The litigation in Rainbow Estates Ltd v Tokenhold Ltd [1999] Ch 64 confirmed that the court can order specific performance, if appropriate, where a tenant is in breach of its repairing obligations, if there is no adequate alternative remedy.
Before granting such an order, the court must consider whether the landlord has rights of entry or could forfeit the tenant’s lease and do the work itself.
If an order is granted, it should not be oppressive and must sufficiently define the work required to comply with it. Furthermore, an order for specific performance will be refused if compliance would require constant supervision by the court.
In Zinc Cobham 1 Ltd v Adda Hotels [2018] EWHC 1025 (Ch) a landlord launched legal proceedings against its tenant in a bid to force it to spend over £100m to rectify breaches of covenant requiring it to carry on trade in 10 Hilton-branded hotels in accordance with Hilton’s operating standards.
The landlord claimed that the condition of the hotels had reduced the value of its reversions and, because it would be very difficult to quantify the compensation needed to make good its loss, an award of damages would not provide it with an adequate remedy.
During preliminary proceedings in which the tenant sought to have the landlord’s claim for specific performance struck out, the landlord claimed that the difference between ordering specific performance of the tenant’s principal trading obligations, and ordering specific performance of obligations relating to the way in which it traded, corresponded with the difference between an order requiring a defendant to carry on an activity and an order requiring a defendant to achieve a result.
But the court was unimpressed. If the court could not grant an order for specific performance of the tenant’s principal trading obligations, it could not grant an order in relation to the ancillary parts relating to the mode of trading.
The judge stated that the landlord’s application had an air of unreality and fictionality about it. An order for specific performance would be difficult to supervise and the only enforcement mechanism available would be contempt of court – which would be oppressive.
The landlord had not shown that it had a legitimate interest that extended beyond pecuniary compensation. It had accepted that completion of the work would make no difference to the annual rents payable under the leases, totalling £26m.
Furthermore, the alleged difficulties in valuation were more imaginary than real. And even if the valuation exercise were to be as difficult as had been suggested, that would not be a reason to award specific performance in place of the usual remedy for breach of contract, which sounds in damages: One Step (Support) Ltd v Morris-Garner [2018] UKSC 20.
Any damages payable would be less than the cost of the work and it would be inequitable to require the tenant to spend a sum that would far exceed the landlord’s likely loss.
A pecuniary award would provide the landlord with an adequate remedy and, because there was no real prospect of obtaining an order for specific performance at trial, the landlord’s claim for specific performance was struck out.
Allyson Colby is a property law consultant
