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High Court gives high-octane judgment comprehensively rejecting bad faith allegations made against Aston Martin

Credit: Sport Car Hub/ Shutterstock.com

On 20 December 2023, Dame Clare Moulder DBE (sitting as a Judge of the High Court) handed down judgment following the trial in Aston Martin MENA Limited v Aston Martin Lagonda Limited [2023] EWHC 3285 (Comm).

The Defendant (“AML”) is the well-known manufacturer of Aston Martin cars. The Claimant (“AMMENA”) is appointed as AML’s exclusive Distributor of Aston Martin cars in the Middle East and North Africa region, pursuant to a long-term Distribution Agreement which runs from 2018 until 2059. On the same day the Distribution Agreement was entered into, the parties also entered into an Agency Agreement, by which AMMENA appointed AML as its agent in respect of AMMENA’s operations as Distributor. The Agency Agreement was terminated in April 2021 and, following a voluntarily agreed ‘Transitional Period’, AMMENA resumed its obligations as Distributor in October 2021.

Both parties brought debt claims against each other pursuant to the terms of the Agency Agreement, with AMMENA seeking unpaid ‘Manager Committed Minimum Profit’ (“MCMP”), and AML seeking indemnification of losses it had suffered following the termination of two Retail Dealers (in Bahrain and Saudi Arabia) on AMMENA’s instructions. The Court rejected AMMENA’s claim for MCMP for 2021 inter alia on the basis that there was no obligation on AML to pay MCMP (or any other remuneration) to AMMENA during the Transitional Period given that the Agency Agreement had been terminated by then. AMMENA conceded the part of AML’s counterclaim concerning Bahrain but the Court rejected the part concerning Saudi Arabia.

Of more general interest, the main part of the case (which occupied nearly all of the disclosure and the evidence at trial) concerned AMMENA’s allegations that AML owed it express and/or implied duties of good faith during the Transitional Period (i.e. after the Agency Agreement had been terminated), and that AML had breached these duties in various ways including by nine specific actions. In a robust judgment (from paragraph 114 onwards), the Court comprehensively rejected this bad faith case:

1. First, the Court held that on their proper construction only certain of the express duties of good faith in the Agency Agreement applied during the Transitional Period, and rejected AMMENA’s contention that the Agency Agreement contained more wide-ranging implied duties to cooperate in good faith. The Court rejected both of AMMENA’s two pleaded formulations for the alleged implied term.

2. Second, the Court considered the content of the alleged duties of good faith (both the express duties and, if they existed, the implied duties). Having reviewed the key authorities on good faith, including the Court of Appeal’s recent judgment in Re Compound Photonics Group Ltd [2022] EWCA Civ 1371, the Court held that none of these duties required AML to “have regard to the effect of its actions on AMMENA”, including by taking into account AMMENA’s financial interests in making its decisions.

3. Third, in case it was wrong about either the existence or the content of the duties of good faith, the Court went on to consider in detail AMMENA’s nine specific allegations of breach (one of which had been abandoned on the eve of trial). In light of the documentary and witness evidence, the Court rejected each of these allegations, concluding that AML had acted in good faith at all times and that it had fully discharged all of its obligations.

Sophie Weber and Robert Harris (led by Iain Quirk KC of Essex Court Chambers) acted for AML, instructed by Slaughter and May. The judgment is available here.