Co-Operative Insurance Society Ltd. Respondents v Argyll Stores (Holdings) Ltd.
[1998] AC 1
House of Lords
Facts:
C leased premises within shopping centre to A on a 35-year lease. The lease contained a covenant that the premises must be open during unusual hours of business.
A is a large store that was known to bring in more customers to the shopping centre.
After a few years, A is not making enough money in the store. A closed the store, despite C offering a lower rent.
C sues for specific performance, requesting that A keep their store open, and damages.
Legal Facts / Procedural History:
High Court – specific performance denied
Court of Appeal – order granted
Legal Issues:
Whether it was right for CA to award an order of specific performance.
Appellants (A) Arguments:
It is never the practice of the courts to grant a mandatory injunction to require people to carry on business when it would cause them to suffer a loss. In this case, A would be oppressed with a disproportionate hardship. This would be unjust.
A could simply obey the court order on a much smaller, economically viable way. No one would win. This would mock the court system and its use of orders of specific performance.
A only expected that they would have to pay damages to C if they broke the lease contract. Other tenants of the shopping centre, who relied on A’s commerce, would not have relied on the covenant being enforceable.
When parties have contracted in good faith and on legal advice, the court should not disturb their agreement.
In commercial contracts, damages should be an appropriate remedy as the exercise is to make money.
Respondent (C) Arguments:
A only had a problem with the covenant once they wanted to breach the contract.
The court generally states that a bargain is to be enforced unless there is good reason not to.
Refusal to grant the order would allow A to benefit from breaching the contract. The court should not make C take damages instead.
Judgement (Browne-Wilkinson LJ, Slynn LJ, Hoffmann LJ, Hope LJ and Clyde LJ):
Appeal allowed.
Making A keep the store open would put them in undue hardship because of the financial burden. If C was allowed to claim specific performance, it was because they had a favourable bargaining position to start with.
Not in the public interest to require someone to operate a business that loses money when there is another means of compensation.
As large commercial organisations they would have been aware that the common remedy for a breach of contract in this case would be damages. It is unreasonable for C to expect more.
In the English common law, specific performance is an equitable doctrine, so at the discretion of the court. It is not a right, unlike in Civil legal systems.
‘the purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of the party entitled to performance’
Comments