Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LEGGATT,LORD JUSTICE ROCH,LORD JUSTICE MILLETT |
| Judgment Date | 21 December 1995 |
| Judgment citation (vLex) | [1995] EWCA Civ J1221-4 |
| Docket Number | CHANI 95/1247/B |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 1995 |
[1995] EWCA Civ J1221-4
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(His Honour Judge Maddocks)
Before: Lord Justice Leggatt Lord Justice Roch Lord Justice Millett
CHANI 95/1247/B
MR P SMITH QC with MR P CHAISTY (Instructed by Messrs BKJ Lewis, Manchester, M60 0AL) appeared on behalf of the Appellant
MR J GAUNT QC with MR M SEAWARD (Instructed by Messrs THG Bamford & Co, Middlesex, UB3 4AY) appeared on behalf of the Respondent
Thursday, 21 December 1995
LORD JUSTICE LEGGATT
The Judgment appealed from
The plaintiffs Co-operative Insurance Society Ltd appeal by leave of the judge from the order of Judge Maddocks Q.C. sitting at Manchester as an additional judge of the Chancery Division. On 31st July 1995 he gave summary judgment for the plaintiffs for damages to be assessed, but refused an order for specific performance against the defendants Argyll Stores (Holdings) Ltd ('Argyll') requiring them to keep open one of their supermarkets for the remainder of the term of the lease.
The property in question comprises 30% of the total letting area of the Hillsborough Shopping Centre. It is let to Argyll for use as one of their Safeway supermarkets. It is the anchor unit in the shopping centre and plays a key role. The lease is for a term of 35 years from 4th August 1979 with periodic rent reviews. The current rent is £140,000 a year. The lease contains a covenant -
"Not to use or suffer to be used the demised premises other than as a retail store for the sale of food, groceries, provisions and goods…."
Another covenant requires the tenant -
"To keep the demised premises open for retail trade during the usual hours of business in the locality and the display windows properly dressed in a suitable manner, in keeping with a good class parade of shops…."
Until May 1995 the store was open for trading. But in its last trading year it made a loss of £70,300. So Argyll decided to sell it together with 26 of their other supermarkets. That decision was made well knowing of the 'keep open' covenant. When the landlords learned of the intention to close, their regional surveyor Mr Wightman wrote to Argyll a letter of 8th May 1995 in which he said that he did not wish to pursue legal remedies, but asked Argyll to keep the supermarket open for trading until an assignee had been found. He offered the prospect of a temporary rent concession and asked for an immediate response. There was none. Instead on 19th May 1995 the shop was stripped out. It would cost £1M to reinstate.
On 11th May a letter before action was written, and that was followed by the issue of a specially indorsed writ on 22nd May 1995. The plaintiffs then proceeded by way of summary judgment. Before the judge they expressed their willingness to consent to a suspension for three months of any order that might be made, in order to allow a prospective assignment to Kwiksave to be concluded. Their anxiety was to prevent a prolonged closure, because that would have a disturbing effect on the whole shopping centre, and would lead to fewer customers coming to the centre with resultant reduction in the level of rents at renewal. The plaintiffs' freehold reversion would thus be adversely affected as well as the trade of their tenants.
The judge referred to the general practice of the Court as being that damages rather than an injunction or specific performance are usually the appropriate remedy for any breach of a keep open covenant. He cited Braddon Towers Ltd v International Stores (1987) 1 EGLR 209, followed in a later case by a Circuit judge sitting in the High Court. He briefly reviewed the present law, saying that difficulty of supervision is a useful and sensible test to apply, that the sanction of committal may prove inadequate when the court makes an order for the carrying on of a business, that the court cannot enforce such a requirement without, in effect, imposing "some form of slavery", and that if it ordered the store to be re-opened it could not dictate the quality or scale of the business. The reasons which the judge gave for concluding that damages were the appropriate remedy I shall consider later in this judgment.
Felicitously expressed by Slade L.J. in this case is the state of authority in 1979, which has not changed materially since. 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 landlords applied for an interlocutory mandatory injunction. A clear statement of the law was to be found in Dowty v Wolverhampton Corporation [1971] 1 W.L.R. 204 in which Pennycuick J. rejected an application for an injunction to compel the maintenance of an airfield as a going concern. He remarked that that would involve continuing acts of management, including the upkeep of runways and buildings, the employment of staff, and in effect the carrying on of a business. He added at page 211 -
"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."
That case reproduced the effect of Hooper v Brodrick (1840) 11 Sim. 47 and Attorney General v Colchester Corporation [1955] 2 Q.B. 207. In the first case the Vice-Chancellor dissolved an ex parte injunction enforcing a positive covenant to use and keep open demised premises during the term as an inn. The inn had proved to be a losing concern and the court declined to order the lessee to carry on the business of an innkeeper. In the second of those cases Lord Goddard C.J. refused an injunction compelling a ferry owner to continue to run a ferry which had become a losing concern, saying that an injunction would not be granted in such circumstances enjoining a person to carry on a business. None of these cases analysed the reasons for the court's reluctance to grant a mandatory injunction.
In Braddon Towers counsel submitted that it was due (1) to the Court's unwillingness to supervise the doing of continuous, successive acts, and (2) to the fact that the terms of a mandatory injunction must be clear and definite. In the present case the requirement to keep open for retail trade during usual business hours and in keeping with a good class parade of shops was quite intelligible to the respondents, while they were carrying on business there. By reference to that standard and without descending to excessive detail the Court would be well able to tell the respondents what is expected of them. If the premises are to be run as a business, it cannot be in the respondents' interest to run it half-heartedly or inefficiently, still less in a way that involves the appellants in continual recourse to the Court. Conversely, as Slade J. said at page 213 -
"I am not persuaded that … 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."
In Powell v DuffrynSteam Coal Co v Taff Vale Railway Co (1874) 9 Ch. App. 331 James L.J., with whom Mellish L.J. agreed, said at page 335 -
"The plaintiffs fail only because of the difficulty in the way this court's enforcing such a right —a difficulty which to my mind is insuperable."
The modern position has however been stated by Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] A.C. 691 as follows:
"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."
The House of Lords was in effect adopting the view of Magarry J. in C.H. Giles & Co v Morris [1972] 1 W.L.R. 307 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. He added that -
"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 put before the court."
Slade J. referred also to a judgment of his own in which he had remarked 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."
Finally, he quoted from the forceful judgment of Bacon V-C in Greene v West Cheshire Railway Co (1870) 13 Eq. 44 in which he ordered specific performance of an agreement to construct and maintain a siding alongside a railway line upon land belonging to the plaintiffs. He rejected the argument that a court of equity should refrain from granting relief and leave it to the plaintiffs to recover damages at law. At page 51 he characterised with contumely the defendant's attitude:
"I can, but I will not...
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