Another trip down memory lane: Richard Cound v BMW, Clover Leaf Cars v BMW

While I am on the topic of old law which we should not forget (a couple of weeks ago it was the Supply of New Cars Order), I thought it worth mentioning these two important Court of Appeal cases on the block exemption. The first one, that is, but potentially still relevant. The trouble is I don't have complete reports, but on the basis that something is better than nothing and I want to have a readily-accessible note of the cases I thought it worth writing as much as I could here.

Richard Cound Ltd v BMW (GB) Ltd [1997] Eu. L.R. 301 was decided on 10 May 1995. The judges in the Court of Appeal were Balcombe LJ, Pill LJ, and Sir Roger Parker. Clover Leaf Cars Ltd v BMW (GB) Ltd [1997] Eu LR 53 was decided in the Court of Appeal (Staughton LJ and Thorpe J) on 28 December 1995 (and at first instance in the Chancery Division, apparently on 20 December that year, by Rattee J). Given that the termination of the dealer agreement in the second case was to take effect on 31 December, one can see perhaps why the courts dealt with it so urgently. (I don't at present have information about the situation in the Cound case, but as I recall the same facts applied - BMW terminated the agreement from 31 December 1995 - but the case was brought a bit more promptly.) In the Clover Leaf case, and (subject to confirmation) in Cound too I think, the key fact was that the dealer had been taken over by a PLC and BMW did not want too many of them in its network, so it gave (as it was entitled to do) 12 months' notice.

In each case, the important matter was not really whether the restrictions in the agreement on ownership were prohibited by Article 85(1) (as was, and in my mind often still is) and, if so, exempted by Regulation 123/85: the manufacturer's freedom to terminate without having to state a cause (to terminate for convenience) on 12 months' notice was enough to make the termination lawful. What was really interesting was the contention by the plaintiffs that the allegedly prohibited and therefore void provisions of the contract could be severed and the rest of the contract enforced without them. The court held that the issue of severance was governed by English law, following Chemidus Wavin Ltd v Societe pour la Transformation et l'Exploitation des Resines Industrielles SA [1978] 3 C.M.L.R. 514. The judge in Cound had been right to conclude that the effect of severance would have been to alter the character of the agreement and that the agreement did not permit the excision of void terms such as to alter its scope and intention entirely: Hinton & Higgs (UK) Ltd v Murphy 1988 S.C. 353. In Clover Leaf, the court was able to follow the judgment in the earlier Cound case.

Also noteworthy, I think, is the court's holding (in both cases) that the termination was to be viewed as unilateral conduct by the manufacturer, not as something that constituted an agreement.