Unique Pub Properties Ltd v Beer Barrels & Minerals (Wales) Ltd [2004] EWCA Civ 586

Case No 2003/1506

[2004] EWCA Civ 586

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

(MR JUSTICE NEUBERGER)

Venue Royal Courts of Justice

Date Friday 14 th May 2004

Strand,

London, WC2A 2LL

Before

THE RIGHT HONOURABLE LORD JUSTICE BROOKE

THE RIGHT HONOURABLE LORD JUSTICE CHADWICK

THE RIGHT HONOURABLE LORD JUSTICE SCOTT BAKER

Between

UNIQUE PUB PROPERTIES LIMITEDRespondent

BEER BARRELS & MINERALS (WALES) LIMITEDAppellant

(Transcript of the Handed Down Judgment of

Smith Bernal Wordwave Limited, 190 Fleet Street

London EC4A 2AG

Tel No: 020 7421 4040, Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

Mr Nicholas Green QC and Miss Catherine Taskis (instructed by Sprecher Grier Halberstam LLP of 30 Farringdon Street, London EC4A 4HJ) for Respondent

Mr Jeremy Cousins QC and Mr Philip Kremen (instructed by Hughmans of 59 Britton Street, London EC1M 5UU) for Appellant

Judgment

Lord Justice Chadwick :

[1]This is an appeal from an order made on 23 June 2003 by Mr Justice Neuberger on an application for summary judgment in proceedings brought by Unique Pub Properties Limited, the owner of some 4,000 tenanted public houses, against Beer Barrels & Minerals (Wales) Limited, a wholesale supplier of beers and other alcoholic and non-alcoholic drinks to the public house trade. The primary relief sought in those proceedings were injunctions restraining the defendant from selling or promoting the sale of beers to those of the claimant’s tenants who were subject to a ‘tie’; that is to say, to those tenants who held under leases which required them to purchase beers only from the claimant or its nominated supplier. The judge granted final injunctions in substantially the terms sought. He refused permission to appeal from his order. The appeal is brought with permission granted by this Court (Lord Justice Aldous) on 20 August 2003.

The underlying facts

[2]The judge found as a fact – and it has been common ground on this appeal – that public houses let by the claimant are let on terms which require the tenant to observe and adhere to “terms of trading” which impose a tie in one or other of three distinct forms, conveniently described as “Full Tie”, “Part Tie (Guest Provision)” and “Premium Tie”. The relevant terms of trading, incorporating the three distinct forms of tie, are reproduced as the first, second and third schedules to the order of 23 June 2003. I shall return to them in a later section of this judgment.

[3]The claimant has, for some time, sought to enforce its terms of trading indirectly, by making it difficult or impossible for its tenants to obtain supplies of tied products from third-party wholesalers such as the defendant company. With that object in mind the claimant has adopted the practice of circulating to wholesale suppliers the names of those of its public houses which are subject to a tie. On four occasions during the period October 2001 to October 2002 Mr Robert May, the claimant’s Operations Planning Director, sent to the defendant company (and, no doubt, to other wholesalers) lists showing the public houses said to be subject to a tie in one or other of the forms to which I have referred. Three of the covering letters – dated 3 January, 4 July and 15 October 2002 – contained the instruction:

“Please update your records and continue to ensure that you do not solicit beer and cider in breach of the ties in these pubs, or take unsolicited orders from these retailers.”

[4]The defendant company carries on business from premises on an industrial estate at Bridgend, Mid Glamorgan. By June 2003 the company had been trading for about eight years. Its turnover was then in excess of £4.5 million. The company has disclaimed any intention to make sales which would involve the breach of a tie to which the purchaser is subject; but points out the practical constraints imposed by its method of trading. Sales are made, predominantly if not exclusively, in response to telephone calls from prospective purchasers. The position is described in paragraph 4 of a witness statement signed by its managing director, Mr Gurmit Singh Bedesha, on 20 June 2003:

“The company has a team of 5 telesales people who, by their very nature, are there to take orders and not to enter into lengthy debates with the customer at the end of the telephone as to whether they are tied and if they are tied, what the nature of the tie is. Their instructions are to take orders and the system that the Defendant company has set up is that they ask as to whom the pub belongs and whether it is tied. If the publican states that he/she is tied then a supply would not be made. The company does not cold call on public houses and relies on publicans telephoning for orders.”

[5]It is plain that, other than the standing instruction to enquire of the purchaser whether or not he or she is subject to a tie, the defendant company made no cross check against the lists with which it had been supplied by the claimant. At paragraph 5 of his witness statement Mr Bedesha explains why it would be impracticable to do so:

“I must make it quite clear, on behalf of the defendant company that we do not seek to induce or break the Claimant’s ties but it would simply be uncommercial to put in place a system to check each and every telephone call. The company relies on low level operatives as telesales operators and whilst the company has a computer system, this is simply for invoicing and stock control. It is not particularly sophisticated. The Defendant company is advised by its lawyers that there is no requirement to install a computerised system to check telephone orders against the lists sent to the Defendant company by the Claimant, . . . [and] . . . it would simply be uncommercial to have the telesales people having to check through [those lists] when taking an order. As a matter of business it would be disastrous as I have no doubt that the publicans would go to one of our competitors as speed is very much the essence of the business. These people require delivery within sometimes, a matter of hours. It would mean that every call received from every customer would need to be checked, whether or not it was from a lessee of the Claimant.”

[6]On 13 January 2003 solicitors for the claimant company wrote to the defendant. The letter enclosed (for the first time) copies of the claimant’s standard terms of trading in the three forms to which I have referred. It went on:

“It has now come to our clients’ attention that you have been supplying tied products to one of its pubs, The Cavalier Public House, in Cardiff. Such supply gives our clients the right to seek an injunction from the Court to prevent such conduct and damages for any loss suffered by them. Unique and Voyager [Voyager Pub Group Limited, an associated company] have issued proceedings against wholesalers on a number of occasions in the past, and have succeeded in obtaining injunctions and undertakings to the Court. Our client’s remedies against you are not effected (sic) by the fact that they may also have remedies against the tenants concerned.”

Proceedings were threatened unless, by 22 January 2003, the defendant (i) gave undertakings not to supply, nor to promote the sale of, tied products to any of Unique or Voyager’s tied houses, (ii) provided details of the steps it would take (by putting in place either a blocking system or otherwise) to ensure that it complied with that undertaking and (iii) disclosed copies of all invoices, delivery notes and other related documents relating to supplies made of tied products to the Cavalier public house and to any other of Unique’s or Voyager’s tied houses.

[7]The undertakings sought were not forthcoming. On 16 January 2003 solicitors instructed on behalf of the defendant company wrote that they considered that the claimant’s actions “to be nothing less than a clear restraint of trade in relation to our clients”. These proceedings were commenced by the issue of a claim form on 25 February 2003.

The tie imposed by the terms of trading

[8]As I have said, it has been common ground that public houses are let by the claimant company on leases which require the tenant to observe and adhere to terms of trading. Those terms of trading are set out in a schedule (typically, the fourth schedule) to the lease. They impose a tie in one or other of the three forms – “Full Tie”, “Part Tie (Guest Provision)” and “Premium Tie”. In each case the tie contains a positive and a negative element. Paragraphs 2(1) and 3(1) of the Full Tie are in these terms:

“2. (1) Subject to the provisions of this Schedule the Tenant shall purchase all Specified Beers and Specified Ciders that he requires for sale in the Property only from the Company . . . 3. Subject to the provisions of this Schedule the Tenant shall not sell or expose for sale in the Property (1) any Specified Beer or Specified Cider not supplied by the Company . . .”

In that context “the Company” means the claimant or (where a notice under paragraph 9 is in force, its Nominees), “the Property” means the premises demised by the lease and “the Schedule” means the schedule to the lease in which the terms of trading are set out. “Specified Beers” and “Specified Ciders” mean, respectively, the “types of beer” or “types of cider” set out in Appendices 1 and 2 to the Schedule “however they are brewed fermented or packaged (and which are represented by the brands or denominations of beers [or ciders, as the case may be] stated in the Company’s Price List)”. The “Company’s Price List” means “the price list from time to time of the Company for the goods which it offers to supply to purchasers at the Tenant’s level of distribution”. (1) any Specified Beer or Specified Cider not supplied by the Company . . .”

[9]Paragraphs 2(1) and 3(1) of the Part Tie (Guest Provision) and the Premium Tie are in similar terms to the corresponding paragraphs of the Full Tie – save that(i) the Part Tie does not extend to ciders (or any drink other than beer),

(ii) the Part Tie allows for the purchase and sale of one (but not more than one) “Draft Cask-Conditioned Beer” and of low alcohol beers and

(iii) the Premium Tie extends to all beers and ciders (whether or not included in the Company’s Price List) and to certain other “Flavoured Alcoholic Beverages” (“FABs”).

[10]It can be seen that the Full Tie and the Part Tie (Guest Provision) are linked – through the definitions of “Specified Beers” and “Specified Ciders” - to the brands or denominations of beers and ciders (as the case may be) stated in the Company’s Price List. Paragraph 2(2) of each of those ties allows the Company, as often as it wishes, to add to the list of brands or denominations set out in the relevant appendix, to substitute a new brand or denomination for one previously listed, or to delete any brand or denomination listed. So, in order to know whether, from time to time, a type of beer or cider is a “Specified Beer” or a “Specified Cider” – and so subject to the restrictions on purchase and sale imposed by paragraphs 2(1) and 3(1) of the Full Tie or the Part Tie at that time – it is necessary to know the contents of the current version of the Company’s Price List. Paragraph 2(3) of each of the Full Tie and the Part Tie provides that the Company will notify the Tenant of any changes in the Company’s Price List “by issuing a new Company’s Price List or by an alternative fair and reasonable method”.

[11]Paragraph 9 of the Full Tie (paragraph 10 of the Part Tie) enables the Company to give notice to the Tenant that some or all of the beers and ciders will be supplied by Nominees for an indefinite or specified future period; and where such a notice is in force references in the earlier paragraphs to the Company or to the Company’s Price List are to be read as references to the Nominees or to the Nominees’ price list. In the case of all public houses other than those formerly owned by Voyager, the Company’s Nominees under that provision have been SupplyLine Services Limited. So, in order to know from time to time whether a type of beer or cider is a “Specified Beer” or a “Specified Cider” – and so subject to the restrictions on purchase and sale imposed by paragraphs 2(1) and 3(1) of the Full Tie or the Part Tie at that time – it has been necessary to know, also,(i) whether the public house is one in respect of which SupplyLine (or any other company) is the nominated supplier and, if so,

(ii) the contents of the current version of SupplyLine’s price list (or the price list of any other nominated supplier).

These proceedings

[12]Particulars of claim were served with the claim form. Paragraph 1 contains the allegation that the claimant is the owner of the reversionary interests immediately expectant on the leases of the public houses shown in the lists of fully tied, part tied and premium tied public houses (“the Lists”) shown at the first 41 pages of the bundle of annexed documents. Paragraphs 3-5 set out the terms of the Full Tie, the Part Tie and the Premium Tie. Paragraphs 6-8 describe the efforts made by Mr May to bring the contents of the lists to the knowledge of the defendant. At paragraphs 9 and 10 it is alleged(i) that the Cavalier public house was shown on the Premium Tie list sent to the defendant on 3 January 2002 and on all subsequent lists,

(ii) that beer, cider and FABs were supplied by the defendant to the tenant for sale at the Cavalier on various dates between 20 August and 16 November 2002,

(iii) that, by purchasing beer, cider and FABs for resale at the Cavalier, the tenant acted in breach of the Premium Tie, and

(iv) that, by selling beer, cider and FABs to the tenant in the knowledge that that such sale constituted a breach of the Premium Tie, “the Defendant procured and/or induced a breach of the Premium Tie and/or unlawfully interfered with the Premium Tie”. Paragraphs 11 and 12 refer to the demands made in the solicitors’ letter of 13 January 2003 (to which I have referred earlier in this judgment) and the defendant’s failure to give the undertakings sought. Paragraphs 13-15 (under the cross-heading “Grounds for making Claim”) are in these terms:

“13. By reason of the matters set out above the Defendant is aware of the terms of the Full Tie, the Part Tie and the Premium Tie and knows that public houses shown in the Lists are subject to either the Full Tie, the Part Tie or the Premium Tie. 14. The Defendant has failed to undertake not to supply beers and/or ciders and/or Flavoured Alcoholic Beverages to tied houses of the Claimant. By reason of this failure, and by reason of the supply made of beer, cider and Flavoured Alcoholic Beverages to the Cavalier, the Claimant has reason to believe and does believe that unless it is restrained by the Court the Defendant will or may sell or promote the sale of beers and/or ciders and/or Flavoured Alcoholic Beverages required for sale on premises to some or any of the public houses shown on the Lists. 15. By selling or promoting the sale of beers and/or ciders and/or Flavoured Alcoholic Beverages required for sale on the premises to the public houses shown in the Lists in the knowledge that they are subject to either the Full Tie, or the Part Tie or the Premium Tie the Defendant will wrongfully procure and/or induce breaches of, and/or unlawfully interfere with, covenants contained in the leases of those public houses and will cause loss to the Claimant which cannot be adequately compensated by an award of damages.”

[13]The defence was served on 28 March 2003. It was admitted that the defendant had supplied both alcoholic and non-alcoholic drinks to the Cavalier public house between the dates alleged; but denied that the defendant was then aware that the Cavalier was tied to the claimant, whether by way of premium tie or otherwise. Paragraph 8 of the defence took the point (foreshadowed in the solicitors’ letter of 16 January 2003, but not now pursued) that the tie was void, pursuant to article 81 of the EC Treaty or at common law. In paragraph 11 it is pleaded that (as is the case) the Lists refer to approximately 4,000 public houses; and that “the Defendant does not know, and should not be taken to know, the details of each entry on the Lists”.

[14]By notice dated 5 June 2003 the claimant applied for summary judgment under CPR Part 24.That application was supported by a witness statement signed by Mr May on 4 June 2003. In paragraphs 29, 34 and 35 of that statement he explained why, notwithstanding that the only evidence of sales by the defendant company to a tied public house relied upon is that in relation to the Cavalier, the claimant sought what may be described as “blanket” injunctions:

“29. The value of the Claimant’s pubs and the Unique Group as a whole suffers from tenants buying tied products from unauthorised sources. Tenants of licensed premises tend to keep in contact with each other both informally and via newsletters and the trade press. This means that buying from unauthorised sources has a tendency to spread through the Unique Group’s estate of public houses unless it is prevented. The history of tie enforcement in relation to these types of leases demonstrates that tenants have often sought to buy outside the tie, and that unchecked buying out can spread widely throughout an estate. . . . . . . 34. . . . it is impossible for the Claimant and Unique Group to accurately assess the level of purchases made by the whole estate of tied tenants from the defendant. In the normal course of events the Claimant will not discover that a breach has definitely taken place, although it may suspect this from the level of purchases from SupplyLine. It will only be when one of the Claimant’s employees actually sees a delivery by the Defendant take place, or otherwise sees firm evidence such as a delivery note, that a particular breach comes to light. 35 In any event, I believe that it would be unreasonable for the Claimant to have to suffer the delay and expense of proceedings for damages each time that it discovered an incident of the Defendant procuring a breach of contract.”

[15]It was in answer to that application, and to Mr May’s statement of 4 June 2003, that Mr Bedesha made the witness statement of 20 June 2003 to which I have already referred. In relation to the supplies which, as the defendant company admits, were made to the Cavalier, Mr Bedesha said this, at paragraphs 8 and 9:

“8. In regard to the particular pub “The Cavalier” the Defendant company had no idea that it was tied to the Claimants. The call would have come through to our telesales department who would have enquired as to whether the pub was tied to which the response was no and consequently supplies were made. . . . 9. The Defendant company certainly had no intention of inducing The Cavalier and nor did it so induce The Cavalier to breach its tie . . .”

The judgment below

[16]The application for summary judgment came before Mr Justice Neuberger on 23 June 2003. The judge identified two questions for decision:(i) whether, on the evidence and on a summary application, he could be satisfied that the defendant company had committed the tort alleged in the claim, and

(ii) whether, if so, he should grant a final injunction covering supplies to all the public houses included in the Lists annexed to the claim – or, it seems, any lists from time to time sent by the claimant to the defendant.

[17]The judge reminded himself of the classic statement, in the judgment of Lord Justice Jenkins in D C Thomson & Co Ltd v Deakin and others

[1952] Ch 646

, 697, as to the elements required to establish an actionable interference with contractual relations:

“ . . . first, that the person charged with actionable interference knew of the existence of the contract and intended to procure its breach; secondly, that the person so charged did definitely and unequivocally persuade, induce or procure the employees concerned to break their contracts of employment with the intent I have mentioned; thirdly, that the employees so persuaded, induced or procured did in fact break their contracts of employment; and fourthly, that breach of the contract forming the alleged subject of interference ensued as a necessary consequence of the breaches of the breaches by the employees concerned of their contracts of employment.”

Some thirty years later, in Merkur Island Shipping Corporation v Laughton and others

[1983] 2 AC 570

, 607F, Lord Diplock described that statement as “authoritative”. But, as the judge pointed out, Lord Diplock went on to observe (ibid, 608G) that the first of the four elements identified by Lord Justice Jenkins encompassed two requirements: (1) knowledge of the existence of the contract concerned and (2) intention to interfere with its performance.

[18]The judge held that both knowledge and intention were established in relation to the supplies to the Cavalier. He said this, at paragraph 21 of his judgment:

“. . . The defendant either knew in fact or, as I find, on the basis of the evidence at this stage, had a plain opportunity of knowing (of which opportunity he, for no good reason, failed to take advantage) the fact, that this public house was subject to a tie. In those circumstances, by supplying the tenant concerned with goods in breach of the tie, he must be treated as having had the intention which is requisite for this. In those circumstances, I consider that the basis of the claim is established . . .”

In reaching that conclusion the judge reminded himself that, on an application for summary judgment, he should be careful not to conduct a “mini-trial”. But he was satisfied that “on the facts as they are established, and making every reasonable assumption in favour of the defendant (which must be made in the light of the fact that these are part 24 proceedings)” the claim in relation to the Cavalier was made out.

[19]The judge recognised, of course, that his conclusion that there had been a tortious interference, during three or four months in 2002, with the contract between the claimant and the tenant of the Cavalier did not lead, necessarily, to the grant of a quiatimet injunction extending, for an indefinite period in the future, to some 4,000 public houses from time to time on lists which the claimant might send to the defendant. But, at paragraphs 28 and 29 of his judgment, he said this:

“28. . . . it appears to me that this is not, strictly speaking, a quia timet case. There have been a number of successive significant breaches by the defendant, albeit of one tie provision, namely that of the Cavalier. Further, I have evidence that I find believable . . . that breaches of tie provisions in public house leases are often very difficult to detect. It seems to me that this is inherently probable, particularly where one has a landlord with over 4,000 public houses spread over the country. 29 In the present case, therefore, one has more than an isolated incident, albeit that the incidents only relate to one public house, of the tort being committed by the defendant. One has the clear evidence of Mr [Bedesha] the managing Director of the defendant, that the circumstances are such that a series of breaches of tie, to which the defendant was party, was not a one-off or accident or oversight. It was something inherent in the defendant’s present system. Finally, one has the fact that there is no proposal that the present system will be altered.”

[20]The judge was satisfied that, primafacie, those features justified the grant of an injunction. But he reminded himself, again, that the application before him was for summary judgment; and that he should allow the matter to proceed to trial in the ordinary way unless satisfied that, on the arguments advanced, “a trial would not take matters any further forward”. He held that it would be wrong to allow the matter to proceed to trial. At paragraph 33 of his judgment he said this:

“33. The claimant’s case is simple. First, the defendant conducts its business in such a way that there has been a significant series of breaches over 3 months, which have led to an infringement of the tie in one public house in circumstances where the defendant is guilty of inducing a breach of contract. Secondly the defendant’s business is carried on in such a way that there is a substantial inherent risk, indeed, in my view, a likelihood, in the light of the number of public houses owned by the claimant, that this will occur again in the future. Thirdly the defendant is making it plain that he will do nothing to prevent such a recurrence. Fourthly, this is in the context of a market where the existence of ties is an inherent part of the public house business going back, as [counsel for the claimant] points out, well over 100 years, and was therefore a significant part of the business landscape when the defendant started business.”

[21]The judge was not impressed by Mr Bedesha’s assertion that it would be impossible for the defendant company to avoid the supply of tied products to tenants of the claimant without incurring disproportionate expense in the monitoring and checking of orders; orders which, as Mr Bedesha had pointed out, were normally received by those whom he described as low level telesales operatives. The judge thought that those difficulties could be overcome by the use of appropriate information technology. So he granted the injunctions sought in terms which restrained the defendant company from “knowingly” selling or promoting the sale of tied products to tenants of public houses owned by the claimant and notified by their inclusion in lists.

The issues on this appeal

[22]The first issue raised by the grounds of appeal annexed to the appellant’s notice is whether the judge was wrong to hold that the defendant’s supply of beer and other drinks to the tenant of the Cavalier public house, between August and November 2002, was an actionable interference with the contract, contained in the terms of trading incorporated in the lease of that public house, between the tenant and the claimant as landlord. It is said that the judge erred, first, in holding on the evidence before him that the defendant company had sufficient knowledge of the terms of that contract at any time before 13 January 2003; and, second, in holding that the defendant intended that the tenant should act in a way that was inconsistent with (or in breach of) those terms.

[23]The second issue is whether the judge was wrong to grant injunctions extending to all the public houses included in lists sent by the claimant to the defendant. It is said that, in the context of an application for summary judgment, the judge erred, first, in rejecting Mr Bedesha’s assertion that “it would be uncommercial and commercially disastrous” for the defendant to be required to check against lists sent to it in order to see if a public house was tied on each occasion that an order was received by telephone; and, second, in holding that there was a sufficiently strong probability that the defendant would commit further acts of tortious interference with the claimant’s contracts with its tenants to justify the grant of quiatimet relief.

[24]Implicit in the second issue, as it seems to me, is whether the judge was right to take the view that the supply of tied products to the claimant’s tenants without making a check against lists would be an actionable interference with the terms of trading incorporated in the leases under which those tenants held. The point is latent in the injunctions which the judge granted – as Mr Justice Pumfrey was to point out when a similar application for summary judgment came before him in Unique Pub Properties Limited v Licensed Wholesale Company Limited (seeparagraph 26 of his judgment,

[2003] EWHC 3386 (Ch)

, unreported, 13 October 2003). It is clear from the post-judgment correspondence between the parties’ advisers and the judge – which led to the inclusion of the word “knowingly” in the order - that the injunctions are not intended to restrain every sale by the defendant to the claimant’s tenants. The injunctions are only intended to restrain sales in relation to which the first element in Lord Justice Jenkins’ statement in Thomson v Deakin is satisfied. In any particular case – where breach of the injunctions were alleged – it would be necessary for the claimant to establish that the defendant “knew of the existence of the contract and intended to procure its breach.” But, plainly, the judge took the view that it would be enough – for the purpose of that requirement – if the claimant established that there had, in fact, been a supply of tied products to the claimant’s tenants without making a check against the lists which had been sent to the defendant.

Knowledge and intention

[25]The statement of principle in the judgment of Lord Justice Jenkins in Thomson v Deakin must be read with the facts of that case in mind. The contract which was said to be the subject of actionable interference in that case was a contract for the supply of paper by Bowaters Sales Ltd to the plaintiff company, who were printers and publishers of periodicals employing non-union labour. The defendants were officers of two trade unions, the Transport and General Workers Union (“TGWU”) and the National Society of Operative Printers and Assistants (“Natsopa”). In furtherance of an industrial dispute between Natsopa and the plaintiff company, Natsopa called for support from other unions. In response to that call, members of TGWU employed by Bowaters as loaders and drivers informed their employer that they might not be prepared to load and deliver paper to the plaintiff company. It was said that that threatened breach by the employees of Bowaters of their contracts of employment had led Bowaters to inform the plaintiff company that it would not be able to perform its contract for the supply of paper. It is in that context that Lord Justice Jenkins described the second, third and fourth elements of the tort in the terms that he did.

[26]The claim failed on the facts: in that it was not established that the defendants had any actual knowledge of the terms of the contract between the plaintiff and Bowaters, or that they had taken steps directly to procure a breach of the contracts of employment by Bowaters’ employees, or that there had been any breach of those contracts of employment.

[27]The present case is one in which the acts said to constitute the alleged interference with the contracts to which the claimant’s tenants are party are dealings by the defendant company with the tenants themselves. In that context, the passage in the judgment of Lord Justice Jenkins in Thomson v Deakin which identifies most clearlythe need for knowledge, and the nature of the knowledge required, is, I think, that at

[1952] Ch 646

, 693-694:

“After full and elaborate argument I am satisfied, first, that . . . there may . . . be an actionable interference . . . with contractual rights where other means of interference than persuasion or procurement or inducement, in the sense of influence of one kind or another brought to bear on the mind of the contract breaker to cause him to break his contract, are used by the interferer; but, secondly, that (apart from conspiracy to injure, which . . . is not in question . . . ) acts of a third party lawful in themselves do not constitute an actionable interference with contractual rights merely because they bring about a breach of contract, even if they were done with the object and intention of bringing about such breach. With those two propositions in mind I turn to consider what are the necessary ingredients of an actionable interference with contractual rights. The breach of contract complained of must be brought about by some act of a third party (whether alone or in concert with the contract breaker) which is in itself unlawful, but that act need not necessarily take the form of persuasion or procurement or inducement of the contract breaker, in the sense above indicated. Direct persuasion or procurement or inducement applied by the third party to the contract breaker, with knowledge of the contract and the intention of bringing about its breach, is clearly to be regarded as a wrongful act in itself, and where this is shown a case of actionable interference in its primary form is made out: Lumley v Gye (1853) 2 E & B 216. But the contract breaker may himself be a willing party to the breach, without any persuasion by the third party, and there seems to be no doubt that if a third party, with knowledge of a contract between the contract breaker and another, has dealings with the contract breaker which the third party knows to be inconsistent with the contract, he has committed an actionable interference: see, for example, British Industrial Plastics Ltd v Ferguson [1940] 1 All ER 479, where the necessary knowledge was held not to have been brought home to the third party; and British Motor Trade Association v Salvadori [1949] Ch 556 . . . .”

[28]The present case, as it seems to me, is one in which – if the purchase of tied products from the defendant company by one of the claimant’s tenants was or would be in breach of the terms of trading in the lease under which that tenant held – the tenant (as the contract breaker) is a willing party to that breach. It is a case which falls within the second class to which Lord Justice Jenkins referred in the passage which I have just set out. In such a case the tort of actionable interference will not be made out unless the breach of contract by the tenant is brought about be some act of the defendant company “which is itself unlawful”; but that requirement will be satisfied where the defendant “with knowledge of a contract between the contract breaker and another, has dealings with the contract breaker which the third party knows to be inconsistent with the contract”. It is the defendant’s knowledge that the supply of tied product to the tenant is inconsistent with the tenant’s contract with the claimant that makes the act of supply unlawful. And it is the knowledge that the supply of tied product is inconsistent with the tenant’s contract with the claimant, coupled with the supply made in that knowledge, which satisfies the requirement that the defendant must act with the intention of bringing about a breach of the tenant’s contract.

[29]The need for a claimant to show, in a case of this nature, that the defendant against whom he seeks to establish the tort of actionable interference with a contract between himself and the contract breaker knows that his dealing with the contract breaker is inconsistent with that contract was emphasised by the House of Lords in British Industrial Plastics Ltd and others v Ferguson and others

[1940] 1 All ER 479

. The question in that case (so far as material in the present context) was whether one of the defendants, James Ferguson & Sons Ltd, knew that a process for the manufacture of chemicals offered to it by a former employee of the plaintiff was subject to a restriction against disclosure imposed by a termination agreement made between the former employee and the plaintiff at the time of his leaving the plaintiff’s employment. The trial judge had held that the defendant company through its officers, honestly although stupidly, had thought that the process was not subject to the restriction in the termination agreement. The House of Lords upheld his view that, in those circumstances, an essential element in the tort had not been made out. Their conclusion is, I think, accurately summarised in the editorial note at

[1940] 1 All ER 479

, 480A-B:

“Where a contractual relationship exists between parties, it is a tort for anyone wrongfully to induce one of the parties to break the contract so as to cause damage. There is a right of action whether or not specific damage has accrued. The word “wrongfully” in such a case is here construed to mean knowingly rather than maliciously. It would seem to be sufficient that a party should act bonafide in the matter, and he will not be liable to an action by reason of the fact that he has acted mistakenly, so long as it cannot be said that he was wilfully shutting his eyes and excluding a means of knowledge. Thus, where a party suspects that there is a possibility that an act of his will in effect induce a breach of contract, and he adopts means of testing that possibility which he honestly believes to be a proper test, he does not render himself liable to an action because he is mistaken as to the efficacy of that test.”

Lord Russell of Killowen put the point in these terms (ibid, 483A-B):

“So far from the respondents closing their ears to anything which might turn their suspicion into a certainty, and so being fixed with constructive knowledge, they adopted a course (as found by Porter J) for the purpose of ascertaining, and by which they thought they would decisively ascertain, whether or not the process was the property of the plaintiffs. Those being the facts, it would be, in my opinion, impossible to hold that the respondents possessed, constructively or otherwise, the knowledge which is an essential ingredient to the cause of action”

. The supply to the Cavalier public house.

[30]With those principles in mind, I turn to the first issue raised by this appeal: was the judge wrong to hold that the defendant’s supply of beer and other drinks to the tenant of the Cavalier public house, between August and November 2002, was an actionable interference with the contract between the tenant and the claimant contained in the terms of trading incorporated in the lease of that public house?

[31]It is said that the judge was wrong to hold that the defendant company had sufficient knowledge of the terms of trading in the Cavalier lease at any time before 13 January 2003. It was by a letter of that date that the claimant’s solicitors informed the defendant company, in terms, that the Cavalier was a tied public house owned by the claimant; and it was under cover of that letter that the defendant company was first sent copies of the three forms of tie in the terms of trading. The letter did not, itself, identify which form of tie was applicable to the Cavalier; but (as is common ground) that could have been ascertained from a close examination of the lists which had been sent to the defendant on earlier occasions. In the context of the claim in respect of actionable interference with the contract between the claimant and the tenant of the Cavalier by the supply of beers and other products in the months of August to November 2002 it is important to keep in mind that the “knowledge” of the defendant upon which the claimant relies is that derived from letters and lists sent on 3 January, 4 July and 15 October 2002.

[32]The letters sent on 3 January and 4 July 2002 are in substantially the same terms. So far as material they inform the reader that “Unique Pub Company has continued to convert existing houses to a full tie for all beers and ciders and to let pubs on new premium tied terms”; and they contain the instructions to “update your records” and to “continue to ensure that you do not . . . take unsolicited orders from these retailers” which I have already referred. The letters are said to enclose four lists, described as follows:

“1. Unique Pub Company pubs fully tied for all beers and ciders. 2. Unique Pub Company pubs tied for beers only, excluding NABLABs and one guest cask-conditioned beer. 3. Unique Pub Company pubs tied for all beers, ciders and FABs. (premium tie) 4. Voyager pubs now let and tied for all beers, ciders and FABs. (premium tie)”

The letter sent on 15 October 2002 is in the same terms; save that only lists 1, 2 and 3 were enclosed. Public houses formerly owned by Voyager (amongst which was the Cavalier) had been transferred into the claimant’s ownership in or about September 2002. In consequence, list 4 had been merged in list 3.

[33]The lists sent on 4 July and 15 October 2002 were described as lists “as at 30 June 2002” and “as at 8 October 2002” respectively. It is plain that, of the 4,000 odd public houses shown on the lists, some were changing hands from time to time; indeed both those letters refer to “those that have been sold out of our estate”. It is plain, also, that the descriptions in the letters “fully tied for all beers and ciders” and “tied for beers only” – in relation to lists 1 and 2 – are less than precise; in each case whether a brand or denomination of beer or cider (as the case might be) was, in fact, subject to a tie turned on whether that brand or denomination of beer or cider was included in the Company’s (or the Nominees’) Price List. Further, even the Premium Tie was not absolute; paragraph 4(2) of the terms of trading imposing the premium tie provided that if the Company failed to ensure the supply of beer, cider or flavoured alcoholic beverage for a period of fourteen days, it would (on the tenant’s application) release the tenant from the tie “to the extent and for so long as is necessary having regard to such failure”. And there is nothing in the letters or in the lists to indicate what it is that the tie requires, or prohibits. In fact, as I have explained earlier in this judgment, the tie contained a positive element – “the Tenant shall purchase all Beers [etc] that he requires for sale in the Property only from the Company” – and a negative element – “the Tenant shall not expose for sale in the Property any Beer [etc] not supplied by or on behalf of the Company”. But the existence of those two distinct elements could not have been identified from the letters or the lists.

[34]The question for the judge was whether, in those circumstances and at the time of the supplies to the Cavalier in August to November 2002, the defendant company “knew of the existence of the contract [between the claimant and the tenant] and intended to procure its breach.” In my view the judge was wrong to answer that question in the affirmative. On the basis of the evidence which was before him, he ought to have held that the claimant had not established that the defendant company had the requisite knowledge and intention. There are four factors which lead me to that conclusion.

[35]First, I am not persuaded that – in the present case at least – means of knowledge is to be equated with the knowledge. The judge addressed this point at paragraphs 15 to 17 of his judgment. After referring to the observation of Lord Denning, Master of the Rolls, in Emerald Construction Ltd v Lowthian

[1966] 1 WLR 691

, 700H, that:

“Even if they did not know of the actual terms of the contract but had the means of knowledge which they deliberately disregarded, that would be enough. Like the man who turns a blind eye.” the judge went on to say this: “16. If, in this case, the claimant had provided the defendant with a very large number of files with a great deal of vaguely relevant, or wholly irrelevant, material, as well as highly relevant material, leaving it to the defendant to trawl through those files to identify which public house was subject to a tie in favour of the claimant, then I think there would be a powerful argument to the effect that the defendant was not supplied with the requisite information. In such a case, it would be unfair to impose on the defendant a duty to go conscientiously through each of the files to identify for itself which public house was subject to a tie in favour of the claimant. 17. On the other hand, where, as in this case, the claimant has supplied the defendant with a comprehensive list identifying clearly each and every public house which is subject to a tie, it seems to me that it will not do for the defendants simply to say that he did not read the list, that the list was too long, that he could not be bothered to read the list, or any similar excuse.”

[36]That, as it seems to me, is to miss the point. This is not a “blind eye” case; where the defendant has chosen not to search for what he knows is there to be found. Primafacie, at least, a negative answer given by the purchaser to the inquiry which the defendant company had instructed its telesales staff to make would lead the defendant to think that the public house in respect of which the order was to be placed would not be on the list. Nor is this a case in which, once read, the information in the list is at all likely to be retained in the memory. The object for which the lists were sent to the defendant company would not be served by Mr Bedesha (or anyone else) reading the lists when the letters arrived. As Lord Justice Millett pointed out in Bristol and West Building Society v Mothew

[1998] Ch 1

, 15G, to hold that defendant must be taken to have had the relevant facts in his mind at the time when he did the act complained of - because he had known them at one time and had the means to retrieve that knowledge – is to confuse knowledge with means of knowledge. If the object for which the lists were sent to the defendant company was to be served what was required was a system which enabled the information contained in the lists to be retrieved by telesales staff at the time when it was needed – and then with the minimum of delay.

[37]Second, knowledge of the contents of the lists – if (contrary to my view) that knowledge is to be attributed to the defendant – is no more than knowledge that the tenant of the Cavalier was subject to some form of tie as at the date that the lists were compiled. As I have sought to explain, knowledge that the tenant was subject to some form of tie at the date that the relevant list was compiled does not equate with knowledge that the person who, at some later date, orders beer for delivery to the Cavalier is also subject to some form of tie. As the letters themselves make clear, the position is not static. Checking the lists is not enough; some further inquiry is required to establish whether or not a supply would be in breach of tie at the time of the order.

[38]Third, knowledge that the person who orders beer for delivery to the Cavalier is subject to some form of tie – described in the letters as a tie “for all beers ciders and FABs. (premium tie)” – is not knowledge that the purchase of beer from the defendant will, necessarily, involve a breach of the obligations imposed by the tie. Whether or not a purchase of beer from the defendant does involve a breach of the obligations imposed by the terms of trading in the Cavalier lease depends on what those obligations are – a matter which the defendant cannot be taken to have known in 2002, there being no evidence that those obligation were then in a form common throughout the trade – and on the circumstances in which and the purpose for which the purchase is made. By way of example, an order by the tenant of a tied house for beers or ciders which were not intended for resale in that public house would not be in breach of tie.

[39]Fourth, the uncontradicted evidence of Mr Bedesha was that the defendant’s telesales staff were under instructions “to ask as to whom the pub belongs and whether it is tied”; and that, in the case of the Cavalier, “The Defendant company had no idea that it was tied to the Claimants. The call would have come through to our telesales department who would have enquired as to whether the pub was tied to which the response was no . . .” The judge did not reject that evidence; and, for my part, I doubt whether it would have been open to him to do so on an application for summary judgment. That evidence points strongly to the conclusion that, whatever might have appeared from the lists sent to the defendant, the defendant did not know, at the time it accepted the order, that the person placing the order was subject to a tie. As I have sought to explain, it does not necessarily follow from the fact that, as at the date the relevant list was compiled, a public house was properly included on it that that public house remained subject to a tie at some subsequent date. And it has not been established that the defendant was obliged to treat the list as definitive and immutable in circumstances where the list was contradicted by or inconsistent with information given by the customer.

[40]Further, however imperfectly the defendant’s telesales staff may have given effect to the instructions described by Mr Bedesha, and accepting that there must be some risk that not all customers will give an honest or accurate response to the enquiry which those instructions required, it is impossible (absent an allegation of bad faith, which is not made) to reconcile those instructions - which are inexplicable unless given with the intention of avoiding sales to public houses in contravention of a relevant tie - with an intention on the part of the defendant company to interfere with the claimant’s terms of trading with its tenants by procuring or inducing a breach of those terms.

[41]For those reasons I would hold that the claimant failed to establish, on its application for summary judgment, that the defendant had acted tortiously in supplying beer and other tied products to the Cavalier in the months of August to November 2002.

The injunctions

[42]In so far as the judge based his decision to grant injunctions for the future on his finding that, in the past, there had been tortious interference with the claimant’s contract with the tenant of the Cavalier, his reasoning cannot stand. But the judge gave other reasons, at paragraph 33 of his judgment, to which I have referred. It is necessary to ask whether those other reasons are sufficient to justify the grant of what would, without doubt in those circumstances, be quia timet relief.

[43]The judge held that the defendant’s business was carried on in such a way that there was a substantial inherent risk - indeed, he thought, a likelihood - that tortious interference with the claimant’s terms of trade would occur in the future. He observed that the defendant was refusing to do anything to prevent that. But, as I have said, the judge did not reject Mr Bedesha’s evidence that the defendant’s telesales staff were under instructions to make the enquiry which – if answered honestly by the customer – would avoid supplies being made by the defendant in circumstances where the claimant’s tenants were in breach of the ties to which they were subject. And he did not find that the instructions which (as Mr Bedesha had said) had been given were not, in fact, being carried out. In those circumstances the risk which the judge identified arises not from anything that the defendant company is doing – other than carrying on its business in a lawful manner – but from the fact that the defendant is not doing all that (as the judge thought) it could do to protect the claimant from the foreseeable possibility that some of its tenants would give a dishonest answer to the defendant’s enquiry.

[44]The question, therefore, as it seems to me, is whether the claimant has established – to the standard required to persuade a court to grant quia timet relief on an application for summary judgment – that, in circumstances where the defendant does not, in fact, know that the supply which it agrees to make in response to a telephone order will be in breach of tie, the defendant is acting wrongfully in making that supply without doing all that it could do to protect the claimant from the foreseeable possibility that the person placing the order will give a dishonest answer to the enquiry made by its telesales operative. In my view the answer to that question is “No”.

[45]I accept, of course, that the question has to be answered in a context where – as the judge pointed out – “the existence of ties is an inherent part of the public house business going back . . . and was therefore a significant part of the business landscape when the defendant started business.” But, even in that context, it is, to my mind, by no means self evident that a supplier who is on notice that the person seeking to be supplied may be doing so in breach of a tie covenant is required to do more than ask that person whether there is, in fact, any relevant tie in force which the supply would infringe. To impose some further obligation it would, as it seems to me, be necessary to be satisfied (at the least) that the risk of receiving a false or incorrect answer to that enquiry was such that no honest supplier would think that reliance could be placed upon the assurance that there was no tie which the supply would infringe. But then, of course, it would be necessary to ask what more the honest supplier has to do. How is he to determine whether there is a relevant tie in force at the time of the supply? If he knows that the public house was tied to the claimant at some time in the past, must he ask the claimant whether that tie is still in force; and, if so, whether the supply would infringe it? And is he bound to accept the claimant’s assertion that the supply would infringe a relevant tie; or is he entitled (or bound) to attempt to determine the issue; and, if so, how? These are not questions suitable for determination on assumed, and incomplete, facts on an application for summary judgment.

[46]I should add this. The letter of 13 January 2003 from the claimant’s solicitors refers to “proceedings against wholesalers . . [issued] . . . on a number of occasions in the past” in which injunctions have been obtained. We have been told only of the proceedings issued by the claimant against Licensed Wholesale Company Limited on 10 December 2001 – to which I have referred. Summary judgment in those proceedings was refused by Mr Justice Pumfrey on 13 October 2003 – that is to say, some time after the letter of 13 January 2003 and the judgment in the present case. It is plain that that case provides no support for the assertion in the letter of 13 January 2003 that “injunctions have been obtained in the past”. We were shown no other case which does support that assertion.

[47]It is clear from Mr Justice Pumfrey’s judgment in that case,

[2003] EWHC 3386 (Ch)

, that the basis on which relief was sought was indistinguishable from that in this case. At paragraph 26 of that judgment Mr Justice Pumfrey pointed out that it was a basic principle of relief by way of injunction that the terms of the injunction should make it absolutely clear to the defendant what it must and must not do. As he said:

“It is not permissible to place upon a defendant an uncertain obligation by way of injunction”

. He explained that that was why the insertion of the word “knowingly” in the injunctions sought was not a permissible qualification:

“If the defendant asks and the tenant lies, a serious issue on knowledge arises”

. And that was not an issue which it would be sensible to put off for resolution on an application for committal for breach of the injunction. I respectfully agree. The question what the defendant must and must not do to avoid committing the tort of actionable interference with the terms of trading agreed between the claimant and its tenants should (so far as possible) be resolved before injunctions are granted.

[48]In paragraph 28 of his judgment in Unique Pub Properties Limited v Licensed Wholesale Company Limited Mr

Justice Pumfrey said this:

“. . . the claimants have here potentially a very important cause of action which, if they are right, will enable them, without huge expenditure on policing their individual tenants, to maintain the effect of their tie clauses. One can understand precisely why the claimants consider that to be desirable, and why, on a proper analysis it may well turn out to be highly desirable. Those considerations cry out for the case to be fixed for a speedy trial. . . .”

I agree that, if the claimant wishes to pursue claims to injunctive relief against suppliers – rather than, itself, incurring the expenditure of policing individual tenants – it should take these actions to trial.

Conclusion

[49]I would allow this appeal and set aside the order of 23 June 2003. If, in the light of our judgments, the claimant wishes to pursue its claims to relief in this action, I would think it right (subject to any submissions which the parties may wish to make) to direct that the trial of this action be heard with the trial of the claimant’s action against Licensed Wholesale Company Limited.

Lord Justice Scott Baker:

[50]I agree.

Lord Justice Brooke:

[51]I also agree.

Order:

[1]The judgment of Mr. Justice Neuberger of 23rd June 2003 be set aside.

[2]The injunctions ordered pursuant to the aforesaid judgment be discharged forthwith

[3]The respondent’s application for summary judgment, alternatively for interim injunctions, be dismissed

[4]The respondent do pay the appellant’s costs of the incidental to the appeal and of the application before Mr. Justice Neuberger, such costs to be subject to detailed assessment if not agreed.

[5]The respondent to make an interim payment of £45,000 on account of such costs mentioned above by 4 p.m. on 28th May 2004 (Order does not form part of the approved judgment)