Supreme Court: Interest awarded by Court of Appeal in DPD franchise dispute is halved

About this case:

• Judgment:
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Writing in his judgment, Mr Justice O’Donnell endorsed the Court of Appeal of England and Wales decision in Jefford v Gee 2 QB 130.

Background

The plaintiffs (Cyril Reaney, Ita O’Regan and Travelon Limited) purchased a number of franchises from Interlink Ireland Ltd (T/A as DPD) to operate a courier business.

Subsequently two franchises were sold by the plaintiffs without incident, and the remaining franchise was lawfully terminated by DPD by notice under clause 13 of the contract between the parties.

Clause 13 provided that DPD would introduce a purchaser for the franchise, or alternatively pay the plaintiffs an amount something akin to market value for the franchise.

High Court

In the High Court, Mr Justice Gilligan rejected a challenge to the restraint of trade clause and dismissed a claim for fraud. However, he awarded the plaintiffs €356,200 being €308,921 (the total including VAT in respect of clause 13), plus €38,599.50 (the Parcel Line claim including VAT), and €8,680 in respect of the “Pulsar” account which was VAT inclusive.

Mr Justice Gilligan did not award interest observing that the parties had not provided for interest in their contract.

Applying Veolia Water UK Plc v Fingal County Council (No. 2) IEHC 240; 2 IR 81, the court awarded the plaintiffs 60 per cent of the costs.

DPD made a number of efforts to suggest a compromise of the claim, including lodgements made with a denial of liability totalling €362,243.23 (i.e. €6,000 more than the award) which had been made prior to the commencement of the hearing in the High Court.

Accordingly DPD contended that the provisions of Order 22 Rule 6 of the Rules of the Superior Courts should apply, and that DPD should recover all the costs of the proceedings after the date of the lodgements – i.e. including all the costs of the trial.

The High Court considered the lodgement to be a nullity, accepting the plaintiffs’ submission that it had not complied with Order 22 Rule 1(5).

Court of Appeal

The Court of Appeal overturned the High Court’s exercise of it discretion in refusing to award interest.

While acknowledging that the fact that the contract did not provide for interest may be a relevant factor in the exercise of that discretion, the court noted that s.22(2)(b) of the Courts Act 1981 specifically precluded the court from making an order under s.22 where there is a contractual right of interest on the debt concerned.

The court decided that interest should be awarded under the Courts Act 1981 at the applicable rate of eight per cent, only from the date of commencement of the 2010 proceedings.

Accordingly, pursuant to s.22 of the Courts Act 1981, the Court granted €413,525 being an increase of €57,325 attributable to the award of interest.

On whether that figure could be taken into account in considering the lodgement, the Court considered that since statutory interest, if awarded, would form part of the award, it could be taken into account in considering if the plaintiff had “not been awarded more than the amount paid into court” for the purposes of Order 22 Rule 6.

Consequently the issue as to the validity of the lodgement itself did not arise, since even if the lodgement was considered valid and effective, on this approach, the plaintiff had succeeded in being awarded more than the lodgement.

Supreme Court

Considering, inter alia, Mellowhide v Barry ILRM 152 and Concorde Engineering v Bus Átha Cliath 3 IR 212 Mr Justice O’Donnell said he would distinguish between the different amounts in this case (i.e. the parcel line, pulsar, and clause 13)

Mr Justice O’Donnell stated that the bulk of the complaints concerned the amount assessed as due under clause 13. Mr Justice O’Donnell said that “the trial judge was fully entitled not to award interest on this aspect of the claim”, and set aside this aspect of the Court of Appeal decision.

Mr Justice O’Donnell calculated that the award of interest of €57,325 made by the Court of Appeal should be substituted with the figure of €26,001.26.

On the issue of inclusion of interest in lodgement, Mr Justice O’Donnell endorsed the Court of Appeal of England and Wales decision in Jefford v Gee 2 QB 130.

In summary, Mr Justice O’Donnell stated that the following should apply:

The Supreme Court allowed DPD’s appeal only to the extent that the award of interest of €57,325 made by the Court of Appeal be substituted with the figure of €26,001.26.