Judicial Remedies (L19)

Question 1

What are the 5 potential remedies for contract?

Answer 1

(i) Action for Debt (enforcing monetary payment).
(ii) Specific Implement (enforcing non-payment obligations).
(iii) Interdict (prohibiting actions constituting breach).
(iv) Remedies agreed in the contract (May require judicial enforcement e.g. liquidated damages clauses).
(v) Damages (compensation for loss caused by breach).

Question 2

What is a decree ad factum praestandum?

Answer 2

The court orders someone to do something.

Question 3

What is specific implement?

Answer 3

A form of decree ad factum praestandum.

The ordinary means of enforcing contractual rights to performance.

Results in a judicial order requiring contracting party to perform specified obligation under the contract.

Failure to comply constitutes contempt of court.

Question 4

What were the issues in Highland & Universal Properties Ltd v Safeway Properties Ltd 2000 SC 297?

Answer 4

Clause third:
12(a) Safeway keep premises open during normal business hours under criteria in 13(a).
13(a) Particular criteria for trading.

Safeway ceased trading.

Could Landlord enforce ‘keep open’ clause through specific implement?

Question 5

What was at stake in Highland v Safeway?

Answer 5

Safeway “held about half of the space in the Centre and provided slightly over a quarter of the rent. It was a fundamental anchor operation, and was thought to be central to the commercial success of the redeveloped centre from the viewpoint of the other tenants….

Cessation of trade by Presto [Safeway] would be very damaging. It was not established that the defenders [Safeway/Presto] would be worse off if they were compelled to continue trading than if they were not.”
(per Lord Kingarth, Inner House).

Question 6

What were the arguments against granting the remedy in Highland v Safeway?

Answer 6

“The obligations … were so unspecific as to render the clause void from uncertainty….”

Obligations “were insufficiently specific to form the basis for a decree of specific implement.”

“Not competent for the court to pronounce an order for specific implement to enforce a contractual obligation of the general nature in question”, especially “ordaining a party to carry on business over a period of time”.

ALL REJECTED!

Question 7

What is the test for specific implement as per Highland v Safeway?

Answer 7

Enforcement by decree of specific implement a ‘matter of right’ subject to a residual discretion in the court to refuse.

Must be framed with sufficient precision.

Will only be refused in exceptional circumstances.

Question 8

What are the ‘exceptional circumstances’ for refusal of specific implement as per Highland v Safeway?

Answer 8

Must be a ‘very cogent reason for depriving litigants of the ordinary means of enforcing their legal rights’.

Must be ‘inconvenient and unjust’ to grant remedy e.g. where enforcement “would be an undue restraint on personal liberty” (Gloag p. 657).

It’s for the defender to satisfy the court that such grounds exist.

Question 9

What did Lord Braid say/do in Sapphire 16 S.A.R.L. v Marks and Spencer Plc [2021] CSOH 103?

Answer 9

“An interim order that the defender re-open the whole of the premises”, but held the order breached:

When the defender’s manner of trading is viewed as a whole, it is undoubtedly recognisable as a breach of an order designed to force the defender to re-open to prevent irreparable damage to the pursuer while the principal action is being determined. While each single action taken by the defender might not in itself have constituted a breach had it been done in isolation, viewed as a whole they undoubtedly do [para 45].

Question 10

What is an inderdict?

Answer 10

A preventative remedy to stop a breach.

‘Prohibits action which is threatened or continuing, and it looks to the future not to the past’ (Church Commissioners for England v Abbey National 1994 SC 651 per Lord President Hope at 657).

Cannot be used to enforce a positive obligation.
Can enforce a negative obligation (e.g. restrictive covenant).
Basis of remedy is equitable and discretionary.

Question 11

What was the issue in the case of Peace v City of Edinburgh Council 1999 SLT 712?

Answer 11

Teacher employed since 1978, but suspended 1997 for alleged professional misconduct.

Dispute over correct disciplinary procedure.

Could the Council be prevented by interdict from using procedures where the selection of those procedures was in breach of the employee’s contract of employment’?

YES: interdict was competent.

Question 12

What is the remedy agreed in the contract which is covered?

Answer 12

Agreed damages (“liquidated damages”).

Question 13

What are liquidated damages?

Answer 13

Remedy defined in a term of the contract.

Typically agrees payment of a fixed sum if a pre-defined breach of contract occurs.

Must satisfy common law test of validity so as to not be ‘unconscionable and extravagant’.

If invalid, the clause is an unenforceable penalty.

Question 14

Which case tells us about the pre-Cavendish law on penalties?

Answer 14

Dunlop Pnuematic Tyre Co v. New Garage & Motor Co [1915] AC 79.

Question 15

What did Lord Dunedin say in Dunlop Pneumatic Tyre Co?

Answer 15

Lord Dunedin set out four tests for construing when a contract term is ‘extravagant and unconscionable’ and therefore a penalty.

When invalid: essence was whether in terrorem.

When valid: essence was genuine pre-estimate of loss.

Effect: if valid then bars any damages claim for the loss; if invalid then may sue for damages instead.

Question 16

What case tells us about the current law on penalties?

Answer 16

Cavendish Square Holding BV v Makdessi [2015] UKSC 67.

Question 17

What did Cavendish change?

Answer 17

Set out new general test for when an agreed remedy clause is “unconscionable and extravagant” and therefore a penalty – abolished in terrorem test.

Validity assessed by proportionality to interest in performance, not whether ‘genuine pre-estimate of loss’.

Extended penalties rule to cover other non-payment obligations triggered by breach, e.g. to transfer assets.

Question 18

What did Lord Hodge say in Cavendish at para 255?

Answer 18

The correct test for a penalty is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party’s interest in the performance of the contract.

Question 19

What did Lords Neuberger and Sumption say in Cavendish at para 32?

Answer 19

The true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.

Question 20

When does Lord Dunedin’s four tests for construing the meaning of the contract term still apply?

Answer 20

For simple cases of damages clauses.

Question 21

What are Lord Dunedin’s four tests?

Answer 21

[When agreeing damages] a clause will be unenforceable if amount is extravagant and unconscionable in comparison with the greatest loss that could have been anticipated.

Unenforceable if breach is constituted by non-payment of a sum and the clause requires a higher sum to be paid upon the breach.

Presumed to be a penalty if payable on occurrence of a number of events of varying gravity where some cause trivial loss and others serious loss.

Not a penalty simply because impossible to pre-estimate true loss.

Question 22

What are the facts of Cavendish?

Answer 22

Sale of controlling stake by founder of an advertising and marketing company, with payment by instalments.

Seller not to act in competition with the business after sale, or else would lose right to remaining payments, and buyer would be entitled to discount for purchase of seller’s remaining shares.

Seller breached contract and triggered terms for a ‘defaulting shareholder’ but argued the terms were an unenforceable penalty and illegitimate deterrent.

Question 23

What was the UKSC decision in Cavendish?

Answer 23

Validity of clauses 5.1 and 5.6 not judged by old test of whether a pre-estimate of loss, but against buyer’s legitimate interest in the non-competition provisions being respected.

Clause 5.1 (in view of Neuberger, Sumption and Carnwath) was simply a “price adjustment clause” (para 74), operating on breach, causing an adjustment in the primary obligation of price.

Clause 5.6, subtracting goodwill from share value “reflects the reduced price which Cavendish was prepared to pay”.

Therefore neither clause unconscionable or extravagant.

Question 24

How can we summarise the rules on penalties?

Answer 24

The real question is whether clause is penal: i.e. extravagant, exorbitant and unconscionable (and not whether genuine pre-estimate of loss).

The proportionality of the sum/transfer compared to the party’s interest in performance is the correct test for a penalty (and not whether in terrorem).

Only engaged in relation to contractual provisions which are triggered by a breach of contract.

Apart from obligations to pay money, penalty clauses may also involve other obligations to transfer assets, withhold payments otherwise due, or to lose a deposit already paid.