Iceland Foods Limited v Aldi Stores Limited

 

Aldi and Iceland have adjoining stores on the outskirts of Cambridge, being Units 1 and 2 respectively. They share the accessway and car park. Aldi originally took a Lease of all the land in 1996 and it then sub-let Unit 2 to Iceland a few months later and retained Unit 1 for its own use.

The dispute between them arose because Aldi now wish to develop Unit 1. It intends to extend it at both the front and the rear and to add a substantial mezzanine floor. It had shut its store and commenced preparatory works when Iceland sought injunctive relief to restrain such development. It claims that Aldi has no right to carry out these works.

Iceland’s case was not based upon any clear express restriction against any extension of Unit 1. Instead, it argued that:

  1. Unit 1 was shown in the Underlease as simply including the footprint of the original structure and the parties had intended that it could not be extended.
  2. All rights were granted to Iceland with referent to Unit 1 as it was.
  3. It had a fixed contribution of 36% to car parking and other shared costs with this percentage based on the original square footage of the Units.
  4. Any extension of Unit 1 would interfere with Iceland’s car parking rights.
  5. There was an implied term that Unit 1 would remain the same size.

Aldi’s defence was based on:

  1. It having rights under its Lease to make additions to Unit 1 and Iceland knew this when it took its Underlease.
  2. The description of Unit 1 in the Underlease by reference to its original footprint was just a description (and not any limitation).
  3. The extension of Unit 1 would not frustrate any rights granted to, or lead to any greater burden on, Iceland. Any extra costs arising from the extension would fall to be paid by Aldi.
  4. There being no legal basis to imply any term.

The Court agreed with Aldi. It held that there was nothing upon which to construe or imply any restriction on extending Unit 1. If that had been the intention, there would have been a need for an express restriction. Clearly, when exercising its right to extend, Aldi needs to be careful not to cause any material infringement to Iceland’s rights as to parking or otherwise but the law will sufficiently protect Iceland in this respect, or in relation to meeting any extra expense cased by the extension, so there is no need for any blanket ban on any development.

The Court re-affirmed that a term will only be implied into a commercial document like a lease in exceptional circumstances. It must be reasonable, as well as necessary to give commercial sense to a contract, and so obvious it goes without saying. It cannot be implied to make a contract fairer but only to give it commercial or practical coherence it would otherwise lack.

In this case, the Court held that implying a term limiting any development was not reasonable or necessary as the existing rights and restrictions could operate satisfactorily without any such additional term. It was not obvious and, if the extension gave rise to an increased contribution from Iceland, the answer was not to say that Unit 1 could not be increased but to say any extra costs could not be recovered by Aldi.

So the works can proceed.

Jonathan Ross
Forsters LLP