Peninsula Securities Ltd v Dunnes Stores (Bangor) Ltd

Peninsula Securities Ltd sought to have a restrictive covenant declared unreasonable and therefore unenforceable. The covenant was contained in a lease which had been assigned to Peninsula Securities Ltd. The covenant prohibited Peninsula Securities Ltd from building on the rest of the land a shop unit of more than 3,000 square feet for the sale of textiles or groceries. The covenant had been entered into by the original lessor of the land, Mr Shortall, and the lessee, Dunnes Stores. The covenant was intended to protect Dunnes Stores from competition on the rest of the land by other retailers. Peninsula Securities Ltd contended that the covenant engaged the doctrine against restraint of trade and was unreasonable. The Court of Appeal held that the covenant engaged the doctrine, and Peninsula Securities Ltd appealed to the Supreme Court. The appeal was allowed and the covenant was held not to engage the doctrine. The court rejected the "pre-existing freedom" test in favour of the "trading society" test. The covenant did not engage the doctrine because it was of a type which had "passed into the accepted and normal currency of commercial or contractual or conveyancing relations" and had "assumed a form which satisfies the test of public policy". The court also noted the existence of an alternative remedy under the Property (Northern Ireland) Order 1978.