This case demonstrates the willingness of the Courts to deny a claim for specific performance of a contract where there have been changes in financial circumstances of a party that did not exist at the time that the party entered into the contract and which would have the effect of creating disproportionate hardship to that party if an order for specific performance was made.
John and Alison Evans contracted to sell property to Robcorp Pty Ltd as trustee for the Robcorp Trust (Robcorp), with Mr Scott as Robcorp’s guarantor. Robcorp failed to complete the sale contract on time and the Evans brought an application for summary judgment under section 70 of the Property Law Act 1974 (Qld). Robcorp resisted the application on grounds relating to its impecuniosity.
Lyons J in the Supreme Court of Queensland firstly held that the following evidence was sufficient to demonstrate that if the matter was being tried, Robcorp may be in a position to satisfy the Court about its impecuniosity:
- funds that were expected from other development projects to enable Robcorp to complete the purchase had not become available;
- Robcorp was “worth nothing at all”; and
- no agreement arose from the conduct of the parties after the email exchange, with Mr Anthony continuing to request a new licence without asserting that USU had already made an offer which he had accepted.
In refusing summary judgment, Lyons J considered the authorities and preferred the view that when deciding whether the effect of an order for specific performance will be to cause disproportionate hardship so as to give rise to an injustice:
- courts of equity must take account of all of the circumstances known to exist at the time when an order for specific performance is made, as well as of circumstances likely to occur subsequently; and
- there is no reason why a source of hardship should be ignored just because it did not exist at the time of entry into the contract.
See the case.