In CH Giles & Company Ltd v Morris

[1972] 1 WLR 307

, 318, Mr Justice Megarry said that, difficulties of constant superintendence were a narrow consideration because, “There is normally no question of the court having to send its officers to supervise the performance of the order. Performance is normally secured by the realisation of the person enjoined that he is liable to be punished for contempt if evidence of his disobedience to the court, to the order, is put before the court.” This is of course true, but does not really meet the point. The judges who have said that the need for constant supervision was an objection to such orders were no doubt well aware that supervision would, in practice, take the form of rulings by the court on applications made by the parties as to whether there had been a breach of the order. It is the possibility of the court having to give an indefinite series of such rulings in order to ensure the execution of the order which has been regarded as undesirable. Why should this be so? The principal reason is that, as Mr Justice Megarry pointed out, in the passage to which I have referred, the only means available to the court to enforce its order is the quasi-criminal procedure of punishment for contempt. This is a powerful weapon, so powerful in fact as often to be unsuitable as an instrument for adjudicating upon the dispute which may arise as to whether a business is being run in accordance with the terms of the court’s order. The heavy-handed nature of the enforcement mechanism is a consideration which may go to the exercise of the court’s discretion in other cases as well, but its use to compel the running of a business is perhaps the paradigm case of its disadvantages, and it is in this context that I shall discuss them. The prospect of committal or even a fine, with the damage to commercial reputation which will be caused by a finding of contempt of court, is likely to have at least two undesirable consequences. First, the defendant who, ex hypothesi, did not think that it was in his economic interest to run the business at all, now has to make decisions under a sword of Damocles which may descend if the way the business is run does not conform to the terms of the order. This is, as one might say, no way to run a business. In this case, the Court of Appeal made light of the point because it assumed that, once the defendant had been ordered to run the business, self-interest and compliance with the order would thereafter go hand in hand. But, as I shall explain, this is not necessarily true. Secondly, the seriousness of a finding of contempt for the defendant means that an application to enforce the order is likely to be a heavy and expensive piece of litigation. The possibility of repeated applications over a period of time mean that, in comparison with a once-and-for-all inquiry as to damages, the enforcement of the remedy is likely to be expensive in terms of costs to the parties and the resources of the judicial system.’ I need not read on in the speech of Lord Hoffman at that point, but it is appropriate to notice this paragraph, which starts at page 16b in the report. ‘The cumulative effect of these various reasons, none of which would necessarily be sufficient on its own, seems to me to show that the settled practice is based upon sound sense. Of course, the grant or refusal of specific performance remains a matter for the judge’s discretion. There are no binding rules, but this does not mean that there cannot be settled principles founded upon practical considerations of the kind which I have discussed, which do not have to be re-examined in every case, but which the courts will apply in all but exceptional circumstances. As Mr Justice Slade said, in the passage which I have quoted from Braddon Towers Ltd v International Stores Ltd

[1987] 1 EGLR 209

, 213, lawyers have, no doubt for many years, advised their clients on this basis. In the present case, Lord Justice Leggett

[1996] Ch 286

, 294, remarked that there was no evidence that such advice had been given. In my view, if the law or practice on a point is settled, it should be assumed that persons entering into legal transactions will have been advised accordingly. I am sure that Lord Justice Leggett would not wish to encourage litigants to adduce evidence of the particular advice which they have received. Indeed, I doubt whether such evidence would be admissible.’

[13]Miss McCafferty accepted, I think, the principles set out by Lord Hoffman, but she contended that they were of no application to the circumstances of the present case. I reject that submission of Miss McCafferty. It seems to me that those principles are highly material to the mandatory injunctions which Flogas seeks. That is most obvious in relation to the first. That is that Mr Warrington must actively promote and extend the sale of the claimant’s LPG and the claimant’s approved equipment to customers, from its premises, in accordance with clause 3.1 of the agreement.

[14]What criteria are to be applied in the assessment of whether or not Mr Warrington is actively promoting and extending the sale of the claimant’s products? Must he, for example, advertise in the local press? If so, how prominently and how often? Must he stand outside his premises with a placard, bidding passers by to enter his premises for the purposes of purchasing the claimant’s goods? Must he engage in distributing leaflets in Morecombe to attract customers to his premises? These are but a few of the issues which would be likely to arise were the court to make an order that Mr Warrington must actively promote and extend the sale of the claimant’s LPG and the claimant’s approved equipment.

[15]But the same sort of difficulties arise, in my judgment, in relation to the other mandatory injunctions sought. The second is that Mr Warrington must order his requirements of LPG and approved equipment from the claimant. By what criteria are what are in fact his requirements to be determined? Is he to be the sole judge of that matter, or is it to be a matter in respect of which the opinion of Flogas is relevant?

[16]Again, when one looks at the third mandatory injunction sought, that Mr Warrington must stock and display a comprehensive range of the claimant’s approved equipment. By what criteria is a decision to be made as to whether the range of approved equipment which Mr Warrington stocks is comprehensive or not?

[17]Then the fourth mandatory injunction sought again has its own difficulties. That is a requirement that Mr Warrington identify his premises as those of a claimant dealer. How is that to be done? Is it to be done by having some sign-board outside the premises? Is it to be done by having a slogan across the windows of the premises? Is it to be done by displaying posters in the premises? All of these issues plainly arise.

[18]Now, whatever in fact may be the answer to these various questions, and whether, indeed, they are susceptible of answers or not, they each plainly engage the principles underlying the expressions of view of Lord Hoffman in the Cooperative Insurance Society case from which I have quoted. One can readily see that, if there was any dispute as to whether or not Mr Warrington had complied with any of the requirements contained in the mandatory orders which the claimant seeks, there would be scope for almost infinite applications to this court for determination as to whether Mr Warrington was complying or not. And it is that vice at which the principles which Lord Hoffman articulated are directed. It is to avoid that happening that the court does not make orders of this type in cases of this sort.

[19]In my judgment, the underlying principles have the effect that one cannot avoid the implications of what are, in effect, mandatory orders, by casting them in prohibitory form, so that the vice to which I have referred bites equally upon those prohibitory injunctions which the claimant seek, which are actually casting in prohibitory form what, in the agreement, are positive obligations.

[20]In the result, I am satisfied that if the claims of the claimant in this action proceeded to trial, there is no serious question to be tried in relation to the issue whether Flogas would be entitled to the mandatory injunctions sought, or to the prohibitory injunctions which are simply positive obligations expressed in prohibitory form. And because there is, in my judgment, no serious question to be tried in relation to those claims, it is not strictly necessary to consider further those elements of the claimant’s claims on the hearing of this application.

[21]However, it is necessary to consider other aspects of the claimant’s claims, because there remain the claimant’s claims for prohibitory injunctions on an interim basis to enforce negative stipulations in the agreement between the claimant and Mr Warrington. The question therefore needs to be considered so far as those issues are concerned, whether there are serious questions to be tried in relation to the allegations that Mr Warrington has been in breach of contract.

[22]The claimant’s case is straightforward. The claimants point out, rightly, that it is not in dispute that Mr Warrington has ceased to obtain supplies from Flogas and has, instead, obtained supplies from Calor. It is plain, if the agreement between Flogas and Mr Warrington remains in force, that by acting in that way Mr Warrington has been in breach of the various terms of the agreement to which I have referred.

[23]However, a number of points have been advanced on behalf of Mr Warrington. The first point which it is convenient to consider is the submission that, in fact, the agreement between Mr Warrington and Flogas has come to an end in accordance with the terms of the agreement. The nature of the argument is this: Article 6, in 6.1, in saying that, ‘This agreement shall remain in force for the initial period, provided that the agreement would continue in force for a period of one year from the 14 January 2005’, and that, of course, came to an end, that period, on the 14 January, 2006. The sub-article goes on, ‘And thereafter for a period of one year.’ And that, submits Mr Singla, came to an end on the 14 January, 2007. Mr Singla submits that the words of the sub-article plainly have the effect, however inelegantly expressed, that in fact the agreement was to continue for a term of two years, from the 14 January, 2005, at maximum, and then to come to an end.

[24]Miss McCafferty responds to this submission by saying that, while the language used in the sub-article may be inelegant, it is plain, on proper construction, that in fact what the parties envisaged was that the agreement would run for a period of one year, and thereafter, unless at the end of the first year it had been terminated by a notice of six months, it would continue from year to year, unless terminated by six months’ notice expiring upon an anniversary of the date of the agreement, up to a maximum of five years.

[25]Miss McCafferty recognises that, from a purely linguistic point of view, that construction has difficulties, but she submits that, when one considers the whole of the agreement, it is plain that that is the correct construction to be placed upon this provision. Miss McCafferty, unsurprisingly, reminds me that Lord Hoffman provided guidance as to the interpretation of written documents in Investors’ Compensation Scheme v West Bromwich Building Society

[1998] 1 WLR 896

, at page 912, starting at letter H. There Lord Hoffman set out the principles to be adopted to construction of written agreement as follows:

‘One, interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. Two, the background was famously referred to by Lord Wilberforce as the matrix of fact, but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties, and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man. Three, the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent; they are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear, but this is not the occasion on which to explore them. Four, the meaning which a document or any other utterance would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars. The meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words, which are ambiguous, but even, as occasionally happens in ordinary life, to conclude that the parties must, for whatever reason, have used the wrong words or syntax – see Mannai Investments Company Ltd v Eagle Star Life Assurance Company Ltd [1997] AC 749. Five, the rule that words should be given their natural and ordinary meaning reflects the common-sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said, in Antaios Compania Naviera v Salen Redoriana AB [1985] AC 191, 201, “If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.” ’

[26]What is important in the present context to notice in that statement of principles is the reference to background circumstances, and the relevance of background circumstances to the construction of documents.

[27]In the present case, there was evidence as to the circumstances in which the agreement between Flogas and Mr Warrington came to be made. On Mr Warrington’s side, the account which was put before me was his, contained in his first witness statement at paragraphs 3 to 5. What he said was this:

‘In December 2004, I had a call from BP, John Cooper, to ask if I was satisfied with our dealings with Flogas. I was obviously not happy, and as I had never signed a contract with Flogas, as apparently no existing British Gas agents had, BP were targeting these agents. I arranged for Mr Cooper to come and see us on Tuesday the 11 January, 2005. On Monday 10 January we had a call from Dave Steward; he also wanted to come and see me the following day. I was astonished, as I had only ever seen him once before, and that was to tell me I was getting a price rise. I told him a time to come so that it did not clash with BP, but he came early, he realised who was here, went out of the yard and waited for him to go. Mr Cooper had offered me a good deal on gas prices, marketing and promotional activity, health and safety audits, clothing and regular visits from representatives. Dave Steward was straight in when Mr Cooper had gone, desperate to know what I had been offered by BP. Before I told him, he said, ‘Whatever you have been offered,’ he would match it, and I would not have the bother of changing over. He then went out to phone head office; when he came back in, he said everything was all right with them, he would let us think about it and come back to see us on Friday the 14th. ‘When Dave Steward came back on Friday the 14 January, 2005, he had a contract with him that he briefly went through. The contract was for 12 months, with a 12-month notice period. I objected to this, as I was not happy with the way Flogas put their prices up quicker and higher than our competitors. He made several phone calls, and it was agreed that he would alter the notice period to six months. I was still not happy with this, and Dave Steward assured us that we could walk away after 18 months with no problem. He amended the contract in front of my wife and I. He also assured me that Flogas would match the package offered by BP regarding marketing, health and safety, etc. Dave Steward pointed out that there would be a problem with the price reduction, as it took ten days to change the prices on the computer. We would therefore have to let him know when the price changed, so he could arrange for a credit note. When he left, he took all the copies of the contract with him, saying that it would have to be verified by head office. When this had been done, he would bring back the contract personally.’

[28]Mr Steward, having considered the account of Mr Warrington, responded in relation to the circumstances in which the agreement was made in his witness statement of the 11 May, starting at paragraph 2. He begins by saying that a certified copy of the original agreement is attached to his witness statement, and goes on:

‘The original is at Flogas head office in Cyston, Leicester. I confirm that this is the version of the contract Mr Warrington signed on the 14 January, 2005. I amended the notice period from 12 months to 6 months, in clause 6.1, and initialled the change. After Mr Warrington signed the agreement, I took all the original paperwork away with me. Subsequently I faxed and posted copies of the agreement back to Mr Warrington.’

[29]So Mr Steward does not appear seriously to dissent from the account given by Mr Warrington as to the financial and economic background to the making of the agreement. However, it is right to recognise that this is very much a preliminary stage in this litigation, and it may well be that, as matters unfold, Mr Steward would wish to develop what he has said rather laconically in his existing witness statement, and indeed it may be that further material is available to Mr Warrington which he would wish to put before the court at the time at which the court is invited to reach a final conclusion as to the proper construction of Article 6.1 of the agreement between Flogas and the first defendant.

[30]In those circumstances, it is plain, as it seems to me, and in fact as was not in dispute so far as Mr Singla was concerned, that there is a serious question to be tried as to whether the agreement between Flogas and Mr Warrington had come to an end before the 17 March of this year, or not.

[31]Miss McCafferty submitted that, while there may be a serious question to be tried, if and in so far as it was appropriate, having regard to the principles enunciated by Mr Justice Megarry in Shepherd Homes v Sandham, to consider whether there was a high prospect of success of the claimant on this issue of construction at trial, then I should come to the conclusion that the claimant had a high prospect of success.

[32]In the light of the conclusions that I have indicated thus far in this judgment, it does not seem to me that, in fact, I really need to address that question anyway. But in so far as it is or may be material, I have to say that I am not satisfied to the standard identified by Mr Justice Megarry that the claimant is likely to prevail on this point of construction at trial. At the moment, the material before me goes little further than the written words which I can see, and which I have quoted, and the account given by Mr Warrington, possibly somewhat briefly.

[33]I have to take into account that, at trial, there may be considerably more material of a background nature which is put before the trial judge for his or her consideration, before coming to a final conclusion on this question. And recognising that possibility, whatever my provisional inclinations at this stage may be, I am not satisfied to the requisite degree that the claimant is likely to prevail. There is a serious question to be tried, and that is as far as I feel able to go on the material put before me.

[34]The next matter which was raised on behalf of Mr Warrington was whether a copy of the agreement was ever sent to him after his signature. It appeared to be common ground that, immediately after signature, Mr Steward took all copies of the agreement away. Mr Warrington’s evidence was that he was never sent any copy of the agreement thereafter. Mr Steward’s evidence, as I have said, was that he faxed and posted copies of the agreement back to Mr Warrington. I am not in a position to come to any conclusion today as to whether Mr Warrington ever received, or was ever sent, any copy of the agreement which he signed. However, Miss McCafferty submits that it is actually irrelevant whether any copy of the agreement was ever sent to him; the important thing is that he signed it, and having signed it he is bound by it.

[35]On that point, I accept the submissions of Miss McCafferty. I am satisfied that, on that point, there is no serious issue to be tried. Having signed the agreement, Mr Warrington is bound by it, whether he subsequently received a copy of it or not.

[36]The remaining two issues raised on behalf of Mr Warrington were alleged representations or repudiatory breach of oral terms of the agreement. For present purposes, I do not think it is necessary to seek to distinguish between the two legal analyses for which Mr Singla contended. Essentially, the point was that Mr Singla submitted that the evidence of Mr Warrington showed that various statements were made to Mr Warrington at the time of signature of the agreement concerning how Flogas would match the terms available from BP during the continuation of the agreement. Mr Singla submitted that an appropriate legal analysis of the circumstances, if, at trial, the evidence of Mr Warrington was accepted, would be that the agreement which he signed was actually partly in writing and partly orally, or possibly included various implied terms, such that, there having been breach as Mr Warrington contended of the obligation on the part of Flogas to match the BP offer throughout the period of the agreement, there had been a repudiation which Mr Warrington was entitled to accept, and did accept by serving his notice of the 14 February, 2007.

[37]Alternatively, submitted Mr Singla, if for whatever reason, and a possible objection to the first analysis may be Article 14 of the agreement, which was an entire agreement clause, the relevant oral observations did not become terms of the agreement; they amounted to representations which induced Mr Warrington to enter into the agreement, and Mr Warrington was entitled, when those representations were demonstrated, as he contended, to be false, to rescind the agreement, and that was the effect of the giving of the notice of the 14 February, 2002.

[38]There may be issues of fact between Mr Warrington and Mr Steward as to what was actually said. Mr Steward, in his witness statement, at paragraphs 4 to 6, says this about the statements which were alleged to have been made to him:

‘I refer to the notes attached to Steven Wright’s witness statement dated the 1 May, 2007, in response to Flogas’s application for an injunction.’

I interpose that that was the first and rather informal way in which what became the first witness statement of Mr Warrington was introduced in evidence in this application. Mr Steward goes on, ‘I did agree with Mr Warrington that Flogas would match the price BP was offering to him at that time if he entered into a new contract with Flogas. However, I did not make any representations that there would be no price increases during the term of the agreement. I said if there was a price increase that he was not happy about, we could sit down and talk about it. I told Mr Warrington that I would sort out whatever he wanted on the marketing and health and safety side. On the health and safety side, I arranged for Mr Warrington to be covered under the dangerous goods safety advisor regulations. However, on the marketing side, Mr Warrington never asked me for anything; I deny telling Mr Warrington that Flogas would supply him with training and equipment. I also deny telling Mr Warrington that he could walk away after 18 months with no problem. I note that Mr Warrington’s recollection of what I am supposed to have said is not clear. I refer to his solicitor’s letter dated the 20 April, 2007, in which it is said, in which it is alleged that I said something completely different, and I am supposed to have said, as long as he remained with Flogas for two years he would be able to walk when he liked thereafter.’

[39]In those circumstances, I am not able to reach any conclusion as to precisely what was said, or as to the legal consequences, if any, of whatever was said. However, it is plain, in my judgment, that there are serious questions to be tried in relation to both the repudiation analysis for which Mr Singla contended, and the misrepresentation analysis for which he concluded.

[40]The next issue which needs to be considered, therefore, is that of the question whether damages would be a sufficient remedy in respect of any breaches of the agreement committed by Mr Warrington.

[41]So far as that is concerned, it was contended on behalf of Mr Warrington that damages would be a sufficient remedy. The analysis which was put before me was essentially this: that what was going to be the disadvantage sustained by Flogas if Mr Warrington did not continue to purchase cylinders and other items from Flogas, between now and the earliest date at which Mr Warrington could lawfully terminate the agreement, was simply the loss of the profit that Flogas would make, or would otherwise have made, on the sale of those items to him for that period.

[42]That point was not made, I think, in advance of the making of the application which is now before me. The application which is now before me was supported by a witness statement of Mr Mukesh Jashmat Patel a partner in the limited liability partnership, HBJ Gately Wareing, which partnership acts on behalf of Flogas in this action.

[43]Mr Patel, in his witness statement, told me, at paragraph 5, that the claimant is one of the largest suppliers of liquefied petroleum gas in the United Kingdom. It supplied liquefied petroleum gas, in refillable metal containers, indirectly to customers through a network of dealers and retailers throughout the United Kingdom. All of that, no doubt, is so, but it was not, I think, contested on behalf of Mr Warrington. But further detail of how the claimant operates, and of the implications of operating in the way in which it does, were not contained in Mr Patel’s witness statement, or in the witness statement of Mr Steward, which was the only other witness statement on behalf of the claimant which was put before me.

[44]Mr Patel, at paragraph 18 of his witness statement, did however deal with the alleged consequences for Flogas of continuing breaches of the agreement on the part of Mr Warrington, were there to be such continuing breaches. What Mr Patel said, was this:

‘The first defendant’s continued breach of the dealer agreement is causing the claimant to suffer loss, namely the loss it would have earned had the first defendant continued to order and supply its customers with the claimant’s liquefied petroleum gas. The claimant is currently compiling details of its loss of profit, which will be disclosed as soon as possible. The claimant is therefore suffering considerable financial prejudice as a result of the first defendant’s continued breaches.’

And that is all that Mr Patel said about it.

[45]Miss McCafferty, on behalf of Flogas, sought in the course of her submissions to introduce other considerations. I do not, for the purposes of this judgment, intend to identify in any way, shape or form what those other considerations were because, in my judgment, I have to decide the application before me, in so far as it depends upon the second American Cyanamid consideration, that is to say whether damages would be an adequate remedy for the claimant, on the basis of the evidence which has been put before me.

[46]On the basis of the evidence which has been put before me, there can be only one conclusion, and that is, as stated in paragraph 18 of Mr Patel’s witness statement, that the damage which Flogas would suffer if Mr Warrington was not restrained from breaching the terms of his agreement with Flogas is simply financial. Damages would be an adequate remedy; Mr Patel says so. On that account, therefore, this application must fail and be dismissed.

[47]However, since I have been addressed at some length on the balance of convenience, the third American Cyanamid factor, it is convenient and appropriate to express the conclusions to which I would have come on the issue of balance of convenience, had that been appropriate. I have, on the one hand, at the balance of convenience stage, the evidence of Mr Patel in paragraph 18 of his witness statement. On the other hand, I have evidence from Mr Warrington as to what would be the consequences for him of being obliged to obtain his supplies, if he wants any supplies at all, of liquefied petroleum gas from Flogas.

[48]It is convenient in this context, first of all, to refer to the second witness statement of Mr Warrington. That was made yesterday, and the material part of it says this:

‘As mentioned in my previous statement, price increases have been regular throughout my dealings with Flogas, and have been out of line with competitors. Whenever I have received notification of a price increase, I have checked with my competitors, and they have freely given me the information regarding their charges. I believe that when prices were increased in August 2006, as referred to in my earlier statement, no other gas company had increased their prices, and the cost of gas to the supply companies was in fact dropping at that time. It was at that stage that I had to be concerned about the viability of my business if I carried on trading with Flogas. Following my complaints, I did not receive a price decrease, but instead received an offer to sell the business, which leaves me to wonder whether or not Flogas are merely wanting to put me out of business because they want my site and contracts for their own purposes. ‘Since the commencement of this litigation, I have received a further letter from Flogas, notifying me of a further increase of 4.5 pence per kilo, plus Value Added Tax. This would mean the cost to me of a 47kg bottle, of which I sell perhaps 3,000 to 4,000 per year, will increase to nearly £29. I am forced to sell my gas, by the local market in effect, for no more than £35 per 47kg bottle, including Value Added Tax. My main competitors sell it at £1 per bottle less. I do not know for how much they buy their gas, but I do know that I can buy gas from Calor which would cost me £25 for a 47kg bottle. I have used the example of a 47kg bottle because I sell by far and away more of these than any other. Effectively I am now paying a sum approaching 20% more for my gas than my competitor’s. I was induced to enter into a contract with Flogas by the representative because BP were offering cheaper gas than Flogas, and Flogas said that they would match this. The latest letter from Flogas is attached to this statement, marked VPW1, and I am informed that, contrary to what their letter says, there has been no increase in wholesale natural gas price, and certainly I understand Calor Gas Ltd have no plans to increase their prices. ‘If I am forced to continue trading with Flogas, then I do not think I would make sufficient profit to justify continuing. Out of my turnover, I have to pay for my transport, rent, usual overheads, and pay for myself and my wife. Before this contract, I was making a profit of £13,500 per year, with my wife earning a salary of £6,500 per year. In the first year of this contract, my profit went down to £7,500, and this year I will be lucky to earn £4,500. My wife’s pay has remained the same throughout, and we both work six and a half days a week.’

[49]So, pausing at that stage, what Mr Warrington is saying is that, if he is compelled to continue to purchase from Flogas his supplies of liquefied petroleum gas, the probability is that he will find that it is insufficiently profitable to justify him in continuing in business at all. It is right to say that this statement was only made yesterday, and the claimants have not had an opportunity of responding to what he says. But it is also right to say that the general theme, that Flogas charge Mr Warrington more than its competitors charge his competitors in the Morecombe area was a theme which was deployed in his first witness statement, the first version of which was attached to the witness statement of Mr Wright of the 1 May of this year, and to which Mr Steward responded in his witness statement of the 11 May.

[50]The second theme identified in Mr Warrington’s second witness statement is the suggestion that the real aim of Flogas in this application may be to reinforce its commercial position in relation to him, in respect of acquiring from him his business. That theme was deployed by Mr Warrington in his first witness statement, starting at paragraph 13. What he said was this: In August 2006, I had another price rise of 3 pence per kilogram. I could not believe it, as no other gas company had had a price rise, and the price of gas was dropping. By this time I was getting concerned about the viability of my business. I rang Dave Steward; it was as if he was ready for me. The first thing he said was he was not prepared to give me a price decrease, but Flogas would be prepared to buy me out. He said, off the top of his head, about £50,000. He said he would come and see me in November; he turned up in the middle of December. I gave him information on my retail prices, yard rental and council tax. He explained, much to my amazement, that Flogas Blackpool was losing money, that trading conditions in Blackpool are difficult and yard costs too high. He said he would get back to me immediately after the new year. He did not contact us. I gave my notice to the Burnley depot on the 14 February, 2006,’ he means 2007, ‘Burnley depot manager rang to say he had received my notice and had passed a copy on to the relevant person. ‘On Friday 16 February, Dave Steward rang; my wife took the call. He asked why I had given my notice in as he thought we had agreed to sell to Flogas. My wife said no firm price had been offered, and it had been two months since he had last contacted us. Dave Steward rang Monday the 19 February to arrange a meeting for the 21 February for himself and R Jones. At the meeting, I went through exactly the same figures as I had given in December. Mr Jones promised an offer in writing within 7 to ten days. At no time did Mr Jones or Mr Steward say there was a problem with my notice period. I carried on ordering gas in small amounts from Flogas. I heard nothing then for three weeks. ‘On the 14 March, I rang the Burnley depot and asked them to pick up the empty bottles. The manager asked if anyone had contacted us; I said no. Mr R Jones then rang; he was very irate, saying there were rumours that he had not kept his promise to me. He said it was only ten days since our meeting. I pointed out to him it was actually 21 days since our meeting. He said he had put a proposal that was with the Board that afternoon. I said he had not got back to me as promised, and that I was no longer prepared to deal with Flogas. ‘On the 15 March, Dave Steward rang; he went ballistic. Said we had a deal that I could not get out of. I said no-one had kept their promises to me and I was going to get my gas from another company. He said he would flood Morecombe with cheap gas; he would make us bankrupt; he was not going to let me get away with it; he would have me. I did not appreciate being threatened in this manner, so I put the phone down. He rang back; my wife took the call. He said he was not threatening me; he was just pointing out what would happen to me if I did not do as I was told. He did not mention at any time the length of my notice. ‘I rang the Burnley depot to see why my empty bottles had not been picked up. The manager had been told not to pick them up, and he was not allowed to contact me. On Friday 16th, am, I had a phone call from [Miss Val Rawlings?], yet another area manager. She wanted to know what my grievances were so that she could solve the problem. I told her what had gone on; she seemed shocked and she said she would pass all this information on to head office and she would come and see me the following week. At no time did she say the length of my notice was incorrect. At this time I did not know that she was the person that my notice had been passed on to, and that it was her that had stopped my bottles being picked up. At 5.15pm that day I received a fax that day from Gately Wareing; this was the first time I was informed that my notice was not right.’

[51]The letter from Gately Wareing was the commencement of a chain of correspondence which ultimately led to the making of the application before me.

[52]Now, none of what was in Mr Warrington’s first witness statement, between paragraphs 13 and 19 was disputed on behalf of Flogas. As I have said, Mr Steward did respond in his witness statement to some comments contained in the first version of that witness statement. The suggestion which was made on behalf of Mr Warrington was that if injunctions were granted which would have the effect of obliging Mr Warrington to obtain supplies of liquefied petroleum gas from Flogas or no-one, the prices which he would have to pay would have the effect, possibly intended, of rendering his business unviable, and thus inclining him to sell to Flogas.

[53]I think it is material to take into account both the effect on the business of Mr Warrington of buying liquefied petroleum gas from Flogas at high prices, reducing profitability even if no offer to buy is made, and also the risk of Mr Warrington being rendered more vulnerable to predatory action on the part of Flogas in respect of the acquisition of his business, in considering the balance of convenience between the parties. The balance of convenience, in my judgment, plainly favours Mr Warrington. So, for that reason also, so far as is necessary, this application fails and is dismissed.

[Further submissions from counsel]

[54]Following my judgment on the substantive application before me, the question arises as to what is the appropriate basis upon which I should say that Mr Warrington, the successful first defendant, should receive his costs. It is accepted that it is appropriate, in the circumstances, that an order for costs should be made in his favour. However, Mr Singla, on behalf of Mr Warrington, asks that I order that he recover his costs assessed on an indemnity basis. The reason that Mr Singla submits that I should make an order on that basis is that the application before me was misconceived. The particular matters upon which Mr Singla relies, I think, are that interim mandatory injunctions were sought in circumstances in which, as I have explained in my judgment on the application, that relief was bound to be refused not only at an interim stage but also at trial.

[55]In my judgment, that submission is well made; it is also right to say this: that the application before me was bound to fail in any event by reason of the failure even to attempt put before the court evidence to demonstrate that damages would not be a sufficient remedy for the claimant in the event that it succeeds at trial. Indeed, not only was that point not grappled with on behalf of the claimant, but the claimants own evidence, in paragraph 18 of the witness statement of Mr Patel, pointed in precisely the contrary direction. It is therefore plain, in my judgment, that if the claimant and its advisors had considered whether to make and pursue the present application against the background of well-established and long-standing principles set out in American Cyanamid Company v Ethicon Ltd, to which I referred in my judgment on the substantive application, the conclusion could only have been reached that the material which it was sought to rely upon did not justify the making of an order.

[56]In those circumstances, it seems to me that the conduct of the claimant in making and pursuing this application can properly be criticised, and that the appropriate way of demonstrating the criticism of the court of the course which the claimant has chosen to pursue, is to say that Mr Warrington should recover his costs of the application before me on the indemnity basis. ----------------------------------------