Co-operative Insurance Society Ltd v. Argyll Stores (Holdings) Ltd

The House of Lords held that the well established discretionary practice of the courts not to grant mandatory injunctions or specific performance requiring a defendant to carry on a business remained sound. The tenant's positive covenant to "keep the demised premises open for retail trade" (clause 4(19)) was insufficiently precise and the grant of specific performance would give rise to problems of supervision, risk forcing the defendant to run a business at a loss and potential unfair enrichment of the landlord. The trial judge's refusal to order specific performance was restored; damages remained the appropriate remedy in the ordinary case.

Background and parties. The landlord, Co-operative Insurance Society Limited (respondent), sued the tenant, Argyll Stores (Holdings) Limited (appellant), for breach of a positive covenant in a lease (clause 4(19)) after Argyll closed its Safeway supermarket in the Hillsborough Shopping Centre in Sheffield. The landlord sought specific performance of the covenant to keep the premises open for retail trade and damages.

Procedural history. At first instance His Honour Judge Maddocks Q.C. (High Court) refused to order specific performance and awarded damages to be assessed. The Court of Appeal reversed and ordered specific performance. The tenant appealed to the House of Lords.

Issues for decision. (i) Whether the settled practice of not ordering specific performance to compel a defendant to carry on a business should be displaced; (ii) whether clause 4(19) was sufficiently certain and practicable to be specifically enforced; (iii) whether considerations of supervision, precision, the risk of forcing a defendant to run a losing business and potential injustice to the defendant justified refusal of specific performance.

Reasoning and conclusions. The House of Lords reviewed the equitable discretionary principles governing specific performance and affirmed the settled practice against mandatory orders to carry on a business. The court identified practical objections: the need for repeated court supervision and enforcement by contempt, imprecision of the covenant (clause 4(19) did not specify level, area or manner of trade), the risk that specific performance would force the defendant to operate at a loss thereby unjustly enriching the landlord, and the availability of damages as an alternative. The court rejected the Court of Appeal's approach that the mere intelligibility of the covenant or the likelihood of voluntary efficient operation would suffice. It restored the trial judge's exercise of discretion refusing specific performance.

Remarks on remedy scarcity. The Lords emphasised that specific performance is an exceptional equitable remedy and that the cumulative practical considerations mean that the settled practice should apply except in truly exceptional cases.

Appeal allowed. The House of Lords held that the Court of Appeal was wrong to order specific performance of the tenant's positive covenant to keep the premises open. The trial judge had correctly exercised his discretion in refusing specific performance because of the settled practice against ordering a defendant to carry on a business and for reasons of supervision, imprecision of clause 4(19), risk of causing the defendant to run at a loss and the adequacy of damages in the ordinary case.

At first instance His Honour Judge Maddocks Q.C. (High Court) refused specific performance and left damages to be assessed (trial on 1 August 1995). The Court of Appeal reversed the trial judge and ordered specific performance. The House of Lords ([1997] UKHL 17) allowed the tenant's appeal and restored the trial judge's refusal to order specific performance.