M D Foods Plc (formerly Associated Dairies Ltd) v Baines and Others
Jurisdiction | England & Wales |
Judge | LORD JUSTICE STUART-SMITH,LORD JUSTICE SCHIEMANN,LORD JUSTICE HIRST |
Judgment Date | 23 June 1995 |
Judgment citation (vLex) | [1995] EWCA Civ J0623-5 |
Court | Court of Appeal (Civil Division) |
Date | 23 June 1995 |
Docket Number | 95/0431/B |
[1995] EWCA Civ J0623-5
IN THE SUPREME COURT OF JUDICATURE CHANI
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Sir John Vinelot)
Before: Lord Justice Stuart-Smith Lord Justice Hirst and Lord Justice Schiemann
95/0431/B
MR PETER ROTH (instructed by Messrs Oglethorpe, Sturton & Gillibrand, Lancaster; London Agents, Moon Beaver, London WC1) appeared on behalf of THE APPELLANT
MR GERALD BARLING QC and MR MARK BREALEY (instructed by Messrs Simpson Cortis, Leeds) appeared on behalf of THE RESPONDENT
Friday 23 June 1995
For the reasons given in the judgments handed down, this appeal will be allowed.
This is an appeal against the order of Sir John Vinelott upon the Defendant Mr Baines' application for the determination under RSC Ord.14A of a question arising in these proceedings and for the discharge of the interlocutory injunction granted against him on 13.1.92. These two matters stand or fall together. The case raises an important and interesting point on the proper interpretation and application of sect. 9(3) of the Restrictive Trade Practices Act 1976.
The Facts
The facts giving rise to this application are very simple and are not in dispute. Associated Dairies, the Plaintiff, is a large wholesale distributor of milk and other commodities. Mr Baines is a milk roundsman, selling and delivering milk to domestic consumers on his "milk round" (formally described as a "milk distribution business"). He was not employed by the Plaintiff but is an independent contractor.
The issues turn on the contract between the Plaintiff and Mr Baines dated 10.8.89 ("the Agreement"). It is convenient here to set out the presently relevant provisions.
Mr Baines is defined as the customer and the milk distribution business as "The milk distribution business of the customer …. carried on in the Lancaster Scotforth area together with any other milk distribution business carried on by him at the date of this agreement and/or acquired by the customer …. during the subsistence of this agreement other than milk distribution business which is acquired subject to an enforceable obligation to obtain supplies of milk from a third party while such obligation subsists."
The presently relevant terms of the agreement are:
"2. The company undertakes and agrees with the customer that the customer complying with the obligations on its part herein contained:
(i)subject to the provisions of clause 3 hereof to supply the customer with all milk for sale in the business
(ii)…. not to sell milk by way of retail to the customers of the business
(iii)to use all reasonable endeavours to persuade its bottled milk buyer customers not to sell milk by way of retail to the customers of the business.
3. If and to the extent that the company shall be hindered or prevented from supplying the customer with part or all of the customer's requirements of milk by reason of any cause whatsoever beyond the reasonable control of the company ….
(1)the company shall to that extent only be free from all obligations to supply milk to the customer and
(2)the customer shall to that extent only and notwithstanding the provisions of sub clause 4(1) hereof be entitled to purchase milk from other sources.
4. In consideration of the undertaking and agreement on the part of the company the customer hereby undertakes and agrees with the company:
(i)for a period of 5 years from the date hereof …. (and subject always to the provisions of clause 3 hereof) to purchase from the company all milk to be sold in the business
(ii) ….
(iii)during the continuance of this agreement …. not to sell milk by way of retail to any customers of the company."
In January 1992, Mr Baines commenced taking supplies of milk for resale to his customers from the 3rd Defendant. The Plaintiff moved for an interlocutory injunction to ensure that he took supplies only from the Plaintiff, relying on cl.4(1) of the Agreement. Mr Baines was then on emergency legal aid and consented to the injunction. The terms of that injunction have now expired. The issues before the court are now relevant because of the Plaintiff's cross-undertaking and the damages that Mr Baines suffered by reason of the injunction.
Mr Baines contends that the contractual restriction set out in cl.4(1), on which the injunction is based, is unenforceable on two grounds:
(a)the Agreement is a registrable agreement pursuant to the Restrictive Trade Practices Act 1976 and particulars of the Agreement were not duly furnished to the Director General of Fair Trading ("DGFT");
(b)the restriction is contrary to Art.85 of the Treaty of Rome in that the Agreement is one of a network of similar or identical agreements which together affect trade between Member States of the EC.
It is accepted that ground (b) is not suitable for determination under RSC Ord.14A. The application under O.14A was accordingly made on ground (a) alone.
It is apparent that under the Agreement:
(a)Mr Baines was permitted to purchase other "milk rounds" that were subject to "an enforceable obligation to obtain supplies from a third party", and as regards such other milk rounds he was not obliged to obtain his milk supplies from the Plaintiff: see the definition of "the Business" and cl. 4(1).
(b)there was provision for allocation of customers. Mr Baines was prohibited from making retail sales of milk to customers of the Plaintiff: cl.4(3); and the Plaintiff was prohibited from making retail sales of milk to customers of "the Business": cl. 2(2).
The Restrictive Trade Practices Act 1976 (" RTPA") 1
The RTPA sets out a statutory regime for the control of restrictive trading agreements. The RTPA applies to an agreement in respect of the supply of goods if it is made between 2 or more parties carrying on business in the UK and restrictions as specified in sect. 6(1) are accepted under it by 2 or more parties. Restrictions in an agreement to which the Act applies are not prohibited as such. Instead, the
RTPA requires particulars of such agreements to be furnished to the DGFT before they take effect: sect.24 and Sched.2. The DGFT then places those agreements on a public register and assesses whether or not the restrictions under the agreement are of such economic significance as to call for reference to the Restrictive Practices Court ("RP Court"); if they appear not to be of such significance, the DGFT makes representations accordingly to the Secretary of State who may then direct that the agreement should not be so referred: sect.21(2). In practice, the DGFT's representations under sect.21(2) are generally accepted and the great majority of duly registered agreements are dealt with in this way. But if a registered agreement is not appropriate for such directions and the restrictions thereunder are not determined, the DGFT refers it to the RP Court for consideration of whether it is contrary to the public interest, applying the statutory test: sect.1(2)(c) and (3) and see sect.10.Breach of the statutory obligation to furnish particulars is not an offence. The sanction for failing properly to furnish particulars is set out in sect. 35. In particular:
(a)the agreement is void in respect of all relevant restrictions accepted thereunder;
(b)it is unlawful for any party who carries on business in the UK to enforce those restrictions.
In (a) above, the expression "relevant restrictions" is used, meaning restrictions by virtue of which the agreement becomes subject to registration under the RTPA. Sect. 35(1)(a) refers simply to "all restrictions". However, it has been generally recognised, both on the basis of the legislative history and the structure of the statute, that this expression "all restrictions" must here refer only to "relevant restrictions" as defined above. See Chitty on Contracts (27th ed.), vol.II, para. 40–156 (p.1011–12). Nonetheless, because of the serious consequences that flow from failing to register a registrable agreement, particulars of many agreements to which the application of the RTPA is unclear are in practice furnished to the DGFT for safety's sake: Chitty, ibid. para. 40–157.
The scheme of the act is that the question whether or no an agreement is registrable is one which has to be answered in a relatively mechanistic way. By contrast, the examination of the question whether an agreement is against the public interest is an examination of substance rather than form. In the present case we are not concerned with this examination of the merits but with the mechanistic exercise of deciding whether or no the agreement is registrable.
The Act clearly does not require all agreements to be registered. It only requires restrictive agreements to be registered. The Act deals both with restrictive agreements as to goods and restrictive agreements as to services. We are only directly concerned with the former although practically identical questions arise in relation to the latter. The Act does not even require all restrictive agreements as to goods to be registered. The Act employs as a matter of legislative drafting technique,a complicated three stage method of identifying agreements which need to be registered.
The first of these stages is contained in section 9 and provides that no account is to be taken of certain restrictions and certain terms in agreements under consideration. The agreement is notionally shorn of the restrictions and terms identified in section 9. I...
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