Schweppes Ltd v Registrar of Restrictive Trading Agreements

LORD JUSTICE WILLMER: We reserved our judgment in the present case until after hearing the argument in the case relating to the agreement between Automatic Telephone and Electric Company Limited and S. G. E. Signals Limited because we were informed (as has In fact proved to be the case) that the two cases raised substantially the same question for determination. If in the course of this judgment I refer to some of the arguments adduced before us and In the court below In the Automatic Telephone and Electric Companycase, it is because those arguments are equally relevant to the determination of the present case

The present case comes before us on appeal from a judgment of Mr Justice Pennycuick given on the 5th June 1964, whereby he refused to make an order for discovery against the applicant companies in proceedings brought by them under section 13, subsection (2) of the Restrictive Trade Practices Act 1956. The question for decision arises out of an agreement of the 1st November 1961 made between the three applicant companies, as varied by supplemental agreements of the 1st March 1962, the 1st April 1962 and the 1st May 1963. I need not refer further to the supplemental agreements which have no bearing on the questions arising on this appeal.

It is necessary, however, to refer in some detail to the Main agreement in order to understand the question which has arisen. The agreement relates to the supply of citrus fruit concentrates. It recites, as is the admitted fact, that Rose Kia-Ora Sales Company Limited (referred to as the Pales Company) is a subsidiary company of Schweppes, and that the parties have agreed that Lyons will supply the Sales Company with citrus fruit concentrates. Clause 1 defines "citrus fruit concentrates", and provides that "Sun resh concentrates" shall mean citrus fruit concentrates produced by Lyons, and "Sun-crush and Kia-Ora concentrates" those produced by Schweppes, Clause 3 provides as followst "(a) Subject as hereinafter provided Lyons Group will sell to the Sales Company and the Sales Company will purchase from Lyons Group such quantities of Sunfresh concentrates as the Sales Company may from time to time require Provided that Lyons Group shall not be required to sell to the Sales Company in any calendar year a greater quantity in volume of Sunfresh concentrates than 43 per cent of the Sales Company's total purchases in such calendar year (b) If in any year the Sales Company shall Purchase from Lyons Group less than the maximum amount of Sunfresh concentrates referred to in the preceding sub-clause the Sales Company shall purchase from Lyons Group and Lyons Group shall sell in such year such an amount of Suncrush and Kia-Ora concentrates asmay be necessary to bring the total sales by Lyons Group to the sales Company of citrus fruit concentrates up to the said proportion of 43 per cent. The Suncrush and Kia-Ora concentrates so purchased by the Sales Company from Lyons Group shall be made to specifications approved by Schweppes Provided that if and so far as production by Lyoaa Group according to such specifications necessitates the installation of additional plant Schweppes will instal in Lyons Group's factory free of charge such additional plant".

Clause 4 in paragraphs (a) and (b) contains corresponding undertaking by Schwejppes to sell Suncrush and Kia-Ora concentrates to the Sales Company up to a limit of 57 per cent of the Sales Company's total purchases, with a corresponding obligation on Schweppes, in the event of the Sales Company purchasing less than the maximum permissible, to sell to the Sales Company such an amount of Sunfresh concentrates as may be necessary to bring the total sales by Schweppes to the Sales Company up to 57 per cent. Clause 5 provides for the prices to be paid by the 3ales Company and need act be referred to further.

Clause 6 provides as follows; "The Sales Company will use its best endeavours to promote the sale of Sunfresh concentrates and Suncrush and Kia-Ora concentrates" Clause 7 provides "The Sales Company will not sell citrus fruit concentrates under the Sunfresh trademark In Scotland or outside the United Kingdom nor will the Sales Company knowingly sell citrus fruit concentrates under the Sunfresh trade mark for resale in Scotland or for export to countries outside the United Kingdom (sales for ships' stores and aircraft stores excepted)". Clause 8 contains an undertaking by Lyons that they will not, during the term of the agreement, sell any citrus fruit concentrates other than those sold to the Sales Company, subject to certain exceptions to which I need not refer. Clause 9 contains a corresponding undertaking by Schweppes not to sell citrus fruit concentrates other than those sold to the Sales Company, again subject to certain exceptions.

During the year 1962 correspondence took place between the Register and the solicitors for the applicant companies as to whether the agreement was one that should be registered under the Restrictive Trade Practices Act 1956. As a result, an originating summons was issued on the 12th June 1963, on behalf of the applicant companies. asking for a declaration that the agreement of the 1st November 1961, as varied by the supplemental agreements, is not an agreement to which Part I of the Act applies and is not subject to registration under section 9 of the Act.

In order to decide whether an agreement is registrable under the Act, the material sections of the Act to be considered are sections 6, 7, 8 and 9. An agreement is registrable under section 9 if it falls within section 6, unless it is excepted under any of the provisions of sections 7 or 8. Section 6, subsection (1) of the Act provides as follows. "Subject to the provisions of the next following sections, this Part of this Act applies to any agreement between two or more persons carrying on business within the United Kingdom in the production or supply of goods, or in the application to goods of any process of manufacture, whether with or without other parties, being an agreement under which restrictions are accepted by two or more parties in respect of the following matters, that is to say (a) the prices to be charged, quoted or paid for goods supplied, offered or acquired, or for the application of any process of manufacture to goods (b) the terms or conditions on or subject to which goods are to be suplied or acquired or any such process is to be applied to goods (c) the quantities or descriptions of goods to be produced, supplied or acquired (d) the pro-cesses of manufacture to be applied to any goods, or the quantities or descriptions of goods to which any such process is to be applied or (e) 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, or any such process applied". Section 7 provides that certain restrictions may be disregarded and is not, I think, Material to this case. Section 8 exempts certain classes ofagreement, and the material part of it is that contained in subsection (3) which is in the following terms: "This part of this Act does not apply to any agreement for the supply of goods between two persona, neither of whom is a trade association within the meaning of section six of this Act, being an agreement to which no other person is party and under which no such restrictions as are described in subsection (1) jf section six of this Act are accepted other than restrictions accepted. (a) by the party supplying the goods, in respect of the sale, or acquisition for sale, of other goods of the same description".

The case for the applicant companies is that the agreement falls with in section 8, subsection (3) because (a) it is an agreement for the supply of goods; (b) it is made between only two persons (the Hales Company being a subsidiary of Schweppes), and (c) no restrictions are accepted other than fall within one or other of the two exceptions

This is the context in which the present application for discovery has to be considered. Under Order 24, rule 3, the Registrar is entitled to call for discovery of documents i]f they are documents relating to any matter in question in the cause or matter". It is, therefore, necessary for the Registrar to show that there is some natter in question in relation to which the documents, discovery of which is asked for, would be relevant. By his summons the Registrar in fact asked for discovery of documents "relating to the question for what purpose or purposes the applicants made the above mentioned agreement". This request foreshadowed the argument for the Registrar which was addressed to the court below, which was to the effect that on their true construction the words in section 8, subsection (3) of the Act, "any agreement for the supply of goods" mean "agreement the essential purpose of which is the supply of goods.

If I may summarise an argument the report of which extends over six pages of the Law Reports, it was to the following effect

The keyword is the word "for", which, it was argued, imports an element of purpose. The question to be determined on the hearing of the originating summons will thus be whether the agreement is one the essential purpose of which was the supply of...