Dunblane Property Ltd. & Anor v Motorcare Holdings Ltd. & Anor

A contractual right of first refusal may be defined by a stated maximum road distance from the relevant premises. Where parties objectively agree a later arrangement to resolve disputes and implement an earlier contract, the later arrangement may vary the earlier rights. Subjective intentions are relevant only so far as they were communicated and assist in identifying the agreement reached. The later agreement governs future rights within its agreed subject and geographical scope while it remains in force. It does not retrospectively settle accrued claims unless that was agreed.

Dunblane Property Limited and Mr Anthony Rand claimed damages from Motorcare Holdings Limited and Motorcare Services Limited for alleged breaches of a share sale and purchase agreement dated 16 May 1995. The agreement gave businesses owned or controlled by the claimants preferred supplier rights within defined geographical limits.

Mr Arthur Marriott QC, sitting as a Deputy High Court Judge in the Commercial Court, determined several preliminary issues. He held that the parties’ later Key Repairer Agreement had no effect on the original agreement and answered affirmatively an issue concerning a repair business at Iver. The defendants appealed the construction of the preferred supplier provisions and the effect of the later agreement and related communications. The Iver determination was challenged on an agreed basis. The central issues were the proper construction of the geographical right of first refusal and whether the later agreement varied the parties’ future or past rights.

1. Disposition. Lord Justice Clarke allowed the appeal in part and dismissed it in part. The President and Lord Justice Sedley agreed.
2. Construction of the preferred supplier right. Paragraph 4 of schedule 3 to the share sale and purchase agreement gave a preferred supplier in a major metropolitan area a right to be offered, and first refusal of, accident repair notifications up to a maximum of 10 miles by road from the relevant repair shop, subject to the supplier’s ability to comply with the applicable terms and conditions. The reference to locality was therefore given practical meaning by the stated distance.
3. Effect of the Key Repairer Agreement. The court rejected the conclusion that the later agreement had no effect on the original agreement. The relevant question was the objective intention shown by what was said and done. The parties’ subjective thoughts were irrelevant except insofar as they assisted in identifying communications between them. The agreed figure of 40 accident repair notifications per month, the specified postcode areas and the obligation to accept referrals demonstrated an agreement to vary the practical implementation of the earlier preferred supplier arrangement.
4. The Key Repairer Agreement governed the future rights of Motorcare Services Limited and the repair business at Kingsbury while it remained in force. The claimants could not disregard it and revive different rights under the original agreement at will. Any such change had to be pursued through the variation or termination mechanism in clause 24 of the Key Repairer Agreement.
5. Past and other premises. The later agreement did not govern past rights or liabilities. The evidence did not establish an agreement abandoning claims for earlier breaches. The agreement was also limited to the Kingsbury premises and did not determine rights concerning other premises, including Iver.
6. The affirmative determination on the Iver issue was set aside by agreement. The issues arising from Iver were left for determination at a subsequent trial, with their costs reserved to the trial judge. The remaining costs were ordered in the proportions stated in the formal order.

1. Court of Appeal (Civil Division) allowed the appeal on issues (b) and (e), dismissed the appeal on the construction of schedule 3 paragraph 4, and set aside the Iver determination by agreement. The Iver issues and costs were reserved for trial.
2. High Court of Justice, Queen’s Bench Division, Commercial Court, Mr Arthur Marriott QC sitting as Deputy High Court Judge, determined the preliminary issues on 20 December 2002. He construed the preferred supplier provisions and held that the later Key Repairer Agreement had no effect on the original agreement.