England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM KINGSTON UPON HULL DISTRICT REGISTRY
(His Honour Judge Peter Heppel QC)

		Royal Courts of Justice Strand London WC2 Tuesday, 14th August 2001

Tuesday, 14th August 2001

1. LORD JUSTICE ALDOUS: This is a renewed application for permission to appeal by the defendant in these proceedings against the judgment of His Honour Judge Peter Heppel QC of 23rd May 2001 and his order of 15th June 2001.
2. The proceedings concern a lease dated 8th May 1987 between Mr Baines (who is referred to as "the lessee") and Courage Ltd. They or their successors in title are the claimants in this case. By that lease Mr Baines became the lessee for a term of five years of a public house called the Bay Horse at Barlby, Selby, in Yorkshire. The lease was for five years from 1st April 1987. It contained in clause 26 an option enabling Mr Baines to renew the lease for a further five years. The option was only exercisable if the lessee had paid the rent and had purchased at least the minimum gallonage of certain designated liquors in each year of the term.
3. By a notice dated 24th July 1991 Mr Baines sought to exercise his option under clause 26. That was rejected by the claimants. The lease expired by fluction of time on 31st March 1992 and fourteen months later, on 12th May 1993, the claimants issued these proceedings in the form of a writ endorsed with a statement of claim, claiming possession of the premises, damages for trespass and mesne profits. On 8th July Mr Baines served his defence and counterclaim. He pleaded, amongst other things, clause 26 of the lease and claimed that he was entitled pursuant to that clause to serve on the claimants a notice of his wish to take a further lease. That he alleged he had done and he counterclaimed for, amongst other things, a declaration that he was entitled to a new tenancy pursuant to clause 26 of the lease.
4. On 19th July 1993 the claimants served a reply and defence to counterclaim which was amended in and subsequently re-amended on 12th October 1993. In that re-amended reply the claimants alleged that Mr Baines was not entitled to exercise the option contained in clause 26 because he had failed to comply with the conditions set out in that clause. The claimants provided a number of particulars of that failure, but the only one relevant to this application is the allegation that in the years 1988 and 1989 Mr Baines failed to purchase the minimum gallonage of cider from the plaintiffs or their nominated suppliers.
5. Although Mr Baines was unable to check the figures put forward by the claimants as to the amounts of cider that had been purchased in those years, the evidence before the judge was consistent with the allegation that Mr Baines had failed to meet that minimum gallonage requirement.
6. These proceedings were taking place at a time when there was considerable legal activity surrounding the tenancies of tied public houses. I suspect it was that background. Which caused the considerable amount of correspondence between partie that we have not seen passed between the end of 1993 and October 2000. As the five-year extended period ended on 31st March 1997, the claimants wrote a letter dated 21st November 1996 giving to Mr Baines a section 25 notice purporting to terminate the tenancy, and on 25th April 1997 they indicated that, if Mr Baines applied to the court for a new tenancy, it would not be opposed. The notice was said to be without prejudice to the result of the present proceedings.
7. It was against that background that the claimants applied on 31st October 2000 for summary judgment, and in December of that year Mr Baines applied to have the action struck out because of the delay in prosecution of the action. It was those two applications which came before the District Judge on 12th March 2001. The District Judge refused to strike out the claim and also dismissed the application for summary judgment. The parties appealed. Their appeal came before His Honour Judge Peter Heppel QC sitting as a judge of the High Court in July 2001. As I have said, he dismissed Mr Baines' appeal but allowed that of the claimants. He ordered that Mr Baines should deliver up to the claimants possession of the Bay Horse Inn and should pay damages for trespass together with interest. That order for possession has been suspended pending this hearing.
8. The judge held that the tenancy had expired and that prime facie the claimants were entitled to possession. Thus Mr Baines could only resist the claim by establishing his counterclaim. That involved establishing that he had met the minimum gallonage set out in clause 26. The judge also considered a defence of waiver or estoppel although that had not been pleaded.
9. The judge concluded that Mr Baines had no realistic chance of establishing that he had purchased the minimum requirement of cider during the years 1988 and 1989. That was based upon his analysis of the evidence, and there is nothing before us to suggest that that conclusion could be overturned on appeal.
10. As I have said, waiver was not pleaded, but it was raised in a witness statement served on behalf of Mr Baines. Mr Patrick Daulby, a partner in the firm of the solicitors who had the conduct of the action on behalf of Mr Baines, stated in paragraph 15 of his witness statement:

"Secondly, it is common ground that although our client was under an obligation to purchase certain quantities of liquor each year from Courage (the quantities being listed in the particulars of the lease) no complaint whatever was made during the continuance of the five-year lease of the failure by my client to purchase precisely the full amount of this particular liquor during the first two years of the term. Any breach (which must be regarded as trivial in any event) had in our submission been waived well before the lease terminated."

11. He went on in paragraph 21 of his witness statement to submit that the small defect in the purchases of cider in 1988 and 1989 had been waived long ago.
12. Waiver was also taken up in the skeleton of the parties before the judge. For the claimants it was said that waiver had not been pleaded and in any case could not succeed as the evidence was clearly insufficient to establish a waiver of a breach of covenant.
13. The matter was argued by counsel on behalf of the parties and the judge expressly dealt with it in his judgment. He said:

"17.It is not the Defendant's case that the terms of the option with regard to minimum liquor purchases were unlawful ab initio. In my judgment there was nothing in the letter of the 24 April 1990 which waived any failure on the part of the Defendant to have made the minimum purchases before that date. After the 1 May 1990 the question of waiver simply does not arise. Mr Baines was under no obligation to make minimum purchases from that date onwards.

18.There is no argument or evidence to the effect that the Defendant provided any consideration for any waiver of the minimum purchase condition for the years 1988 and 1889. Does an estoppel arise? It is, in my judgment, important to distinguish between the failure to make minimum purchases as a breach of covenant on the part of the Defendant entitling the landlord to sue for damages on the one hand, and the obligation on the Defendant to comply with the minimum purchase condition as a condition precedent to his exercising his option to renew on the other. The fact (assuming for this purposes that it is true) that the Claimants may not have complained about the shortfall in cider purchases does not and cannot create an estoppel. It is important to note that the Defendant's witness statement says no more on this point than that the landlords did not complain and that he has lost his records. His stance on this point is that he cannot now prove his purchases; he does not say that he did not make the minimum purchases because he did not think, by reason of the conduct of the landlord, that he had to make the minimum purchase. Neither Mr Baines nor Mr Wray say, in terms, that the Defendant was led in any way to believe that his obligation to renew would not be prejudiced by his failure to make the minimum purchases.

19.In the ultimate analysis the argument as to waiver and estoppel are, I find, without merit."

14. The evidence relied on by Mr Baines as to waiver or estoppel was contained in the witness statement of Mr Wray. He had been employed by John Smith Tadcaster Brewery Ltd between 1982 and 1989. He was the person that was responsible for liaising with publicans and generally assisting them in the running of their business. He dealt with Mr Baines of the Bay Horse Inn. He said that during the course of discussions with Mr Baines he had told him that it was important that he should concentrate on the sale of beers and lager. He said:

"(4)During the course of my frequent discussions with Mr Baines, I said to him that it was important that he concentrate on the sales of beer and lager i.e. the John Smith products. He may well have gained the impression from me that the sale of cider and other such products were of much less importance to John Smith. This is borne out by the fact that I used to maintain records of the beer and lager sales but not the sales of cider.

(5)I recollect that Mr Baines easily exceeded his targets for beer and lager and this, no doubt, would be to the detriment of cider sales. The reason for this being that customers were being encouraged to drink beer and lager, i.e. John Smith products in preference to cider. I believe this is what my employers wanted.

(6)It is certainly the case that neither I nor Mr Baines was criticised for this approach. Indeed, he was very highly regarded by his Landlords.

(7)I do not believe that John Smith's felt that he was in breach of the terms of his Trading Agreement either in spirit or as a matter of fact. If there had been any concerns then I would have be aware of them and I would have communicated them to him so that the problem might have been resolved."

15. After the hearing in this case Mr Baines changed his legal advisers and he now wishes to put forward to this court different submissions to those argued before the judge. In the skeleton arguments which have been placed before the court and in the oral submissions, his advisers drew attention to the Monopolies and Mergers Commission report on the supply of beer of 3rd February 1989, which concluded that a tie on cider was contrary to the public interest. There followed the 1989 order which made the tie on such drinks as cider illegal from 1st May 1990. Following that order the brewery wrote to Mr Baines on 24th April 1990 indicating that the lease should be varied to the extent necessary to relieve him of that obligation. That was accepted by Mr Baines.
16. The argument now sought to be put forward is that the Monopolies and Mergers Commission report is good evidence, that the requirement to purchase cider from a particular source was in 1988 and 1989 contrary to the public interest and therefore that the pre-condition to the exercise of the option in clause 26 was also void. To avoid the difficulty that the matter was neither pleaded nor argued before the judge it is suggested that the judge was in error in failing to look into the matter and come to the conclusion that the argument now sought to be put forward was sound.
17. For my part I believe that such a suggestion is hopeless. The new argument that the tie was in restraint of trade and therefore the obligation to purchase a particular gallonage was void from the time when the lease was made in April 1987 was never pleaded nor was it raised. The only evidential basis for this argument, namely the Monopolies and Mergers Commission report, was not put before the judge, nor was it mentioned. The argument that he should have of his own motion been alerted to an inquiry which would have revealed its existence is in my view not only hopeless but contrary to reality. In cases where a litigant appears in person, judges are alert to see that justice is done with all points being taken. Here the judge was entitled to rely upon the help and assistance that he had obtained from counsel that had been briefed by both parties. In any case, the report itself could not have provided sufficient evidential bases and I cannot envisage this court sending the case back to be repleaded and reheard at a time when the extended period expired in 1997. The point and the evidence could have been taken and provided at the trial, and I do not see that there is any realistic chance of this court allowing fresh evidence and a fresh point to be taken at this stage.
18. The second limb of the request for permission to appeal is an attack upon the judge's conclusion on waiver. It is said that the judge failed to see the real waiver which was contained in the evidence of Mr Wray. The instruction to concentrate on beer provided a waiver, with the consideration being the increased sales of beer with a greater profit to the brewery. It is accepted that the matter was put differently before the judge, but it is submitted that once the waiver is correctly identified, namely the statement made expressly or by implication that Mr Baines was not to worry about the cider if he concentrated on beer, the consideration flowed. That is the extra profit provided to the brewery. Further, it is said that here there was reliance certainly by the landlord and, in particular, by Mr Baines because of his actions in pushing beer sales and therefore reducing those of cider.
19. In my view the evidence of Mr Wray does not establish waiver. At best it is an encouragement to concentrate upon beer sales. But it in no way goes sufficiently far enough to establish a foundation that the obligation in the clause 26 agreement had been waived.
20. Mr Wald, who appeared before us, drew to our attention this passage in Halsbury, volume 9, at paragraph 102-8:

"Requirements of waiver. Waiver may be express or implied from conduct but in either case it must amount to an unambiguous representation arising as the result of a positive and intentional act done by the party granting the concession with knowledge of all the material circumstances. Furthermore, it seems that for a waiver to operate effectively the party to whom the concession is granted must act in reliance on the concession."

21. The alleged concession was to allow Mr Baines not to purchase the required gallonage of cider. It cannot be said upon the evidence of Mr Wray that there was, express or implied, an unambiguous representation to that effect. Further, the evidence of reliance is non-existent. Mr Baines' own statement contained no evidence to suggest that anything that was said by Mr Wray at any time was relied on him or was a basis for it being inequitable for the claimants to rely on the pre-condition set out in clause 26 of the lease. The issue of non-compliance with the pre-condition had been pleaded since 1993 and the evidence did not establish any consideration, or any real basis, for asserting waiver or estoppel in respect of that pre-condition.
22. The way that the case is now sought to be put is not pleaded or argued, nor was there any explicit factual basis for it. We are now in 2001. The extended period of the lease expired in 1997, and I do not believe there is any real prospect of this court allowing the pleadings to be amended or evidence to be supplied to support the case. In my view the submission on waiver stands no real prospect of success.
23. Finally, I come to a submission put forward by Mr Wald based upon Article 8(2)(b) of Regulation 1984/83 on the application of Article 85(3) of the Treaty to categories of exclusive purchasing agreements.
24. Article 8(2)(b) states:

"the agreement must provide for the reseller to have right to obtain:

-drinks, except beer, supplied under the agreement from other undertakings where these undertakings offer them on more favourable conditions which the supplier does not meet.

-drinks, except beer, which are of the same type as those supplied under the agreement but which bear different trade marks, from other undertakings where the supplier does not offer them."

25. That Article of that Regulation is said to be the genesis of clause 4(4)(b) of the business agreement in the lease. That may well be so. The suggestion is that the clause 4(4)(b) should be interpreted so as to be consistent with Article 8(2)(b) and, if so, that relieved Mr Baines of purchasing the minimum gallonage of cider. Even if it be accepted that clause 4(4)(b) should be interpreted in the same way as Article 8(2)(b), that submission stands no real prospect of success. As Article 8(2)(b) makes clear, the agreement must provide for the reseller to have the right to obtain drinks in certain circumstances; one of them being where the drinks are available on more favourable conditions and the other being where they are the same type as those supplied under the agreement but bear different trade marks. There is no evidential basis for suggesting that those matters arose in this particular case. In my view that argument also fails and could not succeed in this court.
26. In my view the reasons of Mance LJ for refusing leave to appeal on paper are correct and there is no real prospect of an appeal succeeding. In any case, this a second-tier appeal and I have not been able to find any point of principle or practice which arises for consideration. I therefore would refuse permission to appeal on that basis as well.
27. LORD JUSTICE ROBERT WALKER: I agree.
Order: Application refused.