TRICK Vs. REGENT OIL CO. LTD.

JUDGEMENT

(1.) THE facts appear from the case stated in this case and in the previous case of Bolam v. Regent Oil Co. Ltd., and I will only state sufficient to show the problem. There are three large suppliers of petrol in this country - Shell, Esso and Regent. Since the war there has been intense competition between them. Each of these three great companies has sought to get the owners of garages of others. Each seeks to get the retailer to sell its brand of petrol exclusively. The competition is so intense that they call it an 'exclusively war'. The retailers have not been show to take advantage of this war between the giants. They have bid the one against the other. They ask each of the big companies : 'What will you pay me if I tie myself to your products ?' In the early stages the inducement held out by each company was a simple rebate. The company would offer the retailer a rebate of a farthing or thereabouts on every gallon of petrol if he would promise to sell its brand to the exclusion of all others. The retailer would tie himself to the company offering the most rebate. Competition forced the rebates up. The next stage was that instead of rebate, the company paid a sum in advance to the retailer each year according to the estimated gallonage for the coming year. So the retailer received cash in hand at the beginning of the year, and then at the end of the year the figure was adjusted up or down according to the gallonage actually supplied. The retailer would tie himself to the company offering the best advance payment. The third stage was, that instead of an advance for one year, the company paid a lump sum in advance for five or six years ahead; and this was adjusted up or down afterwards according to the gallonage sold. That was the stage reached in Bolams case, where Danckwerts J. held that these advance payments made by a company were payments of a revenue nature. They were not capital expenditure. They could be deducted by the company in calculating its profits for tax purposes.

(2.) WE have now reached a further stage. Some of the retailers have taken even greater advantage of their bargaining position. They have extracted from the oil companies a sum in advance which is not to be returned in any circumstances, and furthermore, in such a form that the retailers hope will not be taxable in their hands. This form is known as 'lease -sublease'.

(3.) I will describe it by reference to one of the cases. First, the lease. Green Ace Motors Ltd. owned a garage and filling station in the Norwich Road, Ipswhich. On June 11, 1956, Regent paid Green Ace Motors the sum of pounds 5,000 which was described as 'paid by way of premium'. In return, Green Ace Motors demised to Regent the garage and filling station for 10 years from May 13, 1955, at a rent of pounds 1 a year. The pounds 5,000 was calculated in this way : It was estimated that Green Ace Motors would, during the 10 years, sell 1,200,000 gallons of petrol, and that the rebate on that gallonage would be at about 1. d a gallon. That comes to pounds 5,000 over the 10 years. Secondly, the sublease. On the same day, June 11, 1956, Regent sublet the property back again to Green Ace Motors. They subdemised it for 10 years less three days from May 13, 1955, at a rent of pounds 1 a year. This sublease contained a specific covenant which tied Green Ace Motors to Regent. They covenanted that during the term of the sublease they would buy all their requirements of motor fuels from Regent and they would not sell any fuel except that supplied by Regent. They covenanted also to keep the premises open for the supply of fuel and not discontinue business or reduce the number of pumps. They could not assign the premises if they got a responsible person who would covenant to observe the tie. Thirdly, additional payment. On the same day, June 11, 1956, Regent agreed that if during the 10 years Green Ace Motors bought from them more than 1,20,000 gallons, they would pay or allow by way of rebate a penny a gallon on every gallon over 1,20,000. In other words, if Green Ace Motors sold more than the estimated gallonage they were to receive extra payment. But there was no provision for any adjustment for a repayment of any part of the pounds 5,000. Regent made similar agreements with the other owners of garages, but usually for longer terms of years and bigger payments. In some cases the sum paid was not described as a 'premium' but just as a 'sum.'