In the recent case of Thomas Thompson Holdings Ltd & Ors v Musgrave Group Plc & Ors , the landlord’s application for an interlocutory injunction to prevent the anchor tenant from terminating its lease was refused on the basis that the business was trading at a continued loss.
The plaintiffs are the owners of Carlow Shopping Centre and the landlord to the lease with the original anchor tenant, Superquinn. Following the sale and purchase of the Superquinn group, the defendants, Musgraves became the owner and operator of the Supervalu grocery store in the shopping centre. In early December 2015, Musgraves publicly announced its intention to terminate the lease and cease trading in the shopping centre from 22 January 2016, following several years of operating at a substantial loss.
The plaintiffs sought an interlocutory injunction to prevent Musgraves from closing the Supervalu store as it was in clear breach of the ‘keep open’ covenant in the lease. The unilateral decision on the part of Musgraves to terminate the contract would, according to the plaintiffs, cause irrevocable and irreparable damage to the plaintiffs and other tenants in the shopping centre. Musgraves on the other hand, claimed that they would continue to incur further significant losses if forced to trade until the expiration of the lease in September 2018.
The question before the court was whether it should grant a mandatory injunction in circumstances where the tenant has clearly breached a covenant in the lease but is trading at a substantial loss. As there was no clear Irish authority on the question, the court considered the UK position and decided that in this instance the landlord had not met the threshold for a mandatory injunction – proving there was a ‘strong case likely to succeed at trial’. Further, damages would be an adequate remedy to compensate the landlord, especially in circumstances where the lease itself explicitly provided that the tenant indemnify the landlord for breach of covenant. Most importantly, the court felt it would have ‘grave doubts over the wisdom of forcing companies that are trading at a loss to continue to do so’.
The High Court refused the injunction pending the substantive specific performance action. This is a welcome clarification of the Irish position, which adopts a practical commercial approach.
Contributed by Richard Breen & Gerard James.