David Andrew Charles Hayes (plaintiff) v Shell (UK), Limited (defendant).

Interlocutory Relief - Application for mandatory injunction to preserve status quo between parties to an agreement - Whether there is a serious issue to be tried - Risk of injustice to the parties if interlocutory injunction granted

Whether a permanent injunction would be granted at the trial - Consideration of practicalities of compelling parties to continue to operate agreement.

Estoppel - Promissory estoppel - Whether equity will intervene to enforce future rights - Proprietary estoppel - Whether plaintiff has suffered detriment.

In the High Court of Justice in Northern Ireland (before Mr Justice Pringle); judgment delivered 16 November 1995.

WHEN considering, whether to accede to an application for interlocutory relief the court must first be satisfied that there is a serious issue to be tried. It is the case that when deciding whether to grant an interlocutory mandatory injunction, the court risks making the "wrong" decision, in the sense of granting an injunction to a party who fails to establish his case at the trial, or alternatively failing to grant an injunction to a party who succeeds at the trial. The court should therefore take whichever course appears to carry the lower risk of injustice if it should turn out to have been "wrong" at the interlocutory stage.

In deciding where the lower risk of injustice lies, the court must have regard to whether at the trial a permanent injunction would be granted. The court should also consider the difficulties which may arise it the parties are compelled to continue operating a relationship which requires a high degree of co operation between them.

On the facts, there were serious issues to be tried in relation to whether an assurance given to the plaintiff by a representative of the defendant had created either a promissory estoppel or a proprietary estoppel in favour of the plaintiff. Further, there was a serious issue to be tried with regard to whether the defendant's purported termination of two pre existing agreements had been validly executed. However it was neither probable nor highly probable that the plaintiff would succeed at the trial on any of these issues.

What in effect the plaintiff was seeking was specific performance of the agreements, the performance of which required a high degree of co operation between the parties. The plaintiff could not obtain such relief at the trial.

Mr Justice Pringle so held in refusing an application by the plaintiff for an interlocutory mandatory injunction to preserve the status quo pending the trial of proceedings in which the plaintiff sought declarations that an agreement between the parties constituted a lease and that the purported termination of it by Shell was invalid and/or unlawful, and an injunction restraining Shell from breaching any of the terms of the agreement between them.

Mark Horner BL for the plaintiff; Peter Smith QC and Mark Orr BL for the defendant.

MR JUSTICE PRINGLE said affidavits sworn by and on behalf of the parties had shown that in March 1989 the plaintiff had started to operate a filling station in Lisburn, County Antrim, under a licence from Shell. In February 1990 the plaintiff had moved to a filling station at Marino, County Down, presumably operating under a similar licence. During 1990 Shell had announced a new "Share" scheme under which operators of Shell stations would obtain security of tenure by way of a lease for ten years, instead of the three year licence under the existing scheme. It was subsequently made clear that operators of Shell sites in Northern Ireland would not be granted a lease, but would be granted a licence for five years, renewable for a further five years.

In June 1990 Shell's Northern Ireland manager, Mr Kieran Hill, had informed the plaintiff that Shell would only fail to renew the licence if the plaintiffs performance was unsatisfactory. On October 1990 the plaintiff had signed both a franchise agreement and the licence, and had paid to shell £5,000 for training and £22,000 for the franchise. On 4 April 1995 the plaintiff had written to Shell exercising his option to renew the Licence for five years. On 21 April 1995 Shell had refused his request on the ground that at the end of the licence period it intended "to operate the site under company management". On 11 May 1995 the plaintiffs solicitors had written to Shell claiming that the agreement under which the plaintiff operated the filling station was within the Business Tenancies Act (Northern Ireland) 1984, and that Shell had not given the plaintiff the period of notice to determine required under that legislation. Further, the plaintiff had claimed that Shell was bound by assurances that the lease would be for ten years.

On 16 May 1995 City Petroleum Company Limited, a wholly owned subsidiary of S.hell, had written to the plaintiff indicating that under a new scheme, Shell would be operating in Northern Ireland through a franchise arrangement, with City Petroleum being the franchisee. The plaintiff was advised that he might, as a current licensee, apply for the position of "city contractor", the new designation for self employed retailers operating the filling stations.

Since the end of 1994 Shell, had been operating an "air miles scheme, whereby retail customers, and only retail customers, were given vouchers for free air travel in relation to their purchases of petrol and other products. On 12 September 1995 Shell had written to the plaintiff requiring him to answer questions relating to his having taken advantage of the air miles scheme. The plaintiff had not answered these questions. Shell had therefore written to him on 21 September 1995 giving him 30 days notice of termination of the franchise agreement and licence. Shell had cited a clause of the franchise agreement which provided inter alia for termination on the basis that the franchisee had behaved in a manner which tended to show he was dishonest or not otherwise of good character.

By a letter dated 22 September - 1995 Shell had informed the plaintiff that there would be no more deliveries of fuel after 4 October 1995.

The plaintiff had brought an application for interlocutory relief to preserve the status quo pending the trial of proceedings in which he was seeking declarations that the agreement between the parties constituted a lease and that the purported termination was invalid and/or unlawful, and an injunction restraining Shell from breaching any of the terms of the agreement between them, and in particular ceasing to supply him with petrol.

Mr Justice Pringle said the principles on which a court would grant interlocutory relief by way of a prohibitory injunction had been laid down by the House of Lords in American Cyanamid Co v Ethicon Ltd [1975] AC 396. The first step to be considered was whether there was a "serious question" to be tried, that is, whether there was an issue for which there was some supporting material and the outcome of which was uncertain.

However, said Mr Justice Pringle, it had been held by the English Court of Appeal in Leisure Data v Bell [1988] FSR 367 that the Cyanamid principles were not really relevant where a mandatory injunction was sought on an interlocutory application.

In the Leisure Data case at page 371, Lord Justice Dillon had said that guidelines for granting of interlocutory mandatory injunctions had been laid down in Shepherd Homes Ltd v Sandham [1971] Ch 340. In that case, Mr Justice Megarry had stated at page 349B that, as mandatory injunctions tended to be more drastic in effect than prohibitory injunctions, the case would have to be "unusually strong and clear before a mandatory injunction would be granted. Mr Justice Megarry had gone on to say at page 351G:

". . . 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."

However, in Leisure Data Lord Justice Dillon had said that, notwithstanding the Shepherd Homes v Sandham guidelines, there were cases where the court would grant an interlocutory mandatory injunction "whether or, not the high standard of probability of success indicated by Mr Justice Megarry had been made out.

Lord Justice Dillon had indicated that there were other factors' to be considered when deciding whether or not to grant an interlocutory mandatory injunction. He had said:

". . . The court is required, as Lord Diplock pointed out in NWL Ltd v Woods [1979] 3 All ER 614 at 625, to give full weight to the practical realities of the situation and weigh the respective risks that injustice may result from a decision one way or the other. The court has to keep firmly in mind the risk of injustice to either party. Beyond that, there are many cases where there is a salvage, element involved, and where it is necessary that some form of mandatory order shall be made to deal with a situation which cannot on the practical realities of the situation be left to wait until the trial."

Mr Justice Pringle also referred to the case of Regent International Hotels (UK) Ltd v Pageguide Ltd (unreported, March 1985), in which he said an approach had been taken which, once again, was rather different from Mr Justice Megarry's test requiring a "high degree of assurance" of success. In the Regent Hotels case, interlocutory injunctions had been granted in order to restrain the defendants from hindering the plaintiffs managing and marketing the Dorchester Hotel in accordance with preexisting agreements. The defendants had then applied to have the interlocutory injunctions set aside. Mr Justice Pringle said it was clear that the judge, Mr Justice Simon Brown, had in fact applied the Cyanamid principles, even though he had recognised that the injunctions had a mandatory aspect.

Mr Justice Pringle referred to the fact that Mr Justice Simon Brown had, in considering whether or not to set aside the injunctions, considered the defendants contention that it would be "manifestly wrong in principle to grant a permanent injunction, still less an order for specific performance in this case.

Mr Justice Simon Brown had considered other factors including the ". . . difficulty even in the relative short term in continuing to operate the agreements satisfactorily, having regard to the close relationship into which they inevitably thrust the parties and to the defendants declared total loss of confidence in the plaintiff's management abilities."

Mr Justice Pringle stated that there was much to be said for the approach adopted by Mr Justice Hoffmann in the case of Films Rover International Limited v Cannon Film Sales Ltd [1987] 1 WLR 670. In that case, a principle had been followed which would be applicable to both prohibitory and mandatory interlocutory injunctions. At page 680E, Mr Justice Hoffmann had stated:

"The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the wrong decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been wrong in the sense I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle."

Mr Justice Pringle said in ascertaining where the lower risk of injustice lies", regard must be had to whether at trial a permanent injunction would be granted. In this regard, in the instant case, the very real difficulties in continuing to operate the agreements were a relevant factor.

Mr Justice Pringle said that, on construction of the licence document and comparing the facts of this case to those of Esso Petroleum Company Limited v Fumegrange Limited, [1994] 46EG 199, the submission that the licence was a lease was unarguable.

Mr Justice Pringle said that while there was a serious question to be tried in relation to the issue of the validity of Shell's purported determination of the franchise agreement and the licence, nonetheless, one could not be satisfied that it was very probable that the plaintiff would succeed on that issue at the trial.

Mr Justice Pringle said that it was unarguable that a collateral agreement had been entered into by the plaintiff on the basis of Mr Hill's assurance that the licence would be renewed. There was no consideration for any collateral - agreement.

The plaintiff had also contended that a promissory estoppel had been created in his favour by, Mr Hill's assurance that the licence would be renewed. Mr Justice Pringle said there was a serious issue to be tried in this regard. Admittedly, Mr Hill's assurances to the plaintiff had related to a proposed new licence to be granted in the future. Nonetheless, the case law indicated that, where a person had been induced to change his situation on the basis of assurances given that he would acquire future rights, in these circumstances, equity would step in to ensure that the representee gained the benefit of those future rights: see Bank Nagara Indonesia v Hoalim [1973] 2 MLJ 3; Hughes v Metropolitan Railway Co [1877] 2 AC 439.

Similarly with regard to the question of proprietary estoppel, Mr Justice Pringle said that there was a serious issue to be tried. Mr Justice Pringle referred to the case of Taylors Fashions Ltd v Liverpool Victoria Trustees Ltd [1982] QB 133, wherein Mr Justice Oliver had said:

". . . the application of the Ramsden v Dyson LR 1 HL 129 principle . . . requires . . . an approach which is directed at whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he had allowed or encouraged another to assume to his detriment".

Mr Justice Pringle said that where a proprietary estoppel exists the court will grant relief by whatever means seems appropriate, including the grant of some form of title to the plaintiff: see Inwards v Baker [1965] 2 QB 29.

Mr Justice Pringle then addressed the question of whether or not the plaintiff, had suffered a detriment of the kind referred to by Mr Justice Oliver in the Taylors Fashions case, such as to afford him the protection of proprietary estoppel in the form of rights under a new licence. It was true that the money paid by the plaintiff had been in respect of the franchise agreement, and not the licence. However, Mr Justice Pringle said that the two agreements were so closely bound together that the reality of the situation was that the moneys paid by the plaintiff should be regarded as having been paid for both agreements. Therefore, the plaintiff had suffered the necessary detriment.

Mr Justice Pringle then examined whether or not it was probable or highly probable that the plaintiff would succeed at the trial, on the issues of promissory estoppel and proprietary estoppel. Mr Hill's assurance with regard to the renewal of the licence had been made some four months before the agreements were signed, and had not been raised again either by the plaintiff, his solicitors or any representative of Shell. In these circumstances, Mr Justice Pringle concluded that it was not probable or highly probable that the plaintiff would succeed one these points at the trial.

Mr Justice Pringle concluded that, what in effect the plaintiff was seeking was specific performance by Shell of the franchise agreement and the licence, the performance of which required a high degree of co operation between, the parties, and in relation to which an order for specific performance by the plaintiff could not be obtained by Shell. Mr Justice Pringle considered that at the trial the plaintiff could not obtain the relief he was presently seeking, and therefore the application would be refused.

Mr Justice Pringle said, the issue of whether or not the plaintiffs accumulation of air mile vouchers tended to show he was dishonest or otherwise of good character should not be decided on an interlocutory application. However he considered that, notwithstanding the explanations offered by the plaintiff as to how he had acquired the air miles, the plaintiff's conduct was clearly such as to undermine gravely the trust and co operation required for the efficient operation of the franchise agreement and the licence. Mr Justice Pringle said that if he had been in any doubt as to whether or not the plaintiff should be granted an interlocutory injunction, his conduct in relation to the air miles would have been a decisive factor against granting him an injunction.

Solicitors: Comerton & Hill (Belfast) for the plaintiff; Peden & Reid (Belfast) for the defendant.