Public house – Lease executed pursuant to earlier agreement – Landlord seeking to restrain breach of beer tie provision – Tenant contending for collateral warranty that tie would be removed after a certain date – Tenant relying on pre-lease discussions – Landlord relying on entire agreement clause contained in agreement – Clause held to be effective – Injunction granted
In March 1991 the claimant landlord gave an undertaking to the Department of Trade and Industry (the DTI undertaking) that the number of public houses in its ownership would not exceed 4,350, and also that those remaining in its ownership on 28 March 1988 would be released from a beer procurement restriction that was intended to be universally applied.
At the date of the DTI undertaking, the defendant company (the tenant) held a public house (the pub) in London N7 on a tenancy (the old tenancy), which was being continued under the Landlord and Tenant Act 1954. Over the following four years, discussions took place between the tenant and the landlord with a view to agreeing a new lease of the pub. From time to time during those discussions, mention was made of the DTI undertaking.
In August 1996 the parties entered into an agreement (the August agreement) for the surrender of the old tenancy and the grant of a new 30 year lease, which would contain a tie restricting beer procurement to suppliers nominated by the landlord. Clause 14 of the agreement (the entire agreement clause) provided: “Any variations of the agreement, which are agreed in correspondence, shall be incorporated in this agreement where that correspondence makes express reference to this clause, and the parties acknowledge that this agreement (with the incorporation of any such variations) constitutes the entire agreement.” Pursuant to the August agreement, the new lease was executed in October 1996.
From about January 1997 the tenant began to buy beer in breach of the tie, and by April 1998 had ceased altogether from obtaining beer in accordance with the tie. In the meantime, in February 1997, the landlord, having greatly reduced the number of public houses in its ownership, obtained a release from the DTI undertaking. By proceedings, commenced in November 1999, the landlord sought to restrain the tenant from buying beer outside the terms of the tie. The tenant, pointing to the pre-agreement discussions, counterclaimed for a declaration that a collateral warranty had been given to the effect that the tie would be released, in accordance with the DTI undertaking, by 28 March 1998. The landlord relied inter alia on the entire agreement clause.
Held: The landlord was entitled to the injunction sought.
1. As stated in McGrath v Shah (1989) 57 P&CR 452, the purpose of an entire agreement clause was to preclude a party to a written agreement from “threshing through the undergrowth” with a view to finding a chance remark or statement on which to found a claim to a collateral warranty. Where binding, the effect of such a clause was not, as suggested in Chitty on Contract 28th ed para 12-102, to render evidence of the warranty inadmissible, but to denude what would otherwise constitute a collateral warranty of legal effect. In so far as the clause defined where the contractual terms were to be found, there was no scope for mounting a challenge under section 3 of the Misrepresentation Act 1967 (unreasonable exclusion of liability for misrepresentation).
2. Although drafted in a form shorter than the clauses considered in the decisions relied on by the landlord, the difference in wording did not compel a different conclusion: cf Alman & Benson v Associated Newspapers Group Ltd (unreported 20 June 1980), Deepak Fertilisers & Petrochemical Corp v Davy McKee (London) Ltd ICI [1999] 1 Lloyd’s Rep 387. The form used was amply sufficient to constitute an agreement that the full contractual terms were to be found in the August agreement and nowhere else.
3. The tenant had, in any event, failed to establish that the alleged warranty had been given. On the evidence before the court, what had induced the tenant to go ahead was its belief that the landlord would continue to be bound by the DTI undertaking.
Nicholas Dowding QC and Martin Rodger (instructed by Masons) appeared for the claimant; Robert Bailey-King (instructed by Maitland Walker, of Minehead) appeard for the defendant
Alan Cooklin, barrister
