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Scottish Court of Session Decisions
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Cite as:  ScotCS CSIH_1, 1996 SLT 669, 1996 SC 227
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08 March 1996
|RETAIL PARKS INVESTMENTS LTD|
|THE ROYAL BANK OF SCOTLAND PLC (No 2)|
The reclaiming motion called before an Extra Division, comprising Lord McCluskey, Lord Cullen and Lord Kirkwood for a hearing on 1 and 2 February 1996 during which the pursuers sought and obtained leave to amend the fourth conclusion by deleting the references to specific hours and days of opening and substituting therefor ‘all normal business hours’.
On 2 February 1996 their Lordships made avizandum.
At advising, on 8 March 1996—
Other clauses in the lease impose obligations upon both the tenants and the landlords. The period of the lease (despite its date, 1979) was to be from 18 August 1977 until 17 August 2002. The current rent is £129,000 per annum and the lease contains provision for rent reviews. Clause sixth binds the tenants inter alia ‘not to assign, sub-let or part with possession of the whole or any part of the premises without first obtaining the written consent of the Landlords, which consent shall not be unreasonably withheld in the case of sub-tenants at any time after the said building has been fully let, but the granting or withholding of consent in all other cases shall be at the sole discretion of the Landlords and subject to such conditions as they may impose’.
When the Lord Ordinary considered the case there were six conclusions (including a conclusion for expenses). The first two were conclusions for declarator of the tenancy and of the defenders' obligation to occupy the portion of the premises let to them, respectively. The Lord Ordinary quotes conclusions 3 and 4 in the terms in which they were worded at that time. The Lord Ordinary also narrates the layout of the Sauchiehall Centre and describes the entrances to and the location within the centre of the premises let by the pursuers to the defenders. He summarises the evidence in relation to changes over the years in banking practice and also in relation to the circumstances which gave rise to the decision of the defenders to alter the use which they had been making of the premises in the 16 or so years up until March 1995. As the Lord Ordinary notes, the history of these developments in banking practice were not the subject of any real disagreement between the parties. The Lord Ordinary summarises the history of the use of the defenders' bank branch within the Sauchiehall Centre and, in particular, notes that that branch functioned from 1979 until 1995 as a traditional bank branch, providing essentially the core ‘retail’ services which characteristic of bank branches open to the public during that period, being services as described in the Lord Ordinary's opinion. He also notes that the parties before him were agreed that banking hours in such premises varied over the years; at the material time in the spring of 1995 they were those narrated in the Lord Ordinary's opinion and summarised in the fourth conclusion as ‘9.15 am to 4.45 pm, Monday to Friday (excepting public holidays)’.
In March 1995 the defenders announced that they were proposing to transfer the banking business of the Bath Street branch to a new location in Sauchiehall Street to be known as the Sauchiehall Street branch. In addition to informing the customers of the Bath Street branch of the intended move, the defenders, though not directly informing the pursuers of their intentions at that stage, put posters up in the windows of the Bath Street branch stating that the branch would be closed on 24 March 1995. The pursuers protested and raised the present action. On 24 March 1995 Lord Penrose granted interdict ad interim against the defenders from vacating or removing from the premises and also granted a decree ad interimordaining the defenders ‘(1) to use and occupy the premises as bank premises, (2) to keep the premises open for business as bank offices during all normal business hours until further order of the court’.
Lord Penrose issued an opinion explaining why he had pronounced that interlocutor; it is now reported as Retail Parks Investments Ltd v The Royal Bank of Scotland plc. His Lordship there refers to a letter dated 21 March 1995, which is also quoted in full in the opinion of Lord Coulsfield, in which the defenders' solicitors intimated to the pursuers what the defenders' future intentions were said to be in relation to the subjects. To help to illustrate the context, a passage from the opinion of Lord Coulsfield summarising the effects of that letter (at 1996 SLT, p 56H–J) may be quoted: ‘The nature of the controversy between the parties emerges very clearly from that letter. The defenders have decided that the retail banking business previously carried on at the Bath Street branch should be transferred elsewhere. That decision is a decision taken with a view to their own business interests and while the conduct of banking business has been revolutionised in the manner in which I have attempted to summarise earlier in this opinion, the transfer proposed in this case is not primarily a response to novel features of such banking business, or to new technology or new methods of carrying it out, but to a reorganisation of bank branches which still provide traditional services. The defenders, legitimately, see the rearrangement as a matter in their own business interests. The pursuers, on the other hand, see it as in their interest that there should continue to be a branch of the defenders' bank carrying on retail banking business in the premises at the centre. The issue between the parties is whether the law enables them to achieve that object.’
The Lord Ordinary concluded that what the defenders were proposing to do in the premises was not a sufficient compliance with their obligations under cl third of the lease. He considered that the only method of using the premises which the parties would have in contemplation in 1979 was the operation of a traditional bank branch providing the basic services of the operation of accounts, the receipt and transfer of money and the provision of services, information and advice by the staff directly to members of the public. He also concluded: ‘I think further that the obligation so understood is not one which is void from uncertainty or, indeed, difficult to understand.’ Upon the basis that cl third contained a valid and binding obligation, breach of which would give the pursuers the right to a remedy, he then considered whether or not the pursuers could appropriately be granted a decree ad factum praestandum in this case. Largely upon his reading of the opinions of the judges in Grosvenor Developments (Scotland) plc v Argyll Stores Ltd, he considered that he could not grant decree of specific implement expressed in general terms as, for example, an order ordaining the defenders to use the premises as bank offices. He considered that before a decree ad factum praestandum could be granted it would be essential to be able to specify in the court's order the obligations imposed by such a decree, and to do so in terms which would indicate the manner in which the services were to be provided; he considered (at p 59L) that ‘that would be especially difficult in view of the extent to which the normal manner of providing those services has changed, and may change within the currency of the lease’. He reached his conclusion with regret because, as he had indicated, the contract was a commercial contract in which the intentions of the parties could be ascertained with reasonable clarity and because the alternative to specific implement, an award of damages, might not provide the pursuers with a fully adequate remedy for the defenders' admitted breach of cl third. In the circumstances he granted decree in terms of the first two declaratory conclusions of the summons but quoad ultra assoilzied the defenders from the third, fourth and fifth conclusions.
In inviting the court to grant the reclaiming motion, counsel for the pursuers submitted that the effect of the decision in Grosvenor Developments (Scotland) plc was not such as to preclude the Lord Ordinary from granting decree for specific implement in terms of the fourth conclusion in the form in which it was before him. The real issue in Grosvenor Developments (Scotland) plc was an issue as to the competency of compelling performance of a positive obligation (at the interim stage) by a grant of interim interdict. The decision of the court on that matter was approved in Church Commissioners for England v Abbey National plc. However, each of the judges in Grosvenor Developments (Scotland) plchad gone on to make certain observations about the inappropriateness of specific implement as a remedy in a case in which, under the lease, the tenants had accepted a positive obligation to use and occupy the premises for the retail sale of all foodstuffs including groceries, butcher meat, fish, confectionery, bakery goods, fruit and vegetables and all hardware, electrical goods and non-foods, ‘as commonly sold in Supermarkets and Discount Stores and the use of part of the premises as an off-licence’. In those observations there was reference to the possibility that the tenants could be subjected to a penalty, and this consideration had led to the conclusion that a decree of specific implement should not be granted without very precise specification of what it was that the defenders were being required to do. They had also touched on the question of the court's discretion not to grant a decree ad factum praestandum, and had referred to the difficulties involved, in the circumstances of that case, in pronouncing a permanent decree, which would remain in force until 2016, ie for nearly 30 years more. They had referred to the difference between what the lease required and what the interdict sought. These observations by their Lordships, it was submitted, were all obiter in the context of an attempt by the pursuers in that case to obtain an interim interdict which did not properly reflect the terms of the obligation contained in the lease. The decision in the case did not therefore preclude the Lord Ordinary from granting the remedy sought by the pursuers and reclaimers in the present case. It was not necessary for the decision in Grosvenor Developments (Scotland) plc to be reconsidered; the decision itself was not challenged in any way in the present reclaiming motion.
In Church Commissioners for England the court had concluded that Grosvenor Developments (Scotland) plcwas properly decided in relation to the competency issue but the Lord President and others had made favourable references to the possibility of granting orders for specific implement, under reference to the provisions of the Court of Session Act 1988, secs 46 and 47. It was acknowledged that those observations were made in relation to the rights of parties and the jurisdiction of the judge at the stage when an interim remedy was being sought. Nonetheless, it was submitted that if the court could competently and appropriately grant an order for specific implement at the interim stage it could competently and properly do so at the final stage when a permanent order was sought. Counsel for the pursuers referred to the opinion of Lord Penrose of 24 March 1995 and drew attention to the terms of the court's order, ordaining the defenders ‘(1) to use and occupy the premises as bank offices; and (2) to keep the premises open for business as bank offices during all normal business hours until further order of the court’.
This was an order breach of which could have led to the imposition of a penalty. It was also submitted under reference to Lord Jauncey's observations in Grosvenor Developments (Scotland) plcabout the enforcement of an inflexible order over a period of many years, that there was a degree of flexibility in the order sought in the present case and that, in any event, it would be appropriate for the court to make an order in terms that allowed for appropriate flexibility. An interim order of the same general character had also been made by Lord Penrose in Highland and Universal Properties Ltd v Safeway Properties Ltd. In Elwood v Ravenseft Properties Ltd Lord Sutherland held that it was competent to pronounce an order for a specific course of action to be taken by the defenders in that case if that was the only way in which the contract could be performed. His Lordship had made reference to sec 1 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 and had drawn attention to the requirement for proof of ‘wilful refusal’ before the penalty of imprisonment could be imposed.
Counsel then referred to the means of enforcing a decree ad factum praestandum that were available before the coming into force of the 1940 Act. The matter was summarised in Burn-Murdoch on Interdict (1933), chap 6, in paras 197–198. In essence, it was submitted, the aggrieved party was able to seek the imprisonment of the party allegedly in breach without there being any opportunity for the court to determine whether or not there had been a true breach or otherwise to supervise the proceedings leading to imprisonment, although an opportunity to challenge the proceedings by way of suspension and/or an award of damages might arise at a later stage. The law then envisaged that a defender would be enjoined to perform his obligation within the six days of the charge. The law in relation to these procedures had, however, been changed by the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 and by sec 100 of the Debtors (Scotland) Act 1987; counsel founded upon the opinion of Lord Sutherland in relation to the effect of this legislation in Postel Properties Ltd v Miller & Santhouse plc. There, dealing with what his Lordship described as ‘the second ground upon which it was said that the action was incompetent’, Lord Sutherland had observed that a pursuer who had obtained a decree ad factum praestandum could apply to the court by minute to deal with the alleged contempt of court and that would be an ‘application’ within the meaning of the 1940 Act. Section 1 allowed for flexibility, including the substitution of a different decree. Although the 1940 Act was mentioned in Lord Allanbridge's summary of the submissions in Grosvenor Developments (Scotland) plc, its effect was not otherwise noted in the opinion. In the result, the whole context described by Burn-Murdoch and the background against which the dicta in the older cases were pronounced had been changed.
This, it was submitted, could be illustrated by reference to those cases. In Middleton v Leslie the reasoning of the court to the effect that the defender should be in no doubt regarding the obligation he had to discharge was underpinned by an apprehension about the consequences of, and sanctions supporting, a decree ad factum praestandum. The subsequent legislative changes in the law had changed the rationale behind the opinion of the Lord President in that case. Robertson v Cockburn was not challenged insofar as it held that a pursuer could not get a decree against a defender ‘to perform all his contractual obligations’; but that case illustrated that if it was possible properly to specify the actings that the contract required then such a decree could be pronounced. In Hendry v Marshall the pursuers' case failed because it was plainly impossible for the tenant ‘within six days’ to implement and perform the whole obligations in the lease, having regard to the reference to the proper cultivation and management of the farm. In any event, the imprisonment of the tenant was not going to advance anyone's interests in relation to the cultivation and management of the lands let; yet imprisonment was the normal remedy at that time, cf Burn-Murdoch, paras 195 and 198. In Church Commissioners for England v Nationwide Anglia Building Society, Lord Clyde recalled an order which was too imprecise to be appropriate but pronounced an interim interdict which would preserve the status quo and keep the premises open for business pending the conclusion of the litigation; in that case the landlords had raised their action before the tenants had moved out of the premises. In Whitelaw v Fulton, although the opinions in the Inner House did not deal with the matter, the court had affirmed an obligation upon the defender, as subtenant of the premises, ‘duly to occupy and possess the said premises, and to plenish the same and keep them habitable’. This was clearly only one of the ways in which the obligation in the lease might have been performed; this case had not been brought to the attention of Lord Coulsfield. In McArthur v Lawson the Lord President observed that a contract which could not be enforced by specific implement, insofar as regards its form and substance, was no contract at all and could not form the ground of an action of damages. However, in that case the pursuer had conceded that the contract could not be enforced by obtaining a decree for specific implement; the situation there was therefore entirely different from that disclosed in the present case. In this case the contract was sufficiently clear to be enforceable and there was no element of delectus personae. The decision in Salaried Staff London Loan Co v Swears and Wells Ltd, it was submitted, affirmed the undoubted right of a pursuer to specific performance as a legal right at Scots common law.
The approach in England, where the remedy was in equity, was more restrictive. The English law was conveniently summarised in the judgment of Slade J in Braddon Towers Ltd v International Stores Ltd, a case which was followed in F W Woolworth plc v Charlwood Alliance Properties Ltd.
These cases showed a movement away from the traditional English reluctance to grant a decree of specific implement. The modern position was now abundantly clear from Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd, in which the judgments in the Court of Appeal were handed down on 21 December 1995. The opinions of the judges, including the dissenting opinion of Millett LJ, illustrated clearly that in a case not unlike the present, the court could properly pronounce a decree enjoining the defendants to carry on a business. In so doing the court had relied upon the good faith and business sense of the respondents in that case not to run the business halfheartedly or inefficiently and therefore the court did not require to define in excessive detail, or to attempt a close day to day supervision of, the respondents' actings. Thus the courts, it was submitted, have come to acknowledge and respect the commercial reality and the nature of modern leases of this kind in shopping centres and to give due weight to the importance to landlords of keeping open large trading premises leased to tenants when the closing of such premises could seriously harm other businesses situated in a centre owned by the landlords and occupied by tenants relying on the continued viability of the whole complex. In the present case the alleged difficulties of the defenders in knowing what their obligations would be should not be given undue weight. The defenders could be expected to trade in an acceptable fashion if they were enjoined to run the banking business in terms of the conclusions. The court would not require to supervise to ensure compliance with an appropriate order; and the pursuers would be able, if necessary, to bring to the attention of the court any clear alleged breach of the defenders' obligation. It was also of some relevance that the defenders, as tenants, had enjoyed the benefits of the clause ever since 1979 and it was perfectly appropriate that they should be held to it in the normal way even if they could now see a commercial advantage in unilaterally departing from their voluntarily undertaken obligations.
In summary, therefore, specific implement was the primary remedy for pursuers in this type of situation; the alternative remedy of damages would not be a satisfactory and sufficient remedy; the defenders were able, with consent, to assign or sublet the premises leased to them; the parties to this lease had all been able to understand and give effect to its terms over a period of years and there was no reason to suppose the defenders would not be able to understand and perform their obligations for the remaining six years of the lease; there would be no difficulty in enforcing and policing the order on the application of the pursuers; and the commercial choice which the defenders sought to make should not be allowed to override the pursuers' common law entitlement to a decree of specific implement. The pursuers would seek decree in terms of the third conclusion only if they failed to obtain an order in terms of the fourth conclusion. The interdict should not, however, include the words ‘or taking steps to vacate or remove from’ appearing in the conclusion as presently drafted. The pursuers were entitled to apprehend that the defenders might wrongfully remove from the premises, having regard to the terms of the letter of 21 March 1995. The competency of an order of this kind had been established in Church Commissioners for England v Nationwide Anglia Building Society, approved in Church Commissioners for England v Abbey National; and a similar order had been granted by Lord Gill in Retail Parks Investments Ltd v Our Price Music Ltd. It was further to be noted that the defences contained an admission that the defenders intended to carry out the steps specified in the letter of 21 March 1995. In these circumstances the court should recall the Lord Ordinary's interlocutor and grant decrees in the terms now sought.
At the conclusion of his submissions junior counsel for the pursuers and reclaimers asked leave to amend the fourth conclusion annexed to the summons by deleting the references therein to specific hours and days of opening and by adding a reference to ‘all normal business hours’. The motion to amend was not opposed and was granted. The result was that the pursuers and reclaimers now seek decree in terms of the amended fourth conclusion which reads: ‘(4) For decree ordaining the defenders (1) to use and occupy the premises as bank offices, (2) to keep the premises open for business as bank offices during all normal business hours, all until 17 August 2002 or until the lease in favour of the defenders is irritated or otherwise lawfully terminated or assigned to a third party (whichever is earliest); and for an order under sec 47(2) of the Court of Session Act 1988 ordaining the defenders to carry out the said acts ad interim.’
For the defenders and respondents, counsel moved the court to refuse the reclaiming motion and adhere to the decision of the Lord Ordinary which, it was submitted, was correct. Counsel made it clear that, for the purposes of these proceedings, there was to be no attack on the Lord Ordinary's decision to reject the defenders' argument that the provision of two cash machines amounted to a sufficient compliance with the ‘keep open’ clause; the defenders, however, reserved their position in this respect in relation to any other proceedings. It was submitted that the Lord Ordinary was correct in dealing with the matter of specific implement as a matter of relevancy, not as a matter of competency or as one for the exercise of the court's discretion. As to the matter of relevancy, it was submitted that when an order is made for specific implement the party to whom the order is addressed must be made aware of exactly what was required of him. The order must be precise and must not innovate upon the contractual obligation upon which it was based. Where it was said that the obligations sought to be enforced required to be performed over a long period of time the problem of specification became particularly acute. The requirement of precision in an order for specific implement arose not from the character of the penalty or the forms of procedure which might be employed to punish the person in breach of the order, but rather from the seriousness for a party of disobeying, or running the risk of being held to have disobeyed, an order of the court. Furthermore, the court would not make orders which were impossible of performance or incapable of enforcement. As to interim orders ad factum praestandum made under sec 47(2) of the Court of Session Act 1988, the making of such an order did not of itself demonstrate that a permanent order in the same terms could or should be granted. Any order made ad interim proceeded upon a different basis from the making of a permanent order.
Counsel for the respondents founded strongly upon Grosvenor Developments (Scotland) plc. It was submitted that (contrary to the impression conveyed by the headnote in the report) the decision that specific implement would be an inappropriate remedy was part of the decision of the court and was not just a matter about which the judges ‘observed’. It was therefore wrong to describe the reasoning in support of that part of the decision as obiter. That reporting error and the reasoning behind the decision on this aspect of the case could be seen, it was argued, from the opinions. In the present case, however, it was no part of the defenders' submission that the ‘keep open’ obligation contained in cl third was void from uncertainty; but it was perfectly possible to have a contractual obligation which was sufficiently precise to be binding but insufficiently clear to be made the subject of an order ad factum praestandum. Grosvenor Developments (Scotland) plc illustrated that the creditor in such an obligation had no absolute right to obtain an order ad factum praestandum following upon, or in anticipation of, a breach of that obligation. The court had an equitable jurisdiction to withhold the order, although it was not suggested that in the instant case the court should exercise any such discretion and so refuse the order sought. The essential point was that the terms of the order now sought were insufficiently precise to notify the defenders of what was required of them between now and the year 2002. It was expressly accepted that if—contrary to these submissions—a sufficiently precise order could be formulated on the basis of cl third, without innovating upon it, then the court could competently make such an order and the defenders and respondents would not invite the court to decline to do so on the basis of some discretionary ground. The problem with the amendment which had now been allowed to the fourth conclusion was that the pursuers had had to abandon the precision which the conclusion, before amendment, had contained; the clause itself contained no such precision; and the pursuers were now seeking an order which was vitiated by uncertainty. If the order now sought were to be pronounced there would be very real difficulty in understanding what would constitute a breach of that order. There was no escape from the difficulties arising from the inherent lack of precision. Parties had chosen to agree cl third in broad and imprecise terms and must be taken to have accepted that the consequence thereof was that the obligation would not be enforceable by means of an order ad factum praestandum. This remained so now, even although it was accepted that the defenders were in breach of their contractual obligation and that the proposals contained in the letter of 21 March 1995 would not amount to compliance with the ‘keep open’ provision of the lease. The only remedy was a claim for damages. In Church Commissioners for England v Abbey National plc none of the judges had criticised the reasoning in Grosvenor on this subsidiary issue and particular reference was made to the views of Lord Clyde as expressed in the opening paragraph of his opinion. In Elwood v Ravenseft Properties Ltd the vagueness of the obligation to use ‘all reasonable endeavours’ was not raised as an issue before the Lord Ordinary. He had dismissed the action on a separate basis and any observations in relation to the matter of the precision of the order were strictly obiter. The case of Postel Properties Ltd was wholly against the pursuers' proposition in the present case and particular reference was made to the observation by Lord Sutherland, at p 356F–G: ‘Where what is required to be done by one party is not a clear and specific act to be performed at a clear and specific time, but is simply a general duty to be performed over a long period during which circumstances might change, I consider that the inevitable aura of vagueness which must surround any such proposition is fatal to a party seeking an order ad factum praestandum.’
Reliance was placed upon the observations of the Lord President and Lord Ross in Salaried Staff v Swears and Wells in relation to the difficulties of granting decree to enforce an obligation which was likely to be continuous over a period of many years. It was submitted that the pursuers were wrong to suggest that sec 1 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 had any bearing upon the question. Section 1 related to natural persons only. The source of the court's power to deal with any failure by a corporate body to obtemper an order of court was a general power derived from the common law: this proposition was vouched by a number of authorities but the clearest statement of it might be found in para 2–19 of Macphail on Sheriff Court Practice which the respondents adopted as a correct formulation of the law. In any event, whatever changes might have taken place in relation to imprisonment of persons who failed to obtemper the order of the court or in relation to proceedings initiated by a charge, what mattered was that the seriousness of disobeying a court order made it essential to define the obligation imposed by the order in crystal clear terms. The person against whom the order was directed had to be able to ascertain from its terms precisely what he had to do. He could not be left in any doubt. This was illustrated by the older cases such as Middleton v Leslie, Robertson v Cockburn and Whitelaw v Fulton cited for the reclaimers. The need for precision had been emphasised by the Lord President in Munro v Liquidator of Balnagown Estates Co at p 55: ‘It is impossible for us with propriety to pronounce any decree ad factum praestandum which is not absolutely precise in every particular, both as to time and as to place’.
Lord Cooper had made a similar observation at p 557 of Fleming and Ferguson v Paisley Magistrates. Counsel referred us to the institutional writers but only to illustrate that they contained little, if anything, that assisted the court in the present case. In discussing the English cases referred to by the reclaimers, counsel asked the court to note that the whole background to specific implement was different in England and the judges in CIS v Argyll Holdings had avowedly chosen to depart from the previous settled practice. In any event, that case was very special on its facts. Nothing in that case warranted a departure in Scotland from the settled practice in the Scottish courts as described in Grosvenor Developments plc, particularly by Lord Kincraig. Acknowledging that there could be a difficulty in assessing damages in a case such as the present, it was submitted that that would become an element for consideration only if the court were called upon to exercise its discretion in the matter; but in the present case the conclusion was bound to fail by reasons of relevancy, without any invoking of the court's discretion. Particular reference was made to the judgment of Millett LJ in CIS v Argyll Holdings in support of the proposition that when parties entered into a contract they were entitled to rely upon the settled law. In the present case, the settled law of Scotland was to be found in Grosvenor Developments plc.
On the matter of the interdict sought in terms of the third conclusion (as now amended by the deletion of the words ‘or taking steps to vacate or remove from’), it was apparent from the terms of the letter of 21 March that the defenders had no intention of vacating the premises. That being so, there was no proper basis for apprehending a breach of contract in relation to this matter. It followed that the interdict was not justified. Evidence would not assist the court in relation to the matter now at issue. It was purely a question as to whether or not the obligation in question was one which in law entitled the pursuers to an order, in the terms now sought, for specific implement. The court did not require to speculate about possible changes in the future. It is necessary only to look at the terms of the order sought. The remedy of damages was essentially different from the remedy of specific implement. In assessing damages, the exercise was retrospective in character; in relation to specific implement it looked to the future. The correct view was that the parties to this lease deliberately chose flexibility at a time when the law plainly was that a contract which allowed such flexibility was not one that provided a basis for obtaining a decree ad factum praestandum. That was the position even although it was acknowledged that it might well be unlikely that prospective tenants considering taking a lease of premises within such a development would ever agree to being bound by ‘keep open’ clauses which particularised the precise manner in which their obligation was to be carried out and did so over a period prospectively of several decades. In the present case it was not submitted that the defenders were suffering a loss, or even a loss of profit, by the way in which the premises had been run prior to March 1995. The court should approach the matter on the basis that the decision to change the character of the operations was a purely commercial decision. Apart from these general submissions counsel did not spell out any particular difficulties that the defenders would or might face if the court pronounced an order in the terms now sought.
The debate has been wide ranging; but the parties are agreed as to the material facts and upon much of the law as applicable to this case. It may therefore be convenient to summarise the agreed matters before identifying what other questions have to be addressed before the relevancy issue can be resolved. (1) The lease is binding as between the pursuers and the defenders. (2) The so called ‘keep open’ clause, cl third, is neither void from uncertainty nor difficult to understand, and it imposes a valid and binding obligation which endures until 17 August 2002. (3) What the defenders intend to do in relation to their use of the premises will admittedly put them in breach of that contractual obligation and give the pursuers a right to reparation by way of damages for such financial loss as the pursuers can prove to have resulted from that breach. (4) This court can competently grant a decree ad factum praestandum in respect of an obligation in the present contract of lease, but cannot do so unless the relevancy objection can be overcome and an appropriately worded, sufficiently precise and enforceable decree devised. (5) The defenders do not invite the court to decline to frame such a decree upon the basis of the exercise in their favour of a discretion such as may sometimes be exercised by the court in specific implement cases. (6) The defenders are not pleading that an order in the terms now sought would compel them to do something which it is clearly impossible for them to do but are pleading that it would require them to do something so ill defined and imprecisely specified that they would not be able to know what their obligation was or exactly what they had to do, or refrain from doing, in order to avoid the danger of being in breach of the court's order.
I think it is appropriate to begin by considering the background to the decisions and opinions in the earlier cases before legislation was enacted to alter the procedures and to affect the imposition of penalties. The background is described in Burn-Murdoch, chap 6, paras 197 et seq. In para 197 it is stated, ‘Decrees ad facta praestanda pronounced in ordinary actions for implement are enforced by the personal diligence of imprisonment. Disobedience to such an order seems to imply contempt of the authority of the Court, but in ordinary practice it is not so regarded or disposed of. The imprisonment is not inflicted in modum poenae, there is no fixed duration, and the defender becomes entitled to be liberated immediately upon obtempering the decree. Imprisonment is, in short, only a drastic mode of diligence which "it is in the power of the pursuer to put in force" ex parte and at his own discretion (Middleton v Leslie per Lord President Robertson).... Charge ad factum praestandum is competent.... It is remarkable that there is no requirement…that the actual warrant of imprisonment must be issued as a judicial act by the sheriff himself, on special application.’
Against this procedural background it is not difficult to understand why the court would insist upon precise expression in any decree ad factum praestandum which it was considering granting. It would, in the ordinary case, only be at the stage of pronouncing decree that the court could identify the circumstances in which one citizen (the pursuer) would be entitled to deprive another (the defender) of his liberty. It would not be able to intervene ex proprio motu, and in advance, to prevent imprisonment proceeding upon a personal diligence initiated by the pursuer. It is also easy to understand why the court should be reluctant to pronounce an order which could not be fully performed by the defender promptly and indeed within the six days allowed by the charge procedure. In the light of these considerations it can be seen why in Robertson v Cockburn Lord Neaves desiderated that the summons should point out ‘in a clear and practical manner’ what the pursuer sought and why the Lord Justice-Clerk, Lord Moncrieff, pointed to the necessity of specifying ‘in what way the contract is to be implemented’. Hendry v Marshall was a case in which the court granted the immediate liberation of the complainer (the tenant) whose landlord had had him imprisoned following the six days of charge upon a decree of registration, such a decree being described by the Lord President at p 689 at ‘a decree of this Court pronounced as a matter of course upon a registered instrument’. The charge was held to be incompetent because the warrant embraced ‘the whole obligations incumbent on the tenant under the lease’ (p 690) and not just the ‘performance of some specified act’. The Lord President reserved his opinion on whether the charge had called upon that tenant to perform a specific act but noted that ‘it would have been more regular if the landlord had raised an action for fulfilment of the specific obligation, and having gained the action, given a charge upon the decree, which he would have obtained’.
Lord Deans laid emphasis upon the impossibility of performing the whole obligations in six days. I do not consider that in referring to ‘act’ in the singular the judges were ruling out the possibility of ordering the performance of specified acts in the plural; in Middleton v Leslie a decree ad factum praestandum was pronounced though it plainly involved the performance of a great many acts. The order was, ‘to erect within one year from the date of this interlocutor, on the piece of ground described in the summons, one or more dwellinghouses, or shops and dwellinghouses combined, all as specified in the summons and feu-disposition’.
In that context Lord President Robertson said, at p 802: ‘In pronouncing decree ad factum praestandum, the Court has to bear in mind the consequences and sanctions of such a decree. Failure to implement such a decree exposes a defender to the penalty of imprisonment which it is in the power of the pursuer to put in force. I therefore think that in the case of decrees which may be thus enforced, or which expose a defender to penal consequences, it is right that the Court should so express the decree that the defender shall be in no doubt regarding the obligation he has to discharge.’
I have emphasised the italicised words to draw attention to the fact that there may be penal consequences other than imprisonment at the hand of the pursuers. McArthur v Lawson is a clear case in which the supposed contract lacked the essentials of a contract and contained only a vague and indefinite promise of a kind which could not be enforced as a contract. Indeed the pursuer there did not contend that the contract could be enforced to the effect of obtaining specific implement. It is a case which, in my opinion, sheds no light on the relevancy question raised in a case like the present where the contractual obligation is admittedly valid, binding and capable of being breached in such a way as to give rise to an action of damages.
I do not regard those pre-1940 cases as supporting the view that precision in the wording of a positive court order was necessitated only by reason of the possibility that the person against whom the order had been pronounced might be imprisoned at the instance of the creditor without the prior intervention of the court. The cases appear to me to be particular examples of the general rule that the citizen should not be exposed to the risk of imprisonment or other ‘penal consequence’ unless for a clear breach of an obligation which has been previously expressed, and made known to him, in terms that leave him in no doubt as to what it is that has to be done or avoided. Thus the changes effected in the legislation of 1940 and 1987 did not so change the context as to render the earlier cases and dicta obsolete and inapplicable. Breach of a court order for specific implement could still result in the imposition of serious penalties. In any event, imprisonment was never a sanction that could be employed against a corporate body; yet a decree of specific implement could be pronounced against a corporate body. Furthermore, I have not been persuaded that any part of sec 1 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 applies to corporate bodies; from the wording of the section itself it appears to apply to natural persons only. Accordingly, sec 1(2), allowing the court to make a new and different order, appears to apply only in circumstances in which a natural person could face imprisonment. Finally, as the defenders and respondents submitted, the breach of a court order is itself a very serious matter, not least for a body such as the present defenders, quite independently of the penalties that might be imposed in respect of such a breach. The 19th century cases quoted to us are, therefore, in my opinion, still to be taken as valid and authoritative statements of the law on decrees of specific implement in the kinds of situations disclosed in those cases. The general thrust of the opinion of the judges in those cases is echoed in the observations of Lord President Cooper in Munro v Liquidator of Balnagowan Estates Coat p 55: ‘It is impossible for us with propriety to pronounce any decree ad factum praestandum which is not absolutely precise in every particular’. (It is noteworthy that Lord Cooper contemplated several particulars and did not suppose that such an order could be made only in respect of a single act.)
In Fleming and Ferguson v Paisley Magistrates at p 557 Lord Cooper said: ‘This court will not pronounce a decree ad factum praestandum except in terms of such precision as will leave the defenders in no doubt as to the exact obligation to be discharged by them’. He added: ‘The same principle of courseapplies to a declaration preliminary to a decree of specific performance’ (emphasis added).
This suggests that the court should not grant the declaratory conclusion if it does not intend to pronounce a decree of specific implement.
From the cases referred to in the debate, and the preceding Grosvenor Developments (Scotland) plc, I believe that it is possible to attempt to formulate some general statements of the legal considerations to be kept in mind in assessing the relevancy of a plea for decree ad factum praestandum, while recognising that each case must also be assessed on its own merits. Indeed I did not consider that the parties, by the end of the debate, differed significantly as to the law applicable to the relevancy question. They differed only as to whether or not in the light of the law applicable, this court could properly grant an order in the terms sought. The general statements are: (First) No decree will be pronounced by the court to enforce an obligation said to be contained in a contract if the material wording of the contract itself leaves it uncertain what the debtor in that supposed obligation has to achieve in order to fulfil the obligation; however, the mere fact that the relevant wording does make it sufficiently clear what the debtor has to do is not necessarily of itself sufficient to entitle the creditor to obtain a decree of specific implement in respect of a breach or apprehended breach of the obligation. (Second) The fact that the court has pronounced a decree to compel specific performance ad interim does not prevent the court from concluding at a later stage, and after full submissions in the light of the established facts, that such an order cannot properly be pronounced on a permanent basis. (I should add, however, that in assessing the allegation that the terms of the order are insufficiently precise to make the order enforceable, the history of the defenders' compliance with the order during the interim period might assist the court in reaching a view as to the sufficiency of its precision and specification.) (Third) It is not fatal to the obtaining of such an order that a number of distinct acts may have to be performed in order to secure compliance; nor is it fatal that the order is likely to remain effective against the defenders over a period of years. However, the more numerous the acts desiderated or likely to be required to secure compliance and the longer the period of time during which it is envisaged that the order will remain effective, the more necessary will it be to find terms for the order that will satisfy the need for adequate precision. (Fourth) An order of the court may in effect specify the end to be achieved but leave open the precise means whereby the defender is to achieve the specified end; to that extent, at least, the order may contain a degree of flexibility. (Fifth) In considering the precision that is necessary in a court order, breach of which could have serious, including penal, consequences, the court should consider the commercial realities which form the background to the undertaking of the parties' mutual obligations. (Sixth) The possible difficulties for the debtor in the obligation in knowing what is required of him should be considered against the background of the enforcement procedures available if a breach of the order is alleged. Thus, if the pursuers were to allege a breach they would require to proceed by petition and complaint and, unless a breach were to be admitted, the court would then have to determine whether or not any breach of the order had occurred and, before imposing a penalty, would have to be satisfied that the defenders had acted or were acting in wilful disobedience of the court's order: these procedures would diminish the risk of a person's being punished for, or even found in breach of, a court order which turned out to be lacking in precision. Furthermore, if the court, after the matter has been brought to its attention in a petition and complaint, were to hold that the defenders had not complied with the order but that the non-compliance was not a wilful defying of the court's order, the court could, without proceeding to punishment, give the defenders a further opportunity to comply in the light of the court's pronouncement that the order has been breached by the defenders' previous acts or omissions. Accordingly there should be no insuperable difficulty in policing compliance with an order of the court pronounced in suitable terms.
Against this background I turn to consider the expressions of opinion by the judges in Grosvenor Developments (Scotland) plc on the inappropriateness of the remedy of specific implement in the circumstances of that case. Strictly speaking, in my opinion, their expressions of opinion on this issue were obiter because the appeal concerned the terms of an interim interdict; no decree for specific implement had been sought. However, the judges plainly considered that interdict and specific implement were two sides of the same coin: as Lord Kincraig expressed it, at p 741, if an obligation was ‘too general to be enforced by specific implement’ it was ‘not appropriate for interdict in respect that the terms of an interdict pronounced to enforce the obligation would be too vague and imprecise’; and ‘An order from the court must be precise and specific so that the defenders know throughout the period when the order is in force exactly what they are required to do and what they are prohibited from doing.’ Similar expressions are to be found in the opinions of Lord Allanbridge and Lord Jauncey. In the circumstances, the real authority of these opinions derives from the circumstance that the judges were consciously addressing the same general matter as this case raises and were doing so in the light of the submissions of the parties. However, I do not consider that the judges in Grosvenor Developments (Scotland) plc were breaking new ground. They were simply saying that the particular order sought there—an order which was not couched in the same terms as the relevant clause in the lease—was not an order which passed the usual and familiar tests of precision, specification, definition and notice. Lord Jauncey also pointed out that the order sought would go beyond the obligations required under the lease and would also be impossible of enforcement. It is clear that the order there sought was not exactly in terms of the obligations contained in the lease. More importantly, the judges found the obligation itself to be too vague and general to be enforced by specific implement. Each of them asks a number of rhetorical questions relating to the use of ‘part’ of the premises as an off licence, the meaning of ‘use’, and the methods to be employed in determining the content of the expression ‘[goods]…as commonly sold in Supermarkets and Discount Stores’; and they were all concerned about the appropriateness of pronouncing an order which, against the background of uncertainty which they had detected, could endure for another 28 years.
For myself, without expressing any disagreement with the judges in that case, I think that some at least of these rhetorical questions might have been able to be answered satisfactorily after a proof, if the court had returned to the matter and had been invited, in the light of the known facts, to consider making an order which truly reflected the obligations in the contract of lease. Even if some details of the obligation were not expressed in the contract it might not have been very difficult to imply such details as a matter of business necessity and necessary implication. Furthermore the judges appear to have proceeded upon the basis that the clause itself which was said to give rise to the obligation might not be couched in sufficiently clear terms to create an obligation that could be enforced at all, even by a claim for damages for breach.
In the present case the facts have been established. The period of the order is a mere seven years or so, until August 2002 or possibly earlier. The use is not for multifarious purposes of the kind spelt out in cl third of the Grosvenor Developments lease; it is for use ‘as bank offices during all normal business hours’. These are words which have been deliberately chosen by large commercial organisations acting with legal advice (and the defenders are a bank), to define the defenders' obligations in a lease which also imposed obligations upon the landlords and determined the rent. Furthermore, the defenders have, for nearly 20 years, used and occupied the premises as bank offices without their use or occupation having given rise to any apparent difficulty or misunderstanding. On the face of it there was no reason why that use and occupation should not have continued for the remaining years of the lease. The defenders' intention to cease that use and occupation does not arise from some uncertainty or lack of comprehension as to what their contractual duties are. It arises from a commercially inspired decision to open bank offices 500 yards away in other premises, to transfer the Bath Street branch business, including customers, there, and to cease to use and occupy the premises at the pursuers' centre as bank offices. They have conceded that they would be in breach of the contract if they did what is proposed in the letter of 21 March. If, as the pursuers now seek, the court were to make an order in the same terms as the contractual clause itself, the defenders will know that they will then be in breach of that court order if they do what is proposed in the letter of 21 March. There is no great difficulty there. It may be, however, that they would at some time want to consider some changes from the regime that obtained prior to March 1995 (and still does), and they might then face some difficulties in knowing exactly what they may or may not do to avoid a breach of the order. That may be; but the court has no duty to advise large commercial undertakings as to how close to the wind they can sail in order to avoid a breach of an undertaking that they have freely entered into with legal advice in a probative lease. In a different context, that of defining fairness, Lawton LJ said: ‘Like defining an elephant, it is not easy to do, although fairness in practice has the elephantine quality of being easy to recognise’ (Maxwell v Department of Trade and Industry).
The same idea appears to me to apply here; one does not have to be able to define a breach in advance in order to be confident of recognising it when it appears. What the defenders would have to avoid would be a wilful disobedience of the court's order of such a character that their behaviour would entitle the pursuers to raise a successful petition and complaint. Given the defenders' successful occupation of the premises as bank offices without complaint for two decades, that should not be difficult; the defenders' letter of 21 March refers to the transferring of the staff from the Bath Street branch to ‘the new branch’ and to relocating the business from the Bath Street branch to the new branch. Finally, the question as to what ‘normal’ means in the context of ‘normal business hours’ for such a bank branch is a question of fact and, in the light of such evidence as might be adduced in any breach of proceedings, the court should have no difficulty in determining if the defenders' opening hours are or are not in line with this requirement.
In my opinion, the difficulties urged upon us can too easily be exaggerated. Indeed no particular difficulties were specified or highlighted in the arguments presented to us. The defenders are a leading bank who have occupied and used these premises as bank offices and operated them during normal business hours for nearly 20 years. The court order sought by the pursuers would merely require them to continue to honour their obligation for the remaining six or so years of the lease. In my opinion the order sought passes the tests of precision and specification derived from the authorities. I conclude that the attack on the relevancy of the pursuers' claim for decree for specific implement fails.
As to the conclusion for interdict in terms of the third conclusion, the pursuers did not suggest that it would be necessary for the court to grant such an interdict if a decree for specific implement were granted. In these circumstances I see no need to grant it. Had this court decided against the pursuers on the main question, I should have been in favour of granting interdict in the amended terms now sought, as I consider that, in the light of the recent history of the matter, the pursuers have reasonable grounds for apprehending that the defenders might suddenly and without prior notice to the pursuers decide it to be in their commercial interests to vacate the premises altogether.
In my opinion, therefore, the reclaiming motion should be allowed in relation to the pursuers' claim for specific implement in the fourth conclusion. It follows that the interlocutor reclaimed against should be varied by deleting the words: quoad ultra sustains the defenders' second plea-in-law and assoilzies the defenders from the third, fourth and fifth conclusions of the summons', and substituting therefor: ‘sustains the pursuers' fifth plea-in-law and ordains the defenders (1) to use and occupy the premises as bank offices, (2) to keep the premises open for business as bank offices during all normal business hours, all until 17 August 2002 or until the lease in favour of the defenders is irritated or otherwise lawfully terminated or assigned to a third party (whichever is earliest)’.
Since the discussion in the reclaiming motion has been concerned with the question whether the contractual obligations in the present case provide a sufficient basis in law for the making of such an order, it is necessary to examine how the law stands. In the institutional writers and reported decisions there is a noticeable lack of discussion of the principles which are to be applied in determining whether such a remedy should be given in the particular case. However, it is clear that in the law of Scotland where a party to a contract has acted or threatened to act in breach, the other party has a legal right to seek specific implement of the contractual obligation. In this respect there is a difference from English law under which the only legal right is to claim damages, and the granting of an order for specific performance is purely an equitable remedy (see Stewart v Kennedy, per Lord Watson at pp 9–10). At the same time it is recognised in Scotland that the court has a residual discretion to withhold the remedy of specific implement on grounds of equity (Grahame v Magistrates of Kirkcaldy; and Salaried Staff London Loan Co v Swears and Wells Ltd).
The assumption underlying the making of an order ad factum praestandum is that it should act as a compulsitor. It is clear in cases decided before the change in the law which was effected by sec 1 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 that the prospect of the drastic step of imprisonment following the execution of personal diligence on an individual to whom the order was addressed was an important factor in influencing the court's attitude to the terms in which a proposed order was expressed. They required to be precise so that it was clear to him what he had to do. It is true that this particular type of enforcement has been brought within the control of the court from the outset. However the fact remains that the making of the order may have serious consequences for the person, natural or juristic, on whom it is made. The existence of this important consideration is one reason for the need for precision. Another is that if the order does not make it clear what is to be done, it will be ineffective.
While the exercise by the court of its discretion to refuse specific implement is dependent on the circumstances of the case, there are recognised categories of case where such an order is inappropriate. Thus the court will not order what a party cannot possibly fulfil. In McArthur v Lawson Lord President Inglis observed at p 1136 that this was ‘because that would be to condemn the party to perpetual imprisonment—"Loco facti imprestabilis subest damnum et interesse"’. This exception is clearly based on equitable considerations. Then there are cases, also noted by the Lord President, in which on grounds of equity or policy the court will not enforce certain contractual obligations, such as an engagement to marry or to enter into a partnership. In other cases where there is no special value attaching to performance by a party of his contractual obligation, and the other party can readily obtain implement at his own hand, the court may withhold an order on the ground that this is not required in order to achieve justice between the parties.
On the other hand there may be cases in which the objection to the granting of an order of specific implement is directed to the terms which are sought to be enforced by this means. There should not in general be difficulty in the granting of an order which is based directly on the terms of a contractual obligation, assuming that the contract is not wanting in its essentials and that the contractual obligation is not invalid for any reason. It need hardly be stated that the court would not be prepared to grant an order which innovated on the terms of the contract, although it may be noted that it has been prepared to impose a time limit for performance of a particular contractual obligation in order to leave the party in no doubt as to what is expected of him (Middleton v Leslie).
A proposed order may be objectionable where, although it is based on the contract, it is too widely expressed. Thus in Robertson v Cockburn Lord Justice-Clerk Moncrieff observed at p 23: ‘A conclusion for implement of a contract is a conclusion for nothing, unless it states in what way the contract is to be implemented.’ At p 24 Lord Ormidale remarked: ‘No one could venture to enforce a decree, if he obtained it, in terms so vague and indefinite.’ In that case, which was concerned with the enforcement of a lease against a tenant, the difficulty was removed by the addition of the requirement that he enter into possession of the premises and pay rent when due. In Hendry v Marshall,which was concerned with an extract registered lease, the equivalent of a decree, it was held that a charge to the tenant ‘to cultivate and manage the lands let…according to the most approved rules of good husbandry, and to implement and perform the haill obligations having reference to the proper cultivation and management’ of the farm within six days was incompetent. This was, as Lord President Inglis put it at p 690, ‘because it would be impossible for anyone receiving it to understand what the landlord proposed to enforce by means of that charge. There is no statement anywhere of what the tenant has failed to do, and it can never be taken for granted, in giving a charge of this kind, that the landlord means to say that the tenant has not done any of the things stipulated in the lease’. He went on to observe that the competency of charging on a decree depended on the ordering of the performance of some specified act. At p 692 Lord Deas said: ‘To have it judicially ascertained in some way that the tenant illegally refrains from doing some specific thing which he is bound to do, seems to me an essential preliminary to imprisoning him till that particular thing shall be done.’
These statements demonstrate that the particularisation of the contractual obligation was seen as essential in order to assure the court that there was a proper occasion for the exercise of compulsion, and that what was sought to be enforced was no more than was necessary. From the point of view of the defender it was right that he should know in respect of what contractual obligation he was at risk of a sanction being imposed and hence what he required to do in order to avoid it.
In the present case the order which the pursuers were unsuccessful in obtaining from the Lord Ordinary included reference to particular days and hours of business and public access to the premises. During the hearing of the reclaiming motion the pursuers correctly recognised that these terms were open to objection on the ground that they innovated on the terms of the lease. They were granted leave to amend the fourth conclusion, with the result that, in its amended form, it sought a permanent order in the following terms: ‘For decree ordaining the defenders (1) to use and occupy the premises as bank offices, (2) to keep the premises open for business as bank offices during all normal business hours, all until 17 August 2002 or until the lease in favour of the defenders is irritated or otherwise lawfully terminated or assigned to a third party (whichever is earliest).’
In these terms it is clear that the conclusion is based directly on the express terms of cl third of the lease.
During the discussion of the reclaiming motion the defenders did not dispute the Lord Ordinary's conclusion that their proposals would have involved a failure to comply with their contractual obligations under cl third and in the respects to which the amended conclusion is directed. Further they did not dispute that it was competent for the court to pronounce an order ad factum praestandum in respect of a continuing obligation. The defenders' opposition to the granting of the order was not based on the exercise by the court of its residual discretion to withhold the remedy but upon the argument that the terms of the clause of the lease, and hence of the order, were not such as to found an entitlement to an order of specific implement.
This argument was based on what was said to be the lack of precision of the expressions ‘use and occupy as bank offices’ and ‘all normal business hours’. The defenders pointed out that the need for precision arose from the serious consequences of disobedience to the order. They emphasised that such an order was prospective in effect. Lack of precision was particularly significant when the order was to take effect over a tract of time during which banking practices might change. It was no doubt the case that such expressions were used to give the flexibility which was sought by tenants. However, flexibility might introduce vagueness. While there might be cases which fell clearly on one or other side of the line, the order should be judged by the borderline cases. The defenders wanted to have the opportunity to scale down their operations without running the risk of being taken to court. They could obtain legal advice as to their position but this did not have the same certainty as the decision of the court in dealing with a complaint that the order had not been complied with.
In support of their argument the defenders founded on the decision in Grosvenor Developments (Scotland) plc v Argyll Stores Ltd, which was concerned with the competency of using interdict in order to enforce a positive obligation, in that case an obligation as to the occupation and use of supermarket premises. The decision that it was incompetent was approved by the court of five judges which decided the case of Church Commissioners for England v Abbey National plc. The present case is not concerned with that point. However, the members of the court also considered and upheld an argument that an order for specific implement based on the terms of the lease would not have been appropriate or, in the view of one member of the court, competent. The obligation in that case was to occupy and use the premises for the purpose of the retail sale of all foodstuffs, including various items, and all hardware, electrical goods and ‘non-foods commonly sold in Supermarkets and Discount Stores’ and the use of ‘part’ of the premises as an off licence. The court took the view that there were difficulties in the interpretation and application of the terms of the lease, such as the reference to ‘non-foods commonly sold in Supermarkets and Discount Stores’ and the ‘part’ use of the premises.
I do not consider that the decision in Grosvenor Developments (Scotland) plc v Argyll Stores Ltd was binding on the Lord Ordinary. The views which were expressed by the members of the court in regard to an order of specific implement were directed to a subsidiary issue which it was unnecessary for the court to resolve in order to decide the case. I do not accept the suggestion which was made by the defenders that these views were endorsed in Church Commissioners of England v Abbey National plc. The resolution of that subsidiary issue depended on the view taken by the court of the enforcement of a hypothetical application for a decree ad factum praestandum based on the particular terms in which the lease was expressed.
While the terms of the contractual obligation in the present case are different—with the result that it is distinguishable—it is necessary to consider the approach which the members of the court took to what they perceived as the difficulties posed by the terms in that case. At p 741H–I Lord Kincraig said: ‘It may be difficult for the court to construe the precise scope and meaning of the obligations in clause third. The defenders however must be able to anticipate correctly what construction the court would give to the clause before embarking upon any change in their trading policy, in case they were in breach of the order. An order from the court must be precise and specific so that the defenders know throughout the period when the order is in force exactly what they are required to do and what they are prohibited from doing.’ He went on to refer to Hendry v Marshall and expressed the view that a similar view should be taken of the terms of the interdict sought in that case. Lord Allanbridge at p 743F–G posed a number of questions which arose from the order which was sought, in the light of which he considered that it would be too imprecise to be readily enforceable. At p 745C–E Lord Jauncey expressed the view that questions of interpretation would present formidable difficulties to the extent that an order for specific implement would be impossible of enforcement. Although the conclusions to which each of these judges came are differently expressed, the common element is that the difficulties of interpretation were such as to render enforcement difficult, if not impossible.
In the present case the Lord Ordinary made it clear that the obligation to use the premises as bank offices was not void from uncertainty or difficult to understand. He said that it was clearly established that at the time when the parties entered into the lease, the normal, and probably the only, method of using the premises as bank offices which the parties would have had in contemplation was the operation of a traditional bank branch, that is to say a branch in which the basic services of the operation of accounts, the receipt and transfer of money, and the provision of information and advice were available by direct contact between members of the public and members of the staff at the branch. He went on to say that for these reasons he considered that cl third provided for the conduct of banking business in the premises in a manner which was, in general terms, quite well understood and reasonably clear. On that basis he evidently had little difficulty in rejecting the defenders' argument that the provision of two cash machines was a sufficient compliance with the clause. However, he expressed the difficulty about the order for specific implement, at 1996 SLT, p 59K–L, as follows: ‘Even so, however, there would be room, within that manner of conducting business, for variation in the services to be provided, the number of staff available to provide them and, consequently, the ease with which a member of the public could make use of them. Even if attention were confined to the ‘core’ services discussed earlier in this opinion, it would still be necessary to specify the manner in which those services were to be provided, and that could be especially difficult in view of the extent to which the normal manner of providing those services has changed, and may change within the currency of the lease.’
What the Lord Ordinary has said about the present case indicates that there could be circumstances in which difficult questions might arise as to whether or not a change in the way in which the defenders operated their business within the premises would constitute a non-compliance with the clause. On the other hand no suggestion has been made by the defenders that the clause is void from uncertainty or that the Lord Ordinary was wrong in his view that the meaning of the clause was not difficult to understand. The lease has subsisted since 1979 and will expire on 17 August 2002. In the meantime the Lord Ordinary, having heard proof, has expressed his opinion as to the meaning of the clause which has not been challenged by the defenders, and the pursuers seek an order which is based directly on the terms of that clause. I accept that there may be cases in which the meaning of a provision is so obscure that any attempt to enforce its terms would founder. In such a case the court might well refuse to make an order even if the clause was not void from uncertainty. However, in the present case the most that can be said against the order is that future changes within what is left of the currency of the lease might give rise to difficulty in determining whether the clause was complied with or not. It was not suggested, nor could it be suggested, by the defenders that there were not cases in which there would be clear non-compliance with the order. I do not accept that the correct way to judge the case for making an order is by reference to borderline cases. I do not agree with the view expressed by Lord Kincraig that where an order is based directly on the terms of a contractual obligation the defenders must always know with certainty what they are required to do. It is plain that one would not expect to find in a commercial lease the kind of specification of banking services which the Lord Ordinary envisaged would be required in order to provide a basis for an order for specific implement. For these reasons I do not consider that any difficulty in the application of the expression in the clause on which the proposed order is based is such as to disentitle the pursuers from the order which they seek.
As regards the disposal of the arguments presented in respect of the pursuers' third conclusion I am in agreement with the views expressed by your Lordship in the chair and have nothing to add to them.
Accordingly I am in agreement with your Lordship in the chair that this reclaiming motion should be allowed and the interlocutor reclaimed against should be altered in the respects indicated by your Lordship in the chair.
Clause third of the lease is in the following terms: [his Lordship quoted its terms as set forth, supra, and continued:]
The current rent is £129,000 per annum and there is provision for rent reviews. In terms of cl sixth the tenants are obliged not to assign, sublet or part with possession of the whole or any part of the premises without the landlords' consent.
Since 1979 the leased premises have functioned as a traditional branch of the Royal Bank of Scotland providing essentially the core retail services described by the Lord Ordinary. However, early in March 1995 the defenders announced that they were proposing to transfer their Bath Street branch to a new location in Sauchiehall Street. On 21 March 1995 the defenders' solicitors wrote to the pursuers' solicitors setting out details of their proposals. The letter stated inter alia that the defenders intended to close the branch in the Sauchiehall Centre with effect from close of business on Friday 24 March 1995 and to relocate that business to the new branch in Sauchiehall Street. The staff were to be transferred and moveable property belonging to the bank or to the employees was to be removed and the premises secured. Two cash machines would remain in place and remain operational and they would be available to bank customers. The defenders accepted that they would remain tenants under the lease until such time as the lease is assigned or terminated.
The pursuers seek inter alia an order in terms of their fourth conclusion as follows: ‘For decree ordaining the defenders (1) to use and occupy the premises as bank offices, (2) to keep the premises open for business as bank offices during all normal business hours, all until 17 August 2002 or until the lease in favour of the defenders is irritated or otherwise lawfully terminated or assigned to a third party (whichever is earliest).’
The conclusion as originally drafted sought an order that the premises should be kept open for business ‘during the hours of 9.15 am to 4.45 pm Monday to Friday (excepting public holidays)’, but in the course of the reclaiming motion the pursuers sought and obtained leave to delete these words and substitute the contractual reference to ‘during all normal business hours’, as it was appreciated that the inclusion of specified opening times in the original conclusion had the effect of innovating on the terms of the obligation contained in cl third and was therefore objectionable. Accordingly the pursuers' fourth conclusion now sets out the terms of the defenders' obligations as contained in cl third of the lease.
The Lord Ordinary set out the factual position, which was not in dispute, and your Lordship in the chair has summarised the submissions which were advanced on behalf of each of the parties and the authorities to which we were referred. In particular, it was conceded by the defenders that if they were to implement the proposals contained in the letter of 21 March 1995 they would be in breach of contract in that they would have failed to obtemper the obligations incumbent on them in terms of cl third of the lease.
The Lord Ordinary found, on the evidence, that at the time the lease was entered into, the normal, and probably the only, method of using the premises as bank offices which the parties would have had in contemplation was the operation of a traditional bank branch, that is to say a branch in which the basic services of the operation of accounts, the receipt and transfer of money and the provision of information and advice were available by direct contact between members of the public and members of the staff of the branch. The addition of the requirement to keep the premises open during normal business hours makes it clear that the public were to have access for the purpose of using the services provided by the defenders. I respectfully agree with the Lord Ordinary when he observed that the obligation is not difficult to understand and that cl third provided for the conduct of banking services in the premises in a manner which was, in general terms, quite well understood and reasonably clear and that the parties' intentions can be ascertained with reasonable clarity. However, the Lord Ordinary took the view that the authority of the case of Grosvenor Developments (Scotland) plc v Argyll Stores Ltd precluded him from pronouncing the decree of specific implement sought by the pursuers in the present case.
In Scotland the general rule is that when a contract is breached, the innocent party has the choice either to seek implement of the contract or to sue for damages. There are, however, exceptions to the general rule that the innocent party is entitled to enforce performance of the other parties' contractual obligations by means of a decree ad factum praestandum. Thus, a decree for specific implement will not be pronounced if performance would be impossible or if it would not be possible to enforce the decree. Further, it has long been recognised that the court has a discretion to withhold decree of specific implement on equitable grounds. In Stewart v Kennedy Lord Watson observed (at p 10) as follows: ‘But in Scotland the breach of a contract for the sale of a specific subject such as landed estate gives the party aggrieved the legal right to sue for implement, and although he may elect to do so, he cannot be compelled to resort to the alternative of an action of damages unless implement is shewn to be impossible, in which case loco facti subit damnum et interesse.Even where implement is possible, I do not doubt that the Court of Session has inherent power to refuse the legal remedy upon equitable grounds, although I know of no instance in which it has done so. It is quite conceivable that circumstances might occur which would make it inconvenient and unjust to enforce specific performance of contract of sale, but I do not think that any such case is presented in this appeal.’
Further, even in a case where it is conceded that the defenders' obligations, as set out in the lease, are not void from uncertainty, it does not always follow that it will be appropriate for the court to pronounce a decree ad factum praestandum to enforce implement of these obligations. Each case must be decided in light of its own particular circumstances.
In the present case counsel for the defenders did not contend that the provisions contained in cl third were void from uncertainty and they conceded that it was not incompetent to pronounce a decree ad factum praestandum in relation to a continuing obligation, such as an obligation to continue to operate a business in leased subjects. Further, the defenders did not suggest that this was a case where the court should refuse to grant decree of specific implement in the exercise of its equitable discretion. The submission made on behalf of the defenders was that the obligations incumbent on them in terms of cl third of the lease were not capable of being enforced by a decree of specific implement. It was submitted that while the pursuers would have a claim for damages for breach of contract, decree in terms of the fourth conclusion should not be pronounced as the terms of the order sought were too imprecise to be capable of enforcement. It was important that the terms of a court order should be precise as the defenders had to know exactly what they had to do to comply with the order and they had to be able to know in what circumstances they would be in breach of the order, particularly in the case of an order relating to a continuing obligation over a period of years. This was especially important in view of the fact that bank practices can change and if the defenders were held to have disobeyed the order they would be subject to certain penalties. The wording of the obligations contained in cl third allowed for a degree of flexibility and such flexibility was essential in the case of an obligation in a long lease to keep a business open as the tenant had to be in a position to adapt to changes in circumstances affecting the business. However, this flexibility also introduced an element of vagueness into the obligations and thereby affected their enforceability. It was possible to envisage borderline cases where the defenders would be in serious difficulties in deciding whether or not, if they wanted to make changes in their business operations, they would thereby be in breach of the court's order and it was in the light of such borderline cases that the enforceability of the proposed order had to be judged. An order made in terms of the fourth conclusion, which simply repeated the wording contained in cl third, would be too vague to be capable of enforcement and if the pursuers sought to introduce further specification in relation to the obligations said to be incumbent on the defenders, that would also be objectionable as the pursuers were not entitled to innovate on the obligations contained in the contract. The defenders also founded heavily on observations made by the judges in Grosvenor Developments (Scotland) plc v Argyll Stores Ltd, in which it was held that it is not competent to enforce a positive obligation by way of interdict. However, the members of the court had also considered and upheld an argument that specific implement would not be an appropriate remedy in the circumstances of that particular case.
In Grosvenor Developments the lease related to the period from 1 February 1974 to 31 January 2016 and it was intended that the premises should be used as a supermarket. The provision in the lease with which the case was concerned was cl third which was in the following terms: ‘The premises are let for the retail sale of all foodstuffs, including groceries, butcher meat, fish, confectionery, bakery goods, fruit and vegetables and all hardware, electrical goods and non-foods as commonly sold in Supermarkets and Discount Stores and the use of part of the premises as an off-licence and for no other purpose whatsoever unless with the consent in writing of the Landlords. The tenants shall take possession of and use and occupy the premises for the foregoing purpose(s) within three calendar months from the date of entry hereunder and shall hereafter continue to use and occupy the same for said purpose(s) and during all normal business hours, shall keep the premises open for business throughout the whole period of this lease.’
Lord Kincraig stated (at p 741G) as follows: ‘This is far too general an obligation in my opinion to be enforced by specific implement.’ And he further observed as follows: ‘The defenders however must be able to anticipate correctly what construction the court would give to the clause before embarking upon any change in their trading policy, in case they were in breach of the order. An order from the court must be precise and specific so that the defenders know throughout the period when the order is in force exactly what they are required to do and what they are prohibited from doing.’
Lord Allanbridge expressed the opinion that an order would be too imprecise to be readily enforceable. Lord Jauncey stated (at p 745D–E) that in his view an action for specific implement of the contractual provisions referred to in the crave would fail not only because it sought implement of obligations in circumstances in which performance would not be required under the lease, but also because it would be impossible of enforcement. It is worthy of note that in that case the crave for interdict was without limit of time and that the wording of the crave did not repeat the wording of the obligations set out in cl third.
Having considered the terms of the judgments in Grosvenor Developments I do not consider that they have the effect of precluding the grant of decree of specific implement in this case in the terms sought by the pursuers. In the first place I consider that the observations in Grosvenor Developments relating to a possible decree of specific implement, while entitled to considerable weight, were obiter as they were not strictly necessary for the decision which the court had to make in relation to the crave for interdict. In the second place the comments made by the court in that case were made in relation to the terms of the tenants' contractual obligations in that lease and these obligations, which related to occupying supermarket premises, were of course quite different to the tenants' obligations in the present lease and, as I have said, each case must be decided in light of its own particular circumstances.
Having regard to the way in which this case was presented to us, the issue for our decision is whether it is appropriate for the obligations incumbent on the defenders in terms of cl third of the lease to be enforced by decree ad factum praestandum or whether, as the defenders contend, a decree in terms of the pursuers' fourth conclusion would be too imprecise to be capable of enforcement.
The Lord Ordinary held that cl third provided for the conduct of banking business in the premises in a manner which was, in general terms, quite well understood and reasonably clear. However, he went on to conclude that, on the authority of Grosvenor Developments, it was not open to him to grant a decree of specific implement expressed in general terms as, for example, an order ordaining the defenders to use the premises as bank offices. He said that there would be room within that manner of conducting business for variation in the services to be provided, the number of staff available to provide them and, consequently, the ease with which a member of the public could make use of them. In his view, it would be necessary to specify the manner in which the services were to be provided and that would be especially difficult in view of the extent to which the normal manner of providing these services has changed and may change within the currency of the lease. He stated that he reached his conclusion with regret as this was a commercial contract in which the parties' intentions can be ascertained with reasonable clarity, the pursuers have a real interest in securing that the premises are actually occupied and used, and damages may not provide them with a fully adequate remedy for the defenders' breach of the obligations incumbent on them in terms of cl third of the lease.
In the case of decree ad factum praestandum it is essential that the party against whom the order is pronounced should know what it is that he is being ordered to do. The lease with which we are concerned is a normal commercial lease relating to the use of heritable premises for a period of over 20 years, and it is usual for the provisions of such a lease to allow a measure of flexibility in relation to the way in which the business is to be carried on so that the tenant can exercise his commercial judgment in the event of any change in circumstances affecting the conduct of the business. Thus, no tenant would ever accept a lease which, for example, contained stipulations as to the precise hours during which the premises were to be open for business and the number of staff to be employed. The question which arises in each case is whether the degree of flexibility which is built into the tenants' contractual obligations is such as to exclude the granting of a decree of specific implement to enforce the tenants' obligations on the ground that an order made in terms of the wording of the obligations contained in the lease would be too imprecise to be capable of enforcement.
In the present case the defenders entered into the lease in 1979 and they undertook that they would, until 17 August 2002, use and occupy the premises as ‘bank offices’ and that they would ‘during all normal business hours…keep the premises open for business throughout the whole period of this lease’, and the lease now has some six and a half years to run. The lease did not contain a provision that a breach of the defenders' contractual obligations would sound only in damages. The defenders have, since 1979, been operating the subjects as a normal branch office of the bank, one of many branch offices which they operate throughout Scotland, and the public have had access during business hours to take advantage of the services offered by the defenders. Accordingly, thus far the defenders appear to have had no difficulty in occupying the subjects in a manner which complies with their contractual obligations in terms of cl third of the lease. It was not submitted on behalf of the defenders that they did not know what was meant by the obligation to occupy the leased premises as ‘bank offices’, nor was it suggested that they were unaware of what was meant by the term ‘normal business hours’. They operate numerous branch offices and I am of the opinion that the term ‘normal business hours’ refers to normal business hours from time to time during the currency of the lease as it must be recognised that ‘normal’ hours for carrying on a particular type of business can change over the years. The defenders did not at any stage of the argument before us allege that they would be unable to comply with their obligations under cl third of the lease over the remaining six and a half years or with a court order in terms of the fourth conclusion of the summons. Further, they did not submit that their branch in the Sauchiehall Centre was making a loss, or was likely to make a loss in the future, and that it would be inequitable for them to be forced to carry on a loss making business for a period of years. Moreover, it is clear from the provisions of the lease that the defenders need not necessarily remain tenants of the subjects until August 2002. In terms of cl sixth the tenants bind themselves not to sublet the premises without first obtaining the written consent of the landlords and it is provided that that consent shall not be unreasonably withheld in the case of subtenants at any time after the building has been fully let. So it would appear to be open to the defenders to terminate their contractual relationship with the pursuers by finding a suitable substitute tenant. However, they did suggest that there could be a number of possible borderline situations where there might be doubt as to whether or not they would be in breach of the court's order. But they did not specify what these borderline situations would be other than to suggest the possibility that they might decide to scale down, or alter the nature of, the business. I do not accept that the correct test in deciding whether or not a court order ad factum praestandumis enforceable is to refer to potential difficulties which could arise in unspecified hypothetical borderline situations. Further, I do not consider that it would be reasonable to require in a commercial lease the degree of specification in relation to the provision of banking services which the Lord Ordinary considered would be needed before an order for specific implement could be granted. If the order sought by the pursuers was pronounced and it was subsequently alleged that the defenders were in breach of that order, it would be for the pursuers to establish, by sufficient evidence, that a breach had taken place. In this context it is important to note that the defenders would not be liable to penal consequences unless it was established that they had been in wilful breach of the court's order.
In the circumstances of this case I do not consider that it would, in practice, be difficult for the defenders, a very reputable company which would, I have no doubt, be acting in good faith, to occupy the premises in such a way as to comply with their obligations in terms of cl third of the lease. Further, it is clear that the pursuers have a real interest in having the premises in question occupied in accordance with the obligations contained in the lease and it cannot, in my view, be said that damages would necessarily provide them with a fully adequate remedy as, in a case of this nature, there could be difficulties for the pursuers in proving the measure of their loss. It seems to me that this is a case where the defenders entered into a lease with full knowledge of the obligations which were incumbent on them and undertook to keep their branch in the Sauchiehall Centre open for business during the whole period of the lease and I can see no reason why they should not be held to their bargain. In my opinion the pursuers are entitled to the order ad factum praestandum which they seek and the granting of the order is doing no more than requiring the defenders to do what they contracted to do for the remaining six and a half years of the lease.
Accordingly, I agree that the reclaiming motion should be allowed, the pursuers' fifth plea-in-law should be sustained and decree should be pronounced in terms of the fourth conclusion as amended.
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