Enterprise Inns Plc v Palmerston Associates Ltd & Anor [2011] EWHC 3165 (Ch)

Case No HC11C02017[2011] EWHC 3165 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 30/11/2011
Before
MR JUSTICE MORGAN
Between
ENTERPRISE INNS PLCClaimantPALMERSTON ASSOCIATES LIMITEDDefendantsPAUL RIGBYDefendantJAMES YOUNGERDefendant
Mr Martin Rodger QC (instructed by Gosschalks) for ClaimantMr Jonathan Seitler QC and Mr Julian Greenhill (instructed by DLA Piper UK LLP) for DefendantsHearing Hearing date: 25 October 2011
JudgmentMr Justice Morgan :Introduction
[1]The Claimant is the landlord and the First Defendant is the tenant of a public house known as the Lord Palmerston, at 91 Lordship Lane, East Dulwich, London, SE22. The public house is held on the terms of a Lease dated 4th August 1989 (“the 1989 Lease”) as varied by a Deed dated 17th July 1997 (“the 1997 Deed”) and a further Deed dated 31st May 2001 (“the 2001 Deed”).[2]Certain provisions which are principally contained in the 2001 Deed create what can be called, in shorthand, a “beer tie”. Although that is a convenient shorthand, the provisions are not confined to beer but extend to cider and perry. The provisions are detailed and consist of both an exclusive purchasing obligation and a restriction on competition.[3]The parties disagree as to what the relevant provisions mean and how they operate. That disagreement led Vos J on 29th June 2011 to direct the trial of a preliminary issue designed to answer the question as to who is right about the meaning and effect of the relevant provisions. The provisions contain definitions of “Specified Beers” and “Specified Ciders”. These definitions are fundamental to the operation of the relevant provisions.[4]The Claimant seeks a declaration that on the true construction of the 1989 Lease, as varied by the 1997 Deed and the 2001 Deed, “Specified Beers” and “Specified Ciders” are those of a type which fulfil two conditions, namely:(1) the type is listed in Appendix 1 or Appendix 2; and(2) there is a least one brand of this type on the relevant Price List.[5]The First Defendant seeks a declaration that on the true construction of the 1989 Lease, as varied by the 1997 Deed and the 2001 Deed, “Specified Beers” and “Specified Ciders” are those beers and ciders (as the case may be) which are both:(1) of a type set out in Appendix 1 or 2; and(2) of a brand or denomination listed in the relevant Price List[6]The resolution of the dispute requires the court to construe the relevant provisions in accordance with their terms but also in accordance with their perceived commercial purpose. In carrying out that task, the court does not confine itself to the language of the relevant provisions but also takes into account any relevant background circumstances where information about those circumstances would have been reasonably available to the contracting parties.[7]Although the preliminary issue is confined to the interpretation of the relevant provisions, the Claimant has taken the court on an extensive tour of what it says was the regulatory position, principally under European competition law, in relation to purchasing obligations and restrictions on competition of the kind with which this case is concerned. I am not asked to rule on the application of any of the regulatory provisions to the contractual provisions in this case but it is said that an understanding of the regulatory position is needed to enable the court to understand the meaning and effect of the relevant provisions and, in particular, to understand their commercial purpose.[8]Mr Rodger QC appeared on behalf of the Claimant and Mr Seitler QC and Mr Greenhill appeared on behalf of the Defendants. The First Defendant is the sole tenant under the lease of the public house. In the remainder of this judgment, I will refer to the position of the First Defendant alone.

The 1989 Lease

[9]The 1989 Lease relating to this public house was made between Watney Truman Limited as the lessor and Mr and Mrs R W Buckley as the lessee. The 1989 Lease was for a term of 20 years commencing on 1st June 1989. The 1989 Lease provided for Terms of Trading which were set out in the original First Schedule to that lease. Those provisions contained four principal strands. First, there was an exclusive purchasing obligation which referred to Specified Beers and Specified Non-beer Drinks. Secondly, there were restrictions on competition which again referred to Specified Beers and Specified Non-beer Drinks. Thirdly, there was a Minimum Purchasing Obligation. Fourthly, there was a stocking obligation in relation to wines and spirits. The definitions in the 1989 Lease of Specified Beers and Specified Non-beer Drinks were similar to, but not identical to, the definitions of similar terms in the 2001 Deed which fall to be construed in this case.

The 1995 litigation

[10]In 1995, Mr and Mrs R W Buckley commenced High Court proceedings (Case No. 1995 B No. 2) against Watney Truman Ltd and also against Inntrepreneur Estates (GL) Ltd, Truman Ltd and Courage Ltd. The claim was in similar terms to claims brought by many tenants of tied public houses at around that time. One of the other tenants was a Mr Bernard Crehan. Mr Crehan’s case became the test case and a reported decision in relation to the litigation involving Mr Crehan is referred to later in this judgment. I was not shown a copy of the pleadings in the case brought by Mr and Mrs Buckley but I was told that they claimed that the relevant provisions which then applied in the lease of The Lord Palmerston public house amounted to an unlawful restriction on competition contrary to Article 85 of the EEC Treaty.[11]In around July 1997, Mr and Mrs Buckley settled their High Court proceedings with their landlord, amongst others, on terms that they would enter into a Deed of Variation of the 1989 Lease and a Purchasing Agreement.

The 1997 Deed

[12]On 17th July 1997, Inntrepreneur Pub Company (GL) Limited (who had become the landlord under the 1989 Lease) and Mr and Mrs Buckley as the tenant under the 1989 Lease entered into the 1997 Deed. The original Terms of Trading in the First Schedule to the 1989 Lease were deleted and replaced by new provisions contained in Appendix 1 to the 1997 Deed. The new Terms of Trading continued to impose an exclusive purchasing obligation and a restriction on competition. The provisions contained a definition of Specified Beers which is very similar if not identical to the definition of Specified Beers in the 2001 Deed. The 1997 Deed did not refer to Specified Ciders. The former Minimum Purchasing Obligation and the former stocking obligation in relation to wines and spirits were removed.[13]The 1997 Deed also included at Appendix 2 the following provision which was added as a new clause in the 1989 Lease: “Appendix 2 14. AGREEMENTS “(A) The Company may at any time by notice to the Tenant require the tenant to comply with the new terms of trading which shall be identical to the Terms of Trading save to the extent that the Company by the notice requires the Tenant:-(i) to stock and make prominent a display of such brands of the types of beers listed as Specified Beers as the Company or the Nominees shall specify by reference to the brands listed in the Company’s Price List prevailing at the time such notice is served (including, at the Company’s option, such of the brands as were listed in the Company’s Price List prevailing at the date of the Deed of Variation pursuant to which the clause was inserted into this Lease) (the “Specified Brands”), and(ii) not to sell or expose for sale in the Property any Specified Beer which is not a Specified Brand other than one brand of Draught Cask-Conditioned Beer and where the Company has given notice of the aforesaid then during the currency of each and every notice given hereunder all references to Specified Beers in paragraphs 2,3,7 and 9 inclusive of the new terms of trading shall be read and constructed as including references to the Specified Brands the subject of any such notice of notices. (B) Where notice has been served on the Tenant under sub-clause (A) above, if the Tenant is released (either by such notice or subsequently) from any of its obligations to purchase the Specified Brands from the Company or its Nominees (the Tenant hereby acknowledging and agreeing to the Company’s right to release such obligations), the Company may by notice to the Tenant (“a Company’s Notice”) require an additional review of the rent in accordance with the rent review provisions contained in the Lease as if the date one month after the Company’s Notice were a Rent Review Date and for the purpose of such review (and any subsequent review) the terms of the Lease which have been varied are to be taken into account in their varied forms. (C) Nothing in this Clause is to affect the timing or implementation of any subsequent increase in the Rent. (D) Where notice has been served on the Tenant under sub-clause (A) above, references herein to the Terms of Trading shall thereafter be read and construed as references to the new terms of trading specified in such notice.” (i) to stock and make prominent a display of such brands of the types of beers listed as Specified Beers as the Company or the Nominees shall specify by reference to the brands listed in the Company’s Price List prevailing at the time such notice is served (including, at the Company’s option, such of the brands as were listed in the Company’s Price List prevailing at the date of the Deed of Variation pursuant to which the clause was inserted into this Lease) (the “Specified Brands”), and (ii) not to sell or expose for sale in the Property any Specified Beer which is not a Specified Brand other than one brand of Draught Cask-Conditioned Beer[14]Also on 17th July 1997, the landlord and the tenant under the 1989 Lease (and another party) entered into a Purchasing Agreement; it is not necessary to refer to the terms of that agreement.

The 2001 Deed

[15]On 31st May 2001, Unique Pub Properties Ltd (who had become the landlord under the 1989 Lease) and Mr and Mrs Buckley entered into the 2001 Deed. The 2001 Deed extended the original term of the lease so that it became a term for 30 years from and including 1st June 1989. The 2001 Deed replaced the Terms of Trading in the First Schedule to the 1989 Lease (as varied by the 1997 Deed) with the Terms of Trading contained in Appendix A to the 2001 Deed.[16]Appendix A to the 2001 Deed was in these terms: “APPENDIX A THE FIRST SCHEDULE 18. TERMS OF TRADING 1. In this Schedule (and elsewhere in this Agreement):-(1) “the Appendices” means the Appendices to this Schedule and reference to an “Appendix” is a reference to one of the Appendices(2) “Specified Beers” means the types of beer set out in Appendix 1 however they are brewed fermented or packaged (and which are represented by the brands or denominations of beers stated in the Company’s Price List)(3) “Specified Ciders” means the types of cider set out in Appendix 2 however they are brewed, fermented or packaged (and which are represented by brands or denominations of cider stated in the Company’s Price List)(4) “Unspecified Beers” means any beers which are not Specified Beers(5) “Unspecified Ciders” means any ciders which are not Specified Ciders(6) “Company’s Price List” means the price list from time to time of the Company for the drinks which it offers to supply to purchasers at the Tenant’s level of distribution the current version of which is annexed to this Agreement 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 (2) The Company may as often as it wishes: (a) add to the list of brands or denominations representing the types of beer and cider set out in the Appendices and/or (b) substitute a brand or denomination for a previous one listed and/or (c) delete any brand or denomination listed (3) The Company will notify the Tenant of any changes in the Company’s Price List by issuing a new Company Price List or by an alternative fair and reasonable method 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 or (2) any Unspecified Beer or Unspecified Cider unless:- (a) it is packaged in bottles cans or other small containers; or (b) it is in draught form and the sale of that beer or cider in draught form is customary or is necessary to satisfy a sufficient demand from the Tenants customers 4. ON each occasion that the Tenant brings a brand or denomination of Unspecified Beer or Unspecified Cider onto the Property for the first time under paragraph 3(2) above the Tenant must give notice to the Company of such brand or denomination and advise whether it is draught or packaged 5. BEFORE selling or exposing for sale on the Property any Unspecified Beer or Unspecified Cider in draught form the Tenant must obtain the Company’s written confirmation (or deemed confirmation under paragraph 6 below) that the condition set out in paragraph 3(2)(b) above is satisfied 6. IF the Tenant makes an application for confirmation under paragraph 5 above the Company must respond in writing within seven days of receipt failing which it shall be deemed to have given confirmation 7. The Tenant must not advertise on the Property goods which are not supplied by the Company except in the same proportion that those goods bear to the total turnover of the Tenant in the Property 8. (1) The Company will use its best endeavours to ensure the supply to the Tenant at the prices in the Company’s Price List of such quantities of Specified Beers and Specified Ciders (a) as he may require and be obliged to purchase from the Company or the Nominees under this Schedule and (b) that he is ready and able to pay for (2) If the Company at any time fails to ensure the supply of such Specified Beer and/or Specified Cider for a period of fourteen days the Company will on the Tenant’s application release him from his obligations under this Schedule to the extent and for so long as is necessary having regard to such failure 9. (1) Subject to sub-paragraph (3) the Company may at any time give notice to the Tenant that supplies of some or all beers and/or ciders under this Schedule will in future (or for a specified period) be supplied by Nominees appointed by the Company and while that appointment subsists:- (a) references to the Company in paragraphs 1 to 7 inclusive of this Schedule shall be construed as references to those Nominees (b) notice to be given by or to the Company shall be given by or to those Nominees (c) references to the Company’s Price List shall be construed as references to the price list of those Nominees (d) the obligations of the Tenant under this Schedule shall be for the joint and several benefit of the Company and the Nominees (2) At the date of this Agreement (and until the Tenant is otherwise notified) the Nominees are Supply Line Services Limited (3) Where the Purchasing Agreement is in force the Company will not give notice of a change in the Nominees unless the new Nominees have consented to be bound by the terms of the Purchasing Agreement by notice to the Tenant given by the Nominees or by the Company acting as its agent on its behalf 10. These terms of trading are not intended to be personal to the original landlord and the benefit and obligations will pass any successor ” (1) “the Appendices” means the Appendices to this Schedule and reference to an “Appendix” is a reference to one of the Appendices (2) “Specified Beers” means the types of beer set out in Appendix 1 however they are brewed fermented or packaged (and which are represented by the brands or denominations of beers stated in the Company’s Price List) (3) “Specified Ciders” means the types of cider set out in Appendix 2 however they are brewed, fermented or packaged (and which are represented by brands or denominations of cider stated in the Company’s Price List) (4) “Unspecified Beers” means any beers which are not Specified Beers (5) “Unspecified Ciders” means any ciders which are not Specified Ciders (6) “Company’s Price List” means the price list from time to time of the Company for the drinks which it offers to supply to purchasers at the Tenant’s level of distribution the current version of which is annexed to this Agreement (2) The Company may as often as it wishes: (a) add to the list of brands or denominations representing the types of beer and cider set out in the Appendices and/or (b) substitute a brand or denomination for a previous one listed and/or (c) delete any brand or denomination listed (3) The Company will notify the Tenant of any changes in the Company’s Price List by issuing a new Company Price List or by an alternative fair and reasonable method (1) any Specified Beer or Specified Cider not supplied by the Company or (2) any Unspecified Beer or Unspecified Cider unless:- (a) it is packaged in bottles cans or other small containers; or (b) it is in draught form and the sale of that beer or cider in draught form is customary or is necessary to satisfy a sufficient demand from the Tenants customers (a) as he may require and be obliged to purchase from the Company or the Nominees under this Schedule and (b) that he is ready and able to pay for (2) If the Company at any time fails to ensure the supply of such Specified Beer and/or Specified Cider for a period of fourteen days the Company will on the Tenant’s application release him from his obligations under this Schedule to the extent and for so long as is necessary having regard to such failure (a) references to the Company in paragraphs 1 to 7 inclusive of this Schedule shall be construed as references to those Nominees (b) notice to be given by or to the Company shall be given by or to those Nominees (c) references to the Company’s Price List shall be construed as references to the price list of those Nominees (d) the obligations of the Tenant under this Schedule shall be for the joint and several benefit of the Company and the Nominees[17]Although paragraph 1(6) of Appendix A to the 2001 Deed stated that the current version of the Company’s Price List was annexed to the 2001 Deed, that was not the case.[18]There were two Appendices to the Terms of Trading introduced by the 2001 Deed. Appendix 1 was in the following terms:
“APPENDIX 1 TO THE FIRST SCHEDULE 21. SPECIFIED BEERS Light, pale or bitter ale (1) Export or premium ale (2) Mild ale (3) Brown ale Strong ale (including barley wine) Bitter stout or porter Sweet stout Lager Export or premium lager (4) Strong lager “Diat pils” (or premium low carbohydrate beer) Low Carbohydrate (or “lite”) beer No alcohol beer Low alcohol beer with an alcoholic strength (as defined in the Alcoholic Liquor Duties Act 1979) not exceeding 1.2 per cent ABV Footnotes: (1) Also known (especially in Scotland) as 70/-, Heavy, special or Scotch Ale (2) Also known (especially in Scotland) as 80/-, Ale (3) Also known (especially in Scotland) as 60/-, Light or Pale Ale (4) Also known as “Malt Lager” or “Malt liquor” ”
Light, pale or bitter ale (1) Export or premium ale (2) Mild ale (3) Brown ale Strong ale (including barley wine) Bitter stout or porter Sweet stout Lager Export or premium lager (4) Strong lager Low Carbohydrate (or “lite”) beer No alcohol beer

Footnotes:

[19]Appendix 2 was in these terms:
“APPENDIX 2 TO THE FIRST SCHEDULE 23. SPECIFIED CIDERS Cider Perry”
Cider Perry”

Cider

[20]The provision which was introduced into the 1989 Lease by Appendix 2 to the 1997 Deed remained operative after the 2001 Deed and was not modified or varied by the 2001 Deed.

The Price Lists

[21]I was shown the various Price Lists which were used for the purposes of the Terms of Trading from time to time. The layout and the content of these Price Lists varied over the years. The most recent Price List which was put in evidence did not list beers and ciders by reference to the classes or categories in Appendix 1 and Appendix 2 to the Terms of Trading introduced by the 2001 Deed.

The current parties to the Terms of Trading

[22]In or around 2004, the term of the 1989 Lease, as extended and varied as aforesaid, was assigned to the First Defendant, Palmerston Associates Limited. In or around 2010, the reversion on the 1989 Lease, as varied and extended as aforesaid, was assigned to the Claimant, Enterprise Inns plc.[23]The Terms of Trading which fall to be construed refer to the landlord as “the Company” and to the tenant as “the Tenant”. I will use these terms when discussing the effect of the relevant provisions.

The Claimant’s submissions

[24]The Claimant began its submissions by referring to what it described as “the regulatory background to all standard forms of product tie in UK public house leases granted since 1983”. The Claimant then took the court on a very detailed tour of that regulatory background examining on the way Article 85 of the EEC Treaty (and the similar provisions of Article 81 of the EC Treaty and Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) ), the Block Exemption in Commission Regulation (EEC) No 1984/83, various rulings and statements of the European Commission over the years as to its interpretation of the relevant provisions in the Block Exemption, decisions of the Court of Appeal in relation to those provisions and, finally, later decisions of the courts which came after the date of the 2001 Deed. Later in this judgment, I will summarise the more important matters which were explained in the course of the Claimant’s tour of the regulatory background.[25]The Claimant then examined the relevant terms of the 1989 Lease, the 1997 Deed and the 2001 Deed and submitted that those terms should be considered against the relevant regulatory background as it was understood, rightly or wrongly, from time to time. It was suggested that if the relevant terms were considered in that light then the intentions of the parties, objectively speaking, could be readily understood. The Claimant referred to the standard forms of Terms of Trading which were in use from time to time.[26]The Claimant submitted that the Terms of Trading in the 2001 deed created a tie by type rather than a tie by brand. Specified Beers were “types of beer”. To be a Specified Beer, the type of beer must be set out in Appendix 1 to the Terms of Trading and the type must be “represented” by a brand of beer in the relevant Price List. The Price List was important in defining the scope of the tie because if there was no brand of a particular type of beer on the list, the type would not be a Specified Beer. Once a type is represented by a brand of beer in the Price List then the type is a Specified Beer and the Tenant must purchase all beers of that type, that it requires for sale in the premises, only from the Company.[27]The Claimant submitted that its construction was in accordance with the ordinary meaning of the words used in the relevant provisions. Conversely, the First Defendant’s construction departed from that ordinary meaning. The Claimant also submitted that its construction was supported by the terms of Appendix 2 to the 1997 Deed, which continued to have contractual effect after the entry into the 2001 Deed. The relevant terms of the 1997 Deed allowed the Company to abandon the tie by type imposed by the Terms of Trading and to opt in the alternative for a tie by brand. The existence of this option only made sense if the Terms of Trading provided for a tie by type and not a tie by brand. It was submitted that the option to have a tie by brand was a hedge against the possibility that the view of the Commission, that only a tie by brand could fall within the Block Exemption, would one day prevail in England.[28]The Claimant went on to submit that its interpretation was in accordance with the commercial purpose of the relevant provisions. The original terms of trading were to provide a captive market for beer brewed by the landlord but since 1997 the purpose of the revised terms was to provide a captive market for beer supplied by the landlord, who was no longer a brewer. This allowed the landlord to supply the beers of a wide selection of brewers and to offer an exclusive outlet to brewers with whom it could negotiate favourable terms. On the First Defendant’s interpretation of the tie, its value would be significantly diminished.[29]Finally, the Claimant submitted that its interpretation of the Terms of Trading, which were standard terms, was in accordance with the interpretation of those terms adopted by the European Commission and by the courts over many years. It had not been suggested (before this present case) that those standard terms created a tie by brand. It was also suggested that the whole of the litigation over many years between hundreds of publicans and the pub companies which occupied the time of the courts between 1988 and 2006 would have been avoided if each publican was free (as the First Defendant contends) to purchase any brand of beer which did not appear on the price list of his landlord or the landlord’s nominee.

The First Defendant’s submissions

[30]The First Defendant summarised its submissions by saying that its interpretation:(1) was in accordance with the ordinary meaning of the words used in the relevant provisions;(2) accorded with the obvious commercial purpose of the relevant provisions;(3) made better sense of other provisions in the Terms of Trading;(4) was consistent with a construction contra proferentem; and(5) was consistent with the only authority which had considered the issue.[31]As to the principles of construction, the First Defendant reminded me of the decision in Investors Compensation Scheme Ltd v West Bromwich Building Society [1988] 1 WLR 896 at 912-913 per Lord Hoffmann. It was also said that if the court found it necessary to choose between two alternative meanings, it should construed the provisions against the Company adopting an approach contra proferentem.[32]The definition of Specified Beers referred to beers which were of a type set out in Appendix 1 and which appeared (i.e “represented”) in the Price List. The use of the word “Specified” suggested that the reader would find a degree of specificity over and above what was merely set out in Appendix 1. This specificity is contained in the Price List where beers are specified by brand. The Claimant’s construction lacked the expected degree of specificity. The First Defendant relied upon the comment of Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [17] where he referred to the possibility that the words of the defined expression, or label, may help to elucidate ambiguities in the definition of that expression or elsewhere in the agreement. The First Defendant added that the “types” of beer referred to in Appendix 1 were ill-defined as they overlapped and were amorphous. It was obvious that for a beer to be “specified” a greater degree of specificity was needed.[33]As to the detailed wording, it was suggested that the word “which” in the definition of Specified Beers where it said “… the types of beer … ( … which are represented …)” should be read so that it referred to “the beer which” rather than “the types which”. “Represented by” meant “appear by” or “correspond to”. Regard should be had to the Price Lists which did not attempt to match the categories in Appendix 1 to the brands in the Price List. Further, the provisions did not refer to “a type of beer represented by a brand or denomination in the Price List” but instead refer to “beer represented by brands or denominations in the Price List”.[34]As to the commercial purpose of the provisions, it was submitted that the First Defendant’s construction was commercially sensible. If the Company was offering to sell a particular brand of beer (included in its Price List) then the Tenant must buy that brand of beer from the Company. Conversely, if the Company was not offering to sell that brand of beer, the Tenant was free to buy that brand elsewhere. The Company’s interpretation was extremely wide; if the Company was offering to sell one brand of a particular category of beer, then the Tenant was not free to buy any other brand of that category of beer from another supplier. Further, on the Company’s interpretation the tie is so wide in its scope that the definitions of Unspecified Beers and Unspecified Ciders became redundant. On the Claimant’s case there could never be an Unspecified Cider.[35]The court should take into account the fact that the relevant tie is in favour of a “pubco” and not a brewer. A tie in favour of a brewer which prevented the tenant buying rival brands of beers might be understandable but that was not this case.[36]It was also submitted that the Claimant’s interpretation was demonstrably productive of confusion particularly where, as in the present case, the Price List did not group brands by reference to the categories of beer in Appendix 1. It was desirable to interpret the provisions so as to avoid uncertainty as to their operation, particularly where a failure by the tenant to comply with the terms might lead to a forfeiture of the lease. It was accepted that even on the First Defendant’s interpretation, it was necessary to match types to brands but the problem in such a case was much less acute.[37]The First Defendant drew attention to the power in paragraph 2(2) of the Terms of Trading to effect certain alterations in the list of brands or denominations. On the First Defendant’s construction, this meant that the Company could (for example) add a brand or brands which the Tenant could not then buy elsewhere. But on the Claimant’s construction, the power was potentially much wider. In a case where a type of beer had no brand listed in the Price List, and the Company then added to the Price List a single brand of that type of beer, the result would be that the Tenant could not buy any brand of that type of beer from anyone other than the Company.[38]It was also submitted that paragraph 8 of Appendix 1 did not work on the Claimant’s interpretation of the relevant provisions. Paragraph 8 placed on the Company a best endeavours obligation to supply Specified Beers as required by the Tenant at the prices in the Price List. This only worked if Specified Beers referred to brands of beer rather than the categories of beer referred to in Appendix 1.[39]The First Defendant submitted that if the court was in any doubt as to which interpretation to adopt it should construe the provisions contra proferentem. The Company was the proferens. The Claimant’s construction was “an extravagant result” (compare John Lee & Son (Grantham) Ltd v Railway Executive [1949] 2 All ER 581 at 583 per Lord Evershed MR).[40]It was said that the particular issue which arises in this case was considered by the Court of Appeal in Unique Pub Properties v Beer Barrels & Minerals (Wales) Ltd [2004] EWCA Civ 585 where the court construed the tie as a tie by brand rather than a tie by type. Reliance was placed on the discussion in the judgment of Chadwick LJ at [33] where he said:
“… 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.”
[41]In addition to the above submissions which the First Defendant put forward by way of its positive case, the First Defendant made additional submissions as to why the court should not accept some of the matters relied upon by the Claimant in support of the Claimant’s interpretations.[42]In this way, the First Defendant made submissions on what the Claimant had put forward as the relevant regulatory background. It was said that the decisions and statements of the Commission and of the courts on the Block Exemption, and in particular Article 6, used the expressions “tie by type” and “tie by brand” but in the context of discussing a question which was different from the question of construction arising in this case. The question being discussed in those decisions and statements was as to the non-application of Article 6 in a case where the relevant provisions appeared to allow the supplier unilaterally to alter the scope of the exclusive purchasing obligation. Further, it was not always clear what were the precise terms of the relevant provisions being considered in those other decisions and statements. In the end, it was said, none of that material was of any real assistance in the present case.[43]Further, the First Defendant submitted that the material before the court as to the regulatory background was not in law admissible as an aid to the interpretation of the Terms of Trading. For this submission, the First Defendant relied upon Zoan v Rouamda [2000] 1 WLR 1509. That case concerned the construction of a hire agreement. On one construction, the agreement failed to conform to the requirements of the Consumer Credit Act 1974 and regulations made thereunder and, in particular, the agreement did not come within the terms of an Order exempting certain agreements. On another construction, the agreement came within the exemption Order. The party arguing that the agreement came within the exemption Order submitted that the court should take into account the wording of the 1974 Act and the regulations and Order and should conclude that the intentions of the parties, objectively considered, would have been to produce an agreement which benefited from the exemption Order. The county court judge accepted that argument ruling that the 1974 Act and the regulations and Order would have been part of the background which would have been reasonably available to the parties and so admissible as an aid to the interpretation of the agreement. The Court of Appeal disagreed. The judgment of that court was given by Chadwick LJ. At [36], he said that there was no basis for an assumption that the hirer would have had in mind the Consumer Credit Act 1974 or the regulations or the Order made under it and so the agreement was not to be construed against the background of the 1974 Act, the regulations and the Order. He explained why, in the circumstances of that case, he had reached that conclusion. The First Defendant submitted that the same conclusion should be reached in the present case.[44]The First Defendant also made submissions as to the admissibility of the terms of the 1989 Lease and the 1997 Deed as an aid to the interpretation of the 2001 Deed. It was said that the earlier documents provided no assistance as to the meaning of the 2001 Deed. The scope of the tie under the earlier documents was different from the tie imposed by the 2001 Deed. The earlier documents were agreed in a different commercial context and possibly a different legal context. Further, in so far as the earlier terms were similar to the present terms, they raised the same, or similar, questions of interpretation and so did not help to answer those questions. Finally, it was said that the various agreements reflected the evolution of a standard form of Terms of Trading. The standard form was imposed on tenants in return for concessions in other respects. It was not possible to determine the precise reasons for the various changes. In this context, the First Defendant cited the decision of the Court of Appeal in Seadrill Management Services Ltd v OAO Gazprom [2010] EWCA Civ 691 at [71] per Moore-Bick LJ where he doubted the usefulness of construing a standard form of agreement which has been entered into by the parties by reference to earlier different versions of that standard form. Further, and in the alternative to these submissions, the First Defendant submitted that I would derive no assistance from Appendix 2 to the 1997 Deed. It was pointed out that the option provided by Appendix 2 had not been exercised but, even if it had been, that would not have changed the definition of Specified Beers in paragraph 1 of the current Terms of Trading.

The Rainy Sky

[45]I have set out the parties’ submissions in a little detail as they identify the matters which require to be dealt with on the way to reaching my overall conclusion as to the meaning of the relevant provisions. I need to add to the parties’ submissions a brief consideration of the recent decision of the Supreme Court in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, which was decided after the conclusion of the argument in this case. The only reasoned judgment was given by Lord Clarke, with whom the other members of the Supreme Court agreed. That case considered once again the correct approach to the construction of a written contract. The basic principles have now been authoritatively established in a number of cases. They are so well known that I need not repeat them or attempt my own summary of them. They have been stated in, amongst other places, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 and Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, both of which were cited to me. The issue between the parties in The Rainy Sky was as to the role to be played by considerations of business common sense in determining what the parties meant. Lord Clarke said at [21]:
“The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction with is consistent with business common sense and to reject the other.”

My approach

[46]Although the exercise of construing the provisions in this case must be a unitary one combining a consideration of the language used in those provisions with the relevant background and all material considerations, it is inevitable that one has to discuss the points in play in some sequence or other. The Claimant’s submissions began with a detailed analysis of what it said was the relevant regulatory background long before they addressed the precise language used in this case. My own reaction to the questions arising in this case is to consider the language first and then to look at other matters in turn. Accordingly, I will attempt to deal with the matters arising in the following[47]I therefore begin the task of construing the relevant provisions by examining the words used by the parties in the Terms of Trading set out in the First Schedule to the 2001 Deed.[48]Paragraph 2 of the Terms of Trading is an exclusive purchasing obligation in relation to Specified Beers and Specified Ciders. Paragraph 3 of the Terms of Trading is a restriction on competition which refers to Specified Beers and Specified Ciders and then to Unspecified Beers and Unspecified Ciders. In this case it is critical to understand what is meant by Specified Beers and Specified Ciders and also what is meant by Unspecified Beers and Unspecified Ciders. All four of those terms are defined in paragraph 1 of the Terms of Trading.[49]The definition of Specified Beers refers to “types of beer set out in Appendix 1 however they are brewed … (and which are represented by the brands or denominations of beers stated in the Company’s Price List)”. The definition of Specified Ciders contains similar language to that used in the definition of Specified Beers. The definition of Unspecified Beers refers to “any beers which are not Specified Beers”. The definition of Unspecified Ciders contains similar language to that used in the definition of Unspecified Beers.[50]As is spelt out in the definition, Specified Beers are “types of beer”. The types of beer which are, or can be, Specified Beers are set out in Appendix 1. That Appendix has a list divided into 14 entries. From that list, it is clear that the parties are agreeing that, for example, lager is a type of beer. They also agree that strong lager is a type of beer and, it would seem, they are treating it as a different type of beer from lager. The first line in the list refers to “Light, pale or bitter ale”. It may be that the parties are treating light ale, pale ale and bitter ale as one type of beer, namely, ale or it is possible they are intending to refer to three types of ale. As it happens, for present purposes, nothing turns on this distinction. What is clear is that the list of Specified Beers in Appendix 1 is intended to be a list of types of beer and it is not a list of brands of beer.[51]The definition of Specified Beers refers to the possibility that the types of beer might be brewed or fermented of packaged in different ways. It is agreed that the ways in which they are brewed fermented or package does not matter. The “they” in the phrase “however they are …” refers to types of beer.[52]The definition of Specified Beers continues with the phrase in brackets which begins with the words “and which are represented …”. Grammatically, the things which are so represented are “types of beer”. I do not accept Mr Seitler’s submission that the things which are represented are, or he would have to say “is”, beer. Accordingly, the phrase in brackets refers to types of beer represented by brands in the relevant price list. This requires the reader to ask of any particular type of beer, say lager:
“Is lager represented by a brand in the price list?”
The natural meaning of the words suggests that lager will be “represented” by a brand in the price list if the price list refers to one or more brands of lager. If the price list does refer to one or more brands of lager, then lager is a type of beer so represented in the price list and lager is a Specified Beer or, putting it another way, Specified Beers include lager. This would seem to produce the result that paragraph 2 of the Terms of Trading requires the tenant to purchase all lager from the Company. Similarly, paragraph 3 of the Terms of Trading provides that the tenant must not sell any lager which has not been supplied by the Company.[53]The list of types of beer in Appendix 1 is extensive and it includes most types of beer that one can immediately think of. That means that the definition of Specified Beers will potentially apply to most types of beer. However, this is subject to the limitation that such a type of beer, listed in Appendix 1, must be represented by a brand of that type of beer in the price list. I recognise it would not be difficult to produce the result that, for example, all lagers and all bitter ales are within the definition of Specified Beers by listing one brand of bitter and one brand of lager in the price list. In the course of argument, I was given one example of how a type of beer listed in Appendix 1 can go in and out of the definition of Specified Beers. Appendix 1 lists “sweet stout”. Mackeson is a brand of sweet stout. When Mackeson is included in the price list, then sweet stout is within the definition of Specified Beers and paragraphs 2 and 3 of the Terms of Trading apply to sweet stout, whatever brands might exist. Conversely, when Mackeson is not included in the price list (and no other brand of sweet stout, if there is one, is included in the price list) then sweet stout is not a type of beer within the definition of Specified Beers. Although that example illustrates the working of the definition it remains the case that it will not be difficult to include within the definition of Specified Beers nearly all the types of beer that one can immediately think of.[54]Paragraph 2 of the Terms of Trading permits the Company to add to or substitute or delete brands of beer. Paragraph 2 refers to brands or denominations representing types of beer; this supports my reading of the definition of Specified Beers to the effect that the brands represent “types”, not “beer”. I have considered why the parties spelt out that the Company could add or substitute or delete a brand of beer. After all, if bitter ale is represented by 5 brands in the price list, then bitter ale is a type of beer and it will not matter if the 5 brands are increased to 6 or reduced to 4 or the identity of the brands changes. However, if a type of beer is not represented by a brand and a brand of that type is then added that will bring that type of beer within the definition. Paragraph 2 permits that result. Further, the parties would have considered that the permission to add, substitute and delete brands could affect other parts of the Terms of Trading, for example, paragraph 8.[55]I have also considered the operation of paragraph 2 of the Terms of Trading in so far as it permits the Company to notify the Tenant of any change in the price list. This provision does not require any period of notice to be given. If, for example, no brand of sweet stout was on the price list and then a brand of sweet stout was included in the price list, then sweet stout would become a type of beer within the definition of Specified Beers. That could cause difficulties for the Tenant if had in stock sweet stout which he had previously bought from another supplier. Paragraph 3 of the Terms of Trading would seem to have the effect that from the time that sweet stout became a type of beer within the definition of Specified Beers, by reason of the change in the price list, then the Tenant could not sell his pre-existing stock of sweet stout. It may be that a court would seek to interpret the Terms of Trading and/or imply suitable terms to deal with a possible difficulty of this kind. As Mr Rodger pointed out, the difficulty, if any, caused by a change in the price list is also potentially troublesome (perhaps even more so) if Mr Seitler’s argument were to be right. On Mr Seitler’s argument, the Company can add a brand a beer to its price list with the result that that brand becomes a Specified Beer and then the restriction on selling a pre-existing stock of that brand, bought from another supplier, appears (literally at least) to apply. For this reason, the provisions of paragraph 2 of the Terms of Trading providing for no period of notice for changes in the price list are not sufficient on their own to deter me from adopting what I would otherwise regard as the ordinary meaning of the definition of Specified Beers.[56]Before leaving the definition of Specified Beers, it is necessary to consider the definition of Unspecified Beers. The existence of this second definition and the provisions which use that definition suggest that the parties must have contemplated that there could be Unspecified Beers. Yet, as pointed out above, the list of types of beer in Appendix 1 appears to extend to all the types of beer that one could immediately think of. The answer to that point seems to be, taking the example of sweet stout again, that a type of beer can go outside the definition of Specified Beers and become an Unspecified Beer when there is no brand of that type of beer on the price list.[57]As pointed out, the definitions of Specified Ciders and Unspecified Ciders closely track the definitions relating to beers. The definition of Specified Ciders refers to “types of cider” and refers to Appendix 2. That appendix lists cider and perry. Although the dictionary meaning of cider requires the use of apples and perry is not cider within the dictionary meaning, it is clear that the parties’ dictionary, used in the Terms of Trading, is different. For the purpose of those terms, it has to be taken that perry is a type of cider. Mr Seitler rhetorically asked:
“how can there ever be an Unspecified Cider?”
The answer to that lies in the fact that a type of cider is only a Specified Cider if a brand of that type of cider is in the price list. If no brand of cider is in the price list then cider is not a Specified Cider. Similarly, if no brand of perry is in the price list then perry (which the parties treat as a type of cider) is not a Specified Cider but is an Unspecified Cider.[58]Mr Seitler also relied upon paragraph 8 of the Terms of Trading. He submitted that if the definition of Specified Beers were to be construed as the Company contends then paragraph 8 would be unworkable. He asked what would happen if lager was represented by a number of brands in the price list so that (on the Company’s case) lager was a Specified Beer but the Tenant wished to order a brand of lager which was not on the price list. In such a case, he submitted, the Company would come under an obligation to supply the Tenant with the brand of lager which the Tenant wished to order but in circumstances where the Company may not have expected to be asked to provide that brand (not being on its price list). Further, it was submitted, how would the parties know what price could be charged or would have to be paid when the brand was not given a price in the price list. I think that the obvious answer to that suggested difficulty is that the obligation in paragraph 8 only applies to beers which are given a price in the price list and so that the Company will not be placed under an obligation to supply a beer which it has not offered to supply by its inclusion in the price list.[59]At this stage, I ought also to consider the meaning and effect of the provision introduced into the 1989 Lease by Appendix 2 to the 1997 Deed. As explained, that provision remains operative after the 2001 Deed and can potentially apply to the Terms of Trading introduced by the 2001 Deed. Appendix 2 to the 1997 Deed refers to “brands of the types of beers listed as Specified Beers”. This makes clear that Specified Beers are “types of beer” rather than brands of beer. The provision then allows the Company to impose a stocking obligation on the Tenant. The stocking obligation relates to brands of beer. Certain identified brands are then defined as the “Specified Brands”. In the event that the Company serves a notice under this provision then the Terms of Trading (or some of them) are to have effect by reference to Specified Brands rather than by reference to Specified Beers. For example, the purchasing obligation in paragraph 2 of the Terms of Trading introduced by the 1997 Deed, would then refer to Specified Brands and not Specified Beers. So too would the restriction on competition in paragraph 3 of those Terms of Trading. This provision serves to emphasise the general point that the parties regarded the provisions which related to Specified Beers as referring to types of beer rather than brands of beer. There may be difficulties in construing and applying Appendix 2 to the 1997 Deed following the entry into the 2001 Deed. Appendix 2 to the 1997 Deed refers to the phrase Specified Beers where it appears in paragraphs 2, 3, 7 and 9 of the Terms of Trading introduced in 1997. Those paragraph numbers were appropriate in 1997. Some at least of those paragraph numbers would not appear to be appropriate following the 2001 Deed but they were not revised by the 2001 Deed. Notwithstanding that difficulty, I consider that the language of Appendix 2 to the 1997 Deed, and the way in which types and brands of beer are therein referred to, as supportive of an interpretation of the 2001 Deed which results in Specified Beers referring to types of beer rather than to brands of beer.

Any assistance from the 1989 Lease and the 1997 Deed

[60]In my judgment, the terms of the 1989 Lease and of the 1997 Deed form part of the relevant background to the 2001 Deed. The earlier terms can therefore be considered to see if they provide any assistance when construing the 2001 Deed. I consider it to be well established by authority that the earlier terms are admissible for this purpose. The question is considered and the authorities are cited in Lewison on the Interpretation of Contracts, 4th ed., at paragraph 3.05. If and in so far as the First Defendant submitted to the contrary I would reject that submission. If and insofar as the First Defendant suggested that the remarks of Moore-Bick LJ in Seadrill Management Services Ltd v OAO Gazprom [2010] EWCA Civ 691 at [17] are relevant to this point, I do not agree. Those remarks were dealing with a different subject matter.[61]In any event, the current terms which apply include not only the Terms of Trading in the 2001 Deed but also the provisions of Appendix 2 to the 1997 Deed. On any view, the court must consider the whole of the contractual terms which currently apply.[62]To say that the earlier terms are admissible as a potential aid to construction of the 2001 Deed is not to say that a consideration of the earlier terms will be helpful, much less decisive. In fact, in this case, I do not find that a consideration of the earlier terms, which were later superseded, provides any real help. The principal reason for this is that the same, or similar, arguments would have arisen in relation to the earlier terms as now need to be considered in relation to the current terms.[63]As to the terms of Appendix 2 to the 1997 Deed, which form part of the current terms which bind the parties, I have already expressed my view on that subject when commenting on the apparent effect of the language used in the 2001 Deed considered together with Appendix 2 to the 1997 Deed.

Commercial purpose

[64]If the relevant provisions are construed in the way that the Claimant contends, then those provisions have a certain commercial effect. If the relevant provisions are construed in the way that the First Defendant contends then they have a different commercial effect. The effect contended for by the Claimant is commercially more favourable to it. The effect contended for by the First Defendant is commercially more favourable to it.[65]I do not consider that I am assisted in choosing between the rival meanings of the relevant provisions by reference to the commercial effect of the rival constructions. Both of the rival constructions serve a commercial purpose but one is more favourable to the Claimant and one is less favourable.[66]Applying the approach identified in The Rainy Sky, I do not think that either of the rival constructions is inconsistent with business common sense nor do I think that either of the rival constructions is more consistent with business common sense than the other. I think that this is a case where an appeal to commercial purpose or business common sense does not advance the arguments as to what the parties are to be taken to have meant by the words which they have used.

The regulatory background

[67]As I have explained the Claimant made a detailed submission as to the regulatory background to the 1989 Lease, the 1997 Deed and the 2001 Deed. The material which was provided to the court under this heading was extensive and detailed. I will attempt to summarise the principal matters to which my attention was drawn.[68]The provisions of Article 85(1) of the EEC Treaty, which provisions were later contained in Article 81(1) of the EC Treaty and are now in Article 101(1) of the TFEU prohibit certain anti-competitive practices. Article 85(3) in its original form enabled the European Commission to declare the provisions of Article 85(1) to be inapplicable in certain defined circumstances. The Commission could so declare either by granting a block exemption from Article 85(1) in relation to a category of agreements or could grant an individual exemption to a particular applicant seeking exemption.[69]Commission Regulation (EEC) 1984/83, of 22nd June 1983, provided for a block exemption in relation to certain categories of exclusive purchasing agreements (hereafter “the Block Exemption”). Title II of the Block Exemption contained “special provisions for beer supply agreements”. The recitals to the Block Exemption differentiated between different beers by using various phrases. Recital (15) referred to “products of different makes”; recital (17) referred to “beers and other drinks of the types offered by the supplier”; and recital (18) referred to “beer … of the same type but bearing a different trademark”.[70]Title II of the Block Exemption contained Articles 6 to 9. Article 6 concerned certain exclusive purchasing obligations and Article 7 concerned restrictions on competition. Article 6 referred to “certain beers, or certain beers and certain other drinks, specified in the agreement”. Article 7(1) referred to “beers and other drinks … which are of the same type as beers or other drinks supplied under the agreement” and to “beers … which are of a different type from the beers supplied under the agreement”. Article 7(2) provided:
“Beers or other drinks of the same type are those which are not clearly distinguishable in view of their composition, appearance and taste.”
[71]On 13th April 1984, the Commission published a Notice in the Official Journal offering interpretative guidance in relation to the Block Exemption. Paragraphs 40 to 45 of the Notice concerned Article 6 of the Block Exemption. Paragraph 40 referred to the exclusive purchasing obligation specifying drinks by “brand or denomination” and to the possibility of an exclusive purchasing agreement extending to drinks which had a different brand or denomination provided that the drink remained unchanged in other respects. Paragraph 44 referred to “types” of beer. Paragraphs 46 to 50 of the Notice dealt with Article 7 of the Block Exemption. These paragraphs referred to “types” of beer. In relation to Article 7(2), paragraph 50 of the Notice stated that designations of types customary in inter-State trade and within the individual Member States might afford useful pointers to the interpretation of Article 7(2). The Notice also suggested that the parties to a relevant agreement might jointly appoint an expert to decide on the application of Article 7(2).[72]One of the leading cases on the provisions originally contained in Article 85 is Delimitis v Henninger Brau AG [1992] CMLR 210. That case concerned a beer supply agreement and considered the possible effect of such agreements as foreclosing entry to a relevant market and the resulting impact of Article 85. The ECJ in Delimitis also considered the effect of Article 6 of the Block Exemption. In particular, the court considered whether a beer supply agreement fell within Article 6(1) when the range of products subject to the exclusive purchasing obligation imposed on the reseller was not specified in the text of the agreement itself but was contained in the stock and price lists drawn up at intervals by the supplier; see at [34] – [37]. The court ruled that it was clear from Article 6(1) that the exclusive purchasing obligation on the part of the reseller related solely to certain beers and drinks “specified in the agreement”. The purpose of this was to prevent the supplier from unilaterally extending the scope of the exclusive purchasing obligation. The court added:
“A beer supply agreement which refers, as regards the products covered by the exclusive purchasing agreement, to a list of products which may be unilaterally altered by the supplier does not satisfy that requirement and does not enjoy the protection of Article 6(1).”
[73]I was referred to the judgment of Park J in Crehan v Inntrepreneur Pub Company (CPC) [2003] EuLR 663 for the findings which he made on the evidence before him as to the general structure of the United Kingdom beer and pubs businesses from the mid-1980s onwards ([16] – [29]) and the formation of Inntrepreneur and the evolution of its business over the years ([30] – [57]). These findings dealt with a large number of matters such as the report of the Monopolies and Mergers Commission of February 1989, the Beer Orders (in particular, the Supply of Beer (Tied Estate) Order 1989), the sales of pubs by breweries, the emergence of a new type of company, generically referred to as a “pubco”, which owned a substantial number of pubs but did not have any brewing activities and was not a member of a brewing group, the formation of the Inntrepreneur group, the development of the Inntrepreneur lease with a standard form of beer tie and the litigation between Inntrepreneur and its lessees which involved reliance by the lessees on Article 85(1). In view of my later findings as to the reliance which I ought to place on these matters of background, I need not set out Park J’s findings in any detail.[74]Over the years, the Commission was asked by various parties for negative clearance in relation to Article 85 and/or for individual exemption under Article 85(3). When dealing with such applications, the Commission adopted a consistent line in relation to the interpretation of Article 6(1) of the Block Exemption and as to the degree of specification of beers and other drinks needed to satisfy the requirements of Article 6(1). In particular, the Commission considered whether a tie which took the form of an exclusive purchasing obligation which specified beers by type, rather than by brand, would meet those requirements. The Commission consistently expressed the view that Article 6(1) only applied to ties by brand and not ties by type. This was clear from a number of decisions of the Commission to which reference is made in various reported cases and in particular in paragraph [122] in the decision of the Court of Appeal in Crehan v Inntrepreneur Pub Company (CPC) [2004] 3 EGLR 128.[75]The Court of Appeal also had occasion to consider the degree of specification needed for a beer tie to come within the Block Exemption, and in particular within Article 6. In the earlier decisions of the Court of Appeal dealing with this topic, the court approached Articles 6 and 7 in the same way. The position as established by these first decisions of the Court of Appeal appears from the decision it reached in the various cases together reported as Courage Ltd v Crehan [1999] 2 EGLR 145. The interpretation and application of the Block Exemption arose in one of the cases which was before the court: Byrne v Inntrepreneur Beer Supply Co Ltd. The court considered what it described as “ties by type” at pages 166 – 167. The decisions in the earlier cases were referred to, as were the then existing decisions of the Commission. The court regarded Articles 6, 7 and 8 of the Block Exemption as representing “a coherent whole” and it did not distinguish between the nature of a tie which would satisfy Article 6 and that which would satisfy Article 7. The court held that a tie which referred to beers by type, rather than by brand, satisfied both Article 6 (which dealt with exclusive purchasing obligations) and Article 7 (which dealt with other restrictions on competition).[76]These decisions of the Court of Appeal were given before the date of the 2001 Deed. Following the 2001 Deed, there were two decisions of the Court of First Instance (CFI) and a further decision of the Court of Appeal. The two decisions of the CFI were Shaw and Falla v The Commission [2002] ECR II - 2023 and Joynson v The Commission [2002] ECR II – 2085. The decisions were both given on 20th March 2002. In Shaw and Falla, the CFI held (at [48]) that Article 6 did not permit the beers which were to be the subject of the exclusive purchasing agreement to be specified by types of beer; the specification could be by brand but could not be by type. The CFI pointed out that Article 7 was expressed in different terms and there could be a restriction on competition complying with Article 7 in a case where the restriction was expressed by reference to types of beer. This decision was followed in Joynson.[77]In Crehan v Inntrepreneur Pub Company (CPC) [2003] EuLR 663, Park J discussed the earlier decisions of the Court of Appeal and the two decisions of the CFI: see at [206] – [217]. He held that he was bound by the decisions of the CFI and he did not follow the earlier decisions of the Court of Appeal. Park J’s decision was upheld by the Court of Appeal: see [2004] 3 EGLR 128 at [120] – [138]. The Court of Appeal said at [137] – [138]:
“[137] The previous decisions of this court have not apparently focused upon the difference in language between Articles 6 and 7 or the fact that they relate to different types of obligation. The exempted exclusive purchase obligation referred to in Article 6(1) must relate to "certain beers". The Commission and the CFI have interpreted this to mean beers specified by brand or denomination. This is a perfectly possible construction and one that is supported by the fact that where types of beer are intended to be referred to, the block exemption says so. Article 6 does not refer to certain types of beer. Article 7 refers to types of beer, but this Article applies to non-competition obligations, which are treated as a different kind of obligation by the block exemption. There is no reason, therefore, why the words "certain beers" in Article 6(1) should have the same meaning as the words "beers of the same type" in Article 7(1). Accordingly, we think that the CFI's construction can be justified. [138] This construction can also be justified as a matter of policy. From the perspective of Article 81(3), it might be thought that an exclusive purchase obligation by type went too far to qualify for automatic exemption, particularly where, as here, the supplier was unilaterally entitled to add, substitute or delete any brand of the types of beer specified. Obligations expressed in this way might be beneficial in Article 81(3) terms, and more practical, as the Commission found in the case of the Whitbread and Bass beer ties, but that is a matter for individual exemption to be considered on a case-by-case basis. An obligation to purchase beers identified by brand or denomination is potentially less restrictive and more certain than a tie-by-type and that was as far as the framers of the block exemption were prepared to go.”
[78]That case later went to the House of Lords. The issue as to Articles 6 and 7 of the Block Exemption and the difference between a tie by type and a tie by brand were argued before the House but the matter was not considered in the judgments as the Block Exemption had by then expired: [2007] 1 AC 333 at 336C-D and [73].[79]Having provided a summary of the regulatory background, I next need to consider whether it is admissible as an aid to the interpretation of the relevant contractual provisions. The First Defendant submitted that all, or large part, of the regulatory background would not have been reasonably available to the tenant under the lease and so should not be admitted as a potential aid to the interpretation of the 2001 Deed. It seems clear that the regulatory background would have been available to the succession of landlords under the lease and indeed those sophisticated and well advised landlords would have given considerable thought to the regulatory background when drafting the various Terms of Trading. But it was submitted that what the landlords would have known is of no help when considering the position of the tenant. The First Defendant also relied upon the decision in Zoan v Rouamba [2000] 1 WLR 1509, as I have explained. No other authority on the admissibility of the regulatory background was cited.[80]In my judgment, it is established by authority that, in principle, the legal background to a contract is admissible as a potential aid to the interpretation of that contract. The principle is stated and the authorities are cited in Lewison on The Interpretation of Contracts, 4th ed., at paragraph 4.06. Although that is the general principle, there is room for discussion as to how much of the legal background should be regarded as reasonably available to both of the parties; in this respect, the court is concerned with the position of both parties and not just of one of them. There is also room for discussion as to whether the court is confined to considering the law as it was thought to be at the date of the contract or whether the court can take into account the law as it has developed thereafter. There is also room for discussion as to whether the court should presume that the parties know the relevant principles of English law or whether something more by way of evidence as to their actual position is required.[81]The decision in Zoan v Rouamda [2000] 1 WLR 1509 is not authority for a general proposition that the legal background is not admissible as a potential aid when construing a contract. The reason which Chadwick LJ gave in that case for holding that one could not assume that the hirer would have had in mind the Consumer Credit Act 1974 and the regulations and the Order made under it depended upon the particular circumstances of that case. That case proceeded on the basis that the agreement in question was a consumer credit agreement unless it was an “exempt agreement” in accordance with the Order exempting certain classes of agreement. The issue before the court was as to the interpretation of the agreement. On one interpretation, the agreement was exempt, on the other interpretation it was not. The county court judge had taken into account the legal background and, in particular, the relevant Order and held that against that background the agreement should be construed in a way which brought it within the Order making it an exempt agreement. As Chadwick LJ pointed out at [36] in 1997 when the agreement was made the widely held view was that such an agreement was not a consumer credit agreement in the first place and so did not need to rely upon the Order exempting certain agreements. Therefore, the parties were not to be taken to be intending to draft an agreement which took advantage of that Order.[82]Mr Seitler submits that the regulatory background is totally or largely inadmissible and in any event I should derive no assistance from it as to the meaning of the relevant provisions. Mr Rodger places considerable weight on the regulatory background and puts it forward as the key to my understanding of the relevant provisions.[83]If I were to reach the provisional conclusion, without considering the regulatory background, that the Claimant’s interpretation of the relevant provision is the correct one, then the Claimant does not need to rely on its submission as to the regulatory background. In such a case, the First Defendant does not contend that I will be able to reach a conclusion in its favour by considering that background.

Any authority on the meaning of the relevant provisions

[84]Mr Rodger relies upon the many decisions which considered the possible application of Article 85 (and the successors to that Article) to the contractual provisions in the leases in those cases. He submits that provisions which are essentially the same as the provisions which I have to construe have always been considered to be ties by type rather than ties by brand. However, he is not able to point to any issue in those cases as to the precise meaning and effect of the provisions in those cases. Accordingly, those decisions did not involve the court considering competing arguments as to the meaning of the relevant terms and explaining why it preferred one construction to an alternative construction. Accordingly, those decisions are not of any direct assistance to me in choosing between the arguments in this case. I consider that I should assess the arguments which have been addressed to me in this case and make my own decision as to the meaning and effect of the relevant provisions.[85]Mr Seitler submitted that the issue before me has actually been decided by the Court of Appeal in Unique Pub Properties v Beer Barrels & Minerals (Wales) Ltd [2004] EWCA Civ 585. He referred to the remarks of Chadwick LJ in that case at [33] which I have quoted earlier in this judgment. I do not consider that I am bound by those remarks to find that the relevant provisions mean what the First Defendant submits they mean. There is no sign that there was any question in that case as to the precise meaning and effect of the relevant provisions. There is no reference in that case to the issue which arises before me being argued by the parties or considered by the court, much less were any reasons given for any conclusion as to the meaning and effect of the provisions. It may be that everyone in that case assumed that the provisions operated in the way described by Chadwick LJ. It may be that no point of any kind was raised as to the meaning of the provision and when Chadwick LJ gave his judgment he simply referred to how the words struck him, in the absence of any argument clarifying the various possible interpretations of those provisions. It may be that the assumption made in that case is a little more helpful to me than the assumptions made in the decisions on which Mr Rodger relied but I still consider that I should assess the arguments which have been addressed to me in this case and make my own decision as to the meaning and effect of the relevant provisions.

Pulling the strands together

[86]Having identified all of the arguments in play and my reaction to them considered separately, I now must pull the strands together and consider the overall impact of all of those arguments and come to my conclusion.[87]In my judgment, the single most important matter in this case is the language used by the parties. I consider that that language fairly read has the effect contended for by the Claimant. I do not see that there is anything in the earlier superseded provisions of the 1989 Lease and the 1997 Deed which affects that conclusion. Further, I do not think that an appeal to the commercial purpose of the provisions, nor to business common sense, really advances either side’s argument. As to the regulatory background, despite the considerable time spent on that matter in the course of argument, it emerges that the First Defendant does not rely upon it as assisting the court to reach a conclusion in its favour and the Claimant does not need to rely upon it. In any event, I do not regard the regulatory background as being particularly helpful to the Claimant’s submissions. If one considers Articles 6 and 7 of the Block Exemption without regard to any other matters or any decisions of the courts, then they send out a very mixed message for present purposes. Article 7 seems to allow a restriction on competition by reference to types of beer. Article 6 seems to require that the purchasing obligation is by reference to “certain beers” and does not use the words “types of beer”. The relevant provisions in the 2001 Deed contain both a purchasing obligation and a restriction on competition. Unlike Articles 6 and 7 of the Block Exemption, the contractual provisions deal with beer in the same way; they both refer to Specified Beers. The argument that Specified Beers refer to brands of beer might be said to be supported by Article 6 whereas the argument that Specified Beers refer to types of beer might be said to be supported by Article 7. With competing considerations of that kind, my own view is that it is far safer to give the words used in the relevant provisions their ordinary meaning. In so far as Mr Rodger says that the distinction between Articles 6 and 7 was lost sight of at all times before the 2001 Deed and that the first decisions of the Court of Appeal seemed to regard ties referring to types of beer as being within both Articles 6 and 7, the contrary argument is that the European Commission consistently took the opposite view. Where the law is somewhat uncertain in that way, I do not regard one or other arguable view as to what the law is as a safe guide to the interpretation of the contractual provisions.[88]In the circumstances, I do not need to decide whether the law would treat all of the regulatory background as reasonably available to Mr and Mrs Buckley. However, I will briefly comment on that topic. I am entitled to have regard to the evidence before the court as to the particular circumstances of Mr and Mrs Buckley; I am not constrained to treat them as anonymous tenants of a tied public house about whom nothing in particular is known. The evidence shows that Mr and Mrs Buckley had legal advice and brought High Court proceedings relying on Article 85(1). They therefore knew about the terms of Article 85. I think that I would without difficulty hold that the terms of the Block Exemption were reasonably available to them. Whether I should go further and hold that the detail of the Commission’s notices and the decisions of the Court of Appeal prior to 2001 were reasonably available to them is much more open to dispute. I do not resolve that dispute in view of my earlier conclusion that those conflicting matters do not assist me to interpret the relevant provisions.[89]As to the argument as to contra proferentem, my view is that the language used by the parties is quite clear as to its meaning and effect and the contra proferentem approach does not enable the court to disregard the effect of language which the court considers to be clear.

Conclusion

[90]The arguments of the parties have been very thorough and sophisticated. I considered that I ought to deal with all of those arguments and so this judgment has been lengthier than it might otherwise have been. The length of this judgment should not obscure the fact that the issue of construction in this case was always a relatively straightforward one where I have been able to reach a confident answer by reference to the clear language of the relevant provisions.[91]My conclusion is that the preliminary issue is to be answered in accordance with the interpretation put forward by the Claimant.

order

(1) the language used in the relevant provisions;(2) any assistance I get from the original terms of the 1989 Lease or the 1997 Deed;(3) the commercial purpose of the relevant provisions;(4) any assistance I get from the regulatory background to the 2001 Deed; and(5) any relevant authority on the meaning of the provisions. The language used in the relevant provisions