Coolmoyne and Fethard Co-Operative Creamery, Ltd, v Bulfin

JurisdictionIreland
Judgment Date11 December 1916
Date11 December 1916
CourtKing's Bench Division (Ireland)
Coolmoyne and Fethard Co-Operative Creamery, Ltd.
and
Bulfin (1).

K. B. Div.

Appeal.

CASES

DETERMINED BY

THE KING'S BENCH DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL,

AND BY

THE COURT FOR CROWN CASES RESERVED.

1917.

Restraint of Trade — Co-operative Creamery Society Registered under the Industrial and Provident Societies Act, 1893 — Rules — Member bound to supply all the Milk of all his Cows — Prohibition of Competition — Public Policy — Breach of Contract — Damages.

Rules of a Co-operative Creamery Society registered under the Industrial and Provident Societies Act, 1893 (the shares being transferable only with the consent of the committee of the Society), bound the members not to sell the milk of their cows, produced within a certain defined area, “to any creamery other than a creamery of the society, or to any company, society, person, or persons who sell milk or manufacture butter for sale.”

Held by the Court of Appeal, affirming the decision of the King's Bench Division, not to amount to an illegal restraint of trade, nor to create such a monopoly as to offend against public policy.

As a general rule, parties to a commercial agreement are free to enter into a combination to carry on a trade or business together for their own interest, provided such a course of action is undertaken without a view to injure others; and the law regards the parties as the best judges of what is reasonable as between themselves.

Agreements regulating the relations of parties inter se, while members of a trading association or partnership, or during a contract of service, and imposing a restraint on individual trading, must be differentiated from restrictive covenants in the case of such persons after they have ceased to be members of the association or partnership, or have left the employment.

Judgment of Holmes L.J. in Tipperary Co-operative Creamery Society v. Hanley, [1912] 2 I. R. 580, commented on.

Case Stated for the opinion of the King's Bench Division by Gibson J. at the hearing by him at the Clonmel Spring Assizes, 1916, of a civil-bill appeal from a decree for £20 damages in favour of the plaintiffs given by His Honour the County Court Judge for the South Riding of Tipperary.

The plaintiffs, the Coolmoyne and Fethard Co-operative Creamery, Ltd., sought to recover from the defendant the sum of £20 as damages for breach of contract. The contract was

contained in Rules 5 and 6 of the amended rules of the Coolmoyne Co-operative Creamery, Ltd., of which the defendant was a member.

The plaintiffs had originally carried on their business under the name of the Coolmoyne Co-operative Creamery, Ltd., under rules somewhat different from those relied on in the present case. On the 11th May, 1914, the Coolmoyne and Fethard Co-operative Creamery, Ltd., was established with amended rules which were duly registered under the Industrial and Provident Societies Act, 1893, on the 29th June, 1914. The amendment was designed, inter alia, to remove the difficulty caused by the decision in Tipperary Co-operative Creamery Society v. Hanley (1).

Under Rule 5 the society consisted of special members and of persons resident in, or occupying dr grazing lands in certain townlands within a defined area adjoining the creamery. The operations of the society extended over eight to ten square miles of country, and 1400 or 1500 shares of £1 each had been allotted to 180 allottees. The centre of the creamery was at Coolmoyne, and there were three auxiliary branches. The only village in the plaintiffs' district was Fethard, with a population of 1600, where alone sales to private consumers would be made. The number of these consisting of artisans and labourers was left uncertain, but over ten families were supplied as private consumers.

Rule 6 (2) provided that “After the society shall have started a creamery for its members, no individual member of the society, so long as he continues a member thereof, who shall have milk to sell, the produce of a cow or cows kept or grazed on lands within the area defined in Rule 5, shall, without the written consent of the committee first obtained, sell any such milk to any creamery other than a creamery of the society, or to any company, society, person, or persons who sell milk or manufacture butter for sale. Any member of the society committing a breach of this rule shall pay to the society, as and for liquidated damages, and not by way of penalty, the sum of one shilling per cow per day for every cow's milk sold contrary hereto.” Under Rule 6 (1), the society was bound to accept from all members milk delivered fresh and

in good condition at the creamery of the society, and to pay for it at the current price, to be fixed by the committee of the society, at the time of delivery. It was also bound to pay by way of liquidated damages the sum of one shilling per cow per day for every cow's milk not so accepted, to every member in respect of whom default was made.

Under Rule 27 no member could divest himself of his shares without the consent of the committee.

The society was affiliated with the Irish Agricultural Organisation Society, whose operations extended throughout the entire of Ireland.

Rule 67 provided that any dispute arising between the society and its members should be submitted to the arbitration of the Irish Agricultural Organisation Society; but this rule was not relied upon by either side, or mentioned.

Rule 70 provided that the net profits, after payment of interest on loan capital, should, among other objects, be applied to the payment of interest on fully paid-up capital, not exceeding five per cent.

The defendant applied for shares on the 2nd of March, 1914, when the old rules were in force, and got an allotment on the 25th of August, 1914. The delay was caused by the change then about to be effected. The amended rules were printed in October, 1914, and he was sent a copy in December, 1914. He got no copy of the old rules. He ceased to supply milk from the 17th of September, 1914, his reason being that he could get higher prices elsewhere.

The plaintiffs issued a civil bill against him, claiming under rule 6 (2) £20 damages for breach of contract. The County Court Judge for the South Riding of Tipperary gave a decree for that amount, and on the hearing of an appeal at the Clonmel Spring Assizes, 1916, from that decree, Gibson J. stated the present case, the question for the determination of the Court being whether upon the facts the decree should be affirmed or the civil bill dismissed.

The arguments were similar to those in the Court of Appeal, reported infra.

Serjeant Sullivan K.C. and Gibson K.C. (with them Kinahan), for the appellant:—

Carrigan K.C. and Sealy, for the respondents:—

Madden J.:—

The plaintiffs in this case seek to recover from the defendant the sum of £20 as damages for breach of contract.

The contract is contained in rules 5 and 6 of the amended rules of the Coolmoyne Co-operative Creamery, Limited, of which the defendant is a member. Rule 6 (2) provides that no member of the company who has milk to sell, the produce of a cow kept within limits defined by rule 5, “shall, without the written consent of the committee first obtained, sell any such milk to any creamery other than a creamery of the society, or to any company, society, person, or persons who sell milk or manufacture butter for sale.” A penalty is payable of one shilling per cow per day for every cow's milk sold contrary to the provisions of the rule. Under rule 6 (1) the society is bound to accept from all members milk delivered fresh and in good condition at the creamery of the company, and to pay for it at the current price, to be fixed by the committee of the society at the time of delivery.

The defendant is a member of the company, and he ceased to supply milk to the company on the 17th September, 1914, his excuse being that he could get higher prices elsewhere.

It has not been disputed that there has been a breach of the rules, and that the amount of the penalty has been correctly calculated. The case of the defendant is that the rules in question are not binding on him, inasmuch as they are in restraint of trade in a manner and to an extent which is unreasonable, and injurious to the interest of the public.

The objects for which the society was formed is stated in rule 4 to be to develop and improve the industry of dairying in Ireland, by carrying on the manufacture of butter, cheese, and other milk products. The company carries on the business of wholesale and retail dealers and agents for the sale of all descriptions of dairy, farm, and garden produce. It also supplied its members with all kinds of agricultural and other requisites.

It is evident that the general public are deeply interested in the successful carrying out of the main object with which a society like the plaintiff in the present case has been formed; the development of so important a business as the dairying industry in Ireland, and the manufacture of butter of a quality which will command a high price in the market. It is obvious that the degree of success to be obtained by each individual society must depend on local circumstances, mainly on the degree of intelligence and integrity with which it is worked. On the question of the reasonableness of the rules with regard to the interests of the general public, the objects of the society ought not to be lost sight of. If the general public have an interest in the successful carrying out of the objects of a society, a rule of such a society, which operates as a limited restriction on trade, if it can be shown to be necessary to the successful working of the society, appears to me to hold a different position from a similar rule forming part of a purely commercial undertaking.

That the rules in the present case operate in restraint of trade is obvious. The defendant is restricted from selling his milk for the best price obtainable...

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