P & S Amusements Ltd v Valley House Leisure Ltd & Anor

Contractual terms are not implied merely because they would improve one party’s commercial position. A term must be necessary to give business efficacy, so obvious that it goes without saying, and reasonable and equitable. A detailed, carefully negotiated agreement provides a strong indication that the parties have addressed the relevant matters themselves.

In assessing damages for breach of contract, the court must identify the claimant’s financial position if the contract had been performed. This may require assessing the hypothetical actions of the defendant and an independent third party, including evidence of subsequent events. A contractual provision stating that goods are “to be charged” at list prices does not necessarily require payment of those prices.

The claimants were landlords under a beer-tied underlease of licensed premises. The first defendants were the tenants and the second defendant guaranteed their obligations.

Earlier judgments had held that the beer tie was enforceable, that the tenants had breached it by failing to buy designated beers from the nominated supplier, and that Budweiser had been released from the tie. The present hearing concerned an inquiry into damages for the earlier breach, an alleged post-February 2006 breach, the meaning of the price provision, and the Budweiser claim.

The central issues were whether terms preventing the tenants from negotiating rebates with nominated suppliers should be implied and, if not, what loss the claimants had proved.

1. Implied terms. The alleged terms were not implied. The agreement operated effectively without them. The terms would also risk deterring brewers from accepting nomination, were not so obvious that they went without saying, and were not shown to be reasonable and equitable. The detailed and carefully negotiated underlease reinforced that conclusion. The court applied the principles discussed in B.P. Refinery (Westernport) Pty Limited v Shire of Hastings, (1978) 51 A.L.J.R. 20, and Phillips Electronique Grand Public S.A. v British Sky Broadcasting Ltd, [1995] EMLR 472.
2. Issue estoppel and waiver. A judicial comment does not automatically create an issue estoppel. The earlier point must have been distinctly in issue, and the later contention must be abusive in all the circumstances. The defendants were therefore not estopped from contending that the claimants knew of the rebates. The court made no final determination on waiver or variation because those issues were academic.
3. Price provision. The words requiring goods to be “charged” at the nominated supplier’s current standard price list did not oblige the tenants to pay that price. The claim for damages based on non-payment of list prices failed.
4. Damages. The inquiry concerned the claimants’ loss, not an account of rebates received by the tenants. The court had to assess what rebates would have been paid if the tenants had bought from the nominated supplier. The evidence showed that the tenants would have sought all available rebates and that the supplier would have paid them to the tenants, leaving the claimants without loss. The claimants were therefore entitled only to nominal damages for the pre-February 2006 breach. The same conclusion applied even if the alleged implied terms had existed.
5. Budweiser. The earlier judgment had released Budweiser from the beer tie. That finding was not varied by the later injunction and precluded the claimants’ damages claim for Budweiser sales.

The post-February 2006 claim was dismissed. The remaining breach claim produced nominal damages only.

The judgment records two earlier decisions in the same litigation: Park J’s judgment, [2006] EWHC 99 (Ch), holding the beer tie enforceable and finding an earlier breach; and the Chancellor’s judgment, [2006] EWHC 1510 (Ch), striking out the competition issues, granting an injunction and ordering an inquiry as to damages. The present judgment determined that inquiry and the related claims.