P & S Amusements Ltd v Valley House Leisure Ltd & Anor

The Valentines were concerned when in the summer of 2001, they had learned that the landlord, the claimants, had been receiving rebates from S &N in respect of the beer purchased by the first defendants but they did not do anything about it until the following year probably because those involved in the hospitality and in the entertainment business in Blackpool are likely to go away when the summer season comes to an end.

In 2002, after a letter from Marcus Stefani to Mr Robbins asserting that the first defendants had been making purchases outside the tie, correspondence developed between the solicitors for the claimants and for the solicitors for the defendants about the discounts and rebates which the claimants as landlords had been and were receiving from S & N and to which the tenants took exception. On 16 July 2002, Mr Valentine raised the matter in a letter to the relevant officer of the John Smith's North Sector of the S&N group with responsibility for the trading relationship with the first defendants. Mr Valentine wished to discuss a package of discounts or rebates to be paid only to the tenant, with no discounts or rebates being paid to the claimants, the landlord. The Valentines made it clear to the officers of S & N that they were exceedingly dissatisfied. It is very significant that S & N (and thus John Smith's) then took the decision first to stop paying any rebates to the claimants in respect of sales of the Designated Beers and second instead to pay the full amount of the rebates to the tenants, the first defendants.

On 1 August 2002, Mr Murray of John Smith's, who was that company’s representative with whom the first defendants regularly had its dealings, duly wrote to Marcus Stefani stating that:

The claimants received a letter from CT dated 22 October 2002 in which it offered the claimants rebates on the sale of the Designated Beers by the first defendants. In a letter dated 8 November 2002 from the claimants’ solicitors to the first defendants’ solicitors, the first defendants were notified that:

Notwithstanding that letter, the first defendants did not immediately follow that notification to make its purchases of the Designated Beers from CT, but, as I have explained, they continued to make its purchases from S&N from whom they, but not the claimants, received rebates on the purchases of the Designated Beers.

In the first judgment, Park J held that this failure of the first defendants to purchase the Designated Beers from the nominated brewery, namely CT, constituted a breach of the beer-tie and in this judgment I am seeking to quantify the claimants’ loss caused by this breach.Meanwhile unbeknown to the claimants, the defendants had been negotiating with CT so as to ensure that all the rebates on the sale of the Designated Beers would thereafter be paid solely to the first defendants and not to the claimants. When the first defendants achieved CT’s agreement to this suggestion, they then agreed to purchase their supplies of the Designated Beers from CT. In consequence, the claimants therefore sought permission to amend their pleadings in order to plead first that the agreement between the partied contained implied terms preventing the tenant from seeking to obtain rebates from the nominated supplier of the Designated Beers and second that the first defendants had acted in breach of those terms by obtaining such rebates from CT after February 2006. This second claim is what I have called “the post-February 2006 claim”.

After the claimants became aware of the rebates payable solely to the first defendants on the purchases of the Designated Beers, the claimants set about finding new nominated suppliers and on 5 September 2006, they nominated Coors Breweries Limited (“Coors”). The defendants complained about this nomination and contend that it will be highly detrimental to their business as that had only recently changed suppliers. The first defendants have continued to buy the Designated Beers from CT from whom they (and not the claimants) continue to receive all the rebates in respect of the barrelage of the Designated Beers purchased by the first defendants but the claimants contend that this is in breach of implied terms of the arrangements between the parties which I will set out in paragraph 34 below.

The relevant provisions are set out in clause 2 (11) C of the underlease and I will refer to those provisions in that clause by merely referring to any provision in that clause by its position in that clause (such as clause 1(a)) and thereby by omitting recurring the invariable references to clause 2 (11) C of the underlease. The first relevant part of the beer-tie provision is set out in clause 1 which provides in so far as is material to this judgment that :

The critical provision is clause (3) (a) and it consists of two parts of which the second part is the more important. Park J in the first judgment and counsel in the present application have referred to that second part as “the tailpiece” and I will adopt the same terminology. I, like Park J, will indicate the commencement of the tailpiece by inserting double asterisks but I stress that the double asterisks do not appear in the original underlease. The draftsman has not put any punctuation marks in the lease, but if he had, then I suspect that there would have been a comma or a semi-colon where I have placed the double asterisks.

As clause (7) indicates, “Designated Beers” are specified in the Schedule. The specifications there are by type, not by brand. Thus for example they include 'Light Pale or bitter ale' and 'Lager' but they do not specify particular brands of bitter or lager. They do not include alcopops, wine or spirits although they do include cider.

In the post-February 2006 claim, the claimants contend that since February 2006, the first defendants have been receiving to the exclusion of the claimant’s rebates from CT on the sale of the Designated Beers which should have been paid to the claimants. The thrust of the complaint of the claimants is that these rebates were received as a consequence of the first defendants acting in breach of implied terms (“the alleged implied terms”) that the first defendants would not:

“(a)

seek to negotiate or negotiate with the Nominated Supplier to be charged less than the prices shown in the current standard trade price list for the region in which the premises are situate and/or

(b)

act so as to prejudice the interest of the [claimants] in relation to the Nominated Supplier”

In response, the defendants deny that the agreement with the claimants contained the alleged implied terms and in the alternative, they contend that (if contrary to the first defendants’ main case the agreement contained the alleged implied terms) the claimants cannot rely on such implied terms because the claimants knew through Mr. Peter Stefani that the first defendants were seeking and were receiving rebates from the suppliers of the Designated Beers but that they did not object; in consequence, the case for the defendants is that the claimants have waived the alleged implied terms or are estopped by convention from relying on these alleged implied terms. The riposte of the claimants is that the defendants cannot rely on the fact (which they dispute) that Mr. Peter Stefani knew that the first defendants were seeking and receiving rebates from the suppliers of the Designated Beers because of a contrary finding by Park J in the first judgment. In other words, the claimants’ case is that the defendants are themselves estopped by this finding in the first judgment from alleging that the claimants knew that the first defendants were seeking and receiving rebates from the suppliers of the Designated Beers.

In respect of the enquiry ordered by the Chancellor, there are issues on the appropriate way of calculating the damages and also whether the claimants are entitled to claim for rebates in respect of Budweiser lager in the light of Park J’s findings in the first judgment. Much depends on whether it is correct to imply the alleged implied terms.

Thus the issues to be resolved are:

Mr. Nigel Gerald counsel for the claimants and Mr. Stephen Cogley counsel for the defendants have made very detailed oral and written submissions before and after the hearing for which I am grateful. I should add that as the claimants did not have as long as they wished for their closing oral submissions, I gave counsel for the claimants the opportunity to put in detailed written submissions and he availed himself of that opportunity.

In order to understand the submissions, it is necessary to explain some of the background and in particular that:

Introduction

In order to show that the first defendants acted in breach of contract after February 2006, the claimants contend that the exclusive purchasing obligations in the underlease contained the alleged implied terms, which I have set out in paragraph 27 above. The claimants also rely on the incorporation of the alleged implied terms as being relevant in assessing their damages payable to them.

The claimants’ case is that these terms were to be implied:

The defendants dispute the contention that the alleged implied terms can be implied as they submit that the conditions which have to be satisfied before such terms can be implied have not been met in this case.

The Claimants’ Submissions

The case for the claimants is that:

The Defendants’ Response

The case for the defendants is that the alleged implied terms sought by the claimants should not be implied because:

Mr. Cogley stresses that the case for the claimants fails to take account of the facts that:

I will have to return to consider the significance of these points but it is convenient to consider first in paragraphs 40 to 62 below the contention that these terms were implied “to give business efficacy to the exclusive purchasing obligations” and then in paragraph 63 below the further submissions that these terms are to be incorporated as being “the obvious intention of the parties”. In considering the rival submissions, I will bear in mind that as the Chancellor explained in paragraph 40 of the second judgment, “the question of implication must be judged in relation to both parties in July 1991”. On occasions, I will assume but only when it is correct to do so that some factor which emerged at a later stage would also have been apparent when the apparent when the underlease was entered into.

In my view, there are four reasons which individually and cumulatively lead me to the conclusion that neither of the alleged implied terms should be implied “to give business efficacy to the exclusive purchasing obligations” and I will now set them out in no particular order of importance.

Were the arrangements between the parties effective without the alleged implied terms?

As I will now explain, it seems clear that the arrangements between the claimants and their tenants were effective without the incorporation of the alleged implied terms. This is of critical importance because it is settled law that “ no term will be implied if the contract is effective without it” ( per Lord Simon of Glaisdale in giving the judgment of the majority of the Privy Council in B.P. Refinery (Westenport) Pty Limited v Shire of Hastings (1978) 51 A.L.J.R. 20) .

In this case, the contract could and did work effectively without the need to imply the terms contended for by the claimants for six main and overlapping reasons, which I will set out them again in no particular order of importance and which individually and cumulatively support that conclusion..

First, the alleged implied terms would prevent or preclude brewers from accepting a nomination to supply the Designated Beers. This is an important point as there was very persuasive evidence adduced to show that any brewer nominated to supply the Designated Beers would be keen to enter into any negotiations with the seller of the beer, namely the claimants’ tenants so as to do everything to encourage that party to maximise its sales. Thus the supplier would be keen to please the tenants of the premises and to offer them incentives. It was noteworthy that Mr. Richard Mills, who was an employee of a subsidiary of S& N with 35 years of experience in the brewing trade, explained how important it was for a brewer to negotiate with the seller of his company’s goods. I accept this evidence and also his conclusion that:

“if I was now working for another brewer and the claimants nominated my company as nominated supplier and asked me to supply [the premises] on the basis that I could not have negotiations and discussions with the customer, I would not enter into such an agreement. I would rather walk away from the trade”

In addition Mr. David Murray, the Regional Director of Scottish Courage explained that he did not believe that his company would have entered in to an arraignment which would have “prevented an actual operator of an outlet obtaining or negotiating with us for any discounts”. This evidence and that of Mr. Mills was not challenged or undermined by the claimants, who did not adduce any contrary evidence. Of course the alleged implied terms do not prevent the suppliers of the Designated Beers from offering unsolicited rebates to the tenants but the evidence I have quoted shows the importance to such suppliers of the tenants being able to negotiate and to solicit rebates. In any event, all this evidence was very cogent and it reinforces my view that I should conclude that the alleged implied terms are unworkable and so the arrangements between the parties would not work with the alleged implied terms. Indeed it is not contended by the claimants that the tenants were obliged by the express or by the implied terms of the underlease to ensure that the claimants received a rebate or discount.

Second, is clear that the agreement was not only effective without the implied terms but also significantly that the agreements between the claimants and their tenants might well be ineffective with those alleged terms implied as there is the powerful trade evidence which I accept from Mr. Richard Mills of John Smiths to the effect that his experience in the brewery trade for more than 35 years had led him to the conclusion that preventing tenants in the position of the first defendants from soliciting rebates from a brewery:

“could simply not work. To say that it would give business efficacy to the agreement is in my view nonsensical. You simply cannot have a situation where the brewer has to supply to an outlet when he cannot discuss on a day to day basis the requirements for an outlet which would also include financial matters, promotional matters and the like..”

These important features of the arrangements between the parties and the evidence of Mr. Mills which I found convincing show that the alleged implied terms might well make the arrangements between the parties ineffective if the tenants were prevented from soliciting rebates or discounts.

Third, there is no reason why an arrangement between the parties would not be effective if the claimants received the rent and that they together with the tenants could then each seek rebates for themselves from the nominated brewers. The claimants were in the strong position when the underlease was entered into as it must have been in the contemplation of the parties that they could then have sought an agreement from the brewers to pay them a specific sum by way of rebate as the price for obtaining the nomination. Indeed this is precisely what they did as soon as the underlease was entered into and it must have been contemplated that this would have occurred. Indeed the evidence of Mr. David Murray of S& N was that the claimants’ rebates were about £40 a barrel until 1999, when it increased to £62 before further increasing later to £65. Similarly, the claimants had the sanction that if a nominated brewer ceased paying them an acceptable rebate, the claimant could nominate another brewer instead. I cannot see why the alleged implied terms are needed.

Fourth, as the claimants’ case for incorporating the alleged implied terms was based on financial factors, it must not be forgotten that the payments due to the claimants under the underlease were sufficiently large so that from the claimant’s position, the agreement was effective and was workable even if the claimants were unable to receive any rebates. I accept the evidence of Mr. Peter Valentine that the annual rental income for the claimants of £65,000 was more than enough to pay the sum of £22,500 in the first year needed by the claimants to repay the capital and the interest on the loan made to it by the brewery; in addition these repayments would reduce each year as the capital on the loan was repaid.

Furthermore, I also accept as accurate the evidence of Mr. Richard Garside, who is a Chartered Surveyor with more than 35 years of experience in the Lancashire, who concluded that the rent payable to the claimants under the underlease was “excessive particularly having regard to the trading restrictions contained in the lease”. This conclusion was fortified by the obligations of the tenants to make “very substantial capitol expenditure in fitting out the premises before trading could commence”. [please see post-judgment note]

Mr. Garside also made the powerful point first that the underlease provided for an upwards-only rent review which could only lead to an increase in the rents with such reviews taking place at three yearly intervals and second that it was significant that as at March 2007, the rent reviews had not led to an increase in the rent payable to the claimants in the period of 16 years from when the underlease was granted. The claimants have not adduced any contrary evidence and this factor shows that a high rent was payable to the claimants by their tenants from the outset of the underlease.

Thus the arrangements under the underlease could work effectively with the claimant receiving the high rents payable while both parties could each seek to obtain rebates for themselves from the suppliers of the Designated Beers.

Fifth, there was always the prospect that under the underlease, there would have been no rebates payable as it must have been clearly envisaged by the parties to the underlease that the tenants might either have bought none of the Designated Beers or alternatively the tenants might have only purchased such small amounts of them so that no rebates would have been payable. It must not be forgotten that it was quite possible that the tenants would not have purchased any of the Designated Beers as there was no contractual obligations on the part of the tenants to buy any of the Designated Beers but merely a restriction on them from buying the Designated Beers from anybody other than the nominated supplier. As I have explained in paragraph 32 (a) neither part of the premises consisted of a conventional bar. Further, as I will explain in paragraph 142 below, there was cogent evidence of the increasing demand for alcopops which together with wine and spirits were not Designated Beers and that these sales of alcopops were at the expense of the sale of the Designated Beers.

Finally, the alleged implied terms only prevent the tenants from soliciting rebates and there is nothing to prevent them from receiving an unsolicited rebate. It is difficult to see why an agreement which permits tenants to receive an unsolicited rebate is not effective without the alleged implied terms which prevent the tenants from soliciting for rebates.

So in conclusion, in the words of Lord Simon which I have quoted in paragraph 41 above, the arrangements between the parties were “effective” without the alleged implied terms and this conclusion is fatal to the claimants’ case as “no term will be implied if the contract is effective without it”.

Were the alleged implied terms “so obvious that “[their inclusion] goes without saying?

The second reason why the proposed terms cannot be implied is that they fail to satisfy another of Lord Simon’s conditions in the BP case (supra) which was that “for a term to be implied … (3) it must be so obvious that “it goes without saying’”. Sir Thomas Bingham M.R. (as he then was) explained in Phillips Electronique Grand Public S.A. v British Sky Broadcasting Ltd [1995] EMLR 472 at 481 that there was a high threshold for implying the alleged terms as:

“… it is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred” (with my emphasis added)

I have emphasised the words “without doubt” as they show the high threshold that has to be reached before a term can be implied. In my view, if the parties to the underlease had foreseen the possibility of the nominated brewer being approached by the tenants with a request for a rebate or a discount, there was clearly two contractual solutions which they could have adopted; the first would have been that that such an approach was lawful and second would have been, as is now contended for by the claimants, that the tenants were not entitled to make such an approach. It is impossible to say that the second solution would, in Sir Thomas Bingham’s words, “without doubt” have been preferred because:

Were the alleged implied terms “reasonable and equitable”?

The third reason why the proposed terms cannot be implied is that they fail to satisfy the requirement that they should in the words of Lord Simon in the BP case (supra) be “reasonable and equitable”, which means that they must be fair for both parties. The proposed implied terms meant that one party to the contract, namely the tenants, was to be prohibited from seeking discounts from a third party namely the brewer, although they were entitled to receive unsolicited rebates or discounts. The claimants have failed to show why this prohibition on the negotiating powers of the tenants is fair or “reasonable and equitable”, bearing in mind that;

Thus my conclusion is that the terms sought by the claimants and set out in paragraph 27 above cannot be implied in order to give business efficacy to the agreement between the claimants and their tenants.

In reaching these conclusions, I have borne in mind and considered Mr Gerald’s submission that the existence of the beer-tie meant that the alleged implied terms should be implied as otherwise the beer-tie would have no purpose. In my opinion, this submission is incorrect as the beer-tie would or could still fulfil a useful function from the claimants’ point of view even without the alleged implied terms being incorporated because as at the time when the underlease was entered into, the claimants, for example, could:

In any event, the claimants must have been prepared to enter into a beer-tie which only gave them limited benefits because they were prepared to enter an underlease which contained no positive obligations on the tenants to buy any specific quantity of the Designated Beers nor any restrictions on the tenant receiving unsolicited rebates.

The detailed nature of the underlease and the fact that it was negotiated.

Fourth, if (which is not the case) I had been in any doubt about my conclusion that the alleged implied terms should not be implied, I would have reached the same conclusion because the critical starting points for considering whether these or any other terms who could be implied into written contacts are that:

In this case, the provisions in clause 2 (11) (c) of the underlease are, as I have explained in paragraphs 24 and 25 above, very detailed and very comprehensive. The terms in the underlease had been negotiated carefully and in some detail by the solicitors, who were then acting for the parties to the underlease. In consequence, these factors provide cogent additional grounds for concluding that I should reject the claim that these terms should be implied.

Discussion on the contention that the alleged implied terms were incorporated “as being the obvious intention of the parties”

Mr. Gerald submits that the alleged implied terms can be incorporated as “as being the obvious intention of the parties” becauseif the parties had been asked if the agreement should contain the proposed implied terms, they would have answered in the affirmative. As I have explained in paragraphs 55 and 56, I am unable to accept that submission. In any event if I had been in any doubt about this, which is not the case, I would have reached the same conclusion because of the reasons set out in paragraphs 61 and 62 above namely, where as was the case here, there has been a detailed agreement negotiated between the parties, there is a presumption that the agreement contains all the relevant terms.

Conclusions on the incorporation of the alleged implied terms.

The agreement between the claimants and the tenants did not contain either of the alleged implied terms set out in paragraph 27 above. This conclusion means that I must dismiss the claim for damages in respect of the period after February 2006 because as Mr Gerald accepts his claim in respect of this period is dependant of establishing that the alleged implied terms were incorporated.

Introduction

As I have already explained, the first defendants have contended not only that the alleged implied terms were not included in the agreement between the parties but even if they were, then they have two further arguments as to why the alleged implied terms are no longer incorporated in their agreement with the claimants. First, the first defendants submit that the claimants are estopped from relying on the alleged implied terms because the claimants through Mr. Peter Stefani knew from at least early in 1993 that the first defendants were receiving rebates and that the claimants did not complain but instead they were content for the first defendants to solicit and to negotiate rebates from the suppliers of the Designated Beers. It is said that the first defendants acted to their detriment in reliance on this conduct by the claimants. Second, it argued that the terms of the underlease have been varied by conduct so that the alleged implied terms are no longer incorporated. As I have concluded in paragraph 64 above that the alleged implied terms were not incorporated, the estoppel and waiver issues are now academic. So I will deal with them more briefly than I would have done if they had been of critical importance.

The riposte of the claimants to these contentions is that the defendants are estopped from relying on these two points because of a finding by Park J in the first judgment where he said at paragraph 17 with my emphasis added;-

“for some years (I do not recall the evidence revealing how many) Scott & Newcastle had been allowing small discounts to [the first defendants] on its purchase of beers (discounts of which [the claimants] knew nothing)...”

In response, the defendants contend first that they are not estopped by this comment of Park J and second that in any event there is clear evidence that the claimants thorough the late Mr. Peter Stefani did know that S & N had been allowing discounts to the first defendants.

At the outset of the present trial and in the light of this comment of Park J, Mr Gerald sought an order striking out the allegations in Paragraphs 3 and 4 of the Defence and Counterclaim to the effect that the claimants knew that the first defendants had been receiving rebates with the result that they were estopped from relying on the alleged implied terms or that the alleged implied terms have been waived. I was concerned as to whether it was appropriate to hear that application at the start of the present trial and so I suggested to Mr. Gerald that it would be better for this matter to be dealt with in closing submissions because whatever view I took on the claimants’ application, it would still be desirable, if not necessary, for me to make findings of fact as to whether the claimants knew that S & N were paying rebates to the first defendants. Mr Gerald agreed with this course so I now have to consider his application which entails considering the impact and consequences of Park J’s comments which I have set out in paragraph 66 above.

The case for the claimants on this is that the matter is very clear in the light of Park J’s comment set out in paragraph 66 above and that this statement creates an issue estoppel as against the first defendants.

In response, the defendants contend that the claimants’ knowledge about the discounts being paid to the first defendants was not an issue in the proceedings before Park J. Mr Cogley points out that the matters in issue in front of Park J were the first defendants’ knowledge because it was relevant to the argument that the claimants had derived a secret profit and that this formed the subject matter of the counter-claim. This counterclaim was dismissed in the first judgment because it was held that no fiduciary relationship existed between the parties. It is true that Mr David Murray said in his original statement:

“I wish to make it clear that we never discussed with Peter Stefani or anyone else at the claimant any basis for trading with the defendants”

The circumstances in which an issue estoppel of the kind contended for by the claimant can arise are limited and Halsbury’s Laws of England (4^th Edition Re-issue) Volume 16 (2) states at paragraph 980 (with my emphasis added) that:

“Issue estoppel means that a party is precluded from contending the contrary of any precise point which, having once been distinctly put in issue, has been solemnly and with certainty been determined against him”

Lord Bingham of Cornhill explained in Johnson v Gore Wood & Co [2002] 2 AC 1 at page 31f how a court should approach a contention that an issue estoppel arises by a previous judgment when he said that:

“it is in my view preferable to ask whether in all the circumstances a party’s conduct is an abuse rather than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances”.

It follows that the mere fact that a judge makes a comment about any matter in a judgment does not automatically mean that a party is estopped from putting forward a different case on that matter in a subsequent case. The approaches of Lord Bingham and of Halsbury which I have just quoted show the need for careful scrutiny of the circumstances in which the original judicial comment was made in order to ascertain if the act of subsequently making a contrary assertion in a subsequent action constitutes an abuse. A useful starting point must be to ascertain how germane the original comment was to any contested or any relevant issue or an order in the first proceedings. Thus, if I were, for example, to make a comment in this judgment in the present proceedings about the state of decoration of the premises, that would not create an estoppel in a subsequent action because the state of decoration of the premises is not an issue in the present action nor has it been the subject of any submissions or of evidence.

Applying those principles, I conclude that the defendants are correct and that there was no issue estoppel as a result of paragraph 17 of the first judgment bearing in mind first that the knowledge of Mr Peter Stefani concerning the receipts of rebates by the tenants was not a matter which, in the words of Halsbury, was one “having once been distinctly put in issue”. There was no issue in the hearing before Park J relating to what the claimants knew of the rebates received by the first defendants from S &N. The learned judge was dealing essentially with the validity of the beer tie, the right of the claimants to nominate certain parties as the suppliers of the designated beers, the claim in respect of Budweiser and the validity of the counterclaim which related to alleged fiduciary duties on the part of the claimants. None of these issues nor the relief claimed or granted in the first action was concerned with or related to Park J’s comments in paragraph 17 of his judgment, which I have set out in paragraph 64 above.

Second, Lord Bingham’s test means that the conduct of the defendants in raising in the present case the issue of Mr. Peter Stefani’s knowledge of the rebates paid to the first defendants was not “in all the circumstances ... an abuse” essentially because this matter had not been put in issue in front of Park J. The basis of the abuse is that the court is being asked to reconsider a matter which had been relevant in an earlier action in which it had been considered and resolved. The comment made by Park J in paragraph 17 of his first judgment on which the claimants now rely does not fall into that category.

If, which is not the case, I had been in any doubt on this issue, I would have found against the claimants because the onus of proof of showing an issue estoppel is on them and they have failed to discharge it. So I dismiss the claimants’ application to strike out the claims based on issue estoppel and I now turn to consider how , if at all, this conclusion assists the defendants

What did Mr Peter Stefani know about the rebates being paid to the first defendants?

In considering this issue, I bear in mind the fact that the claimants are unable to rely on any evidence of Mr Peter Stefani as he has sadly died and so in those circumstances, I have considered the evidence of the defendants on this issue with special care especially as the discussions took place many years ago. Nevertheless, I have come to the clear conclusion that Mr Peter Stefani knew full well that the first defendants sought and obtained discounts or rebates from S & N. Mr Trevor Robbins a director of the first defendants and Mr Peter Valentine were both clear in their evidence that they mentioned from time to time to Mr Peter Stefani that they were receiving rebates from S& N. Mr. Robbins for example recalls that during their weekly discussions with Mr. Peter Stefani he mentioned that the first defendants were receiving a rebate of £15 per barrel and some free stock from the suppliers of the Designated Beers. Mr. Peter Valentine spoke of meetings prior to 1995 at which there was a discussion of the rebates being paid from those suppliers to the first defendants as well as one particular occasion on which he told Mr. Peter Stefani that the first defendants were receiving retrospective discounts and that on no occasion did Mr. Peter Stefani say that he was unhappy about this.

I fully accept this evidence as well as the further evidence first that Mr. Peter Stefani’s office was very close to the offices of the first defendants and second that they had regular discussions in which they had some discussions on what the tenants could do. For example, as I will explain in paragraphs 148 and 149 below, Mr Peter Stefani allowed the first defendants to buy Budweiser beer outside of the beer-tie and, Park J found in the first judgment that this constituted a release from the beer-tie for that beer. Indeed Mr Robbins said that he had known Mr Stefani for a long time and that there were no secrets between them. It is not surprising that they cannot remember the precise locations or events as these discussions took place many years ago.

For the purpose of completeness, I should add that Mr. Gerald points out that Mr Peter Valentine suggested for the first time in evidence that there had been some discussion with Mr Stefani between Christmas 1991 and January 1992 when Mr Stefani wanted Mr Valentine to take over the lease after Findextra had experienced financial difficulties. Mr Valentine’s evidence is that it was made quite clear to Mr Stefani that the tenants were seeking rebates from the nominated brewery. In considering the truthfulness and reliability of this evidence, I have taken into account the fact that it does not appear to have been properly pleaded. Nevertheless, no objection was taken by Mr Gerald when the evidence was adduced as a result of his cross-examination and he has not suggested, let alone shown, that he has been prejudiced by the admission of this unpleaded evidence. It is however unnecessary for me to decide if I should accept this evidence as I have already concluded on the basis of the findings in the last few paragraphs that Mr. Peter Stefani knew full well that the tenants were receiving rebates from the suppliers of the Designated Beers and that they did not object to this.

In reaching this conclusion, I have taken into account the evidence of Mr Peter Stefani’s widow and sons. None of them contend or indeed have satisfied me that they were present at all the discussions which took place between Mr Peter Stefani and, for example, Mr Peter Valentine and Mr Trevor Robbins. So they would not have known what was being discussed at those meetings. In any event, it is very unlikely that Mr Peter Stefani would have considered these discussions on rebates payable to the first defendants of such importance that he would have wanted to mention them or indeed that he would have mentioned them to his wife and sons especially as none of them were then actively engaged in working full-time in the claimants’ business or the part of it dealing with the tenants of the premises.. Indeed Mr. Peter Stefani’s son Leon said that it was his father who took the decisions on how the business operated while Mr. Mills who dealt with the claimants when he was employed by a subsidiary of S&N said that Mr. Peter Stefani had said to him that he did not wish Mr. Mills to discuss matters personal to Mr. Peter Stefani or the claimants with anyone or indeed Mr Stefani’s family. I have already explained in paragraph 15B above why I do not accept the evidence of members of the Stefani family unless it is corroborated by the cogent evidence of somebody other than their family members; that has not occurred on this issue.

I am satisfied that Mr. Peter Stefani knew that the first defendants had solicited and had obtained discounts or rebates from S & N. It has not been suggested that Mr. Peter Stefani objected to this practice and I consider that there would have been no reason for the first defendants or any tenants to believe that they were not allowed to solicit rebates from the suppliers of the Designated Beers.

The consequences of Mr. Peter Stefani knowing of and not objecting to the tenants soliciting rebates from the suppliers of the Designated Beers.

The case for the claimants is that even if Mr Stefani had agreed to the tenants soliciting rebates from the nominated brewers, this does not amount to an estoppel or agreement to vary. Although I have had the benefit of full argument on the other issues raised in this case, the argument on the estoppel and waiver issues was much briefer. It is for that reason and also because these issues are now academic that I do not propose to reach any conclusions on these issues other than to say that it seems to me that the defendants have powerful arguments on each of these issues.

The claimants accept that their post- February 2006 claim is dependent on them establishing that the alleged implied terms were incorporated into the agreement with the first defendants. As I have explained those terms were not be implied and so the post- February 2006 claim must be rejected.

There are disputes between the parties first as to whether the underlease obliges the tenants to pay the current standard trade price list and second if the tenants did not do so, whether the tenants are then liable in damages to the claimants. The claimants contend that that the answers to both these questions are in the affirmative while the defendants disagree as they submit that both answers are in the negative.

The claimants rely on the provisions of clause 2 (11) (c) of the underlease which I have already set out in paragraph 25 above but it is significant that that the carefully drafted underlease states (with my emphasis added) that “all goods are to be charged at the prices on the…nominated suppliers’ current standard price list”. What is important is that this provision does not refer to the prices which will be paid or which have to be paid by the tenants.

In my view, there are three reasons why the words of this provision are not to be construed so that the tenant was obliged to pay the current standard trade price list. First, the use of the words “to be charged” are clear and they show that the parties did not wish to include a provision requiring that the goods were to be paid on the basis of the “nominated suppliers’ current standard price list”. Second, no reason has been put forward to explain why the word “charged” should be read as meaning “paid”. Third, if the parties to the underlease had wanted toensure that the tenants wouldonly be obliged to be charged for - but not to pay- the “nominated suppliers’ current standard price list”, they would have used the language which they actually did.

Finally, I should also add that I am content to have reached this conclusion because of Park J’s comments in paragraph 25 (iv) of the first judgment which I have quoted in paragraph 37(f) above that it would be “ridiculous” to suggest that if the supplier wished to charge less than this price, he was unable to do so. Thus I reject the claim that the first defendants are liable in damages to the claimants for failing to pay the “nominated suppliers’ current standard price list”.

Introduction

In respect of the period November 2002 to February 2006, the claimants have stated in an e-mail sent to me after the hearing that their claim for damages has now increased from the figure previously claimed at the hearing to £185,413 which includes their claim in respect of the purchases of Budweiser Beer or for £173,315 if the Budweiser claim is excluded. I interject to explain in the light of my conclusions that the claimants are only entitled to nominal damages, it is unnecessary to analyse the quantification of this claim further. The thrust of the claimants’ case is that:

Mr Cogley takes issue with steps (b) to (e) in the claimants’ submissions and a major dispute between the parties concerns step (d) (iii) and (e). His case is that if the first defendants had taken deliveries from CT during the period from November 2002 until February 2006, they would have received all the rebates and that the claimants would not have received any rebates . Thus he submits that the claimants are not entitled to anything other than nominal damages.

Mr Cogley points out that central to the claimants’ case are their assumptions or contentions that CT and Coors would have paid to the claimants and not to the first defendants all the available rebates on the sale of the Designated Beers. He contends that no evidence has been called from any of the nominated suppliers or from any other brewer to show that the claimants would have received such rebates or indeed any rebates. This omission according to Mr Cogley presents difficulties for the claimants as the burden is upon them to show what loss (if any) they have sustained as a result of the first defendants’ failure to observe or perform the beer-tie and purchase the Designated Beers from CT. Mr Cogley proceeds to submit that the claimants have further difficulties because the evidence adduced on this issue all came from the defendants’ witnesses and that it undermines, if not destroys, the claimants’ case. This evidence, according to Mr Cogley, shows that no rebates would have been paid to the claimants in respect of the period in question even if the defendants had complied with the beer-tie and even if they had bought the Designated Beers from the nominated sellers, who were CT.

So the case for the defendants is that my task is to ascertain what rebates would have been received by the claimants if the first defendant had purchased supplies of the Designated Beers from CT from November 2002 up till the time when the nomination of CT was accepted and acted upon in February 2006. Mr Cogley says that the answer to that inquiry is that if the first defendants had acted upon the nomination of CT in November 2002 and if they had purchased the Designated Beers from CT , then in that event no rebates would have been paid to the claimants by CT. Mr Cogley says the reason for that is that all the rebates would have been paid by CT solely to the first defendants and he says that the proof of that point is that this was precisely what actually happened when the first defendants did subsequently order the Designated Beers from CT after February 2006. The case for the defendants is that the best guide to who would receive rebates before February 2006 is to look to what happened after that date which was that CT paid all the rebates to the first defendants and none to the claimants. It must be stressed that the focus of my attention has to be on matters between November 2002 and February 2006.

What approach should be adopted to ascertaining what losses of rebates were suffered by the claimants from November 2002 until February 2006?

I must now consider the fundamental issue between the claimants and the defendants which is

My starting point is that this is an enquiry into damages suffered by the claimants and that this is not an account of sums received by the first defendants. That is what was ordered by the Chancellor in the second judgment. The principles on which such damages have to be calculated for breach of contract are not in dispute and in Werthheim v Chicoutimi Pulp Company [1911] AC 301, Lord Atkinson referred at page 307 to:

“.. the general intention of the law that, in giving damages for breach of contract, the party complaining should, so far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed” (cited with approval inGolden Straight Corporation v Nippon Yusen Kubiska Kaisha [2007] 2 WLR 691 at paragraph 30 per Lord Scott of Foscote and also at paragraph 37 per Lord Carswell)

Thus the focus of my enquiry has to be on ascertaining the sums which the claimants would have received as rebates if the first defendants had purchased the Designated Beers from CT during the pre-February 2006 period and not what rebates the first defendants actually received from CT in this period when they were not buying the Designated Beers from CT. Such an inquiry as advocated by the defendants meets the requirement of Lord Atkinson in placing the claimants “in the same position as [they] would have been in if the contract had been performed[ namely that the first defendants had purchased the Designated Beers from CT between November 2002 and February 2006]” It follows that the fact that the first defendants did not receive rebates from CT when they were not buying the Designated Beers from them does not necessarily mean or even indicate that if the first defendants had been buying the Designated Beers from CT first what rebates (if any) the first defendants would have received from CT or second what rebates (if any) the claimants would have received .

I cannot accept the claimants’ submissions first that “the court cannot take into account what [the defendants] could have done but did not do [ viz stop buying Designated Beers and/ or negotiate with CT to cut out the claimants and buy from CT]” (Paragraph 12 of the claimants’ closing submissions) and second that it should be assumed that CT would have given all rebates to the claimants. There are four overlapping factors which lead me to that conclusion. .

First, as I have explained, the obligation of the courts in assessing damages in this kind of case is to ascertain the position which in Lord Atkinson’s words “ the claimants would have been in if the contract had been performed”. This entails considering what rebates would have been paid if the first defendants had accepted and acted upon the nomination of CT as the nominated supplier of the Designated Beers.

That enquiry means that it is necessary to ascertain what rebates (if any) would actually have been paid by CT to the claimants in respect of the purchase by the first defendants of the Designated Beers. More specifically it requires focussing on what would have happened if the first defendants had honoured the beer-tie by buying the Designated Beers from CT and then consideration of first whether the first defendants would have approached CT for rebates and second what rebate (if any) would have been given to the first defendants by CT in response to that request and what would have been given to the claimants. I cannot understand how this could be an irrelevant or incorrect exercise in the light of Lord Atkinson’s universally accepted approach.

Second, no case or judicial comment has been put forward which limits the principle explained by Lord Atkinson and quoted in paragraph 93 above. Indeed Lord Bingham of Cornhill very recently explained in paragraph 9 of the Golden Straits case that

“the damages recoverable by the injured party are such sum that will put him in the same financial position as if the contract had been performed”

Mr Gerald, however, seeks to derive assistance from the statement of Lord MacNaugton in Bwllfa and Merthyr Dare Stream Collieries (1891) Limited v Pontypridd Waterworks Company [1903] AC 426 when he asked at page 43, about the judicial role :

“Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess when he can calculate? With the light before him why should he shut his eyes and grope in the dark?

In my view, this approach supports the first defendants’ case because it shows that I can derive assistance in determining what the first defendants would have done if they had accepted the nomination of CT in 2002 from what actually happened when they accepted the nomination of CT in February 2006.

This approach is consistent with the decision in the Golden Straits case (supra), which is another case relied on by Mr Gerald because in that case, the House of Lords has recently held by a majority that it is correct to take into account matters which arose after breach in assessing damages for loss of charter hire. The relevant post- breach development in that case were the outbreak of hostilities in what was described in that case as “the second Gulf war” in 2003 but the reason for the majority in reaching their conclusion was the application of the principle of placing the claimants in the position which they would have been in if there had had been no breach of the charter. This is supportive of the approach advocated by Mr Cogley, which is that it is permissible, if not necessary, to look at subsequent events in order to ascertain what loss the claimants would have suffered. In the present case, the relevant subsequent events are the first defendants’ subsequent dealings with CT and in particular their successful attempts to obtain all the rebates from CT in February 2006 to which I have already referred in paragraph 22 above.

Third, the principle relied upon by the claimants has no place when the ability of a claimant to obtain a benefit which it is claimed has been lost depends first on the prospect of a defendant approaching a third party (namely CT) for a rebate and second on the attitudes of this third party to such an approach. In such a case, the court has to assess first the prospect of the first defendants approaching CT for rebates and second the chances of CT granting rebates to the claimants . I will return to consider these matters in paragraphs 108 to 126 below.

Finally, in accepting as correct Mr Cogley’s approach and in rejecting Mr Gerald’s approach, I have not only borne in mind the established principles but also the disturbing consequences of accepting Mr Gerald’s submission, which can be shown by the following example. If, in the present case, the claimants had nominated X as the suppler of the Designated Beers and X was a company which the claimants were entitled to nominate under the terms of their agreement with the first defendants. Nevertheless let us assume that the first defendants refused to deal with X because they were involved in such a continuing and very bitter long-running dispute with X and they would have never ordered any of the Designated Beers from X .

Instead the first defendants ordered the Designated Beers from Y from whom they received substantial rebates. It would be very strange and contrary to common sense if in those circumstances when assessing the damages due from the first defendants, the claimants were entitled to recover the rebates which had been paid to the first defendants by Y even though the first defendants would under no circumstances have ordered any of the Designated Beers from X. The law would not have allowed such an absurd situation to arise and the reason is that those sums would never have been paid if the first defendants had complied with their contractual obligation and had accepted the nomination of X.

I am fortified in accepting the defendant’s submissions and rejecting those of the claimants by the statement quoted in the Golden Straits case of Lord Wilberforce in Miliangos v George Frank (Textiles) Ltd [1976] AC 443 at 468 when he explained that:

“… it is for the courts… to work out a solution in each case best adapted to giving the injured party that amount in damages which will most fairly compensate him for the wrong which he has suffered”

In my view, I must follow the approach of Mr. Cogley underpinned as it is by Lord Wilberforce’s approach and Lord Atkinson’s statement which I have quoted in paragraph 93 above. I therefore also reject Mr. Gerald’s submissions as they are based on incorrect and false assumptions and in particular for the reasons which I will explain in greater detail in paragraphs 108 to 126 below the assumption that CT would have given all the rebates (or some rebates) to the claimants and none or only limited rebates to the first defendants is in correct and without any foundation. I do not accept that I should make award on those false and incorrect assumptions and thereby turn a blind eye to what actually happened when the first defendants sought all the rebates in February 2006 as Mr. Gerald wants me to. In my view, the task of the court in assessing damages requires it not to make assumptions which are fanciful and totally without any proper factual foundation. In the light of my conclusions in paragraphs 126 to 131 below, I must reject as totally without merit the assumption put forward by the claimants that CT would have given all or most or any of its rebates to the claimants.

Thus it follows that my task in ascertaining the “position as [the claimants] wouldhave been in if the contract had been performed” entails considering what would have happened if the first defendants had accepted the nomination of CT as the claimants’ nominated supplier of the Designated Beers from November 2002 until February 2006. The three questions which then have to be considered in the event that the first defendants had accepted the nomination of CT in 2002 are (i) would the first defendants then have sought a rebate from CT as the suppliers of the Designated Beers?; (ii) if so, what would the response of CT have then been and would they then have paid any rebate to the claimants?; and (iii) if so, what total rebates would then have been paid to the claimants by CT . I will consider each of these questions in turn but I must first consider the terms of the letter of 22 October 2002..

Would the claimants have received the rebates set out in the letter of 22 October 2002 if the first defendants had accepted the nomination of CT as suppliers of the Designated Beers in November 2002?

It is correct that in the letter of 22 October 2002 sent to Mr Bob Collins (who was an agent of the claimants), CT stated that the claimants would receive certain specified amounts of rebate in respect of the Designated Beers purchased by the first defendants. The claimants contend that this was offer from CT, which was then accepted by them when they subsequently nominated CT as the suppliers to the first defendants of the Designated Beers. So Mr. Gerald submits that that the claimants were entitled to these rebates as from the date of the nomination of CT but I am unable to agree with this contention for three main reasons.

First, I do not consider that the letter of 22 October 2002 was sufficiently certain and complete as to be capable of forming a binding agreement as it merely sets out prices. There was for example no agreement about the minimum quantities which had to be ordered to trigger payment of the rebates and I do not believe in the light of the evidence in this case that these rebates would have been payable if only say five or ten barrels were ordered. It is noteworthy that all the other agreements which the claimants entered into or were considering entering into with the suppliers of the Designated Beers were detailed documents which contrast sharply with the benefit of the letter of 22 October 2002. Thus the offer letters of S& N and Mathew Brown respectively of 16 April 1991 and of 10 March 1994 both contain many more terms than the letter of 22 October 2002.

Second, the letter of 22 October 2002 was an initial response of CT, which would have to been the subject of further investigations and negotiations as is shown by the evidence of Mr. Anthony Nelson, a Manger of CT whose evidence at the present trial was adduced under the Civil Evidence Act 1996 because he was unfortunately unwell. I appreciate that the claimants have therefore been prevented from cross-examining him but his evidence is very clear and it is unlikely to have been undermined in cross-examination. It was to the effect that:

“there was no form of contract or legal agreement entered into by or on behalf of CT with the claimant, or indeed anybody on the claimant’s behalf. Bob Collins was trying to find out the terms on which we would supply.”

Mr. Gerald points out that Mr. Nelson then proceeds to state that:

“I was quite happy to confirm that discounts would be paid to [ the claimants], I had not applied my mind in any way to the extent to which [the claimants were] actually operating the outlet at all”

Mr. Nelson did however also explain that the interest of CT was:

“…simply in supplying as much beer as it possibly can to an outlet. The idea obviously is that it will encourage the pub operator to purchase much as possible of our product, as opposed to a competitor”

This statement is consistent with what happened that when the first defendants asked CT to supply the Designated Beers because CT was only too willing to supply the first defendants and to give them all the rebates with none going to the claimants. It also shows that what was indicated in the letter from CT of 22 October 2002 was not an offer but an invitation to treat which would be reconsidered when, in his own words, Mr. Nelson:

“had applied my mind … to the extent to which [the claimants were] actually operating the outlet at all” because then CT would “ encourage the pub operator [namely the first defendants] to purchase much as possible of our product, as opposed to a competitor”.

Third, even if contrary to my views, the letter of 22 October 2002 was sufficiently certain as to be capable when accepted of forming a binding contact between the claimants and CT, then such an agreement was not in my opinion to remain in force for any specific period of time as it could always have been terminated at any time without notice. It is quite clear from the way in which S & N immediately and without notice stopped making rebate payments to the claimants and instead immediately made them to the first defendants that the way in which this trade operated is that any agreement or promise made by brewers to pay rebates was terminable without notice. This also explains that when the first defendants negotiated with CT, who were the suppliers of the Designated Beers, that company immediately and without notice altered the existing arrangements and thereafter paid all the rebates to the first defendants and none to the claimants . There has been no suggestion that these decisions by S & N and CT to cease to pay any rebates to the claimants were wrongful or in breach of contract or even that the claimants have indicated an intention to sue either of these companies for breach of contract. It is also noteworthy that the claimants have not contended (let alone established) that the rebates offered by CT would apply indefinitely or for a specified period or be subject to any notice period. Thus even if there was a binding agreement between CT and the claimants, it was terminable without notice. In consequence the claimants did not have a contractual right to receive rebates from any nominated supplier of the Designated Beers other than perhaps at its highest one terminable without notice. So the rebates which would have been paid to the claimants would have depended on whether the first defendants would have solicited rebates from CT and that is the issue to which I now turn.

Would the first defendants have sought rebates from CT as the suppliers of the Designated Beers and if so, how much?

I am sure that if the first defendants had accepted the nomination of CT in November 2002, they would immediately have made requests and demands of CT that they (and not the claimants) should receive all the rebates before they would have placed any orders for Designated Beers. After all the first defendants dealt with S & N in the period from 2002 up to 2006 on the basis they would receive all the rebates. Again when in 2006 the first defendants decided to order Designated Beers from CT they immediately approached CT for rebates and thereafter they received the full rebates amount. Mr. Gavin Valentine explained that when he met Mr. Anthony Nelson and Mr. Paul Little of CT in February 2006, they agreed to give all the rebates to the first defendants as “we were in effect his customer”. I have no doubt this is what the first defendants wanted and what they would have demanded in November 2002 if they had accepted the nomination of CT.

I can think of no reason why the first defendants would not have done likewise in late 2002 and onwards until February 2006 if they had been purchasing the Designated Beers from CT. It is appropriate for me to state that I found both Mr Gavin Valentine and his father to be honest and reliable witnesses who emerged unscathed from characteristically skilful cross-examinations. The clear impression given by each of them is that they were tough business men who were determined to maximise their profits and that neither of them would have been in the slightest way inhibited from seeking to negotiate for the maximum rebates from their suppliers of Designated Beers whether they were S& N or CT. Indeed, from 2002 onwards the first defendants sought maximum discounts from whoever was supplying them with Designated Beers and I have no doubt that they would have done so if they had honoured the nomination of CT in 2002. In other words, they would have sought all the available rebates and that would have included any rebates which might other wise have been paid to the claimants.

If the first defendants had sought rebates from CT as the suppliers of the Designated Beers in 2002 after CT ‘s nomination, what would the response of CT have been?

The answer to this question would depend upon what rebate (if any) CT would have been prepared to pay to the first defendants. In other words, this is a situation to which a party not involved in the present litigation (namely CT) would have had a determinative role if not a crucial role, because the rebates (if any) which the claimants and the first defendants would have received from CT would depend on what CT was prepared to pay. In other words, this is a situation in which a third party namely CT would have a determinative or crucial role.

The proper approach to showing what a claimant has to prove in such situations was explained by Stuart-Smith LJ in Allied Maples Group v Simmons & Simmons [1995] 1WLR 1602 at pages 1609- 1610 when he spoke of three different situations. He explained them in this way:

“In these circumstances, where the plaintiffs’ loss depends upon the actions of an independent third party, it is necessary to consider as a matter of law what is necessary to establish as a matter of causation, and where causation ends and quantification of damages begins.

(1)What has to be proved to establish a casual link between the negligence of the defendants and the loss sustained by the plaintiffs depends in the first instance on whether the negligence consists of some positive act of misfeasance, or an omission or non-feasance. In the former case, the question of causation is one of historical fact. The court has to determine on the balance of probability whether the defendant’s act, for example the careless driving, caused the plaintiff’s loss consisting of his broken leg. Once established on balance of probability, that fact is taken as true and the plaintiff recovers his damage in full. There is no discount because the judge considers that the balance is only just tipped in favour of the plaintiff; and the plaintiff gets nothing if he fails to establish that it is more likely than not that the accident resulted in the injury”

Having considered this first situation, he said later in his judgment at page 1610 when considering a second situation that:

“(2)

If the defendant’s negligence consists of an omission, for example to provide proper equipment, given proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given? This can only be a matter of inference to be determined from all the circumstances. The plaintiff’s own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed by the judge, especially if there is compelling evidence that he would not…

Although the question is a hypothetical one, it is well established that the plaintiff must prove on balance of probability that he would have taken action to obtain the benefit or avoid risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour...”

Finally, he said that there was a third situation at page 1611 which was that:

“(3)

In many cases the plaintiffs’ loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case, does the plaintiff have to prove on balance of probability, as Mr Jackson submits, that the third party would have acted so as to confer the benefit or avoid risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?

Although there is not a great deal of authority, and none in the Court of Appeal relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr Jackson’s submission is wrong and the second alternative is correct…”

Mr Gerald contends that this case does not “really” fall into Stuart Smith LJ’s third category “because [the claimants’] loss is a matter of historical fact, which does not depend on the hypothetical action of CT”. So he contends “it falls more into the first category”. He contends that the matter has to be determined on a balance of probabilities as was also explained in Davies v Taylor (1974) AC 207, 213.

In my provisional view, this case falls within Stuart-Smith L J’s third category because it depends upon the hypothetical actions of a third party, namely CT. I need not come to a definite conclusion on this issue as it does not really matter into which category this claim falls because in my view the claimants are unable to show on a balance of probabilities that they would have obtained a rebate from CT or that there was a substantial or indeed any realistic chance that they would have done so. In my view, I am quite sure and satisfied beyond any reasonable doubt that CT would have given the first defendants all the rebates and that none would have given to the claimants if the first defendants would have requested all the rebates as I am sure they would have done.. In other words, the claimants would lose on this point irrespective of which of Stuart Smith LJ’S three categories this claim falls or even if it did not fall into any of the categories..

The main reason why I have reached this conclusion is that when after the hearing in front of Park J, the first defendants approached CT for a rebate they received the rebates in full and no rebates went to the claimants. The reason for that decision of CT was because of the need of CT to offer the maximum rebates to “the pub operator” as was explained by Mr. Nelson in the passages which I quoted in paragraph 122 above There is no valid reason for believing that a different course would have been adopted if the first defendants had taken their supply of the Designated Beers from CT in and after November 2002. Indeed as I have explained in paragraph 115 above, the evidence of Mr. Gavin Valentine shows that this is precisely what occurred when the first defendants agreed to order the Designated Beers from CT. I am fortified in coming to that conclusion by the evidence of Mr. Anthony Nelson of CT whose evidence was, as I have explained, adduced under the Civil Evidence Act 1996 because he was unfortunately unwell. I appreciate that the claimants have therefore been prevented from cross-examining him but his clear evidence was that the interests of CT were to supply as much beer as it could possibly could to the retail outlet (which in this case was the first defendants) and they would offer it incentives by providing discounts so as to ensure that the first defendants as the seller of their products “is as happy as possible with our products and is therefore incentivised to sell them”.

It is very unlikely that this or any other part of Mr. Nelson’s evidence would not have survived a cross-examination especially as similar evidence was given by employees of S & N about the need for the brewer to offer maximum incentives to the bar owners. In my view, the history of the first defendants’ dealings with brewers shows that any of the suppliers of Designated Beers would have been interested solely in offering all possible rebates to the end user, namely the first defendants. These suppliers showed no interest in giving incentives to the claimants once the first defendants demanded all the rebates. Thus, I conclude that if, as was inevitable, CT would have been approached by the first defendants for rebates, then CT would certainly have given all the rebates to the first defendants and none to the claimants.

In summary, I am convinced that the first defendants were conducted by determined businessmen who would have demanded all the rebates from CT and who for their part would have given all the possible rebates to the first defendants and none to the claimants.

What total rebates would have been paid to the claimants by CT?

For the reasons which I sought to explain in the previous paragraphs, I do not consider that any rebates or discounts would have been paid to the claimants by CT. It is now appropriate to consider a further submission of the claimants which is that if the first defendants could have negotiated successfully to ensure that the claimants did not receive any rebate, then in the word of the claimant’s skeleton,

“this still does not work because [the claimants] would simply have nominated a new supplier who had paid a discount”

There are problems with this submission which have led me to rejecting it. First, the claimants have not adduced any evidence that any brewer would have been prepared to accept the claimants’ nomination to supply Designated Beers upon the basis that they would not agree to pay all or indeed any of the available rebates to the first defendants. The claimants have had a long period to find a brewer who would accept this arrangement but none has been forthcoming. The claimants sought without success to reach an agreement with Coors which included provisions which would have ensured that the first defendants would not receive a rebate. The arrangement proposed by the claimants with Coors makes the claimants the nominated supplier of the Designated Beers to the first defendants. The draft agreement which the claimants wished Coors to sign placed a number of obligations on Coors not to deal directly with the first defendants but this agreement was not acceptable to Coors. I accept the evidence of Mr. Gavin Valentine which was not rebutted by any evidence and which was that Mr. Philip Nicholson of Coors told him that:

“..the system proposed by the claimant is simply unworkable. By the claimants wanting all the discounts, Coors’ hands are tied as they simply have nothing left to provide to us as their customer...”

Second, it is very unlikely that the claimants would have been able to find another supplier who would have agreed to pay any rebates to the claimants and would have continued to pay such rebates after the first defendants would have sought to obtain all the rebates for themselves. . History has shown that the first defendants approached the suppliers of the Designated Beers for rebates and that, the claimants received none of them but that the first defendants received all of them.

Further, there was clear evidence that brewers would not agree and become a party to any agreement which prevented them from negotiating with the retail outlet, which in this case was the first defendants .This evidence came from

I accept all this evidence as being accurate . So my conclusion is that the claimants would not find any brewer who was prepared to distribute the Designated Beers but who would also agree not to respond to approaches by the first defendants to give them all the rebates and incentives. Furthermore, I consider it to have been highly probable that even if a brewer had agreed or would agree to be the nominated supplier of the Designated Beers to the first defendants, then irrespective of any contractual obligations owed to the claimants they would inevitably have subsequently succumbed to the inevitable requests by the first defendants to receive all the rebates. The experience with S &N and CT demonstrates that whatever may have been agreed originally on nomination with the claimants, these suppliers of the Designated Beers would be and are easily persuaded to give all their rebates to the first defendants as the purchaser of the Designated Beers and the ultimate retail outlet.

For all these reasons, I conclude that if (as I believe to be the position) the alleged implied terms were not incorporated into the agreement, the claimants would not have received any rebates if the first defendants had complied with the beer-tie. .

Introduction

I am now considering what damages would be payable if I am wrong and if the alleged implied terms were incorporated into the agreement between the parties. The case for the defendants is that if the alleged implied terms were incorporated in the agreement so that the first defendants could not negotiate and receive rebates, then;

The no-rebate for the claimants point

This point is explained in the words of paragraph 4.8 of the defendants’ written skeleton argument of 19 April 2007 in this way:

“there is not a shred of evidence preferred by the claimant/no sufficient evidence from which the Court can conclude that even if [the first defendants[ could not “seek” such discounts, the Nominated Supplier would not , of its own volition, grant them in any event ; the overwhelming evidence is that the Nominated Suppliers would not, of its own volition, grant them in any event; the overwhelming evidence in this case is that the Nominated Suppliers are keen to incentivise the actual operator of the outlet so as to maximise throughput”

The claimants dispute this point and I have stood back and I have considered the evidence relating to how keen the suppliers of the Designated Beers would have been to give all the rebates to the first defendants and none to the claimants. Significantly, Mr. Nelson of CT indicated the need for discounts was to “encourage the pub operator to purchase as much as possible of our products… and is therefore incentivised to sell them”. Mr. Murray of Scottish Courage (which is part of S&N) similarly indicated that the primary objective of the brewer would be to deal with the customer (i.e. the first defendants) and that the customer “should be happy and encouraged to buy our products”. He also explained his concern about the decline in volume because in 2002, 40% of the sales of the Designated Beers had been lost to alcopops.

I have concluded that any supplier of the Designated Beers would have been extremely keen to encourage the first defendants to sell as much of the Designated Beers as possible and they would not have been concerned if they did not give any of the rebates to the claimants. There was no cogent evidence to show otherwise certainly in respect of the period from 2002 onwards. So my conclusion is that even if the alleged implied terms were not incorporated, the suppliers of the Designated Beers would still have given all the rebates to the first defendants. I add that surprisingly the claimants did not produce any cogent evidence to the opposite effect. The consequence is that the claimants would only be entitled to nominal damages.

The increased price effect point

The defendants’ evidence on this issue was given by Mr Gareth Woodward their forensic accountancy expert who explained that the first defendants had aimed for a 70% gross profit as had appeared in their 2006 accounts and in each of the accounts for the years from 2002 which he had examined. Each of these accounts showed the first defendants receiving gross profits between 65% and 70% on the items which had sold.

Mr Gerald disputed that this evidence as being admissible for the first time in his closing address. He pointed out that the claimants had sought discovery of many of the financial documents of the first defendants but that this application has been refused by District Judge Needham. I am not persuaded that Mr Gerald’s objection to this evidence is valid. First, if Mr Gerald needed to consider any further documentation before cross-examining Mr Woodward or if he thought that it was inadmissible, he could and should have applied for disclosure or an adjournment or a ruling that it was inadmissible before cross-examining him. Then if Mr Gerald had a valid point, I would have acceded to that request or perhaps determined that this evidence of Mr Woodward was inadmissible. Second, much of the information on which the gross profits of the first defendants has been calculated appeared in their accounts, which are and were, of course, available from Companies House. Third, in any event, a complaint of the kind made by Mr. Gerald for the first time in a final speech is not persuasive when an appeal against the earlier order of the District Judge refusing disclosure had not been pursued and I had not been asked to rule on the admissibility of Mr. Woodward’s evidence. A party cannot sit on his hands when evidence is being adduced and then complain about its admission in a closing speech.

It is also said by the claimants that when the defendants received the rebate from S & N, they did not reduce their prices. The first defendants’ explanation was that as a result of receiving the rebate, they had held the price of the Designated Beers in spite of increasing costs first of utilities and second of wages on account of the minimum wage regulations. I accept this explanation as accurate.

In my view, the critical factor on this issue was the gross profit margin of about 70% which the first defendants were aiming for. There is no reason that they would not have sought to achieve this figure in relation to the Designated Beers if they were not entitled to receive the rebates. This would have led according to Mr Woodward to the prices increasing to £4.62 and £4.14 for lager and bitter respectively. I accept the evidence of Mr Woodward, who was an impressive witness and whose evidence was cogent. The claimants had instructed an accountancy expert, who had produced a report but he was not called as a live witness. I should add that Mr. Woodward’s evidence on the first defendants’ level of gross profits was supported by Mr Robbins whose evidence was accurate and reliable and which I also accept.

The consequence of these increased prices would have been that the sales of bitter and lager by the first defendants would have been greatly reduced. I agree with Mr. Gareth Woodward in paragraph 41 of his report that such prices “would clearly not be viable in an extremely competitive market”. This factor would inevitably have discouraged brewers from accepting the nomination to supply the Designated Beers. There is evidence that Coors in those circumstances would not have accepted the nomination which does not surprise me in the light of the costs involved in accepting a nomination for the reasons set out in paragraph 32(g) above. I also accept the evidence of Mr Gavin Valentine that if the prices had been raised to £4.62 and £4.14 respectively for lager and bitter, the first defendants would not then have required more than 100 barrels. There is evidence from Mr. Murray, who as I have explained had much experience in this area, that such sales would not have produced any rebates for any party from the sellers of the Designated Beers. This statement has to be considered and accepted in the light of the fact that an outlet such as the premises in question could have been conducted without selling Designated Beers but by selling instead wine, spirits and that, as I have explained, Alco pops which were becoming increasingly popular.

It is noteworthy that Mr David Murray indicated that as far back as 2002, he had lost 40% of his barrelage to alcopops. This clearly demonstrates that Alco pops competed successfully with a designated beer. I accept as correct the suggestion of Gavin Valentine that if the first defendants had been unable to receive rebates, they would not have purchased any Designated Beers. He agreed with the statement in the pleadings that if discounts were not available to the first defendants, it would not have purchased any of the Designated Beers but would have traded by selling the non-designated beers Budweiser (which I will explain in paragraphs 147 to 152 below is excluded from the beer-tie) or Alco pops and similar products. This suggestion makes commercial sense. Indeed I found Mr. Gavin Valentine like his father to be a reliable witness whose evidence I accept as accurate on this issue.

In this connection, I must add that it must not be forgotten that the ground floor of the premises comprised a bar in which the major attractions were karaoke and cabaret performances whilst in the basement there was a lap-dancing bar. Thus, many of the visitors to either part of the premises would be attending them not merely for a drink but primarily for entertainment.

It is noteworthy that according to Mr. Gavin Valentine, Mr. Nicholson of Coors explained that purchases of 100 barrels for the season would have meant that it would not have been or be worthwhile for Coors to accept the nomination to supply the Designated Beers. Similar evidence was given by Mr. David Murray who said that John Smith’s would not accept a nomination if there were only to be purchases of 100 barrels of the Designated Beers. I find this evidence convincing.

I conclude that the claimants would have suffered no loss if the agreement contained the alleged implied terms as there would have been no supplier able to accept nomination to supply the Designated Beers to the first defendants or able to pay any rebates on such sales to the claimants or to the first defendants. Thus the claimants would only be entitled to nominal damages.

I have explained in paragraph 64 why I have had to dismiss this claim. If I am wrong and the claimants had been successful on this claim, they would have not been entitled to anything other than nominal damages. I would have reached the same conclusions on the post-February 2006 claim as I have done on the claim pre- 2006 claim as I have explained when dealing with issues E and F above.

The claimants contend that they are entitled to be compensated because the first defendants purchased Budweiser, which was one of the Designated Beers. In response, Mr Cogley contends first that there has been a release from the beer-ties granted by the claimants which entitled the first defendants to purchase Budweiser and second that this release had been agreed orally between Mr. Peter Stefani on behalf of the claimants and Mr. Robbins on behalf of the defendants. In support of this submission, Mr Cogley relies on the findings in the first judgment of Park J that:

“54 Mr Gerald accepts that, if Peter Stefani did in fact agree orally that the tenant could buy Budweiser from Fylde Wines outside the tie, there could be no breach of the tie as respects any consequential purchases, and thus no damages. He invited me, however, to reject Mr Robbins' evidence and to find positively that the tenant had made purchases of Budweiser from Fylde Wines in conscious breach of the tie. Mr Gerald might be right, but I ask myself whether I am sufficiently convinced to find that, notwithstanding Mr Robbins' evidence, P&S has established this part of its case sufficiently for me to find that, on the balance of probabilities, the claim for damages has been made out. The answer is that I am not. Mr Robbins was a somewhat erratic witness, but he did not strike me as in any way a devious or mendacious witness. Maybe he was lying about this, but I think that he probably was not.

55.

The other part of the claimants' case on this issue was evidence from Peter Stefani's sons and his accountant that Peter Stefani never told them that he had agreed with Mr Robbins that the tenant could buy Budweiser outside the tie. That is a factor which carries some weight, but not a lot. I do not think that it is enough to get the claimant home on the issue.

56.The matters which I have described in the previous paragraphs are my reasons for not directing an enquiry as to damages for purchases of Budweiser in breach of the tie”

The fact that the first defendants purchased Budweiser beer was not in dispute before Park J but the judge’s reasons for refusing to direct any enquiry was very significant because he came to the conclusion that there was an agreement to allow for the purchase by the first defendants of Budweiser even though it fell in the category of being a Designated Beer. It is noteworthy that Park J came to this conclusion because he explained that:

“53 (iii)… Mr Robbins continued by saying that a time arose when the tenant needed some new freezer cabinets but could not afford them. Fylde Wines had said that it would provide the money for the cabinets if the bar would buy its supplies of Budweiser from it. Mr Robbins asked Peter Stefani about this on one of his visits to the bar. Mr Stefani agreed to it straightaway, orally and wholly informally

150 It follows that Park J found that there had been a release of the beer-tie in respect sales of Budweiser by the first defendants and indeed he excluded those sales from the enquiry which I am conducting. Park J made this point clear when he said in paragraph 56 of the first judgment that he had explained that :

“his reasons for not directing an enquiry as to damages for purchases of Budweiser in breach of the tie”

Mr Gerald contends that the release from the beer-tie for the purchases of Budweiser was of limited duration. I am unable to accept this submission for four reasons. First, the release was in 2000 and by the time the matter came in front of Park J in December 2005, the first defendants had admitted and had positively stated that they had been purchasing Budweiser for many years after the repairs had been carried out and the acquisition of the refrigerators. There was no suggestion and certainly no finding that by this time, that there had been any variation of the beer-tie so that the release so as to permit the sale of Budweiser had ended or been reversed . In any event Park J clearly excluded it from the inquiry as to damages, which I am now conducting as I have just explained in paragraph 150. Second, nothing in the second judgment changes that finding. Third, no new point has been taken by the claimants in the present trial to show that the beer-tie now covers Budweiser beer. Finally issue estoppel precludes the claimants from contending the present enquiry should embrace the Budweiser purchases.

In reaching this conclusion I have also borne in mind that the injunction granted by the Chancellor restrained the purchase of “allDesignated Beers”, which the claimants say included purchasing Budweiser from anyone other than a nominatedsupplier but I do not think that the terms of this injunction assist the claimants as the second judgment was not concerned with Budweiser sales but with the competition matter left for decision by Park J in the first judgment. In order to understand the definition of “Designated Beers” in the Chancellor’s order, it is necessary to remember what was then covered by the beer-tie. The decision of Park J in the first judgment was that Budweiser ceased to be a “Designated Beer”.

In any event, even if the analysis is wrong and the claimants are entitled to damages for a breach of the beer-tie in respect of the Budweiser sales, then in those circumstances, claimants are not entitled to any damages as:

In spite of the sustained and extremely detailed submissions of Mr Gerald, I conclude that: