Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 68
CA108/08	OPINION OF LORD GLENNIE in the cause LUMINAR LAVA IGNITE LIMITED Pursuers; against (FIRST) MAMA GROUP PLC and (SECOND) MEAN FIDDLER HOLDINGS LIMITED Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuers: Dean of Faculty, McBrearty; Harper Macleod

Defenders: Anderson QC; McGrigors

14 May 2009

Introduction

[1] The pursuers are one of the Luminar group of associated companies. They are in the business of operating discotheques. They are the tenants of premises at West Tollcross, Edinburgh ("the Tollcross property"), from which they operate the discotheque business known as "Lava Ignite" (sometimes written "Lava & Ignite"). The discotheque operates on Wednesday, Friday, Saturday and Sunday nights between the hours of 10 p.m. and 3 a.m., and has done so since at least 1 March 2008 and for some considerable time before then.

[2] Another company in the group, Luminar Liquid Limited, was formerly the owner of premises at 31 Lothian Road, Edinburgh ("the Lothian Road property"). The Lothian Road property and the Tollcross property are in close proximity to one another. Until 2006, Luminar Liquid Limited operated a discotheque from the Lothian Road premises, trading under the name "Revolution". In 2006 they changed the nature of the business and began to operate those premises as a live music venue, trading under the name "Gig". In January 2007 they decided to close down that business and to market the Lothian Road property for sale.

[3] On 5 March 2008, the first defenders ("MAMA Group") entered into Missives with Luminar Liquid Limited for the purchase and sale of the Lothian Road property for a price of £3.55 million. The first and second defenders are associated companies and are in the business of operating live music venues. It was the intention of the defenders that the first defenders should purchase the property and that the second defenders, Mean Fiddler Holdings Limited, should operate it as a live music venue. This was known to the pursuers. In terms of clause 14 of the Missives, the first defenders were bound, on the date of entry to the property, to deliver an undertaking in favour of the pursuers in the form set out in Part 4 of the schedule to the Missives. That undertaking has been referred to as "the Non Compete Agreement".

[4] Pursuant to clause 14 of the Missives, on 17 and 27 March 2008 the pursuers and the defenders entered into the Non Compete Agreement in terms of which they undertook inter alia not to use the Lothian Road property for late night entertainment in direct competition on a like for like basis with the discotheque business carried on by the pursuers at the Tollcross property as at 1 March 2008.

[5] The second defenders have now commenced business from the Lothian Road property under the name "The Picture House". They operate it primarily as a live music venue. They have made it known, however, that they intend to open the premises for club nights (or discotheques, the terms were used interchangeably in the evidence) on Friday evenings under the name "Adventures in Stereo" and on Saturday evenings under the name "Beat Control".

[6] The pursuers contend that such use of the Lothian Road premises would be in breach of the Non Compete Agreement. In terms of the first Conclusion in this action, they seek interdict of the defenders were from using the Lothian Road property as a discotheque on Wednesday, Friday, Saturday and Sunday evenings between the hours of 10 p.m. and 3 a.m., and from trading as a discotheque on those evenings at those times.

[7] In September 2008, interim interdict was granted in terms of the first Conclusion. A motion to recall the interdict was later refused. In January 2009, after the destruction by fire of the Liquid Rooms in Victoria Street, Edinburgh, the previous month, the defenders applied to have the interim interdict restricted to allow them to host two club nights that had previously taken place at the Liquid Rooms. Those club nights were known as "EVOL", which played at the Liquid Rooms every Friday night and had been established since 1991; and "MADCHESTER", which took place on the last Saturday of every month and had operated for nearly 10 years. In an Affidavit sworn in support of the application, Mr Laing, the Group Operations Manager for MAMA Group, said that "EVOL" played only "alternative, rock and indie music", whilst "MADCHESTER" also played "indie/alternative music, focusing on the music scene in Manchester around the early and late-1990s". The application to restrict the interdict in this way was granted, though neither EVOL nor MADCHESTER has in fact taken advantage of this restriction to put on a club night at The Picture House.

[8] The matter came before me for the hearing of a proof for answer. Before the proof, Affidavits were exchanged setting out of the evidence of each of the proposed witnesses. This was done, in the first instance, to determine what factual issues were in dispute and whether proof was necessary: see Rule of Court 47.12(2)(d). In the event, and of consent, these Affidavits were treated as the evidence in chief of each witness, subject to any elaboration and clarification in chief, and subject, of course, to cross-examination in the ordinary way: see Rule of Court 47.12(2)(c). Although some of the earlier witnesses had to be taken through the documents in some detail in chief, once these documents had become familiar it was possible to take other witnesses much more briefly. This resulted in a considerable saving of court time. The use of Affidavits in this way has, however, given rise to a question of practice with which I deal at the end of this Opinion.

The Non Compete Agreement

[9] The Non Compete Agreement is an agreement by the first and second defenders in favour of the pursuers. The Tollcross property is referred to therein as the "Benefited Property". The Lothian Road property is referred to as the "Burdened Property". The first defenders are referred to as "MAMA", the second defenders as "the Purchaser", and the pursuers as "Luminar". Clause 2, which is headed "Non Compete Undertaking", provides as follows:

"2.1 Considering that the Purchaser has purchased the Burdened Property from a Luminar Group Company, subject to clause 2.2, with effect from the Effective Date until the date of termination of this Agreement in accordance with clause 4.1, Mama and the Purchaser jointly and severally undertake to Luminar (as owner and operator of the discotheque business trading from the Benefited Property) not to (1) use the Burdened Property for late night entertainment in direct competition on a like for like basis with the discotheque business of Luminar as carried on at the Benefited Property as at 1^st March 2008 or otherwise permit the Burdened Property to be used for late night entertainment in direct competition on a like for like basis with the discotheque business of Luminar as carried on at the Benefited Property as at 1^st March 2008, and/or (2) trade (from the Burdened Properly) in direct competition on a like for like basis with the discotheque business carried on by Luminar from the Benefited Property as at 1^st March 2008. Luminar hereby confirms that it does not use the Benefited Property, nor permit the Benefited Property to be used, nor trade the Benefited Property as a live music venue as at 1 March 2008.

2.2 Except only as provided in clause 2.1 nothing in this Agreement shall be deemed to prevent Mama, the Purchaser or any Associated Company from using the Burdened Property as a music venue, including, without limitation, as a live music venue or as a bar at which music is played or from trading from the Burdened Property as a music venue, including, without limitation, as a live music venue, or as a bar at which music is played and neither Mama nor the Purchaser gives any undertaking in this respect."

Clause 4 deals with the duration of the Agreement. I need not quote this, since it is agreed that the Agreement is in force. Subject to certain events (which have not occurred), the Agreement remains in force for five years from 31 March 2008. In terms of clause 5 of the Agreement, Luminar was entitled to transfer and assign the benefit of the Agreement and the undertakings therein contained to any other Luminar Group Company.

The issues in outline

[10] The pursuers seek interdict preventing the defenders from operating a discotheque from the Lothian Road property on the evenings in question. They do not seek to differentiate between different types or styles of discotheque. Their case is that any discotheque put on by the defenders at the Lothian Road property on Friday and Saturday nights (and also, for that matter, though the point does not arise, on Wednesday and Sunday nights) would put the defenders in breach of the Non Compete Agreement. Any such activity, they say, would be in direct competition on a like for like basis with the discotheque business which the pursuers carried on at the Tollcross property as at 1 March 2008. The defenders dispute this. They say that the Non Compete Agreement does not prevent them putting on any discotheque or club night, but only a discotheque or club night which directly competes with the pursuers' business on a like for like basis. The type of club night which they offer is of a different character to that offered by the pursuers and attracts a different clientele with different tastes: and that it is not "in direct competition on a like for like basis with the discotheque business of Luminar".

[11] It became clear during the parties submissions at the end of the proof that the case turned ultimately on a question of construction, namely: did the Non Compete Agreement prohibit the defenders from operating any discotheque on the evenings in question, or was the prohibition less extensive than that? The pursuers sought interdict preventing the defenders running any kind of discotheque on those evenings. They did not seek simply to interdict certain types or styles of discotheque. It was common ground that if, on its proper construction, the Non Compete Agreement prohibited the defenders from running any kind of discotheque at the Lothian Road premises at the times in question then the pursuers were entitled to interdict. Equally, it was common ground that if on its proper construction the Non Compete Agreement did not amount to a blanket prohibition on the operation of a discotheque of whatever kind at the Lothian Road premises, then the pursuers could not succeed in their action as framed. The pursuers did not seek to argue, for example, that, even if the Non Compete Agreement allowed the defenders to put on some types or styles of discotheque, those which the defenders intended to put on were within the scope of the prohibition. Much of the evidence led at the proof was directed to the question whether there was in fact any identifiable distinction between different types or styles of discotheque, or whether all discotheques were in reality competing for the same market. This went, it was said, to the question whether the more limited construction of the Agreement advanced by the defenders had any content or, to put it another way, made any sense.

The validity of a Non Compete Agreement in a contract for the sale of heritage

[12] At an earlier hearing, at which the defenders applied successfully to restrict the interim interdict, the question was raised about whether the prohibition in the Non Compete Agreement ran counter to the doctrine of restraint of trade. Both at that earlier hearing and in his closing submissions at the proof, the Dean of Faculty, on behalf of the pursuers, drew my attention to the decision of the House of Lords in Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269, and, in particular, to the speeches of Lord Reid at p.298B-F, Lord Morris at p.309B-C and Lord Pearce at p.325C-D. In that case, the defendants, who were garages and sold motor fuel from their forecourts, entered into agreements with suppliers of motor fuel on terms which prevented them from selling other brands of motor fuels for certain periods. On the hearing of an application for an injunction, the House of Lords held that the agreements were within the scope of the doctrine of restraint of trade. They distinguished the case of a covenant such as might be entered into by a purchaser or lessee of land. It is enough to quote from the speech of Lord Morris at p.309:

"There is a considerable difference between the covenants in the present case and covenants of the kind which might be entered into by a purchaser or by a lessee. If one who seeks to take a lease of land knows that the only lease which is available to him is a lease with a restriction, then he must either take what is offered (on the appropriate financial terms) or he must seek a lease elsewhere. No feature of public policy requires that if he freely contracted he should be excused from honouring his contract. In no rational sense could it be said that if he took a lease with a restriction as to trading he was entering into a contract that interfered with the free exercise of his trade or his business or with his 'individual liberty of action in trading.' His freedom to pursue his trade or earn his living is not impaired merely because there is some land belonging to someone else upon which he cannot enter for the purposes of this trade or business. In such a situation (that is, that of voluntarily taking a lease of land with a restrictive covenant) it would not seem sensible to regard the doctrine of restraint of trade as having application. There would be nothing which could be described as interference with individual liberty of action in trading. There is a clear difference between the case where someone fetters his future by parting with a freedom which he possesses and the case where someone seeks to claim a greater freedom than that which he possesses or has arranged to acquire. So, also, if someone seeks to buy a part of the land of a vendor and can only buy on the terms that he will covenant with the vendor not to put the land to some particular use, there would seem in principle to be no reason why the contract should not be honoured."

It was not suggested that the same principle should not apply in Scotland. In the present case we are concerned with a Non Compete Agreement into which the defenders freely entered as one of the conditions upon which the vendors agreed to sell. In the event, I did not understand Mr Anderson QC, for the defenders, to challenge this.

The proper approach to construction of the contract

[13] There was little difference between the parties as to the principles to be applied by the court when seeking to construe the Non Compete Agreement. The court endeavours to ascertain the intention of the parties from the words which they have used. It is not concerned with what either party subjectively may have intended. The contract is to be construed objectively, by looking at what the parties have said in the context in which they have said it, or, to use the words of Lord Drummond Young in Emcor Drake and Scull Ltd v Edinburgh Royal Joint Adventure 2005 SLT 1233, "according to the standards of a reasonable third party who is aware of the commercial context in which the contract occurs". The contract should, if possible, be given a commercially sensible construction: Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SCE 657, 661D-H. In other words, the court will tend to prefer the construction which appears to make the most commercial sense; and, if a possible construction appears to lead to difficulties, the court will ask itself whether this is what the parties can really have intended. While it is permissible in many cases to enquire into the facts and matters known to both parties at the time of entry into the transaction ("the factual matrix"), in most cases "the enquiry will start, and usually finish, by asking what is the ordinary meaning of the words used" (per Lord Mustill in Charter Reinsurance Co Ltd v Fagan [1997] AC 313 at 384B-C); see also Bank of Scotland v Dunedin Property Investment Co Ltd (per Lord President Rodger at 661D-H) and City Wall Properties (Scotland) Ltd v Pearl Assurance plc 2004 SC 214 at para [23]. It is not the function of the court to search for an ambiguity in the document where there is none, nor to allow an enquiry into the factual background to create an ambiguity which is not there on the ordinary reading of the words used in the contract: Melanesian Mission Trust Board v Australian Mutual Provident Society (1997) 2 EGLR 128 per Lord Hope at 129E-F.

[14] In light of the nature of some of the evidence which was adduced in this case, I should say a little more about the question of negotiations or prior communings. Where it is appropriate to enquire into the facts and matters known to both parties at the time of their entry into the transaction, it will be permissible to consider the terms of any negotiations or prior communings between the parties as evidence of what those facts and matters were and the state of the parties's knowledge of them: see Bank of Scotland v Dunedin Property Investment Co Ltd per Lord President Rodger at 665D-G and Lord Kirkwood at 670H-I. It is not, however, permissible to look at pre-contract negotiations or communings for any other purpose. In particular, it is neither permissible nor relevant to seek to identify from such negotiations what was the aim or objective of one of the parties to the transaction, even if that aim or objective is shown to have been known to the other party. Nor is it permissible or relevant to consider the detailed changes in drafting which inevitably occur in the course of negotiation. It is salutary to remind oneself of the explanation for this rule given by Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381, in a passage beginning at 1384G:

"There were prolonged negotiations between solicitors, with exchanges of draft clauses, ultimately emerging in clause 2 of the agreement. The reason for not admitting evidence of these exchanges is not a technical one or even mainly one of convenience, (though the attempt to admit it did greatly prolong the case and add to its expense). It is simply that such evidence is unhelpful. By the nature of things, where negotiations are difficult, the parties' positions, with each passing letter, are changing and until the final agreement, though converging, still divergent. It is only the final document which records a consensus. If the previous documents use different expressions, how does construction of those expressions, itself a doubtful process, help on the construction of the contractual words? If the same expressions are used, nothing is gained by looking back: indeed, something may be lost since the relevant surrounding circumstances may be different. And at this stage there is no consensus of the parties to appeal to. It may be said that previous documents may be looked at to explain the aims of the parties. In a limited sense this is true: the commercial or business object, of the transaction, objectively ascertained, may be a surrounding fact. Cardozo J. thought so in the Utica Bank case. And if it can be shown that one interpretation completely frustrates that object, to the extent of rendering the contract futile, that may be a strong argument for an alternative interpretation, if that can reasonably be found. But beyond that it may be difficult to go: it may be a matter of degree, or of judgment, how far one interpretation, or another, gives effect to a common intention: the parties, indeed, may be pursuing that intention with differing emphasis, and hoping to achieve it to an extent which may differ, and in different ways. The words used may, and often do, represent a formula which means different things to each side, yet may be accepted because that is the only way to get 'agreement' and in the hope that disputes will not arise. The only course then can be to try to ascertain the 'natural' meaning. Far more, and indeed totally, dangerous is it to admit evidence of one party's objective - even if this is known to the other party. However strongly pursued this may be, the other party may only be willing to give it partial recognition, and in a world of give and take, men often have to be satisfied with less than they want. So, again, it would be a matter of speculation how far the common intention was that the particular objective should be realised."

That passage remains good authority today.

Construction of the Agreement

[15] It is convenient in this case, before reviewing the evidence adduced by the parties, to consider the ordinary meaning of the words used in the Non Compete Agreement. That is where, in the ordinary case, the enquiry should start and will usually finish. Indeed, in their submissions at the end of the proof, both parties argued that much of the evidence led at the proof was irrelevant.

[16] The restriction in clause 2.1 covers the use of the Lothian Road property for late night entertainment and trading from that property. The terms of the restriction in each case are the same and there is no need to distinguish between them. I shall therefore deal with the matter under reference to the restriction on late night entertainment.

[17] According to clause 2.1, the late night entertainment carried on from the Lothian Road property must not be

"in direct competition on a like for like basis with the discotheque business of Luminar as carried on at [Lava Ignite] as at 1^st March 2008."

Looking at this part of the clause, the first and obvious point is that Luminar carries on a discotheque business. This is apparent from the wording of the restriction. In the final sentence of clause 2.1, Luminar confirms that it does not use the Tollcross property as a live music venue. Luminar's only business at the Tollcross property is the Lava Ignite discotheque. The restriction is on competition with this discotheque business carried on by Luminar. But not all competition with Luminar's discotheque business is prohibited. Live music might compete with Luminar's discotheque business, but it is not suggested that live music is prohibited. So also might other forms of entertainment, if one takes the idea of "competition" to include general competition for the "leisure pound", an expression frequently used in evidence, but it is not suggested that this is what the clause is getting at either. The pursuers' contention is that the clause prohibits the defenders putting on any kind of discotheque at the Lothian Road property on the days and at the times at which they put on their discotheque at Lava Ignite. The defenders say: No, what is prohibited is a discotheque which directly competes with the discotheque at Lava Ignite on a like for like basis. That is the ambit of the dispute.

[18] In considering the rival positions, one point can be made at the outset. Had the parties intended that the defenders should be prevented from putting on any discotheque at the Lothian Road property at any particular time, they could easily have said so in terms. But they did not. Clause 2.1 does not, as it could easily have done had such a result been intended, contain an undertaking by the defenders not to use the Lothian Road property as a discotheque, or as a discotheque at certain times or on certain days. The word "discotheque" is not used in describing what the defenders must not do, as opposed to describing what they must not compete with. Indeed, the undertaking does not contain any reference to the nature of the defenders' business which is precluded, except that it must not be in direct competition on a like for like basis with Luminar's discotheque business. This, to my mind, points clearly away from there being a blanket ban on the defenders putting on any kind of discotheque. It points to the restriction being narrower than that.

[19] What is the extent of the restriction? Submissions were made around two specific aspects of the definition in the clause. The defenders' late night entertainment must not be in direct competition with Luminar's discotheque on a like for like basis. The Dean of Faculty submitted that the word "direct" related to the opening times of the two venues: it would be in direct competition if the defenders carried on a discotheque at the Lothian Road property on the same nights and at the same times (or approximately the same times) as the discotheque at Lava Ignite, but not otherwise. Mr Anderson QC did not accept that construction. If it had meant that, it could easily have said so. I agree. It does not seem to me that the clause lends itself to dissection in this way. The phrase "in direct competition on a like for like basis" should be read as a whole, as an attempt to define the nature of the competition which was to be prohibited. Clearly days and times of opening are important elements of this, but I do not think it necessary to treat those elements as imported only by the word "direct". But I do not think that this point really matters. Even if the word "direct" is related to days and hours of opening, it is still necessary to look at the other aspect of the restriction, namely "like for like".

[20] Counsel differed as to the meaning properly to be given to the phrase "like for like". Under reference to the Oxford English Dictionary, Stroud's Judicial Dictionary and the remarks of Mocatta J in Re British Concrete Pipe Association's Agreement [1982] ICR 182 at 188E, the Dean of Faculty submitted that it meant "similar" rather than "the same". Mr Anderson QC pointed out that Mocatta J was concerned with the meaning of the word like, and it was obvious that "like", by itself, did not mean "the same". "Like for like", on the other hand, had a meaning which, if not equivalent to "identical", at least pointed to a point higher on the scale of likeness than the word "like". The nearest equivalent was the expression "in the same manner". I am not sure that a precise semantic analysis of the phrase in isolation is either possible or necessary. In the end there did not seem to me to be much to choose between the two positions. In my view, if one were looking for a phrase which conveys what is meant by "like for like" in this clause, it would be some such phrase as "in a similar manner".

[21] It seems to me, however, that the argument about the meaning of a particular word or phrase in isolation risks taking particular words or phrases out of context. Of greater importance is to ask: direct competition on a like for like basis with what? The answer given by the clause is: with the discotheque business of Luminar carried on at Lava Ignite on the particular date. That date is a date just prior to the date of the Non Compete Agreement. In my view the clause suggests an appreciation by the parties that, as at that date, Luminar carried on a discotheque business at Lava Ignite of a particular kind or style and appealing to a certain group of potential customers; and it was direct competition with that on a like for like basis which the clause was designed to prevent. I say this because the reference to Luminar's discotheque business as carried on at that date does not seem to me to refer simply to the days and hours of opening as at that date, but rather to the type of discotheque that Luminar were offering then. Whether the parties would have been able to define with precision that type of discotheque, or the group of potential customers, is another matter. They might not have been able to do so, though (from the evidence led at the proof, to which I shall refer in due course) I suspect they would have been able to recognise both the style of discotheque put on by Luminar and the style of discotheque which it was the intention of the clause to prohibit.

[22] In summary, therefore, it seems to me that the clause does not seek to prevent the defenders putting on any discotheque on the days and at the times in question; it only seeks to prevent them from putting on discotheques which compete on a like for like basis, by operating in a similar style and seeking to appeal to a similar group of potential customers.

[23] In coming to this conclusion, I have not overlooked the terms of clause 2.2. That provides that "except only as provided in clause 2.1", nothing in the Non Compete Agreement is to prevent the defenders from using the Lothian Road property

"as a music venue, including, without limitation, as a live music venue or as a bar at which music is played"

However, it seems to me that the purpose of this clause is only to make it clear that the agreement not to compete directly on a like for like basis with the discotheque business carried on by Luminar does not impact at all on the defenders' right to operate as a live music venue, or as a bar at which music is played. It might otherwise have been arguable that opening for live music on the same nights as Luminar put on its discotheque was competing directly on a like for like basis. That would require a very wide interpretation of "like for like", so as to embrace all types of musical offering, live or pre-recorded. The purpose of clause 2.2 is to exclude that argument. But it does not, in my opinion, point to a wider interpretation of the restriction in clause 2.1 than that which I have sought to explain in para.[21] above.

[24] In light of the fact that parties led evidence as to certain matters of background, the above analysis of the clause, seeking to find the objective intention of the parties from the words used by them in the context of the agreement as a whole, is inevitably to be regarded at this stage as provisional only. But I should say that I do not find in the words used by the parties any obvious ambiguity requiring evidence. In those circumstances, it seems to me that the main function of the evidence, by informing me as to the context in which the Non Compete Agreement was made and objectively its commercial purpose, was to enable me to cross-check on whether what appeared to me to be the clear interpretation of the Agreement was in fact a plausible one. To put it another way, in the context of the present case, to enable me to understand whether the distinction between different types of discotheque appealing to different groups of potential customers, was an intelligible one which parties might reasonably be supposed to have had in mind at the date of entering into the Agreement.

The scope of the evidence

[25] As I have pointed out, the issue in this case is whether the Non Compete Agreement, on its proper construction, prevented the defenders from running any kind of discotheque from the Lothian Road premises on the nights in question. The focus of that argument was the question of what was meant by the words "in direct competition on a like for like basis with the discotheque business of Luminar" in clause 2.1 thereof. The evidence led by the parties was directed to providing the background circumstances against which this question could be answered. The evidence can conveniently be considered under two heads. First, there was detailed evidence as to the communications between the parties leading up to the sale of the Lothian Road property and the conclusion of the Non Compete Agreement, their respective intentions as to what they wanted to achieve and their understandings as to what was and was not going to be permitted under the Agreement. It was, I think, accepted that most of this evidence, insofar as admissible - and, as it went on, it seemed to me, in the main, to be inadmissible - was of marginal relevance. However, both parties sought to obtain from it some evidence of the factual background against which the Non Compete Agreement was concluded and, sensibly, allowed the evidence to be given without constant interruption. Second, there was evidence given by a variety of witnesses about different types of discotheque and the clientele which they attracted or sought to attract. This involved evidence of the types of music played at different venues, the ambience that a club might try to create, and other features, such as drinks pricing policy and advertising. As part of this exercise, there was evidence from market research professionals engaged by each of the parties with a view, as I understood it, to testing the extent to which the type of entertainment intended to be offered by the defenders at the Lothian Road premises differed from that offered by the pursuers at Lava Ignite at West Tollcross. It is convenient to deal with the evidence under each of these heads separately. I should, however, make it clear that in reaching my conclusions on the evidence I have taken account not only of the passages in the evidence to which I specifically refer but to the whole of the evidence in the Affidavits and other written materials as well as the oral evidence of each witness.

The pre-contractual negotiations

[26] The Lothian Road premises were advertised for sale in January 2008. The premises were marketed as a "development opportunity" and the marketing particulars (6/1 of Process) made it clear, under the heading "Restrictive Covenant", that the vendors were "unwilling to sell their interest in this property to a nightclub/pub operator".

[27] On about 10 January 2008, the defenders submitted an offer for the premises. On 22 January 2008, Andrew Wilkinson, of the pursuers, e-mailed Seb Howard, who was acting at this time as agent for the MAMA Group, in connection with that offer. In the course of that e-mail (6/33), he pointed out that:

"a condition of the sale is that the premises are not used as a nightclub in the future; as we have our existing nightclub premises in Edinburgh of Lava Ignite ... to consider."

It appears that there was a rival bid for the premises which prompted the pursuers to set a deadline for final offers to be made. On 28 January 2008 MAMA Group submitted a renewed offer in the sum of £3.55 million. The letter of that date (6/34, last page) from Dean James of MAMA Group to Andrew Marks, a director of Luminar, setting out that offer, included the statement:

"We are willing to covenant that the property will be used as a live music venue and will not compete with your other venue in Edinburgh."

On the same day, Kirsty McShannon, the in house Group Lawyer for MAMA Group, sent an e-mail (6/34) to Andrew Marks confirming the offer and noting that

"The exact wording of the Restrictive Covenant is to be decided between our solicitors".

At this stage, there was no draft Undertaking or Covenant in circulation.

[28] Discussions and correspondence ensued on a number of topics against a deadline of 29 February 2008 fixed by the pursuers for completion of the transaction (see 6/39).

[29] On 27 February 2008 (6/41), the first draft of the Undertaking was sent by Graeme Nisbet, a partner in the firm of Harper McLeod LLP, who were acting for the pursuers in connection with the sale, to Brian Meldrum, a partner in Macdonalds, Solicitors, who were instructed by MAMA Group. That first draft contained an undertaking that the defenders were not to use the premises "as a discotheque" or trade therefrom "in direct competition with the discotheque business trading from the Benefited Property". The "Benefited Property" was the Tollcross property where the pursuers ran Lava Ignite.

[30] I do not propose to set out the detailed alterations to the drafts as the negotiations progressed, but it is necessary to make some reference to them in order to enable the evidence relied upon to be taken in context. Various revisals and comments were exchanged. At an early stage, the clause containing the restriction was divided into 2.1 and 2.2, and this division of the clause into two parts formed the basis for detailed exchanges about the drafting until the Agreement reached its final form. The revisals put forward by the defenders from the first (see e.g. 6/43) sought to remove from the wording in 2.1 the prohibition on the defenders using the premises "as a discotheque", and replace it with wording which prevented "late-night entertainment in direct competition on a like for like basis with the discotheque business of Luminar" as carried out at Lava Ignite at the date of the Agreement.

[31] By 29 February 2008 a draft had been put forward which had the approval of both sides (see 6/46 and 6/47). On 3 March 2008 Mr Meldrum e-mailed Mr Nisbet (6/48) to say that the defenders had some small changes they wished to make to the wording in clause 2.2. The existing draft circulated on 29 February 2008 had provided, in clause 2.2, that nothing in the Agreement should prevent the defenders from using the premises "as a live music venue (not being a discotheque) or from trading from [the Lothian Road property] as a live music venue (not being a discotheque)" The changes proposed by the defenders and passed on by Mr Meldrum on 3 March 2008 deleted the words in parenthesis, "(not being a discotheque)", and replaced them in each case with the words "or as a bar at which live music is played". Mr Meldrum explained (6/48) that the defenders

"feel that the additional wording in parenthesis in clause 2.2 refers to not using the venue 'as a discotheque' which is much wider than the covenant which they have agreed to at clause 2.1 (i.e. they will not compete as a discotheque in direct competition on a like for like basis with the business which Luminar carry on at the Effective Date). Therefore I have been instructed to delete this wording but made clause 2.2 without prejudice to the provisions of clause 2.1 which should satisfy your clients."

Mr Nisbet's reply by e-mail (6/49) a few minutes later focused on the need to make clause 2.1 a priority rather than clause 2.2, but did not specifically address the deletion of the expression "as a discothequ" or the explanation given by Mr Meldrum for that change.

[32] On 3 March 2008 (6/50), Mr Meldrum responded on the question of priority between the two clauses and continued:

"MAMA need to be able to use the premises for their normal trade and are simply undertaking not to compete on a like for like basis with Luminar in relation to the other premises. MAMA are not in the business of what you and I would know as 'discotheques' i.e. dancing to recorded music however the dictionary definition of "discotheque" is 'nightclub for dancing to live or recorded music and often featuring sophisticated sound systems, elaborate lighting, and other effects'. Live music is MAMA's business but it could be caught under the definition of "discotheque" so we have tried to make it clear that MAMA are not to be prevented from playing live music at all."

Mr Nisbet replied (6/51), again focusing on the question of priority between the two clauses. He added:

"I think we are both pushing the same door: fundamentally Luminar want to prevent a like for like disco which is not your client's intended use."

On the same day Mr Meldrum responded (6/52) saying that:

"MAMA feel very strongly that they wouldn't accept the generic reference to 'discotheque' in clause 2.2 when they have specifically drafted clause 2.1 quite precisely to refer to the particular type of discotheque carried on by Luminar. They feel clause 2.2 is for clarification purposes and that clause 2.1 remains the dominant clause as that is the restrictive covenant, the rest of the agreement is just setting the parameters of that covenant."

[33] Mr Nisbet sent a revised draft later that day (6/53). This was still, it seems, not acceptable to the defenders. Mr Meldrum explained the defenders' position in this way (6/54):

"My clients don't think this amended wording works. The reason they included clause 2.2 was to make it clear that MAMA could still operate the venue as a live music venue and as a bar with music. This is apparently the commercial agreement between the parties. They have agreed to the restriction in clause 2.1 and this provides Luminar with the protection which it is seeking.

MAMA have not agreed not to use their venue as a live music venue, nor have they agreed not to operate it as a bar. By prefacing clause 2.2 with the words 'Except as provided by clause 2.1' this implies that clause 2.1 is designed to limit their use of the venue as a live music venue or as a bar with music. .."

Mr Meldrum sent a proposed alternative draft (6/55) reverting to the idea of a single clause 2 instead of the draft 2.1 and 2.2 on which they had been working. This did not meet with Mr Nisbet's approval. In an e-mail sent on 4 March 2008 (6/56), he said that this was back to front from Luminar's point of view. He continued:

"Fundamentally, Luminar want to ensure that the existing discotheque business at Lava Ignite is not affected by the sale to your client. Your client does not want to use Gig as a discotheque and on this basis, Luminar are happy to confirm that they have no objection to your client using Gig as a live entertainment venue (your latest draft has dropped reference to 'Live').

The primary purpose of the Agreement must be to prevent Gig being used as a discotheque (as currently used on a like for like basis at Lava Ignite).

The secondary purpose (on the basis that your client will not use Gig as a discotheque) is to permit your client to use Gig as a live entertainment venue."

It is not necessary to set out any more of the exchanges between the parties and prior to the conclusion of the Non Compete Agreement.

[34] I heard evidence from a number of witnesses directly involved in the pre-Agreement discussions, and also from others who were indirectly involved in the sense of giving instructions to those who were in direct communication. The principal witnesses for the pursuers on this aspect were Mr Marks and Mr Nisbet; and for the defenders, Mr Laing, Mr James, Mr Meldrum and Ms McShannon. Though the evidence revealed differences between the intentions of, and assumptions made by, the parties during the pre-contract period, it was not a case where the credibility of the witnesses was put in issue and I am satisfied that the witnesses were in fact doing their best to tell the truth. I was also satisfied that, in giving their explanation of the position they had taken in the documentation, the witnesses were generally reliable. In summarising the main aspects of their evidence, I should be taken as accepting it as broadly accurate except where I indicate otherwise.

[35] Mr Marks explained the background to the sale of the Lothian Road premises to the defenders. Luminar had carried out a strategic review in about 2005, as a result of which it reduced the number of its premises from over 300 to around 100. The aim was to concentrate on "branded" nightclubs, under names such as "Oceanic", "Liquid" and "Lava Ignite", with a capacity of 600 to 3,000 people. The proceeds of sale of the premises which were sold were invested in the remaining sites. It was decided to invest over £1 million in Lava Ignite in Edinburgh. In deciding to sell the Lothian Road premises, the pursuers were aware of the risk of competition if those premises were purchased by a night club or pub operator and opened as a discotheque. Any discotheque which opened at the Lothian Road premises would compete with Lava Ignite, whatever its opening hours, since customers and potential customers have limited financial resources and all clubs - indeed all entertainment offered by clubs and other establishments - were competing for the same "leisure pound". However, if any such discotheque was open on the same nights and at the same times, it would compete directly. Because of the decision to invest heavily in Lava Ignite, Luminar did not wish to sell to such a purchaser. They had previously refused approaches from other nightclub and pub operators. This decision not to sell to a club or pub operator was reflected in the marketing particulars for the premises (see 6/1 and para.[26] above).

[36] Some interest in the premises, at values around £1.75 million to £2 million, was expressed by prospective purchasers interested in using the premises for purposes other than entertainment. The pursuers received two offers from buyers wishing to use the premises as licensed premises. One of those was MAMA Group. They offered £3.55 million. The fact that MAMA Group was willing to give a covenant that the property would be used as a live music venue and would not compete with Lava Ignite made their offer acceptable. A live music venue in Lothian Road would not be a direct competitor of Lava Ignite. There was no indication from MAMA Group at any stage that they wanted to use the premises as a club or discotheque for dancing to recorded music. Mr Marks did not consider that the pursuers would have sold the premises to MAMA Group if they had not agreed to such a restriction; that was a clear decision laid down by the board. However, if the premises had been sold without a restriction, there would have had to have been a substantial uplift in the price, which would have been far in excess of the £3.55 million offered by MAMA Group. In cross-examination, he was asked about the statement in the marketing particulars that the pursuers were seeking offers in excess of £2 million. He said that this asking price was meant to reflect the fact that the property was a development opportunity as opposed to a going concern. £2 million was the bottom line below which they would not go. Had the premises been sold as a going concern, the price would have been much higher. However, he saw the premises as a live music venue and as a result there would not be competition with Lava Ignite.

[37] Mr Nisbet's role in the negotiations was that of a solicitor endeavouring to give effect to his clients' instructions. His instructions came from Mr Wilkinson and Mr Marks. He carried out his task principally by communicating with Mr Meldrum in the e-mails to which I have referred. He was taken through the e-mail exchanges and the various drafts and was invited to offer some comments about the thinking behind various changes in the drafting of the Agreement. I do not propose to go into the details of the negotiations and the alterations to the draft Agreement - parties were agreed that such evidence would be inadmissible. Mr Nisbet was in no doubt as to what the defenders were agreeing not to do. There was no ambiguity. The distinction was not between different types of discotheque but between a live music venue, which was what the defenders said that they wanted to put on, and a discotheque. He explained that, between the e-mails, there were a number of telephone conversations between himself and Mr Meldrum. He confirmed that, as appears from the correspondence, his understanding was that both parties were fundamentally in agreement that Luminar should be able to prevent a like for like use of the premises, which he interpreted as being dancing to recorded music (as opposed to dancing to live music). As far as he understood it, the defenders did not intend to use the premises for dancing to recorded music. Their proposed use was as a live music venue. There was no hint from the defenders that they wanted to use the premises for dancing to recorded music or that a large part of their income came from that use. He rejected a suggestion made by Mr Meldrum (in para.8 of his Affidavit) that the two of them had had discussions around the fact that MAMA could not be prohibited from using the premises as a bar with music.

[38] Mr Laing was the Group Operations Manager for the MAMA Group at the relevant time and had responsibility for the day-to-day operations and commercial performance of a range of venues owned by them, including the Lothian Road premises. He was not directly involved in the discussions with Luminar. His evidence was that, when MAMA Group purchased the premises, they always intended that the venue would offer some club nights as well as live music. As far as he was aware, all privately owned, commercial venues in Scotland with a live music offering also offered club nights or discotheques, because of the revenue that that brought in. The budget prepared for the Lothian Road venue in anticipation of the purchase was calculated on the basis that club nights would be run on Friday and Saturday nights for 50 weeks of the year. That would account for about 50 - 55% of the revenue from the venue.

[39] Mr James, the co-chief executive of MAMA Group plc, did become directly involved in the discussions leading up to the sale. He understood that the pursuers did not want the premises to be used as a "nightclub" in any manner which would compete with Lava Ignite. As far as he was concerned, MAMA's venues were predominantly live music venues, hosting live acts "almost always from the alternative genres of music such as rock, indie, grunge or gothic". The club nights were extensions of the live music nights and would attract a similar crowd. The customers were therefore not the traditional mainstream nightclub customers who enjoyed mainstream pop music, but rather customers with niche interests in alternative music. In the defenders' offer of 28 January 2008 (6/34, last page) he stated that the defenders were willing to covenant "that the property will be used as a live music venue and will not compete with your other venue in Edinburgh." In his evidence in chief, Mr James confirmed that by that he meant that it would not compete with Lava Ignite because it would be used as a live music venue. He explained that when he referred to a "live music venue" he meant a live music venue with club nights. That would not compete with Luminar. The club nights were vastly different. People came to the sort of club night arranged by the defenders for the music; they went to Lava Ignite to meet the opposite sex. He explained that every live music operator in the country has club nights. He could not think of any that did not operate in that way. After the initial offer, and before entry into further negotiations with Luminar, he discussed possible restrictions with Steve Forster, the Managing director of MAMA Group's Live Division who had previously worked for Academy Music Group Limited ("AMG") and, in that capacity, had apparently been involved in negotiating a similar restrictive covenant with Luminar in connection with the acquisition by AMG from Luminar of premises in Leeds. He had understood from Mr Forster that wording had been agreed between the parties in respect of the Leeds acquisition stating that "such late night entertainment that does take place will not compete directly with [Luminar's venue] on a like for like basis". He had since been told, and now accepted, that no restrictive covenant was in fact agreed for the premises in Leeds in those terms. However, it was on the basis of what he had understood from Mr Forster that he gave instructions to Ms McShannon to put forward a re-draft of the restriction proposed in clause 2.1 of the draft Agreement. This re-draft (6/43) used the "on a like for like basis" formulation that Mr Forster had suggested. By putting this forward, he said, he intended to convey that the defenders would not seek to operate a business with the same music policy or dress policy as Luminar or which sought to attract Luminar's customers".

[40] Mr Meldrum spoke to the e-mail exchanges in which he was involved. The main point that emerged from his evidence was that he did not know of any intention on the part of the defenders to run club nights in the sense of nights devoted to dancing to recorded music. His e-mail of 3 March 2008 (6/50), by raising concerns that the use of the word "discotheque" in clause 2.2 might, because of a dictionary definition which he had come across, prevent the defenders putting on live music, which was their business, suggested that there was no intention on the part of the defenders to put on club nights. He made it clear that he thought that there might be dancing to recorded music in the bar area, but he did not anticipate large numbers dancing to recorded music as the main attraction. His understanding came from the defenders. He too confirmed that he had had conversations with Mr Nisbet in addition to the e-mails exchanged between them. He was sure that he let Mr Nisbet know that there would be "some dancing to recorded music but that it would not be on a like for like basis with Luminar's operation". He was sure that he had had discussions with Mr Nisbet "around the fact that MAMA could not be prohibited from using the premises as a bar with music".

[41] Ms McShannon was first notified of the proposed acquisition by the defenders on 23 January 2008 when she was told that Luminar would want to include a restrictive covenant restraining the defenders from operating the premises as a nightclub in competition with their existing venue. She was told by Mr James and Mr Forster that this would not be a concern because the defenders proposed operation would be very different from the current operations of Lava Ignite. She was copied into the e-mail of 23 January 2008 (6/33) in which Mr Wilkinson of Luminar had mentioned a condition of the sale that the premises were not to be used as a nightclub in the future, but was told that this would not be a problem since the defenders intention was not to operate as a nightclub in competition with Lava Ignite. She confirmed discussing with Mr Forster the "like for like" wording which he understood to have been used in respect of the Leeds property. She reviewed the draft of the offer sent on 28 January 2008 (6/34, last page). She thought the expression of willingness to covenant that the property would be used as a live music venue and would not compete with Lava Ignite accorded with her understanding, namely that the Lothian Road premises would be used as a live music venue "which would also feature regular club nights and recorded music", but that those nights would not seek to attract the same clientele as currently frequented Lava & Ignite. She did not know anything about the intended frequency of those club nights.

Discussion

[42] Much of this evidence was clearly inadmissible. Evidence of the pre-contractual communings was originally sought to be introduced by the defenders, on the basis that, although they recognised that evidence of the negotiations was inadmissible per se, it was relevant to the extent that it showed what was known to both parties at the time of contracting. After some discussion at the procedural hearing prior to the proof, I indicated that I did not think that I could exclude the evidence at that stage; and, as I have indicated, it was led at proof without constant interruption but under a standing reservation on both sides as to relevancy.

[43] It was common ground between the parties that the detailed revisals of clauses 2.1 and 2.2 were not relevant to the construction of the Agreement as executed. It was also agreed that evidence which went solely to identifying the subjective aim of one of the parties was also not relevant to the construction of the Agreement. The Dean of Faculty, on behalf of the pursuers, sought to take from the evidence the fact that it was known to both parties that the pursuers were not prepared to sell the property to a nightclub or pub operator and that a covenant would be required. From that he sought to draw the inference that the defenders knew that the pursuers would not permit any kind of nightclub or discotheque at the premises. Similarly, he sought to place reliance upon the fact that the defenders in the course of negotiations had made it clear that they were in the business of live music and, apart from the possibility of people dancing in the bar area, had no intention of putting on club nights centred on a large number of people dancing to recorded music.

[44] It seems to me that even for this purpose the evidence is inadmissible. In Prenn v Simmonds, towards the end of the passage quoted in para.[14] above, Lord Wilberforce emphasises that it is

"totally dangerous to admit evidence of one party's objective - even if this is known to the other party".

The reason, he says, is that however strongly pursued that objective may be, the other party may only be willing to give it partial recognition. The evidence of what type of activity the pursuers sought to exclude, and of whether this was known to and acquiesced in by the defenders, falls directly into this category of evidence which is excluded. Of course, such evidence might be admissible if there were a claim for rectification, or an argument based upon personal bar, but no such case was pled or sought to be advanced.

[45] There is an additional problem here. It is true that the pursuers initially wished to prevent the Lothian Road premises being used as a nightclub or discotheque: I accept the evidence of Mr Marks on this, and in any event it appears from the marketing particulars. Over time, however, this intention was, to some extent, watered down. Thus, it is not now contended that the pursuers should be able to prevent the defenders operating discotheques or club nights which are not in "direct competition" with Lava Ignite, in the sense of that phrase for which the pursuers contend, i.e. being open at the same times on the same days/nights as Lava Ignite. Nor is it contended that the defenders should be restricted in the manner in which they put on live music, or have recorded music in the bar area: both of these offerings might be thought to conflict with the pursuers' initial desire to exclude nightclub and pub operators, but the defenders' right to operate in this way is specifically safeguarded in clause 2.2. So it cannot be said that the pursuers' intention remained constant.

[46] Nor can it be said that, in the pre-contractual communings, the defenders accepted that they should not be entitled to put on any discotheque at all. In paras.[31] and [32] above I have quoted certain correspondence from Mr Meldrum in the course of the negotiations. On 3 March 2008 (6/48) Mr Meldrum explained, under reference to clause 2.2, that the prohibition suggested in that clause against using the venue as a discotheque was

"much wider than the covenant which they have agreed to at clause 2.1 (i.e. they will not compete as a discotheque in direct competition on a like for like basis with the business which Luminar carry on at the Effective Date)."

This makes it clear that the defenders were not accepting a blanket prohibition on their using the premises for a discotheque. They made clear their opinion that that was not the effect of clause 2.1 and that the prohibition only went so far as to prevent them competing as a discotheque on a like for like basis with Luminar's business at the given date. On the same day (6/52) Mr Meldrum referred to the defenders having "specifically drafted clause 2.1 quite precisely to refer to the particular type of discotheque carried on by Luminar". I accept, of course, that the latter was sent in the context of the suggestion that "discotheque" might include live music, but taken together these passages seem to me to put the pursuers on notice that they do not regard the restriction in clause 2.1 as being as wide as that for which the pursuers now contend. However, Mr Nisbet used similar language. In his e-mail of 3 March 2008 (6/51) he said: "fundamentally Luminar want to prevent a like for like disco". Even if the evidence were admissible, therefore, it would, in my opinion, be unsafe to draw the inference either that the pursuers had a settled objective of preventing any discotheque at the same time as their own at Lava Ignite or that any such purpose was made known to and accepted by the defenders.

[47] The Dean of Faculty relied on the defenders' emphasis in the correspondence that their business was live music and that therefore they did not compete with the defenders discotheque business at Lava Ignite. Quite apart from any issue of admissibility when one is dealing with a question of construction, I do not think that it takes the pursuers as far as they would like. First, these statements were made in the context of clause 2.2, at a time when the wording of the material part of clause 2.1 had been settled, and at a time when Mr Meldrum was saying, as I have just noted, that the proposed prohibition in clause 2.2 on using the premises as a discotheque went wider than the carefully drafted terms of clause 2.1. Second, subject to the qualification by reference to the larger venues referred to below, I accept the evidence of Mr Laing and Mr James that in their experience all (or almost all) live music venues put on discotheques or club nights on a couple of days a week. It was their intention that the defenders should operate in this way and that the Non Compete Agreement should let them. When they said that the business of the defenders was live music, I accept that they had in mind that a live music venue would put on discotheques or club nights to bolster its revenue. It is true that they did not make this clear to the pursuers. It is also true that it was not put to any of the pursuers' witnesses that they knew that all live music venues put on club nights once or twice a week. In his second Affidavit (at para.28-29), Mr Marks says that he did not know whether or not it was the case that all privately owned commercial live music venues offered club nights. Nor was he aware that club nights provided 50% or more of the projected revenue from the Lothian Road premises and formed an integral part of the defenders business case. As far as he was concerned, that was irrelevant in light of the terms of the negotiations. I therefore am not prepared to find that the pursuers were aware of this. It was pointed out by the Dean of Faculty that, according to David McBride, who was called by the defenders and whose evidence on this point was not challenged by either side, a number of live venues do not operate in this way. These tend to be the large concert halls which depend, to some extent, on public funding or income from conferences rather than from running discotheques. I accept, as I have already said, that this is a qualification which has to be made on the evidence given by Mr Laing and Mr James. Nonetheless, I accept that the defenders believed it to be the norm that operators of live music venues would put on club nights on a regular basis. The evidence does not satisfy me that the defenders deliberately misled the pursuers and pretended to go along with their objective. Nor, of course, does it satisfy me that the pursuers were aware of or content with, what it now transpires, the defenders had in mind. Far from it. But this attempt to identify what one party knew and accepted of the other party's objective simply serves to illustrate the danger to which Lord Wilberforce was referring in Prenn v Simmonds.

[48] I have noted in paras.[37] and [40] that there was a dispute between Mr Nesbit and Mr Meldrum as to whether Mr Meldrum told Mr Nesbit that there would be "some dancing to recorded music but that it would not be on a like for like basis with Luminar's operation". Both witnesses seemed to me to be honest. I am prepared to find that Mr Meldrum may have said something to this effect, but it was linked to the suggestion that the defenders might use the premises, or part of them, as "a bar with music". I am not surprised that Mr Nesbit does not recall a specific conversation to this effect. The suggestion that the defenders might have a bar with music would not have caused Mr Nesbit any alarm. Clause 2.2 made it clear that, whatever else was prohibited, a "bar at which music is played" was permitted.

[49] Ultimately, therefore, it does not seem to me that one can take anything of relevance to the question of construction from the evidence about the pre-contract discussions between the parties.

Discotheques and club nights - music, ambience and clientele

[50] As was made clear in their final submissions, the pursuers' case did not ultimately involve a direct comparison between the style of discotheque operated by them and the club nights proposed by the defenders for the Lothian Road premises. It is fair to say, however, that, in the procedure leading up to the proof, the issue appeared to be whether the style of discotheque which the defenders proposed to put on at the Picture House on Friday and Saturday nights differed in material respects from the discotheque at Lava Ignite on those nights. Much of the evidence under this head was directed, therefore, to this comparison; but this did not matter greatly, since the comparison between the club nights put on (or proposed to be put on) at the two venues served as vehicle for addressing the more general question of whether all types or styles of discotheque necessarily competed for the same pool of customers. This involved a consideration of the different styles of music currently played in such places, the ambience created in different clubs not only by reason of the music played but also of dress code, drinks prices and other factors, and the overlap between such establishments in terms of customer base.

[51] The building at Lothian Road is a former cinema, hence its current name "The Picture House". It is laid out around a large single room, with a central dance floor and bars and sitting areas around the sides. It has a capacity of about 1500 people. Since its acquisition by the defenders its internal layout has been altered by extending the stage, restricting the dance floor, inserting a lower seated balcony and removing two bars and a substantial seating area. According to Mr Laing, those changes make the venue more suitable for live music, which is the defenders' main business, and correspondingly less suitable for a discotheque. As Mr Laing put it in paragraph 8 of his first Affidavit, "each of these measures would be illogical to a clubber forming part of the market for a mainstream club night, who as a rule would wish for the club to have more bars, more seating and less empty space." A club night at the Picture House is, therefore, something of a compromise - people know "that they are attending a club event within a live music venue", rather than attending a mainstream conventional nightclub or discotheque.

[52] After the defenders' purchase of the premises, The Picture House opened as a live music venue under that name in early September 2008. The defenders made it known on their website and in other promotional material that they intended to have club nights on Fridays and Saturdays. Since the promotional material, in the form of flyers, for these club nights was much discussed in evidence, I should set out its content in some detail.

[53] The club night proposed to be held every Friday was advertised under the title "Adventures in Stereo". The main part of the flyer (6/6) described the event as "indie, pop, electro - for music lovers who love to dance". Andy Wilson was to be the DJ. Entry was free before midnight and £3 (students £2) thereafter. The drinks advertised were Tiger Beer at £1.90 per bottle, Tuborg Lager at £2.60 per pint, vodka dash at £1.90 and VK at £1.90 per bottle. On the same flyer, below the advertisement for Adventures in Stereo, there was a list of other forthcoming attractions between 25 September and 28 November 2008. The acts listed, which are all live music acts, were: Travis; Walter Trout; Dirty Pretty Things; The Charlatans; Martha Wainwright; Taste of Chaos; The Music; Tangerine Dream; Todd Rundgren; The Wombats; The Cardinals; James Morrison; Feeder; and Jarvis Cocker & Friends.

[54] Andy Wilson gave evidence. He described the type of music he played as "indie, alternative and electro music styles". He played at the Picture House on Friday19 September 2008 when, because of the interim interdict which was by then in force, the club night had to proceed without dancing. A copy of the playlist from that evening was lodged in process as 7/19, but he explained that because dancing was not allowed he played music which was more "laid-back" than on a full club night. He explained that the use of the word "pop" in the flyer for the proposed "Adventures in Stereo" club night - in the phrase "indie, pop, electro" - meant that the type of music played would be more commercial indie and commercial electro. Although some chart music might feature, it was likely to be music that appeared at the lower end of the top 40 rather than in the top 10.

[55] The club night proposed for Saturday nights was advertised under the name "BEAT CONTROL". It was described as "A night of twisted pop and processed beats". The flyer (6/7) promised "selected drinks £2 all night" and then, against an image of a female in dark glasses and with glossy lipstick licking a heart shaped lollipop on a stick, listed the music likely to be included on the playlist. Again, since so much of the evidence was directed towards it, I should set out some of the names on the list (many were not legible on the copies in court). They included: Justice; Primal Scream; MGMT; Ting Tings; Daft Punk; Hot Chip; Jamie T; Blondie; Pulp; CSS; Depeche Mode; Madonna; Justin Timberlake; Beastie Boys; Gossip; Kasabian; Wiley; Neon Neon; Rapture; Jam; Gorillaz; Nerd; Kooks; Killers; NWA/DRE; Mark Ronson; Kaiser Chiefs; Amy Winehouse; Black Ghost; Missy; Stones; Charlatans; White Stripes; Sugababes; Vampire Weekend; Kings of Leon; Jay Z; Rhianna; Stone Roses; Libertines; Baby Shambles, "plus all sorts of twisted disco pop and processed alternative beats ..". The launch night was to be 20 September 2008, from 11 pm until 3 am. Admission was "FREE B4 12am £5 entry thereafter (£3 students)". The resident DJs were from "EVOL".

[56] EVOL Promotions is an Edinburgh based company dedicated, according to the evidence of Keiron Mellotte, to the promotion of alternative and non-mainstream club events. Keiron Mellotte is a director of the company and the DJ at EVOL, which he describes as Edinburgh's longest running club night, having been going, albeit in different venues, since August 1991. This is to be contrasted with the fact that, according to Mr Mellotte, the majority of clubs last only for a couple of years at most. Until the fire there in December 2008, EVOL held its regular club night on Friday nights at the Liquid Room in Victoria Street, regularly attracting over 700 customers. Mr Mellotte also acted as resident DJ of the club night "Indigo", on Wednesday nights at the Liquid Room, which he described as a student friendly alternative night attracting about 900 people. He is also musical director and DJ of the "Extra Width" club night in The Speakeasy @ Cabaret Voltaire, which he describes as "experimental". It was intended that either he or Neil Rawlings would DJ at "Beat Control" at the Picture House on Saturday nights.

[57] I have already noted that the flyer for "Beat Control" advertised "A night of twisted pop and processed beats". Mr Mellotte explained that they were trying to find a way of advertising to the indie/alternative crowd without using the words "indie" and "alternative". "Twisted pop" was not a term which he had heard before. He used the term "processed beats" to indicate that they had manipulated most of the songs that they played to create an alternative product. He agreed with the suggestion made to him by the Dean of Faculty that some of the artists mentioned on the flyer, such as Rhianna, Justin Timberlake, the Sugababes, Madonna, Amy Winehouse, Jay Z, Wiley and David Bowie were mainstream artists, and made uneasy bedfellows with some of the other artists mentioned on the list, but he said that he liked them, they had been adopted by the "alternative crowd" and they fitted together with the alternative music that he played. In the "Beat Control" flyer, he was aiming at the "alternative" and "indie" customers who would come to his other club nights. The name "EVOL" would be familiar to fans of alternative and indie music. He explained that he used the word "alternative" to include most of what would be called "indie". The word "indie" had become overused, and many of the indie bands, including some of the artists mentioned on the flyer for "Beat Control", had become mainstream. However, apart from a few mainstream artists, he would not expect to hear the other acts on the flyer being played at Lava Ignite. They would jar with the music advertised by Lava Ignite.

[58] Because of the interim interdict granted in September 2008, neither of the club nights planned for Fridays and Saturdays could begin in their intended form. The events took place on 19th and 20 September 2008, but in a restricted form. The DJs played their usual music, or a modified version of it, but no dancing was allowed. Evidence was given as to the attendance on these occasions but, in view of the restrictions under which the club nights were held, the value of that evidence to the enquiry at the heart of this dispute was somewhat limited.

[59] Further advertising material for the Picture House (6/12) described it as "Edinburgh's New 1500 Capacity Live Music and Club Venue". This material advertised a club night at the Picture House every Thursday, called "Smooth, Funky House & RNB" on the version at 6/12, or "Fresh, RNB & Chart Anthems" on the version at 6/31, in both cases under the same picture of a seductively clad girl dancing against a background of hi-fi speakers. The same advertising material listed the bands and other live acts due to perform from January to May or June 2009, with one engagement as far forward as October 2009. The bands listed included Franz Ferdinand, The View, Reel Big Fish, Hue and Cry, Amadou & Mariam, Buena Vista Social Club, Tunng with Tinariwen, Orchestra Baobab, Hawkwind, The Levellers, Ivo Papasov Wedding Band, and The Dammed and The Alarm, as well as tribute bands to Pink Floyd and Led Zeppelin. In evidence from the pursuers, and in cross-examination of the defenders' witnesses, the point was made and, I think, accepted, that many of the bands listed at 6/12 could by no stretch of the imagination be described as alternative or indie. Amadou & Mariam, Buena Vista Social Club, Orchestra Baobab and Ivo Papasov Wedding Band were properly to be regarded as "World Music", Hawkwind was a classic rock band, and the tribute bands were imitations of 60s and 70s rock music.

[60] A further source of evidence about the proposed club nights at The Picture House arose out of the fire at the Liquid Room in Victoria Street in December 2008 and the subsequent motion to restrict the interim interdict to allow The Picture House to host the club nights which had taken place there under the names "EVOL" and "MADCHESTER". In fact, although the interdict was restricted, neither of these events moved to The Picture House. EVOL had made an arrangement with another venue known as Faith, and put on its Friday evening club nights there. Nonetheless, the application prompted the pursuers into investigating the EVOL night at Faith to assess the alleged differences between the defenders' proposed EVOL club nights and the club nights carried on at Lava Ignite. Two representatives of the pursuers, Allan May and Robert Bishop, went to EVOL at Faith on 30 January 2009. Allan May arrived at about 11:30 pm and stayed until about 2:15 the next morning. Robert Bishop was also there for about three hours, in his case from about 11pm until 2am. A list was produced by Mr May (6/64) of some, but not all, of the music played that evening. He compiled it with the help of a mobile phone and an application called "Shazam", which enables a person to identify the music he is hearing by holding the mobile phone up to the music - the phone apparently relays the music to a computer which texts back the name of the track and the artist. There was a question raised as to the reliability of that application, but there was no evidence put before me from which I could sensibly reach any conclusion about that. Nonetheless, both Mr May and Mr Bishop said that they had an actual recollection of some of the tracks referred to on the list having been played that night. They said that many of the tracks were familiar to them and would be played in one or other of the rooms in Lava Ignite. Mr Bishop described the age range of the people at EVOL as between about 21 and 25, with some being older than that. He regarded it as a relatively broad based audience. He thought that the total numbers there were about 450. He liked the music. He knew most of it. Some of it was what he called "guitar pop", an expression which he used for indie music. In his view, the music was relatively mainstream.

[61] When this list was intimated to the defenders, they e-mailed it to Keiron Mellotte, who had been the DJ at the EVOL club night at Faith on that night. To say that he reacted strongly on seeing that list would be an understatement. He e-mailed back within 36 minutes to complain that the list provided by the pursuers "includes a bunch of songs I would never play" (7/57). He described his own playlist for the evening of 30 January in the following way:

"almost 50% are our own versions, edits of songs and stuff that no other DJ owns, let alone plays ... there is a cross over of 6 or so tracks ... and the versions i play are all markedly different to the lava ignite list ... unrecognisably so ... this is 4 and a half hours of music mixed together with a lot of loops and effects used ..."

His e-mail then sets out the playlist for the evening. I do not propose to quote it in full. It includes about 15 of the tracks listed on the pursuers' list. Mr Mellotte said that his playlist was the list he had made before going to work on the Friday night. He had it on the hard drive of his computer and, when he had received the list at 6/64, he had downloaded his own playlist from his computer and pasted it into his e-mail to the defenders' agents. He was happy for the pursuers to examine his computer to see when the file was created. He might have altered the playlist during the evening, depending on the audience response, but not by much. He categorically denied having played some of the tracks on the pursuers' list, and in one case said that he did not own the track. Many of the others on his own playlist were tracks which, it seems clear, would not be played at Lava Ignite. Some of the tracks were recognisable by name as tracks that Lava Ignite might play, but they had been "mixed" with other tracks by other artists or edited in some other way. For example, a Blondie song, "Rapture", identified on the pursuers' list as "Heart of Glass", had been mixed with "Riders of the Storm" by the Doors. He gave other examples and went through the first 15 or so tracks on his own playlist explaining precisely what they were and how they had been mixed or edited.

[62] I should say at this stage that, whilst, subject to the specific comments I make below, I accept that all the witnesses were doing their best to tell the truth and were generally reliable, I found Mr Mellotte to be a particularly impressive witness. He clearly knew his business inside out. On the issue of what music was played at the EVOL club night on 30 January, I accept his evidence in its entirety. He clearly took a great deal of trouble in putting together the ideas and music for any particular club night and was, I believe, genuinely angry at what he took, rightly or wrongly, as a mischaracterisation of the style and content of the evening. The fact that his own playlist was e-mailed back to the defenders' agents within 36 minutes of him receiving the pursuers' list seems to me to be conclusive as to its authenticity. In that time he had to receive, read and try to digest what the pursuers were alleging, download the playlist from his computer and add comments of his own in response to what the pursuers were saying (or, in one case, to what he understood the pursuers to be saying); there would not have been time for him to concoct a list from scratch, or to amend substantially the playlist which he had downloaded; and, to be fair to the pursuers, it was not suggested to Mr Mellotte that his evidence on this was concocted. He made it clear in his evidence that his computer was available for inspection. I do not know whether his computer was inspected, but at any rate there was no application to recall him for further cross-examination on the basis that his evidence did not tie in with what was found. That is not to say that his playlist necessarily matches exactly what he played that night. He accepted that he might have altered it slightly, or changed the order in which tracks were played, depending on the reaction from the people in the club that night. But I am satisfied that it reflects the substance of what was played. In so far as it differs from the playlist produced by Mr May, I consider that Mr Mellotte's playlist is likely to be more accurate. This does not reflect upon the integrity or competence of Mr May or Mr Bishop. Some of the discrepancies between the two lists may have been the result of inaccuracy on the Shazam track recognition application. Mr May said in evidence that he thought that the text messages on his mobile phone identifying the tracks would still be there, and offered to make his phone available for inspection. There was no follow up to this either. I do not doubt that, in so far as Mr May compiled his list based on the texts which he received by this means, he did so honestly and accurately. If these texts identified songs which were not on Mr Mellotte's playlist, I have to conclude that, in the main, the texts are an unreliable guide, maybe because they might pick up a snatch of song which was mixed with other music or maybe because of inaccuracy of the application itself. Similarly, in cases where Mr May or Mr Bishop had a recollection of having heard certain music which Mr Mellotte denies having played, it is possible that they heard snatches of songs which Mr Mellotte had mixed or otherwise altered. In other cases where their recollection differed from the evidence given by Mr Mellotte, I can only conclude that they were mistaken.

[63] The pursuers' premises were re-branded under the name Lava Ignite in April 2005. It is open on Wednesday, Friday, Saturday and Sunday each week. According to Mr Laing, it has about 700 to 800 regular customers on Friday and Saturday nights and about 800 to 900 regular customers on Wednesday and Sunday nights. The Wednesday and Sunday nights are primarily aimed at students. On Sunday nights, only students with student cards are generally permitted entry, although guests of students and regular customers from the other nights may be allowed in at the discretion of the management. There is a crossover between customers who come on the Fridays and Saturdays and those who come on the Wednesdays and Sundays. In other words, some customers come to both.

[64] The most detailed evidence about Lava Ignite was given by William McGregor, the general manager of the club since its rebranding in April 2005 and, indeed, for 18 months before that, when the club was known as the Cavendish. He has been involved in the management of discotheques for the last 30 years. Before joining Luminar, he was employed with the Rank Organisation, with Dean Entertainments, and latterly with First Leisure which operated about 42 discotheques nationwide. His evidence related both to how Lava Ignite operated as at 1 March 2008 and how it operates now; there has been no change over this period.

[65] Mr McGregor confirmed the times of opening, four nights a week between 10pm and 3am. The capacity of Lava Ignite is 1214 people. It has three rooms. The main room, Ignite, has a capacity of about 650 people; Room 2, Lava, has a capacity of about 300 people; while Room 3 can hold about 250 to 300 people. In each of those rooms, music is played by a DJ playing recorded music on vinyl, CD or other digital format. They do not play pre-mixed music. Occasionally there is a departure from this pattern. For example, once a month they might have entertainers such as stilt walkers, burlesque entertainers, etc.; and they might also have guest appearances by television stars. Occasionally, they have guest DJs. But none of this is central to their discotheque business which is based on three live DJs playing recorded music in each of their rooms.

[66] According to Mr McGregor, a very broad range of music is played at Lava Ignite, including mainstream chart music, mainstream dance music, classic dance music, pop, electro, 60s, 70s, 80s, and early 90s music, music from the 2000s, R&B, Hip Hop and other music. Indie and rock music is also played, particularly, but not only, on a Wednesday and Sunday. The music varies from room to room. He said that Room 3, upstairs, plays 60s to 90s music, and attempts to attract the older age group, while Room 2 plays R&B and Hip Hop. (This was in fact the wrong way around, but nothing turns on that.) In the room known as Lava, there is a general policy not to play current chart music or dance music, but otherwise there is no music policy or playlist governing what the DJs play. Mr McGregor conceded that one would be unlikely to hear heavy rock music, thrash metal or the like; but he said that, if the song was popular with people aged between 18 and 30, it would probably be played at Lava Ignite. He was aware that music from some of the artists included on the flyer for Beat Control had been played at Lava Ignite on Wednesdays, Fridays, Saturdays and Sundays.

[67] Mr McGregor also gave evidence about the policies at Lava Ignite concerning dress, age and drinks prices. Lava Ignite did not have a strict dress policy. On any night on which the club was open, a person who looked reasonable would be allowed in, even if wearing jeans, trainers, T-shirts or other casual wear. There is no policy of smart dress. They have never required collars and ties to be worn. Sometimes they market an evening with words such as "dress to impress", but this is more to market a particular night than to dictate any particular dress code.

[68] Mr McGregor said that the age policy was that individuals aged 18 or over, with appropriate proof of their age, would not be refused entry on the basis of age alone. There was no strict age policy or any age restriction, provided the individual was 18 or over. They operate a "challenge 21" policy, widely operated in bars and other licensed premises across the UK, where anyone who looks as though they are under 21 will be required to produce a passport or driving licence or other proof of identity. The student nights on Wednesdays and Sundays might be marketed as for "over 18s", but on Fridays and Saturdays no age limit would be mentioned on the promotional material. Sometimes the promotional material might say "over 20s" but, again, this is more for marketing purposes; 18 year olds upwards are not refused entry on grounds of age. When the club reopened after a substantial refurbishment in August 2008, they erected a sign for one room, Lava, saying "over 25s only" on Fridays and Saturdays, in order to attract a wide age range and to create an area where people over 25 could gather. But the concept was not and is not enforced strictly - there is no one at the door to that room checking age and therefore, since the other two rooms have no age limit, once customers gain entry to the club they are free to go wherever they want.

[69] At Lava Ignite, there is a simple policy on drinks pricing. On Wednesdays and Sundays all drinks are £1.50 throughout the night. On Friday, selected drinks are £1.50 before midnight and full price thereafter. On Saturdays, selected drinks are £1.50 before 11 pm and full price thereafter. The purpose of offering drinks at below full price is simply to attract more customers at times when the club might otherwise be relatively quiet. It is not aimed at attracting any particular type of customer.

[70] Mr McGregor had firm views about the threat of competition from the club nights proposed at The Picture House. In his experience, he said, a club night is a club night and would directly compete with other club nights, to varying degrees of success, no matter what the music or door policy of the clubs in question. He disagreed with the suggestion that there was no possibility of Lava Ignite suffering any loss as a result of the operation of club nights at The Picture House. Nor did he agree that the club nights at the two venues would appeal to different customers with different tastes; he pointed out that many of the artists featured in the flyers for "Adventures in Stereo" (6/6) and "Beat Control" (6/7) were in no sense "alternative"; most of those artists were "pop" (and Justin Timberlake was "teen pop") and a lot of them would be played at Lava Ignite. Referring to the promotional material (6/31) for the Thursday evening club night at The Picture House, under the title "Fresh, RNB and Chart Anthems", he said that that was no different from what might be put on at Lava Ignite - it was the type of flyer which he had produced himself. In his opinion, a discotheque at The Picture House as proposed by the defenders would be "in direct competition on a like for like basis" with Lava Ignite by virtue of the fact that it was open between 10 pm and 3 am on the same nights. He put it in this way in para.16 of his Affidavit:

"In my experience, there will always be crossover of customers when two late-night venues are opened in close proximity to each other, particularly so when both are playing pre-recorded music by DJs. There are many factors, which determine how a consumer will choose a nightclub. The music policy, door policy and dress code are a small part of that. Other factors, such as proximity to the premises in which the prospective customer is located, social factors (such as where other people leaving the premises in which the prospective customer is are going to), marketing (such as flyers being handed out in pubs), the opportunity for meeting members of the opposite sex and others are all relevant in the decision-making process. Many people have a wide range of tastes, for example in types of music, sound systems, lighting systems, dancing, which means that they may choose to go to one club night one week, and then another club night (which may have a different emphasis) the other. The type of music and door policy are not the only determining factors - both music and door policy can, and do, vary and change quickly. In any event, Lava & Ignite, as at 1 March 2008, and now, catered and caters for a very wide range of ages and tastes on all of the nights it is open. In addition, for example, the flyer for "Beat Control" on Saturday night in Picture House mentions artists whose music is played in Lava & Ignite on Wednesday, Friday, Saturday and Sunday nights."

I quote this in full because it appears to me that it summarises fairly comprehensively the thrust of the pursuers' case. Mr McGregor emphasised that in the immediate locality there were no late-night entertainment venues other than Lava Ignite and The Picture House, which were within half a mile of each other. In his oral evidence he made the point that a capacity of 1500 is very large. All nightclubs are presently suffering. Lava Ignite is not immune. There are not 1500 customers wandering around looking for a club to go to. He did not think that the difference in layout affected it: "customers don't talk about layouts". He thought that the pricing policy for drinks was not very different at the two venues. In cross-examination he insisted that it did not matter what music was played, there was bound to be crossover. In November 2008, the defenders had offered an undertaking that they would not at any time play any music which had been in the past 12 months in the UK top 40, "other than music which is within the rock or indie genres of music as those terms are defined within the Official UK Charts Company". Mr McGregor did not think that would make much difference; there would still be significant crossover. In any event, "indie" did not have a definition - if a band made a couple of hits, they became "pop".

[71] Promotional material for Lava Ignite emanating from the pursuers was lodged in process by the defenders at 7/10, 7/11, 7/15, 7/16, 7/18, 7/24, 7/25, 7/51 and 7/54. That material showed how the pursuers advertised the type of club night offered at Lava Ignite on Wednesdays, Fridays, Saturdays and Sundays. On Wednesdays, a night which is designed to appeal to students, the music played in Room 1 is described as "Dance & Indie Anthems". I am here more concerned with Friday and Saturday nights. Some of the promotional material related to a period before the re-launch after the £1 million refurbishment. It is more relevant to look at the material after the re-launch. 7/51 is a flyer for the first night after the re-launch in August 2008. The Friday night is called "Flirt" and is sub-headed "Flirts on Friday". It describes the music in Room 1 as "Commercial Dance Anthems", that in Room 2 as "60's, 70's, 80's & 90's" and that in Room 3 as "RnB & Hip-Hop". The dress code is "Dress to Impress - Smart\Casual" and the age policy is "Over 20's only". The Saturday night is called "Embrace" and is sub-headed "The Biggest & Sexiest Night in Edinburgh". The music, drinks and age descriptions are the same as for Friday except that Room 1 has "Mainstream Chart\Dance" instead of "Commercial Dance Anthems". At 7/54 there are reproductions of posters for the Friday and Saturday nights, 30 and 31 January 2009. Friday has been rebranded "Passion" and the dress code is "Dress to Impress, no sports gear!" The music is much the same as described above except that Room 1 now plays "Dance anthems for those of you who can't keep there (sic) feet still." The Saturday night is still called "Embrace", the dress code is "Smart - no sports wear" and the music in Room 1 is "Some of the latest funky house and The biggest Dance tunes around". The poster for each evening suggests that the theme of the evening is passion and romance.

[72] Mr McGregor was cross-examined about this material. It was suggested to him that it contradicted his assertion as to the wide range of music played at Lava Ignite. Although I thought him generally a credible witness, I did not find his answers to these questions convincing. His answers ranged from saying that his customers did not find the advertising confusing, that it was all subjective, and that they catered for everyone, to a constant re-iteration of the assertion that they played all types of music every night. Later in his evidence, he started to question the website on which the promotional material to which I have referred appeared, in an apparent attempt to distance himself, and the pursuers, from that material. Despite this, it became clear, that whether or not the material was on a Lava Ignite website, it did not misrepresent the image that Lava Ignite sought to project, and it must have come either from Lava Ignite or from another of the pursuers' websites. The Dean of Faculty intervened to accept, on behalf of the pursuers, that 7/54 was from the Lava Ignite website. Mr McGregor's point seemed to be that it was wrong to describe these as "flyers". So be it. Asked whether the dress code "Dress to Impress" meant that customers should dress to impress members of the opposite sex, he said that he "would not take it that way". Asked whether sex was the message sought to be conveyed, he said he was "not sure". To the suggestion that the dress code for Fridays and Saturdays was different from the dress code ("casual") for the student nights, Wednesdays and Sundays, and that this showed that they were aiming for different markets, Mr McGregor simply replied that when you opened a new nightclub, having just spent £1 million on refurbishment, with the new literature, you tried to raise the bar and to heighten the image of the club. He denied the suggestion that the age policy of "Over 20's" was a clear statement that the club wished to attract over 20s on Fridays and Saturdays, compared with the "over 18" policy for the student nights on Wednesdays and Sundays (see 7/51): he said it was a clear message to those aged under 18 that they should not bother coming - without customers aged 18 and 19, he said, the club could not survive. Put shortly, Mr McGregor accepted that the literature said what it said, but denied that it represented the reality of what was put on at Lava Ignite.

[73] In order to demonstrate the overlap between customers at Lava Ignite and those who might be attracted to attend the club nights proposed at The Picture House, Mr McGregor instructed a member of his staff, Allan May, to visit the Picture House on the nights of 19 and 20 September 2008. These were nights when, after interim interdict had been granted, the "Adventures in Stereo" and "Beat Control" club nights were put on but without any dancing being allowed. Mr May gave evidence, which was not challenged, that on 19 September, a Friday night, he attended the Picture House between 11 pm and 2 am. He estimated that there were no more than about 400 people in the venue at any one time. A staff member told him that there had been approximately 700 admissions over the course of the evening. In the course of those three hours, he recognised about 60 individuals whom he knew to be regulars at Lava Ignite on a Friday or Saturday night. He spoke to some of them. Some wanted to see what The Picture House was like, having seen advertisements for it. He visited again the next night, Saturday 20 September, when he was told that there had been approximately 265 admissions over the course of the evening. On that night, he observed about 20 to 30 regular customers of Lava Ignite at the Picture House.

[74] In their Defences, the defenders averred that in Aberdeen they and the pursuers operate premises in close proximity to each other, that each has its own distinct clientele and that the proximity of one has no effect upon the trade of the other, catering as they do for widely different tastes. I heard evidence on this topic but I did not find it of assistance, in particular because Moshulu, which is now owned by the defenders, had previously had a reputation as an extreme venue, with fetish, goth, heavy metal, thrash metal, rubber and PVC nights. The premises were refurbished under the new management in the summer of 2008 and it was now, according to Mark Donlevy, the general manager of Liquid in Aberdeen, a more commercial venue. He thought that there had been a crossover even during its earlier period, but now there were fifty or more customers who might go sometimes to Liquid and sometimes to Moshulu. Since I did not hear the same detailed evidence about the music or ambience at Moshulu as I heard about The Picture House, I find it difficult to see what weight I should give this evidence.

[75] I have concentrated, thus far, on the evidence directly related to Lava Ignite and to the proposed club nights at The Picture House. A number of witnesses gave more general evidence about different musical genres, about the factors which might persuade different people to go to different clubs and about the extent of any overlap between the people who went to one type of club and those who went to another. I have taken into account in considering this case all the evidence given by the different witnesses and it would prolong this judgement unduly if I were to set out in any detail what each of these witnesses said. I propose, therefore, simply to mention a few points made by the witnesses.

[76] Robert Bishop, to whom I have already referred, is a management consultant. He has provided consultancy services to JBD Professional DJ Management ("JBD"), which operates as an agency for DJs. He has worked with JBD for about 17 years and has worked in the nightclub industry for about 20 years. He also DJs on a weekly basis at a venue in Livingston. His evidence was that, whereas five or more years ago DJs would operate within defined categories of music, such as "dance", "R&B", "chart", or "indie", it is now far less common for DJs to limit themselves in this way. He said that what might be described as "chart" music now encompasses a wide range of musical genres, so that artists such as the Kings of Leon, the Kaiser Chiefs and the Arctic Monkeys, formerly regarded as "indie" bands, now regularly feature at the high end of the charts. As to the term "indie" itself, that is now often avoided by DJs because it is too elastic in its meaning. In its original sense, the term "indie" referred to music released on independent music labels. He said that it was now more common to see the term "guitar pop" being used to refer to such artists - though Andy Wilson strongly disagreed with the use of the expression "guitar pop" to equate with "indie". Mr Bishop then made some comments about the management of venues and the ability of the management to establish a musical policy. Nowadays, he said, rather than using particular labels such as "chart" or "dance", it would be more common simply to focus on a particular market for which the club was intended to cater. If the club was catering to a mainstream crowd, they would be looking for a DJ to play commercial music as opposed to something specialist or obscure. But within mainstream music played at clubs, you would now often hear what might be described as "indie" music. It was Mr Bishop's view that both Lava Ignite and the proposed offerings at The Picture House were intended to operate within the mainstream market, playing music which would be readily recognised by people walking in off the street. In that sense he distinguished the proposed offering at The Picture House from certain niche clubs such as Studio 24. The music policy at Lava Ignite varies across the different rooms. The music played in the upstairs room will include a significant proportion of "guitar-based" or indie music. In the main room, which is marketed as playing chart music and commercial dance music, some of the more popular indie bands will be played on a nightly basis. Mr Bishop thought that the flyer for "Beat Control" (6/7) showed a very high potential for cross over with the music played at Lava Ignite. Most of the artists listed there would be played regularly at Lava Ignite. Further, Mr Bishop thought that it was not possible to put customers into particular pigeonholes and say that they would attend a club playing one type of music but not another. There were many reasons why people went to clubs. It would be a mistake to assume that people who regularly attended EVOL would only listen to indie music or restrict themselves to a club playing indie music. They might be looking for somewhere to end the evening with a drink. They might go because their friends go. Often it is the atmosphere within a club rather than a particular music which attracts people.

[77] Mr Marks, to whom also I have already referred, said in his Affidavit that there were many factors which determined a consumer's choice to select a particular discotheque. The type of music played and the door policy were only two of the factors. The proximity of a discotheque to where people are when they decide to go to a discotheque may be a relevant factor. People go to a discotheque to meet people of the opposite sex, and they may go with friends. That was why, in his opinion, any discotheque opening at the same time as Lava Ignite would compete directly on a like for like basis. In his second Affidavit, Mr Marks elaborated on this. He made the point that customers or potential customers had limited resources and might go out less. All discotheques were competing for the same "leisure pound".

[78] Mr Laing, on the other hand, thought that people attending a club night at The Picture House would not wish to attend Lava Ignite on Friday or Saturday nights because of the kind of club night put on there. He referred to evidence given by Rory Callaghan and Gillian Henderson (see below). On the basis of that evidence, he would summarise the Friday and Saturday nights at Lava Ignite "as offering very commercial, mainstream music (what might be termed "party tunes") to young working people (not students) who are interested primarily in drinking alcohol, dancing and socialising with members of the opposite sex ." The customers at whom the club nights at The Picture House were targeted would not wish to attend either of these nights at Lava Ignite. They would have no cultural association with the customers at Lava Ignite.

[79] Rory Callaghan used to work at Lava Ignite but now worked as Bars Manager at The Picture House. He described the music played at Lava Ignite as current and mainstream. In the upper room they were attempting to target people over 25 years old. On Fridays and Saturdays, there was active enforcement of the over 20 age restrictions on the outer door. There was also enforcement of the dress code on those nights, in contrast to the student nights on Wednesday when the clientele was markedly more casual. On Friday nights there would often be "celebrities" from television soap operas making an appearance. His perception of Lava Ignite when he worked there was that it saw itself as the busiest venue in Edinburgh, marketed so as to attract large parties and groups. The Friday and Saturday nights were specifically not targeted towards students. Sometimes there would be hen or stag parties. He contrasted the proposed offering at The Picture House. His understanding was that the Friday and Saturday nights there would operate specifically for indie and alternative music fans, with no dress code or formality. They would be targeted principally at students. There was a marked difference, he said, between indie/alternative nights offering principally music led entertainment, and traditional "nightclubs" such as Lava Ignite which offered a more mainstream musical selection together with additional entertainment, drinks promotions, etc.

[80] Gillian Henderson is the Assistant General Business Manager at The Picture House. She attended Lava Ignite on Saturday, 20 September 2008, after the interim interdict was granted, for the purpose of identifying the particular nature of the club night offered by Lava Ignite on Saturday evenings. She did not know much about the Saturday club night at Lava Ignite before then, but "was aware that its reputation was not particularly desirable as to the typical clientele who attended on Friday and Saturday nights", and that it only played very commercial, mainstream chart music which, since she was a fan of indie/alternative music, she would not have thought of attending with friends in a social capacity. She provided a playlist of the music played in the various rooms in the club (7/20). She did not believe that any of the music played that night would ever have been played at either of the two club nights at the Picture House. It is fair to say that the playlist featured only seven artists from the Main Room, six from the "R'N'B Room" and five from the "60s, 70s, 80s, 90s Room" and cannot, in my view, be regarded as a reliable snapshot of the music over the whole evening. She was allowed in wearing jeans and trainers, despite the dress code which was said to be in force, but the majority of customers were either, in the case of girls, "fairly skimpily dressed and often wearing dresses" or, in the case of males, wearing collared shirts in accordance with High Street fashion. The main room, she thought, was very dance music orientated, and the crowd was generally older than the students targeted by The Picture House. The R&B room played only R&B music, none of which would ever be played at the Picture House on club nights. In the upstairs room they were playing "party tunes" from the 60s, 70s and 80s. The clientele was substantially older than in the other rooms. There was a sign stating that, on Friday and Saturday nights, attendance in the upstairs room was only permitted for over 25s, though there were no stewards there to enforce it. She contrasted all of this with the intended club nights at The Picture House. On both nights, the music would consist entirely of indie and alternative music. The club night at The Picture House would take place in the single main room with an overhanging balcony, unlike at Lava Ignite where the premises were divided into three rooms. She thought that it was "definitely the case" that people who find a club night they like will go back there rather than try different clubs for the sake of it. She cited, as evidence of this, the successful smaller venues such as the Liquid Rooms and Cabaret Voltaire. That was because those club nights offered a particular type of music for a particular genre or subset of music fan. She did not think that any of the customers who were in Lava Ignite when she attended would want to attend the proposed club nights at The Picture House, nor would the people at whom the club nights at The Picture House were targeted want to attend the Friday and Saturday nights at Lava Ignite.

Market Research

[81] Shortly before the commencement of the proof, both parties instructed market research consultants to carry out research into whether and to what extent there was a cross over between the customers who frequented Lava Ignite and those at whom the club nights at the Picture House were targeted. The pursuers instructed a company known as RFM, and the research was carried out by Eve McGregor, who gave evidence under reference to two reports which the company had prepared (6/32 and 6/63). The defenders instructed a company known as Progressive, and the research was carried out principally by Rachel Bishop, who gave evidence under reference to a report which the company had prepared (7/55, with the raw data at 7/56). Both Ms McGregor and Ms Bishop were clearly well-qualified to carry out the research and to give such evidence. In both cases the work had been instructed at a very late stage and therefore the time allowed for its completion was short. In those circumstances, criticisms could easily be made of the methodology and execution on which the conclusions in each report were based. Nonetheless, the evidence provided some useful insights.

[82] RFM was founded in 1983 and, according to its report, has carried out work from both public and private sectors throughout the UK and Ireland for over 25 years. Ms McGregor has been a research executive with RFM since August 2007. She had previously been a teacher. At the time she carried out the research for the purpose of this case, her experience of market research extended to something under a year and a half. Nonetheless, in her evidence she exuded confidence in her abilities and in her report, and was not slow to criticise the report prepared by Progressive for the defenders.

[83] Ms McGregor explained that her brief had been to try to compare and contrast Friday nights at Lava Ignite with what was proposed for Friday night at the Picture House, and to carry out a similar exercise for Saturday nights. She had approached the task independently, with no objective of trying to achieve a certain result favourable to Luminar. Her purpose, as she explained in cross-examination, was to see if customers at Luminar would go to the Picture House, having regard to the promotional material put out by the Picture House.

[84] To achieve this, interviews using on-site questionnaires were carried out at Lava Ignite on both Friday 9 January 2009 and Saturday 10 January 2009, between 10 pm and 2:30 am. This formed the basis of RFM's first report (6/32). 150 interviews were carried out on each night at Lava Ignite under the supervision of Ms McGregor. On Friday night, 62 males and 88 females were questioned. They were asked four questions. The first (Q1) was whether they were male or female. The second (Q2) was whether they had heard of the Picture House. For the third question (mis-numbered Q4 in the report), the people interviewed were shown the flyer for "Adventures in Stereo" (in the proposed Friday night offering at the Picture House) and were asked: "Regarding [that] promotional material ... would you attend this event at The Picture House on a Friday Night?" For the fourth question (Q5), those interviewed were shown the flyer for "Beat Control" (the proposed Saturday night offering at the Picture House) and were asked a similar question: "Regarding [that] promotional material ... would you attend this event at The Picture House on a Saturday Night?" On Saturday 10 January 2009, the same exercise was carried out. This time 58 males and 92 females were questioned. The survey also included the results of interviews carried out in Aberdeen, asking the people at Liquid and Envy if they would attend Moshulu. I have already indicated that I did not find the situation in Aberdeen to be a useful comparator, and I therefore do not propose to set out the result of this part of the questionnaire.

[85] The exercise was repeated three weeks later, on Friday 30 January and Saturday 31 January. This time Q1 sought to identify and eliminate those who had previously answered questions in relation to The Picture House. As I understood the evidence, the interview only proceeded if the interviewee had not answered such questions before. 200 people (112 male and 88 female) completed the interview on the Friday. On Saturday, 180 people (65 male and 115 female) were interviewed.

[86] The results of the survey are set out in the following table:

	Fri 9/1/09	Sat 10/1/09	Fri 30/1/09	Sat 31/1/09
Total interviewees	150	150	200	180
Had heard of The Picture House	59%	71%	66%	56%
Q4: would attend The Picture House on a Friday night	33%	37%	46.5%	30%
Q5: would attend The Picture House on a Saturday night	50%	63%	64.5%	59%

It appears that, amongst those interviewed at Lava Ignite on these days, there were significant numbers who said that they would attend The Picture House on a Friday and Saturday night, in each case the greater numbers being for attending The Picture House on a Saturday night rather than a Friday. This may, or may not, reflect the difference in the advertising material and the appeal of the product advertised. What is not clear, of course, and this is inevitable with the very simple questions asked, is whether those answering in the affirmative had in mind that they would go once, to see what it was like, would go more often than that, or would go regularly in preference to Lava Ignite. Nor is it possible to say to what extent the answers were skewed by a natural desire to give a positive response to what might have been perceived (albeit mistakenly) as a promotion by The Picture House.

[87] Rachel Bishop had spent some 17 years in market research, the last 31/2 years with Progressive. The object of the research carried out by Progressive was to see how the two venues were viewed. She had seen the first report prepared on behalf of Luminar. Her methodology was very different. She and researchers under her instruction carried out 228 face-to-face on street interviews in the centre of Edinburgh, in "high footfall areas" such as Princes Street, George Street and Lothian Road, from 10am and 4pm each day between Friday, 30 January 2009 and Sunday 1 February 2009. All the respondents were between 18 and 39 years old. She considered that sample was adequate for a "quick dip", to find out the "top line" views of what people thought. Of those interviewed, 106 (46%) were male and 122 (54%) were female. As regards age breakdown, 39% were aged between 18 and 24, 27% between 25 and 29, 19% between 30 and 34 and 15% between 35 and 39. Those interviewed were asked whether they had heard of Lava Ignite and of The Picture House. There was a high degree of recognition (83%) for Lava Ignite whereas a smaller number (62%) had heard of The Picture House. 66% said that they had been to Lava Ignite whilst only 23% had been to The Picture House. There is a major difficulty readily apparent in these questions in that, up to this time, The Picture House had been only a live music venue. Question 3 attempted to elicit views on the degree of similarity or difference between the two venues. This was based primarily upon showing the interviewees "show cards", one for each venue, which showed in each case three photographic images of the venue together with two flyers advertising the club night intended to be put on by each venue on Fridays and Saturdays. In the case of Lava Ignite, the flyer for the Friday night went under the name "Passion" while that for Saturday night was called "Embrace". In the case of The Picture House, the flyers were those to which I have already referred, namely "Adventures in Stereo" for the Friday night and "Beat Control" for the Saturday night. The question is described in this way in the report: "Looking at the images and taking into account everything they know of the venues, respondents were firstly asked to consider how similar they think the venues are".

[88] I set out Q3 and the answers to it as they appear in the report:

Q3. Are the venues ...?	Abs	%
Very different to each other in their music/style/atmosphere/ clientele	109	48%
Somewhat different to each other in their music/style/atmosphere/ clientele	95	41%
The same as each other (like-for-like) in their music/style/atmosphere/ clientele	24	11%
Base	228

This part of the report was criticised in three particular respects. First, it was said that the criteria for assessing the venues were too imprecise. Secondly, the interviewees were asked to take into account everything they knew of the venues, but it was not clear to what extent they were taking into account knowledge of The Picture House as a live music venue. Thirdly, it was suggested that the methodology was weighted in favour of a finding that the venues were different. A properly weighted questionnaire would have had an equal number of questions on both sides of the centre position. The only choices were "very different", "somewhat different" and "the same ...". It would have been better to give a range of answers which might go from "very different" and "somewhat different", on the one side, to wording such as "quite similar" and "almost the same" on the other. An answer that the two venues were "somewhat different" might, had that choice been available, have been expressed as "quite similar". I think there is force in the second and third points. I am not persuaded by the first point, however, since the survey was intended to identify the rather general, and partly undefinable, impressions that go to make up how people view one place as against another.

[89] The most important question, to my mind, was Question 4. Respondents were asked to describe the venues by highlighting, from a list of words given to them by the interviewers on a show card, words or phrases that best fitted each venue. I shall not set out the entire table here. The five words or phrases most mentioned for The Picture House were "studenty", "trendy", "good drinks offers", "has good bands" and "good mix of music", in that order. For Lava Ignite the five words or phrases most mentioned were "good drinks offers", "popular", "good for dancing", "cheesy" and "people go to pull". The last two, "cheesy" and "people go to pull", had the highest rating - they were mentioned as characteristic of Lava Ignite by 49% and 44% respectively of those interviewed who expressed any opinion, whereas only 11% and 9% mentioned them in respect of The Picture House. There are, of course, difficulties in interpreting this response. The reference to "has good bands" in connection with The Picture House might be influenced by the fact that up to that point The Picture House was a live music venue only. The Picture House achieved a lower score for "good for dancing" but, again, this might be because it was known as a live music venue. Nonetheless, the responses do appear to me to indicate that Lava Ignite is viewed as a more mainstream nightclub or discotheque compared with the proposed club nights on Fridays and Saturdays at the Picture House.

Expert evidence

[90] The defenders called evidence of an expert nature from Professor Simon Frith, the Tovey Professor of Music at the University of Edinburgh. He described his academic field as the sociology of music, with a focus on the music industry. His initial research was on music and youth culture. He has since written on the history of the music industry, on music and copyright and on music policy. In addition, he spent 30 years as a music journalist, as rock critic for the Sunday Times and the Observer and as a columnist for the Scotsman. He has been chair of the judges of the Mercury Music Prize since its inception. He is currently a director of a three-year research programme on live music in the UK. Initial archive and interview research for that project has, in his words, "focused on drawing up a typology of different kinds of musical event and different models of music promotion." Part of the task is to distinguish between different sorts of performance venues in terms inter alia of characteristic audiences

[91] Prof. Frith's conclusion is summarised in Paragraph 3 of his Affidavit. In that paragraph he says the following:

"Our research ... reveals that there is a clear distinction historically and sociologically between a club that is organised as a discotheque (i.e. attracts audiences for DJs playing records for dancing) and clubs that are primarily live venues but also run club nights for dancing/listening to records (a common musical/financial strategy for contemporary music clubs; in fact it is difficult to think of any UK music club presently this is not organised in this way). Our research therefore distinguishes between dance clubs and music clubs (the term 'disco' was significant historically this is less so today when the term "club" is used so widely). Music clubs depend on a brand image in which the live music featured (and audience attracted) is reflected directly in the kinds of club nights organised. Dance clubs' brand images are primarily based on their reputation as leisure venues, for which the price of entry/drinks, design/atmosphere is just as significant as the music. In no sense do disco-based clubs and live music-based clubs compete for audiences, even on the latter's club nights. Their clientele are different and have different expectations of 'a good night out' (not least in terms of the music played)."

Prof. Frith goes on in para.6 to say this about the club scene:

"While our research has not been focused on Edinburgh in particular and I am by no means an expert on Edinburgh venues, evidence from other cities (we have focused on Glasgow and Sheffield so far) would suggest that The Picture House and Lava/Ignite are quite different sorts of venue with quite different ways of working - they offer different sorts of night out experiences for different kinds of clientele. The Picture House is the latest example of the music club (as already described), rooted in the promotion of live acts appealing to a particular kind of independent rock fan (this has been the growth area in the UK live music scene in the last decade). Lava/Ignite is part of a quite different dance club scene and there are various such disco-based venues in Edinburgh. Based on research done in other cities one would expect The Picture House to have a younger clientele than Ignite/Lava, with a much greater preponderance of students (and this would certainly reflect students' reading of Lothian Road/Tollcross pubs/clubs). In general terms this is how promoters in other cities characterise the difference between the audiences for music clubs and dance clubs, and I doubt if the proximity of the two venues has either positive or negative effects on each other's business; rather, I would suggest that they have to be understood as different businesses."

In his oral evidence, Prof. Frith emphasised again his view that the two venues would attract different clientele. His own students, he said, would go to The Picture House to dance to music they liked and to meet people with similar musical interests. He did not exclude the possibility that they would go to Lava Ignite, but they would go there, as he put it, "to get trashed". Music was one of the factors in choice of venue. There were so many variables, including music, dancing and drink, and the balance between those variables was itself important. A live music venue such as The Picture House needed to establish an identity and to preserve it, and in doing that music was probably the most important aspect. Recorded music played on club nights had to tie in with the live music played on other nights.

[92] In cross examination, Prof. Frith amplified these views, in particular, he pointed out that it was not simply the choice of music played that mattered so much as the attitude to music in the venue as a whole. He was familiar with the MAMA chain of clubs. Before preparing his Affidavit, he was told that The Picture House was a live music venue putting on club nights. His students were aware of this sort of venue. They were not necessarily in competition - if it was in competition with Lava Ignite, The Picture House would soon cease to be the sort of club it was claiming to be. Lava Ignite and The Picture House were genuinely different choices - "you don't go to The Picture House to get trashed". He accepted that they were all competing for the same night time economy, but they offered different occasions and experiences. In his experience people would not decide to go to a disco and then wonder which one to go to. In other words, they were not competing for the custom of people who had, in the abstract, decided to go out to a disco - it was more a case of them all competing for the custom of those who wanted a night out.

Discussion
[93] In para.[25] above, I indicated that, in view of my interpretation of the words used by the parties in the Non Compete Agreement, the relevance of evidence about different types of music and discotheques generally was that it enabled one to see whether there was in fact, or in the perception of people involved in the nightclub business, a range of different types or styles of club or discotheque; so that the concept of some of them competing with Lava Ignite on a like for like basis and others not was an intelligible one. In other words, whether or not my construction of that clause, in the context of the Agreement read as a whole and against the background of what parties in that line of business might reasonably have understood at the time of entering into the Agreement, made sense.

[94] Having considered the whole of the evidence I am satisfied that it does. I am satisfied that a distinction can legitimately be drawn between discotheques in terms of music, ambience and the type of clientele likely to be attracted to them. To put it more precisely, I am satisfied that those involved in the music business, and in particular in the business of putting on club nights or discotheques, would understand there to be a distinction between different styles of club nights at different venues. I do not propose to attempt any definition of that distinction and, indeed, it would be wrong to suggest that there are simply two specific types of club. From the evidence it would appear that there may be a range of types or styles of club night.

[95] In light of the way in which it was focused, it is convenient to discuss the evidence in terms of the similarities and differences between, on the one hand, the proposed Friday and Saturday night offerings at The Picture House (Adventures in Sound and Beat Control) and, on the other, the Friday and Saturday club nights at Lava Ignite, though it is important always to bear in mind that the essential question, on the issue of construction, is the more general one of whether there is or is understood to be a distinction between clubs of different types or styles. For this enquiry, the two places are simply paradigms of a more general range of venues. On the evidence, it seems to me, and I find, that there were such significant differences between The Picture House and Lava Ignite in terms of music, ambience and the clientele attracted or likely to be attracted, that it could properly be said that they did not compete on a like for like basis. They sought to project a different image, reflected in the layout of the venues, the music played, the dress code (or lack of it), and the typical age of those attending.

[96] I have referred already to the difference in the layout of the venues. I accept the evidence of Mr Laing set out at para.[51] above that the layout of the two venues was very different. The Picture House is essentially a live music venue which proposes to host a club night on Friday and Saturday. It is not set up to be a conventional night club and has none of the intensity or intimacy of Lava Ignite, which is divided into three smaller rooms each playing different music and, to some extent, catering to a different market.

[97] In terms of music played, there seems to me to be a fundamental difference between the type of music put on at EVOL, which, for this purpose, can stand as proxy for The Picture House on a Saturday night, and that put on in the three rooms at Lava Ignite. There may well be, it is true, a considerable overlap in the music played at the different venues. Some of the music played at EVOL, and some of that proposed to be played at Beat Control, might properly be classified as mainstream and would probably be played at Lava Ignite. But this does not seem to me to address the fundamental issue. I consider, in reliance in particular on the evidence of Mr Mellotte, that much of the distinction lies not in the particular choice of music, though that is important, but in the way in which it is played and presented. It is clear to me that the type of discotheque put on by Mr Mellotte during the EVOL club night at Faith on 30 January 2009, which featured in the evidence, was radically different from the type of discotheque offered on Friday and Saturday nights by the pursuers at Lava Ignite. A considerable amount of the music may have been recognisable to Mr May and Mr Bishop, but it was often mixed, looped, edited or put in sequences which not only would not have been done at Lava Ignite but would not have appealed to the main body of Lava Ignite customers.

[98] It seems to me also, on the evidence, that the clientele which The Picture House was trying to attract was fundamentally different in its core from that which would tend to frequent Lava Ignite on a Friday or Saturday night. The proposed club nights at The Picture House are designed to appeal to students, in contrast to the Friday and Saturday night discotheques at Lava Ignite which aim to attract a slightly older crowd. Despite the protestations of Mr McGregor, I am satisfied that the publicity put out for Lava Ignite represented, with reasonable accuracy, both the musical and social style of the evening and (while recognising that there might be some flexibility in application) the "door" policies of Lava Ignite in terms of dress, age and the like on a Friday and Saturday night. Indeed Lava Ignite's own publicity appeared to draw a contrast in these respects between their Friday and Saturday nights ("dress to impress") and their own "studenty" nights on Wednesdays and Sundays. Mr McGregor recognised in his evidence that different evenings were aimed at different potential customers.

[99] I, of course, readily accept the evidence from a number of witnesses that there may be a significant crossover in the customers who might go to different types of club. The evidence from the market research carried out on behalf of the pursuers appears to confirm this. Between 30% and 65% of those questioned at Lava Ignite over the four nights in which the interviews were conducted said that they would attend The Picture House on either the Friday or Saturday night, or possibly both. Allowance has to be made for those who might attend just to see what it was that was being advertised, as distinct from those to whom the club nights at The Picture House might appeal on a more regular basis. And allowance has to be made also for the possibility that the interviewees may have thought that they were being asked questions as part of a promotion of a new venue and, in such a context, may have given a positive answer, on the assumption that that is the answer which the questioner wishes to hear. Nonetheless, I am satisfied that there is a significant body of potential customers who might be attracted to different types of club night.

[100] However, the fact that there may be a significant crossover in terms of the potential customer base does not take one very far. That simply shows that there may be competition for the leisure pound. Theatres and cinemas and other night time entertainment also compete for the leisure pound. The clause does not seek to prevent such competition. What it seeks to do is to prevent the defenders competing with the pursuers' discotheque, as it was in March 2008, on a "like-for-like" basis. That raises an entirely different question from the question whether there is a crossover or whether the two venues compete for the same leisure pound.

[101] The distinction between different types of clubs or discotheques may not be capable of precise definition. But like the elephant of legal fiction, it will easily be recognised by those who attend with any regularity. The best indications of the nature of this difference were, to my mind, to be found in the evidence of Ms Bishop, who conducted the market research on behalf of the defenders, and Prof. Frith. Ms Bishop identified in the answers to Question 4 (see para. [89] above) the descriptive words or phrases which those interviewed associated with The Picture House and Lava Ignite. While the former was regarded as studenty and trendy, the latter was popular and good for dancing, but also "cheesy" and a place "where people go to pull". These are concepts which are readily understood by people who go to clubs. Neither "cheesy" nor "a place where people go to pull" featured strongly at all in respect of The Picture House. Prof. Frith sought to articulate the difference between the two types of venue in his report. What struck me most was his evidence of the behaviour of his own students, who would go to The Picture House to dance to music they liked and meet people with similar musical interests but would go to Lava Ignite, if they went at all, "to get trashed".

[102] Much of the market research evidence was hurried and little of it could be described as definitive in relation to The Picture House and Lava Ignite. But that does not actually matter since, as I have already explained, the question is whether there is perceived to be a distinction between different types of club night or discotheque rather than which type The Picture House and Lava Ignite fall into. The market research shows quite plainly that people do recognise a distinction. The same can be said of Prof. Frith's evidence. He may not have been intimately acquainted with the two venues, and his students may be categorising Lava Ignite unfairly in regarding it as a place to get trashed; but the importance of the evidence is that it reflects an understanding that there are some places where people might simply go to get trashed as opposed to other places where they might go to listen and dance to particular types of music.

[103] I am satisfied, therefore, on the evidence that there is a sufficient distinction between different types of clubs and discotheques to give content to the construction of clause 2.1 to which I have earlier arrived. In those circumstances, nothing in this part of the evidence persuades me that my construction of the clause is incorrect. On the contrary, if I had otherwise been in doubt about the construction of clause 2.1, the evidence which I have endeavoured to summarise in this part of my Opinion would have pointed me in the same direction.

[104] Because of the way in which the case was put in final submissions, I have not had to make a finding as to whether the club nights proposed to be held on Fridays and Saturdays at The Picture House would be in direct competition "on a like-for-like basis" with the discotheque held at Lava Ignite on Fridays and Saturdays. It is enough, as I have said, that some discotheques or club nights might so compete and others might not. It will be apparent, however, from my assessment of the evidence, that if I had had to make a decision on that point I would have found that the proposed club nights at The Picture House, if carried out in the manner indicated by the evidence, would not have competed on a like for like basis with Lava Ignite.

Decision
[105] For the reasons explained principally in paras.[15]-[24] above, as confirmed by my assessment of the evidence, I hold that the pursuers have failed to make good their case that the proposed club nights proposed for Friday and Saturday nights at The Picture House would put the defenders in breach of the Non Compete Agreement. In those circumstances, I shall repel the first plea in law for the pursuers, sustain the third plea in law for the defenders and assoilzie the defenders from the conclusions of the Summons.

Postscript

[106] I should mention two points arising out of this proof before answer. The first relates to the extent of the evidence produced by the parties in the context of a dispute which, as it turned out, was essentially about the construction of a clause in a contract. It is, of course, well established by the cases to which I have referred earlier in this opinion that evidence of the context in which the agreement is made may be relevant. There is a danger, however, that parties will too readily conceive that evidence of such matters is necessary before the court can reach a decision on a matter of construction, and that the court will feel constrained to go along with that because it does not know what is sought to be taken from the evidence. This is not intended as a criticism of the parties in the present case. However, it seems to me that, at least in the commercial court where preliminary and procedural hearings provide the opportunity to discuss the scope of the evidence which may be necessary to resolve the dispute, if it is sought to lead evidence of the commercial background there should be averments in the pleadings identifying the matters which it is sought to prove and to which such evidence is directed. There is no reason why this area should be immune from the ordinary rules of pleading - even in the abbreviated pleadings favoured in commercial causes it is necessary to give fair notice of any factual case sought to be made.

[107] The second point is this. In the course of cross-examining the defenders' witnesses, the Dean of Faculty asked a number of them whether they had had sight of the Affidavits lodged in process on behalf of the pursuers' witnesses, in effect their examination in chief. A number of them had seen these Affidavits, or some of them. The Dean of Faculty did not, in the event, ask the court to take this into account in assessing the credibility or reliability of the witnesses, but he said that it raised a matter of practice upon which I might wish to write. He drew to my attention the remarks of Lord Hardie in Watson v Student Loan Co. Ltd. ([2005] CSOH 134, unreported 12 October 2005) at paras.[3]-[7]. In that case evidence which had been taken on commission (from a person who had subsequently died before the proof) had been shown to other witnesses before they came to give their own evidence. Lord Hardie was critical of this. He compared the position with that of a witness being in court during the evidence of another witness, which (with certain exceptions) is not allowed in Scotland whatever may be the position elsewhere. At para.[5] Lord Hardie made these remarks:

"[5] Apart from any implications for the assessment of credibility and for the weight to be attached to the evidence of a witness who may have been influenced by having improper access to the evidence of the deceased, it seems to me that this incident raises issues of general importance for the profession in Scotland. While it is perfectly legitimate to precognosce or reprecognosce a witness in the light of evidence already led, it has never been permissible in Scotland to brief or coach a witness with a view to his altering his evidence. I would also venture to suggest that it is not appropriate for solicitors to take any action in respect of a witness that might be perceived as briefing or coaching him or that might result in the witness departing from the evidence which he would have given but for the intervention of the solicitor. While I accept that the instructing solicitor did not intend such a result when he provided Mr Young with the transcripts of the deceased's evidence, it is significant that when the matter was first raised with Mr Young he stated that he had been given the transcripts by the instructing solicitor 'for background briefing'. It was also acknowledged by Mr Connal that the actions of the solicitor may have resulted in a departure from the evidence which Mr Young would have given although it had not been the intention to influence his evidence. ..."

I accept entirely what Lord Hardie says in that passage. It represents the well-established rule in Scotland, as it has been since time immemorial and as it remains today. In particular, I fully endorse the comment that it "has never been permissible in Scotland to brief or coach a witness with a view to his altering his evidence". Such a course would undermine the basis of trust inherent in the oral evidence tradition. Nothing that I say should be taken as watering down Lord Hardie's remarks in the sort of case with which he was concerned.

[108] However, the manner in which evidence is often led in a commercial proof raises somewhat different considerations. In a commercial proof it is generally (though not invariably) my practice, and I believe that it is also generally the practice of the other commercial judges, to order the parties in advance of the proof to exchange and lodge in process witness statements or Affidavits of the witnesses whom they intend to call to give evidence. In such cases, it is usually (though not invariably) ordered that the witness statements lodged in process shall stand as the evidence in chief of each witness, subject to any necessary correction or amplification when they take the stand. In practice what happens is that the witness, upon taking the oath, will be asked in chief to identify his witness statement and, subject to any corrections which he might wish to make, to confirm its truthfulness. He may then be asked some supplementary questions and, in a documentary case, it will often be necessary to take the first witness on any particular topic through the relevant documents for purposes of identification and explanation. He will then be cross-examined and re-examined in the ordinary way. Sometimes Affidavits are ordered instead of witness statements. In such cases the same approach is followed, though there will strictly be no need for the witness to confirm the truthfulness of his Affidavit since he has already sworn to its truth in writing. This practice is justified by Rule of Court 47.12 (2)(c), the reference to Affidavits clearly covering mutatis mutandis witness statements which are adopted as true by the witness in the witness box. There is a considerable advantage in this practice. It can lead to a considerable saving in time at the proof; and it can encourage earlier settlement, by enabling parties to make a better assessment, in advance of the proof, of the relative strengths and weaknesses of their own and their opponents' case. There have been a number of questions raised from time to time about the application of the practice which has developed. There will be other problems on which rulings will be necessary. I do not think that it would be helpful in this Opinion to attempt a general summary of the practice as it as developed.

[109] The mischief identified by Lord Hardie is that a witness might, on being told what another witnesses has said, be tempted to trim his evidence to take account of that and to make his own evidence fit in more closely with it. The concern is, no doubt, that in an extreme case a witness may be tempted to change his story altogether in light of what he is shown or told about what a previous witnesses has said; but, even in a less extreme case, the concern exists that a witness will not be telling the unvarnished truth. It seems to me that the position is wholly different where a witness has already committed himself in writing to his primary evidence, whether it be by way of witness statement or Affidavit, and that evidence has been lodged in court and made available to the other party. In those circumstances, if he were to change his case he would be doing so in a transparent manner and, if asked, would have to explain why. There might be a good explanation; but the strength or weakness of the explanation can be exposed by capable cross-examination. That is quite a different situation from one in which the alteration in the witness' evidence is not known to the opposite party or to the court and therefore cannot be tested by cross-examination. In a case where witness statements or Affidavits are to be used, it seems to me to be helpful to the fair and efficient disposal of the case that witnesses who have already lodged statements should be shown those of the other witnesses who cover the same areas. Where this is done, supplementary statements are often produced, either narrowing the issues or showing the difference to be more acute. The use of witness statements and Affidavits is a deliberate move away from "trial by ambush" to a situation where witnesses give their evidence having had an opportunity to consider the points made against them and the evidence given or to be given by others. To my mind the truth is more likely to be discovered in this way than if a witness is required to respond on the spot, and without any opportunity of considering the matter, to a suggested version of the facts which he has not even contemplated as a possibility.

[110] I should emphasise that the above comments apply to a case where a witness has already given his own statement or Affidavit and this has been exchanged with the other side and lodged in process. The orders normally made by the court in commercial causes are for an exchange of witness statements or Affidavits in this way, rather than their sequential intimation. In the present case for a number of reasons there was a piecemeal proffering of affidavits, which meant that some witnesses may have seen the other side's evidence before committing themselves to their version of events. This is undesirable, though I have no reason to think that in the present case there was any intent to depart from good practice or that it affected the evidence given.