Claim for a declaration that the conduct of a freezer centre at certain premises was a breach of a covenant in a lease which restricted the use of the ground floor to the business of a supermarket for the sale of a named range of articles and other things ancillary thereto–Whether premises not used as a supermarket because of sales of freezer cabinets–Definitions of ‘supermarket’–Not all goods sold need be portable so as to be the subject of self-service–Sale of freezer cabinets not a breach of covenant–Appeal dismissed
This was an
appeal from an order made by Judge Thomas, sitting as a deputy judge of the
Chancery Division, on an originating summons in which Calabar (Woolwich) Ltd
sought a declaration that Tesco Stores Ltd were in breach of a covenant in a
lease which restricted the use of part of premises at 190-194 Eltham High
Street to the business of a supermarket. Judge Thomas refused the declaration
sought, but, as will be seen from the judgment of Sir John Pennycuick, the
question raised in the Court of Appeal differed from that which was before the
judge in the court below.
L Caplan QC
and J A Speed (instructed by Tobin & Co) appeared on behalf of the
appellants (plaintiffs); Edwin Prince (instructed by Berwin Leighton)
represented the respondents (defendants).
Giving the
first judgment at the invitation of Stephenson LJ, SIR JOHN PENNYCUICK said: We
have before us an appeal from an order made by Judge Thomas, sitting as a
deputy judge of the High Court, on July 22 1976. The case arises upon an
originating summons in which Calabar (Woolwich) Ltd is the plaintiff and Tesco
Stores Ltd is the defendant. The question at issue is whether, in conducting a
freezer centre at certain premises–190-194 Eltham High Street–Tesco is in
breach of a covenant contained in a lease between Calabar and Tesco’s
predecessor in title. The learned judge decided that there was no breach and
Calabar appeals from that decision.
The facts can
be shortly stated. By a lease dated May 1 1961 Calabar demised these premises,
190-194 Eltham High Street, to a company known as Fellows Foodtown Ltd for the
term of 21 years at an annual rent of £5,600. The lease contains a covenant
upon which the whole of the issue in the present case turns. The covenant is
contained in subclause (q) of the lessees’ covenant and runs as follows: ‘Not
at any time during the term to use or permit the demised premises’ etc; then:
. . . nor to
use or permit or suffer the ground floor of the demised premises to be used
except for the purpose of a retail shop for the purposes of the lessees’
business of a supermarket for the sale of groceries provisions garden produce
fresh meat confectionery domestic and hardware and toilet requisites and also
as ancillary thereto for the sale of such other articles or things as are
usually sold by and in supermarkets.
The whole case
turns upon the construction of these words and their application to the facts
of this case. There is no evidence as to the precise nature of Foodtown’s business,
but that is not of practical importance, since we know from the terms of the
covenant itself the nature of that business, namely, the business of a
supermarket for the sale of the specified articles. On July 13 1971 Fellows
Foodtown Ltd assigned the lease to Tesco. Some few years later Tesco decided to
fit out and use the ground floor of the premises as a freezer centre.
It will be
convenient at this stage to quote a few paragraphs from the affidavit sworn in
these proceedings by D N Edgerton on behalf of Tesco. Mr Edgerton is a
chartered surveyor and is employed as property manager by Tesco; his affidavit
contains the following explanation of the nature of a freezer centre and how
Tesco came to use these premises for that purpose. Mr Edgerton’s affidavit is
not contradicted on these points.
Paragraph 17
of Mr Edgerton’s affidavit says:
It became
apparent during the early part of 1974 that the plaintiffs were unwilling to
agree to a change of use and the defendants resolved in March 1974 to use the store
as a centre for the sale of frozen foods, groceries, provisions and freezers
(‘the proposed use’).
Then, in
paragraph 20:
After the
exchange of correspondence in early June 1974 . . . the defendants resolved to
reopen the store as a ‘Cadena Freezer Foods Centre.’
‘Cadena’ being
a trading name of the Tesco Group.
Paragraph 24
confirms that a plan produced by Mr Tibbatts in an affidavit on behalf of
Calabar is a fair reflection of the layout of the store, and he (Mr Edgerton)
goes on:
It is
difficult to attribute percentages of floor space to the different types of
goods sold at the said store but the turnover of the store is represented by
the following . . .
and then under
the headings ‘Types of Goods’ and ‘Approximate Percentage of Turnover’ we see: Frozen
Meat, 10.65 per cent; Other Frozen Food Products (immensely the greatest) 59.58
per cent; Non-Frozen Food Products, 14.72 per cent; Freezer Cabinets, 15.05 per
cent. As the case has developed, it is with freezer cabinets that we are
primarily concerned.
In paragraph
26, Mr Edgerton says:
It is important
to bear in mind that the frozen food industry is a comparatively new industry
in this country and it is only in the past five years that there has been a
marked development in the supply of deep-frozen foods for storage in home
freezers and in that period represented one of the fastest-growing categories
of total food expenditure.
In paragraph
33, after having given certain particulars with regard to the layout and the
goods sold in the freezer centre, Mr Edgerton says:
In all other
respects the said store is like a more traditional Tesco supermarket. The range
of non-frozen food items is similar to that sold at other Tesco supermarkets
although more limited in range.
Then, in
paragraph 34, he says:
The said
store uses the carrying baskets and wheeled trolleys used in other Tesco
supermarkets and the opening hours are the same. The average purchase amounts
to £1.95 which is not very far different from that at other Tesco supermarkets.
What is meant
by ‘freezers’? They are cabinets for
sale to customers who take the freezers back to their own homes and use them
for the storage of the deep-frozen goods. As I understand it, they serve the
same purpose as refrigerators, except that they are designed to keep food
frozen for a much longer time. There is no precise evidence as to their size
and weight; indeed, the size and weight vary, some obviously being larger and
heavier than others, but I think it is fair to say that by and large they are
not portable in the sense that a customer could pick one off the shelf and
wheel it through the exit, paying at the check-point as he goes.
Calabar had
refused its licence to use the ground floor as a freezer centre, and on March
20 1975 Calabar issued the originating summons which commenced these
proceedings. The summons asks for a declaration that on a true construction of
subclause (q), the defendants are not entitled to use the ground floor of the
premises comprised therein as a freezer food centre, and an injunction
restraining the defendants from using the ground floor for any purpose other
than that authorised by the subclause. On the same day Calabar gave notice of
motion for an injunction restraining Tesco from using the ground floor as a
freezer food centre. Upon the motion affidavits were sworn by M S Tibbatts, the
chartered surveyor who is employed as the managing agent of Calabar–that was in
support of the summons–and then by Mr Edgerton on behalf of Tesco, the
affidavit from which I have already quoted; then there is a short affidavit in
reply by Mr Tibbatts, and finally a very lengthy affidavit on behalf of Tesco
by a Mr Corina. I think it will be useful at this stage to quote a number of
passages from the affidavit of Mr Corina.
Mr Corina is
the industrial editor of The Times, and for 12 years he has written, lectured
and broadcast extensively on the distributive trades; he was formerly the
commercial correspondent of the Financial Times. He deposes, inter
alia, at paragraph 3 that ‘There has been no more profound development in
British retailing than the introduction of self-service trading methods since
the end of the second world war.’ Then,
in paragraph 7, he says: ‘What can be stated is that self-service has
contributed to a dramatic change in the structure of retailing’–and he
elaborates that. Then he says, at paragraph 20:
The first
supermarkets (ie self-selection stores over 2,000 sq ft) contained only a few
cabinets. Today, a large area is devoted to long runs of open cabinets,
offering dairy produce, meats, fish, vegetables, pies, speciality foods and cakes.
That is
referring to the cabinets in the shops, not the cabinets for sale to customers.
Then he says:
A constraint
in the 1950s and early 1960s was the limited size of the domestic refrigerator
and even the supply of new thin wall home refrigerators with larger freezing
sections did not meet many family requirements. Consequently, the manufacture
and sale of special deep-freezer cabinets for household use had enlarged. These
vary in size, from modest box-like units for the small kitchen to large cabinets
kept in a garage or some other convenient place.
Those are the
freezer cabinets with which this appeal is primarily concerned.
Then, at
paragraph 21:
The trend has
posed the food retailer with the problem of supplying frozen items on a larger
scale.
Then, at
paragraph 27:
Because of
innovation, there can be no standard definition of a supermarket, which was a
pre-war American phrase coined to describe retail stores attempting to create
the street market atmosphere within premises not relying on counter service.
Paragraph 37:
Food
retailers will state there is no fixed commercial formula for a supermarket.
Outside the grocery trade, there are other traders who also use the term for
their particular systems of selling motor accessories, hardwear and do-it-yourself
materials (to cite some examples).
Paragraph 38:
The
supermarket is what a retailer wants it to be, with an important proviso. That
is that their operation should depend on a substantial element of
self-selection by consumers in making their purchases. The word supermarket
describes a system of selling within premises. In short, it is a principle. A
shop is somewhere shopping takes place. A supermarket shop is one based on the
principle of self-service.
Paragraph 41:
The modern
freezer centre is engaged in the sale of quick-frozen foods by the supermarket
principle. That the goods may be purchased in bulk does not conflict with the
essential aim of supermarket operations to maximise sales of stock to
compensate for lowered profit margins.
Then finally,
paragraph 47:
The only way
to cut through all this is to find the common basis for classifying premises
engaged in retailing as supermarkets. This has to be by acknowledging the one
underlying principle–the sale of goods through self-service means.
No further
evidence was filed; there was no oral evidence or cross-examination on the
affidavits, which of course is in accordance with the usual procedure on a
motion in the Chancery Division.
The hearing
took place on July 21 1976, the motion being treated as the trial of the
action. It appears that the case made by Calabar upon that hearing was
basically that this freezer centre could not be described as a retail shop at
all. That contention was abandoned before us; I need not elaborate upon it,
except to say that the learned judge said that the contention was plainly
ill-founded. The judge gave a very short judgment, of which we have his rather
summary note, but it is important to bear in mind that he was addressing
himself to a very different question from that with which we are concerned. He
said: ‘A supermarket is a large self-service shop selling a variety of goods.
At the date of the lease traditional supermarkets carried on selling groceries
and provisions to customers of all sections of the public for immediate
consumption.’ Then he says: ‘Permitted
use was retail shop, which this is; for supermarket, which it is; for the sale
of groceries etc; these are things sold and it seems that
uncommunicative.
Upon this
appeal Mr Caplan, for Calabar, having jettisoned the contention that this was
not a retail shop, relied, and relied entirely, on a different point, namely,
that for the reasons which he advanced the business carried on by Tesco in this
shop is not the business of a supermarket. The basic ground for that
contention, to which I shall return in more detail, is that among other things
there were offered for sale in this shop freezer cabinets, which are not a
proper subject matter of self-servicing.
It will be
convenient at this point to construe the restriction in subclause (q). In order
to comply with the exception, the following requirements have to be observed:
first, the premises must be used for the purpose of a retail shop; then that
retail shop must be a retail shop for the purposes of the lessees’ business of
a supermarket. One may at this stage elide the word ‘lessees’ in so far as it
relates to Foodtown. The purposes are the business of a supermarket. Then the
business of a supermarket must be a particular business of a supermarket,
namely, the business of a supermarket for the sale of groceries, provisions,
garden produce, fresh meat, confectionery, domestic and hardware and toilet
requisites. So far, it has to be a supermarket for the sale only of that range
of articles. Then follow the important words: ‘and also as ancillary thereto
for the sale of such other articles or things as are usually sold by and in
supermarkets.’
To avoid
misunderstanding, I think it is really clear that in putting a meaning upon the
word ‘supermarket,’ one must see what was the natural meaning, in its context,
of that word at the date of the lease, namely 1961. But obviously, a person
carrying on the business of a supermarket, as that word stood in 1961, might,
while still carrying on that business, vary the methods by which he carried on
that business. That becomes apparent if one thinks of any other trade, for
example a covenant not to carry on any business other than that of an hotel or
a chemist. Again it is clear that a person carrying on the business of a
supermarket might vary, and add to, the articles within the specified range of
articles, but not outside that range. So two issues arise in this case: first,
is the business carried on by Tesco on these premises today the business of a
supermarket? Second, are the cabinets
within the specified range of goods, including the extending words, ‘such other
articles or things as are usually sold by and in supermarkets’?
I shall
consider these points separately, although, in view of certain concessions made
by Mr Caplan, only the first issue is now a live issue. (1) Is the business of
Tesco the business of a supermarket? I
would apply the uncontradicted evidence of Mr Corina. He deposed that ‘The word
supermarket describes a system of selling within premises. In short, it is a
principle . . . A supermarket shop is one based on the principle of
self-service,’ and he says that the one underlying principle is the sale of goods
through self-service means. Mr Corina nowhere states–and his evidence is to the
contrary–that in order to constitute the business of a supermarket, every
single item sold on the premises, or sold in the course of that business, must
independently be the subject matter of self-service. And it seems to me, the
question must be one of fact and degree in each particular case. To state the
extreme example, if 95 per cent of the articles sold are the subject matter of
self-service, then I should have thought, prima facie, that the business
would be nonetheless a supermarket by reason that 5 per cent were not the
subject of self-service; but as the percentage of articles which are not the
subject of self-service increases, then it becomes more difficult to say that
the business is that of a supermarket, and if the percentage rises to 95 per
cent then one may say fairly confidently that the business would not be that of
a supermarket. The percentage which these cabinets form of the whole of the
sales in the supermarket in the present case is 15 per cent. It seems to me
that the plain and sensible conclusion corresponds to the evidence of Mr
Corina; that is, that this business is the business of a supermarket.
Mr Caplan
contended that the evidence of Mr Corina (and indeed, any evidence on the
meaning of the word ‘supermarket’) is wholly inadmissible. He quoted a
statement from the case of Lovell & Christmas Ltd v Wall
(1911) 27 TLR 236 which includes these words after certain other
qualifications: ‘If it contains technical terms an expert may explain them,’
and then it goes on to deal with trade custom and secondary meaning.
But unless
the case can be brought within some of these exceptions it is the duty of the
court, which is presumed to understand the English language, to construe the
document according to the ordinary grammatical meaning of the words used, and
without reference to anything which has previously passed between the parties.
It is not in dispute that the court, in making use of its knowledge of the use of
the English language, may refresh itself by reference to dictionaries.
Mr Caplan
contended that the word ‘supermarket’ is indeed an ordinary word in use in the
English language, so that evidence is inadmissible, though one may look at a
dictionary. I say ‘is’ an ordinary English word, but strictly speaking the
question is whether it was an ordinary English word in 1961. Mr Caplan then
referred to three modern dictionary definitions. The Concise Oxford
Dictionary of Current English, 1976, defines ‘supermarket’ as a ‘Large
self-service store selling foods and some household goods’; Osborne &
Grundage, Concise Commercial Dictionary, 1966 (not a dictionary with which
I am personally familiar but I am told that it is of authority), defines
‘supermarket’ as ‘A retail shop selling a large range of goods to customers who
collect their own purchases and pay at a central point’; and Webster’s Third
New International Dictionary (which I understand is an American work)
defines ‘supermarket’ as ‘A departmentized self-service chain or independent
retail market that sells food, convenience goods and household merchandise
arranged in open mass display.’
From his
contention that ‘supermarket’ is an ordinary English word and from those
dictionary definitions, Mr Caplan derives these propositions: A supermarket is
a retail shop with three characteristics: (1) the goods are on display within
the shop for self-service, with a certain exception which is not now material,
as to goods which have to be weighed or measured; (2) such goods, following
selection, are taken away from the shop by the customer himself, after first
taking the goods to a paying point; and (3) the goods sold are of a wide
variety falling within a general description of portable goods for domestic and
personal use or consumption. The effect of (2) and (3) is that the goods
displayed for self-service in the shop must be confined to goods which are
portable and are capable of being taken to the checkpoint by the customer.
I do not
accept the contention that the word ‘supermarket’ is, even now, an ordinary
English word such that the court must be taken to be acquainted with its
meaning, subject only to refreshing itself by reference to dictionaries. It is
clear that the word ‘supermarket’ started as a fancy trade name in the
distributive food trade, and as such it was a technical term. It may well be
that the word ‘supermarket’ is in the course of development into an ordinary
English word; but even today it seems to me that that word is no more than
passing through an intermediate area between a technical term and an ordinary
English word. For myself, apart from the evidence in the present case, I should
not be certain of its precise meaning, and I am not prepared to pretend that I
am certain of its exact meaning only to the assistance of dictionaries. It
seems to me that evidence of the meaning of the word ‘supermarket’ is
admissible today. I would add that in any event the very short definitions in
the various dictionaries do not seem to me sufficient to
self-service can take place and in which no single article, not being the
subject of self-service, could be sold. I do not accept the three
characteristics advanced by Mr Caplan; it seems to me that the true view is
that a supermarket is a shop in which substantially the greater part of the
articles on display are for self-service, but not a shop in which exclusively
the articles are on display for self-service. I conclude, then, on this first
issue, that the business of Tesco in these premises is, upon the evidence, a
supermarket.
The second
issue is whether these cabinets fall within the specified range of goods. They
can be said to do so under either of two heads, namely (1) that they constitute
domestic requisites, and (2) that they fall under the head ‘such other articles
or things as are usually sold by and in supermarkets.’ I do not propose to elaborate on this issue,
because Mr Caplan very fairly accepts that if he is wrong on his construction of
the word ‘supermarket’ there is no evidence that these cabinets are not usually
sold in supermarkets.
I conclude,
then, that in carrying on the business which it does carry on upon the demised
premises, including the sale of these freezer cabinets, Tesco is not in breach
of the covenant contained in subclause (q) and I would dismiss this appeal.
Agreeing,
BROWNE LJ said: I agree that this appeal should be dismissed for the reasons
given by Sir John Pennycuick. As my Lord has said, in this court the only point
argued by Mr Caplan was that these premises are not being used for the purposes
of the business of a supermarket because of the sale of the freezer cabinets.
As my Lord has pointed out, this was not a point raised by the originating
summons or the notice of appeal and it appears from the note which we have of
the judgment of Judge Thomas that it was not really raised before him. My Lord
has already read Mr Caplan’s submission that a place cannot be a supermarket
unless it has the three characteristics to which my Lord has referred. I agree
with my Lord that the word ‘supermarket’ is not yet established as an ordinary
English word with a clearly defined meaning. For this reason, and also perhaps
because it is a technical term, I agree that evidence is admissible to help us
to give a meaning to that word.
My Lord has
already referred to the judge’s definition in one sentence: ‘A supermarket is a
large self-service shop selling a variety of goods.’ He has also referred to a number of passages
in the affidavit of Mr Corina, which seems to me to be of very great help and
importance. I am not going to read them again; I will only read from one
paragraph in which he says that in effect the essential feature of a
supermarket is ‘that their operation should depend on a substantial element of
self-selection by consumers in making their purchases.’ It is not saying that it must depend entirely
on self-selection. There are two other definitions in the evidence; first of
all, Mr Edgerton in his affidavit filed on behalf of the defendants said in
paragraph 6 on page 52: ‘The defendants define a supermarket as a self-service
store of over 2,500 sq ft net space, selling groceries, provisions, fruit, meat
and toiletries, wines and spirits, and since the early 1960s increasingly
including a limited range of convenience and durable goods not normally sold in
association with foodstuffs, such as menswear, ladieswear, childrens wear,
hardware, domesticware, electrical goods and furniture.’ Mr Tibbatts, in his second affidavit, filed
on behalf of the plaintiffs, said in paragraph 6 at page 80: ‘I do not dispute
the defendants’ definition in paragraph 6 of the said affidavit,’ but he said
that he would add two qualifications, on which Mr Caplan did not rely in this
court. My Lord has also referred to three dictionary definitions which have
been put before us, and I need not repeat them.
Mr Caplan’s
submission to us was that premises cannot be a supermarket if anything is sold
there (to any extent beyond what may be regarded as de minimis) which
cannot be carried by the customer to the pay desk and then carried away from
the premises by him or her. I cannot accept this. Mr Caplan concedes that if no
freezer cabinets were sold here, the premises would be a supermarket, as on the
evidence they clearly would be. When Mr Tibbatts visited these premises on
March 11 1975 he observed that there were at least six deep-freeze units on
offer for sale to the public–see paragraph 7 of his affidavit of March 24
1975–and the sale of freezer cabinets represents 15 per cent of the turnover;
see the passage from Mr Edgerton’s affidavit which my Lord has already read.
That does not in my view prevent the premises from being a supermarket. The
plan exhibited to Mr Tibbatts’ first affidavit, at page 50, though not to
scale, indicates that only a small part of the premises was then used for the
sale of freezer units.
Whether one
takes the definitions of the judge, or of Mr Corina, or of the dictionaries,
these premises in my view are within them–they are substantially used as a
supermarket; I shall come back a little later to this point. But whatever may
be the general meaning of ‘supermarket,’ the decision in this case must of
course ultimately depend on the construction of this particular covenant. Plainly
the parties contemplated and accepted, when the lease was granted in 1961, that
the business was at that time that of a supermarket. Mr Caplan accepts that the
covenant would not be broken merely because the lessees had changed their
method of carrying on that business; for example, by beginning to supply
different ranges of goods. I understand that it is for this reason that Mr
Caplan does not rely on the reference to fresh meat in the covenant.
For the
reasons given by Sir John Pennycuick and for those that I have tried to give,
the premises are in my view still used for the purposes of the business of a
supermarket. They are still used substantially for that purpose, even on Mr
Caplan’s definition. As Sir John Pennycuick has said, the question whether or
not the premises are used for the purposes of a supermarket may in some cases
be a question of degree; as a question of degree, it seems to me that in the
present case they clearly are still used for the purposes of a supermarket. The
words of the clause after ‘the business of a supermarket’ exclude any
suggestion, for example, that a supermarket can only be used for the sale of
food or groceries. In my view, as my Lord has said, these freezer cabinets are
domestic requisites. I would also hold that the sale of the freezer cabinets is
‘ancillary’ to the sale of deep frozen meat. It is true that ‘ancillary’ is
qualified by the words ‘such other articles and things as are usually sold by
or in a supermarket.’ But Mr Caplan
accepted this morning, in answer to my Lord, that those words do not refer only
to the articles which are usually sold by or in supermarkets in 1961, but also
cover articles which are usually sold by or in supermarkets in 1977. As it is
the landlords who are alleging a breach of covenant, the burden of proving that
freezer cabinets are not now usually sold by or in supermarkets is in my view
on them, and Mr Caplan very fairly accepted that there is no evidence before
the court to that effect.
Accordingly,
for I think substantially the same reasons as those which Sir John has already
given, I agree that this appeal must be dismissed.
Also agreeing,
STEPHENSON LJ said:
These premises
are admittedly still used for a retail shop and for the sale of many of the
articles or things specified in the covenant. It is also conceded that the sale
of frozen meat and other frozen food products, which are now the greater part
of what is sold on the premises, would not prevent the premises from continuing
to be used for the purposes of the respondent’s business of a supermarket. That
concession would seem to destroy the case made by the appellants in
correspondence, in their originating summons and notice of
their uncommunicative notice of appeal.
But it is
submitted by Mr Caplan in this court that the sale of freezer units or cabinets
prevents these premises from being premises used for the purposes of the
respondent’s business as a supermarket. Why?
Because they destroy the character of self-service which we should take
judicial notice is essential to a supermarket and is limited to providing
purchasers with things they can collect and carry past the paying point without
help from the respondents’ staff or from too many helpers of their own. That
seems to me to be equivalent to submitting that we ought to know without
evidence that such articles or things as freezer cabinets are not usually sold
in supermarkets (though Mr Caplan submits that they are usually sold in freezer
food centres) and that there is indeed an essential incompatibility between a
supermarket and the sale of freezer cabinets, even if they constitute a
relatively small part of its trade.
I regret to
have to admit that I do not know anything of the kind, and Mr Caplan has not
persuaded me that we must be presumed to know precisely what a supermarket is.
I consider that a supermarket is a recent and still growing concept, and about
its essential nature the courts need evidence. I see no reason, and I find no
evidence, to contradict the evidence of Mr Corina, to which my Lord Sir John
Pennycuick, has referred. I accept the judge’s definition, which has also been
read. On the assumption that a freezer unit cannot be purchased, to quote Mr
Corina’s words, ‘through self-service means’ truly so called, in my judgment to
use these premises for the sale and purchase of freezer cabinets to the extent
specified in the evidence does not contravene this covenant.
Accordingly I
agree that the appeal should be dismissed.
The appeal
was dismissed with costs.
