Landlord and tenant — Whether court was precluded in the present state of the law from granting a mandatory injunction compelling someone to carry on a business — Defendant tenants had covenanted to keep premises intended to be used as a supermarket open at all normal times as a first-class shop, with a display window suitably and attractively placed and to use their utmost endeavours to develop, improve and extend the business and not to do or suffer anything to injure the goodwill — The venture proved to be unprofitable and the defendants decided, in deliberate breach of their covenant, and without prior consultation with the plaintiffs, to close the supermarket — The present proceedings by the landlords sought interlocutory relief by notice of motion, asking for an injunction until judgment in the action, which had been commenced by writ claiming remedies of a permanent nature — The notice of motion sought an injunction restraining the defendants from ceasing to operate the premises as a supermarket and from opening another supermarket in the area; also requiring the defendants to keep open the premises as a first-class supermarket during business hours until the trial of the action or further order (This last relief was the one sought at the hearing) — Slade J said that so far as merits were concerned there was no criticism of the plaintiff landlords, but the defendants’ attitude was unattractive — The question, however, was whether, having regard to the present state of the authorities, the court could grant the plaintiffs the interlocutory relief they sought — The weight of authority was that an injunction would not be granted to compel someone to carry on a business and a reason frequently given was the impossibility for the courts to supervise the performance of the order — In some recent judgments there were indications of a change of attitude, but there was as yet no decision where the court had granted such an injunction — For many years practitioners had advised their clients that it was the settled and invariable practice of the court never to grant mandatory injunctions requiring persons to carry on a business ¾ There was no real prospect of the trial judge in the present case being persuaded to depart from the practice — That was the decisive reason why, ‘reluctantly’, an injunction could not be granted on the present interlocutory application
The following
cases are referred to in this report.
Attorney-General v Colchester Corporation [1955] 2 QB 207; [1955] 2 WLR 913;
[1955] 2 All ER 124; (1955) 53 LGR 415
Attorney-General v Staffordshire County Council [1905] 1 Ch 336
Blackett v Bates (1865) 1 Ch App 117
Dowty
Boulton Paul Ltd v Wolverhampton Corporation
[1971] 1 WLR 204; [1971] 2 All ER 277; (1971) 69 LGR 192
Giles
(CH) & Co Ltd v Morris [1972] 1 WLR 307;
[1972] 1 All ER 960
Gravesham
Borough Council v British Railways Board
[1978] Ch 379; [1978] 3 WLR 494; [1978] 3 All ER 853; (1977) 76 LGR 202
Greene v West Cheshire Railway Co (1871) LR 13 Eq 44
Hooper v Brodrick (1840) 11 Sim 47
Jeune v Queens Cross Properties Ltd [1974] 1 Ch 97; [1973] 3 WLR
378; [1973] 3 All ER 97; (1973) 26 P&CR 98; [1973] EGD 976; 228 EG 143
Powell
Duffryn Steam Coal Co v Taff Vale Railway Co
(1874) LR 9 Ch 331
Ryan v Mutual Tontine Westminster Chambers Association [1893] 1
Ch 116
Shepherd
Homes Ltd v Sandham [1971] Ch 340; [1970] 3
WLR 348; [1970] 3 All ER 402; (1970) 21 P&CR 863; [1970] EGD 583; 215 EG
580
Shiloh
Spinners Ltd v Harding [1973] AC 691; [1973]
2 WLR 28; [1973] 1 All ER 90; (1973) 25 P&CR 48, HL
Editor’s
note: It will be noted that the judgment of Slade J (as he then was) in this
case was given on March 28 1979. The case has hitherto been unreported. The
decision to report it, despite the lapse of time, was influenced by the
reference to it in F W Woolworth plc v
Charlwood Alliance Properties Ltd, a decision of Judge Finlay QC sitting as
a High Court judge, reported at [1987] 1 EGLR 53; (1987) 282 EG 585. Judge
Finlay pointed out that he was dealing with a covenant of substantially the
same character as the covenant in the Braddon Towers case to keep the
demised premises open as a department store or shop — Judge Finlay, like Slade
J, decided reluctantly that, in the present state of the authorities, he could
not grant an injunction by way of, in effect, an order of specific performance
to carry on a business. The relevant authorities are considered in some detail
in Slade J’s judgment.
This was a
notice of motion by Braddon Towers Ltd, the landlords, seeking interlocutory
relief by way of injunction, in an action against tenants, International Stores
Ltd, in relation to premises in the Vincent Park Shopping Centre, Peel Drive,
Vincent Park Estate, Sittingbourne, Kent. The centre consisted of a
supermarket, the subject of the present dispute, and three smaller retail
units, all built by the plaintiffs in 1969 and 1970. The action and the
interlocutory motion arose out of the closing of the supermarket in January
1979.
Ronald
Bernstein QC and Jonathan Gaunt (instructed by Berwin Leighton) appeared on
behalf of the plaintiffs; Gerald Godfrey QC and T Lloyd (instructed by Kenneth
Brown Baker Baker) represented the defendants.
Giving
judgment, SLADE J said: This is an interlocutory motion by which extraordinary
relief is sought in somewhat unusual circumstances. The plaintiffs in the
action, the applicants in the motion, are a company called Braddon Towers Ltd,
which is a subsidiary company of Allied London Properties Ltd. The defendants
in the action and respondents to the motion are a company, International Stores
Ltd, which possesses very large financial resources. According to the
defendants’ unchallenged evidence, they have a paid-up capital of £15,758,318
and an annual turnover of about £500 million. Another company within the
International Stores Group, called Pricerite Ltd, will feature in the history
of this matter, though it is not a party to the proceedings.
The relief
sought by the notice of motion, according to its terms, is an order that the
defendants be restrained by injunction until judgment in the action or further
order from
(a) ceasing to operate the premises identified in
paragraph 1 of the Statement of Claim herein as a first class supermarket; and
(b) opening in Sittingbourne another supermarket or other retail shop selling
goods of the same kinds as have been sold in the said premises; and for a
further Order that the Defendants do (if necessary) reopen and keep open the
said premises as a first class supermarket during the normal business hours of
the locality until the trial of this action or further Order.
Mr Bernstein
on behalf of the plaintiffs, however, has indicated that in the events which have
happened he does not seek relief in the terms of paras (a) and (b) of the
notice of motion. He asks for relief
recognises that the court, if it were to grant relief, might think it
appropriate or necessary to depart from the precise wording of the injunction
sought.
While quite a
large amount of evidence has been filed on both sides in the application, there
is remarkably little dispute as to fact. The premises referred to in the notice
of motion are comprised in an area known as the Vincent Park Shopping Centre,
Peel Drive, the Vincent Park Estate, Sittingbourne, Kent. The centre consists
of a supermarket, which is the property there referred to, and three smaller
retail units. It was built by the plaintiffs in 1969 and 1970 to serve the
Vincent Park Estate, which is a residential area on the outskirts of
Sittingbourne, where 400 new homes have recently been erected by an associated
company of the plaintiffs, Sterling Homes Ltd.
The shopping
area in question is somewhat isolated, in the sense that it is not situated in
a shopping street, and, apart from the three shops which I have mentioned,
there are no other shops in the immediate vicinity.
The evidence
of the plaintiffs’ managing director, Mr Leigh, is that since the viability of
the whole centre, if and when built, was going to depend on obtaining a tenant
for the proposed supermarket, they obtained a tenant before they began the
building operation. This tenant was called Granville Supermarkets Ltd (which I
will call ‘Granville’). Its decision to proceed with the building, according to
Mr Leigh’s evidence, was substantially influenced by the readiness of Granville
to take a 21-year lease of the supermarket and to give positive covenants to
keep the supermarket open as a supermarket and develop its trade.
The lease of
the supermarket was executed by the plaintiffs in favour of Granville on August
10 1970. It was for a term of 21 years and provided for an annual rental of £2,500.
There was, however, provision for rent reviews after seven and 14 years and the
rent has, I understand, now been increased.
Clause 2(3) of
the lease imposed wide repairing obligations on the lessee. Clause 2(8) and
2(9) contained covenants by the lessee which are particularly relevant for
present purposes. They read:
(8) Not to use or permit or suffer to be used the
demised premises or any part thereof for any illegal or immoral purposes nor
for the carrying on of any offensive noisy or dangerous trade business
manufacture or occupation . . . and not without the written consent of the
Lessor (such consent not to be unreasonably withheld) to use the building of
the demised premises otherwise than as a retail shop for the carrying on the
trade of a supermarket with liberty to sell intoxicating liquor for consumption
off the premises.
(9) At all times of the year during the normal
business hours of the locality except when the demised premises shall be closed
for alterations or upon a change of occupier to keep the shop open as a
first-class shop and at all times to keep the shop or display window suitably
and attractively dressed and to use the utmost endeavours to develop improve
and extend the said business and not to do or permit or suffer to be done anything
which may injure the goodwill of the said business and or any other businesses
carried on in the Centre.
Clause
2(20)(b) contained a covenant on the part of the tenant:
Not to assign
the whole or charge underlet or part with possession or occupation or share the
occupation of the whole or any part of the demised premises without the prior
consent in writing of the Lessor.
There followed
three provisos, one of which was that, on the granting by the lessor of such
consent, every assignment should contain a covenant by the assignee directly
with the lessor to observe and perform the covenants and conditions contained
in the lease, including the provisions of subclause (20). Clause 4(1) of the
lease contained a provision for re-entry on breach, in common form.
In April 1972
Granville applied for consent to assign the property to the defendants. It was
one item in a package deal, by which the defendants acquired a number of
supermarkets in Granville. The defendants suggested that they should be
permitted to occupy this particular supermarket for a trial period of 18
months, pending completion of the assignment, upon terms that they should be
responsible for the tenant’s obligations only during that limited period in the
event of the assignment not proceeding. This trial period, it would appear, had
been suggested on behalf of the defendants, because they had doubts as to the
profitability of carrying on a supermarket business on these premises, having
regard to their previous trading record.
The
plaintiffs, however, would not agree to this suggestion of a trial period, and
insisted, as they were entitled to insist, under clause 2(20) of the lease, on
the defendants’ entering into a direct covenant with them to observe and
perform the tenant’s covenants for the whole of the residue of the term.
The defendants
in due course accepted this requirement, and a deed of licence was executed on
November 12 1973, by clause 2 of which the defendants entered into such a
covenant with the plaintiffs in consideration of the licence being granted for
the assignment to them of the term. The assignment was not completed until May
2 1974. It appears from their own evidence that the defendants occupied and
traded from the premises before the assignment was completed, but I do not
think anything turns on this fact.
After taking
possession, the defendants ran the premises for a number of years as a
supermarket. The three shops in the centre are let respectively, as to shop 1,
to a Mr R N Kelly, a baker; as to shop 2, to a Mr and Mrs Mountford, as
newsagents; and as to shop 3, to a Mr and Mrs Bridges, as greengrocers. The
plaintiffs are still the landlords of all these various premises. Since the
centre is not in a shopping street or shopping area, the fortunes of the three
smaller shops naturally depend substantially on the continued presence in the
centre of a supermarket.
Mrs Bridges,
Mr Mountford and Mr Kelly’s wife have all sworn affidavits deposing to the fact
that the decision to take a lease of the respective shops was influenced by,
among other things, the combination of shops in a block which included a
well-known store supermarket, which it was thought would attract shoppers to
this rather isolated shopping centre.
For some years
the defendants ran the supermarket as an International Stores shop. In an
affidavit sworn on their behalf by a Mr Evans, a retail executive director of
Pricerite Ltd, he said that the shop showed a profit in the year to September
1977 of £11,000, but in the following year it made a loss of £9,000. This
trading loss, he said, was ‘unacceptable’, and the defendants were considering
closing the shop in the summer of 1978 at a time when its gross receipts were
£2,200 to £2,300 per week. It was decided, however, that the shop be changed in
character and run by Pricerite Ltd on a different basis, in the hope of
increasing its trade. Whereas International Stores shops stock a large number
of different lines, Pricerite shops, according to Mr Evans’ evidence, are
designed to increase profit margins by stocking a more limited range of goods.
The change to
a Pricerite shop in the summer of 1978, however, did not bring about the hoped
for increase in receipts, which rose only to a weekly average of £2,500. By the
end of November a forecast was made of the store’s likely trading results,
which showed a prospective loss of £4,000 for the year to September 1979; and
it was thought that thereafter things would get worse. In the light of these
figures (I quote from Mr Evans’ affidavit) ‘Pricerite Ltd took the decision that
the shop should be closed, and that the date for closure should be shortly
after Christmas.’
To anyone who
was aware of the terms of the lease, it must have been obvious that such a
closure, if and when it occurred, would involve a serious breach of clause 2(9)
of the lease. The defendants’ evidence on this motion gives no further
particulars of the precise date on which or the manner in which this decision
to close the supermarket was taken. It has not, however, been suggested in
their evidence that the persons who took the decision on their behalf were
ignorant of their obligations to the plaintiffs under the lease; and indeed it
would be surprising if an important decision of this kind had been taken by a
large commercial company entirely without reference to the terms of the lease
affecting the relevant premises.
It must,
furthermore, have been obvious to anyone who knew of the locality that closure
of the supermarket, besides constituting a breach of the terms of the lease,
would be likely to cause serious potential financial loss and anxiety both to
the plaintiffs themselves and to the tenants of the adjacent shops. The
defendants, however, took no steps to notify either the plaintiffs or these
other tenants of the impending closure. However, on the evidence before me,
until January 9 1979 they took no steps whatever to attempt to mitigate the
loss to the other interested parties by finding a suitable assignee or
sublessee of the premises, who would be prepared to carry on a supermarket
business and to move in more or less as soon as they themselves vacated the
premises. All they did was simply to make their own arrangements for closure,
for example by giving notice to the staff employed there. No public
announcement of the impending closure was made until a notice was put up in the
shop on December 28 1978 announcing the impending closure on Saturday, January
13 1979.
On January 3
1979 the plaintiffs learned for the first time of this
only three persons. Mr Walker, the plaintiff company’s secretary, immediately
telephoned Miss Edwards, in the defendant’s legal department. On January 4 the
plaintiffs’ solicitors caused a letter to be delivered by hand to Miss Edwards,
referring to the notice and to the fact that any closure would be a breach of
the terms of the lease. They asked for confirmation that the premises would not
be closed and that the defendants would cease to exhibit the notice.
Even if,
therefore, for any reason as yet unexplained, the relevant provisions of the
lease had not before January 4 1979 been drawn to the attention of the persons
principally concerned with the matter in the defendants’ offices, there seems
no doubt that they would have known of them shortly after that date.
Nevertheless, it would appear, the deliberate decision was taken to go ahead
with the closure, in breach of the terms of the lease.
On January 8
Mr Leigh spoke on the telephone to a Mr Deakin, a director of the defendants,
to whom he had been referred by another director, Mr Muir. Mr Leigh’s account
of this conversation, as given in an affidavit, is as follows:
Mr Deakin
said that he knew of the decision to close the supermarket but also claimed to
be unaware of the covenant requiring the supermarket to be kept open. He
promised to ring me back that afternoon after consulting his legal department,
but did not do so. I told him that if the defendants did close down the
premises on January 13 that it would be the plaintiffs’ intention to take proceedings
for an injunction, to which he replied, ‘It seems to my devious mind that it
might be possible to leave a couple of girls in the shop just selling a few
packets of cigarettes a day.’ Upon my
pointing out how damaging that would be both to the supermarket business and to
the adjoining traders, he said that he quite understood.
In an
affidavit in answer sworn by Mr Deakin, he says that the substance of what Mr
Leigh says about this telephone conversation is correct. He adds:
I was in fact
unaware of the covenant in the lease requiring the supermarket to be kept open
but I was well aware of the losses being incurred. I pointed out to Mr Leigh
that we were trading at a loss and could not be expected to carry on doing so.
This comment
was made, as I understand the evidence, after — not before — the existence of
the covenants had been brought to Mr Deakin’s attention.
On January 9 a
further letter was sent by the plaintiffs’ solicitors to the defendants’
solicitors saying that, since no reply to their letter of January 4 had been
received, they were instructed to issue proceedings. Also on January 9, no
doubt stimulated by the mounting pressure from the plaintiffs, the defendants,
apparently for the first time, put the premises in the hands of estate agents,
Ward & Partners, of Chatham. These instructions were to offer the premises
on the market on the basis of a sale of the leasehold interest with fixtures
and fittings.
Looking ahead
for one moment, Ward & Partners in due course did find a potential
purchaser for the premises, a Mr Patel, but he withdrew in February. The
defendants then verbally instructed other agents, J Trevor & Sons, in
addition to Ward & Partners, to find a purchaser. At the moment, however,
so far as the evidence shows, there is no other potential purchaser or tenant
in sight.
On January 11
letters were delivered to the joint managing directors of the defendants from
Mr Leigh, enclosing copies of the plaintiffs’ solicitors’ letter of January 9.
They did not reply to Mr Leigh. On Saturday, January 13, the defendants opened
the supermarket for the last time. They did not reopen it on Monday 15 and have
never reopened it since. It has remained vacant and unoccupied since that time.
Meantime, a Pricerite shop remains open in Sittingbourne High Street which,
under present circumstances, is being spared the measure of competition that it
would presumably face if a supermarket under another management were reopened
at the Centre, though it is fair to say that Mr Godfrey, on behalf of the
defendants, tells me on instructions that the two premises are situated about
two miles away from one another.
From January
15 onwards, it appears to me on the evidence clear that the defendants were in
deliberate and conscious breach of each and every limb of clause 2(9) of the
lease. They were not keeping the shop open as a shop during the normal business
hours of the locality; they were not keeping the shop or display window
suitably and attractively dressed; they were not using their utmost endeavours,
or any endeavours at all, to develop, improve and extend the business; they
were doing something which might injure both the goodwill of the business and
of the other businesses carried on in the centre.
Against this
background, the writ in the present action was issued promptly on January 15
itself, seeking relief of a permanent nature, substantially in terms similar to
those of the notice of motion, which I have already read. The plaintiffs do not
seek forfeiture of the lease, and there is no reason why they should be
expected to do so.
On the same
day, January 15 1979, the notice of motion was issued. Though he has reserved
his position at the trial, Mr Godfrey on behalf of the defendants has not
sought to argue before me that they have not been continuously in breach of
clause 2(9) of the lease since January 15. Nor has he sought to suggest that
the covenants contained in clauses 2(8) and 2(9) of the lease are anything
other than valid covenants.
At least for
the purposes of the present motion, therefore, the plaintiffs have established
not merely a triable issue on the question of liability; at present they have
established what seems to be clear liability on the part of the defendants. The
only question is what remedy, if any, should be afforded to the plaintiffs
pending the trial of the action. While the plaintiffs would, I understand, be
content that this motion should be treated as the trial of the action, the
defendants are not so content.
The reasons
why the plaintiffs seek interlocutory relief of the nature mentioned in the
notice of motion are readily understandable. First, the closure of the
supermarket is likely to cause a substantial diminution in the value of the
plaintiffs’ interests both in the supermarket premises themselves and in the
reversions of the adjacent shops which are comprised in the centre. It is also
likely to cause them embarrassment and injury to their reputation, in a manner
which could not be compensated by an award of damages at the trial. The longer
the period continues during which the supermarket is left empty and is not used
for its intended purpose, the more difficult it will probably be to relet the
premises. Furthermore, any substantial period of vacancy might seriously impair
the trade of the plaintiffs’ other three tenants and in the end force them out
of business and leave their shops unlettable. This could not only render the
plaintiffs’ reversionary interests in the supermarket and shops very difficult
to market but it could seriously damage their reputation as developers and
landlords in the eyes of potential tenants.
The plaintiffs
and their sister company have developed many other residential areas involving
shopping centres in the Home Counties over the last 25 years and intend to
continue doing so. A disintegration such as is now in the process of occurring
in the Sittingbourne Centre can only do harm to their reputation while it
continues. Though it is suggested in the defendants’ evidence that these
anxieties of the plaintiffs are somewhat exaggerated, they are to a
considerable extent borne out not only by evidence from Mr Leigh but also by
evidence in the affidavits sworn by Mrs Bridges, Mr Mountford and Mrs Kelly.
The first two say that they will be reducing their hours of opening, since the
expense of opening at certain stated supermarket hours will henceforth exceed
any compensating benefit. All state their belief that, as a result of the
closure of the supermarket, trade at the centre will decline and it will become
increasingly difficult to make a living comparable with that enjoyed over the
past years of business.
The plaintiffs
have indeed now received a written request from Mr Bridges that he be released
from his tenancy, due to financial losses following the closure of the supermarket.
They have felt obliged to refuse this request, but the position for them is
clearly an embarrassing one.
On this
present application they may fairly be said to be fighting a battle not only on
their own behalf but on behalf of the tenants of the three shops and the many
members of the public who wish to see the supermarket kept open. The
plaintiffs, at about the end of January, received a petition headed ‘Petition
for Grocery Shop’ signed by a large number of residents in the shopping centre
area, I think about 200. If the plaintiffs’ battle is unsuccessful there must
be a substantial risk of damage to their reputation in the eyes of tenants and
local inhabitants, who may not realise how hard they have fought it. For all
these reasons, I accept Mr Bernstein’s submission that, if interlocutory relief
is refused at the present stage, the plaintiffs are likely to suffer
irreversible damage, some of which will not be capable of being adequately
compensated by a monetary award at the trial.
Mr Bernstein
has made it clear that his clients’ object in bringing the action, in launching
the present motion, is not necessarily to compel the defendants themselves to
continue trading in the supermarket for the whole of the residue of the term of
the lease, which expires in 1991. All they do wish to do is to ensure that a
supermarket business continues to be conducted on the premises by respectable
and responsible persons, be they the defendants or other persons, for the
residue of that term. If the interim injunction sought were now granted against
the defendants, and the defendants were to make really strenuous efforts to
find a new tenant or assignee for the supermarket who was prepared to carry on
the supermarket business, it might well be that such a person would emerge
before the trial and thus render the grant of a more permanent injunction then
unnecessary.
Even though
one particular potential tenant, Mr Patel, has dropped out of the running,
there is as yet no evidence that it will never be possible to find a tenant who
will be prepared to take on the obligation of the lease, including clauses 2
(8) and (9), either as assignee or sublessee. Though there is evidence that the
defendants believe that they themselves cannot fulfil these obligations except
at a financial loss, there is no evidence that shows that other persons,
arranging their staffing and so forth in a different manner, might not be able
to make a profit out of the shop. Such evidence, of course, may emerge at the
trial and, if it did, would doubtless weigh with the court, in so far as it
regarded itself as having discretion to grant or withhold the relief by way of
injunction.
In the
meantime, in Mr Bernstein’s submission, the balance of convenience heavily
favours an order compelling the defendants to fulfil their obligations under
clauses 2 (8) and 2 (9).
So far as
merits have anything whatever to do with the present matter, I know of no
possible criticism that can justifiably be made of the plaintiffs. On the other
hand, I confess that I find the defendants’ attitude an unattractive one. They
undertook their obligations under the lease with their eyes open and, after
negotiation, expressly contracted with the plaintiffs to observe them. They now
commit a serious continuing breach of the covenants under clause 2(9) without
any apparent consideration for the plaintiffs or the other occupants of the
shopping centre. So complete has been their disregard of the plaintiffs that
they failed both to give them any advance notice of their intentions and to make
any response whatever to their letters of protest before action.
Furthermore,
if they had chosen, they could at least have made attempts to mitigate the loss
to the plaintiffs, likely to be caused by their contemplated breach of
covenant, by making active attempts to find another tenant to take their own
place immediately they themselves vacated the premises. So far as the evidence
shows, they did nothing whatever towards this end until January 9, four days
before the intended closure, by which time they had received the plaintiffs’
letter before action.
In effect,
they now say they propose to disregard their obligations under clause 2(9) of
the lease, not because they cannot perform them, nor because they cannot afford
to perform them, but simply because they do not choose to do so. So far as the
evidence shows, they have offered not one word of excuse, apology or regret to
the plaintiffs for their deliberate flouting of these obligations. Certainly
not one word of excuse, apology or regret has been expressed by their counsel.
The only explanation offered on their behalf has been that given by Mr Deakin,
a director of the defendants, in a conversation which I have already quoted: ‘I
pointed out to Mr Leigh that we were trading at a loss and could not be expected
to carry on doing so.’ This explanation
was echoed by Mr Godfrey on behalf of the defendants, who submitted that his
clients made what he called a correct commercial decision. This so-called
correct commercial decision was no doubt made in the expectation that the court
would not grant relief by way of injunction to the plaintiffs to compel the
performance of the defendants’ contractual obligations under clauses 2 (8) and
(9) of the lease and under the licence, and after comparison of the likely cost
to the defendants of performing the covenants with the probable award of
damages to be made against them in the event of their breach. If this is the
standard by which the defendants measure the correctness of all their
commercial decisions, I have some sympathy for the persons who find themselves
doing business with them.
The principal
question for this court, however, is not whether the defendants have behaved in
a shabby manner. It is whether Mr Godfrey is correct in submitting that, on the
present state of the law, the court is precluded from granting a mandatory
injunction compelling someone to carry on a business. I have reluctantly been
driven by him to the conclusion that, at least so far as this court of first
instance is concerned, this submission is correct.
In Hooper
v Brodrick (1840) 11 Sim 47 a lessee had entered into a positive
covenant to use and keep open the demised premises during the term as an inn.
The inn proved to be a losing concern and the defendant threatened to break the
covenant. The landlord obtained ex parte an injunction restraining him inter
alia from discontinuing during the term and to use and keep open the
demised premises as an inn. Sir Lancelot Shadwell V-C dissolved the injunction,
saying (at p 49 of the report):
The court
ought not to have restrained the defendant from discontinuing to use and keep
open the demised premises as an inn, which is the same in effect as ordering
him to carry on the business of an innkeeper.
In Attorney-General
v Colchester Corporation [1955] 2 QB 207, an attempt was made to obtain
an injunction against a ferry owner compelling him to continue to run a ferry
which had become a losing concern. Lord Goddard CJ rejected this claim, saying
(at p 217):
The duty to
maintain and work the ferry is the same whatever the circumstances of the ferry
owner. No authority has been quoted to show that an injunction will be granted
enjoining a person to carry on a business, nor can I think that one ever would
be, certainly not where the business is a losing concern.
Finally, in Dowty
Boulton Paul Ltd v Wolverhampton Corporation [1971] 1 WLR 204, the
plaintiff sought an injunction compelling the maintenance of an airfield as a
going concern, Pennycuick J, in rejecting this claim, said (at p 211):
I turn now to
consider the remedy available to the company should the corporation persevere
in its intention to appropriate this land for housing. It seems to me that the
remedy of the company must lie in damages only and that the company is not now
entitled, and will not be entitled at the hearing of the action, if it is then
otherwise successful, to any relief by way of injunction or mandatory order.
The right vested in the company necessarily involves the maintenance of the
airfield as a going concern. That involves continuing acts of management,
including the upkeep of runways and buildings, the employment of staff,
compliance with the Civil Aviation Act 1949 and so forth, that is to say, in
effect the carrying on of a business. That is nonetheless so by reason that so
far the corporation has elected to engage Don Everall Aviation Ltd to manage
the airfield on its behalf. It is very well established that the court will not
order specific performance of an obligation to carry on a business or, indeed,
any comparable series of activities.
One could not
have a much clearer statement of the law than that.
The weight of
authority against the plaintiffs is thus a formidable one. Not one example has
been cited to me of a case where the court has granted an injunction compelling
someone to carry on a business, but as I have shown, there are now at least
three decisions of first instance in which, effectively, it has been clearly
stated that such an injunction will never be granted.
It is, I
think, fair to say that none of these three decisions explored in detail the
rationale that lay behind the refusal of the courts in the past to make orders
compelling the carrying on of a business. Mr Godfrey suggested that it stemmed
from two principles, namely, that (1) the court cannot specifically enforce a
contract to do continuous successive acts, since the execution of such a
contract requires watching over and supervision by the court, which it is not
prepared to undertake: (2) it is a necessary requisite of every mandatory
injunction that it should be certain and definite in its terms.
In support of
his first principal proposition Mr Godfrey cited Ryan v Mutual
Tontine Westminster Chambers Association [1893] 1 Ch 116 and Blackett
v Bates (1865) 1 Ch App 117 (see at p 124, per Lord Cranworth). In
support of his second proposition he cited a passage from Joyce J’s judgment in
Attorney-General v Staffordshire County Council [1905] 1 Ch 336
(at p 342). As regards the latter decision, I entirely accept that, as Joyce J
said, in relation to every injunction or mandatory order
it must or
ought to be quite clear what the person against whom the injunction or order is
made is required to do or to refrain from doing
I am not,
however, wholly persuaded that an order to carry on a business would in every
case, and by its very nature, be of so uncertain a character that it could not
make it plain what the person concerned was required to do. In particular, for
all Mr Godfrey’s colourful examples of hypothetical borderline cases, I am not
convinced that the defendants in the present case would have any real,
practical difficulty in knowing what they had to do or to refrain from doing to
comply with an order of the court effectively compelling them to observe the
provisions of clauses 2(8) and 2(9) of the lease. It is not suggested that
these provisions are void for uncertainty. As Mr Bernstein pointed out, if
contempt proceedings were to be brought against the defendants alleging that
they were in breach of such an order, the burden or proof would lie fairly and
squarely on the plaintiffs, and the benefit of any doubt would be given to the
defendants. I am not persuaded that, if an order of the court were made in
terms substantially obliging the defendants to observe the provisions of
clauses 2(8) and 2(9) of the lease, and if they themselves thereafter acted in
good faith, they would have any real difficulty in knowing how to comply with
it, without risk of successful contempt proceedings. If, on the other hand,
such an order were made and they were, for example, to adopt Mr Deakin’s idea
of leaving a couple of girls in the shop just selling a few packets of
cigarettes a day, the court would no doubt be well capable of dealing with the
matter.
As regards the
asserted principle that the court will not specifically enforce a contract to
do continuous and successive acts, this is supported by a number of earlier
decisions, such as the Ryan case. Furthermore, James LJ in Powell
Duffryn Steam Coal Co v Taff Vale Railway Co (1874) 9 Ch App 331,
said in a judgment, with which Mellish LJ agreed (at p 335):
Where what is
required is not merely to restrain a party from doing an act of wrong, but to
oblige him to do some continuous act involving labour and care, the court has
never found its way to do this by injunction.
A little later
he said:
The
plaintiffs fail only because of the difficulty in the way of this court’s
enforcing such a right — a difficulty which to my mind is insuperable.
It appears,
however, from recent authorities that the court may to some extent be
abandoning this rigid differentiation between mandatory and prohibitory
injunctions of a continuing nature. Lord Wilberforce in Shiloh Spinners Ltd
v Harding [1973] AC 691, in a speech with which Viscount Dilhorne, Lord
Pearson and Lord Kilbrandon wholly agreed, said:
Where it is
necessary, and, in my opinion, right, to move away from some 19th century
authorities, is to reject as a reason against granting relief, the
impossibility for the courts to supervise the doing of work.
Megarry J in C
H Giles & Co v Morris [1972] 1 WLR 307 (at p 318) said that the
so-called rule that contracts involving the continuous performance of services
would not be specifically enforced was plainly not absolute and without
exception and that it could not be based on any narrow considerations such as
difficulties of constant supervision by the court. The logical anomaly involved
in a complete differentiation between mandatory and prohibitory injunctions of
a continuing nature appears from the following passage in his judgment (at p
318):
Mandatory
injunctions are by no means unknown, and there is normally no question of the
court having to send its officers to supervise the performance of the order of
the court. Prohibitory injunctions are common, and again there is no direct
supervision by the court. Performance of each type of injunction is normally
secured by the realisation of the person enjoined that he is liable to be
punished for contempt if evidence of his disobedience to the order is put
before the court.
In a recent
decision of my own, Gravesham Borough Council v British Railways
Board [1978] Ch 379, after a brief reference to authority, I expressed the
view obiter that it cannot now be regarded as an absolute and inflexible
rule that the court will never grant an injunction requiring a person to do a
series of acts requiring the continuous employment of persons over a number of
years, though the jurisdiction was one that would be exercised only in
exceptional circumstances.
The
willingness of the courts to grant mandatory orders in an appropriate case,
even where there is no precedent for such an order, is well illustrated by the
decision in Jeune v Queens Cross Properties Ltd [1974] 1 Ch 97,
in which Pennycuick J made an order for specific performance against a landlord
in a case where there was a plain breach of covenant to repair. He said (at p
99):
In common
sense and justice, it seems perfectly clear that this is the appropriate
relief.
This and other
recent authorities indicate that the attitude of the court to the making of
mandatory orders has to some extent been developing in recent years and that it
may nowadays be prepared to consider granting relief of this nature in
circumstances in which in the 19th century such relief would have been regarded
as unthinkable.
While none of
these recent authorities has related to the carrying on of a business, Mr
Bernstein submitted that common sense and justice required the grant of a
mandatory injunction in the present case and invited me to create a precedent
by ordering the defendants to carry on the business of a supermarket
accordingly. If I felt free to do so, I would be inclined to accept this
invitation, even though this would involve the granting of mandatory relief on
an interlocutory application.
This is a case
where the defendants, after express notice, have committed and are committing a
clear violation of an express contract and can, I think, expect little
forbearance from the court, even on an interlocutory application (compare Shepherd
Homes Ltd v Sandham [1971] 1 Ch 340 at p 347). The liability, as I
have said, does not appear to be in doubt; only the remedy is in question.
Provided that I thought that there was a good prospect of the court continuing
mandatory relief at the trial, so far as appropriate in the then circumstances,
the balance of convenience would seem to me to favour the grant rather than the
withholding of an injunction at the present stage. If it is withheld, the
plaintiffs, for reasons already explained, are in my view likely to suffer
damage, some of which cannot be compensated in terms of money at the trial. If
it were granted, so that the defendants were obliged to reconstitute the
supermarket business at the centre, and then, contrary to expectation, they
succeeded in resisting liability at the trial, they would, I think, have an
adequate remedy in damages, which could be quite easily quantified. The
plaintiffs have offered an undertaking in damages, supported by their parent
company, Allied London Properties Ltd, and the defendants’ counsel did not
suggest that such an undertaking would not have sufficient financial backing. A
mandatory injunction, if granted at the present stage, would operate only until
trial or further order and could be discharged if a subsequent change of
circumstances made it appropriate or just to do so. It might well serve the
additional useful purpose of persuading the defendants to bestir themselves
further in finding new tenants for the premises who were prepared to carry on a
supermarket.
In all the
circumstances, without the fetter of authority, I would be inclined, on the
special facts of this case, to grant an injunction broadly of the nature
sought. In the absence of other authority I would approach the case much as
Bacon V-C approached the case of Greene v West Cheshire Railway Co
(1870) 13 Eq 44 when he ordered specific performance of an agreement to
construct and maintain a siding alongside a railway line upon land belonging to
the plaintiff. As he said (at p 50):
A more
direct, wilful, and determined violation of a plain contract cannot be
suggested. No excuse is offered for it — no suggestion that it is
impracticable, or even that it is inconvenient, for the company to perform
their part of the contract of which the plaintiff has performed his; but what
they say is, that the plaintiff may, by an action at law, recover against them
in money such amount of damages as a jury may think he has sustained by their
wilful branch of their contract; and that, therefore, a court of equity will
not entertain the complaint. I do not understand that the law, as administered
in this court, countenances any such defence. If that were the law, the great
majority of the cases in which this court has exercised its authority for the
purpose of compelling specific performance of contracts might be readily
disposed of, because in the great majority of cases a payment in money might
satisfy the wrong which the breach of such contracts inflicts. But it would be
a total departure from all principles by which the administration of this
branch of the law has hitherto been guided, to hold that it is at the option of
a man who has persuaded another to part with his rights upon a specific
condition to say: ‘I can, but I will not perform the obligation I have entered
into; and instead of keeping faith and honestly fulfilling my promise, I will
leave you to take the chances of an action for damages, and reserve to myself
the power of endeavouring to defeat your claim; and, instead of acknowledging
your just rights, will compel you to receive, instead of them, such a sum as I
may be able to persuade a jury will compensate you for the loss and injury and
disappointment which my wilful wrongdoing may have occasioned to you’.
Many of
Vice-Chancellor Bacon’s observations appear to me to fit the present facts. In
the Greene case, however, he was not dealing with a covenant to carry on
a business; nor was he faced with at least three reported cases in which courts
of first instance had clearly held that the court will never grant a mandatory
injunction to compel a person to perform a covenant of the particular nature
under consideration.
Whether or not
this may be properly described as a rule of law, I do not doubt that for many
years practitioners have advised their clients that it is the settled and
invariable practice of this court never to grant mandatory injunctions
requiring persons to carry on business. In my judgment, there is no real
prospect of the trial judge in this case being persuaded to depart from the
practice, which has been endorsed and acted upon by at least three different
judges sitting at first instance; still less do I think it would be right for a
court of first instance to depart from it on an interlocutory application. The
rationale which lies behind the rule or practice may perhaps need rethinking,
at least in relation to those cases where it would be possible to define with
sufficient certainty the obligations of the person enjoined to carry on a
business. This process, however, is not an appropriate function for this court
on this present interlocutory motion.
Accordingly, I
must reluctantly decline to grant any injunction at the plaintiffs’ instance on
the present application. If they ask me to do so, however, I will give directions
for a speedy trial, since it seems to me that this is a case where it is
plainly desirable that there should be a quick resolution of the dispute
between the parties in one way or the other.
As regards the
costs of the motion, subject to any further submission of counsel, I propose
simply to direct that the costs be costs in the cause.
After
discussion the judge ordered that the costs of the motion be reserved to the
judge at the trial.
