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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Enterprise Inns Plc v The Forest Hill Tavern Public House Ltd & Ors [2010] EWHC 2368 (Ch) (21 October 2010) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2010/2368.html Cite as: [2010] EWHC 2639 (Ch), [2010] EWHC 2368 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/10/2010

The Chancellor:

Introduction
1. The Ship and The Forest Hill Tavern are tied pubs in South East London. The landlord and tenant are, respectively, Unique Pub Properties Ltd or its parent company, Enterprise Inns plc and Mr and Mrs Albrecht or their company, the Forest Hill Tavern Public House Ltd. Where it is not the landlord, that is in the case of The Ship, Enterprise Inns is the nominated supplier and where Mr and Mrs Albrecht are not the tenants, that is in the case of the Forest Hill Tavern, they are guarantors of the tenant's covenants.
2. In respectively February and March 2009 the landlord commenced proceedings in the Lambeth County Court for forfeiture of the lease of the Ship and the Forest Hill Tavern and payment of the rent and other sums alleged to be due to it by the tenant thereunder. In due course the proceedings were transferred to the High Court and defences and counterclaims were served by the respective tenant/defendant. In each case the tenant averred that:

"..on a true and proper interpretation of [the relevant provision in the lease] and/or by virtue of implied terms contained [therein]:

(a) the prices set by the claimant in relation to Tied Products will at all times be set in good faith at a level reasonably competitive with prices for the same products on the open market;

(b) alternatively, the said prices will at all times be set in good faith at a level which, when combined with the rent on the Premises, gives an overall figure for 'dry' and 'wet' rent that is reasonably competitive with the combined rent and prices paid for equivalent products by un-tied public houses;

(c) in any event the [tenant]'s right [under the relevant provision] to buy out of the tie is triggered in circumstances in which the [landlord] is unable or unwilling to supply Tied Products at prices which accord with the terms of trading."

The defences went on to allege breaches of those terms and to claim damages, set-off and/or restitution.

3. The landlord considered that, in the light of the decision of the Court of Appeal (Morritt, Schiemann and Mance LJJ) in Courage v Crehan [1999] 2 EGLR 145 ("Crehan"), those contentions were not maintainable. It applied for orders under CPR Part 3.4(2)(a) and/or CPR Part 24.2 striking out or dismissing those allegations and others dependent on them. Those applications came before Master Moncaster. The evidence included a witness statement of Mr Albrecht to which he exhibited the report of the House of Commons Business and Enterprise Select Committee ordered to be printed on 21st April 2009 entitled "Pub Companies". The Master acceded to the application in the case of The Ship but not in the case of The Forest Hill Tavern. In the case of the former but not the latter he ordered that the relevant pleadings be struck out. He gave permission to appeal to the losing party in each case. Thus the issues for my determination are whether the Master was right to strike out the defence in the case of The Ship but not in the case of The Forest Hill Tavern. Before I consider those issues it is necessary to set out the relevant terms of the lease and other relevant documents in the case of The Ship and The Forest Hill Tavern, explain the relevant issue and conclusion of the Court of Appeal in Crehan and examine the grounds of the Master's decision.
The Ship
4. The initial lease was made on 9th March 1999 and was for a term of 20 years from 8th August 1995. A Deed to Extend Tie was made on 20th September 2000 by the then landlord and tenant. It substituted new trading terms for those contained in the lease and extended the term by ten years. Neither the lease nor the extension was granted for a premium. The initial rent was £32,000 per annum subject to an upward only quinquennial rent review and is now £38,000 per annum. Mr and Mrs Albrecht are the successors in title to the original tenant.
5. The Terms of Trading substituted by the Deed to Extend contain the following material provisions:

TERMS OF TRADING

1. In this Schedule (and elsewhere in this Agreement):-

(1) "the Appendices" means the Appendices to this Schedule and reference to an "Appendix" is a reference to one of the appendices

(2) "Specified Beers" means the types of beer set out in Appendix 1…(and which are represented by the brands or denominations of beers stated in the Company's Price List)

(3) "Specified Ciders" means the types of cider set out in Appendix 2…(and which are represented by the brands or denominations of cider stated in the Company's Price List)

[(4) and (5) define unspecified beers and ciders as those which are not so specified]

(6) "Company's Price List" means the price list from time to time of the Company for the drinks which it offers to supply to purchasers at the Tenant's level of distribution the current version of which is annexed to this Agreement

2.

(1) Subject to the provisions of this Schedule the Tenant shall purchase all Specified Beers and Specified Ciders that he requires for sale in the Property only from the Company

(2) The Company may as often as it wishes:

(a) add to the list of brands or denominations representing the types of beer and cider set out in the Appendices and/or

(b) substitute a brand or denomination for a previous one listed and/or

(c) delete any brand or denomination listed

(3) The Company will notify the Tenant of any change in the Company's Price List by issuing a new Price List or by an alternative fair and reasonable method

[Paras 3 to 7 impose the tie and ancillary provisions]

8.

(1)The Company will use its best endeavours to ensure the supply to the Tenant at the prices in the Company's Price List of such quantities of Specified Beers and Specified Ciders

(a) as he may require and be obliged to purchase from the Company or the Nominees under this Schedule

(b) that he is ready and able to pay for

(2) If the Company at any time fails to ensure the supply of such Specified Beers and/or Specified Cider for a period of fourteen days the Company will on the Tenant's application release him from his obligations under this Schedule to the extent and for so long as is necessary having regard to such failure

9.

(1) Subject to Sub-paragraph (3) the Company may at any time give notice to the Tenant that supplies of some and/or all beers and/or ciders under this Schedule will in future (or for a specified period) be supplied by Nominees appointed by the Company and while this appointment subsists:-

(a) references to the Company in paragraphs 1 to 7 inclusive of this schedule shall be construed as references to those Nominees

(b) notices to be given by or to the Company shall be given by or to those Nominees

(c) references to the Company's Price List shall be construed as references to the price list of those Nominees

(d) the obligations of the Tenant under this Schedule shall be for the joint and several benefit of the Company and the Nominees

(2) At the date of this Agreement (and until the tenant is otherwise notified) the Nominees are Supplyline Services Limited [now Enterprise Inns plc]

[(3)..]

6. Appendix 1 specifies beers by type such as five varieties of ale, two of stout, three of lager and low or no alcohol beer. Appendix 2 specifies "cider" and "perry". No price list was annexed to the original lease or to the Deed to Extend. But by the time of the execution of the latter there must have been a current price list in circulation. I did not understand the contrary to be asserted.
The Forest Hill Tavern
7. The lease was made on 1st June 2006 and grants a five year term from 27th March 2006 at an initial rent of £20,000 per annum. No premium was payable. The rent is reviewable upward only annually by reference to the RPI index and in either direction quinquennially by reference to market value. The tenant has decided not to exercise its right to renew the lease. Accordingly it will expire in June 2011. Clause 26 required the tenant to perform and observe the trading obligations set out in Schedule 4 thereto. Clause 45 entitled Definitions and Interpretation contained the following, among other, definitions:

"Our Price List" means our current price list (or the current price list of any of our Nominated Suppliers) which we update from time to time.

"Specified Beers" means all beer drinks of types represented by the brands set out in Our Price List.

There was no Nominated Supplier. That part was played by Enterprise Inns, though not appointed as such.

8. Schedule 4 is headed "Trading Obligations". It contains the following material terms:

"1.1 In referring to our obligations to supply and your obligations to purchase from us, it is understood that we may choose to use one or more third party suppliers in relation to that supply and we shall refer to this/these supplier(s) as our "Nominated Supplier". Your restrictions and obligations in this Schedule apply to either a supply by us or by our Nominated Supplier.

[1.2,

1.3]

2 Purchase from us

2.1 You must buy from us all Specified Drinks (whether in draught form or packaged) that you wish to sell as part of the Business

2.2 You must not bring onto the premises any Specified Drinks that have not been supplied by us

2.3 The terms and conditions relating to our supply and your purchase of any goods (including Specified Drinks) shall be our standard terms and conditions of supply at that time

2.4 We have supplied you with the current version of Our Price List prior to you entering into this lease and we will provide you with details of updates and changes from time to time

[3...]

4 Supply by us

4.1 We will use all reasonable endeavours to supply or procure the supply to you of the Specified Drinks that you require for the Business on the terms and conditions set out in this schedule

4.2 If we are unable to supply you with Specified Drinks that you require for an unreasonable period of time, subject to you notifying us...you will be permitted to purchase the products that we are unable to supply from another supplier, but only until we are able to provide those products again

9. The terms and conditions referred to as set out in the schedule are headed "Enterprise's Terms and Conditions of Supply to Tenants". Paragraph 1 provides that they "should be read in conjunction with the Company's price lists and shall be deemed to be part thereof". They provide, inter alia:

5 Prices

(a) The prices charged for goods will be those ruling on the date of delivery

(b) Prices shall be subject to alteration at any time without notice upon any changes of rate of duty, currency exchanges, increased costs or amended prices from its suppliers and, in the event of any change, orders received but unexecuted at the date of the change will only be executed at the revised prices applicable at the time of delivery

c) All prices for goods are exclusive of Value Added Tax, unless otherwise stated

(d) Value Added Tax will be charged at the rate ruling at the date of delivery

(e) The prices of goods shall be inclusive of carriage...

21 Amendment to Terms

The Company reserves the right to alter or amend these Terms and Conditions of Trade for the Company's goods generally or for any particular class of Goods or Customer. The Company will use its reasonable endeavours to give at least one month's notice of alteration or amendment

10. The relevant price list current at the time the Forest Hill Tavern lease was executed is headed, inter alia, "Enterprise Inns 2006 Licensee Price List, All Prices Effective on Deliveries from 20th February 2006". It sets out in columns the brand or description of the lager or ale, the alcohol by volume, size and Enterprise selling price, for example under keg ale it states:

Newcastle Exhibition	4.3%	22g	£177.63
Whitbread Best Bitter	3.3%	10g	£76.57

Crehan
11. This judgment dealt with three appeals and two applications for permission to appeal. They had been selected for a joint hearing in order to deal as comprehensively as possible with the issues arising in one or more of the hundreds of then pending actions or appeals concerning the validity of 'beer ties'. Of the nine issues covered by the judgment the sixth was

"Is any term to be implied in any of the leases as to prices at which beer was to be supplied to a tied tenant and others?"

As the Court of Appeal noted (p. 153F)

"The suggested implication takes three forms; first, that the list prices charged to tied tenants should be reasonable; second, that the margin of the list price charged to tied tenants over the price actually charged to untied tenants should not be maintained at an unreasonable level so as to render the tied tenant's business uncompetitive; third, that such margin should not be permitted to exceed the value of any discounted rent for tied premises as opposed to free premises."

12. As Master Moncaster observed in relation to The Ship (paragraph 12) not only was the Deed to Extend the Tie executed only 18 months after the Court of Appeal decision but the Terms of Trading contained therein are "virtually identical" to those contained in the Crehan and Langton leases considered by the Court of Appeal and set out on pages 152L to 153D. After considering the submissions made for the tenants in support of such implications the Court of Appeal rejected each of them for three reasons which I should quote in full.
13. The first reason was as follows:

"...the obligation of the tenant is to purchase at the list price. It is not a case in which there is no provision or agreement as to the price. So long as the list specifies a price it is binding. If the list is to be produced by the supplier it is still binding so long only as the list sets out the prices at which the supplier is genuinely prepared to sell the products specified in it to all who wish to buy them. May & Butcher v R [1934] 2 KB 17, 21; Esso Petroleum Co.Ltd v Harper's Garage (Stourport) Ltd [1966] 2 QB 514, 573 per Diplock LJ. Thus it would be contrary to this express term to imply a term in any of the three variations advanced by the tenant."

14. The second reason was:

"...we do not consider that it would be reasonable, let alone necessary, to make any such implications. As we have already observed, it should not be assumed, given the commercial interests of the landlords and their nominated suppliers, that either of them will operate the provisions of the lease or fix prices unreasonably. Traditionally the landlord's return consists of the rent for the premises and the profit margin on the beer he supplies. In the case of a tied house such profit margin, known conventionally as the wet rent, is higher, because of the lack of discount, than that obtained from the untied tenant. As we have already pointed out the higher wet rent is compensated for by the traditionally lower dry rent for the premises charged to the tied, as opposed to the untied, tenant. If the landlord unduly maximises the wet rent he will not only jeopardise his prospects of recovering the dry rent but he will thereby run the risk that the open market dry rent to be ascertained at the next rent review will be correspondingly affected. There were no such circumstances in Shell (UK) Ltd v Lostock Garage Ltd [1976] 1 WLR 1187. The comments of Bridge LJ were directed to the case of a supplier alone who was not also the landlord of tied premises."

15. The third reason was:

"...given that the dry rent for each pub is individual to that pub what in any given case is reasonable, competitive or equivalent to the discounted rent for those premises would be different in each individual case and from time to time. It would be the negation of a price list common to all tied houses that the price to be charged to each should be so, infinitely, variable."

16. It is necessary to note two further points arising from the decision of the Court of Appeal in relation to the implication of terms. First, the Court considered that the implications for which the tenants contended would not be possible in cases in which the landlord was also the supplier (page 154F). Second, although the terms of the leases in the cases of Smith and McCaughey were different that did not lead to a different conclusion because:

"The basic framework of the tie is the same, though, in the case of Smith, without the nominee supplier, and it is that framework which in our view renders the suggested implications impermissible."

The judgment of Master Moncaster
17. The Master dealt with The Ship and The Forest Hill Tavern separately. In the case of The Ship (paragraphs 12 to 15) he set out the relevant Terms of Trading contained in the Deed to Extend the Tie. He noted that they were 'virtually' or 'substantially' identical to those of the Crehan and Langton leases considered in Crehan. He could see no answer to the submission for the landlords that, as in Crehan, the implication for which the tenant contended was contrary to the express terms requiring the tenant to buy all his requirements of beer by reference to the landlord's price list. He accepted as technically correct the submission that the judgment of the Court of Appeal in Crehan was not binding in relation to other leases but concluded that it would be wholly unrealistic not to apply the Court of Appeal's conclusions to a lease in substantially identical form executed so soon after the Court of Appeal's decision. Accordingly, the Master's conclusion in relation to The Ship in respect of all three suggested implications was based exclusively on the first ground for rejecting the implications sought in Crehan.
18. The Master dealt with the Forest Hill Tavern in paragraphs 16 to 21. He noted that the lease was not entered into until 2006 and was not in quite the same form as the leases in Crehan. He concluded that neither the terms of the lease nor the standard conditions required the tenant to buy the beer he required "at the list price". Consequently he considered that the first reason given for rejecting the alleged implication in Crehan, namely inconsistency with an express term, did not apply. Similarly he considered that the third reason given in Crehan could not apply because it predicated a price list common to all tied pubs and the evidence in the instant case showed that there never was one.
19. The Master noted that the second reason given in Crehan did not depend on the specific terms of the lease but was based on expert economic evidence of trading conditions at the material time, namely the early 1990s. He recognised that the tenant relied on a mass of material in the Select Committee Report as indicating that evidence must exist showing that relevant trading conditions were different in 2006. The Master concluded that the resolution of that issue would require a factual enquiry inconsistent with an order to strike out a pleading or for summary judgment.
20. In paragraphs 22 and 23 the Master considered whether the fact that there could be a nominated supplier in the case of The Forest Hill Tavern made any difference. In the case of The Ship there was and this would have been an additional reason for rejecting the implications sought. In the case of The Forest Hill Tavern he did not think that this consideration affected the outcome. He could not see why the fact that the implication would not bind the nominated supplier if and when appointed should preclude any implication as long as the landlord was himself the supplier. For all these reasons he refused to strike out the relevant parts of the defence and counterclaim in the case of the Forest Hill Tavern.
Submissions and Conclusions
General Considerations
21. The appeals were opened by counsel for the landlords. He sought to challenge the Master's conclusions in the case of The Forest Hill Tavern but to uphold them in the case of The Ship. Counsel for the tenants did the opposite. There are points common to both which it is convenient to consider at the outset. They are (1) the status of the decision of the Court of Appeal in Crehan, (2) whether the test for the implication of terms has changed since Crehan was decided and (3) whether there is any evidence that the market or commercial interests of landlord and tenant have changed since then. I will consider them in that order.
22. Counsel for the tenants submitted that the decision of the Court of Appeal in Crehan was not conclusive of the issue in this case. He referred me to Lewison on the Interpretation of Contracts 4^th Ed paragraphs 4.07 and 4.11. Counsel for the landlords did not submit that it was and the Master did not treat it as conclusive. But it is necessary to have in mind the extent of its relevance. Crehan did not involve any of the parties to this case. Consequently it cannot have any binding effect as a judgment. So far as these cases are concerned it is a judgment of the Court of Appeal on the proper interpretation of the contracts in those cases. Plainly such a decision cannot be conclusive as to the interpretation of other contracts made at different times, between different parties and in different circumstances even though both are questions of law. But a decision on the interpretation of a contract may be persuasive as to the interpretation of another contract using similar language by parties involved in a similar trade and in similar circumstances, particularly where knowledge of the previous decision may be imputed to the parties. Accordingly, I do not accept the suggestion that the Master was wrong to have taken account of the decision of the Court of Appeal in Crehan to the extent that he did. Whether, having taken account of it, his decision on the interpretation of the contracts in these cases is correct is a different question.
23. The second general issue arises from the speech of Lord Hoffmann in A-G of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 paras 19-27. After referring to the speeches of Lord Pearson in Trollope & Colls Ltd v North West Regional Hospital Board [1973] 1 WLR 601, 609 and of Lord Steyn in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459 Lord Hoffmann said (paragraph 21):

"It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean. It will be noticed from Lord Pearson's speech that this question can be reformulated in various ways which a court may find helpful in providing an answer – the implied term must "go without saying", it must be "necessary to give business efficacy to the contract" and so on – but these are not in the Board's opinion to be treated as different or additional tests. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?"

24. Lord Hoffmann then drew attention to various dangers inherent in applying such tests and concluded in paragraphs 26 and 27:

"26. In BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 282-283 Lord Simon of Glaisdale, giving the advice of the majority of the Board, said that it was "not … necessary to review exhaustively the authorities on the implication of a term in a contract" but that the following conditions ("which may overlap") must be satisfied:

"(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying' (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract".

27. The Board considers that this list is best regarded, not as series of independent tests which must each be surmounted, but rather as a collection of different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means, or in which they have explained why they did not think that it did so. The Board has already discussed the significance of "necessary to give business efficacy" and "goes without saying". As for the other formulations, the fact that the proposed implied term would be inequitable or unreasonable, or contradict what the parties have expressly said, or is incapable of clear expression, are all good reasons for saying that a reasonable man would not have understood that to be what the instrument meant."

25. Plainly the Privy Council was not rejecting the significance of an express term inconsistent with the suggested implication as indicating that a reasonable man would not have understood the instrument to mean what is claimed. The propositions enunciated by Lord Hoffmann do not, in my judgment, undermine the conclusion of the Court of Appeal in Crehan. As Lord Hoffmann recognised the five conditions identified by Lord Simon of Glaisdale in BP Refinery (Westport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 282 are different ways of testing whether the term sought to be implied would express what the reasonable man would understand the contract to mean.
26. Allied to this point counsel for the tenants submitted, by reference to three recent decisions, that the Court is now readier to imply a restriction on the right of one party to a contract to fix the price payable by the other or to imply a term apparently inconsistent with an express term. The three cases are Paragon Finance plc v Nash [2002] 1 WLR 685, Esso Petroleum Co. Ltd v Addison [2003] EWHC 1730 and JDS Corporation Pte Ltd v Al Waha Capital PJSC [2009] EWHC 3376. In Paragon Finance plc v Nash a mortgagor contended that the variable interest rate provision in his mortgage became an extortionate bargain within s.138 Consumer Credit Act 1974 when it was operated so as to increase the rate applicable to his mortgages. The defence was struck out and the appeal against the judge's order dismissed. The Court of Appeal considered that the power to vary the rate of interest payable by the mortgagor was subject to an implied requirement that such power would not be exercised "dishonestly, for an improper purpose, capriciously or arbitrarily" or unreasonably in the Wednesbury sense but that there was no reasonable prospect of a breach of that term being proved at the trial.
27. In Esso Petroleum Co. Ltd v Addison the Addisons were licensees of a filling station owned by Esso. The terms of their licence entitled Esso to alter the terms relating to the price to be charged by the Addisons to the buyer of their fuel. Moore-Bick J referred to the reasoning of the Court of Appeal in Paragon Finance plc v Nash and continued:

"In my view the present licence agreement is subject to a similar implied term. In general people enter into contracts on the understanding that the other party will act honestly and rationally (albeit in his own interests) rather than arbitrarily or capriciously, but whether it is necessary to imply a term to that effect is likely to depend on the nature of the contract and the circumstances in which it is made. Clause 6 gave Esso a wide power to vary the terms of the licensee's remuneration and to that extent the licensee was at Esso's mercy. I do not think it is an answer to say that the licensee could give up his licence if he did not like the new arrangements. Although it appears that Esso did in practice permit licensees to terminate their licences before the end of their term at fairly short notice, the agreement does not give them an express right to do so. More importantly, however, the licence was intended to run for three years and provide an opportunity to develop a business over that period. This requires a degree of mutual co-operation that is inconsistent with one party's having the right to impose terms on the other in an arbitrary manner. I am unable to accept, therefore, that if the question had been raised at the time they entered into the agreement either party would have thought for a moment that Esso was entitled to act arbitrarily, capriciously or irrationally in exercising its rights to vary the margin, shop fees or operating cost allowance."

28. In JDS Corporation Pte Ltd v Al Waha Capital PJSC Mr Jules Sher QC, sitting as a deputy judge of the Chancery Division, was concerned with a claim to the return of a deposit paid as part of a 'lock-out' agreement and expressed to be non-refundable. He concluded by reference to the speech of Lord Hoffmann in A-G of Belize v Belize Telecom Ltd and the detailed terms of the agreement and the circumstances in which it was made that the deposit was refundable if it was the seller who pulled out.
29. Whether or not those cases show that the Court is now readier to imply a restriction on the right of one party to a contract to fix the price payable by the other or to make an implication apparently inconsistent with an express term is not in my view material. The question is and remains whether there is a real prospect of the court doing so in these cases. That depends on the terms and circumstances surrounding the making of these contracts and whether the suggested implied term would spell out what the agreement would reasonably be understood to mean. The terms sought to be implied in this case and in Crehan are quite different to those implied in Paragon Finance plc v Nash and Esso Petroleum Co. Ltd v Addison.
30. I pass then to the third general issue previously referred to, namely whether there is any evidence that the market or commercial interests of landlord and tenant have changed since the decision in Crehan. This relates in particular to the passages on pp. 153E-F and 154D. In those passages the Court of Appeal referred to the facts that tied tenants were charged more for beer than untied tenants and that the mutual commercial interests of landlord and tenant precluded unfair pricing. Counsel for the tenants relied on the Select Committee Report as demonstrating that there is evidence sufficient to show a real prospect of establishing the contrary. The report does nothing to undermine the first of the conclusions in Crehan, namely that tied tenants are charged more than untied tenants, indeed that is the basis for the wide-ranging discontent expressed to the Select Committee by licensees.
31. In relation to the second point, paragraphs 83 to 92 set out the Select Committees conclusions on a number of contentious issues. They expressed the following opinions:

(1) "The effect of the beer tie on the basic rent is that both pubco and lessee take a lower income. However, while the decrease in the lessee's income is absolute, the pubco has [£x] from that part of the discount on its barrelage it has not passed on to the lessee. The reduction in rent is accompanied by a reduction in the lessee's profit but an increase in the pubco's overall profit."

(2) "If the interests of the pubcos operating a tied system and their lessees were truly aligned, one would expect that pubcos would want a system in which the combination of rental costs and beer costs enabled their lessees to supply beer at a price which was competitive with other pubs. This does not seem to be the case."

But, as counsel for the landlord pointed out, those opinions were expressed by reference to trading conditions in the period November 2008 to April 2009. The conditions relevant to the leases in this case are those prevailing in the periods 2000 in the case of The Ship and 2006 in relation to The Forest Hill Tavern.

32. In my judgment the opinions of the Select Committee demonstrate, as one might have suspected anyway, that it cannot be assumed, in the absence of evidence, that market conditions remain the same from one relevant period to another. The relevant period in Crehan was 1991-1992. Further, the Court of Appeal had the benefit of expert evidence. I cannot, and do not, assume that market conditions in 2000 or 2006 were the same as those prevailing in 1991 to 1992. Accordingly, if and insofar as the decision of the Court of Appeal in Crehan depended on facts related to market conditions at the material time it is irrelevant to any similar conclusion I have to reach. In my judgment the second reason given by the Court of Appeal in Crehan, quoted in paragraph 14 above, falls into that category. I cannot make any assumption as to the commercial interests of landlord and tenant or their effect on the landlord's ability to fix prices.
The Ship
33. I turn then to the individual appeals. In the case of The Ship it is clear from the evidence that at the time the Deed to Extend the Tie was executed in 2000 there was a price list within the definition of "Company's Price List" contained in paragraph 1(6) of the Terms of Trading. In those circumstances the provisions of paragraph 2 can only mean that the tenant is to buy his requirements of beer from the landlord at the prices stated in that list. That construction is amply supported by the terms of paragraph 8(1). That such a term is binding on the parties was well established before Crehan, by May & Butcher v King [1934] 2 KB 17, 21 and Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1966] 2 QB 514, 573. It would be inconsistent with that provision that the price to be charged should be "reasonably competitive" with either open market prices or, when combined with the dry rent, with the overall dry and wet rent payable by untied houses. It seems to me to be clear that neither suggested implication could be reasonably understood to have expressed what the Deed to Extend the Tie would in 2000 be reasonably understood to mean. In my view the contrary argument has no real prospect of success and it is unnecessary, even if permissible, to compare the Terms of Trading in this case with those considered by the Court of Appeal in Crehan. That is sufficient to determine the appeal in the case of The Ship whether or not there could have been any such implication in relation to the nominated supplier, now Enterprise Inns.
The Forest Hill Tavern
34. In this case the Master did not consider that there was any obligation on the tenant to buy the beer he required at any specified price. He said [paragraph 17]:

"The obligation of the landlord to use its best endeavours to supply the drinks required by the tenant does not specify any price at which the drinks were to be supplied. The obligation is merely to supply them "on the terms and conditions specified in this schedule". The correlative obligation on the tenant to buy the drinks is therefore not one to buy at a price specified in the landlord's obligation and you have to look elsewhere to find any price at which the drinks are to be supplied and purchased. Further the Forest Hill Tavern definition of "our Price List" is simply "our current price list (or the current price list of any of our Nominated Suppliers) which we update from time to time". This definition is in the most general terms and not tied down as in the Crehan lease to the price list for drinks which they supply to purchasers at the tenant's level of distribution."

35. I am unable to share the views of the Master as to the proper interpretation of the Trading Obligations for substantially the reasons advanced by Counsel for the landlord. They must be read as a whole, including the Terms and Conditions of Supply to Tenants. To my mind it is clear from the definitions, quoted in paragraph 7 above, of "Our Price List" and its form, as shown in paragraph 10 above, that the price list both identified the products subject to the tie and the price payable by the tenant. It is true that Paragraph 2 of the Trading Obligations does not itself expressly link the price payable by the tenant in performance of his obligation under paragraph 2.1 to the price shown on the price list. This omission is more apparent than real. If at the time the Trading Obligations were adopted the question had arisen at what price must the tenant buy the beer he wanted, in my view, the obvious answer would have been by reference to the then current price list. The passages from the speech of Lord Hoffmann in A-G of Belize v Belize Telecom Ltd which I have already quoted are particularly apt in that context. But if there were any doubt the incorporation of the Standard Terms and with them the price list for the time being would be more than enough to allay it.
36. Thus, whilst I agree with the Master that the second ground for the decision in Crehan cannot be applied in the circumstances of this appeal, I do not share his interpretation of the Trading Obligations in the case of the Forest Hill Tavern; in my view the first such ground does apply. Accordingly, for the like reasons as I have given in the case of The Ship, I see no real prospect of the tenant establishing any of the implications for which it contends. It follows that in the case of The Forest Hill Tavern I allow this appeal.
Overall conclusion
37. For all these reasons I allow the appeal of the landlord in the case of the Forest Hill Tavern and dismiss the appeal of the tenant in the case of The Ship.