Court of Appeal: Mr Price cannot sell ‘groceries’ in retail park shared with Dunnes Stores

About this case:

• Citation:
  [2024] IECA 37
• Judgment:
  External link
• Court:
  Court of Appeal
• Judge:
  Mr Justice Robert Haughton

Delivering judgment for the Court of Appeal, Mr Justice Robert Haughton did not accept the appellants’ “contention that the breadth of the declarations undermines the commercially sensible purpose of the restrictive covenants, which is to have an anchor tenant with exclusivities but also allow for other units conducting businesses that do not involve the sale of ‘food, food products and groceries’”.

Background

In the Barrow Valley retail park, the lessor’s interest in two leases over Units 5 and 6 were demised to Dunnes Stores. Clause 3 of each of the leases provided that the Lessor covenanted to perform certain restrictive covenants which were binding on every lease pertaining to the park, part of which stated:

By a deed of transfer dated 14 December 2017, the second respondent acquired the lessor’s interest in the leases over Units 4, 5 and 6. The first appellant thereafter acquired the lessee’s interest in Unit 4 in 2020, sub-letting it to the second appellant (trading as Mr Price Branded Bargains).

In the Unit 4 lease, the lessee promised to observe restrictive covenants in the lease, including clause 20 of the second schedule which stated:

Dunnes Stores’ manager attended at Unit 4 in October and November 2020 and found an array of products for sale which he considered to be “food, food products and groceries” contrary to the covenants.

The High Court

The respondents issued High Court proceedings on 12 November 2020, and subsequently issued a motion seeking injunctive relief to restrain the appellants from using Unit 4 in breach of the restrictive covenants. Interlocutory relief in the terms sought was declined by Mr Justice Senan Allen on 3 December 2020, although an injunction restraining the appellants from selling or displaying food or food product, including drinks and confectionary, was granted.

The respondents’ statement of claim pleaded that “food, food products and groceries” had the “commonplace and applicable standard meaning of the term within the retail food and grocery sector” at the time the leases of Units 4, 5 and 6 were entered into, which included “household healthcare products; household and cleaning products; pet care and pet food; bathroom toiletries; hair care products; oral care products and other toiletries. For the avoidance of doubt, the Unit 4 Restrictive Covenants precluded sale of detergents, washing powder, cleaning products and materials, shower gels, deodorants, shampoos, cosmetics, toothbrushes and toothpaste, kitchen towel and toilet rolls” in line with the terms operated and applied by global market analysts ‘Kantar Worldpanel’ for the purposes of its analysis of the groceries market.

The appellants pleaded inter alia that the word “groceries” was so vague and ambiguous that it was void, or alternatively that it could be implied as merely a synonym for food and other products.

Mr Justice Mark Sanfey found that the parties agreed that the principles summarised in The Law Society of Ireland v. The Motor Insurers Bureau of Ireland [2017] IESC 31 applied to the construction of a contract, and so the trial judge determined inter alia that “groceries” must be interpreted as extending beyond “food” or “food products” to “non-food items of a non-durable consumable nature”.

The appellants appealed on four main grounds, inter alia that the court erred in its interpretation of the Unit 4 Lease, in preferring the expert evidence proffered on behalf of the respondents, and in granting an injunction expressed in vague language such that the appellants could not know with certainty what it was prohibited from selling.

The Court of Appeal

Mr Justice Haughton disagreed with the appellants that the declarations made by the High Court undermined the “commercially sensible purpose of the restrictive covenants”, finding that no evidence supported their contention that the enforcement of the covenant against them “would so damage their trade that they would have to cease business in Barrow Valley”.

Being of the view that most of the declarations set out a “clear primary definition” and then a list of “included items” of sufficient specificity to justify the injunction granted, and that the declarations were “generally consistent with the trial judge’s conclusions on the meaning of ‘groceries’ and his rationale for reaching those conclusions”, the court noted that the third declaration could be considered as extending to some “durable” items such as dog clothing, hair dryers and electric toothbrushes. The court suggested a simple fix, that the words “provided that such items are non-durable” would be inserted at the end of that declaration.

In respect of the appellants’ arguments on the High Court’s preference of the respondents’ expert evidence, Mr Justice Haughton found that “the High Court enjoys considerable deference in preferring the evidence of one expert over another, and this is because the trial judge has the advantage of hearing the witnesses first hand and assessing their answers, particularly under cross-examination” and that the trial judge gave “cogent reasons for rejecting Dr O’Reilly’s opinion that ‘grocery’ applies only to food and food ingredients.”

Conclusion

Accordingly, the court dismissed the appeal, save that the appeal was allowed in respect of the third declaration which would be varied to include the words “provided that such items are non-durable” in order to add greater clarity and to make it consistent with the second declaration.

The court also proposed that the appellants should pay 90 per cent of the costs of the appeal to the respondents on the basis that the respondents were “very substantially successful”, and stated that a short costs hearing would be arranged.

Dunnes Stores Unlimited Company & Anor v. Dafora Unlimited & Ors [2024] IECA 37