Lease — Tied public houses – Construction of contract — Landlords applying for forfeiture of two leases and payment of sums allegedly owed by defendant tenants — Tenants contending that terms should be implied in leases — Landlords seeking to strike out defences or dismiss allegations — Master striking out one case only — Whether master erring in striking out one defence but not the other — Landlord’s appeal allowed – Tenants’ appeal dismissed
In 2009, the landlords of two tied pubs commenced proceedings in the county court to forfeit the leases of premises held by the same tenants. They also sought the payment of the rent and other sums alleged to be due.
The tenants served defences and counterclaims, arguing that, on the true interpretation of the lease and/or by virtue of some of its implied terms, the prices that the landlords set in respect of tied products were to be set in good faith at a competitive level, with prices for the same products on the open market. Alternatively, the said prices should be set in good faith at a level that, when combined with the rent on the premises, gave an overall figure for dry and wet rent that was reasonably competitive with the combined rent and prices that untied public houses paid for equivalent products. In any event, the tenants’ right to buy out –of-the-tie was triggered where the landlords could not or would not supply tied products at prices that accorded with trading terms. The tenants alleged that the terms had been breached and claimed damages, set-off and/or restitution.
The landlords considered that, in the light of the decision of the Court of Appeal in Courage Ltd v Crehan [1999] 2 EGLR 145, those contentions could not be maintained and it applied to strike out or dismissing those allegations.
The master acceded to the application for of one pub but not the other, having taken account of Courage. The parties appealed. The issue for the court was whether the master had been right to strike out the defence in one case but not the other.
Held: The landlords’ appeal was allowed; the tenants’ appeal was dismissed.
Courage and related appeals concerned the proper interpretation of the contracts in those cases, which could not be conclusive as to the interpretation of other contracts made at different times, between different parties and in different circumstances even though they deal with questions of law. However, a decision on the interpretation of a contract might be persuasive as to the interpretation of another contract that used a similar language by parties that were involved in a similar trade and in similar circumstances, particularly where the parties had been aware of the previous decision. Accordingly, the master had not been wrong to take account of Courage to the extent that he had. The question was whether, having done so, his decision on the interpretation of the instant contracts had been correct.
It could not be assumed, in the absence of evidence, that market conditions remained the same from one relevant period to another. The relevant period in Courage was 1991-92. It could not be assumed that market conditions in 2000 or 2006 were the same as those in 1991-92. Further, the Court of Appeal had had the benefit of expert evidence. Accordingly, if and in so far as the decision in Courage depended on facts relating to market conditions at the material time, it was irrelevant to any similar conclusion in the instant case.
The tenants had no real prospect of establishing any of the implications for which they contended; the court was unlikely to restrict the right of one party to fix the price payable by the other or to make an implication that is inconsistent with an express term. In the light of the terms and circumstances surrounding the making of the instant contracts, the suggested implied terms would not spell out what the agreements would reasonably be understood to mean: Attorney General of Belize v Belize telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988 considered.
Martin Rodger QC (instructed by Gosschalks, of Hull) appeared for the landlord; Julian Greenhill (instructed by Gillhams Solicitors LLP) appeared for the tenants.
Eileen O’Grady, barrister
