HIGH COURT REJECTS TENANT’S CLAIM FOR PARTIAL FRUSTRATION OF A LEASE

In a decision of O’Moore J of 30 November 2021 in “Foot Locker Retail Ireland Limited -v- Percy Nominees Limited [2020/6301 P]” the High Court rejected a claim made by Foot Locker (the “Tenant”) for a declaration that their lease had been partially frustrated because of the intervention of the COVID-19 pandemic.

“Keep open” and “Comply with enactment”

The lease contained “a keep open” clause and a “comply with enactment” clause.  The Tenant argued that the combination of the keep open clause and the user clause mandated the Tenant to operate a high end retail store at Grafton Street, Dublin during what in normal times would be termed normal trading hours.

Counsel for the Tenant argued that the lease was partially frustrated because of the pandemic as a result of which they were legally required to close the Grafton Street store, and as such they did not have to pay rent during the various lockdowns. Counsel for the Tenant argued that they could remain in occupation to the exclusion of any alternative letting by Percy Nominees Limited (the “Landlord”) and could resume trading once permitted to do so at the end of lockdowns.

Decision
O’Moore J ruled against the Tenant and held that the concept of partial frustration did not exist in Irish law.  The compliance with enactments clause meant that the Tenant did not have to comply with the keep open clause.  The Irish Courts have already decided in previous cases that partial frustration was not a legal concept applied by the Irish Courts. It is settled law that the doctrine of frustration, if successfully invoked, results in the termination of the relevant contract (or lease).

Counsel for the Tenant had argued that the High Court should “push out the boundaries of the doctrine of frustration”.  The High Court refused and stated that the doctrine of frustration should not, as a matter of principle, “be torn from its moorings in the way Foot Locker had invited the Court to do”.  The Court held that whilst the COVID-19 restrictions may provide a reason for not meeting a contractual obligation, they do not necessarily cause a contract to be frustrated. The Court concluded that the forced closure of the store did not constitute a frustration of the lease.

Conclusion
A takeaway point from this decision is that the concept of partial frustration does not exist in Irish law.

Another point is that there is still a liability to pay rent notwithstanding COVID and it is a matter for landlords whether to agree to deals with tenants or not.  The Tenant had sought to “share the pain” but the Landlord refused.  Tenants with an ability to pay rent cannot unilaterally refuse to pay rent because of the lockdowns.

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