Landlord’s Consents
Use Cases
Peninsula Securities Ltdv Dunnes Stores (Bangor) Ltd
ORD WILSON: (with whom Lord Lloyd-Jones, Lady Arden and Lord Kitchin agree)
Introduction
1. This is another appeal which concerns the doctrine against restraint of trade. If a covenant falls within what I will simply call the doctrine, it is unenforceable against the covenantor unless it is reasonable. Last year, in Egon Zehnder Ltd v Tillman [2019] UKSC 32, [2020] AC 154, the court was required to address aspects of the doctrine. In para 29 it considered what it called the outer reaches of the doctrine, by reference in particular to the decision of the House of Lords in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269. But, as it explained in para 30, there was no need for any closer study of those outer reaches in the light of the facts of that case. The present appeal permits no such escape.
2. A developer of a shopping centre leases part of it to a well-known retailer. He covenants with the retailer that he will not allow any substantial shop to be built on the rest of the centre in competition with the retailer. In due course he assigns his interest in the centre to a company. The company considers that the centre is ailing and that the covenant is stunting its ability to revive it. In these proceedings brought against the retailer, the company seeks a declaration that the covenant by which it is currently bound engages the doctrine; that it is unreasonable; and that it is therefore unenforceable. To date the courts have addressed only the first question raised by the company’s claim: does the covenant engage the doctrine? Yes, ruled the Court of Appeal in Northern Ireland (Stephens LJ, who delivered the judgment of the court, Sir Ronald Weatherup and Sir Richard McLaughlin) on 9 February 2018, [2018] NICA 7, when proceeding to remit the case to the High Court to consider whether the covenant was reasonable. So it is the retailer which now appeals to this court against that ruling.
Facts
3. Mr Shortall is a property developer. In 1979, in his own name, he bought land in Springtown, Londonderry, which, for planning purposes, had been zoned for retail use. At that time Londonderry was, in his own words, an economic and political wasteland. The site comprised about five and a half acres, defined, for land registry purposes, as Folio 25992 County Londonderry. In 1980 he obtained planning permission to develop the site so as to yield 32,000 square feet of gross retail space.
4. Mr Shortall sought an “anchor tenant”, a substantial and prestigious retail company which would lease a significant part of the site and whose presence would persuade other retailers to lease other parts of it, thus making the proposed centre as attractive as possible to shoppers. To this end, he approached Dunnes Stores (“Dunnes”), which comprised a group of companies based in Dublin and which operated a number of substantial retail outlets of high repute throughout Ireland. Early in 1980 Mr Ben Dunne met Mr Shortall at the site and expressed reservations about the economic viability of establishing a retail unit there. But at a further meeting in about May 1980 they orally agreed outline terms. These were that Mr Shortall would grant Dunnes a long lease of part of the site in consideration of its payment to him of a premium of £50,000 and a nominal ground rent. But Mr Dunne required Mr Shortall to promise not to cause or permit the establishment on any other part of the site of a unit measuring more than about 3,000 square feet for the sale of food or textiles. Mr Shortall agreed. In his evidence he said:
“I … had little or no choice but to ‘grab’ the offer made by Mr Dunne with both hands, as it was the ‘only deal in town’.”
5. In November 1980 Mr Shortall and Dunnes signed Heads of Agreement. Dunnes decided that its Belfast company, Dunnes Stores (Bangor) Ltd, which is the appellant in this appeal, should sign the Heads and take the proposed lease. The main terms recorded in the Heads were that Dunnes should take a lease of the part of the site there delineated; that it should bear the cost of building its retail unit there; that Mr Shortall should construct at least six units on the rest of the site; and that Dunnes should contribute one third of the cost of constructing the roads, footpaths and car park on the site. Nothing turns on the omission from the Heads of Mr Shortall’s promise not to establish on the rest of the site any substantial unit in competition with Dunnes.
6. On 2 February 1981 the proposed lease was duly executed. Attached to it was a map of the land in Folio 25992, on which the area subject to the lease was edged in red. The area was said to comprise just in excess of an acre so the rest of the site will have comprised about four and a half acres. The lease was for 999 years in consideration of a premium of £50,000 (which Dunnes paid) and of an annual ground rent of £100. It was Mr Shortall, by his solicitors, who had proposed a term of that length. Upon the area subject to the lease Dunnes covenanted to erect a retail unit measuring at least 15,000 square feet at ground floor level within two years of the grant of detailed planning permission. As provided in the Heads of Agreement, it also covenanted to contribute one third of the cost of the construction of the common areas, in particular of the car park.
7. In the lease, as also foreshadowed in the Heads of Agreement, Mr Shortall covenanted to construct at least six shop units in an enclosed mall in a specified location adjoining the area subject to the lease. He also entered into the restrictive covenant which is the subject of these proceedings. The covenant, as I will call it, is in the following terms:
“That any development on the Lessor’s lands comprised in the Lessor’s folio and on his other lands adjoining the premises shall not contain a unit in size measuring three thousand square feet or more for the … purpose of trading in textiles Provisions or groceries in one or more units.”
The reference to Mr Shortall’s “other lands adjoining the premises” is a reference to a small, rectangular piece of land which adjoins the western end of the area leased to Dunnes but which for some reason was not comprised in Folio 25992. In what follows it can be ignored. Mr Shortall also covenanted that, were he to assign any interest in any part of the land in Folio 25992, he would ensure that the assignee would, for the benefit of Dunnes, covenant to observe all his covenants in the lease.
8. Dunnes duly constructed its store. Acting through one of his companies, Mr Shortall duly constructed the shop units in the mall; and he found tenants for them. He also constructed the car park, to the cost of which Dunnes duly contributed. In October 1982 the shopping centre opened. At first it was a great success.
9. Peninsula Securities Ltd (“Peninsula”), the respondent to this appeal, is another of Mr Shortall’s companies. Of the 100 issued shares in it, he holds 99 and his wife holds the other. He is also its managing director. It is a property holding company. By transfer registered on 27 April 1983, Mr Shortall assigned to Peninsula his freehold interest in all the land in Folio 25992, thus including not only his reversionary interest in the land leased to Dunnes but also his interest in all the other land in the folio which was subject to the covenant.
10. The success of the shopping centre at Springtown has declined. The reasons for its decline are disputed and, at any rate at this stage, are irrelevant. Peninsula blames the covenant for causing the decline and for stunting its ability to reverse it. Dunnes disagrees.
Proceedings
11. In 2010 Peninsula made a reference to the Lands Tribunal pursuant to the Property (Northern Ireland) Order 1978 (SI 1978/459) (“the 1978 Order”). It asked the tribunal to declare under article 4 of the order that the covenant represented an impediment to enjoyment of its land and, in that (so Peninsula said) the impediment was unreasonable, to order under article 5 that it should be modified or extinguished. The suggested modification was to substitute for the reference in the covenant to 3,000 square feet a reference to 55,000 square feet. But Peninsula also included in its reference to the tribunal a claim for a declaration that the covenant was unenforceable at common law as being in unreasonable restraint of trade. In due course Peninsula accepted that the tribunal lacked jurisdiction to determine its common law claim. So instead it made the claim in proceedings which it brought in the Queen’s Bench Division of the High Court of Justice in Northern Ireland. By successive amendments to its statement of claim, it added two further claims to the court proceedings. The first was a claim that the covenant was void under section 2 of the Competition Act 1998. On receipt of Dunnes’ expert evidence in answer, Peninsula withdrew that claim and substituted its claim, already made to the Lands Tribunal, under the 1978 Order, which accordingly had to be recast so as to fall within article 6 of it. But Peninsula there made clear that it relied on its claim under the 1978 Order only in the event of the failure of its common law claim. By its amended Defence, Dunnes disputed both claims and counterclaimed that, in the event of any modification or extinguishment of the covenant under the 1978 Order, it should be awarded compensation. The proceedings in the Lands Tribunal have therefore come to an end.
12. It was therefore agreed that Peninsula’s claim at common law should be determined in advance of its claim under the 1978 Order. In relation to the common law claim, it seems that it was McBride J herself, at first instance ([2017] NIQB 59), who raised the question whether, in particular in relation to an assignee such as Peninsula, the covenant engaged the doctrine at all. Such was the only question which she proceeded to address and which therefore the Court of Appeal addressed. No court has yet addressed the question whether, if the covenant engages the doctrine, the restraint is unreasonable and is therefore unenforceable by Dunnes against Peninsula.
13. It follows that, were it to be determined on this appeal either that the covenant did not engage the doctrine even at the time when Mr Shortall entered into it or that, although it initially engaged the doctrine, it ceased to engage it when Peninsula became subject to it, the High Court would proceed to hear the claim and counterclaim under the 1978 Order.
14. In her judgment dated 25 May 2017, [2017] NIQB 59, McBride J sought faithfully to apply the decision in the Esso case, cited (as there will be no need to repeat) in para 1 above. She correctly took the view that, in the opinion of a majority in the appellate committee, a covenant restrictive of the use of land engaged the doctrine only if the covenantor had, by entry into it, surrendered a pre-existing freedom to use the land as he wished. She reasoned that, from the date in 1979 of his purchase of the land in the folio until the date in 1981 of the lease to Dunnes, Mr Shortall had, subject only to planning permission, been free to build retail units of any size on the land and therefore that he had, by entry into the covenant, surrendered a pre-existing freedom. She therefore concluded that, while the land had been held by Mr Shortall, the covenant had engaged the doctrine. She noted however that Peninsula had become bound by the covenant at the same time as it had begun to hold the land and she therefore concluded that it had not, by subjecting itself to the covenant, surrendered a pre-existing freedom. She therefore held that from then onwards the covenant had no longer engaged the doctrine.
15. On Peninsula’s appeal, the Court of Appeal, at para 56, agreed with McBride J that Mr Shortall had surrendered a pre-existing freedom and therefore, in accordance with the decision in the Esso case, that, while the land had been held by him, the covenant had engaged the doctrine. But at para 45 it disagreed with her conclusion that, upon the assignment of the land to Peninsula, the covenant had ceased to engage the doctrine. It conceded at para 43 that a literal application of the decision in the Esso case would yield her conclusion. But it questioned why in logic the doctrine should at the point of assignment no longer be engaged. It asked at para 44 whether, and if so why, it would no longer be engaged if, instead of assigning the covenant, the original covenantor died or became bankrupt. The court had reminded itself at para 37 that the doctrine was based on public policy; and, observing at para 45 that public policy was a surer foundation for inquiry into the continuing engagement of the doctrine following the assignment of the covenant to Peninsula, it held that there was no reason of public policy why it should not have continued to be engaged.
16. In this court our duty is to look more closely at the decision in the Esso case in the light of the questions of logic and public policy on which the Court of Appeal touched. That court applied its questions only to the later part of the history: why, in terms of logic and public policy, should Peninsula not have continued to enjoy the benefit of the doctrine just because it had surrendered no pre-existing freedom? But we are required also to ask: why, in terms of logic and public policy, should Mr Shortall have enjoyed the benefit of the doctrine in the first place just because he had surrendered a pre-existing freedom? So we confront an awkward question: is the surrender of a pre-existing freedom an acceptable criterion for engagement of the doctrine?
17. At the hearing before us, no doubt fortified by early judicial encouragement, Mr Humphreys QC on behalf of Dunnes presented a preliminary argument. It was founded on the fact that Mr Shortall was and is a property developer and that Peninsula was and is a property holding company. Neither of them was or is a trader. How then, ran the argument, could any restraint on them amount to a restraint of trade? On analysis, however, the argument appears to be too narrow. In para 64 below Lord Carnwath argues persuasively that, notwithstanding its conventional description, the doctrine extends to restraints not only of trade but also, more generally, of business, thus including that of a developer. In any event, however, the covenant does restrain trade because it restrains Peninsula (and still also Mr Shortall under the law of contract) from causing or permitting a trade in specified goods in a retail unit of a specified size on the site. In, for example, The British Motor Trade Association v Gray 1951 SC 586 the Inner House of the Court of Session addressed a covenant which the petitioning association required its trade members to extract from all purchasers of new cars. Following the Second World War there was a shortage of new and nearly new cars; and speculators were operating a black market in them. In an attempt by the trade association to combat it, the requisite covenant obliged ordinary members of the public who purchased a new car not to sell it for the first two years. But ordinary members of the public were not traders in cars. So one question was whether their covenant was in restraint of trade. Lord Russell at p 602 expressed the opinion, with which Lord Keith at p 604 was inclined to agree, that the covenant did restrain the trade of dealers in second-hand cars; but, forming the majority, they proceeded to hold that it was in any event reasonable.
Petrofina
18. The prelude to the Esso case was the decision of the Court of Appeal in Petrofina (Gt Britain) Ltd v Martin [1966] Ch 146. The owners of a petrol filling station in Chesterfield had entered into a covenant to buy from Petrofina all the petrol to be sold at the station (“a solus agreement”) and to require any purchaser of the site to covenant likewise. They agreed to sell the site to Mr Martin, who proposed to form a company to own it and to operate the filling station. He entered into an identical covenant with Petrofina and began to operate the station. Within less than two months, however, he had begun to sell petrol which instead he had bought from Esso. Once his company was incorporated, he agreed to sell the site to it. Petrofina’s claim for an injunction against Mr Martin and his company failed on the ground that the covenant was in restraint of trade and that Petrofina had failed to establish that it was reasonable. It is not easy to identify within the three judgments a common basis for the court’s conclusion that Mr Martin’s covenant engaged the doctrine. But the law reporter was probably correct to suggest in the headnote that its basis was that the covenant restricted the ability to trade on land in which Petrofina “had no interest by way of mortgage, lease or sale”. That such was the basis of the decision seems to follow in particular from passages in the judgment of Harman LJ at p 177 (where he also explained that a reference to the covenantee’s interest in the case of a sale related only to a situation in which the vendor retained other land which could benefit from the restraint) and at p 178; and in the judgment of Diplock LJ at pp 179 and 187. We should note therefore that, in the case of a restriction on the use of land, the focus of the decision was on the covenantee, namely whether Petrofina retained an interest in the use of the land; and also that the doctrine was held to apply to the covenant even though neither Mr Martin nor his company had enjoyed any pre-existing freedom to trade at the site.
Esso
19. In the Esso case Mr Harper (or possibly Mr and Mrs Harper) owned the site of a filling station in Stourport. At first Mr Harper himself operated the trade in petrol there; and in due course he entered into a solus agreement with Esso. Later he allowed the respondent company, which he and his wife owned, to operate it; and so the company entered into the solus agreement. In 1962 the company entered into a revised agreement with Esso for the supply, at a price to be fixed by Esso, of all petrol to be sold there for 21 years. One term of it, similar to a term of the agreement in the Petrofina case, was that the company should keep the filling station open at all reasonable hours throughout the period of the agreement; the effect of it was that, even if it was trading at a loss, the company had to continue to trade there unless it found a purchaser willing to assume its obligations under the agreement. Mr Harper wanted to sell the site to the company. Esso lent to the company funds which enabled it to make the purchase; and the company granted to Esso a mortgage over the site, in which the terms of the solus agreement were repeated. In 1963 the company bought both the site and the business of a second filling station, which was near Kidderminster. The vendor had entered into a solus agreement with Esso on similar terms. At the time of the company’s purchase the agreement was to subsist for about five further years; and the company agreed to be bound by it for that remaining period.
20. The company soon repudiated the solus agreements in respect of both filling stations and Esso sought an injunction to require it to abide by them. The trial judge held that the doctrine was not engaged by covenants which restrained the use of land and he granted the injunction. The Court of Appeal, constituted by the three judges who had decided the Petrofina case, allowed the company’s appeal. It reasoned that, apart from the incorporation of the terms of the solus agreement in the mortgage on the Stourport property, which, so it held, should not affect its conclusion, such a result was mandated by its earlier decision. Upon Esso’s appeal the appellate committee of the House of Lords agreed with the Court of Appeal that the company’s covenants engaged the doctrine. But it held that, whereas the restraint for 21 years on the Stourport property had not been shown to be reasonable and was therefore unenforceable, the restraint for about five years on the Kidderminster property had been shown to be reasonable and that, to that extent, the trial judge’s injunction should therefore be restored.
21. Counsel for Esso submitted to the appellate committee that the trial judge had been correct to rule that restraints on the use of land did not engage the doctrine. It was a powerful argument because counsel were able to point to the long history whereby, in the interests of other land which they retained, vendors of land had required their purchasers to covenant not to use it for a specified purpose, including not to trade there whether in specified respects or indeed at all; and whereby lessors had required lessees to enter into analogous covenants. It was common ground that such covenants did not engage the doctrine. But their argument went further. For they were able to cite a common situation somewhat akin to the solus agreements in issue: it was that of the tied public house, in which a brewery company leased, or occasionally sold, premises to the publican on terms which disabled him from selling any beer there other than beer which it had sold to him itself. It was, again, common ground that the tie of a public house did not engage the doctrine.
22. It is clear that, because of what it perceived to be the oppressive nature of the restraints in many solus agreements relating to the sale of petrol, including in the agreement relating to the Stourport property, the appellate committee was minded to hold that they engaged the doctrine and therefore that, unless they were reasonable, they were unenforceable. But how was the committee to rationalise their engagement of the doctrine in circumstances in which restrictive covenants on the part of purchasers and lessees of land, and in particular the ties to which publicans bound themselves when leasing or buying pubs, did not engage it? In the Petrofina case the Court of Appeal had focussed upon the position of the covenantee: it was when he retained an interest in the land that the doctrine was not engaged.
23. In the Esso case, by contrast, the majority of the committee focussed upon the position of the covenantor. Lord Reid said at p 298:
“It is true that it would be an innovation to hold that ordinary negative covenants preventing the use of a particular site for trading of all kinds or of a particular kind are within the scope of the doctrine of restraint of trade. I do not think they are. Restraint of trade appears to me to imply that a man contracts to give up some freedom which otherwise he would have had. A person buying or leasing land had no previous right to be there at all, let alone to trade there, and when he takes possession of that land subject to a negative restrictive covenant he gives up no right or freedom which he previously had. I think that the ‘tied house’ cases might be explained in this way, apart from Biggs v Hoddinott [1898] 2 Ch 307, where the owner of a freehouse had agreed to a tie in favour of a brewer who had lent him money … In the present case the respondents before they made this agreement were entitled to use this land in any lawful way they chose, and by making the agreement they agreed to restrict their right by giving up their right to sell there petrol not supplied by the appellants.”
24. So the criterion favoured by Lord Reid for distinguishing between restraints on land which engage the doctrine and those which do not do so has come to be called the “pre-existing freedom” test. It is clear that this is the test which enjoyed majority support within the committee and so constitutes the basis of its decision. Lord Morris of Borth-y-Gest said at p 309:
“There is a clear difference between the case where someone fetters his future by parting with a freedom which he possesses and the case where someone seeks to claim a greater freedom than that which he possesses or has arranged to acquire.”
As examples of the latter case Lord Morris referred to incoming lessees and to purchasers of part of a vendor’s land. Lord Hodson said at pp 316-317:
“All dealings with land are not in the same category; the purchaser of land who promises not to deal with the land he buys in a particular way is not derogating from any right he has, but is acquiring a new right by virtue of his purchase. The same consideration may apply to a lessee who accepts restraints upon his use of land; on the other hand, if you subject yourself to restrictions as to the use to be made of your own land so that you can no longer do what you were doing before, you are restraining trade and there is no reason why the doctrine should not apply.”
25. In the Esso case what criterion did Lord Pearce favour? In Cleveland Petroleum Co Ltd v Dartstone Ltd [1969] 1 WLR 116, decided less than two years after the decision of the appellate committee, the Court of Appeal of England and Wales, at pp 118-119, regarded Lord Pearce as having subscribed to the pre-existing freedom test, which that court then proceeded loyally to apply. It may be, however, that his subscription to it was less than comprehensive. It is true that he said at p 325:
“It seems clear that covenants restraining the use of the land imposed as a condition of any sale or lease to the covenantor (or his successors) should not be unenforceable.”
But it seems that Lord Pearce was less confident that the converse applied when the covenantor surrendered a pre-existing freedom to use the land. For he added, also at p 325:
“It may be, however, that when a man fetters with a restraint land which he already owns or occupies, the fetter comes within the scrutiny of the court.”
In the case of a surrender by covenant of a pre-existing freedom, Lord Pearce appears to have favoured a further test. For he said at p 328:
“The doctrine does not apply to ordinary commercial contracts for the regulation and promotion of trade during the existence of the contract, provided that any prevention of work outside the contract, viewed as a whole, is directed towards the absorption of the parties’ services and not their sterilisation.”
So the criterion probably favoured by Lord Pearce has come to be called the “sterilisation of capacity” test.
26. In the Esso case Lord Wilberforce gave the fifth and final speech. It is clear that he did not subscribe to the pre-existing freedom test. He said at p 331 that the common law had often thrived on ambiguity; that, even if it were possible, it would be mistaken to try to crystallise the rules of the doctrine into neat propositions; and that the doctrine had to be applied to factual situations with a broad and flexible rule of reason. He observed at pp 332-333 that provisions of contracts which reflected the accepted and normal currency of commercial relations had come to fall outside the scope of the doctrine because, moulded under the pressures of negotiation, competition and public opinion, they had assumed a form which satisfied the test of public policy as understood at that time. Then, adverting to restrictive covenants imposed on the sale or lease of land, and in particular to the ties imposed on publicans, he said at p 335:
“… I think one can only truly explain them by saying that they have become part of the accepted machinery of a type of transaction which is generally found acceptable and necessary, so that instead of being regarded as restrictive they are accepted as part of the structure of a trading society.”
So the criterion favoured by Lord Wilberforce has come to be called the “trading society” test.
27. Since the covenant in issue in this court today was made by a lessor, it is worthwhile to note that, in his analysis of covenants in relation to land which had generally been found acceptable and necessary, Lord Wilberforce referred at pp 334-335 to covenants by lessors, and by vendors in relation to land retained by them, as well as by lessees and purchasers in relation to the land leased or conveyed to them. Indeed, as an example of a lessor’s covenant, he cited Hinde v Gray (1840) 1 Man & G 195. There the defendant leased a brewery in Sheffield to the claimants. The defendant, who also owned and operated a public house in Sheffield called The Punch Bowl, covenanted that he would not sell beer in that pub other than as supplied to him by the claimants; and, when later he granted a lease of the pub, he caused the lessee to covenant likewise. One of the claims made in an action brought by the claimants in the Court of Common Pleas was of a breach of that covenant. That claim was rejected because the claimants had failed to establish that the beer sold in The Punch Bowl had not been supplied by them at least indirectly even if not directly. There was no suggestion that the covenant engaged the doctrine and so was required to be reasonable. There is nothing in the jurisprudence, ancient or modern, to indicate that covenants by lessors, and by vendors in relation to retained land, engage the doctrine by reference to any criterion different from that which applies to covenants by lessees and purchasers.
28. An intriguing question, irrelevant to the search for legal principle, is why, by reference to the criteria which they favoured, their lordships in the Esso case unanimously held that both of the solus agreements entered into by the company engaged the doctrine. In relation to the Kidderminster property, what was the basis on which the majority considered that the company had enjoyed a pre-existing freedom to trade there? In relation to the Stourport property, what was the basis on which they considered that the company had enjoyed a pre-existing freedom to trade there or, if such was their thinking, that it sufficed that Mr Harper had enjoyed that freedom? Indeed, when Lord Reid observed at p 304 that, while he did not subscribe to all of the Court of Appeal’s reasoning, its decision in the Petrofina case had been correct, what was the basis on which he considered that either Mr Martin or his company had enjoyed a pre-existing freedom to trade at the Chesterfield property? How did Lord Pearce persuade himself that the effect of the solus agreements in favour of Esso had been not to absorb the company’s services but, rather, to sterilise them? And, in the light of the evidence, noted by Lord Hodson at p 315, that, out of 36,000 filling stations in the UK, 35,000 had become subject to solus agreements with oil companies, how did Lord Wilberforce feel able to conclude that, “on balance” (as he said at p 337), the agreements in issue had not become acceptable and necessary as part of the structure of a trading society?
29. Our task in this court is, however, to analyse the validity in principle of the pre-existing freedom test favoured by the majority of our distinguished predecessors. They had alighted upon a distinction which served their purpose: for its effect was, for example, that a tie accepted by a publican upon entry into a lease remained excluded from the doctrine but that a solus agreement with which the operator of a filling station burdened his premises was brought within it. But was the distinction consonant with the doctrine? Or did it mask an attempt to square a circle?
30. The trouble is that the majority did not explain why a covenant restrictive of the use of land is more likely to offend public policy when the covenantor enjoyed a pre-existing freedom in relation to its use than when he enjoyed no such freedom. It is an explanation for which we must therefore search. Is there a ground for concluding, for example, that a covenantor’s pre-existing freedom places him in a weaker bargaining position than otherwise or in some other way renders his covenant more deserving of legal intervention?
Reaction to Esso
31. Less than two years after the decision of the appellate committee in the Esso case, Mr J D Heydon, then a lecturer at Oxford University, wrote a coruscating criticism of it in an article entitled “The Frontiers of The Restraint of Trade Doctrine” (1969) 85 LQR 229. Later the author, who ultimately became a justice of the High Court of Australia, wrote a book entitled “The Restraint of Trade Doctrine”, now in its 4th ed published in 2018, in which he has consistently repeated much of what he said in the article. At p 281 of the article he suggested that the pre-existing freedom test reflected “a distinction based purely on form and not on substance at all”. He developed his suggestion as follows:
“If all the landowners in Yorkshire agree not to trade on their Yorkshire land, the restraint of trade doctrine would apply because the landowners are fettering a pre-existing freedom, and the agreement would certainly be held unenforceable. But if X buys all the land in Yorkshire, covenanting with each seller not to trade on the land, the Esso test prevents the doctrine applying, so that the covenants are all enforceable. In each case the public and the parties restricted are equally damaged. Why should the common law be prevented from controlling this in the second case? Again, if X, who owns two shops, sells one to A and A and X mutually covenant that neither shop shall be used as a butcher shop, the restraint of trade doctrine will apply to X’s obligations but not to A’s; X’s may be held unenforceable but not A’s. … The majority test thus leads to gross anomalies.”
Mr Heydon thereupon undertook an analysis of the criterion favoured by Lord Pearce, which he described at p 245 as “mystical”. He then turned to that favoured by Lord Wilberforce, which he described at p 246 as reflecting “a relatively inert acceptance by the courts of the status quo”. In that connection he observed that “public opinion may be incapable of seeing the evils of the restrictions” and that “commercial men may all be interested in keeping the system going”. Mr Heydon concluded at pp 250-251 with the controversial suggestion that it would be preferable for the doctrine to have “universal application” to all restraints of trade in order to address “a wide range of evils”.
32. Until today neither the appellate committee nor, more recently, this court has had an opportunity to reconsider the committee’s decision in the Esso case. Indeed, apart from in the Cleveland Petroleum case, cited in para 25 above, it has received little attention even in the intermediate appeal courts of the UK. As so often, however, contributions of real value to us in this court are to be found in the judgments of other senior courts in the common law world.
New Zealand and Ireland
33. The early decision of the Court of Appeal of New Zealand in Robinson v Golden Chips (Wholesale) Ltd [1971] NZLR 257 and the decision of the Supreme Court of Ireland in Sibra Building Co Ltd v Ladgrove Stores Ltd [1998] 2 IR 589 suggest that the pre-existing freedom test has been adopted in the law of both jurisdictions.
Canada
34. There are two Canadian decisions of great relevance. They even replicate the circumstances of the case before us, namely a covenant by the owner of a shopping centre in favour of a lessee of part of it.
35. In Russo v Field [1973] SCR 466 the third defendant company was the owner of a shopping centre in Toronto. It leased part of it to the claimants. In consideration of their covenant to conduct business as a hairdresser and beauty salon at those premises, the company covenanted not to permit any other store in the centre to conduct that business. The company then leased adjoining premises to the second defendant, Mrs Field, who had notice of the covenants and who commenced a business (which she ultimately discontinued) of selling wigs. In a judgment of the court delivered by Spence J, the Supreme Court of Canada held that the trial judge had been entitled to find that the sale of wigs had become an integral part of the business of a hairdresser and beauty salon; that he had rightly awarded damages to the claimants against both the company and Mrs Field; and, in that she had discontinued the business only later, he had also rightly enjoined her from continuing it. Spence J addressed the doctrine against restraint of trade at pp 486-487 as follows:
“It has been said that covenants such as those under consideration in this action are covenants in the restraint of trade and therefore must be construed restrictively. I am quite ready to recognize that as a general proposition of law and yet I am of the opinion that it must be considered in the light of each circumstance in each individual case. The mercantile device of a small shopping centre in a residential suburban area can only be successful and is planned on the basis that the various shops therein must not be competitive … if the limited number of prospective purchasers are faced in the same small shopping centre with several prospective suppliers of the same kind of goods or service then there may not be enough business to support several suppliers. They will suffer and the operator of the shopping plaza will suffer.
I am therefore of the opinion that the disposition as a matter of public policy to restrictively construe covenants which may be said to be in restraint of trade has but little importance in the consideration of the covenants in the particular case.”
Although the passage is equivocal, I incline to the view that the Supreme Court was there holding that for practical purposes the company’s covenant did not engage the doctrine rather than holding that, although it did engage it, the covenant was reasonable.
36. In F W Woolworth Co Ltd v Hudsons Bay Co, Zeller’s Inc and Burnac Leaseholds Ltd (1985) 61 NBR (2d) 403 the developer of a shopping mall in New Brunswick had, in the course of granting a lease of premises in it to Woolworths, covenanted that no other premises in the mall would be used as a junior department store, which meant a low-price value store such as Woolworths itself. Zellers, a junior department store in competition with Woolworths, took an assignment of premises in the mall. The New Brunswick Court of Appeal held that the developer’s covenant should be enforced by injunction against both it and Zellers. Hoyt JA, giving judgment on behalf of the court, quoted at para 31 from the speech of Lord Wilberforce in the Esso case and at para 35 the passage set out above in the judgment of Spence J in the Russo case. Hoyt JA continued as follows:
“39. In the present case there was no inequality of bargaining power nor was there evidence of bad faith on the part of Woolworth … All the evidence touching on the point indicated that such covenants are common, if not universal, in leases for space in such developments or, to use Lord Wilberforce’s words at p 337 in Esso, the provision is one which ‘… by the pressure of negotiation and competition, has passed into acceptance or into a balance of interest between the parties and their customers …’.
40. In my view, the restriction in the Woolworth lease does not, in these circumstances, fall within the category of contract known as one in restraint of trade.”
Had he applied the pre-existing freedom test, to which he also referred, Hoyt JA would have been required to conclude, by contrast, that the developer’s covenant did engage the doctrine.
Australia
37. Five Australian authorities will help us; and we should address them in chronological order.
38. The first is the decision of the High Court in Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288. By a majority the court held that a solus agreement entered into by the owner of a proposed filling station in favour of Amoco engaged the doctrine and was unreasonable and so unenforceable. When entering into the agreement, the owner had leased the property to Amoco and had taken back an underlease of it. The majority rejected Amoco’s contention that the owner had therefore enjoyed no pre-existing freedom to trade. In concluding that the covenant engaged the doctrine the majority therefore applied Lord Reid’s test in the Esso case. Nevertheless there were murmurs of doubt about it. Walsh J at p 304 expressed reluctance to accept that it provided a valid criterion for excluding covenants from engagement with the doctrine; and Gibbs J at p 313 expressly left that question open.
39. The second is the decision of the High Court in Quadramain Pty Ltd v Sevastapol Investments Pty Ltd [1975-1976] 133 CLR 390. X owned adjacent parcels of land in New South Wales. On the first parcel it operated a hotel. It sold the second parcel to Y for use as part of a shopping centre. Y covenanted on behalf of itself and its successors not to apply for a liquor licence there. X assigned the first parcel to Quadramain, which continued to operate the hotel. Sevastapol became the lessee of the second parcel and it applied for a liquor licence there. By a majority the court held that Y’s covenant did not engage the doctrine and should be enforced against Sevastapol. Y had surrendered no pre-existing freedom to use the second parcel; and the majority was willing to reach its conclusion by reference to Lord Reid’s test. But there were further murmurs of discontent about it, louder than in the Amoco case. Gibbs J, with whom Stephen and Mason JJ agreed, observed at p 401 that Lord Wilberforce’s test was more flexible than the pre-existing freedom test and might in time come to be preferred; and, in a dissenting judgment with which Murphy J agreed, Jacobs J suggested at p 414 that the distinction which formed the basis of the pre-existing freedom test presented difficulties unmatched in Lord Wilberforce’s test.
40. The third is the decision of the Full Federal Court of the Australian Capital Territory in Australian Capital Territory v Munday [2000] FCA 653. Mr Munday traded in articles of waste. The public authority which operated a waste disposal tip changed the contractual terms of his admission to the tip so as to rescind his licence to solicit members of the public to give articles to him before they abandoned them there. The court rejected his claim that the rescission was in restraint of trade and unenforceable. Application of the pre-existing freedom test might well have yielded a conclusion that the doctrine was engaged. But, in a careful judgment with which the other members of the court agreed, Heerey J, after addressing the Amoco and Quadramain cases and also the Woolworth case in Canada, concluded at para 105 that the trading society test should be adopted; and that it yielded a conclusion that the term which prohibited Mr Munday from soliciting for articles did not engage the doctrine.
41. The fourth is the decision of the High Court in Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126. The respondents, which manufactured ice-cream across Australia, sold their business in Western Australia to the appellant. They covenanted not to sell any ice-cream in Western Australia which they had manufactured. The court upheld a ruling that the covenant was in restraint of trade and unenforceable. Although the covenant did not relate to the use of land, the decision is interesting. For the appellant argued that the covenant absorbed, rather than sterilised, the respondents’ capacity to service the market for ice-cream and that, by application of Lord Pearce’s test in the Esso case, it therefore failed to engage the doctrine. In a joint judgment Gleeson CJ and Gummow, Kirby and Hayne JJ held at para 35 that Lord Pearce’s test involved “the application of criteria of particular indeterminacy” and at para 39 that it “should not be accepted in Australian common law”. In passing the judges had also, at para 22, noted criticisms of the pre-existing freedom test, including in Treitel on “The Law of Contract”, 10th ed (1999), p 434. Indeed four months later, in Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181, three of those four judges, in the course of holding that a confidentiality agreement had been in restraint of trade, suggested at para 55 that the court in the Peters case had gone so far as to reject the pre-existing freedom test.
42. The fifth is the decision of the Supreme Court of Victoria, Court of Appeal, in Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) 41 VR 1. The case is of particular interest because its subject was a covenant by a lessor of part of its premises in relation, among other things, to the use of other parts of them. The appellant conducted a pathology business. It took a lease of premises within two hospitals owned by the predecessors of the first respondent and within a third hospital owned by the second respondent. In granting the leases the owners of the hospitals covenanted (a) not to be concerned in a business similar to that which the appellant was to conduct in the hospitals and (b) not to grant any right to occupy any other part of the hospitals to any third party for the conduct of such business. The respondents breached the covenants. In upholding the appeal the court found that the covenants were reasonable and should be enforced against the respondents. But, perhaps unnecessarily in the light of that finding, the court proceeded to consider whether the covenants engaged the doctrine. By reference to the Australian jurisprudence it resolved to assume that the issue fell to be decided by application of the trading society test. It held as follows:
“64. It may be accepted that, ordinarily, the alienor of part of the land may be able to bind himself or herself with respect to the use of the balance of the land retained after a partial alienation. As [the appellant] submits, such provisions are common in leases of individual retail premises within shopping centres or other stand alone facilities.
65. We were not, however, referred to any persuasive authority which extends the postulated exception from the restraint of trade doctrine to all covenants in restraint of trade made by a landlord.
…
72. As his honour recorded, there was no evidence before him of accepted practice relating to restraint of trade provisions in tenancy agreements concerning pathology facilities within hospitals. Further, his Honour was correct to conclude that no simple analogy should be drawn between exclusivity provisions in shopping centre leases and the case with which he was concerned.”
Thereupon the court identified four reasons why the covenants engaged the doctrine, of which the first was that those at (a) extended beyond the land retained by the respondents.
Discussion
43. The passage of half a century since the appellate committee in the Esso case established the pre-existing freedom test has not generated a reasoned defence of it. Mr Heydon’s early criticisms of it remain unrebutted. The commentary on it in the 10th ed (1999) of Treitel on “The Law of Contract”, quoted in the judgment of the majority in the Peters case cited at para 41 above, is replicated, almost word for word, in the 15th ed (2020) of the book at para 11-151, which reads as follows:
“… it is submitted that the reasoning is hard to reconcile with the emphasis placed on the Esso case itself on the element of public interest; for restrictions on the use of land may cause harm to the public where they are imposed at the time when the land is acquired, no less than where they are imposed later.”
The analysis of the Australian jurisprudence in paras 38 to 42 above demonstrates that there the early murmurs of concern about the test have reached a crescendo at which Australia can be heard to have rejected it.
44. In terms of public policy, which is the foundation of the doctrine, there is no explanation why a restraint should engage the doctrine if the covenantor enjoyed a pre-existing freedom but why an identical restraint should not engage it if he did not do so. Surely our conclusion, respectful to our predecessors yet also firm, has to be that the test does not deserve its place in the doctrine.
45. But is the trading society test any more defensible? At first sight it appears unattractive. It seems to concede that the law follows where many might expect it to lead. Is the law (one might ask) to be determined as if by a weathercock which answers only to the direction of the wind? But such criticisms fail to recognise the nature of the common law. It is a law built by the judges on behalf of the people over seven centuries. It has been generated from below, not imposed from above. Over time bits have been added here, discarded there; enlarged here, confined there; strengthened here, diluted there. Bits have been re-interpreted; bits have withered away as a result of disuse; and bits have been abrogated by statute. In Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 Lord Goff of Chieveley said at p 377:
“… the common law is a living system of law, reacting to new events and new ideas, and so capable of providing the citizens of this country with a system of practical justice relevant to the times in which they live.”
In these circumstances the common law is inevitably a patchwork; and in it we will search in vain for perfect congruity. This is a truth which Lord Wilberforce’s pragmatic test recognises. Although criticised, the phrase “trading society” aptly describes the test. For it reflects the importance attached on the one hand to freedom to trade and on the other to the enforceability of contracts in the interests of trade. It is the former which generates the doctrine and the latter which keeps it within bounds.
46. Under the trading society test a covenant which restrains the use of land does not engage the doctrine if, in the words of Lord Wilberforce in the Esso case at p 333, it is of a type which has “passed into the accepted and normal currency of commercial or contractual or conveyancing relations” and which may therefore be taken to have “assumed a form which satisfies the test of public policy”. But the proper rooting of Lord Wilberforce’s test in public policy itself generates a need to qualify it. In giving the judgment of the Judicial Committee of the Privy Council in Vancouver Malt and Sake Brewing Co v Vancouver Breweries Ltd [1934] AC 181 Lord Macmillan observed at p 189:
“It is no doubt true that the scope of a doctrine which is founded on public policy necessarily alters as economic conditions alter. Public policy is not a constant. More especially is this so where the doctrine represents a compromise between two principles of public policy; in this instance, between, on the one hand, the principle that persons of full age who enter into a contract should be held to their bond and, on the other hand, the principle that every person should have unfettered liberty to exercise his powers and capacities for his own and the community’s benefit.”
Lord Wilberforce himself recognised, also at p 333, that a change in society’s circumstances might precipitate a change in public policy which would require re-examination of whether a type of covenant should continue not to engage the doctrine or (I would add) whether, by contrast, it should continue to engage it.
47. I conclude that, unlike the pre-existing freedom test, the trading society test is consonant with the doctrine.
48. This conclusion places this court in an acutely uncomfortable position.
49. In 1966 the appellate committee recognised a facility for it to depart from one of its previous decisions: Practice Statement (Judicial Precedent) [1966] 1 WLR 1234. This court has inherited the facility to do so. Nevertheless in the Practice Statement Lord Gardiner, the Lord Chancellor, stressed the importance of certainty in the law. A sudden change in the law is likely to destabilise it. Negotiations for contractual restraints on the use of land may well have been conducted with the pre-existing freedom test in mind. Past litigants, actual or potential, whose contentions failed or would have failed by virtue of that test would rightly resent a departure from it which would have given them saliency. Future such litigants, whose contentions would fail by virtue of departure from it, would resent it in equal measure. Subsequent opinions of the appellate committee stressed the high degree of caution with which it should address a request for departure. In Horton v Sadler [2007] 1 AC 307 Lord Bingham of Cornhill said at para 29:
“Over the past 40 years the House has exercised its power to depart from its own precedent rarely and sparingly. It has never been thought enough to justify doing so that a later generation of Law Lords would have resolved an issue or formulated a principle differently from their predecessors.”
The form to be used as a Notice of Appeal to this court asks in particular:
“Are you asking the Supreme Court to depart from one of its own decisions or from one made by the House of Lords?”
The purpose of the question is to enable the court, if granting permission to appeal, to decide in particular whether the appeal should be heard by a panel of more than the conventional number of five justices. But, in its Notice, Dunnes ticked “No”. It was only when at a late stage it filed its written case, and in particular when Mr Humphreys presented its oral argument, that it became clear that Dunnes was inviting the five of us to depart from the pre-existing freedom test which had formed the basis of the decision in the Esso case.
50. It is therefore with appropriate hesitation that I propose that this court should depart from the test favoured by the majority in the Esso case. To adapt Lord Bingham’s words, the objection to it is not just that the issue in the Esso case should have been resolved differently or the principle formulated differently there. Apart from the fact that even at the time Lord Wilberforce chose not to associate himself with it, the objections to the test are that it has no principled place within the doctrine; that it has been consistently criticised for over 50 years and, although in some quarters loyally applied, the reasoning behind it has, to the best of my knowledge, scarcely been defended; and that the common law has been limping between the continuing authority of the test in our jurisdiction and its rejection in Australia and in parts of Canada.
51. The application of the trading society test to the facts of the present case is straightforward; there is no need to remit the case for inquiry into it. At para 39 of her judgment McBride J addressed the evidence of Mr Crothers, the chartered surveyor who gave evidence on behalf of Dunnes. She said:
“He set out the difficult marketing conditions which prevailed in Northern Ireland in the 1970s and described the bringing of Dunnes to Derry as a ‘great achievement’ as Dunnes was a highly sought after anchor tenant. In his view it was not uncommon to find negative covenants in leases in favour of anchor tenants. This was especially so in long leases as the landlord, having received a premium, had no financial interest thereafter in how the centre traded. It was therefore the tenant who had everything to lose if the landlord put in competition. In this case he stated it would have been unpalatable and commercially offensive for the landlord to put direct competition on Dunnes’ doorstep as Dunnes had come to an untested location and had invested significant sums in buying the site, building the store and contributing to the costs of the car park.”
It is not obvious that Peninsula even called evidence to the contrary. And, from the study in paras 35 and 36 above of the Russo case and of the Woolworth case in Canada, and in para 42 above of the Specialist Diagnostic Services case in Australia, we derive confirmation that across the common law world it has long been accepted and normal for the grant of a long lease in part of a shopping centre to include a restrictive covenant on the part of the lessor in relation to the use of other parts of the centre. There is no ground for considering that social changes require re-examination of the conclusion that, by reference to the trading society test, the covenant has at no time engaged the doctrine.
52. It will be recalled that an interesting question caused division between McBride J and the Court of Appeal. It was whether, if a covenant were to engage the doctrine because the covenantor (Mr Shortall) enjoyed a pre-existing freedom, it would continue to engage it following an assignment of the burden of the covenant to an assignee (Peninsula) which enjoyed no such freedom. It follows that, were my colleagues to agree with this judgment, the question would no longer arise.
53. I propose that Dunnes’ appeal should be allowed and that Peninsula’s common law claim should be dismissed.
Postscript: The 1978 Order
54. The possible availability to Peninsula of an alternative remedy in relation to the covenant has played no part in the conclusion that it has at no time engaged the doctrine. But the conclusion is fortified by the possibility of relief pursuant to Peninsula’s alternative claim under the 1978 Order, which should now proceed to be heard. Nothing in this judgment should be taken to influence the determination of any issue which will then arise.
55. The 1978 Order is loosely based on section 84 of the Law of Property Act 1925 which, by section 209(3), extends only to England and Wales. Section 84 is entitled “Power to discharge or modify restrictive covenants affecting land”. In its report entitled “Making Land Work: Easements, Covenants and Profits À Prendre” (2011) (Law Com No 327), [2011] EWLC 327, the Law Commission of England and Wales explained the background to section 84 as follows:
“7.3 In the 19th century, and well into the 20th, land was sold off from large estates so as to facilitate urban expansion, but frequently subject to extensive restrictive covenants. These covenants had an important social function in the era before public planning control and often served to preserve the amenity of an area, controlling building and land use and ensuring consistent development. … However, social needs change over time … Landowners and developers may wish to discharge, or at least modify, covenants on the basis that they are no longer serving a useful purpose but their presence on the title to the land is impeding a change of use or a development.”
It seems that the lack of jurisdiction in the court prior to 1925 to modify or extinguish such a covenant enabled a covenantee to hold a covenantor to ransom even when the covenant was for practical purposes obsolete.
56. The 1978 Order confers a wider, more flexible, jurisdiction than that conferred by section 84 even as amended. If Peninsula were to establish that the covenant represents an impediment to the enjoyment of land under article 3 and that the impediment was unreasonable under article 5(1), the court under article 6(2)(a), like the Lands Tribunal under article 5(1), would have a wide discretion whether to make an order modifying or extinguishing the impediment and, if so, whether under article 5(6) to substitute a different impediment and/or to award compensation to Dunnes. Article 5(5) requires the discretion whether to make the order to be exercised by reference to seven specified factors and to any other material circumstances.
57. It would be absurd to consider that the doctrine against restraint of trade would have represented a vehicle for the resolution of the issues between Peninsula and Dunnes as satisfactory as that represented by the 1978 Order. It is this Order which properly reflects modern public policy in relation to the covenants to which it applies.
LORD CARNWATH:
58. I begin by paying tribute to Lord Wilson’s characteristically compelling judgment, tinged with regret that this is likely to be his last substantive contribution to the jurisprudence of this court. It has been a privilege to work with him. I adopt with gratitude his clear and concise exposition of the legal and factual background, and of the relevant authorities. This enables me to express my own views relatively briefly. I do so in recognition of the importance of the case, and out of respect for the Court of Appeal whose decision we will be reversing.
59. I agree entirely with his analysis of the Esso Petroleum Company Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 case, and that, for the reasons he gives, we should finally discard the much-criticised “pre-existing freedom test”. I also agree with his reasons for considering that this departure is within the scope and spirit of the 1966 Practice Statement. I note that many of the later criticisms had been foreshadowed at the time in the powerful reply of Robert Megarry QC before the House (pp 288-289). He had observed that the test now put forward by the respondents was “wholly novel”:
“It appears in no previous case, and was not argued below, but appeared for the first time in the course of the respondents’ argument here … This test draws a sharp distinction between covenants made by the grantor and those made by the grantee, with highly capricious results.”
He illustrated those capricious results by reference to cases of lease and lease-back and other examples, similar to those cited in later commentaries. It is unfortunate that these criticisms were not effectively addressed in any of the majority speeches.
60. I also agree with Lord Wilson in preferring Lord Wilberforce’s so-called “trading society” approach: whether the restrictive covenants in question –
“… have become part of the accepted machinery of a type of transaction which is generally found acceptable and necessary.” (p 335C)
In a later passage he referred to such restrictions being upheld –
“… where they have become part of the accepted pattern or structure of a trade, as encouraging or strengthening trade, rather than as limiting trade.” (p 336B)
It is true that this formulation is no more than an imprecise guide; and, as Lord Wilson observes (para 28), it raises the question why Lord Wilberforce did not think the test to be satisfied on the facts of the case. On the evidence the vast majority of filling stations in the UK were subject to solus agreements with oil companies. Lord Wilberforce’s answer seems to have turned both on the nature of the agreements and the fact that the restrictions were not sufficiently well-established in form or time. Thus, in giving his reasons for holding that the agreements were “on balance” within the category of restraints which required justification, he noted (at p 337C-G):
“This is not a mere transaction in property, nor a mere transaction between owners of property: it is essentially a trade agreement between traders.”
Having discussed the various “restrictive elements” he concluded:
“Finally the agreement is not of a character which, by the pressure of negotiation and competition, has passed into acceptance or into a balance of interest between the parties or between the parties and their customers; the solus system is both too recent and too variable for this to be said.” (Emphasis added)
One may detect an implicit contrast with the brewery cases, where, as he had explained, contractual clauses tying a leased public-house to the lessor’s beers had been “known, and commonly current, at least since the early 19th century” (p 333G), and with other forms of restrictive covenants treated as acceptable more than a century before that (p 334G).
61. Lord Wilson (para 51) regards the application of Lord Wilberforce’s trading society test in the present case as “straightforward”, having regard to the unchallenged evidence of their not infrequent use in leases in favour of anchor tenants. On the other hand the parallels discussed by Lord Wilberforce might appear to suggest that he had in mind the need for a longer historical pedigree than that implied by the limited evidence in this case. However, as the passage cited above makes clear, the practice had to be looked at in the context of what was “essentially a trade agreement between traders”, rather than a transaction in property. Less important than history is whether, in the light of established practice, there is in the relevant context any public policy reason for interfering in the free process of negotiation between the parties, or seeking to redress the balance of interests between them. The doctrine is an exception to the ordinary principles of freedom of contract, and should not be extended without good justification beyond those categories already established by the case law, or indistinguishable in principle from them.
62. That approach is also consistent with the underlying approach of the majority in the Esso case. The case itself establishes no more than that a restraint may attract the doctrine even if it relates to the use of land. According to the majority in Esso, if the trader is giving up an existing freedom to trade, it matters not whether the covenant is a purely personal restraint or a restraint on the use of a particular piece of land. As Lord Reid explained (at pp 297G-298A), dismissing the argument that the respondents were left free to trade anywhere else:
“But in many cases a trader trading at a particular place does not have the resources to enable him to begin trading elsewhere as well, and if he did he might find it difficult to find another suitable garage for sale or to get planning permission to open a new filling station on another site. As the whole doctrine of restraint of trade is based on public policy its application ought to depend less on legal niceties or theoretical possibilities than on the practical effect of a restraint …”
What matters therefore is the practical effect of the restriction in the real world, and its significance in public policy terms.
63. The present case is quite different from Esso, or any of the other trading cases. The agreement is not in essence an agreement between traders, but a transaction in land. The only trade which might be inhibited is that of a potential future occupier, seeking to trade in textiles, provisions or groceries in some other part of the development. None of the authorities suggest that there is any public policy reason or legal basis for protecting that mere possibility.
64. I accept, as Lord Wilson says (paras 17-18), that the mere fact that the Peninsula is a developer, rather than a trader in the conventional sense, is not necessarily determinative. Common formulations of the doctrine refer to any restraints on “the free exercise of (a person’s) trade or business” (see eg Petrofina (Great Britain) Ltd v Martin [1966] Ch 146, 169C per Lord Denning MR). So it is necessary to focus on the nature of any restriction on Peninsula’s own business as a developer.
65. We have been referred to no case in which the doctrine has been held to apply to a restriction accepted by a developer as part of a development scheme such as the present. This is not surprising. The business of developing a shopping centre as in this case inevitably involves doing deals to regulate the use of the relevant land, and balance the competing interests, to advance the success of the centre as a whole. That was rightly recognised in the Canadian cases to which Lord Wilson has referred (paras 35-36). As is shown by those cases, along with the evidence in this case, there is nothing unusual in special terms being required to secure an appropriate anchor tenant. Indeed, if Dunnes had had reason to think that the covenant would prove unenforceable in law, the likely result would have been its withdrawal from the development, and the failure of the scheme. Thus, the ability to offer such terms does not restrict, but rather facilitates, the developer’s business. It can be seen, in Lord Wilberforce’s words, as “encouraging or strengthening …, rather than as limiting” that business. There is no public policy reason for interfering with such an arrangement.
66. There is a parallel between Mr Shortall’s position and that of the prospective lessee faced with choice of taking premises subject to a covenant, as Lord Morris explained it in the Esso case. He said at p 309B-C:
“If one who seeks to take a lease of land knows that the only lease which is available to him is a lease with a restriction, then he must either take what is offered (on the appropriate financial terms) or he must seek a lease elsewhere. No feature of public policy requires that if he freely contracted he should be excused from honouring his contract. In no rational sense could it be said that if he took a lease with a restriction as to trading he was entering into a contract that interfered with the free exercise of his trade or his business or with his ‘individual liberty of action in trading’.”
67. Like that hypothetical lessee, Mr Shortall was faced with a free but limited choice: to take Dunnes on the terms offered, or not to have an anchor tenant at all. As in the case of the lessee, in no way could it be said that the exercise of that choice interfered with the free exercise of his business as a developer or with his individual liberty of action. It was rather an intrinsic part of that business. In Lord Morris’ words:
“No feature of public policy requires that if he freely contracted he should be excused from honouring his contract.”
68. For these reasons, I agree with Lord Wilson that the appeal should be allowed, and Peninsula’s common law claim dismissed. I do so the more readily having regard to the existence in the 1978 Order, of an alternative, and in many ways more satisfactory, vehicle for the resolution of the issues between the parties. Dunnes Stores (Bangor) Ltd (Appellant) (Northern Ireland)
Camiveo Ltd v Dunnes Stores
[2019] IECA 138
THE COURT OF APPEAL
Neutral Citation Number: [2019] IECA 138
Record No. 2017/285
Irvine J.
Baker J.
Costello J.
BETWEEN/
CAMIVEO LIMITED
PLAINTIFF/RESPONDENT
– AND-
DUNNES STORES
DEFENDANT/APPELLANT
JUDGMENT of Ms. Justice Costello delivered on the 9th day of May 2019
1. The deceptively simple issue for determination on this appeal is whether the appellant (“Dunnes”) is entitled to close and keep closed the main doors of its retail unit situate in Edward Square in the city of Galway. In the High Court, Barrett J. held that it was not, and granted an order restraining Dunnes from disabling the automatic opening mechanism of the doors from its unit in Edward Square shopping centre onto Williams Street (“the Doors”) during the opening hours of its department store at the Centre, which is owned by the respondent, and ordering that it keep the Doors open during the opening hours of its department store. In addition, the High Court awarded the respondent damages, including aggravated damages, in respect of the wrongful closure of the Doors in breach of various covenants in the lease of the unit. Dunnes appealed the entire judgment and order.
Background
2. The issues in the case turn on the interpretation of the planning permission for the Edward Square Shopping Centre and the rights and obligations of Dunnes as a tenant of the anchor unit in the Edward Square Shopping Centre. I propose first to deal with the planning permission for the development and then to consider the provisions of the lease under which Dunnes occupies the anchor unit in the Centre.
Application for planning permission
3. In July 1997 Radical Properties Limited (“Radical”) applied for planning permission to develop a site in Galway city centre. The site was bounded by William Street to the north-west, Eyre Square to the north-east, Merchants Road to the south-east and Abbeygate Street to the south-west. The site was an in-fill u-shaped site accessible only from William Street via Castle Street (also called Barrack Lane). It adjoined and backed onto the existing developments of Eyre Square Shopping Centre and Corbett Court Shopping Mall.
4. The application was for planning permission for:-
“A mixed development on lands between Barrack Lane/Castle Street and Whitehall (formally Corbetts’ Yard) and at No 11 Abbeygate Street. The development comprises residential, office use and retail linking into the existing Eyre Square Shopping Centre in Galway City Centre. Permission (1) to construct a building of four storeys above ground floor and lower ground floor to provide 7,499 sq. m. retail floor space (department store and up to 8 no. retail units and extension to existing retail unit), 72 m2 retail kiosks, 343, sq.m. office floor space and 3,749 residential floor space (49 no. residential units), including alterations to existing Eyre Square Shopping Centre to facilitate proposed linkages… ” (emphasis added)
5. As the application for planning permission included linking into the existing Eyre Square Shopping Centre and alterations to that Centre to facilitate the proposed linkages, the application for planning permission included letters from the owners of properties who were affected by the proposed pedestrian or other linkages acceding to the proposed alterations.
6. Radical submitted revised plans and additional information on the 17th October, 1997 and on the 7th January,1998 Galway Corporation decided to grant Radical planning permission. That decision was appealed to An Bord Pleanála. Further documents were submitted by Radical in response to objections raised by third parties.
7. On the 1st September, 1998 An Bord Pleanála granted Radical planning permission for the development described in the public notice as:-
“Residential, office use and retail linking into Eyre Square Shopping Centre in Galway city centre. The above planning application seeks permission (1) to construct a building of four storeys above ground floor and lower ground floor to provide 7,499 square metres retail floor space (department store and up to eight retail units and extension to existing retail unit), 72 square metres retail kiosks, 343 square metres office space and 3,749 residential floor space (49 residential units), including alterations to existing Eyre Square Shopping Centre to facilitate proposed linkages…in accordance with plans and particulars lodged with [Galway] Corporation. ” (emphasis added)
8. The decision was:-
“to grant permission for the said development in accordance with the said plans and particulars, subject to the conditions specified in the Second Schedule hereto, the reasons for the imposition of the said conditions being set out in the said Second Schedule and the said permission is hereby granted subject to the said conditions.”
9. Condition 1 in the second schedule provided:-
“The proposed development shall be carried out in accordance with the plans and particulars lodged with the application as supplemented and amended by the plans and particulars received by the planning authority on the 14th day of October, 1997, the 3rd day of November, 1997 and the 18th day of November, 1997 and by An Bord Pleanála on the 6th day of March, 1998 and the 20th day of July, 1998, except as may otherwise be required in order to comply with the following conditions.
Reason: to clarify the development permitted.”
10. One of the drawings submitted in March 1998 to An Bord Pleanála showed, inter alia , revised entrance doors from the anchor unit into the open U-shaped courtyard around which the other retail units in the development were situate. The entrance comprised a lobby with double automatic doors two abreast the Doors
11. A block plan referred to as L:37 was submitted to An Bord Pleanála on the 6th March, 1998, and is one of the documents referred to in Condition 1 of the grant of planning permission. The block plan shows the site and the proposed development in context. Two existing developments are shown, Corbett Court Shopping Mall marked in green and Eyre Square Shopping Centre marked in yellow. The proposed development is situated adjoining these two parcels of land and is coloured red. The entrance to the proposed development from William Street into Castle Street is shown as a pedestrian entrance and is part of the pedestrian zone in Galway city. A series of black dots are indicated on the block plan. One line comes from William Street up Castle Street and branches into two. One branch passes to the right and continues over the Corbett Court development and the Eyre Square Shopping Centre. This branch shows two proposed exits, one on to Williams Gate Street from Corbett Court and the other on to Eyre Square via the Eyre Square Shopping Centre.
12. The second branch continues straight through the Doors into the anchor unit of the proposed development. The dotted line continues by showing a route into the Eyre Square Shopping Centre over a bridge to be constructed over the Galway City walls as part of the proposed development. A second dotted line continues directly ahead into a different section of the Eyre Square Shopping Centre. Thereafter the dotted lines show that there can be pedestrian access out into Whitehall and thereafter into Abbeygate Street or alternatively through the principal entrance to the Eyre Square Shopping Centre or out onto Williams Gate Street via the Corbett Court shopping mall.
13. The meaning and effect of this block plan submitted to An Bord Pleanála by Radical was the subject of considerable debate at the trial and on appeal.
14. It is worth noting at this point that Messrs. Brady Shipman Martin, the agent’s acting for Radical, wrote to An Bord Pleanála on the 17th July, 1998 in relation to an argument raised by a third party objector regarding a directive issued by the Department of the Environment and Local Government limiting the retail floor space of supermarkets to no more than 3,000 square metres. An issue arose as to whether, in assessing the area of this supermarket element of the department store proposed, account should be taken of the existing supermarket space in the Eyre Square Shopping Centre development. In replying to this point, Messrs. Brady Shipman Martin emphasised that the proposed scheme was a standalone development and pointed out that Radical had no interest, direct or indirect, in the owners of the adjacent Eyre Square Shopping Centre ” despite the proposals to create pedestrian linkages between the two developments and to share rationalised shared servicing arrangements “. The letter continued at point 21:-
“Moreover, at the instigation of the Local Authority and with the agreement of the owners of Eyre Square Centre, Drakebury Limited, new pedestrian linkages will be created between the existing Eyre Square Centre and the proposed development, to ease pedestrian movement through the block.”
15. It was clear to third parties that the proposed development involved pedestrian linkages between the proposed development and Eyre Square Shopping Centre and Corbett Court Shopping Mall. Ronan Daly Jermyn solicitors acting on behalf of one objector, Decbrooke Limited, the owner of a supermarket in the Eyre Square Shopping Centre, referred to the fact that the proposed development and the existing Eyre Square development were ” irretrievably linked “.
16. The report of the Inspector to An Bord Pleanála of August 1998 clearly noted the proposed links between the proposed development and the Eyre Square Shopping Centre. The report notes that the application is for a development ” linking into the existing Eyre Square Shopping Centre ” and that it includes ” alternations to existing Eyre Square Shopping Centre to facilitate proposes linkages “. In the description of the site location, the inspector states:-
“In addition to the pedestrian linkage, there would be access to the existing multi story carpark…another major access point will be from William Street (this forms part of the major shopping street in the city centre connection Shop Street to Eyre Square, via Barrack Lane…)”.
17. The inspector records that on the 11th November, 1997 the owners of Eyre Square Shopping Centre submitted a letter to the planning authority indicating that they had no objection in principle to the proposed development and its linkage with their property. He referred to the provision of linkages between the two centres and the Corbett Court Shopping Mall as representing ” a logical solution that would also improve public access to this historic area and is very much in accordance with the proper planning and development of the area “.
18. The documents submitted to An Bord Pleanála included a report from the City Engineer entitled ” Report on permission from Mixed Development comprising Residential Office Use & Retail linking into existing Eyre Square Shopping Centre in Galway Ccity Centre which was received by An Bord Pleanála on the 2nd March 19 “.
19. There was no express condition in the grant of planning permission that there be pedestrian access provided through the Doors of the anchor unit of the Edward Square Shopping Centre accessed from William Street and Castle Street through to the Eyre Square Shopping Centre.
20. A significant issue in the case was whether despite the absence of such express condition the grant of planning permission required that there be access or egress via the Doors through the anchor unit to the Eyre Square Shopping Centre.
The law: principles of construction of planning permissions
21. In order to answer that question, it is necessary to consider the principles by which grants of planning permissions should be construed. The starting point is the decision of the Supreme Court in Re XJS investments Ltd . [1986] I.R. 750. At p.756 Mc Carthy J. held that planning permissions are not to be construed in the manner in which statutes or statutory instruments are construed.
“they are to be construed in their ordinary meaning as it would be understood by members of the public, without legal training as well as by developers and their agents, unless such documents, read as a whole, necessarily indicate some other meaning.”
22. In Kenny v. Dublin City Council & Anor . [2009] IESC 19, Fennelly J. approved of the following passage from Simons on Planning and Development Law (2nd Ed, 2007, paras. 5.06-5.07):-
“a planning permission is a public document; it is not personal to the applicant, but rather enures for the benefit of the land. It follows as a consequence that a planning permission is to be interpreted objectively, and not in the light of subjective considerations peculiar to the applicant or those responsible for the grant of planning permission. A planning permission is to be given its ordinary meaning as it would be understood by members of the public without legal training, as well as by developers and their agents, unless such documents, read as a whole, necessarily indicate some other meaning.”
23. Fennelly J. emphasised that planning permission is to be interpreted according to objective criteria but an objective interpretation will not provide the complete answer in every case. It is not a synonym of literal interpretation. Having quoted with approval from the decision in Re XJS Investment Ltd . he held:-
“A court, in interpreting a planning permission, may need to go no further than the planning document itself, or even the words of a condition in issue within the context of the permission. The words may be clear enough. However, it will very often need to interpret according to context.” (para 28)
24. Fennelly J. held that the principle of objective interpretation excludes purely subjective considerations, but it does not provide a result where a provision is unclear, ambiguous or contradictory. In that situation, the court does not confine itself to a purely literal interpretation of a condition; it will seek to ascertain its true meaning from its context in the planning process. (paras 34-35)
25. Fennelly J. had regard to the decision of the Supreme Court in Gregory v. Dun Laoghaire-Rathdown County Council [1996] 7 JIC 1602. That case concerned an application for retention planning permission of what was called a garage/loft. Planning permission was granted and then appealed. An Bord Pleanála imposed a condition:-
“the proposed loft shall be omitted. The proposed garage shall be of single storey construction. Revised details shall be agreed with the planning authority…”
The reason given for the condition was ” in the interests of residential amenity ”
26. The planning authority agreed revised details purportedly in compliance with the condition: the loft was to be omitted but the approved change led to no alteration in the height of the garage. The issue for consideration in the case was whether or not the developer had complied with the condition. On a literal interpretation he had: the loft was omitted and the garage was single story. However, the height had not been altered. Geoghegan J. in the High Court believed that the height of the structure, though not specified, was the main concern. The Supreme Court relied heavily on the reason for the complaint made by the objector which led to the imposition of the condition. The objector’s concern was about the height of the structure, and not the internal layout. Murphy J. writing for the Supreme Court held:-
“by imposing the condition in question they clearly required the reduction of the height of the structure by the removal of the loft area as shown on the plans before them and the second storey which constituted that loft. The omission or deletion of the loft was the means by which the reduction in height of the structure was to be achieved.”
27. In Kenny , Fennelly J. followed this reasoning in construing the condition in that case requiring that the elevation of a building be ” reduced in height by the omission of the first floor… “. The developer omitted a floor other than the first as the condition was interpreted by the planning authority as requiring that the overall height of the building be reduced by one floor. Fennelly J. upheld this construction of the condition and rejected the proposed literal interpretation of the condition in issue.
28. In Lanigan v. Barry [2016] 1 I.R. 656, the Supreme Court considered the interpretation of a general clause in a planning permission requiring a development to be carried out in accordance with the drawings and specifications submitted. The issue between the parties in that case was whether on a proper construction the planning permission concerned it could be said that there was a condition relating to the scale and timing of the motor racing circuit operated by Tipperary Raceway. Clarke J. gave the judgment of the court. He said that the starting point had to be the consideration of the grant of planning permission itself. There was no express decision governing the issue in the case and reliance was placed upon Condition 1 which was in the usual form that development be carried out in accordance with the applicant’s submitted drawings and other outline specifications unless modified by other conditions. This required the court to look back to the application for outline planning permission approval. The issue in that case did not concern the drawings but “outline specifications” as referred to in condition 1. At paras 26 and 27 of the judgment he held:-
“[26] In the context of that issue it is important, in my view, to distinguish between a general description of the scale of operation of a facility which might be anticipated, on the one hand, and a specific condition limiting the maximum scale of the operation concerned, on the other. The distinction may be easy to define in some cases but there may well be grey areas in other cases. For example, a retail unit might be described as being likely to attract a certain level of footfall. That description might, indeed, be relevant for planning purposes for it would undoubtedly affect traffic and potentially the amenity of other property occupiers in the vicinity. But such a description would be unlikely to be taken as imposing an absolute limit on the amount of customers which the retail unit would be permitted to entertain on any given day. Likewise, the documents filed in respect of a planning application might suggest that a retail unit was designed for daytime use. That might indicate the sort of use which might implicitly be approved by the granting of planning permission for the unit concerned. It is well settled that, in considering the use which may be regarded as being permitted, it is possible to look at the development for which permission has been granted together with any documents submitted in the context of the relevant planning application.
[27] In such a case the planning authority might choose to impose a specific condition concerning hours of opening. If it did so choose then the matter would be clear and it would be a breach of the relevant condition for the retail unit to open outside the hours as specified. However, even if no such specified opening hours were included as conditions attached to the planning permission, it would always be open to a court to consider whether opening significantly outside the parameters which were contemplated by the planning application itself might amount, in all the circumstances, to a sufficient intensification of use (over the use impliedly authorised by the permission) so as to justify a finding of a material change. However, in that latter case it would be necessary to take into account a range of factors, including the degree of difference from the use which it might be inferred had been permitted by the planning permission, so as to assess whether any variation from that contemplated use could be said to involve a material change of use.”
29. Following Re XJS Investments Ltd . Clarke J. held that the “text in context” approach required the court to consider the text used in the context of the circumstances in which the document concerned was produced including the nature of the document itself. At para 32 of the judgment he held that:-
“to interpret a general clause such as condition 1… in a way which imposes very specific obligations in the absence of a specific condition does, in my view, require that what might reasonably considered to be the drawings and specifications be clearly of a nature designed to identify specific and precisely enforceable parameters for the development (including its use) .” (emphasis added)
In the instant case, he was not satisfied that the application for outline planning permission met this test and at para 35 of the judgment he continued:-
“that is not to say that there might not be occasions where the language contained in a document submitted might properly be construed as amounting to a clear commitment that particular limits of one sort or another would be complied with. In such a case, it might be possible to construe a general condition such as condition 1 as importing that commitment into the permission itself by means of a condition. But for that to be the case it seems to me that it would be necessary that it would be appropriate to construe the documents submitted by the applicant for planning permission as giving a clear and specific commitment rather than a general indication concerning the scale and timing of the operation. I am not satisfied that the documents in this case can be so construed.”
In the light of these authorities, I turn to consider the decision of the High Court in relation to the construction of the planning permission.
The decision of the High Court in relation to the construction of the planning permission
30. The High Court considered six authorities relating to the construction of planning permissions. These were Kenny v. Dublin City Council, Weston Limited v. An Bord Pleanála [2010] IEHC 255 , Dublin City Council v. Jack Barrett (Builders) Limited (Unreported, Supreme Court, 28th July, 1983), Coffey v. Hebron Homes Limited (Unreported, High Court (O’Hanlon J.), 27th July, 1984) and the decisions of the High Court and Supreme Court in Lanigan v. Barry [2008] IEHC 29 and [2016] 1 1.R. 656.
31. Relying on Kenny , the trial judge held that the essence of what the Court seeks to do in interpreting a planning permission, or an element of the planning permission, is to ” ascertain true meaning within the context of the applicable planning process” . He identified as ” perhaps the key lesson to be drawn from Kenny is just how (very) far the Supreme Court was prepared to go in seeking to ascertain the true intent of the planning authority” . He emphasised that the Supreme Court was prepared not just to look beyond the literal wording of a condition but to allow the doing of something which was entirely contrary to the literal wording of a condition.
32. In relation to Lanigan , the trial judge held that it did not represent a departure from previous case law but was a further exposition of applicable principle consistent with past decisions which envisioned the courts inferring obligations into or from a planning permission as part of their ordinary interpretive function. At para. 44 the trial judge identified as the key lesson to be drawn from Lanigan as:-
“…to contend successfully, in the absence of a specific condition, that a planning permission imposes a specific obligation, one has to identify a clear and specific commitment, and not just a general indication, in the relevant planning application documentation.”
33. At para 47 of the judgment the trial judge identified nine key principles arising from the case law he analysed as follows:-
“(1) When it comes to the interpretation of a planning permission that is a pure question of law;
(2) a planning permission falls to be given its ordinary meaning as it would be understood by a member of the public, unless the document read as a whole necessarily indicates some other meaning;
(3) a member of the public will give a planning permission a common sense meaning, not a technical interpretation;
(4) a planning permission is to be given a purposive interpretation, not a literal one;
(5) planning permission is to be interpreted objectively, not by reference to the subjective intentions of an applicant or planning authority;
(6) a court can have regard to the context in which a planning permission was granted;
(7) a court will look at a permission and the documents on the planning file as a whole, including the description of the development applied for, the information provided by the developer as part of the application, and any report of an Inspector;
(8) the obligation imposed on a developer by a planning condition is not confined to the literal terms of the condition but extends to achieving the objective of the condition; and
(9) the obligation on a developer to carry out a development in accordance with the plans and particulars submitted will extend to any obligation which can reasonably be inferred from those plans and particulars.”
34. When the trial judge came to apply these principles to the facts in the case he cited the grant of planning permission by An Bord Pleanála and the original application by Radical for planning permission. He identified the meaning of linkage which was referred both in the application for planning permission and in the grant of planning permission. He stated that:-
“…What seems abundantly clear from the foregoing is that the word “linkage” embraces a facilitation of connection and movement between people and places. It goes without noting but it is worth noting anyway that where an element of the linkage (the Edward Square entrance) is permanently closed the desired “relationship or connection between people or things”/”means of contact or transport between two places” is thereby necessarily, and completely, frustrated.”
35. At para 51 he highlighted a number of points arising from the description of the application for planning permission:-
“…(1) the site is the urban back-land accessed off Castle Street; there is also access from Abbeygate Street; (2 ) the link into Eyre Square Centre is given some prominence ; (3) the description relates to permission for physical development, but not physical development simpliciter; rather it envisions a physical development that facilitates identified uses, including the linkage between the new development and Eyre Square Centre ; (4) the description expressly states that “The development comprises residential, office use and retail linking into Eyre Square Shopping Centre in the Galway City Centre”, so the whole development links into the Eyre Square Centre; (5) the ‘orphaning’ of the remaining Edward Square Shopping Centre stores from the Eyre Square Centre, thanks to the closing of the doors through which the anticipated linkage was to be (and for a long time was) facilitated was not only never anticipated but the exact opposite of what was anticipated.” (emphasis added)
36. The trial judge quoted from the decision of Charleton J. in Weston Limited v. An Bord Pleanála that:-
“Planning controls operate within the community on the basis that the developer will make an honest application for planning permission, stating precisely what is proposed.”
37. He concluded that if there was to be no access onto Edward Square from the Dunnes unit then that would be a misrepresentation of what the developer (honestly) sought. He therefore concluded that this favoured an interpretation which he described as the only “rational” interpretation of the application for planning permission as being that there was intended to be a link from the proposed development/Castle Street to the Eyre Square Shopping Centre.
38. He then considered the detail of Plan L003 and Drawing L37 and the Brady Shipman Martin letter of the 17th July, 1998 which I have quoted above. With regard to Plan L003 he noted that the plan showed a large double door lobby entrance between the anchor unit and the open courtyard of Edward Square Shopping Centre. The trial judge held:
“… It is readily apparent from the map that this is to be a major entrance that will be extensively used and which will provide access to the Eyre Square Centre through the relevant access/egress points elsewhere in what is now the Dunnes unit.”
39. In addition to his own objective reading of the plan, he referred to the expert evidence of Mr. McKeon and Mr. Grace to the effect that the plan indicated a double door lobby as is customarily used at a retail entrance. He also referred to the evidence of Ms. Byrne who stated that such an arrangement:-
“…would indicate to a planner that the doors thereat would be opening and closing regularly, with it being a reasonable inference to make that they would be used regularly.”
40. He noted that Mr. Grace indicated in his evidence:
“…that the plan clearly indicates to planners, or indeed anybody looking at it , that were such development to be constructed there would be free movement between Edward Square Shopping Centre and Eyre Square Centre.” (emphasis added)
41. On the basis of his own reading of the plans and on the basis of expert planning evidence as to the meaning a planner would infer from Plan L003, the Court concluded that the permanent closure of the double door lobby would constitute a breach of the planning permission issued on the basis of the plan.
42. In relation to Drawing L37 the trial judge held that it:-
“…gives an aerial view of Galway City Centre and by means of large dots gives a sense of how people are expected to move around the Edward Square Shopping Centre and Eyre Square Centre, and into and from some of the streets beyond.”
43. The block plan is in two dimensions and the development was to comprise four floors. Counsel for Dunnes argued that some of the dots appeared to stop at walls and that, in fact, it was not possible to proceed along the line indicated by the dots. In answer to this argument the trial judge held:-
“…Any reasonable reader looking at the drawing would understand from it that what it intends to convey is the ability for there to be free movement up, say, William Street into Castle Street, through Dunnes, on into Eyre Square Centre and out into Eyre Square proper (or vice versa) and so, inter alia, to make commercial use of the urban back-land where the old builder’s yard sat before it was transformed into what is now the Edward Square Shopping Centre.”
44. He concluded that if the Doors to Dunnes are permanently closed the ability of pedestrians to circulate as anticipated is entirely frustrated.
45. Having construed the drawing from the perspective of the reasonable reader, the trial judge then considered the evidence from the expert planners and in particular the evidence of Mr. Grace who stated that the implication of looking at Drawing L37 is that:-
“…during normal trading hours, whatever they may be, it would be available for people to use…”
46. He said that the drawing simply illustrated what was been proposed:-
“…which was that there would be access from various places through the proposed Edward Square development into other parts of the development.”
47. In relation to the Brady Shipman Martin letter, he noted that it was clear that the pedestrian linkages are intended “to ease pedestrian movement through the block” . Similarly, with regard to the Inspector’s Report he noted the reference to the location of the site, and the linkages. The trial judge concluded that the linkage was an important feature of the development and that “to attain that linkage it follows as a matter of simple logic that the doors to the dominant shop unit cannot permanently be closed” in the context of the site as described.
48. The Court then assessed the totality of the evidence and said that “ultimately it must be approached holistically and not in an atomistic or sequential manner” . The trial judge identified the key issue to be determined as: what would a reasonable, informed person make of the planning arrangements at issue in the proceedings? He concluded, having made his own objective assessment, that circulation through the Dunnes unit and access and egress via the Doors permitted a through route allowing pedestrians to pass through the Edward Square Shopping Centre and into the Eyre Square Shopping centre. He concluded that the planning permission properly construed required that the Doors should operate as access and egress doors to the unit and not simply as fire doors and that the failure to operate the Doors as such amounted to a breach of the planning permission for the Edward Square Shopping Centre.
Discussion on planning permission
49. Dunnes appealed the conclusions of the trial judge on the construction of Condition 1 of the planning permission on a number of grounds. The first matter to consider is whether the trial judge correctly identified the principles applicable to construing the planning permission at issue in these proceedings before then considering how he applied those principles to the facts. I am satisfied that he did so in a most comprehensive and clear fashion. Critically, for the issues raised in this case, he identified that the construction of a planning permission is a matter of law for the court and that it is to be construed objectively. He identified the important distinction between a purely literal interpretation of a condition and the true meaning of the condition in the context of the particular planning application. Following on from the decision in XJS , he identified that the planning permission is to be construed in its ordinary meaning as it would be understood by members of the public without legal training as well as by developers and their agents unless the documents, read as a whole, necessarily indicate some other meaning. He considered the decision in Lanigan v. Barry extensively and in particular the fact that, to contend successfully, in the absence of a specific condition that a planning permission imposes a specific obligation, a party must identity a clear and specific commitment, and not just a general indication in the relevant planning documentation. He emphasised that the court must consider the totality of the evidence and approach the planning permission holistically and not in an atomistic or sequential manner.
50. In my opinion there is no error in the judgment in identifying the relevant principles. They accord with principles identified at paras 21-29 of this judgment.
51. The next question to be considered is whether the trial judge correctly applied the principles to the facts in this case. His task was to decide what the planning permission meant to an untrained member of the public, the reasonable reader, looking at it in the context of the planning process and the particular application for planning permission.
52. The application for planning permission said that there were to be linkages between the Edward Square Shopping Centre and the Eyre Square Shopping Centre. The application included a letter from the owner of the Eyre Square Shopping Centre consenting to the creation of the linkages proposed in the planning application. The plans submitted, and in particular Plan L003, showed only one possible linkage between the proposed Edward Square Shopping Centre and the Eyre Square Shopping Centre and this was through the Doors. Block Plan L 37 marked in large black dots pedestrian circulation through Eyre Square Shopping Centre and into Edward Square Shopping Centre and Corbett Court Shopping Mall as I have described above. The letter from Brady Shipman Martin of the 17th July, 1998 was clear that there would be pedestrian linkages between the two developments. The report of the Inspector likewise made clear that linkage was an important feature of the overall proposal. A third party objector represented by Ronan Daly Jermyn Solicitors understood that there were to be pedestrian linkages between the Eyre Square Shopping Centre and the Edward Square Shopping Centre and indeed objected to the grant of planning permission inter alia on that basis.
53. In my opinion, there was ample evidence for the trial judge to conclude that the untrained member of the public looking at the grant of planning permission in the context of the planning process and the particular application for planning permission would conclude that the planning permission required the creation and maintenance of pedestrian linkages between the Edward Square Shopping Centre and the Eyre Square Shopping Centre.
54. Further, a consideration of the plans makes it clear that the only possible means by which such linkages could be provided was via the Doors. In order for there to be linkages between the two shopping centres, a pedestrian must be able to travel in a door in one shopping centre and exit through a door in the other shopping centre (or vice versa) and in so doing must be able to travel across the anchor unit and across the Eyre Square Shopping Centre. The trial judge held this to be so and his decision in this regard is unimpeachable.
55. There was no express condition in the planning permission requiring that the pedestrian access and egress was to be via the Doors and the anchor unit. The construction of the planning permission to this effect was based upon the construction of Condition 1 which I have cited above. Whether the general terms of Condition 1 can impose specific obligations or commitment must be considered in light of the decision in Lanigan . The test established in Lanigan is whether there was a clear and specific commitment and not just a general indication in the relevant planning application documentation. If the test is not satisfied, then no such condition exists, in the absence of an express condition governing the alleged commitment.
56. I am satisfied that the trial judge was correct in holding that there was such a commitment in the planning documentation read as a whole and in the context of the application for planning permission in this case. The commitment was that there would be linkages and that the linkages would be via the Doors and across the anchor unit. The route was not defined but that does not alter the fact that there were to be linkages in the manner I have indicated. The planning documentation read in context contained a clear and specific commitment that there would be access/egress between the Eyre Square Shopping Centre and the proposed development of Edward Square Shopping Centre and it would be via the Doors indicated on the plans and in particular L003.
57. The appellant argued that Condition 1 of the planning permission was satisfied once the development had been constructed and that it had no relevance to the use of the development, therefore it could have no relevance to the operation of pedestrian linkages between the two centres. This argument is clearly incorrect. Planning permission governs the use as well as the construction of the proposed development. A material change of use could arise if the authorised development was, in fact, used for a use which was not authorised. For example, permission might be granted for a private house and if it were subsequently used for business purposes this could constitute a breach of the planning permission notwithstanding the fact that the building had been constructed in accordance with the plans and specifications. In this case the circulation of pedestrians between the streets and the two shopping centres is as much an aspect of the permission as, for example, continued availability of car parking spaces. If, for example, the developer was required to construct a multi storey car park, it would not be in compliance with its planning permission if it closed the car park a week after it had been built. It follows that not only must the linkages be constructed, they must be capable of use, and closure of the Doors severs the links that were to be provided.
58. The possible use of the Doors as a fire exit did not and could not amount to compliance with the planning permission. The use of the Doors as a means of pedestrian access and egress, thereby facilitating pedestrian linkage and circulation, was integral to the grant of planning permission. The disabling of the automatic opening mechanism of the Doors resulted in the closing of the Doors and meant that they were no longer an entrance, as clearly depicted on the plans which was required by the planning permission. It followed that this constituted a material breach of the planning permission for the development regardless of the fact that it arose after the construction had been completed.
59. It was argued on appeal that plans and drawings could not meet the Lanigan test: they did not indicate a specific route through which access was to be facilitated, they did not indicate the times that access was to be provided and the argument of the respondent did not take account of the fact that if the anchor tenant was not open for trade or business (or indeed if the unit was not let) then de facto there could be no linkages.
60. I am not persuaded by these arguments. It is clear that units in shopping developments may have different opening hours. The linkages envisaged by the planning permission could only apply when the department store and supermarket to be located in the anchor unit were open for trade. The commitment in the planning permission was that these linkages would exist when that unit was open for trade and business in the normal way as the linkage was via the unit and not through a common area. The linkages did not require the creation of defined routes through the anchor unit into the Eyre Square Shopping Centre, merely that it would be possible to circulate between the linked premises. Therefore, the lack of a defined route is irrelevant to the proper construction of the planning permission. The trial judge held that a reasonable reader of the planning documentation would understand the application to mean that there would be linkages via the Doors and through the anchor unit when it was open for trade. I see no basis for this court to overturn this finding. It was for him to decide whether the planning application and planning permission so construed constituted a clear and specific commitment. He was satisfied that it did and I agree with him. This case is very different to the situation in Lanigan where intensification of use was in issue, an amorphous concept almost by definition. Here the closure of the Doors is preventing the very thing the planners intended would occur. The drawings identified specific and precisely enforceable parameters for the use of the development as required by Lanigan . Whether there may be a difficulty in the future in relation to the linkages if the occupier of the anchor unit closes for business is not a matter which needs concern this court in this case. At all material times, Dunnes has traded and been open for business throughout the whole of the unit and so this possible difficulty simply does not arise on the facts in this case.
61. It was argued that if the linkages were as integral to the planning permission as the respondent alleged, that the planning authority of an Bord Pleanala could have provided an express condition to that effect and that this was a relevant factor to be taken into consideration when construing Condition 1. The Development Management Guidelines for Planning Authorities (which post the grant of planning permission in this case) at section 7.3.1. state:-
“that a condition is not necessary where what is sought by condition is clearly provided for on the plans and particulars by reference to which the permission is being granted.”
These guidelines set out best practice in relation to the imposition of conditions. The practice reduces the number of conditions which must be attached to grants of planning permission, which otherwise could become unduly cumbersome with superfluous conditions. In the circumstances it would have been contrary to good practice and superfluous to provide a condition requiring linkages, as submitted by Dunnes. I do not attach any weight to the absence of an express condition in the circumstances of this case as the application for planning permission expressly sought permission for the linkages in issue.
62. It was argued that the trial judge failed to have regard to conflicts in the evidence given by expert planners for the respondent and between those expert witnesses and experts who gave evidence on behalf of Dunnes and that he ignored the agreed position paper of the expert witnesses. It was also submitted that he erred in failing to explain why he rejected the evidence of some of the expert witnesses and accepted the evidence of others. In my opinion, this submission is without merit. Ultimately, the views of the planners on the meaning of the planning permission amounted to opinion evidence on the proper construction and meaning of the planning permission and the planning documents and no more. The planning permission is to be construed objectively by the Court and the Court is to have regard to how it would be understood by a reasonable, untrained member of the public as well as by planners and developers. It was therefore not necessary for the trial judge to resolve any conflicts of opinion evidence given by the planners in this case. Ultimately their evidence did not go to establishing any facts in the case and it was not necessary for the judge to weigh their evidence in his judgment in carrying out his task in construing the planning permission.
63. As I have set out above, the trial judge assessed the evidence first by reference to the reasonable member of the public considering the planning permission in the planning process. Once he carried out this exercise and reached his own objective construction of the planning documents, he then pointed to the fact that his conclusions were, in effect, corroborated by the evidence of some of the planners. It was not necessary for him to do this or for him expressly to reject contrary evidence or to resolve conflicts or inconsistencies in the evidence of the planners. It was implicit in his judgment that he did not find the opinion evidence upon which he did not rely either compelling or convincing.
64. It is important to observe that the planning permission cannot be construed by reference to any rights which Dunnes may have under its lease. The planning permission was granted before ever the lease was entered into. The lease was created subsequent to the issue of the grant of planning permission and it could never alter the terms of the planning permission. The planning permission is a matter of public law which enures to the benefit of the land and gives rise to public rights, including enforcement rights. It follows that the planning permission is to be construed without taking into account any of the provisions of the lease. It further follows that it is the planning permission which may impact upon the lease and the rights of either party under the lease and not the other way round. This was accepted by counsel for Dunnes in submissions to the Court on appeal.
65. In a separate argument on appeal counsel for Dunnes contends that standard conveyancing practice is not consistent with the approach for which the respondent contends in that it would involve a purchaser in an analysis of planning documentation and a consideration of compliance with planning conditions at a level of practical and concrete engagement which would be unnecessarily burdensome.
66. This argument fails to have regard to the fact that the Law Society’s standard requisitions on title contain a series of questions regarding the planning status of the property in sale and it is common and good conveyancing practice, absent a special condition precluding this, that a purchaser would require a certificate of a competent person be furnished regarding compliance with planning conditions by a vendor.
67. I am not convinced that this argument, even taken at its height in the context of the board scope of condition one, supports the proposition for which Dunnes contends, that breach of the planning conditions does not give rise to the private law remedy, the subject matter of this appeal.
68. In my judgment the trial judge was correct to hold that Condition 1 of the planning permission as properly construed gave a clear and specific commitment that pedestrian circulation would be facilitated between the Edward Square Shopping Centre and the Eyre Square Shopping Centre. This would be via the Doors and crossing the anchor unit during the hours that the occupier of the unit was open for business. Any indefinite frustration of this pedestrian access would constitute a breach of condition 1 of the planning permission. The indefinite closure of the Doors, as occurred in this case, constituted a material breach of the grant of planning permission.
The Anchor lease
69. It is now appropriate to turn to the provisions of the lease so as to ascertain the rights and obligations of Dunnes under the lease and to ascertain whether they may provide an answer to the claim that the closure of the Doors amounted to a breach of planning permission and of various covenants of the lease. On the 3rd April, 2000 Radical entered into what is described on its title page as a lease of the anchor unit of the Edwards Square Shopping Centre, Barrack Lane, Galway with Dunnes Stores Ireland Company. It is clear from the terms of the lease and the matters set out at paras 15-17 of the judgment of the trial judge that there is no merit whatsoever in the argument that the Edward Square development was not a shopping centre or that the Demised Premises was not the anchor unit of the Edwards Square Shopping Centre and I have no hesitation in dismissing the grounds of appeal based on the assertion that the lease was not a lease of the anchor unit of the Edward Square Shopping Centre for the reasons set out in the judgment of the High Court.
70. The lease governs the relationship between the lessor and the lessee. By deed of assurance of 7th May, 2013 the respondent became the legal owner of the Edward Square Shopping Centre and is the successor in title to Radical. As such, it is the proper plaintiff in these proceedings and I see no merit in the argument to the contrary based upon the submission it has not beneficial interest in the lease. The respondent sought and obtained relief requiring Dunnes to comply with the covenants in three leases in which Dunnes holds the lessee’s interest in the anchor unit of the Edwards Square Shopping Centre: a lease agreement dated the 3rd April 2000 (“the anchor lease”) and two further leases of linked properties known as the Bastion Area and unit 107, Eyre Square Centre (“The Bastion lease” and “the unit 107 lease” respectively). The issues in the case almost exclusively turned upon the terms of the covenants in the anchor lease.
71. The following covenants in the lease were the subject of argument in this court and the High Court:-
“4. TENANT’S COVENANTS
The Tenant to the intent that the obligations may continue throughout the Term HEREBY COVENANTS with the Landlord as follows:
4.19 To Open
4.19.1 To complete the fitting-out of the Demised Premises in accordance with the Plans and Specifications approved heretofore by the Landlord and once such fitting-out has been completed to open for trade to the general public unless prevented from doing so for some cause outside the Tenant’s Control PROVIDED THAT nothing in this Lease or otherwise shall oblige the Tenant to keep the Demised Premises or any part thereof open for trade or business….
4.29 Statutory requirements
4.29.1 At the tenant’s own expense, to comply in all material respects with the provisions of all Acts, statutory Instruments, Bye Laws and other regulations now in force or which may hereafter be in force and any other obligations imposed by law relating to the Demised Premises or the user thereof.
4.29.2 To execute all works and provide and maintain all arrangements upon or in respect of the Demised Premises or the user thereof, which are directed or required (whether of the Landlord, Tenant or occupier) by any statute now in force or which may hereafter be in force or by any government department, local or other competent authority or duly authorised officer or court of competent jurisdiction action, under or in pursuance of any statute and to indemnify and keep the Landlord indemnified against all reasonable costs, charges, fees and expenses of or incidental to the execution of any works or the provision or maintenance of any arrangements so directed or required in relation to the Demised Premises;
4.29.3 Not to do in or near the Demised Premises, any act or thing by reason of which the Landlord may, under any statute, incur or have imposed upon it or become liable to pay any penalty, damages, compensation, costs, charges or expenses;
4.29.4 PROVIDED ALWAYS that the provisions of this clause 4.29 shall not apply to any matters which are the responsibility of the Landlord under this Lease.
4.29.5 Not to do anything in the Demised Premises or occupy them in such a way as shall cause any part of the Centre or the Eyre Square Centre not to comply in any material respect with any statute in relation to fire safety. For the avoidance of doubt this clause does not apply to the initial construction of the Demised Premises undertaken by the Landlord and shall not restrict the Tenant from opening for trade.
4.30 Planning Acts, Public Health Acts and Building Control Act
4.30.1 Not to do anything on or in connection with the Demised Premises the doing or omission of which shall be a contravention of the Planning Acts and the Public Health Acts (if applicable) and the Building Control Act or of any notices, orders, licences, consents, permissions and conditions (if any) served, made, granted or imposed thereunder and to the extent that same is the responsibility of the Tenant hereunder to indemnify (as well after the expiration of the Term by effluxion of time or otherwise as during its continuance) and keep indemnified the Landlord against all actions, proceedings, damages, penalties, costs, charges, claims and demands in respect of such acts and omissions or any of them and against the costs of any application for planning permission, commencement notices, fire safety certificates and the works and things done in pursuance thereof.
4.30.2 In the event of the Landlord giving written consent to any of the matters in respect of which the consent of either or both shall be required under the provisions of this Lease or otherwise and in the event of permission or approval from any Local Authority under the Planning Acts, the Public Health Acts and the Building Control Act being necessary for any addition, alteration or change in or to the Demised Premises or for the change of user thereof, to apply, at the cost of the Tenant, to the relevant local authority for all approvals, certificates, consents and permissions which may be required in connection therewith and to give notice to the Landlord of the granting or refusal (as the case may be) together with copies of all such approvals, certificates, consents and permissions forthwith on the receipt thereof and to comply substantially with all conditions, regulations, bye laws and other matters prescribed by any competent authority either generally or specifically in respect thereof and to carry out such works at the Tenant’s own expense in a good and workmanlike manner;
4.30.3 To give notice forthwith to the Landlord of any notice, order or proposal for a notice or order served on the Tenant under the Planning Acts, the Public Health Acts or the Building Control Act and if so required by the Landlord to produce the same;
4.30.4 To comply at its own costs with any notice or order served on the Tenant under the provisions of the Planning Acts, the Public Health Acts and the Building Control Act in relation to the Demised Premises to the extent that the same is the responsibility of the Tenant hereunder;
4.30.5 To produce to the Landlord on demand all plans, documents and other evidence as the Landlord may reasonably require (including Certificates or opinions on compliance from a duly qualified Architect or Engineer that the relevant works have been carried out to the Demised Premises in substantial compliance with the requirements of the said Acts and with any consents required thereunder) in order reasonably to satisfy itself that all of the provisions in this covenant have been complied with.
4.31 Statutory notices
Within fourteen (14) days of receipt of the same (or sooner if requisite having regard to the requirements of the notice or order in question or the time limits stated therein) to produce to the Landlord a true copy and any further particulars required by the Landlord of any notice or order or proposal for the same given to the Tenant and relevant to the Demised Premises or the occupier thereof by any government department or local or public or statutory authority, and, without delay, to take all necessary steps to comply with the notice or order in so far as same is the responsibility of the Tenant.
4.32 Fire and safety precautions and Equipment
4.32.1 To comply with the lawful requirements and reasonable recommendations (whether notified or directed to the Landlord and then to the Tenant or directly to the Tenant) of the appropriate local authority, the Insurers of the Centre, the Landlord in relation to fire and safety precautions affecting the Demised Premises;
4.32.2 To keep the Demised Premises supplied and equipped with such fire fighting and extinguishing appliances as shall be required by any statute, the local authority or the insurers of the Centre, or as shall be reasonably required by the Landlord and such appliances shall be open to inspection and shall be maintained to the reasonable satisfaction of the Landlord;
4.32.3 Not to obstruct the access to or means of working any fire fighting, extinguishing and other safety appliances for the time being installed in the Demised Premises or in the Centre or the means of escape from the Demised Premises or the Centre in case of fire or emergency.
4.39 Insurance becoming void
The Tenant shall not do or omit to do anything that could cause any policy of insurance in respect of or covering the Demised Premises or do anything that could cause any policy of insurance in respect of or covering the Centre to become void or voidable wholly or in part nor (unless the Tenant has previously notified the Landlord and agreed to pay the increased premium) do anything whereby any abnormal or loaded premium may become payable and the Tenant shall, on demand, pay to the Landlord all additional expenses thereby incurred by the Landlord in renewing any such policy.”
Contractual interpretation
72. The meaning of these covenants must be ascertained by correctly applying the relevant principles of law on the construction of contracts. In paras 18-21 of his judgment the trial judge set out the authorities relevant to the interpretation of the lease. He cited the cases of Analog Devices BV v. Zurich Insurance Company [2005] 1 IR 274, BNY Trust Company(Ireland) Ltd. & Anor v.Treasury Holdings [2007] IEHC 271, Rainy Sky Sa v. Kookmin Bank [2011] 1WLR 2900 and ICDL v. European Computer Driving Licence Foundation Ltd .[2012] 3 I.R. 327. In Analog Devices the Supreme Court approved the statement of five principles by Lord Hoffman in Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 WLR 896. The principles are too well known to require repetition in full. I draw attention to the fact that at point 1 it is stated that interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time at the contract. The fourth point is also particularly apposite in this case, this distinguishes the meaning which a document would convey to a reasonable man from the meaning of its words. The meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. In relation to the decision in BNY Trust Company (Ireland) Ltd , the trial judge noted that the decision of Clarke J. emphasised the need for a commercially sensitive construction of a commercial contract. In this regard the trial judge also had relied upon the decision of the United Kingdom Supreme Court in Rainy Sky where it was held that if there are two possible constructions of a contractual provision, a court is entitled to prefer the construction which is consistent with business common sense.
73. There was no disagreement between the parties as to the principles for the construction of contracts and indeed little time was devoted at the appeal to debating them. There was no allegation that the trial judge misstated the principles or erred in identifying the relevant authorities. The true issue in the appeal was whether the trial judge correctly applied these principles when construing the lease
Dunnes’ case of the lease
74. The essence of the case advance by Dunnes was that by virtue of the provisions of clause 4.19.1of the lease it is not obliged to keep open the Doors. The tenant covenants at clause 4.19.1 :-
“to complete the fit out of the Demised Premises in accordance with the Plans and Specifications approved heretofore by the Landlord and once such fitting out has been completed to open for trade to the general public unless prevented from doing so for some cause outside the Tenant’s Control PROVIDED THAT nothing in this lease or otherwise shall oblige the Tenant to keep the Demised Premises or any part thereof open for trade or business.”
It says the trial judge was in error in in holding that the covenant was irrelevant to the proceedings and in holding that Dunnes is required to keep the Doors open when the unit is open for trade.
75. Dunnes says that under clause 4.19.1 it is obliged to complete the fit out of the premises in accordance with the plans and specifications and then to open for trade. Thereafter, it may cease trading the next day.
76. Dunnes argues that it is not obliged to keep the Demised Premises open. It may close all or part of the unit and not breach the covenant. The Doors are part of the unit and therefore it may close that part of the unit which comprises the Doors.
77. The covenant expressly provides that “nothing in this lease or otherwise shall oblige [Dunnes] to keep the Demised Premises or any part thereof open for trade or business”. It argues that this means that the lessor may not rely upon any other covenant in the lease to contradict this covenant and to require it to open the Doors. It says this is so, even if the closing of the Doors amounts to a breach of another covenant in the lease.
78. Dunnes goes further and says that the words “or otherwise” means that the lessor may not rely upon a condition of the planning permission to require it to keep the Doors open even if a closure of the Doors would constitute a breach of the planning permission (which it denies). It submits that if it is correct then the lessor may not sue Dunnes to enforce any alleged breach of covenant or to compel it to cease to breach any provision of the planning permission. Dunnes’ case is that it is entitled by virtue of the provisions of the proviso in covenant 4.19.1 to close a part of the Demised Premises which includes the Doors even if this amounts to either a breach of another covenant or a breach of planning permission. So, if for example, there is a breach of the fire safety covenants arising from the closure of part or all of the Demised Premises, including the Doors, the lessor may not enforce the covenant relating to fire safety directly but must rely upon the fire safety authorities to take enforcement proceedings against Dunnes if they see fit. Similarly, with regard to any alleged breaches of planning permission. Is this correct?
Discussion of clause of 4.19.1
79. The starting point of the analysis by counsel for Dunnes was this clause of the lease. It was argued that this trumped all other obligations of the tenant. But, in my judgment this was to start at the end. Prior to the lease there was the grant of planning permission. The planning permission governed use as well as construction of the development, including the Demised Premises. The trial judge held, and I agree with him, that on a true construction of the grant of planning permission, pedestrian access linking the Edward Square Shopping Centre with the Eyre Square Shopping Centre via the Doors through the anchor unit of the Edward Square Shopping Centre was a condition of the grant of planning permission. It was accepted by counsel for Dunnes that this is a public law right and that the terms of the lease between Radical and Dunnes could not alter or in other way abbreviate that right (though he denied that the grant of planning permission created such a right). It follows, as I have said in para. 63 above, that the lease cannot govern the planning permission. It is the planning permission which may impact upon the rights and obligations of the parties to the lease. In this case, there was a clear and specific commitment in the application for planning permission and in the grant of planning permission as properly construed that this access and egress would be provided via the Doors while the anchor unit was open for trade and to the public.
80. It follows that clause 4.19.1 cannot authorise Dunnes indefinitely to close the Doors as this amounts to a frustration of the condition of the planning permission and therefore a material breach of the planning permission.
81. Further, clause 4.19.1 relieves Dunnes of the obligation to keep the premises open for trade or business, but it does not authorise Dunnes to close the Doors when the Demised Premises are actually open for business. Such a construction ignores the last four works of the clause and therefore is simply not a permissible construction of the clause, applying the principles in Analog Devices . As the trial judge said at para. 100 of his judgment, the court is required to look at the clause as a whole and give effect to its commercial purpose, which he identifies as to fit out the Demised Premises and to open “for trade” subject to the proviso that, once open, the unit need not be kept open for trade or business.
82. This court therefore does not have to assess whether the grant of the injunction in this case amounts to a mandatory injunction requiring Dunnes to keep open for trade. The order does not require Dunnes to stay open for trade in circumstances where it would otherwise close all or part of the unit for business. This is quite clear from the terms of the order of the 16th May 2017. It follows that the submissions of counsel for Dunnes insofar as they relied upon the absence of a “keep open” clause in the lease are not actually relevant to determining the rights and obligations engaged in this case. The “commercially sensible construction” of clause 4.19.1 cannot be advanced as a justification for the closure of the Doors.
83. The respondent never made the case that Dunnes was required to keep the Demised Premises open for trade or business. Its case was that when Dunnes was open for trade it was required to keep the Doors of the anchor unit of the Edward Square Shopping Centre open.
Was there a breach of clause 4.30 in relation to planning?
84. Dunnes covenanted in clause 4.30.1 not to do anything on or in connection with the Demised Premises, the doing or omission of which shall be a contravention of any notice, consent, commission or condition served, made or granted under the PlanningActs. It also covenanted to keep the landlord indemnified against all actions, claims and demands in respect of such acts or omissions. I have concluded that condition 1 of the grant of planning permission includes an obligation to keep the Doors open to facilitate pedestrian circulation between the two shopping centres while the anchor unit is open for trade. It follows that the closing of the Doors indefinitely by disabling the automatic opening mechanism from the anchor unit into the courtyard at Edward Square Shopping Centre during its opening hours amounts to a material breach of planning permission. A material breach of planning permission by the tenant constitutes a breach of clause 4.30.1.
85. On the14th July 2015, Galway City Council sent a warning letter issued pursuant to s.152(1) of the Planning and Development Act, 2000 to both Dunnes and the respondent. The letter provided:-
“Dear Sir/Madam,
It has come to the attention of the Galway City Council, the Council for the City of Galway that unauthorised development is being carried out by you in contravention of section 34 of the Planning and Development [sic]2000 at Edwards Square/Castle Street, Galway in the townland of Townparks in the City of Galway.
Namely:-
” Unauthorised works, namely closure of pedestrian access point between Edward Square, Castle Street and Eyre Square Shopping Centre via Dunnes Stores ”
I am to inform you that this development is considered by the planning authority to be unauthorised. The pedestrian access point referred to was shown on the original drawing submitted with planning register reference no. 97/449 (IED Drawing No. PL003 and Drawing No. L37). The pedestrian access point should be reinstated immediately.
You are hereby warned pursuant to s.152(1) of the Planning and Development Act, 2000, to discontinue the said unauthorised development forthwith.” (emphasis in original)
86. Dunnes argued that the trial judge erred in law in holding that it was required to accept the warning letter as conclusive that there was a breach of planning permission and further that it was required immediately to rectify that breach. Dunnes argued that the planning authority was wrong in concluding that there was a breach of the planning permission as there were no unauthorised works and that it was entitled to respond to the planning authority disputing this allegation and specifically it committed no wrong by not complying with a warning letter issued under s.152 of the Planning and Development Act, 2000.
87. As a matter of planning law a warning letter issued pursuant to s.152 of the Act of 2000, is the start of a process to ensure compliance with the terms of grants of planning permission which can culminate in enforcement proceedings. A planning authority is required to issue a warning letter where it is in receipt of a complaint from a third party that a developer or occupier of land is in breach of the planning permission or the Planning Acts, save where the alleged breach is of a trivial or minor nature or the allegation is considered to be frivolous, vexatious or without substance. The recipient of a warning letter is not obliged by law to comply with the direction of the planning authority after it has issued the warning letter. The planning authority is then required to investigate the issue and it may well conclude that there is no substance to the complaint which gave rise to the issuing of the warning letter or the issue may otherwise be resolved by the parties concerned. A critical difference between a warning letter and an enforcement notice is that the warning letter issues before the planning authority has had the opportunity of investigating the merits of the issue, whereas the enforcement notice represents the considered opinion of the planning authority after due investigation.
88. This statement of the law does not lead to the conclusion that Dunnes was correct in its submission that it did not have to comply with the warning letter and that the trial judge erred in holding to the contrary. The respondent argued, and the trial judge agreed, that in so acting Dunnes breached the provisions of covenants 4.29.2, 4.29.3, 4.30.4 and 4.31 of the lease. By clause 4.30.4 Dunnes covenanted to comply with any notice or order served on it under the provisions of the Planning Acts in relation to the Demised Premises. By clause 4.31 it covenanted without delay to take all necessary steps to comply with any notice or order relevant to the Demised Premises by a local authority. A warning letter issued pursuant to s.152 of the Planning and Development Act, 2000 is a notice within the meaning of these two covenants and indeed Dunnes did not seek to argue to the contrary. It follows that Dunnes had covenanted to comply with any such notice served upon it and to take all necessary steps without delay to comply with any such notice. The fact that under the Act of 2000 a recipient of a warning letter is not required as a matter of law to comply with the direction of the planning authority does not assist Dunnes in the proper construction of these covenants. They are unqualified, the tenant is not given a discretion whether or not to comply with any such notice. Dunnes advanced no reason why an alternative construction of these clauses should apply. I agree with the submissions of counsel for the respondent that the commercially sensible construction of the covenant is that the tenant should be given no discretion in the matter. The covenants are for the benefit of the landlord. If there is a material breach of the planning permission by a tenant, the landlord wants to have protection against possible prosecution or fines or simply to avoid the time and expense of dealing with breaches occasioned by its tenant. In my opinion the trial judge was correct in concluding that Dunnes had breached clause 4.30.1 of the lease in the circumstances as set out in para. 65 of his judgment and I reject this ground of appeal.
Was there a breach of the covenants relating to fire safety?
89. The trial judge dealt with this issue in paras. 68-84 of his judgment. He first set out the relevant contractual obligations, being clauses 4.29.2, 4.29.5,4.32.1 and 4.32.3. He then described the events which unfolded after Dunnes closed the Doors on the 16th June 2015. On the 19th June, 2015, the respondent’s solicitors wrote to the fire officers of Galway County Council stating their concerns that if the Doors were kept shut indefinitely this might constitute a breach of fire safety regulations. They specifically asked the fire officers to confirm if
“from your point [of]view, the closure of this point of access and egress from the Centre would be considered to be a potential fire hazard and/or if Dunnes are in breach of fire safety regulations.”
Assistant Chief Fire Officer Cunningham attended the premises that day and he was reassured (incorrectly) by the security manager of Dunnes that the Doors were connected to the fire alarm system (when in fact they were not) and they would open on activation of the fire alarm. The Doors were not locked and would slide open by hand. The Doors were connected to the fire alarm system the next day. Mr. Cunningham attended on the 20th June and sought a demonstration that the Doors were connected to the alarm system and he confirmed that the Doors were not locked and there was a notice informing the public that the Doors were not locked Mr Cunningham was satisfied with the arrangement.
90. The trial judge considered the expert evidence of Mr. Michael Slattery, a chartered fire safety engineering consultant, who gave evidence regarding compliance and the need for compliance with provisions of the building regulations insofar as they related to fire safety. Mr Slattery emphasised the need for automatic doors that would open up when the fire alarm was triggered. He accepted that:-
“in the context of the auto sensor being disabled then the doors would have to be physically slid open and then become sliding doors, and unless you had very strong management protocols in place to open the door it would be an issue …”
He later said that:-
“there was a clear… conflict with the fire cert as granted [where the doors were not connected to the fire alarm system and it was a designated exit]”
The trial judge concluded that when the Doors were closed permanently there was a breach of fire safety requirements because the escape strategy on which the applicable fire certificate was granted was not operable as envisaged and, this being so, once the Doors were closed, they were closed in breach of the provisions of the lease.
91. This finding of fact was not challenged by Dunnes on appeal, and indeed, it is difficult to see how it could be, in view of the principles in Hay v O’Grady [1992] 1 I.R. 210.
92. Four weeks later on the 16th July 2015, Senior Assistant Chief Fire Officer Kelly, attended at the premises and he took a much more serious view of the closure of the Doors. He was of the view that the fact that the Doors were connected to the fire alarm was irrelevant. He said that if Dunnes intended to keep the Doors closed, they must be converted to push bar doors (swing doors). He said that sliding doors were not acceptable as fire doors. He said that any changes made to the entrances/exits of the store necessitated a new fire safety application. In the absence of a new fire safety certificate there is a breach of building regulations. He stated that the fire safety application process can take up to two months during which the Doors “must be operational”. He said he would return the following morning “to ensure that the Doors are open”. He indicated that if the Doors were not open that the Council will start litigation procedures which could include a closure order.
93. At para. 77 of his judgment the trial judge held as a fact that :-
“there was the clearest of directions that at the present time they [the Doors]be reopened-which direction went unobserved in breach of the above-quoted provisions”.
He also noted the evidence on behalf of Dunnes that no consideration was given by Dunnes to reopening the Doors.
94. On the 22nd July 2015, five days after Senior Assistant Chief Fire Officer Kelly’s inspection, the Chief Fire Officer of Galway County Council, Mr Raftery, wrote to solicitors acting for Dunnes stating:-
“we strongly recommend in the interim that the presence sensing devices to the main entrance/exit doors from Dunnes Stores directly to open air to be reactivated” (emphasis added)
Mr. Raftery emphasised that they were concerned that the safety of the occupants of the Dunnes Stores Unit in Edward Square ” may be compromised due to current means of escape arrangements “.
95. The trial judge described this as a strong recommendation that Dunnes open the Doors ” in the interim ” in the interests of the fire safety of occupants of the store. The evidence was that despite receipt of this letter, Dunnes did not consider reopening the Doors.
96. The trial judge notes that, as he says, eventually, following a meeting on the 31st August 2015 Dunnes agreed that it would install panic bolts on the Doors but this agreement was subject to the approval of the board of directors of Dunnes. The trial judge does not record when or whether this approval was forth coming. It would appear that no steps have been taken to install panic bolts prior to the grant of an injunction by the High Court on the 9th September 2015 requiring Dunnes to keep open the Doors in compliance with the status quo ante. It further appears that there would be a delay of a number of weeks before the doors could have been installed.
97. The trial judge agreed with the respondents that the failure to comply with the recommendation of the Chief Fire Officer constituted a breach of the provisions of clause 4.32.1 of the lease to comply with the lawful requirements and reasonable recommendations of the Chief Fire Officer. He held that on the evidence before him Dunnes had breached clauses 4.29.2, 4.29.5, 4.32.1 and 4.32.3 of the lease.
98. On appeal Dunnes argued that there were no safety issues as Dunnes had agreed after the meeting on the 31st August 215 that it would install push bars on the Doors. The only reason, it was submitted, that this had not occurred was that it had been overtaken by the injunction of the 9th September, 2015. It argued that the letter of the 22nd July, 2015 did not amount to a requirement but accepted that it was a recommendation within the meaning of the clause. It also argued, as it had in the High Court, that it had a right to assess the recommendations of the Chief Fire Officer and to determine whether Dunnes agreed with those recommendations. It argued that it was entitled to take advice as to how to proceed when there was a division of opinion in the fire Department of Galway County Council in relation to the closure of the Doors and what was required to comply with fire safety regulations and the fire certificate for the unit.
99. In my opinion, the argument of Dunnes is without merit. Clause 4.32 requires Dunnes to comply with the reasonable recommendation of the appropriate local authority in relation to fire and safety precautions effecting the Demised Premises. It cannot be contested that the letter of the 22nd July 2015 constituted a recommendation within the meaning of the clauses. There was no evidence adduced to suggest that the recommendation of the 22nd July 2015 was anything other than reasonable. The recommendation was that the Doors should remain open “in the interim” until the push bar doors were installed. Thus, it is no answer to state that Dunnes agreed (conditionally) to implement the recommendation after the 31stAugust, 2105 (some six weeks later). It cannot be emphasised enough that there was absolutely no technical difficulty in complying with the requirements of the Chief Fire Officer which were in the interest of the safety of the users of the shopping centres. As the trial judge said, it was a matter of seconds to reactivate the disabled mechanism closing the Doors.
100. In addition, I would hold that the refusal to comply with the direction of Senior Assistant Chief Fire Officer Kelly of the 16th July 2015 likewise amounted to a failure to comply with the lawful requirements and reasonable recommendations of the appropriate local authority in relation to fire and safety proportions affecting the unit.
101. Dunnes argued that, just as with the covenants relating to planning, it was entitled to assess whether the recommendation was reasonable, and it was not obliged without question to comply with the measurable recommendation of the fire safety authorities. It is of course true that the obligation is to comply with the reasonable recommendations only. Insofar as an unreasonable recommendation might be made it would be open to Dunnes to challenge the reasonableness of the recommendation ultimately by judicial review proceedings if required. But that does not arise as the facts in this case where it was not suggested that there was no recommendation or that it was unreasonable, or indeed that there was any difficulty in complying forthwith with the recommendation.
102. Dunnes argued that the reasonable recommendation must be lawfully required. This construction ignores the fact that the obligation is to comply with the lawful requirements and reasonable recommendations. The construction contended for simply involves deleting the words “and reasonable recommendations”. Those words must be given a meaning and they mean something different from and in addition to lawful requirements.
103. Even more than in the case of a breach of planning permission, the landlord has a very real interest in the immediate compliance by the tenant with the lawful requirements and reasonable recommendations of the fire safety authorities without equivocation or disputation. As with clause 4.30, clause 4.32, properly construed does not entitle the tenant, Dunnes, to decide whether or not to comply with a recommendation within the terms of clause 4.32. For these reasons, I reject the argument that the trial judge erred in holding that Dunnes was in breach of clauses 4.29.2, 4.29.5, 4.32.1 and 4.32.
Was Dunnes in breach of clause 4.39 in relation to insurance?
104. By Clause 4.39 of the lease, Dunnes covenanted not to do or omit to do anything that could cause any policy of insurance in respect of or covering either the Demised Premises or the Centre to become void or voidable. The trial judge held that the clause meant that the landlord is not to bear the risk arising from any act or omission of Dunnes as tenant which could have, as its consequence, that an insurer would refuse to indemnify upon a claim being made. The trial judge emphasised that the question was whether the tenant had done anything that “could cause” any policy of insurance in respect of or covering the Centre to become void or voidable. He noted that this chimes with commercial and common sense.
105. Dunnes disagreed, appealed and argued that the evidence in the High Court was that an insurer would not be entitled to refuse cover and that the closure of the Doors would not have an impact on the respondent’s insurance. It followed, according to Dunnes, that the trial judge simply had no basis for holding that there had been a breach of Clause 4.39 by Dunnes.
106. The argument ignored the response of the respondent’s insurers to the situation. General Condition 2 of the respondent’s policy of insurance provides that the policy shall be terminated in “any other circumstances, whereby any risk under the policy is increased”. The trial judge notes that following the closure of the Doors the respondent “touched base” with its insurer with regards to the situation. On the 10th July, the insurers wrote to the agent for the respondent as follows:-
“As you know the situation regarding the doors that open out onto Edward Square; whether they are locked, alarmed or otherwise; whether people can use them to enter or exit Dunnes Stores is still very much an issue for us as insurers for the premises.
Based on the information currently available to us, and notwithstanding the fact that there are still some unanswered questions, there is now a serious concern over whether the Insured have failed to follow the “Reasonable Precautions Condition” on their policy.
On that basis we must now advise you that if an accident happens or if a claim is made as a result of the doors being closed it is very likely that our claims department will refuse to indemnify our Insured on the basis that they have failed to follow the “Reasonable Precautions Condition” on their policy.
We should also mention that the failure to reopen the doors at this stage could result in claims being brought against other parties, including but not limited to Dunnes Stores, if there is an incident or injuries as a result of the doors remaining closed.” (emphasis added)
107. This letter satisfied the proof required to show that the actions of Dunnes “could cause” the policy of insurance to become void or voidable. It was not necessary, as is pointed out by the trial judge, to determine whether an insurer had properly indicated a perception of heightened risk. That being so, it is immaterial whether the respondent could have successfully challenged a refusal of cover. A commercial construction of the clause leads to the conclusion that the lessor did not bear any risk of declension of cover by reason of any act or omission on the part of a tenant. Accordingly, I would dismiss this ground of appeal also.
Was there a breach of Clause 4.23.3 by Dunnes?
108. By this clause, Dunnes covenanted not to make any alterations of a non-structural nature to the premises without obtaining the prior written consent of the landlord. The trial judge concluded that the indefinite closure of the Doors and their conversion into emergency doors constituted an alteration of a non-structural nature for which the prior written consent of the respondent was required to be sought. It was neither sought nor obtained and accordingly this clause was breached by Dunnes.
109. On appeal, Dunnes argued that the trial judge failed to provide adequate reasons to support his conclusion and argued that there was no evidence to support a claim that this clause had been breached. Dunnes argued that an alteration must be material in nature otherwise the clause would be unworkable. It argued that the clause only applied to alterations to the physical unit itself and not to the manner of use and accordingly there was no breach of Clause 4.23.3.
110. In my opinion an alternation of a non-structural nature to the premises includes the change of use of what were previously the main doors to the anchor unit of the shopping centre into emergency doors. It could not be described as a de-minimis alternation or that the clause would be unworkable if Dunnes were required to obtain the prior consent in writing from the respondent in advance of effecting such alternation. It should also be pointed out that the alternation is not simply as to use of the Demised Premises, it involves de-activating the automatic sensor system on the Doors which inter alia interferes with the pedestrian linkages between the two shopping centres.
111. In my judgment there was ample evidence for the trial judge to conclude that a breach of this clause had been made out and I reject this ground of appeal.
Was there a breach of Clause 4.16 in relation to common areas?
112. By Clause 4.16 Dunnes covenanted not to do anything whereby the fair use of the common areas by others may be obstructed in any manner. The respondent argued that by closing the Doors Dunnes prevented customers and prospective customers from accessing the Common Areas and thus the fair use of same. Previously such customers and/or prospective customers had become accustomed to entering Dunnes via the Edward Square entrance and continuing on into the Eyre Square Shopping Centre or vice versa. In paras 94 and 95, the trial judge set out the evidence which led him to conclude that the alternative access available via the Corbett Court Shopping Mall is both inadequate and an inconvenience. He referred to the decision of Laffoy J. in Conneran v. Corbett & Sons [2004] IEHC 389 where the Court was satisfied that there had been ” a real and substantial interference with the express and implied rights acquired by the plaintiffs under the leases ” and that it was no answer to say that there were other routes available in circumstances where the plaintiffs had been deprived of ” not only of the most convenient route but of the only suitable route for efficient bulk deliveries of merchandise “. The trial judge applied this reasoning by analogy to the circumstances in this case and held that the cutting off of direct access to the common areas by closing the Doors constituted a breach of Clause 4.16 and it was irrelevant that indirect access might otherwise be gained to the common areas via the separately owned and entirely inconvenient Corbett Court means of access. He therefore concluded that there had been a breach of Clause 4.16 of the lease.
113. On appeal, Dunnes argued that in closing the doors Dunnes did not prevent customers of the Edwards Square Shopping Centre from accessing the common areas of Edwards Square. It argued that customers of Eyre Square Shopping Centre were not customers of the Edwards Square Shopping Centre and vice versa. It argued that it had not blocked customers from accessing the common areas of Edwards Square.
114. It is true that the closure of the Doors did not block customers who walked up Castle Street from accessing the common areas of Edwards Square but it did obstruct the fair use of those common areas by others who formerly traversed them by passing to or from the Eyre Square Shopping Centre, as they were entitled to do under the terms of the planning permission. Further, customers of the Edwards Square Shopping Centre for more than fifteen years used a pedestrian route from the common areas into the anchor unit as well as out of the anchor unit into the common areas. The closure of the Doors obstructed this access in both directions. The High Court in my judgment was correct to conclude that indirect access to the common areas via the separately owned and entirely inconvenient Corbett Court means of access was irrelevant in the circumstances. In my opinion there was ample evidence to support the finding of the trial judge that Dunnes breached this clause also and I would dismiss this ground of appeal.
115. In my judgment the trial judge was correct to hold that by closing and refusing to reopen the Doors while the unit was open for trade, Dunnes thereby breached clauses 4.16; 4.23.3; 4.29.2; 4.29.3; 4.29.5; 4.30.4; 4.31; 4.32.1 and 4.32.3 of the lease.
Appeal against the awards of damages
116. The trial judge awarded the respondent €53,860.50 in compensatory damages arising from the failure of a tenant of the Edward Square Shopping Centre, HMV, to pay the rent due under its lease to the respondent. He concluded that the respondent had suffered loss and damage as a result of a breakdown of commercial relationships with other tenants of the centre and a loss of use of associated rent roll and awarded general damages in the sum of €10,000. In addition, he awarded aggravated damages in the sum of €45,000 to the respondent. Dunnes appealed in respect of each of these awards.
117. First, Dunnes said that the trial judge erred in making the awards of damages in favour of the respondent as it merely holds the legal title to Edward Square and has no beneficial interest in the rent roll from the shopping centre. It was argued that therefore it had not suffered any loss or damage in respect of the matters complained. Therefore, according to Dunnes, there could be no question of compensating the respondent for a loss it did not suffer.
118. This point may be shortly disposed of. As the holder of the legal title, the respondent was the appropriate party to sue for breaches of covenant and for any losses arising out of the alleged wrongful acts of Dunnes. The fact that it must account for the rent or for awards of damages to another party who was beneficially entitled to same does not alter this fact. It certainly does not mean that the beneficial owner is required to sue or that Dunnes is not obliged to pay damages to the respondent.
119. The trial judge held that the evidence established that the respondent had suffered loss and damage including loss of rent from HMV, a breakdown of commercial relationships with other tenants, loss of use of associate rent roll and various legal costs. He accepted that the withholding of rent by tenants (actual in the case of HMV and threatened by others) would have irreparable and knock on consequences for the viability of the Edward Square shopping centre as a whole. He also accepted that this would have implications for the respondent’s loan facility from NALM.
120. Having regard to the principles in Hay v O’Grady , this Court may not interfere with the findings of fact of the High Court where there is credible evidence to support those findings. While inferences of fact derived from oral evidence may be reconsidered, this court will be slow to disturb those inferences.
121. Mr. Hynes gave evidence on behalf of the respondent that HMV stopped paying rent following the closure by Dunnes of the Doors. HMV justified their action in refusing to pay rent on the basis that the Doors were closed and suggested that their footfall and turnover had been adversely affected.
122. However, there was no evidence before the Court that this in fact was the reason HMV withheld its rent. Furthermore, as a matter of law, even if it was the basis for its action, it was not entitled so to act. The respondent itself did not accept that HMV was entitled to withhold its rent, as it issued summary summons proceedings against HMV suing it for the arrears of rent. The respondent subsequently voluntarily decided to discontinue the proceedings “on a commercial basis”, not on the basis that HMV was entitled to withhold its rent. The agreed evidence of the experts was that it was well known at the time that HMV was in financial difficulty throughout the country and John Moran, on behalf of the respondent, acknowledged the fact that it was not unusual at that time for HMV to fail to pay rent in respect of other units. Ultimately HMV went into examinership a number of months later. It cannot be said therefore that the failure of HMV to pay the rent due constituted a loss of rent roll suffered by the respondent as a result of the wrongful actions of Dunnes. In this circumstance it seems to me that there was no evidence upon which the trial judge could properly hold that the actions of Dunnes in closing the Doors was the cause of HMV withholding its rent from the respondents. Even if it were the case, it is another question entirely whether, in the circumstances, Dunnes would be liable in law to compensate the respondent for such losses.
123. Similarly, there was no or no sufficient evidence adduced to ground an award of €10,000 in “unquantified compensatory damages” in relation to “the strain in the commercial relationships” between the respondent and its other tenants or the “corruption of commercial relationships”. The tenants did not withhold their rent and therefore there was no loss of rent roll in respect of these tenants. The height of the evidence in relation to tenants, other than HMV, is at para. 107 of the judgment that if the rents were withheld it would have irreparable and knock-on consequences for the viability of the Edward Square Shopping Centre as a whole. But they were not.
124. I would allow the appeals in respect of each of these awards of damages.
The tort of Causing Loss by Unfawful Means
The trial judge found that Dunnes was guilty of the tort of causing loss to the respondent by unlawful means. He held that the three essential ingredients of the tort were met: (i) intention, (ii) unlawful means and (iii) harm. At para 145 he held:
“The court finds that Dunnes has interfered with the economic interests of [the respondent], that it has intentionally caused loss to [the respondent] by unlawful means [the closure of the doors in breach of covenant] and as a retaliatory measure, that [the respondent] has suffered loss and damage that includes loss of rent from other tenants (whom it had to sue for same), corruption of commercial relationships, loss of use of rent-roll, and legal costs, and thus that the tort of causing loss by unlawful means has been committed by Dunnes.”
For the reasons I have set out above, in my judgment the trial judge was in error in holding that the actions of Dunnes causes the losses identified in this passage. It fails to appreciate the essential distinction between the fact that the respondent suffered loss (in this case the rent due by HMV but nothing more) and the issue whether Dunnes caused it to suffer that loss. It is essential to the tort that the wrongful act complained of must cause the harm allegedly sustained. There is no evidence in this case which would entitle a court to concluded that the actions of Dunnes caused the losses complained of by the respondent. It follows that it is not open to a court to conclude that Dunnes was guilty of the tort.
In light of this conclusion, I do not find it necessary to consider whether the trial judge was correct to conclude that Dunnes’ breach of contract satisfies the unlawful means limb of the tort and I expressly reserve my position on this point for decision in proceedings where it is necessary for the determination of the case.
The award of aggravated damages
125. The leading authority on aggravated and exemplary damages is the decision of the Supreme Court in Conway v. INTO [1991] 2 I.R. 305. The Supreme Court held that compensatory damages may be increased under the heading ‘Aggravated Damages’ by reason of:-
(i) the manner in which the wrong was committed, involving such elements as oppressiveness, arrogance or outrage, or
(ii) the conduct of the wrongdoer after the commission of the wrong, such as a refusal to apologise or to ameliorate the harm done or the making of threats to repeat the wrong, or
(iii) conduct of the wrongdoer and/or his representatives in the defence of the claim of the wronged plaintiff up to and including the trial of the action.
126. Exemplary damages arise either from the nature of the wrong itself or the manner of its commission and are intended to mark the Court’s particular disapproval of the defendant’s conduct in all the circumstances of the case. They are distinct from compensatory damages and are intended to be seen as a punishment of the defendant for such conduct.
127. In this case, the trial judge found as a fact that Dunnes had engaged in egregious deliberate behaviour both prior to the institution of the proceedings and in the conduct of the proceedings once commenced. The following facts were found by the High Court:-
(1) Following the purchase of the Edward Square Shopping Centre by the respondent, Dunnes stopped paying rent and service charges in respect of the Anchor Unit.
(2) The respondent was required to bring summary proceedings to secure payment of sums due and owning. On 14th July, 2014, the High Court gave judgment in favour of the respondent in the sum of €1,134,392.32. Dunnes appealed the decision to the Supreme Court. Dunnes paid a sum of €750,000 to the respondent and gave an undertaking to pay service charges as they fell due on an ongoing basis pending the appeal. The Supreme Court dismissed the appeal on the 15th May, 2015. The balance due pursuant to the summary judgment came to €384,392.32 together with accrued interest of €29,499.19. In spite of the decision of the Supreme Court, Dunnes did not discharge this sum.
(3) Dunnes did not pay any rent arising while the summary proceedings were before the Court. As a result, when the Supreme Court delivered judgment, substantial arrears of rent had accrued. On 15th May, 2015, the respondent demanded €748,979.75, being the outstanding rent and interest accrued from 1st July, 2014. Dunnes made no payment in respect of this demand.
(4) On 16th June, 2015 the respondent’s solicitors served copies of the High Court and Supreme Court orders with penal endorsements on Dunnes registered office at 12.10. At 12.49 an in-house solicitor notified Ms. Margaret Heffernan by e-mail of the service of the orders with the penal endorsements. Eleven minutes later at 13.00 Ms. Heffernan e-mailed Mr. John McNiffe, in the following terms:
“John…can you arrange for the Door from Shop Street to be closed ASAP. Discuss with Paul they should put a fixture of Ladies wear in front of it and out (sic) notice entrance from main to (sic) store.
Can you get this done ASAP
It only needs to have foo (sic) closed and a fixture that I can move if we change to closing another door.
Let me know when it can be done”
Mr. McNiffe replied that the Doors could be closed from the following morning and he would have to double check if Dunnes were required to use the Doors as a fire exit.
Early in the morning of the 17th June, Ms. Heffernan replied:-
“Why should we have as a fire exit? You can check anyway!
What I mean is just put Rails across the door so people know it is closed and use as part of dept display,
We need to look at what we are paying for this area in service charge.
Liz needs to really get involved with this lease now and get our rights and service charges clear. Can you discuss with you and ask her to get involved ASAP..
We need to look at other things we can do like is car park a Walk through?
(5) The plenary summons issued on the 16th July, 2015. Dunnes took the following steps in relation to the dispute and in the conduct of the proceedings:-
(i) It refused to comply with the recommendations of the Senior Assistant Chief Fire Officer of 16th July, 2015 to re-open the Doors.
(ii) It refused to comply with the recommendation of the Chief Fire Officer of the 22nd July, 2016 that the Doors be re-opened in the interest of safety of users of the Edward Square Shopping Centre and Eyre Square Shopping Centre.
(iii) The evidence was that Dunnes never contemplated re-opening the doors in the interim prior to fitting push bars to the Doors.
(iv) Mr. McNiffe, on behalf of Dunnes, said that the Doors were closed for operational reasons. This was directly contradicted by the e-mails quoted above. Under cross-examination Mr. McNiffe continued to assert that the Doors were closed for operational reasons but was unable to identify any such reason.
(6) On the morning of the hearing of the respondent’s motion to have the action admitted into the Commercial List of the High Court, Dunnes discharged the sums due to the respondent on foot of the orders of the High and Supreme Court and the outstanding arrears of rent and interest so that it could argue that the case did not satisfy the Rules of Court to be entered into the Commercial List. The trial judge was of the view that this was a cynical ploy by Dunnes.
(7) The affidavit of Tom Sheridan, Dunnes’ company secretary, opposing the application for an injunction restraining Dunnes from closing the Doors, averred that the closure of the Doors was not in response to service upon Dunnes of the orders of the High Court and Supreme Court with penal endorsements. Ms. Margaret Heffernan, who gave the order in question, did not swear an affidavit in response to the application for an injunction.
(8) It delivered a defence and counter-claim on the 9th October, 2005 expressly pleading at para 54:-
“The Defendant expressly denies that the closure of the doors was a retaliatory measure in response to steps taking by the plaintiff to recover judgment which it had obtained against the defendant.”
(9) Dunnes opposed the request for discovery of all documents establishing evidencing and/or concerning the dissemination within [Dunnes] of the letter of demand dated the 16th June, 2015 from the respondent or information as to its content, the dissemination within Dunnes of the letters of the 15th June, 2015 enclosing copies of the High Court and Supreme Court orders with penal endorsements as served on Dunnes and on its director on the 16th June, 2015, or information as to their contents and the decision by Dunnes to disable the automatic opening mechanism of the Doors and/or to close the Doors and the timing of the giving of instructions and/or the taking of action on foot of that decision. Discovery was only made following an order of the High Court of the 7th December, 2015 which revealed the e-mails set out above.
(10) Dunnes was obliged to amend its defence in light of the discovery of the e-mails on the 29th April, 2016 by deleting the sentence quoted above and substituting the following:-
“It has admitted that the closure of the Doors was in response to the service on the defendant, and not its directors, of the penally endorsed orders of the High Court and the Supreme Court received on 16th June, 2015 in so doing the defendant denies any wrongdoing. It has denied that the closure of the doors was in response to the service of the letter of demand dated 16th June, 2016 which was not received until 17th June, 2016.”
Dunnes thus admitted that it did close the Doors in response to service of the penally endorsed orders. This was contrary to the position maintained on affidavit in opposing the application for an injunction and in the defence delivered on the 19th October, 2015.
128. On appeal, Dunnes argued that the test as to whether aggravated damages ought to be awarded was not, whether it was in fact entitled to act as it did but, whether it bona fide believed at the time that it was so entitled to act. It argued that in his witness statement Mr. McNiffe had so stated and that therefore the trial judge erred in his application of the law and the facts.
129. I am wholly satisfied that there was ample evidence before the trial judge for him to conclude that Dunnes did not have a bona fide belief that it was entitled under the terms of its lease to close the Doors on the 17th July, 2015. He was entitled to conclude that there was a long and substantial history of Dunnes failing to pay rent and service charges and interest due to the respondent. He was entitled to conclude from the extraordinarily swift response that this was a retaliatory measure. If there were any doubt in this regard, the fact that Ms. Heffernan was considering whether there were other possible options open to Dunnes tended to under-score this conclusion. It is remarkable that in none of the exchanges between the parties prior to the application for an interlocutory injunction, did Dunnes or any of its representatives refer to Clause 4.19.1 as the basis for its entitlement to act as it did. Given that this was the central basis of its defence, the judge was entitled to take the view that the failure to rely upon this at an earlier period shows that it was not, in fact, relied upon at the time. He was entitled to take the view that Dunnes ex post facto was seeking to assert that it actually relied upon the provisions of Clause 4.9.1 in June, July and August 2015 when in fact it played no role at all in Dunnes’ decision making and actions.
130. He was entitled to draw inferences adverse to Dunnes from the fact that it stated that the Doors were closed for operational reasons (and continued so to maintain up and until the trial of the action) when it was never in a position to identify those operational reasons and when this was flatly contradicted by the e-mails of the 16th June, 2015. He was also entitled to draw inferences from the failure to call Ms. Margaret Heffernan as a witness. It was her decision to close the Doors. The position maintained by Dunnes from June 2015 until April 2016 was that the Doors were not closed in response to the service of the penally endorsed orders of the High Court and the Supreme Court. Dunnes was obliged to amend its defence in what amounted to a volte face . He was entitled to infer that she could not give evidence that at the time she gave the instruction to close the Doors Dunnes believed that they were entitled to do what they did.
131. In those circumstances, I am satisfied that the trial judge was entitled to hold that the respondent ought to be compensated for the wrongs inflicted by Dunnes by an award of aggravated damages based on the manner in which the wrong was committed, the conduct of Dunnes after the commission of the wrong, and the conduct of Dunnes in the defence of the claim up to and including the trial of the action. It would equally have been open to the trial judge to conclude that it was appropriate to award exemplary damages to mark the Court’s disapproval of the conduct of Dunnes. Therefore, I see no merit in the argument that the trial judge erred in awarding aggravated rather than exemplary damages, particularly as the respondent had sought both aggravated and exemplary damages. The rights of the respondent were deliberately flouted by Dunnes without regard to its obligations under the lease or indeed to other occupants of the Edward Square shopping centre.
132. Insofar as Dunnes has alleged that as a company as opposed to a natural person, the respondent is not capable of suffering “added hurt or insult” so as to attract aggravated damages, in my opinion, this submission is without merit and is contrary to principle. There is nothing in the decision in Conway which would justify such a distinction.
133. The trial judge awarded aggravated damages both for breach of contract and for the tort of unlawful or wrongful interference with economic interests in the aggregate sum of €45,000. I have already concluded that there is no basis for an award of damages for the tort as it was not made out in evidence. The issue is whether nonetheless this court ought to interfere with the award. I can see no basis upon which it can be said that the sum of €45,000 was an excessive award of aggravated damages in the circumstances of this case. It could well have been higher. I would not interfere with the award. I therefore would dismiss the appeal against this award.
Non-derogation from grant
134. Dunnes counterclaimed for damages against the respondent. It argued that if the proper construction and interpretation of Clause 4.19.1 of the lease is to permit Dunnes to close the unit or any part of it, in particular the Doors, but the Court finds that Dunnes is obliged to keep the Doors open during trading hours pursuant to the grant of planning permission, then the respondent ought to be liable to Dunnes for impermissible derogation from grant and/or breach of covenant. It submitted that such a result set at nought the contract agreed between Radical and Dunnes. Further, it argued that based on the representations of Radical, the respondent ought to be estopped from seeking to compel Dunnes to keep the Doors open and thirdly that the requirement to keep the doors open amounted to a breach of its right to quiet enjoyment pursuant to Clause 5.1 of the lease.
135. In my opinion, the submissions of the respondent, that this argument was predicated on the incorrect proposition that there had been a derogation from grant are correct. The trial judge correctly found that the doctrine of non-derogation of grant did not apply to the proceedings in circumstances where the respondent was not derogating from a grant but rather was seeking to compel Dunnes to comply with the terms and conditions of the grant. Further, no question of estoppel arises as this is likewise based upon the flawed reasoning of Dunnes that Clause 4.19.1 is engaged. As set out above, in my judgment, it is not. It follows therefore likewise that there cannot be a breach of the covenant for quiet enjoyment in the circumstances. I dismiss this ground of appeal also.
Balance of the appeal
136. Dunnes appealed against orders compelling it to comply with its obligations under the leases into the future on the basis that they amounted to mandatory injunctions which ought not to have been granted and/or amounted to orders for specific performance. These grounds of appeal were not pursued as they had become moot due to the fact that Dunnes had acquired the reversionary interest in the Demised Premises between the date of the decision of the High Court and the hearing of the appeal.
Conclusion
137. The planning permission for the Edward Square Shopping Centre, properly construed, required that the Doors be open during the hours that the anchor unit was open for trade to facilitate linkages between the Edward Square Shopping Centre and the Eyre Square Shopping Centre. The closure of the Doors on a permanent basis breached the planning permission.
138. The closure of the Doors breached the covenants on the part of Dunnes in clauses 4.16; 4.23.3; 4.29.2; 4.29.3; 4.29.5; 4.30.4;4.31; 4.32.1 and 4.32.3 of the lease. Dunnes had no intention of reopening the Doors in the absence of a court order. The respondent was entitled to an injunction to restrain Dunnes from closing the Doors while the Demised Premises were open for trade.
139. The provisions of clause 4.19.1 of the lease did not entitle Dunnes to close the Doors indefinitely and did not entitle it to breach the other clauses in the lease.
140. The trial judge erred in holding that the facts established that the closure of the Doors by Dunnes caused HMV to cease paying rent due under its lease and that Dunnes was liable to compensate the respondent for this failure by HMV to pay the rent due by it to the respondent. There was no evidence to support the finding that the actions of Dunnes had caused any other financial loss to the respondent arising from the withholding by other tenants of rent due to the respondent and a consequent loss of rent-roll or any other loss sounding in damages. Therefore, the awards of quantified and unquantified compensatory damages must be set aside.
141. The trial judge erred in holding that the facts established that Dunnes had committed the tort of causing loss by unlawful means as there was no evidence to support the conclusion that the harm asserted had been caused by Dunnes.
142. There was ample evidence upon which the trial judge was entitled to conclude that it was appropriate to award aggravated damages against Dunnes. The award of €45,000 was not excessive in the circumstances.
143. The respondent had not derogated from its grant but rather was seeking to enforce the grant of the three leases. There was no misrepresentation by Radical in agreeing to clause 4.19.1 of the lease and the respondent was not estopped from enforcing the clauses in the lease by reason of the provisions of clause 4.9.1. The trial judge was correct to dismiss Dunnes’ counterclaim.
144. For these reasons I dismiss the appeal save that the award of damages will be reduced to €45,000.
Parol Ltd -v- Carroll Village [Retail] Management Services Ltd
[2011] IEHC 119
JUDGMENT of Mr. Justice Clarke delivered the 25th March, 2011
1. Introduction
1.1 On the 22nd October last I gave judgment on a range of issues in these proceedings (“the Principal Judgment”)(Unreported, High Court, Clarke J., 22nd October, 2010). For the reasons set out in the Principal Judgment I came to the view that the closure of a Superquinn supermarket in the Carroll Village Shopping Centre in Dundalk was in breach of the terms of the lease under which that store was held. The lease in question had originally been granted by the first named plaintiff (“Parol”) to the third party (“Superquinn”). However, as a result of financing arrangements entered into by Superquinn, the interest of the lessee in that lease had passed to the defendants (“Friends First”) with Superquinn holding the property under a sub-lease. It will be necessary to make brief reference to the terms of the respective lease and sub-lease in due course.
1.2 However, for the reasons set out in the Principal Judgment I came to the view that Friends First had been placed in breach of a keep open covenant in the lease by virtue of the closure of the relevant Superquinn store. Likewise, Superquinn was in breach of the sub-lease by closing the store.
1.3 On that basis, I made declarations in the following terms:-
“1. The Defendant through the action of Superquinn by closing its anchor store at the Carroll Village Shopping Centre Dundalk in February 2009 acted in breach of Clause 3(6) of the lease dated the 11th June 1998.
2. Superquinn by closing its anchor store at the Carroll Village Shopping Centre Dundalk in February 2009 acted in breach of Clause 3(16) of the sub lease dated the 5th September 2005.”
As pointed out in the Principal Judgment all questions relating to damages were left over for further consideration by agreement of the parties and with the approval of the court. However, the parties agreed that Superquinn would fully indemnify Friends First in respect of any damages which might be awarded. On that basis the order of the 22nd October, 2010, contained the following provision at item 3:-
“The Defendant be excused from attending at the trial of this action insofar as the quantum of damages is concerned on the basis that any award of damages and costs in favour of Plaintiffs as against the Defendant be made with an order over for all such damages and costs as against the Third Party.”
1.4 Therefore, in form what I was trying, so far as damages are concerned, was the case made by Parol against Friends First. However, given that Superquinn had agreed, in substance, to indemnify Friends First in relation to any damages and costs that might be awarded, Superquinn took over the defence of the action. As a matter of substance, therefore, as opposed to form, the damages aspect of the case ran as between Parol and Superquinn. Before going on to deal with the damages claimed it is necessary to refer briefly to a complicating factor that arose subsequent to the Principal Judgment. The problem stemmed from the manner of the reopening of the Superquinn store. I, therefore, turn first to that question.
2. The Reopening of the Superquinn Store
2.1 For the reasons set out in the Principal Judgment, I came to the view that it was appropriate to require, in substance, that the store in question be reopened. The order of the 22nd October, therefore, required that Superquinn reopen its anchor store at the Carroll Village Shopping Centre “as a high end supermarket” not later than the 10th December, 2010. In the context of that order it is important to note that the keep open clauses in respectively the lease and the sub-lease were different in terms so far as use is concerned.
2.2 The user clause in the lease provided as follows:-
“Permitted use means for use as a supermarket and/or superstore (including the sale of intoxicating liquor for consumption off the Property) and for the sale of foods and/or services which may from time to time be sold or provided in supermarkets and/or superstores.”
2.3 However, the material provision as to user in the sub-lease (as a result of an amendment put in place at or around the time when the financial arrangements with Friends First occurred) provided as follows:-
“Use primarily as a high quality supermarket and/or superstore and/or for the sale of intoxicating liquor for consumption off the premise and/or for the sale of sports and leisure wear and sports and leisure accessories and equipment and/or for all such other uses as may be compatible with trends or the future development of or setting of new trends in supermarkets and/or superstores from time to time taking full account of the changing nature of the business and trade of supermarkets/superstore chains in Ireland and worldwide…”
2.4 It should be recalled that one of the issues addressed in the Principal Judgment was as to whether the obligation of Superquinn to open the store under the “keep open” clause in the lease required Superquinn to operate under the Superquinn logo. For reasons set out in the Principal Judgment I came to the view that Superquinn was not so obliged.
2.5 When Superquinn reopened the store, it did so using the title Carroll Village Supermarket. Having regard to the findings in the Principal Judgment there was clearly nothing wrong with that. In addition, it appears to be the view of Parol that the store as opened does not meet the quality requirements set out in the sub-lease or the “high end supermarket” requirement set out in the court order, to which I have referred. Friends First, at a case management hearing, indicated that it reserved its position as to whether it wished to pursue a claim arising out of an alleged breach of the order referable to the standard of supermarket that was opened. In addition, Friends First reserved its position as to whether it might wish to claim any damages on the same basis arising out of a possible breach of the terms of the sub-lease. There was, however, a real issue of substance as to whether it was open to Parol to seek to place any reliance on the quality of the supermarket as the basis of a cause of action in damages, for the terms of the lease (as opposed to the sub-lease) did not make any reference to a requirement that the supermarket be high end or high quality. On that basis it was said by Superquinn that the only party who had any business seeking to argue that the supermarket as opened was not of sufficient quality was Friends First. Friends First not being desirous, at least for the present, of pursuing such a claim, it was said on behalf of Superquinn that it was not open to Parol to claim any damages arising on that basis.
2.6 Perhaps put more rigorously it was said on behalf of Superquinn that what was due to be heard was a claim for damages by Parol against Friends First in respect of which damages Superquinn had agreed to provide an indemnity. However, the starting point of any such claim was, it was argued, necessarily that Parol had a claim against Friends First. As the lease made no provision for the quality of supermarket, it was said that Parol could not have any claim under the lease against Friends First which derived from the quality of the supermarket actually opened. It followed, it was said, that Superquinn could have no obligation to indemnify Friends First, for Friends First had no liability itself in the first place. A number of other connected issues concerning the consequences of the court order made for any potential damages were also canvassed at the case management hearing.
2.7 In the end it was decided that the best course of action to adopt would be that two questions would initially be listed for hearing. The first was as to the damages to which Parol might be entitled as against Friends First, without having any regard to a possible claim deriving from the quality of the supermarket. For the reasons already addressed that claim would, as a matter of substance though not of form, be run as and between Parol and Superquinn. Second, there was then listed to follow a hearing of the issues relevant to the question of whether there was any legal basis on which Parol could put forward a claim deriving from the quality of the supermarket. When the hearing of the first set of issues had concluded it was intimated by counsel on behalf of Parol that Parol did not wish to pursue the issue in relation to a possible claim deriving from the quality of the supermarket opened. That issue no longer, therefore, arises. The assessment of damages is confined, therefore, to damages said to flow from the closure of the supermarket and not from any damages which might be said to be attributable to an allegation that the supermarket as reopened in December, 2010 was of a quality which was in breach of any obligations owed to Parol.
2.8 It is important to note that procedural history for the witness statements filed on behalf of Parol for the purposes of the damages hearing included proposed evidence which would only have been relevant to a possible claim for damages related to the quality of the supermarket as opened. Where relevant it may, therefore, be necessary to make some reference to those witness statements where they are material to what turns out to be a significant issue in the case which is the need to differentiate between those aspects of the situation on the ground today (and, indeed, as may be expected to arise into the future) which are attributable to, on the one hand, the fact that no supermarket at all operated for the best part of two years and, on the other hand, the fact that the supermarket now operating is one which may be different in the nature of the goods and services offered to the one which was present before closure.
2.9 Against that background it is necessary to turn to the claim in damages made by Parol.
3. Parol’s Claim
3.1 On the 16th January of this year Parol furnished updated particulars of the losses which it says are attributable to the closure of the supermarket. It is convenient to group the losses claimed in those updated particulars under three headings.
3.2 The first heading concerns rent said to have been lost in relation to five units within the shopping centre which remained open at the time of the closure of the Superquinn store. The total rent payable under the five relevant leases was €347,332.00 per annum. The Superquinn store closed on the 21st February, 2009. It is said, therefore, that the total rent that would have been achieved from those five units up to the latter part of February of this year would have been €694,664.00. It is said that the total rent actually achieved during the period in question was €249,487.00. The shortfall or difference is, therefore, said to be €445,177.00. It is said on behalf of Parol that that shortfall was a consequence of the closure of the Superquinn store in that it was necessary for Parol to give the relevant tenants significant concessions in order to keep their units open.
3.3 The second heading is a claim for €65,000.00 which is said to be rent lost by virtue of the possibility of further units opening beyond those which remained open as of February, 2009 when the supermarket closed (it will be recalled that details were set out in the Principal Judgment of the fact that many units were vacant at the time of the closure of the supermarket). Evidence was given of negotiations with potential new tenants in that regard. The sum of €65,000.00 is said to be an estimate of the amount of rent which could have been achieved during the relevant two year period from such new tenants in the event that the Superquinn store had been open during that period.
3.4 The third head of claim is for loss into the future. This claim was put on behalf of Parol on an alternative basis. The starting point for the claim on either basis was the assertion that, were it not for the closure of the Superquinn store, the full rent of €347,332.00, to which I have already referred, would have continued to be achieved more or less indefinitely. In the light of the closure of the Superquinn store, and its reopening, it is said that the rent which will now be achievable is unlikely to exceed €125,000.00. On that basis it is said that a shortfall of €222,332.00 per annum will continue to be suffered by Parol.
3.5 In that context it is important to note that the extent of any obligation on Friends First in favour of Parol (to ensure that Superquinn keeps the store open) relates to an obligation which ends on the 25th February, 2019, for the keep open clause in the lease does not place any obligation after that date. On that basis it was agreed that no losses could continue beyond that date for Superquinn would be entitled to close their store as of that time. I am not sure that the position adopted on that point is strictly speaking technically correct. It would be theoretically possible that consequences of the Superquinn store being closed for most of 2009 and 2010 could continue to have an effect on the ground beyond 2019, even though any such consequences would need to seen against the background of the fact that Superquinn would have been entitled to close their store as of that time in any event. However, as the point was not argued, I do not propose to deal with it.
3.6 As already noted, Parol’s case under this heading is that it has lost an income stream into the future. Two ways of assessing that income stream were put forward in the alternative. A simple calculation of the actual amount of rent said to be likely to be lost was given in the sum of €1,777,176.00 which is a simple multiplication of the annual rent said to be lost (€222,332.00) by the eight years between now and the expiry of the keep open clause. Alternatively, it was said that a capital value could be placed on that rent in the sum of €1,350,000.00. In substance, it seemed to me that, in truth, the sum of €1.35m was simply a discounted current value of the income stream to which I have referred. In any event, it was agreed that Parol could not claim both of those sums for the capital loss of €1.35m was the same loss as the gross rental figure to which I have referred.
3.7 I propose dealing with each of the heads of claim in turn. As the second and smallest of the above claims can, in my view, be easily dealt with, I propose turning first to the claim under that heading. I then propose to deal with some general issues which arise under both of the remaining two headings before going on to deal specifically with the respective claims that arise under those headings. I, therefore, turn to the claim which is based on an allegation of lost tenants.
4. The “Lost Tenants” Claim
4.1 At this stage it is appropriate to recall a number of facts that were determined in the Principal Judgment. First it became clear at the hearing which led to the Principal Judgment that a significant portion of the shopping centre was not in fact owned by Parol but rather by its principal Mr. Gerard Maguire and his wife, both in a personal capacity. It is was, therefore, absolutely clear that no claim for losses in respect of those units owned by Mr. Maguire and his wife in that personal capacity could be maintained in these proceedings for they were not parties. The damages claim was, therefore, necessarily confined to those units which were owned by Parol.
4.2 Second, it is clear that a significant portion of the shopping centre had become vacant prior to the closure of the Superquinn store. The circumstances surrounding that very high vacancy rate are set out in the Principal Judgment and it is unnecessary to repeat same here. It is, however, important to recall that no new letting had occurred in the three years immediately before the Superquinn closure. However, evidence was given at the trial of the damages issue, by Mr. Maguire, of negotiations which he had with a number of potential new tenants. Those negotiations occurred after the Principal Judgment had been given in October last and where there was a prospect, therefore, of a reopening of the Superquinn store. However, it is clear that none of the relevant prospective tenants now appear to be prepared to take lettings. It also seems clear that the reason for the reluctance of the relevant tenants to take up lettings is the nature of the store which has been opened by Superquinn and which now trades as the Carroll Village Supermarket.
4.3 The term “offering” is used in the retail sector to describe the types of products and services that may be offered in a particular retail unit. The traditional Superquinn offering is well known and involves a reasonably upmarket product range, together with individual facilities such as bakery, butchers, delicatessen and the like. It would seem that many of those items are not provided in the offering currently available in the Carroll Village Supermarket. However, as pointed out earlier, the only claim with which I am concerned is a claim for damages associated with the closure of the Superquinn store, rather than any possible claim based on an allegation that the current offering in the Carroll Village Supermarket is in breach of any legal obligations.
4.4 It seems to me to be absolutely clear that the reason why the relevant potential tenants did not ultimately sign up was because they were not happy with the current offering in the Carroll Village Supermarket and do not consider that offering to be conducive to the kind of business which they would hope to conduct in units within the shopping centre. There is no real basis, therefore, for suggesting that an inability to sign up the tenants in question is attributable to the closure of the Superquinn store as opposed to the nature of the offering currently available in the store as reopened. The fact that the supermarket had been closed for over a year and a half was not a barrier to the individuals concerned being interested in taking lettings if a “traditional” Superquinn offering were to come on stream by the reopening of the store, even if not necessarily under the Superquinn logo. It was when it became clear to those tenants that the offering would not be a traditional Superquinn offering that their interest waned. The reason for the loss of those tenants cannot, therefore, in my view be attributed to the closure of the store but rather to the nature of the offering currently available in the supermarket. As damages are not being claimed deriving from the nature of the offering, then it does not seem to me that the loss of the tenants in question has any causal connection with the wrongdoing with which I am concerned in this assessment of damages. Those tenants were lost, not because Superquinn closed but rather because the opening of Superquinn disappointed the potential tenants by virtue of the offering made available in the Carroll Village Supermarket. I am concerned with assessing damages that are attributable solely to the closure of the supermarket and not to the offering currently available. The loss of those tenants is not, therefore, causally connected with the wrongdoing with which I am concerned.
4.5 In addition it needs to be taken into account that no new letting had been achieved during the last three years when Superquinn was, in fact, open. It may be that some of the problems (particularly in the latter part of the run up to the closure of Superquinn) were derived from rumours which seemed to have been circulating in Dundalk as to the likelihood of Superquinn closing. There must, therefore, be some possibility that during the two years when the store was closed, Parol might have been able to secure an additional tenant or two, had Superquinn remained open. However, having regard to the fact that no new tenants had been secured, even with Superquinn open, in the three proceeding years and the fact that those tenants who appeared to be potential new operators within the centre, disappeared when Superquinn reopened with an offering which did not satisfy them, it seems to me to follow that the chances of having secured any new tenants for the vacant units owned by Parol during the two years in question was very small. The assessment of damages under this heading seems to me to be properly met by the assessment of a very small amount of general damages to reflect the loss of opportunity attributable to the added difficulty in securing tenants with Superquinn closed as opposed to the undoubtedly already difficult situation that would have obtained even with Superquinn open. I assess damages under this heading in the sum of €10,000.00.
4.6 As already indicated, before going on to address the specific issues which arise under the other two headings of claim, it is necessary to deal with some general considerations.
5. General Considerations
5.1 It must be recalled that the underlying principle behind the assessment of damages in any case is to attempt to put the wronged party back into the position in which that party would have been had the relevant wrong not occurred. The wrong in this case is the fact that the supermarket was closed for the best part of two years. The assessment of damages must, therefore, at the level of principle, be based on attempting to assess the difference (if any) between what would have occurred had the supermarket not closed and what has actually happened.
5.2 As pointed out earlier the remaining damages arise under two headings, being in substance losses said to have arisen in the two years from the closure of Superquinn to-date and future losses said to be referable to the eight years from now until the expiry of the keep-open clause in February, 2019. What has actually happened to date is clear. As pointed out the rent received from the five units which remained open when Superquinn closed, during the two year period to-date, was the sum of €249,487.00. That sum is, of course, significantly below the rent provided for in the leases in question which, during the same period, amounted to just short of €700,000.00. There is no doubt but that Parol was legally and theoretically entitled to collect that sum of just less than €700,000.00 from the tenants in question. It is equally clear that it did not do so.
5.3 The first general question that I need to address is, therefore, to assess Parol’s efforts to collect rent. Clearly any unreasonable failure on the part of Parol to actually collect rent due to it cannot form the basis for a claim in damages against Friends First and, through them, Superquinn. Parol has a duty to mitigate its loss. Parol has an obligation to attempt to collect as much rent as it can.
5.4 However, I have come to the view that there is no evidence on which I could safely conclude that Parol has failed to collect as much rent as it could. The circumstances in which Parol found itself were undoubtedly difficult. It will, of course, be necessary to analyse the extent to which those circumstances might not have been difficult in any event, even if Superquinn had not closed. However, irrespective of the source of the difficulties concerned, it seems to me to be clear that Parol was faced with a situation where insisting, in most cases and at most times, on the payment of the full amount of rent provided for in the respective leases, would have driven the tenants concerned out of business. The shopping centre has operated for the last two years at only a tiny fraction of its capacity. The Superquinn store was closed. A very high proportion of the remaining units were also closed. If the shopping centre were not to close altogether, then it was necessary to do what could be done to keep the existing tenants in business.
5.5 I am satisfied that the actions taken by Parol in making concessions to those tenants over the last two years were reasonable in all the circumstances. It follows that I should accept that the sum of €249,487.00 in rent was the maximum that Parol could reasonably have been expected to have collected from its tenants during the period in question.
5.6 Under the two headings of damages which remain for consideration there are, in each case, two questions. The first is as to what the position would have been had Superquinn not closed. The second is as to what the position actually is (or, in the case of the future, will be). There are, therefore, four matters to be assessed. What would have been the rental income that could have been collected in the two years from the closure of the Superquinn to date, if that store had not closed? That is obviously a hypothetical question and is one to which I will have to turn shortly. From that sum needs to be deducted the actual rent collected, which, for the reasons which I have already sought to analyse, I am satisfied was the maximum that could have been collected in the period in question. The difference is the appropriate amount to allow under this heading.
5.7 The same two questions arise in respect of the future. What would have been the rent into the future, in the event that the Superquinn store had never closed? What will be the rent into the future in the light of the fact that the Superquinn store did close but has now reopened? There must, necessarily, be some degree of speculation in the answers to both of those questions. However, there is always speculation in the assessment of consequential damages and in particular damages into the future, for the likely course of future events (whether actual events or events which might hypothetically have occurred in the absence of wrongdoing) necessarily involves some degree of estimation, although the extent to which it will be possible to form a view on such questions with any real degree of accuracy may vary significantly from case to case (see the comments which I made in this regard in Greenband v. Bruton and Others (Unreported, High Court, Clarke J., 9th March, 2011) and Mount Kennett Investment Company and Anor. v. O’Meara and Ors (Unreported, High Court, Clarke J., 9th March, 2011). However, there are two general observations that need to be made at this stage before embarking on an attempt to measure the three remaining elements identified above.
5.8 First, as no case is being made to the effect that the current user of the supermarket is in breach of any enforceable obligation, it follows that Superquinn could have changed the nature of the offering available in their Dundalk store to that which is currently being offered in the Carroll Village Supermarket without that change being in breach of any legal obligation. It seems to me to follow that the assessment of the rent which might have been hypothetically recovered (either to-date or into the future), in the absence of breach of covenant, must, therefore, take into account the fact that the offering could have changed without any breach of covenant. To the extent, therefore, that there might be an effect on the level of rent which has been recovered to date and which might be expected to be recovered into the future, deriving both from the closure of the supermarket between February, 2009 and December, 2010 and the change in the offering in that supermarket when it reopened in December 2010, it is necessary, for the purposes of calculating damages, to attempt to segregate the effect of both of those phenomena, even though it is, as all of the expert witnesses seemed to agree, a difficult task to make such a segregation. The reason why it is necessary to distinguish those consequences is that the first is a consequence deriving from a breach of covenant in respect of which damages lie, while the second does not derive from any wrongdoing and cannot give rise to any legitimate damages.
5.9 The second general observation that needs to be made at this stage arises from an argument made on behalf of Superquinn. As was clear at the time of the Principal Judgment, the Carroll Village Shopping Centre had suffered significant trading difficulties which were independent of the closure of Superquinn. In assessing what would have happened in the absence of the closure of Superquinn it is necessary, therefore, to pay full regard to those difficulties. On Superquinn’s case the shopping centre was in terminal decline and was likely to have closed in the medium term irrespective of whether Superquinn itself closed. Parol, on the other hand, suggests (while acknowledging the undoubted difficulties which the shopping centre faced) that the added burden of the closure of Superquinn has (notwithstanding its reopening) caused a significant blow to an already vulnerable commercial enterprise. On Parol’s case the shopping centre would have survived albeit in very difficult trading conditions. It is still hoped by Parol that the shopping centre will survive. To the extent that its continuing survival may be at risk, it is said that that risk is attributable to Superquinn’s closure. It will be necessary to address those issues as they arise. I, therefore, turn to the losses to date.
6. Losses to Date
6.1 As already pointed out the actual rental receipts are a given. What is next necessary to estimate is the extent to which more rent might have actually been secured by Parol in the two years between the closure of Superquinn and the hearing, had Superquinn not closed. For the reasons already analysed, it is also necessary to attempt that exercise by excluding any possible benefit which might have been achieved from Superquinn continuing with its previous offering, for the change from that offering to the current offering is not, in itself, in breach of any legal obligation (at least for the purposes of this hearing) and cannot, therefore, give rise to any claim in damages.
6.2 It seems to me that a number of facts need to be taken into account in addressing the assessment with which I am currently engaged. First, it does appear that, in the year immediately prior to the closure of Superquinn, almost all of the rent due under the five leases concerned was, in fact, collected. It is true that one tenant had been given initial terms in their lease which provided for a reduction, of the order of €17,000.00, in the rent for the first five years. That five year period expired a few months before Superquinn closed. However, Mr. Maguire indicated in evidence that no attempt had been made by Parol to suggest that the rent actually be increased to reflect the expiry of the reduced rent period. That is understandable. The shopping centre was already under great pressure. It does not seem to me that there was, in truth, any reality, in the circumstances that pertained in the latter part of 2008 and the early part of 2009, in Parol actually securing that increase in rent. The rent actually being collected as of the time of the closure of Superquinn was, therefore, €17,000.00 less than the theoretical amounts specified in the five relevant leases. Rather than €347,332.00 the actual amount being collected was €330,332.00. For the reasons already analysed I am not satisfied that there was any reality to the rent going up to €347,332.00. The starting point has, therefore, to be that the true rent being collected in accordance with the leases as of the time of the closure of Superquinn was of the order of €330,000.00.
6.3 The second general consideration is to have regard to the fact that all of the tenants in Carroll Village had been pressing, for some time prior to the closure of Superquinn, for concessions deriving from the poor trading conditions being experienced. It seems to me that it necessarily follows that, even if Superquinn have not closed, those demands would have become all the more pressing and would almost certainly have to have been acceded to to some extent by Parol if the relevant tenants were to remain and be able to trade on a viable basis. In addition, if Superquinn had changed from its traditional offering to something along the lines of that which is now available in the Carroll Village Supermarket (without any significant closure), a course of action Superquinn would have been entitled to take, then the pressure for concessions could only have become more acute.
6.4 There was some conflict between the views of the two expert valuers called by the respective parties as to the open market rent of the five units concerned at the time in question. Mr. John Stewart (who gave evidence on behalf of Parol) estimated the open market rent as being of the order of €200,000.00. Mr. Peter Rowan (who gave evidence on behalf of Superquinn), put the figure closer to €150,000.00. There can be little doubt that estimating the open market rent of retail premises must be a difficult task in the current climate. Likewise, the added complication of the fact that Carroll Village was a shopping centre in trouble in any event makes the task all the more difficult. All in all I have come to the view that the open market rent of the five units in question, over the last two years, was something of the order of €170,000.00 per annum.
6.5 It follows that the starting point of any negotiations which the relevant tenants might have had with Parol was the fact that the rent which they were paying was close to double the going rent at which similar units might be let. Against that background, it is difficult to avoid the conclusion that the tenants would have been successful in securing significant concessions. Whether those concessions would have brought the rent down to the open market value may be open to at least some question for Parol had at least available to it as a bargaining chip the fact that the tenants were committed by contract to pay the higher rent. The lessees in many cases were with individuals rather than corporate entities so that a personal liability would have attached to the operator for non-payment of the full rent. The extent to which that bargaining chip could be deployed must, of course, be viewed against the practical commercial situation and the fact that you cannot get blood from a stone so that, irrespective of the legal entitlements of Parol, it would have been necessary to take those commercial realities into account.
6.6 Having regard, therefore, to the fact that the starting point (at the beginning of the two year period) was that rent of €330,000.00 was actually being paid, to the fact that the lessees had a legal obligation to pay that amount which in many cases fell on private individuals rather than corporate entities, but also having regard to the fact that the negotiating position of the tenants would have been strengthened by the knowledge of all concerned that similar units elsewhere could be rented for a total of something of the order of €170,000.00 and that paying significantly more than that sum would have been likely to have rendered many of the businesses unviable, I have come to the view that, in the absence of a closure of Superquinn, rent of the order of €250,000.00 might actually have been secured in the first year after the closure of Superquinn but rent of the order of €200,000.00 was all that would have been secured in the second year. I differentiate between the two years because it does not necessarily follow that any of the concessions which I have found were likely to have been made by Parol would have been made right from the beginning of the period in question, so that the effect of those concessions would have been more pronounced in the second year than the first. It follows that, in my view the best estimate of the total rent that would have been obtained had Superquinn not been in breach of its obligations is €450,000.00 for the two year period in question. Having regard to the fact that the amount actually recovered during the period in question was almost €250,000.00, it seems to me to be appropriate to award damages of €200,000.00 under this heading. It is next necessary to turn to damages into future.
7. Future Damages
7.1 There is necessarily some degree of estimation in both sides of the equation under this heading. What would the income stream for the next eight years have been had Superquinn remained open even with a reduced offering? What will it actually be in all the circumstances of the case? Both assessments involve a significant degree of estimation. Two significant general issues need to be addressed.
7.2 The first concerns the question of whether the shopping centre is, in truth, viable. Put another way, will the shopping centre actually survive for the eight year period in question? It seems to me that it is necessary to factor in at least some realistic possibility that it will not prove to be viable to keep the shopping centre open. I do not think that the evidence supports the view that its closure is a given. I do think the evidence supports the view that there is, however, a real possibility (though not, in truth, a probability) that it will ultimately close in the period in question.
7.3 On the other side of the coin it is also necessary to assess whether all or part of that risk of closure derives from the fact that Superquinn was closed for two years. In that regard I had the benefit of the evidence of Mr. William McMillan, who has significant expertise in the supermarket business. I accept Mr. McMillan’s view that the fact that Superquinn was closed for two years (even though it is now open) has had a significant effect on the overall prospects of the shopping centre. Mr. McMillan’s evidence was that supermarkets do their best not to close at all (even when a refit is required) and when forced to close for short periods, attempt to minimise the length of the closure and surround the closure with appropriate advertising and promotion designed to keep customers on board. As Mr. McMillan points out, much supermarket shopping is governed by habit. If people get used to going somewhere else they may be hard to win back. Therefore, a significant closure necessarily places a supermarket in a position where it will have to win back customers who have formed the habit of going elsewhere during the closure. Customers will not necessarily be won back quickly (or in some cases at all) even if there is a reopening. This will be particularly so where, as appears to be the case on the facts here, little promotion was engaged in to boost the likelihood of customers formerly lost returning. It must be taken into account that a change from the traditional Superquinn offering to that now available in the Carroll Village Supermarket would, of itself, almost certainly have lost some customers. Any such loss cannot, however, provide a basis for the calculation of the damages in this case for the reasons already analysed. I am also satisfied that there would have been some risk that the Carroll Village Shopping Centre would have proved unviable in the medium term even if Superquinn had remained open and most particularly, if Superquinn had made a decision to move to the offering currently being provided in the Carroll Village Supermarket. However, it seems to me that Mr. McMillan’s evidence is compelling as to the fact that whatever risk there may be of closure has been exacerbated by the fact that an already vulnerable commercial enterprise had to endure two years without any supermarket.
7.4 It seems to me, therefore, that I need to approach the question of the calculation of damages under this heading on the basis of a number of facts which I find to be the case on the evidence. First, there was a risk that Carroll Village could close in any event even if Superquinn were not guilty of any breach. However, that risk has become greater because of the two year closure of the anchor store. Second, for reasons similar to those which I addressed in considering damages to date, even if Superquinn had not been guilty of any breach of covenant, the rent likely to be currently being paid by the relevant tenants would be of the order of €200,000.00. I am satisfied that, even if Superquinn had not been guilty of any breach of covenant, there would remain pressure from the tenants to reduce that sum further in the future. On the hypothesis, therefore, that there was no breach of contract, it seems to me that the sort of rental income that Parol could have expected over the next eight years would have been below €200,000.00 per annum. In coming to that view I have taken into account the possibility that some other units might have been let but have also had to take into account the countervailing possibility that some of the existing units might not have remained let. I have also taken into account the fact that the current open market rent is of the order of €170,000.00 but that that figure might improve over the eight year period.
7.5 I am satisfied that the estimate, given by Parol, of the rent likely to be actually secured over the next eight years (€125,000.00 per annum) is reasonable and realistic. I have already indicated my view that the open market rent of the five units in question is currently of the order of €170,000.00. However, there is no guarantee that all of those units will remain open. The very difficult situation in which the shopping centre finds itself, with the vast majority of its units remaining closed, will necessarily make the collection of even the open market rent difficult. It seems to me that I should approach the question of damages into the future against the background of the fact that Parol would, in the absence of wrongdoing, be entitled to expect a rental income of something under €200,000.00 per annum but that Parol, because of the wrongdoing, can now only expect a rental income of €125,000.00.
7.6 The next question is as to whether that loss is likely to continue for the full eight year period or is likely to diminish. It could be said to be likely to diminish for one or both of two reasons. First, a better economic climate might lead to the gap, between the hypothetical situation derived from assuming no breach by Superquinn and the actual situation on the ground, narrowing. Second, in the other direction, it is necessary to take into account the risk that Carroll Village would have closed in any event but also having regard to the possibility that it might now have to close in circumstances where it would not have closed were it not for Superquinn’s wrongdoing. It seems to me that only a general view can be taken of these items. The appropriate approach is, therefore, in my view, to initially calculate damages on the basis of the full current loss of rental income (which, for the reasons already set out, I estimate at being something under €75,000.00 per annum) but to discount that figure to reflect the possibility that it might decline or disappear altogether for any or all of the reasons which I have just addressed.
7.7 It is necessary, in any event, to discount the gross figure for loss of rent to reflect the fact that that figure represents a continuing loss over an eight year period and that some account must be taken of the fact that money lost in eight years time (but being compensated for today) needs to be appropriately discounted to reflect that time delay.
7.8 Just taking the income stream lost without taking into account any possibility that it might change in scale, it seems to me that the loss would approximate to €500,000.00 (being a sum of something under €75,000.00 for eight years discounted conservatively simply to reflect that it is an income stream rather than immediate entitlement). From that must be deducted a further amount to pay proper regard to the risks that that lost income stream might, for one reason or another, not continue to be lost, or be lost to the same extent, for the full eight year period. It seems to me that it is appropriate to discount the figure to a sum of €350,000.00 to have proper regard to those factors.
7.9 Put another way, it seems to me that the best estimate that can be made as to the present value of the loss of income over the next eight years which is attributable to the fact that the Superquinn store was closed for two years and the consequences which that has had for the future operation and, indeed, potential viability of the centre, is of that order. I, therefore, propose to award €350,000.00 under this heading.
7.10 Finally, I should note that it does not seem to me to be necessary to have regard to any taxation issues in the calculation of these damages. Obviously any additional income which Parol might have earned would have been potentially subject to tax on the basis that that additional income would have increased Parol’s profits. However, equally, any damages which Parol now receives will have to be accounted for and is likely to be taxed either as corporation profits or capital gains. The taxation question is, therefore, neutral.
8. Conclusions
8.1 For the reasons already analysed I am, therefore, satisfied that it is appropriate to allow a sum of €10,000.00 in respect of the loss of opportunity to obtain new tenants in the two years to date. In addition, it is appropriate to allow €200,000.00 to reflect loss of rent to date. Finally, it is appropriate to allow €350,000.00 to reflect the present value of rent lost into the future.
8.2 For those reasons it seems to me that Parol is entitled to an award of €560,000.00 as against Friends First. Friends First is, in turn, entitled to an indemnity in respect of the full sum against Superquinn.
Belton v. Nicholl
[1941] IR 230
Black J. 230
An old house, known as Glenagerah Hall, Glenageary, was held by one, Margaret Conway, from 15th November, 1928, under a lease of that year for 99 years, granted by the owners in fee.
This lease contained a negative restrictive covenant prohibiting the lessee inter alia from using, or permitting, or suffering the premises to be used for any purpose save that of a private dwelling-house without the lessors’ written consent, and from exercising or carrying on, or permitting or suffering to be exercised or carried on, upon any part of the said premises any trade or business whatsoever without the like consent.
During the year 1938 the said lessee’s interest in the premises became vested in the defendant, and in May, 1939, the fee simple interest of the said lessors became vested in the plaintiff. It has not been suggested that the restrictive covenants in question do not bind the defendant, although not a party to the deed containing them; nor do I think that such a contention would be sustainable upon the authorities.
The defendant, without having obtained or sought the consent of either the original lessors or the plaintiff, has manifested an avowed intention to convert this old residence into several self-contained flats, and in due course to let them as such. In furtherance of this design he has already erected partitions, closed up doors with fibre wood, replaced an old window at the side of the house with a new door, and made various other alterations detailed in evidence before me and graphically shown in a collection of proved photographs. Plans have also been proved showing that the defendant’s intention is, or was, to carry the work thus begun to completion by still further alterations and additions.
The plaintiff says that all this work is, and will be, in breach of the said prohibitions in the lease of the 14th August, 1928. He, therefore, asks for a mandatory injunction compelling the defendant to undo the work he has already done and restoring the premises to their original state. He also seeks an anticipatory injunction restraining the defendant from doing any more work of the like character, as well as from letting the premises in flats or separate living rooms.
The first and main question is, whether such a conversion into and letting in flats is, or would be, consistent with the using of this old residence for the purpose of a private dwelling-house only; and, secondly, whether the letting of the house in flats would amount to the exercising or carrying on upon the premises of a trade or business.
Mr. Ryan in his very fullbut none too fullargument has cited a series of authorities deciding that the letting of a dwelling-house for such purposes as those of a hostel, public institution, or boarding-house, or for the reception of lodgers would be a breach of such a covenant as that with which I have to deal. I do not comment on any of these cases, not because they were not helpful, but because there are several other cases more closely analogous to the present case. Most of these latter, if not all, were also cited by counsel.
The first, Rogers v. Hosegood (1) is a clear decision that the erection of a building adapted or to be used as flats would be a breach of a covenant that any messuage erected should be adapted for and used as a private residence only. It was there laid down by the Court of Appeal, in affirming Farwell J., that residential flats, involving the use of a public entrance and staircase, do not answer the decription of private residences contemplated by the words quoted. Quite apart from the public entrance and staircase, it was clearly held that the very construction of such a building adapted for a number of separate tenements was not the construction of one private dwelling-house to be used as such.
Again, in Berton and Others v. Alliance Economic Investment Co., Ltd. (2) although the final decision turned on the scope to be given to the words “permitting to be used”and “suffering to be used,” the Court of Appeal did not differ from Coleridge J. in so far as he held that the letting of a house in separate tenements was a breach of a covenant to use the house only as a private dwelling-house. Atkin L.J. makes that plain at p. 758, adding that upon that point there was no dispute. He also cites a previous decision of the Court of Appeal to the same effect, namely, Berton v. London and Counties House Property Co. (1).
Day v. Waldron (2) supports the same view; but as in that case there was a provision that the house was to be”inhabited” as a private dwelling-house, it might be suggested that the restriction was more stringent than in the present case. If so, this does not apply to the other cases just mentioned.
Finally, there is Barton v. Reed (3). The covenant there was against carrying on business, and Luxmoore J. laid it down that “the sub-letting of premises in suites of apartments, with or without the provision of any other service is a business.” He added that he thought there could be little doubt about it. In that case certain services were provided for the occupants of the apartments; but the learned Judge made it clear that, even without that feature, his view would have been the same.
In the present case, the defendant plainly contemplates providing a caretaker. But, even if no species of service were contemplated at all, what has been done, and what it is proposed by the defendant to do, would seem to be well within the class of alteration and user held to be a breach of covenant in the cases I have referred to.
Kimber v. Admans (4) following Attorney-General v.Mutual Tontine Westminster Chambers Association (5) dealt with a covenant that “no house shall be erected on any part of four plots of less value than £500.” The defendant proposed to erect blocks of flats, the value of each flat being less than £500. It was alleged that this was a breach of the covenant and that each flat was itself a dwelling-house. The plaintiff failed. The distinction from Rogers v.Hosegood (6) was that there was nothing about user in the covenant. Each block of flats was one dwelling-house. It does not follow that it was one private dwelling-house. As Farwell J. indicated in Rogers v. Hosegood (6), whether the words are “one private dwelling-house” or “a private dwelling-house,” the result is the same. Farwell J. was a party to both Rogers v. Hosegood (6) and Kimber v.Admans (4) and so was Lord Justice Rigby on appeal. There is no inconsistency between the two.
Finally, in Barton v. Keeble (7) there were two prohibitions in a covenant almost exactly like the two with which I am concerned. It was vainly argued that one cut down the other. That was not argued before me; but in Bartonv. Keeble (1) it was decided that both covenants were independent prohibitions, and that there was a forfeiture of the lease by reason of the breach of them. There was, of course, a forfeiture clause in the lease in that case. The breach was a sub-letting of three rooms. Mr. Justice Eve said:”The premises are to be used as a private dwelling-house only, any sub-division is inconsistent with that. There are obvious reasons why a house occupied by two separate families cannot be accurately described as a single private dwelling-house.”
If ever there was a case in which the precise breach of covenant complained of was covered by authority, the present is such a case. I have not been referred to a single decision contrary to or inconsistent with those I have mentioned; nor has a solitary reason been advanced so far as I could understand to show me why I should not follow these cases upon logical principles.
As to the prohibition against exercising or carrying on, or permitting or suffering to be exercised or carried on, any trade or businessa covenant as frequent as it is nebulousI desire to make quite clear what I am not deciding, lest others affected by such a covenant might be misled. Some aspects of this important and common covenant are covered by authority. Thus “trade” and”business” are not synonymous terms. “Business” is much the wider term. One may carry on a “business”within the meaning of this covenant, though he makes no money and derives no pecuniary benefit from doing so. But an isolated or accidental business transaction does not constitute a carrying on of a business. All these propositions are laid down in Rolls v. Miller (2). I asked Mr. Ryan whether it would be carrying on or even exercising a business to sub-let the whole house. He said it would not.
In most of the cases in which the letting in separate tenements was held a breach of a covenant like the present one, the sub-lessee and not the lessee was the party who made the sub-lettings; yet in none of these cases was it even suggested that the letting of the whole house by the lessee to the sub-lessee was itself a breach of the covenant. If that is right, the covenant is not equivalent to a prohibition against sub-letting, provided there is no sub-division. I admit a difficulty in seeing how this seemingly generally accepted distinction is strictly logical. If a lessee sub-lets his house, he would seem to be using it as a business asset and not as a place to dwell in. As long as the sub-lessee remains and rent continues accruing, the business transaction of letting the house would seem to possess that element of “continuity” insisted upon by Jessel M.R. in Smith v. Anderson (1). If, perchance, the tenant did not stay long, and possibly the lessee went on sub-letting the whole house to a whole series of successive tenants, then there would appear to be that “repetition of acts” which Brett L.J. in the case cited last said implied a “carrying on.”
If a lessee finds, as is the case here, that he cannot live in the house himself or let it as a single entity, and if in order to save himself from sheer loss, he sublets it in the only way practicable, namely, in separate parts, it is not plain to me why his doing so should be any more carrying on or even exercising a business than if he had managed to let the whole house as one unit. He might get two or three permanent sub-tenants and beyond the first two or three letting transactions, there might be no repetition for a life-time. If he let the whole house as one unit to a succession of twenty sub-tenants in as many months, there would be much of that repetition referred to by Brett L.J. So far as the element of continuity is concerned, the collecting of rent would be as continuous in the one case as in the other. If it were necessary for me to accept or reject the dictum of Luxmoore J. in Barton v. Reed (2)to the effect that the sub-letting of premises in suites of apartments with or without the provision of any other service is a business, I would like to hear further argument in which the logic of that opinion would be fully probed. I find that in Smith v. Anderson (1) Jessel M.R. (reversed on another point) said:”A man who is the owner of offices, that is, of a house divided into several floors . . . would not be said to carry on a business because he let the offices as such.” Again, in Barton v. Keeble (3), as I have already pointed out, it was argued that the prohibition against carrying on a business cut down and limited the preceding prohibition against user other than as a private dwelling-house. Eve J. said:”If the concluding words” (meaning the prohibition against carrying on business) “are to be read as defining the private dwelling-house as being one wherein no business is being carried on, it would seem that each room in the house might be sub-let separately without any breach of the covenant.” In saying that, Mr. Justice Eve seems to me to have said in so many words that the sub-letting of the house in separate rooms would not be a breach of the prohibition against carrying on a business.
I can well appreciate that extensive sub-letting, as distinct from a few isolated transactions, might be said to have assumed the dimensions of a business. Some such idea was doubtless in the mind of Farwell J. in Rogers v.Hosegood (1) when he said:”If the whole structure could be regarded as a private residence only, it is difficult to see how thirty or forty different families can find place therein, unless the owner of the entire messuage is carrying on the trade of letting apartments.” I have enlarged upon this part of the covenant relied upon in order to prevent what I am going to decide being misunderstood to mean more than intended, and in order to leave the scope of the prohibition against exercising a business open for argument, if in future any case should turn upon it.
I may add, however, that in the present case it was plainly intended that one flat should be occupied by a caretaker, which rather suggests that the defendant meant to provide some kind of service for his sub-tenants, be it considerable or only slight. Whatever might be the position if there were no caretaker, I think the provision of any appreciable service for the tenants would bring the case well within the authorities and would make the flat-letting a breach of even the prohibition against exercising a business, unless, indeed, the English Court of Appeal is to be regarded as wrong in more than one plain decision. But it is sufficient for the purposes of the present case to hold that the other prohibition has been violated and the plaintiff is threatened with a further violation. I refer to the prohibition against using the house or permitting its use for any purpose save that of a private dwelling-house.
The meaning of the word “private” must vary with the noun it qualifies. A private cheque-book is private in relation to its owner. A private right of way may be private in relation to a whole category of persons. So, I think that a private dwelling-house in such a covenant as the present must mean private in relation to the lessee or at least the individual for the time being standing in his shoes, probably including a sub-lessee of the whole house. If that individual is to use it as a private dwelling-house, that may well mean that he must use it as hisprivate dwelling-house. Moreover, it may mean the whole house as an undivided entity. The person in question must maintain that element of privacy so defined. Of course he may share it with his family, servants, or guests at his will and pleasure. But if he parts with the right to that privacy, he breaks the covenant. If he sub-lets a portion, then it is no longer possible to predicate of the whole house that it is the private dwelling-house of anybody; for the sub-tenant can exclude the lessee from a part and the lessee can exclude the sub-tenant from the remainder. This reasoning would support Mr. Justice Eve’s statement in Barton v. Keeble (1) that where “the premises are to be used as a private dwelling-house only, any sub-division would be inconsistent with that.” It is to be noted that he says “any sub-division,” which I think is entirely logical, if the way in which I have reasoned the matter out is sound.
On this basis, the sub-letting of a single room would destroy the character of the house as a private dwelling-house as effectually as its conversion into several flats Whether, in an extreme case, the principle of de minimis non curat lex might be invoked may be open to argument. I could conceive of one arguing that the letting of one room unfurnished and without service in a large house might be ignored, if the covenant could be construed to mean only a prohibition against using the house substantiallyfor a purpose other than that of a private dwelling-house. It would not be the first time that the convenient word “substantially” was sought to be read into a legal provision. I express no opinion as to all that. It is enough for me to adopt as applicable here Lord Justice Collins’ words in Rogers v. Hosegood (2):”The building proposed is certainly not one . . . dwelling-house only adapted for and used as a private residence. . . . Residential flats, involving the use of a public entrance and staircase, do not answer the description of private residences contemplated.”I likewise adopt the words of Mr. Justice Eve in Barton v. Keeble (1), that “any sub-division” is inconsistent with user strictly as a private dwelling-house. Fortified by what has been said by many Judgesa number of them in the English Court of Appealbut also independently of these decisions, and upon the reasoning I have stated, I must hold that the partial conversion effected in Glenagerah Hall is, and the intended extension of that and the proposed letting in flats would be, in breach of the prohibition against using this house or permitting or suffering it to be used save as a private dwelling-house.
I see no relevance in the decision of Vernon v. Small (1).That case was conversant with a wholly different covenant from that on which the plaintiff here relies. If I had to deal with a similar covenant, I should do so exactly as Mr. Justice Johnston did, both because that case involved a decision of this Court and because it would in any event accord with my own opinion. So far as it could be relied on to negative waste, it affords no help; for the plaintiff here does not rely on waste. If he did, I should take the same view as Mr. Justice Johnston on that point also.
Having arrived at the conclusion that the acts of which the plaintiff complains amount to a breach of the covenant upon which he relies, and that the further acts threatened and admittedly intended by the defendant would, as matters stand at the moment, be a further and continuing breach of that covenant, I have to consider the more difficult question of what remedy should be applied and what form my order should take.
Mr. Ryan, mindful of the vital importance of this latter question, and the conflicting decisions bearing upon it, cited a series of authorities to convince me that I had no option but to grant the injunction sought, including a mandatory injunction to restore the premises to the state in which they were before the work of conversion into flats was begun.
In cases of trespass or nuisance, the Courts of Equity have been in the habit of exercising a discretion, and taking into consideration the question of actual damage and the balance of convenience. But, in the words of Lord Justice FitzGibbon in Craig v. Greer (2), there is “an essential distinction between the obligation of express contract, or of tenure subject to express conditions, on the one hand, and implied obligations upon the other.”
Some cases have been cited in support of the view that when a negative covenant is broken the Courts of Equity would not entertain any question of damage or no damage, but would grant an injunction as a matter of course. The cases I allude to were decided before Lord Cairns’ Act in 1858, when the Courts of Equity had no alternative power to give damages. Naturally in such circumstances they would always grant an injunction rather than leave an aggrieved plaintiff merely to his possible remedy at law and without any remedy in equity. It does not follow that the same view would have prevailed if the Courts which decided these cases had had an option to award damages. But then a number of cases more or less to the same effect were cited as having been decided since Lord Cairns’ Act.
The leading case in this latter series is Doherty v.Allman (1). There, Lord Cairns clearly emphasised that a plaintiff who complains of a breach of contract has a higher and stronger ground upon which to appeal to a Court of Equity than one who complains merely of a nuisance or trespass. He went on to draw a distinction between affirmative and negative covenants, saying that where a breach of the latter is concerned, Courts of Equity would have no discretion to exercise. In that case the covenant was an affirmative one. Lord Cairns said (at p. 720):”If parties . . . contract that a particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, . . . that the thing shall not be done.” Those words would not seem appropriate to a mandatory injunction, which rather means “it shall be undone.” The context suggests that Lord Cairns was thinking rather of an anticipatory injunction.
It may seem hard that if a man promises that he will not use stores otherwise than as stores, but finding them useless as stores, improves them into dwellings, a Court of Equity, if applied to, should have no option but to make him undo all his good work, while if he had merely promised to maintain them as stores, the Court would have power to dismiss an action against him, as it did in Doherty v. Allman (1). If the doctrine relied on by Mr. Ryan amounts to that, I should not wish to extend it an inch beyond the limits binding upon me. In Osbornev. Bradley (2) Farwell J., although using general terms, was plainly thinking of anticipatory injunctions.
I thought Lord Manners v. Johnson (3) to be Mr. Ryan’s strongest case. It at least dealt with a mandatory injunction against breach of a negative covenant. In Kellyv. Barrett (4) Tomlin J. thought there was a discretion even where a negative covenant was involved. On appeal, Warrington L.J. was not satisfied about this, while Pollock M.R. confined himself to saying that in the case of such covenants “the question of damage is not a cardinal point.” That is different from saying it can never be considered at all. In Kerr on Injunctions (6th Ed. p. 479) it is said that Lane v. Newdigate (1) was the first instance in the books of a mandatory injunction for a breach of agreement. If so, the doctrine of no discretion cannot be said to have its roots in any venerable antiquity.
Discarding decisions prior to Lord Cairns’ Act for the reason I have given, most of those since then cited upon the point were conversant with anticipatory injunctions. If the alleged rule of no discretion were inflexible, it would be hard to explain Bowes v. Law (2); Kilbey v. Haviland (3)and above all, Sharp v. Harrison (4). Unless there are some potent reasons against the exercise of such a discretion even where negative covenants are broken, there would seem to me to be weighty reasons in certain circumstances in favour of it, provided it be exercised with great reserve. These reasons are precisely those which have actuated the Courts in exercising their undoubted discretion to refuse a mandatory injunction in cases of trespass and nuisance. Such a case was Isenberg v. East India House Estate Co. (5).There, Lord Westbury said:”To what end, then, should I exercise a jurisdiction which in such a case as this would simply be mischievous to the defendants without being attended with corresponding benefit to the plaintiff, unless, indeed, I could approve of the plaintiff taking advantage of the mischief and loss that the defendants would have to sustain, in order to aggravate his claim for pecuniary compensation.”He then speaks of “the duty not to deliver over the defendants to the plaintiff bound hand and foot in order to be made subject to any extortionate demand that he may by possibility make.” So, in Jessel v. Chaplin (6)a case of obstruction of lightBramwell B. said:”Suppose the party had built this wall under a bona fide belief that he had a right to do so, would it not be hard if the Court were to compel him to pull it down? Or suppose the wall were worth £500, and the damage done by it to the plaintiff only amounted to £5, would it not be most inequitable to compel him to do so in that case?”
These cases show how strongly very eminent Judges have felt that the granting of a mandatory injunction to undo a legal wrong may sometimes be gravely incompatible, with natural justice. It seems to me that in certain circumstances this form of remedy may be equally incompatible with natural justice where a breach of even a negative covenant is in question instead of a tort. The technical differentiation between a covenant in negative form and one which means precisely the same thing, save that it is couched in affirmative form, may well seem to some minds insufficient to justify the enormity emphasised by Lord Westbury and Chief Baron Pollock in certain cases conversant with tort as distinct from contract. The cases dealing with discretion in such circumstances are not so uniform, consistent, or exclusive of any exception from the general rule, as to satisfy me that a mandatory injunction must invariably be granted in every case where a negative covenant has been broken, even though the breach does nobody any harm and the work required by a mandatory injunction could do nobody any good, but might instead inflict cruel hardship upon a party whose only fault might have been an honest mistake of law. In appropriate circumstances, therefore, I should adopt the view of the Court’s discretion taken by Mr. Justice Astbury in the modern case of Sharp v. Harrison (1).
I now leave the law of the case and come to the merits. Glenagerah Hall is an old houseat least 135 years old, I think. It has over 20 rooms. The plaintiff himself says he was offered it for £300 and he would not take it. The defendant took it, intending to live in it. The plaintiff says the defendant made a very bad business deal; and so he did, if he cannot escape from the covenant to use it only as a private dwelling-house. The plaintiff’s own expert witness says it is useless for that purpose. Useless as it is, the defendant, or those who come after him, will have to go on paying a rent of £75 a year for the next 87 years, to say nothing of other outgoings. Moreover, it is said he was bound by a covenant to spend £1,000 on this useless residence, or, in default, to pay an additional penal rent of another £75 a year. The plaintiff says the defendant is now in default and liable, for 87 years to come, to a rent of £150 a year. Indeed, I understood Mr. Belton to say that he hoped to compel the defendant by legal process to pay that heavy annual rent. The plaintiff’s own expert says the only practical alternatives for dealing with this house are conversion into flats or demolition. Mr. Belton will not permit its conversion into flats. Therefore, Mr. Nicholl, on the evidence of the plaintiff’s expert, can only demolish it. He will thus lose the substantial sum he has already spent upon it, and he will have the privilege of paying Mr. Belton £150 a year, for nothingthat is, assuming all Mr. Belton’s views are right. No wonder the plaintiff says that the defendant made a very bad business deal. No wonder that Mr. Rice bethought himself of the scathing passage in the judgment of Lord Justice Christian in Doherty v. Allman (1) in the Court of Appeal in Ireland, where a tenant, bound to maintain old buildings as stores, saw fit to convert them into useful dwelling-houses. “A Court of Equity,” said Lord Justice Christian in the year 1888, “is under no obligation to let itself be made the instrument for perpetuating inequity and unreason, and that is what we should be doing if we were now to pass upon this property . . . sentence of stagnant unimprovableness for 999 years. . . . Stores they are, and stores he will have them remain in saecula saeculorum.” The Lord Justice also spoke of the “arbitrary, capricious, dog-in-the-manger-like interference by this mere rent-owner,” as he called the landlord. So here, I am asked to pass a sentence of stagnant unimprovableness on this old house for some 87 years to come, and also sentence on the defendant to pay the plaintiff £75, or possibly £150, a year for the use of this white elephanta liability that has 87 years yet to run. The dog-in-the-manger is probably maligned by those who look upon him as a symbol of senseless selfishness. I look upon him rather as the faithful servant of his master, whose only fault was that his canine intelligence failed to grasp that the hay was really left for the horse to eat. The plaintiff here does not pretend that he has any such altruistic motive in guarding the manger. He asserts frankly that he wants to protect his own interests. I am not going to impugn any man’s motives without means of testing them, which I have not got here. If the plaintiff really thinks that his property will in future be jeopardised by the defendant’s scheme, he is entitled to do his best to frustrate it. I understood him to have visions of building some 800 houses upon the land which he owns near Glenagerah Hall of a type costing some £3,000 a house. I understood him to visualise that at the end of the present war 800 families might be expected to emerge from its ruins and migrate to the little town of Dalkey to live there in houses that even before the war would have cost £3,000 a house. That will be the creation of a new order in Dalkey village without a doubt. “Hope springs eternal in the human breast.”
I now ask myself has the plaintiff sustained any damage from what the defendant has done, or is he ever going to suffer any damage from what the defendant wants to do. Glenagerah Hall without alterations is said to be a useless asset. The plaintiff’s own expert says it is fit only for letting in flats or for demolition. The plaintiff says, however, that letting it in flats will depreciate the value of the houses he intends at some future date to erect upon the adjacent 30 acres of land, and particularly such houses as he may wish to erect in close proximity to Glenagerah Hall. The proposed flats are intended to be let at £100 to £120 a year. Why the occupation of two or three respectable families of the type likely to take such flats would depreciate the value of any houses the plaintiff may erect near by I do not know. I confess I do not know whether it is only a few, intended, new houses near to Glenagerah Hall that the plaintiff thinks will be lowered in value by the defendant’s enterprise, or whether his idea is that the depreciatory effluvium from two or three £100 flats is going to contaminate the whole 30 acres.
As neither result is self-evident to me, I asked the plaintiff whether he had noticed the following fact, namely, that in certain parts of Dublin there were rows of Georgian houses, each inhabited within living memory by a well-to-do family; then, later, vacated by such families and turned into flatsperhaps at first high-class flats; later on becoming mere lodging-houses, and then, last stage of all, sinking to the level of tenements. The plaintiff said he had noticed this. I asked the question because I suspected that experience of this phenomenon was the sole cause of the plaintiff’s apprehension in the present case. I asked him point blank if he had any other reason than this for his present fears, and I understood him to admit that what I suspected was the case, and that he had no other reason. Whether I understood him aright or not, the fact remains that he gave me no other reason. I then asked him if in his wide experience of house property he could give me an instance of any prospective buyer or tenant of such a house as Glenagerah Hall having made complaint, or tried to beat down the price or rent by reason of the proximity of a house let in good class flats. He admitted he could not do so. I see no reason for supposing that the potential occupiers of such flats as the defendant proposes to create might not be persons who might be on visiting terms with the future occupants of the best houses the plaintiff intends to erect, although from my knowledge of what goes on, I should be in no way surprised if some of the flat-dwellers were to snub the more spaciously housed neighbours that the plaintiff might provide for them as unfit to darken the portals of Glenagerah Hall, even though degraded by £100 flats and a caretaker.
I am well aware, like many of the older citizens of Dublin, that good-class flats sometimes intervene in the downfall of a locality between the stage of single family residences and that of tenements. But to say that the creation of the flats always bring about the decay is to confuse cause and effect. When the old residential families migrate and none offer to replace them, it is a sign that the handwriting is already on the wall. It is frequently due to the previous decay of surrounding streets and the consequent undesirability of the approaches to the old residences. Other causes often collaborate. But once the old whole-house residents go, the decay is likely to follow, flats or no flats. The creation of good-class flats, so far from causing or hastening the decay, will tend to arrest itat least for a time. If I am asked upon what I base that view, I reply that I do not live in a balloon, and am not bound to decide cases without reference to long observation and, I hope, some capacity to draw deductions. Nevertheless, if I were given satisfactory expert evidence in another sense, I should act upon it regardless of my own view; but I should test it thoroughly. If the plaintiff’s prospective house purchasers or tenants took exception to the proposed flats, assuming proper care was taken in letting the latter, I should regard them as utterly irrational. But that is not the point. The question is not whether their prejudice would be irrational, but whether it exists. If it does, then however irrational it might be, the flats would be injurious to the plaintiff.
The whole suggestion of prospective depreciation rests on the plaintiff’s own evidence; but as he admits having no experience of the actual effects of such flats upon house values, and is influenced by the mere phenomenon I have mentioned, from which I think he draws a wrong deduction, I cannot allow that evidence alone to displace my conviction that it is contrary to realities. It is made even more incredible by the fact that there are already small bungalows close to the very gate of Glenagerah Hall. If there were any such prejudice against conversion of this old house into £100 flats as the plaintiff suggests, there is not a leading house agent in Dublin who would not surely have met it in his experience. Not a single such expert has been produced to support such an idea. If they had been produced, I should have attended to their cross-examination with interest and would have asked some pointed questions myself to make sure that what they said was the result of adequate experience and not of speculation, or possibly an odd exceptional example. Upon such evidence as I have, I am of opinion that the proposed flats, if let only to suitable people, so far from injuring the plaintiff’s property, present and prospective, would actually make Glenagerah Hall a much better security for the rent derived from it than it would be if left as a tenantless monument of a bygone age. In one way only could I imagine the conversion work already done capable of costing the plaintiff anything. I shall allude to that presently.
Damage apart, I am satisfied that, as matters stand up to the present, the defendant has committed a breach of covenant, and that any further progress along the same lines would be a continuing breach of it. But I am not satisfied that if the defendant went the right way about the business, he might not in the near future place himself in a position legally to override the covenant in question, subject to certain reasonable conditions. In 1919 Acts were passed for England and Ireland respectively (Housing, Town Planning, etc., Act, 1919 (9 & 10 Geo. 5, c. 35), s. 27; Housing (Ireland) Act, 1919 (9 & 10 Geo. 5, c. 45), s. 22) containing a section common to both, which enabled lessees of houses which, owing to changes in the neighbourhood, could not readily be let as single tenements but which could readily be let if converted into two or more tenements, to apply to the Court to have any restrictive covenant against such conversion varied so as to permit of such conversion. I called attention to these statutes, but counsel for the defendant seemed to think that they related only to working-class houses. I at once expressed a doubt about that, and I have since found that this doubt was more than shared by the English Court of Appeal. In Johnstone v. Maconochie (1) it was decided that the section in the English Act, which in all material respects is word for word the same as the Irish section, was not confined to working-class houses.
The preambles of both Acts show that they related primarily to the housing of the working classes; but this, it was held under the English Act, did not limit the general operation of the section in question. Counsel for the defendant did, however, suggest that s. 57 of the Landlord and Tenant Act, 1931, would enable his client to override the covenant, of course after permission was asked and refused. The force of the word “absolutely”in this section was not discussed, nor a pecuniary payment when “change of user” might not be limited to a change that could be effected without structural transformation, or whether in any event this section could validate sub-letting. If s. 57 alone would not be enough, and ss. 56 and 58 had to be invoked, the controversial scope of the word “alienation” or of the words “absolutely prohibiting or restricting” has not been argued. Counsel may have thoughtand in one sense it is truethat these sections are not material to the main question before me; yet, if it were shown that any of these sections, or all of them combined, might enable the defendant to put himself in a position legally to do all that he has done or wants to do, that surely would be a somewhat material matter for me to consider in dealing with the form of order which should be made at the present juncture.
In these circumstances I have thought right to consider myself the form which my order should take. I express no opinion of any kind on the meaning, relevancy, or effect of any of the statutory provisions I have referred to. All I will say is that it appears to me arguable, and reasonably possible, that by enlisting the aid of certain statutory provisions the defendant might be able in the near future legally to do all that he has claimed the right to do in spite of the covenants relied on by the plaintiff.
There are reported cases in which defendants have done things which at the time they had no right to do and which caused injury, but which they intended to acquire a right to do by Act of Parliament, or the injurious effects of which they later managed to obviate. Such cases furnish precedents for a special manner of dealing with the relief sought by the plaintiff.
In Roberts v. Gwyrfai District Council (1) the Court of Appeal offered to suspend an injunction, to which the plaintiff was entitled, to enable the defendants to apply to Parliament for powers to do what was complained of In Attorney-General v. Birmingham Drainage Board (2) the Court of Appeal discharged an injunction, where the defendants later on succeeded in overcoming the evil complained of: Farwell L.J. suggesting that the Judge of first instance could either have granted a declaration in lieu of an injunction, or could have granted the injunction, suspending its operation, and could eventually have suspended it in toto. On appeal (3) Lord Robson suggested that the Judge of first instance might have postponed his decision as to the injunction. Again, in Stollmeyer v.Trinidad Lake Petroleum Co. (4), where it appeared that a certain nuisance might be overcome in a reasonable time, the Privy Council granted declarations of right, and gave the plaintiffs liberty to apply later on, if so advised, for an injunction.
It is true that these were not cases of breach of covenant; but the motive actuating the framing of the orders was precisely the same as that which affects my mind here. If there is a serious chance that the defendant may soon be in a position to override the covenant on which the plaintiff relies, it might be embarrassing now to restrain him, although I might grant the injunction without prejudice to such rights as he might hereafter acquire or become entitled to exercise, somewhat on the lines of the order made in the Attorney-General v. Westminster City Council (1).
On the whole, I think the better course will be to do no more now than make a declaration that the defendant was not entitled to do what he has done, or to continue the work, or to let the flats, giving the plaintiff liberty to apply, if occasion arises, or as he may be advised. He is not likely to apply further, risking costs of the application, until after the defendant has had a reasonable time to take any steps open to him, if there be any, to provide himself with a legal answer in the event of an injunction being hereafter applied for.
Meantime, the defendant may possibly be advised that some escape from this covenant is open to him, perhaps by one course, or it may be by more than one, in which latter case he may think well to try all possible means concurrently, lest any one should fail. That is a matter for his advisers. It is not for me to express any opinion upon this, and even if it were, I should not have the necessary materials to do so at present.
As regards the work already done upon the premises, there is a reason additional to what I have already mentioned against granting a mandatory injunction forthwith. If in the near future the defendant succeeded in placing himself in a position in which he would be entitled to convert this house into flats notwithstanding the covenant, the result of granting a mandatory injunction, the operation of which I should certainly suspend for a reasonable time, might well be that when the defendant in obedience to it restored the premises to their original state he might be entitled instantly to re-start and do the conversion work all over again. There would be an element of absurdity in compelling the defendant by injunction to do certain work, if in substance as he took out the last brick, say, of the new doorway, in obedience to the injunction, he was entitled instantly to put it back again by virtue of a statutory provision. Such a possibility was not within the contemplation of any of the Courts that gave decisions in favour of an almost automatic right to a mandatory injunction where there was a breach of a negative covenant.
For this and other reasons stated, I should follow the example of Astbury J. in Sharp v. Harrison (1) and award nominal damages in lieu of a mandatory injuction were it not for the following consideration. It may be that the defendant will not succeed in bringing himself within any statutory provision enabling him to override this covenant. In that case, his position will be a deplorable one from the point of view of hardship, which is the reason why I mean to give him every fair opportunity to avoid such a result if he legally can. But I cannot prejudge the matter. If he fails to escape from the yoke of this covenant, he may be driven to surrender the house on the best terms he can arrange. In such an event, the plaintiff might decide to live in it himself or put a nominee into it. In either case he might wish to undo the partial conversion that has taken place. That would be within his rights.
His damage would then be measured by the cost of restoring the premises to their original state. I cannot say whether that contingency will arise, or, if it does, when it will arise. Hence I cannot say what the cost of such future work might be. Therefore, even if I assumed that such damage would ever arise, I could not ascertain it by directing an inquiry now. For that reason I could not substitute damages for a mandatory injunction, and I propose to deal with both types of injunction sought in the same way. I might grant a mandatory injunction, in which case I should certainly suspend its operation for a reasonable time, and I might grant an anticipatory injunction, prefacing it with an indication that it is without prejudice to any right the defendant might hereafter acquire or establish to ignore the covenant in question.
There is, however, another course which I think will be as serviceable to the plaintiff as an injunction and yet free from the possible embarrassment which an injunction might seem to create. I will not grant any injunction at present. I will make a declaration that the work of sub-dividing the rooms in the dwelling-house known as Glenagerah Hall, Glenageary, in the County of Dublin, and of altering the said dwelling-house into separate flats or tenements and of erecting or installing new partitions and doors, which work was done by the defendant in or upon the said premises, constituted a breach of the covenant contained in the lease of the said premises, dated the 14th day of August, 1928, and made between Granville Proby of the first part, Douglas James Proby of the second part, and Margaret Conway of the third part, providing that the lessee should not without the consent in writing of the lessor or his agent use, or permit or suffer to be used, the said premises for any purpose save that of a private dwelling-house and the offices attached to such dwelling-house.
I will further declare that the defendant is not entitled to proceed further with the said alterations to the said dwelling-house, or to let the said premises in separate flats or tenements, without having previously obtained the consent of the plaintiff thereto in writing.
These declarations refer only to the position as it stood when the alterations were begun, as it has stood since, and as it stands at present, and they cannot prejudice the defendant if a new situation is brought into being by reason of which anything he may hereafter propose to do ceases to transgress the valid restraints of the covenant for the time being.
I will give the plaintiff liberty to apply further for an injunction or other relief as he may hereafter be advised. As the defendant, owing to what I have held to be an erroneous view of his rights, has insisted on his claim to do what is complained of without obtaining or even seeking the plaintiff’s consent, and without taking appropriate steps, if such should be available for him, to enable that consent to be dispensed with, I must declare the plaintiff entitled to his costs of the action. I believe the defendant probably acted in a bona fide conviction that he was entitled to convert and sub-let the premises, but that ought not to affect the plaintiff’s right to costs.
If the defendant hereafter claims to have become entitled to carry out the conversion into flats, or to make any particular and proper lettings thereof, and the plaintiff contests that claim, the latter will be able to apply in accordance with the liberty now given him, and the defendant’s claim can be disposed of on that application.
Heathcote and Others v. Maguire.
[1929] IR 170
Johnston J.
This is an action for an injunction by the owners of certain licensed premises in Parnell Street, Dublin, to restrain the defendant, who is the lessee and holder of the licence, from exercising the right of transfer which is conferred upon him by sect. 11, sub-sect. 1, of the Intoxicating Liquor Act, 1927. That sub-section provides that “a person who is at the one time the holder of a six-day licence and the holder of an on-licence which is not a six-day licence (in this section called a seven-day licence) shall, if the premises to which the said licences are respectively attached are situate in the same licensing area, be entitled to have the seven-day licence transferred at the annual licensing district Court to the premises to which the six-day licence is attached, but subject to the condition that on such transfer being made, the six-day licence shall not be renewed, and that the premises to which the seven-day licence was attached before such transfer shall for the purposes of the Licensing (Ireland) Act, 1902, be deemed never to have been licensed.”
The defendant is the owner or lessee of premises at, No. 18 Phibsborough Road, to which a six-day licence is attached, and the lessee of the premises Nos. 218 and 219 Parnell Street, of which the plaintiffs are the owners and to which a seven-day licence is attached. He has served the necessary notice to have the seven-day licence transferred to the premises in Phibsborough Road, and the District Court has adjourned the application pending the hearing of this action. The result of the defendant’s application, if successful, will be that the premises in Parnell Street will cease to be licensed premises and will be statutorily deemed to be premises that never have been licensed; so that when the lease expires the plaintiffs will get back premises to which no licence is attached, and they will, by reason of the statutory pronouncement, be unable to apply for a new licence under the Act of 1902.
The Act of 1927 contains in sects. 36 to 54 certain provisions for the reduction of the number of licences for the sale of intoxicating liquor in the Irish Free State. Proceedings for the purpose of such reduction may be initiated by an officer of the Gárda SÃochána, and where the statutory conditions exist an abolition order may be made by the “compensation authority”under the Act. The powers that are given by these sections are of a compulsory characternot unlike the compulsory powers in the Licensing Acts of 1904 and 1910and an elaborate machinery is set up for the compensating of the two classes of persons who are presumed by the Act to be persons who may be injured by the abolition of licences, namely, the person having the occupation interest and “the immediate lessor.”
The amount of the compensation is dependent upon loss of value, and loss of value is to be determined in accordance with the provisions of sub-sects. 3 to 7 of sect. 42, a distinction being made in the case of premises which are “tied” and premises that are not. I have mentioned this matter for the purpose of showing that the Legislature, recognising the possible necessity for a reduction in the number of licensed premises, has provided suitable machinery for effecting that result, and has provided also an elaborate financial scheme for the compensating of persons who may be affected by abolition.
Sect. 11, which is a portion of Part II of the Act dealing with the general question of the licensing of public-house premises, forms no part of the general code for the abolition of licences, and appears to me to be merely a provision for the personal convenience and profit of the class of persons to whom the section applies. I think that in this case the interest of the defendant in the premises in Parnell Street is an interest which would come within the definition of “occupation interest”in Part IV of the Act, and the plaintiffs would come within the definition of “immediate lessor,” and it would seem that if proceedings were initiated under that part of the Act both parties would be entitled to be compensated for their respective loss of values. It is hard to think that the Legislature intended that the defendant should, on his own initiative and for his own profit, have the power to detach from the premises of which the plaintiffs are the owners part of their “value” for the purpose of adding to the “value” of other premises in his own hands, without any regard for the interest of the plaintiffs.
It is argued here on behalf of the plaintiffs that, apart altogether from the actual terms of the contract under which the defendant holds these premises (which I am satisfied were licensed for the sale of intoxicating liquors at the date of the lease in 1909), the transfer of the licence at the instance of the defendant to his other premises would be an act of waste which can be enjoined by this Court. It is a well established principle that a lessee has no right or power to change the nature of the thing demised, and it is contended by counsel for the plaintiffs that, as a result of the defendant’s conduct, the premises will be changed from a place where a particular trade is being, and can be, carried on, into a place where that trade cannot be carried on either now or in the future. All the cases upon the doctrine of waste of which I am aware, however, were cases in which some structural change or physical alteration in the premises had been made or threatened. I know of no case in which it was held that the voluntary act of a lessee by which some valuable licence, privilege, or franchise attached by statute law or otherwise to corporeal property was lost amounted in law to waste, There is no doubt that in the present case the loss of the licence will result in a loss of valuea loss that will be felt by the plaintiffs in 1930, when the lease will expireand that value will become attached, by virtue of this very novel enactment, to the defendant’s other premises. In Kelly v. Montague (1)it was assumed by the Court that a licence to sell intoxicating liquors was to be regarded as a sort of goodwill, and it was held that there was no property in the licence or the goodwill apart from the premises to which it was attached. The effect of that decision, and others of a later date, is that the premises and the licence form a composite whole. In Murphy v. Crean (1)Lord O’Brien puts the matter in this way: “There is no doubt whatsoever that there can be no property in a spirit licence in Ireland apart from the premises in which the business is carried on by the licensed person. It is not that in a sense it does not and may not represent very valuable property, but it cannot be severed from the house and have the character of separate property.” Sect. 11 of the new Act, however, has changed all that, and for the first time the right of severance is conferred upon the “holder” of the licence. The contention that is now advanced by the plaintiffs’ counsel is, in effect, this, that the purpose of sect. 11 was to confer upon the licensing authorities a power that, as was decided in Murphy v. Crean (1), they did not formerly possess, but that the holder of a licence cannot take advantage of that new jurisdiction unless he is in a position to do so by virtue of some degree of ownership in the licence that he “holds” or by virtue of some arrangement with the owner. It seems to me that there must be some limitation placed upon the meaning of the word “holder” in the section. It could scarcely extend to a person who was the holder of the licence and who had no interest whatsoever in the premises, nor to a person who was the holder merely as trustee for another. The case of Dawson v. Paver (2) sets out very clearly the rule of construction which should be applied in the decision of this question.
The plaintiffs, however, contend that they are entitled to succeed for a reason that is much less general in its character. It is argued that the matter is concluded by the actual contract between the parties, and that the covenants in the lease by which the defendant has bound himself preclude him from taking advantage of this statutory right. On this narrow ground I think that the plaintiffs are entitled to succeed, and it becomes unnecessary, therefore, to decide the general question.
The lease, which was made on October 1st, 1909, for a term of twenty-one years, is very badly drawn, and does not contain many of the clauses which are usually inserted for the protection of an owner’s interest. It purports to demise (inter alia) the premises “now known as the licensed houses Numbers 218 and 219 Great Britain Street,” and it contains a number of covenants on the part of the lessee, including the following:”And will not do, or suffer to be done, on the premises any act whereby the retail licence attached to Numbers 218 and 219 Great Britain Street as an inn, tavern, or public-house may be forfeited or the renewal thereof withheld.” It is argued on behalf of the defendant that this is merely the ordinary covenant that licensing offences will not be committed on the premises, and I am pressed to say that such a covenant cannot be regarded as forbidding the exercise by the licence-holder of a new statutory privilege that did not exist when the lease was made. There is much to be said in favour of this viewin strict law, at any rate, if not in fair play; but I think that the plaintiffs are entitled to rely on this covenant as an admission by the defendant that the licence was in existence previously to the lease, and that the plaintiffs have an interest in its preservation.
It is, however, the next covenant that, in my opinion, preserves the plaintiffs’ rights. The original lessee covenants that she “will at her own expense insure against forfeiture the said licence in the joint names of the lessors and lessee in some insurance company to be approved of by the agent of the lessors in the sum of £500, and for that purpose pay all sums of money payable in respect of such insurance, and will from time to time, when required, produce to the lessors, their heirs or assigns, the policy of such insurance and the receipt for every such premium and sum of money.” There is also a covenant for the insurance by the lessee of the premises themselves from loss or damage by fire. The covenant for the insurance of the licence is obviously taken from a book of English precedents, and is a form of covenant that came into common use after the passing of the Licensing Act, 1904. It is plain that the word”insure,” taken with the context, means “insure and keep insured during the currency of the lease” (see Bray v. Fogarty (1)), and the property to be insured is “the said licence,” which in the previous covenant is spoken of as “the retail licence attached to Numbers 218 and 219 Great Britain Street.”
If therefore the defendant is bound, in the interest both of the lessors and the lessee, to insure and keep insured the licence against forfeiture during the whole course of the term, can he be allowed, by his own voluntary act and for his own profit, to detach the licence from the premises and attach it to other premises in which the plaintiffs have no interest? I do not think he can. The covenant is a continuing one, and the defendant cannot get rid of his liability thereunder by getting rid of the subject-matter of the covenant.
The plaintiffs are, I think, assisted in their present application by the terms of the lessee’s covenant to deliver up possession of”the said demised premises,” on the expiration of the lease “in all respects in such condition as shall be consistent with the due performance and observance of the several covenants herein-before contained.”
The case of Rae v. Yates’ Castle Brewery Co. & Another (2),badly reported though it is, is some authority for the conclusion at which I have arrived. The plaintiff was the owner of a beer-house which had attached to it a licence granted previously to May 1st, 1869. The renewal of such a licence could not be refused by the Justices except upon one or other of the four specific grounds set out in the Wine and Beerhouse Act, 1869. It appeared that the magistrates had intimated that a reduction in the number of licences was desirable, and the defendant company (the lessees), in pursuance of some arrangement arrived at between themselves and other members of the trade, had agreed to surrender the licence of the beerhouse in question. The plaintiff had not authorised this arrangement, but he had subsequently offered to accept compensation. He brought an action to restrain the defendants from surrendering the licence. The following is the summary of the judgment set out in the report:
“Hall, V.C., pointed out that, although no definite contract had ever been at, the plaintiff had before the trial offered to accept compensation, and it was too late for him to go back on that offer and ask for an injunction. At the same time the defendants could not deprive him of valuable property without paying compensation, and therefore an inquiry would be ordered as to the amount to be paid to him. The defendants ought not to have interfered with his property until some definite agreement had been arrived at, and therefore they must pay the costs of the action.”
In the case of Dartford Brewery Co. v. Till (1) an injunction was granted at the instance of the owners of a public-house against the defendant (the lessee), who had issued a notice that he intended to limit the class of trade that he was carrying on in the public-house. It was considered by the Court that such a limitation would injure the plaintiffs’ interest in the licensed premises, and was contrary to the covenants entered into by the lessee, and an injunction was ordered.
An injunction, therefore, must issue in the terms of the plenary summons, and by arrangement this motion will be treated as the trial of the action. The defendant must pay the plaintiffs’ costs.
Brown v Watson
Supreme Court of Judicature.
Court of Appeal.
12 November 1903
[1903] 37 I.L.T.R 246
FitzGibbon, Walker, Holmes L.JJ.
FitzGibbon, L.J.
The question which we have to consider is, whether the plaintiff has proved a breach of the agreement of Feb. 11, 1891, on the tenant’s part. Under this agreement the tenant was bound, during the course of the tenancy, to preserve a valid publican’s licence, and do nothing whereby the licence might be forfeited or prejudicially affected, and on the determination of the tenancy to do any act necessary to transfer the then existing licence to the landlord’s nominee. On the death of James Watson in Oct., 1902, both parties would seem to have come to the conclusion that the premises should be taken up by the plaintiff. The licence duty was paid by the plaintiff, and, although it was in the name of the deceased, there was then an existing licence attaching to the premises, which continued up to the Annual Licensing Sessions of the present year. As the licensed person was dead, it was inoperative, and no one could legally carry on the business until an interim authority to do so or a new licence was obtained. The question is whether the defendant, either as executrix or as tenant, was bound to procure such an authority or licence until the premises were surrendered, and whether by her omission to do so and to carry on the publican’s business, the existing licence was forfeited or prejudicially affected. The correspondence which ensued reveals a deplorable game of cross purposes, which was complicated by the action of the plaintiff and by the inaction of the defendant. The defendant appears to have been willing to give up the premises to the plaintiff without delay, and to have wished not to carry on the business, nor to incur any liability in the matter through dealing with the assets of the deceased. The plaintiff, on the other hand, appears to have been anxious to get possession of the premises, but insisted that they should first be put into good repair, and that the publican’s business should be carried on until they were surrendered. He contended that the closing of the house was a breach of the contract of tenancy which involved *248 the forfeiture of the existing licence or, at least, prejudicially affected it. In the correspondence which followed the position taken up by Mr. Morrison was that the defendant was not the tenant; the plaintiff’s solicitors, on the other hand, refused to furnish a copy of the contract of tenancy until the tenancy in the defendant was admitted. Meanwhile, Moody had received the licence from the plaintiff, and had obtained an interim transfer to the defendant at the Raphoe Petty Sessions on Nov. 29. The plaintiff was himself present, and, subsequently, received a bill of costs in respect of the transfer from Moody. Under these circumstances it is hard not to come to the conclusion that the plaintiff was not Moody’s client in the transaction. It appears, however, that neither of them informed the defendant that the transfer had been obtained until the following January.
The question appears to resolve itself into this, whether, on surrendering the premises on Jan. 31, the defendant was prevented by a previous breach of the contract of tenancy from transferring the licence, or, in other words, of doing acts which would have enabled the plaintiff to obtain a licence as a “transferee,” as distinguished from being able only to apply for a licence as a “new beginner,” deprived of the benefits to which, according to R. (Clitheroe) v. Rec. of Dublin, 11 Ir. L. T. R. 85; Ir. R. 11 C. L. 412, one in the position of a transferee becomes entitled. The case put forward on behalf of the plaintiff is that by keeping the premises closed from October to January, and by omitting to do anything about the licence, the defendant committed a breach of the contract of tenancy, and that the licence was thereby forfeited. We are of opinion that the Judge’s directions to the jury, in any view of the case, amounted to misdirection, as being calculated to mislead the jury on the question of the measure of damages, because, even if the acts complained of had amounted to a breach of the contract of tenancy, it was still open to the plaintiff to have taken a transfer of the licence from the defendant, to have applied for an interim transfer, and subsequently for a licence for himself, in which case the utmost measure of damages would have been the depreciation, if any, of the value of his prospect of obtaining such a licence. As he deliberately abstained from nominating any person to apply for the licence the damages would only have been nominal, unless, of course, the breach of the contract of tenancy had involved the absolute forfeiture of the licence. The next question we have to consider is, was any breach proved? The necessity for producing at each Annual Licensing Sessions a certificate that the publican’s business has been carried on in an orderly and peaceable manner during the preceding year, involves the necessity of continuously carrying on the business as a condition of keeping up a licence. It is quite settled that this does not necessitate the absence of any interruption whatever in the continuous course of the business. Interruptions constantly occur from such causes as death, bankruptcy, fire, alterations, and others. In such cases the business cannot be carried on until an interim transfer has been obtained under the Act of 1855, or a new licence procured at Quarter Sessions under the Act of 1874. We think it is impossible to hold that, on the death or bankruptcy of a licensed person, his executors or assignees must take out an interim licence or conduct the business in their own names for any period whatever. The power in the Justices to transfer the licence by endorsement is derived from the Act of 1855. The assignee of an executor or a purchaser from assignees in bankruptcy, or from a previous assignee, or from the licensed person, may get an interim transfer, which merely amounts to an authority to carry on the business until the Quarter Sessions to be holden next after the expiration of one calendar month from the time of such transfer. The Justices have only jurisdiction to grant such a transfer at a time when no Quarter Sessions shall be holden. No obligation is imposed on any person to take out an interim licence. Anyone may, if he so desires, wait until the Quarter Sessions at least. The Act of 1874 enables the Justices or Recorder to give a certificate, under which a licence may be granted, that will continue in force until the next Annual Licensing Sessions, in cases where an interim transfer has been obtained, and in such other cases as they may deem fit. If the defendant had known that an interim transfer had been made to her, she might have applied under this Act for a licence in her own name at the ensuing January Sessions. But she was not bound to do so. With regard to the question of what amount of interruption will form a sufficient ground for refusing an interim transfer, or a temporary licence, or a licence to a transferee at the Annual Licensing Sessions, it must be decided by the licensing authority, according to the peculiar facts of each case. An executrix cannot trade with the assets of a deceased person, unless authorised by will, without incurring a personal responsibility. It is clear in this case that the defendant did not desire to incur such a responsibility, and that the temporary interruption of the trading which ensued, pending the surrender of the premises to the plaintiff, was consistent with an honest intention to preserve the licensed character of the premises, and substantially to carry on the publican’s business during the year. The defendant was not bound to take out an interim *249 transfer, or a temporary licence in her own name, provided she acted with reasonable diligence and in a reasonable manner in assigning the premises to some proper person, and on the completion of the assignment was ready and willing to transfer the licence. Her omission to do so was not in itself a breach of the contract of tenancy. The conduct of the plaintiff and the course adopted by his solicitors contributed to the delay which occurred. If, on Jan. 31, the plaintiff had taken over the licence with the premises, as he was given the opportunity of doing, and had applied for an interim transfer to himself or to his nominee, or had applied at the next Quarter Sessions for a certificate on which to obtain a licence, it would have been for the licensing authority to consider whether such an application could be granted, but the refusal to grant it could not legally have been put on the ground of any breach of contract of tenancy by the defendant. If any objection had been made to such an application on the grounds of the previous interim transfer to the defendant, it would, in all probability, have been sufficiently met by an explanation of the circumstances under which the endorsement was made, and it must be remembered that it was the plaintiff and Moody, and not the defendant, who were responsible for the interim transfer. On a consideration of the entire facts of the case we are of opinion that no breach of the contract of tenancy, amounting to forfeiture of or prejudicially affecting the licence, has been proved against the defendant; that the order of the King’s Bench was right, and that the appeal must be dismissed with costs.
Walker and Holmes, L.JJ., concurred.
Byrne v. Fox and Dublin Board of Assistance.
[1938] IR 686
Johnston J.
This is an action brought by Mrs. Anne Byrne, widow, as the owner of a small terrace house in Hamilton Street, South Circular Road, (with its back wall and back entrance abutting upon Donore Avenue), to restrain the defendant, Bridget Fox, from sub-letting, and the defendants, the Dublin Board of Assistance, from using, the ground floor and the back premises as a Dispensary and as a Relieving Officer’s Office.
The house in question is the second house of a terrace of small dwellings in Hamilton-street, which is a quiet, residential neighbourhood contiguous to the South Circular Road. The interest owned by Mrs. Fox came into existence by a lease dated September 24th, 1896, by which a certain Society as mortgagees and one, Susannah Hamilton, as life tenant under a settlement, demised a plot of ground in Hamilton Street at a rent of £5 5s. 0d. yearly for a term of 500 years. The lessee was one, Cornelius Frawley, and he covenanted to build upon the site, “according to plans and elevations to be first approved of in writing by the said Society and by the said Susannah Hamilton . . . two good and substantial private dwellinghouses with proper and sufficient outbuildings and conveniences thereto, to be similar and in unison with those erected adjoining in Hamilton Street.” There was also a covenant by the lessee to “keep in good and substantial repair the said dwellinghouses and all other buildings which shall be built upon the said parcel of ground,” and a further covenant to permit the lessors “twice or oftener in every year . . . to enter upon the said premises . . . to view the condition thereof”; and each house was to be insured in the sum of £250.
The plot of ground was thus let for the erection thereon of”private dwellinghouses.” The reference to “all other buildings which shall be built upon the said parcel of ground,”coming as it does immediately after the words, “the said dwellinghouses,” was, I am satisfied, clearly conversant with the “proper and sufficient outbuildings and conveniences thereto,” which are spoken of in an earlier part of the deed. It is impossible to think that this clause gave the lessee carte blanche to erect any buildings that he pleased upon the plot, especially in the light of the provision that the buildings to be erected should be in accordance with plans and elevations which were to be approved by the lessors.
The next clause in the lease is the one upon which the present action is founded. The lessee covenants “that the said lessee, his executors, administrators or assigns shall not be at liberty to sell either wholesale or retail, any spirituous or malt liquors on the said premises during said term, nor carry on any noisome or offensive trade or business therein, and shall not, during the said term build or erect, or cause or permit to be built or erected on the said parcel of land, or any part thereof, any building or erection except such as are hereinbefore covenanted to be erected without the previous licence in writing of the said Society, their successors in title and assigns . . . and shall not at any time during the said term, without such previous licence as aforesaid, convert or use the said parcel of land or any part thereof for such purpose as last aforesaid.”
There is one other clause which must be set out, as follows:”Provided also, that if the lessee, his executors, administrators or assigns shall build or erect . . . erections except such as are hereinbefore covenanted to be erected without such previous licence as aforesaid, or if he or they shall without such previous licence as aforesaid convert or sell or permit to be sold, either wholesale or retail, any spirituous or malt liquours on said premises or carry on or permit to be carried on any noisome or offensive trade or business, or if there shall be a breach or non-observance or non-performance of any of the covenants hereinbefore contained, then and in any of the said cases, the said premises shall be subject to an additonal rent of £10 a year to be payable during the time of such breach of said covenants or any of them and to commence from the time the lessees shall be required by the Society or the said Susannah Hamilton . . . to correct or remove such breach or non-observance, and to be recoverable in the same manner as the hereinbefore reserved rent.”
The Dublin Board of Assistance was constituted by the Local Government (Dublin) Act, 1931, and the entire body of functions and duties of the Dublin Board of Guardians was transferred to the new body, which thus became the authority in Dublin for the administration of that complicated mass of legislation, the Poor Law Acts, as well as the Dispensary Acts, the Vaccination Acts and many others. The principal work of the Board consists in the giving of poor relief in the workhouses, of outdoor relief by Relieving Officers to the destitute poor, of medical relief in the dispensaries, and of assistance by way of vaccination against smallpox, also in the dispensaries.
Owing to the large increase in dispensary work in the South Dublin dispensary district it was determined by the Board, under the guidance of the Ministry of Local Government, that a new district should be formed. The new district has been called the South City, No. 6 (Hamilton Street) dispensary district, and a notice was posted by the Board on October 11th, setting out its boundaries and giving general information as to the work. The Board had a great deal of difficulty in securing suitable premises for the dispensary. Ultimately, however, an agreement was entered into between Mrs. Fox and the Board as to the taking over of the ground floor of No. 37 Hamilton Street for three years at an annual rent of £80 per annum with an option on the part of the Board to call for a further term of three years. The lease by which this arrangement was to be carried out is dated September 28th, 1937, and the premises demised include the right of egress and regress from both the front and back entrances to the house. There is a further proviso that the lessees shall not erect any new building upon the premises or make any alteration in the same “without the previous consent in writing of the lessor, such consent not to be unreasonably withheld.” This, to my mind, is a very ominous clause from the plaintiff’s point of view.
In the case of German v. Chapman (1), James L.J. uttered a very necessary word of warning as to the danger of attempting to solve a problem such as is before me in the present case by references to what the Lord Justice called “that long bead-roll of cases” which it is always thought to be necessary to cite upon such occasions. Such cases, he said,”must be decided upon the plain meaning, whatever that may be, of a few English words, which we have got before us.” In the present case, it is plain beyond demonstration that the carrying on of a poor-law dispensary is a “business,”and the question that I have to decide is whether, under the particular circumstances, it is an “offensive business.”No doubt a dispensary of this kind is a beneficent and highly meritorious institution, and those who work it are public servants of a very exemplary character. But that is not the question. The question rather is this: Is a poor-law dispensary an offensive business from the point of view of the plaintiff’s interest in, and ownership of, this house and any other property she may have in the neighbourhood, and from the point of view of the other inhabitants of this quiet residential street who wish to maintain for themselves and their children not only the amenities and the quietude of the street, but also its freedom from the risk of infection and contagion, from the distressing sight and sound of sickness and disease and from the dread possibilities arising from the storage and the use of medicines and drugs, including smallpox vaccine, in considerable quantities? I rather deprecate the effort of the defendants to suggest that the humble people who live in this street are not as much entitled to have the amenities of life preserved as are richer people who live in grander houses; and I think also that those persons, medical and others, who have sworn affidavits in support of the defendants’ case, have given a very one-sided, not to say incomplete, account of what a poor-law dispensary is and what its work and numerous activities are. I certainly do not accept the suggestion that a public dispensary of this kind is at all comparable to the consultation-room of a general medical practitioner.
A poor-law dispensary is primarily a public institution in which medical relief under the Medical Charities Acts is dispensed to the destitute poor and to the poor generally. The system in its present form was constituted by the Poor Relief (Ireland) Act, 1851, and sect. 8 provided for the appointment of Medical Officers, the supply of medicines and the provision of “a house, building, room or rooms to be used as a dispensary or office for the Medical Officer of each such district and for the meetings of the Committee of Management.” Sect. 15 provided that it was the duty of Dispensary Officers to examine dangerous lunatics and to certify under the statute as to the case of any dangerous lunatic brought before a Justice of the Peace “when summoned by such Justice so to do.” The provision of suitable premises in which to carry on dispensary work was evidently regarded by the Legislature as a matter of great importance. The Dispensary Houses (Ireland) Act, 1879, gave power to the Board of Works to make loans to owners of land “for the purpose of assisting such owner in the erection, enlargement, structural improvement or purchase of any house or building to be used as a dispensary or as a dispensary residence,” and sect. 11 conferred on Boards of Guardians the power of obtaining such loans. This provision was amended and extended by sect. 91 of the Local Government Act, 1898. I am not aware that this legislation has ever been repealed. Sect. 3 of the Public Assistance (Acquisition of Land) Act, 1934, enacted that Public Assistance Authorities that is, bodies corporate entrusted with the administration of the relief of the poorfor the purpose of their powers and duties might acquire land either by agreement, with the consent of the Minister, or compulsorily.
The work to be carried on in dispensaries and the functions and duties of dispensary doctors and other dispensary officials are now regulated by the Dispensary and Vaccination (Rules & Regulations) Order, 1934, which forms an elaborate book of over 100 pages and which summarises the work of the dispensary system. It appears that the dispensary work of each district is in the hands, according to their various statutory functions and duties, of the Board of Assistance, the Assistance Officers (who are referred to by their former name of Relieving Officers in the Board’s public announcement of the establishment of the new Dispensary district), Wardens, Medical Officers, Compounders, Dispensary Nurses and Midwives, and all these are entitled to attend at the dispensary for various purposes and to carry out particular duties as set out in the Regulations. There are three kinds of patients: first, maternity cases; secondly, patients who are being attended in their own homes; thirdly, patients who are actually treated at the dispensary. The first two classes of patients, of course, do not attend the dispensary; but they are entitled to send persons to the dispensary for medicine and the like and to make reports to the Medical Officer. Of the third class, it would appear from Dr. Devane’s affidavit that about thirty patients would ordinarily attend the dispensary daily from 9 a.m. to 11 a.m. That is to say, it is to be expected that an army of nearly 10,000 sick and ailing people would be attracted to these cramped premises for treatment or for ultimate isolation during a single year. But that calculation does not take into account the patients or their messengers who would come back for medicine daily from three to four o’clock; nor does it take into account, as Dr. Lowe in his affidavit points out, the greatly increased numbers of people who would come for treatment when epidemics of various kinds, such as influenza and the like, were raging in the district.
I cannot accept the statements made by a number of medical gentlemen who suggest that the risk of infection and contagion is very slight. Where thousands of sick and ailing people are congregated together for medical treatment it is impossible to believe that the risk of infection and contagion is not a very real and constant thing, and I unhesitatingly accept the evidence of Dr. Lowe on that point.
In the case of Bramwell v. Lacy (1), a case which concerned an institution in which throat and chest ailments were treated, Sir George Jessel, who in addition to being a great lawyer was a man of unrivalled common sense and knowledge of human affairs, said: “It is well known that there are some throat disorders which are contagious; and moreover it is very possible that a patient on his first visit to the hospital might be found to be suffering from some disease of an infectious or contagious character, and not from an ordinary throat or chest disease.” Kekewich J. in Tod-Heatlyv. Benham (1), put the matter in this way: “The defendant in establishing and carrying on this hospital, has brought into the neighbourhood a possible danger from infection sensibly larger than that which exists, as it always does exist, in the London streets.” Bowen L.J., said in the Court of Appeal: “Poor ignorant people who are suffering from certain diseases are collected there, and it appears to me not unreasonable that the neighbourhood should be apprehensive as to the consequences.”
But there are other matters which would render this dispensary, if it is to be carried on, a very “offensive business”not only to the neighbourhood but also to the plaintiff as owner of the reversion. This and the adjoining house were built in accordance with agreed plans and elevations as”private dwellinghouses,” and the effect of the agreement is that no additional buildings are to be erected on the plot (other than certain outbuildings) except with the consent of the landlord; but according to the report of the Supervisor of Relieving Officers, as set out in Mr. Condon’s affidavit, the accommodation in fact is not sufficient. He says:”To accommodate the Relieving Officer it will be necessary, we think, to erect a suitable office in the yard or rere of the premises.” I may remark that the Relieving Officers are entitled to, and do, frequent the dispensary for very many purposes other than the distribution of poor relief. The premises are to be used, amongst other purposes, for the storage of drugs and medicines, including poisonous drugs and lymph for smallpox vaccination. Further, a notice board of a rather alarming character is to be “conspicuously placed on the exterior of each dispensary.” This board must set out the days and hours when the dispensary is”open” with this addendum, “vaccination gratis,” and the names of the Board of Assistance, the Medical Officer, the Compounder and the Midwife are to be given (see p. 83 of the Dispensary Regulations). Another and an even more discomposing notice to be posted up at the dispensary is set out at p. 79.
The Regulations set out also (p. 89) the duties of the Dispensary Officers as to the examination of dangerous lunatics, and (p. 93) as to the work of vaccination. The poor children of the whole district must be taken to the dispensary for vaccination, and it seems to me that this part of the dispensary work must be particularly discomposing to the owner and to the residents in the neighbourhood.
But, indeed, the Regulations themselves are the best testimony that could be adduced as to the reasonableness of the fears that are felt by the surrounding residents and by the plaintiff, and of the dangerous nature of the work that is carried on in a dispensary. I may refer first of all to the very stringent precautions that are directed to be taken as to the care of the medical and surgical appliances and as to the drugs, medicines and lymph that are to be stored and used in the dispensary (pp. 29, 31, 35, 37, and 99). The precautions that must be taken in the case of vaccination are both numerous and strict. For instance, at p. 99, it is stated that the doctor “should not, except of necessity, vaccinate in cases where there has been recent exposure to the infection of measles, chickenpox or scarlatina, nor where erysipelas is prevailing in or about the place of residence,” and the aseptic precautions as set out on p. 101 are startling in the extreme. The general provisions in the Regulations as to the use and the care of disinfectants, soap, water jugs, basins and towels are an amusing commentary upon the affidavits of those medical gentlemen who attempt to make light of the fears of the plaintiff and the residents in the street as to the risk of infection and contagion.
I am therefore of opinion that the work of this dispensary, highly beneficient and praiseworthy though it be, is an offensive business within the clause in the lease.
There is one other matter upon which the defendants rely. The lease contains a reference to the payment of a sum of £10 by way of additional rent in the event of any breach of covenant taking place, and it is argued, with great pertinacity, that the recovery of this sum is the only remedy to which the plaintiff can have recourse, no matter how many of the covenants are broken and no matter how serious the consequences may be to the plaintiff. I cannot accept this argument. These covenants amount to absolute prohibition of the various matters to which they relate, and they are conversant with many different obligations, some of which would seem to be vital and some of which are comparatively unimportant. A money payment cannot have been intended to recompense the plaintiff for all and every breach of obligation. For instance, suppose the lessee proceeded to cover the whole plot with a glaring building four or five stories high, which she proceeded to turn into a flaunting gin palace for the sale of spirituous liquors, or suppose she declined to insure the premises, or suppose she allowed them to fall into a state of absolute dilapidation, would the lessor’s sole remedy be that which the lessees suggest? I think not.
As a matter of fact the clause in question, when it is closely examined, cannot possibly be regarded as having the far-reaching consequences that counsel suggests. The clause is a mere proviso at the very end of a lengthy lease, providing that if any of the covenants shall be broken, “the premises shall be subject to an additional rent of £10 a year”a clause which places an additional burden on the premises but which does not attempt to control the conduct or volition of the lessor. Indeed, the clause recognizes the right of the lessor to forbid the breach of covenant, for it is provided that the additional rent shall run not from the commission of the breach, but from the time when “the lessees shall be required by the [lessors] to correct or remove such breach or non-observance.” The result of this provision is that if an infraction of the lease takes place the lessor, if he does not consider it of a serious character, may serve a notice calling upon the lessee to “correct” the breach. If the lessee declines to do so, then the lessor may, if he choses, recover from his tenant an additional rent of £10 a year; but the clause provides further that the lessee may proceed to correct the breach and then his liability for the additional rent ceases, because this sum is to be payable only “during the time of such breach of said covenants or any of them.”
But in this case the lessor has never asked for the payment of the additional rent; and the suggestion that is made that the right that he appears to have to demand an additional rent completely paralyses his ordinary equitable right to stop a breach of covenant by injunction, is, in my opinion, wholly unsustainable.
On this day the plaintiff applied for a certificate to enable her to tax her costs as full High Court costs of the action.
Supreme Court.
SULLIVAN C.J. :
30 March
I have read the judgment which has been prepared by Mr. Justice FitzGibbon in this case. I agree with it and have nothing to add.
FITZGIBBON J. :
This is an appeal from an order of Johnston J., dated the 17th day of December, 1937, whereby it was declared that on the true construction of an indenture of lease, dated the 24th day of September, 1896, made between the Irish Civil Service Building Society of the first part, Susannah Hamilton of the second part and Cornelius Frawley of the third part, the lessee thereunder was not entitled to use or permit to be used the premises, No. 37 Hamilton Street, the subject-matter of the said lease, or any part of the said premises, as a Dispensary or Relieving Officer’s Office in respect of medical relief, and it was further ordered that the defendants and each of them should be perpetually restrained from carrying on or permitting to be carried on in the house and premises, No. 37 Hamilton Street, the business of a Dispensary or Relieving Officer’s Office in respect of medical relief or other similar offensive trade or business.
By lease, dated September 24, 1896, the Irish Civil Service Building Society, as mortgagees, and Susannah Hamilton, as tenant for life subject to the mortgage, demised to Cornelius Frawley a plot of ground fronting upon Hamilton Street for a term of 500 years at the yearly rent of £5 5s. 0d. The lease contained a covenant on the part of the lessee to
[1938]
1 I.R. Byrne v. Fox and Dublin Board of Assistance.
FitzGibbon J. 699
Supreme Court.
erect upon the demised plot within one year from the date of the demise upon a site and according to plans and elevations to be first approved of in writing by the Society and by Susannah Hamilton two good and substantial private dwelling houses with proper and sufficient outbuildings and conveniences thereto, to be similar and in unison with those erected adjoining in Hamilton Street, and to expend in the erection of each of the said dwelling houses the sum of £225 at the least. Then followed stringent covenants as to the materials to be used in construction, for maintenance and repair, for inspection by the lessors, to insure for £250 and to pay the premiums, to re-instate in case of destruction by fire, and to pay the rent notwithstanding any such destruction, and then follows the covenant, to restrain a contemplated breach of which this action has been brought:”further that the said lessee, his executors, administrators, or assigns shall not be at liberty to sell either wholesale or retail any spirituous or malt liquors on the said premises during the said term or carry on any noisome or offensive trade or business therein, and shall not during the said term build or erect or cause or permit to be built or erected on the said parcel of land or any part thereof any buildings or erections except such as are hereinbefore covenanted to be erected without the previous licence in writing of the said Society their successors in title and assigns or his or her or their agents for the time being and shall not at any time during the said term without such previous licence as aforesaid convert or use the said parcel of land or any part thereof for such purposes as last aforesaid.” Then comes a covenant to deliver up, and a proviso for re-entry by the Society in the case of rent in arrear, and then a proviso, upon which some reliance has been placed in argument by the appellants:”Provided also, that if the lessee, his executors, administrators or assigns shall build or erect or cause or permit to be built or erected erections except such as are hereinbefore covenanted to be erected without such previous licence as aforesaid, or if he or they shall without such previous licence as aforesaid convert or sell or permit to be sold either wholesale or retail any spirituous or malt liquors on said premises or carry on or permit any noisome or offensive trade or business thereon, or if there shall be a breach or non-observance or non-performance of any of these covenants hereinbefore contained, then and in any of the said cases the said premises shall be subject to an additional rent of £10 a year to be payable during the time of such breach of said covenants or any of them and to commence from the time the lessee shall be required by the Society or the said Susannah Hamilton or their successors in title to correct or remove such breach or non-observance and to be recoverable in the same manner as the hereinbefore reserved rent.”
Two preliminary points have been argued upon this proviso, which may be disposed of summarily here. It is said that as the restrictive covenant is confined to such matters as are done “without the previous licence in writing of the said Society,” and that as the proviso for re-entry for non-payment of rent is limited to “the Society, their successors in title or assigns,” while the penal rent for breach of the covenant is recoverable “by the Society or the said Susannah Hamilton or their successors in title,” Susannah Hamilton had no interest in the enforcement of the covenant beyond the right to exact a penal rent for breach of it, and could not enforce it by an application for an injunction.
It was also contended that, upon the true construction of the lease, the lessee was at liberty to break the covenant whenever and however he pleased on condition of paying the penal rent of £10 for every breach, and that he could not be restrained by injunction from doing that which it is said he had a right to do if he chose to pay for it.
The first of these points is disposed of by the proviso in the lease which immediately follows that relating to the penal rent. “Provided always and it is hereby agreed and declared that the lessee shall pay the rent hereby reserved unto the said Susannah Hamilton or other the person for the time being entitled to the equity of redemption of the said premises until the said Society shall by a notice in writing require the payment of said rent to themselves and until such notice the said Susannah Hamilton or other the person entitled as aforesaid shall have the like remedy by distress for recovery of arrears of the said rent as they would have had if seized at law of the said premises in reversion expectant on this lease and shall and may exercise all the rights of owners conferred by these presents on the said Society.” The Society was demising as owner of the legal estate in the premises, Susannah Hamilton was a tenant for life, exercising the powers conferred on her as such by the Settled Land Acts, and mortgagor in possession, and the covenants and provisoes in the lease seem perfectly regular and in accordance with the respective interests of the lessors, either of whom, at least until the mortgagees went into possession, could insist upon due performance of the restrictive covenant.
The second point is equally unsustainable. It is perfectly clear, upon the lease taken as a whole, and upon each material provision taken separately, that the object of the lessors was that the restrictions, whatever they were, upon user of the premises should continue, and not that the lessee should be at liberty to use the premises as he pleased upon payment of an increased rent. The very clause by which the penal rent is reserved expressly contemplates a demand for the correction or removal of the breach as the point at which the penal rent should commence to run, and a proviso that the rent should be payable “during the time of such breach.” This is incompatible with the suggestion that the lessee should be at liberty to break the covenant as and when he chose on payment of an increased rent as liquidated or agreed compensation, and certainly does not oust the jurisdiction of a Court of Equity to enforce obedience to a negative covenant by the grant of an injunction.
The law on this subject was settled in French v. Macale (1) by an elaborate judgment of Sir Edward Sugden, about a century ago, when he said. “If a man covenant to abstain from doing a certain act, and agree, that if he do it, he will pay a sum of money; it would seem that he will be compelled to abstain from doing that act, and, just as in the converse case, he cannot elect to break his engagement, by paying for his violation of the contract. This I apprehend is the general rule of equity,” and he sums up (at p. 284): “Where the covenant is not to do a particular act, and a penalty or forfeiture is annexed to the doing of that act, this penalty does not authorize the party to do the act; and before the act is done, this Court will restrain him by injunction.”
This principle was followed and applied by the Vice-Chancellor in Bray v. Fogarty (2), a case whose facts bear a considerable resemblance to those of the present. There a lease contained a covenant that a house, to be built immediately adjoining the house in which the lessor lived, should be built fit for a private family, under a penalty of £10 yearly additional rent, unless the lessor should convert his house to any public use, and it was held that this was, a continuing covenant, and bound the lessee to keep as well as build the house as a private dwelling house, and was broken by converting it into a public-house, that the £10 a year additional rent was a penalty, and not liquidated damages, and that the lessor was not restricted to sueing for the additional rent, but was entitled to an injunction to restrain the tenant’s converting the house into a public-house, and, finally, that the consent by the lessor to the conversion by the lessee of another house on the demised plot, but not adjoining the house of the lessor, into a public-house, was not such an acquiescence in the breach of the covenant as to debar the plaintiff from relief by way of an injunction. In the course of his judgment, granting an interlocutory injunction, the Vice-Chancellor says:”The restriction appears to have been intended for the protection of the privacy of the lessor’s own dwelling house; and the covenant would be nugatory for that purpose if as soon as the tenement was erected by the lessee, he was to be at liberty to change its character into that of which he was prohibited from erecting it.” As to the contention that the £10 a year additional rent was not a penalty but liquidated damages, he says:”The inquiry always is, whether the parties intended to prevent the act being done, or to permit it to be done, on payment of a stipulated price for the permission, I think the former was the intention of the parties, because the object of the lessor was to secure the comfortable enjoyment of his own house next adjoining, and for that purpose to prevent the inconveniences arising from the noise and publicity of a shop in the next house.”
In the present case the lease was for the erection of”private dwelling houses,” “similar and in unison with those erected adjoining in Hamilton Street,” in which street it would seem that Susannah Hamilton, the lessor, was living at the time, and the covenant was not “to sell, either wholesale or retail, any spirituous or malt liquors on the said premises . . . or carry on any noisome or offensive trade or business therein and not build or erect or cause or permit to be built or erected any buildings or erection except such as are hereinbefore covenanted to be erected . . . and not at any time . . . convert or usethe said parcel of land or any part thereof for such purposes as last aforesaid.”
Apart from the question whether the business which it is proposed to carry on on the premises is or is not an “offensive”one within the meaning of the covenant, it seems reasonably clear to my mind that the intention of the parties was that the houses to be built should be used and occupied as private dwelling houses, but that the occupiers of those private dwelling houses should be at liberty to carry on in them any trade or business which was not within the prohibition of the covenant. I have some doubts whether a lessee of one of these houses could let or assign the whole or any part of his house to a non-resident, for a public office or for the carrying on of any trade or business whether offensive or not. We all know that many professional men and persons engaged in trade do exercise their callings in their private dwelling houses, and that a covenant to use as a private
dwelling house only and not otherwise, will not prevent a doctor or surgeon from treating his patients there, or a barrister from holding consultations, or, in humbler walks of life, a dressmaker, an embroiderer, or a scrivener, from working at their trades in their homes, but the very fact that these people live in the house themselves affords a protection to their neighbours which would be absent if the premises were let to or occupied by tradesmen or business people who did not reside therein.
In the view, however, which I have formed of the meaning of the word “offensive” in the lease to Frawley, it is fortunately unnecessary for me to express any opinion upon the question whether the effect of the provisions in that lease amount to a covenant to use as a private dwelling house only and to a prohibition against assignment or subletting to a non-resident for purposes of any trade or business.
It appears that in the year 1936 the Dublin Board of Assistance contemplated the creation of a new Dispensary District which was to comprise portion of each of two existing Districts, Peter Street and South Earl Street, and would include areas in which large housing schemes are being carried out by the Corporation as well as areas at present occupied by tenements. It appears from the affidavit of the Clerk to the Board of Assistance that the district is a”congested district.” After investigation which covered a period from February, 1936, to May, 1937, the Board decided to take a lease from the defendant, Bridget Fox, of premises at No. 37 Hamilton Street for the purpose of a temporary Dispensary, and on September 28, 1937, a lease under the seal of the Board was executed by Bridget Fox demising to the Board for a term of three years from October 1, 1937, at the annual rent of £80 “All that and those the rooms on the ground floor consisiting of front room, back room, kitchen, scullery and pantries of the house and premises, 37 Hamilton Street, Dublin, together with the rights of egress and regress at all times from the entrances in Donore Avenue and Hamilton Street, and the right to use the hall of said premises at all times.” The lease contained covenants by the lessees that they would not, without the previous consent in writing of the lessor, such consent not to be unreasonably withheld, erect any new building or make any alteration in the said premises or any part thereof, and not at any time during the said term to carry on or permit to be carried or be permitted upon the said premises or any part thereof any noisome, offensive business or occupation, or permit any nuisance to be carried on in the said premises: and the lessor covenanted to insure against fire in the sum of £800, and there was an agreement by the lessor to renew on request for a further term of three years at the same rent and subject to the same conditions.
The plaintiff became aware of the intentions of the Board of Assistance to open a Dispensary in 37 Hamilton Street, probably through a poster which was posted on the wall near the premises, and on October 19 her solicitor wrote to Bridget Fox and to the Clerk of the Board of Assistance protesting on behalf of the owners and occupiers of all the premises in Hamilton Street, other than No. 37, against the opening of a Dispensary with a Relieving Office attached, on the premises, as being injurious to the district, and the value of the property, and as being both noisy and offensive, and intimating that she intended to take proceedings to enforce the restrictive covenant in the lease under which the premises were held by Bridget Fox. The belief in the intended use of the premises as a Relieving Officer’s Office may have been mistaken, as the officials of the Board of Assistance now deny that there was ever any intention on the part of the Board to open a Relieving Officer’s Office in Hamilton Street, and the Chairman of the Board has sworn an affidavit in which he states that at no time did the Board discuss or consider using the premises, 37 Hamilton Street, for a Relieving Officer’s Office for the distribution of poor relief. I do not know whether there is any qualification or reservation intended in the use of the words “for the distribution of poor relief,” and Mr. Condon, the Clerk, whose affidavit was confirmed by his Chairman, swore that “the Board have never contemplated or discussed the question of . . . the opening of a Relieving Officer’s Office in 37 Hamilton Street,”but that the plaintiff’s apprehension of an intention by the Board to do so was not wholly without foundation is made clear by the extract from the Minutes exhibited by Mr. Condon himself. “We have to report that the premises at 37 Hamilton Street, proposed to be procured by the Board for use as a temporary Dispensary, are the most satisfactory that can be found after a prolonged search. To accommodate the Relieving Officer it will be necessary, we think, to erect a suitable office in the yard or rere of the premises.”That was the report of the Supervising Relieving Officers, made in obedience to an order of the Board, and the minute thereon, made on May 12 is “Approved. To Law Agent to draft agreement for three years holding.”
But assuming that there never was in contemplation the opening of any office for a Relieving Officer at 37 Hamilton Street, the question still remains whether the user of the entire ground floor of the premises with the yard at the rereand the right of egress and regress at all times from the entrances in Donore Avenue and Hamilton Street and the right to use the hall of said premises at all times, and all for the purposes of a public Dispensary for the indigent poor, and for public vaccination, is or is not the user of part of the demised premises for the carrying on thereon of an offensive business within the meaning of the restrictive covenant in the lease under which the premises are held.
In face of numerous authorities, to which it is unnecessary to refer in detail, it could not be contended by the defendants with any hope of success that the proposed user of the premises as a public Dispensary, for the treatment of patients and for the compounding and dispensing of drugs and medicines would not be carrying on a “business.”It has long been settled that for the purposes of a covenant against the carrying on of a business, the making of a profit, or the charging of fees, are not essential elements, and that the provision of purely gratuitous services may constitute the carrying on of a business.
The whole controversy has been waged upon the meaning to be attributed to the term “offensive.”
Now it is absolutely settled, beyond all possibility of controversy, that in interpreting this word, in this document, we are to give effect to the intention of the parties, so far as we can ascertain it, and that in trying to ascertain it, we are bound to consider the document as a whole, and to have regard to the circumstances in which it was executed. The lease was for the erection of “good and substantial private dwelling houses . . . similar and in unison with those erected adjoining in Hamilton Street,” there was a prohibition against the erection of buildings of any other description, against the sale of liquor or the carrying on of any noisome or offensive trade or business, and against the conversion or user of any part of the demised premises for such purposes as last aforesaid. It is sworn and not disputed that all the houses in Hamilton Street are private dwelling houses, and several witnesses have described it as being a quiet residential district, a statement which is borne out by the photographs and plans and maps which have been put in evidence. The only attempt to qualify this is in an affidavit by Mr. Conway, a Superintendent of Relieving Officers, who expressly admits that Hamilton Street is a residential street, but says that “it would be more accurate to describe the district as being an industrial or working-class district than as a select residential district.”If he means the Dispensary District as a whole his criticism seems to be well founded, but we are concerned with Hamilton Street and its immediate vicinity, the residents in which are said by Dr. O’Connor, a witness for the defendants, to be of the same class as his own patients, who reside in the neighbourhood of the South Circular Road.
It is also beyond question that in interpreting a covenant such as this we must have regard to the locality, and that a business may be “offensive” in one locality, which would not be objectionable in another. I refer to passages from the opinions of two eminent Judges, each of whom expressly conceded that locality was an important matter for consideration, though he held on the facts of the particular case that an injunction should not be granted and so dissented from the decision of the Court of which he was a member. Lord Justice FitzGibbon, in Pembroke v.Warren (1), said (p. 120):”Anyone unhampered by authorities would say that the establishment of a private hospital in Fitzwilliam Square was contrary to the common understanding of those who know that place. That it is offensive, in a sense, to the feelings of everyone concerned, except one single doctor, is proved by the affidavits, by the memorial signed by practically all the inhabitants, and by the resolution of the Commissioners who represent them.”And (at p. 125):”I fully admit that, in determining whether the act is offensive, locality, the object of the instrument, and everything else, as well as the mere words used, should be considered. A thing may be ‘offensive’ within the meaning of a restrictive covenant, although not a nuisance at common law, and what would be a nuisance, as offensive per se, in one place, might not be so in another.”And (atp. 131):”I admit that all circumstances, and especially locality, are to be taken into consideration.” Fletcher Moulton L.J., in Nussey v. Provincial Bill Posting Co. (2),said (at p. 742):”The word ‘offensive’ as applied to trades has a fairly defined meaning of its own, though it would no doubt be interpreted more widely in a high-class residential neighbourhood than in a case like the present, where at the time of sale there were no houses, and which it was not intended to restrict to residential purposes.”
To the question whether a business such as the defendants propose to carry on in 37 Hamilton Street is or is not”offensive” in a residential street, and surrounded on all sides by private dwelling houses, I think that “for anyone unhampered by authorities,” as FitzGibbon L.J. said, there can be only one answer. And there are many high authorities to support it. In Pembroke v. Warren (1), the majority of our Court of Appeal, affirming the Vice-Chancellor, held that the establishment of a private hospital for five or six patients in Fitzwilliam Square, was, having regard to the locality and the circumstances in which the lease was granted, offensive within the meaning of a covenant not to carry on any one of nineteen specified trades “or any other offensive or noisy trade business, or profession whatsoever.”The business which was held in that case to have been prohibited by the word “offensive,” was far more innocuous FitzGibbon J. and far less annoying or calculated to cause “offence,” than that of a public Dispensary and vaccination office. It consisted of the taking in, as temporary lodgers, of, at most, five or six resident patients, each of whom had been sent by a physician or surgeon as his own private patient; there was no evidence that an infectious case had ever occurred in the similar business which the defendant, Perry, had carried on elsewhere for many years; it was in the interest of the owner of the hospital and of every medical man who sent a patient there to “keep out even the smallest apprehension of infection,” and FitzGibbon L.J. says (at p. 271):”I leave the risk of infection out of consideration, there being in my opinion no evidence of it.” Lord Justice FitzGibbon dissented from the decision of the majority upon the sole ground, as I read his opinion, that the plaintiff’s case had not been so completely established as to justify”the drastic and final remedy . . . of an injunction on an interlocutory motion,” but he said (at p. 125), “My whole difficulty would disappear if I found that there had been any actual ‘offence,’ or even evidence of actual risk, to the neighbours in Harcourt Street” (the place where the defendant had been carrying on a similar business for several years). Contrast that absence of evidence with the depositions in the present case. Mr. Lowe, who has practised as a medical doctor in Dublin for over twenty-six years, and has had considerable experience of the working of Dispensaries in all quarters of the City, and is familiar with the two Dispensary Districts out of which this particular district has been carved, says:”I have ascertained from the affidavits that many of the householders in Hamilton Street have expressed fear and annoyance at the proposal to open a Dispensary in the house No. 37 Hamilton Street, and in my opinion such fear and annoyance is natural, reasonable and justified. Every Dispensary receives and treats persons suffering from contagious diseases such as scabies and impetigo, diseases of the ear and nose, running sores, etc. Persons suffering from the above-mentioned and similar complaints form a considerable proportion of the patients who attend a Dispensary. In addition, adults and children in the early stages of infectious diseases, such as scarlet fever, diphtheria and measles, visit the Dispensaries in ignorance of the nature of their complaints, as it is not until after their visit that their complaints are diagnosed. Others suffering from very highly infectious diseases, such as influenza, whooping cough and pulmonary tuberculosis, are openly received and regularly treated among the other patients at a Dispensary. In my opinion there is a very great danger of infection from persons attending a Dispensary to the occupiers of neighbouring houses, their friends and children from regularly, day after day, meeting such people in the street and possibly having to pass through groups of them assembled outside the Dispensary door. This is particularly the case when there is an epidemic of influenza raging and the large number affected tend to cause great congestion and overcrowding in and around the Dispensary. It appears to me that there is little difference in the amount of such danger whether the Dispensary is near the back door or the front door of the houses.” Two doctors, Dr. Devane and Dr. Cremin, have sworn affidavits in answer to Dr. Lowe. Neither has attempted in any way to deny that numbers of persons suffering from infectious diseases resort to Dispensaries such as this. Dr. Devane does not deny any of the allegations about the danger to the neighbours of infection. Dr. Cremin says:”No contagiousdiseases of any sort are treated in the Dispensary.” I wonder what the medical officer would do with a case of tinea or sycosis, but even if he did not “treat,” it, he could not prevent the sufferer from coming to seek advice. He winds up with:”In my opinion the danger of contagious or infectious disease is non-existent, and no greater than that encountered in the city tram, church, or cinema, or attending any general practitioner’s consulting room.” I cannot regard that as satisfactory evidence. Does Dr. Cremin really intend to swear that during an epidemic of influenza, whooping cough or measles the danger of infection is non-existent in a city tram, church or cinema? If so, why are we warned by our medical advisers to avoid trams and cinemas as much as possible during such epidemics, and why do the education authorities close the schools? People who are suffering from disease of any description do not habitually resort to trams or cinemas, and must in any event consitute only a small proportion of those who do, but a Dispensary exists for the very purpose of providing medical and surgical treatment and advice for the necessitous portion of the community, and practically all those who resort to it are, or believe themselves to be, suffering from some form of ailment which requires attention.
The defendants, the Board of Health, elected that this case should be finally decided upon the affidavits which have been filed; if they intended seriously to controvert the allegations of Dr. Lowe, it was their right to insist upon a plenary hearing at which they could have endeavoured to produce evidence to the contrary, and Dr. Lowe might, in any case, have been cross-examined upon his deposition, but none of these courses have been adopted, and we must deal with his allegations as they stand, making such allowance as we think fit for any possible exaggerations.
In my opinion, “disregarding fanciful fears or fastidiousness, or any innate dislike to the introduction of a business element into the character of the street,” as Walker L.J. said in Pembroke v. Warren (1) he felt bound to do, I cannot say that there are not reasonable grounds for apprehension, entertained by reasonable men. When laymen are so advised by a medical expert, they are not acting unreasonably if they accept his opinion even though it be contradicted by that of another. But I am by no means satisfied that upon the true interpretation of this covenant, it was not the intention of the parties to give a wider meaning to the word “offensive,” which would sustain the injunction. It is not a term of art like nuisance, and the meaning in each particular case must be ascertained secundum subjectam materiem as the Vice-Chancellor held in Pembroke v.Warren (2). In Nussey v. Provincial Bill Posting Company (3), the Court of Appeal in England, Cozens-Hardy M.R., and Buckley L.J., affirming Neville J., held that the erection of a hoarding for bill posting, and the user of it for that purpose, on a residential estate, was the carrying on of an offensive trade within the meaning of a covenant against”the carrying on of any noisome, noisy, offensive or dangerous trade or calling.” The passage which seems appropriate to the present case is as follows:”Upon callings and upon trades otherwise permitted there is a veto expressed in the words upon which the question arises. The relevant provision is that they shall not be ‘offensive.’ The context in which that word occurs shows that the condition forbids (1), noisy trades or callings which offend the ear, (2), noisome trades or callings which offend the nose, (3), trades or callings which expose a man to danger, and (4), trades or callings which are ‘offensive.’ In this context this may mean offensive not to the ear, not to the nose, nor by way of danger, leaving as an obvious meaning offensive to the eye. It is not confined to this, but I see no reason why it should not extend to it. Further, the word ‘offensive’ is, I think, to be construed relatively to the person contemplated as enjoying the benefit of the stipulation, that is to say, relative to such a person as would be the purchaser of such a plot upon such an estate as this estate is by the conditions and plan shown to be. The question, therefore, is whether the trade or calling of a bill-poster carried on upon a hoarding 156 feet long and 15 feet high, carrying with it such disfigurement and such litter by waste paper and, so on as would result from the employment of the site for such a purpose, can properly be called offensive, that is, as legitimately furnishing ground of offence to a reasonable person who became a purchaser of a lot on this estate. A man may be legitimately offended by an annoyance which does not amount to a legal nuisance. The evidence here is not strong, but it is sufficient, I think, to show that this plaintiff and the other residents on the estate are actuated by considerations founded not in aesthetic sensitiveness, but in reasonable good sense in regarding such a hoarding as this occupied under an agreement for seven years for the purpose of posting bills as a legitimate ground of offence to them as owners of adjoining plots.” If an advertisement hoarding is “offensive” within such a covenant, it seems to me that the setting up of a public Dispensary and vaccination office, such as the defendants propose to carry on, is a multo fortioria legitimate ground of offence. Pembroke v. Warren (1) was cited in the arguments in Nussey v. Provincial Bill-Posting Co. (2) as supporting the construction of “offensive” as meaning something causing well founded and reasonable annoyance and as not restricted to something unpleasant to the eye, ear or nose, and Mr. Danckwerts tried to distinguish it in reply as having decided that something in the nature of physical discomfort was necessary to prove a breach of such a covenant. No one suggested that it was not good law.
The only case which even remotely supports the argument on behalf of the defendants is Frost v. King Edward VII Welsh National Memorial Association (3). That was only a decision of a Court of first instance, Eve J., Pembroke v.Warren (1) was not cited or referred to, and neither was Nussey v. Provincial Bill Posting Co. (2). Eve J. did, however, hold 1, that the carrying on of a properly equipped and well managed establishment, such as the defendants’ hospital was proved to be, was not per se a noisy, noisome, or offensive business, and 2, that on the evidence, and in particular upon the ground that the medical evidence was unanimous and unshaken to the effect that the hospital was not a source of danger to the neighbourhood and that there was no risk of infection, and no reasonable ground for the fear of infection, there was no breach of the covenant. As, however, Eve J. did grant an injunction upon another ground, the carrying on of the hospital was restrained In the circumstances, the plaintiff could not appeal, and a appeal by the defendants was “withdrawn on agreed terms”without having been opened to the Court (1). If, and so far as the opinions expressed by Eve J. are in conflict with those of our Court of Appeal in Pembroke v. Warren (2),and of the English Court of Appeal in Nussey’s Case (3), to neither of which was the attention of Eve J. called, I prefer the two decisions of the appellate tribunals, but I think that on the evidence before us as to the existence of a real risk, and the reasonableness of a genuine apprehension, of infection, not only Eve J. but Fletcher-Moulton L.J. and FitzGibbon L.J. would have arrived at conclusions in favour of the present plaintiff.
I must add a few words upon the so-called doctrine or rule of ejusdem generis, which was pressed upon us by Mr. Overend. I have always thought that there was no better statement of the principle than that which is to be found in the judgments in Pembroke v. Warren (2). There was no difference of opinion about the rule. The only difference was whether it applied to the covenant in that case. Mr. Overend has argued as if this canon of construction was, like the rule in Shelley’s Case a rule of law, which we are bound to follow, whereas in fact it is only an aid towards ascertaining the intention of parties when there is a doubt or ambiguity in the term used. “Nothing can well be plainer,” said Lord Esher, in Anderson v. Anderson (4),”than that to show that prima facie general words are to be taken in their larger sense, unless you can find that in the particular case the true construction of the instrument requires you to conclude that they are intended to be used in a sense limited to things ejusdem generis with those which have been specifically mentioned before,” and Rigby L.J. (at p. 755) in the same case says:”The doctrine known as that of ejusdem generis has, I think, frequently led to wrong conclusions on the construction of instruments. I do not believe that the principles as generally laid down by great Judges were ever in doubt, but over and over again those principles have been misunderstood, so that words in themselves plain have been construed as bearing a meaning which they have not, and which ought not to have been ascribed to them. . . . The main principle upon which you must proceed is, to give all the words their common meaning: you are not justified in taking away from them their common meaning, unless you can find something reasonably plain upon the face of the document itself to show that they are not used with that meaning, and the mere fact that general words follow specific words is certainly not enough. . . . You must give the words which you find in the instrument their general meaning, unless you can see with reasonable plainness that that was not the intention of the testator or settlor.” Mr. Overend contended with great pertinacity that because the covenant was “not to carry on any noisome or offensive trade or business,” we were bound to construe “offensive” as hitting at somethingejusdem generis with “noisome,” and therefore as only prohibiting something which amounted to, or fell, infinitesimally short of, a nuisance. That argument ignores the very basis of the principle contended for. There is no enumeration of special instances followed by general words to call the doctrine into operation. There are two terms, quite distinct, put as alternatives, and upon every principle of construction and common sense, we are bound, if we can reasonably do so, to give full effect to each word. If”offensive” imports only matters ejusdem generis with”noisome” it is an empty superfluity, but if it can reasonably be interpreted as having been intended to cover matters which have not been already forbidden by the stronger term, we are bound to assume that the parties meant to give effect to a wider prohibition than that contained in “noisome.”FitzGibbon L.J. points this out (at p. 131) in Pembroke v.Warren (1), when commenting on the case of Tod-Heatlyv. Benham (2) where the general words included “any other noisome, obnoxious, or offensive trade or business”:”I cannot agree that ‘noisome’ is a universal term; it implies a special form of annoyance, viz., unwholesomeness, just as ‘noisy’ implies offence to the ear. But ‘obnoxious’ is a wider term, and both it and ‘offensive’ may fairly cover anything that causes annoyance.” In my opinion the argument that “offensive” is cut down by the ejusdem generis rule to something that is equivalent to “noisome”is wholly unsustainable.
I have not thought it necessary to comment upon the mass of decisions upon other covenants in other leases of different properties, or those which turn upon the provisions of statutes such as the Public Health Acts. I think that the intention of the parties in the present case was to prohibit by the use of the word “offensive” the carrying on of such a business as is contemplated by the defendants, and so far from having discovered any decision which prevents me from giving effect to what I believe to have been the intention of the parties to the lease of September 24, 1896, I think that the cases to which I have referred support the interpretation which I have put upon the word “offensive.”
It is an interesting fact, though it has not influenced my decision in the slightest, that the lease from Susannah Hamilton and the Civil Service Building Society to Bridget Fox was drawn up and executed exactly nine months after the judgment of the Court of Appeal which put the wide interpretation upon the word “offensive” in a restrictive covenant contained in a lease of house property in a residential quarter, a decision with which, I have little doubt, the eminent firm whose name appears upon the lease were well acquainted.
Upon Mr. Overend’s final contention, that this is a case for damages under Lord Cairns’ Act rather than for an injunction, it is sufficient to refer to the words of Lord Cairns himself in Doherty v. Allman (1) at pp. 719-20 stating the principle to be adopted in such a case as the present.
The “good working rule” suggested by A. L. Smith L.J. in Shelfer’s Case (2), that damages in substitution for an injunction may be given:(1), if the injury to the plaintiff’s legal rights is small, (2), and is one which is capable of being estimated in money, (3), and is one which can be adequately compensated by a small money payment, (4), and the case is one which it would be oppressive to the defendant to grant an injunction, has often been approved and followed, and it does not appear to me that any single one of his four conditions exists in the present case. I may add a reference to the concluding paragraphs of the speech of Lord Robertson in Black v. Scottish Temperance Assurance Co. (3) where a decision of the Court of Appeal in Ireland awarding damages in lieu of an injunction for interference with ancient lights was reversed, and an award of a mandatory injunction by Barton J. was restored.
The plaintiff instituted proceedings at the earliest possible moment after she became aware of the intentions of the defendants, the Board of Assistance had full notice of the restrictive covenant in the lease to their lessor, and there is no counter equity which could disentitle the plaintiff to the full relief which she has claimed.
MURNAGHAN J. :
I agree with the judgment which has just been read and have nothing to add.
FITZGIBBON J. :Mr. Justice Meredith, who is unable to be present, concurs in this decision but prefers to state his reasons for doing so in his own words. [His Lordship then read the judgment of Meredith J. which is as follows:]
MEREDITH J. :
Notwithstanding the fact that I entirely agree with the judgment that has just been delivered by Mr. Justice FitzGibbon, I think it is only due to the able argument of Mr. Overend that I should state the extent to which I accede to his main contentions.
What was tried on the hearing of the interlocutory application was, by consent, the action itself, which action was aquia timet action. That being so, there are certain assumptions to the benefit of which the defendants are entitled.
The rules and regulations under which these Dispensaries are managed provide for a number of salutary precautions, and it is to be assumed that these precautions will be duly observed. Then, the Assistance Board have under their letting the right of egress and regress by Hamilton Street as well as by the entrance from Donore Avenue. This has been made an important ground of objection to the opening of the proposed Dispensary. If the use of the premises for the purpose of the Dispensary would not be a contravention of the covenant provided the Hamilton Street entrance were not to be used for persons going to, or leaving, the Dispensary, then an injunction should not be granted in the general terms sought if the defendants are willing to give an appropriate undertaking.
Then, it is in respect of the user of the premises “as a Dispensary and Relieving Officer’s Office” that the plaintiff claims a declaration and injunction. Much of the evidence on behalf of the plaintiff was directed to the objectionable overcrowding that would inevitably result from opening a Relieving Officer’s Office in conjunction with the Dispensary. The plaintiff certainly had ground for believing that it was the intention of the Board to open such an office, but it appears that the Board, at all events now, has no such intention, and certainly would be willing to give an undertaking in that respect. If, then, a Dispensary carried on by itself would not violate the covenant, an injunction should not have been granted, as it was, restraining the defendants from using the premises either as a Dispensary or a Relieving Officer’s Office. In this connection I may point out that the order substituted the word “or” for the word “and”used in the general endorsement of claim.
The only legal principle that is of assistance in construing the covenant in question is the familiar and undisputed proposition that in construing the covenant “we must have regard to the general scope of the instrument in which it is contained, and the object of the parties to that instrument”: Pembroke v. Warren. (1). This, however, does not justify anything more than what is in the last resort only a choice between possible constructions of the given covenant, determined on common-sense grounds having regard to the business in hand. It is not meant to encourage idle speculation as to what the parties would most likely have intended, and, on the basis of such speculation, to introduce difficulty into a covenant which is quite sensible on its plain construction. Suppose that a lease of a plot of ground contains a covenant for the erection of a dwelling house or houses, it may be expected that it will contain some covenant restricting the user of the premises. If it contains a covenant against erecting other buildings on the demised land without license, then the expectation is increased. If, further, an intention is indicated that the building of the dwelling house or houses is to conform to, or be in unison with, that of other dwelling houses, then the expectation may be increased to an expectation that the user of the premises otherwise than as a dwelling house or houses will be found to be prohibited. If, after all this expectation, a covenant restricting the user is found to be in fact included, then the general expectation is realised. The covenant itself then becomes the best place to look, in the first instance, for information as to the precise extent of the restriction. If the covenant does not in fact go the length of a general prohibition against using the premises otherwise than as a dwelling house, which is the form that admits of the simplest statement, then no amount of eloquence on the select residential character of the locality, or on the probable conceptions of an aristocratic landlord as to what is essential for reasonable comfort in the enjoyment of property, will justify construing the covenant as a general restriction to user as a dwelling house only. But, on the other hand, if, while it is recognised that the prohibition falls short of a general prohibition, it is clear that this or that user is prohibited, but not clear from the words used whether some other user was also intended to be prohibited, then the great principle of construction, which is admirably stated in the “excellent treatise” of “that very learned writer”referred to in Pembroke v. Warren, (1) may be invoked. The great usefulness of the principle in such and like cases is unquestionable. But there are some lawyers who would rather extract one grain of vague suggestion from presumed general intention than ounces of plain indication from the covenant specially introduced for the purpose of dealing precisely with the matter. In applying the principle of construction it is advisable to have clearly in view what precise inference is being drawn from the consideration of the instrument as a whole and what is the precise difficulty in the covenant upon which the inference throws light.
The wording of the covenant in the present case presents a difficulty at the very outset. The prohibition against carrying on any noisome or offensive trade or business in the premises implies that a trade or business may be carried on if it is not a noisome or offensive trade or business and if it does not violate some other covenant, as, for instance, by involving structural alteration of the premises. (Seeper Lord Eldon in Bonnett v. Sadler (2).) But there is an ambiguity in the expression: “if it is not a noisome or offensive trade or business.” For there are a number of trades and businesses that are well recognised to be noisome or offensive trades or businesses, and the prohibition might be understood to refer simply to those trades or businesses as if they were all specifically enumerated. In the case of a covenant which restricts the user of property, and especially when followed by a penal clause, it would certainly not be unnatural to interpret the expression “noisome or offensive trade or business” as a distinctive designation of a class of trades or businesses regarded as noisome or offensive as such. On that interpretation the only question in the present case would be whether a Dispensary is, or is not, one of the special trades or businesses indicated. If it were, then it would violate the covenant and no further question would arise. Just as where a number of trades, including, say, a tannery, are mentioned, a proposal to carry on a tannery in such a way as not to be noisome or offensive could not be entertained. If, on the other hand, the trade or business were not one of the class described, then the covenant would give no protection. But the expression”any noisome or offensive trade or business” may also be used in a wider sense, so as to mean that no trade or business is to be carried on in the premises if the carrying on of it is, in fact, noisome or offensive. In this sense the covenant might be violated although the trade or business carried on need not be regarded as noisome or offensive as such. Thus, in this sense, the carrying on of the proposed Dispensary in the present case might be held to be a violation of the covenant, without holding that a Dispensary is in general to be regarded as a noisome or offensive business, and further, without even holding that the position is the same as if a Dispensary had been specially named in the covenant, and even though it was considered that, in altered circumstances, as, for instance, if the whole of the Dispensary District No. 6 were improved and brought up to the same level as Hamilton Street, the carrying on of a Dispensary in No. 37 might not be a violation of the covenant. As I understood Mr. Overend’s argument, he stressed the importance of this distinction in the case of a quia timet action such as the present. That is why I began by making in his clients’ favour all the reasonable assumptions for which he contended.
The actual wording of a restrictive covenant of this kind most strongly suggests the narrow interpretation (according to which a class of trades or businesses is taken to be defined by the distinctive description “noisome or offensive”)where a number of typical noisome or offensive trades are specified and the enumeration is followed by the words”or any other offensive trade or business.” The suggestion here does not arise on any ordinary application of the ejusdem generis principle; for it arises without it being supposed that the trades or businesses have any common attribute other than that of being “noisome or offensive.” The suggestion is that, as the expression “noisome or offensive,” by implication of the word “other,” applies to the trades or business enumerated, it applies to the others that are not enumerated in a similar fashion, that is to say, as a description applicable to them as such (per se), and in just the same way as if they had been actually specified. But, though there may be much to be said for this interpretation from a grammatical and logical point of view, it does not seem to have fared well in the decided cases, and it was not adopted in Pembrokev. Warren (1), although the general words in the covenant in that case followed a specific enumeration.
But the interpretation that adopts the view that the description ought to apply to any trade or business which, though not specified, is held to be within the covenant, in the same fashion as it must be taken to apply to those specifically enumerated, was favoured by FitzGibbon L.J. in his dissenting judgment. The learned Lord Justice said (at pp. 124-125):”I think that Serjeant Campion was right when he said that the plaintiff must show that such reception is per se offensive. That term ‘offensiveper se’ has been ambiguously used. For our purpose I think the true meaning is that the act, no matter how carefully done, is in itself ‘offensive,’ in the sense in which the covenant uses that term; but I fully admit that, in determining whether the act is offensive, locality, the object of the instrument, and everything else, as well as the mere words used, should be considered.”
From the point of view, however, of the object sought to be attained by the covenant it cannot make any vital difference whether noisomeness or offensiveness, actually resulting from the carrying on of a trade or business on the premises, entitles you to describe the trade or business itself as a noisome or offensive trade or business or only’ entitles you to say that the trade or business, whatever it is in itself, is being carried on so as to be offensive. The distinction only arises out of the mode of expressing the objection and does not spring from the ground of objection itself. Consequently, as both interpretations of the actual words are open, I unhesitatingly adopt the latter, according to which it is sufficient, that under existing circumstances and conditions the carrying on of the proposed Dispensary on the ground floor of No. 37 Hamilton Street would inevitably be the carrying on of a trade or business that would be noisome or offensive.
The word “business” occasioned no difficulty to Mr. Justice Johnson. He says in his judgment: “In the present case it is plain beyond demonstration that the carrying on of a poor law Dispensary is a ‘business’ and the question that I have to decide is whether under the particular circumstances it is ‘an offensive business.'” With great respect I do not think the matter is so self-evident, and, besides, having regard to the terms of the injunction granted, it was necessary to decide whether a Relieving Officer’s Office by itself would be a “business.” The defendant Board have the premises for three years, and, if they cannot use them for a Dispensary they might prefer to use them, if permissible, for a Relieving Officer’s Office than to have them idle. Undoubtedly the word “business” may be used in a very wide sense so as to include anything that requires to be transacted for the purpose of any undertaking, which undertaking itself may then be included under the term. In this wide sense “business” does not imply more than something that is set out to be done together with the operations required for doing it, and the thing to be done, considered as importing such subsidiary operations, and the operations themselves considered in relation to what is set out to be done, are included under the term “business.”In this wide sense a man may say:”I was engaged on public business.” All that is essentially implied in this widest use of the term appears when we say of a man that he makes a business even of his recreation. But when we ask what a man is and we are told that he is “in business”we understand the word in a narrower sense, and this narrower sense seems more like the sense intended when the word is used in conjunction with the term “trade” in the complex expression “trade or business.” As the terms are ordinarily used, the exercise and performance of the powers and duties of a local or other public authority are not of themselves regarded as the carrying on of a trade or business by such authority. But a public authority, in the exercise and performance of its powers and duties, may engage upon an undertaking that unquestionably would be the carrying on of a business but for the mere fact that it is not carried on for profit but in discharge of a public duty. This distinction makes no difference in the character of what is done, which alone is material from the point of view of the premises demised by a lease. Carrying on a Dispensary is, from any point of view relevant to the covenant, a carrying on of the business of an apothecary, just as using a dwelling house as a charitable home for girls was held in Rolls v. Miller (1) to be carrying on the business of a lodging-house. Consequently the word “business” must, as it may, be understood to cover the carrying on of the proposed Dispensary. But it is difficult to point to any recognised sort of business that could by name be said to be carried on by the Relieving Officer if the premises were used simply as a Relieving Officer’s Office. Hence there is more difficulty in the case of this user. But the only difference between the Dispensary, regarded simply as an apothecary’s business, and the Relieving Officer’s Office is that tickets for medicine are given out at the latter and the medicine itself at the former, and that a number of poor persons would come for relief to the Relieving Officer’s Office who would not have to go to the Dispensary at all. There is no doubt that user as a Relieving Officer’s Office would be quite as objectionable as user for a Dispensary, and, accordingly, if it is possible, as it is, to understand such user as the carrying on of a business, it should be so understood, and the question of the application of the covenant be left to be decided on the question of the appropriateness or otherwise of the description”noisome or offensive.” The obvious purpose of adding the words “business” to the word “trade” is to get a sufficiently comprehensive noun substantive to carry the really material epithets “noisome or offensive.” It is not as if carrying on a trade or business was as such prohibited, and therefore, regarded as the matter of importance. The covenant implies that the premises may be used for trade or business unless it is noisome or offensive. (See perLord Eldon in Bonnett v. Sadler (1).) Accordingly I am of opinion that using the premises either as a Dispensary or for a Relieving Officer’s Office involves carrying on a business on the premises within the meaning of the covenant.
Much of what was relied upon as ground of objection under the covenant did not impress me. The most noteworthy feature about the affidavit of Dr. Lowe is that his description of the dangerous character of a Dispensary is directed to all Dispensaries in general, and does not merely apply to the proposed Dispensary or any other Dispensary that is not to some extent isolated or detached from dwelling houses. If his affidavit is to be accepted at its full face value then a Dispensary is always a noisome or offensive business, and it is not necessary to go into the facts and circumstances of the particular case. I cannot accept that view having regard to the affidavits of the medical gentlemen supporting the case for the defendants. I think that Dr. Lowe’s affidavit presents an exaggerated and misleading picture. The learned trial Judge, who stated that he unhesitatingly accepted the evidence of Dr. Lowe as to the risk of infection and contagion, seems to have derived special confirmation of his opinion as to the dangerous character of a Dispensarythat is all Dispensaries, wherever situated and whatever the conditionsfrom the stringent regulations which have to be obeyed with a view to preventing any risk of infection or contagion. He says: “The general provisions in the regulations as to the use and care of disinfectants, soap, water jugs, basins and towels, are an amusing commentary upon the affidavits of those medical gentlemen who attempt to make light of the fears of the plaintiff and of the residents in the street as to the risk of infection and contagion.” On this line of reasoning I should be afraid to cross the road because of the new regulations and the elaborate precautions which are being taken to prevent my being killed, and, at Nelson’s Pillar and such places, where the extreme precaution is taken of having a policeman to see that the regulations are strictly observed, I should be so overcome with terror that I would refuse to budge an inch. But, having regard to the character of the district, as a whole, which this proposed Dispensary would have to serve, the makeshift character of the Dispensary itself, and remembering that, whatever be the nature of the diseases which are, or are not, treated in the Dispensaries, numbers of persons are likely to come from the densely populated area in the district suffering from diseases or ailments that have not yet been diagnosed, I would certainly definitely reject the net opinion of Surgeon William C. Cremin expressed in the last paragraph of his affidavit. He says:”In my opinion the danger of contagious or infectious disease is non-existent and no greater than that encountered in the city tram, church, or cinema, or attending any general practitioner’s consulting room.” Mr. Cremin says, with justice I think, that the class of person going to the Dispensary varies “with the class of the district in which the Dispensary is situated.” But that is precislely where the door is opened for approach to the special facts of this case. Mr. Cremin compliments the district in the immediate vicinity of Hamilton Street, and the proposed Dispensary will bring patients swarming in from a district of a very different character. That is what, even on Mr. Cremin’s own showing, makes all the difference.
A great deal was made of the overcrowding in and about the premises that would result from opening the proposed Dispensary. Mr. Justice Johnston stated the position in this way:”About thirty patients would ordinarily attend the Dispensary from 9 a.m. to 11 a.m. That is to say, it is to be expected that an army of nearly 10,000 sick and ailing people would be attracted to these cramped premises for treatment or for ultimate isolation during a single year.”The reference to an army of 10,000 attracted to cramped premises would be very misleading were the fallacy not so obvious. Even the thirty persons attending on an average between 9 and 11 a.m. need not all be present at the same time; and they would, presumably, leave one by one as they severally received treatment. The learned Judge might just as reasonably have aggregated the numbers for the whole three years of the lease and thus increased the size of the army to 30,000 attracted to the cramped premises. Also, as there are two schools very near, a picture might have been drawn of the army of 10,000 patients passing an army of probably 100,000 school children. I can find no evidence of probable overcrowding such as, considered simply as over-crowding and apart from the class of persons forming the crowd, could be held to make the Dispensary a noisome or offensive business.
In my opinion the one solid objection to the proposed Dispensarythe only one that in a quia timet action is sufficiently substantiated as an objection justifying the application of the description “offensive”is that it must inevitably and to no inconsiderable extent bring back into Hamilton Street the conditions naturally incident to the unsatisfactory housing conditions of the unimproved areas in this Dispensary districtsweeping in precisely what it was the evident intention of the building lease under which the premises are held to sweep away. The manifest aim of the covenant in question was to maintain and preserve to the houses in Hamilton Street the salubrious and’ congenial character and surroundings acquired by the erection of dwelling houses of an approved type, and the establishment of a respectable residential quarter, and the elimination of the unhealthy and repugnant conditions inseparable from old and dilapidated tenement houses in a densely populated area. Sympathy with the unfortunate conditions of those whose lot it is to be huddled together in such a densely populated area makes one dislike to apply the expression “offensive” to an assembling of their sick and suffering for the purpose of medical relief; nevertheless I think it impossible to deny to the covenantee in this building lease the right to apply that description as appropriate from the point of view clearly in the contemplation of the parties to this covenant and according to the ordinary dictionary meaning of the words.
Although I take the view that the covenant in question will be violated if using the premises as a Dispensary involves carrying on a business so as to be “noisome or offensive,”even though a Dispensary is not, as such, regarded as a noisome or offensive business, I think the description”noisome or offensive” must be regarded as applying to the proposed Dispensary in a sense sufficiently objective to make the consideration of circumstances peculiar and personal to the covenantor or covenantee irrelevant. No one would question this as regards the covenantee. Even if the covenant were inserted with a view to the interests of the tenants of the other dwelling houses in Hamilton Street, and even if the Dispensary were only to be regarded as offensive because of its proximity to these other houses, it would be immaterial on the question of whether the proposed Dispensary was an “offensive business” that all the other houses in Hamilton Street had happened to come into the ownership of the covenator, who for that reason did not object. The proposed Dispensary is a makeshift arrangement merely intended for temporary convenience. Only the ground floor of the dwelling house is to be requisitioned, and it is expressly provided that the Board are to have the usa of the hall, which must frequently be crowded with patients. This must make the Dispensary a most offensive business as one to be actually carried on in a private dwelling house. But the rent paid by the Board is the extraordinary high rent of £80 per annum, and Mrs. Bridget Fox receives this and she herself is the occupier of the rest of the dwelling house and is ready to put up with any offensiveness. But that does not alter the facts. Suppose that Bridget Fox had made a sub-lease to some sub-lessee other than the Board, say at a rent of £40 per annum, and that it was the sub-lessee that had made the sub-letting to the Board, I venture to think that under such circumstances Bridget Fox would have at once come to the Court, and that she would have had no difficulty in convincing the Court that the Dispensary was an offensive business and in fact rendered the condition of the upper part of the dwelling house intolerable. That Bridget Fox, with £80 in her pocket, can keep on smiling seems to me irrelevant to the question of fact upon which a breach of the covenant depends.
I do not desire to add anything to what has already been said on the other points of the case, save that I have some doubt whether a second penal rent of £10 could be recovered in respect of the Dispensary, as there seems to me to be only a provision for a single penal rent of £10, and I think that provision is exhausted by the penal rent at present being exacted in respect of the erection of the shop at the rere. But, be that as it may, the contention that the covenantor can purchase the right to break the covenant by paying the penal rent seems to me to have been disposed of completely.
I, therefore, agree that the appeal should be dismissed.
FitzGibbon J.:Mr. Justice Geoghegan is unfortunately indisposed and I have received a letter from him in which he says that he has read my judgment and entirely concurs.
O.H.S. Ltd v Green Property Co. Ltd
1985 No. 1417
High Court
9 January 1986
[1986] I.L.R.M. 451
(Lynch J)
LYNCH J
delivered his judgment on 9 January 1986 saying: This is an appeal by the defendant (hereinafter called the landlord) against an order dated 1 July *452 1985 of the Circuit Court declaring that the landlord’s withholding of its consent to a change of user of certain premises held by the plaintiff (hereinafter called the tenant) was unreasonable and also against certain consequential orders.
The premises in question are known as unit number 31 in the Northside Shopping Centre. These premises are landlord’s premises in the sense that they were erected by and at the expense of the landlord and not by any tenant of the landlord. The premises were demised by a lease dated 30 September 1975 from the landlord to one David Rafter for a term of 31 years from 1 October 1974 at the then rent of £1,500 per year. There is a proviso in the lease for a review of the rent from time to time and at the time when the tenant became tenant of the premises by purchase thereof, the rent payable was £3,450 per annum with another review falling due in September 1984.
Covenant No. 3.08 provided that the tenant was:
To use the demised premises for the purposes of businesses of victualler, fruit, fish and vegetable merchants and including the sale of frozen food and not without the lessor’s consent in writing to use or permit or suffer the same or any part thereof to be used for any other purpose and not to permit any business to be operated in or from the demised premises by any concessionaire or licensee without the prior written consent of the lessor.
By an assignment dated 22 June 1981 the then tenants of the premises under the said lease assigned their interest to the tenant in consideration of the payment of a sum of £15,000. The assignment was subject to the foregoing covenant as to user and no difficulty arose regarding that covenant on the occasion of that assignment because the premises were being used as a fruit and vegetable store by the predecessors in title of the tenant and were bought by the tenant with the intention of using them for the same purposes.
Following on the purchase by the tenant of the lessee’s interest in the lease of 30 September 1975 the tenant commenced to trade in the premises as a fruit and vegetable merchant and did so successfully for a year and a half or two years. However, early in 1982 Messrs Dunnes opened a supermarket premises very near to the tenant’s unit number 31 and in fact gaining access to the main trading portion of their supermarket premises through units 27 and 28. More often than not it is advantageous to the tenant of a unit in a shopping centre to be in close proximity to a major supermarket as that brings into the vicinity of his shop a larger number of customers than would otherwise be the case. However, in this case Messrs Dunnes supermarket included fruit and vegetable outlets and the tenant found that it was unable to compete with Dunnes supermarket and at best was trading on a break even basis. That being so the tenant sought to sell its interest in the premises under the lease of 1975 but could obtain no bid or offer for the premises for sale as a fruit and vegetable shop. The tenant, however, obtained an offer from a building society of £35,000 for the assignment to it of the tenant’s interest in the premises under the said lease subject to the landlord’s consent to a change of user of the premises to user for the purposes of a building society. The landlord refused to consent to such a change of user and hence these proceedings were commenced by the tenant by Civil Bill dated 28 January 1985 to which a defence was filed on 1 May 1985 and the case was tried in the Circuit *453 Court on 1 July 1985 with the result already mentioned.
The grounds of the landlord’s refusal to consent to a change of user from a fruit and vegetable store to a building society were that such a change would be contrary to good estate management so far as their shopping centre is concerned. The landlord’s case in this regard is that the Northside Shopping Centre already has more financial institutions in it than any other shopping centre in Dublin and evidence to that effect was given and not contradicted. The Northside Shopping Centre has one bank, two building societies, one post office and one credit union amongst its various units.
It was common case and I accept that it is desirable for a shopping centre to have as many and varied retail outlets as possible in order to attract the maximum number of customers. The more customers that are attracted to the shopping centre the better it is for every trader and the more valuable become the various units in the shopping centre thus attracting a higher rent for the owner of the shopping centre.
The tenant’s case is that he is no longer able to trade profitably as a fruit and vegetable merchant in unit number 31 since Messrs Dunnes Stores are able to sell in their fruit and vegetable departments at a price which sometimes at any rate is lower than the price at which the tenant can purchase its merchandise. Thus, the tenant says, all profit has disappeared from its trade in this shopping centre unit for which it paid £15,000. In these circumstances the tenant says that it is reasonable that it should seek to sell its interest in the premises and for that purpose should seek a change of user. The landlord says that it would entertain a change of user to any other retail outlet but the tenant replies to this that it will be virtually impossible to sell the premises for the purposes of a retail shop or outlet because there are so many units in the shopping centre that all classes of trades and businesses of a retail nature are already catered for and that a sale to the building society would be very suitable for the landlord since the building society would be an absolutely secure and solvent tenant.
In the course of its submissions the tenant made the case that it is entitled to the gain to be derived from its commercial venture and that the court should balance the tenant’s position as against the landlord’s position and if this is done that the court should find that the tenant’s need is greater than the landlord’s and that it is unreasonable of the landlord to withhold its consent accordingly.
If this is the true test to be applied I would have to take into account that the Northside Shopping Centre was constructed wholly by and at the expense of the landlord. I would further have to take into account that in paying £15,000 for the purchase of the tenant’s interest in the premises, a great proportion, if not the whole, of this capital sum must have represented the goodwill built up by the predecessors in title of the tenant in the business of a fruit and vegetable merchant and that what has happened is that unfortunately for the tenant it has lost the goodwill to a competing trader for which the tenant had paid either the whole or a large part of the £15,000. The evidence on behalf of the tenant was that it could obtain no offer for the premises as a fruit and vegetable outlet which would indicate that any goodwill which existed in the premises as bought by the tenant had disappeared. I must ask myself for what then are the building society *454 prepared to pay £35,000? The answer to this question has to be that they will pay the £35,000 for the physical outlet unit number 31 and its location in the Northside Shopping Centre all of which have been provided by and at the expense of the landlord. Why then should the tenant get the benefit of the value of what has been paid for by the landlord? In most of the cases which were cited to me the original tenant had built the premises sometimes pursuant to a covenant in the lease and sometimes without any covenant. In such cases the buildings may be referred to as tenant’s buildings but in this case the buildings are landlord’s buildings.
However, I do not think that a balancing of the positions of the landlord and tenant is quite the test although the special circumstances of the tenant must be taken into account to some extent. The real question is whether the landlord is unreasonably withholding its consent contrary to the term implied in the covenant restricting user by s. 67 of the Landlord and Tenant (Amendment) Act 1980.
The onus is on the tenant to establish that the landlord is unreasonably withholding its consent. Some of the cases would suggest that in order to do this the tenant would have to show that the landlord is acting capriciously or arbitrarily but each case must depend upon its own facts. What the tenant has to show in this case is that the landlord is unreasonably withholding its consent to a change of user from a retail outlet as a fruit and vegetable shop to a building society. This involves primarily a consideration of the landlord’s position without on the other hand ignoring the tenant’s special circumstances. As I have said it was common case that it is better for everybody, traders, customers and landlord that a shopping centre should have as many and as varied retail outlets as possible. It was also common case that an excessive number of what was referred to as dead frontage should be avoided and by dead frontage was meant primarily financial institutions such as building societies, banks, post offices, credit unions and the like. In this case the landlord refuses its consent for a reason which is valid, namely, the avoidance of an excessive number of dead frontages. The tenant more or less concedes that in itself that is a valid reason although contesting the weight to be attached to the reason in the circumstances of this case where the Northside Shopping Centre is very much the largest shopping centre in Dublin and the tenant suggests could therefore well accommodate one other financial institution in unit number 31 in a Mall where none of the other financial institutions are in fact situate.
I am satisfied, however, that the landlords refusal of their consent is based on valid estate management grounds. Furthermore, even taking into account the special circumstances of the tenant to such extent as they ought to be taken into account, I am satisfied that the landlords withholding of their consent is not unreasonable.
I therefore reverse the decision of the learned Circuit Court judge and I dismiss the plaintiff’s case.
Bernard White v Carlisle Trust Ltd
High Court (Circuit Court Appeal)
16 November 1977
[1976-7] I.L.R.M. 311
(McWilliam J)
The plaintiff in these proceedings is tenant to the defendant of premises in D’Olier Street, Dublin, forming part of a building known as O’Connell Bridge House. The tenancy was created by a lease dated 6 September 1973, by which a term of 27 years from 1 January 1972, was demised subject, during the first seven years of the term, to the yearly rent of £4,000, with provisions for review thereafter.
The lease contains a covenant by the plaintiff not without the consent of the defendant to use the premises for any purpose other than as a ladies and gents tailoring and outfitting business.
The plaintiff has failed to make a success of the tailoring business due, as he says, to the collapse of the hatters business in connection with which he had, until recently, the agency for a famous firm. The plaintiff attributes this collapse to change in the fashion of wearing, or not wearing, hats. It may be that there are other associated causes, but he is now anxious to turn to the only other type of business in which he states he has had previous experience, namely, the confectionery business.
He has applied to the defendant for consent to a change in user of the premises but the defendant has refused consent on the ground that other adjoining tenants of the defendant, who state that their businesses would be adversely affected, have objected. Evidence as to their objections was given on behalf of two of these tenants, that is to say, by the proprietor of a confectionery shop attached to a cinema on Burgh Quay and by a director of the Harp Bar. The third tenant appears to carry on a restaurant and delicatessen business, but some minor aspects of this business would appear to be similar to the business proposed to be commenced by the plaintiff. On the evidence before me, I am satisfied that there is no substance in the objection made by the proprietors of the Harp Bar. A similar business to that proposed by the plaintiff is carried on in the shop attached to the cinema. It appears to me to be probable that the bulk of the trade *313 carried on in this shop is associated with the patrons of the cinema, but the shop is so constructed as to have access for the customers directly from the street and I accept the evidence that there is a general trade carried on in it, particularly during the lunchtime period.
One of the directors of the defendant gave evidence and stated that the attitude of the defendant was to accede to the wishes of the tenants who objected to the proposed change in user, but it is clear that the defendant has no other objection to the change.
Under these circumstances, I have to decide whether the consent of the defendant is being unreasonably withheld or not.
I have been referred to the following cases: Rice v Dublin Corporation [1947] IR 425; W & L Crowe Ltd v Dublin Port & Docks Board [1962] IR 294; Egan Film Services ltd v McNamara (1952) 86 ILTR 189; Premier Confectionery Ltd v London Commercial Sale Rooms Ltd [1933] 1 Ch 904.
From these cases it appears to be established that the onus is one the plaintiff to establish that the consent has been unreasonably withheld, that ‘reasonably’ may be contrasted with ‘arbitrarily’ or ‘capriciously’, that a landlord may reasonably base a refusal of consent upon grounds of general policy in relation to the manage-ment of his estate, and that the question whether the grounds alleged for the refusal of consent are reasonable or not in any particular case is a matter for the court.
On behalf of the defendant I was also referred to Sheppard v Hong Kong & Shanghai Bank (1872) 20 WR 459 as supporting the proposition that, where the rent is substantial, a heavier burden is cast on the landlord in justifying a refusal of consent. I am not satisfied that this proposition is correct, and I do not accept it.
Although the defendant’s decision to refuse consent is not capricious it appears to me that, under the circumstances of this case, it is arbitrary. It is not suggested that the defendant will be in any way prejudiced, either immediately or in the future, by granting consent to the change. Of the tenants who have objected, one does not appear to me to be likely to be in any way prejudiced by the change in user and the other two will be only marginally prejudiced.
It seems to me to be an arbitrary decision by a landlord to refuse consent solely on the ground that one or more of his other tenants allege that he or they will or may be prejudiced without any threat or expectation of consequential loss or detriment to the landlord.
Dunnes Stores (Ilac Centre) Ltd -v- Irish Life Assurance PLC & Anor
[2008] IEHC 114 (23 April 2008)
Judgment by: Clarke J.
Status of Judgment: Approved
1. Introduction
1.1 The Ilac Centre was one of the first of its kind in Ireland. The centre was developed over 25 years ago as one of the first city centre shopping facilities in the country. It would be fair to say that it is common case between the parties that the centre had, by the early years of this century, become somewhat “tired”. The ownership of the landlords’ interest in the shopping centre passed through many hands over the years but is now in the possession of the defendants. The Ilac Centre is, therefore, owned as to 50% each by the first named defendant (“Irish Life”) and the second named defendant (“Mr. O’Reilly”) (collectively “the landlords”). Though only relevant in a marginal way, I should also note that the interest of Mr. O’Reilly was, until approximately 2005 owned by British Land Group (“British Land”), the major land holding company, with interests in both the UK and Ireland. The interest of British Land was disposed of, in 2005, to Mr. O’Reilly.
1.2 The plaintiffs (“Dunnes”) are, of course, an extremely well known and established retailing company. Dunnes operate many stores throughout the country and have done so with a significant degree of success over a number of decades. Dunnes has, from time to time, had various interests in properties in and near the Ilac Centre. The particular focus of these proceedings is a unit which is known as Dunnes 1, which has been in the possession of Dunnes since the early stages of the development of the Ilac Centre. The way in which Dunnes holds its interest in Dunnes 1 is by means of a long lease at a nominal rent which was purchased for a significant capital sum. It is obvious that the reason why a lease of that type, rather than an outright freehold purchase, was put in place at the relevant time was so that both Dunnes, the developers of the Ilac Centre and their respective successors in title would be bound by the various covenants contained within the lease designed for the benefit of the centre as a whole. Thus Dunnes, while in commercial terms “purchasing” the property, are nonetheless subject to the terms of the lease which are, doubtless, in terms not dissimilar to those on which the other tenants for the time being in the Ilac Centre hold their properties, save that such tenants are likely to hold their properties on more normal leasehold terms as to rent.
1.3 The dispute which has arisen between the parties concerns a desire on the part of Dunnes to change the use of Dunnes 1 (or, at least, a portion of it), to what is described as a “high quality food hall” use. It is common case that such a use is inconsistent with the existing user clause in the lease. It is also common case that Dunnes are entitled, under the terms of the lease, to apply for a change of use and that the landlords for the time being are not entitled to unreasonably withhold any such consent. This case is, therefore, concerned with the issue as to whether the consent of the landlords has been unreasonably withheld in relation to Dunnes request for that change of use.
1.4 There are some facts of significant controversy between the parties to which it will be necessary to turn in due course. However, many of the underlying and background facts are not in dispute and it is to those that I first turn.
2. The Uncontested Facts
2.1 Irish Life developed the Ilac Centre in the late 1970’s in conjunction with Dublin Corporation with the shopping centre opening in November, 1981. In February, 1997 Irish Life bought out Dublin Corporation’s interest in much of the shopping centre (i.e. the entirety of the shopping centre devoted to retail). In July, 2001 Irish Life sold a 50% share in the centre to British Land, who in turn sold their interest to Mr. O’Reilly in August, 2005.
2.2 It would appear that subsequent to Irish Life buying out the interest of Dublin Corporation in 1997, an application was made for planning permission in 1998 for significant re-development works within the centre. A revised planning permission was obtained in July, 2003. A number of different projects were brought to completion over the next number of years including a significant re-development which was launched in February, 2005, and completed in October, 2006. It is also important to note that a particularly significant additional development involved Dunnes Stores in an independent arrangement with the landlords. A so called “framework agreement” was entered into in November, 2003 between Dunnes and Irish Life/British Land which provided for an exchange by Dunnes of a unit known as Department Store 2 (“Dunnes 2”) for certain units on the central plaza of the Ilac Centre. Those units backed onto a site on which Dunnes intended to build a re-developed Henry Street store, which has become known as Dunnes 3. The units within the Ilac Centre which Dunnes acquired back onto this store, so giving the store access onto the central Ilac Centre mall, as well as directly out onto Henry Street. Therefore, the rear portion of Dunnes 3 is within the Ilac Centre properly so called, whereas the front portion is, strictly speaking, an entirely separate Dunnes development fronting onto Henry Street.
2.3 It is common case that Dunnes wrote to Irish Life on 28th November, 2006, seeking consent to the change of use with which I am concerned. The possibility of such an application had been broached informally some weeks earlier. It will be necessary to turn to the internal consideration given to that matter by and between Irish Life and Mr. O’Reilly and his officials in due course, as this is the subject of some controversy. However, in that context it should be noted that it is clear that Mr. O’Reilly and his officials acted as asset managers of the Ilac Centre and, on any view, had a more significant role in practice in any relevant decision making than Irish Life.
2.4 It should be noted in passing that the user clause relevant to Dunnes 3 was different to that which had been in place in respect of Dunnes 2 for which, of course, Dunnes 3, was, in a sense, a partial “swop”. Unlike Dunnes 2, the user clause for Dunnes 3 permitted food use. It should, however, be noted that there was no obligation on Dunnes to provide food use in Dunnes 3. Rather such use was permitted. It was stated by witnesses on behalf of both Irish Life and Mr. O’Reilly that it had been their assumption or understanding that Dunnes intended opening a food facility in the Dunnes 3 store. In that context it was said that the landlords were surprised when the November letter was received which intimated a desire to change the use of part of Dunnes 1 to a high quality food hall. It became clear at that time that Dunnes no longer intended to operate a food use in Dunnes 3.
2.5 It should also be noted by way of background that permission had been given for Dunnes to operate a food business out of Dunnes 2 on a temporary basis during the period when the revamped Dunnes 3 was under construction. The framework agreement provided, of course, that Dunnes 2 was to be handed back to the landlords as soon as Dunnes 3 was operational.
2.6 In any event, having engaged in various meetings and consultations including some consideration of additional information supplied by Dunnes (on request by the landlords), a letter issued on behalf of the landlords on 2nd March, 2007 which informed Dunnes that the landlords refused consent for the change of use sought. It is in respect of that decision that these proceedings are maintained.
2.7 It should, in addition, however, be noted that certain further information was provided subsequent to the refusal in an attempt by Dunnes to persuade the landlords to change their position. That attempt was unsuccessful.
2.8 On 14th March, solicitors acting on behalf of Dunnes wrote to Frank Martin, head of Asset Management within J.F.M. Property Services Limited (which I understand to be a vehicle of Mr. O’Reilly’s and which was involved in asset management on behalf of the landlords in respect of the Ilac Centre) referring to the refusal. The original letter of refusal of 2nd March, 2007 had stated that the reason was “on the grounds of good estate management”. The letter of 14th March indicated that that reason was not understood and sought an explanation as to what was meant by “good estate management” in the circumstances of the case. This letter does not appear to have been replied to. Proceedings having issued in July of 2007, the landlords maintained the same position in their defence, which was filed on 4th September, 2007, in that it was asserted at para. 3 of the defence that consent had been refused “for good and sufficient reasons related to the management and control of the Ilac Shopping Centre”. In addition at para. 5, and having asserted that Dunnes application for consent to change of use was considered, it was stated that such consent was refused “on the grounds that it was not consistent with good estate management”.
2.9 The only more detailed account of what were asserted to be the reasons for the landlords refusal is to be found in replies to a notice seeking better particulars of the defence. In that context, and in a notice for particulars dated 18th September, 2007, Dunnes asked the landlords to “set forth the exact basis upon which it is claimed that the use proposed by the plaintiff would not be consistent with the alleged plan for the refurbishment of the Ilac Centre (including the reconstruction of the Mary Street frontage)”. The reply, which is dated 4th October, 2007, stated that:-
“The exact basis of the defendants plea is the defendants opinion that the plaintiff’s proposed use would not be consistent with the defendants’ vision and image for that part of the Ilac Shopping Centre, namely as a primary retail fashion area”.
2.10 Therefore, the asserted basis on the part of the landlords for refusal was that use as a “high quality food hall” would, in substance, be inconsistent with what was said to be the landlords “vision and image” for the relevant part of the Ilac Shopping Centre as “a primary retail fashion area”. It should be noted that the first time when any such description was given as the basis for refusal was in the reply to the notice for particulars to which I have just referred. Up to that point the only reason given was the extremely general “good estate management” grounds. In that context Dunnes invite me, in conjunction with other facts, to infer that the reason given was not the true reason for the refusal because, amongst other things, of the fact that that reason was not tendered at a much earlier stage. In substance it is said that, if the vision and image of a retail fashion centre was, in truth, the reason for refusal, then some reference to that basis of refusal would have been forthcoming a long time prior to September 2007, which was, of course, long after the proceedings had commenced. I will turn to that issue when considering the controversial facts in this case.
2.11 A further issue arose at the hearing on the basis of which Dunnes urge that I should infer that the reason given was not the true reason. It is important that I should touch on that issue, which concerned discovery, and indicate the role which that issue should properly play in my considerations. I now turn to that question.
3. The Discovery Issue
3.1 There had been a significant exchange of correspondence in advance of the commencement of the hearing before me in which, it is fair to say, Dunnes made complaint that the discovery furnished on behalf of the landlords was inadequate. It was, of course, clear that Dunnes had sought, in the proceedings, to question the true motive for the refusal of consent. In the course of the hearing and in particular during the cross examination of witnesses called on behalf of the landlords, it became clear that there seemed to be a significant volume of additional documentation which was relevant to the issues which had arisen between the parties (i.e. the landlords “vision and image”) and which had not been discovered. In those circumstances the case was adjourned, with the landlords being given a further opportunity to make proper discovery. A significant volume of additional documentation was revealed by that further discovery process.
3.2 There can be little doubt that at least some of the documentation concerned is of significance for the issues which I have to try. It does have to be recorded that it is very regrettable indeed that a major public company of the standing of Irish Life, and a significant businessman such as Mr. O’Reilly should have been guilty of a very significant failure to deal properly with their obligations to the court in respect of discovery.
3.3 It has often been said that discovery relies to a large degree on trust. This is true. Discovery orders are made by the court (or an agreement is reached by the parties which has a similar effect) on the basis of defining the obligations of the parties concerning disclosure of documents. The book then passes to those charged with swearing the affidavit of discovery, upon whom a trust is placed that they will conscientiously and diligently deal with the task in hand. It is, of course, the case that mistakes can and do happen. Such mistakes can range from the entirely innocent and understandable to those which might be characterised as blameworthy to a greater or lesser extent. At the other extreme are cases where there has been a deliberate failure to disclose material information. At a minimum it is manifestly clear, on all of the evidence, that those involved in making discovery on behalf of the landlords in this case did not take and act upon proper legal advice as to their obligations in relation to discovery. It is, of course, the case that individuals themselves may not fully understand either their overall obligations in relation to discovery, may not be able to properly address questions of relevance which may arise as to whether documents should properly be included, and most certainly may not be able to deal with legal issues, such as privilege, which may arise. However, the obligation on such parties, in those circumstances, is to take proper legal advice and to act upon it. It is again particularly regrettable that major organisations such as the landlords, who have ample resources available to them and had also access to the best of legal advice, should have failed to take the elementary step of ensuring that they knew what their obligations were and of taking advice in respect of any questions of difficulty that might arise.
3.4 I must, therefore, conclude that, at a minimum, there was a very serious failure on the part both of Irish Life and of Mr. O’Reilly to comply with their disclosure obligations to the court. Both were in significant breach of the trust that was placed on them to deal with discovery in a fair and proper manner. There is no doubt but that amongst the consequences of that failure was that these proceedings were significantly lengthened. However for the purposes of this judgment it is important that I emphasise what, if any, consequences for the case itself (as opposed to issues relating to the costs of the proceedings) can properly flow from the failure to make proper discovery.
3.5 I should emphasise that a court has no business in seeking to punish a party who has failed to make proper discovery by interfering with what would otherwise be the proper and fair result of the proceedings. The proper way to deal with a culpable failure of discovery is to direct the consequences to the wrongdoing concerned. If it remains, nonetheless, possible that there be a fair trial, then the court should conduct that fair trial and come to a just conclusion on the evidence and the law. The consequences of any failure to make proper discovery should be in costs or other matters directly flowing from the failure concerned.
3.6 It is only if it is proper and appropriate to conclude or infer from the failure to make proper discovery in the first place that the failure concerned was designed for the purposes of not giving access to the other side to relevant information and where it would be appropriate to infer, in turn, from such a finding, a particular view on the issues to which that information refers, that it would be appropriate to allow a failure to make proper discovery to influence the courts decision on the merits of the case. I should point out that Dunnes invite me to draw such an inference in this case. It is said that I should conclude that there was an attempt to prevent certain information becoming available to Dunnes. It is said that an appropriate inference to draw from that fact (if it be so found) is that the landlords were attempting to disguise their true motivation. On that basis it is suggested that I should reach certain conclusions about the true reasons for refusal of consent to which it will be necessary to refer in due course.
3.7 I do, however, wish to emphasise that I fully accept the submission made by counsel on behalf of the landlords to the effect that it would not be proper for me to allow the discovery issues to influence the decision on the case unless I were satisfied (which he strongly urged I should not be) that it was appropriate to draw inferences of the type suggested on behalf of Dunnes. As counsel put it, his clients “had not helped themselves” by the way in which discovery had been dealt with. However, it was urged that I should conclude that the failure to deal properly with discovery was due to a failure to understand what was required in discovery (admittedly a culpable failure deriving from not having taken and acted upon proper legal advice) which should not give rise to any proper inference in relation to the underlying facts. This is an issue to which I will have to return in the context of the disputed facts. However having identified the discovery issues which arose, it is appropriate to now turn to the legal basis for the challenge mounted by Dunnes to the refusal of consent.
4. Dunnes Case
4.1 In the light of the hearing as it developed, Dunnes made three primary contentions at the end of the case for their submission that consent had been wrongfully withheld. These were as follows:-
A. It was said that, on the facts, I should conclude that the true reason for the withholding of consent was not that given by the landlords (i.e. the fashion retail “vision and image”) but rather it was suggested that the refusal was as a means for exerting leverage on Dunnes to give up possession of some or all of Dunnes 1.
B. In the alternative it is said that the reason given was not bona fide the true reason. and,
C. even if the “fashion” reason was the true reason, it was said on behalf of Dunnes that such a reason was incompatible, in all the circumstances, with the text of the relevant clause of the lease.
4.2 I propose dealing with each of those questions although it has to be said that grounds A and B amount to sides of the same coin in that, in large measure, it is, in reality, suggested that the reason for giving a non bona fide basis for refusal (i.e. “B”) was to disguise “A”.
4.3 Those two issues centre on an assessment of the evidence concerning what was going on within and between the landlords during the period while Dunnes’ request for consent for a change of use was under consideration. It will be necessary, therefore, in due course, to set out the important features of that evidence and reach conclusions.
4.4 However before doing so there are two legal issues which arise to which I should first turn. The first concerns point “C” which involves a largely legal argument concerning the proper construction of the relevant clause. I will turn shortly to that question.
4.5 Secondly, it will be necessary to set out, briefly, the legal principles by reference to which I should approach questions concerning the true reason for the landlords’ refusal. Happily those legal principles were not in significant dispute between the parties, although the facts to which they are to be applied were, of course, hotly disputed.
4.6 I, therefore, turn firstly to the lease itself.
5. The Change of Use Clause
5.1 The relevant clause of the lease (i.e. clause 4.26.1) reads as follows:-
“Not without the prior consent in writing of the Landlord or its Agents thereunto lawfully authorised to use or to permit or suffer or allow the Demised Unit or any part of parts thereof to be used for any purpose other than as set forth in Part II of the First Schedule hereto and for no other purpose or purposes whatsoever and at all times to carry on the said authorised business as a business of high quality standards and tone so as to protect the standing appearance and prosperity of the Centre as a whole and of the other tenants of Units therein PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED that upon any application by the Tenant or any under-tenant of the Tenant for liberty to alter or change the aforesaid permitted user of the Demised Unit that Landlord shall not unreasonably withhold its consent to such proposed change of user, but in considering the matter full account shall be taken of the fact that the Demised Unit forms part of the Centre in which it is necessary and desirable both for the well being and prosperity of the Centre as a whole and of the individual tenants of other Units therein that the nature of the business is carried on in the Centre as a whole should be of an equally high standard quality and tone and be as diverse as possible.”
5.2 It will be necessary to return to certain other aspects of that clause in due course. However, it is the final phrase of the clause which is relevant to the argument with which I am now concerned. As will be seen, the clause does not (as some such clauses do) simply provide that the landlord is not to unreasonably withhold consent for a change of use. Rather the clause specifies that “full account shall be taken” of various matters which stem from the fact that the use to which any particular unit within the centre is to be put can have an affect on the centre as a whole and on the businesses and, therefore, the legitimate interests, of the tenants of other units. In that context, in particular, two matters are required to be taken into account. The first is that the business to be conducted “should be of an equally high standard, quality and tone” and the second, is that the businesses generally should be “as diverse as possible”.
5.3 For the purposes of this argument I propose accepting that the reasons given on behalf of the landlords for the refusal of consent represent the true reasons. On that basis it would appear that the landlords were desirous of converting a very substantial segment of the shopping centre into an area designed for retail fashion units. Dunnes argue that such an intention (even it were, contrary to their submissions, the true intention) if applied to a consideration of an application for a change of use, is inconsistent with what is said to be the mandated requirement under clause 4.26.1 of the lease that, in the consideration of applications for change of use, regard has to be had to the necessity and desirability of the businesses being “as diverse as possible”.
5.4 A number of preliminary observations seem to me to be appropriate. Firstly it seems clear on the evidence that those who are said by the landlords to have been charged with considering the application on behalf of the landlords, did not give any consideration to that particular aspect of the clause. It would seem that some consideration was given to the text of the clause (in particular by expert advisors) for the purposes of determining whether Dunnes needed a change of use consent having regard to the existing user clause. The balance of the consideration given by both those advisors and, insofar as it is possible to tell (an issue to which I will return) the principals, seems to have been directed towards the general question of whether the proposed change of use was desirable without any reference to the requirement that regard should be had to the necessity and desirability of businesses being as diverse as possible.
5.5 Secondly, and again accepting for the purposes of this argument the position as asserted on behalf of the landlords, it would seem that what was envisaged was that, insofar as possible, all units at the relevant end of the centre would be turned into retail fashion units or, at a minimum uses compatible with retail fashion. While there would, doubtless, be some diversity within that overall concept (such as clothing, footwear, accessories and the like) it seems clear on the evidence that the asserted position of the landlords was to minimise or, indeed, exclude from the relevant end of the centre, any units which did not come within the fashion retail definition or were at least compatible with it.
5.6 Against that background it is necessary to turn to the proper construction of the relevant clause. It was argued on behalf of the landlords that the clause simply enabled the landlords to have regard to the specified matters when considering an application for change for use. On that basis it was suggested that the relevant provision would permit the landlords, expressly, to refuse change of use on the basis that the proposed new use would diminish diversity. However, it was suggested that a tenant could not rely upon that aspect of the clause as a basis for suggesting that consent had been wrongfully refused.
5.7 The clear wording of the clause, however, states that “in considering the matter full account shall be taken” of the various matters which follow. It seems to me that the clear wording of the clause, therefore, obliges the landlord to have regard to the matters following in considering whether to consent to a change of use. There is nothing in the context of the agreement as a whole that would lead to that clear wording being given any other interpretation. Neither is that wording inconsistent with an appropriate approach to the construction of the lease as a whole, or in any way ambiguous such as would, again, warrant a departure from the literal meaning of the text.
5.8 In those circumstances, I am satisfied that the lease imposes an obligation on the landlords to have regard to diversity as part of the landlords’ consideration of a change of use application. It seems to me that the landlords’ refusal of Dunnes application for the change of use which is the subject of these proceedings is in breach of that obligation for two reasons.
5.9 Firstly, it is clear on the evidence that the landlords did not give any consideration to diversity as part of their deliberation. This is not a case where the landlords did have regard to diversity, but came to a view (which might or might not be capable of being questioned) as to the appropriateness of refusing consent having taken diversity into account. Rather this is a case where what I have found to be the mandated obligation on the landlords to at least have regard to diversity did not occur at all.
5.10 Secondly, the stated position of the landlords, which involved turning a very significant portion of the shopping centre into a largely single purpose retail fashion mall, seems to me to be entirely inconsistent with the obligation of diversity. I should emphasise that I am not, in this context, making any comment on whether there may or may not have been understandable commercial reasons why the landlord might have considered it appropriate to attempt to turn the relevant portion of the centre into a mall which catered exclusively (so far as possible) for retail fashion. The problem is that the landlords’ freedom of action is circumscribed by its contractual obligations under the lease. The lease does not, in my view, permit the landlord to embark upon such a policy (i.e. to disregard diversity, in considering any application for a change of use which is governed by a clause equivalent to clause 4.26.1) without having secured the agreement of any tenants who may be bound by a clause similar to that in Dunnes’ lease to a waiver of the obligation to have such regard to diversity. The precise freedom of action in terms of diversity which a landlord might have in acting reasonably in relation to applications for consent to change of use under a clause such as that contained in this lease at 4.26.1 could be a matter of legitimate debate. However, it seems to me that the clause cannot contemplate a legitimate refusal of consent on the grounds that the proposed new user was inconsistent with a move towards a position of little or no diversity.
5.11 Therefore, even if the landlord had given consideration to the diversity issue, I am not satisfied that the proffered reason for refusing consent (i.e. the fact that the proposed new user was inconsistent with a policy of the landlord in favour of a significant reduction in diversity in the centre), could have been sustained as being a reasonable basis for refusal.
5.12 For those reason alone, I am satisfied that Dunnes are entitled to a declaration that the refusal of consent was unreasonably withheld. However, lest I be wrong in those conclusions, it is necessary to turn to the other issues which centre on the question of the true basis for refusal which, as I have pointed out, is highly contested. However, before so doing I should touch briefly on the legal principles by reference to which I should address those questions.
6. Bona Fide Reasons – The Law
6.1 Dunnes place reliance on Bromley Park Garden Estates Limited v. Moss [1982] 1 W.L.R. 1019, and Design Progression Limited v. Thurloe Properties Limited [2005] 1 WLR 1, for the proposition that a refusal of consent for an improper purpose, not contemplated by the lease, is not permissible. That contention is accepted at the level of principle on behalf of the landlords.
6.2 Design Progression was a case involving an application by a tenant to be permitted to assign a lease rather than to change use, but there is no reason to believe that the general observations made in that case would not be equally applicable to an application for a change of use. In that case, Peter Smith J. was satisfied, on the evidence that a landlord’s refusal of consent to an assignment was based not on a bona fide reason but was designed for the purposes of getting back possession of the property concerned and, in effect, motivated by a desire to obtain the commercial benefit of the value of the lease for itself. It is important to note that Peter Smith J. acknowledged that a landlord is more than entitled to seek to obtain, by negotiation, a surrender of a lease so as to go into possession and deal with the property as it wishes. There is nothing, in itself, at all wrong with a landlord seeking to secure possession of the property.
6.3 The important point to make is that the terms of a lease bind both landlord and tenant contractually to a series of terms. Among the obligations on the part of the landlord, by covenant, will normally be an obligation not to unreasonably withhold consent to assignment (or, as in this case, to change of use). Such an obligation governs the landlord’s freedom of action. He is obliged to act reasonably in respect of an application for a change of use or assignment. He is not entitled to use such an application to obtain leverage in a strategy to regain possession of the property, even though he would be perfectly entitled to pursue any legitimate negotiation strategy to seek to achieve the same end. The reason why he cannot do this is that he is already bound by covenant only to refuse consent where it is reasonable so to do. The reason for his refusal must be reasonable, independent of his strategy to regain the property.
6.4 In like manner, Dunne L.J., in Bromley Park noted that it would not be reasonable for a landlord to refuse his consent to an assignment where the purpose of the refusal was to seek to destroy the lease or cause it to be merged with another lease in the same building, even though such eventualities might amount to good estate management. Such reasons were not the sort of reasons contemplated by the lease and would amount to an ulterior motive.
6.5 It is clear, therefore, that what is spoken of in the authorities as an “ulterior motive” does not necessarily (or indeed frequently) refer to a motive which might be inappropriate in itself. There might well be very good and sensible commercial reasons for the landlord seeking to achieve the end concerned. However, the landlord is not free to act without regard to his obligations under the lease which are already in being. However sensible, from the landlords point of view, a particular position may be, it cannot amount to a proper reason for refusing a consent to change of use or assignment unless it is a reason contemplated by the lease. It also follows that the court must, as Peter Smith J. did in Design Progression, assess on the evidence what the true motivation of the landlord was.
6.6 I did not understand any of the above principles to be in controversy between the parties although, as I have pointed out, the facts which need to be assessed by reference to those principles are significantly controversial. Against the background of those principles it is, therefore, appropriate that I turn to the facts.
7. The Controversial Facts
7.1 In substance the contention made on the part of Dunnes is that the true reason behind the refusal of consent in this case was an inappropriate attempt on the part of the landlords to seek to obtain possession of Dunnes 1 (or at least a significant portion of it) for the purposes of facilitating what was seen to be a beneficial redevelopment of the Ilac Centre as a whole. I would emphasis that there is nothing, in itself, wrong with the landlords seeking to do this.
7.2 The evidence supports the view that the original unit size in the Ilac Centre, while suitable at the time of the construction of the centre, had become outdated. Modern retailing requires a greater number of larger units. With that in mind it seems clear that the landlords have pursued a policy of attempting to increase unit size by securing vacant possession of various units and adjusting the boundaries between vacant units or amalgamating vacant units so as to provide new units of greater size which were considered to be more suitable for the modern market. Significant elements of the redevelopment to which I have referred were designed with this in mind. Furthermore, it appears to be the intention to divide the existing Dunnes 2 (when possession of same is recovered from Dunnes) into a small number of large units. There is no doubt that, from time to time, some consideration was also given to the possibility of providing a small number of larger units within the boundaries of the existing Dunnes 1 unit should same come back into the landlords possession. I am, therefore, satisfied that at all material times the landlords had a general interest in securing possession of Dunnes 1, so that it could be used as part of the overall redevelopment of the Ilac Centre, and in particular, in the facilitation of more larger units.
7.3 Furthermore, there appears to have been some benefit in securing possession of Dunnes 1, in or around the time when the application for consent was made, because the re-organisation of other parts of the centre would have been facilitated by having a small number of large units within Dunnes 1 which could be offered to existing tenants in other portions of the centre as an inducement to those other tenants to move. In general terms I did not understand the landlords to dispute that it was perceived that there would be benefits from their point of view in obtaining possession of Dunnes 1. However, as I have pointed out, that is not really the issue. The landlords were more than entitled to pursue such a strategy provided it was pursued by legitimate means. The issue in controversy in this case is whether, as a matter of fact, the landlords wrongly refused consent to a legitimate application for a change of use, as part of a strategy designed to secure possession of the unit concerned. This is, in truth, a pure question of fact which I must determine on the balance of probabilities on the evidence.
7.4 However, there are some slightly unusual features to this case (not least the fact that the landlord is, in fact, two separate entities) which require that some consideration be given to the question of how one should, in those circumstances, approach the question as to determining the true motivation of the landlord. In truth the first question which must be considered is as to who really made the decision on behalf of the landlords in the first place. It is to that question that I now turn.
8. Who made the Decision?
8.1 Quite an amount of evidence, particularly evidence elicited under cross examination, was directed to the question of where the real decision making on the part of the landlords actually lay. On the basis of that evidence I am satisfied as to a number of facts.
8.2 Firstly the involvement of Irish Life in the decision making process was limited. While it was suggested that the formal decision to refuse consent was made by Fergus Dowd on behalf of Irish Life and Frank Martin on behalf of Mr. O’Reilly, the truth is that Mr. Dowd’s involvement was extremely limited. No other person on the Irish Life side was involved at all. It would appear that Mr. Dowd had, not surprisingly, relatively regular meetings, concerning the joint affairs of Irish Life and Mr. O’Reilly, which were conducted in a relatively informal way, frequently over lunch. Mr. Dowd attended one such meeting for the purposes of discussing the response to the request by Dunnes for a change of use. It is clear that Mr. Dowd only had a limited opportunity to peruse the materials which had been supplied by Dunnes for the purposes of supporting their application. In substance I am, therefore, satisfied, that, in reality, the landlords’ decision was taken on the O’Reilly side with Irish Life largely confining itself to accepting the advice given by Mr. Martin acting on behalf of Mr. O’Reilly. There is, of course, nothing wrong in itself with such a course of action. It is clear that Irish Life regarded Mr. O’Reilly and his organisation as being, in effect, the asset managers. Irish Life was entirely entitled to take such a position. However, it follows that Irish Life must also accept that the basis for the decision to refuse consent must be taken to be largely the basis adopted by Mr. O’Reilly, rather than Irish Life itself, for it is clear, on the evidence, and I find as a fact, that Irish Life played little independent role in the decision making process.
8.3 So far as the O’Reilly side is concerned, I am also satisfied as a fact that the significant true decision maker was Mr. O’Reilly himself. It is clear that there was an early intimation (in advance of the formal letter seeking consent to change of use) of Dunnes intention to seek the change of use concerned. It seems clear that from an early stage Mr. O’Reilly had expressed a view of opposition to the request. It is true that the task of progressing matters, both by consulting expert advisers and by consulting with Irish Life in its capacity as co-owner, was left to Mr. Martin. It does not seem to me, on the evidence, to be proper, however, to characterise Mr. Martin as the decision maker. Given Mr. O’Reilly’s original indication, it seems clear that Mr. Martin could not have come to a contrary view without going back to Mr. O’Reilly and obtaining Mr. O’Reilly’s agreement to an acceptance of the change of use proposed.
8.4 There is nothing, of course, inappropriate in the owner of a significant business empire (such as Mr. O’Reilly) delegating appropriate decisions to persons within his organisation. If such a delegation were to occur, then it would be appropriate to look at the reasons why the delegated decision maker came to the conclusions that he did. However, this does not seem to me to be a case where there was, in reality, a delegation of decision making to Mr. Martin. Rather Mr. O’Reilly indicated his initial reaction to Mr. Martin and left the nuts and bolts up to Mr. Martin for implementation. I am not satisfied that it would have been open to Mr. Martin to come to a decision that favoured giving consent without reverting back to Mr. O’Reilly. On that basis it does not seem to me that Mr. Martin can, in reality, be regarded as the decision maker. Mr. O’Reilly was the true decision maker.
8.5 Having regard to the fact that Irish Life did, for the reasons which I have set out, largely defer to the O’Reilly side, it follows that the true decision maker on the part of the landlords, on the facts of this case, was Mr. O’Reilly. Mr. O’Reilly indicated an initial view against acceptance of the change of use. It appears clear that a final view in favour could not have been communicated to Dunnes without going back to Mr. O’Reilly. On that basis he was, in reality, the decision maker. Unfortunately Mr. O’Reilly was not tendered in evidence and it is only possible to infer what his motivation was. However, it is against the background of my conclusion that Mr. O’Reilly was the true decision maker, that it is necessary to approach the real reasons why consent was refused in this case. I now turn to that issue.
9. What was the True Reason for Refusal?
9.1 I have already identified two matters put forward on behalf of Dunnes from which, it is said, I should infer that the reason given for refusing consent to change of use was not the true reason. The first such basis was the undoubtedly very lengthy period which elapsed from the refusal itself to the time when any meaningful explanation of the reason proffered for that refusal was given. The second basis was the absence, in the documents as originally discovered on behalf of the landlords, of a significant volume of documentation concerned both with the landlords’ fashion “vision and image” and, indeed, with the consideration given by the landlords either individually (which in reality relates to the O’Reilly side) or collectively, to the question of the consent.
9.2 In this latter context a further significant issue arises. During the period when the application for consent to change of use was “pending” certain negotiations took place between professional agents acting on behalf of Mr. O’Reilly on the one hand and on behalf of Dunnes on the other hand concerning the possibility of Dunnes giving up possession of Dunnes 1. It is fair to say that those negotiations involved a much wider range of possible commercial arrangements between companies controlled by Mr. O’Reilly and Dunnes. Mr. O’Reilly’s interests extend to a significant number of shopping centres (including, for example, the Dundrum shopping centre) and it is hardly surprising that Dunnes, as a major retailer, would have at least the possibility of having an interest in dealing with Mr. O’Reilly in relation to some of his centres. As I have pointed out there is, of course, nothing wrong with Mr. O’Reilly seeking to secure possession of Dunnes 1, whether as a stand alone arrangement or in conjunction with a series of other commercial arrangements to be entered into with Dunnes in relation to a variety of other shopping centres. The only issue which is relevant to these proceedings, in that context, is as to whether the refusal of consent was in some way inappropriately used as part of a strategy to secure an agreement on the giving up of possession of Dunnes 1.
9.3 It was, of course, the case that Dunnes did not need discovery to be informed of the existence of the relevant negotiations. After all Dunnes, through their professional agents, were involved in the negotiations.
9.4 The fact that parallel negotiations were in train was not something, therefore, that could have come as any news to Dunnes. However, much of the background to those negotiations from the perspective of those representing Mr. O’Reilly’s interests was not revealed in the discovery as originally made. The existence of a Master Plan for the Ilac Centre and reference to meetings of an Asset Management Forum within which the interests of Irish Life and Mr. O’Reilly in relation to the Ilac Centre were debated are cases in point. Having considered all of the evidence I have come to the conclusion that the failure to make adequate discovery can not be put down to inadvertence or even negligence. The documents not discovered are too recent and too important to have been accidentally overlooked. While the explanation given by Mr. Martin under cross examination concerning the difficulty of locating all of relevant email strings may go some way towards placing a small number of the omissions into the inadvertent category, that explanation falls far short of providing a full explanation, even in respect of emails, but most particularly in respect of other documentation. It is also clear that much of the documentation which was omitted from the original discovery would, at a minimum, have at least afforded ammunition to the Dunnes side to suggest that at least part of the true reason for the refusal of consent was interlinked with a desire on the part of Mr. O’Reilly’s organisation to obtain possession of some or all of Dunnes 1.
9.5 In those circumstances I am driven to the conclusion that the relevant documents were deliberately suppressed with a view to minimising the extent to which Dunnes would be able to provide a factual basis for the suggestion that a desire to obtain possession of Dunnes 1 was at least a significant element of the consideration given to the user question by those involved in Mr. O’Reilly’s organisation. In those circumstances it also seems to me that I should infer that the reason why this documentation was suppressed was, at least in part, because the possession issue did actually form part of Mr. O’Reilly’s consideration. A number of other factors also point to the same conclusion. There is no doubt but that at least some members of the landlords’ team expressed themselves in writing during the relevant period in terms which suggest that those members, at least, saw the consent issue as “leverage” which might be used to advance possession. While attempts were made to distance the actual decision making from those who had expressed themselves in that way, it remains the case that a linkage between the two issues was at least in the minds of some members of the landlords’ team at the relevant stage. As I have already noted I am satisfied that the true decision maker was Mr. O’Reilly. Mr. O’Reilly did not give evidence and it follows that it is only possible to infer the true reasons for his refusal of consent from the surrounding facts. It is also relevant, and surprising, that Irish Life did not appear to know about the wider negotiations between Mr. O’Reilly’s agent and Dunnes until the facts emerged at the hearing. The belated clarification on behalf of the landlords of the stated reason for refusal is also a matter of some (although not great) weight. That delay is at least consistent with a desire on the part of the landlords to refrain from specifying the reason in any detail. While there might be a number of possible explanations for such conduct, it is at least consistent with the fact that there were a number of factors involved in the decision and the landlords were reluctant to be specific until compelled so to be in the context of these proceedings.
9.6 The sequencing of the negotiations concerning possession is also consistent with possession being a consideration taken into account on the part of the landlords. While it is true that the landlords sought additional information from Dunnes, on the balance of the evidence it would seem unlikely that there was any reality to that process given the clear view that had been taken at an early stage. While it might be going somewhat too far to describe, as was urged by counsel on behalf of Dunnes, the process of seeking additional clarification as a “sham”, it nonetheless remains the case that it is difficult to see what reality there was to the request. Likewise no real explanation was given for the delay in informing Dunnes of the refusal of consent given that, even on the basis of the evidence tendered by the landlords, the final decision had been made some weeks before it was communicated. It is difficult to avoid the conclusion that the delay in telling Dunnes that consent was being refused was intimately connected with the negotiations which were then still alive between Mr. O’Reilly and Dunnes concerning, amongst other things, a basis upon which possession of Dunnes 1 might be surrendered. All of those factors lead me to conclude, on the balance of probabilities, that, as a matter of fact, the refusal of consent was, at least in material part, based upon a desire to strengthen Mr. O’Reilly’s hand viz a viz his overall negotiations with Dunnes and in particular to increase the likelihood of being able to negotiate a surrender of possession on the part of Dunnes of, at a minimum, a part of Dunnes 1. If Dunnes could not make the use which they wanted of that unit then it would, of course, strengthen that position. That conclusion is supported by the strange, and in reality unexplained, fact that Irish Life were wholly unaware of the relevant negotiations until after the hearing began.
9.7 I am, therefore, satisfied that Dunnes have established that at least part of the purpose behind the refusal to give consent in this case was an improper purpose and for that reason, in addition, it seems to me that Dunnes are entitled to the declarations sought.
9.8 Finally I should also deal with the issue which was the subject of expert evidence at the hearing before me and which concerned whether there was an objective justification for the view that the use proposed by Dunnes was or was not consistent with the “vision and image” of retail fashion. This issue would, of course, only have been decisive in the event that I had found against Dunnes concerning the proper interpretation of the relevant clause of the lease (clause 4.26.1) and against Dunnes on the question of the true purpose for the refusal. Had I found against Dunnes on both of those matters, then it would have followed that the landlords would have been entitled to withhold consent if it were truly the case that it could reasonably be concluded that the use proposed by Dunnes was potentially damaging to the “fashion vision and image”. Lest, therefore, I be wrong in both of the conclusions which I have just noted I should deal briefly with that issue.
10. The Justification
10.1 Two sub issues seem to me to arise on the evidence. Firstly there is the question of the nature of what was proposed by Dunnes. Dunnes asserted that what was intended (and what was, indeed, included in the request for change of use) was an upmarket food hall and not, therefore, anything resembling the food element of major stores with which all will be familiar. The landlords seemed to query two aspects of that suggestion. Firstly it was said that the “upmarket” end of the equation was difficult to enforce. On that basis it was suggested that once consent was given, the landlords’ might find themselves with something that was, in effect, a supermarket. It seemed to be accepted by all that a traditional supermarket would not be likely to be beneficial in the location concerned.
10.2 However it seems clear that Dunnes request for consent was based on something very different from a supermarket. It is also worthy of note that clause 4.26.1 itself refers to the business to be carried on being a “high quality standard and tone” business. It is, therefore, clear that the parties themselves (or, at least in part on the landlords’ side, a predecessor in title) were happy that a phrase such as that was capable of enforcement and of governing, in practice, the situation on the ground. It is difficult to see, therefore, that there was any merit in the position adopted on behalf of the landlords which I have just described. The parties themselves voluntarily entered into an agreement which was governed by a similar term governing quality and there seems no reason why a similar provision could not be included in any permission to change use which would be enforceable and effective. I was not, therefore, in any event, satisfied that the quality concerns expressed on the part of the landlords were of any merit and had the general issue which I have described been decisive it would, therefore, have seemed to me to turn on whether the proposed “high quality food hall” use could be said to be a use which could reasonably be refused.
10.3 There was, undoubtedly, expert evidence tendered on the part of Dunnes which suggested that it might well be the case that a high quality food hall might attract the same sort of customers as a fashion mall and that, rather than being inconsistent with the asserted fashion vision and image, a high quality food hall could, in fact, have been beneficial. However, it does not seem to me that the appropriate test is as to whether there might an argument to that effect or indeed whether the court might, on balance, regard the expert evidence tendered on behalf of Dunnes to be more cogent than the evidence tendered on behalf of the landlords. Rather the question would have been as to whether it had been demonstrated that the landlords were acting unreasonably in taking the view which they did. I do not believe that the evidence tendered went so far as to establish that fact. In those circumstances, I am satisfied that it would have been reasonable for a party, such as the landlord, in principle, to come to the view that a high quality food use was not beneficial to the shopping centre as a whole.
11. Conclusions
11.1 It seems to me, therefore, that Dunnes are entitled to the declarations sought on two bases:-
A. On the ground that the landlords improperly took into account the possibility of using a refusal of consent as leverage for the purposes of pursuing the aim of securing possession of some or all of Dunnes 1; and
B. Even if the landlords did not take that improper factor into account, it was, nonetheless, inconsistent with clause 4.26.1 of the lease for the landlords to have refused consent without having had proper regard to the need to maintain diversity in the types of businesses permitted to operate within the Ilac Centre as a whole.
11.2 It should be noted in relation to point B that I have also come to the view that, even had the landlords taken that factor into account, the landlords could not reasonably have concluded that it was legitimate to refuse consent by virtue of a proposed use by reference to a standard which imposed a virtual lack of diversity, contrary to the terms of the lease.
O’Gorman v. Dublin Corporation
[1949] IR 44
Dixon J.
The plaintiff claims a declaration that the consent of the defendants to the waiver of a covenant in his lease has been and is being unreasonably withheld. The lease is one for 150 years from the 25th of March, 1943, of a shop and dwelling in Faussagh Avenue, Cabra, Dublin, and the covenant, so far as material, is that the lessee will not permit or suffer the premises to be used for the sale of intoxicating liquor. According to the decision of the Supreme Court in Rice v. Dublin Corporation (1), this type of covenant is within the scope of s. 57 of the Landlord and Tenant Act, 1931, and is, accordingly, to have effect as if it were a covenant prohibiting the alteration of user without the licence or consent of the lessor and is subject to a proviso that such licence or consent shall not be unreasonably withheld. The premises are admittedly a tenement within the section; and the question is whether consent has been unreasonably withheld.
The premises are the central portion of a group of nine shop-dwellings erected on land belonging to the defendants and are part of an extensive housing scheme covering a considerable, and largely self-contained, area of such land in West Cabra. The scheme was commenced about 1938, and nearly 2,000 buildings have been erected and occupied while about 300 more are in course of erection or planned. The population would be about 13,000 persons within a half mile radius of the plaintiff’s premises, which occupy a fairly central position. The shop premises have been used so far as a general grocery, but the plaintiff has had considerable experience in the licensed trade.
The refusal of consent by the defendants is partly based on a question of general policy under which they first decided to insert a covenant of the type in question in their lettings and then, after consultation with various bodies and individuals, decided not to consent to a waiver of such a covenant. The relation of such a predetermined attitude or policy to the provisions of s. 57 of the Act, and the principles applicable, were considered and decided by the Supreme Court in Rice v. Dublin Corporation (1). When the matter came again before Davitt J., who had stated the Case for the Supreme Court, he held in the light of the decision of the Supreme Court that the refusal there of consent had been unreasonable, and used these words in his judgment (at p. 457):”In considering applications by lessees for relief from such restrictive agreements, the Corporation should consider each one upon its merits, and in relation to whatever policy it may adopt or whatever scheme it may have formulated, to see whether such policy or scheme will permit of the application being granted. It would not be reasonable for them to adopt the attitude that in no circumstances whatever will they grant any such application.”
Even if I am not bound by it, I should adopt and follow the reasoning of Davitt J. if applicable to the circumstances of the present case. Two features, however, distinguish the present case from that before him and it is necessary to enquire whether either of them renders the reasoning inapplicable.
The first feature is that the user proposed here is the sale of intoxicating liquor for consumption on the premises while only an application for an off-licence was contemplated in Rice’s Case (1). Practical differences exist between the two classes of trade as, for instance, the type and number of customers, the hours at which they resort to the premises, the length of sojourn, and the possibility of carrying on other trading. The last mentioned difference clearly relates to a question of the welfare of the tenants generally rather than to any question of general policy, and the evidence is clear that the general shopping community will still be amply provided for even if the plaintiff has to forego trading in some or all of his present commodities. The other differences relate to the manner in which the trade is carried on. In essence the premises remain a shop, analogousallowing for the difference in the commodities and unessential differences in lay out, conduct, and, to some extent, clientèleto a tea shop or ice-cream saloon. These differences seem to me immaterial from the point of view of a general policy which I conceive to be and as it seems to me, must logically be, directed against the sale of intoxicating liquor, irrespective of the manner in which the sale is conducted. The actual covenant makes no distinction as to the manner of sale nor does it appear that the defendants considered the matter from the point of view of the distinction. The manner in which licensed premises are or might be conducted could possibly be availed of in connection with consideration of estate management; but I did not understand an argument to have been based on that ground in this case. Questions depending on the necessity of structural alteration do not belong to the realm of this general policy. Accordingly, I do not consider this feature of the character of the licence contemplated as critically distinctive.
The second distinguishing feature is that immediately prior to the hearing in the Circuit Court, the defendants reconsidered the matter in the light of the decision of Davitt J. in Rice’s Case (1) and in a professed endeavour to consider the matter on the merits of the individual application. The order of the Deputy City Manager and Town Clerk, expressing the decision arrived at, reads:”Adhere to previous decision refusing to waive covenant”; and the subject matter is”Reconsideration in consultation with the Housing Committee of the application.” According to the evidence, the position as to other licensed premises in and near the area was before and considered by the meeting of the Housing Committee, as well as a report from the Town Planning Officer. The latter deals mainly with questions of structural alteration, light and air and the desirability of licensed premises being specifically designed as such in the first instance and, if possible, standing on their own grounds and not forming part of a block of existing shops. Apart from the question of the existence of other licensed premises, this last mentioned consideration seems to me the only one that could be suggested to have a bearing on the question of general policy but, in the circumstances of the present case and in the light of the general policy of opposition to the sale of intoxicating liquor, it seems a little unreal. In the report, it is related to sale on or off the premises but it is not immediately obvious what special design or location is necessary or desirable for premises having only an off-licence. Even limiting it to premises with an on-licence, it is clearly, and especially in modern conditions, a counsel of perfection, a phrase which is often used as synonymous with the unattainable and, therefore, the unreasonable. I do not wish to recede in any way from the dictum of Davitt J. in the case already mentioned, that “the Corporation is . . . quite entitled to seek to control the number, character and distribution of licensed premises upon its housing estates”;but the unreality I have suggested arises from the fact that the attitude of the Corporation is not that they have, in their schemes, provided for such specially designed and located premises. On the contrary, it is quite clear that they set themselves against any provision of any kind and there is no suggestion of any prospective change in this attitude.
As the overwhelming part of the area belongs to the Corporation, if this is a reasonable attitude, it would have the result that no licensed premises could come into existence in that part of the area. I think there is an obvious difference between this attitude and that of merely seeking to control the number, character and distribution of licensed premises on the estate, a difference which might be expressed by saying that a total prohibition, if it is control, is an unreasonable form of it.
It is this last difficulty which probably accounted for the committee considering, and evidence and argument being directed to, the question of the number and distribution of other licensed premises in the area. The facts in relation to this aspect of the matter appear to be that there is one fully licensed premises within a half mile radius of the plaintiff’s premises, but it is not readily accessible to the residents, being actually situated outside what I have described as the self-contained area or, as it was referred to in the evidence,”the neighbourhood unit.” This last expression appears to be a recognised concept in social and town planning. The premises referred to in fact serves, and was evidently intended to serve, another adjoining neighbourhood unit; and the evidence shows that it is inadequate to serve both areas. Over and above this, reference was made to premises which are being builton a site, within the area, which the Corporation failed to acquirebut have not been yet licensed, and to an off-licence which has recently been granted, after successful Circuit Court proceedings against the Corporation, in respect of premises in the same avenue as the plaintiff. These are matters, of course, for the licensing authority to consider, but that does not preclude the defendants considering them on the basis of estate management in conformity with the passage I have quoted from Davitt J. Viewed as a neighbourhood unit, the actual position now is that the only licensed premises in the area is one having an off-licence, and even this did not exist when the Housing Committee considered the plaintiff’s application. The Town Planning Officer, in evidence, did not seriously contest that this area could fairly be described, in its conception and object, as such a unit, and the fundamental modern aim, in planning such a unit, appears to be that it should contain all the proper amenities for the full life of its residents, such as churches, schools, shops and the other requirements of a community of organised society. Whatever one’s individual views on the question of temperance, it would be going very far to-day to suggest that the existence of such a social centre as the public house is not, for at least a large section of the community, an amenity of the kind envisaged. It would be almost cynical to suggest that its need could be supplied by the provision of one or more off-licensed premises. If one needed evidence on the point, there was ample evidence given of the desire and need for such a centre in the area in question. In the light of the facts mentioned, I do not think the refusal of the Corporation could reasonably be based on the existing provision being adequate and I have no evidence of any other arrangement or provision being contemplated by the Corporation.
I have been considering these matters so far as they might be suggested to have a bearing on the question of policy in relation to the particular case and I feel forced to regard them as having, in the circumstances of the particular case, no such bearing. I arrive, therefore, at the position that, so far as the question of general policy is concerned, the reconsideration of the particular application which took place does not essentially distinguish this case from Rice’s Case (1) and that, accordingly, I should adopt and apply the reasoning of that case. That does not dispose of the matter, since matters other than the question of policy were considered by the Committee or advanced at the hearing before me.
The least difficult of such matters is the suggestion made in cross-examination and in argument that because the plaintiff, who was the assignee of the original builder lessee, took the assignment with notice of the covenant, he is bound thereby and cannot invoke the provisions of the Act. I think the answer to this is that, whether the plaintiff knew of the provisions of the Act or not, its terms are such that the lease is to be taken as if the relevant provisions of the Act had originally been written into it.
The position in relation to the Town and Regional Planning Acts, 1934 and 1939, calls next for examination. The whole estate was designed before the first of these Acts was adopted by the local authority; and the present position is that, while the preliminary resolution for the making of a planning scheme has been passed, no such scheme has come into operation. The estate in question was not, and is not, such a scheme or part of such a scheme. In this interim period, the planning authority is given specific powers in relation to structures in the area to which such a planning scheme is proposed to relate. In purported exercise of these powers, the defendants, as the planning authority, refused permission to the plaintiff to make the alterations he proposes. This was in September last, in the interval between the decision of the Circuit Court Judge and the hearing of this appeal. I assume the matter came before the appropriate committee in the normal course and that the committee saw no good reason to postpone its decision pending the appeal. This particular matter is still sub judice and not finally determined, as I understand an appeal, as allowed by the Act, is pending to the Minister for Local Government.
For that and other reasons, I think I must refrain from enquiring into the matter from the viewpoint of the Acts mentioned or expressing any opinion on the merits of this particular controversy. I do not conceive that I am here concerned, even if I had jurisdiction in such a matter, with the limits of the Corporation’s powers in this respect or the principles on which the powers should be exercised. In his evidence, the Town Planning officer stated that, in considering the matter under those Acts, the committee endeavoured to disassociate themselves from the position of the Corporation as lessors. I accept this and feel it was the correct approach to the matter, coinciding, as it does, with my own view of the correctness of the necessary corollary that the position of the Corporation as lessors must be disassociated from their position as the planning authority for the purpose of the enquiry I have to make. It is fortuitous that the Corporation, as well as being a large estate owner, is the planning authority for an area including the estate; and I think I must, for the matter I have to determine, regard them only as landlords, giving due weight to their character as, in the phrase of Davitt J., “exceptional landlord,”but disregarding their character as planning authority. It may be difficult, but it is not at all impossible, for a body like the Corporation which has so many different functions and activities, to preserve this separation of functions or interests; but they themselves have recognised the necessity of the distinction and it is one that appears to me equally applicable to the provisions of s. 57 of the Landlord and Tenant Act, 1931. In my viewand here I differ from the view of the learned Circuit Court Judgethe likelihood of permission being granted or refused under the Town and Regional Planning Acts, 1934 and 1939, or of some compromise being arrived at, is as irrelevant to the reasonableness or unreasonableness of a lessor refusing consent to a proposed alteration of user as is the likelihood of the tenant satisfying the requirements of the licensing statutes and authorities if he becomes enabled to apply for a licence.
While keeping this distinction in mind, and endeavouring to honour it, it is necessary to touch on some of the same facts as were considered in relation to the town planning aspect. This is for the purpose of enquiring whether, from the point of view of estate management, welfare of tenants, effect on other property of the same landlord, or some similar relevant consideration, they afford a reasonable basis for refusal of consent.
A matter to which considerable attention was paid at the hearing was the question of the proposed structural alterations. These involve, briefly, a slight alteration of the frontage, more extensive internal alterations on the ground floor, and the erection of a single-storey building along one side of the yard. They are designed by an architect of experience and evidently with a view to satisfying, as fully as possible, the likely requirements of the police and licensing authorities. It may, I think, be postulated that a refusal to allow any structural alteration, irrespective of its nature or effect or some special circumstance, would be unreasonable. Sect. 57 itself contemplates, in sub-s. 2 (b), that an alteration of user may involve structural alterations; and the lease in question contains no prohibition of such alteration.
The way the matter came before the Housing Committee would appear to have been on the report of the Town Planning Officer, which, in this respect, was as follows:”These premises were originally designed as an ordinary shop-dwelling for the sale of retail goods, such as groceries and provisions, and the Corporation never envisaged their conversion into a licensed premises. Should the present proposal for the conversion of the premises be proceeded with, it will be necessary to build additional accommodation, and this will encroach on the existing yard space at the rere of the premises. It may also interfere with the light and air to the existing and adjoining premises. In the absence of any plans setting out the exact intentions of Mr. O’Gorman in the matter, I am unable to comment further on these points.”
In view of the last sentence quoted, this opinion was necessarily and admittedly tentative. Although the plans were lodged between the date of this report and the meeting of the committee, this was not known and they were not before the committee, so that its view on this aspect of the matter was either speculative or arrived at on the basis that no alteration could be allowed. This position has been remedied at the hearing by the proof and discussion of the relevant plans. From them it would appear that, so far as the frontage is concerned, the proposed alteration would achieve the symmetry which seems to have been a leading feature of the original design of the block of nine shops but which was not quite fulfilled in the case of the plaintiffs. The Town Planning Officer did not question this result in his evidence. He did maintain that the new building would restrict the available air space, but it seems clear from the plans and other evidence that this hardly means more than the self-evident proposition that any building necessarily reduces air space. I did not understand him to contend that any serious or very appreciable restriction would result; and his main thesis was the alteration of the character of the premises and of the block of premises and the departure from the original scheme. I find it difficult to relate these matters to any question of estate management or other relevant consideration in the present case. This is not a case of the proposed opening of a shop in a residential district or some other radical departure from the original plan. The premises have been, and it is proposed that they will remain, the central shop-dwelling in a block of shop-dwellings. They were designed and let for the purposes of trade without any restriction except as to the sale of intoxicating liquor and in one other respect. They would have retained their essential character if an off-licence were obtained in respect of them or if they were converted into an ice cream saloon; and I find it difficult to follow how they would lose this character by the grant of an on-licence, nor how the character of the block as a whole would thereby be altered in any fundamental or important respect. So far as the character of the buildings as such is concerned, I have already referred to the question of the frontage which is the more important but not, of course, the only aspect. So far as the rere is concerned, even excluding from consideration the existence of similar, if less extensive, additions to the adjoining premises, I feel that the proposed erection could not reasonably be said to be likely to affect adversely the character of the district, the block or the premises themselves, or the value or amenity of other property of the same lessors, or the welfare of their tenants, still less of the citizens generally. No appeal was, in fact, made, as I understood the argument, to such a general consideration.
The objection, then, so far as structural alteration is concerned, would reduce to preserving the immutability contemplated for the original scheme; and, if this is the only ground, it involves the denial of perfectability or of change, if not advance, of standards and ideals, as well as assigning no importance to the individual case. As such, it seems to me an unreasonable ground of refusal. It would seem to be equally unreasonable, granting that the special circumstances of the individual case should receive some attention, that the mere fear of creating a precedent, rendering refusal of subsequent similar applications difficult, should dictate a refusal; and, on the other hand, such a general approach would seem an inadequate reason for ignoring the special circumstances of a particular case. I have already, in dealing with the question of policy, sufficiently touched on some subsidiary matters that might have a bearing under a different head, such as the possible restriction on other trading, the possible manner of conduct of the premises, the desirability of specially designed and located premises, and the number, character and situation of other licensed premises.
I, accordingly, arrive at the conclusion, on a consideration of what I conceive to be all the relevant facts and circumstances, that the defendants have not displaced the prima facie case made by the plaintiff that their consent was unreasonably withheld. The plaintiff is, therefore, in my view. entitled to the relief he seeks.
Lloyd and Another v The Earl of Pembroke and Another
High Court.
2 July 1954
[1955] 89 I.L.T.R 40
Dixon J.
Dixon J., in delivering judgment said that he listed this case on representations of urgency on behalf of the plaintiffs and, accordingly, did not propose to reserve judgment because he did not think any delay in doing so would alter his present view. His Lordship said that he supposed the urgency arose by reason of some contract or agreement which was not before him, under which a decision was required for the purpose of carrying out a contemplated sale of the plaintiffs’ interest to the Marist Brothers the proposed assignees. The same haste appeared in the correspondence, and in the manner in which proceedings were instituted and made ready for trial. The urgency and haste showed the reality of the case and what was really behind it; that it was an attempt to enhance the value of the plaintiffs’ interest in the premises for the purpose of facilitating a sale and to secure an enhanced price. It also illustrated what his Lordship thought to be fundamental in the case; that the position and the whole proceeding was mis-conceived.
His Lordship said that he thought the action was mis-conceived as to the parties and that it was also brought prematurely. The persons or organisation who wished to use the premises as a school were the Marist Brothers, a distinguished teaching organisation, and it was to enable them to use the premises in that way that the action was instituted but they were not parties to the action. The actual plaintiffs were the then lessees, who had no intention whatsoever of *42 using the premises as a school or for the purposes of a religious institution and who only desired consent to such user for the purpose as his Lordship said he had already stated, of facilitating a sale to the Marist Brothers, or some similar organisation, and thereby being enabled to dispose of the property subject to less restrictive conditions. In other words, to sell it as a more valuable property. One effect of that position, even if his Lordship were to make an order which imposed terms or conditions as to the future user of the premises, would be that it would not be binding on the Marist Brothers. If an order were made, based on any undertaking by the plaintiffs, through their counsel, equally that would not be binding on the Marist Brothers. That consideration showed that there was not, even before proceedings were brought, any proper basis or situation in which negotiations could have been effectively carried on and some agreement or arrangement arrived at, for the reason that the Marist Brothers, who wished to use the premises in a particular way, had not become the owners of the leasehold interest; they had not become the lessees. Whatever negotiations there were, were carried on by the lessees who wanted consent for a particular user which they did not themselves want and never intended to avail of.
His Lordship thought that the section of the Landlord and Tenant Act which was relied on by the plaintiffs, when it referred to an alteration in user, modified the effect of the covenants prohibiting alteration of user and conferred some relief in that respect on the tenant, but what it dealt with was an alteration of user by the lessee, namely, it contemplated a case in which the lessee applied to the lessor for consent in respect of a particular user to which he wished to put the property. In such case it was provided that the consent is not to be unreasonably withheld. His Lordship did not think the Act contemplated the section being availed of for a purpose such as the present one where the object was to facilitate a sale. Unless its application could be limited to the actual needs of the lessee, it would merely have the effect of enabling the tenant to get in substance a new lease on different terms, to have one or more of the covenants in his lease deleted or modified to such an extent that he would have a lease of a different kind and character and one of greater value.
His Lordship said that he understood the position to be that, in some cases, the Pembroke Estate and, presumably, other estates, indicated for the convenience and benefit of an intending purchaser, whether they would or would not consent to a particular alteration, to a particular waiver of a covenant or something of that nature. But the important point was that where they did so, they did it as a matter of courtesy and convenience to facilitate the particular sale or the particular purchaser. They might, perhaps, commit themselves definitely or they might only deal with the matter by way of indicating that they would give an application, if and when the matter arose, favourable consideration. In his Lordship’s opinion they were not, however, bound in law to do so; nor could the Court, by recourse to this section, or in any other way, be asked to force them to do so or to deal with, in effect, a hypothetical situation, a situation which might arise but which had not actually arisen. In that connection, it would not make the slightest difference whether it was the intending vendor (the lessee), or the intending purchaser, who applied to the landlord. In either event the application would be on the hypothetical basis. “If I purchase or if I sell, will you agree to so and so” and its object, that the parties to the contemplated sale might have an idea whether it was a transaction that could with reasonable safety be put through. His Lordship said that as he was unaware of the contract, if any, between the plaintiffs and the Marist Brothers. Even if he were to hold that consent had been unreasonably withheld in the present case, he did not know that the Marist Brothers would ultimately or inevitably become the purchasers and the occupiers of the property and would use it as a school. It might well be that the sale might go off for some other reason.
That was another way of saying that the matter as it then stood was too vague, indefinite and hypothetical to be dealt with on the present application for a declaratory order. The Court would not, except in exceptional circumstances, grant relief of a declaratory kind in a hypothetical case, in circumstances which had not actually arisen and which might never arise.
A further difficulty in the way of the plaintiffs in the present action was that no adequate or sufficient particulars were furnished to the Pembroke Estate on which they could make up their mind whether or not the proposed user was such that it could be sanctioned or agreed to.
His Lordship said that if a landlord were asked to waive a prohibition of a particular user or were asked to give his consent to a particular user, he was entitled to know precisely the nature of the proposed user and all the details about it which might affect not only his own interest but might affect the *43 question in general of whether he should or should not give his consent.
No such particulars were given in the present case. The correspondence only disclosed in a very general way, the proposed user without any of the particularity or precision that a landlord might reasonably expect and was entitled to expect. That was partly a consequence of the situation which existed, that the Marist Brothers had not become the owners of the lessees’ interest and, consequently, could not deal with the matter in more than a general and somewhat indefinite way; and the solicitors, writing on behalf of the plaintiffs, were in no better position, in fact they were in a worse position because they were not dealing with a contemplated user by their own clients. This appeared from Messrs. Burke’s letter of the 17th May where it was stated, “We are not in a position to furnish you with any further particulars but will thank you to advise us what are the further particulars you will require, if any.” Up to that point, the particulars given were of a very general character. That letter was written in answer to the earlier letter of the 15th May from Mr. Campbell, in which he said, “The particulars you have furnished are too indefinite to enable us to consider this matter.” His Lordship said that for reasons that were not the fault of Messrs. Burke & Co. their reply of the 17th May, from which his Lordship had quoted, did not carry the matter any further and was not very helpful as to matters on which the estate were entitled to require particulars and were entitled to be satisfied.
The urgency and haste of the matter, resulted in the position being left in that state because the same letter, 17th May, stated “Unless we hear from you on or before Friday, 21st instant, that you are prepared to consent to user of the premises of Riverside for the purpose of a school and religious institution, proceedings, which have been drafted, will be issued.” That only gave the Estate three or four days to consider the matter under threat of proceedings and, apparently, the solicitors were as good as their word because the summons in this case was in fact served on the 21st instant. It was issued on the 21st and service accepted on behalf of the Pembroke Estate.
His Lordship did not think that was a very satisfactory way of dealing with a matter of this importance and of dealing with the quite reasonable request in the letter of the 15th May that the position should be gone into more fully. It may have been, as Mr. O’Keeffe urged, that the question of particulars was, or became, irrelevant because the letter from Mr. Campbell of the 15th May gave another reason in that Mr. Campbell said that in any case the application could not be considered. His Lordship thought, however, he should make the comment, that the whole correspondence and the manner in which the matter was instituted and brought before the Court suggested an outlook on one side that the whole question of a waiver of covenant like this and an application for consent was rather a matter of form or a formality. His Lordship said that that was very far from being the true position. The position has been improved considerably from the point of view of a lessee or tenant but a considerable portion of the lessor’s or landlord’s rights were still left, notwithstanding the statutory alterations, and the landlord was still entitled to have an application made to him in proper manner with full particularity, and to be given a reasonable opportunity of considering the whole matter; and he was still entitled to refuse his consent unless it could be shown —and it was for the lessee to show it—that he had been unreasonable in refusing his consent. All that was related, in his Lordship’s view, as a matter of law to the requirement that there was a specific and definite case or set of circumstances in which a lessee sought relief. It would be a complete misconception of the function of the Court on a matter like the present to imagine that it was concerned with the question of whether it was reasonable that there should be a school or that the Marist Brothers should be enabled to set up a school in that particular premises. His Lordship said that he had nothing whatsoever to do with a question like that and it was quite beside the point whether he regarded it as reasonable or desirable that the consent should be given and that a school should be set up or enabled to be set up. The only thing he had to decide was whether it had been shown that the lessors had acted unreasonably in refusing their consent. In considering for themselves whether they would or would not give consent, they were entitled to take everything affecting the position into account, including considerations of their own estate management and including question of their own interests. All he had to decide and could decide on an application such as the present one was whether they, in considering those matters and reaching a decision, had acted reasonably or unreasonably.
His Lordship said that he did not want to say much on that particular question because he had already indicated his view that the action was mis-conceived; that a lessee was not entitled to come to Court and raise the question of consent to an alteration of user where he did not need that consent in relation *44 to any user contemplated by himself but merely for the purposes of a sale and that was sufficient to dispose of the present case.
There was also the point to which his Lordship had referred, i.e., the absence of sufficient particulars to enable the lessors to arrive at a definite decision. That absence of particulars had been cured to some extent, but not wholly, at the hearing, by the evidence of Brother McTiernan, but, even, on that evidence, the position was still necessarily somewhat vague because until his Organisation became the owners and occupiers, if they did, they obviously could not say precisely what they were going to do or the precise manner in which they intended using the premises. That was particularly so as to two matters that were mentioned in the argument and in evidence, i.e., to what extent structural alteration, if any, might be necessary and the position that might possibly obtain as to the use of portion of the lands as a playing-field. Those matters which were still somewhat indefinite were factors that the Estate would be entitled to consider in arriving at a decision.
Accordingly, on those two grounds, his Lordship said he would have to refuse the application. The position might arise in future that the Marist Brothers, or some similar Organisation, might acquire the lease-hold interest, and then apply for consent. The matter might eventually come to Court and different considerations would probably apply. Accordingly, his Lordship did not want to say very much that might prejudge or prejudice that position but he thought it right to indicate that if he were not deciding this matter solely on the points indicated; if he were deciding the specific question whether, having then all the facts and circumstances before him, the Estate did unreasonably refuse their consent or would be unreasonable in refusing consent, there were at least two important matters that made some impression on him in the evidence and correspondence and those would require very serious consideration before coming to any conclusion that the attitude of the Estate in the present case was unreasonable. Those two matters concerned the general estate management as a whole. His Lordship said that he did not require evidence of the fact that the Pembroke Estate was a very large and well-run property-owning organisation in a large part of the City of Dublin. They were entitled in relation to their consent in a particular matter to take into account the general circumstances and character of their property in the particular locality, to take into account their own interests, financial and otherwise, and to take into account, as his Lordship was quite sure they did, the interests of their lessees and tenants. The two matters his Lordship had referred to were separate but, at the same time, somewhat connected. One was referred to by Mr. Campbell in the letter of the 29th April where it was stated “The Estate desires, if possible, that this holding should remain a private residence and failing that that it should be developed as a private residential area in continuation of the development already permitted.” The reference to “development already permitted” was to the erection of some forty houses that was permitted and sanctioned on nearly a half of the original holding and these were erected and laid out in a manner which would clearly permit of subsequent later development of the balance of the holding in the same manner.
It would be difficult to say that a consideration such as that which involved the question of housing requirements in the particular locality and in the City generally should not be given serious consideration and serious weight by the Estate; and, while his Lordship did not wish to express a definite view on the matter, because it might arise as indicated in the future, it was at least open to argument that it would be quite reasonable to refuse consent to the diversion of those premises to the purpose of a school which would probably be of a fairly permanent character, and that it would be preferable if the premises were diverted from their user as a private residence that the diversion should be by way of using the Estate to meet housing needs. It was certainly not an obviously unreasonable point of view and it would have the added practical merit that a housing development would give greater security and enhance the value of the freehold reversion. That was one of the reasons advanced in the correspondence and one that the Estate was entitled to consider and to give considerable weight to. The other reason advanced, more in argument than in the correspondence but to some extent in the evidence of Mr. Campbell, was that the institution of a school might affect to a certain extent the character of the neighbourhood.
Mr. FitzGibbon, in his opening remarks, referred to the locality as being a quiet secluded area. That was not evidence, but his Lordship accepted it that the locality was of that description and it had not been contradicted. His Lordship said that while he was quite sure that any school conducted by the Marist Brothers would be very well run, he could see some merit in the point of view that any school, even of the highest character and run on the best lines, was necessarily *45 some disturbance, some alteration of the character, of a residential neighbourhood. With regard to the character of the neighbourhood, his Lordship thought the intention and wishes of the Estate in relation to the neighbourhood was shown very clearly by the terms of the covenant in question. The covenant in the lease of 1889, which was framed in very severe, strict and almost all-embracing terms, ensured, so far as it could be done by that covenant, that not only would buildings erected on those lands be used as private dwellinghouses but that they would not be used in various other ways that could conceivably be any disturbance or annoyance or interruption of the peace and quiet of the locality or interfere with its character as a residential area.
Concluding, his Lordship said that he thought it proper to again point out that the question was not, whether in his view that was a reasonable consideration. The question was whether the Estate would be acting reasonably in taking a matter of that kind into account and in placing reliance on it in conjunction with any other factors that might be relevant. As he had said, however, it was unnecessary for him, and he did not wish to express any definite opinion on that matter one way or the other. His Lordship was indicating, at the moment, two considerations at least that had been raised in the case before him on which another Court might take the view that it was reasonable for the Estate to rely. As he had said, he thought the action was misconceived and premature and should therefore be dismissed.
The Dublin (South) City Market Company v. McCabes, Limited
[1953] IR 284
Budd J.
The plaintiffs, an incorporated company, are the owners of certain premises known as the Dublin (South) City Markets. The defendants are a limited company, carrying on a well-known fishmongers’ business in this City and they also carry on the trade of poulterers and ice merchants. The defendants have several places of business in the City and they carry on business at, amongst others, Nos. 28 and 29 Dublin (South) City Markets. They also carry on business in the adjoining premises in the South City Markets, that is to say, Nos. 30, 31 and 32, and, furthermore, use for the purpose of their business a certain portion of the vaults underneath the South City Markets extending between Nos. 30, 31 and 32 and Fade Street. The premises known as Nos. 28 and 29 Dublin South City Markets are the premises with which we are chiefly concerned in the present proceedings. These premises front the arcade running down the middle of the South City Markets and consist of two large rooms, that nearest to the arcade being known as the “fish preparation room” and the room immediately behind it being known as the “poultry preparation room.”Alongside the premises, Nos. 28 and 29, and at the opposite side to Nos. 30, 31 and 32, are situate certain premises belonging to Messrs. Henry, who also are fish and poultry merchants. There have been adduced in evidence certain maps and photographs of these premises which show the layout in detail.
The fish preparation room is, as one would imagine, used for the preparation of fish prior to sale. The fish is delivered in boxes which are placed on the floor. There is a large trough extending most of the length of the back wall of the room where the fish is prepared with the aid of tap water and there are in the middle and on the left side of the room eight troughs or baths in which the fish is stored. These baths are similar to the heavy type of glazed porcelain baths which are to be found in a dwelling-house. They have the usual type of plug-hole through which the water escapes but are without waste piping so that any water in the baths must necessarily spill on the floor. The floor slopes towards a channel which is adjacent to the wall of the room which separates Messrs. McCabes’ premises from those of Messrs. Henrys’ fish and poultry shop and is on the opposite side to Nos. 30, 31 and 32 and the floor has various grooves in it which carry off the water to the channel. The channel in its turn carries the water to a gully-trap situate in that corner of the room which is nearest to the arcade and Messrs. Henrys’ premises and it gives entrance to a drain which passes under the arcade and joins the main drainage system of the Dublin (South) City Markets on the far side of the arcade. An excellent impression of the room can be obtained from an examination of photographs nos. 3 and 4. From photograph no. 3 it can be seen that there are a number of sacks in the corner of the premises between the baths and the wall of the premises fronting the arcade. These sacks contained crushed ice and it has been the custom to stack the ice used in the business in this position prior to use. The ice is used during the course of the day for keeping the fish in good condition and is packed with the fish in the baths.
The poultry preparation room has a floor similar to the fish preparation room and several tables are set out in it for the purpose of preparing poultry and game. There is a trough at the end of the poultry room furthest from the fish preparation room which has its base on the floor, and it is the custom to store poultry and game in this trough packed in ice. The nature and position of the trough appear from photograph no. 1. It can be seen from that photograph that in the corner of the room alongside the trough there are bags stacked which contain crushed ice, and it appears from the evidence before me that it was the custom to store ice, stacked in this position in the poultry room, until it should be required for use.
Under the premises occupied by Messrs. McCabe, and, indeed, under the whole area of the South City Markets, are certain vaults, for the most part in the occupation of Messrs. John Power and Son, Limited, the well-known whiskey distillers. The floor of Messrs. McCabes’ premises, which was recently laid, consists of three inches of concrete with an inch of asphalt underneath, and underneath that one and a half inches of concrete screed laid on six inches of concrete. The ceiling of the vaults underneath consists of brick arches supported on iron girders which are, in their turn, carried by brick pillars. Messrs. John Power and Son, Limited, hold the area of the vaults occupied by them from the plaintiffs under lease, dated the 4th March, 1949, but have been in occupation of these vaults since about 1882. The vaults are used by Messrs. John Power and Son, Limited, as a bonded warehouse where they store and mature whiskey.
The defendants first came to occupy portion of the poultry preparation room in 1899, under lease from the plaintiffs, and later, in 1916, became weekly tenants of the front portion of No. 29 and the whole of No. 28, and they continued in that position, that is to say, as weekly tenants of the front of No. 29 and the whole of No. 28 and as lessees of the rear of No. 29, until they obtained a lease from the plaintiffs of the entire of Nos. 28 and 29, including the whole of the fish and poultry preparation rooms, on the 2nd January, 1939, for the term of 115 years and 3 months, commencing on the 1st July, 1938. By clause 5 of the lease, which I take first because it is in that order in the statement of claim, it is provided:
“The lessees shall take all due and proper precautions to prevent the percolation of any waste water fluid matter or thing of whatsoever nature or kind used controlled or created by the lessees from or through any part of the demised premises to any property adjoining or under the demised premises belonging to the lessors or their lessees or tenants and that the lessees shall be responsible for any damage caused to the said last-mentioned premises by such percolation and for damage or injury to or loss of any goods or articles in or on any of the said last-mentioned premises and the lessees hereby indemnify the lessors against all claims and demands made against the lessors by their lessees and tenants in respect of such injury damage or loss.”
The plaintiffs, say that in breach of that covenant the defendants have failed to take proper or any precautions to prevent the percolation of water from their premises into the vaults underneath and have permitted water to percolate into these last-mentioned premises.
By clause 4 of the lease it is provided:
“The lessees shall not carry on or permit in or upon the demised premises any dangerous noisy noisome or offensive trade business manufacture or occupation and shall not expose goods of any description for sale outside the demised premises or do or permit to be done any act or thing which shall or may be or become a nuisance damage annoyance or inconvenience to the lessors or their tenants nor shall they do any act which in the opinion of the lessors whose decision on the matter shall be final and conclusive might injure or depreciate or tend to injure or depreciate the value of the said premises or any part thereof or any of the adjoining premises of the lessors provided however that the lessees may continue to carry on therein the trade and business of fishmonger poulterer and game dealer and ice merchant.”
The plaintiffs say that in breach of that covenant the defendants have permitted water to percolate from the demised premises into the vaults underneath and have permitted such quantities of ice, fish, and water to remain on the floor of the demised premises for such time and in such manner as to cause the temperature of the floor of the premises to be lowered to such extent as to cause condensation in the vaults underneath so that these vaults have become damp so as to be a nuisance, damage, annoyance, inconvenience and injury to the plaintiffs and/or their tenants, and so as to damage the premises, and the plaintiffs further say that these acts of the defendants were such, in the opinion of the plaintiffs, as to injure and depreciate the value of the premises. The plaintiffs seek damages for the alleged breaches of the covenants complained of and an injunction to restrain the defendants from permitting the alleged percolation and to restrain the defendants from using the demised premises in such manner as to be a nuisance to the plaintiffs and to the lessees of the plaintiffs or to cause damage to property of the plaintiffs underneath the said premises.
The defendants deny the allegations with regard to percolation or causing nuisance, inconvenience, annoyance or damage. They also deny permitting ice, fish or water to remain on the floor of the demised premises or that the temperature of the floor has been lowered or that they have caused dampness or condensation in the vaults, and they say that if the things complained of have occurred they have not been occasioned by any breach of covenant or any act or default of the defendants. They also say that they have not done anything to depreciate the value of the premises or which in the opinion of the plaintiffs had depreciated the value of the premises or which would justify the plaintiffs in forming the opinion that the value of the premises had been injured, and they say that the plaintiffs had not formed any opinion to this effect before action brought.
There has been a long history of complaint in connection with the state of affairs in the vaults underneath Messrs. McCabes’ premises, Nos. 28 and 29, from 1940 onwards. There was a long correspondence between the parties which I need not refer to in detail; it is sufficient to say that it is apparent that Messrs. Powers were complaining from time to time of that portion of the ceiling of the vaults under Messrs. McCabes’ being damp and wet, resulting in water dripping on to the floor underneath and on to the barrels in which Messrs. Powers store and mature their whiskey. The complaints, so far as the correspondence goes, seem to have been very frequent in 1940 and 1941 and are again stressed from 1949 onwards. I am satisfied, however, that there were numerous verbal complaints in the intervening period. There was apparently an increase in business about the beginning of the War, which, however, ceased after a few years, and then an increase between that period and more recent times which may have aggravated the position at these two periods and thereby caused increased complaints. I am satisfied in any event that there was considerable dampness of the ceiling resulting in a good deal of dripping of water intermittently and varying as regards the quantity of water dripping through the entire period from 1940 to date and that that dripping caused dampness to the ground and was of such a nature that it tended to rust the hoops of the whiskey barrels and injuriously to affect the wood thereof which could only be prevented from having a serious effect on the barrels by the moving of the barrels under this part of the ceiling from time to time which I am satisfied Messrs. Power and Son had to do.
Further, as I believe, Messrs. Powers cannot use the vaults to the best advantage having regard to the fact that in order to do the necessary shifting they have to leave spaces they would otherwise use for storage from time to time. I am also satisfied that the damp has caused the mortar between the bricks of the arches to decay and become soft and crumbling and that the girders supporting the arches have become adversely affected by rust; they have, in fact, flaked away to some extent. The degree of dampness and intensity of the drip varied a good deal from time to time. No doubt changes of weather conditions involving changes of temperature and humidity of the air had a good deal to do with this.
The actual areas where dampness appeared, on the vault ceilings are shown on a map, marked no. 7. The dampness appears to have varied in intensity over the area but it is very significant that two of the areas, which I believe from the evidence to have been amongst the worst affected, were those which were under the corners of the fish preparation room and poultry preparation room, respectively, where the defendants were wont to store ice from time to time, and, as far as the fish room is concerned, also under portion at least of the area under the baths.
In 1940 Messrs. McCabes put down a floor in the fish room at a cost of £87 0s. 6d. in an attempt to rectify the trouble, and again in 1950 they put down a second floor under both the poultry and fish preparation rooms at a cost of £899 16s. 9d. in a similar attempt. These floors were put down as a result of the complaints made by the plaintiffs, and there is no doubt that Messrs. McCabes made very great efforts, indeed, to remedy the state of affairs existing and it is a most unfortunate feature of this case that despite great expenditure by the defendants the trouble was not cured. While it may have nothing to do with the ultimate liability in law, it is easy to understand that Messrs. McCabes feel aggrieved that they should have spent so much without any satisfactory result.
Now, the first issue which I have to decide is as to what caused this dampness and drip in Messrs. Powers’ vaults; was it condensation or percolation or something else? I will deal first with the suggestion that it was caused, or contributed to, by leakage or percolation.
The plaintiffs for many years suggested there was leakage through the floor of Messrs. McCabes’ fish and poultry preparation rooms and from time to time their architects stated various ways in which they thought that water might be getting through the floor such as through holes in the asphalt and concrete near the door, or by reason of the asphalt not being waterproof, or because the drains in the premises were leaking, or because water was getting down through a hole in the floor around a defective door-step. On the other hand, however, no one ever found an actual leak; that is to say, no one was ever able to say that water from one particular part of the shop came through on any particular part of the ceiling. Nor has anyone proved to my satisfaction that any particular repair or alteration stopped a flow of water. Nor has it been shown in any satisfactory way that the dampness and water drip ceased on any particular repair or alteration being done which would indicate that a leak had been cured. Furthermore, there are two portions of the evidence given by Mr. McGuinness, the contractor who put down the second floor, which I accept and regard as highly significant. He said that before putting down the floor he had tested the brickwork in the arch under Messrs. McCabes’ with a knife and found that while the outside of the brickwork was wet the inside, or portion nearest Messrs. McCabes’ floor, was dry. Again, he said that when he was stripping the old floor in order to put down the new one he found that the concrete under the old floor whilst slightly damp, was not wet in the way he would expect to find it if there was an actual leakage of water passing through it. Professor Bayley-Butler also told me that when he came to analyse the water dripping in the vaults he could find no contamination by fishy matter which would be expected if water from the shop was, in fact, actually percolating through.
In addition to all this, it is abundantly clear to my mind that although these new floors were put down in 1940 and 1950 things were no better thereafter and the damp and drip was, and is, as bad as ever. The floor of the fish and poultry preparation rooms laid down in 1950 is constructed of layers of, concrete and asphalt, as I have already described it, and cost the large sum which I have mentioned. I believe it is a well-laid floor. The work was personally supervised by Mr. McGuinness who knew the leakage had to be stopped (if it existed). It is not suggested that the floor is defective, although the plaintiffs’ architects criticised the drainage provisions in the specifications and the work proposed on the poultry trough. I am satisfied that this floor does not leak, despite the fact that the state of affairs in Messrs. Powers’ vaults is the same as ever.
Finally, there is, I am satisfied, another cause shown for the dampness and dripping which accounts reasonably for it and with which I will deal later. I am left in the position, then, that I have no satisfactory proof that there ever was leakage or percolation which caused the dampness. Therefore, on the issue as to whether there was percolation or leakage through the floor or not, I find for the defendants and I accordingly refuse relief in respect of that part of the plaintiffs’ claim seeking damages or an injunction on that count. I now turn to the second major issue of facts in the case, namely, as to whether the drip and dampness is caused by condensation, and, if so, as to whether certain actions of Messrs. McCabes that are complained of, such as having ice and icy water on the floor of their premises or contiguous thereto, has caused the trouble.
The plaintiffs say that Messrs. McCabes have allowed ice, fish and water to remain on the floor in such manner and for such time as to cause a lowering of the temperature of the floor and the roof of the vaults and that condensation and dampness has resulted in the vaults. I do not think that it can be said that there is any really genuine dispute on this aspect of the case, save that the defendants say that the cold air caused by the ice is a potent factor in the cooling process.
I will deal first with the matter of the ice. I have already explained how the defendants-carry on their business, and it will be recollected that ice is used in the baths in which the fish are stored and also in the poultry trough. The ice is purchased daily and, approximately, between half of a ton and two tons are used in the arcade premises, depending upon the time of the year, weather conditions and the quantity of fish and poultry on hands. It is received, generally, between 9.30 and 11.30 o’clock in the morning, mainly in bags but some of it is in the form of blocks for resale to customers. During the winter about 10 cwts. of ice would be allocated to the fish preparation room and about 4 cwts. to the poultry preparation room. In summer approximately 30 cwts. is used in the fish preparation room and about 10 cwts. in the poultry preparation room. These figures are very approximate and liable to variation from time to time. The ice on arrival is stacked on the floor in the fish and poultry preparation rooms on the portions thereof shown in photographs nos. 3 and 1. A quantity of the crushed ice in the fish preparation room goes into the baths later in the day, but most of it remains on the floor for at least three or four hours before being used for packing with the fish. From the evidence of the defendants’ own witnesses it would appear that the crushed ice is left in sacks on the floor in the fish preparation room until, certainly, 2.30 to 3.30 o’clock, and sometimes up to 5 o’clock in the day. Sometimes, indeed, some ice would remain on the floor overnight. The baths are generally packed with fish and ice during the early part of the afternoon and, as these baths have no stoppers in the plug holes, the icy water coming from the melting ice flows over the floor from the baths as the ice melts. The poultry stored in the poultry trough in the poultry preparation room is also packed and stored overnight in ice and it is apparent from Mr. Hyland’s evidence that ice is stacked and stored on the floor in the poultry preparation room from the time it comes in until, certainly 3 o’clock, and, possibly, to 4.30 o’clock in the day, before it is used for packing in the trough with the poultry. The ice in the baths and poultry trough, of course, remains there overnight until it melts or is removed the next day in the course of re-packing.
The plaintiffs’ complaint that ice and icy water is left on this floor for long periods is therefore amply borne out by the evidence, and the next question is whether that causes a lowering of the temperature in the ceiling of the vaults, causing condensation on the surface thereof? Perhaps the simplest way to approach the issue is to ask oneself whether the damp and drip in the vaults is caused by condensation, and, if so, what causes the condensation? Well, I do not think I need spend a lot of time in discussing these matters, because again there is no real controversy. The experts are, at least, agreed that condensation does occur on the ceiling of the vaults under McCabes’ floor. Professor Jessop took certain readings with a wet-and-dry-bulb thermometer in three different places, namely, under Messrs. McCabes’ Messrs. Henrys’, and Messrs. Kelletts’ premises, respectively, the position of which two latter premises can be seen on the ground plan of the markets. In the result he worked out that the relative humidity of the air under each of these premises respectively was 94%, 87% and 88%, with a dew point (that is the point at which the humid vapour in the atmosphere will turn into water) of 50.4 F., 50.5 F. and 51.0 F., respectively. The actual temperature of the ceiling under Messrs. McCabes’ floor he found to be 49.6 F. and under Messrs. Henrys’ and Messrs. Kelletts’ premises to be 51.4 F. and 52.3 F., respectively. It will, therefore, be seen that if the atmosphere under McCabes’ premises has a dew point of 50.4 F. and the temperature of the ceiling, as Professor Jessop made his tests, is 49.6 F., condensation will be likely to occur, as Professor Jessop says, in that neighbourhood whenever similar conditions prevail; in short, the conditions required to bring about condensation were present when the tests were made. Mr. McConkey made tests with a sling psychrometer and came to the conclusion that having regard to the comparatively high humidity of the air in the vaults a slight cooling on the ceiling surface would be likely to cause condensation. Professor Bayley-Butler did not differ from the other experts in the conclusion arrived at that the drip and damp was caused by condensation, nor did Mr. Gaffey; and, accordingly, I have no difficulty in arriving at a finding that the drip and dampness in the vaults arises from condensation. What, then, caused that condensation, and are the plaintiffs correct in attributing it to the ice and icy waters on McCabes’ premises?
If it is accepted that the drip and dampness under Messrs. McCabes’ premises is caused by condensation it is not difficult to reach a conclusion that the condensation is caused by certain conditions in McCabes’ premises which cool the floor. It is significant in the first place that while there are patches of damp and condensation elsewhere in the vaults, there is not elsewhere in the vaults dampness of a like intensity to that existing under Messrs. McCabes’ premises, Nos. 28 and 29, in the Market. Further, it seems satisfactorily established that the dampest portions of the wet area are those portions of the ceiling lying immediately under the places where the ice is stacked on the floor above. When the ice was off the floor for a certain period it was noticed more than once that the ceiling dried up considerably. The experts further say that they believe that the cold conditions existing in Messrs. McCabes’ premises are the cause of the trouble. Professor Jessop and Mr. McConkey lay the blame on the ice storage and icy water which they say reduces the temperature of the floor. Professor Bayley-Butler and Mr. Gaffey, while agreeing that the ice and icy water cause a lowering of the temperature, say that cold air emanating from the ice flows down on to the floor and also contributes to the mischief. I am satisfied that the conditions in Messrs. McCabes’ premises cause a lowering of the temperature of the floor, which in turn causes condensation on the ceiling below when the warmer and rather humid air of the vault comes in contact with the cold surface of the ceiling. The defendants sought to suggest that Messrs. Power and Son kept up artificially a high humidity in the vaults for their own purposes, but I accept Mr. O’Reilly’s evidence that this is not so. Further, there was no evidence adduced before me which would cause me to come to the conclusion that the humidity or temperature of the vaults were abnormal for underground vaults of this type. Further, while cold air may play some part in causing the trouble, I believe that the major source of trouble is the ice stacked on the premises and packed in the baths and poultry trough, together with the icy water continuously flowing from the baths.
The dampness and wet resulting from the condensation have undoubtedly caused the mortar between the bricks of the arches to deteriorate and the ends of the girders have also been injuriously affected by rust so that the structure has been injured in a serious and permanent fashion. Further, Messrs. John Power and Son have undoubtedly had to move the barrels in the vaults under Messrs. McCabes’ premises more frequently than they would otherwise have done, resulting in loss of their men’s time. It is clear that they have complained frequently and that the plaintiffs have written a vast number of letters about the matter to the defendants. From the point of view of actual physical results I believe that the actions of the defendants complained of have caused damage, annoyance and inconvenience, and, I believe, also nuisance, to both the lessors and their tenants, Messrs. John Power and Son, but it is another question whether Messrs. McCabes are liable in law for such results, or, if they are responsible in law, whether I should grant any part of the relief claimed.
Before I come to the legal questions involved I must say a word about the evidence with regard to how the matters complained of may be remedied and the feasibility of curing the trouble as all that has a bearing on certain submissions made by the defendants.
The plaintiffs’ experts say that the trouble can probably be cured if the following precautions and steps are taken The ice, they say, should be lifted off the floor and stored on some sort of tray-shaped trough which should itself be raised some nine to twelve inches off the floor, leaving an air space underneath and having appropriate piping to carry of the ice water. The water from the baths should be carried in pipes raised about one foot from the floor and discharged into the drain at the gully which I have already referred to. The legs of the troughs, they say, should be suitably insulated and insulating materials should be placed under the ice troughs and baths. It would, in their view, be further necessary to raise the poultry trough some twelve inches or so off the floor and to insulate its supports and also insulate underneath the trough itself.
The defendants’ experts say that these suggested remedies would not be altogether effective, but they agree that they would improve the position. Their suggestion is that insulation underneath in the vaults may be necessary, or even that an actual subceiling with some form of radiant heat or heated wire mat may be necessary. Mr. McGuinness said that a heated wire mat could have been put down in the floor when he was making it which could be adjusted so as to keep the temperature of the floor right. This could, of course, be done now also, but would involve tearing up and re-laying the floor, which would be very expensive.
Professor Bayley-Butler, while agreeing that the suggested remedies would make an improvement, said he believed that it would not be a complete cure because of the cold air that would still, he maintained, flow down to the floor from the ice, thus cooling it, and I shall have something further to say on this.
The views of Professor Jessop and Mr. McConkey were that the suggested remedies would in all probability work a cure. Their competency is not in doubt and the fact that an expert witness is careful and somewhat conservative in the expression of his views does not to my mind decrease the reliance that may be placed on his opinion. Professor Jessop’s attitude was that he would be very surprised if the remedies suggested did not cure the condensation. Mr. McConkey believed that the steps suggested would largely cure it, but he made the reservation that he could not guarantee success in exceptional circumstances, such as when a lot of ice-cold air collected on the floor of Messrs. McCabes’ and there was at the same time a condition of high humidity in the air in the vaults below, a state of affairs which he thought might not occur for years, but might, on the other hand, occur more than once in a short period.
One practical drawback to the suggested cures seemed to be that cooling of the floor, and, hence, the ceiling of the vaults, might well occur from the icy water flowing into the drain, but Mr. McConkey and Professor Jessop pointed out that it would be mixed with tap water, that the drain only presents a small cold area to its surroundings, and, furthermore, it travels over the haunch of the arch where, underneath, the roof is thick, and I accept what the two experts say, that icy water passing into the drain is unlikely to cause condensation.
From what I have heard from all the experts I believe that the effects of cold air on the floor is not by any means as serious as the effect of ice and icy water and far less likely to cause trouble in the future. Professor Jessop says, for example, that in his opinion there is a great difference between the effect of ice and ice water on the floor and that of cold air. He says that if it were in an enclosed space the air an the floor after a time would become the same temperature as the air near the ice, but he points out that there are currents of air in this shop, and, in the day-time, continual disturbance of the air by people moving about, and he said he would be very surprised if the cold air would make the floor sufficiently cold to cause condensation down below. Mr. McConkey’s view was that the cold air, generally speaking, would not cause condensation below, but that it might in the extreme conditions which I have mentioned. Professor Bayley-Butler and Mr. Gaffey, as I have said, while agreeing that there would be an improvement if the recommendations are carried out, say that the cold air will still cause at least some condensation; but in considering their evidence I cannot lose sight of the fact that the condensation appears to be worst immediately under the places where this ice is stored.
The view I have formed on considering the evidence of the experts and weighing all the evidence to the best of my ability is that having the ice and icy water on the floor is the main cause of the trouble, and that while the cold air may be a contributing factor it is by no means certain that it alone will cause condensation in the future, and that the steps suggested will certainly improve matters materially and will in all probability, I believe, cure the condensation, save in unusual or extreme conditions. There may be many other methods of dealing with the situation, such as placing in the floor insulating material or a heating mat of wire, such as that suggested by McGuinness.
I now turn to a consideration of the legal submissions of the plaintiffs as to the construction of the covenants in question on which they seek to fix Messrs. McCabes with liability in law in respect of the physical results of the acts or omissions of the defendants and those made on behalf of the defendants and relied on to show that Messrs. McCabes, notwithstanding these acts and omissions, are not liable in law for the consequences and should not be interfered with in their methods of carrying on business. Before dealing with the main contest in the case, arising on the construction and effect of the first part of clause 4 of the lease of the 2nd January, 1939, I wish, however, to dispose very shortly of the cause of action relied on by the plaintiffs as arising under the latter portion of this covenant. The defendants may not under clause 4 do any act which in the opinion of the plaintiffs might injure or depreciate the value of the premises or the adjoining premises of the lessors, and it is alleged in the latter portion of para. 7 of the statement of claim that the acts of the defendants, with which we are already very familiar, were such, in the opinion of the plaintiffs, as to injure and depreciate the value of the premises. The defendants contend that no cause of action can arise until that opinion is formed. Now, a corporate body can only speak by resolution and there is not before me any resolution passed by the plaintiff Company, before action brought, which indicates that any such opinion was in fact formed. Nor have I any other evidence before me which proves in proper fashion that any such opinion was formed by the plaintiffs before action brought. In my view, therefore, the defendants are entitled to succeed on so much of the claim as seeks to make them liable in respect of a breach of this particular part of the covenant.
As to the first part of clause 4 of the said lease, the plaintiffs say, in the first place, that, on the true construction of the lease according to its ordinary grammatical meaning and considering it as a whole in accordance with the well-established rules for construing documents of that kind, I should construe the document as only entitling the defendants to carry on the specified trades provided they do not cause nuisance, damage, annoyance or inconvenience to the lessors or their tenants. The prohibitions, they say, are to be read as the paramount factor and not the grant of the right to carry on the specified trades. Now, let us see how the lease is framed. First, there is the demise of the lands; then there is clause 4, which is framed as a condition amounting to a negative covenant the lessees are not to do or permit to be done, anything which shall be a nuisance, damage, annoyance or inconvenience to the lessors or their tenants, provided, however, that they, the lessees, may continue to carry on certain specified trades. One therefore starts with a demise subject to the various prohibitions in the said clause and then comes a specific type of licence, so that,prima facie, the licence appears to be subject to the therein-before contained conditions of the demise. Further, from clause 19 it appears that the lease is of premises in a market where one may expect to find other traders and the actual terms of the covenant show that the lessors have other tenants whom they desire to protect. That the trade of ice merchant or fishmonger may lead to water and fluid matter escaping to adjoining premises is recognised in the provisions of clause 5, and the parties obviously agreed, and intended, to provide against nuisance of that particular kind to the lessors and their other tenants. Percolation has not, in my view, been proved to have occurred, but I ask myself whether it could seriously be contended that, though quantities of water are used in the carrying on of the trade of fishmonger and although permitting the percolation of water is expressly provided against, nevertheless no liability would be incurred if percolation did occur, because of the licence contained in the covenant? Is not that particular covenant quite futile in its effect if percolation resulting from the ordinary running of the business is not effectually provided against? Unless the wording clearly leads to an absurd result I do not think that I should construe such a covenant so as to lead to such a result, and, assuming that quantities of ice are used in carrying on these trades, is it to be said that express provisions against creating nuisance, damage, annoyance or inconvenience are to be of no effect as regards nuisance, damage, annoyance, or inconvenience arising from the use of ice, although the corresponding covenant as against causing percolation of water is effectual? That is a suggestion which I find it difficult to accept. The defendants seek to have this covenant read as if the grant of the right to carry on these specified trades was paramount and as if the covenants against causing nuisance, damage, annoyance or inconvenience must be read and construed as subject to the grant. They say, I think rightly, that words of grant should be construed as against a grantor and that a document of this kind should be construed so as to uphold, rather than to annul, the transaction. Accepting that approach, is it correct as a matter of construction to say that the parties intended the grant to be paramount? If so, and if the alleged intention of the parties were to be expressed in words in full, would this construction not involve reading into the licence at the end of the clause some words such as”the lessees may nevertheless do anything which it is in the course of their business to do notwithstanding that it causes nuisance, damage, annoyance or inconvenience to the lessors or their tenants.” The addition of such words would seem virtually to cancel the effect of the negative covenant and to render it nugatory and its insertion pointless, a construction not to be adopted unless clearly intended. Further, it is, I think, of assistance in construing the covenant if it is appreciated that there was a good reason for inserting a licence as part of the clause containing the covenant. There was in fact no necessity to grant the right to carry on these trades at all; the defendants could have carried them on without the express grant of the right. These trades, however, are regarded by many persons as having objectionable features and as being potential sources, at least, of annoyance or inconvenience to neighbours, if not actual nuisance. It seems to me that the proviso can be reasonably explained as being directed against any objection being raised, or action taken, by reason of nuisance, inconvenience or annoyance being caused merely by the carrying on of these trades per se, and having regard to the way the whole clause is framed I think that the clause ought to be construed in that way. I would stress that the prohibition of things causing annoyance and inconvenience covers a much wider range of things to which objection might be made than the prohibition of things causing nuisance, and having regard to these very wide prohibitions in the covenant it would seem to me that some saving clause of the kind found in this covenant was very necessary, having regard to the nature of the trades permitted.
Prima facie, then, there appears to be here a demise subject to a negative covenant that the lessees shall not do anything which will be a nuisance, damage, annoyance or inconvenience to the lessor or his tenants, subject to which, however, the lessees may carry on certain trades. Put otherwise, the lessees may carry on certain trades provided they do not commit a breach of the negative covenant. A consideration of the authorities in point and of certain legal principles which may be applicable is necessary, however, before coming to a final conclusion as to the effect of the whole clause.
Leaving out of consideration for the moment the effect of a negative covenant, such as we have here, the plaintiffs say that the grant of a right to carry on a particular trade does not justify causing a nuisance unless it be proved that the trade cannot be carried on otherwise, and they rely on the case of Pwllbach Colliery Co. Ltd. v. Woodman(1) for this proposition. A fortiori, then, it is submitted that the acts complained of in this case cannot be justified by the grant of the right to carry on the trades specified where there is not only an express prohibition of the commission of a nuisance, but a prohibition which in terms not only restricts acts amounting to nuisance but also restricts acts which may cause damage, annoyance or inconvenience as well. The facts of that case are briefly these. By a lease, dated the 28th September, 1907, one, Fleming Gough, demised certain land his property to the Ystalyfera Tin Plate Company for 99 years from the 25th December, 1906, with power to put up such works, erections and buildings and to carry on such industries and trade on the land demised as the Company by their memorandum of association were empowered to carry on. There followed a list of trades, including those of coke manufacturers, miners and smelters. By an under-lease of the 8th August, 1908, the Ystalyfera Tin Plate Company sub-leased to the Pwllbach Colliery Company portion of the demised land with power to lay and maintain screens, tips and other apparatus, machinery or erection for the purpose of their colliery works. By a lease, dated the 3rd May, 1909, the said Fleming Gough demised for the term of 99 years an adjacent plot of land subject to all rights and easements belonging to any adjoining property. The plaintiff, shortly afterwards, erected a slaughter-house house and sausage factory on this land. In 1912 the defendants erected a screening apparatus and plant on the land demised to them, and the plaintiff complained that the defendants by their screening operations caused a nuisance to his slaughter-house and sausage factory and that the deposit of coal dust from the colliery damaged his meat and sausages. Now it is to be noted that the facts in that case were more favourable to the defendants in that case than the facts in the present case are to the defendants, here, in at least this respect, that there was in that case no negative covenant of the type existing in the defendants’ lease in this case. Mr. FitzGerald says that the judgments do not support the proposition that the case is quoted as authority for and that the head-note stating this proposition is not correct and I must therefore refer in some little detail to the judgments to see if this criticism is justified, since a good deal depends, in my view, on the contentions of the plaintiffs based on this case. Although not a case between landlord and tenant, the case, in my view, is in point, turning, as it does, upon the terms of leases to the co-tenants of the same landlord and, more particularly, on the terms of the lease under which the Colliery Company, as sub-lessees, claimed the right to carry on their trade.
Addressing myself now to the question as to whether the judgments support the proposition contended for and as set out in the head-note I start with Lord Loreburn’s speech. In the course of it he says he would like to point out that the lease of 1907 did not authorise anyone to commit a nuisance; neither, I may remark, does the lease to Messrs. McCabes. It did empower the carrying on of certain industries, but, says Lord Loreburn, at p. 639: “To my mind it is clear that permission to carry on a business is quite a different thing from permission to carry on in such manner as to create a nuisance. If indeed,” he continues,”it could be proved that the business authorised could not possibly, in a practical sense, be carried on without committing a nuisance, so that every one must have known the purpose was to commit a nuisance, or if some particular method of carrying it on had been authorised, which being faithfully observed had nevertheless necessarily resulted in an unexpected nuisance being committed, then it would have been different.” I wish to refer next to portion of Lord Atkinson’s speech, but in order to understand the context properly it is necessary to know that the second finding of the jury in the case was that the screening on the defendants’ colliery was carried on in a reasonable manner and in the ordinary way in which such operations were usually carried on in the County of Glamorgan. Concerning this finding, Lord Atkinson said, at p. 641: “It was argued on behalf of the appellants that the second finding of the jury was sufficient to justify the appellants in causing this nuisance. The finding is, however, far short of a finding that the creation of the nuisance was necessary for the exercise of the right or the enjoyment of the privilege or easement claimed to be granted to the lessees. Even assuming that the operation of breaking up, washing, and screening coals is an ordinary operation of mining, and therefore covered by the words of the lease, it is quite consistent with the second finding that there may be other methods of doing all these things, reasonably practical in character, none of which would cause the nuisance complained of. In this fact lies the fatal defect and insufficiency in the verdict of the jury as a justification of the appellants’ action. I should myself have thought that the law was clear upon this point, but, as it was so resolutely contended that the appellants were not bound to establish that the operations causing the nuisance were necessary for the enjoyment by them of the right or privilege they claimed, it is desirable to refer to a few authorities on the point.” The views of Lord Loreburn and Lord Atkinson seem clearly to justify the terms of the head-note and the proposition contended for as good law by Mr. FitzGerald. Then I find that Lord Sumner, having stated that the lease gives power to put up erections for, and to carry on the trade of, miners, says, at p. 649: “This clause is in its nature restrictive; it limits to the company’s corporate powers those general lawful uses which a natural person would have inferentially enjoyed. I cannot see how this can be read so as to empower the company to erect and use a coal-mining washing plant, even at the cost of causing a nuisance to the neighbours. There will be no derogation from the lessor’s grant, if he, or those claiming under him, successfully resist such an injury, for the appellants will still enjoy the full benefit of reasonable and careful use of the plant, and ample effect will have been given to the words used. There is no finding that they cannot do so without committing a nuisance, nor is a washing plant that will bespatter the countryside with coal dust shown as an indispensable instrument of coal mining.”Finally, Lord Parmoor, at p. 652, says: “The appellants cannot succeed unless they can establish that the term of the lease of September 28, 1907, quoted above, authorises them, as sub-lessees from the Ystalyfera Company, to carry on the business of miners so as to cause a nuisance over the adjoining property of the lessor, and that the respondent, in respect of the said slaughter-house and wooden shed, holds, under his demise, subject to this right or easement conferred in the prior lease. It is not contended that the covenant in question directly authorises the original lessees or the appellants to carry on any business so as to cause a nuisance to the adjoining property of the lessor, but it is said that such a right can be, and ought to be, inferred by implication, as being the common intention of the parties, so long as the business is carried on without negligence and in a manner usual in the district.
My Lords, I confess that I am quite unable to understand this contention unless it can be said that it is practically impossible to carry on the business of mining upon the demised site without causing a nuisance. In the present case there is no evidence that it was in any way necessary, in order to carry on the business of mining, to cause a nuisance, and all the circumstances point to a different conclusion.”
In my view, the judgments and the passages I have quoted, in particular, fully justify the plaintiffs in claiming that the case is authority for the proposition for which they contend. Lord Finlay, in Attorney-General v. Cory Bros. and Co. (1), states the actual proposition (at p. 541) and says that it is, of course, correct, adding, however, that the principle of the Pwllbach Colliery Company’s Case (2) has not, he thinks, any application except in the construction of a licence to carry on a trade. Pickford L.J. had previously quoted the precise proposition in Malzy v. Eichholz (3),and says that that was decided in Pwllbach Colliery Companyv. Woodman (2). If I err in my understanding of the decision, I at least find myself in distinguished company.
Now, in these present proceedings the defendants, Messrs. McCabes, have not pleaded that their business could not be carried on in a practical fashion without creating a nuisance, and therefore they cannot be heard to say that the business cannot be carried on without creating this particular nuisance of causing condensation in the vaults beneath them which is complained of, and I must proceed on the basis that they have not brought themselves within the exception envisaged in the Pwllbach Colliery Co. Case (2). The position, then, as I see it, is prima facie that the plaintiffs are entitled to succeed on the authority of the Pwllbach Colliery Co. Case (2)on the basis that the grant of the right to carry on the specified trades did not authorise the committal of any nuisance anda fortiori on the wording of the covenant unless the defendants can succeed in justifying what has happened by reason of the application to the case of some other overriding principle of law or because some authority exists which shows that the lease should not be construed in the fashion which I have tentatively suggested is prima facie the correct way. In this connection the defendants contend that there are several passages in the Pwllbach Colliery Co. Case (1) indicating that what they have done here may be justified either under the doctrine of continuous or apparent easements or on the basis that a grantor cannot derogate from his grant. They say that it was in the contemplation of the parties that the acts complained of should be done, because the grant was one to continue an existing business in the course of the carrying on of which these things had been done in the past, and they say that the right to continue to do the things complained of must be deemed to be included in this grant as something in the contemplation of the parties, notwithstanding that such acts create a nuisance.
The defendants rely in this connection particularly on the case of Hall v. Lund (2). They say that it follows from that authority that where a lease is made containing a grant of the right to continue to carry on a business the lease may be explained by the mode in which the premises have been previously enjoyed and that, thus explained, there is an implied grant to carry on the business in the same way as before, notwithstanding that a nuisance results. It is important, however, to appreciate what precisely were the facts of that case, and in so far as they are relevant they were these. The business of bleacher was carried on by a former lessee of the premises in a mill on the premises demised and that lessee used, in the course of his bleaching operations, to discharge water into a watercourse the property of the lessor. The lease was surrendered and a new lease granted to a lessee who was described therein as a “bleacher” and the premises were described as being in the occupation of the former lessee. It was hold that there was an implied grant to use the watercourse for the purpose of discharging fouled water. Martin B. said in the course of his judgment that in order to ascertain what passed by a conveyance, evidence may be given of the state of the property at the time it was conveyed and of the mode of enjoyment. If certain rights had been enjoyed with the premises, it must be assumed that the lessor had granted those rights. Now, I wish to point out that in the case of Hall v. Lund (2) the position was that the previous lessee of the premises had discharged fouled water into the landlord’s stream to the knowledge of the lessor and had thus previously enjoyed the right or privilege of committing a nuisance. Pollock C.B., at p. 683, said that the lessor, with full knowledge of the mode in which the premises had been used by the former lessee, granted a new lease to the defendant, and the plaintiff being in the position of the lessor could not derogate from his own grant. Channell B., at p. 685, says that he founds his judgment on the fact that Shaw (the former lessor) knew of the discharge of the refuse water into the stream. It would seem, therefore, in order to bring a case within the authority of Hall v. Lund (1) a lessee, having the right to carry on a similar business to that previously carried on, in order to be able to justify the committal of a nuisance would have to be able to show that he or his predecessor in title enjoyed the right or privilege of committing such nuisance or a similar injury as against the lessor, being the owner of adjoining lands also, prior to the granting of the lease. At any rate, that was the actual state of affairs in Hall v. Lund (1). Applying that to the present case it would seem to me that the defendants, in order to bring themselves within the decision, would have had to have shown, first, that they had, in fact, committed a nuisance of the nature now shown to exist prior to the granting of the present lease under which they hold and that they had enjoyed that right to the knowledge of the plaintiffs. To entitle them to make such a case they would require, it seems to me, to make an appropriate plea in their defence to the broad effect that if they had committed the nuisance complained of they had enjoyed the right to do so prior to the lease and that the right to continue to commit the nuisance must be taken to be implied in the grant as being necessarily in the contemplation of the parties. The defendant in this very case, Hall v. Lund (1), I find relied on a plea on somewhat similar lines and according to the report issue was taken thereon. No such plea having been made here by the defendants in their defence, the plaintiffs contended that it was not open to the defendants to make a case on these lines unless their pleadings were amended, and this seemed to me a correct submission. This resulted in my having to rule that evidence tending to prove the enjoyment of the right to commit a nuisance or similar injury, as against the plaintiffs or their lessees, prior to the lease could not be given. The defendants, in addition, however, put their case also in a somewhat different way later during the hearing. They said that it was unnecessary for them, in order that they might succeed, to have to show that their previous method of carrying on business caused a nuisance, which they were by the grant entitled
to continue, but that if they proved that they had carried on business in a certain way before the granting of the lease and then, after the granting of the lease, carried on in the same way, but a nuisance resulted which had not existed before then, the grant of the right to carry on the previously existing business entitled them to carry on as before not-withstanding that such a nuisance was created. That would, presumably, from a practical point of view, involve the defendants in having to call evidence to show that ice and icy water were left on the floor in the course of the carrying on of the business prior to 1939, and that only similar amounts of ice and icy water were left for similar periods on the floor after the granting of the lease. Again, the plaintiffs contended that such a case must be pleaded and that the defendants, before being entitled to make such a case, should plead that if they had allowed ice and water to remain on the floor for such a time and in such a manner as to cause a lowering of the temperature, resulting in condensation in the vaults below, then that prior to the grant the defendants had carried on in the said business in the same premises under a previous demise from the plaintiffs in a particular fashion, i.e., in a way which involved, inter alia, leaving ice and water on the floor of the premises, and were entitled by virtue of the grant to continue to carry on the said business in the same fashion now, notwithstanding that by so doing condensation arose in the vaults below resulting in nuisance, damage, annoyance or inconvenience to the plaintiffs or their lessees. In other words, the plaintiffs say that a plea by way of confession and avoidance is called for. I would have been glad to read into the pleadings a plea tantamount to what I have suggested if I had felt that I could legitimately do so, because, in my view, it is highly desirable in all cases to have the real issues between the parties decided, and, more particularly, in a case of this magnitude; but, as Mr. Pringle pointed out, a plea of confession and avoidance must be made separately and should not be allowed to be spelt out of a general traverse. On examining the pleadings it seemed to me that a case on the lines indicated was not pleaded in the defence. The point is one of substance because unless some plea of the kind I have indicated is made in this case the plaintiffs cannot know what case they have to meet, and they might very well not have available the necessary evidence to rebut such a case, which involves proving how the defendants’ business was carried on both before and after the lease. I intimated that it seemed to me that some appropriate amendment of the defence should be made so that all issues might be determined between the parties and an amendment was actually formulated by the defendants in the following terms, verbally stated: “At and for many years before the date of the granting of the lease of 1939 the defendant Company carried on the business of fish poultry and ice merchants in the same manner as they have carried on since that date and for many years prior to the lease of 1939 the defendant Company brought on to the premises considerable quantities of ice and in the course of their business water from troughs containing fish and poultry flowed on to the floors of the demised premises and was drained off, in the same manner and with the same effect as from the date of the lease during the time complained of in the statement of claim. The defendant Company claims that under and by virtue of clause 4 of the lease it is and was at all relevant times entitled to carry on its said business in the said manner and the defendant Company will submit that it is entitled so to do and that the plaintiff Company is not entitled by reason of any of the said matters to any of the relief claimed.” The plaintiffs, however, stated that if I should see fit to grant an amendment on these lines they would be taken by surprise, because as the pleadings stood they had not anticipated such a case being made and they stated that they would require an adjournment for the purpose of meeting the case and to give them an opportunity to collect and call rebutting evidence. On hearing this the defendants stated that they would not proceed with any application to amend. It is right that I should make it clear that at the same time they contended, and, indeed, throughout contended, that it was unnecessary to make any amendment to enable them to make the case which they wished. As the amendment was not made I was compelled to rule that the case envisaged in the proposed amendment could not be made and that evidence of a nature calculated to show how Messrs. McCabes carried on their business prior to the lease of 1939 and how they carried on since on relevant matters, from the point of view of comparing the two, was accordingly inadmissible, which I did with regret, as I felt that a decision based on a consideration of all relevant datawas much more in the interests of the parties than one turning, to some extent, on a pleading point.
It will be noted, incidentally, that the amendment tentatively formulated by the defendants reads as a plea that the things done before the lease had the same effect as the things done from the date of the lease, involving, it would appear, reliance on the right to continue to commit a nuisance where the right enjoyed prior to the lease involved causing nuisance, such a defence being intended. I take it, to bring the case within Hall v. Lund (1). Whether, however, the argument of the defendants be that the grantee of a right to carry on a trade may carry it on although it involves creating a nuisance to his landlord or those claiming under him, either because the grantee carried on the business previously in such fashion as to create a nuisance or because he is only carrying on as he did before, such contentions were not, in my view, open to the defendants in this case because they were not pleaded. Even if the defendants were entitled to put their case in the way suggested I feel that, on the evidence so far actually adduced, some formidable difficulties would confront them. On the facts as they stand it would appear that in the early years of the war there was a large increase in the amount of fish dealt with and, presumably in the amount of ice used, and, furthermore, that the consumption of ice has increased in recent years. It is, perhaps, not merely a coincidence that these periods have been those when complaints seemed strongest. Moreover, the defendants have in writing and in evidence stated that there were no complaints of dampness and dripping of water prior to 1940, which would prima facie make it difficult to sustain a case dependent on proving that they had carried on in the same way causing the same results by their actions prior to the date of the lease.
Apart from the matter of pleading, which I have dealt with at some length because it was an important factor in the case, I should like to refer briefly to the defendants’ contention that a grant in a lease of a right to continue a business entitles the lessee to carry on as before, notwith-standing that a nuisance results. I can readily understand that if the right to commit a nuisance is shown to have been enjoyed as against the lessor prior to the granting of the lease, as in Hall v. Lund (1), the continuance of such a right or privilege can be said to be within the contemplation of the parties and thus may be said to form part of the grant. The wider proposition contended for does not appear to be supported by any authority precisely in point, although there are some observations in the judgments in cases cited which may appear to support the contention. Lyttleton Times Co. v. Warner Bros. (2), a decision of the Privy Council, was relied upon. Both parties to that case had agreed to the rebuilding of the appellants’ printing-house on the terms that the respondents were to rent from the appellants the upper floors for bedrooms for their hotel and the appellants were to have on the ground floor an engine house and printing machinery. The parties adverted to the risk of noise and vibration, which was apparent, but, it would seem, they believed that it would be so slight as not to be an inconvenience. It was held that in the absence of evidence that the appellants had erected the building or worked the machinery improperly the action should be dismissed. But there the appellants were doing on the property retained exactly what the other party knew they were going to do and the lessees of the bedrooms knew perfectly well that noise and vibration might be expected and with that knowledge took the risk. What was done, as Lord Atkinson points out in the Pwllbach Colliery Co. Case (1) was the particular thing which it was contracted and agreed should be done. The present case is distinguishable. It has not been shown nor could it be shown as the pleadings stand that any particular method of carrying on these trades was in the contemplation of the parties, and, moreover, there exists in the lease in this case coupled with the grant, a covenant that the defendants shall not do or permit to be done anything which may be a nuisance, damage, annoyance or inconvenience to the lessors or their tenants.
In my view, therefore, the plaintiffs have sustained their contention that the grant of a right to carry on a trade does not entitle the grantee to commit a nuisance affecting his landlord or those claiming title under him unless the trade cannot be carried on in a practical fashion without committing such a nuisance. In addition, on the true construction of the lease, having regard both to its form and wording, the defendants are, in my view, bound by the terms of the negative covenant. Further, the defendants are not entitled on the pleadings as they stand to make a case on the basis that the grant, by reason of the circumstances under which it was made, entitled them to carry on as before whether a nuisance was caused or not, and that they are in fact merely carrying on as they did before. So far, therefore, the plaintiffs have made a case entitling them to succeed on the first part of para. 7 of the statement of claim unless they are otherwise debarred from obtaining relief by reason of certain further contentions of the defendants to which I shall now address myself.
One of these contentions of the defendants had to do with the several statutes under which the plaintiff Corporation came into being and by virtue of which it operates. The defendants said that the statutes did not empower the plaintiffs to make a letting of the vaults to Messrs. Power and Son and that if the letting was void there could not then be any question of nuisance or annoyance caused to any tenants, properly so called, of the plaintiffs, or, indeed, any nuisance, damage, annoyance or inconvenience to the plaintiffs because, I assume, I should treat the position as if there was no one in legitimate occupation of the vaults. While not wishing to indicate any agreement with the suggested results of there being no lawful letting, I do not think that the defendants’ primary submission is valid, because it is clear that the Company has ample power of letting and leasing under s. 55 of the Dublin (South) City Market Act, 1876.
The next contention of the defendants on which they relied to show that the plaintiffs were not entitled to any relief was that, as the plaintiffs were reversioners, they were only entitled to an injunction if they could show that they were entitled to damages and that they were not entitled to recover damages without proof of special damage to the reversion, which they submitted they had not shown.
As put at first I understood the contention to have reference to the plaintiffs’ position as reversioners of the lease made to Messrs. McCabes, and the simple answer seemed to be that the roof to which damage was alleged to be done was outside the area of the premises leased to Messrs. McCabes and therefore not part of the plaintiffs’ reversion, being part of the plaintiffs’ premises outside and apart from those occupied by Messrs. McCabes. It appeared, however, later that the submission was also made with reference to the plaintiffs’ position as reversioners under the lease to Messrs. John Power and Son, and in this respect it requires some careful consideration.
The first case relied upon by the defendants in support of this contention was that of Johnstone v. Hall (1). In that case a house was held under a lease for 999 years and the lessee was bound by covenant not to carry on any trade or business, but to use the house as a dwelling-house only. The plaintiff was only entitled to the reversion in remainder, there being no intervening life estate. An injunction was refused on the ground that the damage was too remote for the Court to interfere. The whole point of the case, as I understand it, was that the reversioner was a remainderman and not immediately entitled in possession to the rents and profits or to an estate in possession subject to the lease. The Vice Chancellor, Sir W. Page Wood, at p. 416, said to counsel, who had claimed that as this was an express covenant the Court would not put the plaintiff to prove damage:”The question is, whether, during the preceding tenancy for life, the plaintiffs have such an interest in the covenant as to maintain this bill.” In his judgment, at p. 421, the Vice Chancellor makes it clear that he would have found for the plaintiffs and enforced the covenant if the plaintiffs had been entitled to the immediate reversion. He says:”If the plaintiffs were now in possession of the property subject to the lease, no doubt, according to the decision in Kemp v. Sober (1), I must have held that the carrying on of a school was a breach of the covenant, which is, that the lessee should use the premises as a dwelling-house only, and there must have been a decree for specific performance of the agreement as between the plaintiffs, so situated, and the defendants.” I venture to think that this authority on analysis rather supports the contentions of the plaintiffs than those of the defendants on the point at issue.
The case of Jones v. Llanrwst Urban Council (2), next cited on behalf of the defendants, had to do with the fouling of water in a natural stream. The plaintiff was the landlord of lands adjoining the stream which were in the occupation of his tenants. Parker J. said, at p. 404, that it was reasonably clear that a reversioner could not maintain actions in the nature of trespass without alleging a previous injury to the reversion. He goes on to say that if the thing complained of is of such a permanent nature that the reversion may be injured, the question is whether it is or is not so injured, and “permanent” in that connection means something that will continue indefinitely unless something is done to remove it. Mr. McCarthy says that neither the trade carried on by the defendants nor the nuisance complained of is of that character. It is, in my view, unnecessary to decide whether these contentions are correct or not because the case is not to my mind in point. It has to do with trespass by third parties and not with breach of covenant by a lessee, which is what I have to deal with here; and it seems to me that the same remark applies to another case cited by the defendants, namely, Simpson v. Savage (3)which was a common law action for nuisance by a person not in possession and unable to show damage to the reversion. It has nothing to do with the contractual liability under a covenant of a tenant to his landlord.
Contrary to the defendants’ contentions it seems to me that the authorities show that a breach of covenant is a sufficient ground for the Court to interfere by way of injunction without the necessity of showing damage to the reversion. A clear statement of the law with regard to the enforcement of a negative covenant is to be found in the judgment of Lord Cairns in Doherty v. Allman (1): “Now, my Lords, let us look at it in that point of view. I said that there is here no negative covenant not to turn these buildings to any other use. My Lords, if there had been a negative covenant, I apprehend, according to well-settled practice, a Court of Equity would have had no discretion to exercise. If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves.”
An interesting point was made by Mr. FitzGerald in his concluding remarks when he suggested that, while the action was not one for nuisance, nevertheless regard should be had to what constitutes a nuisance at common law in order to enable one to construe the covenant. He suggested that at least one definition of common law nuisance was”wrongfully permitting the escaping of deleterious things into another’s land” and that what had happened here, assuming that I accept what was urged on behalf of the plaintiffs, was an abstraction of heat, causing coldness, and that nothing had in fact passed from the defendants’ premises to the adjoining premises. Nuisance has, however, been defined also as “anything done to the hurt or annoyance of the lands tenements or hereditaments of another and not amounting to trespass”: Stephen’s Comms. 1st ed., vol. 3, at p. 499. It would seem passing strange if the law is that you cannot cause your neighbour material discomfort by causing the overheating of his premises by activities on your adjoining land, but that you can with impunity reduce his premises to arctic conditions by the abstraction of heat. However, I need not dwell upon the matter because to my mind what has to be considered here is whether the defendants have committed a breach of any of the terms of a covenant which contains other prohibitions as well as that prohibiting nuisance, and in this connection I have been referred to a case where the question of the necessity of showing pecuniary loss in an action such as the present and the meaning and effect of a somewhat similar covenant were both dealt with.
In Tod-Heatly v. Benham (1) the covenant in question was one by a lessee inter alia against doing any act “which shall or may be or grow to the annoyance, nuisance, grievance, or damage of the lessor, his heirs or assigns, or the inhabitants of the neighbouring or adjoining houses.” The proceedings were to restrain the establishment of a hospital for the treatment of certain diseases on certain demised premises and it was held in that case that it was not necessary to show that actual damage or pecuniary loss had been sustained in order to enforce such a covenant, and the establishment of the hospital was restrained as a breach of the covenant. The opening words of the judgment of Cotton L.J., at p. 91, are relevant: “We have,” he says, “been much pressed in this case on behalf of the appellant that this is a question of nuisance, and that we are to consider whether or not a case of nuisance had been made out. But that is not so. It is a question on the covenant. The predecessors in title of the defendant took the property from the predecessors of the plaintiff, Tod-Heatly, under a certain covenant, and the only question we have to consider is whether that which has been done by the defendant is in violation of that covenant. If that is made out the Court does not in my opinion require the plaintiffs to shew that there is any damage or pecuniary loss sustained by them. There is a contract between the parties, and there being nothing wrong in the bargain, the plaintiff, Tod-Heatly, has a right to insist upon the price in consideration of which the defendant’s predecessors got the property. As was very fairly and properly admitted, the defendant, although he did not personally know of this covenant, as unfortunately he did not, must be taken to have known of it, and he must not use the property in any way in violation of the covenant.”I say that these words of Cotton L.J. apply with some force to the present case and that the real issue on this branch of the case is as to whether there has been a violation of the covenant, not whether damage has been sustained. Then further, at p. 95, Lindley L.J. says: “The question which arises is, what is the meaning of the expression ‘shall or may be or grow to the annoyance, nuisance, or damage’ of the persons named. Certainly that string of words is introduced in order to give the covenantee a greater protection than he would have had without any such words at all, or if only one of those words were used. There is no use in putting in the words ‘any grievance or damage’ as additions to nuisance except for the very purpose of giving some greater protection than he would have had if the word ‘nuisance’ alone were used and included in the covenant. When V.-C. Bacon held, as he did in Harrison v.Good (1), that the word ‘nuisance’ in the covenant meant only that which would be an actionable nuisance without the covenant, I doubt whether he gave sufficient weight to the consideration that the whole object of having a covenant against nuisance is to give the covenantee some protection in addition to what he would have had without the covenant; but for a nuisance in the strict sense there would be an action, covenant or no covenant. I am not by any means sure that the Vice-Chancellor did not put on the word ‘nuisance’ in that covenant too restricted an interpretation. But be that as it may, I cannot at all agree with the contention that these words ‘annoyance or grievance to the inhabitants’ mean that which would be according to law a nuisance, or that the covenant is only against such acts as would produce pecuniary damage. If it were necessary to consider this question of damage, I confess the inference I should draw from the evidence is that pecuniary damage is made out. I think that is the legitimate inference, but I do not rely upon that at all. I will assume that Mr. Justice Kekewich, who saw the witnesses, is correct in that; and his opinion clearly was that there was no pecuniary damage whatever. I will assume that to be so. Still we come back to the question whether that which has been done is not within those words, ‘such as shall cause or may be or grow to the annoyance or grievance of the lessor.’ Now what is the meaning of annoyance? The meaning is that which annoys, that which raises objections and unpleasant feelings. Anything which raises an objection in the minds of reasonable men may be an annoyance within the meaning of the covenant. Then to whom is it to be an annoyance? It must be to ‘the lessor, her heirs or assigns,’ or the inhabitants of the adjoining houses; the lessor is represented by Mr. Tod-Heatly, the owner of the reversion of this property. In this case he says: ‘It is not because I live there, but because my tenants come to me and complain, and it gives me trouble and vexation, since what annoys them is a trouble and vexation to me.’ But the under-tenants, are they not annoyed? Is there nothing done here which raises an objection on their part, looking at them as reasonable beings? Is it a fanciful feeling of distaste? I must say at one time I thought that the appellant might succeed in shewing that there was really nothing to complain of here except fanciful annoyance to the proprietor and to the inhabitants of the adjoining houses. It struck me there might be some doubt whether there was any annoyance to the neighbouring or adjoining houses more than some fanciful distaste, which would not be sufficient. But upon the evidence I am satisfied that what has been done really does annoy a great many people on this estate.” The judgment of Bowen L.J. is to the same effect.
Now, the judgments in this case are most illuminating, when considering the issues in the present case. They show clearly that it is not necessary to show damage to the reversion. They indicate that what a Court has to consider in this type of case is not whether a nuisance at common law has been made out, but whether that which has been done by the defendant is a violation of the covenant. It is further evident that words such as we have here, such as”annoyance and inconvenience,” are to be given their proper force and as providing for some greater protection than the lessors would have had if the word, “nuisance,”appeared alone in the covenant. While I feel that what has been done by the defendants does in law amount to a nuisance, there can, I think, be no doubt whatsoever that what they have done amounts to an annoyance or inconvenience to the plaintiffs and their lessees. The lessees having from time to time this drip on their barrels and having to shift the barrels when they would otherwise not have to do so, and the plaintiffs having continuous complaints from the tenants, involving a vast amount of correspondence, to say nothing of the damage to the mortar and girders, both, to my mind, suffer annoyance and inconvenience, and I do not think there can be much argument about it. I should, perhaps, add that the plaintiffs have in fact, in my view, sustained actual damage since the mortar is affected badly and has perished and the ends of the girders have also been injured by the wet, as was detailed by Mr. McConkey who said it would cost about £100 to put all this right; and it will be remembered that the plaintiffs are under liability to Messrs. John Power and Son to repair the roof of the vault under clause 8 of their lease to Messrs. Power and Son. Mr. McConkey’s evidence was not of the kind on which a decree could be made, but if the plaintiffs are otherwise entitled to succeed it would be sufficient to enable me to say that a prima facie case had been made out so as to enable me to direct an enquiry as to damages.
It is said, then, that Messrs. Power and Son cannot complain, because they use the premises in some peculiar way, and that a person is only entitled to be protected against nuisance in respect of an ordinary user of lands and it was suggested that Messrs. Power and Son kept up the humidity of the vaults to suit their own convenience and could not be heard to complain if the state of affairs they had artificially brought about was a cause or a contributing factor to what is complained of. From the evidence before me I do not believe that Messrs. Power and Son used any artificial means to keep up the humidity of the vaults and I accept Mr. O’Reilly’s evidence on this point. I have no evidence before me which leads me to believe that these vaults are markedly different in these respects to any other underground vault in the City with an earthen floor. The humidity may be above average, but not to the extent of being abnormal. Likewise, I do not believe that there has been any interference of an artificial nature with the temperature and I have no reason to believe that it is in any way abnormal, either, for a vault of this kind.
The position has now been reached where it is apparent that the plaintiffs have shown a breach of covenant which they would in the ordinary way be entitled to restrain the defendants from committing. The defendants say I should nevertheless exercise my discretion in favour of the defendants and refuse the plaintiffs such equitable relief as they claim. They say that the conduct of the plaintiffs was such as disentitled them from seeking an equitable remedy in that such conduct has not been fair and honest and free from any taint of fraud or illegality. The defendants suggestion is that the plaintiffs knew that the damp and drip was caused by condensation and, nevertheless, stood by and allowed defendants to put in a new floor at a cost of nearly £900, and, indeed, more or less insisted that they should do so, and they say, further, that it was put in with the approval of the plaintiffs’ architect. This is not quite correct, because he made several objections; but that is immaterial. Actual fraud is not imputed to the plaintiffs, but it is suggested that they acted dishonestly and unfairly. Now, if it were proved that the plaintiffs well knew that the cause of the trouble was condensation, and never told the defendants that, but on the other hand used every possible endeavour to get them to put down a new floor, well knowing it would do no good, then I would certainly be prepared to say that they had not come into Court with clean hands or comported themselves in the way that a person seeking equitable relief must conduct himself if he is to obtain that form of relief, and I would refuse the equitable remedy of an injunction.
It is apparently the fact that in a report of the 14th November, 1940, sent by the plaintiffs’ architects to the plaintiffs, it was suggested that condensation might be the cause of the trouble. Further, the same architects are said to have reported in December, 1945, that it was possible that the water was coming from some distance away and also that another possibility was that it was caused by condensation. Neither of these reports was sent to Messrs. McCabes, nor were they adduced in evidence. That condensation might be the real cause of the trouble was first suggested to the defendants in the plaintiffs’ solicitors’ letter of the 18th May, 1951. Having regard to all the evidence on the point, I think I may fairly sum up the apparent views of the plaintiffs’ architects in so far as disclosed in the evidence by saying that they had in mind at these two periods the possibility of condensation, a possibility which was conveyed to their clients in a tentative fashion, as Mr. Pim said, but that their real belief, as indicated by such of their reports as were put in evidence, was that dampness or leakage coming through the floor of McCabes’ premises was the real cause of the trouble. Their clients, the plaintiffs, must inevitably, I think, have been influenced by their views. It would be a great mistake to proceed to assess the plaintiffs’ conduct on the basis of the facts as we know them now, when it is clear that condensation is the cause of the trouble. I note that in their report of the 26th November, 1940, that is only twelve days after the first report mentioning condensation, Messrs. Byrne and Sons, the plaintiffs’ architects, say that their conclusion is that the most likely cause of the damp is that the asphalt on McCabes’ floor is no longer waterproof. Again, in 1941, after the first floor was laid, the architects thought that the fault was due to damage to that floor, and on the 5th December, 1941, they say that they are still of the opinion that the water is coming from the floor. The second mention of condensation was at the time when there was correspondence regarding the matter of paying for the laying of the first floor, and at that time there were no written complaints passing from the plaintiffs to the defendants, and it was not until 1949, four years later, that the matter was taken up again in correspondence, when the architects’ reports to the plaintiffs show that they still took the view that leakage was the cause of the trouble. Mr. Leonard would never, I feel sure, have approved of the specification for the second floor without making a suggestion as to the incorporation of insulating material if he had thought seriously of condensation. The defendants’ own architects do not appear to have thought of condensation as a possible cause of the trouble either. All this being so, and having regard to the evidence as a whole on this aspect of the case, I have no reason to believe other than that the plaintiffs’ genuinely believed all along that leakage was the cause of the trouble. They were mistaken in that belief and it would have been better, perhaps, if they had forwarded the reports mentioning the possibility of condensation, though even then the matter might not have been followed up; but I am unable to regard their conduct in failing to forward these reports as amounting to a dishonest suppression of information which should have been forwarded to the defendants. Mr. McCabe, in the course of his evidence, very fairly stated that the parties were in fact most friendly and I believe that that was so. I believe that the true position is that, until quite recently, the directors of the plaintiff Company genuinely believed leakage to be the cause of the trouble, and I am not prepared to hold that they acted either dishonestly or unfairly or that their actions were tainted with fraud, and accordingly that particular objection to the granting of equitable relief is not sustainable.
It did also seem to me to be suggested at one stage of the proceedings that I ought not to grant an injunction because the plaintiff’s experts were unable to swear positively that the remedies they suggested would definitely stop the trouble. That seems to amount to a contention that an injunction cannot go unless the plaintiffs’ expert witnesses are almost prepared to guarantee the success of their suggested remedies. They have in fact suggested certain possible remedies, and I think that what they have suggested is practical and not the less worthy of consideration because they are not prepared to give any guarantees. But a more cogent answer to this point is, perhaps, that the plaintiffs are not bound to suggest any remedy at all. It does probably improve the chances of a plaintiff of obtaining relief by way of an injunction when he can show that there is a cheap and probably efficacious remedy for that of which he complains. If it were to be shown by the defendants that any remedy was impossible, then, no doubt, great difficulties in granting an injunction might arise. But that is not so, and I believe that the remedies suggested are practical and will suffice.
I have now to consider what form of relief the plaintiffs are entitled to, having regard to my findings. On the construction I have given to the covenant, I am satisfied that certain actions of the defendants constitute breaches of covenant which I should restrain by injunction. I do not, however, think that it would be right and proper for me to grant an injunction in the wide terms sought by the plaintiffs, which, I think, could leave the defendants in some doubt as to what exactly they should do or should not do, from a practical point of view. I am, at the moment, unable to determine precisely what part cold air plays in causing the condensation and its existence is not, I may point out, a cause of complaint on the part of the plaintiffs. I think that it may well be that in some extreme conditions condensation and dampness for short periods may occur, notwithstanding that the defendants take such precautions as I believe they should take to prevent reasonable causes of complaint arising, but I altogether doubt whether such isolated occurrences could in the circumstances of the case amount to a breach of covenant. The defendants should not, in my view, be left in the position that they may, through doubt as to where they stand under the order of the Court, be involved in expenditure that may be useless. The plaintiffs themselves have stressed throughout the case what they believe to be the true cause of condensation and I have found myself in agreement with them. The remedy should not, I believe, be very costly, and for that I am glad because I think the defendants have been most unfortunate in having spent large sums already to little or no purpose. It seems to me that if the order is so framed as to restrain the defendants from doing certain specified things in the course of their business, the doing of which I am satisfied has resulted in a breach of that part of the covenant in clause 4 that we are mainly concerned with, it will meet the justice of the case. Accordingly, I propose to make an order preventing the defendants, their servants, or agents from committing any breaches of covenant by restraining them from keeping or storing ice on the floor of the defendants’ premises, Numbers 28 and 29 South City Markets, or allowing ice water to flow over the floor of the said premises or storing or keeping ice in troughs or baths on the said premises without having suitable insulation under the same and in supports thereof. I have formed the view that it will be sufficient if the ice is kept in or on suitable containers raised a foot off the floor and likewise if the ice water is carried away in pipes raised a foot off the floor; but I will hear the parties as to the precise wording of the order. The necessary work to comply with this order will take some time and I will allow a reasonable stay on the order.
As to damages, I am satisfied that a case for damages of some amount has been made out and if the parties cannot agree on a figure I will order an enquiry as to damages.
Wanze Properties (Ireland) Ltd, Sui Man Lam and Choi Lin and Lam v Mastertron Ltd
High Court
18 December 1991
[1992] I.L.R.M. 746
(Murphy J)
This is a claim by an intermediate lessee and the intended assignees of an underlessee for the consent of the superior lessor to a change of user of certain demised premises.
The application arises in circumstances which are somewhat unusual and potentially very unfortunate.
What happened is this; by an indenture of lease dated 13 December 1988 and made between Power Supermarkets Ltd of the one part and Tradlew Ltd of the other part Powers demised to Tradlew a site which was to become known as ‘the Hartstown Neighbourhood Shopping Centre’ Castleknock in the County of Dublin for the term of 10,000 years from 1 October 1983 in consideration of the payment of a fine of £13,397 and the yearly rent of £1.00.
The rent aforesaid was subject to quinquennial reviews but as the increases were limited to the amount of £1.00 such reviews could have no financial significance. In addition to the fine paid by the lessee the lease imposed on it the obligation of constructing on the demised premises a retail shop not exceeding 1,200 square feet in accordance with plans approved by the lessor.
The 1988 headlease contained (at clause 4.26.2 thereof) a covenant prohibiting a range of users in the following terms:
Not at any time to use the demised unit or any part thereof or allow the same to be used for any public meeting, exhibition or entertainment or for any illegal or immoral purpose or for any noisey or offensive trade or business or occupation or as a fish and chip shop or as a pet shop or as a bookmaker’s office and not to *748 permit any musical instrument, gramophone, radio, television, loudspeaker or similiar apparatus to be played or used thereon so as to be audible to a degree so as to cause a nuisance or annoyance….
In addition, however, there was a further clause which regulated the business to be carried on in the demised premises in the following terms:
Not without the prior consent in writing of the landlord or its agent thereunto lawfully authorized to use or to permit or suffer or allow the demised unit or any part or parts thereof to be used for any purpose other than as set forth in part II of the first schedule hereto and for no other purpose or purposes whatsoever and at all times to carry on the said authorised business as a business of high quality standards and tone so as to protect the standing, appearance and prosperity of the centre as a whole and that of the other tenants or occupiers of units therein.
The user permitted as set out in part II of the 1988 lease was in the following terms:
As a shop to be used for the sale or hire of Do It Yourself (DIY) goods to include the sale of glass, garden equipment, flower plants in season, bottled gas, prepacked coal and domestic and general hardware and other than for food retailing and other than as an off-licence premises PROVIDED that nothing herein shall preclude the landlord or tenant or occupiers of any other unit in the centre from trading in such manner or in any or all of the said items.
Again part II of the 1988 lease sought to regulate the discretion of the landlord as to the giving and withholding of consent to a change of user in the following terms:
It is hereby agreed and declared that the landlord shall be entitled at its absolute discretion to refuse its consent to any proposed change of user if the alternative user will be the same as or in competition with any part of the trade or business for the time being carried on upon any other portions of the centre whether being carried on by the landlord or otherwise and such refusal shall notwithstanding anything herein or in the Landlord and Tenant (Amendment) Act 1980 or any such remodification or re-enactment thereof from time to time in force be deemed for all purposes to be reasonable if such change of user (if sanctioned) would or might result in the failure to maintain or the lessening of the necessary or desirable diversity of the nature of the businesses conducted in the centre.
In addition to describing the premises of which the demised unit formed part as ‘a neighbourhood shopping centre’ the lease contains those provisions which are usual and indeed inescapable for the purpose of regulating the rights of *749 tenants and customers using or having resort to the centre. The only other clause to which particular reference must be made is contained in the second schedule to the 1988 lease which reserves to the landlord (Powers) the right to make rules and regulations governing the use of the centre generally and in particular the hours of trading thereat which it is provided (by clause 12.11.2.) that:
Initially the centre shall be open for trading on Mondays to Wednesdays and Saturdays from 9 am to 6 pm and on Thursdays and Fridays from 9 am to 9 pm.
It appears that the interest of the headlessor Power Supermarkets Ltd subsequently became vested in Quinnsworth Ltd and later still was transferred to and vested in the defendants herein Mastertron Ltd. The interest of the lessee Tradlew Ltd was assigned to and is now vested in the first named plaintiffs Wanze Properties (Ireland) Ltd.
Originally the shopping centre consisted of a substantial store or supermarket comprising some 10,000 square feet of usable space which was occupied successively by Powers, Quinnsworth and now Super Valu. In addition there were four units of approximately 1,000 square feet of which the demised premises were one. About December 1990 three additional units were completed by or on behalf of the defendants but no trading has as yet taken place from the new units. In addition the centre has ample car parking spaces for the business which it is likely to attract. The centre is situate in a well populated area but all of the witnesses are agreed that it must draw its customers from the immediately surrounding area as there are bigger centres providing more extensive facilities available to potential customers willing to travel for even relatively small distances.
It appears that unit 3 was used originally as a DIY shop and subsequently by a Mr Paul Dolan as a bicycle shop. The underlease under which Mr Dolan (or his company) held the premises was not forthcoming but it was understood to be for a term of 35 years from some date in 1988 subject to a yearly rent of £10,000. Again the parties were in agreement that this underlease permitted the use of the premises as a bicycle shop or as a DIY centre.
It appears that Mr Dolan’s business did not prosper. The evidence is that he ceased trading some time about May 1989 and that he had from time to time advertised his interest in the unit for sale in local newspapers. As a result of those advertisements Mr Dolan came in contact with Mr and Mrs Lam the second and third named plaintiffs and at a meeting sometime in May 1990 Mr Dolan agreed in principle with Mrs Lam for the sale to her of his interest in the premises for a sum of £12,500.
Apparently there were difficulties in making title to Mr Dolan’s leasehold interest. This problem was solved with the assistance of the intermediate lessor Wanze Properties (Ireland) Ltd. Instead of Mr Dolan assigning his interest under *750 the underlease to Mr and Mrs Lam it was agreed that in consideration of the payment to him of £12,500 he would surrender his underlease to Wanze and they would grant a new underlease to the ‘purchasers’ on the same terms as the lease under which the premises had been held by him. This agreement was set out in a contract for sale dated 30 October 1990. That agreement did provide that:
The purchaser and or the solicitor for the landlord should satisfy all reasonable requirements of the solicitor for the purchaser with regard to prior title, planning permission and architects’ certificates of compliance therewith….
It was, perhaps, in pursuance of that clause that an application was made by the architects on behalf of Mrs Lam for planning permission for the change of user of the premises from that of a retail shop to a Chinese take-away. Building bye-law permission and planning permission for that change of user were granted on 14 and 16 November 1990 respectively. The permission having been granted the proposed tenants expended some £35,000 in converting unit 3 aforesaid for use as a Chinese take-away. In addition to that expenditure the intending tenants paid to Mr Dolan the purchase price of £12,500 but the new underlease from the intermediate lessor to the purchasers although approved has never been executed.
It is clear that the consent of the intermediate lessor to the change of use of the premises was forthcoming, however the headlessors, the defendants/respondents, herein by letter dated 3 January 1991 wrote to the solicitors on behalf of the intermediate lessor stating that:
Our clients inform us that the proposed change of user of the premises is totally unacceptable to our clients.
The issue in this appeal is whether the defendant lessors have acted unreasonably in withholding their consent aforesaid.
In this connection it is appropriate to refer in the first instance to the decision of Lynch J in OHS Ltd v Green Property Co. Ltd [1986] IR 39. Being a recent decision of the High Court as to whether or not the consent of a landlord was being unreasonably withheld in relation to the change of business user of a retail outlet in a shopping centre, it provides valuable assistance both by way of principle and precedent. At p. 43 of the report Lynch J summarized the position in that case as follows:
The onus is on the tenant to establish that the landlord is unreasonably withholding its consent. Some of the cases would suggest, that in order to do this, the tenant would have to show that the landlord is acting capriciously or arbitrarily but each case must depend upon its own facts. What the tenant has *751 to show in this case is that the landlord is unreasonably withholding its consent to a change of user from a retail outlet as a fruit and vegetable shop to a building society. This involves primarily a consideration of the landlord’s position without, on the other hand, ignoring the tenant’s special circumstances. As I have said it was common case that it is better for everybody, traders, customers and landlord that a shopping centre should have as many and as varied retail outlets as possible. It was also common case that an excessive number of what was referred to as dead frontages should be avoided and by dead frontages was meant primarily financial institutions such as building societies, banks, post offices, credit unions and the like. In this case the landlord refuses its consent for a reason which is valid, namely, the avoidance of an excessive number of dead frontages. The tenant more or less concedes that, in itself, that is a valid reason although contesting the weight to be attached to the reason in the circumstances of this case where the Northside Shopping Centre is very much the largest shopping centre in Dublin and the tenant suggests could therefore well accommodate one other financial institution in unit number 31 in a mall where none of the other financial institutions is in fact situate.
I am satisfied, however, that the landlord’s refusal of its consent is based on valid estate management grounds. Furthermore, even taking into account the special circumstances of the tenant to such extent as they ought to be taken into account, I am satisfied that the landlord’s withholding of its consent is not unreasonable.
Expert evidence was given on behalf of both the lessee and the lessor with regard to the desirability or otherwise of a Chinese take-away in a supermarket. The main evidence in this regard was given by Mr Philip Sherry, auctioneer and house agent, on behalf of the lessee and Mr Aidan McDonald, chartered surveyor, on behalf of the lessor. Both of these experts were in agreement that the interests of a lessor of a supermarket and indeed those of the lessees were best served by maintaining a wide mix of tenants so that the diverse retail outlets would tend to attract business not only on their own behalf but on behalf of the other tenants of the centre. In addition it is desirable of course that each outlet should attract the maximum number of customers. Both experts were agreed that tenants which would have what were described in the OHS case as ‘dead frontages’ should be avoided as far as possible. It is equally logical that a lessor must seek to avoid as far as practicable a situation in which any one of the units is closed for any protracted period and particularly in circumstances in which the appearance of that unit and the surrounding area may be permitted to deteriorate. Again the logic of this analysis makes it clear that the preferred tenant will be a person who is not merely open for business but attracts business through all or the greater part of the business day.
There was some suggestion that a Chinese take-away tended to generate litter or to attract customers who would consume the retailer’s food products on the *752 pavement or the car park outside the premises. I believe that this is a mistaken point of view which was not seriously pressed. The containers provided by Chinese take-aways are not readily disposable and the argument made that the food stuffs would be eaten alfresco ignores the nature of the product. There is a very significant difference between Chinese food and fish and chips in respect of both its substance and its packaging. On the other hand all of the witnesses agreed that the main part of the business of a Chinese take-away occurs in the early or late evening. Whilst it was suggested that a lunch trade could be developed it was not seriously suggested that shops of this nature do in practice attract significant numbers of mid-day customers. Indeed I think it was significant that by letter dated 26 November 1991 the solicitors on behalf of Mr and Mrs Lam wrote to the solicitors on behalf of Mastertron Ltd undertaking first to raise the shutters on the premises every day at 9 am and secondly to operate the Chinese take-away from 12 am until 12 pm six days a week. Clearly the offer of raising the shutters was to improve the commercial appearance of the premises during the earlier hours of the business day and then the offer to operate the business from 12 am was to provide a lunch-time trade insofar as that was possible. In an earlier letter of 30 August 1991 it seems to me that it was envisaged that the take-away would operate only between 5.30 pm and 12 midnight. In my view the application must be treated on the basis that the occupying tenant would in fact be open for business during the hours prescribed by the headlessor but the significance of the correspondence, as I see it, is the clear implication that Mr and Mrs Lam recognized that the amount of trade generated by a Chinese take-away during the day time would not be of great significance and in ordinary circumstances might not even justify keeping premises open at that time.
Mr Sherry himself, clearly, fairly and necessarily conceded that a Chinese take-away was in a lower order of choice of tenant for a neighbourhood shopping centre. The way he approached the problem was by saying that a Chinese take-away was far from being the most suitable type of tenant but frequently it was the best available. Mr Sherry contended — and indeed Mr McDonald agreed — that a particular range of desirable tenants such as retailers of fashion goods, electrical goods or jewellery could not be attracted to a relatively small neighbourhood shopping centre. That type of centre attracted only those seeking a convenience in their immediate neighbourhood and people looking for more specialized or expensive goods were more likely to travel the extra distance to a larger shopping centre where all of such facilities would be available. The type of outlets which should be available include newsagents and pharmacies, which are already in the centre and, Mr McDonald would argue, hairdressers, fresh food shops, hardware and dry cleaners. Essentially the debate between Mr McDonald and Mr Sherry was how far retailers within this second range could be attached to the centre. Mr Sherry’s view was that such tenants would not be *753 forthcoming and that it was for that reason that the lessor of the centre would be better advised to accept a tenant of what might be described as the third level of choice which would include the Chinese take-away and perhaps video shops or building societies. Certainly Mr Sherry would urge that a less desirable type of business is better than no business at all as appears to have been the case for some twelve months prior to May 1990. In support of his argument Mr Sherry referred to a number of shopping centres in the Dublin area all of which include a Chinese take-away. Of those shopping centres Mr McDonald and other witnesses on behalf of the defendants claimed that the centres were not comparable inasmuch as they were smaller and indeed less successful. Undoubtedly the defendants were entitled to say that the acceptance of a Chinese take-away into those units may have been a bad commercial decision which has or will contribute to a decline in the business of those centres.
Is it possible to obtain an alternative and more suitable tenant for the Hartstown Shopping Centre than one operating a Chinese take-away? On this issue there was a conflict of evidence between the numerous witnesses called on behalf of each of the parties. Mr John Sherwood, of Monarch Properties Ltd, who is clearly very experienced in the development and maintenance of industrial and commercial property, gave evidence of his efforts to find an alternative tenant by reference to the numerous and valuable contacts which he had in relation to the affairs of his own company. He was strongly of the view that a more suitable tenant would not be forthcoming for unit 3 aforesaid partly, if not largely, for the reason that the units were rather too large being 1,000 feet instead of 750 feet which is more suitable for the needs of, say, a hairdresser. On the other hand Mr Twomey the proprietor of Mastertron Ltd and his auctioneer, Mr White, were in a position to give evidence of the actual negotiations which have taken place in relation to finding tenants not only for unit No. 3 but for the three additional units which were completed in or about December of last year. I must accept that Mr Twomey is confident of his ability to find a suitable tenant. It is extraordinarily unlikely that he would decline the proposed alteration of business user if that was the only method of obtaining a good, careful tenant who would maintain the interior and exterior of the unit so as to preserve the general appearance of the centre. Mr Twomey could not want to have one or more of the units in his centre closed on a semi-permanent basis. Not only am I satisfied that Mr Twomey believes that he can obtain a more suitable tenant, that is to say, a tenant at the second level which I have described but I also accept that he has reasonable grounds for that belief even if it should transpire in the long run that his hopes are not realized.
It is true, as the recited facts indicate, that the headlessor has not what is usually described as ‘the equity’ in either the site or the buildings erected thereon. The buildings were erected by the intermediate lessor in pursuance of a covenant in that behalf contained in the 1988 lease and the fine paid on foot *754 of that lease presumably represented the full value of the lessor’s interest in the lands. The rent of £1.00 per annum is not even a ground rent. It is effectively a peppercorn rent reserved to preserve the relationship of landlord and tenant. However, the whole purpose of creating that structure rather than completing an outright sale is to enable the headlessor to create, maintain and control a relationship between himself and the tenants which will ensure the effective operation of the shopping centre. That being the manifest purpose of the arrangement it seems to me that the reasonableness or unreasonableness of the conduct of the headlessor must be evaluated by reference to that consideration and not on the basis of his financial stake or interest in the premises.
Counsel on behalf of the plaintiffs argued a different and novel point. It was contended on behalf of the plaintiffs that in fact the consent of the defendants was not necessary at all or alternatively would not be necessary if certain transactions within the competence of the defendants themselves were completed.
Counsel on behalf of the plaintiffs recognized that Wanze as lessees under the headlease were not entitled to acquire the fee simple in the premises thereby demised having regard to the provisions of s. 16(2)(a) of the Landlord and Tenant (Ground Rents) (No. 2) Act 1978 and the fact that the headlease contains a rent revision clause albeit a rather unusual and ineffectual one. However it was argued that the intermediate lessee could create a lease in favour of Mr and Mrs Lam which would comply in particular with condition 7(a) of s. 10 of the 1978 Act aforesaid and that this would enable Mr and Mrs Lam to acquire the fee simple interest in the property demised to them. It was said that in this way the clause restrictive of user of the premises will cease to operate. Alternatively it was contended that the restrictive covenant could be defeated by virtue of s. 29 of the Landlord and Tenant (Ground Rents) Act 1967. That section provides in effect that an action which would constitute a breach of covenant in relation to the user of a premises should not constitute such a breach if the user amounts to a development which is authorized by permission granted under Part IV of the Local Government (Planning and Development) Act 1963. In the present case it will be remembered that the change in user to a Chinese take-away was the subject matter of a planning permission granted in November 1990. However counsel on behalf of each of the parties are in agreement that whether the fee simple is acquired or an appropriate planning permission obtained covenants contained in the lease will continue to have effect if it ‘protects or enhances the amenities of any land occupied by the immediate lessor of the grantee’ (see s. 28(2)(a) of the 1978 Act). The issue would then reduce itself to the question whether the word ‘amenities’ as used in s. 28 aforesaid relates exclusively to the physical advantages enjoyed in connection with the premises or whether that word would extend so as to include the commercial advantages which could be derived from control of the use which could be made of different units in a *755 shopping centre.
What counsel on behalf of the plaintiffs says is that I should resolve this issue in favour of the plaintiffs by taking the more restricted view and having done so to conclude that the reality of the matter is that in truth there is nothing to be gained by the headlessor refusing his consent as there is no operative covenant or if one does exist now that it could be rendered inoperative by the adoption of the procedures aforesaid. Whilst I would prefer to resolve all matters and issues between the parties I think that it would be impossible in the present case in proceedings which are brought for the specific purpose of deciding whether the landlord is unreasonably withholding his consent to conclude in effect that his consent is not necessary. If that issue was to be determined it should in my view be determined in proceedings brought for that purpose. Moreover, I do not think that it could be said that a landlord would be acting unreasonably to rely on a covenant which on the face of it had full force and effect and which of necessity the plaintiff had herself invoked in seeking the appropriate consent. It would not be unreasonable to rely on such a covenant even though it might subsequently be established that as a matter of law it had become inoperative. In these circumstances it seems to me that what might be described as the special argument of the plaintiffs fails.
In relation to the substantive or conventional argument to the effect that the consent was unreasonably withheld I feel that the application must be refused. In all of the known circumstances of the case it seems to me that the action of the landlord whilst it has an extraordinarily unfortunate effect for the plaintiffs is not unreasonable and perhaps not the real cause of their misfortunes.
Green Property Co. Ltd. v Shalaine Modes Ltd. and Thomas Crinion
High Court
30 November 1978
[1978] I.L.R.M. 222
(McWilliam J)
The plaintiff is the owner of a shopping centre at Coolock, Co. Dublin, which comprises a large number of shops described as units. The plaintiff is a commercial concern and endeavours to make a profit by letting the units to retailers for use as shops. In order to obtain the best returns from their lettings the plaintiff endeavours to ensure that there is a good ‘tenant-mix’ and controls the number of shops of each variety. For this purpose, each lease contains a restrictive covenant as to user.
By an indenture of 19 November 1975, the plaintiff demised Units Numbers 45 and 46 to John Lappin and Edward Hanly for a term of 35 years from 1 August 1975. The lease contained the following covenants on the part of the lessees.
3.09 (i) To use the demised premises for the purpose of a General Hardware Store and not without the Lessor’s consent in writing to use or permit or suffer the same or any part thereof to be used for any other purpose and not to permit any business to be operated in or from the demised premises by any concessionaire or licencee without the prior written consent of the Lessor.
and
3.11 (a) Not to assign, sub-let, part with or share possession of the demised premises or any part thereof without the consent in writing of the Lessor (such consent in the case of an assignment or sub-letting of the entire of the demised premises not to be unreasonably withheld) AND provided the under-lessee shall enter into a direct covenant with the Lessor to perform and observe all the *224 covenants (other than for payments of rent) and conditions herein contained including a covenant not to further assign or underlet or part with possession of the premises or any part thereof in any manner which shall be inconsistent with the provisions of this covenant and provided that on such assignment or under-letting the Lessee shall guarantee the performance and observance of the covenants and conditions of this Lease by such Assignee or under-Lessee during the residue unexpired and to commence on the date of such assignment or under-letting as the case may be of the term hereby granted.
The lessee’s interest under this indenture was assigned to the defendant, Shalaine Modes Ltd, with the consent of the plaintiff.
Shalaine Modes Ltd did not apply to the plaintiff for consent to change of user but carried on the business of a boutique without objection by the plaintiff or anyone else.
By an indenture of 19 June 1978, the plaintiff demised to the defendant, Thomas Crinion, Unit No. 48 and this indenture contained a covenant by the lessee to use the demised premises for the purposes of household and industrial hardware tools, wood, paint and wallpaper, with glass, garden implements, seed, electrical and fancy goods excluding toys and not without the lessor’s consent in writing to use or permit or suffer the same or any part thereof to be used for any other purpose.
The plaintiff also demised a unit to Bernard Bury for the business of retailing toys. This lease has not been put in evidence, but I assume it contained similar covenants to the other leases.
In addition to his tenancy in Unit No. 48 Thomas Crinion appears some years previously to have taken a lease of Unit no. 47 in which he carried on the business of selling toys. I have not got this lease before me.
It has been accepted throughout that Bernard Bury and Thomas Crinion were for some years conducting similar businesses in opposition in their respective units.
It is accepted that the only really substantial part of the toy trade is conducted during the period of six weeks or so prior to Christmas in each year.
Prior to Christmas 1977, Bernard Bury took temporary sub-lettings of No. 45, 46 and 48 for the Christmas period, using Nos. 45 and 46 for window displays of toys and No. 48 for the sale of toys He did not obtain any consent to these sub-lettings or changes of user but no person appears to have made any objection.
Prior to Christmas 1976, Thomas Crinion took a temporary sub-letting of Unit No. 48 and used it for the sale of toys. I have no evidence as to the terms on which No. 48 was then let by the plaintiff, but I assume that it was let for users which did not include the sale of toys. No consent in writing was obtained to this sub-letting or to any change of user but no person took any objection to the use by Thomas Crinion.
This year Thomas Crinion, without applying for or obtaining any consent in writing, has taken a sub-letting for the Christmas period of the whole or part of the premises Nos., 45 and 46 and has commenced carrying on the business of selling toys in a manner which has caused Bernard Bury and another lessee of the plaintiff to object and the plaintiff has instituted these proceedings to restrain the breaches of covenant by the defendants.
I have heard a considerable amount of evidence as to the profit or loss to be *225 made or suffered by the rival traders as a result of my granting or refusing the application for an injunction. It has also been suggested that the plaintiff’s motive in bringing these proceedings is due to a profit motive and is, therefore, discreditable. I cannot see that these considerations are relevant to the issues I have to decide. All the people concerned are trading for the purpose of making a profit and for no other purpose and, if they take steps to increase their profits, I have to decide whether they are entitled to take such steps or not without being influenced by considerations of which party will make the greater profit or suffer the greater loss as a result of my decision.
Prima facie there has been a clear breach of covenant in this case. For the defence it is submitted that consent to the sub-letting and to the change of user was given verbally or by implication by the manager of the shopping centre and that, by reason of their conduct in the previous two years in permitting sub-lettings and change of user without consent, the plaintiff is estopped from enforcing the covenants this year. I have been referred to Shaw v Applegate [1977] 1 WLR 970 in support of the proposition that the plaintiff having acquiesced in sub-lettings and change of user over previous years without consent, has lulled the defendants into a false sense of security and that it would be unconscionable and dishonest now to try to enforce the covenants. It is also argued that the plaintiff did not move sufficiently quickly once the breach of covenant was observed and thus allowed Thomas Crinion to incur expenditure which will cause him great hardship and that it would be inequitable to make him cease this business now.
I cannot see any substance in this last contention. Thomas Crinion took his sub-tenancy on Monday 13 November and opened for trading on Thursday 16 November. Objection was immediately taken to his method of advertising by posters on the shop and these posters were removed before the week-end. Some of them were replaced on the following Monday and this resulted in a further objection and they were immediately removed, probably having been put up on this occasion by the mistake of an employee. After objections to the plaintiff by rival traders a meeting was held with the manager of the centre, the rival traders and Thomas Crinion present. I have not got a note of the date of this meeting but it was not later than 23 November. At this meeting there was a full discussion but no agreement was reached and these proceedings were commenced on Monday 27 November. The speed of this reaction by the plaintiff bears no resemblance to the delay of some years in the cases considered in the judgments in Shaw v Applegate, and I cannot accept that the plaintiff was unduly dilatory.
Nor do I accept the proposition that the plaintiffs are estopped by their conduct in the two previous years from enforcing the covenants this year. All are and were temporary sub-lettings. The tenants and sub-tenants in each case took a chance by not applying for permission and the effect in the previous years was that there was a tacit consent by the plaintiff. I do not see how this could have the effect of cancelling the covenants for the future any more than written consents for those two Christmas periods could have done so. This situation bears no resemblance to the position in Shaw’s case where there was an observed breach of covenant *226 existing continuously for some years.
Finally, on the question as to the consent having been given verbally or by implication by the manager of the centre, I accept the evidence that the manager had no authority to give this consent and that the granting of consent by the plaintiff depended to a large extent on the reaction of the other traders to the proposed lettings and that the matter was never brought to the notice of the board of the plaintiff until the dispute had arisen. I have considerably sympathy for Thomas Crinion but he stated in evidence that he did not know that he could not change the user of the premises without the consent of the plaintiff although he held under a similar lease of his main premises. This bears out the evidence of the manager that, although he was anxious to have the shop occupied, the question of consent did not really arise with him.
Accordingly, I am of opinion that the plaintiff is entitled to rely on the covenants in the lease and I will grant an interlocutory injunction in the terms of par. 3 of the Summons with the addition of the words ‘without the consent in writing of the plaintiff’.
Bernard White v Carlisle Trust Ltd
High Court (Circuit Court Appeal)
16 November 1977
[1976-7] I.L.R.M. 311
(McWilliam J)
16 November 1977
Subject: Landlord and tenant
McWILLIAM J
delivered his judgment on 16 November 1977 saying: The plaintiff in these proceedings is tenant to the defendant of premises in D’Olier Street, Dublin, forming part of a building known as O’Connell Bridge House. The tenancy was created by a lease dated 6 September 1973, by which a term of 27 years from 1 January 1972, was demised subject, during the first seven years of the term, to the yearly rent of £4,000, with provisions for review thereafter.
The lease contains a covenant by the plaintiff not without the consent of the defendant to use the premises for any purpose other than as a ladies and gents tailoring and outfitting business.
The plaintiff has failed to make a success of the tailoring business due, as he says, to the collapse of the hatters business in connection with which he had, until recently, the agency for a famous firm. The plaintiff attributes this collapse to change in the fashion of wearing, or not wearing, hats. It may be that there are other associated causes, but he is now anxious to turn to the only other type of business in which he states he has had previous experience, namely, the confectionery business.
He has applied to the defendant for consent to a change in user of the premises but the defendant has refused consent on the ground that other adjoining tenants of the defendant, who state that their businesses would be adversely affected, have objected. Evidence as to their objections was given on behalf of two of these tenants, that is to say, by the proprietor of a confectionery shop attached to a cinema on Burgh Quay and by a director of the Harp Bar. The third tenant appears to carry on a restaurant and delicatessen business, but some minor aspects of this business would appear to be similar to the business proposed to be commenced by the plaintiff. On the evidence before me, I am satisfied that there is no substance in the objection made by the proprietors of the Harp Bar. A similar business to that proposed by the plaintiff is carried on in the shop attached to the cinema. It appears to me to be probable that the bulk of the trade *313 carried on in this shop is associated with the patrons of the cinema, but the shop is so constructed as to have access for the customers directly from the street and I accept the evidence that there is a general trade carried on in it, particularly during the lunchtime period.
One of the directors of the defendant gave evidence and stated that the attitude of the defendant was to accede to the wishes of the tenants who objected to the proposed change in user, but it is clear that the defendant has no other objection to the change.
Under these circumstances, I have to decide whether the consent of the defendant is being unreasonably withheld or not.
I have been referred to the following cases: Rice v Dublin Corporation [1947] IR 425; W & L Crowe Ltd v Dublin Port & Docks Board [1962] IR 294; Egan Film Services ltd v McNamara (1952) 86 ILTR 189; Premier Confectionery Ltd v London Commercial Sale Rooms Ltd [1933] 1 Ch 904.
From these cases it appears to be established that the onus is one the plaintiff to establish that the consent has been unreasonably withheld, that ‘reasonably’ may be contrasted with ‘arbitrarily’ or ‘capriciously’, that a landlord may reasonably base a refusal of consent upon grounds of general policy in relation to the manage-ment of his estate, and that the question whether the grounds alleged for the refusal of consent are reasonable or not in any particular case is a matter for the court.
On behalf of the defendant I was also referred to Sheppard v Hong Kong & Shanghai Bank (1872) 20 WR 459 as supporting the proposition that, where the rent is substantial, a heavier burden is cast on the landlord in justifying a refusal of consent. I am not satisfied that this proposition is correct, and I do not accept it.
Although the defendant’s decision to refuse consent is not capricious it appears to me that, under the circumstances of this case, it is arbitrary. It is not suggested that the defendant will be in any way prejudiced, either immediately or in the future, by granting consent to the change. Of the tenants who have objected, one does not appear to me to be likely to be in any way prejudiced by the change in user and the other two will be only marginally prejudiced.
It seems to me to be an arbitrary decision by a landlord to refuse consent solely on the ground that one or more of his other tenants allege that he or they will or may be prejudiced without any threat or expectation of consequential loss or detriment to the landlord.
W. & L. Crowe Ltd. and Another v. Dublin Port and Docks Board
[1962] IR 297
Haugh J.
For clarity’s sake, I will refer to the first-named plaintiffs as “Crowe Limited”; the second-named plaintiffs as”Shamrock Limited”; and to the defendants as “the Board.”
This is an action by both plaintiffs, who seek an order that the Board, as landlords of certain premises, be compelled to assent to an assignment by Crowe Limited, who are lessees of these premises, to Shamrock Limited; that the premises are a tenement to which the Landlord and Tenant Act, 1931, applies; and that as the Board have refused to consent to such sale, they have been unreasonable in so doing.
I will dispose of one point immediately. I am satisfied” and so hold”that the premises are a tenement within the meaning of the Act, for the reasons advanced by Mr. O’Neill.
Shamrock Limited are a new, but much expanding, venture in this country in the business of manufacturing land fertilizers. It is a family affair, carried on by the Messrs. Vandenberg. They began business by building their premises on the docks at Wicklow, a picture of which has been shown in evidence. They rapidly expanded to similar premises at Foynes quayside, and they now operate waterside premises at Limerick, Waterford and Drogheda. They operate inland premises at Kilkenny and at Barrow Street, Ringsend, Dublin, which though near the docks are not near enough to satisfy their present requirements. In recent times, in order to cope with this rapid expansion of business, they have been on the look-out for premises as near the Liffey docks as is possible, and, as a result, they came into business contact with Crowe Limited. They require these premises for the storage and mixing of fertilizers.
Crowe Limited have been builders’ providers for many years. In the years, 1920 and 1921, under two separate leases, they acquired a long letting of the Board’s premises, at Alexandra Basin, Dublin. They are bounded on the east by McCairns Limited, on the west by a new roadway, on the south by the defendants’ docks, and on the north by Alexandra Road, and they are easily recognisable in the aerial photograph produced in evidence.
For the purposes of this judgment I propose to treat the matter as if these premises were held under a single lease, and, in doing so, I am aware that this is against some of the arguments adduced by counsel for the Board.
This lease contains covenants by Crowe Limited to the effect that 1, they “will not assign or underlet the said premises save by way of mortgage or for the purpose of securing debentures or debenture stock without the previous consent in writing of the Board their successors or assigns; but so that such consent shall not be unreasonably withheld to an assignment or underletting of the said premises or any part thereof or any house or building thereon to a respectable and responsible assignee or undertenant and so that no fine or premium shall be required to be paid for the giving thereof.”
2, They “will during the said term carry on and maintain upon the said premises a substantial industry in the manufacture of finished wooden goods and the business of timber and slate merchants and such other trades and business as the lessees carry on or may conveniently carry on in connection with the said business; and not during the said term carry on or permit to be carried on upon the said premises or any part thereof any trade or business other than the said trade or business of the manufacture of finished wooden goods and the other business of timber and slate merchants as aforesaid.”
By virtue of the provisions contained in s. 57, sub-s. 2, of the Landlord and Tenant Act, 1931, the last-mentioned covenant is subject to the proviso that such other trade or business shall not be carried on without the licence or consent of the defendant, such licence or consent not to be unreasonably withheld. In recent times Crowe Limited have decided to make certain changes in that part of their business that deals with the importation of timber. For that reason they have been desirous of selling their interests in the Board’s premises. As a result, certain negotiations have led to a binding agreement between both plaintiffs for a sum of £35,000, when and if the consent of the Board to such sale has been obtained. Meetings and correspondence have since taken place, between the plaintiffs and the Board, and between their respective solicitors, the result being that the Board has refused to consent to the proposed sale. Hence the present action. The proposed sale would constitute a change in the user of the premises. In my opinion this proposed change of user from the business of timber and slate merchants to the business of storing and mixing of fertilizers constituted some of the Board’s objection”this can be read from the evidence. Mr. Hegarty, a witness for the Board, eliminated practically every type of business suggested to him, and when asked what type of user of the premises would he recommend to his Board for their consent, he stated that if Crowe Limited could find tenants who would make use of the premises as a reception centre for the use of the container trucks and tractors with trailers associated with the ferry container traffic boats he possibly would advise their consent.
I approach the matter in this way: I have asked myself whether I must pay any regard to the mass of evidence, adduced by the Board, which was both technical and expert? This evidence has demonstrated that business life on the Board’s property on the Dublin dockyards”both indoor and outdoor”is a world unto itself. It requires men of great skill and expert knowledge to control and operate it efficiently and profitably, and conditions there are entirely different from those that operate in other business centres in the City. Or must I disregard this evidence and look on the same premises as if they were situate in some other part of the City or were like some privately owned premises which are to be found on the South City docks, of which the owners are in no way concerned with dock “policies”, but who use them for the conduct of their own business concerns or otherwise let them for profit. That, to my mind, is the real issue in this case.
I briefly summarise the evidence I have just referred to as follows: the Board are literally trustees for the Irish people in their use of dock space under their jurisdiction. Warehouse accommodation around the quays, and quay space itself is extremely limited having regard to the Board’s needs. The evidence has satisfied me beyond all doubt that in general their primary duty is to achieve a speedy import and export of goods, the quick unloading of cargo, its quick dispatch from the congested areas, and the soonest possible turn round of each ship to make room for the next. Traffic in the dock area has increased two and a half times since the war, while the lineal amount of new quay has been very slight. The Board’s work is required to be done efficiently and economically.
The Board has developed since the war by the dumping of rubbish very valuable warehouse space north of Crowes’ premises. This has been utilised for the installation of large oil tanks of the various well-known brands, for the building of a site for the Electricity Supply Board, and for lettings to well-known business firms, including one to Gouldings Ltd., who happen to be manufacturers in a very big way of business. When Mr. Hegarty was giving evidence for the Board I asked him whether if Crowes’ premises were free he would advise his Board to make a letting to Gouldings Ltd. He said, “No.”He said that there was a critical difference in the two areas and that he could not emphasise that enough. Crowes’ premises were within “hand-trucking” distance of the berthed ships; the new area is not. He said further that Gouldings Ltd. make sulphuric acid, their imports were very much greater than those of Shamrock Limited, and so were their exports, which averaged 100,000 tons a year; and yet, to use his words, he would consider a letting to Gouldings Ltd. as fantastic in present circumstances.
Many other matters were adduced in evidence, but what the Board’s witnesses repeatedly emphasised was the certain and near advent of the development of ferry container traffic for the import and export of merchant cargo. One, Colonel Buster, is the pioneer of this form of transport and so optimistic are all sides that a sum of £30,000 has been spent on the building of a ramp that will allow the loaded lorries or tractors pulling trailers to leave the ships and roll straight away, without causing the congestion that at present generally exists, and in particular at the deep-water Alexandra Basin. This ramp is quite close to Crowes’ premises, and the present delay in proceeding with the project is due to discussions at present going on between the Board and the trade unions concerned. Among the many facts advanced by the Board against the letting to Shamrock Limited, this they considered the most important; and, I repeat, the evidence was that the operation of this new form of cargo discharge is a near certainty. Other matters were referred to, such as the various kinds of merchandise that are directly imported in bulk to the Dublin docks instead of coming in in small cross-channel ships as they did before the war, an example being that all tea coming into the country now enters in bulk via the Liffey docks. Again, it was stated that nowadays much larger ships dock alongside the Liffey quays since the creation of Irish Shipping Ltd.
As I stated, I refer to this evidence in a very brief way. None of it was really challenged by Mr. O’Neill, for the plaintiffs, nor could it be. Mr. O’Neill, however, has maintained that it was irrelevant to the issues involved here. Only those whose work in some way or other is concerned with the smooth loading and unloading of ships, the securing of berths of ships, the keeping of the limited quayside space as free as possible for the quick passage of traffic, the special needs for the operation of container traffic, and other similar matters”they alone are competent to testify on such specialised matters.
I have heard such evidence. Of my own knowledge I could know nothing whatever of such topics. As regards the nature and intended effect of such evidence, it meant”and was clearly intended to mean”that to allow such letting to Shamrock Limited would be an act most injurious to the Board by way of restricting the carrying out by them of the public duties imposed upon them.
Do I accept this intended meaning of the evidence? The answer is that I do so unreservedly. What then is the position? The law will prevent the Board from refusing their consent if such consent is being unreasonably withheld. However, the opposite must also be true. The law will support the Board in their refusal if such consent is being reasonably withheld. It therefore follows that if I was not trying a case of this nature on the section for the first time, I would find in favour of the defendants.
It is my duty to have regard to legal precedent if precedent exists. There is not much, but there is some to which I now turn. In Lloyd and Another v. Earl of Pembroke and Another (1),at p. 44, Mr. Justice Dixon has said:””In considering for themselves” [the landlords] “whether they would or would not give consent, they were entitled to take everything affecting the position into account, including considerations of their own estate management and including questions of their own interests.” In Rice v. Dublin Corporation (2), at p. 436, Maguire C.J. says:””. . . I am of opinion that while it is the duty of the Court to consider each case upon its merits, there is no reason why a landlord may not properly base a refusal of consent upon grounds of general policy in relation to the management of his estate. The question whether the grounds upon which a decision to refuse consent to the alteration of the user of premises is reasonable in reference to a particular case is a matter for the Court. No general rule can be laid down because it is easy to conceive cases in which a refusal to agree to an alteration of user based on a decision of policy in the management of the landlord’s estate would be entirely reasonable. On the other hand the Court may hold that such a ground is not a reasonable ground for withholding consent in a particular case.” In the same case, at p. 441, Mr. Justice Murnaghan says:””The reasonableness of the defendant’s refusal may depend upon considerations which do not arise upon special circumstances of the plaintiff’s case. For example, if it is a question of estate management or the well-being of the estate tenants as a whole, the reasonableness or unreasonableness of the refusal may not depend upon special considerations of the plaintiff’s case; and even if regard be had to the special circumstances mentioned no great weight could be given to these special circumstances in such a case”; and, at p. 451, Black J. says:””. . . but, on the other hand, if his proposed change of user seemed to the Court reasonable in itself but the defendants’ objections also seemed cogent in themselves, then the material question would be whether in the opinion of the Court the reasonable desire of the plaintiff out-weighed, or was outweighed by, the reasonable objections of the defendants.
“It is for the learned judge to form his own opinion from the character of the locality and such other circumstances as may exist whether the determination not to consent to the user of the premises for the sale of intoxicating liquor is reasonable in itself, even allowing for any special circumstances which may be established by the plaintiff.”
I dismiss the plaintiffs’ claim.
Rice v. Dublin Corporation. Kenny v. Same.
1947] IR 425
DAVITT
These two appeals from the Dublin Circuit Court have been heard together. They have been the subject of two Cases which I have stated for the opinion of the Supreme Court upon points of law arising under s. 57 of the Landlord and Tenant Act, 1931. I have before me the answers to the questions submitted, and I have had the advantage of reading the opinions expressed by the Supreme Court in answering these questions. Thus greatly assisted I have now to decide these appeals. The issues which originally divided the parties have been narrowed, and it is unnecessary in the circumstances generally to review the facts.
The first matter which now remains to be determined is the application for a direction made by counsel for the Corporation at the conclusion of the plaintiffs’ case. This was based upon several grounds, but the only one remaining for consideration is the submission that a prima facie case had not been established that it was unreasonable for the Corporation to refuse its consent to the user of the demised premises for the sale of intoxicating liquor for consumption off the premises. I reserved this matter for consideration, and the Corporation thereupon proceeded with its defence and went into evidence. The application for a direction, in so far as it is based upon the grounds mentioned, still remains to be disposed of.
The plaintiffs were, in my opinion, entitled to have had that application refused. Their applications to the Corporation for consent to the user of their premises for the sale of intoxicating liquor were, in my view, prima faciereasonable. If they do apply in due course to the District Court for “off” licences, certain matters may have to be considered upon which it would be improper for me to express any opinion. I can, in company with the learned Circuit Judge, with propriety, say this much; so far as the evidence before me goes, the District Court would not be acting unreasonably in granting either of the licences so sought. Accordingly, if the Corporation had, throughout the hearing of these cases, maintained its original attitude of refusing to give any reason for the refusal of its consent, I must have come to the conclusion that the refusal was unreasonable. The Corporation was not, in my opinion, entitled to succeed in its application for a direction.
The main issue between the parties is whether the Corporation’s refusal is reasonable or not. In answering the fifth question in the Cases Stated the following opinions were expressed in the Supreme Court:””In a case like these before the Court the reasonableness or unreasonableness of the refusal should depend on the facts brought to the knowledge of the Court at the date of the hearing.”(Murnaghan J.); “I am of opinion that while it is the duty of the Court to consider each case upon its merits, there is no reason why a landlord may not properly base a refusal of consent upon grounds of general policy in relation to the management of his estate. The question whether the ground, upon which is based a decision to refuse to consent to the alteration of the user of premises, is reasonable in reference to a particular case is a matter for the Court. No general rule can be laid down because it is easy to conceive cases in which a refusal to agree to an alteration of user based on a decision of policy in the management of the landlord’s estate would be entirely reasonable. On the other hand the Court may hold that such a ground is not a reasonable ground for withholding consent in a particular case.” (Maguire C.J.);”It is for the learned judge to form his own opinion from the character of the locality and such other circumstances as may exist whether the determination not to consent to the user of the premises for the sale of intoxicating liquor is reasonable in itself, even allowing for any special circumstances which may be established by the plaintiff.” (Black J.). It seems to me that I am not confined to consideration of the special circumstances of the plaintiffs’ cases, or of the question whether or not the Corporation in refusing their consent are actuated by opinions reasonable per se and genuinely and firmly entertained, but that I am free to take into account all relevant facts and circumstances legitimately within my knowledge at the date of hearing, with a view to deciding whether, in the light of all such facts and circumstances, the refusal of the Corporation is, in my opinion, reasonable. The matter has occasioned me great difficulty and is obviously one upon which widely divergent views may, and very probably will be, entertained. The conclusion to which I have come has been arrived at with considerable doubt and hesitation. It is convenient at this stage briefly to refer to certain of the circumstances which influenced the Corporation to insert, in its leases of property on its new housing estates, restrictive agreements such as those in question, and, in the first instance, to refuse to the plaintiffs their consent to any relaxation. In the year 1938 an application for a public house licence in respect of premises in Crumlin was made to the Circuit Court. In accordance with the provisions of the Licensing Act, 1902, it was necessary for the applicant to acquire and extinguish an existing licence in respect of premises in the City. I am not clear as to the circumstances attending the acquisition and extinction of this licence, but it would appear that they were such as to influence the City Manager strenuously to oppose the grant of the licence sought. The reasons advanced in support of the opposition to the licence were: (a) that the creation of facilities for the sale of liquor was likely to lead to difficulty in the collection of the Corporation’s rents; in other words that the tenants would be likely to spend the rent money on drink; and (b) that such facilities would not tend to the good of the Corporation’s estate at Crumlin but were likely to lead to family discontents and generally to lower the moral tone of the community. In dealing with applications for licences the Circuit Court is not invested with unlimited discretion, and, however much or little it may have been impressed by the reasons for the Corporation’s opposition, it had, perforce, to confine itself to consideration only of such statutory grounds of objection as were properly before it. In the result the licence was granted. The City Manager thereupon gave instructions to the Law Agent that all future leases of property on the Corporation’s housing estates should contain agreements prohibiting the use of the premises for the sale of intoxicating liquor. These instructions were duly carried out. When the plaintiffs made their applications to the Corporation for its consent to the proposed user of their premises the Corporation was disposed, at once, to refuse. It was realised however that insistence upon the policy of these restrictive covenants might adversely affect the rents to be obtained under Corporation leases, and that there was nothing to prevent the grant of licences in proper cases in respect of premises on land adjoining the Corporation’s housing estates. The matter was accordingly referred to the housing committee. The housing committee gave the matter full and careful consideration. It sought the opinions of many individuals and organisations whom it considered likely to be of assistance. Some of these were concerned with matters of social welfare; some might reasonably be expectedrt to give an unbiassed opinion, some might not. The committee came to the conclusion that the weight of opinion was against any relaxation of the. policy of the restrictive covenants and advised the Corporation accordingly. The plaintiffs’ applications were thereupon refused. To justify its refusal, the Corporation still rely upon the same two grounds as were advanced in opposition to the grant of the licence mentioned in the beginning of this paragraph.
The first of these grounds was not very confidently relied on, and to my mind partakes rather of the character of a mere debating point. It was readily admitted in evidence that the ease or difficulty, as the case might be, of collecting rents bore no discernible relation to the presence or absence of licensed premises in the vicinity. In so far as it is based upon this ground, the Corporation’s refusal does not appear to me to be reasonable.
The second ground is of a different character. I believe that the Corporation’s policy of not allowing licensed premises upon its housing estates is actuated by genuine motives and opinions sincerely held. I accept that it was adopted and adhered to in the belief that it was in the best interests of the tenants on these housing estates and generally in the public interest. It is a policy which cannot he said to beper se unreasonable. A refusal, based as it is in these cases upon such a policy, cannot be said to be capricious, nor, in the ordinary sense of the words, and subject to the qualification implied in what I have to say hereinafter, is it arbitrary or due to improper motives. (See Treloar v. Bigge (1).) In considering whether or not to give its consent, the Corporation is not confined to the special circumstances of the plaintiffs; it can consider the welfare, including of course the moral welfare of its tenants; (Murnaghan J.) and the welfare generally of the citizens of Dublin. (See the judgment of O’Connor M.R. in Cahill v. Mayor of Drogheda (2).) In the case of an individual landlord a purely personal prejudice against the licensed trade might, in certain circumstances, justify a refusal to consent to the user of demised premises for the purposes of such trade. ( Schlegel v. Corcoran & Gross (3).) The trouble is that, so far from being an ordinary individual landlord, the Corporation is a very exceptional landlord indeed.
The Corporation is responsible for the housing of a very large section of the population of Dublin and is likely to continue to be so responsible for many years to come. The
population housed on its estates in Crumlin and Cabra is, I am sure, already greater than that of some of our largest county boroughs. The houses in which tens of thousands of citizens reside have been provided through the expenditure of millions of pounds of public moneys. Notwithstanding the progress made during the past two or three decades housing still remains a major problem, and supply shows no sign of equalling demand. In the natural course of events the Corporation, for very many years to come, must continue to be landlord to great numbers of people. Very many people have not now, and for a very long time many people will not have, any real alternative to becoming tenants to the Corporation on one or other of its existing or contemplated housing estates. If the Corporation is successful in these appeals, and continues the policy of refusing to allow any licensed premises on its housing estates, it can effectively render large portions of the city “dry” areas. I am not here concerned with the question whether such a policy is or is not perfectly legitimate and commendable. I am concerned, I am afraid, with the question whether it is reasonable for the Corporation to carry out that policy in the way in which it is sought to be carried out in these cases. The Corporation has been placed in the position of being the owner of large estates, housing tens of thousands of people, through the expenditure of large sums of money contributed by the public. Is it reasonable that they should use that position to deprive a large section of the city’s population of the convenient exercise of their legal right to purchase a certain commodity? If it is to be sought to make considerable areas of the city “dry” areas, compulsorily, and quite possibly against the wishes of many, if not the majority, of the inhabitants, should not this be done by means of appropriate legislation? If the liberties of citizens are to be interfered with, even to the limited extent here involved, is it not improper that this should be effected, not by the will of the people speaking through the Legislature, but through the exercise by the Corporation of powers which, so far as such matters are concerned, it happens to possess quite fortuitously. It has been entrusted with such powers by the citizens for no such purpose. The policy which the Corporation is seeking to enforce may be a perfectly sound, proper, and reasonable one. It is a truism that a policy which is, in itself, sound may yet be enforced by improper means. In enforcing its policy in the way in which it seeks to enforce it in these particular instances the Corporation are in my opinion acting arbitrarily and unreasonably. I think the Corporation has unreasonably refused its consent in these cases.
Some assistance is to be derived from the case of Zetland v.Hislop and Others (1), a Scottish case, in which Lord Selborne, L.C., at page 450, indicates what, in his view, is the object of restrictive covenants of this kind. He says:””The object of a restriction against carrying on a trade of this nature without licence from the superior is that the superior may judge for himself what number of public-houses, and in what part of the town, may be permitted by him without prejudice to the value and amenity of his other property.”
The Corporation is, in my opinion, quite entitled to seek to control the number, character, and distribution of licensed premises upon its housing estates, not merely with a view to preserving the value and amenity of its other property but also with a view to the welfare of its tenants and the citizens generally. It is not bound to take the same view as the licensing authority as to what is a sufficient number of licensed premises for a particular neighbourhood. It can formulate its own schemes and seek to enforce them by means of its leases and the covenants therein. If it does this in a reasonable way, then it will help to render much easier the often unwelcome task of the licensing authority in dealing with applications for licences in these newly-built portions of the city. In considering applications by lessees for relief from such restrictive agreements the Corporation should consider each one upon its merits, and in relation to whatever policy it may adopt or whatever scheme it may have formulated, to see whether such policy or scheme will permit of the application being granted. It would not be reasonable for them to adopt the attitude that in no circumstances whatever will they grant any such application.
I have arrived at the same conclusions as the learned Circuit Judge, and for substantially the same reasons. His decision will in each case, accordingly, be affirmed and the appeals will be dismissed.