Our quarterly look at interesting cases focuses on the question of whether – in this era of expanded product lines – a drug store is really a drug store.

A recent British Columbia case – Diane Investments Inc. v. Mancal Properties Inc., 2008 BCSC 421 (B.C.S.C.) – involved a restrictive covenant in a lease that prohibited property from being used, among other things, as a grocery store, dairy products store or convenience store.

The dispute centred on whether a national drugstore chain breached this restrictive covenant. On the groceries issue, the Court found that the covenant didn’t prohibit the sale of groceries, but provided that a “grocery store” could not be operated on the property. While the drugstore sold groceries, it did so at a much lower volume and with much lesser variety of foodstuffs than ordinarily found in a grocery store. In terms of dairy products, the same reasoning applied.

In dealing with the convenience store restriction, convenience items amounted to only 13-15% of the drugstore’s total sales and 15- 20% of the store’s floor area. The Court held that the similarities were not sufficient to consider the drugstore a “convenience store”.

On those bases, the Court concluded that the operation of the drugstore did not offend the restrictive covenant.