DUNNES STORES has won its High Court challenge to a decision refusing it permission to operate a "high-quality food hall and wine store" at its Ilac centre branch in Dublin. The refusal was costing it €10 million, Dunnes had claimed.

Mr Justice Frank Clarke yesterday found that the landlords of the Ilac centre premises - Irish Life Assurance and Joseph O'Reilly - had unreasonably withheld consent for change of use for the food hall and had acted in breach of provisions of the lease between the sides.

The lease required the landlords to take "diversity" into consideration when considering Dunnes' application for change of use but this was not done, he said.

He found the "true" decision maker for the landlords in relation to the withholding of permission was Mr O'Reilly. Irish Life was unaware until the court case of negotiations between Mr O'Reilly and Dunnes aimed at procuring a surrender of the Dunnes' outlet as part of overall plans to redevelop the Ilac Centre, he said.

Dunnes Stores has been in the Ilac centre since December 1989 on foot of a 145-year lease.

It was clear from very early on that Mr O'Reilly had expressed opposition to Dunnes' request for change of use and, while he had left the "nuts and bolts" to a representative of his, that representative could not have come to a contrary view without first going to Mr O'Reilly, the judge said.

He ruled the withholding of consent was unreasonable and partly for an improper purpose, the desire to strengthen Mr O'Reilly's hand in the negotiations aimed at regaining the Dunnes store for redevelopment. He had "no doubt" some persons on the landlords' side saw the consent issue as a means of exercising leverage on Dunnes Stores to advance the claim for possession.

While there might be good commercial reasons for the landlords to want to redevelop the centre, the unit sizes being outdated, they had to do that by legitimate means and could not act regardless of their obligations under the lease, he found.

The judge further held that relevant and important documents in the case had been deliberately suppressed by the defendants to inhibit Dunnes in making its claim that the desire of the landlords to redevelop the Ilac Centre as a whole was a "significant element" in the decision withholding permission.

The failure to make adequate discovery was not inadvertent or negligent as the documents in question were too recent and too important to be overlooked, he held. They would have given ammunition to Dunnes' claim that the true reason for withholding consent was to regain the Dunnes outlet for redevelopment. A small number of documents may have not been discovered as a result of inadvertence but not most of them. On the basis of these and other findings, the judge granted a declaration that Dunnes is entitled to use the ground floor of its premises as a high-quality food/grocery hall.