Lease – Supermarket – Lessee in breach of keep open covenant – Plaintiff claiming specific performance – Judge ordering damages – Court of Appeal ordering specific performance – House of Lords restoring order of judge
The defendant’s Safeway supermarket was the largest shop in the Hillsborough Shopping Centre, Sheffield. It was leased to the defendant by the plaintiff. The lease restricted its use to the sale, inter alia, of food and, by clause 4(19), required it to be kept open for retail trade during usual business hours. In 1995, the defendant, following a review of its operations, decided to close at once those supermarkets which were losing money. In April the defendant gave notice to the plaintiff of its intention to close the Hillsborough Safeway. The plaintiff wrote at once to the defendant protesting at the short period of notice and the immediate impact the closure would have upon the shopping centre, pointing to the keep open covenant and inviting Safeway to agree to continue trading until a suitable assignee had been found, and offering a temporary rent concession. The recipient of the letter had been made redundant and the plaintiff received no reply. On May 6 1995 Safeway was closed and stripped of fixtures and fittings.
The plaintiffs issued a writ claiming specific performance of the keep open covenant. The defendants admitted the breach and consented to an order for damages to be assessed. The judge refused to order specific performance stating that there was a long-standing practice not to make orders requiring a defendant to run a business. He said, inter alia, that (i) such an order was difficult to enforce, (2) where a business was being run at a loss, specific relief would be “too far reaching and beyond the scope of control which the court should seek to impose”, (3) a resumption of business would be expensive and although the defendant had acted in breach of covenant knowingly, it had done so in the light of the settled practice of the court to award damages, and (4) while assessment of damages might be difficult, it was the kind of exercise the courts had done in the past. The Court of Appeal allowed the plaintiff’s appeal and granted an order for specific performance. The defendant appealed to the House of Lords.
Held The appeal was allowed.
1. It was the settled practice of the court never to grant mandatory injunctions requiring persons to carry on business: see Braddon Towers Ltd vInternational Stores Ltd [1987] 1 EGLR 209.The practice was not entirely dependant upon damages being an adequate remedy. There were established principles founded upon practical considerations which the court in the exercise of its discretion would apply and the reasons which the judge had given were proper matters for him to have taken into account.
2. The reasons given for difficulty of supervision applied with greater force to orders for specific performance, giving rise to the possibility of committal for contempt, than to conditions for relief against forfeiture. Observations of Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] AC 691 at p724 explained.
3. The obligation in clause 4(19) was not sufficiently precise to be capable of specific performance.
Peter W Smith QC and Paul Chaisty (instructed by BKJ Lewis, of Manchester) appeared for the Co-op; Jonathan Gaunt QC and Martin Seaward (instructed by Titmuss Sainer Dechert) appeared for Argyll.