Principle by which breach of a negative covenant is restrained in equity almost as of right does not apply in full force to applications for interlocutory relief–Injunction pending trial to restrain use of Harlow meat warehouse for ‘freezer centre’ suspended for three months to allow for reorganisation of defendants’ business
This was an
application for an interlocutory injunction by Harlow Development Corporation,
plaintiffs in an action against Cox Bros (Butchers) Ltd, of River Way, Harlow,
for breach of the covenants contained in a lease of April 10 1972.
Mr G A
Lightman (instructed by Wedlake Bell, agents for the corporation solicitor)
appeared for the applicants, and Mr G M Godfrey QC and Miss E Gloster
(instructed by Jay, Benning & Solomon) represented the respondents.
Giving
judgment, GOFF J said that the action was one for breach of a user covenant
which read as follows:
‘To use the
demised premises only for a wholesale warehouse within the meaning of Class X
of the Town and Country Planning Act (Use Classes) Order 1963 and for the
curing of bacon, cooking of hams and production of sausages PROVIDED THAT in
particular but without prejudice to the generality of the foregoing such user
shall be conducted in such a manner that there shall be no breach of subclause
(II) hereof AND PROVIDED ALSO THAT all necessary licences and consents shall be
obtained for any of the foregoing activities.’
In April 1972
the defendants caused to be built on the premises a substantial building of
which 10,000 sq ft were constructed as an area where their goods could be
deposited, stored and processed pending sale, and an adjoining, although
separate, 4,000 sq ft were specially constructed for use as a ‘freezer centre’
for the sale of frozen meat and other frozen foods. It appeared from the
defendants’ evidence that since July 1972 they had been using that 4,000 sq ft
exclusively for the purposes last mentioned. The plaintiffs said that such user
was user for retail sales and was accordingly a breach of covenant, and for the
purposes of the motion that was admitted by the defendants. It followed that in
considering what, if any, relief he ought to grant, he (his Lordship) had to
consider the defendants as being in the position in which they would have stood
had they argued the construction of the covenant before him and failed. The
plaintiffs said that the breach was a breach of a negative covenant, and that
although what they were seeking at this stage was interlocutory and not
perpetual relief, the classic obiter dictum of Lord Cairns in Doherty
v Allman (1878) 3 App Cas 709 at 720 ought to be applied. The principle
of that dictum was that once a breach of a negative covenant was established, a
court of equity had nothing to do but to say by injunction that which the
parties had already said for themselves by covenant, namely that the prohibited
thing should not be done, and accordingly an injunction became almost as of
course and could be resisted only if special circumstances were shown.
In Hampstead
& Suburban Properties Ltd v Diomedous [1969] 1 Ch 248 Megarry J
decided that the dictum did apply to interlocutory proceedings. He said in
conclusion of his observations on that point:
‘I see no
reason for allowing a covenantor who stands in clear breach of an express
prohibition to have a holiday from the enforcement of his obligations until the
trial. It may be there is no direct authority on this point; certainly none has
been cited. If so, it is high time that there was such an authority; and now
there is.’
But in Texaco
Ltd v Mulberry Filling Station Ltd [1972] 1 WLR 814 at 830, the late
Ungoed-Thomas J declined to accept that view. He concluded his observations by
saying:
‘So my
conclusion is that the principle of Doherty v Allman does not
apply to interlocutory injunctions.’
It was true
that in that case there were questions of fact affecting the validity of the
covenants, whereas in the former case the attack on the covenant appeared to
have been one of law–the proposition that it was too uncertain. But there the
two categorically opposite statements remained. For his part, he (his Lordship)
did not think that the dictum could be applied in its full force in an
interlocutory matter, particularly having regard to the strong views recently
pronounced by the Court of Appeal in the case of Hubbard v Vosper
[1974] 1 All ER 1023 as to the necessity of preserving the flexibility of the
discretion in equity in dealing with interlocutory applications for an
injunction. At the same time, in following that direction one should consider
all the circumstances; the fact that one had got a negative covenant, a breach
of which was admitted as far as the motion was concerned, must be an important
factor to be weighed in favour of a plaintiff who said, ‘Stop, now, and not
when the matter comes to trial.’
The defendants
said that even so he (his Lordship) ought not to grant an injunction, but
should stand the matter over until trial, or that the motion should be stood
over with the liberty to restore when the decision of the Secretary of State
for the Environment on their planning application for change
should be suspended for a reasonable time to enable them to close down or
reorganise the retail freezer side of their business. They said that there had
been long delay on the part of the plaintiffs, and they urged that as a reason
why relief should not be granted. They further said that they hoped, at the
trial, to make out some case of acquiescence which would disentitle the
plaintiffs to relief, but in weighing the force of that, even at this stage, he
(Goff J) had to bear in mind that when it got to trial, if a breach of the
negative covenant were established, the defendants would be faced with Doherty
v Allman and would have to make out something very special as an answer
to an injunction. The facts as to the planning application were that Harlow
Council had given approval for the proposed change of use, but because of the
plaintiffs’ opposition had been unable to decide the matter, which had been
referred to the Secretary of State for the Environment. Even if the Secretary
of State confirmed the planning decision, that would not bind the plaintiffs,
because while it would be conclusive so far as planning approval was concerned,
it would not override the right of the plaintiffs as landlords to insist on the
performance of the covenants in the lease. As far as the delay point was
concerned, he (his Lordship) had reached the conclusion that there was not
sufficient force in the defendants’ arguments for him to refuse interlocutory
relief on this ground. A letter of September 20 1974 showed that the plaintiffs
intended, when they knew the Secretary of State’s decision, to consider what
they should do. The letter did not say this about the defendants’ application
alone, but about their actions generally, and added that the plaintiffs would
have to consider other leases in the town and the relations between their
tenants. The defendants’ final point was that the court ought not to grant an
injunction which would stop their business, and then possibly, in the end, have
a perhaps absurd result, in that the Secretary of State might say yes to
planning approval and the plaintiffs go along with it and agree to the use of
the premises in the way the defendants wished, but by that time the business
would have been brought to a halt. In answer to this, the plaintiffs said that
whatever the Secretary of State said regarding the difference of opinion
between them and the planning authority, they had the right and duty to
consider the matter as landlords, and as the development corporation
controlling the new town as a whole they could not be directed to consent to a
change of use. While they would review the position in the light of what the Secretary
of State said, they insisted in the meantime that the covenants in the lease
should be observed. Taking all the circumstances into account, and remembering
that there was for the purposes of the motion an admitted breach of covenant,
his (Goff J’s) conclusion was that there should be interlocutory relief, but
that the injunction restraining the defendants from using the relevant part of
their business for retail sales should be suspended for three months to give
them time to reorganise their operations.
