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Specific Performance - Jumping The Gun?
Specific performance is an order compelling a party to take certain action, often in order to comply with its contractual obligations. Although it is a remedy that is usually sought after a party has breached its contract, a recent case confirmed that it is a remedy that can be sought before any breach of contract has yet occurred.
Airport Industrial GP Limited v Heathrow Airport Limited & AP16 Limited concerned a contract that required AP16 Limited to build a car park providing 280 car parking spaces on land that it owned at Heathrow Airport. The contract required the parking spaces to be available by 23 October 2016.
AP16 Limited subsequently had ideas of its own and decided that it wished to construct a 2000 space multi-storey car park representing a much more profitable development although it would take up to three years to design and construct.
Sensing trouble ahead, the Claimant issued a claim against AP16 Limited seeking specific performance of its contractual obligations (ie the construction of a 280 space car park by 23 October 2016).
The Court accepted that AP16 Limited were not yet in breach of contract.
They would not be in breach of contract until the 23 October 2016 date had come around and the 280 space car park had not been built. Nevertheless, the Court held that it was empowered to order AP16 Limited to take certain steps before the 23 October 2016 deadline to ensure certain defined objectives were met at a later date.
In what some would say was a ruling with a flavour of generosity, the Court held that AP16 Limited should be ordered to build a car park but within an extended period expiring on 2 October 2018, thereby giving them the opportunity to carry out a more profitable development. However, there were conditions. One was that it was ordered to deposit funds to cover losses likely to be caused to the Claimant by the delay. The other was that it was ordered to achieve certain planning and construction milestones over the extended period of time, failing which it would have to build the 280 space car park instead.
The Court considered that it would be disproportionate to punish AP16 Limited by depriving it of any prospect of being able to make profitable use of the site.
The distinctive feature of this case is that the Judge took into account the likely commercial impact of ordering specific performance of the original contractual obligations and preserved the opportunity for the party in breach to keep its head above water and to make profitable use of its land. It will be interesting to see if this apparently generous approach will be adopted in subsequent cases.
