Gráinne Loughnane

On 22 March 2024, the Court of Appeal in Ireland handed down the judgement of Foot Locker Retail Ireland Limited v Percy Nominees Limited.

The legal question in this matter was whether a tenant may be excused from the obligation to pay the rent as stipulated under the lease for the period where the store was required by law to be closed due to the ministerial regulation introduced in 2020 and 2021 to deal with the arrival of Covid-19 in Ireland.

As a point of departure, the doctrine of frustration’s main objective is to automatically discharge a contract by operation of law in its entirety and therefore temporary or partial discharge is in direct conflict with this doctrine.

The appellant, Foot Locker, requested the Court of Appeal to apply a concept of partial or temporary frustration, in effect asking the court to introduce “new” law. The appellant accepted that the rent due was only partly paid for the days the stores was closed during the lockdown period but argued that the respondent should share “some of the pain” caused by the closures due to lease being partially frustrated.

The court agreed with the High Court’s judgement and emphasised that the correct legal principles had been applied in reaching its conclusion. The High Court identified two issues to be determined:

1. whether there is such a thing as partial frustration of a lease; and
2. if the answer to the above is in the affirmative, whether Foot Locker had established an entitlement to a declaration that the lease had been partially frustrated.

The High Court considered various provisions in the lease, including the covenant to comply with the enactments relating to the clauses defining “user” and “keep open” and concluded that the aforementioned clauses could not justify a claim of “partial” or “temporary frustration” of the lease.

The High Court concluded that based on all the information which were presented, that the closure of the store due to the ministerial regulation introduced did not amount to frustration of the lease. Therefore, the judge dismissed Foot Locker’s claims.

The Court of Appeal further held that the concept of partial or temporary frustration is a concept which is contrary to principle and established authority and in effect violates the fundamental of the doctrine of frustration.

A very important aspect raised by the court was the existence of express provision in the lease for allocation of risk.

The only instance in which the payment of rent would be suspended in its entirety was where all or part of the premises were damaged or destroyed by one of the “insured risks” which were defined broadly. The court held that the Covid-19 pandemic was not a supervening event that would render displace this voluntary and express allocation of risk.

The court further held that even if this concept of partial or temporary frustration existed, there would be no reason for applying the doctrine in this particular case, so as to afford the appellant a defence to its failure to comply with the covenant in the lease to pay the rent without any deduction.

In conclusion, the appellant’s appeal was dismissed.

• Gráinne Loughnane is a partner in Kane Tuohy’s real estate department. Trainee solicitor Rubeth O’Reilly assisted in the writing of this article.