An order for specific performance is a discretionary remedy that requires a party to perform its contractual obligations. It is generally reserved for cases where a monetary payment would be inadequate and is usually available for breaches of contracts to sell land (especially where a buyer claims the remedy).
Frasers Islington Ltd v Hanover Trustee Co Ltd [2010] EWHC 1514 (Ch); [2010] PLSCS 175 illustrates the court’s approach in cases where one of the parties claims that an order for specific performance would be inappropriate or should be granted subject to conditions.
The landowner was resisting an order for specific performance of an option that required it to convey its freehold interest in land to a developer on completion of a mixed-use development. It was a condition of the agreement that the developer would then grant the landowner a long leasehold interest in the commercial parts of the development and that the development was connected to the usual services before completion.
The electricity supplier constructed separate transformers to supply electricity to the commercial and residential areas. Unfortunately, the residential transformer was situated in the commercial area and vice versa. The landowner claimed that the developer could not to give vacant possession of the area that housed the residential transformer and refused to complete the transaction until the transformers had been installed in the correct places.
The judge ruled that the party seeking specific performance of a contract must be ready, able and willing to perform its own contractual obligations. However, the important question was whether the defendant would receive substantially what it had bargained for.
The residential transformer was housed in a tiny area of the commercial part of the development and the value of the land on which it was housed represented a miniscule fraction of the value of the entire development. The absence of the land from the commercial lease would not deprive the landowner of the substance of its bargain, especially since the developer had offered to add the residential land that housed the commercial transformer to the commercial lease. The developer had had good reasons for refusing to reposition the transformer and was entitled to specific performance even though it was unwilling to comply in one minor respect with its contractual obligations.
Interestingly, the judge rejected the argument that it would be inappropriate to order specific performance of the contract because the developer had not intended to perform its obligations when the contract was made. He ruled that where a contract to sell land is created by the exercise of an option, the appropriate date for testing whether the claimant intended to perform its obligations is the date on which the obligations were assumed and not the date of the exercise of the option.
The decision confirms that breaches of inessential obligations and/or inability or unwillingness to perform contractual obligations will not necessarily deprive a claimant of an order for specific performance, unless it would be unjust to grant the remedy as a result.
Allyson Colby is a property law consultant
