Interim Injunction – Tie Covenants in Lease 

In the case of Unique Pub Properties Ltd v Roddy the High Court made an interim injunction (in favour of the landlord) which required the pub tenants to comply with the tie covenants in their lease (that is the covenants to buy certain drinks only from the landlord).

Background

The defendants were granted a lease of the public house known as “The Crusader” situated in Garforth, Leeds.

The lease was a retail partnership lease and was granted for a term of ten years commencing on 8 September 2014.

Under the terms of the lease, the defendants were obliged to buy from the landlord (or its nominated supplier) all tied drinks that they wished to sell as part of the business and they were not permitted to bring onto the premises, for any reason, any tied drinks that had not been supplied by the landlord or its nominated supplier.

The lease contained a provision which confirmed that both parties agreed that the rent fairly represented the rent that would be expected to be paid for the lease in the open market, taking into account the tenant’s obligation to buy goods from the landlord.

In breach of the lease, the defendants had from November 2017 been purchasing what would otherwise be tied products from suppliers other than the landlord or its nominee.

The landlord subsequently issued a claim against the defendants in February 2018, seeking a mandatory injunction to enforce the provisions of the lease.

The claim was defended on the basis that the landlord’s nominee had, since May 2017, been supplying a competing public house, the “Bird in Hand”, in that nominee's ownership with drinks at a sufficiently favourable price level so as to place the defendants business at The Crusader at a competitive disadvantage.

The landlord applied for an interim injunction requiring the defendants to comply with the terms of the lease until the substantive application was determined.

Issues

In deciding whether to grant the interim injunction the High Court applied the well-known American Cynamid test and considered whether:

1. there was a serious issue to be tried;
2. damages would be an adequate remedy; and
3. the balance of convenience lay in favour of granting the interim injunction.

Decision

The High Court felt that there was a high degree of assurance that the landlord’s claim would ultimately succeed.

Conversely, there were considerable obstacles in the way of the defendants succeeding. According to the evidence, there were good reasons why it was necessary to provide particular financial support to the Bird in Hand. The Defendant’s arguments were also not assisted by the fact that by the time of the hearing of the claim the Bird in Hand had failed and had closed in July 2018.

For those reasons, the hurdles of a serious issue to be tried and a high degree of assurance that the landlord would succeed, were surmounted by the landlord.

As to the question of whether damages were an adequate remedy for either side, the High Court was provided with no real evidence of the defendants' means.

There were also arrears of payments due to the landlord under the lease and the company through which the defendants operated the Crusader apparently owed VAT in the sum of £10,000.

The landlord owned a substantial portfolio of public house and there was no evidence that it was about to go out of business or was in any particular financial difficulty.

The High Court was therefore satisfied that there was no obstacle to the grant of an interim injunction on the basis that damages under the cross-undertaking would not be an adequate remedy for the defendants.

Further, if the defendants continued to buy tied goods elsewhere and ultimately lost the case, there was a severe risk that the landlord would not be able to recover from the defendants any damages due to it in those circumstances.

In considering the balance of convenience (or balance of injustice), the High Court concluded that the risk of injustice to the landlord was greater if the injunction was wrongly refused, than the risk of injustice to the defendants if it was wrongly granted.

The Court was therefore satisfied that it was just and convenient for the interim injunction to be granted.

Conclusion

Whilst a landlord does not have a right to an injunction (at least in England and Wales) if a tenant breaches a positive keep-open covenant in a lease, this case is a good example of how mandatory injunctions are possible in (other) landlord and tenant contexts and the courts approach to such applications.

Further reading

The judgment: Unique Pub Properties v Roddy (UK), [2018] EWCH 4019 (Ch)).

American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504.