Car dealer loses appeal against VW Ireland over termination of dealership

The reorganisation involved reducing the number of Volkswagen dealers following what the company described as a “catastrophic” fall in overall car sales from 186,000 in 2007 to 79,000 in 2012. 

 

Volkswagen Group Ireland (VGI) had terminated all existing dealerships and invited them to re-tender for a dealership contract in whatever area they thought fit with VGI ultimately deciding between ideal and non-ideal locations. 

 

Pat O’Leary, a main dealer based in Lissarda near Macroom in Cork, took High Court proceedings claiming that notices sent by VGI sent to him in 2011, giving two years notice that three contracts held with it would be terminated with effect from April 30th 2013, were invalid. 

 

O’Leary’s of Lissarda had been selling VW and Audi vehicles since 1989, employing 30 people, and a new 3,500 square foot showroom was built in 2002 following a new EU regulation permitting motorists take their cars to any garage for servicing. 

In judgments in 2016 and 2017, the High Court found breach of a requirement set out in contracts of 2003 to give “detailed, objective and transparent” reasons in the termination notice. 

 

However, Mr Justice Donal Binchy declined to declare the termination of contracts was unlawful and said damages were the appropriate remedy for breach of contract. 

 

Because Mr O’Leary had received two years notice of termination, he decided those damages should be nominal. 

 

He also held an agent of VGI had made a misrepresentation to Mr O’Leary as to its future plans on which Mr O’Leary had relied and acted to his detriment and said he was entitled to damages. 

 

Both sides appealed over various findings of the High Court. 

 

Giving the three judge Court of Appeal judgment on Monday, Ms Justice Caroline Costello dismissed Mr O’Leary’s appeal and allowed VGI’s cross-appeal over various findings. 

 

 

VGI’s appeal concerning costs issues will be decided later. VGI had appealed the High Court decision to make no order for costs in that court, meaning each side had to pay their own, 

 

In the COA judgment, Ms Justice Costello concluded the 2011 notices gave detailed, objective and transparent reasons for termination of the contracts and were valid notices in compliance with the 2003 contracts. 

 

VGI had said it was necessary to reorganise its dealer network in light of structural changes to the market and documents and evidence supported these being the “actual” reasons for its decision, she said. 

 

Termination for anti-competitive reason was the “sole ground” upon which the court could assess the validity of the termination of these contracts, she said. 

 

Mr O’Leary’s own expert witness had withdrawn any allegation VGI was engaged in anti-competitive practices and had accepted VGI did not have “market power”. 

 

Once the trial judge had determined VGI did not terminate the contracts for prohibited anti-competitive reasons, he had no further role in assessing validity of the termination or questioning the commercial necessity to terminate all dealer contracts to, as he saw it, remove just seven out of 40 locations from the VGI network. 

 

That was a matter for the company in the exercise of its commercial judgment and discretion and not for the court to evaluate, she said. 

 

Mr O’Leary was thus not entitled to damages for alleged breach of contract or to a declaration the contracts are subsisting and binding on the parties, she ruled. 

 

She also rejected any entitlement to damages for misrepresentation after finding Mr O’Leary had not established he acted to his detriment by relying on any alleged misrepresentation by any agent of VGI.