Specific performance - an appropriate remedy?
Specific performance is effectively a court order compelling a party to comply with their contractual obligations. The position in England is that as a discretionary remedy, it is generally only available where an action for damages would not provide an adequate remedy. The position is not necessarily the same in Scotland, where the Scots law equivalent of specific implement is more likely to be considered even where an action for damages would be possible.
When the case originally came before the TCC in September, it was held that the obligation on the Contractor to provide a performance bond and collateral warranties were not to be considered as part of the "works" (with any obligations in respect of which falling away on termination due to the wording of the NEC3 contract that was used) but as self-standing, independent obligations which continue after termination. The Court hinted that specific performance may be appropriate to compel delivery of those documents but reserved their position on this point pending further submissions from the parties.
Cuddy argued that the remedy of specific performance was not appropriate in these circumstances, largely because damages were available as a remedy, it was impossible to provide the documents in the circumstances, and the court would be required to supervise the process. Impossibility of performance and the requirement for court supervision are two of the other major factors that a Court considers before granting an order for specific performance (other than availability of damages), but the Court was not persuaded that these would preclude the granting of the order in this case.
However, the Court did not feel able to grant the order on the basis that there was a realistic chance that it could be impossible for Cuddy to perform these obligations. Whilst the Court rejected the argument that damages were an appropriate remedy and that excessive court supervision would be required should they grant the order, they could not assess the prospect of impossibility of performance on the information available. In the circumstances, the Court ordered Cuddy to use their best endeavours to obtain the bond and collateral warranties, at which point the position on the alleged impossibility could be properly considered at a future date.
Where does this leave us in Scotland?
The approach taken by the TCC in this case suggests that the Courts will in general be open to granting a remedy of specific performance in certain circumstances, particularly where the financial position of the defendants would make a remedy of damages ineffectual. That said, the Courts will not make such an order where it would be impossible for a party to obtain the documents in issue, though it certainly looks as though a defendant will need to demonstrate beyond doubt that such performance is in fact an impossibility.
With the Scottish Courts more open to an order of specific implement, it seems that there are even more positive prospects for an Employer seeking to use the Courts to order delivery of outstanding documents under a construction contract.
In Scotland though, the Scots Law doctrine of retention could be a valid defence open to a Contractor in many circumstances, particularly given that a pre-existing dispute is almost an inevitability if the Employer is looking to a Court to invoke the contractual terms. Take for example, an Employer in administration (or their administrator) seeking collateral warranties in favour of third parties where there are monies due to the Contractor. Is the Contractor expected to comply with their contractual obligations to the Employer when the Employer has or had failed to comply with theirs? The doctrine in its basic form would suggest not, but it remains to be seen how a Court would interpret this. As is so often the case, the interpretation that the Courts in Scotland would give to both specific implement and retention would likely turn on the facts of each individual case and it remains to be seen what effect the latest instalment of the Liberty Mercian case will have north of the border.