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

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 25 March 2011
• Neutral Citation: [2011] IEHC 119
• Docket Number: [No. 4644 P/2009]
• Court: High Court
• Date: 25 March 2011

[2011] IEHC 119

THE HIGH COURT

[No. 4644 P/2009]

Parol Ltd & Carroll 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

GREENBAND INVESTMENTS v BRUTON & ORS UNREP CLARKE 9.3.2011 2011 IEHC 109

MOUNT KENNETT INVESTMENT CO & GREENBAND INVESTMENTS v O'MEARA & ORS UNREP CLARKE 9.3.2011 2011 IEHC 210

LANDLORD AND TENANT

Lease

Damages - Purpose of damages - Duty to mitigate loss - Assessment of consequential damages - Factors to be taken into account including economic downturn - Breach of keep open covenant in both lease and sub-lease - Whether re-opening of supermarket of different quality relevant to assessment of damages - Greenband v Bruton [2011] IEHC 109, (Unrep, Clarke J, 9/3/2011); Mount Kennett Investment Company v O'Meara [2011] IEHC 210, (Unrep, Clarke J, 9/3/2011) approved - Damages assessed (2009/4644P - Clarke J - 25/3/2011) [2011] IEHC 119

Parol Ltd v Friends First Pension Funds Ltd: Superquinn, Third Party

Facts This judgment concerned the amount of damages to be awarded for breach by the defendant and third party of a keep open covenant in a lease and sub-lease, the court having previously granted declaratory relief to the plaintiff in an earlier judgment. It had been agreed between the parties that the third party herein would fully indemnify the defendant in respect of any damages that might be awarded. The first named plaintiff had originally granted the lease to the notice party. However, as a result of financing arrangements entered into by the third party, the interest of the lessee in the lease passed to the defendants with the third party holding the property under a sub-lease. The aforementioned breach of the lease and sub-lease arose due to the closure by the third party of its anchor store at the Carroll Village Shopping Centre for a period of almost two years. The store subsequently re-opened under a different name. The first named plaintiff sought damages under three headings. Firstly, the plaintiff sought damages in the sum of €445,177 for the rent said to have been lost in relation to five units within the shopping centre, which remained open at the time of the closure of the Superquinn store. The plaintiff submitted that due to the closure of the Superquinn store it was necessary to give the remaining tenants significant concessions in order to keep their units open. Secondly, the plaintiff sought damages in the sum of €65,000 for rent lost by virtue of the possibility of further units opening beyond those which remained open as of the date when the supermarket closed. Evidence was given of negotiations with potential new tenants in that regard. Thirdly, the plaintiff sought damages for loss into the future. It was agreed that no losses could continue beyond 25/02/2019, as the keep open clause in the lease did not impose any obligation after that date.

Held by Clarke J. in awarding the sum of €560,000 by way of damages: 1. That there was no evidence upon which to conclude that the plaintiff did not collect as much rent as it could from the other tenants and the actions taken in making concessions to the tenants were reasonable in all the circumstances. However, those tenants had been pressing for concessions for some time prior to the closure of Superquinn. In the absence of the closure of that store, rent in the order of €250,000 might actually have been secured in the first year after the closure but rent in the order of €200,000 was all that would have been secured in the second year. Having regard to the fact that €250,000 was actually recovered in that period, it was appropriate to award damages in the sum of €200,000 under this heading. 2. That it was important to note that a significant portion of the shopping centre in question was not owned by the plaintiff and further no new letting had occurred in the three years immediately prior to the closure by the third party. The reason for the loss of new tenants was not attributable to the closure of the store but rather the nature of the offering of the new store and consequently the loss of the tenants did not have any causal connection with the breach of the clause in the lease. However, there was some possibility that during the two years the store was closed, the plaintiff might have been able to secure an additional tenant or two, had Superquinn remained open. Damages under this heading was assessed in the sum of €10,000. 3. That the fact that Superquinn was closed for almost two years had a significant effect on the overall prospects of the shopping centre and whatever risk there was for overall closure of the centre was exacerbated by the fact that an already vulnerable commercial enterprise had to endure two years without any supermarket. The estimate given by the plaintiff that the sum of €125,000 per annum was the rent likely to be secured over the next eight years was reasonable and realistic. The best approach to determine future losses was to initially calculate damages on the basis of the full current loss of rental income but to discount that figure to reflect the possibility that it might decline or disappear altogether. It was appropriate to award €350,000 to reflect the present value of rent lost into the future.

Reporter: L.O'S.

Mr. Justice Clarke

2 1.1 On the 22^nd October last I gave judgment on a range of issues in these proceedings ("the Principal Judgment")(Unreported, High Court, Clarke J., 22^nd October, 2010). For the reasons set out in the Principal Judgment I came to the view that the closure of a Superquinn supermarket in the Carroll Village Shopping Centre in Dundalk was in breach of the terms of the lease under which that store was held. The lease in question had originally been granted by the first named plaintiff ("Parol") to the third party ("Superquinn"). However, as a result of financing arrangements entered into by Superquinn, the interest of the lessee in that lease had passed to the defendants ("Friends First") with Superquinn holding the property under a sub-lease. It will be necessary to make brief reference to the terms of the respective lease and sub-lease in due course.

3 1.2 However, for the reasons set out in the Principal Judgment I came to the view that Friends First had been placed in breach of a keep open covenant in the lease by virtue of the closure of the relevant Superquinn store. Likewise, Superquinn was in breach of the sub-lease by closing the store.

4 1.3 On that basis, I made declarations in the following terms:-

2 "1. The Defendant through the action of Superquinn by closing its anchor store at the Carroll Village Shopping Centre Dundalk in February 2009 acted in breach of Clause 3(6) of the lease dated the 11^th June 1998.

2 Superquinn by closing its anchor store at the Carroll Village Shopping Centre Dundalk in February 2009 acted in breach of Clause 3(16) of the sub lease dated the 5^th September 2005."

As pointed out in the Principal Judgment all questions relating to damages were left over for further consideration by agreement of the parties and with the approval of the court. However, the parties agreed that Superquinn would fully indemnify Friends First in respect of any damages which might be awarded. On that basis the order of the 22^nd October, 2010, contained the following provision at item 3:-

"The Defendant be excused from attending at the trial of this action insofar as the quantum of damages is concerned on the basis that any award of damages and costs in favour of Plaintiffs as against the Defendant be made with an order over for all such damages and costs as against the Third Party."

5 1.4 Therefore, in form what I was trying, so far as damages are concerned, was the case made by Parol against Friends First. However, given that Superquinn had agreed, in substance, to indemnify Friends First in relation to any damages and costs that might be awarded, Superquinn took over the defence of the action. As a matter of substance, therefore, as opposed to form, the damages aspect of the case ran as between Parol and Superquinn. Before going on to deal with the damages claimed it is necessary to refer briefly to a complicating factor that arose subsequent to the Principal Judgment. The problem stemmed from the manner of the reopening of the Superquinn store. I, therefore, turn first to that question.

2 2.1 For the reasons set out in the Principal Judgment, I came to the view that it was appropriate to require, in substance, that the store in question be reopened. The order of the 22^nd October, therefore, required that Superquinn reopen its anchor store at the Carroll Village Shopping Centre "as a high end supermarket" not later than the 10^th December, 2010. In the context of that order it is important to note that the keep open clauses in respectively the lease and the sub-lease were different in terms so far as use is concerned.

3 2.2 The user clause in the lease provided as follows:-

"Permitted use means for use as a supermarket and/or superstore (including the sale of intoxicating liquor for consumption off the Property) and for the sale of foods and/or services which may from time to time be sold or provided in supermarkets and/or superstores."

4 2.3 However, the material provision as to user in the sub-lease (as a result of an amendment put in place at or around the time when the financial arrangements with Friends First occurred) provided as follows:-

"Use primarily as a high quality supermarket and/or superstore and/or for the sale of intoxicating liquor for consumption off the premise and/or for the sale of sports and leisure wear and sports and leisure accessories and equipment and/or for all such...