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ACCRA BREWERY COMPANY LTD. v. GUINNESS GHANA LTD., ACCRA [28/05/99] CS 307/99.

CORAM: HIS LORDSHIP MR. A. A. BENIN J.A. SITTING AS AN

ADDITIONAL HIGH COURT JUDGE

AT: HIGH COURT, ACCRA

ON: FRIDAY, MAY 28, 1999

 ACCRA.

 

 

BENIN, J.A.:

This is an application brought by the plaintiff herein seeking an order of interim injunction restraining the defendant, its agents, servants, privies and assigns from further entering into and or in any other way enforcing the agreement dubbed or entitled “Guinness means profit” retailer scheme initiated by the defendant and or any similar or further agreements with outlet owners of the plaintiff and in Ghana pending the final determination of the suit herein in terms of the accompanying affidavit and for such order or orders as this honourable court may seem fit.

In the accompanying affidavit, the plaintiff set out the reliefs endorsed on the writ, which as at now amended, seek the following:

1. a declaration that the said agreement is unreasonable and in restraint of trade and against public policy and therefore null and void and totally of no effect;

2. a declaration that the said agreement undermines competition and seeks to achieve an unfair advantage over its competitors and is thus contrary to public policy;

3. injunction;

4. damages; and

5. a declaration that the said agreement amounts to an act inducing the said retailers to breach their contractual relations with the plaintiff.

In the affidavit in support, the plaintiff deposed that its products namely, Club Super Stout, Club Dark Beer and Castle Milk Stout (which it launched recently) have common characteristics with the defendant’s product namely Guinness Foreign Extra Stout and for that  reason these products compete with each other on the open market.  But by the agreement-which I shall refer to in due course-the defendant has induced their common retailers with money to covenant that they will stock only the defendant’s products, both alcoholic and non-alcoholic and also to display advertisements put up by only the defendant.  As a result of this, “ the retailers …. have refused to stock the plaintiff’s

products and in fact some of them have even returned stock which had been supplied to them earlier on.” Not only that, the plaintiff alleges that “some of the retailers have refused to sell the plaintiff’s product and those who have been selling the plaintiff’s products have been sanctioned.”

It is the plaintiff’s contention, as deposed to, that the defendant’s said act is an unlawful activity by inducing their mutual customers to break their contracts with the plaintiff.  Also “ the terms of the said agreement are unreasonable, contrary to the public interest, has the tendency of creating a monopoly and amounting to a restraint in trade and has as a result compelled the plaintiff’s retailers to cease stocking their products.”

The plaintiff also says that “the conduct of the defendant is preventing the Ghanaian public from exercising its freedom to choose any alcoholic or non-alcoholic beverage in drinking bar or other authorised place where the plaintiff and defendant’s products are sold.”  The plaintiff also charges that  “the defendant’s act of inducement contravenes the tenets of social and economic liberty and prosperity particularly the liberty of the individual to trade with whom he pleases and the prosperity of the nation by expansion of the total volume of trade.”

As a result of all the foregoing, the plaintiff is saying that it has lost substantial income and continues to lose income, and so if the defendant is not restrained the plaintiff who has already suffered will continue to suffer extreme economic hardship and substantial inconvenience.

A copy of the agreement was annexed to the plaintiff’s affidavit.  In fact it is no different from the copy annexed to the defendant’s affidavit.  It is titled: “Guinness means profit” retailer scheme.  It has the following sub-headings to be filled in with appropriate details: (a) customer; (b) outlet name; (c) address; (d) distributor; and (e) period.  The terms and conditions are:

1.  I agree to stock both sizes of Guinness foreign extra stout (330 ml and 625 ml) and no other packaged stout or dark beer for the duration of the scheme.

2. I agree to stock both Malta Guinness packs (bottle and can) and no other non-alcoholic malt drink for the duration of the scheme.

3. I accept my target for the month of …. as follows ….

FES 330 ML ………………….FES 625 ML …………….

MG BOTTLE ………………… MG CAN ………………

…I would like to be included in the monthly award scheme.

4. I agree to display GGL advertising materials as specified and not to display advertising of any other stout/dark beer or malta.

5. I agree to make available to GGL personnel at all times my stock record book and distributor invoices for last month and this month (these will always be at the bar)

6. I will not disclose details of this agreement with anyone outside Guinness Ghana Ltd.

Signed by customer …………….

Signed by GGL representative ……….

This is the agreement which the plaintiff wants the court to restrain whilst the action to have it declared altogether void has not been determined. As expected, the defendant totally rejects this application.  By an affidavit in opposition filed on April 13, 1999 the defendant says “there is no law in Ghana that prevents the defendant from having an exclusive distribution agreement with some retail outlets with incentive bonuses.” It says also that the scheme covers only 183 out of the 7000 retail outlets in Ghana; that it is a purely voluntary scheme so a number of retailers offered it declined to partake, without losing the privilege of selling Guinness products.

The defendant deposed in the affidavit that the plaintiff withdrew Club Super Stout from the market long ago.  That the Castle Milk Stout was launched on March 26, 1999 and was delivered on the market on March 29, 1999, and just a day later this writ was issued.  And this new product which is the only product of the plaintiff with a semblance to the defendant’s stout was on the market as at the date the writ was issued.  That every consumer goes to a place where he can get the product he likes.  That the scheme is to enable the retailers to share in the defendant’s profits and this is a prudent business practice.  That the common law notion of restraint of trade is an archaic concept.  In the view of the defendant “it will be unfair and against fair market competition for an injunction to be granted against the defendant in relation to a agreement which is of benefit to the retail outlets who are happy, not coerced and who stand to benefit from incentives provided in the ….. scheme who will stand to lose a large amount of money if the scheme is terminated.”

In his argument, counsel for the plaintiff relied largely on their affidavit depositions already referred to.  He referred to clause 4 of the agreement which he submitted is in restraint of trade and designed to drive away competition from the market.  On the number of retail outlets with which the defendant has entered into the agreement, counsel said though it appears small in terms of numbers, yet it constitutes the choicest  and most lucrative in terms of volume of sales.  Counsel referred to statistical data annexed to an affidavit in which it is noted that the defendant’s activities cover the entire country and so counsel submitted the defendant does not need this scheme in order to remain in business, and thus the scheme aims at only stifling competition.  The state suffers if trade is not expanded and taxes paid accordingly.  The defendants are the market leaders with over 40% of the market so they have nothing to lose if this agreement is put aside.  Counsel cited certain authorities in support of his argument and I will refer to them in due course if it should become relevant or necessary.

For his part, counsel for the defendant cautioned that this being only an application for interim injunction, an order nullifying the agreement at this stage may cause a lot of damage if at the end of the day the agreement is upheld as valid.  He also cautioned against the use of statistics since they do not provide full proof evidence.

Counsel said the fact that there are some similarities in their products does not mean they are the same.  He said the action by the plaintiff is a panic move to ensure that the plaintiff’s new product gets a share of the market.  It was counsel’s submission that protecting a market share does not amount to an agreement in restraint of trade.  On public interest, counsel said the defendant is one of the largest tax payers in the country.  They also spend money to promote sports.

Counsel said the reference to Malta Guinness is not proper since the plaintiff does not produce a similar drink.  That even defendant’s own maxi malt failed on the market and this shows that the market is controlled by the taste of the consumers.  People go to particular bars for diverse reasons.

Counsel submitted that competition should not be looked at as restraint of trade, the two are clearly distinguishable. The agreement which is with just 3% of the retailers is no monopoly of the market. Counsel also submitted that the agreement has no binding  legal effect; also it is purely voluntary. Contrary to what plaintiff is saying, it is rather the plaintiff who is seeking, by this action, to compel the other contracting parties to break their agreement with the defendant.  Counsel said to grant this application will be prejudging the entire case.  He suggested, therefore, that the court restricts the time within which the case shall be heard.

It is common knowledge that the grant of an injunction is an equitable remedy which, though has crystallised into written rules of practice, is still largely a matter for the court’s discretion having regard to the facts and circumstances of the case.  Therefore as the numerous authorities on the subject agree, the court must examine each case on its own merits applying the law, where appropriate.  And in this exercise great emphasis should not be placed on decided authorities unless they have a direct or significant bearing on the facts confronting us, or they are general principles decided upon by a superior court as applicable to particular issues or questions.  But even such general principles are to be applied against the background to the case.  One of such principles applied by English courts is that it is not the practice of the court (except by consent) to grant on an interlocutory application, an injunction which will have the practical effect of granting the relief claimed, see DODD VS. MARINE WORKERS UNION (1923), 93 L.J. Ch. 65.  But even here the court will not desist from granting an interim injunction as will be necessary to prevent an irreparable damage; it is equally entitled to say whether there is a legal basis for the relief endorsed on the writ upon which the application is founded.  In this country, the Court of Appeal has said that there are substantial reasons why pronouncements in interlocutory applications which pre-determine the issues for trial should not be encouraged.  That was in the case of VANDERPUYE  VS. NARTEY (1977) 1 G.L.R. 428.  See also ARMAH VS. LANDS COMMISSION, ACCRA AND OTHERS (1979) G.L.R. 79 holding 1. By these decisions, it must not be understood that they lay down any rule that the court must not examine the parties’ respective case; for, as held in the VANDERPUYE VS. NARTEY case (supra), the court must be satisfied that the claim is not frivolous or vexatious, in other words, that there is a serious question to be tried.  What the court is not expected to do is to make findings of fact or to determine the issues.

To make a decision on such application easier, the English courts look for a legal right in the applicant and then go on to find whether that right is abused or threatened or irreparable damage or injury is caused to that right.  But the emphasis has been on infringement or threatened infringement to the established legal right; the other considerations come into play subsequently especially where the injury is found to be substantial and not trivial.  On these principles see these cases: 1 CORPORATION OF BIRMINGHAM VS. ALLEN (1877), 6 CH. D. 284;

2 BALLARD VS TOMLINSON (1884) 26 CH. D. 194;

3 KING VS. BROWN. DURRANT & CO. (1913) 2 CH. 416;

4 ARMSTRONG VS.  SHEPPARD AND SHORT , LTD. (1959) 2 Q.B. 384 C.A.

5 LUGANDA VS. SERVICE HOTELS LTD (1969) 2 ALL E.R. 692, C.A.

In the first case listed above, it was stated that an injunction will not be granted to restrain a threatened and irreparable injury, however serious, unless the plaintiff’s legal rights will be thereby invaded.  The third case listed above decides that an injunction will be granted though no pecuniary damage is proved if the acts complained of will result in infringement to the plaintiff’s legal rights. I think that unless a party can establish a legal right which is capable of being protected by an interlocutory injunction and which is clearly violated or being violated and such violation should be stopped  or the complaint is about a threatened violation of the right which may be prevented by a quia timet injunction, the court will have no justifiable basis to interfere before the parties’ rights are finally determined in the action.   This principle of establishing a legal right underlies the various concepts employed by the courts in dealing with application for interim injunction.  So that when the case of VANDERPUYE VS. NARTEY (supra) decides that there must be a serious question to be tried, it means no more than that the applicant must satisfy the court on the pleadings, if any, or by affidavit evidence, that he has some right which has been, or is threatened to be, infringed unless the respondent is restrained.

On the general principles applicable to such application, some useful guide was given by the Supreme Court in the case of IN RE YENDI SKIN AFFAIRS; YAKUBU 11 VS ABDULAI (1984-86) 2 G. L.R. 231 at pp. 235-236, per Adade J.S.C. who delivered the opinion of the court, as follows:” ……… it is relevant to observe that these courts have consistently operated on the principle that where two parties are litigating, every care must be taken to ensure that the party who eventually wins does not find his judgment useless in his hands ………. the courts try to hold the balance evenly between the parties so that one does not take undue advantage of the other during the course of the litigation.  These principles are applied, subject to the balance of convenience in a particular situation and to the hardship which the making or refusal of an order may have on one or the other of the parties.”

A similar reasoning was adopted in the case of ODONKOR AND OTHERS VS. AMARTEI (1987-88) 1 G.L.R. 578, S.C. AT P. 581, where it was held that “the basic purpose of interim order is, as much as possible, to hold the balance evenly between the parties, pending a final resolution of matters in difference between them, and also to ensure that at the end of the day the successfully party does not find that his victory is an empty one, or that brings him more problems than blessings.”

What right/s then is the plaintiff seeking? Has any right of the plaintiff been violated by the defendant? Is any right of the plaintiff being violated or threatened with violation by the defendant? Or is it the case that the defendant, by the agreement has caused or is causing or threatens to cause substantial or irreparable damage to the plaintiff? Answers to these questions will help us determine this application with much success.

It is necessary then to consider the grounds for the reliefs sought.  These are: 1. that the agreement is seeking to monopolise the market; 2. the agreement is in restraint of trade; 3. the agreement is inducing their common retailers to breach their legal obligations with the plaintiff; 4. the agreement has caused and is causing harm to the plaintiff.  And the plaintiff contends that as a result of the foregoing it has suffered and continues to suffer financial loss.  And on the question of convenience and hardship, plaintiff  contends that the defendant has nothing to lose if the application is granted since it already controls a substantial share of the market.  I am proceeding , therefore, to consider these points raised and the response of counsel for the defendant.

To begin with, the issue of monopoly.  At common law the High Court has power to hold an agreement void as creating an unlawful monopoly. The agreement must be considered in the light of all the surrounding circumstances, including agreements made between the parties and third persons, and the benefit that it accrues to the public.  Generally speaking, such an agreement is not illegal and does not give any cause of action to a third person injured by its operation; see para. 74 of Halsbury’s Laws of England, vol. 47, 4th edn. At page 66 of this book is found this relevant passage:” …..it  is no monopoly if the control, being lawfully and fairly obtained, is limited to particular persons or places or to a particular kind or make of article for which a substitute is obtainable ….” In the footnote, these cases are cited: SERVAIS BOUCHARD VS. PRINCES’S HALL RESTAURANT LTD. (1904) 20 TLR 574, CA and BRITISH OXYGEN CO VS. LIQUID AIR LTD. (1925) CH. 383, and the principle deducible from them is that an agreement by one trader to take a particular class of goods  exclusively from another is not in restraint of trade, thus such an agreement does not seek to do anything illegal or unreasonable.

Thus the plaintiff must succeed in satisfying the court that the agreement seeks to control the market to the exclusive benefit of the defendant and the other parties to the agreement.  By the agreement the retailer is not to stock any other stout or dark beer or advertise any such products other than the defendant’s.  The effect of this, according to the editors of Richard Whish’s book Competition Law 3rd edition, which counsel for the plaintiff graciously made available to me, is that it is a demerit of the exclusive purchasing agreement (such as the one in question) that it may seek to “foreclose the market to other manufacturers and that they prevent the purchaser acquiring goods more cheaply elsewhere; this in turn may deprive the ultimate consumer of the benefit of lower prices.” But in this case there is no competition as to the prices of these products.  The consumers, whose interest may be sought, do not select beer products based on competitive prices since the prices are almost always the same.  This is the factual situation in this country of which judicial notice may be taken.  So it is not possible to say the consumers are deprived of the benefit of lower prices where there is an agreement to foreclose other producers; one may only talk about not having a particular brand.  But that hardly passes for a monopoly.

In my view the applicant must show that really this agreement is monopolising the market.  The statistics provided show the defendant controls 25% of the beer market.  And the report from which these statistics were produced did not say the defendant’s market share has shot up as a result of this agreement.  So that as of now the evidence is not available to show how the agreement has led to a monopoly of the market by the defendant.  It may well be forthcoming at the trial and this is necessary in view of the common law principle that agreement limited to particular persons and places is no monopoly if it is fair and reasonable.  Fairness and reasonableness are matters of law for the court to decide in the light of the facts.  The plaintiff is saying the 183 retailers with whom the agreement was entered constitutes a good part of the market. That is not enough, we must know how far their failure to stock the plaintiff’s products is assisting the defendant to monopolise the market.  It is also not enough to say it is monopolistic, and thus contrary to public policy or public interest without giving us any idea how the consuming public is losing something by the agreement.  It will be unreasonable if there is a covenant in the agreement against competition per se, see: McELLISTRIM VS BALLYMACELLIGOTT CO-OPERATIVE AGRICULTURE AND DAIRY SOCIETY  LTD. (1919) A.C. 548 per Lord Birkenhead, L.C. But on the face of the agreement one cannot talk of an outright monopoly, it could pass for sale promotion too; the evidence will decide what it is.  In these circumstances it is my view that it is unfair to grant an injunction when the court is not satisfied that a serious issue is raised as regards the agreement being monopolistic of the market.

Next, it is argued that the agreement is in restraint of trade.  In an earlier ruling given in this same matter on April 30, 1999 I held, inter alia, that a third party, who is injured in his person or pocket by an agreement to which he is not privy may still seek a declaration that it is void on ground of public policy or public interest I venture to add that if such a party is able to satisfy the court that his commercial interests are harmed he may also sue for a declaration.   This is based on the common law notion of freedom to trade in a reasonable way without harming another’s interest.  If there is a contract which fetters an existing freedom, it can be said to restrain trade, but it is not so if it opens a door by providing a party a new economic opportunity.

In this case there is no doubt that by the agreement the retailers who have signed it are limited as to what products they can sell or advertise.  But the defendant is saying that it is a reasonable agreement as it enables the retailers to share in the defendant’s profits.  And I remember counsel saying so far some 69 million cedis has been paid to the retailers as bonus under the scheme.  The defendant says it is a sales promotion agreement and that the plaintiff too has been conducting sales promotion of one kind or another.  Thus prima facie there appears to be nothing wrong with the agreement since the parties to it who may complain that it is restrictive against them are not complaining.  Thus the onus is on the plaintiff who is attacking the contract to show that the restraint, if any, is injurious to it and especially to the public.  See page 319 of the ESSO PETROLEUM case (supra), per Lord Hodson.  Since on the face of the agreement per se it does not infringe any known public policy, its reasonableness and fairness is to be presumed in defendant’s favour until the contrary is proved.  And so too any injury suffered by the plaintiff or the public is to be established clearly.  Before then the issue of restraint of trade does not seriously arise so as to attract any sanctions, albeit interim, at this stage in the proceedings.

The third limb of the argument centres on what the plaintiff claims is an inducement by the defendant, by virtue of the agreement, to the joint customers to breach their obligations with the plaintiff.  I have held in the earlier ruling in this action on 30 April, 1999 that an agreement whereby one party is induced to break his agreement with a third person is contrary to public policy and is thus actionable per se, without proof of damage.  In the book by Richard Whish that I referred to earlier, the learned editors put it this way at page 58: “An action may be brought against someone who intimidates a third party into harming the plaintiff, or against a defendant who wrongly interferes with the plaintiff'’ s trade or business."

So we begin by asking whether there is any agreement between plaintiff and the 183 retailers with whom the defendant has entered into the present agreement.  It is agreed on the pleadings that these are joint customers of the parties.  But if a person is your customer, does it necessarily imply or mean that there is an agreement between the two of you? I think not.  A customer, as I understand it, is not bound to take goods from any particular person to sell in the absence of a binding agreement, written or otherwise.   The Oxford Advance Learner’s Dictionary defines “customer” to be a person who buys something from a tradesman, shop, etc.  And it appears from the pleadings that it is this ordinary meaning that is meant by  “joint customers”;  that is , retailers who sell the products of both the plaintiff and defendant.  The plaintiff  is yet to provide any evidence to show that these retailers are indeed under any obligation, legal or otherwise, to sell their products, even though it is a relief endorsed on the writ.  I cannot conjecture what sort of evidence plaintiff intends to rely upon to establish this particular relief.  But it is necessary for this court to be satisfied that there is a contract between plaintiff and the retailers, or any of them, the performance of which he is interested in, and thereby  giving him a legal right, and that the defendant had entered into this agreement with those retailers or any of them, and so on the face of it a serious question of inducement to break one’s contract arises.  As it stands now, I do not know, because it has not been disclosed, the nature of the legal relationship, if any, that exists between the plaintiff and those retailers, whether it is based on a written or oral contract, or even on a custom of trade.  The court will not see its way clear in granting an injunction in these circumstances.

The final limb of this argument deals with the financial loss the plaintiff says the agreement has caused and continues to cause it.  The plaintiff has averred that some of the retailer customers who entered into the agreement with the defendant returned stock which had been supplied them, and have ceased to stock the plaintiff’s products.  These averments were denied by the defendant in its statement of defence.  It is the law that “in a proper case a valid covenant in restraint of trade may be enforced by injunction notwithstanding that it provides for the payment of a sum by way of liquidated damages; however, the covenantee cannot claim both the sum by way of liquidated damages and an injunction, but must elect between the two.  Election may be made in the statement of claim, and is not affected by the fact that both remedies have been claimed in the writ,” quoting from para.  63 of  Halsbury’s laws, 4th edn. Vol 47. The plaintiff is not a party to the said agreement.  I am unable to fathom the reason why a party has to elect between a claim for damages and an injunction in matters in restraint of trade.  But since all the cases referred to in the passage from Halsbury’s which I quoted above, dealt with parties to the contract who claimed liquidated damages, it may not be an appropriate authority in a case where a third party seeks general damages and an injunction only.

In a case like this, as was rightly stated in Richard Whish’s book (supra) at p.55 the case of MOGUL SS CO. VS. McGREGOR, GOW AND CO. (1892) AC 25; (1891-94) ALL ER REP. 263 HL still remains an authority for the proposition that a plaintiff cannot recover damages for harm inflicted by the operation of a contract which is in restraint of trade.  The English courts have tried to get around the rather harsh effect of this common law principle by granting declarations that such agreements are void, see EASTHAM VS. NEWCASTLE UNITED FOOTBALL CLUB LTD.  (1964) CH. 413, and were prepared to grant an injunction in NAGLE VS. FIELDEN (1966) 2 Q.B. 633; (1966) 1 ALL ER 689 CA. Similar reliefs were granted in these cases:

1. DICKSON VS. PHARMACEUTICAL SOCIETY OF GREAT BRITAIN (1967) CH. 708; (1967) 2 ALL ER 558 CA, which was affirmed by the House of Lords as reported in (1970) AC 403, (1968) 2 ALL ER 686;

2. GREIG VS INSOLE (1978) 3 ALL ER 211; (1978) 1 WLR 1520.  In these cases the plaintiff’s opportunity to work had been affected by the monopolistic or quasi-monopolistic power of some trade association or trade union.  But the principle is equally applicable to a plaintiff whose commercial interests are injured  by a contract in restraint of trade.  Yet the position of the law remains that a third party may only recover for declaration and an injunction, but not damages.

It appears to me therefore that no serious question of damages arises in law.  And granting that the law permits the plaintiff to recover damages yet it must satisfy this court that it has lost something substantial and that irreparable damage will be caused it if this application is not granted.  The plaintiff has so far concentrated on what the defendant is deriving from the market, it is not telling the loss it has incurred and continues to incur.  It has not told us, for instance, how much it was earning prior to the agreement and whether the earning has reduced since then.  All the statistics provided have concentrated on the defendant but even  these do not actually disclose a rise in the defendant’s earnings  and a corresponding  drop in the plaintiff’s.  Bare assertions will not do even in such applications, there must be a serious question in law or fact raised.  This argument is also not satisfactory.

In conclusion, it is to be stated that this agreement involves two parties who so far want to continue with it.  The court must respect parties’ freedom to contract and give effect to a contract freely and voluntarily entered into.  It may intervene only where there is satisfactory evidence that it is in restraint of trade, monopolistic, an inducement to the mutual retailers to break their agreement, if any, with the plaintiff;  and that it is unreasonable, unfair and contrary to public interest or public policy.  However, to ensure that any delay in the hearing may not work any hardship, I propose to conduct an expeditious hearing with the co-operation of counsel.  On that note I dismiss the application without costs.

(Sgd.) A. A. BENIN J.A.

JUSTICE OF THE HIGH COURT.

COUNSEL

FUGAR for the plaintiff/applicant

OKUDJETO for the defendant/respondent

 

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