A long-running dispute over the sale of goods under the leases of a Swansea supermarket has returned to the Court of Appeal.
Christopher Kiley, trading as CK Supermarkets Ltd, challenged the decision of Judge Moseley QC limiting the amount of tobacco and confectionary that he is able to sell in his store under a letting scheme.
The Appeal Court has upheld the judge’s decision, maintaining that the restrictive trade covenants should be interpreted in terms of the items intended to be traded in November 1963, when the leases of Kiley’s two shop units had been granted.
The decision could effectively reduce by 87% the sale of tobacco and confectionary items within the supermarket.
The initial dispute was brought by John and Hetty Williams, the lessees of a newsagent, confectioner and tobacconist in a parade of shops in Sketty, and Kiley’s trading neighbours.
They claimed that Kiley sold tobacco and confectionery in breach of covenants that specifically excluded use of the premises as a newsagent, confectioner or tobacconist.
In determining two preliminary issues, the Appeal Court held that the parties’ leases formed part of a “letting scheme”, which entitled the Williamses to enforce the covenants directly against Kiley, thereby circumventing the mutual lessors: see [2003] 1 EGLR 46. It also found that Kiley had breached the restrictive trade covenants.
The court remitted the dispute to Judge Moseley QC, sitting in Cardiff District Registry, for determination of the terms of an injunction.
At the injunction hearing, the judge held that an expert report, commissioned to determine what perimeters could be set on the sale of tobacco and confectionery, had been overly generous to Kiley. He subsequently reduced the shelf space taken up by tobacco products in the supermarket from 14m to 1.74m.
Kiley appealed, claiming that the judge had erred in “drawing the line in an essentially arbitrary way by selecting a drastically reduced shelf space without hearing evidence or giving consideration to the question of what effect this would have upon turnover”.
He maintained that the limitation, if echoed in terms of turnover, would “reduce tobacco sales by 87% to 2% of the total turnover of the store being sold from about 0.125% of its total shelf space”.
Three appeal judges have now unanimously dismissed the challenge, stating that the issue of “where to draw the line” was a question of fact that should be decided in terms of the percentage of sales in 1963.
Sir Andrew Morritt V-C added that, because the expert report had been unduly generous, it was unsurprising that the judge’s decision would be more restrictive.
Williams and another v Kiley (t/a as CK Supermarkets Ltd) Court of Appeal (Sir Andrew Morritt V-C and Clarke and Dyson LJJ) 15 June 2004.
Michael Davey (instructed by Johyn Collins & Partners, of Swansea) appeared for the claimants; Mark Blackett-Ord (instructed by Glass & Co, of Swansea) appeared for the defendants.
References: EGi Legal News 16/06/04
