Liberty Mercian Ltd v Cuddy Civil Engineering Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Ramsey |
| Judgment Date | 19 December 2013 |
| Neutral Citation | [2013] EWHC 4110 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT 12 55 |
| Date | 19 December 2013 |
[2013] EWHC 4110 (TCC)
The Hon Mr Justice Ramsey
Case No: HT 12 55
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Simon Lofthouse QC and Marc Lixenberg (instructed by Morgan La Roche) for the Claimant
Simon Hargreaves QC and Richard Coplin (instructed by Hugh James) for the Defendant
Hearing date: 19 November 2013
Judgment No 2
Introduction
In my previous judgment ( [2013] EWHC 2688 (TCC)) I dealt with a number of issues arising out of a contract for a development project ("the Contract"). Those issues included the question of when the Contract was formed and which of the Defendants, Cuddy Civil Engineering Limited ("CCEL") or Cuddy Demolition and Dismantling Limited ("CDDL") was the Contractor under that Contract with the Claimant ("Liberty Mercian").
In that judgment I held that the Contract was formed when it was signed as a deed in July 2010 and that the Contract was formed between Liberty Mercian as the Employer and CCEL as the Contractor and there were no grounds on which CDDL could be construed to be the Contractor or become the Contractor by way of a claim for rectification or on the basis of an estoppel. I also held that CDDL was not CCEL's parent company so that CCEL was not obliged to provide a parent company guarantee from CDDL and that there was no other parent company but I reserved for further submissions the effect of there being no parent company on the obligation to provide the parent company guarantee under the Contract.
I found that CCEL's obligation to supply a parent company guarantee, a performance bond and two remaining warranties from Quantum (GB) Limited to Liberty Mercian and to Waterman Transport and Development Limited ("Waterman") survived the termination of the Contract by whichever of the assumed ways the Contract was terminated. I held that CCEL was in breach of contract in failing to supply the performance bond and the two remaining warranties but reserved for further argument the issue of whether or not on the basis of my findings it was appropriate to order specific performance.
In this judgment I now deal further with the claim for specific performance of the performance bond and the two warranties by setting out my reasons for making an order on 19 November 2013 that CCEL was to use its best endeavours to obtain both the performance bond and the warranties so that the matter could be reviewed at a further hearing on 19 December 2013.
Subject to that, the parties are in agreement that I should not deal, at this stage, with the issue of the effect of there being no parent company on the obligation of CCEL to provide a parent company guarantee under the Contract.
Specific performance: the law
I have been referred to a number of authorities on the question of the circumstances in which it is appropriate to order specific performance. CCEL founds its opposition to specific performance essentially on three grounds. First, that damages are an adequate remedy; secondly, that it is impossible for a bond or the warranties to be provided by CCEL and, thirdly, that as a matter of discretion I should not order specific performance either at all or at this stage.
In relation to whether damages are an adequate remedy I was referred to the Court of Appeal decision in Evans Marshall & Co Limited v Bertola SA and another [1973] 1 All ER 992 where the Court had to consider the issue in relation to a claim for an injunction. At 1005 to 1006 Sachs LJ summarised the position as follows:
" The standard question in relation to the grant of an injunction, are damages an adequate remedy? might perhaps, in the light of the authorities of recent years, be re-written: is it just, in all the circumstances, that a plaintiff should be confined to his remedy in damages?
…
The courts have repeatedly recognised that there can be claims under contracts in which, as here, it is unjust to confine a plaintiff to his damages for their breach. Great difficulty in estimating these damages is one factor that can be and has been taken into account. Another factor is the creation of certain areas of damage which cannot be taken into monetary account in a common law action for breach of contract: loss of goodwill and trade reputation are examples.
…
So far the question of adequacy of damages has been discussed on the footing that if judgment was recovered the sum awarded would be paid. But whenever the adequacy of damages falls to be considered in this class of case, there arises the further question-are the defendants good for the money? Also (if they are abroad), will their government's exchange control permit the payment? In other words, will the judgment be satisfied?
Bertola being a wholly owned subsidiary of unknown financial status in Spain, and ISI a company with a £5,000 share capital, the chances of a judgment for sums such as have just been mentioned being satisfied by them cannot be rated as other than questionable. So on that ground, too, damages would prima facie in this case not be an adequate remedy."
I was also referred to Spry, The Principles of Equitable Remedies (8th edition) at page 68 where it is said:
"There are other matters also that may render the remedy at law of damages inappropriate. So it is relevant that there are doubts as to the solvency of the defendant, and despite occasional statements to the contrary it appears to be clear that a significant risk that a legal remedy such as damages will be ineffective on the ground of the inadequate resources of the defendant or otherwise, may of itself justify the conclusion that it is inadequate. Further, even a very slight risk of insolvency of the defendant may be decisive, especially in combination with other matters that tend to show that only if the plaintiff is given specific relief in equity will he be sufficiently protected. What amounts to a sufficient risk of insolvency to render damages inappropriate depends on the particular circumstances, and the court will simply ask whether the plaintiff will in all material respects be in the same position, if left to legal remedies, as if he obtained performance in specie."
Various passages in Halsbury's Laws (4th edition) Vol 44(1) were also cited. First in relation to the question of whether specific performance will be ordered where the party seeking specific performance is in breach of contract, I was referred to the following passages at paragraph 890:
" 890. Effect of acts done in contravention of contract. Where a plaintiff claiming specific performance of a contract acts in contravention of its terms, the court may refuse to enforce the contract in his favour; thus, where a vendor who has agreed to give immediate possession retakes possession, he is not entitled to specific performance. Similarly, where there is an agreement for a lease and the lessee commits breaches of the terms of the agreement, such as waste, failure to insure or repair, or, if the agreement is for a sublease, knowingly commits acts which are inconsistent with the covenants of the head lease, the contract is not specifically enforced. So, also, a covenant to renew is not enforced where the lessee has been guilty of breaches of the expiring lease.
In the past it has been said that to constitute a bar to specific performance, such acts must be gross and wilful; and in relation to leases they must, as a rule, be not only such as would work a forfeiture of the legal interest, but also such that the court would not relieve against forfeiture. Today it is more likely, even in a claim for equitable relief, that a court will consider not only the nature of the particular term which is breached, but also the consequences which flow from the breach in determining whether to grant specific performance. Consequently specific performance may be granted where the wrongful acts are trifling or, in relation to leases, are such that the court would relieve against a forfeiture of the legal estate."
In relation to the grant of specific performance and the impossibility I was referred to paragraph 892 and 893 where the following is stated:
" 892. Frustration and impossibility. … At law it is no defence to an action for damages that the contract has become impossible of performance through the defendant's own acts. But in equity specific performance will be denied. Again, it is a defence to an action for specific performance that the defendant (who is generally a vendor of land) is not able to put an end to the rights of a third person over the land or to compel him to concur in his conveyance. However, a vendor must do his best to obtain any necessary consents. He must take proceedings to eject a tenant by sufferance, a tenant at will or a trespasser who has no right to be there, but he need not embark on any dangerous and uncertain litigation to secure any consents…..
893. Time At Which Impossibility Is Judged The time at which impossibility is judged is the proper time for performance of the contract, not the date of the contract."
I was also referred to the impact of the need for the court's supervision and the following passages at paragraph 806:
" 806 Acts the performance of which would require continued supervision. It has been held that the court does not enforce the performance of contracts which involve continuous acts and which require the watching and supervision of the court and that, in particular, the court does not normally order the specific performance of a contract to build or repair.
…
More recent cases indicate, however, that the courts are now more ready to enforce contracts requiring supervision. The question...
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