Landlord and tenant — Construction and application of user covenants in lease of shop intended to be a small supermarket in a parade of shops — Appeal by lessors (a development corporation, plaintiffs below) and cross-appeal by lessees from a decision of Whitford J — Dispute centred on two subclauses in lease — The first contained a positive covenant to use the demised premises as in effect a ‘food supermarket’, selling groceries and provisions, including meat and vegetables, bread and other bakers’ items, with an off-licence for beer, wines and spirits — The second contained a complementary negative covenant not to carry on any trade or business other than that specified in the positive covenant, but also contained more particular restrictions — These were not to sell goods ‘not usually sold or dealt with by any other trade or business of the like nature’; not to sell cigarettes, tobacco and confectionery from a sales area exceeding a certain percentage of the net retail area; and not to sell any newspapers, magazines, stationery, toys, haberdashery or wools — Disputes arose when the respondent lessees began to sell certain electrical goods and some items usually sold in chemists’ shops and the plaintiffs (appellants) sought and obtained an interlocutory injunction — At the trial of the action Whitford J construed the relevant clauses as entitling the lessees to deal in articles which at the date of the lease were in fact being dealt with in supermarkets for the sale of groceries and provisions and that comparison would have to be made with a business predominantly concerned with the sale of groceries and provisions — Whitford J granted the appellants an injunction and awarded them the whole costs of the action — The Court of Appeal agreed with the judge as to the construction of the covenants, but held that he was in error in directing himself as to the burden of proof and as to what had been established by the evidence — The court also criticised the terms of the injunction granted, while pointing out that the earlier interlocutory injunction had been too wide
and had caused the appellants to become liable on their cross-undertaking in damages — In view of the unsatisfactory way in which the action had evolved the appellants were asking for a new trial — In the result the appellants had failed to establish that the respondents were carrying on a business which they were not entitled to carry on and, except in regard to certain items where breaches were conceded, had failed to establish a breach of covenant — Held, rejecting the plea for a new trial, that the appeal should be dismissed, the cross-appeal allowed and a substituted injunction granted restraining the respondents from selling those items as to which they had admitted a breach of covenant — The court also ordered an inquiry into damages
This was an
appeal by Basildon Development Corporation, lessors, from a decision of
Whitford J in an action in which as plaintiffs they had claimed relief by way
of injunction against Mactro Ltd, lessees of a lock-up shop at 1 Felmores End,
Basildon, Essex, the defendants and present respondents. The plaintiffs had
obtained an interlocutory injunction from Dillon J subject to the usual
undertaking as to damages.
A F B
Scrivener QC and Brian Leech (instructed by Wortley Byers & Co, of
Brentwood) appeared on behalf of the appellants; Gavin Lightman QC and Jonathan
Sofer (instructed by Kingsford Dorman & Co, agents for Barrett &
Boxall, of Westcliff-on-Sea) represented the respondents.
Giving the
first judgment at the invitation of O’Connor LJ, BALCOMBE LJ said: This is an
appeal from an order of Whitford J made on March 25 1983. The plaintiffs in the
action (the appellants in this court), the Basildon Development Corporation,
were at all material times the freehold owners of a block of lock-up shops,
numbered 1 to 9 Felmores End, Basildon, Essex. They asserted in their statement
of claim (and the learned judge so found) that in the summer of 1980 they were
negotiating with intended lessees of the various shop premises, and they were
taking the view that what they wanted to see was some feature which would
provide for the inhabitants of the area a collection of shops which would meet
the majority of their needs and would be within easy walking distance of quite
a large number of residents. They also took the view that, if this aim were to
be achieved, what was necessary was to grant leases to a variety of businesses
which would not be competing with each other, as no doubt, with a limited
public available, it would not be possible effectively for the various persons
who took leases to sustain their business if competition of this kind within
such a restricted field of activity were taking place. Mr Scrivener, who has
appeared for the plaintiffs before us, submits that this is the matrix within
which the relevant covenants of the lease with which we are concerned ought to
be construed.
The lease in
question is dated November 21 1980 and is made between the Basildon Development
Corporation of the first part and the defendants, Mactro Ltd, of the second
part, and a gentleman as a surety of the third part. The lease was of what
appears from the plan to be the largest unit in this parade of nine shops, no
1. We are told that it has a floor area of some 2,400 sq ft. The term is 15
years from November 21 1980 and the lease contains the usual lessee’s
covenants. The two clauses of the lessee’s covenants with which this court is
concerned are subclauses (20) and (21) of clause 2.
By subclause
(20) the defendants covenanted:
To use the
demised premises for carrying on the trade or business of a supermarket for the
sale of groceries and provisions (including fresh and frozen meat and fresh and
frozen vegetables, bread and other items sold at a bakers) and as incidental to
this main use (subject to the necessary Justices’ Licence being first obtained)
for the sale of beer, wines and spirits for consumption off the demised
premises.
Pausing there,
I read that as a positive covenant to use the demised premises for what I
shall, for the purposes of shorthand, call a ‘food supermarket’. It continues:
and at all
times of the year during the usual business hours of the locality to keep the
demised premises open as a first class shop for carrying on the said business
in its several branches
and that again
is a positive covenant; and then
and not to do
or permit or suffer to be done anything to injure the connection or goodwill of
such business.
Subclause (21)
is negative in its terms, and by it the defendant covenanted:
Not to carry
on or permit or suffer to be carried on in or upon the demised premises or on
any part thereof any trade or business other than that specified in clause
2(20) hereof
(in other
words, the trade or business of what I have called a ‘food supermarket’). That
has been described as the first limb of subclause (21) and in my judgment — I
will refer to the authorities in a moment — it is clear that that refers to the
question of the trade or business, namely, that what the defendants were not allowed
to do under that limb of the covenant was to carry on something which could be
properly described as another trade or business. It is not now alleged (though
in the statement of claim it was so alleged) that the defendants have broken
that limb of the covenant.
The second
limb of subclause (21) is in these terms:
And not to
sell or deal in articles commodities or goods of any description not usually
sold or dealt in by another trade or business of the like nature.
That limb, the
second limb, of the covenant deals with a restriction upon the goods which the
defendants may sell at their premises, even though they are carrying on a
business of a food supermarket, because it is probably well-known today that
most food supermarkets also sell some non-food items of goods. Indeed that
construction of the second limb of the clause is made plain by the third limb
of the subclause, which is in the following terms:
For the
avoidance of doubt and without prejudice to the generality of the restriction
contained in this sub-clause it is hereby agreed that the Lessee shall not be
entitled to sell or otherwise deal in any of the following commodities or goods
namely cigarettes, tobacco and confectionery where the total sales area devoted
to such commodities exceeds two per centum of the net retail area of the
demised premises and shall not be entitled to sell any newspapers, magazines,
stationery, toys, haberdashery or wools whatsoever.
Without
looking at any of the authorities, it seems to me that it is clear from that
third limb of the subclause that what the second limb of the subclause was
intended to do was to enable the defendants to sell goods, even though they
were not items of food or drink, provided that they were usually sold or dealt
in by other food supermarkets, possibly (although this was an issue which was
not dealt with at the trial) other food supermarkets of a size similar to that
of the defendants’ premises. Because if that was not the intention of the
second limb of the clause, there was no point at all in having a total
prohibition on the sale of newspapers, magazines, stationery, toys,
haberdashery or wools (none of which are items of food or drink) nor the
qualified prohibition on the sale of cigarettes and tobacco.
That that
construction of the clause is the correct one is apparent from the three cases
to which we have been referred, namely Stuart v Diplock (1889) 43
Ch D 343, Lewis & Co (Westminster) v Bell Property Trust
[1940] Ch 345, and Labone v Litherland Urban District Council
[1956] 1 WLR 522, all of which make the distinction between the carrying on of
a trade or business and the sale of particular items within that trade or
business, even though those items might themselves be properly sold by another
trade or business. Thus, for example, in the Lewis v Bell Property
Trust case the trade or business which the tenant was entitled to carry on
was that of a tea shop. In the course of that trade or business they sold some
cigarettes and tobacco. It was held that that was not of itself a breach of the
covenant to carry on business only as a tea shop.
What happened
in this case was that quite soon after the grant of the lease the defendants
started carrying on business and included in their business — which it is
conceded has always been that of a food supermarket — certain items of
electrical goods and certain items which might more normally be expected to be
found on sale in a chemist’s shop.
Some of the
other local traders complained, and in the event, on May 29 1981, the
plaintiffs issued a writ claiming against the defendants injunctive relief. It
is significant to see what the form of the relief originally claimed was.
First:
An order that
the defendants do use the premises for carrying on the trade or business of a
supermarket for the sale of those goods only and none other specifically
referred to in Covenant 2(20) of the lease — namely for the sale of groceries
and provisions (including fresh and frozen meat and fresh and frozen
vegetables, bread and items sold at a bakers) and as incidental to the main use
for the sale of beer wines and spirits for the consumption off the demised
premises
That relief
claimed in that way suggested that the plaintiffs thought that the defendants
could be stopped from selling any kinds of electrical items and any kinds of
chemist’s items, and that was complemented by clauses (2) and (3) of the relief
claimed in the writ, (2) being
For an
injunction restraining the defendants whether by themselves their servants or
agents or otherwise howsoever from selling in and from the demised premises any
items usually and normally sold in chemist shops including: toiletries,
cosmetics, sanitary towels, photographic equipment, drugs, medicines,
accessories for babies, hair brushes, scissors, cotton wool and other
prophylactic items.
Clause (3)
claims:
An injunction
restraining the defendants whether by themselves, their servants or agents or
otherwise howsoever from selling in and from the demised premises any
electrical goods including: plugs, adaptors, batteries and light bulbs.
The plaintiffs
then applied on motion for interlocutory relief, and the matter came before
Dillon J on June 4 1981 when, after the plaintiffs had given their usual
cross-undertaking as to damages, he ordered that ‘the defendants be restrained
from selling in their premises . . . until after judgment in this action or . .
. further order’ certain items listed in a schedule, being an exhibit to an
affidavit filed before him, a copy of which was annexed. Those were almost
entirely chemists’ items. They run to 16 in all and I need not enumerate them
here. They include items such as hair colourant, surgical hosiery, surgical
dressing, babies’ bottles, teats and dummies, cotton wool and scissors. In
addition the defendants were injuncted from selling electrical plugs, adaptors,
light bulbs and batteries. The costs of the motion were reserved.
The plaintiffs
served their statement of claim in February 1982 which set out both the
subclauses (20) and (21) of clause 2 of the lease. In para 6 it is pleaded that
‘In breach of the said express terms set out in paragraph 3 above’, that is,
the two subclauses, ‘the defendants have between March 1981 and June 1981’
(those were the relevant dates)
sold from the
shop premises at No 1 Felmores End goods not usually sold in a supermarket for
the sale of groceries and provisions and not in a grocery and provision
supermarket, including: cosmetics, toiletries, sanitary towels, baby lines,
proprietary medicines; goods usually sold at electrical shops, namely plugs,
batteries, adaptors and light bulbs.
The claim for
relief in the statement of claim repeated the claims made in the writ.
By their
defence the defendants admitted that they sold the items listed in para 6 of
the statement of claim between March and June 1981, but then denied that they
had, whether by such sales or otherwise, acted in breach of the terms.
The matter
came before Whitford J in March 1983, and both sides gave what was termed
expert evidence before him. For the plaintiffs there was called a Mr I C
Hayward [FRICS], a surveyor from a well-known firm of estate agents, who put in
as part of his evidence-in-chief a proof of evidence upon which he was
cross-examined. I will say no more about his evidence than this: it seems to be
reasonably clear from both the proof and the transcript of his oral evidence
that he was not putting himself forward as an expert in the grocery or food
trade, and when he gave evidence of what other similar supermarkets within the
area concerned sold he was speaking as the result of an inspection he had made
in the summer of 1982.
The expert who
gave evidence on behalf of the defendants was a Mr A Toft, who could fairly be
described as an expert in this particular field, because he had been concerned
in the grocery trade as a marketing manager for a number of good companies and
then he had launched a journal called The Independent Grocer, of which
he was editor, and had been researching for that journal for some months before
January 1981. He was in a position to speak (and his qualifications for so
doing are not challenged) as to what goods were usually sold (and I quote from
the lease itself) ‘or dealt in by any other trade or business of the like
nature’ to that which the defendants were permitted to carry on at their
premises.
It appears
that the plaintiffs were maintaining, up till quite a late stage, that there
was a breach of the covenant against carrying on any other business, because
much of their expert evidence was concerned with what was the business they
were carrying on and the extent of the shelf space devoted to the particular
goods in question and so on, and of course the defendants had to be able to
meet that and their evidence also went to a great degree to that question,
which it was conceded before us was not the relevant one.
The first part
of the learned judge’s judgment dealt with the question of the construction of
the covenants, and although certain of the reasons which the learned judge put
forward for reaching the conclusion to which he eventually came are not reasons
which appeal to me, nevertheless, in my judgment, he came to the right answer,
although possibly by the wrong road, when on p 7 of the transcript at letter C
he says this:
The result of
it is that to my mind, on the true construction of these two clauses, the
defendants are in a situation where they are entitled, under the terms of their
lease, to deal in articles of a kind which as of the date of the lease — and,
indeed, that is accepted as the relevant date — were in fact being dealt in in
supermarkets for the sale of groceries and provisions, and Mr Caplan
who was
leading counsel for the defendants in the court below
accepts that
in considering a business of that kind one would have to make a comparison with
a business which was predominantly concerned with the sale of groceries and
provisions.
I do not wish
to express an opinion as to whether the date of the lease is, in the
construction of a covenant of this nature, the relevant date, but, as it was
conceded by both parties below that it was, I say no more about it. So having,
as I have said, come to the right result on the question of construction, the
learned judge then went on to consider what he termed ‘the rather difficult
question of the breaches’. He then said this:
The fact is
that I have got no evidence at all as to what in fact was being sold in
supermarkets for the sale of groceries and provisions as at the relevant date
other than what can be inferred from certain material which is dealing with
events subsequent to 1980.
Mr Scrivener
for the plaintiffs (the appellants before us) concedes that that is not
correct; that there was indeed before the learned judge the evidence of Mr Toft
and, in particular, that part of his evidence which is set out in an addendum
to his proof of evidence, and in order to understand this one has to look first
at para 7 in his original report where he says:
7. I have
been instructed: (i) to express an opinion as to which of the items listed on p
11 of Mr Hayward’s report
and they were
these chemists’ items to which I have already referred briefly — the items
scheduled to the order made by Dillon J
are
habitually sold in ‘supermarkets for the sale of groceries and provisions’.
A little later
in his report he says this:
17. Those
chemist lines and cosmetics which need expert handling and advice from the
other side of the counter I would not expect to find in a supermarket or in a
small convenience store. By this I mean such items as cough remedies which are
only legally handled by pharmacists — and not proprietary brands which are
available generally, diabetic foods but not health foods. There is a clear
distinction here.
In para 18 he
says this:
I would not
expect to find in a grocery store or supermarket dermatological creams for skin
problems, but I would expect to see a ladies’ hand cream.
Then, when one
comes to the addendum to his report, he says this:
In summary
form the answers are as follows to the three questions, as set out in para 7 of
my report, upon which I was asked to express an opinion:
1. Subject to
the qualifications expressed in paras 17 and 18 of my report, and
non-self-service cosmetics and perfumes, all the items are, and were in 1980,
habitually sold in ‘supermarkets for the sale of groceries and provisions’
which is a description commonly understood to mean premises in which goods
which are predominantly groceries and provisions are offered for sale by
predominantly self-service methods.
That evidence
was before the trial judge. It does not appear that Mr Toft was ever challenged
about that, and so the learned judge was in error when he said that he had no
evidence as to what in fact was being sold in such supermarkets in 1980. He
then goes on to consider the evidence, first, of Mr Hayward, but discounted
that because Mr Hayward had said he did not know what was being sold in 1980.
That appears to be correct. The judge then considered Mr Toft’s evidence and,
having gone through that in some detail, he said:
In the end I
think Mr Caplan conceded that it could not be suggested even as of today that
plugs and adaptors, I think babies’ bottles and teats for babies’ bottles and
scissors were in fact among the items which are usually sold or dealt in in
supermarkets for the sale of groceries and provisions. The only thing which
follows from this is that on the face of it, it would seem undoubtedly to be
the case that there has been a breach of covenant.
Then he turned
finally to the question of the lease:
Against this
assertion that in breach of the terms there has been a sale of some goods not
usually sold in supermarkets for the sale of groceries and provisions what we
get in the defence is an admission of the sale the subject of complaint and an
assertion that the commodities pleaded in para 6 of the statement of claim, and
listed more fully in a schedule to one of the orders made on the interlocutory
proceedings ‘are usually sold in supermarkets for the sale of groceries and
provisions and grocery and provision supermarkets conducted as a first class
shop for carrying on the said business in its several branches’.
Then he says
this:
the
defendants have not in fact adduced any evidence which in any way establishes
their case that any of these goods were usually sold in supermarkets for the
sale of groceries and provisions as at the relevant date.
That sentence
contains two errors. Firstly, it shows a misconception of the burden of proof
because it was for the plaintiffs to establish both that the goods in question
of which complaint was made were being sold (that was admitted by the defence)
and also that their sale constituted a breach of the covenant, which in turn
threw upon the plaintiffs the onus of proof that these were goods which were
not of a nature which were usually sold in similar types of supermarkets. It
was not for the defendants to take upon themselves that burden, but, even if it
had been, there lies the second error, because by the evidence of Mr Toft the
defendants had established, with the exception of those goods in respect of
which Mr Caplan made a concession and one or two other items which were not
clear, that many of the goods of which complaint was made in fact were goods
which were sold in businesses of a similar type. From that error the learned
judge went on to say that, because the defendants had not established their
case, ‘the plaintiffs are, in my view, accordingly entitled to some form of
relief, but I will hear counsel on the appropriate form’, because the
concession was correct. He then went on to award to the plaintiffs the whole of
the costs of the action.
The order, in
the form in which it was eventually drawn up (that is the order of Whitford J),
was an injunction
that the
defendant be restrained from selling (whether by its directors or by its
servants or agents or any of them or otherwise howsoever) in and from the
premises known as I Felmores End, Basildon, Essex, any items not as of November
21 1980 usually sold in supermarkets for the sale of groceries and provisions.
An injunction
in those terms was certainly something to which the plaintiffs were entitled,
because it merely repeated, in slightly different words and introducing the
concessionary date, the covenant by which the defendants were already bound,
but it was not a particularly helpful kind of injunction, because on any
question of enforcement (committal for contempt or something of that nature) it
would leave wide open the question what goods were sold in supermarkets on that
date. But, secondly, it also introduced problems into the inquiry as to
damages, because the second branch of the order was that the following inquiry
be made, that is to say:
an inquiry as
to what damages (if any) the defendant has sustained by reason of the
injunction contained in the Order dated June 4 1981 which the plaintiff ought
to pay by reason of its undertaking in damages in the said Order contained.
Of course in
the order of June 4 1981 the defendants had been injuncted from selling a very
large number of chemists’ items as well as the limited number of electrical
items to which I have already referred. The plaintiffs have failed to
establish, save by Mr Caplan’s limited concession, that the defendant was in
breach of his covenant at all in respect of the sale of those items. Therefore,
except in respect of what I will call the concessionary or conceded items, the
injunction granted in June 1981 was wider than that to which the plaintiffs
became entitled as a result of the trial, and accordingly the plaintiffs became
liable on their cross-undertaking in damages because the defendants had been
prevented from selling goods which the plaintiffs had failed at the trial to
establish that they should not have sold. Again, the injunction in its original
form leaves open the issue to what the inquiry as to damages should have
related.
Before us we
have an appeal by the Basildon Corporation and a cross-appeal; though it is
contained in a document headed ‘Respondents’ Notice’, it is in fact a
cross-appeal by the defendants.
The appellants
at the end of the day are asking for a new trial. They concede that the
judgment was not a satisfactory one. Initially Mr Scrivener asserted that the
clause, that is the second limb of subclause (21), was entitled to a wider
construction than that which the learned judge gave it, but, as I have already
said, in my judgment his construction was correct, though he reached it by an
unusual route. So they finally came down to submitting that the case evolved in
such an unsatisfactory way — in fact, if I can use Mr Scrivener’s own words, it
was such a mess — that the only satisfactory solution was to discharge the
order in its entirety and send the case back for a new trial.
Mr Lightman,
on the other hand, submitted that that would be unduly hard on the defendants,
who have had this case hanging over them now for some four years. In my
judgment, Mr Lightman’s submission is justified. Whatever the reason, the
position is that the plaintiffs brought this case; they brought it, as I have
said, under two heads — one asserting that the defendants were carrying on a
business which they were not entitled to carry on, and on that they have failed
and do not now maintain that they should have succeeded; and they also ask for
relief stopping the defendants selling certain specified items of goods, but
even in respect of those items they failed to adduce any evidence at the trial
which would have established that the sale of such items was a breach of the
covenant in question, except those items which eventually the defendants
conceded were sold in breach of covenant.
In the result,
in my judgment the appeal should be dismissed, the cross-appeal allowed, and
for the order which the learned judge made there should be substituted an
injunction restraining
the
defendants, whether by its directors or by its servants or agents or any of them
howsoever, from selling in and from the premises known as no 1 Felmores End,
Basildon, Essex, the following items or any of them,
and the
following items would be those which the defendants conceded represented a
breach of covenant, namely, plugs, adaptors, babies’ bottles, teats, scissors,
non-self-service cosmetics and non-self-service perfumes. For my part, I think
that the words ‘non-self-service cosmetics and non-self-service perfumes’ may
not be sufficiently precise to be the subject of an order and, if there is any
doubt about that, I think the appropriate course would be for junior counsel
for each of the parties to settle a form of minute which would accurately
reflect the substance of what I believe should be the right order, namely, the
injunction should be limited to the sale of the conceded items. Then there
should be an inquiry as to damages in the form in which it was contained in the
original judgment, but I make it clear that the case on which the plaintiffs
eventually succeeded was only in relation to the conceded items. Accordingly
the interlocutory injunction granted on June 4 1981, in so far as it prohibited
the sale of items beyond the conceded items was beyond that to which the
plaintiffs were entitled by way of relief, and accordingly the inquiry will be
directed to the damages which the defendants have sustained by being precluded
from selling items other than the conceded items from the date of the
interlocutory injunction.
That leaves
the question of costs below. We have not yet heard any submissions as to the
costs of this appeal, but, so far as costs below are concerned, in my judgment
the learned judge, because of his error as to the burden of proof and to the
question of what evidence there had been before him about the type of goods
that were in November 1980 sold in food supermarkets, took the view that the
plaintiffs had won. They had won to a limited extent because the concession
about the conceded goods appears to have been made at a fairly late stage, but,
as against that, they had lost, both on their initial claim to restrain the
defendants from carrying on a particular type of business, and also by failing
to adduce any relevant evidence about a large number of the particular items of
goods, the sale of which they were complaining of. It is very difficult of
course for this court to place itself in the position of the court below when
it comes to dealing with a question of costs, but I am satisfied that, as a
result of the view I take upon the true meaning of the covenant and the
evidence which was adduced before the learned judge, the order for costs below
cannot stand, and, doing the best I can in the circumstances, I would
substitute for the order for costs below an order for no order for costs below,
leaving each side to pay their costs at first instance, because each succeeded
to an extent and failed to an extent.
Agreeing, SIR
DENYS BUCKLEY said: I only desire to add, I hope, quite a short word upon the
analysis of covenants (20) and (21) contained in the relevant lease.
Covenant (20)
contains what can be described as a positive obligation to use the demised
premises for a particular kind of business, and it identifies the type of
business to be carried on as the
business of a
supermarket for the sale of groceries and provisions (including fresh and
frozen meat and fresh and frozen vegetables bread and other items sold at a
bakers) and as incidental to this main use (subject to the [availability of a
suitable licence]) for the sale of beer wines and spirits for consumption off
the . . . premises
That covenant
identifies the type of business which the tenants are to carry on upon the
premises, but it does not identify in any way the particular classes of goods
which might be dealt with in the course of that business.
Covenant (21)
has been referred to as a restrictive clause, but in my view it is restrictive
in only a very limited sense or extent. For the purpose of analysing it, I
divide it into three parts, which I call subparas (1), (2) and (3). Subpara (1)
starts with the first word and goes down to the words ‘in clause 2(20) hereof
and’. Subpara (2) starts with the words ‘not to sell or deal in articles’ and
goes to the
doubt’ and goes down to the end of the covenant.
Subpara (1)
excludes the carrying on of any business other than a business of the type
identified in covenant (20). It does not cut down covenant (20) in any way; it
merely makes it clear that the defendants are to confine their activities to
the carrying on of a business within the type of business identified in
covenant (20). Subpara (2) of (21) identifies the articles to be dealt in in
that business. It does so by an exclusive mechanism. It excludes goods not
usually sold or dealt in in businesses of the permitted class, that is to say,
the business of a supermarket for the sale of groceries and provisions. It is
precisely complementary with covenant (20); it does not, to my mind, restrict
what may be done under covenant (20). It merely identifies the classes of goods
which may be properly dealt in in that business. It is not, in my view, a
restrictive clause. Subpara (3) is to some extent restrictive, and it is
inserted in the covenant, as the opening words indicate, for the avoidance of
doubt. It does more than avoid doubt, because it does in fact to some extent
restrict the classes of goods which can be dealt in in the course of the
business. It restricts the sales of cigarettes, tobacco and confectionery by
reference to the area or areas devoted to goods of those classes, and it
contains a positive embargo on the sale of certain classes of goods, namely,
any newspapers, magazines, stationery, toys, haberdashery or wool whatsoever.
In my
judgment, there is nothing in either clause 2(20) or clause 2(21) to indicate
that the tenants are in any way restricted in their business to goods that are
food or drink. I would not wish to define precisely what falls within the term
‘groceries’; I am not sure that upon its true interpretation it should be
confined to consumables in the sense of foods and drink, but in my judgment,
upon their true construction, the two covenants clearly leave it open to the
tenants, in the course of their business of a supermarket for the sale of
groceries and provisions, to deal in any goods which would in the usual course
of businesses of this character be dealt in in addition to the sale of those
articles which precisely fall within the definition of groceries and
provisions.
So, although I
would arrive at the conclusion by a different course of reasoning from that
which was adopted by the learned judge in his judgment, I think that he was
right in his conclusions at p 7 of the transcript of his judgment in saying
that the result, on the true construction of the two clauses, is that ‘the
defendants are in a situation where they are entitled, under the terms of their
lease, to deal in articles of a kind which as of the date of the lease’, and I
say a word about that in a moment, ‘were in fact being dealt in in supermarkets
for the sale of groceries and provisions’. Before the learned judge it was
common ground that the lease should be read, construed and applied by reference
to the state of affairs at the date when the lease was executed. We have not
heard argument about that because it was common ground before the learned
judge. I do not think it would have been right for either party to attempt in
this court to recede from that standing, and I think that for the purposes of
this appeal we must also treat the matter as to be decided in the light of the
facts as they existed at the date of the lease. That does not mean that I would
necessarily take the view that, upon the true construction of the clauses, one
has to have regard exclusively to what was the state of affairs when the lease
was executed.
For these
reasons I agree that the result of this appeal should be that which has been
formulated by Balcombe LJ, and I agree with the views which he has expressed
about what should be done about the costs both here and below.
Also agreeing,
O’CONNOR LJ said: Subclause (20) of clause 2 in this lease imposes a positive
covenant upon the lessee to carry on a particular type of business. The
premises demised were a shop of 2,400 sq ft and the lessee was required to use
it for the sale of groceries and provisions. He was also required to sell fresh
and frozen meat and fresh and frozen vegetables and bread and other items sold
at a bakers. So that, effectively, what the lessors, who perfectly properly
were setting up a small shopping parade, intended (and in my judgment achieved)
by their positive covenant was to see to it that there was a small supermarket
which was going to deal with groceries and provisions and was to be the
equivalent of a local butcher, greengrocer and baker. In addition, it is quite
plain that the covenant required the lessee to apply for a justices’ licence
and operate an off-licence.
When one comes
to consider that covenant, the business of a supermarket for sale of groceries
and provisions, including all these other matters, must be limited by the size
of the premises; that is within the matrix of the covenant. Quite plainly, the
lines of goods carried in a supermarket of that size would not necessarily be
the same as those carried by one twice the size, 10 times the size or somewhat
smaller.
Subclause (21)
was in three parts, as my lords have said. The first part adds nothing to the
positive covenant in subclause (20); it is the other half of it. Then the rest
of subclause (21), in my judgment, operates to restrict that which the lessee
can sell in his shop. Some things he is barred from selling altogether, such as
newspapers, magazines, stationery, toys, haberdashery or wool. The reason why
that is necessary is because it might well be that the sale of those items in
small quantities would not change the nature of the business carried on and
required to be carried on by subclause (20).
The other
matters were that he was ‘not to sell or deal in articles, commodities or goods
of any description not usually sold or dealt in by any other trade or business
of the like nature’. I would construe that as saying that, where you have got
effectively a food market with its ancillary matters which may properly be
included with groceries (and, without defining them, it seems to me that there
will be a good many household articles customarily bought at a small
supermarket properly described as selling groceries and provisions), in so far
as the lessee deals in other goods, they must not be such as are not commonly
found also dealt in by other supermarkets of equivalent size.
Within those
limits he is free to sell anything that he likes, as long as it does not change
the nature of the business which he is required to carry on by subclause (20).
I do not wish
to say anything beyond what my lords have said as to the judgment of the
learned judge. I agree that unfortunately a number of errors occurred. I agree
that the onus of proof on a breach of subclause (21) was mistakenly put upon
the defendants and, for the reasons given by my lords, I agree that the
injunction granted cannot stand, and I also agree with the order proposed by
Balcombe LJ.
The appeal
was dismissed and the cross-appeal allowed. There should be substituted for the
order below an injunction and inquiry into damages in the terms stated in the
judgment of Balcombe LJ. For the order as to costs below there should be
substituted no order for costs below; and the respondents to have the costs in
the Court of Appeal.
