Sarah McCormick considers the recent decision of the Court of Session (Outer House) in Sapphire 16 S.a r.l v Marks and Spencer Plc.
In March 2020, all non-essential retail premises were required to close. The Marks & Spencer store in East Kilbride shopping centre was no exception.
The first lockdown
When Covid restrictions were first introduced, the store, which has operated as a M&S since the 1970s, closed part of its operations, leaving only essential foodstuff on the shelves.
All other retail space – which had previously sold general merchandise, including clothing - was closed. Whilst other entrances to the store (from the street) remained open, the doors leading from East Kilbride shopping centre into the store were locked up and the window displays into the centre were blacked out.
Easing of lockdown
When Covid restrictions were lifted, rather than resuming trade as normal, M&S continued to offer only limited foodstuff. At one point, the only offering in the store was one shelving unit, selling biscuits and juice.
M&S's lease, though, contained a keep open obligation, requiring it to keep the premises open for business during normal business hours and to maintain lighting in the shop windows each day from sunset until 11pm.
Interim order to "keep open"
Its landlord, Sapphire 16 S.a.r.l., sought and obtained an interim order from the Court of Session in July 2020, requiring M&S to comply with the keep open obligation in its lease by:
- re-opening the whole of the store;
- keeping it open for business during normal business hours; and
- keeping it sufficiently staffed, stocked, furnished and otherwise equipped for that purpose.
Thereafter, M&S converted the store to an outlet, reducing its staff and selling only limited stock at reduced prices. It chose not to re-open the entrances from the shopping centre and the windows to the shopping centre remained blacked-out.
Proceedings alleging breach of the "keep open" order
The interim order did not specify, with any precision, the amount of stock or staff required to be on the premises. Nor did it set out that specific entrances to the store should remain open.
Nevertheless, when proceedings were brought by the landlord alleging breach of the interim order, the court found that – whilst there was some ambiguity in the question of how much stock or staff 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, Lord Braid, said that, on viewing the manner of trading as a whole, 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 is considers it need do in order to comply with its obligations".
The factors the court considered to point to carrying on business "half-heartedly" included the following facts:
- a main source of access to the store remained closed;
- the windows between the store and shopping centre remained blacked out;
- no sign was exhibited directing customers to the entrance which did remain open;
- there was evidence that staff had made comments to the effect that M&S did intend to close the premises at some point;
- there were low levels of stock within the store, as compared to other M&S stores of that size;
- the store was being traded as an outlet, which was unusual given its size and location;
- staff were not consistently wearing M&S livery; and
- there was evidence that at least some shoppers, and other retailers, were – likely due to the factors above – under the impression the premises were closed.
Accordingly, the court found that M&S had failed to comply with the interim order.
Lord Braid did not go so far as to find Marks & Spencer to be in contempt of court, which would have had quasi-criminal consequences. For contempt of court to be established, conduct which is wilful and shows a disregard for the court must generally be proved (with a couple of exceptions).
Lord Braid described this element of the decision as "in some respects a marginal one" but said that, in all the circumstances, he was willing to give the defender the benefit of the doubt.
This decision acts as a useful reminder to both landlords and tenants that, when considering operational decisions which involve either closing or changing the manner of trading at leased premises, the lease should be checked carefully for any keep open provisions which might restrict these steps being taken.
If you have any concerns or questions about a keep open provision, please do not hesitate to get in touch with our Real Estate Disputes team or your usual Brodies' contact.