Woolworths, Harris Farm lock horns in court over shop in Sydney's Double Bay shopping centre

Woolworths and Harris Farm are locked in a battle for a prime retail shop lease at a $110 million Kiaora Lane development in Sydney's Double Bay.

Woolworths is in the NSW Supreme Court seeking orders against organic grocer About Life and Harris Farm, saying it had the first right of refusal over About Life's retail lease, according to The Australian Financial Review. 

Family-owned grocer Harris Farm says Woolworths is engaging in anti-competitive practices by entering into leases that gives the supermarket giant the first right of refusal.

In 2009, Woolworths gave an undertaking to the Australian Competition and Consumer Commission it would not enter into new leases that gives Woolworths a first or last right of refusal in relation to additional supermarket space in a shopping centre where Woolworths had its store.

In 2014, Woolworths signed a 30-year lease with About Life where the latter granted Woolworths a "first right of refusal to retail" the retail shop if it wished to transfer the lease to a third party.

Harris Farm bought the About Life store in the Double Bay retail precinct in April for $10 million and About Life agreed to transfer the lease to Harris Farm. 

The bone of contention is the ‘first right of refusal’ in the lease, with Woolworths saying the deal cannot proceed because Woolworths says the lease rules were breached.

The Kiaora Lane Double Bay precinct was developed by Woolworths and Woollahra Council in a $110 million joint venture.

It has a Woolworths supermarket and a Dan Murphy liquor store, which is part of the Woolworths group.

In his opening submission, Woolworths' barrister Matthew Darke, SC, said the object of the agreement between About Life and Harris Farm was for Harris Farm to occupy the retail premises in Double Bay because following the sale, Harris Farm was to demolish the shop's fitout and dispose of the equipment.

Darke said About Life breached the lease because it did not first offer Woolworths the right to take over the lease on the same commercial terms as Harris Farm.

Woolworths director of property Ralph Kemmler told the court the first right of refusal was added to secure its right over the site.

"It was a valuable piece of real estate... and we wanted the ability to go back to that piece of real estate," he said.

When asked by Harris Farm's barrister Peter Wood, Kemmler said large scale supermarkets such as Woolworths face strong competition from specialist retailers for food and grocery sales.

When Darke asked co-CEO of Harris Farm, Angus Harris, whether it is "not seeking to be a supermarket at all", Harris told the court while Harris Farm advertises itself as a "market" as part of a marketing strategy but it remains a supermarket that competes in the grocery space.

"We know we're a supermarket but we're like going to the market."

The hearing continues.