Luminar Lava Ignite Limited V. Mama Group Plc+mean Fiddler Holdings Limited

JurisdictionScotland
CourtCourt of Session
JudgeLord President,Lord Hodge,Lord Eassie
Judgment Date12 January 2010
Neutral Citation[2010] CSIH 01
Date12 January 2010
Publication Date12 January 2010
Docket NumberCA108/08

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

Lord President Lord Eassie Lord Hodge [2010] CSIH 01

CA108/08

OPINION OF THE LORD PRESIDENT

in Reclaiming Motion

by

LUMINAR LAVA IGNITE LIMITED

Pursuers and Reclaimers;

against

MAMA GROUP PLC AND MEAN FIDDLER HOLDINGS LIMITED

Defenders and Respondents:

_______

Act: Ellis, Q.C., McBrearty; McClure Naismith LLP

Alt: Anderson, Q.C.; McGrigors LLP

12 January 2010

[1] I have had the opportunity of reading Lord Hodge's Opinion in draft. I agree with him that, for the reasons he gives, the two items of evidence sought to be relied on from the parties' pre-contractual communings ought to be excluded from consideration when construing the contract. I also agree with him (para [39]) that it would be more difficult for parties to know where they stand on the respondents' construction than on the reclaimers'; but that this is not a pointer of any great weight in the construction of the restriction, as neither party's construction is unworkable.

[2] I am also in agreement with Lord Hodge that the most difficult issue is the correct construction of the critical phrase in clause 2.1, in the context of the clause as a whole and in the light of the surrounding circumstances. I have not found that issue easy to resolve.

[3] It is plain that the parties contemplated that there would be or might be some competition between the operations at their respective premises. That is sufficiently clear from the use in clause 2.1 of the phrase "in direct competition"; indirect competition was not prohibited. Both were in the same market for the attraction of persons looking for "late night entertainment". This is plainly a narrower class of business than that which seeks to attract those spending "the leisure pound" - which would include those interested in attending theatres or cinemas in the evening. The fact that, in the event, there might, as the Lord Ordinary found, be significant crossover in the customers who might go to different types of club nights does not, in my view, assist the reclaimers' contention. It simply means that the terms of the agreement which they entered into may not have been sufficiently tight to prevent crossover to that extent. The issue remains the objective construction of the words used, according to the standards of a reasonable third party who is aware of the commercial context in which the contract occurred (Emcor Drake & Skull Ltd v Edinburgh Royal Joint Venture 2005 SLT 1233, per Lord Drummond Young at page 1237I; see also Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989, per Lord Wilberforce at p.996; ICS Ltd v West Bromwich BS [1998] 1 WLR 896, per Lord Hoffmann at p.912).

[4] The ruling contractual provision is clause 2.1. Clause 2.2 opens with the phrase "Except only as provided in clause 2.1 ...". Accordingly, Mama and the Purchaser are prevented from use which is excluded by clause 2.1. It is not, however, irrelevant to notice that clause 2.2 contemplates the use of the Burdened Property, subject to clause 2.1, as "a music venue, including, without limitation, as a live music venue or as a bar at which music is played". "Music venue" is not defined but clearly is a wider expression than a "live music venue" or "a bar at which music is played". As a matter of language it might include some kind of discotheque.

[5] The critical phrase is the restriction on using the Burdened Property "for late night entertainment in direct competition on a like for like basis with the discotheque business of Luminar as carried on at the Benefited Property as at 1 March 2008". I agree with the Lord Ordinary (para [19]) that the words "direct competition on a like for like basis" should be read as a whole as an attempt to define the nature of the competition which is to be prohibited. Even if the two elements (viz.(1) "direct competition" and (2) "on a like for like basis") should be read distinctly, which I doubt, proper content requires to be given to element (2). The expression "on a like for like basis" imports some shared feature against which the subjects fall to be compared. The comparison is of how ("as carried on") the two premises are used - the Benefited Property as at 1 March 2008 and the Burdened Property when the issue arises. To give the expression "on a like for like basis" content, there must be features of the respective uses on the basis of which the comparison can be made. These may, no doubt, include the arrangements under which particular types of entertainment are available at different nights of the week; but I see no reason to restrict the examination to that feature. The nature, or style, of the entertainment provided would also, in my view, be an examinable feature. The expression "discotheque business as carried on" points in the context of the earlier expression "on a like for like basis" not simply to the carrying on of a discotheque business but to the carrying on of such a business in a particular way. If the Benefited Property was used as at the relevant time for a restricted, but identifiable, form of discotheque, then a comparison which demonstrated that in that respect the challenged use of the Burdened Property was different from the use of the Benefited Property as at that time would, in my view, lead to the conclusion that the contractual provision had not been infringed. The Lord Ordinary's findings of fact that distinctions can meaningfully be made among kinds of discotheque entertainment confirms that this is not a distinction without a foundation in reality.

[6] The final sentence in clause 2.1 was, it would appear, inserted to give some protection to the respondents by having Luminar confirm that it did not use the Benefited Property as at the relevant time as a music venue. It goes only so far. It does not exactly match the provisions of clause 2.2 - there is no declaration that the Benefited Property is not used as a bar at which music is played. But, however, that may be, I am not persuaded that the language of that sentence affects the construction of the earlier sentence which I favour.

[7] I find nothing in the admissible evidence of the circumstances surrounding the making of the contract which is of material assistance in resolving the issue of its construction. I am not persuaded that any difficulties in policing performance of the contract are such as to render the reclaimers' construction the only sensible result.

[8] Although I regard this as a narrow issue, I am of opinion that the Lord Ordinary's construction of the contract was correct. In these circumstances I would have refused the reclaiming motion. However, as I understand that both your Lordships are in favour of allowing it, I merely with diffidence record my dissent.

[9] I agree with and endorse Lord Hodge's observations in his postscript (paras [53] - [58]) on the matter of the use of transcripts and signed witness statements in commercial business.


FIRST DIVISION, INNER HOUSE, COURT OF SESSION

Lord President Lord Eassie Lord Hodge [2010] CSIH 01

CA108/08

OPINION OF LORD EASSIE

in Reclaiming Motion

by

LUMINAR LAVA IGNITE LIMITED

Pursuers and Reclaimers;

against

MAMA GROUP PLC AND MEAN FIDDLER HOLDINGS LIMITED

Defenders and Respondents:

_______

Act: Ellis, Q.C., McBrearty; McClure Naismith LLP

Alt: Anderson, Q.C.; McGrigors LLP

12 January 2010

[10] I have had the opportunity of reading in draft both the Opinion of your Lordship in the Chair and the Opinion of Lord Hodge.

[11] In common with both of your Lordships, I agree that the most difficult issue in this case is the correct construction of clause 2.1 of the "Non Compete Agreement". I too have found this a difficult issue to resolve, but I have ultimately come to the view that the construction for which the reclaimers contend is to be preferred and I agree with the views expressed on this matter by Lord Hodge. I agree also with the views which he expresses on the other issues in the reclaiming motion.

[12] One of the factors which inclines me to the reclaimers' construction is the terms of the final sentence of clause 2.1 of the agreement. If the undertaking not to use, or permit to be used, the Picture House "for late night entertainment in direct competition on a like for like basis with the discotheque business of Luminar..." had the meaning for which the respondents contend, it is difficult to see the reason for the inclusion of that final sentence. That sentence records what, to adopt the phrase used by Mr Ellis, is a "generic" feature of that business - namely the absence of live music - and thus gives to the preceding provisions of the clause a generic colour. It is the only attribute of the reclaimers' Tollcross business thus noted. The giving of such a colour is, I think, reinforced by the absence of any noting of any of the prevailing, more subjective features pertinent to the setting up of a basis for comparison in terms of style, ambiance and clientele, which one might reasonably have expected, were the clause to have the meaning for which the respondents contend. I join with Lord Hodge in being struck by the fact that, so far as demonstrated by the evidence led, neither party appears to have been particularly aware of what the other's business or intentions were. Had it been that the parties intended a subtle, nuanced agreement founded on style and ambiance, I would have expected at least some evidence of investigation and knowledge by the respondents of those aspects of the reclaimers' Tollcross venue.

[13] I also think that the terms of clause 2.2 reinforce that generic colour in respect that they in themselves are couched in similar generic terms and have nothing referable to style, selection of music, ambiance or the like.

[14] While I accept, of course, that the primary words of prohibition are in the earlier part of clause 2.1, which I have partially quoted above, I consider that, given their manifest lack of clarity, it is...

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