Foot Locker Retail Ireland Ltd v Percy Nominees Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian O'Moore
• Judgment Date: 30 November 2021
• Neutral Citation: [2021] IEHC 749
• Court: High Court
• Docket Number: [2020/6301 P]

Between

Foot Locker Retail Ireland Limited

Plaintiff

and

Percy Nominees Limited

Defendant

[2021] IEHC 749

[2020/6301 P]

THE HIGH COURT

Lease – Frustration – Contract – Plaintiff claiming that there was a partial frustration of the terms of the lease between the parties – Whether partial frustration of contract exists

Facts: The plaintiff, Foot Locker Retail Ireland Ltd (Foot Locker), claimed that the lease between the parties had been frustrated, and sought both a declaration to that effect and, more particularly, a declaration that it had no liability for rent from the 24th of March 2020 onwards or some portion of that period. The defence and counterclaim of the defendant, Percy Nominees Ltd (Percy), denied much of the claim pleaded by Foot Locker. By the time the trial of the action opened before the High Court (O’Moore J) on 19th October, 2021, the claim made on behalf of Foot Locker had radically altered from one that the common intention of the parties had been frustrated (and that the lease was at an end) to a claim put in the following way by counsel for Foot Locker: “We’ve claimed that there is a partial frustration of the terms of the lease such that the tenant should not be obliged to pay the rent for the periods it was closed.”

Held by O’Moore J that the concept of partial frustration (as advanced on behalf of Foot Locker) is not one which exists in Irish law.

O’Moore J dismissed the claims made by Foot Locker.

Claims dismissed.

JUDGMENT of Mr. Justice Brian O'Moore delivered on the 30th day of November, 2021.

1 It was once widely believed that every adult citizen of the United States could remember where they were and what they were doing at the time that they were told of the assassination of President Kennedy. A similar phenomenon of collective memory may not have been triggered by the announcement in Washington D.C. by An Taoiseach, in March 2020, of the dramatic steps needed to limit the spread of COVID-19 in Ireland but the unprecedented nature of these measures, and the speed with which they were introduced, will be remembered by most, if not all, of those affected by them.

2 Against the background of the arrival of COVID-19 in Ireland, and the measures taken by the Government to control the spread of the virus, on 17th March, 2020 the plaintiff (‘Foot Locker’) decided to close all Foot Locker stores in the State. There were seven Foot Locker stores in operation in Ireland at the time. These included the store at Grafton Street, Dublin 2. Subsequent to this decision, on 24th March, 2020 pursuant to emergency legislation non-essential retail stores (including the Foot Locker shops) were obliged to close.

3 In the months that followed, Foot Locker was legally unable to operate the Grafton Street store as it had in the past. It attempted to engage with its landlord (‘Percy Nominees’), the defendant in these proceedings. Such engagement proved fruitless. It is not a matter for me to determine who was in the right and who in the wrong in this regard; indeed, there may be no moral right or wrong side to the argument about what accommodation might have been possible between Foot Locker and Percy Nominees. Foot Locker did reach arrangements with other of its landlords. As an agreement with Percy Nominees was not possible, by letter of 8th June, 2020 the solicitors for Foot Locker wrote to Percy Nominees setting out the tenant's position. In that letter, it was proposed on behalf of Foot Locker that:-

“These premises are held for a term of thirty-five years from the 20th of March 1990. Among the covenants set forth in the lease is the necessity of the tenant to:

• • Comply with enactments “for the time being enforced or any orders or regulations thereunder for the time being enforced”;

• • Not to use or permit the demised premises or any part thereof to be used for any purpose other than at ground floor as a high quality retail shop and on the upper floor levels such a retail shop or as a public bar and restaurant (with ancillary offices);

• • To keep the premises open at all reasonable times during usual business hours.

It is clear since the introduction of the strict regime of retail openings under the COVID-19 pandemic, as declared by the World Health Organisation that our client has been unable to open this premises or make any use thereof for retail purposes since 17th March 2020.

It is now the case that there will be a limited retail opportunity for opening from today the 8th June 2020. However, it is clear that such an opening is nothing like what is either envisaged by or provided for under the said lease. Trading could not be said to be of a high-retail shop and the market rent which is set for this property is completely at odds with the potential or possible legal use to be made of this unit.

As such, our client firstly believes that there is no basis under which there is a liability for rent for the period during which the premises was closed being the period from 17th March 2020 to 7th June 2020 in order for them to comply with the COVID-19 Regulations. Secondly, it is also clear that our client cannot be in a position in which to discharge a rent for premises which simply cannot be operated or used for the purposes which are envisaged in the lease or envisaged under the rent last fixed under the rent review provisions under the lease.

Out client considers that the lease is in effect now entirely frustrated both by the COVID-19 restrictions which have been put in place to date and those which are now to be put in place by the authorities going forward.

Our client will not have any opportunity to obtain or operate anything like the type of retail unit which was the subject of this lease and which has been operating since its commencement date.

In the circumstances our client will, entirely without prejudice to this position, operate this unit for a limited period of time and expressly reserve the right to treat this lease as entirely frustrated and should be extinguished on that basis.” [Original Emphasis]

4 The response of Percy Nominees was unmistakably direct. On the 21st of July 2020, the landlord served a 21-day notice seeking payment of all arrears failing which a petition would be brought to wind up Foot Locker.

5 In the light of the threat of a winding up petition, Foot Locker instituted these proceedings on the 11th September 2020.

6 At the outset, Foot Locker sought a declaration that the lease was frustrated and that Foot Locker had no liability for rental payments under the lease as and from 24th March, 2020. This, at least, was the claim made in the Plenary Summons. The Statement of Claim, delivered on 19th October, 2020, sought somewhat different reliefs. In particular, the declaration sought in the Statement of Claim was a declaration to the effect that the “common intention of the parties has been frustrated in whole or in part”. Equally, a declaration was sought that Foot Locker has no liability for rental payments under the lease as and from 24th March, 2020 “or a proportional part thereof”.

7 By the time the trial of the action opened before me on 19th October, 2021, the claim made on behalf of Foot Locker had radically altered from one that the common intention of the parties had been frustrated (and that the lease was at an end) to a claim put in this way by counsel for Foot Locker:-

“We've claimed that there is a partial frustration of the terms of the lease such that the tenant should not be obliged to pay the rent for the periods it was closed.”

8 This case therefore presents two issues:-

• (i) Is there such a thing as partial frustration of a lease?

• (ii) If the answer to (i) is in the affirmative, has Foot Locker established an entitlement to a declaration that the lease in respect of Grafton Street has been partially frustrated?

9 I will deal with the issues in the case under the following headings:-

• (a) The Lease;

• (b) The Evidence;

• (c) The Submissions of the Parties;

• (d) Analysis; and

• (e) Conclusion.

A. The Lease

10 The lease is dated 14th March, 1990. Originally, it was between AIIM Nominees Limited (as landlord) and Xtravision PLC (as tenant). Percy Nominees is now the landlord; Foot Locker is now the tenant.

11 While a number of the terms of the lease were emphasised to me by counsel on both sides, the more important ones are those stressed by counsel for Foot Locker. These are:-

“3.4.1. At all times during the said term to observe and comply in all respects with the provisions and the requirements of any and every enactment for the time being in force or any orders or regulations thereunder for the time being in force and to do and execute or cause to be done and executed all such works as under or by virtue of any such enactment of any orders or regulations thereunder for the time being in force are or shall be properly directed or necessary to be done or executed upon or in respect of the demised premises or any part thereof whether by the owner landlord lessee tenant or occupier and at all times to keep the Landlord indemnified against all claims demands and liability in respect thereof and without derogating from the generality of the foregoing to comply with the requirements of any local or other statutory authority and the order or orders of any Court of competent jurisdiction.”

12 The “User” clause at 3.19:-

“3.19. Not to use or permit the demised premises or any part thereof to be used for any purpose other than at ground floor as a high quality retail shop and at upper floor levels as such a retail shop or as a fully licensed public bar and restaurant with ancillary offices.

AND for no other purposes save with the Landlord's written consent which consent shall not be unreasonably refused or delayed but it is hereby agreed and declared that it shall be reasonable for the Landlord to refuse its consent on the grounds that the change of user...