Specific Performance Absent Any Breach
In a 2008 case the Court of Appeal considered whether a decree for specific performance should have been made when there was no breach of contract, or a reasonable apprehension of breach.
The appellant vendor was a share-title home unit company. The vendor and purchaser entered a contract for the purchase of shares allowing the purchaser to exclusively occupy an unused attic apartment. The contract was conditional on the relevant council consenting to a development application for the use of that apartment as a residence.
Under the contract the vendor was required to “proceed with all due despatch to lodge the development application” and to “use its best endeavours to secure the consent of the council”. The council initially refused development approval, but a review application was subsequently made.
When the purchaser commenced proceedings, the vendor had not breached any of its relevant obligations under the contract. However, the purchaser was granted specific performance, together with costs. In reaching his conclusion that a breach of contract was not essential, the primary judge took into account events that occurred after proceedings had commenced.
During the appeal, it was revealed that the review application had been granted. Therefore, the only real issue between the parties was that of costs. The central issue was whether a decree for specific performance should have been made (or applied for). The appellant submitted that the circumstances did not warrant the intervention of equity (specific performance being an equitable remedy).
The court agreed with the appellant — specific performance should not have been granted.
The mere existence of a contract is not sufficient itself to justify a decree for specific performance, absent breach or its reasonable apprehension express or implied.
Equity does not require actual breach, but there must be more than a theoretical or remote possibility of a breach. In any case, before a court exercises its discretion to award specific performance, it should consider:
whether there is sufficient likelihood or risk of non-performance of the defendant’s obligations, and
other discretionary matters that bear on the justice or injustice of equity intervening, including hardship and the balance of convenience.
On the facts, there had been no actual breach by the vendor when the proceedings commenced and (remembering that both parties had an interest in the transaction going ahead) the likelihood of breach was remote. Therefore, any hardship on the purchaser by denying specific performance would be minimal. By contrast, the hardship on the vendor by granting specific performance was not minimal — it had a costs order awarded against it. In the circumstances, specific performance should not have been awarded; costs followed the event.
