Specific Performance

Prof Cameron Stewart

Definition• The remedy of specific performance is the principal means

by which contractual obligations are enforced in equity. To a lesser extent the equitable remedy of an injunction can also be used to enforce a contract. Of course, contractual claims are also enforceable by an order for damages at common law. Whereas the common law remedy of damages is designed to provide monetary compensation to a plaintiff for losses resulting from a breach of contract by the defendant, the equitable remedies of specific performance and injunction are designed to force a defendant to perform his or her contractual obligation.

Specific Performance• In Wolseley Investments Pty Ltd v Gillespie [2007] NSWCA 358, at [33],

Santow JA (Ipp and Tobias JJA agreeing) said that ‘the trigger for the commencement of a specific performance suit will be some threat of refusal, express or at least implied, or some actual refusal, on the part of a contracting party to perform the contract in whole or part’.

• His Honour, at [19], also noted that, in cases of a threatened breach of a contract, the threat does not need to be explicit, but there must be more than merely a theoretical or remote possibility of a breach.

• However, in such cases, his Honour, at [47], also observed that a court has ‘to consider the likelihood or degree of risk of non-performance before granting specific performance.

• Also to be considered is the discretionary factor of hardship and balance of convenience’.

In personam• Like most equitable remedies specific performance is in personam in nature.

This essentially means that the remedy attaches to the person of the defendant rather than to his or her property (in rem).

• This has the result that, provided the defendant is within the jurisdiction of the court, specific performance can be ordered even though the property the subject of the contract may be outside the court’s jurisdiction.

• Thus, in Richard West & Partners (Inverness) Ltd v Dick [1969] 2 Ch 424, an English court ordered specific performance of a contract for the sale of land where the property was located beyond the court’s jurisdiction in Scotland.

• Because of the in personam nature of specific performance, the sanction for non-compliance with an order for specific performance focuses on the person and not on the contract or property the subject of the contract.

• Thus, a defendant who fails to comply with the order will be guilty of contempt of court with the ultimate consequence of being imprisoned for such contempt

Two senses• The remedy of specific performance is applied in two

distinct senses. • First, there is specific performance in the proper sense,

and second, relief analogous to specific performance. • Specific performance in the proper sense presupposes an

executory as opposed to an executed contract. Such contracts ‘contemplate the execution of a formal document or other act in law under which the rights of the parties are to be governed’: Lighting By Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2008) 35 WAR 520 at 545.

Proper sense

• In J C Williamson Ltd v Lukey & Mulholland (1931) 45 CLR 287 at 297, Dixon J said:

• Specific performance, in the proper sense, is a remedy to compel the execution in specie of a contract which requires some definite thing to be done before the transaction is complete and the parties’ rights are settled and defined in the manner intended.

Proper sense• In Bridge Wholesale Acceptance Corporation (Australia) Ltd v

Burnard (1992) 27 NSWLR 415 at 423, Clarke JA explained that the order for specific performance in the proper sense is an order that the whole of the contract, and not individual obligations under it, be carried into effect. Thus, in a contract for the sale of land, upon a purchaser’s application for specific performance in the proper sense, the court would order a vendor to execute a deed of conveyance or memorandum of transfer, as the case may be. Until the execution of such a document is achieved the rights of the parties have not been settled and defined as intended by the contract of sale.

Relief analogous to specific performance

• Relief analogous to specific performance presupposes an executed contract, in the sense that nothing further needs to be done to settle or define the rights of the parties as intended by the contract. In fact, the contract itself fully establishes the parties’ rights.

Relief analogous to specific performance

• In Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Limited [2007] NSWCA 276, the New South Wales Court of Appeal noted that the distinction between specific performance in the proper sense and relief analogous to specific performance ‘lay in the underlying basis that attracted the intervention of equity’. Beazley JA, at [62], said that the equity that justifies the making of an order for specific performance in the proper sense is ‘the need to place the parties in the relative legal positions contemplated by the contract’.

Relief analogous to specific performance

• In relation to relief analogous to specific performance, her Honour referred to the joint judgment of Isaacs and Rich JJ in Pakenham Upper Fruit Company Limited v Crosby (1924) 35 CLR 386 at 395., where their Honours observed that, in such cases, “the equity must be sought in some other consideration appropriate to the actual legal relative situation of the parties”.

Fell v NSW Oil & Shale Co (1889) 10 LR (NSW) Eq 255

Owen CJ in Eq said at 259–60.:• There arises not unfrequently some confusion between two classes of

suits — both popularly described as suits for specific performance, though governed by very different principles — one, in which the contract is executory, and something remains to be done in order to complete the contract, where the contract is not intended to be the final instrument regulating the relations of the parties under the contract; the other in which the contract is executed, and the Court is asked to compel one of the parties to carry out the contract. To the former class only does the expression specific performance strictly apply. In the latter class the remedy is more frequently sought by way of injunction to prevent some breach of the contract, and so indirectly compelling the performance of the contract.

Jurisdiction

• Breach of contract damages ‘as of right’• Specific performance discretionary• Jurisdiction vs discretionary factors

Jurisdictional and discretionary factors

• Practical significance • If specific performance is denied on jurisdictional grounds

there is no power to award equitable damages, and a plaintiff is confined to recovering damages at common law for the breach of contract.

• If specific performance is refused on discretionary grounds, so-called equitable damages can be awarded.

• Although the measure of damages recovered in either case is determined largely on the basis of the same principles, there are some circumstances that preclude the recovery of equitable damages that do not apply to common law damages.

Unconscientiousness• The basis of the court’s decision is the principle of

unconscientiousness. • When a court refuses to make an order for specific

performance, be it on jurisdictional or discretionary grounds, it is effectively saying that it is not unconscientious for a plaintiff to be confined to recovering common law damages for breach of contract.

• On the other hand, when an order for specific performance is granted, the court is effectively saying that it would be unconscientious to confine the plaintiff to pursuing common law damages and that the justice of the case entitles him or her to pursue the equitable remedy of specific performance.

Jurisdictional factors

• Binding contract for valuable consideration• Inadequacy of damages

Binding contract not for valuable consideration

• As a rule, a court has no jurisdiction to grant specific performance of a promise not supported by valuable consideration: Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at 556

• Equity follows the law?• Equity does not assist a volunteer?

Binding contract not for valuable consideration

• Some say that the inadequacy of consideration does not preclude a court entertaining an application for specific performance, although this may be a factor going towards refusing an application on discretionary grounds - Jones and Goodhart G Jones and W Goodhart, Specific Performance, Butterworths, London, 1986, pp 15–6.

• But J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies, 5th ed, LexisNexis Butterworths, Sydney, 2015, p 652.

• Furthermore, although the court has no jurisdiction to order specific performance in (i) the case of a promise not supported by valuable consideration, but set out in a deed, and (ii) a cases of a promise supported by nominal consideration only, in both cases damages at common law will be ordered for breach of such promises: Cannon v Hartley [1949] Ch 213 at 217

Inadequacy of damages at common law

• If a plaintiff can be adequately compensated by an award of damages at common law the court has no jurisdiction to order specific performance. The adequacy or inadequacy of common law damages is determined by reference to the date of the order for specific performance and not the date of the contract: ANZ Executors & Trustees Ltd v Humes Ltd [1990] VR 615, at 632; Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd [2010] NSWCA 283 at [5]

Inadequacy of damages at common law

• The question to be answered on the issue of the adequacy of damages is ‘whether relegating the plaintiff to damages would leave it in as favourable a position in all respects as would exist if the defendant’s obligation were specifically performed’: International Advisor Systems Pty Limited v XYYX Pty Limited [2008] NSWSC 2, at [41]

• This question is jurisdictional not discretionary: Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Limited [2007] NSWCA 276

• Contracts for personalty• Contracts for land

Dougan v Ley

• Sale of taxicab and licence – purchaser had bought another cab in the meantime

• Order for specific performance?• Can you get specific performance of an

agreement to sell goods?• Are damages adequate?• Lack of mutuality – requirement for

supervision?

Dixon J• In the case of goods or securities obtainable upon the market, damages at

law place the disappointed buyer or seller in as good a position as delivery of the articles or receipt of the price because it enables him to go upon the market. But damages at law for the refusal of a vendor of land to go on with the contract might not be a complete remedy to the purchaser, to whom the land might have a special value (Adderley v. Dixon[9]), and the vendor's failure to complete through defect of title left the purchaser without any adequate remedy at law (Flureau v. Thornhill[10]; Bain v. Fothergill[11]). But specific performance is also the right of a vendor of land against a defaulting purchaser. "It has been said, but has long since been overruled, that a seller may go to law, as he only wants the money, whereas the purchaser wants the estate; but a seller wants the exact sum agreed to be paid to him, and he wants to divest himself legally of the estate, which after the contract was no longer vested in him beneficially" (per Lord St. Leonards, Eastern Counties Railway Co. v. Hawkes[12]).

Dixon J• But apart from land, a contract for which has always been

considered a proper subject of specific performance, the question raised for the Court of Chancery was to say in what circumstances equity considered the purchaser entitled to the specific thing contracted to be sold or the vendor to divest himself of it and receive the price, rather than in either case being bound to accept damages as the price of the loss of the contract.

• It was not difficult to say that a purchaser of "articles of unusual beauty rarity and distinction" was entitled to obtain them in specie (Falcke v. Gray[13]).

Dixon J

• In the present case I think that we should have no difficulty in concluding that, because of the limited number of vehicles registered and licensed as taxi-cabs, because of the extent to which the price represents the value of the licence, and because of the essentiality to the purchasers' calling of the chattel and the licence annexed thereto, we should treat the contract as within the scope of the remedy of specific performance.

Dougan v Ley

• Second cab?• An answer was attempted on the part of the

appellant to the effect that the respondents in fact succeeded in buying another taxi-cab. This, I think, is not material. It was not an election on their part to obtain a substitute at the expense, in damages, of the appellant. They were entitled to obtain an additional car, if they could, for their business without prejudicing their right to obtain in specie the taxi-cab registration and licence already contracted for.

Dougan v Ley• Supervision?• An argument was advanced that there was a lack of

mutuality because, as against the respondents as purchasers, the contract could not be enforced without a continued supervision or superintendence, which the Court would not undertake: cf. Peto v. Brightons Uckfield and Tunbridge Wells Railway Co.[18]; Pickering v. Bishop of Ely[19]. But it is evident from the nature of the statutory provision that the argument is misconceived. All the respondents must do is to submit the materials for satisfying the Commissioner. If they fail to satisfy him the decree has no further operation.

Contracts for the sale of land

• Damages at common law have almost invariably been seen as inadequate in contracts involving land.

• Thus, if a vendor in a contract for the sale of land refuses to convey title to a purchaser, the court has jurisdiction to order specific performance of the contract in favour of the purchaser on the basis that the purchaser cannot be adequately compensated by an award of damages at common law.

• A common justification for this practice is based upon the unique nature of each parcel of land.

Loan Investment Corp of Australasia v Bonner [1970] NZLR 724 at 745

• Sir Garfield Barwick said: • No two pieces of land can be identically

situated on the surface of the earth. When a buyer purchases a parcel, no other piece of land, or the market value of the chosen land can be considered, in my opinion, a just substitute for the failure to convey the selected land.

Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146

• High Court ordered specific performance of a contract to a purchaser of land in circumstances where the purchaser was buying the land solely for the purpose of developing it for resale at a profit.

• The High Court held that, even in these circumstances, damages at common law were inadequate in so far as the purchaser was concerned.

Opposition

• Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 at 519, the Privy Council observed that, in some circumstances, no distinction could be drawn between land sale contracts and other commercial contracts because “land can also be an article of commerce and a flat in Hong Hong is probably as good an example as one could find”.

• This observation clearly implies that damages could be an adequate remedy in contracts involving land.

Opposition• Semelhago v Paramadevan [1996] 2 SCR 425 at 428–9;, Sopinka J

said:• While at one time the common law regarded every piece of real

estate to be unique, with the progress of modern real estate development this is no longer the case. Both residential, business and industrial properties are mass produced much in the same way as other consumer products. If a deal falls through for one property, another is frequently, though not always, readily available. It is no longer appropriate, therefore, to maintain a distinction in the approach to specific performance as between realty and personalty. It cannot be assumed that damages for breach of contract for the purchase and sale of real estate will be an inadequate remedy in all cases

Contracts to pay or lend money

• Generally, contracts to pay or lend money are ones where a plaintiff will be adequately compensated by an award of damages at common law.

• However, in some circumstances common law damages will not do justice to the plaintiff and the court will have jurisdiction to award equitable relief

Wight v Haberdan Pty Ltd [1984] 2 NSWLR 280

• Kearney J ordered specific performance of a money lending contract

• Damages at common law were not an adequate remedy because of the complex questions that would have arisen, the delay and expense involved and the fact that damages would be extremely difficult, if not impossible, to assess with reasonable accuracy.

Contracts for the benefits of a third party

• Contracts in which the promisor’s obligation to be enforced is the conferral of a benefit upon a third party to the contract raise particular issues as to whether damages at common law are an adequate remedy.

• An important example of such a contract is where the promisor’s obligation is to pay a sum of money to a third party.

• At first glance it could be surmised that damages would generally be an adequate remedy. However, this is not the case. The plaintiff’s measure of damages in such a case will usually be nominal

Coulls v Bagots Executor & Trustee Co Ltd (1967) 119 CLR 460

• Mr Coulls contracted with O’Neil Constructions to quarry part of his land.

• O’Neil was to pay royalties to Mr Coulls and his wife as joint tenants (he said tenants in common but meant jts – ‘the one that goes to th living partner’).

• When Mr Coulls’ died, his executor (Bagots) sought to determine whether O’Neil was required to pay the royalties to the estate or to Mrs Coulls.

• A majority of the High Court held that the royalties were payable only to the estate as the royalties had not been properly assigned to Mrs Coulls

• Barwick CJ and Windeyer J concluded that where a promise is made to joint promisees then either promisee can enforce even though consideration only moved from one

Barwick CJ• It must be accepted that, according to our law, a person not a party to a contract may not

himself sue upon it so as directly to enforce its obligations. For my part, I find no difficulty or embarassment in this conclusion. Indeed, I would find it odd that a person to whom no promise was made could himself in his own right enforce a promise made to another. But that does not mean that it is not possible for that person to obtain the benefit of a promise made with another for his benefit by steps other than enforcement by himself in his own right : see the recent case of Beswick v. Beswick (1966) Ch 538 . I would myself, with great respect, agree with the conclusion that where A promises B for a consideration supplied by B to pay C then B may obtain specific performance of A's promise, at least where the nature of the consideration given would have allowed the debtor to have obtained specific performance. I can see no reason whatever why A in those circumstances should not be bound to perform his promise. That C provided no part of the consideration seems to me irrelevant. Questions of consideration and of privity are not always kept distinct. Indeed, on some occasions when lack of privity is the real reason for not allowing a plaintiff to succeed on a promise not made with him, an unnecessary and irrelevant reason is given that the plaintiff was a stranger to the consideration ; that is to say, that he was not merely not a party to the agreement but was not a party to the bargain.

Barwick CJ• But as I construe this writing, we have here not a promise by A with B for

consideration supplied by B to pay C. It was, in my opinion, a promise by A made to B and C for consideration to pay B and C. In such a case it cannot lie in the mouth of A, in my opinion, to question whether the consideration which he received for his promise moved from both B and C or, as between themselves, only from one of them. His promise is not a gratuitous promise as between himself and the promisees as on the view I take of the agreement it was a promise in respect of which there was privity between A on the one hand and B and C on the other. Such a promise, in my opinion, is clearly enforceable in the joint lifetime of B and C : But it is only enforceable if both B and C are parties to the action to enforce it. B, though he only supplied the consideration, could not sue alone. If C were unwilling to join in the action as plaintiff, B no doubt, after suitable tender of costs, could join C as a defendant. And A's promise could be enforced. But the judgment would be for payment to B and C. If B would not join in an action to enforce A's promise, I see no reason why C should not sue joining B as a defendant. Again, in my opinion, A's promise would be enforced and a judgment in favour of B and C would result. In neither of these cases could A successfully deny either privity or consideration.

Windeyer J

• Suppose that A makes a contract with B that, for consideration moving from A, B will pay $500 to C, and that B fails to do so, C cannot sue B at law. Nor can he seek relief in equity unless A has become a trustee for him of his, A's, rights under the contract. (I leave out of consideration any statutory modification of these rules.) It is, however, equally certain that A can sue B for damages; for, by not paying C, B has broken his contract with A. (Alternatively A may sue B for specific performance in a case where that remedy is available.)

Windeyer J• Yet I do not see why, if A sued B for a breach of it, he must get no

more than nominal damages. If C were A's creditor, and the $500 was to be paid to discharge A's debt, then B's failure to pay it would cause A more than nominal damage. Or, suppose C was a person whom A felt he had a duty to reward or recompense, or was someone who, with the aid of $500, was to engage in some activity which A wished to promote or from which he might benefit - I can see no reason why in such cases the damages which A would suffer upon B's breach of his contract to pay C $500 would be merely nominal: I think that, in accordance with the ordinary rules for the assessment of damages for breach of contract, they could be substantial. They would not necessarily be $500; they could I think be less, or more.

Windeyer J• Suppose that A does recover substantial damages for B's failure to perform his promise to A to pay

C $500 - the next question is does he recover these damages for himself or for C. Notwithstanding the statements in Beswick v. Beswick (1966) 1 Ch 538 suggesting that he would recover them for C, I do not see why this should be. On the hypothesis of a purely contractual right with no trust attached, why should A hold for C the proceeds of his action? He sued at law for damages he himself suffered, not as the representative of C. C had no right of action. A, not being a trustee of his contractual rights, might, had he wished, have released B from his contract, or declined to sue him for breach of it; or by agreement between A and B the contract could have been varied. C could not have complained. Why then is it said that proceedings brought by A to enforce his legal right give C a right against A when previously he had none? (I leave out of consideration the possibility of a bargain between A and C supported by consideration moving from C.) Of course A, whose purpose had miscarried because of B's breach of contract, might make over any damages he recovered to C: but that would not be because C had a right to them, but because A still wished to give effect to his plan to confer a benefit on him. In a case in which specific performance was an available remedy, A might choose to seek that form of redress against B, and thus obtain a judgment that B pay C $500. But that would not be because A was enforcing a right of C, but because he was enforcing his own right against B by obtaining an order that B perform his contract with him, A. For this reason - and always on the assumptions that there was no trust and that the transaction was as between A and C wholly gratuitous - I am not persuaded that C could force A to seek redress from B, or dictate to him what form of redress, specific performance or damages, he should seek.

Beswick v Beswick• Peter Beswick contracted with his nephew John Beswick. • By the terms of the contract Peter was to transfer his business to

John and in return John agreed to employ Peter as a consultant for the rest of his life and after Peter’s death to pay Ruth Beswick (Peter’s wife) an annuity for the rest of her life.

• After Peter’s death John refused to make the payments to Ruth. • Ruth, in her capacity as the administratrix of Peter’s estate,

brought an action seeking specific performance of the obligation to pay the annuity. NB this bit is important

• The House of Lords ruled in Ruth’s favour holding that common law damages were an inadequate remedy

Beswick v Beswick

• Lord Upjohn, at AC 102; All ER 1221, observed that in such a case, especially where the plaintiff has performed his or her contractual obligations and all that remained to be done was for the defendant to honour his or her obligation and pay money to the third party, equity would enforce the obligation as common law damages would be inadequate to meet the justice of the case.

Attorney General v Blake [2001] 1 AC 268

• Lord Nicholls interpreted Beswick v Beswick as a case in which:

• ‘[t]he law recognised that the innocent party to the breach of contract had a legitimate interest in having the contract performed even though he himself would suffer no financial loss from its breach’.

Could the contracting party ever get damages for the benefit to the third party?• The Albazero [1977] AC 774 Lord Diplock said: • [I]n a commercial contract concerning goods where it is in the

contemplation of the parties that the proprietary interests in the goods may be transferred from one owner to another after the contract has been entered into and before the breach which causes loss or damage to the goods, an original party to the contract, if such be the intention of them both, is to be treated in law as having entered into the contract for the benefit of all persons who have or may acquire an interest in the goods before they are lost or damaged, and is entitled to recover by way of damages for breach of contract the actual loss sustained by those for whose benefit the contract is entered into.

Could the contracting party ever get damages for the benefit to the third party?• Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd

[1994] 1 AC 85 at 114–5 – assignment of contractual rights without permission

• B, a contracting party, could bring an action to recover damages from A, the builder, for losses suffered by C, a third party, where under the building contract it was contemplated that the property would be purchased by C and there was a prohibition on the assignment of the benefit of the contract from B to C without the consent of A, thereby making it reasonably foreseeable that C would be unable to bring an action against A

Could the contracting party ever get damages for the benefit to the third party?• Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518 the House of

Lords was faced with a situation in which A entered into a building contract with B for B to build commercial premises on land owned by C. B and C were part of a group of companies.

• As part of the arrangements made for the building work, A also executed a duty of care deed in favour of C in relation to the building work. This gave C a cause of action against A in relation to any defective building work on A’s part.

• A’s work was defective and the issue before the court was whether B could sue A to recover damages for losses incurred by C as a result of the defective building work.

• The majority of the House of Lords held that B could not recover damages for C’s losses because C had a separate cause of action against A pursuant to the duty of care deed.

• The view of the minority was to the effect that if B was unable to recover for C’s losses, the law was defective in that B would be unable to get compensation in relation to not getting what B contracted for— that is, performance of the contract in favour of C.

Could the contracting party ever get damages for the benefit to the third party?

• Chidiac v Bhatt [2014] NSWSC 1253; • Trident General Insurance Co Ltd v McNiece

Bros Pty Ltd (1988) 165 CLR 107 at 118–19 per Mason CJ and Wilson JJ;

• FCT v Orica Ltd (1998) 194 CLR 500 at 542

Personal services contracts• Discretionary factor?• Equity will not enforce a contract if to do so would result

in compelling the defendant to maintain a personal relationship with the plaintiff. The underlying rationale for this principle lies in human nature and the undesirability of maintaining a personal relationship against the will of one of the parties to the contract. As was observed by Fry LJ in De Francesco v Barnum (1890) 45 ChD 430, at 438, courts ‘are bound to be jealous, lest they should turn contracts of service into contracts of slavery’

CH Giles & Co Ltd v Morris [1972] 1 All ER 960

• G and his coy G Ltd contracted with Invincible Policies Ltd to, amongst other things appoint G as a manager

• SP was ordered but then ignored – contempt proceedings• Megarry J - even though a contract that has been entered into pursuant to a

specific performance order may not be enforceable because it is a contract for personal services, this is no bar to ordering its execution.

• Although such a contract for personal services would usually not be specifically enforced, the plaintiff would nevertheless recover common law damages if it was breached.

• Megarry J:• The distinction between an order to perform a contract for services and an order

to procure the execution of such a contract seems to me to be sound both in principle and on authority. I do not think that the mere fact the contract to be made is one of which the court would not decree specific performance is a ground for refusing to decree that the contract be entered into

Tradition Australia Pty Ltd v Gunson [2006] NSWSC 298

• An employer sought specific performance of its contracts with three employees employed in a very specialised field within Australia’s capital markets broking industry. The employees were engaged under fixed term contracts, but had, allegedly in breach of their contracts, commenced work with another employer at the time the employer sought relief

• Barrett J, after consideration of the relevant authorities, indicated that specific performance of employment contracts would be an extremely rare occurrence.

• Barrett J refused the order as it would have compelled a personal relationship

Turner v Australasian Coal & Shale Employees Federation (1984) 55 ALR 635

• The Full Court of the Federal Court observed that in employment contracts specific performance had been traditionally denied on the ground that repudiation by one party destroyed the mutual confidence which must exist between an employer and employee, thereby making it undesirable to compel performance of an employment contract between them.

• However, the Full Court observed that this need not always be the case, as not all employment relationships are ones where the relationship of mutual confidence must exist. Thus, in the situation of persons employed by large corporate enterprises, the Full Court said:– It is difficult to say that a relationship of mutual confidence must exist in the case

of every person employed by a large corporate enterprise. There are many occupations in such enterprises where the precise identity of the employee performing a particular job is immaterial to the collective management of the corporation.

Geys v Société Générale, London Branch [2013] 1 AC 523

Sumption JSC• Historically, there have been three main reasons for this. The first is that the

relationship of employer and employee was traditionally regarded as a highly personal one. In an age of large corporate enterprises many of whose employees perform routine jobs, the personal character which was once typical of employment relationships has lost much of its former importance. But employment is none the less a relationship based on mutual trust and confidence, a factor which has assumed growing importance in the way that the law has developed over the past 30 years. Second, the difficult and litigious history of industrial relations in the United Kingdom in the late 19th and early 20th centuries reinforced the sensitivity which the common law had always had about any intervention by a court which might force the parties to continue in a relationship which has been described as “at once inter-dependent and oppositional”: The Oxford History of the Laws of England, vol xiii (2010), p 623 … This makes it more difficult to justify intervening in a way that forces an employer to employ someone if the law is to maintain the ordinary principle that remedies should operate mutually or not at all.

Geys v Société Générale, London Branch [2013] 1 AC 523

• Third, legal thinking in this area has always been influenced by a concern for the productive use of resources, including labour. This … is reflected in the abiding concern of the common law to ensure the terminability of contracts of employment, without prejudice to the subsequent regulation of the financial consequences by an award of damages. The harsher consequences of this approach for individuals have been mitigated in the last half century by a parallel scheme of statutory protection of employment, operating within defined limits and administered by specialised statutory tribunals with limited jurisdiction over purely contractual disputes. But the statutory protection of employment overlays the common law without necessarily altering it. Indeed, it makes the development of a more stringent standard of employment protection at common law unnecessary and perhaps inappropriate.

Constant court supervision• Contracts in which the parties’ obligations are imprecisely defined will generally

not be specifically enforced. In Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1, at 12–13; [1997] 3 All ER 297, at 1302–3, Lord Hoffmann said:

• It is the possibility of the court having to give an indefinite series of rulings to ensure the execution of the order which has been regarded as undesirable. Why should this be so? A principal reason is that … the only means available to the court to enforce its order is the quasi-criminal procedure of punishment for contempt … The prospect of committal or even a fine, with the damage to commercial reputation which will be caused by a finding of contempt of court, is likely to have at least two undesirable consequences. First, the defendant … has to make decisions under a sword of Damocles … Secondly, the seriousness of a finding of contempt for the defendant means that any application to enforce the order is likely … to be expensive in terms of cost to the parties and the resources of the judicial system.

Co-operative Insurance Society v Argyll Stores

• Co-operative Insurance Society (CIS) was the owner of a shopping centre and Argyll Stores was the tenant of the centre’s supermarket.

• With 19 years of the lease remaining, Argyll gave notice to CIS of its intention to close the supermarket.

• CIS, concerned that the closure would adversely affect other tenants, requested Argyll to keep operating the supermarket until a new supermarket operator could be found to take over the premises.

• Argyll refused to accede to this request and proceeded to close the supermarket.

• CIS sought specific performance of the lease obligation to operate the supermarket during normal business hours.

• A unanimous House of Lords refused the application. The principal basis for the decision was that enforcement of the obligation to carry on the supermarket business would require the constant supervision of the court.

Co-operative Insurance Society v Argyll Stores

• Lord Hoffmann, at AC 13; All ER 303, drew a distinction between cases where the obligation that was the subject of an application for specific performance concerned the carrying on of activities and those where the obligation related to achieving a result. In the latter case, his Lordship said that if the result was defined with sufficient precision, specific performance would be ordered because the possibility of subsequent wasteful litigation would be minimised.

• The degree of precision in defining the obligation was of a higher order than that required to escape the consequences of a contract being void for uncertainty.

• However, with obligations of an ongoing nature, specific performance would not generally be ordered because of the threat of repeated litigation arising from disputes as to whether at any particular time the defendant was complying with the order.

• This was particularly important in this case because Argyll’s obligation to keep the supermarket open was of an ongoing nature.

Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at

46–7• What is significant is the acceptance by the House of Lords

that the concept of ‘constant supervision by the court’ by itself is no longer an effective or useful criterion for refusing a decree of specific performance … Reference to constant court applications should not be misunderstood. The courts are well accustomed to the exercise of supervisory jurisdiction upon applications by trustees, receivers, provisional liquidators and others with the responsibility for the conduct of administrations. The reservation of liberty to apply to the Federal Court in respect of certain of the orders to be made is in no way out of the ordinary in the exercise of equitable jurisdiction.

Hardship

• An order for specific performance will be refused if it would result in unconscionable hardship upon the defendant. It is not any hardship to the defendant that will suffice.

Dowsett v Reid (1912) 15 CLR 695

• Agreement for lease of a farm• Lack of understanding – unable to read/drunk• Specific performance not ordered• Damages

Dowsett v Reid (1912) 15 CLR 695

• The court must balance the potential hardship to the defendant that would result if specific performance were granted with the potential hardship to the plaintiff if specific performance were refused.

• If the two cancel each other out, specific performance will be ordered despite the hardship to the defendant.

Falcke v Gray (1859) 62 ER 250

• Specific performance of an option to purchase rare China jars at a price 80 per cent below market value was declined on grounds of hardship to the defendant.

• Because the contract was for a rare and special chattel, the court had jurisdiction to award specific performance, as common law damages to the plaintiff would have been an inadequate remedy.

• However, the hardship to the defendant led the court to refuse the grant of relief in the exercise of its discretion.

Vitiating factors

• Equitable relief will be refused if the contract is affected by vitiating factors due to the defendant’s conduct or actions. Thus, contracts induced by a defendant’s misrepresentation, mistake, duress, undue influence

• Unconscionability

Lack of mutuality• Specific performance is not available to a plaintiff unless the defendant

could also have obtained relief against the plaintiff. This principle of mutuality cannot be raised by a defendant if the reason that the defendant could not get equitable relief against the plaintiff is to be found in the defendant’s own conduct or default. Thus, if the defendant cannot get equitable relief because of some misrepresentation, unconscionable conduct, undue influence, laches and the like on his or her part, the plaintiff will not be denied relief on lack of mutuality grounds. The classic example of a lack of mutuality is a contract with a minor. The minor will be unable to receive an order for specific performance against the other party as that person will be unable to insist upon his or her rights against the minor. Thus, there is a lack of mutuality, which impairs the minor’s own ability to seek the equitable remedy: Boyd v Ryan (1947) 48 SR (NSW) 163

Lack of mutuality• The critical aspect of the mutuality principle is the question of when

mutuality must be present. In Price v Strange [1978] Ch 337; [1977] 3 All ER 371, it was held that the critical time for mutuality to be present is the date on which the court is to make the order for specific performance. The fact that mutuality may not have existed at an earlier time is irrelevant. In Price v Strange, mutuality was not present at the time of the breach of contract because the plaintiff’s obligation to repair and renovate an aparatment would have required the constant supervision of the court, thus precluding the defendant from obtaining specific performance

• However, by the time of the hearing, the repairs and renovations had been completed, and thus there was no reason why the defendant would not have been able to obtain specific performance against the plaintiff. Thus, mutuality was present at the date of hearing and the plaintiff obtained his order for specific performance.

Plaintiff in substantial breach and/or not ready, willing and able to perform

• A plaintiff will be denied equitable relief if he or she is in substantial breach of the contract. A substantial breach means a breach that would enable the other party to terminate the contract for that breach. Other breaches do not disqualify a plaintiff from obtaining relief in equity. In Green v Sommerville (1979) 141 CLR 594, at 610; 27 ALR 351, at 363, Mason J said:

• It is well settled that a plaintiff in a suit for specific performance is not required to show that he has strictly complied with all of his obligations under the contract; it is enough that he has performed and is ready and willing to perform the substance of the contract.

Plaintiff in substantial breach and/or not ready, willing and able to perform

• Even if the plaintiff has committed a substantial breach, the plaintiff will be entitled to equitable relief if the other party has affirmed the contract and elected not to terminate it: Mehmet v Benson (1965) 113 CLR 295. The court will make ancillary orders to compensate a defendant for any losses that result from the plaintiff’s breach of contract.

Mehmet v Benson (1965) 113 CLR 295

• plaintiff who was a purchaser of land under an instalment contract, and who, during the currency of the contract, was declared bankrupt.

• While a bankrupt, the plaintiff, because of the limitations imposed upon a bankrupt to perform a contract, was not ready, willing and able to perform, and would thus not have been able to obtain an order for specific performance of the contract.

• However, the plaintiff obtained a discharge from bankruptcy and then sought an order for specific performance

Barwick CJ• The question as to whether or not the plaintiff has been and is

ready and willing to perform the contract is one of substance not to be resolved in any technical or narrow sense. It is important to bear in mind what is the substantial thing for which the parties contract and what on the part of the plaintiff in a suit for specific performance are his essential obligations. Here the substantial thing for which the defendant bargained was the payment of the price: and, unless time be and remain of the essence, he obtains what he bargained for if by the decree he obtains his price with such ancillary orders as recompense him for the delay in its receipt. To order specific performance in this case would not involve the court in dispensing with anything for which the vendor essentially contracted.