Marks and Spencer (M&S) has recently avoided being held in contempt of court. It was decided in the Court of Session that the company was in breach of an interim order granted against it, which instructed the retailer to fully re-open its store and continue trading at the Plaza in East Kilbride, as stipulated in the ‘keep-open’ clause within its lease.
What is a keep-open clause?
A keep-open clause is typically found within a retail commercial lease and requires the tenant to keep their property open and their business trading during usual trading hours throughout the duration of the lease. Landlords tend to include these clauses within retail leases: particularly of premises within shopping centres, as they are concerned about the effect closed premises can have on the centres as a whole.
Landlords want to avoid their tenants closing up shop, leading to a reduced footfall in a shopping centre and other tenants not renewing their leases as a result. Which in turn leads to a loss of income for the landlord.
Enforceability of keep open clauses
In Scotland, parties are entitled to enforce their contractual obligations, such as keep open clauses, via a decree (court order) of specific implement. Interim orders can also be applied for which require the tenant to comply with the clause until the final decision is pronounced.
Disregarding these orders can be held to be in contempt of court and is punishable by a fine - when dealing with companies.
The case
The latest case on this matter was heard in the Outer House of the Court of Session in October 2021. Sapphire 16 SARL leased premises to M&S who were in breach of their court order obliging them to keep the store open.
Sapphire raised a commercial action in 2020 seeking to enforce the keep-open clause. It was argued that M&S had failed to comply with the terms of the interim court order to re-open the premises.
M&S had entered a 99-year lease at East Kilbride Shopping Centre in 1972. Sapphire 16 SARL had acquired the landlord interest at a later date. There was a clause in the lease which provided that M&S must keep the premises open during normal business hours and maintain lighting within the premises until 11pm every night.
During the first Covid-19 lockdown the retailer kept the store open for the sale of food only. Once Covid restrictions eased it continued to operate the store on a skeletal basis.
Witnesses stated that the change in trading was motivated by an intention to close the store and focus on their other location. It had also been reported in the local press that M&S was in negotiations with Sapphire to set a closure date for the store.
In court (July 2020) Lord Braid granted an interim order and held that M&S should reopen the store and keep the premises stocked, furnished and staffed, however, the store continued to operate on a skeletal basis. Sapphire argued that this was in contempt of court and in breach of the interim order.
When analysing what the interim order required M&S to do Lord Braid stated; “The premises were not to be re-opened simply so that members of the public could enter them: once re-opened, they were to remain open for business.”
He concluded however, that “…it [M&S] is doing the bare minimum which it considers it need do in order to comply with its obligations.”
In relation to the contempt of court issue Lord Braid did not impose a penalty, recognising some uncertainty regarding the decisions and that M&S “may already have exposed itself to a damages claim in the event that a breach is ultimately established after proof.”
The case was continued for M&S to decide what action to take to comply with the order. Lord Braid stopped short of declaring the defender in contempt, which would have quasi criminal consequences, and gave them the benefit of the doubt.
The effect
This case highlights the benefits and pitfalls of keep-open orders in Scotland. It is a useful reminder that half-hearted trading may not be sufficient to satisfy a tenant’s obligations under a keep-open clause in a commercial lease and that there seems to be an expectation that tenants should trade in good faith. Any such provisions found within a lease should be checked carefully by legal representation.
