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Specific Performance...

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SPECIFIC PERFORMANCE BACKGROUND o

SP will not be ordered to enforce specific provisions BUT only to enforce the entire contract (Beswick; Williamson; York Civil v Coleman Rail)

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Discretionary remedy where court orders party in breach of a contract to specifically perform it (Williamson v Lukey) o

Williamson v Lukey & Mullholland (1931) 45 CLR 282, 297, Dixon J : ‘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’. 

Entitled to SP of a contract almost as of right (Zhu v Treasurer of NSW)

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Operates in personam – breach can lead to personal remedies (eg. Contempt)

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AIM = place parties in positions actually contemplated by performance of the contract (Jaddcal v Minson)

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“strict sense” of SP - forcing a party to execute a final instrument or do a certain act which then gives effect to the contract (eg. executory contract) W

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“wider sense” of SP - ordering a party to perform an obligation under a contract that already exists

STEP 1 o

ELEMENTS:

AN LEGALLY ENFORCEABLE AGREEMENT o

Indicia of a binding contract: 

Consideration: 

equity will not assist a volunteer - Jeffery v Jeffery (1841).

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there can be no specific performance of a voluntary agreement and uncertain contracts

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Offer and acceptance: 

The contract must be properly formed

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Must be a contract or agreement.

Certainty: 

there must be certainty of subject matter and obligations of the parties

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If contract is uncertain or no contract or contract rescinded or terminated = no specific performance (Tanwar Enterprises Pty Ltd v Cauchi)

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Equity will not specifically enforce a contract that is not binding or where a party has a right to rescind or terminate (Tanwar Enterprises Pty Ltd v Cauchi)

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A BREACH/THREATENED BREACH OF THE AGREEMENT BY D: o

Part Performance 

The object of the doctrine is ‘always to enlarge part performance into complete performance’ (J.C. Williamson v Lukey & Mullholland (1931) (Dixon J)

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Where an oral agreement exists that should have been in writing, it may be specifically enforced if the doctrine of part performance is satisfied.

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Dispositions of land must be in writing - s 23C Conveyancing Act 1919 (NSW).

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In order to constitute part performance the act(s) must McBride v Sandiland (1918) [Isaacs and Rich JJ]: 

Must be in performance of the agreement; o

The act done must be in performance of the agreement: Maddison v Alderson (1883) (Lord Selbourne LC, Lord Blackburn)

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The act is sufficient if it is permitted by the agreement although neither required nor expressly authorized by it: Millett v Regent [1975] (Hutley JA).

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Must be referable to the agreement; and o

The acts must be unequivocally in their own nature and referable to the alleged agreement: (Maddison v Alderson (Lord Selbourne LC, Lord Blackburn)

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The acts must point to the existence of an agreement between the parties of a general class to which the agreement allegedly belongs (Francis v Francis [1952] (Smith J)

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Some authorities suggest that only a mere reference to some contract as alleged is required: Steadman v Steadman [1976] (Lord Simon of Glaisdale)

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Must involve a change of position o

The doctrine is based upon the fact that it would amount to an equitable fraud on the part of the defendant to rely upon the Statute of Frauds once the plaintiff has relied on the agreement to its detriment and commence performance: Maddison v Alderson. (Lord Selbourne LC, Lord Blackburn)

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This is a separate equity that arises out of the acts of part performance and not the contract itself so that it is unconscientious for a defendant to plead the Statute of Frauds to avoid its obligations: McBride v Sandiland. [Isaacs and Rich JJ]

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The difficulties of applying a strict part performance test has been ameliorated by other remedies such as equitable estoppel, restitution and constructive trusts: 

Estoppel - Walton Stores (Interstate) Ltd v Myer (1988)

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Constructive Trust - Ogilvie v Ryan [1976]

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Restitution - Pavey & Mathews Pty Ltd v Paul (1987)

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Narrow view: 

Where a person seeks to avoid the promise made orally on the basis that it was not in writing, several remedies available: o

part/specific performance, equitable estoppel, restitution, constructive trust.

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services must be “unequivocally” referable to the agreement (McMahon v Ambrose [1987] – endorsed by McBride v Sandilands, Cooney v Byrnes; JC Williamson Ltd v Lukay & Mulholland).

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Wide view – generally followed: 

refused to apply the narrow view and held that the appropriate test was to ask whether it was more probable than not that a contract has been entered into (Steadman v Steadman [1976])

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surrounding circumstances to be considered (Ogilvie v Ryan, Holland)

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Critical that a disposition of land be in writing. Moreover sufficient acts of part performance to support an oral agreement incl acts of ownership (taking possession, paying rates, improve property) (Khoury v Khoury (2006))

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Non-Performance 

must prove that D has not performed the contract according to its terms - ie there must be breach or threatened breach (in case of anticipatory breach P must seek specific performance instead of accepting the repudiation).

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The breach must be actual, anticipated or threatened. Proceedings can start as so as the party threatens/actually refuses to perform the contract (Turnerv Bladin [1951] HCA (Williams, Fullagar and Kitto JJ))

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In cases of anticipatory breach, the innocent party may seek specific performance instead of accepting the repudiation by terminating the contract. The order for specific performance may be postponed until the time for performance arrives. (Hasham v Zenab [1960] [Coleman J])

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D can raise issue of jurisdictional denial by asserting that performance is impossible. If the assertion is true, the court will refuse the remedy (Ferguson v Wilson (1866)) 

even where D caused the impossibility (Kennedy v Vercoe (1960)).

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impossibility may be the result of illegality (Norton v Angus (1926)) or necessary consent of third party – eg minister of govt - is not forthcoming (Dougan v Lay (1945)).

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Impossibility is usually treated as a jurisdictional issue (McMahon v Ambrose [1987] 

Marks J at (849) whereas futility of performance is a discretionary defence. Refusing relief on either ground is consistent with equitable maxim that “equity does nothing in vain”.

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CL DAMAGES WOULD BE INADEQUATE REMEDY FOR THE BREACH o

If damages are an adequate remedy the contract will not be specifically enforceable (since “equity follows the law”). 

Equity follows the law, so as a general rule if damages are an adequate remedy the contract will not be specifically enforceable (Adderley v Dixon (1824) [Sir John Leech V-C])

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the adequacy of damages as a jurisdictional limitation has not been replaced with the discretionary approach as to whether it would be more just to grant specific performance rather than damages - Waterways Authority NSW v Coal and Allied (Operations) Pty Ltd [2007] per Beazley JA at [95]-[96]:

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The law has developed categories of cases where damages will or will not be adequate (these categories are not closed): 

Contract for the sale of a racehorse - Borg v Howard [1996];

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Contract for the sale of a thoroughbred stalllion - Austin Bloodstock Pty Ltd v Massey [2011];

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Contract to publish a defamation apology - Summertime Holidays Pty Ltd v Environmental Defender’s Office Ltd (1998) [NB refused on discretion]

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Contract to settle litigation - NSW v Karibian [2005].

Contract for sale of land: 

Damages are not regarded as an adequate remedy for the failure of a vendor to complete a contract for the sale of land (because each parcel of land is regarded as unique , ie has “peculiar and special value”) - Adderley v Dixon (1824).

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Damages are not regarded as adequate for the failure of a vendor to complete a contract for sale of land: Dougan v Ley (1946) 71 CLR 142, 150 (Dixon J).

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Damages also inadequate with re airspace above land - Uniting Church in Aus Property Trust (NSW) v Immer (No 145) Pty Ltd (1991) at 511 (Meagher JA).

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Damages also inadequate where land has been misdescribed - Mortlock v Buller (1804)

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Damages also adequate even if the land is acquired for commercial purposes such as subdivision and sale; Pianta v National Finance & Trustees Ltd (1964) 38 ALJR 232, 233 (Barwick CJ).

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If a plaintiff vendor has contracted to sell more than it owns, it may still obtain specific performance but may have to compensate unless misdescription so substantial the purchaser might not have entered into the contract at all: Flight v Booth (1834)

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Where consent is required before land may be conveyed, the Court will order a defendant to do all things necessary to get that consent: Bahr v Nicolay (No 2) (1988)

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Contracts to pay or lend money 

Generally specific performance of a contract to pay/lend money will not be ordered because damages will be adequate - McIntosh v Dalwood [No 4] (1930).

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Equity has always ordered specific performance of contracts for the sale of land. Damages are inadequate because substitutes cannot be readily found (McIntosh v Dalwood (No 4) (1930) [Evatt J

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Exceptions: 

1.

Mutuality - where the purchaser can obtain SP then vendor

can also obtain SP -Turner v Bladin (1951) 82 CLR 463, 473. 

2.

Where damages inadequate remedy for breach - Coulls v

Bagot’s Exc & Trstee (1967) o

‘Where specific relief is given in lieu of damages it is because the remedy, damages, cannot satisfy the demands of justice’ Coulls v Bagot’s Executor & Trustee Co (1967) [Barwick CJ]

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Indemnity contracts - McIntosh v Dalwood (No 4) (1930);

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A contract to execute a mortgage - Takemura v NAB Ltd [2003];

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Security contracts - Swiss Bank Corp v Lloyds Bank Ltd [1982];

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Composite contracts - involving both money and land:

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Agreement to pay money to third parties: 

Only parties to a contract can seek SP - Coulls v Bagot’s Executor & Trustee Co (1967): 

Majority (McTiernan, Taylor, Owen JJ): o

A third party does not have righs to seek specific performance for payment of the royalties.

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Dissenting (Barwick CJ and Windeyer J): o

the agreement was between the co and both Mr and Mrs C therefore Mrs C could seek SP.

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Contracts for sale of goods: 

Damages will normally be an adequate remedy if replacement goods can be obtained readily on the open market - Dougan v Lay (1945).

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If the goods are rare or of special value then damages will be inadequate; Falcke v Gray (1859); Doulton Potteries Pty Ltd v Bronotte [1971].

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The rarity of a chattel (its unusual beauty, rarity or distinction - eg original painting or a vintage aircraft) is but one factor to consider in the question of whether damages are an adequate remedy; Aristoc Industries Pty Ltd v R A Whenham (Builders) Pty Ltd [1965] (Jacobs J).

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If scarce due to market conditions, then court will more readily grant specific performance: Dougan v Ley (1946)

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Other: 

Chattel supply severely interrupted – no SP - Cook v Rogers (1946): 

“There would be an extraordinary extension of the jurisdiction in equity if it were attracted to cases in which it would be otherwise absent merely by the fact that the goods were temporarily in short supply and difficult to obtain, or by that fact together with the additional fact that the prices for the goods were fixed by law. “

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“In my opinion, the existence of market difficulties of an apparently temporary nature does not give a jurisdiction to the court which it does not otherwise have, even though it might be difficult to predict when the difficulties will disappear.

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Chattel necessary for P’s business – yes SP - Dougan v Ley (1946) 

When the subject of the sale is a special right attached to a chattel, transferrable only with it, and numerically restricted because of the limited number of (chattel with the special right ie. Vehicles registered as licensed 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 licence...we should treat the contract as within the scope of the remedy of SP.”

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Intellectual property – yes SP

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Unique and therefore specifically enforceable where damages inadequate - eg: o

Contract for sale of patent - Cogent v Gibson (1864);

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Agreements to assign copyright - Erskine Macdonalds Ltd v Eyles [1921]

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Agreement to publish material (where subject matter sufficiently certain) - Burrow v Chappell & Co Ltd [1976].

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But if the agreement contains “unnecessary” or “oppressive” terms “they must be justified before they can be enforced” - A Schroedr Music Publishing Co Ltd v Macaulay [1974].

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If not justified the contract can be rescinded - therefore no entitlement to SP.

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Goodwill and business assets – yes SP 

if damages are inadequate

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Pasdonnay Pty Ltd v SDS Corp Ltd [2005] - where the merger of mining, oil, gas and construction corps (which also involved the trans of patent rights) was found to be specifically enforceable.

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Personal Services and Employment 

Courts are reluctant to order SP of contracts for personal services or employment - C H Giles & Co Ltd v Morris [1972] per Megarry J.

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“Contracts of service are not to be made contracts of slavery. Real question is whether there is a sufficient definition to what has to be done [pursuant to the terms of the contract] in order to comply with the order of the court” - Tito v Waddell (No 2) per Megarry VC whose reasoning has received subsequent approval in Australia in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union Aus (1998] at [78]-[80 per Brennan CJ, McHigh, Gummow, Kirby and Hayne JJ.

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Stocks, Shares and Securities 

Dougan v Lay, Dixon J observed damages generally sufficientput P back on market.

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However, will be SP where damages inadequate eg shares in a private company (Iambic Pty Ltd v Northwind Holdings Pty Ltd [2001])

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if shares issued on court-approved scheme of arrangement (Toal v Aquarius Platnum Ltd [2004])

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vendor ‘anxious to retain’ all shares in a company (ANZ Exec & Trustees Ltd v Humes Ltd

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NO DISCRETIONARY DEFENCES OR DENIAL DISENTITELING RELIEF

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Court may refuse SP at its discretion - having regard to any defences or public interest in order being granted (Toal v Aquarius Platinum Ltd [2004]). 

Plaintiff is not ready willing and able to perform the contract: 

In the strictest sense (i.e. payment of price or conveyance or property etc) (Bridge Wholesale Acceptance Corp (Australia) Ltd v Burnard (1992))

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At all times, including during the trial, the party seeking specific performance should be ready and willing to perform their side of the bargain (Roberts-Smith J at [455]-[456] in SDS v Pasdonnay)

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Emanates from maxims of ‘clean hands’ and “he who seeks equity must do equity”.

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The plaintiff’s readiness to perform the agreement is a question substance so that a plaintiff may still be ready notwithstanding minor defaults; Mehmet v Benson (1965) (Barwick CJ).

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To prove P not ready and willing - D must show breach of “essential term” of contract by P - Barwick CJ at 307-8 in Mehmet v Benson (1965).

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Mutuality 

Court reluctant to grant SP unless available for both parties - J C Williamson v Lukey & Mullholland (1931).

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Although Courts have discretion to award in absence of mutuality Santow J in Cannavo v FCD (Holdings) Pty Ltd [2000] “real basis of ..mutuality” is weighing up interests of P+D

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Unfair conduct and undue hardship 

Court reluctant to order SP if it will cause undue hardship or unfairness to D: o

An unfair or low purchase price for D vendor - Farrell v Bussell [1960] 

however inadequate consideration would either need to be grossly inadequate or coupled with unconscionable conduct

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An erroneous valuation fixed the price of the contract - Legal & General Life of Aus Ltd v A Hudson Pty Ltd (1985), McHugh J

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enforced removal of a physically disabled D vendor with children from ppty where she was able to received help from relatives and friends who lived close - Patel v Ali [1984];

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the land purchsed by D would be subject to forefeiture Norton v Angus (1926)

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the order would expose D to prosecution - Pottinger v Genge (1967)

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D lessor of a hotel would be require to undetake many costly repairs and pay taxes without receiving rent or profit for many months while P retained possession - Dowsett v Reid (1912);

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D would be req to run a business at a loss - Cooperative Insurance Society v Argyll Stores (Holdings) Ltd [1998];

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D would be forced to become the reluctant proprietor of a brothel - Hope v Walters [1900];

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D would be required to maintain a joint venture after an “irretrievable breakdown of relations” - Cannovo v FCD (Holdings) Pty Ltd [2000] at [67] Santow J;

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Order would cause D to suffer “loss or liability” under CCA Demagogue Pty Ltd v Ramensky (1992).

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Unfairness must normally amount to unconscionable conduct on the part of the plaintiff. It is not enough that it is simply a bad bargain although this may be evidence of unfairness - Burrowes v Lock (1805) 32 ER 927.

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In exceptional cases specific performance may ...