Bear Necessities Daycare Ltd v Lancashire Fuels 4 U Ltd (First Respondent) Mr Peter Ogg (Second Respondent)

Hearing dates: 2 March 2015

The background

This is an application by the Applicant for interim delivery up and preservation by the First Respondent of two cars which are currently in the First Respondent's possession. I heard oral submissions on the application on 2 March 2015 and gave my decision, reserving my written reasons which I now give.

The Applicant is a limited company which specialises in childcare. The First Respondent is also a limited company dealing in, amongst other things, the manufacture, sale and supply of biodegradable fuels. Miss Claire Smith is the sole shareholder and director of the Applicant and is also a 25% shareholder and director of the First Respondent. The Second Respondent, Mr Peter Ogg, is a director of the First Respondent. The Applicant is only one of Miss Smith's business interests. She is, or has formerly been, a director of several other companies. In particular, she is or was a director of a company known as Ace Waste. The Second Respondent was, at least at one time, also a director of and a consultant to Ace Waste.

This application relates to a claim for damages made by the Applicant in the sum of £145,833.63 in respect of monies and expenses which it alleges are owed to it by the First Respondent, together with £3,506.19 said to be owed by the Second Respondent. It is contended by the Applicant that, for reasons that are unclear, Miss Smith, through the Applicant, agreed to assist the business endeavours of the First Respondent by providing it with, amongst other things, a company credit card, two loaned motor cars, a funding circle loan, direct loans to cover certain expenditure and the payment of the First Respondent's initial expenditure. The Applicant alleges that agreements to provide these facilities were made between Miss Smith, acting on its behalf, and the Second Respondent, as director of the First Respondent, and that those agreements were then breached.

The provision of the two cars

For these purposes, only one of the agreements referred to is relevant. That relates to the provision of two motor cars, a Volkswagen Touareg ("the VW") and an Audi Q7 ("the Audi") to the First Respondent. The Applicant alleges that it obtained the cars on lease, then handed them over to the First Respondent for the use of the Second Respondent and another director of the First Respondent in their capacities as directors. The Applicant alleges that the First Respondent failed to comply with its agreement that it would reimburse the Applicant for the payments made by the Applicant to VW Financial Services (VWFS) for the lease of the cars and other relevant expenses. In its Particulars of Claim, the Applicant claimed damages for £6,391.08 in respect of payments outstanding for the VW and £4,051.98 for the Audi. In their Defence, the Respondents denied that any payments were outstanding.

There is no dispute that the Applicant and the First Respondent signed two written contracts in respect of the First Respondent's use of the cars. On 20 November, 2013, Miss Smith on behalf of the Applicant and Mr Ogg and Mr Baison (another director of the First Defendant) on behalf of the First Respondent signed a document described as an "informal contract" whereby the First Respondent agreed that it would "undergo ( sic) to pay against monthly invoice from the Applicant contract hire for the VW". The contract was agreed to start on 25 April 2013 and to end on 25 April 2016. The Applicant alleges that, from April 2013, the VW was provided by it to the Second Respondent for use in his capacity as director of the First Respondent. The Respondents contend that the VW was initially provided for the Second Respondent to use in connection with his directorship of Ace Waste, not the First Respondent. There appears to be agreement that, from November 2013 (when, according to the Respondents, the First Respondent started in business), the VW was transferred to the First Respondent.

Also on 20 November 2013, a contract was signed in respect of the Audi. That contract was identical to the first, save that, in the case of the Audi, it was agreed that the contract should start on 28 November 2013 and end on 28 November 2017. It is agreed that the Audi was acquired for the use of the First Respondent.

What happened thereafter is in issue. The Applicant alleges that the First Respondent did not pay the monthly invoices in full. It is alleged that there were no payments in respect of the VW during the periods from July 2013 until October 2013 or from 1 February 2014 until 1 July 2014. Thus, it is said, a total of £6,391.08 remains outstanding. In relation to the Audi, it is said that invoices totalling £4,051.98 remain outstanding, representing non-payment for the period from 1 February 2014 until 1 July 2014. The First Respondent denies that there has been any non-payment. It is common ground that, as from 1 July 2014 until the present time, the monthly payments have been made regularly.

By September 2014, it seems that the relationship between the Applicant and the Respondents had deteriorated. Solicitors were involved (certainly on the Applicant's side) and it appears that the Applicant was contemplating making a claim for defamation against the First and/or Second Respondent, as well as the claim for monies owing. In a letter from the Applicant's solicitors, McHale and Co. (McHales), to the First Respondent, dated 17 September 2014, the solicitors referred to the alleged failure by the First Respondent to make regular payments for the cars, and indicated that the Applicant was seeking payment of the outstanding monies, together with interest. They referred also to the fact that the Applicant had made previous requests for the return of the cars on account of the arrears, which had been refused.

McHales' letter dated 17 September 2014 also raised another issue, namely the terms on which the Applicant had leased the two cars. The letter stated:

"… it has become apparent, that unbeknownst to our clients, under the terms of the lease the vehicles must be used by the agents/servants/agents/employees of Bear Necessities Daycare Ltd [ i.e. the Applicant] only. In light of this fact any sub-lease to Lancashire Fuels 4 U Ltd/you [ i.e. the First/Second Respondent], is in breach of the agreement, and thus our clients are at risk of having legal proceedings brought against her/it for delivery up of the vehicles. In addition, under the terms of the agreement, our clients could therefore be liable for the remainder of the same once the vehicles have been recovered."

The provisions of the leasing agreement between the Applicant and VWFS referred to in the letter were as follows:

" 4 Restrictions relating to the Vehicle

4.1 You must keep this Vehicle in your possession and control and must not sell or otherwise dispose of it or attempt to do so. You must immediately pay any amount needed to remove any lien or other right another person may have over the Vehicle. You must not use the Vehicle as security for a loan or other obligation. …

…4.6 You must keep the Vehicle in good repair and condition. You will be responsible for any damage to or deterioration of the Vehicle except through fair wear and tear.

7 Our right to terminate

7.1 We may terminate the hiring by giving you written notice if any of the following happens …

7.1.9 you break any of the terms of this Agreement.

Your Liability

8.1 When the Hiring Period ends or we terminate the hiring (or accept your repudiation of this Agreement) you must return the Vehicle to us immediately, at such address as we may reasonably require, at your own expense together with everything supplied with the Vehicle (including the service book) and the registration document and any MOT certificates. If you do not return the Vehicle, we may repossess it and recover from you any expenses we incur. For this purpose you authorise us or our agents to enter any premises which you occupy or control.

8.2 If we terminate the hiring, or accept your repudiation of this Agreement, you must pay us:

• all unpaid rentals and any unpaid maintenance charges and other payments due (which shall include interest, where applicable); plus

• as compensation or agreed damages on our acceptance of your repudiation, or as a debt on our termination, the total amount or rentals payable during the Hiring Period (excluding VAT) less the amount of rentals paid or which have become due (excluding VAT) less also an amount (if any) equal to a rebate of rentals calculated at the rate of 4% per annum on the rentals (excluding VAT) which have not become due; …"

The Applicant's solicitors repeated their previous requests for immediate return of the cars. They indicated that, failing such return, they would make an urgent application for delivery up of the cars. After some further communications between the parties, Mr Baison made clear that, so far as the First Respondent was concerned, there were contracts in place which it intended to "see out to the finish". In other words, the First Respondent was not prepared to return the cars.

The claim

The Applicant issued a Claim Form on 3 October 2014 and Particulars of Claim some time later, on 16 October 2014. I have not seen a copy of the original pleading, but am told that it contained no claim for delivery up of the cars. As I understand the position, the...