Specific Performance: Discretionary Defences

• Author: Jeffrey Berryman
• Pages: 313-347

313

CH AP TER 11

SPECIFIC

PER FOR M ANCE:

DISCRETIONARY

DEFENCES

A. INT RODUCTION

In this chapter we wi ll explore a number of discretionary defences

to the granting of specif‌ic performance. Some of these defences are

intimately connected to issue s of contract formation and enforceability.

Others are related to equity ’s method and approach — in particular,

they build upon notions of fairnes s and avoidance of unconscionable

behaviour. Finally, some are simply historical anachronisms that may

have outlived their usage. Although these m atters have traditionally

been dealt with under a heading of “defences,” they do not necessarily

all operate as would a defence, in say, criminal law. They do not invari-

ably lead to denial of all equitable relief, although th at can happen;

rather, they operate as signposts alert ing a court to matters that may

affect the justice of awarding equ itable relief. In many of these are as we

are dealing wit h gradations of a person’s conduct that must be analyzed

in the particul ar context of the litigants’ dispute. Often, a number of

these “defences” will arise, and it is the totality or cumulative effect

which is ultimately determi native of the court’s discretion.

Historically, the denial of specif‌ic rel ief could have a serious impact

on the eventual remedy granted a plaintiff. It would be of little conse-

quence if the denial of equitable relief, based on some discretionary

ground due to the plaintiff ’s improprieties, simply meant that t he plain-

tiff would receive equivalent justice in common law damages. But this

was not the case while determ ination of damages was left to juries who

THE LAW OF EQUITABLE RE MEDIES314

ameliorated their awards to ref‌lect the pla intiff’s conduct. Thus, the

denial of specif‌ic relief ca rried with it signif‌icant risk of the plaintiff

being under-compensated as well as having the expense and inconven-

ience of starting a new action at common law. Now, since control has

been placed on jury damage assessments, and chancer y and common

law procedures have been fused, some of the discretionary defences

appear anachronist ic. It is probably fair to say that the factors that

motivate a court in denying specif‌ic relief are also considered in the

assessment of damages.1 However, where specif‌ic performance would

amount to a more complete justice, because damages are inadequ ate,

denying the plainti ff her remedy of choice will have a signif‌icant impact.

B. ISSUES RELATING TO CONTR ACT

FOR M ATION AN D ENFOR CEM ENT

Before specif‌ic performance can be decreed there must be a contract in

existence.2 Thus, any inter vention that makes t he contract void or void-

able will also deny speci f‌ic performance as a remedy. Equity plays a

signif‌icant role in contract law through a number of doctrines in addi-

tion to the granting of specif‌ic performance — in particular, rescis-

sion for fraud, undue inf‌luence, unconscionability, misrepresentation,

and mistake which operates to bring the contract to an end. There is

some controversy as to the extent of these interventions, but the net

effect is to bring the contractual obligations to an end and to restore

the parties to t heir original positions. Historica lly, a common feature to

1 In one study undert aken in the United States, t he authors concluded that where

specif‌ic relie f has been denied based on s ome equitable defence it is in fact a

f‌inal deni al of the case. It is very rar e for a plaintiff to be able to resor t to a

common law remedy af ter denial of specif‌ic per formance. See J.P. Frank & J.

Endicott, “Defens es in Equity and ‘Legal R ights’” (1954) 14 La. L. Rev. 380. E.L.;

and Sherwi n, “Law and Equity in Contra ct Enforcement” (1991) 50 Md. L. Rev.

253, who suggests t hat where an equitable defence has re sulted in the denial of

specif‌ic per formance, then based on t he same grounds, a court wil l often resort

to compensati ng the promisee for his lost reli ance interest rather th an his

expectat ion interest. The former damage s will be lower. The decision in Jacobs v.

Bills, [1967] N.Z.L.R. 249 (S.C.) would appear to exempli fy this suggestion: t he

plaintif f was denied specif‌ic per formance but then allowed to recover d amages

based upon the old r ule of Bain v. Fothergill (1874), L.R. 7 H.L. 158 (lim iting

damages to t he cost of exploring the title) rat her than for his loss of the prop-

erty value unde r the contract.

2 For an explan ation, see the discussion on e stoppel in Section B(4), below in this

chapter.

Specif‌ic Perform ance: Discretionar y Defences 315

equity’s intervention in these areas was that it would aris e even though

at common law the contract could be treated as valid. This was based

on the fact that chancery’s notion of what conduct constituted impro-

priety, often referred to as “equitable or constructive fraud,”3 was wider

in ambit than equivalent common law doctr ines. Whether it is still

relevant to maintain a d istinction between treatment of contracts at

common law and in equity with re spect to substantive doctrine s

on formation and enforcement is beyond the scope of this book. If

a contract is resci nded ab initio it appears futile to suggest that it could

have remained enforceable at common law, and in any case, this has

nothing to do with the avai lability of specif‌ic performance. The dom-

inant issue in most of these c ases is whether either part y has a right

to rescission. This section looks at the question, under what circum-

stances will specif‌ic performance be denied and t he plaintiff left to

damages at common law, which was recognized as a possible scenario

before the enactment of the Judicature Acts.4

1) Mistake

Where the parties have entered into a contract under a common mis-

take the contract wil l not be specif‌ically enforced if the mistake is so

fundamental th at it prevents the formation of an agreement. Where the

parties have entered into a contract in which the defendant has made

a unilateral mistake, which was known by the plai ntiff or induced by

the plaintiff ’s conduct, then the contract will be rescinded. Where the

defendant has made a unil ateral mistake that is neither known nor

contributed to by the plaintif f, the contract will be enforced unless

there are some other circumstances present that make enforcement a

hardsh ip amounting to i njustice.5 Apart from cases where rescission

is granted, where the denia l of specif‌ic performance logically follows,

3 In the case of mi srepresentation, equit y’s intervention is justi f‌ied even for an

innocent mis representation before the contr act has been executed. See gen er-

ally G.H.L. Frid man, The Law of Contract in Canada, 6t h ed. (Scarborough, ON:

Carswell, 2011) at 761ff.

4 See R.J. Sharpe, Injun ctions and Specif‌ic Performance, lo oseleaf (Aurora, ON:

Canada L aw Book, 2012) § 10.100; and I.C.F. Spry, The Principles of Equita ble

Remedies: Specif‌ic Performance, Injunctions, Rectif‌ication and Equitable Damages,

7th ed. (Sydney: LBC Inform ation Services, 2007) at 155–57.

5 See Tamplin v. James (1880), 15 Ch. D. 215 (C.A.); and Foderaro v. Future Homes

Constructio n Ltd. (1991), 17 R.P.R. (2d) 258 (Ont. Ct. Gen. Div.) [Foderar o];

Sharpe, abo ve note 4 at § 10.110; G.H. Jones & W. Goodhart, Spec if‌ic Perfor-

mance, 2d ed. (London: Butte rworths, 1996) at 105; Spry, above note 4 at 157;

and Taylor v. Johnson (1983), 151 C.L.R. 422 (H.C.A.).