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OUTER HOUSE, COURT OF SESSION
[2006] CSOH 170
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A615/04
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OPINION OF LORD HODGE
in the cause
CALOR GAS LIMITED
Pursuers;
against
EXPRESS FUELS (SCOTLAND)
LIMITED and D JAMIESON & SON LIMITED
Defenders:
ญญญญญญญญญญญญญญญญญ________________
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Pursuers: Sandison, Advocate; DLA Piper Rudnick Gray Cary Scotland LLP
Defenders: Johnston, QC; Maclay Murray & Spens
2 November 2006
[1] The
pursuers and minuters are suppliers of liquefied petroleum gas and other gas
products and the defenders are dealers in those gas products. The first defenders were formerly principal
dealers to whom the pursuers supplied those products. The same persons control both defenders; they are associated companies. The first defenders terminated their
principal dealer agreement with the pursuers on 31 August 2004 and entered into a contract with a
rival supplier, Flogas UK Limited ("Flogas").
In the principal action for interdict and damages the pursuers seek
interdict against the first defenders based on a provision of their contract
and a separate interdict against both defenders based on a delictual claim.
[2] The
Temporary Lord Ordinary R. F. MacDonald QC granted the pursuers interim
interdicts on 14 September 2004. The first interdict, so far as relevant to
these proceedings, prohibited the first defenders from handling or distributing
containers for gas storage ("gas cylinders") belonging to the pursuers and the
second interdict prohibited both defenders from taking possession of or
otherwise interfering with any gas cylinders belonging to the pursuers.
[3] In
July 2005 the pursuers lodged a Minute for breach of interdict. Each of the defenders lodged Answers to that
Minute; those Answers are in identical
terms. A procedure roll debate took
place at the instance of the pursuers, who submitted that the defences were
irrelevant and that the court should hold de
plano that each of the defenders were in
breach of the interdict or interdicts which affected them. The defenders submitted that their defences
were relevant and that there required to be a proof to determine whether or not
their actings amounted to breaches of interdict.
Factual
background in the pleadings
[4] As the debate progressed it
became clear that the central question was the interpretation of the
interdicts. In order to set that issue
in context it is necessary to give a summary of the nature of gas supply trade
as disclosed in the admitted averments.
[5] Dealers
in gas supplied by the pursuers and their competitors sell gas to the public by
supplying the customer with the gas in a cylinder owned by the supplier. The customer pays the dealer the purchase
price of the gas and in addition a hire charge for the use of the
cylinder. When the customer has used up
the gas in the cylinder, he may return the cylinder to any of the supplier's
dealers and exchange the empty cylinder for a full cylinder, paying only the
purchase price of the gas. The hire
charge which he has already paid is carried forward in relation to the
replacement cylinder. If, however, the
customer of one supplier seeks to buy gas from a dealer selling the gas of
another supplier he obtains from the new dealer a cylinder belonging to the
other supplier. He has to pay the new
dealer a hire charge for the other supplier's cylinder. In accordance with normal practice the new
dealer should advise the customer to return the empty cylinder belonging to the
original supplier to one of the original supplier's dealers.
[6] It
is also material to record that the defenders make the following averments in
the principal action:
"To handle
unwanted cylinders belonging to other suppliers is a normal aspect of the
competitive process. It allows members
of the public to switch suppliers at their choice, based on their
preference. Prohibiting the handling of
cylinders is a barrier to switching and is a practice which has the effect of
limiting customers' freedom of choice.
As such it is an exclusionary practice".
While the pursuers do not respond
to these averments which therefore fall within their general denial, it appears
that their motive for imposing contractual restraints on former dealers and
seeking interdict must at least in part be the wish to protect their trade
connection by hindering customers from switching to rival suppliers. In the debate the pursuers' counsel did not
suggest otherwise. Thus it appears
likely that the defenders have obtained commercial benefit from receiving the
pursuers' gas cylinders from customers seeking to switch to supplies from
Flogas. It is also relevant that one of
the defences in the principal action, which is scheduled for a proof hearing
next May, is that the pursuers' agreement with the first defenders (which prohibits
handling the pursuers' gas cylinders after its termination) is void for
infringement of competition law.
[7] The
first interdict is based on a provision of the pursuers' principal dealer
agreement which provides that upon termination of the agreement the dealer
"will cease to sell, supply, handle, distribute or install" the gas
cylinders. The second interdict against
both defenders is based on the allegation that the defenders induced customers
and dealers who were in contractual relations with the pursuers to breach their
contracts. The pursuers aver that this
delict was committed by the defenders (a) taking possession of the pursuers'
gas cylinders from their customers, when the customers' "cylinder refill
agreement" with the pursuers obliged them not to part with possession of the gas
cylinders except to the pursuers or one of the pursuers' authorised dealers and
(b) removing the pursuers' property from Calor Gas retailers when persuading
them to take supplies of gas from Flogas.
The defenders deny those averments.
[8] In
the Minute for breach of interdict the pursuers aver a course of conduct by the
defenders in the six months after interim interdict was pronounced and
continuing thereafter. Among the
allegations which the pursuers make is the averment that they employed
investigators to visit the defenders' premises on several occasions to buy gas
supplied to the defenders by Flogas. On
each occasion the investigator making the purchase handed over an empty gas
cylinder belonging to pursuers and the defenders' employees accepted it. The defenders deny this averment which is
therefore not relevant to the debate at procedure roll. What is proper for consideration is what
defenders admit or aver that they did.
[9] The
defenders deny breach of the interdict and aver that since September 2004 they
have taken the pursuers' gas cylinders into their custody solely with a view to
contacting the pursuers and returning the cylinders to them. They sent faxes, which I was shown, to the
pursuers on seven occasions between October 2004 and March 2005 inviting them
to uplift their gas cylinders. The
aggregate number of cylinders referred to in the faxes was eight hundred and
five. The defenders also aver that they
wrote to their customers advising them that they no longer traded in gas
supplied by the pursuers. They also aver
that since October 2004 they have displayed a notice in their premises stating
that customers should not leave their Calor Gas cylinders there. They aver that members of the public have
continued to leave gas cylinders outside their yard or have brought them onto
their premises and refused to return them to the pursuers' nearest dealer. They aver that their drivers on delivering
gas to customers' homes have been faced with customers who, when told that the
defenders did not handle the pursuers' gas cylinders, have stated that they
will not keep the pursuers' empty cylinders in their homes. The drivers have therefore taken the gas cylinders
into their custody to prevent them being abandoned. They aver that they have uplifted abandoned gas
cylinders at the request of the police and that they have discussed the problem
of abandoned gas cylinders with the Health and Safety Executive. They aver that it is normal practice for
responsible members of the gas industry to take abandoned gas cylinders into
their yards and then contact the gas company which owns the cylinders. They aver that they have not breached the
interdict or in any event they have not done so wilfully.
Parties'
submissions
[10] Mr Sandison for the pursuers, addressing the averment that
there had been no wilful breach, referred to Director General of Fair Trading v Pioneer Concrete (UK) Ltd [1995] 1 AC 456. In that case the House of Lords approved the
distinction drawn by Warrington J in Stancomb
v Trowbridge Urban Borough Council [1910] 2 Ch 190 between wilful conduct on the one hand and casual or accidental and
unintentional acts on the other and held that deliberate conduct by an employee
was wilful even although it did not involve a direct intention to disobey an
order. He submitted that the defenders'
averments amounted to an admission of handling or taking into their possession
the pursuers' gas cylinders. While the
defenders asserted that they had done so solely to return the cylinders to the
pursuers, that was irrelevant. He
referred to The King v Poplar Metropolitan Borough Council [1922]
1 KB 95 (Lord Sterndale at pp.103-104) in support of the proposition that the
defenders' motive for their acts was irrelevant if, objectively assessed, those
acts involved a breach of interdict.
While it might not be a breach of the interdicts to take into custody
cylinders which members of the public had abandoned outside the defenders' yard
or within the yard as that might arguably amount to involuntary possession, the
defenders had failed to give adequate specification of the number of occasions
on which that had occurred. Further, the
acts of the defenders' delivery drivers and the uplifting of cylinders at the
request of the police amounted to voluntary handling or taking of possession
and were caught by the interdict.
[11] Mr Johnston QC for defenders submitted that defenders had
pleaded a relevant defence that they were not in breach of the interdict. He concentrated on the meaning of the words
in the interdicts in support of the submission that, properly interpreted, the
interdicts did not prohibit what the defenders had done. In relation to the first interdict, he
submitted that the prohibition against handling the cylinders was properly to
be interpreted in the context of the contract and in particular the contractual
clause from which I have quoted in paragraph 7 above. What the clause prohibited was handling with
a view to profit. He referred me to in
support of the application of the eiusdem
generis rule to Thames and Mersey
Marine Insurance Co Ltd v Hamilton
Fraser & Co (1887) 12 App Cas 484, Lord Halsbury at pp.489-490. In relation to the second interdict he
submitted that the defenders had not taken possession of the cylinders because
they had had custody of them solely in order to return them to the
pursuers. In order for the defenders to
have taken possession of the cylinders they would have to have done so for
their own use. This they had not
done. In support of this submission he
referred to Professor Kenneth Reid's discussion of the concept of possession in
his impressive work in volume 18 of the Stair Memorial Encyclopaedia at
paragraphs 114 - 125 and to the institutional writers (Bell's
Principles paragraph 1311, Erskine 2.1.20 and Stair 2.1.17) who supported
Professor Reid's analysis. He submitted
also that the court would require to hear evidence as to the custom and
practice of the gas industry in order to interpret the concept of handling and
also evidence as to the defenders' state of mind in order to decide whether
they had taken possession of the cylinders.
As it was necessary to prove an assertion of breach of interdict beyond
reasonable doubt - Gribben v Gribben 1976 SLT 266 - the court could
not conclude at this stage that the defence was bound to fail. He did not address me on the pursuers'
challenge to the lack of specification in the defenders' pleadings.
[12] Mr Sandison in reply submitted that the defenders were
incorrect in seeking to give a technical meaning to the words of the
interdicts. He referred me to Mcintyre v Sheridan 1993 SLT 412 and Burn Murdoch on
Interdict (paragraph 448) on the correct approach to the interpretation of
interdicts: words should be given their natural and ordinary meaning.
Decision
[13] The test in deciding a
challenge to the relevancy of defences is whether the defence must necessarily
fail even if the defenders prove all of their averments. See Jamieson
v Jamieson 1952 SC (HL) 44 and Henderson v
3052775 Nova Scotia Limited 2006 SC (HL) 85, Lord Rodger at paragraph
16. The central issue therefore is
whether what defenders admit or aver that they did in the months after
September 2004 demonstrates that they were in breach of interdict. I am satisfied that the defenders' averments
demonstrate breach of interdict and that sending the case to a proof would not
alter this view.
[14] Averments of a worthy motive for disobeying a court order are
not relevant as a defence against an assertion of breach of interdict: The King
v Poplar Metropolitan Borough Council
(above). In the present case,
averments of motive would be relevant as a defence only if they supported an
argument that the mental element in the defenders' acts caused those acts to
fall outside the terms of the interdicts.
In other words, the defenders' averments of motive would be relevant
only if they supported the legal assertion that the first defenders did not
handle the gas cylinders owned by the pursuers or that the first defenders and
the second defenders did not take possession of or otherwise interfere with
those cylinders.
[15] It is well established in law that the interim interdicts
should be interpreted in a practical way, in accordance with the ordinary and
natural meaning of the words used, and not in any technical sense unless it is
clear from the context that a technical meaning was intended. See McIntyre
v Sheridan (above) Lord Justice Clerk Ross at
p.418C-D, and Burn-Murdoch on Interdict, para 448, where the learned author
cites Duke of Argyle v McArthur 1861 23 D 1236, Lord Kinloch
at p.1239. In taking the words "in their
plain practical import" (as Lord Kinloch enjoined) it is relevant to consider
the nature of the alleged mischief which the pursuers sought the orders of the
court to prohibit.
[16] It is clear from the pleadings in the principal action and the
admitted averments in the Minute and Answers that what the pursuers were
seeking to do was to prevent the defenders from interposing themselves between
the pursuers and their customers. In
particular, they were seeking to prevent the defenders from relieving the
pursuers' former customers of their empty cylinders when providing them with
gas cylinders from another supplier and thus facilitating such customers to
switch to that supplier.
[17] The contractual prohibition against "handling" the cylinders
applies only to the first defenders.
That prohibition falls to be interpreted in the context of the
termination clause and the contract as a whole.
What is prohibited in the contract is selling, supplying, handling,
distributing or installing (among other things) the cylinders. While I am prepared to accept that the
contract envisaged that the prohibited activities would be activities carried
out in the course of the first defenders' business, I am not persuaded that the
contract sought to prohibit such activities only when they were carried out
with a view to profit directly from the activities themselves. Having regard to the obligation on the
pursuers' customers in their "cylinder refill agreements" (Form 167 Agreements)
to return the cylinders to the pursuers or their authorised dealers (a
stipulation which must have been within the defenders' knowledge), it appears
to me that the prohibition against handling extends at least to receiving the
cylinders from former customers of the pursuers and obviating the need for such
customers to visit a dealer in the pursuers' products. By so handling the gas cylinders, the first
defenders facilitated the switching of gas supplier. This is implicit in their averments quoted in
paragraph 6 above. In my opinion such
handling of the gas cylinders, for example by the first defenders' delivery
drivers, with the intention of returning them to the pursuers falls within the
scope of the contractual prohibition and thus the first interdict.
[18] Turning to the second interdict which is directed against both
defenders, I accept that Professor Reid's statements in paragraphs 123 and 125
of Volume 18 of the Stair Memorial Encyclopaedia, that for a person to acquire
possession of a thing he must intend to exercise control over the thing for his
own benefit, are vouched by the institutional writers to whom he referred and
which Mr Johnston cited in his submission (see paragraph 11 above). That is our law. There are circumstances where the distinction
between possession and custody is very important, for example in the transfer
of ownership of corporeal moveable property.
But I am satisfied that it is not correct to interpret the interdict in
a strict sense which would draw a distinction between possession on the one
hand and custody on the other. It
appears to me to be highly artificial to say, in this context, that while they
held the cylinders, the defenders were the mere custodiers of them and that
either the pursuers or their former customers were the possessors (see Lord
Ivory in Miller & Co's Trustee v Western Bank of Scotland (1856) 19 D
152, at p. 161). In seeking a
prohibition against taking possession of or otherwise interfering with the
cylinders, the pursuers clearly wanted to prevent the defenders from
interposing themselves between the pursuers and their customers by, among other
steps, relieving those customers of the empty gas cylinders which belonged to
the pursuers. It must be borne in mind
that the pursuers' delictual claim against the defenders in article 5 of the
principal action was one of inducing the customers to breach their contracts
with the pursuers which required them to return the cylinders to the pursuers
or the pursuers' dealers. If I were to
interpret the second interdict in a way which drew the technical distinction
between "possession" and "custody" I would not be following the authoritative
guidance set out in paragraph 15 above.
In addition, I cannot ignore the words "or otherwise interfering with"
which are part of the interdict. Thus
even if I were wrong in declining to give a technical meaning to the phrase
"taking possession of", the defenders' admitted acts of interposing themselves
between the pursuers and their former customers by taking the empty cylinders
amount "interfering with" the cylinders.
[19] In reaching the view that the interdicts have been breached, I
have borne in mind the dictum of Lord President Emslie in Murdoch v Murdoch 1973
SLT (Notes) 13 that
"where interdict
is granted by the court the terms of the interdict must be no wider than are
necessary to curb the illegal actings complained of, and so precise and clear
that the person interdicted is left in no doubt what he is forbidden to
do."
In my opinion, having regard to the
context averred in the principal action, both defenders should have been in no
doubt that the second interdict prohibited them from taking the pursuers'
cylinders into their possession or custody. The first defenders similarly
should have been in no doubt about the prohibition against handling in the
first interdict. There may have been
cases where the defenders have a reasonable explanation for doing so, such as
when the members of the public abandoned gas cylinders outside or within their
premises, and such circumstances may be a relevant consideration in mitigation
of the consequences of breach of the court's orders. But that does not alter the fact that, on the
interpretation of the interdicts which I favour, the defenders' averments
provide no relevant defence to the allegation of breach of interdict.
[20] Mr Johnston suggested that the requirement of proof beyond
reasonable doubt supported the need for a proof. I do not accept this submission. If there were matters which needed to go to
proof, the standard of proof would indeed be proof beyond reasonable
doubt. But I am here concerned with the
logically prior question of whether anything needs to be proved before I can
reach a concluded view on the allegation of breach. I am satisfied that I do not need proof of
trade practice or of the state of mind of the employees of the defenders when
they took possession or custody of the cylinders in order to interpret the
interdicts and apply them to the admitted facts.
[21] Mr Sandison also attacked the lack of specification in the
pleadings of the defenders. It is not
necessary for my decision to express concluded views on that submission. However I consider that the defenders, when
faced with the interim interdicts, could have kept records of the circumstances
in which they came to hold the pursuers' cylinders and used that information to
give greater specification in their pleadings as to the frequency of the
occurrence of such circumstances. As
their pleadings stand, they aver some circumstances which are in my opinion
breaches of the interdicts and some which arguably are not; but the frequency of the occurrence of
incidents in each category is unclear.
In addition, in the principal action I am surprised by the defenders'
apparent failure in Answer 5 to address the terms of the pursuers' standard
form "cylinder refill agreement" with their customers, which must have been
within their knowledge. Greater candour
may assist their position in further hearings on this matter. Their averred concerns for health and safety
while relevant in mitigation are not relevant to the question of breach. If such concerns predominated, it might have
been appropriate to have sought recall of the interim interdicts.
Conclusion
[22] I conclude that the
defenders have not averred a relevant defence to the allegation of breach of
interdict. I therefore uphold the
pursuers' second plea-in-law in their Minute and repel the defenders' three
pleas-in-law in their respective Answers. I will put out the case by order for
discussion of further procedure.
