Covid-19 restrictions do not frustrate leases

Judgment was recently handed down by Mr. Justice O’Moore in a case brought by Foot Locker Retail Ireland Limited (“Foot Locker”) seeking declarations regarding its obligation to pay rent during the period of forced closure during the Covid-19 pandemic.

The Issues

The claim related to a dispute between Foot Locker and Percy Nominees Limited (“the Landlord”) concerning its Grafton Street store. Foot Locker claimed that as it was unable to comply with the “keep open” and “user” clauses in the Lease and that, therefore, the lease was frustrated during the period of forced closure - a partial frustration - such that it should not be obliged to pay rent for the period of forced closure. Accordingly, the Court was tasked with considering two issues. Firstly, is there such a thing as partial frustration of a lease and secondly, if such a concept exists, had Foot Locker established an entitlement to a declaration that the lease has been partially frustrated. The Landlord denied that partial frustration existed in law and counterclaimed for the payment of all outstanding rent.

The evidence

The Judge made it clear in this case that the evidence was of limited assistance in answering these questions. However, it was noted that the evidence provided by Foot Locker included confirmation that it was in a position to pay the entirety of the rent on the premises and that it had originally taken the view that the lease was frustrated as opposed to temporarily frustrated and that this concept, as pleaded at trial, only developed during the proceedings. No evidence was required to be provided on a further aspect of Foot Locker’s claim relating to the level of footfall on Grafton Street as this relief was withdrawn on the first morning of the hearing.

Determination

The Judge in analysing the evidence and submissions made by the parties, highlighted the essence of the doctrine of frustration as being that where a contact is treated as being at an end and where both parties are freed from their obligations to each other. He described the case being made by Foot Locker, that it was free from any obligation to pay rent but nonetheless entitled to continue to occupy the premises, as a form of frustration which “does violence to the fundamentals of the doctrine” and amounts to a one-way street in favour of Foot Locker. The Judge went on to state that “the obligation to pay rent, the basic requirement placed on the tenant by any lease, is not a severable obligation”. He made it clear that the Irish authorities had decided that partial frustration is not a legal concept applied in these courts. Having considered recent case law advanced by Foot Locker, the Judge concluded that while the Covid-19 restrictions may provide a reason for not meeting a contractual obligation, they do not however necessarily cause a contract to be frustrated.

Conclusion

The Judge determined that the concept of partial frustration does not exist in Irish Law and that the concept of partial frustration is at odds with the doctrine of frustration itself. Further, he stated that even if it did exist he would have found against Foot Locker and the forced closure of the store did not constitute a frustration of the lease. The claim was accordingly dismissed.

AMOSS acted for the Landlord in this case which was the first in which the effect of the Covid-19 restrictions on a tenant’s liability for rent was considered.

For further information in relation to this matter, please contact Gavin Simons (Partner), Jerry Burke (Partner), or your usual AMOSS contact.

By using this site you are agreeing to our cookie policy. Please read our cookie policy for further details.