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Couturier & Ors v Hastie & Anor

[1856] UKHL J3

Lord Cranworth

….

The cause was tried before Mr. Baron Martin, when his Lordship ruled, that the contract imported that at the time of the sale, the corn was in existence as such, and capable of delivery, and that as it had been sold and delivered by the captain before this contract was made, the Plaintiffs could not recover in the action. He therefore directed a verdict for the Defendants. The case was afterwards argued in the Court of Exchequer before the Lord Chief Baron, Mr. Baron Parke, and Mr. Baron Alderson, when the learned Judges differed in opinion, and a rule was drawn up directing that the verdict found for the Defendants should be set aside on all the pleas except the sixth, and that on that plea judgment should be entered for the Plaintiffs, non obstante veredicto. That the Defendants should be at liberty to treat the decision of the Court as the ruling at Nisi Prius, and to put it on the record and bring a. bill of exceptions (8 Exch. 40). This was done, and the Lord Chief Baron sealed the bill of exceptions, adding, however, a memorandum to the effect that he did so as the ruling of the Court, but that his own opinion was in opposition to such ruling.

The case was argued on the bill of exceptions in the Exchequer Chamber, before Justices Coleridge, Maule, Creswell, Wightman, Williams, Talfourd, and Crompton, who were unanimously of opinion that the judgment of the Court of Exchequer ought to be reversed (9 Exch. 102). The present writ of error was then brought.

The Judges were summoned, and Mr. Baron Alderson, Mr. Justice Wightman, Mr. Justice Creswell, Mr. Justice Erle, Mr. Justice Williams, Mr. Baron Martin, Mr. Justice Crompton, Mr. Justice Willes, and Mr. Baron Bramwell, attended.

Sir F. Thesiger and Mr. James Wilde for the Plaintiffs in Error: The purchase here was not of the cargo absolutely as a thing assumed to be in existence, but merely of the benefit of the expectation of its arrival, and of the securities against the contingency of its loss. The purchaser bought in fact the shipping documents, the rights and interests of the vendor. A contract of such a kind is valid, Paine v. Meller (6 Ves. 349); Cass v. Rudele (2 Vern. 280). The language of the contract implies all this. The representation that the corn was shipped free on board at Salonica, means that the cargo, was the property of, and at the risk of the shipper, Cowasjee v. Thompson (5 Moo. P.C. 165). The Court of Exchequer proceeded on the words of this contract, and gave the correct meaning to them. Mr. Baron Parke (8 Exch. 54) said, ” There is an express engagement that the cargo was of average quality when shipped, so that it is clear that the purchaser was to run the risk of all subsequent deterioration by sea damage or otherwise, for which he was to be indemnified by having the cargo fully insured; for the 27s. per quarter were to cover not merely the price, but all expenses of shipment, freight, and insurance.” In a contract for the sale of goods afloat, there are two periods which are important to be regarded, the time of sale and the time of arrival. If at the time of the sale there is anything on which the contract can attach it is valid, and the vendee bound, Barr v. Gibson (3 Mee. and Wels. 390). The goods are either shipped, as here, “free on board,” when it is clear that they are thenceforward at the risk of the vendee, or they are shipped “to arrive,” which saves the vendee from all risk till they are safely brought to port, Johnson v. Macdonald (9 Mee. and Wels. 600). The intention of the parties is understood to be declared by different terms of expression, and the judgment of the Exchequer Chamber here really violates that intention. The case of Strickland v. Turner (7 Exch. 208), which was referred to by the Lord Chief Baron (8 Exch. 49), is not in point, for there the annuity, which was the subject of the sale, had actually ceased to exist when the sale took place; there was nothing whatever on which the contract could attach; and the principles therefore on which all contracts of sale must proceed, as explained and illustrated by Pothier,[1] whose definitions of a sale are literally adopted by Mr. Chancellor Kent (2 Kent’s Com. 468), applied there, but they do not apply here, for here the parties were dealing with an expectation, namely, the expectation of the arrival of the cargo. As Lord Chief Baron Richards said, in Hitchcock v. Giddings (4 Price, 135), ” If a man will make a purchase of a chance, he must abide by the consequences.” Here, however, the chance was only that of the arrival of the cargo, and that chance was covered by the policy, for the cargo, itself, as stated in the contract, had been actually shipped. Had the cargo been damaged at the time of this contract, the loss thereby arising must have been borne by the purchaser. Suppose the corn had been landed at Tunis, and had remained in the warehouse there, it would have ceased to be a cargo in the strict and literal meaning of the word, but the purchaser would still have been bound by his contract.

The Court of Exchequer Chamber, admitting that the vendee might have recovered an average loss under the policy on this cargo, said that he could not have recovered if a total loss had occurred, and referred to, an admission to that effect supposed to have been made by the present Baron Martin when arguing Sutherland v. Pratt (11 Mee. and Wels. 296). That admission does not mean what is thus supposed; and after the case of Roux v. Salvador (3 Bing. N.C. 266), where there was a total loss, and the Plaintiff recovered on the policy, it is difficult to understand how such an opinion could be entertained. A technical objection arising on the form of the policy would not affect this question. The purchaser’s right on this policy would have been complete, Phillips (1 Phill. Ins. 438), Marshall (1 Marsh. Ins. 333), and March v. Pigott (5 Burr. 2802). By what has happened here, the purchaser has been saved the payment of freight, Vlierboom v. Chapman (13 Mee. and Wels. 230); and Owens v. Dunbar (12 Ir. Law. Rep. 304) shows that he would have been bound to accept the cargo. The contract here was, that the cargo was shipped “free on board.” To that extent the vendor was bound, but he was not bound by any farther and implied warranty, Dickson v. Zizinia (10 Corn. Ben. 602). Mr. Butt and Mr. Bovill for the Defendants in Error were not called on.

The Lord Chancellor: My Lords, this case has been very fully and ably argued on the part of the Plaintiffs in Error, but I understand from an intimation which I have received, that all the learned Judges who are present, including the learned Judge who was of a different opinion in the Court of Exchequer, before the case came to the Exchequer Chamber, are of opinion that the judgment of the Court of Exchequer Chamber sought to be reversed by this writ of error was a correct judgment, and they come to that opinion without the necessity of hearing the counsel for the Defendants in Error. If I am correct in this belief, I will not trouble the learned counsel for the Defendants in Error to address your Lordships, because I confess, though I should endeavour to, keep my mind suspended till the case had been fully argued, that my strong impression in the course of the argument has been, that the judgment of the Court of Exchequer Chamber is right. I should therefore simply propose to ask the learned Judges, whether they agree in thinking that that judgment was right.

Mr. Baron Alderson said: My Lords, Her Majesty’s Judges are unanimously of opinion that the judgment of the Exchequer Chamber was right, and that the judgment of the Court of Exchequer was wrong; and I am also of that opinion myself now, having been one of the Judges before whom the case came to be heard in the Court of Exchequer.

The Lord Chancellor: My Lords, that being so, I have no hesitation in advising your Lordships, and at once moving that the judgment of the Court below should be affirmed. It is hardly necessary, and it has not ordinarily been usual for your Lordships to go much into the merits of a judgment which is thus unanimously affirmed by the Judges who are called in to consider it, and to assist the House in forming its judgment. But I may state shortly that the whole question turns upon the construction of the contract which was entered into, between the parties. I do not mean to deny that many plausible and ingenious arguments have been pressed by both the learned counsel who have addressed your Lordships, showing that there might have been a meaning attached to that contract different from that which the words themselves impart. If this had depended not merely upon the construction of the contract but upon evidence, which, if I recollect rightly, was rejected at the trial, of what mercantile usage had been, I should not have been prepared to say that a long continued mercantile usage interpreting such contracts might not have been sufficient to warrant, or even to compel your Lordships to adopt a different construction. But in the absence of any such evidence, looking to the contract itself alone, it appears to me clearly that what the parties contemplated, those who bought and those who sold, was that there was an existing something to be sold and bought, and if sold and bought, then the benefit of insurance should go with it. I do not feel pressed by the latter argument, which has been brought forward very ably by Mr. Wilde, derived from the subject of insurance. I think the full benefit of the insurance was meant to go as well to losses and damage that occurred previously to the 15th of May, as to losses and damage that occurred subsequently, always assuming that something passed by the contract of the 15th of May. If the contract of the 15th of May had been an operating contract, and there had been a valid sale of a cargo at that time existing, I think the purchaser would have had the benefit of insurance in respect of all damage previously occurring. The contract plainly imports that there was something which was to, be sold at the time of the contract, and something to be purchased. No such thing existing, I think the Court of Exchequer Chamber has come to the only reasonable conclusion upon it, and consequently that there must be judgment given by your Lordships for the Defendants in Error.

Judgment for the Defendants in Error, with costs. Lords’ Journals, 27 June 1856.

Taylor & Anor v Caldwell & Anor

[1863] EWHC QB J1, 3 B & S 826

Blackburn J

There is a class of contracts in which a person binds himself to do something which requires to be performed by him in person; and such promises, e.g. promises to marry, or promises to serve for a certain time, are never in practice qualified by an express exception of the death of the party; and therefore in such cases the contract is in terms broken if the promisor dies before fulfilment. Yet it was very early determined that, if the performance is personal, the executors are not liable; Hyde v. The Dean of Windsor (Cro. Eliz. 552, 553). See 2 Wms. Exors. 1560, 5th ed., where a very apt illustration is given. “Thus,” says the learned author, “if an author undertakes to compose a work, and dies before completing it, his executors are discharged from this contract: for the undertaking is merely personal in its nature, and, by the intervention of the contractor’s death, has become impossible to be performed.”For this he cites a dictum of Lord Lyndhurst in Marshall v. Broadhurst (1 Tyr. 348, 349), and a case mentioned by Patteson J. in Wentworth v. Cock (10 A. & E. 42, 45-46). In Hall v. Wright (E. B. & E. 746, 749), Crompton J., in his judgment, puts another case. “Where a contract depends upon personal skill, and the act of God renders it impossible, as, for instance, in the case of a painter employed to paint a picture who is struck blind, it may be that the performance might be excused.”

It seems that in those cases the only ground on which the parties or their executors, can be excused from the consequences of the breach of the contract is, that from the nature of the contract there is an implied condition of the continued existence of the life of the contractor, and, perhaps in the case of the painter of his eyesight. In the instances just given, the person, the continued existence of whose life is necessary to the fulfilment of the contract, is himself the contractor, but that does not seem in itself to be necessary to the application of the principle; as is illustrated by the following example. In the ordinary form of an apprentice deed the apprentice binds himself in unqualified terms to “serve until the full end and term of seven years to be fully complete and ended,” during which term it is covenanted that the apprentice his master “faithfully shall serve,” and the father of the apprentice in equally unqualified terms binds himself for the performance by the apprentice of all and every covenant on his part. (See the form, 2 Chitty on Pleading, 370, 7th ed. by Greening.) It is undeniable that if the apprentice dies within the seven years, the covenant of the father that he shall perform his covenant to serve for seven years is not fulfilled, yet surely it cannot be that an action would lie against the father? Yet the only reason why it would not is that he is excused because of the apprentice’s death.

These are instances where the implied condition is of the life of a human being, but there are others in which the same implication is made as to the continued existence of a thing. For example, where a contract of sale is made amounting to a bargain and sale, transferring presently the property in specific chattels, which are to be delivered by the vendor at a future day; there, if the chattels, without the fault of the vendor, perish in the interval, the purchaser must pay the price and the vendor is excused from performing his contract to deliver, which has thus become impossible.

That this is the rule of the English law is established by the case of Rugg v. Minett (11 East, 210), where the article that perished before delivery was turpentine, and it was decided that the vendor was bound to refund the price of all those lots in which the property had not passed; but was entitled to retain without deduction the price of those lots in which the property had passed, though they were not delivered, and though in the conditions of sale, which are set out in the report, there was no express qualification of the promise to deliver on payment. It seems in that case rather to have been taken for granted than decided that the destruction of the thing sold before delivery excused the vendor from fulfilling his contract to deliver on payment.

This also is the rule in the Civil law, and it is worth noticing that Pothier, in his celebrated Traite du Contrat de Vente (see Part. 4, § 307, etc.; and Part. 2, ch. 1, sect. 1, art. 4, § 1), treats this as merely an example of the more general rule that every obligation de certo corpore is extinguished when the thing ceases to exist. See Blackburn on the Contract of Sale, p. 173.

The same principle seems to be involved in the decision of Sparrow v. Sowyate (W. Jones, 29), where, to an action of debt on an obligation by bail, conditioned for the payment of the debt or the render of the debtor, it was held a good plea that before any default in rendering him the principal debtor died. It is true that was the case of a bond with a condition, and a distinction is sometimes made in this respect between a condition and a contract. But this observation does not apply to Williams v. Lloyd (W. Jones, 179). In that case the count, which was in assumpsit, alleged that the plaintiff had delivered a horse to the defendant, who promised to redeliver it on request. Breach, that though requested to redeliver the horse he refused. Plea, that the horse was sick and died, and the plaintiff made the request after its death; and on demurrer it was held a good plea, as the bailee was discharged from his promise by the death of the horse without default or negligence on the part of the defendant. “Let it be admitted,” say the Court, “that he promised to deliver it on request, if the horse die before, that is become impossible by the act of God, so the party shall be discharged, as much as if an obligation were made conditioned to deliver the horse on request, and he died before it.” And Jones, adds the report, cited 22 Ass. 41, in which it was held that a ferryman who had promised to carry a horse safe across the ferry was held chargeable for the drowning of the animal only because he had overloaded the boat, and it was agreed, that notwithstanding the promise no action would have lain had there been no neglect or default on his part. It may, we think, be safely asserted to be now English law, that in all contracts of loan of chattels or bailments if the performance of the promise of the borrower or bailee to return the things lent or bailed, becomes impossible because it has perished, this impossibility (if not arising from the fault of the borrower or bailee from some risk which he has taken upon himself) excuses the borrower or bailee from the performance of his promise to redeliver the chattel. The great case of Coggs v. Bernard (1 Smith’s L. C. 171, 5th ed.; 2 L. Raym. 909) is now the leading case on the law of bailments, and Lord Holt, in that case, referred so much to the Civil law that it might perhaps be thought that this principle was there derived direct from the civilians, and was not generally applicable in English law except in the ease of bailments; but the case of Williams v. Lloyd (W. Jones, 179), above cited, shews that the same law had been already adopted by the English law as early as The Book of Assizes. The principle seems to us to be that, in contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance. In none of these cases is the promise in words other than positive, nor is there any express stipulation that the destruction of the person or thing shall excuse the performance; but that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel. In the present case, looking at the whole contract, we find that the parties contracted on the basis of the continued existence of the Music Hall at the time when the concerts were to be given; that being essential to their performance.

We think, therefore, that the Music Hall having ceased to exist, without fault of either party, both parties are excused, the plaintiffs from taking the gardens and paying the money, the defendants from performing their promise to give the use of the Hall and Gardens and other things. Consequently the rule must be absolute to enter the verdict for the defendants. Rule absolute.

McRae v Commonwealth Disposals Commission

[1951] HCA 79; (1951) 84 CLR 377

High Court of Australia

Dixon and Fullagar JJ1

19. The position so far, then, may be summed up as follows. It was not decided in Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) that the contract in that case was void. The question whether it was void or not did not arise. If it had arisen, as in an action by the purchaser for damages, it would have turned on the ulterior question whether the contract was subject to an implied condition precedent. Whatever might then have been held on the facts of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) , it is impossible in this case to imply any such term. The terms of the contract and the surrounding circumstances clearly exclude any such implication. The buyers relied upon, and acted upon, the assertion of the seller that there was a tanker in existence. It is not a case in which the parties can be seen to have proceeded on the basis of a common assumption of fact so as to justify the conclusion that the correctness of the assumption was intended by both parties to be a condition precedent to the creation of contractual obligations. The officers of the Commission made an assumption, but the plaintiffs did not make an assumption in the same sense. They knew nothing except what the Commission had told them. If they had been asked, they would certainly not have said: “Of course, if there is no tanker, there is no contract”. They would have said: “We shall have to go and take possession of the tanker. We simply accept the Commission’s assurance that there is a tanker and the Commission’s promise to give us that tanker.” The only proper construction of the contract is that it included a promise by the Commission that there was a tanker in the position specified. The Commission contracted that there was a tanker there. “The sale in this case of a ship implies a contract that the subject of the transfer did exist in the character of a ship” (Barr v. Gibson (1838) 3 M& W, at pp 399, 400 (150 ER, at pp 1200, 1201) ). If, on the other hand, the case of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) and this case ought to be treated as cases raising a question of “mistake”, then the Commission cannot in this case rely on any mistake as avoiding the contract, because any mistake was induced by the serious fault of their own servants, who asserted the existence of a tanker recklessly and without any reasonable ground. There was a contract, and the Commission contracted that a tanker existed in the position specified. Since there was no such tanker, there has been a breach of contract, and the plaintiffs are entitled to damages for that breach. (at p410)

20. Before proceeding to consider the measure of damages, one other matter should be briefly mentioned. The contract was made in Melbourne, and it would seem that its proper law is Victorian law. Section 11 of the Victorian Goods Act 1928 corresponds to s. 6 of the English Sale of Goods Act 1893, and provides that “where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made the contract is void”. This has been generally supposed to represent the legislature’s view of the effect of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065) . Whether it correctly represents the effect of the decision in that case or not, it seems clear that the section has no application to the facts of the present case. Here the goods never existed, and the seller ought to have known that they did not exist. (at p410)

21. The conclusion that there was an enforceable contract makes it unnecessary to consider the other two causes of action raised by the plaintiffs. As to each of these, the plaintiffs would have been, to say the least, faced with serious obstacles. We have already referred to the evidence bearing on the issue of fraud. And the claim based on negligence would have encountered the difficulties which were held by a majority of the Court of Appeal to be fatal to the plaintiff in Candler v. Crane Christmas & Co. (1951) 1 All ER 426 . (at p410)

Solle v Butcher

[1950] 1 KB 671

Denning LJ

“ It is quite plain that the parties were under a mistake. They thought that the flat was not tied down to a controlled rent, whereas in fact it was. In order to see whether the lease can be avoided for this mistake it is necessary to remember that mistake is of two kinds: first, mistake which renders the contract void, that is, a nullity from the beginning, which is the kind of mistake which was dealt with by the courts of common law; and, secondly, mistake which renders the contract not void, but voidable, that is, liable to be set aside on such terms as the court thinks fit, which is the kind of mistake which was dealt with by the courts of equity. Much of the difficulty which has attended this subject has arisen because, before the fusion of law and equity, the courts of common law, in order to do justice in the case in hand, extended this doctrine of mistake beyond its proper limits and held contracts to be void which were really only voidable, a process which was capable of being attended with much injustice to third persons who had bought goods or otherwise committed themselves on the faith that there was a contract. In the well-known case of Cundy v Lindsay, Cundy suffered such an injustice. He bought the handkerchiefs from the rogue, Blenkarn, before the Judicature Acts came into operation. Since the fusion of law and equity, there is no reason to continue this process, and it will be found that only those contracts are now held void in which the mistake was such as to prevent the formation of any contract at all.

Let me first consider mistakes which render a contract a nullity. All previous decisions on this subject must now be read in the light of Bell v Lever Bros Ld. The correct interpretation of that case, to my mind, is that, once a contract has been made, that is to say, once the parties, whatever their inmost states of mind, have to all outward appearances agreed with sufficient certainty in the same terms on the same subject matter, then the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends, or for fraud, or on some equitable ground. Neither party can rely or his own mistake to say it was a nullity from the beginning, no matter .that it was a mistake which to his mind was fundamental, and no matter that the other party knew that he was under a mistake. A fortiori, if the other party did not know of the mistake, but shared it. The cases where goods have perished at the time of sale, or belong to the buyer, are really contracts which are not void for mistake but are void by reason of an implied condition precedent, because the contract proceeded on the basic assumption that it was possible of performance. So far as cases later than Bell v Lever Bros Ld are concerned, I do not think that Sowler v Potter can stand with King’s Norton Metal Co Ld v Edridge, which shows that the doctrine of French law as enunciated by Pothier is no part of English law. Nor do I think that the contract in Nicholson and Venn v Smith-Marriott,[6] was void from the beginning.

Applying these principles, it is clear that here there was a contract. The parties agreed in the same terms on the same subject-matter. It is true that the landlord was under a mistake which was to him fundamental: he would not for one moment have considered letting the flat for seven years if it meant that he could only charge 140l. a year for it. He made th fundamental mistake of believing that the rent he could charge was not tied down to a controlled rent; but, whether it was his own mistake or a mistake common to both him and the tenant, it is not a ground for saying that the lease was from the beginning a nullity. Any other view would lead to remarkable results, for it would mean that, in the many cases where the parties mistakenly think a house is outside the Rent Restriction Acts when it is really within them, the tenancy would be a nullity, and the tenant would have to go; with the result that the tenants would not dare to seek to have their rents reduced to the permitted amounts lest they should be turned out.

Let me next consider mistakes which render a contract voidable, that is, liable to be set aside on some equitable ground. Whilst presupposing that a contract was good at law, or at any rate not void, the court of equity would often relieve a party from the consequences of his own mistake, so long as it could do so without injustice to third parties. The court, it was said, had power to set aside the contract whenever it was of opinion that it was unconscientious for the other party to avail himself of the legal advantage which he had obtained: Torrance v Bolton per James L.J.

The court had, of course, to define what it considered to be unconscientious, but in this respect equity has shown a progressive development. It is now clear that a contract will be set aside if the mistake of the one party has been induced by a material misrepresentation of the other, even though it was not fraudulent or fundamental; or if one party, knowing that the other is mistaken about the terms of an offer, or the identity of the person by whom it is made, lets him remain under his delusion and concludes a contract on the mistaken terms instead of pointing out the mistake. That is, I venture to think, the ground on which the defendant in Smith v Hughes would be exempted nowadays, and on which, according to the view by Blackburn J of the facts, the contract in Lindsay v Cundy, was voidable and not void; and on which the leas in Sowler v Potter, was, in my opinion, voidable and not void.

A contract is also liable in equity to be set aside if the parties were under a common misapprehension either as to facts or as to their relative and respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault. That principle was first applied to private rights as long ago as 1730 in Lansdown v Lansdown. There were four brothers, and the second and third of them died. The eldest brother entered on the lands of the deceased brothers, but the youngest brother claimed them. So the two rival brothers consulted a friend who was a local schoolmaster. The friend looked up a book which he then had with him called the Clerk’s Remembrancer and gave it as his opinion that the lands belonged to the youngest brother. He recommended the two of them to take further advice, which at first they intended to do, but they did not do so; and, acting on the friend’s opinion, the elder brother agreed to divide the estate with the younger brother, and executed deeds and bonds giving effect to the agreement. Lord Chancellor King declared that the documents were obtained by a mistake and by a misrepresentation of the law by the friend, and ordered them to be given up to be cancelled. He pointed out that the maxim ignorantia juris non excusat only means that ignorance cannot be pleaded in excuse of crimes. Eighteen years later, in the time of Lord Hardwicke, the same principle was applied in Bingham v Bingham.

If and in so far as those cases were compromises of disputed rights, they have been subjected to justifiable criticism, but, in cases where there is no element of compromise, but only of mistaken rights, the House of Lords in 1867 in the great case of Cooper v Phibbs, affirmed the doctrine there acted on as correct. In that case an uncle had told his nephew, not intending to misrepresent anything, but being in fact in error, that he (the uncle) was entitled to a fishery; and the nephew, after the uncle’s death, acting in the belief of the truth of what the uncle had told him, entered into an agreement to rent the fishery fl om the uncle’s daughters, whereas it actually belonged to the nephew himself. The mistake there as to the title to the fishery did not render the tenancy agreement a nullity. If it had done, the contract would have been void at law from the beginning and equity would have had to follow the law. There would have been no contract to set aside and no terms to impose. The House of Lords, however, held that the mistake was only such as to make it voidable, or, in Lord Westbury’s words, “liable to be set aside” on such terms as the court thought fit to impose; and it was so set aside.

The principle so established by Cooper v Phibbs has been repeatedly acted on: see, for instance, Earl Beauchamp v Winn,[11] and Huddersfield Banking Co Ld v Lister.[12] It is in no way impaired by Bell v Lever Bros Ld, which was treated in the House of Lords as a case at law depending on whether the contract was a nullity or not. If it had been considered on equitable grounds, the result might have been different. In any case, the principle of Cooper v Phibbs has been fully restored by Norwich Union Fire Insurance Society Ld v William H. Price Ld.[13]

Applying that principle to this case, the facts are that the plaintiff, the tenant, was a surveyor who was employed by the defendant, the landlord, not only to arrange finance for the purchase of the building and to negotiate with the rating authorities as to the new rateable values, but also to let the flats. He was the agent for letting, and he clearly formed the view that the building was not controlled. He told the valuation officer so. He advised the defendant what were the rents which could be charged. He read to the defendant an opinion of counsel relating to the matter, and told him that in his opinion he could charge 250l. and that there was no previous control. He said that the flats came outside the Act and that the defendant was “clear.” The defendant relied on what the plaintiff told him, and authorized the plaintiff to let at the rentals which he had suggested. The plaintiff not only let the four other flats to other people for a long period of years at the new rentals, but also took one himself for seven years at 250l. a year. Now he turns round and says, quite unashamedly, that he wants to take advantage of the mistake to get the flat at 140l. a year for seven years instead of the 250l. a year, which is not only the rent he agreed to pay but also the fair and economic rent; and it is also the rent permitted by the Acts on compliance with the necessary formalities. If the rules of equity have become so rigid that they cannot remedy such an injustice, it is time we had a new equity, to make good the omissions of the old. But, in my view, the established rules are amply sufficient for this case.

On the defendant’s evidence, which the judge preferred, I should have thought there was a good deal to be said for the view that the lease was induced by an innocent material misrepresentation by the plaintiff. It seems to me that the plaintiff was not merely expressing an opinion on the law: he was making an unambiguous statement as to private rights; and a misrepresentation as to private rights is equivalent to a misrepresentation of fact for this purpose: MacKenzie v Royal Bank of Canada. But it is unnecessary to come to a firm conclusion on this point, because, as Bucknill LJ has said, there was clearly a common mistake, or, as I would prefer to describe it, a common misapprehension, which was fundamental and in no way due to any fault of the defendant; and Cooper v Phibbs affords ample authority for saying that, by reason of the common misapprehension, this lease can be set aside on such terms as the court thinks fit.

The fact that the lease has been executed is no bar to this relief. No distinction can, in this respect, be taken between rescission for innocent misrepresentation and rescission for common misapprehension, for many of the common misapprehensions are due to innocent misrepresentation; and Cooper v. Phibbs66 shows that rescission is available even after an agreement of tenancy has been executed and partly performed. The observations in Seddon v North Eastern Salt Co Ld, have lost all authority since Scrutton L.J., threw doubt on them in Lever Bros Ld v Bell, and the Privy Council actually set aside an executed agreement in Mackenzie v Royal Bank of Canada. If and in so far as Angel v Jay decided that an executed lease could not be rescinded for an innocent misrepresentation, it was in my opinion, a wrong decision. It would mean that innocent people would be deprived of their right of rescission before they had any opportunity of knowing they had it. I am aware that in Wilde v Gibson, Lord Campbell said that an executed conveyance could be set aside only on the ground of actual fraud; but this must be taken to be confined to misrepresentations as to defects of title on the conveyance of land.

In the ordinary way, of course, rescission is only granted when the parties can be restored to substantially the same position as that in which they were before the contract was made; but, as Lord Blackburn said in Erlanger v New Sombrero Phosphate Co: “The practice has always been for a court of equity to give this relief whenever, by the exercise of its powers, it can do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract.” That indeed was what was done in Cooper v Phibbs. Terms were imposed so as to do what was practically just. What terms then, should be imposed here? If the lease were set aside without any terms being imposed, it would mean that the plaintiff, the tenant, would have to go out and would have to pay a reasonable sum for his use and occupation. That would, however, not be just to the tenant.

The situation is similar to that of a case where a long lease is made at the full permitted rent in the common belief that notices of increase have previously been served, whereas in fact they have not. In that case, as in this, when the lease is set aside, terms must be imposed so as to see that the tenant is not unjustly evicted. When Sir John Romilly MR, was faced with a somewhat similar problem, he gave the tenant the option either to agree to pay the proper rent or to go out: see Garrard v Frankel; and when Bacon V-C. had a like problem before him he did the same, saying that “the object of the court is, as far as it can, to put the parties into the position in which they would have been in if the mistake had not happened”: see Paget v Marshall.[19] If the mistake here had not happened, a proper notice of increase would have been given and the lease would have been executed at the full permitted rent. I think that this court should follow these examples and should impose terms which will enable the tenant to choose either to stay on at the proper rent or to go out.

The terms will be complicated by reason of the Rent Restriction Acts, but it is not beyond the wit of man to devise them. Subject to any observations which the parties may desire to make, the terms which I suggest are these: the lease should only be set aside if the defendant is prepared to give an undertaking that he will permit the plaintiff to be a license of the premises pending the grant of a new lease. Then, whilst the plaintiff is a licensee, the defendant will in law be in possession of the premises, and will be able to serve on the plaintiff, as prospective tenant, a notice under s. 7, sub-s. 4, of the Act of 1938 increasing the rent to the full permitted amount. The defendant must further be prepared to give an undertaking that he will serve such a notice within three weeks from the drawing up of the order, and that he will, if written request is made by the plaintiff, within one month of the service of the notice, grant him a new lease at the full permitted amount of rent, not, however, exceeding 250l. a year, for a term expiring on September 29, 1954, subject in all other respects to the same covenants and conditions as in the rescinded lease. If there is any difference of opinion about the figures stated in the notice, that can, of course, be adjusted during the currency of the lease. If the plaintiff does not choose to accept the licence or the new lease, he must go out. He will not be entitled to the protection of the Rent Restriction Acts because, the lease being set aside, there will be no initial contractual tenancy from which a statutory tenancy can spring.

In my opinion, therefore, the appeal should be allowed. The declaration that the standard rent of the flat is 140l. a year should stand. An order should be made on the counterclaim that, on the defendant’s giving the undertakings which I have mentioned, the lease be set aside. An account should be had to determine the sum payable for use and occupation. The plaintiff’s claim for repayment of rent and for breach of covenant should be dismissed. In respect of his occupation after rescission and during the subsequent licence, the plaintiff will be liable to pay a reasonable sum for use and occupation. That sum should, prima facie, be assessed at the full amount permitted by the Acts, not, however, exceeding 250&L a year. Mesne profits as against a trespasser are assessed at the full amount permitted by the Acts, even though notices of increase have not been served, because that is the amount lost by the landlord. The same assessment should be made here, because the sums payable for use and occupation are not rent, and the statutory provisions about notices of increase do not apply to them. All necessary credits must, of course, be given in respect of past payments, and so forth.

Herman and Others v. Owners of S.S. “Vicia.”

[1942] IR 305

Hanna J.

What is frustration? In the case of Joseph Constantine S.S. Line, Ltd., v. Imperial Smelting Corporation Ltd. (1),various definitions are given of frustrationincidental to the main question involved in that casenamely, upon whom the burden of proof lies. In that case, the ship in question, the “Kingswood,” was chartered to agents of the respondents in a voyage with ores from Port Pirie in South Australia to Europe. Before she became an”arrived ship” at Port Pirie, there was a severe explosion in the neighbourhood of her auxiliary boiler, causing such damage that she could not perform her charter party. As the headnote says (2), that was “a destruction of the essential subject-matter of the contract so as to frustrate the commercial object of the adventure.” In that respect the case differs from the one under consideration. As there was no negligence or default found with either party, it was held to discharge all liability under the charter. At p. 29, Viscount Simon L.C. says that “when ‘frustration’ in the legal sense occurs, it does not merely provide one party with a defence in an action brought by the other. It kills the contract itself and discharges both parties automatically. The plaintiff sues for breach at a past date and the defendant pleads that at that date no contract existed.” He further says that frustration depends on the terms of the contract and the surrounding circumstances of each case, as some kinds of impossibility may not discharge the contract at all.

Lord Maughan says, at p. 31, that “frustration is based on the presumed common intention of the parties,” and he also states that the legal rights already accrued are unaffected.

At pp. 35, 36, Lord Wright, while recognising frustration by the destruction of the subject-matter, gives a wider conception of impossibility and says: “Another illustration is where the actual object still exists and is available, but the object of the contract as contemplated by both parties was its employment for a particular purpose, which has become impossible, as in the Coronation Gases. In these and similar cases, where there is not in the strict sense impossibility by some casual happening, there has been so vital a change in the circumstances as to defeat the contract. . . . The common object of the parties is frustrated. The contract has perished, quoad any rights or liabilities subsequent to the change.” He then cites passages from the judgment in Paradine v. Jane (1); and from the judgments in Hirji Mulji v. Cheong Yue S.S. Co. (2); Couturier v. Hastie (3);and Dahl v. Nelson, Donkin & Co. (4), and then he says:”I have quoted these statements of law to emphasise that the Court is exercising its powers, when it decides that a contract is frustrated, in order to achieve a result which is just and reasonable.”

The converse proposition is that it is not to be held to be frustrated unless it is just and reasonable.

Lord Porter, in the same case, seems to give a larger interpretation to frustration, where he says, at p. 40:”Frustration is the term now in common use in cases in which the performance of a contract becomes impossible because its subject-matter has ceased to be available for the purpose for which both parties intended it to be used.”He points out that in that case no question arises as to the extension of the doctrine to a case where the subject-matter of the contract is not itself destroyed but the underlying purpose alone has been frustrated.

On these principles I am of opinion that the evidence on the part of the owners is not sufficient to justify a finding of frustration of the seamen’s contracts. Adopting the words of Lord Wright, I decline to hold that it would be just and reasonable under the circumstances to decide that the seaman’s contracts had been frustrated. The vessel had gone from Lisbon to Tampa without a convoy and was not interfered with. She sailed for thirteen days alone in the Atlantic without a convoy and without a proper warrant. I can find no case similar in facts to this, where it has been alleged, or held to be, a frustration for the owners of the vessel, apart from any hostile act of an enemy, to be unwilling to send her to sea on account of the risks and perils of war, with possible interception or seizure. It seems to me that the vessel could have reasonably reached Cardiff to obtain bunkers as she had the undertaking of the British Ministry of Shipping to give her facilities to a port in the United Kingdom. As Lord Sumner described the rule in Hirji Mulji v. Cheong Yue S.S. Co. (2) at p. 510: “The rule as to frustration is to reconcile justice with the absolute contract. The seamen’s contract was in this case an absolute contract. If the contingency was known to the parties as something which might happen and they did not provide for it, the contract ought to stand.”

Upon this point of the implied term in the contract, in the case of Emanuel v. La Compagnie Fermière (1), Lord Esher says: “A term which was not actually contained in a written contract could not be implied unless the Court came to a clear conclusion that both parties must have intended that term to be implied. It was not enough that both parties should have contemplated that a certain state of circumstances would exist. The Court must be satisfied that the party against whom the implied term was to be enforced intended to bind himself that that state of circumstances should exist.” A similar principle is stated by Viscount Simon L.C. in the case of Luxor, Ltd. v. Cooper (2),and in Jacob Marcus & Co. v. Credit Lyonnais (3)Bowen L.J. said: “One of the incidents which the English law attaches to a contract is that . . . a person who expressly contracts absolutely to do a thing not naturally impossible, is not excused for non-performance because of being prevented by vis major.” And in the case of Larrinaga & Co. v. Sociétié Franco-Americaine des Phosphates (4),Lord Sumner said: “If the appellants’ own ships were under requisition, they could have fulfilled their contract with other ships, of which they might be able to obtain the disposition.” Applying that principle to this case the agents here might have made arrangements to take the seamen back to America in other vessels, but they did not do so and relied upon frustration.

This case is obviously different on the facts from any other, and the critical point is the British shipping warrant. I am not satisfied that all the four plaintiffs had information as to the British shipping warrant having expired, or that the Captain did not renew it. The Captain knew, and it would have been his duty to anticipate, that if he did not get it renewed to the United Kingdom while in Charleston, or Halifax, or Sydney, there might be some difficulty in Dublin, and, therefore, he should have included in the conditions of the contract the rights of the crew on the kind of frustration which actually occurred as well as frustration by “torpedo, mine or loss.” As he did not, I find as a fact that the alleged frustration in Dublin, if the British shipping warrant was necessary and the letter from the British Ministry of Shipping insufficient, was due to the neglect of the Captain who was responsible to the owners. If the full British warrant was not absolutely necessary and the letter from the British Ministry of Shipping sufficient, then there was no frustration in the Port of Dublin as it would have carried the vessel to Cardiff.

For these reasons I am of opinion, when the case is carefully analysed, that in the Port of Dublin there was no ground for concluding that there was impossibility of performance. There is no evidence that the British Ministry of Shipping definitely refused a new warrant and, in my judgment, Turner Brightman & Company’s concern was really to reduce expenses until arrangements had been made for the trading of the vessel. If the ship had gone to Cardiff she might have got, as previously, a cargo to Lisbon and a British warrant.

If there was frustration I think having regard to the full argument before me, I should investigate the question as to whether frustration, while it might in some cases cover a breach of a charter party, would in any case apply to the seamen’s contracts for repatriation.

Seamen’s contracts have always stood before the law in a peculiarly favourable position, as many

Davis Contractors v Fareham Urban DC

[1956] UKHL 3 [1956] AC 696, [1956] 2 All ER 145

Lord Reid

Frustration has often been said to depend on adding a term to the contract

by implication: for example, Lord Loreburn in Tamplin Steamship Co. Ltd.

v. Anglo Mexican Petroleum Products Co. Ltd. [1916] 2 A.C. 397 at p. 404,

after quoting language of Lord Blackburn, said: ” That seems to me another

” way of saying that from the nature of the contract it cannot be supposed

” the parties, as reasonable men, intended it to be binding on them under

” such altered conditions. Were the altered conditions such that, had they

” thought of them, they would have taken their chance of them, or such

” that as sensible men they would have said: ‘ If that happens, of course,

“‘ it is all over between us”? What, in fact, was the true meaning of the

” contract? Since the parties have not provided for the contingency, ought a

” court to say it is obvious they would have treated the thing as at an end? “.

I find great difficulty in accepting this as the correct approach because it

seems to me hard to account for certain decisions of this House in this way.

I cannot think that a reasonable man in the position of the seaman in Horlock

v. Beal [1916] 1 A.C. 486 would readily have agreed that the wages payable

to his wife should stop if his ship was caught in Germany at the outbreak

of war, and I doubt whether the charterers in the Bank Line case could

have been said to be unreasonable if they had refused to agree to a term

that the contract was to come to an end in the circumstances which occurred.

These are not the only cases where I think it would be difficult to say that a

reasonable man in the position of the party who opposes unsuccessfully

a finding of frustration would certainly have agreed to an implied term

bringing it about.

I may be allowed to note an example of the artificiality of the theory of

an an implied term given by Lord Sands in Scott & Sons v. Del Sel [1922]

S.C. 592 at p. 595: ” A tiger has escaped from a travelling menagerie. The

” milk girl fails to deliver the milk. Possibly the milkman may be exonerated

” from any breach of contract: but even so it would seem hardly reasonable

” to base that exoneration on the ground that ‘ tiger days excepted ‘ must be

” held as if written into the milk contract”.

I think that there is much force in Lord Wright’s criticism in Denny, Mott

& Dickson at p. 275: ” The parties did not anticipate fully and completely,

” if at all, or provide for what actually happened. It is not possible, to my

” mind, to say that, if they had thought of it, they would have said: ‘ Well, if

” ‘ that happens, all is over between us ‘. On the contrary, they would almost

” certainly, on the one side or the other, have sought to introduce reservations

” or qualifications or compensations “.

It appears to me that frustration depends, at least in most cases, not on

adding any implied term but on the true construction of the terms which are

in the contract read in light of the nature of the contract and of the relevant

surrounding circumstances when the contract was made. There is much

authority for this view. In British Movietonews Ltd. v. London & District

Cinemas, Ltd. [1952] A.C. 166 at p. 185 Lord Simon said: ” If, on the other

” hand, a consideration of the terms of the contract, in the light of the circum-

” stances existing when it was made, shews that they never agreed to be bound

” in a fundamentally different situation which has now unexpectedly emerged,

” the contract ceases to bind at that point—not because the court in its

” discretion thinks it just and reasonable to qualify the terms of the contract,

” but because on its true construction it does not apply in that situation “.

In Parkinson v. Commissioners of Works [1949] 2 K.B. 632 Asquith, LJ.

said (at p. 667): ” In each case a delay or interruption was fundamental

” enough to transmute the job the contractor had undertaken into a job of a

” different kind, which the contract did not contemplate and to which it

“could not apply, although there was nothing in the express language of

” either contract to limit its operation in this way “. I need not multiply

citations but I might note a reference by Lord Cairns so long ago as 1876 to

” additional or varied work so peculiar so unexpected and so different from

” what any person reckoned or calculated upon ” (Thorn v. The Mayor and

Commonalty of London, 1 App. Cas 120 at p. 127). On this view there is

no need to consider what the parties thought or how they or reasonable men

in their shoes would have dealt with the new situation if they had foreseen

it. The question is whether the contract which they did make is, on its

true construction, wide enough to apply to the new situation: if it is not

then it is at an end.

……

The Appellants’ case must rest on frustration, the termination of the con-

tract by operation of law on the emergence of a fundamentally different

situation. Using the language of Asquith, L.J. (as be then was) which I have

already quoted, the question is whether the causes of delay or the delays were

” fundamental enough to transmute the job the contractor had undertaken

” into a job of a different kind, which the contract did not contemplate and to

” which it could not apply “. In most cases the time when the new situation

emerges is clear, there has been some particular event which makes all the

difference. It may be that frustration can occur as a result of gradual change,

but if so the first question I would be inclined to ask would be when the

frustration occurred and when the contract came to an end. It has been

assumed in this case that it does not matter at what point during the progress

of the work the contract came to an end, and that, whatever the time may

have been, if the contract came to an end at some time the whole of the

work must be paid for on a quantum meruit basis. I do not pursue this

matter because the Respondents have admitted that if there was frustration

at any time the Appellants are entitled to the sum awarded. But even so,

I think one must see whether there was any tune at which the Appellants

could have said to the Respondents that the contract was at an end and that

if the work was to proceed there must be a new contract, and I cannot find

any time from first to last at which they would have been entitled to say

that the job had become a job of a different kind which the contract did not

contemplate. There is a difficulty about a party being entitled to go on

and finish the work without raising the question that a new agreement is

necessary and then maintain that frustration occurred at some time while

the work was in progress, but again I do not pursue that matter because it

does not arise in view of the course this case has taken.

In a contract of this kind the contractor undertakes to do the work for a

definite sum and he takes the risk of the cost being greater or less than

he expected. If delays occur through no one’s fault that may be in the con-

templation of the contract and there may be provision for extra time being

given: to that extent the other party takes the risk of delay. But he does

not take the risk of the cost being increased by such delay. It may be that

delay could be of a character so different from anything contemplated that

the contract was at an end, but in this case in my opinion the most that

could be said is that the delay was greater in degree than was to be expected.

It was not caused by any new and unforeseeable factor or event: the job

proved to be more onerous but it never became a job of a different kind

from that contemplated in the contract.

Bush v. Whitehaven Trustees appears to me to be a very special case and

it must be read in light of the development of the law in later cases. I agree

with your Lordships’ comments on it and I can get little assistance from it

for the decision of the present case. I agree that this appeal should be

dismissed.

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd

House of Lords [1942] UKHL 4, [1943] AC 32, [1942] 2 All ER 122

Lord Wright

Keywords

“My Lords, the claim in the action was to recover a prepayment of 1000l. made on account of the price under a contract which had been frustrated. The claim was for money paid for a consideration which had failed. It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution. The root idea was stated by three Lords of Appeal, Lord Shaw, Lord Sumner and Lord Carson, in R. E. Jones, Ld. v. Waring & Gillow, Ld, which dealt with a particular species of the category, namely, money paid under a mistake of fact. Lord Sumner referring to Kelly v Solari, where money had been paid by an insurance company under the mistaken impression that it was due to an executrix under a policy which had in fact been cancelled, said: “There was no real intention on the company’s part to enrich her.” Payment under a mistake of fact is only one head of this category of the law. Another class is where, as in this case, there is prepayment on account of money to be paid as consideration for the performance of a contract which in the event becomes abortive and is not performed, so that the money never becomes due. There was in such circumstances no intention to enrich the payee. This is the class of claims for the recovery of money paid for a consideration which has failed. Such causes of action have long been familiar and were assumed to be common-place by Holt CJ in Holmes v Hall in 1704. Holt C.J. was there concerned only about the proper form of action and took the cause of the action as beyond question. He said: “If A give money to B to pay to C upon C’s giving writings, etc., and C will not do it, indebit will lie for A against B for so much money received to his use. And many such actions have been maintained for earnests in bargains, when the bargainor would not perform, and for premiums for insurance, when the ship, etc., did not go the voyage.” The Chief Justice is there using earnest as meaning a prepayment on account of the price, not in the modern sense of an irrevocable payment to bind the bargain, and he is recognizing that the indebitatus assumpsit had by that time been accepted as the appropriate form of action in place of the procedure which had been used in earlier times to enforce these claims such as debt, account or case.

By 1760 actions for money had and received had increased in number and variety. Lord Mansfield C.J., in a familiar passage in Moses v Macferlan, sought to rationalize the action for money had and received, and illustrated it by some typical instances. “It lies,” he said, “for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition (express, or implied;) or extortion; or oppression; or an undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.” Lord Mansfield prefaced this pronouncement by observations 136 which are to be noted. “If the defendant be under an obligation from the ties of natural justice, to refund; the law implies a debt and gives this action [sc. indebitatus assumpsit] founded in the equity of the plaintiff’s case, as it were, upon a contract (‘quasi ex contractu’ as the Roman law expresses it).” Lord Mansfield does not say that the law implies a promise. The law implies a debt or obligation which is a different thing. In fact, he denies that there is a contract; the obligation is as efficacious as if it were upon a contract. The obligation is a creation of the law, just as much as an obligation in tort. The obligation belongs to a third class, distinct from either contract or tort, though it resembles contract rather than tort. This statement of Lord Mansfield has been the basis of the modern law of quasi-contract, notwithstanding the criticisms which have been launched against it. Like all large generalizations, it has needed and received qualifications in practice. There is, for *63 instance, the qualification that an action for money had and received does not lie for money paid under an erroneous judgment or for moneys paid under an illegal or excessive distress. The law has provided other remedies as being more convenient. The standard of what is against conscience in this context has become more or less canalized or defined, but in substance the juristic concept remains as Lord Mansfield left it.

The gist of the action is a debt or obligation implied, or, more accurately, imposed, by law in much the same way as the law enforces as a debt the obligation to pay a statutory or customary impost. This is important because some confusion seems to have arisen though perhaps only in recent times when the true nature of the forms of action have become obscured by want of user. If I may borrow from another context the elegant phrase of Viscount Simon L.C. in United Australia Ltd v Barclays Bank Ltd, there has sometimes been, as it seems to me, “a misreading of technical rules, now happily swept away.” The writ of indebitatus assumpsit involved at least two averments, the debt or obligation and the assumpsit. The former was the basis of the claim and was the real cause of action. The latter was merely fictitious and could not be traversed, but was necessary to enable the convenient and liberal form of action to be used in such cases. This fictitious assumpsit or promise was wiped out by the Common Law Procedure Act 1852. As Bullen and Leake (Precedents of Pleading, 3rd ed., p. 36) points out, this Act, by s. 3, provided that the plaintiff was no longer required to specify the particular form of action in which he sued, and by s. 49 that (inter alia) the statement of promises in indebitatus counts which there was no need to prove were to be omitted; “the action of indebitatus assumpsit,” the authors add, “is [that is by 1868] virtually become obsolete.” Lord Atkin in the United Australia case 138 , after instancing the case of the blackmailer, says: “The man has my money which I have not delivered to him with any real intention of passing to him the property. I sue him because he has the actual property taken.” He adds: “These fantastic resemblances of contracts invented in order to meet requirements of the law as to forms of action which have now disappeared should not in these days be allowed to affect actual rights.” Yet the ghosts of the forms of action have been allowed at times to intrude in the ways of the living and impede vital functions of the law. Thus in Sinclair v Brougham, Lord Sumner stated that “all these causes of action [sc. for money had and received] are common species of the genus assumpsit. All now rest, and long have rested, upon a notional or imputed promise to repay.” This observation, which was not necessary for the decision of the case, obviously does not mean that there is an actual promise of the party. The phrase “notional or implied promise” is only a way of describing a debt or obligation arising by construction of law. The claim for money had and received always rested on a debt or obligation which the law implied or more accurately imposed, whether the procedure actually in vogue at any time was debt or account or case or indebitatus assumpsit. Even the fictitious assumpsit disappeared after the Act of 1852. I prefer Lord Sumner’s explanation of the cause of action in Jones’s case. This agrees with the words of Lord Atkin which I have just quoted, yet serious legal writers have seemed to say that these words of the great judge in Sinclair v Brougham closed the door to any theory of unjust enrichment in English law. I do not understand why or how. It would indeed be a reductio ad absurdum of the doctrine of precedents. In fact, the common law still employs the action for money had and received as a practical and useful, if not complete or ideally perfect, instrument to prevent unjust enrichment, aided by the various methods of technical equity which are also available, as they were found to be in Sinclair v Brougham.

Must, then, the court stay its hand in what would otherwise appear to be an ordinary case for the repayment of money paid in advance on account of the purchase price under a contract for the sale of goods merely because the contract has become impossible of performance and the consideration has failed for that reason? The defendant has the plaintiff’s money. There was no intention to enrich him in the events which happened. No doubt, when money is paid under a contract it can only be claimed back as for failure of consideration where the contract is terminated as to the future. Characteristic instances are where it is dissolved by frustration or impossibility or by the contract becoming abortive for any reason not involving fault on the part of the plaintiff where the consideration, if entire, has entirely failed, or where, if it is severable, it has entirely failed as to the severable residue, as in Rugg v Minett. The claim for repayment is not based on the contract which is dissolved on the frustration but on the fact that the defendant has received the money and has on the events which have supervened no right to keep it.”

Maritime National Fish Ltd v Ocean Trawlers Ltd

[1935] UKPC 1

. thought that the appellants when they renewed the charter in 1932 were well informed of the legislation and when they renewed the charter at a reduced rate and inserted no protecting clause in this regard, must be deemed to have taken the risk that a licence would not be granted. They also thought that if there was frustration of the adventure, it resulted from the deliberate act of the appellants in selecting the three trawlers for which they desired licences to be issued.

Their Lordships are of opinion that the latter ground is sufficient to determine this appeal. Great reliance was placed in the able argument of Mr. Smith for the appellants on the Bank Line v. Capel [1919] AC 435, and in particular on the judgment of Lord Sumner in that case. That case was in principle very different from this, because the vessel which was chartered in that case was actually taken from the control of the shipowners for a period such as to defeat the contemplated adventure: it was in consequence impossible during that time for the shipowners to place the vessel at the charterers’ disposal at all. In the present case the St. Cuthbert was not requisitioned: it remained in the respondents’ control, who were able and willing to place it at the appellants’ disposal: what happened was that the appellants could not employ the St. Cuthbert for trawling with an otter trawl. No doubt it was expressed in the charter party that the St. Cuthbert should be employed under the charter in the fishing industry only, but the respondents did not warrant the continued availability of the vessel for that employment nor was payment of hire made dependent on that condition. The St. Cuthbert was available for the appellants to make such use of her as they desired and were able to make. This case is more analogous to such a case as Krell v. Henry [1903] 2 K.B. 740, where the contract was for the hire of a window for a particular day: it was not expressed but it was mutually understood that the hirers wanted the window in order to view the Coronation procession: when the procession was postponed by reason of the unexpected illness of King Edward, it was held that the contract was avoided by that event: the person who was letting the window was ready and willing to place it at the hirer’s disposal on the agreed date; the hirer, however, could not use it for the purpose which he desired. It was held that the contract was dissolved, because the basis of the contract was that the procession should take place as contemplated. The correctness of that decision has been questioned, for instance, by Lord Finlay, L.C., in Larrinaga v. Societe Franco-Americaine des Phosphates, 29 Com. Cases 1 at p. 7: Lord Finlay observes :–

“It may be that the parties contracted in the expectation that a particular event would happen, each taking his chance, but that the actual happening of the event was not made- the basis .of the contract.”

The authority is certainly not one to be extended: it is particularly difficult to apply where as in the present case, the possibility of the event relied on as constituting a frustration of the adventure (here the failure to obtain a licence) was known to both parties when the contract was made, but the contract entered into was absolute in terms so far as concerned that known possibility. It may be asked whether in such cases there is any reason to throw the loss on those who have undertaken to place the thing or service for which the contract provides at the other parties’ disposal and are able and willing to do so. In Hirji Mulji v. Cheong Yue Steamship Co. [1926J A.C. 497, Lord Sumner at p. 510 speaks of frustration as “a device by which the rule as to absolute contracts are reconciled with a special exception which justice demands” In a case such as the present it may be questioned whether the Court should imply a condition resolutive of the contract (which is what is involved in frustration) when the parties might have inserted an express condition to that effect but did not do so, though the possibility that things might happen as they did, was present in their minds when they made the contract.

This was one of the grounds on which the Judges of the Supreme Court were prepared to decide this case. Their Lordships do not indicate any dissent from the reasoning of the Supreme Court on this point, but they did not consider it necessary to heal’ a full argument, or to express any final opinion about it, because in their judgment the case could be properly decided on the simple conclusion that it was the act and election of the appellants which prevented the St. Cuthbert from being licensed for fishing with an otter trawl. It is clear that the appellants were free to select any three of the five trawlers they were operating and could, had they willed, have selected the St. Cuthbert as one, in which event a licence would have been granted to her. It is immaterial to speculate why they preferred to put forward for licences the three trawlers which they actually selected. Nor is it material, as between the appellants and the respondents that the appellants were operating other trawlers to three of which they gave the preference. What matters is that they could have got a. licence for the St. Cuthbert if they had so minded. If the case be figured as one in which the St. Cuthbert was removed from the category of privileged trawlers, it was by the appellants’ hand that she was so removed, because it was their hand that guided the hand of the Minister in placing the licences where he did and thereby excluding the St. Cuthbert. The essence of ” frustration” is that it should not be due to the act or election of the party. There does not appear to be any authority which has been decided directly on this point. There is, however, a reference to the question in the speech of Lord Sumner in the Bank Line v. Capel (supra) at p. 452. What he says is

” One matter I mention only to get rid of it. When the shipowners were first applied to by the Admiralty for a ship they named three, of which the Quito was one, and intimated that she was the one they preferred to give up. I think it is now well settled that the principle of frustration of an adventure assumes that the frustration arises without blame or fault on either side. Reliance cannot be placed on a -self-induced frustration; indeed, such conduct might give the other party the option to treat the contract as repudiated. Nothing, however, was made of this in the courts below, and I will not now pursue it.”

A reference to the record in the House of Lords confirms Lord Sumner’s view that the Court below had not considered the point, nor had they evidence or material for its consideration. Indeed in the war time the Admiralty, when minded to requisition a vessel, were not likely to give effect to the preference of an owner, but rather to the suitability of the vessel for their needs or her immediate readiness and availability. However the point does directly arise in the facts now before the Board and their Lordships are of opinion that the loss of the St. Cuthbert’s licence can correctly be described, quoad the appellants as ” a self induced frustration.” Lord Sumner in Hirji Mulji v. Cheong Yue Steamship Co. (supra) at p. 507 quotes from Lord Blackburn in Dahl v. Nelson 6 A.C. 38, who at p. 53 refers to a ” frustration ” as being a matter ” caused by something for which neither party was responsible”: and again (p. 508) he quotes Brett J.’s words which postulate as one of the conditions of frustration that ” it should be without any default of either party.” It would be easy but is not necessary. to multiply quotations to the same effect. If either of these tests is applied to this case, it cannot in their Lordships’ judgment be predicated that what is here claimed to be a frustration, that is, by reason of the withholding of the licence, was a matter for which the appellants were not responsible or which happened without any default on their part. In truth, it happened in consequence of their election. If it be assumed that the performance of the contract was dependent on a licence being granted, it was that election which prevented performance, and on that assumption it was the appellants’ own default which frustrated the adventure: the appellants cannot rely on their own default to excuse them from liability under the contract.

On this ground, without determining any other question, their Lordships are of opinion that the appeal should be dismissed with costs.

They will humbly so advise His Majesty.

Foot Locker Retail Ireland Limited v Percy Nominees Limited

[2020/6301 P] (WLIE 1)

High Court [Approved]

30 November 2021

unreported
[2021] IEHC 749
Mr. Justice Brian O’Moore

November 30, 2021

JUDGMENT
1. It was once widely believed that every adult citizen of the United States could remember where they were and what they were doing at the time that they were told of the assassination of President Kennedy. A similar phenomenon of collective memory may not have been triggered by the announcement in Washington D.C. by An Taoiseach, in March 2020, of the dramatic steps needed to limit the spread of Covid-19 in Ireland but the unprecedented nature of these measures, and the speed with which they were introduced, will be remembered by most, if not all, of those affected by them.

2. Against the background of the arrival of Covid-19 in Ireland, and the measures taken by the Government to control the spread of the virus, on 17th March, 2020 the plaintiff (‘Foot Locker’) decided to close all Foot Locker stores in the State. There were seven Foot Locker stores in operation in Ireland at the time. These included the store at Grafton Street, Dublin 2. Subsequent to this decision, on 24th March, 2020 pursuant to emergency legislation non-essential retail stores (including the Foot Locker shops) were obliged to close.

3. In the months that followed, Foot Locker was legally unable to operate the Grafton Street store as it had in the past. It attempted to engage with its landlord (‘Percy Nominees’), the defendant in these proceedings. Such engagement proved fruitless. It is not a matter for me to determine who was in the right and who in the wrong in this regard; indeed, there may be no moral right or wrong side to the argument about what accommodation might have been possible between Foot Locker and Percy Nominees. Foot Locker did reach arrangements with other of its landlords. As an agreement with Percy Nominees was not possible, by letter of 8th June, 2020 the solicitors for Foot Locker wrote to Percy Nominees setting out the tenant’s position. In that letter, it was proposed on behalf of Foot Locker that:-

“These premises are held for a term of thirty-five years from the 20th of March 1990. Among the covenants set forth in the lease is the necessity of the tenant to:

• Comply with enactments “for the time being enforced or any orders or regulations thereunder for the time being enforced ”;
• Not to use or permit the demised premises or any part thereof to be used for any purpose other than at ground floor as a high quality retail shop and on the upper floor levels such a retail shop or as a public bar and restaurant (with ancillary offices);
• To keep the premises open at all reasonable times during usual business hours.
It is clear since the introduction of the strict regime of retail openings under the Covid-19 pandemic, as declared by the World Health Organisation that our client has been unable to open this premises or make any use thereof for retail purposes since 17th March 2020.

It is now the case that there will be a limited retail opportunity for opening from today the 8th June 2020. However, it is clear that such an opening is nothing like what is either envisaged by or provided for under the said lease. Trading could not be said to be of a high-retail shop and the market rent which is set for this property is completely at odds with the potential or possible legal use to be made of this unit.

As such, our client firstly believes that there is no basis under which there is a liability for rent for the period during which the premises was closed being the period from 17th March 2020 to 7th June 2020 in order for them to comply with the Covid-19 Regulations. Secondly, it is also clear that our client cannot be in a position in which to discharge a rent for premises which simply cannot be operated or used for the purposes which are envisaged in the lease or envisaged under the rent last fixed under the rent review provisions under the lease.

Out client considers that the lease is in effect now entirely frustrated both by the Covid-19 restrictions which have been put in place to date and those which are now to be put in place by the authorities going forward.

Our client will not have any opportunity to obtain or operate anything like the type of retail unit which was the subject of this lease and which has been operating since its commencement date.

In the circumstances our client will, entirely without prejudice to this position, operate this unit for a limited period of time and expressly reserve the right to treat this lease as entirely frustrated and should be extinguished on that basis.” [Original Emphasis]

4. The response of Percy Nominees was unmistakably direct. On the 21st of July 2020, the landlord served a 21-day notice seeking payment of all arrears failing which a petition would be brought to wind up Foot Locker.

5. In the light of the threat of a winding up petition, Foot Locker instituted these proceedings on the 11th September 2020.

6. At the outset, Foot Locker sought a declaration that the lease was frustrated and that Foot Locker had no liability for rental payments under the lease as and from 24th March, 2020. This, at least, was the claim made in the Plenary Summons. The Statement of Claim, delivered on 19th October, 2020, sought somewhat different reliefs. In particular, the declaration sought in the Statement of Claim was a declaration to the effect that the “common intention of the parties has been frustrated in whole or in part”. Equally, a declaration was sought that Foot Locker has no liability for rental payments under the lease as and from 24th March, 2020 “or a proportional part thereof”.

7. By the time the trial of the action opened before me on 19th October, 2021, the claim made on behalf of Foot Locker had radically altered from one that the common intention of the parties had been frustrated (and that the lease was at an end) to a claim put in this way by counsel for Foot Locker:-

“We’ve claimed that there is a partial frustration of the terms of the lease such that the tenant should not be obliged to pay the rent for the periods it was closed.”

8. This case therefore presents two issues:-

(i) Is there such a thing as partial frustration of a lease?
(ii) If the answer to (i) is in the affirmative, has Foot Locker established an entitlement to a declaration that the lease in respect of Grafton Street has been partially frustrated?
9. I will deal with the issues in the case under the following headings:-

(a) The Lease;
(b) The Evidence;
(c) The Submissions of the Parties;
(d) Analysis; and
(e) Conclusion.
A. The Lease
10. The lease is dated 14th March, 1990. Originally, it was between AIIM Nominees Limited (as landlord) and Xtravision PLC (as tenant). Percy Nominees is now the landlord; Foot Locker is now the tenant.

11. While a number of the terms of the lease were emphasised to me by counsel on both sides, the more important ones are those stressed by counsel for Foot Locker. These are:-

“3.4.1. At all times during the said term to observe and comply in all respects with the provisions and the requirements of any and every enactment for the time being in force or any orders or regulations thereunder for the time being in force and to do and execute or cause to be done and executed all such works as under or by virtue of any such enactment of any orders or regulations thereunder for the time being in force are or shall be properly directed or necessary to be done or executed upon or in respect of the demised premises or any part thereof whether by the owner landlord lessee tenant or occupier and at all times to keep the Landlord indemnified against all claims demands and liability in respect thereof and without derogating from the generality of the foregoing to comply with the requirements of any local or other statutory authority and the order or orders of any Court of competent jurisdiction.”

12. The “User” clause at 3.19:-

“3.19. Not to use or permit the demised premises or any part thereof to be used for any purpose other than at ground floor as a high quality retail shop and at upper floor levels as such a retail shop or as a fully licensed public bar and restaurant with ancillary offices.

AND for no other purposes save with the Landlord’s written consent which consent shall not be unreasonably refused or delayed but it is hereby agreed and declared that it shall be reasonable for the Landlord to refuse its consent on the grounds that the change of user sought would be substantially increase the rate of insurance in respect of the demised premises or nearby adjoining premises.”

13. The “Keep Open” requirement at 3.19.2:-

“3.19.2. At all reasonable times during the usual business hours of the locality to keep the demised premises open for carrying on the Tenant’s business and at all times comply with all requirements of the Dublin Corporation or the relevant Local Authority in connection with the user of the demised premises for the purposes of the Tenant’s business.”

14. The essence of Foot Locker’s case, on the lease, is put this way by its counsel:-

“The fact that you are obliged to use it and are covenanted to use it, that is something which, in this case, has to come to an end as a result of the Government restrictions, it cannot be used in accordance with the covenant.”

15. I do not accept that the combination of these last two provisions justify, in this case, the creation or application of a doctrine of partial frustration of the lease. These provisions, which lay obligations on the tenant, may well reflect an understanding on the part of the parties when the lease was entered into that the premises would be kept open, in ordinary trading hours, for the purpose of high class retail. However, what constituted “normal trading hours” could change over time; indeed, I suspect that normal trading hours in 1990 were very different to normal trading hours in 2020, before the intervention of the Covid-19 Pandemic. Even without the provision of Clause 3.4.1, I do not think that Clause 3.19.2 required Foot Locker to trade out of the Grafton Street premises during the course of the pandemic at the hours which would apply under more normal circumstances. Contrary to the submission made by counsel for Foot Locker, I do not see how any reasonable or proper interpretation of Clause 3.19.2 could result in Foot Locker being found to be in breach of the keep open provision because it did not open the Grafton Street premises for business at a time when it was illegal to do so and at a time when citizens were legally obliged to stay at home and to travel no more than two kilometres from their residence except in very limited circumstances.

16. When one adds into the mix the requirement on the part of Foot Locker to “comply with enactments” the position is put beyond any doubt. It seems plain to me that the parties in 1990 hardly foresaw the specific situation of a global pestilence affecting Ireland as profoundly as it has, but in general terms the parties did address the requirement to comply with the law and independently prescribed that the premises must only be kept open “at […] reasonable times during the usual business hours of the locality […]”.

17. A key part of the Foot Locker case is that the combination of these requirements distinguishes this action from every other case in which the partial frustration of a contract (in particular a lease) was found to be a legal mirage. I do not believe that the construction placed on this combination of clauses supports this submission. If anything, the clauses (taken either alone or in combination) are relevant to the question as to whether or not Foot Locker has established a supervening event frustrating the common intention of the parties (rather than whether or not partial frustration has any legal reality). I do not think that these clauses assist Foot Locker in establishing that there is such a thing as partial frustration of a contract.

B. The Evidence
18. Foot Locker had originally included as part of its claim an argument that there was a common understanding by the parties that Grafton Street had and would continue to have a high level of personal footfall (when the rent was review in January 2006 and again in March 2012). There were therefore witness statements provided by both parties to address this portion of the claim. As it happens, this aspect of the claim was not pursued at trial, so the testimony put before the court was confined to the evidence of one witness on behalf of Foot Locker (John Lowry, Real Estate Director of Foot Locker Europe BV and Real Estate Director of the plaintiff company) and one witness called by Percy Nominees (David Goddard, Director of Percy Nominees and Chief Executive of Davy Real Estate – Percy Nominees being associated with the stock broking and investment firm of Davy).

19. The evidence of both witnesses was of limited use. Unsurprisingly, Mr. Lowry gave evidence that he had been looking for an agreement with Percy Nominees given the closure of the store in Grafton Street (which he said was for a period of 253 days). Mr. Lowry accepted that the original position of Foot Locker had been that the lease was frustrated by which he meant that the lease was “entirely frustrated” as opposed to being “temporarily frustrated”. Mr. Lowry further accepted that in replies to interrogatories he had sworn that the intention of Foot Locker was not to trade from the demised premises “for the remainder of the term of the lease”. The replies to interrogatories are dated 15th June, 2021. As I have already recorded, by the time the trial opened before me on 19th October, 2021 the position of Foot Locker had changed.

20. Mr. Lowry went on to give evidence that the view of Foot Locker was that “the landlord should share some of the pain […]”. In the replies to interrogatories, Mr. Lowry had accepted that Foot Locker was financially capable of paying the rent, but in his oral evidence he elaborated upon this to the effect that Foot Locker felt that a fair resolution of the issues created by the pandemic would be that half of the rent would be paid. This compromise, however, was not acceptable to Percy Nominees.

21. Mr. Goddard gave evidence (accepted by counsel for Foot Locker as being accurate) about the amounts paid by Foot Locker in respect of rent and insurance and on the balance which, Mr. Goddard swore, was due and owing by Foot Locker to Percy Nominees on foot of the former’s obligations under the lease.

22. Mr. Goddard’s conclusion on the position taken by Foot Locker with regard to negotiations was that:-

“They’d unilaterally given themselves a discount of half the rent.”

23. In response to cross-examination on the pleadings in the case, in my view never a terribly fruitful exercise, Mr. Goddard accepted that he was aware that temporary frustration was part of the plaintiff’s case.

24. As I have noted, none of this evidence was of particular assistance in deciding the legal issues which this action, in the focussed form it has taken, requires me to decide. I do not think there is any huge advantage in a witness accepting that there are certain provisions in a lease. Equally, I do not think there is any great benefit from the court’s perspective in having a witness concede their awareness of how a claim has developed.

C. The Submissions
25. Foot Locker claims that its entitlement is to continue to occupy the premises in Grafton Street, but to pay no rent for the period that it cannot trade from the premises in the normal way. As I have already noted, Foot Locker says that the combination of the keep open clause and the user clause “mandates” the tenant to operate a high end retail store from the Grafton Street premises during what, in normal times, would be normal trading hours. Counsel for Foot Locker acknowledges that, without the keep open clause, the case currently brought could not be advanced in any way.

26. It is accepted by Foot Locker that there is no Irish authority supporting the concept of the partial frustration of a lease (or of a contract). However, it is submitted that the relevant judgments (of Kelly J. in Ringsend Property Ltd. v. Donatex Ltd. & Anor.[2009] IEHC 568 and of Sanfey J. in Oysters Shuckers Ltd. v. Architecture Manufacture Support (EU) Ltd.[2020] IEHC 527) are distinguishable because of the combination of the keep open clause and the user clause.

27. It is further submitted that in Law Society of Ireland v. MIBI[2017] IESC 31 and Merck Sharp Dohme Corp. v. Clonmel Healthcare Ltd.[2019] IESC 65 the Supreme Court had departed from established legal principles (or as counsel for Foot Locker put it “moved the goal posts […]”) and that a similar departure from accepted legal rules should take place here.

28. It was further submitted that it has been accepted, in England and Wales, that a lease could be frustrated, and that (in principle) if a lease is subject to the doctrine of frustration there is no principle reason why a lease should not be subject to a doctrine of temporary or partial frustration; the decision of Master Dagnell in Bank of New York Mellon (International) Limited v. Cine – UK Limited[2021] EWHC 1013 (BNY).

29. Foot Locker’s counsel also relied upon the decision in London Trocadero (2015) LLP v. Picturehouse Cinemas Ltd. & Ors.[2021] EWHC 2591 (Ch), but ultimately accepted that the essence of that decision (relating to unjust enrichment on the part of a landlord) had not been pleaded in these proceedings. Despite the fact that I was told, after counsel had concluded his submission, that an application would be made to amend the pleadings (on the second day of the hearing) to make a claim for unjust enrichment I was then told at the start of the second day that Foot Locker had revised its position, and no such application to amend was ultimately made.

30. The position taken by Percy Nominees is simpler to summarise. Counsel for Percy Nominees submitted primarily that partial frustration (as contended for on behalf of Foot Locker) was unknown in law or (to put it even more trenchantly) was known not to exist. It is to that fundamental issue that I now turn. The second submission was that the lease had not, on the facts, been frustrated in any way.

D. Analysis
31. The essence of the doctrine of frustration is that the contract is treated as being at an end. Both parties are freed from their obligations to each other. At the risk of stating the obvious, it follows that neither party thereafter has an entitlement to receive any benefit from the other. Notwithstanding these elementary propositions, the case made by Foot Locker is that it is free from any obligation to pay rent but nonetheless it is entitled to continue to occupy 44 Grafton Street. This is a form of frustration which does violence to the fundamentals of the doctrine. It results in what counsel for Foot Locker accepted was a “one way street”; benefits flowing to the tenant without any balancing release of liabilities in favour of the landlord. Even if the premises were proposed for another use (for example, as an HSE walk in centre testing for Covid-19), Foot Locker claims that it remains entitled to remain in occupation and to refuse to allow Percy Nominees rent out the premises for such an alternative purpose. Foot Locker’s case, therefore, is that the doctrine of partial frustration allows it to pay no rent, to remain in occupation of the premises to the exclusion of any alternative letting by the landlord, and to resume trading out of the premises (and the payment of rent) when and for as long as the Covid-19 rules permit.

32. Unsurprisingly, Foot Locker is unable to point to any caselaw that supports the submission which results in this extraordinary conclusion. On the contrary, the authorities are uniformly against the case made by Foot Locker. As I have said, the concept of partial frustration, as enunciated by Foot Locker, is unsupportable at the level of principle. I will now set out why the concept is also contrary to precedent.

33. The speeches of Lord Simon and of Lord Roskell in National Carriers v. Panalpina Ltd.[1981] A.C. 675 have loomed large in the Irish caselaw. In his speech, Lord Simon described the doctrine of frustration in this way:-

“Frustration of a contract takes place when there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case the law declares both parties to be discharged from further performance.”

34. Lord Roskell, to similar effect, considered the basis of the doctrine:-

“My Lords, I do not find it necessary to examine in detail the jurisprudential foundation upon which the doctrine of frustration supposedly rests. At least five theories have been advanced at different times. At one time without doubt the implied term theory found most favour, and there is high authority in its support. But weighty judicial opinion has since moved away from that view. What is sometimes called the construction theory has found greater favour. But my Lords, if I may respectfully say so, I think the most satisfactory explanation of the doctrine is that given by Lord Radcliffe in Davis Contractors v. Fareham U.D.C.[1956] AC 696 at page 728. There must have been by reason of some supervening event some such fundamental change of circumstances as to enable the court to say – this was not the bargain which these parties made and their bargain ‘must be treated as at an end’ – a view which Lord Radcliffe himself tersely summarised in a quotation of five words from the Aeneid ‘non haec in foedera veni’. Since in such a case the crucial question must be answered as one of law – see the decision of your Lordships’ House in Tsakiroglou & Co. Ltd. v. Noble Thorl G.m.b.H.[1962] A.C. 93 by reference to the particular contract which the parties made and to the particular facts of the case in question, there is, I venture to think, little difference between Lord Radcliffe’s view and the so-called construction theory.”

35. The passage from the Aeneid is taken from Aeneas’ address to Dido when, in justifying his decision to leave both Carthage and the Queen, he explains that he had never agreed to marriage. It is difficult to imagine a clearer example of a permanent parting of the ways as opposed to a partial frustration or temporary suspension of relations.

36. Blayney J., with whom Finlay C.J. and Denham J. agreed, referred to both of these passages in Neville & Sons Ltd. v. Guardian Builders[1995] 1 ILRM 1. He then continued at para. 29.:-

“I am satisfied that these two quotations from the decision of the House of Lords represent a correct statement of the principles of law applicable to frustration in our law and I am prepared to adopt them as being a correct statement of principle.”

37. In the next portion of his judgment, Blayney J. quoted with approval from the speech of Lord Wilberforce in Panalpina a passage which concluded:-

“In any event, the doctrine [of frustration] can now be stated generally as part of the law of contract; as all judicially evolved doctrines it is, and ought to be, flexible and capable of new applications.”

38. It will be recalled that, in Panalpina, the “new application” of the doctrine was its application to leases. This was a positively timid extension of the scope of the doctrine of frustration compared with what is contended for here, namely that a lease can be suspended temporarily but indefinitely in the one-sided way proposed by Foot Locker. The application of the doctrine to leases did not involve its radical reshaping which Foot Locker’s case necessarily requires; in particular, the concept of a lease which is frustrated but which continues in existence in some form is quite inconsistent with the foundations of the doctrine as it has originated and evolved.

39. The Supreme Court, therefore, endorsed the portions of the judgments in Panalpina which make clear that a frustrated contract is one which is at an end. In DonatexKelly J. considered not only the doctrine of frustration generally but also the particular concept of partial frustration. The judgment is a forthright one. Having considered the doctrine of frustration, emphasising its narrow scope, and having referred to the passage from the speech of Lord Simon in Panalpina, Kelly J. drew the conclusion (on the general doctrine) that:-

“If a defence of frustration is made out by the defendants, the contractual obligations are at an end.”

40. This was no obiter observation; instead, this conclusion was fundamental in the court’s finding that the doctrine availed the defendants nothing, as the release of all contractual obligations meant that the plaintiffs were thereby entitled to be repaid the funds they had advanced.

41. Kelly J. then addressed the submission that the arrangements between the parties had been subject to partial frustration – a phrase which appears in inverted commas and italics whenever it is employed in the judgment. The central paragraph (para. 50) is this:-

“As to ‘ partial frustration’ , it is considered in Treitel at paras. 50-07 and following. The author refers to some civil law systems where partial destruction of the subject matter of the contract can lead to the same type of relief in respect of that part as would be available in respect of the whole in cases of total destruction. He cites German law and provisions of the civil code in that jurisdiction. The author goes on ‘these rules have no direct counterpart in English law, under which, in cases of partial impossibility, the contract is either frustrated or remains in force. There is no such concept as partial or temporary frustration on account of partial or temporary impossibility…the concept of partial discharge in English law is restricted to obligations which are severable, whether in point of time or otherwise.’ “ [Original Emphases]

42. In the present case, Foot Locker has not established that there has been any partial discharge of severable obligations. The obligation to pay rent, the basic requirement placed on the tenant by any lease, is not a severable obligation. Relieving the tenant of this obligation, while permitting it to occupy the premises to the exclusion of the landlord or any alternative tenant, is not what Kelly J. contemplated when referring to the concept of partial discharge.

43. Kelly J. went on to find that:-

“Thus, it can be seen that there is no concept of ‘ partial frustration’ as such. It might apply if clause 5.1.19 (i) was capable of being severed from the rest of the loan stock instrument. But there is no arguable basis demonstrated for the severability of clause 5.1.19 (i) from the remainder of the contract. It is an integral part of the contract and not a standalone provision such as an arbitration clause.”

Equally, in my view, the obligation to pay rent is “an integral part of the contract […]”

44. Donatex was considered by Sanfey J. in Oysters Shuckers. Having set out the portions of the judgment of Kelly J. to which I have referred, Sanfey J. stated at para 86.:-

“I agree with the observations of Kelly J. in this regard. The obligation to pay rent is an integral and indeed fundamental part of the contract. The obligation may be suspended in certain circumstances set out at clause 3.2 of the disputed lease; those circumstances do not apply here. Accordingly, the plaintiff cannot argue that the rent obligation is frustrated, while arguing that the lease itself remains valid.”

45. The Irish authorities, in a consistent and principled way, have decided that partial frustration is not a legal concept applied in these courts. They also establish that the doctrine of frustration, if successfully invoked, results in the termination of the relevant contract (or lease). It is not submitted on behalf of Foot Locker that these cases are wrongly decided. Instead, it is argued that the combination of the Keep Open and User clauses distinguish this case from the earlier Irish authorities. I have already set out why I do not accept this argument. Secondly, it is suggested that I should emulate the Supreme Court (in the MIBI and MSD cases I have mentioned at paragraph 27 of the judgment) and push out the boundaries of the doctrine of frustration. Apart altogether from the fact that I am not convinced that the Supreme Court radically altered the existing law in the judgments to which I am referred, I do not agree that the doctrine of frustration should (as a matter of principle) be torn from its moorings in the way Foot Locker invites me to do.

46. I have been referred to a number of foreign authorities. None of these assist Foot Locker.

47. The most relevant is the decision in the BNY case. Master Dagnall firstly rejected the argument that the leases in question had been frustrated – or “frustrated altogether” as he put it to distinguish this form of frustration from partial frustration. In doing so he expressed the view that enforced closure because of Covid-19 restrictions was a supervening event “capable in principle as giving rise to the frustration of commercial leases […] especially where, as here, the user clauses only permit in practice what have become impossible uses […]” (at paragraph 209(b) of the judgment). It is notable that Master Dagnall considers the user clause in the context of whether the enforced closure constitutes a “supervening event”. I agree with this approach.

48. On the question of partial frustration, Master Dagnall found (at para. 211.a):-

“However, I do have to deal with SportsDirect’s arguments that there has been a ‘temporary frustration’. It seems to me that, arising from the matters above, there are two combined reasons why the Tenants have no real prospects of establishing such to have been or be the case, being:

a. First, that there is no such thing as a ‘temporary frustration’, effectively suspending the contract for a period of time, in law. Both Treitel and the case-law, in particular my initial citations from Panalpina, make clear that frustration has the effect of discharging the contract and ending it. That is one reason why such a ‘radical difference’ has to exist. Frustration does not suspend the contract, rather it terminates it and so that it does not subsequently revive. What the Tenants are seeking to do is to introduce one possible version of the flexibility that Lord Simon said would require statute. There is no case-law as to general ‘temporary frustration’ (I consider the question of “supervening event” separately below); […].”
49. This passage summarises, briefly yet comprehensively, the reasons why partial frustration is not available to Foot Locker. To put it even more briefly, the concept of partial frustration is at odds with the doctrine of frustration itself. The latter, as a matter of logic, requires the contract to be treated as at an end. The former, necessarily, requires the contract to remain alive. In those circumstances, if a doctrine of partial frustration is to be introduced it would require legislation rather than development through case law.

50. Foot Locker’s reliance on other authorities is also misplaced. In London Trocadero, the relevant analysis of Deputy Judge Vos was in respect of unjust enrichment arising from total failure of basis. As noted earlier, Foot Locker does not make this case and abandoned an application to amend its pleadings in order to advance such a claim. The John Lewis Properties Plc. v. Viscount Chelsea[1993] 2 EGLR 77 decision, which counsel for Foot Locker very decently accepted was “in many ways against [him] … “ is well summarised in BNY at paragraph 218 of the judgment, where Master Dagnall states:-

“Moreover, the John Lewis case makes clear that illegality amounting to an excuse of one obligation does not itself relieve liability to pay Rent. I note that this also seems to have been the view of Chief Master Marsh in the Commerz Real case (and which perhaps was a stronger case than these as there was actually a ‘keep open’ covenant).”

This decision puts the Covid-19 restrictions in their proper place. They may provide a reason for not meeting a contractual obligation. They do not however necessarily cause a contract to be frustrated.

E. Conclusion
51. Having considered all the submissions made on behalf of Foot Locker, I conclude that the concept of partial frustration (as advanced on its behalf) is not one which exists in Irish law.

52. While it is therefore not necessary for me to decide the second issue, I should say that I would also have found in favour of Percy Nominees on this point. The parties had clearly provided for compliance by the tenant with all legal requirements governing the operation of the shop in Grafton Street. The obligation to keep the store open, so heavily emphasised in the tenant’s submissions. is one which is caveated by reference to normal trading hours and reasonable times. While a pandemic was hardly considered a possibility by AIIM and Xtravision when the lease was executed in 1990, they can be expected to have known of the ongoing campaigns of violence which, while centred on Northern Ireland, had brought bombs to the centre of Dublin. In agreeing that the tenant would comply with “[…] any and every enactment […]” the parties can be taken to have contemplated the possibility that the shop would be closed in emergency situations; the lease nonetheless made no provision for a suspension of rent in such circumstances, unlike (for example) if the premises were destroyed or damaged (Clause 5.2). Equally, as I have already set out, I do not think that any fair reading of the lease requires the tenant to keep the store open for business when (a) it is illegal to do so or (b) it would constitute a danger to public health to do so.

53. I would therefore have concluded that the forced closure of the store did not constitute a frustration of the lease. Naturally, that decision would have been made on the limited evidence before me, and confined to the facts of this case.

54. I will therefore dismiss the claims made by Foot Locker. I will list the action for mention on the 2nd of December 2021 at 10am for the purpose of dealing with any outstanding matters. These include the counterclaim of Percy Nominees, to which I have already briefly referred. Percy Nominees have counterclaimed for the balance of the outstanding rent due since March 2020, insurance premia unpaid by Foot Locker since that time and interest. Given my decision on Foot Locker’s claim, I do not anticipate any significant dispute on the Order to be made on the counterclaim.

Ringsend Property Ltd -v- Donatex Ltd & Anor

[2009] IEHC 568 (18 December 2009)

JUDGMENT of Mr. Justice Kelly delivered on the 18th day of December, 2009
Background

This case was spawned by the purchase for in excess of €410,000,000 of the Irish Glass Bottle plant in Ringsend, Dublin 4. Those premises, which were owned by a company called South Wharf Plc, were bought by a consortium consisting of the Dublin Docklands Development Authority (DDDA), the second defendant (Mr. McNamara) and Derek Quinlan.

The purchase was effected by a company called Becbay Limited (Becbay) buying the entire share capital of South Wharf Plc. The plaintiff tells me that the purchase took this form in order to avoid paying the stamp duty which would have been exigible on a straightforward sale of land.

Each of the members of the consortium holds part of the share capital of Becbay. Mr. McNamara holds 41% of its capital through the first defendant which is his company. Mempal Limited representing the Quinlan interest holds 33% of Becbay. DDDA holds the remaining 26% of Becbay.

In order to finance Mr. McNamara’s share of the equity contribution to the purchase of the Ringsend plant the first defendant issued loan stock. That loan stock offered the prospect of a very good return to investors. There was to be 14% annual interest and a 3% redemption premium payable to them.

Davy Stockbrokers were retained for the purpose of marketing the investment proposal. Davy did so by the use, inter alia, of an information memorandum dated November 2006. That document spoke about the transaction offering “the opportunity of participating with one of the most prolific and successful developers in the country in the development of the largest and most high profile property to become available in Dublin 4 for decades”.

The information memorandum made it clear that no planning permission was in existence in respect of the proposed development. The memorandum said that the DDDA had “confirmed that they will seek to have Section 25 of the Planning Acts applied to the site. If successful, this means that the development of the site will be an exempt development for the purposes of the Planning Acts”.

The information memorandum also made it clear that neither the information contained in it nor the fact of its distribution were to form the basis of any contract.

The terms on which investors subscribed for the loan stock are contained in an agreement of 29th January, 2007. It is called a “Loan Stock Instrument constituting €62,550,000, 14% secured redeemable loan stock” (the loan stock instrument). Under it, the investors subscribed for a total of €62,550,000 in loan stock of the first defendant.

The stock issued by the first defendant was held by Davy Property Holdings Limited as trustee and agent of the stockholders. By a transfer agreement of 18th September, 2008, the loan stock was transferred from that company to Davy Estates Limited. By loan stock transfer agreement of 27th March, 2009, the loan stock was transferred from Davy Estates Limited to the plaintiff which is a company registered in Jersey. The transfer of the loan stock to the plaintiff was registered by the first defendant on 24th July, 2009 and a loan stock certificate was issued by the first defendant to the plaintiff in the plaintiff’s name on 24th July, 2009. It follows that the plaintiff acts as security trustee, trustee and agent of the stockholders and holds the stock on their behalf. Furthermore, the first defendant is entitled to communicate with the plaintiff and deal solely with it in relation to that defendant’s obligations under the loan stock instrument.

It was envisaged that the investment would have a lifetime of seven years. But the loan stock instrument provided for the stock becoming immediately redeemable in certain circumstances resulting in accelerated repayment to the investors. It is that provision of the loan stock instrument which is pertinent to this application for summary judgment.

Accelerated Repayment

Clause 5 of the loan stock instrument is headed “Accelerated Repayment”. Clause 5.1 is headed “Immediate Payment”. It provides that the issued stock “shall become immediately redeemable on the happening at anytime of any of the following events”. It then sets out a whole series of events which trigger the immediate redeeming of the stock. Only one of these events is relevant for the purposes of this application. It is contained in clause 5.1.19 (i).

Clause 5.1.19 (i) provided “If, Becbay shall not have applied for all necessary Section 25 certificates from DDDA or alternatively received any planning permission required from Dublin City Council for the commencement of the development within 30 months of the date of this deed” then the issued stock became immediately redeemable.

It is common case that Becbay has not applied for Section 25 certificates from DDDA nor has it received any planning permission from Dublin City Council. As more than 30 months have elapsed since the date of the loan stock instrument (29th January, 2007) the plaintiff contends that it is entitled to have the loan stock redeemed and be paid €98,145,905.

Mr. McNamara

Mr. McNamara provided a personal guarantee in respect of the principal advanced by the plaintiff to the first defendant. It was always envisaged that he would do so and that fact was mentioned in the information memorandum issued by Davy. The memorandum did, of course, point out that at the time of its issue whilst Mr. McNamara was understood to have “significant net worth there was no guarantee that that would be the case should the guarantee ever be called upon”.

Mr. McNamara accepts that he executed the guarantee on 29th January, 2007 and that in the event of judgment being entered in favour of the plaintiff against the first defendant, he has no defence to judgment being entered against him on foot of his guarantee. The amount involved in his case is €62,550,000. Originally he was sued for the same sum as the first defendant but it is accepted that he has no liability for interest. I give leave to amend the summons to reflect this.

Summary Judgment

Two decisions of the Supreme Court deal with the principles to be applied on an application for summary judgment such as this.

The first is the decision in First National Commercial Bank Plc v. Anglin [1996] 1 IR 75. There Murphy J. said as follows:-

“For the court to grant summary judgment to a plaintiff and to refuse leave to defend it is not sufficient that the court should have reason to doubt the bona fides of the defendant or to doubt whether the defendant has a genuine cause of action… In my view the test to be applied is that laid down in Banque de Paris v. de Naray [1984] 1 Lloyd’s Law Rep. 21, which was referred to in the judgment of the President of the High Court and reaffirmed in National Westminster Bank Plc v. Daniel [1993] 1 W.L.R. 1453. The principle laid down in the Banque de Paris case is summarised in the headnote thereto in the following terms:-
‘The mere assertion in an affidavit of a given situation which was to be the basis of a defence did not of itself provide leave to defend; the Court had to look at the whole situation to see whether the defendant had satisfied the Court that there was a fair or reasonable probability of the defendants having a real or bona fide defence.’
In the National Westminster Bank case, Glidewell L.J. identified two questions to be posed in determining whether leave to defend should be given. He expressed the matter as follows:-
‘I think it right to ask, using the words of Ackner L.J. in the Banque de Paris case, at p. 23, ‘Is there a fair or reasonable probability of the defendants having a real or bona fide defence?’ The test posed by Lloyd L.J. in the Standard Chartered Bank case, ‘Is what the defendant says credible?’, amounts to much the same thing as I see it. If it is not credible, then there is no fair or reasonable probability of the defendant having a defence.’”
In Aer Rianta Cpt v. Ryanair Limited [2001] 4 IR 607, McGuinness J. in the Supreme Court endorsed the test laid down in First National Commercial Bank Plc v. Anglin. She said:-

“Thus it is for this court to decide whether in the instant case the defence set out in the affidavits of Mr. O’Leary, together with the documents exhibited therewith, is credible, or in other words, whether there is a fair or reasonable probability of the defendant having a real or bona fide defence… The court does not ask whether Mr. O’Leary’s account of events is probable, or likely to be true; nor does it ask whether Mr. Byrne’s account of events is more likely. The question is rather whether the proposed defence is so far fetched or so self contradictory as not to be credible.”

Hardiman J. delivered a concurring judgment, in which he said the following:-

“I believe that the test for obtaining summary judgment has not changed since the early days of the procedure in the late nineteenth and early twentieth centuries. The formulation used in First National Commercial Bank plc. v. Anglin [1996] 1 IR 75 and the cases cited in that judgment are useful and enlightening expressions of the test, but I do not believe that this formulation expresses an altered criterion which is more favourable to a plaintiff than that derived from the other cases cited. The ‘fair and reasonable probability of the defendants having a real or bona fide defence’, is not the same thing as a defence which will probably succeed, or even a defence whose success is not improbable.”

He went on to say:-

“In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”

These are the questions which I must pose to myself in considering this application for summary judgment.
I have also derived assistance from the judgment of Charleton J. in Danske Bank v. Durkan New Homes and Others [2009] IEHC 278, and in particular, his comments at paras. 15 through 17 on the summary judgment jurisdiction of this Court and its appropriateness in cases where legal issues arise which do not necessitate a plenary hearing.

Clause 5.1.19

The loan stock instrument contains twelve major headings, many of which are subdivided into multiple subheadings. It was prepared by solicitors with much experience in commercial and corporate law. The terms in which clause 5.1.19 are framed are highly relevant.

The clause is wholly unconditional. It provides for immediate repayment of the investor’s money if the Section 25 certificate has not been applied for or, alternatively, planning permission has not been obtained from Dublin City Council within 30 months of 29th January, 2007. The defendants accept that as a matter of fact the Section 25 certificate has not been applied for nor has a planning permission been received from Dublin City Council. Nonetheless they contend that they have shown an arguable defence sufficient to resist this application for summary judgment.

The Defences

Five lines of defence can be discerned from the affidavits and the submissions of counsel. I will deal with each of them in turn.

(1) Validity of assignment
At para. 19 of his replying affidavit, Mr. McNamara contends that a valid assignment from Davy Property Holdings Limited had not taken place. This contention was abandoned during the hearing and I need not deal with it further.

(2) Plaintiff’s non-compliance with loan stock instrument

At para. 18 of his affidavit, Mr. McNamara contends that there was a failure on the part of the plaintiff to comply with the provisions of clause 4.1 of the loan stock instrument thereby disentitling it to make a successful claim against the first defendant with a consequent inability to recover against him on foot of his guarantee.
Clause 4.1 reads “stock shall only be redeemed against surrender of the relevant certificates for cancellation”.

Clause 4.3 reads “all stock redeemed by the company under the provisions of this deed shall be cancelled and the company shall not reissue the same stock”.

The defendants argue that the plaintiff has failed to comply with the provisions of the loan stock instrument because it has not sought to redeem by the surrender of the certificate but has simply made a demand for repayment. By so doing, it is said that the plaintiff has failed to comply with the provisions of clause 4.1 of the loan stock instrument. This argument completely ignores the terms of the demand.

The demand in question is dated 11th August, 2009. The penultimate paragraph of the letter of demand reads:-

“The loan stock certificate held by us in respect of the €62,550,000 14% secured redeemable loan stock shall be surrendered to the company for cancellation at the same time as payment of the entire amount due is made to us by the company.”

Given this statement in the demand letter, I find it difficult to understand how it can be said that any breach of clause 4.1 has occurred. Indeed, I asked counsel what had to be done in order to comply with clause 4.1. He replied that the certificates had to be proffered and surrendered before payment. I then asked if that meant that the certificates had to be cancelled before the monies were repaid. He indicated in the affirmative. When I inquired as to where the business efficacy in that proposition could be found he was unable to enlighten me.
It appears to me that the letter of demand, coupled as it was with a clear statement that the loan stock certificate would be surrendered for cancellation at the same time as payment of the amount outstanding was perfectly in order.

I am unable to discern any arguable defence under this heading.
(3) Frustration
The defendants seek to avoid the provisions of clause 5.1.19 (i) by invoking the doctrine of frustration. The basis for so doing is an interpretation which they place on the decision of Finlay Geoghegan J. in North Wall Property Holding Company Limited v. Dublin Docklands Development Authority [2009] IEHC 11. I will consider the defendants interpretation of that judgment later in this ruling. It is sufficient to note here that they contend that because of it, the DDDA is incapable of issuing a Section 25 certificate. Neither, it is said, can Dublin City Council grant a planning permission which is the alternative to the Section 25 certificate contemplated in clause 5.1.19 (i).

Assuming that the defendants are correct in those contentions as to the inability of both statutory bodies, the argument runs that the provisions of clause 5.1.19 (i) are frustrated.

My task on this aspect of the matter is to ascertain whether, assuming the defendants are correct in their submission as to the sterility of the DDDA and Dublin City Council, a defence of frustration is arguable.

The defence of frustration is one of limited application and narrowness. It arises in circumstances where performance of a contract in the manner envisaged by the parties is rendered impossible because of some supervening event not within the contemplation of the parties. As was said by Lord Radcliffe in Davis Contractors Limited v. Fareham UDC [1956] AC 696:-

“frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do.”

His Lordship went on to state that:-

“it is not hardship or inconvenience or material loss itself which calls the principle of frustration into play. There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for.”

In this jurisdiction the doctrine of frustration was considered by Blayney J. in Neville & Sons Limited v. Guardian Builders [1995] 1 ILRM. In that case he quoted with approval from the speech of Lord Simon in National Carriers Limited v. Panalpina (Northern) Limited as follows:-

These quotations demonstrate the narrow scope for the doctrine of frustration to be invoked. As is said in Chitty On Contracts (30th Ed.) para. 23 – 003:-

“The courts do not wish to allow a party to appeal to the doctrine of frustration in an effort to escape from what has proved to be a bad bargain: frustration is ‘not likely to be invoked to relieve contracting parties of the normal consequences of imprudent commercial bargains’.”

There are many difficulties which confront the defendants in their attempt to invoke the doctrine. The first is the express terms of the loan stock instrument and, in particular, clause 5 thereof. That clause provides for an accelerated repayment of an immediate nature, in the event of any one of the provisions of the clause being satisfied. The contract expressly contemplated that an application for a Section 25 certificate might not be applied for within the specified time or alternatively that a planning permission might not be obtained from Dublin City Council within that time. The parties expressly provided that in the events contemplated in clause 5.1.19 (i), the risk of immediate repayment was to fall upon the defendants. As is said in Treitel on The Law of Contract (11th Ed.):-

“The object of the doctrine of frustration is to find a satisfactory way of allocating the risk of supervening events. There is, however, nothing to prevent the parties from making their own provisions for this purpose. Thus they can expressly provide that the risk of supervening events shall be borne by one of them and not by the other or they can apportion it or deal with it in various other ways. Such provisions exclude frustration; and the same is true of an express term which, though it does not precisely cover the supervening event, shows that the parties had contemplated it and allocated the risk of its occurrence.”

Thus, it can be seen that there are formidable hurdles which confront the defendants in attempting to invoke the doctrine of frustration. Notwithstanding those difficulties, it might still be said, however, that it is an arguable defence. But the defendants still have a further problem and in my view, an insuperable one.
If a defence of frustration is made out by the defendants, the contractual obligations are at an end. In such circumstances the plaintiffs will be entitled to repayment of the monies advanced. So even if successful in invoking the doctrine the defendants still remain liable to immediately repay the funds advanced. So the defence avails them nothing.

In these circumstances, the defendants have contended for what they call ‘partial frustration’. They seek to argue that clause 5.1.19 (i) has been frustrated, but that the remainder of the obligations under the contract continue to exist. Indeed, counsel for the defendants argued a most extraordinary proposition unsupported by any authority that clause 5.1.19 (i) although now frustrated, would, at some stage in the future, through some unexplained and, I suspect, inexplicable alchemy, revive itself, but framed differently, so as to exclude the 30-month period referred to in it. This part of the proposition is clearly devoid of substance.

As to ‘partial frustration’, it is considered in Treitel at paras. 50-07 and following. The author refers to some civil law systems where partial destruction of the subject matter of the contract can lead to the same type of relief in respect of that part as would be available in respect of the whole in cases of total destruction. He cites German law and provisions of the civil code in that jurisdiction. The author goes on “these rules have no direct counterpart in English law, under which, in cases of partial impossibility, the contract is either frustrated or remains in force. There is no such concept as partial or temporary frustration on account of partial or temporary impossibility . . .the concept of partial discharge in English law is restricted to obligations which are severable, whether in point of time or otherwise.”

Thus, it can be seen that there is no concept of ‘partial frustration’, as such. It might apply if clause 5.1.19 (i) was capable of being severed from the rest of the loan stock instrument. But there is no arguable basis demonstrated for the severability of clause 5.1.19 (i) from the remainder of the contract. It is an integral part of the contract and not a standalone provision such as an arbitration clause.

It follows that there is no such defence of ‘partial frustration’ available to the defendants.

The plain fact is that the investors invested their money on terms that would entitle them to an immediate repayment if the events specified in clause 5 occurred. That has happened in the case of clause 5.1.19(i).

There is, in my view, no arguable basis for seeking to avoid the provisions of that clause by reference to either the doctrine of frustration or a concept called partial frustration. Accordingly, this alleged ground of defence is unarguable.

Mistake

The defendants contend that they can avail of the defence of mistake in response to the plaintiff’s claim. The species of mistake which they say occurred here was a mistake of law.

Up to relatively recent times, the effect of a mistake of law did not afford a defendant a defence, but that has altered somewhat as a result of the decision of the House of Lords in Kleinwort Benson Limited v. Lincoln City Council [1999] 2 AC 349.

It is important to bear in mind precisely what is contended for here by the defendants. It is set out at paras. 24 and 25 of their written submissions as follows:

“The loan stock instrument was entered into by Donatex on the basis that the DDDA had the power to grant section 25 certificates and to guarantee that a plot ratio of at least 3:1 was attainable. Had those representations not been made by the DDDA, the purchase of the Irish Glass Bottle site by Becbay would not proceeded (sic).
The investors behind Ringsend Property are all experienced commercial investors and they agreed to lend the money to Donatex on the basis of a return that was predicated on the availability of a fast-track planning process under the 1997 Act, and also with the certainty of high plot density ratios, both of which were based on representations made by the DDDA to Donatex and Bernard McNamara prior to the acquisition of the Irish Glass Bottle site by Becbay . .”

Even assuming all of this to be correct (and I will return to the judgment of Finlay Geoghegan J. later), it does not, in my view, give rise to an arguable defence on the basis of a mistake of law. If correct, it may give some basis for action at the suit of the first named defendant and Mr. McNamara for an action against the DDDA, but it does not provide a defence to this claim on the basis of the contract having been entered into under a mistake of law.
This case is nowhere near the situation which obtained in Kleinwort Benson, or indeed, any of the other decisions cited by the defendants.

The extremely limited circumstances in which the principles established in Kleinwort Benson might apply do not have any application here, and in my view, no arguable defence has been demonstrated under this heading either.

Implied Term

The final line of defence sought to be asserted is to invite me to imply a term into clause 5.1.19 (i) to the effect that the DDDA had the legal possibility of operating the Section 25 mechanism. I assume, for the purpose of this argument that the defendants are correct when they say that the DDDA did not have such. As stated already, I will return to this topic later in the judgment when considering the decision of Finlay Geoghegan J. already referred to.

The principal authority relied upon for seeking to imply such a term is the decision of the Commercial Court, Steyn J. (as he then was) in Associated Japanese Bank (International) Limited v. Credit du Nord SA [1988] 3 All ER 902. In that case, the judge considered the traditional and well-established test for implying a term into a commercial contract which is derived from the decision in the Moorcock [1889] 14 P.D. 64. He said this:

“In the present contract, such a condition may only be held to be implied if one of two applicable tests is satisfied. The first is that such an implication is necessary to give business efficacy to the relevant contract i.e. the guarantee. In other words, the criterion is whether the implication is necessary to render the contract (the guarantee) workable. That is usually described as the Moorcock test. It may well be that this stringent test is not satisfied because the guarantee is workable in the sense that all that is required is that the guarantors who assumed accessory obligations must pay what is due under the lease.”

Applying the Moorcock test to the present situation, it seems to me that there could be no basis for the implication of a term such as is contended for. The whole loan stock instrument, clause 5 of it and clause 5.1.19 (i), are perfectly workable and efficacious from a business point of view. Thus, there is no basis for implying a term applying the Moorcock test.
Steyn J. went on:

“But there is another type of implication, which seems more appropriate in the present context. It is possible to imply a term if the court is satisfied that reasonable men, faced with a suggested term which was ex-hypothesi not expressed in the contract, would, without hesitation say: yes, of course that is ‘so obvious that it goes without saying’: see Shirlaw v. Southern Foundries [1939] 2 K.B. 206, 227 per Mackinnon L.J.
. . .

Although broader in scope than the Moorcock test, it is nevertheless a stringent test, and it will only be permissible to hold that an implication has been established on this basis in comparatively rare cases, notably where one side is dealing with a commercial instrument such as a guarantee for reward. Nevertheless, against the contextual background of the fact that both parties were informed that the machines existed and the express terms of the guarantee, I have come to the firm conclusion that the guarantee contained an implied condition precedent that the lease related to existing machines. Again, if this conclusion is right, the plaintiff’s claim against the defendants as guarantors, or as sole or principal debtors under clause 11, fails.”

In my view, it is not arguable as a defence that this broader, but, nonetheless, stringent test, has any application in the present case.
Why would the investors, as reasonable men, have regarded this implied term contended for as one so obvious as to go without saying? In signing up to the provisions of the loan stock instrument and in particular clause 5, dealing with accelerated repayment, they were ensuring that they would be entitled to immediate repayment prior to the seven-year term in the event of the conditions set out in clause 5 being met. It was a matter of complete indifference to them as to why clause 5.1.19 (i) had not been complied with. All they wanted to ensure was that if it was not, for whatever reason, they were entitled to have their monies repaid and the stock redeemed. The risk in that regard was assumed by Becbay and the defendants. That is how the clause is drafted and no sensible businessman investing monies of the type involved here would, in my view, have even contemplated the implication of a clause such as is contended for.

Accordingly, I hold that there is no arguable ground of defence under this heading either.

The Judgment of Finlay Geoghegan J.

For the purposes of dealing with all of the preceding arguments, I have assumed the defendants to be correct in their contention concerning the judgment of Finlay Geoghegan J. in the North Wall litigation. Mr. McNamara interprets the decision as follows in one of his affidavits:-

“In that case, the High Court held that the DDDA was precluded from entering into any prior commercial agreement in advance of the determination of the application for such a certificate under Section 25. The court also made it clear that the DDDA was precluded from granting a certificate pursuant to Section 25 of the 1997 Act, in circumstances where it was also involved as a developer in that project. This judgment has not been appealed by the DDDA and has far-reaching and important consequences for the Irish Glass Bottle site. As a direct result of the decision, the DDDA is precluded from issuing a Section 25 certificate, as contemplated by the parties who had involvement in the Irish Glass Bottle site. Accordingly, the Irish Glass Bottle site cannot utilise the Section 25 certificate planning route.”

In the North Wall case, the decision of the DDDA to issue a Section 25 certificate to the notice party in respect of a development at North Wall Quay was challenged on a number of grounds. One of those was objective bias. The applicants argued that there was objective bias on the part of the DDDA when making the decision to grant the certificate because of the terms of an agreement entered into between the DDDA and the notice party after it had made an application for a Section 25 certificate, but prior to a decision on that application by the DDDA. Clause 6 of the agreement in question was to the effect that if the DDDA granted the Section 25 certificate, the notice party would transfer a portion of land, at no cost, to the DDDA to facilitate its plans for a public space in the area.
The judge held that the decision of the DDDA to grant the Section 25 certificate should be quashed on the ground of objective bias. The basis for that was that the existence of the agreement, and in particular clause 6, gave rise to a reasonable apprehension that the DDDA might have been biased.

Mr. McNamara’s interpretation seems to ignore what was actually said by Finlay Geoghegan J. in her judgment, and in particular, what is contained at paras. 112 and 113. The judge said this:-

“Undoubtedly, the respondent (DDDA) has very wide powers given it to secure the development and regeneration of the Dublin Docklands Area. However, for the reasons set out earlier in this judgment, it appears to me that it has what is a separate and distinct power and obligation to adjudicate on applications for certificates under Section 25(7)(a)(i). In carrying out this function, it is, in the first instance, carrying out an adjudicative function as to whether or not a proposed development is consistent with the planning scheme for the area. If it does so, it may then decide to impose conditions which are closely related to the development function. By reason of its development function and obligations, the respondents may not present the appearance of strict impartiality required, for example, by a court administering justice in determining an application for a Section 25 certificate. It might be considered to have a predisposition towards granting a certificate. However, this being so, the principles set out so clearly by Keane J. (as he then was) in Radio Limerick One Limited v. Independent Radio and Television Commission apply, and the respondent is under an obligation to take practical steps to free itself in taking a decision on an application from (sic) a Section 25 certificate, not merely from actual bias, but the apprehension of bias in the minds of reasonable people. This appears to include having a procedure under which no commitment is given, not just by a member of the board itself, but by the executives, who can only be, or perceive to be, acting on behalf of the respondent, to any person as to the view to be taken, or a recommendation for view, on an application for a Section 25 certificate prior to the determination by the board. It further appears to me to require that the respondent does not permit any arrangements to be put in place carrying out its development functions which would create an impression that the respondent would be obtaining a benefit in the sense of something that it wishes to have or achieve for the purpose of its development functions if it grants a Section 25 certificate.
. . .

Accordingly, whilst it appears to me permissible for the executives of the respondent to enter into pre-Section.25 application discussions, as is their practice, it appears impermissible that those discussions would result in either a commitment given by the executives to make a formal recommendation, or in an agreement whereby the respondent would obtain area (sic) benefit in any sense in the event that it grants the Section 25 certificate. There is, I recognise, a thin line between what appears permissible, namely, discussions under which a developer might seek to ascertain from the executives whether or not they perceive any inconsistency with what is being applied for or a discussions (sic) about potential conditions with the type of formal commitment by the executives to make a particular recommendation which appears impermissible. The practical working of the Act of 1997, having regard to the development function, and the provision for Section 25 certificates, appears to require for its effective working some pre-application discussions and therefore must be considered as contemplated by the Oireachtas. However, it is important that the executives at all times make clear that they are not in a position either to commit themselves or the board to a particular course of action, nor should they seek any benefit (in the very general sense of the word) for the respondent, in the event of the grant of a certificate. What is permissible falls short of what was done in this instance.”

It is clear from that quotation from the judgment that the judge’s decision does not have the wide implications described in the paragraph in Mr. McNamara’s affidavit from which I quoted.
However, for the purposes of testing whether an arguable defence arises, either under the grounds of frustration, partial frustration, mistake or implied term, I have assumed the position to be as stated by Mr. McNamara. The fact that it is not so, merely copper-fastens the lack of any arguable defence to this claim.

Some Final Comments

This case concerns a formal commercial contract entered into between the plaintiff and the defendants. At the time it was entered into, the parties knew that the venture was speculative because of the absence of any planning permission. They knew there was no planning scheme and they took the chance to proceed.

The investors advanced the money but did so on the basis that it would be repaid if one of the circumstances specified in clause 5 arose. The risks under clause 5 were entirely allocated to Becbay and the defendants, not to the plaintiff. If the requirements of s. 5.1.19(i) were not met, as they were not, then the parties contracted that the monies would be repaid immediately. Clause 5.1.19(i) could have been drafted in a different fashion so as to remove from or reduce the risk to Becbay, but it was not.

As was said by Lord Bingham of Cornhill in Golden Strait Corporation v. Nippon Yusen [2007] 2 AC 353:-

“As has long been recognised and recently reemphasized by the House of Lords, the principle of certainty is of great importance, especially in relation to commercial transactions.”

In support of that proposition, he quoted a line of authority going back to 1774, and up to and including 2005. The quotation from 1774 is from Lord Mansfield who, in Vallejo v. Wheeler [1774] 1 Cowp. 143, said:-

“In all mercantile transactions, the great object should be certainty: and therefore, it is of more consequence that a rule should be certain, than whether the rule is established one way or the other, because speculators in trade then know what ground to go upon.”

Insofar as attempts were made during the course of argument to refer to representations made to Mr. McNamara prior to the loan stock instrument and his guarantee being executed, they cannot be relied upon for a number of reasons. First, this is not a claim seeking rectification of the contract. Secondly, the representations were not made by the plaintiff or its assignors. Thirdly, the clause in question is unambiguous and no aid to interpretation by reference to the matrix of surrounding fact is required. Even if it was, its scope is limited, particularly having regard to the most recent observations of Lord Hoffman in Charterbrook Limited and Another v. Persimmon Homes and Others [2009] 3 WLR 267, where he said at p. 280:-

“There is certainly a view in the profession that the less one has to resort to any form of background in aid of interpretation, the better. The document should, so far as possible, speak for itself.”

In my view, this document does speak for itself. There was a clear obligation on the part of the defendants to repay the monies in the circumstances identified in clause 5.1.19(i). Those circumstances have occurred and no arguable defence is made out.
There will be judgment in favour of the plaintiff as against the first named defendant for €98,145,905 and against Mr. McNamara for €62,550,000 on foot of his personal guarantee.

Zuphen v. Kelly Technical Services (Ireland) Ltd.

[2000] IEHC 117 (24th May, 2000)
THE HIGH COURT

JUDGMENT of Mr Justice Roderick Murphy delivered the 24th day of May, 2000.
1. The Plaintiffs are South African technicians and the first and second named Defendants are each a recruitment company of which the third and fourth named Defendants are directors.

2. By Plenary Summons dated the 13th January, 2000 the several Plaintiffs claim a declaration that the purported determination of their employment under contracts of employment entered into on the 27th September, 1999 with the first and/or second named Defendant is null, void and of no effect and is valid and subsisting until the 27th September, 2000.

3. The Plaintiffs also claim salaries due from the 22nd December, 1999, damages and restraining orders.

4. By Order dated the 13th January, 2000 O’Sullivan J. made certain orders in relation to the replying Affidavit to be served on the Intended Plaintiffs; to the delivery of a Statement of Claim within seven days and the delivery of a Defence within a further seven days.

5. By Defence dated the 10th February, 2000 the Defendants, inter alia, pleaded that the performance of the agreements which the second named Defendant concluded with the Plaintiffs became impossible of performance without any fault on the part of the Defendants or any of them and that the agreements were thereby frustrated.

6. The particulars of frustration contained in the Defence was stated as follows:

“It was at all times understood between the Plaintiffs and the second named Defendant that the retention of the Plaintiffs by the second named Defendant was to be in the context of carrying out work on behalf of Eircom Plc and in late December, 1999 the said Eircom work was no longer available as Eircom Plc indicated to the second named Defendant that it would not be requiring it to carry out any further. (sic). This was not due to any default on the part of the Defendants or any of them.”

7. By reply dated 3rd March, 2000 the Plaintiffs, inter alia, denied that the performance of their agreements with the second named Defendant became impossible of performance without any fault of the part of the Defendants or any of them and denied that the agreements were thereby frustrated. The Plaintiffs denied that, in the premises, the Defendants and each of them were discharged from performance of the said agreements. By way of further special reply, the Plaintiffs plead that the Defendants were estopped from claiming that the agreements were frustrated because the Defendants gave the Plaintiffs unambiguous assurances that the agreements would be for at least one year.

8. Furthermore, the Plaintiffs deny that the contracts were frustrated without any fault on the part of the Defendants, or any of them, because the contract entered into by the second named Defendant and Eircom Plc provided that Eircom could only terminate the contract on the grounds of specified breach by the second named Defendant on grounds set out at clause 47 of that agreement. In the premises, the Plaintiffs plead that the termination of the contract between the second named Defendant and Eircom Plc was caused wholly and/or exclusively as a result of the breach of contract and/or negligence and/or fault of the second named Defendant, its servants or agents.

9. In addition the Plaintiffs deny that at all times it was understood between the Plaintiffs and the second named Defendant that the retention of the Plaintiffs by the second named Defendant was to be in the context of carrying out work on behalf of Eircom Plc and that in late December, 1999 the said Eircom work was no longer available as Eircom Plc indicated to the second named Defendant that it would not be requiring it to carry out any further work. The Plaintiffs further deny that this withdrawal was not due to any fault on their part.

10. The Plaintiffs also plead that if there were any frustration of the contract between Eircom Plc and the second named Defendant (which is denied) then the same was induced by the second named Defendant through its own fault.

11. An amended Statement of Claim was delivered on the 8th March, 2000 which gave particulars of the agreements and of damage, loss, distress and inconvenience.

12. By Notice of Preliminary Issue dated 24th March 2000 the Plaintiffs and the Defendants agreed and the Court ordered as follows:

“That this Honourable Court does direct the trial of the issue of frustration as the sole issue of liability in these proceedings (save for the contention of the Defendants that the Plaintiffs listed under Schedule 1 thereof resigned and/or terminated their contracts with the Defendants, which said resignation and/or termination gave rise to a termination of any liability to those Plaintiffs on the part of the Defendants, which issue shall be tried along with the assessment of damages in the event of the Plaintiffs in the action succeeding on the issue of frustration before this Honourable Court).”

13. A subpoena duces tecum was served on the Company Secretary of Eircom Plc on the 5th April, 2000.

14. By amended reply and Defence to counter claim delivered the 6th April, 2000 the Plaintiffs denied that they terminated or repudiated their contract of employment or agreed to release the Defendants from the contractual obligations and that the Defendants are estopped from so contending.

EVIDENCE
15. The matter came before the Court on Tuesday 11th April. It was agreed that the Defendants, in respect of the preliminary issue would first give evidence.

16. Mr Patrick O’Flaherty, the financial director of the first named Defendant, gave evidence of two distinct contracts.

17. The first was a contract of May, 1999 in respect of the Galway area which involved a dead network requiring a copper jointer’s skills which required less responsibility than working on the existing live network. The first named Defendant employed predominantly Irish copper jointers under this contract which is still ongoing.

18. The second contract of the 30th September, 1999 related to upgrading and maintaining the existing “live” network in Dublin. Eircom Plc (“Eircom”) had told Mr O’Flaherty that 250 workers would be needed and the first named Defendant stated that they could supply 80. That contract was based on the general conditions of the May, 1999 contract but with a difference of the basis of payment and an accreditation course. 70 were employed as copper jointers in Dublin; 6 went to Galway and 4 to Athlone because of the demand there. The worksheets were completed by the first named Defendant and signed by an Eircom supervisor. Mr O’Flaherty stated that the funding for the contract of the 30th September came out of capital which was a separate budget in respect of the Dublin contract with Eircom.

19. On the 23rd December, 1999 Eircom had overpaid on that budget. The first named Defendant offered to postpone receiving payment until April. However, this was refused by Eircom. Mr O’Flaherty told the Plaintiffs who then commenced these proceedings. He tried to get work for them in Eircom. There was no resumption of the work in Dublin. He said that the first named Plaintiff never had any intention of taking the Plaintiffs other than for the work with Eircom. He had assumed that the work was secure until March, 2000. However, work was no longer available. He was able to secure some employment with British Telecom in London, Northern Ireland and in Ireland.

20. Under cross-examination Mr O’Flaherty agreed that the contract with Eircom of May, 1999 gave no entitlement to any particular level of work. He did not have any dealings with the advertising in South Africa. He agreed that the recruitment of 70 in South Africa proceeded before the written memo of the 30th September, 1999 was executed with Eircom. While there was no form of commitment from Eircom he did not feel it improper to rely on Eircom and felt able to make a judgment call.

21. He agreed that the general agreement, at paragraph 2.1, provided that work should be “allocated as the need arises”. The notification of the requirement was received orally in August, 1999 according to his recollection. The figure of 80 followed on his colleague Mr Hartnett visiting South Africa in September, 1999 to recruit copper jointers. He did not agree that the terms offered to the intending workers was prior to a commitment from Eircom. That commitment was verbal that they needed 250 and that the Defendants would provide 80.

22. He agreed that the contract letters dated the 17th September, 1999 to the Plaintiffs offered secure employment conditional on their being available in Dublin on the 29th October, 1999 and having a work permit. Mr O’Flaherty said that his company had been advised that the need was there and that there was no necessity to make the contracts conditional on that work being available.

23. It was not the fault of the Defendant companies that Eircom could not provide any other work. Mr O’Flaherty agreed that the letter of 16th November, 1999 from the first named Defendant to Eircom regarding increases of £30 – £34 per hour was sent but denied that it had anything to do with the termination by Eircom. There was no written response to such a request. He agreed that there was less profit on pressurisation work. A letter dated the 5th January, 2000 from Eircom to the first named Defendant referred to a complaint in relation to the Dublin contract was received by all contractors. He attended a meeting on the 15th March, 2000 to discuss the concerns of Eircom and a discount for the amount charged on work. There was no prospect of new work. However, under “Tender 2000” he expected that Eircom would have additional work which will involve the Access Network Programme. He understood that the Defendant company would be given different work under that programme.

24. He said he was in South Africa in March, 2000.

25. The Plaintiffs were told that there would be recommencement of work not under the September agreement but under the “Access Network Programme 2000”.

26. In relation to the letter of the 23rd March, 2000 Mr Hartnett to Mr Foy of Eircom he agreed that the reference to failure of project to deliver related to Eircom’s contention that there was a failure. The letter of the 5th January, 2000 evidenced the unhappiness of Eircom prior to the ending of the contract on the 7th January, 2000. Mr O’Flaherty disputed the fact that there was a failure. There had been a problem regarding a shortage of tools and equipment. However, at a meeting on the 22nd November, 1999 assurances were given that the employees would be looked after.

27. Mr Martin Cooper, head of Regulation and Costing of Eircom and head of Outsourcing in May, 1999 referred to the contract for the Galway work in May, 1999 and to the September, 1999 contract for the Dublin region which was black spot and pressurisation work.

28. He agreed that the memo of the 30th September, 1999 relating to a meeting between the first named Defendant and Eircom put in writing some of the discussion. He would not describe it as a contract document but as a reflection of what was discussed. He agreed that the Galway project was primarily a capital budget expenditure as was the Dublin pressurisation project. However, the black spot element of the work was a current budget expenditure.

29. He also agreed that the accreditation course for Dublin was one day longer than that for Galway.

30. The work slowed down before Christmas and no further work was given to the first named Defendant after Christmas. From the 7th January, 2000 only authorised work would be paid for. There was no performance issue – the letter of the 5th January was not the reason that they did not get work as there was no work for other contractors.

31. The 2000 contract was mainly general work in respect of new contracts.

32. On cross-examination Mr Cooper agreed that the memo of the 30th September, 1999 was not a contract but gave an indication that there was work. There was no contractual commitment by Eircom. He could not say if there would be more work after Christmas.

33. Mr Brian Hartnett, Operating Director of the Defendant companies was involved in the tendering process. He was asked by Eircom how many technicians could the Defendant company provide and he agreed to provide them with 70.

34. On the 31st August, 1999 he went to South Africa and sent letter to prospective employees with draft terms and conditions. Confirmation would be received once they came to Dublin Airport and presented themselves. There were taken in batches. They had to undergo accreditation process here. They were paid £10 per hour on the course and £14 per hour when working. A unit rate rather than an hourly rate applied to payments by Eircom to the Defendant companies.

35. On the 21st December, 1999 Mr Cooper rang Mr Declan Kelly the fourth named Defendant and indicated that the network upgrade was to stop. The Plaintiffs were informed on the 5th January, 2000 informally and on the 11th January, 2000 formally.

36. On cross-examination Mr Hartnett agreed that the dates for the ads were either August or September, 1999. He believed that the contracts were to run from six months to one year but that there were indications that overtime would be available. He saw the letter of the 27th September, 1999 from Mr O’Flaherty referring to one year renewable. He was assured by Eircom that they would have work until March. Until the tendering process at present is complete the Defendant will not know how many they will need. He said he did not know whether the Defendant was currently advertising for cable jointers in the United Kingdom.

37. Mr Raymond Kelly, the third named Defendant, went to the South African agencies who indicated that they could supply 50 people. There was a verbal agreement with Eircom. The agencies advertised in South Africa as this was their responsibility.

38. Mr Kelly agreed that they believed that Eircom intended to upgrade all exchanges and that they made a commercial judgment accordingly. However, the agency did not act in the absence of a commitment. The agency wished to indicate in the advertisements that the contract was as long as possible but that he had limited contracts to one year as in the memo of the 16th September, 1999.

39. Mr Martin Cooper’s memo to Mr Kelly of the 9th March, 1999 referred to a relationship with fewer contractors. Mr Kelly believed that there was ample work from Eircom. He stressed that he tried to develop long term relationships rather than entering into litigation.

40. Four witnesses gave evidence for the Plaintiffs: Mr Schneeberger (forty first named Plaintiff); Mr Witter (fifty third named Plaintiff); Mr Bezuidenhout (nineteenth named Plaintiff) and Mr Neveling (thirteenth named Plaintiff). All four had left permanent employment. All were given assurances of work of one year and would not have considered a six month contract. They all had signed a letter dated 27th September, 1999 with the agency and left those letters at the agency taking a signed copy with them.

SUBMISSIONS ON BEHALF OF THE PLAINTIFFS
41. The Plaintiffs contend that the advertisements placed by the South African employment companies referred to a guaranteed minimum period of one year renewable in addition to other terms.

42. The conditions of contract dated the 27th September, 1999 emphasise that the offer was conditional upon the Plaintiffs being available for work in Dublin on the 29th October, 1999 and not being refused a work permit. The letter also dealt specifically with the issue of termination of contract as follows:

“This contract can be terminated by yourself by giving one month’s notice at any time. This contract can be terminated by Kelly Technical Services in the event you do not pass the Eircom accreditation within three attempts. This contract can be terminated by Kelly Technical Services with immediate effect for unsatisfactory performance of your duties, primarily if you fail to develop a good working relationship with the Eircom staff with you come into contact with or with your supervisors at Kelly Technical Services.”

43. The Plaintiff say that there was no suggestion that the contracts of employment would be terminated should the Defendants not have any further work from Eircom. The Defendants argue that the contracts with the Plaintiffs had been frustrated because “they lost the Eircom contract”. Nowhere in the contract entered into between the parties is there any reference to the contracts being dependant and/or conditional upon the Defendants continuing to conduct work on the part of Eircom.

44. The Plaintiffs made considerable sacrifices in accepting the offer. They would not have accepted an offer of employment for less than twelve months. A number of Plaintiffs brought their families with them.

45. In January, 2000 the Plaintiffs were advised by the Defendants to return to South Africa and were informed there was no further work available. It was only when the Plaintiffs issued proceedings against the Defendants on the 13th January, 2000 that the Defendants gave undertakings to the Court that they would continue to pay the Plaintiffs the agreed contractual salary and, further, that they would continue to provide or seek to provide employment for the Plaintiffs.

46. The Plaintiffs submit that the theoretical basis for the doctrine of frustration is disputed. There are contradictory Irish authorities providing alternative explanations as between the implied contract theory and/or the true construction theory ( Cummins -v- Stewart (No 2) 1913] IR 95 and Mulligan -v- Browne (High Court, Kenny J. unreported, 9th July, 1976)).

47. Notwithstanding the uncertainty as to its theoretical basis, the doctrine itself is straightforward. A contract may be discharged on the grounds of frustration when something occurs after the formation of the contract which renders it impossible to fulfil the contract or transforms the obligation to perform into a radically different obligation from that undertaken at the moment of entry into the contract. The doctrine is subject to the limitation that the frustrating circumstances must arise without fault of either party ( Maritime National Fish Limited -v- Ocean Trawlers [1935] AC 5 24 and Constantine Lion -v- Imperial Smelting Corporation [1941] 2 All ER 165.

48. The Plaintiffs submit that the doctrine of frustration can never be applied in order to discharge a party to a contract from performing its contractual obligations in circumstances where it may be extremely difficult or even impossible to do so. In Leeson -v- North Bristol Oil and Candle Limited [1974] 8 IR CL 309, it was held that the fact that the Defendants could not obtain paraffin from their own supplier because of a strike did not excuse their failure to supply the Plaintiff. In Paradine -v- Jane [1647] Aleyn 26, the Plaintiff had let lands to the Defendant under the terms of a lease which required the lessee to pay rent on a quarterly basis. The lessees were ejected from possession by armed force, the lands then being occupied by the military during the English Civil War. In an action for arrears of rent, the lessee pleaded that the circumstances excused non-payment of rent. However, this plea was rejected and a distinction was drawn between a general duty imposed by law upon a lessee and a duty undertaken by way of contract. In respect of duty taken on by way of contract the Court stated that:

“When the party by his own conduct creates a duty or a charge upon himself he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity because he might have provided against it by his contract.”

49. The Plaintiff submits that the Defendants could have included the term in this contract specifically dealing with the situation which would arise if the Eircom work was no longer available. They did not do so under the section dealing with termination of contract. However, if such a term had been included the Plaintiffs would not have accepted such a precarious and unguaranteed offer of employment.

50. Besides the requirement in relation to provision against a third party not providing work, an element of mutuality is necessary.

51. The advertisements and the letter of offer and letter containing the contract did not expressly or impliedly provide that the agreement would be terminated should Eircom work not be available.

52. The fact that the Defendants had been able to provide work for 39 of the Plaintiffs who remained in Ireland disproves the contention that the contracts of employment entered into could not be fulfilled should the Eircom work no longer be available.

53. The Plaintiffs submit that the Courts do not allow the doctrine of frustration to apply where increased costs or a limited amount of work make it impossible for one party to perform the contract without incurring serious financial losses and refer to Clarke: Contract Law in Ireland, 3rd Edition, 425:

“It would be undesirable for a business man to agree to perform a contract for a fixed amount and permit him to seek relief through the doctrine of frustration if, during performance, unanticipated difficulties arise.”

54. Reference was also made to Revell -v- Hussey [1813] 2 Ball and B 280 and Davis Contractors -v- Fareham UDC [1956] AC 696.

55. The Plaintiffs contend that the cessation of Eircom work was not unforeseen or unexpected and referred to paragraph 2.1 of the contract whereby work would be allocated “as the need arises” by the head of outsourcing or his duly authorised representative. Moreover, paragraph 2.2 provides a forecast and projection of work that would be required on the “best estimates of anticipated demand for the services as required and are therefore provided for information only and no commitment as to the level of business eventually awarded during the term of the contract is to be inferred, either in its entirety or the relative size or category of work”.

56. Counsel for the Plaintiffs also referred to Neville & Sons Limited -v- Guardian Builders Limited [1995] 1 ILRM 1 where the Supreme Court held that frustration of a contract takes place when a supervening event occurs without the default of either party and for which the contract makes no sufficient provision. The event must so significantly change the nature of the outstanding contractual rights and obligations from what the parties could reasonably have contemplated at the time of the contract’s execution that it would be unjust to hold them to its terms in the new circumstances.

57. The Plaintiffs submit that the failure of Eircom to continue to provide work has not significantly changed the contractual rights entered into by the parties who remain employees of the Defendants. Some are continuing to work while others are available for work. They say that the Defendants do not wish to continue paying the Plaintiffs money for work which is not as abundant as they thought would be the case. Frustration in this circumstance would provide an alternative to redundancy in which an employer would no liability or responsibility to the employee.

SUBMISSIONS ON BEHALF OF THE DEFENDANTS.

58. The Defendants submit that no contractual obligations arose on the part of the last two named Defendants. Any contract with the Plaintiffs arose from the first or second named Defendant against whom any liability which attaches in the present claim arises. I would agree with this submission.

59. The Defendants submitted that a small number of the Plaintiffs have, in fact, resigned from employment with the Defendants and have therefore terminated their contracts with the Defendants. As to the balance of the Plaintiffs the issue is whether the contract between the first and/or second named Defendants and the Plaintiffs was effectively discharged by virtue of frustration of the contract.

60. The Defendants case is that at all material times the contracting of the Plaintiffs for the carrying out of work on their behalf was in the context of doing work on behalf of Eircom Plc; and when Eircom indicated to the Defendants in late December 1999 that no further work was available for the first named Defendants to carry out, the contract was effectively terminated from that point onwards. The contracts commenced with a written contract document on the 27th September 1999 and the Plaintiffs were paid appropriate remuneration and expenses during the currency of that contract and appropriate remuneration and expenses on the termination of the contract by virtue of the withdrawal of the availability of work by Eircom on the aspect of the project on which the first named Defendants were working.

61. The Defendants submit that the relevant law as stated in Halsbury’s Laws of England (4th Edition, Vol 9 at par. 450) is as follows:-

“It frequently happens that a contract is silent as to the position of the parties in the event of performance becoming literally impossible or only possible in a very different way from that originally contemplated. In such cases the law excuses further performance under the doctrine of impossibility or frustration. “

62. Counsel for the Defendants referred to the origin of the doctrine in the old case of Taylor -v- Caldwell (1863) 3 B. & S. 826. There a contract for a musical performance was discharged by frustration of the contract when the intended music hall venue was destroyed by fire. Counsel mentioned that while there are a number of academic theories as to the basis of the doctrine, the approach of the Courts to commercial arrangements between parties are more instructive. Where events arise which effectively change the basis for the performing of a contract so that what is in place is a materially different contract from that which is originally envisaged by the parties the Courts will alleviate the harshness of the contractual obligation by treating the original contract as being frustrated if its original purpose and intention cannot be met by virtue of outside circumstances with no wrong on the part of the contracting parties. The opposite extremes of the interpretation of the doctrine are to be found in the “Coronation cases” of Krell. v. Henry (1903) 2 K. B. 740 and Heron Bay Steambot Co . v. Hutton (1903) 2 K. B, 683.

63. It is submitted by the Defendants that the cancellation of the Eircom contract effectively gave rise to a situation analogous to that in Krell where the procession which was to be viewed from particular rooms was no longer to take place rather than in Heron Bay where the hirers had at least the benefit of a trip around the port.

64. The Defendants also referred to Neville .v. Guardian Builders (1990) ILRM 601 and (1995) 1 LLRM 1 , where the Defendants purchased a plot of land for development purposes. The only access to the site was through a narrow road which was inadequate for the purpose of proceeding with the intended development. While the High Court determined that the contract had been discharged by frustration, in the Supreme Court overturned this decision on the facts of the case. Blayney J. determined that the contract, while more onerous on the parties, was not completely discharged by frustration owing to the failure to obtain land from the Local Authority to provide sufficient access for development purposes on to the site.

65. The net position as emerges from the Neville case is as follows (as appears from headnote no. 1 of the High Court Report) and echoes Lord Radcliffe in Davis Contractors -v- Farnham UDC [1956] AC 696 at 778/9:

“A contract will be deemed to be frustrated whenever the law recognises without the default of either party a contractual obligation has become incapable of being performed because the circumstances in which it is called for would render it a thing radically different from that which was undertaken by the contract. “

66. The Defendants say that in the present case Eircom were limited under the terms of their contractual arrangement with the Defendants to terminate the contract only for a stipulated breach. The contract between the Plaintiffs and the Defendants as reflected in the letter of 27th September 1999 and any of the surrounding documents did not provide for a “force majeure”: in fact the contracts did not provide as to what had to happen in the event that what apparently was the basis or cornerstone of the contract was to be removed.

67. In the initial advertising for the contract which is sought to be enforced by the Plaintiffs herein it was specifically indicated that work was to be carried out “At a large telecommunications company in Ireland”. The document of the 1 7th September 1999 to the Plaintiffs specifically indicated that the offer was for a twelve month contract “Working on … the Eircom network”. The document indicated that Telecom Eireann (as it was then known) was Ireland’s national telecommunications company. The document went on specifically to indicate that an orientation course would be required to meet the requirements of Eircom representatives as to sufficiency of competence on the part of the Plaintiffs. These matters were echoed in the letter of the 27th September 1999 which the Plaintiffs contend comprises the contract of obligation on the part of the Defendants. Again reference was made to a twelve month contract working on a particular aspect of the Eircom network (indicating that Eircom is Ireland’s national telecommunications company). The document indicated that the contract could be terminated by the Defendants only in the event that the Plaintiffs fail to meet Eircom accreditation within a fixed period of time and specifically also requires that a good working relationship will be needed with the Eircom staff. The work permit available for the Plaintiffs was only for work in Ireland. The only work in Ireland with the Defendants was to work on the Eircom contract. The contract between the Plaintiffs and the Defendants never envisaged the Plaintiffs being paid for not doing any work. Accordingly it is the contention of the Defendants that once their was no work available on the Eircom contract, they had no other work available and the Defendants were not obliged to pay the Plaintiffs for doing no work. All of the present Plaintiffs were required to attend training programmes which were relevant only to the aspect of the Eircom contract which was subsequently cancelled by Eircom. In these circumstances it is the contention of the Defendants that the contract was discharged by frustration and without any wrongdoing or fault on the part of the Defendants.

Applying the Neville criteria to the facts of the present situation Counsel for the Defendants submitted that all of the considerations determined in the Neville case to give rise to an effective application of the doctrine of discharge by frustration were met:-

(a) There was no default on either the part of the Plaintiffs or the Defendants.
(b) The contract has become incapable of being performed. Eircom have ceased requiring the Defendants to carry out the relevant work for them and therefore the Defendants have no work for the Plaintiffs with Eircom or on the relevant aspect of the Eircom network.
(c) What is now involved in continuing with the contractual obligation is to put in place a contract which is radically different from that which was intended between the parties.

68. It was never intended that the Defendants would pay the Plaintiffs for doing no work. The Defendants have no other work for the Plaintiffs in Ireland except on the identified aspect of the Eircom contract. There is no further Eircom work available with the Defendants to be carried out by the Plaintiffs. Any requirement of the Plaintiffs to do work for the Defendants other than in accordance with the Eircom contract has been in the context of seeking to mitigate the Plaintiffs loss and not otherwise. This work (mainly in the U.K.) was not what was envisaged between the Plaintiffs and the Defendants at the inception of the original contract.

69. In the circumstances the Defendants submitted that the contract was discharged by frustration.

Determination
70. The issue before the Court is whether the contracts entered into on the 17th September, 1999 between the second named Defendant (whether on its own behalf or on behalf of the first named Defendant is not material) and the several Plaintiffs was frustrated by the termination of work by Eircom in January, 2000.

71. It is common case that the Plaintiffs were employed by the Defendant companies and not by Eircom nor by the South African agencies.

72. It is significant that the letter of 27th September, 1999 was conditional only on being available for work in Dublin on the 29th October, 1999, or earlier as arranged, and not being refused a work permit by the Department. There was no condition about availability of work. Such a condition could have been inserted as would be provided in an engineering sub-contract and could have been provided for in a carefully drafted contract of employment.

73. The contract would be terminated by the employee on giving one month’s notice at any time and could be terminated by the Defendant companies where the employee had not passed the accreditation course within three attempts or had unsatisfactorily performed his duties.

74. There is no evidence of either eventuality. Indeed, it is clear that it is not a matter of termination that is before the Court by of frustration of the contract without fault.

75. I accept that the evidence of complaints by Eircom did not amount to a basis for termination of the contract between Eircom and the Defendant companies.

76. The basis of the doctrine of frustration would appear from the authorities is that there is a supervening event which must be so unexpected and beyond the contemplation of the parties, even as a possibility, that neither party can be said to have accepted the risk of the event taking place when contracting.

77. The clear evidence of Mr O’Flaherty was, while there was no form of commitment from Eircom, he did not feel it improper to rely on Eircom and felt able to make a judgment call.

78. The general agreement of the Defendant companies with Eircom as to work being “allocated as the need arises” points to the possibility of such work not arising. It was certainly not so unexpected as to be beyond the contemplation of the parties, even as a possibility.

79. Mr Raymond Kelly believed that Eircom intended to upgrade all exchanges and that, accordingly, the Defendant companies made a commercial judgement accordingly.

80. The memorandum of the 30th September, 1999 related to a meeting between the first named Defendant and Eircom. Mr Martin Cooper of Eircom did not describe it as a contract document but as a reflection of what was discussed. It seems to me that it was on the basis of this document that the Defendant companies proceeded. Indeed, Mr Cooper agreed that the memo gave an indication that there was work even if there was no contractual commitment. Significantly, however, Mr Hartnett had sent letters to prospective employees with draft terms and conditions before that date.

81. The clear evidence was that, notwithstanding the non-finalisation of the contract with Eircom, the Defendant companies sought to engage technicians on one year contracts.

82. The Defendants were aware in making a commercial judgement call that this was conditional on work being available.

83. The Court must accordingly on a general impression of what the rule in relation to frustration requires. It is for that reason that special importance is necessarily to the occurrence of an unexpected event that, as it were, changes the face of things. It seems to me that this is not the case. It is not hardship or inconvenience or a material loss itself which calls the principles of frustration into play. There must have been such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for.

84. Moreover, it does not seem to me that the contract had become entirely incapable of being performed. Indeed, the Defendant companies, in order to mitigate loss or damage, have obtained work for some of the workers concerned.

85. Indeed, the very commendable attempt by the Defendant companies to procure such work for the technicians they had employed is to my mind an indication that a contractual relationship survived which would be inconsistent with the contract being frustrated.

86. Moreover, the relationship entered into with the Plaintiffs was one of master and servant, to use the old fashioned term. It seems to me to be inappropriate in that circumstance to apply a strict contract law approach to employment disputes. Attempts to so apply tend to obscure the social implications of certain kinds of conduct or events by reducing them to legalistic principles. However, it is not for this reason alone that I find that the contract was not frustrated in the circumstances.

87. Furthermore, I am satisfied from the evidence given by the four Plaintiffs that they would not have entered into the contracts had there been a condition that the contract could be terminated if work were not available. Those Plaintiffs gave evidence which showed a commitment to coming to Ireland for a period of one year with hope of continuing further in reliance on the first letter of 17th September, 1999 in relation to the renewal of the contract after a period of one year.

88. In the circumstances and for the foregoing reasons it does not seem to me that the contract was frustrated by the loss of the specific Eircom contract.

Mount Kennett Investment Company -v- O’Meara & Ors

[2007] IEHC 420 (21 November 2007)

Judgment delivered by Mr. Justice T.C. Smyth on 21st November, 2007
This is a purchaser’s action. It arises from an agreement in writing dated 28th January 2003 made between the Defendants and one Tom Pollard (In Trust) for and on behalf of the Plaintiff. The agreed purchase price was €3,900,000 in respect of which €195,000 was paid as a deposit. The closing date for the sale was 30th March 2005. The property in sale in known locally in Clonmel, County Kilkenny as “The Show Ground”; the property being sold excluded the property known as the Dog Track – which adjoins or is continuous to The Show Ground – which had for some years earlier been transferred to Bord na gCon.
The contract was based on the General Conditions of Sale (2001 Edition) of the Incorporated Law Society of Ireland and was subject to a number of Special Conditions, of which
numbers 5, 6 and 10 were central to this case. These provide as follows: –
5. The property was subject to leases of 1st July 1931,
3rd October 1941 and 1st July 1944 between Clonmel Horse
Show & Agricultural Society Ltd of the One Part and Thomas
A. Morris & Ors of the Other Part. The Lessees under the
said Leases have long since vacated the property in sale.
No surrender was ever completed by the parties. The terms
devised under the Leases aforesaid have now expired. A
declaration along these lines from Clonmel Horse Show &
Agricultural Society Limited will be furnished if requested on closing.
The Purchaser shall not require Surrender in respect of the said Leases.
6. The Purchaser is referred to Lease made 2nd August 1988 in favour of
Clonmel Leisure Group Limited. The Lessees in respect of this Lease have
vacated and surrendered the property. On or before the closing the vendors
shall furnish a Surrender duly executed in respect of the said Leases.
…
8. (If) ‘the sale to the Vendors herein has not closed no objection or requisition
shall be raised by reason of the fact that the Vendors have not completed the sale
to them or are not registered owners.
…
10. Not withstanding the title document schedule and the documents therein
the vendor shall deduce fee simple title without burdens or restrictive covenants
to the subject property on or before closing.”
The evidence establishes that condition 10, which appears in manuscript form in the contract, was inserted at the behest of the Plaintiff with the consent of the Defendant Mr. Tobin (who is not only a Defendant but also the solicitor for the Defendants in the action and also is a controlling shareholder in Clonmel Leisure Group Limited) prior to the signing of the contract.
Clonmel Leisure Group Limited was a private limited liability company of which the three Defendants are shareholders, it came to have, through and arrangement with a Mr. Buckley, an interest in purchasing The Show Ground from the Clonmel Horse Show & Agricultural Society Limited (“the Society”) which it is common case was a registered charity, and as such required the
consent of the Commissioners of Charitable Donations & Bequests for Ireland (“the Commissioners”) to dispose of its asset(s). The contract between Mr. Buckley and the Society was expressly made subject to the consent of the Commissioners.
The parties hereto have signed the contract of 28th January 2005, the Plaintiff’s solicitors on 31st January sought documentation specifically in relation to special conditions 5 and 6 of the contract and title deduction pursuant to special condition. The response of the Defendants’ solicitor – (the Defendant Mr. Tobin) – of 8th March 2005 was:
“We are not in a position to furnish the documentation,
particularly in relation to Special Condition 5, 6 and10.”
It is common case that what was in sale was development land, and by 11th March the Plaintiff was at an advance stage of finalising a planning application, and negotiating with intended anchor tenants – this incidental matter was not proven in evidence but the letter of 11th March 2005 alluding to it was not disputed during the hearing by the Defendants. More pertinently, the Plaintiff’s solicitor in that letter stated:
“Our client wishes to complete the sale on the closing date specified
in the Contract. Under general condition 7 your client is obliged to furnish the documents referred to in the Documentation Schedule to the Contract. We don’t understand as to why you would not be in a position to furnish these
or those in Special Conditions 5, 6 and to the Contract as you
must have been in possession of same when the contract was drafted.”
No response was forthcoming and on 4th April 2005 the Plaintiff served a Completion Notice on the Defendants solicitor. The Defendants were in no doubt that the Plaintiff would pursue the contract through litigation if the Completion Notice was not complied, for a draft Plenary Summons and draft Statement of Claim accompanied the letter of 4th April 2005.
Issue was joined when the Defendants’ solicitor by letter dated 20th May 2005 (inter alia) stated:
“We refer to the above matter and we would refer in particular to contract
dated 28th day of January 2005. We take this opportunity to again remind
you, as I did during the course of our telephone conversations, that we are not in a postion to proceed with this sale as the Charitable Commissioners have not granted their consent to the purchase by our clients of the lands in question. On the presentation of the contracts in this matter to your goodself you inserted a special condition making the contract subject to devolution of a fee simple title, namely special condition number ten. By reason of the fact that the Charitable Commissioners have refused their consent, we are not in a position
to satisfy that condition and the contract is therefore at an end. There is no question of any liability in respect of non performance resting on your clients in this matter.”
It goes on as follows:
“In short this is quite simply a case of a contract being conditioned in respect of a particular issue that condition not being satisfied then in such an event the contract is at an end. If you wish to have this issue adjudicated by the High Court that is a matter entirely for yourself, but we would respectfully suggest that it is totally unnecessary being an abuse of process and a generation of costs which would ultimately be borne by your clients.”
The Defendants from that date, contended that what was in suit was a conditional contract and it was only at the end of the first day’s hearing that it was properly conceded by counsel for the Defendants that such plea was being abandoned. In my judgment on the documentation it was unsustainable. At another part of the case the suggestion was clearly made against the Plaintiff on the instructions of the Defendants solicitor that the Plaintiff had not paid the full deposit and/or that it had been received back from the Defendants. On the Plaintiffs seeking to have further evidence called to rebut this baseless suggestion, which the Defendants knew or ought to have known was untrue, it was withdrawn on the third day of the hearing.
The Plaintiffs case was that the grant or refusal of consent by the Commissioners to eitther the Defendants contract to purchase or, the better, to facilitate the Defendants to complete the contract in suit to sell was not its concern. Furthermore the contract of 28th January 2003 to sell to the Plaintiff was not made subject to the consent of the Commissioners and accordingly there was an absolute obligation on the Defendants to deduce title before the closing date to enable the sale to be completed in accordance with the contract.

In the course of the judgment in Duffy -v- Ridley Properties Limited & Anor (The High Court, 7th July, Unreported, Finlay Geoghegan J.) It is stated as follows:
“The remedy of specific performance is discretionary. As John Farrell SC in the Irish Law of Specific Performance puts it at p 223: ‘The relief may be withheld as an exercise of that discretion even where a Plaintiff proves a valid contract and no particular defence or ground for refusal is established.'”
“However in the case of a contract for the sale of land the normal rule is for the court to grant specific performance and there is an onus on a defendant once the Plaintiff proves a valid contract to establish a ground or grounds upon which relief should be refused.”
It is accepted by the Defendants that the contract was a valid contract and that they had the onus of displacing the entitlement, in such circumstances, of the Plaintiff to an entitlement to a decree of specific performance. It was on this basis that the case proceeded. However, Mr. Michael McMahon S.C. for the Defendants signaled in advance that the evidence to be led would inform the Court as to: –
a) The belief the Defendants had of obtaining the consent of the Commissioners to their own contract to purchase.
b) The knowledge of the Plaintiff that the consent of the Commissioners was necessary to both the Defendants contract to purchase and the second or ‘sell on’ contract of 28th January 2005 AND that such knowledge is a material consideration as to whether the Plaintiff should be given the relief of specific performance or not, because of: (i) frustration, or (ii) the impossibility of specific performance.
The Evidence:
The Solicitor for the Society gave a general history of the site and verified that the first contract for sale of January 2001 to Mr. Buckley was for £2m. A deposit 11:41 was paid and the consent of the Commissioners obtained, but Mr. Buckley was unable to complete the transaction. A variety of negotiations followed or arose from the inabilities of Mr. Buckley which led to the dog track being sold to Bord na gCon, and on 31st January 2002 the balance of the Society’s property, ie the north field was sold to Mr. Tobin (In Trust) for £750,000 (€952,303) – that contract was made by special condition expressly subject to the consent of the Commissioners. A further condition provided that for the consideration of £1 the purchaser would procure the surrender of the leasehold interest of Clonmel Leisure Group Limited in the property the subject of the contract for sale to Bord na gCon; and further that in the event of the rezoning of the property by April 2003 that the purchase price would be increased by an additional £100,000.
In short this evidence established that –
(a) the consent of the Commissioners was available on 21st February 2001 to a sale to Mr. Buckley of the totality of the dog track and north field (the subject of the contract in suit) as it was then zoned for £2m in the terms of the contract between the Society and Mr. Buckley;
(b) he consent of the Commissioners was required in respect of the sale to the Defendants by the Society and it was available at a price which the Commissioners considered reflected a net benefit to the Society at full market value (if such) (of which the Plaintiff knew nothing at the time) and same existed between the Commissioners and the parties to the First contract – the ultimate position of the Commissioners was expressed in a letter from them to the Society dated 16th March 2005 –
“That since the Commissioners approved the sale of the property
on 20th August 2002 for €952,303 with the proviso that should
rezoning be granted within 12 months of the date of the closing
or within two years from the date of the contract, the purchase price to increase to €1,199,902.00, factors have emerged which cast doubt on the adequacy of the consideration agreed.
In the circumstances the Commissioners cannot agree to the sale.”
Matters did not improve over time for the Commissioners by letter dated 1st March 2005 to the Society’s Solicitors (inter alia) stated as follows:-
“The Commissioners are deeply concerned about many aspects of
this application. Unless they can be satisfied that theproposed sale
of the property is for the full market value and for the benefit of the
charity, their sanction will not be forthcoming.”
Further, the view of the Commissioners came to be reiterated in their letter of 19th January 2007 as follows:-
“That the Commissioners are not satisfied, on the evidence furnished,
that the net benefit accruing to the charity represents the full market
value of the Lessor’s interest.”
In the course of his evidence Mr. Flynn, the Society’s Solicitor, said that he, “The Committee of the Society, and just about everybody
elsewhere perhaps,except the Commissioners, were at a loss to understand where they were coming from.”

While ignoring events post the application for consent I have no difficulty in understanding the Commissioners concerns which are clearly stated. If consent was available for the sale of the entire holding of the Society in February 2001, they might reasonably be concerned (even ignoring any question of confusion over the differences in market price per acre) that with re-zoning and in a national rising market that the property in suit could pass through the hands of speculators in a relatively short period of time (some of whom added no value) each of whom would make a handsome profit but in whole or part at least at the expense of the charity. The consent of the Commissioners to the sale of the dog track was in August 2002 forthcoming at existing use value plus what Mr. Flynn referred to as:
“The inducement payment that was made by the Davis Road
Greyhound Stadium Group, all of which secured theCommissioners consent by December 2002.”
I am satisfied and find as a fact that if the Defendants has been prepared to accept a lesser element of profit on ‘the sell on contract’ to the Plaintiff the consent of the Commissioners was as a matter of probability available in respect of the contract between the Society and the Defendants.
In my judgment it is clear that the Commissioners were concerned that the Society should not only receive full market value (which includes the hope or potential of the property). I do not discern from the correspondence that the Commissioners expected a purely philanthropic purchaser to exist, but they repeated their view that the Society should be the net beneficiary of the sale of property. They could scarcely permit with impunity the selling on of the Society’s property within short intervals by speculative investors, each making appreciable profits.
In the events by the date of the hearing the First of the contracts, ie that between the Society and Mr. Tobin (In Trust) (through which, notwithstanding the Vendors’ had no title on 28th January 2005 still entitled them to maintain a claim for specific performance against the Plaintiff if it had defaulted in its obligations there under). In my judgment the corollary should also apply.
Parallel to the litigation and without prejudice to it arrangements were made to achieve an outcome that the Defendants would sell back to the Society the leasehold interests which they held and the Society would sell directly to the Plaintiff the freehold interest in the property.

As I say, and I repeat, the events by the date of the hearing brought about a situation where the contract between the Society and Mr. Tobin (In Trust) had been annulled – the date or circumstances were not vouchsafed to the Court or whether this was a deliberate action taken by Mr. Tobin and/or with his associates under which or whatever aegis to disable themselves of having an interest in the property in suit to ‘sell on’ to the Plaintiff. I am unaware and make no findings about facts of which I had no evidence. By the date of the hearing the Society had entered into a contract on 1st September 2006 for the property of the north field – The Show Ground to the Plaintiff for a sum of €6 million. At the same time there was a contract entered into between the Defendants and the Society for the sale of the lessees interest for a consideration of €3,200,000. Some time in January 2007 Mr. Flynn contacted the solicitors to the Commissioners as a result of which he understood that an additional €1 million might be sufficient to bring the Commissioners to consent to the sale to the Plaintiff, ie that the net benefit to the Society would be €3.8m.
I am satisfied and find as a fact on the evidence that the Plaintiff was prepared to make such financial adjustment by way of an additional payment of €500,000 but the Defendants were not prepared to reduce by €500,000 the payment to be received by them from Society for the lessees interest under the lease. Accordingly matters being unresolved the case proceeded in respect of the contract of 28th January 2005.
I am satisfied and find as a fact that these more recent arrangements were initiated without prejudice to the litigation and as an attempt by the Plaintiff to mitigate such damage as it may have suffered from the failure of the Defendant to conclude the sale of 25th January 2005.
In my judgment the fact that by the closing date fixed by the contract in suit the Defendants had not secured directly or through the Society the consent of the Commissioners did not discharge the contract but left the Defendants in breach of their obligations to close the sale. Furthermore I am satisfied and find as a fact there was not a frustration in fulfilling the Defendants obligations under the contract. Frustration invariably involves some subsequent supervening event not in the contemplation of the parties at the time of the making of the contract. It does not and cannot arise in the instant case because the issue of the necessity of the consent of the Commissioners was fully
known at the time of the making of the contract, most particularly by Defendants but the Plaintiff was not so conditioned.
Likewise I am satisfied and find as a fact that on the evidence the defence of impossibility of performance is unsustainable. The evidence in this case is that the consent of the Commissioners was obtainable if and only if they were satisfied as to the amount or price the Charity (The Society) received and that is quite clear from their correspondence. If the Defendants had paid a sufficiently adequate price to the Society, even if did mean accepting some reduction in the element of profit to it on the ‘sell on’ contract to the Plaintiff, I believe on the evidence that the requisite consent would on the balance of probability on the evidence have been forthcoming. There is no credible evidence that the Defendants took any meaningful step to secure the consent. Quibbling about errors in the figures first put to the Commissioners was to miss the point completely because the Commissioners were dealing with matters of substance that clearly concerned them.
In the admirably reliable and concise textbook Farrell on Irish Law of Specific Performance (1994) at page 59, para [3.27] states as follows:
“While a Court of equity will not compel a person to do something which
is impossible it will have little sympathy for someone whose own neglect
default makes it impossible for him to perform his contract.”
In my judgment the Plaintiff is entitled to a decree for specific performance.

Moloney & Anor -v- Fox

[2010] IEHC 72 (22 February 2010)

Judgment of Mr. Justice Kevin Feeney delivered on the 22nd day of February, 2010.
1. The claim brought by the plaintiffs in these proceedings is based upon a contract dated the 25th September, 2006. That contract (hereinafter referred to as the sub-contract) was between John Moloney and Patrick Meade as vendors and Tadhg Fox (in trust) as purchaser whereby the vendors agreed to sell and the purchaser agreed to purchase the registered lands described therein, namely, all that and those part of the lands situated at Foulkscourt, Barony of Galmoy and County of Kilkenny being part of the property comprised in Folio 14004 of the register County of Kilkenny together with part of the property comprised in Folio 10759F of the register County of Kilkenny for the total purchase price of €2,900,000 subject to the terms and conditions set out in the memorandum of agreement.

2. Special conditions contained in the sub-contract between the plaintiffs as vendors and the defendant as purchaser provided that the vendors were selling on foot of a contract (hereinafter referred to as the head contract) for sale dated the 9th May, 2006 and made between Margaret Fitzpatrick of the one part and the vendors of the other part. The sub-contract was essentially an unconditional contract and contained a closing date of the 1st February, 2007.

3. The defendant failed to close the sale by the stated date and a completion notice dated the 26th February, 2007 was served on the defendant/purchaser on behalf of the plaintiffs. That completion notice was signed by Neil Corbett who was a solicitor acting for both the plaintiffs/vendors and the defendant/purchaser in relation to the sale and purchase pursuant to the sub-contract. The completion notice called upon the purchaser in accordance with general condition No. 40 of the contract to complete the sale within 28 days from the date of the service of that notice. It was also stated that if the purchasers should fail to complete the sale within the specified period that the vendors would enforce against the purchaser such rights and remedies as may be available to them at law or in equity.

4. The defendant/purchaser failed to respond to the completion notice and the plaintiffs thereafter proceeded on the basis that the defendant was in fundamental breach of contract.

5. The plaintiffs issued proceedings against the defendant by plenary summons dated the 30th April, 2008 wherein a claim for specific performance was made together with an alternative plea, at the election of the plaintiffs, seeking rescission of the said contract. The statement of claim was served on the defendant on the 1st August, 2008 seeking the same alternative reliefs as identified in the plenary summons. The defendant raised a notice for particulars dated the 23rd October, 2008 and in a reply thereto dated the 10th March, 2009, the plaintiffs elected to rescind the contract and stated that they accepted that their contract with Margaret Fitzpatrick has been rescinded and that they have therefore elected to pursue a remedy in damages.

6. The defendant delivered a defence and counter-claim dated the 20th November, 2008 wherein he admitted the agreement of the 25th September, 2006 (the sub-contract). The defendant pleaded that it was an express, or in the alternative, an implied term of that agreement that the plaintiffs would be in a position to convey to the defendant good title of the said lands on completion of the agreement. The defendant also sought to rely on a plea that he had entered into the said contract as trustee for Trotfox Limited. The plea that the defendant was acting as trustee for a limited liability company was not pursued at the hearing before the Court and the case proceeded on the basis that the defendant was the real principle and that the plaintiffs could rely on the general conditions set out in the contract and that any liability under the contract was the liability of the defendant. The defendant further pleaded, at para. 15 of the defence, that further in the alternative, it was an express condition of the said contract for sale between Margaret Fitzpatrick and the plaintiffs that the plaintiffs would apply for a specified planning permission within three months of the date of that contract and further that in the event of their failing to apply for the said planning permission, the contract could be rescinded by the said Margaret Fitzpatrick. The defendant alleged that in breach of the said condition the plaintiffs failed, refused and neglected to apply for the agreed or any planning permission and accordingly the contract for sale between Margaret Fitzpatrick and the plaintiffs was voidable at the instance of Margaret Fitzpatrick as and from the 9th August, 2006. Based upon such plea it was contended (at para. 17) in the defence that the only consideration received by the defendant on foot of the agreement with the plaintiffs was their rights pursuant to a contract which was unilaterally voidable at the instance of the other party thereto. It was denied that the defendant received or was to receive any or any adequate consideration from the plaintiffs and in those circumstances it was denied that the agreement was enforceable as against the defendant. The defendant further contended (at para. 24) that by reason of the rescission of the contract (the head contract) for sale between Margaret Fitzpatrick and the plaintiffs, which said rescission was caused solely by reason of the failure of the plaintiffs to apply for planning permission, the contract the subject matter of the proceedings could not now be performed. It was further claimed by the defendant that specific performance of the agreement the subject matter of the proceedings or any relief thereunder would be unjust, inequitable and contrary to public policy in circumstances where the agreement was prepared by the solicitor for the plaintiffs and where the defendant to the knowledge of the plaintiffs did not receive impartial or independent legal advice in relation to the terms of the said agreement. The defendant counter-claimed for rescission of the agreement the subject matter of the proceedings (the sub-contract) and for an order directing the plaintiffs to return the deposit paid by the defendant and for damages for breach of contract.

7. The plaintiffs delivered a reply and defence to counter-claim dated the 10th March, 2009 in which it was denied that the contract for sale made between Margaret Fitzpatrick and the plaintiffs (the head contract) was void for uncertainty or unenforceable. The defendant had pleaded in his defence that the contract for sale between Margaret Fitzpatrick and the plaintiffs was void for uncertainty and unenforceable in that the special conditions within that contract as set out at special conditions 4, 5, 6 and 8 were mutually contradictory and irreconcilable. That was expressly denied in the reply and defence to counter-claim. It was pleaded that even if the contract between the plaintiffs and Margaret Fitzpatrick (the head contract) was void for uncertainty, that that did not affect the liability of the defendant under the contract the subject matter of the proceedings. The plaintiffs further pleaded in the reply and defence to counter-claim that if the head contract with Margaret Fitzpatrick was voidable, the same did not and does not affect the liability of the defendant as the contract between the plaintiffs and Margaret Fitzpatrick was not avoided at any material time. It was admitted that the head contract between the plaintiffs and Margaret Fitzpatrick was rescinded on the 11th October, 2007 but it was denied that such rescission was affected by the reason of any failure on the part of the plaintiffs to make the agreed or any application for planning permission. The plaintiffs also denied all pleas contained in the defendant’s counter-claim.

8. The matter came on for hearing before the High Court in Clonmel and oral evidence was heard on the 2nd and 3rd December, 2009. The Court heard evidence from the first named plaintiff. The Court also heard evidence from Ian Corbett, solicitor, who had acted for both the plaintiffs and the defendant in relation to the sub-contract, the subject matter of these proceedings. The Court also heard evidence from Margaret Fitzpatrick who was the person identified in special condition 7 of the sub-contract, and who was the vendor in the head contract for the sale of the said lands to the plaintiffs. Special condition 7 of the sub-contract specified that the sale to the defendant was to be a sale by way of sub-sale on foot of that head contract. The evidence of Margaret Fitzpatrick dealt with the issue of the increased deposit agreed to be paid under the head contract with the plaintiffs. This matter will be dealt with later in the judgment. She also gave evidence that if she was asked to complete the sale to the plaintiffs in September 2006 or in February 2007 or on the closing date that she would have closed the sale. Her evidence was that she would have completed the sale under the head contract if she had been paid the agreed purchase price. She was expressly asked if she would have done so even though there was no planning and she stated that she would have done so. The evidence before the Court established that Margaret Fitzpatrick on the dates material to these proceedings was willing and able to complete the sale of the property to the plaintiffs if the purchase money had been forthcoming. All relevant documents and correspondence were admitted in evidence including a letter from the solicitor acting for Margaret Fitzpatrick dated the 11th October, 2007 wherein the head contract between Margaret Fitzpatrick and John Moloney and Patrick Meade was rescinded. The stated reason for the rescission was that John Moloney and Patrick Meade had not received planning permission in accordance with special condition 4 of the agreement between those parties. The Court also heard evidence from Jim Moran who was an official with Allied Irish Banks. Mr. Moran gave evidence that his bank had advanced a loan to the plaintiffs for the purchase of the said lands and in particular to enable the plaintiffs to pay an increased deposit under their contract with Margaret Fitpatrick. Mr. Moran’s evidence was that the bank advanced such loan on the basis of a requirement that before the money would be advanced that there be an unconditional contract in existence between the plaintiffs and a sub-purchaser. The loan was repayable on the 1st February, 2007. The bank also required an undertaking from Mr. Corbett, solicitor, to lodge the money from the proceeds of sale. Evidence was also given by Mr. Moran that the bank ultimately took proceedings against the plaintiffs in respect of the sum advanced in relation to the contract between the plaintiffs and Margaret Fitzpatrick and in respect of other outstanding sums. Evidence was given that judgment was obtained by Allied Irish Banks Plc against the plaintiffs on the 18th May, 2009 for a sum of €1,202,891.53 together with costs and that sum included as part of the total in the €450,000 loaned to fund the deposit paid to Margaret Fitzpatrick together with interest thereon. Mr. Moran identified that the sum for interest was €79,797.04 up to the 2nd December, 2009.

9. The Court also heard evidence from Pat Shine who was a property intermediary involved in the transaction the subject matter of the proceedings. Mr. Shine was involved in introducing the defendant to the plaintiffs with a view to a potential agreement for the sale and purchase of the lands the subject matter of these proceedings. The sub-contract between the plaintiffs and the defendant provided for a deposit of €150,000 and Mr. Shine gave evidence that the arrangement agreed was that a sum of €50,000 was to be paid by the defendant to the solicitor, Mr. Corbett, and that the payment of the outstanding balance of €100,000 was agreed to be deferred until the closing of the sale with that sum then being paid by the defendant, Mr. Fox directly to Mr. Shine. That sum of €100,000 was never paid as the contract was never completed. The Court also heard evidence that Mr. Fox paid a cheque of €50,000 to Mr. Corbett, as deposit but that that cheque was not cashed. The original of that cheque was produced.

10. The Court heard evidence that in relation to the head contract the original deposit agreed and as provided for in the memorandum of agreement of the 9th May, 2006 was in the sum of €50,000. The purchase price was €2m.

11. In special condition 5 in the head contract, the purchasers, namely the plaintiffs herein, undertook as a condition of that contract that an application for planning permission would be lodged with the planning authority within three months from the date of the contract. That time period expired on the 8th August, 2006 but the Court heard evidence that following negotiations between Margaret Fitzpatrick and the plaintiffs that that special condition was deleted by agreement. The evidence established that as John Moloney and Patrick Meade were aware of a potential sub-sale of the lands to a third party, namely, Tadhg Fox, for a consideration greater than the sum provided for in their contract with Margaret Fitzpatrick, that they entered into negotiations with Margaret Fitzpatrick and agreed that the time limit for them to obtain planning permission would be extended to the 1st February, 2007 and that special condition No. 5 in the head contract could be deleted. In consideration for such agreement, John Moloney and Patrick Meade agreed to pay an additional non-refundable deposit of €450,000 over and above the €50,000 non-refundable deposit already paid. It was agreed that the further non-refundable deposit of €450,000 would be paid within 14 days of such agreement being concluded. That agreement was confirmed by letter of the 27th October, 2006 from Margaret Fitzpatrick’s solicitors, Butler Cunningham & Molony, addressed to Neil Corbett, the solicitor acting for the plaintiffs. The additional sum of €450,000 was duly paid within the agreed time period.

12. The extra deposit was additional to the original deposit and it was a special condition (No. 6) that the deposit would be non-refundable notwithstanding the provisions of any of the general conditions or special conditions in the contract for sale, that is the head contract. An issue arose during the proceedings as to whether Tadhg Fox was aware of such alteration to the head contract and of the payment of the additional €450,000 non-refundable deposit to Margaret Fitzpatrick. I will return to this issue later in this judgment. The Court also heard evidence that when Margaret Fitzpatrick rescinded the head contract by solicitors’ letter of the 11th October, 2007, she retained the total deposit of €500,000, which was up to that time held by the solicitor as stakeholder.

13. The Court also heard evidence from the defendant. Mr. Fox gave evidence that through Mr. Shine he became involved in the purchase of the lands the subject matter of these proceedings. Together with Mr. Shine he met Mr. Corbett, solicitor. Mr. Corbett had acted for him in respect of one small transaction on a previous occasion and Mr. Fox gave evidence that he, together with Mr. Shine and Mr. Corbett, visited the lands. During that journey Mr. Fox indicated that it was agreed that Mr. Corbett would become his solicitor in respect of the purchase. Mr. Fox was aware that Mr. Corbett was also acting for the vendors, the plaintiffs herein. An agreement was reached between Mr. Fox and Mr. Corbett as to the payment of a €150,000 deposit on the lands, €50,000 of that sum to be paid by Mr. Fox by cheque to Mr. Corbett and the remaining €100,000 “deposit” being deferred and to be paid directly to Mr. Shine on closing.

14. Mr. Fox was a business man involved in the purchase and development of property. He had been working in that capacity for five or six years, having previously been employed by Radio Kerry. Mr. Fox purchased land and then developed the land by building houses thereon. He had built houses in County Galway and apartments in County Kerry and he sought to purchase the lands the subject matter of these proceedings with a view to obtaining planning permission and building houses. The reason that he was interested in the lands was that his housing development in Gort was almost complete. Mr. Fox also explained to the Court that the reason that the purchase of the lands in the sub-contract fell through “was the finance”. He explained that at the time that he was buying the land he had been in negotiation with Anglo Irish Bank in Cork, a bank with which he had done a lot of business, and the bank were quite happy and had looked at the land. Mr. Fox went on to explain that as the market started to fall and he was unable to produce planning permission, the finance was not forthcoming from the bank. Mr. Fox indicated that he was aware that he had signed a contract for the purchase of the lands in September 2006 and that when he signed that contract, he thought that the money necessary to complete the sale was available from Anglo Irish Bank and that he would not have signed the contract if he did not so believe. In cross-examination Mr. Fox openly admitted that he was not able to complete the contract and that that was not as a result of anything to do with the head contract.

15. Mr. Corbett was the solicitor acting for both the plaintiffs and the defendant. He drew up the sub-contract the subject matter of the proceedings herein which was ultimately dated the 25th September, 2006. In that contract it was expressly identified that the vendors therein were selling on foot of a contract for sale dated the 9th May, 2006 and made between Margaret Fitzpatrick, of the one part, and the vendors, of the other part, that is the plaintiffs herein. It was also expressly provided in special condition No. 7 that the sale shall be closed by way of a sub-sale. Mr. Corbett sent out the contract to the defendant. The defendant returned it through the post having signed the contract. Mr. Corbett indicated that the defendant knew that he was signing an unconditional contract. Mr. Corbett did not expect to receive the signed contract returned through the post. Mr. Corbett’s evidence was that Mr. Fox at all times knew that for the sale under the head contract to proceed that it was necessary that he as the sub-purchaser sign an unconditional contract. When the signed sub-contract came back through the post, Mr. Corbett contacted the plaintiffs, who came in and signed the contract which was dated the 25th September, 2006. Mr. Corbett indicated that he had expected Mr. Fox to call in and go through the contract before signing it but that Mr. Fox did not do so. When he received the signed contract from Mr. Fox he acknowledged the contract, had it signed by the plaintiffs and then sent a copy of the signed contract to the Allied Irish Bank who were providing finance to the plaintiffs. That resulted in the bank providing the funds and the first named plaintiff was able to pay the agreed €450,000 additional deposit.

16. A dispute which arose in the evidence between the defendant and Mr. Corbett was whether or not Mr. Fox was aware of the increased non-refundable deposit of €450,000 to be paid to Mrs. Margaret Fitzpatrick. Mr. Corbett gave evidence that he fully informed Mr. Fox of that fact and that Mr. Fox was well aware of the terms of the re-negotiation between Mrs. Fitzpatrick and Mr. Moloney and Mr. Meade. It was that re-negotiation which allowed the matter to proceed and Mr. Corbett gave evidence that Mr. Fox was fully informed of such re-negotiation. He also gave evidence that Mr. Fox had been informed that Allied Irish Bank would only fund the additional deposit if there was an unconditional contract in place and that that was made clear to Mr. Fox. This position was described by Mr. Corbett in evidence as being “a chicken and egg” situation, that is to say that without the unconditional contract signed by Mr. Fox that the bridging necessary to fund the additional deposit would not have been available. Mr. Fox gave evidence that Mr. Corbett did not tell him about the additional €450,000 deposit and contended that even though the reason why he had not proceeded was due to the lack of finance from his bank, that he had been subsequently led to believe that he had no obligation to proceed as the head contract had been rescinded. On cross-examination he was uncertain in relation to that matter even though he acknowledged that he knew that he was buying by way of sub-sale. Mr. Fox disputed that he had knowledge of the increased €450,000 deposit in the head contract. The Court is satisfied that in relation to this conflict of evidence that the evidence of Mr. Corbett is to be preferred. Whilst Mr. Corbett was in many ways an unsatisfactory witness who demonstrated a disregard for the standard procedures and professional good practice required in dealing with the sale of lands, that in relation to this matter Mr. Corbett’s evidence is to be preferred. There was no doubt that Mr. Fox knew that he was purchasing by way of sub-contract and the Court is satisfied that the circumstances which prevailed in this case were such that in all probability Mr. Fox was made aware and knew of the fact that for his purchase to proceed that the head contract must be in place and that additional funds were required to ensure that that could occur and that those funds would only be available if Mr. Fox signed an unconditional contract. There is no doubt but that that was the position of the bank and the willingness and alacrity with which Mr. Fox signed the contract is indicative of the fact that he knew that an unconditional contract was required to be signed by him to enable the head contract to proceed. The Court accepts the evidence from Mr. Corbett that he fully informed Mr. Fox of the altered terms of the head contract and of the willingness of the vendor under that contract to permit the head contract to proceed notwithstanding the terms of special condition No. 5 therein. If the vendor under the head contract had not been prepared to waive special condition No. 5, then the plaintiffs could not have proceeded to identify a future date for the closing of the sub-contract between them and the defendant. The Court is satisfied and accepts the evidence from Mr. Corbett that Mr. Fox was made aware of the amendments to the head contract and agreed to same and that Mr. Corbett’s evidence is to be believed when he stated that he told Mr. Fox that the plaintiffs in this action could not sell to him without the amendments to the head contract. The Court accepts the evidence of Mr. Corbett and is satisfied that it is supported by the surrounding circumstances and facts. When Mr. Corbett gave evidence that he informed Mr. Fox of the terms of the re-negotiations between the plaintiffs and Mrs. Fitzpatrick, he was doing no more than indicating the basis upon which the plaintiffs could proceed with the proposed sub-sale to Mr. Fox and given the position of Allied Irish Bank, it was clearly a necessity that an unconditional contract be in place. The Court is satisfied that Mr. Corbett’s evidence is to be believed when he stated that he showed the defendant the head contract and went through it with him. This is supported by Mr. Corbett’s evidence that he tippexed out the purchase price in the head contract prior to showing it to Mr. Fox so that he would be unaware of the actual purchase price in the head contract which would be kept confidential as between the parties to that contract. Even though Mr. Corbett did not have any attendances, there was available to the Court on Mr. Corbett’s file the head contract with the details tippexed out which was supportive of his recollection of what occurred. The evidence to the Court establishes that the amendments to the head contract were required in order to allow the sub-sale to proceed. The Court is satisfied that on the balance of probabilities Mr. Corbett’s evidence that the defendant was fully informed of the amendments including the additional €450,000 non-refundable deposit is to be preferred over Mr. Fox’s evidence in relation to this matter. Circumstances required that the defendant execute an unconditional contract and the Court is satisfied that those circumstances were explained to the defendant. 17. The Court does not accept the defendant’s denial that he knew nothing of the amendments to the head contract. However, even if the Court had been so satisfied the position is that the defendant signed an unconditional contract knowing that it was a sale by sub-contract for the agreed purchase price of €2.9m. The amendments to the head contract enabled that unconditional contract to be completed and ensured that the defendant’s purchase would not be undermined by a rescission of the head contract. The agreed amendments to the head contract also enabled a three way closing to take place and identified a closing date and these amendments were for the benefit of the defendant. The amendments which were agreed to the head contract ensured that the defendant was put in the position where the parties could complete the purchase of the lands on 1st February, 2007.

18. An issue which arose in legal argument related to the fact that Mr. Corbett acted for both the plaintiffs and the defendant in the sub-contract. Irrespective of the desirability of such conduct and of the slipshod and casual manner in which Mr. Corbett proceeded, the Court cannot identify a basis based on Mr. Corbett’s conduct which alters the defendant’s liability to the plaintiffs. Mr. Corbett’s conduct in how he dealt with the defendant is not a manner which is the responsibility of the plaintiffs. The facts are that Mr. Corbett was acting under a dual mandate to the plaintiffs and the defendant. The defendant was well aware of that dual mandate and proceeded to instruct Mr. Corbett to act on his behalf notwithstanding that he knew that he was acting for the plaintiffs. Mr. Fox was free to proceed with the proposed contract with or without legal assistance. If he chose to receive legal assistance it was open to him to choose whether or not to instruct an entirely independent solicitor or to instruct Mr. Corbett to act under a dual retainer. Mr. Fox was an experienced property developer and on the facts of this case chose to instruct Mr. Corbett under a dual retainer. How Mr. Corbett carried out that retainer in representing Mr. Fox is not the responsibility of the plaintiffs or something for which the plaintiffs can be held responsible. Further, on the facts of this case, Mr. Fox has failed to identify any acts or neglect on the part of Mr. Corbett that has caused the defendant any damage. The facts of this case establish that the defendant desired an unconditional contract for the purchase of the lands the subject matter of these proceedings and that that is what he received. Insofar as the amendments to the head contract are relevant, the amendments which were agreed were such as to enable that contract to be completed and not to be undermined by its rescission. Such amendments as were agreed were for the potential benefit of the defendant and the defendant has failed to identify any prejudice which arises from any alleged default of Mr. Corbett even if such default was to be deemed relevant. Central to the factual background of this case is the fact that the defendant desired to purchase the lands in question for a stated price on foot of an unconditional contract and that the reason why the contract did not proceed was that the defendant was unable to raise the finance when it was required.

19. A number of legal defences were raised by the defendant which are hereinafter dealt with. The factual position which was established before the Court is that there was no issue between the parties to the head contract in relation to the presence or absence of an express completion date in the head contract. The evidence available to the Court provided no support for any contention that the vendor under the head contract, Mrs. Fitzpatrick, was unwilling to complete that contract. The evidence from Mrs. Fitzpatrick established that she was able and willing to complete the sale under the head contract and would have done so if the money was forthcoming. It follows that the issue which was raised by the defendant in relation to the ambiguity of a closing date under the head contract is not relevant on the facts of this case as the clear evidence was that the vendor under the head contract was willing and able to complete as of the 1st February, 2007. Any argument in relation to a suggested ambiguity in relation to a completion date under the head contract is therefore a theoretical argument as the evidence establishes that such ambiguity as there was would not have prevented the completion of the head contract.

20. The evidence establishes that the defendant entered into an unconditional contract with the plaintiffs with a specified closing date of the 1st February, 2007 and that the defendant failed to close on that date. Thereafter, Mr. Corbett acting as solicitor for the plaintiffs served a completion notice on the defendant on the 26th February, 2007. The defendant failed to respond to that completion notice and failed to complete the sale within the time specified therein. It follows that the defendant is in fundamental breach of contract. After the service of the completion notice attempts were made to complete the sale and to raise the finance required by the defendant to permit a completion. Those attempts failed and the sale did not proceed. This resulted in the vendor under the head contract, Mrs. Fitzpatrick, rescinding the head contract.

21. The contract between the plaintiffs and the defendant was a sub-contract in that the sale was to be closed by way of sub-sale. The consequence of that was that the legal estate was vested in the vendor under the head contract, Mrs. Margaret Fitzpatrick. The legal requirement on the plaintiffs under the sub-contract of the 25th September, 2006 was to procure Mrs. Fitzpatrick’s participation in the completion of the transaction so as to cause the legal estate to pass to the defendant. The evidence before the Court was that the plaintiffs were in a position to secure Mrs. Fitzpatrick’s participation in the transaction causing the legal estate to pass to the defendant. It was contended on behalf of the defendant that the plaintiffs could not discharge that obligation but there is no reality in that claim. The Court heard the evidence of Mrs. Fitzpatrick which was clear and to the point in confirming that she was willing to complete provided she was paid. The Court must look to see what the position was as of the closing date identified in the sub-contract, the 1st February, 2007. By that date an agreement had been reached between the plaintiffs and Mrs. Fitzpatrick to amend the original head contract of the 9th May, 2006. That contract had been amended by the deletion of special condition No. 5 and an effective closing date with a proposed three way closing of 1st February, 2007 had been identified. That closing date was consistent with the closing date in the sub-contract of the 25th September, 2006. It was also the position as of the 1st February, 2007 that the time period provided for in special condition No. 4 in the head contract which would have enabled Mrs. Fitzpatrick to rescind that contract had not run as the period of nine months from the 9th May, 2006 had not yet elapsed. It is also the case that after that date Mrs. Fitzpatrick did not seek to rescind and remained able and willing to complete the head contract.

22. The position therefore is that as of the 1st February, 2007, Mrs. Fitzpatrick had contracted to sell the lands in issue to the plaintiffs, that the plaintiffs had an entitlement under the head contract to complete that sale at any time whether or not planning had issued, as provided for in special condition No. 8, and could therefore enforce the head contract against Mrs. Fitzpatrick as of the 1st February, 2007. The plaintiffs were therefore in the position that by the proposed closing date of the 1st February, 2007 they had obtained a sufficient interest in the lands the subject matter of the proceedings and could compel the owner of those lands to concur in the proposed sale. The fact that the plaintiffs’ capacity to so compel was dependent upon an amendment agreed to the head contract entered into after the date of the agreement of the 26th September, 2006 was of no relevance as it is not the interest which the plaintiffs had as of the date of the contract of the 26th September, 2006 which is relevant but rather whether by the date of the closing on the 1st February, 2007, the plaintiffs had sufficient interest or were in a position to compel Mrs. Fitzpatrick to concur in the sale. By that date they were in that position and therefore were in a position to complete the sub-contract as of the 1st February, 2007 and were in a position to fulfil their bargain with the defendant. The requirement that a Court focus on the position as of the date that the vendor under a contract is obliged to perform that contract is illustrated in the judgment of Harmon J. in Harold Elliott and H. Elliott (Builders) Ltd. v. Pierson [1948] 1 Ch 452 at p. 455 in the following words:

“At law A may contract to sell to B any defined subject matter and can enforce the contract if by the time when he is obliged to do so he has obtained a sufficient interest or can compel other interested parties to concur in the sale. It matters not at all that at the date of the contract A had no interest if he obtain it in time to fulfil the bargain.”
The judgment of Harmon J. went on to deal with a qualification to that statement but the qualification related to a set of circumstances which do not apply to this case as there was no attempt by the defendant in this action to repudiate at any time prior to the closing date of the 1st February, 2007. It is also the case that after the 7th February, 2007 the plaintiffs had a sufficient interest to fulfil the bargain with the defendant as Mrs. Fitzpatrick had not and did not seek to repudiate the head contract under special condition No. 4.
23. The defendant raises a number of points in relation to the provisions contained in the head contract. Whilst the Court will deal with those points, the legal obligations between the plaintiffs and the defendant arise out of the sub-contract of the 26th September, 2006. The defendant entered into an unconditional contract where the sale was to be closed by way of sub-sale. In the documents set out in the schedule on the second page of the sub-contract at para. 4, one of the documents of title identified was the contract for sale dated the 9th May, 2006, Margaret Fitzpatrick to vendors. The defendant was thereby fixed with notice of the contents of the document schedule including the head contract of the 9th May, 2006. He was so fixed whether or not he read the documents or whether or not he received advice from his solicitor in respect of the contents of those documents. The position as provided for in the general conditions of sale contained in the contract of the 25th September, 2006 and in particular, condition No. 6 identified that the documents specified in the document schedule have been available for inspection by the purchaser or his solicitor prior to the date of sale. The factual position was that the head contract, in its amended form, was unconditional in that it enabled the plaintiffs to complete that contract with or without planning permission, as such entitlement was expressly provided for in special condition No. 8. The plaintiffs could override special condition No. 4 and make it effectively inoperable as of the date of the 1st February, 2007.

24. The defendant made a number of points in relation to the terms of the head contract and, in particular, to the special conditions therein and it is therefore appropriate to set out special conditions No. 4, 5 and 8:

(4) The sale is conditional upon the purchaser obtaining full Planning Permission for the erection on the property in sale of a minimum of 96 houses in accordance with Plans and Specifications whereof details will be submitted to the local Planning Authority for the purpose of obtaining such permission and if, at the expiration of 9 months from the date hereof Planning Permission as aforesaid shall not have been granted and that fact shall have been notified to the vendor within seven days after the expiration of the said period then either party may by notice in writing in that behalf served upon the other rescind this agreement whereupon the vendor shall return the deposit to the purchaser but without interest costs or compensation and the purchaser shall return the copy title deeds and any other papers furnished to him and neither party shall be entitled to any sum in respect of costs, compensation or otherwise.
(5) The purchasers hereby undertake and it is a condition of this contract that their application for Planning Permission as described in the preceding special conditions shall be lodged by them with the Planning Authority within three months of the date of this Contract. In the event that the purchasers do not lodge their Planning Application within the said period of three months then the vendor may, at her option, rescind this agreement whereupon the vendor shall return the deposit to the purchaser but without interest costs or compensation thereon.

(8) The purchasers shall have the right to complete this sale at any time whether or not planning has issued in accordance with condition No. 4 herein.

25. The defendant contended that the head contract did not specify a closing date for completion in that the contract indicated that the closing date should be ascertained by “see special conditions” and the special conditions did not in fact identify a specific closing date. The position of the plaintiffs in relation to a closing date was articulated by Mr. Corbett in his evidence when he stated that the provisions contained in special condition No. 4 meant that the closing date for that contract was the 9th February, 2007. That special condition provided that if full planning permission was not obtained by the 9th February, 2007 that either party to the head contract could serve a notice in writing and rescind the contract. In effect, the head contract was voidable at the instance of Mrs. Fitzpatrick if full planning permission had not been obtained by the 9th February, 2007. Mr. Corbett stated in evidence that it was therefore his view that the closing date could be ascertained as being the 9th February, 2007. Special condition No. 5 had been deleted by agreement between the parties and any entitlement to rescind thereunder no longer existed. The defendant’s argument in relation to there being uncertainty in relation to the closing date for the head contract is effectively dealt with by special condition No. 8 which was inserted by Mr. Corbett acting as solicitor for the plaintiffs to enable the sub-sale to the defendant to take place. That special condition allowed and permitted the plaintiffs as the purchasers under the head contract to have the right to complete that sale at any time whether or not planning had issued in accordance with special condition No. 4. The Court is satisfied that, even though the special conditions in the head contract are not drafted in the most lucid form, they are sufficiently apparent and comprehensible to enable the Court to be satisfied that the head contract in its amended form was unconditional in that it enabled the plaintiffs to complete without full planning permission prior to the 9th February, 2007. That is the clear effect of special condition No. 8 and therefore any contention raised by the defendant reliant upon there being no closing date in the head contract or relying upon any uncertainty within that contract is without foundation. In any event, as the Court has already indicated, even if there is any basis to the defendant’s argument in relation to the uncertainty as to the closing date within the head contract, it is clear that following the deletion of special condition No. 5 and given the terms of special condition No. 8 that as of the 1st February, 2007, the plaintiffs had a sufficient interest and were in a position to compel Mrs. Fitzpatrick to concur in the proposed sale to the defendant. Mrs. Fitzpatrick was also ready, willing and able to close the sale under the head contract. The relevant date for this Court in considering the contractual obligations of the parties to these proceedings is the 1st February, 2007 and it is irrelevant that at the time that the plaintiffs entered into the sub-contract of the 25th September, 2006 with the defendant that they were in breach of special condition No. 5 of the head contract given that by the date of the proposed closing, the vendor under the head contract had agreed to the deletion of special condition No. 5 and had agreed that the plaintiffs should have the right to compete the sale under the head contract at any time whether or not planning had issued therby ensuring that as of the 1st February, 2007 the provisions of special condition No. 4 had no effect. Thereafter special condition No. 4 had no effect until Mrs. Fitzpatrick sought to rescind the head contract and the position was that as of the date of the expiration of the 28 day period provided for in the completion notice, Mrs. Fitzpatrick was ready and willing and able to close the head contract and the plaintiffs were thereby able to fulfil their bargain with the defendant as of that date.
26. The defendant raises various arguments in relation to the contention that the plaintiffs were in breach of the provisions of the head contract and, in particular, special condition No. 5 as of the date of the sub-contract of the 25th September, 2006. Those arguments are theoretical given the facts of this case. Firstly, both the plaintiffs and the defendant entered into their contract well knowing that an unconditional contract was required to enable funding to be obtained by the plaintiffs. The Court has already given its conclusion in relation to this matter. As of the closing date provided for in the sub-contract, the plaintiffs were in a positron to compel Mrs. Fitzpatrick to complete the contract and in those circumstances there is no basis for the argument raised on behalf of the defendant that there was a failure of consideration based upon the contention that Mrs. Fitzpatrick could not have been so compelled as of the 25th September, 2006. The relevant date for considering such matter is the specified closing date of the 1st February, 2007 and by that date the plaintiffs had obtained sufficient interest to enable them to fulfil the bargain. The legal obligation on the plaintiffs was to be in a position to fulfil their bargain with the defendant as of the closing. As this Court is satisfied that they were in such a position both on the 1st February, 2007 and on the expiration of the 28 day notice period provided in the completion notice, it cannot be said that the consideration for the payment of the deposit by the defendant under the sub-contract was illusory.

27. The defendant raised a further defence based upon a claim that no action can be brought against the defendant on foot of the amended sub-contract unless the amended sub-contract or some note or memorandum thereof is in writing and signed by the party to be charged therewith or some other person lawfully authorised to sign on his behalf. It was accepted that for such a plea to be considered by the Court and for the defendant to succeed on this point that it would be necessary to amend the defence as the Statute of Frauds had not been pleaded. An application for such amendment was considered by the Court and the Court refused the application. In those circumstances this matter does not require to be further considered in this judgment.

28. In paragraph 24 certain special conditions in the head contract are set out. The defendant contends that there was no completion date in the head contract. The Court is satisfied that as a matter of construction of the head contract a closing date can be identified. Special Condition No. 8 does not contain any closing date but the Court is satisfied that consideration of the conditions, read together, result in a situation where the sale was to be completed on or before the period specified in condition No. 4 and having regard to the amendment to the head contract and the deletion of special condition No. 5, the relevant date for completion is the 1st February, 2007. In any event, the evidence established that none of the parties to the head contract and, in particular, the vendor made any point or took any issue in relation to the alleged lack of a closing date. The omission in special condition No. 4 in failing to provide a closing date in the event that planning was achieved, and any argument arising therefrom, is of no relevance given the evidence of what actually occurred. The plaintiffs entered into a contract for the sub-sale of the property and in those circumstances the relevant special condition became condition No. 8 and as the Court has already indicated as a matter of construction the sale was to be completed on or before the period specified in special condition No. 4 and therefore the relevant closing date identifiable from the contract is the 1st February, 2007.

29. A further matter relied upon by the defendant in his defence is a claim based upon the validity of the completion notice dated the 26th February, 2007. The defendant contends that that notice was invalid. The defendant submitted to the Court that whilst the plaintiffs may have been ready, willing and able to complete on the 1st February, 2007, they were not able to complete as of the 26th February, 2007. They based this contention on the argument that the plaintiffs were in breach of their obligation to obtain planning permission from the 8th February, 2007 and so they could not compel Mrs. Fitzpatrick to complete the head contract thereafter. The evidence available to the Court establishes that there is no basis for such argument. The facts establish that as of the date of the completion notice and the expiration of the 28 day period identified therein neither of the parties to the head contract had sought to rely on special condition No. 4 and neither had sought to rescind the contract. The evidence also established that the plaintiffs were ready, willing and able to complete the purchase under the head contract and the oral evidence of Mrs. Fitzpatrick established that she was ready, willing and able to complete the purchase and was not seeking rescission under the terms of special condition No. 4 at such time. There was, therefore, no evidence to support the contention that the plaintiffs were not ready, willing and able to complete the sale. They had sufficient interest both as of the date of the completion notice and at the end of the 28 day period provided therein to fulfil the bargain and complete the sale to the defendant. General condition No. 40 of the sub-contract deals with the issue of completion notices. Under that condition the completion notice is effective if the party giving it shall at the date of the notice be able, ready and willing to complete the sale or if not so able, ready or willing be in that position by reason of the default or misconduct of the other party. The evidence in this case establishes that the plaintiffs were ready, willing and able to complete and insofar as the completion could not take place, the same was as a result of the default of the defendant. What was envisaged was a three way closing and that closing did not take place as a result of the default of the defendant.

30. A further argument raised by the defendant in his defence relates to the basis upon which the plaintiffs’ claim damages. The defendant contends that the head contract was rescinded on a particular basis. The head contract was rescinded by letter from Mrs. Fitzpatrick’s solicitors, Butler Cunningham & Molony, dated the 11th October, 2007. That letter stated:

“As your clients have not received planning permission in accordance with special condition No. 4 and, indeed, we understand have not even lodged an application for planning permission, we have been instructed by our client to notify you that she is rescinding the contract dated the 9th May, 2006 in accordance with special condition No. 4 therein.”
The defendant argues that he cannot be held liable for the plaintiffs’ failure to obtain planning permission within the time identified in the head contract or thereafter and accordingly that the defendant cannot be held liable for any loss suffered by the plaintiffs by reason of Mrs. Fitzpatrick’s rescission of the head contract based on such failure. The defendant further contends that Mrs. Fitzpatrick was legally entitled to rescind the head contract pursuant to special condition No. 4 and that the letter of rescission, from Mrs. Fitzpatrick’s solicitors, must be taken as an accurate record of the exact reason why the head contract was terminated. It is on that basis that the defendant contends that he cannot be responsible for any loss suffered by the plaintiffs. The defendant has failed to identify any grounds upon which the rescission could have been challenged. The argument that the defendant cannot be liable for the plaintiffs’ failure to obtain planning permission and therefore is not responsible for the rescission and is not liable for any loss suffered by the plaintiffs arising from such rescission, fails to have regard to the fact that such rescission arose as a result of the defendant’s failure to compete the sub-contract when called upon to do so by the completion notice of the 26th February, 2007. When Mrs. Fitzpatrick rescinded the head contract she did so at a time when she was entitled to do so and the reason upon which she relied is irrelevant. For rescission to be valid the right to rescind must have arisen and such right must have been exercised. On the facts of this case Mrs. Fitzpatrick had a right to rescind and exercised such right. It was contended on behalf of the defendant that as time was not of the essence under special condition No. 4 and since Mrs. Fitzpatrick, the vendor under the head contract, had not served a completion notice, that the plaintiffs herein should have queried the entitlement of Mrs. Fitzpatrick to rescind the head contract. That argument fails to have regard to the fact that by the date of that letter the right to rescind had arisen and Mrs. Fitzpatrick was entitled to exercise such right. Even if it was accepted that the reason stated in the letter rescinding the head contract was incorrect, it is of no significance given that by the date of that letter the right to rescind had arisen and therefore such right could be exercised with or without a stated ground and even in such circumstances where the stated ground was incorrect. It was the entitlement to rescind as of the date of that letter which was crucial to the effectiveness of such rescission and as of the date of the letter Mrs. Fitzpatrick had such entitlement.
31. The final matter required to be considered by the Court is the issue of damages. This issue arises in circumstances where the Court is satisfied, for the reasons herein before set out, that the plaintiffs have established that the defendant was in breach of contract in failing to close the sub-contract of the 25th September, 2006 and comply with the completion notice which was served on him on the 26th February, 2007. It also follows that the defendant’s counterclaim must fail. Arising out of such breach the plaintiffs have rescinded the contract and have sued for damages. In the completion notice for the 26th February, 2007, the plaintiffs had stated that if the purchaser should fail to complete the sale within the period therein identified, that the plaintiffs would enforce against the defendant such rights and remedies as may be available to the plaintiffs at law or in equity. In paragraph 9 of the replies to particulars of the 10th March, 2009, the plaintiffs indicated that they accepted that their contract with Margaret Fitzpatrick had been rescinded and that they therefore had elected to pursue a remedy in damages. The plaintiffs thereby exercised their option in relation to the nature of the remedy which they were seeking against the defendant.

32. As a result of the defendant’s breach of contract, the plaintiffs have suffered loss and damage. That loss and damage can be quantified. Firstly, the plaintiffs have lost the total sum paid as a deposit to Mrs. Fitzpatrick under the head contract, that contract having been rescinded. The total sum of €500,000 was forfeited by Mrs. Fitzpatrick as that sum was a non-refundable deposit. The defendant raised an argument at the hearing that he should not be compelled to indemnify the plaintiffs for the loss of the additional €450,000 deposit for a number of reasons. It was first contended that as he was unaware of the additional €450,000 deposit that he should not be liable in damages for such sum. The Court is satisfied that on the evidence before it, the defendant was aware of such additional deposit and that therefore there is no factual basis for this claim. Secondly, it was contended on behalf of the defendant that the payment of the additional sum of €450,000 arose solely from the plaintiffs’ failure to comply with their contractual obligations to apply for planning permission before the 9th August, 2007 and that the defendant should not be responsible for such sum. It is correct that the payment of the additional deposit of €450,000 arose in circumstances where the plaintiffs had failed to apply for planning permission before the 9th August, 2007. However, the facts of this case establish that that payment was made to the knowledge of the defendant and was made in circumstances whereby it ensured that the plaintiffs would be in a position to fulfil their bargain with the defendant. Further, when the defendant failed to comply with the completion notice of the 26th February, 2007 and was in breach of contract, the defendant knew of the increased deposit and was well aware that a breach of contract on his part would have the potential consequences of causing Mrs. Fitzpatrick to rescind the head contract and to forfeit the non-refundable deposit. In those circumstances the loss of the entire deposit was a loss and damage which could be fairly and reasonably considered to arise naturally from the defendant’s breach of contract and to be a loss and damage that would have been in the contemplation of both the plaintiffs and the defendant. It was also the defendant’s breach of contract that caused the rescission as no rescission would have occurred but for the failure of the defendant to complete. The third ground relied upon by the defendant in an attempt to avoid liability for the additional €450,000 deposit is a claim that the defendant entered into the sub-contract of the 25th September, 2006 without the benefit of proper or independent legal advice. The facts of this case establish that the defendant was an experienced developer who chose a particular solicitor knowing that that solicitor would be a joint solicitor. Irrespective of whether or not that solicitor provided the defendant with proper or adequate legal advice, and that is a matter which this Court does not have to consider, there is no basis upon which the plaintiffs can be held responsible for any defect in the legal advice and assistance received by the defendant. Nor can any issue arise in relation to the fact that there was a common solicitor acting for the plaintiffs and the defendant given that such situation arose from the actions of the defendant when he instructed Mr. Corbett knowing he was already acting for the plaintiffs.

33. The Court is satisfied that applying the principles identified in Hadley v. Baxendale& Ors. [1854] 9 Exch 341 and [1843 – 60] All E.R. 461, that the loss of the entire deposit of €500,000 was a loss which can be identified as being; in essence, a loss actually resulting which was at the time of the contract reasonable foreseeable as likely to result from the breach. When the defendant signed the contract of the 25th September, 2006, he was aware of the requirement for an unconditional contract to facilitate the plaintiffs obtaining a loan to finance the increased deposit to Mrs. Fitzpatrick and therefore the Court is satisfied that the loss of the entire non-refundable deposit is a loss which was reasonably foreseeable to Mr. Fox at the time that he entered into the sub-contract of the 25th September, 2006 and therefore is a loss which the plaintiffs can recover arising out of Mr. Fox’s breach of contract.

34. The second loss which was foreseeable to both the plaintiffs and the defendant and must have been within their contemplation at the time that the contract was made, was that any profit that the plaintiffs would make arising out the difference in the purchase price in the head contract and in the sub-contract would be lost by the plaintiffs if the defendant failed to complete the sub-contract. The defendant did not know the amount of that profit as the purchase price in the head contract had been tippexed out when he was shown that contract. However, the defendant was well aware that any profit which the plaintiffs would generate from the difference between the two purchase prices would be lost if he failed to complete. It follows that when the defendant was in breach of contract in failing to complete, that one of the losses which would naturally arise from such breach would be the loss of that profit. The defendant is liable to the plaintiffs for the difference between the two contract prices, namely, €900,000. The defendant is liable to pay the plaintiffs as damages the two sums of €500,000 and €900,000 totalling €1,400,000. As regards the claim for interest the Court is satisfied that since the plaintiffs did not exercise their option to sue for damages as opposed to pursue a claim for specific performance until the notice of particulars of the 10th March, 2009, that any interest should only run from that date and the Court will hear the parties in relation to the issue of the amount of interest and/or its calculation. The plaintiffs are entitled to an order for the rescission of the sub-contract. As no deposit was actually paid, no order is required for forfeiture of a deposit. The plaintiffs are also entitled to damages for breach of contract in the sums identified above. The defendant’s counterclaim will be dismissed.

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Cases

Couturier & Ors v Hastie & Anor

Taylor & Anor v Caldwell & Anor

McRae v Commonwealth Disposals Commission

Solle v Butcher

Herman and Others v. Owners of S.S. “Vicia.”

Davis Contractors v Fareham Urban DC

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd

Maritime National Fish Ltd v Ocean Trawlers Ltd

Foot Locker Retail Ireland Limited v Percy Nominees Limited

Ringsend Property Ltd -v- Donatex Ltd & Anor

Zuphen v. Kelly Technical Services (Ireland) Ltd.

Mount Kennett Investment Company -v- O’Meara & Ors

Moloney & Anor -v- Fox

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Cases

Couturier & Ors v Hastie & Anor

Taylor & Anor v Caldwell & Anor

McRae v Commonwealth Disposals Commission

Solle v Butcher

Herman and Others v. Owners of S.S. “Vicia.”

Davis Contractors v Fareham Urban DC

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd

Maritime National Fish Ltd v Ocean Trawlers Ltd

Foot Locker Retail Ireland Limited v Percy Nominees Limited

Ringsend Property Ltd -v- Donatex Ltd & Anor

Zuphen v. Kelly Technical Services (Ireland) Ltd.

Mount Kennett Investment Company -v- O’Meara & Ors

Moloney & Anor -v- Fox

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