Scottish Court of Session Decisions

[1] The pursuers and the defenders are respectively the landlords and the tenants of a shop unit in the Wellgate Centre, Dundee ("the Leased Premises" or "the shop"). In this action the pursuers seek to enforce the obligations undertaken by the defenders under a "keep open" clause in the Lease. The summons contains five conclusions for declarator, a conclusion for interdict and interim interdict, and a conclusion for decree of specific implement and an interim order under section 47(2) of the Court of Session Act 1988.

[2] The case first came before me on 6 June 2001 on the pursuers' motion for interim orders. The hearing was continued until 8 June, and on that date I pronounced an interlocutor granting inter alia interdict ad interim and an interim order under section 47(2).

[3] Thereafter the defenders re-opened the shop and resumed trading from it in accordance with the user clause in the Lease and in compliance with the keep open clause. At the preliminary hearing on 31 July I was given to understand that negotiations were proceeding between the parties, and I continued the preliminary hearing until 8 October without further order. When the case called on 8 October the parties presented to me a draft of a permanent order for specific implement ("the proposed final order"), in terms somewhat different from those of the seventh conclusion of the summons (as those terms had been amended on 8 June). The proposed final order contained a proviso relating to the eventuality of the shop being sub-let. The parties were in agreement in principle that a permanent order should be pronounced, but the pursuers contended that it should not contain the proviso, whereas the defenders contended that it should. It was apparent that discussion of the issue between the parties would require more time than was available on that date, and the matter was continued until 12 October. On that date the issue was fully debated.

[4] The Lease was entered into between the pursuers and the defenders under their former name of Scottish Hydro-Electric plc, was dated 20 July and 8 August 1994, was registered in the Books of Council and Session on 16 August 1994, and is No. 6/1 of process. The duration of the Lease was from 30 August 1993 to 29 August 2018 (Clause (SECOND) 1). Approximately seventeen years of its twenty-five year term accordingly remain.

[5] The Tenants' Obligations are set out in Part IV of the Schedule to the Lease (see Clause (FIRST) (A) (xiv)). Clause 13 of Part IV of the Schedule is in inter alia the following terms:

Clause 28 of Part IV of the Schedule is in inter alia the following terms:

The Regulations (defined in Clause (FIRST) (A) (xv)) are set out in the Appendix to Part IV of the Schedule. Regulation 5 is in the following terms:

The expression "Trading Hours" is defined in Clause (FIRST) (A) (xxii) of the Lease as meaning:

[6] Clause 30 of Part IV of the Schedule to the Lease contains inter alia the following further Tenants' Obligations:

[7] The part of the proposed final order which is acceptable to both parties is in the following terms:

I understand that in so far as the Trading Hours specified in the proposed final order differ from those mentioned in the Lease, they reflect modifications properly made by the Landlords in accordance with the provisions of the Lease. There is no dispute between the parties that in any final order the Trading Hours should be specified in the way set out in the proposed final order.

[8] The proviso which the defenders seek to have inserted in the proposed final order is in the following terms:

[9] The position adopted on behalf of the defenders by Mr Cormack was that they were willing to submit to a final order in terms of the proposed final order including the proviso. On the other hand he resisted the making of a final order in the terms proposed by the pursuers, namely in terms of the proposed final order, omitting the proviso. He advanced two submissions in support of that position. First, he maintained that a final order in the terms proposed by the pursuers would not accurately reflect the defenders' obligations under the Lease. Secondly, he submitted that, if his first submission was wrong, the court should nevertheless, as an exercise of discretion, refuse to make a final order in the terms proposed by the pursuers.

[10] In brief, Mr Cormack's first submission was that, on the occurrence of a lawful sub-letting of the Leased Premises and for the duration of the sub-lease, the defenders would cease to be themselves obliged to comply with the user clause (clause 13 of Part IV of the Schedule to the Lease) and the keep open clause (Regulation 5), and would instead be obliged, in terms of clause 30(g) of Part IV of the Schedule of the Lease, to enforce performance by their sub-tenant of the corresponding obligations which would, in compliance with clause 30(d)(i) of Part IV of the Schedule, have been incorporated in the sub-lease. That was no more than due recognition of the fact that, once the Leased Premises were lawfully sub-let, the defenders would, with the consent of the pursuers, no longer be in actual occupation of the shop, and therefore no longer in a position themselves to comply with the user and keep open clauses. A final order expressed in terms that bore to compel the defenders themselves to comply with the user and keep open clauses during the currency of a lawful sub-letting of the Leased Premises would therefore demand of the defenders more than was required by the terms of the Lease, properly construed. It was inappropriate that such an order should be pronounced.

[11] In developing that submission Mr Cormack put forward the following propositions:

1. Breach of a court order is itself a very serious matter, quite independently of any penalties that might be imposed (Highland and Universal Properties Ltd v Safeway Properties Ltd 2000 SC 297 per Lord President Rodger at 302F; Retail Parks Investments Ltd v The Royal Bank of Scotland plc (No. 2) 1996 SC 227 per Lord McCluskey at 240).
2. An order for specific implement should not innovate upon the terms of the contract, although the court has power to make its order in terms which are more restricted or more particularised than those of the contractual obligation (Retail Parks, per Lord Cullen at 245; Co-operative Insurance Society Ltd v Halfords Ltd 1998 SC 212, per Lord Penrose at 226H-227A).
3. An order for specific implement must be precise, so as to make the defenders aware of what is required of them (Retail Parks, per Lord McCluskey at 240 and Lord Kirkwood at 252; Highland and Universal, per Lord President Rodger at 302G and 303F).
4. A party will not be ordered to do the impossible, or that which is outwith his power (Highland and Universal, per Lord President Rodger at 299G and Lord Kingarth at 310B; Moore v Paterson (1881) 9 R 337, per Lord Shand at 351).

[12] In the light of those propositions, Mr Cormack submitted that the pursuers were not entitled to a final order in the terms they sought. The proposed final order bore to ordain the defenders to keep the Leased Premises open for normal trading purposes during the specified Trading Hours. So long as a sub-tenant was in occupation of the Leased Premises in pursuance of a sub-lease granted in accordance with Clause 30(d) of Part IV of the Schedule to the Lease, the defenders were not in a position to occupy them, and therefore could not themselves fulfil the keep open obligation. In those circumstances, on a proper construction of the Lease, the defenders were not bound themselves to obtemper the keep open clause during the subsistence of a lawful sub-lease. They were obliged to take their sub-tenant bound to observe the keep open clause (Clause 30(d)(i)) and to enforce compliance by the sub-tenant with that obligation (Clause 30(g)), but the existence of those ancillary obligations reinforced the soundness of the proposition that the keep open clause in the Lease had no application to the defenders themselves during a sub-lease. In these circumstances it was inappropriate to order the defenders themselves to keep the Leased Premises open during the currency of a lawful sub-lease.

2. Discretion

[13] Mr Cormack's alternative submission took as its starting point the proposition that the court has, in limited circumstances, a discretion to refuse to order specific implement. He supported that proposition by reference to the opinion of the Lord President in Highland and Universal at 299E-300D. His Lordship there quoted part of the speech of Lord Watson in Stewart v Kennedy (1890) 17 R (HL) 1 at 9-10, including the following passage:

After referring to a number of other authorities dealing with the court's discretion to refuse specific implement, the Lord President went on (at 300C) to say:

(See also per Lord Kingarth at 311-312).

[14] Mr Cormack listed the circumstances on which he founded for the purpose of invoking the court's discretion to refuse specific implement in this case.

1. At present the defenders were not in continuing breach of the keep open clause, and they did not dispute that that clause was in general enforceable by specific implement.
2. Sub-letting of the shop was a possible course of action which the defenders had in mind.
3. Such sub-letting can only occur with the consent of the pursuers (Clause 30(a) of Part IV of the Schedule to the Lease), and they may require the insertion in the sub-lease of such conditions as they choose (Clause 30(d)(i)).
4. It would be unjust to the defenders to pronounce an order that would have the effect that they were automatically in breach of it if their sub-tenant closed the shop, even without their knowledge. Although they would not be punished for contempt of court if they were not guilty of deliberate defiance of the order (Highland and Universal, per Lord President Rodger at 302F), the mere fact of being in breach of a court order was nevertheless an important matter (see paragraph [11](1) above).
5. If an order were pronounced in terms that did not apply during a sub-tenancy, the pursuers would not be without an appropriate remedy against the defenders in the event of breach of the keep open clause in the sub-lease by the sub-tenant. In that situation the pursuers would be entitled to take proceedings against the defenders to compel them to fulfil their enforcement obligation under Clause 30(g).

In those circumstances, Mr Cormack submitted, it would be unjust to make the order sought by the pursuers.

[15] Mr Maclean for the pursuers submitted that the proposed final order, without the proviso proposed by the defenders, accurately reflected the defenders' obligations under the Lease. He further submitted that the circumstances did not justify the withholding of an order for specific implement on discretionary grounds. He therefore invited me to make a final order in terms of the proposed final order under deletion of the proviso.

2. The Scope of the Tenant's Keep Open Obligation

[16] Mr Maclean submitted that the granting of a sub-lease had no effect on the subsistence of the tenant's obligations under the lease. In support of that proposition he cited Halliday, Conveyancing Law and Practice, second edition, Vol. 2, paragraph 46-23, where, in the context of the legal effect of sub-letting, the view is expressed that:

"As between the landlord and the principal tenant the latter remains liable for all his obligations under the principal lease".

Similarly, Rankine on Leases, third edition, 195, contains the following passage:

"A sublease has not the effect of discharging the lessee from liability to the lessor, nor the lessor from liability to the lessee, since the original contract continues in full force, and cannot be altered by the operation of the sublease".

Mr Maclean submitted that it followed that the keep open clause, like any other obligation incumbent on the tenant, remained in full force and effect during the subsistence of any sub-lease. It could not be correct that (to adopt the language used in the defenders' proposed proviso) the granting of a sub-lease caused the keep open clause to "cease to apply to the Leased Premises". The sub-lease might be for a duration less than the unexpired term of the lease, and plainly the keep open clause would bind the tenant after the expiry of the sub-lease. The existence of ancillary provisions to secure that any sub-tenant was taken bound by the same conditions as bound the tenant under the Lease (Clause 30(d)(i)) and obliging the tenant to enforce those conditions against his sub-tenant (Clause 30(g)) did not mean that the tenant was freed of his own obligations under the keep open clause during the currency of the sub-lease. It could be seen from the terms of the order granted in Retail Parks (see the fourth conclusion quoted in the report of the proceedings in the Outer House, 1996 SLT 52 at 53G-H) that there was no exception made in that case for the event of a sub-letting. The correct view was that the defenders remained bound by the keep open clause during the subsistence of any sub-lease. The defenders' primary ground for resisting the making of a final order in the terms proposed by the pursuers was therefore unsound.

3. Discretion

[17] Mr Maclean accepted that as a matter of law the court has a discretion to decline to grant an order for specific implement in exceptional circumstances. He submitted, however, that in the circumstances of this case the making of a final order was required, and should not be refused as a matter of discretion. He reminded me of the history of the defenders' non-compliance with the keep open clause. It originally came to the pursuers' attention in November 2000 that the defenders intended to cease trading from the shop. A letter was written on 28 November 2000 (No. 6/3 of process) pointing out that for them to do so would constitute a contravention of the keep open clause, and seeking an undertaking that they would not cease to trade during the currency of the Lease. By letter dated 18 January 2001 (No. 6/4 of process) the defenders replied indicating that they were closing the shop for refurbishment from 27 January to 19 February, and stating that they would continue to trade in compliance with the terms of the Lease until termination "or until such time as an assignation or sub-let can be agreed in terms of the Lease". The shop was closed and re-opened as proposed in that letter. Thereafter by letter dated 28 May (No. 6/5 of process), in contravention of the statement in the letter of 18 January, the defenders intimated that they were going to close the shop on 31 May. That letter prompted the pursuers to raise this action and seek the interim orders which I granted on 8 June. In those circumstances, there was no justification for refusing a final order as a matter of discretion.

[18] As I understand the parties' positions in this case, there is no dispute that in light of the history of breach of the keep open clause on the part of the defenders, and the fact that they accept that that clause is binding in general terms upon them and specifically enforceable against them, it is appropriate that a final order of specific implement should be pronounced. The only dispute is as to the proper scope of the order. I do not understand it to be disputed that the court cannot grant specific implement in terms more onerous than the underlying contractual obligation. The primary issue therefore comes to be whether the proposed final order in the form argued for by the pursuers purports to bind the defenders in circumstances in which they would not be bound by the contractual obligation.

[19] The defenders argue that the proposed final order, unless qualified by the proviso for which they contend, would oblige them to obtemper the keep open clause during the subsistence of a lawful sub-lease, whereas the Lease, properly construed, does not so bind them. I shall leave aside for the moment consideration of the actual terms of the proposed final order, and confine my attention to whether on a sound construction of the Lease the defenders are obliged themselves to keep the shop open during the subsistence of a lawful sub-lease. I accept without hesitation Mr Maclean's submission that the granting of a sub-lease does not bring the contract of lease to an end, or sever the contractual relationship between the landlord and the tenant. That simply reflects the fundamental distinction between sub-letting and assignation of the tenant's interest in the Lease. But it does not seem to me to exclude the possibility that, on a sound construction of an obligation imposed on the tenant by the Lease, the content of the obligation varies according to whether, on the one hand, the tenant is in actual occupation or, on the other hand, there is a sub-tenancy in subsistence. The point may be illustrated by reference to the tenant's obligation to occupy the subjects of let. In the Lease in the present case that obligation is to be found in Clause 5 of Part IV of the Schedule. It is not expressly qualified in any way in relation to any period during which the Leased Premises are lawfully sub-let. Yet it seems to me to be inescapable that during the subsistence of the sub-lease the sub-tenant will occupy the Leased Premises to the exclusion of the tenant. It would, in my view, make no sense to say that, by virtue of allowing his sub-tenant to succeed him for the time being in the occupation of the Leased Subjects, the tenant was failing to obtemper his obligation under Clause 5. On the contrary, occupation by the sub-tenant rather than the tenant is what the landlord, in consenting to the sub-lease, must have had in contemplation. There is thus, it seems to me, an implied qualification of the express obligation to occupy, and it would in my view be wrong to pronounce a court order compelling the tenant to occupy the subjects of let for the duration of the lease, without expressing a qualification excusing occupation during the subsistence of a lawful sub-lease.

[20] In my opinion the same reasoning applies to the keep open clause. So long as a sub-tenant is in occupation of the Leased Premises in pursuance of a lawful sub-lease, it seems to me that the tenant cannot be personally obliged to obtemper the keep open clause. Only the party in actual occupation can keep the premises open for trade. That point seems to me to be recognised in the terms of the Lease. The keep open clause is contained in the Regulations (regulation 5). It is not expressed as something that the tenant must do, but rather in the abstract as something that must be done. Obligatory force is given to the Regulations by Clause 28 of Part IV of the Schedule to the Lease. Clause 28 does not simply impose on the tenant an obligation to comply with the Regulations. It is expressed in a more complicated form:

It therefore seems to me to contemplate two possibilities, namely (i) a situation in which the obligation is on the tenant to observe the requirements of the Regulations, and (ii) a situation in which the tenant's obligation is the indirect one of procuring observation of the Regulations by his sub-tenant. It seems to me that it is in further recognition of the same point that the Lease contains provisions obliging the tenant (a) to include a corresponding keep open clause in the sub-lease (Clause 30(b)(i) of Part IV of the Schedule), and (b) to enforce the terms of any sub-lease (Clause 30(g)). The landlord can ensure compliance with the first of those obligations by virtue of the requirement that he consent to the sub-lease. By enforcing the second obligation against the tenant, the landlord can indirectly enforce the keep open clause against the sub-tenant. The provision of those indirect means of enabling the landlord to ensure that a sub-tenant adheres to the substance of the keep open clause seem to me to reinforce the conclusion that the effect of Clause 28 and Regulation 5, read together, is not to place on the tenant an unqualified obligation to keep the shop open at all times and in all circumstances throughout the duration of the Lease, but rather to require the tenant to do so only so long as he is (or ought to be) in actual occupation. In my view, on a sound construction of the Lease as a whole, the tenant's obligation, so long as there is a lawful sub-lease in subsistence, is to procure observance of the keep open clause by his sub-tenant. The separate obligations imposed on the tenant under Clause 30(d)(i) and (g) provide the machinery by which the landlord may hold the tenant to that modified obligation. On that view of the construction of the Lease it would, in my view, be demanding more of the defenders than they are contractually obliged to do to subject them to an order which required them in unqualified terms to keep the shop open.

[21] I turn now to the terms of the proposed final order to see if it would indeed impose too onerous an obligation on the defenders. If it were pronounced without the proviso contended for by the defenders, it would ordain the defenders, until the expiry or lawful determination or assignation of the Lease, or until the defenders "otherwise [ceased] to be bound to comply with the provisions ... [of] clauses 5 and 13 of Part IV of the Schedule to the Lease and Regulation 5 of the Regulations" to keep the shop open for normal trading purposes during the Trading Hours as defined. Without the proviso it would contain no exception applicable during the subsistence of a lawful sub-lease. In the course of the debate I raised with counsel the possibility that the passage which I have just quoted might serve as a sufficient qualification of the defenders' obligation under the proposed final order to bring it into conformity with the contractual obligation. On reflection, however, I do not consider that it could be regarded as doing so. On the view which I have taken of the proper construction of the Lease, it is not the case that during the subsistence of a sub-lease the defenders cease to be bound by Regulation 5. Rather they remain bound by that regulation, but in a different way. Their obligation becomes to procure the sub-tenant's observation of the Regulation, rather than to observe it themselves. To express the matter in the way the part of the proposed final order which I have just quoted would do would not in my opinion express with sufficient clarity the nature and extent of the defenders' obligations during the subsistence of a sub-lease. In my view an order upon the defenders to keep the shop open during Trading Hours, without an express qualification relating to any period during which a lawful sub-lease was in subsistence, would overstate the defenders' contractual obligations, and would on that account be inappropriate.

[22] It follows, in my opinion, that I should not pronounce a final order in the terms proposed by the pursuers. Although the defenders have expressed their willingness to be made subject to an order in the terms they propose, i.e. with the addition of the proviso quoted in paragraph [8] above, I do not consider that I can pronounce a final order except on the motion of the pursuers. It is therefore for them to consider whether they wish to renew their motion for a final order in a modified form.

[23] I should add some observations on the form of the proviso. It does not seem to me to be in wholly appropriate terms to reflect the view I have taken of the extent of the defenders' obligations. In particular, it provides that the order shall "cease to apply" on the occurrence of a lawful subletting. That seems to me to go too far. In my view the defenders' personal obligation to keep the shop open would revive on the termination of the sub-lease. I do not think that the defenders dispute that, but the form of the proviso does not make it clear. Moreover, although I recognise that the need to cater for partial sub-letting as well as a sub-lease of the whole Leased Premises makes for a complicated provision, it seems to me that further thought might devise a qualification that might be introduced in the body of the order (along with the reference to expiry, determination or assignation) rather than as a proviso at the end.

[24] I have reached the foregoing conclusion as a matter of construction of the obligations placed on the defenders in terms of the Lease. It is therefore unnecessary for me to address Mr Cormack's alternative submission based on my discretion to refuse specific implement. I do not consider that in the circumstances it is appropriate for me to express any hypothetical views on that aspect of the submissions.

[25] For the reasons which I have set out I am of opinion that it is not appropriate for me to pronounce the final order sought by the pursuers. I shall do no more at this stage than put the case out By Order to afford the pursuers an opportunity to reconsider their position, and if so advised reformulate their motion for a final order.