The Court of Appeal has upheld the termination of three Volkswagen dealership contracts held by Pat O’Leary, finding that Volkswagen Group Ireland Limited gave valid notice in 2011 to end them two years later.
The judgment, delivered by Ms Justice Costello on 3 February 2020, allowed the company’s appeal against findings that its termination notice breached the contracts and that it owed damages for negligent misrepresentation. The court rejected O’Leary’s appeals concerning the contracts and other alleged representations. It said it would hear submissions on costs; it did not decide costs in this judgment.
O’Leary and his family had operated an Audi and Volkswagen dealership in Lissarda, County Cork. Under three Volkswagen contracts made in 2003, either side could terminate with 24 months’ written notice. Article 20 required the supplier’s notice to give detailed reasons that were objective and transparent.
Volkswagen Group Ireland’s letter of 18 April 2011 said it needed to reorganise its dealer network because of structural changes in the market and the significant downturn in the Irish economy. The termination took effect on 30 April 2013. The letter referred to a presentation to dealers three days earlier, which set out the planned network changes and selection process.
At trial, the High Court found that the notice failed to give the required reasons, but held that damages were the appropriate remedy for the contract breach. It awarded nominal damages for that breach and damages for a separate misrepresentation claim. It declined to declare the contracts ongoing. Both sides appealed aspects of the decisions.
The Court of Appeal said that, where a supplier gave two years’ notice, the relevant concern was whether termination was for a prohibited anti-competitive reason. It found that O’Leary had not established such a reason. The court said the company’s commercial judgment about how to reorganise its network was not for the court to assess. It also held that the notice, read with the presentation it referenced, provided sufficient detailed, objective and transparent reasons under Article 20. The contracts were therefore validly terminated, and O’Leary was not entitled to contract damages or a declaration that they remained binding.
The court also set aside the High Court’s misrepresentation damages award. The trial judge had found that a Volkswagen Group Ireland sales manager, responding to another dealer’s question at a July 2009 meeting, said the company then had no plans to reorganise its network. But the Court of Appeal found no evidence that O’Leary relied on that answer when deciding to carry out works at his commercial vehicle premises. The court rejected his appeal concerning other alleged assurances, including statements said to have been made in 2003 and 2007. It concluded he had not established reliance to his detriment on any alleged misrepresentation.