M D Foods Plc (formerly Associated Dairies Ltd) v Baines and Others
| Jurisdiction | England & Wales |
| Judge | LORD GOFF OF CHIEVELEY,LORD MUSTILL,LORD NICHOLLS OF BIRKENHEAD,LORD HOFFMANN,LORD CLYDE |
| Judgment Date | 27 February 1997 |
| Judgment citation (vLex) | [1997] UKHL J0227-2 |
| Court | House of Lords |
[1997] UKHL J0227-2
HOUSE OF LORDS
Lord Goff of Chieveley
Lord Mustill
Lord Nicholls of Birkenhead
Lord Hoffmann
Lord Clyde
and Others
My Lords,
I have had the advantage of reading a draft of the speech of my noble and learned friend, Lord Nicholls of Birkenhead. For the reasons he has given, I would allow this appeal.
My Lords,
I have had the advantage of reading a draft of the speech of my noble and learned friend, Lord Nicholls of Birkenhead. For the reasons he has given, I too would allow this appeal.
My Lords,
Mr. Andrew Baines is a milk roundsman in Lancaster. He buys milk from a wholesale supplier, and delivers it from house to house onto the doorsteps of his customers. In August 1989 he entered into a five-year milk supply agreement with Associated Dairies Ltd., now known as M. D. Foods Plc. The company agreed to supply to Mr. Baines, and Mr. Baines agreed to buy from the company, all the milk he needed for sale in his business. His "business" meant his existing milk distribution business, together with any milk distribution business he might acquire in future not already tied to another milk supplier. If force majeure prevented the company from maintaining supplies, Mr. Baines could obtain milk elsewhere as a temporary measure. The agreement contained mutual non-competition clauses. The company agreed not to sell milk to the customers of Mr. Baines' business; Mr. Baines agreed not to sell milk by way of retail to any customers of the company. The latter restriction lies at the heart of this case. I must set out the form in which it was expressed:
"4. … [Mr. Baines] hereby undertakes and agrees with the Company:
(3) During the continuance of this Agreement (except with the prior written consent of the Company) not to sell milk by way of retail to any customers of the Company"
Milk roundsmen are under increasingly severe competition from milk sales by shops, especially supermarkets. If a milk roundsman's business is to survive, the difference between the price of milk on sale in shops and the price of the milk he delivers to the homes of his customers must not become too large. So it was a matter of grave concern to Mr. Baines when the company, more than once, increased the price it charged him for his milk. He had to increase his own prices to his customers, or see his profit margin eroded.
In January 1992 he started taking his milk supplies from an outside source, where he could obtain milk more cheaply. Other sources could obtain milk, ironically from the company itself, at one or two pence per pint less than the price charged by the company to Mr. Baines. They were not tied by an exclusive supply agreement and they were able to negotiate better terms. One of these sources was Mr. Baines' own father, who also was a milk roundsman.
The company started High Court proceedings against Mr. Baines and obtained interlocutory injunctive relief. One of his defences was that his obligation to buy all his milk from the company was void because the agreement had not been registered under the Restrictive Trade Practices Act 1976. An application to determine this issue under R.S.C., Ord. 14A came before Sir John Vinelott, sitting as a judge of the Chancery Division [1995] I.C.R. 296. He held, in favour of the company, that the agreement was not registrable. He declined to discharge the injunction.
The Court of Appeal, comprising Stuart-Smith, Hirst and Schiemann L.JJ., [1996] I.C.R. 183 reached the contrary conclusion. By now the agreement had expired by effluxion of time, but the validity of the agreement remained a live issue: partly because of the company's liability on its cross-undertaking in damages, but more especially because the agreement was in the company's standard form. The Court of Appeal upheld Mr. Baines' contentions and ordered an enquiry as to the damages he had sustained by reason of the injunction. With the leave of the Court of Appeal the company appealed to your Lordships' House.
Some points of common ground can be noted. Clause 4(3), plainly, applied to milk supplied to the milkman under the agreement. It is common ground that in two circumstances the agreement could apply to milk which had not been supplied under the agreement. The milkman's obligation not to sell milk to customers of the company would apply if he obtained milk supplies elsewhere while the company was temporarily unable to supply him. The obligation would also apply if he obtained milk from a third party to whom he was bound by an exclusive supply agreement.
It is also accepted that if clause 4(3) had been drafted in a different form, although having precisely the same ambit, the agreement would not have been registrable. This would be so if clause 4(3) had been drafted in two linguistically separable pieces, to the following effect:
"(3)… not to sell by way of retail to any of the customers of the Company any milk supplied to him (a) by the Company or (b) by any source other than the Company"
The question is whether this difference in form makes all the difference so far as registrability is concerned.
The basic scheme of the Restrictive Trade Practices Act 1976 is familiar. Certain agreements are made subject to registration in a register maintained by the Director General of Fair Trading. The agreements may concern goods (Part II of the Act) or services (Part III). In respect of agreements of which particulars have been registered, the court is given power to declare whether restrictions, or provisions for the furnishing of information, by virtue of which the Act applies are contrary to the public interest. Any restrictions or information provisions found by the court to be contrary to the public interest are void and unenforceable. The sanction for non-registration is that all restrictions accepted under the agreement, and all information provisions made under the agreement, are void and it is unlawful to enforce them.
This case concerns restrictive agreements relating to goods. Section 6(1), so far as material, provides that the Act applies to agreements between persons carrying on business within the United Kingdom in the production or supply of goods under which restrictions are accepted by two or more parties in respect of, among other matters, prices to be charged or recommended, the terms on which goods are to be supplied, the quantities to be produced or supplied or, in paragraph (f), the persons from whom goods are to be acquired or to whom goods are to be supplied.
Mr. Baines' milk supply agreement was an agreement between persons carrying on business within the United Kingdom in the supply of goods. It is common ground that under this agreement Mr. Baines and the company accepted several relevant restrictions, by which I mean restrictions falling within section 6(1). Mr. Baines' obligation to buy all his milk from the company, the company's obligation not to sell milk to customers of Mr. Baines' business, and Mr. Baines' obligation under clause 4(3) not to sell milk to customers of the company are all restrictions which come within section 6(1)(f). Thus, unless exempted, particulars of the agreement were registrable.
There are two relevant exemptions. Under section 28 the Act does not apply to the agreements described in Schedule 3. Paragraph 2 of Schedule 3 concerns exclusive dealing agreements. Omitting immaterial words for ease of comprehension, paragraph 2 provides:
"This Act does not apply to an agreement for the supply of goods between two persons … under which no such restrictions as are described in section 6(1) above are accepted … other than restrictions accepted …
(a) by the party supplying the goods, in respect of the supply of goods of the same description to other persons; or
(b) by the party acquiring the goods, in respect of the sale, or acquisition for sale, of other goods of the same description."
Taken by itself, paragraph 2 does not operate to exempt Mr. Baines' agreement from the Act. Some of the restrictions in the agreement fall within subparagraphs (a) and (b). The company's obligation not to sell milk to Mr. Baines' customers is within subparagraph (a). Mr. Baines' obligation to buy all his milk from the company is an obligation not to buy milk elsewhere. This falls within subparagraph (b). So also does his obligation under clause 4(3) so far as it relates to milk not supplied by the company. Mr. Baines' obligation not to sell milk to customers of the company is within subparagraph (b) so far as it relates to milk not bought from the company because that is a restriction accepted by him, as the person acquiring goods under the agreement, in respect of the sale of other goods of the same description.
To continue reading
Request your trial
-
Bowman v Fels (Bar Council and Others intervening)
...of over-literal interpretation of the language of a statute which were identified by Lord Nicholls in Associated Dairies Ltd v Baines [1997] AC 524 at p 532: "Linguistic arguments of this character should be handled warily. They are a legitimate and useful aid in statutory interpretation, b......
-
Dale Farm Dairy Group Ltd v Akram
...has been the subject of decisions by this court and the House of Lords in Associated Dairies Ltd v Baines [1996] I.C.R.183 and [1997] 2 W.L.R. 364 respectively. This court held that the terms in the standard form agreement were unenforceable. The House of Lords took the contrary view. Mr B......
-
Wesleyan Methodist Trustees v Lightbourne and Lightbourne
...of the late Rev. John Wesley which is the foundation upon which the Methodist Church was established. In Associated Dairies Ltd v Baines[1997] A.C. 524 @ p. 532 it is stated in the speech of Lord Nicholls of Birkenhead that: ‘In the process of statutory interpretation there always comes a s......