In Castle Street (Dumbarton) Developments Limited v Lidl Great Britain Limited, the Lands Tribunal for Scotland was asked to determine the validity and enforceability of a real burden, the purpose of which was to prevent other supermarkets from occupying land beside Lidl in Dumbarton.
The Burden
The burden in question was worded as follows:
"So long as the granter of this Disposition (or another member of the same group of companies) is either a proprietor of or occupies the whole or part of the Retained Property, no part of the Conveyed Property shall be occupied by either (a) any of Aldi, Farmfoods, Iceland, Home Bargains, Tesco, Asda, Sainsbury and/or Morrisons or (b) any operator whose convenience (food) offer accounts for 30% or more of the sales areas of their property on the Conveyed Property."
The clear purpose of the burden was to protect the Lidl group by preventing the competition setting up shop next door. The owner of the burdened property ("Castle Street") sought to strike down the burden as invalid on three grounds:
- The burden contravened the 'praedial rule';
- It was an unreasonable restraint of trade; and
- Its extent wasn't set out within the 'four corners' of the deed.
Praedial Rule: Does it run with the land?
Real burdens must be for the benefit of property, not persons. In other words, they should run with the land (benefiting future owners) and not solely confer a personal benefit on the owner of the property at the time the burden is created.
Castle Street argued that this burden only benefitted Lidl (or its group companies) so long as they owned or occupied the land. As such, it was only beneficial to Lidl. Lidl tried to argue that was not the case – one of their reasons being if they let out the property to a party outside the group, the tenant would also get the benefit of the burden. Castle Street didn't accept that, because if the land was sold, the new owner wouldn't benefit from the non-compete burden.
The Lands Tribunal agreed with Castle Street. They took the view that the burden was so inextricably tied to Lidl that it could not be considered to run with the land. The burden was therefore held to be invalid for its failure to comply with the praedial rule.
Other considerations: Unfair Restraint on Trade and 'Four Corners' Rule
Castle Street's second argument that the burden was an unreasonable restraint of trade did not get far off the ground. The Lands Tribunal considered this was a position that would have required further exploration as to whether any restraint of trade was reasonable, but that wasn't a question the Tribunal had to address given their finding that the burden was invalid anyway.
The third argument for invalidity by Castle Street was that the legal entities who were prohibited from occupying the land next to Lidl weren't identified, only their brand names were. So, it wasn't clear how far or over whom the burden extended. Lidl's response to this was that specification of company names and numbers would have been counter-productive as new companies could be set out to get round the burden, whereas brand names were unlikely to be departed from. The Lands Tribunal agreed that the use of brand names didn't present the problem Castle Street claimed it did.
Outcome
The Lands Tribunal's decision focussed on the praedial rule. While Castle Street raised the question of anti-competitive burdens being invalid as a restraint of trade, the point didn't need to be decided here because the burden fell on another ground. But while the Lands Tribunal considered it would be "going too far too fast" for the burden to be held invalid on competition grounds alone without detailed consideration, we can see that there may well be circumstances where burdens are indeed subject to unfair restraint of trade type decisions.
