Defendant landlords of medical centre granting lease to claimant pharmacist – Lease containing clause requiring claimant to seek to transfer licence at termination of tenancy – Claimant contending clause in restraint of trade – Judge finding reasonable restraint – Claimant’s appeal dismissed
The defendants were the landlords of a medical centre. In 1995 the defendants granted the claimant pharmacist a 15-year lease of a unit in the centre. The permitted use was a retail chemist and pharmacy. Clause 3.25.2 of the lease required the claimant, at the termination of his tenancy, “to use his best endeavours to procure the transfer… of the authorisation permission or licence of the Family Health Services Authority and any other or replacement authorisation permission or licence necessary for the use of the premises as a pharmacy”. The claimant challenged clause 3.25.2, contending that it imposed unreasonable restrictions upon his ability to trade. He submitted that the covenant was void and unenforceable. The judge held that clause 3.25.2 was a provision in restraint of trade but went on to hold that the defendants had a legitimate interest to protect, therefore, the restraint was not unreasonable. The claimant appealed. The claimant was governed by the provisions of the Medicines Act 1968 and The National Health Service (Pharmaceutical Services) Regulations 1992. He submitted that the effect of the clause was that, at the end of his tenancy, he would be unable to apply for a minor relocation. Furthermore, he would be deprived of all the goodwill he had acquired.
Held: The appeal was dismissed.
The defendants were not under a legal duty to have a pharmacy on the premises, but, since it was purpose-built, they were likely to have a professional interest in doing so. It was reasonable for the defendants to want to keep a pharmacy at the medical centre, in their own interests, and in the interests of their patients. Therefore, they had an interest which they sought to protect. If that prevented a minor relocation for the claimant, it was because of the effect of the provisions in the 1992 regulations, not because of the defendants’ unfairness. The claimant’s claim was not based on mistake or on a poor commercial bargain, but on public policy and the unreasonable restraint of trade. The claimant operated in a field where there were strict restraints imposed. The defendants had discharged their burden of showing that the restriction in clause 3.25.2 was reasonably necessary for the protection of their interests, which they were entitled to have, even if it operated in a way that the claimant found harsh. The clause was upheld but was not to be regarded as an appropriate precedent to be followed in other cases.
Geoffrey Zelin (instructed by Charles Russell) appeared for the claimant; Simon Booth (instructed by Walker Smith & Way, of Chester) appeared for the defendants.
Sarah Addenbrooke, barrister
