Tied public house – Tenant having option to renew – Landlord waiving purchase restrictions – Whether waiver extended to conditions attached to option – Effect of Supply of Beer (Tied Estate) Order 1989 if conditions not waived
Since 1980 the claimant tenant had at all material times been the tenant of The Deers Hut public house in Liphook, Hampshire. On 23 October 1986 the tenant took from the defendant landlord (then known as Courage Ltd) a new lease for a term of five years with an option, contained in clause 26 of the lease, to renew for a further five years. Under the terms of a business agreement, which was incorporated into the lease, the tenant agreed to purchase all his requirements of beers and liquors from the landlord or its nominated supplier, and to purchase certain minimum quantities from those sources (the tie obligations). The option was conditional, inter alia, upon the tenant having fulfilled the minimum purchase requirements in each year of the term.
In February 1989 the landlord, anticipating the implementation of certain recommendations of the Monopolies Commission, notified the tenant that he was released from the tie obligations so far as they related to wines and spirits. On 19 December 1989 the government made the Supply of Beer (Tied Estate) Order 1989 (the TEO), applicable to agreements made with brewers interested in more than 2,000 licensed premises. The order required such brewers, from 1 May 1990 (the operative date), to allow the sale on their tied premises of a draught beer of the lessee’s choice, and prohibited the imposition of any tie relating to low-alcohol beers and non-beer drinks (relevant purchases). Parties to any existing agreement relating to relevant purchases were required to terminate offending provisions before the operative date. In correspondence between the parties during April and May 1990, it was confirmed that the tie provisions would cease to operate so far as relevant purchases were concerned.
In January 1992 the tenant sought to exercise the option, but was persuaded by the landlord that the waiver of the tie obligations did not affect the conditions attached to the option, which he had failed to fulfil. In the belief that the option could not be exercised, the tenant accepted the offer of a new 20-year lease from Inntrepreneur Pub Co plc (CPC) on terms allegedly much more onerous than those which would have applied had he renewed pursuant to clause 26. Subsequently, having formed the view that he had been misled by the landlord, the tenant brought an action for damages for misrepresentation. Two questions fell to be determined by way of preliminary issue: (i) whether the the tenant was correct in maintaining that the waiver extended to the conditions in clause 26; and (ii) whether, if the landlord’s view was correct, the TEO deprived the tenant of the benefit of the option.
Held: The tenant succeeded on the first issue, but not on the second.
1. Since the same form of lease had been considered by the Court of Appeal in Byrne v Inntrepreneur Beer Supply Co Ltd (reported sub nom Courage Ltd v Crehan [1999] 2 EGLR 145), the court was bound to hold that the tie obligations and the option conditions had to be read together. There was nothing in the relevant correspondence to prevent a reasonable person from assuming that the waiver was intended to apply to both provisions. As a matter of business usage, it was immaterial that the landlord’s letters spoke in terms of “obligations” and “requirements” as distinct from “conditions”. The waiver accordingly operated in the manner contended for by the tenant.
2. If the landlord’s interpretation was correct (and not otherwise) then the presence of the conditions attached to the option would provide a strong disincentive to purchase from third parties. For that reason the landlord could not require compliance with those conditions without purporting to enforce an agreement that, in the language of the regulation, was one that “precludes or restricts relevant purchases”. However, that alone did not invalidate the option, as the offending provisions, unlike those considered in Byrne (supra), could be severed without destroying its commercial purpose. Nevertheless, the tenant would lose the benefit of the option because he could not enforce it without relying on his own unlawful failure to terminate the agreement: see Byrne, applying Tinsley v Milligan [1994] 1 AC 340; [1993] EGCS 118.
Mark Breale (instructed by Maitland Walker, of Minehead) appeared for the claimant; Nicholas Green QC and Martin Roger (instructed by Masons) appeared for the defendants.
Alan Cooklin, barrister
