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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Peel Land and Property (Ports No. 3) Ltd v TS Sheerness Steel Ltd [2013] EWHC 2689 (Ch) (01 August 2013) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2013/2689.html Cite as: [2013] EWHC 2689 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		The Rolls Building 7 Rolls Buildings Fetter Lane London, EC4A 1NL
		01/08/2013

MR. JUSTICE MORGAN :

1. The claimant is the lessor and the defendant is the lessee under two leases, granted in 1971 and 1973 respectively, later varied by a Deed of Variation entered into in 1992. This judgment concerns an application by the claimant for an injunction to restrain the defendant from removing its trade fixtures from the premises demised by the leases. The claimant says that the defendant's removal of trade fixtures will be a breach of a lessee's covenant and that the court ought to restrain that breach.
2. The rights and obligations of the parties have already been the subject of a trial where I was the trial judge. I handed down judgment on 14th June 2013 with Neutral Citation Number: [2013] EWHC 1658 (Ch). I held that the removal of trade fixtures would not be contrary to the relevant covenant. On that ground I dismissed the claimant's claim to a permanent injunction and I declared that the defendant was entitled to proceed as it wished. I gave the claimant permission to appeal as to the meaning and the operation of the relevant covenant.
3. The claimant has now appealed to the Court of Appeal. The claimant says that the High Court should grant an injunction to protect its rights pending the determination of the appeal. Indeed it has long been established that a court of first instance, having dismissed a claim to a permanent or an interim injunction, may go on to grant an interim injunction pending the determination of the matter in the Court of Appeal: see by way of an example Erinford Properties Limited v Cheshire County Council [1974] Ch 261.
4. As I have said, the leases in this case were granted in 1971 and 1973. For the purpose of explaining my decision on this application, the separate existence of the 1973 lease can be disregarded and I will hereafter discuss the matter on the basis that there is a single lease, the 1971 lease.
5. By the 1971 lease, the then lessor demised a large area of land at Sheerness for a term of 125 years from 1st September 1968. The then lessee covenanted to erect the steelworks on the land and it did so. The premises were used as a steelworks until the works were closed in January 2012 and since then the premises have not been used for any purpose.
6. Since 2012 the parties have engaged in more than one round of litigation and there have been various interlocutory applications. The claim which came on for trial before me raised a number of points but the principal questions were whether the plant and equipment in the steelworks consisted of chattels or fixtures and, if fixtures, whether the same were removable trade fixtures.
7. I dealt with those questions in some detail. I identified a number of items which were chattels belonging to the lessee which the lessee was entitled in law to remove from the premises. The rest of the disputed items were fixtures, but in relation to the vast majority of these, I held that the items were trade fixtures and under the general law the lessee had a right to sever the fixtures and to turn them into personal property which would then be owned outright by the lessee.
8. No party has sought permission to appeal against these conclusions. In the course of the trial, a question arose as to whether clause 2(6) of the lease, which was a covenant against certain alterations in certain circumstances, prevented the lessee, at any rate at the present time, from severing the trade fixtures from the demised premises.
9. The claimant initially accepted that the covenant did not have that effect. Later the claimant changed its mind, amended its pleadings and argued that severance of the trade fixtures, at any rate at the present time, would amount to a breach of covenant. I heard full argument on that point and I ruled against the claimant's contention.
10. Following judgment I gave the claimant permission to appeal to the Court of Appeal. I considered, in accordance with the established test, that there was a real prospect of the claimant succeeding in the Court of Appeal in establishing that the severance of trade fixtures would, at any rate at the present time, amount to a breach of clause 2(6) of the lease. The claimant has now appealed my decision in relation to clause 2(6). I am told that the Court of Appeal has indicated that the appeal will be heard in the period from 18th December 2013 to 22nd April 2014.
11. I now need to refer to clause 2(6) of the lease, as varied, which is in these terms:

"Not at any time during the said term to erect make or maintain or suffer to be erected made or maintained any building erection alterations or improvements nor to make or suffer to be made any change or addition whatsoever in or to the said premises save in connection with the use of the said premises for such industrial purpose as may from time to time be approved by the Lessors under clause 2(14)".

12. To understand the operation of clause 2(6), it is necessary to refer to clause 2(14) which is in these terms:

"Not to use or occupy the said premises other than for the purposes of steel making steel rolling and operations ancillary thereto or for such other purposes as may from time to time be approved by the Lessors (such approval not to be unreasonably withheld) and to retain the premises in the occupation of one person or one company or one group of companies each being a subsidiary of one company within the meaning of Section 143 of the Companies Act 1948 only."

13. On the assumption that clause 2(6) can potentially prevent the lessee from severing trade fixtures, the position would seem to be this. If the lessee wishes to sever trade fixtures in connection with the use of the premises for a permitted purpose, then the lessee has an absolute right to do so. It does not need to seek the lessor's consent. Even if the lessor might have grounds for objecting to that course, he is not in law able to prevent it.
14. But if the lessee wishes to sever the fixtures so as to return the buildings to cleared space ready for a future possible industrial purpose, there is an absolute prohibition on such action. That cannot be done until the lessee first identifies the intended use and obtains the lessor's consent to that use. There is no provision for the lessee to be able to apply to the lessor for consent, to clear the premises, to enable them to be marketed to a range of different industrial users, nor is there a provision that consent is not to be unreasonably withheld.
15. Although the claimant claimed at the trial a final injunction to restrain an alleged breach of clause 2(6) from the severance of trade fixtures, there were no submissions from either party as to whether I should or should not grant such an injunction if I were to construe clause 2(6) as the claimant asked me to.
16. In the course of considering my judgment following the trial, I reflected on what I should do if I reached the conclusion that severance of trade fixtures was, at any rate at the present time, a breach of clause 2(6).
17. My provisional view then was that in such a case I would have to permit further argument as to whether I should grant an injunction to restrain a breach of clause 2(6) and, if so, in what terms and in what circumstances or whether to award damages in lieu of an injunction or take some other course.
18. I considered that it might be relevant to know whether the lessor would suffer any harm as a result of the severance of the trade fixtures. What attitude should I take if the lessee was likely to be entitled to a change of use to another industrial purpose and the breach of clause 2(6) merely consisted of the lessee removing the fixtures prematurely before identifying the new use? In the light of my actual decision on clause 2(6), I did not in the end need to deal with that eventuality.
19. On this application for an interim injunction pending the appeal to the Court of Appeal, it has for the first time in this litigation become necessary to consider what attitude a court should adopt to the claim to an injunction to restrain a breach of clause 2(6) in the event that the court finally determined that the severance of trade fixtures would amount to a breach of that covenant.
20. There is a quite separate question as to what attitude a court should adopt to such a claim at a point when the court has not finally determined that the severance of trade fixtures will amount to a breach of covenant. I will leave that second question to later in this judgment.
21. Ms. Tiffany Scott, who appears for the claimant, submits that if the Court of Appeal concludes that the severance of trade fixtures will at any rate at the present time amount to a breach of clause 2(6), then it is inevitable that the court will grant a final injunction to prevent that breach. She relied on some of the reasoning in the House of Lords' decision in Doherty v Allman (1878) 3 App Cas 709. The headnote to the report reads as follows:

"The grant of an injunction to restrain a person from doing a particular thing is an act dependent on the discretion of the Court, and in exercising that discretion a Court of Equity will consider, among other things, whether the doing of the thing sought to be restrained must produce an injury to the party seeking the injunction; whether that injury can be remedied or atoned for, and, if capable of being atoned for by damages, whether those damages must be sought in successive suits, or could be obtained once for all.

Two leases were granted of pieces of land with some buildings on them, one granted in 1798 for 999 years, the other granted in 1824 for 988 years. There was no reservation of a power of re-entry for breach of covenant, nor was there any negative covenant obliging the lessee not to change the use of the premises. There was a power of re-entry, for rent in arrear and no sufficient distress on the premises. In each lease there was a covenant by the lessee that he, his executors, &c, will 'during the term herby granted preserve, uphold, support, maintain, and keep the said demised premises, and all improvements made and to be made thereon, in good and sufficient order, repair, and condition; and at the end or sooner determination of this demise, shall and will so leave and deliver up the same unto', the lessor, his heirs, &c. The premises had been used as corn stores for some years; and afterwards as artillery barracks, and dwellings for married soldiers. They had fallen into disrepair: it became necessary to repair them; the lessee thought it would be beneficial to convert the store buildings into dwelling-houses, which would much increase their value, and was proceeding to convert them accordingly, when the lessor filed a bill to restrain him, alleging waste:-

Held, that this was not the case of enforcing a negative covenant where the words of contract were clear and indisputable; that the waste alleged was meliorating waste, and that, under the circumstances, the Court below had, in the due exercise of its discretion in such matters, properly refused to interfere by injunction."

22. Ms. Scott did not rely upon the reasoning which led the House of Lords to refuse to grant an injunction. Instead, she relied on a particular passage in the speech of Lord Cairns, the Lord Chancellor, and also on a passage in the speech of Lord Blackburn.
23. Lord Cairns said at pages 719 to 720:

"I said that there is here no negative covenant - not to turn these buildings to any other use. My Lords, if there had been a negative covenant, I apprehend, according to well-settled practice, a Court of Equity would have had no discretion to exercise. If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury - it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves. But, my Lords, if there be not a negative covenant but only an affirmative covenant, it appears to me that the case admits of a very different construction."

24. Lord Blackburn said at pages 729 to 730:

"I will take the question of the covenant in the contract first. Wherever a consideration of a covenant, and examination into its words and meaning, reveal that the plain intention of the parties was that the lessee might have possession of the land, whatever it may be, on the express bargain that a particular structure was to be kept up, or a particular thing was not to be done, and that the lessor stipulated for that, and the lessee came in and took possession of the premises on the terms that he was to keep that bargain, there, as a general rule, the Court of Equity would not do its duty if it did not enforce the contract, because mere damages would not then afford a sufficient or adequate remedy. A very good instance of it was in the case (1) where it appeared clearly that the landlord of a house for some reason, no matter what, thought it desirable for him that the house should not be used as a ladies school, and accordingly he in express terms in the contract under which he let the house, bargained that it should not be used as a ladies school, and a tenant, or an assignee of the tenant, came in, and occupied the premises under the contract, and yet proceeded to use them as a ladies school. In such a case I say it would have been monstrous if a Court of Equity had for a moment hesitated, and had said that the using of the premises as a ladies school would do the landlord no harm. The answer would be plain, whether the damages were great or little, the very bargain, on which the premises were taken, was that the tenant or his assignees should not use them as a ladies school, and therefore he should of course be prevented from doing so.

I think, however, it would be but seldom that you could have it appear distinctly upon a lease that it was intended that a thing should not be done unless there were negative words used. But I am not inclined for my own part to base my opinion upon the mere technical difference between negative words and affirmative words in a covenant. Whether they are negative words or affirmative words are very excellent reasons in considering whether it is meant that the thing should be done, or whether it is not meant, but I do no think it is advisable upon that ground to say that while negative words would shew prima facie you are not to do the thing, affirmative words may mean, but do not necessarily mean that, unless the whole context shews that such is the intention of the parties."

25. I do not think that it is inevitable that the Court of Appeal will take the view that the grant of an injunction is the only possible response to a finding that severance of trade fixtures at the present time would be a breach of clause 2(6). At any rate I do not consider that the reasoning in Doherty v Allman will compel them to reach that conclusion.
26. The headnote refers to a negative covenant where the words are clear and indisputable. Clause 2(6) is a negative covenant. If the Court of Appeal holds that it prevents the severance of trade fixtures, then that will be its meaning. But will the words be considered to be "clear and indisputable"?
27. It seems to me it will be problematic for the claimant so to argue. Their leading counsel initially conceded that clause 2(6) did not prevent severance of trade fixtures. I can well see that the Court of Appeal might disagree with my own interpretation of clause 2(6), but it is an altogether different thing for the Court of Appeal to go on and hold that its interpretation of clause 2(6) will be clear and, not only that, indisputable.
28. I acknowledge that the phrase "clear and indisputable" does not appear in terms in the passages in the speeches relied on by Ms. Scott. Lord Cairns, however, referred to a contract that "a particular thing" should not be done. I doubt if that applies to a covenant such as clause 2(6) which, whatever it means, refers to matters generally and not to specific matters. Further, I consider that the reference to "clear and indisputable" in the headnote was the law reporter's summary of the relevant part of the speech of Lord Blackburn who used words such as "plain", "express", "particular", "the very bargain" and "distinctly" to describe the type of case he had in mind.
29. I also consider that the question of whether the Court of Appeal should grant an injunction in this case might involve consideration of section 50 of the Senior Courts Act 1981. The court can in some cases award damages in lieu of an injunction. The conventional approach to that jurisdiction was described by A.L. Smith LJ in Shelfer v City of London Electric Lighting Company (1895) 1 Ch 269 in these terms:

"There are, however, cases in which this rule may be relaxed, and in which damages may be awarded in substitution for an injunction as authorized by this section.

In any instance in which a case for an injunction has been made out, if the plaintiff by his acts or laches has disentitled himself to an injunction the Court may award damages in its place. So again, whether the case be for a mandatory injunction or to restrain a continuing nuisance, the appropriate remedy may be damages in lieu of an injunction, assuming a case for an injunction to be made out.

In my opinion, it may be stated as a good working rule that -

(1.) If the injury to the plaintiff's legal rights is small,

(2.) And is one which is capable of being estimated in money,

(3.) And is one which can be adequately compensated by a small money payment,

(4.) And the case is one in which it would be oppressive to the defendant to grant an injunction:-

then damages in substitution for an injunction may be given."

30. I wish to make it clear that the submission I am dealing with is Ms. Scott's submission that if the Court of Appeal held that clause 2(6) does prevent, at any rate at the present time, the severance of trade fixtures, that it will be inevitable that the Court of Appeal will grant a final injunction. I do not think that that is inevitable. However, I make it clear I do consider that there is a real prospect that the Court of Appeal would grant an injunction.
31. I will now deal with a second fundamental question which emerged in the course of submissions. What approach should I adopt to this application for an injunction pending appeal? What are the legal principles which I should apply?
32. Ms. Scott submits that the legal principles to be applied are the same as those which apply when a court is asked to grant an interim injunction at an early stage in the proceedings pending the trial of those proceedings; in other words, the principles in American Cyanamid v Ethicon Limited [1975] AC 396.
33. Ms. Scott is entitled to say that there is no reason to apply different principles. The position with an application for an injunction pending a later trial and an injunction pending an appeal is essentially the same. In both cases, when the injunction is applied for, the court does not know what the ultimate conclusion will be as to the rights and obligations of the parties. She is entitled to say that although I have held that severance of trade fixtures is not a breach of clause 2(6), the Court of Appeal may well take a different view and my determination will then be of no effect.
34. Mr. Reynolds QC, who appears for the defendant, was not minded to accept this approach. He submitted that the court has declared that the defendant is entitled to remove trade fixtures. Unless the effect of that declaration is stayed, the defendant should be free to act on it. What the claimant needs is a stay of the court's declaration. The court can grant a stay pending appeal but only when a stay is needed to prevent harm to the appellant in the period before the appeal is determined. He submits that the claimant will suffer no harm by the removal of the trade fixtures before the outcome of the appeal is known.
35. It seems to me that Ms. Scott is basically right about this point. I would have reached that conclusion based on earlier authorities such as Erinford Properties Ltd v Cheshire County Council [1974] Ch 261 and Ketchum International Plc v Group Public Relations Holdings Ltd [1997] 1 WLR 4. In addition, Ms. Scott was able to cite a recent helpful discussion by the Court of Appeal in Novartis AG v Hospira UK Ltd [2013] EWCA Civ 583.
36. In that case the claimants sought an injunction to restrain the infringement of a patent. At trial it was held that the patent in suit was invalid and the claim was dismissed. The trial judge gave the claimant permission to appeal and the claimant then applied for an interim injunction to restrain the alleged infringement pending appeal.
37. The injunction was refused at first instance and the claimant appealed that refusal. The Court of Appeal granted an interim injunction pending appeal. The judgment was given by Floyd LJ with whom Lewison LJ and Kitchin LJ agreed. Floyd LJ summarized the principles to be applied at paragraph 41 as follows:

"I would summarise the principles which apply to the grant of an interim injunction pending appeal where the claimant has lost at first instance as follows:

i) The court must be satisfied that the appeal has a real prospect of success.

ii) If the court is satisfied that there is a real prospect of success on appeal, it will not usually be useful to attempt to form a view as to how much stronger the prospects of appeal are, or to attempt to give weight to that view in assessing the balance of convenience.

iii) It does not follow automatically from the fact that an interim injunction has or would have been granted pre-trial that an injunction pending appeal should be granted. The court must assess all the relevant circumstances following judgment, including the period of time before any appeal is likely to be heard and the balance of hardship to each party if an injunction is refused or granted.

iv) The grant of an injunction is not limited to the case where its refusal would render an appeal nugatory. Such a case merely represents the extreme end of a spectrum of possible factual situations in which the injustice to one side is balanced against the injustice to the other.

v) As in the case of the stay of a permanent injunction which would otherwise be granted to a successful claimant, the court should endeavour to arrange matters so that the Court of Appeal is best able to do justice between the parties once the appeal has been heard."

38. That statement does not specifically refer to the Cyanamid principles. However, it seems to me that the Cyanamid principles are at the heart of that statement. The court asked whether the appeal had a real prospect of success. Cyanamid refers to the need to show a serious issue to be tried. The statement refers to "all the relevant circumstances".
39. In Novartis, the Court of Appeal considered in detail issues as to the unquantifiable damage which each party would suffer with or without an injunction. The statement refers to balance of hardship rather than to balance of convenience or balance of justice.
40. I do not read the judgment in Novartis as laying down a more onerous test for an injunction pending appeal as compared with an injunction pending trial. I consider that "hardship" is being used in that context to refer to the potential injustice which would flow from an injunction which it later turns out should not have been granted or which would flow from a refusal to grant an injunction which it later turns out ought to have been granted.
41. It may be that the formulation in Novartis does owe something to the case law as to the grant of a stay pending appeal. If so, that would seem to be because the Court of Appeal considered that the principles which apply to the grant of an injunction pending appeal and the grant of a stay are directed to the same end, namely the production of a just result on an interim basis before the final outcome is known.
42. Before attempting to apply this approach to the circumstances of this case, there is, I fear, one more point of principle to which I need to refer. Although Ms. Scott put her case on the basis of Cyanamid principles, she heavily relied on the decision in Doherty v Allman. On her approach that decision not only governed the position when a final injunction was sought but also where an interim injunction was sought. She put the matter very clearly and forcefully in paragraph 15 of her skeleton argument in this way:

"TSS appears to take the view that Peel is not likely to suffer financial loss if the injunction is refused. As will appear further below, this is not accepted; but in any event it is nothing to the point. Peel has a contractual right that (assuming its argument on appeal is correct) it is entitled to enforce without demonstrating damage; and damages will not be an adequate remedy for losing the ability to enforce the contract. Refusing an injunction would have the effect of sanctioning TSS's (potential) breach of covenant, rendering the covenant of clause 2(6) unenforceable as regards those tenant's fixtures that are removed prior to the determination of the appeal, and enabling TSS in effect to buy off Peel's contractual rights".

43. In the course of argument there was discussion as to the approach which a court should adopt in the case where, absent an injunction, the claimant would suffer some damage which would be compensated by an award of damages and a case where, absent an injunction, a breach of a claimant's contractual rights would result in no harm, no loss, no damage to the claimant so that it would be entitled to nominal damages only for that breach.
44. The logic of Ms. Scott's submission seems to lead to the conclusion that in the first case an interim injunction would be refused on the grounds that damages were an adequate remedy, whereas in the second case where there was no damage an interim injunction would be granted.
45. I am indeed aware of the argument that is sometimes made when a court is asked to grant a final injunction, namely that if an injunction is not granted the claimant whose rights have been infringed will be without a remedy apart from nominal damages.
46. However, before hearing this application I was not familiar with the suggestion which has been made in this case that a court should grant interim relief at a time when it does not know who is right and who is wrong, even where the claimant cannot show any harm or loss or damage which it will suffer in the absence of interim relief. Certainly in the overwhelming majority of cases, if not all cases, where a court is asked to intervene in favour of a claimant, before the claimant has established the existence of its legal right, interim relief is granted because unless the court intervenes the claimant will suffer uncompensatable harm.
47. Ms. Scott's submissions assumed that Doherty v Allman was the dominant consideration in this case and that the discussion in that case in relation to final injunctions applied to interim relief also. She did not refer to any case which discussed the relevance of Doherty v Allman to an application for an interim injunction.
48. In fact there are two cases which are very much in point in that respect. They are Hampstead & Suburban Properties Limited v Diomedous [1969] 1 Ch 248 and Texaco Ltd v Mulberry Filling Station Ltd [1972] 1 WLR 814.
49. The first of these cases establishes that where there is no arguable defence to the application for interim relief, then the applicant need not show that the breach of contract is causing uncompensatable damage: see page 259. That decision was before Cyanamid but the position is still the same after Cyanamid: see Patel v WH Smith (Eziot) Ltd [1987] 1 WLR 853. That decision is of no help to the claimant in the present case as there is clearly an arguable defence to the allegation of breach of covenant.
50. The second case is more relevant. In Texaco Ltd v Mulberry Filling Station Ltd, the issue was whether the claimant had shown a good arguable case of a breach of contract -- that was the test before Cyanamid -- and whether in all the circumstances the court should grant an injunction to restrain that breach. The claimant relied on Doherty v Allman. The judge in the Texaco case said at 830 to 831:

"The plaintiff however as an exception to this rule submitted on the footing that it succeeded before me on the restraint of trade issue that as the right in respect of whose violation it claimed relief was a contractual negative obligation, an injunction should follow as a matter of course in accordance with the principle stated by Lord Cairns L.C. in Doherty v. Allman (1878) 3 App.Cas. 709, 720. [I have already quoted this passage.] Those obiter observations were made not with regard to an interlocutory injunction but a perpetual injunction; not on motion but at the trial; and on the footing that there was no dispute as to the validity of the covenant relied on. Lord Cairns L.C.'s reference to 'balance of convenience' is readily associated in our generation with interlocutory injunctions; yet in Lord Cairns' generation Kekewich J. in Jenkins v. Jackson (1888) 40 Ch.D. 71, 77 referred to it as comprising considerations relevant to the granting of perpetual injunctions; and even much later Kerr on Injunctions, 6th ed. (1927), p. 32, also so referred to it. It seems to me unlikely that Lord Cairns L.C. directed his mind to interlocutory injunctions at all, but of this there can be no certainty.

If, of course, as here, the validity of the covenant is in dispute on an interlocutory application, it might well be that the judgment at the trial, after full discovery and evidence, will not be in accord with the interlocutory conclusion on a prima facie case and probability of success; and even if validity is not disputed on the motion, it is subject to being in issue at the trial and it does not seem to me that the possibility of its being put in issue (for example, in the light of subsequent information and advice on it) can be justly ignored. Of course, the required degree of judicial conviction of success at the trial can vary from near certainty to something appreciably less, and the application of the Doherty v. Allman, 3 App.Cas. 709 rule to applications for interlocutory injunctions would make the injunction automatic on the probability of success at the trial being established, irrespective of the degree of such probability and every matter which, in accordance with the general rule, it is right for the court to take into consideration. The result would be that a probability of success barely established, without the advantage of full evidence and opportunity for full consideration, would result in an injunction in circumstances in which, until trial, the absence of injunction would be no disadvantage of any substance to the applicant and injunction would cause most serious harm to his opponent. It is not difficult to conceive of such a situation. The plaintiff referred to Hampstead & Suburban Properties Ltd. v. Diomedous [1969] 1 Ch. 248, 259. However, the crucial sentences there have to be read bearing well in mind the careful qualifying words and the significance of the maintenance of the status quo to which I shall come. So my conclusion is that the principle of Doherty v Allman, 3 App.Cas. 709 does not apply to interlocutory injunctions."

51. The decision in Texaco was before the decision in American Cyanamid. However, no later case has cast any doubt on this passage in Texaco. Indeed now that the threshold for an application for an interim injunction has been lowered from good arguable case to a serious issue to be tried, the reasoning in Texaco becomes more rather than less cogent.
52. Having at long last directed myself in relation to these matters of principle, I will now seek to apply those principles to the present application. I will, in particular, as suggested by the claimant, seek to apply the principles in Cyanamid.
53. I consider that there is a serious question to be argued as to whether the severance of trade fixtures, at any rate at the present time, would be a breach of clause 2(6) of the lease. I consider that there is a serious question to be argued as to whether the claimant should be granted an injunction to restrain such a breach if it succeeds on its interpretation of clause 2(6). I need not consider whether that decision would be made by the Court of Appeal itself or whether it would remit the matter to a judge at first instance to determine that issue. I reject the claimant's submission that it is inevitable that the relevant court will grant such an injunction.
54. I next consider what harm would be suffered by the claimant if the defendant were to remove some trade fixtures before the decision of the Court of Appeal is known. In view of the evidence at the trial set out at paragraph 104 of my earlier judgment, it seems most unlikely that the more substantial items will be removed from the premises before the decision of the Court of Appeal is known, although I accept that some trade fixtures might be removed before then.
55. The claimant says that the defendant might contract to sell trade fixtures even if they are not removed by the defendant or the purchaser before that time and that the defendant should be restrained from entering into a contract of that kind. However, if clause 2(6) prevents the severance of trade fixtures, that covenant will bind the lessee and persons deriving title under it such as a purchaser of a fixture.
56. Ms. Scott's case as to the harm which would be done to the claimant relied on the suggested interference with the claimant's contractual rights under clause 2(6). She submitted that nothing should be allowed to happen which would infringe those rights. It was irrelevant that the removal of trade fixtures did not cause any harm in any other sense. She was entitled to insist on an interim injunction even if the removal of the trade fixtures would be beneficial to the claimant, for example, if it prepared the premises for an alternative use sooner rather than later.
57. The difficulty with that submission is that at present, that is the time when the court is asked to intervene, the claimant has not established its rights. What it can say at the present time is there is a serious issue to be argued as to whether it has those rights.
58. For the purposes of interim relief it will normally not be enough to justify intervention from the court that the claimant has a right to have nominal damages for an interference with the rights of his claiming. In particular, I do not accept that I am bound to apply the approach in Doherty v Allman on an application for an interim injunction and I further do not accept that the claimant has shown that even applying that approach to the facts of this case, it is inevitable it will be entitled to a final injunction if it succeeds with its argument as to the meaning of clause 2(6).
59. As a fall-back, Ms. Scott suggested in her skeleton argument that the removal of trade fixtures would cause damage to the claimant's reversion. Her difficulty is I have no evidence to support her suggestion and I cannot see that without that evidence I could reach the conclusion that her suggestion might possibly be right. The evidence in support of this application consists of three short witness statements from the claimant's solicitor. As to possible damage to the claimant, he refers to interference with its contractual rights. He also refers to the possibility that the steel-making plant will permanently cease to function "with the consequent loss of jobs for the existing workforce".
60. Later in this judgment I will refer to this question of future use of the steel plant and employment in the local area. What the claimant does not say is that it will suffer damage to its reversion. It is easy to see why the claimant does not say that. The lease is for a term of 125 years from a date in 1968. There are some 80 years left. The rent is a ground rent. The presence of trade fixtures cannot affect the amount of the rent. The premises and the trade fixtures are currently unused. Their presence on the premises does not improve the lessee's ability to pay the rent and perform the covenants.
61. Conversely, if the lessee were to remove and sell the trade fixtures, that would improve the lessee's ability to pay the rent and perform the covenants. Indeed the lessee has filed evidence to that effect that it needs to sell chattels and fixtures also in order to keep up payment of the rent and outgoings in respect of the premises. There is no covenant requiring the lessee to operate the premises as a steelworks. The landlord cannot distrain on trade fixtures in relation to unpaid rent. If the lease is surrendered or otherwise determined, the lessee will be entitled to remove trade fixtures: see clause 2(11) which so provides.
62. Accordingly, the claimant has not shown that it will suffer any harm if an injunction is refused. That would suggest that damages, probably nominal damages, would be an adequate remedy. The defendant can obviously afford to pay nominal damages. The claimant did not suggest that this would be a case for the award of damages to reflect any loss of bargaining position. Even if there were anything in that possibility, the right remedy would not be to prevent the defendant from removing trade fixtures but might conceivably lead to an examination as to whether some part of the proceeds of sale should be preserved. That might involve considering matters which arise when a court is asked to grant a freezing injunction. Those are not the considerations which I have been asked to address. A claimant for a freezing injunction would have to show a good arguable case and not just a serious issue to be tried.
63. Further, a defendant is normally allowed to use its assets in the ordinary course of business and in this case that would at least permit use of the assets to pay the rent and outgoings in relation to the premises. No doubt there would be many other matters which would need to be considered before a court would be prepared to grant such relief. There has been no suggestion from the claimant that that is the relief that it is interested in securing.
64. The above reasoning suggests that this is not a case in which a court, consistently with principle, should grant the interim injunction which is sought by the claimant. I will, however, briefly consider the other matters identified in Cyanamid.
65. I have some evidence as to the effect on the defendant of the interim injunction which is sought. However, I am not wholly clear from that evidence what precisely the defendant wants to do in this case and when. Does the defendant wish to re-open the steelworks? Does it wish to attract an investor for that purpose? Would it help to attract an investor if the trade fixtures were charged to that investor? Is it open to the lessee, as distinct from its associated companies, to charge the trade fixtures to an investor given they are currently charged to its associated companies? Do the lessee and its associated companies want to re-finance by discharging the existing charges and granting a new charge to an investor? Does the claimant's case as to clause 2(6) inhibit such charges? Would an injunction pending appeal make matters any worse in that respect?
66. None the less, what does come through clearly enough from the defendant's evidence is that it wishes to have the ability to sell trade fixtures to pay the rent and outgoings. It may well need to sell trade fixtures for this purpose. If it cannot sell trade fixtures it may become insolvent and have to be wound up. That would cause it loss and damage which would be unquantifiable so that an award of damages would not be adequately compensated.
67. I consider that if I granted the interim injunctions sought and if it later turned out that such an injunction should not have been granted, damages may very well not be an adequate remedy.
68. Ms. Scott suggests that the defendant could keep going by selling only the chattels and it need not sell any trade fixtures. There is something in that point, but I would not be able to come to a properly considered view of it on the present evidence. I know next to nothing about what is readily saleable, in what timescale and for what price. On the present state of the evidence it is clear to me that there would be a real possibility of harm to the defendant resulting from the grant of an injunction and I cannot eliminate the possibility of such harm by reason of the fact that the defendant will be able to sell the chattels.
69. Before considering any final balancing exercise which may be required on an application such as this, I need to refer to a suggestion made in Ms. Scott's skeleton argument that there is a public interest in the trade fixtures remaining on the premises. Her suggestion is that if the trade fixtures remain on the premises, then there is more chance of the premises being used again as a steelworks.
70. As against that, the witness statement of the defendant's solicitor is that the prospect of re-opening the premises as a steelworks is increasingly remote. I cannot judge what is likely to happen in relation to the future use of these premises. There is no material which would enable me to assess the possibility that the steelworks might re-open. I do not know if use as a steelworks has again become viable. After all, the steelworks previously had to close down when the earlier lessee went into administration. The original workforce was laid off apart from a handful of workers who provide security and the like at the premises.
71. The claimant's solicitor does not explain what led him to make what seems to be a surprising statement that the grant of an injunction would help prevent a loss of jobs for the existing workforce. In any case, would the public interest be served if the premises were cleared of what may be redundant plant and made ready for an industrial use which could provide secure employment in the local area?
72. Given the state of the evidence, I cannot possibly give any weight to these matters. In any case, I very much doubt if the suggested public interest can play any part in the present context where the claimant is asserting its alleged legal rights to counter the defendant's legal rights.
73. Further, although the public interest has in the past been invoked by both sides, I am sceptical about the claims of both parties in this respect. I think it overwhelmingly likely that these two parties are motivated by their own interests and not much influenced by wider concerns.
74. As to the balance of convenience or balance of justice or balance of hardship, it is quite clear to me that the grant of an interim injunction would carry with it a real risk of injustice to the defendant. As the claimant seeks such an injunction in a case where it cannot show any harm to its own position pending the appeal, I consider that there can only be one answer to this application which is that I should not grant it. I will dismiss the application.
(See separate transcript for proceedings after judgment)