Equity and Trusts - Remedies

When A, the tenant of retail premises comprising the main unit in a shopping centre, closed its supermarket in breach of a "keep open" covenant in the lease because it was operating at a loss, C, the landlord, sought specific performance of the covenant and/or damages. The judge made an order for damages, but refused to order specific performance on the grounds that it would be inappropriate and against settled practice. His decision was overturned by the Court of Appeal and A appealed.
Held, allowing the appeal, that there was a settled practice that mandatory injunctions which required a defendant to carry on a business would not be granted. There were several sound objections to an order for specific performance, including the difficulties of enforcement and supervision by the court, the possibility of oppression caused by the threat of contempt proceedings and the potential for injustice where a defendant's loss in having to continue trading might be greater than the loss caused to a plaintiff through breach of the covenant. Whilst the decision on whether to grant specific performance was always one for the judge's discretion, the settled practice should be departed from only in exceptional cases. In the instant case, the obligation in the lease was not sufficiently precise to allow certainty as to what would constitute compliance, and specific performance should not be ordered.

The remedy is not available as of right, it is of discretionary nature. However, it should be remembered that this discretion is not of an arbitrary nature but is determined in the light of carefully formulated maxims:
“It must be exercised according to fixed and settled rules; you cannot exercise a discretion by merely considering what, as between the parties, would be fair to be done, what one person may consider fair, another person may consider unfair, you must have some settled rule and principle upon which to determine how this discretion is to be exercised”

The use of discretion is determined by settled equitable principles, it is not used in an arbitrary fashion. The courts will draw on a body of principles known as the maxims of equity. Thus the maxim ‘he who comes to equity must do equity’ may result in a plaintiff being refused relief because of the nature of his own conduct. Grounds to exercise discretion. The exercise of this discretion is based on settled principles
Other Equitable principles not offended - The application of maxims and doctrines of equity will apply including the behaviour of the parties

L contracted to sell land to J. L decided not to perform contract and sold land to a Company controlled by him. Whilst normally 3p rights would not be overridden in special circumstances order granted

Equitable remedies are only available if there is no adequate common law remedy:

‘the court gives specific performance instead of damages, only when it can by that means do more perfect and complete justice’
The common law remedy of damages will usually be an adequate remedy in contracts for the sale of goods, since the buyer could go back to the market and obtain similar goods elsewhere, unless the goods in the contract are unique or possess a particular intrinsic value which renders them irreplaceable

Equitable remedies are only available if there is no adequate common law remedy:

S sought injunction to prevent V refusing to supply petroleum at a time of world shortage and no alternative supply. In effect provided specific performance

Equitable remedies are only available if there is no adequate common law remedy:

Mr B made contract with nephew to pay pension to wife out of business. Mr B died but nephew refused to make payment. Mrs B not a party to contract but in capacity as personal representative sought to enforce contract. As PR had suffered no loss so damages would be nominal. Specific Performance granted thereby ensuring payment

A court will not grant an equitable remedy unless it can ensure execution of the remedy
“Equity like nature does nothing in vain"

Effect on third party’s position

X agreed to sell property to Y. X adjudicated bankrupt and sent to prison. Xdiagnosed with bone cancer shortly prior to second child and had leg amputated. X expecting third child. In circumstances hardship to X in enforcing greater than that to Y if not enforced

Interim/ Interlocutory:
Subject to the difficulty of balancing the claimants, defendants, and third parties interests as the outcome of the trial is not known

This test has now been replaced in most cases by a phased test laid down by the House of Lords in
The case involved the infringement of a patent for a pharmaceutical product, it was feared that once the public used the product of the defendant it would be difficult to remove it from sale.
Throughout the following principles the court is seeking to decide whether an injunction at this stage is equitable but as no final decision on the case has been made, both sides must be considered:

a. Is there a serious issue to be tried? The plaintiff need only show that the application is not frivolous or vexatious AND that there is a serious issue to be tried (a good arguable case or real prospects of success)

b. The Balance of convenience:
1. Are damages an adequate remedy? If they are and the defendant can pay then an injunction will not be granted. This is merely a restatement of the established rule that the defendant must suffer irreparable damage.
2. Damages not adequate for Plaintiff? If this were the case the court must consider the contrary hypothesis i.e. if the injunction were granted and the plaintiff then loses is the plaintiff's undertaking sufficient to adequately compensate the defendant and can pay then an injunction should be granted.
3. Where doubt as to adequacy: " It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or both, that the problem of the balance of convenience arises." Here other factors will have to be considered to decide on the balance of convenience whether an injunction should be granted. The phrase has been described as misleading and "an unfortunate expression" and that the words "balance of the risk of doing an injustice" would be better.
. 4. Other Factors: Four such factors were identified by Lord Diplock:
a. "where other factors appear to be evenly balanced it is a counsel of prudence ... to preserve the status quo"
b. "The extent to which the disadvantages to each party would be incapable of being compensated in damages in the event of his succeeding at the trial is always a significant factor in assessing where the balance of convenience lies "
c. " If the extent of the uncompensatable disadvantages to each party would not differ widely, it may not be improper to take into account in tipping the balance the relative strength of each party's case as revealed by the affidavit evidence adduced on the hearing of the application. " i.e. at this stage the prospect of success becomes a relevant factor - now last and not as previously first.
d. " In addition ... there may be many other special factors to be taken into consideration in the particular circumstances of individual cases." e.g. public interest, freedom of speech.

Quia Timet Injunctions
These are injunctions based upon feared or threatened behaviour where no injury has yet occurred rather than to prevent the continuance of existing matters. As such " the plaintiff must show a strong case of probability that the apprehended mischief will arise." The requirements for such injunctions were reviewed by the House of Lords

Defendant’s extraction activities caused landslip on plaintiff's market garden. Damages granted for area affected, prohibitory injunction to prevent further withdrawal of support and a mandatory injunction to restore support. The appeal against the award of the mandatory injunction was successful on ground 4 but the court set out the requirements for such injunctions:
1. strong probability of grave damage
2. substantial damage
3. cost of prevention by defendant has been considered
4. defendant absolutely aware of steps required
1 and 2 apply to all cases, and in addition 3 and 4 to mandatory injunction applications

Freezing orders
This is a special kind of ex parte interlocutory injunction utilised to prevent assets being removed from the jurisdiction by acting not only against the owner of the assets but also persons in whose hands the assets are held. The jurisdiction was originally granted to be effective within the jurisdiction but are now granted in appropriate cases for proceedings and assets within a foreign jurisdiction.
There are three main questions:
* Has the applicant a good arguable case
* Has the applicant satisfied the court that there are assets within and , where an extra territorial order is sought without the jurisdiction
* Is there a real risk of dissipation or secretion of assets so as to render any judgment which the applicant may obtain nugatory and in addition the applicant is required to take certain steps :
· to make full and frank disclosure of all matters in his knowledge which are material for the judge to know
· give full particulars of his claim and amount thereof and fairly stating any response made by the other party
· provide an undertaking in damages

Search Orders: This is a special kind of order allowing a plaintiff to enter the defendant’s premises and to look at and make copies of documents. It is necessarily applied for ex-parte. Such orders have been the subject of much criticism recently due to the growth in their use.
“If the stable door cannot be bolted, the horse must be secured...If the horse is liable to be spirited away, notice of intention to secure the horse will defeat the intention” Ormrod J set out three essential pre conditions
· an extremely strong prima facie case
· serious potential damage
· real possibility that evidence will be destroyed

Constant Supervision/Uncertainty as to Compliance: These are linked together as recent case law has suggested that the previous objections to constant supervision were based more on uncertainty as to requirement for compliance than on constant supervision

Agreement to provide a resident porter to keep common parts clean, look after central heating and empty rubbish. Order granted and three tests laid down:
· is there a sufficient definition of what has to be done in order to comply
· will enforcing compliance involve superintendence by the court to an unacceptable degree
· what are the respective prejudices or hardships to be suffered by the parties in making or refusing the order

Contracts for Personal Services/Employment Contracts: A distinction must be made between contracts of service and contracts for services as now the former is subject to statutory restriction under S16 Trade Union and Labour Relations Act 1974.
However there is a reluctance to enforce personal contracts for a number of reasons:
1. damages often suffice
2. difficulty of supervision
3. difficulty of deciding as to compliance
4. undesirability of compulsion to another's will
Further the court will not grant an injunction which in effect would amount to specific performance

Contractual provision in exclusive management agreement by which a pop group agreed not to work for any other manager. Order refused

Mutuality: Personal incapacity or the nature of the contract may result in a contract only being specifically enforceable in favour of one party. This absence of mutually enforceable obligations precluded the remedy on principles of equality of opportunity.

Infant refused relief as no similar order available against him It now appears that there has been some relaxation in the rule and also the academic dispute as to whether mutuality had to exist at the time the contract was made, when performance sought or at anytime subsequently