Re Supply of Ready Mixed Concrete (No 2)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Jauncey of Tullichettle,Lord Templeman,Lord Mustill,Lord Slynn of Hadley,Lord Nolan
Judgment Date24 Nov 1994
Judgment citation (vLex)[1994] UKHL J1124-1

[1994] UKHL J1124-1

House of Lords

Lord Jauncey of Tullichettle

Lord Templeman

Lord Mustill

Lord Slynn of Hadley

Lord Nolan

Director General of Fair Trading
(Appellant)
and
Pioneer Concrete (U.K.) Limited and Others
(Respondents)
Lord Jauncey of Tullichettle

My Lords,

1

I have had the advantage of reading in draft the speeches by my noble and learned friends, Lord Templeman and Lord Nolan. I agree with them and for the reasons they give I too would allow the appeal.

Lord Templeman

My Lords,

2

By the Restrictive Trade Practices Act 1956, the Restrictive Trade Practices Act 1968, the Fair Trading Act 1973 and finally the Restrictive Trade Practices Act 1976 successive Parliaments have sought to eradicate restrictive practices from industries engaged in the supply of goods and services.

3

Sections 1, 6 and 24 of the Act of 1976 provide for the registration with the Director General of Fair Trading of agreements between two or more 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:

"6(1) …

  • ( a) the prices to be charged, quoted or paid for goods supplied, offered or acquired, …;

  • ( b) the prices to be recommended or suggested as the prices to be charged or quoted in respect of the resale of goods supplied;

  • ( c) the terms or conditions on or subject to which goods are to be supplied or acquired …;

  • ( d) the quantities or descriptions of goods to be produced, supplied or acquired;

  • ( e) the processes of manufacture to be applied to any goods, …: or

  • ( f) the persons or classes of persons to, for or from whom, or the areas or places in or from which, goods are to be supplied or acquired, …"

4

By section 35(1) of the Act of 1976 if particulars of any agreement which is subject to registration are not duly furnished, then

"( b) it is unlawful for any person party to the agreement who carries on business within the United Kingdom to give effect to, or enforce or purport to enforce, the agreement in respect of any such restrictions …"

5

By section 43(1) "'agreement' includes any agreement or arrangement, whether or not it is or is intended to be enforceable … by legal proceedings, …"

6

Suppliers of ready mixed concrete followed well established restrictive practices which were registrable under the Act of 1956 and remain registrable under the Act of 1976. Arrangements made by suppliers of ready mixed concrete were first concealed, then sought unsuccessfully to be justified on the grounds that they served the public interest and finally made subject to court orders. There are now pending proceedings in respect of some 65 arrangements which, it is alleged, were clandestinely made and implemented by suppliers of ready mixed concrete in breach of the Act of 1976 and in breach of court orders. This appeal deals with two of the companies against which court orders are extant.

7

By orders made by the Restrictive Practices Court dated 14 March 1978 and 29 March 1979 upwards of 30 limited companies engaged in the supply of ready mixed concrete were each restrained from giving effect to agreements specified in the orders and:

"from giving effect to or enforcing or purporting to enforce (whether by itself or by its servants or agents or otherwise) any other agreements in contravention of section 35(1) of the Act of 1976."

8

Amongst the companies thus restrained were the respondents Pioneer Concrete (U.K.) Limited ("Pioneer") and Ready Mixed Concrete (Thames Valley) Limited ("R.M.C. Thames"). The companies restrained by the orders also included Hartigan Readymixed Limited ("Hartigan") and Smiths Concrete Limited ("Smiths").

9

The Restrictive Practices Court after a hearing which lasted for eight days (see In re Supply of Ready Mixed Concrete [1991] I.C.R. 52 (" Smiths' case)) found [1991] I.C.R. 52, 61H, that from at least March 1983 onwards representatives of the four companies, Pioneer, R.M.C. Thames, Hartigan and Smiths, met at regular intervals at convenient public houses and made price fixing and allocation agreements in respect of the supply of ready mixed concrete in an area around Bicester, Kidlington and Thame in Oxfordshire. The available market was agreed to be shared as to 43 per cent to Smiths, 21 per cent each to Pioneer and R.M.C. Thames and 15 per cent to Hartigan. The jobs available were allocated in accordance with the agreed percentages. The understanding was that those to whom a particular job had not been allocated would, if offered that job or asked to quote, tender on terms less favourable than those to be offered by the chosen party. To assist in this a price list for different mixes of the product was agreed. There was also a no poaching provision; R.M.C. Thames was not actively to seek to expand its business in the Bicester area, Hartigan in Kidlington and Smiths in Thame. These arrangements were held to be a loose compact, by no means rigidly applied. Their provisions were regarded as markers rather than strict contractual obligations but the Restrictive Practices Court found [1991] I.C.R. 52, 61H, that: "However loosely applied, the employees participating in these meetings were committing themselves to some restrictions on their companies' selling operations". There were regular complaints that the arrangement was not working and that a company had taken a job not allocated it but after some protests and changes, prices rose and percentages were achieved. There is no doubt that the companies implemented the arrangements made by their representatives.

10

Some time in 1984 one of the representatives of Pioneer, a Mr. Tomkies, informed the Director General of Fair Trading of what was going on. Hartigan initially denied involvement in a registrable agreement. Smiths admitted that their representative attended meetings but denied that restrictions had been accepted. R.M.C. Thames admitted they might possibly have been party to registrable agreements but denied the existence of an allocation agreement and a price fixing agreement; they admitted area arrangements reflecting, so it was said, the economic and logistic realities of operating and transporting and admitted there might have been an understanding between the parties that when they announced a price increase they would enforce it as fully as possible. Pioneer at first denied any involvement but later agreed with R.M.C. Thames that there might have been a possible price increase understanding. The written and oral evidence of Mr. Tomkies was hotly and unsuccessfully attacked; the Restrictive Practices Court accepted his evidence. At the hearing before the court, Pioneer, R.M.C. Thames and Hartigan accepted that they were in contempt; their representatives were accused of aiding and abetting the contempt. Smiths and its employee denied contempt and fought on all grounds until the end. The Restrictive Practices Court found all four companies to be in contempt and found all the representatives to have aided and abetted that contempt. The court in its judgment said, at p. 70 that:

"It is not to be tolerated that four or five years after a court order is made seeking to stamp out this kind of covert anti-competition operation, [the companies] are found through their employees to be engaged in the same potentially harmful conduct."

11

Nevertheless the court only imposed derisory fines.

12

In addition to the defences and excuses put forward by the companies, each company asserted by way of mitigation in the case of the three companies which had pleaded guilty of contempt and by way of defence in the case of Smiths, that express instructions had been given to each employee not to participate in registrable arrangements. Smiths appealed against the finding of the Restrictive Practices Court that Smiths were in contempt. The appeal was allowed by the Court of Appeal [1992] Q.B. 213.

13

Lord Donaldson of Lymington M.R. held, at p. 231, that Smiths were not party to any arrangement made by their employee Mr. Hayter because:

"Smiths expressly forbade Mr. Hayter to enter into any such arrangement on its behalf. It did not know that he had purported to do so and cannot therefore be said to have stood by and thereby ratified his actions. It had adopted reasonable compliance systems to monitor his activities with a view to ensuring that he did not purport to do so. Nor is it estopped from denying his authority by virtue of the fact that it had appointed him unit manager and that he might otherwise be considered to have ostensible authority to enter into the arrangement on its behalf, because he had made it clear to the other parties and they knew that Smiths did not consent and that he had no authority to signify consent on their behalf."

14

Since Smiths were not liable for contempt, Mr. Hayter could not be liable for aiding and abetting Smiths to commit contempt. The orders made by the Restrictive Practices Court against Smiths and Mr. Hayter were therefore quashed.

15

The present respondents R.M.C. Thames and Pioneer, notwithstanding their former pleas of guilty, sought and obtained leave to appeal out of time the orders of the Restrictive Practices Court and their appeals were allowed. See In re Supply of Ready Mixed Concrete (No. 2) [1994] I.C.R. 57. The Director-General now appeals to this House. In the proceedings the respondents had given evidence, which the Director did not controvert, that each of them had issued instructions to their employees not to make arrangements of the kind that were concluded. Russell L.J., at pp. 66-67 went even further than the Court of Appeal in Smiths' case [1992] Q.B. 213. He said, in delivering the judgment of the court:

"In our judgment an employer does not become party to an agreement or an arrangement if he prohibits his employee from entering into it, provided that the prohibition is in clear and...

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