Litigator's view

The unanimous House of Lords judgment in the case of Co-operative Insurance Society Limited v Argyll Stores (Holdings) has steered the law of specific performance back onto its settled course after the Court of Appeal's venture into previously uncharted waters.

The House of Lords has now confirmed that specific performance will not be granted to enforce a keep open covenant or any other obligation to carry on a business.

The possibility remains that in cases involving "gross breach of personal faith" or blackmail, an order might be granted, where the needs of justice overrode all other considerations.

Their Lordships have made clear their approval of settled principles which do not have to be re-examined in every case, but which the courts will apply in all but exceptional circumstances.

A litigator's advice to his client can again be based on the usual English practice, where specific performance is an exceptional remedy. A party bound by a contract can now make his choice about performance or non-performance in the knowledge that his non-performance will not lead to an order for specific performance.

The non-performer will be liable for damages, but their calculation and proof are major problems for the party entitled to the benefit of the covenant, who is obliged to justify every allegation of loss.

It is questionable whether that party's "expectations of performance" are satisfied by an award of common law damages alone.

In the Court of Appeal, Lord Justice Millett, while dissenting from the majority, displayed some sympathy for the plight of the covenantee when he hinted that a proper approach might be to award damages on what has wrongly been called the "restitutionary" principle. This would permit the covenantee to argue for the loss of the benefit of future performance to be valued and awarded as damages, in a similar manner to the calculations of damages in cases where restrictive covenants have been breached or rights of light infringed.

The Co-op case itself will not be the subject of further litigation as the tenant managed to assign its store shortly after the Court of Appeal decision.

However, questions about calculation of damages remain.