Mr Justice Warren :
Introduction
- The claimant Unique Pub Properties Ltd ("Unique") owns the reversion on a lease ("the Lease") of a public house in Croydon called The Broad Green Tavern ("the Property"). The Lease contains a beer tie. It also reserves to the lessor the right to install certain equipment relating to the dispensing of beer. Unique wishes to install an item of monitoring equipment on the beer lines purportedly in exercise of that right; but the first Defendant, Broad Green Tavern Ltd ("BGTL") has refused to give entry to Unique to the Property to do so. The second Defendant, Daniel Joseph Dempsey ("Mr Dempsey") is the owner and controller of BGTL and the licensee of the Property.
- By its claim in this action, Unique seeks injunctive relief against BGTL and Mr Dempsey ordering them to permit it to have access to the Property on reasonable notice, in order to install the monitoring equipment which I have mentioned. Before me is an application for summary judgment for that relief.
- Martin Rodger QC appears for Unique. Anthony Verduyn appears for BGTL and Mr Dempsey.
The Lease
- The Lease was granted on 26 March 1999 to BGTL by Unique's predecessor in title, Inntrepreneur Pub Company (CPC) Ltd for a term of 20 years from 11 March 1999. Mr Dempsey joined in the Lease as guarantor of BGTL's obligations under the Lease. The lessor (including its successors in title) is referred to in the Lease as "the Company". I shall simply refer to the lessor and the Company as Unique.
- By clauses 6 and paragraph 3 of the Third Schedule to the Lease, various rights are reserved for the benefit of Unique. These included the right
"To enter the Property
(1) to inspect and/or take inventories
..
(6) to install operate repair replace renew inspect and maintain such beer and cider (or other drinks) dispensing equipment including (without limitation) lines pumps cooling apparatus flow regulating or monitoring systems and such other ancillary equipment as Unique may from time to time consider appropriate or desirable
(7) to connect to use replace renew inspect and maintain such utility services (including but without limitation electricity water and telecommunications) at or serving the Property from time to time
..
.
such entry
(a) to cause as little disturbance to the Tenant as practicable and
(b) to be on condition that Unique makes good all damage caused to the Property
and (except where the need arises due to an emergency or the Tenant's default) to be at reasonable times on reasonable notice."
I will refer to paragraph (6) as "the Reservation".
- By clause 7 of the Lease, the Tenant covenants to comply with the obligations contained in the Fourth and Fifth Schedules. The Fourth Schedule comprises a tie in relation to all specified beer and cider. The equipment which Unique wishes to install relates to beer and cider within the scope of the beer tie. The tie requires the Tenant to purchase all specified beers and ciders which it requires for sale in the Property only from Unique or its nominated supplied. The Tenant is also prohibited from selling any specified beer or cider not supplied by or on behalf of Unique.
- Also to be noted are the following provisions of the Lease:
(1) The definition of the Property includes any landlord's fixtures and fitting in the Property.
(2) There is a covenant for quiet enjoyment on the part of Unique to let the Tenant have undisturbed possession of the Property.
(3) The Tenant's covenants in the Fifth Schedule which include these:
i. to keep the Property in good repair and to ensure that it complies with health and safety regulations;
ii. to comply with all Acts of Parliament;
iii. to use the Property as a public house with ancillary provision of accommodation, food and other refreshment and recreation for the public;
iv. not to damage the Property;
v. not to damage beer dispense equipment, to clean beer equipment and not to use it for any product not purchased from the Company;
vi. to permit Unique to inspect and sample stock and to take copies from Tenant's books of account and VAT records.
Weights and Measure legislation
- BGTL and Mr Dempsey raise an issue in relation to Weights and Measures Act 1985 ("W&MA"). It is convenient to set out the provisions relied on. Sections 7 and 17 W&MA provide, so far as material, as follows:
"7. Meaning of "use for trade"
(1) In this Act "use for trade" means, subject to subsection (3) below, use in Great Britain in connection with, or with a view to, a transaction falling within subsection (2) below where
(a) the transaction is by reference to quantity or is a transaction for the purposes of which there is made or implied a statement of the quantity of goods to which the transaction relates, and
(b) the use is for the purpose of the determination or statement of that quantity.
(2) A transaction falls within this subsection if it is a transaction for
(a) the transferring or rendering of money or money's worth in consideration of money or money's worth, or
(b) the making of a payment in respect of any toll or duty
"
"17. Offences relating to false or unjust equipment or fraud
(1) If any person uses for trade, or has in his possession for use for trade, any weighing or measuring equipment which is false or unjust, he shall be guilty of an offence and the equipment shall be liable to be forfeited.
"
The "i-draught" system
- The equipment which Unique wishes to install is a device for measuring the flow of liquid through pipes or lines and for measuring the quantity passing. It is manufactured by a company referred to in these proceedings as Brulines and is called the "i-draught" system. Brulines also manufacture another flow monitoring system know as the Dispense Monitoring System (or "DMS"). For present purposes, I can take as correct the brief description given of the i-draught system by Unique's solicitor, Mr Hastie. The i-draught system is a more sophisticated system that DMS but the installation process and the equipment is similar. During the installation process, every beer, cider and water line is cut and a flow meter is inserted into each line. The flow-meter is, in essence, a paddlewheel which sits in the flow of liquid and rotates at the liquid passes. The paddlewheel has three magnets embedded at equal points around its centre, and as it spins, the movement of the magnets opens and closes a switch embedded in the flow meter's electronic circuitry. Each opening and closing of the switch sends one pulse to the electronic box, located in the bar, which records those pulses. The information is then processed electronically and transmitted to Brulines' remote server. The "i-draught" system is able to detect the type of liquid flowing through the line. It is thus able to detect whether there is a flow of beer or cider or whether the flow is of water during the cleaning process. It is also able to send information about the time at which each liquid is flowing; it is therefore able to enable a record to be compiled of when beer is being dispensed and thus to give some indication about whether beer is being served outside the hours for which the relevant public house is licensed to do so. But its primary purpose from the point of view of Unique is as part of the process of monitoring the amount of beer dispensed. This enables a comparison to be made with the amount of beer delivered to the relevant premises and thus to see whether the beer tie is being observed.
- The evidence is that Unique (which is one of the largest pub companies in the UK) has had extensive experience of the use of the "i-draught" system, DMS and systems manufactured by competitors of Brulines, such as Smart Cellar and Nucleus Data. The "i-draught" system is currently its favoured system. It has installed it in 56 of its pubs. The DMS system has been far more extensively used across the industry with the system installed in 19,000 pubs according to Brulines itself.
- Although flow-monitoring equipment of this sort has not proved popular with some licensees, Mr Dempsey's stated position is that he has no objection to the installation of flow monitors per se. His objection is to the installation of the "i-draught" system because he considers it to be inaccurate. I will come to the evidence about that, and the consequences of the alleged inaccuracy, later in this judgment. In response to suggestions made by the House of Commons Business and Enterprise Select Committee in its report on Pub Companies published on 14 May 2009, Brulines asked the Trading Standards Authority to test the DMS and the "i-draught" system; and in a further report issued on 4 March 2010, that Select Committee suggested that the Government should commission the National Measurement Office ("NMO") to clarify whether the equipment was covered by the W&MA. In response to that suggestion, Brulines itself referred the equipment to the NMO for testing. I shall refer to NMO's conclusions later.
- A description of the DMS can be found in the decision of HH Judge Behrens (sitting as a judge of this Division) in Unique Pub Properties v Onifas Limited [2011] EWHC 3071 (Ch) ("Onifas"), to which I will be referring. He dealt with DMS (in rather more detail than I have so far dealt with the "i-draught" system) at paragraphs 33 to 47 of his judgment.
The proceedings
- The Claim form was issued on 15 December 2010. Particulars of Claim were contemporaneous and contain a Statement of Truth by Mr Hastie dated 14 December 2010. The original Defence is dated 4 February 2011 with a Reply dated 17 February 2011. An application for summary judgment was issued in April 2011 supported by a witness statement made by Mr Hastie on 18 April 2011. This application was withdrawn following an application to amend the Defence. An Amended Defence was produced but I do not know its date, followed by a Reply dated 5 July 2011. Matters did not progress pending the decision in Onifas. Judgment in that case was handed down on 24 November 2011 following which Unique, considering its claim to be clear in the light of that judgment, made a further application for summary judgment which was issued on 13 January 2012. That was supported by a further witness statement made by Mr Hastie on 18 January 2012. The application came before Morgan J on 13 February 2012 who ordered that it be listed for hearing. Pursuant to that order, the application now comes before me.
- The issues which can be identified on the pleadings are summarised by Mr Rodger as set out below. To the extent necessary to deal with this application, my decision on those issues will become apparent. The issues:
(1) Is the flow monitoring equipment referred to in the Reservation limited to "equipment the sole purpose of which is to facilitate and ensure the safe dispensing of beer and cider of an appropriate quality" at the Property as submitted by BGTL and Mr Dempsey? Or does it include, contrary to their submissions, equipment which (among other uses) is intended to be used to monitor compliance with the tie?
(2) Does the Reservation permit the installation of equipment "which is unlawful and/or is not to be shown to be accurate for the purpose of monitoring the flow of beers and ciders" contrary to the submissions of BGTL and Mr Dempsey?
(3) Does the Reservation permit the installation of equipment "which would interfere substantially with the reasonable operation of [BGTL]'s business" contrary to the submissions of BGTL and Mr Dempsey?
(4) Is the equipment for "use in trade" within the meaning of section 7 W&MA as is alleged by BGTL and Mr Dempsey? And, if so, is it "false and unjust" so that its use would be an offence contrary to section 17?
(5) Is Unique required (before it may install the equipment) to prove that it is accurate and lawful, that it "meets the requirements of electrical safety and food hygiene" (a requirement alleged in the Amended Defence) and that it will not substantially interfere with the reasonable operation of BGTL's business?
- Included in those issues are questions of construction of the Lease and W&MA. Even though this is a summary judgment application, they are not complex questions and it is appropriate that I should deal with them.
Onifas
- Onifas is an important decision in the context of the present case and it is convenient for me to deal with it at this stage. In that case, Enterprise Inns plc owned the reversion on the lease of another public house, The Bedford, in Balham, having taken as assignment of that reversion from Unique. Onifas Ltd was the tenant. Unique had installed DMS at The Bedford in 2006. While Unique was still its landlord, Onifas gave notice to Unique requiring it to remove the equipment, threatening to remove it itself if Unique did not. Unique refused to do so, and threatened to apply for an injunction if Onifas' threat was carried out. Following a refusal by Onifas to give an undertaking, proceedings were commenced by Unique on 25 March 2010 seeking an injunction to restrain the threatened interference. It was after commencement of proceedings, in late December 2010 and January 2011 that transactions took place as a result of which Enterprise acquired the reversion on the lease.
- The dispute hinged on the meaning of the reservation in that case, which was in identical terms to the Reservation. So far as material to the present application, the main issue was stated in this way: Was the reservation subject to an implied proviso that Unique/Enterprise would not consider appropriate or desirable any flow regulating or monitoring system which was either unlawful or is in fact unable to support an accurate monitoring of the sales of beers and ciders for the purposes of the terms of trading in the lease? There is no record of it having been argued that DMS was not a flow monitoring system within the meaning of the reservation. Nor is there a record of it having been argued that DMS, even if it was a monitoring system within the meaning of the reservation, could not properly be described as dispensing equipment so as to be brought within the scope of the reservation by the words "including (without limitation)": indeed, at the beginning of his judgment, the Judge expressed the reservation as a right to enter the property
"to install such flow regulating or monitoring systems and such other ancillary equipment as [it] may from time to time consider appropriate or desirable."
which indicates that this point of construction was not raised and considered.
- In relation to the point which was argued, the Judge held that there was no implied term such as that for which Onifas contended. Mr Seitler QC, on behalf of Onifas accepted that the landlord was entitled to a degree of flexibility in its choice of flow monitoring system but that that flexibility did not, he argued, extend to a system that was inherently inaccurate and unlawful. In the present case, a similar argument to which I will come is raised, although BGTL and Mr Dempsey rely primarily on their arguments on construction, seeking to rely on the existence of an implied proviso in the alternative as I shall explain.
- Mr Seitler also argued that the landlord had not proved that DMS was lawful. He submitted that there was a potential breach of section 17 W&MA and that Unique/Enterprise had not shown that the DMS system was lawful. The Judge held that the use of the DMS system was not in breach of the Act. In the present case, it is not contended by Mr Verduyn that the burden of proof lies on Unique to show that W&MA is not infringed. But he does submit that there is in fact a breach and that HH Judge Behrens was wrong in his conclusion and invites me not to follow him.
Construction of the Reservation
- Mr Rodger submits that the meaning of the Reservation is clear. The "i-draught" system is a flow monitoring system and, as such, is clearly within the meaning of the words in the Reservation. Further, the system is within the ordinary concept of "dispensing equipment" just as much as lines pumps and cooling apparatus; even if there were any doubt about that, the words "including (without limitation)" remove any doubt and make it clear that monitoring systems are included within the concept of "dispensing equipment". Even if Mr Verduyn were correct in saying that the "i-draught" system is not properly to be regarded as a monitoring system within the meaning of the Reservation, that system is certainly "ancillary equipment" which Unique is entitled to install if it considers, as it does, that such a system is appropriate or desirable indeed it considers it to be both appropriate and desirable.
- Mr Verduyn does not accept that reasoning, submitting that the position is more complex. He has two main reasons for rejecting what Mr Roger submits.
- First, he says that the meaning of "flow monitoring systems" must be ascertained as of the date of the Lease, 26 March 1999. Although the "i-draught" system might today be described as a flow monitoring system, it did not exist in 1999. It is, he says, a system which is significantly different from any equipment which existed at the date of the Lease; equipment of this sort was not within the contemplation of the parties at the date of the Lease. Applying the now well-known principles of construction (see for instance Lord Hoffmann in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 770 at [17] and in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912F-913G and, most recently, Lord Clarke in Rainy Sky SA v Kookmin Bank [2011] UKSC 50 at [14]), Mr Verduyn submits that the reasonable person would not have understood the parties to the Lease to have included within the scope of flow monitoring systems a system which had not yet been developed such as, in the events which happened, the "i-draught" system.
- Secondly, he says that even if the "i-draught" system is flow monitoring equipment within the meaning of the Reservation, it is not on any view properly to be seen as "dispensing equipment". The introductory words "including (without limitation)" are not apt to bring within the scope of "dispensing equipment" any item of equipment whatsoever simply because that item is used in connection with other equipment which is, on any view, dispensing equipment.
- Taking these arguments in turn, it is clear, in my judgment, that the "i-draught" system is a flow monitoring system within the meaning of the Reservation. The Lease contains no technical definition of flow monitoring systems. The concept is not difficult to understand. Nor is it a modern concept: clearly some sort of flow monitoring systems were in existence in 1999 otherwise the Lease was not have used the phrase at all. The measuring of the rate of flow of liquid and the total amount of liquid flowing through a pipe can hardly be said to be something which was not entirely commonplace in 1999.
- Mr Verduyn submits, as I have mentioned, that the reasonable person would not have understood the parties to the Lease to have included within the scope of flow monitoring systems a system such as the "i-draught" system. He takes this analogy. Before the microwave oven was invented and became commonplace in the domestic market, the word "oven" in a domestic context would have signified a conventional gas or electric oven. Once the microwave oven had itself become an item of equipment to be found in many kitchens, the word "oven" would ordinarily have subsumed a microwave oven. He adds that such an item of equipment is now conventionally referred to as a "microwave" so that, possibly, the word "oven" would no longer include a microwave oven. This all goes to confirm what we all know namely that the context in which a word is used is critical. Building on that analogy, Mr Verduyn submits that the "i-draught" system did not exist in 1999 so that it could not have been contemplated as covered by the words "flow monitoring system" in the Lease.
- I reject that line of argument for two reasons:
(1) First, the "i-draught" system is only a development of previous systems. It may have been novel in some respects but was not so different that, once having been produced, it would not have been seen as a flow monitoring system.
(2) Secondly, the Reservation contains a reference to "such other ancillary equipment as the Company may from time to time consider appropriate or desirable". The draftsman contemplated that the Company would be able to exercise its choice from time to time. I do not consider that the Company is restricted to selecting, from time to time, only ancillary equipment of a type which existed at the date of the Lease in 1999. Rather, it may select any equipment provided that it is ancillary to dispensing equipment (including ancillary to the listed items such as lines and pumps). Given that ancillary equipment is not restricted in that way, flow monitoring equipment should not be given a restrictive meaning. The concept covers, in my judgment, new types of flow monitoring equipment developed after the date of the Lease.
- Mr Verduyn's second point of construction is that the "i-draught" system cannot properly be described as dispensing equipment within the meaning of the Reservation He argues that dispensing equipment and equipment ancillary thereto is limited to equipment the sole purpose of which is to facilitate and ensure the safe dispensing of beer and cider of an appropriate quality. The i-draught system is not itself part of a system of dispensing in that it is not concerned in any way with the delivery of beer or cider from the barrel to the glass or with the quality or state of the product delivered. Its principal purpose is to monitor the amount of product sold to customers in the pub in order to police the tie and has nothing with dispensing at all.
- The introductory words "including (without limitation)" and the words which follow it do not, on Mr Verduyn's argument, extend the meaning of "dispensing equipment" so as to bring within the scope of the Reservation items which are not capable of forming part of a system for dispensing product. Accordingly, even if the i-draught system is a flow monitoring system, it is not a flow monitoring system within the meaning of those words in the Reservation.
- Then it is said that the i-draught system is not, by parity of reasoning, ancillary equipment within the meaning of the Reservation. An item of equipment is ancillary to a dispensing equipment only if it assists the purpose of the dispensing equipment itself, that is to say to dispense product of an appropriate quality. Further, the use of the words "other" in the phrase "such other ancillary equipment" indicates that what has gone before (ie lines pumps cooling apparatus flow regulating or monitoring equipment) must also be ancillary in that sense.
- Rather, the introductory words and the words which follow are apt to eliminate any argument about the inclusion of items of equipment which would ordinarily be seen as dispensing equipment, such as pumps, or items about which there might be some doubt, such as cooling equipment. But if it is clear that a particular item of equipment cannot be seen as part of or ancillary to, actual dispensing equipment and it is Mr Verduyn's case a monitoring systems such as the i-draught system cannot be seen in that way then the introductory words do not bring that item of equipment within the scope of the Reservation.
- I reject this second point of construction too. There is, in my judgment, no warrant at all for examining the motive of Unique in wishing to install a monitoring system when determining whether that system is or is not included within the Reservation. It is the function of the system which is, in my view, decisive and motive has nothing to do with it. The function of the i-draught system is to measure the quantity of liquid passing through the pipes. Equipment which performs that function (that is to say a monitoring system) is on any view closely connected with the dispensing system and the function of that system, namely to deliver product. In my view, it is correct to regard a monitoring system as part of the dispensing system so that the introductory words "including (without limitation") are effective to make clear that such equipment is intended to fall within the scope of the Reservation. If that is putting matters too high, equipment which performs that function is certainly ancillary to the dispensing equipment. But rather than treat such equipment as within the scope of the Reservation by virtue of the words "other ancillary equipment" it makes more sense to regard that equipment as covered by the words "any monitoring system".
- My conclusion on the two issues of construction addressed is accordingly that the i-draught system falls within the scope of the Reservation.
Implied term to similar effect
- In the Amended Defence, BGTL and Mr Dempsey seek to reach the same result on the basis of an implied term. The process of implication was discussed by Lord Hoffmann in his speech in A-G of Belize v Belize Telecom Ltd [2009] 1 WLR 1988, a decision considered by Judge Behrens in Onifas. It is a process which is itself an aspect of construction, construction being designed to make express the meaning which would be conveyed to the reasonable person having all the relevant background knowledge described by Lord Hoffmann in [16] of the judgment. The question of implication can arise, as in the present case, when the parties have not expressly provided for certain events in the present case if the equipment which Unique wishes to install is not, as BGTL and Mr Dempsey allege, fit for purpose and non-compliant with W&MA. A term can be implied where the reasonable addressee would understand the instrument to mean something different from that which its express terms indicate. As Lord Hoffmann put it at [21]:
"It follows that in every case where 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
. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?"
- Lord Hoffmann's speech is also important in providing a reminder that the various formulations which the courts have used as the test for the implication of a term (see in particular the conditions set out by Lord Simon of Glaisdale in BP Refinery (Westport) Pty Ltd.v Shire of Hastings (1997) 180 CLR 266, 282-283, set out by Lord Hoffmann at [26]) are no more than different ways in which judges have attempted to articulate what was "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". These formulations are not legislation and are not to be allowed to take on a life of their own.
- In my judgment, it is clear that it is not possible to imply into the Lease the term pleaded in the Amended Defence to the effect that the dispensing equipment referred to in the Reservation is limited to dispensing equipment and equipment ancillary thereto the sole purpose of which is to facilitate and ensure the safe dispensing of beer and cider of an appropriate quality, or any similar term. Nor is to possible to imply the alternative term pleaded to the effect that the equipment which Unique can install is limited to equipment the main purpose or predominant function of which is to facilitate and ensure the safe dispensing of beer and cider of an appropriate quality. It cannot be said in relation to any of these suggested implied terms that an objective reasonable person reading the Lease and knowing that it contained a beer tie would conclude that the landlord should not be entitled to install a monitoring system the function of which was to measure the flow of beer or cider even if the sole motivation for wishing to do so was to enable the landlord to police the beer tie. Once it has been decided, as I have decided, that such monitoring equipment falls within the scope of the Reservation properly construed, there is no scope for an implied term.
Other implied terms
- It is further contended by BGTL and Mr Dempsey that the right of entry does not extend to (i) entry for the purpose of installing any equipment which is unlawful and/or is not shown to be accurate for the purpose of monitoring the flow of beers and ciders through the dispensing equipment, an appropriate objective standard of accuracy being a margin of error of +/- 0.5% or (ii) entry for the purpose of installing any equipment which would interfere substantially with the reasonable operation of the tenant's business at the Property.
- BGTL and Mr Dempsey seek to establish those implied terms in the light of the facts which they say they should have the opportunity of establishing at a trial. As to the first implied term, it is alleged that the i-draught system is not accurate within those tolerances. It is therefore said to be "false and unjust" within the meaning of section 17 W&MA so that its presence at the Property may render BGTL and Mr Dempsey guilty of an offence. As to the second implied term, it is suggested that the i-draught system will interfere with another system (Searflo) which Mr Dempsey has already installed at the Property, it being suggested that electrical interference and yeast build up generated by the i-draught system is capable of affecting Searflo and other (unidentified) monitoring equipment at the Property. I will say something more about these factual suggestions later in the judgment. But at this stage, I wish to consider the meaning of W&MA.
W&MA
- In Onifas, it was submitted by Mr Rodger (who appeared for Unique in that case too) that there was no breach of section 17 because the equipment in that case, DMS, was not "used in trade" within the meaning of section 7(2). The Judge agreed with that although it is right to say that his judgment did not contain any analysis of W&MA. There is no material difference in the context of W&MA between DMS and the i-draught system. Onifas would therefore appear to provide a conclusive answer against Mr Verduyn's argument based on a breach of W&MA. He submits that I should not follow the decision of Judge Behrens.
- The point is a short one which I propose to address disregarding, for the time being, the decision in Onifas. If one ignores the (exclusive) definition of "use for trade" found in subsection (2), there is a superficial attraction in Mr Verduyn's position since the dispensing equipment is, adopting the ordinary meaning of the words "used in trade", clearly used in BGTL's trade of selling beer and cider. But when one does turn to subsection (2), it is immediately apparent that that straightforward meaning cannot be given to "used in trade" and, indeed, that there is great difficulty in bringing the use of the i-draught system within the scope of the subsection.
- Subsection (1), explaining the meaning of "use for trade" requires the identification of a transaction. The use of the i-draught system has to be in connection with or with a view to that transaction. The transaction must be one where the conditions of both paragraphs (a) and (b) are satisfied. In the present case, the candidates for that transaction include (i) the sale of beer by Unique or its authorised suppliers to BGTL and (ii) the sale of beer and cider by BGTL to a customer. Each of those transactions falls within subsection (2)(a).
- The sale of beer by Unique or its authorised suppliers falls within subsection (2)(a), the supply of beer and cider in return for payment. I doubt very much, however, that it is right to regard the use of the i-draught system as being "in connection with" or "with a view to" (the phrases used in subsection (1)) that transaction of sale and purchase. It is certainly not "with a view to" since the use of the i-draught system occurs after the transaction. It is, I suppose, just about arguable that the use is "in connection with" the sale and purchase on the basis that the dispensing equipment is used to dispense the beer or cider which is the subject matter of the transaction and the i-draught system is part of that dispensing system. But even if that is so, paragraphs (a) and (b) impose additional requirements. Paragraph (a) requires that the transaction is by reference to quantity or is one where there is a statement of quantity; and paragraph (b) requires that the use is for the purpose of the determination or statement of that quantity. In the present case, the sale and purchase of beer and cider is no doubt by reference to quantity. But the use of the i-draught system is not for the purpose of the determination of that quantity. The use of the i-draught system is to monitor the amount of beer or cider passing through the lines for the primary purpose of policing the beer tie. It does not measure the amount of beer and cider for the purpose of the sale and purchase: the quantity supplied is measured elsewhere (presumably by equipment which complies with W&MA). It does not even measure the quantity of beer and cider subject to a series of sale and purchase transactions between Unique or its authorised suppliers and BGTL for the purposes of the totality of the sales.
- The i-draught system does not, therefore, measure the quantity of beer and cider passing through the lines for the purposes of a contract of sale and purchase in a direct way, for instance by establishing, or even providing confirmation of, the precise volume of beer for which BGTL must pay. It does not necessarily follow, of course, from that fact that the i-draught system is not being used "in connection with" the sale and purchase transaction. However, in my judgment, there is no relationship between such a transaction and the use of the i-draught system which would justify the conclusion that such use is "in connection with" the transaction. There is a connection between the subject matter of the transaction that is to say the beer and cider and the i-draught system in that the system monitors the flow of liquid through the lines and that liquid will include the beer and cider subject to the transaction. But that is not enough, in my view, to bring the use of the i-draught system within the words "use
.in connection with" the transaction itself.
- That conclusion is reinforced, I consider, when it is appreciated that the i-draught system does not distinguish between beer and cider purchased from Unique or its authorised suppliers and beer and cider (if any) bought "off tie" in breach of the Lease. It monitors the total amount of beer and cider passing through the lines. The information which it provides is not used for the purposes of, or even in connection with, the sale and purchase transaction; rather, it is used as the starting point for an investigation about whether beer and cider has been sold "off-tie". If there have been any sales "off-tie" then Unique's remedy is in respect of the breach of contract. That is a claim which sounds in damages where the measure of damages may (but this will not necessarily be so) equate to the profit which Unique would have made if BGTL had purchased the same amount of beer and cider from it as it purchased "off-tie". However, even if the information acquired from the use of the i-draught system forms the evidential basis of the claim for damages, I do not consider that it can therefore be said that the system was being used, in providing that information, "in connection with" the sale and purchase of beer and cider under the relevant transaction or transactions. The relationship between the claim under the Lease and the use of the i-draught system is too remote to lead to that conclusion.
- Moving on to the second candidate for the relevant transaction, I consider that the i-draught system has nothing to do with the sale of beer or cider to the customer in the bar. There is not the remotest connection, so far as I can see, between the i-draught system and the sale other than that the beer or cider has passed through the system and formed part of the measured flow; nor can I see how the use of the i-draft system was with a view to a sale to the customer.
- Accordingly, section 7 W&MA is not, in my judgment, engaged by either a transaction consisting of the sale of beer or cider to BGTL or by a transaction consisting of a sale of beer or cider to the customer in the bar.
- I observe that if this were not the right result, the installation of the i-draught system by the tenant of a public house would be with W&MA. Accordingly, if it was so inaccurate as to be "false and unjust", the tenant would be committing an offence under section 17 even though he might be using it solely for his own purposes. The argument based on breach of W&MA applies whoever it is that installs the relevant equipment.
- Mr Verduyn went on to argue that the i-draught system may result in a payment in respect of a toll within the meaning of section 7(2)(b). The argument, if I understand it correctly, runs as follows. The i-draught system measures the total flow of beer and cider over a period of time, at least it does so if the throughput of water used for cleaning the lines can be accurately excluded. If that total flow exceeds the amount of beer and cider purchased from Unique or its authorised suppliers, the excess must be beer and cider purchased "off-tie". Unique then imposes a penalty (it has been referred to in argument as a "fine" but that is clearly inaccurate), the amount (in money) of which is directly related to the amount of that excess (of beer and cider). That amount of money is said to be a toll with the result that the use of the i-draught system is "use for trade".
- I reject that argument which fails for a number of reasons:
(1) First, as I have expressed it, the argument does not identify what transaction for the purposes of section 7 is said to be. Without a relevant transaction, there is nothing for section 7 to bite on. I have already rejected the sale of beer and cider to BGTL and the sale of beer and cider to customers at the bar as possible transactions.
(2) Mr Verduyn was not able to identify to my satisfaction any other transaction which would engage section 7(1). Arguing backwards, as it were, if it is said that the payment of the penalty for breach of the beer tie is a toll, then the transaction in respect of which that toll is imposed can only be one of two things: either it is the Lease itself or it is the "off-tie" purchase of beer or cider.
(3) The Lease itself cannot, in my view, possibly be a relevant transaction. That is so for many reasons, including the fact that the Lease has nothing relevant to do with a quantity of beer and cider so as to fall within section 7(1)(a) and the fact that the use of the i-draught system has no connection with the Lease in the sense required by the opening words of section 7(1).
(4) Nor can the sale and purchase of beer or cider "off-tie" be a relevant transaction. It is simply impossible, as a matter of language, to describe that sale and purchase as a transaction for the making of a payment in respect of any toll however wide a meaning is ascribed to "toll". That transaction is no more and no less than a sale and purchase of beer or cider which is supplied in consideration of the purchase price; it is not a transaction "for" the making of a payment "in respect" of any toll.
(5) Onward sale to customers of beer and cider purchased under such an "off-tie" agreement may entitle Unique to remedies under the Lease, in particular a right to claim damages for breach of contract, but those damages cannot, I consider, be seen as a "toll" however wide a meaning might be given to that word.
- Accordingly, I conclude that BGTL and Mr Dempsey have no arguable defence which seeks to rely on the provisions of sections 7 and 17 W&MA. It is not alleged that the use of the i-draught system would be unlawful for any other reason. It is therefore unnecessary to decide whether a term should be implied into the Lease that the right of entry cannot be exercised to install equipment which would result in a breach of W&MA. However, the court would surely strive to reach the result that Unique should not be entitled to install equipment the use of which would be unlawful and I accordingly incline strongly to the view that such a term ought to be implied.
Implied terms again
- After that analysis of W&MA, I return to the remaining terms which Mr Verduyn submits should be implied into the Lease. It is said that terms are to be implied which would prevent Unique from exercising its right of entry in order to install equipment (i) which is not shown to be accurate or (ii) which would interfere substantially with the operation of the Tenant's business.
- I should deal with one short point of construction. The Reservation concludes with the phrase "as Unique may from time to time consider appropriate or desirable". The question arises whether that phrase qualifies everything that has gone before or only the other ancillary equipment referred to. The more limited approach gains support from the use of the word "such" before "other ancillary equipment": indeed, if the closing phrase did not relate to "such other ancillary equipment" those words would be left hanging in the air. But it must also be noted that the word "such" also appears in the first line of the Reservation and introduces what it is that Unique may install ("such beer and cider (or other drinks) dispensing equipment
" followed by the list of specific items). If the closing phrase did not relate to the dispensing equipment, the words "such beer and cider (or other drinks) dispensing equipment" would also be left hanging in the air. The conclusion must be that, although the drafting is not grammatically perfect, the closing phrase relates both to the dispensing equipment including the items specifically listed and to other ancillary equipment. Accordingly, the Reservation is to be read as granting a right of entry to Unique to install such flow monitoring equipment as it should from time to time consider appropriate or desirable.
- Mr Rodger cited a number of authorities which deal with the implication of terms where a contractual provision puts one part at the mercy of another's exercise of a discretion. He cited the same cases to Judge Behrens in Onifas. They, and the principle each case is establishes, are these:
(1) Ludgate Insurance Co Ltd v Citibank NA [1998] Lloyd's Reports IR 221 per Brooke LJ at [35]: the circumstances in which the court will interfere with the exercise by a party to a contract of a contractual discretion given to it by another party are extremely limited. The courts will not intervene where the discretion is exercised honestly and in good faith for the purpose for which it was conferred and provided that it was true exercise of the discretion in the sense that it was not capricious or arbitrary or so outrageous in its defiance of reason that it can properly be categorised as perverse.
(2) Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] EWCA Civ 1047 per Mance LJ at [62]: implication all depends on the circumstances, and the authorities do not establish any automatic implication of a term as to reasonableness whenever a contractual provision exists putting one party at the mercy of another's exercise of a discretion.
(3) Abu Dhabi National Tanker Co v Product Star Shipping Ltd [1993] 1 Lloyd's Reports 397 per Legatt LJ at p 404: where a contractual discretion falls to be exercised, it must be exercised honestly and in good faith and must not be exercised arbitrarily, capriciously or unreasonably.
(4) Paragon Finance plc v Nash [2002] 1 WLR 685 per Dyson LJ at [41] and to the same effect Gan Insurance per Mance LJ at [64]: unreasonableness in the context connotes conduct or a decision to which no reasonable person having the relevant discretion could have subscribed.
- What I conclude from those authorities is this principle, namely that a contractual discretion must be exercised honestly and in good faith and must not be exercised arbitrarily, capriciously or unreasonably, unreasonableness being assessed in the sense that no reasonable person would exercise the discretion in the manner proposed. Sometimes the courts appear to approach these restrictions by way of implication. In others, they appear to approach the matter of one of construction. It does not matter which approach is more accurate, especially as the implication is, in any case, a facet of construction as explained by Lord Hoffmann.
- The case presented by Mr Verduyn in relation to the first implied term (concerning accuracy) turns on the proposition that the i-draught system is inaccurate. I do not propose to go into the detail of the evidence about that. It is enough to observe that he makes criticism of the selective, as he would say, approach to the results of the NMO on which Brulines has relief to demonstrate the accuracy of the i-draught system and Mr Dempsey gives some first-hand and some anecdotal evidence of instances of inaccuracy. Unique contends that the i-draught system is accurate by any objective standard and certainly for the purposes for which it wishes to use it. This dispute about accuracy, and in particular about whether the i-draught system falls within the tolerances which BGTL and Mr Dempsey assert must be met, is not one which I can resolve on this application were it a relevant factor.
- However, even though it is not possible to resolve the dispute about accuracy within stated tolerances, the implied term concerning the accuracy of equipment for which Mr Verduyn contends does not, in my judgment, fall within the principle which I have just identified. There is nothing to suggest that Unique is acting other than honestly and in good faith; the fact that BGTL and Mr Dempsey do not like what Unique is proposing to do because they consider the i-draught system to be inaccurate is not a reason to doubt the honesty and good faith of Unique. There is, it is true, a dispute about whether the i-draught system falls within certain tolerances. But even if BGTL and Mr Dempsey are right on this detail, I do not consider that Unique is acting arbitrarily, capriciously or unreasonably (in the sense discussed) in what it is proposing to do. The position might be different if the equipment was, on any view, wildly inaccurate and not fit for the purpose for which Unique wish to install it, it is not necessary to decide that point. But that is not the position. My conclusion is that there is no reasonable prospect of establishing the implied term for which BGTL and Mr Dempsey contend.
- That conclusion is supported by these considerations.
(1) First, the Reservation is wholly for the benefit of Unique whose apparent rights should not be restricted save in accordance with the principle which I have just identified.
(2) Secondly, subject to matters to which I will come in relation to the second implied term for which Mr Verduyn contends, the i-draught system has no adverse effect on BGTL's business thus eliminating any argument based on the need to eliminate adverse effect.
(3) Thirdly, the principal purpose of the i-draught system from Unique's point of view is to police the beer tie. It can hardly be suggested that Unique's wish to install equipment with that purpose is, for that reason alone, arbitrary, capricious or unreasonable, especially given the words "as the Company[Unique] may from time to time consider appropriate or desirable" at the end of the Reservation.
(4) Fourthly, an implied term such as that for which Mr Verduyn contends would have to identify what is meant by "inaccurate". Recognising that point, the suggested implied term sets out what the Amended Defence refers to as an appropriate objective standard of accuracy, being a margin of error of +/- 0/5%. That may be a tolerance which some commercial users of the i-draught system might require before purchasing it. But it does not follow that, from Unique's perspective, a different tolerance would not be acceptable. And since the accuracy of the i-draught system is acceptable to Unique, it cannot be said, in my view, that Unique is acting in an arbitrary, capricious or unreasonable (in the sense described above) manner.
- The case presented by Mr Verduyn in relation to the second implied term (interference with business) turns on the proposition that the i-draught system will interfere with the Searflo system already installed. The evidence about this risk is extremely thin. Mr Dempsey relates personal experience which he had in another pub run by him. This did not, however, relate to the i-draught system but to a previous Brulines product, presumably DMS. It is said that this system caused electrical interference which resulted in wasted costs and time. No detail is given about how this came about. However, as I understand it, the Brulines equipment and Mr Dempsey's equipment were physically placed quite close to each other, near the barrels in each case. In contrast, the physical position at the Property would be different. The Searflo system is installed in the cellar near the barrels; the i-draught system is installed under the bar near the pumps. It is not, in any case, explained how the risk of interference arises; there is no evidence from a person skilled in matters electrical or electronic nor even indirect evidence from Mr Dempsey explaining what such a skilled person has told him.
- In my judgment based on the material before me, there is no reasonable prospect of establishing breach of any implied terms concerning interference with business such as is alleged.
- I do not, in any case, consider that such a term is to be implied. BGTL already has the benefit of Unique's covenant for quiet enjoyment. I do not consider that it would be correct to imply an additional burden on Unique designed to protect BGTL's commercial interests.
- Moreover, Mr Rodger makes the point, which I think is a good one, that even if there is electrical interference of the sort suggested, it would be quite wrong in principle to imply a term the results of which would be (i) to preclude Unique from installing the equipment which it wishes to install and (ii) override the clear entitlement of Unique to install equipment which it considers to be desirable or appropriate. The installation of the i-draught system might interfere with the use of the Searflo system: but it does not interfere with the business. The remedy, he says, lies in BGTL's hands, which is to cease using the Searflo system. Test the matter this way. Suppose that the Searflo system had not been installed at the Property. There could be no objection then to installing the i-draught system on the basis of interference with BGTL's trade which demonstrates that, in principle, Unique ought to be entitled to install it. It would be wrong to imply a term which overrode that right as a result of the prior installation of the Searflo system.
Miscellaneous point
- The Amended Defence purports to put Unique to proof (i) that the i-draught system meets the requirements of electrical safety and food hygiene and does not contravene such lawful requirements and (ii) that it will not substantially interfere with the reasonable operation of BGTL's business.
- As to (i), this, I think, is put forward as another aspect of the alleged implied term concerning unlawfulness. However, it is not for Unique to prove that the i-draught system satisfies these requirements before it can be installed. If it is the case of BGTL and Mr Dempsey that these health and safety requirements are breached, they can allege it, providing details of why that is so; if there is then a triable issue and if a term as to lawfulness is to be implied, then it might be right to allow matters to proceed to trial. But such a breach is not alleged and particularised by BGTL and Mr Dempsey; they cannot throw the burden onto Unique at this stage with a view to fending off summary judgment. In any case, the evidence currently before the court all points one way, namely to the effect that the i-draught system is compliant with all relevant statutory requirements.
- As to (ii), there is no general burden on Unique to demonstrate this and, indeed, it is impossible to see how it could be expected to address each and every aspect of BGTL's business to anticipate whatever interference might be alleged. The correct course is for BGTL and Mr Dempsey to identify the possible interferences on which they rely and for Unique then to deal with the matters raised. BGTL and Mr Dempsey have raised the possibility of electrical interference, with which I have dealt. Only one other potential interference has been raised, which is the possibility of increased yeast build-up. As to that, there is only assertion and no prima facie evidence to back it up. In any case, there is no evidence that this would have any significant impact on the amount of cleansing of the lines which would be needed in any event.
Conclusion
- In my judgment, BGTL and Mr Dempsey have no arguable defence to Unique's claim to be allowed to have access to the Property on reasonable notice in order to install the i-draught system. I do not consider that it would be appropriate, nonetheless, to give leave to defend on the basis that there is a compelling reason for the case to be decided at trial. I accept that the issues are of a much wider concern than to the parties to this action. But the wider concern does not justify putting Unique to the expense of a trial. In any case, if there is anything in the allegations concerning inaccuracy, the dispute can be resolved in the context of a claim by Unique for damages if and when, in reliance on the information derived from the i-draught system, Unique seeks to claim damages under the Lease for an alleged breach of the beer-tie.
Accordingly, Unique's application for summary judgment succeeds. I will make an order accordingly.
