A recent decision of the English High Court provides a rare example of an order for specific performance given in respect of construction obligations. The decision appears to be first case in which such an order has been made before the contractually agreed date for completion has passed.
Specific performance and building contracts
Specific performance, or specific implement as it is known in Scotland, is a mandatory order from a court requiring a contract to be performed. A continued failure to perform in contravention of the order makes the defendant criminally liable for contempt of court.
Unlike in many civil law jurisdictions where a claimant is (in theory at least) entitled to specific performance as of right, specific performance is a discretionary remedy in England and is not generally available where an order for damages would be an adequate remedy for the claimant. This often rules out an order for specific performance in a construction context, as an award of damages will usually be adequate for an employer who is able to instruct others to complete works in the place of a defaulting contractor. Circumstances sometimes exist, however, which do justify such an order under English law:
- If the works concerned are highly technical or proprietary, such that the contractor is the only person able to complete them.
- If the beneficiary of the works does not have the right to enter upon the relevant land and arrange for the carrying out of the works by others. Such a situation can arise where an owner of land undertakes construction obligations to others. Similar circumstances can also arise in a leasing context, where it may be necessary to consider whether it is reasonable for a landlord to forfeit the lease and carry out the works itself.
A further impediment to an order for specific performance of construction obligations is the necessity for clarity as to the work to be carried out. Given the criminal sanctions applicable for non-compliance, any order must contain a sufficiently precise definition of what is to be done. The obligation in question will usually need to be one to produce a certain result, rather than a simple obligation to carry out building works or provide services. Design and Build or Turnkey contracts are therefore more likely to be susceptible to an order for specific performance than a traditional building contract.
Airport Industrial GP Ltd v Heathrow Airport Ltd and AP16 Ltd
The present case concerned the rights and obligations of various parties in relation to the provision of car parking on a site at Heathrow Airport. The rights and obligations were contained not in a building contract but in a number of agreements and leases.
Airport Industrial and Heathrow Airport Ltd (“HAL”) claimed that AP16, the leaseholder of the site, was obliged to provide a car park of 280 spaces by 22 October 2016. HAL and Airport Industrial each sought orders for specific performance, respectively to compel AP16 to create the car park and to force HAL to procure the provision of a car park by AP16. AP16 argued that the obligation to provide the car park had not yet been breached.
The court held that the effect of the various agreements was that AP16 was obliged to provide the specified parking spaces by 22 October 2016 and granted an order of specific performance in favour of HAL. HAL did not have the right to enter the site itself and was not entitled to forfeit its lease to AP16 due to AP16’s failure to construct the car park. A right to damages was not therefore an adequate remedy for HAL.
AP16’s contractual obligation was to carry out the “preparation surfacing layout marking fencing lighting and landscaping of the Heathrow Express Site as a car park for use for parking purposes in a good proper and workmanlike manner using suitable materials of their several kinds in accordance with the specification and layout drawings referred to in the Second Schedule.” The court had no difficulty in characterising this as an obligation to achieve a result (i.e. the construction of a car park in accordance with a specification) and an order for specific performance could therefore be framed in sufficiently precise terms.
The court decided that it was not necessary to wait for AP16’s breach to actually occur before HAL was entitled to specific performance. Given that AP16 had not begun preparation for the works, it was clear that the car park would not be provided by the required date. The court therefore allowed AP16 a further two years to comply with its obligation on the basis that during the period of delay HAL would receive damages for the resulting loss of income.
The court also allowed AP16 the choice to develop the land into a car park which would provide an income notwithstanding the fact that this would take longer to construct than the surface carpark argued for by HAL and Airport Industrial. This was balanced by the order for HAL to receive damages for the period of delay. The court took account of the fact that if it did not allow AP16 such flexibility it was likely that the company would become insolvent and therefore unable to provide the car park which was not in the interests of any of the parties. Specified milestones were to be included in the order and if AP16 failed to achieve a milestone it would be obliged to revert to a surface carpark design.
Conclusions and implications
The court’s decision provides a useful reminder of the availability of orders for specific performance under English law where an award of damages would be inadequate. The case appears to be the first to require a party carry out steps before the contractual date for completion and provides helpful clarity for employers faced with a defaulting contractor early on in a project.