#6753 - Adam Opel V. Mitras Automotive - Restitution of Unjust Enrichment BCL

Adam Opel v. Mitras Automotive

Facts

The First Claimant ("Opel") is a wholly owned subsidiary company within the General Motors group ("GM") based at Russelsheim in Germany. In the late 1990s GM and the Second Claimant ("Renault") entered into a joint venture to produce a van, badged and sold variously as an Opel/Vauxhall "Vivaro", a Renault "Trafic" and a Nissan "Primastar", which went into production in 2001.

The Defendant ("Mitras"), originally a subsidiary of a German company, manufactured and supplied components to the automotive industry from a factory in Winsford, Cheshire. It was from the inception of the X83 project the sole supplier to the Luton plant of the technical front end, in layman's language the moulded plastic unit upon which the front bumper was mounted, under a highly developed system known as single source supply, used widely throughout the motor industry for many years. The Barcelona plant was by served by a different sole supplier, Peguform, based in Catalonia. In 2006, when the Claimants sought to refresh the look of the van by a "face-lift" which included a change to the front bumper, Mitras lost its role as supplier of the bumper mount.

Somewhat surprisingly in the light of the RFQ provisions, no Purchase Orders were ever produced. Instead, Mitras received each week a rolling schedule of requirements for the following 40 weeks, generated by GM's computer in Germany. The precise quantities required each day were determined and notified by IBC to Mitras according to variations in production. There was a daily collection by GMR's haulier in a large articulated lorry. This was divided at the haulier's regional distribution centre into 3 separate loads, which were then delivered to Luton at eight hour intervals. The system was designed to minimise the amount of stock held by IBC. At any time there would be a maximum of 432 units in store with a further 48 lineside, to meet a production rate of 18 to 19 vans per hour. The functioning of this "lean material" or "just-in-time" system, if not the precise figures, was explained to all suppliers, including Mitras.

In 2004 GMR began to plan a refreshment to the look of the van, known as Phase 2. For this purpose they envisaged a change to the bumper mount to support an altered front bumper… By the end of 2005 GMR had apparently decided that the bumper mount for the Phase 2 van should be produced by LFT technology. GMR informed Mitras orally on 24 January 2006 that it was not intending to use Mitras on Phase 2.

On being informed of GMR's intention to terminate its role as supplier in six months' time, Mitras advanced certain financial demands. In a fax dated 25 January 2007 Mr Keith Worrall, the Managing Director of Mitras, pointed out that the amortization of Mitras' development costs had been based on the estimated supply of 863,257 units over 12 years; said that Mitras had reduced the price during the initial negotiations to reflect the longevity of the project/volume of the vehicles to be built; and referred to the fact that Mitras had given a 3% reduction of price in years 2, 3 and 4.

Referring to Mitras' statement in the fax under reply that it"was not willing to negotiate on this price", Mr Becker and Mr Vincent (for GMR) wrote that"This can only be interpreted as a threat by Mitras to GM, Renault and IBC to cease supply, without warning, if we do not agree to this extortionate and wholly unjustified price increase."This provoked the response in Mr Worrall's (for Mitras) reply:

"You are free to make whatever interpretation you wish however, the reality is that we are not compelled - nor are we willing - to supply at less than the quoted price. You have a choice of either accepting the price or procuring the goods elsewhere."

So far as GMR was concerned failure of supply would have catastrophic consequences. On the stocks as they believed them to be, including the units in the transport pipeline, production of the vans would have to be halted in about 24 hours - that would give rise to losses of over 500,000 per day and also have knock-on effects for other component suppliers operating on a similar basis to Mitras. Cessation of supply had, therefore, to be avoided at almost any cost. As it appeared to the GMR representatives, the choice lay between capitulation and attempting to obtain an injunction to compel supply by Mitras.

Attempt to get an injunction:

On the afternoon of 13 March 2006 GMR decided to apply without notice for an injunction. The matter came before Tugendhat J at 3.40 p.m. that afternoon. He was not willing to deal with the matter in the absence of the defendant and suggested that short notice could be given.

Final Fax from GMR to Mitras:

“As you know we continue strongly to refute your analysis of the contractual position. We also feel very strongly that we do not have any liability to pay Mitras the capital sums and enhanced piece prices. On the other hand, as you probably know, our stock of these parts is down to one days supply. As we mentioned in our fax yesterday, you have placed us in an impossible position. We have therefore decided to deal favourably with your demands.”

On 19 October 2006 GMR's solicitors sent a letter before action requiring repayment of these sums, totalling 451,021.80, with interest. They contended that the agreement of 15 March 2006 was unenforceable because (in essence) it was made under duress and there was no consideration for the agreement.

Holding

Citing Dyson J in DSND Subsea Ltd v Petroleum Geo Services ASA, [2000] BLR 530 at Para 131:

The ingredients of actionable duress are that there must be pressure, (a) whose practical effect is that there is compulsion on, or a lack of practical choice for, the victim, (b) which is illegitimate, and (c) which is a significant cause inducing the claimant to enter into the contract: see Universal Tanking of Monrovia v. ITWF [1983] AC 336, 400 B–E, and The Evia Luck [1992] 2AC 152, 165 G. In determining whether there has been illegitimate pressure, the court takes into account a range of factors. These include whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he confirmed and sought to rely on the contract.

The pressure may - and in the case of economic duress normally does -consist of a threat to breach a contract. In the present case, the pressure alleged by GMR was a threat by Mitras to breach the obligation owed by Mitras to GMR to supply units to IBC. I am satisfied that Mitras did indeed threaten to stop supplies unless its demands for payment of compensation and increase in price were accepted and met.

The fundamental concern of GMR was to avoid any halt in the production line at Luton,...