Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd

Specific performance is a discretionary and exceptional remedy. A court will ordinarily refuse to compel a defendant to carry on a business, even if damages are difficult to assess or are not fully adequate. The settled practice rests on practical considerations: prolonged judicial supervision, repeated and costly contempt proceedings, imprecision, oppressive commercial decision-making and the risk that the claimant will obtain more than the value of performance.

The distinction between an order to conduct an activity and an order to achieve a defined result is important. The latter may be enforceable where its terms are sufficiently precise. Although exceptional circumstances may justify departure from the settled practice, an ordinary commercial breach of a keep-open covenant does not do so merely because it was deliberate.

Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd concerned a tenant's admitted breach of a covenant to keep a supermarket open during usual business hours. The tenant closed the loss-making store as part of a wider commercial reorganisation. The landlord claimed specific performance and damages.

A High Court judge refused specific performance but permitted damages to be assessed. The Court of Appeal reversed that refusal and granted a final injunction requiring continued trading until expiry of the lease or an earlier assignment or subletting. The order was suspended, and the lease was assigned before it took effect.

The tenant appealed. Although the practical dispute had become substantially one about costs, the central issue was whether the Court of Appeal was entitled to interfere with the trial judge's exercise of discretion and compel performance of a commercial keep-open covenant.

1. Appeal allowed unanimously. Lord Hoffmann delivered the leading speech. Lord Browne-Wilkinson, Lord Slynn of Hadley, Lord Hope of Craighead and Lord Clyde agreed that the appeal should be allowed for his reasons. The trial judge had exercised his discretion on proper grounds. His order refusing specific performance was restored.

2. Per Lord Hoffmann, specific performance is an exceptional and discretionary remedy. Damages are ordinarily awarded as of right, whereas specific relief serves cases in which common law remedies are inadequate. Even inadequate damages do not compel specific performance. The settled practice against ordering a defendant to carry on a business rests on wider practical considerations and should be applied absent exceptional circumstances.

3. The objection called constant supervision concerns the prospect of an indefinite series of applications about compliance, enforced through the quasi-criminal law of contempt. Such proceedings can be oppressive, expensive and damaging to commercial reputation. They may force business decisions under threat of punishment and consume disproportionate private and judicial resources.

4. An order to conduct an activity over time differs from an order to achieve a defined result. Compliance with a result-based order can ordinarily be judged retrospectively by examining the finished work. Even then, specific relief requires sufficiently precise terms. A contractual obligation may be certain enough to support damages while remaining too imprecise for enforcement by contempt.

5. The covenant to keep the premises open for retail trade was insufficiently precise. It did not define the required level, area or type of trade. The court had to assess precision on the assumption that its order might require enforcement according to its terms, not on speculation that commercial self-interest would induce fuller voluntary performance.

6. An order to run a loss-making business may cause injustice by imposing loss far exceeding the claimant's loss and placing the claimant in a position to demand more than the value of contractual performance. Contractual remedies protect expectations; they do not punish breach. Damages normally conclude the dispute and avoid perpetuating a hostile commercial relationship.

7. Lord Hoffmann contemplated that a gross breach of personal faith or threatened non-performance used as blackmail might exceptionally override those considerations. This was an ordinary dispute between sophisticated commercial organisations with purely financial interests. The deliberate breach and discourteous conduct did not justify departing from the settled practice.

1. House of Lords: The tenant's appeal was allowed unanimously. The Court of Appeal's mandatory order was set aside, and the High Court judge's refusal of specific performance was restored.

2. Court of Appeal: By a majority, the court reversed the trial judge and made a final injunction requiring the tenant to trade until expiry of the lease or an earlier assignment or subletting. The injunction was suspended for three months and never took effect because the lease was assigned.

3. High Court: His Honour Judge Maddocks QC treated the summary judgment hearing as the trial, refused specific performance and permitted damages to be assessed.