The Society was concerned by the extension of the range of non-pharmaceutical goods sold in chemist’s shops and the effect which it might have on the quality and status of the profession, proposed a new rule for inclusion in the code of ethics and submitted it in the form of a motion to a specially convened meeting of the members. The effect of the rule would be that new pharmacies would have to be situated in physically distinct premises and their trading activities confined to pharmaceutical and traditional goods as defined in a report of one of the society’s committees. The main object of the society was ‘to maintain the honour and safeguard and promote the interests of the members in the exercise of the profession of pharmacy’. The respondent, a member of the society, brought an action for a declaration that the motion was ultra vires the society’s objects and in unreasonable restraint of trade.
Held: The rules against arrangement imposing restrictions on trade are not limited to particular kinds of restraint, and are not confined to contractual arrangements but apply to all restraints of trade, howsoever imposed. If the effect of the decision is unreasonably in restraint of trade the courts will declare it invalid.
Lord Reid said: ‘ There are about 29,000 registered pharmacists. Some, such as those employed in hospitals, have no other duties than the professional task of dispensing. But the typical pharmacist owns or is employed in a chemist’s shop where goods other than dispensed medicines are sold to the public. Such goods have been divided into three classes: first ‘professional’, which include, besides medicines and sick room requirements, agricultural, horticultural, and industrial chemicals and various scientific and other appliances; secondly, ‘traditional’, which, largely for historical reasons include cosmetics and photographic requisites; and thirdly ‘non-traditional’, which include a wide variety of articles which many pharmacists have found it profitable and convenient to sell in chemist’s shops. So most pharmacists act in a dual capacity, combining retail trading with their professional work. That pharmacists should be engaged in trade is regarded by many pharmacists as undesirable. But it is generally recognised that comparatively few chemist’s shops could survive without engaging in some degree of trading . .
In every profession of which I have any knowledge there is a code of conduct, written or unwritten, which makes it improper for members of the profession to engage in certain activities in which ordinary members of the public are quite entitled to engage. Normally this is regarded as a domestic matter within the profession. But it appears to me that if a member of a profession can show that a particular restriction on his activities goes beyond anything which can reasonably be related to the maintenance of professional honour or standards, the court must be able to intervene, and in the present case there is a question whether these restrictions are within the objects of the society. In Jenkin v. Pharmaceutical Society of Great Britain it was held that certain attempts to regulate trading by the members were ultra vires. But the respondent does not dispute that the society is entitled to regulate such trading activities in so far as that is reasonably necessary to achieve the society’s objects set out in the Charter. So it becomes a question whether these restrictions can properly be related to the maintenance or improvement of the status of the profession of pharmacy.
That these restrictions are in restraint of trade cannot be doubted. Any pharmacist who opens a new chemist’s shop can only sell professional or traditional goods in it, and in any existing chemist’s shop no new classes of non-traditional goods can be sold unless the council consents. This restraint may severely hamper the shopkeeper, and indeed it may make the business so unprofitable that the shop has to be closed. I need not consider the wider aspects of public interest, whether that might seriously inconvenience members of the public who wish to have prescriptions dispensed or to buy medicines.’
Judges:
Lord Reid
Citations:
[1970] AC 403
Jurisdiction:
England and Wales
Cited by:
Cited – Bermuda Cablevision Limited and others v Colica Trust Company Limited PC 6-Oct-1997
(Bermuda) An alternative remedy to winding up is available to a shareholder where oppressive conduct is alleged, though the main thrust is that the conduct is unlawful. . .
Cited – Bermuda Cablevision Limited and others v Colica Trust Company Limited PC 6-Oct-1997
(Bermuda) An alternative remedy to winding up is available to a shareholder where oppressive conduct is alleged, though the main thrust is that the conduct is unlawful. . .
Cited – Tillman v Egon Zehnder Ltd SC 3-Jul-2019
The company appealed from rejection of its contention that its former employee should be restrained from employment by a competitor under a clause in her former employment contract. . .
Lists of cited by and citing cases may be incomplete.
Company, Commercial
Leading Case
Updated: 10 April 2022; Ref: scu.221578