Breach of ‘keep-open’ court order is not contempt of court

In an opinion handed down on 15 October (26 page / 593KB PDF) the judge found the operators of the Marks & Spencer (M&S) store in a in a shopping centre in East Kilbride had breached the terms of the ‘keep open’ clause in their lease once pandemic-related restrictions had lifted.

However, the judge, Lord Braid, said he gave M&S the ‘benefit of the doubt’ when it came to finding it not in contempt, as there was a degree of uncertainty in the content of the keep open order and it had relied on legal advice.

“I also have in mind that any penalty which I did impose would of necessity be a financial one; and that the defender may already have exposed itself to a damage claim in the event that a breach is ultimately established after proof,” the judge said.

The claim was brought by M&S’s landlord. The store in question previously included a foodhall and a further floor of space where clothes used to be sold. The lease stipulated its opening hours and a requirement to maintain a “substantial retail store”.

When the Scottish government put trading restrictions in place in March 2020 as a result of the Covid-19 pandemic, M&S closed all but the foodhall section of the store and one entrance and blacked out the windows.

It did not reopen normally when Covid restrictions were lifted, and a sign directed customers to another M&S store nearby.

The landlord argued this manner of trading was in breach of the lease. In July 2020 the court made an interim order requiring M&S to re-open the store in full by 24 August 2020.

Following this order, M&S turned the store into an outlet store with restricted numbers of goods on sale and only a small number of staff. It also did not reinstate its window displays or open additional entrances.

The landlord said M&S was “wilfully” in breach of the re-opening order. M&S argued it had done everything required by the order, and it was not the function of the court to “micro-manage” how it ran the store.

The judge said the order, which required M&S to keep the store open for business and to keep it “sufficiently staffed, stocked, furnished and otherwise equipped” carried the implication “that the order requires the defender to trade in good faith, and not to carry on business half-heartedly”.

He found M&S was “doing the bare minimum which it considers it need do in order to comply with its obligations”, and accordingly was in breach of the order.

The judge put the case out by order for M&S to decide what action to take to properly comply with the order.

Property disputes expert Brian Grierson of Pinsent Masons, the law firm behind Out-Law, said the case showed the courts’ willingness to enforce keep open clauses and orders requiring compliance with them even when there are various restrictions in place.

Grierson said: "We have long known that the courts will enforce 'keep open' clauses in circumstances where a tenant retailer has reviewed its business and decides that it wishes to close a store. This is particularly important for landlords relying on the footfall brought to developments by anchor tenants, which is how the landlord in this case viewed the tenant.”

“This case shows the willingness of the court to enforce these clauses even where businesses have faced difficult trading conditions during the pandemic. Further, the courts have shown that they will not tolerate anything which falls short of full compliance with the tenant's obligations to operate from premises – only opening a limited area of the store is not enough,” he said.