Attorney General v Grape Bay Ltd 1997 Civil Appeal No. 21

• Jurisdiction: Bermuda
• Judgment Date: 01 June 1998
• Neutral Citation: BM 1998 CA 6
• Date: 01 June 1998
• Docket Number: Civil Appeal No.21 of 1997
• Court: Court of Appeal (Bermuda)

In the Court of Appeal for Bermuda

Astwood, P.

Kempster, J.A.

Zacca, J.A.

Civil Appeal No.21 of 1997

BETWEEN:

The Attorney General

Appellant

-and-

Grape Bay Limited

Respondents

William Pearce, Q.C., Solicitor General and Lloyd Barnett for the Appellant

Mark Diel and Ronald Myers (Diel & Myers) for the Respondents

Sykes (Wessex) Ltd v Fine Fare Ltd.UNK [1967] 1 Lloyds Rep 53

Attorney General v LilleymanUNK (1964) 7 WIR 496

Attorney General v JobeELR [1984] 1 AC 689

La Compagnie Sucriere de Bel Ombre Ltee. v Government of MauritiusUNK [1995] 3 LRC 494

Societe United Docks v Government of MauritiusENR [1985] AL 585

R v Dawson (1997) 141 DLR (4th) 251

Olivier v ButtigiegELR [1967] 1 AC 115

Prohited Restaurant Act 1997

Bermuda Constitution Order 1968, s. 1, Schedule 2, s. 13

McDonald's restaurant — Franchise — Conditional agreement — Public policy — Deprivation of property without compensation

JUDGMENT

(Delivered by Astwood, P.)

KEMPSTER, J A.

On 23 December, 1995, there appeared a Notice in the Royal Gazette of the intention of certain persons (the ‘promoters’) to incorporate a local (Bermudian controlled) company, to be called Grape Bay Limited, (‘Grape Bay’) having as its principle object the acquisition from McDonald's Corporation (‘McDonald's’) of ‘all necessary permits or licenses … for the purpose of enabling the company to carry on the business of McDonald's restaurants within the islands of Bermuda …’ The intention of the promoters was to implement a conditional agreement which, following earlier discussions, had been made between McDonald's and Warner Holdings Limited (‘Warner’) on 26 October, 1992. With the consent of the Minister, of Finance Grape Bay was incorporated and registered between 19 and 21 February, 1996. The objects clause in the Memorandum of Association closely followed the terms of the earlier Notice.

A storm of protest resulted. It was and is alleged that the opening of a McDonald's outlet would be inimical to the environment, to the character and to the traditions of these islands. The concern of the Legislature for such considerations has been demonstrated to us by reference to the Advertisement Regulation Act 19 11, the Summary Offences Act 1926, the Public Healt! (Water Storage) Regulations 195 1 (made under section 25 of the Public Health Act 1949), the Motor Car Act 195 1, the Development and Planning Act 1974, the Hamilton Building Ordinance 1954 (made under section 38 of the Municipalities Act 1923), the Paget Parish Waterlot Act 1954, the Endangered Animals and Plants Act 1976, the Protection of Birds Act 1975, the Waste and Litter Control Act 1987, the Coral Reef Preserves Act 1966 and the Clean Air Act 1991.

Undeterred Grape Bay paid for one of its employees to be sent to England for training, visits to Bermuda were made by McDonald's staff and application was made for concessions at the airport. Subject to the approval of the lease by the House of Assembly (‘the House’) and legislation then before it Grape Bay's application, the only one submitted for the supply of ‘food and beverage’, was recommended to the Minister of Transport for acceptance as demonstrated by letter dated 26 June, 1996. The related lease has never been laid before the House for the necessary approval. On 17 July, 1997, Warner assigned its interest in the 1992 agreement, as from 21 February, 1996, to Grape Bay. On 27 of that month, Sir John Swan, one of the promoters, by deed guaranteed the payment of $3 million to Grape Bay on demand; such monies to be disbursed only in the operation of McDonald's restaurants.

Meanwhile on 30 April, 1996, the Prohibited Restaurant Bill had been tabled in the House. The Explanatory Memorandum read: ‘This bill seeks to restrict the operation in Bermuda of restaurants which are associated with overseas restaurants. It is felt that, regardless of questions such as whether a Bermuda restaurant is a franchise or whether the overseas entity is carrying on business in Bermuda, such restaurants detract from Bermuda's unique character’. In due course Meerabux J. was unable to find any evidence explaining the expression ‘Bermuda's unique character’. The provisions of the bill, as enacted on 4 August, 1997, are set out below. On 4 June 1996 the Minister of Finance announced a review of government policy on fast-food franchises to be carried out by a group chaired by the Ministers of Tourism, the Environment and Finance. The members of such group carried out interview over a period of three months and reported, with recommendations, on 22 November. Their conclusion that fast-food franchises should be continued was implicitly rejected by the Legislature.

Having regard to the delays in relation to the airport concession Grape Bay looked for a further or alternative site for the opening of a McDonald's outlet. On 27 July, 1997, they concluded an agreement with Sir John Swan for an option to lease premises at the comer of Victoria and Parliament Streets, in Hamilton. They had entered into a contingent agreement with the proposed manager on 25 July.

The Prohibited Restaurant Act 1997 (‘the Act’), following the definition of ‘restaurant’ but deleting the savings in the Restaurant Act 1961, is short and reads as follows:-

‘1997: No.27

THE PROHIBITED RESTAURANT ACT 1997’

WHEREAS it is expedient to make provision to restrict the operation of certain restaurants in Bermuda:

Be it enacted by The Queen's Most Excellent Majesty, by and with the advice and consent of the House of Assembly of Bermuda in accordance with the provisions of section 38 of the Constitution of Bermuda, and by the authority of the same as follows:-

Citation

• 1. This Act may be cited as The Prohibited Restaurant Act 1997.

Interpretation

• 2. In the Act, unless the context otherwise requires:

‘Exclude Date’ means 10 May 1996;

‘Prohibited Restaurant’ means'a restaurant which is operated in any manner, whether through distinctive name, design, uniforms, packaging, decoration or otherwise, which reasonably suggests a relationship with any restaurant or group of restaurants operating outside Bermuda;

‘restaurant’ means any tavern, public house or place trading for profit by provision to the public “of food or refreshment with or without entertainment.

Prohibited Restaurants

• 3. (1) Subject to subsection (2), no person shall after the commencement of this Act operate a Prohibited Restaurant in Bermuda.

• (2) Subsection (1) shall not prohibit the operation of any Prohibited Restaurant, which was being operated in Bermuda on the Excluded Date, in substantially the same manner as such Prohibited Restaurant was being operated on the Excluded Date.

• (3) Any person who contravenes the provisions of this section, and any director or officer of a company which contravenes the provisions of this section, commits an offence against this Act and shall be liable upon summary conviction to a fine of $5,000.00 or imprisonment for six months, or both such fine and imprisonment.’

The savings in the Restaurant Act 1961, are ‘restaurant … shall not be deemed to include any such accommodation when provided by a members' club or by an hotel if the same is used by, the hotel primarily for persons resident therein.’

On 11 August, 1997, Grape Bay who, unlike Kentucky Fried Chicken, Four Star Pizza and Haagan-Das Ice Cream, for example, were in no position to invoke Section 3(2), issued an Originating Summons, directed to the Attorney General, seeking a declaration that the Act should so be construed as not to interfere with its vested rights or, alternatively, that the Act was void in that it violated the company's fundamental constitutional rights under section 1 of the Constitution, being Schedule 2 to the Bermuda Constitution Order 1968, to ‘protection … from deprivation of property without compensation’, to the protection of the law and to freedom of expression and association. By section 34 the power of the Legislature to make laws for the peace, order and good government of Bermuda is subject to its provisions. An order was made, by consent, on 21 August, 1997, that certain questions should be tried with expedition as preliminary issues; all further proceedings being stayed meanwhile. It was in these terms:- ‘In relation to the applicant (Grape Bay) whether the Prohibited Restaurant Act 1997 is unconstitutional in that the true effect of the Act is to deprive the applicant of property without compensation in contravention of section 1...