Case: Sapphire 16 S.a.r.l -v- Marks and Spencer Plc (2021)
In a Scottish claim, M&S were found to be in breach of an interim order requiring them to re-open and remain trading. The interim order was based on a 'keep open' clause which can often be found in commercial leases, usually those surrounding the retail sector. In Scotland, a landlord can obtain a court order to force the tenant to remain open and trading. This is exactly what happened here, but M&S failed to do so and were found to be in breach of the court order. However, as there was a degree of uncertainty in the order, they were given the benefit of the doubt and were not found to be in contempt of court.
Background
During the first lockdown, M&S closed part of its operations (in line with government guidance) and only kept open part of the store selling essential foodstuff. Most of its retail space was closed. The entrance on the street remained open, but the doors leading from the shopping centre (that the landlord (Sapphire) also owned) were locked and the window displays blacked out.
When the restrictions were lifted, M&S continued to only offer limited foodstuff; food stocks were depleted and there was no stock in other parts of the store, even though the lease contained a 'keep open' clause.
Sapphire therefore sought and obtained an interim injunction in July 2020 requiring M&S to comply with the lease terms. The order provided that M&S were obliged to:
- Re-open the whole of the store;
- Keep it open for business during normal business hours; and
- Keep it sufficiently staffed, stocked, furnished and otherwise equipped for that purpose.
M&S went onto convert the shop to an outlet store, reducing the number of staff and only selling limited stock at reduced prices. The entrance from the shopping centre remained closed and the windows remained blacked-out.
While Lord Braid found that the interim order had some ambiguity in how much staff or stock was 'sufficient' it was clear that M&S had been ordered to open the whole of the retail space and to trade in good faith and not carry-on business "half- heartedly".
The Judge commented that he was "led to the inexorable conclusion that the defender is not interested in attracting business to its store, and that it is doing the bare minimum which it considers it need do in order to comply with its obligations"
Keep open clauses
A keep open clause requires the tenant to actively trade for the duration of its lease but it has long been established that enforcement of keep open clauses in English courts can be difficult. A specific enforcement remedy is often rejected by the courts, especially when it would force a tenant into financial difficulty to keep its doors open. Equally, in claims for damages it can be difficult to evidence loss.
This is a timely reminder for tenants that leases should be carefully checked for any keep open clauses that might restrict or prohibit operational decisions.
Our team regularly advise on the preparation and execution of leases, deeds of variation and side letters and advice is best sought on such matters to ensure that both parties understand their obligations or so variations can be made to onerous clauses.
