Summary

Preliminary questions referred to the ECJ: whether Community law conferred on the tenant of licensed premises the right as against his landlord not to be subjected to a beer tie which, together with other such ties, infringed Art.85 EC Treaty, and assuming that the tenant had been damaged by actions taken under the agreement by the landlord, whether the national court was obliged as a matter of Community law to award damages to the injured party, notwithstanding their own rules as to the enforceability of illegal agreements as between the parties to them. * Leave to appeal to the House of Lords refused.

Facts

Combined hearing of three appeals, Crehan (see Courage Ltd v Crehan (1998) EGCS 171), Langton and Byrne (see Byrne v Inntrepreneur Beer Supply Co. Ltd (1999)) and two applications for permission to appeal (Smith and McCaughey (see Walker Cain v McCaughey (1999)). All five concerned the validity of beer ties, under which the tenant of a public house was required by the terms of his lease to purchase all or most of the beer required for sale in the premises from the landlord or a nominated brewer at prices prescribed by the supplier. Byrne raised questions as to the proper construction and application of the block exemption granted by the European Commission in respect of exclusive purchasing agreements which specifically included such ties and the court's findings are reported separately at Byrne v Inntrepreneur Beer Supply Co. Ltd (1999). In each of the other cases the tenant complained that the supplier had sold beer to publicans who were not subject to a beer tie at substantially lower prices than those charged to tenants who were. They claimed to be entitled so to do because either the tie or the events leading up to its imposition were said to amount to concerted practices, constituted infringements of Art.85 (now Art.81) EC Treaty, or because the higher price charged to the tied tenant, when compared with those charged to an untied tenant was a breach of a term to be implied in the lease to the tied tenant. There were hundreds of pending cases or appeals in which similar issues arose. The issues were summarised as follows. (i) Whether the beer ties contained in the leases to tied tenants were prohibited by Art.85 ("the co-contractor point"). (ii) Whether the arrangements between a brewer and the landlord of tied houses, as exemplified by the Beer Procurement Agreement, were prohibited by Art.85 ("the concerted practices point"). (iii) If the answer to either of those questions was in the affirmative, whether the tenant was entitled to a directly enforceable right under Community law. (iv) If the tenant was entitled to such a right did he, under English law, have a pecuniary remedy for its infringement for either damages or restitution. (v) If the tenant did have such a right but English law afforded him no such remedy, whether the principle of English law which denied it, for example, illegality, was displaced or superseded by the requirement of Community law that direct effect be given to the right. (vi) Whether any term was to be implied in any of the leases as to prices at which beer was to be supplied to a tied tenant and others. (vii) Whether a tenant could set-off any liability to him arising from the application of Art.85, or breach of the implied term against his liability for rent due under his lease. (viii) Whether any, and if so which, points of Community law should be referred to the ECJ under Art.177. (ix) Whether the block exemption afforded by Reg.1984/83 applied to the tie in Byrne (dealt with in Byrne, supra).

Held

(1) The Court of Appeal had ruled that Art.85(1) was designed to protect third party competitors and not parties to the prohibited agreement (Gibbs Mew plc v Gemmell (1999) 01 EG 117. While the English courts had not been prepared to give parties to such agreements any remedy in damages, no case had been cited to the court in which the ECJ had ruled either way. Neither did the ruling in BRT v SABAM (1974) ECR 51 (cited in Delimitis v Henninger Brau AG C-234/89 (1991) ECR 1-935) amount to an ECJ ruling that a party to an agreement which infringed Art.85 was entitled to sue the other party for damages. However, there was a policy argument in favour of accepting that a party to a prohibited agreement had a right to sue for damages. (2) The court was minded to refer to the ECJ the question whether, assuming that a party to a prohibited agreement might be someone who was given rights against the other party by virtue of Art.85 which were protected under Community law, and assuming that such a party had been damaged by actions taken under the agreement by the other party, the national court was obliged as a matter of Community law to award damages to the injured party. (3) Whether or not a particular agreement or concerted practice existed and was prohibited under Art.85 would turn on the facts of the particular case. In order to establish a case on concerted practice, the tenant needed to establish four elements: (i) that there was a concerted practice between the landlord and the brewers; (ii) that this concerted practice might affect trade between Member States; (iii) that the practice had as either its object or its effect the prevention, restriction or distortion of competition in the common market; and (iv) that he had been damaged thereby. In so far as the case for Mr Crehan and Mr Smith was based on concerted practices it ought to be dismissed purely because it lacked any appropriate factual substance. (4) No term could be implied in the lease as to the price at which beer should be sold for the following reasons. (a) Any implied term would be contrary to the express obligation of the tenant to purchase at the list price. (b) It would not be reasonable or necessary to imply such a term. (c) In the circumstances of the trade, it would be the negation of a price list common to all tied houses that the price to be charged to each should be infinitely variable. (5) Unless and until the ECJ determined that Art.85 conferred on the tenants a right to be directly enforced by the national courts, with remedies which included a pecuniary award, the tenants could have no monetary cross-claim against the claims made against them for rent or the price of beer or other goods sold and delivered. (6) If the tie was illegal and void because it infringed Art.85 it did not follow that the individual contracts for the supply of the beer and other products entered into pursuant to the tie were likewise illegal and void. (7) The claim for a legal set-off proceeded from the premise that the contracts for the supply of beer were illegal and void. Therefore, the price paid was recoverable as paid for a consideration which had wholly failed so that there was a restitutionary remedy for that reason in that amount. The court did not accept the claim for the following reasons. (i) The assumption on which it was bound to approach this part of the case was that the supply contracts were valid and therefore the claim for a restitutionary remedy would fail. (ii) The argument that the sum prima facie recoverable was the gross price was a triumph of form over substance. (8) No equitable set-off was available. Apart from authority, the court considered the decision in Gibbs Mew (supra) to be right. The connection between the Art.85 claim and the claim for rent was too tenuous. Even if the ECJ were to conclude that Art.85 conferred on a tenant of tied premises a right for the breach of which he was entitled to damages from his landlord, that cross-claim could not go to reduce or extinguish the tenant's liability to his landlord in respect of the rent for the tied premises.