Summary

The claimant had no case on the merits because negotiations had been "subject to contract" and the licence fee had never been paid.

Facts

The claimant ('E'), a provider of studio and rehearsal space to the film and television industry, applied for an interim mandatory injunction for reinstatement to the premises following the second defendant's ('WS') termination of a licence and repossession. E held a five-year lease of certain buildings in East London ('the site') granted in November 1995. In November 1996 WS, holder of a 99-year lease of the site, entered into an agreement for the granting E leases of parts of an additional building on the site for term of fifteen years. Under the agreement E had a license to enter and remain in the additional building on the same terms as if the leases had been granted. The terms included provisions for the payment of a licence fee based upon the rent; a right of re-entry; WS to determine the agreement upon E's failure to perform or observe any material obligations. The leases were not entered into and E never paid the licence fee. Negotiations then took place to revise the terms of the agreement. In October 2000 WS terminated the licence and retook possession of the additional building. In November 2000 E sought reinstatement. It claimed that it was entitled to rent-free periods in relation to the additional building so WS was not entitled to evict it. The basis for this claim was proprietary estoppel or, alternatively, constructive trust. The court had to decide whether E had a strong enough case on the merits for an interim mandatory injunction.

Held

(1) The merits threshold was a flexible one designed to take account of the fact that its grant might involve a greater risk of injustice if it turned out to have been wrongly granted, and that the greater the degree of assurance that E would succeed, the less would be the risk of injustice to WS. There were two decisive reasons why E had no case on the merits: (a) The "subject to contract" nature of the negotiations was decisive; (b) E had never suggested that it was not bound to pay the licence fee from September 1999 to October 2000. The licence fee was never paid and WS was therefore entitled to terminate the licence. There was nothing in the agreement which made the payment of the licence fee conditional on the leases being executed. E had not satisfied the lowest possible threshold for the grant of an injunction - namely a serious issue to be tried. Shepherd Homes Ltd v Sandham (No.1) (1971) Ch 340; Locabail International Finance Ltd v Agroexport (1986) 1 WLR 657; American Cyanamid Co v Ethicon Ltd (1975) AC 396; and Zockoll Group Ltd v Mercury Communications Ltd (1998) considered.

Judgment accordingly.