Scottish and Newcastle v Dixon

The court gave procedural directions rather than finally determining the construction of the Supply of Beer (Loans Ties, Licence Premises and Wholesale Prices) Order 1989. It identified two related questions: whether the Order affected the financial consequences of termination on three months’ notice, and whether it affected agreements while they were continuing. The court indicated that the Order might be relevant to assessing damages following repudiatory breach, including claims for future barrelage compensation. It might also bear on whether contractual sums were a genuine pre-estimate of loss. Those were preliminary observations only and were expressly left for independent determination.

Scottish and Newcastle appealed with permission from the judgment of HHJ McGonigal in the High Court, which had determined a preliminary issue against Mr Dixon. The dispute concerned a debenture, trading agreement and guarantee relating to tied beer purchases, loan repayment and compensation for barrelage shortfalls.

The preliminary issue was whether the agreements, or provisions within them, were void or unenforceable under the Supply of Beer (Loans Ties, Licence Premises and Wholesale Prices) Order 1989. The central questions concerned the effect of the Order’s three-month termination right and its possible application to agreements operating in the ordinary course.

The Court of Appeal did not finally determine the construction of the Supply of Beer (Loans Ties, Licence Premises and Wholesale Prices) Order 1989. The judgment recorded preliminary concerns and directed that the matter proceed to a further hearing.

1. The Order, made under section 56 of the Fair Trading Act, provided for loan ties to be terminated to the extent that they were inconsistent with paragraph 2(3), and made it unlawful to make or operate them to that extent.
2. The court identified a question whether the requirement for repayment on not more than three months’ notice merely required a contractual termination right, leaving the parties free to impose financial conditions, or instead permitted termination upon payment of sums due only up to the expiry of the notice. The possible effect on accelerated barrelage compensation and enhanced interest was left open.
3. The court also questioned whether paragraph 2(4), which preserved obligations to make payments as they fell due, resolved or materially affected that construction. The judge’s contrary approach was not finally endorsed or rejected.
4. The trading agreement appeared to have ended when receivership and the sale of the premises occurred. If that involved repudiatory breach, Maredelanto v Bergbau (The Mihalis Aggelos) [1971] 1 QB 164 might bear on the assessment of damages by reference to the tenant’s contractual ability to terminate on three months’ notice.
5. The same termination right might also be relevant to whether sums claimed for breach were a genuine pre-estimate of loss. The court stressed that these were preliminary thoughts and did not prejudge amendment or any substantive issue.

Directions were made for exchanged skeleton arguments, with no order as to costs.

• Court of Appeal (Civil Division): heard an appeal with permission from Rix LJ against the High Court judgment of HHJ McGonigal dated 7 December 2001. The court gave directions for a further hearing and did not finally determine the preliminary issue.