Court grants order for specific performance and confirms some general principles in relation to injunctions

Sarah Milsted

In Alfa Finance Holding AD v Quarzwerke GmbH, the High Court considered whether to grant specific performance (a type of mandatory injunction) of a clause in an agreement between the parties which gave the claimant a right of access to various documentation.

On 31 December 2012, the parties entered into an agreement whereby the defendant purchased shares in a company called Kaolin AD from the claimant. That agreement contained a clause which provided that:

The [defendant] shall…retain for a period of ten (10) years from the Closing Date the books, records and documents of [Kaolin AD and its subsidiaries] to the extent they relate to the period prior to Closing and shall procure that the relevant [company] shall allow the [claimant] and its professional advisers reasonable access to such books, records and documents, including the right to take copies at the [claimant’s] expense”.

On 20 June 2014, the claimant sought access to various documents. The defendant refused to grant the access sought and, therefore, the claimant brought a claim for specific performance. The judge made an order for specific performance and, in doing so, confirmed the following principles in relation to the granting of injunctions:

The need for clarity

The judge emphasised that uncertainty in the way in which an injunction is framed may be a ground for refusing relief. An injunction will not be granted if the persons subject to the injunction will be in doubt as to what it is they have to do or refrain from doing so as to ensure compliance.

The defendant had argued that the contractual obligation was sufficiently imprecise to form the subject matter of a specific performance decree. The judge rejected this argument. He commented that the defendant had not argued that the contractual obligation was sufficiently imprecise so as to be void for uncertainty. Moreover, the claimant had proposed a form of order which spelled out with greater precision than the contractual clause what was to be done so that the defendant knew exactly what was required of it.  

An injunction can have extra-territorial effect

The English court has jurisdiction to grant an injunction which compels action to be taken by the respondent abroad. In this case, Kaolin AD was a Bulgarian company and the obligation under the order was for the documents sought to be made accessible from Kaolin AD’s archive at Senovo in Bulgaria.  

Damages must not be an adequate remedy

On an application for an injunction, the court considers whether damages would be an adequate remedy for the claimant instead of an injunction. If damages are an adequate remedy then it is very unlikely that the court will grant the injunction. In this case, the judge held that it was impossible to quantify the damage which would result from the breach of the clause and, therefore, damages would not be a suitable remedy. Following judgment, the defendant asked the judge to clarify his reasons for deciding that damages would not be an adequate remedy. The judge held that the unsuitability of damages in this case was obvious and that this was a “strong indication that specific performance [was] a suitable and appropriate remedy”.

Alfa Finance Holding AD v Quarzwerke GmbH [2015] EWHC 243 (Ch)

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