Parol Ltd & Caroll Village (Retail) Management Services Ltd v Friends First Pension Funds Ltd & Superquinn

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 08 October 2010
• Neutral Citation: [2010] IEHC 498
• Docket Number: [No. 4644 P/2009]
• Court: High Court
• Date: 08 October 2010

[2010] IEHC 498

THE HIGH COURT

[No. 4644 P/2009]

Parol Ltd & Caroll Village (Retail) Management Services Ltd v Friends First Pension Funds Ltd & Superquinn

BETWEEN

PAROL LIMITED

AND

CARROLL VILLAGE (RETAIL) MANAGEMENT SERVICES LIMITED

PLAINTIFFS

AND

FRIENDS FIRST PENSION FUNDS LIMITED

DEFENDANT

AND

SUPERQUINN

THIRD PARTY

CHARTERED TRUST PLC v DAVIES 1997 2 EGLR 83

MOLTON BUILDERS LTD v CITY OF WESTMINSTER LONDON BOROUGH COUNCIL & ANOR 1975 30 P & CR 182

BRITISH LEYLAND EXPORTS LTD v BRITTAIN MANUFACTURING LTD & THE BRITTAIN GROUP LTD 1981 IR 335

IRISH TELEPHONE RENTALS LTD v IRISH CIVIL SERVICE BUILDING SOCIETY LTD 1992 2 IR 525 1991 ILRM 880 1991/4/744

HONG KONG FIR SHOPPING CO LTD v KAWASAKI KISEN KAISHA LTD 1962 2 QB 26 1962 2 WLR 474 1962 1 AER 474

ALDIN v LATIMER CLARK MUIRHEAD & CO 1894 2 CH 437

LANDLORD AND TENANT

Lease

Keep open clause - Shopping centre - Ceasing of trading by supermarket - Anchor tenant - Breach of keep open clause - Difficult trading conditions in border region - Alleged failure of management and promotion at centre - Whether landlord in breach of obligations under lease - Whether breaches entitled tenant to resile from complying with keep open clause -Lease - Obligation to trade - Obligation to procure other lessees to open - Whether deliberate running down of store - Payment of service charges - Absence of major complaint regarding management of store - Absence of documentation specifying complaints - Whether decision to closed based on trading difficulties - Complaints regarding management of store - Vacant units - Failure to enforce keep open clauses in leases of other units - Whether supermarket required trade under particular name - Terms of lease - Absence of obligation to obtain consent to assignment - Chartered Trust Plc v Davies [1997] 2 EGLR 83; Moulton Buildings Limited v Westminster [1975] 30 P&CR 182; British Leyland Exports Limited v Britain Group Sales Limited [1981] IR 335; Irish Telephone Rentals v ICS Building Society [1991] ILRM 880; Hong Kong Fir Shipping Company v Kawasaki [1962] 2 QB 26 and Aldin Latimer Clarke, Muirhead & Company [1984] 2 Ch 437 considered - Finding that third party obliged to keep open as high end supermarket trading (2009/4644P - Clarke J - 8/10/2010) [2010] IEHC 498

Parol Limited v Friends First Pension Limited

Facts: After the sale and leaseback of Superquinn supermarket chain to the defendant pension fund, Superquinn stopped operating a store in 2009 in Dundalk. Parol, the owner of units in a shopping centre and Carroll Village Shopping Centre in Dundalk asserted that this was in clear breach of the keep open clause. Superquinn asserted that they were released from the obligation to comply with the clause. The question arose inter alia as to whether there was an entitlement to resile from the keep open obligation, whether it had to trade under the Superquinn name and also whether there was any "running down" of Superquinn prior to its closure.

Held by Clarke J. that Superquinn was obliged to comply with the keep open clause. The Court was not satisfied that Superquinn was obliged in compliance with that clause to do other than keep open as a high end supermarket under whatever title might be appropriate.

Reporter: E.F.

Mr. Justice Clarke

2 1.1 The third parties ("Superquinn") have been one of the leading supermarket chains in Ireland for upwards of 50 years. As is widely known, Superquinn was developed by Senator Fergal Quinn. For historical reasons the chain had an association with Dundalk. In more recent times, Superquinn operated a supermarket in Dundalk which is the subject of these proceedings.

3 1.2 The immediate background to the issues which arise in this case stem from two changes in the Superquinn organisation. First, the shareholding of the Quinn family in Superquinn was sold in 2005. In substance, Superquinn is now beneficially owned by Select Retail Investments Holdings Ltd ("SRH") which is a vehicle for a number of private investors. While that change in ultimate ownership had an obvious affect on the management of Superquinn, it did not affect its legal relations with the third parties.

4 1.3 The second change came about as a result of a sale and leaseback arrangement entered into, in 2007, by Superquinn with the defendant pension fund ("Friends First") under which Friends First bought a number of Superquinn stores (including the Dundalk store) from Superquinn and immediately leased those stores back to Superquinn. The purpose of that arrangement, from Friends First's point of view, was that the pension fund would have the benefit of owning the stores as investments and would also receive a significant guaranteed rent from Superquinn for a period of time.

5 1.4 The Dundalk store formed part of what is known as the Carroll Village Shopping Centre. The precise ownership of the units within that shopping centre, both as to the interest of the landlord and the interest of tenants, is a matter which was clarified in the course of the hearing and will be addressed, insofar as relevant to the issues which arise in these proceedings, in due course. However, in general terms, the shopping centre may be described colloquially as being beneficially owned by Mr. Gerard Maguire ("Mr. Maguire") and his wife. Mr. Maguire is the principal behind the first named plaintiff ("Parol"), which own some of the units in the shopping centre. Mr. Maguire and his wife directly own some other units within the shopping centre. The position of the Superquinn store is somewhat different. At the level of commercial substance Superquinn, in fact, purchased its store at the time of the development of the Carroll Village Shopping Centre paying two significant capital sums of IR£450,000 and IR£3.85m in 1998. However, the legal form of that arrangement was that Parol gave Superquinn a long lease on the property at a nominal rent in consideration of IR£450,000 and also entered into a building contract to construct the Superquinn store for IR£3.85m. However, of particular relevance to this case is the fact that the lease concerned contained a keep open clause to which it will be necessary to refer in due course. The second named plaintiff ("Carroll Village"), is the management company which runs the Carroll Village Shopping Centre.

6 1.5 At one level the issues which arise in these proceedings are very simple. Superquinn stopped operating their store in February, 2009. Parol and Carroll Village assert that this is in clear breach of the keep open clause to which I have referred. Superquinn assert that the manner in which the shopping centre was operated entitled Superquinn, as a matter of law, to be released from complying with the keep open clause. Against that, Parol and Carroll Village say that the undoubted problems which the Carroll Village Shopping Centre suffered from can be placed at the door of Superquinn. Into the mix comes the fact that Friends First are now the lessees under the original long lease given to Superquinn but, in turn, are the landlords in relation to a sub-lease in favour of Superquinn. In addition, questions arose as to whether, if it should transpire that Superquinn were obliged to continue to keep the store open, any obligation lies on Superquinn to use the "Superquinn" name on any store which might operate.

7 1.6 Against that general description, it is necessary to set out the issues in some greater detail.

2 2.1 The backdrop to the factual dispute between the parties is the difficult retail trading circumstances that existed over recent years in the border region in general, and Dundalk in particular. The causes of those difficulties are well known. Differences (unfavourable to traders south of the border) in applicable taxes (such as excise duty and VAT) were coupled with an unfavourable exchange rate so as to make trading conditions in areas close to the border very difficult indeed. Shoppers from south of the border who might otherwise be expected to do their shopping in retail units in places such as Dundalk were travelling North. Likewise, shoppers from the southern part of Northern Ireland, who might otherwise have been enticed to do at least some of their shopping south of the border, found the trading conditions unattractive.

3 2.2 Against that background it is hardly surprising that many in the retail sector in border areas (not least those in Dundalk) experienced tough trading conditions during most of the period with which I am concerned. On top of those difficulties, a further problem for the Carroll Village Shopping Centre emerged when a rival shopping centre was established which, at least on one view, may have attracted some business away from Carroll Village.

4 2.3 There can be little doubt but that both Superquinn and many, if not all, of the other units within the Carroll Village Shopping Centre suffered as a result of the difficulties which I have noted. The evidence established that Superquinn, in its Dundalk store, was trading at a loss for a number of years prior to its closure and, in particular, was known to be a loss making store both at the time when the change of ownership occurred in 2005 and when the sale and leaseback arrangement with Friends First was put in place in 2007. Likewise, it is not disputed but that there were significant closures in the retail units operating in the Carroll Village Shopping Centre going back over a number of years prior to the Superquinn closure. Many of the units which closed did not re-open. While both Mr. Maguire and Superquinn gave some acknowledgement to the general difficulty of retailing conditions in Dundalk, the primary factual dispute between them was as to whose fault it was that the Carroll Village Shopping Centre went into decline. That it had gone into decline prior to Superquinn's closure and that...