Estoppel
Promissory Estoppel
Sometimes the strict rules of consideration would lead to injustice. A promise may be made and relied on, but because of the lack of consideration, it is not legally enforceable. Where there is a promise or representation of fact or definite intention, given in circumstances where the promised person does not give consideration, the discretionary principle of promissory estoppel may apply.
If one party makes a statement of fact or a statement of his intention to another, which he realises or should realise the other will act on, and on faith of which the other acts to his detriment, then the courts may decide not to allow the first person to enforce the strict legal rights, if it would be inequitable in the circumstances.
There must be an unambiguous statement of fact or intention. It must be relied on by the party to whom it is addressed. The party, who acted to his detriment must have done so, by reason of the statement. It must be unfair or unconscionable not to enforce the promise.
Nature of Representation
The representation can be written or by conduct. Where a person acts by words or conduct, from which it is reasonable to infer and was in fact inferred that a certain position would hold and the other acts in reliance and takes steps to his detriment, the former will be denied from asserting the strict legal position.
Originally, the principle of estoppel was limited to statements of fact. However, later cases have extended the principle to a representation of a future intention, on the basis that it may be equivalent to a fact. There must be a definite commitment and representation. A representation by conduct is possible but is more difficult to prove.
A representation by conduct alone may be difficult to establish. Mere forbearance from reliance on strict legal rights, even on a number of occasions will not generally constitute a representation, that those rights have been waived.
It may be necessary in this case, for the party who seeks to invoke his strict legal rights, to give notice in order to re-establish reliance on them.
Limitations on Principle I
The extent of the principle of promissory is limited in several respects. It does not apply in every case where one party acts to his detriment in reliance on another’s statement. There must be something in the circumstances, which make it unjust for the person who made the statement to renege on it. The courts give relief, only to the extent necessary to alleviate injustice.
Promissory estoppel is generally available as a defence. It cannot be used as the basis of a claim in itself / an independent legal action. This principle has been reduced and narrowed in recent years. In some other jurisdictions, promissory estoppel can be used to bring an action.
Some Irish cases contemplate that promissory estoppel might be a cause of action in some cases. In some other jurisdictions, promissory and proprietary estoppel have been effectively merged into a single broader principle.
Internationally, some courts have broadened the principles of promissory estoppel and proprietary estoppel. They have sought to rest them on broader equitable principles and extend their application more generally.
Estoppel may be used in a claim where there is another separate legal basis for that claim. It may also be available as an element in establishing a claim, which has its own separate basis.
Limitations on Principle II
There must be knowledge or intention on the part of the person who makes the statement/promise, that it will be relied on to affect an existing legal relationship. The person addressed must have relied on or acted to his detriment by reason of the representation.
The essence of estoppel is reliance on the representation. The addressee of the representation must rely on it and alter his position. In some cases, detrimental reliance has been required. In other cases, reliance alone has been sufficient.
There is usually some pre-existing “legal” relationship between the parties, such as landlord and tenant or as parties to an existing contract. The predominant view of the principle holds that this is a requirement. This usually requires an existing contractual or similar relationship between the parties. Some cases have indicated that it is sufficient that there be an intention to contract.
In some modern cases, the courts have minimised or dropped the requirement for an existing legal relationship. Something similar to, but short of a prior legal relationship may suffice.
Requirement of Inequity
It must be inequitable for the person making the promise to withdraw from the promise because the other person has relied on it. Because of the requirement that it be inequitable for the promisor to go back on the representation, there will generally be some element of detriment incurred by the promisee in reliance on it.
There is no legal effect until the other person has acted to his detriment. This is equivalent to changing his position on the faith of the representation. On an alternative view, detrimental reliance is not always a necessary element for the application of promissory estoppel.
Nature of Equitable Rights
The essence of the claim is that it would be later unjust for the person making the promise or statement to deny or retract it. Where the court applies the principle of promissory estoppel, the party concerned may not be able to insist on his strict legal rights, if it would be inequitable have regard to the past dealings between the parties.
Unlike a breach of contract, estoppel may lead to a discretionary relief so as to prevent injustice. It does not create a right as such. The particular remedy, if any, is a matter for the court, in its equitable discretion. The remedy granted in a case of promissory estoppel will be tailored to the equity of the situation or injustice concerned.
Effect of Estoppel
The defendant is said to be “estopped” from asserting his strict legal rights. It is available as a defence only; it is said to be a shield and not a sword. Generally, the legal right is suspended, but not necessarily extinguished. Where the reliance or detriment is extensive or irreversible, then the suspension of the legal rights may become perpetual. In this case, the effect is to change substantive rights.
Estoppel prevents the person who has made the promise from acting on his strict legal rights to the extent that it would be unjust and inequitable. He cannot claim or plead the matter concerned.
Rights may be extinguished or may be suspended only. If the suspension is indefinite, this may be tantamount to extinguishment.
Reversion to Strict Legal Position
It may be that the person “estopped” may be able to resile from his statement by giving reasonable notice that he intends to return to the strict position, as regards the future. In this case, it must be possible for the person promised to resume his former position and undo the detriment. If the person promised cannot resume his original position, the other’s promise may be final and irrevocable.
An example of the principle and its effect may arise in the context of a promised reduction in rent. If the tenant relies on the promise of the reduced rent to his detriment, then the landlord may be precluded from recovering the full rent. However, the landlord may be able to give reasonable notice to resume the strict legal position, and collect the whole rent, after reasonable notice has been given.
Proprietary Estoppel I
The principle of estoppel has been expanded in the context of property. The principle of “proprietary estoppel” has been developed. There is more support for the proposition that proprietary estoppel, as opposed to promissory estoppel, may be the basis of an action and is not limited to being a defence.
A person may effectively obtain an interest in the property as a consequence. The principle may apply where a person has acted to his detriment on foot of a belief known or encouraged by another, that he has or will be granted rights over property.
In one type of case, a mistaken belief as to legal rights is involved. The detriment typically involves expenditure on the property by a person in the mistaken belief that he has rights to it. The person who knows the mistaken belief and stands by, may not be able to insist on his strict legal rights.
Proprietary Estoppel II
It must be unjust and inequitable that the property owner relies on his strict legal rights, in circumstances where the person has let the other person act to his detriment on foot of the mistaken belief. There must be a link between the inducement relied on and the conduct by which the person promised, has acted to the detriment. The detriment must be substantial and it must be based on the assurance.
If a person is let into possession of property and encouraged to spend money with the promise (short of a legal contract) of a lease, the principle may compel the landlord to give effect to the promise.
References and Sources
Irish Textbooks and Casebooks
Clark, R. Contract Law in Ireland 8th Ed. (2016) Ch .20
Friel, R. The Law of Contract 2nd Ed, (2000)
McDermott, P. Contract Law (2001) 2nd Ed (2017) Ch. 2
Enright, M. Principles of Irish Contract Law (2007)
Clark and Clarke Contract Cases and Materials 4th Ed (2008)
English Textbooks and Casebooks
Poole, J. Casebook on contract law. (2014) 12th edition
Stone and Devenney, The Modern Law of Contract 10th Ed (2015)
McKendrick, Contract Law 10th Ed (2013)
Chen-Wishart, Contract Law 5th Ed (2015)
Anson, Reynell, Beatson, J., Burrows, Cartwright, Anson’s law of contract. 29th Ed (2010)
Atiyah and Smith, Atiyah’s introduction to the law of contract. 6th Ed.
Chen-Wishart, M. (2015) Contract law. 5th Ed.
Cheshire, Fifoot and Furmstons, Furmstons and Fifoot Cheshire, Fifoot and Furmston’s law of contract. OUP.
Duxbury, Robert (2011) Contract law. 2nd Ed.
Halson, Roger (2012) Contract law. 2nd Ed.
Koffman & Macdonald’s Law of Contract. 8th Ed. (2014)
O’Sullivan, Hilliard, The law of contract. 6th Ed. (2014)
Peel, and Treitel, The law of contract. 13th Ed. (2011).
Poole, J.Casebook on contract law. 12th Ed. (2014).
Poole, J. Textbook on contract law. 12th Ed. (2014)
Richards, P Law of contract. 10th Ed. (2011)
Stone, R. The Modern law of Contract. 10th Ed. (2013)
Treitel, G. H. An outline of the law of contract. 6th Ed (2014).
Turner, C Unlocking contract law. 4th Ed. (2014).
Upex, R. V., Bennett, G Chuah, J, Davies, F. R. Davies on contract. 10th Ed. (2008).
UK Casebooks
Stone,Devenney, Text, Cases and Materials on Contract Law 3rd Ed (2014)
McKendrick, Contract Law Text, Cases and Materials 6th Ed (2014)
Stone, R, Devenney, J Cunnington, R Text, cases and materials on contract law. 3rd Ed (2014)
Burrows, A. S. A Casebook on Contract. 4th Ed.
Beale, H. G., Bishop, W. D. and Furmston, M. P. Contract: cases and materials. 5th ed. (2008)
Blackstone’s Statutes on Contract, Tort & Restitution 2017 (Blackstone’s Statute Series)
UK Practitioners Texts
Chitty on Contracts 32nd Edition, 2 Volumes & Supplement (2016)
The above are not necessarily the latest edition.
Cases
Central London Property Trust Ltd v High Trees House Ltd
[1947] KB 130
Denning J
held that the full rent was payable from the time that the flats became fully occupied in mid-1945.
If I were to consider this matter without regard to recent developments in the law, there is no doubt that had the plaintiffs claimed it, they would have been entitled to recover ground rent at the rate of £2,500 a year from the beginning of the term, since the lease under which it was payable was a lease under seal which, according to the old common law, could not be varied by an agreement by parol (whether in writing or not), but only by deed. Equity, however stepped in, and said that if there has been a variation of a deed by a simple contract (which in the case of a lease required to be in writing would have to be evidenced by writing), the courts may give effect to it as is shown in Berry v. Berry [1929] 2 K. B. 316. That equitable doctrine, however, could hardly apply in the present case because the variation here might be said to have been made without consideration. With regard to estoppel, the representation made in relation to reducing the rent was not a representation of an existing fact. It was a representation, in effect, as to the future, namely, that payment of the rent would not be enforced at the full rate but only at the reduced rate. Such a representation would not give rise to an estoppel, because, as was said in Jorden v. Money (1854) 5 H. L. C. 185, a representation as to the future must be embodied as a contract or be nothing.
But what is the position in view of developments in the law in recent years? The law has not been standing still since Jorden v. Money (1854) 5 H. L. C. 185. There has been a series of decisions over the last fifty years which, although they are said to be cases of estoppel are not really such. They are cases in which a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and which was in fact so acted on. In such cases the courts have said that the promise must be honoured. The cases to which I particularly desire to refer are: Fenner v. Blake [1900] 1 Q. B. 426, In re Wickham (1917) 34 T. L. R. 158, Re William Porter & Co., Ld. [1937] 2 All E. R. 361 and Buttery v. Pickard [1946] W. N. 25. As I have said they are not cases of estoppel in the strict sense. They are really promises – promises intended to be binding, intended to be acted on, and in fact acted on. Jorden v. Money (1854) 5 H. L. C. 185 can be distinguished, because there the promisor made it clear that she did not intend to be legally bound, whereas in the cases to which I refer the proper inference was that the promisor did intend to be bound. In each case the court held the promise to be binding on the party making it, even though under the old common law it might be difficult to find any consideration for it. The courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to allow the party making it to act inconsistently with it. It is in that sense, and that sense only, that such a promise gives rise to an estoppel. The decisions are a natural result of the fusion of law and equity: for the cases of Hughes v. Metropolitan Ry. Co. (1877) 2 App. Cas. 439 , 448, Birmingham and District Land Co. v. London & North Western Ry. Co. (1888) 40 Ch. D. 268 , 286 and Salisbury (Marquess) v. Gilmore [1942] 2 K. B. 38 , 51, afford a sufficient basis for saying that a party would not be allowed in equity to go back on such a promise. In my opinion, the time has now come for the validity of such a promise to be recognized. The logical consequence, no doubt is that a promise to accept a smaller sum in discharge of a larger sum, if acted upon, is binding notwithstanding the absence of consideration: and if the fusion of law and equity leads to this result, so much the better. That aspect was not considered in Foakes v. Beer (1884) 9 App. Cas. 605. At this time of day however, when law and equity have been joined together for over seventy years, principles must be reconsidered in the light of their combined effect. It is to be noticed that in the Sixth Interim Report of the Law Revision Committee, pars. 35, 40, it is recommended that such a promise as that to which I have referred should be enforceable in law even though no consideration for it has been given by the promisee. It seems to me that, to the extent I have mentioned, that result has now been achieved by the decisions of the courts.
I am satisfied that a promise such as that to which I have referred is binding and the only question remaining for my consideration is the scope of the promise in the present case. I am satisfied on all the evidence that the promise here was that the ground rent should be reduced to £1,250 a year as a temporary expedient while the block of flats was not fully, or substantially fully let, owing to the conditions prevailing. That means that the reduction in the rent applied throughout the years down to the end of 1944, but early in 1945 it is plain that the flats were fully let, and, indeed the rents received from them (many of them not being affected by the Rent Restrictions Acts), were increased beyond the figure at which it was originally contemplated that they would be let. At all events the rent from them must have been very considerable. I find that the conditions prevailing at the time when the reduction in rent was made, had completely passed away by the early months of 1945. I am satisfied that the promise was understood by all parties only to apply under the conditions prevailing at the time when it was made, namely, when the flats were only partially let, and that it did not extend any further than that. When the flats became fully let, early in 1945, the reduction ceased to apply.
In those circumstances, under the law as I hold it, it seems to me that rent is payable at the full rate for the quarters ending September 29 and December 25, 1945.
If the case had been one of estoppel, it might be said that in any event the estoppel would cease when the conditions to which the representation applied came to an end, or it also might be said that it would only come to an end on notice. In either case it is only a way of ascertaining what is the scope of the representation. I prefer to apply the principle that a promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply. Here it was binding as covering the period down to the early part of 1945, and as from that time full rent is payable.
I therefore give judgment for the plaintiff company for the amount claimed.”
Combe v Combe
[1951] 2 KB 215
Denning LJ
“where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him. He must accept their legal relations subject to the qualification which he himself has so introduced, even though it is not supported in point of law by any consideration but only by his word. ”
He stated the estoppel could only be used as a “shield” and not a “sword”. In the High Trees case, there was an underlying cause of action outside the promise. Here, promissory estoppel created the cause of action where there was none. In this case, the court could not find any consideration for the promise to pay maintenance. He further stated that the High Trees principle should not be stretched so far as to abolish the doctrine of consideration,
“the doctrine of consideration is too firmly fixed to be overthrown by a side-wind….it still remains a cardinal necessity of the formation of a contract”. ”
Crabb v Arun District Council
[1975] EWCA Civ 7
Lord Denning MR.
“When Mr Millett, QC, for Mr Crabb said that he put his case on an estoppel, it shook me a little: because it is commonly supposed that estoppel is not itself a cause of action. But that is because there are estoppels and estoppels. Some do give rise to a cause of action. Some do not. In the species of estoppel called proprietary estoppel, it does give rise to a cause of action. We had occasion to consider it a month ago in Moorgate Mercantile v Twitchings [1975] 3 WLR 286 where I said that the effect of estoppel on the true owner may be that
“his own title to the property, be it land or goods, had been held to be limited or extinguished, and new rights and interests have been created therein and this operates by reason of his conduct – what he has led the other to believe – even though he never intended it.”
The new rights and interests, created by estoppel, in or over land, will be protected by the Courts and in this way give rise to a cause of action. This was cited in Spencer, Bower and Turner on estoppel by Representation, Second Edition (1966) at pages 279 to 282.
The basis of this proprietary estoppel – as indeed of promissory estoppel – is the interposition of equity. Equity comes in, true to form, to mitigate the rigours of strict law. The early cases did not speak of it as “estoppel”. They spoke of it as “raising an equity”. If I may expand that, Lord Cairns said: “It is the first principle upon which all Courts of Equity proceed”, that it will prevent a person from insisting on his strict legal rights – whether arising under a contract, or on his title deeds, or by statute – when it would be inequitable for him to do so having regard to the dealings which have taken place between the parties, see Hughes v Metropolitan Railway Co (1877) 2 AC 448. What then are the dealings which will preclude him from insisting on his strict legal rights? -If he makes a binding contract that he will not insist on the strict legal position, a Court of Equity will hold him to his contract. Short of a binding contract, if he makes a promise that he will not insist upon his strict legal rights – then, even though that promise may be unenforceable in point of law for want of consideration or want of writing – then, if he makes the premise knowing or intending that the other will act upon it, and he does act upon it, then again a Court of Equity will not allow him to go back on that promise, see Central London Property Trust v High Trees House (1947) KB 130: Richards (Charles) v Oppenhaim (1950) KB 616, 623. Short of an actual promise, if he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights – knowing or intending that the other will act on that belief – and he does so act, that again will raise an equity in favour of the other: and it is for a Court of Equity to say in what way the equity may be satisfied. The cases show that this equity does not depend on agreement but on words or conduct. In Bamsden v Dyson (1866) LR 1 HL at page 170 Lord Kingsdown spoke of a verbal agreement “or what amounts to the same thing, an expectation, created or encouraged.” In Birmingham & District Land Co v The London & North Western Railway (1888) 40 Ch D at page 277, Lord Justice Cotton said that
“…. what passed did not make a new agreement but what took place …. raised an equity against him.”
And it was the Privy Council who said that
“…. the Court must look at the circumstances in each case to decide in what way the equity can be satisfied”
giving instances, see Plimmer v City of Wellington Corporation (1884) 9 AC 713-4.
Recent cases afford illustrations of the principle. In Inwards v Baker (1965) 2 QB 29, it was held that, despite the legal title being in the plaintiffs, the son had an equity to remain in the bungalow “as long as he desired to use it as his home.” Mr. Justice Danckwerts said (at page 38):
“Equity protects him so that an injustice may not be perpetrated.”
In ER Ives Investment Ltd v High (1967) 2 QB 379, it was held that High and his successors had an equity which could only be satisfied by allowing him to have a right of access over the yard, “so long as the block of flats has its foundations on his land.” In Siew Soon Hah v Wang Tong Hong [1973] AC 837, the Privy Council held that there was an “equity or equitable estoppel protecting the defendant in his occupation for 30 years”. In Bank Negara Indonesia v Philip Foallm (1973) 2 Malaya Law Journal the Privy Council held that, despite the fact that he had no protection under the Rent Acts, he had an equity to remain “so long as he continued to practise his profession.”
The question then is: were the circumstances here such as to raise an equity in favour of Mr. Crabb? True the Council on the deeds had the title to their land, free of any access at point B. But they led Mr. Crabb to believe that he had or would be granted a right of access at point B. At the meeting of 26th July, 1967, Mr. Alford and Mr. Crabb told the Council’s representative that Mr. Crabb intended to split the two acres into two portions and wanted to have an access at point B for the back portion: and the Council’s representative agreed that he should have this access. I do not think the Council can avoid responsibility by saying that their representative had no authority to agree this. They entrusted him with the task of setting out the line of the fence and the gates: and they must be answerable for his conduct in the course of it, see Attorney-General to the Prince of Wales v Collom (1916) 2 KB at page 207: Moorgate Mercantile v Twitchings (1973) 3 WLR at page 298 A-B.
The Judge found that there was “no definite assurance” by the Council’s representative, and “no firm commitment”, but only an “agreement in principle”, meaning I suppose that, as Alford said, there were “some further processes” to be gone through before it would become binding. But if there were any such processes in the mind of the parties, the subsequent conduct of the Council was such as to dispense with them. The Council actually put up the gates at point B at considerable expense. That certainly led Crabb to believe that they agreed that he should have the right of access through point B without more ado.
The Judge also said that, to establish this equity or estoppel, the Council must have known that Crabb was selling the front portion without reserving a right of access for the back portion. I do not think this was necessary. The Council knew that Crabb intended to sell the two portions separately and that he would need an access at point B as well as point A. Seeing that they knew of his intention – and they did nothing to disabuse him but rather confirmed it by erecting gates at point B – it was their conduct which led him to act as he did: and this raises an equity in his favour against them.
In the circumstances it seems to me inequitable that the Council should insist on their strict title as they did: and to take the highhanded action of pulling down the gates without a word of warning: and to demand of Crabb £3,000 as the price for the easement. If he had moved at once for an injunction in aid of his equity – to prevent them removing the gates – I think he should have been granted it. But he did not do so. He tried to negotiate terms, but these failing, the action has come for trial. And we have the question: In what way now should the equity be satisfied?
Here equity is displayed at its most flexible, see Snell’s Equity, 27th edition, page 568, and the illustrations there given. If the matter had been finally settled in 1967, I should have thought that, although nothing was said at the meeting in July 1967, nevertheless it would be quite reasonable for the Council to ask Crabb to pay something for the access at point B, perhaps – and I am guessing – some hundreds of pounds. But, as Millett pointed out in the course of the argument, because of the Council’s conduct, the back land has been landlocked. It has been sterile and rendered useless for five or six years: and Mr. Crabb has been unable to deal with it during that time. This loss to him can be taken into account. And at the present time, it seems to me that, in order to satisfy the equity, Mr. Crabb should have the right of access at point B free of charge without paying anything for it.
I would, therefore, hold that Crabb, as the owner of the back portion, has a right of access at point B over the verge on on to Mill Park Road and a right of way along that road to Hook Lane without paying compensation. I would allow the appeal and declare that he has an easement, accordingly.”
Scarman LJ.
“In such a case I think it is now well settled law that the Court, having analysed and assessed the conduct and relationship of the parties, has to answer three questions. First, is there an equity established? Secondly, what is the extent of the equity, if one is established? And, thirdly, what is the relief appropriate to satisfy the equity? See:- The Duke of Beaufort v Patrick (1853) 17 Beavan 60; Plimmer v Wellington Corporation (1884) 9 A.C. 699; and Inwards v Baker (1965) 2 Q.B. 29, a decision of this Court, and particularly the observations of the tester of the Rolls at page 37. Such therefore I believe to be the nature of the inquiry that the Courts have to conduct in a case of this sort. In pursuit of that inquiry I do not find helpful the distinction between promissory and proprietary estoppel. This distinction may indeed be valuable to those who have to teach or expound the law; but I do not think that, in solving the particular problem raised by a particular case, putting the law into categories is of the slightest assistance.
[…]
I turn now to the other two questions – the extent of the equity and the relief needed to satisfy it. There being no grant, no enforceable contract, no licence, I would analyse the minimum equity to do justice to the plaintiff as a right either to an easement or to a licence upon terms to be agreed. I do not think it is necessary to go further than that. Of course, going that far would support the equitable remedy of injunction which is sought in this action. If there is no agreement as to terms, if agreement fails to be obtained, the Court can, in my judgment, and must, determine in these proceedings upon what terms the plaintiff should be put to enable him to have the benefit of the equitable right which he’s held to have. It is interesting that there has been some doubt amongst distinguished lawyers in the past as to whether the Court can so proceed. Lord Kingsdown refers in fact to those doubts in a passage, which I need not quote, at page 171 of his speech in Ramsden v Dyson. Lord Thurlow clearly thought that the Court did have this power. Other lawyers of that time did not. But there can be no doubt that since Ramsden v Dyson the Courts have acted upon the basis that they have to determine not only the extent of the equity, but also the conditions necessary to satisfy it, and they have done so in a great number and variety of cases. I need refer only to the interesting collection of cases enumerated in Snell on Equity, 27th edition at pages 567 to 568: paragraph 2(b). In the present case the Court doe3 have to consider what is necessary now in order to satisfy the plaintiff’s equity. Had matters taken a different turn, I would without hesitation have said that the plaintiff should be put upon terms to be agreed if possible with the defendants, and, if not agreed, settled by the Court. But, as already mentioned by the Master of the Rolls and my Lord, Lord Justice Lawton, there has been a history of delay, and indeed highhandedness, which it is impossible to disregard. In January 1969 the defendants, for reasons which no doubt they thought good at the time, without consulting the plaintiff, locked up his land. They removed not only the padlocks which he had put on the gates at point B, but the gates themselves. In their place they put a fence – rendering access impossible save by breaking down the fence. I am not disposed to consider whether or not the defendants are to be blamed in moral terms for what they did. I just do not know. But the effect of their action has been to sterilise the plaintiff’s land; and for the reasons which I have endeavoured to give, such action was an infringement of an equitable right possessed by the plaintiff. It has involved him in loss, which has not been measured; but, since it amounted to sterilisation of an industrial estate for a very considerable period of time, it must surpass any sort of sum of money which the plaintiff ought reasonably, before it was done, to have paid the authority in order to obtain an enforceable legal right, I think therefore that nothing should now be paid by the plaintiff and that he should receive at the hands of the Court the belated protection of the equity that he has established. Reasonable terms, other than money payment, should be agreed: or, if not agreed, determined by the Court.”
D & C Builders Ltd v Rees
[1965] EWCA Civ 3
Lord Denning MR
“In point of law payment of a lesser sum, whether by cash or by cheque, is no discharge of a greater sum.
This doctrine of the common law came under heavy fire. It was ridiculed by Sir George Jessel in Couldery v Bartram.[1] It was said to be mistaken by Lord Blackburn in Foakes v Beer.[2] It was condemned by the Law Revision Committee (1945 Cmd 5449), paras. 20 and 21 . But a remedy has been found. The harshness of the common law has been relieved. Equity has stretched out a merciful hand to help the debtor. The courts have invoked the broad principle stated by Lord Cairns in Hughes v Metropolitan Railway Co.[3]
“It is the first principle upon which all courts of equity proceed, that if parties, who have entered into definite and distinct terms involving certain legal results, afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them when it would be inequitable having regard to the dealings which have taken place between the parties.”
It is worth noticing that the principle may be applied, not only so as to suspend strict legal rights, but also so as to preclude the enforcement of them.
This principle has been applied to cases where a creditor agrees to accept a lesser sum in discharge of a greater. So much so that we can now say that, when a creditor and a debtor enter upon a course of negotiation, which leads the debtor to suppose that, on payment of the lesser sum, the creditor will not enforce payment of the balance, and on the faith thereof the debtor pays the lesser sum and the creditor accepts it as satisfaction: then the creditor will not be allowed to enforce payment of the balance when it would be inequitable to do so. This was well illustrated during the last war. Tenants went away to escape the bombs and left their houses unoccupied. The landlords accepted a reduced rent for the time they were empty. It was held that the landlords could not afterwards turn round and sue for the balance, see Central London Property Trust Ltd v High Trees House Ltd.[4] This caused at the time some eyebrows to be raised in high places. But they have been lowered since. The solution was so obviously just that no one could well gainsay it.
In applying this principle, however, we must note the qualification: The creditor is only barred from his legal rights when it would be inequitable for him to insist upon them. Where there has been a true accord, under which the creditor voluntarily agrees to accept a lesser sum in satisfaction, and the debtor acts upon that accord by paying the lesser sum and the creditor accepts it, then it is inequitable for the creditor afterwards to insist on the balance. But he is not bound unless there has been truly an accord between them.
In the present case, on the facts as found by the judge, it seems to me that there was no true accord. The debtor’s wife held the creditor to ransom. The creditor was in need of money to meet his own commitments, and she knew it. When the creditor asked for payment of the £480 due to him, she said to him in effect: “We cannot pay you the £480. But we will pay you £300 if you will accept it in settlement. If you do not accept it on those terms, you will get nothing. £300 is better than nothing.” She had no right to say any such thing. She could properly have said: “We cannot pay you more than £300. Please accept it on account.” But she had no right to insist on his taking it in settlement. When she said: “We will pay you nothing unless you accept £300 in settlement,” she was putting undue pressure on the creditor. She was making a threat to break the contract (by paying nothing) and she was doing it so as to compel the creditor to do what he was unwilling to do (to accept £300 in settlement): and she succeeded. He complied with her demand. That was on recent authority a case of intimidation: see Rookes v. Barnard[5] and Stratford (JT) & Son Ltd v Lindley.[6] In these circumstances there was no true accord so as to found a defence of accord and satisfaction: see Day v McLea.[7] There is also no equity in the defendant to warrant any departure from the due course of law. No person can insist on a settlement procured by intimidation.
In my opinion there is no reason in law or equity why the creditor should not enforce the full amount of the debt due to him. I would, therefore, dismiss this appeal.”
Dillwyn v Llewelyn [1862] EWHC Ch 67
Lord Westbury LC held that the younger son did not have merely an incomplete gift, but was in fact entitled to call for a legal conveyance, and not merely of a life-estate, but of the whole fee-simple. He said the following.[1]
“About the rules of the court there can be no controversy. A voluntary agreement will not be completed or assisted by a court of equity, in cases of mere gift. If anything be wanting to complete the title of the donee, a court of equity will not assist him in obtaining it; for a mere donee can have no right to claim more than he has received. But the subsequent acts of the donor may give the donee that right or ground of claim which he did not acquire from the original gift. Thus, if A gives a house to B, but makes no formal conveyance, and the house is afterwards, on the marriage of B, included, with the knowledge of A, in the marriage settlement of B, A would be bound to complete the title of the parties claiming under that settlement. So if A puts B in possession of a piece of land, and tells him, ‘I give it to you that you may build a house on it,’ and B on the strength of that promise, with the knowledge of A, expends a large sum of money in building a house accordingly, I cannot doubt that the donee acquires a right from the subsequent transaction to call on the donor to perform that contract and complete the imperfect donation which was made…
The Master of the Rolls, however, seems to have thought that a question might still remain as to the extent of the estate taken by the donee, and that in this particular case the extent of the donee’s interest depended on the terms of the memorandum. I am not of that opinion. The equity of the donee and the estate to be claimed by virtue of it depend on the transaction, that is, on the acts done, and not on the language of the memorandum, except as that shews the purpose and intent of the gift. The estate was given as the site of a dwelling-house to be erected by the son. The ownership of the dwelling-house and the ownership of the estate must be considered as intended to be co-extensive and co-equal. No one builds a house for his own life only, and it is absurd to suppose that it was intended by either party that the house, at the death of the son, should become the property of the father. If, therefore, I am right in the conclusion of law that the subsequent expenditure by the son, with the approbation of the father, supplied a valuable consideration originally wanting, the memorandum signed by the father and son must be thenceforth regarded as an agreement for the soil extending to the fee-simple of the land. In a contract for sale of an estate no words of limitation are necessary to include the fee-simple; but, further, upon the construction of the memorandum itself, taken apart from the subsequent acts, I should be of opinion that it was the plain intention of the testator to vest in the son the absolute ownership of the estate. The only inquiry therefore is, whether the son’s expenditure on the faith of the memorandum supplied a valuable consideration and created a binding obligation. On this I have no doubt; and it therefore follows that the intention to give the fee-simple must be performed, and that the decree ought to declare the son the absolute owner of the estate comprised in the memorandum.
I propose, therefore, to vary the decree of the Master of the Rolls, and to declare, by virtue of the original gift made by the testator and of the subsequent expenditure by the Plaintiff with the approbation of the testator, and of the right and obligation resulting therefrom, the Plaintiff is entitled to have a conveyance from the trustees of the testator’s will and other parties interested under the same of all their estate and interest under the testator’s will in the estate of Hendrefoilan in the pleadings mentioned, and with this declaration refer it to the Judge in Chambers to settle such conveyance accordingly.”
Hughes v Metropolitan Railway Co
[1877] UKHL 1
Lord Cairns LC
“My Lords, it is upon those grounds that I am of opinion that the decision of the Court below is correct. It was not argued at your Lordships’ Bar, and it could not be argued, that there was any right of a Court of Equity, or any practice of a Court of Equity, to give relief in cases of this kind, by way of mercy, or by way merely of saving property from forfeiture, but it is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results—certain penalties or legal forfeiture—afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties. My Lords, I repeat that I attribute to the Appellant no intention here to take advantage of, to lay a trap for, or to lull into false security those with whom he was dealing; but it appears to me that both parties by entering upon the negotiation which they entered upon, made it an inequitable thing that the exact period of six months dating from the month of October should afterwards be measured out as against the Respondents as the period during which the repairs must be executed.
In this instance the rights of the landlord were suspended only temporarily, allowing the tenant more time to repair.”
Baird Textile Holdings Ltd v Marks & Spencer Plc
[2001] EWCA Civ 274 [2001] CLC 999, [2001] EWCA Civ 274, [2002] 1 All ER (Comm) 737
The Vice Chancellor
“Counsel for M&S submits that the judge was wrong. He contends, amongst many and varied arguments, that a conclusion to that effect does not involve the reconciliation of numerous cases but the recognition that this court is, as the judge was, bound by three decisions of the Court of Appeal to conclude that the estoppel claim has no real prospect of success either. The three decisions and the propositions they respectively established are (1) a common law or promissory estoppel cannot create a cause of action, Combe v Combe [1951] 2 KB 215; (2) an estoppel by convention cannot create a cause of action either, Amalgamated Investment & Property Co. Ltd v Texas Commerce International Bank Ltd [1982] QB 84 and (3) accepting that a proprietary or equitable estoppel may create a cause of action it is limited to cases involving property rights, whether or not confined to land, Western Fish Products Ltd v Penwith District Council [1981] 2 AER 204, 217.
Counsel for Baird did not dispute that those cases established the propositions for which M&S contended. Rather, he submitted, it is wrong to categorise particular types of estoppel and then impose limitations in each category not applicable to one or more of the other categories. He suggested that English law permits some cross-fertilisation between one category and another. He contended that English law should follow where the High Court of Australia has led in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and Commonwealth of Australia v Verwayen (1990) 170 CLR 394 and permit estoppel to create causes of action in non-proprietary cases. In reply counsel for M&S conceded that if the Australian cases, to the effect that promissory estoppel extends to the enforcement of voluntary promises, represent the law of England then the judge was right and the cross-appeal must fail.
Warnings against categorisation have been given by Robert Goff J and Lord Denning MR in Amalgamated Investment & Property Co. Ltd v Texas Commerce International Bank Ltd [1982] QB 84, 103A-104E and 122B-D, by Scarman LJ in Crabb v Arun DC [1976] QB 179, 192H-193B and by Lord Bingham of Cornhill in Johnson v Gore Wood & Co [2000] All ER (D) 2293 at p.16. But dicta to the contrary effect are to be found in First National Bank v Thomson [1996] Ch. 2311, 236 per Millett LJ, McIlkenny v Chief Constable of the West Midlands [1980] 1 QB 283, 317 per Lord Denning MR and in Johnson v Gore Wood & Co [2001] 1 All ER p. 481, 507/8 per Lord Goff of Chieveley.
As in the case of the contractual claim, it is important to appreciate exactly what is being alleged and why. The material allegation in paragraph 15 is that M&S is estopped from denying that “the relationship with BTH could only be determined by the giving of reasonable notice”. But by itself this claim, which has undoubted echoes of Hughes v Metropolitan Railway Co. (1877) 2 App.Cas.439 and Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130, does not lead to the relief sought. For that purpose it is essential to establish an obligation by estoppel that, in the words of paragraph 12, “during the subsistence of the relationship Marks & Spencer would acquire garments from BTH in quantities and at prices which in all the circumstances were reasonable”. As counsel for Baird put it in their written argument “BTH contends that an equity generated by estoppel can be a cause of action”. They rely on a series of dicta as pointers in that direction contained in Amalgamated Investment & Property Co. Ltd v Texas Commerce International Bank Ltd [1982] QB 84, Taylor’s Fashions v Liverpool Trustees [1982] QB 133, Habib Bank v Habib Bank [1981] 1 WLR 1265, The Hendrik Sif [1982] 1 Ll.R. 456, Holiday Inns v Broadhead (1974) 232 EG 951, Re Basham [1986] 1 WLR 1498 and Gillett v Holt [2000] 3 WLR 815.
In my view English law, as presently understood, does not enable the creation or recognition by estoppel of an enforceable right of the type and in the circumstances relied on in this case. First it would be necessary for such an obligation to be sufficiently certain to enable the court to give effect to it. That such certainty is required in the field of estoppels such as is claimed in this case as well as in contract was indicated by the House of Lords in Woodhouse AC Israel Cocoa Ltd v Nigeria Produce Marketing Co Ltd [1972] AC 741 and by Ralph Gibson LJ in Troop v Gibson [1986] 1 EGLR 1, 6. For the reasons I have already given I do not think that the alleged obligation is sufficiently certain. Second, in my view, the decisions in the three Court of Appeal decisions on which M&S rely do establish that such an enforceable obligation cannot be established by estoppel in the circumstances relied on in this case. This conclusion does not involve the categorisation of estoppels but is a simple application of the principles established by those cases to the obligation relied on in this. I do not consider that any of the dicta in the line of cases relied on by Baird could entitle this court to decline to apply those principles.
Counsel for M&S was, at one stage, inclined to concede that if we considered that the House of Lords, after the facts had been found at a trial, might adopt the propositions formulated by Mason CJ, Wilson and Brennan JJ in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 then it might be said that there was a real prospect of succeeding on the estoppel issue so that judgment under CPR 24.2 should not be given at this stage. In reply he submitted that the possibility that the House of Lords might adopt those propositions was an inadequate reason for allowing a trial. I agree. If I am right in believing that English law, as it now stands, does not permit the enforcement of an estoppel in the form alleged in this case then it is the duty of this court to apply it, notwithstanding that it may be developed by the House of Lords, who are not bound by any of the cases relied on, in the future. As Mann LJ said in Hamid v Secretary of State for the Home Department [1993] Imm AR 216, 222 (a renewed application for leave to move for judicial review, from which, if rejected, there could be no appeal)
“This court has in effect been asked to grant leave on the basis that, regarding ourselves as bound by two previous decisions of this court, we should in due time contemplate whether or not this is a suitable case for leave to appeal to their Lordships’ House. In my judgment this court has to apply the law as it stands, and the law as it stands is as stated in the cases of Khan and Chan and upon that basis there is no ground for granting leave to move.”
To the like effect is the dictum of Mummery J in Bristol & West BS v Turner [1991] 2 EGLR 52, 54 that the duty of this court is to apply the law as it stands. See also Willoughby v Eckstein [1936] 1 All ER 650 and Derby v Weldon (No.3) [1989] 3 All ER 118, 124. It must follow that it cannot be a compelling reason for requiring the estoppel claim to be disposed of at a trial either.
In all these circumstances I do not agree with the judge that the estoppel claim has a real prospect of success. Nor do I agree that there are good reasons why this issue should be tried. I have accepted that there is a real prospect that the allegations will be established but if there is no real prospect that if established they will give rise to the relief claimed then there is no reason compelling or otherwise why they should be established at a trial. It follows that there can be no compelling reason for only disposing of the contract claim at a trial either.”
Judge LJ
“I agree with the judgment of the Vice Chancellor on the contractual issue generally, and in particular his analysis of the problems of ascertaining with any sufficient precision the parties’ mutual obligations, and also, by reason of the uncertainty, of establishing a mutual intention to create a legally enforceable relationship.
The interesting question therefore is whether equity can provide a remedy which cannot be provided by contract. It seems clear that the principles of the law of estoppel have not yet been fully developed, and during the course of the argument I was greatly attracted by the consideration that if summary judgment were entered against BTH under CPR 24.2 in a case such as this, the effect would be to stultify the possible development of the substantive law, or the correction of what Lord Hoffmann, in Kleinwort Benson Limited v Lincoln CC [1999] AC 349 described as “ancient heresies”.
Two specific aspects of the current principles of the law of estoppel which may be open for reconsideration need mention. First, it is possible to envisage that the different principles encapsulated under the heading, “Estoppel”, should cease to be treated as if they were individually compartmentalised. The most illuminating analysis of the disadvantages of rigidity was summarised by Robert Goff J in Amalgamated Investment v Texas Bank [1982] QB 84, where he said,
“Of all doctrines, equitable estoppel is surely one of the most flexible ….. it is no doubt helpful to establish, in broad terms, the criteria which, in certain situations, must be fulfilled before an equitable estoppel can be established; but it cannot be right to restrict equitable estoppel to certain defined categories, and indeed some of the categories proposed are not easy to defend….. Thus in Snell …. the editors isolate two categories of equitable estoppel, promissory estoppel and proprietary estoppel. It may be possible nowadays to identify the former with some degree of precision; but the latter is much more difficult to accept as a separate category ……. As a separate category, proprietary estoppel may be regarded as an amalgam of doubtful utility ……. It is not surprising, therefore, to discover a tendency in the more recent authorities to reject any rigid classification of equitable estoppel into exclusive and defined categories …….” (See also per Oliver J in Taylor’s Fashion Limited v Liverpool Victoria Trustees Co Limited noted at [1982] 1 QB 133 and further, per Lord Denning MR in Amalgamated Property Co v Texas Bank: but, see to the contrary, his earlier observations in McIlkenny v Chief Constable of the West Midlands [1980] 1 QB 283, and his description of the House “called Estoppel”, with its many rooms)
The less graphic, but equally trenchant comment by Millett LJ, as he then was, in First National Bank v Thomson [1996] Ch 231 at 236, summarises the opposite contention:
“…… (the) attempts to demonstrate that all estoppel other than estoppel by record are now subsumed in the single embracing estoppel by representation and that they are all governed by the same requirements has never won general acceptance.”
The removal of formal classifications would represent the starting point from which to consider the second possible development, consigning to history the misleading aphorism that estoppel is a shield, not a sword. In reality that principle has no application to what is described as a proprietary estoppel The cause of action founded on proprietary estoppel may, and should, so the argument runs, be extended generally in this jurisdiction, both in accordance with the recent decisions in the High Court of Australia in Waltons Stores (Interstate) Limited v Maher [1988] 164 CLR 387 and Commonwealth of Australia v Verwayen [1990] 170 CLR 394, and perhaps also by reference in this jurisdiction to Plimmer v Wellington [1884] 9 App CAS 699, which involved a contractual interest in a licence over land, and also on the basis that if the compartmentalisation of “estoppel” were broken down, the remedies provided for one form of estoppel (proprietary estoppel) would then be extended to the others.
These, very briefly summarised, were the considerations which led me to the preliminary view that although BTH’s argument in contract was unsustainable, the possible development of the law in relation to estoppel might properly justify allowing the case to proceed to trial.
If it did, however, both the trial judge and this court would be bound to hold that the principles relating to proprietary estoppel are limited to “rights and interests created in and over land” and, possibly “to other forms of property”. (Western Fish Products v Penwith DC [1981] 2 All ER 204, where in this specific context, Megaw LJ observed, at 218: “The question of new rights and remedies is a matter for Parliament, not the judges”.) Moreover, assuming for present purposes only that this authority could be distinguished, the difficulties arising from the underlying uncertainties referred to in the judgment of the Vice Chancellor extend to the estoppel as well as the contractual issue. (Woodhouse AC Israel Cocoa Limited SA v Nigerian Produce Marketing Co Limited [1972] AC 741.) In reality, BTH’s possible success in this litigation would depend on establishing liability against M & S in equity when it would not otherwise be liable in contract, and would represent a dramatic, if not indeed a revolutionary development of the legal principles governing the enforcement of private obligations.
On reflection, I am persuaded by the judgments of the Vice Chancellor and Mance LJ, and for the reasons given by them, that there is no real prospect of the claim succeeding unless and until the law is developed, or corrected, by the House of Lords. In my judgment however, such a possibility would not normally justify a case proceeding to, nor provide a compelling reason for trial. However settled the law may appear to be, one of its strengths is that the possibility of development, or change, remains. In my view, even for the purposes of CPR 24.2, we must apply the law as it is, not as it may possibly one day become (my emphasis).
I do not believe that this approach means that the development of the law is likely to be stultified. If for example, there were a significant conflict in the authorities, or if the law could reasonably be described as uncertain, or perhaps also, if there were a substantial body of academic or judicial opinion that the law as currently understood produced injustice and should be considered by the House of Lords, but simultaneously the essential facts were heavily in dispute, considerations such as these might provide a compelling reason for trial. Although the House of Lords in Barrett v Enfield LBC [1999] 3 WLR 79 has recently emphasised that the law should be developed on the basis of established rather than assumed facts, in this case, as I have explained, many of the essential facts are not in reality in dispute. If Morison J’s order were set aside, as I think it should be, without suggesting that this court should grant permission to appeal to the House of Lords, it would be open to BTH to seek permission either from this court, or if refused, directly from the House of Lords, which could then decide whether the principles of estoppel should be re-examined, and whether this case provides an appropriate vehicle for that examination.”
Yeoman’s Row Management Ltd & Anor v Cobbe
[2008] UKHL 55
LORD SCOTT OF FOSCOTE
“My Lords,
Introduction
The essence of the problem to be resolved in this case can be quite shortly stated. A is the owner of land with potential for residential development and enters into negotiations with B for the sale of the land to B. They reach an oral “agreement in principle” on the core terms of the sale but no written contract, or even a draft contract for discussion, is produced. There remain some terms still to be agreed. The structure of the agreement in principle that A and B have reached is that B, at his own expense, will make and prosecute an application for the desired residential development and that, if the desired planning permission is obtained, A will sell the land to B, or more probably to a company nominated by B, for an agreed up-front price, £x. B will then, again at his own expense, develop the land in accordance with the planning permission, sell off the residential units, and, when the gross proceeds of sale received by B equals £2x, any further gross proceeds of sale will be divided equally between A and B. Pursuant to this agreement in principle B makes and prosecutes an application for planning permission for the residential development that A and he have agreed upon. B is encouraged by A to do so. In doing so B spends a considerable sum of money as well, of course, as a considerable amount of time. The application is successful and the desired planning permission is obtained. A then seeks to re-negotiate the core financial terms of the sale, asking, in particular, for a substantial increase in the sum of money that would represent £x. B is unwilling to commit himself to the proposed new financial terms and A is unwilling to proceed on the basis of the originally agreed financial terms. So B commences legal proceedings. The question for your Lordships is what relief, in the circumstances described, B should be granted, for, I believe, none of your Lordships considers that he would not be entitled to any.
A number of possible bases for the grant of relief to B need to be considered.
(i) First, there is proprietary estoppel. B has, with the encouragement of A, spent time and money in obtaining the planning permission and has done so, to the knowledge of A, in reliance on the oral agreement in principle and in the expectation that, following the grant of the planning permission, a formal written agreement for the sale of the property, incorporating the core financial terms that had already been agreed and any other terms necessary for or incidental to the implementation of the core terms, would be entered into. In these circumstances, it could be, and has been, argued, A should be held to be estopped from denying that B had acquired a proprietary interest in the property and a court of equity should grant B the relief necessary to reflect B’s expectations.
(ii) Second, there is constructive trust. In circumstances such as those described, equity can, it is suggested, give effect to the joint venture agreed upon by A and B by treating A as holding the property upon a constructive trust for himself and B, with A and B taking beneficial interests calculated to enable effect to be given to B’s expectations engendered by the agreement in principle.
(iii) Third, there is unjust enrichment. The grant of planning permission, obtained by B at his expense and through the deployment of his time and planning expertise, has increased the value of the property. So A has been enriched at the expense of B and, since it was A’s repudiation of the oral agreement in principle that frustrated the basis upon which B had been relying, perhaps unjustly enriched.
(iv) Fourthly, there is the question of a quantum meruit. B has supplied valuable services to A in obtaining planning permission for the benefit of A’s property. There is no question of the services having been provided gratuitously but no fee for the services was agreed between A and B. B’s reward was supposed to have been the conclusion of an enforceable contract. In these circumstances a quantum meruit, taking into account the amount of B’s expenditure of time and money and the value of the services, can, it could be argued, be fixed by the court.
(v) Fifthly, the arrangement between A and B for the sale of the property to B can be regarded as involving two stages. The first stage is the making and prosecution by B at his own expense of the application for the grant of planning permission. This stage constitutes, in effect, the consideration given by B to A in return for A’s promise, if planning permission is granted, to enter into a formal written contract of sale embodying, inter alia, the core financial terms that had already been agreed. A’s promise, being no more than an oral promise to enter into a written contract and, moreover, part of an incompletely negotiated agreement, is not contractually enforceable but A’s repudiation of that promise, after B had supplied his first stage consideration and the planning permission had been granted, would, it could be argued, constitute a complete failure of the consideration that A was to have given, and entitle B to a restitutionary remedy.
(vi) Finally, in circumstances such as those described the possibility of a remedy in damages for the tort of deceit must be kept in mind. If A represented to B that he was willing to enter into a written agreement, or regarded himself as bound by an oral agreement embodying the core financial terms that had already been agreed, and so represented at a time when he, A, had already decided to repudiate those terms and demand better ones, B, if and to the extent that he had acted on those false representations and thereby suffered loss, would have an action in deceit for damages.
Two features of these possible remedies are worth noticing. First, both the proprietary estoppel claim and the constructive trust claim are claims to a proprietary interest in the property. The other remedies do not require proprietary claims but follow upon in personam claims for compensation or restitution. Second, a proprietary estoppel claim and a constructive trust claim would constitute, if successful, a means whereby B could obtain a remedy providing him with a benefit more or less equivalent to the benefit he expected to obtain from the oral and inchoate agreement; in effect a benefit based on the value of his non-contractual expectation. By way of contrast, an unjust enrichment remedy, a quantum meruit remedy and a consideration that has wholly failed remedy are essentially restitutionary in character, concentrating not at all on the value of the expected benefit of which B has been deprived but, as the case may be, on the extent of A’s enrichment at B’s expense, on the value of B’s services or on the amount or value of the consideration provided by B to A. And a tortious remedy for deceit would concentrate on the loss caused to B in acting on A’s false representation and would seek to restore him to the position in which he would have been if the false representation had never been made. One of the main issues for your Lordships to decide on this appeal is, in my opinion, whether B should be held entitled to a proprietary remedy based on the extent of his disappointed expectations or to an in personam remedy of, using the adjective fairly loosely, a restitutionary character. The question of a remedy in deceit does not arise, for no allegation of fraudulent misrepresentation has been made, but the conceptual possibilities of such a claim are useful to keep in mind. It is very well established that the remedy for a fraudulent misrepresentation inducing a contract is, besides rescission of the contract if the victim so elects, a tortious action in deceit for damages for any loss thereby caused; and that, unless the representation has become a term of the contract, the victim is not entitled to claim damages measured by the loss of the benefit he would have obtained if the representation had been true, i.e. he is not entitled to contractual damages.
The Facts Proprietary estoppel
Both the learned judge and the Court of Appeal regarded the relief granted as justified on the basis of proprietary estoppel. I respectfully disagree. The remedy to which, on the facts as found by the judge, Mr Cobbe is entitled can, in my opinion, be described neither as based on an estoppel nor as proprietary in character. There are several important authorities to which I want to refer but I want first to consider as a matter of principle the nature of a proprietary estoppel. An “estoppel” bars the object of it from asserting some fact or facts, or, sometimes, something that is a mixture of fact and law, that stands in the way of some right claimed by the person entitled to the benefit of the estoppel. The estoppel becomes a “proprietary” estoppel – a sub-species of a “promissory” estoppel – if the right claimed is a proprietary right, usually a right to or over land but, in principle, equally available in relation to chattels or choses in action. So, what is the fact or facts, or the matter of mixed fact and law, that, in the present case, the appellant is said to be barred from asserting? And what is the proprietary right claimed by Mr Cobbe that the facts and matters the appellant is barred from asserting might otherwise defeat?
The pleadings do not answer these questions. The terms of the oral “agreement in principle”, the second agreement, relied on by Mr Cobbe are pleaded but it is accepted that there remained still for negotiation other terms. The second agreement was, contractually, an incomplete agreement. The terms that had already been agreed were regarded by the parties as being “binding in honour”, but it follows that the parties knew they were not legally binding. So what is it that the appellant is estopped from asserting or from denying? The appellant cannot be said to be estopped from asserting that the second agreement was unenforceable for want of writing, for Mr Cobbe does not claim that it was enforceable; nor from denying that the second agreement covered all the terms that needed to be agreed between the parties, for Mr Cobbe does not claim that it did; nor from denying that, pre 18 March 2004, Mr Cobbe had acquired any proprietary interest in the property, for he has never alleged that he had. And what proprietary claim was Mr Cobbe making that an estoppel was necessary to protect? His originally pleaded claim to specific performance of the second agreement was abandoned at a very early stage in the trial (see para.8 above) and the proprietary claims that remained were claims that the appellant held the property on trust for itself and Mr Cobbe. These remaining proprietary claims were presumably based on the proposition that a constructive trust of the property, with appropriate beneficial interests for the appellant and Mr Cobbe, should, by reason of the unconscionable conduct of Mrs Lisle-Mainwaring, be imposed on the property. I must examine that proposition when dealing with constructive trust as a possible means of providing Mr Cobbe with a remedy, but the proposition is not one that requires or depends upon any estoppel.
It is relevant to notice that the amendments to Mr Cobbe’s pleaded prayer for relief, made when the specific performance and damages for breach of contract claims were abandoned, include the following :
“(4) Alternatively, a declaration that [the appellant and Mrs Lisle-Mainwaring] are estopped from denying that [Mr Cobbe] has such interest in the Property and/or the proceeds of sale thereof as the Court thinks fit.”
This is the only pleaded formulation of the estoppel relied on by Mr Cobbe and, with respect to the pleader, is both meaningless and pointless. Etherton J concluded, in para.85 of his judgment, that the facts of the case “gave rise to a proprietary estoppel in favour of Mr Cobbe”, but nowhere identified the content of the estoppel. Mummery LJ agreed (paras.60 and 61 of his judgment, concurred in by Dyson LJ (para.120) and Sir Martin Nourse (para.141)), but he, too, did not address the content of the estoppel. Both Etherton J and Mummery LJ regarded the proprietary estoppel conclusion as justified by the unconscionability of Mrs Lisle-Mainwaring’s conduct. My Lords, unconscionability of conduct may well lead to a remedy but, in my opinion, proprietary estoppel cannot be the route to it unless the ingredients for a proprietary estoppel are present. These ingredients should include, in principle, a proprietary claim made by a claimant and an answer to that claim based on some fact, or some point of mixed fact and law, that the person against whom the claim is made can be estopped from asserting. To treat a “proprietary estoppel equity” as requiring neither a proprietary claim by the claimant nor an estoppel against the defendant but simply unconscionable behaviour is, in my respectful opinion, a recipe for confusion.
Deane J, in Muschinski v Dodds (1985) 160 CLR 583, in a judgment concurred in by Mason J, drew attention to the nature and function of constructive trusts in the common law. His remarks, at 612 to 616 repay careful reading but I would respectfully draw particular attention to a passage at 615 relevant not only to constructive trusts but equally, in my opinion, to proprietary estoppel. He said this:
“The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, starting from the conceptual foundations of such principles … Under the law of this country – as, I venture to think under the present law of England … proprietary rights fall to be governed by principles of law and not by some mix of judicial discretion, subjective views about which party ‘ought to win’ … and the ‘formless void’ of individual moral opinion …”
A finding of proprietary estoppel, based on the unconscionability of the behaviour of the person against whom the finding was made but without any coherent formulation of the content of the estoppel or of the proprietary interest that the estoppel was designed to protect invites, in my opinion, criticism of the sort directed by Deane J in the passage cited. However, Mr Ivory QC, counsel for Mr Cobbe both in the Court of Appeal and before your Lordships, has relied on authority and to that I must now turn.
Oliver J (as he then was) stated the requirements of proprietary estoppel in a “common expectation” class of case in a well-known and often cited passage in Taylors Fashions Ltd v Liverpool Victoria Trustees Co. Ltd [1982] QB 133 at 144 :
“if A under an expectation created or encouraged by B that A shall have a certain interest in land, thereafter, on the faith of such expectation and with the knowledge of B and without objection by him, acts to his detriment in connection with such land, a Court of Equity will compel B to give effect to such expectation.”
Note the reference to “a certain interest in land”. Taylors Fashions was a case where the “certain interest” was an option to renew a lease. There was no lack of certainty; the terms of the new lease were spelled out in the option and the lessees’ expectation was that on the exercise of the option the new lease would be granted. The problem was that the option had not been registered under the Land Charges Act 1925 and the question was whether the freeholders, successors in title to the original lessors who had granted the option, could be estopped from denying the right of the lessees to exercise the option. But what is the comparable expectation and the comparable “certain interest” in the present case? Mr Cobbe’s expectation, encouraged by Mrs Lisle-Mainwaring, was that upon the grant of planning permission there would be a successful negotiation of the outstanding terms of a contract for the sale of the property to him, or to some company of his, and that a formal contract, which would include the already agreed core terms of the second agreement as well as the additional new terms agreed upon, would be prepared and entered into. An expectation dependent upon the conclusion of a successful negotiation is not an expectation of an interest having any comparable certainty to the certainty of the terms of the lessees’ interest under the Taylors Fashions option. In the Taylors Fashions case both the content of the estoppel, i.e. an estoppel barring the new freeholders from asserting that the option was unenforceable for want of registration, and the interest the estoppel was intended to protect, i.e. the option to have a renewal of the lease, were clear and certain. Not so here. The present case is one in which an unformulated estoppel is being asserted in order to protect Mr Cobbe’s interest under an oral agreement for the purchase of land that lacked both the requisite statutory formalities (s.2 of the 1989 Act) and was, in a contractual sense, incomplete.
A reference to the expectation of “a certain interest in land” had appeared in the speech of Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129 at 170
“If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation.”
Lord Kingsdown went on to say, at 171, that even if there were uncertainty as to the terms of the contract a court of equity could nevertheless interfere in order to prevent fraud but that it was unclear what, in that case, the remedy should be. The choices, he said, were between the grant of a specific interest in the land and the grant of a restitutionary remedy such as monetary compensation. This is an issue to which I must return but it suffices for the moment to notice that Lord Kingsdown’s remarks at 171 show that, when referring at 170 to “a verbal agreement … for a certain interest in land”, he was referring to an agreement that was complete, with no uncertainty as to its terms.
Lord Kingsdown’s requirement that there be an expectation of “a certain interest in land”, repeated in the same words by Oliver J in the Taylors Fashions case, presents a problem for Mr Cobbe’s proprietary estoppel claim. The problem is that when he made the planning application his expectation was, for proprietary estoppel purposes, the wrong sort of expectation. It was not an expectation that he would, if the planning application succeeded, become entitled to “a certain interest in land”. His expectation was that he and Mrs Lisle-Mainwaring, or their respective legal advisers, would sit down and agree the outstanding contractual terms to be incorporated into the formal written agreement, which he justifiably believed would include the already agreed core financial terms, and that his purchase, and subsequently his development of the property, in accordance with that written agreement would follow. This is not, in my opinion, the sort of expectation of “a certain interest in land” that Oliver J in the Taylors Fashions case or Lord Kingsdown in Ramsden v Dyson had in mind.
Mr Ivory cited, also, a number of other authorities in support of his proprietary estoppel case. In Plimmer v Mayor of Wellington (1884) 9 App. Cas. 699, a Privy Council case, the question was whether the appellant, Mr Plimmer, had a sufficient “estate or interest” in land to qualify for statutory compensation when the land became vested in the Wellington Corporation. Plimmer had occupied the land under a revocable licence from the Corporation’s predecessor-in-title and at the request of that predecessor-in-title had made extensive improvements to the land. The Judicial Committee held that these circumstances “were sufficient to create in his [Plimmer’s] mind a reasonable expectation that his occupation would not be disturbed…” In effect, the owner of the land became estopped from asserting that the licence remained revocable. That was sufficient to constitute the licence an “estate or interest” for compensation purposes. The Plimmer case does not, in my opinion, assist Mr Cobbe, whose expectation was that of further negotiations leading, as he hoped and expected, to a formal contract. To the extent that he had an expectation of a “certain interest in land”, it was always a contingent one, contingent not simply on the grant of planning permission but contingent also on the course of the further contractual negotiations and the conclusion of a formal written contract.
Inwards v Baker [1965] 2 QB 29 was the case in which an indulgent father had encouraged his son to build a bungalow on his, the father’s, land. The son had done so in the expectation, encouraged by the father, that he, the son, would be permitted to remain in occupation. The Court of Appeal held that the son had an equity entitling him to live in the bungalow as long as he wished. In effect the father, and after his death the trustees of his will, were estopped from denying that the son’s licence to occupy the land was an irrevocable one. The case was on all fours with Plimmer’s case, which was relied on both by Lord Denning M.R. (36/37) and by Danckwerts LJ (38) in their respective judgments. The principle that, if A, an owner of land, encourages B to build on his, A’s, land on the footing that B will be entitled thereafter to occupy the new buildings for as long as he wishes and B, taking A at his word, then acts accordingly, A will be estopped from denying the right of B to continue to occupy the new buildings, is undoubted good law but is a principle of no assistance to Mr Cobbe in the present case. Crabb v Arun D.C. [1976] Ch 179 is likewise of no assistance to Mr Cobbe. The case was one in which the DC had led Mr Crabb to believe that he could have access to his land via a road belonging to the DC. In reliance on that promise Mr Crabb allowed his land to become otherwise landlocked. He was held entitled by way of proprietary estoppel to a right of way as promised. The DC was estopped from denying that he had the right of way.
Closer to home, so far as support for Mr Cobbe’s promissory estoppel claim is concerned, is the line of cases in which a claimant has expended money on land on the basis of an informal or incomplete agreement and in the expectation that, in due course, a binding agreement would be forthcoming. The present case, if the proprietary estoppel claim is to succeed, must be brought within this line of cases. Laird v Birkenhead Railway Co. (1859) Johns.500 is an early example. The plaintiff applied to the defendant railway company for permission to construct and use a private branch line connecting with the railway company’s main line. Agreement was reached for the plaintiff to do so “on reasonable terms, which were to be afterwards settled” (per Page Wood V-C at 513). The plaintiff, acting on this agreement, constructed and used the branch line and for some two and a half years paid tolls at an agreed rate to the railway company. Agreement in principle was reached on the details of the plaintiff’s user of the branch line but a formal agreement was never signed. The railway company gave notice to the plaintiff to cease his user of the branch line. The Vice-Chancellor said that the railway company had allowed the plaintiff “to expend his money on the faith that he would be permitted to join their line on reasonable terms” (513) and that the tolls agreed upon and paid by the plaintiff for his past user must be assumed to represent reasonable terms. “It must”, said the Vice-Chancellor, “be inferred, from the nature of the transaction, that the privilege of using the line was not to be determinable …” (511). The Vice-Chancellor’s ability, by inference from the nature of the transaction and from the basis on which the plaintiff for the past two and a half years had been using the branch line, to fill in the gaps in the parties’ contractual agreement is not an ability that has its counterpart in the present case. The court could not have made complete the inchoate second agreement. On none of the three outstanding matters referred to in paragraph 6 above would the court have been able to infer the contractual terms that further negotiations would or might have produced and Etherton J, quite rightly, did not attempt to do so.
Holiday Inns Inc. v Broadhead (1974) 232 EG 951, 1087 has been treated as, but correctly analysed is in my opinion not, a case of proprietary estoppel. The plaintiffs, Holiday Inns, and the defendant, Mr Broadhead, agreed, in effect, on a joint venture, the essential ingredients of which were that a site in the vicinity of Heathrow Airport would be identified as suitable for an hotel. Mr Broadhead, or a company nominated by him, would acquire the site, Holiday Inns would apply for the requisite planning permission and, if planning permission were granted, the site would be leased to Holiday Inns under a lease the terms of which the parties had agreed. A suitable site was identified and was then purchased by a company owned or controlled by Mr Broadhead. Holiday Inns, at their own expense, applied for and obtained planning permission for the building of the hotel. But Mr Broadhead then entered into negotiations for a lease with another hotel group and granted a lease to a company in that group before Holiday Inns could intervene. Whatever equity Holiday Inns had against Mr Broadhead could not have been asserted against the lessee, which had taken the lease without notice of any such equity. Holiday Inns sued Mr Broadhead. The judge, Goff J, accepted that the Holiday Inns executives who had dealt with Mr Broadhead thought that they and he had reached “a gentleman’s agreement which would be honoured” and that Mr Broadhead’s “failure to inform them of his true state of mind was deceitful and unconscionable” (1089). He held that Holiday Inns were “clearly entitled to relief” (1094) and declared that Mr Broadhead’s company, which had purchased the site and granted the lease to the rival hotel group, held the land subject to the lease upon trust to sell it and to divide the net proceeds of sale, after discharging various expenses incurred by the respective parties, between itself and Holiday Inns in equal shares. The relief was granted, therefore, by imposing, or recognising, a constructive trust over the property. Whether, if Mr Broadhead had not pre-empted the choice of relief by granting the lease before any restraining injunction could be obtained, Holiday Inns’ expectation of a lease would have been recognised by an order that they were entitled to a lease on the terms already agreed is an open question. It does not appear from the report of the case that anything remained to be negotiated between Mr Broadhead and Holiday Inns. The terms of the intended lease had been agreed. In the event, however, the relief granted by Goff J was on the same footing as that granted in the joint venture cases to which, starting with Pallant v Morgan, I will later refer, namely, that where a joint venture involves the acquisition by one of the joint venturers of the property intended for the purposes of the joint venture and the pursuit of the joint venture then becomes impracticable or impossible, the acquirer is not entitled to retain the property for his own benefit but must be taken to hold the property upon trust for himself and the other joint venturers jointly. Before leaving the Holiday Inns case, it is to be noted that the judge, Goff J, was Sir Reginald Goff, and not Sir Robert Goff, later Lord Goff of Chieveley, as was erroneously stated at 122F in the judgment of the Board (of which, oddly, Lord Goff was a member) delivered by Lord Templeman in Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114.
The Humphreys Estate case was one in which a written agreement, expressed to be “subject to contract”, for the purchase of development property had been signed. The agreement said that the terms could be varied or withdrawn and that any agreement was subject to the documents necessary to give legal effect to the transaction being executed and registered. In short the parties had made it clear that neither of them was for the time being legally bound. The Hong Kong government, the intended purchaser, was permitted to take possession of the property and to spend money on it. The owners of the property then decided to withdraw from the transaction and gave notice terminating the government’s licence to occupy the property. In the litigation that ensued, the government contended that the owners were barred by proprietary estoppel from exercising their legal right to withdraw from the transaction (see the submissions of counsel referred to by Lord Templeman at 121). The proprietary estoppel relied on was that which had been enunciated by Lord Kingsdown in Ramsden v Dyson. The government lost in the courts in Hong Kong and appealed to the Privy Council but lost there too. Lord Templeman explained why at 127H
“It is possible but unlikely that in circumstances at present unforeseeable a party to negotiations expressed to be ‘subject to contract’ would be able to satisfy the court that the parties had subsequently agreed to convert the document into a contract or that some form of estoppel had arisen to prevent both parties from refusing to proceed with the transaction envisaged by the document. But in the present case the government chose to begin and elected to continue on terms that either party might suffer a change of mind and withdraw.”
The reason why, in a ‘subject to contract’ case, a proprietary estoppel cannot ordinarily arise is that the would-be purchaser’s expectation of acquiring an interest in the property in question is subject to a contingency that is entirely under the control of the other party to the negotiations (see also British Steel Corporation v Cleveland Bridge and Engineering Co. Ltd [1984] 1 AER 504 per Robert Goff J at 511; Walton Stores (Interstate) Ltd v Maher [1988] 164 CLR 387; London & Regional Investments Ltd v TBI Plc. [2002] EWCA 355 per Mummery LJ at para.42 and Pridean v Forest Taverns (1996) 75 P&CR 447). The expectation is therefore speculative.
Both Etherton J and Mummery LJ in the Court of Appeal recognised that, in cases where negotiations had been made expressly subject to contract and a contract had not in the end been forthcoming, it would be very difficult for a disappointed purchaser to establish an arguable case for a proprietary estoppel. Etherton J, having referred to the relevant authorities, accepted the improbability that in a subject-to-contract case a proprietary estoppel might arise (paras. 119 and 120), but distinguished the present case on the footing that Mrs Lisle-Mainwaring had encouraged Mr Cobbe to believe that if he succeeded in obtaining planning permission the second agreement would be honoured even though not legally binding (para.123) and, also, I think, that nothing equivalent to a subject-to-contract reservation had ever been expressed (para.119) and that no issue likely to cause any difficulty had been raised in the negotiations that culminated in the second agreement (para.122). In the Court of Appeal Mummery LJ dealt with the subject-to-contract point in paragraphs 53 to 57. The second agreement, he said, “was never expressly stated to be ‘subject to contract’ either by use of that well known expression or by other language to the same effect” (para.57). He agreed with Etherton J that
“proprietary estoppel could be established even where the parties anticipated that a legal binding contract would not come into existence until after planning permission had been obtained, further terms discussed and agreed and formal written contracts exchanged.”
My Lords, I can easily accept that a subject-to-contract reservation made in the course of negotiations for a contract relating to the acquisition of an interest in land could be withdrawn, whether expressly or by inference from conduct. But debate about subject-to-contract reservations has only a peripheral relevance in the present case, for such a reservation is pointless in the context of oral negotiations relating to the acquisition of an interest in land. It would be an unusually unsophisticated negotiator who was not well aware that oral agreements relating to such an acquisition are by statute unenforceable and that no express reservation to make them so is needed. Mr Cobbe was an experienced property developer and Mrs Lisle-Mainwaring gives every impression of knowing her way around the negotiating table. Mr Cobbe did not spend his money and time on the planning application in the mistaken belief that the agreement was legally enforceable. He spent his money and time well aware that it was not. Mrs Lisle-Mainwaring did not encourage in him a belief that the second agreement was enforceable. She encouraged in him a belief that she would abide by it although it was not. Mr Cobbe’s belief, or expectation, was always speculative. He knew she was not legally bound. He regarded her as bound “in honour” but that is an acknowledgement that she was not legally bound.
The reality of this case, in my opinion, is that Etherton J and the Court of Appeal regarded their finding that Mrs Lisle-Mainwaring’s behaviour in repudiating, and seeking an improvement on, the core financial terms of the second agreement was unconscionable, an evaluation from which I do not in the least dissent, as sufficient to justify the creation of a “proprietary estoppel equity”. As Mummery LJ said (para.123), she took unconscionable advantage of Mr Cobbe. The advantage taken was the benefit of his services, his time and his money, in obtaining planning permission for the property. The advantage was unconscionable because immediately following the grant of planning permission, she repudiated the financial terms on which Mr Cobbe had been expecting to be able to purchase the property. But to leap from there to a conclusion that a proprietary estoppel case was made out was not, in my opinion, justified. Let it be supposed that Mrs Lisle-Mainwaring were to be held estopped from denying that the core financial terms of the second agreement were the financial terms on which Mr Cobbe was entitled to purchase the property. How would that help Mr Cobbe? He still would not have a complete agreement. Suppose Mrs Lisle-Mainwaring had simply said she had changed her mind and did not want the property to be sold after all. What would she be estopped from denying? Proprietary estoppel requires, in my opinion, clarity as to what it is that the object of the estoppel is to be estopped from denying, or asserting, and clarity as to the interest in the property in question that that denial, or assertion, would otherwise defeat. If these requirements are not recognised, proprietary estoppel will lose contact with its roots and risk becoming unprincipled and therefore unpredictable, if it has not already become so. This is not, in my opinion, a case in which a remedy can be granted to Mr Cobbe on the basis of proprietary estoppel.
There is one further point regarding proprietary estoppel to which I should refer. Section 2 of the 1989 Act declares to be void any agreement for the acquisition of an interest in land that does not comply with the requisite formalities prescribed by the section. Subsection (5) expressly makes an exception for resulting, implied or constructive trusts. These may validly come into existence without compliance with the prescribed formalities. Proprietary estoppel does not have the benefit of this exception. The question arises, therefore, whether a complete agreement for the acquisition of an interest in land that does not comply with the section 2 prescribed formalities, but would be specifically enforceable if it did, can become enforceable via the route of proprietary estoppel. It is not necessary in the present case to answer this question, for the second agreement was not a complete agreement and, for that reason, would not have been specifically enforceable so long as it remained incomplete. My present view, however, is that proprietary estoppel cannot be prayed in aid in order to render enforceable an agreement that statute has declared to be void. The proposition that an owner of land can be estopped from asserting that an agreement is void for want of compliance with the requirements of section 2 is, in my opinion, unacceptable. The assertion is no more than the statute provides. Equity can surely not contradict the statute. As I have said, however, statute provides an express exception for constructive trusts. So to Mr Cobbe’s constructive trust claim I must now turn.”
Revenue Commissioners v. Moroney
[1972] IR 372
Kenny J. The Supreme Court
“In the course of the hearing I asked whether the sons could succeed on a plea that the parent was estopped from claiming any part of the “purchase” money. Counsel for the defendants did not show any enthusiasm for this point and so I did not have the advantage of hearing counsel for the plaintiffs on it. Despite this, I think that in an action by the parent against the sons they would succeed on what is now called promissory estoppel.
This doctrine first appeared in Hughes v. Metropolitan Railway Co. 2 which was a claim that a lease be forfeited on the ground that the lessee was in breach of a covenant to effect certain required repairs within six months from the date on which the lessee received from the lessor a notice specifying the defects. The landlord gave notice of the breaches on the 22nd October, 1874, and the tenant’s solicitors wrote that the repairs would be commenced immediately but that they proposed to postpone them until they heard whether the landlord wished to purchase the tenant’s interest. The landlord’s solicitors replied asking whether the tenant was the owner of other adjoining property and was willing to give immediate possession of it and stating that, when they had this information, their client would consider whether he would acquire the tenant’s interest. The attempt to negotiate a settlement broke down on the 31st December and the question in the case was whether the six months ran from that date or from the
22nd October, for the repairs had been carried out within the period of six months from the 31st December. The case was decided before the law was altered by s. 14 of the Conveyancing Act, 1881. In the course of his speech the Lord Chancellor, Lord Cairns, said at p. 448 of the report: “. . . it is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results certain penalties or legal forfeiture afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.” Lord Justice Bowen in Birmingham & District Land Co. v. London & North Western Railway Co. 3 showed that the principle was not confined to forfeiture cases but was of general application; at p. 286 of the report he said: “. . . if persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time, those persons will not be allowed by a Court of Equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were before.”
The doctrine got little attention in the textbooks until it was revived in striking fashion by Mr. Justice Denning (as he then was) in Central London Property Trust Ltd. v.High Trees House Ltd. 4 In that case the landlords had let a block of flats for 99 years at an annual rent of £2,500. The tenants found difficulty in letting them and in 1940 the landlords agreed to reduce the rent to £1,250. There was no consideration given for this nor was any period for the reduction agreed. From then the tenants paid the reduced rent until September, 1945, when the landlords demanded the full amount of £2,500 and the arrears for the period during which the lower rent had been paid. Mr. Justice Denning held that the rent of £2,500 could not be recovered for any period before September, 1945. In the course of his judgment he said at p. 134 of the report:”There has been a series of decisions over the last fifty years which, although they are said to be cases of estoppel are not really such. They are cases in which a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on. In such cases the courts have said that the promise must be honoured . . . The courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to allow the party making it to act inconsistently with it.” In Combe v. Combe 5 the same judge said that the doctrine “only prevents a party from insisting upon his strict legal rights, when it would be unjust to allow him to enforce them, having regard to the dealings which have taken place between the parties.” These cases were discussed by Viscount Simonds in Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. 6 in which he said at p. 764 that the gist of the equity lies in the fact that one party has by his conduct led the other to alter his position; this aspect was emphasised by Mr. Justice McVeigh in Morrow v. Carty 7; see also Cullen v. Cullen 8and Inwards v. Baker. 9
In Ajayi v. R. T. Briscoe (Nig.) Ltd. 10 the advice of the Privy Council, given by Lord Hodson, was that the doctrine is confined to cases where the representation relates to existing contractual rights. At p. 1330 of the report Lord Hodson said: “Their Lordships are of opinion that the principle of law as defined by Bowen L.J. has been confirmed by the House of Lords in the case of Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. 6 where the authorities were reviewed and no encouragement was given to the view that the principle was capable of extension so as to create rights in the promisee for which he had given no consideration. The principle, which has been described as quasi estoppel and perhaps more aptly as promissory estoppel, is that when one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favour of the other party. This equity is, however, subject to the qualifications (1) that the other party has altered his position, (2) that the promissor can resile from his promise on giving reasonable notice, which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position, (3) the promise only becomes final and irrevocable if the promisee cannot resume his position.” This, if correct, would conclude this case in favour of the plaintiffs as any promissory estoppel arises here because the parent before the deed was signed represented by his conduct and by what he said to his sons that he would not require payment of any part of the”purchase” price. Until the deed was signed, there were no legal relations to be effected.
In my view there is no reason in principle why the doctrine of promissory estoppel should be confined to cases where the representation related to existing contractual rights. It includes cases where there is a representation by one person to another that rights which will come into existence under a contract to be entered into will not be enforced. This is the way in which the doctrine is stated at p. 627 of Snell’s Principles of Equity (26th ed. 1966) which has the considerable authority of having had Mr. Megarry (as he then was) as one of its co-editors:”Where by his words or conduct one party to a transaction makes to the other a promise or assurance which is intended to affect the legal relations between them, and the other party acts upon it, altering his position to his detriment, the party making the promise or assurance will not be permitted to act inconsistently with it.” It seems to me that the parent represented to his sons that he would never seek payment of any part of the consideration of £16,000 and that they acted on this by signing the assignment. Each of them altered his position to his detriment because by signing each took on a legal liability to pay two-thirds of the consideration which they would not otherwise have assumed. Although they got the benefit of the interest in the joint tenancy, it seems to me to be probable that if they had refused to sign the deed in the form in which it was they would have got this without payment. The assumption of the legal liability created by the deed was in my opinion sufficient to raise the equity against the parent and the representation has become final because the sons cannot be restored to their original position unless the view is taken that there never was a debt. This equity does not affect the rights of other parties who would be entitled to rely on the deed, but this does not assist the plaintiffs. Their claim can succeed only if the parent would have succeeded in a claim against his sons.
In my view the plaintiffs’ claim fails because the parent would not have got judgment against the sons for any part of the “purchase” price if he had sued them for it. It was argued that the appointment of the sons as executors was a forgiveness of any debt but Mr. Cooke rightly replied that, if it were, estate duty would be payable on the amount: see s. 32 of the Finance Act, 1941.
Daly v. Minister for the Marine
Fennelly J The Supreme Court
[2001] IESC 77 [2001] 3 IR 513
The Law Relating to Promissory Estoppel
40. The applicant relied at the hearing of the appeal also on the doctrine of promissory estoppel, though without citing any of the relevant authorities other than the well-known passage
from the judgment of Finlay C.J. ( Webb) treating legitimate expectation as an “aspect of the well-recognised equitable concept of promissory estoppel (which has been frequently been applied by our courts) whereby a promise or representation as to intention may in certain circumstances be held binding on the representor or promisor.” (page 384)
41. Mr Gerard Hogan, Senior Counsel contended that this was either an exceptionally generous application of promissory estoppel or a new doctrine of promissory estoppel. In either event he contended that he did not have to point to any act of reliance on the promise which formed the basis of his case. It is not unfair tocharacterise that as a daring submission, striking, as it does, at the root of the concept of equitable estoppel. The passage cited was clearly not intended to convey that the doctrine of legitimate expectation is coextensive with promissory estoppel. It clearly is not. The learned Chief Justice, in the passage in question cited, as authority, a judgment ofDenning M.R. which proceeded precisely from the fact that the parties had “conducted the dealings between them..” on foot of an underlying assumption. It is the fact that it would be unconscionable for one party to be permitted to depart from a position, statement or representation, upon which the other party has acted to his detriment, that justifies the courts in intervening to restrain him from doing so. If the recipient of a promise or representation, is to be dispensed from any obligation to demonstrate reliance, the doctrine would be more than exceptionally generous. It would be a virtually ungovernable new force affecting potentially not only equity but the laws of contract and property and, as here, the exercise of administrative powers.
42. This Court explained the doctrine of promissory estoppel very clearly in Doran v Thompson [1978] I.R. 222, where Griffin J said (at page 230):
“ Where one party has, by his words or conduct, made to the other a clear and unambiguous promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, and the other party has acted on it by altering his position to his detriment, it is well settled that the one who gave the promise or assurance cannot afterwards be allowed to revert to their previous legal relations as if no such promise or assurance had been made by him, and that he may be restrained in equity from acting inconsistently with such promise or assurance.”
43. Kenny J, at page 233, cited as being correct the statement of the law on promissory estoppel at page 563 of the 27th edition (1973) of Snell’s Principles of Equity which reads:—
“Where by his words or conduct one party to a transaction makes to the other an unambiguous promise or assurance which is intended to affect the legal relations between them (whether contractual or otherwise) and the other party acts upon it, altering his position to his detriment , the party making the promise or assurance will not be permitted to act inconsistently with it. ” (emphasis added in each case).
44. Turning to the facts of the present case, I think the letter of 1 st October 1993 is well capable of qualifying as the type of unambiguous promise or assurance contemplated by the doctrine of promissory estoppel. It told the applicant simply and directly that his vessel would be acceptable for replacement purposes. The applicant does not, however, satisfy the second requirement. The facts to which I have referred in rejecting his claim based on legitimate expectations apply with greater force in the present context.
45. The applicant frankly accepted at all stages that he had not acted on foot of this letter. He did not change his position in any material way. It was not inequitable, therefore, for the Minister to withdraw the offer contained in that letter to treat the applicant as being part of the demersal sector and entitled to use his tonnage for replacement.
46. I would accordingly dismiss the appeal.
Cullen v. Cullen [1962] IR 268
Kenny J.
“It seems to me that this was a statement of intention by the plaintiff of what he proposed to do. He offered to do this because he wanted to retain his liberty and to avoid arrest under the order made under the Mental Treatment Act, 1945. Mr. Matheson has relied on the decision in Dillwyn v. Llewelyn (1) as an authority for the proposition that the Court should now compel the plaintiff to transfer the lands and premises at Adamstown to Mrs. Cullen. The case is an authority for the proposition that a person claiming under a voluntary agreement will not be assisted by a Court of equity but that the subsequent acts of the donor may give the donee a ground of claim which he did not acquire from the original gift. In that case a father had told his son (the plaintiff) that he should live near him and had offered him a farm in order that the plaintiff might build a house: there was a written memo in which the father confirmed that it was his wish that his widow should give the lands to his son so that he would have a house. The plaintiff expended a large sum of money in building a house on the lands. Lord Westbury held that the making of the promise to give the lands coupled with the knowledge that the plaintiff had spent a considerable sum of money in building the house on the lands gave the plaintiff an equity to call on those claiming through the father to complete the gift. In this case, however, the only act relied on by Mrs. Cullen to create the equity is the putting of £403 into the business on Mr. Lawton’s suggestion; she has, however, been in receipt of the profits of the business since the 6th June, 1959, and these are considerably more than the sum which she paid in. Moreover, the balance sheet of the business as at the 31st December, 1960, shows a sum of £680 16s. 2d. to the credit of the bank account (I assume that this is the bank account in her name) and she could at any time since January, 1960, have repaid out of the profits of the business the monies advanced by her. The equity referred to by Lord Westbury is a discretionary one and when I consider the circumstances in which the plaintiff made the statement that he was about to transfer the property at Adamstown to his wife and that he made it because he believed that it was the only way by which he could remain free, I have no doubt whatever that it would be grossly inequitable to regard Mrs. Cullen as being entitled to a transfer of the property at Adamstown or as having acquired any proprietary interest, legal or equitable, in the property as a result of what was said. The use by Mrs. Cullen of her own monies for the running of the business, particularly when she could have repaid this advance at any time, does not, in my opinion, create any claim in conscience or in equity which the Court should enforce or give any ground for disregarding the general principle that equity will not aid an imperfect gift. As Mrs. Cullen has no proprietary interest in the property the defendants cannot shelter behind her permission to them or her employment of them in the business. A further ground relied on was that the plaintiff made no provision for Mrs. Cullen when he left, that she had to run the business to provide maintenance for herself and that she was accordingly entitled to employ the defendants and to license them to reside in the premises. In the circumstances I think that she was entitled to conduct the business when the plaintiff left, but she had no authority to employ either of the defendants in the business or to license them to reside in the premises after the letters of the 14th September.
A further justification pleaded in para. 8 is that the plaintiff made an oral contract with Patrick Cullen in 1954 under which Patrick Cullen agreed to reside in the dwelling-house at Adamstown and to work in the business and that the contract has not been terminated by the plaintiff. There was no evidence to support this and I decline to infer such a contract.
……
I come now to deal with the ownership of the site on which the house, won by Mrs. Cullen in the competition in the “Sunday Press,” had been erected. However unfortunate the Cullens may have been in their domestic relations, they have been singularly fortunate in competitions; Sean had won a substantial prize in the Hospitals Sweepstake and in March or April, 1959, Mrs. Cullen had won a fully furnished portable house. She gave this house to Martin and the plaintiff knew this in April, 1959. Martin intended to erect the house on his lands at Coolnagreine and, when representatives from the”Sunday Press” visited Adamstown in April, 1959, a site on his farm at Coolnagreine was selected. Shortly after this, Martin began to prepare the site for the house and did some work on the foundations. He had offered the house to his father before the 6th June, 1959, as he thought that his father did not approve of the position selected for it, but the offer was not accepted. When the plaintiff left Adamstown on the 6th June, Mrs. Cullen decided that she would like to have the house erected on the farm at Adamstown and, when she was speaking to Mr. Lawton, she told him this and sought her husband’s permission for it. Mr. Lawton said that he did not see why the permission was necessary as the property at Adamstown would be transferred to her; she persisted and Mr. Lawton undertook that he would write to Father Kavanagh and would telephone to her when he got a reply. A few days afterwards Mr. Lawton wrote to Father Kavanagh who discussed the matter with the plaintiff. The plaintiff told him that it was not necessary to discuss the matter because he was making over the place at Adamstown to Mrs. Cullen and that she could put the house where she liked. This discussion took place on the 13th or 14th June. Father Kavanagh gave this information to Mr. Lawton who then telephoned Mrs. Cullen and told her that she could go ahead with “the project as mentioned” and put the house up wherever she liked. Mrs. Cullen sent a message to Martin that he was not to go on with the preparation of the site on his farm and was to put up the house on the lands at Adamstown. He then stopped the preparation of the site on his own lands and began to work on a site for the house at Adamstown. He employed a man to work with him and spent about £200 in installing a water supply and building the foundations. The house arrived at the end of July and was assembled and erected in August. Some time after it was erected Martin heard that his father objected to its being placed at Adamstown and in August, 1960, Martin, who was about to get married, wrote to his father asking him to attend the wedding, and added:””I am hoping that you will give me the site the bungalow is on and your blessing.”
I am satisfied that Martin would have erected the house on his own lands if the plaintiff had not given Mrs. Cullen permission to put up the house at Adamstown and that he erected the house on the lands at Adamstown because he relied on the permission given. I am convinced that the plaintiff knew at all times that Mrs. Cullen had given the house to Martin and that the house was being erected for Martin to live in. It would cost £700 at least to take it down now and to lay foundations for it elsewhere; the cost of the decoration of the house which would be made necessary by its removal would be all additional £100. It has been submitted on the authority of Ramsden v. Dyson (1) that Martin Cullen has acquired a right to compel the plaintiff to transfer to him the site on which the house now stands. That case decides that if a stranger begins to build on land which he thinks is his and the real owner, seeing the mistake, abstains from correcting it and leaves him to continue, equity will not afterwards allow the real owner to assert his title to the land; but that if a stranger builds on land knowing it to be the
property of another, equity will not prevent the real owner from claiming the lands afterwards. In this case, however, Martin knew that the land belonged to the plaintiff and his letter written in August, 1960, supports this view. In my opinion the argument based on Ramsden v. Dyson (1) is incorrect.
I am of opinion, however, that the plaintiff is estopped by his conduct in giving consent to the erection of the house at Adamstown when he knew that the house had been given to Martin and that the plaintiff cannot now assert any title to the site on which the house has been erected. There was a representation by him that he consented to this and that representation was acted on by Martin who spent £200 at least in erecting the house and gave a considerable amount of his time to this work. It seems to me that the principle stated by Denning J. in Central London Property Trust, Ltd. v. High Trees House, Ltd. (2) and affirmed by the same Judge when he was a Lord Justice of Appeal in Lyle-Meller v. Lewis & Co. (Westminster), Ltd. (3) applies to this aspect of the case and that the plaintiff cannot withdraw the permission which he gave for the erection of the house on the lands at Adamstown and cannot now assert a title to the site on which the house stands or to the house. While the estoppel created by the plaintiff’s conduct prevents him asserting a title to the site, it does not give Martin a right to require the plaintiff to transfer the site to him: if I had jurisdiction to make such an order I would do so, but I do not think I have. However, neither the plaintiff nor any person claiming through him can now successfully assert a title to the lands on which the house is built by any proceedings and, at the end of the twelve-year period from the date when the erection of the bungalow commenced, Martin will be able to bring a successful application under s. 52 of the Registration of Title Act, 1891, for his registration as owner. If this case goes further, I hope that it will be held that I was wrong in deciding that I had no power to order the plaintiff to transfer the site to Martin. There is a claim in the pleadings that Martin has acquired a lien on the lands but this was not argued. I must accordingly dismiss the counterclaim.
There will be judgment on the plaintiff’s claim for £50, damages, against Patrick Cullen and for £50, damages, against Martin Cullen, both up to this date.
I have considered the question of costs. The plaintiff claimed an injunction and has failed on that part of his claim. Much of the time which the hearing of the action took was
Smyth v. Halpin [1997] 2 ILRM 38
Geoghegan J.
“The plaintiff does not and indeed cannot ground his action upon contract. He does not suggest that there was any agreement on his part to confer any benefit on his father in return for making over the dwelling house. The fact that the plaintiff has not tried to make that very convenient case is to his overall credit in my view when assessing the credibility of his evidence. It might have been easy for him to have suggested that the father indicated that it would suit him if the plaintiff could look after him and his wife in their old age and that in return for that he would allow him build an extension to the house for immediate living in and give him the entire house in due course along with the land. Although such an agreement would not have been in writing or indeed evidenced by writing, it might have been quite a simple matter to establish it through acts of part performance. However, none of that arises. The plaintiff does not suggest that there was a contract. His claim to have the reversionary interest transferred to him is an equitable claim based on the principle of proprietary estoppel. The question I have had to consider therefore is whether in the light of the authorities on proprietary estoppel the facts of this case give rise to a proper recourse to that principle and if so, whether the application of the principle of proprietary estoppel in this case actually requires that this Court make an order directing a transfer of the reversionary interest. The granting of the latter remedy would effectively involve permitting the estoppel to be used as a sword and not merely a shield and would also be an exceptional inroad into the well established principle that equity will not complete an uncompleted gift.
The kind of proprietary estoppel invoked in this case has its origins in Dillwyn v. Llewelyn (1862) 4 De GF & J 517 . In that case a father had placed a son in possession of land and at the same time signed a document which was intended to be a conveyance of the land to him but proved not to be sufficient for the purpose. The son, with the full approval of the father, built a house on the land and occupied it as his own residence. After the father’s death, he claimed and obtained a court declaration that he was beneficially entitled to the land and an order requiring the trustee to whom the father had devised the land under his will to convey it to him. Two important principles emerged from that case. First of all the extent of the estate to be handed over was determined not by what was in the document but by the nature of the transaction and the entitlement then to that estate arose by reason of the expenditure acquiescence. The same principle has been applied in a number of other English cases. In Inwards v. Baker [1965] 1 All ER 446 , for instance, the Court of Appeal held that in a case where a father had suggested to his son that he build on his land which the son then did largely at his own expense, the son had an equity to remain in the house for the rest of his life notwithstanding that the father in fact left all his property to a lady with whom he had lived for some years and the two children he had by her. The son who lived in the house in that case was unmarried and the court took the view that a life interest was sufficient. The following passage from the judgment of Lord Denning MR at p. 449 illustrates the position:
In this case, it is quite plain that the father allowed an expectation to be created in the defendant’s mind that this bungalow was to be his home. It was to be his home for his life or, at all events, his home as long as he wished it to remain his home. It seems to me that, in the light of that equity, the father could not in 1932 have turned to the defendant and said ‘you’re to go, it is my land and my house’ . Nor could he at any time thereafter so long as the defendant wanted it as his home.
Counsel for the plaintiffs put the case of a purchaser. He suggested that the father could sell the land to a purchaser who would get the defendant out but I think that any purchaser who took with notice would clearly be bound by the equity. So here, too, the plaintiffs, the successors in title of the father, are clearly themselves bound by this equity. It is an equity well recognised in law. It arises from the expenditure of money by a person in actual occupation of land when he is led to believe that, as a result of that expenditure he will be allowed to remain there. It is for the court to say in what way the equity can be satisfied. I am quite clear in this case that it can be satisfied by holding that the defendant can remain there as long as he desires to use it as his home.
The important sentence in that passage is:
It is for the court to say in what way the equity can be satisfied.
As I understand the authorities, the court is at large as to how best it will protect the equity and of course it has to consider what the equity is. In this case the clear expectation on the part of Mr Smyth was that he would have a fee simple in the entire house. The protection of the equity arising from the expenditure therefore requires in this case that an order be made by this Court directing a conveyance of that interest to him. The same principle is well enunciated in the judgment of Cumming-Bruce LJ in Pascoe v. Turner [1979] 2 All ER 945 at p. 950 where the following passage appears:
So the principle to be applied is that the court should consider all the circumstances and the counter-claimant having at law no perfected gift or licence other than a licence revocable at will, the court must decide what is the minimum equity to do justice to her, having regard to the way in which she changed her position for the worse, by reason of the acquiescence and encouragement of the legal owner. The defendant submits that the only appropriate way in which the equity can here be satisfied is by perfecting the imperfect gift as was done in Dillwyn v. Llewelyn .
Later on in the judgment at p. 951, Cumming-Bruce LJ had this to say:
We are satisfied that the problem of remedy on the facts resolves itself into a choice between two alternatives; should the equity be satisfied by a licence to the defendant to occupy the house for her lifetime or should there be a transfer to her of the fee simple?
The main consideration pointing to a licence for her lifetime is that she did not, by her case at the hearing, seek to establish that she had spent more money or done more work in the house than she would have done had she believed that she had only a licence to live there for her lifetime. But the court must be cautious about drawing any inference from what she did not give in evidence as the hypothesis put is one that manifestly never occurred to her. Then it may be reasonably held that her expenditure and effort can hardly be regarded as comparable to the change of position of those who have constructed buildings on land over which they had no legal rights.
The court went on to take the view that the equity established in that case could only be satisfied by granting a remedy which ensured to the defendants security of tenure and quiet enjoyment. The court therefore ordered that the gift be perfected by the execution of the appropriate conveyance.
In my view, the plaintiff has clearly established that he falls within these principles. The only remaining question to be considered is the right of way. I am entirely satisfied that having regard to all the surrounding circumstances of the case, the right of way being referred to in the will is the way which has been used by the plaintiff close to the house. It is unfortunate that there is now bad feeling between the plaintiff on the one hand and his mother and sister on the other hand who are occupying the original part of the house. I would hope therefore that the plaintiff would be as considerate and tactful as he can in the use of the right of way but I will declare his entitlement to it as I do not find it credible that the way referred to in the will is the other right of way for the benefit of the farm.
I will direct that an appropriate deed or instrument be executed to effect the vesting of the remainder interest in the house in the plaintiff and I will discuss further with counsel as to the nature of that document and as to who are to be the parties to it.”
An Cumann Peile Boitheimeach Teorenta -v- Albion Properties Ltd & Ors
[2008] IEHC 447 (07 November 2008)
JUDGMENT of Mr. Justice John Edwards delivered on the 7th day of November, 2008.
Introduction
These proceedings concern certain lands and premises in a suburb of Dublin which is known formally as Phibsborough, although this name is sometimes informally abbreviated to Phibsboro. Both names are to be found in documents that have been produced in evidence in this case, and both names are used in this judgment. They are used interchangeably and nothing turns on whether the formal or informal name is used in any particular instance.
The plaintiff is a company limited by guarantee. The main object of that company, as expressed in its memorandum of association, is to promote the game of association football, through a football club known as “The Bohemian Football Club” in the premises known as Dalymount Park, Phibsborough, Dublin and other premises which may be acquired for that purpose. The premises known as Dalymount Park constitutes a substantial football stadium in the heart of Dublin 7 and it is, and has for generations been, the home ground of the Bohemian Football Club. Dalymount Park is in the ownership of the plaintiff company as are certain surrounding lands.
Dalymount Park is adjoined along its eastern boundary by a shopping centre, owned and operated by the first named defendant, and known as the Phibsboro Shopping Centre. The second named defendant is a property development company. The third named defendant is a business man and property developer and he is, and was at all material times, the principal beneficial owner of the first and second named defendants.
The proceedings herein arise out of a course of dealings between the plaintiff and the defendants or some combination of them. Because of a degree of uncertainty on the part of the plaintiff concerning the exact legal person with whom it was dealing the plaintiff has, on an ex-abundante cautela basis, sued all three defendants herein. Nothing substantive turns on this. Although it is pleaded that the first and third named defendants are incorrectly sued the point was not pressed before me. All of the defendants have been represented by the same legal team and a unitary case has been put forward on their behalf. In the circumstances I propose to defer making any ruling on the pleading point until after I have delivered my judgment. However, for convenience I propose hereinafter to refer to the plaintiff company simply as “Bohemians” and to the defendants collectively simply as “Albion”.
The course of dealings in question took place between 2001 and 2006 respectively and concerned the potential sale of part of Dalymount Park to Albion. Bohemians contend that the dealings between the parties never moved beyond pre-contractual negotiations and there was no concluded agreement between the parties. They contend that by October, 2006 such negotiations as existed between the parties had broken down and proceeded no further.
It is a matter of some significance that subsequent to this Bohemians entered into an agreement with a third party, namely Daninger Limited, for the sale of the entirety of Dalymount Park to that company for a consideration of €35 million in cash plus the provision of a new stadium (in an alternative location on the north side of Dublin), the entire package representing a total consideration in the order of €67.5 million.
Conversely, Albion contends that an agreement was concluded between the parties as early as February of 2003 and that a number of further agreements varying that first agreement were subsequently concluded.
Arising out of all of this, Albion issued High Court proceedings against Bohemians seeking specific performance of the said alleged agreements. These proceedings bore record number 2007 Number 4759P. Within days of this, Bohemians issued its own High Court proceedings against Albion, bearing record number 2007 No. 4902P (the record no. of the present proceedings), claiming a declaration that there is no concluded or enforceable contract in existence between the parties in relation to the sale of any lands of the plaintiff at or in the vicinity of Dalymount Park. Bohemians proceedings further claimed an injunction restraining Albion from asserting that they have a concluded or enforceable contract for the sale of any lands of the plaintiff at or in the vicinity of Dalymount Park, or from seeking to interfere with the plaintiff’s contractual negotiations or contract with the third party. Various ancillary reliefs were also sought on both proceedings.
It was then sensibly decided between the parties that it was not desirable to allow both actions proceed independently. Accordingly the proceedings were de facto reconstituted on the basis that the action initiated by Albion would be pursued by way of a counterclaim to the Bohemians proceedings.
The course of dealings between the parties as established in evidence
The Phibsboro Shopping Centre was originally developed by Gaylon Weston when he came to Ireland in the 1960s. The initial anchor tenant was Quinnsworth. The shopping centre was managed for many, many years by Gaylon Weston’s agent, Tom Murphy, through a company known as Chatham Management Limited. When Quinnsworth sold out to Tesco, the shopping centre was put up for sale and it was ultimately acquired by Albion. Thereafter Chatham Management Limited continued to run the Phibsboro Shopping Centre on behalf of Albion. Tom Murphy remained at the helm of Chatham Management Limited until about four years ago when he was tragically killed in a car crash. At some point in the latter half of the 1990s Tom Murphy suggested to Pascal Conroy that Albion should undertake a redevelopment of the Phibsboro Shopping Centre. Mr. Conroy was receptive to the idea and in furtherance of it, Albion set about the acquisition of additional land.
In or about 1998 (there was some inconsistent evidence as to exactly when, but nothing turns on it) Bohemians sold the east terrace of Dalymount Park, save for a strip of ground 1.8m wide nearest the pitch, to Albion. Since purchasing the east terrace Albion has not used it for any purpose and they have allowed Bohemians continue to use it on a temporary basis as a gesture of good will towards the club. Accordingly, for some time after the sale Bohemians used it to accommodate spectators at football matches as they had in the past. However, they eventually had to stop using it for that purpose due to safety concerns arising from the structure’s age and condition. Since then Bohemians have used it for the more limited purposes of accommodating advertising hoardings and providing camera positions for television and film crews. A site on the North Circular Road, referred to as the Kelly’s Carpetdrome site, was also acquired by Albion. Having acquired these additional properties, Albion engaged a firm of architects, namely Project Architects, to do a feasibility study in relation to the proposed redevelopment of the shopping centre. Tesco, the current anchor tenant, was approached to ascertain its attitude. It should be pointed out that although Albion owns most of the shopping centre, Tesco actually own their own shop plus a small yard at the back. Tesco were quite co-operative and enthusiastic about the proposed redevelopment of the shopping centre. However, they made it plain that if it was to happen they would require to be provided with proper loading and unloading facilities. The existing facilities available to them for these activities were sub optimal. They wanted any redevelopment to incorporate a docking facility for articulated lorries and sufficient clear space in front of this to provide a safe turning circle for these lorries to enable them to manoeuvre safely and without creating an undue hazard to any persons, vehicles or property in the vicinity. The feasibility study indicated that Albion would need to acquire a further piece of land to accommodate Tesco’s requirements. A piece of land owned by Bohemians adjacent to the Connaught Street entrance to Dalymount Park was identified as being suitable and Bohemians were approached by Tom Murphy in 2001 to see if they would agree to sell it to Albion. Bohemians responded positively to Albion’s invitation to meet and the parties proceeded to enter into negotiations. Initially Albion was represented by Tom Murphy in the negotiations. For their part, Bohemians were represented by Mr. Felim O’Reilly. Mr. O’Reilly was the President of the Bohemian Football Club Limited, from in or about 1999, until February 2006. Mr. O’Reilly is also a solicitor and he is a partner in the firm of FH O’Reilly and Co., Solicitors. The firm of FH O’Reilly and Co. acts for the Bohemian Football Club Limited. Although they had only recently opened negotiations with Bohemians, Albion’s representatives were impatient to lodge a planning application in respect of their proposed shopping centre redevelopment. The proposed redevelopment was to be a major project costing in the region of €200 million. From June 2001 onwards, and in advance of any agreement, Mr. O’Reilly was pressed repeatedly by Tom Murphy to provide Albion with a letter consenting to Albion including part of Bohemian’s property at the Connaught Street entrance to Dalymount Park in their planning application for the redevelopment of Phibsboro Shopping Centre. However, Mr. O’Reilly resolutely resisted the pressure to do so and negotiations continued. As both sides had particular requirements with respect to the nature and extent of the parcel at issue it was decided that their respective architects would meet and liaise with a view to deciding on a parcel that would meet the requirements of both sides. Unfortunately they were unsuccessful. Accordingly, on the 18th October, 2001, Tom Murphy wrote to Felim O’Reilly in an attempt to progress matters. His letter ( as with most of the inter-partes correspondence) was headed “Subject to contract/contract denied”. This letter proffered a map covering part of the Phibsboro Shopping Centre and Dalymount Park with a hatched area representing the lands which Albion wished to buy. The hatched area was stated on the map to represent an area of 266.5 sq m. This map clearly indicated the general location, extent and shape of the parcel under discussion, but it was not sufficiently detailed for precise identification purposes. Nevertheless it provided the basis for further progress in the stalled negotiations and by 20th November, 2001 the parties had agreed on a monetary consideration of IR£600,000 (€761,843) in respect of the proposed sale. Now it appears that in or about this time Mr. O’Reilly had also canvassed with Mr. Conroy the possibility that by way of further consideration Albion would provide Bohemians with corporate boxes overlooking Dalymount Park within the redeveloped shopping centre building. Mr. Conroy was not prepared to commit himself on this but did agree to look into the feasibility of providing corporate boxes. Following that, there was a course of correspondence over the next five or six weeks between Tom Murphy and Felim O’Reilly focusing largely on the amount of the deposit to be paid by Albion and on what proportion of the deposit was to be non-refundable. These proved to be extremely difficult issues to negotiate and in early January 2002, the negotiations broke down. However, there was a re-engagement in mid-January 2002, and eventually an agreement was reached for the payment by Albion to Bohemians of a non-refundable deposit of IR£80,000 (€101,582). Following this agreement Albion made a payment on account of IR£50,000 (€63,486) to Bohemians in respect of the deposit by means of two cheques of IR£25,000 (€31,743). One cheque was immediately negotiable and the other was post-dated to a date approximately a month later. The parties then instructed Albion’s solicitors, Messrs Hughes Murphy Walsh and Co., to draw up a contract in writing. Upon receiving these instructions Tim Ryan, solicitor, of that firm initiated a course of correspondence with John McDonald of F. H. O’Reilly & Co., Bohemians’ solicitors, seeking to clarify various aspects of the transaction. The initiating letter was dated the 8th of March, 2002. It was headed “Subject to contract/contract denied” and concluded with a paragraph stating:
“In the meantime kindly note that we have no instructions to bind our client to any contract and that no contract shall exist or be deemed to exist until contracts are executed, exchanged and a contract deposit furnished.”
Among the various issues raised by Mr. Ryan was the need for confirmation and identification of the parcel in sale, the question of the precise nature of the interest to be granted or conveyed (i.e. a licence or a leasehold estate) and when the balance of the agreed deposit should be paid. The evidence makes it clear that on the other side John McDonald also had concerns on behalf of his clients that he felt needed to be addressed. It is important to note in this context that at this point in time Bohemians had lodged, and were awaiting a decision on, a planning application for a new North Stand at Dalymount Park. It was vital to the success of this proposal that Bohemians should be able to get a Fire Safety Certificate in respect of their new stand, and this meant that it was essential for Bohemian’s to retain the Connaught Street entrance to Dalymount Park for use as an emergency exit. John McDonald was concerned on behalf of his clients to ensure that any sale of land to Albion would not prejudice Bohemian’s ability to get their Fire Safety Certificate. Moreover, it remained to be clarified if Albion was agreeable in principle to providing the requested corporate boxes, and if so on what basis it would do so. Albion’s Solicitors proposed that a meeting should be held, to be attended by the parties’ representatives and relevant professional advisers, for the purpose of addressing these and other issues. This suggestion met with agreement and a meeting was duly convened on the 24th May, 2002. It was attended by Felim O’Reilly, Pascal Conroy, Tom Murphy, John McDonald, Solicitor, of FH O’Reilly and Co., Tim Ryan, Solicitor, of Hughes, Murphy, Walsh and Co., as well as by representatives of the parties respective Architects’ firms. In his evidence before the High Court John McDonald said of this meeting that:
“It was really to see what the parameters were. To see if we could be in a position to prepare documentation which would ultimately lead to a contract.”
In the course of the meeting a further map labelled “corrected map” and dated 24th May, 2002, was produced. This superceded the map that had earlier been produced by Tom Murphy and the new map showed two parcels on it coloured pink and yellow respectively. After the meeting John McDonald dictated a detailed memorandum concerning what was discussed. This memorandum was produced in evidence before me and, as its accuracy was not challenged, it bears recitation:-
“Memo
To the file of Bohemians Football Club and Chatham Development
Re: Minutes of meeting
Date 24th May, 2002.
In attendance were Felim O’Reilly, Tom Breen, Tom Murphy, Tim Ryan, Solicitor, Pat (Albion’s Engineer), Nicola (Albion’s Architects), Pascal Conroy of Albion Properties and John McDonald.
On the question of the map which was furnished it was clarified that the map furnished by Tom Murphy and hatched black did not represent the extent of the property which Albion were seeking and that the map named corrected map dated 24th May, 2002, is in fact the map showing the property which they require coloured pink and yellow at the north eastern corner (‘the map’). It includes that property coloured yellow which was not on Tom Murphy’s plan. They will also require the reservoir, pump house and man hole. The switch room will be relocated to Albion’s land but as it exists at the moment will be moved. Albion will be responsible for obtaining the ESB’s consent to the moving of the sub-station and granting the necessary rights of way.
It was agreed that heads of agreement would be drawn up at this stage and Albion stated that at minimum they would require a long lease over the property at the north eastern corner. Discussions [took place] on the basis of whether we were in a position to allow for that having regard to fire safety requirements on exiting the ground and John McDonald expressed the view that it would not be possible to give exclusive possession to Albion in respect of that particular portion. It was agreed that consent would be given to allow Albion lodge their application to include the portion that they are seeking but without prejudice to Bohemians title to the property. At the same time Bohemians would lodge an application showing a revised north stand and excluding that portion which it was proposed could be sold or licensed to Albion to ascertain whether in fact Bohemians would be in a position to obtain planning and a fire safety certificate in respect of the balance of the property on the north side. It was agreed also that Bohemians would lodge an application for a fire safety certificate at the same time as the application for planning. Both the costs of the planning permission and of the fire safety application would be subject to approval by Pascal Conroy [and] the cost of same be borne by Pascal Conroy.
He pointed out that the current application in with the planners by Bohemians for the north stand included a portion of the ‘pink’ property on the map.
Albion confirms that they had included in their plans a basement level under the property which extended 4m in depth and that they would require a minimum of 6m from the ground level up. It was also agreed that a time limit would be put into the heads of agreement during which planning permission must be obtained by both Bohemians and Pascal Conroy. A time of 2 years and 6 months was suggested but this has yet to be agreed.
It was agreed that Pascal’s planning could be lodged as soon as the plans are agreed by Bohemians. It was agreed that Bohemians would amend their existing plans and lodge a new planning application to run concurrently with their existing application within 3 months. Pascal’s plans are to incorporate replacement of one of the floodlights pylons (yet to be erected) and also provide for some form of corporate boxes for Bohemians. The plans would also be amended to ensure that Dalymount is not overlooked.
It was also pointed out that Bohemians would proceed with the construction of the lights on their property at this stage for which they have planning permission and if Albion was as successful in obtaining permission then they would have to incorporate into it an application to move one of the Bohemians lights which were on the north eastern portion of the property which they required.
It was agreed that any heads of agreement would be subject to:-
A. A grant of planning permission to Pascal Conroy’s developments issuing within the time limit.
B. A grant of planning permission for Bohemians north stand development issuing within the time limit.
C. Issue of a fire safety certificate for Bohemians north stand development: issuing within the time limit.
D. The corporate box area was discussed and it was agreed that Tom Breen and Nicola meet and liaise and see if an area along the eastern boundary with Bohemians could be provided for at Albion’s expense subject to Bohemians fitting same out to use as a corporate box area, either by recessing or cantilevering.
E. It was agreed that a look would be taken at “Jack’s Gate” at the south eastern boundary of Dalymount where there was an exit onto the adjoining lands of what was effectively Kelly’s Carpetdrome.
It was agreed that a non refundable deposit of £50,000 would paid at this stage together with a non refundable deposit of £30,000 on signing. It was also agreed that the proposed consideration would amount to £600,000.
It was further agreed that all of the outstanding items in the original contract between Albion and Bohemians would be incorporated into any subsequent agreement so as to ensure that they were attended to. End of Memo.”
It should be pointed out that the “corrected map” was in fact a site layout map prepared by Project Architects in connection with the proposed regeneration and extension of Phibsboro Shopping Centre. This map was revised many times over subsequent months and years, but the same colour coding was used consistently throughout all revisions of it, and on related maps and elevations. Moreover, throughout all of their subsequent dealings the parties to this litigation consistently used this map or a revision of it. Accordingly, from here on in the chronology references to “the pink and yellow lands” are to be taken as referring to the lands in sale adjacent to the Connaught Street entrance to Dalymount Park. There will also be reference in due course to certain “blue lands” and these refer to lands in the ownership of Bohemians to the west of the shopping centre and at subterranean level. Further, there will be reference to certain “green lands” in the ownership of Albion where it was proposed that the aforementioned corporate boxes would be located. Finally, there will be a reference to lands in the ownership of Albion and coloured “brown”, representing a proposed right of way to be granted from the North Circular Road to a gate leading into Dalymount Park known as “Jack’s Gate”. (Jack Charlton had been allowed exceptionally to use this gate during his time as Manager of the Republic of Ireland soccer team.)
Following the meeting of the 24th May, 2002 the parties’ solicitors set about attempting to craft heads of agreement. At the same time, the parties’ architects began looking into the feasibility of the proposed corporate boxes. On 12th July, 2002 Mr. O’Reilly forwarded plans drawn up by Bohemian’s architect, Tom Breen, to Tom Murphy so that he might in turn pass them to Albion’s architects. On 16th July, 2002 Albion’s solicitors forwarded draft heads of agreement to Bohemian’s solicitors, the covering letter stressing that Messrs. Hughes Murphy Walsh and Company “have no instructions to bind our client to any agreement and no contract shall exist or deemed to exist until contracts are executed, exchanged and the contracts deposit furnished”. This was the first of many drafts of the proposed heads of agreement. In the meantime Albion, through the agency of Tom Murphy, continued to press Bohemians for a letter of consent to planning. However, this was not immediately forthcoming. There were meetings between representatives of Bohemians and Albion at the end of August, 2002 and again in mid-September, 2002 in the hope that matters might be progressed but little progress was in fact achieved. In early October, 2002, Bohemian’s architect, Tom Breen, produced a fee proposal for agreement by Pascal Conroy of Albion. This proved to be controversial and for months it represented a major sticking point in the on-going negotiations. The end of 2002 came and went but eventually in late January, 2003 agreement was reached on the question of Mr. Breen’s fees. In the interim some progress had also been made on other issues. By 17th February, 2003 John McDonald was in position to produce, and forward to his opposite number Tim Ryan for his approval, a document which he described as “a final draft of the heads of agreement”. As it turned out this was by no means the final draft but it was an important document in as much as it provided the template on which all subsequent revisions were based. The letter forwarding this document was headed “subject to contract/contract denied”, as was the case with every revised version of it.
It will be of assistance if at this point I recite the template document in its entirety:-
“HEADS OF AGREEMENT
Subject to contract/contract denied.
Strictly confidential.
Bohemian Football Limited (Bohs) and Albion Enterprises Limited (Albion).
These heads of agreement are entered into on the …. day of ……. 2003.
PARTIES
1. This agreement is made between An Cumann Peile Boitheimeach Teoranta (Bohemians Football Club Limited) (hereinafter called ‘Bohs’) having its registered office at Dalymount Park in the City of Dublin of the one part and Albion Property Company Limited (hereinafter called ‘Albion’) having its registered office at 2 Herbert Street in the City of Dublin.
HEADS OF AGREEMENT
2. The purpose of this agreement is to record the principal terms and conditions under which it is proposed that a) Albion will acquire from Bohs certain property currently in the ownership of Bohs in order to construct a portion of the development envisaged by Albion on the lands adjoining Dalymount Park for the consideration agreed and b) Bohs shall acquire certain interests in land currently belonging to Albion adjoining Dalymount Park.
IDENTITY
3.1 Subject to the terms hereinafter set out Bohs shall grant to Albion a long lease over the property coloured yellow (“the yellow property”) and pink (“the pink property”) on the map attached hereto (“the map”) to a depth of 4 metres from ground level and to a maximum height of 6 metres above ground level on the yellow property and pink property.
3.2 Bohs shall also grant to Albion a long lease over the reservoir, pump house and manhole retained by Bohs on the property adjoining Dalymount Park as identified on the map but Albion agrees to relocate a suitable reservoir, pump house, service pipes and all necessary manholes on Bohs’ lands at Dalymount Park in a location to be agreed between the parties.
3.3 Albion shall relocate the switch room belonging to Bohs on to Albion’s land and shall grant to Bohs a long lease of same together with all necessary rights of way and wayleaves so as to enable Bohs to have access from and to the said switch room to and from Dalymount Park and for the maintenance, repair and renewing of all conduits and wires thereto and therefrom.
3.4 Bohs shall grant Albion a long lease over the basement levels 1 and O on the land coloured blue (“the blue lands”) on the map to a finished floor level depth of 7 metres.
3.5 Albion will grant to Bohs a long lease of the land coloured green (“the green lands”) on the map above level 1 to height of x metres (this height to be agreed between the respective architects for Albion and Bohs and confirmed by the parties hereto).
3.6 Albion will grant to Bohs a right of way of the area coloured brown on the map (“the right way of way”) leading from Dalymount Park at the gate known or to be known as Jack’s Gate to the North Circular Road. The document creating this right of way shall contain provisions that Bohs shall provide security at Jack’s gate during its use of same. This right of way shall be limited to access by the V.I.P.’s of Bohs and shall not (save in times of emergency when it may be used by the persons attending Dalymount Park) be used for general access from Dalymount Park to North Circular Road.
3.7 Albion shall grant to Bohs an irrevocable license in respect of 5 designated car parking spaces (“the car parking spaces”), the location of which shall be agreed between Albion and Bohs in level 0 of the basement of the green lands and the blue lands together with all necessary rights of ways to enable Bohs gain egress to and access from the car parking spaces.
3.8 Bohs will grant a license to Albion to enter upon the blue lands for a period of 9 months from the date of commencement of construction of the corporate box development (“the corporate box”) on the green lands and blue lands. The document creating this licence shall contain all reasonable indemnities required by Bohs in respect of Dalymount Park and its use so as not to prejudice Bohs in any way whatsoever, including any breach of health and safety legislation, building control regulations, planning legislation and third party liability at Dalymount Park and so not to prejudice the use of Dalymount Park by Bohs in any way whatsoever. The document creating the licence shall also provide for access through the entrance from North Circular Road over the existing car park at the south eastern corner of Dalymount Park provided always that the said car park shall be kept clear of all material on match days and such other days as may be stipulated by Bohs from time to time. The indemnities referred to above shall extend to cover the area of the existing car park.
PLANNING
4.1 It is noted that Bohs have a current application before the Planning Authority for a new North Stand which includes a portion of the pink property and yellow property. It is agreed that Bohs shall lodge a revised application for the North Stand (without withdrawing the existing application) so as to exclude the pink property and the yellow property. The cost of this application including the cost of preparation of same and the planning fees attaching to same shall be discharged by Albion in accordance with the agreed payment schedule “the schedule” attached hereto.
4.2 Bohs shall lodge an application for a fire safety certificate in respect of the revised North Stand referred to above at the same time (or as near as shall be reasonably practicable) as the planning application. Again the cost of this application including the cost of preparation of same and the fees attaching to same shall be discharged by Albion as per the payment schedule.
4.3 Bohs shall consent, without prejudice to their title to the pink property, yellow property, and blue lands to an application for planning permission by Albion over the pink property, the yellow property and the blue lands. Albion shall within 4 months of the date hereof apply for planning permission for their proposed development (“the development”) which planning application shall incorporate the following:-
(a) Permission for a basement to have a finished basement floor level of 4 metres from ground level and for a building with a maximum height of 6 metres above ground level on the pink property and yellow property subject to an agreement between the respective architects for Albion and Bohs on setting a ground level for the pink property and yellow property.
(b) The inclusion of the corporate box on the green lands and blue lands in accordance with the plans agreed between the parties annexed hereto (“the plans”).
(c) An access by Bohs through the gates known or to be known as Jack’s Gate for the V.I.P. guests and as an emergency exit leading to and from North Circular Road.
(d) Sufficient access by Bohs over such parts of the development as may be necessary to and from the car parking spaces.
(e) An application for a seating area and offices over the pink property in accordance with the design agreed on the plans.
(f) An application to relocate such as the flood lights at Dalymount Park as shall be necessary to facilitate the development.
4.4 Albion shall apply for the planning permission for the development (in accordance with a general design submitted to Bohs) and to incorporate the matters set out above within 4 months of the date hereof. This agreement shall be subject to final grant of planning permission being obtained in respect of the development (or such altered development as the parties may agree) within 2 years and 6 months from the date of application.
4.5 It is the intention of Bohs to relocate the existing flood lighting on Dalymount Park in accordance with planning permission obtained in respect of same. If the planning permission referred to above for which Albion shall make application is granted then it will be necessary to relocate one or more of the flood lighting pillars to be erected by Bohs and it is agreed that Albion shall relocate the said flood lighting at Albion’s expense.
WORKS
5. In the event that planning permission shall be obtained for the agreed development s then Albion shall at its own expense:-
(a) Construct and complete to fitting stage only the corporate box within 15 months of the final grant of planning permission to the satisfaction of Bohs Architect. (It is agreed that Bohs will be responsible for the fit out of the said corporate box at its own cost).
(b) Relocate one or more as necessary of the new flood lights at its own expense in accordance with the planning permission to be obtained.
FINANCE
6.1 The fine in respect of the long term Lease to be granted to Albion in respect of the yellow property and pink property shall be €761,843. It is agreed that the terms of this lease shall be agreed prior to the commencement of any works.
6.2 Albion shall on the signing hereof pay to Bohs a non-refundable deposit of €101,582. It is hereby agreed and declared that if this agreement shall not proceed for any reason whatsoever the said money shall remain the sole property of Bohs and shall be deemed to be in that event a consideration for the grant by Bohs of the letter of consent to the application for planning permission by Albion.
6.3 Albion shall discharge on demand at the time and in the manner set out in the schedule the fees, costs and other outlays due to the relevant parties named therein.
6.4 Albion shall discharge upon demand the reasonable legal fees incurred by Bohs in the negotiation and preparation of this agreement and the completion thereof and the negotiation, preparation and completion of all contracts, leases, licences, wayleave agreements and other documents required, entered into, or reasonably envisaged as a result of this agreement and/or matters arising therefrom and shall indemnify Bohs against all reasonable costs incurred as a result of entry into this agreement.
GENERAL
7.1 The agreement the subject, once planning permission has been obtained, to the negotiation in good faith and the preparation and conclusion of all necessary contracts, leases, licences, wayleave agreements and other documents required or reasonably envisaged under the terms hereof.
7.2 Albion shall notify Bohs through their professional advisors of any notices served by the local authority or any requirements of the local authority in relation to the applications for planning permission envisaged by this agreement and shall comply with all reasonable requests of Bohs relating to the inspection of plans, drawings and the receipt of copies thereof including requests for copies in electronic format of such drawings and plans and any other information and any other matters reasonably required so as to enable Bohs to be fully appraised at the state and stage of the planning application.
SCHEDULE
(It is not proposed to recite this).
(The document concludes with provision for signatures and attestation)”
Two days later on the 19th February 2003 Felim O’Reilly wrote to Tom Murphy in the following terms:
“Dear Tom,
We ….. understand that Paschal is agreeable to release the sum of €38,095 being the balance of the non-refundable deposit.
On the assumption that the said monies are paid by Paschal forthwith, and subject to the terms of the heads of agreement, we now enclose herewith consent addressed to the Planning Authority to the application by Albion.”
That letter duly enclosed a letter addressed to the Planning Department of Dublin City Council, also dated the 19th February, 2003 in the following terms:-
“Re development of Phibsboro Shopping Centre and adjoining lands at Dalymount Park.
Dear Sirs,
As solicitors for Bohemian Football Club Limited, we hereby consent to the application by Albion Enterprises Limited for redevelopment of the property at Phibsboro Shopping Centre which incorporates a small portion of the lands owned by Bohemian Football Club Limited on the plans attached hereto.
Yours faithfully.”
In or about the 24th February, 2003, Bohemians received a cheque from Paschal Conroy in the sum of €38,000 in respect of the balance of the non-refundable deposit. Then on the 27th February, 2003, Tom Murphy forwarded maps to John McDonald for Bohemians consideration. On 26th March, 2003, John McDonald wrote back to Tom Murphy pointing out that, following a consideration of those maps, Bohemians were of the view that “the corporate box area as indicated on the map would appear to be mainly constructed on the Bohemian site. This is not what was agreed”. He asked that Mr. Murphy would revert to him with corrected maps by return. Its appears that Albion’s architects were not inclined to accept at first that there was an encroachment on to Bohemians lands and the argument about this dragged for some time. In the meantime, Tom Murphy came back to Felim O’Reilly indicating that, notwithstanding the letter of 19th February, 2003 written on behalf of Bohemians, one of the planners was not totally convinced “that Bohemians and Albion are good friends” and that this person “seemed to believe otherwise”. Mr. Murphy requested that a stronger letter should be written to the Planning Authority. In response Felim O’Reilly wrote to the Chief Planning Officer of Dublin County Council on 6th May, 2003 in the following terms:-
“Re application for planning permission in respect of Phibsboro Town Centre, at Phibsboro Shopping Centre, Dublin 7.
Dear Sir,
We hereby confirm that Bohemians football club are fully supportive of the present application by Albion in respect of the said development. The club believed that this development would be considerably to their advantage and should any queries arise; please do not hesitate to contact the writer of this letter.
Yours sincerely.”
Matters dragged on into the summer and autumn of 2003. In the course of pre-planning meetings Albion encountered significant difficulty in convincing the planners as to the merits of their proposals and concerning Bohemians support for what was proposed. The planners demanded major alterations to the proposed plans. On the 18th December, 2003, Tom Murphy wrote to Felim O’Reilly saying “It looks as if we are in the final stages of planning preparation and then the application will be lodged in early January”. In response Felim O’Reilly wrote back on 19th December, 2003 enquiring “when do you expect we will be in a position to conclude the agreement?” Tom Murphy responded on 22nd December, 2003 with what was effectively a holding letter in which he stated that he would “answer your query as soon as I can get to Paschal”. He promised to contact Mr. O’Reilly again after Christmas.
In reciting this chronology it is important not to leave 2003 without referring to the fact that Bohemians received a further €150,000 from Albion in that year over and above the agreed non-refundable deposit. This was paid in three tranches of €50,000. The first was by a cheque received on 04.07.2003, the second was by cheque received on 24.07.2003 and the third was received by means of two cheques, one for €40,000 received on 31.10.2003 and one for €10,000 received on 07.11.2003. The circumstances in which these were applied for and secured were probed in some detail in cross-examination of Mr. O’Reilly. It was put to Mr. O’Reilly that Bohemians was very short of money in 2003 and he agreed. It was suggested that Mr. O’Reilly had no hesitation in ringing up Mr. Conroy and asking for further payments on account over and above the agreed non-refundable deposit because Bohemians believed they had a deal with Albion, and that Mr. Conroy had no difficulty in paying the money because he also believed that Albion had a deal with Bohemians. Mr. O’Reilly disagreed with this. His evidence was that throughout 2003, he was continuously ringing up Mr. Conroy saying that nothing is happening here, no progress has been made with regard to entering into any form of legally binding agreement and that he was under considerable pressure from the club’s members to bring matters to a conclusion. He claimed that he emphasized to Mr. Conroy that Bohemians officers and committee would cease to believe that “this is ever going to get anywhere unless we receive some further monies on account”, and that it was in that context that Mr. Conroy paid additional monies from time to time. His contention was that it was absolutely vital for Mr. Conroy to keep Bohemians on side and that the extra monies were paid on a pragmatic basis with that objective in mind. When Mr. Conroy came to give evidence he sought to explain the circumstances in which he paid this extra €150,000. His evidence was as follows:-
“Basically Felim and myself had become reasonably good pals. He invited – one day Tottenham Hotspur were playing in Dublin against Bohemians at the club, and he invited me along. He asked me would I like to put my two sons in as mascots. I was delighted to do that, they were delighted too. They were about seven and eight at the time. Then I was brought into the bar afterwards where we met all the players and then I was brought to dinner that night in La Stampa, where I met the directors of the club. We had become good pals. I had met him at the Galway races, I had joined him at the Galway races. So there was a good relationship there and he said to me that the club were in dire straights financially and would I give them some money. I said, well, where are we with this deal. He, well, do not worry about that, that the deal is done as far as I am concerned but we do need the money. So I gave him the money at the time and I trusted Felim, and took him as friend who would not let me down. So basically I did not have a problem paying over the monies”.
On balance, I am inclined to prefer the evidence of Mr. Conroy on this issue. Mr. Conroy was undoubtedly well disposed towards Bohemians at this time. Moreover, Bohemians’ need at this point in time was greater than Albion’s need. Bohemians were very short of money. As against that, although Albion did need the continued support of Bohemians for their proposed redevelopment of the Phibsboro Shopping Centre, they were already holding a letter from Bohemians addressed to the Planning Authorities indicating that Bohemians were supporting the project. While in theory Bohemians could have withdrawn the letter they had no commercial grounds, or other good grounds, for doing so at the time.
Returning to the chronology, it is not clear whether Mr. Murphy did make contact with Mr. O’Reilly after Christmas as he had promised, but in any case nothing of significance happened. No further progress had been made by mid summer of 2004. In July of 2004 there is correspondence from Mr. O’Reilly to Mr. Murphy complaining about the delay, but to no avail. Seemingly, Albion had encountering numerous unforeseen difficulties with its planning application. Eventually by a letter dated the 15th of October, 2004 Albion’s solicitors (now Walsh & Associates, with the same Tim Ryan, solicitor, managing the file) wrote to Bohemian’s solicitors enclosing revised maps. They also enclosed a copy of an “A.I.” (additional information) request that their client had received from Dublin City Council, and sought the assistance of Bohemian’s solicitors in replying to aspects of this, particularly relating to Bohemian’s intentions concerning the future spectator capacity of Dalymount Park and proposed means of access to it and egress from it. F.H. O’Reilly & Co replied by letter of the 6th of December, 2004 headed “Subject to Agreement to be Concluded”. The letter commenced by commenting firstly on the revised maps and pointing out that they were incorrect in that they showed part of the proposed development (namely the subterranean “blue lands”) extending under the existing football pitch. They requested “that you amend this proposal to exclude such development as there is no provision in our Agreement for this.” The letter then went on:
“Our planning permission was granted on a spectator capacity of 20,000. Whilst our Agreement provides for the reduction in the width of the escape route to Connaught Street it is our intention to retain this capacity and to seek a new fire safety certificate based on same. We have asked our fire engineer to prepare a strategy based on this capacity and we will let you have it in two weeks time to inform your response to the planning authorities request for further information.”
Referring to this letter in the course of his evidence Mr. O’Reilly pointed out that at that time the actual lawful capacity of Dalymount Park was only 8,000 spectators. This was because the east stand was unusable and only part of the north stand was usable. Effectively spectators could only be accommodated on two sides of the pitch.
Nothing further of note happened in 2004, save for the fact that Bohemians applied to Albion for, and received on the 16th of November, 2004, a further sum of €50,000 bringing total payments over and above the agreed non-refundable deposit to €200,000 as of the end of 2004.
The chronology then moves into 2005. A further €50,000 was paid by Albion and received by Bohemians on or about the 5th of January, 2005. There were various unsuccessful attempts in January, February and March respectively to convening a meeting between the parties’ respective principals. It appears that the blockage was largely to do with a refusal by Project Architects to accept that their maps were wrong. In the circumstances both they and Pascal Conroy were insistent that a full site survey should be carried in advance of any meeting. It appears from the evidence that a surveyor went out and conducted a site survey on the 28th of May, 2005. It was also suggested that shortly thereafter there was a meeting on site on the 1st of June, 2005 in the course of which the lands were walked. There was some controversy about this. Mr. Conroy testified that he was there, Felim O’Reilly was there, Pat O’Hara was there and Mr. Ryan was there. This was confirmed by Mr. O’Hara. Neither Mr. Conroy nor Mr. O’Hara was certain if John McDonald was there. Mr. McDonald does not appear to have been asked if he was there. It is clear from the evidence that Mr. Breen was not there. Pat O’Hara related that “On that occasion we had one of our legal meetings to deal with the transfer maps, and afterwards we then adjourned to Dalymount and physically walked the actual marked up land. I indicated the various locations of the actual survey points as completed by the surveyor.” Mr. Conroy recalled seeing “stakes in the ground with a nail in the top of them”. He said “we looked at the stakes in the ground and we kind of, as far as I recall, agreed that it would be up to the architects to finalise it.” Mr. O’Reilly contended he that could only vaguely recall such a meeting and he was adamant that he could not recall seeing markings on the pitch. On balance I am satisfied that this meeting did take place on the 1st of June, 2005 and, given its proximity to the 28th of May, 2005 when the survey was carried out, that there were stakes in the ground as described by Mr. Conroy, and that they were pointed out by Mr. O’Hara. Moreover, a further payment of €50,000 from Albion to Bohemians was received on the 2nd of June, 2005. This is consistent with there having been a meeting on the 1st of June. It emerged in the course of the evidence that Felim O’Reilly would frequently use the occasion of such meetings to take Mr. Conroy aside and solicit further payments on account from him in ease of Bohemian’s cash flow difficulties.
The next thing to occur was that a meeting was convened in or about the 6th of June 2005 between the parties’ solicitors at the offices of FH O’Reilly & Co in the hope of making progress on other fronts. In the course of his evidence, Mr. McDonald said:
“ …we met to discuss the outstanding legal matters that would need to be attended to once the various points were resolved in relation to mapping etc. We had a meeting and went through each of the terms of the heads of agreement at that stage.”
Following that meeting, John McDonald of F.H. O’Reilly & Co sent an e-mail to Tim Ryan of Walsh & Associates attaching two documents labelled respectively “List of Points.doc” and “Heads of Agreement FINAL.doc”. The former was based upon a handwritten attendance taken by Mr. McDonald at the meeting and it sets out issues discussed referable to paragraph numbers in the existing draft Heads of Agreement (the template document) and actions required to be taken. The latter was simply a copy of the template document re-dated “2004”, presumably sent with the list of points for convenient reference purposes.
The document entitled List of Points.doc” is in the following terms:
“ 1. 3.1 Pink and yellow lands – identify Bohs gates.
1. 3.1 Has provision been made for office space overhead in planning?
2. 3.1 Are Bohs to retain access to offices over pink and yellow area?
3. 3.2 & 3.3 Has provision been made for relocation of reservoir, pump house, service pipes, manholes and switch room? (Switch room on Albion’s lands).
4. 3.4 Agree terms of lease
5. 3.5 Agree height – agree extent of green area – see “landing” on stairwell.
6. 3.5 Agree terms of lease – service charge and insurance.
7. 3.6 Has ROW been identified?
8. 3.6 Agree terms of ROW
9. 3.7 Agree terms of licence and designation of car park spaces – service charge
10. 3.8 Envisaged date of commencement – Autumn 05?
11. 3.8 Agree terms of licence – How will plant and machinery be moved and to where?
12. 4.1 What is position re : revised application?
13. 4.2 What is position re : fire cert?
14. 4.3 & 4.4 What does planning include. Can we see maps etc. Check a) to f) inclusive of 4.3
15. 4.5 How many floodlights need to be relocated?
16. 5. a) 15 months for construction
b) time limit for relocation of flood lights
17. 6.3 & 6.4 Agree relevant fees to date.”
John McDonald laid considerable emphasis on this list in the course of his evidence as indicating that the issues still outstanding were so extensive and so complex as to negate any suggestion that the parties had a concluded agreement at that stage. It was suggested to him in cross-examination that the document was merely a “to do list” in respect of details “that would, as a matter of certainty, have been worked out” between the solicitors. He would not accept that.
On the 17th of June, 2005 Tim Ryan of Walsh & Associates wrote to John McDonald enclosing a letter of the 16th of June, 2005 from Albion’s architects answering, or suggesting answers, to many of the queries raised in the document entitled “List of Points.doc”. The letter suggested that John McDonald should liaise with Bohemians’ architect, following which it was envisaged the solicitors should meet again. However, what happened next was that there was a re-engagement by the principals on both sides. On the 14th of July, 2005 a meeting was held at the offices of FH O’Reilly & Co, Solicitors, in the hope of breaking the impasse. The meeting was attended by Felim O’Reilly, Pascal Conroy, Pat O’Hara (of Project Architects), Tom Breen (Bohemians Architect), John McDonald and Tim Ryan. Unfortunately the meeting was a fraught one and it ended in a stand off. There was disagreement on a range of issues but the most serious dispute related to the proposed corporate boxes. Having committed in principle to building corporate boxes for Bohemians Mr. Conroy had discovered, upon looking into the practicalities of the proposal, that it could cost him up to €2 million to do so, and that to meet the proposed 15 months timescale suggested in the draft Heads of Agreement would be “quite difficult logistically”. He outlined his concerns at the meeting and in doing so became engaged in a serious row with Bohemian’s architect, Tom Breen. It is quite clear to the Court from a consideration of all of the evidence in the case that the relationship between Pascal Conroy and Tom Breen has frequently been difficult and tetchy, and that a jaundiced view which Mr. Conroy came to have of Mr. Breen most likely had its genesis in the protracted wrangling which had occurred over the previously mentioned controversial fee proposal of October 2002. At any rate, Tim Ryan, solicitor’s, minute of the meeting of the 14th of July, 2005 vividly records what happened at that meeting:
“A major row then broke out at the meeting in relation to clause 5 between Pascal Conroy and Tom Breen. Pascal indicated that there was no way that he could construct and complete the fitting out stage of the corporate boxes within 15 months of the final grant of permission. He pointed out that it will take between four and six months to get a Fire Certificate and then there will be demolition and piling works before the construction could even commence. He further indicated that he may have a problem with getting tenants to vacate. He even suggested that if the economic climate was not appropriate at the time of the Grant of Planning Permission….then he might not want to proceed for a couple of years.
Solicitors for Bohemians were not happy with this state of affairs. Tom Breen suggested that the whole thing could be easily done within 15 months and indeed that the corporate boxes could be constructed within twenty six weeks. With this, Pascal Conroy told Mr. Breen that he hadn’t a clue what he was talking about and he stormed out of the meeting. The parties continued with the meeting and it was suggested that Pat O’Hara will revert to Pascal Conroy and come back to us. It was suggested that the meeting would be reconvened for the next Thursday.
In the meantime I spoke with Pascal by telephone in the afternoon and he indicated that he is not prepared any dateline (sic) into this Agreement in relation to the construction of corporate boxes and that Bohemians could take it or leave it.”
The minutes of a meeting of the Directors of Bohemians Football Club held four days later on the 18th of July 2005 were produced in evidence and are instructive as to the attitude of Bohemians at this time. The relevant minute states:
“FOR [Felim O’Reilly] updated the board re Pascal Conroy situation as this impacts almost every other financial area. Following meeting FOR attended with Pascal last week it appears that the corporate boxes will not commence until 12 months after planning permission granted. Issue of Fire Certificate main part of this delay. They hope to have planning permission in September. Further meeting with P.C. to be held on Wednesday 20th July. FOR to try to meet with him alone and to pursue some more funds on grounds of initial contract broken.”
It is important to contextualise this document by saying that the evidence establishes that at this time Bohemians was continuing to experience serious cash flow difficulties, and that the club remained desperately in need of money. Clearly, Mr. O’Reilly did not regard the row as representing a serious set-back. Rather he saw in it the opportunity to secure the payment of further monies on account from Albion. The defendants point to this minute as being evidence of a confidence on Mr. O’Reilly’s part that Bohemians and Albion had concluded a firm agreement, and they say that this confidence was reflected by his use of the word “contract”. Under cross –examination about this minute Mr. O’Reilly denied that the minute was accurate saying “I wouldn’t have used the word ‘contract’”. Moreover, he was emphatic in asserting in that he did not regard Bohemians as having a firm deal with Albion. Notwithstanding Mr. O’Reilly’s testimony, I regard the defendants interpretation as being a reasonable one, and I am satisfied that it is correct. Confident that Bohemians and Albion had an existing deal, Mr. O’Reilly’s attitude was that if Albion wanted a variation to what they had agreed then they could have it, but only at a price, namely, by having to pay more money up front.
Continuing with the chronology, a further attendance of Tim Ryan, solicitor, was produced. This details separate conversations he had with Pascal Conroy and Felim O’Reilly, respectively, on the 20th of July, 2005 (two days after the Bohemians board meeting). It states:
“I spoke with Pascal Conroy today, 20th July in relation to Bohemian Football Club.
1. He insists that he will not change his mind on his objection to a 15 month deadline being put in the completion of the boxes.
2. He wants to see the papers where he agreed a fee of £50,000 with Tom Breen for his architectural fees (Felim O’Reilly says that he met Tom Breen directly and this was agreed and that in fact there is partial payment and acknowledgement thereof)
3. There is a gate which Bohemians Club opened (or widened) between Kelly’s Car Park and Bohemians Football Club for the purposes of building the south stand. He wants this re-instated.
I spoke to Felim O’Reilly after that and he insisted that he is going to leave Pascal ‘sit on it’. He is not going to allow Bohemians Football Club to be bullied or pushed into anything and that he may advise Bohemians Football Club to pursue a different deal with the Mater Hospital in relation to parking as the Mater Hospital has approached the club. This will involve Bohemian Football Club giving the turning space to the Mater rather than to Pascal Conroy for the purpose of the Tesco lorries.
This was pointed out to Pascal whereupon Pascal also indicated that he was thinking of demolishing the East Stand and doing a deal with the Mater Hospital in relation to parking on that area and Kelly’s yard for a couple of years until the development of Phibsboro Shopping Centre is complete.”
It is quite clear from all of this that both sides were engaging in brinksmanship, and indeed a certain amount of posturing, at this point in time. However, I am satisfied that neither side was seriously contemplating walking away from the transaction. Not surprisingly, and after a short cooling off period, the putative stand-off was ultimately resolved in the following circumstances. Mr. O’Reilly telephoned Mr. Conroy and invited him to lunch, suggesting that if the principals could meet and talk without their professional advisors, it might be possible for them to resolve their difficulties. Mr. Conroy was agreeable and so on Monday the 22nd of July, 2005 he joined Mr. O’Reilly, who was accompanied by the then Secretary of Bohemians F.C., Mr. Gerry Cuffe, for lunch at “Peploes” restaurant on St Stephen’s Green in Dublin city centre. Over a long afternoon the business in hand (namely the dispute over the corporate boxes) was discussed, a way forward was found, lunch was had, and a good deal of alcohol was consumed. The way forward involved an agreement that Albion would buy out the obligation to build corporate boxes for Bohemians. Both Mr. O’Reilly and Mr. Cuffe left Peploes believing that they had also agreed with Mr. Conroy that a consideration of €750,000 should be paid by Albion to Bohemians in respect of the buy out. However, while Mr. Conroy acknowledges that “they were looking for €750,000” he denies that he agreed to this. He said that he told Mr. O’Reilly and Mr. Cuffe that he would ask his quantity surveyor “to cost out the job for me and then we would negotiate a figure that was acceptable to both parties”. In emphasising his position he said:
“Well, let me put it this way: There was a lot of drink consumed that day, I would not have agreed to any deal like that until I was conclusively sure of what the costs were to me. Now, it is possible that it could have been done for 250,000, I don’t know. But I wasn’t going to take any chances, I wanted to know the exact figures and then I would take, I would negotiate with them.”
There was some conflict in the testimonies of the respective participants as how exactly the afternoon proceeded. Mr. O’Reilly’s belief was that they talked business immediately, successfully finding a way forward within about an hour or so, and then in celebration of having broken the log jam had a lengthy and convivial lunch during which a good deal of alcohol was consumed. Mr. Cuffe gave testimony along similar lines, adding however that the meeting was fraught in the extreme at the outset and that no alcohol was consumed while discussions were ongoing. Mr. Conroy’s recollection was somewhat different. He said the meeting commenced in a rather frosty atmosphere. He went on:
“…we chatted about different things. I personally felt it was best, that if we start into a meeting again about previous stuff, well, this is going to go nowhere, we won’t even get through our lunch because there will be another blow up. So I felt the best thing to do – and this is my recollection, this is what I recall – is that we all sat down, we had a few glasses of wine, we chit-chatted about everything and about nothing basically, about how Bohs were going, things like that, how I was going. Then the meeting softened and mellowed and we got almost back on to a level of where we originally had been. It was then that we started chatting.”
He added:
“Maybe towards the end of the main course we started chatting about — I can’t specifically recall what point in time that we started chatting about the corporate boxes, but I can certainly assure you that we did not start the minute we arrived into the room. Because that was a recipe for disaster.”
Counsel for the plaintiff spent some time highlighting these differences in recollections. While they are seemingly trivial at first sight, and might on one view of it be explained away on the basis that a large amount of alcohol was undoubtedly consumed, the plaintiffs strongly repudiate Mr. Conroy’s account of the sequence of events and insist that their recollection of the events of that afternoon is clear. They were adamant that there had been no misunderstanding, that when the parties met it was straight down to business before pleasure, that Mr. Conroy agreed a consideration with them and then in due course sought to renege upon that agreement. While I am not sure that very much ultimately turns on it, I prefer the evidence of Mr. Conroy, to that of Mr. O’Reilly and Mr. Cuffe, as representing in my view a more inherently likely scenario.
As I have indicated Mr. O’Reilly left the luncheon in Peploes Restaurant believing that he had a commitment from Mr. Conroy that Albion would buy out its obligation to construct the corporate boxes for Bohemians at a consideration of €750,000. Mr. O’Reilly then went off to the Galway Races and while there, happened to bump into Mr. Conroy. They had a brief conversation and each of them expressed relief to the other that the problem relating to the corporate boxes had been solved. There was no mention of any problem whatsoever. At some point between the 22nd July, 2005 and the 2nd September, 2005, Mr. O’Reilly informed the committee of Bohemians Club that Albion were going to buy out the obligation for €750,000 and he similarly informed John McDonald. On the 2nd September, 2005 John McDonald wrote to his opposite number Tim Ryan in the following terms:-
“Subject to agreement/agreement denied re Bohemian Football Club – Development at Phibsboro shopping Centre.
Dear Tim,
I trust you have a pleasant holiday and refer to our recent telephone conversation. As indicated my understanding is that Albion have agreed to pay to Bohemians on the signing of an agreement an additional sum of €750,000 compensation in lieu of having to construct the corporate boxes. Albion however, will continue to apply for planning permission for the corporate boxes and will leave Albion’s finished construction of the car park basement areas ready for the construction by Bohemians of the corporate boxes and stands and roofs on top thereof.
In all other respects I believe the points agreed in negotiations to date will continue. Bohemians accordingly will continue to grant to Albion a lease of the area coloured blue below ground and Albion will continue to grant Bohs a lease of the area coloured green above level 1 of the car park to the height arranged.
Because the car park “roof” and the buildings of Albion which will abut the green area are to be left in such a manner both structurally and practically to allow Bohemians to construct their corporate boxes thereon and tie in where necessary to the structure to be built by Albion abutting the green area, there will be an engineering input into the plans to be prepared and you might let us have a draft condition in consultation with your client’s engineers in relation to a proposal as to how same may be dealt with in practice.
Provision will also need to be made in relation to the roof stand which will need to be supported by your client’s structure and indeed the lease to be granted to our client of the “green area” will need to incorporate various easements of support and shelter etc. I will be obliged if you would take your client’s instructions as soon as possible and revert to me.
Yours sincerely.”
Mr. McDonald was asked in the course of his evidence why it was that he was focussing on the issues of structure and support. He replied:
“Well there was always going to be an issue where we either retained land above land being granted to Albion, or Albion retained land above or below land which had been granted to us. But because in this particular area what was being left was a space, if you like, we wouldn’t be getting a lease of a completed building. We would need any lease to be granted by Albion to us to incorporate various rights to either tie into their building if that was necessary and again it would — I mentioned in the letter we would need an engineering input to enable me draft the type of conditions that we would need and the easements which we would need to retain or include in any lease.”
This elicited a response from Mr. Ryan dated the 29th of September, 2005 in the following terms:-
“Re: Bohemian Football Club/Re development of Phibsboro Shopping Centre, Our client Pascal Conroy/Albion Properties Limited subject to agreement/agreement denied.
Dear Sirs,
We refer to the above matter and to your letter dated 2nd September, 2005, a copy of which we have passed to our client.
We also refer to several telephone conversations we have had in relation to this matter since the date of your said letter.
Our client instructs that he has no recollection that any agreement was made in relation to a definite figure to be paid. Our client does agree that the topic of compensation in lieu of building corporate boxes was brought up for discussion between the parties but that no figure was agreed. Our client accepts that there appears to a misunderstanding in relation to a final figure to be agreed. Our client does not rule out a future agreement for a cash payment as compensation for not constructing a corporate box for Bohemians and in the event that there was to be an agreement in relation to such compensation this matter could be expedited quickly.
Our client further instructs that if there is failure to reach an agreement in relation to a compensation sum for not constructing corporate boxes for Bohemians then our client is prepared to adhere to the agreement which has been negotiated over a long period of time and almost complete. You will recall that this is where Albion will continue grant to Bohemians a lease of the area coloured green above level of the one car park to an agreed height. Bohemians will grant to Albion a lease of the area coloured blue below ground, Albion will continue to apply for planning permission for the corporate boxes and will construct the corporate boxes as part of the redevelopment of the Phibsboro Shopping Centre.
Yours faithfully.”
There was then a further letter by way of rejoinder (again entitled subject to agreement/agreement denied) from John McDonald to Tim Ryan dated 12th October, 2005. This was in terms:-
“Dear Sirs,
We refer to your letter of 29th inst. We have taken instructions from our clients and both the President and the Honorary Secretary of our clients are in no doubt whatsoever that a figure was discussed and agreed and to suggest that there might be a “misunderstanding” in relation to a final figure is wholly disingenuous to say the least. You will be aware that this is not the first time that our clients have sat down with your clients, negotiated points in relation to the proposed Heads of Agreement and agreed same only for your clients to subsequently deny that the point was agreed.
We have now passed the fourth anniversary of the commencement of negotiations in relation to Heads of Agreement – something which would normally take less than a month. If the Heads of Agreement itself cannot be agreed within four years then our client has no confidence that a full contract which is capable of binding both parties can be agreed and accordingly sees no basis for the continuation of any further negotiations.
Indeed both the President and the Honorary Secretary of our clients have been subjected to no little vilification at the hands of the members as a result of this saga and would have no appetite to enter any further negotiations even if they were so authorised.
Please note that it is our client’s intention to notify the Planning Department that our clients can no longer support your client’s proposals having regard to the breakdown in relations between our clients.
Yours faithfully.”
In the course of his evidence Mr. McDonald explained what he was alluding to in the first paragraph as follows:
“Well there had been various discussions which took place where at different stages throughout the course of negotiations Mr. Conroy denied that an agreement had been reached. For instance on the issue of architectural fees, my Lord. It was agreed that Mr. Breen’s fees would be paid by Albion and at one particular meeting where Mr. Breen produced a letter confirming his fees, his schedule of fees, Mr. Conroy denied that he had ever agreed and the meeting became a little bit tetchy until the letter was actually produced. Another situation [related to] the corporate box area where [a] dispute arose when we got [a] map, in that the green area was wholly located on Bohemian’s land. Mr. Conroy …..denied that he had ever agreed that the corporate boxes area would be built on Albion’s land and again we had to go back to the prior draft Heads of Agreement to show that that was in fact the case.”
It seems that there was then a subsequent telephone conversation between Felim O’Reilly and Tim Ryan in which the new impasse was discussed, following which Mr. O’Reilly wrote to Mr. Ryan on the 24th October, 2005 stating:
“I refer to our telephone conversation and I confirm that I have now received instructions to forward the letter as discussed to Bord An Pleanála.”
Mr. Ryan replied quickly on the next day, the 25th October, 2005, in the following terms:-
“Subject to agreement/agreement denied
Dear Sirs,
We refer to the above matter and to your letter of 24th October, last.
We have since taken instructions from our clients in relation to same. We refer in particular to your reference to a letter to be furnished to An Bord Pleanála on behalf of your client. You will recall that we discussed this said letter by telephone conversation.
Our client firmly instructs that in the event of you sending such letter, our client will immediately demand the return of the approximately €400,000 as furnished to your client by way of part performance in relation to the post transaction being discussed over the past number of years.
In the event that your client does forward such letter to An Bord Pleanála, our client will be demanding the immediate return of such monies and he has pointed out that in the event of any delay in relation to the return of any such monies, he should use all and every legal means to compel your client to furnish such monies to him in their entirety.”
On the 8th November, 2005 Mr. O’Reilly wrote to Walsh Associates in the following terms:-
“Subject to Agreement/Agreement denied
Re: Bohemians Football Club – re-development of Phibsboro Shopping Centre
Your client: Paschal Conroy/Albion Properties Limited
Dear Sirs,
We hereby confirm that in relation to the corporate box issue that arose our clients have agreed with yours the following arrangement:
(1) That a sum of €650,000 be paid in compensation for the building of the corporate box and that this will be deemed as follows:
(i) A sum of €100,000 to be paid on tomorrow’s date the 9th November, 2005.
(ii) A further sum of €200,000 to be paid on 30th day of November, 2005. In relation to (i) and (ii) the said cheques will be delivered to this office tomorrow.
(iii) Further cheques in the sum of €100,000 be paid on the 1st of each successive month to discharge the total liability to Bohemians which is the said sum of €650,000 together with the balance due in relation to the original figure agreed for the area to be leased at Connaught Street corner after allowing for the monies already paid.
It is also agreed that your clients will lay foundations and structure for the building of the corporate boxes overhead.
It is also agreed that the entire agreement will not be subject to any planning permissions.
In the circumstances we look forward to hearing from you immediately so that the full formal agreement may be concluded so that all matters may be clarified and finalised between the parties.
Yours faithfully.”
Mr. O’Reilly was, to quote him, “a little hazy” as to how that letter came to be written. He thought that the letter may have been written as a result of a phone call from Mr. Ryan. He said he did not have any conversation with Pascal Conroy. Mr. Conroy’s evidence as to how it came about was fairly cryptic. He did, however, say this much:
“…there was a threat here to pull down the whole deck of cards. So I was concerned. So I readily went ahead and did a deal with them.”
The evidence establishes that on the 30th of November, 2005 Bohemians duly received a further €300,000 from Albion by means of two cheques, one for €100,000 and the other for €200,000.
On 20th December, 2005 the Bohemians Architect, Michael Breen wrote to Felim O’Reilly stating “I have raised the matter of the lands to be transferred in the heads of agreement with Pat O’Hara in Project Architects. They are to revise their scaled drawings to include information, including digital co-ordinates and dimensions; sufficient to allow the lands to be found and identified when the site is been cleared and all existing landmarks are gone. I will be back in touch as soon as the drawings are to hand.”
There then followed a meeting at the offices of F.H. O’Reilly and Company, Solicitors, on 13th December. Subsequent to that meeting Mr. Ryan wrote to F.H. O’Reilly and Company on the 11th of January, 2006 stating:-
“Subject to agreement/agreement denied.
Dear Sirs,
We refer to the above matter and to the meeting which occurred on 13th December last at your offices in the presence of Paschal Conroy, Pat O’Hara and Robert Walsh, solicitor for our side.
We also refer to our telephone conversation of today’s date with your Felim O’Reilly solicitor.
The main issue outstanding appears to be the agreement of final maps between our respective client’s architects. We are informed by Pat O’Hara, Architect that he has furnished hard copy maps and some other necessary date to Tom Breen just before Christmas and he is waiting for Tom Breen to revert to him to say that all is in order.
Furthermore we note from the attendance filed by Robert Walsh that Bohemians account[ant]s are to agree and confirm what is being [sic] paid by our clients to date.
We shall contact our client today in relation to the outstanding figure of €100,000 to be paid by the 1st January.
As agreed we shall try and proceed to bring this matter to a conclusion this month. Thank you for your co-operation.
In the meantime kindly note that we have no instructions to bind our client to any agreement and no contract shall exist or begin to exist until contracts are executed, exchanged and deposit furnished.
Yours faithfully.”
It seems that the cheque promised for the 1st January, 2006 did not arrive by that date. On the 17th January, 2006 Felim O’Reilly wrote to Walsh and Associates complaining that he had still not received a cheque and also enclosing an email from Tom Breen, Architect, in which he had stated that he was due to receive a survey from project architects but had not yet received it. On the 26th of January 2006 Bohemians received the outstanding €100,000. In the first week of February 2006 Mr. O’Reilly stood down as President of the Bohemian Football Club and was replaced by Mr. Cuffe. Bohemians received a further €100,000 on the 9th of February, 2006. Then on 26th February, 2006, Mr. O’Reilly wrote again to Walsh and Associates saying that he had heard from Tom Breen to say that he had requested and was awaiting from Albion an ordnance survey map and full planning applications documents together with any further maps and documentation submitted or lodged in the course of the application. He asked if they would confirm that these matters were being attended to.
The evidence establishes that in or about the same time, circa February 2006, Bohemians entered into negotiations with a third party, a building conglomerate called “Andorrey”, for the sale to that entity of the remainder of Dalymount Park. In March and April of 2006 Bohemians received two more payments of €100,000 respectively from Albion. In early May rumours concerning the ongoing third party discussions were published in the print media and Mr. Conroy, on reading them, became alarmed. Arising out of this, Mr. Ryan of Walsh and Associates wrote to F.H. O’Reilly and Company, solicitors, on the 9th of May, 2006. This was an open letter in the following terms:
“Re Bohemian Football Club/Re development of Phibsboro Shopping Centre.
Our client: Paschal Conroy/Albion Properties Limited”.
Dear Sirs,
We refer to the above matter. We are aware from various reports in the media that your client has sold the Bohemian Football Club site to a consortium of developers. You are aware that your client has a binding agreement with our client to sell to our clients the lands, the subject matter of the agreed heads of agreement to our client for the amounts of money as stated therein.
In addition you will be further aware that our client has already paid to your client approximately €1.6 m in part performance of the agreement.
Please confirm by immediate return that your clients intends to honour its agreement with our client and that it is prepared execute the heads of agreement in the very near future.
Mr. Conroy instructs that he is extremely anxious to have the heads of agreement executed and pay over any outstanding sums owed to your client under the agreement (if any) to bring this matter to a conclusion. Our client further instructs that in the event that your client fails to confirm the binding agreement between our respective clients within seven days from the date hereof, he will be compelled to use all necessary measures available to him to ensure that the agreement is honoured.
Yours faithfully.”
It should be pointed out that the figure of €1.6 million mentioned in that letter was in fact incorrect. The total amount paid in excess of the non-refundable deposit was in fact €1,050,000. In any event Mr. McDonald replied to this letter by his letter of the 11th May, 2006. Again this was an open letter and it was in terms:-
Dear Sirs,
We refer to your letter of 9th May and are much surprised at the contents thereof. There is no binding agreement in place between our clients in this matter and whilst we acknowledge that negotiations have continued for five years with a view to reaching such a conclusion, nevertheless such conclusion has not been reached.
We refer you to your letter of the 8th March, 2002 addressed to Felim O’Reilly of this office which was the first letter written by your firm and to the final paragraph thereof which states:-
“In the meantime kindly note that we have no instructions to bind our client and that no contract shall exist or to be deemed to exist until contracts are executed by both parties, exchanged and a contract deposit furnished.”
Whilst our client acknowledges that it has been in receipt of monies from your client the facts of the matter are that no agreement has yet been concluded, no agreed contracts have been prepared and nor have any documents which either singly or in conjunction with others could be deemed to constitute a contract or a memorandum sufficient to satisfy the Statute of Frauds been signed or indeed exchanged. In all of the correspondence to date, including your last letter to this office on 16th January last, same are all marked “agreement denied”.
We do not understand therefore how your client is claiming that there is a binding agreement in existence.
Strictly without prejudice to the fact that there is no such binding agreement, our client is prepared to meet with your client on a without prejudice basis to discuss matters and in this respect would suggest that you contact the writer with a suitable date to meet in our offices. We look forward to hearing from you.
Yours faithfully.”
A meeting did take place arising out of this letter on the 17th of May, 2006 at the offices of F.H. O’Reilly & Co. John McDonald described to the court what happened at this meeting:
“….there was some media coverage of the proposed sale to Andorrey, which I think probably frightened Pascal Conroy into the belief that we had gone behind his back and dealt with Andorrey in respect of all of the property, and it was that that prompted the letter from Walsh and Associates to ourselves.
When we met at the meeting I confirmed at that stage that the lands which we were negotiating with Albion were excluded from the discussions with Andorrey and we were still prepared to trade with Albion in that respect.
Q. How did that affect the mood of the meeting?
A. I think the mood was significantly better after I explained that.
Q. So what was discussed then at that meeting?
A. We mainly discussed that if we were going to go forward there would be other changes required, because if we concluded a deal with Andorrey we wouldn’t be requiring various aspects. In other words, we would get rid of the pitch itself so we wouldn’t be requiring various aspects relating to the monies that were — sorry, the items that were set out in part of the Heads of Agreement, and we listed them down: The executive offices for instance; the corporate boxes in the green area, they wouldn’t be required; the cost of construction to the foundation level of the executive boxes; the cost of the relocation of the switch room, the well, reservoir and pump house; the value of the right of way to Jack’s gate; the value of the car spaces in the basement; and the cost of the application for planning permission in respect of the offices, the cost which wouldn’t be incurred then as set out in the schedule, and these are the schedules to the draft Heads of Agreement; and the cost of relocation and reconstruction of the flood lights.
Q. Do I understand this correctly? The Andorrey deal was the other part of the jigsaw, the vast bulk of Bohemian’s land was now being sold?
A. There were discussions in relation to the sale of it.
Q. So if that deal went ahead, Bohemians would have moved from there to another …(INTERJECTION)
A. To another pitch.
Q. And that had a knock-on effect as to what you might or might not need in any deal.
A. In any deal we concluded.
Q. And these are a list of items that would now come out of the Heads of Agreement, but for which at the meeting you were suggesting had a value to you or to Bohemians; is that right?
A. That is correct. And that was acknowledged at the meeting and Pascal Conroy agreed that he would put a value on those and come back to us.”
On 17th August, 2006, John McDonald wrote to Walsh and Associates in the following terms:
“Subject to contract/contract denied:-
Re Our Clients Bohemian Football Club, Your Client Albion Properties Limited
Dear Sirs,
We refer to the above and to the meeting held on 17th May, at our offices. At that meeting it was agreed that the matters listed would be valued by your client. We confirm that the items listed were as follows:-
(1) The area of land which was going to be leased on a long term lease to Bohs for the executive boxes and that part of the roof of the stand over the executive boxes.
(2) The cost of construction to foundation level of the executive boxes.
(3) The costs of relocation and reconstruction of the well reservoir and the pump house.
(4) The value of the right of way to Jack’s Gate.
(5) The value of the car spaces in the basement (eight in all).
(6) The cost of the application for planning permission in respect of the offices.
(7) Costs which will now not be incurred as set out in the schedule.
(8) The costs of relocation and reconstruction of the flood lights.
We understand that several meetings have taken place between Mr. Cuffe of our client and Pascal Conroy of your client and it has been agreed that these matters will be removed from the draft heads of agreement proposed to date provided the sum of €600,000 together with an overdue sum of €280,000 out of the original price are each paid on or before the 30th September, 2006. Please let us hear from you by return with your client’s confirmation of the above agreement and we will arrange to redraft the heads of agreement. We look forward to hearing from you.
Yours faithfully.”
Mr. Ryan replied by an open letter dated 8th September, 2006. That was in the following terms:-
“Dear Sirs,
We refer to the above matter and to your letter of 17th August, last. You may be aware that Mr. Cuffe of your clients and Paschal Conroy of our clients met recently in relation to the matter set out in your said letter of 17th August last. Arising out of the said recent meeting, our client confirms that the items listed (1) to (8) inclusive in your said letter may be removed from the drafts heads of agreement proposed to date. Our client is prepared to pay the sum of €600,000 together with the sum of €280,000 in relation to an earlier overdue sum. He instructs that his financial controller will confirm the said overdue sum of €280,000 with reference to his records but our client confirms that he is prepared to pay any overdue sum relating to the original price. We should point out however that your client’s said representative agreed with Mr.Conroy that our client will be entitled to develop or construct in the area coloured yellow and pink on the maps previously utilised to any height above ground or depth below ground as it requires. You might confirm this latter matter with your client. In view of the fact that there now appears to be an agreement between our respective clients, we would be obliged if you would redraft the heads of agreement and furnish such redraft at your earliest convenience. We thank you for your co-operation.
Yours faithfully.”
It seems that John McDonald was unable to take immediate instructions from Mr. Cuffe as Mr. Cuffe was away. However he eventually spoke with him and, according to Mr. McDonald, “he became highly incensed” … “and he told me there was no such discussion, not alone agreement in relation to it.” Mr. Cuffe confirms this. On the instructions of Mr. Cuffe John McDonald wrote to Walsh and Associates by a letter dated 9th October, 2006 and headed “Subject to contract/contract denied” stating:
“ …..Mr. Cuffe denies that any discussion took place in relation to the right to develop and construct in the areas coloured yellow and pink to any height or depth above or below ground beyond what was originally discussed. We will revert to you as soon as we have met with Mr. Cuffe.
Yours faithfully.”
Nothing further happened for many months. The transaction remained stalled and there was a total impasse. There were, however, significant developments on the third party front. As Mr. Cuffe explained in his evidence, part of the consideration for the proposed sale to Andorrey of the majority of Dalymount Park involved the provision to Bohemians by Andorrey of an alternative stadium on a site in Castleknock adjacent to the M50. However, it had by this time become obvious to both Bohemians and Andorrey that to get planning permission for a football stadium there would be difficult and, at best, a protracted process. In the meantime Daninger Ltd had come to the table and were offering a better deal to Bohemians. According to Mr. Cuffe:
“[On the night of a club EGM]….we received an offer from Daninger of €55 million cash. No stadium, no strings attached. ‘You give us the keys to Dalymount, we will give you the 55 million’. It was never going to work for us, because we are a football club at the end of the day. We are not an investment company. We wanted a football pitch that we could make our home and move forward. So, we rejected that and we put it to the members on the night of the meeting just as a ‘by the way, today we received this’, and we got a clear direction from the meeting that that was never going to work for Bohemian Football Club. Some time elapsed, maybe 6, maybe 8 weeks, …and we had a further approach …. that Daninger were looking to talk to us again.”
“…we explained to Daninger what we would require, i.e. a stadium in a site within the boundaries that I have previously mentioned, and Daninger had identified the site, and at a point in time there was a little bit of horse trading over the financial package to go along with it, but it was substantially in excess of where Andorrey were at with regard to finances.”
“….ultimately the overall value of the package, if it was to take five years to deliver the stadium for us, came in at circa €67.5 million.”
So Bohemians broke off negotiations with Andorrey in favour of negotiations with Daninger. It should be noted, and it may be of some significance in terms of what happened next, that the Daninger offer was for the whole of Dalymount Park including the parcels the subject matter of Bohemian’s protracted dealings with Albion. Then on 20th April, 2007 John McDonald received a telephone call from Tim Ryan. The subject matter of that telephone call is recorded in an attendance note dictated subsequently by John McDonald on 23rd April, 2007. That attendance note states:-
“I got a telephone call from Tim Ryan on 20th inst. who asked me what the position was in relation to the property. He indicated that the last thing he remembered was that Albion had stated that they would be entitled to build as high as they wanted on the pink and yellow portions and we had reverted confirming that was not the case and had never been the case. He confirmed that he had recently spoken with Paschal Conroy and Paschal Conroy was prepared to go back to the original position if we were prepared to deal with him on that basis and I said that we were in the course of taking instructions and that I should have definitive instructions within the next few days and I would write to him on the matter. I indicated that I would telephone him once I had any instructions as a matter of courtesy to just to let him know what our clients were going to do.”
It appears that subsequent to this telephone conversation Mr. Ryan sent a fax to F.H. O’Reilly and Company, Solicitors, marked for the attention of John McDonald. This fax was an open letter and it was in the terms:-
“Dear Sirs,
We refer to the above and to our recent telephone conversation with your Mr. John McDonald. We are writing this letter on the strict instructions of our client. We refer to our letter to you of 8th September last, together with your letter of 19th October, last. Your said letter clearly states that our client will not be allowed to build to any heights or depth in the areas shaded yellow and pink beyond what is set out in the heads of agreement. Our client accepts this. We now call upon you to confirm that your client is prepared to execute the heads of agreement which terms are clearly now agreed. Our client has given us the strictest instructions to us to inform you that in the event of your client failing to execute the agreed heads of agreement and be bound by them, our client will take all necessary measures to compel your client to do so and if necessary our client will issue High Court proceedings against your client. We wish to point out that our client has made significant part performance of this contract to date. Our client hopes not to have to take any steps to compel your client to execute the agreement, but in the event the same is not executed and furnished to us in the very near future, then our client will have to take such measures. We await hearing from you by immediate return.
Yours faithfully.”
By letter of the 22nd May, 2007 headed “Subject to contract/contract denied” John McDonald then wrote to Mr. Ryan of Walsh and Associates as follows:-
“Dear Sirs,
We refer to your Mr. Ryan’s telephone conversation with the writer on the 20th ult and your subsequent letter of 20th ult received on 23rd ult. Our client has indicated that it is not prepared any longer to continue with negotiations with your client.
Our client acknowledges however that certain monies were paid by your client in good faith in anticipation of reaching an agreement with our client which sums our client confirms amount to €1,050,000. As a result of our clients ceasing all negotiations in this matter we accordingly return herewith said monies received.
Kindly acknowledge safe receipt and oblige.
In the meantime please note that we have no authority to bind our client and we are under strict instructions that we are not acting as agents for our clients. Accordingly neither this letter nor any further correspondence from this firm shall be deemed to constitute an offer or an acceptance of an offer on the part of our client.
Our client, however, also denies the existence of a concluded agreement intended to represent a memorandum within the meaning of The Statute of Frauds (Ireland) Act, 1695. We would further ask you to note that our client is not to be considered bound until formal contracts have been signed by all parties and a full deposit paid.
Yours faithfully.”
As intimated in the letter it was accompanied by a cheque (drawn on the client account of F.H. O’Reilly & Co and payable to Walsh & Associates) in the sum of €1,050,000.
The final letter in the course of correspondence under review, and the end of the material chronology, is a letter from Walsh and Associates to John McDonald of F.H. O’Reilly and Company dated the 23rd May, 2007. Once again this is an open letter and it is the following terms:-
“Dear Sirs,
We refer to your letter of 22nd May last and we have taken instructions from our client in relation to same. Mr. Conroy utterly rejects the content of your said letter and to this end we return your cheque in the sum of €1,050,000. We refer to our letter to you of the 20th April last. We repeat that our client has an agreement with yours in relation to the purchase of certain parts of Dalymount Park. Furthermore our client has paid considerable monies to your client over a number of years as part performance of this agreement. In fact the monies paid by our client represent the vast majority of the agreed purchase price which said monies were accepted and utilised by your client on the basis that there is a binding agreement between our respective clients. Mr. Conroy is most disappointed at this attempt by your client to reject this agreement and will take every step to ensure that your client honours the said agreement in full. We now call upon you to furnish us with the engrossed heads of agreement in duplicate for immediate execution by our client as already called for in ours of 20th April last. If these are not furnished within seven days from the date hereof, our client will immediately institute High Court proceedings in order to compel your client to complete the agreement and we shall use this letter to fix your client with the costs of any such application that will have to made to the High Court in this matter. In the mean while your client is to immediately reinstate the wall on our clients’ property, knocked by your client and cease using both the east terrace and passageway known as Jack’s Gate. We await hearing from you with engrossed agreements by return of post.
Yours faithfully.”
This letter was not replied to and shortly thereafter the parties issued their respective proceedings.
Other evidence in the case
There was other evidence in the case which it is not necessary to review in as much detail as heretofore. The reason for this is that it consists of evidence which, although relevant, is quoted and referred to extensively in the submissions of the parties which I will be reviewing later, alternatively it is evidence that is no longer relevant in the light of the decisions that I have come to on the various issues that I have had to consider.
A great deal of time was spent by Counsel for the defendants in cross-examining both Mr. O’Reilly and Mr. Cuffe concerning the financial circumstances of Bohemians Football Club Ltd, and concerning statements contained in the annual accounts for the years ended 30th November, 2004, 30th November, 2005 and 30th November 2006 respectively. It was clearly established in evidence that Bohemians was in grave financial difficulties throughout this time, and was only able to keep going at all because it received a total €1,151,486 from Albion between January 2002 and the end of August 2006. Moreover, things were mostly getting worse not better as time went on. It had a steeply climbing debt graph.
Much was made in cross-examination (reiterated in detail in the defendants’ submissions) of the following statements which appeared in the 2004 accounts and the 2005 accounts respectively. In the plaintiffs’ accounts to the year ended 30th November, 2004, signed by Mr. O’Reilly as President and Mr. Cuffe as Secretary, the Directors Report refers, inter alia, to “Future Developments”. Under that heading it states:
“The company has incurred significant cash flow deficiencies in the year under review. The trading losses at balance sheet date stand at approximately €1.5 million. The company has undertaken a number of plans to utilise the companies resources and generate income. These plans include:
– sale of small part of land to Albion Enterprises Limited for €750,000. The company has already received a deposit in the sum of €200,000, with a further €300,000 receivable immediately upon planning permission being granted to Albion Enterprises Limited. Planning permission is expected to issue shortly.”
In the same Directors’ Report, under the heading “Sale of Part of Land” it is stated:
“The Company have agreed to sell a small part of its land at the shopping centre end of the ground to Albion Enterprises Limited. The sale is dependant on Albion Enterprises Limited receiving planning permission for development at said location. The proceeds of sale would yield the company €750,000, in addition to the provision of Corporate Boxes for the company at no cost. The value of the ground will not be reduced as a result of this sale. On receipt of planning permission the full €750,000 becomes receivable. The company have [sic] already received a deposit of €200,000 from Albion Enterprises Limited towards this sale, of which €100,000 is refundable. The €100,000 will become refundable if the planning permission is refused to Albion Enterprises Limited and this sum has been provided for in creditors as a refundable deposit.”
In the plaintiffs’ accounts to the year ended 30th November, 2005, signed by Mr. O’Reilly as President and Mr. Cuffe as Secretary, the Directors Report again refers, inter alia, to “Future Developments”. Under that heading it states:
“The losses of the company currently stand at approximately €0.72 million. The company has undertaken a number of plans to utilise the companies resources and generate income. These plans include:
– the sale of a small part of land to Albion Enterprises Limited has been agreed at €720,000, in addition to the provision of corporate boxes at no cost. Of this amount, the company has already received funds in the sum of €600,000, with a further €120,000 receivable immediately. The company is to receive a further €650,000 from Albion Enterprises Limited in compensation for the delay in the provision of the corporate boxes. The total monies receivable are to be paid to the company by way of monthly instalments of €100,000, beginning January 2006 until the balance is settled in full.”
In the same Directors’ Report, under the heading “Sale of Part of Land” it is stated:
“The Company has sold a small part of its land at the shopping centre end of the ground to Albion Enterprises Limited. The sale price has been agreed at €720,000, in addition to the provision of Corporate Boxes for the company at no cost. The value of the ground will not be reduced as a result of this sale. The company has already received funds in the sum of €600,000, from Albion Enterprises Limited at the balance sheet date. The company, as stated earlier in the director’s report, is due to receive a further €650,000 from Albion Enterprises Limited in compensation for the delay in the provision of the corporate boxes.”
The Court also heard evidence that Bohemians was under severe pressure from the Revenue in late 2005. There was evidence concerning a letter written by Mr. O’Reilly on behalf of Bohemians to a revenue official on the 17th of November, 2005. That letter stated inter alia that:
“I would like to basically summarise the position regarding Bohemian Football Club and Pascal Conroy, Albion Properties Limited, relating to the redevelopment of Phibsboro Shopping Centre. In this regard we enclose herewith a copy of the initial Heads of Agreement which dealt with all issues including the payment of €650,000 on the full granting of planning permission and the other issue set out in the agreement. All issues in the agreement are not in dispute, save in respect of the building of corporate boxes for the club on an area of land already owned by Albion Properties limited”.
….
“The original agreement, as you will see, provided the corporate boxes would be built within a period of 15 months, the final grant of planning permission. It is in relation to this provision only that dispute has arisen. You will see from correspondence that all the other issues including payment of the balance of monies at Paragraph 6.1 are not in dispute”.
“Albion now inform us that the building of the corporate boxes could be as long as five years down the road rather than the 15 month period that was specified. They are entitled to argue that if they are delayed in carrying out this work that they cannot be forced to do it under the time provision in the contract…”
“obviously we have raised the issue that if there is such delay in building the corporate boxes that they should pay us compensation and with this we could then build the corporate boxes ourselves.”
“We clearly could not agree to observe the existing Heads of Agreement and wait for approximately five years when building the corporate boxes. This would not be in the best interest of the club.”
Mr. O’Reilly was cross examined extensively about this letter by Counsel for the defendants.
There was also evidence concerning the terms of the Memorandum and Articles of association of the plaintiff company. Article 58(15) of the Articles of Association empowers the directors (the committee) to dispose or part dispose of any of the club’s assets without the sanction of a General Meeting up to a value of IR£500,000 (or nowadays its euro equivalent €635,000). There was also evidence of a temporary amendment to Article 58 suspending the limit specified there in sub-article 15 for a period twelve months from the 5th of May, 2006.
The Court further heard the evidence of both architects, namely Mr. Breen on behalf of the plaintiffs, and Mr. O’Hara on behalf of the defendants. It should be noted that Mr. Breen practises in two firms, namely Michael T Breen, Architects, and Gardiner Architects. Both firms have acted for the plaintiff at different times relevant to these proceedings and nothing turns on that. The common denominator in each instance was Mr. Breen. The main point arising from the architectural evidence was that Mr. Breen was not happy and would not approve the maps sent to him by Mr. O’Hara, being of the view that that the Project Architect maps did not show a gap of 6m between the boundary wall of Dalymount Park and the north boundary of the pink and yellow lands, and indeed show a gap of 5.3m, a difference of some 70cm. It will be recalled that a 6m gap was critical in terms of satisfying the Fire Officer in respect of the Connaught Street entrance. However, it emerged in cross examination that Mr. Breen never conveyed his concerns to Mr. O’Hara. Moreover, it was common case that both principals knew that a 6m gap was required, and accepted that that had to be. There was no dispute about on this. It was a non issue. Further, Mr. Breen was also of the view that the maps should have been developed to refer positions to fixed features that would not be obliterated in the course of the intended developments. For this reason he asked Mr. O’Hara for digital co-ordinates. He did not receive them, but then the evidence establishes that he did not explain to Mr. O’Hara why he wanted them and what his concerns were. Mr. O’Hara didn’t provide them because he was sure that he had provided sufficient information already for what he believed were Mr. Breen’s purposes. He said that if Mr. Breen had made his specific concerns known to him he could, and would, have supplied him with the digital co-ordinates.
The Issues For The Court
It seems to the Court that the following issues may, on the pleadings, arise for decision:
• Was there a concluded agreement or agreements?
• If there was a concluded agreement or agreements –
o what was the effect of the endorsements “Subject to Contract / Contract Denied”?
o was there a sufficient note or memorandum for the purposes of the Statute of Frauds (Ireland)1695?
o If there was not a sufficient note or memorandum were there sufficient acts of part performance?
o If there was an otherwise enforceable agreement or agreements, was that transaction or those transactions ultra vires the powers of the company? Further, if so, is any difficulty for the defendants arising from that to be avoided on account of section (8) of the Companies Act, 1963 or the European Communities (Companies) Regulations, 1973 or otherwise?
o If there was an otherwise enforceable agreement or agreements, was that transaction or those transactions in breach of the internal rules of the plaintiff company. Further, if so, is any difficulty for the defendants arising from that to be avoided by the rule in Royal British Bank Ltd –v. Turquand [1856] 6 E & B 327?
• If there was no concluded agreement at all, do the circumstances of the case nonetheless give rise to a proprietary estoppel in favour of the defendants?
Was there a concluded contract?
The plaintiff’s submissions
The first issue that the Court is required to consider is whether there was a concluded contract or contract. In this regard the plaintiff submits that while the parties treated in relation to a piece of land at Dalymount over a number of years, there was no concluded agreement at all (whether oral or evidenced in writing). It further submits that the Court could not, on the evidence before it, conclude that in some way the bones of a deal were in place and that the parties were bound together in such a way that they were forced to continue negotiation until a final written document incorporating all of the terms that either party would want came about. The plaintiff points to key elements that it says were never agreed:
(i) While it was agreed that Mr. O’Hara representing the defendants’ architects should produce a map for approval and agreement by Mr. Breen, the plaintiff’s architect, Mr. Breen never approved and agreed any map. In addition to the general complaint that there was no agreed map, the plaintiff’s witnesses made much in the course of the evidence of two reasons as to why it was not possible for Mr. Breen to agree the maps tendered to him . The first was the fact that the plaintiff required a minimum gap of 6m between the boundary wall of Dalymount Park and the north boundary of the pink and yellow lands. The plaintiff says that the Project Architects’ maps tendered to Mr. Breen did not show the required gap of 6m. Rather, they show a gap of 5.3m, a difference of some 70cm. Secondly, they say the maps should have been developed to refer to fixed features that would not be obliterated in the course of intended developments.
(ii) The negotiation of the “leases, licences, wayleave agreements and other documents to be drafted and completed” had not even started.
(iii) Clause 7.1 of the Heads of Agreement refers to the agreement being subject …. “to the negotiation in good faith” …. of all necessary contracts, leases, licences, wayleave agreements and other documents required or reasonably envisaged. The plaintiff says an agreement to negotiate has no legal content.
In his submissions to the Court, Counsel for the plaintiff referred specifically to the following points in the evidence as supporting the plaintiff’s contention that there was no concluded agreement.
The first contract contended for by the defendants in their pleadings is that of February 2003. Heads of Agreement were forwarded on 17th February, 2003 in a letter marked “Subject to Contract” and indicating that they were subject to approval and required the necessary maps to be attached. Included in that proposal was the construction of corporate boxes. Yet there was evidence is that Mr. Conroy “stormed out” of a meeting over Mr. Breen’s requirement that if a deal were to go ahead the Corporate boxes would have to be built within the specified time limit. Mr. Conroy’s behaviour was not consistent with there being a concluded agreement, so says the plaintiff.
On 19th December, 2003 Mr. O’Reilly wrote to Mr. Murphy asking him “When do you expect we will be in a position to conclude the Agreement?” On 9th July, 2004 he wrote indicating that “It is most urgent that this matter must be concluded”. The plaintiff suggests that none of this correspondence would be consistent with there being a concluded agreement yet it is met with the assertion that there was in fact a contract of February 2003.
In mid 2005, John McDonald prepared a memo concerning the issues that were still outstanding. This was forwarded on 10th June, 2005 yet the defendants variously give June or July 2005 as a date when it is contended there was a contract.
In late 2005 there was a sequence following the meeting at Peploes. This commences with a letter from John McDonald of FH O’Reilly to Tim Ryan dated 2nd September, 2005. This states, “my understanding is that Albion have agreed to pay to Bohemian on the signing of an agreement as additional sum of €750,000”. The letter goes on to indicate that a base is to be left to facilitate later building of corporate boxes and looks for a “draft condition” and that the lease would need to “incorporate various easements of support and shelter”. Mr. Ryan on 29th September, 2005 in a letter marked “Subject to agreement / agreement denied” goes on deny that any agreement was made in relation to a definite figure to be paid”. On 12th October Bohemians reply, again on a “Subject to contract basis” that this was not the first time that Bohemians believed Mr. Conroy had gone back on oral commitments made. They refer to the “breakdown in relations between our clients”. On 24th October Mr. O’Reilly indicates that he will forward a letter withdrawing consent to An Bord Pleanála. On 25th October, 2005 Mr. Ryan indicates that if such a letter is sent his client “will immediately demand the return of the approximately €400,000 as furnished to your client”. While he goes on to mention part performance, it is noteworthy that nowhere does he suggest that there was (a) a contract (either of February 2003 or June/July 2005), or (b) that his client has a right to specific performance. The plaintiff submits that this sequence of correspondence runs absolutely contrary to any notion that these are parties who were in agreement on all “essential terms”. Accordingly, the plaintiff says, there is no evidence to establish a concluded agreement.
On 11th January, 2006, Mr. Ryan wrote to F.H. O’Reilly and stated “The main issue outstanding appears to be the agreement of final maps between our respective clients’ architects”. That letter is headed “Subject to agreement / agreement denied” and concludes with the words “no contract shall exist or be deemed to exist until all contracts are executed, exchanged and deposit furnished”. It is clearly accepted that as at 11th January, 2006 there was no agreement of a final map between the architects. The plaintiff suggests that this in itself accepts that agreement by the plaintiff’s architect was a core requirement, and this never happened.
In mid 2006 the Andorrey negotiations came into the picture. On 9th May, 2006, Mr. Ryan wrote to F.H. O’Reilly and for the first time asserts that there is a binding agreement with Bohemians. The Court is asked to note in passing that even the Defendant does not assert that there had been some agreement between the letter of 11th January and that of 9th May. Mr. McDonald replied on 11 May pointing out that all the negotiations had been conducted on the basis set out in the last paragraph of the letter of 8th March 2002 from Hughes Murphy Walsh & Co to FH O’Reilly & Co. He goes on to say “no agreement has yet been concluded, no agreed contracts have been prepared…” and notes that all of the correspondence was marked “Agreement denied”. However he indicates that “strictly without prejudice to the fact that there is no such binding agreement” and on “a without prejudice basis” his client (the plaintiff) was prepared to meet Mr. Ryan’s clients (the defendants). The plaintiff submits that the negotiations in mid to late 2006 were
(i) conducted on a without prejudice basis.
(ii) conducted on a subject to contract basis (cf. F.H. O’Reilly & Co.’s letter of 17 Aug 2006).
(iii) clearly conditional on the Andorrey deal going ahead. Insofar as there was discussion about the value of the items not necessary if Bohemians were leaving Dalymount (as set out in the letter of 17th August) this would only have been the case if the Andorrey deal was proceeding. However, there was absolutely no guarantee that Bohemians would in fact be leaving Dalymount. As it happened the Andorrey deal did not proceed, and insofar as the plaintiff subsequently entered a contract with Daninger Ltd that was not in the parties minds as of August 2006.
The plaintiff says that the evidence discloses further uncertainty at this time on account of an assertion by Mr. Conroy, through his solicitor, on 8th September, 2006 that he, “will be entitled to develop and construct in the areas coloured yellow and pink on the maps previously utilised to any height above ground or depth below ground that it requires.” On 19th October, 2006 Mr. McDonald replied to the effect that “Mr. Cuffe denies that any discussion took place in relation to the right to develop and construct in the areas coloured yellow and pink to any height above ground or depth below ground”. No reply to that was received and in fact there is then a gap of six months until 20th April, 2007. Mr. McDonald’s file memo of 23rd April, 2007 states that “[Mr. Ryan] confirmed that he had recently spoken with Pascal Conroy and Pascal Conroy was prepared to go back to the original position” (the plaintiff’s emphasis). A letter was written on the same day. Mr. Ryan was asked about this in the following passage from the transcript of day 12 of the trial:
“Q (Mr. Mohan S.C.) – And you tell John McDonald that, you said to him that Pascal is prepared to go back to the original position if Bohs were prepared to deal with him on that basis.
A (Mr. Ryan) – Correct”.
The plaintiff suggests that that evidence is not consistent with there being a concluded agreement at that point.
The plaintiff further submits that on the letter of 8th September, 2007 alone, the counterclaim should fail. It is suggested that this should be viewed as Mr. Conroy seeking to negotiate yet again a further advantage to himself in the context of the parties dealings. This takes place just one month after the last of the alleged dates of contract (viz, August 2006) Counsel for the plaintiff speculated that perhaps Mr. Conroy felt that if Bohemians were leaving Dalymount the height/depth issue was no longer important to them but, whatever his reasons, it is suggested that he made a clear counter offer which was rejected by the letter of 19th October, 2006.
“…before one comes to the question of a note or memorandum it is necessary to see if an entire contract was concluded on Sunday the 24th October, for it is only in that event that the statutory note or memorandum would be required. If the negotiations between the parties had not ripened into the fullness of an entire contract the plaintiff’s claim for specific performance would fail….”
“The formation of a contract, in my view, involves more than a serial accumulation of separate and discrete agreed clause. Consensus on several particular terms of an overall agreement normally will not give rise to a contract until all essential terms have been formulated and agreed upon. A contract is more than the sum of its parts considered separately, just as a melody is different from the individual notes…..”
The Court was also referred to Dore v. Stephenson, (Unreported, High Court, Kenny J., 24th April 1980). In that case the parties had discussions about the sale and purchase of a cafe on the first floor of premises on the High Street in Kilkenny without making any provision as to the rights of either party with regard to access to the premises or ownership of the foyer through which the same were entered. Kenny J. held that:
“The nature of the property and particularly the mutual rights in the foyer made it essential that the parties should agree on whether the plaintiff was to remain the owner of the foyer with the defendant having a right for himself and the customers of the Country Shop and the occupants of the flat to pass through the foyer to go up the stairs or whether the defendant was to remain the owner of the foyer and the plaintiff and his customers would have a right to pass through it. Until agreement was reached on this point, there was in my opinion, no consensus between the parties.”
The Court was also referred to the statement of Geoghegan J. in the Supreme Court in Supermacs Ireland v. Katesan (Naas) Ltd. [2000] 4 I.R. 273 (an application to dismiss) indicating that the correct test as to whether there is a concluded agreement is whether “everything intended to be covered by the agreement has been either expressly or impliedly agreed”.
The plaintiff lays great emphasis on the statement in the letter of the 8th of March, 2002 that “no contract shall exist or be deemed to exist until contracts are executed by both parties, exchanged and a contract deposit furnished”. It says that the defendants have put forward no evidence as to when this basis of negotiation was changed. Moreover, they say that this understanding is reflected in clause 7.1 of the Heads of Agreement which, it will be recalled states:
“The agreement is subject, once planning permission has been obtained, to the negotiation in good faith and the preparation and conclusion of all necessary contracts, leases, licences, wayleave agreements and other documents required or reasonably envisaged under the terms hereof.”
The plaintiff has referred the court to a recent examination of the law in relation to negotiation in good faith by Laffoy J. in Triatic Limited v. Cork County Council [2007] 3 IR 57, at 78 seq.. In that case the Laffoy J. considered the House of Lord decision in Walford v. Miles [1992] 2 A.C. 128. In that case Lord Ackner distinguished between an agreement to negotiate in “good faith” as against an agreement to use “best endeavours”. He stated:
“The reason why an agreement to negotiate, like an agreement to agree, is unenforceable, is simply because it lacks the necessary certainty. The same does not apply to an agreement to use best endeavours. The uncertainty is demonstrated in the instant case by the provisions which it is said has to be implied in the agreement for the determination of the negotiations. How can a court be expected to decide whether subjectively a proper reason existed for the termination of negotiations? The answer suggested depends upon whether the negotiations have been determined “in good faith”. However the concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties when involved in negotiations. Each party to the negotiations is entitled to pursue his (or her) own interest, so long as he avoids making misrepresentations. To advance that interest he must be entitled, if he thinks it appropriate, to threaten to withdraw from further negotiations or to withdraw in fact, in the hope that the opposite party may seek to reopen the negotiations by offering improved terms…..a duty to negotiate in good faith is as unworkable in practice as it is inherently inconsistent with the position of a negotiating party. It is here that the uncertainty lies. In my judgment, while negotiations are in existence either party is entitled to withdraw from those negotiations, at any time and for any reason. Thus there is no obligation to continue to negotiate until there is a “proper reason” to withdraw. Accordingly a bare agreement to negotiate has no legal content.”
Laffoy J. indicated that she found the reasoning of Lord Ackner persuasive.
The plaintiff submits that the absence of agreement in relation to the “leases, licences, wayleave agreements and other documents to be drafted and completed” is important and is not some sort of mere trifle, that would have been worked out.
The plaintiff invites the Court to conclude that, having regard to the complexity of the transaction, the parties never intended to contract until a final written document was in front of them. It says that in a complicated transaction of this type all of the detail has to be put down on paper. It further says that with two experienced conveyancing solicitors involved they would undoubtedly have insisted that all of the details should be worked out, and that these would be embodied in a contract document built around the standard Incorporated Law Society of Ireland conveyancing contract, adopting in so far as possible the normal General Conditions of that contract and with further Special Conditions appropriate to the particular transaction. Counsel for the plaintiffs contended that the plaintiff would never have agreed on an open contract which would have left it wholly unprotected, and asserted a belief that neither would the other side.
The court was further referred to the following statement of Parker J. in Van Hatzfeldt Widenberg v. Alexander [1912] 1 Ch. 284 which, the plaintiff says, encapsulates the law on this issue and, properly applied, supports its position:
“It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored.”
The plaintiff’s position, in summary, is that although the parties treated over a long period, their dealings never moved beyond a series of offers and counter offers. In short, there was never a concluded agreement.
The Defendants’ Submissions
In reply to the plaintiff the defendants say the following. They say there were successive contracts with variations. They say there is nothing complicated about the idea of successive contracts, each one a variation on the one before it, with each contract remaining in place unless and until replaced by a variation. Moreover, they say there are three points in time at which the existence of a concluded contract can be identified with certainty on the evidence.
• July 2005, just prior to the introduction of the variation arising from the corporate boxes. (The defendants’ pleadings refer to June 2005 rather July 2005 but the Court is of the view that nothing turns on it.)
• November 2005, when agreement was reached on removing the corporate boxes and paying compensation instead.
• August 2006, when agreement was reached on removing further elements of the original deal and paying additional compensation for that.
(Though it was contended in the pleadings, and at one point during the trial, that there was a concluded agreement as early as February of 2003, this was not pressed in submissions and the Court understands the defendants to be confining their claims at this stage to the three dates mentioned above.)
It is necessary to deal with each in turn.
July 2005
The defendants point to the following evidence as demonstrating that there was a concluded contract at this stage:-
(a) The payments from February 2003 to June 2005. Excluding the non-returnable deposit of over €100,000, these amounted to €300,000.
(b) The alleged representations made by Felim O’Reilly to Paschal Conroy on the occasion of these payments. Mr. Conroy gave the following account:-
“I said, well, where are we with this deal. He said, well, do not worry about that, that deal is done as far as I am concerned but we do need the money. So I divvied up the money at the time and I trusted Felim, and I took him as a friend who would not let me down.” (Day 10, page 100)
There are statements to similar effect on day 10, page 108 and day 11, page 113 of the transcript. He later stated at day 11, page 115:
“No, sorry, I was paying the money because I had a deal with Bohemians. I was assured by Felim O’Reilly that I had a deal with them. He told me, we need the money. I said, fine, because we have a deal here, I don’t really have a problem with giving you the money up front.”
(c) The statements in the directors’ reports and the accounts of the plaintiff company to December 2004, which were signed off in January 2005.
(d) The defendants say that statements themselves are utterly unequivocal. Moreover, they say that while it is tentatively suggested by Bohemians that one would not want to understand these to mean what they say, because they were prepared by the auditors and merely signed by the directors, that was not the process. They point out that the plaintiff company’s auditor Mr. Whelan described the process in the course of his evidence. He said he went to the directors, spoke to them about the affairs of the company, went away, prepared accounts and reports based on what he had been told, sent drafts back to the directors, came and spoke to them, made alterations based on these discussions, and then finally sent the drafts. Mr. Whelan made it clear that the statement in the directors’ report to the effect that Bohemians had agreed to sell land to Albion was precisely what the auditors were told by the directors. Mr. Whelan also said that if he had been told that this money might or might not come in and was dependent on something other than planning permission, he would possibly have taken the view that Bohemians was not viable as a going concern.
November 2005
The defendants point to the following evidence as demonstrating that there was a concluded contract at this stage:-
(a) All of the evidence relating to the July 2005 period.
(b) The agreement of November 2005, which was recorded in the letter of the 8th November 2005 but was reached prior to that. The defendants say that the position is completely changed from the position that applied prior to this. There is now an acknowledged liability on the part of Albion to pay, irrespective of planning permission, or of the existence of heads of agreement.
The letter means on its face that Albion had agreed to pay €1.4 million only on the basis that it was getting land in exchange. Any other explanation of what occurred is simply absurd. The case made by Bohemians amounts to saying that Albion was committed to paying €1.4 million, but that it was getting nothing in return. On the contrary, Bohemians could hand the money back at any time that it wanted. They point out that, indeed, Mr. McDonnell’s view was that Bohemians did not even have to hand the money back, but rather was entitled to keep it, and that Albion was in any event entitled to nothing in return. They suggest that if the question is asked the other way around, the reality becomes clear: could it really have been the case that Albion was entitled at any stage simply to say that it wanted the money back, and that Bohemians would have had to repay it?
(c) The money actually paid under the November 2005 agreement. €750,000 was paid between November 2005 and August 2006.
(d) The accounts to December 2005. Again, they say these are utterly unequivocal. The accounts state:-
“The company has sold a small part of its land at the shopping centre end of the ground to Albion Enterprises Limited. The sale price has been agreed at €720,000, in addition to the provision of Corporate Boxes for the company at no cost. The value of the ground will not be reduced as a result of this sale. The company has already received €600,000 from Albion Enterprises at the balance sheet date. The company, as stated earlier in the directors report, is due a further €650,000 from Albion Enterprises in compensation for the delay in the provision of the corporate boxes.”
The defendants say that the evidence establishes that in 2005 the auditors followed the same process of obtaining information from the directors and checking it carefully with them, as they had done in 2004. They suggest that it is not simply the statements in the directors’ reports and accounts that are significant. The accounting treatment of the payments from Albion depends entirely on whether it was payable as of right by Bohemians or not. It was only when he was told that it was payable as of right that Mr. Whelan could include it in income. If he had been told it was repayable, he would have had to show it as a liability. Mr. Whelan asked specifically whether the money due to Bohemians was coming in. He got a letter back from Mr. O’Reilly dated the 13th January 2006 saying that the entire was due. Mr. Whelan then spoke to Mr. O’Reilly. His view following that conversation was that the money was Bohemians to keep, and that it was entitled to get the further payments. If he had been told that the state of affairs was such that Bohemians might have to repay it, it would not have been possible to draw the accounts on a going concern basis. He continued (transcript, day 8):-
“ 212. Q. So through whatever Mr. O’Reilly said to you, he clearly conveyed the impression to you that this was their money to which they were entitled?
A. That is correct…….
220. Q. And none of that was done?
A. None of that was done. Basically, we were not told that this money was going to be repaid. Under no circumstances were we told that.
Q. Or even repayable?
A. No, we were not.
Q. Under any circumstances?
A. We were not told that.”
The defendants submit that it is hard to imagine anything more definite. The directors at the time were clearly of the view that the land had been sold. The defendants say they were of that view because they were right.
(e) The alleged representations of Mr. McDonald made at the meeting of the 17th May, 2006, supported tacitly by Mr. Conway and Mr. Cuffe.
In the course of his testimony Mr. Conroy described these events:-
“Yeah. At this point I would have said to them, look, guys, we have a deal here, you know, I don’t want any messing with this deal. I said, you know, it could possibly end up in the High Court if it ever got messy. John McDonald assured me that no, definitely not, that the deal was mine.”
The defendants point to the fact that Mr. Ryan gave similar evidence on day 12 of the trial. Moreover Mr. O’Hara testified on day 10 of the trial that Mr. Cuffe gave similar assurances that the deal was going ahead at a meeting held in the autumn of 2006.
(f) The fact that in the negotiations with third parties, at all stages up to November 2006, the lands in sale to Albion were excluded from those on offer. The defendants suggest that was only when it became clear after November 2006 that Bohemians may have mistakenly sold these lands to Daninger that a suggestion was made that they had not been sold to Albion.
August 2006
The defendants point to the following evidence as demonstrating that there was a concluded contract at this stage:-
(a) All of the evidence relating to the November 2005 period
(b) The exchange of correspondence from the 17th August, 2006 to the 20th April, 2007. They say that the first letter in that sequence reflected an agreement reached directly between the parties, to the effect that certain obligations would not have to be fulfilled by Albion and that an additional consideration of €600,000 would be paid.
(c) The fact that, in the negotiations after August 2006, the lands in sale to Albion were not offered to third parties.
In reply to the plaintiff’s suggestion that there could be no agreement until “contracts are executed by both parties, exchanged and a contract deposit furnished” the defendants say that this is wrong as a matter of principle. While acknowledging that the quotation cited by the plaintiff from the judgment of Parker J. in In Van Hatzfeldt Widenberg v. Alexander correctly encapsulates the law, the defendants say it is a question of interpretation as to whether this falls into one category or the other. The defendants submit that the reality is that in this case, the relevant clause (i.e. clause 7.1) of the Heads of Agreement is no more than a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. They suggest that any other view is inconsistent with the course of dealing between the parties, in particular the payment of monies, the representations made, and the contents of the accounts and directors’ reports. Further, they say that the proposition can have no relevance to contracts reached directly between the parties. In the specific case of the November 2005 agreement contended for this agreement was reached directly between the parties. The defendants submission is that in these circumstances the contents of subsequent letters and draft heads of agreement cannot alter the simple fact that an agreement was reached.
With reference to the mapping issues they say that the absence of an agreed map is irrelevant. They accept that no map was finally agreed but say that there was no doubt as to what was in sale. They say that the lands to be transferred to the defendants are and always were what the parties long ago started to call “the pink and yellow lands” and “the blue lands” as repeatedly shown on the maps submitted in evidence. They say that in truth, the pink and yellow lands have never moved or changed while the blue subterranean lands were always intended to stop short of the plaintiff’s playing surface and were fixed in that and all other respects after the survey and subsequent walking of the lands in late May and early June, 2005.
Dealing in more detail with the identification issues the defendants say the following:
Re: The Pink and Yellow lands
The defendants acknowledge that the Project Architect maps do not show a gap of 6m between the boundary wall of Dalymount Park and the north boundary of the pink and yellow lands, and indeed show a gap of 5.3m, a difference of some 70cm. However, they contend that this is an irrelevant issue. They say it is simply a mapping error, caused in turn by a mapping error as to the true position of the boundary wall of Dalymount Park. The important point is that it is common case that, at all times, both parties intended the north boundary of the pink lands to be 6 metres south of the plaintiff’s north boundary.
They say there is no mistake as to what was in sale. The mapping error, such as it is, can be readily corrected. In fact, that has been done, and by Mr. Breen. They point out a map prepared by Mr. Breen in June, 2006 in the course of negotiations with Andorrey, shows the pink and yellow lands set back correctly (i.e. 6 metres) from the correct boundary, as it was always intended to be. Furthermore, that this was what was intended is perfectly clear not only from Mr. Breen’s mapping, but from the fact that, as much stressed in evidence, he never even raised the point when he discovered the alleged mapping error mentioned above. He simply took the pink and yellow lands to run only to six metres from the boundary of the plaintiff’s land.
The defendants say that had the parties persisted with the Project Architects’ map and attached it to a documentary contract, and if it had ultimately transpired that there was a mapping error, the Court would readily have rectified the document in relation to the 6 metres on the common evidence that a 6 metre gap had been what was intended. They seek to emphasise that what was agreed is not in issue. Moreover, had the mapping error spotted by Mr. Breen been pointed out to Mr. O’Hara (or anyone) the maps would have been corrected. And there is, in fact, an undeniably correct map, prepared by the very person who had to approve it for the plaintiffs, namely Mr. Breen’s map referred to above.
Re: The Blue Lands
The defendants submit that these lands are also identified beyond any doubt on a set of five maps submitted by Project Architects on the 5th July, 2007. Critically, they are also clearly shown, in identical terms, on a map prepared by Gardiner Architects (representing the plaintiff) in June, 2006, at the time and for the purpose of the (ultimately abortive) negotiations for the sale of Dalymount Park to Andorrey. This is Gardiner Architects drawing number GAL05-107-001 which was produced in evidence and discussed by Mr. Breen in response to questioning from Mr. McCullough S.C in relation to the proposed sale to Andorrey and then to Daninger. It is a hand-numbered “1” in a bound and indexed set of maps produced in court. Drawing number “2” in the same book is even clearer, says the defendant. This drawing, taken from the December, 2005 version of the Project Architects set, has manuscript notes on it penned by Mr. Breen and dated the end of March, 2006. In those notes he clearly indicates that the key dimensions of the blue lands are correct. The defendants submit that, putting the two drawings together, Mr. Breen’s own and his notes on the Project Architects’ drawing, it is beyond doubt that both parties knew very well both the position and the dimensions of the blue lands and that Mr. Breen’s understanding of the blue lands corresponded with that of Mr. O’Hara (from July, ’05 onwards) as shown on the maps cited above.
The defendants also sought to deal in the course of their submissions with the complaints made by the plaintiff concerning the method of mapping. They acknowledge that numerous references were made during the evidence of Mr. O’Hara and Mr. Breen, to Mr. Breen’s view that the maps should have been developed to refer positions to fixed features that would not be obliterated in the course of the intended developments. They do not disagree that this could have occurred. However, they point out that Mr. Breen accepted in the course of cross-examination by Mr. McCullough S.C. that the lands could be identified by reference to any such fixed feature. That being so, they make two points. First, there are numerous fixed points outside the plaintiff’s lands on most of the drawings. Connaught St., North Circular Road and Phibsborough Road appear on most of them and houses and buildings on all three. Secondly, dimensions are given on many of the drawings to fixed points which, at the dates of those drawings, were not intended to be obliterated, and this was emphasised in evidence. They point to the fact that examples were specifically put to Mr. Breen in cross-examination and Mr. Breen accepted that these were dimensions to given features of the football ground.
In summary the defendants position on this issue is this: while there may have been, especially in relation to the final deal of August, 2006, when the football ground itself was to be obliterated, considerable practical merit in the proposal to establish references that would survive, the failure to do so did not indicate that the lands in sale were not known. While they might usefully have been mapped in a way that would make it easier to mark them in the future, the failure to do so does not go to the identification of the lands in sale.
Turning then to the plaintiff’s submission that there could be no concluded agreement in the absence of agreement on the “leases, licences, wayleave agreements and other documents to be drafted and completed”, the defendants contend that the issue here is whether these were minor matters left to be agreed later by lawyers, or were they fundamental matters on which agreement was never reached.
They cite Black v. Kavanagh (1973) 108 I.L.T.R. 91. (However, I am not sure that that case is in point. While Gannon J. did refer to circumstances where the authority of solicitors to negotiate and conclude a contract on behalf of their clients may be implied from the circumstances, the facts of that case were very different to those of the present case.) Perhaps, more pertinently, they also refer to Chitty on Contracts (28th edition, Volume 1) wherein it is stated at paragraph 2-104-
“On the other hand, an agreement may be complete although it is not worked out in meticulous detail. Thus, an agreement for the sale of goods may be complete as soon as the parties have agreed to buy and sell, where the remaining details can be determined by the standards of reasonableness or by law.”
The authors then go on at paragraph 2-105 to say:-
“Even an agreement for the sale of land dealing only with the barest essentials may be regarded as complete if that was the clear intention of the parties. Thus in Perry v. Suffields Ltd [1916] 2 Ch. 187 an offer to sell a public house with vacant possession for £7,000 was accepted without qualification. It was held that there was a binding contract even though many important points e.g. the date for completion and question of paying a deposit, were left open.”
Further, the defendants rely on the New Zealand case of Electricity Corporation of New Zealand v. Fletcher [2001] NZCA 289. (This case was also referred to in oral argument by counsel for the plaintiff.) The New Zealand Court of Appeal said in that case:-
“A helpful analysis of various possible situations is given by Lloyd L.J. in Pagnan S.p.A. v. Feed Products Ltd (1987) 2 Lloyd’s Rep 601, 619. After pointing out that the parties may intend to be bound forthwith even though there are further terms still to be agreed, his Lordship said that, if they then failed to reach agreement on the further terms, the existing contract is not invalidated unless the failure to reach agreement renders the contract as a whole “unworkable” or void for uncertainty. By “unworkable” we take him to mean that the transaction is lacking in business efficacy. Lloyd L.J. continued:
‘It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word “essential” in that context is ambiguous. If by “essential” one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by “essential” one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by “essential” one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, “the masters of their contractual fate”. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called ‘heads of agreement’.”
Albion submits that in this case, that was precisely the intention of the parties. Agreement had been reached. The terms of the wayleaves, leases etc were (and still are) minor details to be filled in later, according to the standards of reasonableness. The most significant consideration is that the terms of the wayleaves, leases etc were never mentioned once in correspondence. Both parties were happy in November 2005 that Albion could safely commit to paying over large amounts of money without these details being in place. They submit that the most significant issues are in the draft heads of agreement anyway. Further, in relation to the proposed leases they cite Yaxley v. Gotts [2000] Ch 162, an equitable estoppel case, as an example of a case in which the court was prepared to order a defendant to grant the plaintiff a 99 year lease, although the terms of any such lease had neither been negotiated nor agreed.
The defendants contend that in this case, that was precisely the intention of the parties. Agreement had been reached. The terms of the wayleaves, leases etc. were (and still are) minor details to be filled in later, according to the standards of reasonableness. The most significant consideration is that the terms of the wayleaves, leases etc were never mentioned once in correspondence. Both parties were happy in November 2005 that Albion could safely commit to paying over large amounts of money without these details being in place. They submit that the most significant issues are in the draft heads of agreement anyway. Further, in relation to the proposed leases they cite Yaxley v. Gotts [2000] Ch 162, an equitable estoppel case, as an example of a case in which the court was prepared to order a defendant to grant the plaintiff a 99 year lease, although the terms of any such lease had neither been negotiated nor agreed.
Turning to the question of the requirement of “negotiation in good faith” …. of all necessary contracts, leases, licences, wayleave agreements and other documents required or reasonably envisaged,” the defendants maintain that the decision in Triatic v. Cork Co. Council favours them. They say that Triatic is a case in which it was sought to create a contract out of an obligation to negotiate in good faith. However, in this case, there is already a contract in existence, and the question is whether details can be filled in by negotiations conducted in good faith. They say Triatic supports the proposition that this is permissible.
The defendants’ submissions deal at some length with the evidence that they claim supports their contention that the parties were committed to each other from an early stage. They say that the evidence is overwhelming in this regard. They claim that the payments made represent compelling evidence that the parties were fully committed. They further submit that, as the trial has developed, the position of the plaintiff’s officers on the question of whether there was a deal has become quite bizarre, not only in relation to the payments they sought, but much more tellingly because it was so clearly recorded, in relation to the documents they themselves generated or transmitted. They say the plaintiff’s officers, for the purposes of this case, ask the Court to find that they themselves consistently misrepresented the position to their own members, to their creditors and to the Revenue and that they misled Andorrey (against their own interest) and (also against their own interest) Mr. Black (the solicitor originally acting for Daninger).
The defendants submit that the relationship of the payments to the transaction is clear and that the only credible explanation is that of Mr. Conroy; that they were made on promises that the deal (in place at each date) would be completed.
Date Payee Amount
17/1/02 F.H. O’Reilly & Co €31,743.45
15/2/02 F.H. O’Reilly & Co €31,743.45
These first two payments were payments in consideration of negotiation. It is acknowledged that they did not reflect a committed deal. However, that had been specifically agreed.
20/2/03 F.H. O’Reilly & Co €38,000.00
This was the last payment of the agreed non-refundable deposit of IR£80,000, and it was paid just after the first heads of agreement were prepared.
04/07/03 Bohemian F.C. €50,000.00
24/07/03 F.H. O’Reilly & Co €50,000.00
The above payments are accidentally listed as income in the 2003 accounts, which treatment was corrected in the 2004 accounts on the basis that they would be refundable if (but only if) planning permission were ultimately refused.
1/11/03 F.H. O’Reilly & Co €50,000.00
This payment, with the previous two, completes the €150,000 recorded in the plaintiff’s accounts for the year ended 30th November, 2003 as income but as giving rise to a contingent liability. €50,000 is reclassified in the 2004 accounts.
12/11/04 F.H. O’Reilly & Co €50,000.00
04/01/05 F.H. O’Reilly & Co. €50,000.00
02/06/05 F.H. O’Reilly & Co. €50,000.00
09/11/05 F.H. O’Reilly & Co., €100,000.00
This last is the first payment on foot of the agreement of November, 2005 for increased payments in lieu of having to build the corporate boxes, which were to be made in instalments. This is also the point at which the agreement ceased to be contingent on planning permission, a point that clearly demonstrates the defendants’ commitment to the purchase.
4/12/05 F.H. O’Reilly & Co., €200,000.00
23/1/06 F.H. O’Reilly & Co., €100,000.00
06/02/06 F.H. O’Reilly & Co., €100,000.00
09/03/06 F.H. O’Reilly & Co., €100,000.00
06/04/06 F.H. O’Reilly & Co., €100,000.00
All of the above are instalments paid pursuant to the November, 2005 agreement.
24/8/06 Bohemian F.C. €50,000.00
Total €1,151,486.90
The defendants contend that the Court has heard no credible explanation of these payments other than that they were made in reliance on assurances that the relevant deal was in place. (The Court would comment that that assertion is correct, but, of itself, it is not dispositive of the matter). The plaintiff’s officers accept that they sought these payments but, even though they amount to most of what was payable for the lands and clearly relate from November 2005 onwards to the specific agreement of that date, they deny that the payments were made in reliance on completed deals. The amount of the payments is obviously very significant in the context of the parties’ dealings, whatever their nature.
The defendants ask the Court to consider what is the alternative explanation offered by the plaintiff? They submit that it is only this: that Mr. Conroy paid these sums to keep the plaintiff on side, specifically to keep the plaintiff’s support in relation to its planning permission and not on the basis that the plaintiff was committing to the sale. They suggest there is a complete absurdity at the heart of that explanation: the land may have been of little use to the defendants without a planning permission but any planning permission incorporating the lands was worse than useless to the defendants without those lands (the defendants’ emphasis). The defendants contend that the proposition that Mr. Conroy was paying the price he might have had to pay in the future for the privilege of getting a planning permission that would bind his €200 million investment to a piece of land he might never get is bizarre. Furthermore, they say, this was necessarily obvious to every person aware, even in general terms, of the defendants’ overall plan and the significance of the lands in sale to that plan. The plaintiff’s officers admit they were aware in this regard.
The defendants submit that it just is not credible that the plaintiff’s officers thought there was no commitment between them when they sought and obtained these payments from the defendants.
They suggest that the proposition put forward on behalf of the plaintiffs is particularly absurd in relation to the payments made from the 9th November, 2005 onwards. They say that in respect of these payments, there is no need to rely on any assurances given on behalf of the plaintiff, because the basis upon which they are paid is specifically set out in writing. They were made on foot of the deal recorded in the letter from the plaintiff’s solicitors of the 8th November, 2005. That letter specifically records the fact that the parties “have agreed the following arrangement”. The arrangement set out in the letter commits the defendant to paying a further sum of €650,000 “in compensation for the building of the corporate boxes”. It need hardly be said that one can only be compensated for a right that one has given up, which in this case can mean only the contractual entitlement to have the defendant build the corporate boxes. The letter further states that this amount together “with the balance due in relation to the original figure agreed for the area to be leased at Connaught Street…” would be paid according to an agreed schedule. The entitlement of the plaintiff to these payments was not made subject to execution of the heads of agreement, to planning, or (still less) to any further agreement on the terms of leases. And indeed the defendant began to pay the amounts due under this arrangement without waiting for anything else to occur. The defendants submit that it simply makes no sense to say that the parties entered into a deal whereby the plaintiff would be entitled to these large payments, and the defendant would be entitled to nothing.
They further assert that, in fact, the plaintiffs told various unconnected parties that they had a deal. In the plaintiff’s accounts for the year to the 30th November, 2004, which the Court heard was sent to every member, not only is the deal with the defendants described, but the description and accounts show, they suggest, an acute awareness of two very relevant points; the matters on which the deal was contingent and the consequential obligations in accounting for monies received from the defendants. The Directors’ report, signed by Mr. O’Reilly as President and Mr. Cuffe as Secretary, refers to “Future Developments” including plans for the sale in issue in these proceedings. They say that Mr. O’Reilly, attempting to explain this away, suggested that this was only a description of plans (in the sense of “possibilities”), but, even at that point, the report goes on to be very clear. It says:
“- sale of small part of land to Albion Enterprises Limited for €750,000. The company has already received a deposit in the sum of €200,000, with a further €300,000 receivable immediately upon planning permission being granted to Albion Enterprises Limited. Planning permission is expected to issue shortly.”
Thus a contingency is identified, but only one – that of whether the defendants would obtain planning permission. The defendants say that use of the word “receivable” clearly showed an intention that once such permission was obtained, the plaintiff would receive the additional money.
Moreover, they suggest that, in any event, the position is put even more explicitly further down on the same page:
“Sale of Part of Land”
The Company have agreed [sic] to sell a small part of its land at the shopping centre end of the ground to Albion Enterprises Limited. The sale is dependant on Albion Enterprises Limited receiving planning permission for development at said location. The proceeds of sale would yield the company €750,000, in addition to the provision of Corporate Boxes for the company at no cost. The value of the ground will not be reduced as a result of this sale. On receipt of planning permission the full €750,000 becomes receivable. The company have [sic] already received a deposit of €200,000 from Albion Enterprises Limited towards this sale, of which €100,000 is refundable. The €100,000 will become refundable if the planning permission is refused to Albion Enterprises Limited and this sum has been provided for in creditors as a refundable deposit.” (defendants’ emphasis in italics)
So it is contended that the auditors, instructed by the officers of the club, and fully aware of the need to distinguish monies which might have to be returned from those which might not, drafted for the Directors, and the directors signed and sent out to the members, a plain statement that there was an agreement for sale that was contingent only on planning permission, as was in fact the case at that time, and accounting for the financial position on that basis. And this was in the context of fundamental uncertainty about the club / company to continue as a going concern.
In the accounts themselves, at page 7, point 1.5, the auditors made specific reference to their preparation on the basis of a going concern, referred to the deal with the defendants (again in terms that leave no doubt other than the contingency as to planning) and confirmed, on that basis, that the directors considered it appropriate to treat with the company as a going concern. Finally, and still with that set of accounts, the auditors emphasised their appreciation of contingency by making special provision for monies that had been treated as income the previous year but which might have to be repaid if planning were refused.
Those accounts show that they were signed for the board by Mr. O’Reilly and Mr. Cuffe on the 2nd February, 2005. This, of course, was before the survey of late May, 2005, the walking of the lands, the revised deal of June, 2005 and the maps of July. But in November, 2005, the deal having been revised, Mr. O’Reilly wrote to Mr. Joe Connolly of the Revenue Commissioners. His letter discusses the deal in detail, including the planning issue and the row that had then erupted as to whether the defendants would build the corporate boxes within 15 months of planning. The letter is couched entirely in terms that there has been a deal in place for some time. Indeed, it discusses the enforceability of one aspect of the deal then in place, using the term contract to describe it. It includes the following sentence:
“They [the Defendants] are entitled to argue that if they are delayed in carrying out this work that they cannot be forced to do it under the time provision in the Contract.”
Thus, the defendants contend, it is quite clear, notwithstanding that a row was ongoing, that Mr. O’Reilly saw that issue partly in terms of whether the terms of the deal could be enforced. In that regard he was concerned not as to whether there was a deal but as to whether delay might have excused performance within the time specified.
There is, of course, some disagreement as to whether the row about the time-frame for building the corporate boxes was resolved at the Peploe’s lunch, but there is no doubt that it was subsequently resolved and that this produced the agreement of November, 2005. Mr. O’Reilly’s letter of the 8th November 2005, as set out above, clearly records the fact that “our clients have agreed with yours the following arrangement”. It goes on to record that a sum of €650,000 was to be paid “in compensation for the building of the corporate boxes” and that this sum “together with the balance due in relation to the original figure agreed for the area to be leased at Connaught Street” would be paid according to an agreed schedule. By letter of the 13th December, 2005 to Mr. Breen, Mr. O’Reilly confirmed that “as I informed you there is a new arrangement whereby Albion will build the foundations for the corporate boxes and will pay off instead a compensation figure of €650,000.” The defendants contend that not only do these letters acknowledge that an agreement has been reached, but the use of the phrases “new arrangement” and “compensation” clearly show that Mr. O’Reilly saw this as replacing a previous commitment. Otherwise, for what was the plaintiff to be compensated?
Mr. O’Reilly writes to the company auditors on the 13th January, 2006 again in terms which clearly describe an agreement and, again, in place of “the Agreement referred to earlier for the sale and interest in relation to the Connaught Street side.”
This leads to the directors’ report and accounts for the year ended 30th November, 2005, signed by Mr. O’Reilly and Mr. Cuffe as Directors and on behalf of the Board of the plaintiff, on the 19th January, 2006. Again, these accounts are prepared in circumstances where there is doubt about whether they can be presented on a going concern basis and that doubt is explicitly resolved by reliance on the monies received and to be received from the defendants. Here again, the sale to the defendants is recorded both as a future plan and, more explicitly, on the basis that “The company has sold a small part of its land…” The contingency in relation to planning is gone. There is now no contingency at all. No part of the monies paid is recorded as potentially repayable and the monies to be received are clearly stated to be receivable in specific instalments.
The defendants ask what then, is the explanation offered to the Court by the plaintiff company’s officers for years of representations that, they now say, were not true?
The defendants remind the Court that the evidence in that regard was to the effect that they almost had a deal, they believed they would get a deal and so they treated with the situation as if they had a deal. They say their auditors went along with that; the same auditors that were so careful in the accounts for 2004 to correct the mistaken treatment of refundable monies as income. They say they always told the members at general meetings that the deal was only potential and that the reason the minutes do not reveal this is that they were prepared hurriedly and are incomplete. They don’t explain why, if they needed to explain this to the members, they did not simply instruct their auditors to reflect the position correctly in the accounts. They don’t say that they took any steps to correct the mistaken impression they were giving to members who were not in attendance at meetings or creditors or revenue officials or companies office officials. Finally, they imply that this mis-accounting was deliberate but well-intentioned, to allow the company and thus the club to continue to operate. (The Court would observe that this appears to be a fair commentary on the relevant evidence.)
The defendants submit that the reason there are no serious explanations for the fact that all these statements were untrue is that they were not untrue. They were perfectly true. A senior solicitor, a careful auditor and a banker carefully told their members, their creditors, the revenue, each other and ultimately third parties who wanted to buy their lands what they, in fact, understood to be the case; that they had agreed the sale of these parts of their lands to the defendants. They suggest that it was only when one of those third parties, Daninger, refused to proceed with a deal worth perhaps €67 million unless these lands were included, that the plaintiff decided it hadn’t really had a deal with the defendants because the documentation had never been concluded. The defendants suggest that documentation was not essential in their minds until they needed to escape the deal they had so extensively reported.
The defendants rightly point out that the evidence establishes that the plaintiff told Andorrey it could not sell the subject lands to it and mapped the exclusion. But, it is contended, the Court also has evidence from which it can only infer that it said the same to a Mr. Black, who, for a time, represented Daninger. This is because, following discussions with Mr. Cuffe, at the end of 2006, Mr. Black provided a draft letter for F.H. O’Reilly to send to him stating, inter alia, that “while [the Plaintiffs] have entered into a Verbal Agreement or Arrangement with their Adjoining Owner no contract or written agreement of any kind has been signed or exchanged by our client with the Adjoining Owner….” Following this, the draft does go on to say that, although money has been received for the lands “no contract is in place…” and the Club is “prepared to abandon the proposed arrangement…” It is contended that there can be no doubt from what has gone before, there can be no doubt that Mr. Black, in drafting the letter, relied upon the absence of writing to say that there was no contract and to describe the arrangement as proposed. The defendants consider that he believed that there was, in fact, an agreement. Of course, the draft was corrected and the letter in that form was never sent. But Mr. Black was dealing for Daninger, not for Andorrey (which had the same understanding) or for the defendants. The defendants suggest that his understanding can only have come from his discussions with Mr. Cuffe.
The defendants say that this draft letter and what it reveals about the state of mind of the plaintiff’s officers as late as December, 2006, is like the background radiation of this dispute. It discloses the thinking of the plaintiff’s officers, as given to a third party, just after the big bang, when they knew they had a problem. They speculate that it may even have been from Mr. Black that they got the idea of working from the denial of anything in writing to the denial of any contract at all. But, the defendants say, whether the plaintiff’s officers suggested it to him or he suggested it to them, there is no doubt that the letter shifts, over two paragraphs, from “our clients have entered into a verbal agreement” to “no Contract or Written Agreement of any nature has been signed” to “no contract is in place.” This is at or close to the origin of the present dispute. This is why, they suggest, even in giving evidence, Mr. O’Reilly keeps saying, “no”, “no deal”, “no concluded deal”, even when faced with stark statements of his own that there was a deal. The defendants say the root of the plaintiff’s denials in the face of their own accounts and correspondence is seen, for example, in Mr. O’Reilly’s evidence on day 4. Pressed with the conflict between his directors’ report and his statement that it would have been ludicrous to say there was a deal, he answers (at Q494);
“I have not said – what I have said is that I could not say that a concluded deal had come into effect.” (italics added).
At Q.499 to 501, faced with the fact that he is denying the plain meaning of what he has said, Mr. O’Reilly says –
“perhaps these are words – these are words used by an auditor, and I would perhaps as a lawyer, even take issue with whether – I would take issue that they actually mean that a sale has been made.”
Leaving aside the fact that no such qualifying words as Mr. O’Reilly inserts (Q. 494) actually appear in the directors’ reports (and also the fact that the auditors had no difficulty elsewhere noting payments that were contingent – a point made by the Court two pages later), the defendants say that these answers reveal the thinking, of the plaintiff’s officers.
They suggest that the plaintiff’s officers feel entitled to deny an agreement because they feel, or have been advised, that they can challenge its effectiveness in law. This, they suggest, is how the plaintiff has ended up denying what it told everyone for years was the case. But the existence of an agreement is quite different from its enforceability and the right to question its enforceability does not justify denying that it was made.
Decision
The court is extremely grateful to the parties for their comprehensive and very helpful submissions. Although unimpressed with some of the plaintiff’s arguments, particularly those relating to mapping and mapping issues, and the requirement of “negotiation in good faith” …. of all necessary contracts, leases, licences, wayleave agreements and other documents required or reasonably envisaged”, I do think there may be substance in the point that the negotiation of the “leases, licences, wayleave agreements and other documents to be drafted and completed” had not even started. Applying the test enunciated by Geoghegan J. in Supermacs Ireland v. Katesan (Naas) Ltd. [2000] 4 I.R. 273 I have to consider whether “everything intended to be covered by the agreement has been either expressly or impliedly agreed”. The number and complexity of the outstanding matters leads me to seriously doubt that they would all necessarily have been agreed with ease ex post facto. Moreover, there was no specific mechanism in place for their agreement, or for something like arbitration in default of agreement.
In the Supermacs case the term at issue, and said by the defendant not to have been agreed, was the amount of a deposit. However the principles discussed therein have much wider application. In that case Geoghegan J, in the course of reviewing the authorities, and in particular having subjected the judgments in Boyle v. Lee [1992] 1 I.R. 555 to very detailed analysis, accepted that in some cases leaving over of the question of a deposit until the drawing of a formal contract document would not necessarily mean that there was not a concluded agreement. Referring to a passage from the judgment of O’Flaherty J. in Boyle v. Lee he stated:
“It is clear from this passage that the evidence in the case must have been that Mr. McManus as agent for the vendor had expressly declined to take a deposit on the basis that the deposit question was to be left to be put into the formal contract. There might be situations where that would not necessarily mean that there was not a concluded agreement as, for instance, where each side simply trusted the other to submit to reasonable arrangements which the solicitors might include in the contract relating to deposit and other matters etc. But it is obvious that on the transcript of evidence in Boyle v. Lee [1992] 1 I.R. 555, both Finlay C.J. and O’Flaherty J. accepted that the question of the deposit was still to be negotiated and that it was intended to be a term of the agreement. In my view Finlay C.J.’s reference to the importance of a deposit in such a transaction was simply a comment on credibility. He was taking the view that once the deposit was still to be negotiated that meant there was an actual term of the contract still to be negotiated and therefore there was no concluded contract. The views of O’Flaherty J., although expressed differently, are not dissimilar.”
Continuing with his review of the authorities Geoghegan J. said:
“In Barrett v. Costello (Unreported, High Court, Kenny J., 13th July, 1973), (noted in (1973) 107 I.L.T.R. 239) the plaintiff told his agent that he was prepared to pay £40,000 and auctioneer’s fees in relation to a particular property but had stipulated that there was a deposit of 10%. The agent spoke to the vendor and told him of the offer but omitted to mention the stipulation about the deposit of 10%. The defendant approved the sale and although it had not been mentioned to him he would have agreed to the 10% deposit had it been mentioned. On the particular facts of the case and the evidence as to how the negotiations ran Kenny J. held that there was an oral concluded agreement without any express term relating to the deposit. But he went on to observe as follows:-
“In former times a deposit of 25% was usual but the evidence satisfies me that a deposit of 10% has become a common practice in property sales in Dublin. I do not accept the submission of the defendant’s counsel that there was never a concluded contract between the parties.”
While it is not entirely clear, I think that Kenny J. was effectively holding that there was an implied term as to a deposit of 10% rather than that there was no agreement of any kind relating to deposit. But it does not much matter because if Kenny J. was holding that there was neither an express nor an implied term as to the deposit then effectively he was holding that there was a concluded agreement with both parties ignoring the question of a deposit and leaving it as something to be dealt with ultimately when the formal contracts were drawn up. In such a situation however if for some reason or other the solicitors drawing up the contract were unable to agree on a deposit, the original oral agreement would remain binding and there would be no contractual deposit. The underlying legal principle was referred to by Lavery J. in his dissenting judgment in Godley v. Power (1961) 95 I.L.T.R. 135 at p. 147 where he quotes with approval what he described as “the oft quoted and oft approved” passage from the judgment of Parker J. in Van Hatzfeldt Wildenberg v. Alexander [1912] 1 Ch. 284 at p. 288. The passage reads as follows:-
“It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored.”
Applying the above principles as enunciated in the case law to this particular case, it would seem that if this action goes to trial there may be a number of alternative arguments relating to the question of the deposit. I would list these as follows:-
(1) That it was always intended that the parties would be contractually bound by a particular deposit yet to be negotiated.
(2) That having regard to the nature of the transaction in this case and in particular the fact that there was a franchisor – franchisee relationship between the parties, it was not intended that there be a deposit.
(3) That in all the circumstances of the case there would have been an implied term that a reasonable deposit would be paid.
(4) That in all the circumstances there was an implied term that the standard deposit normally payable in transactions of this kind would be paid.
(5) That it would never have occurred to any of the parties that there would be a problem about the deposit and that a concluded agreement was reached ignoring it with the assumption that the solicitors when drawing up formal contracts would agree a deposit.
If the trial judge held in favour of the first of those arguments the action would undoubtedly have to be dismissed because there would then have been no concluded agreement. But the action would not have to be dismissed if any of the remaining four arguments held good.”
It is clear from the decision in Supermacs, and the earlier authorities reviewed by Geoghegan J, that the critical question for this court is whether the intended execution of the wayleaves, leases, licences and so forth contemplated by the parties were conditions of the bargain or whether the references to them are merely an expression of the desire of the parties as to the manner in which the bargain is to be effected. By what means is the Court to make this assessment? I am provided with considerable assistance in that regard by the following somewhat lengthy passage from the judgment of Blanchard J. in the New Zealand Court of Appeal in case of Electricity Corporation of New Zealand v. Fletcher [2001] NZCA 289 which was cited by the plaintiff and the defendant. Before quoting from the judgment I should state that the case concerned whether Heads of Agreement executed by the Electricity Corporation of New Zealand and a company called Fletcher Challenge Energy Ltd reflected a concluded agreement. Among the issues the Court had to consider was whether, having regard to the fact that the Heads of Agreement provided for the parties “to use all reasonable endeavours” in reaching certain further agreements, there could be a concluded agreement. In the course of his judgment Blanchard J. said:
“[57] It is …. very important, in considering the intention of the parties to be bound, to bear in mind the dynamics of the negotiation process and the internal inter-relationship of the terms of a commercial bargain. Tamberlin J. of the Federal Court of Australia made the following valuable observation in Seven Cable Television Pty Ltd v. Telstra Corporation Ltd (2000) 171 ALR 89, 114 (para [97]):
‘When parties are negotiating in order to arrive at a contract to govern their legal relations the process is often complex, especially in cases of detailed and wide ranging agreements intended to endure over many years. In the course of negotiations there will generally be a constant and ongoing process of adjustment and readjustment of the positions adopted by the parties on particular clauses. This process sometimes involves a series of mutual “trade-offs” whereby a concession is made by one party in respect of one provision in exchange for the giving of a concession by the other party in respect of a different provision. It will also involve compromise and adjustment so that it is often difficult to determine whether at any particular point of time prior to execution of a final agreement the parties have entered into contractual relations. Before a final contract is made it is also difficult to detach any particular provision from its context and say that a final agreement has been reached on that particular clause as a discrete agreement.’
[58] The Court has an entirely neutral approach when determining whether the parties intended to enter into a contract. Having decided that they had that intention, however, the Court’s attitude will change. It will then do its best to give effect to their intention and, if at all possible, to uphold the contract despite any omissions or ambiguities (Hillas & Co Ltd v. Arcos Ltd (1932) 147 LT 503; [1932] All ER Rep 494; R & J. Dempster Ltd v. Motherwell Bridge and Engineering Co Ltd [1964] SC 308 and Attorney-General v. Barker Bros Ltd [1976] 2 NZLR 495). We agree with the way in which Anderson J. expressed the position in Anaconda Nickel Ltd v. Tarmoola Australia Pty Ltd (2000) 22 WAR 101, 132-3:
‘I think it is fair to say, speaking very generally, that where the parties intended to make a final and binding contract the approach of the courts to questions of uncertainty and incompleteness is rather different from the approach that is taken when the uncertainty or incompleteness goes to contractual intention. Where the parties intended to make an immediately binding agreement, and believe they have done so, the courts will strive to uphold it despite the omission of terms or lack of clarity: see Trustees Executors & Agency Co Ltd v. Peters (1960) 102 CLR 537; Upper Hunter County District Council v. Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429; Meehan v. Jones (1982) 149 CLR 571. However, the principle that courts should be the upholders and not the destroyers of bargains, which is the principle that underlies this approach, is not applicable where the issue to be decided is whether the parties intended to form a concluded bargain. In determining that issue, the court is not being asked to enforce a contract, but to decide whether or not the parties intended to make one. That inquiry need not be approached with any predisposition in favour of upholding anything. The question is whether there is anything to uphold.’
[59] In the Australian Broadcasting case (at 548), Gleeson CJ. commented on the need to examine together both contractual intent and adequacy of agreed terms:
‘It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, e.g. Masters v. Cameron [(1954) 91 CLR 353, 360]. That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.’
[60] Something should be said about the place that the controversial decision of the House of Lords in May and Butcher Ltd v. The King [1934] 2 KB 17n has in the modern law of contract. We take the view that this case is no longer to be regarded as authority for any wider proposition than that an “agreement” which omits an essential term (or, as Lord Buckmaster called it, “a critical part”), or a means of determining such a term, does not amount to a contract. No longer should it be said, on the basis of that case, that prima facie, if something essential is left to be agreed upon by the parties at a later time, there is no binding agreement. The intention of the parties, as discerned by the Court, to be bound or not to be bound should be paramount. If the Court is satisfied that the parties intended to be bound, it will strive to find a means of giving effect to that intention by filling the gap. On the other hand, if the Court takes the view that the parties did not intend to be bound unless they themselves filled the gap (that they were not content to leave that task to the Court or a third party), then the agreement will not be binding.
[61] On its own facts we respectfully doubt that May and Butcher would be decided by their Lordships in the same way today. We are now perhaps more accustomed to resort to arbitration in order to settle even matters of considerable importance to the contracting parties. We find curious the notion that, in a commercial contract where price is left to be agreed, a reasonable price cannot be fixed and that, even where there is an arbitration clause, that clause cannot be used to determine the price because “unless the price has been fixed, the agreement is not there”. (p20)
[62] We agree with Professor McLauchlan (Rethinking Agreements to Agree (1998) 18 NZULR 77, 85) that “an agreement to agree will not be held void for uncertainty if the parties have provided a workable formula or objective standard or a machinery (such as arbitration) for determining the matter which has been left open”. We also agree with him that the court can step in and apply the formula or standard if the parties fail to agree or can substitute other machinery if the designated machinery breaks down. This is generally the approach taken by this Court in Attorney-General v. Barker Bros Ltd.
[63] However, if essential matters (i.e. legally essential or regarded as essential by the parties) have not been agreed upon and are not determinable by recourse to a mechanism or to a formula or agreed standard, it may be beyond the ability of the Court to fill the gap in the express terms, even with the assistance of expert evidence. In Coal Cliff Collieries Pty Ltd v. Sijehama Pty Ltd (1991) 24 NSWLR 1, 20, Kirby P remarked:
‘Courts are not well equipped, drawing on their own experience, to fill out the detail of such contracts where the parties leave gaps in their own agreement. The fact that this may result in wasted time and money is a risk which parties to negotiation must always weigh up. Courts cannot enforce such agreements because they are incapable of judging where the negotiation on particular points would have taken the parties, acting bona fide but legitimately in their own interests.
It will be a matter of fact and degree in each case whether the gap left by the parties is simply too wide to be filled. The Court can supplement, enlarge or clarify the express terms but it cannot properly engage in an exercise of effectively making the contract for the parties by imposing terms which they have not themselves agreed to and for which there are no reliable objective criteria.’
[64] Where the intention to contract is found to have existed, the Court may supply an omission by implying a term. It is true that the Privy Council remarked in Aotearoa International Ltd v. Scancarriers A/S [1985] 1 NZLR 513, 555 that, in order to determine whether there is a legally binding bargain, it is impermissible to add to the express terms further implied terms upon which the parties have not expressly agreed, and then, by adding the express terms and the implied terms together, thereby to create “what would not otherwise be a legally binding bargain”. But this observation was made on the particular facts of that case, where there does not appear to have been a mutual intention to contract. Mustill L.J., having referred to it in Malcolm v. Chancellor, Masters and Scholars of the University of Oxford [1994] EMLR 17, said that there could not be found in this passage the route to a decision on whether there is a contract or not “since it requires the court to assess the contractual efficacy of express terms which the court knows, ex hypothesi, could be bulked out by implied terms” (at p. 35). It provided, he said, a valuable reminder of the risks involved in the exercise of taking potential implied terms one group at a time, implying them, moving on to another group, implying those, and so on until a contract is built up out of implied terms from no express bargain at all. Mustill L.J. thought it was necessary instead to “consider whether there was a sufficient skeleton of express terms to be fleshed out by implication”. We respectfully agree. Gaps can be filled by implication, but only if there is such a skeleton of express terms combined with an intention to contract.
[65] A helpful analysis of various possible situations is given by Lloyd L.J. in Pagnan S.p.A. v. Feed Products Ltd (1987) 2 Lloyd’s Rep 601, 619. After pointing out that the parties may intend to be bound forthwith even though there are further terms still to be agreed, his Lordship said that, if they then failed to reach agreement on the further terms, the existing contract is not invalidated unless the failure to reach agreement renders the contract as a whole “unworkable” or void for uncertainty. By “unworkable” we take him to mean that the transaction is lacking in business efficacy. Lloyd L.J. continued:
‘It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word “essential” in that context is ambiguous. If by “essential” one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by “essential” one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by “essential” one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, “the masters of their contractual fate”. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called “heads of agreement”.’
[66] It follows that merely because an important term is deferred to be settled on a future occasion, that does not mean that there is no intention to be bound. In such circumstances, provided the Court is satisfied that the parties did intend to enter immediately into a contractual relationship, it will do its best to find a means of giving effect to that intention by determining, if possible, the outstanding matter.”
I agree wholeheartedly with Blanchard J. that the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court should be to conclude that they had the requisite contractual intention. Despite what the defendants say I feel I must accept the evidence of Mr. McDonald, an experienced conveyancer, that the complexity of the outstanding issues was such that he could have no confidence that they would be resolved straightforwardly or with ease. He explained carefully and cogently what his concerns were and the court will not lightly gainsay them. A good example of Mr. McDonald’s conscientiousness, and of the care that he takes in his work, is to be seen in his explanation for the issues raised by him in his letter of the 2nd September, 2005 to his opposite number Tim Ryan concerning the need for an engineering input to the plans for the car park, and for a draft condition “in consultation with your client’s engineers in relation to a proposal as to how same may be dealt with in practice”. He explained: “We would need any lease to be granted by Albion to us to incorporate various rights to either tie into their building if that was necessary and ….we would need an engineering input to enable me draft the type of conditions that we would need and the easements which we would need to retain or include in any lease.” The Court would not agree that matters of this sort are standard or routine or minor. There is no mechanism in the supposed agreements whereby a failure to agree on important issues of this sort can be resolved. These are not matters determinable by recourse to a mechanism or to a formula or agreed standard. As pointed out by Blanchard J. it is a matter of fact and degree in each case whether the gap left by the parties is simply too wide to be filled. The Court can supplement, enlarge or clarify the express terms but it cannot properly engage in an exercise of effectively making the contract for the parties by imposing terms which they have not themselves agreed to and for which there are no reliable objective criteria. I therefore consider that in all the circumstances of this case there was no concluded agreement between the parties.
Proprietary Estoppel
As the defendants are counterclaimants for relief on the grounds of proprietary estoppel, and as the plaintiff is defendant to that counterclaim and seeks to resist it, it is appropriate to consider the defendants submissions first and then the plaintiff’s submissions in reply.
The Defendants’ Submissions
The defendants submit that even if the Court does not find a finalised contract or, doing so, finds no memorandum or part performance, the plaintiff is estopped from denying the commitment made, the detriment to the defendants arising therefrom, or that, having sought and accepted the payments concerned, it knew of the reliance being placed on its commitment to sell to the Defendant. On these grounds, they submit, the case presents a classic example of circumstances to which proprietary estoppel is applicable.
In Haughan v. Rutledge [1988] 1 I.R. 295 Blayney J. summarised the requirements for this form of estoppel (at p. 300) as follows (quoting the terms of the rules from Snell’s Equity):
“1. Detriment.
‘There is no doubt that for proprietary estoppel to arise the person claiming must have incurred expenditure or otherwise have prejudiced himself or acted to his detriment.’
2. Expectation or Belief.
‘ “A” must have acted in the belief either that he already owned a sufficient interest in the property to justify the expenditure or that he would obtain such an interest.’
3. Encouragement.
‘“A” must have been encouraged by “O” or his agent or predecessor in title.’
4. No bar to the equity.
‘No equity will arise if to enforce the right claimed would contravene some statute, or prevent the exercise of a statutory discretion or prevent or excuse the performance of a statutory duty.’”
(emphasis added).
The defendants submit that this is a particularly clear case for the application of these principles since, even if certain details were not concluded, the dealings and expectations of both parties on the fundamental elements of the sale sought to be enforced are quite clear and the detriment incurred in reliance thereon was not only observed but initiated by the plaintiff. They also refer to the acknowledged leading authority on estoppel; that of Ramsden v. Dyson (1866) L.R. 1 H.L. 129. Although the classic statement from the judgment of Cranworth L.C. in that case deals with a true owner standing idly by while witnessing mistaken acts of ownership by another (a situation more analogous to adverse possession) even in 1866 it was clear that the principles were applicable to the enforcement of incomplete transactions. So Lord Kingsdown is quoted by Blayney J. in Haughan v. Rutledge as follows:
“If a man, under a verbal agreement with a landlord for a certain interest in land, or what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a court of equity will compel the landlord to give effect to such promise or expectation.” (emphasis added)
The defendants further submit that an even broader application of the doctrine of estoppel is applicable to the attempt of the plaintiff to rely, in the face of the assurances of commitment given at the dates of payment, on the Statute of Frauds (Ireland), 1695 or on an alleged agreement that no contract would exist pending the execution of formal documentation. In Doran v. Thompson Ltd (1978) and in Ryan v. Connolly [2001] 1 IR 627, the Supreme Court indicated that estoppel could be applied very broadly to, for example, prevent reliance on the statute of limitations by a party who had indicated that it would not do so.
Returning to the specific case of proprietary estoppel, in Owens v. Duggan (Unreported, High Court, Hardiman J., 2nd April, 2004) Hardiman J., sitting as a judge of the High Court on appeal from the Eastern Circuit, specifically relied on a wide formulation of the doctrine of estoppel and on the passage from the judgment of Lord Kingsdown in Ramsden v. Dyson quoted above, to uphold an award of specific performance, specifically noting that the trend of the authorities is not to require exact compliance with a formulaic statement of proprietary estoppel but to look, in the words of Robert Walker J. in Gillet v. Holt [2001] Ch. 211 to “whether repudiation of an assurance is or is not unconscionable in all the circumstances.” In this regard, Hardiman J. expressly relied, also, on the broad statement of similar principles given by Murphy J. in McCarron v. McCarron (Unreported, Supreme Court, 13th February, 1997).
The defendants say this application of estoppel to contractual cases is well established. The principle is applicable to assurances given in the course of sales of land which otherwise would be in writing and which, for lack of writing, are unenforceable as contracts by reason, for example, of the Statute of Frauds. It is also applicable notwithstanding a degree of uncertainty or incompleteness in the agreement of parties that would prevent a finding of a concluded oral contract.
In Yaxley v. Gotts [2000] Ch 162 proprietary estoppel was the basis for an order (upheld in the Court of Appeal) requiring the Defendant to make a grant of a lease for 99 years in the face of the Defendant’s argument that the agreement was unenforceable by virtue of the modern English replacement for s. 2 of the Act of 1695, namely Section 2 of the Law of Property (Miscellaneous Provisions) Act, 1989 (England). Furthermore, the Court of Appeal was willing to apply the principles of proprietary estoppel even though the English section contains a specific saver for constructive trusts and in the face of an argument that their application to cases such as this ran in the face of the intention of the primary provisions of the Act (for sales of land to be in writing only) and even though the acts of detriment could not have been treated as part performance because that concept had been abolished in England, by the same section. The Court took this view because the application of proprietary estoppel in this scenario did not undermine or offend, but actually supported the underlying policy of the Act; the avoidance of fraudulent assertions or fraudulent denials of contracts. Robert-Walker L.J., citing a number of recent authorities, stated (at p. 174 F) that he had;
“…no hesitation in agreeing with Peter Gibson L.J., Neill L.J. and Morritt L.J. that the doctrine of estoppel may operate to modify (and sometimes perhaps even counteract) the effect of section 2 of the Act of 1989. The circumstances in which section 2 has to be complied with are so various and the scope of the doctrine of estoppel is so flexible, that any general assertion of section 2 as a ‘no-go area’ for estoppel would be unsustainable.”
The other judges agreed. Beldam L.J. specifically draws a moral or policy-based analogy between the application of the doctrine of constructive trust to family situations and its application to persons, such as the claimant in Yaxley, acting at arms length and led to expect an interest during discussions of a sale:
“There are circumstances in which it is not possible to infer any agreement, arrangement or understanding that the property is to be shared beneficially but in which nevertheless equity has been prepared to hold that the conduct of an owner in allowing a claimant to expend money or act otherwise to his detriment will be precluded from denying that the claimant has a proprietary interest in the property. In such a case it could not be said that to give effect to a proprietary estoppel was contrary to the policy of s. 2(1) of the 1989 Act. Yet it would be a strange policy which denied similar relief to a claimant who had acted on a clear promise or representation that he should have an interest in the property.”
Yaxley is followed on this point in Kinane v. Mackie-Conteh [2005] EWCA Civ 45. There the Court of Appeal upheld and enforced assurances for the grant of a charge on the basis that the promise to grant the charge created an estoppel (and a constructive trust to that extent) over the land intended to be charged. The application of estoppel to what would otherwise have been a contractual sale of land is again illustrated in Cobbe v. Yeoman’s Row Management Ltd [2006] 1 WLR 2964 where the Court of Appeal explicitly recognised that the “case [was] set very close to contract territory” having arisen “in the context of pre-contractual negotiations for the sale, purchase and development of a block of flats.” Cobbe is discussed further below.
The assurance or conduct leading to the expectation to be enforced need not itself be as certain as contractual terms might need to be. The above quotation from the judgment of Beldam L.J. adopts the same phraseology in its opening words as used by Lord Bridge in Lloyds Bank plc v. Rosset [1990] 1 All ER 1111 at 1118. What is required is an “agreement, arrangement or understanding”. Similar points are made by Murphy J. in McCarron and by Mummery L.J. in Cobbe v. Yeoman’s Row Management Ltd (2006). In the latter case Mummery L.J., again adopting Lord Bridge’s wide wording, put the matter as follows (at p. 50):
“It was accepted by Mr. Cobbe that the second agreement was not a legally binding and enforceable agreement, lacking the certainty and not containing all the necessary terms. The judge held that this was not fatal to the proprietary estoppel claim. I agree.”
Dyson L.J. and Sir Martin Nourse also agreed. Mummery L.J. went on (at p. 51):
“As a general proposition, the assurance, arrangement or understanding relied on to found an estoppel need not be sufficiently certain to be an enforceable contractual obligation. The crucial element is that the defendant has created or encouraged the belief on the part of the claimant that the defendant will not withdraw from the assurance, arrangement or understanding.”
This same view, though not explicitly restated and applied to a very different circumstance, underlies the following memorable passage from the judgment of Murphy J. in McCarron. After referring to cultural differences so profound as to have made it difficult to record the evidence at the trial, he says:
“It is these difficulties that remind one that in Ireland accent and style of speech may vary substantially from place to place. What is noticeable from the transcript and in particular the evidence of the plaintiff was that natural courtesy (which John Millington Synge associated with the west of Ireland) which often results in an unwillingness to pursue discussion to a logical and perhaps harshly expressed commercial conclusion….I would merely conclude that in some, particularly rural areas, a meeting of minds can be achieved without as detailed discussion as might be necessary elsewhere.”
It is not suggested that similar habits of speech or culture precluded formal or final expressions of agreement in this case. But here too there were prolonged dealings and an understanding emerged. The plaintiff not only encouraged it but took advantages from it. The Defendant not only relied on it but made very substantial payments pursuant to it. The key point is that such an understanding, being relied upon and being known to be relied upon, is sufficient sometimes to give rise to a contract, as it did in McCarron, and must, a fortiori, certainly be sufficient to give rise to an enforceable estoppel, where less precise terms are required.
This flexibility is not excluded by the use of terms such as “subject to contract”. Indeed, in Cobbe, a comparable, though different, phase had been used. While accepting that “subject to contract” (in England) had a well understood meaning (which is not necessarily clear here), reserving the rights of the parties to walk away, Mummery L.J. makes the following point:
“Even the use of the expression “subject to contract” would not, however, necessarily preclude proprietary estoppel if the claimant established that the defendant had subsequently made a representation and had encouraged on the part of the claimant a belief or expectation that he would not withdraw from the “subject to contract” agreement or rely on the “subject to contract” qualification.”
The defendants submit that this is precisely what has happened here.
The Plaintiff’s Submissions
The plaintiff refers to the defendants’ assertion that, “Even if the Court does not find a finalised contract or, doing so, finds no memorandum or part performance, it is submitted that the plaintiff is estopped from denying the commitment made…” (the plaintiff’s emphasis). The plaintiff submits that it is not clear what the commitment is, and this is too vague to be capable of specific performance.
The plaintiff suggests that the Court should examine the authorities in this regard. Haughan v. Rutledge [1988] 1 I.R. 295 is cited as an example of a case where, although Blayney J. summarised the requirements for proprietary estoppel, he found that although the plaintiffs (representing a harness racing club) had actually constructed a track on the lands, it could not be said that they did so in the belief that they owned, or in the expectation that they would own, a sufficient interest in the lands to justify such action, which belief was encouraged by the owner of the property.
The plaintiff also urges the Court to consider the decision of Laffoy J. in Triatic Limited v. Cork County Council [2007] 3 IR 57 again in this context. There the Court held that an agreement to negotiate was unenforceable. It was submitted therefore that the law on equitable estoppel does not and cannot lead to a view that simply because the parties negotiated over a long period of time, that this in itself entitles the Defendant to say that he was given an expectation or belief that he had or would obtain an interest in the land and that this was encouraged by the plaintiff or its authorised agents.
Furthermore in relation to estoppel itself, the plaintiff invites the Court to have particular regard to the recent Supreme Court decision of CF v. JDF [2005] 4 I.R. 154. There the Supreme Court held that in order to establish the existence of a beneficial interest on the basis of promissory or proprietary estoppels, there must be some clear evidence of an actual promise – “in order to establish such an estoppel there must be a promise, or at least a reasonably clear direct representation or inducement of some kind. It is not sufficient to say that this or that was permitted to happen or that third parties looking at the situation thought that a particular outcome was likely.”
The plaintiff submits that these two authorities tie up logically. If in fact there was no concluded contract then the fact that the plaintiff continued to negotiate over a long period and the fact that the parties hoped a contract would come about cannot amount to the necessary “promise” or “reasonably clear inducement.” To hold otherwise would be to say that in almost any case where there were protracted negotiations where one side (or even both sides) believed there would be an eventual contract, that this limb of the test for proprietary estoppel was satisfied.
Furthermore in relation to the detriment it is not entirely clear from the defendants’ submissions what alleged detriment the defendants rely on. It is clear that it must be “something substantial” (cf. Robert Walker J. in Gillet v. Holt [2001] Ch. 211, at 232). The plaintiffs cite various examples as to what has been held to be sufficient detriment.
The case of Smyth v. Halpin [1997] 2 ILRM 38 concerned the building of an extension to a family home. The plaintiff’s father had suggested that the plaintiff should build an extension on to the family home. An extension was designed by an architect on the assumption that the entire house would eventually belong to the plaintiff. The site on which the extension was built was transferred to the plaintiff so that he could use it as security to borrow the money required to build the extension. The plaintiff built the extension. In a will dated 25 June, 1991, the plaintiff’s father left his land to his wife for life, then to the plaintiff absolutely, and left the house to his wife for life, then to the second named defendant (one of the plaintiff’s sisters) absolutely. Geoghegan J. ordered the fee simple to be transferred to the plaintiff.
In Cullen v. Cullen [1962] I.R. 268 the mother gave the son a portable home. He intended to erect it on his own lands. The parents moved to lands at Adamstown in Dublin. The mother sought permission from the father to have the son erect the portable home on the family lands. The father said that as he was making the land over to her, she could erect the house where she liked. As a result the son erected the portable home on the family lands and not his own lands. He spent £200 at least (presumably a considerable sum almost 50 years ago).
In McMahon v. County Council of Kerry [1981] I.L.R.M. 419 the plaintiffs were prevented on “principles of equity” from recovering possession of land because the Council had in fact built two houses on the land and these were in the occupation of needy persons. It was that it would be unconscionable and unjust for the plaintiffs to be allowed to recover possession of the lands.
In McCarron v. McCarron (Unreported, Supreme Court, 13th February, 1997) the case was ultimately decided on the basis of there being a contract, but the Court also indicated that if proprietary estoppel was established it “would permit the plaintiff to claim in equity an estate in the lands of the deceased”. As regards detriment Murphy J. stated: “The facts, of which the plaintiff in particular gave evidence, established that the plaintiff worked on the farms of the deceased over a period of sixteen years – and that for long hours – without reward”.
The plaintiff submits that if one compares the evidence in the present case to the examples cited above it is clear that there is insufficient detriment to enable the Court to conclude that the first limb as suggested by Blayney J. is satisfied. All of the examples cited involved family or quasi family situations where the promissee made what might be described as lifetime decisions, such as the building of an extension, the erection of the portable home, or performing 16 years of unpaid work. In all of these cases the Court, quite correctly, decided that this was a substantial detriment.
In the present case the defendant pleads detriment in paragraphs 22 (b) – (f) of the Defence and Counterclaim. [Paragraph 22(b) refers to continuing to allow the plaintiff to use the route along the brown lands to “Jack’s Gate. Paragraph 22(c) refers to permitting increased used of the lands coloured brown to include access and egress of camera crews. Paragraph 22(d) refers to “substantial investment” in preparing plans for the development of the lands the subject matter of the parties negotiations. Paragraph 22(e) refers to payments to the plaintiff’s architect. Paragraph 22(f) refers to permitting advertising hoardings to be placed upon, and filming from, the East Stand.] The plaintiff says it is a matter for the Court to assess the evidence in relation to these pleas. However the plaintiff would contend that the defendant suffered no “substantial detriment”.
They comment that in relation to items (b), (c) and (f) the permissions provided, or forbearances suffered, were based upon no more than good neighbourliness and not on foot of a sufficient promise/representation. They continued from the start of the negotiations. It was submitted that no evidence was given of any other usage that the defendant had enjoyed, but which he yielded in reliance on a promise from the plaintiff.
In relation to (d) they submit that it was clear from the very first approach from Chatham Ltd to Felim O’Reilly that the defendant was committed to a planning application with all of the plans etc. that this would involve regardless of whether a contract came about. The letter of 13th June, 2001 states:
“….the project team will all continue with their work and it is proposed to make a planning application in the very near future. I am enclosing a draft letter of consent, which I shall be grateful if you would put to your own letterhead and return to me in order to allow our clients to submit their planning application. This letter of consent does not bind you in any way to our client but merely demonstrates to the Planning Authority that you are aware of and agreeable to our client making his planning application.”
In the plaintiff’s submission it is clear that insofar as the defendants say they advanced plans for their development, they were committed to expenditure on those plans almost two years prior to February 2003 which is the first date when the defendant ever contended there was an agreement.
In relation to (e) the plaintiff says the only payment made to Mr. Breen was a 20% fee on 15th December, 2004. This sum was not attributable to any specific work but as per the Heads of Agreement was to be paid simply on the “signing hereof”. It is clear that this was the fee for Mr. Breen’s work in advising on the negotiations and was not therefore paid in reliance on a contract/representation that the lands were sold. Furthermore, the plaintiff says that such payment cannot in the context of the figures that were cited in relation to the value of the development constitute a “substantial” detriment.
Finally, it is contended that as the defendant relies on proprietary estoppel it is important to draw attention to one aspect of the Supreme Court decision in McCarron v. McCarron. That case was determined on the basis of there being a contract. However, the Court went on to indicate that if it were decided on proprietary estoppel it would not necessarily follow that the plaintiff would obtain title to the lands. Murphy J. indicated that:
“In practice, however, it might be difficult to determine the extent of the estate or interest in land for which a plaintiff might qualify as a result of his personal efforts. Perhaps a claim of that nature would be adequately compensated by a charge or lien on the lands for a sum equivalent to reasonable remuneration for the services rendered.”
In other words the court could value the equity rather than give the promissee the land.
Decision
Having carefully considered all of the evidence in the case I have come to the view that the defendants are entitled to an equitable interest in the pink and yellow lands, and in the blue lands on the grounds of proprietary estoppel. There was clear evidence of repeated promises, representations and inducements held out to Mr. Conroy by Mr. O’Reilly that if Bohemians were paid money on account Albion would get the land. I find as a fact that Mr. Conroy was assured repeatedly that he had “a deal”. Moreover, I also find as a fact that Mr. Conroy did alter their position substantially to their detriment. Mr. Conroy, representing Albion, devoted much time, attended many meetings and devoted significant resources in terms of the employment of professional assistance, in attempting to accommodate the specific ongoing needs or wishes of Bohemians, particularly by accommodating within Albion’s plans Bohemian’s need to ensure that the Fire Officer would be satisfied with respect to the Connaught Street entrance to Dalymount Park, and their desire to have corporate boxes. While it is true to say that the scale of the effort and expenditure on these items was relatively small compared to the overall investment, both in effort and financial terms, of the defendants’ redevelopment project that is beside the point. The effort and expenditure concerned was by no means insignificant in terms of the transaction in contemplation between the parties. Moreover, it cannot be overlooked that the defendants paid over in excess of a million euro in advance of any contractual obligation to do so in response to specific requests for money from the plaintiff. While the plaintiff may now be in a position to repay this money if required to do so, the defendants paid over the bulk of it during a period when the plaintiff’s ability to repay, if called upon to do so, was seriously in doubt. In my view it would be unconscionable in all the circumstances of the case for the plaintiff not to transfer an appropriate estate in the lands in question, namely the pink and yellow lands, and the blue lands, to whichever of the defendants shall nominated to receive the appropriate transfer. I therefore deem the plaintiff to hold the lands in question upon a constructive trust for the benefit of the defendants. I will receive further submissions concerning the appropriate nature of the estate to be transferred in respect of each parcel respectively, the appropriate nominee to receive the transfers, and any other matter or matters arising from my decision.
Healy -v- Ulster Bank Ireland Ltd
[2009] IEHC 360 (17 July 2009)
JUDGMENT of Mr. Justice Brian J. McGovern delivered on the 17th day of July, 2009
1. The plaintiff is a medical doctor and at all material times carried on practice in Mullingar, County Westmeath. The defendant is a bank. In or about the year 2005, the plaintiff entered into a partnership with a medical colleague, Dr. Patrick Cullen, whereby they acquired lands and premises at Coole, in County Westmeath, with a view to creating a modern medical centre at a former hospital premises. The plaintiff and his partner borrowed substantial sums of money from the defendant and on 9th August, 2006, the plaintiff executed a guarantee (“the guarantee”) in respect of the borrowings. His partner subsequently entered into a guarantee. By December 2006, relations between the partners was deteriorating and there were many disagreements as to how to proceed with the development at the site which included provision for not only a medical centre and ancillary facilities, but also a number of houses. In the spring of 2007, discussions took place between the parties and their advisers as a result of which it was agreed to terminate the partnership. The discussions to dissolve the partnership concluded at the end of July 2007. This involved Dr. Cullen paying a sum of €2,213,607.00 to the plaintiff. Dr. Cullen was to take over the assets and liabilities of the partnership.
2. On 1st August, 2007, the plaintiff lodged the proceeds with the defendant. He claims that he did so following representations made on behalf of the defendant by Mr. Alan Leech to the effect that he was discharged from his guarantee in respect of loans made to the partnership and was freed of any liability to the defendant bank. The plaintiff claims that by lodging the proceeds of the partnership settlement with the bank, he was entering into a commercial relationship under which the defendant agreed to provide various services to him in the nature of “wealth management” services which included commercial, investment and banking services. He claims that he would not have done so if he had not been given the aforesaid representations by the defendant.
3. On 14th August, 2008, the defendant exercised its rights on foot of the guarantee setting off the sum then standing in credit to the plaintiff against the debit balance outstanding in respect of the finance extended to the partnership. The funds transferred on foot of the purported set-off were in US Dollars as the plaintiff had funds in that currency in an account. The amount set off was US$993,983.03. The plaintiff alleges that the defendant was not entitled to use these monies and that they were wrongfully set off and converted by the defendant to its own use. He says that as a result of this he suffered loss and damage. He claims various reliefs as set out in the statement of claim, including damages and declarations, and claims that the defendant is estopped from denying the representations made to him on or about 1st August, 2007, to the effect that the plaintiff had no further liability to the defendant on foot of the guarantee executed by him on 9th August, 2006, in favour of the defendant.
Issues
4. There is no dispute between the parties that the defendant set off the sum of US$993,983.03 against the liabilities of the plaintiff on foot of the guarantee. There is really only one issue in this case and that is whether Mr. Alan Leech, on behalf of the defendant, made the representation contended for by the plaintiff, and if he did, whether the plaintiff acted on foot of the representation to his detriment.
The law
5. In Doran v. Thompson Limited [1978] I.R. 223, a decision of the Supreme Court, Griffin J. stated at page 230:
“Where one party has, by his words or conduct, made to the other, a clear and unambiguous promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, and the other party has acted on it by altering his position to his detriment, it is well settled that the one who gave the promise or assurance cannot afterwards be allowed to revert to their previous legal relations as if no such promise or assurance had been made by him, and that he may be restrained in equity from acting inconsistently with such promise or assurance. The representation, promise or assurance must be clear and unambiguous to found such an estoppel: see Bowen L.J. at p. 106 of the report of Low v. Bouverie [1891] 3 Ch. 82.”
6. That case was cited with approval by Keane C.J. in Ryan v. Connolly [2001] 1 IR 627. The Chief Justice said at p. 632:
“Applying that general principle to the category of cases in which a defendant may be held to be precluded from relying on a defence otherwise available to him under the Statute of Limitations, the learned judge added: –
‘If the defendants insurers had made a clear and unambiguous representation (in the sense I have explained) that liability was not to be an issue, and the plaintiff’s solicitor had withheld the issue of proceedings as a result, I would have held that the defendants were estopped from pleading the Statute of Limitations’.
In an earlier passage at p.230, Griffin J. had pointed out that, for the principle laid down in Low v. Bouverie [1891] 3 Ch. 82, to apply, it was not necessary that the representation should be one ‘positively incapable of more than one possible interpretation’.
A party seeking to rely on the principle cannot, in other words, rely on a strained or fanciful interpretation of the words used, he must show that it was reasonable in the circumstances for him to construe the words used by the other party in a sense which would render it inequitable for that party to rely on the defence under the Statute of Limitations.”
7. In the same judgment, Keane C.J. continued at p. 633:
“On any view, however, it is clear that a plaintiff who seeks to rely on the law as laid down in Low v. Bouverie [1891] 3 Ch. 82 and Doran v. Thompson [1978] I.R. 223, must be in a position to satisfy the court that there was a clear and unambiguous representation by the defendants that liability would not be an issue from which it was reasonable for the plaintiff to infer that the institution of proceedings was unnecessary. The issue that arises on this appeal is whether the High Court was correct, as a matter of law, in holding that in this case the principles to which I have referred applied.”
8. It seems to me that these are the relevant legal principles which apply in this case.
The plaintiff’s case
9. The plaintiff claims that after he received the proceeds of the sale of his interest in the partnership from Dr. Cullen, he went to the Ulster Bank branch in Mullingar, County Westmeath, where he met with Mr. Alan Leech. The meeting took place on 1st August, 2007. At that time, Mr. Leech was a business centre manager with a title of ‘Relationship Manager’. He was an assistant to a manager. The plaintiff claims that he arrived at the bank with his mother and that they were taken to an office upstairs by Mr. Leech. He told Mr. Leech that the deal had been done in relation to the Coole partnership and Mr. Leech told the plaintiff that he was surprised although he knew the closing of the deal was imminent. After some preliminary conversation, the plaintiff discussed what interest rates he could secure on the monies he was about to deposit. The plaintiff informed Mr. Leech he had spent some considerable time discussing interest rates, terms and conditions that he might be able to obtain from other banks. Mr. Leech told the plaintiff that he was reasonably confident he could not only match any other offers, but could make him a better offer. The plaintiff recalled that Mr. Leech then left the room and came back later on, indicating that he would be able to do so. Then the plaintiff discussed with Mr. Leech his liabilities to the bank and informed Mr. Leech that he had been talking to his solicitor, Mr. Patrick Groarke, the day before, and that he had informed the plaintiff that it was safe for him to go into Ulster Bank with his funds and that he had no liability. The plaintiff claims that Mr. Leech concurred and said, “That is my understanding”. The plaintiff claims that he said to Mr. Leech, “Alan, am I square with Ulster Bank and can you give me your assurances that I have no liability in relation to the project at Coole with Ulster Bank?” He said that Mr. Leech replied, “Neil, you have my assurances”. He then added, “Alan, if I lodge this cheque with you, is it safe from you and is it safe in Ulster Bank?” He gave evidence that Mr. Leech said, “Neil, you are in the clear”, and added, “You let me do the worrying for Ulster Bank”. He then stated, in evidence, that he told Mr. Leech, “Alan, on the basis of those assurances, I am going to continue to do business with Ulster Bank, I am going to continue to have my practice account with you and I am going to deposit these funds with you”.
10. The plaintiff claims that he relied on these assurances and that he did so to his detriment because, having lodged the funds, some time later the bank set off those funds, or a portion of them, against his liabilities arising out of the former partnership.
The defendant’s case
11. The defendant denies that it made the representations contended for by the plaintiff. While Mr. Alan Leech candidly admitted that he had no precise recollection of his conversation with the plaintiff, he does remember the meeting of 1st August, 2007, at the bank. He stated that he was quite sure that he did not give the representations contended for by the plaintiff and that he would have had no authority to do so or to release the plaintiff from his security without obtaining sanction from the Credit Control section of the bank. This was confirmed by another witness from the bank, Ms. Breda Finnegan, who is employed by the defendant as Senior Manager in the North Midlands Business Centre in Mullingar.
Evidence
12. A number of witnesses gave evidence on behalf of the plaintiff and the defendant. In the course of that evidence, significant conflicts of fact arose which I have to resolve in reaching my decision. There was also evidence given in the course of the hearing from which it is possible to draw certain inferences.
13. The guarantee executed by the plaintiff and dated 9th August, 2006, was a formal written document executed by the plaintiff under seal and duly witnessed. It was a normal document of its type. The plaintiff was aware that there would have to be a formal release from that guarantee if he was to be absolved of liability under it. In the course of his evidence-in-chief, he stated that it took approximately six to eight weeks to fine-tune the details of the agreement dissolving the partnership. He said, “ . . . the nub of the agreement was that I would leave my assets, the new practice, the partnership and my medical practice for a consideration in financial terms, that Dr. Cullen would assume the liabilities of the previous business, and that there would be a letter of release from Ulster Bank . . .” (transcript 12th May, 2009, pages 59-60). In the course of his evidence on the same date, he informed the court that when Mr. Leech told him that he was surprised that the deal dissolving the partnership had closed, it “ . . . planted a seed of doubt in my mind because I was surprised in that because I had anticipated that either the (sic) Mr. Leech or Ms. Finnegan would have sent a letter of release to Patrick Groarke and that they would then be fully familiar that all of the closing documents were, in fact, completed . . .” What emerges from this evidence is that that the plaintiff himself appears to have understood that a letter of release would be required to free him of his liability under the guarantee.
14. I accept on the evidence that the normal bank practice is that a guarantor would only be released from a guarantee after the matter was referred to the Credit Department of the bank to consider. A person in the position of Mr. Leech would not have the authority to release the plaintiff or any guarantor from a guarantee without receiving the approval of the Credit Committee. Therefore, if the plaintiff is correct in his assertion that Mr. Leech gave him the undertaking contended for, and a release from his obligations under the guarantee, without reference to the Credit Committee, this was contrary to normal bank practice. It would also have amounted to a breach of well-established procedures in circumstances where the plaintiff had very substantial liabilities to the bank on foot of the guarantee. It is against that background that I must consider the evidence. I have to consider whether those assurances were given by Mr. Leech and, if they were, whether they amounted to “. . . a clear and unambiguous promise or assurance . . .” as required in view of the Supreme Court decision in Ryan v. Connolly [2001] 1 IR 627.
15. I have already referred to the fact that the plaintiff expected that he would need a letter of release from his guarantee when he completed the dissolution of the partnership. The plaintiff accepted, in his evidence, that he did not obtain a letter of release. Instead, he relies on what he says were verbal assurances given by Mr. Leech.
16. Mr. Leech was quite clear in his evidence to the court that he would not have given a release to the plaintiff and that he had no authority to do so. He continued to assert this, although he accepted he could not remember precisely what he said. Counsel for the plaintiff laid significant emphasis on the fact that the plaintiff, for his part, was quite clear as to the assurances which were given on 1st August, 2007, whereas Mr. Leech had no recollection of what was said. If the plaintiff’s evidence is reliable on this detail, then, clearly, he is in a strong position, because while Mr. Leech may not have had actual authority to give him a release, he may have had ostensible authority to do so. The credibility of the plaintiff is obviously crucial to the determination of the issue of fact as to whether or not the words contended for by the plaintiff were said by Mr. Leech. As such an undertaking would be contrary to bank practice and most unusual, it requires the plaintiff’s account of the meeting of 1st August, 2007, to be scrutinised.
17. The plaintiff informed the court that when he went to collect the cheque from his solicitor, Mr. Groarke, on 31st July, 2007, he asked him whether it would be safe for him to go back into Ulster Bank with his funds and deposit them. Mr. Groarke told him that he would be safe and that he had no liability. He also says that prior to the closing of the deal he had a checklist which he sent to Mr. Groarke. The defendant called Mr. Groarke as a witness on foot of a subpoena. Mr. Groarke denied that any checklist had been produced to him and quite trenchantly denied that there was any discussion between him and the plaintiff about the plaintiff’s liability to Ulster Bank in respect of loans or guarantees or that the plaintiff sought his advice as to what he should do with the proceeds of sale (transcript 15th May, 2009, pages 20-23). Furthermore, on 1st August, 2007, the plaintiff sent an email to Mr. Groarke after his meeting with Mr. Leech in which he stated:
“I met with Alan Leech, one of the managers with Ulster Bank in Mullingar. I lodged the cheque to a deposit account with them for the moment. He was not aware that our deal had concluded and I am keen to ensure that I am protected from Ulster Bank and, indeed, that my name is removed from any shared accounts concerning the Coole project. I might ask you to contact him to ensure that this is in order . . .”
Mr. Groarke responded on the following day, informing the plaintiff that he had written to the bank seeking confirmation that the plaintiff’s name had been removed from all partnership accounts. Mr. Groarke confirmed that neither on 1st nor 2nd August, 2007, was he informed by the plaintiff that he had received an assurance from the bank that he had been released from his liabilities under the guarantee.
18. When Mr. Groarke was cross-examined by the plaintiff’s counsel about a discussion in which he allegedly told the plaintiff that he had no liability, Mr. Groarke replied,;
“I couldn’t have said that because, not only would it not have been right, but it was clear, (and I have no doubt that Dr. Healy was aware) as transpired on 1st August, that he was not released from the guarantee. I couldn’t release him from the guarantees and I couldn’t tell him he was.” (Transcript 15th May, 2007 p. 37).
19. I accept the evidence of Mr. Groarke.
20. The plaintiff’s mother accompanied the plaintiff to the bank for the meeting with Mr. Leech on 1st August, 2007. Although Mr. Leech did not recall her being present in the room when he was receiving the cheque from the plaintiff, I accept her evidence that she was there at the time. She said she heard Mr. Leech telling the plaintiff that he was, “. . . in the clear with the Ulster Bank”. But when she was asked whether there was any detailed discussion on the issue as to whether her son had a liability under a guarantee, she could not remember any such discussion.
21. The plaintiff’s accountant and financial adviser, Mr. Malachy Stephens, said that around the time the deal to terminate the partnership was being concluded, he had a conversation with Mr. Alan Leech and informed him that the deal had been struck and that in closing the deal, the plaintiff would require €2.25 million and would need a letter of release from his liabilities to the bank. He told Mr. Leech to expect such an application to be made by Dr. Cullen’s advisors to the bank. When the dissolution of the partnership was imminent, he received a letter from the bank on 11th July, 2007, setting out the current liabilities of the partners under each of the accounts and stating “Neil Healy continues to be liable for all facilities in the name of Coole Properties Ltd.”. At that time, he accepted that the plaintiff remained liable under these arrangements and while the plaintiff should have been released from his liabilities to the bank on the closing of the deal, that this did not happen.
22. Mr. Leech informed the court that he could not specifically remember what he said at the meeting of 1st August, 2007. He said that he had absolutely no discretion to restructure existing facilities or release existing security in relation to customers. All such matters would have to be approved by the Credit Department after a report was submitted to the Credit Risk Department. I accept that evidence. He did not recall the plaintiff informing him that he had asked his solicitor, Mr. Groarke, whether it was safe for him to go to Ulster Bank with his funds and that Mr. Groarke told him he had no liability to the bank. Neither did he recall informing the plaintiff that he had no liability in relation to the project at Coole. The plaintiff said, in evidence, that he told Mr. Leech that he had met with his solicitor, Mr. Groarke, the evening before the meeting, and that Mr. Groarke had told him that it was safe for him to lodge his funds in Ulster Bank and that he had no liability. Since I accept Mr. Groarke’s evidence that he never said this to the plaintiff, it seems, as a matter of probability, that the matter was not raised at the meeting between Mr. Leech and the plaintiff which supports the evidence of Mr. Leech insofar as he says he has no recollection of the matter being raised. If it was said by the plaintiff to Mr. Leech, then it was misleading. It is perhaps worth noting that the plaintiff, under cross-examination, conceded that he did not ask Mr. Groarke on 31st July, 2007, what the position was in relation to the guarantee.
23. In August 2008, the plaintiff was informed by the defendant that he had liabilities to the defendant in excess of €2.2million and the repayment was sought about the outstanding sum. On 14th August, 2008, the defendant exercised a set off against the debit balance outstanding in respect of the Coole Property Holdings Limited account in the sum of US$993,983.03. Shortly afterwards, two meetings involving the plaintiff took place which are of significance. On 1st September, 2008, Mr. Peter Lynch of Ulster Bank Ireland Limited brought his son to the plaintiff’s surgery as a patient. It was Monday morning. Over the weekend, Mr. Lynch had contacted him to ascertain if he could see his son on the Monday morning. The plaintiff said that he could. It is clear, therefore, that the plaintiff knew that Mr. Lynch would be coming to his surgery with his son. After the medical consultation, the plaintiff asked Mr. Lynch’s son to call his father in from the car park and Mr. Peter Lynch went into the surgery and had a discussion with the plaintiff. Unknown to Mr. Lynch, the plaintiff secretly recorded the discussion. To do so in circumstances where Mr. Lynch was at the surgery because his son was attending as a patient was, in my view, quite improper. In the course of the discussions, Mr. Lynch twice insisted that their conversation was “off the record” and the plaintiff agreed. Notwithstanding that, he sought to use the recording to bolster his case that the Bank had relieved him of his obligations under the guarantee.
24. The other meeting to which I have referred took place on 4th September, 2008, also at the plaintiff’s clinic. On that occasion, the plaintiff was due to meet Mr. Leech and Mr. Roche who would be taking over from Mr. Leech. Mr. Roche could not attend, but the meeting went ahead in any event. That meeting was also secretly recorded by the plaintiff and again he sought to use that recording to bolster his position.
25. In each of these meetings, the plaintiff sought to elicit from the bank personnel an admission that Mr. Leech had agreed, on behalf of the bank, that he was relieved from his liability under the guarantee. He sought to manipulate the discussion and gain such admissions by presenting a scenario which was, at times, inaccurate and misleading. For example, he referred to the assurances which he had received from Mr. Patrick Groarke. Mr. Groarke has emphatically denied that he gave such assurances. In his meeting with Mr. Leech, he gave the impression that he had documented every conversation that he had with him and with his solicitor Mr. Groarke and he informed Mr. Leech that he had written an email to Mr. Groarke to say that he had attended at the bank where Mr. Leech had given assurances that his money was safe. Under cross-examination, he conceded that in his email to Mr. Groarke on 2nd August, 2007, there was no statement by him to Mr. Groarke that he had received such assurances. At each of these meetings, he conveyed the impression that he had suffered a substantial loss in relation to the purchase of a property in Florida when he knew that to be untrue. I will deal with this later in the judgment. The plaintiff was, of course, aware that at the time he recorded his conversation with Mr. Leech, that Mr. Leech had no clear recollection at what transpired at the meeting in the bank on 1st August, 2007, and it was clear from the transcript that the plaintiff had the intention of exploiting this uncertainty on the part of Mr. Leech by suggesting matters to him (some of which were untrue) and inviting him to agree that he had given the assurances for which the plaintiff contends. Having regard to the circumstances in which those recordings were procured, I do not believe the plaintiff should be permitted to rely on them. In any event, I might add that there is nothing contained in those recordings which would assist the plaintiff’s case. All they show is that the plaintiff was prepared to act improperly and go to almost any lengths to bolster his case.
26. I now turn to the Florida property mentioned above. The plaintiff gave evidence that he intended to purchase a Wachovia Bank property at Riverside Financial Centre, 219, Indian River Avenue, Florida, 32796, USA, (The “Wachovia property”) for the sum of US$900,000. He claimed to have suffered significant loss as a result of being unable to proceed with this purchase. He blames this on the fact that the defendant exercised a set-off in respect of funds standing to his account in Mullingar. Mr. Ralph Perrone, a licensed Real Estate Broker in the State of Florida, gave evidence that if the plaintiff purchased the property, it could have been put back on the market at a price of between US$3.7million to US$3.9million. Under cross-examination, he accepted that the purchase of the building would be a very speculative venture unless they intended to wait for a return in many years time.
27. Mr. Geoff Carson, a Certified General Appraiser for the State of Florida and licensed Real Estate Broker, gave evidence on behalf of the defendant. Having set out the many drawbacks in relation to the building, he concluded that it would be very difficult to sell, and stated that the property has a negative cash flow. He added that the plaintiff would not have been able to develop the site unless the Wachovia Bank decided to leave and that this was very unlikely having regard to the terms of the lease. He gave evidence that the property was sold ultimately in 2008, for a sum of US$750,000 and that, in the circumstances, the plaintiff suffered no loss by not proceeding with the deal. I prefer the evidence of Mr. Carson to that of Mr. Perrone for two reasons. In the first place, I hold that he was better qualified to give the evidence, and secondly, his evidence as to the value of the premises was borne out by the actual sale price.
28. The plaintiff was cross-examined on this issue and he conceded that he never paid US$90,000 by way of a deposit. He admitted that he lied to Mr. Leech in the secretly recorded meeting when he told him that he had paid a US$90,000 deposit and lost that deposit. (See transcript of 13th May, 2009, page 71). He conceded that he knew the property was sold in December 2008, for around US$750,000 and that if he had bought it for US$900,000 he would have suffered a loss. Yet, during the hearing, he persisted in maintaining a claim for loss on the Florida property deal. (Transcript 13th May, 2009, page 73).
29. The plaintiff placed considerable reliance on some of the bank documents which he contends support his assertion that he was discharged from any liability to the bank. In September 2007, documents were created under the heading ‘Business Centres Customer-Existing Credit Application’. These documents related to the plaintiff and his former partner, Dr. Patrick Cullen. They comprised an exchange of memoranda between various bank personnel concerning the facilities which were in place and the release of any security, having regard to the fact that the plaintiff was bought out by his former partner. It is clear that Mr. Leech was proposing that the plaintiff be cleared of the loan and the facilities which were granted and that these be put in the name of Dr. Cullen. He made this request on 3rd September, 2007. On 10th September, 2007, a memo from Mr. Ian Long, a solicitor with the bank stated, “. . . the security is still held in joint names and amending same may not be correct”. He added later in the same memo:
“Healy effectively no longer has any liability to us and as I say, he has signed contracts signing over any interest he had in all lands and property at Coole to Cullen. I have amended this on the security screen now. This can be changed back if not correct. On the same date, there is a memo from Mr. Donal Coyle on a document entitled “Sanction Summary Sheet”, it is necessary to retain Mr. Healy’s name on the loan. Did not approach us to have his name removed before now – this would have given us time to re-evaluate our security requirement. Of perhaps more importance, he did not use any of the funds he received from the sale of his share of the assets of the partnership to reduce any of the debt for which he continues to be jointly and severally liable.
If and when the sale of the site with pp for 22 units goes ahead, the payment is then made and at that stage NH can be formerly released. If the sale falls through for whatever reason, the Bank would require the fallback of reliance on the security – something it would be forsaking if he was released.”
30. Taken in its entirety, these memoranda do no more than show that the bank was considering a request by Mr. Leech to have the plaintiff cleared of any liability to the bank, but the bank was not prepared to do so. They do not, in my view, support a “clear and unambiguous promise or assurance” made by the bank to the plaintiff. If anything, these documents support Mr. Leech’s evidence, where he explained to the court that he would not have had authority to give any assurance to the plaintiff that he was released from his guarantee without referring the matter to the Credit Committee. I think it is of significance that at the meeting on 1st August, 2007, when the plaintiff handed over the cheque to Mr. Leech and enquired about what interest rates he could get, Mr. Leech left the room to see whether he could match rates already offered to the plaintiff. It seems unlikely that he would have taken such a step in relation to interest, but would have released the plaintiff from substantial liabilities to the bank on foot of a guarantee without referring the matter to anyone else in the bank, even when he knew he had no authority to give such a release.
31. I found Mr. Alan Leech to be a credible witness. He candidly admitted that he had no recollection of the words spoken at the meeting of 1st August, 2007, but was well aware of the extent of his authority. He quite freely admitted that he was not happy about the manner in which the bank exercised a set-off of the plaintiff’s funds against the indebtness of the partnership.
32. I found the plaintiff to be lacking in candour and credibility. He admitted that he had lied to Mr. Leech and Mr. Lynch in respect of his losses claimed over the failed purchase of the Wachovia Bank site and his evidence on other important details was in direct conflict with that of his former solicitor, Mr. Patrick Groarke, whose evidence I accept. The fact that he secretly recorded conversations with Mr. Leech and Mr. Lynch and invited them to comment on facts which he put before them and knew to be untrue further undermines his credibility.
33. The burden of proof is on the plaintiff and he must satisfy the court that, on the balance of probabilities, he was released from his guarantee and that the bank was not entitled to set off his funds and that he suffered loss and damage as a result. In the circumstances of this case, the credibility of the plaintiff is essential to enable him to establish these facts as they depend on the plaintiff’s account of what occurred at the meeting on 1st August, 2007.
34. I reject the plaintiff’s account of the meeting and I hold that the plaintiff is not entitled to the relief claimed. I therefore dismiss the claim. I will hear counsel on what form the order should take, having regard to the counterclaim.
Coonan v. A.G.
[2001] IESC 48; [2002] 1 ILRM 295 (29th May, 2001)
JUDGMENT OF MR JUSTICE FRANCIS D MURPHY DELIVERED THE 29 TH DAY OF MAY, 2001.
_______________________________________________________________________
1. Charles Coonan, the above named Plaintiff (Mr Coonan), was appointed as State Solicitor for the area of North Kildare/ Wicklow in August, 1974, upon the terms of a document described as “Conditions of Appointment” dated the 14th day of August, 1974. The first paragraph of that document was expressed in the following terms:-
“1 The State Solicitor shall be entitled to hold the office of State Solicitor for the above area until he shall attain the age of 65 years but, provided that he is then in good health, the age of retirement may be extended by the Attorney General, with the concurrence of the Minister for Finance, to any age not exceeding 70 years. The State Solicitor shall be removable at any time, by order of the Government made on the certificate of the Attorney General, for misconduct, incapacity, neglect of duty, physical or mental infirmity, or any other cause which, in the opinion of the Attorney General, would render him unfit to perform the duties of a State Solicitor. The certificate of the Attorney General in respect of any of the aforesaid matters shall be binding on the State Solicitor. The appointment will carry no right to pension or compensation on termination.”
2. Unquestionably it had been the invariable practice before 1974 and for at least 20 years thereafter for a year by year extension to be granted up to the age of 70 years to any State Solicitor who applied for it. Mr Coonan was well aware of that practice.
3. On the 14th of January, 2000, Mr Coonan, who would attain the age of 65 years on the 5th November, 2000, applied for renewal. He met with the Chief State Solicitor in the same month who told him he was not going to be renewed after the age of 65 years. The Attorney General on the 5th February, 2000, in accordance with a change in policy, made a decision that no extension should be granted. On the 18th February, 2000, the Director of Public Prosecutions informed Mr Coonan that there would be no extension and by letter dated the 7th of March 2000 the Chief State Solicitor gave formal notice to that effect.
4. On the 4th October, 2000, Mr Coonan instituted plenary proceedings claiming a declaration that he was entitled to continue as State Solicitor for the area to which he had been appointed and an injunction restraining the Defendants from appointing any person as State Solicitor in his place. In addition to other relief, Mr Coonan claimed damages for breach of contract.
5. In the statement of claim delivered on the 13th November, 2000, Mr Coonan having asserted the material facts to which I have referred went on to say:-
“7 The plaintiff is and remains state solicitor for the area of North Kildare/ Wicklow and at all material times hereto relied upon the conditions of his appointment and the terms both expressed and implied of his appointment and the practice heretofore in respect of extensions to state solicitors appointed by way of similar conditions of appointment. The plaintiff has acted to his detriment and loss in the legitimate expectation that his appointment would be extended pursuant to his conditions of employment until he attained 70 years of age.
8 The defendants have in breach of the conditions of appointment and the terms expressed and implied therein failed to extend the plaintiff’s employment having been lawfully called upon so to do by the plaintiff pursuant to his conditions of appointment.”
6. The defence might be summarised by saying that the Defendants admitted the facts alleged in the statement of claim but denied the inferences and conclusions of law drawn therefrom. In particular the Defendants contended that the conditions of appointment conferred on the Attorney General “a lawful discretion” to extend the Plaintiff’s age of retirement with the concurrence of the Minister for Finance to any age not exceeding 70 years: that such discretion had been exercised lawfully to extend the Plaintiff’s age of retirement up to and including the 31st January, 2001, but no further. In the reply delivered on the 14th December, 2000, Mr Coonan denied (among other things) that the Attorney General had lawfully exercised the discretion aforesaid.
7. Because of the urgency of the matter for both the Plaintiff and the Defendants the matter was processed with commendable speed. It was heard by Ms Justice Carroll on the 23rd and 24th of January, 2001, and she delivered her judgment on the 31st of January, 2001, in pursuance of which it was ordered that Mr Coonan was entitled to recover against the Defendants damages in the sum of £100,000 together with the costs of the proceedings. It is from that judgment and order that the Defendants appeal to this Court.
8. The Defendants/Appellants submitted that no term could be inferred into the contractual relationship between the parties which would be inconsistent with the discretion expressly conferred upon the Attorney General . It was argued – and the evidence appears to have supported the fact – that Mr Coonan had not altered his position to his detriment as a result of the established practice concerning extensions and consequently a claim based on estoppel could not succeed. The Appellants submitted that an issue of legitimate expectations could not arise in what was in essence a commercial contract between the Attorney General and a solicitor for the provision of legal services by the latter. However, the main thrust of the argument made by Counsel on behalf of the Appellants was that nowhere – not in the pleadings, the particulars furnished or the written submissions in the High Court or this Court – had Mr Coonan specified the nature, scope or terms of the right on which he relied. Mr McDonagh, SC, for the Appellants, pointed out that the judgment of the learned trial Judge did not identify any such right. Mr McDonagh posed the question which was not merely rhetorical but, in the existing circumstances, hypothetical, namely:-
“If the claims of the Plaintiff were upheld and the matter referred back to the Attorney General to make an appropriate determination what standard, criteria or procedure would the Attorney General be required to apply or adopt?”
9. As the post held by Mr Coonan had been filled before Ms Justice Carroll delivered her judgment the possibility of referring the matter back to the Attorney General was not then a realistic option. Less still could that procedure be adopted now. Nevertheless it is, in my view, the difficulty in answering the hypothetical question which underscores the infirmity in Mr Coonan’s case.
10. It was conceded by Mr Condon, SC, on behalf of Mr Coonan that the word “may” in the Conditions of Appointment conferred on the Attorney General a discretion. Rightly, in my view, Mr Condon did not seek to argue that the word “may” should be interpreted as “shall”. What then is the limitation on the exercise of this discretion? Was it to be inferred that the Attorney General would afford every outgoing state solicitor an opportunity of being heard in relation to the decision to extend his term of office in a procedure analogous to that required by the decision of the House of Lords in The Council of Civil Service Unions .v. The Minister for the Civil Service [1985] AC 374. Did the alleged rights of Mr Coonan go beyond the merely procedural? Was the Attorney General bound to review the conduct and capacity of Mr Coonan and, if so, by reference to what standard? Did the Attorney General owe any duty to the office holder in relation to the exercise of the contracted discretion? Mr McDonagh explored some of these possibilities but with understandable frustration. He did not know with any degree of particularity the term which Mr Coonan claimed was implied in the contract or the restrictions allegedly imposed on the exercise by the Attorney General of his discretion.
11. The learned trial Judge understandably expressed concern for Mr Coonan having regard to the impact of the Attorney General’s decision on his career and expressed her conclusions in law in the following terms (at page 11 of the transcript):-
“I am not saying that the Attorney General could not change the policy of renewal on request, health permitting. But I do say that he was not entitled to change this long standing custom, rule or policy, by whatever name it was called, and relied upon by Mr Coonan, without giving adequate notice to enable him to arrange his affairs to cope with this alteration in his life plan. The two extra months given as a conciliatory gesture were wholly inadequate.”
12. It is difficult to reconcile that conclusion with the discretion expressly and admitted conferred on the Attorney General by the conditions of his appointment. It seems to me that this decision necessarily involves the substitution of an obligation for a discretion subject to the qualification that the discretion could be restored to the Attorney General on his giving reasonable, but undefined notice, to Mr Coonan and presumably all other State Solicitors. I cannot envisage the officious bystander postulated in Shirlaw .v. Southern Foundries [1926] LDD 1939 2 KB 206 (and more recently by this Court in Carna Foods Ltd .v. Eagle Star Insurance (Ireland) Ltd [1997] 2 IR 193) suggesting a provision to that effect. Less still could I envisage either party testily suppressing his intervention with a common “Oh of course”. At the very least such a suggestion would give rise to debate and the very existence of debate would preclude the implication of the suggested term. Nor can I see any basis on which the ill defined and inadequately explored doctrine of legitimate expectations could be invoked so as to prevent successive Attorneys General exercising or declining to exercise the discretion expressly reserved to them simply because a practice or pattern could be identified which indicated that for many years the discretion had in fact been exercised one way rather than another. Even in that context the question would arise “What was it that the office holder was led to expect?”. The much quoted case of Webb .v. The Attorney General [1988] 1 IR 353 Finlay CJ (at 384) seems to have cast doubt upon the existence of any such right of action when he said:-
“It would appear that the doctrine of “legitimate expectation” sometimes described as “reasonable expectation”, has not in those terms been the subject matter of any decision of our courts. However, the doctrine connoted by such expressions is but an aspect of the well recognised equitable concept of promissory estoppel (which has been frequently applied in our courts), whereby a promise or representation as to intention may in certain circumstances be held binding on the representor or promisor.”
13. It was in that context that Finlay CJ quoted with approval certain passages from the judgment of Lord Denning MR in Amalgamated Property Company .v. Texas Bank [1982] QB 84 on which considerable reliance was placed by Counsel on behalf of Mr Coonan. In his judgment in Wiley .v. The Revenue Commissioners [1993] ILRM 482 Mr Justice O’Flaherty repeated the observations which I have quoted from the judgment of Finlay CJ in the Webb Case and went on to analyse the evolution of the doctrine of legitimate expectations. In concluding that it had no application to the claim of the plaintiff to the repayment of excise duty in accordance with certain representations made to him O’Flaherty J said (at page 494):-
“The appellant is not concerned with seeking fair procedures in the sense of submitting that he should have been heard by the Revenue Commissioners before they changed their evidentiary requirements in relation to the granting of a refund. Rather does he submit that he should continue to have conferred on him a substantive benefit by way of exemption in the circumstances that he was not informed in advance of the more stringent requirements that the Revenue Commissioners had put in place to satisfy themselves so that they could properly discharge their duty in accordance with the scheme they had set up under the relevant legislation. It will be clear immediately that acceptance of this admission would involve a radical enlargement of the scope of legitimate expectation. It would involve the courts saying to the administration that it was not entitled to set more stringent standards, so that it might discharge its statutory obligations, without giving notice to anyone who might have benefited in the past from a more relaxed set of rules. Stated thus, I believe it would involve the courts in an unwarranted interference with the actions of administrators. Our constitutional system is based on the separation of powers and just as the judicial organ of State requires the respect of the legislative and executive branches of Government, so must the courts exercise proper judicial restraint.”
14. Even if the relationship between the Attorney General (or the Director of Public Prosecutions) and a state solicitor is to be seen as a matter of public law to which the doctrine of legitimate expectations applied, it would seem to me that the judgment of Mr Justice O’Flaherty would preclude Mr Coonan obtaining any substantive benefit.
15. At the end of the day the learned trial Judge awarded Mr Coonan a sum of £100,000 by way of damages. Of course the trial Judge had been placed in the difficult position that Mr Coonan could not be restored to his post so that any review of his circumstances by the Attorney General would have been meaningless. At the same time, Carroll J had received evidence that the remuneration of state solicitors had been, or was about to be, increased to £35,000 per annum. The award of £100,000 therefore would appear to represent effectively the full value of a claim for wrongful dismissal on the basis that the “employee” was entitled to three years notice of termination. Indeed recognising that Mr Coonan had given evidence, that in the event of his ceasing to be State Solicitor, he would discontinue the employment of one typist, it may be that the award represented the full amount of the loss which Mr Coonan would sustain over a period of five years. If the notice which it was held that he was entitled to receive of any change of policy was, say, twelve months – which would be the longest period that one could envisage as appropriate notice to determine a contract of employment from year to year – that computation could not be justified.
16. Whilst I share entirely the views of the learned trial Judge as to the harshness of the decision of the Attorney General and the effect which it had upon the understandable – if not legitimate – expectations of Mr Coonan, I do not accept that the Plaintiff has made out a case in law to recover damages for breach of contract or otherwise against the Defendants. I would allow the appeal.
THE SUPREME COURT
Murphy J.
Geoghegan J.
Fennelly J.
Record No. 56/01
BETWEEN
CHARLES COONAN
Plaintiff
and
THE ATTORNEY GENERAL AND IRELAND
Defendants
Judgment of Mr. Justice Geoghegan delivered the 29th day of May 2001
17. On the 14th of August 1974, the plaintiff was appointed State Solicitor for the area of north Kildare/Wicklow. As in the case of all State Solicitors since the foundation of the State until quite recent times the plaintiff was required to sign a document under which he agreed to accept and comply with certain specified conditions of appointment. These were the same conditions of appointment as were invariably used. For the purposes of this appeal, it is not necessary to consider the exact legal nature of the office of State Solicitor. Even if, for some purposes, his office might be regarded as being governed by public law (and I am expressing no opinion whatsoever on this matter) it is the contractual terms of his appointment and matters arising therefrom which are in issue in this case ,which was an ordinary action commenced by plenary summons and not, in any sense, an application for judicial review. For the most part in so far as the action is founded directly on contract paragraph 1 of the conditions of appointment is the relevant provision. I think it best to set out that paragraph and then in the light of it explain what the issues between the parties are. Paragraph 1 reads as follows:-
“The State Solicitor shall be entitled to hold the office of State Solicitor for the above area until he shall attain the age of sixty-five years but, provided that he is then in good health, the age of retirement may be extended by the Attorney General, with the concurrence of the Minister for Finance, to any age not exceeding seventy years. The State Solicitor shall be removable at any time by order of the Government made on the certificate of the Attorney General, for misconduct, incapacity, neglect of duty, physical or mental infirmity or for any other cause which, in the opinion of the Attorney General, would render him unfit to perform the duties of State Solicitor. The certificate of the Attorney General in respect of any of the aforesaid matters shall be binding on the State Solicitor. The appointment will carry no right to pension or compensation on termination.”
18. When the plaintiff was reaching the age of sixty-five years he applied, as most of his colleagues had done over many years, for an extension. Apart from a very minimal extension which the plaintiff was ultimately given this was refused and it was refused on the grounds of a new policy which the Attorney General was adopting. That policy was that there would be no more extensions after the age of sixty-five years unless there were exceptional circumstances. I do not find it necessary to set out in this judgment the history of how this policy came about. It is sufficient to state that the policy was decided upon.
1 In the High Court and on appeal in this court the plaintiff essentially makes two alternative cases which are:-
(1) That once there was no problem with the plaintiff’s health there was in all the circumstances a breach of contract on the part of the Attorney General in not granting the extension.
(2) Even if there was technically no breach of contract the Attorney General was precluded from refusing to renew by virtue of the doctrine of promissory estoppel and/or legitimate expectation.
19. There is a further refinement to be made in relation to issue No. 1. The contractual issue was argued on behalf of the plaintiff in the High Court effectively on two alternative fronts though it was never put like that. As it happens, the books of transcript from the High Court include argument as well as evidence and it emerges from Book 1 of the transcript that Mr. Condon, S.C. opened the case on behalf of the plaintiff on the basis that the Attorney General was contractually obliged to grant the extensions provided that there was no health problem and that the word “ may” in the first sentence of Condition No. 1 connoted merely an enabling provision allowing the Attorney General actually to grant the extension in such circumstances. On this interpretation the Attorney General would have no discretion. The question of the role of the Minister for Finance has never really featured and I think that it would be accepted by all sides that it would be fiscal matters with which the Minister for Finance would be concerned and I do not think that his role is relevant to the issue.
20. Mr. Ercus Stewart, S.C., also acting for the plaintiff, argued the contractual points slightly differently in his closing of the case in the High Court. At p. 108 of Book 2 of the transcript he is reported as having said as follows:-
“What the State is alleging is that some time in 1999, they adopted a policy or a rule – the words are both used – changing it, and I would submit, Judge, that if there was a discretion, that the discretion is clearly being … totally being done away with, or fettered by a general rule or policy that only in exceptional circumstances, and the two – and the word two, Judge, they became three a few moments ago, and they are back now to two. They were related to the particular State Solicitor’s office and the work being done at the time. You can call them three situations or two, but it is two or three. But they each relate to the particular job, the particular office being served, and they clearly are matters of benefit to the State.”
21. While therefore Mr. Condon was making the bolder argument that there was no discretion left to the Attorney General, if there was good health, Mr. Stewart was modifying that somewhat by arguing that even if the Attorney General did have a discretion under the contract, he was not contractually permitted to adopt a policy fettering his own discretion. At the hearing of the appeal Mr. Condon ultimately conceded that the Attorney General did have some discretion.
22. Carroll J., in the High Court, delivered a reserved judgment in which having referred to the evidence of a former Chief State Solicitor, Mr. Dockery, and the State Solicitor for Limerick, Mr. Murray, who was also President of the State Solicitors Association, which was to the combined effect that over many years renewals were more or less routine, she expressed strong adverse views as 1to the manner in which the plaintiff had been treated by the State and she held in his favour. The defendants have appealed that decision to this court. Carroll J., in her judgment, chose not to analyse what exactly the contractual terms were but preferred to base her decision on estoppel arising out of the manner in which the Attorney General, over many years, had exercised his contractual discretion. At p. 10 of her judgment she said the following:-
“This case seems to me to fit four square within the doctrine expressed by Lord Denning M.R. in Amalgamated Property Company Limited v. Texas Bank [1982] Q.B. 84 and referred to by Finlay C.J. in Webb v. Ireland [1988] IR 353:
‘Where the parties to a transaction proceed on the basis of an underlying assumption either of fact or law, whether due to misrepresentation or mistake makes no difference, on which they have conducted the dealings between them neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow them to do. If one of them does seek to go back on it the court will give the other such remedy as the equity of the case demand.’
23. Counsel for the Attorney General, Mr. McDonagh, S.C., argued very forcefully by reference to case law that the doctrine of legitimate expectation had no place in private law but only in public law. But in view of the fact that the Amalgamated Property Company Limited was a private law case and not a public law case, I do not think that this issue really arises. It would seem that it was more on the basis of estoppel than legitimate expectation that the learned trial judge came to her decision.
24. Mr. McDonagh also drew to the attention of the court difficulties in the way of the plaintiff succeeding on the basis of estoppel and these are referred to in the judgment of Murphy J., but as I have formed the view that the plaintiff is entitled to succeed at any rate on foot of his contract with the Attorney General, I do not find it necessary to consider the application of the principles of estoppel.
25. I return therefore to the contract. It may be at least arguable, as originally suggested by Mr. Condon, that the Attorney General was contractually obliged to renew subject only to health problems but I am inclined to the view that that is not a correct interpretation, having regard to the use of the word “ may”. I find it difficult to follow how the word “ may” in the context could connote merely an enabling provision. In this exercise one is not construing a statute or a statutory instrument and it would be absurd to suggest that Mr. Coonan could enable the Attorney General to do something. I am satisfied, therefore, that over and above the health question the Attorney General does have a residual discretion which could be exercised against renewal in particular circumstances and in a particular case. But I am in complete agreement with the more modified contractual argument to the effect that the Attorney General was not entitled to introduce a blanket policy. When I say that he was not entitled to do so, I mean that he was not contractually entitled to do so. Obviously, the Attorney General can have any kind of policy and, indeed, such a policy may well have been very sensible. But he may, in any given instance, be precluded contractually from implementing it. I believe that that is the case here. During all the years that the plaintiff was a State Solicitor he might have from time to time looked at his own contract, and if he did so, it would have been clear to him that by the plain words of Condition No. 1 he was given, at the very least, the hope of being considered for renewal on his own individual circumstances if he should make an application for renewal after sixty-five. It would never have occurred to him that that discretion in the Attorney General for which he had been guaranteed in the contract would be at the relevant time effectively removed. In order to construe Condition No. 1 in this way, I do not think that it is necessary to imply any term. This would seem to be the natural interpretation of the express term but if it is necessary to imply a term, I would have no hesitation in doing so. It must surely have been an attractive feature for most applicants for State Solicitorships over the years that they would have the expectation, or at the very least, the reasonable hope that they could remain at the job until seventy. The absence of any pension made this of considerable importance.
26. I am firmly of opinion, therefore, that the Attorney General has been in breach of contract and I agree with the view of the learned trial judge that the only practical remedy now is damages. It is not entirely clear how Carroll J. arrived at the figure of £100,000, but I think that it was a reasonable figure. She had evidence before her of the annual salary which the plaintiff was receiving, a figure in the order of £27,000 and she had been told that a substantial increase was likely to emerge from the report of the Buckley Review Body. That report was published shortly before the judgment and it did recommend increases which would have brought the salary, if implemented, to £35,000. I do not think that the learned trial judge was making an exact calculation of loss of earnings. In arriving at her figure, the learned trial judge was entitled to have regard to the earnings. While there could have been no guarantee that the plaintiff would have been retained till seventy even if the Attorney General properly exercised his discretion, the learned judge was entitled to weigh up the probabilities especially in the context that the Attorney General had elected to defend the action solely on the basis of policy with no suggestion of ill health or unsuitability on the part of the plaintiff. In all the circumstances, the justice of the case is met by the award of £100,000 and I would, therefore, dismiss the appeal.
Daly v. Minister for the Marine
[2001] IESC 77 (4 October 2001)
[2001] 3 IR 513
JUDGMENT of FENNELLY J. delivered the 4th day of October, 2001 [Nem. Diss.]
1. Cases concerning the disappointment of legitimate expectations have formed part of the regular diet of the courts in judicial review matters since at least the decision of the Supreme Court in Webb v Ireland [1988] IR 353. (” Webb”) The law has not been comprehensively reviewed in this Court, though some remarks about it are to be found in the recent judgments in Glencar v Mayo County Council (unreported judgment of 19th July 2001), where essentially it was decided on the facts that no recognisable legitimate expectation had been established.
2. Similarly, in the present case, the applicant, as the holder of a sea fishery licence, failed in his application for judicial review of a decision by the first named respondent (“the
3. Minister”), to refuse him the right to use the tonnage of his vessel on de-registration as replacement capacity so as to facilitate the entry of another vessel into the fishing fleet. The learned trial judge, O’Sullivan J, held that the applicant did not satisfy the threshold requirement of being able to point to a legitimate, in the sense of a reasonably entertained, expectation that he would receive this benefit at the hands of the Minister.
The Statutory Background
4. Before recounting the relevant facts, I will advert to the few comparatively simple surrounding legal provisions, which are fully set out in the judgment of O’Sullivan J.
5. Sea fishing is governed by the Fisheries Acts and registration of boats is governed by the Merchant Shipping Acts.
6. The Minister is empowered to license boats, registered under the Merchant Shipping Acts, for sea fishing, by 222B of the Fisheries (Consolidation) Act, 1959 inserted by section 2 of the Fisheries (Amendment) Act, 1983. The Minister may allow or refuse an application for a license and may impose terms and conditions on licenses he grants. He may also make regulations exempting classes of boats from licensing. However, it was (at the relevant time) an offence, unless exempt, to use an unlicensed sea-fishing boat for sea-fishing.
7. The applicant’s boat, the “Angela Madeleine” , being under 65′ in length, was exempt from licensing pursuant to the Licensing of Sea-fishing Boats (Exemption) Regulation of 17 th August 1983 (SI No 245 of 1983). This regulation was revoked by the Licensing of Sea-fishing Boats (Exemption) (Revocation) Regulations 1994 (SI No 444 1994) with effect from 1 st January 1995 to comply with EC Regulation Council Regulation 3690/93. I will return to this issue at a later stage.
8. Despite this exemption, the applicant had to license his boat. In order for Bord Iascaigh Mhara (BIM) to be able to register a mortgage to secure their loan made to the applicant on the boat, the boat had to be registered. Section 8 of the Fisheries (Amendment) Act, 1983 required that, to be registered, a boat had to have a sea-fishing license.
The Facts
9. The applicant is a fisherman and mussel farmer and owner of a 35 foot sea-fishing boat, the “Angela Madeleine.” He works from Kilmakillogue Harbour, Lauragh, Killarney. He had his boat built in 1991 by Dingle Boats Teoranta, with the benefit of a loan and grant from BIM as well as a grant from European Community funds (FEOGA).
10. For an appreciation of the applicant’s complaint it is necessary to explain the policy background to the Minister’s refusal. It is an amalgam of national and European Community policies. It is notorious that Community fish stocks are under more or less constant threat from over-fishing. Community policies include fish quotas and, what is relevant to this case, the reduction of fishing capacity. The long term objective is to achieve a balance between fishing effect and available stocks. Commission Decision 88/142/EEC of 11 December 1987 (modified on 23 December 1988) required Ireland to significantly reduce its fishing fleet in stages up to 1991. Fleet tonnage was to be cut from 58,845 tonnes to 43,941 tonnes (a 25% reduction). In August 1989, the Minister set up a review committee to examine licensing policy and to recommend measures for the control of the fleet in line with the State’s obligations.
11. As it happens, the applicant made his first application for a license under section 222B, quoted above, on 13 th March 1990. The vessel was not specified as it had not yet been built, but under the heading, “Methods of Fishing” , he stated : “mussel farming by long line system & potting.” Under “species in order of priority,” he filled in: “mussels, crab, lobster
and shrimp.” In his accompanying letter he said that he would be “principally engaged in mussel harvesting,” but that he intended to “go potting for crab, lobster and shrimp when mussels are out of season.” The Minister wrote on 16 th March stating that he had “suspended consideration of all sea fishing boat license applications” and that the application would be considered when a revised policy was in place, based on consideration of the report of a Review Committee.
12. In May 1990, upon consideration of the report of the committee, the Minister adopted a 100% replacement policy in respect of new entrants to the fleet. In order to license a new vessel, a tonnage equivalent to that of the new vessel would have to be withdrawn from the register. In practical terms, an applicant seeking a new sea fishing boat license would have to acquire vessels or capacity which are entered on the sea fishing boat register of capacity at least equivalent to that of the proposed new vessel. However, in view of Community regulations,aquaculture vessels and vessels engaged exclusively in bivalve fishing were exempt from this requirement.
13. To the extent that the applicant’s application included crabs and lobster, he would have been required to show replacement of equivalent tonnage. On 6 th June 1990, the Minister wrote to the applicant stating that “preference would be given to applicants who have proposed tonnage replacement” and that “applicants will have to demonstrate that they intend to remove a significant level of active tonnage from the Fishing Boat Register to facilitate the entry of new entrants.” The letter went on to ask “ whether there [was] a replacement element associated with his application” and asked the applicant to furnish details. The applicant replied on 25 th June 1990, furnishing an amount of detail. His letter contains the following:
– “The vessel will not be fishing for quota species of fish.”
– “For the six month mussel season the boat will be harvesting my mussels and the mussels of other members of the Kenmare Bay Aquaculture Co-Op.”
– “I cannot afford to leave the boat idle for five months of the year. I intend to pot for crab during the summer months.”
– “in answer to your question “is replacement element associated with your application,” the answer is no.”
On 4 th February 1991, when the launching of the boat was imminent, the applicant wrote as follows to the Minister :
“I wish to have my new 38’ mussel harvesting vessel being built by Dingle Boats Teo licenced and registered. The boat is due to be launched in March 1991.
The total cost of the boat is £71,400. In addition to personal finance the boat is being funded by FEOGA grant £22,640, BIM grant £13,420, BIM loan £30,270. The loan repayments (approximately £6,000 per annum) and boat upkeep (approximately £3,000 per annum) will be met from my mussel sales income and also contract mussel harvesting. My mussel sales January 1990/February 1991 were 112 tonnes @ £390 per tonne. The local mussel production now at 600 tonnes per annum increasing to 1000 tonnes in 1992 offers a considerable amount of contract work. The boat will be used exclusively for mariculture. I am confident that the mussel industry is now viable enough to support this investment.
Please find enclosed supporting documents.”
14. The Minister replied on 26 th April to the effect that he was prepared, in principle, to offer a license but specified a number of conditions, particularly, that which read: “the tonnage in question is to be used for aquaculture purposes only and you will not be allowed dispose of the tonnage for general purposes.” O’Sullivan J. explains that the terms “mariculture” and “aquaculture” are interchangeable: they relate to mussel fishing and fishing for “bi-valve molluscs ” (clams, scallops, razor clams), a sector also denoted by the word “specific.” The applicant was informed also that he had to send written acceptance of the offer within four weeks and that if it was not taken up any further request for a license would be considered as a new application and subject to whatever policy criteria might then be in force. The applicant wrote in reply on 1 st May 1991:
“I was very happy to receive your letter dated 26th April 1991 informing me that a Sea Fishing Boat Licence would be offered to me subject to the conditions listed in your letter.
I agree to comply with these conditions. Thank you for your assistance.”
15. The applicant was informed by the Department of the Marine of his port number and letters, which must be displayed. At the end of May, the boat was launched and he commenced to fish even before the license was issued .
16. The license duly issued. It is dated 28 th August, and operated only for the period from 26 th August to 30 th November 1991. This was because the sole purpose of the license was to enable the boat to be registered for the reasons already given. It contained no condition of the sort that had been notified regarding use of the boat for aquaculture nor, indeed any condition concerning the type of fishing which was permitted, or replacement tonnage.
17. The applicant claimed that the absence from the license of any such condition meant that the conditional offer of 26 th April, restricting fishing to aquaculture, had lapsed prior to the issue of the license.
18. At first, the applicant fished for crab and lobster, with pots, and fished for mussels only in the winter. He continued fishing with pots from 1991 to 1993, selling the catch to processing factories and French buyers. He did not commence fishing for demersal species of white fish (cod, haddock, hake and whiting) until 1994. However, the applicant says that the Department of the Marine include fishing with pots in the demersal sector. What is more, the officers of the Department made no complaint about the type of fishing he was engaged in and issued him with books in which to record his catch. As already noted, he would have had to show replacement tonnage if he had persisted in his application to fish for crab, lobster and shrimp.
On 1 st October 1993, the Department of the Marine wrote a letter to the applicant:
“Re: Categorisation of Sea Fishing Vessels
“The Department of the Marine has released a discussion document on the Management and Development of the Sea Fishing Fleet. A copy of the document is enclosed.
Under agreed European Community fleet policy, the fleet is being divided into five categories: Demersal (Irish Sea); Demersal (other than Irish Sea); Pelagic; Beam Trawl; and Specific. The Demersal categories include netters, potters and nephrops trawlers. The Specific category covers vessels which are exclusively engaged in aquaculture. Each vessel in the fleet has been provisionally assigned to one of these categories by the Department on the basis of our knowledge of its active fishing history in recent years. Some vessels may be appropriate to more than one category.
Your vessel, the MFV “Angela Madeleine” (S 215) is being provisionally assigned to the Specific and Demersal (other than the Irish Sea) categories. This means that the vessel will be allowed to be used only for aquaculture purposes including fishing for bi-valve molluscs and for demersal species in all areas other than the Irish Sea. The vessel will be precluded from fishing for demersal species in the Irish Sea, for pelagic species, and by means of beam trawls.
For replacement capacity purposes your vessel will be acceptable for the introduction of a new or second hand vessel into the Demersal (other than the Irish Sea) category on a one to one basis.
If you consider that the vessel has been incorrectly categorised, you may appeal the provisional categorisation in writing to the Sea Fisheries Division of the Department. Such an appeal should be supported with documentary evidence such as long sheets or vessel has actively fished in one relevant category for four months in each of the last four years. Appeals must be received in writing by Friday the 26th November 1993. Should you require any assistance in regard to this matter, please contact the local Sea Fishery Officer.
A further letter will issue to you either confirming your categorisation or adjusting it in the light of the current consultation process or a successful appeal.”
19. Clearly, the third paragraph, by including the demersal sector to any extent in the categorisation, and the fourth paragraph, by allowing the applicant’s vessel to be used for replacement capacity purposes, was directly at odds with the letter of 26 th April 1991. Despite the last paragraph, no further letter was, in fact, sent and the applicant says he assumed that the position expressed in the letter of 1 st October stood. He continued to fish as he had done and expended monies on his vessel.
20. Early in 1997, the applicant commenced to experience financial difficulties. He was under pressure inter alia from BIM. He decided to sell his tonnage through the agency of a solicitor, Patrick Crowley, who advertises for tonnage in “The Skipper” newspaper. A side effect of the licensing policy combined with the ministerial policy of replacement was that a trade had developed in licensed “tonnage,” which, as noted by the learned trial judge had “become a valuable commodity in itself.” An agreement for sale of the applicant’s tonnage was made in March 1997, subject to the Minister’s approval, which was expected to take about three weeks to obtain. Meantime the agreed consideration was transferred to the account of Mr Crowley, solicitor, who was handling the transaction to await the approval. At first, the Minister was favourable to the request and the proceeds of sale were even transferred on or about 27 th March 1997 into the applicant’s bank account after discharge of the amounts due to BIM. On 4 th April, the Minister wrote stating that “the Department’s letter of 26 April 1991 to the owner (Mr Daly) indicated that the tonnage could not be disposed of for general fishery purposes.” The Department of the Marine explained it’s position more fully in a letter to the applicant on 10 th June 1997. It read:
“I refer to your letter of the 3rd March 1997 requesting the de-registration of the MV “Angela Madeleine” from Sea Fishing Boat register and the sale of its capacity to facilitate the entry of the another vessel to the fleet.
Under current licensing policy, vessels which are correctly entered on the sea fishing boat register are acceptable as replacement capacity for the introduction of vessels to the same segment of the fleet. Vessels such as mussel dredgers which are licensed to fish solely for bivalve molluscs or to engage in aquaculture, are not considered to be eligible to be used as replacement capacity other than in respect of another aquaculture vessel.
I would also draw to your attention that you indicated in your letter to the Department of the 4th February 1991 (copy attached) in support of your application for the licensing and registration of a mussel harvesting vessel, that the MV “Angela Madeleine” would be used “exclusively for Mariculture”. In addition no replacement capacity was withdrawn in association with the introduction of the MFV “Angela Madeleine”.
For these reasons, the licence offer which issued from the Department on the 26th April, 1991 (copy attached) explicitly stated that the vessel was to be used exclusively for aquaculture purposes and that the capacity of the vessel could not be disposed of as replacement tonnage for general fishery purposes. In addition, your letter of the 1st May (copy attached) indicated that you agreed to the conditions under which the licence was offered.
It is acknowledged that in 1971, vessels under 65 feet in length were exempt from the requirements to hold a current sea fishing boat licence, and licences were only issued in respect of vessels under 65 feet to facilitate registration. Consequently, the licence issued in respect of the MFV “Angela Madeleine” did not contain conditions relating to the vessel being used solely for fishing for bi-valve molluscs.
The Department’s letter of 1st October 1993, provisionally assigned the vessel to the Specific and Demersal segment of the Irish fleet. However, the letter did not purport to be definitive and envisaged the issue of a further letter if the provisional assignment was to be confirmed. In the event the provisional assignment was not confirmed.
In light of the above having reviewed the case it has been decided that the capacity of the MFV Madeleine cannot be accepted as replacement capacity for the following reasons:-
(a) the vessel was introduced to the fleet exclusively for aquaculture purposes, and was not required to withdraw replacement capacity as aquaculture vessels are not taken into account in the calculation of EU fleet targets;
(b) it was made clear to you in the licence offer that the capacity of your vessel was not to be used for aquaculture purposes only and that ‘you will be allowed to dispose of the tonnage for general fishery purposes’;
(c) your letter of the 1st May 1991 indicated that you accepted the conditions under which the licence issued.”
21. Thus the transaction was frustrated at the last moment.
22. The above account of the facts does not do full justice to the evidence cited by the applicant to support his legitimate expectations case. It will be easier and less repetitious to do so when I come to assess the strength of that contention.
The High Court judgment
23. The full hearing of the applicant’s judicial review application took place before O’Sullivan J. over a period of five days. The affidavits were supplemented by oral evidence. O’Sullivan J. gave judgment on 25 th February 1999 dismissing the application. He excluded from consideration the fact that the Minister stated that the letter of 1 st October 1993 was written in error. That fact did not mean that it could not form “part of the transaction or course of dealing between the parties to which the Court will have regard in the context of legitimate expectations.”
24. O’Sullivan J. held that it was not reasonable for the applicant, on receipt of the license, to conclude that the Minister had changed his requirement in relation to tonnage. His fishing activities in apparent breach of the 1991 undertakings had more to do with that activity itself than with the Minister’s tonnage replacement requirements. They were also “equally consistent with lack of communication between the various representatives of the Minister, some confusion and perhaps even a relaxed attitude.”
The letter of 1 st October 1993 was at odds with the stated requirements of the Minister regarding tonnage replacement. “It may well have looked like a gift from the Gods” so far as the applicant was concerned, but it was gratuitous and would mean that the applicant would gain an unpaid advantage at the expense of the Irish fleet. It would strain logic and common sense, he said, to treat the letter as an unqualified assurance with the consequences which the applicant was seeking to enforce.
The Appeal
25. The applicant, in his appeal to this Court, relies both on the doctrine of legitimate expectations and the equitable doctrine of promissory estoppel. He takes issue with the judgment of O’Sullivan J in several respects:
(i) he failed to give sufficient weight to the fact that the applicant’s boat was exempt from licensing. The Minister acted ultra vires in seeking to impose conditions on the grant of a license to the applicant, which the applicant required merely for registration purposes.
(ii) the learned trial judge’s conclusion that it was not reasonable for the applicant to consider that the Minister had dropped the conditions and in particular his attitude to replacement tonnage when he received the license in August 1991. The applicant fished openly in the demersal sector, had a log book and received compensation based on his earnings in this sector.
(iii) the learned trial judge’s conclusion that the letter of 1 st October 1993 was contrary to the course of dealing up to then was itself contrary to the weight of the evidence.
(iv) the conclusion that the letter of 1 st October 1993 was “like a gift from the Gods” in the sense of an uncovenanted benefit and gratuitous benefit to the applicant was incorrect as the evidence showed that the Minister had not, as he claimed, operated a policy of 100% replacement. Detailed reference was made to alleged breaches of this policy.
26. The Minister responds by saying that the concept of legitimate expectations requires the existence of a clear unambiguous and unqualified promise. There is no such promise in the present case. Furthermore, the legitimate expectation must be reasonable in the sense of being objectively justifiable. In the present case, the applicant had obtained his license in which he was aware of the necessity to extinguish tonnage and of the restriction on the use of his vessel to that end. The learned trial judge was right to emphasis the relevance of equitable principles. Finally, the applicant’s attempt to obtain the substantive remedy of the right to use his tonnage for replacement exceeds what is available for breach of legitimate expectations, which confers procedural rights only.
The Law Relating to Legitimate Expectations
27. The learned trial judge decided the case essentially on the facts. The applicant did not, he held, have an expectation which it was reasonable or legitimate for him to have. The very name of the doctrine demonstrates, in my view, that this approach is correct. If authority were need for this self- evident proposition, it is to be found in express terms in the judgments of this Court in Wiley v The Revenue Commissioners [1994] 2 I.R., 160. Blayney J in the High Court and both Finlay C.J. and McCarthy J accepted that the plaintiff, a disabled person, expected, as a fact, that he would be granted a refund of excise tax on a new motor car under a scheme designed to benefit disabled drivers. He had received a refund on previous occasions, but the Minister altered the terms of the scheme so as to require medical evidence that the applicant possesses the disability described in the scheme. He did not, however, in the view of the Court, have an expectation which was legitimate.
28. The Minister relied upon the following passage from the judgment of Barr J. in Cannon v Minister for the Marine [1991] 1 I.R. 82, which seems to me to distil the essence of
the doctrine which is fairness:
“….the concept of legitimate expectation, being derived from an equitable doctrine, must be reviewed in the light of equitable principles. The test is whether in all the circumstances it would be unfair or unjust to allow a party to resile from a position created or adopted by him which at that time gave rise to a legitimate expectation in the mind of another that that situation would continue and might be acted upon by him to his advantage.”
Conclusion
29. The policy of replacement tonnage was, in substance, an administrative scheme. The State was required to comply with Community policy by reducing total fishery tonnage by targeted amounts. On the other hand, there was no directly applicable Community regulation. The achievement of the objective was left to Ireland, which had to act within the general parameters of Community policy.
30. The licensing of sea-fishing boats was and is a statutory scheme. Fishing without a license was rendered unlawful, but the Minister had full discretion to grant or refuse a license. He was entitled, in the exercise of this statutory discretion, to adopt a policy relevant to the attainment of a balance between the available fish stocks and fishing capacity in the form of boats, and to alter that policy from time to time. The replacement tonnage policy was designed to ensure that additional fishing capacity would not be added to the fleet: a new license would be granted only upon it being shown to the satisfaction of the Minister that equivalent existing capacity would be eliminated. Aquaculture or mussel fishing was, as we have seen, outside the scope of this policy. In Murphy v Minister for the Marine and others [1997] 1 I.L.R.M., 523, Shanley J. fully considered the replacement-tonnage policy and held that the Minister was fully entitled to have regard to it in exercising his discretion to grant or refuse sea-fishing licenses. No challenge to the correctness of that decision has been advanced in this case. It should be said, however, that nothing in Community law obliged the Minister to treat individual applicants for licenses by reference to the tonnage replacement policy. In other words, if the applicant had a genuine basis for legitimate expectations nothing in Community law or, for that matter, in the statutory regime would prevent him succeeding.
31. The applicant frankly accepts that, at all relevant times before mid 1991, with only a minor qualification, he put himself forward as being interested only in aquaculture. The qualification is that he said initially in 1990 that he would want to pot for lobster and crab in the summer months. However, when he was informed that he would have to show that he was replacing existing tonnage, he abandoned this and confined his application in express terms to aquaculture. I do not accept that the applicant, in so doing, was under duress. He acted voluntarily. From this exchange, it was abundantly clear that the Minister had adopted a new policy of insisting on tonnage replacement upon the grant of a new license. Not only was the applicant not replacing tonnage, because of the confinement of his application, but, more importantly, he accepted expressly and in writing that his own tonnage could not, in the future, be used as replacement tonnage.
32. However, it is said that the applicant, because of the small size of his boat, was exempt from the licensing requirements, and that the Minister acted ultra vires by seeking to impose the requirements in the letter of 26 th May 1991. In my view, this does not alter the
situation for several reasons. The applicant did, in fact, require a license, if only for technical reasons. That may not be conclusive, since, as we know, it was considered sufficient for that purpose to issue a license for a three month period. It seems that the boat could be registered if, at the time of registration, it was licensed for sea-fishing. Technically, the Minister might have been entitled to impose conditions even on a license for a three month period. On the other hand, those conditions would not have survived the expiry of the license. The important point is not whether or not the applicant was entitled to fish without a license and, consequently, free of any licensing conditions, but rather that his interest in providing replacement tonnage is an independent matter and is not related to his own obligation to be licensed. The fact that the applicant was exempt from licensing at all times prior to 1995, does not enable him to acquire any right to use his vessel for replacement.
33. The central plank of the applicant’s case is not, as he has accepted at all times, the letter of 1 st October 1993, but his claim that everything changed in August 1991, when as he put it, “it all unravelled.” Firstly, the license, when issued did not repeat the conditions contained in the letter, restricting him to aquaculture and denying him the right to use his tonnage for replacement. At the same time, he was informed, apparently by BIM that the Minister could not restrict his fishing. Furthermore, he was issued with logbooks to enable him to record his catches. This was done although he would not in fact be required to make returns, but he was told that it would be useful to keep records for his own benefit. He did, in fact, fish for what he calls demersal species even before the issue of the licence. In that respect, I have noted that, prior to 1994, his fishing other than mussel fishing, consisted of fishing for lobster and shrimp. These are not normally classed as demersal, though they are so treated by the Department of the Marine for tonnage replacement. The applicant also received the benefit of a scheme of assistance for loss of lobster pots. He says this further confirmed his understanding that he was allowed to fish in the demersal sector.
34. I can find no basis in fact, whatever the quality of promise required to justify a legitimate expectation, in the so called unravelling events, formed on any objective or reasonable basis, that the Minister had departed from what he had consistently stated, and that he was, on the contrary, now implicitly promising that he would allow the applicant to use his tonnage for replacement. The silence of the license on the topic was perfectly consistent with the view that the Minister had no power to restrict the applicant’s fishing, since he was exempt from licensing. Nor can the applicant rely on his fishing, in fact, for demersal species or the apparent tolerance of this fact by officers of the Department of the Marine. This fishing was perfectly lawful. Insofar as the applicant was told by officials of BIM that the Minister could not impose conditions on his license, this was also consistent with this fact. In evaluating the reasonableness of an expectation, it will usually be easier to establish that an authority has bound itself when its actions are consistent with and imply the continued effectiveness of a position already communicated. Promise by implication is no doubt conceivable, but is not easy to establish where it flies in the face of the authority’s stated position.
35. On the face of it, the letter of 1 st October 1993, furnishes a much more robust material for a legitimate expectation by the applicant. However, that, strangely, is not the applicant’s case. So far as he was concerned, that letter changed nothing. It merely confirmed his existing understanding. I would be reluctant to hold this point against the applicant without careful consideration. After all, if the letter had formed part of the relationship between the parties from 1991, it would have been difficult for the Minister to justify any departure from it. The letter, though expressed in provisional terms, is very explicit in its fourth paragraph in admitting the use of the applicant’s vessel for replacement tonnage purposes “for the introduction of a new or second-hand vessel into the Demersal (other than the Irish Sea) category on a one to one basis.” Viewed objectively, on the other hand, the applicant’s case lacks internal logic. Any expectation he had prior to receipt of that letter, which contains an explicit recognition of the essentials of his claim, could not be considered legitimate. He, however, attaches little or no importance to the letter, claiming that it represented the Minister’s position as he already (incorrectly, in my view) understood it to be.
36. Furthermore, the applicant accepted in evidence without demur that he had done nothing on foot of the letter to alter his position to his detriment. Counsel for the applicant argued strenuously in response to questions from the Court that the doctrine of legitimate expectations contains no requirement that the claimant show that he has so acted: that is relevant only to the alternative claim based on promissory estoppel. I will comment on that proposition later in this judgment. At this point, I think the answer to the dilemma of the unfortunate and obviously confusing terms of the letter of 1 st October lies elsewhere. The terms of the
letter are clearly and explicitly at odds with the clear basis of the applicant’s dealings with the Minister as established in 1991 and, as I have said, as they remained up to that point. Having described the proposed system of division of the fleet, the letter indicates the assignment of the applicant’s boat to “the Specific and Demersal (other than Irish Sea) categories.” The applicant must or should have realised that this was incorrect. All of his dealings with the Minister in 1991 were on the express basis accepted by him that he would engage in aquaculture only. On his own evidence, he had not, in fact fished for demersal species in the ordinarily understood meaning of that term prior to 1994. He had engaged in potting outside the mussel season. The applicant appears to have deceived himself, possibly on the basis of what he was told by BIM and by the issue of logbooks to him, that he was entitled not only to fish for demersal species (which as a matter of law, based on the exemption, he was prior to 1 st January 1995) but also that the Minister would allow him to use his tonnage for replacement. Crucially, however, he has produced no evidence at all to justify the latter assumption, and accepted in evidence that he gave no real thought to it at that time. If he had appreciated the true position on receipt of the letter of 1 st October, he would have realised that he could not treat it as a correct statement of the Minister’s position without further enquiry, but he made no attempt to contact the Minister to verify the letter. I do not think it was reasonable for him to do this and I do not think it was legitimate for him to expect that the Minister would from now on accept his tonnage for replacement. The applicant’s failure to make reasonable enquiries is, of course, explained by the belief he unreasonably held that the Minister was saying nothing new.
37. Returning to the applicant’s acceptance that he had not acted to his detriment on foot of the letter of 1 st October 1993, I would accept that there is a distinction between the doctrine of legitimate expectations and promissory estoppel. Legitimate expectations constitutes an accepted part of the principles of administrative law applied by our courts through the vehicle of Judicial Review. It is concerned essentially to see that administrative powers are not used unfairly. An expectation may be legitimate and cognisable by the courts even in the absence of the sort of action to the claimant’s detriment that forms part of the law of estoppel. On the other hand, I would not accept that the mere fact of an expectation can suffice without some context relevant to fairness in the exercise of legal or administrative powers. Those who come within the ambit of an administrative or regulatory regime may be able to establish that it would be unfair, discriminatory or unjust to permit the body exercising a power to change a policy or a set of existing rules, or depart from an undertaking or promise without taking account of the legitimate expectations created by them. However, the very notion of fairness has within it an idea that there is an existing relationship which it would be unfair to alter. The existing relationship between the applicant and the Minister was that created in 1991. The letter of 1 st October 1993 did not tend to alter that to the disadvantage of the applicant. On the contrary, it constituted a gratuitous or fortuitous and uncovenanted benefit. This is not the sort of interest that the doctrine is designed to protect.
38. One further point is the change from 1 st January 1995 in the licensing rules. From that date, the applicant was no longer exempt. He said in evidence that he was unaware of this change. It emerged in evidence that the Department of the Marine, at least in their internal
records, treated the applicant as being licensed but only for aquaculture i.e. “specific” . The applicant did not apply for or receive any license. However, insofar as he fished for demersal species after 1 st January 1995, his fishing was unlawful. It is abundantly clear that such illegal action could not form the basis of any legitimate expectation, nor could any act of the Minister permit it to do so.
39. Finally, the applicant claims that the Minister has not, in fact, operated a consistent 100% tonnage replacement policy. A number of exceptions have been identified. I do not find it necessary to review these cases in detail. They amount to a series of individual cases where the Minister considered that an exception could be made or were not subject to the policy. In general terms, they were either boats that had already entered the fleet or been approved for FEOGA grants prior to the adoption of the new replacement tonnage policy in 1991. The applicant did not qualify for any of the exceptions. I think that is enough to dispose of that argument. This case is not concerned to review the Minister’s operation of the licensing regime or the tonnage replacement policy generally. It is concerned with the applicant’s claim that he as the owner of a sea fishing boat had a legitimate expectation to be treated in a particular way. In my view the learned High Court judge was correct in deciding that he had not established that case.
The Law Relating to Promissory Estoppel
40. The applicant relied at the hearing of the appeal also on the doctrine of promissory estoppel, though without citing any of the relevant authorities other than the well-known passage
from the judgment of Finlay C.J. ( Webb) treating legitimate expectation as an “aspect of the well-recognised equitable concept of promissory estoppel (which has been frequently been applied by our courts) whereby a promise or representation as to intention may in certain circumstances be held binding on the representor or promisor.” (page 384)
41. Mr Gerard Hogan, Senior Counsel contended that this was either an exceptionally generous application of promissory estoppel or a new doctrine of promissory estoppel. In either event he contended that he did not have to point to any act of reliance on the promise which formed the basis of his case. It is not unfair tocharacterise that as a daring submission, striking, as it does, at the root of the concept of equitable estoppel. The passage cited was clearly not intended to convey that the doctrine of legitimate expectation is coextensive with promissory estoppel. It clearly is not. The learned Chief Justice, in the passage in question cited, as authority, a judgment ofDenning M.R. which proceeded precisely from the fact that the parties had “conducted the dealings between them..” on foot of an underlying assumption. It is the fact that it would be unconscionable for one party to be permitted to depart from a position, statement or representation, upon which the other party has acted to his detriment, that justifies the courts in intervening to restrain him from doing so. If the recipient of a promise or representation, is to be dispensed from any obligation to demonstrate reliance, the doctrine would be more than exceptionally generous. It would be a virtually ungovernable new force affecting potentially not only equity but the laws of contract and property and, as here, the exercise of administrative powers.
42. This Court explained the doctrine of promissory estoppel very clearly in Doran v Thompson [1978] I.R. 222, where Griffin J said (at page 230):
“ Where one party has, by his words or conduct, made to the other a clear and unambiguous promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, and the other party has acted on it by altering his position to his detriment, it is well settled that the one who gave the promise or assurance cannot afterwards be allowed to revert to their previous legal relations as if no such promise or assurance had been made by him, and that he may be restrained in equity from acting inconsistently with such promise or assurance.”
43. Kenny J, at page 233, cited as being correct the statement of the law on promissory estoppel at page 563 of the 27th edition (1973) of Snell’s Principles of Equity which reads:—
“Where by his words or conduct one party to a transaction makes to the other an unambiguous promise or assurance which is intended to affect the legal relations between them (whether contractual or otherwise) and the other party acts upon it, altering his position to his detriment , the party making the promise or assurance will not be permitted to act inconsistently with it. ” (emphasis added in each case).
44. Turning to the facts of the present case, I think the letter of 1 st October 1993 is well capable of qualifying as the type of unambiguous promise or assurance contemplated by the doctrine of promissory estoppel. It told the applicant simply and directly that his vessel would be acceptable for replacement purposes. The applicant does not, however, satisfy the second requirement. The facts to which I have referred in rejecting his claim based on legitimate expectations apply with greater force in the present context.
45. The applicant frankly accepted at all stages that he had not acted on foot of this letter. He did not change his position in any material way. It was not inequitable, therefore, for the Minister to withdraw the offer contained in that letter to treat the applicant as being part of the demersal sector and entitled to use his tonnage for replacement.
46. I would accordingly dismiss the appeal.
The Leopardstown Club Ltd -v- Templeville Developments Ltd & anor
[2013] IEHC 526 (02 September 2013)
Judgment of Mr. Justice Charleton delivered on the 2nd of September, 2013.
Leopardstown racecourse was founded in 1888, at a time when it was in the countryside near Dublin. Now, it is surrounded by the city, becoming the only urban racecourse in Ireland. It is used for National Hunt racing and flat racing. There are 23 race meetings on the track every year. The most significant of these are the Hennessy Gold Cup meeting and the Christmas racing festival. For the purposes of this litigation, the racecourse is owned and controlled by the plaintiff company (hereinafter “Leopardstown”), though some portions of the land, particularly on the Carrickmines side, are owned directly by Horse Racing Ireland. The campus in which the racecourse is situated also contains a golf course, situated in the middle of the track, a nightclub towards the back of the main stand, a golf shop and a fitness club. This club is central to this litigation. The fitness club is on property leased by the first named defendant company Templeville Developments Limited (hereinafter “Templeville”) from Leopardstown. The second named defendant Philip Smyth is the guarantor on the lease and on the agreement which is most central to this judgment. Templeville, despite being a limited liability company and having four directors, is totally controlled by Philip Smyth.
Leopardstown and Templeville are physically the closest of neighbours. The fitness club is branded as Westwood. There are other Westwood clubs in Dublin city. Unlike this situation, those others are situated on their own land. This club features gymnasium, tennis, swimming and other facilities to a very high standard. There is also a facility called Fit Zone and a children’s party area. These are all located proximate to the racecourse grandstand. For whatever reason, the parties as neighbours do not get along. As with many such disputes, where people continue to live or do business side by side without severing the relationship by one party moving elsewhere, the dispute has continued over decades: in this instance for 14 years. I do not regard it as essential to rehearse every detail of the bitter disputes between the parties that have marked this time. Litigation in abundance has resulted.
Many sets of proceedings were ongoing in the Autumn 2011, when the parties decided that an attempt to put matters behind them would be a good idea. Hence, mediation was arranged. It was apparently successful. Having ostensibly settled their differences under a mediation painstakingly conducted by Paul Gallagher SC in October 2011, and having set out their mutual rights and obligations in a mediation settlement agreement dated the 26th of that month, the defendants Templeville and Philip Smyth no longer regard themselves as bound by the terms of that contract. In that regard, however, Templeville has had no independent say.
These defendants claim that the mediation settlement agreement has been brought to an end by the conduct of Leopardstown. They assert a breach of agreement so serious as to be a fundamental breach that terminated the rights and obligations of Templeville and Philip Smyth as innocent parties, returning them to a state that no such agreement existed. The defendants also claim that by virtue of misrepresentation, and or because of a mistake central to the mediation process as to the site of a major electricity cable, which was allegedly set up and exploited by Leopardstown, the mediation settlement agreement was void from its inception. The defendants further assert that if the mediation settlement agreement is valid and has not been terminated by the fundamental breach of Leopardstown, they have been grievously wronged under the terms thereof and are counterclaiming for damages. They also seek declarations that rights of way to their premises over and through the racecourse have been breached and claim appropriate declarations through this process. A claim is also made by Templeville and Philip Smyth to ownership through adverse possession of certain land on which three shipping containers are sited. Leopardstown asserts that rent and service charge due under the mediation settlement agreement has not been paid. Leopardstown seeks the termination of the lease under which the defendants hold their premises on the racecourse and argue that the conduct of the defendants has been so wrong that they are unworthy of equitable relief against forfeiture.
Background
About 40 years ago, Squash Ireland apparently leased premises from Leopardstown and organised a facility close to the grandstand. In 1993, Templeville leased that facility and some other land. There was another lease entered into in 1998. At that time, Leopardstown paid money towards the upgrading of the premises, including the installation of a swimming pool. As this is not central to the proceedings, detail is kept to a minimum. In consequence of whatever improvements were effected, the rent increased. It may be that prior to that time Philip Smyth had been involved in organising entertainments of various kinds on the premises of the racecourse. Whatever involvement he had, I am satisfied it was minor. It certainly does not give rise to prescriptive or any other legal rights. A separate agreement regulating access to the club facilities during race days, called a race day licence, was made by Templeville and Leopardstown in the same year as the 1998 lease. It was then anticipated that part of Leopardstown’s lands would be compulsorily acquired by Dún Laoghaire-Rathdown County Council for the new M50 motorway. A very large inflatable dome containing seven tennis courts had been erected by Templeville, called Dome 1, and later a similar facility was erected called Dome 2. These are proximate to each other. The domes are held up by pressurised air, a bit like a balloon. Because the structures can blow away in high winds, these domes need heavy concrete foundations; possibly 450mm wide and over 1m deep, but Philip Smyth told the Court that the holding mass of the foundations was the important point. It was apparently agreed under a supplemental licence that should Templeville’s holdings under the lease be affected by the new motorway, Leopardstown would provide a suitable site for the relocation of some facilities. A dispute arose as to Templeville’s entitlement under the licence and ultimately the matter was referred to arbitration. On the 30th January, 2008 the arbitrator, Paul Gardiner SC, concluded that Templeville was entitled to a demise of a ‘new site’ of 5.5 acres, apparently in consequence of the motorway. Leopardstown never intended that this would be the effect of the licence. From the wording, however, the arbitrator felt constrained to so hold. This gave rise to the possibility that some land in the centre of the racecourse might have to be passed to the occupation of Templeville. The evidence at this trial of Brian Kavanagh, chief executive officer of Horse Racing Ireland, indicated that this would have been potentially disastrous for racing. Leopardstown therefore commenced High Court proceedings seeking rectification of the relevant ostensible agreement. On the 29th January, 2010 Edwards J. found in favour of Leopardstown. This decision prompted an appeal by Templeville to the Supreme Court. In terms of litigation, that was far from all that was in dispute at that time. In addition, there were other proceedings between the parties. Briefly, Leopardstown was claiming substantial arrears of rent against Templeville; other proceedings embroiled the local county council in addition to those parties; there was a dispute as to the running of the Hennessy Gold Cup; the service charge was apparently in arrears; there was also a rent review issue in the offing, apparently also relevant to arrears; there was a dispute about signs to advertise the facilities of Templeville; and proceedings were threatened as to how to resolve water charges to the local authority since both Templeville and Leopardstown got their water through one common source. High Court proceedings as to arrears of rent and service charge had been managed through the commercial court process and had been listed for trial for the 14th November, 2011. This then imminent case involved a claim by Leopardstown for arrears of rent of €3.2 million and non-payment of water, service and other charges in the sum of €2 million. In addition, the hearing in front of Edwards J. had lasted for 22 days and the costs apparently amounted to €800,000. In the arrears of rent and other charges claim by Leopardstown, a defence had been entered and a counterclaim was mounted claiming that by reason of certain alleged wrongs by Leopardstown, Templeville were entitled to recover €5.4 million. Lengthy hearings were anticipated by both sides. In September 2011, while the appeal was pending against the judgment of Edwards J. and the imminent trial of the rent and service charge claim and counterclaim was looming, the parties resolved to appoint Paul Gallagher SC as mediator. Formal sessions took place over seven days commencing on the 27th September, 2011.
The purpose of the mediation process was to settle all the disputes between the parties that were then outstanding. At all stages, Philip Smyth alone controlled the Templeville side of the mediation negotiation while Leopardstown were represented by various officers. In the mediation process the subject of ESB cables running through a proposed site of seven new tennis courts proximate to Dome 2 never arose on either side. This cable has now become central to this litigation. There are two cables, one skirting the site and another traversing the site. At the first session, the mediator had identified the main issues on both sides and position papers and replies were exchanged between October 5th and 7th. A map was produced on the 4th October showing the layout of the site. This was done quickly by Ian Roberts, the engineer engaged by Leopardstown, and showed a jagged edge and a map accompanying it showed a major underground ESB cable skirting the site. No map produced during the mediation process showed another cable which traversed the site. Later I will discuss the issue as to whether Templeville or Leopardstown were aware of this cable. As will be seen, Templeville had applied for planning permission to lay out seven new courts in this exact place and this had been granted by the local authority. During racing days, this site was useful to Leopardstown as a car park as were the four outdoor tennis courts that had been laid out and surfaced beside this unfinished site. The racecourse used these too. Templeville put forward the argument that outdoor tennis was not popular and that they should be permitted to erect a further dome, Dome 3, to protect the new seven tennis courts when they were laid out. In the alternative, the plan was that the site could be used for indoor soccer. In doing so Templeville were prepared to cede back to Leopardstown four outdoor tennis courts to be used on a permanent basis as a car park. It would seem that on the 10th October, Leopardstown conceded that the site should be rounded off to its edges, thus removing the jagged boundary. Leopardstown agreed to give up the right to park on the new site of the seven tennis courts on race days and instead were prepared to take back the four outdoor courts as a car park to the benefit of patrons. There was discussion about the new site and the issue arose as to whether Leopardstown would concede the erection of a structure over the new seven tennis courts. Leopardstown were concerned about landlord and tenant rights possibly arising. After this meeting some heads of terms were generated and a further position paper was exchanged by both sides. Another meeting took place on October 18th. At this meeting it was agreed that Templeville could put on a covering over the site of the seven tennis courts; which Templeville contemplated as taking the shape of a dome. What was probably then conceived by both parties was that either an irregular, as opposed to rectangular, shaped dome or two interlocking rectangular domes could be erected. In the later agreement, this is reflected in the fact that Leopardstown agreed to support any planning application for an appropriate structure by Templeville.
In effect, the mediation process was finished by Friday, the 21st October, 2011. An agreement in principle had been reached. Again, no ESB cable was discussed. Engineering representatives on behalf of both sides met on the following Tuesday, the 25th October at the Westwood café. It appears that they did not walk the site. The mediation settlement agreement was signed that day on behalf of Leopardstown by Denis Brosnan. Between Friday the 21st and the following Wednesday, certain small issues had arisen that were supplemental to the agreements that had been guided to a conclusion by the mediator. These issues concerned signage; service charge; lighting in car parks; and an issue of cars using Leopardstown to bypass heavy traffic during rush hour. These small issues were discussed and made the subject of a solicitors’ note that was appended to the agreement on Wednesday, the 26th October, 2011 and signed by both solicitors. Philip Smyth had signed the agreement on behalf of Templeville earlier and is the personal guarantor of Templeville’s performance of it. The mediation settlement agreement was supplemented by a solicitors’ note and by consent of the parties on the 3rd November, 2011 and was lodged as part of the announcement to the High Court that the monetary claim had been settled.
What perhaps has not been appreciated on the part of the defendants in this case is that whatever the rights and wrongs of any situation over the years of the relationship prior to this settlement, whatever litigation was pending and whatever disputes festered or remained to be resolved between these parties, all of these were entirely removed as justiciable controversies through the agreement thus entered into. An unnavigable barrier has been placed in the way of any controversy that the mediation settlement agreement embraced. That barrier is the terms of the settlement document.
The agreement
The mediation settlement agreement sets out the parties’ obligations and responsibilities in respect of a number of divisive issues. Under Clause 1.1-2.2 it was agreed that a revised higher rate of rent of €499,310 per year from January 2012 as well as a fixed annual service charge of €45,000.00 would be payable by Templeville from the 1st January, 2012. Clause 4.1-4.7 provided that Leopardstown would develop four named car parking areas with tarmacadam, lighting and lining of spaces and non-exclusive parking rights as set out in the 1998 Lease, Licence and Race Day Licence, as to restriction to Templeville’s parking entitlements, were confirmed. There was to be a new site for Templeville; the seven tennis courts site and the area covered by Dome 2. The parties contemplated that the seven tennis courts site would eventually become Dome 3 containing seven new tennis courts or indoor soccer facilities. An area where there were already four outdoor tennis courts was expressly excluded as part of this new site. This was to become a car park and, in return, Leopardstown agreed that it would not seek to exercise parking rights in certain areas. At this stage, the arrears of rent were very substantial. These had been ostensibly set off by the defendants against the many alleged wrongs of Leopardstown which Templeville claimed had caused monetary loss. In relation to arrears, it was agreed under Clause 14.1 that Templeville would pay Leopardstown the sum of €4,090,000.00 in two tranches, the first of which would be €2.5m payable by the 10th November, 2011 followed by a payment of €1.5m on the 10th August, 2012. Agreements were also reached in relation to, as the headings of the agreement state: ‘Race Day Parking & Shuttle Bus’; ‘Water Connection & Water Storage Tanks’; ‘Signage’; and ‘Containers’. Fresh disputes in relation to these issues since the execution of the mediation settlement agreement have since arisen.
Leopardstown contends that the agreement represented a fresh start. It seems that for a short time thereafter business relations between the parties were positive, at least on the surface. Raymond Horan, director and company secretary of Leopardstown, was tasked with overseeing the implementation of the agreement. Day-to-day interactions with Templeville concerning issues on the ground were delegated to Pat Keogh, the newly appointed chief executive officer of Leopardstown, and Nessa Joyce, racing and operations manager. Matthew O’Dwyer was also involved with matters on the ground, particularly lighting and car parking. The evidence on behalf of Leopardstown is that Leopardstown has at all times endeavoured to discharge its obligations under the agreement and remains fully committed to enforcing and abiding by the agreement. Philip Smyth and Templeville assert that almost immediately after the agreement was reached, Leopardstown began breaching the terms of the agreement and that these breaches were so detrimental to their ability to operate their business that they constituted a fundamental breach of the mediation settlement agreement. What was called a notice of termination for fundamental breach was served on Leopardstown by Templeville on the 15th June, 2012. All of these decisions were made by Philip Smyth. Templeville as an independent corporation were never consulted, much less made any decisions, as to any of this.
Correspondence
On the 2nd November 2011, approximately one week after the mediation agreement was reached, Philip Smyth wrote to the newly appointed chief executive of Leopardstown, Pat Keogh and enclosed a cheque for €2.5 million in respect of the first payment agreed under the mediation settlement agreement. Philip Smyth raised the issue of signage at the front gates of the racecourse and expressed his wish that this matter be dealt with as a matter of urgency. In his evidence Pat Keogh said that on the 4th November, 2011 he had a very cordial meeting with Philip Smyth during which he told him that he hoped any issues which arose could be dealt with between the parties without resorting to writing letters. On the 9th November, 2011 Philip Smyth again wrote to Pat Keogh thanking him for his courtesy at that meeting and expressing his optimism for the future. He set out in detail a number of issues relating to Leopardstown’s conduct which were of concern to him and which, as he put it, “lets everyone down”. It appears that it was around this time that relations between the parties began to rapidly deteriorate. By this stage, Philip Smyth had gone to New York for the opera season at the Metropolitan and had then overwintered in the south of France, returning in early May, 2012. By the time of his return the parties were at loggerheads. I am satisfied, however, that even though Philip Smyth was physically absent that he was directing everything that Templeville contributed to the dispute.
In his letter of the 9th November, 2011, Philip Smyth mentioned that the ladies who sell chocolate and fruit on race days had left rubbish near Dome 2. Barriers used to marshal horses through car park 1 and near Dome 2 had not been fully cleared, he asserted. He complained that during the recent heavy rain “a large amount of water came down from the grandstand’s roofs and torpedoed on to the roof of” his facility. He complained that cars parking in front of the grandstand on non-race days had stickers put on them when they parked on double yellow lines. He complained that during a recent race day or days, very few racing enthused people had attended and that the car parks that he was normally entitled to use on non-race days had been underused. Photographs of some horse droppings were enclosed. No abundant amount of manure is involved.
What is extraordinary about this letter is that Philip Smyth had felt the need to write it at all. I am satisfied that it was made perfectly clear by Pat Keogh that if the parties were to resort to writing letters to each other then the spirit of the mediation settlement agreement would be undermined. He was right. Whereas Leopardstown drafted a reply, it was not sent for that express reason. Instead they attempted to reopen ordinary channels of friendly communication. I am satisfied that this effort was calculatedly rebuffed by Philip Smyth and, through his express direction and control, by Templeville.
Very quickly, also, the solicitors on both sides became embroiled as fresh disputes bubbled to the surface. In order to resolve these, it will be necessary to approach each issue on the basis of the degree of importance which a reasonable person would attach to whatever fault attaches to the party responsible. In terms of the correspondence, on the 7th February, 2012 the solicitors for Leopardstown wrote to the solicitors for Templeville complaining that some €156,827 in water rates remained unpaid. A without prejudice meeting was suggested. That meeting did not happen. I am satisfied that it did not happen because Philip Smyth had instructed Templeville not to engage. The 30th March, 2012, dawned with a letter from Leopardstown’s solicitors to Templeville’s solicitors complaining about an apparent attempt to drill a well on the racecourse with the erection of high fences. Also mentioned were the adhesion of advertising material to the sign of the Leopardstown Road entrance by Templeville; the spillage of sewage near the racecourse; a break in and changing of locks at the water meter service press inside the grandstand; and the lack of progress in the attempts by the engineers for Leopardstown to contact the engineers for Templeville with a view to progress in works under the mediation settlement agreement like the car park and the new site. The answer from Templeville’s solicitors of the 3rd April, 2012 contained a bizarre lie, clearly properly based on instructions, in claiming that no well drilling attempt had taken place. On the 19th April, 2012 the Leopardstown solicitors complained about a very serious matter: rent for January and February had been paid by Templeville but at the lower rate that had ceased to apply under the mediation settlement agreement from the beginning of that year; furthermore, no payment in respect of service charge had been made. On the 27th April, 2012, the solicitors for Leopardstown suggested scheduling the works that were necessary to implement what was needed under the agreement. That letter was ignored. The evidence establishes clearly that this was because of the strategy on Templeville’s part of ignoring any communication from Leopardstown in favour of constructing a case that they had been badly wronged. The origin of this strategy was Philip Smyth. On the 2nd May, the solicitor for Philip Smyth wrote to the engineer for Templeville in the following terms:
I gave a Philip [Smyth] a very detailed letter of advice last Thursday, 26 April, as well as a draft letter which I prepared for sending to Kilroys [solicitors]. I suggested he would read these matters carefully and would meet with me early this week, to discuss and agree a strategy going forward. I have heard nothing so far. He seems intent on adopting the position that Leopardstown have now breached the settlement agreement, by interfering with car parking on race days and non-race days. (In fairness, there have been a number of incidents where car parking has been interfered with). So far, my instructions are not to engage, and this seems to be your instructions. I don’t think there is much more we can do for the time being – but I do hope this changes. At least, if we could engage, we could make some progress. If there is a change of instructions, I shall let you know.
Philip Smyth should have followed this advice. As an independent corporation, Templeville should have had a chance to change this incorrect strategy. He did not and so Templeville could not either. On the 8th May 2012, a reminder was sent that €126,287 was now owed to Leopardstown. The next day, a letter was sent about the erection of speed ramps that had not been authorised by Leopardstown. On the 23rd May, 2012, the solicitors for Leopardstown sought the attention of the newly appointed solicitors for Templeville, who did act in this litigation, as to the marking out of the site on which Dome 3 was to be situated. This was followed up by a further letter of the 31st May, 2012. Both of these letters were ignored because of the strategy of Templeville that an artificial case against Leopardstown was to be constructed. That day, the solicitors for Templeville wrote a letter in which they complained about the employees of Leopardstown having run a “campaign of disruption of, and antagonism towards, our client’s commercial interests”. The letter complains of numerous supposedly serious breaches of the mediation settlement agreement including: rubbish; insisting on shutting car parks to Templeville patrons on race days; security barriers not being cleared away after race days; blocking off some areas of one car park during the farmers’ market which normally happens on a Friday; cutting off a lawful interchange; stopping exploratory works for putting in water tanks; blocking a car park on the 16th March, 2012; closing of access to Templeville patrons early on the 28th March, 2012, a race day; leaving barriers on the 30th March, 2012; shutting off a car park at 7am on the 13th April, 2012; cutting off access to Templeville patrons to the car parks near their facilities early on the 15th April, 2012, a race day; leaving some rubbish behind afterwards together with barriers and bollards; Leopardstown proposing drawing a smaller site for the new area to be demised to Templeville on the 27th April, 2012; blocking a fire exit on the 3rd May, 2012; and removing a speed ramp on the 9th May, 2012. The letter demands the return of the €2.5 million paid under the mediation settlement agreement.
It is pointless to go through the rebuttal of this letter and the further fulsome correspondence which gushed out of the again-active dispute as the Court has had evidence of all the substantial matters which need to be addressed in this judgment. In addressing what I consider to be of importance, I have not forgotten or failed to have regard to any complaint. Thirteen extra long days of court time have been filled with these complaints and any answer there may be to them. It suffices to say, that only substantial complaints will be addressed; and these as to the essence thereof. It also suffices to note that the correspondence continued. On the 8th June, 2012 the solicitors for Templeville, not the solicitors in this litigation, who at all times acted professionally, claimed that Leopardstown was in fundamental breach of the mediation settlement agreement. This letter describes replying correspondence from Leopardstown as being a “crude, reactionary response”. A further letter from these solicitors, dated the 13th June, 2012 reiterates old wrongs and makes new complaints. It ends in this way:
Your client continues to exhibit extreme bad faith in its dealings with our client. We await your reply to, and explanation for, the matters raised in our letter of 31 May and in this letter. We know that your client has instructed you that it is not reasonable to conclude that it is in fundamental breach of the mediation settlement agreement. It is clear, however, that your client is in fundamental breach of the mediation settlement agreement. We now await our client’s instructions on electing to terminate the mediation settlement agreement for that fundamental breach.
That letter was replied to in detail on the 13th June, 2012. Then on the 15th June, 2012 the following declaration was included in a letter from Templeville’s solicitors:
The mediation settlement agreement was founded and constructed upon an understanding of good faith between the parties and your client has exhibited the utmost mala fides in its repeated, continuing and aggravated breaches of that agreement. We will reply in detail to your letter of 13 June, which contains distortions and inaccuracies which we have been instructed to address, and to the reply you have now indicated you will give to our letter of 13 June.
In the meantime our client is cognisant of its obligation to act promptly and decisively in this matter. TAKE NOTICE, therefore, that our client elects to terminate the mediation settlement agreement of the 26 October 2011 with immediate effect because of your client’s fundamental breach of it. We shall be writing to you separately seeking remedy that breach.
In this brief chronology, an earlier date is of fundamental importance. Philip Smyth instructed the financial controller for Templeville to pay rent at the old rate with no service charge attached and in consequence Leopardstown received an underpayment that does not accord with the mediation settlement agreement on the 15th March, 2012. While that date is relevant, 19th April is when Leopardstown’s solicitors raised the matter. Philip Smyth claimed an entitlement to so act in his evidence before this Court because of what he said were the serious breaches by Leopardstown of the mediation settlement agreement. In consequence of that, it must logically follow, Philip Smyth asserts that the mediation settlement agreement was effectively at an end as to the defendants obligations under it by that date. Thus, while the termination letter of the 15th June, 2012 formally purported to put an end to the mediation settlement agreement, the underpayment in deliberate breach of that agreement of the 15th March, 2012 if it is to be justified, must be underpinned by so grave a breach of the agreement by Leopardstown as to justify Philip Smyth contriving that Templeville would not abide by its terms.
Approach of the Court
The substantial matters in complaint between the parties will now be considered. As in any case, the court retains an entitlement to decide what is necessary for decision and what is trivial, insubstantial or insignificant in the context of the business relationship between the parties. The Court reminds itself in considering these issues and cross-issues that sometimes when people complain about other people they are, in fact, talking about themselves. In that context, having made finding of fact, the Court will go on to consider any legal ruling that may be necessary.
The map
An issue has arisen, which has taken up much time, as to whether Leopardstown during the mediation process were guilty of misrepresentation by attempting to chop off, with the aid of a map, a portion of the site to be given for the seven tennis courts by planting shrubs over some of the approximate area of the ESB cable traversing the site and by cutting off one end of the site with trees. I have carefully listened to the evidence of Philip Smyth in that regard. The map of which he speaks, he claims, has disappeared. I do not accept that. An approximately similar map was produced. There was some discussion about trees and I am satisfied that it occurred on the last Friday of the mediation and that Philip Smyth had another engagement. I do not accept that this was a fraught discussion where there was any attempt by Leopardstown to deceive. In the pleadings of the defendants, the solicitors’ note which is appended to the mediation settlement agreement is alleged to have arisen out of this deception at the insistence of Philip Smyth. Whereas two distinguished solicitors gave honest but contradictory evidence, both were agreed that the necessity for an appended solicitors note arose from additional matters that had come into focus in the ordinary way that extra issues may be thought of and which needed attention after the mediation settlement agreement had been signed by one party. Insofar as I have to distinguish between the evidence of two genuine witnesses who are doing their best in accordance with their duty as officers of the court, the preponderance of the circumstances points towards a non-confrontational meeting on the Friday. There is no suggestion in the evidence of deviousness on the part of Leopardstown. I do not regard this issue as being in any way influential on my decision.
The well and the water tanks
A racecourse can use a gigantic amount of water. The course must be sprayed extensively during warm weather to ensure a suitable surface for horses. As a commercial enterprise, Leopardstown must pay the local authority for such water as they take from the municipal system. This amounts to tens of thousands of euros per annum. Since Templeville runs a swimming pool and has extensive showering and washing facilities for those exercising on its premises, it also uses water. Commercial enterprises must pay local authorities for water. It was perhaps not conducive to harmony between the parties that water came into the campus from a single source and was metered at a single location underneath the racecourse grandstand and that in this cupboard the distribution of water to Templeville, and hence their share of the cost, was also recorded. The mediation settlement agreement deals with water connection and water storage tanks at clause 10. The first subclause deals with Leopardstown agreeing to permit a separate supply of water to the premises of Templeville, subject to certain conditions. Clause 10.2 deals with water tanks and provides:
Leopardstown agrees to permit the construction and installation of two underground water tanks, one for mains water and one for rainwater or recycled water, by Templeville on Leopardstown’s land in front of Templeville’s premises in the location identified and marked out on the map identified and provided by Templeville and attached to this agreement. Ref: appendix A. Leopardstown will allow their use for water storage and access, maintenance and repair as an easement.
This was subject to conditions making the installation at the expense of Templeville; full details of the tanks to be supplied to Leopardstown; the capacity of each tank not to exceed 5500 litres; details as to installation and maintenance to be approved by Leopardstown; access not to be allowed on or before race days; and the land to remain the property of Leopardstown. The location in question is just to the right of the grandstand and almost directly in front of the café premises of Templeville. The area is right beside the race track. It is also proximate to the loading areas at the front of the grandstand. It follows that were a spring to erupt in this area it could spoil the track for racing.
From France in February 2012, an instruction was received from Philip Smyth by Templeville that instead of proceeding with putting in water tanks, a well was to be drilled instead. In his evidence, he justified this instruction on the basis that if a well was successfully drilled that he would go and present the good news to Leopardstown: abundant free water, as he put it, would be to the benefit of everyone. It is also clear that he insisted that his intentions would be concealed by the ostensible purpose of installing water tanks. Apart from his own evidence, this state of affairs is evidenced in an e-mail from Brenda Flood of Templeville to George Farrell which states: “I spoke with Philip [Smyth] he said just go ahead and organise the drill for the well. No need for me [to inform] the racecourse”. As with other matters, the unfortunate recipient of this instruction was Brenda Flood. She is the managing director of Templeville and together with Karen Polley and Philip Smyth, one of the three directors of Templeville who gave evidence. Brenda Flood is universally respected on all sides of this dispute and for good reason. She is a highly intelligent and reliably efficient manager who would clearly be an asset to any organisation that employed her. She was put in an impossible position on this issue and on other issues by Philip Smyth. On the 4th March, 2012 “a builder’s skip for cleaning up after the drilling” was arranged within Templeville. On the 5th March, 2012, Matthew O’Dwyer, the general manager of Leopardstown, received notification that exploratory works for the installation of the two tanks were to be conducted at the appropriate location on the following Wednesday. He rang the Westwood club and left a message seeking details from the appropriate person. His telephone calls were not returned. This was under instruction from Philip Smyth. Matthew O’Dwyer then emailed the club forbidding works until consultation had taken place under the mediation settlement agreement. His approach was far from unreasonable as evidenced in his e-mail to Templeville of that date:
Further to your e-mail … regarding the matter of your proposed exploratory works next Wednesday, I took the liberty to call you to discuss the same. However following two phone calls with a message to return same I have not heard from you. In this event I must inform you that Ian Roberts (representing Leopardstown …) in his capacity as an engineer is meeting with Toal Ó Muiré (representing [Templeville] next Thursday as March 2012 to discuss the relevant matter of the proposed works in composting carparks construction and water works respectively as arranged by both parties. Therefore I must ask you to desist from carrying out any exploratory works until you receive instructions from Toal Ó Muiré following the said meeting. Also I would be obliged if you would forward details of your proposed works so that I can forward them to Ian Roberts whereby they can be discussed at a meeting next Thursday. I would be obliged if you would call me to discuss the above matter.
At the express instruction of Philip Smyth, this communication was ignored by Templeville. At 08:00 hours on the 14th March, Matthew O’Dwyer was notified that two trucks had arrived to the front of the grandstand close to the area immediately in front of the Westwood restaurant that overlooks the racetrack. He went out and looked at the trucks. In addition the car park had been blocked off by Templeville the previous night in breach of every agreement between the parties. High fencing had been erected. The trucks were enormous. They were clearly drilling trucks and had no equipment for moving earth for the purpose of inserting tanks. The men in the trucks said that they were going to drill a well. While this is hearsay, photographs of the two trucks were produced in evidence. This makes the purpose obvious. Further, some time earlier a dowser with a divining rod had been seen near that location. It is obvious that the equipment brought onto Leopardstown was for the purpose of drilling down to find a supply of well water. It is further obvious that the equipment has nothing to do with installing two relatively small tanks to store mains water and rainwater. This was a serious breach of the mediation settlement agreement.
Had water been found and not controlled, the proximity to the racecourse of the proposed well could have ruined the surface of the gallops. Damian Kirby, maintenance caretaker, had met the men and they also proposed to construct a kind of French drain to take the silt from drilling. Leopardstown had not agreed to the drilling of any well. If Templeville had wanted it, they could have asked for it. Instead the approach was to enter into an agreement which, certainly as to this provision, meant nothing in terms of obligation. At this trial, instead of admitting that the defendants were about drilling a well, Leopardstown was left to prove this matter by evidence and the production of photographs of the equipment and the high fencing installed proximate to the gallops. Philip Smyth in evidence eventually admitted that well drilling was his purpose.
If neighbours behave in an underhand manner they cannot reasonably expect to be treated with anything other than distrust. What is worrying about this episode is that Philip Smyth instructed what he regards as his staff, but who in reality are employed by Templeville, to engage in evasion and obstruction. It is clear that while a well may have been a good idea, the appropriate approach would have been to honestly discuss the plans with Leopardstown and to avoid the kind of machinations that experience shows raises the emotional temperature of even the most sanguine of individuals.
The water meter cabinet
On Monday, the 19th March, Damian Kirby went to open the alarm cabinet underneath the grandstand which contains the water meter. The key did not turn the lock because the cabinet had been broken into and the lock had been changed. The usage of water was, as earlier indicated, of substantial concern to Philip Smyth. I am satisfied that Damian Kirby had spoken to Philip Smyth in July 2011 and told him that he could have access to this cabinet at any time. I cannot believe that the reason that this cabinet was broken into was because Leopardstown had changed the locks. If this had happened, it is clear that there was ample opportunity for Templeville to seek the new key.
The rubbish and horse droppings issue
For generations, Dublin women from particular families have been setting up stalls in Leopardstown from which they sell fruit, chocolates, drinks and sweets. These women have their origin in Moore Street as traders over generations. The women constitute an important tradition linking the people of the less affluent inner-city areas with those who have an interest in racing; sometimes referred to as the sport of kings. Any interaction with these women, experience has universally shown, will be pleasant and any purchase will be good value. Their service adds to the colour and variety of any outing to a race meeting. Naturally, some litter may be left behind but this is probably more due to the patrons then to the stallholders. It is churlish to complain that some litter may be left behind, as it probably has been, on the days following a race meeting. Leopardstown, naturally, have no wish to interfere with this tradition. Instead, when the occasion arises, a polite word has been offered as to the need for special vigilance in controlling any rubbish. This complaint is made in the context of Templeville having a huge rubbish skip proximate to their premises. On occasion, this is not closed over and rubbish will blow out. While Philip Smyth did not seek in evidence to criticise the traders, the reality is that in correspondence this matter is mentioned more than once. I do not regard it as being of any importance at all. Leopardstown’s approach has been unimpeachable.
A racecourse will of course have horses on it and horses will drop the waste from their digestive systems randomly as they walk around. The parade ring at Leopardstown is to the back of the grandstand. Racing personnel and punters congregate around this area in order to get a good view of the horses on which they are spending or are about to spend good money. The idea, apparently, is to see what kind of condition the horses about to race are in and whether they are worth a bet. Some gossip, no doubt, is exchanged together with tips as to form, of varying reliability, part of the currency of this gathering. To get to the parade ring, the horses must leave their stable area in the centre of the racecourse, proceed through the race track, exit the track by the side of Templeville’s main premises and proceed through the car park which, for this purpose, has lines of fencing erected in the shape of movable barriers. These are essential so that if a horse panics it will not hurt members of the public. With five or six races on a card, there can be a considerable amount of droppings.
Some of the correspondence in relation to this issue has already been referenced. I am satisfied that Leopardstown make substantial efforts to clear all horse droppings as and when they occur and at the end of race meetings. On less than a handful of occasions, however, some residues of horse droppings have been left in the car park. Complaints were made about this in 14th January, 2007, two occasions in July, 2008 and in 2012 on the 4th February, the 8th June, the 13th October and the 4th November. From the photographs produced in court, on occasion the application of a hose as well as a shovel could well benefit the cleanliness of the area. As parents and children may be accessing the Westwood club belonging to Templeville, it is unfortunate when it happens that dung is walked into the otherwise scrupulously clean premises.
This is all a matter of give and take. As between neighbours who tolerate each other is a matter easily solved. In the context of Templeville’s attitude to Leopardstown, the very small number of issues concerning horse dung has been seized upon as a major offence and a deliberate insult. This it is not.
Three containers and the blocking car
To the rear of Dome 1, Templeville have deposited three large shipping containers. No evidence was adduced as to what was in these. Clause 12.1 of the mediation settlement agreement provides:
Templeville agrees no later than by 30 June 2012 to remove the three containers together with the barbed wire currently located between Dome No 1 and Dome No 2 and will generally tidy up this area to include the portacabin (which may remain in situ) to improve the visual aspect of this entrance.
No effort has been made to remove these substantial containers. During the course of his evidence, Philip Smyth explained why. He claimed adverse possession of the land on which these containers are situated and therefore asserted that he had no obligation to remove them but that if he did he would be entitled to, and intended to, replace them by a building. This startling piece of evidence came as a shock to the Court and, one may suspect, to everyone in the courtroom as well. His justification was that the containers were always there with the consent of Leopardstown. Once he vacated the three containers he would, he said, need the area to erect changing rooms for school children, as 60 or 70 kids might be coming into the club in order to play soccer. Yes, he intended under the mediation settlement agreement to move the containers but the land, he nonetheless asserted, was his!
Later in this judgment the court will deal, in so far as is necessary, with prescriptive rights. Characteristic of these is that no claim to any form of adverse possession can arise where occupation has occurred through force, concealment or permission. The claim made by Philip Smyth is that because Leopardstown gave him permission to site these containers where they now are, that adverse possession of the land thereby arises. This claim is self-contradictory. Nor was any evidence produced as to how long the containers were there. What is worrying about this claim is that it demonstrates that the person who made it as capable of making unsubstantiated demands on the property of another party without any justification. The claim had every appearance of arising simply out of whim while Philip Smyth was in the witness box. There may well be emotional impulses related to the past relationship in this, but with the intervention of the mediation settlement agreement, any past rights or wrongs can no longer form part of this litigation.
The area of the four tennis courts that are outdoors and at the rear of Dome 1, beside Dome 2, is under the mediation settlement agreement to be ceded by Templeville to Leopardstown for car parking purposes. David Harris, the general manager of the Westwood club, gave evidence that he was asked to park a car at the gateway which would give access to this area. Regrettably, his evidence is not reliable. The car has been there since the 14th June, 2012. In addition, despite the fact that under the agreement the tennis courts were to be repainted as car parking, the gateway was shut and locked and additionally secured. When access was asked for at an early stage, reference was made by Templeville to advance tennis bookings. The true reason for this excuse emerged in the evidence of David Harris. The origin of this instruction was Philip Smyth. The Court was asked to believe in the evidence of Alan Leach that the car had been parked there temporarily but “had died.” The Court has heard of mechanics and of the Automobile Association and so have these witnesses. They look foolish. The car has now been parked there for over a year. On the 14th June, 2012, David Harris wrote to another Templeville employee:
We’ve taken the locks off the tennis courts and moved Alan’s car. Please put the locks back on and Alan’s car back tonight once the tennis courts are empty. Keys for Alan’s car are in the Ops safe and his car is parked in the lower car park.
This is a breach of the mediation settlement agreement. From the point of view of what is tolerable between neighbouring businesses, there seems to be no realisation on the part of Templeville through the direction of Philip Smyth that agreeing to do something means that you are bound to keep your word. Furthermore, the continual instruction to Templeville staff by Philip Smyth to act in breach of their better instincts has undermined the entire credibility of their testimony. Because they have had to justify their conduct, which in reality was not their conduct at all but the fulfilment of his orders, their position as witnesses has been considerably weakened.
Blocking a fire escape
David Harris told the Court of a number of occasions where the fire exits to the side and rear of the Westwood club have been impeded. The dates which he specified in 2012 were the 21st March, the 29th March, the 24th April, the 25th April, the 3rd May, the 14th May and the 15th June. An allegation was also made that a forklift truck was parked blocking a different exit. I am satisfied that Leopardstown do not own a forklift truck. I have carefully examined his testimony on this issue. On at least one occasion, Leopardstown have impeded a fire exit from Templeville’s premises.
With every complaint from Templeville, the attitude in the background needs to be kept in mind. Matters were generally over-emphasised in evidence; what could have been sorted out through communication was shunned in favour of storing up a flavour of bitterness to present to the court. No insight was present as to the effect that their own conduct would have on even the most stoic of neighbours. On the 25th March, 2012, on the express or implicit instructions of Philip Smyth, Brenda Flood e-mailed all the senior managers in Templeville in the following terms:
I cannot stress this enough. If ANYTHING happens re the Raceboard I want to know. Even if the[y] sneeze. Check around the car parks, Fillies [bar and restaurant], staff car park etc. If the Raceboard have barriers, anything around take a photo and let me know. Important days to remember: 1. Farmers’ Market day; 2 Racedays; 3 Any other events. Even if you think it is insignificant I want to know. Each manager is to let their staff know. Ops have departments tell the staff.
Any obstruction of a fire exit is a serious matter. As regards the tendency of those incidents complained of, what seems to have happened is that straw matting, put down in the car park so that the horses would not injure their hooves, came somewhat close to fire exit doors. From the evidence, it would still be possible to push open the door but any obstruction is undesirable in a panic. Templeville could have dealt with this matter by making an immediate complaint but in most instances the attitude taken was that it was better to have a complaint in order to cause trouble and in order to justify, on the instructions of Philip Smyth, not paying the appropriate rent. Furthermore, from inspecting the premises and from the photographs presented in court, matters could have been improved by Templeville more clearly signing the relevant exits as essential for fire escape.
What I am not satisfied of, on this issue, is that anything was done by Leopardstown in a malicious manner. When it comes to matters of fire, extreme caution is needed. That, however, is a matter for both sides. No reasonable person could countenance an attitude of preferring to take a photograph, rather than dealing with such a serious matter. On the 29th March, for instance, a bale of hay or straw matting was put where it should not have been put. The fault there is Leopardstown’s; the fault in not following that up in immediate action is that of Templeville. The situation is not capable of exact analysis because of the lack of complaints. Damien Kirby, as maintenance caretaker of Leopardstown, believes that he never blocked an exit. He struck me as being an honest witness. Even still, from time to time there seem to have been some problems.
Barriers
On a number of occasions, barriers were not cleared away immediately after a race meeting but were either left in the vicinity of the car park and blocking some parking spaces or were untidily placed to one side rather than being removed into a store. On the 6th March 2012, and possibly the day before, barriers were left behind after a race meeting. This is one of the rare instances where a complaint was made of spaces being blocked for members using the Westwood club. Nessa Joyce of Leopardstown apologised and was clearly embarrassed by what had happened. On a number of Fridays, spaces in the vicinity of Fillies bar and café were blocked off. The owner of that establishment was expecting a good patronage for lunch. He was supported in that regard by Nessa Joyce. She claimed that this was a new policy which had been supported by Templeville, whereas it was not. This she accepted in evidence. This unfortunate approach by her did not help matters. In other respects, she dealt with complaints readily.
On the 9th March, the throughway beside Fillies that can lead to car park 1 beside Dome 1 was blocked. This happened again on the 30th March. Some degree of fault here must be ascribed to Leopardstown since no one from Fillies can be blamed. Again, with ordinary communication, this matter could have been sorted out.
I am not satisfied, as a probability on the evidence, that serious disruption was caused to patrons of Templeville by these incidents. People are used to coming to car parks and having to look around for a space. There is no right in the lease for Templeville to use any particular route as of right. On the express instructions of Philip Smyth, the reaction was to remove and dump barriers. The response of Templeville was utterly out of proportion. It showed a determination by Philip Smyth to escalate the situation from an early stage so that issues that could be seized on as grievances would always remain as a record about which he could later complain. On the instructions of Philip Smyth, which once again badly compromised the staff of Templeville, barriers and beautifully made wooden benches were damaged. A perhaps extreme protest in this context might be to carry the barriers and put them in a place which would cause them to be noticed by Leopardstown and perhaps thereby to learn a lesson. Instead, on the 30th May, barriers belonging to Leopardstown disappeared. This was followed up by 19 barriers and 3 benches being taken by Templeville staff and thrown over a wall down a ravine towards the M 50. The photographs demonstrate that many of these were wrecked. On the 12th May, a further 17 barriers went the same way. This is hooliganism. Little of this was the fault of Templeville staff who, under proper leadership, would have displayed restraint and common sense.
Stickers on cars
On the right-hand side at the front of the grandstand there is a large entrance into what is called the Tote Hall. On Fridays, this spacious area is used by farmers and traders to sell their wares; vegetables, eggs, meat, honey and the like. The double yellow lines in this area make it clear that there should be no parking. Some staff members from Templeville have parked there in the past and this has led to irritation from Leopardstown because the area is an entranceway. Small stickers were put on offending cars where no obstruction of vision would occur. By early 2011, putting stickers on to cars had ceased for some time. Apparently, according to Damian Kirby the maintenance caretaker of the racecourse, he had been putting stickers on cars parked on double yellow lines quite enthusiastically from September through to November 2011. Then, Pat Keogh asked him to cease. The inappropriate parking of cars was, as he described it and as I accept it, very inconvenient. Trucks have to move around in that area and the farmers’ market vendors need to have access temporarily to set up stalls. He set up signs saying that the inlet was for emergency exit purposes. Because the situation became bad again, he started stickering cars from June 2012 but more recently he was asked to stop.
In evidence, Philip Smyth complained that putting stickers on cars was a terrible way to treat young staff. The entire matter has been exaggerated out of all proportion. Some samples of the stickers were produced to the court. These are about 8 cm x 18 cm. They were never plastered across somebody’s windscreen, so they couldn’t see, but were instead placed on the rear of the driver’s window, or rear passenger window if it was a saloon car. Leopardstown staff were entirely within their rights in acting as they did.
Sewage
In March, 2012, on Leopardstown considering how to progress upgrading the area that is now the bus concourse carpark, a foul smell was noticed. This was because the sewage pumps that service some part of the Westwood club had broken down. This had not been noticed. An area of soil was contaminated with human waste. The response of Leopardstown was simply to dig away that area. No fuss was caused. Leopardstown completed the works by putting in the bus concourse car park. That is how neighbours ought to behave.
Wrongful denial of access
On a number of occasions, the variation to the race day licence agreement of 1998 has been deviated from by Leopardstown. Briefly put, whereas early forms of the agreement between the parties required Templeville to shut on race days, it is now the case that members and patrons of the Westwood club are to be treated in the same way as ordinary members of the public on race days. This differentiates them from race officials and owners who park closer to the stand.
A vast amount of evidence has been given on this issue. Most of it seems to have been proffered on the basis that the court should regard the mediation settlement agreement as at an end and should reassign the rights to the parties based upon the view of an independent mediator. That is not the function of the court. The parties are at large as to what agreement they reached and the court is not entitled to interfere with that agreement, absent an appropriate defence.
Clause 9 of the mediation settlement agreement governs race day parking and shuttle bus arrangements for those 23 racing days of the year. Complaints have been made that some race meetings are small and that car parking in the four designated areas, in the event that the four outdoor tennis courts ever get made into a car park, is poorly taken up. This is irrelevant. Sensible evidence was given that in the event that the Leopardstown car park was used that it might have proved more suitable on most of the race days than the arrangements currently in place: but this is not what was asked for, much as provided for, during the mediation process. Evidence has been heard of inconvenience to mothers with children, whereby five minutes was lopped off an agreed concession for those picking up and dropping children on race days, of a lack of complete knowledge by the security personnel and an attempt to allege to the court that these men were rude. A video with regard to the latter was produced which was not only entirely unconvincing but strong evidence that the security personnel were reasonably trained, polite and friendly. During race days, members of the public who are not important racing folk like jockeys and owners and commentators and administrators are not admitted to the car parks near to Templeville’s Westwood premises and near to the grandstand and parade ring. Equal treatment is given to those using the Templeville facilities. Important horse people get to park in a privileged way. The entrances remain open during race days for all comers but members of the public, including those coming to the Westwood club, are required to park, if coming from the Leopardstown road entrance at the Horse Racing Ireland car park, and if coming from Carrickmines, in the Carrickmines car park. This is supposed to start four hours before the first race of the day and end two hours after the last race of the day. This may be irksome to either the public or to those using Templeville’s services but it is what has been agreed. I note quote clause 9 of the mediation settlement agreement:
The provisions of the race day licence concerning the parking arrangements for Templeville and the shuttle bus arrangements are hereby confirmed. Templeville hereby acknowledges and agrees that the parking and shuttle bus arrangements as set out therein that apply to Templeville’s/Westwood’s members on race days will apply for all race days at Leopardstown, including the “smaller meetings”, unless both parties agreed otherwise in writing. The parties acknowledge that the normal courtesies will be given by Westwood members and Leopardstown security personnel to each other on race days. On race days, subject to availability, Leopardstown will permit access up the main avenue from Leopardstown Road to park in Car Park 1 and/or Car Park 2 and/or the Crescent Car Park for up to a maximum number of six members of Westwood management and/or nominated guests or visitors on the basis of a list of named individuals provided to Leopardstown in advance (or from time to time) together with any disabled individual.
The arrangements as to a Leopardstown shuttle bus at the Carrickmines car park and a shuttle bus provided by Westwood at the Horse Racing Ireland car park are adequate and reasonable and in conformity with the mediation settlement agreement and the race day licence. There have been some minor glitches where people going to Westwood have been asked to park in the Pavilion car park but I cannot understand, nor can I believe, that the Templeville bus would not pick them up. Again, this is a matter of give and take and there has been a complete absence of proof of malice or ill will or reckless disregard of agreements by Leopardstown.
There have been occasions when the security personnel were over enthusiastic and stopped people coming from the Leopardstown Road entrance into Templeville’s premises of the Westwood club too early. A small incident of this occurred on the 28th and the 29th January, 2012. In addition, the International Thoroughbred Breeders Association met in Leopardstown on the 24th and the 25th February, and An Taoiseach, tireless in promoting Irish industry, attended. There was no provision for blocking off entrances and this was inconvenient. A complaint was made on the first day and any inconvenience was limited and entirely minimised on the second day. Philip Smyth had been invited to meet An Taoiseach but, as noted, was elsewhere. On another occasion, some energetic ladies from a nearby basketball club came and did a foot race around the racecourse, there were no fences apparently, with a view to raising money. The inconvenience of this is complained of by Templeville and it sounds, and it is, silly. The racecourse is entitled to use its facilities as it wishes. A student race day is complained of on the 28th March and it is said that drunken students attended “descending in buses”. This strikes me as an exaggeration. On that day the four hour rule was broken. On the 15th April, the four hour rule was again broken. On the 14th June, there was another minor breach. None of these breaches were for a serious length of time and none of them were in consequence of a deliberate policy by Leopardstown. None of this would happen when the parties were in communication with each other. The correspondence clearly establishes that this situation is partly lack of attention by Leopardstown but, as to the vast bulk thereof, a result of the entrenched and entirely self -motivated attitude of Templeville as directed by Philip Smyth.
In addition, on a number of occasions, specifically on the 14th May and the 22nd June, 2012, temporary signs indicating that there was no through road were left up along the Carrickmines entrance. In fact the road was functioning. This seems to have happened, but it was minor and there is no evidence of any inconvenience.
Breach of contract: reduction in rent
Many of the problems in the years leading up to the mediation settlement agreement in 2011 stemmed from the fact that when something went apparently wrong, Templeville, acting on the instructions of Philip Smyth, would withhold rent. The new rent was set in the mediation settlement agreement at €499,310 per annum together with an annual service charge of €45,000. The new rent was to be paid together with the service charge from 1 January 2012. The new rent has never been paid. This is because Templeville claim a right of set off due to the supposed wrongs of Leopardstown. As stated above, the operative date here is 15 March 2012 when rent at the old rate was paid on the instructions of Philip Smyth to Leopardstown. Section 3 of the mediation settlement agreement provides that there is to be no set off in the following terms:
Templeville agrees that the lease will be interpreted to provide a Templeville would not be allowed to claim any legal or equitable right of set off of any nature whatsoever against the rent or the service charge due under the lease. Subject to Templeville’s agreement that it will not be entitled to, and it will not claim, any right of set off as aforesaid, the parties agree that they will use their best endeavours to engage constructively and reach agreement in relation to any future disputes that may evolve between the parties, before resorting to proceedings or arbitration.
Construing this agreement in accordance with its plain language, even a serious breach of contract would not entitle Templeville to withhold rent or service charge. Instead, as the second paragraph makes clear, Templeville would have to resort to proceedings or invoke any entitlement to arbitration that they might have in contract. In essence, the clause provides security of rent and service charge to Leopardstown. As with many other aspects of the agreement, this Court has been asked by Philip Smyth to second guess the arrangements reached as a consensus between the parties and has been asked to consider the fairness of the repayment of arrears by Templeville, the car parking arrangements or the re-arrangement in land holding and occupation. The Court is not entitled to embark on such a course. Instead, any court must give this agreement such business efficacy as brings its plain terms into effect as a series of binding obligations in respect of which the parties have reached a consensus.
In evidence, Philip Smyth was asked as to why he gave an instruction in early March that rent should be paid at the 2011, and not the 2012, rate. He gave a number of reasons. None of these amounted, even if correct, to a serious breach of contract. In the context of the agreement which he had entered into there was no entitlement to withhold rent. First of all, it was said that Willie Gibbons had confronted his staff. He is the racecourse manager and therefore is responsible for managing such things as barriers and ensuring proper cleanup after races. As with the staff from Templeville, he is a credit to his employer. Unlike the staff from Templeville, however, he does not labour under the burden of emotional mismanagement. When, on the 12th May, 2012, the barriers and seats were flung into the ravine, he rightly queried this matter by going to Westwood reception and asking for an explanation. He asked to speak to Brenda Flood; but she would not meet with him. He was very unhappy with what had happened. Notwithstanding that, I am satisfied that, within the measure of appreciation that must be allowed to human nature, he behaved properly and formally. His membership of the Westwood club was cancelled out of the blue. Philip Smyth seeks to justify this, as it was at his direction, but in reality this was nothing other than an act of spite. Even had set off been possible, Templeville was in the wrong. Further, no one can see forward in time. Secondly, Philip Smyth complained that the signs at the Leopardstown Road entrance were not properly done. This is wrong. While Leopardstown insisted on using blue, Westwood at their other clubs have paid the designer the compliment of copying her colour. There is nothing to complain about. Thirdly, he said that the well drillers had been put off the site. So they had, and rightly too. Fourthly, he said that priority had not been given to installing lighting in car parks 1 and 2. This was supposed to have been carried out under clause 4.4 of the mediation settlement agreement within six months and no later than nine months, with the possible delay because of planning permission difficulties. Further the public ownership of the space required public tendering. In reality, any delay is substantially explicable by the lack of cooperation by Templeville, as evidenced in the letter of 2 May 2012 quoted above, and in particular the emotion-driven instruction by Philip Smyth not to cooperate in any process involving Leopardstown. As a fifth matter, Philip Smyth complained that Leopardstown were not cutting the hedge and grass between car parks 1 and 2. As he was out of the country, I do not know how this complaint could rationally be made. No complaint is made anywhere about this in correspondence and, even if it were, this is a trivial matter. The sixth complaint concerns horse manure. That has been analysed above. As to the seventh issue, the question of barriers is raised. Actually, in the context of what was done, this complaint would be ironic were it not also groundless. Lastly, Philip Smyth complains that in reality he was dealing with the old chief executive of Leopardstown rather than with the new one. I reject that complaint. There was nothing wrong with the old chief executive and there is nothing wrong with the new one. It is also hard to imagine how someone can complain of having to deal with an individual when they are living about 1000 km away in France away from the dark Irish winter.
There was no basis for withholding rent. A clear breach of the mediation settlement agreement was wilfully engaged as of March 2012, by Templeville on the direction of Philip Smyth.
Car parks
The mediation settlement agreement provides at clause 4 that Leopardstown is to develop or upgrade car parking areas with tarmacadam lighting and lining of car parking spaces in a series of numbered and described car park areas: Dome 2; the existing four outdoor tennis courts with suitable car and pedestrian access and egress to Dome 2; the bus concourse car park; the access road car park. All of these are identified. The car parks are to be developed to a standard similar to the pavilion car park and with adequate lighting in accordance with an outline specification. Leopardstown was to do its best to complete these works within six months or, at the latest, within nine months of the first payment of €2.5 million due under the mediation settlement agreement. Clause 4.3 provides:
Leopardstown (and its Engineers) agrees to consult, in advance, with Templeville (and its architect) and to give Templeville an opportunity to make observations and suggestions on all aspects of the development including the standard thereof, prior to the development of these car parking areas and the New Access route; provided, however, that Leopardstown will have absolute discretion with regard to the development of the said four car parking areas and the New Access route and need not accept or agree to any suggestions made by Templeville.
A number of complaints are made by Templeville. Firstly, it is said that there was delay in commencing the works. As against that, Leopardstown have spent in excess of €700,000 in pursuing what is in effect a joint project. Nor should the deliberate misuse of set off claims be ignored. As well as that, Leopardstown are subject to public procurement rules, a fact which Templeville does not appreciate. This has added 2 to 3 months to the expected time. The factor of most importance, however, is the complete lack of cooperation by Templeville at the direction of Philip Smyth. This unhelpful attitude has been referenced in the correspondence already detailed. In addition to that, it is clear from the evidence during the hearing that specific orders to ensure a lack of cooperation and to store up resentment for use in litigation constituted an impenetrable barrier to any form of rational discussion towards progress. Most disappointing has been an attitude that the professional persons engaged by Templeville were not to meet those engaged by Leopardstown. Secondly, it is said that the works were not completed as to the ground surface to an appropriate standard. Walking the site, I could see no evidence which would substantiate that claim. Having a neighbour is a matter of give and take: it is not a matter of take and take. Matthew O’Dwyer gave evidence that by the time the contractor came on site only two more days were to pass before the letter of the 15th June, 2012 whereby Templeville gave Leopardstown notice of termination of the mediation settlement agreement in respect of what they call the fundamental breach. Notwithstanding this, he instructed the contractor to carry on. Two car parks were upgraded in accordance with the agreement by tarmacadam, using patches where appropriate, and lighting was installed. The complaint is made is that a local lighting contractor was used. During all of this, while going for minimal disruption, Templeville were watching and taking photographs in order, I am satisfied, to later assert a claim disruption in legal proceedings.
The impenetrable nature of the problem faced by Leopardstown, whatever were the rights and wrongs of the situation prior to the mediation settlement agreement, is internally evidenced by emails inspired by Philip Smyth’s direction which were exchanged in August 2012. A member of Templeville staff writes to a senior manager: “The potholes have not been repaired. Will I write to remind them would we prefer that they were left undone?” The answer is given the next day: “No don’t send another letter. Take photos today with date. And say again in another week etc.” Thirdly, the lighting is said to be substandard. As it turns out, the lighting is not quite the right standard. A probability is established, however, that the lighting would have reached the appropriate standard had Templeville allowed a professional person on their behalf to meet with the lighting contractor from Leopardstown. During the course of this hearing, agreed evidence was given as to defects and the commitment made in evidence to rectification would, I am completely satisfied, have been given to Templeville by Leopardstown absent this litigation.
Counterclaim
Coupled with the implicit submission that the court should rewrite the mediation settlement agreement, there has been a counterclaim based on damage to business. If you sign up for a particular arrangement, and Templeville did sign up for this, you cannot claim that your business has been damaged because your customers are put off from coming on 23 days a year to swim, or play tennis, or work out, or chill out, or drink coffee, or whatever. The facilities of Westwood are excellent. Members are privileged to be able to join a club with such pleasant and efficient staff and facilities which are a credit to the Westwood brand. But, the normal ease of access ceases by agreement of the parties on race days. When such an agreement is negotiated, the rate to be paid for a lease of premises takes into account that on approximately 2 days a month patrons will have to walk or get a shuttle bus.
I have had regard to the opposing evidence that attendance is about 71% higher on non-race days, compared to race days. This statistic can be looked at in a different way, in which case it looks more like 30%. I have also taken into account references to international journals and perhaps not so reliable websites. The evidence from both experts, one on each side, was genuinely helpful. It is also irrelevant. The parties bargained for this and that is what they have got. The counterclaim has no basis. A loss is claimed by the defendants of €1.189 million. Members of Westwood sign a form on joining saying that there will be parking restrictions on race days. There is also a plaque on the wall of Westwood indicating this. In addition to any change that may be due to people not attending because there is racing on, there is a lot of competition among these kind of clubs and, regrettably, all but the best patronised leisure facilities have gone the way of so many other businesses have gone since the economic crisis manifest from 2008. The membership of Westwood through Templeville at Leopardstown has kept relatively steady which is a tribute to good management and the attractive nature of the product provided.
Rights of way
Rights of way are claimed by Templeville over the Leopardstown racecourse campus. The only evidence in that regard is given by Philip Smyth. None of this evidence establishes any probability that any right-of-way of any kind was ever granted by Leopardstown to Templeville or that any prescriptive right ever arose. Such a situation would be impossible. The relevant provisions of the lease of 1998 provide for access to the Templeville demised premises in the following terms:
…the Landlord hereby demises unto the Tenant… a right of way for the Tenant and its licensees, invitees, servants and agents with or without passenger or good vehicles, at all times, to pass and repass to and from the public roadway and along such of the roadways, avenues and passages, built or to be built as may be prescribed from time to time by the Landlord, and as are for the time being used by the public attending race meetings, and on other than race days the driveway to the front of the main grandstand.
This is a matter of consent. Consent is completely incompatible with prescriptive rights unless that consent has been given so far in the past as to be rendered irrelevant. That issue does not need to be analysed in this case because that does not arise. Leopardstown continue to occupy the racecourse and have done so at every stage when Templeville has been there. They have directed the appropriate route. There seems to be a misunderstanding by Philip Smyth that just because someone once used, or because there was for a time some habitual use of, a route that a right-of-way becomes thereby established. As a matter of law, that is not so. Assertion of rights based on permission is untenable. The reality is that these routes changed and even were this contention tenable as a matter of law, these changes established the continuing nature of permission as to access. This claim is also vague as to route and is woolly as to where the alleged right over the servient tenement is supposed to begin and end. What is clear is that the essential quality of prescriptive rights must arise by reference to right and not by reference to permission. A user giving rise to prescriptive rights must be without force, without deception and cannot be based on permission from the owner of the land or, as early Norman French puts it nec vi, nec clam, nec precario: Bland, Easements, 2nd edition., (Dublin 2009) at paras. 16.52-16.53. I completely accept the evidence of Tom Burke of Leopardstown as to the permission given to Templeville to have access to their premises along particular routes. His knowledge in that regard, as the retired racecourse manager, is invaluable in establishing a complete absence of any basis for a claim of prescriptive rights. I prefer his evidence to any contradicting evidence.
Mistake and the agreement
Templeville and Philip Smyth complain that the mediation settlement agreement was undermined by misrepresentation by Leopardstown as to a transverse 220 kV oil-surrounded ESB cable that ran through the site of the seven new tennis courts that would be covered by a dome or domes. A brief word about this cable may put this matter in context. There are two cables running through the Leopardstown campus. One of them, which transverses the seven tennis courts site, is apparently there since the 1970s. This is the transverse cable. The second one, which goes along the edge of the car park and Dome 2 skirting the seven tennis courts site, was laid by the ESB in 2000 and commissioned in 2001. This is the skirting cable. Dome 2 was originally planned much closer to the new seven tennis courts site than it now sits. It was moved by Templeville so as to ensure that its foundations missed any cable. This dome now sits as to its foundations as close as just under 3 m to such a cable. These domes need an air pumping system. These sit outside the line of the foundations of the dome and push air inside. One of the air pumping stations in Dome 2 is over a cable. This establishes knowledge by Templeville that this cable existed and that no dome could be built above it or, according to the ESB position, no foundation could be laid within 5 m of it. Philip Smyth gave evidence that he thought that what was happening in 2000/2001 was that the ESB was decommissioning the original transverse cable, which is the inner cable for these purposes, and replacing it as to function with the skirting cable. This evidence is improbable. In addition, apart from all of this, it should be noted that on the site of the seven tennis courts there are three side-by-side ESB manhole covers, clearly marked with a lightning symbol. This establishes to anyone considering taking any interest in this site that there is a major ESB cable under the ground there. It is not possible to move any of these cables save with the expenditure of millions of euros. This site with the manholes so marked has been in the effective occupation of Templeville for many years.
In addition, the site was the subject of a planning application in 2007. At that stage Templeville were planning to construct seven outdoor tennis courts and to this application Leopardstown put in an observation. This was made by Ian McGrandles on behalf of Leopardstown through a firm called Tíros Resources. In the observation, he refers to an earlier planning application that had been made by Leopardstown in 2002 that included this site. This application showed both cables. It is inconceivable that Templeville did not have regard to this application which was lodged together with appropriate drawings on the 12th July, 2002. In it, drawing D 2443-11 C121 PL1 showed an alignment of two almost parallel 220 kV underground cables one of which traversed the application site. In the observation by Leopardstown on the planning application which was lodged on the 21st February, 2007, and directly relevant to the application being made by Templeville, the following was pointed out: “there are two 220 underground kV ESB cables and an associated wayleave at the western edge of the proposed site” and an observation was made that it was not shown on the site plan as required under the relevant Planning and Development Regulations. That is not all. The local planning authority then engaged by seeking additional information from Templeville, stating: “it will be necessary to consult with ESB regarding the potential impact of development on the ESB cables indicated as traversing the site. Please submit written evidence of consultation with ESB on this matter.”
On the 19th July, 2007, Brendan O’Sullivan, on behalf of Templeville, responded to this request including a revised position of the access to the site showing the line of the ESB cable traversing the site marked in yellow and in ESB link box within the application site. Evidence was also submitted of consultation with the ESB by Templeville about the cable traversing the site. Following a meeting with John Daly, who is a manager for high-voltage cables, an e-mail was exchanged between them summarising their discussion as to this transverse cable and making the following points:
• The proposed tennis courts have been generally located not to conflict with the line of the cable. However, there are possible conflicts on the access routes. Some trial holes were carried out, but it was agreed to carry out a further series to confirm both the position and levels of the cable, as the original levels have been changed, and as there would appear to be a discrepancy between ESB record of the cable and your drawing. Declan Mullen will arrange this with you. An outage of this cable is planned in any case over the summer to carry out annual maintenance testing
• The curved pedestrian entrance will be redesigned to avoid a conflict with the cable circus at the steps, if it proves necessary
• The lower vehicular entrance will be moved from the NE corner to the SE side to avoid conflict
• The proposal to install low shrubs over part of the cable route is acceptable to ESB, provided no trees are installed
• The cable was originally installed in this area in non-road construction, so at all traffic crossing locations, the back filling must be replaced to road construction standards. If the cable depth has been compromised, this may require special provisions to spread traffic loading, such as steel plates/concrete slabs
• All planned signage and fencing posts must be designed to avoid the cable route
• ESB Central Site should be re contacted to obtain an up-two-date record of all ESB services in the area.
This matter could not have been forgotten by Templeville as a corporate entity, nor could Philip Smyth as its controlling mind have been unaware of it or have forgotten it. It is far too important for that.
On the 26th May, 2008, a position paper was submitted by Templeville during the course of the arbitration to Paul Gardiner SC. Since this arbitration was about the land which Templeville claimed to be entitled to, the submission by Templeville described the land and at para.13.5 added:
A further significant consideration in respect of this strip of land, which Leopardstown seems to have lost sight of, is the fact that an underground ESB cable runs through same. As part of Templeville’s planning application process, Templeville has been in discussions with the ESB with regard to its proposed development. Templeville proposed plans to construct the graded embankment with no groundcover planting, the new footpath, the 4 m high fence and the pedestrian entrance gates and parts have been approved in principle by the ESB, subject to final approval at the time of the construction of these works. The ESB’s primary concern is to preserve the integrity of this cable. This again is a further complication in relation to this site, and Templeville needs to be granted sufficient land to enable it to carry out the development. Further reference is made to this issue at the top of page 2 of the report prepared by …
Whilst that arbitration process was ongoing in 2008, Philip Smyth swore an affidavit dated 10th June, 2008, in which he referenced an earlier hearing of April 21st, 2008 and enclosed a copy of the transcript in his affidavit by way of an exhibit. In that transcript, counsel for Templeville referred to a problem with an ESB cable and said: “It’s a huge mains cable, apparently, and there are difficulties about building over it or around it.” During the mediation process in 2011, a replying position paper was admitted to the mediator Paul Gallagher SC by Templeville. This refers to the new site as not being level and the difficulties concerning the site are specifically referenced to the position paper of the 26th May, 2008 which is appended to that paper. This document goes on to state that Templeville would like the opportunity to have the map within the mediation process, which only shows the skirting cable and not the transverse cable, reviewed by its own expert and compare it with what is marked out on the ground. The map there referenced, Arup 1004, shows a jagged and not a squared off edge to the site, though this was later conceded by Leopardstown, and the transverse cable is absent.
It is impossible not to be satisfied that Templeville had knowledge of the transverse ESB cable. I am satisfied that Philip Smyth, in claiming no knowledge of the cable is giving evidence that, in these circumstances, a court could not accept.
Unawareness of this transverse cable, of which Templeville clearly had knowledge, is blamed on Ian Roberts, the engineer who drew up the relevant map and who decided as a matter of subconscious prudence not to show any features on the interior of the site. Thus, the maps used in the mediation process, including for instance Arup D4352-20, show the skirting ESB underground cable in an approximate position. Ian Roberts was skilfully cross-examined. I entirely accept all of his evidence. In particular, whether conscious or unconscious, putting nothing on the inside of the sites that was to be devised to Templeville was entirely prudent and completely in accordance with a fair-minded desire to avoid trouble. As he put it in the witness box, if in marking the cable within the site he had been even inches out, the result would have been another court case. This is a prudent observation.
On the 27th March, 2012, Toal Ó Muiré wrote to the solicitor for Templeville in the following terms:
Brenda [Flood] rang me to ask the question (which I could not answer) as to what Ian Roberts meant by mentioning a “well” in the draft agenda he sent me on 12 March. She was curious because that date was two days before Templeville’s testing rig arrived at the racecourse. I said I did not know what Ian meant at the time, and I confirmed to her that I have been instructed by you to deal only with the setting out of boundaries and levels … I also clarified that the Arup drawings I posted to Kieron [Flood] on 20 March are those which I received that afternoon from Ian [Roberts], which I trust are those Kieron is using to check boundaries and levels. Brenda says she will phone Kieron to check this, and will ask him to ring me to let me know what anomalies there may be between that latest set of Arup drawings and the Arup drawing Philip [Smyth] signed as part of the Mediation Settlement last year.
It is disturbing, and it also shows the prescience of Ian Roberts, that Philip Smyth would instruct a highly respected professional person to look for anomalies in an agreement that he had signed months earlier. On the 4th April, 2012, Pat Keogh invited Templeville to a meeting to review the car parking facilities upgrade. Templeville never turned up, and that was done deliberately.
While Philip Smyth was in France, on the 26th March, 2012, acting on an earlier instruction from him, Kieron Flood had walked site with a view to finding differences between the signed map in the mediation agreement and the latest general arrangement of map and he said, among other things: “the underground ESB lines now appear to be running within the site as opposed to along the access road and car parking on the signed map.” Brenda Flood was again placed in an impossible position on the instructions of her employer. It is highly probable that she drew this to his attention during one of the several phone calls that she made reporting general and important affairs to him in France 2 to 3 times a week. Yet, in the correspondence, this is not at all mentioned. Philip Smyth did not claim that it was part of his reasoning for not paying the full rent to Leopardstown on the 15th March, 2012.
In terms of what is probable or improbable the situation as it ostensibly developed rules out any acceptance of his evidence. He claims that on June 14th, 2012, he walked the site and noticed blue lines. This happened only by accident, he says, because there was a race meeting on and he was stopped at the Carrickmines car park, which is a pleasant walk in good weather from Dome 2. He claims to have telephoned, through Brenda Flood, Kieran Flood and to have been surprised that there was a transverse ESB cable which might compromise the number of courts that he could put on that site. Kieran Flood described a recollection of Philip Smyth being apparently surprised. Brenda Flood had little recollection of the event. The next day the letter claiming termination for fundamental breach of contract went out. It, however, has no mention of the cable. If there was a horrible surprise, this was the time to mention it. Not until the 20th July, 2012, was the cable referenced in correspondence among a number of points of difficulty as to the site of the seven tennis courts. In the meantime, a letter of the 20th June, complained of a rainy 14th June, race day with only four cars in the Dome 2 carpark, rubbish, a forklift and security barriers. This, in comparison, would be trivial stuff. I regret that I cannot accept any evidence that the cable was first discovered on the 14th June, 2012. Nor can I accept that Ian Roberts acted dishonestly, or gave untruthful evidence, or that there was any kind of sharp practice by Leopardstown, or that Templeville made a mistake or that any misrepresentation of any kind was made by Leopardstown.
Although it is not essential to this decision, which would have been made in the absence of this principle, the failure by the defendants Templeville and Philip Smyth to call Brendan O’Sullivan makes it reasonable to independently reject this evidence.
Failure to call evidence
Making and inference on the basis of the failure of a litigant to call readily available and highly important evidence should only be engaged in sparingly.
Laffoy J. has analysed this matter in Fyffes PLC v. DCC PLC and Others [2009] 2 IR 417:
The other issue which it is convenient to consider in the context of the burden of proof is much more difficult. It was the plaintiff’s contention that the court should draw certain inferences from the failure of the defendants to call certain witnesses. The plaintiff made this argument in relation to the defendants’ failure to call –
(a) Kyran McLaughlin, a senior executive in Davy, whom it was contended was a critical witness in relation to the dealing issue and whose involvement will be outlined later, and
(b) two of the non-executive directors of DCC, the chairman, Mr. Spain, and Mr. Gallagher, and two of the Dutch directors of Lotus Green, Gerard Jansen Venneboer and Henri Roskam, in relation what was characterised as Mr. Flavin’s direct and controlling involvement in the share deals.
While the plaintiff did not cite any authority of a court of this jurisdiction in support of its argument, it did rely on a number of English authorities, which it is necessary to consider in some depth in order to ascertain whether they support the proposition advanced by the plaintiff.
The earliest authority cited by the plaintiff was M’Queen v. Great Western Railway Company [1875] L.R. 10 Q.B. 569. The plaintiff in that case sued for the value of a parcel of drawings which he had entrusted to the defendant railway company for delivery. The goods never reached their destination, having been stolen while in the custody of the defendant. The defendant pleaded a defence under the Carriers Act. The plaintiff responded that the defence was not available because the goods were lost by reason of having been taken feloniously by the servants of the carrier. The trial judge directed the jury that, if the facts, in their opinion, were more consistent with the guilt of the defendant’s servants than with that of any other person not in their employ, that was sufficient to call upon the defendants for an answer, which not having been given, the inference might well be that a felony had been committed by some of the defendant’s servants. It was held that the direction was wrong and that the jury’s verdict in favour of the plaintiff was wrong. The principle relied on by the plaintiff is contained in the following passage of the judgment of Cockburn C.J., who, coincidentally, had been the trial judge, at p. 574:
“If a prima facie case is made out, capable of being displaced, and if the party against whom it is established might by calling particular witnesses and producing particular evidence displace that prima facie case, and he omits to adduce that evidence, then the inference fairly arises, as a matter of inference for the jury and not as a matter of legal presumption, that the absence of that evidence is to be accounted for by the fact that even if it were adduced it would not disprove the prima facie case. But that always presupposes that a prima facie case has been established; and unless we can see our way clearly to the conclusion that a prima facie case has been established, the omission to call witnesses who might have been called on the part of the defendant amounts to nothing.”
It was held that a prima facie case had not been made out that the defendant’s servants, rather than somebody else, had stolen the goods. All that had been established was that the defendant’s servants had a greater opportunity of committing the theft.
In Reg. v. IRC, ex p. Coombs & Co. [1991] 2 A.C. 283, the issue was whether a notice under the taxation code issued by the Inland Revenue to a firm of stockbrokers to deliver or make available for inspection documents in their possession relevant to the tax liability of a taxpayer, a former employee, in connection with various named companies should be quashed. Against the background of a presumption of validity and having noted the sparseness of the evidence adduced by the IRC, Lord Lowry, with whom the other Law Lords agreed, stated as follows at p. 300:
“In our legal system generally, the silence of one party in 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.”
The IRC had relied on their general duty of confidentiality as a justification for their reticence. Lord Lowry accepted that, by reason of the principle of confidentiality, the general rule for taking account of a party’s silence did not fully apply.
The earlier authorities were reviewed by the Court of Appeal in Wisniewski v. Central Manchester Health Authority [1998] Lloyd’s Reports Med. 223. Brooks L.J. summarised their effect in the following passage from his judgment:
“From this line of authority I derive the following principles in the context of the present case:
(1) In certain circumstances the 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 witnesses.
(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.”
That case which concerned a claim on behalf of an infant who suffered irreversible brain damage before birth in the defendants’ hospital, which it was alleged was caused by negligence of the defendants, illustrates the application of the foregoing principles. The trial judge had held that the defendants were negligent, in that the senior house officer should have attended and examined the plaintiff’s mother about two hours before the birth. That led to an issue on causation, which turned on what the senior house officer would probably have done if he had attended the mother, read her notes and seen the cardiotachograph trace and, in particular, whether a Caesarean section would have been performed at that stage, which would have prevented the injury which was caused because, as the baby moved down the birth canal, the umbilical cord was wrapped around his neck and had a knot in it and he was effectively being strangled. The senior house officer, who was living in Australia, was not called, nor was the registrar who had been on call that night, nor the consultant with overall responsibility for the obstetrics unit. On an analysis of the evidence, Brookes L.J. identified the evidence on the issue as to what the senior house officer would have done which was adduced by the plaintiff as the evidence of two expert witnesses (whose evidence conflicted with the evidence of two expert witnesses called on behalf of the defendants) and certain text book references. The Court of Appeal held that the trial judge was entitled to adopt the course he chose to adopt, which was to infer from the failure of the senior house officer to attend the trial that he had no answer to the criticism made and to find that he would have done what the plaintiff’s expert witnesses testified should have been done and that he would have proceeded to a Caesarean section. The Court of Appeal found that the plaintiff had established a prima facie, if weak, case as to what a doctor would have done in the hypothetical situation the court was required to envisage. The trial judge was entitled to treat the absence of the senior house officer, in the face of a charge that his negligence had been causative of the catastrophe which had befallen the plaintiff, as strengthening the case against him on that issue.
The court was referred to three recent decisions of the English High Court in which the application of the principles set out by Brooks L.J. in the Wisniewski case was considered: Pedley v. Avon Insurance [2003] EWHC 2007; Rock Nominees v. RCO Holdings [2003] 2 B.C.L.C. 493; and Lewis v. Eliades (No. 4) [2005] EWHC 488 (Unreported, England and Wales, High Court, Smith J., 23rd March, 2003). Having considered the judgments in those cases, I am of the view that decisions made in the last two cases to draw adverse inferences because of the failure to call witnesses turned very much on the facts of those cases.
While, as I have already stated, the plaintiff did not point to any Irish authority in which the basis on which adverse inferences may be drawn from the absence or silence of a witness whose evidence might be expected to be critical to an issue arose, I have no doubt that in practice, in the course of fact finding, judges do draw adverse inferences in such circumstances. The type of situation I have in mind arose in one of the earlier authorities considered in the Wisniewski: Herrington v. British Railways Board [1972] AC 877. Where an issue arises as to whether an adverse inference should be drawn, I consider that the principles outlined in Wisniewski are helpful guidelines for the court.
I regard this analysis as very helpful. I note that Laffoy J applied it in a case that was obviously different.
I regard the absence of Brendan O’Sullivan as a witness is fatal to the claim of surprise and misrepresentation made by Templeville and Philip Smyth. That determination is independent of the decision that I have already made on this issue by reference solely to the likelihood or otherwise of the evidence presented in testimony.
Mistake
It follows that the law as to mistake and as to misrepresentation does not require detailed analysis. Mc Dermott, Contract Law (Dublin, 2001) follows the traditional analysis dividing mistakes into three broad categories. Firstly, common mistake occurs where both parties to an agreement have the same mistaken perception. McDermott states that:
A common mistake will not affect the formation of the contract since the parties are genuinely ad idem. However, if the mistake was a fundamental one the consent of the parties to the contract may be nullified. In O’Neill v Ryan (No 3) Costello J provided the following definition of what he termed a shared common mistake:
There is a category of cases in which it is accepted that there was an offer and acceptance reached between the parties but in which it is claimed that the parties shared a common mistake which has resulted in the agreement being void. For example, where both parties agree on the purchase and sale of a painting believing it to be a Gainsborough and it is subsequently established that this is not so, or where both parties agree on the sale of tenanted property and both believe that the tenant is affected by the Rent Restrictions Act and subsequently ascertain that this is not so…’
In considering the extent of this category of mistake, McDermott offers this view:
A contract will be void at common law if there is a common mistake that is also fundamental. Traditionally this rule was quite restrictive and it was only if the mistake related to the existence of the subject matter of the contract or to the existence of a person or a relationship essential to the whole transaction that the mistake would be regarded as operative. It is clear that the rule now extends beyond the mere existence of the subject matter…However, the number of cases, other than cases of non-existent subject matter, which can be interpreted as cases of fundamental operative mistake is small…In Associated Japanese Bank v Credit du Nord SA, Steyn J Laid down the following five rules for mistake at common law:
(i) The law ought to uphold rather than destroy apparent contracts.
(ii) The common law rules as to a mistake regarding the quality of the subject matter are designed to cope with the impact of unexpected and wholly exceptional circumstances on apparent contracts.
(iii) In order to attract legal consequences the mistake must substantially be shared by both parties and must relate to the facts as they existed at the time the contract was made.
(iv) The mistake must render the subject matter of the contract essentially and radically different from the subject matter which the parties believed to exist.
(v) The mistake must not consist of a belief which is entertained by a party without any grounds for such belief.
The second category is mutual mistake. This arises where both parties are mistaken but they do not share the same mistake; thus the issue is as to whether or not they have reached the necessary consensus for an enforceable agreement. Where parties to a contract mutually mistake the subject matter of what they are agreeing in a way that is fundamental so that its nature, and not merely one of its characteristics, is altered a consensus of minds, is avoided. That is not the case here.
The third category, unilateral mistake, may occur where one of the parties is mistaken as to some element of the agreement. This does not automatically render an agreement void: more is needed, such as an exploitation of that mistake by the other party. McDermott states:
The courts will grant relief against… unilateral mistakes based on the concept of unconscionability. In Commission for the New Towns v Cooper (GB) Ltd the defendant tricked the plaintiff into believing that the terms of the contract which he was signing would achieve one object when the terms were so drafted as to achieve a different object. The English Court of Appeal held that the conduct of the defendant was unconscionable and that the plaintiff was entitled to rescission or rectification of the contract…The Court adopted the statement of principle set down by the High Court of Australia in Taylor v Johnson. In that case Mason ACJ, Murphy and Deane JJ said:
“…a party who has entered into a written contract under a serious mistake about its content in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension.
Fundamentally, the law upholds the bargains of parties. Contracts are arrangements of mutual convenience whereby the parties bargain to a consensus as to what each is to give the other. It is not the function of the courts to police agreements by rewriting those that later turn out to be unwise. Rather, parties to a contract are, by virtue of the process of bargaining that leads to a meeting of minds as to what each is to do for the other, assumed to exercising a reasoned judgment. The law will not interfere in commercial bargains absent defined situations which either demonstrate that consensus had never been reached or require intervention based on the principle that reasonable and honest people could not stand over the bargain in question. Jurisdiction as to mistake cannot be invoked in order to escape what is simply a bad bargain. In relation to this category of mistake, Treitel, The Law of Contract, 13th ed., (2011) states:
…a mistake is not operative if the mistaken party, A, has so conducted himself as to induce the other party, B, reasonably to believe that A has agreed to the terms proposed by B. In particular, a person cannot have a contract set aside because of a mistake which he made because he failed to act with due diligence.
When one party to a contract realises that the other party is making a mistake and engages in sharp practice with a view to ensuring the benefit of that error to itself, the contract will be rendered void from its inception. An active misrepresentation as to the subject matter of the contract can be so serious as to have the same effect. There is simply no basis in evidence upon which I could hold that there was either misrepresentation or mistake. The nature of the difficulty with the ESB cable was known to Templeville. That company had negotiated with both the planning authority and the national electricity supply company about it. There are three manhole covers with the electricity caution symbol on them towards the middle of the site. People who buy or lease land, absent any such history, at the very least have a duty of reasonable investigation as to what they are taking on. Philip Smyth swore an affidavit about this issue in a legal context. I cannot accept that forgetting something, if that happened, which is very improbable, amounts to a lack of knowledge about it. Furthermore, there has been considerable debate as to what shape the dome, Dome 3, which might be put over the seven tennis courts site might be and what area it might encompass. It seems to me that a fair reading of the evidence is that there was enough room were the entire site to be used for six or possibly seven tennis courts within a dome. Now there is room for five. As to whether there is the business for that or not, no evidence has been led.
Breach of contract
Templeville and Philip Smyth claimed the right of set-off in respect of wrongs by Leopardstown whereby the rent appropriate to 2011 with no service charge is apparently to be paid and the defendants also claim that the mediation settlement agreement was validly terminated for fundamental breach of contract on the 15th June, 2012. The relevant correspondence has already been referenced.
The doctrine of fundamental breach of contract was developed to ensure that exclusion clauses which limited or excluded liability for breach could not be so wide as to deprive the innocent party of any redress under the contract. Two propositions were blurred. The first was that, by a rule of law, no excluding or limiting term was given force and effect by the courts in a context which ensured that an innocent party would be protected from any consequence that a party that had perpetrated a fundamental breach of contract would be able to sidestep obligations under the agreement. Secondly, in contrast to a rule of law, the interpretive power of the court would generally exclude all but the clearest cases, backed up by plain wording in unambiguous language, whereby liability could be denied notwithstanding that the contract had in an important, or fundamental sense, not been performed. With the passing of the Sale of Goods and Supply of Services Act 1980, particularly s.22, resort to fundamental breach, or even to fundamental frustrating breach, a further development of the doctrine, has been rendered unnecessary where the parties deal one with the other as a consumer or, in other jurisdictions, through unfair contract terms legislation. The law has, similarly, modernised with regard to the old distinction between breaches of terms and breaches of condition but this has been done not by statute but through judicial reordering of the applicable case law. It used to be that a breach of a term would not entitle the innocent party to give notice of termination of contract but that party would be required to perform the contract and be left to a remedy solely in damages. A breach of condition, on the other hand, was more serious and entitled the innocent party to bring the contract to an end and claim damages based upon the loss suffered and what would be quantifiable as the benefit of the contract had it been properly performed. Some earlier written forms of contract had been scrupulous as to classifying particular obligations as either terms or conditions and in setting out preconditions on the exercise of the parties’ entitlements thereby. Such clarity is admirable; and it is possible where people sit down with lawyers and think of every foreseeable event and provide for what is to happen should one come to pass. But it is unlikely. Human affairs and the use of language as a necessarily imprecise instrument pointed up this approach as both excessive and unlikely to yield clear results. What matters, as a principle of ordinary commonsense, is how serious any breach of contract is and whether on the basis of the parties mutual rights and obligations it can be classified as so striking at the heart of what the innocent party was to expect under the agreement as to entitle that party to bring the contract to an end.
The modern law as to how serious a breach of contract must be to justify the innocent party bringing an agreement to an end and seeking damages was considered by Costello J. in Irish Telephone Rentals v. ICS Building Society [1992[ 2 I.R. 525. The plaintiff had rented to a financial institution a telephone system which was impossible to use and which caused astonishing delays in those seeking to access the business from outside due to the backing up of calls blocked within the system. The defendant counterclaimed for damages on the basis that it was entitled not to pay the rental for a system which did not do the job that any reasonable person would have expected it to. The comments of Costello J. are instructive:
The issue which arises now for consideration is one which arises in many cases. It does not follow that because one party is guilty of a breach of contract that the other may treat himself as discharged from obligation further to perform the contract.
There may be many cases in which the court, when presented with a problem of this sort, may be required to consider whether the term which was broken was ‘a condition’ or a ‘warranty’ or, a ‘fundamental term’ of the contract but, as the frequently cited case of Hong Kong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Limited [1962] 1 Q.B. 26 shows, this is by no means a necessary exercise to be undertaken in every case. I think the approach suggested by the judgment of Diplock L.J. at pages 65 and 66 of the report is appropriate to this case. In answer to the question ‘In what event will a party be relieved of his undertaking to do that which he has agreed to do but has not yet done?’ he said:-
“The contract may itself expressly define some of these events, as in the cancellation clause in a charter party; but, human prescience being limited, it seldom does so exhaustively and often fails to do so at all. In some classes of contract such as sale of goods, marine insurance, contracts of affreightment, evidenced by Bills of Lading and those between parties to Bills of Exchange, parliament has defined by statute some of the events not provided for expressly in individual contracts of that class; but where an event occurs the occurrence of which neither the parties nor parliament have expressly stated will discharge one of the parties from further performance of his undertakings, it is for the court to determine whether the event has this effect or not.
The test whether an event has this effect or not has been stated in a number of metaphors all of which I think amount to the same thing: does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings?”
If this question is posed in this case there can be only one answer to it. The ‘event’ which occurred in this case is the development of a situation in which the installation which the defendants had hired significantly failed to fulfil its purpose. This ‘event’ has deprived the defendant of the whole of the benefit which it was intended the defendant would obtain from the hiring agreements. The defendant was therefore, in my opinion, discharged from further performing the hiring agreements and was entitled to treat the contract as being at an end and request the plaintiff to take back its installations. It follows therefore that the plaintiffs are not entitled to rely on clause 11 of the contract and that its claim for damages for breach of the hiring contracts relating to the telephone installations also fails.
A similar analysis was engaged in by Clarke J. in Parol Limited and Carroll Village (Retail) Management v Friends First Pension Funds Limited and Superquinn [2010] IEHC 498 (Unreported, High Court, Clarke J., 8th October, 2010).
Posing the test as to whether there has been a breach of obligation by Leopardstown which is so serious as to entitle Templeville and Philip Smyth to bring the mediation service agreement to an end, I conclude that there is evidence of some minor lack of attention by Leopardstown and nothing more than that. Most of the problems that have arisen could have been easily sorted out. They were not sorted out because Templeville, under the direction of Philip Smyth, retreated with no reasonable cause into an entrenched attitude of exploiting every grievance and storing up resentment under the misplaced belief that it could provide evidence of serious breach of contract in a later legal case. There is no tenable evidence of misbehaviour under the mediation settlement agreement by Leopardstown.
On the other hand, Templeville has demonstrated no commitment to the mediation settlement agreement. The agreement was carefully worked out. It could have operated to the benefit of both parties. Instead of that, the attitude of Templeville has been one of non cooperation from the outset. While it is true that there have been a number of lapses from the obligations of Leopardstown, these are entirely minor. Any reasonable assessment of the evidence presented would indicate that had Templeville kept open the channel of communication that was vaguely present like a ray of sunshine on a wet December day, from the end of 2011 into 2012, there was more than sufficient goodwill on the part of Leopardstown to allow the parties to work together. Instead of that, the attitude of Templeville has been one of seeking to vacuum up the least grievance with a view to litigation, a lack of any reasoned response through communication as to its difficulties and the justification of the destruction of property, the non-payment of sums due and the invasion of rights of realty through subterfuge. Even had everything that Templeville claims to have gone wrong with the mediation settlement agreement been proved in evidence, and that has not happened, the substance of what Templeville had bargained for was available to them. On the other side of the contract, Leopardstown have been deprived of substantial money and has had the unpleasantness of dealing with a company directed away from plain dealing. It is clear that Templeville has not been deprived of the substantial benefit of the mediation settlement agreement.
Sums outstanding
When rent was paid at the rate appropriate to 2011, with no service charge, through the proffering of a cheque on the 15th March, 2012, from Templeville to Leopardstown, it was cashed by Leopardstown. The relevant officers in Leopardstown were then under the impression that a clerical error had been made. When it dawned on Leopardstown that Philip Smyth was deliberately paying an undervalue and was, again, claiming some kind of set off, when thereafter cheques continued to be proffered from Templeville to Leopardstown, these were not accepted. That was reasonable. Leopardstown were entitled as a matter of law to insist on Templeville and Philip Smyth fulfilling their side of the bargain. Therefore a debt has built up. It will be recalled that clause 3 of the mediation settlement agreement provides that there is no legal or equitable right of set-off in favour of Templeville as and from the 26th October, 2011. Detailed provisions as to rent are contained in clause 1 of the mediation settlement agreement. I quote:
The rent reserved under the lease of the 5th June 1998 … as amended by the License Agreement for Works of the 5th June 1998 and is further amended by virtue of rent reviews is in a total sum of €499,310 per annum. The said rent… will be paid by Templeville in the manner provided for in the lease as and from the 1st day of January 2012. For the purpose of avoidance of doubt, Templeville will continue to pay the existing rent (being €58,599.68 paid every 2 months) to Leopardstown in the manner provided for in the lease up to the 31st day of December 2011.
In addition, the service charge contribution was agreed under clause 2.1 at €45,000 excluding VAT annually payable every two months in equal parts as and from the 1st day of January 2012.
Whether it was in respect of arrears, or was somehow otherwise apportioned to outstanding obligations, the obligations as to payment under the mediation settlement agreement cannot be re-written. Under clause 14 of the mediation settlement agreement, Templeville was to pay Leopardstown the sum of €4,090,000 in two tranches: the first being €2.5 million by the 10th November, 2011, and the second, taking into account the release of €90,000 held jointly between the parties, being €1.5 million was to be paid on or before the 10th August, 2012. The first tranche was paid, I imagine but do not know because I was not told that the €90,000 was also released to Leopardstown, but the second tranche of €1.5 million was never paid. Clause 14.2 of the mediation settlement agreement provided that in the event that Templeville should default on either of the payments it consented to Leopardstown marking judgement against it. Philip Smyth agreed that such a default would require him to pay within seven days thereof any amount then due up to a maximum of €1.5 million, with no extension of time.
These obligations have been badly defaulted on by Templeville and by Philip Smyth. Therefore, in accordance with the mediation settlement agreement, Leopardstown are entitled to judgement as against Templeville and as against Philip Smyth, as guarantor. There is no dispute as to the manner of calculating interest on rent or the service charge. The sum outstanding in respect of rent and service charge and the interest thereon amounts to €688,793.11. Together with the sum outstanding as of the 10th August, 2012, of €1.5 million, the sum due as of the 30th April, 2013, is €2,188,793.11. There will be judgment in that amount as against Templeville. As to any further sum outstanding that will be adjusted as of the date of judgment hereof. There will be judgment as against Philip Smyth in the amount of €1.5 million.
Forfeiture and relief against forfeiture
It is clear that Templeville is a dysfunctional company. Wallersteiner v. Moir [1975] Q.B. 373 is mainly treated as an authority for the circumstances under which the corporate veil may be drawn back to establish liability against those controlling a company. It is also authority for the proposition that the incorporation of a company establishes duties on directors to ensure its independence as a legal entity separate from whoever may be its main investor. In speaking, as Lord Denning MR did, of the corporate creations of the main promoter of the relevant one-man companies dancing to his bidding and of his pulling the strings of his puppets, anything other than strict corporate governance in accordance with the code of company law is condemned as unacceptable. Templeville has one entirely formal meeting of its board of four directors once a year. Philip Smyth, as one director, tells them what to do. Two other directors gave evidence, Karen Polly and Brenda Flood. They have been prevented from exercising their legitimate voice. It is not relevant that unusual provision may be made in the articles of association of Templeville. Whatever may be cleverly devised, the code of corporate governance cannot be overcome through internal reordering of a company. No company can legitimately offer corporate protection on the one hand and be, on the other, the alter ego of an individual director. There is no structure in company law whereby the benefits of incorporation are entitled to be assumed through deviation from the norm that the board of directors of a company carry the responsibility for its direction and governance subject to the rule of the shareholders in general meeting. Notable, in this regard, is the entire absence of any input from the practical, intelligent and experienced voices of Brenda Flood and Karen Polley on any decision as to whether the new seven tennis courts site was viable or useful to Templeville; as to whether the car parking arrangements might gravitate towards the Leopardstown car park; as to whether as of March or April 2012 any wrong in contract had been committed by Leopardstown; as to whether set off was somehow available notwithstanding the clear term to the contrary in the mediation service agreement; and as to whether monies should be withheld in that regard. On that point, it is astonishing that neither of these directors had any knowledge, apart from the most superficial, as to what the mediation settlement agreement had obliged the company to do.
Templeville must be restructured. At least two new directors need to be brought in from outside the sphere of influence of Philip Smyth.
There have been deliberate breaches of the mediation settlement agreement. There has been a lack of objectivity on the part of Philip Smyth. There has been the direction of Templeville in a manner not entirely beneficial to the corporation by him. This is all deeply regrettable. Philip Smyth is a determined businessman who has made a truly valuable contribution to Irish life. It is not for the court to exercise personal judgements beyond recognising that his exceptional qualities of concentration and attention to detail are perhaps the origin of some of the unfortunate decisions made through the agency of Templeville. A corporation cannot be the agent of one of its directors. No neighbour should have to put up with the conduct evident in this case from Templeville. The court would have no hesitation in ordering forfeiture of the 1998 lease but for the fact that the intelligent and sensible direction of Brenda Flood and of her colleagues as directors offer a final chance. The court would order forfeiture in this case were only Philip Smyth involved as lessee. But he is not even the lessee. He is a party to the mediation settlement agreement and he is the guarantor under the relevant lease.
In Campus and Stadium Development Ltd v. Dublin Waterworld Ltd [2006] IEHC 200 (Unreported, High Court, 21st March, 2006), Gilligan J. set out that the equitable nature of relief against the legal remedy of forfeiture. Relief in equity, following that judgment, should be approached thus:
I take the overall view that in order to exercise my discretion fairly, I must take into account the conduct of the parties, the wilfulness of any breach by the tenant, the general circumstances particular to the issue, the nature of the commercial transaction the subject matter of the lease, whether the essentials of the bargain can be secured, the value of the property, the extent of equality between the parties, the future prospects for their relationship, the fact that even in cases of wilful breaches it is not necessary to find an exceptional case before granting relief against forfeiture and then apply general equitable principles in reaching a conclusion.
Gilligan J. refused relief. In the principles so outlined, as to conduct, the risk of repetition, whether such conduct was deliberate or mistaken, whether bargains were overturned for no valid excuse, whether the contract might be secured without forfeiture, whether an extreme remedy that might destroy jobs should be ordered, relief against forfeiture could not be granted were Templeville incapable of reform. But that company can, and should, be reformed and if it is then the prospects for a working relationship with Leopardstown into the future are reasonable. I propose to grant relief against forfeiture but on the Court giving the defendants time to consider how Templeville may be properly restructured in order to function as a company subject to the rule of law. Two additional and experienced directors are required. Templeville should have at least monthly meetings of its board. Decisions in aid of proper management of the company must be made through such meetings. No director is to have any say outside of that structure. All important issues beyond day to day arrangements are to be referred to the board of directors. Absent an undertaking that Templeville will henceforth act as a corporate undertaking subject to the law, forfeiture will be ordered. Time will be given to put new directors in place and for the new arrangements to be bedded in. If that undertaking is forthcoming that the board of directors of Templeville will now take charge of its corporate governance, the matter of forfeiture can be left in abeyance.
I would be compelled otherwise to refuse relief against forfeiture. There is no comprehension on the part of Templeville of the solemnity of an agreement arrived at through a process of considerable care and much expense. An attitude of non-cooperation and the seeking out of grievances does not show an attitude which would enable any agreement to work. I will give time to Templeville to consider giving a solemn undertaking to the court. Absent an undertaking in the terms indicated, the approach I must take is clear.
Conclusion
There will be judgment for the plaintiff against the defendants in the amount indicated
Guilfoyle -v- Farm Development Co-operative Limited
[2006] IESC 18 (23 March 2006)
Judgment delivered the 23rd day of March, 2006 by Denham J.
1. This is an appeal by Barry Guilfoyle, the plaintiff/appellant, hereinafter referred to as ‘the plaintiff’, from the judgment and order of the High Court delivered on the 5th November, 2002, wherein the High Court refused the plaintiff the relief he sought in the pleadings.
2. In the pleadings the plaintiff claimed that on or about the 12th day of April, 1999, Jack Murphy, the managing director of the Farm Development Co-operative Limited, the defendant/respondent, hereinafter referred to as ‘the defendant’, acting on behalf of the defendant, agreed to purchase the plaintiff’s shareholding of 150 “B” ordinary shares in FDC Financial Services Limited for the consideration of £120,000.
3. The plaintiff, having worked with the defendant, was departing from the company and planning to go into business elsewhere. At issue is an oral agreement he alleges was created, and pursuant to which he alleges that he is entitled to £119,555. The plaintiff’s case is that the oral agreement was made on the 12th April 1999. In fact, as the learned trial judge pointed out, the matter reduced itself to consideration of a period of about eight or ten days and what occurred in those eight or ten days.
4. The matter came on for hearing in the High Court (Smyth J.) on the 5th day of November, 2002. At the hearing the issue was the alleged oral contract entered into on the 12th day of April, 1999. Contrary evidence was given by the plaintiff and Mr. Jack Murphy. Thus, the plaintiff stated, inter alia:
“The arrangements I made with Jack Murphy that morning were as follows: I advised him of my resignation. We then discussed matters that needed to be dealt with on my termination, which was the value of the equity. At that meeting I put it to him that my termination would be easy to calculate, in that we had just dispensed with James Barlow who had 75 shares. He had got approximately £60,000. I had 150 shares, therefore my payout would be double James Barlow. He agreed to that, he said, yeah, that is agreeable and that is the fashion that I was to be treated in.”
[transcript Q.51]
Mr. Jack Murphy, on the otherhand, did not have the same recollection. He stated, inter alia:
“My recollection is that Barry Guilfoyle visited me and advised me of his intention to resign. That was the first I had heard of it and I was surprised by it, disappointed by it. We discussed various issues surrounding it. I asked him what his plans were and what he was intending to do and he advised me. I wished him well in relation to his future business. I discussed with him in general terms the future of Financial Services resulting from his departure, issues to do with management, etc. The meeting ended perhaps after, my recollection would be an hour, three-quarters of an hour maybe.”
[transcript Q. 169]
and,
“The luncheon meeting took place in the Metropol Hotel, which we frequented periodically, and the substance of the discussion, my recollection of it is that again it varied over issues to do with the business, issues to do with his future career. I was not made privy to any matters that I can recall to do with his purchase of offices, etc. The matter of shareholding was raised and I said to him that we would deal honourably and fairly with his share encashment, as we always have done with all parties with FDC.”
[transcript Q. 173]
5. In refusing the relief sought, Smyth J. pointed out that the case “boils down to the differences of recollection between two people”. Having assessed the evidence the learned trial judge held:
“In my judgment, I have come to the view that although Mr. Guilfoyle genuinely believed he was going to get the same treatment as Mr. Barlow, I am equally satisfied that Mr. Murphy did not agree to give Mr. Guilfoyle £119,555 or £120,000 in respect of his shares in the company. The whole valuation process, if it had no meaning, could have been stopped in its tracks without the necessity to going through the correspondence, which Mr. Macken on behalf of Mr. Guilfoyle made very conveniently available to before lunch. That went on for months. If it had no real feature in this matter, it was a complete red herring.
Mr. Guilfoyle, on his version of the contract he made, the oral contract, was at £120,000 or £119,555 or nothing. He agreed in the box that if the valuation came up a shade off, that he might have accepted, but there was no question of a band or range of parameters by which the parties had agreed at all. It was either his figure or the valuation, it could not be both. He thought he pitched the valuation correctly. The valuation has not been gone into, I am not concerned about that, I am concerned with the matter of legal principle of contract: Was the figure agreed upon by the parties in respect of what was stated to be the case?
It is a matter of some regret that the parties who have soldiered so long and so well commercially should have found themselves here and that it should fall to my lot to say that the plaintiff has not made out the case that he has put forward to the court and, regretfully, the case must rest on the basis of the valuation that has been arrived at, notwithstanding the fact that in the transfer document referred to by Mr. Macken and handed into court, which is not in dispute, there is clearly a reference again to the figure of £120,000. That has not been accepted by Mr. Murphy or by the company at any stage and the fact of placing the documents in letter form or in transfer form with the figure does not necessarily get over the fact that the evidence does not establish to my satisfaction that it is the true position.
Accordingly, there are forms of relief sought in the proceedings. The declaration that the consideration of £72,000 is void, that is refused. There is a refusal to grant specific performance of the agreement that is alleged by the plaintiff at £120,000, and the other reliefs fall as defeated, also.”
6. The plaintiff has appealed against the determination of the High Court. The notice of appeal filed on his behalf set out the following grounds of appeal:-
(i) The learned trial judge erred in law and in fact in holding that no agreement was concluded as between the plaintiff and the defendant on the 12th April 1999 whereby the defendant agreed to purchase the plaintiff’s shares in FDC Financial Services Limited (hereinafter “the Company”) for a price of IR£119,550.00
(ii) The learned trial judge failed to have regard to the evidence and the weight of the evidence that an agreement had been made on the 12th April 1999 in relation to the value of the plaintiff’s shareholding in the Company.
(iii) The learned trial judge erred in law and in fact in holding that the plaintiff’s letter of resignation of the 21st April 1999 [and subsequent correspondence from solicitors for the plaintiff] contained no reference to the said agreement of the 12th April 1999, and further erred in failing to give sufficient weight to the failure of the defendant to deny such agreement in correspondence.
(iv) The learned trial judge erred in law and in fact in failing to take into account the fact that the Company and the shares therein had been valued in accordance with a procedure overseen and approved by Mr. Jack Murphy, the General Manager of the defendant, for the purposes of instituting an employee share option scheme.
(v) The learned trial judge erred in law and in fact in failing to give adequate weight to the valuation by the Company, which valuation was approved of by Mr. Jack Murphy on behalf of the defendant, of the shares of Mr. James Barlow, upon the termination of James Barlow’s employment with the Company.
7. The parties filed written submissions also and oral submissions were presented to the Court. The essence of the plaintiff’s submission was that the learned trial judge had erred because of: a) the recent valuation of the shareholdings in the company; and, b) the application of that valuation to Mr. Barlow’s situation; and that the learned trial judge had erred in giving insufficient weight to these two factors in assessing the claim of the oral agreement.
8. The core of this appeal relates to findings of fact and credibility by the High Court. The plaintiff brought a claim alleging an oral contract, the primary evidence of which was the oral evidence of the plaintiff and Mr. Murphy, which evidence was contradictory. The learned trial judge was entitled to assess the credibility of the two witnesses, indeed it was his duty. The learned trial judge was entitled to accept the evidence, of Mr. Murphy over that of the plaintiff. I am satisfied that the learned trail judge did not misdirect himself in law or fact as to the scheme of shareholdings and their valuation because at issue was an oral contract, which he determined, although he did in fact also refer to the Articles of Association, and to the scheme which had existed in relation to the valuation of Mr. Barlow’s shareholding. He was entitled on the evidence to come to the conclusion which he did.
In all the circumstances I am satisfied that the learned trail judge was entitled, indeed compelled, to find for the defendant. This is the type of case where an appellate court treads very carefully, because at issue are questions of fact and credibility. These are quintessentially matters for the trial court. In this case the findings of the learned trial judge as to which witness he believed were findings of primary fact. In Hay v. O’Grady [1992] 1 I.R. 210 this Court pointed out that an appellate court does not enjoy the opportunity of seeing and hearing witnesses, or observing the manner in which the evidence is given or the demeanour of those giving it. If the findings of fact made by the trial judge are supported by credible evidence, this Court is bound by them, however voluminous and weighty the testimony against them. In this appeal, the findings of fact made by the learned trial judge were supported by credible evidence and I am satisfied that this Court is bound by them.
9. Conclusion
For the reasons given I would affirm the order and judgment of the High Court and dismiss the appeal.