Judgments - Hamilton and others (Appellants) v. Allied Domecq Plc (Respondents) (Scotland)

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    33.  At the hearing of the reclaiming motion the defenders' counsel submitted that Mr Hamilton's mistake about the date and place tended to suggest that the Lord Ordinary should not have relied on his recollection of what was said. Lord Marnoch considered that, at the very least, this was a matter that must be taken into account when assessing the reliability of his evidence. Since there was nothing to show that the Lord Ordinary had taken the point into account, Lord Marnoch considered that the matter was at large for the Division and he, for his part, would have found it difficult to attach any importance at all to Mr Hamilton's evidence on the point: 2006 SC 221, 257, para 122. By contrast, while aware of these criticisms of Mr Hamilton's evidence, Lord Hamilton proceeded on the basis that, so far as it went, it was both truthful and accurate: 2006 SC 221, 246, para 97. The Lord Justice Clerk agreed with both Lord Hamilton and Lord Marnoch. In adopting his approach, Lord Hamilton had regard to the fact that, in cross-examination, Mrs Swanson had adopted what he described, at p 243, para 88, as

    "a somewhat relaxed approach to the places and dates of meetings, concentrating more on the terms and substance of what may have been said, wherever and whenever that may have been."

Considering the opportunity which the Lord Ordinary had to observe Mr Hamilton giving evidence, and considering also the attitude adopted by Mrs Swanson at the proof, I prefer to approach the matter in the same way as Lord Hamilton. Proceeding, therefore, on the assumption that Mr Hamilton's evidence is to be regarded as truthful and accurate so far as it goes, what does he say that Mr Beatty said on the matter?

    34.  The first important passage comes in his evidence in chief where he was asked what he had said to Mr Beatty about why the pursuers wanted to go into the deal with the defenders:

    "That Allied was bringing the power of its distribution to this deal, and we were bringing the technology of the water business.

    Yes. When you spoke about it bringing its power of distribution, did you discuss within that concept any particular area of distribution, to any part of the trade? Were you looking at retail, at HORECA or what? - We were very definitely discussing HORECA.

    Discussing HORECA? - Yes.

    Yes. So you were looking for Allied to bring in access to HORECA? - Yes.

    Yes. And was that made quite clear to Mr Beatty? - Oh, it was crystal clear to him.

    And what was Mr Beatty's response to the suggestion that you were looking for Allied to bring access to HORECA to the deal? - His answer to that usually was that it was in Allied's interests to cover the distribution in all sectors.

    Yes? - And this was something they could do.

    Could do or would do? - 'Would do' was the implication .

    Yes. Well, you were saying they wanted your expertise, you wanted their distribution to HORECA ...? - Yes.

    … in particular? - Yes.

    And whatever exact words were used, they were giving you the impression that they would do it? - Yes."

Although the point was taken up in cross-examination, Mr Hamilton's later evidence added nothing of significance.

    35.  Taking this passage in his evidence at its highest in favour of the pursuers, it merely shows that Mr Beatty said that it was in Allied's interests to cover the distribution in all sectors and that this was something that they would do. The reply is hardly surprising: since the defenders were going to put £6 million into a company that hoped to sell large quantities of bottled water, it would plainly be in their interest to cover distribution in all sectors. What is missing is any indication that the defenders would distribute the product to both the on-trade and off-trade sectors simultaneously from the outset. I respectfully agree with Lord Hamilton's analysis of the passage: 2006 SC 221, 247, para 99.

    36.  Mr Clark suggested that an inference that there would be distribution to the on-trade immediately could be drawn from another passage in Mr Hamilton's evidence in chief where he was discussing the Britannia problem. Mr Hamilton said that he had discussed this problem with Mr Beatty

    "to the extent that, had he got it in his Water Division, would there be a problem in getting Britannia for the distribution in the HORECA trade? I was given an assurance that that would not be a problem once he had got the matter resolved, and it was really a courtesy to sort out the problem with Britannia, and he was choosing his moment, his timing and his method of handling it with the other parties.

    Right. So there was the shareholding problem? - Yes.

    But, on the back of that, on the back of whatever deal he struck with Britannia on shareholding....? - Yes.

    There was the understanding from him...? - Yes.

    That once the deal was in place you would get access to the HORECA trade? - Yes."

Mr Clark said that there was no suggestion of a gap in time between any deal over Britannia and the pursuers getting access to the on-trade. The simple fact, however, is that the passage does not contain anything which shows Mr Beatty actually saying that the strategy would be that Gleneagles would have access to the on-trade as well as to the off-trade from the beginning.

    37.  Mr Clark also drew attention to a passage in the cross-examination of Mr Hamilton:

    "Isn't that the case that when you were discussing distribution with Mr Beatty he talked about distribution through the existing sales networks that we have talked about previously, the spirits division or the food division, and said that Britvic would be a possibility, but he didn't give you any guarantees in that regard? - I have never had written guarantees, nor have I asked for them, but I have had discussions in which David Beatty told me that he was in fact organising the whole position to get us into Britvic, and it was being done by this device of presenting the option to Britvic to make the investment directly, or to take over the investment. This was part and parcel of his negotiating strategy."

Again, whatever the exact import of the passage may be, there is nothing which actually points to Mr Beatty having said that the defenders would arrange distribution to the on-trade through Britvic from the outset.

    38.  Mr Clark indeed acknowledged that there was only one place in the transcript where he could point to any specific words which might suggest that Mr Hamilton had referred to distribution to the on-trade being envisaged from the outset. The passage in question comes in Mr Hamilton's re-examination:

    "Now, before I come on to the completion meeting, if I may move back very briefly to the May, you have indicated that you can't say precisely which - you have told us there were several meetings in May? - Yes.

    You can't say precisely which meeting in May you spoke to David Beattie? - That is correct.

    Yes, but you spoke in chief about having put it to him - made it quite clear to him that you needed access to the on-trade; is that right? - Yes.

    To Britvic? - Yes.

    And what is your recollection at that meeting of his response? - Basically he understood that this was a component of getting the company off the ground.

    Yes. And did he say anything to you about his ability to do so, or anything of that nature, can you recall? - I have the - or had the - impression that this was something that he could achieve and deliver from the way he presented to me. To try to put specific words at this stage, I really couldn't do.

    Are you satisfied in your own mind, however, you put it to him that this was a necessary component ...? - Yes.

    ... of the deal you wanted to do? - Yes.

    Yes. And did he demur to that in any way? - He - there was an acceptance that this was a fact, that we needed this in the deal."

    39.  Both Lord Hamilton, 2006 SC 221, 248, para 102, and, indeed, Mr Clark in his submissions at the hearing seemed to think that the significance of the evidence was somehow reduced because it was given in re-examination. For my part, I would attach no particular importance to that factor: the value of evidence depends on its quality, not on the stage at which it is given.

    40.  On the other hand, I note that the question which elicited the important answer asked what Mr Beatty's "response" had been to Mr Hamilton saying that they needed access to the on-market. A response can come in various forms. Perhaps unsurprisingly therefore, the very first word of Mr Hamilton's reply ('Basically') immediately shows that he is not purporting to recall exactly how Mr Beatty responded - far less to give the exact terms of anything which Mr Beatty might have said. Mr Hamilton is just recalling that the purport of Mr Beatty's response was that he understood that access to the on-trade was a component of getting the company off the ground. A measure of interpretation by Mr Hamilton may well be involved.

    41.  Lord Hamilton considered, 2006 SC 221, 248, para 102, that "'getting the company off the ground' could equally refer to making Gleneagles a commercially viable entity (the ultimate objective), as it could to the strategy to be adopted from the outset to achieve that end.'" I doubt that. If - as Lord Hamilton thought and as may well be the case - Mr Hamilton was giving his interpretation of Mr Beatty's response, then his interpretation would undoubtedly have been that Mr Beatty was saying that there would be access to the on-trade from the outset. So Mr Hamilton would have used the words "off the ground" with that meaning. On the other hand, if Mr Hamilton was purporting to recall some specific words of Mr Beatty, I do not agree that they could "equally" refer to the ultimate objective of making Gleneagles a commercially viable entity. The phrase "off the ground" is a comparative newcomer to our language and must be a somewhat decayed metaphor from flying. Whatever its ultimate destination, a 'plane, or indeed a bird, gets off the ground at the beginning rather than at the end of its flight. In my view the more natural meaning of the evidence would be that Mr Beatty understood that access to the on-trade was to be a component of the strategy from the beginning.

    42.  Nevertheless, as Lord Hamilton notes, it is interesting to see that, after this particular answer, with a little further prompting, the witness said that there was an acceptance by Mr Beatty that the pursuers needed this in the deal. Yet, the one thing that is certain is that neither this nor anything else about distribution was to be found in the deal as finalised in the subscription agreement.

    43.  Weighing up all these considerations, I do not regard this passage, even on its face, as providing a sufficiently clear basis for the Lord Ordinary's finding that, by what he said, Mr Beatty led Mr Hamilton and Mr Douglas to believe that he agreed with Mr Hamilton that Gleneagles should try to penetrate the on-trade as well as the off-trade from the beginning. It is much too oblique an answer. If it was to be the linchpin of the pursuers' case, the answer should have been clarified.

    44.  I am reinforced in that view by the fact that - as Mr Keen QC pointed out - when senior counsel came to cross-examine Mr Beatty, he did not put it to him that he had said that access to the on-trade would be a component of getting the company off the ground. Nor did he challenge his recollection that the strategy would be to concentrate on the off-trade and then move on to the on-trade:

    "And did you also discuss or do you remember rather whether you discussed the benefit of a branded presence in the HORECA trade which would give a spin-off into the branded retail sales? Do you remember discussing that? - I was always aware that Mr Hamilton had aspirations that the brand ought to be distributed in what I would call the on-trade as well as the off-trade. That was never in dispute.

    Yes, your position yesterday, your recollection yesterday was that there was an agreement almost from the outset that you would concentrate on the off-trade and then move on to the on-trade? - Absolutely.

    Now, to the best of your recollection, that was your understanding at the time, is that the position? - Yes.

    So, presumably, one would have to be in the on-trade for a period of months or a period of years...? - The off-trade.

    In the off-trade for a period of months or a period of years before one makes serious impact on the on-trade. You were envisaging brand building through the supermarkets and such things and then on the platform of that you would move into the on-trade because people, having seen it in the supermarket, you could say to the pubs and hotels, look, this is something that is very popular in the off-trade, you should be stocking it. Was it that sort of arrangement you envisaged? - That was the way I envisaged it.

    So the on-trade in a sense might be a couple of years down the line, is that really it? - It could be and, if it came forward earlier, then that is fine.

    But it was the secondary step? - As far as I was concerned, it was the least volume, the most difficult and carried with it the least amount of consumer awareness. People tend to order water in the on-trade and they get water. It doesn't really matter to the restaurateur, the pub owner or indeed the consumer what they get. If they go to a supermarket, they have a choice and they pick up the brand of their choice and that is the way I saw this operating.

    I see, and you are clear about that recollection? - Absolutely."

    45.  The Lord Ordinary accepted, at para 15 of his opinion, that Mr Beatty was a credible witness, but made no overall assessment of his reliability. He also noted, at para 45, however, that it was not suggested to Mr Beatty that he was mistaken in giving this unqualified evidence that the initial move was always intended to be into the off-trade. That being so, it is hard to resist the conclusion that, if Mr Beatty had in fact represented that there would be simultaneous distribution to the on-trade and off-trade from the outset, he would have been not merely negligent, but dishonest. Of course, there is no hint of an allegation of dishonesty or fraud in the pursuers' pleadings or in their conduct of the case. Moreover, as Lord Marnoch noted, any such conclusion would seem to be inconsistent with the certificate of credibility which the Lord Ordinary gave Mr Beatty: 2006 SC 221, 259, para 125. All this confirms that it would not be safe to rely on the single answer in Mr Hamilton's re-examination as a basis for finding that the pursuer has established the necessary misrepresentation by Mr Beatty.

    46.  For these reasons, which are, in very large measure, the same as those given by the Second Division, I am satisfied that the evidence did not warrant the Lord Ordinary's finding that Mr Beatty misrepresented the position to Mr Hamilton. I would accordingly dismiss the appeal. The appellants must pay the respondents' costs.

LORD WALKER OF GESTINGTHORPE

My Lords,

    47.  I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Rodger of Earlsferry, and for the reasons he gives I too would dismiss the appeal.

LORD NEUBERGER OF ABBOTSBURY

My Lords,

    48.  I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Rodger of Earlsferry, and for the reasons he gives I too would dismiss the appeal.

 
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