4. Specific performance EQT

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SPECIFIC
PERFORMANCE

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Outline:
• Introduction to relief and equitable remedies
• Definition of specific performance
• General characteristics of specific performance
• Contracts where specific performance is available / enforceable
• For whom Contracts may be Specifically Enforced
• To whom the contract is not enforceable specifically
• Against whom contract is enforceable specifically
• Against whom contract is not enforceable specifically
• Grounds for which court may refuse specific performance
• Powers of court to grant damages in lieu of specific performance
• Defences

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INTRODUCTION TO RELIEF AND
EQUITABLE REMEDIES

Meaning and scope of relief

• Relief means the alleviation of pain, discomfort or distress

• Specific relief is a type of judicial redress under the discretion of the
courts to do equity.

• The type of relief that can be granted goes beyond granting damages
under common law. Specific relief includes:
• The granting of an injunction to order a party to do an act or stop it
from doing an act;
• an order against a contracting party who has breached a contract to
specifically perform his part of the contract;
• an order to rescind or rectify a contract; etc.

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INTRODUCTION TO RELIEF AND
EQUITABLE REMEDIES

Under sec.4 of the Specific Relief Act 1950 (Akta Pemulihan Specifik 1950):
Specific relief is given—
(a) by taking possession of certain property and delivering it to a claimant;
(b) by ordering a party to do the very act which he is under an obligation
to do;
(c) by preventing a party from doing that which he is under an obligation
not to do;
(d) by determining and declaring the rights of parties otherwise than by an
award of compensation; or
(e) by appointing a receiver.

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INTRODUCTION TO RELIEF AND
EQUITABLE REMEDIES

• There are certain types of relief in the Act that have not been mentioned in
sec. 4:

• Rectification of instrument
• Rescission of contracts
• Cancellation of instruments
• Enforcement of public duty

Basis of relief
• Whenever there is a wrong, there must be a remedy
• Equity will not suffer a wrong to be without a remedy

DEFINITION OF SPECIFIC 6
PERFORMANCE

• An order of the court compelling a person to perform an obligation
existing under either contract or trust.

• SP is about compelling a person to perform his contract or statutory
obligation.

• The main function of SP is to enforce the agreement of the parties in a
contract, whether in writing or not. It is also ideal to enforce an
agreement for the sale and purchase of a property, including the
delivery of strata title.

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AUTHORITIES

• SP is governed by ss 11 – 29 of the Specific Relief Act 1950.
• These provisions must be read together with other laws, such as–

• Civil Law Act 1956
• Contracts Act 1950
• National Land Code 1965
• Rules of Court 2012
• Companies Act 1965
• Arbitration Act 2005
• Housing (Control and Licensing) Act 1966

GENERAL CHARACTERISTICS OF 8
SPECIFIC PERFORMANCE

a) It is discretionary in nature but not arbitrary since it is determined
according to a set of settled principles (see sec 21 of the Specific
Relief Act 1950).

• Eg: delay in seeking the remedy and the conduct of the plaintiff can be a
reason as to the court whether or not to award a decree of specific
performance.

b) Common law remedy is inadequate. Damages at common law is
for actual breach of contract, but equity is more flexible and does
not require such a breach. Equity may take a more flexible view of
the circumstances than the common law.

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c) SP were regarded as a classic example of equity acting in
personam, placing emphasis on the conscience of the defendant.
In other words, specific performance is a remedy in personam i.e.
issued against an individual defendant and refusal to comply with its
requirements is ultimately subject to the criminal sanctions of
contempt of court.

• Eg: if the defendant is within the jurisdiction of the court and can be
compelled personally to carry out his obligation, the court may order him
to do so even though the subject-matter of the contract is outside the
jurisdiction of the court

CONTRACTS WHERE SPECIFIC 10
PERFORMANCE IS ENFORCEABLE

• Sec 11 (1) of the SRA – four circumstances where SP may be granted:

(a) S11(1)(a) SRA 1950: During performance of an act in the
agreement/transaction

• When the act agreed to be done is in the performance, wholly or partly, in
trust.

• For example, A holds certain stock in trust for B. A wrongfully disposes of the
stock. The law creates an obligation on A to restore the same quantity of
stock to B, and B may enforce specific performance of this obligation.

• In Wood v Rowcliffe (1847) - in equity, specific delivery of a chattel (property
not real estate) is on a person who breaks the fiduciary relationship. Even if the
applicant may receive satisfactory monetary compensation as court decides.

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(b) S11(1)(b) SRA 1950: No standard to ascertain actual damage

• When there exists no standard for ascertaining the actual damage
caused by the non-performance of the act agreed to be done.

• Gan Realty Sdn Bhd v Nicholas [1969] 2 MLJ 110 - a case involving a
contract for the disposal of shares which were not readily available
in the open market and thus the court granted specific
performance.

• For example, A agrees to buy, and B agrees to sell, a picture by a
dead painter and two rare China vases. A may compel B specifically
to perform this contract, for there is no standard for ascertaining the
actual damage which would be caused by its non-performance.
The related principle at common law is that specific performance
may be granted when damages are difficult to quantify.

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(c) S11(1)(c): Where Pecuniary compensation is not adequate relief

• When the act agreed to be done is such that pecuniary
compensation for its non-performance would not afford adequate
relief (see illustrations to sec 11(1)(c) of the SRA 1950.

• The fundamental here is that specific performance will not normally
be granted where damages are an adequate remedy.

• Perbadanan Setiausaha Kerjaan Selangor v Metroway Sdn Bhd
[2003] 3 MLJ 522- where the court held that specific relief is generally
denied where monetary compensation is an adequate remedy. On
the facts of the case, an award of damages would be appropriate.
Hence, since equity follow the law, specific performance would not
be available when damages provide a complete remedy or where
damages are adequate to meet the justice of the case.

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(d) S.11(1)(d) - Pecuniary compensation cannot be obtained
• When it is probable that pecuniary compensation cannot be

obtained for the non-performance of the act agreed to be done,
specific performance may be ordered.
• Illustration, where A transfers without endorsement, but for valuable
consideration, a promissory note to B. A becomes insolvent, and C is
appointed his assignee. B may compel C to endorse the note, for C
has succeeded to take A‘s liabilities. B can compel C since pecuniary
compensation cannot be obtained by B.

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CONTRACTS WHERE SPECIFIC PERFORMANCE IS
ENFORCEABLE

- SPECIFIC PERFORMANCE FOR PART OF CONTRACT

1) Where subject of the performance has partially ceased to exist – S.12

• S12 said: Notwithstanding anything contained in section 57 of Contract Act 1950, a
contract is not wholly impossible (means it is possible) of performance because a
portion of its subject matter, existing, at its date, has ceased to exist at the time of the
performance.

• Contrast with sec 57 of Contracts Act 1950 which says that contract is not valid if
after the contract is made, the performance becomes impossible. So the contract is
impossible to perform.

• While s12 says: A contract is not rendered wholly impossible, because the portion of
its subject matter, though existing at the date of the contract, has ceased to exist at
the time of the scheduled performance, so the party affected can apply for SP.

• lllustration sec 12 of SRA 1950. ―A contracts to sell a house to B for RM10k. The day
after the contract, the house is destroyed by a cyclone. B may be compelled to
perform his part of the contract by paying the purchase money.‖

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2) Where part unperformed is small- s.13 SRA

• Wong Siew Choong Sdn Bhd v Anvest Corp Sdn Bhd [2002] 3 AMR 2254; [2002] 3 MLJ
143-

• Appellant was the registered owner of all that piece of land, situated in the town and
district of Kuala Lumpur (‗the said land‘).

• A dispute arose over the transfer of the said land to the respondent.
• The dispute arose as appellant refuse to transfer the land to respondent as small portion

of the land has not yet been paid by the respondent but been compensated by the
govt to the App.
• the respondent issue a writ claiming for specific performance and damages for breach
in addition to specific performance.
• By dismissing the appeal, the court (FC) held that as a minor portion of the land had
been converted into compensation money of RM5,252,783.20 which was paid to the
appellant by the government. Thus the appellant had actually been remedied by that
payment.
• Upon the respondent paying the full purchase price of RM5,551,370 which was agreed
by the contract of sale of the said land, the beneficial ownership in the remaining
portion of the said land would therefore pass to the respondent.
• S13:…part unperformed left only a small proportion, and admits compensation in
money…ct may direct SP.

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3) Where part unperformed is large- S.14 SRA

• Sec 14 SRA - here, the section provides that where a contracting party
is unable to perform the whole of his part of it, and the part which must
be left unperformed constitutes a considerable portion of the whole, or
does not admit of monetary compensation, he may not be awarded
specific performance.

• But, the court may at the suit of the other party, direct the party that
has defaulted to perform so much of his part of the contract as he can
perform, (ct may order SP to compel the def to perform so much as he
was able) provided that the plaintiff relinquishes (surrender) all claims to
further performance, and all right to compensation either for the
deficiency, or for the loss or damage sustained by him through the
default of the deft.

• Eg; A contract to buy B‘s land for 1Mil. 10k has been paid by A as
deposit. A failed to pay the balance although B has spent 100k to build
a fence on the land. So court can grant SP if B surrender/relinquish all
his claims or claim any compensation from A. Sort of start a new phase
of agreement. Then SP can be granted by the court. 10k will go to pltf.

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4) SP of independent part of contract- s15 SRA:

• Where a part of a contract which, taken by itself, can and ought to be
specifically performed, stands on a separate and independent footing
from another part of the same contract which cannot or ought not to
be specifically performed, the court may direct specific performance
of the former part.

• One whole contract which contain part which can apply SP and the
other part cannot apply SP, so court will grant SP to the first part only.

• See the case of City Investment Sdn Bhd v Kooperasi Serbaguna
Cuepacs Tanggungan Bhd [1985] 1 MLJ 285, FC (to be presented in tutorial)

• Notes: Ss. 13, 14 and 15 above deal with specific performance of part
of contract. S.16 provides that the court shall not direct SP of a part of
contract, except in cases coming under ss. 13, 14 and 15.

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FOR WHOM CONTRACT MAY BE
SPECIFICALLY ENFORCED

Section 22:
Except as otherwise provided by this Chapter, the specific performance of a contract may
be obtained by—
(a) any party thereto;
(b) the representative in interest, or the principal, of any party thereto:
Provided that, where the learning, skill, solvency, or any personal quality of the party is a
material ingredient in the contract, or where the contract provides that his interest shall not
be assigned, his representative in interest or his principal shall not be entitled to specific
performance of the contract, unless where his part thereof has already been performed;
(c) where the contract is a settlement on marriage, or a compromise of doubtful rights
between members of the same family, any person beneficially entitled thereunder;
(d) when a public company has entered into a contract and subsequently becomes
amalgamated with another public company, or;
(e) when the promoters of a public company have, before its incorporation, entered into
contract for the purposes of the company, and the contract is warranted by the terms of the
incorporation.

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TO WHOM THE CONTRACT IS NOT
ENFORCEABLE SPECIFICALLY

Section 23 - Specific performance of a contract cannot be enforced in favour
of a person—

(a) who could not recover compensation for its breach;

(b) who has become incapable of performing, or violates, any essential term
of the contract that on his part remains to be performed;

(c) who has already chosen his remedy and obtained satisfaction for the
alleged breach of contract; or

(d) who, previously to the contract, had notice that a settlement of the
subject matter thereof (though not founded on any valuable consideration)
had been made and was then in force.

- see illustrations to s.23

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AGAINST WHOM CONTRACT IS
ENFORCEABLE SPECIFICALLY

Section 26 : Except as otherwise provided by this Chapter, specific performance of a
contract may be enforced against—
(a) either party thereto;
(b) any other person claiming under a party to the contract by a title arising subsequently
to the contract, except a transferee for value who has paid his money in good faith and
without notice of the original contract;
(c) any person claiming under a title which, though prior to the contract and known to the
plaintiff, might have been displaced by the defendant;
(d) when a public company has entered into a contract and subsequently becomes
amalgamated with another public company, the new company which arises out of the
amalgamation; and
(e) when the promoters of a public company have, before its incorporation, entered into a
contract, the company:
Provided that the company has ratified and adopted the contract and the contract is
warranted by the terms of the incorporation.
- See illustrations to s.26

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AGAINST WHOM CONTRACT IS NOT
ENFORCEABLE SPECIFICALLY

Section 27 - Specific performance of a contract cannot be enforced against a party
thereto in any of the following cases:

(a) if the consideration to be received by him is so grossly inadequate, with reference to
the state of things existing at the date of the contract, as to be either by itself or coupled
with other circumstances evidence of fraud or of undue advantage taken by the plaintiff;

(b) if his assent was obtained by the misrepresentation (whether wilful or innocent),
concealment, circumvention, or unfair practices, of any party to whom performance
would become due under the contract, or by any promise of the party which has not
been substantially fulfilled; or

(c) if his assent was given under the influence of mistake of fact, misapprehension, or
surprise.

Provided that, when the contract provides for compensation in case of mistake,
compensation may be made for a mistake within the scope of the provision, and the
contract specifically enforced in other respects if proper to be so enforced.

- See illustrations to s.27

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CONTRACTS NOT SPECIFICALLY ENFORCEABLE
- NO SP WILL BE GRANTED

• Governed under sec 20(1)(a)-(h) of the SRA 1950.
• (1) A contract for the non-performance of which compensation in

money is an adequate relief.
• For example, A contracts to sell, and B contracts to buy, $10,000 in the

four percent loan in the City of Penang. This contract cannot be
specifically enforced? Why? B would be reimbursed by compensation
in number of money. Number of money can be ascertained- 10k with
4%interest.

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(2) A contract which runs into such minute (details) or numerous details,
or which is so dependent on the personal qualifications or volition
(eagerness) of the parties, or otherwise from its nature is such, the
courts cannot enforce specific performance of its material terms.

Illustrations: A contracts to render personal service to B; A contracts to
employ B on personal service, and A, an author, contracts with B, a
publisher, to complete a literary work. B cannot enforce specific
performance of these contracts. Hence, contracts for personal services
will not normally be specifically enforced.
- see illustrations in the section.

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(3) A contract the terms of which the court cannot find with reasonable
certainty. (the terms of the contract is rather absurd and not
certain). So the court cannot grant SP.

• The position at common law was emphasised in Cooperative
Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1-where
the relevant clause which required the defendants ―to keep the
demised premises open for retail trade during the usual hours of
business in the locality and the display windows properly dressed in a
suitable manner in keeping with a good class parade of shops‖ was
held not to be sufficiently certain which in turn may attract arguments
as to whether a tenant is doing enough according to the clause or
otherwise.

• However, Wylie CJ in Lin Nyuk Chan v Wong Sz Tsin [1964] MLJ 200- a
case which involved a tenancy agreement but one which failed to
clearly stipulate for variation of rent, the court found that the
uncertainty did not relate to what the contracting parties had agreed
to do, and on the facts of the case , the associated difficulties did
warrant a decree of specific performance. The court can actually find
the problem with reasonable certainty, so SP has been granted.

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(4) A contract which is in its nature revocable. A related principle is
specific performance may be refused on account of futility.

• Puncak Niaga Holdings Bhd v NS Water Sdn Bhd [2004] 5 MLJ 430. In
setting aside the ex parte injunction, the court held that if a contract
cannot be specifically enforced, injunction also cannot be granted to
prevent its breach. The MOU was not capable of being specifically
enforced under those provisions of the Specific Relief Act 1950. Since
MOU has no valid contractual effect at that time).

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• (5) A contract made by trustees either in excess of their powers or in
breach of their trust.

• Illustrations, A is a trustee of land with power to lease it for seven years.
He enters into a contract with B to grant a lease of the land for seven
years, with a covenant to renew the lease at the expiry of the term.
This contract cannot be specifically enforced.

• See also another example where two trustees, A and B, empowered
to sell trust property worth $10,000, contract to sell it to C for $3,000.
The contract is so disadvantageous as to be a breach of trust. C
cannot enforce its specific performance.

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(6) A contract made by or on behalf of a corporation or public
company created for special purposes, or by the promoters of the
company, which is in excess of its powers.

• Illustrations: a company existing for the sole purpose of making and
working a railway contracts for the purchase of a piece of land for the
purpose of erecting a cotton-mill thereon. (ultra vires contract, cannot
be enforced by SP, promoter only acted on one single contract only).
This contract cannot be specifically enforced.

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7) A contract the performance of which involves the performance of a
continuous duty extending over a longer period than three years
from its date.

• Illustrations:―A contracts to let for twenty-one years to B the right to use
such part of a certain railway made by A as was upon B‘s land, and
that B should have a right of running carriages over the whole line on
certain terms, and might require A to supply the necessary engine-
power, and that A should during the term keep the whole railway in
good repair. Specific performance of this contract must be refused to
B.

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(8) A contract of which a material part of the subject matter supposed
by both parties to exist, before the contract has been made,
ceased to exist.

• For example, ―A contracts to pay an annuity to B for the lives of C and
D. It turns out that, at the date of the contract, C, though supposed
by A and B to be alive, was actually dead. The contract cannot be
specifically enforced.

• Addittional Notes: Apart from sec 20(1)(a)-(h) of the SRA 1950, court
may also refuse to grant specific performance by virtue of sec 20(2) of
the Specific Relief Act 1950 stating that save as provided by law
relating to civil procedure, no contract to refer a controversy to
arbitration shall be specifically enforced. Also, legislative prohibitions
exist against the grant of specific performance or injunction in
proceedings by or against the government. The proper remedy in
such cases is a declaration of the rights of the parties.

POWERS OF COURT TO GRANT 30
DAMAGES IN LIEU OF SPECIFIC

PERFORMANCE

• S. 18 of the SRA gives the court power to award damages or compensation
instead of SP.

• The above section provides that an applicant, in addition to an application
for specific performance, may also seek compensation on account of
breach of contract, either in addition to, or in substitution for, its
performance.

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Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings Sdn Bhd [1994] 3 MLJ 777

• second appellant, Pekan Nanas Rubber Estate Sdn Bhd, had agreed to sell
to the respondent, certain land in Johor Bahru for RM47,939,958 for the
purpose of development.

• first appellant, Tan Sri Khoo, undertook to obtain a loan for the respondent
and gave a further undertaking that if he was unable (to get the loan) to do
so, he and the second appellant would join the respondent in a joint
venture to develop the land. The respondent paid a deposit of
RM4,793,995.80 but failed to pay the balance within time. The second
appellant then terminated the agreement and forfeited the deposit.

• High Court: held that the termination was not valid and ordered specific
performance of the agreement with damages to be assessed. (ordered the
first and 2nd app). FC however allowed the appeal by Tan Sri Khoo and
awarding nominal damages.

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DEFENCES

Defences available: s27 SRA

• Generally the courts may exercise their discretion and refuse to grant
a decree of specific performance if it can be demonstrated that the
party seeking performance has behaved in an unfair manner towards
the other. (See sec 27 of the Specific Relief Act 1959). The following
are some of the examples:

(i) S27(a&b): Misrepresentation e.g. fraudulent misrepresentation is a
good defence to refuse SP: In other words, if gross inadequacy of
consideration can be established on the basis of fraud or of undue
advantage taken by the plaintiff, that alone would be considered
as sufficient as defence. Hence, the case for refusal would be
stronger if there is evidence of fraud.

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ii. Mistake- To constitute a valid defence the mistake must be of a
fundamental nature that strikes at the root of the contract. (See
sec 27(c) of the Specific Relief Act 1950). For example, A, one of
the executors, in the erroneous belief that he had the authority of
his co-executor, enters into an agreement of sale with B of his
testator‘s property. B cannot insist on the sale being completed
since it is the mistake of A as to the subject matter of the contract
that is the land.

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• iii. Hardship- Under sec 21(2)(b) of the Specific Relief Act 1950, the
court may refuse to grant the relief of specific performance to the
plaintiff if the granting of it would involve some hardship on the
defendant which he did not foresee, whereas its non performance
would involve no such hardship on the plaintiff.

• RM Venkatachalam Chettiar & Ors v NKR Arunasalam Chettiar [1957]
MLJ 234-where Thomson J as he then was, held that no great hardship
would be caused to the vendor‘s representative to complete the
transaction even if it would incur some unanticipated expenditure.
The court further ruled that the fact that the bargain turned out to be
worse than was originally anticipated by the defendant was outside
the scope of the provision.

• Haji Osman bin Abu Bakar v Saiyed Noor bin Saiyed Mohamad [1952]
MLJ 37- where the court granted specific performance and rejected
the argument that hardship would be caused to the beneficiaries if
such an order was granted.

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• vi. Time clauses- Generally equity considers that time is not of the
essence in a contract. Even if time is not of the essence, laches or
delay in performance or delay in bringing proceedings may defeat a
claim for specific performance under the equitable doctrine of ‗delay
defeats equity‘. For example, in the English case of Eads v Williams-
three and a half years delay defeated a claim for specific
performance.

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CONCLUSION

• All in all, specific performance plays an important role by compelling
a person to perform an obligation existing under either a contract or a
trust. Though the granting of specific performance as a remedy is said
to be discretionary, it should be remembered that this ‗discretion‘ is
not of an arbitrary nature but is determined in the light of a carefully
formulated set of maxims or principles i.e. the court will not grant
specific performance if damage is an adequate form of a remedy.