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.