Where a tenant entered into a lease of a public house and breached the terms requiring it to purchase goods exclusively from the landlord, is the issue considered a ‘serious issue’ sufficient to warrant an injunction as a remedy?
In Unique Pub Properties Ltd v Roddy & others , the tenant entered into a lease of a public house with the landlord, the terms of which required the tenant to purchase goods exclusively from the landlord company. Drinks from other suppliers were not to be brought onto, or sold from, the premises.
The tenant accepted that it had acted in breach of these lease terms by purchasing drinks from other suppliers. In defence, the tenant argued that such provisions were void and unenforceable because the landlord’s nominee had also supplied a local public house which was in direct competition with the tenant’s property at prices which put the tenant at a disadvantage. The landlord made an application for an injunction to require the tenant to comply with its obligations under the lease.
The High Court made an order for an interim injunction in the landlord’s favour, having considered whether:
1. There was a serious issue to be tried;
2. Damages were sufficient as a remedy; and
3. On balance, the convenience of granting an interim injunction.
The Court considered whether the tenant could establish his right sufficiently to constitute a case at trial; if there was a good possibility that the tenant could establish a case in due course, there was a reduced risk of injustice in granting an injunction to the landlord. Regardless, the Court would consider whether the risk of injustice in refusing the injunction outweighed the risk of injustice if it was granted.
The Court felt that, although provisional, there was a strong chance of success for the landlord. Further, the competing public house had in fact closed which removed this argument available to the tenant.
In considering whether damages could be an adequate remedy for the landlord in place of an injunction, the Court concluded that the financial statuses of the parties differed considerably and there was no evidence of threat to the landlord’s business as a result of the tenant’s actions. Moreover, the tenant itself appeared to be struggling with a sizeable VAT debt.
As a result, there was a risk that the landlord would be unable to recover damages if the tenant continued to purchase its stocks from other suppliers. In balancing the risk of injustice, there was greater risk presented to the landlord by refusing the injunction and accordingly an order was made.
Analysis & Advice
This case is reassuring for commercial landlords seeking injunctions to protect their interests under leases. Here, the tenant was not in a strong financial position and there was considerable risk presented to the landlord by the tenant’s continuing breach in the event that it sought damages at trial. As a result, an injunction was the fair and just remedy on the balance of risk.
Landlords must be able to demonstrate in similar cases that the balance of risk weighs in their favour, which in particular may reference a tenant’s financial ability to make good through damages any loss suffered by a landlord.
The High Court made an order for an interim injunction in the landlord’s favour. In balancing the risk of injustice, there was greater risk presented to the landlord by refusing the injunction and accordingly an order was made.