British Basic Slag Ltd v Registrar of Restrictive Trading Agreements

This is an appeal from a judgment of Mr. Justice Cross given on the 6th July 1962, relating to two Originating Summonses taken out under Section 13 of the Restrictive Trade Practices Act, 1956. Both Summonses relate to certain agreements made between various companies carrying on business as steel manufacturers and a company called British Basic Slag, Ltd. (hereinafter referred to as "Basic") for the sale fertilizers including basic slag by the former to the latter. By the first summons, 1960 B. No. 4358, Basic seeks a declaration, pursuant to Section 13 subsection (2) of the Act, that the agreements in question, all of which are in the same form, are not subject to registration under Section 9, subsection (1). By the second summons, 1960 C. No. 3911, the steel manufacturing companies apply under Section 13 subsection (1) of the Act for an order that the Register be rectified by deletion therefrom of particulars of these agreements previously registered on their behalf.

In both cases the learned judge decided adversely to the applicants. In the first case he held that the agreements between the various steel manufacturing companies and Basic were agreements falling within Section 6 subsection (1) of the Act, and as such were subject to registration under Section 9. In the second case he held that the particulars of the agreements could not be deleted from the Register, because the agreements had been entered into in pursuance of an "arrangement" between the respective steel manufacturing companies within the meaning of Section 6 subsection (3) of the Act.

It will be convenient to refer at once to the relevant provisions of Section 6 of the Act, which are as follows:- "6. -(1) Subject to the provisions of the two next following sections, this Part of this Act appliesto any agreement between two or more persons carrying on business within the United Kingdom in the production or supply of goods, or in the application to goods of any process of manufacture, whether with or without other parties, being an agreement under which restrictions are accepted by two or more parties in respect of the following matters, that is to say:"-

(a) the prices to be charged, quoted or paid for goods supplied, offered or acquired, or for the application of any process of manufacture to goods:

(b) the terms or conditions on or subject to which goods are to be supplied or acquired or any such process is to be applied to goods;

(c) the quantities or descriptions of goods to be produced, supplied or acquired:

(d) the processes of manufacture to be applied to any goods, or the quantities or descriptions of goods to which any such process is to be applied; or

(e) the persons or classes of persons to, for or from whom, or the areas or places in or from which, goods are to be supplied or acquired, or any such process applied.

(3) In this Part of this Act 'agreement' includes any agreement or arrangement, whether or not it is or is intended to be enforceable (apart from any provision of this Act) by legal proceedings, and references in this Part of the Act to restrictions accepted under an agreement shall be construed accordingly; and 'restriction' includes any negative obligation, whether express or implied and whether absolute or not."

The facts giving rise to the making of the agreements and the registration of the particulars were very fully stated by the learned judge, and are conveniently setout in the report of the case contained in the Law Reports 3 Restrictive Practices Cases at page 178. It would serve no useful purpose for me to set out all the details again, and I therefore content myself with a brief summary.

Basic Slag is a by-product manufactured from waste material left over from the manufacture of steel. When ground to a fine powder it is a valuable fertilizer for agricultural purposes, and has been used as such for many years. Before the first World War a number of steel manufacturing companies had a contract with a German firm for the disposal of the basic slag resulting from their manufacture of steel. In pursuance of this contract the German firm had installed plant at the various companies' steel works for grinding the slag. During the War the German firm's business in this country was ordered to be wound up pursuant to the Trading with the Enemy Act, 1916. The steel manufacturing companies then conceived the idea of themselves marketing their basic slag in common, and to this end joined in forming a company (of which Basic is the successor) for the purpose of taking over the German firm's business in this country. The steel manufacturing companies who were parties to the scheme became shareholders in the new company in proportion to the amount of their average deliveries of basic slag during the last three years before the War. Each of the steel manufacturing companies appointed a director to the board of the new company; and each purchased the plant which had been installed by the German firm at its respective works. Once the new company was formed each of the steel manufacturing companies entered into a 10 years agreement with it for the sale to the new company of the basic slag produced at its works. Substantially the same arrangement has continued till the presentday, the agreements being renewed from time to time as they expired. Over the years there have been changes in the membership of Basic and its predecessor company, some of the original steel manufacturing companies having dropped out of the scheme and others having joined in.

The agreements with which we are now concerned, or at least most of them, were executed on the 16th March 1954, and were expressed to continue in operation till the 30th September 1964. The question of renewing the previously current agreements, and the form which the new agreements should take, was discussed at a number of board meetings of Basic beginning on the 22nd July 1953. The relevant extracts from the minutes of these meetings are fully set out in the learned judge's judgment, and formed part of the particulars entered on the Register by Basic on behalf of the member companies on the coming into force of the Restrictive Trade Practices Act, 1956, It will be necessary to refer to some of these minutes hereafter when I come to consider the question raised by the second summons, viz. whether there was an "arrangement" between the steel manufacturing companies within the meaning of Section 6 subsection (5) of the Act.

I propose, however, to consider first the question whether the agreement made between each of the steel manufacturing companies as "vendor" and Basic as "purchaser" is an agreement to which Section 6, subsection (1) of the Act applies. This depends upon whether on the true construction of the agreement the parties thereto accepted restrictions in respect of any of the matters specified in paragraphs (a) to (c) of that sub-section. Clause 1 of the agreement, omitting immaterial words, provided:- "The Vendor shall "sell and the Purchaser shall purchase subject to theterms and conditions hereof the whole of the fertilisers (as hereinafter defined) which the Vendor shall produce own or control…. Provided that nothing herein contained shall be deemed to impose on the Purchaser any obligation to purchase from the Vendor any fertilisers of which it cannot dispose".

By Clause 2 "fertilisers" were defined to mean, amongst other things, "basic slag ground or otherwise processed as a fertiliser," Clause 3 entitled the Vendor to use or sell any portion of its make of fertilisers for the manufacture of steel or iron or to dispose of any fertilisers which the Purchaser should refuse to take. By Clause 4 the Vendor was not to be bound to sell to the Purchaser any specific quantity provided that it sold to the Purchaser the whole of the fertilisers which it produced owned or controlled. Clause 5, under which the Vendor clearly accepted a relevant restriction, provided as follows:- "The Vendor shall not without the written consent of the Purchaser (except as aforesaid) sell or dispose of any basic slag ground or unground capable of use as a fertiliser to any other person firm company or body and will refer to the Purchaser all inquiries which it may receive for fertilisers."

Clauses 6, 7 and 8 made provision for the method of delivery of fertilisers sold in pursuance of the agreement. In substance it was provided that delivery should be made direct to the consignees named by the Purchaser, that is to say to the buyers to whom the Purchaser disposed of the goods. There was to be no delivery to the Purchaser, who would never handle the goods itself; in the result a sale would only take place when, and in so far as, the Purchaser succeeded in disposing of the goods.

Clause 13 regulated the price to be paid by thepurchaser to the Vendor, and provided that this was to be based on the realised price obtained by the Purchaser on resale of the goods, less certain deductions.

Clause 16, which is the only clause whereby it is suggested what the Purchaser accepted any...