Supreme Court dismisses appeal for interlocutory injunction to force continued agency supply due to adequate damages and balance of convenience.

McGuinness J.

Hardiman J.

Geoghegan J.

336/00

THE SUPREME COURT

BETWEEN/

NOEL Ó MURCHÚ TRADING AS TALKNOLOGY

Appellant

and

EIRCELL LIMITED

Respondent

Judgment of Mr. Justice Geoghegan delivered the 21st day of February 2001

This is an appeal from an order of the High Court (Kearns J.) refusing a number of interlocutory injunctions, the effect of which would

have been to compel the respondent, until further order, to continue supplying or permitting the supply of “Ready to Go Mobile

Phones” to the appellant and treat the appellant as an authorised agent for this purpose.

There is a very substantial factual background to this application, but I am satisfied that for the purposes of considering the question

of whether injunctions should be granted or not it is neither necessary nor desirable that I should set out detailed particulars of all the

facts in this judgment. The following skeleton outline of facts is sufficient.

The appellant carried on the business of selling mobile phones in a number of outlets in the south of Ireland, mostly in Co. Kerry. He

had a history of expanding his business and opening additional shops. The appellant maintains that at all material times as and from

May, 1998 he acted as an authorised agent of the respondent. The system was that by arrangement with the respondent the

appellant purchased prepaid “Ready to Go” phones from a company called Sigma Telecom Limited, through which the “Ready to Go”

mobile phones were exclusively channelled by the respondent. There was a different system and a different company involved in

relation to contract or bill pay phones. The appellant alleges in his first grounding affidavit that the nature of his agency was that he

bought the product from Eircell supply lines and that then he, as a retailer, brought customers to Eircell, whether by way of contract

customers (bill payers) or by way of “Ready to Go” customers. If, however, a customer connected to the Eircell network failed to pay

his or her bill for a period of six months the respondent charged the appellant a claw back penalty. The appellant alleges that he

attended agent conferences, arranged by the respondent, and that he was supplied with agent signs. He also had a special agent

code number.

In the summer of 2000 a considerable problem of indebtedness had arisen between the respondent and the appellant when schemes

were entered into for the repayment of the debt owing to the respondent by the appellant. Around about the same time the

respondent demanded that the appellant enter into standard form agency agreements which were prepared, and indeed, it is

suggested that as part and parcel of the rescheduling of the indebtedness the appellant undertook to sign these agreements.

However, in the event, the appellant refused to do so allegedly on the grounds that the proposed agent’s agreement was for a period

of six months and might be renewed for a further period of up to six months. The appellant claimed that in the context of his liabilities

under commercial leases etc. in relation to his shops, these periods were too short and not viable from his point of view. The

respondent then threatened to cease dealing with the appellant, but despite this threat the appellant claims that he continued to

purchase the respondent’s goods from Sigma Telecom and he has exhibited a statement dated 26th of November, 2000 bearing this

out. It is unnecessary to go into all the details of what happened then. It is sufficient to state that at a stage when the appellant

wanted to make a large order for the Christmas sales the respondent refused to allow the Ready to Go Phones to be supplied to him.

The appellant then instituted these proceedings and moved for interlocutory injunctions because he claimed that his trade would be

ruined particularly having regard to the loss of the Christmas business.

There is an approved counsel’s note of the ex tempore judgment of Kearns J. who heard the injunction application. The note reads as

follows:

“In my opinion, this is not an appropriate case in which to grant an interlocutory injunction.

I would adopt the observations of my colleague, Mr. Justice McCracken, to the effect that it is a matter for the plaintiff to

make out a case that he has a subsisting contract with the defendant. As Mr. Gallagher says, what is the contract relied on by

the plaintiff? He was offered a written contract by the defendant but refused that contract. In those circumstances, it is not

clear on what basis the court could properly determine that any contract existed with specific terms (including quantities to

be supplied).

This application is brought against the background of credit concerns on the part of Eircell which arose before determination

of the plaintiff’s right to sell Ready to Go handsets. Eircell gave the plaintiff a number of opportunities to regularise his position

but these were not availed of.

Furthermore, having regard to the contents of the affidavit of Moore McDowell I am not at all convinced that there is any

case for relief under the Competition Act, 1991.

As I have said already, I am of the opinion that this is not an appropriate case for an interlocutory injunction. In my opinion, if

there is any arguable case that can be established at the hearing of these proceedings, damages can deal adequately with any

loss to the plaintiff.”

In considering the correctness or otherwise of that judgment it is important to address the argument, which was put forward in both

courts, that what was being sought here were mandatory interlocutory injunctions and that on the well established principles the

court should be very slow to grant such an injunction. Kearns J. does not really refer to this argument in his judgment and he may

have considered, as I do, that it really has no force in this case. There are different kinds of mandatory injunctions. Undoubtedly, if a

plaintiff is looking for a mandatory injunction requiring a wall to be knocked down he may in fact be attempting to obtain at an

interlocutory stage what effectively is his final relief. Once the wall is gone it may not be practicable to rebuild it. That is the classic

form of mandatory injunction which a court will rarely grant. Although the injunctions sought in this case may arguably be classified as

“mandatory” they are not of that type. They are directed simply towards retaining the status quo pending the outcome of the action,

which is the normal purpose of a prohibitive injunction. I see no reason therefore why the traditional principles would not be relevant

to this case.

It is, therefore, important to consider the three well known factors, that is to say:

1. Is there a serious issue to be tried?

2. Are damages an adequate remedy?

3. Does the balance of convenience favour the granting rather than refusing of an injunction?

On the first element I take a different view than that taken by the learned High Court judge. It seems quite clear that the plaintiff has

an arguable case, at least that he had some kind of contractual relationship with Eircell. The express or implied terms of that oral or

implied agreement would in the main have been those referred to by the appellant in his affidavit. It was not a term of that agency

agreement that he had to enter into some kind of written agency agreement, the form of which was prepared by the respondent

whenever requested by the respondent to do so. Indeed, even if there was such a term it is doubtful that it would be enforceable

because it would be effectively a contract to enter into another contract. Assuming therefore that the appellant had a contract with

the respondent that contract is still alive unless either of the following two sets of circumstances apply:

(1) the agreement has been terminated by reasonable notice pursuant to an implied term or

(2) the appellant was in such serious breach of contract that the respondent treated his breach as a repudiation of the

contract and accepted it as terminating the contract.

Such acceptance of repudiation, of course, could not be inferred if the respondent appeared to waive the breach by continuing to

trade with the appellant.

It would seem on the documentation before this court that the appellant must, at the very least, have an arguable case that neither

of the above sets of circumstances occurred and that therefore, the arguable contract, if it exists, continues to exist. But if it does

continue to exist, then no matter what collateral disputes were in train between the appellant and respondent in relation to other

monies owing it, was a breach of the agency agreement to prevent the supply of the Ready to Go handsets to the appellant. There

must clearly, therefore, be a serious issue to be tried on the breach of contract issue.

As to whether there is a serious issue to be tried in relation to allegations which were also made in the proceedings that the

respondent has been in breach of the Competition Act, 1991, as amended, I can only say that there is not enough evidence before

this court to enable it to form a definite view on that, particularly in the light of the affidavit of the economist Mr. Moore McDowell.

The onus is on the appellant and in my view the appellant has not, at this stage, produced sufficient evidence to satisfy this court

that as a matter of probability that there is a serious issue to be tried under the Competition Act. But it may well be that at the trial

of this action the appellant will be able to expand his evidence so that the competition point becomes a live issue. Nothing in this

judgment is to be taken as expressing a view that there is definitely no cause of action arising from the Competition Act, 1991. But on

the papers, at present before the court, it has not been established sufficiently that there is a serious issue to be tried on this matter

to enable an injunction to be granted.

I move now to the question of whether damages would be an adequate remedy. The learned High Court judge clearly thought it was

and I would have to agree with him. In every case in which there is a breach of an agency or distribution agreement the task of

assessing damages will be difficult, but that does not mean that it cannot be done. The respondent is a viable company and is

financially in a position to meet any award in damages that may be made against it. The appellant’s loss is essentially financial. An

interesting feature of the case is that much of the argument put forward on behalf of the appellant in the High Court was that the

Christmas trade was absolutely vital and that without it, he would go out of business. The plaintiff is still in business. But even if he

does go out of business, as a result of losing the agency, his losses can be assessed in money terms. There is a further reason why I

think that damages are an adequate remedy. If there is an implied or oral agency agreement, that agreement would be terminable

upon reasonable notice and I doubt very much that the appellant would be able successfully to argue that the length of that notice

could be more than six months. Depending on the evidence of the trade it might be less. Any damages to be assessed therefore would

be confined within a limited period. I am not, of course, expressing any view as to how damages are to be assessed in the event of a

finding of infringement of the Competition Act as that is not before this court. But in so far as the appellant is complaining of breach

of contract the damages would be limited in the manner which I have suggested. That should not make them too difficult to assess.

I would, therefore, affirm the order of the High Court. But even if I had doubts as to whether damages were an adequate remedy I am

satisfied that the balance of convenience favours refusing the injunction. First of all there is the well known principle that in general

the courts will not grant an injunction which would involve ongoing supervision. A court, therefore, is very slow to grant injunctions in

either service contracts or trading contracts because it is very difficult to assess, at any given time thereafter, as to whether such

injunctions are being obeyed or not. It is also usually impracticable and undesirable that two parties be compelled to trade with one

another when one, for reasons which are perfectly rational, does not want to carry on such trading. The appellant’s bad debt

situation and the unsatisfactory nature of his relationship with the respondent make it prima facie reasonable, that the respondent

would not want to continue trading with him and I doubt that it would be practicable for a court to force such continued trading.

On this ground also therefore I would dismiss the appeal.