Highland & Universal Properties Ltd v Safeway Properties Ltd

Factual and Procedural Background

The pursuers and respondents, landlords since February 1994, owned a shopping centre in The City, formerly Wester Hailes Shopping Centre and renamed Westside Plaza in October 1996. The defenders and reclaimers became tenants of Store Number 1, the largest unit in the centre, in 1974, operating a supermarket business under the name Presto. In 1979, a formal Sub-lease was entered into between the defenders and the pursuers' predecessors, with an expiry date of 24 March 2009.

The Sub-lease contained clauses obliging the defenders to keep the premises open for retail trade of goods typically sold in a high class retail store during normal business hours. Over time, the shopping centre experienced a decline in trade and appearance, leading to public investment and refurbishment beginning in the early 1990s.

In 1995, the defenders decided for commercial reasons to cease trading from the premises, announcing their intention publicly and proceeding without notifying the pursuers. The pursuers raised legal action, obtaining interim orders requiring the defenders to keep the store open. The defenders challenged the enforceability and specificity of the relevant lease clauses and contended that the court should exercise discretion to refuse specific implement.

The Lord Ordinary found in favour of the pursuers, declaring the defenders bound to keep the store open under the terms of the Sub-lease and rejecting the defenders' arguments for refusing specific implement. The defenders appealed, raising questions about the competency and discretion of the court to grant specific implement orders in such circumstances.

Legal Issues Presented

1. Whether it is competent under Scots law for a court to grant a decree of specific implement requiring a party to carry on business over a period of time.
2. Whether the particular lease clause obliging the defenders to keep the store open is sufficiently certain and precise to found a decree of specific implement or is void for uncertainty.
3. Whether, even if competent and sufficiently certain, the court should exercise its discretion to refuse specific implement on grounds that it would be inconvenient or unjust to grant such a remedy.

Arguments of the Parties

Defenders' Arguments

• The obligation to keep the store open is too unspecific and vague, rendering the relevant lease clause void for uncertainty.
• As a matter of Scots law, it is not competent for the court to grant an order requiring a party to carry on a business continuously over a period, as opposed to requiring specific acts or results.
• The court should, in the exercise of its discretion, almost invariably refuse to grant such orders due to practical difficulties including the need for constant court supervision, uncertainty in compliance, and potential undue burden on the defenders.
• Reliance was placed on English case law, notably Co-operative Insurance Society Limited v. Argyll Stores (Holdings) Limited, to highlight practical and policy reasons against granting such orders.

Pursuers' Arguments

• Under Scots law, unlike English law, a party generally has a legal right to enforce contractual obligations by specific implement, subject only to limited, well-established exceptions which do not include obligations to carry on business.
• The relevant lease clause, when properly construed in context, is sufficiently certain and precise to support a decree of specific implement.
• The court’s discretion to refuse specific implement is to be exercised only in exceptional cases with very cogent reasons, such as when enforcement would be inconvenient, unjust, or cause disproportionate hardship.
• Recent Scottish authorities support the competence of such orders and demonstrate that practical difficulties feared by defenders have not materialised in practice.
• The obligation to keep the premises open is critical to the pursuers’ investment and damages would not be an adequate remedy.
• The defenders’ construction of the lease clause was misconceived; the phrase "trade specified" in the Sub-lease should be understood as permitting the sale of any goods sold in a high class retail store, not all goods.
• The phrase "normal hours of business" refers to the tenant’s established hours, which can be determined by evidence and are not meaningless.
• The court should adopt a pragmatic and commercially realistic approach in interpreting and enforcing "keep open" clauses.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by reviewing the historical and legal background of specific implement as a remedy under Scots law, affirming the fundamental distinction from English law whereby specific implement is generally a legal right rather than a discretionary equitable remedy. The court emphasized the long-standing principle that the creditor may elect to seek specific implement or damages, with the court’s discretion to refuse specific implement being rare and requiring very cogent reasons grounded in injustice or inconvenience.

The defenders’ argument that it is incompetent for the court to grant specific implement orders requiring a party to carry on business over time was rejected. The court found no general rule of incompetence in Scots law and noted that prior authorities, including recent cases, support the competence of such orders. The court distinguished obiter comments in earlier cases and underscored the practical experience of effective enforcement without undue difficulty.

Regarding the specificity of the lease clause, the court undertook a detailed construction exercise. It rejected the defenders’ literal and overly broad interpretation of the clause as meaningless and found the clause sufficiently certain when read in context. The phrase "trade specified" was interpreted as permitting the sale of any goods sold in a high class retail store, consistent with subclause prohibitions. The court acknowledged some difficulty with the term "normal hours of business" but concluded that it was capable of ascertainment by reference to the tenant’s established trading hours or the retail trade generally, thus providing sufficient precision.

The court also addressed practical concerns raised about enforcement, such as the need for court supervision and potential penal consequences. It found these concerns exaggerated in the Scottish context, where enforcement procedures require proof of deliberate defiance and where experience showed that such decrees were generally complied with without extensive litigation.

Finally, the court considered the exercise of discretion to refuse specific implement and found no basis for doing so in the present case. The defenders failed to demonstrate that enforcement would cause disproportionate hardship or injustice. The economic importance of the defenders’ continued trading to the pursuers’ investment and the inadequacy of damages as a remedy weighed heavily in favour of granting specific implement.

Holding and Implications

The court’s final decision was to allow the reclaiming motion, but only to the limited extent of clarifying the terms of the order regarding "normal hours of business". The court held that:

It is competent under Scots law to grant a decree of specific implement requiring a party to carry on business over a period of time, provided the terms of the obligation are sufficiently certain and precise.

The lease clause in question is not void for uncertainty and is sufficiently precise to support a decree of specific implement, when construed in context.

The court’s discretion to refuse specific implement is exceptional and was not properly exercised in this case, as no cogent reasons of inconvenience or injustice were established.

As a result, the defenders remain bound to keep the store open according to the terms of the Sub-lease and the order of specific implement granted by the Lord Ordinary is upheld with minor modification for clarity.

No new precedent was established beyond the reaffirmation of settled Scots law principles. The decision underscores the distinctiveness of Scots law in granting specific implement as a legal right and confirms the practical enforceability of "keep open" clauses in commercial leases.