Damages Issues I
General Cases
Kelleher & Anor -v- O’Connor practicing as Don O’Connor & Company
[2010] IEHC 313 (16 July 2010)
JUDGMENT of Mr. Justice Clarke delivered on the 16th July, 2010
1. Introduction
1.1 In 2001 the plaintiffs (“the Kellehers”,“Mr. Kelleher” and “Mrs. Kelleher”) were interested in buying a restaurant premises at No. 1 Parkwest, Mallow in Cork. Their purpose was to buy same as an investment with the intention being to let it to a restaurant operator. In that regard, they retained the defendant (“Mr. O’Connor”) to act as their solicitor.
1.2 There can be little doubt but that the purchase has turned out to be unsuccessful. The Kellehers say that Mr. O’Connor was negligent in the way in which he handled the transaction on their behalf and bring these proceedings for damages arising out of that alleged negligence.
1.3 The problem with the restaurant stemmed from its status under the Food Hygiene Regulations 1950 as amended (“the Food Hygiene Regulations”). There is no doubt that the restaurant encountered significant difficulties with the authorities in relation to that status. It is said that Mr. O’Connor’s handling of the transaction, insofar as it related to dealing with questions under the Food Hygiene Regulations, was negligent. Some further reliance is placed on behalf of the Kellehers on planning issues and the user covenant in the relevant lease.
1.4 Against that general background, it is necessary to turn first to the facts.
2. The Facts
2.1 Mr. Kelleher is involved in the IT business. Mrs. Kelleher, prior to the events which I am about to describe, helped part-time in that business.
2.2 In 2001, the Kellehers saw a restaurant known as “Pat’s Chat” for sale. The restaurant was located in one of a series of shop type units which were built on the same campus as the Tesco Store in Mallow. In that context, the Kellehers approached the auctioneer, Mr. Michael O’Donovan, who had carriage of the sale on behalf of the owner, a Ms. Patricia Piggott. At that time, the evidence establishes that the restaurant being run by Ms. Piggott provided a full, if simple, lunch menu with, for example, Roast Beef, Bacon or the like. The Kellehers went to the restaurant themselves to see how it worked.
2.3 The Kellehers entered into negotiations with Mr. O’Donovan and agreed a purchase price of IR£120,000.00. The Kellehers then instructed Mr. O’Connor to act as their solicitor.
2.4 Mr. Kelleher gave uncontradicted evidence, which I accept, that when initially instructing Mr. O’Connor, he asked Mr. O’Connor to make sure that everything under the Food Hygiene Regulations was in order, and that the restaurant was in compliance.
2.5 A contract, dated the 7th July, 2001, was ultimately signed, which provided for a closing date of the 3rd August, 2001. On the Kellehers case it is said that there was a subsidiary agreement to the effect that the premises would be taken over directly by the Kellehers as a going concern. It will be necessary to return to this issue in due course.
2.6 However, in any event, Mr. Kelleher went to the premises some two weeks or so before the anticipated closing date but found that it had already been closed from a date, apparently, around the 13th July. Thereafter, the sale closed in the ordinary way.
2.7 Prior to that closing a potential tenant who wished to rent the premises for use of a restaurant had been identified. A tenancy agreement was entered into providing for a term of four years and eleven months, and a rent of IR£250.00 per week. The intention of the tenant concerned was to open an Indian Restaurant. However, at or around the time when the restaurant was due to open, problems with the Health Authority emerged, which meant that the restaurant did not, in fact, open. Not surprisingly the tenant concerned ultimately left. The Kellehers had discussions with officials from the Health Authority which resulted in alterations being carried out to the premises, which in turn resulted in the premises being registered with limitations for the purposes of the Food Hygiene Regulations. It will also be necessary to return to the detail of the dealings by officials from the Health Authority in relation to the premises in due course. Thereafter, the restaurant operated for a period through tenants at a lower rent but was ultimately run by Mrs. Kelleher herself, which position continues to this day. As a result of the limited certification of the premises, to which I have referred, the number of covers permitted was reduced to 24 (it would appear that, in practice, prior to the sale, the seating was 40). In addition, significant limitations were imposed as to the type of food which could be served. Initially all that was permitted was cold food. Subsequently a limited entitlement to serve certain types of hot food was permitted.
2.8 Against that general background, two other aspects of the sequence of events need to be commented on.
2.9 First, it is now clear (although it would not have been clear at the time of the sale or the completion of same) that concerns had been expressed to the previous owner, Ms. Piggott, by Health Authority officials, some months prior to the sale which is central to these proceedings. A detailed letter setting out the concerns of the Health Authority had been written. It is clear, therefore, that problems concerning the restaurant had emerged and were already in being, known to Ms. Piggott, but not disclosed to the Kellehers, prior to the events which give rise to these proceedings.
2.10 On the other hand, it would seem that up to the time when Ms. Piggott closed her restaurant (and, therefore, at the time of the contract for sale), the restaurant was properly registered for the purposes of the Food Hygiene Regulations and did not have any limitation on its ability to trade such as came into place in the circumstances which I have already described. Strictly speaking, therefore, the restaurant was, at the time of the contract, registered and does not appear to have been operating outside the terms of its registration in any material respect. It was, however, clear that trouble was coming down the tracks.
2.11 So far as the conduct of the conveyancing process is concerned, a number of facts need to be noted. First, it should be said that Mr. O’Connor did not conduct any pre-contract requisition exercise relating to food hygiene matters. This is an issue to which it will be necessary to return. Second, Mr. O’Connor raised requisitions in the standard form recommended by the Law Society, which included requisitions specific to the Food Hygiene Regulations (Requisition 32). I will refer in more detail to those requisitions and the replies thereto in due course. However, for present purposes it should be noted that the reply to Requisition 32.1.b suggested that there was no evidence available of registration under the provisions of the Food Hygiene Regulations 1950, as amended, while the reply to Requisition 32.2.a suggested that no notice had been served by the Health Authority and that the vendor or her agents had no information of an intention to serve any such notice.
2.12 In general terms it is suggested that those replies ought to have led Mr. O’Connor to conduct further inquiries.
2.13 Against that background, it is next necessary to turn to the issues in the proceedings.
3. The Issues
3.1 The conveyancing issues raised on behalf of the Kellehers suggest that Mr. O’Connor was negligent in four respects:-
A. It is said that he was negligent in failing to raise the food hygiene issues as a pre-contract set of requisitions;
B. It is said that, in the light of the requisition replies to which I have referred, Mr. O’Connor should have engaged in further inquiries;
C. It is said that, because of the specific request made by Mr. Kelleher to Mr. O’Connor concerning the Food Hygiene Regulation regime, at the time when Mr. O’Connor was initially instructed, there was an added obligation on Mr. O’Connor to conduct inquiries (or, perhaps, to advise Mr. Kelleher to conduct inquiries) into the food hygiene situation; and,
D. It is said that Mr. O’Connor was negligent in allowing the premises to shut up for business prior to the closing of the transaction.
3.2 In addition, although these were not central issues in the case, it is said that Mr. O’Connor was also negligent in allowing the sale to go through in circumstances where it is said that use as a restaurant was both in breach of the planning permission in respect of which the unit operated and in respect of a user covenant in the lease under which Ms. Piggott, and through her the Kellehers, held the property.
3.3 The position of Mr. O’Connor in respect of each of those items needs also to be noted.
3.4 While not admitting negligence, I did not understand counsel for Mr. O’Connor to contest the evidence tendered on behalf of the Kellehers to the effect that the recommended and accepted practice for solicitors dealing with the purchase of restaurants was to raise food hygiene matters as a pre-contract matter. Likewise, I did not understand counsel for Mr. O’Connor to contest the expert evidence that Mr. O’Connor should have followed up on the reply to requisitions which asserted that no evidence of registration was available.
3.5 However, under both of those headings, it was suggested on behalf of Mr. O’Connor that there was no causal link between any such inaction and any adverse consequences for the Kellehers.
3.6 So far as the third item is concerned, Mr. O’Connor’s position was that there was no evidence to suggest that the ordinary practice of competent solicitors involved making direct inquiries of the Health Board or its officials concerning food hygiene matters. In those circumstances, it is argued that Mr. O’Connor fulfilled any duty of care which he might have by raising the appropriate requisitions.
3.7 So far as the fourth item is concerned, there was some debate about the precise instructions which Mr. O’Connor was bound by, but of greater relevance is the contention made on behalf of Mr. O’Connor to the effect that there was again no causal link between the fact of the closure of the premises by Ms. Piggott in advance of it being handed over to the Kellehers and any of the difficulties which the Kellehers subsequently encountered.
3.8 So far as the allegation that operating the premises as a restaurant is in breach of planning permission is concerned, it is suggested that, on a proper analysis of the relevant planning regulations, a restaurant is a permitted use. So far as the user covenants in the lease are concerned, attention is drawn on behalf of Mr. O’Connor to the fact that no action has been taken by the landlords, notwithstanding the fact that the premises have been in use as a restaurant of one type or another for a very considerable period of time such that, it is said, there could be no question of any adverse consequences now arising.
3.9 Finally I should record that there were serious issues in relation to damages with significant controversy both as to fact and principle.
3.10 I propose dealing with the issues in the order in which I have addressed them, and in that context it is appropriate to turn, first, to the requisitions including the question of whether same should have been raised pre-contract.
4. The Requisitions
4.1 In relation to the issues concerning requisitions I had the benefit of the evidence of Ms. Áine Hynes. Ms. Hynes is an experienced conveyancing solicitor who has also acted as both a lecturer and a tutor in the Law Society since 2000. She is co-author of the Law Society’s Complex Conveyancing Manual. I have no hesitation in accepting Ms. Hynes’ expertise in these matters.
4.2 I also accept Ms. Hynes evidence that it is standard proper conveyancing practice for a solicitor to raise food hygiene matters as a pre-contract requisition. The logic of this position is clear. The reason for raising certain matters pre-contract is that issues might emerge as a result of such inquiries, which might lead either to a recommendation or advice to the relevant purchaser client not to enter into a contract at all or to only enter into a contract provided that appropriate conditions are included to protect the interests of that purchaser client. While there may be problems which, emerging post-contract and in the course of investigation of title, can be adequately dealt with, it is also the case that a contractually bound purchaser may encounter difficulty in dealing adequately with issues which emerge post-contract and which have not been the subject of appropriate conditions. It is for that reason that queries relating to certain matters are recommended to be raised pre-contract. As indicated, I am satisfied that food hygiene queries come into that category.
4.3 However, it seems to me that counsel for Mr. O’Connor was correct when he argued that there was no reason to believe that the replies which were ultimately given to Requisition 32, would have been any different had they been raised pre-contract as opposed to, as it turned out they were, post-contract. Therefore, nothing seems to me to turn on the specific question of the time when these requisitions were raised. Whether Mr. O’Connor’s response to those replies was appropriate is the next issue to which I will have to turn. However, the conveyancing process in this case, as it happens, was not influenced by the timing of the raising of requisitions. This is not a case where it can be said that the fact that a party had entered into a contract of a particular type placed them at a disadvantage, which disadvantage could have been avoided had pre-contract requisitions been engaged in. In such a case the timing of the raising of requisitions might well be crucial for there would be a causal link between that timing and the consequences. A party stuck with an unfavourable contract because certain matters were not identified pre-contract, will clearly be able to establish a causal link between whatever problems they are stuck with as a result of that unfavourable contract and the fact that requisitions were not raised at the appropriate time. However, that is not the case here. Nothing actually changed because of the timing of the raising of the requisitions in this case. That leads to the question of Mr. O’Connor’s response to the requisitions as were actually raised.
4.4 In this regard I also accept the evidence of Ms. Hynes that the reply to Requisition 32.1.b gives rise to a necessity for further inquiry. Requisition 32 reads as follows:-
“32. FOOD HYGIENE REGULATIONS
1.a. Is the use of the property one which requires to be registered with the Local Health Authority pursuant to the Food Hygiene Regulations 1950 as amended.
b. If so furnish now evidence of such registration.
c. Furnish evidence of compliance with any conditions of undertakings attached to such registration.
2.a. Has any notice been served by the Health Authority or has the Vendor or his gents any information of an intention to serve any such notice.
b. If any such notices have been received furnish now full copies thereof stating whether same have been complied with either in full or in part.
c. With regard to any such notices furnish details of any undertakings given in respect thereof.”
4.5 Requisition 32.1.a. was replied to as follows:-
“Yes. Purchaser must Register with the Local Health Authority.”
However, Requisition 32.1.b. was simply replied to by:-
“None available.”
As pointed out by Ms. Hynes, it is difficult to see how that answer could have been considered to have been correct or adequate. It was correctly accepted by the vendor in response to Requisition 32.1.a. that the premises needed to be registered. However, under 32.1.b., it was suggested that there was no evidence available of registration. That could only mean one of two things. Either the premises had not been registered, in which case it had been operating illegally – a matter that would undoubtedly be of the very greatest concern to any potential purchaser. Alternatively, the premises had been registered but the vendor was declining to make available evidence of that registration. In those circumstances, as Ms. Hynes pointed out, a serious question arises as to why the vendor is not in a position to make evidence of registration available.
4.6 I am, therefore, satisfied that Mr. O’Connor was also negligent under this heading. However, a question of causation also arises here just as it did under the last heading. The question which arises is as to what action Mr. O’Connor should have taken. It seems to me that there were two ways in which Mr. O’Connor could have pursued the matter. He could have insisted that the vendor’s solicitor actually provide the relevant information. Alternatively, he could have sought to check the Register himself. However, the problem with the Kellehers case is that, in either eventuality, nothing untoward would ultimately have shown up. The fact is that the premises were registered. There was no limitation on the Register. The original Register was produced in court. It is a relatively sparse document containing basic details of the proprietor and the premises and also including, where relevant, the fact that there may be a limitation on the certification of the premises concerned. At the material time, that is to say at the time of the sale (whether pre-contract or investigation of title), these premises were registered and had no limitation. Therefore, had Mr. O’Connor insisted on evidence of registration being produced, the vendor’s solicitor could easily have produced such evidence which would not have revealed anything untoward. Likewise, if Mr. O’Connor had sought to investigate the registration himself, he would have come up with the same answer. The premises were registered and no limitation was placed on that registration so far as the Register was concerned.
4.7 Again, I agree with counsel for Mr. O’Connor that there is no causal link, therefore, between the undoubted negligence in failing to pursue evidence of registration and any adverse consequences for the Kellehers, for if Mr. O’Connor had pursued evidence of registration, he would simply have identified that the restaurant had indeed proper and unlimited registration.
4.8 I should now move to the fourth question which is as to whether anything flows from the fact that the premises was closed by Ms. Piggott in mid July and was, thus, not continuing to operate as of the date of sale. I turn to that question and will, thereafter, return to question three.
5. The Closure of the Premises
5.1 In relation to the operation of the Food Hygiene Registration system at the relevant time, I had the benefit of the evidence of Ms. Sarah O’Malley who was the authorised officer relevant to the district in which the restaurant was situate for most of the period with which I am concerned. Ms. O’Malley gave evidence that in circumstances where there was a simple transfer of proprietorship and where the new proprietor intended to carry on more or less the same business as the existing proprietor, then it is possible to effect a change in registration by substituting the name of the new proprietor as she put it “on the proviso that the nature and extent of the business does not change”. However, in this case Ms. Piggott had closed the business and such a “seamless” transition was not practicable. In those circumstances it appears that it would have been necessary for any new proprietor (whether the Kellehers or a tenant operating from them) to have given 28 days notice to enable a new registration to take place.
5.2 However, it does not seem to me on the facts of this case that a seamless direct transfer of proprietorship would have been open. What the Kellehers intended was to let the premises to a tenant who intended to make a significant alteration in the nature of the business. As pointed out by Ms. O’Malley it is only where the existing business continues largely unaltered that a simple transfer of proprietorship can occur. That would not have been open on the facts of this case.
5.3 Likewise, it is clear that the Health Authority had already expressed serious reservations in writing to Ms. Piggott about her business continuing to operate in the way in which it was at the relevant time. It is clear that that was a problem that was not going to go away. Even if it had been possible to effect a seamless change of proprietorship, it is clear that the problem about the existing business would have emerged sooner rather than later in any event. While a simple transfer of proprietorship might have been administratively easier, it would not have gotten over the problem that there was a serious issue coming quickly down the road about this restaurant in any event. In those circumstances, it does not seem to me that any connection exists between the fact that Ms. Piggott was allowed to close her restaurant and the ultimate problems which emerged. A simple change of proprietorship would not have been available in any event. Even if it was, the problems which ultimately caused significant difficulties for the Kellehers were going to happen anyway and would have happened quite soon.
5.4 That leads to the third question which concerns the inquiries which it is said Mr. O’Connor should have carried out on behalf of the Kellehers. I turn to that issue.
6. The Extent of the Inquiries
6.1 While it is normally logical to consider questions of negligence before questions of causation, for reasons which I hope will become apparent, I propose considering the issues under this heading in the reverse order.
6.2 The reason for taking that approach stems from asking the question as to the circumstances in which it might have been possible for the Kellehers to avoid the problems which ultimately beset them. In order to have avoided those problems, it is necessary that the Kellehers would have to have found out about them before the sale closed. That the problems were there in the background is clear from the evidence given by the Health Authority officials to the effect that serious concerns had already been expressed about whether the building was up to being used at the level which Ms. Piggott was employing. It is clear that many of difficulties that had already been identified were not capable of resolution. The site is completely built on. There was no room for extension. One of the most significant complaints was that the kitchen was too small for the kind of business being done. The only way the kitchen could be extended was by eating into the seating area. Likewise, many of the facilities which the Health Authority felt would need to be in place in order to allow for a more elaborate menu to be provided, were just not capable of being provided within the confines of the building. The problems were not soluble. It follows that the only way in which the Kellehers could have been relieved of the difficulties which they ultimately encountered was if the fact that there were problems and the fact that such problems were likely to be insoluble (in the sense that there were no remedial works that could be carried out to allow a more elaborate business than that ultimately permitted to be carried on) was identified prior to closing. In order, therefore, for there to be a causal connection between any negligence on the part of Mr. O’Connor and the undoubted consequences which the Kellehers suffered, it is necessary that that negligence should be such as would lead to the inference that, had it not been for that negligence, the Kellehers would have become aware of the relevant problems in advance of closing and could, therefore, have legitimately pulled out of the contract.
6.3 In substance, it seems to me that that question comes down to one of analysing whether there were any steps which should have been taken by Mr. O’Connor which would have led to direct contact, either by him or by the Kellehers, with relevant officials of the Health Authority. On the evidence of the Health Authority officials it seems clear that those officials would not have disclosed the letter which they had written to Ms. Piggott, for that letter would have been regarded as a confidential matter between the Health Authority and Ms. Piggott. However, it is equally clear on the evidence of the Health Authority officials that, had they been consulted at any material time prior to the Kellehers taking over the premises, the substance of their concerns relating to the restaurant business then being carried on would have been discussed with the Kellehers or Mr. O’Connor. Indeed, it would appear that it is common practice (and a very sensible one at that) for Health Authority officials to discuss, in advance, with proprietors, the requirements which they are likely to impose so that the relevant proprietor can adjust any proposals in a way that meets any concerns of the Health Authority. There can be no doubt, therefore, that had contact been made, prior to closing, with the Health Authority officials concerned, then the problem and its extent, together with the difficulties in solving it in any way other than the partial solution that was ultimately achieved, would have been identified. The question which arises, therefore, is as to whether there was any negligent act on the part of Mr. O’Connor which resulted in contact not taking place but where, had Mr. O’Connor not acted in a negligent fashion, it would be appropriate to infer that contact with its resulting information would have ensued.
6.4 The evidence does not support the view that it is common or recommended practice for solicitors, acting on behalf of purchasers of restaurant premises, to make direct contact with Health Authority officials to discuss the registration status of a restaurant property. That seems to me to be an entirely understandable position. The details of the requirements which the Health Authority might have, the practicality of complying with those requirements, solutions to problems and the like, are matters which, in an ordinary case, are much more likely to be effectively dealt with directly between the relevant proprietor and Health Authority officials. A solicitor’s obligation is to ensure that proper registration is in place and that no adverse notices have been served or are contemplated. Those are the sort of legal matters which are properly within the remit of a solicitor. Practical questions about how the restaurant is actually going to operate are more properly matters to be dealt with between a proprietor and Health Authority officials.
6.5 I am not, therefore, satisfied that there is any basis for suggesting that a solicitor will ordinarily be negligent in not making inquiries himself. The question does, however, arise as to whether, in those circumstances, and in the light of all the other circumstances of this case, it was negligent of Mr. O’Connor not to advise the Kellehers to make contact with the Health Authority officials themselves.
6.6 In this regard, it seems to me that the following facts need to be taken into account.
6.7 First, the Kellehers were, to Mr. O’Connor’s knowledge, not restaurateurs and had no experience in the restaurant business. They were purchasing the property for the purposes of investment and intended to let it out to a tenant. Second, Mr. Kelleher specifically asked Mr. O’Connor to make sure that all was right in relation to the Food Hygiene Regulations. Third, as is pointed out in the Complex Conveyancing Manual to which I have already referred, compliance with the Food Hygiene Regulations is a matter of considerable importance to those purchasing restaurant businesses. For example, para. 10.4 of the Manual makes clear that a solicitor should advise a client acquiring a food business of the implications of owning a food business and as to the consequences of failing to operate the business in compliance with legislation. Given the Kellehers lack of knowledge of the business, given the importance of the matter, and given the specific request made by Mr. Kelleher in relation to the question of compliance, it seems to me that it was incumbent on Mr. O’Connor, in the circumstances of this case, either to make contact with the Health Authority himself, or, perhaps more realistically, to advise Mr. Kelleher so to do. I am satisfied that, in this regard, Mr. O’Connor was negligent in failing to either take the steps himself or advise Mr. Kelleher to take them. For the reasons already analysed, I am satisfied that there is a causal connection between that item of negligence, and that item only, with the adverse consequences for the Kellehers which form the basis of the claim in these proceedings.
6.8 Before turning to the question of damages, I should also deal with the questions arising in relation to planning and the user covenant in the lease.
7. Planning Conditions and Lease Covenants
7.1 So far as planning is concerned, it seems to me that counsel for Mr. O’Connor is correct in the manner in which he has analysed the relevant Planning Regulations. The planning permission itself makes specific reference to the use of retail units being as per class 1 of Part IV of the Third Schedule of the Local Government (Planning and Development) Regulations, 1977. That class is defined as use as a shop for any purpose with certain immaterial exceptions. Shop is defined in the Regulations in s. 9 in the following terms:-
“means a structure used for the carrying on of any retail trade or retail business wherein the primary purpose is the selling of goods by retail and includes a structure used for the purposes of a hairdresser, undertaker or ticket agency or for the reception of goods to be washed, cleaned or repaired, or for any other purpose appropriate to a shopping area, but does not include a structure used as a funfair, garage, petrol filling station, office, or hotel or premises (other than a restaurant) licensed for the sale of intoxicating liquor for consumption on the premises.”
It is clear from that definition that a shop includes a restaurant, for in excluding, ordinarily, licensed premises, the definition makes clear that a restaurant licensed for the sale of intoxicating liquor is included. It seems to me, therefore, that the planning permission in this case expressly allows for use as a restaurant. There is no merit in that point whatsoever.
7.2 I now turn to the user clause. The permitted use is as a shop. There might be some question as to whether the planning definition of a shop applied so that user as a restaurant was included. However, more importantly the premises has operated as a restaurant for a very considerable period of time without any action. It would be difficult to see how a landlord would not now be estopped from accepting that a restaurant was included within the definition of shop. In those circumstances, it does not seem to me that any case can be made on the user clause either.
8. Conclusions on Liability
8.1 For the reasons which I have analysed, it follows that there is only one item of negligence which I am satisfied occurred and which had a causal link with the adverse consequences for the Kellehers. That was a failure to either inquire of the Health Authority or, perhaps more realistically, to advise the Kellehers themselves to inquire of the Health Authority, concerning the food hygiene status of the premises. However, there is one further consequence of that finding. It follows that had it not been for that negligence the Kellehers would have discovered the problem coming down the road in respect of the restaurant. For the reasons which I have already analysed, most of those problems were not soluble. In the light of those problems and the fact that they could only be solved in part and with consequences for the both the scale and type of operation of the restaurant concerned, the Kellehers would have only had two choices. They could have pulled out of the sale. It seems to me clear from the judgment of Costello J. in Geryani v. O’Callaghan (Unreported, High Court, Costello J., 25th January, 1995) that, had the problem been identified, such a course of action could have been adopted. The alternative would have been to try and renegotiate the sale or, alternatively accept the limitations imposed. On the evidence, I am satisfied that the Kellehers would not have gone ahead with the sale in all the circumstances. It follows that this is a “no transaction” case, such as I had to analyse in ACC v. Johnston (Unreported, High Court, Clarke J., 1st June, 2010). Before going on to address the question of the calculation of the amount of damages to which the Kellehers are entitled, it is necessary to say something about the legal position in respect of the calculation of damages in such cases.
9. The Law on Damages
9.1 It is important to start with the fundamental proposition that, in almost all cases, the principal function of the award of damages is to seek to put the party concerned back into the position in which they would have been had the relevant wrongdoing not occurred. The differences which are identified in the authorities concerning the proper approach to the calculation of damages for a tort, on the one hand or, a breach of contract, on the other hand, stem from that fundamental proposition. In the case of a tort, the court has to attempt to put the plaintiff back into the position in which that plaintiff would have been had the tort not occurred at all. It is the pre-incident position that the court must look at as a starting point. On the other hand, the wrongdoing which a party sued successfully for breach of contract is liable for, is the failure of that party to comply with its contractual obligations. The position which the court must look at as a starting point is, therefore, the position that should have obtained post-incident in the sense that the court is looking at what would have been the situation had the contract been complied with in accordance with its terms. The court is not, therefore, concerned directly with the position of the aggrieved party pre-contract, but rather what the position of that party post-contract would and should have been had the contract been complied with.
9.2 However, it is important in making that distinction to note that it is necessary to analyse the contractual obligations which have been breached before going on to ascertain the proper approach to the calculation of damages. As pointed out in ACC v. Johnston, a solicitor does not contract with her client that she will procure for that client a successful conclusion of a conveyancing transaction. Rather, the solicitor contracts with her client that she will carry out a proper professional job on the conveyancing transaction. Depending on the circumstances, that obligation might lead to the solicitor advising the relevant client not to proceed at all, or only to proceed provided certain assurances or terms can be imposed or the like.
9.3 While it is true to say that a solicitor can be sued in breach of contract or in negligence, it does not seem to me that it is likely, at least in the majority of cases, that there will be any practical difference between the approach to damages in either case. If the proper conduct of the conveyancing transaction by the solicitor concerned ought to have led the relevant client not to go ahead with the transaction at all, then the proper approach of the court to the assessment of damages in such a case is to look at what would have happened had there been no completed transaction.
9.4 Counsel for the Kellehers sought to argue that having a restaurant as an investment which could be let at a rent was a foreseeable consequence of the transaction. It was undoubtedly foreseeable, from the point of view of Mr. O’Connor, in that he knew that such was their purpose. However, Mr. O’Connor did not contract to get the Kellehers a restaurant which was suitable to be let. Rather he contracted with them that he would carry out the conveyancing task entrusted to him in a proper fashion. Mr. O’Connor was not, therefore, in breach of contract in failing to deliver an easily lettable restaurant with no problems on the food hygiene front. There was nothing he could have done to procure that. No breach of contract on his part led to that. Rather, for the reasons which I have analysed, Mr. O’Connor was negligent in allowing the transaction to complete at all. This case must, therefore, be approached on the basis of it being a “no transaction” case. If Mr. O’Connor had not been negligent, then this transaction would not have gone ahead, the Kellehers would not have spent any money, and they would not have had the impaired asset which the restaurant ultimately turned out to be.
9.5 In that regard, I should comment on the decision of Vos J. in Joyce v. Bowman Law Ltd. [2010] EWHC 251 (Ch). In that case the defendant was firm of licensed conveyancers. A contract for the purchase of property by the relevant plaintiff was discovered to contain a seller’s option, whose importance had not been appreciated by the firm of licensed conveyancers concerned. The plaintiff’s claim involved an assertion that he had intended to demolish the cottage built on the property and replace it with a new house. He sought to recover the profit that he would have made had he been able to carry out that development. It was, therefore, a loss of bargain case to that extent.
9.6 It is true that, on the facts of the case, the court did approach the calculation of damages on that basis. However, it is clear from a careful analysis of the judgment that counsel for the plaintiff conceded, and the court accepted, that it was necessary to make an appropriate reduction in the damages by reference to the risk that, had the problem with the option been properly identified by the licensed conveyancers concerned, it might not have been possible to remove or suitably ameliorate the option by renegotiating the terms of the contract.
9.7 What Joyce v. Bowman Law makes clear is that there may be intermediate cases in between what I might term a pure “no transaction” case, on the one hand, and a case where it is clear that, in the absence of negligence, a proper and complete conveyance could have taken place. It might perhaps be useful to term such a case as a “completed transaction” case. It is important to note why that is the case. In order to analyse the consequences of negligence on the part of a solicitor (and this analysis applies equally to a breach of contract on the part of the solicitor stemming from the same facts), it is necessary to look at what would have happened had the solicitor not been negligent. In some cases it may be clear that, had the solicitor not been negligent, no transaction would have taken place. At the other end of the spectrum, it may be clear that had the solicitor not been negligent, the solicitor’s client might have obtained good title to the relevant property. For example, if, due to an error in drafting the relevant deed of assurance, the deed does not actually pass title to the solicitor’s purchaser client, then it may well be possible to argue that, had the deed been properly drafted, the client would have obtained proper title. In many such cases it might well, of course, be possible to rectify matters so that title could still be procured with the only damages flowing being whatever costs might be associated with remedying the matter. However, it is possible to envisage circumstances where, for example by virtue of intervening events, it is no longer possible to remedy matters. In those circumstances, the proper approach to the calculation of damages is to look at what would have happened had the conveyancing transaction been properly conducted. On the hypothesis with which I am dealing the purchaser client would have obtained proper title to the property and in such a case it is appropriate to assess damages on that basis.
9.8 However, there may well be intermediate cases where it is not possible to say for certain what would have happened. Joyce v. Bowman Law is one such case. There was an adverse clause in the contract. The licensed conveyancer should have noticed it, advised his client about it, and, almost certainly, raised it with the vendor. What would have happened next was not absolutely clear. The vendor might not have been willing to renegotiate the terms of the contract, in which case there might well have been “no transaction”. On the other hand, the vendor might have been willing to renegotiate the term. In those circumstances there would have been a “completed transaction”. In intermediate cases the court is faced with the situation where there is a hypothetical event which never occurred precisely because the conveyancer concerned was negligent, but where the court has to make some assessment as to the likelihood or otherwise of the conveyancer having been able to successfully deal with the problem had it been identified at the time. In those circumstances the proper approach of the court, for reasons similar to those identified in Phillip v. Ryan [2004] 4 IR 241, is to assess the possibilities, form a view as to the likelihood or otherwise of each of them occurring and award damages, having regard to the proper calculation on a “no transaction” basis, the proper calculation on a “completed transaction” basis and the likelihood or otherwise of either of those eventualities having proved to be the case in the hypothetical circumstances that the problem had been identified and an attempt had been made to negotiate a solution to it.
9.9 Joyce v. Bowman Law was an intermediate case. For those reasons it was entirely appropriate for the court to assess damages on the basis of a completed transaction but reduced appropriately for a weighting derived from the risk that it would not have been possible to secure a successful conclusion even had the problem been identified. In one sense such a case may be viewed as one of a loss of opportunity. The consequence of the solicitor’s negligence was that there was no opportunity to seek to negotiate a solution to the adverse option clause. There was no certainty that, even had the problem been identified, it would have been possible to achieve that end. However, it was possible. The client lost the chance of doing it due to the licensed conveyancer’s negligence. The measure of those damages was properly viewed as being a reduced version of the full loss of bargain for there was no certainty that the bargain could have been gained, but the relevant plaintiff had lost the opportunity of seeking to gain the bargain concerned.
9.10 I am, therefore, satisfied that the overall approach which the court should adopt in cases of solicitors negligence in the conveyancing field is to first identify whether, on the evidence, it is proper to regard the case as a “no transaction” case where in the absence of solicitors negligence the transaction simply would not have gone ahead, a “completed transaction” case, where in the absence of solicitors negligence a successful conclusion to the transaction would have occurred or an intermediate case. Where there is no significant difference in the calculation of the damages under either heading, it may not make much difference. Where, however, as was undoubtedly the case in Joyce v. Bowman Law (or in other such cases where there is a loss of bargain involved or the relevant property is of particular value to the purchaser), there is a significant difference in the proper approach as and between the two cases, the court, in an intermediate case, must take a view on how likely it was that the problem concerned could have been solved and asses damages somewhere between the “no transaction” value and the “completed transaction” value, having regard to the likelihood that a successful conclusion could have been reached in the event that the solicitor concerned had not been negligent.
9.11 However, it seems to me that this case is firmly in the no transaction camp. There was nothing Mr. O’Connor could have done to have solved the Food Hygiene Regulation problems. All he could have done was identify them, and saved the Kellehers the problem of buying into a problematic restaurant.
9.12 It follows that it is necessary to assess damages in this case on the basis that, had Mr. O’Connor not been negligent, no transaction would have taken place, the Kellehers would not have paid out any money but equally would not have been left with the restaurant. I, therefore, proceed to consider the proper calculation of those damages.
10. The Calculation of Damages
10.1 It is fair to say that the basis on which the Kellehers put forward their claim for damages was, at the commencement of the case, somewhat unclear. For logistical reasons the case took place in two parts. At the end of the first three days hearing, I gave directions that further details of the basis on which the Kellehers wished to put forward their claim to damages should be furnished. Ultimately, the Kellehers formulated their claim on the basis of suggesting that there was a capital loss resultant from the reduction in value of the property by virtue of the impaired food hygiene registration status, losses attributable to the alterations which had to be carried out to secure the limited registration which was ultimately obtained, and losses in rent in the intervening period.
10.2 However, on the other hand, counsel for Mr. O’Connor suggested that the proper basis to look at the damages was to look at the value of the asset obtained by the Kellehers and compare it with what they had, in fact, paid for it.
10.3 I am satisfied that the approach suggested by counsel for Mr. O’Connor is an appropriate starting point. For the reasons which I have already sought analyse, what would have happened, had Mr. O’Connor not been negligent, was that the Kellehers would not have paid for the property, but equally, would not have had the property. The simplest way of looking at such a situation is to compare the value of the property actually obtained with the price paid. There was a conflict of evidence concerning that valuation. Two valuers were called on behalf of the Kellehers and one on behalf of Mr. O’Connor. Two of those valuers (including the valuer called on behalf of Mr. O’Connor) came in with relatively modest figures for the difference between the price paid and the then actual value of the property, warts and all. In addition, it was not clear as to what exactly was being valued. In my view, the proper comparator was the value of the property as it stood after purchase and without any additional works carried out. The third valuer, who was assessing the difference at a different time, and, in truth, on something of a different basis, did not seem to me to approach the task on a realistic basis.
10.4 Insofar as there were any differences between the two valuers who placed a modest amount on the difference concerned, their views were not based on a detailed analysis of comparators, but, rather, on an estimate based on their experience. The competing views are not, therefore, capable of detailed analysis. All in all, I have come to the view that the property, as it stood after purchase, was worth IR£15,000 less than the price paid for it.
10.5 The next question concerns whether that is an appropriate basis for assessing damages. A party faced with having acquired an impaired asset as a result of negligence is faced with a number of choices. The relevant party can, obviously, dispose of the asset and sue the negligent party for the difference between the price paid for it and what they can secure for it, given its impairment. There may, of course, in all the circumstances of any particular case, be reasons for not taking that course of action. It may not be easy to dispose of the asset. There will, in any event, be costs associated with its disposal. A party is, however, obliged to act reasonably. If the party decides to keep the impaired asset, for whatever reason, then it seems to me that, unless it can be demonstrated that there was some good reason for keeping it, rather than selling it, then it is difficult to see how the negligent defendant can be fixed with any knock-on consequences that would not have occurred had the asset been disposed of.
10.6 On the facts of this case, if the Kellehers had disposed of the asset, it would have cost them the IR£15,000 loss, which, I estimate, they would have suffered on a sale, together with the costs of sale (auctioneering and legal) which, having regard to a property worth of the order of IR£100,000, might have come to some IR£5,000 inclusive of VAT. If, therefore, the Kellehers had cut their losses at that stage, those total losses would have come to something of the order of IR£20,000. The actions taken by them need to be viewed against that background.
10.7 First, significant sums were spent on altering the premises in order to satisfy the requirements of the Health Authority officials. However, there was no evidence that any proper analysis was carried out prior to incurring that expenditure. Some expenditure related to what might reasonably be called betterment or improvement in the premises. In the course of the hearing, it was agreed that a sum of a little over IR£26,000 was actually expended on items necessarily required to meet the requirements of the Health Authority officials. There does not seem to have been any basis for suggesting that that money was well spent. All of the evidence supported the view that the price paid for the property was the market rate for a restaurant which was permitted to carry on business in the way in which Ms. Piggott had been carrying on business. For the reasons which I have sought to analyse, I am satisfied that the premises, with its impaired position, was worth some IR£15,000 less. The expenditure of a significant sum to meet the Health Authority official’s concerns would not seem to have added that amount to the value of the property. Indeed, it would seem that the net position after that expenditure was a loss. The property, even after that expenditure, was still partially impaired. No evidence was given to suggest that, viewed from the perspective of the time, things looked differently. Rather, the Kellehers just seem to have gone ahead, spent the money, tried initially to let the property, and subsequently ran it themselves. They were, of course, entitled to take that course of action. However, having taken it, without any real analysis as to whether that course of action was going to increase their losses, it does not seem to me that it is open to the Kellehers to now seek to place the much greater losses which have flown from that decision on Mr. O’Connor.
10.8 As identified in many of the cases, not least, County Personnel (Employment Agency Limited) v. Alan R. Pulver & Company (A Firm) [1987] 1 WLR 916, the starting point for the assessment of damages is that same should be considered as of the date of the wrong. However, given the overall requirement to attempt to put the wronged party back in the position in which that party would have been, had the wrong not been committed, it may, in appropriate cases, be necessary to take a different approach. The starting point indicates, therefore, that the proper measure of damages in this case ought to be, as of 2001, IR£20,000. Had the Kellehers simply sold the property, then they would have been IR£20,000 worse off at that time.
10.9 For the reasons which I have sought to analyse, I am not satisfied that there is any legitimate basis for taking a different approach to the date of calculation of damages on the facts of this case. Had it appeared to the Kellehers, on the basis of a proper analysis of their situation in 2001, that persevering with the impaired asset was likely to be a better course of action than selling it (or even that there was not much to choose between the two), then there might well be some justification for taking such an approach. It should be emphasised that parties who have to make judgements as to their actions as a result of being placed in a difficult position due to the wrongdoing of others, cannot be judged unduly harshly if, with the benefit of hindsight, their judgements turn out not to be right. However, no evidential basis was put forward for there being any good reason for persevering with the impaired asset in this case, rather than selling it. Certainly, there was no evidence that it looked to be a more advantageous way of minimising loss, viewed from the perspective of 2001, and without the benefit of hindsight. In those circumstances, I am satisfied that the proper way to assess damages is to look at them in the manner in which counsel for Mr. O’Connor argued, and that the basic loss is to be viewed as IR£20,000, as of 2001.
10.10. That leads to the question of interest. Counsel for Mr. O’Connor argued that, in the light of the way in which the case was presented, interest should not be allowed. In that regard, I do have to comment on the evidence of the Kellehers’ accountant, Mr. Gerard Piggott. In the course of the proceedings, a claim was, as I have pointed out, maintained by the Kellehers in relation to the loss of rent on the property. For the reasons which I have sought to analyse, I am not satisfied that approaching the question of damages on that basis is correct. However, the claim was maintained and evidence was produced in relation to it. The results of running of the business, when it was taken over by Mrs. Kelleher personally, were, of course, relevant to such a claim. Accounts for each of the relevant years, prepared by the Kellehers’ accountant, were supplied. On analysis, in the course of the evidence, it became absolutely clear that those accounts were wrong and misleading. Each of the accounts contained a purported significant sum in relation to rent, in circumstances where no rent was paid. I have to confess that I found the evidence of the Kellehers’ accountant in this regard to be highly unsatisfactory. When pressed on the question of why he had prepared incorrect accounts, his answer was to state that Mrs. Kelleher knew the true position and that the accounts would only be misleading if they were produced to a third party. He also stated that the accounts had been properly adjusted when being submitted as part of the Kellehers’ tax returns. Why, however, a qualified accountant should produce accounts which he knows would be misleading when seen by any third party, I fail to understand. Indeed, I had even more difficulty in comprehending why the relevant accountant did not seem to see that there was a problem.
10.11 Be that as it may, it is also fair to say that the precise formulation of the Kellehers’ claim lacked precision until a very late stage in the case. However, it does not seem to me that it is appropriate to penalise the Kellehers, themselves, for any of the above matters. It does, therefore, seem to me to be appropriate to award interest.
10.12 I should also add that I am not satisfied that this is an appropriate case for general damages. There can be no doubt but that the Kellehers had a difficult time in having to deal with this property. However, if they had taken the sensible course of simply selling it as soon as they discovered the problem, then all of those difficulties could have been avoided. For the reasons which I have already sought to analyse, I am not satisfied that there was any good reason not to sell the property. Indeed, even without the benefit of hindsight, it would seem that it was always likely to be a much more beneficial way of minimising losses.
11. Conclusions
11.1 On the basis of that analysis, I am satisfied that the proper measure of damages in this case is IR£20,000 converted to Euro and with interest at the Courts Act rate from 2001 to date. On the basis of evidence tendered at the hearing, I am satisfied that, as IR£10,000 converted to Euro with the relevant interest comes to the sum of €21,839, it follows that IR£20,000 converts to €43,678.
11.2 There will, therefore, be judgment in favour of the Kellehers in the sum of €43,678 for damages for negligence and for breach of contract.
Coonan v. A.G.
[2001] IESC 48; [2002] 1 ILRM 295 (29th May, 2001)
[JUDGMENTS FROM MURPHY AND GEOGHEGAN JJ.; FENNELLY J. AGREED WITH GEOGHAN J.]
JUDGMENT OF MR JUSTICE FRANCIS D MURPHY DELIVERED THE 29 TH DAY OF MAY, 2001.
_______________________________________________________________________
1. Charles Coonan, the above named Plaintiff (Mr Coonan), was appointed as State Solicitor for the area of North Kildare/ Wicklow in August, 1974, upon the terms of a document described as “Conditions of Appointment” dated the 14th day of August, 1974. The first paragraph of that document was expressed in the following terms:-
“1 The State Solicitor shall be entitled to hold the office of State Solicitor for the above area until he shall attain the age of 65 years but, provided that he is then in good health, the age of retirement may be extended by the Attorney General, with the concurrence of the Minister for Finance, to any age not exceeding 70 years. The State Solicitor shall be removable at any time, by order of the Government made on the certificate of the Attorney General, for misconduct, incapacity, neglect of duty, physical or mental infirmity, or any other cause which, in the opinion of the Attorney General, would render him unfit to perform the duties of a State Solicitor. The certificate of the Attorney General in respect of any of the aforesaid matters shall be binding on the State Solicitor. The appointment will carry no right to pension or compensation on termination.”
2. Unquestionably it had been the invariable practice before 1974 and for at least 20 years thereafter for a year by year extension to be granted up to the age of 70 years to any State Solicitor who applied for it. Mr Coonan was well aware of that practice.
3. On the 14th of January, 2000, Mr Coonan, who would attain the age of 65 years on the 5th November, 2000, applied for renewal. He met with the Chief State Solicitor in the same month who told him he was not going to be renewed after the age of 65 years. The Attorney General on the 5th February, 2000, in accordance with a change in policy, made a decision that no extension should be granted. On the 18th February, 2000, the Director of Public Prosecutions informed Mr Coonan that there would be no extension and by letter dated the 7th of March 2000 the Chief State Solicitor gave formal notice to that effect.
4. On the 4th October, 2000, Mr Coonan instituted plenary proceedings claiming a declaration that he was entitled to continue as State Solicitor for the area to which he had been appointed and an injunction restraining the Defendants from appointing any person as State Solicitor in his place. In addition to other relief, Mr Coonan claimed damages for breach of contract.
5. In the statement of claim delivered on the 13th November, 2000, Mr Coonan having asserted the material facts to which I have referred went on to say:-
“7 The plaintiff is and remains state solicitor for the area of North Kildare/ Wicklow and at all material times hereto relied upon the conditions of his appointment and the terms both expressed and implied of his appointment and the practice heretofore in respect of extensions to state solicitors appointed by way of similar conditions of appointment. The plaintiff has acted to his detriment and loss in the legitimate expectation that his appointment would be extended pursuant to his conditions of employment until he attained 70 years of age.
8 The defendants have in breach of the conditions of appointment and the terms expressed and implied therein failed to extend the plaintiff’s employment having been lawfully called upon so to do by the plaintiff pursuant to his conditions of appointment.”
6. The defence might be summarised by saying that the Defendants admitted the facts alleged in the statement of claim but denied the inferences and conclusions of law drawn therefrom. In particular the Defendants contended that the conditions of appointment conferred on the Attorney General “a lawful discretion” to extend the Plaintiff’s age of retirement with the concurrence of the Minister for Finance to any age not exceeding 70 years: that such discretion had been exercised lawfully to extend the Plaintiff’s age of retirement up to and including the 31st January, 2001, but no further. In the reply delivered on the 14th December, 2000, Mr Coonan denied (among other things) that the Attorney General had lawfully exercised the discretion aforesaid.
7. Because of the urgency of the matter for both the Plaintiff and the Defendants the matter was processed with commendable speed. It was heard by Ms Justice Carroll on the 23rd and 24th of January, 2001, and she delivered her judgment on the 31st of January, 2001, in pursuance of which it was ordered that Mr Coonan was entitled to recover against the Defendants damages in the sum of £100,000 together with the costs of the proceedings. It is from that judgment and order that the Defendants appeal to this Court.
8. The Defendants/Appellants submitted that no term could be inferred into the contractual relationship between the parties which would be inconsistent with the discretion expressly conferred upon the Attorney General . It was argued – and the evidence appears to have supported the fact – that Mr Coonan had not altered his position to his detriment as a result of the established practice concerning extensions and consequently a claim based on estoppel could not succeed. The Appellants submitted that an issue of legitimate expectations could not arise in what was in essence a commercial contract between the Attorney General and a solicitor for the provision of legal services by the latter. However, the main thrust of the argument made by Counsel on behalf of the Appellants was that nowhere – not in the pleadings, the particulars furnished or the written submissions in the High Court or this Court – had Mr Coonan specified the nature, scope or terms of the right on which he relied. Mr McDonagh, SC, for the Appellants, pointed out that the judgment of the learned trial Judge did not identify any such right. Mr McDonagh posed the question which was not merely rhetorical but, in the existing circumstances, hypothetical, namely:-
“If the claims of the Plaintiff were upheld and the matter referred back to the Attorney General to make an appropriate determination what standard, criteria or procedure would the Attorney General be required to apply or adopt?”
9. As the post held by Mr Coonan had been filled before Ms Justice Carroll delivered her judgment the possibility of referring the matter back to the Attorney General was not then a realistic option. Less still could that procedure be adopted now. Nevertheless it is, in my view, the difficulty in answering the hypothetical question which underscores the infirmity in Mr Coonan’s case.
10. It was conceded by Mr Condon, SC, on behalf of Mr Coonan that the word “may” in the Conditions of Appointment conferred on the Attorney General a discretion. Rightly, in my view, Mr Condon did not seek to argue that the word “may” should be interpreted as “shall”. What then is the limitation on the exercise of this discretion? Was it to be inferred that the Attorney General would afford every outgoing state solicitor an opportunity of being heard in relation to the decision to extend his term of office in a procedure analogous to that required by the decision of the House of Lords in The Council of Civil Service Unions .v. The Minister for the Civil Service [1985] AC 374. Did the alleged rights of Mr Coonan go beyond the merely procedural? Was the Attorney General bound to review the conduct and capacity of Mr Coonan and, if so, by reference to what standard? Did the Attorney General owe any duty to the office holder in relation to the exercise of the contracted discretion? Mr McDonagh explored some of these possibilities but with understandable frustration. He did not know with any degree of particularity the term which Mr Coonan claimed was implied in the contract or the restrictions allegedly imposed on the exercise by the Attorney General of his discretion.
11. The learned trial Judge understandably expressed concern for Mr Coonan having regard to the impact of the Attorney General’s decision on his career and expressed her conclusions in law in the following terms (at page 11 of the transcript):-
“I am not saying that the Attorney General could not change the policy of renewal on request, health permitting. But I do say that he was not entitled to change this long standing custom, rule or policy, by whatever name it was called, and relied upon by Mr Coonan, without giving adequate notice to enable him to arrange his affairs to cope with this alteration in his life plan. The two extra months given as a conciliatory gesture were wholly inadequate.”
12. It is difficult to reconcile that conclusion with the discretion expressly and admitted conferred on the Attorney General by the conditions of his appointment. It seems to me that this decision necessarily involves the substitution of an obligation for a discretion subject to the qualification that the discretion could be restored to the Attorney General on his giving reasonable, but undefined notice, to Mr Coonan and presumably all other State Solicitors. I cannot envisage the officious bystander postulated in Shirlaw .v. Southern Foundries [1926] LDD 1939 2 KB 206 (and more recently by this Court in Carna Foods Ltd .v. Eagle Star Insurance (Ireland) Ltd [1997] 2 IR 193) suggesting a provision to that effect. Less still could I envisage either party testily suppressing his intervention with a common “Oh of course”. At the very least such a suggestion would give rise to debate and the very existence of debate would preclude the implication of the suggested term. Nor can I see any basis on which the ill defined and inadequately explored doctrine of legitimate expectations could be invoked so as to prevent successive Attorneys General exercising or declining to exercise the discretion expressly reserved to them simply because a practice or pattern could be identified which indicated that for many years the discretion had in fact been exercised one way rather than another. Even in that context the question would arise “What was it that the office holder was led to expect?”. The much quoted case of Webb .v. The Attorney General [1988] 1 IR 353 Finlay CJ (at 384) seems to have cast doubt upon the existence of any such right of action when he said:-
“It would appear that the doctrine of “legitimate expectation” sometimes described as “reasonable expectation”, has not in those terms been the subject matter of any decision of our courts. However, the doctrine connoted by such expressions is but an aspect of the well recognised equitable concept of promissory estoppel (which has been frequently applied in our courts), whereby a promise or representation as to intention may in certain circumstances be held binding on the representor or promisor.”
13. It was in that context that Finlay CJ quoted with approval certain passages from the judgment of Lord Denning MR in Amalgamated Property Company .v. Texas Bank [1982] QB 84 on which considerable reliance was placed by Counsel on behalf of Mr Coonan. In his judgment in Wiley .v. The Revenue Commissioners [1993] ILRM 482 Mr Justice O’Flaherty repeated the observations which I have quoted from the judgment of Finlay CJ in the Webb Case and went on to analyse the evolution of the doctrine of legitimate expectations. In concluding that it had no application to the claim of the plaintiff to the repayment of excise duty in accordance with certain representations made to him O’Flaherty J said (at page 494):-
“The appellant is not concerned with seeking fair procedures in the sense of submitting that he should have been heard by the Revenue Commissioners before they changed their evidentiary requirements in relation to the granting of a refund. Rather does he submit that he should continue to have conferred on him a substantive benefit by way of exemption in the circumstances that he was not informed in advance of the more stringent requirements that the Revenue Commissioners had put in place to satisfy themselves so that they could properly discharge their duty in accordance with the scheme they had set up under the relevant legislation. It will be clear immediately that acceptance of this admission would involve a radical enlargement of the scope of legitimate expectation. It would involve the courts saying to the administration that it was not entitled to set more stringent standards, so that it might discharge its statutory obligations, without giving notice to anyone who might have benefited in the past from a more relaxed set of rules. Stated thus, I believe it would involve the courts in an unwarranted interference with the actions of administrators. Our constitutional system is based on the separation of powers and just as the judicial organ of State requires the respect of the legislative and executive branches of Government, so must the courts exercise proper judicial restraint.”
14. Even if the relationship between the Attorney General (or the Director of Public Prosecutions) and a state solicitor is to be seen as a matter of public law to which the doctrine of legitimate expectations applied, it would seem to me that the judgment of Mr Justice O’Flaherty would preclude Mr Coonan obtaining any substantive benefit.
15. At the end of the day the learned trial Judge awarded Mr Coonan a sum of £100,000 by way of damages. Of course the trial Judge had been placed in the difficult position that Mr Coonan could not be restored to his post so that any review of his circumstances by the Attorney General would have been meaningless. At the same time, Carroll J had received evidence that the remuneration of state solicitors had been, or was about to be, increased to £35,000 per annum. The award of £100,000 therefore would appear to represent effectively the full value of a claim for wrongful dismissal on the basis that the “employee” was entitled to three years notice of termination. Indeed recognising that Mr Coonan had given evidence, that in the event of his ceasing to be State Solicitor, he would discontinue the employment of one typist, it may be that the award represented the full amount of the loss which Mr Coonan would sustain over a period of five years. If the notice which it was held that he was entitled to receive of any change of policy was, say, twelve months – which would be the longest period that one could envisage as appropriate notice to determine a contract of employment from year to year – that computation could not be justified.
16. Whilst I share entirely the views of the learned trial Judge as to the harshness of the decision of the Attorney General and the effect which it had upon the understandable – if not legitimate – expectations of Mr Coonan, I do not accept that the Plaintiff has made out a case in law to recover damages for breach of contract or otherwise against the Defendants. I would allow the appeal.
THE SUPREME COURT
Murphy J.
Geoghegan J.
Fennelly J.
Record No. 56/01
BETWEEN
CHARLES COONAN
Plaintiff
and
THE ATTORNEY GENERAL AND IRELAND
Defendants
Judgment of Mr. Justice Geoghegan delivered the 29th day of May 2001
17. On the 14th of August 1974, the plaintiff was appointed State Solicitor for the area of north Kildare/Wicklow. As in the case of all State Solicitors since the foundation of the State until quite recent times the plaintiff was required to sign a document under which he agreed to accept and comply with certain specified conditions of appointment. These were the same conditions of appointment as were invariably used. For the purposes of this appeal, it is not necessary to consider the exact legal nature of the office of State Solicitor. Even if, for some purposes, his office might be regarded as being governed by public law (and I am expressing no opinion whatsoever on this matter) it is the contractual terms of his appointment and matters arising therefrom which are in issue in this case ,which was an ordinary action commenced by plenary summons and not, in any sense, an application for judicial review. For the most part in so far as the action is founded directly on contract paragraph 1 of the conditions of appointment is the relevant provision. I think it best to set out that paragraph and then in the light of it explain what the issues between the parties are. Paragraph 1 reads as follows:-
“The State Solicitor shall be entitled to hold the office of State Solicitor for the above area until he shall attain the age of sixty-five years but, provided that he is then in good health, the age of retirement may be extended by the Attorney General, with the concurrence of the Minister for Finance, to any age not exceeding seventy years. The State Solicitor shall be removable at any time by order of the Government made on the certificate of the Attorney General, for misconduct, incapacity, neglect of duty, physical or mental infirmity or for any other cause which, in the opinion of the Attorney General, would render him unfit to perform the duties of State Solicitor. The certificate of the Attorney General in respect of any of the aforesaid matters shall be binding on the State Solicitor. The appointment will carry no right to pension or compensation on termination.”
18. When the plaintiff was reaching the age of sixty-five years he applied, as most of his colleagues had done over many years, for an extension. Apart from a very minimal extension which the plaintiff was ultimately given this was refused and it was refused on the grounds of a new policy which the Attorney General was adopting. That policy was that there would be no more extensions after the age of sixty-five years unless there were exceptional circumstances. I do not find it necessary to set out in this judgment the history of how this policy came about. It is sufficient to state that the policy was decided upon.
1 In the High Court and on appeal in this court the plaintiff essentially makes two alternative cases which are:-
(1) That once there was no problem with the plaintiff’s health there was in all the circumstances a breach of contract on the part of the Attorney General in not granting the extension.
(2) Even if there was technically no breach of contract the Attorney General was precluded from refusing to renew by virtue of the doctrine of promissory estoppel and/or legitimate expectation.
19. There is a further refinement to be made in relation to issue No. 1. The contractual issue was argued on behalf of the plaintiff in the High Court effectively on two alternative fronts though it was never put like that. As it happens, the books of transcript from the High Court include argument as well as evidence and it emerges from Book 1 of the transcript that Mr. Condon, S.C. opened the case on behalf of the plaintiff on the basis that the Attorney General was contractually obliged to grant the extensions provided that there was no health problem and that the word “ may” in the first sentence of Condition No. 1 connoted merely an enabling provision allowing the Attorney General actually to grant the extension in such circumstances. On this interpretation the Attorney General would have no discretion. The question of the role of the Minister for Finance has never really featured and I think that it would be accepted by all sides that it would be fiscal matters with which the Minister for Finance would be concerned and I do not think that his role is relevant to the issue.
20. Mr. Ercus Stewart, S.C., also acting for the plaintiff, argued the contractual points slightly differently in his closing of the case in the High Court. At p. 108 of Book 2 of the transcript he is reported as having said as follows:-
“What the State is alleging is that some time in 1999, they adopted a policy or a rule – the words are both used – changing it, and I would submit, Judge, that if there was a discretion, that the discretion is clearly being … totally being done away with, or fettered by a general rule or policy that only in exceptional circumstances, and the two – and the word two, Judge, they became three a few moments ago, and they are back now to two. They were related to the particular State Solicitor’s office and the work being done at the time. You can call them three situations or two, but it is two or three. But they each relate to the particular job, the particular office being served, and they clearly are matters of benefit to the State.”
21. While therefore Mr. Condon was making the bolder argument that there was no discretion left to the Attorney General, if there was good health, Mr. Stewart was modifying that somewhat by arguing that even if the Attorney General did have a discretion under the contract, he was not contractually permitted to adopt a policy fettering his own discretion. At the hearing of the appeal Mr. Condon ultimately conceded that the Attorney General did have some discretion.
22. Carroll J., in the High Court, delivered a reserved judgment in which having referred to the evidence of a former Chief State Solicitor, Mr. Dockery, and the State Solicitor for Limerick, Mr. Murray, who was also President of the State Solicitors Association, which was to the combined effect that over many years renewals were more or less routine, she expressed strong adverse views as 1to the manner in which the plaintiff had been treated by the State and she held in his favour. The defendants have appealed that decision to this court. Carroll J., in her judgment, chose not to analyse what exactly the contractual terms were but preferred to base her decision on estoppel arising out of the manner in which the Attorney General, over many years, had exercised his contractual discretion. At p. 10 of her judgment she said the following:-
“This case seems to me to fit four square within the doctrine expressed by Lord Denning M.R. in Amalgamated Property Company Limited v. Texas Bank [1982] Q.B. 84 and referred to by Finlay C.J. in Webb v. Ireland [1988] IR 353:
‘Where the parties to a transaction proceed on the basis of an underlying assumption either of fact or law, whether due to misrepresentation or mistake makes no difference, on which they have conducted the dealings between them neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow them to do. If one of them does seek to go back on it the court will give the other such remedy as the equity of the case demand.’
23. Counsel for the Attorney General, Mr. McDonagh, S.C., argued very forcefully by reference to case law that the doctrine of legitimate expectation had no place in private law but only in public law. But in view of the fact that the Amalgamated Property Company Limited was a private law case and not a public law case, I do not think that this issue really arises. It would seem that it was more on the basis of estoppel than legitimate expectation that the learned trial judge came to her decision.
24. Mr. McDonagh also drew to the attention of the court difficulties in the way of the plaintiff succeeding on the basis of estoppel and these are referred to in the judgment of Murphy J., but as I have formed the view that the plaintiff is entitled to succeed at any rate on foot of his contract with the Attorney General, I do not find it necessary to consider the application of the principles of estoppel.
25. I return therefore to the contract. It may be at least arguable, as originally suggested by Mr. Condon, that the Attorney General was contractually obliged to renew subject only to health problems but I am inclined to the view that that is not a correct interpretation, having regard to the use of the word “ may”. I find it difficult to follow how the word “ may” in the context could connote merely an enabling provision. In this exercise one is not construing a statute or a statutory instrument and it would be absurd to suggest that Mr. Coonan could enable the Attorney General to do something. I am satisfied, therefore, that over and above the health question the Attorney General does have a residual discretion which could be exercised against renewal in particular circumstances and in a particular case. But I am in complete agreement with the more modified contractual argument to the effect that the Attorney General was not entitled to introduce a blanket policy. When I say that he was not entitled to do so, I mean that he was not contractually entitled to do so. Obviously, the Attorney General can have any kind of policy and, indeed, such a policy may well have been very sensible. But he may, in any given instance, be precluded contractually from implementing it. I believe that that is the case here. During all the years that the plaintiff was a State Solicitor he might have from time to time looked at his own contract, and if he did so, it would have been clear to him that by the plain words of Condition No. 1 he was given, at the very least, the hope of being considered for renewal on his own individual circumstances if he should make an application for renewal after sixty-five. It would never have occurred to him that that discretion in the Attorney General for which he had been guaranteed in the contract would be at the relevant time effectively removed. In order to construe Condition No. 1 in this way, I do not think that it is necessary to imply any term. This would seem to be the natural interpretation of the express term but if it is necessary to imply a term, I would have no hesitation in doing so. It must surely have been an attractive feature for most applicants for State Solicitorships over the years that they would have the expectation, or at the very least, the reasonable hope that they could remain at the job until seventy. The absence of any pension made this of considerable importance.
26. I am firmly of opinion, therefore, that the Attorney General has been in breach of contract and I agree with the view of the learned trial judge that the only practical remedy now is damages. It is not entirely clear how Carroll J. arrived at the figure of £100,000, but I think that it was a reasonable figure. She had evidence before her of the annual salary which the plaintiff was receiving, a figure in the order of £27,000 and she had been told that a substantial increase was likely to emerge from the report of the Buckley Review Body. That report was published shortly before the judgment and it did recommend increases which would have brought the salary, if implemented, to £35,000. I do not think that the learned trial judge was making an exact calculation of loss of earnings. In arriving at her figure, the learned trial judge was entitled to have regard to the earnings. While there could have been no guarantee that the plaintiff would have been retained till seventy even if the Attorney General properly exercised his discretion, the learned judge was entitled to weigh up the probabilities especially in the context that the Attorney General had elected to defend the action solely on the basis of policy with no suggestion of ill health or unsuitability on the part of the plaintiff. In all the circumstances, the justice of the case is met by the award of £100,000 and I would, therefore, dismiss the appeal.
ACC Bank Ireland PLC -v- Fahey & Ors
[2010] IEHC 41
JUDGMENT of Mr. Justice Kelly delivered on the 12th day of February, 2010
Introduction
When these proceedings began, the plaintiff (the bank) sought to recover judgment against the defendants for a sum of €3.5m together with interest thereon which, as of 17th June, 2009, amounted to €711,697.93 giving a grand total of €4,211,697.93. There was also a claim for continuing interest calculated at a rate of €1,386.24 per day. By February 2010 that added a further €310,000 approximately to the defendants’ liability.
On the day of trial (2nd February, 2010), the bank reduced its claim from in excess of €4.5m to €3,273,611. The bank was quite right to adopt that course but the reasons for so doing raise a number of troubling issues.
The plaintiff
The bank has its registered office at Charlemont Place in Dublin and carries on business at a number of locations in Ireland. The transactions the subject of these proceedings emanated from the bank’s Galway Financial Services Centre.
The defendants
The first and second defendants are married to each other as indeed are the third and fourth. The first three defendants are described in the statement of claim as property developers and the fourth is described as a retired nurse.
The third defendant (Mr. McGrath) both in an affidavit sworn by him and in the witness box described himself as a retired Garda. He is now 53 years old and retired on pension from the Garda force three years ago having served 30 years as a member of it. Twenty five of those years were spent in Loughrea, County Galway. He was the only defendant to give evidence at the trial. He was the conduit through which the bank transmitted information to the other defendants.
Over the last twenty years or so, Mr. McGrath has been heavily involved in the acquisition and development of properties and lands. In information supplied to the bank in October 2008, Mr. McGrath was shown to own 22 properties in his own right to a total value of €5.7m. He was also in partnership with the first defendant (Mr. Fahey) under the partnership name of G. & G. Properties which had a property portfolio consisting of development and residential properties valued at €12.2m. In addition, he was a partner with three others (one of whom was Mr. Fahey) in a partnership called DFGM Properties which owned property to a total value of €26.1m. Both Mr. McGrath and Mr. Fahey were also partners in a four-man partnership called the Portmore partnership which owned the Thai Garden Restaurant at Spanish Arch, Galway, valued at €2.7m. Finally, he was also a partner in a three man partnership called the Pier Road partnership which owned a property in Portumna to a value of €1.5m. Thus, it is clear that although his career was as a member of the Garda, Mr. McGrath acquired a considerable knowledge and expertise in the acquisition and development of lands and properties.
As of October 2008, Mr. Fahey was the owner of 25 properties in his own right to a total value of €6.5m. He was also a partner in the various partnerships which I have already alluded to.
Whilst many of the properties owned by Mr. Fahey and Mr. McGrath were mortgaged, in January 2008 a credit report prepared by the bank noted that they had a combined certified net worth of €25.86m as at October 2007.
The relevance of the wealth of Mr. McGrath from his property transactions as distinct from his earnings as a member of the Garda will become apparent later in this judgment.
The transaction in suit
In 2006, the defendants wished to obtain a bridging term loan from the bank in the sum of €3.5m to assist in the purchase of a property at Moore Street/Bride Street, Loughrea, County Galway. Their application was successful.
On 9th May, 2006, a letter of loan sanction and agreement for bridging finance was sent to the defendants at Mr. McGrath’s address.
The defendants were offered the facility of €3.5m for a one year term. The letter was materially inaccurate when it described the property to be purchased as being situate at Main Street, Loughrea, County Galway. It was also wrong when it said that a planning permission had been granted in respect of the property.
The letter from the bank was signed on its behalf by Aidan Corcoran, a Relationship Manager and Pat O’Callaghan, a Senior Manager.
The defendants accepted the offer contained in the letter and on 19th May executed a form of acceptance. Each of the defendants appended their signatures to the acceptance and each signature was witnessed by Mr. Brian Doherty Solicitor. Mr. Doherty acted for the defendants in the transaction.
The inaccuracies in the letter of 9th May, 2006 were spotted both by Mr. McGrath and by Mr. Shane McSweeney who was the solicitor acting for the bank. He had been sent a photocopy of the letter of offer and he recommended to the bank that they correct the inaccuracies and issue a fresh one. Mr. McGrath likewise drew Mr. Doherty’s attention to the inaccuracies.
The bank issued a fresh letter of sanction dated 7th June, 2006. This letter correctly described the property but despite Mr. McSweeney’s advice continued to inaccurately describe it as having the benefit of a planning permission for residential office and retail units.
The letter of 7th June, 2006 specifically provided that it cancelled and superseded the offer extended by the bank in the letter of 9th May, 2006.
The uncontroverted evidence of Mr. McSweeney is that funds totalling €3,279,000 were transferred to his client account by the bank on 9th June, 2006. The reason why the sum is less than the €3.5m is because there was deducted from that sum €206,000 interest rollup and a bank arrangement fee of €15,000.
On 12th June, 2006, Mr. McSweeney received a request from Mr. Doherty on behalf of the defendants seeking to draw down the funds.
The following day €3,273,611 was transferred from Mr. McSweeney’s client account to the client account of Mr. Doherty. The reason for the small discrepancy between the sum lodged and the sum paid out from Mr. McSweeney’s client account arises from the fact that he was authorised to deduct a portion of his fees from that sum. Nothing turns on this.
The defendants accept that they received €3,273,611 from the bank.
The bank has in its possession the letter of 7th June, 2006, which was purportedly signed by each of the defendants and witnessed by Mr. Aidan Corcoran. The acceptances and the witnessing of the signatures bear the date 8th June, 2006.
In accordance with the terms of the letter of 7th June, 2006, the loan became due and owing on 9th June, 2007, one year from the draw down date. The repayment date was extended until 8th February, 2008 and a further extension was granted until August 2008.
The defendants failed to discharge interest payments on the loan since 1st August, 2008.
In February and March 2009, correspondence took place between the bank and the defendants which, inter alia, involved the defendants suggesting that the bank roll up interest for a further year and complaining about a high interest rate. Ultimately, the bank demanded repayment of all outstanding monies. This was done by a letter of 5th March, 2009, at which stage the amount due on foot of the loan of 7th June, 2006, was €4,066,142.55. The money was not paid.
This litigation
These proceedings were commenced in April 2009, and an appearance was entered on 25th May, 2009. On 17th June, 2009, the plaintiffs issued a motion seeking to transfer the litigation to the Commercial List and also sought summary judgment.
On 22nd June, 2009, I made an order transferring the litigation to this division and fixed 14th July as the date for the hearing of the plaintiffs’ application for summary judgment. That application was grounded upon an affidavit of Hilda Hewson who also gave evidence before me at the trial.
Prior to the hearing of the application for summary judgment, each of the defendants swore an affidavit. Each of them averred in unequivocal terms that they had not signed the revised letter of loan sanction of 7th June, 2006. They swore that the signatures on the document were not theirs. They all alleged that the first time that they had ever seen the letter of 7th June, 2006, together with the purported acceptance of it was when they read the grounding affidavit of Ms. Hewson. They also alleged that, quite apart from not receiving or signing the letter of 7th June, 2006, they did not receive the document described in the first sentence of that letter and known as the bank’s “general terms and conditions applicable to commercial credit facilities”. There are a number of other matters dealt with in the affidavits which are not germane for the purposes of this judgment.
The defendants cogently made the point that the loan instrument relied upon by the bank in support of its claim had never been furnished to them, were never signed by them and was seen by them for the first time when they read the affidavit sworn by Ms. Hewson.
In response to these affidavits, the bank filed two affidavits. The first was sworn by Mr. McSweeney, solicitor, setting out what I have already described in this judgment.
The second was from Mr. Corcoran, the bank’s Relationship Manager. In respect of the contentions made by the defendants he said this:-
“I again refer to paragraph 3 of the defendants’ affidavits, and the assertion that they have collectively not seen the June 2006 letter before. A copy of the June 2006 letter was furnished to the defendants however I cannot specifically recall the circumstances surrounding the transmission. It may have been the case that I either posted the June 2006 letter to the defendants or the defendants collected it from me.
5. I recall receiving the 2006 letter signed by the Defendants, and then I would have added by (sic) own signature though the June 2006 letter refers to me witnessing the signatures, which was not the case.”
I heard the application for summary judgment on 14th July, 2009. The bank pressed for judgment but I refused its application and adjourned the action for plenary hearing. I also directed an exchange of pleadings. Subsequently, on 12th October, 2009, I fixed 2nd February, 2010, for the commencement of the trial.
The trial
In opening the bank’s case, its counsel made a number of significant concessions.
First, he indicated that the bank was no longer pursuing any claim against the defendants other than for the recovery of the €3,273,611 which was the net amount transferred to Mr. Doherty’s account on 13th June, 2006. All claims for any further sums whether by way of principal or interest were abandoned. He indicated, as is the case, that no monies at all have ever been repaid by the defendants to the plaintiff either in respect of principal or interest. The interest was provided for initially by way of a rollup.
Counsel also accepted that the replying affidavit which had been sworn by Mr. Corcoran on the application for summary judgment was “unsatisfactory” from the point of view of the bank.
The court was assured that the questions raised by the defendants’ replying affidavits were taken extremely seriously by senior management within the bank. Within a week of my order of 14th July, 2009, both Mr. Corcoran and Mr. O’Callaghan had been interviewed by the head of internal audit at the bank. Shortly after the internal auditor’s investigation, Mr. Corcoran tendered his resignation from the bank. It became effective on 31st October, 2009. Subsequent to his resignation, he declined to cooperate with the prosecution of these proceedings. Mr. O’Callaghan has also left the employment of the bank.
Counsel went on to point out that the bank had elected not to subpoena Mr. Corcoran and thus it followed that the bank would not be in a position to call evidence to the effect that the defendants signed the letter of loan sanction on 7th June, 2006. But he went further. He told me that the bank had engaged an independent handwriting expert who came to the conclusion that the signatures on the document were not those of the defendants. It followed that the bank was not going to challenge the intended evidence of the defendants indicated in their witness statements to the effect that they did not sign the letter of loan sanction of 7th June, 2006. He conceded that they were not bound by its terms.
He thus confined his claim to that which was contained as a plea in the alternative in the prayer of the statement of claim for the recovery of the principal sum advanced as money payable to the bank for money lent by it to the defendants.
Three witnesses gave evidence at the trial. The first was Mr. McSweeney, the second, Ms. Hewson and finally, Mr. McGrath.
At the conclusion of his cross-examination, Mr. McGrath accepted that the bank lent him the money in suit and that he was obliged to repay it. In the light of that concession, and subject only to a pleading point made by the defendants’ counsel, it might be possible to dispose of the claim at this juncture with judgment being entered for the plaintiffs.
Unfortunately, I cannot do so since, in addition to the apparent forgery of the defendants’ signatures on the loan instrument, two other matters of concern emerged in the evidence.
The P. 60 issue
Prior to the institution of proceedings, representatives of the bank including Ms. Hilda Hewson held meetings with Mr. McGrath and Mr. Fahey. The first such meeting took place in Loughrea on 11th November, 2008 and the second was in Dublin on 23rd January, 2009.
On 3rd November, 2008, Mr. Corcoran called to Mr. McGrath’s house in anticipation of the meeting with Ms. Hewson which was to take place the following week.
In the course of conversation, Mr. Corcoran is alleged to have said to Mr. McGrath that they should “both be on the hymn sheet” for the meeting the following week. If Mr. McGrath were asked about his wages, he should, said Mr. Corcoran, indicate that they were in the sum of €107,000, and that his wife should also have a high figure. Mr. McGrath asked how could he say that since the bank officials at the meeting would ask for P.60 certificates. Mr. Corcoran is alleged to have said that that was covered and that he had P.60s. Mr. McGrath asked him where he had got them. Mr. Corcoran replied that an accountant friend owed him a favour.
Mr. McGrath gave evidence that he believed that the bank was in possession of P.60 forms in respect of his earnings and those of his wife. In his witness statement, he referred to and exhibited a P.60 form for the year ended 31st December, 2005. It shows total pay of €24,951. That was in respect of a period when he was working as a garda but was doing so on a half-time basis. That was the correct figure by way of earnings for him for that year.
In March 2009, Mr. McGrath wrote to the data controller of the bank. He wrote on his own behalf and on behalf of the other defendants. Each defendant applied for the data retained by the bank in respect of them. The request was made pursuant to the provisions of the Data Protection Acts.
The bank responded to the request by furnishing two large boxes containing eleven files. The documents enclosed dealt with all of the dealings which the defendants had with the bank over the years. Included amongst the documents was a P.60 form that purported to be in respect of Mr. McGrath and to deal with his earnings for the year ended 31st December, 2005. It purported to certify that he earned €89,952.35 for that year. This was false. Mr. McGrath believes that the original of this document is still in the possession of the bank.
Mr. McGrath has no idea as to how this false P.60 came into being or got into the possession of the bank. He swears that he had no part in its creation, or procurement.
In the course of his evidence he also referred to other documents which had been retrieved from the bank containing inaccurate information, none of which he supplied to the bank.
It is worrying that the bank should apparently have been in possession of a false P.60 certificate purporting to certify a level of pay far in excess of what was, in fact, the case.
Ms. Hewson’s evidence is that the bank had no interest in Mr. McGrath’s earnings since its decision to lend was based on the defendants’ net worth and not on their earnings. She found no P.60 on the file which she had been working on since September or October 2008. In fact, she told me that P.60s would only be of interest to the bank in respect of personal borrowings and not commercial borrowings of the type in suit. That approach on the part of the bank appears to me to make sense. It would not have been reasonable or sensible for the bank to have advanced €3.5 million to Mr. McGrath on the basis of his garda earnings. What was important was his net worth, and indeed, that of his co-defendants. From what I have set out in the earlier part of this judgment, it is clear that the defendants were persons of substantial net worth and it was on that basis that the monies were lent.
Nonetheless, there is evidence before the court of the bank being in possession of what appears to be a fictitious P.60. That is a matter of concern.
The final email
At 11.23pm on the night before the trial began, Mr. McGrath sent an email to the bank’s solicitor. It was drawn to my attention by counsel for the bank, who described it as a, “not very subtle threat to obtain some unwarranted concession from the bank”. He also said that it was “impossible to interpret that email as other than a threat and an attempt to intimidate the plaintiff from bringing this case before the court today”.
The email reads as follows:
“Claire,
My solicitor, Mr. John Mitchell, advised me that we were meeting in Galway today at 4.00pm to discuss ‘settlement’ of our issues. Unfortunately, when we arrived there at 4.00pm, you were gone. It was intimated that your case in court finished early and you left for Dublin. I wish to clarify the following with you. John Mitchell advised me that he contacted you by phone this morning to arrange the proposed meeting. He further states that he advised you that we, his clients, would be willing to settle and conclude the matter by walking away from the site, leaving same to ACC, provided ACC did not seek a judgment order. John Mitchell was not acting on my expressed authority to offer or agree those terms and I did not advise him so. He was surmising that I would be happy with that result, that is not the case.
I am confident that tomorrow, in the High Court, Judge Peter Kelly will rule in our favour, and that he will insist on the matter being investigated further by the Director of Public Prosecutions, for the following reasons:
(i) The fraudulent loan offer dated 7th June, 2006;
(ii) the forged signatures on the loan offer;
(iii) the forged form P.60s that were concocted in my name;
(iv) the ACC Bank’s failure to comply with my rights under section 4 of the Data Protection Acts 1988 and 2003;
(v) the fraudulent overcharging of interest by ACC Bank to the tune of €521,581.66.
It is my intention to pursue the matter rigorously through the courts, specifically, the Criminal Justice (Theft and Fraud Offences) Act 2001. I will also be advising the financial services regulatory authority on the matter. I have only spoken to a small circle of friends about my situation with ACC Bank, and their pursuing me in the High Court. That being said, my story seems to have leaked out, and since last Thursday, I have been approached on four occasions and literally begged to go public with my situation. Having discussed the matter with my partners, we decided not to liaise with this particular group, fearing slightly that they may have their own specific agenda. This morning, at 9.10am, I received a phone call stating that I would receive a substantial sum of money, in exchange for going public. At this point, I have neither accepted nor rejected the offer.
My intention was, had we met today, I would advise you of my situation and you, in turn, could advise your clients, ACC Bank. On 21st January, 2010, I emailed Hilda Hewson of ACC Bank, and requested that she meet with me, on a one-to-one basis; she declined.
I attach my statement of evidence and a report from ‘BANKCHECK’ outlining the interest overcharged. I have not attached the exhibits, but I am sure that Arthur Cox, solicitors, will make them available to any interested parties.”
This email was copied to three persons. They were (i) Nicola Turley, Press Contacts, ACC Bank, (ii) Brian Bell, Public Relations Consultants and (iii) Hilda Hewson, ACC Bank.
At the conclusion of the email, the following was stated:
“I request that Nicola Turley and Brian Bell forward this email immediately to the present CEO of ACC Bank, Mr. Robert Hartog, and also to his eminent successor, Mr. Kevin Knightly. Please also forward to Raymond Salet and Roelina Bolding. As I do not have their respective email addresses, I will be forwarding a hard copy of this email to all, in course.”
Mr. McGrath gave evidence concerning the sending of this email. He said it was sent for the purpose of highlighting discrepancies to the bank. He denied that its purpose was to threaten the bank or to try and deter it from proceeding with the case. He said, “I didn’t threaten anybody. My intention was not to threaten. My intention was to alert. And had I met with Claire McGrade, yesterday, as we thought we would, I would have told her and that would be that.”
It is difficult to see why Mr. McGrath thought it necessary to send this email to the bank’s solicitor the night before the trial began. He had a competent solicitor and counsel appearing for him who were well able to communicate whatever his concerns might be. The copying of the email or request to do so to the other persons named makes his explanation of simply seeking to impart information implausible. I think it much more likely that the email was sent with a view to attempting to put improper pressure on the bank to drop its claim.
In McGivern v. Kelly [2008] IEHC 58, I had to consider whether the sending of a minatory email in that case was a contempt of court. I reviewed the relevant authorities and said as follows:
“It is of the highest importance that a citizen who exercises the right to litigate should be able to do so free of threats or obstructions. Conduct that is calculated to inhibit a litigant from availing himself of the constitutional right to have his legal entitlements determined by the court by the use of threats is a contempt of court. From as far back as 1744, it was held that threatening a party if he allows an action or suit to continue amounts to contempt of court. It is so because it creates an obstruction to a party to proceedings.”
In the present case, I think it likely that it was Mr. McGrath’s intention to put improper pressure on the bank. I am not, however, going to hold him in contempt of court in that regard. I do so because I believe the email was sent out of a sense of desperation. He only became aware of the concessions concerning the bank’s claim on the day of the hearing. So, on the night before, he believed that the bank was seeking to visit him with liability for the full amount that would have been due on foot of the letter of 7th June, 2006. He knew that the signatures on that letter, both of himself and his co-defendants, were forged. He obviously had a great sense of injustice in relation to that. In these circumstances, I propose to take no action in relation to the sending of this email.
The pleading point
Despite the acceptance by Mr. McGrath that he and his co-defendants had received the monies from the bank and were obliged to repay them, his counsel argued that the statement of claim delivered subsequent to the application for summary judgment being refused was deficient. Counsel for the plaintiff did not rely on many of the recitals in the statement of claim and I am satisfied that the pleading is quite in order.
Whilst the document sets out the background to the transaction in some detail, the alternative prayer is for a simple payment of money to the plaintiff in respect of money lent by it to the defendants. It is in the precise form which is recommended in Bullen and Leake and Jacobs ‘Precedents of Pleadings’ (13th Edition). The money was sought to be recovered as a simple contract debt.
The matter is put succinctly in ‘Chitty on Contracts’ (29th Edition) at para. 38-229, where it is said:
“If money is proved, or admitted, to have been paid by A to B, then in the absence of any circumstances suggesting a presumption of advancement, there is prima facie an obligation to repay the money; accordingly, if B claims that the money was intended as a gift, the onus is on him to prove this fact.”
In the present case, there is neither a presumption of advancement nor any suggestion of a gift. This was a commercial loan made by the bank to the defendants and the defendants admit that they received it. They also accepted, through the mouth of Mr. McGrath, that they have an obligation to repay. The statement of claim is drafted in such a way as to encompass such a claim.
It follows, therefore, that the bank is entitled to recover judgment.
Result
There will be judgment in favour of the bank for the net sum received by the defendants, namely, €3,273,611. No interest is payable in respect of that sum and, indeed, none is sought by the bank. The bank also, quite properly, has indicated that it does not seek the costs of these proceedings against the defendants.
In view of the disturbing evidence concerning the apparent forgery of the defendants’ signatures on the loan instrument of 7th June, 2006, I am referring the papers in this matter to the Director of Public Prosecutions.
I am also concerned at the fact that the bank appears to have been in possession of a fictitious P.60 certificate in respect of Mr. McGrath. This matter also requires investigation by the appropriate authorities. The referral of the papers to the DPP will also encompass a request for his consideration of that matter.
Restit Damages Cases
Conneran & Anor v. Corbett & Sons Ltd. & Anor
[2006] IEHC 254
Judgment of Miss Justice Laffoy delivered on 31st May, 2006.
Liability
By agreement of the parties I determined the issue of liability in this matter in a judgment delivered on 15th December, 2004. Having found for the plaintiffs on the liability issue, this judgment is concerned with the remedy to which the plaintiffs are entitled. In essence, it is concerned with the quantification of the damages to which the plaintiffs are entitled. While the plaintiffs claimed injunctive relief in the proceedings, the plaintiffs did not apply for an interim or an interlocutory injunction and, in effect, the claim for permanent injunctive relief was not pursued.
I determined that the defendants are liable to the plaintiffs because –
(a) the plaintiffs, as lessees, acquired, by virtue of their leases, easements to receive and make deliveries of stock and material for storage in Unit No. F (but limited to the use of Unit No. F as a store for goods supplied in Units Nos. 11 and 12) or directly to and from Units Nos. 11 and 12 Corbettcourt Shopping Mall in Galway through the car park delivery doors via the loading bay and the car park from and to the public roads, which were accessed at either Barrack Lane or Whitehall, subject to regulation by the lessors under the terms of the leases, and
(b) there was a real and substantial interference by the defendants with those rights, which was actionable at the suit of the plaintiffs.
In relation to the use of the plaintiffs of the hatch doors and the chute for receiving deliveries, I determined that such use was permitted under a separate agreement, which post-dated the grant of the leases, and was in the nature of a revocable licence, which could be revoked on reasonable notice.
This judgment should be read in conjunction with the judgment delivered on 15th December, 2004, in which the geography and physical features which gave rise to the issues in these proceedings are described.
The claim for damages as pleaded
The claim for damages as pleaded in the plaintiffs’ second amended statement of claim delivered on 26th February, 2004, which does not differ materially from the claim as pleaded in the amended statement of claim delivered on 16th July, 1999, particularised the following components of alleged extra expense, inconvenience, loss and damage (stated in Irish pounds but converted to Euro in the following summary) incurred by the plaintiffs by reason of the defendants’ alleged wrongdoing:
(1) Additional wages, stated to amount to “a little over a half of one employee’s wages”, arising from the necessity to employ additional personnel to deal with deliveries to the Units via the alternative access at the public street available to the plaintiffs after the closure of the car park delivery doors and the development of the loading bay and the car park. The additional wages were calculated at €6,789.29 (IR£5,347) for the first year of the disruption, that is to say, from February, 1998 to February, 1999 and estimated at €8,207.59 (IR£6,464) for the second year. It was also pleaded that it was expected that employment costs would increase “in the amount of 3% arising from wage agreements and inflation”. On that basis the cost of additional wages which would be incurred by the plaintiffs over the residue of the terms of the leases, which was put at 28 years, would be €352,905.92 (IR£277,936).
(1) Additional cost of €761.84 (IR£600) per annum, representing the cost of delivering large items to the buyers’ addresses, which additional costs were alleged to be incurred by reason of the fact that customers were unable to drive into the rear of the premises (i.e. into the car park and loading bay) to collect large items. These additional costs for the residue of the terms created by the leases were calculated at €32,756.70 (IR£25,798).
(2) Loss due to reduced trading activity, which component was not pursued.
(3) Additional cost of an external warehouse at a rent of €6,348.69 (IR£5,000) per annum, which over the residue of the terms (28 years) “incorporating 3% inflation rate” was calculated at €272,978.45 (IR£214.988).
(5) Diminution in the value of Unit No. F, which it was stated was calculated at €71,105.33 (IR£56,000). In fact, no evidence was adduced of the alleged diminution in value of Unit No. F.
At the hearing, evidence was adduced only in relation to the alleged losses at (1), (2) and (4), that is to say, additional wages costs, additional delivery to customer costs and the additional cost of external warehousing. The figures at (1), (2) and (4) aggregate €658,641.07 (IR £518,722.00).
The damages were claimed in respect of breach of contract, trespass and nuisance.
The evidence in support of the claim
The expert evidence adduced by the plaintiffs to support the contention that the interference with the rights they acquired under the leases gave rise to losses of the nature and to the degree alleged in the statement of claim consisted of the evidence of an engineer with specialised knowledge of time and motion studies, an accountant and an actuary. All of the plaintiffs experts’ evidence was to a large extent premised on facts supplied by the plaintiffs. The first plaintiff testified as to those facts.
The engineering evidence
The engineer, Mr. Con O’Donovan, addressed the additional work involved in receiving stock via the routes available from March, 1998 onwards after access via the car park and loading bay through the car park delivery doors had been cut off. His evidence was based on time studies carried out by him at the request of the plaintiffs on 7th and 8th July, 1998.
Mr. O’Donovan’s understanding of the rights of the plaintiffs in relation to receiving deliveries via the car park and the loading bay through the concrete building, which was based on information given to him by the plaintiffs, was subject to certain misconceptions. Most importantly, his understanding was that the hatch doors and the chute were part of the “Goods Inwards Access” in respect of which the plaintiffs were granted rights in the lease. As I found in my judgment of 15th December, 2004, that assumption is not correct. The terminus of the “Goods Inwards Access” within Corbettcourt Shopping Mall was the car park delivery doors. Further, insofar as there was an implication in Mr. O’Donovan’s statement that “there was a capability to store goods at the bottom of the chute and also on the chute incline” that the plaintiffs had a right to such storage, the statement is incorrect. The plaintiffs did have a revocable licence to use the chute for the purpose of bringing goods into their storage area at Unit No. F, which was determinable on reasonable notice. In my judgment of 15th December, 2004 I found that the plaintiffs effectively got no notice of the revocation of this licence. However, in my view, on the evidence, the failure to give reasonable notice could give rise to little more than nominal damages, because, given the circumstances, relatively short notice, say two weeks would have been reasonable. The significant point is that on the revocation of the licence the plaintiffs would have had to make and receive deliveries through the double doors, which on the evidence they rarely did while the chute was available, or by one of the other routes available.
In reaching his conclusions, Mr. O’Donovan does not appear to have factored in the fact that, while the hatch doors were at ground level to the exterior loading bay, the car park delivery doors (which in my judgment of 15th December, 2004 I erroneously stated were at level 1, rather than level 2, of the interior of the concrete building) were a few feet higher than the level of the loading bay, so that palletized deliveries could not be brought in through them. He did not carry out any time and motion study in relation to the delivering of goods via the car park and loading bay through the car park delivery doors and from thence to the plaintiffs’ units, which is the mode of delivery of which the plaintiffs have been deprived. However, Mr. Bryan Egan, the consulting engineer called by the defendants, was satisfied that the methodology used by Mr. O’Donovan, giving what he described as “the Chute route” a time/cost value of zero without directly analysing the costs of making deliveries to the store room, was correct. However, Mr. Egan considered that, in the light of the determination that the plaintiffs did not have rights in relation to “the Chute route”, it was necessary to review Mr. O’Donovan’s conclusions.
Mr. O’Donovan’s studies related to the three alternative routes available for bringing in deliveries to the plaintiffs’ Units in July, 1998, which were through –
(i) the main entrance at Williamsgate Street,
(ii) Ball Alley Lane, and
(iii) Eyre Square Shopping Centre loading bay.
The study established that the Ball Alley Lane route was the most time and cost efficient of the three routes. To the extent that it indicated that the plaintiffs could mitigate their loss by adopting the Ball Alley Lane route, the study was useful.
Mr. O’Donovan calculated the additional man hours involved in bringing in deliveries via Ball Alley Lane at 58.4 hours per month, comprising three components, two of which were calculated on the basis of information furnished to him by the plaintiffs that there had been 817 deliveries of packages or cartons to the plaintiffs in Corbettcourt Shopping Mall in the month of May, 1998, which was taken as an average month. The first component was 26.7 hours per month, which was the product of 1.96 standard minutes per carton by 817. The 1.96 standard minutes per carton represented the time involved in loading the van in the plaintiffs’ store in Ballybane, which was 2.7 miles from Ball Alley Lane, the journey time from Ballybane to Ball Alley Lane, unloading at Ball Alley Lane and delivering the stock to Unit No. F. Included in the figure of 1.96 is Mr. O’Donovan’s calculation of the delivery time from a van parked in Ball Alley Lane to Unit No. F at 0.70 standard minute per carton. The second component was 19.50 hours for van utilisation, which, as I understand it, reflects the time during which a van was “tied up” on the job. This calculation was based on the product of 1.43 standard minutes per carton and 817 cartons. The third component was 12.2 hours use of a forklift truck for loading (7.2 hours) and unloading (5 hours) per month.
Mr. Egan’s evidence was that, if the plaintiffs chose to deliver via Ball Alley Lane, they would use an additional 37.2 man hours per annum. In doing this calculation, Mr. Egan adopted the 817 cartons per month average used by Mr. O’Donovan but limited the additional time to 0.70 standard minute per carton, that is to say, the time involved in delivering stock from a van parked in Ball Alley Lane to Unit No. F. He did not take into account the time factor involved in loading at, and journeying from, Ballybane, or the time the van was tied up or the forklift use time. Mr. Egan rationalised his approach on a number of grounds. First, he contended that a fourth alternative route is still available. This is the route through Edward Square Shopping Centre from Castle Street and Barrack Lane to the porch entrance which, as I stated in my judgment of 15th December, 2004, was created during the development of Edward Square Shopping Centre. This route only became available around September, 2003 and it will be clear from my determination on the liability issue that I do not consider that route as an appropriate substitute for the rights which the plaintiffs acquired as lessees under their leases. Mr. Egan also made the point, which is a fact, that the warehouse at Ballybane was acquired before the closure of the loading bay and car park and not as a consequence of the closure. While Mr. Egan analysed the time involved in bringing deliveries from the car park delivery doors to Unit No. F and came up with a result of 0.474 standard minute per carton, he does not seem to have utilised that figure.
Accountancy and actuarial evidence
Mr. O’Donovan did not attempt to convert additional time into additional
wages. This was left to the accountant, Mr. Prionsias Kitt, Chartered Accountant, of the firm of D.H.K.M., Chartered Accountants, who practises in Galway. However, Mr. Kitt did not use the figure of 58.4 additional man hours per month which Mr. O’Donovan calculated as the consequence of having to bring deliveries in via Ball Alley Lane. He effectively used a figure of 109.5 man hours per month.
Mr. Kitt’s role was to approve the figures set out in the statement of claim, which were based on a report the accountants furnished to the plaintiffs in May 1999. In relation to the first year, the figure of €6,789.29 (IR £5,347.00) was a figure given to the accountants by the plaintiffs. His projected figure for the second year, €8,207.59 (IR £6,464.00) was based on the actual hours which documentation, time cards, furnished by the plaintiffs to their accountants indicated represented actual additional time (109.5 hours) spent by two employees during the month of April, 1999 handling deliveries in consequence of the deliveries having to be brought in via Ball Alley Lane. The accountants took that information at face value. They did not conduct any audit of what activities the two named employees were actually engaged in, nor did they do any review of the time involved in handling deliveries which were brought in via the car park delivery doors prior to the closure of the car park. Their task was to multiply the monthly figure supplied by twelve. They viewed Mr. O’Donovan’s study as “an academic exercise to prove a point” and “as a comfort factor”. The actual costs for the succeeding six years were not ascertained. So, in effect, the accountants merely did a calculation of the additional cost on the basis of the information furnished by the plaintiffs for the residue of the terms of the leases, 28 years, factoring in an envisaged 3% increase in wage costs annually. The figure that they arrived at is the figure which appears in the particulars in the statement of claim – €352,905.92.
Similarly, they calculated the additional delivery to customer costs at €32,156.70 on the basis of information furnished by the plaintiffs that they were incurring additional costs of €12.70 (IR£10) per item in respect of 60 large items per annum purchased by customers, arriving at the figure of €32,756.70 which appears in the statement of claim. Much was made of the first plaintiff’s evidence that 70 such deliveries were made in the year 1999 and that the figure of 60 was an underestimate. No evidence was adduced of the actual deliveries in the succeeding six years. They also calculated the additional cost of external warehousing at €272,978.45, the figure which appears in the statement of claim, on the basis of information furnished to them by the plaintiffs.
The position, therefore, is that, on the basis of information furnished by the plaintiffs, the accountants calculated the additional wages costs, the additional delivery to customer costs and the additional warehousing cost, incorporating a 3% inflation factor, over the 28 years residue of the leases which remained unexpired in 1998/1999 at €658,640 in aggregate. Mr. Kitt’s evidence was that, if account had been taken of a 9% inflation factor, the figure would be €1,225,285.76. In my view, on the evidence there is absolutely no justification for an annual provision of 9% for inflation over the 28 years from 1998/1999. I regard this part of the evidence as hyperbole.
Unlike Mr. O’Donovan, Mr. Egan did attempt to convert his opinion on additional time into additional wages. As I have stated, his opinion was that, if the plaintiffs chose to deliver via Ball Alley Lane, they would use an additional 37.2 man hours per annum which, in his view, was equivalent to additional wages cost of €940 per annum. He based his calculation on the Construction Industry Federation rate for a tradesman or driver as of 10th October, 2006, which he put at €16.50 per hour, and he allowed a factor of 1.5 for calculating the “built-up” rate.
As with the accountants, the actuary, Mr. Joseph Byrne, had a relatively simple task. He was asked to capitalise the current value of the future losses which it is contended will be incurred by the plaintiffs annually on account of additional wages and delivery costs. He did the calculation on the assumption that the loss will be incurred annually for the residue of the terms of the leases which is currently twenty years, without making any allowance for “mortality” and on the basis of an anticipated future rate of investment return of 3% per annum for the purpose of discounting back to the present time. On the basis that the plaintiffs will be liable for income tax at the rate of 42%, Mr. Byrne’s evidence was that the appropriate multiplier was 16.915. Mr. Byrne’s calculation of future loss, on the basis of additional costs of €10,977 per annum for wages at the time of the hearing and deliveries to customers was €185,676 and he calculated the loss to date at €74,702. These calculations gave a total of €260,378 in respect of the plaintiff’s losses to date and projected over the residue of the terms of the leases by reason of additional costs of wages and customer deliveries. The difference between Mr. Byrne’s total and Mr. Kitt’s corresponding figure (€385,662) is presumably attributable to the fact that Mr. Kitt did not discount for the fact that, if awarded a capital sum, now the plaintiffs would be able to invest it and get a return on it.
General observations on the expert evidence
Leaving aside the appropriateness or otherwise of the method of quantification of the loss they contend resulted from the interference with their rights at issue in these proceedings adopted by the plaintiffs, I would comment on the evidence adduced in support of that approach as follows.
First, in relation to the evidence adduced to support the claim for the additional wages costs, Mr. O’Donovan’s expertise and the results of the study he conducted were not utilised in the calculation of the loss. There was no objective analysis of the man hours claimed for the first year of the interference or in respect of the two named employees whose activities form the basis of Mr. Kitt’s calculations. The evidence was that in the three accounting periods following the interference with their rights, wages as a percentage of sales were shown as having decreased in the accounts of the plaintiffs’ business. Various explanations were proffered for this, for instance, that the management of the business had improved and that the plaintiffs’ wives helped out in the business. While the explanations were not supported by any hard facts, I do not think it proper to infer that that the plaintiffs have incurred no actual loss in the past eight years by reason of the interference with their rights and will incur no prospective loss over the residue of the terms of the leases.
Staying with the additional wages costs, I do not find Mr. O’Donovan’s evidence to be a sound basis for quantifying loss under this head of claim. Mr. O’Donovan’s calculation of the additional man hours per month occasioned by the interference with the plaintiff’s rights, which is approximately half the figure which was used, on my reading of the appendices to his report involved two personnel, a driver and a helper, from the time loading started at the warehouse in Ballybane to the time unloading was completed in Unit No. F, apart from the forklift truck time. While I have no reason to think that Mr. O’Donovan did not adopt a reasonable approach in comparing the logistics of bringing in deliveries via the three routes which were available to the plaintiffs in 1999, his calculation of 58.4 additional man hours per month, cannot be accepted as a reasonable reflection of the additional man hours involved in the plaintiffs having to take deliveries in via Ball Alley Lane rather than through the car park, the loading bay and the car park delivery doors. I appreciate that it is a major plank of the plaintiffs’ case that the closure of the car park, the loading bay, and the car park delivery doors necessitated the adoption by them of a new model for servicing the units in Corbettcourt Shopping Mall with stock and material, which involved the stock and material being delivered by suppliers to the store at Ballybane rather than directly to Corbettcourt Shopping Mall. While a new model may have been adopted which was economical, even parsimonious as Mr. O’Donovan testified, I do not think that, as a matter of probability, it was necessitated by the defendants’ activities.
Secondly, even if the additional cost to the plaintiffs in terms of man hours of the interference with their rights is a proper legal basis for quantifying their loss in these proceedings, I cannot see how the cost of delivering, say, a flat-packed kitchen trolley to the home of a customer living in Salthill is a necessary consequence of the interference with the plaintiffs’ rights, the costs of which should be visited on the defendants. In my view, at most, a reasonable case could be made for the additional man hours involved in bringing the item in question to an adjacent car park, for example, the car park of the Eyre Square Shopping Centre. The fact that prior to its closure in February, 1998 the car park existed as a facility for customers shopping in the “Options” shops was not based on any right or entitlement of the plaintiffs under their leases.
Thirdly, as regards both additional wages costs ands additional delivery costs, the claim for alleged losses to date is estimated on the basis of a number of “snap shots” over short periods of time, for example, the 109.5 hours ascribed to the two named employees in April 1999. Given that the actual losses over the past eight years are quantifiable, the claim as so presented lacks credibility.
Fourthly, if it is appropriate to apply the actuarial evidence, it must be applied with caution because, as Mr. Byrne properly pointed out, he made no allowance for “mortality”, which I take as meaning the type of contingency which, during the residue of the terms of the leases, might have impacted on the plaintiffs’ trading as “Options”. In Reddy v. Bates [1983] I.R. 141, delivering his judgment in the Supreme Court, Griffin J., albeit in the context of a claim for future loss of earnings by an individual in a personal injuries action, stated at p. 147:
“Whilst the mathematical calculations made by an actuary may be constant and correct, they should be applied in the particular circumstances of every case with due regard to reality and common sense.”
In my view, those observations apply whatever the legal context in which actuarial calculations are used to calculate loss.
Fifthly, in my view, the component of the plaintiffs’ claim which seeks a capitalised amount for the additional cost of external warehousing is wholly unsustainable. Unit No. F comprises about 1,000 sq. ft. of storage space. It is clear on the evidence that is has been utilised up to and beyond its maximum capacity by the plaintiffs in the intervening years since the interference with the plaintiffs’ rights. In fact, the evidence establishes that frequently during that period the overflow from Unit No. F at level 1 in the concrete building has given rise to complaints by the insurance brokers and the insurers who insure Corbettcourt Shopping Mall and by the fire officer. On the evidence there can be no doubt but that since February, 1998 the plaintiffs have received value for the rent payable in respect of Unit No. F, which was restricted to use as a store for goods supplied in Units Nos. 11 and 12. The evidence of the first plaintiff, which was that Unit No. F has been of little practical use to the plaintiffs and has only been used “as a back-up store” and not for receipt of goods from suppliers since February 1998, has to be viewed in the context of the evidence of the plaintiffs’ business operations as a whole. In the relevant period the plaintiffs carried on a retail business at three other locations: Headford Road Shopping Centre in Galway, where they have been trading since 1996; Tuam, where they have been trading since 1993; and, for a while, in Loughrea. They also carried on a wholesale business from 1995/1996 until 2005. They acquired a lease of a warehouse in Ballybane (1,500 sq. ft) in 1996, around the same time as they acquired the unit in the Headford Road Shopping Centre. In July, 1999 they moved their warehousing operations to Tuam and since then have warehoused at three different locations in Tuam. While the evidence is somewhat imprecise, in that the square footage is approximate, my understanding is that currently the plaintiffs retail from Units Nos. 11 and 12 (3,000 sq. ft.), Headford Road Shopping Centre (1,500 sq. ft.) and Tuam (1,000 sq. ft.). They have 1,000 sq. ft. of storage space in Unit No. F and they have a warehouse (1,500 sq. ft.) in Tuam. I do not think that it is reasonable to infer that 1,000 sq. ft. of warehouse space in Tuam has been, and is, necessitated by the interference with the plaintiffs’ rights in issue here. I consider this aspect of the plaintiffs’ claim to be not only unrealistic but also exaggerated, although, as I stated in my judgment of 15th December, 2004, I am of the view that the plaintiffs were deprived of the only suitable route for efficient bulk deliveries of the merchandise retained in Unit No. 12.
Sixthly, the plaintiffs’ claim, and the evidence adduced to support it, do not manifest any recognition by the plaintiffs of their duties to mitigate their loss, save to the extent that they followed Mr. O’Donovan’s advice that the Ball Alley Lane route was the most time and cost efficient of the routes for receiving and making deliveries available to them after February, 1998. In particular, I think there is substance in the defendants’ submission that the formulation of the plaintiffs claim on the basis of an inflation proof annual sum for each year of the residue of the terms of the leases, which the defendants characterised as simplistic, fails to take into account the duty of the plaintiffs to organise their business so as to minimise their losses. I think it is likely that the plaintiffs have minimised their losses, but a claim for loss to date based on “snap shots” in time more than six years ago does not reflect this.
Finally, it was submitted on behalf of the defendants that the court must take into account the fact that the plaintiffs have been paying the same rent for Unit No. F. since 1992, the rent reviews which arose in 1996, 2000 and 2004 not having been determined. The evidence is that there are six rent reviews outstanding, which I understand to mean that the rent reviews due in respect of both Unit No. F and Unit No. 12 in 1996, 2000 and 2004 have not been determined. A letter dated 2nd January, 2004 from Michael Fitzpatrick MRICS, who was appointed as independent expert to conduct the reviews, was put in evidence. That letter was in response to a request from the plaintiffs for a postponement of the determination by the expert pending the outcome of these proceedings. Mr. Fitzpatrick suggested that the parties might agree to him fixing two rents for each take which, as I understand it, would reflect the “before and after” interference with the plaintiffs’ rights scenarios. That seems to me to have been a very sensible suggestion, but it was not taken up. Counsel for the defendants cautioned that the court must have regard to the possibility that the plaintiffs will seek to be compensated twice for the same loss: by way of a direct capital payment; and by a reduction in the rent payable in respect of the premises. For the reasons I will outline later, the approach the court is constrained to take is to assume that, in determining the rent payable on the reviews, the expert will take cognisance of the finding of the court that there has been an interference with the rights the plaintiffs acquired under the leases and that the reviewed rents will reflect the diminished rights.
Legal principles applicable to quantification of loss
Counsel for the defendants invoked the decisions of the Supreme Court in Vesey v. Bus Éireann [2001] 4 I.R. 193 and Shelley-Morris v. Bus Átha Cliath [2003] 1 IR 232, not on the basis that any of the plaintiffs’ witnesses had been untruthful but on the basis that contradictory and confusing evidence had been adduced on behalf of the plaintiffs and that the court should not attempt to unravel the contradictions or lack of clarity. In the most recent of those decisions Denham J. stated as follows at p. 257:
“I wish to reiterate what was said by this court in Vesey v. Bus Éireann … that the onus of proof in these cases lies on the plaintiff who is, of course, obliged to discharge it in a truthful and straightforward manner. Where this has not been done ‘a court is not obliged, or entitled, to speculate in the absence of credible evidence’ (per Hardiman J. at p. 199). To do so would be unfair to the defendant. …”
While that dictum has to be applied by this Court, I think it is fair to say that the quantification of the plaintiffs’ loss in this type of case is likely to give rise to more difficulty than the quantification of damages in a personal injuries action, where the approach to be adopted is well established. At the end of the evidence I sought written submissions in this case because I considered that I needed guidance on the proper approach to the quantification of the plaintiffs’ loss.
Restitutionary damages
In their written submissions the plaintiffs argued for an entitlement to restitutionary damages relying on –
the commentary in McGregor on Damages (17th Edition), at chapter 12 and the English authorities referred to in the commentary, in particular, the decision of the Chancery Division of the High Court in Wrotham Park Estate Company Limited v. Parkside Homes Limited [1974] 1 W.L.R. 798, the decision of the Court of Appeal in Jaggard v. Sawyer [1995] 1 WLR 269, and the decision of the House of Lords in A.G. v. Blake [2001] 1 AC 268 and
the commentary in Clark on Contract Law in Ireland (5th Edition) in chapter 19, and the commentary in McDermott on Contract at para. 22.113, in each of which there is reference to the decision of this court (Finlay P.) in Hickey & Company Limited v. Roches Stores (Dublin) Limited (No. 1) (High Court, Unreported, 14th July, 1976).
The plaintiffs’ argument was that the court should assess damages by reference to, or direct an account of, the profit made by the defendants from the development of the Edward Square Shopping Centre, which it was asserted was carried out in a manner which breached the plaintiffs’ property rights and in the knowledge of the nature of the plaintiffs’ claim but blindly ignoring it. The basis on which it was contended that the first defendant is liable for restitutionary damages was that the first defendant received, as the purchase price for the land sold to the second defendant, consideration in excess of €1.5 million and, in addition, received several units in the new development. The bases on which it was contended that the second defendant is so liable is that, notwithstanding knowing the particulars of the plaintiffs’ claim, they proceeded with the development “at a cost of many millions of pounds/euro” and “it is clear that the Edward Square Shopping Centre has been a major success”.
I find it unnecessary to express any view on the circumstances in which a claim for restitutionary damages will succeed in this jurisdiction, because I consider that the submission made by counsel for the defendants that, even if this were a case in which it would be appropriate to award restitutionary damages, no such award could be made because the plaintiffs did not claim restitutionary damages nor did they adduce evidence which would support such a claim.
As regards pleading, it was accepted on behalf of the plaintiffs that a claim for restitutionary damages was not pleaded. While the plaintiffs claimed an injunction, they did not claim damages in lieu of, or in addition to, an injunction under the Chancery Amendment Act, 1858 (Lord Cairns’ Act), nor did they claim exemplary damages. No particulars of the factual basis for such a claim were pleaded. The issue of restitutionary damages as the proper basis of assessment in this case first arose in the plaintiffs’ written submissions, so that the defendants were not on notice that they might have to counter such a claim until the evidence had closed.
The evidence adduced by the plaintiffs was not directed in any way to such a claim and there was no evidence which would support such a claim. It is true that the agreement for sale between the first defendant and the second defendant was put in evidence during the hearing which led to the decision on liability. While it was not reintroduced during the hearing on quantification of damages, I assume that the consideration is correctly stated in the plaintiffs’ written submission. However, on the basis of what I stated in my judgment of 15th December, 2004, it is clear that the consideration was paid in return for considerably more property than the property affected by the plaintiffs’ rights, including the entirety of the car park and Corbett House. Moreover, even if it were appropriate in this case to adopt an approach similar to that adopted by –
• Brightman J. in Wrotham Park Estate Company v. Parkside Homes Limited (where damages were awarded in a sum that might reasonably have been demanded by the plaintiffs from the defendant, which had built 14 houses in contravention of a restrictive covenant, as a quid pro quo for relaxing the covenant), or
• Graham J. in Bracewell v. Appleby [1975] 1 All E.R. 993 (where the defendant built a house which could be accessed only over the plaintiffs’ property over which he did not have a right of way appurtenant to the site of the house, and having refused an injunction to restrain use of the right of way, which would have rendered the house uninhabitable, the court awarded damages equivalent to a proper and fair price which would be payable for the acquisition of a right of way),
(whether such methods of assessment are properly categorised as compensatory or restitutionary), here no evidence whatsoever was adduced as to the value of the rights which were interfered with, either by reference to the difference, if any, between the value of the plaintiffs’ leasehold interests with those rights and without them (i.e. diminution in value), or the sum the plaintiffs might reasonably have demanded for their surrender, or as to the benefit in monetary terms which accrued to either defendant from the interference with the plaintiffs easements in carrying out the development of Edward Square Shopping Centre.
Apart from the pleading and evidential difficulties, on the facts as established, I would regard the plaintiffs’ argument in relation to an entitlement to restitutionary damages as being both fanciful and lacking obvious merit, particularly, as planning permission for the development of Edward Square Shopping Centre was granted prior to the institution of these proceedings and the plaintiffs, who had been appellants on the appeal to An Bord Pleanála, had withdrawn their appeal on payment of a sum of money, albeit without prejudice to their contention that their property rights were being interfered with.
Irish authorities relied on by the plaintiffs
The only Irish authorities which the plaintiffs cited in which the court was concerned with the award of damages for interference with an easement were McGrath v. Munster and Leinster Bank Limited [1959] I.R. 313; and Scott v. Goulding Properties Limited [1973] I.R. 200. Each was concerned with interference with an easement of light. As an easement of light is intrinsically different from the type of easement under consideration here, it is not surprising that neither case gives much practical guidance as to the assessment of damages.
It was submitted on behalf of the plaintiffs that the award in the McGrath case was a generous award, the implication, I assume, being that the award in this case should be generous. I do not agree with the plaintiffs’ interpretation of the award in the McGrath case, which was concerned with compensating the plaintiff for the diminution of light to office of the plaintiff, who was a solicitor, in consequence of the reconstruction to a much greater height than hitherto of an adjoining building. Dixon J., in addressing the issue of damages, stated as follows at p. 328:
“It is not easy to assess damages in a matter of this kind, as the greatest injury to the plaintiff is in the rather intangible realm of loss of convenience and amenity in the use of her office. There is no real likelihood of any loss of business or of profits, except insofar as the greater use of artificial light entails additional expense.”
Dixon J. had found earlier (at p. 326) that from early in 1958 the plaintiff had been subjected to interference with light. She held under a lease which was due to expire in June, 1970, which was subject to a yearly rent of £75 and rates. The valuation evidence was that a fair rent for the office subject to the diminution in light would be £55 per annum with rates, so that there was a depreciation of £20 per annum. Dixon J. also recorded that it was contemplated that some decoration and internal rearrangement of the room at a cost of £120 was contemplated, which would necessitate upkeep at a cost of about £30 every four years. The loss of depreciation for twelve years and the expenditure contemplated would have come to £450. Dixon J. did remark that the redecoration would to some extent offset the additional cost of artificial lighting. The total sum awarded, as damages in lieu of an injunction, which was £500, clearly included a modest sum, around £50, in respect of general damages.
The head note in Scott v. Goulding Properties Limited succinctly sets out the effect of the decision as follows:
“Obstruction of part of the light reaching the ancient lights of a building on a dominant tenement gives the person in possession of that tenement a cause of action for damages consisting of compensation for the resultant diminution in the value of the tenement and for the resultant loss of amenity; but such damages should not include any element of compensation or the reduction, caused by the same act of obstruction, of the amount of light reaching modern windows of the building.”
As the majority judgment in the Supreme Court, delivered by Fitzgerald J., indicates, the order of the High Court had not indicated that the trial judge had differentiated between ancient lights and modern lights in assessing the compensation. Further, it was not indicated in the judgment how the trial judge obtained the figure of £1,700 which he awarded, but the Supreme Court was informed that the judge had indicated that he was allowing £1,500 for depreciation in value and £200 for loss of amenity.
Fitzgerald J., at p. 220, stated the basis on which the damages should be assessed as follows:
“Damages for loss of amenity are properly awarded in respect of the injury sustained up to the date of the trial and for such further period, if it can be estimated, as the plaintiff may continue to occupy the premises. In my view, damages for depreciation should relate to loss in selling value in the future if and when the plaintiff decides to dispose of the property. Where there is no definite evidence as to whether or when the plaintiff is likely to dispose of the property, a global figure for general damages has to be awarded without necessarily segregating the figure in compartments for loss of amenity and depreciation on future sale.”
Fitzgerald J. went on to say that the amount of £1,700 appeared to him to bear no reasonable relation to the extent of the injury suffered by the plaintiff as a result of the obstruction of the light to the ancient windows themselves and the loss of amenity or depreciation in value. Accordingly, the judgment for £1,700 was set aside.
The report of the decision of the Supreme Court in the Irish Reports notes that the parties agreed to have the damages re-assessed by the Supreme Court and they were reassessed in the sum of £1,200. Despite that information, it is not possible to analyse the award, as it is clear from the dissenting judgment of Walsh J. that there was a conflict on the evidence of the valuers called by the plaintiff and the defendant as to the depreciatory effect of the diminution of light on the market value of the property.
In reliance on the decision in the Scott case, it was submitted on behalf of the plaintiffs that, as they did not call a valuer to prove the depreciation in the value of the premises, the damages awarded should be wholly attributed to the loss of amenity. It seems to me that that submission is based on a misunderstanding of the approach advocated in the judgments in the Scott case, including the dissenting judgment of Walsh J., which are analysed in Bland on The Law of Easements and Profits à Prendre (Dublin, Round Hall, Sweet and Maxwell, 1997) at p. 334. Fundamentally it ignores the distinction between general damages and special damages and the fact that what the plaintiffs have sought to prove here is special damage, the extra expenses involved in bringing in and making deliveries. Further, given that the absence of any valuation evidence coupled with the fact of the outstanding rent reviews means that it is impossible to make any assessment of the real impact in financial terms of the interference with their easements on the value of the leasehold interests to which they were appurtenant, it is not possible to arrive at a global figure for depreciation and loss of amenity.
The normal measure of damages
Although the jurisprudence of the courts in the United Kingdom which culminated in the decision of the House of Lords in Attorney General v. Blake permeates the commentary in the 17th Edition of McGregor, it contains some statements on the normal measure of damages in situations analogous to the situation which arises in this case, which are indicative of the approach which might be adopted to proving loss in this case. Bearing in mind that the plaintiffs have claimed damages in both contract and tort, I will consider the position in relation to each cause of action.
The relationship of landlord and tenant in this jurisdiction is based on contract rather than tenure (s. 3 of the Landlord and Tenant Law Amendment Ireland Act, 1860, Deasy’s Act). The leases of the Units in Corbettcourt Shopping Mall create the relationship of landlord and tenant between the plaintiffs and the first defendant. In the context of the proper measure of damages for breach of the lessor’s covenants in a lease, McGregor states as follows at para. 23-011:
“Apart from specific covenants, breach of the overarching obligation of the lessor not to derogate from his grant may give rise to the issue of damages. In Platt v. London Underground [[2001] 2 E.G.L.R. 121] loss of profits resulting from the derogation of grant were awarded; … The loss of a right to park on land retained by the lessor was regarded as a derogation from grant in Saeed v. Plustrade Limited [[2002] 2 EGLR 19, C.A.] and led to an award based upon rental value of the parking lot but discounted by 10 per cent in recognition of the possibility that the lessee, in competition with others, might not always find the parking lot available.”
In the context of sale of land, McGregor points out at para. 22-049 that, in the case of a breach by a covenantor of a restrictive covenant, the diminution in the value of the adjoining or retained land, that is to say, the land benefited by the covenant, will still form the starting point in the assessment of damages, but goes on to discuss the measure of damages which is an alternative to diminution in value, which has emerged for restrictive covenants, which is based upon the sum of money for which the covenantee might reasonably have demanded of the covenantor for releasing him from his covenant. The fons et origo of this alternative measure is the Wrotham Park Estate Company case, which leads back to the question whether the quantification of damages should be restitutionary rather than compensatory.
In outlining the normal measure of damages in torts affecting land, trespass and nuisance, McGregor considers the particular case of nuisance at para. 34-015 stating:
“Where the nuisance does not entail physical damage to land, diminution in value and cost of abatement again appear as acceptable measures of damages. Thus in Snell & Prideau v. Dutton Mirrors [[1995] 1 E.G.L.R. 259, C.A.], where the claimant’s right of way was obstructed and narrowed by building by the defendants, the claimants’ entitlement to damages was said to amount to the difference between the value of their property with the full right of way, including the right of passageway for vehicles, and its value with the more limited right now existing.”
As is noted by McGregor, the defendants in the Snell and Prideau case were not ordered by mandatory injunction to pull their building down. The issue of the quantification of damages was dealt with in that case in the judgment of Stuart v. Smith L.J. who stated (at p. 264):
“Although, in my opinion, the plaintiffs have suffered substantial damage, with the loss of vehicular access and the restriction imposed by the proximity of the defendants’ building on the free and easy use of trolleys and forklift trucks, the fact is that, for many years, they made virtually no use of it and they do have an alternative access at the front of the building. Indeed at one time they had two such accesses the garage and the loading bay, although the garage has now been converted to offices or a showroom. In the light of these considerations, I consider that the plaintiffs can be adequately compensated by an award of damages which will reflect the difference in value between the plaintiffs property with the benefit of the full right as compared with its value with the limited right as now exists”.
What all of the foregoing extracts from McGregor illustrate is that the cornerstone of the traditional or normal measure of damages for breaches analogous to the breach of the plaintiffs’ rights complained of here is diminution in value. The absence of evidence of diminution in value in this case undermines the court’s ability to measure damages in accordance with the normal measure. In particular, the approach adopted in the Snell and Prideau case, which commends itself because of the similarity of the factual circumstances in that case and here, cannot be adopted.
Application of legal principles to the facts
At the outset, I set out the nature and extent of the rights of the plaintiffs which the defendants have interfered with so as to render them liable in damages to the plaintiffs.
I have then analysed the plaintiffs’ claim and outlined the evidence adduced in support of the claim. I have concluded that the third surviving component of the plaintiffs’ claim, the cost of additional warehousing, is unsustainable. In relation to the first of the other two surviving components, the additional wages costs, the inconsistency as to the additional man hours necessitated by the interference with the plaintiffs’ rights between Mr. O’Donovan’s finding, adopting a scientific approach, and the additional man hours which formed the basis of the accountant’s and the actuary’s calculation, gives an appearance of artificiality and unreality to the plaintiffs’ claim. It is in fact artificial and unreal because it not based on additional wages costs actually incurred to date, which are quantifiable. As regards the second, the additional cost of deliveries to customers, the claim does not reflect the reality of the limited extent to which the plaintiffs would have been entitled, as a matter of law, to facilitate customers had their rights not been interfered with. Overall, I think the claim presented by the plaintiffs to the defendants was exaggerated and the approach adopted in the proceedings opportunistic.
As regards the defendants, although I have concluded that a claim for restitutionary damages does not fall to be considered, for completeness, I find on the evidence that the plaintiffs have not established mala fides on the part of the defendants in the sense envisaged by Finlay P., as he then was, in Hickey & Company v. Roches Stores (Dublin) Limited [1980] I.L.R.M. 107. On the evidence I am satisfied that there was a genuine belief on the part of the principals of the first defendant that they were entitled to interfere with the access for deliveries to Corbettcourt Shopping Mall under the terms of the leases which had been created and that the interference with the plaintiffs’ rights which I have found was wrongful was neither wilful nor deliberate nor a cynical denial of such rights. However, I do not accept the defendants’ contention that the plaintiffs have not sustained any loss on account of the interference with their rights and that they should recover no damages.
Having regard to the state of the evidence, I have found it impossible to determine what is a fair measure of damages in this case as between the plaintiffs and the defendants for the interference with the plaintiffs’ rights. No evidence has been adduced which enables the court to determine the extent in money terms to which the interference has diminished the value of the leasehold interests in Units No. 11, 12 and F. The revised rents payable in respect of Units No. 12 and F since 1998, which have yet to be fixed, would be relevant factors in that determination. The absence of evidence of diminution in value of the leasehold interests means that there are no evidential points of reference against which it is possible measure compensation for loss of amenity or inconvenience. The only evidence adduced, evidence of special damage alleged to have been incurred by the plaintiffs by way of additional costs, overstates the real loss.
Nonetheless I am satisfied that the plaintiffs have incurred extra costs and have suffered inconvenience. In relation to loss to date in respect of Units Nos. 12 and F, the revised rents for the review periods since 1996 should partially redress that. Going forward, the revision of the rents reserved by the three leases should reflect the plaintiffs diminished rights.
Because of the state of the evidence, it is not possible to assess what would be a fair measure of damages to compensate the plaintiffs for the wrongs they have suffered, but, as the saying goes, the plaintiffs will have “another bite of the cherry” in the rent revision processes. In relation to the loss which will not be addressed in those processes, while I have found it extremely difficult to put a figure on it, I have come to the conclusion that a global figure of €50,000 is all that is justified on the evidence. The approach I have adopted, acting on the assumption that overall fairness as between the plaintiffs and the defendants will be achieved in the rent revisions processes, may be somewhat unorthodox, but it is an approach which has been forced on the court by the state of the evidence, which is entirely of the plaintiffs’ doing.
Decision
Accordingly, there will be judgment in favour of the plaintiffs in the sum of €50,000.
Approved
Laffoy J.
Cotter v. Minister for Agriculture and others
High Court 31 July 1991
Mr. Justice Murphy:
This is a claim for damages for negligence, negligent mis-statement and breach of contract, arising out of the negotiations, agreements and actions of the above parties or some of them in relation to the drainage of the Ballyfinboy river, Tipperary in the years 1983 to 1986.
The drainage works were carried out by the Defendants (other than the Minister for Agriculture, Ireland and the Attorney General) who own or occupy farms on or near the Ballyfinboy river and who might expect to benefit from the drainage thereof. Those Defendants were in the pleadings and are in this Judgment referred to as “the Farmers”. The work was undertaken with the benefit of that part of the Farm Modernisation Scheme which became applicable to joint works as from the 10 February, 1976. The Farm Modernisation Scheme itself was introduced on the 1 February, 1974 in implementation of certain directives of the EEC though it would appear that the joint works aspect of that scheme did not fall within the framework of the EEC directive or at any rate was not funded by monies provided in pursuance of that scheme. The Farm Modernisation Scheme was operated by the Department of Agriculture and Fisheries and in particular a section of that Department known as the “Farm Development Services” which was in the pleadings and which will be in this Judgment referred to as “the FDS”. The Farm Development Services itself is a significant section of the Department which has Officers and Representatives throughout the country and in particular an Office and Representative at Nenagh, Co Tipperary.
The evidence did not make clear how far the Farm Modernisation Scheme was publicised or even made available to the public or interested journalists. It was beyond dispute, however, that the farming community in general and the Farmers in particular were aware of the scheme insofar as they applied to individual farmers and many of the Farmers in the present case had benefited from such schemes. In simple cases a proposal would be made to the Farm Development Services by a farmer for the construction of say a cattle shed and the proposal in that behalf would be investigated by a field officer of the Department and if the proposal was approved the Farm Development Services would pay a significant percentage of the cost of the construction thereof. The individual farmer would arrange to carry out the work and would be responsible himself for the cost thereof but would qualify for the appropriate grant payable under the Farm Modernisation Scheme.
As far back as the 1920’s some drainage works were carried out to the Ballyfinboy river but by 1970 there was some agitation with a view to having further works done.
Apparently the farmers and their neighbours were advised that it would be many years before the Board of Works would be in a position to carry out drainage works on the river. It is clear too that the farmers and other interested persons became aware of the fact that drainage works could be carried out under or with the benefit of a grant payable by the Department pursuant to the Land Project Scheme. The Land Project Scheme was the forerunner of and similar to the Farm Modernisation Scheme and it too had a joint works aspect as well as providing for individual farmers. I am satisfied that all or most of the farmers and many of their neighbours and interested persons signed forms in the year 1975 applying for a grant under the Land Project Scheme for the drainage of the Ballyfinboy river. Before these applications were dealt with the Land Project Scheme was replaced by the Farm Modernisation Scheme and in accordance with the directions attached to a circular dispatched by the Department to its various offices throughout the country and dated the 10 February, 1986 the applicants were informed that the Land Project Scheme was being terminated and that their applications would be treated instead as being made under the Farm Modernisation Scheme unless the Department was notified to the contrary. Apparently the joint works under the Farm Modernisation Scheme are dealt with by the Farm Development Services under the circular dated the 10 February, 1976. That circular identifies three categories of joint works, one of which is described as follows:-
“(a) The common outfall water courses to facilitate the drainage and reclamation of the land”.
The circular then goes on to provide the rate of grant applicable to category (a) work should be 50% of the estimated cost as approved. In relation to the actual procedures the circular provides as follows:-
“Joint Drainage Works:
The procedures established, including the full examination of the case from the cost/benefit point of view and the processing of applications under the former Land Project will be retained in relation to Joint Works applications handled under the Farm Modernisation Scheme, except that the forms in use will now be designated FJI (application form); FJ2 (contract agreement form); FJ3 (letter of approval) and FJ4(R) (Report form)”
The Land Project procedures were not put in evidence nor was it suggested that any aspect of the those procedures was material to the present case.
It is beyond debate that the drainage works in the present case were carried out by the Farmers and in particular by the Contractor, that is to say the Plaintiff, employed by them. It is equally clear that the Department committed itself, subject to certain conditions, to grant aid the scheme in accordance with the joint works programme of the Farm Modernisation Scheme. What the Plaintiff and the farmers say is that the role of the Department and in particular the Farm Development Services was not a matter of fact or law confined to that of Banker or financier (however benevolent) but went much further. It was contended that the Farm Development Services would be better described as the promoters of the drainage scheme as it was they who had advised the farmers, and directly or indirectly the Plaintiff — in relation to the advisability and feasibility of the scheme as well as it’s implementation.
Perhaps the most surprising aspect of the present case is the basic concept of a number of neighbouring farmers, albeit with the support of the Department and the acquiescence of their neighbours attempting to carry out a drainage project extending over 9 miles of countryside and under five public bridges from Borrisokane to Lough Derg. It is not necessary for the purposes of this action for Counsel to open to the Court the Arterial Drainage Act 1945 or the earlier Act of 1925 or indeed any of the numerous Irish Drainage and Improvement of Land Acts passed in the nineteenth century. That legislation has no bearing on the present case but it is instructive to see the structures which were put in place to enable statutory drainage schemes to be carried out and the problems which legislators had foreseen for more than a century in relation to such schemes. Frequently Courts must be on guard to prevent themselves criticising or judging with the benefit of hind sight. The legislative history in relation to drainage would demonstrate that the appropriate wisdom was not gained by the unfortunate circumstances of the present case but had been freely available for very many years previously.
In 1981 it did seem that progress was about to be made towards the realisation of the plans to drain the Ballyfinboy river. Early in that year a public meeting was convened and a number of interested farmers attended. They elected a committee of 14 members. The Chairman was Patrick Fogarty, the Secretary Mr Donal O’Meara and the Treasurer Mr Rory Dunne. It is probable that Mr Patrick Mallon was present at this meeting. Mr Mallon was the Senior Officer of the Farm Development Services branch in Nenagh, Co Tipperary for a number of years prior to his retirement on the 1 March, 1982. He was known to and respected by the farmers and their colleagues in Tipperary. He was known to and respected by the farmers and their colleagues in Tipperary. He was the civil servant most intimately connected with the drainage works but having regard to the scope of the scheme final approval had to be obtained from head office in Dublin. Mr Mallon’s immediate superior was Mr Cashen whose office was situated in Thurles, Co Tipperary. Another civil servant of great importance in the present case is Mr Hickey who is an Engineer by profession. The actual plans for the drainage works were prepared by him or under his authority. He also prepared a more controversial document estimating in accordance with certain figures accepted by the Department the total cost of carrying out the proposed work. These costings were for internal purposes only and were in that sense confidential. They were not at any time during the course of negotiations known to any of the other parties but their contents were subsequently revealed without proper authority to the Plaintiff. Mr Mallon was succeeded briefly by Mr Finlay and subsequently by Mr Dillon.
It was 1982 before further progress was made. Whilst there is disagreement or at any rate confusion with regard to the material events of this and the following year it can be said with some measure of certainty that Mr Hickey’s costings were prepared and completed in January, 1982; but the letter from Mr Patrick Mallon addressed to Mr Donal O’Meara conveying the Ministerial approval to the carrying out of the joint works was dated the 1 March, 1982 and that the committee opened on the 19 March, 1982 the five tenders which they had received for the carrying out of the proposed drainage works. It was stated in opening the case on behalf of the farmers that in fact five tenders were received ranging from £155,000 to £250,000. There were two tenders at £200,000 one from Mr James Sheehan and another from the late Nicholas Cotter. The lowest tender had been submitted by a local man named Peter Downey. It appears that the majority of the interested parties were anxious to accept the lowest tender but this proposal was effectively vetoed by one of the farmers who is the most substantial contributor and who threatened to pull out of the transaction if that tender were accepted. If the works could have been carried out properly at the lowest tender that indeed would have been extremely attractive seeing that the Ministerial approval conveyed the news that the Departmental grant would amount to £122,651.00, a figure which was subsequently increased to £132,972.00. In any event this dispute led to further delays and the matter was postponed for a further year.
The late Nicholas Cotter died on the 13 April, 1983. He had been a Contractor with long experience of land reclamation and river drainage. Nicholas Cotter, the Plaintiff herein was related to the deceased but not involved in any way in the business carried on by him. The Plaintiff is and was at all material times a civil servant. He had emigrated as a young man and gained experience in a variety of occupations before returning to Ireland in 1979 when he secured his appointment as personal assistant to a Government Minister. He concedes himself that he had no practical or professional expertise in the building or land reclamation industries. He did, however, assemble or retain some of the employees and advisors who had worked for his namesake. In particular he retained Mr Kevin O’Callaghan as his consulting Engineer. Mr O’Callaghan had, among other things, advised the deceased in relation to the preparation of the original tender to drain the Ballyfinboy river. It is, I think, proper in these unusual circumstances to make it clear that there is no suggestion whatsoever that the Plaintiff misled the Farmers in anyway as to his identity. The uncontradicted evidence is that it was Mr Cotter, the Plaintiff herein, who was approached by one of the Farmers at the funeral of the late Nicholas Cotter and invited to tender for the works which the Farmers were still anxious to have executed.
The Plaintiff herein did submit a tender in the sum of £200,000 — the same sum as had been proposed by the deceased — on the 2 May, 1983. Among other things that tender was expressed to be “subject to a detailed investigation of the river proving satisfactory”. As the contract for the execution of the works is dated the 15 June, 1983 and sets out the contract price at £190,500.00 the period within which controversy appears to have arisen is essentially the six weeks from the 2 May, 1983 to the 15 June, 1983. Indeed it would seem that the more controversial meetings or discussions took place in the week preceding the date of the contract.
The Plaintiff explained how he and Mr O’Callaghan, the consulting Engineer walked the river bank and discussed the nature of the river bed and adjoining land with some adjoining farmers and a fisherman who was particularly familiar with the river. The Plaintiff and Mr O’Callaghan explained that farmers generally were in a position to give information as to the presence or absence of rock under the lands and that the inspection of the river and the flow of the water indicates whether or not rock is present in particular parts thereof. On the other hand it was recognised that without undertaking a detailed investigation and survey of the river bed that nobody could be certain as to the precise extent or nature of the rock which might be encountered.
The Plaintiff was pressed by the Farmers to reduce his quotation for the works. He agreed to do so. The figure was reduced to £190,500 on terms that certain works would be omitted or undertaken by the Farmers themselves. This adjustment in the price took place at a meeting with the Farmers or some of them. Mr Cotter places that meeting in the Talbot Hotel in Nenagh while the Farmers say that it took place at the Pavilion in Ballinderry. However there is no dispute between the parties as to the fact of the reduction or the reason for it. More important is the evidence to the effect that the Plaintiff says that Mr Rory Dunne asked him why would he not do the work — particularly the work in an area known as the Canal — and that Mr Dunne had told him that the Farm Development Services could pay for the rock to which he, Mr Cotter, replied “why did you not tell me”. The evidence was that Mr Dunne invited one Plaintiff to go down to Mr Tom Dillon, the then head the Farm Development Services in Nenagh and obtain confirmation of this information.
Mr Cotter did go to Mr Dillon’s office in Nenagh and it is his evidence that he told Mr Dillon that Mr Dunne had told him that the Farm Development Services would pay for rock. It was Mr Cotter’s evidence that Mr Dillon agreed with that statement. However, Mr Dillon said that Mr Ken Hickey would know about it. Mr Dillon then arranged for Mr Cotter to speak to Mr Hickey on the telephone and in the course of ‘that conversation it is Mr Cotter’s evidence that he told Mr Hickey that the Farmers had agreed that the Department would pay for rock and Mr Hickey agreed with this. Mr Cotter further gave evidence that Mr Hickey said that there was very little rock along the river and that the rock under the bridge at Ballyhooney was brittle and that he, Mr Hickey, had taken the rock into account and in his estimate the amount of rock was insignificant. Mr Hickey was quoted by Mr Cotter as saying “there is no rock worth talking about and you will be paid for it”. It is agreed by Mr Cotter that the rate for payment was not discussed nor was “the small amount of rock” quantified in anyway. Before leaving Mr Dillon’s office the final words attributed to Mr Dillon were “would you not take his, Mr Hickey’s, word for it”.
As I understood the evidence of Mr Cotter, his conversation with Mr Dunne took place at the meeting at which the tender price was reduced to £190,500 whereas undoubtedly Mr Dunne’s evidence was to he effect that the conversation with Mr Cotter took place on the telephone. This discrepancy may be due to a faulty recollection by one or other of the persons concerned (or indeed to an error of my hurried note of the evidence) because the reality of the matter is that both Mr Cotter and Mr Dunne are agreed that such a discussion did take place.
One must then go back to ascertain where Mr Dunne obtained the information which he claims to have given to Mr Cotter. It is the Farmers case that a variety of officers of the Department of Agriculture made statements which led the Farmers to believe that the Department would pay in full the cost of extracting all rock or at any rate all “extra” rock encountered by any contractor carrying out the drainage works. The history of these representations according to the evidence of the Farmers appears to be as follows:-
1. In early 1981 Mr Rory Dunne enquired from Mr Mallon what would happen about extra rock and Mr Mallon assured him that extra rock would be paid for. The extraordinary feature of that evidence is that the debate took place before the scheme for the drainage of the Ballyfinboy river had even been drafted and at a time when Mr Dunne did not know what significance the words “extra rock” might have. He had, as he explained, heard the words used in connection with a drainage scheme carried out in the Terryglass area of Co Tipperary. Mr Mallon denies that he made any such statement.
2. Mr Kennedy and Mr O’Meara gave evidence to the effect that at the meeting held in early March, 1982 (on either the 1 or the 4 day of that month) Mr Mallon was asked about “extra rock” and those present were told or led to believe that the Department would pay for it.
3. At a meeting held in early June, 1983 in the house of Mr Patrick Cotter (no relation of the Plaintiff) Mr William Cashen informed the farmers who were present with him discussing a particular problem in relation to the intended works in response to the question “what if there is a lot of rock” were told by Mr Cashen “anything unforeseen coming up will be paid for”. Messr Mallon, Cashen, Dillon and Hickey denied that they ever told or represented to the farmers that the Department or the Farm Development Services would pay in full for any rock whether it be described as original or extra and whether foreseen or unforeseen.
I accept that the farmers who gave evidence before me were men of integrity and, although they were reluctant to concede it, were men of ability and sound common sense even though some of them may have terminated their formal education at an early age. Indeed the integrity of the farmers was not seriously challenged in cross-examination nor indeed was the credibility of the civil servants attacked. So far from it, the farmers paid tribute in particular to Mr Mallon and Mr Dillon as men who had rendered dedicated service to the farming community in the area over many years. In the nature of their position as civil servants they had no financial interest in the outcome of the transaction, moreover by the time the case came to hearing the key witnesses had retired from the service and accordingly it could not be suggested that their prospects for promotion or their status within the service might be affected by any admission which they might properly make in the course of the hearing. The reality of the situation as I see it is that it is extremely unlikely that any of the civil servants whom I have named and each of whom were familiar with and operated a farm modernisation scheme would have said or consciously implied that the State would pay the full cost of carrying out any of the drainage works. It is to my mind inconceivable that four different officials would have made the same erroneous representation over a period of a number of years. On the other hand I think that the Department must concede that its officers never warned the farmers of the possibility of an over run in costs or the consequences of that happening. The officials concerned did not address their minds to that problem at all even though the Department must have known that its own estimate of the cost was based on a superficial inspection of the river so that a cost over run was not a improbable contingency.
In the circumstances I can accept that in the course of some meeting or some meetings that one or other of the farmers may have adverted to some aspect of the problem. I believe that one or other of the officers concerned must have given some reassurance with regard to the prospect of the Department making payment in respect of the unforeseen problems. However, I cannot believe that the officers concerned intended to convey anything more than the fact that further grants would probably be available in such circumstances. The statements may not have been worded with sufficient care by the officials or understood correctly by the farmers but I suspect that the real difficulty is that the farmers in reviewing the misfortunes that have occurred and discussing the matter among themselves in an effort to identify how the problems arose have, unintentionally, seized upon isolated words or expressions used from time to time in a somewhat different context from that in which they were presented to the Court. The very phrase “extra” rock suggests that this is so. As I have pointed out when Mr Dunne claimed to have posed the question concerning extra rock in early 1981 he had no concept of what those words involved. Even in 1983 the words “extra rock” were meaningless except by reference to the costings prepared by Mr Hickey showing the quantity of rock which he estimated as being involved in the works. As that document was not available to the farmers at the time the representations were alleged to have been made it was impossible to obtain any explanation as to what the word “extra” was intended to convey.
If there is a difficulty in understanding how or why experienced civil servants should have implied that the Department would pay in full for works which were merely grant aided it is perhaps equally difficult to understand why the Farmers should have inferred that this was the case. Whilst there was no direct evidence as to how far the joint works schemes were publicised it is clear that all of the farmers understood in general terms that the concept of the Farm Modernisation Scheme was that approved works were carried out by applicant farmers or their agents and merely grant aided by the Department. The farmers were aware that under the Farm Modernisation Scheme the Department did not themselves undertake any works and did not in any case subvent the full cost thereof.
The farmers were further embarrassed by the fact that a document (or series of documents) exists which purports to be an agreement between the Farmers (together with other owners of farms in the same locality) and the Minister for Agriculture under which the Minister agreed to pay the sum not exceeding £122,651.00 by way of grant and the Farmers (together with the other owners) agreed to carry out the works described in the specification prepared by Mr Hickey before March, 1985. That agreement or the schedule to it was signed by every one of the farmers between the 4 and the 6 March, 1982 and their signatures were (or so the document would suggest) witnessed by Mr Donal O’Meara. It would seem that the document was posted to the Department on the 10 March, 1982 but returned to Mr O’Meara by Mr William Murphy, an official in the Department — and signed by Mr O’Meara in Mr Murphy’s presence on the 30 March, 1982. It seems to me that that document makes it abundantly clear that it was the Farmers who were committing themselves to doing the work and that the only obligation of the Minister was an obligation, if it can be so described, to make a limited grant towards the completion of those works. In fact the Farmers denied that they had ever executed any such agreement with the Minister. What the witnesses say is that the schedule to the agreement which they (and others) signed was represented to them by Mr Mallon (and by them to others) as being a way-leave agreement enabling the works to be carried out. There is no doubt but that the agreement and schedule were delivered to Mr O’Meara who is not merely the Secretary of the Committee but also the designated representative of those involved in the scheme. He says that he received those documents in separate envelopes at a meeting of the interested parties with Mr Mallon on the 4 March, 1982 at the Pavilion in Ballyinderry. Mr Mallon says that he was never at such a meeting and that the documents were given to Mr O’Meara at his house on the day as of which they are dated, namely, the l March, 1982 which was in fact the day on which Mr Mallon retired as a civil servant. Whilst it is surprising that this controversy arises it does seem that a series of documents were given to Mr O’Meara early in March, 1982 and that this contained the vital information for which the farmers had been waiting for some considerable time, namely, the Minister’s approval of the scheme and the amount of the grant which he was prepared to make towards its implementation. I accept that Mr Mallon properly advised Mr O’Meara against disclosing the amount of the grant until all of the tenders had been received. I do not believe that he attempted to place any embargo on an envelope being opened but merely recognised that information as to the grant was confidential to the farmers — not the Department — and that its premature disclosure might deter contractors from making the best tenders. Again I would readily accept that Mr Mallon at some stage must have explained to the Farmers that it would be essential to obtain the concurrence of all persons owning or occupying land adjoining the river. In the absence of compulsory powers of acquisition such agreements would be necessary to enable the works to be completed.
However of the 41 farmers who signed the schedule to the Ministerial agreement, 36 had completed and signed application forms for a grant under the original Land Project Scheme for the works in 1975. Two more, namely, John Kennedy and Patrick Browne appeared to have signed similar application forms subsequent to 1975 and that appears to be the form to which Mr O’Meara referred in his letter dated the 10 March, 1982 to the Nenagh Office of the Farm Development Services. Three more signed the agreement in March, 1D82, namely, Oliver O’Meara, Martin Costelloe and Joseph Slavin but there is no record apparently of their ever having completed an application for the grant. The matter was not dealt with in evidence but I might be justified in inferring that they are the three owners of the council houses referred to in Mr O’Meara’s letter of the 10 March, 1982 and in respect of whom he promised to get forms completed. It is difficult to accept that in signing those applications the farmers could have believed that they were merely granting a way-leave.
It is common case that all of the documentation was open to the committee and available at the meeting on the 19 March, 1982 when the tenders were received. The evidence is that the members of the committee interested themselves in the amount of the grant to be provided by the Minister and that none of the witnesses had any recollection of reading or having read to them the contents of the Minister’s letter or the body of the agreement which was referred to in the document which they had signed. It was not 1982 but 1983 when the acceptable tender of the Plaintiff was received so that more than a year elapsed during which the Ministerial approval was available to Mr Donal O’Meara and through him to all of the members of the committee. In these circumstances it is difficult to accept as a matter of fact or law that the parties did not have full knowledge of this agreement.
I have no doubt but that Mr Cotter was concerned as to the problems which he might face in carrying out the works. I accept that he went to see Mr Dillon and spoke to Mr Hickey. Whilst Mr Cotter was ignorant of the general procedure concerning the operation of the Farm Modernisation Scheme it is unlikely that the information which he got from either Mr Dunne, Mr Dillon or Mr Hickey was of decisive importance to him in proceeding with the transaction. It would be difficult to believe that a man involved in such a substantial business venture would rely to any significant extent on the casual and unprofessional advice of one of the persons who is seeking to engage his services and that at a reduced price.
Insofar as Mr Cotter was put onto and sought information from M/s Dillon and Hickey I have already expressed the view that it is unlikely that either and less still both of those civil servants would be so incompetent or dishonest as to mislead Mr Cotter with regard to the contribution which the Minister would make to a scheme of this nature. It is improbable that Mr Hickey, for example, would have said or implied that the State would pay in full for rock extracted from the river bed when it was Mr Hickey himself who had taken out the figures, estimated the amount of rock and calculated the Ministerial contribution as a percentage of the cost of extracting rock and other material. If the question was posed of the statement made that “extra” rock was to be paid for in full by the State I would have thought that the first reaction of any civil servant would be to explain that any further payment of any description would require the sanction of higher authority as was the case. It seems inconceivable that a subordinate would confirm the availability of 100% payment of extras or unforeseen problems without any sanction knowing that the only payments theretofore sanctioned had been a fraction of the notional cost of carrying out the works. In addition I have had the advantage of hearing Mr Hickey giving evidence and he struck me as being a cautious officer who would not be given to making confident statements and certainly would not have given an assurance based on anticipating a Ministerial consent. I believe that Mr Cotter, like the farmers has misled himself in relation to the details of the conversations which he had with Mr Dillon and Mr Hickey. The likelihood is that some reference was made to the cost of rock and the involvement of the Department but I cannot believe that the officials went further than confirming that the Department did pay for rock in the sense that the Department contributed to the cost of extracting the same. With regard to the quantity of rock estimated to be in the river again I find it impossible to accept that Mr Hickey gave an unqualified assurance as to the quantity of rock. His own costings show such a variety of materials and gradings of excavation that it would be amazing if he would participate in any serious conversation regarding the river bed without making some such distinction. On the other hand it is clear from Mr Hickey’s costings that he described as “rock excavation” only 1,132 cubic yards out of the 162,000 cubic yards to be excavated. This is a considerably less that 1% of the material involved. Even if one included as rock the 11,200 cubic yards of “hard gravel and rock excavations” the amount of rock to be excavated would be well below 10% of the materials to be encountered. In those circumstances Mr Hickey might well be prepared to express the view that the rock should not be encountered in significant quantities and would not be a problem for the contractor but I do not believe that any Engineer, least of all a cautious man like Mr Hickey would give any confident assurance or express any authoritative view as to the nature or composition of the river bed when he knew that no borings had been made and no detailed survey undertaken. Accordingly, whilst I accept that Mr Cotter spoke to Mr Hickey on the telephone and I accept that some discussion took place with regard to the composition of the river bed I believe that Mr Hickey did no more than express his view as to the quantity of rock likely to be found therein and that it was clear to both parties that this view was like Mr Cotter’s own view based upon a visual inspection of the river only. I do not believe that Mr Hickey or Mr Dillon made any statement intending to represent that the Department would in any circumstances pay 100% of any part of the excavation works or that the Department would even necessarily pay a grant in addition to that already expressly provided for.
THE CONTRACTUAL BARGAIN
Both the Plaintiff and the Farmers gave evidence as to their purpose and intention in executing the agreement dated the 15 June, 1983. It is the Farmers case that they at all times sought and intended what they described as “a lump sum contract”. They emphasised that they had only very limited resources available to them and they said, no doubt correctly, that they had no means of levying further contributions from the particular Farmers or their neighbours. Accordingly the Farmers were at all times determined and intent upon ensuring that there were no “extras” and no liability beyond the precise sum already collected by them. Indeed the Farmers emphasised again and again that they saw the position and that Mr Mallon confirmed that the obligation of the Farmers to “fill the gap” between the contract price and the amount of the Ministerial grant.
Mr Cotter’s stand point was that he was apprehensive about the presence of rock in the river and that he would not accept the proposed lump sum contract. It was his evidence that he was invited to execute a contract which had been prepared by the Solicitors on behalf of the Farmers and that he declined to do so on the advice of his consulting Engineer Mr O’Callaghan. In fact Mr O’Callaghan’s evidence was rather to the effect that the proposed contract was rejected because it was not in the standard form. Mr O’Callaghan was not concerned about the price payable under the contract but about the general form thereof. It was his view that 99% of engineering works were carried out under and in accordance with a standard form of Civil Engineering Contract and that to depart from that precedent would be to invite trouble. Mr O’Callaghan’s objection was accepted and it was Mr Eric Cotter (one of the Farmers) who procured a copy of the requisite precedent and brought it to the Farmers’ Solicitors. It was the same Mr Eric Cotter who conveyed the instructions of the committee to the Solicitors with regard to the terms to be included in the contract. The Farmers’ position is that they made it clear to Mr Cotter and, they say he accepted, that they the Farmers had no monies and would not pay a penny more than the figures stipulated in the contract. Mr Cotter says that he rejected the concept of a fixed price contract and this was borne out by his refusal to execute the contract originally produced to him by the Farmers.
The views, the intentions and the state of mind of the two parties to the contract might be material if it were found that the officials of the Farm Development Services had misrepresented material facts to the parties or one or other of them. Undoubtedly their state of mind and intentions would be relevant if there was, which there is not, a claim for rescission or rectification of the contract. Whether the intentions of the parties and their stated positions is material in construing the contract was a matter on which Counsel for the Contractor and Counsel for the Farmers made conflicting submissions.
The first problem in relation to the written contract is to determine its meaning in accordance with the construction of the actual terms contained therein. The particular clauses of the contract which are crucial to these proceedings are 11(1), 12(1), 12(4) and 52(4)(b). Those clauses provide as follows:-
“11(1) The Contractor should be deemed to have inspected and examined the site and its surroundings to have satisfied himself before submitting his tender as to the nature of the ground and sub-soil (so far as is practicable and having taken into account any information in connection therewith which may have been provided by or on behalf of the Employer) the form and nature of the site, the extent and nature of the work and materials necessary for the completion of the works, the means of communication with and access to the site, the accommodation he may require and in general to have obtained for himself all necessary information (subject to above mentioned) as to risks, contingencies and all other circumstances influencing or affecting his tender.
12(1) If during the execution of the works the Contractor shall encounter physical conditions (other than weather conditions or conditions due to weather conditions) or artificial obstructions which conditions or obstructions he considered could not reasonably have been foreseen by an experienced contractor and the Contractor is of opinion that additional cost would be incurred which would not have been incurred if the physical conditions or artificial obstructions had not been encountered he shall if he intends to make any claim for additional payment give notice to the Engineer pursuant to claim 52(4) and shall specify in such notice the physical conditions and/or artificial obstructions encountered and with the notice if practicable or as soon as possible thereafter give details of the anticipated effects thereof, the measures he is taking or proposing to take and the extent of the anticipated delays in or interference with the execution of the works.
12(4) If the Engineer shall decide that the physical conditions or artificial obstructions could in whole or in part could have been reasonably foreseen by an experienced contractor he shall so inform the Contractor in writing as soon as he shall have reached that decision but the value of any variation previously ordered by him pursuant to the sub-clause 2(d) of this clause shall be ascertained in accordance with clause 52 and included in the contract price.
52(4)(b) If the Contractor intends to claim any additional payment pursuant to any clause of these conditions other than sub-clauses (1)(2) of this clause he shall give notice in writing of his intention to the Engineer as soon as reasonably possible (and in the case of clause 12 claims within a maximum period of 30 working days) after the commencement of the events giving rise to the claim. Upon the happening of such events the Contractor shall keep such contemporary records as may reasonably be necessary to support any claim he may subsequently wish to make”.
The Plaintiff himself consistently made the case that his claim was against the Farmers on foot of the contract and in particular on the basis that the rock encountered in the excavation works constituted physical conditions “which could not reasonably have been foreseen by an experienced contractor” and accordingly he was entitled to be paid the extra cost of extracting the same in accordance with clause 12(3) which provides as follows:-
“12(3) To the extent that the Engineer shall decide the whole or some part of the physical conditions or artificial obstructions could not reasonably have been foreseen by an experienced contractor the Engineer shall take any delay suffered by the Contractor as a result of such conditions or obstructions into account in determining any extension of time to which a contractor is entitled under clause 44 and the Contractor shall subject to clause 52(4) (notwithstanding that the Engineer may not have given any instructions or order pursuant to sub-clause 2 of this clause) be paid in accordance with clause 60 such sum as represents the reasonable cost of carrying out any additional work and additional construction plant used which would not otherwise have been done or used had such conditions or obstructions or such part thereof as the case may be not being encountered together with a reasonable percentage addition thereto in respect of profit and the reasonable cost incurred by the Contractor by reason of any unavoidable delay or disruption of working suffered as a consequence of encountering the said conditions or obstructions or such part thereof”.
The mode of payment is dealt with in clause 60 under the heading of “Certificates and Payments” in the following terms:-
“60(1) The Contractor shall submit to the Engineer after the end of each month a statement (in such form as may be prescribed in the specification) showing … (d) the estimated amounts to which the Contractor considers himself entitled in connection with all other matters for which provision is made under the contract including any temporary works or construction plant for which separate amounts are included in the bill of quantities”.
There is in fact great difficulty applying the foregoing provisions, whatever their true construction, to the facts of the present case because of the failure of the parties to adapt the contract to the facts as they existed or alternatively to adopt the procedures required by the standard form of contract. No bill of quantities was prepared or priced. Nor does it appear that the Contractor or his Engineer had available to him material from which to produce an analysis of the rates and prices used in the preparation of the tender and whilst the Contractor did inform the Farmers that he had encountered rock he gave no details of the measures he proposed to take in respect of it or the consequences which it would have in the performance of the contract. However the complete disaster was that no person accepted the responsibility as or was prepared to discharge the duties of Engineer under and for the purposes of the contract.
As the contract is in the standard ICE form the parties were able to refer to the leading text book Hudson on Building and Engineering Contracts 10th Edition in which clause 12 aforesaid is reviewed at page 569. The editors of that edition recognised the problems inherent in allowing extra remuneration for unforeseen or unforeseeable events. The cautious contractor, it was pointed out, would tender on the basis that if a particular risk in fact matures that the Engineer would not accept that it was unforeseeable. On the other hand the more adventurous contractor would more readily anticipate that the worst fears would not be realised and that even if they were that the Engineer would take a sympathetic view. There is, therefore, an element of gamble and, as Mr O’Callaghan pointed out in evidence, the employer himself loses the benefit of truly competitive tendering. Apart from recognising that difficulty the learned authors seemed reluctant to express any definitive view as to the proper interpretation of clause 12. They pointed out the attitude adopted by arbitrators, however, in the following terms:-
“The exceptionally sympathetic attitude of some Engineering Arbitrators (who, unlike Architects, have often passed at least a part of their working lives “on the other side” as contractors) encourages this tendency, which can drive honest and efficient contractors out of business and provokes wholly unmerited litigation”.
The authors go on, page 570, to point out, however, that clauses such as clause 12 are usually and rightly subject to stringent provisions limiting their operation and that such clauses must be complied with fully.
In principle I find difficulty in accepting that rock in the bed of a river could not have been reasonably foreseen. The bed of the river must consist of something and it is common case that the means and materials exist by which that substance can be identified. However the fact that the present case established that Mr Cotter himself but more particularly his Engineer Mr O’Callaghan had not foreseen that there was rock in the river in anything like the quantities which were in fact encountered. That evidence coupled with the detailed estimate by Mr Hickey as to what he found and what he anticipated based on his own inspection and such information as he would have obtained from the field officers who drew the maps and took the measurements on which his costings were based is to my mind of decisive importance in concluding for practicable purposes and in the context in which the contract was made that the rock which was encountered was indeed a physical feature which could not reasonably have been foreseen within the meaning and for the purposes of section 12 aforesaid.
Prima facie this interpretation of the contract will entitle the Plaintiff to additional remuneration or damages in respect of the difficulties encountered subject to the performance of the contractual conditions precedent.
Perhaps the nearest the contractor came to complying with the conditions of clause 12 was by letter dated the 6 October, 1983 when Mr Dillon of the Farm Development Services was informed in writing as follows:-
“We would like to inform you that we have met with a large amount of rock in the area of Ballyhooney bridge. A rough measurement has shown that there could be anything from 4,600 to 5,000 cubic meters of rock present. As this is a greater amount than was envisaged we would like to schedule a meeting with you to discuss same”.
Whilst various demands and claims were made both from the Farm Development Services and the Farmers and a variety of formal and informal meetings held neither party to the contract invoked or applied the procedures laid down therein. The failure to do so raises a separate and equally troublesome issue as to whether the Farm Development Services were indeed the Engineers appointed under the contract.
In the executed contract the Farm Development Services is specified as being the Engineer for the purpose thereof. Counsel on behalf of the Department of Agriculture argued that such an appointment would be an absurdity and Counsel pointed out that the Farm Development Services is an amorphous substantial body of civil servants operating throughout the State the composition of which varies from month to month as civil servants retire or are appointed or transferred to other positions. It is inconceivable Counsel argued that the local officers of the Farm Development Services could have agreed on their own behalf on behalf of some section of the Department of Agriculture to accept the position of Engineers for the purposes of the contract. On the other hand the evidence that Mr Dillon and Mr Cashen were asked to accept the position of Engineers and agreed to do so is quite remarkable. It is undisputed that Messrs Kennedy, Dunne and Eric Cotter attended on Messrs Dillon and Cashen at the Farm Development Services Office in Nenagh in early June, 1983 when the position of Engineer for the purpose of the contract was discussed. The evidence on behalf of the Farmers was to the effect that Mr Kennedy as their spokesman enquired whether the Department would accept and act on a certificate by an Engineer appointed by the Farmers certifying, in due course, that the works had been duly completed and they were told by Mr Dillon “No” that the Department required to have the final say in the matter. It was Mr Kennedy’s evidence that he then said “would you agree to be Engineers”. The response from Messrs Dillon and Cashen is that such an arrangement would be most unusual and that they or more particularly Mr Dillon went on to say that it would involve a lot more visits to the site and that there would be a charge of £20.00 per visit.
There are differences of emphasis between the five witnesses concerned in relation to this meeting but as I understand it, neither Mr Dillon nor Mr Cashen would claim that they rejected the proposal. Certainly they did not point out that it was impossible or absurd or impracticable. They agree that they did advert to the cost of £20 per visit which had been recently introduced by the Department and it does seem that all three farmers left the meeting under the impression that the Farm Development Services, was somehow going to fulfil the dual role of being Engineers under the Contract and Advisers to the Minister. The understanding of the farmers is supported by subsequent correspondence, the first of which is dated the 28 June 1983 and headed “To Whom It May Concern”. It states as follows:-
“This is to state that the approval dated the 1st day of March 1982 relating to the Ballyfinboy Drainage Scheme is being supervised by Officers of the Farm Development Service”.
Then in a letter dated the 28 July 1983 from the Tipperary (NR) County Council to the Farm Development Services, it is stated (among other things) as follows:-
“We have also on file a letter from your office signed by Mr T Dillon dated the 28th day of June 1983 stating quite clearly that the scheme is being supervised by Officers of the Farm Development Service”.
It was contended by the Farmers and by the Contractor that the Farm Development Services did in fact act as Engineers under the Contract. This is an even more questionable proposition. Undoubtedly, the Farm Development Services supervised the work as they were bound to do on behalf of the Minister so as to ensure that the work qualified for the grant payable under the joint works scheme. They did not certify for payment by the Farmers as employers on foot of the Contract and most assuredly they did not exercise the quasi judicial functions of an Engineer in determining technical disputes between the Employer and the Contractor. I can only conclude that the Farm Development Services, did not intend to accept the position as engineers on foot of the Contract but unfortunately rejected the proposal put to them in a very ambiguous manner. At the end of the day, it seems to me that the Plaintiff cannot be faulted for failing to invoke procedures prescribed by the Contract which involved the co-operation or at least the existence of an Engineer appointed on foot of the Contract when either no such Engineer existed or alternatively, he was declining to fulfil his functions thereunder. What the Plaintiff says is that the Agreement, as I have construed, expresses and records correctly the bargain between the parties and relies on the parol evidence rule to preclude reference to other alleged agreements between the parties so as to vary the bargain as recorded in the written instrument. In particular, reliance was placed upon Chitty on Contracts 26th Edition paragraph 846 where a passage from a leading authority was cited as follows:-
“If there be a Contract which has been reduced to writing, verbal evidence is not allowed to be given — so as to add to or abstract from, or in any way to vary or qualify the written Contract. Indeed, in 1897, Lord Morris accepted that “Parol testimony” cannot be received to contradict, vary, add to or subtract from the terms of a written Contract, or the terms in which the parties have deliberately agreed to record any part of their Contract”.
It is true, as Counsel on behalf of the Farmers pointed out, that the parol evidence rule is subject to numerous exceptions. Certainly it is open to either party to establish the existence of an independent or collateral agreement. Indeed insofar as it is an independent agreement, it is hardly an exception to the rule at all. Again it is possible in certain cases to establish the existence of an agreement or representation which would be so inequitable for one or other of the parties to rely upon the written term as to estop them from so doing. However, the problem facing the Farmers in the present case is the radical difference between the terms of the contract which they are seeking to establish and that which was recorded in the writing over their signatures and indeed drafted by their own Solicitors. It was the Farmers contention that the Plaintiff is and was entitled to recover what was generally referred to as “extras” but that the Contractors right to recover any such amounts was as against the Department of Agriculture and not against the Farmers. The Farmers had, it was submitted, no contractual obligation to pay any sum of money above the amount specified in the Contract document, less the amount representing certain works subsequently abandoned.
Such an interpretation is wholly inconsistent with the terms of the written Contract. Furthermore, it is impossible to construe the agreement so as to impose a liability on a person who is not a party thereto. Again it is clear that Clause 12 of the Agreement of the 15 June 1983 is the only machinery which could have been invoked to enable the Contractor to recover monies from anybody and clearly the only persons liable on foot of that provision are the Farmers.
In these circumstances it seems to me that the position with regard to the rights and obligations of the party in contract may be summarised as follows:-
1. The contractual rights and obligations of the parties are enshrined in the written Agreement dated the 15 June 1983.
2. Under that Agreement, the Farmers are bound to remunerate the Contractor in respect of the rock encountered and excavated which had not been foreseen by the Contractor.
3. The Defendants (other than the Farmers) have no liability to the Contractor on foot of the Agreement dated the 15th June 1983 or any alleged modification of it.
LIABILITY IN TORT
Both the Contractor and the Farmers claim damages against the other Defendants for misrepresentation and negligence generally. ‘As the case of the Farmers must necessarily be stronger than that of the Contractor, having regard to the relationship between the Farm Development Services, and the Farmers, it may be more helpful to consider this aspect of the matter from the point of view of that relationship.
The analysis in a number of Irish authorities of the principle established in Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465 has established the proposition that where a person gives professional or technical advice in circumstances where he ought reasonably to have foreseen that it would be relied upon, he has a duty to exercise reasonable care in the giving of such advice even where it is given gratuitously, unsolicited and independently of any contractual obligation in that behalf. If and to the extent that the specifications, mapping and other engineering detail provided by the Department to the Farmers for the purpose of the drainage work were prepared without the appropriate degree of care and skill, then prima facie the Department would be liable for any damages caused by such negligence. Indeed in that respect it was alleged that the engineering advice implicit in the scheme was defective insofar as it related to that part of the work described as “the canal” and that the execution of the proposed works in that area would have deprived the riparian owners of their legal right to a supply of water. As that part of the works was abandoned, the issue in that regard was never fully resolved. However, it is common case that a serious and unfortunate error was made in the specification. The longitudinal section of the river from which the quantities to be excavated were calculated showed the drainage to be measured in yards. This was an error as the unit measurement used on the drawings was in fact metric. This meant that costings based on those measurements would be understated by approximately 10%. The accuracy of the specifications insofar as they related to the work to be carried out on the five public bridges which traversed the river was also a matter of controversy. The engineers employed by the Tipperary (North Riding) County Council appear to have been wholly dissatisfied with both of the specification proposed by the Department and the workmanship of the Contractor. However, by February 1984 the original specification had been amended to meet the standards required by the County Council and it does not appear that the amended specification was open to challenge.
Negligence in the preparation of the documents and advice implicit therein is not the main plank of the Plaintiff’s case. Apart from the allegation, which I have rejected, to the effect that representations were made by Officers of the Department to the effect that rock or extra rock would be paid for in full by the Department, it is contended first that subordinate Officers of the Department were negligent in not procuring a detailed survey and investigation of the bed of the river before sanctioning the scheme for grant purposes and secondly that the Department, through it’s senior officers, was negligent in drafting a grant aid scheme which did not provide for such a survey and investigation to be carried out and thirdly, that the Defendants (other than the Farmers) were negligent in failing to warn the Farmers of the financial implications which might arise if there was an over-run due to circumstances which were not in fact foreseen on the visual inspection of the river but would have been known if a detailed examination had been carried out.
Understandably, the Farmers (and the Contractor) rely heavily on the decision of the Supreme Court in Ward v. McMaster [1989] ILRM 400 in support of these arguments. In Ward v. McMaster Louth County Council as a Housing Authority for the purposes of the Housing Act, 1966 agreed to make a loan pursuant to Section 39 of the Housing Act 1966 of £12,000 to enable the Plaintiff in that case to buy a house on the outskirts of Dundalk, Co Louth for a sum of £24,000. Louth County Council arranged for an Auctioneer to inspect the premises and reported to them on the value thereof. He gave it as his opinion that the house was a reasonable risk for a loan over 30 years and expressed his view that the value of the house was approximately £25,000. In fact the house was so riddled with concealed structural defects that it had to be abandoned. There is the parallel with the present case therefore that a technical as opposed to a visual inspection of the locus in quo would have averted the disaster. The other significant similarity is that in both cases the investigations of which the Plaintiff complained were designed primarily (and, it was argued, exclusively) to safeguard the interest of the party providing the finance. The issue in Ward v. McMaster was whether the relationship between the intended house buyer as Mortgagor and the Council as Mortgagee together with the foreseeability of damage resulting from the failure to make an adequate examination of the premises converted the public duty imposed on the Housing Authority to a private duty to the person affected by the particular manner in which the statutory duty was exercised. Indeed, Mr Justice Henchy delivering the principle Judgment of the Court expressed the view that the special relationship between the Plaintiff in that case and the Council was of itself and apart from the public duty of the Council sufficient to impose on the Housing Authority the duty to ensure by a proper valuation that the house would be a good security for the loan. Whilst these similarities exist between the two cases, it seems to me that there is a fundamental and decisive distinction to be drawn between them. The essence of the wrong doing by Louth County Council was that they implicitly represented to the Plaintiff that the house in question was habitable. As Mr Justice Henchy said at page 402:-
“It has to be remembered that one of the primary duties imposed on the Council by the Act was the elimination of all uninhabitable dwellings in their area. It falls that they should have realised that it would be in breach of their statutory functions if they granted a loan for the purchase of a house which turned out to be uninhabitable”.
Mr Justice Henchy went on at the end of the same paragraph to say:-
“The Council must be taken to have impliedly assured the Plaintiff that the house would be a good security for the loan”.
Mr Justice McCarthy expressed the same view (at page 411) in the following terms:-
“A purchaser — may well think, as the first Plaintiff thought, that the very circumstances of the Housing Authority investigates money in the house was a badge of quality”.
It was, therefore, the purpose of the Housing Act, 1966 and the statutory and other conditions regulating the circumstances in which a Housing Authority could make loans for the purchase of dwellings that induced Mr Ward to believe that the house in question was a habitable dwelling and represented good security for a loan of £12,000 neither of which was true.
The payments of grants under the Farm Modernisation Scheme are not regulated by Statute and the machinery, such as exists, with regard to the evaluation of any proposed drainage works is materially different in its nature and purpose from that provided by the Housing Act, 1966 and the Regulations made thereunder. No doubt the approval of the scheme or the sanctioning of a grant by the Minister could be interpreted as conferring upon the proposal “a badge of quality” to the extent that it is implied that the drawings made and any advice given has been done so competently and without negligence, this would add nothing to the obligations imposed upon the Minister and his Officials by the ordinary principles of negligence. The question is whether the decision to pay a particular grant carries with it some implication as to the total cost of the scheme or the extent of the employers liability in respect thereof.
The joint works programme is a Ministerial scheme and for the purposes of that scheme the Minister set up procedures to determine the cost/benefit of any proposed scheme and also a method of determining for internal purposes the cost of the scheme based on costings provided by the Board of Works. As we know from the evidence of Mr Mallon, the cost/benefit exercised related to the acreage of land affected by the proposed drainage works and not merely the acreage of land occupied by those proposing the scheme and the cost/benefit was calculated by spreading the grant and any further costs to the Exchequer in relation to other subsidiary schemes over all of the lands affected. There is also the complication that the grant determined upon by the Minister included the sum which his Officials believed would meet in full of the market cost of carrying out any consequential works to the five bridges affected by the works.
In the light of those circumstances, a question must be posed as to what inferences the Farmers could properly draw from the fact and the amount of the grant. That the Contract works would be approximately twice that of the grant? or would it be inferred that no grant would have been authorised unless and until a thorough investigation of the site had been made. I do not believe as a matter of fact that the Farmers drew such inferences nor do I believe that the Minister could reasonably have foreseen that the Farmers would make or rely on any such judgment. The financial circumstances of the Farmers was not explored in any detail before the Court but while I accept in general that they are not wealthy men and certainly could not look with equanimity on the cost of the drainage works and they ultimately emerged, they are and were in a totally different position from Mr Denis Ward in his claim against the Louth County Council. As Mr Justice Henchy pointed out in Ward v. McMaster [1989] IRLM 400, Mr Ward in order to qualify for a loan from the Housing Authority, had to show that he was unable to obtain the loan from a Commercial Agency and that his circumstances were such that he would otherwise need to be rehoused by the Council. It was that degree of indigency which lead the Court to the conclusion that Mr Ward could not be expected to incur the further expense of obtaining a structural survey of the house.
In the present case there was never any question of the Farmers adopting a purely passive role. It was clear that they would have to do, as they did, engage a Solicitor and seek tenders from Contractors and make difficult commercial decisions in relation to a variety of problems as they emerged. Indeed it is clear that they were conscious of the fact that it was they who would select the Contractor and determine which tender would be accepted and, as it subsequently emerged, the most significant fact of all negotiate the terms in which the works would be carried out. I can see the desirability of the Minister arranging to have a comprehensive survey made of any river which it is proposed to drain. By doing so he could assure himself in the interest of the Exchequer as well as the interest of the community that the proposed works would be carried out on beneficial terms. But if that conclusion is valid it would have been even more obvious that in the contractual relationship between an employer and a contractor excavating a river bed that one or other of them should procure an appropriate investigation to be carried out. If it is not done, one or other of the parties must gamble as to the nature of the material to be excavated and which party takes the risk would be determined by the terms of the Contract into which they enter. Whilst the Minister may incur liability in respect of any advice given or work undertaken which was not given or done with the appropriate degree of care and skill, the fact of authorising or paying a grant to facilitate work being carried out does not in general or in the particular circumstances of the present case constitute a representation that the works could be carried out at a particular price or that the liability of the persons undertaking the works will be limited to a particular sum. In my view, the Minister has not incurred any liability to the Plaintiff in Tort. The Plaintiff’s claim to be paid substantially larger sums than those already received by him on foot of the Contract was not seriously disputed in the course of the action or in the years before it came on for hearing. The issue between the parties related to the identity of the person liable to the payment; the amount due and the legal basis for the claim.
I am satisfied that the Farmers are liable in Contract to the Plaintiff in respect of the rock encountered in the course of the works to the extent to which the same was “unforeseen” in the sense that that word was used in Clause 12 of the Contract. Again I am satisfied that the Plaintiff cannot be denied his right to payment for the works done in respect of those unforeseen circumstances solely by reason of his failure to comply with the conditions which were rendered impossible due to the absence of any person acting as Engineer for the purposes of the Contract. On the other hand, it is not practicable at this stage to appoint an Engineer to carry out the functions which should have been exercised several years ago. It seems to me that all that can be done at the present stage is to compensate the Plaintiff on a quantum meruit basis for the extra work which he did as a result of the unforeseen conditions. The liability under this heading is one of Contract or Quasi Contract falling on the Farmers.
I agree with Mr Hickey, however, that the bill as presented by the Plaintiff was “much too high”. When the Plaintiff originally tendered for the works the quantities to be excavated, as they appeared in Mr Hickey’s estimate of cost, amounted to approximately 162,000 square yards. If one deducts from the amount of the tender £30,000 in respect of the bridges and a further £8,000 being the estimated cost of providing certain piping, it would appear that the average excavation rate worked out at £1 per cubic yard. That average charge would have to cover all grades of material to be found in the river together with removing scrub and spreading spoil. The reduced contract price as adjusted to cover the works completed, that is to say, the works other than the canal — would have allowed a figure of £130,000 to complete an excavation of 148,000 cubic yards with the ancillary works, that is to say, about 87p per cubic yard. These figures give a fair indication, as I see it, of the Plaintiff’s own approach to the works involved in the Contract. It seemed to me that much of the detail in respect of which claims are now made by the Plaintiff are in respect of works which of their nature would have to be carried out in one form or another as part of the Contract. Working in deep water or moderately deep water, diverting the river or creating dams seemed to be part of the problems which were necessarily envisaged by any contractor tendering for the job. These problems were no doubt magnified by the altered specification but the alteration does not in my view justify the extravagant claims that have been made.
In my view the fair, if somewhat rough and ready approach to assessing damages in this case is to determine the amount of rock in fact extracted from the river and to allow a commercial price to cover the additional cost and profit of removing all that rock. The price as I see it, should envisage all of the work ancillary to the removal of the rock and again it seems to me that the price determined must in fact cover all grades of rock varying perhaps from boulders to friable rock to a hard rock. In the final analysis the Plaintiff claims that he excavated 16,841 cubic yards of rock, the State Agencies accept that 10,883 cubic yards of rock was excavated and that a further 4,989 cubic yards of hard digging was encountered. The State will put the cost of the “hard digging” at something like half the cost of rock excavation. It seems to me that I should resolve this dispute in favour of the Plaintiff and I accept that what he extracted may be described as rock so that something over 10% of the materials extracted from the bed of the river consisted of that material.
Turning then to price. In his estimated costing Mr Hickey took the price of rock at £11 per square yard. However he allowed a sum of £13 per cubic yard for rock in the area described as the Canal as that involved working in deep water from high banks. The figures used by Mr Hickey were notional only in the sense that they were not obtained from commercial contractors but represented an amalgam of figures compiled by the Board of Works. This indeed should have produced a fairly realistic guide subject only to the fact that the figures may have been published or circulated by the Board a year or two earlier and that in a time of very high inflation. It does seem to me that the cost of excavating rock could vary greatly depending on its precise nature and location. But I believe that the figure of £13 did represent the commercial cost in general of removing rock and that to allow that figure in respect of all the grades or forms of rock which the Plaintiff claims to have excavated and where ever it was found would it meet the justice of the case. In this regard too it must be appreciated that the £13 is in addition to the basic cost of excavation claimed by the Plaintiff as part of the contract sum. Obviously this cost will result in a significant profit in those areas where the rock was quickly and effectively extracted and less profit or even a loss in more difficult areas. I am convinced that the basis of any tender in a case of this nature, would be, as the evidence suggested on the basis of a bill of quantities which would take a particular sum for rock recognising that some part of the rock works would have to subsidise others. However, having allowed that figure there is in my view no room for any extras or additions based on time sheets for labour employed or machinery provided. The sum appropriated to the excavation of rock and so allowed is intended to cover all of the matters incidental to the works done.
On this basis I calculated the damages attributable to “extra” rock at £212,433.00. That is the full amount as claimed by the Plaintiff under this particular heading.
Next after the “extra” rock the most troublesome aspect of the drainage works related to the cost of underpinning and preserving the five public bridges which crossed the Ballyfinboy river. With hind sight it is known that Mr Hickey costed the work at £29,7561.00. It would appear from the account ultimately furnished by Mr Cotter that he costed the same work at almost exactly the same figure, namely, £29,000.00.
The position with regard to the bridges was, as Mr Mallon explained, that prior to the approval of the scheme the consent of the local authority had been obtained in principle. The Tipperary (NR) County Council felt itself unable to carry out the necessary work to the bridges but were willing to have it carried out by a competent contractor subject to their supervision. The result was that instead of the work being carried out on commercial terms by the County Council at the expense of the Department of Agriculture, the Farm Development Services included as a particular sum within the grant (though not identified as such) what they computed as the full commercial cost of carrying out the works which they anticipated would be required on the public bridges. Effectively, therefore, the contractor ultimately engaged by the Farmers was to carry out the necessary underpinning works on the bridges and the full cost of those works was intended to be recouped to the Farmers by means of this addition to the grant.
Shortly after the commencement of the works in June, 1983 the County Council became alarmed by the manner in which the works were being carried out and the specifications and drawings (or lack of them) relating to those works. As a result of the intervention of the Local Authority work on the first and second bridges from the Lough Derg side, that is to say, Drominagh and Ballinderry was not completed and instead the Contractor proceeded with the excavation works upstream of those bridges. At that stage there was considerable disagreement and confusion involving the Local Authority, the Farm Development Services, the Farmers and the contractor. It was September before the Local Authority Engineers were satisfied with the terms of a revised specification for the work to be done and even then there were disputes as to the manner in which it should be carried out. The Farmers sought to obtain a solution to the problem by engaging the services of another engineer Mr Gill and apparently it was he who made certain drawings which were subsequently adopted by Mr Hickey and approved by the Local Authority in or about January or February, 1984. There is no doubt but that the revised specification increased the cost of the works to be carried out. Again it is obvious that the disagreements and misunderstandings would have resulted in some delays. One difficulty in this regard is, however, the fact that parallel with the disagreement in regard to the bridges was the delay by the Contractor in producing an Insurance Bond as required by the contract, to the satisfaction of the Local Authority. This was not completed until January, 1984 so that the Contractor was not in fact entitled to proceed with the works until that date in any event.
In these circumstances it seems to me that the Contractor was entitled to be paid or compensated for the additional works required by the revised specification but not for the delay up to January, 1984 in proceeding with the work as the revision of the specifications was not the only cause of that delay.
The State Agencies accept that they are liable for the proper cost of the additional work to the bridges.
The Plaintiff claims that the additional cost amounts to £62,000. The Minister puts the additional cost at a figure of approximately £21,000.00. Insofar as the figure claimed by the Plaintiff includes the extraction of rock — in particular rock at Ballyhooney and other bridges — this part of the claim is already covered by the £13 which I have allowed in respect of the excavation of unforeseen rock. I believe that by allowing a figure of £75,000 in total in respect of the bridges it would meet the justice of the case and that on the basis that the figure includes all incidental works in relation to the superintending and protecting of the bridges and to carrying out of emergency works.
There was a considerable dispute between the parties as to the nature and extent of the work done on what was described as the Canal before that part of the project was abandoned. Apparently the works done were of a preparatory nature and did not result in any permanent alteration of the site. It seems to me that the figure claimed at £17,000 is grossly excessive having regard to the fact that the plaintiff himself estimated the cost of doing all of the work on the Canal at £30,000. I believe that the maximum figure allowable under this heading is £5,000.00
Another heading of damage concerned the understatement of the works to be done as a result of the misdescription of the nature of the measurements. This addition to the bill would seem to fall again in the first instance on the Farmers but to be recoverable by them in full from the State on the basis of Tort. Again I understand from the running of the action that the liability of the State under this heading is not in dispute. The amount of the claim is agreed at £12,168.00.
Another heading of the damages is delay. This heading has two aspects. First the Plaintiff complains that the completion of the works was delayed by reason of the unforeseen conditions and the additional works with the result that extra cost was incurred under the heading of “Labour Variations” and secondly that the Plaintiff has been deprived for several years of the monies to which he was entitled. In my view the delay was in part in any rate the fault of the Plaintiff. I am convinced by the evidence of the Farmers and by the circumstances of the Plaintiff himself that the contract works were not at all times under effective management. More particularly there was extraordinary delay on the part of the Plaintiff in producing what has been described as the Final Account. It seems that he submitted no accounts at all from the end of 1985 to the end of 1988. Clearly that delay has made it very difficult for any of the Defendants to check the many items in the bill.
The circumstances have to be borne in mind in considering the claim based on delay.
In relation to the claim based on the Labour Variation clause firstly it would seem that clause 82 of the contract precluded any claim under this heading in respect of any period before the 1st October, 1984. The Plaintiff’s own calculations in relation to wages variations are set out in page 104 of the Volume containing his final revised account. The total of the sums claimed under this heading is £27,220.00 but unfortunately it would appear that that figure is based on arithmetical miscalculation. It seems to me that the actual total of the six periods set out in the computation is £19,507.65. From the figure then must be deducted the sum of £5,611.00 which is appropriated to the period before the 1 October, 1984. It follows that the maximum amount of the claim under this heading is something less than £14,000.00. It seems to me that if I allowed £10,000 under this heading it would meet the justice of the case.
With regard to the delay in payment it seems to me that interest should be allowed but regard should be had to the delay in producing the final account and that the Defendants should have been allowed a reasonable opportunity for considering the bill from the date of presentation. I would allow interest at the rate prescribed pursuant to the Courts Act, 1981 on the total amount of the Judgment as from the 1 June, 1989.
There was one other particular and significant heading of claim, namely, loss of future profits.
Whilst I accept in principle that a person in the position of the Plaintiff might be able to recover loss suffered indirectly as a result of his membership of a company through which the contract had been carried out see Lee v. Sheard [1956] 1 QB 192 I am not satisfied in the present case that such loss was incurred. In that regard it must be remembered that the Plaintiff had no tradition in or experience of the contracting work and that the company in respect of which the loss is alleged to have been suffered was not formed until after the commencement of the contract the subject matter of this action. As Counsel on behalf of the State Agencies pointed out the alleged loss is highly speculative in its nature. Furthermore, Mr Byrne the Accountant who gave evidence in relation to the accounts of the Company conceded that the projected profit did not take into account any remuneration for a competent executive to be employed by the company. It seems to me that the present case demonstrates the vital importance of such an executive in day to day control of the affairs of a company such as this and to assume that a profit could be earned and maintained without such an executive would be unreal. In the circumstances I am not satisfied on the balance of probabilities that the Plaintiff has (or will) suffer any loss under this heading.
I would summarise the Plaintiff’s loss as follows:-
1. Contract price –£130,000.00.
2. Error in linear measurement –£ 12,168.00.
3. Extra rock –£212,432.00.
4. Bridges –£ 75,000.00.
5. Work on abandoned Canal — £ 5,000.00.
6. Price variation clause –£ 10,000.00.
Total … £440,600.00.
Less paid on account … £267,048.00.
Balance … £177,552.00.