Garden Cottage Foods Ltd v Milk Marketing Board
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE MAY,SIR SEBAG SHAW |
| Judgment Date | 18 May 1982 |
| Judgment citation (vLex) | [1982] EWCA Civ J0518-3 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 82/0220 |
| Date | 18 May 1982 |
[1982] EWCA Civ J0518-3
The Master of the Rolls
(Lord Denning)
Lord Justice May
and
Sir Sebag Shaw
82/0220
1982 G. No. 1401
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
(MR. JUSTICE PARKER)
Royal Courts of Justice.
MR. DAVID VAUGHAN, Q.C. and MR. P. LANGDON-DAVIES (instructed by Messrs. Joynson-Hicks & Co.) appeared on behalf of the Appellants.
MR. L. HOFFMANN, Q.C. and MR. F. JACOBS (instructed by Messrs. Ellis & Fairbairn) appeared on behalf of the Respondents.
Preliminary
It is some years ago now that we considered in this court Articles 85 and 86 of the Treaty of Rome. It was in Application Des Gaz S.A. v. Falks Veritas (1974) 1 Chancery 381. I there said (at page 396):
"…articles 85 and 86 are part of our law. They create new torts or wrongs. Their names are 'undue restriction of competition within the common market'; and 'abuse of dominant position within the common market.' Any infringement of those articles can be dealt with by our English courts. It is for our courts to find the facts, to apply the law, and to use the remedies which we have available".
Three years later in Valor International Ltd. v. Application Des Gaz S.A. (1978) 3 Common Market Law Reports 87 at page 99 Lord Justice Roskill reserved his opinion on the matter. But I still think that what I said was right. It has been reinforced by later decisions in this court as in the House of Lords that the Articles of the Treaty are part of our own law. They have supremacy over anything in our own municipal law which is inconsistent with them. They can be and are to be enforced by our courts just as any other provisions of our law. See McCarthys v. Smith (1981) 1 Queen's Bench 180, Worringham v. Lloyds Bank (1981) 1 Weekly Law Reports 950, Garland v. British Rail (1982) 2 Weekly Law Reports 918. So far as these two Articles 85 and 86 are concerned, there is the direct authority of the European Court itself in B.R.T. v. Sabam (1974) 1 European Court Reports at page 62 where it was said:
"As the prohibitions of Articles 85(1) and 86 tend by their very nature to produce direct effects in relations between individuals, these Articles create direct rights in respect of the individuals concerned which the national courts must safeguard.
"To deny…the national courts' jurisdiction to afford this safeguard, would mean depriving individuals of rights which they hold under the Treaty itself".
Facts of this case
In this case an English company, Garden Cottage Foods Limited, comes to these courts—the national courts. They say that the Milk Marketing Board has a dominant position within the Common Market, or a substantial part of it. They complain that the Milk Marketing Board are abusing their dominant position.
The Milk Marketing Board is an undertaking set up by statute. They collect milk from all the farmers in England and Wales. They sell that milk at the best price they can obtain. They turn the surplus into butter and cheese. They package a great deal of the butter and sell it under their own brand names—"Country Life" and so forth—in England. But there is a large surplus left which is called "bulk butter". The "bulk butter" is not put into packages. It is sold in bulk largely to countries within the Common Market.
It is sold in this way: A representative of the Milk Marketing Board arranges contracts with customers in England. Those customers buy the bulk butter from the Milk Marketing Board. They then re-sell it to "middle men" in countries such as Holland. It is a term of the re-sale that the bulk butter is not to be imported back to England: because, if it were sent back, it would depress the market here.
For many years there have been a number of buyers in England. One concern was called Staple Dairy Products. Mr. Bunch was previously employed by this company. Having gained a great deal of expertise in the bulk butter market, he left Staple Dairy Products and set up his own company which he operated under the name of Garden Cottage Foods Limited. Mr. Bunch and his wife carried on the business on their own. They bought bulk butter from the Milk Marketing Board and re-sold it overseas. Their major customer was a Dutch company called J. Wijffels B.V. We have before us a summary of all the sales by the Milk Marketing Board to Garden Cottage Foods Limited since the commencement of business. From August 1980 to November 1980 Mr. Bunch bought over 1,200 tonnes of bulk butter for which he paid £2,170,257. From January 1981 to August 1981 he bought about 10,000 tonnes for which he paid £20,126,854. He re-sold that butter overseas. That was his turnover, but Mr. Bunch's profit margin was very small—something like a quarter of one per cent.
In the middle of 1981 there was an unfortunate happening so far as Mr. Bunch was concerned. A consignment of butter from the Milk Marketing Board was badly packaged. It became streaky. Mr. Bunch arranged to sell it to the Netherlands. They agreed to take it in its defective condition. But afterwards they changed their minds. They would not take it. So Mr. Bunch had to sell it on the U.K. market.
The Milk Marketing Board were displeased. They told Mr. Bunch that he should not have sold the butter in England. There was an inquiry, but in the end all was settled satisfactorily. No blame was put on to Mr. Bunch. Indeed the Milk Marketing Board paid compensation of £1,000 to Mr. Bunch's company. On the 24th August, 1981 the Bulk Butter Manager of Dairy Crest—that is the name under which the Milk Marketing Board sells its bulk butter—wrote to Mr. Bunch, saying:
"…it has been decided to continue to do business with your company in the normal way…
"I hope that we can do business together in future to the satisfaction of both parties".
That sounded very nice: but no business was forthcoming. Months and months passed. Mr. Bunch said that he telephoned every fortnight. He asked, "Have you got any butter for sale?" They always said, "No; I am afraid we have none available".
The matter came to a head in March 1982 when the Milk Marketing Board (under the heading of "Dairy Crest") wrote to Mr. Bunch. They said:
"Dear Mr Bunch
MMB Bulk Butter for Export
"Following a detailed review of our sales and marketing strategy we have decided to appoint 4 independent distributors to handle the sales of our bulk butter for export with effect from 1 April 1982".
They set out the names and addresses of the four independent distributors, which included Staple Dairy Products Ltd., who had been Mr. Bunch's previous employers. Then they went on:
"We have valued the business which we have done with you in the past and I wish to record our appreciation for your efforts in exporting some of our bulk butter. For the future, you should contact the above distributors to discuss availability of supplies if you require MMB bulk butter for export.
"If you wish to discuss any points about the new arrangements then please contact Malcolm Matthew or me".
It is quite clear that if Mr. Bunch had to buy bulk butter from the four distributors in the future, he would have to pay more for it than he did before. The distributors would have to allow for their own profit margin. This would mean that Mr. Bunch would not be able to compete in the bulk butter market.
Mr. Bunch went to see Mr. Matthew, the Board's representative. They had a meeting about a week later. He was told that the Milk Marketing Board had previously supplied bulk butter to 20 distributors: but they had now changed their policy and were only going to supply the four named distributors. They were not prepared to re-consider their decision and supply Mr. Bunch or his company with bulk butter in the future.
At the end of March 1982 Mr. Bunch or his advisers bethought themselves of Article 86 of the Treaty of Rome which deals with the abuse of a dominant position. On the 14th April, 1982 they issued a writ and applied for an injunction asking that the Milk Marketing Board should be restrained from withholding supplies of butter from them. The solicitors for the Milk Marketing Board said that the arrangement which their clients had had with Mr. Bunch had no contractual force: and that the appointment of distributors did not infringe the provisions of the Treaty of Rome.
The matter came before Mr. Justice Parker. He gave an interesting judgment on the impact of the Common Market. He thought there was a good arguable case that there had been a breach of Article 86. He said that it was difficult to know what to do in the circumstances, but he thought that damages might be an adequate remedy. He felt that it was difficult to frame an injunction in sufficiently precise terms so as to be a ground for relief. In those circumstances, he refused to grant an injunction. Now Mr. Bunch has come to this court.
The Treaty provisions
I first refer to Article 3 of the Treaty. It says:
"…the activities of the Community shall include…(f) the institution of a system ensuring that competition in the common market is not distorted".
Article 86 says:
"Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States.
"Such abuse may, in particular, consist in:
"(a) directly or indirectly imposing unfair purchase or selling prices or...
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