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Court of Appeal upholds Restrictive Covenant in Favour of Dunnes Stores.

By April 24, 2024June 26th, 2024No Comments

In a recent high profile case, and one that will be welcomed by landlords and  anchor tenants who have negotiated exclusivity clauses in relation to leasehold arrangements.

This involved a case where Dunnes had entered into a long-term lease in Barrow Valley retail park in Carlow. As a general rule, Dunnes stores will insist on exclusivity in relation to the sale of groceries etc and the restrictive covenant in this case provided very clearly that no unit would be used as a ‘supermarket, hypermarket, grocery, discount food store, frozen food outlet, mini-food market, convenience store or any similar premises, save as expressly permitted for the sale of any food, food products or groceries’. This was a standard clause which Dunnes insisted on being included in leases at the time. The term ‘grocery’ was not precisely defined.

Mr Prices (corporate name being Defora Unlimited Company) opened a store in the retail park and a representative from Dunnes Stores noticed that it was selling products which they argued fell under the definition of ‘groceries’.

Mr Price argued that groceries did not include, other commonly purchased household items like pet food and cleaning supplies, and argued for a narrower interpretation based on several grounds. Essentially, it was argued that groceries was synonymous with food and food products. However the High Court accepted Dunnes’ argument that the wording i.e. ‘food, food products are groceries’, suggested that the terms groceries was different to food/food products, and that it deserved a broader interpretation. The High Court found that  the definition of groceries was broad and went beyond food and food products to include non-durable consumable items, and as such Dunnes Stores were successful in their injunction.

Mr Prices appealed to the Court of Appeal, and the Court of Appeal agreed with the High Court’s decision and reasoning subject to one clarification on the wording of one of the High Court orders.

This is an important decision and brings further clarity to the issue of restrictive covenants and appears to indicate a recognition by the Courts of a commercial reality to anchor tenants taking units in retail shopping centres- i.e. if the exclusive/restrictive covenants are not enforced that it would make it extremely difficult for developers to attract anchor tenants. It also highlights the importance of drafting of such covenants to make sure that they are as tight as possible.

For further information or advice on the matters highlighted in this article, do not hesitate to contact any member of our property team on 012960666.