British Motor Trade Association v Gray
| Jurisdiction | Scotland |
| Judgment Date | 16 March 1951 |
| Docket Number | No. 62. |
| Date | 16 March 1951 |
| Court | Court of Session (Inner House - First Division) |
1st Division.
Lord Blades.
Contract—Breach of contract—Inducing breach of contract—Interdict—Covenant by purchasers of new motor vehicles not to resell within specified period—Whether illegal as being in restraint of trade—Liability of third party inducing breach.
In an attempt to remedy the situation resulting from the post-war shortage of new motor vehicles available for release to the general public, the British Motor Trade Association (a trade union to which all British motor car manufacturers and their accredited distributors belonged) instituted a scheme under which every purchaser of a new motor vehicle was required, on or before the date of delivery of the vehicle, to execute a deed of covenant with the Association and with the dealer from whom he purchased it, whereby he undertook not to resell the vehicle within a specified period. Thereafter the Association presented a petition craving the Court to interdict a motor car dealer, who was not a member of the Association, from buying or facilitating the dealing with motor vehicles offered for sale or other disposal by persons known by him to have executed a deed of covenant with the petitioners and to contemplate breaking such covenant. The petitioners averred that the respondent had persistently engaged in the purchase and resale of vehicles in respect of which a covenant was in force, and that he had on numerous occasions knowingly bought vehicles from retail purchasers by whom a covenant had been executed and before the expiry of the time limitation on resale. The petition further set forth that the respondent had carried on a course of dealing in concert with another person, from whom he had bought a number of vehicles in respect of which, to the knowledge of both of them, a covenant was still in force. He had therefore persistently procured breach of contract by the persons whom he had induced to sell motor vehicles in contravention of their covenants with the petitioners, and had wilfully taken advantage of that breach. The respondent contended that the petition should be dismissed as irrelevant in respect that (1) the contract embodied in the deed of covenant was unenforceable as being in restraint of trade, and that (2), even assuming that the contract was valid and enforceable, there were no averments relevant to infer that the respondent had induced its breach.
Held (1) that the contract embodied in the covenant was not a contract in restraint of trade, and further that, even if it could be so regarded, it was not on that account illegal and unenforceable seeing that it was reasonable as between the parties and consistent with the interests of the public; (2) that, if damage results, it is an actionable wrong for a third party knowingly and unjustifiably to induce breach of a lawful contract, and that the petitioners' averments were relevant to infer the commission of such wrongs by the respondent; and a proof allowed, an opportunity being given to the petitioners to make more precise the terms of the interdict craved.
The British Motor Trade Association, an association certified as a trade union under the Trade Union Act, 1913, presented a petition for suspension and interdict and for interim interdict against Allan Gray, motor car dealer, Glasgow. The petitioners prayed the Court "to interdict, prohibit and discharge the respondent and all others acting under his authority from buying or facilitating the dealing with motor vehicles (including a chassis) offered for sale or other disposal by a person or by the agent of a person known by them to have executed a deed of covenant with the petitioners and to contemplate breaking such covenant: and meantime to grant interim interdict. …"
The petition was amended in the Inner House and, as amended, it set forth, inter alia:—"(2) The petitioners' Association includes among its members all British motor car manufacturers and importers and concessionaires of foreign cars, all their accredited distributors and dealers and the majority of motor car accessory manufacturers, factors, stockists and dealers of all kinds engaged in the motor industry. No new cars are distributed by any manufacturer in Great Britain for resale to the public except through an accredited distributor or dealer with whom the manufacturer has a contract, and it is a term of all such contracts that the distributor or dealer shall be a member of the Association. Accordingly a new car is obtainable in this country only through a member of the Association. The principal objects of the Association are to encourage, promote and protect the interests of the motor trader and safeguard the purchasing public against unfair treatment and discrimination in their dealing with the motor trade and for this purpose to take, inter alia, such steps as may from time to time be necessary or expedient to prevent price cutting or price inflation of trade goods. (3) War-time conditions and post-war Government restrictions have resulted since the end of the recent war in an acute shortage of new motor vehicles available for release to the general public in this country. A member of the public ordering a new vehicle from an authorised motor dealer has been, and still is, obliged to wait for delivery for a period of months and very often years. This situation resulted in speculators placing orders for new vehicles with several dealers with the object of reselling the vehicles immediately on delivery at a substantial profit, either directly to other members of the public or to dealers who took advantage of the strong public demand for vehicles of which immediate delivery could be given. The result of such transactions, when extensively practised, was to increase the already considerable delay experienced by ordinary members of the public in obtaining new vehicles at the controlled price fixed by the manufacturers and to inflate very seriously the price of new cars purchased at the controlled price and immediately thereafter sold as “second hand.” The resulting situation was gravely prejudicial to the interests of both the motor trade and the general public. (4) In an attempt to remedy this situation the petitioners, with the knowledge and approval of the Government, and to protect the legitimate interests of their members, introduced within the trade a scheme to prevent the purchaser of a new vehicle from selling it at an inflated price within a reasonable period after delivery. Under this scheme, known as the “Covenant Scheme,” which came into operation on 15th August 1946, all retail purchasers of new vehicles (including chassis) from an accredited dealer were required to enter into a deed of covenant or undertaking whereby they undertook both to the petitioners and to the dealer that they would not during the period of six months (increased from 15th March 1947 to twelve months and from 1st December 1950 to two years) from the date of the deed, except with the consent in writing of the petitioners, use the vehicle or permit it to be used for any purpose other than their own private, professional or trade purposes, and in particular that they would not, except with the petitioners' consent, sell, pledge, give, hire, or otherwise deal with the vehicle in any manner whereby the property therein would be transferred to any other person.1… The petitioners propose
in the near future to bring into use, in lieu of the said deed of covenant, an undertaking in slightly different form, but containing the same legal obligation, except that, as the said new form of undertaking will require to be signed by the purchaser when the order for the new vehicle is placed with the dealer, the said period of two years will run from the date of delivery or of first registration of the vehicle under the Road Vehicles Registration and Licensing Regulations, whichever shall be the later. … (6) The respondent is not a member of the Association but, as a result of his conduct in breach of the Association's rules relating to price protection, and in particular Rule 12 (2), his name was put on the Association “Stop List” on 4th February 1948, and has remained on the “Stop List” since then. Since that date the respondent has persistently engaged in the purchase and resale of vehicles in respect of which a covenant has been in force, and on numerous occasions he has knowingly bought vehicles from the retail purchaser by whom a covenant has been executed before the expiry of the covenant obligation. In particular the petitioners believe and aver that the respondent bought the following vehicles from retail purchasers who had signed in respect thereof covenants which at the time of the respondent's purchase from them were still in force:—[Here followed particulars of nine vehicles, one of which was stated to have been purchased from a
man named Mark Hutchison.] The petitioners believe and aver that in all the above transactions the respondent was well aware that the vehicle concerned was subject to a covenant executed by the seller and that the covenant was still in force. Copies of the deeds of covenant above referred to are produced herewith. (7) In addition to the foregoing transactions, since February 1948 the respondent has carried on a course of dealing in concert with the said Mark Hutchison in vehicles known by both the respondent and the said Mark Hutchison to be subject to covenants. In particular the respondent bought from the said Mark Hutchison [here followed particulars of five vehicles]. All the said vehicles were subject to covenant at the date of the respondent's purchase, and the petitioners believe and aver that the respondent and the said Mark Hutchison traded in the said vehicles in the knowledge that they were so subject to covenants. (8) In carrying on the said course of dealing and in particular in buying vehicles within the restrictive period of such covenants from persons who, to the...
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