How do the courts decide whether to grant an order of specific performance

Introduction

Equity intervenes when payment of damages does not serve as adequate remedy in case of breach of a contract. Such intervention is in the form of a court order of specific performance against the defendant to perform their contractual obligations. Such order will also be made to confer benefits on a third party. This essay will explore the circumstances under which a court makes this order.

How Courts grant specific performance?

An order of specific performance is granted only when it is the only option that could deliver justice. The power to issue the order of specific performance is discretion exercised by the court to do justice in absence of an adequate remedy at common law. The order of specific performance is rarely granted and under unique circumstances. It will not be granted where a more appropriate remedy, which may be damages, is available.

There are certain situations where specific performance is the only appropriate remedy. Specific performance is not generally available as a remedy for breach of contract. Special circumstances or reason will call for the order of specific performance. For instance, in the sale of land, order of specific performance may be granted as land is deemed unique and there cannot be an identical market alternative. In Sudbrook Trading Estate Ltd v Eggleton, an option was granted to purchase reversion conferred on lessees under certain leases. On this contention Lord Diplock ruled that damages was not wholly inadequate. Since it would be unjust remedy, the appropriate remedy is a decree of specific performance. Specific performance has, therefore, been suited for contract for sale of land, as damages even if substantial, cannot offer the same market value attached to a single piece of land. However, this may not mean that it is always appropriate. This is supported by the case of Wroth v Tyler, where the court refused specific performance of contract for sale of land as it considered unreasonable in the circumstances. In this case, the contract price was 6,000 pound, at the date of the breach it was 7,500 pounds, and at the date of the order it was 11,500 pounds. Megarry J ruled that the court could award such damages, which extended to 5,500 pounds, to put the plaintiffs into as good a position as if the sale contract had been performed. This resonated with the purpose of specific performance.

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1. Hutton v Watling [1948] Ch 26; affd [1948] Ch 398
2. Beswick v Beswick [1968] AC 58.
3. Wilson v Northampton and Banbury Junction Rly Co. (1872) LR 14 Eq 477; (1874) LR 9 Ch App 279.
4. Co-operative Insurance v Argyll Stores [1997] 3 All ER 297 at 301.
5. Christian Twigg-Flesner, The Europeanisation of Contract Law: Current Controversies in Law (Taylor & Francis 2013).
6. Open University, Chapter 23: Specific performance (Oxford University Press, 2020).
7. Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444, at 478.
8. Ibid.
9. Terence Ingman, The English Legal Process (Oxford University Press 2011).
10. Wroth v Tyler (1974] Ch 30.

The question regarding the order of specific performance is to determine the circumstances that make a remedy adequate or inadequate. There are different circumstances, where the court has issued the order. For instance, in case of inability of the defendant to pay damages, difficulty to prove loss, or of statutory right, for example Landlord and Tenant Act 1985, s 17 requiting landlord to repair. The issue of order of specific performance, as it appears, is not only confined to substituting inadequate damages. It has an economic reason attached with principle of justice or notion of convenience. As for economic reason, the case of RVB Investments Ltd v Bibby is a good example where the court issued the order of specific performance requiring the insolvent surety to complete a lease. In this case, the local authority was pursuing claimant landlord for non-domestic rates. Howver, it would pursue the surety instead if it took the lease. As for justice, the case of Wroth v Tyler mentioned above is a good example where the order would not have been appropriate in these circumstances. As for convenience, the case of Airport Industrial GP Ltd v Heathrow Airport Ltd is a good example where convenience seems to have driven the order of specific performance. In this case, the order was pleaded in anticipation of a contractual breach to secure performance. Claimant anticipated the tenant would not complete the contracted multi-storey car park within the deadline, which would cause significant reduction in its financial return and maybe insolvency. The court while determining specific performance conducts a balancing act considering the circumstance of the case. Such a balancing act could be seen in cases where its constant supervision is required. Thus, in case of contractual term, which is continuing in nature, as occurred in Ryan v Mutual Tontine Westminster Chambers Association, where lessor was need to appoint a porter who would be constantly present, the court would order damages instead. However, later judgments ruled otherwise and sited that difficulty in supervising cannot be the reason to reject the order. As such, the change in the ruling of the court suggests the determining the order is subject to the current circumstances, which may be economic, convenience, justice and not just inadequate damages. It is a standard principle that in presence of a more appropriate remedy, order of specific performance will not be granted. Thus, in case an inferior remedy does justice, a superior remedy will not be granted. Thus, if the goods are ordinary items, which can be compensated with damages, the order is not needed. However, if they are unique or rare, the order may be granted. Thus, in Sky Petroleum Ltd V VIP Petroleum Ltd, the court passed an interlocutory injunction to prevent the defendant from cutting off the supplies of petrol to a garage when there was no other alternative.

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11. Evans Marshall & Co v Bertola SA [1973] 1 All ER 992.
12. Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361.
13. RVB Investments Ltd v Bibby [2013] EWHC 65 (Ch).
14. Ryan v Mutual Tontine Westminster Chambers Association [1893] 1 Ch 116, CA.
15. Terence Ingman, The English Legal Process (Oxford University Press 2011).
16. Ibid.
17. Sky Petroleum Ltd V VIP Petroleum Ltd [1974] 1 All ER 954.
The order of specific performance is an equitable remedy. This means “he who seeks equity must do equity” and “he who comes to equity must come with clean hands”. Thus, the claimant must act equitably if they seek of specific performance. In Walters v Morgan, the order was refused as the claimant took advantage of defendant’s ignorance of the value of property.

Conclusion

Adequate remedy in respect specific performance is beyond merely performing the contractual obligation. It is determined by the facts and circumstances surrounding the case. The notion of justice and economic and administrative convenience has expanded the concept of adequate remedy. Thus, specific performance could be stated to be drive by the maxim that if the claimant seeks equity, he must do equity and come with clean hands.

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18. Richard Stone, The Modern Law of Contract (Cavendish 2005).
19. Walters v Morgan (1861) 3 DF & J 718

Bibliography

Books

Ingman T, The English Legal Process (Oxford University Press 2011)

Open University, Chapter 23: Specific performance (Oxford University Press, 2020)

Stone R, The Modern Law of Contract (Cavendish 2005)

Twigg-Flesner C, The Europeanisation of Contract Law: Current Controversies in Law (Taylor & Francis 2013)