Peel Land and Property (Ports No. 3) Ltd v TS Sheerness Steel Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Morgan |
| Judgment Date | 01 August 2013 |
| Neutral Citation | [2013] EWHC 2689 (Ch) |
| Docket Number | Case No: HC 12 D 02023 |
| Court | Chancery Division |
| Date | 01 August 2013 |
[2013] EWHC 2689 (Ch)
Mr. Justice Morgan
Case No: HC 12 D 02023
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
Ms. Tiffany Scott (instructed by Gordons LLP) for the Claimant
Mr. Kirk Reynolds QC (instructed by McGuireWoods London LLP) for the Defendant
The claimant is the lessor and the defendant is the lessee under two leases, granted in 1971 and 1973 respectively, later varied by a Deed of Variation entered into in 1992. This judgment concerns an application by the claimant for an injunction to restrain the defendant from removing its trade fixtures from the premises demised by the leases. The claimant says that the defendant's removal of trade fixtures will be a breach of a lessee's covenant and that the court ought to restrain that breach.
The rights and obligations of the parties have already been the subject of a trial where I was the trial judge. I handed down judgment on 14th June 2013 with Neutral Citation Number: [2013] EWHC 1658 (Ch). I held that the removal of trade fixtures would not be contrary to the relevant covenant. On that ground I dismissed the claimant's claim to a permanent injunction and I declared that the defendant was entitled to proceed as it wished. I gave the claimant permission to appeal as to the meaning and the operation of the relevant covenant.
The claimant has now appealed to the Court of Appeal. The claimant says that the High Court should grant an injunction to protect its rights pending the determination of the appeal. Indeed it has long been established that a court of first instance, having dismissed a claim to a permanent or an interim injunction, may go on to grant an interim injunction pending the determination of the matter in the Court of Appeal: see by way of an example Erinford Properties Limited v Cheshire County Council [1974] Ch 261.
As I have said, the leases in this case were granted in 1971 and 1973. For the purpose of explaining my decision on this application, the separate existence of the 1973 lease can be disregarded and I will hereafter discuss the matter on the basis that there is a single lease, the 1971 lease.
By the 1971 lease, the then lessor demised a large area of land at Sheerness for a term of 125 years from 1st September 1968. The then lessee covenanted to erect the steelworks on the land and it did so. The premises were used as a steelworks until the works were closed in January 2012 and since then the premises have not been used for any purpose.
Since 2012 the parties have engaged in more than one round of litigation and there have been various interlocutory applications. The claim which came on for trial before me raised a number of points but the principal questions were whether the plant and equipment in the steelworks consisted of chattels or fixtures and, if fixtures, whether the same were removable trade fixtures.
I dealt with those questions in some detail. I identified a number of items which were chattels belonging to the lessee which the lessee was entitled in law to remove from the premises. The rest of the disputed items were fixtures, but in relation to the vast majority of these, I held that the items were trade fixtures and under the general law the lessee had a right to sever the fixtures and to turn them into personal property which would then be owned outright by the lessee.
No party has sought permission to appeal against these conclusions. In the course of the trial, a question arose as to whether clause 2(6) of the lease, which was a covenant against certain alterations in certain circumstances, prevented the lessee, at any rate at the present time, from severing the trade fixtures from the demised premises.
The claimant initially accepted that the covenant did not have that effect. Later the claimant changed its mind, amended its pleadings and argued that severance of the trade fixtures, at any rate at the present time, would amount to a breach of covenant. I heard full argument on that point and I ruled against the claimant's contention.
Following judgment I gave the claimant permission to appeal to the Court of Appeal. I considered, in accordance with the established test, that there was a real prospect of the claimant succeeding in the Court of Appeal in establishing that the severance of trade fixtures would, at any rate at the present time, amount to a breach of clause 2(6) of the lease. The claimant has now appealed my decision in relation to clause 2(6). I am told that the Court of Appeal has indicated that the appeal will be heard in the period from 18th December 2013 to 22nd April 2014.
I now need to refer to clause 2(6) of the lease, as varied, which is in these terms:
"Not at any time during the said term to erect make or maintain or suffer to be erected made or maintained any building erection alterations or improvements nor to make or suffer to be made any change or addition whatsoever in or to the said premises save in connection with the use of the said premises for such industrial purpose as may from time to time be approved by the Lessors under clause 2(14)".
To understand the operation of clause 2(6), it is necessary to refer to clause 2(14) which is in these terms:
"Not to use or occupy the said premises other than for the purposes of steel making steel rolling and operations ancillary thereto or for such other purposes as may from time to time be approved by the Lessors (such approval not to be unreasonably withheld) and to retain the premises in the occupation of one person or one company or one group of companies each being a subsidiary of one company within the meaning of Section 143 of the Companies Act 1948 only."
On the assumption that clause 2(6) can potentially prevent the lessee from severing trade fixtures, the position would seem to be this. If the lessee wishes to sever trade fixtures in connection with the use of the premises for a permitted purpose, then the lessee has an absolute right to do so. It does not need to seek the lessor's consent. Even if the lessor might have grounds for objecting to that course, he is not in law able to prevent it.
But if the lessee wishes to sever the fixtures so as to return the buildings to cleared space ready for a future possible industrial purpose, there is an absolute prohibition on such action. That cannot be done until the lessee first identifies the intended use and obtains the lessor's consent to that use. There is no provision for the lessee to be able to apply to the lessor for consent, to clear the premises, to enable them to be marketed to a range of different industrial users, nor is there a provision that consent is not to be unreasonably withheld.
Although the claimant claimed at the trial a final injunction to restrain an alleged breach of clause 2(6) from the severance of trade fixtures, there were no submissions from either party as to whether I should or should not grant such an injunction if I were to construe clause 2(6) as the claimant asked me to.
In the course of considering my judgment following the trial, I reflected on what I should do if I reached the conclusion that severance of trade fixtures was, at any rate at the present time, a breach of clause 2(6).
My provisional view then was that in such a case I would have to permit further argument as to whether I should grant an injunction to restrain a breach of clause 2(6) and, if so, in what terms and in what circumstances or whether to award damages in lieu of an injunction or take some other course.
I considered that it might be relevant to know whether the lessor would suffer any harm as a result of the severance of the trade fixtures. What attitude should I take if the lessee was likely to be entitled to a change of use to another industrial purpose and the breach of clause 2(6) merely consisted of the lessee removing the fixtures prematurely before identifying the new use? In the light of my actual decision on clause 2(6), I did not in the end need to deal with that eventuality.
On this application for an interim injunction pending the appeal to the Court of Appeal, it has for the first time in this litigation become necessary to consider what attitude a court should adopt to the claim to an injunction to restrain a breach of clause 2(6) in the event that the court finally determined that the severance of trade fixtures would amount to a breach of that covenant.
There is a quite separate question as to what attitude a court should adopt to such a claim at a point when the court has not finally determined that the severance of trade fixtures will amount to a breach of covenant. I will leave that second question to later in this judgment.
Ms. Tiffany Scott, who appears for the claimant, submits that if the Court of Appeal concludes that the severance of trade fixtures will at any rate at the present time amount to a breach of clause 2(6), then it is inevitable that the court will grant a final injunction to prevent that breach. She relied on some of the reasoning in the House of Lords' decision in Doherty v Allman (1878) 3 App Cas 709. The headnote to the report reads as follows:
"The grant of an injunction to restrain a person from doing a particular thing is an act dependent on the discretion of the Court, and in exercising that discretion a Court of Equity will consider, among other things, whether the doing of the thing sought to be restrained must produce an injury to...
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