iStock_000076102009_Small

If a party to a contract refuses to comply with its contractual obligations, then one option open to the other party is to apply to the Court for an order for specific performance. Specific performance is a remedy that can be granted by the Court which forces a party to comply with any contractual obligations it has failed to comply with.

Generally, Courts will only order specific performance of an obligation on or after the date on which the obligation is due to be performed. However, a recent High Court decision[1] is a useful reminder that the Courts can go further than this, and order a party to take preparatory steps to complying with the obligation, before the due date has even arisen. In certain circumstances they might also dictate the way in which the obligation is performed. This is particularly important because it might deprive the defaulting party of the opportunity to carry out the works in the way it wants to.

The case was about a car park just to the south of Heathrow Airport (the site). Through a complex series of leases, AP16 had covenanted to construct a car park of 280 spaces on the site. However, this obligation only arose on termination of an existing car parking licence. This licence is due to terminate on 22 October 2016.

Although AP16’s obligation to construct the car park had not yet arisen, its immediate landlord,  HAL, was anxious that AP16 should complete construction of the car park as soon as it was able to. This was because HAL itself was under an obligation to its landlord to procure construction of the car park as soon as possible. HAL therefore took the novel step of asking the Court to order AP16 to take action before 22 October 2016.

Of course, a Court cannot order a party to specifically perform a contract before a due date. HAL wasn’t asking the Court to do that, however. What it was asking it to do was order AP16 to take preparatory steps so that it could construct the 280 spaces as soon as possible after 22 October 2016.

AP16 hadn’t taken any formal steps to commence construction of its preferred type of car park, which was a multi-storey scheme, which would produce significant profits for it. HAL, however, argued that AP16 should only be entitled to construct a surface car park (which wouldn’t produce any income for AP16 at all), because this was the only scheme that could be completed without significant delay. The Court therefore had to decide whether it had the power to make an order that would take the decision as to what type of scheme out of AP16’s hands.

In the event, the High Court decided that it did have such power, if construction of a multi-storey car park would cause serious harm to HAL’s legitimate interests. Luckily for AP16, however, the Court concluded that although there was harm to HAL’s legitimate interests, this could be adequately compensated in damages. AP16 was therefore allowed to construct its multi-storey car-park, but would have to pay damages to HAL for any delay beyond 22 October 2016.

During the case the High Court was very critical of AP16’s failure to take any preparatory steps to construct the car park. This could very easily have led to AP16 being deprived of the opportunity to construct its choice of scheme, and having an alternative, non-profitable scheme imposed upon it. Those in the construction industry should therefore be aware that just because a due date hasn’t yet arisen, doesn’t mean that no action is needed until then. Indeed, failure to take preparatory steps before a due date could lead to a Court imposing a much less profitable alternative.

For more information, email blogs@gateleyplc.com.

[1] Airport Industrial GP Limited v Heathrow Airport Limited and AP16 Limited [2015] EWHC 3753 (Ch)

 


Leave a Reply

Your email address will not be published. Required fields are marked *

three + 20 =

This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.