England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		19/12/2013

Judgment No 2

Mr Justice Ramsey :

Introduction

1. In my previous judgment ([2013] EWHC 2688 (TCC)) I dealt with a number of issues arising out of a contract for a development project ("the Contract"). Those issues included the question of when the Contract was formed and which of the Defendants, Cuddy Civil Engineering Limited ("CCEL") or Cuddy Demolition and Dismantling Limited ("CDDL") was the Contractor under that Contract with the Claimant ("Liberty Mercian").
2. In that judgment I held that the Contract was formed when it was signed as a deed in July 2010 and that the Contract was formed between Liberty Mercian as the Employer and CCEL as the Contractor and there were no grounds on which CDDL could be construed to be the Contractor or become the Contractor by way of a claim for rectification or on the basis of an estoppel. I also held that CDDL was not CCEL's parent company so that CCEL was not obliged to provide a parent company guarantee from CDDL and that there was no other parent company but I reserved for further submissions the effect of there being no parent company on the obligation to provide the parent company guarantee under the Contract.
3. I found that CCEL's obligation to supply a parent company guarantee, a performance bond and two remaining warranties from Quantum (GB) Limited to Liberty Mercian and to Waterman Transport and Development Limited ("Waterman") survived the termination of the Contract by whichever of the assumed ways the Contract was terminated. I held that CCEL was in breach of contract in failing to supply the performance bond and the two remaining warranties but reserved for further argument the issue of whether or not on the basis of my findings it was appropriate to order specific performance.
4. In this judgment I now deal further with the claim for specific performance of the performance bond and the two warranties by setting out my reasons for making an order on 19 November 2013 that CCEL was to use its best endeavours to obtain both the performance bond and the warranties so that the matter could be reviewed at a further hearing on 19 December 2013.
5. Subject to that, the parties are in agreement that I should not deal, at this stage, with the issue of the effect of there being no parent company on the obligation of CCEL to provide a parent company guarantee under the Contract.

Specific performance: the law

6. I have been referred to a number of authorities on the question of the circumstances in which it is appropriate to order specific performance. CCEL founds its opposition to specific performance essentially on three grounds. First, that damages are an adequate remedy; secondly, that it is impossible for a bond or the warranties to be provided by CCEL and, thirdly, that as a matter of discretion I should not order specific performance either at all or at this stage.
7. In relation to whether damages are an adequate remedy I was referred to the Court of Appeal decision in Evans Marshall & Co Limited v Bertola SA and another [1973] 1 All ER 992 where the Court had to consider the issue in relation to a claim for an injunction. At 1005 to 1006 Sachs LJ summarised the position as follows:

"The standard question in relation to the grant of an injunction, are damages an adequate remedy? might perhaps, in the light of the authorities of recent years, be re-written: is it just, in all the circumstances, that a plaintiff should be confined to his remedy in damages?

…

The courts have repeatedly recognised that there can be claims under contracts in which, as here, it is unjust to confine a plaintiff to his damages for their breach. Great difficulty in estimating these damages is one factor that can be and has been taken into account. Another factor is the creation of certain areas of damage which cannot be taken into monetary account in a common law action for breach of contract: loss of goodwill and trade reputation are examples.

…

So far the question of adequacy of damages has been discussed on the footing that if judgment was recovered the sum awarded would be paid. But whenever the adequacy of damages falls to be considered in this class of case, there arises the further question-are the defendants good for the money? Also (if they are abroad), will their government's exchange control permit the payment? In other words, will the judgment be satisfied?

Bertola being a wholly owned subsidiary of unknown financial status in Spain, and ISI a company with a £5,000 share capital, the chances of a judgment for sums such as have just been mentioned being satisfied by them cannot be rated as other than questionable. So on that ground, too, damages would prima facie in this case not be an adequate remedy."

8. I was also referred to Spry, The Principles of Equitable Remedies (8th edition) at page 68 where it is said:

"There are other matters also that may render the remedy at law of damages inappropriate. So it is relevant that there are doubts as to the solvency of the defendant, and despite occasional statements to the contrary it appears to be clear that a significant risk that a legal remedy such as damages will be ineffective on the ground of the inadequate resources of the defendant or otherwise, may of itself justify the conclusion that it is inadequate. Further, even a very slight risk of insolvency of the defendant may be decisive, especially in combination with other matters that tend to show that only if the plaintiff is given specific relief in equity will he be sufficiently protected. What amounts to a sufficient risk of insolvency to render damages inappropriate depends on the particular circumstances, and the court will simply ask whether the plaintiff will in all material respects be in the same position, if left to legal remedies, as if he obtained performance in specie."

9. Various passages in Halsbury's Laws (4th edition) Vol 44(1) were also cited. First in relation to the question of whether specific performance will be ordered where the party seeking specific performance is in breach of contract, I was referred to the following passages at paragraph 890:

"890. Effect of acts done in contravention of contract. Where a plaintiff claiming specific performance of a contract acts in contravention of its terms, the court may refuse to enforce the contract in his favour; thus, where a vendor who has agreed to give immediate possession retakes possession, he is not entitled to specific performance. Similarly, where there is an agreement for a lease and the lessee commits breaches of the terms of the agreement, such as waste, failure to insure or repair, or, if the agreement is for a sublease, knowingly commits acts which are inconsistent with the covenants of the head lease, the contract is not specifically enforced. So, also, a covenant to renew is not enforced where the lessee has been guilty of breaches of the expiring lease.

In the past it has been said that to constitute a bar to specific performance, such acts must be gross and wilful; and in relation to leases they must, as a rule, be not only such as would work a forfeiture of the legal interest, but also such that the court would not relieve against forfeiture. Today it is more likely, even in a claim for equitable relief, that a court will consider not only the nature of the particular term which is breached, but also the consequences which flow from the breach in determining whether to grant specific performance. Consequently specific performance may be granted where the wrongful acts are trifling or, in relation to leases, are such that the court would relieve against a forfeiture of the legal estate."

10. In relation to the grant of specific performance and the impossibility I was referred to paragraph 892 and 893 where the following is stated:

"892. Frustration and impossibility. … At law it is no defence to an action for damages that the contract has become impossible of performance through the defendant's own acts. But in equity specific performance will be denied. Again, it is a defence to an action for specific performance that the defendant (who is generally a vendor of land) is not able to put an end to the rights of a third person over the land or to compel him to concur in his conveyance. However, a vendor must do his best to obtain any necessary consents. He must take proceedings to eject a tenant by sufferance, a tenant at will or a trespasser who has no right to be there, but he need not embark on any dangerous and uncertain litigation to secure any consents…..

893. Time At Which Impossibility Is Judged The time at which impossibility is judged is the proper time for performance of the contract, not the date of the contract."

11. I was also referred to the impact of the need for the court's supervision and the following passages at paragraph 806:

"806 Acts the performance of which would require continued supervision. It has been held that the court does not enforce the performance of contracts which involve continuous acts and which require the watching and supervision of the court and that, in particular, the court does not normally order the specific performance of a contract to build or repair.

…

More recent cases indicate, however, that the courts are now more ready to enforce contracts requiring supervision. The question is whether the contract sufficiently defines the work to be done, expressly or by implication, to permit the court to make an order which enables the defendant to know what he has to do to comply with it."

12. I was also referred to the decision of Megarry J in Wroth v Tyler [1974] 1 Ch 30 at 47, 48 and 50-51 where he said this:

"With that out of the way, I turn to the main question of specific performance. It seems to me that where a third party has some rights over the property to be sold, there are at least three categories of cases. First, there are those cases where the vendor is entitled as of right to put an end to the rights of the third party, or compel his concurrence or co-operation in the sale. Second, and at the other extreme, there are cases where the vendor has no right to put an end to the third party's rights, or compel his concurrence or co-operation in the sale, and can do no more than to try to persuade him to release his rights or to concur in the sale. An example of the first category would be the vendor's right, as mortgagor, to pay off a mortgage, or his right, as a mortgagee, to obtain possession from the mortgagor. An example of the second category would be when the third party is entitled to an easement over the land.

In between those two categories there is a third category, namely, where the vendor cannot as of right secure the requisite discharge or concurrence, but if it is refused he can go to the court, which has power, upon a proper case being shown, to secure the release or concurrence.

…

A vendor must do his best to obtain any necessary consent to the sale; if he has sold with vacant possession he must, if necessary, take proceedings to obtain possession from any person in possession who has no right to be there or whose right is determinable by the vendor, at all events if the vendor's right to possession is reasonably clear; but I do not think that the vendor will usually be required to embark upon difficult or uncertain litigation in order to secure any requisite consent or obtain vacant possession. Where the outcome of any litigation depends upon disputed facts, difficult questions of law, or the exercise of a discretionary jurisdiction, then I think the court would be slow to make a decree of specific performance against the vendor which would require him to undertake such litigation."

13. Finally, I was referred to the decision of His Honour Judge Stephen Davies, sitting as a Judge of the High Court, in Matila Limited v Lisheen Properties Limited and others (unreported 23 June 2010) where in considering a claim for specific performance of leases of apartments and commercial units, the defendant had submitted that the court should not exercise its discretion to grant specific performance because it had been unable to obtain the funding required to complete the contracts. At [258-259] he dealt with that submission:

"258. In paragraph 86 of his closing submissions Mr Oughton for Matila submitted that the Defendants had failed to provide any, let alone full, disclosure as to their respective means, both in terms of the assets available to Lisheen, Brendan Clarke and Paul Clarke, but also in terms of what might reasonably be available to them from third party sources, whether commercial lenders or otherwise. He submitted that since it would only be in exceptional circumstances that the Court would not order specific performance in a case such as the present, it was incumbent on the Defendants to provide the fullest disclosure as to their means and, given their failure to do so, the Court could not draw the inference which they invited the Court to make.

259. I agree with that submission. It seems to me that there is a real difference between my concluding, as I do, that as at the end of September 2008 the Clarke brothers themselves saw no way of completing without funds from the Bank of Ireland, and my concluding that on the evidence before me that as at the present date the combined finances of the Defendants, coupled with their access to third party funds, whether on a commercial or non-commercial basis, and whether on a secured or unsecured basis, is such that it is simply impossible for them to complete. Whilst given the fall in property values and the credit crunch I can see that this may well be the case, in my judgment it is incumbent on a defendant who wishes to advance such an argument to give the fullest possible disclosure of his financial position so that the other party and the court can be satisfied that this is so, and in this case the Defendants have failed to surmount that high hurdle."

14. In the light of the principles to be derived from those passages, I now turn to consider specific performance, first in relation to the performance bond and then in relation to the two warranties.

Performance Bond

15. Simon Hargreaves QC, who appeared with Richard Coplin on behalf of CCEL, submitted that damages are an adequate remedy for non-provision of a performance bond because such a bond is in a liquidated sum and can be expressed in terms of damages, even given the evidence that CCEL is a dormant company without any assets. He submitted that Liberty Mercian contracted with CCEL, a company with no assets, rather than with CDDL which had assets. He pointed out that, at present, CCEL has made a claim of over £2 million against Liberty Mercian and the court has not yet been asked to determine which of the assumptions as to termination made for the purpose of determining the issues is correct (contractual termination by Liberty Mercian, acceptance by Liberty Mercian of a repudiatory breach by CCEL or acceptance by CCEL of a repudiatory breach by Liberty Mercian). He submitted that, on the basis that there were justified claims by CCEL against Liberty Mercian, damages would be an adequate remedy.
16. Mr Hargreaves also submitted that the court at this stage has three alternative hypotheses as to how the contract was terminated, one of which was that Liberty Mercian repudiated the Contract and this was accepted by CCEL. He submits that specific performance will not be ordered where the party seeking it is in breach of contract and that therefore specific performance should not be ordered now.
17. On this aspect Simon Lofthouse QC, who appeared with Marc Lixenberg on behalf of Liberty Mercian, submitted that an obligation to provide a document in the nature of a performance bond cannot be properly reflected in an award of damages particularly in the circumstances of this case where CCEL is a company without assets. In relation to CCEL's reliance on the assumption that Liberty Mercian is in repudiatory breach, he referred to the decision in Knatchbull v Grueber (1815) 1 Madd 153; affd (1817) 3 Mer 124 upon which the statement in Halsbury at para 890 (cited above) is based and submitted that the alleged breach by Liberty Mercian has no relevance to CCEL's obligation to provide the bond. He said the grounds upon which this is alleged are that Liberty Mercian wrongly exercised a contractual right to terminate not that there was some other breach of contract or conduct by Liberty Mercian. It was therefore submitted that this should not form a basis for refusing specific performance.
18. In my judgment, particularly in this case, damages are not an adequate remedy for the non-provision of a performance bond. The performance bond was requested on 29 November 2011 before termination of the contract. The Contract is between Liberty Mercian and CCEL, a company which has no assets. In such a case the provision by an insurer or a bank of a performance bond cannot be adequately remedied by an award of damages against CCEL. As set out in Bertola at 1006, where, as here, the chances of a judgment being satisfied cannot be rated as other than questionable, damages would prima facie not be an adequate remedy.
19. I do not consider that the undetermined position on whether Liberty Mercian repudiated the Contract should affect the position. It is one of three possible assumptions because it cannot be determined. I do not see that this should affect the approach of the court to the obligation to provide a performance bond. If that assumption is correct and termination occurred by CCEL's acceptance of Liberty Mercian's repudiatory breach, then CCEL may be entitled to an award of damages. Whether that means that overall a balance is due to CCEL will depend on a number of factors and claims. The purpose of the performance bond is to protect Liberty Mercian against any balance of sums which may be held to be due to it from CCEL which has no assets. In such circumstances I do not consider that the existence of a claim by CCEL against Liberty Mercian can be said to establish that damages would be an adequate remedy in the present case.
20. Mr Hargreaves next submitted that it was impossible for CCEL to obtain a performance bond in circumstances where the Contract has been terminated and where CCEL does not have assets. He relied on evidence contained in the witness statement of Darren Evans, called as a witness at the main hearing, where he said it was not practically possible to obtain a bond and he relied on an email from "our bondsman" confirming this. That is an email from John Norbury of Buckingham House (London) Limited where he refers to a performance bond being requested for a terminated contract and says that he has discussed the possibility of obtaining a bond with his usual bond markets and none were willing to issue a performance bond.
21. In his evidence before me Mr Evans said that he had spoken to his usual bond provider who would try and facilitate a bond. He said he thought that Mr Norbury would have gone to as many bond providers as he could.
22. Simon Lofthouse QC on behalf of Liberty Mercian submitted that Mr Evans' hearsay evidence of what Mr Norbury had done did not disclose any knowledge of the extent of the searches or who had been approached. Equally, in paragraph 30(2) of the Defence, the matters raised to defend the claim to provide a performance bond related to the absence of a copy of the Contract and not impossibility of being able to obtain one when the contract was terminated.
23. The current evidence on this aspect is clearly unsatisfactory and I have come to the conclusion that, if otherwise I would have granted specific performance in relation to the performance bond, I should hold back from making such an order and provide CCEL with an opportunity to make good their un-pleaded contention that a performance bond would not be available in this case because of the termination of the Contract. If they can show that they cannot obtain one by the use of best endeavours and Liberty Mercian do not put forward evidence to the contrary then the court would generally be reluctant to order a party to perform an obligation which, in practical terms, is impossible. The court would then have to consider what, if any, remedies are appropriate.
24. CCEL also resists specific performance of the obligation to provide a performance bond on the ground that it says it is impossible for CCEL, without any assets, to obtain a performance bond as it would need to provide a counter-guarantee even if it were possible to obtain a performance bond for a terminated contract.
25. Mr Lofthouse submitted that whilst, on the basis of the findings in my previous judgment, there is no financial connection in terms of company structure between CCEL and CDDL this is a case where CCEL agreed with Liberty Mercian to carry out the work but CDDL carried them out and were paid for them. He also pointed out that CCEL now seeks to make a claim for the balance of the sums due under the Contract and, in doing so gives credit for sums which have already been paid to CDDL. Equally this litigation in which CCEL were the original party has been and continues to be funded. He submitted that, given those matters, CCEL cannot rely on an inability to fund the provision of a performance bond. He refers to the decision in Matila.
26. In my judgment this is a case where there is evidence that CCEL has access to funds from a third party, whether on a commercial or non-commercial basis and where CCEL has been involved as a contracting party in substantial works which it has had carried out by CDDL. There must therefore be some arrangement or agreement by conduct, however informal or non-commercial, between CCEL and CDDL. I do not consider therefore that CCEL can rely on its inability to fund a performance bond to resist the granting of an order for specific performance. In particular, this applies in circumstances where there has not been full disclosure of how CCEL has been funded in this litigation and has dealt with its arrangement for CDDL to carry out the works. If, for instance, CCEL has entered into an arrangement whereby CDDL would perform CCEL's obligations under its contract with Liberty Mercian, then CDDL would similarly have the obligation to provide a performance bond for the work carried out by CDDL.
27. CCEL also relies on a number of additional matters which it says the court should take into account in considering whether to exercise its discretion to grant specific performance in this case. CCEL points to the fact that the draft bond annexed to the Contract contains no expiry date but merely states: "Expiry: [Details] which shall be conclusive for the purposes of this Guarantee". Mr Hargreaves submitted that, in these circumstances, the court should not exercise its discretion to order specific performance of this uncertain obligation, particularly where the Contract has been terminated. He submitted that the bond could have had the date for completion as the expiry date but this date had already passed when the performance bond was first requested by Liberty Mercian. There are obviously a number of possible dates on which a performance bond may expire, for instance completion or even termination. The obligation in this case, as expressed in clauses Z4.1.2 and X13, was for a performance bond to be provided by a bank or insurer. The question of when the bond would expire is therefore, in the absence of any date in the draft form of bond, a matter which will depend upon what the bank or insurer is prepared to provide. If, for instance, they are only prepared to provide one which expires on termination, then it will be impossible to provide one. Equally if they are not prepared to provide one to cover the liabilities up to termination then there will be difficulties in ordering specific performance. Again I consider that this is a further aspect which is best dealt with by seeing what date a bank or insurer willing to provide a performance bond will accept. At this stage I do not make any decision as to what otherwise would be the effect of there not being an expiry date in the draft form of bond attached to the Contract.
28. Mr Hargreaves also raised the point that if specific performance were ordered there would have to be supervision of that process by the court. Mr Lofthouse submitted that there is no need for the type of supervision which causes concern for the courts. I find there is nothing here which would require excessive supervision. It would be necessary for the court to order specific performance by the provision of a bond in accordance with the form of bond attached to the Contract. Some supervision may be necessary in terms of the identity of the bank or the insurer and the expiry date, but I do not consider that this type of supervision, inherent in an order for specific performance, should preclude the court from granting that remedy.
29. Finally, Mr Hargreaves relied on the fact that, by Clause 5 of the draft bond, CCEL undertakes to perform and discharge the obligations on its part set out in the contract. He submitted that, as the Contract has already been discharged by termination, there was no longer any obligations for CCEL to perform or discharge. Mr Lofthouse submitted that there were continuing obligations. I accept that submission. In my judgment, whilst the primary obligations can no longer be performed, there are obligations under the Contract which CCEL would have to perform, for instance, if they had to pay back sums to Liberty Mercian under the Contract.
30. In those circumstances, subject to the matter of impossibility and the appropriate expiry date, I consider that this is a case where it would be appropriate to order specific performance of CCEL's obligation to provide a performance bond.

The warranties

31. Mr Hargreaves submitted that damages are an adequate remedy for non-provision of warranties because any liability for failure to provide a warranty can be expressed in terms of damages and he relied on the matters I have already referred to in respect of the performance bond.
32. Mr Lofthouse submitted that an obligation to provide a warranty from a third party cannot be properly reflected in an award of damages particularly in the circumstances of this case where CCEL is a company without assets. He again relied on the matters referred to above in response to Mr Hargreaves' submissions. Mr Lofthouse also submitted that here the benefit of the warranty was also in favour of a third party, Waterman, and damages would not be recoverable by Liberty Mercian from CCEL for the benefit of Waterman.
33. In my judgment, particularly in this case, damages are not an adequate remedy for the non-provision of the warranties. The warranties were requested on 9 June 2011 before termination of the Contract. The Contract is between Liberty Mercian and CCEL, a company which has no assets. In such a case the failure to provide Liberty Mercian and Waterman with a warranty which gives them a direct right of action against a third party with, it seems, professional indemnity insurance cover cannot be adequately remedied by an award of damages against CCEL. I take into account that it is said that Quantum is in administration or creditors' voluntary liquidation but the position of Quantum or its insurers is not clear from the evidence. As set out in Bertola at 1006, where, as here, the chances of a judgment being satisfied cannot be rated as other than questionable, damages would prima facie not be an adequate remedy against CCEL. In addition, a claim for a warranty in favour of the third party, Waterman, would not be adequately compensated by an order for damages in favour of Liberty Mercian.
34. Mr Hargreaves also submitted that specific performance should not be ordered in this case where the Contract is between Liberty Mercian and CCEL but the relevant subcontract was between CDDL and Quantum. As a result he said that CCEL had no contractual right to obtain the warranties from Quantum and could not compel Quantum to provide the warranties. In any case, he said that from the exchange of correspondence in June 2012 the administrator of Quantum had unequivocally refused to supply the warranties and there was no obligation to litigate with Quantum and, in any event for the reason just mentioned, any litigation by CCEL against Quantum would fail.
35. Mr Lofthouse submitted that, as he set out above in relation to the performance bond, whilst, on the basis of the findings in my previous judgment, there is no financial connection in terms of company structure between CCEL and CDDL this is a case where CCEL agreed with Liberty Mercian to carry out the work but CDDL carried them out and were paid for them. He also pointed out that CCEL now seeks to make a claim for the balance of the sums due under the Contract and, in doing so gives credit for sums which have already been paid to CDDL. He submitted that the relationship between CCEL and CDDL where CDDL was carrying out the work for CCEL means that there is, at the very least, an implied obligation arising from that relationship that CDDL would at CCEL's behest exercise its right to procure warranties from its sub-contractors so that CCEL could comply with its obligation under the Contract with Liberty Mercian.
36. In relation to the correspondence with Quantum's administrator in June 2012, Mr Lofthouse submitted that CCEL has not discharged the burden to show that the warranties cannot be procured and the correspondence is not sufficient. He refers to the obligations of Quantum to CDDL under the subcontract, in particular that it is deemed to have notice of all the terms of the Main Contract which was between CCEL and Liberty Mercian and that under Clause 33 of the subcontract Quantum was obliged to procure the execution and delivery of deeds of warranty in favour of Liberty Mercian and "any beneficiary having a bona fide interest in the works", which in my previous judgment I found included Waterman. On this basis he submitted that CCEL must show more than an initial request which is declined. Given the clear contractual term and the absence of any apparent defence by Quantum, Mr Lofthouse referred to the decision in Wroth v Tyler [1974] Ch 30 at 47G to 51G and submitted that steps to be taken are not "highly unreasonable" and this is not a case where proceedings against Quantum depend on disputed questions of fact or difficult questions of law or the exercise of a discretionary jurisdiction.
37. In my judgment this is a case where CCEL has been involved as a contracting party in relation to substantial works which it has had carried out by CDDL. There must therefore be some arrangement or agreement made expressly or impliedly, probably by conduct, between CCEL and CDDL, however informal or non-commercial that arrangement is. That would include an obligation by CDDL to perform the obligations which CCEL was obliged to perform under the Contract. CDDL would therefore be obliged to enforce the terms of the subcontract against Quantum to provide the warranties which CCEL is in turn obliged to provide to Liberty Mercian in favour of Liberty Mercian and Waterman. I do not consider therefore that CCEL can rely on the absence of a direct contract with Quantum when it has the route through CDDL to obtain the warranties.
38. It is also evident that, with the exception of the request for the warranties made by CCEL/CDDL's solicitors to Quantum in June 2012 which was declined, no further steps have been taken to obtain those warranties. The position of the administrator was at that stage that it was "not prepared to provide" the warranties and nothing further has been done. I accept Mr Lofthouse's submission that this is not adequate to raise the defence to a claim by Liberty Mercian for specific performance of the obligation to provide the warranties. Either by pressure on CDDL or by using the solicitors acting for both Defendants, CCEL should have taken steps to obtain the warranties. Only if, after using its best endeavours, is CCEL unable to obtain the warranties either through CDDL or direct would the matter become clearer. At this stage I am not persuaded that CCEL can rely on the absence of a means through CDDL or direct to obtain the warranty from Quantum.
39. Mr Hargreaves also referred to the fact that Waterman, as the Contract Administrator, has already operated Clause Z.17.2 and deducted sums for the non-provision of the warranties. I do not consider that this affects the position. That remedy applies until the warranties are provided and doubtless the sum deducted would be payable if the warranties were now provided.
40. Mr Hargreaves also relied on the need for the court to supervise the obligation to provide the warranties. As before, I do not consider that the extent to which the court would be involved should prevent the court from granting specific performance.

Summary and conclusion

41. In this case, on the evidence I would have been inclined to grant specific performance, having found that Liberty Mercian have established rights to the performance bond and warranties and that CCEL has not established any defence.
42. Whilst CCEL has raised the possibility that the obligations might be impossible, it has not established that contention on the evidence. I am concerned however that I should not order specific performance in circumstances where, on proper investigation, the obligations to provide the performance bond or the warranties might prove to be impossible.
43. As set out above, in relation to the performance bond, CCEL raises the issue of whether it can now obtain a performance bond for the performance of CCEL's obligations under the Contract which has been terminated. It also raises the issue as to its ability to obtain warranties from Quantum in favour of Liberty Mercian and Waterman.
44. Given that, subject to those matters I would have granted specific performance, I have decided to proceed by stages and by first ordering CCEL to use its best endeavours to obtain both the performance bond and the warranties so that the position on the alleged impossibility can be properly considered at another hearing at an early date, together with any further evidence that Liberty Mercian wishes to put before the court. In this way I am providing CCEL with a final chance to establish that the obligations to provide the performance bond and warranties are impossible.