Grant of equivalent specific performance by way of payment into court

Zoe Read

In Liberty Mercian Ltd v Cuddy Civil Engineering Ltd, the Technology & Construction Court demonstrated it is prepared to be flexible when ordering specific performance. One of the factors the court takes into account in considering whether to grant specific performance is whether the performance is possible. Here, the relevant performance was found to be impossible. Instead Ramsey J ordered equivalent specific performance by way of a payment into court by the defendant.

The facts of the case are straightforward. Liberty had entered into a development contract with Cuddy. The contract included an obligation upon Cuddy to provide a performance guarantee from a bank or insurer and two collateral warranties from a third party. Problems arose on the development and the contract was terminated.

In a previous hearing, the court had held the obligation to provide the guarantee and warranties survived the termination of the contract, but the question then arose as to whether it was possible for Cuddy to obtain them. Ramsey J declined to decide the issue but instead ordered the defendant to use its “best endeavours” to obtain both the bond and the warranties, so that the position on the alleged impossibility could be properly assessed.

Cuddy duly went away and through its broker approached a number of underwriters. However, none were prepared to take on the perceived high risk of the bond being called upon. As it was now established to be impossible for Cuddy to obtain the guarantee, the court turned its attention to whether Liberty could have performance by an equivalent means.

There were authorities, although old (indeed the two cases cited dated from the eighteenth century), that demonstrated that where the performance of an obligation had become impossible to perform, the court could still order performance of the obligation in substance or by alternative means. Ramsey J was not dissuaded from relying on the precedents, despite the fact that no more modern authority could be adduced. It was also appropriate to grant specific performance against Cuddy in respect of the obligation to provide the third party warranties.

The judge also dismissed the defendant’s argument that the court had no power to make an order for the payment of sums into court as a final remedy. The court has inherent jurisdiction under section 19 of the Senior Courts Act 1981 to order payment in on either an interim or final basis.

In the event Cuddy was ordered to pay £420,000 into court to stand in place of the performance guarantee it was no longer able to procure. The decision is a rare modern example of the court ordering specific performance of this kind.

Liberty Mercian Ltd v Cuddy Civil Engineering Ltd and another [2014] EWHC 3584 (TCC)

Post By Zoe Read (3 Posts)

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