Agreement to grant lease — Obligation on tenant to make improvements — Landlord obliged to approve scheme — Landlord entitled to terminate agreement if work not commenced — Landlord approving one scheme — Refusing to approve a second scheme — Whether landlord entitled to injunction to enter and carry out work
The first plaintiff sold two properties in Manchester to the second plaintiff and completion took place in October 1987. The first defendant was a tenant of part of the premises, with the second defendant being the guarantor of the lease. In July 1987 it was agreed that the first plaintiff would grant the first defendant a lease subject to the completion of certain building work. An annex to the agreement set out the terms of the proposed lease and a schedule detailed the work, which involved the conversion of several properties to one trading area. By clause 2 of the agreement the work was to be done to the landlord’s approval and by clause 7 the landlord could terminate the agreement if the work was not carried out.
The landlords contended that they gave approval to a scheme of work in September 1987 and that the tenant is obliged to implement this; the tenant denies it is obliged to proceed under this scheme. It is agreed that this question is a triable issue. A second scheme proposed by the tenant in 1988 was rejected by the landlords. The plaintiffs commenced proceedings seeking a mandatory injunction to enable them to enter the property to carry out the approved scheme.
Held The motion for an interlocutory injunction was dismissed. The injunction sought by the plaintiffs, had it been granted, would have been irreversible in effect and such an order should not normally be made unless the court is very sure that it would be granted at the trial. The defendant is in possession and trading as a licensee, and by virtue of the agreement the terms of the proposed lease are to apply as if the term had been granted. The landlords’ contractual rights include clause 3.34.1 of the lease: a covenant by the tenant to allow the landlord a right to “view … repair … rebuild”; clause 3.34.2, a covenant by the tenant to make good defects for which it is liable; and clause 3.34.3 permitting the landlord to enter to do works not carried out by the tenant under clause 3.34.2. The rights in clause 3.34.1 are extraordinarily wide. It seems unlikely that the landlord could rely on these rights to exclude the tenant from possession, as would have to happen, to do the improvements. The scale of the works approved under the “September scheme” was such as not to come within the scope of the clause and the tenant could not be excluded from possession.
An order for specific performance would not be appropriate as there was a dispute about the tenant’s contractual obligation and the “September scheme” was not sufficiently detailed to be the subject of such an order.
The plaintiffs’ argument in support of their application, that damages would not be an adequate remedy, depended on the agreement between the first and second plaintiffs. Under this agreement the first plaintiff agreed that the work of improvement would be completed during 1988 and, if not, the second plaintiff was released from paying certain retention sums. But the agreement between the first and second plaintiffs was made after the original agreement with the tenant; damages would therefore be too remote. The retention provision might be a penalty and so not enforceable.
Nicholas Stewart QC (instructed by Taylor Garrett) appeared for the plaintiffs; and Robert Akenhead (instructed by Clifford Chance) appeared for the defendants.
