Lobb (Alec) (Garages) Ltd v Total Oil (Great Britain) Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,LORD JUSTICE DUNN,LORD JUSTICE WALLER |
| Judgment Date | 08 November 1984 |
| Judgment citation (vLex) | [1984] EWCA Civ J1108-2 |
| Docket Number | 84/0416 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 November 1984 |
[1984] EWCA Civ J1108-2
Lord Justice Waller
Lord Justice Dunn
Lord Justice Dillon
84/0416
No. 1979 A. 1773
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR PETER MILLETT, Q.C., Sitting as a DEPUTY HIGH COURT JUDGE)
Royal Courts of Justice,
MR T. CULLEN, Q.C., and MR E.W.H. CHRISTIE (instructed by Messrs. Holmes & Hills, Solicitors, Braintree) appeared on behalf of the Appellants.
MR JOHN PEPPITT, Q.C., and MR PETER CRESSWELL. Q.C., and MR M. KAY (instructed by Messrs. Denton, Hall Burgin) appeared on behalf of the Respondents.
This is an appeal from a decision of Mr. Peter Millett Q.C., sitting as a deputy High Court Judge in the Chancery Division. There is also a cross-appeal. They raise questions as to the validity of a lease/lease back arrangement entered into in July 1969 in relation to a garage and petrol filling station ("the property") in South Street, Brain-tree, Essex. The facts are set out with admirable clarity in the judgment of the learned deputy Judge, which is reported, and I do not need for the moment to do more than briefly summarise what happened in a very general way in order to make the issues intelligible.
In 1968 a Company, Alec Lobb (Garages) Ltd. ("the Company") which was the first plaintiff in the action as originally constituted, was the owner of the freehold of the property and carried on the business of a garage and petrol filling station there. It was the Company's only garage. The Company was a private company whose only directors and shareholders were Mr. Alec Lobb and his mother Mrs Bertha Lobb, the second and third plaintiffs in the action as originally constituted. The Company had since 1964 obtained its supplies of petrol exclusively from the Respondents ("Total"). By the latter part of 1968 there were a number of agreements outstanding between the Company and Total including mortgages on the property, guaranteed by Mr and Mrs Lobb personally, to secure moneys advanced by Total to the Company which were either interest free or carried interest at relatively low rates, and including also various hire or hire-purchase agreements in respect of fuel tanks and other equipment, under one of which certain underground petrol tanks provided by Total, would at the end of 20 years from 1964, become the property of the Company without more than nominal further payment. One effect of the mortgages was, as is not disputed, to impose a valid petrol tie on the Company in respect of the property, obliging the Company to take all petrol supplies for the property from Total and to keep the filling station on the property open at all reasonable times for the sale of petrol and to provide a proper and efficient service to the public for a period of which some 4 years remained unexpired by the end of 1968.
The Company was seriously under-capitalised. Though it traded at a small profit in the 6 months to the 30th November, 1968, there had been substantial earlier losses. Cheques given to Total for the supply of petrol had been dishonoured on presentation, and Total very early in 1969 insisted that supplies could only be continued on the basis of payment by banker's draft for each load against delivery. Apart from indebtedness to Total, by November, 1968 the Company was in serious difficulties with its bankers who also had a charge on the property, and was under pressure to reduce its overdraft.
Against that background, Mr Lobb wrote to Total on the 28th November, 1968, proposing that in order to solve the Company's financial difficulties the fore-court of the property should, for a premium, be leased to Total for a number of years and leased back to the Company. Discussions followed. Separate solicitors were instructed by each party, and ultimately on the 25th July, 1969 a Lease and Leaseback were executed. The Lease was a Lease of the whole of the property and not merely the forecourt, by the Company to Total for a term of 51 years at a peppercorn rent in consideration of a premium of £ 35000 paid by Total. The Leaseback was a Sub-Lease granted by Total to Mr. and Mrs Lobb, rather than to the Company, for a term of 21 years, with a right for either party to terminate the Lease back at the end of the 7th or 14th years at an initial rent of £2250 p.a. with upwards only rent reviews at the end of the 8th and 15th years of the term. The Lease back also contained an absolute prohibition on assignment and tie provisions throughout the term requiring the lessees to take all supplies of petrol from Total exclusively and to keep the filling station open at all reasonable times and provide a proper and efficient service to the public.
In the action, commenced on the 11th June, 1979, the Company and Mr. and Mrs Lobb claimed to set aside the Lease and Lease back on a variety of allegations, including an allegation that the 21 year tie provision in the Lease back constituted an unreasonable restraint of trade with, it was alleged, the result that the Lease and Lease back were wholly void. The learned deputy Judge held that the tie provisions in the Lease back were indeed void as an unreasonable restraint of trade but that they were severable from the remaining provisions of the Lease back. He rejected all the other allegations of the plaintiffs and accordingly held that the Lease and the remaining provisions of the Lease back, other than the tie provisions which he identified, were valid.
I should at this juncture mention certain changes among the Plaintiffs in the action. In the first place the Company has been put into creditors' voluntary liquidation. In the next place, Mr. Lobb died in July, 1979; his personal representatives were added as plaintiffs by order to carry on before the trial. Finally, Mrs Lobb has died since the decision of the learned deputy Judge. The appellants to this Court are her personal representatives, but no argument was advanced to the effect that they have no locus standi to pursue an appeal which, if successful, would enure to the benefit, primarily, of the Company which has not appealed.
Several arguments which were pressed in the Court below are not raised on this appeal. In particular the appellants do not rely in this Court on the tort of economic duress or on any allegations of undue influence and they do not submit that the Lease and Lease back are,despite their form, in reality a mortgage and to be treated as such. In addition the appellants have accepted the Judge's identification of the provisions of the Lease back which are struck down if only the tie provisions of the Lease back are invalid.
The appellants therefore, put their case in this Court on two grounds only. They say firstly that the tie provisions of the Lease back, which the Judge held to be void as an unreasonable restraint of trade, are not severable and that the Lease and Lease back, which have to be taken together as parts of one transaction, are therefore wholly void. They say alternatively that the Lease and Lease back, taken together as one transaction, ought to be set aside in equity because at the material time in 1969 there was inequality of bargaining power as between Total on the one hand and the Company and Mr and Mrs Lobb on the other hand, and Total has not established that the terms of the transaction were in point of fact, fair, just, and reasonable.
Total disputes both these contentions of the appellants. Total further submits that any claim to set aside the Lease and Lease back on equitable grounds ought to be held to be barred by laches on the part of the Company and Mr and Mrs Lobb. The learned deputy Judge held that a somewhat different formulation of the Plaintiffs' claim—that Total exercised coercive pressure on Mr Lobb and the Company—was indeed barred by laches and delay on the part of the Plaintiffs. In addition, however, by the cross-appeal Total challenges the findings of the learned deputy Judge that the tie provisions of the Lease back are void as an unreasonable restraint of trade. Total advances three submissions on the cross-appeal, viz:-
(1) that the Lease back is not an agreement in restraint of trade at all because the restrictions on trading in the Lease back derive from the disposal by the Company of substantially all its interest in the property by the grant of the 51 years' Lease to Total
(2) that the Lease back is not an agreement in restraint of trade at all because the Lease back was granted to Mr and Mrs Lobb and not to the Company and
(3) alternatively that even if the Lease back is an agreement in restraint of trade the restrictions on trading in the Lease back are, in all the circoumstances, reasonable and are therefore valid.
It is logical to consider the cross-appeal first, and I can deal very shortly with the second of the above arguments. In Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. (1969) AC 269, it was held that the doctrine of restraint of trade had no application to restraints imposed on persons who, before the transaction by which the restraints were imposed, had no right whatsoever to trade at all on the land in question. Their Lordships had in mind in particular the case where an owner of land grants a lease of the land to a person who had no previous right to occupy the land, and imposes by the Lease restraints on the lessee's power to trade as he likes on the land. Such a Lease would ordinarily not be regarded as an agreement in restraint of trade. In the present case however the granting of the Lease back to Mr and Mrs Lobb rather than to the Company was a palpable device in an endeavour to evade the...
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