Obliged to build before contractual completion date
Author: Kate McCall
Applies to: England and Wales
In a recent case the High Court has ordered, by way of specific performance, that building works must be carried out before the date specified in the contract for those works to be completed.
Airport Industrial GP Ltd & another v Heathrow Airport Ltd & another 
The facts of the case are complex and involve several agreements relating to land at Heathrow Airport. The pertinent details are that a leaseholder, AP16, was obliged to build a car park providing 280 spaces for use without charge by another tenant.
An order was sought for specific performance requiring AP16 to act to ensure that the car park was built by the contractual completion date, 22 October 2016. Various parties were involved in bringing the action. All agreed that building works would be required but they disagreed about the type of works needed and the layout/design of the car park (flat surface vs multi storey).
Specific Performance is a remedy available at the discretion of the court which forces someone to take action to fulfil their contractual obligations.
AP16 argued that the obligation to build the car park had not yet arisen but it accepted that it would be in breach of contract if the car park did not exist by the contractual completion date.
It was accepted that, if an order for specific performance was appropriate, proceedings could be started to seek the order before the contractual completion date. But, was the court able to order AP16 to act before that date with a view to ensuring that the 280 spaces could be provided as soon as reasonably possible thereafter? There was no direct authority on this point and so this case has made new law.
The court decided that it could order specific performance of AP16's obligation to build the car park. It was able to give directions as to the steps to be taken to bring about this performance and so could order AP16 to take steps before 22 October 2016.
The passage of time and the fact that AP16 had done nothing towards fulfilling its obligations meant that the options open to it to perform its obligations were now more limited than they might have been. There was doubt that the car park could be finished by the due date whatever its design.
The Court also recognised that the cost of building a surface car park with no prospect of income from it would probably render AP16 insolvent. This was AP16's own fault but the risk of its insolvency had to be weighed against the prejudice that would suffered by the other parties if the car park was not built by the contractual completion date.
The Court ordered that AP16 should perform its obligations under the court's supervision but that AP16 could have an additional 2 years in which to complete the works. Damages would be paid during that period to those to whom the obligation was owed. Because of the risk of insolvency, the court thought it would be inappropriate to force AP16 to do the works without being able to make any profitable use of the land. Instead it should be able to choose to develop the land other than as a surface car park to make the endeavour more profitable.
This case provides helpful clarification of the fact that a court may order a party to take steps to achieve a prescribed result before the date set for achieving those steps has passed. It means contracting parties no longer have to wait for a breach to occur and suffer loss as a result. Instead, they can take action to ensure contracts are performed in good time.
It remains to be seen whether, in the future, courts will be as willing to extend timetables for compliance beyond the term that contracting parties have agreed. This case was complex and the circumstances unusual, and so it would be a brave person who seeks specific performance of anything other than the strict letter of their contract.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.