Latif & Waheed v Tesco Stores Limited: Claimants are released from their restrictive covenant within a month of bringing their claim against Tesco.

Land agreements lost their exemption from competition law on 6 April 2011. On that date, they became subject to the prohibition on anticompetitive agreements in Chapter 1 of the Competition Act 1998. Land agreements which violate Chapter 1 are unlawful even if they were entered into before that date.

The main relevance of this has been to restrictions on land use in the retail sector. For instance, if the lease of a unit in a shopping centre includes a covenant preventing the leasing of another unit to a competitor of the lessee, that restriction may now be unlawful.

Nonetheless, such restrictions are rarely challenged given the cost of doing so, often exacerbated if the party benefiting from the restriction is significantly larger than the party objecting to it.

However this may be set to change, as there is now a fast track procedure with the potential to reduce these obstacles significantly. Claimants on the fast track can expect an expedited and therefore relatively inexpensive procedure, and a cap on the contribution they may have to pay towards the Defendant’s costs if they lose.

So far there have only been two applications to use the fast track, the second of which concerned a challenge to a restrictive covenant in a land agreement. This is highly significant:

  1. because the fast track is for any alleged infringement of competition law, and land agreements are a very small part of that landscape; and
  2. as noted, litigation over allegedly anticompetitive land agreements has been so rare.

The fact that only the second ever fast track application concerns a land use restriction may indicate that the new procedure heralds a significant increase in challenges to such restrictions.

Latif & Waheed v Tesco Stores Limited

In 1997, the Claimants sold land to Tesco. The sale agreement included a restrictive covenant to the effect that land retained by the Claimants could not be used for the vending of food, convenience goods or pharmacy products.

Pursuant to land agreements becoming subject to competition law in 2011, the Claimants alleged that this covenant was anticompetitive and therefore void and unenforceable. In February 2016 they commenced a claim seeking:

  • a declaration to that effect;
  • an injunction restraining Tesco from enforcing the covenant; and
  • unspecified damages.

They also applied for the claim to be designated to the fast track.

As with the first case in which fast track designation was sought, resolution of the dispute followed rapidly. Within a month of the 18 February Notice announcing commencement of the claim, the parties agreed to an Order in which Tesco released the Claimants from the restriction.

Indeed, as with the first case – the commencement of which we reported here, and the settlement of which we reported here – the resolution was so swift that there was no order of designation. It therefore remains true that no claim has yet gone onto the fast track. However, as it is only a matter of time before one does, below is an explanation of its key features.

The Fast Track

On 1 October 2015, the Consumer Rights Act 2015 came into force, Schedule 8 of which included a raft of measures to assist actions for damages by those who have suffered from competition law infringement. The most newsworthy change was the introduction of a US-style class actions regime, primarily for the largest cases. However, of perhaps equal significance was the introduction of the fast track, primarily for the small.

The fast track can be used by those seeking an injunction to restrain infringement of competition law and/or damages for such infringement.

Fast track claims have to be brought in the Competition Appeal Tribunal (the “CAT”). Details of the procedure are in Rule 58 of the CAT Rules as supplemented by the CAT Guide.

Rule 58 sets a tight timeline, requiring the trial to commence within six months of the order placing the claim on the fast track. Trials are likely to be short as well, as one of the criteria in making such an order is whether the time estimate for trial is three days or less.

Other criteria include:

  • The complexity and novelty of the issues involved.
  • The number of witnesses.
  • The likely extent of any disclosure.
  • The nature of the remedy sought and, if damages, the amount claimed.
  • Whether one or more of the parties is an SME.

The fast track is primarily intended to protect SMEs from costly proceedings, and further rules exist to address any wealth imbalance there may be between the parties:

Rule 58(2): provides that, where a case is designated to the fast track, the amount of costs that one party may recover from another will be capped at a level to be determined by the CAT on a case-by-case basis.

Rule 68(5): provides that, where there is an application for an interim injunction on the fast track, the CAT may either cap or waive entirely any cross-undertaking in damages that the applicant must give. Such undertakings are usually given to cover the situation where a defendant suffers loss because it is subject to an interim injunction and then, when the court is able to consider the matter more fully at trial, it decides that the injunction should not continue.