Tied public house – Defendant tenant required to purchase specified beers only from claimant landlord – Construction of beer tie provisions in lease – Whether creating tie by beer type or tie by brand – Declaration granted in favour of claimant
The claimant was the landlord and the first defendant was the tenant of a public house in London SE22 under a lease originally granted in 1989 and varied by deed in 1997 and 2001. The terms of the lease created a beer tie imposing on the tenant an exclusive purchasing obligation for beer, cider and perry and a restriction on competition.
The beer tie provisions, as varied by the 2001 deed, required the first defendant to purchase all “Specified Beers” and “Specified Ciders” that it required for sale only from the claimant. “Specified Beers” and “Specified Ciders” were defined as the types of beer and cider set out in two appendices to the 2001 deed “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)”. The terms of trading under the 2001 deed permitted the claimant to add to or substitute or delete brands of beer and cider.
In proceedings between the parties, a preliminary issue was tried as to the meaning and effect of the beer tie provisions, and in particular as to the definition of “Specified Beers” and “Specified Ciders”. It was accepted that the definition imposed two conditions, the first of which was that the beer or cider should be of a type set out in one of the appendices. The parties differed as to the second condition. The claimant contended that it was fulfilled if there was at least one beer or cider of that type on the relevant price list, and that the 2001 deed accordingly created a tie by type rather than a tie by brand. The defendant contended that there had to be a beer or cider of not only the same type, but also the same brand or denomination, on the price list in order for the second condition to be fulfilled.
Both parties contended that their interpretation accorded with the ordinary meaning of the words used and with the commercial purpose of the beer tie. The claimant contended that its interpretation of the relevant terms was consistent with the regulatory background and the approach adopted by the courts and the European Commission over many years in decisions on, inter alia, Article 85 of the EEC Treaty and Articles 6 and 7 of the Block Exemption.
Held: A declaration was granted in favour of the claimant.
The beer tie provisions fell to be construed in accordance with the established principles of construction of a written contract: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101; [2009] 3 EGLR 119 and Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900 applied. The process of construction was a single exercise combining a consideration of the language used in those provisions with the relevant background and all material considerations.
In the instant case, the most important consideration was the language used by the parties. Fairly read, the language used in the definition of “Specified Beers” and “Specified Ciders” had the effect contended for by the claimant. Grammatically speaking, the words “and which are represented”, at the beginning of the phrase in brackets in the definition, referred back to “types of beer”. Accordingly, the phrase in brackets referred to types of beer represented by brands in the relevant price list. The beer type “lager” would therefore be “represented” by a brand in the price list if the price list referred to one or more brands of lager. On that interpretation, a type of beer would go outside the definition of Specified Beers if there were no brand of that type of beer on the price list. If a brand of that type were then added, that would bring that type of beer within the definition. That interpretation was supported by certain provisions of the 1997 deed that continued to be operative after the 2001 deed.
The terms of the terms of the 1989 lease and the 1997 deed that had been superseded by the 2001 deed still formed part of the relevant background to that deed and were admissible for consideration when construing it: Seadrill Management Services Ltd v OAO Gazprom [2010] EWCA Civ 691 distinguished. However, they provided no real help in the instant case. Nor did an appeal to commercial purpose or business common sense assist as to what the parties were to be taken to have meant by the words they had used. Neither of the rival constructions was inconsistent with business common sense; nor was one more consistent with business common sense than the other.
In principle, the legal background to a contract was admissible as a potential aid to interpretation: Zoan v Rouamda [2000] EWCA Civ 8; [2000] 1 WLR 1509 distinguished. However, there were no authorities of direct assistance and no binding authority on the meaning and effect of the relevant provisions: Unique Pub Properties Ltd v Beer Barrels & Minerals (Wales) Ltd [2004] EWCA Civ 585 distinguished. The regulatory background did not assist the first defendant and the claimant did not need to rely on it in the light of the above.
Martin Rodger QC (instructed by Gosschalks) appeared for the claimant; Jonathan Seitler QC and Julian Greenhill (instructed by DLA Piper UK LLP) appeared for the defendants.
Sally Dobson, barrister
