Specific Performance and Mandatory Injunctions

‘Contracts ought to be performed. To break them, and to propose compensation for the breach by damages, is not complete justice.’

Tilley v Thomas (1867) LR 3 Ch App 61, 72 (Rolt LJ).

An order of specific performance requires the defendant to perform his primary obligations under the contract. There are various restrictions on the availability of specific performance, the most important of which is that it will not be awarded where damages would be an adequate remedy. A mandatory injunction is an order by the court that the defendant do some act. As such, it covers much the same ground, and is subject to similar restrictions, as specific performance.

Falcke v Grey (1859) 4 Drew 651

C agreed to buy a vase belonging to D for £40. D was then offered £200 for the vase by T and accepted that offer. C sought specific performance of his contract with D. Held: C was entitled to an order for specific performance.

‘. . . the contract is for the purchase of articles of unusual beauty, rarity and distinction, so that damages would not be an adequate compensation for non-performance; and I am of opinion that a contract for articles of such a description is such a contract as this Court will enforce . . .’ (Kindersley VC).

Beswick v Beswick [1968] AC 58

Peter Beswick sold his coal merchant’s business to his nephew in consideration of the nephew’s promise to pay a weekly consultancy fee to Peter Beswick for the remainder of the latter’s life, and a weekly sum to his widow after his death. After Peter Beswick’s death, the nephew failed to make the weekly payments to his widow. Held: the widow, in her capacity as administratrix of her late husband’s estate, was entitled to an order of specific performance of the agreement.

RESTRICTIONS ON THE AVAILABILITY OF SPECIFIC PERFORMANCE

DAMAGES WOULD BE AN ADEQUATE REMEDY

Societe des Industries Metallurgiques v Bronx Engineering [1975] 1 Lloyd’s Rep 465

C sought specific performance of a contract under which D agreed to manufacture and supply machinery at a cost of £287,500. C argued that it would take it between nine months and a year to find a replacement. Held: specific performance was refused as damages would be an adequate remedy and there was no evidence that D would be unable to satisfy its liability.

The position in the Bronx case can be contrasted with that in the next case:

Sky Petroleum Ltd v VIP Petroleum Ltd [1974] 1 WLR 576

In 1970 C agreed to buy all its fuel supplies for its filling station from D. In 1973 D sought to terminate the contract alleging a breach by C. C disputed the claim. Pending trial of the action, C sought an injunction restraining D from withholding fuel supplies to it. D argued that a court would not order specific performance of a contract for the supply of goods which were not specific or ascertained. Goulding J granted an injunction: the rule reflected the reality that in most cases involving the sale of goods, damages would be an adequate remedy. On the facts of this particular case, it was clear that damages would not be an adequate remedy.

THE ORDER WOULD REQUIRE CONSTANT SUPERVISION

Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1

The defendant took a lease from the claimant of premises in a shopping centre in Sheffield. The defendant intended to operate a Safeway supermarket from the site. Under the terms of the lease, the defendant undertook to keep the supermarket open for trading during normal business hours for the duration of the 35-year term. With 19 years of the term remaining, the defendant closed the supermarket and ceased trading from the premises. The claimant sought specific performance of the undertaking to keep the store open. Held: The claimant was only entitled to an award of damages.

Lord Hoffmann, who delivered the only substantive speech in the House of Lords, was able to rely on an apparently clear and consistent line of authority to the effect that the court will not order specific performance of a covenant to carry on a business.

According to Lord Hoffmann, the most frequent ground for the court’s refusal to make such an order is that it will ‘require constant supervision by the court’. This, Lord Hoffmann says, refers to the possibility of the court having to give an indefinite series of rulings on whether the order is being obeyed. This is an unwelcome prospect as ‘the only means available to the court to enforce its order is the quasi-criminal procedure of punishment for contempt’.

Lord Hoffmann identified two undesirable consequences which follow from a possible finding of contempt. First, the defendant will be carrying on the business ‘under a sword of Damocles’. Second, the litigation spawned by the order is likely to be heavy and expensive in terms of the costs to the parties and the judicial system.

In his judgment in the Court of Appeal in Co-op v Argyll, Millett LJ said that the constant supervision objection ‘has little force today’. And while Lord Hoffmann thought that the covenant to keep the premises open for retail trade could not possibly be regarded as sufficiently precise, all three members of the Court of Appeal reached the opposite conclusion.

The approach adopted by the House of Lords in Co-op v Argyll may be contrasted with that adopted by the Scottish courts.

Highland and Universal Properties Ltd v Safeway Properties Ltd 2000 SLT 414

In 1974, the defenders became tenants of premises in an Edinburgh shopping centre owned by the pursuer, operating a supermarket business under the name ‘Presto’. Under the terms of their lease, the defenders undertook to keep the premises open during normal hours of business for the retail sale of all goods which may from time to time be sold in a high-class retail store. The date of expiry of the lease was 24th March 2009. In 1995, the defenders decided, for commercial reasons, that they no longer wished to trade from the premises and, without intimation to the pursuers, proceed to implement that decision. The pursuer brought an action seeking an order ordaining the defenders to keep the supermarket open for trading pursuant to the terms of the lease, and the Lord Ordinary granted such a decree, and this was upheld by the First Division.

THE ORDER WOULD BE OPPRESSIVE

Patel v Ali [1984] Ch 283

D agreed to sell her house to C. A delay of some four years, which was not attributable to the fault of either party then occurred before C sought an order of specific performance of the agreement. In the meantime, D, who spoke very little English had suffered serious illness, leading to the amputation of one of her legs, and given birth to two children (having had a child already at the time of the sale). The evidence indicated that D was dependent on the help of friend and relatives, help that she would lose were she to move house. The court held that an order of specific performance would, in the circumstances, inflict on D hardship amounting to injustice. The just response would be to leave C to his remedy in damages provided that such remedy would be effective.

Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1

Lord Hoffmann’s other ground for refusing specific relief was that it would have been oppressive. The order ‘may cause injustice by allowing the plaintiff to enrich himself at the defendant’s expense’. The prospective cost to the defendant of running the business for an indefinite period may substantially exceed the potential loss that the claimant will suffer from the covenant being broken. This puts the claimant in a strong bargaining position from which he may extract, as a release fee, a sum far greater than his likely loss.

Argyll’s own counsel noted that the breach was, on the evidence, always likely to cease well before the date of the next rent review, and the company had, in fact, assigned the lease before the hearing in the House of Lords.

While in the year before closure the store itself was making a daily loss of less than £200, the business as a whole was making a daily profit of more than £1m. In the context of Argyll’s overall financial position, it is nonsense to describe prospective annual losses in the order of £70,000 as oppressive.

Further, the defendant is to be assumed to have entered into the covenant relying on the settled practice of the court not to award specific performance.

THE CONTRACT IS FOR PERSONAL SERVICES

Trade Union & Labour Relations (Consolidation) Act 1992

S 236 No compulsion to work

No court shall, whether by way of—

(a) an order for specific performance or specific implement of a contract of employment, or

(b) an injunction or interdict restraining a breach or threatened breach of such a contract,

compel an employee to do any work or attend at any place for the doing of any work.

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