Summary

In making an order for specific performance on an application for summary judgment, the judge had erred in finding that there was no evidence of impossibility to perform.

Facts

Appeal by the first defendant ('MPG') from Pumfrey J's order of 15 March 2002 on a CPR Part 24 application by the claimant ('the council') awarding summary judgment and ordering specific performance of one aspect of an agreement between the parties. The agreement was in respect of a proposed development of a site owned by the council. The council entered into the agreement with a developer ('KB') for the development of the site. The development was dependent upon various conditions contained within the agreement. Upon satisfaction of those conditions, which related to planning permission and funding, the site was to be transferred to KB. Planning approval was granted but there remained a dispute as to funding. A supplementary agreement was made that substituted MPG for KB as developer under the agreement. In June 2000 PNO Development Ltd ('PNO') acquired 50 per cent of the shares in KB. KB, PNO and MPG thereafter entered into a joint venture agreement and a supplementary joint venture agreement ('the venture agreements'). The venture agreements provided, inter alia, that the development could be delayed if PNO was not satisfied that pre-lettings and sales had been achieved to a satisfactory level. There arose difficulties in finding an appropriate foundation solution for the erection of the development, and there were difficulties in gaining pre-lets and sales. Accordingly no substantial development works were commenced. It was PNO's case that the delay in commencement of the development and initial site preparation was justified under the venture agreements. These proceedings were commenced alleging that MPG failed to begin the works within the time required under the agreement. That was not disputed, but MPG resisted the council's claim for specific performance of the whole works. The judge was faced with that claim on an application for summary judgment. He declined to order specific performance for the whole works on the ground that they had not been sufficiently defined in the agreement. However, the judge did indicate that he would entertain the council's fall-back position for specific performance of MPG's obligation to develop a roundabout on the site. That obligation was contained in an agreement between the council and MPG pursuant to s.278 Highways Act 1980. The relevance of the roundabout was to provide access to a proposed spur road providing access to the site. The judge gave summary judgment in favour of the council on that issue and ordered specific performance of MPG's obligation to construct the roundabout. This was MPG's appeal from that decision on two grounds that had been advanced before the judge, namely that: (i) MPG had no assets and was dependent upon finances from elsewhere, and that PNO was unwilling to advance any funds or commence the development without the conditions contained in the venture agreements being fulfilled; and (ii) in any event, even if MPG were not impecunious, it was contrary to settled practice in law relating to specific performance for the court to make an order for the construction of works upon the claimant's own land in circumstances where damages were an adequate remedy.

Held

(1) In rejecting the defence of impossibility of performance due to absence of finance, the judge had found that there were other sources of funding that could have been explored, but that MPG had not provided evidence of attempts to gain funding elsewhere. (2) The judge had failed to remind himself of the test required on an application for summary judgment, namely that the defendant had no reasonable prospect of defending the claim. On the contrary, the judge cited the submissions of the council that the evidence of MPG's inability to perform the development of the roundabout was less compelling. (3) The question for the judge was not whether he was satisfied that the defence of impossibility to perform was made out, but whether that defence had a reasonable prospect of success. (4) In deciding the overall question before it on a summary judgment application, the court, if faced with a real and non-fanciful defence of impossibility to perform, was not entitled to seek to hold a mini-trial in order to see if there was a real state of impossibility or whether the defence fell short of it. (5) The judge had been wrong to say that there was no evidence of impossibility to perform and accordingly he was in error in seeking to resolve that issue then and there. It followed that the appeal was allowed on that ground. (6) Obiter: The remedy of specific performance required exceptional circumstances (see Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd) (1997) 3 All ER 297), especially where it was sought for the construction on land owned and occupied by the claimant. The basic position was that where the claimant was in possession he was in a position to quantify his loss by doing the work himself, subject to reasonableness and an intention to do the work. (7) The position in this case was that either the council genuinely wanted and intended to build the roundabout and therefore damages could be quantified, or the development itself was uncertain and speculative. In the latter case the roundabout was not required since the spur road had not been built. Whilst damages could not be assessed in the latter case, the situation was that the need for the roundabout was uncertain and may have turned out to have been unreasonable. As such, the judge erred in his discretion in seeking to find an exceptional case for the granting of specific performance.

Appeal allowed.