The Crehan verdict
The "big man wins again" was how licensee Bernie Crehan summed up the loss of his landmark court case in a statement last week. The licensee had taken on the might of former pub company Inntrepreneur, which is backed by Japanese bank Nomura, claiming the beer-tie caused the failure of his business.
For 13 years he has fought the case, being blacklisted from other pub companies, being unable to work and fighting against bankruptcy. The tie, he alleged, allowed the company to maximise rent while supplier Courage maximised its beer prices.
He claimed these unfair terms between 1991 and 1993 made it impossible for his two pubs in Staines - the Cock Inn and the Phoenix - to compete, leading to the collapse of his business and losses of £1.3m. He also owes Inntrepreneur something in the region of £17,000 from that time.
The long-running case was forced to go to the European Court of Justice for a ruling which claimed that his beer-tie was in breach of European competition law. But the case failed at the final hurdle on July 19 with the House of Lords overruling that decision and finding in favour of the Japanese bank-backed company.
Obviously disappointed to lose the case Bernie Crehan has spoken exclusively to The Publican. He says he was not shocked by the ruling as things were not looking positive in June when the House of Lords refused to hear submissions on potential damages and the case was brought to an abrupt halt.
He said: "I was expecting it really as the House of Lords was very hostile against the barristers and it looked to me like a set-up job."
During the Lords hearing he says he felt the case was not being taken seriously. "As far as I am concerned he (the judge) had his mind made up before the case started. I am sorry for all the other litigants but I did my best for them. That's the way life is.
"I'm not disappointed because the big man wins again. Not to worry, life goes on."
But for the 600 licensees that have been waiting for the ruling of this case it's a desperate situation with many facing legal action from Inntrepreneur for bills left over from their failed pubs. Many licensees went bankrupt owing Inntrepreneur thousands of pounds in arrears.
Ken Lindsay has been forced to make himself bankrupt following the loss of the case. He ran the Silver Fox in Norwich between 1989 and 1994 and says the beer-tie crippled his business.
He owes Inntrepreneur in the region of £150,000 costs for losing a previous case he took against the pubco for misrepresentation and is fearful it will want to pursue him. He says going bankrupt was the only "practical thing" to do.
"It's inconceivable that the highest court in the land has been over- turned in the House of Lords," he said.
However, there is still a hope for Mr Crehan and the licensees involved. Rupert Croft, partner at lawyers Maitland Walker, says Inntrepreneur has never pursued Mr Crehan for the costs, which could have made him bankrupt.
"We are hopful that it is going to take the same reasonable approach to the other cases," he added.
Trudy Feaster-Gee is competition lawyer and legal director at law firm Addleshaw Goddards Leeds office
The House of Lords' ruling in the Crehan saga is clearly discouraging for other publicans with claims similar to Mr Crehan. Although the decision does not undermine the principle established by the European Court of Justice that damages must be an available remedy for breach of EC competition law, the House of Lords held that there was no breach.
For any agreement which has an apparent restriction on the face of it (eg obliging publicans to source beer from certain suppliers only), competition law will prohibit such an agreement only where it gives rise to a significant restriction of competition.
In seeking to establish a significant restriction, the courts will look at the overall effect of the network of similar agreements used by the beer supplier and also the networks of its competitors.
Where a market benefits from sufficient competition between rival suppliers and their pub chains, particularly where there is plenty of consumer choice and price competition at the retail level, the courts and regulators are not in a strong position to intervene under the general competition rules. The ruling here will undoubtedly influence the UK courts in any similar cases which are currently going through the system.
How did the Crehan case turn out to be such a landmark case and how did it all start?
March 1993: 30 licensees armed with banners protest outside Inntrepreneur owner Grand Met's AGM. Lease failures in the past six months had shot up to more than nine per cent, from an average of 4.5 per cent
October 1994: A case is brought against Bernie Crehan by Courage for non-payment of a trade debt. For the first time Inntrepreneur admits the lease is in breach of Article 85 of the Treaty of Rome which outlaws uncompetitive practices
1997: Japanese bank Nomura purchases Inntrepreneur
October 1998: Inntrepreneur wins an initial victory in the case. A High Court judge rules that Crehan will be bound by another court decision which says that the tie was unlawful but that tenants cannot sue because they signed the agreement
September 2001: Hundreds of licensees are given the green light to press for damages as former licensee Mr Crehan wins his test case against the pubco and Courage in the European Court of Justice
March 2002: Thousands of publicans are expected to press for damages after a new advertising campaign invites licensees to submit claims
February 2003: The dispute hits the High Court
July 2003: Both sides claim partial victory. The judge rules that the terms of the beer tie caused Mr Crehan's business to fail but rules that Inntrepreneur's agreement did not breach European competition laws
February 2004: Crehan asks the Court of Appeal to rule on whether the tie was unlawful
May 2004: The Court of Appeal rules the beer-tie did break European law. Mr Crehan is awarded £131,336 damages with interest
June 2004: The Court of Appeal gives both sides permission to appeal to the House of Lords
April 2005: The case is delayed as Mr Crehan has to apply for funding to pay for the case
June 2005: Mr Crehan faces bankruptcy and a loss of legal aid
May 2006: Spiralling costs and intervention by the Office of Fair Trading could delay the case
June 2006: The Lords refuses to hear submissions on potential damages
July 2006: The Lords overturns the Court of Appeal ruling from 2004 and finds in favour of Inntrepreneur.
