Restrictive covenants, use of land, and the restraint of trade doctrine

Abstract

The common law doctrine of restraint of trade has a well-established presence in relation to contracts of employment and contracts for the sale of a business. Beyond those specific areas it reared its head from time to time, but the legal test for its applicability was not a model of clarity. Where the covenantor ceded a pre-existing freedom to engage in commercial activity, the decision of the House of Lords in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 brought it within the doctrine, but the recent decision of the Supreme Court in Peninsula Securities Ltd v Dunnes Stores (Bangor) Ltd [2020] UKSC 36, on appeal from the Northern Ireland Court of Appeal [2018] NICA 7, has discarded that test in favour of one based on the structure of a trading society. Peninsula Securities was a case concerned with the applicability of the restraint of trade doctrine to covenants affecting the ability of a landowner and its successors in title to use the land in a way that potentially competed with the business of an adjoining occupier. The decision that the restraint of trade doctrine was not engaged in these circumstances was set against the power of the Lands Tribunal to modify or extinguish covenants affecting land under article 5 of the Property (NI) Order 1978.