10 Injunction, Specific Performance, Restitution PDF

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10 GENERAL PRINCIPLES OF SPECIFIC RELIEF (PART 1) Reading Textbook - Chapter 9: [9.05] – [9.190]; Wright – Chapters 12, 14, 15; Barnett & Harder – Chapters 10, 11. Questions to consider: 1.

What types of specific relief might be ordered by a court? On what basis can such orders be made? 

2 prerequisites: damages must be inadeq and equitable remedies are always discretionary.

A. INJUNCTION 

Interlocutory injunction: To continue until the hearing of the cause upon the merits or generally until further order



Perpetual injunction: To effect a decree and concludes a right

B. SPECIFIC PERFORMANCE 

It is the actual execution according to its stipulations and terms, and is contrasted with damages or compensation for non-execution of the contract. Note: limited to contract, available for breach of existing contract (part performance and estoppel).



Therefore, performance is always enforced by court behind time

C. SPECIFIC RESTITUTION 

s78 of the Common Law Procedure Act 1854 (ENG) give courts the power to order D to restore goods without allowing the D the option of paying damages



Courts of equity have always had power to order restoration of goods in specie either in their exclusive jurisdiction (Wood v Rowcliffe) or auxiliary jurisdiction (Pusey v Pusey)

2.

Should Australia follow the Canadian approach to specific performance of contracts for the sale of land? See note 4 in Textbook [9.45]?

Key cases (to be discussed in detail): 1.

Loan Investment Corp of Australia v Bonner [1970] NZLR 724; Textbook [9.40] pg2

2.

ANZ Executors and Trustees Ltd v Humes Ltd [1990] VR 615; Textbook [9.65] pg4

3.

Beswick v Beswick [1968] AC 58; Textbook [9.100] pg5

4.

Gedbury Pty Ltd v Michael David Kennedy Autos [1986] 1 Qd R 103; Textbook [10.140] pg9

Bryan Cheong, 163201 1

A. SPECIFIC PERFORMANCE

SP: Court ordering contracting party to perform their obligations as per the their contractual terms. 

2 Prerequisites: o

Ensures expectation interest; Specific performance is ordered when damages are inadequate to compensate.

o

Establish that court has jurisdiction to grant SP; present good enough reasons to the court that they should exercise their discretion in favour of making an award of specific performance.

3 jurisdictions: (see pg8) Auxillary jsuirs (CL): 

2 prerequisities

Equity jurisdiction Statute jurisdiction (Statue) 

s11.

Specific performance in various situations: 1.

A.1 Land contracts 3

2.

A.2 Goods contracts 5

3.

A.3 Where damages are speculative 6

4.

A.4 Where damages are irrecoverable 6

5.

A.5 Share contracts 7

6.

A.6 Loan contracts 8

7.

A.7 Contracts to discharge another's debts 9

8.

A.8 Contracts to pay money to third parties 10

9.

A.9 Building contracts 11

10. A.10 Contracts for personal services 11 11. A.11 Intellectual property and goodwill 12

1. Land Contracts Damages at law might not be a complete remedy to the purchaser as the land might have special value to the purchaser. Dixon CJ in Dougan v Ley (1946) 71 CLR 142 [150]. RULE1: In Australia, SP is available for land contracts whether or not they are domestic, commercial or investment (Pianta v National Finance & Trustees Limited; (1964) 180 CLR 146)

RULE2: when a vendor refuses to convey title to purchaser, court has jurisdiction to order specific performance because damages cannot adequately compensate purchaser. Recognises the unique nature of each parcel of land (Loan Investment Corp of Australia v Bonner [1970] NZLR 724 - Privy Council) ( Wight v Haberden Pty Ltd [1984] 2 NSWLR 280, and cited with approval in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107.)

Loan Investment Corp of Australia v Bonner [1970] NZLR 724 - Privy Council

2



MF: D sold land to P, loan P $ without security over the land for 10years with interest. D repudiated so P sought SP to take the land.



H: refused SP because the principal transaction of the contract was the provision of a loan with interest over 10 years – nothing to do with the land itself. o

o

Majority (Pearson L): The contract was a composite contract. There were two separate contracts - one for sale and purchase of land. The other for lending and borrowing. 

Consideration given by the purchaser was a twofold promise



1. to pay price of land



2. to receive loan and pay interest and repay capital



Composite contract was predominantly in nature a commercial bargain. Provision of loan is not ancillary but a principal transaction.

Dissent/Minority (Barwick) – this was followed in Australia: 

The contract was a single contract, essentially for the sale and purchase of land. - order for specific performance to be restored.



General assumption is that damages for breach of a mere promise to lend money adequately compensates the would-be borrower; However, assumption is not necessarily of universal validity and must yield when in fact in the particular circumstance, damages would not do justice.



Uniqueness of land: 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



The motives of the appellant in entering into the purchase are irrelevant to thwe question, whethe the contract is one for sale and purcahse of land, an order for specific performance should be made.



there is no such general discretion to refuse specific performance in equity. But because damages are inadequate remedy, justice requires specific performance.

2. Goods Contracts RULE1: Equity won’t usually grant specific performance for sale of goods and chattels because damages are usually adequate. Can simply buy replacements in the open market (Dougan v Ley).

RULE2: Although specific performance may be needed if the good is unusual, rare or of a specific value (Dougan v Ley). Section 56 Sale of Goods Act 1896 (Tas)  allows for specific performance of goods but at the discretion of the court (‘the court may, if it thinks fit, on application of the P’)

Dougan v Ley (1946) 71 CLR 142 

MF: P bought an action for specific performance of an agreement for the sale of a registered and licensed taxi cab. Legislation limited the number of registered cabs.



H: Contract could be specifically enforced on the basis that: o

there were a limited number of registered and licensed vehicles and

o

that damages for loss of profits would be inadequate, and

o

also because the price reflected the value of the licence rather than the vehicle.

3. Where damages are speculative

3

RULE1: A court of equity will decree specific performance because damages at law cannot accurately represent the value of future dividends; and to compel the purchaser to take such damages would be to compel him to sell dividends at conjecture price (Adderley v Dixon).

Adderley v Dixon (1824) 1 Sim & St 607 

MF: Seller sought specific performance of a contract for the sale of debts proved in bankruptcy. Concerned a contract for the sale of uncertain dividends which may become payable from the estates of the two bankrupts.

4. Where damages are irrcoverable RULE1: An injunction will be given over damages Hodgson v Duce (1856) 2 Jur NS 104 

MF: D was made insolvent. D committed series of acts of trespass and waste on Ps property, causing P's tenants to leave premises. P sought injunction restraining D from further acts of trespass, damage or waste upon premises.



H: D had no $. Taking into consideration that D’s actions went beyond acts of trespass, but had been vexatious and oppressive to no ordinary degree, an injunction should be granted.

5. Share Contracts RULE1: If shares are readily available in the market, there will generally be no specific performance ( Dougan v Ley). RULE2: Contracts for the sale of shares, stock or other securities will be specifically enforceable where they cannot be readily obtained in the marketplace (ANZ Executors & Trustees Ltd v Humes Ltd). RULE3: Simply because the P's interest in them is merely financial does NOT always mean that $ damags is an adequate remedy (ANZ Executors & Trustees Ltd v Humes Ltd). ANZ Executors & Trustees Ltd v Humes Ltd 

MF: Smorgon group took over Humes successfully. At time of takeover, there was an issue of notes which gave holders the right to convert the notes into ordinary shares. Smorgon was anxious to acquire those notes to prevent any change of beneficial ownership of its shares. The P only bought shares because they knew Smorgon Group, desperately wanted to get hold of those shares to prevent them from being converted. o



P argued that they only ever wanted to make money on the shares so damages would be a perfectly appropriate remedy and SP was not needed

Held: Specific performance of conversion allowed. Damages will be unsatisfactoy as P would be faced with the need to quantify its loss which is novel and problematic. o

Damages particularly difficult to assess because they only had value by being used to take advantage of Income Tax benefits.

6. Loan Contracts RULE1: Contract to lend money will not be specifically enforced as the borrower can re-finance elsewhere. RULE2: There can be exceptional circumstances where SP is allowed in a contract to lend money. For example, where the loan contract is part of a larger transaction (Wight v Haberdan Pty Ltd). The test is ‘Would justice be done by leaving P to his remedy in damages?’.

Wight v Haberdan Pty Ltd [1984] 2 NSWLR 280 

MF: P (property developer) purchased land from D1 (Haberdan). P borrowed from/entered into a loan contract with the D2 (Beneficial) to provide mortgage finance to complete the purchase. D2 led P to embark on his venture with the assurance that they will back him. But few days before contract conpletion D2 pulled out leaving P to complete the purchase of land without sufficient finances.

4

o

Without the backing, P would have to rescind the contract thus disupting his project.

o

P sought specific performance of the agreement with D2 so that P can complete purchase with D1 before expiration of time for completion.



Held: Kearney J ordered a mortgagee to specifically perform its obligation to provide finance for the plaintiff’s purchase of real estate. The loan contract was held to have been part of a larger transaction including contractual obligations normally amendable to an order for specific performance.



The circumstances created an exception to the general rule and warrant the conclusion that SP be ordered. o

If P did have to get CL damages, there would be very difficult questions of remoteness and how much, delay and expense , and to determine the assessment of damages would be virtually impossible.

o

The complications in leaving P to damages “are so monumental and the prospects of an adequate recovery are so remote as to render such a course an unjust imposition on P.”

7. Contracts to discharge another’s debt RULE1: - SP is enforceable if the benefit to be obtained was NOT just the payment of money but the release of debt by the third party. 

Without SP, the P still potentially be exposed by being sued by the third party for payment of the debt (McIntosh v Dalwood (No 4)).

McIntosh v Dalwood (No 4) (1930) 30 SR (NSW) 415 

MF: Beck, a buyer of shares from P had defaulted, P had then become entitled to keep the deposit and sell the unbought shares. D had been negotiating with Becketts to buy those same shares once Becketts had got them. So a three way deal was done. P consented to  Becketts selling the shares to  D, and in return the defendant agreed to take over the Plaintiff’s liability for a completely different debt, and indemnify P from liability under that debt. o



D also eventually defaulted… entire debt owed by P became payable immediately and P was required to pay it all. So P brought an action against D asking for a declaration that D must indemnify P and that D pay the debt.

Held: SP enforced - D must pay the debt that he promised to relieve P of. The agreement was for D to pay it and keep P safe from having to pay it.

8. Contracts to pay $ to 3rd parties RULE1: Contracts to pay money to a third party may be specifically enforced (Beswick v Beswick). Beswick v Beswick [1968] AC 58 

MF: The deceased entered into a written agreement with the D that in assigning his business to the D, the D is to pay the deceased a certain sum and upon his death, pay his widow [P], 5 pounds per week for the remainder of her life. o

D paid the P once but not again. So P, both in her personal and administratrix of deceased's estate, claimed payment of arrears and an order for specific performance.



Held: Equity will grant SP. SP of the contract was enforced beause the D had taken the whole of the benefit under the contract and therefore as a matter of conscience, should be required to perform his part of it.



Hodson L: The remedy is plainly inadequate becauase:



o

(1) only nominal damages can be recovered

o

(2) in order to enforce a continuing obligation it may be necessary to bring a series of actions whereas specific performance avoids multiplicity of actiom

In a case such as this, there having been an unconscionable breach of faith, the equitable remedy sought is apt. Appellant has had full benefit of the contract and the court will be ready to see that he performs his part. 5

RULE2: In Australia, SP would not be available if the P has not paid any consideration for the contract (Coulls v Bagot’s Executor and Trustee Co Ltd). Coulls v Bagot’s Executor and Trustee Co Ltd 

MF: Mr Coulls had contracted with a company for it to quarry on his land, giving it the right to pay the royalties to himself and his wife as joint tenants. When he died the company stopped the payments, arguing his wife couldn’t require it to pay her the royalties as she had no privity to the contract.



H: The majority held that the company had no obligation towards the wife because she was not a party to the contract, and any authority to pay royalties was revoked by the husband’s death. o

The two dissenters held that the consideration had moved from both husband and wife and that she could enforce the contract by SP.

RULE2.1: EXCEPTION to the rule that consideration is required - The doctrine of privity does not apply to insurance contracts Trident General Insurance Co Ltd v McNeice Bros Pty Ltd 

“There is no reason to doubt that the courts will grant specific performance of a contract of indemnity or insurance

9. Building Contracts RULE1: An order for specific performance won't be made for building contracts just because: 

Another builder can do the work



It is difficult to ascertain precisely what needs to be done under the contract;



It is likely to require constant supervision.



May be ordered where the work is sufficiently defined in the contract, damages are not adequate and the defendant has entered into possession of the land to do the work.

10. Contracts for personal services Rarely granted because: 

Amounting to an order of slavery



Impossible to ensure obligations are performed properly



Loss of trust between parties creates obvious tensions into the future - e.g. promise to marry



Require court to constantly supervise



Impacts on specific performance of other contracts where a substantial part of the consideration for sale is performance of personal service

11. IP and Goodwill 

IP rights are unique, so contracts concerning patents, designs, copyright or trade marks can be specifically enforced if damages are inadequate as a remedy .



Sale of goodwill of a business can also be specifically enforced as well.

B. SPECIFIC RESTITUTION/RECOVERY OF GOODS RULE1: The Specific performance of goods is available under the Sale of Goods Act (Tas) s 56. 

“the court may, if it thinks fit, on the application of the plaintiff, by its judgment or decree direct that the contract shall be performed specifically without giving the defendant the option of retaining the goods on payment of damages.”

6

RULE2: In Equity the court still has jurisdiction to intervene in respect of chattels  arises where: (a) those chattels are of special value to a person in carrying on of his business and (b) where its jurisdiction is attracted by the nature of the relevant chattels, the court can give whatever relief be appropriate, including an order for specific return of the particular chattel.

Doulton Potteries Ltd v Bronotte [1971] 1 NSWLR 591 

MF: P sent to the D a dye they owned for repairs. The D refused to return the dye until the P accounted for repairs. P used dye for their business and any replacement of that dye takes 4 months. P sought injunction to restrain the D from interfering with the P's access to the dye for the purpose of resuming possession of it.



Held: Damages were inadequate remedy for wrongful detention of the dye and accordingly, the jurisdiction of the court is attracted. o

the court of equity to intervene in respect of chattels arises where those chattels are of special value to a person in carrying on of his business and where its jurisdiction is attracted by the nature of the relevant chattels, the court can give whatever relief be appropriate, including an order for specific return of the particular chattel.

RULE3: In cases where the D may have improved the property, an order for SP may work injustice on the D. Thus it is necessary to allow specific restitution subject to the P making some allowances in favour of the D (to the extent which P will be enriched by D’s improvement) (Peruvian Guano Co v Dreyfus Brothers & Co).

RULE3.2: The test for compensation is whether the work done conferred on the P an inconvertible benefit. If so, P must pay compensation as prerequisite to obtaining an order for specific recovery of the chattel proportionate to that of the incontrovertible benefit (McKeown v Cavalier Yachts Pty Ltd).

C. INJUNCTIONS

This is an order made by a court either requiring someone to do something or restraining from doing something. Types of injunction 

Mandatory injunction: Injunction is to make you do something - ap...