Enforcement
Cases
Kelly & Anor -v- Lennon
[2009] IEHC 320
Judgment by: Clarke J.
JUDGMENT of Mr. Justice Clarke delivered the 2nd July, 2009
1. Introduction
1.1 On the 25th May, 2007, the parties to these proceedings entered into a contract (“the Contract”) for the sale of lands in County Westmeath for an agreed sum of €46,693,300. The defendant (“Mr. Lennon”) was the vendor. The plaintiffs (“Mr. Kelly and Mr. O’Sullivan”) were the purchasers. In circumstances which it will be necessary to explore in a little more detail, Mr. Kelly and Mr. O’Sullivan now contend that that contract is at an end. They have brought these proceedings for the purposes of seeking a declaration to that effect. More specifically, Mr. Kelly and Mr. O’Sullivan seek a declaration that the contract to which I have referred “has been validly rescinded” by them. Mr. Kelly and Mr. O’Sullivan also seek the return of a deposit in the amount of €9,093,000 together with interest on that sum under the terms of the contract. Mr. Lennon disputes the entitlement of Mr. Kelly and Mr. O’Sullivan to either order and, indeed, maintains that the contract continues in effect and remains capable of enforcement.
1.2 However, in addition Mr. Lennon maintains that what he says is the true dispute which arises in these proceedings is governed by the standard form arbitration clause contained in the Law Society General Conditions of Sale (2001 edition), which was incorporated into the contract by the parties. On that basis, Mr. Lennon seeks to have these proceedings stayed until such time as certain issues between the parties have been resolved by arbitration.
1.3 This judgment is directed to the question of whether it is appropriate to stay these proceedings in those circumstances. Some of the factual background to the dispute between the parties is relevant to a full understanding of the issues which have arisen under this application, and I, therefore, turn to the facts insofar as they are material to the issue which I now have to decide.
2. The Material Facts
2.1 The contract provided for a closing date six months from the date of its signing. As the contract was dated the 25th May, 2007, the closing date was in November, 2007. The lands to be sold were described by reference to six different freehold folios. However, it would appear that, in the course of investigating title, differences arose between the parties as to the consistency of the physical boundaries of the lands with the boundaries of the land registry folios to which I have referred. It would appear that it was, at least at one stage, contemplated that an application might be made to the land registry for the purposes of rectifying those boundaries. Be that as it may, the question of closing the sale did not really come to a head until the latter part of 2008. Two completion notices were served, followed by correspondence between the respective parties’ solicitors as to the basis upon which the respective parties might be willing to close the sale. On the evidence currently available it would appear that all of the closing requirements of Mr. Kelly and Mr. O’Sullivan (through their solicitors), were agreed save for two matters. The parties remained in dispute concerning the consequences of what was said to be an error, to which I have already referred, in the description of the lands, the subject matter of the contract, arising out of the difference between the boundaries on the ground and those contained in the relevant folios. In addition, there appears to have been some dispute between the parties concerning the issue of tenancies.
2.2 Special condition 5 of the contract provided that the property was to be sold “subject to and with the benefit of the Tenancies, particulars of which are set out in the First Schedule hereto and the Vendor shall not be required to hand over vacant possession of the said property on closing and General Condition No. 21 is amended accordingly”.
2.3 The same clause went on to provide that the purchaser should be entitled to communicate and negotiate with the relevant tenants, while the vendor agreed not to communicate with those tenants “save on the direction of the Purchasers”. It would appear that, prior to the events which I am describing, at least some of the relevant tenants had terminated their tenancies. Issues concerning the contractual entitlements of the parties in those circumstances appear to have arisen in the context of the closing requirements made by the respective solicitors acting for the parties.
2.4 Against that background it is next appropriate to turn to the issues which are likely to arise in these proceedings.
3. The Issues in these Proceedings
3.1 The net issue between the parties is, of course, as to whether the contract between them is validly at an end in circumstances where Mr. Kelly and Mr. O’Sullivan would be entitled to a repayment of their deposit, together with interest. However, in addressing that issue it seems clear that a number of further sub-issues will necessarily arise. It does not appear to be disputed but that a valid completion notice was served. Equally it is clear that completion did not take place. The position of the parties will, therefore, depend on the view which the court ultimately takes as to the circumstances surrounding that failure to complete. If Mr. Lennon can ultimately persuade the court that he was ready, willing and able to complete, but that he was prevented from so doing because Mr. Kelly and Mr. O’Sullivan imposed conditions in relation to closing, which they were not legally entitled to impose, then it follows that the contract will still subsist and that Mr. Lennon would, in those circumstances, be entitled to pursue whatever remedies (whether specific performance, damages or the like) as he may be advised. Equally, if the court is persuaded that the position adopted on behalf of Mr. Lennon by his solicitors as to closing was not in accordance with Mr. Lennon’s legal obligations, then it seems clear that Mr. Kelly and Mr. O’Sullivan will be entitled to succeed in their claim to the effect that the contract is now at an end by virtue of the failure (on the assumption which I have made the failure would be for no good or sufficient reason) of Mr. Lennon to complete in accordance with his obligations under the completion notice.
3.2 On that basis it seems clear that the real issues in the case will be as to the circumstance surrounding the attempts to close the sale, with a particular focus on the position adopted by the respective parties at that stage. In those circumstances, it seems highly likely that the case will turn on the view which the court takes as to the position adopted at all relevant times by the parties concerning the question of the boundaries, and also concerning the tenancies to which I have referred. In addition it may well be that issues will arise as to the entitlement of Mr. Lennon to insist on arbitration where it is said that the first attempt to refer the issue to arbitration occurred after the service of the relevant completion notices. It is in the context of those issues arising that the question of arbitration needs to be addressed. The issue concerning the boundaries is one, on Mr. Lennon’s argument, which can only properly be determined by an arbitrator.
3.3 The first point for consideration is, therefore, as to whether Mr. Lennon is correct in that assertion. In that context it is appropriate to refer to the relevant provisions of the 2001 edition of the Law Society General Condition of Sale. I turn to those conditions.
4. The General Conditions
4.1 The relevant provisions of the Law Society General Conditions of Sale are Conditions 33 and 51. I set out the text of those provisions hereunder:-
“Condition 33
(a) In this Condition “error” includes any omission, non-disclosure, discrepancy, difference, inaccuracy, mis-statement or mis-representation made in the Memorandum, the Particulars or in the Conditions or the Non-Title Information Sheet or in the course of any representation, response or negotiations leading to the Sale, and whether in respect of measurements, quantities, descriptions or otherwise
(b) The Purchaser shall be entitled to be compensated by the Vendor for any loss suffered by the Purchaser in his bargain relative to the Sale as a result of an error made by or on behalf of the Vendor provided however that no compensation shall be payable for loss of trifling materiality unless attributable to recklessness or fraud on the part of the Vendor nor in respect of any matter of which the Purchaser shall be deemed to have had notice under condition 16 (a) nor in relation to any error in a location or similar plan furnished for identification only
(c) Nothing in the Memorandum, the Particulars or the Conditions shall:
(i) entitle the Vendor to require the Purchaser to accept property which differs substantially from the property agreed to be sold whether in quantity, quality, tenure or otherwise, if the Purchaser would be prejudiced materially by reason of any such difference
or
(ii) affect the right of the Purchaser to rescind or repudiate the Sale where compensation for a claim attributable to a material error made by or on behalf of the Vendor cannot be reasonably assessed
(d) Save as aforesaid, no error shall annul the Sale or entitle the Vendor or the Purchaser (as the case may be) to be discharged therefrom.
Condition 51
All differences and disputes between the Vendor and the Purchaser as to:
(a) whether a rent is or is not a rack rent for the purpose of Condition 10(c), or
(b) the identification of the Apportionment Date, or the treatment or quantification of any item pursuant to the provisions for the apportionment in the Conditions, or
(c) any issues on foot of Condition 33, including the applicability of said Condition, and the amount of compensation payable thereunder, or
(d) the materiality of any matter for the purpose of Condition 36 (a), or
(e) the materiality of damage or any other question involving any of the provision in Condition 43, 44 and 45, including the amount of compensation (if any) payable, or
(f) whether any particular item or thing is or is not included in the Sale, or otherwise as to the nature or condition thereof shall be submitted to arbitration by a sole Arbitrator to be appointed (in the absence of agreement between the Vendor and the Purchase upon such appointment and on the application of either of them) by the President (or other Officer endowed with the functions of such President) for the time being of the Law Society of Ireland or (in the event of the President or other Officer as aforesaid being unable or unwilling to make the appointment) by the next senior Officer of that Society who is so able and willing to make the appointment and such arbitration shall be governed by the Arbitration Acts, 1954 to 1998 provided however that if the Arbitrator shall relinquish his appointment or die, or if it shall become apparent that for any reason he shall be unable or shall have become unfit or unsuited (whether because of bias or otherwise) to compete his duties, or if he shall be removed from office by Court Order, a substitute may be appointment in his place and in relation to any such appointment the procedures hereinbefore set forth shall be deemed to apply as though the substitution were an appointment de novo which said procedures may be repeated as many times as may be necessary.”
4.2 As will be noted from the above an error for the purposes of Condition 33 includes any discrepancy in the memorandum or particulars of the contract. I did not understand the parties to dispute but that the alleged discrepancy between the physical boundaries and the folios concerned would, if established, amount to an error within that definition.
4.3 It is clear from Condition 33(b) that a purchaser is entitled to compensation for any loss suffered as a result of an error unless either:-
(a) The loss is of trifling materiality save when same is attributable to recklessness or fraud; or
(b) under Clause 33(c) where the error creates a situation where the purchaser would be required to accept property “which differs substantially from the property agreed to be sold” so that the purchaser would be prejudiced materially by reason of such difference or where (under sub-clause (ii)) any relevant compensation could not reasonably be assessed.
4.4 It is clear that Condition 33(d) provides that an error shall not annul the sale or entitle either party to be discharged therefrom “save as aforesaid”.
4.5 In those circumstances it seems clear to me that the effect of General Condition 33 as a whole is such as to preclude either party from being able to escape from an otherwise contractually valid arrangement on the basis of an error in the particulars, unless that error is:-
(a) As a result of fraud or recklessness;
(b) Sufficiently substantial as would cause material prejudice; or
(c) Incapable of giving rise to a reasonable computation of relevant compensation.
In all other cases the parties are required to complete the contract with an appropriate adjustment being made to the purchase price to reflect the error (unless the error is so immaterial as to be trifling and not, therefore, to warrant compensation at all).
4.6 To the extent, therefore, that there would appear to have been an error in the contract so far as boundaries are concerned, the issue which arises between the parties is as to whether that error is sufficiently material so as to cause prejudice and thus to lead to the entitlement on the part of the purchasers to treat the contract as at an end. In addition, and in the event that it be determined that any error is not sufficient to warrant permitting the purchasers to walk away from the contract, then the question of the appropriate amount of compensation to be assessed also arises.
4.7 It is also clear that the relevant provisions of General Condition 51 provide that all differences and disputes between the vendor and the purchaser as to “any issue on foot of Condition 33, including the applicability of the said Condition, and the amount of compensation payable thereunder” is to be submitted to arbitration. Contrary to the submission of Mr. Kelly and Mr. O’Sullivan it seems to me that General Condition No. 51 requires that any question as to whether a relevant error is such as might bring the contract to an end under the provisions of Condition No. 33 is to be determined by arbitration.
4.8 Having analysed the relevant contractual provisions it is next appropriate to turn to the basis on which Mr. Kelly and Mr. O’Sullivan oppose the application for a stay.
5. The Issues on the Stay Application
5.1 Two points are raised in opposition to the stay on behalf of Mr. Kelly and Mr. O’Sullivan.
5.2 Firstly, it is argued that, as the contract has been validly rescinded, there is no longer an arbitration clause capable of enforcement. In that context it is also said that no arbitrator could determine the ultimate issue in these proceedings which is as to whether the contract is validly at an end.
5.3 A second point is made arising out of the fact that Mr. Lennon has, undoubtedly, entered an unconditional appearance to these proceedings. In those circumstances it is said that Mr. Lennon has taken a step in the proceedings and is not, therefore, entitled to a stay pending arbitration.
5.4 I propose to turn to the continuing effectiveness of the arbitration clause first.
6. The Validity of the Arbitration Clause and its Application
6.1 It does not seem to me that there is any merit in the principal argument put forward on behalf of Mr. Kelly and Mr. O’Sullivan under this heading. There is no basis for suggesting that there was not a valid contract entered into between the parties. The only issue between the parties is as to whether, in accordance with the terms of that contract, the contract still subsists (as Mr. Lennon argues) or may have come to an end, whether by rescission or otherwise, as Mr. Kelly and Mr. O’Sullivan argue. This is not one of those cases where there may be an argument as to whether there was ever a valid and subsisting contract in the first place, such as to give rise to a valid arbitration agreement between the parties. Rather this case is one where there was undoubtedly a valid agreement with an arbitration clause in the form of General Condition 51. It is clear from the review of the authorities conducted by Kelly J. in Doyle v. Irish National Insurance Company [1998] 1 ILRM 502 that, in such circumstances an arbitration clause survives any contended termination of the contract. Indeed in Doyle the argument was that the insurance contract concerned was void with retrospective effect. The high water mark of the case made in these proceedings is that contractual relations between the parties have come to an end. This case is, therefore, if anything, an even clearer case for the survival of the arbitration clause concerned. In principle, therefore, I can see no basis for the suggestion put forward on behalf of Mr. Kelly and Mr. O’Sullivan to the effect that the arbitration clause is no longer in being, or capable of being given effect to.
6.2 However, it is important also to address the question of the undoubted limitation on the scope of the arbitration clause in this case. In most cases involving an arbitration clause, the scope of any potential arbitration is wide. Phases such as “any disputes arising out of” and the like make it clear that all relevant disputes between the parties are likely to be properly the subject of arbitration. However, that is clearly not the case here. The only dispute between the parties which comes within the scope of General Condition 51 is the boundary dispute. As pointed out earlier I did not accept the argument put forward on behalf of Mr. Kelly and Mr. O’Sullivan to the effect that the dispute between the parties was not properly within the scope of General Condition 51 or that there was, at least, a doubt about this fact. The dispute between the parties arising out of the alleged error in the boundaries is one which seems to me to be governed by General Condition 33.
6.3 Leaving aside for the moment the question of the dispute concerning the tenancies (to which it will, of course, be necessary to return), and the issues concerning the sequencing of the completion notices and the first attempt to refer to arbitration, it is important to analyse what the legal position of the respective parties would be in the event that the only issue between them as to closing centred on that boundary dispute.
6.4 If, on a proper application of the terms of General Condition 33 to the facts of this case, it is appropriate to decide that any error as to the boundary of the properties was such as did not entitle Mr. Kelly and Mr. O’Sullivan to treat the contract as at an end, then the only issue (other than that relating to the tenancies to which I have referred) which might arise between the parties is as to the consequences of that finding for the continuance of the contract in the light of the sequence of events which, in fact, occurred in this case. What in fact happened was that a completion notice was served at a time prior to any attempt being made to suggest that issues arising out of the boundary question should be referred to arbitration. Prior to the expiry of the second completion notice in this case, an attempt was made on behalf of Mr. Lennon to have the issues which arose under General Condition 33 referred to arbitration under the provisions of General Condition 51. As I understand it, the parties adopt a different view as to the consequences of that sequence of events. It is argued on behalf of Mr. Kelly and Mr. O’Sullivan that it had, in practice, become too late for Mr. Lennon to seek to refer the matter to arbitration at that stage, given that he had already served a completion notice. Mr. Lennon argues for a contrary position relying, at least in part, on what is said to have been the position previously adopted on behalf of Mr. Kelly and Mr. O’Sullivan which was to the effect that an application could be made to the Land Registry to seek to remedy the apparent boundary discrepancies. In those circumstances it is said that there was a belated change of position on the part of Mr. Kelly and Mr. O’Sullivan such that Mr. Lennon cannot be blamed for the lateness of seeking to refer the boundary question to arbitration.
6.5 As indicated earlier, it is also necessary to touch on the fact that there is clearly a potential dispute between the parties as to the legal consequences for the continuance of the contract on the fact (which seems to be so), that some of the tenancies referred to in the contract had terminated before the proposed closing.
6.6 In all those circumstances it seems to me that, on the basis of the evidence and arguments currently put forward, there would be likely to be three questions which any court or other competent adjudicator would need to determine in order to decide whether the contract still subsists, or whether it should be treated as at an end with the deposit being repaid. Those issues would seem to be:-
(a) Whether the change in the status of the tenancies to which I have referred means, as a matter of law and as a matter of fact, that the contract can no longer be preformed;
(b) Whether, in the light of the fact that the first attempt to refer the matter to arbitration on the part of Mr. Lennon took place after the service of a completion notice, the contract was not completed due to a failure on the part of Mr. Lennon irregardless of the proper application of Clause 33 to the boundary issue; and
(c) In the event that the argument under (b) above does not avail Mr. Kelly and Mr. O’Sullivan whether, on a proper application of the provisions of General Condition 33 to the facts of this case, any error in the boundaries concerned is such as entitles Mr. Kelly and Mr. O’Sullivan to treat the contract as at an end.
6.7 It is also clear that items (a) and (b) are matters purely for the court. However, for the reasons which I have sought to analyse, I am satisfied that there is a valid arbitration clause in being and enforceable as a result of which the parties have agreed to abide the decision of an arbitrator in respect of issue (c).
6.8 On a proper analysis of the issues which arise between the parties it is clear, therefore, that some but not all of the issues which arise in these proceedings are the subject of a valid and binding arbitration clause. In those circumstances it seems to me that the issue which I have to decide is as to the proper course which a court should adopt where, as here, some but not all of the issues which arise in a set of proceedings are the subject of a valid and binding arbitration clause and, in particular, where, as here, those issues relate not to stand alone causes of action in themselves, but rather are components of the matters that need to be determined by the court in order to come to a proper decision on a single cause of action, which, in this case, is as to the continued validity of the contract. I, therefore, turn to that question.
7. Partial Arbitration
7.1 It seems to me that the starting point must be to give full recognition to the fact that the parties have agreed between themselves in the contract to refer any questions under General Condition 33 to arbitration. A court should not seek to go behind that decision of the parties. In those circumstances it does not seem to me that there could be any legitimate basis for the court taking on the role, which the parties had agreed to refer to an arbitrator, of determining any issues which arise under General Condition 33.
7.2 However, the court also has to take into account the fact that there are other issues which will, in any event, arise in these proceedings, being the tenancy issue identified at 6.6(a) above and the question of the consequence of the sequence of the service of the completion notices, and the attempted referral to arbitration referred to at 6.6(b) above. There could be no suggestion that either of those issues come within the scope of the arbitration clause.
7.3 The net position is, therefore, that in order that there be a final determination as to the continuing existence of the contract, it is necessary that some issues are decided by the court and some issues are decided by an arbitrator. That fact is unusual but stems from the terms of the contract which provide for arbitration in only limited circumstances. The question which I must now address is as to what the court should do when faced with a situation where there is a single cause of action, the proper resolution of which requires a determination (possibly) of some issues over which the court has jurisdiction, and some issues which the parties have agreed to refer to arbitration. I use the terms “possibly” in parenthesis because it is, of course, possible that a determination by the court in favour of Mr. Kelly and Mr. O’Sullivan on issue (a) or issue (b) could render any decision as to the effect of General Condition 33 redundant. For example, if the court were to find that the tenancy issue was such that the contract was no longer capable of being performed then it would, in all likelihood, become irrelevant to determine the proper application of General Condition 33.
7.4 In my view, in cases such as this, where some but not all of the issues necessary to determine a cause of action arising in proceedings are the subject of a valid and subsisting arbitration clause, the court has a discretion as to the proper course of action to adopt which should be exercised in the light of all the circumstances of the case with a view to ensuring, insofar as possible, a speedy resolution of all of the issues which arise, and a final determination of the cause of action concerned, while at the same time ensuring that the court does not trespass on determining any issue which has been properly made the subject of an arbitration agreement between the parties.
7.5 I should emphasise that the discretion of which I speak does not, it seems to me, extend to the court taking over a jurisdiction to determine any issue properly referred to arbitration. Rather, the discretion is as to how the various elements of the case (being those properly within the jurisdiction of the court and those validly referred to arbitration) should be sequenced so as to maximise the likelihood of a speedy and just resolution of all issues between the parties.
7.6 I should also emphasise that the analysis which I have engaged in has no bearing on a case where there are separate causes of action some, but not all, of which are the subject of a valid arbitration agreement. In those circumstances a court should have no difficulty in staying any aspect of the proceedings before the court in relation to those causes of action which are the subject of a valid arbitration agreement. The position with which I am concerned is different. It stems from the unusual circumstances of this case, where a determination of the single cause of action in the proceedings (if one leaves out the consequential question of interest on the deposit) itself requires a resolution of a number of sub-issues, some but not all of which, are the subject of the arbitration agreement.
7.7 In those circumstances, it seems to me to be necessary to consider the application of the discretion which I have identified to the facts of this case.
8. Application to the Facts of this Case
8.1 It is necessary to take into account the fact that Mr. Lennon needs to be successful on all three of the issues which I have identified in order that he should succeed in these proceedings. He will need to satisfy the court that the tenancy issue is not such as has rendered the contract, properly construed, incapable of completion. He will need to satisfy the court that the sequence of events concerning the service of the completion notices and the attempt to refer the matter to arbitration is not such as leaves him in a position where it can be properly said, in accordance with the terms of the contract, that he was unable to complete. In addition, he will need to satisfy the arbitrator that the proper application of General Condition 33 to the facts of this case leaves either to no compensation (on the grounds of triviality) or measured compensation and does not entitle Mr. Kelly and Mr. O’Sullivan to have the contract treated as at an end.
8.2 It clearly follows that, if the court hearing were to come on first, and Mr. Kelly and Mr. O’Sullivan were to win on either issues (a) or (b), then issue (c) (which would fall for determination by the arbitrator) would almost certainly become irrelevant. Likewise, even if Mr. Lennon were to win before the arbitrator on issue (c), prior to a court hearing, it would still be for the court to determine issues (a) and (b), for those issues would not become redundant by reason of a favourable finding in favour of Mr. Lennon by the arbitrator on issue (c).
8.3 Against that background, it seems to me that it would be inappropriate to fully stay these proceedings pending arbitration, for it is clear that the other issues, which are substantive stand alone issues, will need to be determined in any event. On the other hand, it seems to me that any question of the issues arising under General Condition 33 must be stayed for to do otherwise would be to usurp the function which the parties have, by agreement, referred to arbitration.
8.4 In those circumstances, it seems to me that the proper course of action to adopt in this case is to stay any further consideration in these proceedings of the issues which arise under General Condition 33. It also seems to me that it would be preferable for the court to have the answer to the arbitrator’s consideration of the position under General Condition 33 before the court embarks on a trial of any other issues. I, therefore, propose to direct that notice of trial in these proceedings should not be served until such time as the arbitrator should have delivered his award in respect of the General Condition 33 issues. This will allow the court, when embarking on the trial, to have a full picture of all of the legal issues available to it and to reach a single concluded determination. However, I see no reason why those aspects of these proceedings which have not been stayed (that is those issues other than the question of the proper application of General Condition 33), should not proceed in the ordinary way up to the service of a notice of trial, so that the pleadings can be completed and any other interlocutory matters such as discovery can be explored and determined. For the avoidance of doubt, it seems to me that in those circumstances it should be open to Mr. Kelly and Mr. O’Sullivan to make reference in any relevant pleading to the General Condition 33 issues, subject to it being made clear in any such pleading that what is being relied on is the possible determination in their favour on that issue by an arbitrator. No pleading should be filed which might be construed as attempting to invite the court to determine those issues because, for the reasons which I have set out, any consideration by the court of those issues is being stayed pending arbitration.
9. The Appearance
9.1 I should finally deal with the point made on behalf of Mr. Kelly and Mr. O’Sullivan to the effect that the entry of an unconditional appearance by Mr. Lennon amounts to Mr. Lennon having taken a step in the proceedings, such as would debar him from being entitled to rely on the arbitration clause concerned. It seems to me that this point is manifestly ill-founded. Section 12(1) of the Arbitration Act 1954, (which introduces the concept of the taking of a step in the proceedings) provides in express terms that a party to an arbitration agreement can seek a stay “at any time after appearance and before delivering any pleadings or taking any other step in the proceedings”. In those circumstances the express terms of the Arbitration Act itself make it clear that an appearance is not to be treated as taking a step in the proceedings and that, indeed, the application for a stay is to take place after appearance. There is, in my view, therefore, no merit in this point whatsoever.
10. Conclusions
10.1 I, therefore, propose to make an order staying that part of these proceedings which refers to any issues arising under General Condition 33 pending an arbitration of those issues. I propose directing that the balance of these proceedings may proceed in an orderly fashion up to the service of the notice of trial, but that notice of trial cannot be served until such time as there an award of an arbitrator on the General Condition 33 issue has been made. Finally, I will give both parties liberty to apply lest there be any logistical difficulties encountered which have not been anticipated at this stage.
Donegan & Ors v Kenny
[2020] IECA 90 (08 April 2020)
Haughton J.
Murray J.
Collins J.
JUDGMENT of Mr. Justice Robert Haughton delivered on the 8th day of April 2020
Introduction
1. This is an appeal from the judgment of Twomey J. delivered on 31 October 2018, and his order dated 7 November 2018 (perfected 8 November 2018) in specific performance proceedings where the appellant failed to complete a purchase and ultimately the subject property was resold by the respondent vendors at a lower price. The High Court ordered recovery by the respondents against the appellant of a sum of €248,871 by way of damages and interest. Although a number of issues are raised in the appeal, of central importance are two issues: (1) whether the respondents took reasonable steps to minimise their losses in the resale of the property, and (2) whether the trial judge was correct in his use of the interest rate of 10% stipulated in the contract of sale as the “metric” for assessing damages arising from the delay in receiving the proceeds of sale occasioned by the necessity to resale.
Background
2. By Agreement for Sale dated 20 May 2016 (the “Contract”) the respondents agreed to sell, and the appellant agreed to purchase Block 20A, Beckett Way, Park West Business Park, Gallanstown, Dublin 12 (“the Property”) at a price of €1,450,000 (“agreed sale price”). The Contract was signed by the appellant, albeit that it listed a Mr. Barry Cogan as the purchaser. The Closing Date was to be “four weeks from the date hereof” i.e., 17 June 2016. The Interest Rate stipulated under the Contract on page 2 was 10% per annum. The deposit, originally intended to be €145,000, was reduced to €74,000. The Law Society General Conditions of Sale (2009 Edition) applied to the sale.
3. Special condition 8 provided –
“8. Mortgage
The property in sale is charged to AIB bank Plc. On or prior to completion the Vendors’ solicitor shall furnish the Purchaser’s solicitor a letter from AIB bank confirming the proceeds that they require in order to release the property in sale from its security. The Vendors’ solicitor shall undertake to discharge the charges over the said property out of the proceeds of sale and to furnish the Purchaser’s solicitor with evidence of eDischarges or alternatively a vacates or vacated charges as soon as same comes to hand after completion.”
4. The appellant failed to complete the purchase on the agreed closing date, and a Completion Notice was issued on 20 June 2016 by the respondents’ solicitors. The time for completion was further extended by agreement beyond this date, and ultimately on 31 August 2016, the respondents extended the closing date for an additional two-week period which expired on 14 September 2016.
The proceedings and resale
5. These proceedings were initiated by Plenary Summons issued on 17 August 2016, seeking specific performance of the Contract, and/or damages in lieu of specific performance. The case was entered into the Commercial Court on 5 December 2016.
6. Subsequently, as the sale was never completed, the deposit of €74,000 was forfeited by the respondents under General Condition 41(a), and the Property was subsequently resold by them to an unrelated third party, Trinitymount Limited (“Trinitymount”) for a sum of €1,300,000. That sale was agreed on 30 August 2017 and closed on 13 September 2017.
7. These proceedings thereafter were amended and continued as a claim for damages for breach of contract and a declaration that the respondents were entitled to retain the deposit for their own use. In addition to retention of the deposit the respondents claimed: –
(A) €76,000 calculated as the shortfall between the agreed sale price (€1.45M) and the resale price (€1.3M), being €150,000 less the forfeited deposit of €74,000 giving a net figure of €76,000.
(B) Interest of 10% on the said sum of €76,000.
(C) By way of damages, interest at 10% on the amount of the agreed sale price not received by the plaintiffs on the closing date – in the sum of €1.376M – for the period of delay from the closing date of 20 June 2016 up to completion of the resale on 13 September 2017 (a figure calculated to be €171,151.40).
(D) Additional costs allegedly incurred by the respondents as a result of the delay in closing between June 2016 and September 2017 made up of rates (€4,267.24), insurance (€2,131.51) and a service charge (€8,016.47), making a total of €14,415.22
This last head of claim was not allowed by the trial judge on the basis that during the period of delay, the vendor had the benefit of rent from the property and to award such sums would be to put the vendors in a better position, than if the appellant had performed the Contract and amount to double compensation. This element of the decision is not the subject matter of any cross-appeal.
8. The matter was heard in the High Court on 16 October 2018 and 26 October 2018. The appellant appeared in person.. Three witnesses were called for the plaintiffs – the first named respondent Mr. Donegan, Mr. Milan Schuster, a solicitor in Adams Law the firm representing the respondents, and Mr. Pat Riney, a valuer in Orchard Real Estate Alliance, retained by the respondents both in respect of the original sale and on the resale. While this court did not have the benefit of Transcripts, it did have copies of the Witness Statements of these three witnesses, and counsel for the respondent confirmed that these witness statements were adopted as part of their evidence by each of these witnesses. The appellant did not disagree with that statement.
9. The High Court had to deal with a number of defences that do not arise on this appeal. The defences raised by the appellant that are germane to the appeal are succinctly set out in para. 10 of the judgment: –
“10. … He also claims that for the plaintiffs to recover the difference between the Actual Sale Price and the Agreed Sale Price, the Property should have been sold within 12 months of the Agreed Closing Date of 17th June, 2016, as required by Condition 41(a) of the Contract, which he says did not occur. He also claims that the interest rate of 10% under the Contract, which the plaintiffs are seeking on the sum of €1.45 million (but this Court calculates should be €1,376,000 once account is taken of the deposit) for the one year and the three month delay between the Agreed Closing Date and the Actual Closing Date (and the same rate of 10% on the shortfall of €76,000 thereafter) is not enforceable as he says it is an unconscionable rate of interest.”
10. General Condition 41(a) is relied upon by the respondents and states –
“If the purchaser shall fail in any material respect to comply with any of the Conditions, the Vendor (without prejudice to any rights or remedies available to him at law or in equity) shall be entitled to forfeit the deposit and to such purpose unilaterally to direct his Solicitor or other stakeholder to release same to him AND the Vendor shall be at liberty (without being obliged to tender an Assurance) to resell the Subject Property, with or without notice to the Purchaser, either by public auction or private treaty. In the event of the Vendor reselling the Subject Property within one year after the Closing Date (or within one year computed from the expiration of any period by which the closing may have been extended pursuant to Condition 40) the deficiency (if any) arising on such re-sale and all costs and expenses attending the same or on any attempted re-sale shall (without prejudice to such damages to which the Vendor shall otherwise be entitled) be made good to the Vendor by the Purchaser, who shall be allowed to credit against same for the deposit so forfeited. Any increase in the price obtained by the Vendor on any re-sale, whenever effected, shall belong to the Vendor.”
11. It was the appellant’s contention at trial that the resale had not taken place within the one year provided within General Condition 41(a) and therefore there was no entitlement to claim the shortfall.
12. As to the respondents’ contention at trial that the rate of interest of 10%, being the stipulated interest rate in the Contract, should apply to the calculation of interest on the outstanding purchase monies up to the date that those monies were received on completion of the resale, the respondents relied in the High Court on General Condition 25(a), either directly or indirectly, as setting the appropriate rate. That condition provides: –
“25(a)If by reason of any default on the part of the Purchaser, the purchase shall not have been completed on or before the later of (a) the Closing Date or (b) such subsequent date whereafter delay in completing shall not be attributable to default on the part of the Vendor. (i)the Purchaser shall pay interest to the Vendor on the balance of the Purchase Price remaining unpaid at the Stipulated Interest Rate for the period between the Closing Date (or as the case may be such subsequent date as aforesaid) and the date of actual completion of the Sale. Such interest shall accrue from day to day and shall be payable before and after any judgment
and
(ii) the Vendor shall in addition to being entitled to receive such interest, have the right to take the rents and profits less the outgoings of the Subject Property up to the date of the actual completion of the Sale.”
13. The appellant had contested that that rate was applicable, or alternatively argued that it was unconscionable.
Decision in the High Court
14. Having found that the Completion Notice was validly served on the appellant, the trial judge made the following findings in relation to the key issues: –
A. The issue of sale outside the one-year period mentioned in General Condition 41(a) is covered in paragraphs 26-28 of his judgment where he rejects the defence based on a failure to resell the property within the one-year period, finding –
“27… This is because the reference in the condition, to a particular right on the part of the vendor if the property is re-sold within the twelve-month period, does not mean that the normal rules for damages arising from a breach of contract do not apply if the property is sold outside of that twelve-month period. Indeed, this is expressly recognised in the condition, since it states that the reference to the vendor’s entitlement to recover the deficiency on a sale within 12 months is stated to be ‘without prejudice to such damages to which the Vendor shall otherwise be entitled’. The damages to which a vendor is otherwise entitled is a reference to the normal rules for the calculation of damages for breach of contract. The principal feature of these rules was noted by Clarke J. (as he then was) in Kelleher v O’Connor [2010] IEHC 313 at para. 9.1, as; –
‘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.’”
This conclusion was reached based on “the fact that the Property might have been re-sold to Trinitymount Limited outside the period of twelve months”. However the trial judge made no specific finding as to whether or not the property was in fact resold outside the twelve-month period.
B. As part of the loss occasioned by the appellant’s breach of contract, the respondents were entitled to an award of the sum of €76,000 being the net difference, after forfeiture of the deposit of €74,000, between the agreed sale price and the resale price of €1.3M.
C. The trial judge rejected the contention that the respondents had failed to mitigate their loss by, as was alleged by the appellant, selling the Property at an undervalue i.e., at a price of €150,000 less than the agreed sale price. The trial judge took into account that the respondents were under pressure from their lender AIB to sell the property, that no expert valuation evidence had been provided by the appellant, that €1.3M was an undervalue in September 2017, and that after the appellant failed to complete the respondents’ auctioneer it did seek buyers for the property at the price of €1.45M but was unsuccessful, leading ultimately to the negotiated sale to Trinitymount for €1.3M. In reaching this conclusion, the trial judge in his judgment cited and applied the approach noted by the Court of Appeal in Hyland v Dundalk Racing [2017] IECA 172, at paragraph 78 (joint judgment of Finlay Geoghegan J. and Irvine J.) when seeking to find another purchaser that –
“the standard by which they are to be judged is not an unduly harsh one because […] it is the defendant, as wrongdoer, who has put the claimant into that difficult position”.
D. As to the 10% interest claim the trial judge made a number of relevant findings. Firstly, on the authority of O’Donnell v Truck and Machinery Sales Limited [1998] 4 IR 191 (the judgment of Barron J. in the Supreme Court, at p. 2018) he found that penalty interest rates are permissible in contracts for the sale of land. Secondly he found that General Condition 25(a) has the effect of applying interest at the stipulated contractual rate (10%) from the Closing Date until “the date of the actual completion of the Sale”, which he found to be “a reference to the sale of the property to the Purchaser under that Contract, not to some purchaser under a subsequent Contract”. Accordingly it had no application to the appellant who did not complete the sale under the Contract. This was not a finding that was appealed by either party.
E. Notwithstanding this, the trial judge went on to conclude that the rate of 10% interest was the appropriate rate for the court to apply between the Agreed Closing Date, and the date on which the resale was completed, in calculating the loss to the respondents arising from the appellant’s failure to complete the sale. His reasoning for this will be referred to later in this judgment.
F. As to interest on the shortfall of €76,000 that the High Court awarded as part of the damages claimed, he found that the 10% rate did not apply because Clause 25(a) dealt only with interest for the period up until completion of the sale of the property, and that there was no agreed interest rate in respect of damages that might be assessed. Accordingly he applied the Courts Act interest rate of 2% for a 413 day period from 13 September 2017 to the date of judgment, being a sum of €1,719.87. This finding was not the subject of any Ground of Appeal.
G. As to the claim by the respondents for additional costs arising because of a part vacancy of the property – the insurance, service charges and rates amounting to €14,415.22 – the trial judge rejected this claim on the basis that during the period in respect of these expenses were incurred, the respondents were in possession and entitled to receipt of the rent. As mentioned earlier there was no cross-appeal in respect of this finding.
Grounds of appeal
15. The appellant appealed the entirety of the High Court decision on Grounds of Appeal (a) – (g) as follows: –
“(a) The learned trial judge erred in determining that the respondents were entitled to recover the deficiency in the resale price paid for the property the subject matter of these proceedings.
(b) The learned trial judge erred in failing to correctly interpret and apply the provisions of the Law Society General Condition of Sale, Condition 41(a) which limited the right to recover the deficiency in the resale price to a one year period.
(c) The learned trial judge erred in concluding that there had been no failure to mitigate losses on the part of the respondents.
(d) The learned trial judge erred in conducting the interest rate the respondents were entitled to recover under the contract of 10% was not penal in the circumstances.
(e) The learned trial judge erred in failing to apply the relevant principles on breach of contract. In particular, the learned trial judge erred in awarding an sum of damages (including interest) which put the respondents in a better position then they would have been if the contract had been performed.
(f) The learned trial judge erred in awarding a total sum of €172,871.27 in respect of interest in circumstances where the respondents had put forward evidence of the costs incurred as a result of the appellant failing to close the sale which amounted to €14,415.22.
(g) The learned trial judge erred in failing to apply the appropriate metric to assess damages in the circumstances.”
16. The respondents’ Grounds of Opposition traverse the Grounds of Appeal and plead that the trial judge made his decisions based on uncontroverted evidence given on behalf of the respondents. It was also noted that the appellant failed to challenge the issue of calculation of the figures in respect of the damages award prior to the trial judge making the final order on 7 November 2018 as the appellant did not attend court on 31 October 2018 (or, as the Order notes, on the adjourned date of 7 November 2018).
17. I have also considered the written legal submissions of the appellant and the replying submissions from the respondents. The appellant attended this court in person but made limited oral submissions. The respondents were represented by counsel. I propose to address the Grounds of Appeal in turn.
Grounds (a) and (b) – Shortfall claim/Resale after one year period
18. These can be addressed together as they largely cover the same point relating to the alleged failure to resell the Property within the one-year period, and the consequences of such a failure having regard to the terms of Condition 41(a).
19. The first issue that arises is whether, as a matter of fact, the resale took place within the one-year period – a matter on which the trial judge made no specific finding. This period commences “after the Closing Date (or within one year computed from the expiration of any period by which the closing may have been extended pursuant to Condition 40)”. Condition 40 allows the parties, where a Completion Notice has been served, to extend the term of the Notice for one or more specified periods of time whereupon the notice is deemed to expire on the last day of such extended period or periods, and time is of the essence in relation to such extended period(s).
20. The undisputed evidence was that the Completion Notice was served on 20 June 2016 and allowed 28 days for completion, which expired on 17 July 2016. It was extended by agreement on successive occasions, and the last such extension was for a two-week period commencing on 31 August 2016 and ending on 14 September 2016.
21. Accordingly, the one-year period under Condition 41(a) commenced on 15 September 2016 and ended on 14 September 2017.
22. The respondents’ agreement to resell the Property to Trinitymount was entered into on 30 August 2017 and that sale closed on 13 September 2017. Although the trial judge made no finding, in my view this undisputed evidence compels a finding that the property was in fact resold within one year after the extended Closing Date. It follows that the second limb of General Condition 41(a) came into play and the respondents were entitled to have the deficiency arising on the resale, and all costs and expenses attending same to “be made good to the Vendor by the Purchaser, who shall be allowed credit against same for the deposit so forfeited”.
23. Even if this were not the case I would have agreed with the trial judge’s analysis at paras. 26 – 28 of his judgment. The second and third sentences of General Condition 41(a) deal expressly with the position that is to prevail in the event that the property is resold within the one-year period, and do so “without prejudice to such damages to which the Vendor shall otherwise be entitled”, which can only be a reference to the damages that a vendor is entitled to at common law for breach of contract in the event that a purchaser fails to complete in accordance with their contractual obligations. Absent this express clause, which governs the matter in the event of a sale within the one-year period, there would be an entitlement to damages designed to put the vendors back into the position in which they would have been but for the relevant wrongdoing, and those damages would generally include the deficiency arising on resale, but subject to other general principles, including the requirement that a claimant mitigate their losses. It is also notable that the last sentence in General Condition 41(a) – which entitles the vendor on any resale to retain any “increase in price”, applies “whenever [the resale is] effected”. Thus the Condition makes it expressly clear that the vendor is entitled to forfeit the deposit, and to retain any increase in price on resale. General Condition 41(a), when read as a whole, is clearly drafted to benefit the vendor in the event that the sale falls through due to the purchaser’s failure to comply with a contract.
Ground (c) – Failure to mitigate loss
24. Undoubtedly the respondents had a duty to mitigate their losses following on the appellant’s failure to complete the Contract. In Contract Law (McDermott P.A and McDermott J., 2nd Edition, (2017) Bloomsbury) the authors introduce the topic of mitigation in the following terms: –
“[23.250] Mitigation of damages is the principle that a plaintiff may not recover losses that could have been avoided by taking reasonable steps after the breach. In other words, the plaintiff cannot recover avoidable losses. The rule is based on notions of fairness and the idea that damages for breach of contract are not generally intended to be punitive. It is also socially desirable to minimise the costs of a civil wrong. The duty to mitigate can also be said to allocate risks fairly, since the plaintiff is usually in the best position to deal with the consequences of a breach of contract. The plaintiff should therefore be prevented from recovering losses that could reasonably have been avoided. These factors have recently been described by Finlay Geoghegan J in the Court of Appeal as ‘the public policy considerations core to the concept of mitigation’.
What is reasonable is a question of fact. The burden of proof is on the defendant to show that the plaintiff could reasonably have avoided a loss or was unreasonable in his conduct. A pragmatic approach is often evident in the case law and the measures that the plaintiff should have taken to mitigate will not be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty.”
25. In approaching this issue the trial judge at paragraph 33 of his judgment referred to the decision of this court in Highland v Dundalk Racing [2017] IECA 172. There Dundalk Racing brought appeals against three orders of the High Court in favour of bookmakers concerning the operation of the “Pitched Rules” at the newly developed Dundalk Racecourse with the first all-weather racetrack in Ireland. The dispute concerned Dundalk Racing seeking a capital contribution of €8,000 for the allocation of bookmaker’s pitches at the racecourse. The bookmaker plaintiffs claimed, successfully, that the Pitch Rules were contractually binding on Dundalk Racing and governed the allocation of pitches, and that Dundalk Racing was in breach of contract, as a result of which the bookmakers were entitled to damages. These were assessed in the High Court and the subject matter of appeals and cross-appeals in the Court of Appeal. The main argument made by Dundalk Racing was that the bookmakers had failed to mitigate their losses. While the facts of that case were different to the instant case, the joint judgment of Finlay Geoghegan and Irvine JJ undertakes an analysis of the duty to mitigate loss which in my view is of general application to claims for damages for breach of contract.
26. The court adopted and applied the principles established in Waterford Harbour Commissioners v British Rail [1979] 1 ILRM 296 and Banco de Portugal v Waterlow & Sons Limited [1932] AC 452 (per Lord McMillan at p. 506), which authorities along with the court’s judgment in Hyland are footnoted as the basis for the passage from Contract Law quoted above. The court also quoted with approval from Rosbeg Partners Limited v. L.K. Shields (a Firm) [2016] IECA 161, where MacMenamin J. sitting as a member of this court stated: –
“51. Turning then to the question of mitigation, it is true to say that the quantum of recoverable damages may be reduced, if a plaintiff fails to take reasonable steps to mitigate its loss. the duty is ‘to take all reasonable steps’, having regard to the circumstances of the case (see the judgment of Hamilton C.J., and Denham J. in Kelly v. Hennessy [1995] 3 IR 253).
52. Here, again, the trial judge’s assessment of the reasonableness of efforts to mitigate is highly relevant. The second principle in Hay v. O’Grady is engaged. Where a plaintiff has provided an explanation for a failure to take certain steps to mitigate loss, and the trial judge has accepted that explanation, an appellate court should be slow to overturn that assessment, unless there was no credible evidence to support it. (See judgments of Hamilton C.J. and Denham J. in Kelly v. Hennessy). In that authority, the Supreme Court declined to engage in any substantive assessment of the reasonableness of mitigation. The trial judge’s findings were based on an acceptance of the plaintiff’s evidence, which was sufficient to dispose of that ground of the appeal. It has not been suggested that Kelly was erroneously decided, or can be distinguished on the facts.
53. It is well established, that reasonableness of a plaintiff’s effort to mitigate is a question of fact, not a question of law (Payuz v. Saunders [1919] 2 KB 581; The Soholt [1983] 1 Lloyds Rep 605) and McCord v. Electricity Supply Board [1980] ILRM p. 153. In general, courts, both here and elsewhere, rarely find it appropriate to interfere with conclusions of a trial judge either based on evidence, or the lack of satisfactory evidence. The onus lies on a defendant (here the appellant) to establish, on the basis of satisfactory evidence, that there was a failure to mitigate.”
27. Of particular relevance to the present appeal is firstly that what was reasonable was a question of fact for the trial judge, and secondly that the burden of proof to show that the respondents could have avoided (or reduced) the loss of €150,000 on a resale rested with the appellant. Clearly a trial judge is entitled to take into account all of the evidence that might be relevant, and a party seeking to minimise their losses is entitled to take a pragmatic approach.
28. Finlay Geoghegan and Irvine JJ. In Hyland, at paragraph 78 also observed: –
“While a plaintiff is bound to mitigate his or her loss ‘the standard by which they are to be judged is not an unduly harsh one’ because, as was stated by Jackson J. in Shepherd Holmes v Encia Remediation Limited [2007] EWHC 1710 (TCC), it is the defendant, as wrongdoer who has put the claimant into that difficult position.”
This passage was referenced by the trial judge in the instant case at paragraph 33 of his judgment, and establishes the standard by which the respondents’ conduct was to be judged.
29. In my view the trial judge correctly identified the obligation on the respondents to mitigate their loss, and he made findings of fact relevant to the issue at paragraphs. 30-33. This court should be slow to overturn those findings of fact. The appellant in his written submissions is critical of the valuation relied on by the purchaser to negotiate down the price and argues that the respondents “failed/refused to re-market the property” and that the shortfall of €150,000 “could have been avoided”.
30. Of particular relevance is that the onus was on the appellant but, as the trial judge notes at paragraph 31, he did not call any expert valuation evidence to suggest that, at the time the resale was entered into on 31 August 2017, €1.3M was an undervalue. The appellant did, as he was entitled to, rely on certain valuations that were referred to in evidence called by the respondents, although not all of these were relied on by them. His starting point was the agreed sale price in the Contract (€1.45M), and that was a price that initially Trinitymount appeared willing to pay. The first of the relevant valuations was a report obtained by Trinitymount from Cushman Wakefield dated 10 April 2017, valuing the property at €1.3M, in respect of which Mr. Schuster, solicitor, in his Witness Statement on behalf of the respondents, stated the following: –
“36. We wrote to Mr. Tom O’Regan’s office [acting for the appellant in the original purchase] on 28th April 2017, advising that the Valuation Report of Cushman Wakefield was seriously flawed in that the valuer failed to take into account that the lease for the second floor, to Clonmel Healthcare, had a rent review that is upward only in nature and not as it is set out in the report as being upwards or downwards. As a result, the rental income value was reduced by €30,000 which impacted on the valuation of the overall building.
37. Following from this, our clients had a Valuation Report carried out by CBRE who valued the premises at the price it was originally on the market for €1,450,000.”
31. The appellant relied secondly on the CBRE valuation for €1.45M. Thirdly the appellant was able to point to paragraph 14 of the Witness Statement of Mr. Riney, the valuer who gave evidence on behalf of the respondents. Mr. Riney at paragraphs 12 and 13 of his Witness Statement makes similar comments to those of Mr. Schuster, and then at paragraph 14 states: –
“In my opinion, a more accurate valuation of the premises would have been in the region of €1.5M”.
32. However, both Mr. Schuster and Mr. Riney go on to explain why the resale was ultimately concluded with Trinitymount for €1.3M. Mr. Schuster explains: –
“38. However, after a considerable amount of time spent trying to sell the property and facilitating the numerous proposed sub-purchasers/purchasers, the Plaintiffs decided that they had no alternative but to mitigate their losses, and agreed to the sale of the property for the reduced purchase price of €1,300,000.00.
39. We wrote to Amoss solicitors on the 28th July 2017 advising that our client was prepared to sell the property for €1,300,000.00 to their clients, however may only do so with the consent of their lending institution. We had received confirmation that Amoss solicitors were in funds of €535,000.00 and a facility in the sum of €780,000.00 was obtained.
40. We wrote to AIB Bank Plc on the 28th July 2017 advising that the original sale was no longer proceeding and that an offer from an independent third party was received. We advised that the proposed purchaser was a Mr Timothy McSweeney, through an SPV called Trinitymount Limited for the sum of €1,300,000.00, and requested their consent to sell the property at the new purchase price.
41…..
42. I say that AIB Bank Plc wrote to us on the 24th August 2017 and confirmed that the bank would release its charge over the property provided that they received €1,401,146.81 by 28th August 2017. I say that we were advised that interest as and from 28th August 2017 amounted to €119.65 per day.”
33. This court did not have the benefit of transcripts of the evidence in the High Court, but were advised by counsel, without demur by the appellant, that he did not undertake any cross-examination as to the time spent and efforts made by or on behalf of the respondents and their professional advisers to sell the property for a figure at or nearer to €1.45M. The trial judge notes at paragraph 32 of his judgment that the respondents –
“…provided evidence from their auctioneer that he sought buyers [for] the property, after the sale to Mr. Kenny did not complete, at the price of €1.45M but was unsuccessful and this led to the sale of the property to Trinitymount Limited for €1.3M as they were not willing to pay €1.45M.”
He also notes at paragraph 4 of his judgment that the resale on 31 August 2017 occurred “following protracted negotiations”. It is also clear from reading Mr. Schuster’s Witness Statement that, after the appellant had failed to complete the sale, he and/or his solicitor Mr. Tom O’Regan made efforts to find a substitute purchaser, and indeed on 2 December 2016 Mr. Tom O’Regan wrote to the respondents’ solicitors advising him of “a new person who wished to ‘step into the purchase’ of the Property”, and that initially they introduced an offer from Profunder dated 25 November 2016 (this potential purchaser only had a facility for €1M), and later a Mr. Tim McSweeney, with whom there were pre-contract discussions over a period of some months on the basis that there would be a sub-sale rather than a resale. It was that interested party that appeared initially willing to purchase for €1.45M, but later, following receipt of the Cushman Wakefield Report of 10 April 2017, reduced the offer to €1.3M. That ultimately resulted in the second sale – but not by way of a sub-sale as the new purchaser required a new contract – and also on the advice of Mr. McSweeney the ultimate purchaser was a SPV namely Trinitymount Limited.
34. The trial judge was also entitled to take into account “[t]hat the plaintiffs were under pressure from AIB to sell the property, which they had purchased for €2.76 million, with funding from AIB, and they were obliged to make up the shortfall to AIB between the €2.76 million purchase price and the sale price, whether €1.3M or €1.45M, when the property was sold.” (paragraph 30).
35. In my view it was open to the trial judge, in applying a standard that was not too exacting or “unduly harsh”, to find on the facts that the respondents had taken reasonable steps in all the circumstances to mitigate the loss on resale of the property bearing in mind the difficult position in which they found themselves. Although re-marketing to the public at large and/or a sale by public auction, would have been options, the law did not require that the respondents follow either of those paths – rather their duty was to take reasonable steps in all the circumstances. It is clear that the trial judge did not consider that the appellant had discharged the onus that was on him to show failure to mitigate loss, characterising his claims as “mere assertion”. This was a question of fact for the trial judge to decide. It may well be that it would not have taken much evidence for him to have taken a more critical view of the resale process and price achieved, but the appellant’s failure to adduce any valuation evidence or cross-examination on the issue arguably left the trial judge with no scope to reach a different conclusion. In my view the trial judge correctly applied the law, and this ground of appeal must fail.
Grounds of Appeal (d)(e) (f) and (g) – Award of 10% interest on balance of purchase monies
36. It is convenient to address these issues together. It will be recalled that the Contract stipulated an interest rate of 10% per annum which applied for the purposes of General Condition 25(a). It was not disputed (or appealed) that the trial judge was correct in determining that this rate was not, as a matter of contract, “directly applicable to the situation that transpired” because Condition 25(a) only applied to late completion of the Contract by the appellant (paragraphs 39-40 of the judgment). However the appellant argued that the 10% rate should not have been applied indirectly or otherwise as the “appropriate metric” to assess damages arising between the Agreed Closing Date and the date on which the resale to Trinitymount closed, particularly where the respondents put forward evidence of the costs incurred as a result of the appellants failure to close which amounted to €14,415.22; and he argued that it was penal and put the respondents in a better position than they would have been had the Contract been completed.
37. The respondents submitted that the trial judge was correct in his reasoning in determining that the respondents should be put in the same position as if the Contract was completed by the appellant. This reasoning is set out below and examined in more detail later. It was further submitted that the principles applicable to assessing whether rates of interest amount to penalty clauses and are thus unenforceable have no application to contracts for the sale of land, and that the trial judge was correct in his reliance on the obiter statement of Barron J. in O’Donnell v. Truck and Machinery Sales Ltd [1998] 4 IR. 191 which indicated that a different approach was to be taken in relation to contracts for the sale of land compared to other contracts. Counsel also relied on a recent review of the law on ‘penalty clauses’ undertaken by McKechnie J in Launceston Property Finance Limited v. Burke [2017] IESC 62 in the context of the recent UK Supreme Court decision in Cavendish Square Holding BV v. Makdesse [2015] UKSC 67, where that court gave primacy to freedom to contract and favoured an approach of whether a contractual decision “is penal, not whether it is a pre-estimate of loss”. McKechnie J at paragraph 43 expressed the view obiter that he was “not immediately convinced that any change to the test [genuine pre-estimate of loss] is necessary, nor that the route taken by the UK Supreme Court in necessarily a superior one. I stress that the live debate must be left over…”. Thus the respondents appeared to submit that insofar as the 10% rate was that chosen by the parties it was a genuine attempt to pre-estimate loss.
38. Turning to the reasoning of the trial judge for adopting the 10% rate, this commences at paragraph 42:
“42. First, it is the purpose of this Court to assess what damages or compensation is due to the plaintiffs. In this regard, it is relevant to note that in the High Court case of Mac A Bhaird v Commissioner of Public Works [2016] IEHC 630 at para. 53, Baker J concluded that the interest rate in the Law Society Conditions for a sale of property, amounted to compensation: –
‘53. The claim for interest is a claim for compensation for late closing to be assessed on an agreed formula, and although the general conditions make no reference to ‘compensation’ the intention of the interest provision is clear. It is to award compensation to the vendor on account of the failure by the purchaser to handover the monies.’
43. Secondly, the reason this Court concludes that it is appropriate to use the 10% rate of interest as the metric for assessing damages is because if the Contract had been performed by Mr. Kenny, albeit late, which he failed to do after the service of the Completion Notice, the plaintiffs would have been entitled to the 10% interest from him.
44. Thirdly, the plaintiffs are entitled to be put in the position they would be in if the Contract had been performed. If it was Mr. Kenny, rather than Trinitymount Limited, that completed the sale on the Actual Closing Date, then there can be no question, but that Mr. Kenny would have been contractually liable to pay the plaintiff’s interest of 10% for the period of delay. To put the plaintiffs in the position that they would have been in, therefore, it is appropriate for this Court to assess the damages due to the plaintiffs on the basis of such an interest rate which was actually agreed between the parties to cover a similar eventuality (if Mr. Kenny himself had completed the sale late) but not an identical eventuality (a delayed sale of the property to Trinitymount Limited).
45. Furthermore, and to put the matter another way, 10% was the agreed estimate by both parties (after obtaining legal advice) of the amount of compensation, (to use Baker J’s description of the interest provision in Law Society’s General Conditions of Sale) which would be incurred by the plaintiffs by a late completion of the Contract. It was agreed by parties as the rate which should be paid in the event that Mr. Kenny’s default caused the delayed completion of the sale (albeit that under the terms of Condition 25(a) it is based on the sale proceeding late with Mr. Kenny and not some third party). Nonetheless, this Court believes that it should be reluctant to interfere in the parties’ own assessment of the amount of damages which would be incurred by a delayed sale and therefore it should be reluctant to replace that rate with its own interest rate.
46. In this regard, it is also to be noted that in Mac A Bhaird v Commissioner of Public Works [2016] IEHC 630 at para.20, Baker J. comments on Condition 25 in the following manner:
‘general condition 25 is designed and intended by the parties to be one mechanism by which the parties have agreed as a form of remedy in the event of default.’
47. On this basis the Court concludes that it should adopt the ‘form of remedy’ negotiated by the parties to assess damages and this Court would therefore conclude that 10% is the appropriate metric to use to calculate the damages to be awarded to the plaintiffs rather than interposing its own interest rate. It does so in the particular circumstances of this case, including the fact that the Actual Closing Date took place within a reasonable period of time of the Agreed Closing Date. This is because it seems to this Court that the delayed completion interest rate of 10% is in all likelihood set at a relatively high rate so as to provide a disincentive to purchasers to delay completing purchases and accordingly it is likely that the parties negotiating that rate expected it to apply for a relatively short time. Although reluctant to interpose a different rate from the one agreed by parties (albeit for a similar, but not identical, eventuality) there may be situations where the Court might have to do so. For example, if a period of say five years’ interest was being claimed, then bearing in mind that the overriding duty of this Court is to put the vendor in the position they would have been in, if the Contract had not been breached, this Court might conclude in those circumstances that five years interest at 10% would put the vendor in a better position than if the Contract had been performed and so conclude that in such a situation 10% was not the appropriate metric to use to assess damages incurred by the vendor in the delayed sale.”
The trial judge accordingly awarded interest at 10% on €1.36M from the Agreed Closing Date to the date of completion of the resale, being 454 days – a sum of €171,151.40.
Discussion
39. The starting point in assessing damages for breach of contract is to see what has been agreed between the parties, and this applies equally to contracts for the sale of land, just as it would apply to other contracts.
40. The General Conditions (2009) provide expressly for two situations of breach of contract by the purchaser. The first arises when the purchaser fails to complete on time, and a completion notice is served making time of the essence, (and, as in the instant case, the parties may agree further time extension for closing time still being of the essence), but ultimately the purchaser does complete. Clause 25(a) covers this situation and expressly entitles the vendor to interest on the balance of the purchase monies at the stipulated interest rate – here 10% was stipulated – from the Closing date to the date of actual completion by the purchaser. In addition during this period the vendor is entitled to take the rents and profits, less the outgoings, from the property. Condition 25(a), unlike General Condition 41, does not make any reference to “such damages to which the Vendor shall otherwise be entitled”, and therefore in my view does not leave scope for a vendor to claim other losses e.g. the cost of putting in place bridging finance and any additional interest that that might attract.
41. It may be noted that generally the period to which such interest will apply will be relatively short, perhaps spanning days, or a few weeks if the sale is completed within the 28 days allowed by the Completion Notice. The stipulated interest rate is usually high compared to normal borrowing rates, and is an incentive for closing promptly.
42. It is important to note that this was the situation with which Baker J was concerned in Mac A Bhaird. Her comments on interest being “a claim for compensation for late closing” relate only to interest arising under Condition 25(a) which she regarded as the “mechanism by which the parties have agreed as a form of remedy in the event of default”. In my view the trial judge erred in applying those comments to the instant case to formulate a ‘form of remedy’ in circumstances where General Condition 41(a) applies.
43. This leads to the second and very different situation where the purchaser fails to complete at all, even after time is made of the essence by a Completion Notice. This is covered by General Condition 41(a). This entitles the vendor in the first place to forfeit the deposit. This is a significant entitlement, with deposits usually ranging from 5% to 20%, and frequently being agreed at 10%. The amount of a deposit will in many, if not most, sales exceed the costs of sale, leaving the vendor to the good unless there has been a significant reduction in the value of property. It is perfectly possible that the vendor will make a profit from the purchaser’s failure to complete, and the law permits this. There is no obligation thereafter for the vendor to resell – the vendor may choose to hold onto the deposit and the property. If the vendor does sell within one year then the further provisions in Condition 41(a) entitle recovery of shortfall (after giving credit for the retained deposit). As found by the trial judge, with whom I agree on this point, if the vendor does not sell within the year the vendor can still seek to recover the shortfall as damages to which they are entitled at common law. Further if the vendor resells at an increased price, whether during the one year period or later, Condition 41(a) expressly allows the vendor to retain that increase. Thus Condition 41(a) is the mechanism that the parties have agreed addresses the failure to complete that occurred in the instant case.
44. Nowhere in Condition 41(a) is there any reference to interest, still less to the stipulated rate under the contract. This must be deliberate. Successive versions of the General Conditions have been developed over time by expert conveyancing committees of the Law Society, and adopted by the Law Society, and were it intended that the balance of purchase monies should attract interest at the stipulated contract rate or any stated rate it can safely be assumed that an express provision would have been built into Condition 41(a). It would also have been open to the parties to vary the contractual position by special condition. Accordingly the trial judge erred in principle in ‘forming a remedy’ based on the stipulated rate applicable under Condition 25(a) when this was never agreed between the parties and Condition 41(a) contains its own mechanism for compensating the vendor where a purchaser fails to complete.
45. In their written submissions Counsel for the respondents rely on what Clarke J (as he then was) said on the law of damages in Kelleher v O’Connor [2010] IEHC 313, in which he found that a solicitor who acted in the purchase of a restaurant was negligent in failing to carry out appropriate pre-contract enquiries with the health authority in relation to compliance with hygiene regulations. Paragraph 31 of the respondents submissions try to justify the adoption of the 10% rate by the trial judge in the instant case by quoting Clarke J:
“[9.1] It is important to start with the fundamental proposition that, in almost all cases, the principal function of an 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 that 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.”
46. In my view this does not advance the respondents’ case. Clarke J was concerned with a case in negligence, and his comments on the law of damages in contract should be read in that context. Where he refers to the ‘starting point’ in contract cases this does not mean that express contract terms that directly bear on the consequences of a breach of contract are to be ignored. Condition 41(a) is one such term. Moreover if the position of the respondents is considered on the basis that the appellant had completed the Contract in accordance with its terms, then it is clear that they would have received the balance of the purchase monies which would immediately have been paid over to AIB to discharge in whole or in part the bank debt charged on the property. No interest, whether at the rate of 10% per annum or otherwise, would have been payable to the respondent if the appellant had completed the Contract in accordance with its terms.
47. It follows that the trial judge’s reasoning that 10% interest should apply because this is what the appellant would have paid if he had completed late does not stand up to scrutiny. It also cannot be said that adopting this form of remedy puts the respondents “in the position in which they would be in if the Contract had been performed”, because this is to ignore the mechanism of Condition 41(a) that applies where the contract has not been performed. It provides for the recovery of damages for any loss, not of interest. For the same reason the trial judge erred in suggesting that applying the 10% rate reflects “the parties’ own assessment of the amount of damages which would be incurred by a delayed sale”.
48. The trial judge states in paragraph 45 that for the reasons he gave, the court was “reluctant to replace that rate [10%] with its own interest rate.” He presumably had in mind the rate which the courts can apply pursuant to s.22 of the Courts Act, 1981, which currently stands at 2%. This indeed was the rate that he applied to the shortfall of €76,000, and in my view correctly. Section 22 provides:
“22.(1) Where in any proceedings a court orders the payment by any person of a sum of money (which expression includes in this section damages), the judge concerned may, if he thinks fit, also order the payment by the person of interest at the rate per annum standing specified for the time being in section 26 of the Debtors (Ireland) Act, 1840, on the whole or any part of the sum in respect of the whole or any part of the period between the date when the cause of action accrued and the date of the judgment.”
49. The subsection only empowers a court to add non-contractual interest when the court orders a payment. It was therefore open to the trial judge to add, as he did, interest at 2% to the €76,000 shortfall which he ordered be paid by the appellant to the respondents, covering the period from the date or closing of the resale on 13 September 2017 to the date of his judgment. However the subsection could not be utilised to order interest on the €1.3M purchase monies which Trinitymount paid to the respondents on the resale, as these were not a payment ordered by the court but rather a payment made by Trinitymount pursuant to its contractual obligation.
Assessing the damages
50. How then should the damages have been assessed? The starting point was General Condition 41(a). As the trial judge observed, when deciding that the resale did not have to take place within the one year period, Condition 41(a) does not exclude the vendor pursuing damages by reference to the normal rules for the calculation of damages for breach of contract because of the bracketed words “(without prejudice to such damages to which the Vendor shall otherwise be entitled)”. I cannot identify any reason why that should not apply to General Condition 41(a) in its entirety. Accordingly if the resale is at a price which is so reduced that the vendor is still at a loss even when credit is given for the forfeited deposit – as occurred here – then in my view the vendor in entitled to claim sufficient damages to put him/her “back into the position in which they would have been had the relevant wrongdoing not occurred” – per Clarke J (as he then was) in Kelleher v O’Connor. Accordingly the correct approach was to ascertain the respondents’ actual loss arising from the appellant’s failure to complete, viewed as of the date of completion of the resale. When this is ascertained and payment ordered it will put the respondents back into the position in which they would have been had the appellant not defaulted.
51. This was not addressed at all in evidence or argument in the High Court, or even before this court. The case seems to have proceeded, from written submissions to judgment to appeal, on an assumption that the damages should be addressed by an award of interest. Yet prima facie the actual loss suffered by the delay between the Agreed Closing Date of 17 June 2016 and the completion of the resale on 13 September 2017 (454 days) is clear from consideration of Special Condition 8 of the Contract. That contains the respondents’ solicitor’s undertaking to discharge the AIB charges over the property from the proceeds of sale. An identical undertaking is given in Special Condition 8 of the contract for sale to Trinitymount. Thus prima facie the actual loss was the additional interest in fact charged by AIB on the sums owed to the bank over that 454 day period.
52. In paragraph 42 of his Witness Statement Mr. Schuster states –
“I say that AIB Bank Plc wrote to us on the 24th August 2017 and confirmed that the bank would release its charge over the property provided that they received €1,401.146.81 by the 28th August 2017. I say that we were advised that interest as and from 28th August 2017 amounted to €119.65 per day.”
In paragraph 24 of his Witness Statement Mr. Donegan states that AIB agreed to release their charge over the property “upon receipt of the sum of €1,401,146.81 which was the total sum due and owing by the Plaintiffs to the bank…on the 30th September 2017, and the security was subsequently released on the 27th November, 2017”.
53. This evidence falls short of identifying the principal due as of 17 June 2016 and the interest actually added during the 454 days ending on 13 September 2017: there may have been rate changes or payments against principal or interest (e.g. from rental income) over that period; interest may have been compounded; and there may have been a moratorium on interest. As a result the figure of €119.65 per day may not have been a constant. However assuming for illustrative purposes that it was a constant, then the actual interest accrued over the period would have been 454 x €119.65 which comes to €54,321.10. If there was a moratorium or concessionary rate agreed between the bank and the respondents then the appellant is entitled to the benefit of that because it represents the actual loss and the respondents had a duty to minimise their losses.
54. It will be noted that this illustrative figure is substantially less than sum of €171.151.40 awarded for interest in the High Court. On this basis I would accept the appellant’s main argument that the adoption of the 10% interest rate by the trial judge put the respondents “in a better position than they would have been if the contract had been performed”, and was, in principle, the wrong approach to assessing damages. As the appellant must succeed on this point it is not necessary to consider the question whether the rate applied by the trial judge should be struck down as penal which was ground (d) in the Notice of Appeal.
55. If the figure for actual loss of interest is awarded as damages, and added to the €76,000 shortfall, and taking into account the €74,000 forfeited deposit, the position is reached where the respondents are, at least theoretically, restored to the position in which they would have been if the Contract had been completed without any default or delay. This does not take into account that during the 454 days the respondents remained in receipt of the rents and profits, but would have had outgoings; this may have resulted in loss but is more likely to have resulted in profit. It also excludes interest arising after 13 September 2017. In principle the respondents should have been able to pay the monies received from Trinitymount to AIB to discharge the mortgage within a day or two of closing on 13 September 2017 (a Sunday), and in light of their duty to minimise losses this should have been done to stop the clock running on the interest.
Conclusion
56. On this basis and for the reasons given I would allow the appeal in part and, by reference to the Order of the High Court I would order as follows:
1) I would vacate the Declaration made “(d) that the rate of 10% interest is applicable to the Contract for Sale for the period between the date that the Contract for Sale should have closed up until the Contract for Sale actually closed with the third party” and would substitute therefor the following Declaration:
“(d) that in addition to the sums to which the Plaintiffs are entitled by virtue of Condition 41(a) the Plaintiffs are entitled to recover as actual loss the interest that accrued in respect of the relevant borrowing from AIB for the period of 454 days from 17 June 2016 when the Contract for Sale should have closed to 13 September 2017 when the Contract for Sale with the third party actually closed as damages for breach of contract”.
2) In all other respects I would affirm the Declarations made in the High Court.
3) I would vacate the Order that the Plaintiffs do recover as part of the damages –
“(2) Interest in the amount of €171,151.40, being interest at the rate of 10% per annum on the amount of the agreed sales price not received by the Plaintiffs on the agreed closing date (the sum of €1.376 million) for the period prior to the completion of the sale (i.e. being the period from 17th June 2016 – 13th September 2017, a total of 454 days)”
and I would substitute therefor –
“(2) The actual interest that accrued in respect of the relevant borrowing by the Plaintiffs from AIB for the period of 454 days from 17 June 2016 when the Contract for Sale should have closed to 13 September 2017 when the Contract for Sale with the third party actually closed, in such sum as maybe agreed or in default of agreement as be ascertained by the Court.”
4) Consequently I would delete the words “in the sum of €248,871.27” from that part of the order that reads “IT IS HEREBY ORDERED that the Plaintiffs do recover from the Second Named Defendant damages in the sum of €248,871.27 made up as follows:”,
5) I would affirm the orders at (1) and (3) for recovery by the Plaintiffs of the sums €76,000 and €1,719.87 respectively.
6) I would postpone making any orders in respect of costs in the High Court or this court pending hearing further argument.
57. It would be a singular waste of time and resources, both for the parties and the courts, if this court were at this point to remit the matter to the High Court simply to ascertain the actual interest that accrued on the AIB debt over the relevant 454 days. In the present appeal this should be resorted to only if there is a factual dispute that cannot be resolved by agreement in this court.
58. I would therefore direct that within 28 days the respondents should swear and deliver an affidavit setting out and vouching details of the relevant account(s) for the 454 day period of 17 June 2016 to 13 September 2017 which resulted in AIB’s letter of 24 August 2017 to Adams Law with the figures identified in paragraph 42 of Mr. Schuster’s Witness Statement, or alternatively file and deliver an affidavit from AIB with the same information. This affidavit should be furnished to the appellant with a net figure which he should be asked to agree in substitution for the interest figure of €171,151.40 awarded in the High Court at paragraph (2) of the order. The matter should then be relisted before this court not later than two months from the date of delivery of this judgment for final orders and to address any questions of costs.
As this judgment is being delivered electronically, Murray and Collins JJ. have indicated their agreement with it.
Leggett v Crowley
[2020] IECA 3
Ms. Justice Costello 22nd day of January 20201.
This is an appeal against the Order for specific performance of a contract for the sale ofland known as Newbarn, Kilsallaghan, County Dublin, being the property comprised inFolio 49441F of the Register of Freeholders County Dublin (“the property”), for €460,000by O’Connor J. on 10 April 2019 following a written judgment delivered on 27 March2019, [2019] IEHC 182.Background2. The appellant purchased the property in 2002 and on 31 October 2002 he was registeredas the full owner of the property. He constructed a dwelling house on the lands where heresides with his partner and his father. The appellant was a builder and he provided theproperty as security in the form of a first legal charge for two loan facilities advanced tohim by Bank of Scotland (Ireland) Limited (“BOSI”) in May 2006 and March 2008. On 13July 2006, BOSI was registered as the owner of the charge on the folio.3. Along with many others in the last decade, the appellant experienced significant financialdifficulties and he defaulted in his obligations under the loan facilities. On 4 October 2012solicitors for BOSI demanded repayment of the outstanding loans in the sum of€997,482.02. Subsequently, on 11 December 2012 they demanded possession of theproperty.4. On 20 December 2012 the appellant’s solicitors, Eamonn Greene & Company (“Greenes”),advised BOSI that the property was for sale following discussions the appellant had withthe bank where he indicated that he would sell the property and use the proceeds of saleto pay down his outstanding indebtedness.5. The respondent was anxious to purchase a home for his family. He viewed the propertyon two occasions in October 2013 and made an offer to purchase the property for thesum of €475,000 to the appellant’s auctioneer. The auctioneer accepted the respondent’sPage 2 ⇓offer on behalf of the appellant. The purchase price was subsequently reduced byagreement to €460,000.6. By letter dated 18 February 2014, Bank of Scotland plc (“BOS”) (with whom BOSI hadmerged in a cross-border merger) informed Greenes that the appellant must providecleared funds in the sum of €445,887.20 to BOS before it would release the charge on thefolio.7. A contract for sale was executed by the appellant in the presence of his solicitor on orabout 24/25 February 2014, whereby he agreed to sell the property to the respondent for€460,000. Greenes forwarded the executed contract to the respondent’s then solicitors on25 February 2014, together with a copy of the letter of BOS dated 18 February 2014. Theclosing date fixed by the contract was 4 March 2014.8. In replies to requisitions on title, the appellant said that there was no litigation pending orthreatened in relation to the property, no other person had any direct or indirect interestin the property and there was no boundary dispute in relation to the property. At thehearing the appellant claimed that there was a dispute regarding the boundary; there wasoutstanding litigation regarding the boundary dispute and the appellant asserted that hisfather, with whom he resided, had an interest in the property by reason of financialassistance he received from his father when he purchased the property. He did not clarifywhether this interest was a charge securing a loan to the appellant or an equitableinterest reflective of the father’s contribution to the purchase of the property.9. The appellant failed to complete the sale and the respondent instituted proceedingsseeking specific performance of the contract on 20 June 2014.The defence of the appellant10. Initially, the appellant maintained that he did not execute the contract for sale. Prior tothe conclusion of the trial, that assertion was withdrawn. Secondly, he said that the courtshould not order specific performance as the contract was illegal and, therefore,unenforceable. He asserted that the appellant and the respondent agreed that therespondent would pay €525,000 for the property, €460,000 of which would be recordedas the purchase price in the contract for sale and the balance of €65,000 would be paidby the respondent directly to the appellant in the form of an “under the table” cashpayment, thereby under-declaring the stamp duty payable on the transaction. Thirdly, itwas argued that there was a boundary dispute in relation to the property. The appellantasserted that the house was, in fact, partially erected on the lands of an adjoining ownerin respect of which there were outstanding proceedings. It was not possible, in thecircumstances, to order specific performance of the contract as the court could notextinguish a third party interest in the land. Finally, it was said that the appellant, hispartner and his father would each suffer hardship by virtue of losing the home in whichthey resided. In addition, the appellant’s father would suffer hardship because he wouldnot receive compensation for sums he provided to the appellant to assist in the purchaseof the lands and in the construction of the house in 2002.Page 3 ⇓Judgment of the High Court11. As noted above, the appellant did not maintain his argument that he did not execute thecontract for sale. The trial judge rejected the allegation that the respondent had agreed topay part of the consideration as an “under the table” cash payment. He, therefore,rejected the argument that the contract was illegal and, therefore, unenforceable. Thisfinding has not been appealed.12. An adjoining landowner had taken proceedings for trespass on 27 July 2004 against theappellant (“the trespass proceedings”). The trespass proceedings came on for hearing on20 June 2006 and were adjourned generally. No further steps had been taken in thetrespass proceedings, though a notice of intention to proceed was served in 2012.Furthermore, the appellant’s then solicitor, Mr. Greene, gave evidence that therequisitions on title were completed in accordance with the appellant’s instructions. It willbe recalled he specifically confirmed that there was no litigation pending or threatened inrelation to the property, and there was no boundary dispute in relation to the property.13. The respondent gave evidence that he only became aware of a possible boundary disputein November 2017 when the appellant was represented by a different firm of solicitors.The court accepted this evidence. In light of these facts, the trial judge concluded thatthere was no evidence of a continuing dispute in relation to the boundary or the allegedtrespass by the appellant on the lands of his neighbours. The trial judge noted that “[t]heplaintiff is aware of this risk and accepts the disclosure for the closing of the sale.” He,therefore, rejected the argument that specific performance could not be ordered on thegrounds of alleged impossibility.14. The appellant had further referred to the “unascertained position” of Start Mortgages, thesuccessor in title of BOS. The trial judge held that Start Mortgages would not be entitledto resile from the position of BOS communicated in the letter of 18 February 2014, andthus, would be required to release its security over the property upon payment of a sumof €445,887.20 (being the net proceeds of sale). The trial judge held that the appellantwas not entitled to rely on a possibility that Start Mortgages might not accept the netproceeds of sale as a reason to withhold an order of specific performance when he hadnot adduced any evidence that Start Mortgages would not release his security uponreceipt of the net proceeds of sale under the contract.15. The trial judge also rejected the appellant’s argument that he should not be ordered tospecifically perform the contract on grounds of hardship. The appellant argued that anorder for specific performance would cause him hardship due to the loss of his familyhome. In addition, the appellant claimed that his father made a contribution of €50,000 tothe appellant for the home. As his father also lives in the property, an order of specificperformance would result in his father losing his home and receiving no compensation forhis contribution of €50,000 to the property.16. The trial judge made no findings of fact with regard to the claimed hardship on the part ofthe appellant, his partner and his father. He accepted that the appellant was assistedPage 4 ⇓financially by his father but he made no finding that the appellant’s father had anyinterest in the property, or on the extent of the financial assistance.17. The trial judge said that the appellant entered into the contract willingly and in an effortto deal with his liabilities with BOS. The height of his case was that the appellant wasprepared to sell his home in 2014. He raised no issue at the time that the sale of hishome would cause either the appellant, his partner or his father hardship due to the lossof the family home. The trial judge held that the hardship asserted must be external tothe contract in order to preclude performance of the contract. As this was not so, herejected that argument. He, therefore, made an order that the appellant specificallyperform the contract for the sale of the property and declined to order the payment ofdamages in lieu of specific performance.The appeal18. The appellant appealed the decision of the High Court on the grounds that performance ofthe contract is impossible by virtue of the boundary dispute that exists in relation to theproperty and/or that specific performance should be refused because of the allegedhardship which the appellant, his partner and his father would suffer if the contract was tobe completed.19. At the hearing of the appeal, counsel for the appellant said that the sole issue in the casewas whether damages should be awarded in lieu of specific performance.20. The appellant argued that the trial judge erred in ordering specific performance of thecontract because this would entail extinguishing the interest of the neighbouringlandowner in the lands or compelling the neighbouring landowner to concur in theconveyance. This argument is misconceived. It is open to a purchaser to elect to takewhatever title the vendor has to give. This is set out in Wiley and Woods, IrishConveyancing Law (4th ed., Bloomsbury Professional, 2019) at p. 632 where the authorsstate:-“One of the primary objects of a decree of specific performance of a contract for thesale of land is that the purchaser should become the owner of the land to theextent agreed in the contract. Clearly this will not be the result if the vendor has abad title and so is unable to transfer the title he undertook to transfer by hisagreement with the purchaser…..However, as in the case of misdescription, thepurchaser may elect to take whatever title the vendor has to give…”.There is no suggestion that the vendor conveys that which he does not have and,thereby, extinguishes the interests of a third party in the land. Nor is there anysuggestion that a third party is required to “concur in the conveyance” in order to ensurethat the purchaser obtains the title that a vendor undertook to transfer by his agreementwith the purchaser. It is merely that the purchaser may get less than he bargained for.The trial judge clearly understood this. At para. 56 of the judgment, he does not purportto extinguish any alleged interest of the neighbouring landowner. Rather, regarding thepossible alleged trespass, the appellant is required to give the respondent the best title toPage 5 ⇓the property which the appellant can, on the basis that the respondent is “aware of thisrisk and accepts the disclosure for the closing of the sale.” In my judgement, there wasno error on the part of the trial judge in this regard and thus, this ground of appeal mustfail.21. The Supreme Court accepted in Lavin v. Walsh [1964] I.R. 87, at p.105, that the courthas power to refuse an order for specific performance on the grounds of hardship. To doso is “quite unusual and exceptional”. In Patel v. Ali [1984] CH 283, Goulding J. statedthat:-“…only in extraordinary and persuasive circumstances can hardship supply anexcuse for resisting performance of a contract for the sale of immovable property. Aperson of full capacity who sells or buys a house takes the risk of hardship tohimself and his dependents, whether arising from existing facts or unexpectedlysupervening in the interval before completion.”I accept that this statement reflects the law in this jurisdiction.22. In Roberts v. O’Neill [1983] I.R. 47, at p.56, McCarthy J. speaking for the Supreme Courtstated:-“Hardship is permitted to defeat specific performance where an existing hardshipwas not known at the relevant time, being the date of the contract.”23. The claim of hardship was never pleaded or articulated in advance of the trial. It is notclear upon which basis the appellant was permitted to raise this argument in the HighCourt. The High Court made no findings of fact which would support any plea of hardship.Insofar as the case was based upon the economic pressures which obliged the appellantto sell his family home in order to meet his pressing financial commitments, this cannotsuffice to justify the exercise of the court’s exceptional power to withhold granting anorder of specific performance in a case in which it is otherwise appropriate to grant suchrelief. Such a proposition would fundamentally undermine contractual certainty and wouldleave purchasers in an unclear position of never knowing whether they, in fact, hadconcluded enforceable contracts for the sale of land.24. No specific facts as regards the hardship that may be suffered by the appellant’s partnerare asserted, other than the obvious fact that the sale involves the sale of the property inwhich the appellant and his partner currently reside which I have held is not sufficient tojustify the withholding of an order of specific performance. There is no finding that theywill have nowhere to live, and it seems this case was not made on his behalf.25. The appellant argued on appeal that he was compelled to sell the family home by reasonof his indebtedness and that the trial judge ought to have refused to order specificperformance on grounds of hardship based on this fact. The trial judge did not err in thisregard. He held as a fact that the appellant entered into the contract willingly. Thatfinding is binding on this court and no basis for overturning it was advanced. Even if aPage 6 ⇓purchaser were constrained by the need to repay debts to sell his family home, that alonecould not be a sufficient answer to a claim for specific performance. Therefore, there is nofactual basis to support the argument on behalf of the appellant and his partner.26. As regards the claim that sale of the property would involve hardship to the appellant’sfather, it is to be noted that the appellant is registered as the sole owner of the folio. Theappellant executed a first legal charge over the property in favour of BOSI which was notsubject to any alleged interest of his father. No interest of his father was registered onthe folio at the time the appellant entered into the contract. In replies to requisitions, heindicated that no other person had an interest in the property and the trial judge found,as a fact, that the respondent was not informed of any alleged interest of the appellant’sfather in the property. It is to be borne in mind that the trial judge did not find that theappellant’s father had any interest in the property, he merely held that in 2002 he hadprovided financial assistance to the plaintiff. In the circumstances, in my judgment, thetrial judge was correct to hold that the appellant had not made out a case of hardship inrespect of his father either.27. Furthermore, any hardship allegedly arising from the sale of the property was well knownto the appellant at the time he entered into the contract and he did so willingly. He,therefore, cannot bring himself within the parameters of Roberts v. O’Neill.28. The appellant’s reliance on the decision in Aranbel Ltd v. Darcy and Others [2010] 3 I.R.769 is misplaced. While Clarke J. observed that it was possible that the hardshipjurisprudence might have some application in circumstances where a defendant purchasercould complete a contract for sale only by selling his family home or some other asset,that is the exact opposite of the position in this case. In these proceedings, the appellantis the vendor and, therefore, he always contemplated the sale of his family home when heentered into a contract for the sale of the property. Furthermore, he will obviously obtaina reduction of his liabilities when the proceeds of sale are used to repay a portion of theseliabilities.29. It is also important to bear in mind that the court has a discretion whether to awardspecific performance of a contract. Specific performance, and relief from specificperformance, are equitable remedies and, therefore, equitable principles apply to thecourt’s exercise of its discretion with regard to either relief. It is, accordingly, relevant toconsider the actions of the appellant when assessing his argument that he should not beordered to perform his contract on the grounds of hardship. The appellant provided a firstlegal charge over the property in favour of BOSI without apparent reference to anyalleged trespass by him on the adjoining lands, or any interest of his father in theproperty. From October 2012, BOS was entitled to repossess the property on foot of theregistered charge of BOSI. From 2012 until 2014, the appellant was willing to sell theproperty and provide the proceeds of sale to BOS in an effort to deal with hisindebtedness to BOS. At the time of the execution of the contract for sale of the property,the appellant remained indebted to the BOS for a sum of approximately €1 million.Page 7 ⇓30. Finally, the conclusion of all of the arguments of the appellant was that the trial judgeought to have awarded the respondent damages in lieu of specific performance. Thisargument seems to me to be without merit. The appellant entered into a bindingenforceable contract for the sale of the property. Prima facie, the respondent is entitled tothat which he bargained for and, therefore, specific performance should follow. Ifdamages in lieu are to be awarded there must be a reality to the disappointed purchaserrecovering those damages, otherwise the purchaser receives no relief for the wrong doneto him. The trial judge found, as a fact, that the appellant is in debt to Start Mortgagesfor approximately €1 million. There was no evidence regarding any other debts or assetsof the appellant. The appellant adduced no evidence and the trial judge made no findingas to his ability to meet any award of damages. The argument that he could meet anaward of damages out of the proceeds of sale of the property which exceeded the sumwhich BOS agreed to accept as a condition of releasing the charge is untenable and, inany event, is predicated upon the very thing the appellant allegedly seeks to avoid: thesale of the property. This is no more than a disguised argument that he wishes to obtain abetter price for the sale of the property. I have no hesitation in rejecting this argument.31. In my judgment, the trial judge was correct in holding that it was not appropriate torefuse to order specific performance of the contract on the asserted grounds of hardship,and so this second ground of appeal likewise fails.32. In addition to these arguments which had been advanced in the High Court, counsel forthe appellant raised arguments at the hearing of the appeal which had not been pleaded,were not raised in the High Court, and were not in the grounds of appeal. This is notpermissible and no basis for departing from this central rule of procedure was suggested;therefore, those submissions are not addressed in this judgment.Conclusion33. The fact that there may be a dormant boundary dispute affecting the property for saledoes not mean that specific performance of the contract should not be ordered on thegrounds of impossibility.34. The appellant has not established as a matter of fact that the sale, by him, of his familyhome to the respondent would result in hardship such that a decree of specificperformance of the contract should not be ordered. Similarly, no case was establishedthat the appellant’s father would suffer a hardship arising from the sale of the familyhome such that an award of specific performance of the contract should be refused.35. The appellant has not established that the trial judge erred in law by making an order forspecific performance of the contract of 25 February 2014, rather than awarding damagesin lieu of specific performance.36. Accordingly, I would refuse the appeal and affirm the order of the High Court.
Gibbons v Doherty & anor
[2019] IECA 275
Ms Justice Baker delivered on the 30th day of October, 2019
1. This appeal concerns the execution by a purchaser of a contract for sale of real propertyin trust or as agent in the light of the provisions of General Condition 30 of the LawSociety General Conditions of Sale, 2001 Edition (the “General Conditions of Sale”).2. The appeal is from the order of Murphy J. made on 19 March 2013 following delivery of awritten decision on 14 March 2013, Gibbons v. Doherty [2013] IEHC 109, by which heordered specific performance against the second defendant/respondent, ADT InvestmentsLimited (“the Company”), of an agreement executed in writing dated 21 December 2006and made between the plaintiff/appellant, Mr Gibbons, as vendor and the firstrespondent/defendant, Mr Doherty, as purchaser in trust. By implication, the trial judgerefused to order specific performance against the first defendant/respondent.3. For convenience I propose to refer to the plaintiff/appellant and the firstdefendant/respondent by their names or, where appropriate, as “purchaser” or “vendor”.4. There is relatively little dispute between the parties regarding the factual context and theprimary issue for determination arises from the execution by Mr Doherty of the contractfor sale in trust and his subsequent nomination of the Company as beneficiary andpurchaser. At the date of the contract, the Company had not yet been incorporated.5. No issue arises concerning the application of s. 37 of the Companies Act 1963 (now s 45of the Companies Act 2014) as the parties accept that the section has no application, asthe contract was not made expressly by way of a pre-incorporation contract and MrDoherty did not execute the contract on behalf of a company yet to be incorporated.6. The matter is to be determined by reference to the provisions of the General Conditions ofSale, the legal effect of the execution of a contract in trust by a purchaser, and the factssurrounding the nomination of the Company as purchaser.Page 2 ⇓7. Mr Gibbons argues that he is entitled to specific performance against Mr Doherty and notjust against the Company, and he makes this assertion for the practical reason that theCompany does not have the financial means to complete the sale.Background8. By plenary summons issued on 21 May 2009, Mr Gibbons sought an order for specificperformance of a contract in writing made on 21 December 2006 for the sale of threeplots of land, part of Folios 1984 and 17310F of the Register of Freeholders, CountyDonegal, comprising 7.93 hectares or thereabouts. He also claims damages for breach ofcontract in addition to, or in lieu of, specific performance.9. The contract for sale made in writing incorporated the General Conditions of Sale and MrGibbons thereby agreed to sell to Mr Doherty the folio lands therein described for the totalprice of €4m and subject to the general and special conditions therein contained. Thepurchaser Mr Doherty is defined as acting “in trust”.10. The sale was agreed to be closed in three lots and the sales of lot 1 and lot 2 were closedwithout difficulty in accordance with the special conditions in that behalf, which providedfor the closing of the first lot within fourteen days after the receipt of loan finance, and ofthe second lot twelve months thereafter. The purchase price was apportioned as to thefirst lot in the sum of €2m, and as to lots 2 and 3 in the sum of €1m each. It is in respectof the completion of lot 3 that the claim for specific performance was brought and theSpecial Conditions provide that completion of that sale was to take place twenty-fourcalendar months from the date upon which the first completion had taken place. In theevent, the sale was therefore agreed to close on or before 29 March 2009.11. On 28 February 2007 the solicitors for the purchaser identified the Company as thepurchaser, and thereafter raised requisitions on title and furnished a draft deed of transferon its behalf. The sale of the first two lots closed to the Company by direct sale to theCompany and not by sub-sale. The transfer of 29 March 2007 from Mr Gibbons of lot 1was made to the Company as was that of 24 April 2008 of lot 2. The sale of lot 3 did notclose as agreed.12. The correspondence from the solicitors for the purchaser thereafter identified theCompany as purchaser, and some of the correspondence from the vendor’s solicitor didlikewise, although I note that the name of another company in which Mr Doherty waspersonally involved appeared in the heading on correspondence on most, but not alloccasions, and that that company was also named as purchaser in correspondence fromthe solicitors for the purchaser in 2008. I will return below to the argument made on thepart of Mr Doherty that the actions of the vendor in treating the Company as purchaser ofthe two first lots are inconsistent with the case it now makes against Mr Dohertypersonally and that the vendor is estopped from seeking specific performance against MrDoherty personally.Page 3 ⇓13. By completion notice served pursuant to General Condition 40 of the contract for sale anddated 3 April 2009, the vendor called upon the purchaser to close the sale in respect oflot 3 within 28 days from the service thereof.14. The purchaser was identified in the completion notice and in the subject line of the coverletter of 3 April 2009 as “Daniel Doherty in trust for ADT Investments Limited and A.D.T.Investments Limited.” The completion notice had been served after a “without prejudice”letter was sent by the solicitors for the purchaser dated 20 November 2008, in which itwas stated that the Company would be unable to proceed to close the sale of lot 3 as thesevere downturn in the economy and general banking conditions made it impossible forthe Company to obtain finance. It seems from the letter that Mr Gibbons had beeninformed of this fact at a meeting with Mr Doherty personally some weeks earlier. Thatletter invited the vendor to vacate the remainder of the agreement and was met some tendays later by the completion notice.The High Court decision15. The trial judge, having reviewed the sequence of events, made findings of fact which Inow propose to outline. At p 13, under the heading “decision of the court”, the trial judgestated that the first two lots were:“purchased by the second named defendant without any issue being raised by thevendor.”16. The events surrounding the difficulty in obtaining finance to close the purchase of thethird lot were described and the trial judge recites the fact that the solicitors for thevendor did not understand that the contract was to close by means of a deed of sub-saleto which Mr Doherty and the Company would be parties. At p 25, the trial judge madethe finding of fact on which the legal issues in this appeal centre:“The court is satisfied that the plaintiff accepted the second named defendant aspurchaser in respect of lots 1 and 2. The completion of the purchase of lot 3 wasnot pursuant to a separate contract, but to the same contract of the 21stDecember, 2006.The contract in question was in respect of freehold registered land, was of acommercial nature, the first named defendant had contracted in trust, the identityof the company was made known prior to the closing of the first lot, was notsubject to loan approval and was closed by the second named defendant in respectof lots 1 and 2.”17. In the circumstances, the trial judge, having taken the view that the sale of the third lotwas also to be completed by the Company, and that Mr Doherty, as trustee, had nopersonal obligation to complete the sale, made the order for specific performance againstthe Company only.Page 4 ⇓18. Mr Gibbons argues that the trial judge failed to make any finding of fact but theseextracts from his judgment are, in my view, findings of fact and are to be treated as suchfor the purposes of the appeal.The grounds of appeal19. Mr Gibbons has appealed the order of Murphy J. by notice of appeal dated 16 April 2013on grounds which may be summarised as follows:(1) the trial judge failed to properly interpret and/or apply the provisions of GeneralCondition 30 of the General Conditions of Sale of the contract;(2) the trial judge erred in not finding that the correct interpretation and meaning ofGeneral Condition 30 is that the person signing a contract in trust must be acting inreality for or on behalf of another real and, then, existing person whom he cantruthfully later identify as principal or other person on whose behalf, as a matter oflaw, he was acting at the time of signing the contract. In the circumstances wherethe Company was not incorporated at the date of the execution of the contract, andwas not incorporated until 23 February 2007, two months or thereabouts followingthe signing of a binding contract for sale, Mr Doherty was properly to be heldpersonally liable;(3) the trial judge erred in law in finding that the provisions of General Condition 30 ofthe contract for sale relieved Mr Doherty from personal liability under the contractsigned by him.20. The respondents argue that, as a matter of law, the signing in trust of the contract forsale by Mr Doherty meant that he had no personal liability once he identified theCompany as the beneficiary of the contract, and that, on the facts surrounding the closingof the contract in respect of lots 1 and 2, the vendor had accepted the Company aspurchaser. It is argued that the contract is indivisible and that the approach for which thevendor contends is inconsistent with the indivisible nature of the contract in that it issought to make Mr Doherty personally liable in respect of part only of the contract andwhere the Company has closed the sale of the 2 out of the 3 lots for which the contractprovided.General Condition 30 of the General Conditions of Sale21. It is common case that General Condition 30 governs the contractual relationship, andboth parties rely on the meaning and import of the General Conditions of Sale.22. General Condition 30 was expressly incorporated into the contract and reads as follows:“A Purchaser who signs the Memorandum “in Trust”, “as Trustee” or “as Agent”, orwith any similar qualification or description without therein specifying the identity ofthe principal or other party for whom he so signs, shall be personally liable tocomplete the Sale, and to fulfil all such further stipulations on the part of thePurchaser as are contained in the Conditions, unless and until he shall havedisclosed to the Vendor the names of his principal or other such party.”Page 5 ⇓23. The words in quotation marks are those already defined in the Memorandum ofAgreement and, as I have noted, the purchaser was defined or identified as “DanielDoherty in trust”.24. Mr Gibbons argues that the provisions of General Condition 30 could not have beenintended to allow for substitution of any natural or legal person as principal, and that aperson signing a contract in trust must, in truth, be acting for a person on whose behalfhe is actually acting in trust at the date of signing the contract. In the absence of suchactual existing beneficiary, it is argued that the person signing in trust is personally liableas purchaser.25. Mr Gibbons argues that the contractual right engaged by Mr Doherty was the right torequire a sub-sale, explained in Wylie, Irish Conveyancing Law (3rd ed., Tottel Publishing,2005), para 18.18:“Subject to any agreement to the contrary, the purchaser can require the vendor toconvey the land to a nominee or nominees as directed, e.g. where he has effected asub-sale.”26. That is an uncontroversial proposition and one established by the authorities. The closingof a contract for sale by sub-purchase deed would not, of course, relieve the purchaserfrom liability under the contract, as the purchaser remains primarily liable to complete thesale.27. The appeal therefore centres on the correct interpretation of the contractual provisions bywhich a person purchases in trust, and whether and how a person is to be considered asacting in a representative capacity, whether as trustee or agent.28. What then falls for consideration is whether Mr Gibbons, as vendor, is correct that MrDoherty could not have been acting in trust for the Company when it did not exist as alegal entity at the time the contract was signed.29. A further limb of the argument on appeal is that General Condition 30 does not avail apurchaser who openly states at or near the time of signing that the transaction may at hisor her option be completed in his or her name or in the name of a company to beidentified, or in the name of a company not yet formed.30. This arises from a letter dated 20 December 2006, before the purchase of the first lot wascompleted, from the solicitors for the purchaser to the solicitors for the vendor, in which itwas said that Mr Doherty “has signed the Contract in Trust for the present”, but that“[t]he property may ultimately be acquired in his own name or in the name of a Companyto be determined.”Contracting in a representative capacity31. An agent who expressly contracts in a representative capacity on behalf of an unnamedprincipal may be excused from personal performance and the general rule is explained inPeel, Treitel on The Law of Contract (14th ed., Sweet & Maxwell, 2015) at para 16.071Page 6 ⇓relied on by counsel for Mr Doherty in his written submissions, in which the authors stateas follows:“Where the principal is undisclosed the agent is both entitled and liable; but thisrule does not apply where the agent uses words of representation and the principalis only unnamed. The agent’s failure to name the principal may make it easy toinfer that he intended to contract personally; but there is no general rule to thateffect.”32. The execution of a contract expressly in a representative capacity where the principal isunnamed, therefore, is capable of excluding personal liability by the agent or trustee. Anumber of different scenarios may prevent the operation of the rule, such as where aperson is not, in fact, an agent, or acts in excess of authority.33. Counsel for Mr Gibbons relies on the judgment of Costello J. in Dublin Laundry CompanyLtd v. Clarke [1989] ILRM 29, the conclusions in which have not been varied or rejectedin subsequent case law. Costello J. was dealing with a number of questions concerningthe execution of a contract for the sale of land and the relevant part of his judgment isthat relating to General Condition 5 which is in identical terms to General Condition 30.34. Costello J. was dealing with a contract for the sale of land where the purchaser hadsigned the contract at a time when he did not know whether title would be taken by anew company or by an existing company. The contract was not expressly made by thepurchaser in trust or as agent, and thus, on its face, there was no reason to believe thatGeneral Condition 5 was engaged.35. The first issue to be determined is whether the purchaser had in fact entered into thecontract in a representative capacity or as agent for a principal. Costello J. found that thedefendant did not, on the facts, contract in a representative capacity. The evidence ofthe purchaser was that he intended that a company would develop the land, but that atthe date of the contract he did not know whether title would be taken by a new companyor a company in which he already had an interest with a co-director. Various candidatecompanies were identified in evidence.36. Costello J. relied on the principles stated by Budd J. in Lavan v. Walsh [1964] IR 87, at p96, that:“The question as to whether an agent is to be deemed to have contractedpersonally in the case of a contract in writing depends on the intention of theparties as appearing from the terms of the written agreement as a whole.”37. At pp 38 and 39 Costello J. stated the proposition as follows:“It seems to me that this is not a case of a person entering into a contract onbehalf of a principal whose name has not been disclosed. The defendant had noprincipal at the time of the contract and he did not enter into it in a representativecapacity. It is the case of a person with the intention that the obligations andPage 7 ⇓benefits would be taken over by a third party, a limited company, which might notyet be in existence. In these circumstances condition 5 of the conditions of contracthave no application to the facts of this case […].”38. The judgment of Costello J. in Dublin Laundry Company Ltd v. Clarke can readily bedistinguished from the facts in the present appeal, as that defendant/purchaser had notsigned the contract either in trust or as agent and, as a matter of contract, the generalcondition had no application. Costello J. did not determine that the purchaser had notentered into the contract in a representative capacity because he had no existing principalat the time of the contract, but that, as a matter of fact, he had not entered into thecontract on behalf of any other person or body. Thus, the judgment is not authority forthe proposition that a contract signed in trust or as agent could not relieve a trustee oragent of personal liability if he had, in fact, no principal or beneficiary at the time of thecontract, and insofar as Costello J. determined otherwise, his conclusion was obiter.39. Mr. Doherty did sign in trust and the vendor accepted the capacity in which the purchasersigned, and this is further embodied in the description of “the Purchaser” in the first pageof the contract. Whether Mr Doherty contracted in a representative capacity is readilydetermined as he clearly did so on the plain words of the contract, and both partiescontracted on that basis.The beneficiary did not exist at the time of the contract40. It is the balance of the paragraph from which I quoted at para. 38 supra that is central tothe argument in the present appeal. Having determined that, on the facts, the purchaserhad not contracted in a representative capacity, Costello J. went on to say:“[I]t seems to me that even if the defendant had signed as agent he could not nowclaim to avoid a personal liability on the contract if he was not an agent, as I havefound. Therefore, I think the pleas in the defence have not been established.”41. The argument of the vendor centres on the issue of whether a person who purports to actas trustee or agent must have an identified principal in mind at the time of the contract,and whether such identified beneficiary or principal must exist at that time.42. By letter of 28 February 2007, the solicitors for the purchaser informed the solicitors forthe vendor that a new company, ADT Investments Limited, had been incorporated “as avehicle for the lands”, and Mr Gibbons argues that this fact means that, as a matter oflaw and fact, Mr Doherty was not, at the time of the contract, acting as agent for theCompany, and the nomination of the Company as purchaser did not retrospectivelyconstitute it as principal or beneficiary on whose behalf Mr Doherty had signed thecontract.43. Counsel for Mr Gibbons argues, in reliance on the obiter comment of Costello J., thatGeneral Condition 30 does not avail a purchaser even where he or she signs a contract “intrust” or “as agent” where, as a matter of fact, he had no principal at the time of signing,Page 8 ⇓but hoped or expected to vest his rights under the contract in a third party or companyyet to be incorporated and not yet identified.44. Counsel for Mr Gibbons argues that it is fatal to Mr Doherty’s argument that the Companyhad not been incorporated at the date of the contract and that, as a matter of fact, as notrust or agency existed at the date of the contract for sale, General Condition 30 has noapplication.45. It is argued, therefore, that whilst the purchaser in Dublin Laundry Company Ltd v. Clarkehad not expressly contracted in a representative capacity, the judgment of Costello J.remains the relevant authority as a signature in a representative capacity may not bemade in a vacuum and where, in fact, no beneficiary or principal exists or is incontemplation at the time of the contract.46. Counsel relies on the decision of the House of Lords in Keighley, Maxted & Co. v. Durant[1901] AC 240. There, the House of Lords was considering the liability of a contractingparty who intended to contract on behalf of a third party but without his authority andwho did not profess at the time of making the contract to be acting on behalf of aprincipal. The question was whether that third party could ratify the contract.McNaughten L.J. considered that, as civil obligations are not to be created by, or foundedupon, undisclosed intentions, the doctrine should not be extended to a case where aperson intends to act for another but, as he put it:“keeps his intention locked up in his own breast”, at p 247.47. He referred to the judgment in Brogden v. Metropolitan Railway Company (1877) 2 AppCas 666, at p 692, and said that the principle is well established.48. These conclusions can be distinguished, as the contracting party made no suggestion hewas acting for anyone but himself and seems to have had merely a hope or expectationthat the appellants would ratify or adopt the transaction. The case was decided on theterms of the contract and on the principles of authority generally. It does not offer anyguidance in the present case.49. The case of Kelner v. Baxter (1866) LR 2 CP 174 is relied on frequently as authority forthe proposition that when an agent contracts as agent or trustee, the principal orbeneficiary must be in existence at the time the contract is made in order that theprincipal or beneficiary may validly ratify the contract thereafter. There, certain personsexecuted as agent for a company but were held to be personally liable as no subsequentratification by the company, which was later incorporated, could relieve them fromliability without the assent of the plaintiff. That judgment centred to a large extent on theadmissibility of parol evidence to show that personal liability was not intended, but insofaras the judgment is relevant, it is noteworthy that Erle C.J. observed that:“an inchoate liability might be incurred on behalf of a proposed company, whichwould become binding on it when subsequently formed: but that notion wasPage 9 ⇓manifestly contrary to the principles upon which the law of contract is founded”, atp 183.50. That decision is rooted in the general proposition that the rights and obligations createdbetween the two parties to a contract “cannot be transferred by one of them to a thirdperson who was not in a condition to be bound by it at the time it was made”, at p. 183.51. The authors of Watts (ed.), Bowstead and Reynolds on Agency (20th ed., Sweet &Maxwell), at para. 2-060, explain this case as being authority for the proposition that:“The only person who has power to ratify an act is the person in whose name or onwhose behalf the act was purported to be done, and it is necessary that he shouldhave been in existence at the time when the act was done, and competent at thattime and at the time of ratification to be the principal of the person doing the act;but it is not necessary that at the time the act was done he was known, eitherpersonally or by name, to the third party.”52. While this may be a correct general proposition, and I am not required to decide that inthe present appeal, it seems to me that this appeal does not concern the law relating toagents in general, but to a contract for the sale of land on precise express terms.53. General Condition 30 has as its purpose the regulation of mutual obligations and rights byproviding that an agent or trustee who signs in that capacity remains personally liableuntil and unless the condition precedent for excluding such personal liability is met. Itmeans that a purchaser who contracts on behalf of an unnamed principal in trust or asagent remains personally liable until the principal or beneficiary is identified and unlessthat person is expressly identified. The use of the word “until” imports a temporalcondition which permits the identification of a principal or a beneficiary in due course, butrests liability with the agent or trustee until that happens.54. By signing as agent or trustee a person reserves onto himself or herself the right to sonominate the beneficiary or principal at any time until the sale closes. It seems to methat General Condition 30 must be read as permitting a person who expressly contractsas agent or as trustee to nominate or identify a person or body on whose behalf thecontract has been entered into even if that person or body did not exist or did not knowof the contract at the time it was made. General Condition 30, in its plain language, ispermissive and permits the nomination of the beneficiary or principal, but protects thevendor as it makes the agent or trustee personally liable until such time as this is done.55. The provisions of General Condition 30 mean that a purchaser who signs in arepresentative capacity has an agreed right, at some future time, to nominate the personwho, upon nomination, assumes contractual liability. The General Condition permits thetrustee or agent to be relieved from liability under the contract when, and if, that is done.56. To that extent, the provisions of General Condition 30 do not depend on the generalprinciples of the law of agency or those which permit the ratification by an undisclosedPage 10 ⇓principal of a contract made or purported to be made on his or her behalf. The GeneralCondition provides a means by which personal liability may be shifted to another personor body and makes the trustee or agent personally liable until and unless that happens.The corollary is that once it happens and once a principal or beneficiary is identified, thatperson or body is entitled to call for completion of the sale and is the person or body whomay be obliged to close.57. The General Condition therefore makes relevant not the time of the contract, but thetime at which the trustee or agent identifies the person on whose behalf he has agreed topurchase the lands. It means that that person may eventually be identified, and when soidentified, becomes the party entitled to the benefit and subject to the obligations of thecontract, and absent a special condition to vary that provision, is the express basis onwhich a party may be nominated as purchaser and the named agent or trustee excusedfrom performance.58. It seems to me that the present case does not fall to be determined on the question ofwhether Mr Doherty, who expressly contracted as trustee, contracted on behalf of a thenexisting beneficiary, as the vendor bound himself to a contract in which Mr Dohertypurchased in trust and which permitted the purchaser, provided he met the conditionsprecedent to avoiding personal liability contained in General Condition 30, to nominateanother person or body to take the contract.59. This appeal concerns the construction of the contract, the identity of the parties expresslyidentified in the contract, and the meaning and effect of General Condition 30. Theintention of the parties is not relevant, and even if it could have been shown on theevidence that Mr Gibbons intended to contract with a personal and not a corporatepurchaser, or with Mr Doherty and not one of his companies, the interpretative exercisedoes not admit of an analysis of his intention, and neither party has argued that anyambiguity exists in the express language of the contract.60. The trial judge made a finding of fact that the first defendant, Mr Doherty, contracted intrust and that the Company was identified as purchaser prior to the closing of the first lot.The factual matrix, therefore, against which the appeal is conducted, does not admit of orrequire an analysis of intention other than that which finds expression in the writtencontract itself.61. The completion notice, in fact, bears out the construction for which Mr Doherty contends,as it describes the purchaser as “Daniel Doherty in trust for ADT Investments Limited andADT Investments Limited”, and in its express terms called upon one or both of the namedaddressees to complete the sale but does not, in its terms, call upon Mr Doherty in apersonal capacity to complete.62. The contract did permit Mr Doherty to nominate a purchaser and that once he did so hethereupon was relieved of personal liability under the contract. I consider that the trialjudge was correct as a matter of law to so conclude.Page 11 ⇓A possible injustice?63. Counsel for Mr Gibbons argues that an injustice could result were a contracting party toidentify a straw man as principal or beneficiary after the contract was entered into. Thefrailty with that argument is that the parties to a contract for sale are free to nominatethe terms on which they agree, and a vendor may reject a contract signed as agent ortrustee and insist on personal liability. Equally, a vendor may exclude or otherwiserestrict the permissive terms of General Condition 30 or insist on a special condition thathe or she has may reject a nominated beneficiary or agent or insist on proof of funds. Avendor could, by a suitable special condition, prevent a purchaser from later seeking toavoid personal liability by nominating a person who could not close the sale bynominating a man of straw or a limited liability company without assets or means.64. A myriad of special conditions come to mind, including that a vendor could expresslyprovide for the forfeiture of a deposit, or require a larger deposit, in the event that anomination was made of a purchaser who was not in a financial position to close.65. In short, a vendor may refuse to contract with a purchaser in trust or as agent, or mayrequire that the beneficiary or principal be identified at the date of the contract, or mayreserve onto himself or herself as vendor the right to approve or reject the personnominated as principal or beneficiary.66. The matter comes down to the express contractual terms and the language of thecontract. Mr Doherty did sign in trust, was accepted to have signed in trust, and GeneralCondition 30 was not varied by any of the special conditions. Mr Doherty could avoidpersonal liability provided he identified a principal and remained personally liable until andunless he did so.67. I reject the argument of Mr Gibbons that the interpretation favoured by the trial judgecould lead to an injustice on that account.Reservation of right to take the deed personally68. Counsel for Mr Gibbons argues that the letter from the solicitors for the purchaser dated20 December 2006 is inconsistent with a true agency or trust as Mr Doherty, by thatletter, retained or reserved onto himself the right to close the sale of his own name. Inthat context, Mr Gibbons makes a further argument that because the solicitors for thepurchaser by the letter of 20 December 2006 had expressed the possibility that MrDoherty might take the property in his own name or in the name of a company, andthereby reserved onto himself the option to complete by either means, General Condition30 had no application.69. That argument fails to recognise that Mr Doherty was personally liable on the contract forsale and remained so unless and until he identified another party as purchaser. The letterof 20 December 2006, in my view, does no more than reflect that fact and is to be readas an acknowledgement of his contractual rights and obligations by Mr Doherty, viz thathe could take the deed in his own name and choose not to identify a beneficiary ortrustee, and that he was, as things then stood, entitled not to disclose a principal, and notto rely on his entitlement to do so further to General Condition 30.Page 12 ⇓70. That letter, in my view, does not vary the provisions of General Condition 30, nor can itbe read as a reflection of the view of Mr Doherty that no true trust or agency existed.71. I make this observation without taking any view as to whether the parol evidence rulemight mean that the letter could not be admissible as an interpretive tool.Is the contract divisible?72. The argument that the vendor has accepted the Company as purchaser may depend, toan extent, on whether it is possible to treat the contract for sale of the lots as divisible,and whether the vendor was entitled to reject the nomination of the Company aspurchaser of the third lot.73. Whether the contract was divisible in this sense requires an examination of its terms andconditions.74. The contract provided for the sale in three separate lots of the folios therein described aslot 1, lot 2, and lot 3. The proceedings related to the sale of lot 3. The Particulars andTenure describe the lands in sale by reference to the folios and read as follows:“ALL THAT AND THOSE that part of Folio 1984 County Donegal together with ALLTHAT AND THOSE that part of Folio 17310F County Donegal as outlined in red onthe map annexed hereto containing 7.93 hectares otherwise 19.595 or thereaboutsstatute measure.”75. A plain reading of that term suggests that what was in contemplation was one contract forthe sale of the land outlined on the one map attached to the contract. The SpecialConditions provided that title was to commence with the two folios and was to be deducedtherefrom and Special Condition 5 made provision for the closing of the sale in three lotsand at the dates provided. Special Condition 5(1) provides as follows:“The within sale shall be effected in three lots and the total consideration shown inthe Contract shall be apportioned as between the said lots in the following manner[…]”.76. The singular word “sale” is used.77. The contract then goes on to define the three lots by reference to the map attached to thecontract on which the lots were shaded blue, green, and orange and marked withdifferent letters. The three lots were defined by reference to the map and to the numberof hectares comprised in each lot.78. Special Condition 5(2) provided that, in respect of the completion of each lot, theconsideration was to be apportioned out of the total purchase price. The consideration forlot 1 was €2m, described as “portion of consideration”.79. The closing date for the sale of lot 1 was linked to the date at which the purchaserreceived finance and contained a proviso that the vendor could rescind the contract in itsPage 13 ⇓entirety should finance not be obtained by 16 March 2007, with a further provision for therefund of the deposit.80. The evidence, therefore, was that the vendor reserved to himself the entitlement torescind the entire contract had the purchaser not been in a position to fund the sale of thefirst lot. No special condition dealing with loan finance is contained by which the closingdates for lots 2 and 3 were to be ascertained, such closing dates being linked to theclosing in each case of the contract in respect of lot 1. All the relevant indices in thewritten contract and the Special Conditions point to parties having intended that thecontract would be indivisible and was to be treated as a single contract. The trial judgerecognised this in his finding recited on p. 25 of his judgment where he said:“The completion of the purchase of lot 3 was not pursuant to a separate contract,but to the same contract of the 21st December, 2006.”81. A reading of the contract would suggest that what was intended and agreed was thatthere would be one sale and that the contract price would be apportioned between thethree lots, and the sale close in respect of each lot on different sequential dates. Thesingular is used, and the reference is to the “total consideration”, the “within sale”, andthe total consideration is then apportioned as was the total area of land in sale.82. The trial judge had ample evidence on which to make that finding of fact, and theinferences that he drew from the contract documentation bore out this interpretation.Estoppel83. The respondents make the argument that the appellant is estopped by his conduct innow rejecting the Company as nominee or beneficiary of the trust under which MrDoherty executed the contract. Because of the view I take that the trial judge wascorrect that the contract was indivisible, and that, by its terms, Mr Doherty expresslyentered into the contract in a representative capacity and thereafter identified theCompany as purchaser, I do not propose to consider whether the facts bore out anargument that Mr Gibbons is estopped by his conduct from seeking to treat Mr Doherty aspersonally liable. Further, there was no finding of fact that might enable an appellatecourt to consider whether estoppel arises.Conclusion and summary84. General Condition 30 permits a person who has expressly signed a memorandum of salein trust or as agent, or using a similar formula, to nominate his principal or beneficiary.The General Condition does not provide in its express language that the principal orbeneficiary must be in existence at the time of the contract but sets in place a structurecapable of being availed of by a party who signs in a representative capacity to disclosethe name of his principal or such other party, and to nominate that person as purchaser.Commercial reality often requires a degree of flexibility or confidentiality regarding theidentity of a principal and might lead to a desire not to disclose the name of a principaluntil close to or at the date of completion. The General Condition is permissive to thatextent, but may be varied by special condition.Page 14 ⇓85. The trial judge found, as a matter of fact, that the contract was entered into on trust andthat the trust was accepted by the vendor. Mr Gibbons must be regarded as havingaccepted that Mr Doherty’s execution of the memorandum of sale in a representativecapacity enabled him to avoid personal liability by the nomination of the Company as heduly did. There was no discussion in the correspondence that the sale be closed by a sub-sale, nor did the completion notice served for the failure to close the contract for the thirdlot suggest that the vendor had in mind that the deed would be a transfer by way of sub-sale.86. For the reasons I have identified, it seems to me that the trial judge was correct in hisconclusions and that the appeal must fail.
Result: Appeal dismissed; Adjourned Re: Cost to Monday, 11/11/19, at 10.00 a.m.
Leggett v Crowley
[2019] IEHC 182
Judgment
Title:
Leggett v Crowley
Neutral Citation:
[2019] IEHC 182
JUDGMENT of Mr. Justice Tony O’Connor delivered on the 27th day of March, 2019
Table of Contents
Introduction 2
Background History 2
Loan from Bank of Scotland Ireland 2
Release of Property as Security 4
Leading up to the Contract 4
The First Viewing 4
The Second Viewing 5
Initial sale price 5
Revised Sale Price 5
Defendant’s claims regarding the sale price 6
Boundary Dispute 7
Execution of the Contract 8
Discovery 9
Failure to Call the Father of the Defendant 10
Conclusion 12
Legal Submissions on the Claim 12
Illegal Contract 13
Conclusion 14
Impossibility 14
Conclusion 18
Hardship 19
Conclusion 22
Summary 23
Appendix 24
Introduction
1. The defendant has been in possession of his home in Kilsallaghan, Co. Dublin since it was built in 2003 and more significantly, since the closing date of 4th March, 2014, for its sale to the plaintiff and the prosecution of these proceedings seeking specific performance which were commenced in June 2014.
Background History
2. According to the defendant, he has been involved in the construction industry from his early days. He bought land which is now comprised in Folio 49441F, Co. Dublin (” folio “) in 2002, when he was about 21 years of age. The defendant resides with his partner and his father in the home which was built on the lands comprised in the folio. The defendant also gave evidence that the total construction cost for his home was approximately €600,000 to which the defendant’s father contributed a significant sum.
3. Notification of grant of approval issued in July 2003 to the defendant and a retention permission for a sunroom was granted in March 2004. An additional extension, referred to as “granny flat” during the course of the trial, has not been the subject of any specific permission.
Loan from Bank of Scotland Ireland
4. In May 2006, the defendant accepted an offer of an interest-only home loan of €725,000 with the ” Basis of Interest Rate “: 1% ” over ECB Main Refinancing operations rate ” from Bank of Scotland Ireland Ltd (” BOS “). The loan was secured by:-
(i) a first legal mortgage over his home, which was then valued at €1,500,000;
(ii) an assignment of a mortgage protection life policy on the defendant; and
(iii) an assignment of a life policy for the 40-year term of the loan with a note that BOS “does not in any way represent or warrant that the surrender or maturity value thereof will be sufficient to discharge the principal of the loan”.
5. In March 2008, the defendant accepted an ” offer of further advance loan ” in the sum of €250,000 to be repaid over 38 years at ” 0.83% plus the ECB main refinancing operation rate.”
6. The defendant testified that he did not repay the contribution made by his father to the building of the home because his father was content for the defendant to remain in the construction and property industry.
7. The collapse of the Irish property market caused BOS to appoint receivers over all of the properties belonging to the defendant which he had acquired with other loans advanced by BOS.
8. By letter dated 4th October, 2012, solicitors for BOS advised the defendant that he then owed BOS €997,482.02, pursuant to the loan facilities granted in May 2006 and March 2008, by reason of his failure to adhere to the repayment terms.
9. A further letter from solicitors for BOS dated 11th December, 2012, requested possession of the house and lands comprised in the folio (” the property “) within seven days in order to avoid the commencement of proceedings.
10. Eamonn Greene & Company (” Greenes “), then solicitors for the defendant, in a reply telefaxed on 20th December, 2012, referred to the property as the principal residence of the defendant when expressing an understanding that the defendant was paying €1,000 per month and that the property was for sale. The defendant had discussed with BOS that the defendant himself should sell the property.
11. Up to this point, there is little controversy. Thereafter, the defendant recounts a story to the effect that he was prepared to enter into a contract for sale of the property with the plaintiff and release the proceeds of the sale to BOS in exchange for BOS releasing him from any further liability to BOS and for the defendant to obtain from the plaintiff a cash payment of €50,000 (later increased to €65,000). It is noted that not one professional adviser or any other witness called to give evidence testified that there was an intention for the defendant to obtain such a cash payment which lies at the heart of many allegations made by the defendant.
Release of Property as Security
12. The circumstances leading to the short letter from BOS to Greenes dated 18th February, 2014, and which reads as follows: “You must provide cleared funds in the sum of €445,887.20 to Bank of Scotland plc (‘the bank’) in order for the bank to release the secured property from its mortgage and charge”, are at the centre of the dispute to be resolved in the context of the claim for specific performance of the contract which is the subject of these proceedings.
Leading up to the Contract
The First Viewing
13. The plaintiff gave evidence that he viewed the property with his partner and their young son on 22nd October, 2013, while the defendant and a Mr. O’Reilly (an auctioneer engaged by the defendant) were in attendance. The defendant alleged at trial that the plaintiff inquired about the mortgage on the property and that the defendant informed the plaintiff about his negative equity in the property. The defendant further alleged that he informed the plaintiff that he could not enter into a binding agreement until he had a binding agreement with BOS. The plaintiff denied these exchanges during the viewing and asserted his intention and commitment to negotiate with the auctioneer only.
The Second Viewing
14. On 23rd October, 2013, the plaintiff attended at the property again. He said that he had mentioned this intention to Mr. O’Reilly because they were unable to view the granny flat while the tenant was present on 22nd October. The defendant alleged that the plaintiff attended unannounced when the defendant and his father were at home. The plaintiff insisted that he never met the defendant’s father until these proceedings came on for trial originally in October 2017.
Initial sale price
15. The defendant’s auctioneer, by letter dated 24th October, 2013, confirmed to Greenes that he had accepted an offer for the sale of the property for €475,000 from the plaintiff who had furnished a booking deposit of €10,000. This supports the plaintiff’s evidence that he negotiated with Mr. O’Reilly exclusively and it is what one would expect when an auctioneer is involved. The asking price in the brochure produced by Mr. O’Reilly was €525,000. The defendant did not allege that Mr. O’Reilly was instructed not to negotiate with the plaintiff; rather the defendant alleged that the plaintiff was informed by the defendant about achieving a binding agreement with BOS.
Revised Sale Price
16. The plaintiff and Mr. O’Reilly testified that they renegotiated the sale price down to €460,000, which was confirmed by the standard typed letter sent by Mr. O’Reilly to Greenes dated 6th November, 2013. The plaintiff was looking at similar properties and it was apparent that the market at that stage was one which suited buyers as there were few then. The plaintiff remarked that his original offer was ” a bit of a stretch ” and that he had actually paid a booking deposit for another house. He preferred the property and that was his reason for pursuing a reduction in the price.
Defendant’s claims regarding the sale price
17. The defendant claimed during the trial that at the second viewing the plaintiff had come to the property with a proposal. The defendant said that he had explained to the plaintiff the situation with BOS: that the property was mortgaged for over €1 million and that a binding agreement with BOS was required. He surprised the plaintiff and the solicitors who gave evidence at trial with his allegations that he informed the plaintiff at the second viewing about a boundary dispute. The defendant also referred to his father’s interest in the house due to his financial contribution to the construction of the house.
18. The defendant alleged under oath, which was denied vehemently by the plaintiff, that the plaintiff offered to pay the asking price of €525,000 of which €50,000 would be in cash. That would mean that BOS and the Revenue would be informed of a sale price of €475,000 whereas the true price was the asking price of €525,000. The defendant’s allegations about the plaintiff referring to having untaxed cash from his business and realised properties in Spain and Eastern Europe were denied calmly, but firmly by the plaintiff.
19. There was not a shred of corroborating evidence to support these serious allegations. In fact, all of the solicitors who gave evidence said that any knowledge or suggestion of such an arrangement would have obliged them and the late Maurice Leahy, a solicitor by all accounts with impeccable professional standards, to cease their involvement with the parties.
20. The defendant’s explanation for the sale price reduction to €460,000, further persuades this Court that the defendant will stop at nothing to hinder the plaintiff from completing his purchase of the property. The defendant alleged that he received a phone call from the plaintiff on 25th October, 2013, during which the plaintiff allegedly offered a further €15,000 in cash in exchange for a corresponding reduction in the price to be recorded in the contract. The Court accepts the plaintiff’s evidence that the only conversation which he had with the plaintiff, during which the defendant was loquacious, concerned the closing of the sale as quickly as possible.
21. The plaintiff testified that he only discussed the closing of the sale with the defendant and he did not renegotiate the price with the defendant at any stage. The plaintiff mentioned the ramblings of the defendant in calls which lasted between 22 minutes and 32 minutes on 25th October, 7th November and 18th November, according to mobile account statements produced in the discovery process.
22. The defendant consistently fails to appreciate that the plaintiff is entitled to rely on an executed contract and that it does not permit for pre-contractual beliefs or understandings which he may have had to be part of the equation. No matter how many conversations, misunderstandings or reinventions of the facts which the defendant puts forward for consideration, a written contract for the sale of land has legal effect.
Boundary Dispute
23. This Court accepts that the plaintiff only became aware of a possible and unpursued boundary dispute after the defendant’s newly appointed solicitor mentioned same in November 2017. The plaintiff quite reasonably explained that if he had been aware of a boundary dispute in 2013, he “would have stopped right there … who would buy a house with a boundary issue?”.
Execution of the Contract
24. Mr. Jeff Greene of Greenes gave evidence that the defendant came in to sign the contract for the sale of the property to the plaintiff on or around 24th or 25th February, 2014, and that he witnessed the signature of the defendant. Greenes forwarded the contract for sale to the plaintiff’s solicitor by letter dated 25th February, 2014, and enclosed a copy of the letter from BOS dated 18th February, 2014, which lies at the heart of the dispute to be resolved. Mr. Greene confirmed that replies to requisitions on title were given in accordance with instructions and that there was no boundary dispute to be notified. Further, there was no litigation pending or threatened in relation to the property and no other person had any direct or indirect interest in the property according to Mr. Greene and his then instructions from the defendant.
25. The defendant originally alleged that he did not sign the contract but does not now deny his actual signature on the execution of the contract. He claimed that the first time that he became aware of the signed contract was when it was emailed to him by his auctioneer on 5th March, 2014. The then very irate state of the defendant is not disputed by Mr. Greene who produced an attendance by a secretary dated 7th March, 2014, concerning the alleged execution by the defendant of the contract. The defendant advised in this call that he was going to An Garda Síochána and the Law Society about the conduct of Greenes in proceeding with the sale which he had not authorised.
26. Mr. Greene denied that the defendant had repeatedly given instructions to him not to send the contractual documents until the BOS situation and the cash payment had been sorted. Mr. Greene was emphatic that he would have immediately stopped acting for the defendant if the defendant had told him about an ” under the table ” cash payment.
27. The defendant’s allegation that the now deceased Maurice Leahy, solicitor with the plaintiff’s solicitors, knew of the cash payment is further evidence of the level to which he will stoop. Mr. Fran Mulligan, solicitor with the plaintiff’s solicitors at the time, assured this Court that the late Mr. Leahy would not have countenanced such a cash payment. It does the defendant little credit to impugn the professional reputation of a deceased professional in the way that he has done, whether to secure his home or whatever arrangement he wants to achieve with BOS.
28. In the context of these proceedings, this Court does not need to consider whether the defendant has committed perjury, is delusional or suffers from a memory alteration due to strained circumstances. The balance of probabilities is the relevant standard of proof. The defendant is a poor and self-serving historian with little consideration for the effects on others as a result of his story telling.
Discovery
29. The defendant’s failure or omission to complete discovery, as directed by Gilligan J. on 4th April, 2017, assisted the obfuscation which has occurred in these proceedings. The correspondence from BOS and particularly the letters of 18th February, 2014, is crucial to a consideration of the factual matrix. This Court does not have to consider whether the defendant has a claim against Greenes and refrains deliberately from commenting further because Greenes are not a party to these proceedings although the evidence of Mr. Greene is particularly relevant. The alleged difficulties which the defendant had with various firms of solicitors is not a matter of concern for the plaintiff; the defendant has the primary duty to complete discovery.
30. Ultimately, the plaintiff and the Court got access to copies of relevant communications including copies of the facility letters with BOS mentioned earlier in this judgement. This Court does not condone the failure or omission of the defendant to understand or comply with the order for discovery. The defendant’s conduct in this regard does not assist him in persuading the Court that he should be believed in respect of the crucial facts where there is a conflict of evidence. The conclusion of the Court about the inadequacies of the discovery undertaken by the defendant is that the Court does not need to rely on those inadequacies in order to determine the crucial facts on the balance of probabilities.
Failure to Call the Father of the Defendant
31. The plaintiff submitted that the Court should take into account the fact that the defendant failed to call his father to give evidence in this case. This failure was significant according to Counsel because:-
(i) the defendant maintained that his father was present at both viewings and was a witness to the discussions involving an ” under the counter ” payment, both allegations being denied by the plaintiff; and
(ii) the plaintiff was precluded from cross-examining the defendant’s father in relation “to the circumstances in which he came to issue proceedings claiming an interest in the property (and registering a lis pendens ) … [in circumstances where the defendant] instead received an indefinite loan from his father”.
32. The plaintiff submitted that the Court should take an adverse inference from the failure to call the defendant’s father to corroborate this part of the defendant’s defence.
33. In Crofter Properties Limited v. Genport Limited [2002] 4 I.R. 73, McCracken J. held that “[t] here is certainly ample authority that the failure to call a witness is something which the court may take into account .” (p. 85). He referred to the decision of the House of Lords in R. v. IRC ex parte T.C. Coombs & Co . [1991] 2 A.C. 283, where Lord Lowry stated that:-
“In our legal system generally, the silence of one party in the face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party, may be either reduced or nullified.” (p. 300 at p. 85 of Crofter).
34. Having considered Lord Lowry’s dicta above, Brooke L.J. in Wiszniewski v. Central Manchester Health Authority [1998] PIQR P324 (also known as Wisniewski ) derived the following principles to be applied where there is an absence of a witness:-
“(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
(2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.
(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
(4) If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.” (p. 340)
35. These principles were applied by Kelly J. (as he then was) in Smart Mobile Limited v. Commission for Communications Regulation [2006] IEHC 338, (unreported, High Court, 31st October, 2006) (pp. 96-97).
Conclusion
36. The decision not to call the defendant’s father, even though it had been indicated that he would testify to support the defendant’s version of events of the two controversial viewings of the property by the plaintiff in October 2013, was understandable when one considers the alleged ill-health of the defendant’s father. Nevertheless, the defendant cannot expect this Court to assume that the defendant’s father would have assisted the defendant in his version of events. Therefore, the Court is not drawing any inference adverse to or in favour of the defendant arising from the decision not to call the defendant’s father. The Court is willing to accept in the absence of evidence to the contrary that the defendant was assisted financially by his father. This does not mean that this alleged fact was made known to the plaintiff or any of the professionals who denied knowledge of the alleged interest of the defendant’s father in the property.
Legal Submissions on the Claim
37. The plaintiff seeks specific performance of the contract that was concluded on 25th February, 2014. The defendant relies on two separate defences. First, he argued that there was never any agreement as he did not recollect signing the contract. The situation now is that no one disputes the existence of the written contract. Second, he claimed that specific performance should not be granted for the following reasons:-
(i) it was an illegal contract;
(ii) impossibility; and
(iii) hardship.
38. The plaintiff submitted that an award of damages in lieu of specific performance will be worthless as there is little, if any, chance of such an award ever being satisfied by the defendant, given the extent of his known indebtedness.
Illegal Contract
39. The defendant alleged that the contract for sale was unenforceable because it was an illegal contract due to the cash payment that was agreed between the parties with the intention of defrauding the Revenue. As noted above, the defendant alleged that the plaintiff wished to use untaxed income from either his restaurant business or his properties. The plaintiff argued that the issue of illegality did not arise because he did not agree to make an additional cash payment to the defendant.
40. The burden of proving an illegal contract lies with the party alleging the illegality. This is clear from the case of Whelan v. Kavanagh [2001] IEHC 14, (unreported, High Court, 29th January, 2001), where Herbert J. stated that:-
“… a party who has executed a contract required by Law to be evidenced in writing and which is regular and lawful on its face, and whose execution of that contract has been witnessed by his or her Solicitor should not lightly be permitted to impugn that contract, particularly to his or her own advantage, by pleading illegality as a defence to a claim for specific performance. The onus of proving such alleged illegality lies firmly with the party raising it and the burden of proof is the same as in all civil actions.” (pp. 11-12)
41. Murphy J. reiterated in Kavanagh v. Caulfield [2002] IEHC 67, (unreported, High Court, 19th June, 2002) that it was “… clear that the onus of proving illegality of a contract is, in this case, on the Defendant. The Defendant must prove an illegal intention on the part of the Plaintiff. ” (para. 7.1).
Conclusion
42. This Court, applying the relevant standard of proof (balance of probabilities), has already found that the defendant did not agree to cash payments in addition to the final contract price of €460,000, (the balance of the 10% deposit, after accounting for the earlier booking deposit of €10,000 given to the auctioneer, was paid by an AIB bank draft dated 17th January, 2014, and forwarded to Greenes by letter from the plaintiff’s solicitor dated 24th January, 2014). The defendant, therefore, cannot rely on illegality as a ground of defence.
Impossibility
43. The defendant argued that specific performance should not be granted where the defendant is unable to extinguish the interest of a third party in the land. The defendant referred to an alleged ongoing trespass onto the lands of the adjoining owner. Proceedings were issued, Glynn v. Crowley [2004 No. 18384 P.] on 27th July, 2004. They were set down for trial on 27th May, 2005, and came on for hearing on 20th June, 2006, when the proceedings were adjourned generally. A notice of intention to proceed was issued on 13th September, 2012, but since then nothing has occurred in those proceedings. The defendant argued that the Court cannot make an order for specific performance which would result in the plaintiff trespassing on Ms. Glynn’s property, thereby adversely affecting the property rights of a party who was not before the Court.
44. The defendant further referred to the ” unascertained position ” of Start Mortgages, the successor of BOS. On 18th February, 2014, BOS wrote to the defendant’s solicitors confirming that it was willing to accept the net proceeds of sale in order to release the security of BOS over the property. This offer was dependent on the defendant executing a short settlement agreement and providing the funds within 30 days of the letter. The defendant gave evidence that he did not sign any short settlement agreements. Start Mortgages issued proceedings claiming a sum in excess of €1 million as monies due by the defendant. Proceedings ( Start Mortgages DAC v. Crowley [2016 No. 2025 S.]) were issued on 28th October, 2016, and came into the list of the Master of the High Court as a motion for summary judgment on 11th January, 2019, when it was adjourned until 15th February, 2019. At that stage, it was transferred to the Common Law Motion List for hearing on 29th April, 2019. The defendant gave evidence that the loan was an interest-only loan and while there were arrears of repayments, he was confident that he could pay them. The defendant argues that in light of these developments, it was unlikely that Start Mortgages feels itself bound to accept the originally agreed net proceeds of sale to the plaintiff.
45. In O’Regan v. White [1919] 2 I.R. 339, a statutory tenant sold a portion of his holding without the consent of the landlord. The plaintiff purchaser sought specific performance of the contract but, notwithstanding the efforts of the defendant, the consent of the landlord could not be obtained. O’Connor L.J., in the Court of Appeal, noted that “[e] very plaintiff in an action for specific performance has to face the possibility of his eventually being unable to obtain it, owing to the incapacity of the defendant, for one reason or another, to perform it” (p. 387).
46. In Wroth v. Tyler [1974] 1 Ch. 30, an English case, the defendant entered into an agreement to sell his home, where he lived with his wife and grown-up daughter, to the plaintiffs with vacant possession. Subsequently, the defendant’s wife entered on the Land Register a notice of her rights of occupation, namely a right not to be evicted, under s. 1(1) of the Matrimonial Homes Act 1967. The defendant tried unsuccessfully to persuade her to remove the notice so that the agreement could be completed. He then informed the plaintiffs that he was unable to complete and offered to pay damages. The plaintiffs sued seeking specific performance.
47. Megarry J. in the High Court held that if the plaintiffs were entitled to specific performance of the contract with vacant possession, the form of order sought would require the defendant to make an application to the court under the 1967 Act to terminate the rights of occupation of his wife which became a charge on the estate of the defendant.
48. He noted that where a third party has some rights over the property, there are three possibilities:-
“First, there are those cases where the vendor is entitled as of right to put an end to the rights of the third party, or compel his concurrence or co-operation in the sale. Second, and at the other extreme, there are cases where the vendor has no right to put an end to the third party’s rights, or compel his concurrence or co-operation in the sale, and can do no more than to try to persuade him to release his rights or to concur in the sale. An example of the first category would be the vendor’s rights, as mortgagor, to pay off a mortgage, or his right, as a mortgagee, to obtain possession from the mortgagor. An example of the second category would be when the third party is entitled to an easement over the lands.
In between those two categories there is a third category, namely, where the vendor cannot as of right secure the requisite discharge or concurrence, but if it is refused he can go to the court, which has power, upon a proper case being shown, to secure the release or concurrence. …” (pp. 47-48)
49. Megarry J. held that the defendant fell into the third category and noted that he had endeavoured to persuade his wife but had failed. In those circumstances, it was stated that the Court should be slow to grant a decree of specific performance which would require a husband to take his wife to court, especially while they are still living together. He held that it would be ” highly unreasonable to make such a decree if there is any other form of order that could do justice …” (p. 51). He awarded damages to the plaintiff.
50. In the case of Watts v. Spence & Anor [1976] Ch. 165, the first defendant signed a contract to sell the family home to the plaintiff. The wife of the first named defendant was a joint owner of the house and never gave her husband authority to sell the house on her behalf. She refused to join in the sale and the plaintiff sued for specific performance. Graham J. refused to order specific performance as the first defendant’s wife, a third party interested in the property, would be seriously prejudiced. The plaintiff was awarded damages.
51. In Lehmann v. McArthur [1868] L.R. 3 Ch. App. 496, there was a covenant in a lease which required that the lessee could not assign without licence. The lessor covenanted not to refuse his licence unreasonably or vexatiously. The lessee contracted to assign his lease to the plaintiff subject to the landlord’s approval. The lessee applied for a licence but it was refused by the lessor because he wished to buy up the lease in order to rebuild the premises. The Court of Appeal in Chancery held that the defendant lessee was not obliged to take legal proceedings to oblige the lessor to give his licence. It was sufficient that he had used all reasonable efforts to induce the lessor to consent. Specific performance was refused.
52. In Aranbel Ltd v. Darcy & Ors [2010] 3 IR 769; [2010] IEHC 272, (” Aranbel Ltd “) Clarke J. (as he then was) stated that “… equity will not act in vain. A court should, therefore, be reluctant to make an equitable order where there is no reasonable prospect of the order concerned being complied with .” (para. 7). However, Clarke J. noted that “[t] here obviously may be cases where persons may simply decline to obey an order of the court. The fact that a party might be most unlikely to obey a court order could not, in my view, be a reason for the court not making the order in the first place.” (para. 7).
Conclusion
53. This Court will indeed not act in vain but it can fashion a remedy to ensure that the rule of law and justice applies. This Court is not satisfied that Smart Mortgages, the successor to BOS, is entitled to retract its position about receiving the net proceeds from the sale of the property which will cause the release of its security on the property. No one from BOS or Start Mortgages was called on behalf of the plaintiff. BOS issued a letter dated 18th February, 2014, to the defendant’s solicitors which confirmed the provision of €445,887.20 for the release of the relevant security on the property. In a separate letter of the same date addressed to the defendant, care of Greenes (the receipt of which by the defendant was put in doubt by the defendant in evidence) stated in the fifth paragraph of the first page:-
“Therefore the bank is willing to accept €445,887.20 (being the net proceeds of sale) in accordance with the repayment terms of the shortfall balance as set out in short settlement agreement but strictly without prejudice to your liability to discharge in full the total debt due under the mortgage account.”
54. It was submitted on behalf of the defendant that the third paragraph of the second page of that letter dated 18th February, 2014, which read:-
“This contractual agreement shall only be concluded when the bank is in receipt of the following:-
(i) one part executed and dated short settlement agreement;
(ii) [unconditional contract for sale];
(iii) agreed amount in cleared funds.”
means that Smart Mortgages cannot be foisted with the sale.
55. The defendant is effectively relying on a possibility that Smart Mortgages may not accept the net proceeds while not adducing any evidence that Smart Mortgages will do that. The defendant cannot rely on his own default with a third party such as BOS (now Smart Mortgages) without establishing on the balance of probabilities that Smart Mortgages will not release its security at the closing of the sale to the plaintiff. As mentioned, the order to be made by this Court will afford Smart Mortgages, or the current owner of the relevant charge, the opportunity to seek all necessary orders and directions. It is noted that the Court was informed that Start Mortgages had a representative in Court (albeit without a right of audience) when settlement was mentioned following the commencement of the plenary hearing in October 2017.
56. With regard to the rights of the neighbour and the boundary dispute there is no evidence of a continuing dispute. The plaintiff is aware of this risk and accepts the disclosure for the closing of the sale.
Hardship
57. McCarthy J. in the Supreme Court in Roberts v. O’Neill [1983] I.R. 47 held that it is well established that a court “… will not enforce the specific performance of a contract the result of which would be to impose great hardship on either of the parties to it.” (p. 55)
58. The hardship must exist at the time of the execution of the contract (Roberts v. O’Neill, p. 56). Quoting Budd J. in Lavan v. Walsh [1964] 1 I.R. 87, McCarthy J. stated that the ” … exceptions to the general rule appear very rare. ” (p. 55). He further noted that it:-
“… requires a strong case to be made out before one should accede to a plea for the exercise of judicial discretion in a quite unusual way, that is, by reason of hardship arising subsequently to the contract, and, the onus being on the defendant to satisfy me of the existence and genuineness of the alleged hardship on her, the proof of it should be strong and above suspicion.” (p. 103 at p. 56 in Roberts v. O’Neill ).
59. McCarthy J. concluded:-
” While recognising that there may be cases in which hardship arising after the date of the contract is such that to decree specific performance would result in great injury, there must be few such cases and, in my view, they should not include ordinarily cases of hardship resulting from inflation alone. To permit, as an ordinary rule, a defence of subsequent hardship, would be to add a further hazard to the already trouble-strewn area of the law of contracts for the sale of land .” (p. 56).
60. In Patel v. Ali [1984] 1 Ch. 283 the English High Court allowed the defence of hardship where the circumstances of the defendant-vendor had changed dramatically. Goulding J. held that:-
“The important and true principle, in my view, is that only in extraordinary and persuasive circumstances can hardship supply an excuse for resisting performance of a contract for the sale of immovable property. A person of full capacity who sells or buys a house takes the risk of hardship to himself and his dependents, whether arising from existing facts or unexpectedly supervening in the interval before completion .” (p. 288).
61. The Court found that in the four-year delay between the date of the contract and the hearing of the action for specific performance, the defendant had suffered from ill-health, had one leg amputated, and had two more children. If forced to sell the property she would have to move from the area and lose the support of family and friends. The Court noted as important that the delay was not attributable to the defendant’s conduct.
62. In Aranbel Ltd the defendants had entered into contracts for the purchase of apartments in late 2006 and by March 2008 they were legally obliged to complete the sale. In the meantime, the value of the properties had significantly dropped. The plaintiff-vendor sought an order for specific performance. The defendants argued that they were no longer in a position to complete the sale and as such, specific performance should not be ordered. Although Clarke J. considered the case under impossibility rather than hardship he noted that if the purchaser had to sell their family home in order to complete the purchase of an investment property, “… such a course of action on the individual concerned might amount to a hardship and the court might have to consider whether, in all the circumstances, in exercise of the court’s equitable jurisdiction, it was appropriate to impose such a course of action on the person concerned.” (para. 14).
63. In obiter remarks, Clarke J. stated:-
“I would wish to defer to a future, more suitable case, in which the issue was determinative, any definitive ruling on the way in which the hardship jurisprudence might be said to apply in cases where a defendant purchaser could complete, but only by disposing of assets such as a family home or business assets, which action would have significant practical consequences. There would be an obvious reluctance on the party of a court to require such a course of action. On the other hand, the court also has to take into account the fact that an inevitable consequence of the court not ordering specific performance is that an award in damages would be likely to be made which damages will, of course, ultimately be able to be charged on any relevant property of the defendant concerned. It seems to me that it is likely that any such case would require careful analysis to ascertain the consequences of an award of damages; for the relevant defendant may be equally badly off as a result of a significant award of damages as from a decree of specific performance, particularly if a reasonable period of time was afforded for completion .” (para. 35).
64. The defendant sought to rely on Clarke J.’s obiter comments and argued that ” if hardship is to be considered in the light of the loss of a family home it hardly matters if that home is lost by the Defendant acting as a vendor as opposed to a purchaser. ” This is a forced argument. The defendant entered into a contract for the sale of his family home and is now arguing that an order for specific performance would cause him hardship due to the loss of said family home. The hardship that is alleged must be external to the contract to preclude performance of the contract. It is also unclear if the defendant is alleging that this hardship existed at the time of the execution of the contract for sale or whether the hardship has subsequently arisen.
65. The defendant claimed that his father had made a contribution of €50,000 to the defendant for the home and in the circumstances where his father also lives in the property, granting specific performance will operate an exceptional hardship as he will lose his home and receive no compensation.
66. The plaintiff submitted that there is no basis for the claim that an order for specific performance will cause hardship for the following reasons:-
(i) This claim arose for the first time during the hearing of the action and was never pleaded or articulated in advance of the trial;
(ii) The defendant did not identify how he will suffer hardship as:
a. The completion of the contract and the payment of the purchase price will result in a substantial reduction of the debt owed by the defendant;
b. The defendant at all relevant times contemplated the sale of his home. This case is to be contrasted with a claim for hardship where a party might be forced to sell their family home to complete some other transaction.
Conclusion
67. The defendant entered into the contract willingly and in an effort to deal with BOS. The defendant’s own evidence indicated even at the height of his case that he was prepared to sell his home in 2014. The issue about moving home was never discussed even on his version of events. The law is that the Court looks at matters at the time of the contract save in exceptional circumstances which do not arise here.
Summary
68. The Court has set out above its conclusions on the appropriate facts and has applied the law as it has determined to be relevant to the issues arising. The Court will now set a date for the parties to consider and make further submissions if necessary on the proposed order for specific performance which is now circulated. In the meantime, the Court requests the solicitors for the plaintiff to copy this judgment to the owners of the charge on the folio along with a copy of the proposed order so that representations, if necessary, can be made on the adjourned date for finalisation of orders.
Appendix
Chronological Summary of Prosecution
1. For the sake of completeness, the following is a chronological summary of the prosecution of and the events occurring in these proceedings in case any party or the Court needs to consider the alteration of the proposed order for specific performance when this matter returns to Court for the making of final orders or at some early date in the future:-
24/01/2014 Contracts for sale were signed by the plaintiff and these, along with a bank draft for €36,000, were sent to the then solicitors for the defendant.
25/02/2014 The defendant’s solicitors returned one part of contract for sale duly executed by the defendant which had a closing date of 4th March, 2014.
06/03/2014 The plaintiff’s solicitors contacted the then solicitors for the defendant requesting that the transaction be completed.
07/03/2014 The defendant’s solicitors contacted the plaintiff’s solicitor informing them that their instructions had been revoked and that they no longer acted on behalf of the defendant.
10/03/2014 The defendant’s solicitors wrote to the plaintiff’s solicitors attempting to refund the deposit of €36,000. The plaintiff’s solicitors also registered a caution on the folio.
11/03/2014 The plaintiff’s solicitors rejected the attempt to refund the deposit and stated that the solicitors were contractually bound to hold the deposit as stakeholders.
12/03/2014 The plaintiff’s solicitors served a completion notice on the then solicitors for the defendant.
20/06/2014 The plenary summons herein was issued.
28/07/2014 An order for substituted service on the defendant was granted.
21/08/2014 The plenary summons and statement of claim were served on the defendant.
19/09/2014 A new firm of solicitors entered an appearance on behalf of the defendant.
20/11/2014 A defence was delivered.
18/05/2015 An order for discovery was made by Gilligan J.
10/03/2016 The plaintiff issued a motion seeking to strike out the defence for failure to comply with the discovery order.
23/06/2016 The Master of the High Court struck out the defence of the defendant.
28/06/2016 A motion was issued on behalf of the defendant to discharge the order of the Master.
21/03/2017 A notice of change of solicitors was filed and served.
04/04/2017 Gilligan J. set aside the order of the Master and ordered that the defendant file an affidavit within seven days in compliance with the order for discovery and listed the proceedings for trial on 10th October, 2017.
06/04/2017 An affidavit in purported compliance with the order of Gilligan J. was sworn by the defendant.
24/05/2017 The plaintiff requested particulars arising from the defence.
02/10/2017 The defendant delivered replies to the particulars sought.
10/10/2017 The proceedings came on before this Court for hearing and on the second day, following the adducing of evidence, the case was adjourned on the suggestion that a settlement was imminent.
27/10/2017 The matter came before this Court for mention and it was stated that Start Mortgages did not get a financial statement from the defendant.
08/11/2017 The matter again came before this Court for mention when the outstanding financial statement requested by Start Mortgages was mentioned again while the then legal team for the defendant was granted liberty to issue a motion to come off record.
14/11/2017 The defendant served a notice of discharge of his solicitors.
22/11/2017 These proceedings came before the Court for mention when the plaintiff elected to continue with the hearing of the case without having a legal team.
15/12/2017 The matter came before the Court again for directions and the 21st-23rd March, 2018, were provisionally allocated for the hearing of the balance of the trial.
23/02/2018 The matter came before the Court for mention in anticipation of the provisional hearing date and the Court recommended the defendant to obtain the services of solicitors and counsel.
15/03/2018 A new firm of solicitors came on record for the defendant when the matter came before the Court for mention only. An order was granted allowing the solicitors to take up the Digital Audio Recording of the evidence heard on 10th October, 2017, and the proceedings were adjourned to get a date for hearing.
10/04/2018 The proceedings came before this Court for mention and a hearing date of 17th July, 2018 was allocated.
29/06/2018 The matter was listed for mention before the Court because the Court had other assignments for July 2018 and the proceedings were put back into the Chancery List to get a date for hearing.
04/12/2018 The matter resumed hearing on 5th, 6th, 12th and 18th December, 2018.
06/03/2019 Oral submissions were made on behalf of the parties in relation to written submissions that had been delivered and which had not afforded the other side an opportunity to address.
Wyn Clons Development Ltd -v- Cooke
[2016] IECA 317
Peart J.
Hogan J.
Hedigan J.
Appeal No. 2014/719
BETWEEN
WYNN CLONS DEVELOPMENT LTD
PLAINTIFF / RESPONDENT
-AND-
KEITH COOKE
DEFENDANT/APPELLANT
JUDGMENT of Mr. Justice Hedigan delivered on the 4th day of November 2016
Background
1. This is the defendant’s appeal against an order made in the High Court on the 10th October, 2012, by Laffoy J. The order was for specific performance of a contract for the purchase of a commercial unit. Judgment was given on the 1st October, 2012. The appellant’s counterclaim was dismissed.
2. The commercial unit in question formed part of an office and retail development. The agreed price was €330,000 plus VAT in 2006. Prior to the completion of the purchase in March 2007, the appellant was informed by his solicitor that there was a strong odour of diesel in the unit. An engineer was engaged to inspect and confirmed the existence of a strong smell of diesel. In April, 2007 the appellant attempted to repudiate the contract and have his deposit returned. A plenary summons issued on the 5th March, 2008. A defence and counterclaim were delivered on the 3rd September, 2009. The following helpful chronology of events was set out in the appellant’s submissions.
Chronology of Events
August, 2006 The appellant agreed, subject to contract, to purchase the office unit (Unit 12) at the price of €330,000 plus VAT and paid a booking deposit.
5th December, 2006 A contract for sale and a building agreement were executed on behalf of the respondent, with a closing date of seven days after the completion date.
9th January, 2007 The respondent’s solicitors notified the appellant’s solicitors that they had the certificate of completion.
21st February, 2007 The appellant’s solicitors sought confirmation that there were no workmen any longer on the premises, and stated that the appellant would then have the premises “snagged”.
22nd February, 2007 The respondent’s solicitors informed the appellant’s solicitors that Unit 12 had been completed.
End of February, 2007 Title matters and other contractual matters were attended to by the respondent’s solicitors.
8th March, 2007 The appellant’s solicitors furnished the appellant’s snag list to the respondent’s solicitors. Various correspondence occurred about whether a parking space was being acquired with the unit.
29th March, 2007 The principal of the appellant’s solicitors visited Unit 12 and detected a “very strong odour’ of diesel, and telephoned his client and suggested that the appellant engage an engineer.
29th March, 2007 The appellant’s solicitors wrote to the respondent’s solicitors reporting the smell, but it appears that the letter got lost in the DX system or otherwise went astray.
31st March, 2007 Mr. Lunn of Dunbar Lunn, Civil and Structural Consulting Engineers visited Unit 12 and reported that “[o]n entering the office we were struck by an odour which we concluded to be the same smell emanating from diesel fuel. No source for this odour could be found and inspections in adjacent offices found no odour present.”
17th April, 2007 The respondent’s solicitors issued a notice under Condition 40 of the Law Society General Conditions requiring payment of the balance of the purchase monies. By letter on this day the appellant’s solicitors informed the respondent’s solicitors that, because of the “strong smell of diesel or kerosene in Unit 12”, the appellant did not wish to complete the transaction and informed the respondent that the appellant was repudiating the contract because of a breach of contract, inter alia, and sought return of the deposit of €33,000.
20th and 25th April, Mr. Mooney, of Mooney Estates Ltd., a firm of auctioneers and
2007 estate agents practising in Gorey, inspected Unit 12 to determine the projected rental income it would yield and the likely demand for it, but reported on 25th April, 2007, that after two visits on these dates the position was that it would be extremely difficult, if not impossible, to rent the unit, “as the aforementioned odour would be immediately apparent to any prospective tenant”. Mr. Mooney confined that the smell was “very strong” on his second visit.
1st May, 2007 While rejecting the entitlement of the appellant to pull out of the transaction because of an alleged smell, the respondent wrote that it intended forfeiting the appellant’s deposit if the sale was not completed and putting the property back on the market, and thereafter the respondent would seek redress from the appellant for any financial loss.
9th May, 2007 The respondent’s solicitors informed the appellant’s solicitors that they had been given instructions to issue proceedings seeking specific performance or damages in lieu of specific performance. However, they suggested an “independent review” of Unit 12.
29th June, 2007 The respondent’s solicitors nominated two professionals to conduct the independent review and inquired as to the appellant’s preference.
3rd August, 2007 The appellant’s solicitors indicated that they had no difficulty with either nominee “as the smell in the unit is still very pungent”.
28th September, 2007 The appellant’s solicitors complained that they had not had a response to the letter of 3rd August, 2007, and stated that the smell “up to the last few days was extremely bad”. They sought return of the deposit and “a mutual rescission of the contract”.
8th October, 2007 The respondent’s solicitors wrote to the effect that the deposit had been forfeited and they expected to serve proceedings for specific performance shortly.
5th March, 2008 The plenary summons issued.
Late 2008 The respondent put the property back on the market and Kinsella Estates, on behalf of the respondent, agreed the sale of Unit 12, subject to contract, to a third party at the price of €300,000 plus €10,000 for a car park space. However, that sale subsequently fell through. If it had proceeded, the respondent’s loss would have been mitigated. Unit 12 remains in the ownership of the respondent.
3rd September, 2009 Defence and counterclaim delivered.
April, 2011 Dr. O’Callaghan for the respondent carried out tests and found no hydrocarbons present.
June, 2011 Mr. Mooney, estate agent, re-visits the property and confirms the smell had “paled into insignificance compared to what it was in 07”.
3. At the hearing of this appeal, counsel for the appellant outlined three grounds of appeal upon which the appellant relied.
(i) The trial judge’s finding on the core issue of the existence of a smell was contrary to the weight of the evidence.
(ii) The respondent both in 2007 and at the opening of the trial on 6th October, 2011, abandoned their claim for specific performance and elected to sue for damages in lieu. Thus the trial judge had no jurisdiction to grant an order of specific performance.
(iii) The trial judge should not have awarded High Court costs to the respondent in the absence of evidence that the rateable valuation of the property in question was in excess of the jurisdiction of the Circuit Court.
Appellant’s Submissions
4. On the first ground the appellant relies upon the principles set out by the Supreme Court in Hay v. O’Grady [1992] 1 I.R. 210. These principles were summarised by Ryan P. in Emerald Isle Assurances v. Dorgan [2016] IECA 12 at para. 31 as follows:-
“(a) Were the findings of fact made by the trial judge supported by credible evidence? If so, the appellate court is bound by the findings, however voluminous and apparently weighty the testimony against them.
(b) Did the inferences of fact depend on oral evidence of recollection of fact? If so, the appeal court should be slow to substitute its own different inference.
(c) In regard to inferences from circumstantial evidence, an appellate court is in as good a position as the trial judge in that regard. Did the judge draw erroneous inferences?
(d) Was the conclusion of law drawn by the trial judge from a combination of primary fact and proper inference erroneous? If so, the appeal should be allowed.
(e) If, on the facts found and either on the inferences drawn by the trial judge or on the inferences drawn by the appellate court in accordance with the principles set out above, it is established to the satisfaction of the appellate court that the conclusion of the trial judge as to whether or not there was negligence on the part of the individual charged was erroneous, the order will be varied accordingly.”
5. On the second ground, the appellant argues that the respondent unequivocally waived its right to specific performance and opted for a suit in damages in its original correspondence when it forfeited the deposit and placed the property on the market. Moreover at the outset of the hearing the respondent informed the trial judge that it was seeking damages in lieu of specific performance. This, the appellant argues was a second waiver of the respondent’s right to sue for specific performance. The appellant argues that allowing the respondent to forfeit and sell (albeit unsuccessfully) and at the same time pursue an action for specific performance was to allow it “run with the hare and chase with the hounds”. The appellant relies upon Guerin v. Heffernan [1925] 1 I.R. 57 where the Supreme Court, due to both delay and acts of the parties showing a belief all round that the transaction was at an end, refused specific performance. The appellant also relies upon Flanagan v. Forde (Unreported, High Court, Feeney J., 6th March, 2009) where Feeney J. held the remedies of forfeiture, damages for breach of contract and specific performance were alternatives and a vendor cannot be awarded all three. Feeney J. went on to hold that the party seeking said remedy must elect at the very latest at the hearing of the action. The appellant also relied in this regard on the judgment of Lord Wilberforce in Johnston v. Agnew [1980] 1 A.C. 367 and referred the Court in particular to page 392. In that case Lord Wilberforce held that:-
“First, in a contract for the sale of land, after time has been made, or has become, of the essence of the contract, if the purchaser fails to complete, the vendor can either treat the purchaser as having repudiated the contract, accept the repudiation, and proceed to claim damages for breach of the contract, both parties being discharged from further performance of the contract; or he may seek from the court an order for specific performance with damages for any loss arising from delay in performance. (Similar remedies are of course available to purchasers against vendors.) This is simply the ordinary law of contract applied to contracts capable of specific performance.
Secondly, the vendor may proceed by action for the above remedies (viz. specific performance or damages) in the alternative. At the trial he will however have to elect which remedy to pursue.
Thirdly, if the vendor treats the purchaser as having repudiated the contract and accepts the repudiation, he cannot thereafter seek specific performance. This follows from the fact that, the purchaser having repudiated the contract and his repudiation having been accepted, both parties are discharged from further performance.”
6. On the third ground the appellant argues that in the absence of any evidence of the rateable valuation to the effect that the property was in excess of the jurisdiction of the Circuit Court, proceedings should have been brought there and consequently only Circuit Court costs should be allowed.
Respondent’s Submissions
7. On the first ground relating to findings of fact the respondent argues that the test is whether there was credible evidence before the trial judge, allowing him prefer one case over the other. The respondent referred the Court to the assessment of the evidence as appears in the transcript. It shows that the appellant had a range of reasons why he did not wish to proceed apart from the alleged smell which only emerged immediately after it was confirmed by the respondent’s solicitor that a parking space was not included in the sale. The snag list prepared only three weeks before had not made any mention of the smell. The real reason argues the respondent, is that the appellant had no finance, no tenant and a car park space was not included. Counsel referred the Court to a whole range of witnesses all of whom gave evidence of no smell in Unit 12. Against this was the evidence of the appellant’s solicitor, the solicitor’s daughter in law, the solicitors’ secretary and the engineer Mr. Lunn. Mr. Lunn did not carry out any scientific testing. In fact he agreed in evidence that the only source of the odour was probably outside. He also stated that due to his being a devoted pipe smoker, he had a poor sense of smell. In para. 24 the trial judge properly analysed his evidence and her conclusions reached were solidly based on that analysis.
8. On the second ground raised in this appeal the respondent argues that the claim brought was always one in specific performance. The completion notice of the 17th April, 2007, provided the alternative remedy of specific performance. At the opening of the trial the respondent’s counsel did not withdraw the claim for specific performance. In fact he argues he reiterated it but specified that the respondent sought damages in lieu of specific performance. It was certainly not an unequivocal repudiation of specific performance. The respondent argues that in an action for specific performance a plaintiff may pursue a claim for damages in lieu of specific performance where it has not been established that the defendant is in a position to complete the purchase. See Aranbel Ltd v. D’Arcy [2010] 3 IR 769 as relied upon by Clarke J. at para. 32 of his judgment. Thus the respondent argues the appellant always had to meet a claim for specific performance and the opting by the respondent for damages in lieu was no more than an option for one of the remedies available in an action for specific performance. The appellant cannot claim to have suffered any prejudice. Damages in lieu of specific performance may only be granted where a right to specific performance has been established and so it was a case of specific performance that he had to meet anyway. See the judgment of Finlay Geoghegan J. in Collins v. Duffy & Callan [2009] IEHC 290.
9. On the third ground relating to costs the respondent argues that the appellant has cited no authority to support the proposition that the trial judge could take judicial notice of the rateable valuation of a commercial property and no evidence thereof was given. No argument was made to the trial judge on this issue. No application to remit the case was made and in any event the potential level of damages was likely to be well above the jurisdiction of the Circuit Court.
Decision
10. The specific performance case made by the appellant is based upon two grounds. Firstly, it is argued that on the 1st May, 2007, the respondent’s solicitors wrote to the appellant’s solicitors informing them that it was intending to put the property on the market after the completion notice had expired and the deposit had been forfeited. This, the appellant argues was an unequivocal election for common law damages instead of pursuing specific performance. In addition or in the alternative, at the opening of the respondent’s case before Laffoy J., counsel for the respondent in answer to the judge’s question stated that his client was seeking damages in lieu of specific performance.
11. Did the respondent in 2007 unequivocally elect to abandon its specific performance rights? I do not think so. The completion notice dated the 17th April, 2007, at para. 3 thereof retains all options for the vendor ie. forfeiture of deposit, rescission of contract, re-sale of the property with a claim over for any deficiencies suffered together with a claim for costs, losses, damage and expense incurred and finally specific performance. Far from being an unequivocal abandonment of its specific performance rights, it in fact expressly retains them. The vendor was faced with an apparent attempt by its purchaser to repudiate the contract just as the development had reached completion. Its response was to bring all due pressure to bear upon the purchaser, but also to attempt to market the property so as to mitigate its loss. It seems to me that any vendor in such a financially exposed situation, as here seemed to be the case, is entitled – and perhaps even obliged – to do everything he can to mitigate his potential loss. Dealing with a similar situation, the Court of Appeal in New Zealand in McLachlan v. Taylor [1985] 2 N.Z.L.R. 277 at p. 285, Cooke J. stated:-
“It is elementary that an election at common law must be an unequivocal choice between inconsistent courses of action. We cannot read this letter as an unequivocal choice of damages rather than specific performance. If the efforts of the vendors had produced an unconditional contract by them to resell, the result might have been different. As it is, they did no more than intimate that that they were trying to resell. A mere attempt by a vendor to mitigate his position by reselling, if it proves to be fruitless, does not we think relieve the purchaser from his ordinary contractual duty or deprive the vendor of his primary remedy of specific performance.”
I gratefully adopt this statement of the law by the Appeal Court of New Zealand.
12. In my reading of the transcript, I do not find support for the appellant’s claim of abandonment by the respondent of its specific performance claim. In answer to the judge’s query, its counsel seems to be opting for damages in lieu in the specific performance action because the respondent did not believe the appellant was actually in a position to complete the purchase of the property. In fact a proper reading of the full transcript of the 18th October, 2011, including pp. 55, 78, 79 and 81 shows that the learned judge is clearly dealing with the case as one for specific performance. (See p. 81, at line 26 and 32 where she explicitly states at the end of the hearing that it is a specific performance action with which she is dealing). Clearly the learned trial judge did not consider that the claim for specific performance had been abandoned.
This ground of appeal fails.
13. Were the findings of fact made by the trial judge supported by credible evidence? The principles applicable are agreed. They have already been summarised at paragraph 4 above. The key principle applicable to this case is set out by McCarthy J. in Hay v. O’Grady at p. 217 of the judgment as follows;-
“If the findings of fact made by the trial judge are supported by credible evidence, this court is bound by those findings, however voluminous and, apparently, weighty the testimony against them. The truth is not the monopoly of any majority.”
14. The findings of fact made by Laffoy J. are set out succinctly at para. 26 of her judgment:-
“Having considered the evidence outlined in the preceding paragraphs and all the other evidence adduced by both parties on the condition of Unit 12 in April and May 2007, it is impossible to conclude that the plaintiff, as vendor, was not in a position to deliver to the defendant Unit 12 in the condition in which the plaintiff was contractually bound to deliver that unit. In particular, it is impossible to find that there existed in Unit 12 a noxious smell which rendered Unit 12 unfit for human habitation or unsuitable on safety, health and welfare at work grounds for use as an office.”
15. The essence of the finding is in the final sentence. The appellant’s key objection to this finding is that Laffoy J. did not engage with the evidence in the manner required by Doyle v. Banville [2012] IESC 25 and, specifically, gave inadequate reasons for her conclusion that there was no noxious smell.
16. Starting at para. 21, Laffoy J. addressed the evidence. She described the net issue for the Court, i.e., whether there was a smell in the premises and, if so, whether that smell was sufficient to entitle the appellant to repudiate the contract. Continuing in para. 22, the learned judge noted only four experts were called. Brian Mahoney, Structural Engineer, who certified compliance with engineering aspects of the project. He detected no noxious odour albeit he had left the site when it was first mentioned by the appellant. Michael Kiely, Architect, produced a certificate of practical completion of the 21st December, 2006, indicating completion subject to “snagging”. Two such snag lists were provided dated the 4th December, 2006, and the 18th January, 2007. Both included Unit 12. No noxious odour was referred to therein. He never detected any smell and there was nothing he could think of which could cause such a smell. After the complaint of a smell was made by the purchaser’s solicitor following his visit to Unit 12 on the 29th March, 2007, Mr. Kiely visited the premises to investigate the smell. He detected none. In April 2011, Dr. Fergal O’Callaghan did an indoor air assessment on Unit 12 and found no health or safety risk to staff working there. The Unit he reported was fit for human habitation. This it must be noted was the only scientific report done on the premises. The fourth expert was Mr. Lunn. He admitted to having a bad sense of smell, but said he had detected a bad smell in Unit 12 at the time of the complaint. He agreed with Mr. O’Gorman, the appellant’s solicitor who had also acquired units at the same premises and who described the level of smell as 10 out of 10. Mr. Lunn conducted no air testing or any scientific investigation. Two other witnesses were subpoenaed by the respondent, both of whom purchased and occupy units in the same building. Neither had ever detected any smell in the building. Edward Mooney, Auctioneer instructed by the appellant stated in a report of April 2007, that he noticed a chemical odour which was stronger on his second visit. Other witnesses not referred to by the learned judge were Charles O’Reilly Hyland, Gerald Kean, the respondent’s solicitor, Michael Kinsella and Niall Slattery, all of whom testified that there was no smell. Josephine Dunne of O’Gorman Solicitors, Anthony O’Gorman, solicitor, Lana O’Gorman, solicitor and Susan Byrne, Legal Executive with O’Gorman Solicitors gave evidence of the existence of a smell.
17. It is clear there was a conflict of evidence. The learned judge did not however, have to choose whom to believe as to whether there was, in fact, a smell. It is apparent from her succinct conclusion that even taking the appellant’s evidence at its height, she considered that it could not support a finding that there existed in Unit 12 a noxious smell which rendered it unfit for human habitation or unsuitable on safety, health and welfare grounds for use as an office. Although she did not specifically say so in terms, it is implicit in her judgment that she concluded that the appellant had produced no scientific evidence of such unfitness sufficient to free the purchaser from his obligation to complete. It is obvious that this is why the learned judge decided as she did. That finding is based on credible evidence and thus this Court cannot interfere with the learned judge’s finding of fact. This ground also fails.
18. As to the award of costs on the High Court scale, the appellant did not raise the issue of an incorrect choice of jurisdiction either in pleadings or in submissions made to the trial judge. No evidence was given as to the rateable valuation of the premises. Had the issue been raised the parties may have been given the opportunity to produce evidence. This is a court of appeal and cannot address such an issue anew. This ground also fails.
I would dismiss the appeal.
McGrath -v- Stewart & anor
[2016] IESC 52
O’Donnell J.
Laffoy J.
O’Malley J.
Judgment of Ms. Justice Laffoy delivered the 29th day of July, 2016
Underlying High Court proceedings leading to judgment and orders appealed against
1. The two plenary actions underlying this conjoined appeal were heard together in the High Court. In the first, the plaintiff, as purchaser, and in the second, the plaintiffs, as purchasers, sued the defendant, as vendor, for specific performance of two contracts, each of which was for the sale of property in the City of Dublin. Apart from the obvious fact that each of the contracts related to a different property, there is very little difference between the two contracts in issue and between the factual basis, the pleadings and the procedural process in both actions. That being the case, it is convenient to outline the background to this appeal by reference to the first plenary action.
2. The contract the subject of the first plenary action (Record No. 2004/10969P) was a contract in the standard form published by the Incorporated Law Society of Ireland for a sale by private treaty which was dated 8th June, 1998 and was expressed to be made between the defendant in the first action (Mr. Stewart), as vendor, and, in its final form, by the plaintiff in the first action, P.J. McGrath (Mr. McGrath) in trust, as purchaser, for the sale of the dwelling house and premises know as 14 Rutland Street in the City of Dublin at the price of IR£25,000. The relevant features of the contract were the following:
(a) that the interest being sold was a long leasehold interest for the residue of a term of nine hundred and four years from 29th September, 1882;
(b) that the special conditions did not disclose that the sale was subject to any tenancy, so that by virtue of General Condition 21, ex facie, Mr. McGrath was entitled to vacant possession on completion of the sale;
(c) that the closing date was 23rd July, 1998; and
(d) that a deposit of IR£2,500 was payable by Mr. McGrath on the execution of the contract.
The correspondence put before this Court demonstrates that the solicitors for Mr. Stewart, Stewart & Co., sent that contract and two other contracts, to Mr. McGrath’s solicitors, Tom Collins & Co. on 8th June, 1998 on a “subject to contract/contract denied” basis. The contracts as so furnished named William Black (Mr. Black) as purchaser. Mr. McGrath’s solicitors having obtained confirmation from Mr. Black that it was in order to do so, Mr. McGrath’s name was substituted for Mr. Black’s name as purchaser. The contracts thus amended were returned to Mr. Stewart’s solicitors by letter dated 25th June, 1998 together with a cheque, which will be referred to at the end of the judgment, which covered the deposit on that transaction and on the two other transactions and also requisitions on title. Of the other two contracts, one, which was the subject of the second plenary action (Record No. 2004/10973P), was for the sale of 9 Summerhill Place in the City of Dublin to Mr. McGrath (in trust) for IR£25,000 on similar terms to the terms in relation to the sale of 14 Rutland Street outlined above. The subsequent interaction between the parties and the pleadings disclose that Mr. McGrath was contracting to purchase 9 Summerhill Place in trust for himself and the second named plaintiff in the second plenary action, Thomas McGrath (the second Respondent).
3. On 2nd July, 1998, in accordance with normal practice, one part of the contract signed by both Mr. Stewart and Mr. McGrath was returned to Mr. McGrath’s solicitors. Subsequently by letter dated 10th July, 1998 Mr. Stewart’s solicitors furnished their replies to the requisitions on title, which were in the standard form published by the Law Society. The replies disclosed that the property was occupied by a tenant who was in possession at a weekly rent. By letter dated 8th September, 1998, Mr. McGrath’s solicitors informed Mr. Stewart’s solicitors that their client would seek vacant possession on closing of the transaction. The response of Mr. Stewart’s solicitors by letter dated 14th September, 1998 was that they were not in a position to give vacant possession on closing of 14 Rutland Street or of 9 Summerhill Place, which the replies to the relevant requisitions disclosed was also occupied by a tenant who was in possession at a weekly rent.
4. As regards the third contract, which related to another property in the area, 13 Summerhill Place, of which Mr. Stewart had vacant possession, the sale of that property was completed on 9th October, 1998. However, neither the sale of 14 Rutland Street nor of 9 Summerhill Place was completed. Thereafter correspondence continued from Mr. McGrath’s solicitors to Mr. Stewart’s solicitors seeking to know when the transactions could be completed with vacant possession. Although the relevant letter has not been put before this Court, it would seem that the last item of correspondence was a letter of 23rd May, 2000 from Mr. McGrath’s solicitors, which, as recorded in the judgment of the High Court referred to later (at p. 3), sought confirmation of the position regarding vacant possession and noted Mr. McGrath’s desire to close the sale. There was no response received to that letter or to any of the earlier letters, the last of them being dated 28th March, 1999.
5. Nothing happened after that for over four years. On 11th June, 2004 Mr. McGrath’s solicitors served a notice to complete on Mr. Stewart calling on Mr. Stewart to complete the sale within twenty eight days after the date of service of the notice and indicating that, in the event of failure to comply with the notice, Mr. Stewart, as vendor, would be deemed to have failed to comply in a material respect with the conditions of the contract and Mr. McGrath, as purchaser, would elect to pursue remedies available to him under the contact. The notice to complete was not complied with.
6. The first plenary action was initiated by a plenary summons which issued on 15th July, 2004, in which Mr. McGrath sought specific performance of the contract dated 8th June, 1998 in relation to 14 Rutland Street and damages. A statement of claim was delivered on 31st January, 2005 in which the reliefs claimed were specific performance of the contract and damages in lieu of specific performance. A defence and counterclaim was delivered by Mr. Stewart on 17th February, 2005 in which it was asserted that Mr. McGrath’s claim was statute-barred and, without prejudice to that plea, the various matters pleaded by Mr. McGrath were traversed. In the counterclaim, it was pleaded that the sale, which was denied, was subject to “existing tenancies” and that it was an express provision of the contract that Mr. McGrath would not be given vacant possession on closing. Rectification of the contract was sought.
7. It is disclosed in the outline submissions filed on behalf of Mr. Stewart that, by motion dated 1st April, 2005, Mr. Stewart sought orders striking out the first plenary action and the second plenary action on the basis, inter alia, that neither disclosed a reasonable cause of action. That motion having come on for hearing on 16th December, 2005, the relief sought was refused. That is mentioned merely because affidavits filed on the motion were mentioned in the pleadings in the circumstances outlined later. Those affidavits are not before this Court and their status in the High Court is not clear.
8. Both plenary actions were heard together in the High Court before Murphy J. (the trial judge) over two days on 14th and 15th October, 2008. Judgment was delivered by the trial judge on 11th November, 2008 ([2008] IEHC 348).
The judgment of the High Court
9. Having outlined the factual background more comprehensively than has been done in this judgment, the trial judge made a number of findings which are of relevance on this appeal.
10. First, he found that Mr. McGrath had contracted with Mr. Stewart to purchase his interest in the properties, but not a qualified interest subject to tenancies. He stated (at p. 5):
“The agreement was that he would purchase the properties with vacant possession. The contractual documents are consistent only with the interpretation that the plaintiff was to acquire vacant possession. I am satisfied that it was not until after he entered into the contract that he was informed of the expectation that he would take the properties subject to the existing tenancies. Accordingly, he contracted not for a title subject to tenancies but for the acquisition of all three properties without tenants.”
11. Secondly, the trial judge addressed another issue which had been raised which he stated was:
“. . . whether the parties had ever reached a consensus ad idem, and thus whether they had entered into a valid contract.”
Having observed that he had reservations in relation to the consideration of that question, since the issue was not pleaded, he stated that, in his view, the submission was not well founded in any event. Later, having analysed a number of authorities, he stated that, taking an objective view of the circumstances, it could not be said that Mr. Stewart’s mistaken understanding of the agreement, which I understand to mean his understanding that the sales of 14 Rutland Street and 9 Summerhill Place were subject to existing tenancies, was justified.
12. Thirdly, the trial judge addressed the contention of Mr. Stewart that Mr. McGrath had not come to Court seeking equitable relief with clean hands. Having reiterated that he was satisfied that the parties had entered into a valid contract for the sale of the three properties with vacant possession, the trial judge pointed out that specific performance is a discretionary remedy. He went on to consider whether, in relation to the transactions, Mr. McGrath had come to equity “with clean hands”, by reference to the various allegations made against Mr. McGrath, for example, that he acted otherwise than in good faith. However, he rejected all the allegations and he rationalised that rejection.
13. Fourthly, the trial judge addressed Mr. Stewart’s contention that Mr. McGrath was guilty of laches. In so doing, the trial judge identified the criteria which must be satisfied in order for that defence to be successful by reference to the decision of the High Court in J.H. v. W.J.H. (Unreported, High Court, 20th December, 1979), quoting the following passage from the judgment of Keane J. (at p. 35):
“I have no doubt that the interval of time which elapsed before the proceedings were issued in the present case could properly be described as substantial. That, however, is not sufficient . . . there must also be circumstances which render it inequitable to enforce the claim after such a lapse of time. I must accordingly consider the circumstances in which the defendant will now find himself if the plaintiff’s claim is allowed, as contrasted with the circumstances in which he would have found himself if the plaintiff had successfully prosecuted proceedings in 1973 or earlier.”
The trial judge recognised that in the case before him the Court was confronted with a delay of lesser duration than had arisen in J.H. v. W.J.H., but stated that there was a substantial delay nonetheless. He referred to the fact that the contract was entered into in 1998, that it became clear later that year that Mr. Stewart did not intend to convey the property otherwise than subject to the existing tenancies, that the completion date was 23rd July, 1998 and that Mr. Stewart was in breach from that date in failing to complete the sale and that the proceedings were not instituted until July 2004. The trial judge then stated (at p. 12):
“Where the defendant has indicated an intention not to perform the contract, either by express repudiation or otherwise, the plaintiff is expected to pursue his claim with greater expedition. The same is true where, during the period of delay, the plaintiff knew of the manner in which the defendant would be prejudiced by his failure to act expeditiously (Spry, Equitable Remedies, 5th Ed, 1997, p 232-233). Both of these circumstances arise here.”
Further, the trial judge rejected the explanation advanced for the delay by Mr. McGrath, being unable to conclude that the explanation was a plausible one.
14. The trial judge then considered whether the circumstances were such as to render an order for specific performance inequitable. Referring to the judgment of Keane J. in J.H. v. W.J.H. again, the trial judge stated that Keane J. had concluded that the defence of laches was made out by virtue of the added financial burden on the defendant in that case that resulted from the massive increase in market value of the property in issue and that the same circumstance applied to the case before him, indeed to a greater extent. He recorded that, while the contract price for each of the properties the subject of the actions before him was fixed at IR£25,000, the expert evidence given at the trial valued each somewhere between €250,000 and €270,000. He continued (at p. 14):
“Even in the uncertain climate currently prevailing in the property market, the defendant could not hope to acquire equivalent properties for a sum equivalent to the contract price agreed in 1998. Accordingly, I am satisfied that to make an order of specific performance against the defendant would be inequitable.”
15. On that basis, the trial judge concluded that the defence of laches succeeded. He then stated (at p. 15):
“Accordingly, the decree of specific performance should be refused on the ground of laches. However, even if I am wrong in that conclusion, it has been established that where a decree of specific performance is sought, damages can be awarded in lieu thereof where a delay such as to make damages more appropriate has occurred, even where the defence of laches has not been established (White v. McCooey [1976-77] ILRM 72).”
16. While the trial judge made it clear that, unlike the situation here, the defence of laches had not been established in White v. McCooey, it is convenient at this juncture to consider the circumstances in which, in that case, Gannon J., in the High Court, considered it appropriate to award damages in lieu of specific performance. As here, the action was an action by a plaintiff purchaser against a defendant vendor and it was for specific performance of a contract for the sale of a licensed premises and, as Gannon J. stated in his judgment (at p. 73), “alternatively for damages for breach of contract”. A number of defences were raised by the defendant, all of which were rejected by Gannon J. For instance, he found that the defendant had not established a line of defence based on the contention that there was such disparity between the price which the defendant might reasonably have expected from any other buyer and the price the plaintiff was paying as would suggest unfairness about the contract. On the plea of laches, Gannon J. stated (at p. 86):
“As to the plea of laches on the part of the plaintiff there is no evidence from which I could be asked to infer that the plaintiff intended to abandon his claim nor have I any evidence of injurious affect upon the defendant’s position by such delay as did occur. . . . Nevertheless there are necessarily some changes and circumstances of which I think I should take account in the exercise of the Court’s discretion as to the remedy to be given the plaintiff on his claim.”
Having outlined certain difficulties which might be encountered on the particular facts of that case, which related to the transfer of the publican’s licence attached to the premises and the contractual relations between the defendant and his tenants, Gannon J. stated that the proper relief in the case was to award to the plaintiff a sum of damages in lieu of specific performance. A significant feature of the decision of Gannon J. for present purposes is that he found that the plaintiff purchaser had established an entitlement to have the contract specifically enforced but he exercised his discretion as to the remedy to which the plaintiff was entitled and he determined that damages in lieu of the specific performance was the proper remedy.
17. Having diverged from the outline of the judgment of the trial judge in this case, to highlight the manner in which the decision in White v. McCooey is distinguishable from it, I will now return to it. The trial judge then went on to consider whether damages could be awarded to the plaintiff and he stated (at p. 15):
“Even where a plaintiff has sought a decree of a specific performance in circumstances where he had no right to do so, it is open to the court to award damages in lieu of a decree (Duggan v. Allied Irish Building Society (Unreported, High Court, Finlay J., 4th March 1976)). The plaintiff has sought such damages in the event of the refusal of a decree and the court must now consider how they are to be quantified.”
18. As an introduction to addressing how damages in lieu of specific performance should be measured, the trial judge quoted a passage from the judgment of this Court delivered by Walsh J., with whom Budd and Fitzgerald JJ agreed, in Holohan v. Ardmayle Estates (Unreported, Supreme Court, 1st May, 1967). Expanding the passage quoted slightly, Walsh J. stated:
“The present claim, however, as in all actions for specific performance, is grounded upon the submission that the contract is in being and that it is to be enforced. I take the view, therefore, that when the facts of the case are such that the trial judge is of opinion that he could make an order for specific performance but in his discretion does not do so but awards damages in lieu thereof, he must take into account in assessing the damages not merely such items as the loss of bargain and other loss which flows from that breach but the out of pocket expenses and other money laid out by the plaintiff which would naturally include any part of the purchase money already paid.”
The significant feature of the case under consideration by the Supreme Court which emerges from that passage is the emphasis on the trial judge being of opinion that “he could make an order for specific performance”, but having the discretion to award damages in lieu thereof.
19. There followed an analysis by the trial judge of a number of authorities on the quantification of the damages and on the factual scenario on the basis of the evidence he had heard. He set out at the end of his judgment the basis on which he considered that damages should be assessed in each of the plenary actions before him. He stated (at p. 22):
“From the market value as at mid 2005 (or the date of judgment if the latter is a lesser figure) will be subtracted the contract price of the properties. In light of the decision of the Supreme Court in Holohan, the plaintiff is also entitled to the return of the deposit paid in respect of the two properties. The total arrived at is to be calculated according to this method in respect of each property.”
Earlier, the choice of “mid 2005” was explained. It was chosen “as being three and a half years preceding the date of judgment in this action”.
20. On the delivery of the judgment of the trial judge, each of the plenary actions was adjourned so that the Court could hear evidence as to the market value of each of the properties in sale as at mid 2005. That hearing took place on 6th February, 2009, when the trial judge heard oral evidence of Peter Quigley of Douglas Newman Good, Estate Agents and Valuers, on behalf of Mr. McGrath and further evidence of Mr. Stewart. The order of the High Court on each of the plenary actions was made on 13th February, 2009.
The orders of the High Court
21. Both orders of the High Court are in the same format and have precisely the same effect. Once again, it is convenient to consider the order made in the first plenary action (Record No. 2004/10969P). The effect of the judgment delivered on 11th November, 2008 was recorded as follows:
“The Court refused the Plaintiffs claim for a decree of Specific performance of the contract for sale between the Plaintiff of the one part and the Defendant of the other part dated 8th June, 1998 for the sale by the Defendant to the Plaintiff of all the hereditaments and premises commonly known as 14 Rutland Street in the City of Dublin.
And the Court awarded damages in lieu of a decree of specific performance and ordered and adjudged that the Plaintiff do recover against the Defendant damages to be assessed in accordance with the method set out in the said judgment.”
The finding of the trial judge following the hearing on 6th February, 2009, which was declared on 13th February, 2009, and the subsequent assessment of damages was recorded as follows:
“The Court doth find that the market value of the said property as at mid 2005 was €170,000.00.
In accordance with the method set out in the said judgment delivered on the 11th day of November 2008 the Court doth assess damages in lieu of a decree of specific performance in the sum of €141,589.61.”
It is difficult to relate the final figure to the method set out in the judgment in that difference between the sum found to be the value of the property at mid 2005, €170,000, and the final figure, €141,589.61, is in excess of €3,300 less than the Euro equivalent of IR£25,000. However, that is a minor point. In the order, Mr. McGrath recovered against Mr. Stewart the costs of the action including any reserved costs, when taxed and ascertained.
The appeal
22. The orders of the High Court having been perfected on 19th November, 2009, notice of appeal was filed on behalf of Mr. Stewart in this Court on 16th June, 2010 against both orders of the High Court.
23. The grounds of appeal set out in the notice of appeal can be broken down into the following components, which will be outlined by reference to the first plenary action:
(a) There are eleven grounds which contend that the trial judge erred “in ignoring or not taking any or any sufficient account of certain evidence”, which is described as “uncontradicted evidence” given by three witnesses who were called to give evidence on behalf of Mr. Stewart, including Mr. Stewart. The eleventh ground asserts that even on the basis set out therein alone, there was no consensus ad idem and therefore no agreement between the parties.
(b) It is asserted that, if there was an agreement between Mr. Stewart and Mr. McGrath, which is denied, the trial judge erred in failing to hold that the failure and/or refusal of Mr. McGrath to complete the sale amounted to a repudiation thereof and that the contract was thereupon at an end and entitled to be so treated by Mr. Stewart.
(c) It is asserted that the trial judge erred in fact and in law in having held on the one hand that there was delay on the part of Mr. McGrath in issuing proceedings which disentitled him to specific performance and that he then in error granted to Mr. McGrath damages in lieu of specific performance, as if he was entitled to specific performance, when he should have dismissed Mr. McGrath’s claim and recognised and held that Mr. McGrath was not entitled to the reliefs sought on account of such delay and inactivity.
(d) Without prejudice to the foregoing grounds, it is asserted that the trial judge erred in his assessment of the damages on various bases.
The relief which Mr. Stewart seeks on the appeal, as outlined in the notice of appeal, is an order dismissing the claims in each of the plenary actions for specific performance or damages in lieu thereof in their entirety.
24. Outline submissions were filed on behalf of Mr. Stewart on the appeal on 26th May, 2016. In the outline submissions, having outlined Mr. Stewart’s version of the facts, three issues were identified for determination on the appeal, which, by reference to the first plenary action, may be outlined as follows:
(a) Whether there could have been consensus ad idem between the parties given the unilateral insertion by Mr. McGrath’s solicitor “by Tippex” of the name of Mr. McGrath as purchaser onto the contract with Mr. Stewart as vendor “in circumstances where the uncontradicted evidence of [Mr. Stewart], the beneficial owner that at all material times were selling the [property] subject to [tenancy] to Mr. Black”.
(b) Whether the unilateral insertion of the name of Mr. McGrath, described as “a third party”, “who is not a party to the contract without the consent of the beneficial owner/vendor” has the capacity “to bind the beneficial owner of the property to convey the same to that third party”.
(c) Whether an award of damages in lieu of specific performance can be made where a defence of laches succeeds in defeating a claim for a decree of specific performance.
As regards the issue at (a), it would appear that the issue was intended to be formulated as whether, given the uncontradicted evidence of Mr. Stewart and the beneficial owner, that they were selling the property subject to tenancy to Mr. Black, there could have been consensus.
25. In the replying outline submissions filed on behalf of Mr. McGrath and the second Respondent on the appeal on 20th June, 2016, having recognised that the nineteen grounds of appeal in the notice of appeal had been netted down to those three issues, those issues were addressed.
26. The basis on which the issues outlined at (a) and (b) in para. 14 above are advanced is that all three properties the subject of the transactions in 1998, including 14 Rutland Street and 9 Summerhill Place, were beneficially owned by Mr. Matthew Kelly (Mr. Kelly) and that Mr. Stewart only held the legal title. That is recognised in the judgment of the trial judge, as is the fact that Mr. Stewart was at all material times the solicitor for Mr. Kelly. Both issues are premised on the proposition that Mr. Stewart, who executed the contracts as vendor simpliciter (by which I mean, without disclosing that he held the property in trust) and was, in any event, acting for Mr. Kelly in the sales, did not have capacity to bind Mr. Kelly. Indeed, on the hearing of the appeal counsel for Mr. Stewart sought to advance that argument. Nowhere in the pleadings in either of the plenary actions is any lack of capacity on the part of Mr. Steward been pointed to. Aside from the plea that the claim was statute-barred, and the invocation of laches, the defence was that Mr. Stewart had no liability because the entirety of the claim was traversed, including the denial of the existence of an agreement and, even if an agreement existed, the denial that Mr. Stewart had liability to Mr. McGrath on the basis asserted on various grounds, for example, that the sale of 14 Rutland Street was subject to the existing tenancy. Further, as has already been recorded, in the counterclaim, Mr. Stewart sought rectification of the contract, the clear implication being that he had capacity to do so. The only reference to Mr. Kelly in the pleadings is a reference to an affidavit sworn by him on 30th June, 2005, presumably, on the motion to strike out referred to above (para. 7), which was one of a number of affidavits stated to set out the sequence of events, in reply to a request in a notice for particulars dated 13th July, 2005 issued on behalf of Mr. McGrath requesting that the full facts upon which it was alleged or claimed that Mr. McGrath was not ready, willing and able at the time of service to complete the sale. As has already been noted, those affidavits are not before the Court.
27. Moreover, I see nothing in the judgment of the trial judge to suggest that an argument was made to him on the consensus ad idem point that there was no consensus because Mr. Kelly, as the beneficial owner, was not bound. Quite clearly, the trial judge was treating Mr. Stewart, the defendant in both plenary actions, as the vendor and it was Mr. Stewart’s “mistaken understanding” which he addressed in the context of the consensus ad idem point, as outlined above (at para. 11).
28. For the foregoing reasons, I have come to the conclusion that issues (a) and (b) cannot be pursued on this appeal. Even if they could, this Court would be confronted with an insuperable problem. There is no transcript available of the hearing before the trial judge on 14th and 15th October, 2008 or of the hearing on 6th February, 2009. No digital audio recording of the hearing is available. There is not even an agreed note of the evidence given at the hearings. On the hearing of the appeal, this Court was furnished, for the first time, with notes of the evidence given on 14th and 15th October, to the High Court, which notes were prepared on behalf of the respective parties by their respective legal teams and in which there are conflicting accounts of the evidence.
29. Even if this Court had a satisfactory record of the evidence given in the High Court, and if the Court considered it appropriate to entertain issues (a) and (b), careful consideration would have to be given to the extent, if any, to which the findings of the trial judge could be interfered with, having regard to the jurisprudence of this Court and, in particular, the judgment of McCarthy J. in Hay v. O’Grady [1992] 1 I.R. 210. In any event, I have come to the conclusion that it is proper for this Court only to entertain issue (c). Accordingly, the issue which remains is whether a court may award damages in lieu of specific performance where the defence of laches has been upheld by the court and the court has found that a decree of specific performance should be refused and, in particular, whether Mr. McGrath, having been found guilty of laches, was entitled to damages in lieu of specific performance, as was found in the first plenary action.
Entitlement to damages in lieu of specific performance?
30. As is clear from the outline of the judgment of the trial judge above, the trial judge made an adverse finding against Mr. McGrath, as plaintiff, in the first plenary action, and also against both plaintiffs in the second plenary action, in that he found that the defence of laches must succeed and that the decree of specific performance should be refused on the ground of laches. Significantly, that finding was not cross-appealed by the respondents on this appeal, nor was any notice to vary filed on their behalf. Indeed, on the hearing of the appeal, counsel for the respondents argued that, notwithstanding that finding, the trial judge was entitled to award damages to the respondents, his principal arguments being that –
(a) the decision of the High Court in Duggan v. Allied Irish Building Society was authority for that proposition;
(b) what the respondents were seeking was damages for breach of contract; and
(c) although the relief sought in the statement of claim was damages in lieu of specific performance, in the plenary summons the relief sought was damages without qualification.
31. The jurisdiction to award damages in lieu of specific performance was first conferred on the Courts of Chancery in Ireland by the Chancery Amendment Act 1858 (21 & 22 Vict. c27), commonly known as Lord Cairns’ Act, s. 2 of which provides:
“In all cases in which the Court of Chancery has jurisdiction to entertain an application for an injunction against a breach of any covenant, contract, or agreement, or against the commission or continuance of any wrongful act, or for the specific performance of any covenant, contract, or agreement, it shall be lawful for the same Court, if it shall think fit, to award damages to the party injured, either in addition to or in substitution for such injunction or specific performance; and such damages may be assessed in such manner as the Court shall direct.”
As is pointed out in Buckley, Conroy and O’Neill on Specific Performance in Ireland (Dublin, 2012) (at para. 10.16), while s. 2 was repealed in 1883, the jurisdiction to award damages in lieu and in addition to specific performance continued, as the repealing statute contained a saver in respect of any jurisdiction or rule of law or equity established or confirmed by or under any previous enactment. The authors (at footnote 42) helpfully identify the repealing statute and also the saver provision and a later saver provision.
32. The claim of the plaintiff in Duggan v. Allied Irish Building Society in the High Court proceedings before Finlay J. was described as follows in the judgment (at p. 12):
“In them the plaintiff claims firstly specific performance of an agreement to advance to him the sum of £32,000 upon the security of a mortgage, secondly in the alternative damages for breach of that contract and further and other relief and costs.”
The defendant lender in that case raised a number of defences, the second being that, as a matter of law, the plaintiff was not entitled to specific performance of an agreement to make an advance and could not accordingly obtain damages in lieu of such specific performance either. In relation to this ground of defence, Finlay J. stated (at p. 15):
“With regard to the second ground of defence ultimately relied upon namely that the plaintiff is not entitled as a matter of law to a decree for specific performance and that accordingly the Court cannot award to him damages as an alternative I am satisfied on the authority of the decision in Roger v. Challis 27 Bevin Reports 175 and of Larios v. Gurety Law Reports 5 Privy Council 346 that the Court cannot and should not grant specific performance of a contract to advance money even where the contract is in the form of a contract to enter by the defendants into a legal mortgage. The second part of the contention, however, which of course is the vital one from the defendants point of view namely that there being no power to grant specific performance there is no power to grant damages in lieu thereof fails completely having regard to the provisions of the Judicature Acts. It is quite clear that the necessity for a right to exist or to have existed at the time of the commencement of an action to an order for specific performance as a condition precedent to the granting of damages applied only at a time when the Courts of Equity were separated from and distinct in their powers and jurisdiction from the Courts of Common Law. If in fact I am satisfied that the defendants had been in breach of this contract then the plaintiff upon proof of loss is entitled to damages for that breach irrespective of whether he could at law have obtained an order for specific performance of it.”
Finlay J. stated that, in the circumstances before him, he was satisfied that the defendants had been guilty of a breach of the contract which they entered into to advance the sum of £32,000 to the plaintiff and that the plaintiff was entitled to damages for that breach.
33. The reference in the second passage from the judgment in Duggan v. Allied Irish Building Society quoted above to the Judicature Acts is obviously a reference to the series of statutes which commenced with the Supreme Court of Judicature (Ireland) Act 1877 (40 & 41 Vict. c57) (the Act of 1877) and subsequent Acts which amended it and which were enacted before 1922. Those Acts changed the structure of the courts in Ireland and, in particular, outlined the jurisdiction vested in the various courts and how common law and equitable jurisdictions were to be exercised by each court. Counsel for Mr. McGrath referred the Court to the recent judgment of the High Court (Hogan J.) in Meagher v. Dublin City Council [2013] IEHC 474, in which the extent of what is usually referred to as the “fusion of law and equity” in consequence of the Act of 1877 was discussed in the context of the issue which arose there. It is useful to consider that judgement before considering the judgment in Duggan v. Allied Irish Building Society further.
34. It is clear from the judgment of Hogan J. that what he was considering was a claim for a liquidated sum of money, which had been initiated by way of summary summons which issued on 9th March, 2005. The proceedings were subsequently remitted to plenary hearing. As is pointed out by Hogan J. (at para. 17), the claim was for damages for breach of contract. Laches was pleaded as a defence. The issue addressed by Hogan J. which is of interest for present purposes is whether the equitable doctrine of laches could be utilised to defeat a claim for damages for breach of contract at common law which is otherwise not statute-barred. Having referred to some of the judicial and academic commentary on the effect of the Act of 1877, Hogan J. pointed out that, in over one hundred and thirty five years (and as of now, one hundred and thirty eight years) of jurisprudence since the passing of the Act of 1877, there is no authority for the proposition that the Court might refuse to award damages for breach of contract or in tort on discretionary grounds, such as undue delay per se or because the claimant has been guilty of bad faith, even though these would be well established grounds for refusing any equitable relief which might otherwise have been granted. His conclusion was that, while the two systems of law (that is say, common law and equity) work evermore closely together and draw mutual inspiration from each other, the two systems “are not yet fused”. In consequence, the doctrine of laches has, as such, no application to a claim at common law for damages for breach of contract where that claim is not otherwise barred by the Statute of Limitations. I respectfully agree with that conclusion. It follows that, if the claim by Mr. McGrath in the first plenary action was for damages for breach of contract and that claim was not statute-barred, a finding of laches would not preclude Mr. McGrath from pursuing the claim for damages for breach of contract.
35. Returning to the decision in Duggan v. Allied Irish Building Society, I consider that the identification of “the provisions of the Judicature Acts” as the solution to the problem there is misconceived. It must be borne in mind that the plaintiff there sought two alternative remedies: specific performance; and damages for breach of contract. It was held that he was not entitled to specific performance, because of the nature of the contract he sought to enforce, being a contract in respect of which specific performance is not granted. The reference to the Judicature Acts is made in the context that what Mr. Duggan was seeking was damages in lieu of specific performance. However, his alternative claim was for damages for breach of contract and, moreover, it was held by Finlay J. that the defendants had been guilty of breach of contract and that Mr. Duggan was entitled to damages for that breach. The effect of the Judicature Acts was that Mr. Duggan could pursue a claim in equity for specific performance, which, if wrongdoing was established on the part of the defendant, might, depending on the exercise by the Court of its discretion under Lord Cairn’s Act, give rise to an entitlement to damages in lieu of specific performance and, as an alternative, as he did, he could pursue a claim for damages for breach of contract at common law, and he could pursue both claims in the same Court, as he did, that is to say the High Court.
36. As the Judicature Acts do not supply the solution to the problem, it is necessary to revert to s. 2 of Lord Cairn’s Act and to consider its application on the facts here. The first question which arises, again by reference to the first plenary action, is whether in that action the High Court had jurisdiction “to entertain an application . . . for the specific performance of” the contract for sale entered into between Mr. Stewart and Mr. McGrath. In my view, the answer is that it had, because the contract was a contract for the sale of land. Accordingly, by virtue of s. 2, the Court had jurisdiction to award damages in lieu of specific performance, if it was appropriate for the Court to think it fit that it should do so. In a situation where the Court has determined that laches on the part of the plaintiff purchaser, as here, should operate as a bar to entitlement to an order for specific performance, it is difficult to see how the Court could think it fit to award damages in lieu of specific performance. The situation in which the Court refuses to make an order for specific performance in favour of a plaintiff purchaser because laches on the part of the plaintiff purchaser has been established is wholly different from a situation in which there is no finding that the plaintiff has been guilty of laches but the Court may think it fit to grant damages in lieu of specific performance, rather than specific performance. One example which is pertinent in the context of this case is the situation which arose in White v. McCooey referred to earlier, where it was found that there was delay but it was insufficient to establish the defence of laches, but the Gannon J. determined, in accordance with his discretion, that the plaintiff would be confined to a remedy in damages. In this case, the trial judge, having refused to make an order for specific performance because it would be unequitable to do so on the ground of laches, in my view, should also, for the same reason, have refused to award damages in lieu of specific performance.
37. Of course, as outlined earlier, it is an entitlement to damages for breach of contract which counsel for Mr. McGrath and the second respondent now argues on behalf of his clients. The question which remains is whether that argument can succeed. In my view, it cannot. The pleadings in the first plenary action have been outlined in some detail earlier to demonstrate the relief the plaintiff was seeking. The plaintiff, Mr. McGrath, was seeking specific performance or damages in lieu of specific performance, as was the case in Holohan v. Ardmayle Estates. His case was that the contract was in being. Nowhere was it alleged that he was entitled to damages for breach of contract and no basis for assessing such entitlement or for measuring the damages, if such entitlement existed, was pleaded. The trial judge approached the quantification of damages entirely on the basis that the damages awarded were damages in lieu of specific performance. The quantification of damages for breach of contract would, in all probability, not be the same. As was recognised by this Court in Duffy v. Ridley Properties Limited [2008] 4 I.R. 282, the general rule is that damages for breach of contract should be assessed at the date of the breach. On this appeal, it is not open to Mr. McGrath and the second Respondent to seek to pursue a claim which was not made or pleaded at first instance and, accordingly, the argument advanced on their behalf must be rejected. On this point I have had regard to the principles outlined in Delany and McGrath on Civil Procedure in the Superior Courts (3rd Ed.) at para. 22 – 79 to 22 – 83. I am satisfied that for this Court to find that in this case there is an exception to the general principle that this Court should not hear and determine an issue which has not been tried and decided in the High Court is not justified, because to so find is clearly not required in the interests of justice.
38. In the interests of clarity, I would reiterate that it appears from the judgment in Duggan v. Allied Irish Building Society that the plaintiff in that case did claim damages for breach of contract, so that that authority is distinguishable from the position here. The decision in Holohan v. Ardmayle Estates is also distinguishable because the Supreme Court treated the award of damages in that case as damages in lieu of specific performance in circumstances where the Court had jurisdiction to make such an order for specific performance.
Summary of conclusions
39. The only issue which, in my view, it is appropriate for this Court to consider on this appeal is whether the trial judge was entitled to make an award of damages in lieu of specific performance in favour of Mr. McGrath and the second Respondent in circumstances where he had found that Mr. McGrath and the second Respondent were not entitled to a decree of specific performance in either plenary action, because Mr. Stewart had established laches on their part. On that issue, I am of the view that the trial judge did not have jurisdiction to award damages in lieu of specific performance. As regards the argument advanced on behalf of Mr. McGrath and the second Respondent, that they are entitled to damages at common law for breach of contract, I consider that, as no such claim was made or pleaded in the High Court or considered by the trial judge, they cannot pursue such a claim on the appeal.
Order
40. I propose that there be an order allowing Mr. Stewart’s appeal and vacating the order of the High Court in both plenary actions awarding damages in lieu of specific performance and quantifying those damages.
41. Although not specifically addressed on the hearing of the appeal, apart from in the context of the measurement of damages, I think it appropriate to make some observations in relation to the deposits paid by the plaintiff purchasers under the contracts the subject of both plenary actions. The cheque referred to earlier in para. 2, which was sent to Mr. Stewart’s solicitors on 25th June, 1998, was dated 24th June, 1998 and it was made payable to “Stewart & Co. Solicitors”. It was in the sum of IR£7,500, IR£5,000 of which related to the deposits payable under the contracts in relation to 14 Rutland Street and 9 Summerhill Place. Those deposits, in accordance with Condition 5 of the general conditions in each of the contracts, were payable to Stewart & Co., as the vendor solicitors, as stakeholders. Assuming that the deposits have not been repaid, Mr. McGrath, as regards the 14 Rutland Street contract, and Mr. McGrath and the second Respondent, in relation to the 9 Summerhill Place contract, would appear to be entitled to repayment of the deposits so paid, even if, as seems likely, they have not been demanded. However, apart from making those observations, I do not consider it appropriate for this Court to take any further action in relation to the deposits.
Durkan New Homes -v- The Minister for the Environment Heritage & Local Government
[2012] IEHC 265
Charleton J.
1. In June 2006 a site owned by the State at Harcourt Terrace in Dublin consisting of a Garda station and the film censor’s office, measuring 3540 m² or 0.874753 of an acre, was valued at €17.7 million. By December 2008, the value of that site had dropped to €9.6 million. In September 2010 the site was worth €3.8 million. In November 2011 a professional valuer made a statement for the purposes of this case putting the potential realisable sale price of the site at €3 million. When it came to the date of trial in June 2012, he revised his opinion to €2.8 million.
2. The plaintiff is a firm of housebuilders specialising in supplying the market for young couples who are buying their first home. The inflated values represented by the site at issue in this case at Harcourt Terrace were also reflected in house prices. To enable people to purchase a home, the defendant Minister started a number of schemes in August 2005 under an organisation called the Affordable Homes Partnership. All such schemes were ended in December 2010 when the Affordable Homes Partnership was dissolved. By legislation applicable at the earlier date, builders of housing estates were to supply some units to the public at discounted prices. The scheme in question here was one whereby the State exchanged pieces of land which were not needed on a barter transaction to builders who would supply a particular value of discounted homes to the public. This scheme involved careful evaluation. The site to be exchanged was professionally assessed as to what it was worth in the open market. The open market price of houses that would be exchanged for any such site was researched and a discount value was arrived at whereby they would be sold for less than the market price. The sum of such discount, as availed of by less well off couples, was multiplied by the number of houses sold at an undervalue to arrive at the price for which land would be exchanged. In a competitive market, the sale of sites by tender was usual. Durkan New Homes had a particular interest in purchasing the Harcourt Terrace site. Previously, on the basis of a competitive tender, it had purchased an adjoining site on which a butter testing station had once stood, on the basis of exchanging a discount on affordable homes. By having both sites together, the firm of builders hoped to achieve a greater density of development and more effective site access.
3. When tenders were requested by the State by July 2006 for the Harcourt Terrace site, Durkan New Homes made a handsome offer. This outstripped two rival bids. In exchange for the site to be transferred, the building firm offered to discount 215 houses and apartments in various parts of Dublin city by 47%. The Affordable Homes Partnership evaluated that tender as against the expected open market price of the site. It represented excellent value. The 215 houses and apartments discounted by 47% cost Durkan New Homes a return of €31,243,000 plus VAT. That is the main sum claimed in damages in this action. The State, through the Affordable Homes Partnership, accepted that tender. Because of various delays, the site at Harcourt Terrace which the State contracted to sell to Durkan New Homes was never conveyed.
4. The plaintiff firm of builders seeks the return of what was in effect the purchase price of the site. In essence, the defence to the action is that by entering into negotiations with the State to buy and lease back the site, an estoppel in respect of the strict legal rights under the contract of sale has arisen by convention. In consequence, it is argued that the question of damages does not arise and that there is no liability. Were that argument found to be incorrect, the State seeks to persuade the court that the true measure of damages is an assessment of the open-market cost of the site at various dates later to the acceptance of the tender; namely when the contract would have been completed had an enforcement notice been complied with, or as of today’s date or at other suggested times. Fundamentally, on the issue of damages, it has been eloquently argued on behalf of the State that the principle applicable is that a plaintiff should not be put in a better position than if the contract had been performed. Therefore the value that would have resulted to Durkan New Homes had the contract for the sale of the land been performed is the measure of damages. This would place the value current as of the date of trial as the correct figure. In addition, an argument as to a penalty clause arrived at when this site could not be conveyed, due to the reluctance of the gardaí to leave the station at Harcourt Terrace, is in issue. The claim for the interest charges to the borrowings necessary to fund the purchase by Durkan New Homes must also be decided. Whether value added tax should be included as a measure of damages is also an issue. Finally, some items of special damage have been agreed in the event of a finding in favour of the plaintiff.
5. I propose to move on to these issues after first setting out a brief chronology.
Chronology
6. In 2005 Durkan New Homes successfully tendered for the purchase of the adjoining butter testing station site. The tender offer was to offer a discount to the public for 193 housing units, amounting to a total market saving to those purchasing of €15.7 million. A difficulty had arisen with stamp duty on the transaction. In July 2006 the Harcourt Terrace site was offered for sale by tender on the basis that offers were sought “for the delivery of a number of affordable units, as quickly as possible, on sites within the greater Dublin area with preference to those proposals which maximise the provision of affordable units in the Dublin metropolitan area.” The advertisement specifically stated that the objective was to fund the provision of affordable housing units “by the exchange of the Harcourt Terrace site.” The advertisement also states that cash offers would not be accepted. It warns that any offer “must represent a fair value for the site.” By letter dated 19 July 2006, Durkan New Homes, and some people referred to in the case as the Durkan individuals, made a tender offer which competed with two other such offers. By letter dated 10 August 2006, the Affordable Homes Partnership accepted the Durkan New Homes’ tender. The letter confirms that the transfer of land at Harcourt Terrace was for the exchange of 215 residential units discounted from the market value, “representing a value for the exchange of €35,461,000 inclusive of VAT.” By a document dated 24 of August 2007 a development agreement was then entered into between those sets of parties, the Affordable Homes Partnership representing the interests of the defendant Minister. Title to the land in question was held by the Commissioners of Public Works in Ireland. The Commissioners of Public Works in Ireland is also now referred to as the Office of Public Works or OPW. They hold the title for a much public land holding and in particular Garda stations. An agreement for sale between the Affordable Homes Partnership and Durkan New Homes was entered into on 7 December 2007 with a closing date for 31 December 2008. The special condition included at clause 21 is a provision for the payment of money in the event of non-completion within the contemplated time. There was no specific provision as to interest beyond a standard clause in the general conditions which places interest at 4% above the court rate, currently at 8%. Clause 40 of the contract deals with completion notices. This provides that if the sale is not completed by the closing date notice may be given by either party to complete the sale and that such notice is effective if that party is able, ready and willing to proceed. The term provided for completion in the contract is 28 days. The clause continues in the following terms:
If the vendor does not comply with such a notice within the said period (or within any extension thereof which the purchaser may agree), then the purchaser may elect either to enforce against the vendor, without further notice, such rights and remedies as may be available to the purchaser at law or in equity or (without prejudice to any right of the purchaser to damages) to give notice to the vendor or requiring a return to the purchaser of all monies paid by him, whether by way of deposit or otherwise, on account of the purchase price.
7. By a separate agreement of 10 December 2007, Durkan New Homes sold some or all of that forthcoming interest to four people, three of whom were members of the Durkan family; previously referred to as the Durkan individuals. That agreement was not argued as being germane to the issues raised in this hearing. Later difficulties with the conveyance of the land focused upon whether there had been an agreement for sale incorporating a new corporate entity and a sub sale involving these individuals. No argument has been advanced, and in my view no rational argument could have been advanced, to the effect that the later insistence by the purchaser under contract which included these individuals on a sub sale and which avoided stamp duty entitled the vendor not to complete. From the time the tender was first advertised for, stamp duty was not to be payable. By a third party limited recourse mortgage of 13 December 2007 Allied Irish Bank gained an interest in the site through the individuals and through a separate mortgage of the same date in relation to the relevant corporate vehicle, Harcourt Terrace Limited. On 18 December 2008 a draft indenture involving a proposed deed of transfer to the corporate vehicle and the individuals was furnished to the Chief State Solicitor’s Office. An amendment to that indenture was delivered by the Chief State Solicitor’s Office which deleted the corporate vehicle was delivered on 27 May 2010. In the meanwhile there had been much discussion about the issue of a sale or sub sale.
8. On 19 August 2010, Durkan New Homes served a completion notice on the Affordable Homes Partnership. The site had yet to be conveyed by the Commissioners of Public Works in Ireland to the vendor; hence no sale to the purchaser Durkan New Homes. Another completion notice was in turn served by the Affordable Homes Partnership on 20 August 2010 to try to force the completion of the sale. That proved impossible, apparently, because the gardaí would not move.
9. Between the disappointment of the sale not closing on 31 December 2008 and the eventual disavowal of the contract and request for the return of the purchase price by Durkan New Homes on 15 October 2010, a situation is claimed to have arisen whereby an estoppel by convention renders that step under the written contract unenforceable. It was also on 15 October 2010 that the difficulties between the land owner and the vendor had been eventually sorted out, dissolving any difficulty as to stamp duty, sub sub sale and the individual purchasers. A brief statement of the law is therefore necessary.
Estoppel by convention
10. Estoppel is a device in equity, which operates as a protection against defined legal rights, including legal defences, whereby a party to whom a clear representation has been made inviting reliance may be spared the unfairness of a retreat from that position by the representor. This form of estoppel is outlined in Treitel – The Law of Contract (13th Edition, Edwin Peel) at 3.094 as follows:
Estoppel by convention may arise where both parties to a transaction “act on an assumed state of fact or law, the assumption being either shared by both or made by one and acquiesced in by the other”. The parties are then precluded from denying the truth of that assumption, if it would be unjust or “unconscionable” to allow them (or one of them) to go back on it. Such an estoppel differs from estoppel by representation and from promissory estoppel in that it does not depend on any “clear and unequivocal” representation or promise. It can arise where the assumption was based on a mistake spontaneously made by the party relying on it, and acquiesced in by the other party, though the common assumption of the parties, objectively assessed, must itself be “unambiguous and unequivocal”.
11. A clear example is provided in the decision of the Supreme Court in Courtney v McCarthy [2008] 2 IR 376, which was also a sale of land case. The plaintiff agreed to sell a site in Ennis, Co Clare to the defendant. The sale was due to close on a particular day but the purchaser’s solicitor was out of town. An agreement was made to complete the sale on the following day but then an enquiry was made as to why the purchaser’s solicitor had not turned up on the day designated by the contract for the closing and the purchaser was told that the sale had been called off. The purchaser was granted an order of specific performance on the basis that where a party made, by words or conduct, a clear and unambiguous promise or assurance to another party which was intended to affect legal relations between them and was to be acted on accordingly, if such action was taken to the detriment of that party, the party giving the promise or assurance would be estopped from reverting to the previous legal relations between them. Geoghegan J relied on the authority of Amalgamated Property Co v Texas Bank [1982] 1 QB 84. At pages 389-390 he set out the law as follows:
The case related to a bank guarantee given by a company the validity of which was being disputed by the liquidator of that company. A question arose as to whether even if the guarantee was not valid an estoppel had arisen by virtue of the conduct of the company which precluded denial of the guarantee. Brandon L.J., though forming the view that the guarantee was in fact effective, went on to consider the estoppel question in the event that he was wrong. Two main arguments against the existence of the estoppel had been put forward in the High Court and the Court of Appeal. The first was that since the bank held its mistaken belief as a result of its own error alone and that the company had at most innocently acquiesced in that belief which it also held, there was no representation which could found an estoppel. The second argument was that the bank was seeking to use the estoppel not as a shield but as a sword and that that was not permitted by the law of estoppel. Brandon L.J. rejected both arguments. He expressed the view that the particular estoppel relied on was of the kind described in Spencer Bower and Turner, Estoppel by Representation, (3rd ed. 1977). at pp. 157 to 160 as “estoppel by convention”. He cited the relevant passage of that work as follows:
“This form of estoppel is founded, not on a representation of fact made by a representor and believed by a representee, but on an agreed statement of facts the truth of which has been assumed, by the convention of the parties, as the basis of a transaction into which they are about to enter. When the parties have acted in their transaction upon the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that transaction each will be estopped as against the other from questioning the truth of the statement of facts so assumed.”
In this particular case, both parties knew that the contract was lawfully rescinded and both parties accepted that that was to remain the position subject only to the proviso that both would act on the artificial assumption that the contract was still alive and enforceable if the sale was completed on a particular date and time.
Brandon L.J. then dealt with the second argument which, as I have already pointed out, was an argument which featured heavily in this case and particularly in the High Court. Counsel for the plaintiff argued strongly that estoppel here was being used as a sword and not a shield. But this is what Brandon L.J. had to say in relation to this alleged principle at pp. 131 to 132 of Amalgamated Property Co. v. Texas Bank [1982] 1 Q.B. 84:-
“In my view much of the language used in connection with these concepts is no more than a matter of semantics. Let me consider the present case and suppose that the bank had brought an action against the plaintiffs before they went into liquidation to recover moneys owed by A.N.P.P. to Portsoken. In the statement of claim in such an action, the bank would have pleaded the contract of loan incorporating the guarantee, and averred that, on the true construction of the guarantee, the plaintiffs were bound to discharge the debt owed by A.N.P.P. to Portsoken. By their defence the plaintiffs would have pleaded that, on the true construction of the guarantee, the plaintiffs were only bound to discharge debts owed by A.N.P.P. to the bank, and not debts owed by A.N.P.P. to Portsoken. Then in their reply the bank would have pleaded that by reason of an estoppel arising from the matters discussed above, the plaintiffs were precluded from questioning the interpretation of the guarantee which both parties had, for the purpose of the transactions between them, assumed to be true.
In this way the bank, while still in form using the estoppel as a shield, would in substance be founding a cause of action on it. This illustrates what I would regard as the true proposition of law, that, while a party cannot in terms found a cause of action on an estoppel, he may, as a result of being able to rely on an estoppel, succeed on a cause of action, on which without being able to rely on that estoppel, he would necessarily have failed. That, in my view, is, in substance, the situation of the bank in the present case.”
As I have illustrated earlier in this judgment that is exactly the position which pertains in this case.
12. I am not convinced, however, that estoppel by convention is applicable in the circumstances of this case.
13. In early 2009, Neil Durkan, of Durkan New Homes, met with John O’Connor of the Affordable Homes Partnership and John McMahon of the Commissioners of Public Works. At that meeting Mr McMahon indicated that both the Garda station and the film censor’s office were still occupied. He explained that the alternative Garda station on Kevin Street, to which the existing station was to be relocated, had not yet been completed. That site on Kevin Street is in an area of archaeological interest which created delays. A number of other issues emerged, including contamination of the site, which required to be resolved before construction could commence. The initial works on the site, at the total cost of €4.2 million were completed in October 2008, after which construction was to take place and for which a construction contract was agreed in June 2010. That has since been cancelled, I understand, because the contractor failed to give certain undertakings sought. It has not again been put out for tender. In 2009, as there was no immediate space for the gardaí to move into, Mr McMahon expressed the view that while temporary accommodation could be sourced, the preference was to remain in occupation of the Garda station for the moment. Vacation was not possible at that juncture, otherwise then by means of an emergency evacuation. Neil Durkan was asked if there might be some interest in granting a lease in the site to the Commissioners of Public Works for the purposes of accommodating the gardaí. Negotiations commenced in respect of a lease.
14. By the end of the summer 2009, there was agreement in principle on the outline terms of that lease. Later, in October 2009, Durkan New Homes obtained consent from AIB Bank, as its banker, to enter into a lease on those terms. This consent was not in writing. It was not an unqualified consent. One of the pre-conditions was that the lease contains no onerous conditions or that there would be nothing in the lease that could prejudice the security that AIB had taken over the site or under the contract. The solicitors for Durkan New Homes issued a draft lease in November 2009 and again in January 2010. By January 2010 no response had been received. The lease had been formally issued to the Chief State Solicitor’s Office, who, in turn, had issued it to Eversheds, solicitors for the Affordable Homes Partnership. In February 2010 Neil Durkan contacted Mr O’Connor for an update by email. In that communication he expressed his frustration that no formal response had been received to the lease. Mr O’Connor, for his part, said that he would endeavour to get some feedback on the state of play. A meeting took place between the solicitors for Durkan New Homes, the Chief State Solicitor’s Office and Eversheds in May 2010 to discuss a number of outstanding issues in respect of the lease. It was then made clear by the vendors that it would not be acceptable for the lease to be issued in the name of the corporate vehicle that Durkan New Homes had contemplated as being the co-party in the eventual conveyances, namely Harcourt Terrace Limited. Serious issues regarding the insurance of the building and its reinstatement in the event, for example, of a fire, were also discussed. Durkan New Homes took the view that as it was to be a short term letting, it would be extremely unusual for the landlord to agree to rebuild the building in the event that it was damaged by fire. On the other hand, the Commissioners of Public Works had an issue that as the buildings were quite old, should the lease extend to three or even five years, there was the possibility of dilapidations. Finally, there was an issue over guaranteeing the rent until the end of 2011, which the Chief State Solicitor’s Office had rejected.
15. Once Durkan New Homes had decided the identity of the corporate vehicle that was to carry out the development of the Harcourt Terrace site, namely Harcourt Terrace Limited, it sought to have the site transferred into its name. This proposal was rejected by the Chief State Solicitor’s Office and it was decided to have the site instead transferred into the names of four individuals associated with Durkan New Homes, who would hold the site on trust for Harcourt Terrace Limited. In tandem, that issue arose with the question regarding the inclusion of Harcourt Terrace Limited’s name in the proposed lease. In May 2009, a formal response was received from the Chief State Solicitor’s Office to the draft deed for the transfer of the Harcourt Terrace site which the solicitors for Durkan New Homes had provided in December 2008. That deed provided that the Commissioners of Public Works would transfer the site to the Affordable Homes Partnership who would transfer it on to Durkan New Homes and then finally a transfer on to the Durkan individuals. The Chief State Solicitor’s Office objected to the final transfer. Instead, it was proposed that the Commissioners for Public Works would transfer to the Affordable Homes Partnership who would in turn transfer the site jointly to Durkan New Homes and the Durkan individuals in their sole names. This raised an implication that Durkan New Homes would be liable for stamp duty on any subsequent transfer of the site to the Durkan individuals. That potential stamp duty liability was in excess of €2 million. This clashed with the expectation of the purchasers as the tender documentation had provided that stamp duty would not be payable on the transaction. Furthermore, Durkan New Homes maintained that its draft deed was in accordance with the terms of the contract concluded between the parties. The difficulty appears to have arisen due to a difference between the contract between the Commissioners for Public Works and the Affordable Homes Partnership on the one hand and that between the Affordable Homes Partnership and the plaintiff on the other. In order to effectively address the stamp duty concern, there was a proposal that a submission be made to the Revenue authorities so that the Revenue Commissioners would make a ruling on the matter.
16. The lease negotiations took place between Neil Durkan, Mr O’Connor, Mr McMahon and Mr O’Loughlin, who was a property negotiator/real estate agent with HWBC appointed as agent for the Affordable Homes Partnership and the Commissioners of Public Works. At that point the Affordable Homes Partnership and the Commissioners had agreed to act in concert with one another. The proposed rental fee under the lease for the Harcourt Terrace site was €600,000 per annum. That figure was to be back dated to the 1 January 2009 irrespective of when the lease was ultimately executed. It was part of the terms of the lease negotiations that any rental fee would involve an element which would allow for any claim under clause 21 of the special conditions to the contract for sale to be surrendered. The terms of the lease were close to final completion bar a number of discrete issues by the 25 August 2010, when the solicitors for Durkan New Homes sent a draft lease to the Chief State Solicitor’s Office with a cover letter headed “strictly without prejudice, subject to letting agreement, letting agreement denied”. Because there was no agreement to transfer the site, the lease could not be concluded for the simple reason that Durkan New Homes, or any other entity, could not grant a lease as a landlord if it did not hold the necessary title to the site. There was also an issue as to whom the site was to be transferred. Correspondence continued through the summer of 2010 between the solicitors for Durkan New Homes and the Chief State Solicitor’s Office. The Chief State Solicitor, however, maintained her position in respect of the lease and the deed of transfer through June until September 2010. That attitude only softened after the expiry of the completion notice in October 2010. Mr O’Connor had informed Mr McMahon on the 27 July 2010 of the possibility that a completion notice might be served and the implications in that eventuality.
17. A letter of demand was then sent on behalf of Durkan New Homes dated the 16 August 2010, which sought the recovery of “all payments due to [Durkan New Homes] pursuant to the contracts for sale with [the Affordable Homes Partnership]”. The completion notice was then served by Durkan New Homes on the 19 August 2010. In evidence, Neil Durkan explained that by that stage there was a considerable degree of frustration, especially regarding what were seen as onerous terms in the lease. The difficulty first was that the inclusion of Harcourt Terrace Limited was rejected in the proposed conveyance. The second was a query over the insurances which would be taken out in respect of the building on entry into a lease and by whom. In the normal course, the Commissioners of Public Works do not insure its buildings; preferring instead to take the risks that any of its buildings might face. The seriousness of the situation and the lack of equivocation involved from the point of view of the argument as to estoppel by convention is illustrated in an e-mail sent by John O’Connor on 6 September 2010:
On foot of discussions … on the Wednesday I contacted Neil Durkan … I requested that Durkan New Homes would withdraw the completion notice served on the Affordable Homes Partnership. This would in turn allow the Affordable Homes Partnership to withdraw the completion notice on the [Commissioners of Public Works]. Neil Durkan said that the directors of Durkan New Homes are not in a position to withdraw the notice as they would be acting improperly as directors having regard to the handling of the matter with legal due diligence. They are under very considerable pressure from AIB Bank who provided the lending for the Harcourt Terrace site. AIB would not consent to them withdrawing the completion notice. He stated that AIB’s legal department are now involved. He also stated that the loan was due to transfer to [the National Asset Management Agency] shortly and that is why AIB is taking a particularly hard line. He stressed that the transaction had to be completed right away. I asked Neil Durkan to agree to a minimum period before instigating legal proceedings. He said he had not discussed with their solicitor the issue of instigating proceedings in the event that the title transfer and contract was not completed by 17 September as they expected it to be completed. He said he would talk to their solicitor but again stressed that the bank was also involved in any decision.
18. The final query was in relation to the reinstatement issue. The completion notice expired on the 17 September 2010. It was not extended. There was no correspondence received by Durkan New Homes during the completion period. However, Neil Durkan noted that there was no sense from anybody that Durkan New Homes was not entitled to serve such a notice. Mr O’Connor made two requests that the completion notice be withdrawn, which were rejected by Neil Durkan. In turn, the fact that the Affordable Homes Partnership had served a similar completion notice on the Commissioners of Public Works only emerged on discovery. That completion notice was served so as to seek to protect the Affordable Homes Partnership’s position. A meeting took place on the 28 September 2010 between the Commissioners for Public Works , Affordable Homes Partnership and the Department of the Environment at which the issue of the transfer deed was discussed and resolved. The Commissioners of Public Works changed its position for the reason that the Affordable Homes Partnership had agreed to provide an indemnity in relation to any potential stamp duty liability. There was a suggestion that Mr. O’Connor contacted Neil Durkan on either the 29 or 30 September 2010 by telephone to inform him that the Commissioners of Public Works was now willing to complete the transfer in the manner requested by Durkan New Homes. Neil Durkan did not recall this conversation, but neither did he dispute that it took place. There was a conversation between the parties’ solicitors on the 8 October 2010 which was followed on the 15 October 2010 by a letter written on behalf of the Commissioners of Public Works to Durkan New Homes communicating that they had resiled from their position in relation to the sub-sale and the inclusion of the transfer to the Durkan individuals in the deed of transfer for the site. That letter crossed with a letter from solicitors for Durkan New Homes demanding payment of the monies paid under the tender by way of the discount given as the selling price. There was also telephone communication between the solicitors on that day which may go some way to explaining why the letters crossed. The letter sent on behalf of Durkan New Homes was the first occasion that it had sought the repayment of the discount provided under the tender contract.
19. The film censor’s office was relocated in mid-2009 to its present offices in Smithfield. As of the date of this judgment the Harcourt Terrace Garda Station has only been partially vacated. A number of operations have been transferred to the Irishtown and Pearse Street stations but an assurance, to whoever might be prepared to accept it, has been given that the gardaí will have completed all operations and vacated the site by the end of 2012.
20. Neil Durkan was subjected to a searching cross-examination by counsel for the defendants. I quote from transcript for the second day of the hearing:
Question: I mean your contractual entitlement was to have a transfer of property to the Durkan individuals. There was no contractual entitlement on your part, and never asserted at this stage, for the Commissioners for Public Works to transfer to Harcourt Terrace Limited, isn’t that correct? Answer: When the deed was prepared in 2008 it was sent over in the name of … the individuals. We had sought to include Harcourt Terrace Limited on the deed, which was refused. And the reason this was in draft with the names and the option of possibly the company as well was because we didn’t know who ultimately the landlord was going to be because the Chief State Solicitor’s Office was actually refusing the inclusion of the individuals as a separate transferee.
Question: But this was not a problem that had any bearing on the lease, Mr Durkan, it was a problem in relation to the transfer of the property, but the lease could be taken from who ever held the legal interest in the property, isn’t that correct? Answer: That’s not my understanding.
Question: Well, I think that’s so, Mister Durkan, and that’s what is reflected here? Answer: I’m not a solicitor, but the Chief State Solicitor’s Office was insisting that is the deed be taken in [the name of] Durkan New Homes and the individuals, where the contract had provided for the deed to be taken in the names of Durkan New Homes and then onto the individuals. That, in turn, could have been passed to Harcourt Terrace Limited by the individuals, but the landlord was not certain at that stage.
Question: No, and that’s why the draft is in the form it is in. If there had been a conveyance to the Durkan individuals they could have … ? Answer: It was drafted for that reason. And as referred to here, there was also the issue of the repairing clause.
Question: In relation to that, Mr Durkan, I think that was really just simply an administrative matter. As was common, the repairing clause would be based on a condition survey? Answer: There was a survey to be done, which we hadn’t sight of.
Question: And it had been done and it was furnished within days of this draft lease? Answer: This lease had not been finalised, for the reason that we did not know who the ultimate landlord was going to be. There was the issue of the repairing. And, ultimately, because the terms of the lease had differed from what we had originally agreed in 2009, we still had to go back and get further bank consent on it. So we hadn’t got bank consent and I think that is made clear there as well [in the letter of 25 August 2010], as I understand it.
21. I accept the evidence of Neil Durkan that, as he put it, he and his company had never “led anyone up the garden path”. Mr Durkan’s evidence was objectively reliable. A situation of clear peril to the completion of the contract existed from at least June 2010, thereby withdrawing any issue that the parties were negotiating for a lease under a mutually understood suspension of their legal rights. The lack of agreement on fundamental issues undermines any suggestion of an unequivocal understanding, much less a commercial agreement for a lease subject only to some minor terms being sorted out. The continual reiteration in correspondence that there was no contract for a lease would be completely overturned were a court to take the view that an estoppel could arise. While there was an impetus from all parties towards a lease, that impetus was upset in circumstances about which no complaint can be made when, after a more than reasonable time, the reference by Durkan New Homes to the contract of sale of Harcourt Terrace alerted everybody that that mutual understanding could no longer be relied on. In so acting, Durkan New Homes acted within their rights. In so far as there is a conflict in the evidence, I am disposed to accept the evidence of Neil Durkan in the context of the entirety of the testimony and correspondence in this case.
22. The rejection of the contract by Durkan New Homes and the claim for damages was therefore valid. I turn to the issue of damages.
Penalty clause
23. Parties entering onto a contract are always aware that it may be broken. Since parties are free to contract on the basis of any consideration and for any purpose, other than what is illegal, it is also within their rights to genuinely pre-estimate what loss would occur in the event of a breach. A damages clause within a contract is to be upheld by the courts as having equal validity to any other term of the contract as thereby the parties are shown to contemplate and agree on their future losses. The difficult question of quantification is therefore removed from any future dispute as to the effect of a breach. What parties are not allowed to do however is to terrorise against a breach of contract through a clause disguised as a damages clause but which considerably overloads the party in breach with a liability to pay that is unrelated to what the contemplation of the parties genuinely would be as to loss.
24. In Irish Telephone Rentals v Irish Civil Service Building Society [1992] 2 IR 525, [1991] ILRM 880, at issue was a clause which operated to manifestly discourage the dissolution of a contract for the hire of a telephone system by frontloading an unconscionable portion of the rent on the occurrence of that event. Costello J stated the relevant principle at pp. 536-537 as follows:
The courts have evolved various rules for considering whether a stipulated sum is a penalty or a genuine pre-estimate. That which is relevant to the present case is that stated by Lord Dunedin in Dunlop Pneumatic Tyre Co. Ltd. v New Garage and Motor Co. Ltd. [1915] AC 79 at p. 87:
It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.
The application of this principle is to be seen in the majority decision of the Court of Appeal in England in Robophone Facilities Ltd. v. Blank [1966] 1 W.L.R. 1428 in which the court considered a contract for the hiring of a telephone-answering machine for a seven year period which was repudiated before the hiring began. The hiring agreement contained a clause which made provision in the event of premature termination for the payment of agreed liquidated damages equal to fifty per cent of the total of the rentals due. In deciding that the sum of fifty per cent was a genuine pre-estimate of loss and not a penalty Lord Diplock examined what would be recoverable by way of damages assessed on common law principles and concluded that because 50 per cent of the gross rent would not produce a figure which was “extravagantly greater” than those damages the clause was enforceable.
25. The principles set out by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 87 continue to be applied and do not need to be quoted again here. In Treitel – The Law of Contract (13th Edition, Edwin Peel) at 20.131 the question of construction of clauses with an apparently penal element is helpfully considered as follows:
A clause is penal if it provides for “a payment of money stipulated as in terrorem of the offending party”, or, as it has been put more recently, if the contractual function of the clause is “deterrent rather than compensatory”. If, on the other hand, the clause is a “genuine” attempt by the parties to estimate in advance the loss which will result from the breach, it is a liquidated damages clause. This is so even though the stipulated sum is not precisely equivalent to the injured party’s loss. The question of whether a clause is penal depends on its construction and on the surrounding circumstances at the time of contracting (not at the time of breach). In answering this question, the fact that the payment is described in the contract as a “penalty” or as “liquidated damages” may be relevant, but it is doubtful whether much, if any, weight should be attached to it. Clauses in identical terms may be held penal or not, according to the subject matter of the contracts and to the circumstances in which the contracts were made. It seems that a clause may be severed so as to exclude any penal element.
26. In issue here is clause 21 of the special conditions of sale. The correspondence surrounding this clause is consistent in tenor: the clause is described as a penalty. It provides as follows:
In the event that the transferor is not in a position to complete this transaction and give vacant possession of the subject property to the acquirer on the closing date then the transferor shall pay to the acquirer or the following:
(A) from 1 January 2009 to the earlier of 28 February 2009 or the date of the actual transfer of the subject property to the acquirer or with vacant possession, the sum of €20,000 per week or parts thereof.
(B) From 1 March 2009 to the earlier of 30 April 2009 or the date of the actual transfer of the subject property to the acquirer with vacant possession, the sum of €30,000 per week or parts thereof.
(C) For any delay extending beyond 30 April 2009 the sum payable shall be increased to €50,000 per week or parts thereof during that period until the day of actual transfer of the subject property with vacant possession to the acquirer.
27. Notwithstanding the attempts to justify this clause, nothing points to it being a genuine pre-estimate of loss. There is no basis upon which €2.6 million per year could be the basis of damages under clause (C) for not being allowed to proceed with the completion of this contract. With the catastrophic inflation of property prices that characterised the Irish economy in the years 2000-2008, the subsequent collapse in price might be argued to justify this enormous sum. Whereas property inflation might have been within the contemplation of the parties, it is certain that deflation was not. A comparison of interest charges on borrowings equivalent to the discounted price of the homes and apartments sold in exchange for the Harcourt Terrace site, at €31,243,000 plus VAT, yields figures of around €1.3 million for one year, a figure which this sum vastly exceeds. The clause is therefore a penalty clause and will be struck down. It cannot be part of the assessment of damages.
Damages
28. In the light of the letter dated 10 August 2006 from the Affordable Homes Partnership confirming the acceptance of the tender from Durkan New Homes any argument that damages in this case are at large is untenable. When a contract is broken damages is always open as a remedy, provided loss has been occasioned by the breach. In contrast, in equitable claims for specific performance or restitution such remedies depend upon discretion and the proof of particular conditions. The purpose of damages is compensatory. It is not to make the claimant’s overall position better than it would have been out of the contract not been broken: as thereby commercial law would intrude the application of criminal-like penalties into private affairs. Where the subject matter of the contract is one of sale, the primary recourse for the analysis of damages has always to be the price which the parties agreed to pay. That is their bargain and that is what must be enforced. There can be no question of the court being entitled to rewrite a bargain in the light of what the court feels is appropriate, or in accordance with the movement in values for the real property or goods in question. Regrettably, over the last four years, every court in Ireland has had to enforce debts based upon contracts to purchase land which experience has now shown represented speculation and not value as to price. In a similar way, bank debts have had to be enforced for borrowings that fuelled these inflated values. In none of those instances was a court ever entitled to substitute its own view as to what a fair bargain might be considered to be on reflection.
29. It is correct that clause 40 of the general conditions of contract does not generally contemplate that the purchaser will have paid the entirety of the purchase price or have given money’s worth equivalent to that full purchase price at the time of entering a contract. Normally, only a deposit will be paid. As of the time of this contract, however, the equivalent of every sum due had been discharged by Durkan New Homes. A contract is to be construed in accordance with the factual matrix in which it occurs. It is not to be construed as an exercise in legal parsing divorced from the reality of what was in contemplation between the parties; Irish Bank Resolution Corporation v Cambourne Investments Inc, Century City Limited and Peter Curistan [2012] IEHC 262. By the time this contract was signed, €31,243,000 had been discounted by Durkan New Homes from the sale of 215 houses to the benefit of the scheme organised by the State. This was to be exchanged for the Harcourt Terrace site. That is therefore the true measure of damages. In the written argument, questions are raised as to the appropriate payee, which question is not touched upon herein, and as to the range of obligations as between the parties who would eventually have entered into this contract had dispatch been exercised on the part of the defendant. These arguments are an ingenious effort to avoid the inevitable result that this sum of money must be awarded as against the defendant in favour of the plaintiff. That sum was the purchase price. As plaintiff, Durkan New Homes paid in full. As the contract was broken, that money must be returned. This contract is no different to any other in that regard.
30. No question as to value added tax arises. As the discount was offered, no one paid value added tax on the full amount, but only on the discounted amount. No liability arises to VAT as against the plaintiff and the defendant is therefore not obliged to bear that burden and neither is Durkan New Homes as a matter of law.
31. In addition, the sum of the special damages has been agreed between the parties at €562,539 in the event of a liability finding against the defendant.
32. Finally, there is the issue of compensation in respect of borrowing to fund the sums that would otherwise have been available to Durkan New Homes had the houses been sold at full value. In that regard it is prudent to mention that this company reached a peak of house sales over the years 2005-2007. There is no evidence that had the houses not been discounted that they would not have been sold at full market value. That evidence would, in any event, have been irrelevant as the price was set through voluntary agreement between the parties to the contract. What would have happened had Durkan New Homes come into possession of the Harcourt Terrace site? The intention was to develop office accommodation. What the result of that would have been has rightly not been considered in evidence. In July 2007, planning permission was granted for the development proposed by Durkan New Homes by the local planning authority. That was appealed to An Bord Pleanála and that permission was overturned. A new application, based on a different scheme, was made to the planning authority in Dublin in November 2008 and was granted. An appeal in favour of the applicant was only decided in November 2009. This contract was terminated when the completion notice expired on 17 September 2010. There was therefore a ten month loss of interest, since that is the only time between the formation of the contract and the determination thereof that the borrowing was wasted in the futile payment of interest. Since, helpfully, general figures have been provided, from which an exact calculation may be made upon this finding of fact.
Result
33. The defendant agreed and accepted €31,243,000 for the Harcourt Terrace site. The payment of this sum through discount on the sale of 215 homes cannot render that sum anything other than repayable as a liquidated sum. Unusually in a contract of sale of land, at the time of entering into the agreement the entirety of that sum had been paid by the plaintiff Durkan New Homes and had been accepted by the defendant as representing value for the purchase of the site. The Court cannot make any finding in favour of the carefully constructed argument against the repayment of that money. In addition €562,539 has been agreed as special damages. Finally, there will be a ten month interest charge from the time of the grant of planning permission on the site up to the disappointment of the plaintiff in the performance of the contract by the non-fulfilment of the completion notice of 19 August 2010 upon the expiry of the 28 days under the contract on 17 September 2010; that amounts to €782,491.
Ashcoin Ltd -v- Moriarty Holdings Ltd
[2012] IEHC 365
Hogan J.
Status of Judgment: Approved
31st July, 2012
1. Are the proceeds of a grant from a statutory agency capable of amounting to a book debt within the meaning of a particular debenture? This, essentially is the issue which the parties have agreed should be determined as a preliminary issue of law pursuant to O. 25, r. 1 RSC. The issue arises in this way.
2. In April 2007, Sustainable Energy Ireland agreed to make a grant payment to the defendant (“Moriarty Holdings”) in respect of a housing development at Spicers Mill, Balbriggan, Co. Dublin. As the plaintiff company (“Ashcoin”) had provided engineering solutions for heat efficient dwellings, it is contended that Moriarty Holdings agreed in June 2007 to share the proceeds of that grant with it on an equal basis. A grant of some €328,500 was paid to Moriarty Holdings by Sustainable Energy Ireland in June 2008, but the relevant moiety allegedly payable to Ashcoin remains in dispute and has not been paid.
3. The debenture in question was executed in December 2007. That deed charged all debts of Ashcoin (other than book debts) in favour of Ulster Bank Commercial Services Ltd. as well as creating a first floating charge over the property and assets of the company. On 20th June 2008, the debenture holder appointed Mr. Kieran Wallace as receiver over the assets of the company. Mr. Wallace now maintains these proceedings against Moriarty Holdings in that capacity. The latter company disputes his entitlement to do so on the grounds that if any monies are due to Ashcoin, they would constitute a book debt within the meaning of the December 2007 debenture and that Mr. Wallace accordingly has thus no standing to maintain these proceedings. It is agreed, therefore, that Mr. Wallace’s entitlement to maintain these proceedings stands or falls on the question of whether the sums in question would constitute book debts for the purposes of the debenture.
4. In approaching this question I will assume simply for the purposes of resolving it that Ashcoin will be able to demonstrate that it has an entitlement to half the proceeds pursuant to the June, 2007 agreement. If, however, that were the case, would these proceeds constitute a book debt for this purpose?
5. To my mind, there is little doubt but that they would. While it must be recalled that we are here dealing with a contractual definition of the phrase “book debts”, the definition in the debenture mirrors and reflects the conventional understanding of this term. The phrase “book debts” is thus defined by Clause 1.1 of the debenture as meaning:-
“All book and other debts of any nature whatsoever arising now or at any time hereinafter due, owing or incurred to the company, including, without limitation, all things in action due or owing or which may become due or owing to or purchased or otherwise acquired by the company, the benefit of all negotiable instruments, rights, encumbrances, guarantees and indemnities of any nature whatsoever now or at any time hereafter enjoyed or held by it in relation thereto.”
6. Here the agreement (assuming, again, for present purposes, that there was such) is one which would classically constitute a book debt in as much Ashcoin doubtless treated the monies which were recoverable from Moriarty Holdings (and, by extension, Sustainable Energy Ireland) as a debt which had accrued in its favour arising from the course of its own trade. If I may venture to repeat the language which I used in Response Engineering Ltd. v. Caherconlish Treatment Plant Ltd. [2011] IEHC 345, [2012] 2 I.L.R.M. 67, 70, the term “book debts” means no more:-
“than future income which will accrue to the company by reason of the provision of goods and services to third parties by that company in the course of its trade or business.”
7. Viewed in this light, the monies which Ashcoin claim to be entitled from Moriarty Holdings are plainly related to trading activities. While it is true that the monies were paid to Moriarty Holdings pursuant to a grant, in effect, the situation is as if Ashcoin had presented an invoice in respect of goods. Counsel for the receiver, Mr. O’Reilly, argued that what was at issue here related only to a contingent contract and did not form a debt until payment by Sustainable Energy Ireland. The fact is, however, that Sustainable Energy Ireland have paid the grant and the only question is what (if any) is the share of those monies to which Ashcoin are entitled.
8. Nor can it be an objection to say that there is an element of contingency in relation to the payment. That is of the very nature of a book debt. The term describes the goods and services which the company has supplied for which it expects to receive payment in the ordinary course of trade, but at the risk of stating the obvious, once payment is received it is no longer a book debt. As Buckley J. stated in Independent Automatic Sales Ltd v. Knowles & Foster [1962] 3 All E.R. 27,36:-
“It is not disputed that it is competent for anyone to whom book debts may accrue in the future to create an equitable charge on those book debts which will attach to them as soon as they come into existence. That such a charge can accurately be described as a charge on book debts does not appear to me to be open to question.”
9. Perhaps the entire matter can be summarised thus. If Mr. Wallace qua receiver was to sue to recover the one half share moiety which he contends is due to Ashcoin as a result of the agreement to share the proceeds of the grant paid by Sustainable Energy Ireland, he would be suing to recover from Moriarty Holdings a book debt of that company. Yet, by virtue of the very terms ofthe debenture by reference to which he was appointed, book debts fall outside its scope.
10. It follows, therefore, that, as matters stand, these proceedings are improperly constituted and Moriarty Holdings are entitled to say that in view of the terms of the debenture by which he was appointed, Mr. Wallace has no standing as receiver to recover these monies on behalf of Ashcoin. That, of course, is not to imply that other steps cannot be taken on behalf of Ashcoin to recover these monies, but it is rather to say that the receiver cannot maintain these proceedings in their present form.
Mc Kenny -v- Martin
[2010] IEHC 293
Laffoy J.
19th day of May, 2010.
Representation of the parties
1. Like too many matters which have come before this Court in recent times, the trial of this action, which was heard on 11th May, 2010, was played out in a most unsatisfactory fashion, because, after the action had been set down for trial by the defendant’s solicitors, the solicitors who had been on record for the plaintiff had been allowed by the Court to come off record. Therefore, the plaintiff, Mr. McKenny, appeared in person on 11th May, 2010. The defendant, Mr. Martin, was represented by a solicitor and counsel. Because of those circumstances, in this judgment I propose to outline the relevant facts and principles and to set out my decision in terms which I hope a lay litigant can understand.
Procedural application
2. The proceedings have been ongoing since the 21st March, 2006, when the plaintiff’s solicitors issued the plenary summons herein claiming specific performance of a contract for the sale of a site. The statement of claim was delivered on 18th July, 2006 and the defence was delivered on 5th September, 2006. I mention those procedural matters, because, when the action came on for hearing on 11th May, 2010, there was before the Court a motion, which issued on 6th May, 2010, in which the defendant sought an order deeming good service of a counter-claim which was “served” on the plaintiff’s solicitors on the 28th March, 2007.
3. The position in relation to that motion is that, the defendant’s solicitors having sent the counter-claim document by letter to the plaintiff’s solicitors nine months after the defence was delivered, the plaintiff’s solicitors responded promptly on 29th March, 2007 stating that they were taking their client’s instructions in relation to it. The matter was not pursued at that stage, notwithstanding that a motion was brought before this Court in January 2007 for an order vacating a lis pendens which had been registered by the plaintiff. That motion was subsequently amended in May 2007 to include an application for an order striking out the plaintiff’s claim on the grounds that it was frivolous or vexatious or that it must fail. The motion was heard on 6th June, 2007. An order was made on that day which preserved the lis pendens in relation to the site the subject of the contract between Mr. McKenny and Mr. Martin and refused the application to dismiss.
4. The matter of the counter-claim was not raised again by the defendant’s solicitors until January 2009, when they wrote to the plaintiff’s solicitors indicating that they would rely on Order 28, rule 12 of the Rules of the Superior Courts and would make an application at the hearing for an order pursuant to that rule. If I may say so, it was a bit presumptuous of the defendant’s solicitors to assume that the Court would allow an amendment to a pleading on foot of a motion which issued less than a week before the listed hearing date. The fact that the defendant’s solicitors were aware for three months that the plaintiff was not legally represented compounded matters. In my view, the defendant’s solicitor’s application was much too late and it would have been unfair and unjust to the plaintiff to accede to it. It was refused.
5. I will turn now to the substantive issues in the proceedings.
The substantive proceedings
6. Mr. Martin is the owner of land at Reaghstown, Ardee, County Louth which is registered on Folio 12593F of the Register of Freeholders, County Louth. It is common case that before July 2002 he did a deal with Mr. McKenny, who is a builder, to sell a site off those lands comprising 0.331 hectares to Mr. McKenny at the price of €38,092.14. The deal was a very unusual deal, in that it was agreed that a deposit of €31,743.45 would be paid by Mr. McKenny to Mr. Martin under the contract and that the deposit would be released to Mr. Martin, who needed the funds. The deposit represented, on my mathematics, over 83% of the purchase price.
7. On 29th July, 2002, Mr. Martin’s solicitors, Richard H. McDonnell, sent contracts to Mr. McKenny’s solicitors. Mr. John Mulvihill was the solicitor in the firm of Richard H. McDonnell dealing with the transaction. He testified at the hearing, although the firm of Richard H. McDonnell did not act for Mr. Martin in these proceedings.
8. The contract was in the standard form conditions of sale published by the Incorporated Law Society (2001 Ed.). The important provisions, for present purposes, are three of the special conditions.
9. Special condition 4 as it originally appeared in the contract provided:
“The sale is subject to the purchaser applying for and obtaining a grant of outline planning permission for the erection of one dwelling house on the site within a period of six weeks from the 19th June, 2002 or such extended period thereof as may be agreed between the parties provided that in the event of the grant of outline planning permission not issuing within the aforesaid period or such extension thereof as may be agreed [between] the parties, then this contract shall be rescinded in which event the purchaser shall be entitled to return of his deposit without interest, costs or compensation.”
Mr. McKenny’s solicitors made three amendments to special condition 4. First, they deleted the word “outline” where it appeared, so that the condition, as amended, made the contract subject to Mr. McKenny obtaining full planning permission. Secondly, they changed the period of “six weeks” to three months. Thirdly, they changed the commencement of that period from 19th June, 2002 to 1st August, 2002. In the light of what happened immediately after the contract was returned by Mr. McKenny’s solicitors and, in particular, the fact that, at the request of Mr. Martin, the deposit was released to him, there can be no doubt but that Mr. Martin accepted those amendments and the amendment to special condition 10 referred to later. Having said that, in my view, the most important element in special condition 4 was the fact that the period within which planning permission was to be obtained was subject to “such extension thereof as may be agreed between the parties”. Special condition 4 was clearly for the benefit of the purchaser, Mr. McKenny.
10. Special condition 8 provided:
“The purchaser agrees that the deposit in the sum of €31,743.45 shall be [released] to the purchaser immediately upon the exchange of contracts herein.”
That special condition came after special condition 5, which provided that no contract “shall be deemed to be in existence until such time as the same has been signed and exchanged and full deposit specified paid”. I will return to that provision later.
11. Special condition 10, as drafted by Mr. Martin’s solicitors, provided that the sale should be completed on 9th August, 2002. However, that special condition was amended by the solicitors for Mr. McKenny to provide that the sale was to be completed “seven days after the issue of formal grant of planning permission”.
12. Mr. McKenny signed the contract in duplicate. He furnished the deposit of €31, 743.45, which he drew down from the Credit Union, to his solicitors. Both parts of the signed contract together with the deposit were returned by Mr. McKenny’s solicitors to Mr. Martin’s solicitors, who received them on 14th August, 2002. Mr. Mulvihill testified that he contacted his opposite number in the office of Mr. McKenny’s solicitors seeking permission to release the deposit to Mr. Martin. He got that permission. He sent the deposit cheque to Mr. Martin’s bank with Mr. Martin’s consent. Accordingly, Mr. Martin had 83% of the agreed purchase price from mid-August 2002.
13. While Mr. Martin never signed the contract and one part thereof signed by Mr. Martin was not returned to Mr. McKenny’s solicitors, as is the usual practice, I am satisfied that the agreement in relation to the release of the deposit brought the contract into being, notwithstanding special condition 5. Although the case made in the defence is that there was no binding agreement, counsel for Mr. Martin acknowledged at the hearing of the action that there was a binding agreement in the terms of the contract. That was a realistic and a proper approach to adopt. I surmise that it was through oversight that Mr. Martin did not sign the contract. In any event, as Mr. Mulvihill testified, as late as 8th September, 2005, he notified Mr. McKenny’s solicitors that Mr. Martin was prepared to proceed with the sale upon payment of the balance of the purchase money. At that stage replies to requisitions on title were furnished together with a draft statutory declaration for the purposes of the Family Home Protection Act 1976.
14. In the interim, Mr. McKenny had made three applications for planning permission. At the hearing Mr. McKenny alleged that Mr. Martin frustrated his attempts to get planning permission. It is specifically pleaded in the statement of claim that Mr. Martin caused his solicitors to write to the planning authority, Louth County Council, on 14th February, 2006 for the purposes of frustrating the grant of planning permission to Mr. McKenny. I find it unnecessary to make a finding on the allegation that Mr. Martin frustrated Mr. McKenny’s attempts to get planning permission.
15. Insofar as I consider it relevant for present purposes, the planning history is as follows:
(a) Mr. McKenny’s first planning application in relation to the site was dated 31st October, 2002 (file No. 021336). That application was subsequently withdrawn.
(b) The second application was made on 31st July, 2003 (file No. 031030). On 13th October, 2003 Louth County Council issued a notification of decision to refuse that application on the ground that the proposed development (a dormer dwelling house with waste water treatment plant) would be prejudicial to public health, as Mr. McKenny had not demonstrated that the site was suitable for a waste water treatment system and details had not been submitted of associated excavation and mounding works required.
(c) The third planning application was made on 29th August, 2005. It is clear from the correspondence from Mr. Martin’s solicitors to Mr. McKenny’s solicitors that, by early September 2005, Mr. Martin was aware that the third planning application had been submitted. It was ultimately refused, but the important point for present purposes is that it was still pending when Mr. Martin purported to withdraw from the contract, thus provoking these proceedings.
16. Mr. Martin’s change of heart came about in early December 2005, just three months after he had instructed his solicitors that he would complete the deal. At that stage, Mr. Martin contacted Mr. Mulvihill and told him that it looked as if Mr. McKenny would get planning permission. He also told him that the site had trebled in value since the price payable under the contract was agreed and that he was seeking an additional sum of €30,000 (inclusive of the balance of €7,748.69 due on foot of the contract) to close. That proposition was put by Mr. Mulvihill to Mr. McKenny’s solicitors in a letter of 20th December, 2008.
17. To say that Mr. McKenny was not best pleased by that suggestion is an understatement. I think Mr. Mulvihill stated that he was informed by Mr. McKenny’s solicitor that he was “livid”. In any event, things went from bad to worse, although not, I think, not due to the fault of Mr. McKenny or his solicitors. The chain of events was as follows:
(1) In an letter of 8th February, 2006 Mr. McKenny’s solicitors refuted Mr. Martin’s solicitors’ contention made earlier that there was no binding contract and pointed out that, not only had Mr. Martin acquiesced in the planning applications, but had received the deposit of in the region of €31,750 in part performance of the contract. It was also pointed out that Mr. McKenny had incurred expenditure in doing works to the site. Legal proceedings were threatened if the sale was not closed. It was made clear that, because the parties had been friends for a long time, Mr. McKenny was reluctant to bring proceedings, but he would do so if it was necessary.
(2) Mr. Martin’s response, in his solicitor’s letter of 14th February, 2006, was to state that “this transaction is at an end” and to return the sum of €31,743.45. At the same time, Mr. Martin’s solicitors wrote to the planning section of Louth County Council stating that he had withdrawn from the sale of the site to Mr. McKenny.
(3) By letter dated 16th February, 2006 Mr. McKenny’s solicitors returned the cheque for €31,743.45 and indicated that they were relying on the contract and on part performance and inquired whether Mr. Martin’s solicitors had authority to accept service of proceedings.
(4) The response of Mr. Martin’s solicitors, by letter of 23rd February, 2006, was that they had authority to accept proceedings. Once again, they sent the cheque for €31,743.45 to Mr. McKenny’s solicitors, where it has remained uncashed to the present day.
As I stated at the outset, the proceedings were then commenced on 21st March, 2006.
18. The nub of Mr. McKenny’s case for specific performance of the contract, as pleaded in the statement of claim, is that –
(1) there was a binding agreement between the parties,
(2) it was part performed by Mr. McKenny by the release of the bulk of the purchase money to Mr. Martin and his expenditure on the site in connection with his planning applications,
(3) Mr. McKenny fulfilled his obligations under the agreement and was ready, willing and able to perform all his obligations thereunder, and
(4) Mr. Martin, to use legal terminology, wrongfully repudiated the agreement in refusing to complete the sale.
19. Although the primary position adopted by Mr. Martin in his defence was that there was no binding agreement, as I have already indicated, the position adopted by counsel for Mr. Martin at the hearing was to accept that there was a binding agreement. However, the case made on behalf of Mr. Martin was that the contract, as provided for in special condition 4, was subject to planning permission, that Mr. Martin had afforded Mr. McKenny every opportunity to seek planning permission and had acted more than reasonably in the time allowed and that he was entitled to terminate the contract on returning the deposit when he did so in February 2006.
20. In my view, Mr. Martin was not entitled to “pull the plug” in February 2006. It is true that a long time had passed between the making of the deal in July/August 2002 and February 2006 – three and a half years. However, as I have emphasised earlier, special condition 4 provided for such extension of the period allowed to Mr. McKenny to obtain planning permission as might be agreed between Mr. Martin and Mr. McKenny. On the evidence, there can be no doubt that Mr. Martin, implicitly, if not expressly, agreed to the extension of the period to beyond the date on which Mr. McKenny submitted his third application, which was 29th August, 2005. That is clear from what transpired in September 2005. It was only when Mr. Martin perceived that Mr. McKenny might be successful in his planning application that he decided that he wanted more money or, alternatively, he would renege on the deal. In my view, Mr. Martin was not entitled to withdraw from the sale unilaterally and peremptorily while Mr. McKenny’s third application for planning permission was pending. Accordingly, Mr. Martin was in breach of contract in purporting to withdraw from the sale on 14th February, 2010. Mr. McKenny did not treat that breach as bringing the contract to an end, as he might have. He made it clear that the contract continued in being and that he wanted it enforced.
21. The position on the ground, over the four years since these proceedings were initiated, is that Mr. McKenny is in possession of the site. His evidence was that he currently has material, for example, scaffolding, on the site and that he has a lorry parked there. He continues to hope to get planning permission for the site. However, his third attempt was not successful, nor was a fourth attempt. That last planning application was made on 9th May, 2006 (file No. 06549). Notice of intention to refuse the application was issued by Louth County Council on 23rd June, 2006. Mr. McKenny appealed to An Bord Pleanála but his appeal was unsuccessful on two grounds. The first was that it was the policy of the then current development plan for County Louth that not more than four dwellings should be permitted per landholding except where family members were concerned and that the proposed development would contravene this policy. That state of affairs was contributed to by the fact that Mr. Martin had sought and obtained planning permission for an adjoining site. The second ground for rejecting the appeal was that An Bord Pleanála was not satisfied, on the basis of submissions made on the planning application and on the appeal, that the site could be drained satisfactorily, notwithstanding the proposed use of a proprietary waste water treatment system, so that the development would be prejudicial to public health.
22. As I have stated, Mr. McKenny is optimistic that he will be able to obtain planning permission. The basis of this optimism is that the current development plan for the area does not contain the “four dwellings” restriction.
23. Mr. McKenny told the Court that the remedy he wishes to pursue is to get the site, that is to say, specific performance. He is still making repayments in the sum of €100 per week to the Credit Union in respect of the sum he borrowed to pay the deposit in 2002. His evidence was that he has paid €50,000 to the Credit Union already. In response to a question from the Court, he stated that at this stage he probably will have “to take his chances” on getting planning permission. I understand this to mean that he is prepared to waive special condition 4 of the contract.
Decision
24. Although these proceedings involved a lengthy pleading process and a substantial interlocutory application, unfortunately no submissions on the law were made at the hearing. The legal position as between Mr. McKenny and Mr. Martin when the contract came into being was that enforcement of the contract against Mr. McKenny was conditional on special condition 4 being fulfilled (O’Connor v. Coady [2005] 1 ILRM 256). However, special condition 4 was exclusively for the benefit of Mr. McKenny and it was, and is, capable of being waived by him while still extant (Maloney v. Elf Investments [1979] I.L.R.M. 253). In my view, it was still extant and the contract was still in being when Mr. Martin purported to terminate, because he had implicitly, if not expressly, agreed to an extension of the period for obtaining planning permission until Mr. McKenny’s third planning application was finally adjudicated on. By his peremptory action, Mr. Martin was in breach of his contractual obligations to Mr. McKenny. The contract remained extant and continues in being as of now, as that is what Mr. McKenny elected for. It is still open to Mr. McKenny to waive special condition 4.
25. Accordingly, it seems to me that the proper course both on the facts and in law, and, in particular, having regard to the Court’s equitable jurisdiction, is to make an order for specific performance of the contract but excluding special condition 4 so as to give effect to Mr. McKenny’s waiver of that condition. This means that on payment of the balance of the purchase money (€7,748.69) by Mr. McKenny to Mr. Martin, Mr. Martin will have to transfer the site to Mr. McKenny and furnish him with marketable title to it in accordance with the contract. In order that the parties may avoid the cost and expense of further appearances in Court, I will direct that the contract, subject to the exclusion of special condition 4, be completed by 18th June, 2010.
26. The plaintiff also has a claim for damages in addition to specific performance. The losses he itemised were consultants’ fees in the sum of €3,000 in relation to his various planning applications and the spreading of soil on the site, as requested by Louth County Council, as planning authority, at the cost of €1,100. All of that expenditure related to Mr. McKenny’s endeavours to comply with his obligations under the contract and it must be assumed that he got value for the money he expended. In my view, that expenditure cannot be laid at the door of Mr. Martin. Accordingly, no damages are awarded to the plaintiff.
27. On the issue of costs, I find it peculiar that an action in relation to the sale of a site measuring less than an acre, the purchase price of which is less than €40,000, should be the subject of a High Court action. I would assume that the rateable valuation of the site, or even if it is not separately valued, the holding of which it forms part, is less than €253.90, the jurisdictional limit of the Circuit Court. I do not intend making any decision in relation to costs until such time as there is evidence of the rateable valuation before the Court.
28. I will list the matter to deal with the question of costs on 22nd June, 2010 at 10.30am.
Bourke v Grimes
Supreme Court.
25 April 1929
[1929] 63 I.L.T.R 53
Kennedy C.J., FitzGibbon Murnaghan JJ.
Kennedy, C.J.
We are all agreed that the order of the learned Judge cannot stand. The agreement for sale was made in 1923, and was for the sale of certain lands for £1,100. A sum of £5 was paid as deposit, the balance to be paid when the transaction was completed. The vendor was tenant-forlife, selling under a carefully-drawn contract of sale determining the rights of the parties. All the various matters proper to such a transaction were provided for. No time, however, was limited for the delivery of the abstract of title. But this does not relieve the vendor from his liability to deliver the abstract of title. It is, in my opinion, an implied term of the contract that the vendor shall deliver an abstract of title within a reasonable time.
In this case the vendor never delivered any abstract of title, but, in some way which has not been explained, the purchaser entered into possession of the lands before the contract *53 of sale was completed, and has remained on in possession until the present time.
The contract of sale was made on 1st April, 1923, but apparently nothing further was done in the matter until the 24th March, 1924, when the vendor issued a writ for specific performance of the contract of April, 1923. No alternative relief by way of rescission was claimed. The purchaser entered no appearance to the writ, and the vendor filed his statement of claim in lieu of delivery, repeating therein the claim set out in the writ for specific performance and resting the claim on an averment that the purchaser had failed to perform the contract. It did not refer to the fact that the vendor had omitted to furnish any abstract of title. On that writ and averment the vendor plaintiff obtained judgment for specific performance of the contract, with a reference to Chambers to determine (1) whether a good title could be made, and (2) if so, when title was first shown. That order was made on 26th February, 1925, and no appeal was taken from it.
A summons to proceed was taken out on 23rd March, 1925, by the plaintiff, but no other step was taken to expedite the matter. In November, 1925, Court Counsel issued a number of requisitions and objections on the title, and I presume that these came into the possession of the vendor’s solicitor, who took no further steps in the matter until March, 1928, when he served this notice of motion to rescind the contract on the ground that the purchaser had failed to carry it out. This motion was based on the affidavit of Richard Vandeleur Bourke, the substance of this affidavit being that at the time of making the contract the purchaser was relying on receiving money from America, and that the source of the money having failed, the purchaser was now unable to complete the contract. On these grounds the purchaser was now to be considered as having refused to complete, and the order for specific performance was to be rescinded.
On the motion coming before the learned Judge the vendor relied on the contention that, if forced to comply with the Court Counsel’s requisitions, he would be put to considerable trouble and expense, and that he should not be asked to do so when the purchaser would never be in a position to complete.
The judgment of the learned Judge ordering rescission of the contract is based solely on the vendor’s right to rescind under the clause of the contract which provided for rescission. In so doing he seems to have ignored the proviso to this clause of the contract, that rescission was to be by notice in writing to the purchaser specifying the particular requsitions with which the vendor was unable or unwilling to comply and giving the purchaser the opportunity of waiving these requisitions if he chose.
In my opinion this order cannot stand, nor can the order for specific performance thus be got rid of. It has not been proved that the purchaser is so insolvent that, if a good title is shown, he cannot raise the necessary purchase-money. It is possible that he could, with the abstract of title, if furnished, have secured a sufficient advance from his bank.
Whether it is sought to justify rescission under the clause of the contract providing for rescission or on the ground that the purchaser is unable to complete, it is my opinion that this order cannot stand and must be discharged. The action will, therefore, stand as an action in which an order for specific performance has been made, and under that order the vendor is bound to furnish an abstract of title to the purchaser within a reasonable time. The appeal must, therefore, be allowed with costs.
FitzGibbon, J.
I agree. I do not decide that a party can in no case get an order for setting aside a decree for specific performance which he himself has obtained, but a party seeking to do so must make a clear case for relief on equitable grounds. The decree for specific performance is made for the benefit of both parties, and the purchaser is entitled to rely on the decree unless and until his inability or refusal to carry it out is clearly proved. There is certainly no evidence in this case of such inability or refusal, nor has it been proved that he could not have obtained a sufficient loan upon the security of the property, had he been offered a good title; and until these facts have been established, the plaintiff cannot be permitted to rescind the decree for specific performance which was granted at his own request.
The Court below seemed to take the view that the vendor should be allowed to rescind the contract because the purchaser refused to waive within seven days an objection which he had made, and which the vendor did not remove. This view cannot be supported either in law or fact, and therefore this order cannot stand. When the vendor was granted the decree for specific performance, it was the Court Counsel and not the purchaser who made any objection. The purchaser was never in a position to make requisitions, as the title was never furnished to him, and hence the condition on which the vendor now seeks to rely never existed.
The purchaser is under no obligation, even when in actual possession of the property, to insist on an abstract of title being furnished, and his omission to insist cannot be treated as an implied refusal to complete the contract. It is for the vendor to furnish a good title to the Court Counsel, and then should the purchaser refuse or be unable to complete the contract the vendor may prove these facts and seek the relief to which they entitle him.
Murnaghan, J.
I also agree. The vendor having obtained a decree for specific performance ordering an inquiry for title, seeks to rescind the contract before answering the inquiry. It would be very difficult for the vendor to prove that the purchaser was unable to complete. Proof of good title being shown is a very material element in determining whether the purchaser will be able to complete the contract. No such evidence has, in my opinion, been given in this case.
I do not consider it a sound argument on the vendor’s part that he may rescind the contract on the ground that he is unwilling to answer requisitions made by the purchaser. The requisitions were not made by the purchaser but by the Court Counsel, and were necessary to enable the plaintiff (vendor) to enforce his decree.
In my opinion the order of Meredith, J., must be set aside, and the vendor left to his usual remedies after he has answered the inquiry directed by the judgment.
Clegg v Wright
High Court of Justice.
Chancery Division.
3 February 1920
[1920] 54 I.L.T.R 69
Powell J.
January 23, February 3, 1920
Powell, J.
Undoubtedly the statement in condition No. 6 as regards these premises was inaccurate. For some reason, which has not been very satisfactorily explained, it appears to have been considered that in some way or other the defendant, the widow, could make title to these premises, either by reason of being jointly in possession of them with her husband for upwards of twelve years without payment of rent or acknowledgment of the title of any person, or as administratrix of her husband, and it is now conceded, of course, that in neither respect could she make a good title. The only interest she had was a life interest in one-third by way of dower. As I have pointed out, it is quite plain that this state of things was discovered and known to the plaintiff’s solicitor on the 26th February, 1919, when he de *70 livered his requisitions, and before he wrote the letter of the 10th of March, namely, on the 3rd of March, he had been informed that the heir-at-law of Joseph Wright would convey, and although his letter would seem to suggest by the phrase in reference to the heir-at-law “some person named James Wright” that he did not know who James Wright was, it is quite certain that his client, the plaintiff, who was a friend and neighbour of the family, could have told him that James Wright was the eldest son of Joseph Wright, who had acquired the estate by the statute. He does not suggest by his requisition that he regards the statement in condition six as a misrepresentation entitling him to repudiate the contract, or that his discovery at that time, that the widow could not convey, would, in fact, cause him to repudiate the contract. So far from that being the case, it appears to me, having regard to the other requisitions, that his client was prepared to carry out the contract if the person really entitled would convey the premises, and he asks, very naturally, how it is proposed to convey the lands, and he is told that the heir-at-law of Joseph Wright will convey, and his client knew perfectly well that James Wright, the eldest son of Joseph Wright, was heir-at-law; and paragraph three of the declaration furnished at the same time as the replies to the requisitions states that James Wright is the eldest son of Joseph Wright, so that the position of affairs on the 10th of March was this: that the plaintiff’s solicitor knew that the error or inaccurate statement as to the title could be made right, and a good title given. On the 20th of March, in answer to this letter, the defendant’s solicitor replied as follows. (Reads letter.) Although there are further inaccuracies as to the title in this letter, it plainly states that the vendor had arranged for a conveyance of his interest by James Wright, the eldest son and heir-at-law, and that she was, therefore, able to carry out her contract. To this letter the plaintiff’s solicitor replied on the 26th of March, 1919, as follows. (Reads letter.) I do not agree on the facts of this case that there was any attempt made to foist a thoroughly bad title on the purchaser. There was undoubtedly a blunder made as to the state of the title, which the solicitor for the plaintiff discovered and appreciated on the 26th of February, when he delivered his requisition. Mr. Megaw contended that on the 26th of February no title had been shown, but there was no repudiation until the 10th of March, and on the 3rd of March the defendant’s solicitor had clearly stated to the purchaser that the person who could give title—namely, the heir-at-law—would join in the conveyance, and on the 3rd April, 1919, James Wright, in fact, conveyed his interest, as heir-at-law of Joseph Wright, to the defendant, and from that date she was in a position to convey the premises absolutely to the plaintiff, so that as regards both the lands sold and the dwelling-house and out-offices, she could give, as far as I can see, a perfectly good title to the purchaser to everything which he had agreed to purchase. The real question which I have to determine is whether, under all the facts and circumstances of this case, the plaintiff is entitled to rely upon the letter of the 10th of March, 1919, as a repudiation of the contract? Mr. Brown, K.C., on behalf of the plaintiff, contended that he was so entitled, and relied upon the judgment of the Master if the Rolls in Forrer v. Nash (35 Beav. 167). The statement in the judgment upon which Mr. Brown relied will be found on page 171, where Sir John Romilly says:—“I am of opinion that when a person sells property which he is neither able to convey himself nor has the power to compel a conveyance of it from any other person, the purchaser as soon as he finds that to be the case may say: I will have nothing to do with it. The purchaser is not bound to wait to see whether the vendor can induce some third person, who has the power, to join in making good title to the property sold.” I do not think that this dictum, which, of course, I am bound to follow in so far as it is applicable to the present case, is an authority for the plaintiff in this case. It may well be that if the plaintiff’s solicitor, when he ascertained that the defendant here could not make a good title to the premises, had written repudiating the contract, it would have been a good rescission, but when he wrote the letter of the 10th of March he was not in the position of a purchaser finding out that the defendant had sold property which she was neither able to convey herself nor had the power to compel a conveyance of it from any other person. He had found out on the 26th of February that the plaintiff had no estate in the freehold, and he had asked how it was proposed to convey the lands, and on the 3rd of March he had received a definite reply that the heir-at-law would convey, and I do not think he was entitled on the 10th of March to say that the plaintiff was neither able to convey herself nor had power to compel a conveyance from any other person. I think he should *71 have given a reasonable time to the plaintiff to make good her statement that the heir-at-law, her son James Wright, would convey, and reading the entire judgment of the Master of the Rolls in Forrer v. Nash, I think that some of the remarks of the learned judge are in favour of the defendant in this case. In that case the plaintiff had agreed to grant to the defendant a lease for 21 years, with a right to re-let, but he had only a term of 20 years and could not under-let without the consent of his landlord. The defendant repudiated the contract. The plaintiff afterwards filed his bill for specific performance, and pending the suit the landlord agreed to concur; and it was held that the contract could not be enforced. On the 22nd September the plaintiff’s solicitor wrote to the defendant to perform his agreement, and the defendant’s solicitor replied on the same day remarking that the plaintiff had not the power to carry out the agreement, and adverting to the deficiency of the term and to the restriction against under-letting the premises, and added: “Unless some communication from you in the course of to-morrow should alter our views, we shall consider the whole negotiations at an end.” The plaintiff’s solicitor rejoined insisting on the contract, and on the 23rd September the defendant’s solicitor replied adhering to their former letter, and declining any further negotiations. The plaintiff, on the 7th October, 1864, before he had obtained the concurrence of his landlord in granting the lease, filed his bill for specific performance of the contract. It appeared that so late as January, 1865, the landlord had refused to join in the lease to the defendant, but in April, 1865, the landlord made an affidavit in which he stated that he had been and was ready to do all acts necessary for enabling the plaintiff to perform in all respects on his part the agreement with the defendant, so that after the proceedings for specific performance had been commenced the landlord had refused to join in the lease, and had not consented until the month of April, 1865. The Master of the Rolls pointed out that it appeared from the correspondence that the defendant had set the plaintiff at defiance in the month of September, 1864; that it was also to be observed that the shop was wanted by the defendant for the purpose of carrying on his trade, and that if he had taken possession of the premises he might have been turned out by the lessor at any time he thought fit, and besides, that the defendant could not have had the lease for the full term with power to re-let which he had contracted for. Now, the facts in the present case are in great contrast to the facts in that case. On the 3rd of March the defendant’s solicitor had stated that the heir-at-law would join. In his letter of the 10th of March the plaintiff’s solicitor does not in any way question that statement, or ask that the matter should be speedily concluded, or take any step to ascertain whether, in fact, the heir-at-law would join, and I have not the slightest doubt from the evidence in this case that the heir-at-law, James Wright, was not only ready but anxious and willing to facilitate the carrying out of this transaction, which all the members of the family had agreed to and desired; but, also, that the said James Wright would at any time have joined in the conveyance. But the point raised by the plaintiff’s solicitor in his letter of the 10th March is that he had no contract with the heir-at-law; that the vendor had no title and had broken her contract. I do not think that the defendant here is a person who comes within the dictum of the Master of the Rolls in Forrer v. Nash. She was no doubt a person who sold property which she was not able to convey, but in this case there was no question of such a person not having the power to compel a conveyance from any other person. It is a case of a person who was in a position—as I hold as a fact—to do what her solicitor undertook to do on the 3rd of March—namely, to get the heir-at-law to join in the conveyance. Moreover, the plaintiff’s solicitor in his letter of the 10th of March put an end to the contract so far as he was concerned without giving any opportunity to the defendant to make good his undertaking within a certain time, which he would be entitled to do, provided the time was reasonable, because I hold in this case that time was not of the essence of the contract, although, as I say, I think the plaintiff would have been quite within his right in fixing a time within which a good conveyance should be made to him. The Master of the Rolls in Forrer v. Nash says that if the freeholder had made the statement in September, 1864, which he made in April, 1865, namely, that he would join the lease, and that the plaintiff had communicated it to the defendant, there would have been an end to the question. In this case I am satisfied that the heir-at-law was at all times willing to join, and the defendant’s solicitor positively stated on the 3rd of March that he would join, and no doubt whatever is suggested as to the bona fides of this statement in the plaintiff’s solicitor’s letter *72 of the 10th March. Mr. Brown also relied on the case of Bellamy v. Debenham, [1891] 1 Ch. p. 412. In that case Lindley, L.J., pointed out that the house in question was not any ordinary freehold house but copyhold, and under the Copyhold Acts the mines, minerals, clay and gravel were reserved to the lord of manor and did not belong to the vendor. He said that the purchaser did not see that until the abstract was sent in, and when it was sent in he said: “I shall not complete,” and continues: “The defendant’s solicitor in his letter of the 20th of May says that as the plaintiff cannot give his client the mines and minerals he cannot advise his client to complete, and that advise is communicated to the client and adopted by him. It appears to me, therefore, that there was on the 20th of May a plain repudiation on the part of the defendant of all liability to complete, and he has never flinched from that position.” He says later on: “The facts are that on the 24th of June the plaintiff had no more got the property than he had in April. He had begun to negotiate for it, but he did not get it until September.” I think the great distinction between the facts of that case and the facts of the present case is that here the purchaser’s solicitor, when he ascertained the true state of affairs on the 26th of February, did not repudiate the contract but asked how it was proposed to convey, and on the 3rd of March he is told how it is proposed to convey, and as I have said before, in his letter of the 10th of March he does not question the statement that the heir-at-law will convey and give a good title to his client. Mr. Denning relies upon the judgment of Mr. Justice Parker in Halkett v. The Earl of Dudley, [1907] 1 Ch. 590. The head-note of that case, in so far as it is applicable to the present case, is as follows:—“The purchaser’s right to repudiate a contract is an equitable right arising from want of mutuality, and may be a defence to an action for specific performance, but in order to avail himself of that defence he must repudiate the contract as soon as he finds that the vendor cannot make a good title.” I think that in the present case the plaintiff’s solicitor treated the contract as subsisting after discovery of the defect. The plaintiff’s solicitor, after he knew of the defect, as he has shown by his own requisitions, made requisitions and objections which would have been wholly useless if the contract had been repudiated, but it is not pretended here that the contract was repudiated prior to the 10th of March. So far from that being the case, the plaintiff’s solicitor in dealing with this very defect points it out and asks, practically, how is it to be remedied? how is it proposed to convey the lands sold? And a week after he receives a statement that it will be remedied by the heir-at-law conveying. He purports to repudiate the contract, not on the ground that he does not believe the statement that the heir-at-law will in fact convey, but raising questions which he might have raised but did not on the 26th of February. His Lordship referred to Hoggart v. Scott, 1 Russ. & My. 293; Eyston v. Simonds, 1 Y. & C. C. 608; Salisbury v. Hatcher, 2 Y. & C. C. 54; Murrell v. Goodyear, 1 De G. F. & J. 432; and Chamberlain v. Lee, 10 Sim. 444. Now, no doubt, in that last case the quantity of land to which it appeared that the vendors had no title was very small, still it cannot be lost sight of that counsel for the purchaser asserted most strongly that it was the most important part of the whole, and that it was the inducement to the purchase, and that if he could not get it he lost the whole benefit of the purchase, and that the remainder of the ground would be valueless to him. In the present case the plaintiff’s solicitor certainly does in his letter of the 10th of March suggest fraud, but I do not think there is a particle of foundation for any such suggestion. Where is the evidence of fraud? Some sort of blunder was undoubtedly made in condition six. It seems to have been thought that the defendant could make good title either by reason of having been jointly in occupation for the necessary period with her husband, or as administratrix of her husband, or as both. Plaintiff’s solicitor, before the 26th February, 1919, discovered this mistake, pointed it out, and asked who is to convey. On the 3rd of March he is told that the heir-at-law will convey, and he receives a draft declaration which sets out the facts. I presume that, as a careful solicitor, he consulted his client before repudiating. His client knew perfectly well that James Wright was the eldest son of his father, and as no point was made at any time that the father of James had not acquired a title under the Statutes of Limitation, plaintiff’s solicitor could have informed his client, and I have no doubt did inform him, that if James was the eldest son, and if James joined in the conveyance, the title could be made good, and, therefore, in this transaction I see no shred of evidence of fraud on the part of the defendant, and when the plaintiff’s solicitor in his letter of the 10th of March suggests that he does not know James I do not think the suggestion is to be taken seriously, and I think that the letter of the 10th of March was written because, for some reason which the plaintiff knows but has not thought fit to in *73 form the Court, he had become an unwilling purchaser. In considering some of the authorities in which the purchaser was held entitled to repudiate by reason of the vendor not being able to make title, I find passages in the judgments which I think are in favour of the defendant in the circumstances of the present case. In In re Bryant and Barningham’s Contract (44 Ch. D. 218) the vendors contracted to sell land as trustees for sale, and the purchaser paid a deposit. Upon investigation of the title it appeared that the vendors had no power of sale until the death of an existing tenant for life. The purchaser objected to the title, and the vendors thereupon offered to procure a conveyance from the tenant for life under the powers of the Settled Land Act. The purchaser declined to enter into a new contract with the tenant for life, and took out a summons under the Vendor and Purchaser Act for a return of the deposit. It was held by the Court of Appeal (affirming the decision of Kay, J.) that the vendors were not entitled to compel the purchaser to enter into a new contract with the tenant for life, and that they must repay to him his deposit, with interest at four per cent., and his cost of investigating the title. Now, of course, in the present case the defendant has only a partial interest in the estate. She affected to sell the fee simple before repudiation and at a time before any time that I can hold was fixed for completion she offered to have the conveyance made by the person entitled, and she has actually gone through a form of having a conveyance to herself, and is ready to convey to the purchaser, and in my opinion she is not a person who could not obtain a conveyance of the estate to herself before the time fixed for completion. Mr. Brown very ingeniously, in order to get out of this class of case, suggested that I ought to fix some time for completion of the purchase which would expire before the 10th of March. But the time fixed in the conditions of sale was clearly waived; indeed, the documents of title were not furnished to the plaintiff’s solicitor until the time for completion had elapsed, and no point whatever was made as to this by the plaintiff’s solicitor. He might have named some reasonable time for completion when he made his requisitions, but he did not do so, and in his letter of repudiation of the 10th March he does not even suggest that the time for completion had expired, and therefore I am not prepared to hold that even when the defendant obtained the conveyance from her son on the 3rd of April, 1919, the time for completion had expired. Now, in the Court of Appeal in the case under review Lord Justice Cotton said:—“I do not doubt that if a vendor is able to make a good title before the day fixed for the completion of the contract, the contract can be enforced, but that is not the case here. The vendors cannot, even now, show a good title in themselves. They cannot convey because their power does not arise until after the death of the tenant for life, who is still living. But they say: ‘Although we cannot convey, the tenant for life can sell under the powers of the Settled Land Act.’ If the tenant for life were a person who could concur so as to make the title of the vendors a good title, the case would be different, but the title of the vendors in this case is not made good by joining with them the persons entitled to sell under the Settled Land Act. The purchaser has contracted with the vendors that they should make a good title as trustees under the will, and he has never agreed to purchase from the tenant for life.” In this case, in my opinion, the vendor was able to make a good title before any day that I can hold was fixed for the completion of the contract, and we have here a person—namely, the heir-at-law—who not only could concur, but has concurred, so as to make the title of the vendor a good title. In In re Head’s Trustees and McDonald (45 Ch. D. 310), the trustees of a will of a testator in December, 1889, entered into a contract to sell property which was to be completed on the 24th of January, 1890. The purchaser took the objection that during the life of the widow the trustees could not sell. On the 6th January, 1890, the vendors’ solicitor wrote contending that the trust for sale could be accelerated by the widow surrendering her life estate. On the 7th of January the purchaser’s solicitor wrote to repudiate the contract on the ground that a good title could not be made, and asking for a return of the deposit. Nothing further took place until the 29th of January, which was after the date fixed for the completion, when the vendors’ solicitor wrote saying that the vendors were advised that a good title could be made by the beneficiaries joining in the conveyance, and that the vendors would procure their concurrence. The purchaser declined to proceed further with the purchase, and on the 4th of February took out a summons under the Vendor and Purchaser Act for a declaration that a good title had not been shown, for payment of the costs of investigating the title, and for a return of the deposit. Mr. Justice Chitty made in Chambers an order as asked for by the summons, and the vendors moved to discharge that order. Lord Justice Cotton pointed out that when the objection was *74 taken by the solicitor of the purchaser the vendors said we are advised we can make a good title, for those who are beneficially entitled will concur. Those who were beneficially entitled, he says, are the children of the testator, and it is not even now ascertained that they are willing to concur. And Lord Justice Fry said:—“The objection having been taken to the title, the vendors said that they would obtain the concurrence of the beneficiaries. Now, if that had been done at an early stage of the proceedings, and if the trustees had been able to show that the beneficiaries did, in fact, consent to join, and an opportunity had been given of investigating their title, and it had been shown that they would concur in reasonable time, it is by no means clear to me that the vendors might not have enforced their contract. According to the terms of the contract, the purchase was to be completed on the 24th of January. On the 7th the purchaser’s solicitor puts an end, so far as he can, to the contract, and demands repayment of his deposit. Nothing is done till the 29th January, on which day, after the time for completion had expired, the vendors communicate to the purchaser that they will obtain the concurrence of the beneficiaries, not producing any evidence that that concurrence had been obtained, and, in fact, they had no power at that time to bind the beneficiaries. I think the proposal came too late.” Now, in the present case, before any repudiation took place, the defendant’s solicitor undertook to obtain the concurrence of the heir-at-law of a conveyance. The plaintiff’s solicitor could thereupon have satisfied himself that the heir-at-law would in fact convey. No opportunity was required for investigating his title. It could have been shown that he would concur in a reasonable time. He was always ready and willing to do anything necessary to carry out this contract in my opinion, and the plaintiff’s solicitor could have ascertained that fact without any trouble whatever, but he chose in his letter of repudiation of the 10th of March to rely upon what he considered a sufficient legal ground to enable his client to get out of his contract. I do not think it would be consistent either with fair dealing or good sense, or with the legal principles applicable to the facts and circumstances of this case, that he should be allowed to take advantage of what I believe, notwithstanding the evidence of Mr. McQuaid, was caused by a misconception of the legal rights of the vendor. For the reasons which I have indicated, I have come to the conclusion that I ought to dismiss the plaintiff’s action, and that I ought to decide in favour of the defendant on her counterclaim, and to order specific performance, and the plaintiff must pay the costs.
W.P. McCarter & Co Ltd v John P. B. Roughan
and John McLaughlin & Co Ltd
1983 No. 1283 P
High Court
11 February 1985
[1986] I.L.R.M. 447
(McWilliam J)
The McLaughlin family has been, for a very long time, engaged in the manufacture of shirts in Buncrana, Co. Donegal, and also in the retail business with two shops, one for men’s and the other for women’s clothes. The second-named defendant, hereinafter called the ‘company’, was formed in 1939 to take over these businesses. At all dates relevant to these proceedings John McLaughlin was the managing director of and the principal shareholder in the company. The company got into difficulties in the early 1970s and, in December 1973, borrowed *448 a sum of £40,000 from Foir Teoranta and this sum was registered as a charge over the property. At that time the company was already indebted to Allied Irish Banks in the sum of £78,000 and the bank had a first charge on the property. Approximately eighteen months later Foir Teoranta appointed the first-named defendant to be receiver over the property of the company. The management of the business by the receiver was not successful and it was decided, in summer 1976, to realise the assets. Although the overall trading position of the company was bad, it is accepted that the trading of the two retail shops was profitable.
In order to dispose of the factory, the receiver got in touch with the Industrial Development Authority through which the plaintiff was made aware that the factory was to be sold. The receiver did not advertise the property, being of opinion that the Industrial Development Authority would be aware of all possible purchasers. Negotiations with the plaintiff followed and a sum of £20,000 was discussed. In September 1976, having received an offer of this sum from the plaintiff, the receiver asked a local auctioneer for his opinion on it but did not ask for a full valuation in the usual form. This auctioneer stated that he would normally consider this price unacceptable but, under the prevailing circumstances, he would recommend acceptance. After further negotiations the receiver agreed to sell the factory to the plaintiff for £21,000. During the course of the negotiations with the plaintiff, the receiver had had offers from John McLaughlin of, first, £17,000 and, later, £20,000, neither of which was accepted by the receiver. Following the agreement with the receiver, the plaintiff went into occupation of the factory at the rent of £30 per week pending completion of the sale and has remained in occupation ever since.
Having agreed to sell the factory premises to the plaintiff, the receiver arranged to hold an auction of the shop premises. Proceedings were then instituted by the company against the receiver by plenary summons dated 7 February 1977, claiming damages for negligence, a declaration that the contract with the plaintiff was null and void and an injunction restraining the receiver from disposing of the shops other than as a going concern. The plaintiff was not made a party to these 1977 proceedings. On 14 February 1977, on an application before me in these proceedings by the company, I refused to restrain the holding of an auction of the shop premises but directed that the sale of the factory be postponed until an independent valuation had been obtained. No further steps were taken in the 1977 proceedings, the explanation given being that the death of my registrar after a very trying illness, without having made up an order, prevented any further steps being taken.
On 9 December 1976, the solicitors for the receiver furnished a contract to the plaintiff for execution and enclosed some documents of title. Some enquiries as to the title having been made by the solicitors for the plaintiff, they returned the contract executed by the plaintiff to the solicitors for the receiver together with a deposit of £5,250 on 2 February 1977.
In February 1977, John McLaughlin tendered to Foir Teoranta all money due to it and the solicitors for the receiver indicated to the solicitors for the plaintiff that discussions with regard to this tender were taking place. This money was subsequently paid.
There is silence as to what happened during the summer of 1977 but the solicitor for the plaintiff wrote on 15 September calling for completion of the contract by the receiver. This led to a short correspondence in which the solicitors for the plaintiff were informed that it was proposed to discharge the receiver and that it was proposed to bring the matter before the court.
The plaintiff remained in occupation of the factory, operating it for the purposes of its business, and nothing appears to have been done with regard to the contract until November 1979, when the receiver wrote to say that a valuation at the sum of £32,000 had been obtained and suggesting that an offer of this sum would be likely to influence the court to remove the stay on completion. It appears that this valuation was dated 7 March 1977, and, presumably, it was made shortly before that time. The plaintiff agreed to pay this increased price. Notwithstanding the procurement of this valuation, no further step was taken in the 1977 proceedings either by the receiver or by the company or by John McLaughlin and the plaintiff has continued in the occupation and operation of the factory until the present time.
In July 1980, John McLaughlin paid off the debt due to the Allied Irish Banks. It appears that he had given a personal guarantee for the repayment of the advances. In July 1980, a notice to quit was served on the plaintiff by the receiver but, up to the present, no further step has been taken to obtain possession from the plaintiff.
The next step that appears to have been taken in the matter was in February 1983, when the plaintiff instituted these proceedings, having learnt that it was proposed shortly to discharge the receiver. By deed dated 10 March 1983, John McLaughlin and Foir Teoranta did discharge the receiver from his appointment. Throughout the period of inaction from July 1980, until February 1983, requests were occasionally made on behalf of the plaintiff for the completion of the contract for the sale of the factory.
On 16 January 1984, the plaintiff sent to the receiver the arrears of rent due in respect of its occupation of the factory under the agreement of 1976. This was forwarded to the solicitors for the company who returned it to the plaintiff with the comment that their client was a stranger to any agreement entered into with the receiver and referred to the 1977 proceedings.
No pleadings have been delivered in the present proceedings and I have been asked to determine whether there is a valid and enforceable contract for the sale of the premises to the plaintiff.
On behalf of the plaintiff it is argued that there is an enforceable contract sufficiently evidenced in writing by letters of 15 October, 18 October and 20 October 1976. Alternatively, it is argued that there have been sufficient acts of part performance to take the case out of the provisions of the Statute. Emphasis is laid on the long occupation and use of the factory and the expenditure on improvements for the purposes of the plaintiff, agreed by and contributed to by both parties.
On behalf of the company it is argued that there was neither a sufficient note or memorandum in writing or sufficient part performance to take the case out of the Statute. It is further argued that the contract was discharged by mutual *450 agreement because the parties purported to agree to increase the price to the sum of £32,000. Finally it was argued that a receiver selling property is in the same position as a mortgagee and must use the same care as a reasonable person would use in order to see that the best price is obtained, and that, if he does not, the sale may be set aside. I was referred to the case of Holohan v Friends Provident & Century Life Office [1966] IR 1. The lack of care alleged is that the receiver did not obtain a proper valuation before selling, did not advertise the property and sold to the plaintiff on the introduction of the Industrial Development Authority which was only, or mainly, interested in ensuring a continuation of employment in the area, and that the estimates (widely varying) of the property in 1976 now put before the court indicate a sale at a gross undervalue.
On behalf of the plaintiff I was referred to Farrand on Contract and Conveyance (3 ed), (1980) p. 49; Davies v Sweet [1962] 2 QB 300; Kelly v Park Hall School Ltd [1979] IR 340; and to my own decision in Starling Securities v Woods High Court 1975 No. 4044 P, 24 May 1977.
It is my opinion that there was a sufficient note or memorandum of the contract in the initial correspondence. The letter of 18 October 1976, was signed by the receiver so that no question of authority to enter into a contract arises. I am also of opinion that there were, in any event, sufficient acts of part performance to take the contract out of the Statute. With regard to the agreement to increase the price to £32,000, I am satisfied that this was conditional upon an application being made to the court. I cannot accept the explanation for not so applying as adequate. An application could have been made to me at any time to have this difficulty resolved. As no such application was made, the situation is analagous to that which arose in the case of Davies v Sweet and, as between the plaintiff and the receiver, the original contract at £21,000 stands, although it would have been reasonable for me to accept the valuation of £32,000 obtained in response to my directions had an application been made.
The last argument made on behalf of the company presents me with the most difficulty. On the evidence before me, I am satisfied that the receiver did not act reasonably in that he did not obtain a proper valuation before negotiating a sale and that he did not advertise the property at all. On the other hand the company, as the plaintiff in the 1977 proceedings, had control of the situation and should have had those proceedings re-entered before me. Although those proceedings are not before me at the moment, I must take notice of them and I must also take notice of the long delay of seven or eight years in prosecuting them since February 1977, during all of which time the plaintiff was, to the knowledge of the company, in occupation of the factory and expending money on it and carrying on its busines there. In my opinion it would be inequitable to set aside this contract at this stage and I will direct that it be specifically enforced and leave the company to pursue its claim for such damages or other relief as it may be entitled to against the receiver in the other action.
Derek Treacy v Dwyer Nolan Developments Ltd
[1979] I.L.R.M. 163
(McWilliam J)
31 October 1979
This is an action for specific performance of a contract by the defendant to build a house for the plaintiff and sell it to him. Although the defence denies everything most comprehensively, including the agreement to build and sell the house, the issue at the hearing concerned only the question of when the house was properly completed and the liability of the plaintiff to pay interest at the rate of 20% from two weeks after the date when the house was ready for occupation, on any of the purchase price then outstanding until payment, as provided by the contract.
The agreement was in writing and was dated 6 September 1977. It provided *164 that the defendant woud try to have the house completed by 29 September but would not be liable for any delay. It also provided that, if any dispute should arise with regard to any matter concerning the progress or completion of the work, the same should be referred by either party, with notice in writing to the other, to the defendant’s architect, whose decision should be final and binding.
In the event, the defendant informed the plaintiff that the house had been completed on 27 October 1977. The plaintiff alleged that the house had not been completed in accordance with the contract and, by letter of 27 November 1977, a list of defects was furnished to the solicitor for the defendant. This list, or a similar one, had already been furnished by the plaintiff personally at an earlier date. Early in December the defendant notified the plaintiff that all defects had been remedied. Up to this date no difficulty arises in the case. The defendant accepts that there were defects but claims that they were not of a serious nature. I am satisfied from the evidence that this claim is correct. The defendant also alleges that all defects had been remedied by early December.
Some time in the middle of December the plaintiff attended at the premises with a qualified person, whether a relative or a friend of a relative of the plaintiff is not clear to me, and some sort of inspection of the premises was carried out on his behalf.
From then onwards the correspondence seems to have proceeded on parallel lines, not meeting at any point: the plaintiff claiming that the house was defective and that he required an inspection before he would complete, and the defendant claiming that the house was fully completed and that interest on the purchase price at the full rate of 20% was payable from November. So the correspondence went on. The plaintiff did not ask for a definite appointment to inspect the premises although he complained that he was being prevented from inspecting them, and he did not send a list of his complaints supported by a report from his qualified adviser. The defendant did not suggest making an appointment to inspect the premises and, until May 1978, did not send a certificate or report from his architect to the effect that the defects had been remedied.
There is a conflict of evidence as to the opportunity given to the plaintiff to inspect, as to actual inspection by him, as to allegations that the plaintiff had stated or indicated that he was satisfied with the work done, and as to the plaintiff’s allegation that he had, at all times, maintained that the work was defective.
When the defendant furnished the architect’s certificate in May 1978 the plaintiff agreed to complete and to pay interest in accordance with the contract as from that time. The defendant insisted on payment of interest in full from November 1977. The plaintiff refused to pay interest in respect of any period before 10 May 1978, and, on 25 June 1978, put the balance of the purchase money on deposit in the joint names of the plaintiff and the defendant. These proceedings were commenced by the plaintiff on 3 August 1978, no further steps having been taken by either party to resolve the dispute.
I am satisfied that the house was not completed in accordance with the contract in October or November 1977, although it is clear from the evidence of the only architect to give evidence that the defects were not of a serious nature, and I accept the evidence of a witness on behalf of the defendant that they were such *165 as could be remedied within a day or two. It appears to me to be probable that they had been remedied by the middle of December when the plaintiff had the house examined by his qualified friend or relative. It is significant that this person was not called to give evidence and no report of his was furnished to the defendant although this inspection was referred to in a letter from the plaintiff’s solicitor on 24 January 1978. From this, I am satisfied that interest was payable on the balance outstanding of the purchase price from a time which has, for convenience, been accepted on behalf of the defendant as 1 January 1978.
Having reached these conclusions of fact, I asked counsel to address me on the legal position resulting from them but they have not been able to refer me to any authorities and have, in effect, accepted or adopted the entrenched attitudes of the parties, neither of whom was prepared to concede anything or to make any reasonable suggestion to the other to try to resolve the dispute to the best advantage of both parties.
As it has been accepted on behalf of the defendant that the plaintiff is to have a decree of specific performance I am relieved of the responsibility of deciding as to how I should exercise any discretion I may have in this respect.
It seems to me that the questions I have to decide in the events which have happened and having regard to the attitudes of the parties are as follows:
1. To what interest on the balance of the purchase price is the defendant entitled under the provisions of the contract?
2. Is the plaintiff entitled to any damages because he was deprived of the use of his house.
3. Is the plaintiff entitled to damages for injury to the house caused as a result of the severe weather in the early months of 1979?
On my findings of fact, I am of opinion that:
1. the defendant is entitled to interest at the full rate of 20% per annum from 1 January 1978, until 25 June 1978, when the balance of the purchase price was placed on deposit and that, after 25 June 1978 the defendant is only entitled to the interest which accrued on the deposit.
2. the plaintiff is not entitled to any damages for being kept out of the house from 1 January 1978, until the present date.
3. the defendant is responsible for the damages to the house caused by the hard winter of early 1979 insofar as this was due to his want of reasonable care. I have been given no evidence whatsoever as to the position in this respect.
Timothy Finbarr O’Mullane v Patrick Riordan
High Court
20 April 1978
[1978] I.L.R.M. 73
(McWilliam J)
This is an action for specific performance of an agreement in writing dated 8 May 1972, whereby the defendant agreed to sell two fields comprising approximately 13 or 14 acres in all to the plaintiff at the price of £1,500.00 per acre, subject to outline planning permission being granted.
The contract was prepared by a solicitor on the instructions of the plaintiff but is unusually short and in an unusual form and a number of points have been raised with regard to it. Indeed, many of the circumstances leading up to and surrounding the transaction are unusual.
The plaintiff is a businessman who lives in Cork, his main business being concerned with the packaging, processing and export of butter. His premises in Cork city had become inconvenient for the purposes of his business and he was anxious to move to premises on a more convenient site. The defendant owned a farm of about 100 acres on which he carried on dairy farming. He stated in evidence that he had experienced labour problems in connection with his dairy farming activities and decided to sell about 40 acres. He did not make it clear why he decided to sell forty acres but this is not very material. In February 1972, he had an advertisement inserted in the Cork Examiner under a box number offering this amount of land for sale and describing it as suitable for residential or industrial development. The plaintiff did not require so much land as this but arranged for his solicitor to answer the advertisement. This was done by letter of 3 March 1972. After some delay the defendant telephoned the plaintiff’s solicitor and informed him of the location of the lands and his own name and address. On inquiry by the solicitor, he said he was looking for £2,000.00 per acre but would not take less than £1,500.00 per acre. On being informed of this, the plaintiff went to see the land and meet the defendant. There is a conflict of evidence as to whether he went out alone or with his manager. This is not very material but I am inclined to accept his account that he went out alone on this occasion. He told the defendant that he only required four to six acres, but the defendant was not anxious to sell less than the 40 acre lot. *75 The plaintiff states that, about a week later, he returned with his manager and made a more detailed inspection of the land and decided that the smaller of the two fields would suit his purpose if he could get a portion of the larger field as well. He states that he returned with his manager on a third occasion and, after some discussion with the defendant, made an offer for both fields of £1,200.00 per acre but that the defendant was not pleased with this offer but did not make any counter offer. There is a conflict of evidence as to the number of visits made to the lands by the plaintiff and as to the plaintiff having made any visit alone. There is also a conflict of evidence as to whether it was suggested to the defendant that he should have a solicitor to act for him. Clearly, the question of a solicitor for the defendant was discussed because the plaintiff alleges it was suggested to the defendant that he should have a solicitor while the defendant alleges that the plaintiff deterred him from having a solicitor. The general attitude of the defendant indicates that it is much more likely that he did not wish to have a solicitor. After these visits to the farm, be they one or two, the plaintiff says that there was at least one telephone conversation between the parties and it was arranged that the defendant should come to the plaintiff’s office, that this happened and that a price of £1,500.00 per acre was finally offered to the defendant who reluctantly agreed to it, that a discussion then got up about planning permission and the plaintiff said he would give a bit extra if he got planning permission but that this would be at his discretion. The defendant’s account is that there was never any offer of £1,200.00 and that the sum of £1,500 was offered at the second visit by the plaintiff to the lands, that he went in to the office the next day and that he more or less agreed to the figure of £1,500.00 although he was never satisfied with this price. He agrees that the plaintiff said that he would pay more ‘at his own discretion’. I am satisfied that he agreed that the plaintiff should have an agreement drawn up. This was done by the plaintiff’s solicitor who sent it to the plaintiff and wrote to the defendant to tell him that he had done so. The defendant states that he was sent a copy of the agreement and that he read it before the plaintiff came out to have it signed.
The three clauses of the agreement are as follows:
1. The vendor will sell and the purchaser will buy the lands described in the schedule hereto for the sum of £1,500.00 (fifteen hundred pounds) per statute acre, subject to the usual consent of the Land Commission to subdivision being obtained and subject to outline planning permission being granted.
2. On receipt of outline planning permission, the purchaser may at his own discretion purchase at a price in excess of the sum of £1,500.00 per acre referred to at (1) above.
3. The application for outline planning permission will be made by the purchaser or his agent.
The plaintiff and his manager brought this agreement out to the defandant’s house on 8 May 1972, and it was signed by both parties on that day. Before the agreement was signed, the defendant said he would require to have a wayleave for the connection of water and sewerage to the remainder of his lands and this was agreed. The plaintiff’s manager thereupon wrote out a further agreement in the following terms:
I, Timothy Finbarr O’Mullane, agree in the connection of the Purchase Lands from Mr Patrick Riordan, Glytown, Glanmire, Co. Cork and as described in the Memorandum of Agreement Jointly , that I will allow a Wayleave for the connection of Water and Sewage at the Eastern Boundary as described in the Memorandum of Agreement as the Vendor’s — Bounds Fence.
This was signed by the plaintiff but not by the defendant. It was probably signed and may have been written out after the principal agreement had been signed.
Some steps towards obtaining planning permission appear to have been taken by the plaintiff and his solicitor almost immediately afterwards but the approaches to the planning authority appear to have been rather tentative and a consulting engineer was employed in the following year to proceed with the application. In the meanwhile, in January 1973, the plaintiff had received an offer of £3,000 per acre for the entire 40 acres with an indemnity against any possible action by the plaintiff. On 1 February 1973, the solicitor for the plaintiff wrote to the solicitor for the defendant calling for the title and stating that the plaintiff was prepared to complete the purchase. This brought a reply asking what increase in price was proposed under paragraph 2 of the agreement. An increase was refused on behalf of the plaintiff. The defendant then refused to furnish the documents of title on the grounds that the contract was unenforceable until planning permission had been obtained and also on the grounds of uncertainty as to the amount of the consideration. An objection was later lodged by the defendant to the grant of the plaintiff’s application for planning permission. Permission was granted in August, 1974 for the development of the land required for the plaintiff’s business. In November, 1974, the plaintiff obtained planning permission for the remainder of the lands and this decision was appealed by the defendant. This appeal was not successful.
The plaintiff now claims to have the agreement of 8 May 1972 specifically enforced. This claim is resisted on the grounds that (1) having regard to the terms of clause 2, the agreement is void for uncertainty; (2) planning permission was not obtained within a reasonable time and that the defendant, therefore, is entitled to rescind the contract; (3) the sale was at a gross under-value and the defendant did not have any independent advice and was throughout in a position of inferiority and it would be inequitable to grant specific performance; and (4) although it was not pleaded, that the agreement with regard to the wayleaves was a material part of the contract and that there was no sufficient note or memorandum signed by the defendant.
A great deal of evidence was given with regard to the value of the land, both at the time of the agreement and subsequently. Having heard all the evidence, I am satisfied that the price agreed in May 1972, was not significantly under the proper value. I am sure that £1,750.00 or even £2,000.00 per acre might have been obtained had the defendant employed experienced persons to deal with the sale on his behalf, but he deliberately chose to sell the land anonymously and by himself and, although he at first denied it, he later agreed that he had had other replies to his advertisement. Presumably he considered them. It has been very strongly urged upon me that the agreement was unfair in that it was drawn in favour of the plaintiff in every respect but, essentially, the defendant agreed to sell the land for the sum of £1,500.00 per *77 acre which was a price he had mentioned at the commencement of the entire transaction and before the plaintiff or his solicitor knew anything about the land. I fail to see that there is any evidence of unfair or oppressive dealing on the part of the plaintiff such as occurred in the case of Smelter Corporation v O’Driscoll [1977] IR 305 to which I was referred. The price of the land has increased astronomically since May 1972, and it has been argued that, as this contract was subject to a condition (i.e. the obtaining of planning permission) there was no contract until the planning permission had been obtained and that this is the time at which I have to ascertain the value of the land for the purpose of establishing the fairness of the bargain. I was referred, in this context, to the case of Aberfoyle Plantations Ltd v Khaw Bien Cheng [1960] AC 115. I cannot accept this argument. The fact that a contract is subject to a condition has the effect of making it unenforceable until the condition is fulfilled, but it does not mean that there is no contract at all and the case cited decided that the purchaser was entitled to recover his deposit under a term in the agreement. A conditional contract is one which becomes enforceable provided the condition is fulfilled within the time provided by the contract or, if no time is provided, within a reasonable time. Accordingly the time at which I should investigate the fairness of the price is the time at which the contract was signed.
This leads to the consideration of the defence that the defendant was entitled to rescind because the planning permission was not obtained within a reasonable time. I have re-read the correspondence and it does not appear that the defendant at any time attempted to rescind on the ground of delay in obtaining planning permission. What he did do was to attempt to make time of the essence of the contract without suggesting any length of time; to query the validity of the contract on other grounds; and, when the application for planning permission was made, to object to the application. Whatever delay was caused by this latter course of action, it certainly was not helpful to the plaintiff with regard to obtaining planning permission within a reasonable time. Reference was also made to the case of Healy v Healy Homes [1973] IR 309 in which it was decided that a party in whose favour a condition is made may waive the condition. I am not familiar with this decision and, unfortunately, it was not made available to me but, having regard to the view I have taken that the defendant failed actually to rescind the contract, it is not necessary for me to deal with this point although the plaintiff made it clear at an early stage that he was prepared to complete without obtaining planning permission.
On the question of uncertainty, it is urged upon me that clause 2 creates uncertainty as to the amount of the purchase price because it can mean either that the plaintiff has a discretion to pay some increase or no increase at all, or that he is bound to pay an increase but that the amount only is within his discretion. It is also argued that the clause is of such a nature that it must have caused uncertainty in the mind of the defendant. To me the clause appears to be quite clear. The plaintiff has an absolute discretion as to whether he will increase the price or not. The defendant and his wife stated in evidence that they had plenty of time to read the agreement, that they did read it and that they understood it in the sense in which I understand it. Although the clause may be useless to the defendant, this does not render the *78 contract void for uncertainty.
With regard to the sufficiency of the note or memorandum, the subsidiary agreement was not signed by the defendant, the party to be charged. It is not and could not have been referred to in the principal agreement and therefore cannot be incorporated with it so as to constitute a memorandum sufficient to satisfy the statute: see Timmins v Moreland Street Property Co Ltd [1958] Ch 110. It is a material term of the contract and counsel has referred me to the case of Burgess v Cox [1951] Ch 383 in support of the proposition that the plaintiff cannot avoid the consequences of the omission from the note or memorandum by undertaking (as he has done) to carry out the additional term. Counsel has, very properly, also referred me to the case of Scott v Bradley [1971] Ch 850 in which the decision in Burgess v Cox was not followed but a decision to the contrary in a case of Martin v Pyecroft (1852) 3 de G, M & G 785 was followed. It is clear that the agreement about the wayleaves was discussed, prepared and signed at the time when the principal part of the agreement was signed and it would be an abuse of the statute if I were compelled to hold that the entire agreement was unenforceable because this extra term was not signed by the defendant although it was signed in his presence, at his request and for his benefit and was witnessed by his wife who signed it under the signature of the plaintiff. Accordingly, I hold that the memor- andum was sufficient on the authority of the decision of Scott v Bradley, a decision with which I am in full agreement.
There will be a decree for specific performance of the contract, the plaintiff submitting to be bound by the term contained in the document signed by him alone.
Thomas Lyons v. Anne Thomas
1986 IR 666
Murphy J.
14th October 1985
The issues
The present case (and a vendor and purchaser summons between the same parties 1985/159Sp heard in conjunction with it) raises important questions with regard first, to the duty of a vendor with regard to the preservation of property pending the completion of a sale and secondly, the right of a vendor unilaterally to rescind a contract for sale.
The background
The premises known as “Camlinn” 62 Orwell Road, Rathgar, in the City of Dublin were built in the late 1920s pursuant to the building covenant in that behalf contained in an indenture of lease dated the 3rd August, 1927, made between Walter Parkinson of the one part and Emily Harris of the other part.
The premises at Orwell Road aforesaid were owned by a Mrs. Farrell prior to her death in March, 1982. She, together with one or more tenants or lodgers had occupied the premises for a number of years. It appears that Mrs. Farrell was an elderly widow and that no member of her family resided with her. There was evidence, which I accept, that Mrs. Farrell in her later years maintained a keen interest in the gardens adjoining the premises but did not have any comparable interest in keeping up or decorating the interior of the premises.
In May, 1981, Mrs. Farrell became ill and went to reside with relatives in County Roscommon. She was subsequently transferred to a nursing home where she died in March, 1982. She had not returned to the premises at Orwell Road subsequent to leaving them in May, 1981.
Under her will Mrs. Farrell bequeathed the premises to her daughter Anne Thomas the defendant herein. Mrs. Thomas is married and has resided for some years with her husband and family in West Sussex, England. A decision was made by Mrs. Thomas to sell the house and accordingly she arranged to procure vacant possession from the tenant or lodger who was in occupation of one room therein. Some negotiations took place with a view to a sale with a Mr. Ryan who was known to the vendor’s family and had shown an interest in the house. It was Mr. Ryan who introduced Thomas Lyons (the plaintiff herein) to Mrs. Thomas and eventually a contract was entered into in January, 1983, under which Mrs. Thomas (to whom I shall refer as “the vendor”) agreed with Mr. Lyons (to whom I shall refer as “the purchaser”) for the sale to him of the Orwell Road premises for the sum of £56,500. The contract provided that the closing date should be the 18th February, 1983; that the deposit should be a sum of £14,125 and that interest, where payable, should be at the rate of 24% per annum. Save as aforesaid the contract contained no special conditions and was comprised exclusively of the general conditions of sale (1978 edition) published by the Incorporated Law Society of Ireland.
These proceedings involve in particular a consideration of clauses 10 and 26 of the contract for sale. Those clauses which are respectively entitled”rescission” and “insurance” provide as follows:
“10. If the purchaser shall make and insist on any objection or requisition as to title, the assurance to him or any other matter relating to or incidental to this sale, which the vendor shall be, on the ground of unreasonable delay or expense, or other reasonable ground, unable or unwilling to remove or comply with, the vendor shall be at liberty (notwithstanding any intermediate negotiation or litigation or attempts to remove or comply with the same) by giving to the purchaser or his solicitor not less than seven days notice in writing to rescind the sale. In that case, unless the objection or requisition in question shall in the meantime have been withdrawn, the sale at the expiration of such notice shall be rescinded and the purchaser shall thereupon be entitled to a return of his deposit, but without interest, costs or compensation, on his returning to the vendor all documents and papers in his possession belonging to or furnished by the vendor relating to the sale, and procuring the cancellation discharge or release of any entry relating to the contract in the Land Registry or Registry of Deeds. The purchaser shall accept the sum so returned in full satisfaction of all claims, whether for interest, costs, damages or otherwise. . . . .
26. The property shall as to any damage from whatever cause arising after the date of the sale be at the sole risk of the purchaser and no claim shall be made against the vendor for any deterioration or damage unless occasioned by the vendor’s wilful neglect or default.”
On the 25th January, 1983, the solicitors on behalf of the vendor forwarded to the solicitors on behalf of the purchaser one part of the contract for sale duly executed by the vendor. The solicitors on behalf of the purchaser then, with commendable dispatch, forwarded both his requisitions on title in duplicate and the draft assignment on the 31st January, 1983, to the solicitors for the vendor. As no replies were received to the requisitions and the time for completion of the sale had been permitted to pass, the solicitors on behalf of the purchaser wrote a reminder to the solicitors on behalf of the vendor on the 11th April, 1983. The reply to that communication though dated the 29th August, 1983, was not dispatched to or received by the vendor until the 5th October, 1983. The reply apparently included replies to the requisitions on title.
Apart from any question of delay involved on the part of the vendor the first indication of the problems which were the subject matter of these proceedings is contained in a letter from the solicitor on behalf of the purchaser to the solicitor on behalf of the vendor dated the 13th October, 1983. In that letter the purchaser’s solicitors stated that the property for sale had been “considerably vandalised and has also fallen into disrepair” and asked the vendor to accept that she was responsible for the maintenance of the property pending the completion of the sale. The vendor was also requested to indicate the reduction in the purchase consideration which she would grant having regard to the deterioration. Later in the same month the solicitors on behalf of the purchaser raised certain rejoinders on title which are of no relevance to these proceedings but in a subsequent letter repeated the complaint that the premises were deteriorating. It was stated that a pipe had appeared to have burst in the premises and had been flowing for some time. In addition the vendor was put on notice that the property had been used by squatters. Finally in this connection the vendor was notified that fire insurance cover was no longer available to the purchaser as the property was vacant. Little appears to have happened in relation to the matter between November, 1983, and May, 1984. In the month of May, 1984, a change occurred as was explained in evidence in the personnel dealing with the transaction in the firm of solicitors acting on behalf of the vendor. This change is apparent from reading the book of correspondence between the solicitors concerned. On behalf of the vendor there is a firm denial of any liability for deterioration or damage; there is a complaint that the purchaser failed to pay the agreed deposit; an accusation of delay on the part of the purchaser and a notice by the vendor fixing the 31st August, 1984, as the date for completion and making time of the essence in that respect. Having taken this firm line the solicitors on behalf of the vendor then (by letter dated the 28th August, 1984,) offered to close the sale immediately and to litigate subsequently the issue of liability for the damage or deterioration to the property and, for that purpose to reserve out of the purchase money a sum of £10,000 pending determination of the litigation. The purchaser declined to adopt this procedure. He insisted that he would only close if the property was restored to its original condition. From that point onwards the relationship between the parties and their respective solicitors deteriorated still further. It is perhaps significant that in their letter of the 18th September, 1984, the solicitors on behalf of the vendor said:
“It is perfectly clear that the purchaser had his own reasons for allowing the matter to continue as it undoubtedly did and we are satisfied that we will now be able to satisfy any court as to these.”
This threat apparently arose from a suspicion which the solicitors on behalf of the vendor entertained that the purchaser did not have the finance with which to complete the purchase and the fact established in evidence, that the purchaser was a local authority employee with the Dublin Corporation attached to the planning section and that he had applied in his wife’s maiden name and from an address which was not his or her permanent residence first for permission under s. 4 of the Housing Act, 1969, for the demolition of the premises numbered 62 Orwell Road (which was granted) and secondly on the 14th November, 1983, for outline planning permission for a two-story mansard development containing ten apartments (which was refused). Presumably these are the facts which the vendor’s solicitors had in mind when on the 21st September, 1984, they wrote again as follows:
“We are absolutely satisfied that that attitude which your client has adopted in regard to this transaction in particular since the dwelling-house was broken into indicates that he, his servants, agents or principals have had ulterior motives in regard to the property herein. We are in possession of clear, unequivocal evidence that your client, his servants, agents or principals are wholly unconcerned in reality about the condition of the dwelling-house. The nature of that evidence indicates to us that your client has been making points about the condition of the dwelling-house as an excuse for delaying the closing of this transaction and in the hope that other matters will in the interim occur.”
In October, 1984, the purchaser issued and served on the vendor the plenary summons herein claiming specific performance of the contract for sale dated the 14th January, 1983. Such was the relationship between the parties at that stage that the vendor’s solicitors declined to accept service of the summons and instead it was necessary for the purchaser to apply to the court for liberty to issue and serve the summons outside the jurisdiction of the court.
By letter dated the 14th November, 1984, the vendor’s solicitors gave notice to the purchaser’s solicitors of the vendor’s intention to invoke the rescission clause which I have recited above. In the absence of any reply to that letter the vendor’s solicitors formally notified the purchaser’s solicitors on the 26th November, 1984, that the sale had been rescinded and returned a cheque for a sum of £3,500 which had been paid by the purchaser by way of deposit in connection with the contract. On the 7th March, 1985, the vendor instituted proceedings by way of special summons in proceedings under the Vendor and Purchaser Act, 1874, claiming a declaration that the contract made in January, 1983, had been validly rescinded. However, as the claim of rescission was also an integral part of the vendor’s defence to the specific performance proceedings it was convenient to deal with that issue in the plenary proceedings rather than on the vendor and purchaser summons.
The deterioration of the premises
There is little room for dispute as to the present condition of the premises. Over 70 photographs were put in evidence and these record pictures taken in every room in the house from a variety of different angles as well as a number of external views. It is clear that several windows were broken; paper has been torn from the walls; paint work has deteriorated; the copper cylinder and piping has been removed; rubbish has accumulated inside and outside the house; hand basins and other fittings have been broken; parts of ceilings have come down and indeed some floor boards have come up. In addition there are widespread and obvious marks of dampness under the ceilings, walls and floors in most of the rooms. As I say there is little room for dispute with regard to the present deplorable condition of the premises. The issue between the experts called on behalf of the vendor and the purchaser related first to the period when the deterioration occurred and secondly to the proper procedure (though not so much the cost) of making good the damage. As to the first of these issues the problem for the vendor was to establish the condition of the premises as at the date of the contract for sale. In this regard emphasis was placed on the fact that the premises were something over 50 years old at the date of the contract and that no effort had been made for many years before then to replace the original plumbing or electric fittings or to carry out routine repairs or decoration. General evidence to this effect was given by Mr. Thomas, the husband of the vendor, who visited the premises once a year or so. More cogent evidence was given by a neighbour, Mr. Keogh, who was a frequent visitor to the house during the life-time of Mrs. Farrell. He was able to say that he himself had in fact patched the wall-paper from time to time rather than replace it. He pointed out that the fittings were old and it was clear that crude extensions had been made to the plumbing to convenience the tenant or lodger who resided there from time to time. Again some support for the poor state of the premises in January, 1983, is to be found in the evidence of the valuers called on behalf of the vendor-Mrs. Hargaden and Mr. Broadhead, both of Messrs. Lisney & Co. The effect of their evidence was that the premises in good condition in January, 1983, would have been valued at a sum in the order of £66,000 rather than the sum of £56,500 which they fetched. Indeed there was a considerable measure of agreement between the valuers called on behalf of the vendor and those called on behalf of the purchaser. The value of the premises in 1983 as established by the sale was £56,500. Mr. Gray, the valuer called on behalf of the purchaser, had in fact inspected the premises and reported upon them for a potential purchaser (Sean O’Kelly) in December, 1982, and he had at that stage valued the premises at a sum of £60,000. However, the valuers on behalf of both parties were agreed that the present value of the premises was £40,000. Mr. Gray attributed the fall in value exclusively to the deterioration in the premises where the valuers called on behalf of the vendor attributed the fall to a general reduction in the price of properties which they say has occurred since the date of the contract. Whilst Mr. Gray agrees that there has been a fall perhaps a fall of 20% as suggested by Mrs. Hargaden he says that this fall has not applied to properties such as the house under consideration here which is an attractive house in the Dublin 6 district.
The principal witnesses on behalf of the purchaser maintained that the premises were in reasonably good condition in January, 1983. The purchaser and his wife gave evidence to this effect as did Mr. Ryan who was, as I have already mentioned, a potential purchaser at one stage. All confirmed the view expressed by Mr. Gray that the premises were in January, 1983, in a reasonable state of repair.
In Bank of Ireland v. Waldron [1944] I.R. 303 the question as to the party on whom the onus lies with regard to proving when or how deterioration of property occurred was dealt with by Overend J. (at p. 308) in the following terms:
“When it is proved to the satisfaction of the Court that the property sold has been damaged between the date of sale and the time when the purchaser gets possession, the onus is shifted to the vendor, whose duty it was to preserve the property, and it is for him to establish, if he can, what portion of the damage pre-existed the sale and what portion could not have been prevented by the exercise of due care and forethought on his part.”
Even accepting, as I do, that the principle aforesaid is applicable to the present case I am satisfied on the evidence that, having regard to the age of the premises and the lack of repair and maintenance during the years prior to the contract for sale, the plumbing and electric wiring in the premises were obsolete; the metal-framed windows had deteriorated and that the decoration of the interior was of a very low standard. Moreover, I accept that flooding had occurred in the premises on at least one occasion prior to the contract for sale and on balance I take the view that the dampness in the lower part of the wall of the livingroom is due to rising damp rather than the percolation of water through the ceiling. It is clear too that the dampness in the wall under the chimney-stack (which is reflected in a very high degree of dampness in the chimney breast in bedroom number 1) is due to an external defect not caused by the action of any vandal, squatter or other person residing in the premises. Mr. Doyle, an engineer called on behalf of the purchaser, expressed the view that it was due to a broken flashing.
Mr. Vincent Drum the quantity surveyor who gave evidence on behalf of the purchaser costed the repairs which he believes should be carried out at a sum of approximately £27,500. Mr. Forrest the civil engineering consultant called on behalf of the vendor costed the works which he regarded as necessary to restore the premises to their condition in January, 1983, at a sum of £2,480.
The law
Before considering further the conduct of the parties it may be convenient at this stage to examine the legal principles applicable to the matters in issue.
There is general agreement among the text book writers as to the nature of the obligations imposed on a vendor subsequent to the execution of a contract and before the completion of the sale. Such problems as exist in this regard relate not so much to the nature of the duty but as to its basis in law and its extent in practice.
A convenient statement as to the nature of the vendor’s duties under an open contract is to be found in Clarke v. Ramuz [1891] 2 Q.B. 456 at p. 459 by Lord Coleridge, C.J. in the following terms:
“It appears to be well established in equity that, in the case of a contract for the sale and purchase of land, although the legal property does not pass until the execution of the conveyance, during the interval prior to completion the vendor in possession is a trustee for the purchaser, and as such has duties to perform towards him, not exactly the same as in the case of other trustees, but certain duties, one of which is to use reasonable care to preserve the property in a reasonable state of preservation, and, as far as may be, as it was when the contract was made.”
Counsel for the vendor properly drew attention to the decision of the Supreme Court in Tempany v. Hynes [1976] I.R. 101 and to the fact that the majority decision in that case may cast some doubt upon the correctness of the assumption made by Lord Coleridge to the effect that a purchaser is entitled to the equitable estate in the property pending completion. In fact Kenny J. (delivering the majority judgment) said at p. 114: “He (the vendor) is not a trustee of the beneficial interest merely because he signs a contract.”
It must be said at once (as counsel fully recognised) that the very sentence quoted follows immediately a statement by that learned judge in which he recognises and reiterates the duties of the vendor in the following terms:
“A vendor who signs a contract with a purchaser for the sale of land becomes a trustee in the sense that he is bound to take reasonable care of the property until the sale is completed, but he becomes a trustee of the beneficial interest to the extent only to which the purchase price is paid.”
In his judgment (the minority judgment) Henchy J. at p. 109 affirms the duty of the vendor in the following terms:
“When a binding contract for the sale of land has been made, whether the purchase money has been paid or not, the law (at least in cases where the parties proceed to the stage of conveyance) treats the beneficial ownership as having passed to the purchaser from the time the contract was made: Gordon Hill Trust Limited v.Segall [1941] 2 All E.R. 379. From then until the time of completion, regardless of whether the purchase money has been paid or not, the vendor, in whom the legal estate is still vested, is treated for certain purposes (such as the preservation of the property from damage by trespassers) as a trustee for the purchaser.”
It would seem, therefore, that there is superficially, at any rate, a conflict between the authorities as to whether the duty to preserve imposed upon the vendor derives from the fact that he is a trustee for the purchaser or whether indeed the status of the vendor as trustee arises from the fact that such a duty is imposed upon him by law.
It seems to me that this conflict which in any event is not of fundamental importance is more apparent than real. In Tempany v. Hynes [1976] I.R. 101 the Supreme Court was considering the nature of the interest retained by a vendor subsequent to the execution of a contract and in particular whether such interest could be captured, in the circumstances of that case, by a mortgage created under the provisions of the Judgment Mortgage (Ireland) Act, 1850. What Kenny J. concluded in his sentence at the end of the penultimate paragraph on p. 114 of the judgment was that:
“Until the whole of the purchase money is paid, the vendor has in my opinion a beneficial interest in the land which may be charged by a judgment mortgage.”
In reaching that conclusion the learned judge was in fact recognising as had judges in many earlier cases that the trusteeship, if that is how it should be described, of a vendor is unorthodox in as much as he clearly has a significant beneficial interest perhaps with regard to occupation or interest as well as the potential right to have the property restored to him in the event of the contract being rescinded for one reason or another. In the circumstances it seems to me to be sufficient that subsequent to the execution of a contract, and whether or not all or part of the purchase price is paid, that the vendor has (subject to any particular bargain negotiated between the parties) the duty to use reasonable care to maintain the property in a reasonable state of preservation and that this duty, which is well established in law, derives from the fact that the purchaser has a significant interest in the property and is (I am assuming) precluded from the occupation and control of the property until actual completion.
The provisions of the contract in the present case and in particular the terms of what I have described as “the insurance clause” expressly provide that the property should be at the sole risk of the purchaser as to any damage from whatever cause arising after the date of the sale and that no claim should be made against the vendor for any deterioration or damage. Excepted from that exclusion is damage caused to the property occasioned by the “wilful neglect or default” of the vendor.
Whilst the words “wilful neglect or default” were traditionally used in contractual provisions dealing with the payment of interest and it is in that context that the expression has been subject to judicial scrutiny, I see no reason to conclude that the words should be interpreted differently merely because the action or inaction comprised therein would give rise to a different consequence when used in another context. Accordingly it seems to me that the comments of Bowen L.J. in Young v. Harston’s Contract (1855) 31 Ch. D. 168 at p. 174 are equally applicable to the present case:
“What does wilful default mean in a contract like this? The term “wilful default” though one in common use in such contracts is not a term of art and to pursue authorities with a view to defining for all time what is its meaning in a contract like this appears to me to press citation far beyond the point at which it ceases to be useful. Default is a purely relative term, just like negligence. It means nothing more, nothing less, than not doing what is reasonable under the circumstances not doing something which you ought to do, having regard to the relations which you occupy towards the other persons interested in the transaction. The other word which it is sought to define is “wilful”. That is a word of familiar use in every branch of law, and although in some branches of the law it may have a special meaning, it generally, as used in courts of law, implies nothing blameable, but merely that the person of whose action or default the expression is used, is a free agent, and that what has been done arises from the spontaneous action of his will. It amounts to nothing more than this, that he knows what he is doing, and intends to do what he is doing, and is a free agent.”
In other words it seems to me that wilful default is no more and no less than a formula by which the courts of chancery describe an intentional (as opposed to an unconscious or accidental) negligent act or omission.
The other important question of law involved in these proceedings relates to the right of the vendor to rescind the contract. There is no doubt but that the rescission clause is expressed in wide terms and purports to confer extensive powers on the vendor. On the other hand it is settled law – and rightly accepted as such by counsel on behalf of the vendor that there are restraints imposed on a vendor seeking to invoke a clause of this nature.
The most recent decision to which reference was made with regard to the construction and application of a clause of this nature was the judgment of Privy Council in Selkirk v. Romar Investments Ltd. [1963] 1 W.L.R. 1415. In that case, which arose by way of an appeal from the Supreme Court of the Bahama Islands, a purchaser sought evidence of the devolution of the ownership from one person who appeared to be the owner of the property in question to another. That matter was raised by way of requisition on title and it is sufficient to say that the Privy Council was satisfied that the requisition was entirely proper. The issue in the case was whether the vendor for his part was entitled to invoke the contractual right of rescission which was included in the contract for the sale of the premises in question. The way the court posed the question was whether “there was anything in the situation of the conduct of the parties to preclude the vendor from taking advantage of a contractual right which, ex facie, the contract had undoubtedly secured to him”. Viscount Radcliffe delivering the judgment of their Lordships explained the position (at p. 1422) as follows:
“Now, on what can the appellant rest his claim to set aside the respondent’s notice of rescission? It is plain enough that, so far as the terms of the contract go, the respondent is within its rights. Clause 3 (3) [the rescission clause] is as much a part of the various undertakings and stipulations that make up the total nexus of the parties’ agreement as any other of its clauses, and it is in fact a
stipulation that was included in the draft put forward by the purchaser. If a vendor, having stipulated for or been conceded such a right, is to be precluded from asserting it in any particular context, it must be by virtue of some equitable principle which enures for the protection of the purchaser; and it is not in dispute that courts of equity have on numerous occasions intervened to restrain or control the exercise of such a right of rescission in contract for the sale of land, despite what, on the face of the contract, its terms seem to secure for the vendor. It does not appear to their Lordships, any more than it did to the Judge who tried the action, that there is any room for uncertainty as to the nature of the equitable principle that is invoked in these cases. It has frequently been analysed, and frequently applied, by Chancery judges, and, although the epithets that described the vendor’s offending action have shown some variety of expression, they are all related to the same underlying idea, and their variety is only due to the fact that, as each case is decided according to the whole context of its circumstances and the course of conduct of the vendor, one may illustrate more vividly than another some particular aspect of that idea. Thus, it has been said that a vendor, in seeking to rescind must not act arbitrarily, or capriciously, or unreasonably. Much less can he act in bad faith. He may not use the power of rescission to get out of a sale “brevi manu” since by doing so he makes a nullity of the whole elaborate and protracted transaction.”
A similar view had previously been expressed by the Court of Appeal in England in Baines v. Tweddle [1959] Ch. 679 in which the conclusion was expressed by Lord Evershed M.R. (at p. 688) in the following terms:
“On the face of this condition [the rescission clause] the right appears to be unqualified; if a purchaser takes or makes any objection which the vendor is unable, or on the grounds of unreasonable expense, unwilling to remove, etc., then the vendor may rescind the contract. Naturally enough it has been the main burden of Mr. Sparrow’s argument for the vendor that this was the bargain which the purchaser made. It gave the vendor this apparently unqualified right of rescission and the purchaser must, accordingly, accept the consequences. I only venture, by way of comment on that, to remind the vendor that he on his part contracted to sell an unincumbered fee simple and nearly three weeks after doing so allowed the purchase money to be paid into the joint account. But this condition, which is one of considerable ancestry, though quite unqualified in terms, nevertheless has had a qualification undoubtedly imposed upon it by the decision of the Court.”
Lord Evershed then went on to quote Henn Collins M.R. in In re Jackson and Haden’s Contract [1906] 1 Ch. 412 as follows:
“As I have already said, numerous cases have been most carefully set before us, which I have had the opportunity of examining as they were read, and it seems to me that, in every case where the vendor was allowed to avail himself of a stipulation like this, there was always absent that element of shortcoming on his part which, though falling short of fraud or dishonesty, might be described as ‘recklessness’.”
Lord Evershed then went to quote (indirectly) from the decision of Rigby L.J. In re Deighton and Harris’s Contract [1898] 1 Ch. 458 at p. 464 as follows:
“It would not, in my opinion, be right here to enable a vendor to ‘ride off upon a condition to rescind which was obviously not framed with reference to any such case as that which has arisen’.”
Again in Baines v. Tweddle [1959] Ch. 679 Romer L.J. in his judgment also cited with approval from the judgment of Henn Collins M.R. in In re Jackson and Haden’s Contract [1906] 1 Ch. 412 the following passage at p. 421:
“Now what is the element that the Vice Chancellor is seeking for there which determines the case? It seems to me to be an element of something on the part of the vendor less than the law requires of him in such cases. It may stop short of fraud, it may be consistent with honesty; but, at the same time, there must be a falling short on his part he must have done less than an ordinary prudent man, having regard to his relations to another person, when dealing with him, is bound to do.”
As I say, counsel on behalf of the vendor properly recognises that a vendor does not have an absolute right to invoke the terms of a rescission clause. Instead it is argued on behalf of the vendor in the present case that his purported rescission was reasonable and that it was not arbitrary, capricious or based on any reckless conduct of the vendor or his legal advisers. In addition the vendor is entitled to distinguish the rescission clause in the present case from some of the earlier versions of that clause which did not afford a purchaser a locus poenitentiae. The clause in the present case coupled with the notice given by the vendor afforded the purchaser an opportunity to recant by withdrawing his insistance on a claim for damages.
The vendor relied on (among others) the decision in Duddell v.Simpson (1867) 1 Eq. 578 in which Turner L.J. commented upon a rescission clause in the following terms:
“I think that in a case where the vendor annuls the contract on the ground of unwillingness, he must show some reasonable ground for unwillingness; thus, for instance, he may show that if heproceeds to comply with a requisition, he will be involved in expenses far beyond what he ever contemplated, or be involved in litigation and expense which he never contemplated, and for avoiding which he reserved to himself the power of annulling the contract.”
Again reference was made to Re Glenton and Saunders to Haden (1885) 53 L.T. 434 from which it may be convenient to cite in full the brief judgment of Bowen L.J. as follows:
“It seems to me that there are in this case two questions to be answered: (1) Did the purchaser insist on his requisitions? (2) Had the vendors a reason for refusing to comply? With regard to the insistence, it is plain to me that there was, on the part of the purchaser, an unequivocal adhesion to a demand which had been refused as, for instance, in the case of the plans. Then what kind of reason must lie at the bottom of non-compliance? It is a question which often arises, but not in every case. The authorities, ending with re Dames to Wood show that something is to be read into a contract of this kind. But here it is a matter of construction of the contract. Here the contract expressly states the reasons to be expense or any other reason. The question is not whether the purchaser was entitled to make these demands; but whether the vendors had honest and bona fide reasons for non-compliance. Mere caprice is not sufficient. But if there is a reason it need not be communicated by the vendor to the purchaser; that would be putting a new term into the contract. I agree therefore with the decision of the other Lords Justices, and I think that one good reason would be sufficient.”
In the present case the point taken by the purchaser was not in form at any rate either an objection or a requisition whether as to title or as to assurance. Nor did it relate to any matter or thing existing at the date of the contract of sale. It was a complaint by the purchaser that the vendor had failed in the duty which she owed to him to maintain the property pending the completion of the sale. To that extent it may be said to be a complaint which was incidental to the sale. Nonetheless I would find it very hard to accept that a complaint relating to such a wrongdoing was within the contemplation of the parties when the rescission clause was framed and that conclusion of itself would (on the basis of the decision of Hall V.C. in Bowman v. Hyland (1878) 8 Ch. D 588) justify rejecting the vendor’s contention herein.
However, as the case was fairly argued before me on behalf of the vendor that she had acted reasonably in her response to the conduct of the purchaser which was in the circumstances as they developed unreasonable, and that the purchaser effectively argued for the converse, I would prefer to decide the case by resolving that dispute.
It could hardly be suggested that a purchaser who insists upon a right to be compensated for damage to property in which he is interested is acting unreasonably. What is said on behalf of the vendor is that the purchaser acted unreasonably in failing (in all of the circumstances of the case) firstly, to specify or quntify the damages to the premises of which he complained and secondly, to co-operate in the solution ultimately proposed on behalf of the vendor, namely, that the contract would be completed without delay and the issue as to damages decided at a later date but on the basis that a substantial part of the purchase price would be set aside to meet any claim under that heading.
Whilst the proposal aforesaid made on behalf of the vendor was an eminently reasonable and practicable one there was no obligation on the purchaser to adopt it. There is no doubt but that the vendor and her legal advisers by the time the offer was made not merely suspected but had become convinced that the purchaser was not acting and had not acted in abona fide manner and that his refusal to co-operate merely represented the culmination of an unhelpful approach to the problems facing the parties. The vendor suspected that the purchaser never had adequate finance with which to complete the purchase. Investigations by the solicitors on behalf of the vendor suggested that the purchaser did not intend to occupy the premises but sought to have the same demolished and the site cleared so that it could be developed as flats. There was a period during which an appeal was pending to the planning board and the vendor inferred that the purchaser was seeking to delay the transaction pending the decision of that body. It appears that the suspicions of the vendor with regard to the finances of the purchaser were unfounded. Convincing evidence was tendered at the trial as to the financial facilities available to the purchaser to enable him to complete the sale. On the other hand there is no doubt but that the purchaser sought permission to demolish the premises and applied for planning permission for their subsequent development and moreover caused these applications to be made under a name other than his own. However sinister such transactions might appear I cannot see that in any way they affected the rights of the vendor or in fact impinged upon the transaction between the parties. Moreover it must be recognised that if the vendor had become suspicious of the approach being taken by the purchaser, the purchaser for his part had every right to be concerned about the delay on the part of the vendor which had in fact occurred and it would not be surprising that the purchaser and his legal advisers would approach the proposals ultimately made on behalf of the vendor with some hesitation having regard to the context in which the same arose.
At the end of the day the position is this: under the terms of the contract for sale and in accordance with established legal principles the purchaser is entitled to be paid a substantial sum by the vendor by way of compensation for the vendor’s wrongdoing. Whilst in my view it is entirely understandable that the vendor should wish to escape this liability I could not accept that it would be reasonable for a vendor to invoke a rescission clause so as to enable him to escape a liability which was caused by and indeed consisted of his or her wilful default.
In these circumstances I am satisfied that the rescission clause was not validly or effectively invoked.
A further point of law which arose in the course of the proceedings related to the Civil Liability Act, 1961. It was pointed out on behalf of the vendor (and indeed accepted on behalf of the purchaser) that a “wrong” is defined in s. 2 of the Civil Liability Act so as to include “a tort breach of contract or breach of trust” and accordingly that the damages otherwise recoverable by the vendor would fall to be reduced to the extent to which the same were caused by his own negligence or want of care. Whilst there was no dispute about the correctness of that proposition it is specifically adverted to as questions with regard to contributory negligence less frequently arise in relation to what are ordinarily described as “chancery matters”.
The conduct of the parties
The vendor took no steps to preserve or maintain the property. As already stated she lived with her immediate family at all times in England. It does not appear that the vendor retained the services of an estate agent to advise her in relation to the sale or the preservation of the property pending the completion thereof. Her solicitor carries on business from Longford so that he would not have had occasion to inspect the property (nor indeed would he have had any responsibility for so doing). The vendor did have a number of relatives who lived in or near Dublin and in giving evidence her husband (the vendor herself did not give evidence) did indicate that some of the relatives and neighbours might have been expected to “keep an eye” on the premises. It was quite clear, however, that the vendor did not specifically ask any particular person to inspect the premises and in fact Mr. Thomas did recognise or explain that there was not a great deal that he or his wife could do. The extent to which the vendor and her husband were uninformed as to the position with regard to the premises was indicated by the fact that Mr. Thomas was in the first instance under the impression that his sister-in-law who lived in Navan might have interested herself in the premises but he subsequently recognised that she was probably away from Ireland during the period when the premises were vacant.
Some cousins of the vendor did in fact visit the premises irregularly and a close neighbour Mr. Keogh not only visited the premises from time to time, apparently on his own initiative, but did keep the premises under observation and in fact interested himself very much in the question as to how the premises might be developed by the intending purchaser. It is alsoclear that the vendor neglected to disconnect the public services. As it turned out it seems particularly unfortunate that she failed to disconnect the water, gas and electricity supply to the premises.
No doubt the conduct of the vendor may be seen in the context that she anticipated, and had in fact expressly provided, that the sale would be completed within a period of some four weeks. However, the delay in completion and the information which was undoubtedly communicated to her in the Autumn of 1983 that the premises had been vandalised did not result in any effective action being taken at this stage either. It is common case that damage continued thereafter and there appears to have been significant damage caused in the Autumn of the following year. Indeed it is clear from the photographs put in evidence that the final vandalisation of the plumbing and the theft of the copper cylinder occurred only in the months prior to the hearing of the action. Again it is common case that the premises were occupied by one or more squatters apparently of a reasonably benign nature over considerable periods. It does appear that the vendor or her agents did arrange to prevent further flooding: after the first report of damage all of the services were disconnected. In addition the vendor arranged to have some repairs carried out although the suitability and adequacy of those repairs was a matter of controversy between the parties.
Evidence was given by the estate agent and the solicitor on behalf of the purchaser (despite the objection on behalf of the vendor) as to the nature of the steps which should be taken to preserve property pending the completion of a sale. It was recommended that the vendor should where practicable continue to reside in the premises but that where that could not be done, steps should be taken to preserve the appearance of a house that is lived in. It was recommended that the post should be removed from the letter-box; the garden should be kept up; a car should be parked in the driveway from time to time; a timing device should be installed so as to switch on the lighting at intervals and above all the local Gardaà should be informed of the fact that the house was being vacated. Mr. Gray, the estate agent, went on to suggest that it might be desirable to retain the services of persons described as “house minders” to inspect the premises at regular intervals. He estimated the costs of that service at £2,000 per annum.
Whilst I would not accept that a vendor owes a purchaser the duty to engage professional “house minders” to protect vacant premises pending the completion of a sale (although this is an arrangement which the parties might be well advised to provide for in a special condition of sale in that behalf) it does seem to me that a vendor would be failing in the duty which he owes to the purchaser under conditions such as exist in the present case where first he fails to disconnect the public services which are an obvious source of danger and damage and secondly neglects to make arrangements to have the premises inspected at regular and frequent intervals (whether by a friend, relative or employee) to ensure that no damage has occurred and to take necessary remedial action if the premises are damaged.
In the circumstances the complaint that the vendor was guilty of wilful default has been fully established.
Perhaps a surprising feature of the case is the fact that the purchaser was a frequent visitor to the premises subsequent to the signing of the contract of sale. At an early stage he obtained the key from a relative of the vendor for the purpose of carrying out a brief inspection. That key was subsequently returned. However Mr. Keogh, the neighbour to whom reference has already been made, gave evidence of having seen Mr. Lyons entering the premises on a considerable number of occasions. Whilst Mr. Lyons seemed slow to accept the evidence of Mr. Keogh in that regard I have no doubt at all but that Mr. Lyons was a constant visitor to the premises. He did admit that he entered the premises through the back door and that he had no trouble in gaining access to the premises and he left them in such a manner that any other person could enter the premises with equal ease.
I fully accept the argument made on behalf of the vendor that the purchaser too had an obligation to exercise reasonable care in his own interest to preserve the premises of which he was a beneficial or potential owner. From the vendor’s point of view the difficulty is to establish what action the purchaser could have taken to protect the premises. It was suggested, for instance, that the purchaser should have insured the premises and maintained the insurance notwithstanding the problems which arise in obtaining cover for premises which are vacant. Again it was urged that the purchaser aggravated the problem by failing to define the work required to restore the premises to their pre-contract condition. And in general terms it was argued that the purchaser had failed to mitigate his loss, in particular by accepting the offer made by the vendor to complete the sale on the terms already mentioned.
The real difficulty in bringing home an allegation of contributory negligence to the purchaser is the fact that there is so little that the purchaser could do as a matter of law to the premises themselves. He was not in occupation of the premises and would not have been entitled to interfere with them. I would have had no hesitation in finding him guilty of negligence and apportioning a substantial part of the blame to him if knowing of the damage to the premises he had taken no steps to inform the vendor or her agents of it. But that is not the present case. However, in the peculiar circumstances of this case where the purchaser was, as I am satisfied he was, a frequent trespasser on the premises and took no steps whatever other than the recorded complaints which he made to the vendor I think he must bear some small degree of blame. Certainly it is an unusual situation but I take the view that as the purchaser was prepared to enter the premises without the authority of the vendor it was negligence on his part to leave the premises after such visits without taking any steps to secure the premises or at least to send a specific notification to the vendor or her solicitor of the particular fact that he had visited the premises and of the condition in which he had left them. In these circumstances I think it would be appropriate to find the purchaser guilty of contributory negligence and to apportion ten per cent of the blame to him and the remaining ninety per cent to the vendor.
The damage
As I have already mentioned there is a substantial difference between the vendor and the purchaser as to the cost of carrying out the necessary repairs. The purchaser measures the cost at £27,500 and the vendor at £2,480. I can say that I believe that Mr. Forrest, the engineer on behalf of the vendor, was mistaken when he excluded from the schedule of repairs a number of items on the ground that the damage or deterioration had occurred prior to the date of the contract for sale. In particular I believe that the damage to the ceilings in many of the rooms was caused by flooding which occurred subsequent to the date of the contract. Again in this regard I prefer the evidence of Mr. Drum to the effect that these ceilings will require to be replaced. On balance I was not convinced by Mr. Forrest’s evidence that the defects could be remedied by adopting a less expensive procedure. On the other hand I was not satisfied on the balance of probabilities that the present condition of the iron framed windows was due to a deterioration or damage which took place subsequent to the contract date. It seems to me that the greater part of this damage took place during the many years between the date when the same were first installed and the execution of the contract for sale. Another item to which specific attention may be drawn is a claim for the cost of reconnecting the public services. I would not regard this as an appropriate charge. In fact the evidence is, as I have indicated, that these services should be disconnected so that the reconnection is a charge which will properly fall on the purchaser.
Again, I have already recognised that there was a considerable conflict of evidence as to the extent and cause of the dampness which now affects the premises. I have already pointed out that I would accept that some of this dampness is attributable to rising damp for which the vendor has no responsibility and more is due to some defective lead flashing in respect of which no responsibility was brought home to the vendor. In those circumstances it would be wrong to lay the full cost of replastering work at the door of the vendor.
Finally, there is the matter of decoration. I accept that the premises were in a poor state of decorative repair at the date of the contract for sale and that the condition of the premises both as regards electric wiring and plumbing were such as one might expect in a fifty year old house which had not been renovated for many years. In those circumstances to allow as a valid claim the cost of redecoration in full would involve fixing the measure of damage at a sum which in the words of Henchy J. in Munnelly v. Calcon
Limited [1978] I.R. 387 at p. 401: “. . . would enrich the plaintiff excessively and unnecessarily and would mulct the defendants unreasonably.”I do not believe that it is practicable or desirable to review each of the items claimed on behalf of either party. I have already indicated that I would allow the cost of replacing the ceilings. In addition I would allow a substantial fraction of the cost of replastering. Effectively too the vendor must bear the cost of replacing the plumbing and the electric wiring. In addition some provision must be made for making good the works aforesaid. Having reviewed the figures submitted to me in the light of those conclusions it seems to me that the appropriate measure of damages is the sum of £12,700 (to include V.A.T.) and then reducing this amount by ten per cent. On the apportionment of fault the total sum is reduced to £11,430.
Subject to any submissions to be made on behalf of the parties it would seem then there should be an order for a specific performance on terms that the purchase price should be reduced by the figure aforesaid.
James Airlie and Eamonn Keenan v Anthony C. Fallon
[1976-7] I.L.R.M. 1
( Hamilton J)
27 January 1976
The plaintiffs in this action claimed
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1. The rescission of an agreement made 15 November 1973 for the sale by the defendant to the plaintiffs for the sum of £95,000 of the property described in the general endorsement of claim on the plenary summons herein and in the conditions of sale hereinafter referred to.
2. The return of the deposit of £20,000 paid by the plaintiffs to the defendant on foot of the said agreement for sale and the sum of £4,750 auction fees also paid by the plaintiffs on foot of the said sale together with interest on the said sums at the rate of 13 per cent per annum from 15 November 1973 to date of payment.
3. Damages for misrepresentation, breach of warranty, fraud and deceit.
4. All necessary accounts and inquiries.
In the statement of claim delivered on their behalf after reciting the facts contained in paragraphs 3 to 5 inclusive alleged that:
8. On the said 15 November 1973 at 10 Lower Ormond Quay aforesaid and prior to the said auction of the said property the defendant in order to induce the plaintiffs to enter into and complete the agreement aforesaid and to pay the money aforesaid, expressly warranted to the plaintiffs, through the said John J. Quinn, that the turn-over of income derived from the said property during the immediate preceding financial year was between £60,000 and £65,000 and that, in his annual return of income to the Revenue Commissioners, he the vendor had returned a turn-over in the region of £60,000 to £65,000 in respect of the property.
9. The plaintiffs, through the said John J. Quinn, were induced to and did in fact enter the said agreement, execute the said memorandum and paid the said money by and on the faith of the said representation and warranty.
10. The plaintiffs have since discovered that the fact is that the said representation was untrue and the said warranty broken in that, the turn-over of income derived from the said property during the immediate preceding financial year was not between the sum of £60,000 and £65,000 but on the contrary, did not exceed the sum of £50,000.
11. The defendant made the said representation and gave the said warranty fraudulently and either knowing that the same was false and untrue or recklessly and not caring whether they were true of false.
12. The plaintiffs, on ascertaining that the said misrepresentation and warranty were untrue, repudiated the said agreement by letter in writing dated 8 March 1974.
The plaintiffs proceeded to allege that:
By reason of the foregoing, the said property is worthless or worth far less than the £95,000 which the plaintiffs have agreed to pay therefor, whereby the plaintiffs and each of them have incurred unnecessary expense and have suffered and are continuing to suffer serious loss and damage including ( inter alia) the loss of the said deposit of £20,000 and the auction fees of £4,750 paid by the plaintiffs as aforesaid and the interest thereon.
In his defence, the defendant: *3
1. Denied that he either represented or warranted to the plaintiffs or either of them that the turn-over of income derived from the said property during the immediate preceding financial year was between £60,000 and £65,000 or that in his annual return of income to the Revenue Commissioners, the defendant had returned a turn-over in the region of £60,000 to £65,000 in respect of the property.
2. Further denied that he quoted to the plaintiffs or either of them or to any agent on their behalf any figure in relation to turn-over of the premises in question.
He alleged that:
If he or anyone on his behalf mentioned any figure in relation to turn-over (which is denied) he denied that the same constituted a warranty or condition relating to the contract in question.
And, without prejudice to the foregoing, he denied that the statement made by him or on his behalf was untrue.
He denied that there was the alleged or any misrepresentation, a breach of warranty, a fraud or deceit on the part of the defendant or on the part of any of his servants or agents.
He also denied that the plaintiffs or either of them were induced to enter the said agreement by virtue of any statement made by or on behalf of the defendant in relation to turn-over figures for the premises in question and denied that the value of the premises was reduced as alleged or at all and that they suffered the alleged or any loss or damage.
By way of counterclaim the defendant claimed:
(a) A declaration that the sum of £20,000 being the deposit paid by the plaintiffs is forfeited to the defendant and that the defendant is absolutely entitled thereto.
(b) Specific performance of the said agreement.
(c) Alternatively an order that the defendant is at liberty to re-sell the said property.
(d) Interest on the outstanding purchase money and
(e) Damages for breach of contract.
A reply and defence to the counterclaim was delivered on behalf of the plaintiffs and the matter was set down for hearing and the action was heard by me in the first instance on 12 and 13 December 1974.
It was not an issue in the proceedings that:
(a) At a public auction held at 10 Lower Ormond Quay in the City of Dublin on 15 November 1973 by Messrs Archbold Corry & O’Connor, auctioneers, Dublin 1, John J. Quinn of Messrs F.J. Gearty & Company solicitors, Longford was the highest bidder and was declared the purchaser of the said property at the sum of £95,000.
(b) He the said John J. Quinn bid for and purchased the said property as agent *4 for and on behalf of the plaintiffs and each of them.
(c) By a memorandum in writing dated 15 November 1973 executed by the said John J. Quinn for and on behalf of the plaintiffs and by R.E. Sexton for and on behalf of the defendant the plaintiffs agreed to complete the purchase of the said property in accordance with the conditions annexed to the said memorandum and the defendant confirmed the sale thereof.
(d) The plaintiffs paid to the said auctioneers the stakeholders the sum of £20,000 by way of deposit and the sum of £4,750 auctioneers fees. By letter dated 8 March 1974 the plaintiffs purported to repudiate the said agreement and requested the return of the deposit and the auction fees paid.
What was in issue at the hearing was:
(a) Whether the defendant represented and or warranted to the plaintiffs’ agent that the turn-over of income derived from the said property during the immediate preceding financial year was between £60,000 and £65,000 and that the defendant had returned such turn-over in his return to the Revenue Commissioners.
(b) Whether such representation or warranty (if given) was made or given to induce the plaintiffs to enter into and complete the said agreement.
(c) Whether they were in fact induced to enter the said agreement by the alleged representation and warranty.
(d) Whether the representation or warranty was false.
(e) If it were false was it made fraudulently or was it made by the defendant well knowing that the same was false and untrue or recklessly and not caring whether they were true or false and
(f) Whether after the plaintiffs had learned that the turn-over was not as represented or warranted, the payment of the balance of the deposit amount by the plaintiffs’ solicitor amounted to a ratification of the agreement.
On all these matters there was a serious conflict of evidence and because of this regrettable conflict it is necessary for me to review the evidence in some detail.
The first-named plaintiff James Airlie stated that he was on friendly terms with the second-named plaintiff Eamonn Keenan and that for some time prior to November 1973 they had decided to go into business together as partners if they could acquire a suitable business which was big enough.
He stated that they decided to buy a public house if a suitable premises came on the market and had been keeping a look out to see if a suitable premises became available. They had discussions with regard to price and were in a position to go up to £100,000 as partners. Mr Keenan could go to £60,000 if he were buying on his own. He stated that he ascertained that the going price on a licensed premies would be roughly one and a half times the turn-over.
He heard that the defendant’s premises were coming on the market and stated that he knew the premises and generally the type of trade carried on therein.
*5
When he heard that the premises were for sale he told his wife to ring Mr Gannon, the solicitor for the defendant, to inquire about turn-over. She was told to contact the auctioneers in Dublin. He stated that the turn-over was important to him in determining price.
He stated that he instructed Mr Gearty to act in the matter and to ascertain full particulars including turn-over from the auctioneers. He was aware of the fact that Mr Keenan had visited the auctioneers in Dublin in an attempt to ascertain the turn-over and when he went to the auction he had a rough idea that the turn-over was in the region of £50,000. He stated that when going to the auction he was prepared to pay up to £60,000 on the face value of the premises. Without turn-over figures he was not prepared to bid more. In addition he was concerned as to whether or not he could buy out the freehold of the premises.
Prior to the auction he had lunch in the Ormond Hotel with Mr John Quinn solicitor, a member of the firm of F.J. Gearty & Co., his solicitors who was to bid on his behalf.
He told Mr Quinn that it was important to ascertain the turn-over but that he was to bid up to £60,000 if he did not obtain particulars of the turn-over.
At the auction he and Mr Quinn sat apart. The defendant was present at the auction which was conducted by Mr Sexton of Archbold, Corry & O’Connor. The particulars of the property were read out by Mr Sexton and the conditions of sale read out by a solicitor representing Mr Gannon.
Mr Quinn then asked about the title and subsequently about the turn-over and records.
In reply to the questions about turn-over Mr Sexton said ‘No, that he had nothing’. Then Mr Airlie alleges Mr Fallon stood up and spoke across the room to Mr Quinn. He stated that the turn-over was between £60,000 and £65,000 and that this was his return to the Revenue Commissioners.
Mr Airlie stated that having heard this he was satisfied and gave the signal to Mr Quinn to proceed with the bidding. Mr Airlie then described the course of the auction. When the bidding approached £70,000, there was a break for a short while during which he had a discussion with Mr Quinn in a room provided by the auctioneer during the course of which he expressed satisfaction with the turn-over figures and gave him further instructions.
When they returned to the auction room he and Mr Quinn sat together. The bidding began again and after this the only other bidder was Mr Rochford, solicitor.
There was a further break after which the property was put on the market. He stated that this happened when the bidding was at £80,000 or £90,000.
The property was eventually knocked down to Mr Quinn at £95,000.
He stated that he authorised Mr Quinn to bid up to £95,000 because of the figures given by Mr Fallon on turn-over, that without figures as to turn-over he would have not authorised a bid of much more than £60,000 and if the figure *6 for turn-over had been between £40,000 and £50,000 he would have been thinking of £70,000.
He stated that he and Mr Keenan would have experienced no difficulty in raising the £95,000.
He stated that he learned the turn-over was not correct and gave certain instructions to Mr Gearty.
Before that he had visited the defendant on the Saturday after the auction, was shown over the premises by the defendant and was told by him that the turn-over was genuine.
He stated in January 1974 Mr Fallon called to his house and told him that the turn-over was genuine and that he could show proof but he never did.
Cross-examined by Mr Lynch he denied that there was anybody involved in the transaction but himself and Mr Keenan, denied that he had made up his mind to buy the premises before he went to the auction for the sum of £70,000 or more, that he had given instructions to Mr Quinn to that effect, that Mr Fallon’s only contribution was to answer the question with regard to the title and that the property was not put on the market until the bidding had reached £94,000. He stated that Mr Rochford had forced the bidding up of £95,000.
He was then cross-examined by Mr Lynch in regard to the circumstances in which the cheque for £24,750 was cancelled but denied that this was done because they had difficulty in producing the money. The cheque was cancelled by arrangement with the auctioneers.
He denied that the sale was repudiated because they could not raise the money necessary to complete the sale and buy out the freehold and alleged that they could bid up to £95,000 or £100,000 on any place and then they had the finance available.
Mr Padraig Gearty a partner in the firm of F.J. Gearty & Co. then gave evidence that his firm were instructed by Mr Airlie on 5 November 1973 and that he made a note of this attendance at the time. This note showed that he was to ascertain from Archbold, Corry & O’Connor ‘the turn-over per year, of books’. His secretary contacted the auctioneers and ascertained that no figures were available. This evidence is relevant to show that Mr Airlie was concerned to ascertain the turn-over of the premises.
The second-named plaintiff Eamonn Keenan then gave evidence.
He stated that from his experience turn-over was a relevant factor in determining price and that when he heard the defendant’s premises were for sale he visited the offices of Archbold, Corry & O’Connor in Dublin and had a discussion there about turn-over. He was given no exact figures and was told that there were no figures available. He states however that there was a discussion about figures in the region of £50,000.
He had no discussion with any other person about figures and left the negotiations to Mr Airlie. He was prepared to go to £60,000 on the basis of the *7 appearance of the premises.
He then gave evidence with regard to the property and finance available to him to complete the purchase.
Upon cross-examination by Mr Lynch he denied that his brother in the U.S.A. was involved in any way in this transaction and that it was between him and Mr Airlie. He admitted he was informed in Archbold, Corry & O’Connor’s office that there were no figures available, that the premises were being sold as premises and not on figures. He denied that on the basis of a turn-over of £50,000 he was budgeting on a purchase price of up to £90,000.
He stated that the limit of Mr Airlie’s authority to bid at the auction without figures was £60,000.
He further stated that the cheque given for the deposit of £24,750 was drawn on his account, he had £10,000 in the bank and £15,000 in a building society.
He agreed with Mr Lynch that it would be necessary to buy out the fee simple in order to obtain the loan which Lombard and Ulster Bank had agreed to give.
He agreed with Mr Lynch that the owner of the fee simple was asking for more money than he had anticipated but denied that he experienced any difficulty in financing the transaction.
Mr John Quinn a solicitor working with Mr F.G. Gearty & Company attended the auction on behalf of the plaintiffs. He had been instructed in this regard by Mr Padraig Gearty on the previous day.
On receipt of these instructions he contacted the office of J. Delany Gannon & Company the solicitors for the vendor, the defendant herein, and obtained some particulars with regard to the title. On that evening he had a discussion with Mr James Maguire the owner of the lessor’s interest with regard to the purchase of his interest and portion of the lands. He subsequently informed Mr Gannon of the nature of these discussions.
He stated that in accordance with his instructions he met Mr Airlie in the Ormond Hotel and lunched with him. He told him the position with regard to the fee simple interest and then asked him what figure he was prepared to bid for the premises. He was told by Mr Airlie that ‘he must question and find out particulars of the turn-over’. He agreed to do this. Subsequently he spoke to the Lombard and Ulster Bank, explained the position about this superior interest and was told to go ahead on the basis that they would provide the agreed finance.
After that discussion Mr Airlie told him to look for particulars of the turn-over and to go to £60,000/£65,000 if the turn-over was in the region of £40,000 to £50,000.
Mr Quinn again endeavoured to contact Mr Gannon but failed to do so.
He then described the conduct of the auction. Mr Sexton read the particulars of property and Mr Michael Conroy read out the conditions of sale.
He (Mr Quinn) then questioned Mr Conroy about the leasehold interest and asked whether there was a right to buy out the lessor’s interest. Mr Conroy said *8 he did not know and Mr Fallon intervened and stated that the freehold interest was readily available.
Mr Sexton then gave a description of the property and its potential and then asked for bids.
Mr Quinn then stood up and asked were there any books or records or any indication as to the turn-over of the business.
Mr Sexton stated that there were no figures available and that you ‘take the property’.
Mr Quinn stated in evidence that this reply did not satisfy him or comply with his instructions and that he remained standing.
He stated that after a short while Mr Fallon stood up, turned around and stated, to the best of Mr Quinn’s recollection that ‘the figures that he had returned to the Revenue Commissioners for last year were in the region of £60,000 to £65,000 or a little more’. Mr Fallon then sat down and Mr Sexton asked for bids.
Mr Airlie then signalled Mr Quinn to proceed.
Mr Quinn then gave an account of the bidding at the auction.
When the bidding approached £70,000 there was an interval during the course of which he had a discussion with Mr Airlie.
The last person to bid before the interval was Mr Rochford.
When he returned to the auction room Mr Airlie sat beside him. The bidding was re-opened by Mr Rochford. After that the bidding was between Mr Quinn and Mr Rochford.
Subsequently there was another interval while the auctioneer decided whether the property was to be put on the market.
The property was put on the market and Mr Rochford’s final bid was either £94,500 or £94,750 and the property was knocked down to Mr Quinn at £95,000.
Mr Quinn gave evidence with regard to the payment of the deposit and the arrangement made with regard to the cheque. In pursuance of that arrangement he sent an office cheque for £10,000 on 19 November 1973 and subsequently agreed deferment of payment of the balance.
Mr Quinn was cross-examined by Mr Walsh and stated that he was reasonably optimistic about buying out Mr Maguire’s interest and was not aware of the exact agreement between Mr Airlie and Mr Keenan.
He was cross-examined by Mr Walsh about the extent of his authority to bid up until the time of the first interval after which Mr Airlie sat beside him.
In reply to Mr Walsh he stated that he was quite clear that Mr Fallon intervened after he had asked the question about the turn-over, that he was quite clear about the figures given by Mr Fallon and he further stated that he had no doubt but that Mr Sexton did not mention a figure at the auction and was absolutely clear that Mr Fallon did.
John Murphy an auditor and accountant practising at Glack, County Longford then gave evidence.
*9
He was accountant both for Mr Airlie and Mr Fallon. He stated that he dealt with Mr Fallon’s income tax affairs for many years. He was not supplied by Mr Fallon with turn-over figures in respect of income tax liability but was in connection with turn-over tax.
He prepared the said accounts for the two years ended 30 September 1973 for submission to the Revenue Commissioners.
The turn-over for these two years was £32,000 odd, £12,000 for the first year and £20,000 for the second year. These accounts were approved by Mrs Fallon who looked after the accounts on behalf of her husband.
In reply to Mr Lynch, Mr Murphy stated that the Tuesday after the auction he gave Mr Airlie the impression that the turn-over in respect of the premises would not be as high as £50,000 and was about £40,000.
The first witness called on behalf of the defendant was Patrick O’Doherty a member of the firm of Archbold, Corry & O’Connor who had handled the sale of the premises up to the date of the auction and who was present at the auction.
He stated that there were no trading figures given or available. He had been informed by the defendant that there were no trading figures. They received numerous inquiries about trading figures. Each inquirer was told that there were no audited or any type of figures.
The auction was conducted by Mr Sexton who stated that they were selling the property as it stood and that they had no figures.
He remembered Mr Quinn intervening and asking whether the fee simple could be purchased and Mr Fallon replying ‘Yes’.
Mr Quinn then asked about the turn-over. Mr Sexton replied ‘We are not selling this on turn-over. We have got no figures’.
He had no recollection of Mr Fallon intervening or saying anything to Mr Quinn about the turn-over.
In reply to Mr O’Donovan he stated that Mr Sexton may have mentioned a figure and could have mentioned a figure of £50,000 or £60,000 for premises like these.
Mr Robert Sexton who conducted the auction then gave evidence.
He stated that he was aware of the fact that the turn-over was not available in respect of the property and that it was not proposed to provide them at any stage.
In describing part of the property at the auction he mentioned a potential figure for turn-over and had in mind a figure of £1,000 to £1,400 per week.
After raising a question with regard to the fee simple which was dealt with by Mr Fallon, Mr Quinn then asked about the turn-over.
Mr Sexton stated that he intervened just as Mr Fallon was speaking and stated that he had no figures. He stated that he had no clear recollection of Mr Fallon intervening in reply to Mr Quinn’s question.
In reply to Mr O’Donovan he stated Mr Fallon could have said something in *10 reply to Mr Quinn’s question which he did not hear or which he could not remember.
The defendant then gave evidence and stated that in 1973 he decided to sell the property at Roosky if he could obtain a proper price.
He entrusted the sale of the property to Messrs Archbold Corry & O’Connor with a reserve price of £120,000 which immediately prior to the auction he reduced to £100,000.
He made it clear to the auctioneers that he had no figures and that the sale would have to be without figures.
He attended the auction on 15 November 1973 and remembered Mr Quinn raising the question about the fee simple and his reply to same.
He remembered Mr Quinn asking about the turn-over but stated that Mr Sexton declared that the property was not being sold on figures. He stated that he did not intervene or say anything.
He stated that he did not signal to Mr Sexton.
He stated that when the bidding had reached around the £90,000 mark he agreed that the premises should go on the market.
He stated that after the auction he did not know that any question was being raised about the turn-over until the day before he was due to leave the premies around 28 February 1974.
He stated that he had no idea of the actual turn-over in November 1973.
In reply to Mr O’Donovan he specifically denied that the question of turn-over was discussed by him with Mr Airlie on the Saturday after the auction when Mr Airlie visited the premises.
He reiterated that the property was on the market on the day of the sale without figures and denied that he had mentioned any figure in an attempt to boost the auction.
Mr Conroy, solicitor attended the auction on behalf of Mr Gannon but his recollection of the events of the auction was understandably hazy and his evidence was not of any assistance to the court.
Patrick Hanley a brother-in-law of the defendant also attended the auction and gave evidence.
He stated that when Mr Quinn asked him about the turn-over he believed that the question was answered by Mr Sexton and that he said the turn-over was in the region of £50,000 to £60,000. He also said that Mr Sexton made it clear that the premises were being sold as they stood.
He stated that to his knowledge Mr Fallon did not intervene in reply to Mr Quinn’s question with regard to the turn-over. He did not hear any reference to the Revenue Commissioners.
Donal Fallon who was present at the auction with his father the defendant stated that the only time his father spoke at the auction was when he spoke on the subject of the lease to Mr Maguire.
*11
Mr Martin Larkin who was present at the auction with Mr Hanley and who is a nephew of Mr Fallon stated that he had a vague recollection of Mr Fallon saying something about a leasehold but that he spoke only once.
Mrs Teresa Fallon in the course of her evidence stated that when she and her husband decided to sell the premises they decided that they were never going to sell it on trading figures, that they never furnished trading figures to the auctioneer and that she first heard that there was some dispute about them on the last day of February 1974.
In reply to Mr O’Donovan she stated that the turn-over figures were not discussed by her with her husband when they decided what figure they would ask for the premises.
They decided to sell without figures as figures would not do justice to the premises.
Mr James Maguire then gave evidence of his discussion with Mr Quinn.
Both Mr Thomas Gannon and Mr Gerard Gannon gave evidence and were cross-examined in regard thereto. It is not necessary for me to review that evidence as it does not affect my decision.
The evidence has been reviewed by me at some length because of the conflict therein in regard to the matters fundamental to this case. At the conclusion of the case I reserved judgment so that I could determine which account was the more probable because I did not accept that any witness was deliberately lying.
Before I was in a position to deliver my judgment I was requested by counsel on behalf of the plaintiffs to re-enter the matter for the purpose of hearing evidence with regard to and submissions on a matter which had been overlooked at the trial and in my desire to do justice between the parties I acceded to this request.
Before dealing with this matter I consider it desirable to declare my findings on the foregoing facts. It is only right that I should declare that I have had some considerable difficulty in this regard.
However, having carefully considered all the evidence and the inherent probabilities I have come to the conclusion that the account of the events of the auction by Mr Airlie and Mr Quinn is the more probable and I accept unreservedly the evidence of Mr Quinn.
I do so because it is quite clear that from the very beginning the plaintiffs attached considerable importance to the question of turn-over. This is shown by the unrebutted evidence that:
(1) Mrs Airlie on behalf of her husband rang Mr Gannon to ascertain the turn-over and was referred by him to the auctioneers.
(2) On 4 March 1973 Mr Airlie requested Mr Gearty to ascertain the turnover.
(3) That Mr Gearty through his secretary attempted to obtain particulars of the turn-over.
(4) That Mr Keenan called to the auctioneer’s office in Dublin for the purpose *12 of attempting to ascertain the particulars of turnover.
(5) That Mr Quinn was specifically instructed by Mr Airlie to find out what the turnover was and
(6) In accordance with these instructions Mr Quinn prior to the opening in bidding requested particulars of turn-over figures.
In these circumstances I consider it most improbable that if Mr Quinn had not received a satisfactory reply to his question that he would not have made further efforts to obtain these figures and I accept his evidence that Mr Fallon stated that the figures returned to the Revenue Commissioners for the previous year were in the region of £60,000 to £65,000 or a little over.
I also accept that having regard to the circumstances in which this statement was made it was made with the intention of inducing the people present at the auction including the plaintiffs to bid for the said premises and that the plaintiffs were so induced. I also accept having regard to the evidence of Mr Murphy that the statement was untrue, that Mr Fallon knew it was untrue and to say the least was made recklessly.
I also accept that were it not for the said misrepresentation with regard to the turn-over the plaintiffs would not have agreed to pay £95,000 for the said property.
I do not accept Mr Walsh’s submission on behalf of the defendant that the contract was subsequently ratified by the plaintiffs after they had learned from Mr Murphy that the turn-over was not as represented by the payment by Mr Quinn of a cheque for £14,750 being the balance of the deposit. I am satisfied that this cheque was sent by him to the auctioneers on foot of an undertaking to that effect previously given by him.
In these circumstances I am satisfied that the plaintiffs were entitled to rescind the contract, are entitled to the return of the deposit and the amount paid by way of auction fees and to interest by way of damages in the sum of £9.00.
The matter was re-entered for hearing on 9 June 1974 in order to enable the plaintiffs to make submissions based on the terms of the Sale of Land by Auction Act 1867.
It is quite clear from the evidence of Mr Gannon that Mr Rochford who had made bids at the auction was employed to do so on behalf of the vendor.
The conditions of sale provided that the vendor reserved the right to bid by himself or an agent up to the reserve price.
Originally the reserve price was £120,000 but this was subsequently reduced to £100,000.
However, it is clear from the evidence that at a certain stage the property was put on the market. At this stage the property was to go to the highest bidder and there was no question of a reserve price.
Although there was some doubt as to whether the property was put on the market at £90,000 as stated by the defendant or at £94,000 as stated by Mr *13 Doherty which doubt is not in any way resolved by Mr Sexton’s notes on his folder, I do not have to decide at which price the property was put on the market because I accept the evidence of Mr Quinn that the property was knocked down for £95,000 which was £500 more than Mr Rochford’s last bid. This evidence is confirmed by that of Mr Rochford when he stated that he probably made a bid after the property was put on the market.
A sale by auction in these circumstances is invalid by reason of the terms of the Act of 1867.
For this reason also the plaintiffs are entitled to succeed.
Eithne Coyle v Central Trust Investment Society Ltd
[1978] I.L.R.M. 211
(McWilliam J)
The plaintiff has brought these proceedings for a declaration that she is entitled to forfeit a deposit of £6,750.00 paid by the defendant under the provisions of an agreement dated 30 May 1978 for the sale of premises at Burlington Road, Dublin for the sum of £27,000.00 and for a declaration that she is entitled to re-sell the property. The *213 particulars in the agreement stated that the premises were held in fee simple free of rent and also held for a term of 150 years from 29 September 1856 subject to the yearly rent of £8 but indemnified against a moiety thereof by other premises. The closing date was expressed to be 30 June 1978.
Condition 9 of the agreement provided as follows:
The Purchaser shall, within ten days after the delivery of the documents of title, send to the vendor’s solicitor a written statement of all his objections and requisitions (if any) on the title. Any objections or requisitions not made within the time aforesaid and not going to the root of the title shall be deemed to have been waived. The Vendor’s replies to any objections or requisitions shall be answered by the Purchaser in writing within ten days after the delivery thereof and so on toties quoties and if not so answered shall be deemed to have been accepted as satisfactory. In all respects time shall be considered to be of the essence in this condition.
Condition 29 of the agreement provided as follows:
If the Purchaser shall fail in any material respect to comply with any of these conditions his deposit shall be absolutely forfeited and the vendor shall be at liberty (without being obliged to tender an assurance) to re-sell the property, with or without notice to the Purchaser, either by public auction or private contract. In the event of the Vendor re-selling the property within one year after the closing date for the present sale (or after the expiry of any period by which the closing may have been extended pursuant to Clause 28 of these conditions) the deficiency (if any) arising on such re-sale (after giving credit for the deposit so forfeited) and all expenses attending the same or any attempted re-sale shall be made good and paid by the Purchaser as liquidated damages. Any increase in price obtained by the Vendor on any re-sale, whenever effected, shall belong to the Vendor. On any re-sale by auction the property may be bought in.
The leasehold interest in the premises had been settled by the will of Catherine Tallon upon trust for Aloysius Tallon for life, with remainder to his wife Eva Tallon, for life, with remainder to the children of Aloysius and Eva Tallon in equal shares. Aloysius Tallon and Thomas Tallon were appointed executors and trustees of the will but no trustees were appointed for the purposes of the Settled Land Acts. Catherine Tallon died on 3 September 1956 and probate of her will was granted to Thomas Tallon on 21 January 1957. Aloysius Tallon died on 18 February 1966. On 30 January 1969 Thomas Tallon and Justin Tallon took a conveyance of the premises in fee simple from the Honourable Henry George Alexander Herbert subject to and with the benefit of the lease of 1856 but freed and discharged from all the covenants on the part of the lessee and conditions contained in the said lease in so far as the same affected the premises. On 28 July 1969 Thomas Tallon and Justin Tallon were appointed trustees for the purposes of the Settled Land Acts of the settlement of the premises created by the will of Catherine Tallon.
By Indenture made 30 November 1972 the premises were assigned to the plaintiff by Eva Tallon, selling as tenant for life, for all the residue of the said term of 150 years subject to the covenants on the part of the lessee and the conditions therein contained, Thomas Tallon and Justin Tallon joining as parties for the purpose of receiving the purchase money.
By another indenture of the same date Thomas Tallon and Justin Tallon conveyed the premises to the plaintiff in fee simple subject to and with the benefit of the lease.
Copy documents of title were furnished to the defendant on 7 June 1978, but no *214 requisitions were raised, and by letter of 20 June the defendant was requested to furnish a draft conveyance for approval and was reminded that the closing date was 30 June. On the following day the defendant appears to have instructed solicitors in the matter. Letters were sent to these solicitors on 6 and 18 July requesting completion but no replies were received and, on 21 July a letter was sent to them giving notice under condition 28 of the condition of sale requiring completion within 28 days and stating that time would be of the essence of the contract in this respect and that failure to comply would result in forfeiture of the deposit and rescission of the sale. This did produce a reply dated 25 July from the solicitors for the defendant who stated that they had not got the documents. Requisitions dated 9 August 1978, were finally furnished and were answered on behalf of the plaintiff without prejudice on 11 August. These requisitions included the following:
67. It is clear that since Thomas Tallon and Justin Tallon were appointed trustees of the property 18 Burlington Road, Dublin, by Order of Mr Justice Kenny 28th July 1969 the freehold interest should have been brought into the application on foot of which said Order was made and that the conveyance of the freehold interest 30th November 1972 should have included the joinder of Eva Tallon as tenant for life pursuant to the provisions of the said Order. This must be rectified. The reply to this requisition was as follows: This contention is not accepted. Thomas Tallon and Justin Tallon did not acquire the freehold in any trust capacity. That interest was completely separate and could not have been brought into the trust as it was never owned by the settlor, Catherine Tallon and the leasehold and freehold interests were never merged.
This reply was followed by a letter of 17 August notifying the solicitors for the defendant that the plaintiff was relying on the notice of 21 July and the conditions of sale and proposing to release the deposit to the plaintiff. After further correspondence, these proceedings were instituted.
On behalf of the plaintiff it is strongly urged that there is no trust disclosed on the conveyance of the freehold and that the defendant is not entitled to look outside the deed to see if there is a trust. I was referred to Carritt v Real & Personal Advance Co. (1889) 42 Ch D 263. It is also urged that, in any event, the freehold interest was never in the possession of the settlor and could not be the subject of the settlement.
If the freehold interest had been sold by itself by Thomas and Justin Tallon there might well be something to be said for the former argument, but the two interests were then and are now being sold together to the same purchaser as one transaction and the defendant was bound to look at the documents relating to both interests together. The most cursory glance immediately discloses that the freehold interest was purchased by one of the trustees of the trusts of the leasehold interest. This being so, I do not see how Thomas Tallon can avoid being bound by the general rule of equity that no one who has duties of a fiduciary nature to perform is allowed to enter into engagements in which he has or can have a personal interest conflicting with the interests of those he is bound to protect. This principle has been continuously accepted and rigidly applied since the case of Keech v Sandford (1726) Sel. Cas. Ch. 61. See Phipps v Boardman [1967] 2 AC 46; Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443. No question of fraud or unfair profit arises in applying this principle and none is suggested here, but the circumstances *215 of Thomas Tallon being a trustee of the settlement prevented him from taking any beneficial interest in the property and his fiduciary position had the effect of placing Justin Tallon in the same position whether he was also a trustee at the time of the purchase or not. See Phipps v Boardman at p. 100–101.
Accordingly, I am of opinion that Thomas and Justin Tallon took the fee simple interest upon the same trusts as they held the leasehold interest although they would be entitled to be recouped by the beneficiaries for the purchase price they paid for it. Without a power of sale, this interest could only be sold by the tenant for life under the provisions of the Settled Land Acts or by all the beneficiaries if of full age.
Although it is accepted that the value of the freehold interest is very small as compared with the value of the leasehold interest, this was a contract to sell the fee simple interest and, in so far as that interest is concerned this is an objection which goes to the root of the title within the meaning of condition 9 and the plaintiff is not entitled to rely on the provisions of this condition in her favour.
John A. Kennedy v Noreen Wrenne
[1981] I.L.R.M. 81
26 February 1981
COSTELLO J
delivered his judgment on 26 February 1981 saying: … I have been referred to Wiley on the Conveyancing Law at page 656 and following pages; to the statement of the law of Johnson J in McMahon v Gaffney, [1930] IR 576; to the Court of Appeal decision in In re Jackson and Hayden Contract, [1906] 1 Ch 412; and Baines v Tweddle, [1959] Ch 696. In addition, I was referred by Mr Sutton to a case of Weston and Thomas Contract, [1907] 1 Ch 244. I have come to the very clear conclusion on the authorities to which I have been referred that the first matter which I must consider is whether or not the vendor is entitled to rely on Clause 10.
Mr Sutton’s submission is that there was a precondition to the Contract for Sale that the Release of the Mortgage would be obtained and, this being so, the plaintiff is not entitled to rely on Clause 10. I agree with this submission. I think that the situation which the parties allowed to develop can be stated in legal formulae in the following way: I think there was a collateral agreement that *82 the vendor would obtain the Release of the Mortgage by the mortgagee. This was collateral to the main Contract for Sale and in my judgment the vendor cannot rely on the terms of the main contract to defeat the obligation which he entered into under the collateral prior agreement. I accept therefore that the plaintiff was not entitled to rely on Clause 10 as submitted by Mr Sutton.
In support of the view which I have just expressed I should refer to the passages in Baines v Tweddle, [1959] Ch 687 & 698 at which the Master of the Rolls, Evershed LJ and Pearce J expressed considerable doubts as to whether in the facts of that case the Rescission Clause applied. In my judgment the facts of the present case make it clear that the vendor is not entitled to rely on the Rescission Clause.
If I should be wrong in this view of the case I am also of the opinion that if Clause 10 does apply that the authorities make it perfectly clear that a vendor’s right to rescind is not an unqualified one, that it is subject to qualifications which have been put on by the courts over a great number of years and it seems to me that the qualifications have been well stated in the case of Jackson and Hayden Contract to which I have referred and that the head note properly summarises the effect of the judgment in that case. The head note reads as follows:
A condition giving the vendor the right to rescind in the event of his unwillingness to comply with an objection to the title, must not be considered as giving him an arbitrary power to annul the contract; some reasonable ground for his unwillingness must be shown. Before a vendor will be allowed to rescind, he must satisfy the court that he entered into the contract in ignorance of some material fact or document, or under some mistaken notion that he was entitled to sell and could make a title; there must be no failure of duty on his part, no element of shortcoming, and he must have omitted nothing which the ordinarily prudent man, having regard to his contractual relations with other persons, is bound to do.
In the course of his judgment Cozens-Hardy LJ stated as follows at page 425:
When we look at the authorities, and particularly the recent authorities in the Court of Appeal, that is the way in which conditions of this kind have been dealt with, and ought to be dealt with, by the Court. It is not enough for the vendor to say: Here is a condition which, as a matter of construction, entitles me to rescind this contract. The answer is: No, you must look at all the circumstances; are they such as to entitle you to put an end to that Contract of Sale which, in form and in fact, you have entered into?
And later on the same page he asks a question, having set out the facts and circumstances of the case: ‘Under those circumstances, is it just, is it reasonable that they should be’, that is to say the plaintiff, the vendor, ‘be allowed to put an end to the Contract’. And in the later case to which I have referred, Baines v Tweddle, the concept of the duty of a vendor under a contract is dealt with and it is made clear that if a breach of duty of a vendor occurs this will be a ground for refusing to permit him to rely on a Rescission Clause. In the course of his judgment Romer LJ said as follows:
It is quite clear that a vendor is under a duty to his purchaser to satisfy himself before he signs a Contract of Sale that he will be in a position to convey what he is contracting *83 to sell, and that duty was recognised by Henn Collins MR in In re Jackson and Hayden’s Contract, to which the Master of the Rolls has referred in his judgment.
Henn Collins MR, after referring to a decision of Knight Bruce V.-C. in the case of Nelthorpe v Holgates, said: ‘Now what is the element that the Vice-Chancellor is seeking for there which determines the case? It seems to me to be an element of something on the part of the vendor less than the law requires of him in such cases. It may stop short of fraud, it may be consistent with honesty; but, at the same time there must be a falling short on his part — he must have done less than an ordinarily prudent man, having regard to his relations to another person, when dealing with him, is bound to do.’
‘With the Master of the Rolls I decide this case on the narrow ground that the vendor here fell short of a proper discharge of that duty.’
In the circumstances of the present case with which I am concerned, I am satisfied the vendor fell short of the duty which he owed the purchaser. He owed the purchaser a clear duty to obtain the release and he cannot avoid that duty because of the difficulties which Mr Shinnick created. He should have ascertained the situation before he entered into the contract and so undertake obligations to the purchaser, or if necessary, in my view, because of the particular circumstances of the case, he should have instituted proceedings against Mr Shinnick to carry out the obligations which he had undertaken to the purchaser.
I agree with the view that Mr Blayney has urged, namely, that in ordinary cases a vendor is not required to institute proceedings because of the delays and uncertainties that may be involved but in this particular case the vendor did undertake a particular obligation to the purchaser and this involved him in taking certain steps which, because he failed to do so, disentitled him in my view to rely on the Rescission Clause.
Thirdly and finally, it seems to me that the authorities clearly establish that the vendor can only exercise his rights in a reasonable manner. In my view it is not reasonable in the circumstances of this case for the vendor so to exercise his right of rescission. I refer on this point to the remarks which I have just made in relation to the duty which he had undertaken to the purchaser in relation to the release but in addition there is, on this aspect of the case, the fact that had the vendor’s solicitor searched the Registry of Deeds he would certainly have found a memorial of the release. Now the vendor’s solicitor knew that the vendor’s father had obtained the Title deeds to the property. Any reasonable solicitor would have assumed that he obtained the Title deeds because the Mortgage had been released. The purchaser’s solicitor did not know the Title and it was not reasonable for him to assume that the mortgagee must have released his mortgage. A simple search in the Registry of Deeds by the vendor’s solicitor would have obtained this information and would have allowed this sale to go through.
In the circumstances I don’t think it was reasonable for the vendor merely to exercise or attempt to exercise his rights under Clause 10. Instead he should have taken the steps which I have just indicated. The conclusion I therefore reach is that the vendor was not entitled to rescind this Contract … I think that the sale should be completed without awaiting the taxation of costs and I give liberty to either party to apply and I will give the defendant the costs of these proceedings.
Norman Arthur Peilow v Michael ffrench O’Carroll
Supreme Court
19 December 1969
Teevan J.:
This action for specific performance of a contract to purchase the freehold residence 6 Manders Terrace, Ranelagh in the City of Dublin arises out of the sale of those premises by public auction. Put briefly the case is that the defendant purchaser refuses to complete on the grounds charged that the contract included a right of way to and from the rere of the premises over a certain laneway, to which the plaintiff vendor has declined or failed to show title and refuses to convey specifically The plaintiff says that this right of way was not included in the contract of sale. The defendant counter-claims for rescission of the contract, return of his deposit and auction fees and claims damages for breach of contract. As an alternative he claimed, as the pleadings originally stood when issue joined, specific performance of the contract in the terms he claims it to have been concluded. At the conclusion of the evidence, counsel for the defendant applied for liberty to amend the defence by setting up fraudulent or alternatively innocent misrepresentation and claiming relief in consequence. As a further alternative, he sets up in the submitted amended defence, the plea of mutual mistake of such materiality as to vitiate the contract and he seeks damages for misrepresentation. At this point I need not go more fully into the pleaded or proposed additional defences, save to remark that the application for leave to amend was made after the defendant had given evidence and the proposed plea of fraudulent misrepresentation would be in accord with inferences which might be drawn from some of the evidence. *31
There is a sharp and regrettable conflict of evidence as to facts between the defendant and his solicitor on the one side and the plaintiff who is also a solicitor, and the auctioneer on the other—such a conflict that acceptance of the former in all its detail and without qualification or reconciliation with the plaintiff’s evidence must lead to a finding of dishonesty on the part of the plaintiff his agents and indeed in the light of the plaintiff’s evidence as to his knowledge of the state of the property in relation to the substance of the dispute, of intentional dishonesty. The charges laid against the plaintiff are in consequence, as I need scarcely say, of the utmost gravity, reflecting as they do, if well founded, on the plaintiff’s personal honour and on his probity in his profession. I should say, however, that the defendant’s own evidence as to this, given with acerbity and vehemence seemed to be directed against the auctioneer rather than against the plaintiff personally. I am not to be taken as conveying that merely because of their gravity the accusations against the plaintiff and the auctioneer should be evaded, but they are of a nature that calls for very particular care by the court when weighing the evidence on both sides and in making any necessary findings of fact.
The plaintiff is the executor of the will of Frederick Charles Ward deceased who died on 18 December 1965 seized in fee simple and resided in the dwellinghouse in question. The plaintiff acted as solicitor for the deceased in his lifetime and was a personal friend. Immediately after the deceased’s death, the plaintiff went to the residence 6 Manders Terrace, which is one of a terrace of nine houses. He inspected the place and found it in a very neglected state. There is a large garden at the rere and back of that a laneway which runs along the backs of the gardens of all the houses in the terrace, round the side of the garden of house No. 1, to an archway under No. 1 which at its other end gives on to a service roadway which in turn connects with the main thoroughfare at Ranelagh. Mr. Peilow was struck by the condition of this laneway. It was blocked up with assorted rubbish, was overgrown with vegetation including young trees and bore all the appearance of having been disused as a way for a very long time. I accept and find that as a way it was and is in its then and present condition impassable. I find also that this condition and its consequences must be apparent to anyone inspecting the property, certainly to a solicitor or to any person with knowledge of and experience in dealing with house property. On return to his office Mr. Peilow examined the title deeds. He found that the property had been conveyed to the late Mr. Ward by an indenture of conveyance of the 8th April, 1927. I need not give the description in full. The matter of importance is that the description of the premises conveyed includes the words “with the right of way in common with the owners and occupiers of the adjoining house through the laneway at the rere of the said houses and with right of ingres and egress and regres for the purchaser his tenants or servants or workmen and all persons employed by him and them with or without horse carts and carrnages at all times over and through said laneway to and from the public roadway…” (It is probable that the words “house” in the foregoing is a scrivenery error and should read “houses”; in any event nothing turns on that in the present case) From his observation of the place and his knowledge of the habits and way of life of the deceased, Mr Peilow felt that there was a probability that the right had or may have been lost by abandonment. There was a direction for sale in the will, of which he was executor and he put the place on the market as soon as possible. The residuary beneficiary was elderly and he was anxious to realise the estate as soon as possible. He instructed the well known firm of auctioneers, Messrs. James Adams & Sons to auction the property. Later they advertised the place with a description which included the words “large walled garden with back entrance”. Mr. Peilow became aware of this and instructed the auctioneers to inform enquirers that they were not selling the right-of-way.
Doctor ffrench O’Carroll, the defendant, who speculates in and develops house property in the city and who, as his evidence establishes, is very skilled and experienced in such enterprises, is alert to the potential of properties for development and well versed in town planning regulations and requirements, saw the advertisement and was immediately interested. He procured the key from Messrs. Adams and inspected the house thoroughly. He also examined the garden and the laneway at the rere and on leaving Manders Terrace noticed that the archway under No. 1 at the road end, was closed by a double sheeted gate or door. He made no close inspection of this gate at that time, but saw that it was closed and bolted; that it barred the way even if not the right to use it, must have been obvious. His interest in the property lay in its suitability for reconstruction into a number of self-contained re *32 sidential apartments. He said he would not have been interested if there was no right of way along the back laneway; that he would not have even asked for a key to inspect it unless such right of way existed. His subsequent dealing with the property does not show consistency of attitude in this regard throughout but leaving that aside I have no doubt that a rere entrance would be of undoubted advantage, particularly in the scheme of development he had in mind. That the place was advertised with rere entrance is also undoubted and if Doctor ffrench O’Carroll had bought simply on the faith of the advertisement the latter contained a misrepresentation that the court would have to take notice of. Messrs. Adams and Sons ought to have struck out the words “with back entrance” on the circular advertisement handed to Doctor ffrench O’Carroll in compliance with Mr. Peilow’s instructions. Furthermore, the auctioneer should have called attention to the necessary amendment at the auction. Be that as it may Doctor ffrench O’Carroll was satisfied with the place as suitable to his purpose and instructed his solicitor, Mr. Brendan P. McCormack, to bid for him at the auction and in the result the place was knocked down to the latter and the contract for sale signed by him in trust for his client at £3,300 and fees.
But before the auction something else of importance happened. Having inspected the place the defendant consulted Mr. McCormack’s assistant, Mr. Walsh, also a solicitor, by telephone in consequence of which Mr. Walsh attended at the plaintiff’s office to make enquiries and inspect the title deeds. It is at this point that conflict of evidence first arises. Mr. Peilow says that he made it clear to Mr. Walsh that he was not including the right of way in the sale. His evidence was to the effect that he said to Mr. Walsh the laneway is there, we may or may not have any right over it. He explained, he says, to Mr. Walsh that the late owner had lived alone and had no relative in this country and that he (Mr. Peilow) could give no information about the right of way. He said if there are any rights you are welcome to them but I am not putting them in the conditions of sale The particulars and conditions of sale were available at this time and were inspected by Mr. Walsh. The particulars described the property simply as “All that the dwellinghouse and premises known as 6 Manders Terrace, Ranelagh in the City of Dublin, held in fee simple, R/V £21”. (There was added to the end the words: “For further particulars apply to W. J. Shannon & Co. … Solicitors having carriage of sale”; or to—James Adams & Sons … the auctioneers”). These particulars were read by Mr. Walsh, who apparently failed to attach any significance to the fact that no reference was made therein to the right-of-way which he found described in and the benefit of which had been conveyed to the late owner by the conveyance of 1927 which he closely studied. He knew of course of the advertised statement of a back entrance. I am not going to re-state in full the material details of Mr. Walsh’s evidence. He was most definite that Mr. Peilow did not make any reservation in regard to the right of way and gave him no hint that it was not to be expressly included in the sale. If he had got even the slightest hint of that he would not have further pursued his inspection of the deeds; he would have no further interest.
Before giving my decision on this very sharp conflict of evidence, it would, I think, be appropriate to decide between the rival contentions as to the true construction of the contract in regard to its subject matter. On the one hand Mr. Crivon for the plaintiff contends that the contract embraces only what is stated in the particulars as quoted above. He submits that a contract to sell a piece of land simpliciter does not carry easements appurtenant to it or enjoyed de facto with it not mentioned in the particulars, and in this regard the subject matter is not enlarged by section 6 of the Conveyancing Act, 1881, which applies only to conveyances. He says, however, that a conveyance in execution of such a contract may be so drawn as to attract the operation of that enactment so that the purchaser might take whatever rights in fact existed in favour of the owner at time of contract. In this case he contends that as mention is not made of any right of way in the contract the vendor cannot be called upon to convey the right of way in question if it still subsists. On the other hand Mr Conolly sets up two propositions. The first is that the particulars in the newspapers and on the circular hand-out given to the defendant by the auctioneers before sale form part of the contract and must be read into it. I asked Mr. Conolly had he any authority for such a proposition and he confessed that he had found none, adding what in any case I would have taken for granted, that that was not for want of searching for it. I am not surprised by the negative result of his research for precision in the construction of written contracts would be badly blunted if his proposition were accepted in the wide manner in which *33 it was advanced. There are, of course, cases where certain apparently extraneous matter must properly be brought within the framework of the contract, but this is not such a case. That proposition must be rejected. Next Mr. Conolly contends that in fact the right of way was included in the written terms of contract. It was referred to expressly in and conveyed by the 1909 and 1927 deeds, comprising the title offered by condition 6 and the first schedule of the conditions of sale. This argument I must also reject. Condition 6 and the muniments mentioned in the first schedule express no more than the title the vendor offers to the subject matter of the sale and do not define that subject matter. What the vendor was offering for sale was set out in a part of the contract well recognised as the appropriate place—in the case of conditions of sale by auction, as here, in the particulars, the offered title was set out in an equally well recognised manner and form. The mention of the right of way in the two deeds may have a bearing of another kind on some of the issues raised. I am not now saying that it should be completely disregarded. What I am saying is that it does not enlarge the subject matter as defined in the particulars —even by reason of the words “and premises” to which Mr. Conolly appealed for support. In my opinion the right of way was not included in the contract. Before leaving this topic I must make mention of another matter The question whether the right of way was included in the contract, or not, is a question which ought to be determined objectively by the court as a matter of construction. It is not for either of the parties to interpret the contract when a dispute as to its terms is before the court for determination. Mr. Conolly subjected the plaintiff to a searching cross-examination as to what the contract embraced. I ought to have disallowed certain questions which were questions for the court to decide independently of what any witness or party might think or believe was within or without the contract.
Having determined that question in favour of the plaintiff it might be thought unnecessary to make any finding on the unpleasant conflict of evidence which has been pursued on the defendant’s side with a tone of rancour, or bitterness (to use his own expression) which Doctor ffrench O’Carroll freely owned to, and on the other side with a marked absence of personal feeling. As will be seen shortly I could possibly avoid this unhappy task even on the issue of misrepresentation raised in the amended defence. I think, however, that for two reasons I ought not to shirk that task, however much I would like to do so. Firstly, a grave charge has been laid against the plaintiff which as I have already said goes to his professional conduct and probity as well as to his personal character Secondly, the case may be carried further, in which event all findings of fact on the issues raised should be available for appeal.
The course of the case, not only the evidence of the defendant, but also the attitude of his counsel, made it clear that the defence is primarily based on a wilful misrepresentation Mr. Conolly stated in cross-examination of Mr. Peilow that he (Counsel) was submitting the plaintiff’s case derived from an afterthought upon discovery that the owner of No. 1 Mander’s Terrace disputed the right-of-way under his premises and that at the time of sale no question existed in Mr. Peilow’s mind of the right to use the laneway or of its exclusion from sale True, the defendant submits an alternative case of unintentional misrepresentation but this can only avail in the event of the court deciding the issue of fraud against the defendant; or, as an element in the still further alternative defence based on mistake. As I see it, if I should decide in favour of Mr. Peilow’s version of the Peilow-Walsh interview, the only fact left to involve a possible case of unintentional misrepresentation lay in the advertisements. What happened at the auction (if the defendant’s and Mr. McCormack’s evidence be correct) is of no consequence for two reasons: firstly, as contended for by Mr Crivon because Doctor ffrench O’Carroll said he had already (i.e. before the auction) satisfied himself on the point (this is an example of the disservice to his case of Doctor ffrench O’Carroll’s personal advocacy in his answering of questions): secondly, because the supposed unintentional misrepresentation cannot be set up merely as an element of the defence of mistake, of the kind spoken of by Baggalay L.J. in Tamplin v. James 15 Ch. Div. 215 if the mistake had already occurred and the only mistake that I can see possible is in Mr. Walsh’s misunderstanding of what Mr Peilow communicated, or believed he was communicating to him about the laneway and this has already taken place and had its effect before the auction.
Now what is the truth of the Walsh-Peilow interview? If I accept Mr. Walsh’s version it must inevitably follow that Mr Peilow has fabricated a case and has been deliberately dishonest. On the other hand *34 Mr. Peilow’s account of the interview can be accepted without any such reflection on Mr. Walsh. I accept that Mr. Walsh gave in evidence what he honestly believes to be a true account of the interview. I emphasise this because of a possible, or seeming, relationship of what passed at that interview with subsequent events, attitudes or conduct. On his own evidence Mr. Walsh spent twentyfive or forty minutes in Mr. Peilow’s office, and on Mr. Peilow’s evidence he was there over an hour. Conversation or discussion between them did not of course occupy all that time, much of which was taken up in reading the deeds and making a verbatim copy in longhand of the description of the premises and right of way contained in the 1908 deed; not that the reading should take much time. Both deeds are of the simplest kind which a solicitor, of Mr. Walsh’s experience, would read and comprehend in a matter of moments.
I am satisfied that Mr. Peilow did say that the right-of-way was not being included, but I do not think it can have been made quite as plain as Mr. Peilow thought and said it was. This was not taken in by Mr. Walsh and I can well understand how he missed its purport and significance. But before coming to my reason for that I must say that Mr Peilow’s deportment in the witness box, the manner in which he gave his evidence, his frank expressions of doubt on points upon which his recollection would not allow him to speak emphatically, his apparent objectivity all impressed me and carried conviction. His objectivity was such that one would not think from the manner of his giving of his evidence that his personal honour and integrity were under heavy attack. There was a marked absence of any embelhshment of either a defensive or an offensive nature and no sign of hostility and his evidence bore no trace of advocacy Perhaps, however, I should say by way of qualification that Mr. Peilow struck me as of a very placid temperament and his attitude and deportment in giving evidence may be no more than a natural manifestion of his usual disposition, for it must be noted that his handling of the matter throughout, and particularly in the correspondence prior to the court proceeding was rather carefree and casual. Now in Mr. Walsh’s evidence we find some indirect or partial corroboration of Mr Peilow. Mr. Peilow said that he gave to Mr. Walsh as his reason for being unable to assure the right of way, that the deceased had lived alone in the house, had no relative in this country and that he (Mr Peilow) could get no information about it (the right of way). Mr. Walsh agrees that Mr. Peilow told him about the deceased’s condition, about his having no relative in this country and of Mr. Peilow’s inability to get information This seems pointless to me save as a reason for some lack in Mr. Peilow’s instructions or, as he was acting for himself, perhaps, I should say knowledge of facts, and the only lack of the kind that I know of related to the subsistence of the right of way. I am satisfied that Mr Walsh was concerned primarily with whether the muniments of title revealed a right of way over the laneway and was satisfied with this on seeing that the benefit of the right had expressly passed to the grantee under the 1909 and 1927 deeds. It is clear from the evidence of the defendant that he had already inspected the rere entrance and the laneway before consulting Mr. Walsh. The advertisement mentioned only the back entrance and Doctor ffrench O’Carroll had seen the laneway for himself. It is also clear from Mr Walsh’s evidence that his instructions from his client were such that he had to satisfy himself and his client that the title covered a right to use the laneway. Having assumed that the right of way was being sold, I think it is probable that he had no further doubts and in my judgment by reason of this what Mr. Peilow said concerning it failed to make its full impact on Mr. Walsh’s mind. One of the many incidents leading to this dispute was the divided attentions of Doctor ffrench O’Carroll, Mr. Walsh and Mr. McCormack. Of the three Doctor ffrench O’Carroll alone had seen the right of way and had seen that it was not an open way Mr. Walsh alone had the pre-sale interview with Mr. Peilow and Mr. McCormack dealt with the problem of obtaining access to the laneway through the premises No. 1 Mander’s Terrace. There was in consequence ample opportunity for error and for a a failure of understanding.
Mr. Walsh assumed that because the deeds in the offered title included grants of the right of way, the latter would by reason of that fact alone become part of the subject matter of the contract—as he said himself he rightly or wrongly made that assumption. In my opinion he was wrong in that assumption. The subject matter of a contract in the form of particulars and conditions of sale for public auction, which later becomes the memorandum of contract when the subjoined form of agreement is signed by or on behalf of the purchaser, is what is specified in the part known as the particulars Thus if of two lots held under the same title, one only is specified in the particulars, it will not *35 avail a purchaser who claims that he bought in the belief that both lots were on sale because on reading the offered title he found that both were expressly included in the muniments of title. His position is analogous to that of the purchaser in Tamplin v. James 15 Ch. Div. 215. There the purchaser went merely on his knowledge of the place and did not read or pay attention to the particulars; here the error arose from disregarding the particulars and attending only to the title. I must take into account that it was not the purchaser but his solicitor who read the particulars and conditions. A lay person might not be expected to appreciate the significance of this exclusion, or omission from the particulars and in such a case mistake originating in the misrepresentation of the advertisement might remain operative.
The cases cited to me are not directly in point in that all of them relate to ways over land of the vendor not expressly included in the contract of sale, while in the case before me there is no question of a grant de novo (the grants in the 1908 and 1927 deeds were not even grants de novo but assurances of the benefit of an easement previously created, although this could be better expressed in those deeds, it is plain that such was the case).
Nevertheless, the cases do show that when it comes to what the purchaser is entitled to have in his conveyance, the subject matter expressed in the contract must be looked at. By reason of the non-inclusion of the right of way in the particulars and hence in the contract the defence and counterclaim must fail at once and for that simple reason did but for the published advertisement and circular which represented the premises as being sold with a back entrance. This was a mistake-inducing factor that might well deflect the purchaser and his solicitor, Mr. Walsh, from the significant omission. If the case ended there; if it could be shown that the purchaser and his solicitor bought solely on this representation then a case might well be made for relieving the purchaser of his contract I do not say that it would for I think another factor would in the circumstances have to be considered, but I will assume that such might be the case. Even so I think the defence fails on the ground that Doctor ffrench-O’Carroll inspected the way and saw its condition and that it was obstructed by this bolted gate. In other words he bought with his eyes open and in my opinion it is no excuse for him to say that he failed to appreciate the extent of this obstruction because he did not wish to reveal his interest in the property. If I may say so I find difficulty in understanding this point. It seems to me that his driving to the house, leaving his motor car outside and making a close inspection of the house, garden and laneway would in itself publicise Doctor ffrench O’Carroll’s interest, particularly when he is so well known in the locality However, I take him to mean that a closer examination of the gate and the gateway would involve his having to seek the permission of the occupier of No. 1 or at least intimating his intention to that occupier. That to my mind, if it be a correct interpretation of his evidence, makes matters all the worse for him by putting him on notice that the interests of such occupier were involved in user of the way.
There have been many slips on both sides in this case. It is the kind of case in which when one thing goes wrong a series of further errors or slips lead to an aggravation of the trouble, or to further troubles. It was a transaction to which the old saw could be applied that “troubles never come singly”. One of these was the remarkable omission of any requisition in relation to access via the archway of No. 1 to the laneway. Were I not accepting Mr. Walsh’s mistaken impression from his interview with Mr. Pielow as bona fide, I would come to the conclusion that this omission corroborated Mr. Pielow; that the reason for silence in the requisition was because the purchaser and his solicitor knew that the right of way was in doubt, that they were acting in accord with what Mr. Pielow said “whatever right may still exist, you are welcome to” and that they knew they were buying with a possible rather than a certain right of way. This view would be enhanced by the fact of Doctor ffrench O’Carroll and Mr. McCormack taking the question up later with the owner of No. 1. While this was done with Mr. Peilow’s concurrence I cannot accept and do not accept that it was done by Mr. McCormack purely on the vendor’s behalf. It would fit in perfectly with the situation I am supposing. Of course, it is easy in the light of Mr. Walsh’s evidence to see another reason for his not raising such a requisition He went on the map attached to the 1908 deed and this showed an open way under No. 1—an un-built-upon way: it certainly did not show or indicate in any way an enclosure, or gate. He did not know, of any such difficulty, as an answer he gave on cross-examination shows, until later than the requisition stage and even the draft conveyance stage but Doctor ffrench O’Carroll and Mr. McCormack did know or should have known of it. *36
What I have been discussing just now is perhaps beside the point, even if worthy of some note in passing. Whatever justification may be urged for ignoring possible difficulty of access prior to the stage of actual dispute or to the point when it became obvious that this might be denied to the purchaser, Doctor ffrench O’Carroll not only in full knowledge but in full appreciation of the fact that title to the right of way was not to be given by the vendor proceeded to deal with the property as his own. He applied to the local authority for planning permission for the development of the property. Nor did he do this without legal advice. He consulted his solicitor and counsel on the question whether his title to the property would allow his construction of a car park on one of the ornamental plots in front of the terrace, which had originally been intended for the common use of all the residents in the terrace. This was not even the case of the submission to the local authority of mere outline drawings. Doctor ffrench O’Carroll said in evidence “I put a tremendous amount into this … We did have a great deal of trouble. Eventually after considerable drawing and re-drawing which involved personal visits to many departments of the Dublin Corporation, we brought them to the state of working drawings and submitted them”. The survey for these drawings was carried out in the month of March and the application was lodged with the City Authorities on 28th April. Doctor ffrench O’Carroll’s belief that he was getting the right-of-way in his purchase came to an end at the end of February or the beginning of March. He said “all that planning was done after I had discovered that I was not getting this right of way”. Asked: “Can you say did those plans show access to the premises via the laneway?” Doctor ffrench O’Carroll replied: “No. Those particular plans did not show entrance by the laneway because at this stage the right of way had not been provided to my satisfaction and I could not submit it to the Dublin Corporation because if I did they would ask me to prove a title to it which I had failed to do. So for those drawings—I was anxious to try and develop the property and try and do something with it and I proposed an alternative in the case of car parking”. This evidence was repeated during cross-examination. I intervened on this point and I put the question: “I am not sure I understand this. You did not put in the plans Mr. Crivon is discussing with you, until after you found you were not getting the right of way you believed you had bought?” Doctor ffrench O’Carroll’s reply was: “Yes, and I had to propose that alternative of putting the cars in front instead of the back and had considerable trouble to do so because I could not show title to the right-of-way which I had bought”. Now this evidence is of great importance, particularly when the requirement of the Planning Section of the Corporation relating to title is considered. The letter of 21 June, 1966, from the Dublin Planning Officer to Doctor ffrench O’Carroll requires inter alia “Proof of title to the plot of ground shown on the lodged plans which you propose to use for off street car parking …” The letter concludes: “Please note that the effective date of your application for permission will be the date on which this notice is complied with”. While there is no direct evidence of the fact it must be presumed that the defendant submitted his title to the Corporation for but in evidence was the notification of refusal of application for permission to develop. This document dated 9th September, 1966, stated the date of the application as 11th July, 1966, and in conformity with the letter of the 21st June this presumably is the date of lodgment of title: Doctor ffrench O’Carroll’s title depended on and derived from the contract of sale.
Mr. Conolly has argued that acts in recognition of the contract do not amount to binding affirmation of the contract so as to stand in the way of repudiation unless they have been directed or related to the vendor. He produced no authority in support of this proposition and when Mr. Conolly fails to produce authority for a submission it is safe to assume that no such authority exists. I do not agree with his submission. The question is whether the alleged acts of ownership over the subject matter are inconsistant with the intention to repudiate the contract. Here Doctor ffrench O’Carroll applied for permission to develop, on the footing of ownership of the property which he could only establish by reliance on the contract of sale and claims to have spent some £438 on the submitted plans (letter of 9 March 1967) after becoming aware that the right of way was precarious—indeed in his mind more than precarious, as his belief then was that he would not get any right of way and he planned his development accordingly. I find that the defendant recognised and affirmed the contract after becoming aware of the fact upon which he now seeks to repudiate it. In my judgment he cannot be permitted to do so. If he was entitled to repudiate the contract on any of the grounds now relied upon he ought to have repudiated it when he *37 realised he was not going to get his right of way and before dealing with the property as his own. The case against him is as strong as if instead of refusing the Corporation had granted him permission to build. Not that this present finding is of much consequence for I am satisfied that there was no fraudulent misrepresentation. To allow for such a finding I must deal with the application for leave to amend the defence and counterclaim. I will allow the submitted amendment.
So far as the plea of innocent representation is concerned I am satisfied that the defendant cannot be heard to say that he purchased solely in reliance upon any such representation. He inspected the property and saw the situation for himself and I am satisfied was capable of appreciating the significance of the obstacle that stared him in the face on his pre-sale inspection. I have already dealt with this aspect of the case and perhaps I am only repeating something I have already said. There is, however one other thing that I must refer to in this connection. Doctor ffrench O’Carroll is, as his own evidence establishes, well acquainted with these lanes at the back of old terraced properties in Dublin. It is I think a matter of common knowledge that there are usually quite open ways to the thoroughfare. In my view Doctor ffrench O’Carroll should have taken serious note of the unusual feature in this instance of a closed gate at the lane’s exit. If the laneway was to be of particular importance to him and one can readily appreciate its value to his scheme of development, he was put on sufficient notice before buying, of the difficulty in its use, particularly having regard to the experience and acumen in buying and developing properties of which his evidence disclosed him to be possessed in a high degree.
So far I have not said anything about the statement alleged to have been made by the auctioneer at the auction to the effect that the right of way was being sold with the property. Here again there is conflict of fact between four men of standing, on the one side, a solicitor and auctioner and on the other a solicitor and medical doctor. The evidence by the latter was given with pronounced positivity and emphasis. Mr. Peilow and Mr. Coyle have no recollection of any question having been asked at the auction concerning the right of way. They are less dogmatic or positive than Doctor ffrench O’Carroll and Mr. McCormack. Mr. Peilow said that if any question whether the right of way was included in the sale were asked he would have said “no” because he (Mr. Peilow) was clear about that from the very beginning. He added “I would never have told him” (i.e. the auctioneer, if the latter had referred to any such question to him) “that there was a right of way”. Mr. Coyle had no recollection of any such question or answer as is alleged.
It is another unpleasant conflict to have to decide on. On the one hand if the statement sworn to by Doctor ffrench O’Carroll and Mr. McCormack was made by Mr. Coyle then it was a dishonest misstatement made with the dishonest concurrence of Mr. Peilow. How they could hope to prevent discovery of the deception and its consequences is not easy to see but that is another matter. On the other hand I am perfectly satisfied, I am sure I need hardly say, that neither Doctor ffrench O’Carroll nor Mr. McCormack would commit themselves so positively to this evidence unless convinced of its truth. Happily, however, I do not have to make a hard and fast finding of the probable truth. The reasons I have given for pronouncing upon the conflict between Mr. Peilow and Mr. Walsh do not, I think, apply in this instance because I accept Mr. Crivon’s submission if I may repeat it, that any representation then made or understood to have been made at the auction did not on Doctor ffrench O’Carroll’s own evidence induce the contract. Nevertheless, I feel that I should express my view of it. I think the most likely solution is that some such question was asked but not so pointedly as Doctor ffrench O’Carroll and Mr. McCormack believe; which might account for its slipping the recollection of Mr. Peilow and Mr. Coyle. I think that Doctor ffrench O’Carroll and Mr. McCormack may well have misconstrued whatever answer was given. For instance the words “are” and “aren’t” can very easily be confused so that “we aren’t selling with the right of way” might very well be taken up as “we are selling with the right of way”. The reason I think so is that the form and words of the answer attributed to Mr. Coyle are not what I would expect— unless indeed the doubt was toyed with for a moment and a sudden decision made to take the risk of including a doubtful right-of-way. Or it could be just another of the thoughtless slips bestrewing the path of this transaction. Yet another is encountered in Mr. Peilow’s approval of the draft conveyance including the right of way.
I think now that I have re-read the evi *38 dence of Mr. Peilow and Mr. Coyle that I was wrong in stopping Mr. Crivon’s pursuing in cross-examination the possibility that some statement might have been made but misunderstood by the defence witnesses. At the time I was (and I think Counsel also were) under the impression that Mr. Peilow and Mr. Coyle had more postively denied that any such question was asked than the note of their evidence reveals.
Mr. Conolly did not say much in support of his counter-plea for specific performance by way of a conveyance including the right of way. I understood his main case to lie in avoidance of the contract. In any event it seems to me clear on the whole case, apart from my findings already pronounced, that his claim for specific performance could not succeed.
I must find in favour of the plaintiff and it follows that I must direct that the conveyance be in the rectified form sought in paragraph 7 of the plaintiff’s reply.
The following were the amendments of the defence and counterclaim.
A. 1(a) further and in the alternative the defendant was induced to enter into the said agreement by representations made both by parole and in writing by the plaintiff or his agents to the defendant or his agents with the intention of inducing and which did in fact induce the defendant to enter into the said agreement and which were not true in substance or in fact to the knowledge of the plaintiff or his agents. The said representations were of a material nature namely as to the present existence of a right of way giving access to the back garden of the premises the subject matter of the sale from the roadway in front of the said premises and that the premises were sold with such right of way annexed. On discovering that the said misrepresentations had been made the defendant refused and was entitled to refuse to complete the sale and will submit that by reason of such misrepresentations the defendant is entitled to rescind and that the plaintiff is not entitled to obtain specific performance of the said agreement. The said misrepresentations were made:—
(i) in advertisements published in the public press by the plaintiff’s agents the auctioneers referred to in paragraph 3 of the statement of claim;
(ii) in a circular or hand-out describing the property to be sold issued to prospective buyers by the plaintiff’s agents the said auctioneers;
(iii) in a statement made verbally by the said auctioneers by Mr. Coyle in the presence and with the authority of the plaintiff on the occasion of the auction of the property on the 24th day of January, 1966.
1 (b) In the further alternative the said misrepresentations were made innocently but with the intent of inducing and they did in fact induce the defendant to enter into the said agreement. The defendant having discovered that the said misrepresentations had been made was entitled to refuse to complete the said sale as he did and the defendant will submit that on the grounds of innocent misrepresentation the defendant is entitled to rescind and the plaintiff is not entitled to obtain specific performance of the said agreement.
B. Add to paragraph 3 of the defence the following:—Alternatively the said gate was nailed up or closed in a permanent manner so that the defendant was deprived of access to the said right of way. The plaintiff could not open the said gate without forcing certain bolts and removing nails or claim to exercise the said right of way without incurring the risk of litigation with third parties over whose land the said right of way ran.
C. 4 (a). In the further alternative there was a mutual mistake between the parties as to the subject matter of the contract and the description of the property sold. There was consequently no consensus of mind and not contract made between the parties and the plaintiff is not entitled to an order for specific performance.
D. Counterclaim. 9 (a). The defendant repeats paragraph 1(a) of the defence and says that in breach of the said representations the plaintiff refused to put the defendant into possession of the said premises with access to the said right of way and claims that no right of way was agreed to be sold or conveyed to the defendant.
E. Defendant’s counterclaim:
Add to claim:—
Par. (3) (i) damages for misrepresentations.
Supreme Court.
Budd J.:
These proceedings arose out of the sale by public auction of certain premises known as No. 6 Manders Terrace on the 24th January, 1966. The premises are situate in Ranelagh in the City of Dublin. The purchase price was a sum of £3,300. The premises form part of the estate of one Frederick G. Ward who had been the occupier thereof and the plaintiff/respondent is his executor. He is a solicitor and sold as personal representative of Frederick C. Ward. The defendant/appellant was the purchaser of the premises. As well as being a medical doctor he is interested in the purchase of property for the purpose of development and conversion.
The premises in question are part of a terrace of houses. There is a roadway in front which leads down to the Ranelagh Road. No. 6 has a large garden at the back. There is a double gate at the bottom of the garden giving access to a laneway which runs at the end of the gardens of Nos. 1 to 8 of the houses in the terrace. The laneway is blocked at one end but in the other direction the lane-way runs along the end of the gardens parallel with the terrace, turns sharply after passing the last garden, and runs out to the road *42 way in front of the terrace through an archway underneath the upper part of the first house in the terrace. Virtually the only means of access to the premises for the purpose of any major conversion including the extension of the premises into the garden would be via the laneway and through the garden door at the end of the garden. Where the laneway passes under the archway there is a large double gateway which was bolted and barred for some time before the auction.
While there were many subsidiary points at issue between the parties, what gave rise to these proceedings was a dispute as to whether or not a right of way over this lane-way was included in the contract for the sale of the premises. The appellant claims that it was and he also alleges that he was induced to understand that it was included and to enter into the contract by fraudulent or alternatively innocent misrepresentations made by or on behalf of the respondent. The allegation that the representations were made fraudulently was relied on in the Court below but was abandoned before this Court. The respondent says the right of way was not included in the sale and that any representations that may have been made to the contrary did not induce the contract.
The proceedings were launched on the 30th June, 1966, and sought the specific performance by the appellant of the agreement to purchase executed on the 24th January, 1966, at the close of the auction. As well as seeking specific performance of the contract the respondent also sought damages for breach of contract, the usual declaration of lien and alternatively a declaration that the deposit made on the sale had become forfeited.
The memorandum of agreement to purchase was contained at the end of the conditions of sale and was in the usual form. It was duly signed by the appellant’s solicitor, Mr. McCormack, who was purchasing in trust for the appellant. The closing date was the 28th February, 1966. The particulars and tenure of the property were stated in very brief form immediately before the conditions proper and read: “All that and those the dwellinghouse and premises known as No. 6 Manders Terrace, Ranelagh in the City of Dublin held in fee simple R.V. £21.” There also appears on the same page as the particulars: “For further particulars apply to W. J. Shannon & Co., 19 Upper Ormond Quay, Dublin 7, solicitors having carriage, or to James Adams and Sons, 17 Merrion Row, Dublin 2, the auctioneers.” The appellant sought further particulars from the auctioneers and was given a leaflet which described the house as containing inter alia a large walled rear garden with back entrance. The advertised description of the house was similar. The title offered was to commence with an indenture of conveyance of the premises dated the 6th day of March, 1908, Eileen C .Goulding to Richard Davis and then to pass to an indenture of conveyance dated the 8th day of April, 1927, made between the said Richard Davis of the one part and Frederick C. Ward of the other part. A right of way over the laneway to the public road in common with the owners and occupiers of the adjoining houses was conveyed to the respective grantees, their tenants, servants and workmen with or without horses and carts and carriages in both of these conveyances. The said conveyances also conveyed a right in common with the other occupiers of the houses on Manders Terrace to use the plot of ground in front of the houses.
The respondent’s contention was that there was no mention of the right of way in the description of the premises in the particulars and tenure contained in the conditions of sale and, therefore, that the contract did not include it. He sought specific performance of the agreement to sell the premises simpliciter, that is to say, without any conveyance of the right of way.
The appellant in his pleadings admitted that he had entered into an agreement on the 24th January, 1966, to purchase the freehold together with the right of way. He claimed that it was an express or in the alternative an implied term of the contract that the sale included the use of the right of way which was described and conveyed by the said two conveyances of 1908 and 1927 constituting the title offered. He claimed that the respondent had refused to complete in accordance with the terms and conditions. The respondent, it was claimed, was well aware at all material times that the premises were useless to the appellant without the right of way. In his counterclaim the appellant claimed a declaration that the plaintiff was bound to put him into possession of the entire premises including user of the right of way. He also claimed rescission of the contract and repayment of the deposit and auctioneers’ fees and also damages for breach of contract. Alternatively he claimed specific performance of the *43 contract as pleaded by him, that is to say, including the right of way and he also claimed damages.
During the hearing of the case the appellant sought liberty to amend his defence and counterclaim, which was later granted, by pleading that he was induced to enter into the contract by representations by parol or in writing made by the respondent or his agents with the intention to induce him to enter into the contract which were not true to their knowledge. These representations were of a material nature as to the existence of the right of way. On discovering that the misrepresentations had been made the appellant refused to complete and claimed that he was entitled to rescind the contract. Alternatively he relied on innocent misrepresentations by the same parties with the intention to induce him to enter into the contract which they in fact did. The misrepresentations relied on as inducing the contract were stated to be contained in an advertisement in the press inserted by the auctioneers and also in a circular or hand-out describing the property also issued to the appellant by the respondent’s agents, the auctioneers. The appellant also relied on a statement alleged to have been made by the auctioneer at the auction that the right of way was included in the sale. The appellant claimed that in breach of these representations the respondent refused to put him into possession of the premises with access to the right of way. The appellant also relied on mutual mistake as to the subject-matter of the contract and consequently there was no consensus of mind and no contract between the parties so that the respondent was not entitled to specific performance. The appellant claimed damages for misrepresentation. On this appeal the appellant relied only upon the alleged innocent misrepresentations of the respondent or his agents and did not seek to rely on any fraudulent misrepresentations.
Leave having been sought to amend the pleadings during the trial and granted in the judgment the respondent did not have the opportunity to put in a further reply. The respondent, however, submitted during the hearing that what was contained in the advertisement and leaflet did not amount to representations that a right of way existed and that if it did that the appellant did not rely upon the representations because of his knowledge gained by inspection of the physical state of the laneway which was overgrown and virtually impassable and closed by a barred gateway. This was supported, he contended, by the appellant’s failure to raise the matter in the requisitions. It was also submitted that such representations, if made, did not mislead the appellant or induce him to contract. The respondent also submitted during the hearing that the appellant had made the property his own and had elected to affirm the contract for the sale of the property simpliciter, that is to say, without the right of way, by applying to the Dublin Corporation for planning permission after he knew that he was not going to get a conveyance of the right of way.
The contentions in the Court below were in the main confined to the issues as to whether misrepresentations had been made and, if so, what was their effect. The point as to the right of way being included in the contract was not as fully developed as on the hearing of this appeal.
The learned trial judge gave the respondent a decree for specific performance and he dismissed the appellant’s counterclaim for specific performance or rescission or damages for misrepresentation. He took the view that the right of way was not included in the contract of sale because the inclusion of the right of way in the two deeds offered as part of the title did not have the effect of enlarging the subject matter of the contract and he also held that neither the advertisement nor the leaflet nor what was included therein formed any part of the contract. Dealing with the alleged misrepresentation the learned judge’s view was that if the appellant had bought simply on the faith of the advertisement the latter contained a misrepresentation that the Court would have to take notice of, presumably as a ground for rescission. He did not determine this finally I assume because of his view that there were other factors in the case which prevented the purchaser from relying on the misrepresentation. He took the view that the appellant had inspected the laneway and could appreciate the significance of the obstacle staring him in the face and thus purchased with his eyes open. He also took the view that by his visiting the premises under which the gateway to the road ran he had notice of the interests of the occupier of the house under which the laneway ran through the archway. It is implied in what the learned judge said that the appellant should have seeen from the state of the laneway that it had not been used for a long time and that all that he saw should have made clear to him that he should not rely on what was stated in *44 either the advertisement or pamphlet. He accordingly gave no relief on the ground of misrepresentation He held moreover that the appellant, by his action in lodging the application for planning permission, had elected to accept the respondent’s contention as to the nature of the contract or had in any event elected to proceed with the contract on the basis that the right of way was not included therein.
It was contended on this appeal that the learned trial judge was wrong in law in holding that the right of way was not incluuded in the sale and should have held that the agreement for sale included the right of way first because a contract for the sale of a house and land in law includes all right appurtenant to the land and this right of way was appurtenant at the time of the sale, secondly, because of the reference in the two deeds offered as the title to the right of way and, thirdly, because the conditions of sale invited any interested party to apply to the auctioneers for further particulars and the information given in writing in the leaflet implied the existence of the right of way. It was contended that the information so given in writing thus formed part of the written agreement so as to include the right of way in the sale.
It was also contended that the learned trial judge was wrong in law in holding that the appellant was not entitled to resist specific performance of the contract as relied on by the vendor, namely, an agreement to purchase without the right of way oy reason of any representations that might have been made because he knew what the situation with regard to the right of way was from his visual inspection. It was submitted in reply to this contention that the judge should have found that the misrepresentations induced the contract because the evidence did not support his view that the appellant’s knowledge of the physical state of the laneway should have had the effect of causing him not to rely on the representations. It was further contended that the learned trial judge was wrong in law in finding that the appellant had by his action in submitting plans to the Dublin Corporation made the property his own and elected to affirm the contract in the form contended for by the respondent.
I must now refer more fully to some of the salient facts of the case in so far as relevant to the matters in issue between the parties. The respondent decided to sell sometime early in January 1966 and advertised the premises in the press. The appellant saw the advertisement appearing in the Irish Times on the 13th January, 1966 The advertisement appeared under the name of James Adam and Sons, the auctioneers employed by the respondent, and offered 6 Manders Terrace for sale as a freehold with vacant possession. After describing the situation of the premises there appeared the words “ideal residence or for conversion.” After stating the date of the sale these words appeared: “The house contains eight rooms, bathroom, W. C., fuel store, large walled rear garden with back entrance” This advertisement attracted the appellant and he went to the auctioneers’ premises for further information where he was given the hand-out or leaflet about the proposed sale of the premises which also contained the material matters contained in the advertisement which I have already recited. The appellant drove out and saw the premises from the outside and later on the 20th January, 1966, he got the key of the premises from the auctioneer and inspected the house and garden. He also went out into the laneway through the double doors at the back and saw the condition of the laneway which was very much overgrown and was blocked to a great extent by deposits of rubbish. While departing in his car along the roadway in front of the terrace he had a look at the gate leading from the laneway to the roadway but did not make a close inspection of it. I may conveniently add here that sometime towards the end of February or beginning of March he made a detailed inspection of the gate and saw that it was barred up but this was after the auction.
Another event of importance took place before the auction. As a result of seeing the state of the laneway the appellant was put on the alert and wished to make sure that the right of way was included in the sale. He discussed the position with Mr. Walsh, an assistant solicitor in the offices of his solicitor Mr McCormack, and as a result Mr. Walsh made an appointment with the respondent to examine the title deeds, with the object of seeing what was the position about the right of way and as to whether there were any restrictive convenants affecting the premises. He went to the respondent’s office on the 21st January, 1966, and made an inspection of the title deeds He found that both the deeds offered as the title to the premises conveyed the premises together with a right of way over the laneway and the right to use the plot *45 in front in the form I have already stated Mr. Walsh says that he asked a question about the location of the right of way. Mr Peilow says he made it clear to Mr. Walsh that the right of way was not included in the sale He says that he went on say “The laneway is there and we may or may not a right of way over it,” giving as his reason for this view that the late owner lived alone and had not relatives in the country and that he, Mr Peilow, could give no information about it. He says that he added that if there were any rights the purchaser was welcome to them. Mr. Walsh denied that Peilow had made any reservations with regard to the right of way and said that he did not tell him that it was not to be included in the sale Mr. Walsh subsequently included the right of way in the draft conveyance of the premises. The learned trial judge was satisfied that Mr Peilow did say that the right of way was not being included but his view was that Mr Peilow did not make the matter as clear to Mr Walsh as he, Mr Peilow, thought he had and that what was said about the right of way not being included was not taken in by Mr. Walsh.
Another incident should also be referred to which took place, it is alleged, at the auction The evidence adduced on behalf of the appellant as to this incident was to the effect that someone had asked at the auction as to whether or not the right of way was included in the sale and that the auctioneer, Mr. Coyle, of Adam & Co, auctioneer, had stated after consultation with Mr. Peilow, who was beside him, that the right of way was included in the sale. Neither Mr Peilow nor Mr Coyle had any recollection of such an incident The learned trial judge said that he did not have to make a hard and fast finding on the issue but I shall have to refer to this incident in more detail later.
After the sale the usual steps were taken for its completion. Requisitions were delivered on the 4th February, 1966, and replied to on the 7th February, 1966. No requisition bears directly on the issue as to whether or not the right of way was included in the sale The respondent contended that the nature of the requisitions indicated that the appellant was not concerned about the right of way and was not affected in his decision to purchase by what was stated in the advertisement and leaflet. The appellant says that it was unnecessary to raise any point about its inclusion in the sale in the requisitions because the existence of the back gate leading from the garden to the laneway and the other gate on to the public road were physical indications that a right of way existed and this was confirmed by clear implication in the advertisement and leaflet and, as he says, also indicated at the auction. The respondent’s attitude was that the appellant, on seeing the state of the laneway and that the gateway leading to the public highway was closed up, should, if he believed that the right of way was being included in the sale, have made requisitions as to who, if anybody, was under obligation to clean the laneway and as to how he was to obtain exit and entrance through the gateway His failure to do so, it was submitted, indicated that he knew there was no right of way and was not relying on any representation that such a right of way existed.
Another event of importance occurred shortly afterwards on the 21st February, 1966, when Mr. Peilow himself approved on behalf of the vendor of the draft conveyance of the property to the purchaser which included in it a conveyance of the right of way Mr Peilow says that he did this inadvertently but the appellant naturally says that the approval of the conveyance including the right of way confirms his contention that its inclusion in the sale was intended by the vendor.
After the auction correspondence ensued between the parties. The appellant insisted throughout that he was entitled to have the right of way included in the conveyance while the respondent was unwilling to convey it.
While the correspondence was taking place between the solicitors the appellant lodged plans with the Dublin Corporation showing a plan for a proposed conversion and addition to the premises and sought planning permission from the Corporation. It appears that the appellant was anxious to see if he could work out a plan providing for the off street parking of cars for the future residents of the converted premises in front of the premises rather than at the back. His difficulty was as to showing title to the plot in front of the premises of which occupants of No 6 Manders Terrace only had the use along with the occupants of other houses in the terrace The Corporation, by a letter dated 21st June, 1966, required title to be shown to the area proposed to be used for parking purposes and that a suitable layout plan should be lodged Plans were accordingly submitted it would appear on the 11th *46 July, 1966, but planning permission was refused on the 9th September, 1966, on the grounds of an excessive density in the number of flats proposed and because off street parking for the exclusive use of the occupants of the proposed flats had not been provided for.
With regard to the submission made on behalf of the appellant that the inclusion of the two conveyances conveying the right of way in the conditions of sale had the effect of enlarging the subject matter of the agreement for sale. Having perused the conditions of sale, I would agree with the learned judge that the mention of the right of way in the two conveyances in the deeds offered as the title to the premises could not enlarge the subject matter of the agreement. Section 6 of the conditions of sale and the first schedule thereto state the title offered and do not define the subject matter. What was offered for sale was stated in the particulars.
It was also submitted on behalf of the appellant that the particulars contained in the conditions of sale were enlarged by the representations contained in the leaflet to include the sale of the right of way as part of the contract. The argument was that these particular conditions of sale had in them after the portion describing the premises the words “for further particulars apply to W. J. Shannon & Co., 19 Upper Ormond Quay, Dublin 7, solicitors having carriage of the sale, or James Adam and Sons, 17 Merrion Row, Dublin 2, the auctioneers.” It was submitted that these words invited any would-be purchaser to apply for further particulars to either of these firms and that when further particulars were supplied in writing they formed part of or were an addition to the particulars contained in the conditions of sale and that since the leaflet on its true construction indicated the existence of a right of way to the premises the enlarged particulars had the effect of including the right of way in the contract. I am at present inclined to the view that what is contained in the leaflet cannot be said properly to enlarge the particulars in the conditions of sale. It would seem to me that what was intended by the invitation to apply for further particulars was that further particulars of that which was offered for sale in the conditions of sale, such as the accommodation in the house and the like, would be furnished on request. To hold that every particular furnished by an auctioneer with regard to the nature of a premises for sale becomes incorporated into the contract on his furnishing such particulars seems to me to be prima facie a somewhat untenable proposition in that it would involve the inclusion in the contract of puffing descriptions by an auctioneer. It is, however, not necessary to come to a final conclusion on this matter having regard to the views which I have formed as to the true construction of the contract and I therefore express no final view on the matter.
Mr. Conolly submitted that a contract for the sale of a house and land described in the particulars and conditions of sale comprises and includes in it such rights of way as exist as appurtenant to the premises even though they are not mentioned in the particulars in the conditions of sale. Such rights if not intended to be included must be excluded.
It may be remarked apart from any citation of authority for the proposition that it seems well founded in common sense having regard to the ideas usually held by those having to deal with the sale of land either for vendor or purchaser. The usual view of such persons is I venture to think that when a house is sold there goes with it such rights in the way of easements as are appurtenant to it. There readily occur to the mind such easements as rights of ancient lights and the right to have ones water supply and drainage system pass under a neighbour’s lands. It would surprise most people engaged in the sale of houses to find that such rights would not pass on the sale of a house unless expressly mentioned.
Mr. Conolly, moreover, referred the Court to several passages in works by authors of authority supporting his proposition. In Dart on Vendor and Purchaser 8th edition it is stated at p. 109 that “An agreement to sell land is, in the absence of any restrictive expressions, an agreement to sell the whole of the vendor’s interest.” Further at p. 110 it is stated “The interest offered for sale (whether it be absolute or qualified), will be presumed to be accompanied by all these advantages which are legally incidental to it. Emmet on Title 11th edition at p. 647 says: “Rights strictly appurtenant need not be mentioned either in a contract or in a conveyance. They, being annexed to the land, are included in the sale of the land.” Finally the Simmonds edition of Halsbury vol. 34 at p. 218 has a paragraph as follows: “An agreement to sell land implies, in the absence of indication to the contrary, that the whole of the vendor’s interest in the land is the *47 subject of the agreement, and that that interest is an estate in fee simple free from encumbrances, unless the purchaser had notice, before entering into the contract, that the title which the vendor was able to give was subject to limitations or encumbrances which the vendor could not remove.”
I should state here that Mr. Ellis submitted that the proposition in Dart was not supported by the case cited in support thereof, namely, Skull v. Glenister (1864) 16 C. B. N. S. 81. In that case the view of Erle C.J. was that if there be a right of way appurtenant to and the land is demised, the right of way will pass to the lessee and that is so even though nothing was said about it at the time of the demise, so that the statement in Dart would appear to be borne out.
Finally Mr. Ellis accepted the first part of the proposition saying: “I must accede to the proposition that although the right of way was not mentioned in the particulars in the conditions of sale, the conditions of sale itself involved such right of way as there was being comprised in the sale.” This acceptance of the proposition being of course subject to a contention that the right of way had been excluded from the sale. I am satisfied that Mr. Conolly’s proposition is a correct statement of the law and the right of way over this laneway was included in the sale provided that the evidence shows that it was appurtenant to the premises at the time of the sale and was not excluded in some fashion from the sale.
The next question to be considered is as to whether there was at the time of the sale such a right of way as the appellant claims appurtenant to the property. The evidence before the Court on this topic was, in my view, all the one way. While a right of way is an incorporeal hereditament the physical features of the ground over which the right of way is alleged to exist may afford valuable evidence as to its existence. In the present case there is the fact that there exists physically at the ends of the gardens of this terrace a laneway which gives access to the public highway and there are at the ends of the gardens of these houses doors or gates giving access to the lane. The houses were apparently in existence for some time before the conveyance of 1908. The laneway is a cul-de-sac at one end and appears to serve no other houses or land as a means of ingress and egress. The physical features, therefore, strongly suggest that the laneway came into existence for the purpose of giving access from the back of the houses to the public highway. That may fall short of showing the existence of an easement in law but it goes a long way towards it. Next we have the fact that a right of way over this very laneway was conveyed to the grantee under the deed of 1908 as a then existing right of way. There was, therefore, a right of way in law appurtenant to the house, 6 Manders Terrace, prior to 1908. This right of way was further conveyed to the grantee in the conveyance of 1927. The grantee under that deed was Mr. Ward of whom the plaintiff is personal representative and he apparently resided in the house during the rest of his lifetime from 1927. In addition to the evidence afforded by the physical features of the case and the two title deed in question there also certain other factors which point to the existence and continuance to the present time of an easement appurtenant to the house. There is the fact that the draft conveyance submitted by the purchaser, incorporating a conveyance of this right of way, was approved by the vendor’s solicitor on the 21st February, 1966. One is, therefore, driven to the conclusion that the fact that the right of way was allowed to be included in the conveyance by the vendor should be viewed as a factor going to the proof of its existence. There is then the matter of the advertisement and the leaflet. With regard to the meaning of the representations made in the advertisement and leaflet I would have little doubt as to what they meant and that they were subsisting up to the date of the sale. Both the advertisement and the leaflet described the house as having a back entrance. There was some controversy as to whether or not this would convey to a would-be purchaser that the house was being sold with a right of way at the back. The title offered included the assignments conveying the right of way. The back entrance to the laneway existed physically and the laneway led to the public highway. A back entrance is no use whatsoever unless you can pass through it and use it and, having regard to the physical nature of the surroundings, the only way that the back entrance could be used would be to go out on to the laneway and thence to the public road. In the circumstances existing the words to my mind clearly convey that a right of way was included in the sale. The representations in these two documents, coming as they do from the vendor, the person in the best position to know the facts or at least under a duty to find out about them, seem to me to afford at least some further evidence corroborative of the appellant’s contention that *48 a right of way existed and was appurtenant to the premises at the date of the sale and continued to the present time. As I shall show later in this judgment the appellant had no reason to doubt the truth of the representations.
The proper inference to be drawn from the facts narrated is that a right of way existed and was appurtenant to the premises sold and such inference could only be refuted if it was shown that the right of way was abandoned in such fashion as to extinguish it or that it was excluded from the sale. Kingsmill Moore J. in his judgment in Cullen v. Dublin Corporation (22 July, 1960, unreported) in dealing with the question of abandonment in that case of the right to use water to produce power on a presumption only of a grant of such rights as a riparian owner could acquire by prescription in an artificial stream, pointed out that disuse was not abandonment. He said that there could be no abandonment without an intention to abandon. Long disuse might raise a presumption of such intention but the circumstances must be considered to see if such an intention should be implied. In the case relied on by Mr. Conolly of Dogherty v. Beasley (1838) Jones Reports 123 Joy C.B. rejected the suggestion that the dominant owner had to go over a right of way continuously to preserve it and was not excluded per se from his right by twenty years non-user. Such non-user was only of evidential value as to abandonment. It is indeed admitted that mere non-user on the part of the owner of the dominant tenement is not sufficient to show an abandonment of a right of way nor does such a right of way become extinguished by mere lapse of time. There must be an intention to abandon and extinguish There was, in my view, no evidence of intention to abandon before the Court. There was no evidence of long disuse. Such evidence of nonuser as there is is confined to the fact that the laneway was overgrown and blocked with debris and had saplings growing on it so as to make it physically impassable and that it had a barred gate across it. Apart from the matter of the gate this evidence is quite consistent with the blocking of the laneway having taken place in recent times and is of no value as evidence of an intention to abandon. The existence of a gateway, bolted or not, over a right of way does not of itself lead to the conclusion that the right of way had become abandoned or extinguished in the absence of evidence of acquiescence in a permanent closure of the right of way by such a gate by the owner of the dominant tenement. There is in fact no evidence of acquiescence on the part of the dominant owner to any such obstruction of the right of way as existed.
On the matter of the continuous existence of the right of way it seems to me to be established on the evidence as it stands that the right of way existed at the time of sale and was appurtenant to the premises.
It was, however, alleged that the right of way was in fact expressly excluded from the sale by the respondent. As to this I may in preliminary fashion observe that where in a sale of land a vendor has inadvertently described the property for sale in such fashion that the contract includes either expressly or by implication of law such rights of way as are appurtenant to the property it is the duty of the vendor to correct the conditions of sale so as to exclude that which he does not wish to sell or convey or which he cannot sell or convey. If he does not do this he must make it clear to any would-be purchaser either before or at the sale that such a right is not in fact included in the sale.
In this case there was no attempt to amend the conditions of sale which would as they stand include the right of way in the agreement for sale It is said, however, that it was made clear before the sale to Mr. Walsh or at the sale by the auctioneer that the right of way was not included in the sale. In my view the learned trial judge’s finding with regard to what happened at the interview between Mr. Peilow and Mr. Walsh amounted to a finding that the position was not corrected at that interview. The onus was on Mr. Peilow as vendor to correct the position arising on the contract, namely, that the right of way appurtenant to the premises was included in the sale and would be conveyed under the conditions of sale. Mr. Peilow says that he told Mr. Walsh that the right of way was not included in the sale but the learned judge’s finding is that what was said was not taken in by Mr. Walsh. In the result the contract of sale stands, as far as this interview was concerned, with the position as to the right of way not being corrected.
In so far as what occurred at the auction is concerned it would appear clear from the evidence that there was no statement immediately before the bidding took place that the right of way was not being included in the sale. The evidence adduced on behalf of *49 the appellant was to the effect that someone had asked at the auction as to whether or not the right of way was included in the sale and that the auctioneer Mr. Coyle of Adam & Co., had stated after consultation with Mr. Peilow, who was beside him, that the right of way was included in the sale. Neither Mr. Peilow nor Mr. Coyle had any recollection of such an incident. The learned Judge does, however, indicate that he thought that the most likely solution of the question was that some such question was asked but that Dr. ffrench O’Carroll and Mr. McCormack may have misconstrued whatever answer was given. He pointed out that the words “are” and “aren’t” can be very easily confused so that “we aren’t selling with the right of way” might very well be taken up as “we are selling with the right of way.” This is tantamount to finding that any attempted correction of the form of the contract was not brought home to the appellant’s mind. There was thus nothing to show that it had been brought home to the appellant at the time of the auction that the sale did not include the right of way and there is no finding that the information was conveyed otherwise either before or at the auction. The appellant is, therefore, entitled to succeed on this claim that the right of way was included in the sale.
The appellant also contended in the alternative to the pleas that I have already dealt with that he was also entitled to resist any order for the specific performance of the contract without the right of way, if it could be so construed, and further to rescind the contract, by reason of its having been obtained by misrepresentations that the right of way was included in the sale. The contest in the Court below was in fact mainly on the issue as to whether or not the appellant had induced to enter into a contract to purchase 6 Manders Terrace without the benefit of the right of way over the laneway by misrepresentations made by the respondent and as to whether these misrepresentations, if made, were material and induced the contract. As counsel on both sides argued this matter I feel that the parties are entitled to have their contentions dealt with notwithstanding the views I have expressed as to the proper construction of the contract.
The learned trial judge in dealing with the matter of misrepresentation proceeded on the assumption that he was concerned with a contract to sell without the benefit of a right of way. He took the view that having regard to his state of knowledge of the condition of the laneway the appellant should not have relied and was entitled to rely on any misstatements in the leaflet or advertisement. He also held that the appellant had elected to affirm the contract he had assumed he was dealing with, namely, to purchase without the right of way. Accordingly he gave no relief on the ground of misrepresentation.
The learned judge in the course of his judgment did state, however, that if it could be shown that the purchaser and his solicitor bought solely on the representations contained in the advertisement and leaflet a case might well be made for relieving the purchaser of his contract but that he did not think it would because another factor in the circumstances would have to be considered, presumably that of the alleged affirmance of the contract. He then went on to say that he would proceed on the basis of assuming that might be the case. Even so he thought that the defence would fail on the ground that Dr. ffrench O’Carroll inspected the way and saw its condition and that is was obstructed by the bolted gate. In other words he bought with his eyes open. He also stated at a later stage in his judgment that Dr. ffrench O’Carroll had inspected the property and saw the situation for himself and that he was satisfied that Dr. ffrench O’Carroll was capable of appreciating the significance of the obstacle that stared him in the face and that he was put on sufficient notice before buying of the difficulty in the user of the laneway. I would regard the learned judge’s observations as meaning that in his view the appellant knew, before entering into the contract, that there was no existing right of way to the premises in that it had been extinguished by abandonment and that accordingly he was entitled to rely on the alleged misrepresentatitons to enable him to resist an order for the specific performance of the contract without the right of way. The question is, was he entitled to arrive at such a conclusion on the evidence before him?
There is no doubt that representations were made in the advertisement and leaflet as to there being a back entrance to the garden and that these were made to the purchaser because of his having read the advertisement inserted by the respondent’s agents and intended to be read by a possible purchaser and also because the leaflet containing them was also given to the appellant by the respondent’s same agents. They were calculated to induce a person, wishing to convert the house into flats, to buy by reason *50 of the suitable access which the laneway would give for the conveyance of the necessary materials. I have already stated my view that these representations contained in the leaflet and advertisement clearly represented that a right of way was included in the sale.
It would seem to me further that since both the advertisement and the leaflet carried the implication that a right of way existed it should have been made clear at, or prior to, the auction that the advertisement and leaflet were erroneous. The judge found that this had not been done. His view was that the position was not rectified during the interview between Mr. Peilow and Mr. Walsh, in that Mr. Peilow had not brought home to Mr. Walsh’s mind that the right of way was not included in the sale. In effect he took the same view with regard to what was said at the auction. The position of the appellant at the date of the auction was that these representations implying that a right of way existed had been made to him and that it had not been made clear to him that they were untrue or that he should not rely on them. He was entitled, therefore, to believe them and rely on them unless there was some further reason why he should not do so, such as his having knowledge that the representations were not correct.
It was, however, then submitted that the judge’s view that the appellant was in possession of such knowledge as should have indicated to him that the representations were untrue and not to be relied on was correct. It is important to consider what a purchaser’s position is when a misrepresentation has been made. It is, of course, sufficient to prove that he knew the truth to take away his right to rely upon any misrepresentation made. But it must be shown that he had full and complete knowledge. It is not sufficient to show that he had partial or fragmentary knowledge or that he could have found out for himself. I have already pointed out that there was no evidence of intention to abandon or extinguish the right of way on the part of the owner of the dominant tenement. As I have said the appellant’s inspection of the laneway prior to the auction merely disclosed that it was at that time too overgrown to be passable and that there was a closed gate at the end leading to the roadway. Such physical obstructions as he saw could be removed and the gate opened assuming, as he was entitled to assume, that the right of way existed. There was no reason to assume from what he saw that the right of way did not, despite the physical obstructions, continue to have a legal existence.
It was, however, submitted that the appellant’s failure to raise the matter of the existence of the right of way in the requisitions indicated knowledge on his part that there was no right of way. It would seem to me that what was stated in the advertisement and leaflet implying the existence of a right of way together with the apparent physical existence of a right of way, supported by Mr. Walsh’s understanding of what took place at the interview with Mr. Peilow (which the judge accepted as bona fide) was sufficient explanation as to why the matter of the existence of the right of way was not raised in the requisitions. The matter had been cleared up already. I cannot regard the failure of the appellant to raise the matter in the requisitions as providing any such grounds as would justify a finding that he had knowledge that the right of way did not exist or as disentitling the appellant to rely on the misrepresentations made in the leaflet and advertisement.
The learned judge was, it would appear to me, dealing solely with the physical circumstances relating to the laneway and not with considerations of a legal nature as to whether the right of way existed in law or not. It was these later considerations that were those relevant to consider on the point at issue. Dr. ffrench O’Carroll could scarcely be expected to have approached this consideration from a lawyer’s point of view but even if he had it would seem to me that what he saw should only have conveyed to his mind that the laneway had not been used in recent times. There was no evidence of a nature sufficient to lead him to the conclusion that the right of way had been abandoned with the intention of extinguishing it. On the contrary the documents including the two conveyances and such other evidence as there was apart from the physical condition of the laneway all pointed the other way. The representations contained in the advertisement and leaflet pointed to the existence of the right of way. The auctioneer, Mr. Coyle, thought that a right of way existed by reason of what he saw on his inspection. The respondent himself never arrived at a definite conclusion to the effect that the right of way did not exist and as we know did not at the time when he was approving of the conveyance strike out the portion thereof containing the right of way. One may well ask why the appellant should come to the conclusion *51 on his inspection of the laneway that the right of way did not exist in law when neither Mr. Coyle, the auctioneer, nor Mr. Peilow himself arrived at that conclusion although they had also seen the physical condition of the laneway. There was, in my view no reason for the appellant to assume from what he saw that the right of way did not exist in law. Apart from such conclusions as the appellant might come to as a result of seeing the laneway there is in fact before this Court no evidence that the right of way was ever legally extinguished. There is, therefore, in my view no such evidence as would support a finding that the appellant knew or should have known at the time that he entered into the contract that the right of way over the laneway did not exist from the legal point of view. The appellant has, therefore, made out his contentions that the representations alleged were made and that they implied that a right of way existed. On the assumption which the learned judge was proceeding on this aspect of the case, namely, that the right of way was not included in the sale or did not exist, these representations were false.
I would have little doubt that the misrepresentations made in the advertisement and leaflet were of a material character. They indicated an advantage which the premises had and were one of the inducements held out to a purchaser. They were intended to induce the contract. The house was advertised as being suitable for conversion which could be reasonably understood by an intending developer of itself to mean that suitable access was available for conversion purposes. The appellant intended to buy for conversion into flats and extending into the back garden for that purpose. The leaflet and advertisement clearly indicated that suitable access was in fact available for this purpose. Further the garden would provide suitable space for off street parking of motor cars which would have to be provided to satisfy the town planning authorities. With regard to reliance on the representations and their inducing the contract the appellant said he would not have bought unless he got the right of way since he could not carry out his plans for conversion without the user of the right of way. His keen interest in the right of way is shown by his raising the point with Mr. Walsh with the result that Mr. Walsh went to see the documents at Mr. Peilow’s office, to assure himself on the matter. Since the appellant was buying for conversion and sought through Mr. Walsh assurance on the point, it is also clear that the appellant was induced to enter into the contract by reason of the misrepresentations being made and that he also relied on these misrepresentations.
It was then submitted that even if the premises were misdescribed expressly or by implication as having a right of way thereto such misstatement would not annul the sale and that the alleged contract for the sale of the premises without the right of way could be specifically enforced.
It is provided in condition 12 of the conditions of sale that any error, misstatement or omission in the particulars or the conditions should not annul the sale or be a ground of any abatement or compensation on either side. It was submitted that by reason of this condition any such misstatement as there might have been in any particulars given as to the nature of the property to be sold should not annul this sale and that the respondent was entitled to enforce the contract notwithstanding such misstatements. Mr. Conolly submitted, however, that this condition does not apply where the misstatement goes to root of the contract. I need not, however, dwell on the point of law because Mr. Ellis for the respondent does not dispute the correctness of this proposition of law and I accept it as well established. In my view the misstatements made as to the existence of the right of way were, in the circumstances of this case where the premises were held out as being suitable for conversion, most material because of the necessity of obtaining a reasonable form of access and were thus such as to go to the root of the contract. This, in my view, prevents the respondent from relying upon this condition.
In my view, therefore, the misrepresentations which were made were such as would entitle the appellant to repudiate and rescind a contract for the purchase of the premises without the right of way and to succesfully resist a claim to have it specfically enforced unless there was some other reason preventing him from doing so. It was in fact next suggested that there was such a reason, which I deal with next.
It was contended on behalf of the respondent on this aspect of the case that the appellant had by his actions indicated his intention to affirm the alleged contract without the right of way and to waive his right to rescind notwithstanding the misrepresentations made. It was submitted that the correspondence should have conveyed to the *52 appellant that the right of way was not to be conveyed and that the appellant had manifested his intention to accept the property without the right of way by lodging plans with the planning authority of the Dublin Corporation first on the 28th April and secondly in a more completed form on the 11th July, 1966, plans which were based upon the provision of parking sites for the residents of the converted premises in front of No. 6 Manders Terrace and ignoring any space there might be for parking at the rear of the premises, thus indicating that he accepted the position that he was not getting the right of way and that there was no right of way thereto.
The learned judge found that the appellant, after discovery of the facts entitling him to rescind and with full appreciation that the right of way was not to be given by the vendor, proceeded to deal with the property as his own and had thus by his actions indicated that he had elected to affirm the contract for sale without the right of way.
Counsel for the appellant invited this Court to take the view that the proper approach to the question as to whether there had been an affirmance of the contract after discovery of facts entitling the purchaser to avoid the contract was to be found in Volume 23 of the Hailsham edition of Halsbury’s Laws of England, volume 23, page 110, where it is stated: “The acts and conduct relied upon as evincing the representee’s affirmance must be such as are more consistent, on reasonable view of them, with that than with any other theory. It is not sufficient to point to acts of a neutral character, or acts which are equally consistent with a possible ultimate intention to disaffirm or with a mere suspension of judgment.” It was pointed out that in Watson v. Burton [1956] 3 All E.R. 129 Wynn Parry J. had accepted this statement as correctly stating the proper approach to be adopted in considering whether a party to a contract who had been induced to enter a contract by misrepresentation had by his acts and conduct affirmed it. I also accept the statement as stating the correct approach. It was submitted that the finding was, on any reasonable view of the facts without evidence to support it.
There is not in the correspondence any letter in which it is stated that the appellant was waiving any claim to have the right of way conveyed with the premises. Not only is there no acceptance of the contention that the right of way was not included in the sale but a clear insistence that the appellant was entitled to have the right of way conveyed to him as part of his contract. This claim was made right up to May 18th, 1966, a date after the first lodgment of the plans with the Corporation. The appellant did not state or give any verbal indication that he was giving up such rights as he might have had with regard to the right of way or state that he was accepting the position that a right of way would not or could not be conveyed. The appellant on the other hand. makes it clear in his evidence that the premises would be of no avail to him unless he got the right of way. His attitude was that he wanted the right of way over the lane. I am unable to find that there is anything in his evidence to indicate that he changed his position. This Court was not shown that there was in the plans or documents lodged any statement which would indicate that he was abandoning his rights or that was inconsistent with an intention to insist upon the conveyance of a right of way. When the action was launched the appellant’s pleadings in his defence and counterclaim delivered on the 7th November, 1966, indicates that he still claimed that the right of way should be conveyed to him. The first paragraph of the defence admits the agreement for the sale of the premises was entered into but pleads the agreement entered into as being for the sale of the house together with the right of way. Further, an examination of the appellant’s evidence shows that throughout he was insisting that even if he got approval by the Corporation for the alternative plan for car parking he still could not have built in the garden unless he could get in by the back as the front entrance was entirely unsuitable for bringing in building materials which was inconsistent with an intention to abandon his claim to the right of way. These matters then would appear to be the background against which his acts in seeking planning permission should be judged. The only reasonable inference to be drawn from the circumstances narrated is that throughout the appellant was insisting on his right to have the right of way conveyed. An affirmance of a contract to buy without the right of way would be quite inconsistent with the attitude of the appellant. As against all this there is only the fact of the lodgment of the plans without showing the right of way to support the contention of an election to affirm a contract not including the right of way.
The mere act of lodging documents seeking planning permission for a layout not indicating a user of the right of way does not *53 at all indicate an abandonment of a claim to the right of way. It is equally consistent with an attempt by the appellant to see if some other way out of his difficulties was feasible. At the best this action of the appellant was of an equivocal nature and an act of that nature is not sufficient in law to prove affirmance. When all the matters I have just mentioned are taken together they seem to me to be clearly more consistent with a view that the appellant had no intention of affirming any alleged contract to buy without the right of way than with any other theory. They seem to me to show that the appellant was up to the time of the commencement of proceedings and the filing of the pleadings insisting on the completion of the contract with the inclusion in the conveyance of the right of way. In my view the evidence, on any reasonable view of it, leads only to the conclusion that the appellant did not at any time waive his rights to enforce such remedies as he had arising on the misrepresentations made to him or elect to affirm the contract without the right of way. In my view the evidence does not support the finding of affirmation made by the learned judge, which cannot, therefore, stand.
A further argument advanced by the respondent was that the appellant had failed to repudiate or rescind the contract immediately on discovering that misrepresentations had been made to him as to the existence of the right of way and its inclusion in the sale and that he was not going to get the right of way. This, it was contended, he should have done if he desired to be relieved of the contract. Whether a contract such as this must be repudiated or rescinded immediately after a purchaser discovers that he is not getting what he bargained for appears to be a matter of some doubt and I express no view on the point as it is unnecessary to do so because the argument as far as this case is concerned is founded on a misconception of the position in the case. The position as has been shown is that the contract of sale included the right of way. That was the appellant’s attitude. He was ready and willing to take a conveyance of the house which included the right of way. He was maintaining, not repudiating, the contract. No occasion to repudiate, therefore, arose. He sought a declaration that the respondent was bound by the terms of the contract to put him into possession of the entire premises including the right of way. It was in fact the respondent and not the appellant who repudiated the contract by refusing to complete the sale by his refusal to execute a conveyance of the house to the appellant including the right of way and in endeavouring to enforce the sale of the house without the right of way and it is only because of that that the appellant sought to rescind. The claim to rescind in fact only arose in the pleadings in reply to the respondent’s claim for specific performance of the contract of sale without the right of way. Even then it was accompanied by a claim for specific performance in the alternative showing that the appellant maintains still that the contract includes the right of way. The appellant’s claim to rescind by virtue of the misrepresentations made is a plea in the alternative and it would be quite illogical for him to repudiate on this basis when in fact his first and main point was that the contract in law included the right of way. In my view therefore the responent’s contention based on the appellant’s alleged delay in repudiation fails.
The respondent’s claim in this case is for specific performance or damages for breach of contract but the contract which he seeks to have specifically performed is a contract to sell without the right of way. He is not entitled to either relief because the right of way was included in the agreement for sale and he cannot, or will not, make title to the right of way. No defect in the title to the right of way was ever finally proved. The respondent’s attitude, as taken up in the letters of the 7th March, 1966, and the 3rd May, 1966, was that the premises were sold in the condition in which they were and that if there was still an existing right of way that would be a matter for the purchaser to deal with which is tantamount to saying that he did not know if the right of way existed or not and that it was up to the purchaser to assert it if he saw fit. His counsel moreover stated that his attitude was that “you can have whatever right of way is there” and that he was only prepared to say “we will give you what we have.” Finally the respondent insisted upon the exclusion of the right of way from the conveyance. This attitude and his refusal and failure to convey without qualification a right of way exercisable immediately was a clear breach of contract which disentitled the respondent to succeed in his claim for the specific performance of the contract or to recover damages for its breach. His proceedings must, therefore, fail and the order for specific performance of the alleged contract without the right of way will be set aside. *54
The appellant is, in my view entitled to succeed on his counter-claim and there still remains to be considered what relief the appellant is entitled to on it. In it he claims inter alia specific performance of the contract, that is to say, the contract including the right of way and also damages for breach of contract. Having regard to the delay which has occurred and the uncertainty as to the title to the right of way which the respondent has created the appellant no longer seeks specific performance. He is, however, entitled to recover damages for breach of contract in lieu of specific performance and it remains to be considered what damages he is entitled to in the circumstances.
Condition 11 of the conditions of sale provides that if the purchaser shall make any objection or requisition which the vendor is unable to comply with vendor may annul the sale whereupon the purchaser shall be entitled to the return of his deposit and a sum equivalent to the auctioneers’ fees. The parties’ therefore, envisaged that the purchaser would be entitled to get back his deposit and a sum equivalent to the auctioneers’ fees when the sale is rightfully called off. It must follow a fortiori that the parties must have envisaged that where the sale is not rightfully called off but instead the vendor commits a breach of contract in failing to convey that which he contracted to sell the purchaser would be entitled to the same rights.
The case of McMahon v. Gaffney 64 I.L.T.R. 233; [1930] I.R. 576 is in point in that both Meredith J. and Johnston J. recognise that where there is a breach of contract for the sale of land on the part of the vendor the purchaser can recover the fees paid to the auctioneer from the vendor as damages for breach of contract.
In any event the purchaser cannot be in a worse position than when the contract is rescinded, an order for which the appellant would be entitled to in this case. On such an order being obtained the respondent would be bound to indemnify the appellant against the consequences and obligations of the contract. This would, in addition to the deposit and auctioneers’ fees include the costs of investigating the title.
In my view, therefore, the appellant is entitled to recover by way of damages the above amounts and also the costs of investigating title. The loss sustained by him is the amount of the deposit made, £825, the auctioneers’ fee of £165 and the costs of investigating the title. There will be judgment for the first two amounts and also for the costs of investigating title, when taxed and ascertained, together with interest on the first two items from the dates on which the expenditures were respectively incurred at the rate of 6 per cent. The expenditure incurred in connection with the lodgment of the plans and seeking planning permission, including the architect’s fees, was not, in my view, an expenditure which the appellant was obliged to make under the contract or by reason of his having been induced to enter into the contract. It was rather an expenditure made for his own purposes and in my view this expenditure is not recoverable against the respondent as being too remote.
Fitzgerald J.:
The plaintiff in this action is a solicitor, being the principal partner in the firm of Messrs. W. J. Shannon and Company, and is the executor of one Frederick Charles Ward, deceased, who died on the 18th December, 1965. The said deceased was the owner in fee simple of and resided in the dwellinghouse No. 6 Manders Terrace, Ranelagh, in the City of Dublin. The house is one of a terrace of nine houses, of which Nos. 1 to 8 inclusive, have large gardens at the rear abutting on a laneway to which each garden has a gate. The laneway originally gave access to the public road by way of a gateway at the side of the garden of No. 1, the passageway passing under a portion of that house. The laneway was the only means of access from the public road to the rear gardens of the houses Nos. 1 to 8 Manders Terrace. The house No. 6 Manders Terrace had been conveyed by indenture dated the 6th March, 1908, from Evelyn Goulding to Richard Davis in fee simple “with the right of way in common with the owners and occupiers of the adjoining houses through the laneway at the rear of the said houses and with the right of ingress, egress and regress for the said Richard Davis, his tenants, servants and workmen and all persons employed by him and them with or without horses and carts and carriages at all times over and through the said laneway to and from the public roadway.” The said indenture also granted a right in common with the other occupiers of the houses on Manders Terrace to use the plot of ground in front of the houses. *55
By an indenture dated the 8th April, 1927, the said Richard Davis conveyed the said house to the said Frederick Charles Ward together with the right of way and the use of the plot in front of the houses in precisely the same manner as they had been conveyed to Davis in 1908. Incidentally Ward’s address is stated in the deed of 1927 as being No. 6 Manders Terrace. Presumably he was already a tenant holding from Davis. The evidence established that Ward continued to reside in the house until his death on the 18th December, 1965. By the end of 1965 the laneway had fallen into a state of disuse. Rubbish had been dumped on it, presumably thrown over the boundary walls. It had been heavily overgrown with weeds and sapling and the gateway under portion of No. 1 Manders Terrace was secured by an iron bar. The physical state of the laneway would indicate that it had not been used as a passageway for a number of years.
Probate of Ward’s will which was dated the 19th March, 1959, was granted to the plaintiff on the 27th January, 1966. The will directed the executor to sell the house as soon as convenient; it made provision for a number of pecuniary bequests and devised and bequeathed the residue of the testator’s estate to his brother George Victor Ward who resided and still resides in Canada. Pursuant to the directions in the will the plaintiff proceeded to arrange for the sale of the house by public auction. For this purpose he prepared particulars and conditions of sale in which the premises were described as “all that the dwellinghouse and premises known as No. 6 Manders Terrace, Ranelagh, in the City of Dublin held in fee simple R.V. £21.” There was no reference to any right of way or right to the use of the plot in front of the houses. It was stated that further particulars could be obtained from Messrs. W. J. Shannon & Co., Solicitors, or from Messrs. James Adam and Sons, Auctioneers. The plaintiff, Mr. Peilow, said that he decided to exclude the laneway from the conditions of sale because, from an inspection by him of the laneway, it appeared to be disused and derelict and blocked by the gate at No. 1. He in fact excluded it merely by making no reference to it.
He instructed Messrs. James Adam and Sons to offer the property for sale by public auction and for this purpose he furnished them with the particulars and conditions of sale. Messrs. Adam arranged to hold the auction on Monday the 24th January, 1966, and in relation thereto they inserted an advertisement in the Irish Times which appeared in the issue of that paper on the 6th January. The advertisement described the location and accommodation of the premises and stated, inter alia, that it was “double-fronted”, ideal residence or conversion” and that it had “a large walled garden with back entrance”. The information as to the house being “double-fronted, ideal for residence or conversion and having a large walled garden with back entrance” was not given to the auctioneers by Mr. Peilow but was inserted in the advertisement as a result of a personal inspection of the premises by Mr. Coyle of Messrs. Adam and Sons. This advertisement was repeated in the Irish Times published on the 13th January.
The defendant is a medical doctor by profession and also for a number of years prior to 1966 engaged in the purchase and development of property. He read the advertisement in the Irish Times of the 13th January and called to Messrs. Adams to enquire about the property 6 Manders Terrace. Messrs. Adam supplied him with a hand-out which contained the same information as had appeared in the the Irish Times advertisement. He then drove to Ranelagh and viewed the premises from the outside. He called back to Messrs. Adam on the 20th January and asked for the key of the house so that he might inspect it. He was provided with the key and proceeded to the premises accompanied by his wife. He inspected the house, the back garden and the laneway as far as the corner where it turned at right angles beyond No. 1 Manders Terrace. He observed the neglected condition of the laneway and estimated that it would cost £60 to £75 to have it cleared. He also observed that the gates from the gardens of the other houses were barricaded or bolted. When driving away from the house he observed that the doorway to the lane under No. 1 was bolted in some way.
Dr. ffrench O’Carroll’s evidence was that his intention was, if successful in purchasing the property, to develop it by converting it into flats and that this work would include the extension of the existing house into the back garden. He regarded access through the laneway as essential to the development which he intended. His intention as to the type of development envisaged was not challenged although it was put to him that conversion of the property did not necessarily mean any development or reconstruction outside the walls of the existing house. *56
Following his inspection of the property on the 20th January Dr. ffrench O’Carroll got in touch with Mr. Walsh, an assistant in the office of his solicitor, Mr. McCormack, as a result of which Mr. Walsh called on Mr. Peilow on the following day, January 21st, to inspect the title deeds and to ascertain if there was any covenant-restrictive of development in the deeds and to see whether the right of way was included in them. His inspection of the deeds of 1908 and 1927 disclosed that the right of way was included and that there were no covenants restrictive of development. There followed a discussion between Mr. Walsh and Mr. Peilow as to the right of way. There is a conflict between the evidence of Mr. Walsh and Mr. Peilow as to whether Mr. Peilow informed Mr. Walsh that the right of way was not being conveyed. It is clear that Mr. Peilow believed that he informed Mr. Walsh that the right of way was not being included in the sale, and equally clear that Mr. Walsh left Mr. Peilow’s office believing that the right of way was included and this is confirmed by the fact that he subsequently included the right of way in the draft conveyance which he prepared.
The auction on the 24th January was attended by Dr. ffrench O’Carroll and his solicitor, Mr. McCormack. Mr. Peilow was also present at the auction which was conducted by Mr. Coyle of the firm of Messrs. Adam. There is a conflict between the evidence of Mr. Peilow and Mr. Coyle on the one hand and Dr. ffrench O’Carroll and Mr. McCormack on the other as to whether a question relating to the inclusion of the right of way was asked at the auction prior to the bidding. Dr. ffrench O’Carroll and Mr. McCormack say that the question was asked and that Mr. Coyle replied that they were selling the right of way. Mr. Peilow and Mr. Coyle had no recollection of any question being asked with reference to the right of way.
The auction proceeded and Mr. McCormack purchased the property at £3,300. He duly signed the contract and paid the deposit of £825 and auction fees amounting to £165. The date for completion was to be the 28th February. Mr. McCormack furnished his requisitions on title on the 4th February and these were replied to on February 7th. The requisitions did not raise any query as to the right of way. The draft conveyance prepared by Mr. Walsh and including the right of way was sent by Mr. McCormack to Messrs. Shannon on the 25th February and was approved by them on the same day. Subsequently the issue arose between the parties that gave rise to this litigation. Dr. ffrench O’Carroll maintained that he had purchased the property including the right of way and Mr. Peilow maintained that the right of way was not included in the sale. Both parties have maintained their respective stands on this issue throughout, save that the vendor, through his counsel, has maintained that while not being bound to convey the right of way, the purchaser would be entitled to it if the right of way still exists. The pleadings in the action brought by the plaintiff for specific performance and the defence and counterclaim seeking specific performance of the contract including the right of way and damage for breach of contract, were amended during the course of the trial to permit the defendant to rely on fraudulent or alternatively innocent misrepresentation and in the further alternative to be relieved of his contract on the ground of mutual mistake. The allegation that the alleged misrepresentations were fraudulent was relied upon at the trial but abandoned on the hearing of the appeal.
The advertisement in the Irish Times and the hand-out given to Dr. ffrench O’Carroll by Messrs. Adam when he called on the 20th January clearly stated that the property was suitable as a residence or for conversion, was inclusive of a large walled garden with a back entrance. Having regard to the physical existence of the laneway this latter statement could only mean that there was a right of way over the laneway to the public road. Mr. Justice Teevan, having heard Dr. ffrench O’Carroll, was satisfied that he instructed Mr. McCormack to bid for the property on the basis that the right of way existed.
A vital issue of fact to be decided is whether either at the interview between Mr. Peilow and Mr. Walsh on the 21st January or at the auction on the 24th January the the statement in the newspaper advertisement and the hand-out that there was a rear entrance was corrected effectively, so that anyone who was relying on the statement in the advertisement or the hand-out would be informed that the statement was incorrect. Both Mr. Peilow and Mr. Coyle appear to accept the necessity for such a correction. Mr. Peilow said that he told Mr. Coyle to inform any prospective purchaser that the right of way was not being sold and Mr. Coyle said that he agreed that such a correction was necessary. *57
In relation to the interview between Mr. Peilow and Mr. Walsh, Mr. Justice Teevan was satisfied that both were truthful in their evidence as to their recollection of what was said. He finds that Mr. Peilow did say to Mr. Walsh that the right of way was not being included but that it cannot have been made quite as plain as Mr. Peilow thought it had, and he finds that this information was not taken in by Mr. Walsh. The learned judge also comments that Mr. Peilow’s attitude throughout was rather carefree and casual and that what Mr. Peilow said may not have had its full impact on Mr. Walsh’s mind and that there was ample opportunity for error or a failure of understanding. These findings by the trial judge do not amount to a finding that Mr. Walsh was clearly informed that the statement in the advertisement and hand-out was incorrect and that the right of way was not being sold. In effect the judge decided that Mr. Walsh was not clearly so informed.
In relation to the conduct of the auction Mr. Justice Teevan comments upon the evidence given by Mr. Peilow, Mr. Coyle, Dr. ffrench O’Carroll and Mr. McCormack as to whether any question was asked with reference to the right of way and whether any answer was given. Again he accepts that the witnesses had given evidence in accordance with their belief. He was satisfied that the question was asked, which is an acceptance of the evidence of Dr. ffrench O’Carroll and Mr. McCormack. He then finds that the answer given by Mr. Coyle may have been misunderstood by reason of a possible confusion from the words “we are’nt selling the right of way” being taken up as “we are selling the right of way.” In my opinion this also amounts to a finding that the necessary correction of the description of the property in the advertisement and hand-out was not made at the auction.
It was submitted by Mr. Conolly on behalf of the appellant that the appeal should be allowed on a number of grounds.
He contended, firstly, that the contract signed by Mr. McCormack following the auction was a contract to sell the premises with any appurtenances or rights, unless they were specifically excluded and that this was so, independently of any reference to the information contained in the newspaper advertisements or the hand-out which was given to Dr. ffrench O’Carroll. For this proposition he relied on a statement in Dart’s Vendor and Purchaser 1929 Edition at page 110 and to a further statements in Halsbury’s Laws of England Simnonds 3rd edition, volume 34, page 218, paragraph 361, that “An agreement to sell land implies the whole of the interest of the vendor will be conveyed”.
Mr. Ellis submitted that the case cited in Dart’s Vendor and Purchaser Skull v. Gleniston 16 C.B.N.S. H.E. 1, did not support the statement in the textbook. In that case an appeal was taken to the Court of Common Pleas in an action for trespass which had been tried before a judge and jury. On its particular facts a number of issues arose which are irrelevant to this issue in the present case. Earl C.J. does, however, state at page 188 that “this right of way was appurtenant to the lands demised by the Wheelers to the defendants.” The lease which the defendants had obtained was apparently in general terms, no right of way being mentioned. The learned Chief Justice seemed to be satisfied that the right of way being appurtenant to the land, passed with it under the demise and in point of fact this issue does not appear to have been debated. Other cases cited included (a) Stanton v. Tattersall 1 Sm. & G. page 529. This was an action brought by a purchaser for a declaration that he was entitled to rescind a contract for the purchase of certain premises at Pall Mall, London, on the ground that the access to the premises was by means of a right of way which in fact passed through the ground flloor of another building, portion of which was below the right of way in the basement and the rest of the building above it. It was held by the Vice-Chancellor that the plaintiff having contracted to buy certain property with a right of way to it, was now being offered an unusual right of way having regard to its situation and construction and that he was entitled to rescind the contract and his deposit was ordered to be returned to him. (b) Denne v. Light 8 De G.M. & G. This was a vendor’s action for specific performance. On the trial the plaintiff had succeeded but on appeal before the Lord Justices it was held that in the absence of special circumstances a Court of Equity would not enforce specific performance of a contract for the purchase of land which was silent as to the means of access to it when it is reasonably uncertain whether any means of entering on the land at all times could be inferred. (c) Curling v. Austin 2 Drew & Sm. 129. This was a purchaser’s action for specific performance. While the action succeeded, the circumstances were somewhat unusual. *58 The purchaser required the vendor to make title to a right of way which was in fact a cul-de-sac serving a number of houses. It was held that the vendor under the contract was not bound to make title to the right of way but in addition following the primary decree on the trial of which this isue had not been raised, the vendor raised it for the first time when the matter was before the Examiner and then came before the Court on further consideration.
It appears to me that the effect of these decisions establish that on a failure by a vendor to disclose to the purchaser any unusual feature of the property which is material, and a refusal by him to convey the property contracted to be sold without having inserted in the conveyance a limiting definition of the property, specific performance will not be granted in a suit brought by him and the purchaser is entitled to rescind.
Mr. Ellis conceded that under the contract Dr. ffrench O’Carroll became the equitable owner of the premises and of whatever right of way might be subsisting. He ultimately conceded that although the right of way was not mentioned in the particulars in the conditions of sale the sale itself involved such a right of way as was there, being comprised in the sale.
This appears to me to restrict the issue to a question as to whether the contract, quite apart from any representation by advertisement or hand-out or given verbally, included a full right of way in the terms of the deeds of 1908 and 1927, or alternatively only the possibility of such a right of way still existing having regard to the evidence of the apparent disuse of the laneway for a number of years.
It appears to me that when it is admitted that such a contract would carry the right of way, if it still subsisted, the onus of proving that in this case that the effect of the contract should be limited, rested upon the vendor to establish such a limitation. Such a limitation could be established by proving either an express communication to the purchaser that such was the position, or that the circumstances were such that he must have known it from observation of the property itself. There is no finding by the trial judge that such a limitation was ever communicated to the purchaser by the vendor prior to the contract being signed by his solicitor, Mr. McCormack.
Neither, in my opinion, was there sufficient evidence to support the trial judge’s finding that in the absence of such a communication the condition of the laneway on his inspection prior to the auction should have conveyed to Dr. ffrench O’Carroll that the right of way might have been lost by abandonment. Mr. Coyle after his examination of the premises and having no specific instruction to do so, included in the description of the property its suitability for conversion and that it had a rere entrance, which statements were based on his own assessment of the position as he saw it. If Mr. Coyle, an experienced auctioneer, arrived at these conclusions I see no reason why it should be held that Dr. ffrench O’Carroll should have come to any different conclusion. Consequently, in my opinion, there is no basis upon which it could be held that Dr. ffrench O’Carroll should have realised that the property which he had agreed to buy would be conveyed to him without a full right of way. The vendor has refused to convey the property without any limitation.
Consequently, in my opinion, under the contract the vendor was bound to convey the premises No. 6 Manders Terrace with its appurtenances which included the right of way. His refusal to execute such a conveyance is, in my opinion, a breach of contract by him and consequently he is not entitled to succeed in his claim for specific performance. It appears to me that the defendant is entitled on his counterclaim to damages for breach of contract. Having regard to the view which I take on this issue it is possibly superfluous to deal with the other issues raised other than the question of damages.
I find myself unable to accept Mr. Conolly’s second proposition that the particulars contained in the hand-out must be incorporated in the contract having regard to the fact that the conditions of sale referred the person reading them, to Messrs. Adam for further particulars and that the hand-out furnished by them referred to the rere entrance and thus indicated that a right of way existed. Mr. Conolly agreed that the fact that the information about the right of way happened to be in a hand-out put him in no better position than if the enquirer at Messrs. Adam had been told verbally of the existence of the rere entrance. It appears to me to be going too far to suggest that any information given by the auctioneers over the counter should be taken as being incorporated in the contract. No authority to *59 support Mr. Conolly’s second proposition was cited and in my opinion such a decision in this case would amount to an unwarranted alternation in the law of contract.
Mr. Conolly abandoned his third ground which related to the admissability of evidence.
His fourth submission was that the exclusion of the right of way amounted to a breach of contract by the vendor in which, as I have stated above, I consider that his submission is correct.
His fifth proposition was that it was a condition of the contract that the right of way was included and that the purchaser was entitled to rescind and recover damages. Having regard to my conclusion that the vendor was guilty of a breach of contract it is unnecessary for the defendant to rescind the contract as he does not require to be relieved of it having regard to the vendor’s breach.
Mr. Conolly submitted, ground 6, that on the evidence of Mr. Coyle and the plaintiff the further particulars furnished by Messrs. Adams and contained in the advertisements were misleading and that the plaintiff could not be granted specific performance, where the contract was not clear. For the reasons stated above I think Mr. Conolly’s submission on this point is well founded.
Ground 7—I think that for the reasons stated above Mr. Conolly’s submission that the trial judge was wrong in law in holding that Dr. ffrench O’Carroll should have appreciated that the right of way had been abandoned is also well founded.
In my opinion Mr. Conolly was also correct in submitting that the advertisement and the hand-out amounted to representations that the right of way existed, that its existence was a material matter to the purchaser and that the misrepresentations entitled the purchaser to rescind.
A further issue was raised by the plaintiff at the trial that the purchaser had elected to treat the contract as subsisting and that he affirmed it after he had ascertained that the vendor refused to convey the right of way. This issue was not raised in the pleadings as the plaintiff was not aware of the relevant facts prior to the hearing. The facts relevant to this issue are that subsequent to his being informed that the vendor would not convey the right of way Dr. ffrench O’Carroll lodged plans with the Dublin Corporation seeking planning permission in relation to the property, which plans did not depend upon his having any title to the right of way. While his action in lodging the plans is consistent with an intention to complete the sale without the right of way being conveyed, it is equally consistent with his endeavouring to utilise the property if it were decided in litigation that he was bound to complete although the right of way was excluded. The evidence and the correspondence establish that Dr. ffrench O’Carroll always maintained his claim to have the right of way included and that the persisted in his refusal to complete if the right of way was not included. Mr. Justice Teevan came to the conclusion that the action of Dr. ffrench O’Carroll in submitting plans to the Corporation after he became aware that the vendor would not convey the right of way amounted to a recognition or affirmation of the contract, and that he was not entitled to repudiate it subsequently. I respectfully differ with the trial judge. A recognition or affirmation of a contract would normally arise where such was communicated to the other party and might possibly be inferred without any such communication where the purchaser’s conduct was consistent only with an intention to complete. It appears to me, however, that recognition or confirmation are not to be inferred where the purchaser’s conduct is equally consistent with a different intention and where no such communication is made to the vendor. In the present case, on the contrary, there is a persistent demand by the purchaser for completion of the contract in accordance with the purchaser’s version of it.
Consequently, in my opinion, Dr. ffrench O’Carroll is entitled to damages for the loss sustained by him consequent upon the breach of contract committed by the vendor. The loss sustained was the deposit, the auction fees and the costs of investigating the title. It was submitted on behalf of the plaintiff that the auction fees were not recoverable as this was not money paid to the plaintiff. It appears to me, however, that the money paid by the defendant to the auctioneer was a loss sustained by him directly attributable to the breach by the plaintiff of the contract to sell and I see no reason why it should not be recoverable as part of the damages for breach of contract. As pointed out by Mr. Justice Budd in his judgment the liability of the vendor to refund the deposit would *60 arise under the conditions of sale if the vendor lawfully rescinded the contract. Consequently this was a loss which was envisaged and there appears to me to be no good reason why the vendor should be liable to reimburse the purchaser if the contract was lawfully rescinded, but that he should not be liable where the contract goes off because of the vendor’s breach of it.
The purchaser also claimed the expense of submitting the plans for planning permission to the Dublin Corporation. In my opinion these latter expenses are not recoverable. They would have been incurred in any event if he was forced to accept the conveyance without the right of way and somewhat similar expense would have been incurred even if he had obtained the conveyance with the right of way. I am consequently of the opinion that the order of the High Court should be set aside, that Dr. ffrench O’Carroll is entitled to damages for breach of contract as above set out and interest at 6 per cent.
McLOUGHLIN J.
I agree.
Leslie White v Kevin McCooey
[1976-7] I.L.R.M. 72
(Gannon J)
26 April 1976
The plaintiff’s claim is to enforce performance by the defendant of a contract for the sale of a licensed premises in the town of Monaghan and alternatively for damages for breach of the contract. The defendant disputes the claim on the grounds that there was no agreement, and that at the time of making the contract he was so drunk that he was incapable of contracting, and whatever agreement was made is unfair and is unenforceable and should be set aside. Although, as pleaded, the agreement is alleged to have been made in writing the contract relied upon is a verbal agreement in relation to which a subsequent written document is relied upon as being a memorandum such as is required for compliance with the Statute of Frauds. To accord with the oral evidence I am allowing the pleadings to be amended by the insertion in the first line of paragraph 1 of the statement of claim of the words so as to make this line read ‘by an oral agreement of which was made a memorandum in writing made on or about the’, and the fifth paragraph of the defence as being amended by the insertion of the words ‘memorandum or’ before the word ‘agreement’, and the fifth paragraph of the reply with the corresponding amendment by the insertion of the words ‘memorandum of’ before the word ‘agreement’. The defendant maintains that the written document in which there is not any reference to the publican’s licence is not such a memorandum, and further that there has been such delay on the plaintiff’s part seeking relief that he should be deemed to have abandoned his claim to equitable relief, and that in the changed circumstances now existing performance of the contract would be a hardship and should not be enforced. Whether the plaintiff is entitled to any relief and, if so, to what form of relief cannot be determined *74 until some serious disputes on questions of fact have been resolved.
The onus lies on the plaintiff to prove the making of the contract, all its terms, the consensus of the contracting parties, the completion and sufficiency of the memorandum required by the Statute of Frauds, and the evaluation of whatever damages the plaintiff might seek. The defendant seeking on equitable grounds to avoid the contract undertakes the onus of proving all the circumstances on which he relies for that purpose including the drunkenness alleged and the knowledge thereof of the plaintiff and the changed circumstances relied upon to relieve the defendant from the obligation of now performing the agreement. A plaintiff coming into court seeking equitable relief must be frank and forthright in his evidence and in the presentation of his claim free of any appearance of, or attempt at, misleading by suppression of information or otherwise. In considering and assessing the evidence given by or on behalf of the plaintiff I have kept this principle in mind and likewise in relation to the counterclaim of the defendant for a rescission of the agreement and in respect of the onus of proof so far as it lies on the defendant to support the equitable grounds on which he relies to avoid the contract. Having seen and heard both the plaintiff and the defendant, and having observed their manner of answering questions and giving evidence and their demeanour in the witness box, I feel it proper to say at this stage that where there are conflicts in the evidence given by them I have no hesitation in preferring the evidence of the plaintiff. I am satisfied that the plaintiff has come into court ‘with clean hands’.
The contract which the plaintiff seeks to have performed was made, according to the plaintiff, at a table in the dining-room of Hayden’s Hotel Ballinasloe (on the evening of 3 August 1972). The plaintiff’s evidence was that in the course of general discussion, the discussion about the sale of the property was introduced by the defendant and the discussion interspersed with general conversation lasted about one hour before agreement was reached subject to the matter of furniture which took a further half hour. The plaintiff’s version of the matter, as corroborated by his companion Miss Best, is that the defendant had invited him to increase on the amount which he had previously offered in earlier discussions and that, he having refused to increase his offer, the defendant finally agreed to the sale at the sum of £6,000. He says that he took out his cheque book and put it on the table and asked Miss Best to draw the cheque for a sum of £6,000 payable to the defendant on 1 September 1972 being the date on which he says it was agreed he should take possession of the property and he signed the cheque. At Miss Best’s suggestion the plaintiff asked the defendant for a receipt and the defendant took out a piece of paper from his pocket on which he wrote but the plaintiff was not satisfied that what was written was sufficiently legible. This piece of paper was given to Miss Best who wrote on it what the plaintiff dictated to her including an alteration in relation to furniture and it was then signed by both the plaintiff and the defendant. There were present at the *75 table at that time four other persons also who had a meal at the table and with the defendant a Mr Dynes, his companion, both of whom had a meal at the table but neither the plaintiff nor Miss Best had a meal there. The cheque and the piece of paper were produced and proved in evidence.
The evidence given by and on behalf of the defendant and his witnesses in relation to the same incident was briefly as follows. The defendant recalled being at a dining-table in Hayden’s Hotel, Ballinasloe on 3 August 1972, in the company of his friend Mr Dynes, at which a Mr Hanlon, a Mr Plunkett, Mr Plunkett’s son and girl friend for a meal. He had no recollection of the plaintiff’s coming into the dining-room to the table nor of any conversation with the plaintiff nor of the cheque nor of the piece of paper. He recalled being told by Mr Dynes when he awoke in the Imperial Hotel Galway on the morning of 4 August 1972 that ‘he had sold a pub the night before’ and that Mr Dynes said something to him which he could not remember about a cheque. He said he could not remember any other conversation then or later with Mr Dynes about either the pub or the cheque. He said he first saw the cheque when he received it from a receptionist at the Skeffington Arms Hotel, Galway, later the same morning. He denied having seen the piece of paper, put in evidence as the note signed by him, before he came into court. When asked to identify his signature on it he took a banker’s card from his pocket and compared the signature on it with that on the piece of paper before saying that it was not his usual signature. He wrote a specimen signature on a piece of paper in court which does not correspond to that on the alleged note or memorandum.
The evidence of Mr Dynes was that he was seated at the table in the dining-room of Hayden’s Hotel opposite to the defendant and beside Mr Hanlon and Mr Plunkett with whom he was in conversation. He saw the plaintiff and the defendant in conversation and he did not overhear any part of their conversation nor did he know what they were talking about. He said there was a lot of earnest conversation between the plaintiff and the defendant and that they were talking quietly and that he was not paying any attention. He said he did not see any cheque book nor any cheque being written nor any piece of paper nor writing at the table. He had no recollection of having any part in the conversation or of saying anything about furniture. The first he knew of any transaction, he said, was on the Friday morning when he and the defendant arrived at the Skeffington Arms Hotel from the Imperial Hotel, Galway when the defendant, after speaking to a Mr Devlin, went to the reception desk to collect a cheque which was made out to the defendant for £6,000 and signed by White. In reference to this he said ‘without anyone saying anything I took it for granted the cheque was connected with the events of the night before’. He said the defendant seemed bewildered and that he said to the defendant ‘You were in very deep conversation with White in Hayden’s and something may have come of that’.
Mr Hanlon gave evidence that he was seated at the table in Hayden’s Hotel with Mr Dynes on his left and that after he had finished his meal two people came in and sat near the defendant who gave them recognition but, so far as he saw, there was no conversation between the defendant and the plaintiff who was one of the two. He said he did not see any cheque book or writing or business of any kind at the table.
A Mr Devlin gave evidence of seeing the defendant arriving in the hall of the Skeffington Arms Hotel at about 1 am or 1.30 am on 4 August 1972 staggering in and mumbling about having sold or bought a pub. He said the defendant took a cheque out of his pocket and that he, Devlin, took it from him, because of his condition, and gave it to the receptionist to keep it safe until the next morning. He said he met the defendant in the morning and told him there was a cheque belonging to him in the safe and that the receptionist would get it for him.
I am satisfied that both the cheque and the piece of paper were made and written on the same occasion, that is, at the table in the dining-room of Hayden’s Hotel on the evening of 3 August 1972. It is not pleaded, nor was it suggested to, nor by, any of the witnesses that either of these two documents was a forgery, but it seemed implicit from the evidence of the defendant, of Mr Dynes and of Mr Hanlon that they must have come into existence at some other time and place than as deposed to by the plaintiff. In regard to this matter I accept the evidence of both the plaintiff and of Miss Best.
The next matter is what was the agreement reached by the plaintiff and the defendant. The plaintiff swore that in the course of the previous month of July he had discussed with the defendant on three occasions at his Park Street licensed premises the sale of the licensed premises at 16 Dublin Street, Monaghan which the defendant told him had ‘a clean seven day licence’. According to the plaintiff he had made three offers to the defendant of £5,000, £5,500 and £6,000 for the purchase of the Dublin Street licensed premises all of which offers the defendant had refused. He said the defendant had asked him to bid more on each occasion and had informed the plaintiff on one occasion that he had had an offer but that the deal had fallen through. The plaintiff says that when talking with the defendant at the table in Hayden’s Hotel in Ballinasloe the defendant raised the matter of these offers and asked the plaintiff if he would give more and suggested £8,000 to which the plaintiff says he replied: ‘You’ll have to do better’. According to the plaintiff the defendant at a later stage in the conversation raised the matter again and asked for £7,500 but the plaintiff claims he refused to go any further than the £6,000 he had offered in July and that eventually after further conversation the defendant said he could have it and it was agreed he would take over at the end of the month. It was then the post-dated cheque was made and after that the plaintiff asked to have the furniture in the licensed premises but the defendant wanted more money for this. According to the plaintiff there was further bargaining for some time until Mr Dynes intervened and said to the *77 defendant that as he had got good money he might as well let the plaintiff have the furniture and that that was agreed. The plaintiff then handed over the cheque and Miss Best suggested that he should get something in writing. The contents of the written note which was produced in court corresponds to what the plaintiff says was agreed but it does not describe the premises as being a licensed premises. The plaintiff does not allege that there was any conversation about the licence attached to the premises or in reference to the transfer of it to him.
The defendant’s evidence in relation to the alleged negotiations for agreement at Hayden’s Hotel is entirely negative as he says he cannot remember seeing the plaintiff come into the dining-room nor any conversation or other transaction then. But the defendant did swear that he did not have three interviews with the plaintiff in July about the sale of his licensed premises at 16 Dublin Street and that he had no conversation with anyone about it anywhere save in the office of Mr Connolly, auctioneer whom he had instructed to advertise the property as being for sale. If the defendant is correct in this, the first and only conversation he could have had with the plaintiff about the sale of the Dublin Street licensed premises must have been in Hayden’s Hotel in the dining-room of which event he has no memory but out of which he received the plaintiff’s cheque for £6,000. A Mr Brownlee who gave evidence on behalf of the plaintiff said that he was in the defendant’s licensed premises at Park Street, Monaghan on the Sunday following 3 August 1972 and that the defendant produced and showed to him a cheque for £6,000 drawn by the plaintiff. According to Mr Brownlee the defendant knew that he, Brownlee, knew the plaintiff and the defendant having shown him the cheque asked him would he say it was all right and he said it was all right. Mr Brownlee’s evidence was not contradicted nor contested in any way.
The plaintiff said that he called to the defendant at the Park Street premises about ten days after 3 August 1972 to enquire about his solicitor, deeds and title, but the defendant said to him £6,000 was small and he would need to give more to which the plaintiff replied, ‘you are getting a good price.’ The plaintiff said he called again later in the month and again the defendant asked for something extra and the matter advanced no further. According to the plaintiff at the beginning of September the defendant told the plaintiff to contact Mr O’Gara solicitor and to give more money and when he came back on 12 September the defendant then told him that he was not giving the premises to him. That was the last time they met and thereafter the plaintiff put the matter in the hands of his solicitor. For his part the defendant said that after he came home from the Tuam races on the Friday night he did nothing about the matter and took no steps to find out about it. He said the plaintiff came to him in the Park Street premises about a week later and he recounted the conversation they had as follows: ‘He said: ‘What about that deal the other night?’ I said ‘I had no deal’. He said: “I bought Dublin Street off you and I have proof of it’. I said: ‘You *78 didn’t”. He said: ‘I’ll see about it’ and that was all he could remember. The defendant said the plaintiff kept coming and he told him there was no deal and after four or five interviews he told his own solicitor ‘This man was on to me’. The cheque was retained by the defendant until it was produced by him in court. The piece of paper was retained by the plaintiff until it was produced by him in court. On such occasions as the plaintiff and the defendant met each other subsequent to 3 August 1972 neither of them produced to the other the cheque or the piece of paper. If I accept the plaintiff’s account of these meetings between the plaintiff and the defendant after 3 August 1972 there would be nothing unusual about the non-production by either of them to the other of the cheque or the note. But if the defendant’s account of such meetings is correct coupled with his disclaimer of any conversation at all prior to 3 August 1972 and no recollection of any negotiations in Hayden’s Hotel the non-production by him of the cheque to the plaintiff and his failure to enquire about ‘the deal’ and the ‘proof of it’ seems highly improbable. The defendant’s own conduct subsequent to 5 August 1972 as given in evidence by himself and by the plaintiff and by Mr Brownlee confirms to my mind the plaintiff’s account of the July conversations and the transaction at the table in Hayden’s Hotel in Ballinasloe.
I find the following facts to have been proved namely:
1. That the defendant agreed with the plaintiff to sell to him for the sum of £6,000 the licensed premises, No. 16 Dublin Street in the town of Monaghan with the furniture therein and to complete the sale and give the plaintiff beneficial possession on 1 September 1972;
2. That a memorandum in writing of the contract was made after the agreement was reached and was signed by the defendant.
In his statement of claim the plaintiff claims that the defendant agreed to sell him the publican’s licence of the premises in question but the defendant did not raise any issue on this by his defence. In his direct evidence the plaintiff made no reference to this aspect but said that it was his intention to pull down and re-build most of the premises and he expected to spend about £10,000 on it. When it was suggested to him in cross-examination that he had not got the defendant’s agreement to sell the licence to him he said he considered he was to get the licence but that there was no mention of it at the time nor in the note or memorandum. The defendant made no point about this either in his pleading or in his evidence and I accept that both parties took it for granted as necessarily implicit in a transaction of this nature that whoever had the premises should have the licence. It was not an express term of agreement nor is it a term on which there is disagreement, and accordingly there is no reason why mention of it should have been included in the note or memorandum which, as made, is complete in fact without such reference to the licence.
The plea of non-compliance with the Statute of Frauds on which the defendant relies raises an issue of sufficiency of evidence in support of the plaintiff’s claim. *79 In the case of an oral agreement, as in this instance, the inclusion in, or omission from, the note or memorandum of an alleged term of agreement does not alter the contract. To hold otherwise would permit of the Statute of Frauds being used itself as an instrument of fraud. Where an agreement is contested, and so far only as it is contested, the evidence required by the Statute of Frauds must be adduced in support of the claim in order to invoke the assistance of the court. To ascertain the sufficiency of the note or memorandum it is necessary for the court to hear evidence of the making of the oral agreement and its terms. If there be a dispute as to the existence of the agreement or as to consensus on some or any of its terms the plaintiff will fail to prove the consensus of the parties and the completeness of the alleged contract and therefore get no aid from the court unless his oral evidence be supported also by the written evidence, vouched by the signature of the defendant, which the Statute of Frauds prescribes. But the defendant cannot, in circumstances in which he admits agreement with the plaintiff, invoke the provisions of the Statute of Frauds simply to deprive the plaintiff of the benefit of such agreement, as this would be a fraud of the converse nature to that which the Statute of Frauds is expressed to prevent. What I have stated is consistent, I believe, with the basic principles of the law of contract and of evidence and accords with the earlier authorities. I do not think it necessary therefore to indulge in an analysis of the type of scholastic disputation to be found in Twedell v Henderson [1975] 1 WLR 1496, Tilverton Estates Ltd v Wearwell Ltd [1975] Ch 146 and Scott v Bradley [1971] Ch 589 and the distinctions made therein in relation to the decisions in Burgess v Cox [1951] Ch 850 and Hawkins v Price [1947] Ch 645 which were cited to me in the course of argument.
The cross-examination of the plaintiff in reference to the licence and the examination made on behalf of the defendant with reference to the provisions of the Statute of Frauds appear to have been based on a supposition that the defendant had a special property in the seven day licence relating to 16 Dublin Street capable of being sold or withheld independently of the sale of the premises. The decision in Irish Industrial Benefit Building Society v O’Brien [1941] IR 1 which was cited in the course of argument for the defendant does not support this proposition nor is that decision at variance with the decisions in Kelly v Montague (1892) 29 LR Ir 429 and James L. Murphy & Co Ltd v Crean [1915] 1 IR 111. In the last mentioned case the Lord Chancellor O’Brien in the course of his judgment at p. 135 said:
There is one principle of licensing law which is now absolutely well settled since the case of Murphy v The Cork Justices [1895] 2 IR 104, and indeed there has not been any real doubt on this question since the decision of the Court of Appeal in Kelly v Montague 29 LR Ir 429. There is no doubt whatsoever that there can be no property in a spirit licence in Ireland apart from the premises in which the business is carried *80 on by the licensed person. It is not that in a sense that it does not and may not represent very valuable property, but it cannot be severed from the house and have the character of separate property. Possibly the minds of some lawyers were not quite settled in respect of this matter at the time when the agreement in the present case was entered into, but that cannot affect the question once the law is clearly ascertained. There is contained in the decisions of our Irish courts a principle, not merely technical, but resting, as I conceive, upon the public policy of the Irish licensing code — namely, that a severance of licences from licensed premises, to be dealt with apart from and irrespective of the premises, and when separated to be manipulated in the interest of private individuals for their personal profit or gain, is not permitted by law, and it would be a grave misfortune if the law were otherwise.
The very clear and simply stated exposition by Chief Baron Palles of this aspect of the licensing laws contained in his judgment in the report of Murphy v Crean [1915] I IR 111 at 141 to 143 has been so long accepted and acted upon by those engaged in the licensed trade and their legal advisors that I consider it unnecessary to quote it again here. Subject therefore to the matters on which the onus of proof lies on the defendant I am satisfied that the plaintiff, so far as the onus lies on him, has proved the consensus of the parties to the contract and its terms with that degree of certainty the law requires and the existence of a note or memorandum thereof in writing signed by the defendant which complies with the requirements of the Statute of Frauds.
The defendant seeks to avoid the contract on the grounds that at the time it was made he was so intoxicated by alcohol that he was incapable of knowing what he was doing or understanding the nature of the transaction and that the plaintiff was aware that this was so. He further submits that by reason of his drunkenness there was such want of mutality to the knowledge of the plaintiff that the contract was unfair because the defendant was in an unequal bargaining position of which, he says, the plaintiff took advantage. Two issues of fact fall to be determined namely whether and to what extent the defendant was so intoxicated as to be incapable as he alleged, and whether this was known to the plaintiff at the time, and on these issues the onus of proof lies on the defendant. His evidence was that the incident at Hayden’s Hotel, Ballinasloe occurred on the evening of the third day of Galway Races in 1972 and that he and a companion Mr Dynes had attended the races on each of the three days. He said that on Thursday, 3 August 1972 he had had no breakfast and between 10.30 and 11.30 am he had two glasses of brandy and two bottles of Harp at the Skeffington Arms Hotel in Galway. Between 11.30 am and the time he left for the races he had two more glasses of brandy and bottles of Harp and had a sandwich at the race course but no lunch. While at the races he had four bottles of Harpm and left the races while the last race was being run with the intention of returning to Monaghan. Mr Dynes was driving the defendant’s car, in which they had travelled together, and they stopped at a village about 10 miles from *81 Galway where they delayed for about one hour in a licensed premises and he had four brandies and Harps before the 6.30 pm news on television and a further one brandy and Harp after the news. They drove on to Ballinasloe where they intended to have a meal and went into a licensed premises where the defendant said he had four brandies and Harps and from there they went to Hayden’s Hotel. On entering Hayden’s he had two brandies and Harps in the company of Mr Dynes and then three more brandies and Harps in the company of the plaintiff and Miss Best before going into the dining-room. At the table in the dining-room he and Mr Dynes joined four others, a Mr Hanlon, a Mr Plunkett, Mr Plunkett’s son and his girl friend and in the course of conversation about the races he won £10 from Mr Hanlon on a bet as to whether or not a horse called William’s Love had been placed in a race on the Tuesday. It was suggested to him that he went out to his car to get a paper to check the information and then invited the plaintiff and Miss Best in to the dining-room telling them of the bet which he had won. He insisted that he did not leave the dining-room at that time nor invite in the plaintiff and Miss Best. He said he bought a bottle of champagne and a bottle of brandy out of the money won on the bet and had it served before the meal was served. He said he could not remember what he had to eat or anything more about that evening from the time the champagne and brandy were bought to the table.
Mr Dynes with whom the defendant went to the Galway Races and who drove the defendant’s car said that on the Thursday morning they had had no breakfast, that the defendant had a brandy and beer about 10 am and before they set out for the races they had a bowl of soup and a sandwich and the defendant ‘had quite a few drinks’. He said that on their way home from the races they went into a licensed premises in a village the name of which he could not remember in which he said the defendant ‘had at least four brandies and four beers’. Mr Dynes also said they went into a licensed premises in Ballinasloe in which, he said, ‘McCooey had about three brandies and three beers’ and from there they went to Hayden’s Hotel. When they went in the defendant ordered a brandy and left Mr Dynes to join someone whom the barman said had paid for the defendant’s drink and the defendant later came back to bring Dynes to join him with the plaintiff and Miss Best. In their company, according to Mr Dynes, the defendant and he each bought drinks but he did not say what drinks. Mr Dynes said that when they were going into the dining-room the defendant was unsteady but gave no other indication that he was intoxicated. He too described the incident of the bet between the defendant and Mr Hanlon but said that Mr Plunkett went out for the race card and came back without it and Mr Plunkett’s son went out and came back with the race cards to show that the defendant had won the bet whereupon the defendant ordered champagne and brandy. Mr Dynes said they had started to drink the champagne and brandy before the plaintiff and Miss Best came in although both the plaintiff and Miss Best gave evidence they *82 had come in on the invitation of the defendant and that the champagne, but no brandy, was ordered after they had joined the party. Mr Dynes said the defendant was singing a song, he was not rowdy, was not disturbing anyone and that they had tried to join in but did not know the words. He said that when the defendant was in conversation with the plaintiff he was ‘under the weather’ and ‘not a capable man’.
The plaintiff on the contrary said of the defendant that he was sober, that there was no singing, that his voice was normal, that he did not show any signs of drink and that he understood perfectly the kind of bargain he was making. Miss Best said the defendant did not sing at all, that he was quite capable of writing, that after he had first written on the piece of paper he handed it over and said ‘I’m not a good writer’ and that he signed it after she had written it out and the plaintiff had signed. Mr Hanlon described the defendant as being in good form when he joined their table and was singing. He too described the incident of the bet about the horse ‘William’s Love’ and said the defendant ordered champagne and brandy and settled for the meal for all of them and for the champagne and brandy about an hour before they left and gave the change to the waitress. The defendant offered no evidence as to his previous experience of drinking or of the effect of alcohol upon him nor did he give me any evidence of his capacity or tolerance for alcohol or evidence which would assist me to assess the effect on him of the quantity and nature of the alcohol consumed by him as given in evidence. The defendant purported to be accurate and precise about the nature quantity and number of drinks he had prior to going to the table in the dining-room in Hayden’s Hotel. By contrast Mr Dynes, who presumably remained sober and in a fit condition to drive the car, was vague about the same matters. The defendant confidently contradicted the evidence of the plaintiff and Miss Best as to how he and they came to join company in Hayden’s Hotel and as to the number and nature of the drinks he had had before he went into the dining-room. While at the table he successfully backed with confidence his memory of horses and race results of the previous Tuesday. He recalled the verification of his win on the bet and the ordering of the champagne and brandy but denied having gone out to get the information and denied having invited the plaintiff and Miss Best to come in.
All this evidence of the defendant strikes me as highly inconsistent with his being or giving the impression of being seriously affected by drink up to the time the champagne was served. I do not believe the evidence that he had as many drinks as 18 brandies and 22 Harps on 3 August 1972 or that he showed the signs of intoxication suggested by the evidence of Mr Dynes and of Mr Hanlon before the defendant went to the dining-table. There were no drinks served in the dining-room before the champagne was served and I believe both the plaintiff and Miss Best were present when it was served. I do not believe that the defendant had no recollection of seeing the plaintiff and Miss Best come in *83 or of having conversation with them. Rergretfully I must say that this is a case in which I find I cannot resolve the differences between the witnesses without rejecting some of the evidence as being untruthful. The ability of a witness to remember, and whether he does so or not, is a question of fact and I am not satisfied that the evidence as to the extent of their memories were truly stated to me in relation to this occasion in Hayden’s Hotel by the defendant or by Mr Dynes or by Mr Hanlon.
I accept that the defendant was drunk and incapable when seen by Mr Devlin at 1 am or 1.30 am at the Skeffington Arms Hotel later the same night but the defendant was sober when he received the cheque the following day. According to the evidence he did not talk about the matter at all to Mr Dynes in whose company he spent the Friday at Tuam Races. He produced the cheque to Mr Brownlee on the following Sunday but when speaking to the plaintiff later that week he made no reference to it nor did he make any effort to refresh his allegedly faulty memory of the events of the previous Thursday at Hayden’s Hotel. On none of the occasions when the defendant saw and spoke to the plaintiff did the defendant give any indication that he had any complaint about the circumstances under which he obtained the cheque or that he wished to avoid the transaction which, on his own evidence, either never took place or, if it did, had occurred without any previous communication from the plaintiff and without any recollection of the defendant of the event. Even after he had consulted his solicitor he did not seek to have this contract avoided, which he now says was voidable, but on the contrary he sought to have it affirmed subject to a variation of the price by a substantial increase. The plaintiff’s evidence of the transaction and the matters leading up to it and the encounters following it bears all the marks of probability but the defendant’s account bears none. The defendant’s evidence is so heavily burdened with improbability that I have no alternative but to reject it. I am not satisfied that the defendant was incapable through drunkenness to enter into a binding agreement such as has been proved, and I am quite satisfied that the plaintiff did not know and had no reason to suppose that the defendant was so affected.
The defendant has not discharged the onus of proof which lies on him in respect either of his defence as alleged of incapacity to contract by reason of drunkenness or of his counterclaim to have the contract avoided.
But the defendant further claims that the agreed price as alleged is so much below the fair price for the property as to be unfair and unconscionable and suggests that but for his intoxicated state the plaintiff would not have obtained his agreement to a price so low. On this aspect the onus of proof lies on the defendant. He is a publican living at Park Street, Monaghan where he has a licensed premises, and in 1970 he purchased the additional licensed premises, No. 16 Dublin Street for his son then aged 18 years of age, for the sum of £7,000 from a man named Duffy who expected to get £8,000 for it. After the purchase *84 he spent a couple of hundred pounds retiling the floor, putting in a new carpet, new chairs and a new ceiling. In less than two years, namely in May 1972, he instructed an auctioneer James Connolly to get offers with a view to selling it again. He said he expected to make a profit and lodge it to the account of his son. He did not say what profit he expected to make. He said the average weekly turnover of the business was £130 and he had a weekly income of £19 from three tenancies in the flats above the ground floor. He said he is a member of the Monaghan Vintners’ Association who buy licensed premises in the town for the purpose of extinguishing the licences for the protection of the business of the members of the Association. In the eight years that he was a member they had bought two or three premises and extinguished the licences. Patrick McElvaney the treasurer of the Monaghan Vintners’ Association, who is a publican and auctioneer, gave evidence of his inspection of the premises in April 1976. He was not told in 1972 that the premises was up for sale nor did he see any advertisements relating to it but there was a rumour that it was for sale then. He described the premises as a four storey building in a situation somewhat hampered by the narrowness of the street with a 26 foot frontage to Dublin Street and a rear entrance by a six foot six inches passageway leading off Dublin Street. It has a bar having 450 square feet area and lounge accommodation of the same area. He said the state of repair was below average, the top floor was unoccupied and uninhabitable and the remainder of the house was occupied in flats. There was no living accommodation for the owner without removing the tenants. The poor law valuation is £24 and there is a fee farm rent of £10 per annum.
On the basis of a comparison with a licensed premises in Market Street which was sold in 1971 by public auction with five acres of land for £10,100 he estimated the value of 16, Dublin Street in 1972 as £12,000 assuming vacant possession. The Market Street premises had a poor law valuation of £13 and was subject to a fee farm rent of £3 and the owner resided in it. The bar area was 170 square feet and it had no lounge accommodation. It was bought for the Monaghan Vintners’ Association by Mr McElvaney and the five acres of lands he later sold for £5,000 and the licence was extinguished, from which he estimated the value of the licensed premises portion without the land at £7,000. By establishing a mathematical ratio between the poor law valuation and the estimated capital value estimated for 1972 and assuming an annual appreciation in value of 10% and applying these ratios to the poor law valuation of the Dublin Street premises he estimated its present value at between £16,000 and £18,000. He thought that a turnover of £130 per week would yield a net profit of 15% and he gave it as a general rule-of-thumb that a licensed premises would sell at a price equivalent to the amount of the annual turnover. His most recent purchase of a licensed premises in this area was for £7,000.
Mr James Connolly auctioneer gave evidence that he was instructed in May 1972 by the defendant to look for offers for the licensed premises at Dublin *85 Street and he says he advertised the property for sale in the Irish Independent, the Northern Standard, the Cavan Celt and the Armagh Observer. He said he got an offer of £10,000 in July 1972 from a Mr Hickey and an offer of £10,000 in August 1972 from a Mr McElroy both of which he submitted to the defendant who turned them down as he was then looking for £12,000 at that stage. Neither Mr Hickey nor Mr McElroy lives in Ireland and neither made any further offer, but both inspected the premises before making their offers. Mr Connolly said he did not send people who made enquiries to the defendant but that either the defendant would have to be there or he would have to get the key of the premises to let people in to inspect it. He said he sold the licensed premises at Market Street in 1971 with five acres for £10,100 and he considers the Dublin Street premises preferable because of the greater accommodation and the prospect of development of that part of the town. He said he advertised the premises as having 14 apartments with storage accommodation at the rear but did not say anything in the advertisements about the poor law valuation or the turnover or that there were flats yielding a rental income as he expected offers would be made on the basis of vacant possession and on no other terms. His instructions were that he could accept nothing only offers for a cash sale, and the whole difficulty was to find a buyer with cash, and one of the offers fell through because the cash was not forthcoming.
For the plaintiff Mr Nugent auctioneer of Castleblaney said he visited the premises with the defendant’s solicitor at 11.35 am on 1 April 1976. There were no customers and there was no one in attendance. He said the lounge was small, the ceiling in the bar was hanging down, the second floor was dilapidated and the back wall and roof in a bad condition. He asked to see the books but none were available and without the trading information he could not value the property as a going concern. He estimated the present day value of the property as a licensed premises at £10,000 and thought £7,000 would have been its maximum value in 1972. He expressed the view that had the property been maintained in proper condition it would have increased in value between 1972 and 1976 but not if it had not been looked after as he thought was the case. He had not seen any advertisements offering the premises for sale in 1972.
The plaintiff’s evidence was that he had been in the Dublin Street premises four or five times and his knowledge of the premises, he said, was that it was not open during the day save Saturdays and only in the evenings and was now closed most of the time, and it seemed to do hardly any trade. He described the premises by saying that it was ‘dozey’ inside, that the furniture was old, that he would have to pull the whole inside out, take off the back wall and put a new roof on, and he expected to spend about £10,000 on it. He said he was not interested in the turnover or the rents as he was making his offer for ‘a run down pub in that area at that time’ on which he would have to spend a lot of money and that his offer was a reasonable price. He was basing his price, he said, on *86 what he would have to spend and what he could afford and he did not know of sales of other licensed premises in Monaghan. He had heard nothing about an auctioneer until he heard if from his own solicitor after he went to him about proceedings.
The conclusion I have come to on the evidence on this aspect of the case is that there is not such a disparity between the price agreed for the sale by the defendant to the plaintiff and the price which the defendant might reasonably have expected from any other buyer as would suggest any unfairness about the contract. There is not such evidence as would support the defendant’s allegation that the plaintiff took an unfair advantage of him in his intoxicated condition. The plaintiff’s price was reached by negotiation, as I believe, during the visits by the plaintiff to the defendant’s Park Street premises in July during which time there is no suggestion that the defendant was affected by alcohol. I believe the defendant was anxious to get rid of the premises and wanted to be paid in cash in full. He did not inform either his auctioneer to whom he might have been liable for fees, nor did he inform the Monaghan Vintners’ Association of which he was a member. I am not convinced that the price of £7,000 which he paid to purchase the premises in 1971 is necessarily a true standard of value. It seems to me that the defendant did not make a business-like effort to make a success of his investing in a second licensed premises in 1970/71 and does not appear to have had any genuine concern for the return from his investment other than an expected capital gain. He was in no position after his very short period of ownership to show any evidence of trading returns attractive to a purchaser wishing to buy the premises as a going concern. The plaintiff who was not interested in purchasing on that basis and who intended disregarding whatever trading good-will existed and who would pay cash must have seemed to have been the right sort of purchaser for the defendant. But if the Monaghan Vintners’ Association were to bid against the plaintiff they might have forced the price to a point uneconomical for the plaintiff whereupon the defendant as a member of the Monaghan Vintners’ Association would become a contributor to the purchase price at which that association would have to buy in order to extinguish the licence. Taking the rule-of-thumb suggested by Mr McElvaney with a gross annual turnover of slightly more than £6,500 the defendant could not have expected to get more than £7,000 from a purchaser interested in the trading figures, but if finding a purchaser with cash was difficult the defendant would have had to settle for less. The defendant has not established this line of defence.
As to the plea of laches on the part of the plaintiff there is no evidence from which I could be asked to infer that the plaintiff intended to abandon his claim nor have I any evidence of injurious affect upon the defendant’s position by such delay as did occur. I do not accept solicitors’ letters to each other preliminary to proceedings as proof of the truth of the facts stated in them. Nevertheless there are necessarily some changes and circumstances of which I *87 think I should take account in the exercise of the court’s discretion as to the remedy to be given the plaintiff on his claim. Had the sale been completed on 1 September 1972 or within a reasonable time thereafter its completion would have coincided with the period of annual licensing sessions and no difficulty would have been encountered about transferring to the plaintiff the responsibility for renewing the licence or obtaining a new one. A completion at the present time of the year would create difficulties in that regard for which the parties did not make provision in their contract. No doubt it is implicit in a contract for the sale of a licensed premises that if the vendor is the occupier and licensee he will not permit the licence to be forfeited or lapsed nor will he surrender it. In the present case the plaintiff did not ask for the customary ancillary relief of a declaration that the defendant is a trustee for him of the premises and the licence but instead asked for injunctions for which on the evidence there appears to be no basis. A further aspect with which I should be concerned is the matter of the contractual relations between the defendant and his tenants on which no evidence was given. The defendant’s tenants presumably would have known of the defendant’s intentions in 1972 to sell the premises with the expectation that they might have to seek other accommodation. It would be unfair I think to precipitate these people into that situation now without knowing what opportunities can be given to them nor what arrangements can or ought to be made for them.
I think the proper relief in this case is to award to the plaintiff a sum for damages in lieu of specific performance. I have no evidence of what income or net capital gain would have accrued to the plaintiff had the contact been performed in September 1972, nor of what income from the property accrued to the defendant since 1972 for which he might have been required to account to the plaintiff. I think it unlikely such evidence would be available if there were to be an enquiry as to damages. I think the most just recompense to the plaintiff is to award to him such sum as now would enable him with the £6,000 he was prepared to spend in 1972 to purchase this licensed premises at 16 Dublin Street if if be still obtainable at a reasonable estimate of its present value. On the basis of the evidence I have heard as to value I estimate this sum at £4,500 and accordingly I will give judgment for the plaintiff for that amount in lieu of specific performance and award the plaintiff his costs.
Michael Horgan v Liam Deasy
[1979] I.L.R.M. 71
(McWilliam J)
15 May 1979
The plaintiff is a son and the personal representative of Denis Horgan who died on 18 February 1929. Denis Horgan had, on 10 March 1909, been registered as full owner of the lands described on Folio 7967 County Cork, of the Register of Freeholders in the Land Registry, and he is still registered on this folio as full owner of the lands. After his death another son, his only other child, continued to reside on the lands. This son appears to have been somewhat of a recluse who did not work the farm very energetically. He died a bachelor while still in occupation of the lands. The plaintiff, who resides in England, then put the lands up for auction and on 2 March 1972 entered into a contract for the sale of them to the defendant although representation had not been raised to the estate of the registered owner. The dated fixed for completion was 21 March 1972. Letters of administration of the estate of Denis Horgan were issued on 27 March 1972. Under the circumstances of the ownership and use of the lands it was apparent to everybody that these were lands which it was likely that the Land Commission would consider acquiring and the defendant was allowed into possession immediately after the sale so that his position might be stronger if the Land Commission made any move. The Land Commission did become interested and served a notice to inspection dated 29 March 1972, under the provisions of s. 40 of the Land Act, 1923. Under the provisions of s. 13 of the Land Act, 1965 the effect of this notice was to prevent, during the period of three months from the date of service to the notice, the sale or transfer of the lands without the consent in writing of the Land Commission. On 16 June 1972, the Lay Commissioners, in pursuance of s. 25(1) of the Land Act, 1936, certified that the lands were required for the relief of congestion and a provisional list in accordance with the provisions of s. 40(2) of the Land Act, 1923 was duly published in Iris Oifigiúil on 27 June 1972. This meant that, unless there was a valid objection to the acquisition allowed by the Land Commission, the lands would become vested in the Land Commission on the appointed day and that there could be no dealing with the lands without the consent of the Land Commission. An objection was lodged on behalf of the plaintiff. The defendant was represented at the hearing before the Lay Commissioners and appears, by mutual agreement, to have taken over the presentation of the objection. The objection was disallowed on 14 June 1973. Notwithstanding some conflict of evidence at the hearing before me, I am satisfied that the parties were substantially in agreement up to this point and for some time afterwards and that both parties were anxious that the defendant should obtain the lands.
The appointed day, when the lands will vest in the Land Commission, has not yet been declared.
By letter of 19 July 1973, the solicitors for the defendant wrote to the Land Commission asking if the Land Commission agreed that the defendant was entitled to complete his contract, and, by letter of 7 September 1973, the Land Commission replied that they had no objection to the registration of the defendant as owner *73 of the lands and stated that the letter might be produced to the Land Registry as evidence of such consent. It was made clear by the Land Commission that this was to be without prejudice to the acquisition proceedings.
Notwithstanding the service of the notice of inspection in March, 1972, the parties proceeded with the contract to the point where the solicitors for the plaintiff wrote on 1 May 1972 to say that the plaintiff had executed the transfer and other appropriate documents necessary to complete the transaction. For the next year or so the defendant, although retaining possession, was complaining that, owing to the intervention of the Land Commission, the plaintiff was not in a position to complete and was discussing the questions of the return of his deposit and damages for breach of contract.
After the objection to acquisition had been disallowed, the defendant adopted the opposite attitude and, on 19 July 1973, his solicitors wrote to say that the defendant had decided to complete the sale and, from that time until the issue of the proceedings on 30 January 1976, a somewhat desultory correspondence took place with the defendant seeking completion and the plaintiff delaying discussion of the matter. Presumably the increase in the value of land had something to do with the changes in front, the Land Commission price being considerably in excess of that agreed under the contract between the parties.
Th plaintiff claims a declaration that the contract is null and void because of the provision of the Land Acts prohibiting dealings with the lands. The defendant claims specific performance of the contract and, as an additional defence to the defendant’s claim, the plaintiff says that the defendant has been guilty of laches.
S. 13 of the Land Act, 1965, in so far as relevant to these proceedings, provides as follows:
(1) Where a provisional list under s. 40(2) of the Land Act, 1923 has been published after the passing of this Act, the lands (or any part thereof) mentioned in the provisional list shall not, until the termination of proceedings under the Land Purchase Acts for the acquisition of the lands, be sold, transferred, let, sublet or subdivided without the consent in writing of the Land Commission.
(2) Where a notice under s. 40(b) (as amended by s. 29 of this Act) of the Land Act, 1923 has been served after the passing of this Act, the lands (or any part thereof) mentioned in the notice shall not, in the period of three months commencing on the date of service of the notice, be sold, transferred, let, sublet or subdivided without the consent in writing of the Land Commission; provided, however, that the Lay Commissioners may ….
(4) Any attempted or purported sale, transfer, letting, subletting or subdivision in contravention of this section shall be null and void as against all persons; provided, however, that in any case where the consent of the Land Commission under this Act is given after the attempted or purported sale, transfer, letting, subletting or subdivision, such consent shall, if the Land Commission do direct, so operate as to validate with retrospective effect such attempted or purported sale, transfer, letting, subletting or subdivision.
At the time when the parties entered into it the contract was valid and, had the sale been completed on 21 March 1972, in accordance with the provisions of the contract, it could not have been impugned under the provisions of the Land Acts as the notice of inspection was not served until some time after that date.
The provisional notice and, subsequently, the provisional list having been served, the lands could not be validly transferred without the consent of the Land *74 Commission. Although there were, from time to time, claims and counterclaims made by the parties in correspondence, neither party took the clear and definite step of rescinding the contract and I am of opinion that the contract, in so far as it can be completed, is still a binding contract. The defendant claims that the letter of 7 September 1973, from the Land Commission is a sufficient consent within the meaning of s. 13 of the Act of 1965 to enable the lands to be lawfully transferred. On behalf of the plaintiff it is argued that the form of the consent is such that it is only appropriate to a consent under s. 45 of the same Act which refers, amongst other things, to purchases by persons who are not Irish citizens. I am satisfied that the defendant’s contention is correct. No special form is required for the consent although it may be that a different form is commonly used, and there could be no purpose in agreeing to the registration of the defendant on the Folio unless a consent to a transfer to the defendant is implied. Any other interpretation would make nonsense of the letter.
On the question of laches, I accept that a decree of specific performance is discretionary and delay may be a ground for refusing this relief. I was referred to the case of Wroth v Tyler [1973] 2 WLR 405 in which Megarry J at p.423 refers shortly to the question of laches or acquiescence and makes it clear that the delay must be considered in relation to all the circumstances of the case and uses the expression ‘unexplained delay’. In the present case, the delay was fully explained until the Lay Commissioners had dealt with the objection to acquisition and, after that, however desultory the correspondence may have been, the delay was all on the part of the plaintiff who was keeping the defendant ‘on a string’ by his replies to requests for completion. As the defendant was in occupation of the lands at all times, he was not acquiescing in anything to his detriment. Accordingly I am satisfied that the plaintiff is not entitled to rely on this delay and I will make the order for specific performance sought by the defendant.
Joan Browne and Bernard Patrick Dowling v. Mariena Properties Limited
[1998} 1 568
Laffoy J.
23rd January, 1998
The plaintiff is the owner of the lands registered on folio 2463 of the Register of Freeholders County Louth, being a residential farm which is known as Marsh Farm containing in excess of 200 acres. She also claims a possessory title over tidal lands or foreshore on the seaward side of the eastern boundary of the lands registered on folio 2463, which, for the sake of brevity but not in any technical sense, I will call “the foreshore”.
The lands registered on folio 2463 are, and were at all material times, subject to a charge for present and future advances repayable with interest, which is registered as a burden at entry number 16 on the folio. Originally, Bank of Ireland Finance Ltd. was the registered owner of this charge. Subsequently, on the 23rd June, 1994, Bio Enterprises Ltd. (Bio) was registered as owner of this charge in place of Bank of Ireland Finance Ltd. At that stage, Bank of Ireland Finance Ltd. had already, as mortgagee, obtained an order for possession of the lands in proceedings in the High Court entitled “Bank of Ireland Finance Ltd. v. Nicholas Browne and Joan Browne” (Record No. 1985 No. 380 Sp. Court 6), which, for the sake of clarity, I will refer to as “the mortgage proceedings”, the order for possession having been made on the 15th July, 1985. By a further order made in the mortgage proceedings on the 24th June, 1996, Bio was substituted as plaintiff in the mortgage proceedingsin lieu of Bank of Ireland Finance Ltd. and Bio was given leave to issue execution on foot of the order for possession of the 15th July, 1985. The plaintiff appealed to the Supreme Court against the order dated the 24th June, 1996. The appeal was due to be heard on the 30th June, 1997, but prior to that date the plaintiff agreed to sell Marsh Farm and the possessory title in the foreshore to the first defendant.
The second defendant, Mr. Monahan, who is a well known property developer, is the beneficial owner of the first defendant. The second defendant knew of Marsh Farm for some time and was interested in acquiring it for development purposes. Before entering into negotiations with the plaintiff, he had been negotiating with the representatives of Bio and was contemplating acquiring its mortgagee’s interest. However, having decided that the better course was to deal with the plaintiff, he concluded negotiations with the plaintiff for the acquisition of Marsh Farm on the 25th June, 1997 and his bargain with the plaintiff was incorporated in the following documents which were executed on that day:-
(1) an agreement for sale (the agreement), which was in the standard form published by the Law Society of Ireland (1995 ed.), whereby the plaintiff contracted to sell the lands registered on folio 2463 and such rights as she enjoyed over the foreshore to the first defendant at the price of £1,600,000;
(2) a so-called letter of comfort (the letter of comfort) written by the second defendant to the plaintiff, the terms of which were expressly accepted by the plaintiff, in which the second defendant confirmed that if it should be necessary for the plaintiff to pay a sum in excess of £900,000 to Bio to procure the discharge of its charge, he would procure that the first defendant would pay to her the additional amount necessary up to a limit of £100,000;
(3) a guarantee by the second and the third defendants, the directors of the first defendant, guaranteeing to the plaintiff performance by the second defendant of its obligations under the agreement.
On its face, the agreement provided for a purchase price of £1,600,000. The closing date stipulated was the 30th October, 1997. It was to be a sale free of encumbrances and condition 5 of the special conditions provided as follows:-
“Upon closing the [plaintiff] shall furnish to the [second defendant] a discharge of all mortgages, charges or other encumbrances affecting the lands for sale together with the Land Registry fees payable on the discharges.”
It was understood between the parties that the plaintiff would have to procure the discharge of the charge of Bio and deal with the pending appeal to the Supreme Court. The understanding between the parties was that the plaintiff would compromise with Bio by agreeing a sum to be paid in full and final settlement of its claim as mortgagee and she would withdraw her appeal. The plaintiff did achieve a compromise with Bio under which she withdrew her appeal to the Supreme Court and agreed to pay the sum of £1,000,000 to Bio in full and final settlement of its claim on or before the 31st October, 1997, the day following the contractual closing date in the agreement In return Bio agreed not to act on foot of its order for possession until the 1st November, 1997. The terms of the compromise were reflected in the following documents:-
(a) a letter of the 14th July, 1997, from the plaintiff’s solicitors, Patrick J. Carolan & Co., to Bio’s solicitors, Mason Hayes & Curran; and
(b) an order made by the Supreme Court on the 30th June, 1997, by consent of the parties in which it was ordered that the appeal should be struck out and the order of the 24th June, 1996, affirmed, it being recorded that Bio would not move for possession until the 1st November, 1997.
As the plaintiff had to agree to pay £1,000,000 to Bio to procure the discharge of its charge, under the terms of the letter of comfort the purchase price payable by the first defendant to the plaintiff under the agreement became £1,700,000 and that this was the case was never disputed by the second defendant.
The claim of Bio having been compromised, it appeared that all of the parties, the plaintiff, the first, second and third defendants and Bio were on course to a mutually satisfactory outcome on the 30th October, 1997. However, it was not to be.
Requisitions on title in the standard form published by the Law Society of Ireland (1996 ed.) were dispatched by the first defendant’s solicitors on the 23rd September, 1997 and these were replied to on the 7th October, 1997, by the plaintiff’s solicitors. Requisition 12 (1) (a) queried whether any notice, certificate or order had been served upon or received by the plaintiff or whether the plaintiff had notice of any intention to serve a notice relating to the property or any part of it under various statutes, twenty nine in all, listed in the requisition, including the Wild Life Act or under any other Act or any statutory rule or order or statutory instrument. The plaintiff’s solicitors reply was:-
“Not to the [plaintiff’s] knowledge. Definitive inquiries being made.”
By letter dated the 28th October, 1997, the first defendant’s solicitors raised rejoinders on title and sought,inter alia, the results of the plaintiff’s solicitors definitive inquiries under requisition 12 (1) (a). In response, by letter dated the 28th October, 1997, the plaintiff’s solicitors stated that there were”none”.
However, contemporaneously with raising rejoinders, the first defendant’s solicitors were carrying out their own independent searches and inquiries, in consequence whereof on the evening of the 29th October, 1997, they discovered that the lands registered on folio 2463 and the foreshore were within a proposed Natural Heritage Area designation (site code 455-Dundalk Bay) proposed by the Department of Arts, Heritage, Gaeltacht and the Islands, which, it subsequently transpired, had been the subject of notices to that effect in local newspapers. The upshot of this discovery was that the first defendant adopted the position that the proposed Natural Heritage Area designation was a matter which the plaintiff was under a duty to disclose under clause 35 of the general conditions in the agreement and that failure to disclose it before the sale entitled the first defendant to rescind. Accordingly, on the 7th November, 1997, the first defendant, through its solicitors, served notice of rescission under clause 35 on the plaintiff.
In these proceedings the plaintiff claims specific performance of the agreement and ancillary relief. In order to progress matters, the plaintiff brought an interlocutory application seeking specific performance, in effect, a mandatory injunction to compel the second defendant to close the sale. That action did progress matters to the extent that, having regard to the urgency of the matter from the plaintiff’s perspective, the matter was listed for plenary hearing without pleadings having been delivered, on the basis that the parties would agree the issues to be determined by the Court. The parties have agreed that the following are the issues for determination:-
(1) Do the Natural Heritage Area notices published in the public press in 1994 and 1995 constitute a notice for the purpose of clause 35 of the general conditions of sale which form part of the contract for sale by the plaintiff to the first defendant of the lands comprised in folio 2463 of the Register of Freeholders, Co. Louth?
(2) If the Natural Heritage Area notices do constitute a notice for the purpose of clause 35, did the failure of the plaintiff to disclose them entitle the first defendant to rescind?
(3) If the answer to the foregoing is in favour of enforcement:-
(a) Is the plaintiff entitled to an order of specific performance?
(b) Is the fact of orders for possession in favour of Bio and the Supreme Court order of the 30th June, 1997, and/or the agreement evidenced by the letter dated the 14th July, 1997, from Patrick J. Carolan & Co. to Mason Hayes & Curran, a bar to an order for specific performance?
I propose addressing these issues first and then considering what relief, if any, should be granted to the plaintiff.
Clause 35 provides as follows:-
“Where prior to the sale
(a) any closing, demolition or clearance order; or
(b) any notice (not being of the contents of the Development Plan other than an actual or proposed designation of all or any part of the subject property for compulsory acquisition) made or issued by or at the behest of a Competent Authority in respect of the subject property and affecting same at the date of sale has been notified or given to the Vendor (whether personally or by advertisement or posting on the subject property or in any other manner) or is otherwise known to the Vendor or where the subject property is at the date of sale affected by any award or grant which is or may be repayable by the Vendor’s successor in title then if the Vendor fails to show:-
(i) that, before the sale, the Purchaser received notice or was aware of the matter in question; or
(ii) that the same is no longer applicable or material; or
(iii) that same does not prejudicially affect the value of the subject property; or
(iv) that the subject thereof can and will be dealt with fully in the Apportionment Account; the Purchaser may by notice given to the Vendor rescind the sale.”
The expression “Competent Authority” is defined in clause 2 of the general conditions as including –
“. . . the State, any Minister thereof, Government Department, State Authority, Local Authority, Planning Authority, Sanitary Authority, Building Control Authority, Fire Authority, Statutory Undertaker or any Department, Body or person by statutory provision or order for the time being in force authorised directly or indirectly to control, regulate, modify or restrict the development, use or servicing of land or buildings, or empowered to acquire land by compulsory process.”
The first defendant bases its entitlement to rescind under clause 35 on the publication of two notices in local newspapers in circulation in the Dundalk area where Marsh Farm is situated.
The first of these notices was published in the 18th November, 1994, edition of “The Argus” under the imprint of the Office of Public Works. It was headed “Natural Heritage Areas” and”Notice of Interest to Land Owners”. The text of the notice was as follows:-
“The Commissioners of Public Works in Ireland wish to notify owners and occupiers of land that Natural Heritage Areas (NHAs) have been designated in County Louth.
1/2″ site maps of the NHAs may be viewed in the Teagasc Farm Development Services and Department of Social Welfare Offices of the county, as well as in the major Garda Stations. Arrangements to view the 6″ site maps may be made with the District Wildlife Officer (D.W.O.) of the Office of Public Works.
Land owners in townlands containing NHAs will be notified by post as soon as possible. Owners/occupiers identified by O.P.W. as having land in an NHA will be contacted later and provided with a site map and a site report. NHA status recognises the importance of the area for wildlife conservation and farmers are requested to continue farming in a manner that will help to conserve the sites for wildlife.
NHA designation will not prevent any owner/occupier from developing the land. However, it is E.U. policy that any developments undertaken are compatible with the protection of the environment. If not compatible they will not be afforded grant-aid.
. . .The Minister for Arts, Culture and the Gaeltacht proposes to establish an appeals system which will allow land owners or occupiers to appeal, on scientific grounds, against decisions as to the status or boundary of an NHA and details of this system will be published in due course . . .”
The notice incorporated a list of townlands in which the Natural Heritage Areas in County Louth were situated, which included Mooretown in which Marsh Farm is located. The notice also incorporated a map based on the A.A. map of County Louth which depicted the Natural Heritage Areas.
The second notice was published in the 17th March, 1995, edition of “The Independent”. This notice was headed: “Withdrawing the NHA Designations in 12 Counties”. The text of this notice was as follows:-
“The Minister for Arts, Culture and the Gaeltacht, Mr. Michael D. Higgins, T.D., wishes to inform land owners and occupiers that he has directed the National Parks and Wildlife Service (N.P.W.S.) to withdraw the natural heritage area designations made in Counties Carlow, Cavan, Clare, Kildare, Kilkenny, Laois, Offaly, Louth, Longford, Meath, Wexford and Wicklow.
The Minister wishes to make it known that areas previously designated should now be regarded asproposed designations only. The Minister has taken this position so as to enable adequate prior consultation to take place with land owners and occupiers and with other interested parties. All interested parties will have an opportunity, therefore, to make their views known regarding the proposed designations and indeed to object to such proposals. All views expressed will be taken into account prior to a final decision being taken in regard to designation.
Consideration is being given to proposals for legislation under which applications might be made for the designation as Natural Heritage Areas (NHAs) of the areas referred to above because of their importance for wildlife conservation. Therefore the references to NHAs and the shaded areas on the maps which have been sent to the authorities referred to below should be regarded as only being references to areas which might be designated if new legislation is enacted.
The County Planning Authorities, the Department of Agriculture, Food and Forestry . . ., the Department of Marine . . . and Bord Iascaigh Mhara . . . and other Public Authorities and grant-aiding authorities will be issued with maps indicating that the areas in question might be designated NHAs at a future date. These authorities will be requested to provide the National Parks and Wildlife Service with an opportunity to make representations and if necessary submit relevant reports prior to making any decision which might affect the proposed NHAs. It is E.U. and national policy that grant-aid will not be given in instances where the project proposed is likely to adversely affect the environment.
In accordance with the ordinary decision-making procedures of those authorities, decisions which might affect the proposed NHAs will be made by them after fully informing all parties entitled to be heard. This will include the provision of all relevant information to such parties. It will also allow them the opportunity of answering, if they so wish, any case made by the National Park and Wildlife Service . . .”
I suspect that counsel for the plaintiff was correct in surmising that the “U-turn” reflected in the second notice published was a reaction,albeit a belated reaction, to the decisions of this Court and of the Supreme Court in MacPharthalain v. Commissioners of Public Works [1992] 1 I.R. 111 and [1994] 3 I.R. 353, respectively. In that case, the Supreme Court upheld the decision of this Court (Blayney J.) that designation of an area of land near Clifden as an area of international scientific interest by the Wildlife Services, a section of the Office of Public Works, was a decision and a decision capable of being judicially reviewed and his conclusion that the designation was a designation which affected the lands and, as such, could only be taken after due regard to the requirements of natural justice including the first fundamental requirement of natural justice that a land owner affected should be given the opportunity to be heard or to object or to make representations on the issue.
Be that as it may, the question which falls to be considered in relation to the published notices referred to above and the decisions they reflected as between the parties to these proceedings is whether both published notices were or either was made or issued by or at the behest “of a competent authority” within the meaning of clause 35 and whether they or either of them affected Marsh Farm at the date of the sale, that is to say, the 25th June, 1997. This is primarily a question of the proper construction of clause 35. However, there are a number of preliminary observations to be made. First, it is common case that no statutory authority or basis existed at any time for designation as a Natural Heritage Area or proposed designation as a Natural Heritage Area or for publication of notices in respect of any such designation or proposed designation. Secondly, it was acknowledged by counsel on behalf of the first defendant, properly in my view, that the second notice effectively negatived the first notice and that the first defendant’s case for rescission under clause 35 must rest on the second notice. Thirdly, no evidence has been adduced as to the intention of the Minister in publishing the second notice or as to its effect, save as is to be inferred from the notice itself and, in particular, no witness was called from the Department of Arts, Heritage, Gaeltacht and the Islands.
Before attempting to interpret clause 35 and apply its provisions to the facts I propose recording two findings of fact. First, I find that the plaintiff was not aware of either published notice before the 25th June, 1997, or of the decisions reflected in those notices. Secondly, I find that, although the second defendant was generally aware that Marsh Farm was ecologically sensitive because of the reasons ascribed for conditions imposed in a planning permission dated the 5th March, 1993, which had been granted by An Bord Pleanála for the development of an airfield and ancillary buildings at Marsh Farm, he was not aware of the published notices or the decisions reflected in them prior to the sale, nor was any other officer or representative of the first defendant.
The effect of clause 35 is to impose a positive duty of disclosure upon a vendor in relation to the orders and notices which come within its ambit, so that thecaveat emptor maxim does not apply in relation to such orders and notices or the subject matter of them. As clause 35 is structured, it is for a purchaser to establish that an order or notice which comes within the ambit of clause 35 known to the vendor was not disclosed by the vendor prior to the sale and the onus then is on the vendor to establish the existence of one or more of the four factors which obviate a rescission even where there has been a failure on the part of the vendor to disclose.
Accordingly, the first question which arises in applying clause 35 to the facts of the instant case is whether the second defendant has established that the second published notice was a notice within the ambit of clause 35. There are two aspects to this question. The first aspect is whether it was a notice “made or issued by or at the behest of a Competent Authority”, which affected Marsh Farm and the foreshore on the 25th June, 1997. If it was, the second aspect arises: whether it was notified or given to the plaintiff in any manner or was otherwise known to the plaintiff.
In relation to the first aspect, it was submitted by counsel for the defendants, pointing to the disjunctive “or” after “Statutory Undertaker”, that the definition of “Competent Authority” in clause 2 recognises two categories of public bodies, one category being the specified public bodies, namely, the State, any Minister thereof, a Statutory Undertaker,etc. and the second category being other public bodies captured by the general description of “any Department, Body or person”. It was further submitted that the words “by statutory provision or order for the time being in force authorised directly or indirectly to control. . .” in the definition only refer to the second category and do not qualify the first category. In other words, it was contended that any notice made or issued by a Minister is made or issued by a competent authorityper se. A further submission made was that, in any event, the qualifying words which require a person or body to have either direct or indirect statutory authority to control the development, etc., of land are merely intended as an identifying mark of the type of body or person who qualifies as a competent authority and that there is no requirement in the definition that that body or person should have statutory competence in relation to the particular order or notice in issue under clause 35. To illustrate this point, it was submitted that the Commissioners of Public Works, for instance, are empowered under s. 11 (1) of the National Monuments (Amendment) Act, 1994, to acquire land compulsory and, accordingly, so the argument goes, they are a competent authority within the definition for all purposes including functions which do not have statutory basis.
I have no doubt that the definition of competent authority was intended to cast a wide net and to capture every conceivable public person or body who could make or issue a legally effective order or notice in relation to land. Moreover, I would accept that the definition of competent authority, in terms of identifying a person or body as such, on its own, should be interpreted in the manner suggested by counsel for the defendants. But that is not the end of the matter. What clause 35 requires is that the order or notice made or issued by a competent authority should affect the property at the date of the sale. In other words, what is required is that the person or body in question should have legal competence to affect, either immediately or prospectively, the land to which the order or notice relates in the manner in which it purports to do so in the order or notice as of the time of the making or issuing of the order or notice.
There was implicit recognition in the judgments of this Court and the Supreme Court in MacPharthalain v. Commissioners of Public Works [1992] 1 I.R. 111 and [1994] 3 I.R. 353, that express statutory authority was not an essential prerequisite to the designation of an area as an area of international scientific interest by the Commissioners of Public Works. In my view, on the proper construction of clause 35, and reading into it the definition of competent authority contained in clause 2, it admits of an interpretation that an order or notice made or issued by, say, a Minister or by the Commissioners of Public Works is within its ambit even though such order is not made or notice given on foot of an express statutory authority, but only provided that it is the exercise prior to the sale of a function within jurisdiction and competence which has legal effect as regards the property the subject of the sale at the date of the sale. Clearly, the second published notice was not of that character. It merely evinced a proposal or a statement of intent to designate at a future date and subject to compliance with law including the rules of natural justice. It is clear from the evidence that by the 25th June, 1997, no steps had been taken which would have advanced the proposed designation, as regards Marsh Farm or the foreshore, beyond the stage of being a mere proposal or statement of intent and, accordingly, the second published notice was not a notice”affecting” Marsh Farm or the foreshore within the meaning of clause 35 as of that date.
Moreover, in my view, the publication or advertisement of the second published notice in “The Independent” did not have the consequence of the plaintiff having been “notified or given” notice of the proposed designation within the meaning of clause 35. Notification or the giving of notice ordinarily connotes that information is actually conveyed to and received by the object of the notification or the giving of notice. In the absence of a statutory provision, a contractual obligation or some other legally enforceable mechanism which deems publication in a local newspaper to be notice for the purpose of conveying information to an owner or occupier of land, such person cannot be regarded as having been notified or given notice of a decision, proposal or intention of a public body in relation to the land merely by the publication or advertisement in a local newspaper. As I have already found, the plaintiff did not know of the second notice.
Accordingly, the first defendant has failed to establish on both aspects of the question that the second published notice came within the ambit of clause 35, and accordingly, the entitlement of the first defendant to rescind does not arise.
This brings me to the third question which the parties have sought to have determined, namely, whether the plaintiff is entitled to an order of specific performance.
The gravamen of the first defendant’s resistance to such an order is that on the contractual completion dated, the 30th October, 1997, the plaintiff was unable to fulfil her obligation under special condition 5 to furnish a “discharge” of all encumbrances affecting the land in sale. This complaint focused on only three of the many burdens registered on folio 2463. In relation to those burdens the following facts were established in evidence:-
(1) The burden registered at entry number 22 on the folio was a judgment mortgage in favour of Michael McGoldrick and Bernadette McGoldrick. The amount due to the judgment mortgagees had been discharged as long ago as October, 1990, but no formal requisition for discharge had been obtained from them at that stage. Although the judgment mortgagees’ solicitors by letter dated the 28th October, 1997, acknowledged payment in full of the judgment debt, despite Trojan-like efforts on their part, the plaintiff’s solicitors did not obtain a requisition for discharge executed by the judgment mortgagees until the 5th November, 1997. The first defendant’s solicitors were informed of its availability on the following morning, the 6th November, 1997.
(2) The burden registered at entry number 23 was a judgment mortgage in favour of National Irish Bank Limited. The evidence established that well in advance of the 30th October, 1997, the amount necessary to procure the discharge of this judgment mortgage had been agreed between the plaintiff’s solicitors and the legal department of the bank and an arrangement was in place that an official of the bank would attend the closing of the sale on the 30th October, 1997 and hand over a sealed requisition for discharge in exchange for the agreed amount. It subsequently transpired that this judgment mortgage was also registered in the Registry of Deeds against the foreshore, a fact the plaintiff’s solicitors only became aware of after the 30th October, 1997. On the evidence I am satisfied that had the first defendant turned up to close the sale on the 30th October, 1997 and produced a Registry of Deeds search which disclosed the judgment mortgage against the foreshore, a satisfaction piece executed by the Bank would have been forthcoming to clear that judgment mortgage off the unregistered title.
(3) The burden registered at entry number 29 was a judgment mortgage in favour of Kate Grace Browne and Richard Browne, who were residing in England but were represented in this jurisdiction by A&L Goodbody, solicitors. The amount necessary to procure the discharge of this judgment mortgage was agreed between the plaintiff’s solicitors and A&L Goodbody, who faxed the prescribed form of requisition for discharge to their clients’ English solicitors on the 29th October, 1997. While the original requisition for discharge executed by the judgment mortgagees was not received by A&L Goodbody until the morning of Tuesday, the 4th November, 1997, there was an arrangement in place that a representative from A&L Goodbody would attend the closing on the 30th October, 1997 and, in exchange for payment of the agreed amount of the judgment debt, would hand over a solicitor’s undertaking to furnish an executed requisition for discharge. Moreover, on the evidence I am satisfied that had the first defendant turned up to close on the 30th October, 1997, a satisfactory affidavit would have been forthcoming to prove conclusively the discharge of the agreed amount of a judgment debt, had it been insisted on.
The stance adopted by the first defendant’s solicitors in the lead up to the closing date and thereafter was that, by virtue of special condition 5, they were entitled to be furnished with requisitions for discharge executed by the owner of every charge and judgment mortgage registered on the folio. There are a number of general observations to be made in relation to this. First, the plaintiff was selling free from encumbrances and, even in the absence of special condition 5, the plaintiff would have been contractually bound to furnish evidence of the discharge of all encumbrances appearing on the title at closing. Secondly, while one method of procuring the cancellation of a registered burden off a folio is to produce the prescribed form of discharge executed by the owner of the burden, the prescribed form in the case of a judgment mortgage being form 76 of the Land Registration Rules, 1972, that is not the only method available. As is pointed out in Fitzgerald onLand Registry Practice, 2nd ed. at p. 243, and as the plaintiff’s solicitors were aware, any person having an interest in a registered burden or registered property may apply on affidavit in form 71B to have the burden cancelled.
On the evidence, I am satisfied that had the first defendant turned up to close the sale on the 30th October, 1997, the plaintiff would have been in a position to fulfil her contractual obligations in relation to discharge of the encumbrances affecting the title, both her general obligation by reason of the sale being a sale free from encumbrances and her specific obligation under special condition 5. On any objective appraisal of the matter there cannot be any doubt that, in relation to each of the three burdens referred to above, the plaintiff’s solicitors would have been in a position to produce documentation sufficient to procure the cancellation of the burdens off the folio. Moreover, on the evidence, I am satisfied that the first defendant’s solicitors had no genuine concern in relation to the discharge of the encumbrances. They did have an understandable genuine concern about the revelations which resulted from the inquiries in the Department of Arts, Heritage, Gaeltacht and the Islands and I infer from the evidence that their stance in relation to the discharges was a posture for the benefit of the plaintiff that the first defendant had “more than one string to its bow”.
In any event, in the context of the issue whether the plaintiff is entitled to a decree of specific performance the foregoing debate about the discharge of encumbrances is entirely academic. Even if the plaintiff had not been in a position to fulfil her contractual obligations in relation to clearing off encumbrances on the title on the contractual closing date, this would not have amounted to a breach of contract which would have entitled the first defendant to terminate the contract or regard itself as discharged from further performance thereof forthwith, time not being of the essence. The service of a notice to complete under clause 40 of the general conditions by the first defendant and a failure to comply with it by the plaintiff would have been a necessary prerequisite to rescission by the first defendant. It is clear beyond peradventure that had such notice been served, the plaintiff would have been able to comply with it.
I now turn to considering whether the existence of the order for possession in favour of Bio is a bar to an order of specific performance. The charge of which Bio is registered as owner remains registered as a burden at entry number 16 on folio 2463. In fulfilment of her contractual obligations to the first defendant, the plaintiff will have to discharge that charge on or before closing. Bio, in addition to being the registered owner of the charge, has the benefit of the orders of this Court of the 15th July, 1985 and the 24th June, 1996, the combined effect of which is that Bio is entitled to issue execution on foot of the order for possession. Bio also has the benefit of the order of the Supreme Court dated the 30th June, 1997, wherein the plaintiff effectively undertook to deliver up possession on the 1st November, 1997.
In the interest of completeness I should perhaps record that when the first defendant failed to close the sale on the 30th October, 1997, the plaintiff, on the following day, the 31st October, 1997, applied to the Supreme Court for a stay of execution on the delivery up of possession. Bio undertook on that occasion not to execute for possession for one week from the 31st October, 1997 and this undertaking is recorded in an order of the Supreme Court of that day. By order dated the 21st November, 1997, the Supreme Court declined to entertain any further application from the plaintiff for a further stay or postponement of taking possession, on the ground that the situation which had arisen was something over which it had no control or no jurisdiction.
The submission made on behalf of the first defendant is that, because of the existence of the various orders in the mortgage proceedings, the plaintiff has been under an obligation to deliver possession of Marsh Farm to Bio since the 1st November, 1997 and that since that date, because of the existence of that obligation, the plaintiff has been unable to comply with her contractual obligation to furnish vacant possession to the first defendant on completion. This submission utterly fails to take account of the true nature of Bio’s interest in the lands. Bio is merely the owner of a charge on the lands as security for the plaintiff’s indebtedness to it in accordance with the provisions of the charge and law. While it also has an entitlement to immediate possession of the lands and can enforce that entitlement, that entitlement only persists for the purpose of the facilitating the realisation of the security with a view to the discharge of the plaintiff’s indebtedness to it. One of the fundamental rubrics of our law of property and one of equity’s great contributions to its development is that a mortgagor is entitled to redeem his mortgage.
On the evidence, I am satisfied that the purchase price payable to the plaintiff by the first defendant, £1,700,000.00, is as of today sufficient to discharge the indebtedness of Bio and all other encumbrances. Accordingly, subject to compliance by the first defendant with its contractual obligation to the plaintiff, I am satisfied that the plaintiff is in a position to redeem the charge in favour of Bio and set at naught the effect of the orders of this Court and the Supreme Court, that is to say, Bio’s entitlement to execute for possession and the plaintiff’s obligation to deliver possession. Accordingly, neither the existence of the orders nor the compromise evidenced by the letter dated the 14th July, 1997, is a bar to an order for specific performance.
In relation to the substantive relief claimed by the plaintiff in the proceedings, the plaintiff is entitled to an order for specific performance of the agreement as supplemented by the letter of comfort. I will, accordingly, make an order for specific performance by the first defendant of the agreement on or before Friday, the 6th February, 1998. The plaintiff will have liberty to apply on notice to the first defendant to fix a time for hearing any application the plaintiff has in relation to the ancillary relief claimed.
Browne v. Mariena Properties Ltd. Supreme Court
Barrington J.
This is an appeal from the judgment and order of Laffoy J. given and made herein on the 23rd January, 1998, in which she granted the claim of the plaintiff for specific performance of a contract for the sale of lands.
The background to the case, which is rather complex, is succinctly set out in the judgment of the learned trial Judge as follows:-
[The judgment recites the facts as set out in the judgment of Laffoy J.,supra at p. 573.]
The appeal to this Court turned on net points of law relating to whether the learned trial judge properly construed clause 35 of the general conditions in the agreement for sale or had properly understood the effect of the notices published in the press by the Department of Arts, Heritage, Gaeltacht and the Islands.
Clause 35 reads as follows:-
“Where prior to the sale
(a) any closing, demolition or clearance order; or
(b) any notice (not being of the contents of the Development Plan other than an actual or proposed designation of all or any part of the subject property for compulsory acquisition) made or issued by or at the behest of a Competent Authority in respect of the subject property and affecting same at the date of sale has been notified or given to the Vendor (whether personally or by advertisement or posting on the subject property or in any other manner) or is otherwise known to the Vendor or where the subject property is at the date of sale affected by any award or grant which is or may be repayable by the Vendor’s successor in title then if the Vendor fails to show:-
(i) that, before the sale, the Purchaser received notice or was aware of the matter in question; or
(ii) that the same is no longer applicable or material; or
(iii) that same does not prejudicially affect the value of the subject property; or
(iv) that the subject thereof can and will be dealt with fully in the Apportionment Account; the Purchaser may by notice given to the Vendor rescind the sale.”
Clause 2 of the General Conditions provides that, save where the context otherwise requires or implies the term competent authority:-
“includes the State any Minister thereof, Government Department, State Authority, Local Authority, Planning Authority, Sanitary Authority, Building Control Authority, Fire Authority, Statutory Undertaker or any Department, Body or person by statutory provision or order for the time being in force authorised directly or indirectly to control, regulate, modify or restrict the development, use or servicing of land or buildings, or empowered to acquire land by compulsory process.”
The first of the notices referred to appeared on the 18th November, 1994, in one or more local newspapers and was headed”Natural Heritage Areas” and “Notice of Interest to Land Owners”. The text of the notice was as follows:-
“The Commissioners of Public Works in Ireland wish to notify owners and occupiers of land that Natural Heritage Areas (NHAs) have been designated in County Louth. 1/2″ site maps of the NHAs may be viewed in the Teagasc Farm Development Services and Department of Social Welfare Offices of the county, as well as in the major Garda Stations. Arrangements to view the 6″ site maps may be made with the District Wildlife Officer (D.W.O) of the Office of Public Works.
Land owners and townlands containing NHAs will be notified by post as soon as possible. Owners/Occupiers identified by O.P.W. as having land in an NHA will be contacted later and provided with a site map and a site report. NHA status recognises the importance of the area for wildlife conservation and farmers are requested to continue farming in a manner that will help to conserve the sites for wildlife.
NHA designation will not prevent any owner/occupier from developing the land. However, it is E.U. policy that any developments undertaken are compatible with the protection of the environment. If not compatible they will not be afforded grant-aid.
. . . The Minister for Arts, Culture and the Gaeltacht proposes to establish an appeals system which will allow land owners or occupiers to appeal, on scientific grounds, against decisions as to the status or boundary of an NHA and details of this system will be published in due course . . .”
The notice incorporated a list of townlands in which the Natural Heritage Areas in County Louth were situated which included Moretown in which the Marsh Farm is located.
The second notice was published in a local newspaper on the 17th March, 1995. This notice was headed “Withdrawing the NHA designation in 12 Counties”. The text of this notice was as follows:-
“The Minister for Arts, Culture and the Gaeltacht, Mr. Michael D. Higgins, T.D., wishes to inform land owners and occupiers that he has
directed the National Parks and Wildlife Service (N.P.W.S.) to withdraw the natural heritage area designations made in Counties Carlow, Cavan, Clare, Kildare, Kilkenny, Laois, Offaly, Louth, Longford, Meath, Wexford and Wicklow.
The Minister wishes to make it known that areas previously designated should now be regarded as proposed designations only. The Minister has taken this position so as to enable adequate prior consultation to take place with land owners and occupiers and with other interested parties. All interested parties will have an opportunity, therefore, to make their views known regarding the proposed designations and indeed to object to such proposals. All views expressed will be taken into account prior to a final decision being taken in regard to designation.
Consideration is being given to proposals for legislation under which applications might be made for the designation as Natural Heritage Areas (NHAs) of the areas referred to above because of their importance for wildlife conservation. Therefore the references to NHAs and the shaded areas on the maps which have been sent to the authorities referred to below should be regarded as only being references to areas which might be designated if new legislation is enacted.
The County Planning Authorities, the Department of Agriculture, Food and Forestry . . . the Department of Marine . . . An Bord Iascaigh Mhara . . . and other Public Authorities and grant-aiding authorities will be issued with maps indicating that the areas in question might be designated NHAs at a future date. These authorities will be requested to provide the National Parks and Wildlife Service with an opportunity to make representations and if necessary submit relevant reports prior to making any decision which might affect the proposed NHAs. It is E.U. and national policy that grant-aid will not be given in instances where the project proposed is likely to adversely affect the environment.
In accordance with the ordinary decision-making procedures of those authorities, decisions which might affect the proposed NHAs will be made by them after fully informing all parties entitled to be heard. This will include the provision of all relevant information to such parties. It will also allow them the opportunity of answering, if they so wish, any case made by the National Park and Wildlife Service.”
Issues to be decided
It is clear from the foregoing that no legal significance can be attached to the first notice. It had been withdrawn long before the contract in the present case was entered into and its significance, if any, is purely historical. Initially the defendants had relied upon the first notice as a ground for rescinding the contract but both parties are now agreed that the relevant notice is the second notice. Both parties are also agreed (as would appear to be confirmed by the text of the second notice) that the Minister, or the Department or the Commissioners of Public Works had not at any relevant time statutory authority to designate Natural Heritage Areas. Nevertheless, counsel for the defendants submits that even if the second notice were merely an indication of ministerial intention its effect was to diminish the commercial value of the lands and that therefore the second notice should have been disclosed pursuant to the provisions of clause 35. Counsel for the plaintiff, on the otherhand, submits that if the commercial value of the lands has been diminished this is because of the ongoing policy of the European Union and the Minister not to make grants in aid of commercial development in environmentally sensitive areas. The publication of the second notice did not, counsel submits, affect this policy one way or the other and could not, therefore, affect the value of the property.
The submissions on the appeal concentrated on three points:-
(1) Was the Minister or the Department of the Arts Culture, the Gaeltacht and the Islands (or the Commissioners for Public Works) a”Competent Authority” within clause 35 of the General Conditions of Sale?
(2) If so, did the second notice “affect” the property for sale within the meaning of clause 35 (b) at the time the contract for sale was entered into.
(3) It was common case that the plaintiff had no knowledge of the issuing of either notice at the time she entered into the contract of sale. Nevertheless counsel for the defendants submitted that on a correct construction of clause 35 (b) her failure to inform the first defendant of the existence of the second notice entitled the first defendant to rescind the sale.
Competent Authority
The term competent authority, is defined for the purpose of the contract and, as the learned trial judge remarked it is defined in very wide terms. This intention is further manifested by the use of the word “including” in clause 2 which is the definition section in the General Conditions.
Nevertheless, I cannot accept the way counsel for the defendants has construed the definition. The defendants have asked the Court to accept that there are at least two different kinds of competent authorities referred to in the definition. The first are the State, any Minister thereof, Government Department, State Authority, Local Authority, Planning Authority, Sanitary Authority, Building Control Authority, Fire Authority, Statutory Undertaker who, are as it were, competent authoritiesper se. Then you have the second half of the definition which refers to”or any Department, Body or person by statutory provision or order for time being in force authorised directly or indirectly to control, regulate, modify or restrict the development use or servicing of land or building or empowered to acquire land by compulsory process”. But it does not appear to me to be correct to split the definition in this way. It appears to me that the closing words govern all which went before. To be competent, an authority must be expressly or impliedly authorised by statute or order to do what it is purporting to do.
It therefore appears to me that neither the Minister nor the Department nor the Commissioners of Public Works were at any material time competent authorities to designate Natural Heritage Areas, or to issue legally binding notices to that effect, within the meaning of clause 35 of the General Conditions.
The meaning of the word “affect” in clause 35
The Minister was of course competent to issue a notice of his future intention to introduce legislation designed to give him power to designate Natural Heritage Areas. This fact alone, the defendants submit could and did affect the commercial value of the lands. The defendants are undoubtedly right when their counsel says that the term”affect” is a very wide and loose term and he has referred us to the cases of Tradax (Ir.) Ltd. v. Irish Grain Board [1984] I.R. 1; Carna Foods Ltd. v. Eagle Star Insurance Co. (Ireland) Ltd. [1995] I.R. 526 and In Re Buckinghamshire County Council and Hertfordshire County Council (1899) 68 L.J.Q.B.
Counsel for the defendants submits that if there is any ambiguity in the contract this should be resolved against the plaintiff on the basis that the plaintiff prepared the contract. Generally speaking the defendants’ approach is correct. If we were dealing with a special condition in the contract prepared by the plaintiff, I would have no hesitation in accepting it. But we are here dealing with a general condition in a standard contract of sale approved by the Incorporated Law Society on the basis, presumably, that it preserves a fair balance between vendor and purchaser. In these circumstances it appears to me that the Court should approach the question of interpretation with an open mind and examine the wording of the clause itself.
Subject to the exclusions therein contained, clause 35(b) refers to “any notice . . . made or issued by or at the behest of a Competent Authority in respect of the subject property and affecting same at the date of sale”. The issue is whether the term “affecting” means affecting in law or whether it is sufficient if it has an influence on the commercial value of the lands. If for instance the Minister for Social Welfare were to issue a notice purporting to designate the lands as a Natural Heritage Area would this “affect” the lands within the meaning of the clause? Surely the answer to this must be no. It is possible that such a notice might influence the commercial value of the lands. But because the Minister would not be the competent authority the notice would be a nullity. This interpretation seems to be borne out by the reference in the section to the property for sale as “affected” by”any award or grant which is or may be repayable by the vendor’s successor in title”. More over it is not sufficient that the notice should be issued “in respect” of the lands it must also “affect” them. This interpretation appears further to be borne out by the escape provision for the vendor in the event of his being able to show that the notice “does not prejudicially affect the value of the subject property”. In other words the clause contemplates that a notice which “affects” the property may not prejudicially affect its value. It therefore appears to me that the clause is contemplating a notice which may affect the property in law even though it does not affect it in value.
In the present case the Minister had not, at any material time, power to make a Natural Heritage Area Order. Therefore a notice from him to the effect that he had the intention of introducing legislation could not “affect” the property in law. It therefore appears to me that the learned trial judge was perfectly right to hold that the Minister (or the Department, or the Commissioners of Public Works) had not got at any material time power to make a Natural Heritage Order in respect of these lands and that therefore the notice was a nullity and not capable of affecting the lands. For the same reason she was right to hold that the bodies referred to were not the competent authority in respect of this matter.
Notice
As already stated it is common case that the plaintiff was not at any material time aware of either of the notices referred to. Counsel for the defendants however submits that, notwithstanding this fact, she was still caught by the provisions of clause 35 (b). That clause refers to “any notice” made or issued by or at the behest of a competent authority in respect of the lands “notified or given to the Vendor (whether personally or by advertisement or posting on the property or in any other manner) or is otherwise known to the Vendor”.
We are not here dealing with any special act authorising service or the giving of notice in any particular manner so that in this case we are not concerned with the meaning of the words in brackets. For there is no special statute which could be invoked here. We are therefore concerned with a notice which has been “notified or given to the Vendor . . . or (which) is otherwise known to the Vendor”. It appears to me that this means a notice which was known to the vendor either because it was actually notified or given to her or because it came to her knowledge otherwise. In other words it appears to me that we are dealing with a notice of which the vendor had actual knowledge. It is common case that the plaintiff had no such knowledge in the context of this sale.
Conclusion
For all these reasons it appears to me that the plaintiff was not and is not caught by the provisions of clause 35 of the General Conditions. It therefore appears to me that the first defendant has no answer to the plaintiff’s claim and that the appeal should be dismissed and the order of the learned trial judge affirmed subject to such adjustments as may be necessary to bring her order up-to-date.
Lynch J.
I agree with the judgment of Barrington J.
Barron J.
I agree with the judgment of Barrington J.
Kelly & Anor -v- Lennon
[2009] IEHC 320
Clarke J.
JUDGMENT of Mr. Justice Clarke delivered the 2nd July, 2009
1. Introduction
1.1 On the 25th May, 2007, the parties to these proceedings entered into a contract (“the Contract”) for the sale of lands in County Westmeath for an agreed sum of €46,693,300. The defendant (“Mr. Lennon”) was the vendor. The plaintiffs (“Mr. Kelly and Mr. O’Sullivan”) were the purchasers. In circumstances which it will be necessary to explore in a little more detail, Mr. Kelly and Mr. O’Sullivan now contend that that contract is at an end. They have brought these proceedings for the purposes of seeking a declaration to that effect. More specifically, Mr. Kelly and Mr. O’Sullivan seek a declaration that the contract to which I have referred “has been validly rescinded” by them. Mr. Kelly and Mr. O’Sullivan also seek the return of a deposit in the amount of €9,093,000 together with interest on that sum under the terms of the contract. Mr. Lennon disputes the entitlement of Mr. Kelly and Mr. O’Sullivan to either order and, indeed, maintains that the contract continues in effect and remains capable of enforcement.
1.2 However, in addition Mr. Lennon maintains that what he says is the true dispute which arises in these proceedings is governed by the standard form arbitration clause contained in the Law Society General Conditions of Sale (2001 edition), which was incorporated into the contract by the parties. On that basis, Mr. Lennon seeks to have these proceedings stayed until such time as certain issues between the parties have been resolved by arbitration.
1.3 This judgment is directed to the question of whether it is appropriate to stay these proceedings in those circumstances. Some of the factual background to the dispute between the parties is relevant to a full understanding of the issues which have arisen under this application, and I, therefore, turn to the facts insofar as they are material to the issue which I now have to decide.
2. The Material Facts
2.1 The contract provided for a closing date six months from the date of its signing. As the contract was dated the 25th May, 2007, the closing date was in November, 2007. The lands to be sold were described by reference to six different freehold folios. However, it would appear that, in the course of investigating title, differences arose between the parties as to the consistency of the physical boundaries of the lands with the boundaries of the land registry folios to which I have referred. It would appear that it was, at least at one stage, contemplated that an application might be made to the land registry for the purposes of rectifying those boundaries. Be that as it may, the question of closing the sale did not really come to a head until the latter part of 2008. Two completion notices were served, followed by correspondence between the respective parties’ solicitors as to the basis upon which the respective parties might be willing to close the sale. On the evidence currently available it would appear that all of the closing requirements of Mr. Kelly and Mr. O’Sullivan (through their solicitors), were agreed save for two matters. The parties remained in dispute concerning the consequences of what was said to be an error, to which I have already referred, in the description of the lands, the subject matter of the contract, arising out of the difference between the boundaries on the ground and those contained in the relevant folios. In addition, there appears to have been some dispute between the parties concerning the issue of tenancies.
2.2 Special condition 5 of the contract provided that the property was to be sold “subject to and with the benefit of the Tenancies, particulars of which are set out in the First Schedule hereto and the Vendor shall not be required to hand over vacant possession of the said property on closing and General Condition No. 21 is amended accordingly”.
2.3 The same clause went on to provide that the purchaser should be entitled to communicate and negotiate with the relevant tenants, while the vendor agreed not to communicate with those tenants “save on the direction of the Purchasers”. It would appear that, prior to the events which I am describing, at least some of the relevant tenants had terminated their tenancies. Issues concerning the contractual entitlements of the parties in those circumstances appear to have arisen in the context of the closing requirements made by the respective solicitors acting for the parties.
2.4 Against that background it is next appropriate to turn to the issues which are likely to arise in these proceedings.
3. The Issues in these Proceedings
3.1 The net issue between the parties is, of course, as to whether the contract between them is validly at an end in circumstances where Mr. Kelly and Mr. O’Sullivan would be entitled to a repayment of their deposit, together with interest. However, in addressing that issue it seems clear that a number of further sub-issues will necessarily arise. It does not appear to be disputed but that a valid completion notice was served. Equally it is clear that completion did not take place. The position of the parties will, therefore, depend on the view which the court ultimately takes as to the circumstances surrounding that failure to complete. If Mr. Lennon can ultimately persuade the court that he was ready, willing and able to complete, but that he was prevented from so doing because Mr. Kelly and Mr. O’Sullivan imposed conditions in relation to closing, which they were not legally entitled to impose, then it follows that the contract will still subsist and that Mr. Lennon would, in those circumstances, be entitled to pursue whatever remedies (whether specific performance, damages or the like) as he may be advised. Equally, if the court is persuaded that the position adopted on behalf of Mr. Lennon by his solicitors as to closing was not in accordance with Mr. Lennon’s legal obligations, then it seems clear that Mr. Kelly and Mr. O’Sullivan will be entitled to succeed in their claim to the effect that the contract is now at an end by virtue of the failure (on the assumption which I have made the failure would be for no good or sufficient reason) of Mr. Lennon to complete in accordance with his obligations under the completion notice.
3.2 On that basis it seems clear that the real issues in the case will be as to the circumstance surrounding the attempts to close the sale, with a particular focus on the position adopted by the respective parties at that stage. In those circumstances, it seems highly likely that the case will turn on the view which the court takes as to the position adopted at all relevant times by the parties concerning the question of the boundaries, and also concerning the tenancies to which I have referred. In addition it may well be that issues will arise as to the entitlement of Mr. Lennon to insist on arbitration where it is said that the first attempt to refer the issue to arbitration occurred after the service of the relevant completion notices. It is in the context of those issues arising that the question of arbitration needs to be addressed. The issue concerning the boundaries is one, on Mr. Lennon’s argument, which can only properly be determined by an arbitrator.
3.3 The first point for consideration is, therefore, as to whether Mr. Lennon is correct in that assertion. In that context it is appropriate to refer to the relevant provisions of the 2001 edition of the Law Society General Condition of Sale. I turn to those conditions.
4. The General Conditions
4.1 The relevant provisions of the Law Society General Conditions of Sale are Conditions 33 and 51. I set out the text of those provisions hereunder:-
“Condition 33
(a) In this Condition “error” includes any omission, non-disclosure, discrepancy, difference, inaccuracy, mis-statement or mis-representation made in the Memorandum, the Particulars or in the Conditions or the Non-Title Information Sheet or in the course of any representation, response or negotiations leading to the Sale, and whether in respect of measurements, quantities, descriptions or otherwise
(b) The Purchaser shall be entitled to be compensated by the Vendor for any loss suffered by the Purchaser in his bargain relative to the Sale as a result of an error made by or on behalf of the Vendor provided however that no compensation shall be payable for loss of trifling materiality unless attributable to recklessness or fraud on the part of the Vendor nor in respect of any matter of which the Purchaser shall be deemed to have had notice under condition 16 (a) nor in relation to any error in a location or similar plan furnished for identification only
(c) Nothing in the Memorandum, the Particulars or the Conditions shall:
(i) entitle the Vendor to require the Purchaser to accept property which differs substantially from the property agreed to be sold whether in quantity, quality, tenure or otherwise, if the Purchaser would be prejudiced materially by reason of any such difference
or
(ii) affect the right of the Purchaser to rescind or repudiate the Sale where compensation for a claim attributable to a material error made by or on behalf of the Vendor cannot be reasonably assessed
(d) Save as aforesaid, no error shall annul the Sale or entitle the Vendor or the Purchaser (as the case may be) to be discharged therefrom.
Condition 51
All differences and disputes between the Vendor and the Purchaser as to:
(a) whether a rent is or is not a rack rent for the purpose of Condition 10(c), or
(b) the identification of the Apportionment Date, or the treatment or quantification of any item pursuant to the provisions for the apportionment in the Conditions, or
(c) any issues on foot of Condition 33, including the applicability of said Condition, and the amount of compensation payable thereunder, or
(d) the materiality of any matter for the purpose of Condition 36 (a), or
(e) the materiality of damage or any other question involving any of the provision in Condition 43, 44 and 45, including the amount of compensation (if any) payable, or
(f) whether any particular item or thing is or is not included in the Sale, or otherwise as to the nature or condition thereof shall be submitted to arbitration by a sole Arbitrator to be appointed (in the absence of agreement between the Vendor and the Purchase upon such appointment and on the application of either of them) by the President (or other Officer endowed with the functions of such President) for the time being of the Law Society of Ireland or (in the event of the President or other Officer as aforesaid being unable or unwilling to make the appointment) by the next senior Officer of that Society who is so able and willing to make the appointment and such arbitration shall be governed by the Arbitration Acts, 1954 to 1998 provided however that if the Arbitrator shall relinquish his appointment or die, or if it shall become apparent that for any reason he shall be unable or shall have become unfit or unsuited (whether because of bias or otherwise) to compete his duties, or if he shall be removed from office by Court Order, a substitute may be appointment in his place and in relation to any such appointment the procedures hereinbefore set forth shall be deemed to apply as though the substitution were an appointment de novo which said procedures may be repeated as many times as may be necessary.”
4.2 As will be noted from the above an error for the purposes of Condition 33 includes any discrepancy in the memorandum or particulars of the contract. I did not understand the parties to dispute but that the alleged discrepancy between the physical boundaries and the folios concerned would, if established, amount to an error within that definition.
4.3 It is clear from Condition 33(b) that a purchaser is entitled to compensation for any loss suffered as a result of an error unless either:-
(a) The loss is of trifling materiality save when same is attributable to recklessness or fraud; or
(b) under Clause 33(c) where the error creates a situation where the purchaser would be required to accept property “which differs substantially from the property agreed to be sold” so that the purchaser would be prejudiced materially by reason of such difference or where (under sub-clause (ii)) any relevant compensation could not reasonably be assessed.
4.4 It is clear that Condition 33(d) provides that an error shall not annul the sale or entitle either party to be discharged therefrom “save as aforesaid”.
4.5 In those circumstances it seems clear to me that the effect of General Condition 33 as a whole is such as to preclude either party from being able to escape from an otherwise contractually valid arrangement on the basis of an error in the particulars, unless that error is:-
(a) As a result of fraud or recklessness;
(b) Sufficiently substantial as would cause material prejudice; or
(c) Incapable of giving rise to a reasonable computation of relevant compensation.
In all other cases the parties are required to complete the contract with an appropriate adjustment being made to the purchase price to reflect the error (unless the error is so immaterial as to be trifling and not, therefore, to warrant compensation at all).
4.6 To the extent, therefore, that there would appear to have been an error in the contract so far as boundaries are concerned, the issue which arises between the parties is as to whether that error is sufficiently material so as to cause prejudice and thus to lead to the entitlement on the part of the purchasers to treat the contract as at an end. In addition, and in the event that it be determined that any error is not sufficient to warrant permitting the purchasers to walk away from the contract, then the question of the appropriate amount of compensation to be assessed also arises.
4.7 It is also clear that the relevant provisions of General Condition 51 provide that all differences and disputes between the vendor and the purchaser as to “any issue on foot of Condition 33, including the applicability of the said Condition, and the amount of compensation payable thereunder” is to be submitted to arbitration. Contrary to the submission of Mr. Kelly and Mr. O’Sullivan it seems to me that General Condition No. 51 requires that any question as to whether a relevant error is such as might bring the contract to an end under the provisions of Condition No. 33 is to be determined by arbitration.
4.8 Having analysed the relevant contractual provisions it is next appropriate to turn to the basis on which Mr. Kelly and Mr. O’Sullivan oppose the application for a stay.
5. The Issues on the Stay Application
5.1 Two points are raised in opposition to the stay on behalf of Mr. Kelly and Mr. O’Sullivan.
5.2 Firstly, it is argued that, as the contract has been validly rescinded, there is no longer an arbitration clause capable of enforcement. In that context it is also said that no arbitrator could determine the ultimate issue in these proceedings which is as to whether the contract is validly at an end.
5.3 A second point is made arising out of the fact that Mr. Lennon has, undoubtedly, entered an unconditional appearance to these proceedings. In those circumstances it is said that Mr. Lennon has taken a step in the proceedings and is not, therefore, entitled to a stay pending arbitration.
5.4 I propose to turn to the continuing effectiveness of the arbitration clause first.
6. The Validity of the Arbitration Clause and its Application
6.1 It does not seem to me that there is any merit in the principal argument put forward on behalf of Mr. Kelly and Mr. O’Sullivan under this heading. There is no basis for suggesting that there was not a valid contract entered into between the parties. The only issue between the parties is as to whether, in accordance with the terms of that contract, the contract still subsists (as Mr. Lennon argues) or may have come to an end, whether by rescission or otherwise, as Mr. Kelly and Mr. O’Sullivan argue. This is not one of those cases where there may be an argument as to whether there was ever a valid and subsisting contract in the first place, such as to give rise to a valid arbitration agreement between the parties. Rather this case is one where there was undoubtedly a valid agreement with an arbitration clause in the form of General Condition 51. It is clear from the review of the authorities conducted by Kelly J. in Doyle v. Irish National Insurance Company [1998] 1 ILRM 502 that, in such circumstances an arbitration clause survives any contended termination of the contract. Indeed in Doyle the argument was that the insurance contract concerned was void with retrospective effect. The high water mark of the case made in these proceedings is that contractual relations between the parties have come to an end. This case is, therefore, if anything, an even clearer case for the survival of the arbitration clause concerned. In principle, therefore, I can see no basis for the suggestion put forward on behalf of Mr. Kelly and Mr. O’Sullivan to the effect that the arbitration clause is no longer in being, or capable of being given effect to.
6.2 However, it is important also to address the question of the undoubted limitation on the scope of the arbitration clause in this case. In most cases involving an arbitration clause, the scope of any potential arbitration is wide. Phases such as “any disputes arising out of” and the like make it clear that all relevant disputes between the parties are likely to be properly the subject of arbitration. However, that is clearly not the case here. The only dispute between the parties which comes within the scope of General Condition 51 is the boundary dispute. As pointed out earlier I did not accept the argument put forward on behalf of Mr. Kelly and Mr. O’Sullivan to the effect that the dispute between the parties was not properly within the scope of General Condition 51 or that there was, at least, a doubt about this fact. The dispute between the parties arising out of the alleged error in the boundaries is one which seems to me to be governed by General Condition 33.
6.3 Leaving aside for the moment the question of the dispute concerning the tenancies (to which it will, of course, be necessary to return), and the issues concerning the sequencing of the completion notices and the first attempt to refer to arbitration, it is important to analyse what the legal position of the respective parties would be in the event that the only issue between them as to closing centred on that boundary dispute.
6.4 If, on a proper application of the terms of General Condition 33 to the facts of this case, it is appropriate to decide that any error as to the boundary of the properties was such as did not entitle Mr. Kelly and Mr. O’Sullivan to treat the contract as at an end, then the only issue (other than that relating to the tenancies to which I have referred) which might arise between the parties is as to the consequences of that finding for the continuance of the contract in the light of the sequence of events which, in fact, occurred in this case. What in fact happened was that a completion notice was served at a time prior to any attempt being made to suggest that issues arising out of the boundary question should be referred to arbitration. Prior to the expiry of the second completion notice in this case, an attempt was made on behalf of Mr. Lennon to have the issues which arose under General Condition 33 referred to arbitration under the provisions of General Condition 51. As I understand it, the parties adopt a different view as to the consequences of that sequence of events. It is argued on behalf of Mr. Kelly and Mr. O’Sullivan that it had, in practice, become too late for Mr. Lennon to seek to refer the matter to arbitration at that stage, given that he had already served a completion notice. Mr. Lennon argues for a contrary position relying, at least in part, on what is said to have been the position previously adopted on behalf of Mr. Kelly and Mr. O’Sullivan which was to the effect that an application could be made to the Land Registry to seek to remedy the apparent boundary discrepancies. In those circumstances it is said that there was a belated change of position on the part of Mr. Kelly and Mr. O’Sullivan such that Mr. Lennon cannot be blamed for the lateness of seeking to refer the boundary question to arbitration.
6.5 As indicated earlier, it is also necessary to touch on the fact that there is clearly a potential dispute between the parties as to the legal consequences for the continuance of the contract on the fact (which seems to be so), that some of the tenancies referred to in the contract had terminated before the proposed closing.
6.6 In all those circumstances it seems to me that, on the basis of the evidence and arguments currently put forward, there would be likely to be three questions which any court or other competent adjudicator would need to determine in order to decide whether the contract still subsists, or whether it should be treated as at an end with the deposit being repaid. Those issues would seem to be:-
(a) Whether the change in the status of the tenancies to which I have referred means, as a matter of law and as a matter of fact, that the contract can no longer be preformed;
(b) Whether, in the light of the fact that the first attempt to refer the matter to arbitration on the part of Mr. Lennon took place after the service of a completion notice, the contract was not completed due to a failure on the part of Mr. Lennon irregardless of the proper application of Clause 33 to the boundary issue; and
(c) In the event that the argument under (b) above does not avail Mr. Kelly and Mr. O’Sullivan whether, on a proper application of the provisions of General Condition 33 to the facts of this case, any error in the boundaries concerned is such as entitles Mr. Kelly and Mr. O’Sullivan to treat the contract as at an end.
6.7 It is also clear that items (a) and (b) are matters purely for the court. However, for the reasons which I have sought to analyse, I am satisfied that there is a valid arbitration clause in being and enforceable as a result of which the parties have agreed to abide the decision of an arbitrator in respect of issue (c).
6.8 On a proper analysis of the issues which arise between the parties it is clear, therefore, that some but not all of the issues which arise in these proceedings are the subject of a valid and binding arbitration clause. In those circumstances it seems to me that the issue which I have to decide is as to the proper course which a court should adopt where, as here, some but not all of the issues which arise in a set of proceedings are the subject of a valid and binding arbitration clause and, in particular, where, as here, those issues relate not to stand alone causes of action in themselves, but rather are components of the matters that need to be determined by the court in order to come to a proper decision on a single cause of action, which, in this case, is as to the continued validity of the contract. I, therefore, turn to that question.
7. Partial Arbitration
7.1 It seems to me that the starting point must be to give full recognition to the fact that the parties have agreed between themselves in the contract to refer any questions under General Condition 33 to arbitration. A court should not seek to go behind that decision of the parties. In those circumstances it does not seem to me that there could be any legitimate basis for the court taking on the role, which the parties had agreed to refer to an arbitrator, of determining any issues which arise under General Condition 33.
7.2 However, the court also has to take into account the fact that there are other issues which will, in any event, arise in these proceedings, being the tenancy issue identified at 6.6(a) above and the question of the consequence of the sequence of the service of the completion notices, and the attempted referral to arbitration referred to at 6.6(b) above. There could be no suggestion that either of those issues come within the scope of the arbitration clause.
7.3 The net position is, therefore, that in order that there be a final determination as to the continuing existence of the contract, it is necessary that some issues are decided by the court and some issues are decided by an arbitrator. That fact is unusual but stems from the terms of the contract which provide for arbitration in only limited circumstances. The question which I must now address is as to what the court should do when faced with a situation where there is a single cause of action, the proper resolution of which requires a determination (possibly) of some issues over which the court has jurisdiction, and some issues which the parties have agreed to refer to arbitration. I use the terms “possibly” in parenthesis because it is, of course, possible that a determination by the court in favour of Mr. Kelly and Mr. O’Sullivan on issue (a) or issue (b) could render any decision as to the effect of General Condition 33 redundant. For example, if the court were to find that the tenancy issue was such that the contract was no longer capable of being performed then it would, in all likelihood, become irrelevant to determine the proper application of General Condition 33.
7.4 In my view, in cases such as this, where some but not all of the issues necessary to determine a cause of action arising in proceedings are the subject of a valid and subsisting arbitration clause, the court has a discretion as to the proper course of action to adopt which should be exercised in the light of all the circumstances of the case with a view to ensuring, insofar as possible, a speedy resolution of all of the issues which arise, and a final determination of the cause of action concerned, while at the same time ensuring that the court does not trespass on determining any issue which has been properly made the subject of an arbitration agreement between the parties.
7.5 I should emphasise that the discretion of which I speak does not, it seems to me, extend to the court taking over a jurisdiction to determine any issue properly referred to arbitration. Rather, the discretion is as to how the various elements of the case (being those properly within the jurisdiction of the court and those validly referred to arbitration) should be sequenced so as to maximise the likelihood of a speedy and just resolution of all issues between the parties.
7.6 I should also emphasise that the analysis which I have engaged in has no bearing on a case where there are separate causes of action some, but not all, of which are the subject of a valid arbitration agreement. In those circumstances a court should have no difficulty in staying any aspect of the proceedings before the court in relation to those causes of action which are the subject of a valid arbitration agreement. The position with which I am concerned is different. It stems from the unusual circumstances of this case, where a determination of the single cause of action in the proceedings (if one leaves out the consequential question of interest on the deposit) itself requires a resolution of a number of sub-issues, some but not all of which, are the subject of the arbitration agreement.
7.7 In those circumstances, it seems to me to be necessary to consider the application of the discretion which I have identified to the facts of this case.
8. Application to the Facts of this Case
8.1 It is necessary to take into account the fact that Mr. Lennon needs to be successful on all three of the issues which I have identified in order that he should succeed in these proceedings. He will need to satisfy the court that the tenancy issue is not such as has rendered the contract, properly construed, incapable of completion. He will need to satisfy the court that the sequence of events concerning the service of the completion notices and the attempt to refer the matter to arbitration is not such as leaves him in a position where it can be properly said, in accordance with the terms of the contract, that he was unable to complete. In addition, he will need to satisfy the arbitrator that the proper application of General Condition 33 to the facts of this case leaves either to no compensation (on the grounds of triviality) or measured compensation and does not entitle Mr. Kelly and Mr. O’Sullivan to have the contract treated as at an end.
8.2 It clearly follows that, if the court hearing were to come on first, and Mr. Kelly and Mr. O’Sullivan were to win on either issues (a) or (b), then issue (c) (which would fall for determination by the arbitrator) would almost certainly become irrelevant. Likewise, even if Mr. Lennon were to win before the arbitrator on issue (c), prior to a court hearing, it would still be for the court to determine issues (a) and (b), for those issues would not become redundant by reason of a favourable finding in favour of Mr. Lennon by the arbitrator on issue (c).
8.3 Against that background, it seems to me that it would be inappropriate to fully stay these proceedings pending arbitration, for it is clear that the other issues, which are substantive stand alone issues, will need to be determined in any event. On the other hand, it seems to me that any question of the issues arising under General Condition 33 must be stayed for to do otherwise would be to usurp the function which the parties have, by agreement, referred to arbitration.
8.4 In those circumstances, it seems to me that the proper course of action to adopt in this case is to stay any further consideration in these proceedings of the issues which arise under General Condition 33. It also seems to me that it would be preferable for the court to have the answer to the arbitrator’s consideration of the position under General Condition 33 before the court embarks on a trial of any other issues. I, therefore, propose to direct that notice of trial in these proceedings should not be served until such time as the arbitrator should have delivered his award in respect of the General Condition 33 issues. This will allow the court, when embarking on the trial, to have a full picture of all of the legal issues available to it and to reach a single concluded determination. However, I see no reason why those aspects of these proceedings which have not been stayed (that is those issues other than the question of the proper application of General Condition 33), should not proceed in the ordinary way up to the service of a notice of trial, so that the pleadings can be completed and any other interlocutory matters such as discovery can be explored and determined. For the avoidance of doubt, it seems to me that in those circumstances it should be open to Mr. Kelly and Mr. O’Sullivan to make reference in any relevant pleading to the General Condition 33 issues, subject to it being made clear in any such pleading that what is being relied on is the possible determination in their favour on that issue by an arbitrator. No pleading should be filed which might be construed as attempting to invite the court to determine those issues because, for the reasons which I have set out, any consideration by the court of those issues is being stayed pending arbitration.
9. The Appearance
9.1 I should finally deal with the point made on behalf of Mr. Kelly and Mr. O’Sullivan to the effect that the entry of an unconditional appearance by Mr. Lennon amounts to Mr. Lennon having taken a step in the proceedings, such as would debar him from being entitled to rely on the arbitration clause concerned. It seems to me that this point is manifestly ill-founded. Section 12(1) of the Arbitration Act 1954, (which introduces the concept of the taking of a step in the proceedings) provides in express terms that a party to an arbitration agreement can seek a stay “at any time after appearance and before delivering any pleadings or taking any other step in the proceedings”. In those circumstances the express terms of the Arbitration Act itself make it clear that an appearance is not to be treated as taking a step in the proceedings and that, indeed, the application for a stay is to take place after appearance. There is, in my view, therefore, no merit in this point whatsoever.
10. Conclusions
10.1 I, therefore, propose to make an order staying that part of these proceedings which refers to any issues arising under General Condition 33 pending an arbitration of those issues. I propose directing that the balance of these proceedings may proceed in an orderly fashion up to the service of the notice of trial, but that notice of trial cannot be served until such time as there an award of an arbitrator on the General Condition 33 issue has been made. Finally, I will give both parties liberty to apply lest there be any logistical difficulties encountered which have not been anticipated at this stage.
Collins & Anor -v- Duffy & Anor
[2009] IEHC 290
Finlay Geoghegan J.
26th day of June, 2009
1. The plaintiffs are husband and wife and engaged in property development. The defendants are property developers.
2. By an agreement in writing made on 12th September, 2007, the plaintiffs agreed to sell and the defendants agreed to purchase the lands comprised in folio 8328 of the Register of Freeholders, County Dublin, in consideration of €6.3 million (“the Contract”). The defendants paid to the plaintiffs a non-refundable deposit of €630,000 pursuant to the Contract. The Contract provided a closing date of 30th July, 2008. The defendants obtained planning permission for eighteen houses on 1st August, 2008. In the summer of 2008, the plaintiffs and the defendants agreed to a six-week extension and a new completion date of 12th September, 2008.
3. The defendants failed to complete the contract on 12th September, 2008. By letter of 16th September, 2008, the solicitors for the defendants indicated that their clients had now arranged for a survey of the property and that a preliminary report had been provided, indicating that there was a discrepancy between the Property Registration Authority map for folio 8328, County Dublin, and the actual boundaries on the ground. They indicated that they were seeking a map clearly indicating the extent of the discrepancy and that they were uncertain as to the “full extent or relevance of the discrepancy”. They indicated that they hoped a map would be prepared prior to the end of the week and would send it for comments. No such map was sent.
4. There was further correspondence in the second half of September, including an allegation made on behalf of the plaintiffs that one of the defendants had indicated that he did not intend completing the purchase of the property. Specific performance proceedings were threatened and a plenary summons issued on 9th October, 2008, claiming specific performance of the Contract, damages, and other ancillary reliefs.
5. At the end of the hearing, the plaintiffs, through their counsel, indicated that they were opting to pursue a claim for damages in lieu of specific performance and not seeking an order for specific performance of the Contract. The defendants each gave evidence of their current inability to raise finance to complete the Contract. It is common case that the plaintiffs are only entitled to damages in lieu of specific performance if they establish an entitlement to an order for specific performance of the Contract.
6. The defendants admit the Contract and raise no issue as to its validity. They defend the claim for specific performance on three grounds.
(i) The Contract was contingent upon the plaintiffs ensuring that the first named plaintiff and/or his associates purchased from a company owned by the defendants, Pecan Investments Limited, two units to be built by it at the development to be known as Metro Point Business Park, Kettles Lane, Swords, County Dublin, for a total price of €2,266,800.00 plus VAT.
(ii) The plaintiffs did not serve a completion notice pursuant to condition 40 of the general conditions of sale and in the absence of same are not entitled to maintain proceedings for specific performance.
(iii) The plaintiffs were not ready, willing and able to complete the sale of the property at the time of the issue of the plenary summons by reason of the alleged discrepancy in relation to the western boundary of the site and an issue as to whether or not the stream along the western boundary forms part of the property the subject matter of the sale.
Kettles Lane Property
7. It is not in dispute that at the end of 2006 or early 2007, the first named plaintiff and his business partner, Niall Doyle, put a booking deposit on two units being developed by the defendants’ company, Pecan Investments Limited, at Metro Point Business Park, Kettles Lane, Swords, County Dublin. It is further agreed that ultimately the plaintiff and Mr. Doyle determined not to proceed with the proposed purchase by reason of a potential increased stamp duty liability on the transactions and that the booking deposits were returned. I have concluded, on the oral evidence of the first named plaintiff, Mr. Michael Greene (the auctioneer and valuer for the plaintiffs) and the defendants, and find as a fact that there was not even an oral agreement making the purchase by the defendants of the property in folio 8328, County Dublin, pursuant to the Contract, contingent on the purchase of the two units at Kettles Lane, Swords, County Dublin.
8. Irrespective of the existence of any oral agreement, condition 5 of the special conditions of the Contract provides, “it is hereby further agreed that this document contains the entire terms and conditions of the agreement between the parties hereto …..” I am satisfied that the Contract does contain the entire terms and conditions of the agreement between the parties in relation to the sale and purchase of the lands in folio 8328, County Dublin, and was not contingent on any purchase by the first named plaintiff of units at Kettles Lane, Swords, County Dublin.
Completion notice
9. The defendants contend that time was not of the essence in respect of the Closing Date and accordingly, in the absence of the service of a completion notice pursuant to condition 40 of the general conditions of sale, the plaintiffs were not entitled to commence proceedings for specific performance and obtain an order for specific performance of the Contract. They rely, in particular, upon general condition 40(d) which provides:
“Save where time is of the essence in respect of the Closing Date, the following provisions shall apply:
(a) . . .
(d) if the Purchaser shall not comply with such a notice within the said period (or within any extension thereof which the Vendor may agree) he shall be deemed to have failed to comply with these Conditions in a material respect and the Vendor may enforce against the Purchaser, without further notice, such rights and remedies as may be available to the Vendor at law or in equity, or (without prejudice to such rights and remedies) may invoke and impose the provisions of Condition 41 ….”
Condition 41 refers to the right of a vendor to forfeit the deposit and resell the property.
10. Counsel for the defendants did not refer to any authority in support of the proposition that a vendor is obliged to serve a completion notice prior to commencing proceedings seeking an order for specific performance. The submission is contrary to the view expressed in Farrell, ‘Irish Law of Specific Performance’ (Dublin, Butterworths, 1994) at para. 8.38, where it is stated, “[a] plaintiff seems to be entitled to sue for specific performance once the agreed completion date has passed without making time of the essence”. Mr. Farrell refers, as authority for that statement, to an unreported decision of O’Caoimh P. of 18th May, 1973, Sidebottom Limited v. Leonard. In that decision, O’Caoimh P. stated:
“Now it has been argued that before a vendor can institute proceedings for specific performance of a contract when the time for completion has passed and the completion date has been not insisted upon by the vendor he must serve a notice making time of the essence. I know of no authority for this proposition. I accept that if the vendor wishes to enforce rights under the contract to forfeit the deposit he must make time of the essence and that in default of some notice it does not. Making time of the essence I think is a misdescription because time can never be made of the essence of a non-commercial contract unless the contract makes it such. I think this is the effect of Mr. Justice Harmon’s decision. What the notice can do is give to the other party notice that his failure to complete within a reasonable time specified in the notice will be treated by the other party as a refusal on his part to carry out the contract and that is what normally is meant by making time of the essence in a contract such as this, but I don’t think it is necessary there should be such a notice in the case of an action by a vendor, not to call off the contract and pocket the deposit, but merely to call upon the purchaser to do what he has engaged to do and I think the vendors are entitled to a decree for specific performance. On the whole I think it better not to say anything about title in the decree, just make a decree for specific performance.”
11. Whilst the contract for sale, the subject matter of the above decision, probably included an earlier version of the Law Society general conditions, I am in agreement with O’Caoimh P. and do not consider that general condition 40 in any way alters the entitlement of a vendor to bring proceedings, certainly after a closing date, where a purchaser has indicated an unwillingness to complete as he was contracted to do. On the facts herein, I find, on the evidence, that the purchasers, through their solicitors in the correspondence between 16th September, 2008, and the date of issue of the summons, had made clear that they were then unwilling to complete the purchase.
Alleged boundary discrepancy
12. There is only a small difference in the evidence of the experts called by the plaintiffs and the defendants in relation to the alleged boundary discrepancy, as it was referred to, or perhaps more accurately, an uncertainty in relation to the boundary. The property comprised in folio 8328, County Dublin, is at present agricultural land with no difficulty identifying the precise boundaries on the ground in relation to the northern, eastern and southern perimeters. At the western perimeter, a stream runs along the entire length. The evidence is that on the ground, the eastern side of the stream is overgrown with thicket, hedgerows, bushes, etc. The steam is down a ravine of differing heights along the length of the perimeter. The Ordinance Survey maps indicate that the western boundary of folio 8328 is also the town land boundary. The Ordinance Survey map, from which the Property Registration Authority map is taken, identifies the western boundary as being “6′ [or now 1.83m] FF”. Mr. Bruffini, who gave evidence for the plaintiff, explains that this, on an Ordinance Survey map, means six feet from a fence. However, he also stated that in some instances there were no such fences, that what is being referred to is a hedgerow or similar.
13. Mr. Williams, a surveyor called by the defendants, gave evidence that on his reading of the Ordinance Survey maps and the Property Registration Authority map taken therefrom, including the above referred to explanation, the boundary line falls on the western side of the stream. Mr. Bruffini, by reason of the identification of the boundary at 6′ from a fence and by reason of the fact that the stream, as a matter of probability, is not uniformly 6′ wide along the length of the western boundary, stated that, in his view, the boundary line may fall at some points on the western side of the stream, but also if, for example, the stream were ten feet wide, it would fall in the stream. Also, that it depended on the distance of the stream from whatever is being referred to as the old fence or hedgerow. Mr. Williams also stated that there was evidence along the stream of some activity including cutting down of trees on the eastern edge of the stream by adjoining landowners.
14. I am satisfied, on the evidence of the surveyors, that as a matter of fact, it is not possible to identify precisely from the Property Registration Authority map where exactly the boundary falls in relation to the stream running along or adjacent to the western perimeter of the property. Whilst there are indications that it may be at the western edge of the stream, that is not certain.
15. In relation to the legal issues, it is common case between the parties that by reason of s. 85 of the Registration of Title Act, 1964 (as substituted by s. 62 of the Registration of Deeds and Title Act, 2006), the Property Registration Authority map is not conclusive as to the boundaries or extent of the land comprised in folio 8328. There, however, agreement ends.
16. The plaintiffs submit that they agreed to sell all the lands comprised in folio 8328, County Dublin, and are under no obligation to identify on the ground the precise boundaries of the property being sold, having regard, in particular, to condition 14 of the general conditions. They also submit, having regard to special condition 4, that it is a matter for the defendants to satisfy themselves as to the exact location of the western boundary on the ground. The plaintiffs further subit that they were, on 12th September, 2008, and at the date of issue of the plenary summons, ready, willing and able to complete the sale.
17. The defendants submit that there was, at least since 16th September, 2008, a genuine issue raised in relation to a possible discrepancy concerning the western boundary and that the plaintiffs are obliged to resolve this matter prior to being entitled to require the defendants to complete the sale. They also contend that the plaintiffs were not ready, willing and able to complete the Contract, as they were not in a position to give vacant possession of the entire of the lands in folio 8328 by reason of evidence of use or occupation by the adjoining landowners of an area on the eastern edge of the stream.
18. The plaintiffs also sought to rely on the fact that the defendants did not have finance in place to complete the Contract in September, 2008. On the evidence, I find as a fact, that the defendants did not have finance in place to complete the Contract in September 2008. Nevertheless, such finding is not relevant to the issues as to whether the plaintiffs were entitled to require the defendants to complete the Contract in September, 2008, and were themselves ready, willing and able to do so.
19. The Contract describes the property in sale as:
“All that and those the lands and premises situate at Killsallaghan, Rolestown, County Dublin, being all the property comprises (sic) in Folio 8328 of the register of Freeholders, County Dublin, held in fee simple”.
20. The document schedule contains folio 8328, County Dublin, and file plan 8328, County Dublin. There is no map attached to the Contract. General condition 14 provides:
“The Purchaser shall accept such evidence of identify as may be gathered from the descriptions in the documents of title plus (if circumstances require) a statutory declaration to be made by a competent person, at the Purchaser’s expense, that the Subject Property has been held and enjoyed for at least twelve years in accordance with the title shown. The Vendor shall be obliged to furnish such information as is in his possession relative to the identify and extent of the Subject Property, but shall not be required to define exact boundaries, fences, ditches, hedges or walls or to specify which (if any) of the same are of a party nature, nor shall the Vendor be required to identify parts of the Subject Property held under different titles.”
21. As already indicated, the only documents of title are the folio and file plan. The latter is not conclusive as to boundaries. There was no statutory declaration such as referred to in condition 14. It is not suggested that the plaintiffs had any other information in their possession relative to the identity or extent of the property. I am satisfied that in accordance with the express terms of condition 14, which forms part of the Contract and therefore the terms under which the defendants agreed to purchase the property, the plaintiffs are not required to define exact boundaries. In the light of this conclusion, it is unnecessary for me to consider the plaintiffs’ reliance on special condition 4.
22. I am also satisfied that the plaintiffs were ready, willing and able to complete the Contract on 12th September, 2008, and all material dates thereafter, up to and including the date of issue of the plenary summons. The admissible minimal evidence of work done by adjoining landowners on the eastern side of the stream does not, in my view, preclude a finding that the plaintiffs were able to deliver vacant possession of the property comprised in folio 8328, County Dublin. Even that evidence results from a survey in December 2008. Further, whilst evidence was sought to be given by the defendants of claims made by adjoining landowners in November 2008, those persons were not called. There is no admissible evidence of any such claim.
23. The solicitor for the defendants gave evidence of difficulties which he envisaged in the development of the property if the defendants were required to complete the purchase without precise identification of the western boundary on the ground. That may be so. However, the defendants entered into the Contract with the benefit of legal advice and are bound by its terms. Having regard to condition 14 of the general conditions to which they agreed, they are not entitled to require the plaintiffs to identify the boundary before being obliged to complete.
24. Accordingly, I am satisfied that the plaintiffs, if they had pursued a claim for same, would have been entitled to an order for specific performance of the Contract. As they have opted for damages in lieu of specific performance and having regard to the evidence of the defendants as to their present financial circumstances I consider I should exercise my discretion to award damages must determine the appropriate amount.
Quantum of damages
25. The damages to be awarded to the plaintiffs should be such as will put the plaintiffs in as good a position as if the Contract had been performed. There is no dispute that such is the principle. If the sale had been completed in accordance with the Contract, the plaintiffs would have received the balance of the purchase price of €5,670,000.00 on 12th September, 2008, or within a short period thereafter. They have not received this sum and by reason of the option taken at the end of the proceedings i.e. not to seek an order for specific performance they are, in effect, accepting the breach of contract by the defendants and now treating the Contract as discharged. The plaintiffs therefore retain the lands and must give credit for those lands at their current value against the gross loss of €5,670,000.00.
26. There is great difficulty in present market conditions in reaching a conclusion as to the probable current value of this property. Evidence was adduced on behalf of the plaintiffs from Mr. Greene and by the defendants from Mr. Duff, both valuers. Each valued the lands, having regard to potential development in accordance with the planning permission for eighteen houses obtained in August, 2008. Nevertheless, the evidence of Mr. Duff was that, at present, there is no market for the sale of a site such as these lands, or, indeed, for the sale of individual house sites if the property were to be laid out with roads and services and eighteen individual sites sold. Insofar as he placed a value on those individual sites, those values would only apply if the market picked up and finance becomes available. The evidence of Mr. Greene on this point was less explicit but nevertheless it was clear there was great uncertainty, in his view, of what is the current market value. He gave evidence of some recent sales of houses which he considered relevant to the prices used in his valuation. I am satisfied that both valuers genuinely attempted to assist the Court in a time of great uncertainty..
27. Mr. Greene approached the valuation of the site in two ways. First, if the property were fully developed and houses built in accordance with the planning permission obtained, for the detailed reasons given to the Court, including probable house prices and building costs, he formed a view that, taking into account a required contribution for social and affordable housing, the site has a current market value in the order of €1,884,000.00. In the context of a witness statement which had been delivered from Mr. Duff, he also considered a valuation upon a basis that approximately €300,000.00 would be spent to put services and roads on the lands and then eighteen individual sites sold off. On that basis, again with a contribution for social and affordable housing, he estimated the value of the entire site to be in the order of €2,102,000.00. There was some controversy in relation to VAT which if not applied, as he stated, might increase his value on this basis by a further €400,000.00 approximately.
28. Mr. Duff, on the other hand, expressed the view that if roads and services were put in the eighteen sites would then realise, on average, not less than €250,000.00 each and might even achieve €300,000.00. Taking into account the agreed sum of €300,000.00 for roads and services, and a social and affordable housing contribution in the order of €500,000.00, and using €250,000.00 this results in an estimated value of the site of €3.7 million. Nevertheless, as already stated Mr. Duff accepted that there is, at present, no market for the sale of this site at that price or the eighteen individual sites and an average of €250,000.00 each. Accordingly, this cannot be considered as a current market value but rather a potential value when the market picks up.
29. There was also evidence of a valuation of the site in 2005, before rezoning, at €1.8 million and, after rezoning, at €4.0 million. In Mr Greene’s view, current land values are now lower than 2005 values. He expressed a view that they were closer to 2003 or 2004 values. Unfortunately, I have no evidence of the value of this property or a comparable site in 2003 or 2004.
30. On all the evidence given by the valuers, I have concluded that the value of the property in sale has reduced from the price agreed in the Contract by more than 50%. I have concluded that the evidence given by Mr. Greene in relation to a current market value (with his VAT treatment) is at the lower end of a probable current value but that Mr Duff’s valuation is more significantly higher. I have determined that, in assessing the damages herein, the plaintiffs should give credit for the retention of the lands at a current value of €2.6 million. The balance due pursuant to the Contract was €5.670 million. This results in a net award of €3,070,000.00.
31. The remaining issue is that of interest. The plaintiffs claim interest pursuant to the Contract on the outstanding balance of €5,670,000.00. The rate of interest under the Contract is 8%. As damages are being awarded in lieu of specific performance, it appears to me that in accordance with the principle of putting the plaintiffs in the position they would have been if the Contract had been performed, and taking into account the fact that they now retain the property, interest should only be payable on the net amount of the award. If the Contract had been performed, completion should have taken place on 12th September, 2008, or within a short period thereafter. Having regard to condition 40 of the general conditions, and the fact that no completion notice was served, I have concluded that I should exercise the discretion given me by the Courts Act in relation to interest (also at 8%), to award the plaintiffs interest on the sum of €3,070,000.00 from the date of commencement of proceedings i.e. 9th October, 2008, pursuant to the Courts Act,(at the rate of 8%) until the date of judgment.
Relief
There will be judgment in favour of the plaintiffs against the defendants, jointly and severally, in the sum of €3,070,000.00, together with €175, 621.00 being my estimate of interest at 8% from 9th October, 2008, to the date of this judgment, giving a total of €3,245,621.00.
Duffy v Ridley Properties Limited
High Court, Finlay Geoghegan J., July 7, 2005 and October 7, 2005, [2005] I.E.H.C. 314
he plaintiff’s claim is for damages for specific performance of a Contract for Sale which is an agreement in writing dated the 7th May, 2003, made between the plaintiff and the first named defendant whereby the plaintiff agreed to purchase and the defendant agreed to sell the property described in the particulars therein in consideration of €520,000 (“the Contract”). The Contract incorporated the Law Society general conditions of sale. The plaintiff also has ancillary and alternative claims for damages.
The proceedings were issued by plenary summons on the 25th November, 2003, against the first named defendant alone. In February, 2004 the plaintiff became aware that the same or substantially the same property was alleged to have been sold by the first named defendant to the second named defendant. On the 2nd November, 2004, an order was made adding the second named defendant to the proceedings.
Proceedings
The proceedings were heard before me over four days at the end of April, 2005. During three of those days oral evidence was given by the plaintiff, two directors of the first named defendant, the second named defendant, the solicitor for the plaintiff, the solicitor for the second named defendant, the architect for the plaintiff and the engineer for the first named defendant. In addition all correspondence between the parties, including certain correspondence between the plaintiff and the first named defendant which had been “without prejudice” but in respect of which a claim to privilege was withdrawn, was also agreed as part of the evidence. Likewise the contracts for sale between the plaintiff and the defendant dated the 7th May, 2003, and the first named defendant and second named defendant dated 10th November, 2003, and certain other documents were admitted in evidence.
Facts
Certain of the facts referred to below were not in dispute. Insofar as facts were in dispute the following statement of the facts includes my findings of fact.
The plot of land at issue between the plaintiff and the first named defendant is part only of Folio 12382 Co. Longford. It is situated on the main road at the exit of Edgeworthstown in the direction of Longford. The first named defendant is a development company and owned an adjacent site upon which it was proposing to build houses. Part of the planning permission for such houses required the use of a portion of Folio 12382 as an access road, footpaths and green space.
Prior to the sales, the subject matter of these proceedings, the first named defendant had sold a small portion at the south eastern corner of Folio 12382 to Mr. Kane who has an adjacent garage business.
Folio 12382 is the site of the old mart in Edgesworthtown. The mart buildings remain on the site.
The site had been for sale for approximately two years prior to April, 2003. In April, 2003 the second named defendant made enquiries through his solicitor, Ms. Karen Clabby, about the site. Ms. Clabby inspected the site with an architect and with a Mr. Tom Groarke, a director of the first named defendant. At that time there were no physical features to indicate the proposed boundary on the south western/western/north western side of the site (to which I will hereafter refer to as the western boundary or side) between the portion being sold and that being retained for the access road, footpaths and green area. Further there was no physical boundary identifying the small plot sold to Mr. Kane in the south eastern corner. The southern boundary was identified by the main road and the eastern boundary had a fence. Mr. Groarke put yellow markings at certain points on the site to roughly identify the proposed boundary on the western side of the portion to be sold.
The second named defendant agreed a price of €480,000 and paid €20,000 through his solicitor Ms. Clabby to the auctioneers then acting for the first named defendant as a booking deposit. Prior to a Contract in writing being furnished Ms. Clabby was informed by the auctioneers for the first named defendant on 16th April, 2003, that the first named defendant was not proceeding with the sale as there was a dispute between the directors of the first named defendant about the sale. Ms. Clabby confirmed via telephone conversation with Mr. Tom Groarke that the sale was not proceeding by reason of a dispute between the directors.
The plaintiff is a supermarket owner. He has what he describes as a small supermarket in the centre of Edgesworthtown. On the 14th April, 2003, he received a phone call from a Mr. Pat McGarry to ask if he was interested in purchasing the mart site and if so he was to ring Mr. John Duffy (no relation) who was a director of the first named defendant. He rang Mr. Duffy on Good Friday. There is disagreement as to precisely how the plaintiff and Mr. Duffy reached agreement on a figure of €520,000 but there is agreement that such a figure was agreed on the following Tuesday or Wednesday. I have concluded on balance that the plaintiff was not made aware at this stage of the precise acreage of 2.05 acres though as a matter of probability he was aware of the approximate size of the site. He stated in evidence that he had a letter from the auctioneers which referred to 2.3 acres. I have concluded as a matter of probability that the plaintiff was made aware that the vendor was retaining a portion of the mart site for the purposes of an access road, footpaths and green area but was not made aware by Mr. John Duffy of the yellow markings. The plaintiff was made aware that it was to be a direct sale without the intervention of auctioneers and that it had to be completed within three weeks.
The plaintiff instructed Mr. Vincent Crowley of Collins Crowley & Co., Solicitors. Draft contracts were furnished to him by the first named defendant’s solicitors, Kilrane O’Callaghan & Co., by letter of the 23rd April, 2003, with an indication that they were instructed that the plaintiff would be signing the Contract on Friday 25th April, 2003. The particulars in the draft Contract describe the site being transferred as “2.05 acres or thereabouts”. Prior to signing the Contract the plaintiff was aware of the area of the site being sold and I have concluded had seen the yellow markings on the site but was not told they were definitive boundary marks.
The plaintiff’s solicitor amended special condition No. 6 (which is not at issue) and special condition No. 7, which related to the wall to be built around the portion being sold to Mr. Kane, which is at issue. The Contracts with such amendment, signed by the plaintiff, and a deposit in the sum of €52,000 were returned on the 28th April, 2003. The Contracts were signed on behalf of the first named defendant on the 7th May, 2003, as returned save that initially the closing date was specified to be 3 weeks from the date of the Contract and it was changed by the first named defendant’s solicitors to two weeks with an explanation that one week had already passed since the Contracts had been furnished. No objection was taken to this. Accordingly the sale was due to be completed on the 21st May, 2003.
On the 15th May, 2003, the solicitor for the plaintiff furnished requisitions and a draft transfer and sought a copy of a map. The requisitions were replied to on the following day and on the 21st May, 2003, a copy map was furnished. Minor points were raised on the requisitions which are not relevant and on the 4th June, 2003, substantive criticisms were justifiably made by the solicitor for the plaintiff of the colouring and legend on the map furnished. These were responded to by letter of the 4th June, 2003, and a new map with altered colourings and legend enclosed. In evidence the solicitor for the plaintiff confirmed that as of receipt of the revised map on the 5th June, 2003, he was satisfied that he had a map which could be used for the transfer.
In the meantime there were two important meetings on the site. The first was on the 6th May, 2003, and attended by the plaintiff, his architect Mr. McHugh and Mr. Tom Groarke, a director of the first named defendant. The second took place on the 5th June and was attended by those three gentlemen and Ms. O’Hara, the engineer for the defendant.
The evidence of all four as to what transpired at these meetings differed in relation to some matters. Inevitably in respect of meetings which took place approximately two years prior to the hearing there will be differences in recollection. I have concluded on the evidence given that as a matter of probability the account of the meetings given by Mr. McHugh, the architect for the plaintiff, is closest to what transpired. I have made the following findings in relation to those meetings:
1. Prior to the first meeting Mr. McHugh had been instructed by the plaintiff that he was purchasing 2.05 acres excluding the public road.
2. At that meeting Mr. Groarke confirmed that the area being transferred was 2.05 acres.
3. At the first meeting there were yellow markings on the walls of the mart and elsewhere and Mr. Groarke indicated that he had put on those marks as a rough guidance of the proposed western boundary for the site being sold. Further that they were not marks which could be relied upon to properly determine the western boundary. The plaintiff at that time did not suggest they had previously been given to him as definitive markings.
4. Mr. Groarke, at Mr. McHugh’s request, agreed that he would have his engineer mark definitive points from which the western boundary of the site could be deduced.
5. The purpose of Mr. McHugh attending the site was to advise the plaintiff as to the area he was obtaining by reference to the actual western boundary marked on the ground.
6. There was considerable uncertainty at the first meeting as to what was the accurate line for the western boundary. In particular it was pointed out by Mr. McHugh that on the map attached to the Contract the western boundary was a straight line whereas on the ground it was “meandering somewhat”.
7. At all times Mr. Groarke made clear that his main concern was that he would have enough space between the western boundary of the property being sold and the western boundary of the folio to construct a road and footpaths to serve the housing development which was going to commence at the rear of the mart site.
8. On the 5th June, 2003, Ms. O’Hara met with Mr. Groarke at the site prior to meeting with the plaintiff and Mr. McHugh.
9. Ms. O’Hara was the person who had prepared the map attached to the Contract and the one furnished for use in the transfer. The maps had been prepared by her with reference to a map used in the application for the planning permission for the houses at the rear of the mart site. Her instructions were to include in the property for sale that portion not required for the access road, footpaths and green space as per the planning permission. She had prepared the maps by indicating a boundary which she considered excluded those requirements.
10. There were no physical features on the western boundary which identified the boundary line of the site being sold as marked on the map. The fact that part of the old mart building went through the proposed boundary line at certain points made identifying and marking the boundary line on the ground more difficult. Ms. O’Hara and a colleague identified certain physical features such as a bridge on the road and a drain at the north eastern point which she considered were identifiable from the copy folio map and on those points scaling back from the map she had prepared. She attempted to mark with red paint appropriate points to identify the intended boundary line. Certain of these were on the old mart building. Others were on the ground, a wall and one on a sheet of galvanised iron.
11. Ms. O’Hara has no recollection of using a ranging rod. Mr. McHugh was clear in his evidence that a ranging rod was there and appeared to him to have been used as a marker. I have concluded on balance that a ranging rod was used by Ms. O’Hara and her colleague as a marking point on the site. On the 5th June, 2003, when Mr. McHugh and the plaintiff arrived Ms. O’Hara indicated the points marked. She did not give to Mr. McHugh any dimensions she had used. Mr. McHugh identified the marks on that day.
12. Mr. McHugh returned to the site a third time a few days later and carried out a digital survey using electronic equipment known as a total station and data logger. He measured the total area enclosed by the site now identified with the red markings at 1.95 acres. Mr. McHugh sent to the plaintiff’s solicitor a report dated 27th June, 2003, following this survey.
13. Whilst an attempt was made at the hearing to explain the difference in area by reference to the possibility of the red mark on the galvanised sheet having been moved, I have concluded as a matter of probability it was not so caused.
In the meantime on the 23rd June, 2003, the plaintiff’s solicitor had sent an engrossed transfer to the first named defendant’s solicitor and indicated that the revised map received on the 5th June, 2003, had been sent to the plaintiff’s architect for his comments.
On the 4th July, 2003, the plaintiff’s solicitor wrote to the first named defendant’s solicitor setting out the conclusion of the plaintiff’s architect, Mr. McHugh, following his survey. In substance they were:
a. That the area enclosed by the boundary marked on the ground was only 1.95 acres instead of 2.05 acres as specified in the particulars of the property on the Contract: and
b. The line of the western boundary on the ground differed from that on the map provided, and in the position of certain of the corner points.
No response was received to the letter of the 4th July, 2003, until a letter of the 15th August, 2003. In that, the first named defendant’s solicitors appeared to attempt to explain the difference in area by reason of scaling from copy maps and a digital survey. They then stated:
“notwithstanding the above, our client is prepared to accommodate your client insofar as the corner points of ‘plot C’ [the plot being transferred] is concerned and amend the corner points accordingly.”
They then indicated their client was anxious to close as soon as possible and asked the plaintiff’s solicitor to confirm that the closing documentation was executed.
By this time the plaintiff’s solicitor was on holidays and the first named defendant’s solicitor was so informed by letter of the 20th August, 2003, but that he would be returning on Monday the 25th August, 2003. The first named defendant’s solicitor then wrote on the 28th August, 2003, seeking that the matter be closed without further delay and seeking confirmation that he was in funds and ready to close. It was also indicated that in default of hearing by return in those terms that the first named defendant reserved the right to serve a completion notice and charge interest on the unpaid balance of the purchase monies.
The plaintiff’s solicitor replied by letter dated 1st September, 2003, indicating that he had only now returned from holidays and stated “we are in the course of writing to you on the matter and will revert early this week”.
It is not clear whether without waiting for this letter or in response to this letter the solicitor for the first named defendant sent a 28 day completion notice dated 2nd September, 2003. It is stated therein that “the Vendor is ready, willing and able to complete and has been so ready, willing and able to complete from the 21st May 2003”. The latter was the closing date stipulated in the Contract. The vendor also claimed interest at the stipulated contract rate of 12% per annum for the period from the 21st May, 2003, and the date of actual completion.
On the following day, the 3rd September, 2003, the plaintiff’s solicitor wrote again. The letter makes no reference to the Completion Notice. Nothing turns on whether or not the Completion Notice was received prior to that letter being sent. The letter indicated that a further report was being sought from the architect on the points made by the first named defendant’s solicitors in the letter of the 15th August, 2003. It also then raised for the first time the fact that there had not been compliance with special condition No. 7 of the Contract of sale in relation to the wall between the site being sold and the plot sold to Mr. Kane. The first named defendant’s solicitor responded on the 5th September, 2003, in relation to the wall, asserting that this was the first time that they had received a specific requirement regarding the wall and indicating that it would be dealt with and would be in place by the 8th September, 2003.
On the 15th September, 2003, the plaintiff’s solicitor responded in relation to the boundary difficulties and repeated the contention that on Mr. McHugh’s survey the area being transferred as identified on the ground was only 1.95 acres resulting in a net shortage of 0.1 of an acre. It was indicated that the plaintiff would be prepared to complete the contract with a reduction of the purchase price of €52,000 (being the amount referable to 0.1 of an acre having regard to the purchase price of €520,000 for 2.05 acres). A meeting was also requested between the respective engineers on site.
Thereafter there was a series of correspondence between the solicitors for the plaintiff and first named defendant, some of which at the time was “without prejudice” but which at the hearing by consent was put into evidence. Having regard to that correspondence and the evidence given by the plaintiff, Mr. Groarke and Mr. Crowley, solicitor for the plaintiff, I have reached the following conclusions as to what happened in this period:
1. The first named defendant maintained that it was entitled to rely upon the Completion Notice. The plaintiff at all times asserted that it was an invalid Completion Notice.
2. There were negotiations as to a reduced purchase price.
3. The plaintiff’s solicitor continued to seek a meeting on site between the architect and engineer. This was resisted by the solicitors for the first named defendant on the basis that it had no purpose. In the initial period the purpose of this meeting appears to have been to agree new corner points on the western boundary.
4. An allegation was introduced in the course of the correspondence by the solicitor for the plaintiff that the boundary markings were altered after contracts were signed i.e. from the yellow markings to the red markings and the site reduced.
5. By a letter of the 7th October, 2003, the first named defendant reached a position and through its solicitors indicated that a further meeting at this stage between the engineers was fruitless and that the plaintiff had two choices available: he could complete the purchase on the basis of a reduction in the purchase price provided confirmation was given that he was agreeable to that and the sale could be closed within that week: or if he was not prepared to take up the offer the first named defendant would rely upon the Completion Notice and proceed in accordance with its terms.
6. One of the grounds relied upon by the solicitor for the plaintiff for the invalidity of the Completion Notice and to resist being forced to complete was that there remained substantial uncertainty as to the identity on the ground of the lands to be transferred. In his letter of the 23rd September, 2003, he stated:-
“In your letter of 15th August you state that your client is prepared to amend the corner points of ‘Plot C’, presumably so as to ensure that the lands to be transferred in fact comprise 2.05 acres in accordance with the contract. We are however instructed that to date no steps have been taken to amend the boundaries in this way. The position therefore is that there still remains substantial uncertainty as to the identity on the ground of the lands to be transferred. That being so, your client cannot seek to rely on the Completion Notice, as on the date of service thereof he could not be said to have been ready, willing and able to close the sale. It is similarly self evident that no court would compel our client to close a transaction when the land to be transferred to him had not yet been definitively identified. Accordingly we repeat again, and have been so advised by Senior Counsel, that the Completion Notice is invalid and of no effect.”
7. In response to the option given on the 7th October, 2003, agreement appears to have been reached upon a reduced price of €500,000 but the solicitor for the plaintiff stipulated on instructions that “the boundaries must be marked and physically defined or permanently marked at the corners on the ground”. It was further stated in the letter of the 9th October, 2003, that the plaintiff’s lending institution also insisted upon this as the funds were being borrowed.
8. I have concluded on this correspondence and the evidence of Mr. Groarke, which I accept on this point, that at this time the first named defendant became concerned that the plaintiff was not intending to complete the purchase of the property.
9. Ultimately on the 14th October, 2003, by a fax of that date the solicitors for the first named defendant persisted in a denial of any alteration in the boundaries since the Contract and that there was nothing to be gained by any further meeting on the site as the boundaries had been marked out. They also confirmed their client’s agreement to complete the sale at a price of €500,000 but subject to confirmation being received from the solicitor for the plaintiff by return that the balance of the sum due of €448,000 would be lodged with them by the evening of the 15th October, 2003, to be held in trust until the closing documents were furnished to the solicitor for the plaintiff. It was also stated in that letter that in default of the receipt of the purchase monies that there would be no further extension of the time and that the first named defendant “will rely on the Completion Notice already served and proceed in accordance with same”.
10. The response in writing of the plaintiff’s solicitor was by letter of the 22nd October, 2003, which was probably sent by fax. In that letter the solicitor for the plaintiff maintained his position that “the boundaries are not adequately defined”. He stated his instructions were not to complete until they had been suitably defined. He also indicated that the defendant could not elect to close a transaction on one days notice and repeated that the Completion Notice was invalid. Finally it was stated “please note that if you confirm by return that you are acting on the Completion Notice we will register the contract and will have to issue proceedings”.
11. No response appears to have been received to that letter and a reminder was sent by a fax of the 31st October, 2003. That elicited a response, dated 31st October, 2003, which appears to have been received by post which was the first open correspondence for some time from the solicitor for the first named defendant. In it he simply referred to the Completion Notice which had not been complied with and then stated “Our client is therefore now relying on the Completion Notice served and is proceeding accordingly.
At this point the solicitor for the plaintiff appears to have accepted that the first named defendant was not prepared to continue further negotiations as to how this sale might be completed. On the 6th November, 2003, the solicitor for the plaintiff wrote confirming that counsel had been briefed to draft High Court proceedings and requesting confirmation from the solicitor for the first named defendant that he would continue to hold the deposit as stakeholder pending resolution of proceedings. When no response was received to this the solicitor for the plaintiff wrote further on the 11th November, 2003, seeking a reply by return of fax to the letter of the 6th November, 2003, and confirming that proceedings were in the course of being issued and that a lis pendens would be registered and the land registry formally notified. It was also stated in that letter that their instruction from the plaintiff was that he believed the first named defendant to be in the course of selling to another party and confirmation was sought and an injunction threatened. A response was received dated the 12th November, 2003, which revisited the dispute in relation to the boundaries (reflecting a possible misunderstanding of the plaintiff’s position) and seeking to justify the service of the Completion Notice. It was indicated that proceedings would be fully defended and counterclaim made. On the 14th November, 2003, the plaintiff’s solicitor sought confirmation that the solicitor for the first named defendant continued to hold the deposit and that the premises were not in the course of being sold. This solicited a “without prejudice” response confirming that the deposit was being held and indicating a willingness to take instructions as to whether his client wished to return the deposit if the solicitor for the plaintiff so wished. In response to the alleged sale it was stated “this property belongs of course to our clients and our client is free to do with same as they wish, and will not be accountable to your client that regard.”
The next step on behalf of the plaintiff appears to have been the issue of a plenary summons on the 25th November, 2003, and the lodging of papers applying to register a lis pendens in the land registry on the 27th November, 2003. On the 8th December, 2003, a letter was written to the solicitor for the first named defendant asking if they had authority to accept service of proceedings which were stated to have been issued 10 days ago and informing them of a lis pendens which had been registered against Folio 12382 Co. Longford. Ultimately in default of response the proceedings were served directly on the first named defendant and on the 22nd December, 2003, the solicitors for the first named defendant indicated that instructions had been given to enter an appearance.
The plaintiff and his solicitor only became aware of the sale of the property to the second named defendant in mid February, 2003. This sale was completed on the morning of 28th November, 2003, pursuant to a contract for sale dated 10th November, 2003. Prior to considering the position of the second named defendant it is necessary to consider the primary issues between the plaintiff and the first defendant.
Issues between plaintiff and first defendant
The plaintiff’s primary claim is for specific performance of the Contract dated 7th May, 2003, between the plaintiff and the first named defendant. The first named defendant defends this claim in accordance with its pleadings and the submissions made on two distinct grounds:
1. The first named defendant served a valid Completion Notice in accordance with clause 40 of the General Conditions of Sale and the plaintiff not having completed within the period of 28 days it is entitled, pursuant to clause 41 of the General Conditions of Sale, to forfeit the deposit and resell the property without notice to the plaintiff.
2. Even if a valid Completion Notice was not served and the court is of the view that there remains a subsisting contract between the plaintiff and the first named defendant that the court should exercise its equitable jurisdiction so as to refuse an order for a specific performance. The grounds for this contention relied upon will be referred to further below.
Completion Notice
The parties were in agreement as to the relevant principles. At the date of service of the Completion Notice the first named defendant must have been ready, willing and able to complete the sale.
The plaintiff asserts the first named defendant was not so ready, willing and able on two grounds. The first, (not necessarily in order of importance) is that it had not complied with special condition No. 7 in relation to the wall to be constructed along the small boundary with the plot sold to Mr. Kane. Special condition No. 7 provided:
“The vendors shall arrange for a wall to be constructed on the area marked red on the map attached hereto prior to completion and the construction of the said wall, the dimensions and the materials used shall be agreed with the purchasers architect before the commencement of the said works.”
It is not disputed on the facts by the first named defendant that such wall had not been constructed prior to the date of service of the Completion Notice i.e. 2nd September, 2003. It is submitted that prior to that date the purchaser had not given to the first named defendant his specifications and requirements for the wall. It is not alleged that any request had been made to the plaintiff for such specification.
The special condition in its ordinary meaning imposed two obligations on the vendors: an obligation to arrange for the wall to be constructed prior to completion and also an obligation prior to the commencement of the works for the construction of the wall to agree the dimensions and material used with the purchaser’s architect. It was therefore a matter for the vendors to approach the plaintiff or his architect and seek to agree the dimensions and materials to be used prior to commencing construction. It was further the vendor’s obligation to arrange for the construction of the wall prior to completion of the Contract. This had not been done prior to 2nd September, 2003. Accordingly on this ground alone I am satisfied that the first named defendant was not ready, willing and able to complete the Contract for sale on the 2nd September, 2003, and the Completion Notice is invalid.
I have also concluded that the second ground of objection to the validity of the Completion Notice has been made out. The first named defendant was not in my view on 2nd September, 2003, ready, willing or able to complete a sale to the plaintiff lands which it could be said with certainty were the subject matter of the contract for sale of the 7th May, 2003.
I have reached this conclusion for the following reasons.
The lands being sold were described in the contract for sale as:-
“ALL THAT AND THOSE part of the property of the townland of Edgeworthstown in the Barony of Ardagh and County of Longford being part of the property described in Folio 12382 of the Register of the County of Longford comprising 2.05 Acres or thereabouts statute measure being the property shown shaded green on the attached map hereto held by the Vendor in fee simple.”
The map attached to the contract was prepared by Ms. O’Hara, the engineer for the first named defendant. In evidence she explained how she had prepared this as a “draft map” to identify the site from a much photocopied copy of the land registry map. She also referred to it as a “preliminary map”. It also appears that it was on this map that she measured the area being sold with a planimeter as being 2.05 acres. In handwriting on the map attached to the contract is the legend “area shaded green 2.05 acres excl. public road” and it is signed by Ms. O’Hara.
As already stated there were no physical boundaries on the site to determine the location of the western boundary to the site being sold. The south eastern boundary appears to have been determined by the sale to Mr. Kane.
The evidence of Ms. O’Hara was that she subsequently prepared what she described as a “property transfer map”. She stated that this was prepared with more care from either an original land registry map or a copied land registry map. She also stated that the western boundary was more accurately shown on the property transfer map as being approximately parallel to the western boundary of the folio. It is obvious to the naked eye that there is a significant difference between the location and direction of the western boundary to the site being sold in the map attached to the original Contract from that in the map sent to the solicitors for the plaintiff and intended to be the map attached to the transfer.
Whilst it appears to me that it can be said that the first named defendant agreed to sell to the plaintiff an area within folio 12382 County Longford comprising 2.05 acres or thereabouts it cannot be determined with certainty, particularly on the western boundary where that area was to be located. I am further satisfied that the use of the description “2.05 acres or thereabouts” is a commonly used description to cover what might be considered to be insignificant variation from the area specified. What is insignificant will obviously depend upon the nature of the lands and the area being transferred. In an area such as this, of 2.05 acres of development lands, I am satisfied on the plaintiff’s solicitors evidence that an area of .01 of an acre might be considered to be insignificant. Hence it does not appear that there was uncertainty in the area to be transferred.
The property transfer map must have been prepared by Ms. O’Hara prior to 21st May, 2003, as it was sent on that date by the solicitors for the first named defendant to the solicitors for the plaintiff albeit with incorrect colourings and an incorrect legend. No evidence was given that any measurement was done of “plot C” as specified by the obviously altered western boundary on that map. The evidence of Ms. O’Hara was that the legend attached was probably taken from her computer. It shows a total area for plot C to the centre of the public road of 2.22 acres. That legend is dated the 4th July, 2001.
The red markings placed on the ground on the 5th June, 2003, were marked out by Ms. O’Hara and a colleague on her own description “to the best of their ability” from the property transfer map. I have concluded on the evidence of Mr. McHugh that as a matter of probability the measurement of the area marked out by Ms. O’Hara was 1.9 acres. I have also concluded that there were differences in the location of certain of the corner points on the western boundary between the markings on the ground and the property transfer map.
Whilst an offer had been made on the 15th August, 2003, to meet to agree an alteration of the corner points no such meeting had taken place. There was no agreement as of the 2nd September, 2003, as to the identification on the ground of the property being transferred. There was no special condition included in the Contract as to how the new western boundary was to be identified on the ground. Having regard to the evidence of Ms. O’Hara as to the nature of the map used for the Contract I have concluded that it was not possible to identify in accordance with any general condition in the Contract the western boundary of the site to be sold by reference to the map attached to the Contract.
On the 2nd September, 2003, the first named defendant was willing to transfer the area identified by a boundary which would go through the red markings on the ground. Such boundary only surrounded an area of 1.95 acres. That was a significant difference from the area agreed to be sold in the context of development land of an area of “2.05 acres or thereabouts”. Whilst a willingness had been expressed to amend the corner points, no agreement had been reached as to the boundary on the ground of the area of 2.05 acres or thereabouts to have been sold and there was no mechanism under the contract for determining same.
Counsel for the first named defendant submitted that even if there were what was considered to be a significant difference in the area enclosed by the red markings and that agreed to be sold in accordance with the particulars in the Contract, that such matter could be dealt with under condition No. 33 of the general conditions of sale. It does not appear to me that on the facts herein having regard to the uncertainties surrounding exactly the lands agreed to be sold that condition No. 33 applies. However even if it does so, in accordance with the decisions of the High Court in Keating v. Bank of Ireland [1983] I.L.R.M. 295 and O’Brien v. Kearney [1995] 2 I.L.R.M. 232 (with which I agree), a purchaser is not obliged to comply with a Completion Notice where the question of compensation for mis-description has not been settled.
Accordingly I have concluded on each of the above grounds that the first named defendant did not serve a valid Completion Notice on the 2nd September, 2003.
Plaintiff’s entitlement to specific performance
The remedy of specific performance is discretionary. As John Farrell S.C. in the Irish Law of Specific Performance puts it as p. 223 “the relief may be withheld as an exercise of that discretion even where a plaintiff proves a valid contract and no particular defence or ground for refusal is established”. However in the case of a contract for the sale of land the normal rule is for the court to grant specific performance and there is an onus on a defendant, once the plaintiff proves a valid contract, to establish a ground or grounds upon which relief should be refused.
In this case the primary ground upon which the first named defendant supported by the second named defendant submitted that the remedy of specific performance should be refused is by reason of the uncertainty surrounding the lands to be transferred under the Contract. In written and oral submission at the hearing the first named defendant submitted that the uncertainty was such that there did not exist a valid contract. However, no such case was made in the pleadings and that submission was only made at the end of the evidence. I have concluded that it would be an unfair procedure to the plaintiff if I were to entertain a submission that the uncertainty was such as to render the Contract invalid.
The defendants relied alternatively upon the principle again set out in Farrell on the Irish Law of Specific Performance at p. 7 where it is stated:
“[1.11] If a contract is “completely uncertain” it is equally void at law and in equity. Occasionally there is a degree of uncertainty which will lose the right to specific performance without also destroying remedies at law. As Lord Redesdale pointed out in 1805,
‘…if it is certain to a degree, but doubtful as to the extent, equity would, I think, act infinitely more wisely in leaving the party to the old remedy by action for damages, than to run the hazard of doing injustice, in doing what is said to be more complete justice, by decreeing a specific performance.’
The burden is on the plaintiff to satisfy a court of an agreement, the terms of which ‘are sufficiently certain to justify a decree for specific performance’. He may expect to fail if he does not satisfy the court of the certainty of the material terms even though it may believe that some complete and binding agreement was reached”.
For the reasons which I have already set out above I have concluded that the contract for sale of the 7th May, 2003, between the plaintiff and the first named defendant did not describe with certainty the lands to be transferred herein nor did it include either in the general conditions nor by way of a special condition a mechanism by which the western boundary of the plot to be transferred was to be identified on the ground.
I have concluded that this is a case where the uncertainty surrounding the determination on the ground of the plot to be transferred is such that the court should depart from the normal rule and should now exercise its discretion to refuse an order for specific performance and to award the plaintiff damages in lieu thereof. I am reinforced
in that view by reason of the attitude of the plaintiff as demonstrated in the correspondence sent on his behalf by his solicitor in the month of September and first half of October, 2003. At that time, following the service of the alleged Completion Notice, as already stated there was at the time, what on the first named defendant’s side were “without prejudice” offers as to the terms on which the sale might be completed. For much of the month of September, 2003 at least it appears that both parties were genuinely interested in completing the sale but yet no agreement could be reached as to the terms according to which the sale would be completed. In September, 2003 the plaintiff was both seeking a reduction in the purchase price and a meeting between respective engineers the purpose of which was to attempt to agree new boundaries from those marked with the red paint on the site. The plaintiff at this stage was resisting any attempt to compel him to complete the transaction and his solicitor stated in the letter of the 23rd September, 2003, “. . . no court would compel our client to close a transaction where the land to be transferred to him has not yet been definitively identified”.
At no stage throughout this correspondence did either party suggest that the Contract provided a mechanism for determining the boundary of the lands which were to form part of the sale. Even when, in October, 2003, agreement appears to have been reached upon a reduced purchase price the solicitor for the plaintiff was maintaining as in the letter of the 22nd October, 2003, that “the boundaries are not adequately defined”. By this point in time the solicitors for the plaintiff had introduced the requirements of the lending institution and created, whether unwittingly or not, what appears to me to have been a justifiable apprehension on the part of the defendant as to the plaintiff’s then enthusiasm for completing the transaction.
I wish to make clear that the behaviour of the plaintiff in September and early October, 2003 simply confirms me in the view which I have formed. It of itself is not the primary reason for which I have determined the court should refuse an order for specific performance. It hardly seems equitable to grant an order for specific performance in favour of a party who has resisted completing a contract for sale upon the basis that the boundaries are not adequately defined when the contract itself does not provide any mechanism or special condition as to how those boundaries should be defined. Such definition in a manner acceptable to both parties remains dependent upon agreement being reached between the parties or their respective engineers or architects. The court has no power to compel such an agreement.
Notwithstanding that the plaintiff is not entitled to an order for specific performance, as the Completion Notice was invalid there remained a subsisting contract. The first named defendant was not entitled, in breach of that contract, to treat it as terminated and sell the lands to a third party. The plaintiff is now entitled to damages in lieu of specific performance.
Counsel for the plaintiff indicated that no claim was being made for special damages. It was submitted that a claim for general damages was being made upon the basis that the plaintiff intended to develop the mart site as a supermarket and that he has been delayed in doing that and benefiting from the anticipated expansion of business. No evidence was offered in support of this submission. No evidence was given of any difference in value of the site the subject of the sale between May, 2003 and the date of the hearing.
In the course of the hearing (at the end of the second day) an issue arose as to the nature of the claim for damages being made on behalf of the plaintiff. At that time having heard submissions on behalf of the plaintiff and the first named defendant, I determined that I would not leave over any issue of further evidence but would permit further submissions at the end of the hearing. Notwithstanding this ruling I have concluded that it is necessary for me in order to determine the appropriate amount of damages to which the plaintiff is entitled against the first named defendant to obtain further evidence in relation to the following matters only:
(a) Whether the solicitor for the first named defendant still retains the deposit paid by the plaintiff pursuant to the contract. If so, the amount of interest earned thereon to date. If not, the date upon which same was paid to the first named defendant.
(b) Whether any fees were paid by the plaintiff to Mr. McHugh or are due and owing by the plaintiff to Mr. McHugh for the work done by Mr. McHugh for the plaintiff in connection with the Contract in 2003.
(c) Whether any fees have been paid or are due and owing by the plaintiff to his solicitor in connection with the work done in connection with the Contract up until 22nd October, 2003.
In the event that the solicitor for the first named defendant still retains the deposit it is my intention to make an order directing the repayment of the deposit and interest earned thereon to the plaintiff as part payment of the award of damages to be made. In the event that the solicitor for the first named defendant retains the deposit he should continue to hold same until further order of this Court.
Lis pendens
As I have determined that an order for specific performance should be refused it is unnecessary for me to consider the impact on the sale to the second named defendant of the application to register a lis pendens lodged on behalf of the plaintiff on the 27th November, 2003. Further it appears to follow that an order should be made directing the Land Registry to vacate either the lis pendens (if registered since the date of the hearing) or the application for the lis pendens. I will hear counsel on the appropriate form of the orders to be made.
Approved: Finlay Geoghegan J.
SUPPLEMENTAL JUDGMENT of Ms. Justice Finlay Geoghegan delivered on the 7th day of October, 2005.
This judgment is supplemental to a judgment delivered by me herein on 7th July, 2005. In that judgment I refused the plaintiff’s claim for an order of specific performance of an agreement in writing dated 7th May, 2003, made between the plaintiff and the first named defendant whereby the plaintiff agreed to purchase and the first named defendant agreed to sell the property described in the particulars therein in consideration of €520,000 (“the Contract”) and decided that the plaintiff is entitled to damages in lieu of specific performance against the first named defendant. In that judgment I also left over the determination of the quantum of such damages and sought further evidence in relation to three specific matters which then appeared to me necessary to obtain in order to determine the quantum of damages.
When the matter was re-listed in relation to the time and mode of the additional evidence referred to in my judgment of 7th July, 2005, I was informed by Mr. Whelan S.C. that I had misunderstood the plaintiff’s position in relation to his claim for damages in lieu of specific performance and that the plaintiff at all times intended to pursue a claim for loss of bargain based on the increased value of the property since the date of the Contract and sought to adduce evidence of the current value of the property. Mr. Keane S.C. objected to the admission of any evidence other than that referred to in my judgment of 7th July, 2005.
Having heard the submissions of counsel, as the end of term was approaching and I needed to consider such legal submissions, I reserved my decision on the admissibility of the claim for loss of bargain and relevant evidence. Without prejudice to my decision I said I would hear the evidence of value and gave directions for the exchange of reports and hearing of relevant evidence. I heard the further evidence on the 28th July, 2005.
Misunderstanding
Senior counsel for the plaintiff submits there was a serious misunderstanding. In relation to questions I had put at the end of the evidence given for the plaintiff. This occurred on day two of the trial on Wednesday, 27th April. Prior to the evidence for the first named defendant commencing Mr. Keane SC on behalf of the first named defendant asked that the plaintiff would at that stage elect as to what remedy he was seeking. Following exchanges between both counsel and me, Mr. Whelan S.C. clarified that the plaintiff was seeking an order for specific performance; damages in addition to specific performance by reason of the delay in completion and in the event that the court refused specific performance damages in lieu of specific performance.
There were also exchanges as to the nature of the claim being made on behalf of the plaintiff for damages. As appears from p. 25 of my judgment of the 7th July I understood Mr. Whelan to indicate that the plaintiff was not making any claim for special damages both in relation to the claim for damages in addition to specific performance and in relation to the claim for damages in lieu of specific performance.
Mr. Whelan at the hearing subsequent to my judgment informed me that in giving that indication to the court he was only addressing the plaintiff’s claim for damages in addition to specific performance.
At the end of these exchanges on day two of the hearing I made a ruling that I would not leave over further evidence in relation to damages as had been suggested at one point but rather would hear submissions at the end of the case in relation to the claim for damages on the basis of the evidence already given. Again, as is apparent from my judgment of 7th July, as I had understood the submissions made by Mr. Whelan to relate to all claims for damages I intended that ruling to relate to evidence in relation to all claims for damages. Notwithstanding when I commenced consideration of the quantum of an award for damages in lieu of specific performance I concluded in the light of the evidence given it was necessary to obtain certain further evidence of the amount of expenses which on the evidence given had probably been incurred by the plaintiff and the then circumstances of the deposit.
The additional evidence which I considered necessary at the time of my judgment of 7th July was in part based upon the indication which I had understood to be given by Mr. Whelan that no claim for special damages was being made. In relation to damages in lieu of specific performance, I understood this to mean that no claim was being made that the property the subject of the sale had increased in value between May 2003 and the date of the hearing. In my judgment of 7th July at p. 25 I expressly stated “no evidence was given of any difference in value of the site the subject of the sale between May, 2003 and the date of the hearing”.
At the subsequent hearing Mr. Whelan informed me, he believed at all times during the hearing that in the event that the court were to refuse the claim for specific performance and determine that the plaintiff was entitled to damages in lieu of specific performance that the quantification of those damages and the evidence necessary to do this would be left over to a future date as was done in the case of O’Connor v. McCarthy [1982] I.R. 161. He submitted that such an approach is the norm and further pointed out that as the appropriate measure of damages for loss of bargain is the difference in the value of the premises at the date of the contract and the date of judgment that it is not possible to call evidence in relation to that value until after judgment is given.
It is common case that the court in determining the amount of an award of damages in lieu of specific performance will take into account inter alia the loss of bargain. As stated by Farrell on Specific Performance at page 21, par. 1.31 “The loss suffered by not getting the property agreed to be sold should be measured at the date of judgment which decides that the claimant should have the damages in lieu of specific performance. The loss under that head is the difference between the value of the property at the date of that judgment and the contract price”. Where it is being contended on behalf of a plaintiff that there has been an increase in value of the property it would appear necessary to leave over evidence of the increase until after judgment on the claim for specific performance.
I have carefully reconsidered the transcript of the exchanges on the 27th April. Whilst, at that the time I understood Mr. Whelan’s statement that there was no claim for special damages to relate to all claims for damages being made and my subsequent ruling undoubtedly was intended to relate to all such claims, I can understand in the light of the exchanges that there may have been some confusion as to which claim for damages was being addressed in particular when at p. 25 Mr. Whelan indicated that he was not making a claim for special damages. I also accept that (as does Mr. Keane on behalf of the fist named defendant) Mr. Whelan is totally bona fide in now submitting to the court that he understood at the time the exchanges only to relate to the claim for damages in addition to specific performance.
The question which arises therefore is whether in the light of this misunderstanding between me and counsel I have jurisdiction to alter the earlier ruling in relation to the admission of further evidence and if so whether I should exercise my discretion to allow a claim for a loss of bargain based upon a difference in value of the property between the date of contract and date of judgment to be pursued and evidence be given in relation to such difference in value.
Mr. Keane on behalf of the first named defendant objects to the admission of any evidence on behalf of the plaintiff of a difference in value of the property between the date of the contract and the date of judgment. He does so by reason of the ruling on the admission of evidence given in my judgment of 7th July at p. 26. That ruling must be considered in the context of what I have stated immediately preceding the ruling in relation to what had been indicated on behalf of the plaintiff in relation to the claim for special damages. Mr. Keane relies upon the decisions in relation to the circumstances in which according to common law principles a final order, made and perfected may be interfered with as set out in the judgment of Murray J. in the Supreme Court in McMullen v. Clancy (Unreported, 31st July, 2002). He does however accept that in this instance no order has been made up or perfected. Further he accepts that the outstanding issue between the plaintiff and the first named defendant is the quantum of the damages to which the plaintiff is now entitled as damages in lieu of specific performance.
I have concluded that the decisions of the Supreme Court in Belville Holdings v. Revenue Commissioners [1994] 1 ILRM 29, in Re Greendale Developments Limited (No 3) [2000] 2 I.R. 514 and McMullen v. Clancy (Unreported, Supreme Court, 31st July, 2002) do not deprive this court of jurisdiction to determine whether or not the ruling previously given as to the type of evidence I would admit prior to determining the quantum of the damages in lieu of specific performance to be awarded to the plaintiff should be altered for the following reasons.
Each of the above decisions concerns a factual situation where judgment had been given and an order made and drawn and perfected on the relevant substantive issue. On the facts of this case the substantive issue of the quantum of the damages in lieu of specific performance to be awarded to the plaintiff has not been determined. No order has been drawn pursuant to the judgment of 7th July, 2005. I have also considered the underlying public policy and common law principles in relation to finality of litigation referred to in those decisions. I have concluded that they do not deprive this Court of jurisdiction to alter, if it considers appropriate the procedural ruling on the admission of evidence contained in my judgment of 7th July 2005.
The obligation of this Court is to hear cases in accordance with the principles of constitutional justice, including those relating to fair procedures. I accept that a court should not lightly change a procedural ruling made in a case. However, for so long as the court retains seisin of the case and there are outstanding issues between the parties to be determined the court remains obliged to hear and determine those issues in accordance with the law and fair procedures. I have concluded that the principles relating to the measurement of damages in lieu of specific performance and fair procedures require me on the facts of this case to vary the rulings given so as to now permit the claim for loss of bargain be pursued and to admit additional evidence relating to the alleged difference in value of the property the subject matter of the sale between the date of contract and the date of judgment. I have done so for the following reasons.
I understood senior counsel on behalf of the plaintiff to state on the second day of the hearing that the plaintiff was not making any claims to special damages in relation to all the potential claims for damages. In particular I understood this to mean that in relation to the potential claim for damages in lieu of specific performance that no claim was being made for a difference in value in the property between the date of the Contract and the date of hearing and/or judgment. The rulings made both on day two of the hearing as to the timing of the admission of evidence in relation to the claim for damages and those in my judgment were based upon this understanding.
I now accept that Mr. Whelan SC did not intend to inform the court, by the statement made, that the plaintiff was not making any claim to a difference in value in the property between the date of contract and date of judgment. Further that he had at all material times instructions to make such a claim.
The first defendant is not at any procedural disadvantage by such evidence now being admitted. In the directions which I gave since this matter was raised on behalf of the plaintiff subsequent to my judgment of 7th July, 2005, I granted the first defendant sufficient time to consider the potential evidence of the valuer to be called on behalf of the plaintiff and to put in place appropriate evidence of valuation in response.
Quantum of Damages
It is common case that the plaintiff is entitled as part of the award for damages in lieu of specific performance to the return of the deposit paid of €52,000 and such interest as has been earned thereon. The deposit is retained by the solicitor for the first named defendant.
The only further claim made by the plaintiff is the claim for loss of bargain. It is accepted no claim for expenses lies where loss of bargain is pursued. The quantum of such claim is submitted to be €1,480,000 based upon a valuation of the property in question as of the 7th July, 2005, at €2,000,000.
The first defendant submits in response to this claim:
1. That the open market value of the property as of the 7th July, 2005, is €900,000; and
2. By reason of the delay of the plaintiff in prosecuting the proceedings that the loss of bargain should be assessed by reference to the market value of the property at an earlier date. It is submitted that July, 2004 is the appropriate date when proceedings ought to have been heard and determined and that at that such date the open market value of the property was €600,000.
3. That as damages in lieu of specific performance are discretionary that the court should take into account the attempts made by the first named defendant to complete the sale at a reduced price in the autumn of 2003 and the fact that the first defendant sold the property to the second defendant for €485,000 i.e. lower than the original contract price of €520,000 and as a result has not been enriched by the second transaction.
The first defendant relies upon the decision of the Court of Court Appeal in Malhotra v. Choudhury [1980] Ch 52 to support its submission that this court should determine the quantum of the loss of bargain by reference to a date earlier than the date of judgment. In that case the evidence was that the price of the property had continued to increase from the date of the contract to the date of the judgment. In his judgment, at page 81, Cumming-Bruce LJ stated
“… it is unfair to the defendant that the deliberation with which the plaintiff moved from the middle of 1975 until he issued the present proceedings in January 1977 should be allowed to enhance the damage which the defendant has to pay the plaintiff if the price level of real property has risen during that period. For my part I would think that justice is done between them by holding that the plaintiff did not sufficiently mitigate his damage by proceeding with greater celerity in the various and difficult legal convolutions that he has being forced to undergo. The right order is that, for purposes of valuation of Novar [the property in question] and the loss sustained by the plaintiff by the failure of the defendant to honour the contract for sale, the terminal date by reason of delay should be moved back from October 20, 1977, to October 21, 1976.”
The Court of Appeal then directed that the assessment of damages was to be the difference between the value on 21st October, 1976, and 4th June, 1974.
On the facts of this case I have concluded that I should not make any adjustment of this nature for two reasons. I have concluded in my judgment of 7th, July, 2005, that it was following a letter sent by fax on 31st October, 2003, that the solicitor for the plaintiff accepted that the first named defendant was not prepared to continue further negotiations as to how the sale might be completed. The plenary summons was issued on the 25th November, 2003. On 8th December a letter was written to the solicitor for the first named defendant asking if they had authority to accept service of proceedings. In default of a response the proceedings were served directly on the first named defendant on 22nd December, 2003. An appearance was entered on 2nd January, 2004. The statement of claim was delivered on 18th February, 2004, and the defence of the first named defendant delivered on 4th May, 2004.
In the meantime in February, 2004 the plaintiff became aware of the sale to the second named defendants. Initially separate proceedings were commenced against the second named defendant and ultimately by an order of 2nd November, 2004, the second named defendant was added to these proceedings. An amended statement of claim was delivered on 4th November, 2004, a defence of the second named defendant delivered on 4th December, 2004, and notice of trial served on 24th February, 2005.
On these facts and in particular given the complexities introduced by the sale by the first named defendant to the second named defendant and intervening interlocutory relief applied for which is not referred to in the above list I have determined that there was no significant delay by or on behalf of the plaintiff in these proceedings. The only criticism which might be made of the plaintiff and his advisors relates to the very early period up to the date of delivery of the statement of claim. Even if it were to be considered that the plaintiff should have moved with greater alacrity during this period I have concluded that any delay was only of the order of approximately four to six weeks in total.
The evidence of the valuers for both the plaintiff and the defendant do not suggest any significant difference in the value of the property between May and July 2005. On the contrary the last comparative sale relied upon by the valuer for the plaintiff was the sale in May, 2005 of Auburn Hall in Edgesworthtown.
Accordingly I propose reaching a conclusion on the market value of the property the subject matter of these proceedings as of the date of judgment i.e. 7th July, 2005, upon the basis that such value has remained constant since May, 2005. I will now refer to this value as the “current market value”.
I have also concluded that there is no basis upon which this court could now exercise a discretion to reduce the amount to which the plaintiff might otherwise be entitled by reason of the negotiations in the autumn of 2003. No authority has been advanced in support of the proposition and I am unable to identify any relevant principle which permits the court to make such a reduction.
There is significant difference between the view of Mr. Paul Murtagh, the valuer for the plaintiff and Mr. Patrick Davitt, the valuer for the first named defendant as to the current market value. Each are experienced valuers with a knowledge of the area and adjacent areas in Co. Westmeath and Co. Longford. Mr. Murtagh may have a more intimate knowledge of property in Edgeworthstown and was aware of two recent private sales in Edgeworthstown upon which he relied as comparators. The first of these was the private sale in 2004 of the Imperial Hotel which is a property of approximately 1.1 acres in the centre of Edgeworthstown. It traded as a licensed premises and restaurant and the building was stated to have been in poor structural condition at the time of the sale. It has a large car park. The sale price was €1,500,000 and Mr. Murtagh valued the seven day liquor licence at approximately €150,000.
The second sale referred to by Mr. Murtagh was the private sale in May 2005 of Auburn Hall for €300,000. This was stated to be a dilapidated building but possibly capable of use on approximately 0.25 acres. This is a little closer to the centre of Edgeworthstown than the mart site. It was stated that at auction this property was withdrawn at €260,000 and sold later for €300,000.
Mr. Murtagh’s evidence was that if one applied the prices obtained for the Imperial (excluding the value attached to the licence) and Auburn Hall pro rata to the size of those sites to the mart premises of 2.05 acres that the appropriate valuations would be €2.4 million or €2.5 million. He accepted that he would not expect to obtain an increase in price pro rata to the increase in size but stated that by discounting back to €2 million he had made an appropriate adjustment. He emphasised that in terms of zoning and planning permission all three sites were identical. All were zoned for commercial purposes and none had planning permission for any particular development. He also stated that he believed that both the Imperial Hotel and Auburn Hall were bought for the purposes of redevelopment and it was not contemplated that the existing buildings would be used. The buildings of each were however capable of use at the dates of sale.
If the court were to accept Mr. Murtagh’s valuation of €2 million as the current market value of the mart site this would mean an increase in value of approximately 280% from the contract price in May 2003. Such increase is over approximately two years. Mr. Murtagh could not identify any particular reason for such an increase. He did refer to tax incentives for the western region including Co. Longford. He pointed out that Edgesworthtown would be the first town going west at which these incentives would apply. Such incentives have been in existence since 1997/98. Mr. Murtagh’s evidence was that Edgesworthtown was slow to respond and only did so in 2000 and 2001 and that the value of property had increased since then. He considered there had been a significant increase towards the end of 2004 by reason of a belief that planning permission had to be applied for any redevelopment before 1st January, 2005, if the incentives were to be availed off. On this evidence the price obtained for the mart in May, 2003 should have benefited to some extent from the increases caused by the tax incentives.
Mr. Davitt’s evidence of €900,000 was not based upon any close comparators. He gave evidence of sales in a business park in Mullingar and a 3.3 acre site in Castlepollard. They are less significant comparators than those given by Mr. Murtagh. In relation to the sale of the Imperial Hotel he suggested that a price of €175,000 might have been attributed to the licence and that some value would have been attributed to the buildings such that it might be appropriate to attribute only €600,000 to €700,000 to the site alone.
The evidence in relation to the sale in 2003 of the mart site is that it was originally advertised through auctioneers, Brady McDonagh Casey and the second named defendant gave evidence of seeing a large “for sale” sign on it. Further that the asking price by the auctioneers was then €500,000. An oral agreement was reached between the auctioneers and the solicitor for the second named defendant in April, 2003 for the sale to him at €480,000. Subsequently this sale was not proceeded with and agreement was reached with the plaintiff for €520,000. The sale agreed with the plaintiff was without the benefit of auctioneers. There is, however, no suggestion that the price at which the property was sold to the plaintiff in May, 2003 was not the then market price.
In reaching my conclusion as to the current market price I do not propose taking into account the subsequent sale in November, 2003 to the second named defendant for €465,000. The evidence given by Mr. John Duffy on behalf of the first named defendant was that the first named defendant was then under pressure from its banks and a quick sale was needed. I do not consider that the market was tested at that time.
Whilst the evidence of Mr. Murtagh supports a significant increase in value I cannot accept it supports an increase in the order of 280%. I have concluded that the probable open market valuation of the mart site, the property the subject matter of the contract for sale in the period May to July, 2005 was in the order of €1,400,000. Accordingly I measure the damages for loss of bargain at €880,000.
The award of damages in lieu of specific performance will be for payment of the sum of €880,000 and an order for the return of the deposit paid of €52,000 plus the amount of the interest earned thereon as certified by the solicitor for the first named defendant.
Approved: Finlay Geoghegan J.
McDonnell v. McGuinness
[1939] I.R. 223
SULLIVAN C.J.:
23. Jan. 1939
The appellant in this appeal was the plaintiff in an action in which the respondent was the defendant, brought in the Circuit Court to recover £160 damages for breach of warranty of authority.
The plaintiff’s claim endorsed on the Civil Bill alleged that the defendant, assuming to be the agent of Dr. Matthew McCann, or other the representatives of Terence McCann deceased, induced the plaintiff to enter into a contract for the purchase of the premises, 29 and 30 Main Street, Cavan, for the sum of £950, and warranted by his signature to a contract in writing, dated the 28th September, 1936, that he was authorised by the said owner or owners to make the said contract on his or their behalf; that the plaintiff upon the faith of such warranty entered into and signed the said contract and paid a deposit of £285, but that the defendant was not authorised by the said owner or owners to make the said contract on his or their behalf, and the said owner or owners repudiated the said contract and refused to be bound by it, and subsequently sold the premises for the sum of £1,100, and that the plaintiff had lost the value of the contract amounting to the sum of £150 and incurred £10 costs and expenses. The defendant in his defence denied that he had warranted that he was authorised to contract as agent for Dr. Matthew McCann or the representatives of Terence McCann deceased, and further denied that the plaintiff had suffered any loss or damage.
The action was heard at the Cavan Circuit Court by Circuit Judge Sheehy. The evidence established that the premises in question had been put up for sale by publicauction on the 30th July, 1936, subject to particulars and conditions of sale in which Dr. Matthew McCann was stated to be the vendor. The plaintiff had bid at that auction, but as the reserve price was not reached the sale was abortive. In the following September the defendant suggested to the plaintiff that he should purchase the premises by private treaty. They went together to Dr. McCann’s house, where they met Dr. McCann and after some discussion on the question of price, Dr. McCann agreed to sell the premises to the plaintiff for the sum of £950. No contract was signed on that day as Dr. McCann said that he wanted to obtain his sister’s approval of the sale. On the 28th September the defendant came to the plaintiff’s house bringing with him the particulars and conditions of sale that had been used at the abortive offer. He represented to the plaintiff that the McCanns were satisfied with the sale, he got from the plaintiff a cheque for £285, representing the amount of the deposit and his commission as auctioneer, the plaintiff signed the memorandum endorsed on the conditions of sale acknowledging that he had purchased the premises for £950, and agreeing to pay the balance of the purchase money within 14 days, and the defendant signed, confirming the sale.
On the 3rd October the defendant came to the plaintiff and showed him a letter he had received from Dr. McCann’s solicitor, Mr. Smith, stating that Dr. McCann would not accept £950 as he had a better offer in view, and asking the defendant to return the deposit to the plaintiff. On the 5th October Dr. McCann agreed to sell the premises to a Mr. McDonald for £1,100 and that sale was subsequently completed. On the 7th October the plaintiff received from the defendant a cheque for £285 in repayment of the deposit and commission. On the 9th November the plaintiff issued the Civil Bill in this action.
The case made by the defendant at the healing was that he had no authority from Dr. McCann to sign the memorandum and that he had never represented to the plaintiff that he had such authority, and, alternatively, that the plaintiff could not recover damages beyond the costs he had incurred in connection with the sale. The Circuit Court Judge was satisfied that the defendant had not Dr. McCann’s authority, but that he had represented to the plaintiff that he had, and accordingly he held that the plaintiff was entitled to recover damages for the defendant’s breach of warranty of authority. He held that the plaintiff would have been entitled to recover damages for the loss of his bargain if in fact the plaintiff had suffered such damage, but that the premises were not worth more than the sum of £950 which the plaintiff had agreed to pay for them and that accordingly the plaintiff had suffered no damage by the loss of his bargain. He assessed the damages at £9 16s. 11d. being the costs incurred by the plaintiff.
The plaintiff served notice of appeal against so much of the order of the Circuit Court as awarded the sum of £9 16s. 11d. damages, and the defendant served notice of appeal against the entire order.
The appeal was heard by Johnston and Gavan Duffy JJ. Both the learned Judges agreed that the defendant’s appeal should be dismissed, but on the plaintiff’s appeal they differed in opinion. Johnston J. was of the opinion that the plaintiff’s appeal should be allowed, and that in addition to the sum awarded by the Circuit Court Judge the plaintiff should get the sum of £75 for loss of his bargain, making the total damages £84 16s. 11d. Gavan Duffy J. held that the plaintiff’s appeal should be dismissed on the ground that the rule in Flureau v. Thornhill (1) applied in this case and that the plaintiff was precluded by that rule from obtaining in this action damages for loss of his bargain.
The order of the High Court dismissed both appeals with costs and affirmed the decree of the Circuit Court Judge. The plaintiff, pursuant to s. 61 of the Courts of Justice Act, 1924, now appeals to this Court from that order in so far as it affirmed the damages awarded by the said decree.
The hearing in the Circuit Court proceeded on the basis that the only questions to be decided by the Circuit Court Judge were:(1) Did the defendant represent that he had Dr. McCann’s authority to sign the memorandum? and, if so, (2) could the plaintiff recover damages for the loss of his bargain?
The second question was argued on the basis that at the time that the memorandum was signed Dr. McCann was in a position to make good the title to the premises: no suggestion to the contrary was made by the defendant’s counsel. The hearing of the appeal in the High Court proceeded on the same basis, and it was not until the appeal was at hearing in this Court that it was said that Dr. McCann was unable to make title, and that his inability to do so limited the damages recoverable in this action.
As a general rule the measure of damages in an action for breach of warranty of authority is the loss sustained by the plaintiff as a direct result of the non-existence of the authority which the agent professed to have, and in a case where a contract is made without authority and is repudiated by the principal the measure of damages is the loss sustained by the plaintiff by losing that contract: Simons v. Patchett (1); In re National Coffee Palace Co. (2).
Assuming that the general rule applies in this case, the plaintiff has lost a contract binding Dr. McCann to sell the premises in question to him for £950. If the plaintiff had such a contract what would his position be upon Dr. McCann’s refusal to complete? He could sue Dr. McCann for specific performance or for damages for breach of contract, and Dr. McCann’s ability to pay any damages properly recovered against him is admitted. What damages would the plaintiff be entitled to in such an action? It is on this question that Dr. McCann’s ability to make good title is material. Unquestionably if Dr. McCann was, without fraud, incapable of making a good title the plaintiff would not be entitled to recover more than his deposit with interest and his costs, he would not be entitled to damages for the loss of his bargain: Flureau v. Thornhill (3), Bainv. Fothergill (4).
Dr. McCann’s title to the premises as disclosed in the particulars and conditions of sale is as eldest son and heir-at-law of Terence McCann, who held the premises under a fee farm grant, dated the 26th November, 1863, at the annual rent of £31 4s. 0d. Terence McCann died intestate on 9th July, 1926, leaving him surviving his widow Bridget McCann and Dr. McCann his eldest son and heir-at-law. The evidence given at the trial established that Bridget McCann was living, and Dr. McCann admitted in his evidence that she had a right of dower in the premises in question. The truth of that statement was not questioned either in the Circuit Court or in this Court. It follows that Dr. McCann was, without fraud, incapable of making a good title and the damages recoverable in an action for refusal to complete would be limited in the way that I have stated in accordance with the rule established by Flureau v. Thornhill (3). No damages for loss of bargain would be recoverable against him, and, in accordance with the general rule as to the measure of damages for breach of warranty of authority, no such damages are recoverable against the defendant in this action.
Having come to that conclusion it is unnecessary for me to consider what the measure of damages in this action would be if Dr. McCann had a good title to the premises at the time when the memorandum in this case was signed by the defendant.
I am of opinion that, for the reasons that I have stated, the plaintiff is not entitled to any damages beyond those awarded to him in the Circuit Court, and that this appeal should be dismissed.
MURNAGHAN J. :
I agree with the judgment of the Chief Justice and for the reasons stated in his judgment.
MEREDITH J. :
I entirely agree with the judgment of the Chief Justice, which I have had the advantage of reading. A great number of authorities were cited at the hearing before this Court and in the High Court, but on full consideration it seems that the case, which is of importance to auctioneers, can be disposed of very shortly.
No question arises on this appeal as to the liability of the defendant, and the only question is as to the amount of damages to which the plaintiff is entitled.
The rule defining the proper measure of damages in an action for breach of warranty of authority to sell is well established by Collen v. Wright (1), and by a long line of authorities following that case. The proper measure is what the plaintiff has lost by reason of the defendant not having the authority which he professed to have.
The nature of the action for the breach of warranty is the same whether the contract which the agent professed he had authority to make was one for the sale of chattels or for the sale of land, and, consequently, the rule is general and applies equally in both cases. But in the case of a sale of land the purchaser cannot always be said to have suffered the loss of his bargain by reason of the contract for sale not being binding; for, even if it were binding, the purchaser might not be able to recover damages for the loss of his bargain, which in other cases he can recover, in the event of the contract being broken. A difference may, therefore, arise incidentally in the application of the rule. The different possible causes that may arise in the application of the rule to contracts for the sale of land must, therefore, be examined. In so doing, it is important to remember that if the contract were binding the purchaser could, prima facie, obtain specific performance, and that it is only contingently that a question as to what he could obtain by way of damages for breach of contract arises.
Suppose, then, that the vendor was in a position to make good title. In that case, the contract being binding, it must be assumed that the sale would have gone through. The purchaser would have got his bargain, and no question of damages for loss of bargain would have arisen. For having lost that bargain, which, presumably, he would have obtained if the contract were binding, the purchaser is entitled to obtain damages measured by loss of bargain in his action against the agent for falsely warranting his authority. It was on that basis that damages for loss of bargain were recovered in Godwin v. Francis (1) and Spedding v. Newell (2).
Suppose, however, that there was some defect in the title, but that it should be assumed that the sale would nevertheless have gone through. In that case, as the purchaser would be accepting something not as good as what he bargained for, an allowance would then have to be made in respect of this, since it would affect the value of a binding contract, unless compensation for the defect could have been obtained. On that question the conditions of sale would have to be considered.
Suppose, however, that the vendor could not have made good title and that it has to be assumed that on that account the sale would not have gone through. In that case, the rule in Bain v. Fothergill (3) would come into play, and for the breach of contract the purchaser could only recover costs and expenses. Hence in that case all that a purchaser would lose by reason of the contract made by the agent not being binding would be costs and expenses, and that, according to the rule, would be the measure of damages recoverable in the action for breach of warranty against the agent.
Accordingly, the not result is that it is only where, owing to the vendor not having a good title, it is evident that the sale would not have gone through, even though there was a binding contract, that the special rule in Bainv. Fothergill (3) prevents more than costs and expenses being recovered in an action against an agent for falsely warranting that he had authority to sell land.
In this case the learned Circuit Court, Judge, seeing no reason why the sale should not have gone through if the contract were binding, held that the plaintiff was entitled to damages for loss of his bargain, but he held that the £950 which the plaintiff had agreed to pay was the full value of the propertythe sum of £1,100 paid by a subsequent purchaser having presumably been obtained only by means of false representations similar to those made by the vendor to the plaintiff in an effort to induce the plaintiff to offer a higher price. As, then, the loss of the bargain was no loss, he, in fact, only allowed costs and expenses.
Both the learned Judges in the High Court seemed to think that, because this action against the auctioneer is simply one for damages for breach of contract, all that they could look to in measuring the damages obtainable in this action was what would be obtainable as damages for breach of contract in an action by the purchaser against the vendor, and they left specific performance out of account. Both the learned Judges, further, agreed in regarding the vendor as having been guilty of wilful default and considered the result of the imaginary action on this basis, owing, therefore, to the vendor’s notional wilful default, Johnston J. in imagination awarded the purchaser damages for loss of bargain in the imaginary action and then made that the measure of damages to be recovered by the plaintiff against the defendant in this action But fraud and wilful default are matters of hard fact, which must be both alleged and proved, and it is quite impossible to treat the vendor, who in truth and in fact only repudiated, as he was entitled to do, a contract admittedly made without his authority, as having had wilful default alleged and proved against him in an imaginary action by the purchaser. Notional fraud and notional wilful default are unknown to the law.
Gavan Duffy J. also assumed that damages for loss of bargain could not be recovered by the plaintiff in this action unless they could have been recovered on a claim for damages for breach of contract in the imaginary action against the vendor. The learned Judge considered that such damages could only be obtained in all action of tort, and, consequently, could not be recovered in this action, which, no doubt, is only for breach of contract.
The confusion between this action against the agent and proceedings by the purchaser to enforce his rights against the vendor if the contract had been binding is bewildering. So far as concerns the measure of damages recoverable in this action the nature of the claim in the hypothetical vendor and purchaser proceedings is a matter of complete indifference. To the extent to which the claim would be effectual it affects the value of a binding contract. However, as I have said, there is no basis for imaginary fraud, wilful default, or action of tort in the case of a vendor who in fact has only stood on his legal right to repudiate a contract he did not authorise.
But, apart from all that, I do not consider that Gavan Duffy J. is correct in his view that on a claim for damages for breach of a contract for the sale of land a purchaser could not recover damages for loss of bargain if he alleged and proved wilful default. Such proof would simply prevent the special rule affirmed in Bain v. Fothergill (1)from applying, and that would leave the plaintiff free to recover damages for loss of his bargain on his claim for breach of contract, just the same as if the contract had been one for the sale of goods. See Day v. Singleton (2); In re Daniel, Daniel v. Vassal (3). But the fundamental point is that the probability of the purchaser having got his bargain if the contract had been binding was from first to last disregarded by both the learned Judges.
In the present case the title of the vendor was proved to be subject to a serious defect, as the vendor’s mother was entitled to dower out of the lands. Whether the case is looked on as one in which, even if the contract were binding, the sale would have gone off owing to the vendor not being able to show good title, or whether it is to be looked on as one in which the plaintiff (who, in this case, gets no help in respect of compensation from the conditions of sale), would have accepted the title subject to the defect, it is clear that all that the plaintiff is shown to have lost by reason of the contract not being binding is only his costs and expenses, which must, accordingly, be the measure of damages in this action.
For these reasons I agree that the appeal must be dismissed.
GEOGHEGAN J. :
I agree.
Desmond Murtagh Construction Ltd (in receivership) v Hannan
[2011] IEHC 276
JUDGMENT of Mr. Justice Kelly delivered on the 28th day of July, 2011
Introduction
This is a claim for specific performance of 22 contracts for sale made between the defendants as purchaser and the late Desmond Murtagh (Mr. Murtagh) as vendor dated 30th November, 2007. Specific performance is also sought of 22 corresponding building agreements, made between the defendants, as employer and Desmond Murtagh Construction Limited (the Company) as contractor. All of these contracts were dated 30th November, 2007 and their subject matter were units 4, 7, 8, 10, 21, 24, 27, 30, 31, 32, 35, 36, 53, 54, 55, 56, 57, 58, 67, 68, 69 and 70 Castlemanor, Billis, Drumalee, Co. Cavan. The unit price for each unit was €82,000 which was payable together with the sum of €188,000 on foot of the building contract for each unit. Thus, there is an alleged total of €1,804,000 payable to the estate of Mr. Murtagh, deceased, for the sale of the units and a sum of €4,136,000 payable to the Company on foot of the building agreements for the construction of those units.
The contracts in suit represent the balance of an original 48 contracts for the purchase of the entire Castlemanor villas, such other contracts having already been completed.
The Parties
ACC Bank Plc appointed Kieran Wallace as receiver of the Company on 11th February, 2009.
Mr. Murtagh died on 5th June, 2009. Probate to his estate was extracted on 18th January, 2010, by his brother and sister who are the executors named in his Will. Mr. Murtagh’s personal representatives authorised Mr. Wallace to make all decisions as might be required in respect of these proceedings.
The Defendants
The first defendant (Mr. Hannan) lived in Cavan for 32 years where he was manager of the ACC Bank. All of the other defendants were customers of that bank. In 2002, they formed a partnership which got involved in property purchase and development. It was known as the Hammo Partnership. The present case arises out of one of the partnership’s ventures into property speculation and development.
In short, the Hammo Partnership purchased lands at Billis, Co. Cavan in 2005. The purchase price was €1.7m. Between that purchase price, the paying off of a Mr. Leddy who introduced them to the land and the obtaining of planning permission, the total expenditure which the Hammo Partnership made on these lands was of the order of €3m. Two years after its purchase, it put the lands on sale seeking €9m for it. That price was not achieved but the late Mr. Murtagh paid the partnership €7m for the land.
Not content with having more than doubled their money, the defendants, as members of the Hammo Partnership, sought to derive further fiscal benefits by entering into arrangements details of which I will examine presently. These arrangements were driven by tax avoidance motives.
The Arrangements
The contract under which Mr. Murtagh purchased the Billis lands was dated 8th January, 2007. Mr. Murtagh and the Company constructed a residential retirement complex known as Castlemanor Retirement Village on the lands.
By two further contracts which were also dated 8th January, 2007, it was agreed that the defendants would purchase back a total of 48 units when constructed in the development and that the Company would construct those units.
Subsequently, having regard to tax advice which was given to the defendants, these two composite contracts were replaced by individual contracts pertaining to each of the 48 units. All of these contracts bear the same date namely 30th November, 2007. Each of the 48 contracts comprised an individual contract for sale of the land by Mr. Murtagh to the defendants and a corresponding building agreement in which the Company was the contractor and the defendants the employer.
The closing dates in respect of the units which are in suit were as follows. Units 4, 7, 8, 10 and 35 had a closing date of 31st March, 2008. Units 21, 24, 27, 30, 31, 32 and 36 had a closing dated of 30th June, 2008. Units 53, 54, 55, 56, 57, 58, 59, 67, 68, 69 and 70 had a closing date of 31st October, 2008.
At the time when the contracts in suit were executed, the building work on the retirement village was far advanced and indeed was proceeding with speed. This was because the works had to be completed by a specific date in order to avail of the tax advantages. Despite the speed of the works, all parties agree that Mr. Murtagh was a good and competent builder and the work done by him and the Company was of a high standard.
The Bond
When the original contracts of 8th January, 2007, regulated the relationship between the parties, it was agreed that the defendants would provide a €1,500,000 bond in respect of a deposit for the contract for sale and building agreement. That bond was to remain in place until the sales of all 48 units in the development closed.
On 8th March, 2007, a guarantee was executed between National Irish Bank Limited, the lending bank of the defendants and ACC Bank Plc, the lending bank of the Company and Mr. Murtagh. That instrument provided that in consideration of ACC Bank affording facilities to Mr. Murtagh, National Irish Bank guaranteed the payment on demand of a total sum of €1,500,000 provided that that demand could only be made by ACC Bank in the event that Mr. Murtagh had not paid that sum. This was a continuing guarantee which could be terminated by National Irish Bank on giving 90 days notice in writing to ACC Bank. This arrangement was arrived at between the parties and this bond acted as a substitute for the composite deposit monies due on foot of the contracts for sale and the building agreements.
When the 48 individual contracts of 30th November, 2007, replaced the earlier two contracts of January 2007, exchange of the individual contracts was carried out on the basis of that bond remaining in place in respect of the deposit for the 48 units.
For the sake of completeness, I ought to record that on 20th October, 2008, ACC Bank plc. demanded payment from National Irish Bank Limited of this sum of €1,500,000. The defendants through their solicitors P.J.F. McDwyer and Company by letter dated 24th October, 2008, instructed National Irish Bank that payment was not to be made on foot of the bond because “the amounts due and referred to in the said guarantee have already been discharged and paid to the ACC Bank Plc by Desmond Murtagh and therefore this guarantee has been satisfied in full”.
Events Post-November 2007
Between December 2007 and the summer of 2008, 26 sales of the 48 units were completed. All 48 houses were substantially completed. The completion dates were staggered as indeed is the case in relation to the units which are in suit.
By July 2008, the plaintiffs were of the view that the defendants had become reluctant to close the remaining sales and so a completion notice was served dated 14th July, 2008, in respect of such of the units whose closing date had passed at that time.
The defendants contended that these completion notices were invalid because of an alleged agreement to withdraw the contracts in respect of which they were served and to replace them by other contracts. That contention had no substance, was disputed by the plaintiffs and was never pursued.
Further completion notices were served on 4th November, 2008.
In December 2008, controversy erupted on issues pertinent to the bond and the receiver was appointed to the Company in February 2009.
I mention these matters because throughout these various controversies no issue was raised by the defendants concerning any aspect of the planning permission granted in respect of the development or compliance with it.
In the light of the defences raised in this action and my findings later in this judgment, that is a matter of some significance.
The Planning Permission
Whilst a number of planning permissions were granted in respect of the development, the one which is pertinent to this case is that bearing register No. 05/162 dated 13th October, 2005.
The applicant for the permission was the fourth defendant (Mr. Olwill).
The permission was subject to 54 conditions, only a small number of which have any relevance to this case.
Condition No. 2 required the developer to make a contribution to the planning authority towards expenditure to be incurred by it in respect of public infrastructure and facilities benefiting development in the area of the authority. The sum specified was €296,220. That amount was discharged as the development went along and a balance remains due to Cavan County Council which the receiver of the Company has undertaken to pay. He is in funds to do so.
Condition No. 3 required the developer to lodge with Cavan County Council, a cash deposit or bond of an insurance company or other security to secure the provision and satisfactory completion of roads, footpaths, public lighting etc. The amount specified was the sum of €2,000 per unit. That bond was lodged and was called by Cavan County Council.
Condition No. 14 provided that the dwellings “may not be occupied until the new sanitary facilities have been constructed and tested in accordance with the Council’s requirements”.
It is condition 33 which has given rise to much of the controversy that I have to deal with. It provides as follows:-
“The proposed 150mm diameter foul sewer from Billis Cross to Drumalee Cross to be increased to 300mm diameter. The applicant shall arrange a meeting with Cavan County Council prior to commencement of the development to agree the details and construction. This section of pipeline will be taken over by Cavan County Council after installation and testing.”
Condition No. 34 ought to be mentioned. It provided:-
“The proposed 100mm diameter foul sewer rising main from the pumping station to Billis Cross to be increased to 150mm diameter.”
Finally, condition No. 35 required written confirmation “from the M+E contractor, Envirocare, that the pumping station has been installed as per their (sic) submitted specification and drawings with the exception of the capacity of the emergency overflow tank to be increased to 40 cubic meters. A copy of the commissioning certificate to be sent to Cavan County Council.”
The road from Billis Cross to Drumalee Cross mentioned in condition 33 is a public road and a busy one at that. It is quite clear from the evidence that the carrying out of the work contemplated in condition No. 33 would require closure of that road or a large part of it for a number of months. That in turn would result in serious traffic disruption.
The Contracts
The format of the contracts governing each of the 22 properties in suit is the same. It consists of the contract for the sale of the land for €82,000 per unit and the building agreement for €188,000 per unit. As I have already pointed out there are staggered closing dates. 20 of the 48 units were to close in December 2007 with a further 8 on 31st March, 2008, 10 on 30th June, 2008 and 10 on 31st October, 2008.
The Building Agreement
The building agreement provides at recital VI that “‘the works’ shall mean the dwelling house and premises specified in the plans together with such necessary ancillary works and services as may be necessary to render the dwelling house and premises reasonably habitable when completed and comply with Health Service Executive specifications.”
The covenant to build requires the Company for the contract price to build and completely finish in a good substantial and workmanlike manner and deliver to the employer the works on the site in accordance with the plans and subject to the conditions set out at numbers 1 to 22 annexed to the agreement. In fact, those works are complete.
I have been quoting from the special conditions but the building agreements are also governed by the Law Society of Ireland’s Building Agreement (2001 edition) conditions. The only such condition which is relevant is No. 3 which reads:-
“The contractor shall at his own expense conform to the provisions of any statute, by-law or regulation applicable for the time being and affecting the works on the site and shall give all necessary notices to and obtain all necessary sanctions of the local planning or any other authority in respect of the works and shall keep the employer indemnified against all fines, penalties, expenses and loss incurred by reason of any breach of any statute, by-law or regulation or the failure to give any such notice of a failure to obtain any such sanction.”
The Agreements for Sale
The contracts for sale are governed by the Law Society of Ireland General Conditions (2001 edition) but are subject to a number of special conditions. The general conditions are to apply insofar as they are not altered or varied by the special conditions and in the event of any conflict between them the special conditions are to prevail (see special condition 2).
Special condition No. 10 is of central importance to this case. It provides as follows:-
“On completion the vendor shall furnish the purchaser with an engineer’s certificate of compliance with planning permission and building regulations together with a structural defects indemnity from the contractor in the building agreement for a period of six years for major defects and no objection, query or requisition raised regarding same shall be admitted and general condition 36 is hereby varied accordingly.”
General condition 36 is headed “Development”. It provides as follows:-
“(a) Unless the Special Conditions contain a stipulation to the contrary, the Vendor warrants:
(i) that there has been no Development of the Subject Property since the 1st day of October, 1964, for which Planning Permission or Building Bye-Law Approval was required by law
or
(ii) that all Planning Permissions and Building Bye-Law Approvals required by law for the Development of the Subject Property as at the Date of Sale were obtained (save in respect of matters of trifling materiality), and that, where implemented, the conditions thereof in relation to and specifically addressed to such Development were complied with substantially
PROVIDED HOWEVER that the foregoing warranty shall not extend to (and the Vendor shall not be required to establish) the obtaining of approvals under the Building Bye-Laws or compliance with such Bye-Laws in respect of Development or works carried out prior to the 13th day of December, 1989 (this proviso being hereinafter in Condition 36 referred to as the ‘Proviso’)
(b) unless the Special Conditions contain a stipulation to the contrary, the Vendor warrants in all cases where the provisions of the Building Control Act, 1990 or of any Regulation from time to time thereunder apply to the design or Development of the Subject Property or any part of the same or any activities in connection therewith, that there has been substantial compliance with the said provisions in so far as they pertained to such design, Development or activities
(c) the warranties referred to in (a) and (b) of this Condition shall not extend to any breach of provisions contained in Planning Legislation, which breach has been remedied or is no longer continuing at the Date of Sale.
(d) the Vendor shall prior to the Date of Sale make available to the Purchaser for inspection or furnish to the Purchaser copies of:–
(i) all such Permissions and Approvals as are referred to in Condition 36(a) other than in the Proviso
(ii) all Fire Safety Certificates and (if available) Commencement Notices issued under Regulations made pursuant to the Building Control Act, 1990, and referable to the Subject Property (such Permissions, Approvals and Certificates specified in this Condition 36(d) being hereinafter in Condition 36 referred to as the ‘Consents’) and
(iii) (Save where Development is intended to be carried out between the Date of Sale and the date upon which the Sale shall be completed) the documents referred to in Condition 36(e).
(e) the Vendor shall, on or prior to completion of the Sale, furnish to the Purchaser
(i) written confirmation from the Local Authority of compliance with all conditions involving financial contributions or the furnishing of bonds in any such Consents (other than those referred to in the Proviso)
PROVIDED HOWEVER that where
the Development authorised by such Consents relates to a residential housing estate of which the Development of the Subject Property forms part
and
such Consents relate to the initial construction of a building on the Subject Property
written confirmation from the Local Authority that the roads and services abutting on the Subject Property have been taken in charge by it shall be accepted as satisfactory evidence of compliance with such conditions, unless the said confirmation discloses a requirement for payment of outstanding moneys
(ii) a Certificate or Opinion by an Architect or an Engineer (or other professionally qualified person competent so to certify or opine) confirming that, in relation to such Consents (save those referred to in the Proviso)
– the same relate to the Subject Property
– (where applicable) the design of the buildings on the Subject Property is in substantial compliance with the Building Control Act, 1990 and the Regulations made thereunder
– the Development of the Subject Property has been carried out in substantial compliance with such Consents
– all conditions (other than financial conditions) of such Consents have been complied with substantially
and
– in the event of the Subject Property forming part of a larger development, all conditions (other than financial conditions) of such Consents which relate to the overall development have been complied with substantially so far as was reasonably possible in the context of such development as at the date of such Certificate or Opinion
(f)
(i) where the Vendor has furnished Certificates or Opinions pursuant to Condition 36(e), the Vendor shall have no liability on foot of the warranties expressed in Condition 36(a) or 36(b) or either of them in respect of any matter with regard to which such Certificate or Opinion is erroneous or inaccurate, unless the Vendor was aware at the Date of Sale that the same contained any material error or inaccuracy
(ii) if, subsequent to the Date of Sale and prior to the completion thereof, it is established that any such Certificate or Opinion is erroneous or inaccurate, then, if the Vendor fails to show
that before the Date of Sale the Purchaser was aware of the error or inaccuracy
or
that same is no longer relevant or material
or
that same does not prejudicially affect the value of the Subject Property
the Purchaser may by notice given to the Vendor rescind the Sale.”
Having regard to the wording of special condition No. 10, it is clear that it varies condition 36 of the general conditions. The purchaser has agreed to be furnished with the engineer’s certificate of compliance in lieu of the entitlements under general condition No. 36. The purchaser’s entitlement is therefore to obtain the certificate of compliance which is referred to in special condition No. 10.
The format of that certificate of compliance was disclosed in advance to the defendants. It was contained in the Booklet of Title. The certificate which was ultimately issued in each case was in the format contained in that booklet. Thus, from the outset, the defendants were aware, not merely that they were varying their entitlements under general condition No. 36 and were receiving instead the certificate of compliance contemplated in special condition No. 10, but they had sight of the format of that certificate in advance of becoming contractually bound.
The Certificate of Compliance
In each case, the Certificate of Compliance was issued by David McCormack (Mr. McCormack), an architect of the firm of David McCormack & Company, which practices in Cavan. Special condition No. 10 called for an Engineer’s Certificate but in fact the certificate was issued by Mr. McCormack. Nothing turns on this point.
Mr. McCormack qualified as an architect in 1992 and has been in independent private practice since 1993. The certificate recites that he was the architect retained by the company in respect of the development. The Certificate also recites that the plans and other particulars, on foot of which Planning Permission 05/162 was granted, had been inspected by Mr. McCormack’s firm.
Each certificate then recites the grant of Permission 05/162 as well as Permission 07/1658 dated 24th October, 2007, relating to the retention and continuation for the repositioning and layout of seventy retirement homes previously approved under planning reference 05/162 at Billis in Cavan.
The certificate goes on to provide that the relevant works and the services thereof had been designed in substantial conformity with the building regulations made pursuant to the Building Control Act 1990. It also recites, as was the fact, that a commencement notice of intention to undertake the relevant works was duly given on 14th December, 2006, and that that notice contained or was accompanied by the information and particulars prescribed by the Building Control Regulations 1991. Mr. McCormack certifies that he made periodic inspection of the relevant works during the construction thereof and that in his opinion the construction of same complied substantially with the grant of permission and substantially with all of the building regulations applicable thereto.
Paragraph number 10 of the certificate reads as follows:-
“The conditions of the permission referred to at paragraph 5 relating to the estate of which the relevant works form part, have been substantially complied with insofar as is reasonably possible at this stage of the development of such estate BUT this paragraph is not to be taken as extending to conditions for the payment of financial contributions or the giving of security for satisfactory completion, compliance with which is not within my competence to certify.”
Clause No. 11 of the certificate reads:-
“Take notice that this certificate is issued solely with a view to providing evidence for title purposes of the compliance of the relevant works with the requirements of planning legislation and of the Building Control Act 1990 and the regulations thereunder. Except insofar as it relates to compliance with the said requirements and regulations, it is not a report or survey on the physical condition or on the structure of the relevant works, nor does it warrant, represent or take into account any of the following matters:-
(a) The accuracy of dimensions in general, save where arising out of the conditions of the permission/approval or the building regulations aforesaid.
(b) Matters in respect of private rights and obligations.
(c) Matters of financial contribution.
(d) Development of the relevant works which may occur after the date of issue of this certificate.”
The final part of the certificate certifies Mr. McCormack’s familiarity with the lands in question and the scheme of development in suit.
The Pleadings
The statement of claim is straightforward. It asserts the existence of the contracts for sale and the building contracts and gives detail of their prices and their respective closing dates. It also alleges the service of the completion notices which I have already referred to and alleges breach of contract on the part of the defendant and proceeds to pray for an order of specific performance.
In the defence and counterclaim it is admitted that the defendants entered into the contracts for sale and the building agreements in suit.
The defendants allege that the following were terms of the agreements between the parties:-
(a) that the units would be built in accordance with the requirements of the local authority;
(b) that the units would be reasonably habitable when constructed;
(c) that the sewers, water mains and other services would be constructed and laid as soon as practicable to a standard acceptable to the local authority;
(d) that the conditions of the planning permission for the construction of the units would be complied with substantially;
(e) that the plaintiffs would furnish to the defendants an appropriate certificate of compliance with planning permission as provided for in special condition 10 of the contract for sale;
(f) that in the event that the certificate of compliance was erroneous or inaccurate, the defendants were entitled by notice to the plaintiffs to rescind the sale; and
(g) on completion, the plaintiffs were required to provide the defendants with a structural defects indemnity for a period of six years in respect of major defects.
The defence alleges that the plaintiffs are not in a position to provide a valid certificate of compliance in circumstances where the planning permission authorising the construction of the scheme has not been complied with. In particular, condition 33 of planning permission 05/162 which requires the construction of the foul sewer to be constructed from Billis Cross to Drumalee Cross and to have the necessary details agreed with regard to the construction before the commencement of development has allegedly not been complied with.
The defence also alleges that conditions 34 and 35 have not been complied with. In said circumstances it is contended that the plaintiffs were not in a position to provide the appropriate certificate of compliance and that therefore the contract cannot be completed and the defendants are entitled to rescind it.
It is also alleged that the failure to comply with the terms and conditions of the planning permission prevent the use of the dwellings as such and that they are not habitable contrary to the terms of the building agreement. The defendants also contend that the plaintiffs cannot in equity compel them to complete the contract in circumstances where to do so would involve the defendants in a transaction in relation to a development which amounts to an unlawful development having regard to the provisions of s. 150 of the Planning and Development Act 2000, as amended.
The defence also contends that condition No. 14 has not been complied with.
The defence alleges that, insofar as the plaintiffs have provided a purported certificate of compliance, it is inaccurate and erroneous. These pleas are, in large measure, repeated in a counterclaim which, in addition, alleges that on 18th March, 2010 (subsequent to the issue of these proceedings), the defendants served notice, as they were entitled to do, both under the general law and pursuant to clause 35(b)(iii) and (iv), clause 36(e)(ii) and clause 36(f)(i) and (ii) of the general conditions of sale that they were rescinding the sale. A declaration that the contract has been rescinded is prayed for.
The Issues
There are two core issues for determination.
The first is, does the production by the plaintiffs of Mr. McCormack’s certificate in accordance with special condition 10 discharge their contractual obligations to the defendants thus entitling them to specific performance?
If the answer to that question is in the affirmative then the plaintiffs say that much, if not all, of the defendants’ contentions disappear.
If the answer is in the negative then the question arises as to whether Mr. McCormack’s certificate is correct. That involves a consideration of much evidence which was tendered over many days. It involves a consideration of whether or not it can be said that conditions No. 14 and 33 of the planning permission have been complied with. If not, does that render the certificate incorrect? It also may require an assessment of the defendants’ state of knowledge of all this.
Counsel for the plaintiff expressly acknowledged that no issue concerning compliance with condition No. 34 was being raised.
First Issue
Special condition No. 10 requires the plaintiff to furnish the defendants with the engineer’s certificate of compliance with planning permission and building regulations together with a structural defects indemnity from the contractor and “no objection, query or requisition raised regarding same shall be admitted and general condition 36 is hereby varied accordingly”.
This special condition varies and takes precedence over general condition 36. In its terms, it disentitles the defendants from making any objection, query or requisition concerning the certificate and its contents. Thus they are not entitled either before or after closing the sale to any further investigation. Instead, having varied their entitlements under general condition 36, they must now be, it is said, satisfied and accept the certificate which has been issued.
There is no dispute but that such a certificate exists in the case of each of the contracts in suit and Mr. McCormack has stood over his certificate in the witness box. The plaintiffs contend that that is an end of the matter. Having contracted for such a certificate and having received it, it is not open to the defendants to question its validity as a basis for refusing to perform their contractual obligations. If the defendants are correct in contending that the certificate is defective, their remedy is against Mr. McCormack and not the vendors, say the plaintiffs.
A number of arguments are made by the defendants against these propositions and I will endeavour to deal with each of them in turn. Before doing so, however, it is important to bear in mind that para. 10 of Mr. McCormack’s certificate is to the effect that there has been substantial compliance insofar as is reasonably possible with the various conditions of permission 05/162. In that regard, it is common case that the foul sewer contemplated in condition 33 has never in fact been built. I will deal with the reasons for that in due course and the consequences that it has for this litigation. However, I should say that the evidence satisfies me that the failure to comply with this condition is not as a result of any culpable default on the part of the plaintiffs.
Discussion
As to the case that Mr. McCormack’s certificate issued pursuant to special condition 10 is all that is required to be handed over on closing, the following arguments are made.
The first argument which is made by the defendants is that in matters of title, a restrictive condition requiring the purchaser to accept what the vendor knows to be incorrect can be disregarded. If Mr. McCormack’s certificate can be regarded as touching on a matter of title and is incorrect, it can be disregarded.
Reliance is placed by the defendants upon two passages contained at paras. 5.008 and 5.011 of Emmett and Farrand on Title (2010) and the cases cited therein.
Paragraph 5.008 reads in part as follows:-
“Conditions of Sale
In the light of the above complexities, a vendor may wish to insert a condition in the contract dealing with any defect in his title, designed to “safeguard himself against any undue trouble to which he might be put by inquiries about facts which took place some time ago” (Simonds J. in Re Holmes [1944] Ch 53 at 57; see also Becker v. Partridge [1966] 2 QB 157 at 171 – 172). If so, the rule is that the condition must not mislead the purchaser in any way. (Re Banister [1879] 12 Ch D 131). The vendor will only be able to rely on the condition if he has made a sufficiently full disclosure to enable the purchaser to consider and determine whether it is worth his while to accept the particular defective title by entering into the contract (Re Haedicke & Lipski’s Contract [1901] 2 Ch 666).”
Paragraph 5.011 states :-
“Purchaser to Assume that a State of Facts Exists-
A condition requiring a purchaser to assume that what the vendor knows is not true can be disregarded on the ground that it is misleading, and the vendor cannot enforce specific performance (Re Sandbach & Edmundson’s Contract [1891] 1 Ch 99). This is also so if the vendor knows only that what has to be assumed may not be true (Wilson v. Thomas [1958] 1 WLR 422, where the state of facts to be assumed depended on the proper construction, with the aid of extrinsic evidence of a latent ambiguity in a will). But the condition would not be considered misleading if the vendor believed it to be true what he asked the purchaser to assume, although his belief was untrue and unsupported by evidence (ibid). The utmost that can be asked of a purchaser is that he shall assume something of which the vendor knows nothing. It follows that if the vendor knows, or from the state of his title ought to know, that what he asked the purchaser to assume is not correct, the condition would be misleading (Re Banister [1879] 12 Ch D 131: Beyfus v. Lodge [1925] Ch 350.”
The plaintiffs contend that these authorities and the propositions advanced by them do not assist the defendants in their defence of these proceedings.
First, it is said that a purchaser is entitled to agree to a very restrictive special condition and that in such circumstances, the principles set out above do not apply. They rely on a passage from Farrell’s Irish Law of Specific Performance [1994] where at para. 974, the author wrote:-
“In a vendor’s action for specific performance it is a good defence to show that he has no title unless the purchaser has unwisely agreed to a very restrictive special condition.”
At para. 978, the author continued:-
“Formal contracts usually contain some restrictions on the right of the purchaser to investigate title. It is obvious that under an “open” contract the purchaser is entitled to a full investigation of title and no less obvious that the right to a full investigation may be cut down by conditions of sale. It has been said that ‘a purchaser may preclude himself by agreement from making any inquiry as to title and specific performance may be enforced against him.”
Thus it is argued that the points made by the defendants by reference to the quotations from Emmett and Farrand are subject to the overarching principle of freedom of contract and that they are entitled to agree what they wish. In the present case, it is said that special condition No. 10 means what it says and should be given effect to.
In agreeing to special condition No. 10 it is argued, both parties committed to obtaining the services of Mr. McCormack to provide a professional opinion in respect of planning matters. If Mr. McCormack is wrong then remedies are available to the defendants but not as against the plaintiffs.
A second line of objection to the defendant’s arguments in this regard is mooted by reference to the fact that the extracts from Emmett and Farrand deal only with defects in title. The plaintiffs contend that planning does not go to title. In that regard, they cite a dictum from Keane J. in Doolan v. Murray (21st December, 1993) where he said:-
“The objection, moreover, taken by the plaintiff at this stage to the replies all relate to alleged non-disclosure of planning matters. Although requisitions in relation to such matters are raised today as a matter of course, they are not in the strict sense requisitions on title and, even if the plaintiff’s contention that they were inadequate in the present case is well founded, and she had been in a position to rely on them at the appropriate time, i.e. before the sale was completed, it is unlikely that their allegedly inadequate nature would have afforded her any grounds for rescinding the contract.”
Quite apart from that dictum, the plaintiffs contend that in the same edition of Emmett and Farrand relied upon by the defendants, there is contained at para. 4.025, the following statement:-
“User of property –
Is this an aspect of quality or of title? There is some authority supporting an implied obligation on the part of a vendor to disclose planning restrictions (see per Harman J. in Sidney v. Buddery [1949] 1 P. & C.R. 34; but cp. Mitchell v. Beacon Estates (Finsbury Park) Limited ibid 32). Thus Graham J. after saying that the value of the land would be affected, stated ‘Non-disclosure of the position in respect of planning permission might therefore in some circumstances give rise to a misrepresentation’ (Sinclair-Hill v. Southcott [1973] 266 E.G. 1399 at p 1401). This authority may be better explained not as indicating an extension of a vendor’s duty of disclosure of latent defects in title but merely as illustrating that misrepresentations can be made by conduct as well as words…. Otherwise, it would appear to be in conflict with the general principle that it is the business of the purchaser:-
‘If he does not protect himself by an express warranty, to satisfy himself that the premises are fit for the purposes for which he wants to use them, whether that fitness depends on the state of their structure or the state of the law or any other relevant circumstances’ (per Devlin J. in Edler v. Auerbach [1950] 1 KB 359 at 374). This statement of the law enjoys the express approval of the Court of Appeal (Hill v. Harris [1965] 2 QB 601, concerning a head lease covenant) but is still not applicable where there has been a positive misrepresentation as to user (Laurence v. Lexcourt Holdings Limited [1978] 1 WLR 1128 at 1134)’.”
Accordingly, it is contended that special condition 10 ought to be construed of reference to the normal rules of construction and that it means what it says. It is not referable to matters of title and was within the competence of parties to these commercial arrangements to so provide. It was designed to ensure certainty and it did so.
The plaintiffs contend that even if there are special rules which would disentitle the plaintiffs to rely on special condition 10 requiring the defendants to assume what the plaintiffs knew not to be true, such special rule is of no assistance to the defendants. This is so for a number of reasons.
First, the certificate envisaged in special condition 10 was to certify substantial compliance “insofar as is reasonably possible at this stage of the development”. Thus, both parties were aware the certificate would merely be as to compliance at the stage of the development on the date of the certificate. The condition did not require the defendants to assume anything that the plaintiffs knew to be untrue. There was no reason why the plaintiffs would believe that such a certificate could not be and would not be given in good faith.
The defendants also make the case that special condition 10 provides a variation to general condition 36. In its terms that is correct but what is the effect of that in practical terms?
General condition 36(a)(ii) provides a general warranty that all planning permissions required by law for the development of the subject property as of the date of sale were obtained and that, where implemented, the conditions were complied with substantially.
Special condition 36(e) provides that the vendor shall, on or prior to completion of the sale, furnish to the purchaser a certificate or opinion by an architect or an engineer. General condition 36(e)(ii) sets out what that certificate or opinion ought to contain. The prescribed certificate is in a somewhat different form to the one provided in the present case.
General condition 36(f)(i) provides that where the vendor has furnished certificates pursuant to condition 36(e), the vendor shall have no liability on foot of the warranties expressed in condition 36(a) of 36(b) or either of them in respect of any matter with regard to which said certificate or opinion is erroneous or inaccurate unless the vendor was aware at the date of sale that the same contained any material, error or inaccuracy. Thus, it is clear that where the vendor furnishes a certificate pursuant to condition 36(e), he has no liability on foot of it unless he was aware at the date of the sale that the certificate contained a material inaccuracy, so it is argued that even under general condition 36, the defendants’ rights following delivery of the certificate are limited. Once a certificate is provided under general condition 36(f)(i), no further warranty is made in respect of its contents unless the condition provided for in 36(f)(i) is applicable.
General condition 36(f)(ii) deals with the situation in which subsequent to the date of sale but prior to completion, it is ascertained that there is an inaccuracy in the certificate. In such circumstances, if the vendor fails to show that before the date of sale the purchaser is aware of the error or inaccuracy or that the same is no longer relevant or material or that the same does not prejudicially affect the value of the subject property, the purchaser made, by notice given to the vendor, rescind the sale.
The plaintiffs argue that even if they are incorrect in their contention that special condition 10 has to be viewed, in effect, as overriding in a general way what is contained in general condition 36 nonetheless, the line of defence sought to be made by reference to the above quoted provisions of general condition 36 are of no avail.
This argument runs as follows. Condition 36(e)(ii) is, it is said, entirely excluded because it provides for a particular form of certification to be given. Special condition 10 provides for a different form of certificate and they cannot stand together.
Condition 36(f)(ii) is also excluded because that relates to the situation in which the certificate is furnished prior to completion whilst general condition 10 makes it clear that that will not happen. Accordingly, condition 36(f)(ii) is of no relevance.
It is also argued that condition 36(f)(i), is of no relevance. It, in any event, provides that there is to be no liability on foot of a certificate once provided. Special condition 10 expands upon that and says there is to be no objection or no query or no requisition in relation to the certificate. It is said that special condition 10 alters by exclusion the provisions of general condition 36(f)(i).
General condition 36(a) is, it is argued, also excluded.
Thus, it is said, that on any view of the matter, there is no defence available to the defendants having regard to what is contained in special condition 10.
The plaintiffs say that, in essence, the argument of the defendants is that special condition 10 has to be given a meaning different from its ordinary meaning and that that is not appropriate.
View
In my view, the contentions made by the plaintiffs are correct. Special condition 10 means what it says. The parties contracted for the form of certification which is envisaged by it and if that certificate proved to be incorrect then the remedy is not against the vendors but against the certifier.
Even if that view is incorrect, I am of opinion that there is much force in the plaintiff’s contentions concerning the exclusion of the various entitlements which the defendants might otherwise have pursuant to general condition 36. They are effectively excluded when one juxtaposes the provisions of special condition 10 with general condition 36.
However, I do not propose to go into any greater detail in expressing my views on this matter because, lest I am wrong in the view which I have formed, I am going to consider the merits of the matter by reference to the evidence which I heard. Thus, although the conclusion which I have reached at this juncture would be sufficient to dispose of the litigation, I will consider all other elements of the case.
Second Issue
The resolution of this issue requires consideration of whether the certificate produced by Mr. McCormack is substantially correct. It also requires consideration of the state of knowledge of the defendants in relation to the central issue in this case. That issue relates to the failure to install the sewer which is contemplated at condition 33 of the planning permission. There is also a secondary issue of lesser importance concerning an alleged failure to comply with condition 14 of the planning permission.
Condition 33
It is common case that condition No. 33 has not been complied with. In a few moments, I will explore why that is so.
I am quite satisfied on the evidence that the reason why condition 33 has not been complied with is not due to any fault or failure on the part of the plaintiffs.
Mr. Murtagh was at all times willing to install the sewer and was anxious to do so. He expressed a willingness and a desire to install the sewer himself. Cavan County Council was against that because it took the view that he did not have the necessary expertise. Its officials wished to have a specialist firm engaged. I am satisfied that even if a specialist firm had been engaged, there was no realistic possibility of the sewer being built because of Cavan County Council’s clear preference that it should not be installed until such time as that Council was in a position to install a water main along the same stretch of road. Such an approach made perfect sense. Major disruption to traffic over a lengthy period was going to be experienced during the time of installation of the sewer. The road would have to be closed for that time. There was no sense in installing the sewer other than concurrently with the installation of the water main which Cavan County Council had been planning for a long time.
In a few moments, I will consider the evidence tendered by officials of Cavan County Council who, it will be apparent, were hamstrung in their efforts to install the water main as a result of a failure on the part of the Department of the Environment to provide promised funding so to do.
Despite Mr. Murtagh’s willingness to comply with condition 33, there was no practical or realistic ability on his part to do so without the agreement of Cavan County Council and that was not forthcoming at any time.
The matter was put succinctly by Mr. McCormack in his evidence where he said (day one, question 258):-
“Question 258: I am going to put it to you that there was nothing preventing your client in 2007 from building this sewer. It may have been the preferred option of the Council to have both done at the same time, but don’t you agree that if your client wanted to do it he could have done it?
Answer: No, my client expressed a willingness and a desire to do the sewer himself and the Council specifically stated that he was not allowed to do it because his firm hadn’t got the necessary expertise and that they would need a specialist firm to be engaged should they want to go down that route, but that, however, their preference at the time was to wait on the water main.
Question 259: Alright, we’ll take that stage by stage. The first thing that the Council were saying to Mr. Murtagh and his company, I gather, was that they didn’t think he had the competence to do the work?
Answer: Yes. Well, he expressed a desire to do the works himself.
Question 260: They said ‘well, in relation to construction we want somebody competent to do it’. But that wasn’t saying that if they got somebody competent to do it, it couldn’t have been done.
Answer 260: They expressed the preference to carrying it out in conjunction with the water main should a contractor be appointed, an independent contractor. That was their preference.
Question 261: That was their preference. Firstly, they would like an independent contractor. And, secondly, their preference, to stop disruption and things, would be that it would be done at the same time, isn’t that right?
Answer: Commonsense would dictate, yes, rather than closing the road.
Question: There was nothing in any of that to prevent your client from doing what he was required to do under the planning permission.
Answer: Other than commonsense by all parties and closing a road for up to months and then reopening it a few months later.”
Instead of installing the new sewer, there was a temporary connection made for which permission was given by Cavan County Council. Prior to that, a camera survey was carried out so as to determine the condition of the exiting sewer. Permission for the connection was given by Mr. Vincent Craig of Cavan County Council. At that time, Cavan County Council believed that monies from the Department of the Environment for the building of the water main were “imminent”. If such monies had been forthcoming, the two pieces of work could have been done together.
The evidence of Mr. Treacy, who had many dealings with officials of Cavan County Council in relation to this matter, is clear that the preference of that Council was that the water main and the sewer would be installed together.
The issue was copperfastened by the evidence given by Mr. Traynor, senior executive engineer with Cavan County Council. From his evidence, it is possible to recount the saga of the water main and the sewer envisaged in condition 33.
The Water Main Saga
As I have indicated, for very good reasons, Cavan County Council was not happy that the sewer should be installed other than in conjunction with the water main which it has wished to install for years. Mr. Gaynor produced drawings with a cross-section and an overall view on calculations for the installation of the sewer but there was no reality in it proceeding, absent the approval of the Council. The line of the sewer would be evident from the manholes already on the road. Over a number of years, Cavan County Council believed that funding would be available to it so as to carry out this work. In 2007, some funds were made available by the Department of the Environment but it did not include funds for this particular water main. This meant that the Cavan County Council officials had to go back to the Department to try and obtain funding for it. Cavan County Council was continually making application to the Department of the Environment and submitting to it what it believed were the requisite documents so as to trigger payment of the funds which it believed it had secured for the water main. But every time it submitted the documents, it was asked for additional information from the Department. The position of the County Council was accurately described by Mr. Traynor as “frustrating”.
Mr. Traynor made it clear that it was definitely the preferred option of Cavan County Council that the sewer should not be installed other than in conjunction with the installation of the new water main.
Cavan County Council at all times wished to install this water main and the only thing that prevented it from so doing was the failure on the part of the Department of the Environment to provide it with the necessary funds. Such funds had been promised and the County Council believed had been secured by it and their payment was “imminent”. The funds were never, in fact, made available.
At the conclusion of the cross-examination of Mr. Gaynor, I asked the following questions:
“Question: Mr. Justice Kelly: Would I be correct in this description, that insofar as condition 33 was concerned, at all times, the developer and his engineer gave an indication that they wished to comply with that and the only reason that they didn’t was because of the preferred option on the part of Cavan County Council that they should not do so until such time as the new sewer could be put in at the same time as the new water main?
Answer: Correct.
Question: Mr. Justice Kelly: And that if anything, you were being put under pressure to provide information as to when that might happen?
Answer: Continually.
Question: Mr. Justice Kelly: Continually, and it reached the stage where you were actually embarrassed by being asked those questions because you were operating on the basis that funds were about to be made available and on each occasion that proved to be fruitless, there were no funds?
Answer: I’ll never use the word ‘imminent’ again.
Question: Mr. Justice Kelly: So that’s the position that obtained throughout, so Cavan County Council were putting no pressure on to have this work done because the temporary arrangement was working satisfactorily and the nightmare that would be involved in a double road opening was such as make it prudent to wait until such time as the funds for the water main became available and then do the two together?
Answer: You see, Judge, Cavan County Council were never aware that there was an issue in relation to this. We had never been informed by anybody that this was going to affect anything other than the sewer. So we were of the opinion that the contractor was obliging us by waiting, but we were never aware that it was creating any problems for the contractor or his development.”
Conclusions on Condition 33
I am quite satisfied on the evidence that the only reason why the sewer was not installed in accordance with condition 33 was because of the requirements of Cavan County Council that it should be delayed until such time as it could be installed at the same time as the proposed water main. Not merely were the plaintiffs conscious of their obligation to install the sewer, but it is clear from the County Council evidence that they were continually endeavouring to engage with the County Council to enable that work to be carried out. Although Mr. Murtagh has died and the company is in receivership, the receiver has undertaken to make up any shortfall between the money available on foot of the bond and the cost of carrying out these works. I am satisfied that the works will be done once the County Council agrees that that should happen.
In the circumstances, I am satisfied that the certificate which was issued by Mr. McCormack that there had been substantial compliance with condition 33 “insofar as it is reasonably possible at this stage of development” is correct.
Condition 14
This condition required that the dwelling should not be occupied until the new sanitary facilities were constructed and tested in accordance with the Council’s requirements. The plaintiffs contend that this condition is met once the internal sanitary facilities on the estate have been connected to the outside and constructed and tested in accordance with the requirements of the Council. The defendants say that this should be given a much wider interpretation and that it concerns itself not merely with the internal sanitary facilities, but extends outside the site to the main sewer.
I am satisfied the defendants are incorrect in this assertion. I am of opinion that condition No. 14 deals exclusively with the sanitary facilities in the estate and does not concern itself with matters outside the development project. I am fortified in that view by the evidence given on behalf of Cavan County Council. That is the body that is charged with ensuring compliance with the planning permission.
In the course of his evidence, Mr. Connaughton, a senior engineer with the Council said, concerning condition No. 14 (day 7, question 140):
“And as far as Cavan County Council is concerned, there is no problem with 14.
Answer: Not that we are aware of, no.
141 Question: Is that because, as far as you’re concerned, its connected up to the public sewers and it works?
Answer: Well, I mean, yes, that’s correct. As far as we’re aware, the system, the temporary arrangement is working satisfactorily, and if we were to take action against condition 33, we wouldn’t rely on condition 14.”
Whilst the view of the County Council is not determinative of the issue, I am quite satisfied that its interpretation, as voiced by it’s officials who gave evidence, of what is covered by condition 14 is correct. The more expanded view urged upon me by the defendants is not.
It follows that I am satisfied that Mr. McCormack’s certificate insofar as condition 14 is concerned is also substantially correct.
Unlawful Development
In their defence, the defendants plead that the development as it stands is unlawful because of the failure to comply with condition 33 of the permission.
I do not accept that this is so. Any risk of proceedings under the planning legislation by reference to condition 33 or for that matter condition 14 is without substance. It is a phantom.
Mr. Connaughton dealt with the matter in his evidence immediately after his answer to Question 141 on the seventh day of the trial which I have already reproduced. Here is what he said:-
“Mr. Justice Kelly: And when you speak about taking action about condition 33, I take it there isn’t any question of any action being taken about that?
Answer: Not at this moment, Your Honour, no.
Mr. Justice Kelly: Nor could there be, isn’t that so, because all the developer has done is to comply with your wishes in that regard?
Answer: I’ll defer to your judgment, Your Honour.
Mr. Justice Kelly: Well, no, it is a question I am asking you. You expressed a preference that he should not proceed with the work and he didn’t.
Answer: That’s correct, yes, but…(interjection)
Mr. Justice Kelly: Sorry, do you want to say something else?
Answer: Yes, My Lord. I mean, now or if we didn’t in future wish to take action, the condition is quite clear, but not up to May 2009. We wouldn’t have been in a position to – we wouldn’t have wanted to take action. There was no reason for us to.
Mr. Justice Kelly: And you wouldn’t have any case to make in that regard because he would have a perfect answer, in the sense that he would say ‘you asked me not to proceed with the work and I complied with your wishes’.
Answer: That would be true, Your Honour, yes.
Question 142: Mr. McCullough: And in truth, that remains the position. There was a blip in 2009, but in fact it remains the position to date? You’ve heard others give evidence to that effect?
Answer: Yes, that’s right.”
I am satisfied that the defendant’s contention based upon s. 150 of the Planning and Development Act 2000, as amended, is incorrect.
Lest I am incorrect in the conclusions which I have drawn to date, I now turn to consider the defendants’ state of knowledge concerning the non-installation of the sewer contemplated in condition 33.
The Defendants’ Knowledge
The plaintiffs contend that at all material times, the defendants were aware of the position concerning the non-compliance with condition 33 of the planning permission. If that be so, the plaintiffs argue that the defendants cannot succeed in their counterclaim for rescission. Actual knowledge of the alleged defect is, it is contended, fatal to the defendants’ case.
In Emmett and Farrand, at para. 5.009, the following is to be found:-
“Although there is an express representation by the vendor, the purchaser would not be entitled to take advantage of it if it can be shown that he well aware of the real facts of the case (Ecclesfield v. Londonderry [1876] 4 Ch D 693; Smith v. Chadwick [1884] 9 App Cas 187) or that he stated in terms or showed clearly by his conduct that he did not rely on the representation (Redgrave v. Hurd [1881] 20 Ch D 1).”
I accept that to be an accurate statement of the legal position. It follows that even in cases where there is an express warranty pertaining to title, a purchaser cannot rely on a defect in such title if he was aware of it at all material times. One cannot be misled by a misrepresentation if one knows the true position.
I therefore turn to attempt to ascertain what the state of knowledge of the defendants was concerning the failure to comply with condition 33.
I have already dealt with the general background by which the defendants became involved in this transaction. They were the original purchasers of the lands. One of their number on behalf of the Hammo Partnership applied for planning permission in respect of it. They sold the lands to the plaintiffs and then contracted to buy them back as already described in this judgment.
The defendants were well acquainted with the lands and they also had a number of other ventures into speculative land development. They knew their way around the planning process and had an eye to taxation considerations when involving themselves in land and property development.
With the exception of Mr. Hannon, all of the defendants were resident in the general area of the development. Mr. Hannon in more recent years has been living in Dublin. But each of the defendants had interests in property in the Cavan area and of course, a very definite interest in this development.
There is no dispute but that the vast bulk of the works on this development were completed by November 2007. I have already pointed out the deadline that had to be met in order to enable the defendants to avail themselves of the tax reliefs applicable to it. I have also pointed out how the contractual arrangements changed to the issue of individual contracts for each unit on foot of tax planning advice.
I have also pointed out the extent of the disruption that would be involved by the installation of the sewer in accordance with condition 33. It is, in my view, unlikely that the defendants were unaware of the fact that the sewer had never been installed.
I have reached this conclusion from a consideration of the evidence given by the defendants.
I do not propose to add to an already lengthy judgment by setting out extensive extracts from the defendants’ respective evidence but will mention just a few.
Mr. Olwill gave evidence on seventh day of the trial. He made it clear that he knew the sewer had to be installed and that that would be a major piece of work involving road closure. I found his responses to questions in cross examination on this aspect of the matter (from Question 282 onwards) unconvincing.
Mr. McGuigan who was cross examined on the following day was no more convincing on the topic.
Mr. Malone also gave evidence on the eighth day. He was a frequent traveller on the road where the sewer was to be installed (Question 318). Having accepted that if somebody was installing a major sewer installation, it would be obvious (Question 323 and following). He indicated that he did not know that the sewer was supposed to be installed (Question 326). The answer to those questions and his testimony following them failed to convince me that he was unaware of the necessity to have the sewer installed. Once aware of it, its non-installation would have been clear to him.
Mr. Hannon in the course of his evidence confirmed the very considerable experience which he and his fellow defendants had in respect of property development and the planning process associated with it. As he was living in Dublin throughout the relevant period, he had less familiarity with the area on a day-to-day basis. In addition, he gave evidence that he was not particularly involved in the planning process. His direct knowledge was, therefore, probably less than any of the other defendants on this topic but he was, of course, an important member of the partnership.
In general, I did not find the evidence of the defendants on the topic of their alleged lack of knowledge of the sewer not being built convincing. They are canny men and I do not believe that they were completely candid with the court. As a matter of probability I find that they were aware at all relevant times that the sewer had never been completed.
I believe they were also aware of why that was so. I believe that they have been searching for a legal excuse to avoid their obligations under this contract for some time. Finally, they happened upon one which they thought they could rely upon successfully. That was the failure to comply with condition 33.
That they were casting around in search of a legal excuse to avoid their obligations is exemplified by the unimpressive situation which developed midway through 2008. There, the defendants claimed in correspondence from their solicitor that they had entered into an alternative agreement with Mr. Murtagh. It was said that Mr. Murtagh was willing to discard the contracts in suit and to replace them by contracts for the purchase of nineteen houses. That proposition was challenged head on in correspondence by Mr. Murtagh’s solicitor. The matter was then not pursued further. There was, in my view, no basis for the defendants’ assertion. It was a stratagem to try and avoid contractual obligations. When it failed they sought to rely on the non-compliance with condition 33.
The evidence satisfies me that these defendants knew at all times that the sewer had not been completed and their late-in-the-day reliance upon that fact as a means of escaping their obligations is without merit.
Specific Performance
The relief claimed is equitable relief. I am satisfied that the plaintiffs are not in breach of any obligation owed to the defendants. But that is not to say that there are not obligations still to be fulfilled. Insofar as any of them involve the payment of monies, I am satisfied to accept the undertaking of the receiver to discharge such obligations when required. I am also satisfied that he is in funds to do so.
The receiver also accepts that there is an obligation on him to comply with condition 33. He is willing to do so and has the necessary funds available to him. There is little prospect of the condition being met until such time as Cavan County Council gives permission and that will come only in circumstances where it is put in funds by the Department of the Environment to install the water main.
I am of opinion that the plaintiffs are not disentitled to an order for specific performance in these circumstances.
In Spry on Equitable Remedies (8th edition, 2010), the partial enforcement of contracts is dealt with at p. 111. The author says:-
“Specific performance is not ordered against the defendant if by reason of the non-specific enforceability of an obligation of the plaintiff the order would operate unjustly. However a number of different positions arise. In the first place, the plaintiff may overcome the material objection by performing the obligation in question before the time of the making of the order of the court, or the defendant may in some circumstances be sufficiently protected by a conditional order or by a special term inserted in the order. Secondly, on the proper construction of the contract, obligations of the defendant may be independent of the performance of the relevant non-specifically enforceable term, and if so specific performance of those obligations may be obtained, provided that special considerations such as hardship do not render this course unjust. So the non-specifically enforceable term may be an inessential term rather than an essential term, that is to say, the intention of the parties may be such that the obligation of the defendant to perform the remainder of the agreement is not conditional or dependent on the absence of a breach of the term in question.”
In my view, no injustice is done to the defendants if specific performance is ordered provided that the order expressly recites the undertaking of the receiver to ensure that condition No. 33 is complied with when called upon to do so by Cavan County Council and to fund such compliance insofar as it is not met by the proceeds of the bond.
Result
The plaintiffs are entitled to succeed and specific performance will be decreed. I will discuss the precise terms of that order with counsel.
Donegan v Kenny
[2020] IECA 90
Jurisdiction: Ireland
Court: Court of Appeal (Ireland)
Judge: Mr. Justice Robert HaughtonGrounds of appeal
15
The appellant appealed the entirety of the High Court decision on Grounds of Appeal
(a) – (g) as follows: –
“(a) The learned trial judge erred in determining that the respondents were entitled to recover the deficiency in the resale price paid for the property the subject matter of these proceedings.
(b) The learned trial judge erred in failing to correctly interpret and apply the provisions of the Law Society General Condition of Sale, Condition 41(a) which limited the right to recover the deficiency in the resale price to a one year period.
(c) The learned trial judge erred in concluding that there had been no failure to mitigate losses on the part of the respondents.
(d) The learned trial judge erred in conducting the interest rate the respondents were entitled to recover under the contract of 10% was not penal in the circumstances.
(e) The learned trial judge erred in failing to apply the relevant principles on breach of contract, In particular, the learned trial judge erred in awarding an sum of damages (including interest) which put the respondents in a better position then they would have been if the contract had been performed.
(f) The learned trial judge erred in awarding a total sum of €172.871.27 in respect of interest in circumstances where the respondents had put forward evidence of the costs incurred as a result of the appellant failing to close the sale which amounted to €14.415.22.
(g) The learned trial judge erred in failing to apply the appropriate metric to assess damages in the circumstances.”
16
The respondents’ Grounds of Opposition traverse the Grounds of Appeal and plead that the trial judge made his decisions based on uncontroverted evidence given on behalf of the respondents. It was also noted that the appellant failed to challenge the issue of calculation of the figures in respect of the damages award prior to the trial judge making the final order on 7 November 2018 as the appellant did not attend court on 31 October 2018 (or, as the Order notes, on the adjourned date of 7 November 2018).
17
I have also considered the written legal submissions of the appellant and the replying submissions from the respondents. The appellant attended this court in person but made limited oral submissions. The respondents were represented by counsel. I propose to address the Grounds of Appeal in turn.
Grounds (a) and (b) – Shortfall claim/Resale after one year period
18
These can be addressed together as they largely cover the same point relating to the alleged failure to resell the Property within the one-year period, and the consequences of such a failure having regard to the terms of Condition 41(a).
19
The first issue that arises is whether, as a matter of fact, the resale took place within the one-year period – a matter on which the trial judge made no specific finding. This period commences “after the Closing Date (or within one year computed from the expiration of any period by which the closing may have been extended pursuant to Condition 40)”. Condition 40 allows the parties, where a Completion Notice has been served, to extend the term of the Notice for one or more specified periods of time whereupon the notice is deemed to expire on the last day of such extended period or periods, and time is of the essence in relation to such extended period(s).
20
The undisputed evidence was that the Completion Notice was served on 20 June 2016 and allowed 28 days for completion, which expired on 17 July 2016. It was extended by agreement on successive occasions, and the last such extension was for a two-week period commencing on 31 August 2016 and ending on 14 September 2016.
21
Accordingly, the one-year period under Condition 41(a) commenced on 15 September 2016 and ended on 14 September 2017.
22
The respondents’ agreement to resell the Property to Trinitymount was entered into on 30 August 2017 and that sale closed on 13 September 2017. Although the trial judge made no finding, in my view this undisputed evidence compels a finding that the property was in fact resold within one year after the extended Closing Date. It follows that the second limb of General Condition 41(a) came into play and the respondents were entitled to have the deficiency arising on the resale, and all costs and expenses attending same to “be made good to the Vendor by the Purchaser, who shall be allowed credit against same for the deposit so forfeited”.
23
Even if this were not the case I would have agreed with the trial judge’s analysis at paras. 26 – 28 of his judgment. The second and third sentences of General Condition 41(a) deal expressly with the position that is to prevail in the event that the property is resold within the one-year period, and do so “without prejudice to such damages to which the Vendor shall otherwise be entitled,” which can only be a reference to the damages that a vendor is entitled to at common law for breach of contract in the event that a purchaser fails to complete in accordance with their contractual obligations. Absent this express clause, which governs the matter in the event of a sale within the one-year period, there would be an entitlement to damages designed to put the vendors back into the position in which they would have been but for the relevant wrongdoing, and those damages would generally include the deficiency arising on resale, but subject to other general principles, including the requirement that a claimant mitigate their losses. It is also notable that the last sentence in General Condition 41(a) – which entitles the vendor on any resale to retain any “increase in price,” applies “whenever [the resale is] effected”. Thus the Condition makes it expressly clear that the vendor is entitled to forfeit the deposit, and to retain any increase in price on resale. General Condition 41(a), when read as a whole, is clearly drafted to benefit the vendor in the event that the sale falls through due to the purchaser’s failure to comply with a contract.
Ground (c) – Failure to mitigate loss
24
Undoubtedly the respondents had a duty to mitigate their losses following on the appellant’s failure to complete the Contract. In Contract Law (McDermott P.A and McDermott J., 2nd Edition. (2017) Bloomsbury) the authors introduce the topic of mitigation in the following terms: –
“ [23.250] Mitigation of damages is the principle that a plaintiff may not recover losses that could have been avoided by taking reasonable steps after the breach. In other words, the plaintiff cannot recover avoidable losses. The rule is based on notions of fairness and the idea that damages for breach of contract are not generally intended to be punitive. It is also socially desirable to minimise the costs of a civil wrong. The duty to mitigate can also be said to allocate risks fairly, since the plaintiff is usually in the best position to deal with the consequences of a breach of contract. The plaintiff should therefore be prevented from recovering losses that could reasonably have been avoided. These factors have recently been described by Finlay Geoghegan J in the Court of Appeal as ‘the public policy considerations core to the concept of mitigation’.
What is reasonable is a question of fact. The burden of proof is on the defendant to show that the plaintiff could reasonably have avoided a loss or was unreasonable in his conduct. A pragmatic approach is often evident in the case law and the measures that the plaintiff should have taken to mitigate will not be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty.”
25
In approaching this issue the trial judge at paragraph 33 of his judgment referred to the decision of this court in Highland v Dundalk Racing [2017] IECA 172. There Dundalk Racing brought appeals against three orders of the High Court in favour of bookmakers concerning the operation of the “Pitched Rules” at the newly developed Dundalk Racecourse with the first all-weather racetrack in Ireland. The dispute concerned Dundalk Racing seeking a capital contribution of €8.000 for the allocation of bookmaker’s pitches at the racecourse. The bookmaker plaintiffs claimed, successfully, that the Pitch Rules were contractually binding on Dundalk Racing and governed the allocation of pitches, and that Dundalk Racing was in breach of contract, as a result of which the bookmakers were entitled to damages. These were assessed in the High Court and the subject matter of appeals and cross-appeals in the Court of Appeal. The main argument made by Dundalk Racing was that the bookmakers had failed to mitigate their losses. While the facts of that case were different to the instant case, the joint judgment of Finlay Geoghegan and Irvine JJ undertakes an analysis of the duty to mitigate loss which in my view is of general application to claims for damages for breach of contract.
26
The court adopted and applied the principles established in Waterford Harbour Commissioners v British Rail [1979] 1 ILRM 296 and Banco de Portugal v Waterlow & Sons Limited [1932] AC 452 ( per Lord McMillan at p. 506). which authorities along with the court’s judgment in Hyland are footnoted as the basis for the passage from Contract Law quoted above. The court also quoted with approval from Rosbeg Partners Limited v. L.K. Shields (a Firm) [2016] IECA 161, where MacMenamin J. sitting as a member of this court stated: –
“51. Turning then to the question of mitigation, it is true to say that the quantum of recoverable damages may be reduced, if a plaintiff fails to take reasonable steps to mitigate its loss. the duty is ‘to take all reasonable steps’, having regard to the circumstances of the case (see the judgment of Hamilton C.J.. and Denham J. in Kelly v. Hennessy [1995] 3 I.R. 253).
52. Here, again, the trial judge’s assessment of the reasonableness of efforts to mitigate is highly relevant. The second principle in Hay v. O’Grady is engaged. Where a plaintiff has provided an explanation for a failure to take certain steps to mitigate loss, and the trial judge has accepted that explanation, an appellate court should be slow to overturn that assessment, unless there was no credible evidence to support it. (See judgments of Hamilton C.J. and Denham J. in Kelly v. Hennessy). In that authority, the Supreme Court declined to engage in any substantive assessment of the reasonableness of mitigation. The trial judge’s findings were based on an acceptance of the plaintiff’s evidence, which was sufficient to dispose of that ground of the appeal. It has not been suggested that Kelly was erroneously decided, or can be distinguished on the facts.
53. It is well established, that reasonableness of a plaintiff’s effort to mitigate is a question of fact, not a question of law ( Payuz v. Saunders [1919] 2 KB 581; The Soholt [1983] 1 Lloyds Rep 605) and McCord v. Electricity Supply Board [1980] ILRM p. 153. In general, courts, both here and elsewhere, rarely find it appropriate to interfere with conclusions of a trial judge either based on evidence, or the lack of satisfactory evidence. The onus lies on a defendant (here the appellant) to establish, on the basis of satisfactory evidence, that there was a failure to mitigate.”
27
Of particular relevance to the present appeal is firstly that what was reasonable was a question of fact for the trial judge, and secondly that the burden of proof to show that the respondents could have avoided (or reduced) the loss of €150,000 on a resale rested with the appellant. Clearly a trial judge is entitled to take into account all of the evidence that might be relevant, and a party seeking to minimise then losses is entitled to take a pragmatic approach.
28
Finlay Geoghegan and Irvine JJ. In Hyland, at paragraph 78 also observed: –
“While a plaintiff is bound to mitigate his or her loss ‘the standard by which they are to be judged is not an unduly harsh one’ because, as was stated by Jackson J. in Shepherd Holmes v Encia Remediation Limited [2007] EWHC 1710 (TCC), it is the defendant, as wrongdoer who has put the claimant into that difficult position.”
This passage was referenced by the trial judge in the instant case at paragraph 33 of his judgment, and establishes the standard by which the respondents’ conduct was to be judged.
29
In my view the trial judge correctly identified the obligation on the respondents to mitigate their loss, and he made findings of fact relevant to the issue at paragraphs. 30-33. This court should be slow to overturn those findings of fact. The appellant in his written submissions is critical of the valuation relied on by the purchaser to negotiate down the price and argues that the respondents “failed/refused to re-market the property” and that the shortfall of €150,000 “could have been avoided”.
30
Of particular relevance is that the onus was on the appellant but, as the trial judge notes at paragraph 31, he did not call any expert valuation evidence to suggest that, at the time the resale was entered into on 31 August 2017. €1.3M was an undervalue. The appellant did. as he was entitled to, rely on certain valuations that were referred to in evidence called by the respondents, although not all of these were relied on by them. His starting point was the agreed sale price in the Contract (€1.45M). and that was a price that initially Trinitymount appeared willing to pay. The first of the relevant valuations was a report obtained by Trinitymount from Cushman Wakefield dated 10 April 2017, valuing the property at €1.3M. in respect of which Mr. Schuster, solicitor, in his Witness Statement on behalf of the respondents, stated the following: –
“36. We wrote to Mr. Tom O’Regan’s office [acting for the appellant in the original purchase] on 28th April 2017, advising that the Valuation Report of Cushman Wakefield was seriously flawed in that the valuer failed to take into account that the lease for the second floor, to Clonmel Healthcare, had a rent review that is upward only in nature and not as it is set out in the report as being upwards or downwards. As a result, the rental income value was reduced by €30.000 which impacted on the valuation of the overall building.
37. Following from this, our clients had a Valuation Report carried out by CBRE who valued the premises at the price it was originally on the market for €1.450.000.”
31
The appellant relied secondly on the CBRE valuation for €1.45M. Thirdly the appellant was able to point to paragraph 14 of the Witness Statement of Mr. Riney. the valuer who gave evidence on behalf of the respondents. Mr. Riney at paragraphs 12 and 13 of his Witness Statement makes similar comments to those of Mr. Schuster, and then at paragraph 14 states: –
“In my opinion, a more accurate valuation of the premises would have been in the region of €1.5M”.
32
However, both Mr. Schuster and Mr. Riney go on to explain why the resale was ultimately concluded with Trinitymount for €1.3M. Mr. Schuster explains: –
“38. However, after a considerable amount of time spent trying to sell the property and facilitating the numerous proposed sub-purchasers/purchasers. the Plaintiffs decided that they had no alternative but to mitigate their losses, and agreed to the sale of the property for the reduced purchase price of €1.300.000.00.
39. We wrote to Amoss solicitors on the 28 th July 2017 advising that our client was prepared to sell the property for €1.300.000.00 to their clients, however may only do so with the consent of then lending institution. We had received confirmation that Amoss solicitors were in funds of €535.000.00 and a facility in the sum of €780.000.00 was obtained.
40. We mote to AIB Bank Plc on the 28 th July 2017 advising that the original sale was no longer proceeding and that an offer from an independent third party was received. We advised that the proposed purchaser was a Mr Timothy McSweeney, through an SPV called Trinitymount Limited for the sum of €1.300.000.00. and requested their consent to sell the property at the new purchase price.
41. . …
42. I say that AIB Bank Plc mote to us on the 24 th August 2017 and confirmed that the bank would release its charge over the property provided that they received €1,401,146.81 by 28 th August 2017. I say that we were advised that interest as and from 28 th August 2017 amounted to €119.65 per day.”
33
This court did not have the benefit of transcripts of the evidence in the High Court, but were advised by counsel, without demur by the appellant, that he did not undertake any cross-examination as to the time spent and efforts made by or on behalf of the respondents and their professional advisers to sell the property for a figure at or nearer to €1.45M. The trial judge notes at paragraph 32 of his judgment that the respondents –
“… provided evidence from then auctioneer that he sought buyers [for] the property, after the sale to Mr. Kenny did not complete, at the price of €1.45M but was unsuccessful and this led to the sale of the property to Trinitymount Limited for €1.3M as they were not willing to pay €1.45M.”
He also notes at paragraph 4 of his judgment that the resale on 31 August 2017 occurred “following protracted negotiations”. It is also clear from reading Mr. Schuster’s Witness Statement that, after the appellant had failed to complete the sale, he and/or his solicitor Mr. Tom O’Regan made efforts to find a substitute purchaser, and indeed on 2 December 2016 Mr. Tom O’Regan wrote to the respondents’ solicitors advising him of “a new person who wished to ‘step into the purchase’ of the Property,” and that initially they introduced an offer from Profunder dated 25 November 2016 (this potential purchaser only had a facility for €1M). and later a Mr. Tim McSweeney. with whom there were pre-contract discussions over a period of some months on the basis that there would be a sub-sale rather than a resale. It was that interested party that appeared initially willing to purchase for €1.45M, but later, following receipt of the Cushman Wakefield Report of 10 April 2017, reduced the offer to €1.3M. That ultimately resulted in the second sale – but not by way of a sub-sale as the new purchaser required a new contract – and also on the advice of Mr. McSweeney the ultimate purchaser was a SPY namely Trinitymount Limited.
34
The trial judge was also entitled to take into account “[t]hat the plaintiffs were under pressure from AIB to sell the property, which they had purchased for €2.76 million, with funding from AIB. and they were obliged to make up the shortfall to AIB between the €2.76 million purchase price and the sale price, whether €1.3M or €1.45M. when the property was sold.” (paragraph 30).
35
In my view it was open to the trial judge, in applying a standard that was not too exacting or “unduly harsh,” to find on the facts that the respondents had taken reasonable steps in all the circumstances to mitigate the loss on resale of the property bearing in mind the difficult position in which they found themselves. Although re-marketing to the public at large and/or a sale by public auction, would have been options, the law did not require that the respondents follow either of those paths – rather their duty was to take reasonable steps in all the circumstances. It is clear that the trial judge did not consider that the appellant had discharged the onus that was on him to show failure to mitigate loss, characterising his claims as “mere assertion”. This was a question of fact for the trial judge to decide. It may well be that it would not have taken much evidence for him to have taken a more critical view of the resale process and price achieved, but the appellant’s failure to adduce any valuation evidence or cross-examination on the issue arguably left the trial judge with no scope to reach a different conclusion. In my view the trial judge correctly applied the law, and this ground of appeal must fail.
Grounds of Appeal (d)(e) (f) and (g) – Award of 10% interest on balance of purchase monies
36
It is convenient to address these issues together. It will be recalled that the Contract stipulated an interest rate of 10% per annum which applied for the purposes of General Condition 25(a). It was not disputed (or appealed) that the trial judge was correct in determining that this rate was not, as a matter of contract, “ directly applicable to the situation that transpired” because Condition 25(a) only applied to late completion of the Contract by the appellant (paragraphs 39-40 of the judgment). However the appellant argued that the 10% rate should not have been applied indirectly or otherwise as the “appropriate metric” to assess damages arising between the Agreed Closing Date and the date on which the resale to Trinitymount closed, particularly where the respondents put forward evidence of the costs incurred as a result of the appellants failure to close which amounted to €14.415.22; and he argued that it was penal and put the respondents in a better position than they would have been had the Contract been completed.
37
The respondents submitted that the trial judge was correct in his reasoning in determining that the respondents should be put in the same position as if the Contract was completed by the appellant. This reasoning is set out below and examined in more detail later. It was further submitted that the principles applicable to assessing whether rates of interest amount to penalty clauses and are thus unenforceable have no application to contracts for the sale of land, and that the trial judge was collect in his reliance on the obiter statement of Barron J. in O’Donnell v. Truck and Machinery Sales Ltd [1998] 4 IR. 191 which indicated that a different approach was to be taken in relation to contracts for the sale of land compared to other contracts. Counsel also relied on a recent review of the law on ‘penalty clauses’ undertaken by McKechnie J in Launceston Property Finance Limited v. Burke [2017] IESC 62 in the context of the recent UK Supreme Court decision in Cavendish Square Holding BV v. Makdesse [2015] UKSC 67. where that court gave primacy to freedom to contract and favoured an approach of whether a contractual decision “is penal, not whether it is a pre-estimate of loss”. McKechnie J at paragraph 43 expressed the view obiter that he was “not immediately convinced that any change to the test [genuine pre-estimate of loss] is necessary, nor that the route taken by the UK Supreme Court in necessarily a superior one. I stress that the live debate must be left over …”. Thus the respondents appeared to submit that insofar as the 10% rate was that chosen by the parties it was a genuine attempt to pre-estimate loss.
38
Turning to the reasoning of the trial judge for adopting the 10% rate, this commences at paragraph 42:
“42. First, it is the purpose of this Court to assess what damages or compensation is due to the plaintiffs. In this regard, it is relevant to note that in the High Court case of Mac A Bhaird v Commissioner of Public Works [2016] IEHC 630 at para. 53, Baker J concluded that the interest rate in the Law Society Conditions for a sale of property, amounted to compensation: –
‘53. The claim for interest is a claim for compensation for late closing to be assessed on an agreed formula, and although the general conditions make no reference to ‘compensation’ the intention of the interest provision is clear. It is to award compensation to the vendor on account of the failure by the purchaser to handover the monies.’
43. Secondly, the reason this Court concludes that it is appropriate to use the 10% rate of interest as the metric for assessing damages is because if the Contract had been performed by Mr. Kenny. albeit late, which he failed to do after the service of the Completion Notice, the plaintiffs would have been entitled to the 10% interest from him.
44. Thirdly, the plaintiffs are entitled to be put in the position they would be in if the Contract had been performed. If it was Mr. Kenny, rather than Trinitymount Limited, that completed the sale on the Actual Closing Date, then there can be no question, but that Mr. Kenny would have been contractually liable to pay the plaintiff’s interest of 10% for the period of delay. To put the plaintiffs in the position that they would have been in. therefore, it is appropriate for this Court to assess the damages due to the plaintiffs on the basis of such an interest rate which was actually agreed between the parties to cover a similar eventuality (if Mr. Kenny himself had completed the sale late) but not an identical eventuality (a delayed sale of the property to Trinitymount Limited). 45. Furthermore, and to put the matter another way, 10% was the agreed estimate by both parties (after obtaining legal advice) of the amount of compensation, (to use Baker J’s description of the interest provision in Law Society’s General Conditions of Sale) which would be incurred by the plaintiffs by a late completion of the Contract. It was agreed by parties as the rate which should be paid in the event that Mr. Kenny’s default caused the delayed completion of the sale ( albeit that under the terms of Condition 25(a) it is based on the sale proceeding late with Mr. Kenny and not some third party). Nonetheless, this Court believes that it should be reluctant to interfere in the parties’ own assessment of the amount of damages which would be incurred by a delayed sale and therefore it should be reluctant to replace that rate with its own interest rate.
46. In this regard. it is also to be noted that in Mac A Bhaird v Commissioner of Public Works [2016] IEHC 630 at para.20, Baker J. comments on Condition 25 in the following manner:
‘general condition 25 is designed and intended by the parties to be one mechanism by which the parties have agreed as a form of remedy in the event of default.’
47. On this basis the Court concludes that it should adopt the ‘ form of remedy’ negotiated by the parties to assess damages and this Court would therefore conclude that 10% is the appropriate metric to use to calculate the damages to be awarded to the plaintiffs rather than interposing its own interest rate. It does so in the particular circumstances of this case, including the fact that the Actual Closing Date took place within a reasonable period of time of the Agreed Closing Date. This is because it seems to this Court that the delayed completion interest rate of 10% is in all likelihood set at a relatively high rate so as to provide a disincentive to purchasers to delay completing purchases and accordingly it is likely that the parties negotiating that rate expected it to apply for a relatively short time. Although reluctant to interpose a different rate from the one agreed by parties ( albeit for a similar, but not identical, eventuality) there may be situations where the Court might have to do so. For example, if a period of say five years’ interest was being claimed, then bearing in mind that the overriding duty of this Court is to put the vendor in the position they would have been in. if the Contract had not been breached, this Court might conclude in those circumstances that five years interest at 10% would put the vendor in a better position than if the Contract had been performed and so conclude that in such a situation 10% was not the appropriate metric to use to assess damages inclined by the vendor in the delayed sale.”
The trial judge accordingly awarded interest at 10% on €1.36M from the Agreed Closing Date to the date of completion of the resale, being 454 days – a sum of €171,151.40.
Discussion
39
The starting point in assessing damages for breach of contract is to see what has been agreed between the parties, and this applies equally to contracts for the sale of land, just as it would apply to other contracts.
40
The General Conditions (2009) provide expressly for two situations of breach of contract by the purchaser. The first arises when the purchaser fails to complete on time, and a completion notice is served making time of the essence, (and. as in the instant case, the parties may agree further time extension for closing time still being of the essence), but ultimately the purchaser does complete. Clause 25(a) covers this situation and expressly entitles the vendor to interest on the balance of the purchase monies at the stipulated interest rate – here 10% was stipulated – from the Closing date to the date of actual completion by the purchaser, In addition during this period the vendor is entitled to take the rents and profits, less the outgoings, from the property. Condition 25(a), unlike General Condition 41. does not make any reference to “such damages to which the Vendor shall otherwise be entitled,” and therefore in my view does not leave scope for a vendor to claim other losses e.g. the cost of putting in place bridging finance and any additional interest that that might attract.
41
It may be noted that generally the period to which such interest will apply will be relatively short, perhaps spanning days, or a few weeks if the sale is completed within the 28 days allowed by the Completion Notice. The stipulated interest rate is usually high compared to normal borrowing rates, and is an incentive for closing promptly.
42
It is important to note that this was the situation with which Baker J was concerned in Mac A Bhaird. Her comments on interest being “a claim for compensation for late closing” relate only to interest arising under Condition 25(a) which she regarded as the “mechanism by which the parties have agreed as a form of remedy in the event of default”. In my view the trial judge erred in applying those comments to the instant case to formulate a ‘form of remedy’ in circumstances where General Condition 41(a) applies.
43
This leads to the second and very different situation where the purchaser fails to complete at all. even after time is made of the essence by a Completion Notice. This is covered by General Condition 41(a). This entitles the vendor in the first place to forfeit the deposit. This is a significant entitlement, with deposits usually ranging from 5% to 20%. and frequently being agreed at 10%. The amount of a deposit will in many, if not most, sales exceed the costs of sale, leaving the vendor to the good unless there has been a significant reduction in the value of property. It is perfectly possible that the vendor will make a profit from the purchaser’s failure to complete, and the law permits this. There is no obligation thereafter for the vendor to resell – the vendor may choose to hold onto the deposit and the property. If the vendor does sell within one year then the further provisions in Condition 41(a) entitle recovery of shortfall (after giving credit for the retained deposit). As found by the trial judge, with whom I agree on this point, if the vendor does not sell within the year the vendor can still seek to recover the shortfall as damages to which they are entitled at common law. Further if the vendor resells at an increased price, whether during the one year period or later, Condition 41(a) expressly allows the vendor to retain that increase. Thus Condition 41(a) is the mechanism that the parties have agreed addresses the failure to complete that occurred in the instant case.
44
Nowhere in Condition 41(a) is there any reference to interest, still less to the stipulated rate under the contract. This must be deliberate. Successive versions of the General Conditions have been developed over tune by expert conveyancing committees of the Law Society, and adopted by the Law Society, and were it intended that the balance of purchase monies should attract interest at the stipulated contract rate or any stated rate it can safely be assumed that an express provision would have been built into Condition 41(a). It would also have been open to the parties to vary the contractual position by special condition. Accordingly the trial judge erred in principle in ‘forming a remedy’ based on the stipulated rate applicable under Condition 25(a) when this was never agreed between the parties and Condition 41(a) contains its own mechanism for compensating the vendor where a purchaser fails to complete.
45
In then written submissions Counsel for the respondents rely on what Clarke J (as he then was) said on the law of damages in Kelleher v O’Connor [2010] IEHC 313. in which he found that a solicitor who acted in the purchase of a restaurant was negligent in failing to carry out appropriate pre-contract enquiries with the health authority in relation to compliance with hygiene regulations. Paragraph 31 of the respondents submissions try to justify the adoption of the 10% rate by the trial judge in the instant case by quoting Clarke J:
“[9.1] It is important to start with the fundamental proposition that, in almost all cases. the principal function of an 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 that 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.”
46
In my view this does not advance the respondents’ case. Clarke J was concerned with a case in negligence, and his comments on the law of damages in contract should be read in that context. Where he refers to the ‘starting point’ in contract cases this does not mean that express contract terms that directly bear on the consequences of a breach of contract are to be ignored. Condition 41(a) is one such term. Moreover if the position of the respondents is considered on the basis that the appellant had completed the Contract in accordance with its terms, then it is clear that they would have received the balance of the purchase monies which would immediately have been paid over to AIB to discharge in whole or in part the bank debt charged on the property. No interest, whether at the rate of 10% per annum or otherwise, would have been payable to the respondent if the appellant had completed the Contract in accordance with its terms.
47
It follows that the trial judge’s reasoning that 10% interest should apply because this is what the appellant would have paid if he had completed late does not stand up to scrutiny. It also cannot be said that adopting this form of remedy puts the respondents “in the position in which they would be in if the Contract had been performed,” because this is to ignore the mechanism of Condition 41(a) that applies where the contract has not been performed. It provides for the recovery of damages for any loss, not of interest. For the same reason the trial judge erred in suggesting that applying the 10% rate reflects “the parties’ own assessment of the amount of damages which would be incurred by a delayed sale”.
48
The trial judge states in paragraph 45 that for the reasons he gave, the court was “reluctant to replace that rate [10%] with its own interest rate.” He presumably had in mind the rate which the courts can apply pursuant to s.22 of the Courts Act, 1981, which currently stands at 2%. This indeed was the rate that he applied to the shortfall of €76,000, and in my view correctly. Section 22 provides:
“22.(1) Where in any proceedings a court orders the payment by any person of a sum of money (which expression includes in this section damages), the judge concerned may, if he thinks fit. also order the payment by the person of interest at the rate per annum standing specified for the time being in section 26 of the Debtors (Ireland) Act. 1840, on the whole or any part of the sum in respect of the whole or any part of the period between the date when the cause of action accrued and the date of the judgment.”
49
The subsection only empowers a court to add non-contractual interest when the court orders a payment. It was therefore open to the trial judge to add. as he did. interest at 2% to the €76,000 shortfall which he ordered be paid by the appellant to the respondents, covering the period from the date or closing of the resale on 13 September 2017 to the date of his judgment. However the subsection could not be utilised to order interest on the €1.3M purchase monies which Trinitymount paid to the respondents on the resale, as these were not a payment ordered by the court but rather a payment made by Trinitymount pursuant to its contractual obligation.
Assessing the damages
50
How then should the damages have been assessed? The starting point was General Condition 41(a). As the trial judge observed, when deciding that the resale did not have to take place within the one year period. Condition 41(a) does not exclude the vendor pursuing damages by reference to the normal rules for the calculation of damages for breach of contract because of the bracketed words “(without prejudice to such damages to which the Vendor shall otherwise be entitled)”. I cannot identify any reason why that should not apply to General Condition 41(a) in its entirety. Accordingly if the resale is at a price which is so reduced that the vendor is still at a loss even when credit is given for the forfeited deposit – as occurred here – then in my view the vendor in entitled to claim sufficient damages to put him/her “back into the position in which they would have been had the relevant wrongdoing not occurred” – per Clarke J (as he then was) in Kelleher v O’Connor. Accordingly the correct approach was to ascertain the respondents’ actual loss arising from the appellant’s failure to complete, viewed as of the date of completion of the resale. When this is ascertained and payment ordered it will put the respondents back into the position in which they would have been had the appellant not defaulted.
51
This was not addressed at all in evidence or argument in the High Court, or even before this court. The case seems to have proceeded, from written submissions to judgment to appeal, on an assumption that the damages should be addressed by an award of interest. Yet prima facie the actual loss suffered by the delay between the Agreed Closing Date of 17 June 2016 and the completion of the resale on 13 September 2017 (454 days) is clear from consideration of Special Condition 8 of the Contract. That contains the respondents’ solicitor’s undertaking to discharge the AIB charges over the property from the proceeds of sale. An identical undertaking is given in Special Condition 8 of the contract for sale to Trinitymount. Thus prima facie the actual loss was the additional interest in fact charged by AIB on the sums owed to the bank over that 454 day period.
52
In paragraph 42 of his Witness Statement Mr. Schuster states –
“I say that AIB Bank Plc wrote to us on the 24 th August 2017 and confirmed that the bank would release its charge over the property provided that they received €1.401.146.81 by the 28 th August 2017. I say that we were advised that interest as and from 28 th August 2017 amounted to €119.65 per day.”
In paragraph 24 of his Witness Statement Mr. Donegan states that AIB agreed to release their charge over the property “upon receipt of the sum of €1.401,146.81 which was the total stun due and owing by the Plaintiffs to the bank … on the 30 th September 2017, and the security was subsequently released on the 27 th November, 2017”.
53
This evidence falls short of identifying the principal due as of 17 June 2016 and the interest actually added during the 454 days ending on 13 September 2017: there may have been rate changes or payments against principal or interest (e.g. from rental income) over that period: interest may have been compounded: and there may have been a moratorium on interest. As a result the figure of €119.65 per day may not have been a constant. However assuming for illustrative purposes that it was a constant, then the actual interest accrued over the period would have been 454 x €119.65 which comes to €54,321.10. If there was a moratorium or concessionary rate agreed between the bank and the respondents then the appellant is entitled to the benefit of that because it represents the actual loss and the respondents had a duty to minimise then losses.
54
It will be noted that this illustrative figure is substantially less than sum of €171.151.40 awarded for interest in the High Court. On this basis I would accept the appellant’s main argument that the adoption of the 10% interest rate by the trial judge put the respondents “in a better position than they would have been if the contract had been performed,” and was. in principle, the wrong approach to assessing damages. As the appellant must succeed on this point it is not necessary to consider the question whether the rate applied by the trial judge should be struck down as penal which was ground (d) in the Notice of Appeal.
55
If the figure for actual loss of interest is awarded as damages, and added to the €76.000 shortfall, and taking into account the €74.000 forfeited deposit, the position is reached where the respondents are. at least theoretically, restored to the position in which they would have been if the Contract had been completed without any default or delay. This does not take into account that during the 454 days the respondents remained in receipt of the rents and profits, but would have had outgoings: this may have resulted in loss but is more likely to have resulted in profit. It also excludes interest arising after 13 September 2017. In principle the respondents should have been able to pay the monies received from Trinitymount to AIB to discharge the mortgage within a day or two of closing on 13 September 2017 (a Sunday), and in light of their duty to minimise losses this should have been done to stop the clock running on the interest.
Conclusion
56
On this basis and for the reasons given I would allow the appeal in part and. by reference to the Order of the High Court I would order as follows:
1) I would vacate the Declaration made “(d) that the rate of 10% interest is applicable to the Contract for Sale for the period between the date that the Contract for Sale should have closed up until the Contract for Sale actually closed with the third party” and would substitute therefor the following Declaration:
“(d) that ill addition to the sums to which the Plaintiffs are entitled by virtue of Condition 41(a) the Plaintiffs are entitled to recover as actual loss the interest that accrued in respect of the relevant borrowing from AIB for the period of 454 days from 17 June 2016 when the Contract for Sale should have closed to 13 September 2017 when the Contract for Sale with the third party actually closed as damages for breach of contract”.
2) In all other respects I would affirm the Declarations made in the High Court.
3) I would vacate the Order that the Plaintiffs do recover as part of the damages – “(2) Interest in the amount of €171,151.40. being interest at the rate of 10% per annum on the amount of the agreed sales price not received by the Plaintiffs on the agreed closing date (the sum of €1.376 million) for the period prior to the completion of the sale (i.e. being the period from 17 th June 2016 – 13 th September 2017, a total of 454 days)”
and I would substitute therefor –
“(2) The actual interest that accrued in respect of the relevant borrowing by the Plaintiffs from AIB for the period of 454 days from 17 June 2016 when the Contract for Sale should have closed to 13 September 2017 when the Contract for Sale with the third party actually closed, in such sum as maybe agreed or in default of agreement as be ascertained by the Court.”
4) Consequently I would delete the words “in the sum of €248,871.27” from that part of the order that reads “IT IS HEREBY ORDERED that the Plaintiffs do recover from the Second Named Defendant damages in the sum of €248,871.27 made up as follows:”,
5) I would affirm the orders at (1) and (3) for recovery by the Plaintiffs of the sums €76.000 and €1,719.87 respectively.
6) I would postpone making any orders in respect of costs in the High Court or this court pending hearing further argument.
57
It would be a singular waste of tune and resources, both for the parties and the courts, if this court were at this point to remit the matter to the High Court simply to ascertain the actual interest that accrued on the AIB debt over the relevant 454 days. In the present appeal this should be resorted to only if there is a factual dispute that cannot be resolved by agreement in this court.
58
I would therefore direct that within 28 days the respondents should swear and deliver an affidavit setting out and vouching details of the relevant account(s) for the 454 day period of 17 June 2016 to 13 September 2017 which resulted in AIB’s letter of 24 August 2017 to Adams Law with the figures identified in paragraph 42 of Mr. Schuster’s Witness Statement, or alternatively file and deliver an affidavit from AIB with the same information. This affidavit should be furnished to the appellant with a net figure which he should be asked to agree in substitution for the interest figure of €171,151.40 awarded in the High Court at paragraph (2) of the order. The matter should then be relisted before this court not later than two months from the date of delivery of this judgment for final orders and to address any questions of costs.
As this judgment is being delivered electronically, Murray and Collins JJ. have indicated their agreement with it.
Aranbel Ltd v Darcy and Others
[2010] 3 IR 769n[2010] IEHC 272
Mr. Justice Clarke
2. Specific Performance
2
2 2.1 As the term implies, an order for specific performance is an order which requires the relevant defendant to complete the contract which is the subject of the proceedings in question. Specific performance is an equitable remedy. It has often been said that equity will not act in vain. A court should, therefore, be reluctant to make an equitable order where there is no reasonable prospect of the order concerned being complied with. I should add one qualification to that statement. There obviously may be cases where persons may simply decline to obey an order of the court. The fact that a party might be most unlikely to obey a court order could not, in my view, be a reason for the court not making the order in the first place. However, where it is clear on the evidence that a party would not, in fact, be able to comply with a court order, then a court should be most reluctant to make such an order.
3
3 2.2 It needs to be emphasised that there is a whole spectrum of circumstances with which a court might be faced where it is said that difficulty might be encountered by a party in completing the sale of a contract for land. In many of the decided cases there was a legal impossibly in completion. A vendor might not have title. There would, in an ordinary case, be little point in making an order for specific performance against a vendor who did not have title although, in an appropriate case, ( see Mount Kennett Investment Ltd v. O ‘Mara [2007] IEHC 420) a court may make an order for specific performance where it is satisfied that the vendor concerned has it within its power to cure any problem with its title.
4
4 2.3 Indeed Mount Kennett is an example of, perhaps, an intermediate case. On the facts of that case, Smyth J. was satisfied that the vendors concerned would be able to comply with their contractual obligations provided that they were prepared to offer a sufficient sum to buy in a freehold interest in the property in question sufficient to satisfy the Charity Commissioners as to the adequacy of the relevant consideration. In other words, the vendors could cure their title provided they were prepared to pay a sufficient sum of money to procure the relevant consent. In those circumstances specific performance was ordered. There will, therefore, be cases where, to a greater or lesser extent, there is a realistic possibility that a party may be able to complete the sale in question within a realistic timeframe. In those circumstances, a court may well consider that specific performance is appropriate on the understanding that if, despite best endeavours, it proves impossible to complete for whatever reason, then the court may be constrained to discharge the order of specific performance and direct that damages in lieu be assessed. At the other end of the spectrum there will be cases where, while there may be some technical difficulty in a defendant completing, the court is satisfied that any such difficulty can readily be overcome by the defendant concerned. In such circumstances, and in the absence of any good reason for not ordering specific performance, it would normally follow that the court would direct specific performance of the contract concerned.
5
5 2.4 It seems to me, however, that the only point in the court ordering specific performance is if there is some realistic possibility that the sale may complete. If there is no such realistic possibility, then the making of an order for specific performance will be in vain. It will inevitably be followed by a failure to comply and the matter will come back before the court. Provided that the court is satisfied that the failure to comply was not due to steps taken (or not taken) by the defendant concerned after the order for specific performance was made, it is difficult to see how the court could, in those circumstances, take any action other than to discharge the order of specific performance and award damages in lieu. Where a party is, in substance, in contempt of an order for specific performance the court has, of course, a wider range of options open to it, up to and including imprisonment. However, it hardly needs to be said that a court would not impose any such penal sanctions unless the relevant defendant was culpable in relation to a failure to comply with the order of the court.
6
6 2.5 It follows that, if it is obvious that there is no realistic possibility of the sale closing, a court should not, in the absence of highly unusual circumstances, order specific performance for in so doing nothing would be achieved. The ordering of specific performance will simply lead to a further hearing at which the order will be discharged and damages in lieu directed. Such would be a pointless exercise.
7
7 2.6 In setting out that principle, I should emphasise that in a case where there is some realistic prospect of the sale closing, the court can have regard to that fact and can, in an appropriate case, order specific performance within whatever timeframe might appear appropriate on the implicit understanding that, in the event that closure should prove impossible through no fault of the defendant concerned, it will follow that the order will be discharged. However, in such circumstances there would be some point in the exercise. It is possible that whatever problems may exist may be overcome. The relevant defendant will be obliged, on pain of being found in contempt, to try to overcome them. If they are overcome, then specific performance will be effective.
8
8 2.7 Against that general background, it is necessary to consider what the situation should be where the impossibility is said to flow from the impecuniosity of a purchaser. It is important that I should emphasise at this stage that the point currently under discussion concerns impossibility and not hardship. There may be circumstances (to which I will refer) where a court may decline to order specific performance because it would cause hardship. However, hardship is not the same thing as impossibility.
9
9 2.8 To take a simple example it is possible to envisage a person who entered into a contract to purchase an investment property for (say) €400,000 and where the current value of the property is only €200,000. If the same person owns their own home, which had been purchased sufficiently long ago that a significant equity (say €300,000) in favour of the owner remains in it, then it could not be said that the completion of the sale for the purchase of the investment property was impossible. It could be done. The person could sell their own home and move into the investment property, if necessary (if their equity in their own home was insufficient) by relying on some limited mortgage facility secured on the investment property to fill any shortfall. It might well be that imposing such a course of action on the individual concerned might amount to a hardship and the court might have to consider whether, in all the circumstances, in exercise of the court’s equitable jurisdiction, it was appropriate to impose such a course of action on the person concerned. However, the point to be made is that such a course of action would not be impossible. Provided an appropriate period of time was given to allow the original home to be sold, the sale could be closed and, therefore, completion would not be impossible.
10
10 2.9 However, the case which is made here is that completion is impossible although, as a fallback position, reliance is placed on the hardship jurisprudence. In order for a purchaser to be able to say that completion is impossible, it is necessary for such a purchaser to demonstrate that the purchaser has no realisable assets or borrowing capacity that could be brought to bear to pay the contracted purchase price.
11
11 2.10 I am satisfied that, as a matter of principle, where a purchaser demonstrates that fact, i.e. demonstrates that the purchaser concerned does not have the assets or borrowing capacity sufficient to allow them to purchase the property concerned at the contracted price, then a court should not make an order for specific performance for such an order would be in vain. Where the application of that test is in doubt (for example where it may be clear that the purchaser has some assets and/or some borrowing capacity or both but it may be open to doubt as to whether the combined effect of those assets and borrowing capacity is sufficient, then a different situation may arise where the court will need to consider whether, in all the circumstances, it would be appropriate to make an order for specific performance and thus impose an obligation on the relevant purchaser to use best endeavours to come up with the money, whether by the realisation of available assets or the raising of borrowing or both. While the established jurisprudence seems to be concerned with impossibility arising from title difficulty and the like, I am satisfied that impossibility arising from lack of funds on the part of a purchaser provides an equal reason for refusing specific performance. A decree of specific performance is no less in vain if it is made against a purchaser with no access to the necessary funds as if it is made against a vendor with no title. Equally just as a title problem that can (or may) be solved is no barrier, a lack of funds that can be remedied will also not be a barrier.
12
12 2.11 It should also be noted that each of the defendants argued that the Court should exercise its discretion to refuse specific performance on the grounds of alleged delay on the part of Aranbel in issuing proceedings. In the first two cases, where Stephen Darcy and Linda Crampton, and Richard Darcy and Mary Darcy are respectively the defendants, the defendants’ solicitors wrote to Aranbel’s solicitors on 27 th September, 2007, stating as follows:-
“We regret that our clients above named are unable to continue with the purchase of the above matter. They realise that they will forfeit their deposit and may be sued for breach of contract however they are prepared to put their case to the court due to dreadful financial difficulties.”
Those defendants point to the fact that proceedings were not issued by Aranbel until 28 th October, 2008. In the case where Seamus and Audrey McGivern are the defendants, Aranbel served a completion notice on the defendants’ solicitors on 10 th October, 2007 and proceedings were issued by Aranbel on 28 th October, 2008. Correspondence between the parties continued through the later months of 2007 and into early 2008.
13
13 2.12 Each of the defendants argued that the fact that the property market and the economy generally was falling so dramatically at that time meant that the value of the relevant apartment, the prospect of the respective defendants obtaining finance to comply with any order for specific performance and the prospect of selling the apartments diminished as Aranbel delayed. Aranbel asserted that at no time did it engage in any act or make any representation which could have lead the defendants to reasonably believe that Aranbel considered the deal to be at an end.
14
14 2.13 As a general principle a plaintiff who delays unreasonably in bringing proceedings may fail to obtain specific performance where, by reason of the delay, it would be inequitable to grant the relief. Delay alone may be insufficient and it will usually be necessary to show circumstances which, when considered in conjunction with the delay, would render unjust the granting of specific performance. Aranbel asserted that such special circumstances are not present in these proceedings. It is also, of course, the case that damages may remain open as a remedy to a plaintiff even where delay has been held to preclude specific performance. See for example LarkDevelopments Ltd v Dublin Corporation (Unreported, High Court, Murphy J, 10 th February, 1993).
15
15 2.14 Against that general background, it is necessary to turn to the facts of the case. However, before so doing it is necessary to say something briefly about the procedural history of these proceedings insofar as same is still material to the issues which I have to decide.
Kelly v Park Hall School Ltd
[1979] IR 340, 113 ILTR 9,
Henchy J. (nem diss) delivered the 7th December 1978
In December 1977 the defendant school had 5 1/2 acres of land at Monkstown, Co. Dublin, for sale. The school board had applied for planning permission which, if granted, would have made the lands more valuable. But they could not wait for a decision on their planning application. Their financial situation was such that their bankers were pressing them for an immediate reduction of their overdraft. So they decided to sell without the planning permission.
Mr. Whittaker of Lisney & Co., a Dublin firm of estate agents, was acting for the vendors. He was in negotiation with the plaintiff. The plaintiff had earlier bought adjoining lands from the vendors and was anxious to buy these lands. He made Mr. Whittaker an offer of £175,000 for them. Having taken instructions from his principals, Mr. Whittaker entered into further negotiations with the plaintiff, as a result of which he made an oral agreement for the sale of the lands to the plaintiff. In a letter dated the 19 December 1977, signed by Mr. Whittaker and sent by him to a financial adviser to the school board, he set out the agreement arrived at as follows:
“Hall School – Lands at Rere
“Further to our telephone conversation this morning I confirm that we have agreed terms, subject to contract, for the sale of these lands to Mr. Paddy Kelly of Berkeley Homes Ltd., who were the purchasers of the front lands. The principal terms to be included in the contract for sale are as follows:-
“Proposed purchaser: Hickey Beauchamp”
Kirwan & O’Reilly (In Trust).
“Proposed price: £175,000”
“A non-returnable deposit of £30,000 to be paid on exchange of contracts, the balance to be paid not later than 6 months thereafter with interest at 12% from the contract date until the closing date.
“I am sending a copy of this letter to Mr. Haugh of A. & L. Goodbody [solicitors for the vendors] and perhaps you could kindly j confirm instructions to him on behalf of the [School] Committee”
There seems to be little doubt but that the vendors approved the agreement recorded in that letter. At the very least, nothing has emerged to suggest that they repudiated it.
The judge has found as a fact that the oral agreement covered all necessary terms and that no further negotiations were required. It is impossible to gainsay that finding. The plaintiff was familiar with the title, having a short time before bought adjoining lands on the same title from the vendors. If the vendors” solicitors had been able to forward a contract forthwith, the sale would have gone through without a hitch.
Christmas holidays, however, intervened. That and some difficulty in getting a map prepared for annexation to the contract delayed the sending out of the contract. Eventually, the vendor” solicitors sent it to the purchaser’s solicitors on the 13th January 1978 with an accompanying letter which said:
“On the instructions of our clients, this offer remains open for acceptance by your clients for a period of seven days only from the date of this letter and we are instructed that, if the contract is not back with us within the said period of time, duly executed, the offer is deemed to be withdrawn”.
As might have been observed by those who are superstitious, or by those who are painfully aware that there are no postal deliveries in Dublin on a Saturday, the 13th January 1978 fell on a Friday. That letter, therefore, could not have reached the plaintiff’s solicitors before Monday the 16th. However, because of the vagaries of the postal service, it did not reach them until Tuesday the 17th. They then forwarded it to the plaintiff. As he happened to be working in Cork, it did not reach him until after the period of the seven-day ultimatum had expired. Although he sent word to the vendors on the 25th January that he was willing to sign the contract, the vendors said that by failing to sign and return it within seven days of the 13th January, he had forfeited his right to buy the lands. This repudiation has led to the present proceedings, in which the plaintiff seeks specific performance of the oral agreement to sell the lands.
The case hangs on whether the letter of the 19th December, which I have quoted, constitutes a sufficient memorandum for the purpose of the Statute of Frauds. In my opinion it does. It contains not only all the essential terms of the contract but also a recognition that a contract had been made. It says, “we have agreed terms, subject to contract”. Since the judge, having heard oral evidence, held that the oral agreement recorded in the letter was a completed agreement, in the sense that nothing further was left to be negotiated, the words “we have agreed terms subject to contract” must be taken to mean that a contract had been made, subject to its being formalised in writing. It therefore constitutes a sufficient memorandum.
Counsel for the vendors have argued that a date for the signing of the contract had yet to be agreed on, and that the words “subject to contrac” kept this term of the contract open to be negotiated. I cannot agree. It is true that speed in executing the contract was crucial for the vendors, for on the signing of the contract they were to get £30,000 and were to be entitled to interest on the balance of the £175,000 at 12 per cent from the signing of the contract. It is also true that speed was discussed. So much so that the plaintiff expected to be presented with the draft contract within 48 hours. While speed was of great importance to the vendors, it was not a term of the contract which remained to be negotiated. To get the benefit of the requirement of no delay in the signing of the contract, all the vendors had to do was to present the draft contract without delay to the purchaser for his signature. Had they done so, and had the purchaser delayed in signing, they could have served a notice making time of the essence after a short specified period.
But the delay in signing the contract was not the purchaser’s fault. The vendors allowed from the 19th December to the 13th January to pass before even sending out a draft contract. And when they sent it out, they coupled with it a requirement that it be signed and returned within seven days, which in the circumstances was less than the period within which this requirement could be even communicated to the purchaser. A court exercising an equitable jurisdiction could not allow a vendor, by such an unreasonable and unilateral act, to escape his obligations.
I would hold that it was an implied term of the contract and as such not bound to be mentioned in the memorandum – that the written contract would be signed without delay. The vendors, by their delay in sending out the written contract, waived that term, at least to the extent that they could have insisted only on reasonable compliance with the requirement of promptitude. What they have sought to insist on is compliance by the purchaser with an arbitrarily imposed and unreasonably short period for signing and returning the formal contract. In fact the period given was so short that it had expired before it could possibly have been complied with by the purchaser. It would be inequitable to allow the vendors by that device to defeat an otherwise valid and enforceable agreement.
It is for the foregoing reasons, which are not quite those given by the trial judge, that I concur in the decision of this Court (already announced) that the vendors” appeal against the order granting specific performance of the contract should be dismissed.
Duffy v Ridley Properties Ltd
[2008] IESC 23
Judge: Mr Justice Finnegan
Case History: Confirms [2005] IEHC 315On behalf of the Vendor it is also submitted that notwithstanding the existence of a concluded and still subsisting Agreement for Sale the court had no jurisdiction to award damages in lieu of specific performance. Firstly, it is submitted, that specific performance could not be granted because of lack of mutuality. A Court of Equity will not grant a decree for specific performance of an agreement unless at the time the agreement was entered into it might have been enforced by either of the parties against the other. By reason of the uncertainty as found by the learned trial judge neither party was entitled to specific performance of the Agreement for Sale they contended for and accordingly neither would be entitled to damages in lieu. As I understand it this is merely to restate the argument that there was no concluded agreement in the first place. In any event mutuality is a matter to be considered in relation to the exercise of the court’s discretion as opposed to a bar on the award of specific performance: Price v Strange [1978] Ch. 337.Again it is submitted that Lord Cairn’s Act section 2 conferred upon the court jurisdiction to award damages in lieu of specific performance only where it had jurisdiction to grant specific performance. Reliance is placed on Ferguson v Wilson [1866] 2 Ch. App. 77 where Lord Cairn’s held that the Act:
“did not in any way give the court a power where it had no jurisdiction to decree specific performance for want of the subject matter whereon its decree would operate to give damages by reason of some antecedent breach of contract. ”
Again in Lavery v Purcell [1866] 39 Ch. D. 508:
“The jurisdiction to give damages in substitution or in addition to specific performance has not been extended to cases where specific performance could not possibly have been directed. ”
I have no difficulty in accepting that this is undoubtedly the law.
For the Purchaser it is submitted that the learned trial judge having found that there was a subsisting contract exercised her discretion in refusing to decree specific performance and instead under Lord Cairn’s Act to award damagers in lieu. She relied on a passage in Farrell, Irish Law of Specific Performance at page 7: 1.11:
“If a contract is `completely uncertain’ it is equally void at law and in equity. There is a degree of uncertainty which will lose the right to specific performance without also destroying remedies at law. As Lord Redesdale pointed out in 1805 ( Harnett v Yielding [1805] 2 Schoales & Lefroy 549):
‘… if it is certain to a degree, but doubtful as to the extent, equity would, I think, act infinitely more wisely in leaving the party to the old remedy by action for damages, than to run the hazard of doing injustice, in doing what is said to be more complete justice, by a decree of specific performance.’
The burden is on the plaintiff to satisfy a court of an agreement, the terms of which `are sufficiently certain to justify a decree of specific performance ( Williams v Kenneally) [1912] 46 I.L. T R. 292 at 294.) He may expect to fail if he does not satisfy the court of the certainty of the material terms even though it may believe that some complete and binding agreement was reached. ”
In this case the learned trial judge had found a completed and subsisting agreement and her refusal to order specific performance was merely an exercise of her discretion. The power to award damages in any event existed at common law and was not dependant on Lord Cairn’s Act.
I am satisfied that it was no part of the Vendor’s case that the contract was uncertain. That case was not pleaded nor was it canvassed in evidence. No application was made to amend the pleadings. In those circumstances I am satisfied that it was within the learned trial judge’s discretion to refuse to allow that issue to be raised. Quite apart from this insofar as the learned trial judge held that there was a subsisting contract I am satisfied that she was correct in so doing. It is the experience of conveyancers’ that there are very many contracts for the sale of registered land where the lands to be sold are identified by reference to a Land Registry Map. For the entire of the folio this would generally give rise to no difficulty notwithstanding that Land Registry Maps are not conclusive as to boundaries. Where part of a folio is being sold almost invariably a photocopy folio of the Land Registry Map is marked and even if there are boundaries ascertainable on the ground by way of hedges and ditches there remains the difficulty identified in the course of the evidence in this case that scaling from such a map onto the ground cannot be conducted with complete accuracy: the same is true of an original Ordnance Survey Sheet. Such sales are in general completed without difficulty and where difficulty is encountered it can be resolved. The reason for this is the obligation which the law places on the parties to a contract for the sale of land as identified by Costello J. in Northern Bank Limited & Ors v Duffy [ 1981 ] I.L.R.M. 309. He cited with approval a passage from Bayley-Worthington and Cohen’s Contract[ 1909] 1 Ch. 648 in the context of a default by a party to a contract as a result of which it was not completed but it is clear from the passage which I now cite that it is of wider application. The passage cited by Costello J. with approval is the following:
“Default must, I think, involve either not doing what you ought or doing what you ought not, having regard to your relations with the other parties concerned in the transaction; in other words it involved the breach of some duty you owe to another or others. It refers to personal conduct and is not the same thing as breach of contract. If A contracts that B shall do something by a certain day and B does not do it by the day
named A commits a breach of contract; but if the question arises whether delay be due to A’s default, A’s personal conduct has to be considered, and the question will be whether he has committed some breach of his duty towards B. So in contracts for the sale of real estate providing for completion at a certain date and containing provisions as what is to happen if completion be delayed beyond that date by or without the default, or wilful default, of either party, the conduct of that party has to be considered; and if he has been guilty of no breach of duty he will not, I think be in default within the meaning of the contract. Of course, the duties of each party towards the other must be determined by all the circumstances, including the nature of the contract and its provisions; and in determining these duties the complexities of the English law of real property must be borne in mind. The duties of, at any rate, the Vendor under contract for sale of real estate cannot be gauged by the standards applicable to other contracts, for example the sale of goods. ”
Costello J. remarked:
“Just as a Purchaser owes a duty to his Vendor in the course of the implementation of a contract for sale so does a Vendor owe a duty to the Purchaser. The nature and extent of that duty will, of course, be different as the sale progresses.
A consequence of this is that there is a duty on a Vendor to deal with the reasonable requisitions and objections of a Purchaser. Failure to do so would, as in this case, prevent a Vendor from relying on a Completion Notice. In the present case it was common case that the map attached to the Agreement for Sale and the map proffered by the Vendor to be attached to the transfer did not admit of the western boundary being accurately delineated on the ground. There was a difference in area between the two maps. There was a difference in the configuration of the western boundary of the Lands. I am satisfied that notwithstanding the provisions of General Condition 14 the Purchaser was entitled to an accurate map to be attached to the transfer from which boundaries could be accurately ascertained most likely by accurate dimensions marked thereon or alternatively to have delineated on the ground those lands which the Purchaser
proposed to transfer in performance of the Agreement for Sale: see Lindsay & Forder’s Contract [1895] 72 L.T. 832 where a plan attached to Particulars of Sale had endorsed thereon a note “this plan is simply prepared as a guide to intending Purchasers, and its accuracy in regard to area, measurement, abuttals, or otherwise is in no way guaranteed” and it was held that the map formed part of the contract and the Purchaser was entitled to a conveyance of the whole of the lands coloured thereon. The precise boundary in this case was a matter of considerable importance to the Vendor who required access to other lands and to ask the Purchaser to complete in the circumstances which prevailed at the date of service of the notice to complete was to invite the Purchaser to run the risk of future disputes and litigation. The Purchaser’s insistence in having the lands marked on the ground was reasonable and appropriate in the absence of a plan from which the Lands could be scaled. In the event that a dispute then existed the Special Conditions provide an appropriate and well tested remedy in General Condition 33 for any discrepancy that might result between the lands as delineated on the map attached to the Agreement for Sale, the second map and the lands as marked out on the ground. If the discrepancy was of trifling materiality no compensation shall be paid. No compensation is payable in relation to any error in a plan furnished for identification only as here. However under General Condition 33 the Vendor cannot be required to accept property which differs substantially from the property agreed to be sold whether in quantity, quality, tenure or otherwise. If the Purchaser will be prejudiced materially by reason of any such difference the Agreement for Sale provides that the applicability of General Condition 33 and the amount of any compensation shall be determined by arbitration. Neither party sought to invoke General Condition 33. Even if the contract contained no provision to deal with discrepancies the court will resolve any difficulty and may award specific performance with an abatement and where appropriate will direct an inquiry as to the amount of the abatement: Barnes v Wood 8 Eq. 424. It is well settled that where an issue as to compensation arises the Vendor may not rely upon a notice to complete: Keating & Ors v Bank of Ireland [1983] I.L.R.M. 295.
Upon the basis that the court had no jurisdiction to grant specific performance there being no concluded agreement the Vendor argues that the court likewise had no jurisdiction to grant damages in lieu of specific performance. If the premise were correct in this case, that there was no
concluded agreement, the court would have no jurisdiction to award damages in lieu of specific performance. However the issue as defined in the pleadings and as presented to the court was whether there being a concluded agreement that agreement had been determined by a notice to complete. Where there is a concluded agreement but the court in its discretion refuses to grant specific performance the court has jurisdiction to award damages.
Having regard to the ruling of the learned trial judge, which in my opinion was correct, it is not open to the Vendor on this appeal to argue that there was no completed agreement. The award of a decree of specific performance is discretionary. The award of damages whether at common law for breach of contract or under Lord Cairn’s Act in lieu of a decree for specific performance arises where there is a breach of a concluded subsisting agreement. It is a matter for the plaintiff to seek whichever remedy he wishes. The circumstances in which the court will exercise its discretion and refuse to award specific performance are myriad. Both of the cases referred to in Farrellin the passage cited above require some scrutiny. In Williams v KenneallyBarton J. held that there was a binding agreement for a lease of the exclusive right of fishing on the River Lee where it passed through the lands of the defendant. There was no memorandum and the plaintiff relied on part performance. The plaintiff alleged that the agreement was for a term of five years for the season 1909 and the following four seasons. The plaintiff entered into possession in January 1909 and again in January 1910. The learned trial judge found that there was uncertainty as to the date from which the Agreement was to run, whether 1909 or 1910 and as to liability for rates. He purported to follow Harnett v Yieldingand on the basis of that uncertainty dismissed the action without costs. The decision appears at variance with the well established law that an agreement for a lease is enforceable only if the parties, the property, the length of term, the rent and the date of commencement are fixed. I do not regard it as correct in law.
The brief head note in Harnett v Yieldingreads as follows:
“Equity will not decree specific execution upon a contract, the terms of which are uncertain as to its extent.
Nor will equity decree specific execution against a party not lawfully competent to execute the contract.
Nor, where it is doubtful whether the party meant to contract to the extent that he is sought to be charged. ”
The facts were as follows. The defendant demised lands to the plaintiff’s father for a term of twenty one years. The lease contained a covenant by the defendant “for and during the term of his life to renew the said lease for the said D.H., his executor’s administrators and assigns, by giving unto him or them a lease for twenty one years of said demised premises when applied to by him or them so to do.” The lease contained a break clause which the lessee exercised. The defendant then agreed with a third party to grant to him a lease of the lands and attended at the lands to accept the surrender of the original lessee and to give possession to the third party. The third party did not appear and the defendant entered into an agreement for a fresh lease to the original lessee and an endorsement was made on the original lease as follows:
“I promise and agree to perfect afresh lease to Mr Daniel Harnett, at any time he shall demand the same at £5 a year less than the within mentioned rent. ”
The endorsement was duly signed and the lessee continued in possession for a further seventeen years paying the reduced rent but without having a new lease executed. He assigned the lease to his son, the plaintiff, and when the term granted was close to expiration the plaintiff applied for renewal which the defendant refused. On behalf of the defendant it was argued:
1. That the endorsement did not import an agreement for any more than one term of twenty one years.
2. That he was tenant for life with a power to demise for twenty one years only in possession at the best improved rent.
The plaintiff indicated that he would accept a lease for twenty one years commencing on the expiration of the original lease. The court construed the endorsement and expressed it clear and effectual to grant a term of twenty one years but that it did not import into the endorsement the provisions of the original lease providing for renewal. Having construed the endorsement the court refused to grant specific performance of the agreement as that agreement was beyond the powers of the defendant as a tenant for life and this being known to the plaintiff. The conclusion of the judgment reads as follows:
“…nothing can be more mischievous than to permit a person who knows that another has only a limited power, to enter into a contract with that other person, which if executed, would be a f and on the power; and when that is objected to, to say 7 will take the best you can give me’. A Court of Equity ought to say to persons coming before it in
such a way `make the best of your case with a jury’.
On the whole, I think, (though I have had considerable doubts) that this Bill ought to be dismissed. If the plaintiff shall think fit to waive any action at law against the defendant, I will dismiss it without costs; if otherwise, with costs. This is frequently being done in cases of this kind to put an end to litigation. ”
The judgment must be seen in its historical context. Equity did not award damages although in certain circumstances it would award compensation. A party seeking damages for breach of a contract for the sale of lands had his remedy at common law or as Redesdale L.C. said “make the best of your case with a jury”. The ruling on costs equally recognise that an action lay at common law for damages for breach of a contract for the sale of lands where specific performance was refused. This action predated Lord Cairn’s Act (Chancery Amendment Act 1858) and the Judicature Acts which empowered courts of chancery to award damages. Specifically Harnett v Yielding is a case involving a concluded subsisting Agreement where in exercise of its discretion the court refused to order specific performance of the same, such performance being in excess of the powers of the defendant as a tenant for life but also on the grounds that from the circumstances it was doubtful whether the defendant meant to contract to the extent that the court found him liable. It recognised the entitlement of the plaintiff to damages at common law where the court in its discretion refused specific performance: after Lord Cairn’s Act and the Judicature Act it is not necessary for two separate actions to be brought. It does not support the vendor’s contention that the court has no power to award damages where it refuses to order specific performance.
2. That the learned trial judge was in error in allowing the plaintiff to adduce evidence of loss of bargain after the issues had been determined.
In outlining proceedings at the trial I have dealt with the misunderstanding between counsel for the Purchaser and the learned trial judge as to whether the Purchaser was maintaining a claim for damages in lieu of specific performance should the learned trial judge in her discretion refuse to grant specific performance. No evidence was led in relation to such damages. The claim for damages in lieu was not dealt with in the Purchaser’s written submissions in
the High Court. The Vendor submits that once the judgment of the court was given it was not open to the Purchaser to pursue a claim for damages: reliance was placed on the judgment of the Supreme Court in McMullan v Clancy [2002] I.E.S.C. 45 and In the Matter of Greendale Developments Limited (in liquidation) [2000] 2 I.R. 514.
It is customary in the indorsement of claim and statement of claim in an action for specific performance, as here, to claim damages in addition to or in lieu of specific performance but also to claim as a relief if necessary an inquiry as to title and an inquiry as to damages. It is not necessary to do so. Special damages should be claimed and particularised in the Statement of Claim. Prior to Lord Cairn’s Act the Court of Chancery in refusing to grant specific performance of a concluded agreement did so without prejudice to the right of the plaintiff to bring an action at common law for damages. After Lord Cairn’s Act the Court of Chancery and after the Judicature Act the High Court in refusing specific performance will proceed to consider the question of damages even where such question is not raised by the pleadings. See Daniell’s Chancery Practice 10th edition page 1134 and cases there cited. In recent times at least, the common practice for the court in refusing to award specific performance is to direct an inquiry as to damages: see In the Matter of Greendale Developments Limited (in liquidation).In this case the learned trial judge found that the Purchaser had not in opening the case waived its claim to damages in lieu of specific performance. She was entitled to so find and I would not interfere with that finding. Accordingly on refusing to award a decree of specific performance the learned trial judge was entitled under Rules of the Superior Courts, Order 36 Rule 38 and well established practice to adjourn the case for further consideration before her. Both McMullan v Clancy
and
In the Matter of Greendale Developments Limited (in liquidation) have no application here the former concerning amendments to an erroneous order and the latter the setting aside by the Supreme Court of an earlier order. The learned trial judge was clearly entitled to proceed as she did.
3. The learned trial judge assessed damages for loss of bargain as of the date of the judgment. Thus damages were calculated on the basis of the difference between the value of the lands on that date and the contract price.
The general common law rule as to damages for breach of contract is that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with regard to damages, as if the contract had been performed. The general rule accordingly was that damages should be assessed as at the date of breach. Thus in a contract for the sale of generic goods should the seller fail to deliver, the buyer can at once spend his money in purchasing like goods from another and can recover any increased price as damages. In Wroth v Tyler [ 1970] 1 Ch. 30 the court considered the position in relation to contracts for the sale of land. In that case the contract price was £6,000 and the value of the house at the date of breach was £7,500. By the date of hearing the value of the house was £11,500. Megarry J. at p.57 in reference to these circumstances said:
“How, then, it may be asked, would the award today of £l, 500 damages place them in the same situation as if the contract had been performed? The result that would have been produced by paying £1,500 damages at the date of the breach can today be produced only by paying £5,500 damages, with in each case the return of the deposit. On facts such as these, the general rule of assessing damages at that the date of the breach seems to defeat the general principle rather than carry it out. ”
He considered the terms of Lord Cairn’s Act section 2 which provides as follows:
“In all cases in which the Court of Chancery has jurisdiction to entertain an application for an injunction against a breach of any covenant, contract or agreement, or against the commission or continuance of any wrongful act, or for the specific performance of any covenant, contract, or agreement, it shall be lawful for the same court if it shall think fit, to award damages to the party injured either in addition to or in substitution for such injunction or specific performance, and such damage may be assessed in such manner as the court shall direct. ”
In the course of his judgment at p.58 Megarry J. said:
“On the wording of the section the power `to award damages to the party injured,… in substitution for such… specific performance’ at least envisages that the damages awarded will in fact constitute a true substitute for specific performance. Furthermore, the section is speaking of the time when the court is making its decision to award damages in substitution for specific performance, so that it is at that moment that the damages must be a substitute. The fact that a different amount of damages would have been a substitute if the order had been made at the time of the breach must surely be irrelevant …. A choice between the inadequate and the equivalent it seems to me to be no real choice at all. ”
He concluded:
“In my judgment, therefore, if under Lord Cairn’s Act damages are awarded in substitution for specific performance, the court has jurisdiction to award such damages as would put the plaintiffs into as good a position as if the contract had been performed, even if to do so means awarding damages assessed by reference to a period subsequent to the date of the breach. ”
He proceeded to award the plaintiff damages as of the date of hearing.
Wroth v Tyler was followed in this jurisdiction in O’Connor v McCarthy & Ors [1982] I.L.R.M. 201 where however it was accepted by counsel that damages should be assessed at the date of judgment.
It is submitted on behalf of the Vendor that it is open to the court in awarding damages in lieu of specific performance to fix a date other than the date of breach or the date of judgment and I accept that this was held by Megarry J. at page 60 and that that represents the law in this jurisdiction also.
The Vendor relies on Suleman v Savari & Ors [1989] 2
“http://All.E.R.460.In”
All. E.R. 460. In that case damages were assessed as at the date
of the judgment. While not material it is to be noted that that was a claim against the solicitor for a vendor who signed a contract without the authority of the vendor and the measure of damages in these circumstances would be the same as in an action against a vendor. In the course of his judgment Andrew Parke Q.C. summarised his conclusions on the cases as follows:
(a) A purchaser who loses his purchase is entitled to damages at common law as well as to damages in lieu of specific performance under Lord Cairn’s Act.
(b) The usual measure of damages at common law has in the past been the difference between the contract price and the price at completion plus interest from completion until judgment.
(c) This is not an absolute rule of law, and damages may be assessed by reference to the value at a different date if it would be more just to do so.
(d) Where, as often in recent years, there have been dramatic changes in property values, it may be more just to assess damages at a different date.
(e) This is particularly so where the innocent party reasonably continues to try to have the contract completed: in such a case it is logical and just to assess damages as at the date when (otherwise than by his default) the contract is lost.
On behalf of the Vendor it is argued that in the present case the Vendor comes within paragraph (e) above. At the hearing on damages it was submitted on behalf of the Vendor that by reason of the delay of the plaintiff in prosecuting the proceedings that the damages for loss of bargain should be assessed by reference to the market value of the property at a date earlier than the date of judgment, the 24th July 2004 being suggested, that being the date when the proceedings ought to have been heard and determined. It was further submitted that the court should take into account the attempts by the vendor to complete the sale at a reduced price in the autumn of 2003 and the fact that the Vendor sold the property to the second defendant for £485,000, that is less than the purchase price and the Agreement for Sale with the plaintiff, and as a result has not been enriched. Neither of these submissions found favour with the learned trial judge. No submission was made to the learned trial judge on the basis of Suleman v Savari & Ors.Again in this court the Vendor argued that the present case can be distinguished from Wroth v Tyler.In that case damages were measured on the basis that the plaintiff should be put in a position to purchase a replacement or
alternative property of an equivalent nature: in the present case the evidence was that the lands represented a once-off or unique site and therefore the approach in Wroth v Tyler was not appropriate.
The purchaser relies on Wroth v Tyler as authority for the damages being assessed as of the date of the judgment.
I am satisfied that damages were correctly assessed as of the date of the judgment and that Wroth v Tyler represents the law in this jurisdiction. I am not satisfied that either of the earlier dates suggested by the Vendor are appropriate. The chronology of the proceedings is as follows:
Barry v Buckley
[1981] IR 306,
MR. JUSTICE COSTELIODelivered 9th day July 1981
A disappointed purchaser can, by instituting proceedings for specificperformance, and by registering a lis pendens against the land which healleges he has purchased, effectively prevent a resale of the lands fora considerable time, extending perhaps over several years. Obviouslysubstantial injustice could thereby result, both to the owner of theland and to a subsequent innocent purchaser. The Courts should be ableto provide a speedy means, in suitable cases, for determining the issuesbetween the vendor and the first purchaser. It seems to me that such ameans is to hand. A vendor who is sued by a purchaser for specificperformance may bring a motion (which is heard on affidavit) to stay orstrike out the proceedings and for an order that the lis pendens bevacated. In clear cases the Court can so order, its jurisdiction arisingin two ways. Firstly, the Rules of Court provide (Order 19 Rule 28)that:
“The Court may order any pleading to be struck out, on the groundthat it discloses no reasonable cause of action or answer and in anysuch case or in case of the action or the defence being shown by thepleadings to be frivolous or vexatious, the Court may order the actionto be stayed or dismissed, or judgment to be entered accordingly, as maybe just”.
The corresponding English Rule (Order 18 Rule 19) which permits theCourt to make an order striking out a pleading on the ground that itdiscloses no reasonable cause of action also specifically provides thatno evidence is admissible on such an application. Although no suchexpress prohibition exists in our Order 19 I think nonetheless that theCourt can only make an order under this Rule when a pleading on its facediscloses no reasonable cause of action. But apart from Order 19 theCourt has an inherent jurisdiction to stay proceedings and onapplications made to exercise it the Court is not limited to the partiespleadings but is free to hear evidence on affidavit relating to theissues in the case. (See: Wyllie, “The Supreme Court of Judicature(Ireland) Act, 1877” pages 34 to 37, and “The Supreme CourtPractice, 1979” paragraph 18/19/10). The principles on which itexercises this jurisdiction are well established – basically itsjurisdiction exists to ensure that an abuse of the process of the courtsdoes not take place. So, if the proceedings are frivolous or vexatiousthey will be stayed. They will also be stayed if it is clear that thePlaintiff’s claim must fail (See, Buckley, J., Goodson .v.Grierson 1908 1 K.B. 761, 766). This jurisdiction should of coursebe exercised sparingly and only in clear cases. But it is one whichenables the Court to avoid injustice particularly in cases whose outcomedepends on the interpretation of a contract or agreed correspondence. Ifhavingconsidered the documents the Court is satisfied that the Plaintiffs casemust fail then it would be a proper exercise of its discretion to strikeout proceedings whose continued existence cannot be justified and whichare manifestly causing irrevocable damage to a Defendant. Having done sothe Court can also order that the lis pendens be vacated. (As to theapplication of the Lis Fendens Act 1867 to Ireland see Flynn .v.Buckley, the Supreme Court, 24th April 1980 (unreported)over-ruling Giles .v. Brady 1974 I.R. 462).
The Court’s jurisdiction to act as I have just indicated was exercisedby Mr. Justice McWilliara in Kelly .v. Kinneen and others 29thApril 1980 (unreported). In a somewhat analagous situation in England,when the Court had been asked on an interlocutory motion to vacate acaution registered in the Land Registry by a Plaintiff in a specificperformance suit, the Court’s power to deal with the matter in a summaryway was explained by the Master of the Rolls (Lord Denning) asfollows:
“The entry of a caution casts a dark shadow on the property. Itparalyses dealings in it. No one will buy the property under such acloud … I know that the rules of court do not prescribe anysummary procedure such as Order 14 does for judgment or Order 86 forspecific performance. But that is no obstacle. These courts are mastersof their own procedures and can do what is right even though it is notcontained in the rules. If it is drawn to the attention of the court byaffidavit or otherwise, that a caution has been entered when it oughtnot to be, then the Court”
“can order it to be vacated forthwith. In particular if thecautioner does not adduce any writing sufficient to satisfy the Statuteof Frauds …. the court can order the entry to be vacated. If thepoint depends on the correct interpretation of correspondence, then thecourt can decide the matter then and there without sending it for trial…. (See Tiverton Estates Ltd. .v. Wearwell Ltd. (1975)Ch. 146, 156).”
The Defendant in these proceedings has brought a motion to dismiss thePlaintiff’s claim. He says he can show that the Plaintiff has noreasonable cause of action because there never was a concluded bargainfor the sale of his lands to the Plaintiff and so the Plaintiff’s claimfor an order for specific performance is clearly unsustainable. Forreasons which I have already given an order under Rule 19 cannot be madein the circumstances of the present case. But the Defendant asks me toconsider agreed facts which are established on affidavit and to exercisethe Courts inherent jurisdiction to stay or strike out an action whichobviously must fail.
The facts can be briefly summarised. The Defendant’s auctioneer obtainedan offer from the Plaintiff to purchase two building sites owned by thePlaintiff adjacent to his dwellinghouse in Killiney, Co. Dublin. TheDefendant’s solicitor has sworn that he was informed that this offer wasmade subject to contract and this has not been denied by the Plaintiff.Having been informed of the offer theDefendant’s solicitor wrote on the 5th January 1981 to the Plaintiff’ssolicitor. He headed his letter “subject to contract”. Hereferred in it to the fact that the sale negotiated by the auctioneerhad been made “subject to contract”. He enclosed a draftcontract and for good measure added:
“For the record, we should emphasise that we have no instructionsfrom our client to bind him in the matter and no binding contract willbe deemed to exist until such time as the enclosed contract has beenexecuted by both parties and the deposit paid.”
It would have been impossible to have made the position clearer. It wasone accepted by the Plaintiff’s solicitor. He replied by return by aletter also headed “subject to contract” in which he raiseda number of queries about the title. These were immediately replied to,again in a letter headed “subject to contract”. A gap ofseveral weeks in the correspondence then ensued, but the partiessolicitors were in touch by telephone on title matters. On the 24thFebruary the Plaintiff’s solicitor wrote and returned the draftcontract. It was signed by the purchaser but only after it had been veryextensively amended by his solicitor. The deposit was not sent on butthe Plaintiff’s solicitor confirmed that he held a cheque for the”proposed deposit”. The vendor never signed the amendedcontract. The purchaser never sent on the deposit. The title wasnot a simple one and one of the amended conditions in the contractrequired the vendor to obtain certain consents and releases. Thevendor’s counsel advised that these were unnecessary and a copy of hisopinion was sent to the Plaintiff’s solicitor. The Plaintiff’s counseldisagreed and when the Plaintiff’s solicitor insisted that the consentsbe obtained the Defendant’s solicitor regarded the matter as being at anend. On the 8th April the Plaintiff’s solicitor wrote that”appropriate proceedings” would be instituted. TheDefendant’s solicitor made it clear that he did not regard his client asbeing bound to the Plaintiff. Steps were taken to re-advertise theproperty and on the 19th May (after advertisement and before publicauction) a written contract to sell the property, along with otherproperty, was entered into between the Defendant and a new purchaser. Onthe 22nd May these proceedings by plenary summons were instituted. Onthe 12th June a motion to stay or dismiss them was brought.
The affidavit of the Plaintiff’s solicitor appears to raise, albeit insomewhat imprecise terms, a conflict of evidence as to what transpiredon the telephone between him and his opposite number as to theamendments he was proposing in the draft contract. Itwould be clearly inappropriate to attempt to resolve such a conflict ona motion of this sort. It is not necessary however for me to do so. Theagreed facts establish beyond any doubt that the Defendant’s solicitorhad made it abundantly clear in his first letter of the 5th January thatthere would be no binding contract between the parties until the writtencontract had been signed by both parties and the deposit paid. Thatremained the situation. And no written contract was signed and nodeposit paid. There was therefore no concluded contract in existencewhich can now be specifically enforced and this action must plainlyfail. In reaching this conclusion I have not lost sight of thesubmission made on the Plaintiff’s behalf that there was a sufficientnote or memorandum to satisfy the Statute of Frauds contained in aletter written by the Defendant’s solicitor to the Defendant’s counsel.But there was, as I have said, no concluded agreement and the letterrelied on must be read in that context and cannot be regarded as anacknowledgement of a concluded agreement which the Defendant’s solicitorhad taken considerable pains to avoid concluding. It is also urged onthe Plaintiff’s behalf that he can rely on acts of part performance tosupport his claim to specific performance. Whilst it is truethat steps were taken to deal with some of the problems raised in thecourse of the negotiations between the parties, these do not establishthat a concluded bargain had been reached or confer on the Plaintiff aright to specific performance.
As the case is a clear one, as considerable injustice could result ifthe matter is not disposed of now, it seems that to allow the case toproceed to trial would be to permit an abuse of the Court’s processes. Iwill therefore order that the proceedings be struck out and that the 11spendens be vacated.
In the light of the views I have just expressed it is unnecessary for meto consider the second (alternative) submission made on the Defendant’sbehalf; namely, that even if the action is not stayed the Court shouldnone the less vacate the lis pendens and allow the Plaintiff to applyfor an interlocutory injunction to restrain the Defendant from dealingwith the land until the trial of the action, an injunction which wouldbe coupled with an undertaking to pay damages to the Defendant if thePlaintiff’s claim should fail. This submission was based on Clearbrook Property Ltd. .v. Verrier (1974) 1 W.L.R. 243 and Tiverton Estates Ltd. .v. Wearwell Ltd. (1975) Ch. 146. Thesewere cases related to cautions registered in the Land Registry inEngland. Whether or not the provisions of the Lis Pendens Act 1867 wouldpermit analagous orders to be made in relation to a lis pendens (inwhich connection see Wyllie “Irish Land Law” paragraph13.165 and the cases there referred to) is a matter which I am not nowcalled upon to decide.