Operator of Point Village Starbucks awarded €116,500 damages for exclusivity clause breach

The operator of a Starbucks outlet at the Point Village Shopping Centre has been awarded €116,500 damages to compensate for sales lost due to another coffee chain opening next to it.

Rexbay Limited, which operates the Starbucks, sued the shopping centre’s joint statutory receivers, Paul McCann and Stephen Tennant, and, by order of the court, Hakuba Limited, which purchased the building from the receivers.

It claimed the defendants breached an exclusivity clause in a 2015 letting agreement that precludes the running of a similar type of coffee chain within the centre.

The clause pertained to outlets where coffee is the primary product and did not cover bakeries, sandwich bars or restaurants where coffee and other hot beverages are sold as ancillary products.

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Just under two years after Starbucks began trading at the centre, a Freshii outlet opened right beside it, selling salads, soups and burritos and allowing Hand Print Coffee Ltd to sell coffee within the unit.

In a judgment published on Tuesday, Ms Justice Siobhán Stack said it is “abundantly clear” the opening of Hand Print within Freshii was a breach of the exclusivity clause.

On the balance of probabilities, she said, the sales made by Hand Print would have been made by Starbucks due to their “extreme proximity”, similarity of offering and this being corroborated by sales figures.

Rexbay claimed Hand Print was clearly a branded coffee chain, having coffee as its primary product and having multiple stores, albeit this was a new chain and the Point Village outlet was the first to open, the judge noted. It does not matter if the chain was not the sole or even the main business being run from the unit, it submitted.

The defendants alleged the exclusivity clause does not capture the situation, as Hand Print Coffee was not a “first letting” within the meaning of the clause and the outlet was clearly “ancillary” to the Freshii offering.

In considering the case, the judge had regard to the internal appearance and layout of the store, as well as the window advertisements and Hand Print branding.

She found that the running of two separate businesses by the same corporate tenant within a single unit was covered by the wording of the exclusivity clause. Freshii already had the capacity to sell coffee and did not need a separate supplier, she said.

Quantifying damages, she noted Hand Print operated at the centre from December 2017 and closed in November 2022. She referenced the total sales made by the coffee shop and the reduced sales made by the Starbucks during the period.

Rexbay claimed all of Hand Print’s sales were sales were diverted from its business, while it also missed out on impulse purchases of pastries, bottled water and merchandise.

The defendants disputed the degree to which Hand Print caused Starbucks to fall short of its projected sales in its third year of trading by €144,000.

Ms Justice Stack was satisfied Rexbay’s projection of 10 per cent growth in the third year was “rational”.

She also found Hand Print’s sales presented a “very cogent evidence” as to the sales that could be achieved in the precise location where Starbucks was.

She ruled Rexbay is entitled to damages of €116,518.