Pre-Contract Matters II
Cases
In re Thomas Lewis, Deceased;
Pullan v Groves
High Court of Justice.
Chancery Division.
22 June 1908
[1908] 42 I.L.T.R 210
Meredith M.R.
Meredith, M.R.
The cases cited by Mr. Carrigan clearly show that on the construction of the condition of sale this was not an outgoing. [After referring to the affidavits.] I am quite clear that a notice was served by the sanitary officer with the view of compelling the erection of water-closets in these three houses. The notice was served under the provisions of s. 110 of the Public Health (Ir.) Act, 1878, and if the notice was not complied with the sanitary authority had power to execute the works and constitute the expenditure a charge upon the property. I think that the agent considered that the notice was one of very little importance, for he says in a letter which has been referred to that such sanitary notices are served in Belfast in hundreds. With all due respect to the Corporation of Belfast I say, and say emphatically, that if notices such as the notice referred to in the present case have been served in hundreds I do not wonder the recipients have considered them as waste paper. If the sanitary authority, having satisfied itself of the existence of a nuisance, honestly desires to put in force the provisions of s. 110 and the following sections, a clear and plain intimation of what the nuisance is should be found in the notice served by the executive officer of the sanitary authority, it appears to me to be almost an outrage upon commonsense to serve a document couched in *210 the offensive and incorrect language of the document before me. In one sense the document is as vague as it is possible to be, and in another as offensive as it is incorrect. [His Lordship dealt with the terms of the notice, which described the premises as being “a nuisance,” and “being generally in a filthy, dilapidated and defective state,” and strongly animadverted on such language being incorrectly and carelessly used concerning the premises.] However, the notice was served, and I assume the required dust-bins were provided; but no further steps were taken by the sanitary authority to enforce this notice as regards the erection of water-closets. As a juror, however, I draw the inference of fact that the sanitary authority did intend that the water-closets should be erected in each of these three houses, and their executive officer had his eye upon the premises. When, however, the particulars and conditions of sale were being settled the agent and solicitor did not communicate the fact that the notice had been received and had not been complied with. I absolutely agree with Mr. Carrigan that this was not a charge. Expenditure to be incurred in erecting water-closets was neither a charge nor an inchoate liability, nor an outgoing in any sense; it was not an outgoing which the vendor was bound to discharge. The cases cited by Mr. Carrigan are not merely cases of the highest authority, but those cases are commonsense decisions which the man in the street can under-stand. But in precisely similar circumstances my predecessor, in the case of M’Cann v. Valentine (1 N. I. J. R. 28), held that the receipt of the sanitary notice should have been disclosed at the auction. The knowledge that such a notice had been received, and had not been complied with, whether it was enforceable or not, might prevent a purchaser giving the same sum as he gave without such knowledge. In that case there was also an error in the particulars of sale, but the case is a clear decision upon the question of principle. The receipt of a notice and the fact that it has not been complied with must be disclosed at the auction or sale. I must follow that case, and I have no reluctance in following it; for while I must admit that there is no law rendering it obligatory for the parties having a sale in Court to be more superlatively honest than others with a purchaser, it is at least desirable for a purchaser buying in Court to know that the Court will see that right and justice will be done; and once that such a case has been decided I think it would be a calamity if a subsequent decision should be to a contrary effect, and that purchasers have a right to rely upon that decision. But I will say just this, that I very much prefer that the sale should not proceed than that a notice such as this should be read at the auction, especially when it describes the premises in the terms this notice does. The practice that must be followed in these cases is: The agent of the property must be asked by the solicitor to disclose whether any charges exist on the property, also whether any notice has been received; and, if such notice has been received it must be mentioned in the instructions submitted to counsel. I will know how to deal with it. I will require the sanitary authority to specify its charges, or ignore it as a ridiculous document. I will allow the purchaser £5 10s. in respect of each of the houses, which is ample to compensate him for the mistake, and also his costs. The vendor will also have his costs. I will measure the purchaser’s costs at £4 4s.
Representation
Zahedi v Mc Cann
[2008] I.E.H.C. 233Factual Background
In these proceedings, which were initiated by special summons which issued on 21st May, 2007, the plaintiffs have invoked s. 9 of the Vendor and Purchaser Act, 1874 (the Act of 1874) and seek the determination of certain questions which arise out of a contract, which, for present purposes, it can be accepted came into existence on 21st February, 2007, whereby the defendants agreed to sell to the plaintiffs at the price of €317,500.00 Apartment No. 12, Amiens Square, Amiens Street, in the City of Dublin (the Premises). The Premises were held by the defendants under a lease dated 19th September, 1997 (the Lease) made between Cruson Developments Limited of the first part, Amiens Square Management Company Limited (the Management Company) of the second part, Irish Intercontinental Bank Limited of the third part and the defendants of the fourth part, which created a term of 500 years from 31st May, 1997 at a nominal rent and subject to the covenants on the part of the lessee, including the covenant for payment of service charges, and conditions therein contained.
The history of the transaction, insofar as it is relevant for present purposes, is as follows:-
· On 7th November, 2006, the defendants’ solicitors furnished, on a “subject to contract” basis, the contracts to the plaintiffs’ solicitors, together with copies of the title. The contracts were in the standard form General Conditions of Sale (2001 Revised Edition) published by the Law Society.
· On 13th November, 2006, the plaintiffs’ solicitors raised certain queries. What is relevant for present purposes is that the plaintiffs’ solicitors furnished what I understand to be requisition 37 (but was described as requisition 36) of the Law Society’s standard Requisitions on Title (2001 Edition) headed “Second hand flats/second hand managed properties” and requested replies.
· On 22nd November, 2006, the defendants’ solicitors informed the plaintiffs’ solicitors that they had asked the “Managing Agents” to reply to requisition 37 and would revert as soon as they heard from the Management Company.
· On 29th January, 2007, the plaintiffs’ solicitors returned the executed contracts together with the balance of the deposit to the defendants’ solicitors on a “subject to contract” basis.
· Although the defendants had not executed the contracts, on 1st February, 2007, the defendants’ solicitors requested the plaintiffs’ solicitors to furnish requisitions on title and a draft deed for approval. The plaintiffs’ solicitors obliged. The defendants’ solicitors returned one part of the contract duly executed by the defendants together with the replies to the requisitions on title with a letter dated 21st February, 2007. The closing date which appeared in the contract predated the coming into existence of the contract. As I understand it, it is agreed that the closing date was 16th March, 2007.
· By letter dated 22nd February, 2007, the defendants’ solicitors returned requisition 37 with replies, together with an invoice and copy documentation received from the Management Company, to the plaintiffs’ solicitors. I will consider these documents in detail later. Of particular significance is that the accompanying documentation included a Companies Registration Office (CRO) print-out dated 16th February, 2007, which showed the status of the Management Company as “normal”. It is accepted for the purpose of these proceedings that prior to returning the contracts and the contractual relationship coming into existence, the plaintiffs’ solicitors had done a Companies Office Search and had ascertained that the status of the Company was “normal”.
· The plaintiffs contend that on or before the 16th March, 2007 it was agreed between the solicitors for the parties that there would be a closing by post. In truth, it was more a closing by courier and fax, but, in any event, what happened is consistent with an arrangement that the plaintiffs’ solicitor would not attend in person at the defendants’ solicitor offices with the balance of the purchase money. The following steps were taken by the parties on 16th March, 2007:
§ The defendants’ solicitors sent the original documents of title and the executed assignment in favour of the plaintiffs to the plaintiffs’ solicitors and requested them to hold the same on trust “pending receipt of the balance of the funds”.
§ The plaintiffs’ solicitors sent bank drafts which aggregated the balance of the purchase monies to the defendants’ solicitors by courier on the basis that the monies would be held in trust and to the plaintiffs’ solicitors order “pending our receipt and satisfaction with all closing documents and explanation of searches”.
§ The plaintiffs’ solicitors submitted their searches by fax to the defendants’ solicitors and sought explanations. The only issue which arose on the searches of relevance in these proceedings arose on the CRO search in relation to the Management Company. The designation of the Management Company was given as “Strike Off Listed” and the date of that designation was given as 18th February, 2007.
§ The defendants’ solicitors’ explanation of that designation which was furnished to the plaintiffs’ solicitors was: “not our client”.
§ The plaintiffs’ solicitors’ immediate response was that that explanation would not suffice, that the defendants’ solicitors’ client was a member of the Management Company and was selling the premises with all easements and rights contained in the Lease, and that they would not accept the stated position of the Management Company “without satisfactory explanation and proposed resolution from the managing agent”. They also requested the defendants’ solicitors to confirm that they continued to hold the purchase money in trust and to their order. That letter was sent by fax.
A controversy arises on the affidavits as to whether the keys of the premises were furnished to the plaintiffs’ solicitors, so as to enable the plaintiffs to get possession of the Premises. The Court can not resolve that controversy.
· On 20th March, 2007, the plaintiffs’ solicitors served a notice to complete in accordance with General Condition 40 of the contract on the defendants’ solicitors.
· The defendants’ solicitors responded by letter of 22nd March, 2007. The essence of the response was that the plaintiffs’ solicitors should take the matter up with the Management Company; they did not act for the Management Company and had no knowledge of its affairs. It was their understanding that the Management Company had not yet been struck off and, in the circumstances, it was for the plaintiffs’ solicitors to deal with the matter and to make enquiries in the CRO.
· The plaintiffs’ solicitors were not happy with that response and, by letter dated 27th March, 2007, sought an explanation as to why the Management Company was listed for strike off, an undertaking from the Management Company that a strike off would be avoided, and an indemnity from the Management Company that the plaintiffs would not be responsible for any levies which might be incurred in relation to reinstatement of the Management Company in the register. They sought return of the purchase monies if the defendants’ solicitors were not in a position to comply because the plaintiffs were incurring interest on a daily basis on the purchase monies.
· The defendants’ solicitors responded by letter dated 29th March, 2007, in which they contended that the contract had been complied with in full by the defendants. They made the point that the Management Company had not been struck off. It was a matter for the plaintiffs to contact the CRO or the Management Company to ascertain the position and take such action as might be required. As far as the defendants were concerned the matter was completed and they would be releasing the purchase monies to the defendants forthwith.
· The correspondence between the solicitors continued in a similar vein. The parties accept that the Court can not resolve the issues as to the basis on which the purchase monies were paid and whether the plaintiffs got the keys of the Premises and possession. The final letter from the plaintiffs’ solicitors which has been exhibited prior to the initiation of the proceedings, a letter dated 17th April, 2007, made the point that the status of the Management Company was integral to title and ultimately to the certificate of title which they would be required to furnish to the plaintiffs’ mortgagees. In the final letter from the defendants’ solicitors, a letter dated 18th April, 2007, the position adopted by the defendants’ solicitors was that the fact that the Management Company had been listed for strike off was not a matter which entitled the plaintiffs to refuse to close the sale.
Before these proceedings were initiated, the Management Company was dissolved for failure to file annual returns, the date of dissolution being 11th May, 2007. The Court was informed that the Management Company was restored to the register within twelve months of its dissolution by the Registrar of Companies.
Replies to Requisition 37
As I have stated, the replies to requisition 37, which had been submitted by the plaintiffs’ solicitors as a pre-contract enquiry, were furnished by the defendants’ solicitors with their letter of 22nd February, 2007, after the contract came into existence. In fairness to the defendants’ solicitors, it took six letters and numerous phone calls over a period from 10th November, 2006 to 22nd February, 2007, to get the information necessary to reply to requisition 37 from the Management Company.
The replies to requisition 37 furnished by the defendants’ solicitors were the replies written in manuscript by the agent of the Management Company. The information furnished in the replies was as follows:-
(a) Evidence was enclosed to show by way of the search in the CRO that the Management Company was still registered. As I understand it, that evidence was the CRO search of 16th February, 2007, which showed the Management Company status as “normal”. However, it also disclosed that the last annual return filed was in respect of 31st December, 2004 and that the return for 31st December, 2005 was outstanding.
(b) It was stated that the common areas were still vested in the name of the developer, presumably Cruson Developments Limited, and that the deed of assurance of the reversionary interest to the Management Company was “currently in the process of transfer”.
(c) Details of the “Block Insurance” were given and the replies were accompanied by a letter dated 21st February, 2007 from the insurers which confirmed that the interest of the plaintiffs and their mortgagee was noted on the policy, the insured being the Management Company.
(d) Copies of the certificate of incorporation and memorandum and articles of association of the Management Company were furnished.
(e) It was stated that the service charge in respect of the Premises was in arrears and an invoice was enclosed setting out the service charge for the years ended 31st July, 2006 and 31st July, 2007. No issue arises in relation to the service charge because the defendants’ solicitors gave to the plaintiffs a letter dated 16th March, 2007 in which they undertook to discharge the service charge up to and including that date and to furnish a receipt as soon as practicable after closing.
In summary, the information given in the replies was that the Management Company was still registered in the CRO, that the common areas had not yet been transferred by the developer to the Management Company, but the Management Company was managing the Estate. Requisition 37 presupposed that the Premises were the subject of a scheme of disposal of the type usually utilised for residential or mixed commercial and residential developments. That supposition was correct as the provisions of the lease disclosed.
The Lease
The lease recited in a general way how the scheme of disposal would operate in relation to the Estate, as defined, of which the Premises form part. The leases of the apartments on the Estate would all be in the same form as the Lease of the Premises, to the intent that the restrictions and stipulations would be mutually enforceable. Each lessee would be a member of the Management Company. It is clear from the articles of association of the Management Company that only the lessees of the units in the Estate would ultimately be members of the Management Company. It was further recited in the Lease that the lessor, Cruson Developments Limited, had agreed to assure its interest in the Estate to the Management Company subject to and with the benefits of all leases in the Estate, the effect being that the Management Company would become the owner of the Estate in the sense of they would be owner of the reversions on the leases of units and the owner of the external common areas, the structural elements of the block and the internal common areas.
The Management Company joined in the lease to confirm the demise, including the demise of easements and way-leaves over the common areas and structural elements, and to covenant to perform the lessor’s covenants from completion of the assurance of the Estate to it.
The Issue
While a number of questions were set out on the endorsement of claim on the special summons for determination by the Court, it was agreed at the hearing that the issue for the Court is whether the defendants were ready, willing and able to complete the sale on 16th March, 2007, and, in particular, whether they were in a position to give good title to the plaintiffs in accordance with the contract, given the status of the Management Company, which, on the closing date, was designated as listed for strike off in the CRO. My understanding is that the parties will deal inter se with the consequences of the Court’s finding on that point.
The Submissions
Counsel for the plaintiffs submitted that the status of the Management Company could not be other than an issue of title and that it was an issue which required to be resolved before the plaintiffs could be required to take on the obligations of the Lease and their financial consequences. He submitted that, having regard to the terms of the Lease, the Management Company was on the title and it was integral to the successful management and viability of the development. Its status impacted on the operation of the scheme of management. The plaintiffs’ mortgagee might not accept the title and it was intolerable that the title should be foisted on the plaintiffs. As regards the use and enjoyment of the Premises, the status of the Management Company was crucial in terms of the repair, maintenance, upgrading and such like of the common areas. Counsel for the plaintiffs pointed to the possibility of the plaintiffs, as the owner of the Premises, incurring costs in connection with the restoration of the Management Company to the register if it was struck off. The nub of the case advanced by counsel for the plaintiffs was that the defendants’ title was defective on the closing date, that the defect had arisen between the contract coming into existence and the closing date, and that the defendants were not in a position to fulfil their contractual obligations until the defect was removed, meaning until the status of the Management Company reverted to “normal”.
The position adopted by counsel for the defendants was that, as of 16th March, 2007, the Management Company was still in being. By reference to s. 12 of the Companies (Amendment) Act, 1982, he submitted that the outstanding annual returns could have been filed and the company could have been saved from dissolution. Apart from that, he submitted that the question for the Court is whether the status of the Management Company is a matter of title, urging that it is not. He identified the functions of the Management Company as twofold: to be the owner of the reversions; and to provide services to the unit lessees. In relation to the first function, he pointed out that, as things stood, the lessees of units still had their rights vis à vis the lessor, Cruson Developments Limited, and were safeguarded irrespective of the status of the Management Company. As regards the provision of services function, he submitted that the services could be provided by anybody, for example, the unit lessees could get together to resolve any difficulty which arose in the provision of services.
In reliance on the decision In Re Flynn and Newman’s Contract [1948] I.R. 104, counsel for the defendants submitted that the change in the designated status of the Management Company in the CRO did not affect the defendants’ title, in that, notwithstanding that change, they were no less entitled to occupy the Premises and enjoy the easements over the common areas and to give title to a third party. On the closing date they were in a position to give to the plaintiffs what they had contracted to give.
Counsel for both parties informed the Court that they could not find any authority either in this jurisdiction or in the United Kingdom which dealt with the type of issue which has arisen in this case, involving a second or subsequent sale of a unit in a multi-unit development.
Conclusions
As I have stated, the core issue for determination is whether, given the status of the Management Company as listed for strike off on the agreed closing date, the defendants were in a position on that date to furnish title to the Premises to the plaintiffs in accordance with the contract. It seems to me that that issue falls to be determined by the application of first principles to the particular facts of this case. Kingsmill Moore J. in his judgment In Re Flynn and Newman’s Contract set out (at p. 112) the relevant principles governing contracts for the sale of land as follows:-
“In the absence of any express provision to the contrary, the vendor undertakes and is bound, in law, to show a good title to the property to be sold and to convey land corresponding substantially, in all respects, with the description contained in the contract. If he fails to do these things, the purchaser may rescind and recover his deposit. The vendor may, of course, limit his obligation to show good title by suitable special conditions but, if he does so, he must fairly indicate what is the defect in his title to which the purchaser must submit, and must take care that he is not guilty of any misrepresentation. A liability to ejectment for forfeiture, crystallised by service of a repairing notice by the landlord, is clearly a defect in title to which the vendor must call attention. Mere disrepair which may involve an action for breach of covenant, but which, in the absence of a proviso for re-entry, cannot be a ground for forfeiture, is not a defect of title, but a defect in subject matter. Provided that the terms of the lease were known to the purchaser before signing the contract, and inspection of the property was open to him if he so desired, it seems to me that no breach of any legal obligation would be involved in failure to disclose the state of repair or the letter from the landlord …”.
The letter from the landlord referred to was, in effect, a schedule of dilapidations which the lessor had served and of which the vendor lessee was aware before signing the contract but had not been disclosed to the purchaser. The Lease was for a term of one hundred and fifty years of which about seventy years were left to run. Although the Lease contained a covenant to keep and yield up and repair, there was no proviso for re-entry in the event of breach of the covenant to repair. Kingsmill Moore J. held that the state of disrepair which, in the absence of a proviso for re-entry, could not be a ground for forfeiture, was not a defect in title but a defect in subject matter. The vendor was not under any legal obligation to disclose the defective state of repair or the schedule of dilapidations.
Although the affidavits filed on behalf of each side in these proceedings have sought to highlight perceived shortcomings of the other side, there are a number of facts which are not in dispute on the basis of which deductions can be made which are crucial to the determination of the core issue. First, on the evidence of the two copies thereof exhibited, it would appear that there were no special conditions whatsoever in the contract presented by the defendants’ solicitor for execution and as ultimately executed by both sides, so that the defendants’ obligation to show good title was neither specifically limited nor expanded. Secondly, while the plaintiffs’ solicitors raised the pre-contract requisitions in the form of requisition 37, they were not replied to prior to the coming into existence of the contract, so that the replies thereto neither induced the plaintiffs to enter into the contract nor did they become terms of the contract. Thirdly, while I am of the view that the replies furnished on 22nd February, 2007 must be regarded as the replies of the defendants’ solicitors and must be stood over by them, there was no incorrect or misleading information or misrepresentation contained in the replies, because the Management Company was still registered in the CRO and the CRO printout furnished, although a few days out of date, correctly showed the status of the Management Company on 16th February, 2007. Fourthly, at all times prior to the closing date the status of the company in the CRO and its position in relation to filing of annual returns was a matter of public record. It follows that there was no material nondisclosure on the part of the defendants. There was no obligation on them, either at common law or under condition 15 of the General Conditions of the contract to disclose the change in the status of the Management Company in the CRO prior to the plaintiffs assuming contractual liability. Finally, and most significantly, the Management Company was still registered in the CRO as of the closing date, and, although it was under the threat of strike off, strike off was not inevitable.
That the change in the status of the company recorded in the CRO on 18th February, 2007 did not constitute a defect of title is obvious when one analyses the defendants’ position on the closing date. On the closing date the defendants were in a position to give to the plaintiffs the title to the Premises they had contracted to give. They were in a position to assign to the plaintiffs the leasehold interest created by the Lease in the Premises. The defendants, in fact, executed such an assignment and it was delivered to the plaintiffs. Such assignment passed the right of possession to the Premises to the plaintiffs for the residue unexpired of the term created by the Lease and the benefit of all of the appurtenant easements and of the lessor’s covenants contained in the Lease. As things stood, the obligation to perform the lessor’s covenants was still vested in the lessor, Cruson Developments Limited. Moreover, the Management Company was still in being as a corporate entity. The assignment also passed to the plaintiffs the entitlement to membership of the Management Company. Accordingly, the defendants were in a position to pass, and they did pass, to the plaintiffs everything they were contractually bound to pass.
It is true that, with the benefit of hindsight, we know that, as regards the Management Company, as counsel for the plaintiffs put it, “the path was already mapped out” to dissolution, which occurred approximately two months later. It is also true that dissolution of a Management Company in a multi-unit development may, and frequently does, give rise to adverse consequences for individual unit owners, in that they may incur accountancy fees, penalties and legal fees in having the Management Company restored. Some prospective purchasers may be wary of purchasing a unit in such circumstances. However, as a matter of contract, in this case the defendants, as vendors, were under no obligation to ensure that the status of the Management Company was designated as “normal” at the closing date. Its designation as listed for strike off did not render the defendants’ title defective.
Order
While I will hear the parties on the precise form of order which will be made, it seems to me that, having regard to the manner in which the proceedings were conducted at hearing, there should be a declaration that, notwithstanding the designation of the status of the Management Company in the CRO as “Strike Off Listed” on 18th February, 2007, on the closing date the defendants were in a position to furnish title to the Premises to the plaintiffs in accordance with the contract.
McGrath v Stewart
[2008] I.E.H.C. 348
JUDGMENT of Mr Justice Roderick Murphy delivered on the 11th day of November, 2008.
1. Background to the proceedings
This is an application for a decree of specific performance of a contract for the sale of land entered into on 8th June 1998, between the plaintiff in the first action as purchaser and the defendant as vendor, of 9 and 13 Summerhill Place and 14 Rutland Street. The sale of number 13 was closed on 9th October 1998. These proceedings concern the remaining two.
The closing date fixed by the contract was 23rd July, 1998. The defendant held the legal title of the premises and was at all material times the solicitor for Mr. Matthew Kelly, the owner of the beneficial interest in all three premises. Earlier in 1998 the defendant had agreed to sell those premises to Mr. Black, a man Mr. Kelly knew and trusted. Mr. Kelly and the defendant gave evidence that they informed Mr. Black in pre-contract discussions that the sale of 9 Summerhill Place and 14 Rutland Street were subject to existing tenancies. Mr Black’s evidence was that he had been so informed. The third property, 13 Summerhill Place, was derelict and untenanted. Its purchase price was £22,500, being less than the price of the two tenanted properties, for each of which a sum of £25,000 was to be paid.
It was understood that Mr. Black would not close the sale of the properties and he or a Mr. Maher would instead find an interested buyer for them. He discussed the matter with Mr. Maher, who arranged to purchase the properties. Mr. Maher in turn arranged for the plaintiff to purchase the properties and to pay a finder’s fee in addition. The plaintiff’s solicitor received the contracts signed by the defendant as vendor and indicating Mr. Black as purchaser. Mr. Black did not sign the contract. He tried to find another purchaser and expected to be paid a finder’s fee for so doing. His name was erased with Tipp-ex and the plaintiff’s name was inserted. The contracts were returned to the defendant signed by the plaintiff in trust. Mr. Black was paid a fee of £4,000. Mr Maher, who also gave evidence, was paid a similar fee. The plaintiff’s evidence was that he was unaware that the sale was to be subject to tenancies. The plaintiffs’ solicitor raised requisitions on title with the defendant on 25th June 1998, inquiring, inter alia, whether vacant possession of the property would be given. A legal executive employed by the defendant replied to the requisitions by referring to the tenancies. The plaintiff insisted on vacant possession, but the defendant was not prepared to close the sale on that basis. By letter dated 18th September, 1998, the plaintiff’s solicitors suggested that a sum of £10,000 be placed on joint deposit to secure vacant possession. The defendant was not agreeable to this, but closed the sale of the vacant property, 13 Summerhill Place, on 9th October, 1998. On that date, he swore a statutory declaration in relation to all three properties concerning leases to which they were subject. However, the two tenanted properties remained with the defendant after that date. On 3rd November, 1998, the plaintiff’s solicitors wrote to the defendant’s firm seeking confirmation of the current position on the issue of vacant possession and expressing the plaintiff’s eagerness to proceed. By letter of 28th March, 1999, the plaintiff’s solicitors again raised the issue of completion with the defendant. Another letter of 23rd May, 2000, again sought confirmation of the position regarding vacant possession and noted the plaintiff’s desire to close the sale. No response was received to any of these letters.
On 30th April, 1999, almost 11 months after the signing of the contract, Mr. Kelly went to the plaintiff’s office to confront him. The plaintiff and his sister gave evidence that he threatened both of them. Mr. Kelly, in his evidence, agreed that the conversation was heated. He informed the plaintiff that he was the beneficial owner of the property and that he would not see it pass to the plaintiff without the tenants remaining in residence. The plaintiff said that he decided to wait until the properties were vacant before pursuing the matter further, hoping not to antagonise Mr. Kelly. Five years later he became aware, in June, 2004, that the property was vacant. On 11th June, 2004, his solicitor issued a 28-day Completion Notice requiring the defendant to close the sales. Mr. Kelly instructed his solicitor to ignore the notice. The present proceedings were instituted on 15th July, 2004, over six years after the signing of the contract.
2. The extent of the interest conveyed
In a conveyance of freehold land it is the duty of the vendor at common law to ensure the purchaser will have clear vacant possession of the entire property on completion: Bank of Ireland v. Waldron [1944] I.R. 303 at 305. The parties are of course free to exclude this duty by agreement, but in such an event the existence of any lease or tenancy agreement must be disclosed to the purchaser: Healy v. Farragher (Unreported, Supreme Court, 21st December 1972). Independently of common law, contracts for the sale of land often provide expressly for the giving of vacant possession. In such cases the vendor is obliged to ensure no tenants remain in occupation of the property: Re Postmaster-General and Colgan’s Contract [1906] 1 IR 287, affirmed at 477. Condition 21 of the Law Society General Conditions of Sale, 1988, which was incorporated into the contract of 8th June, 1998, provides, in respect of those contracts made subject to it:
“Subject to any provision to the contrary in the Particulars or in the Conditions or implied by the nature of the transaction, the Purchaser shall be entitled to vacant possession of the subject property on completion of the sale.”
In this case the contract was expressly made subject to the Law Society General Conditions of Sale, 1988. There is nothing in the Particulars or Conditions to detract from the general guarantee in Condition 21. I was invited to infer an exclusion of that Condition from the nature of the transaction but I can see no ground capable of justifying such an inference. This was an ordinary conveyance of full and unfettered title to freehold property. No circumstance which would have altered the nature of that transaction as it appeared from the contractual documentation was brought to the attention of the purchaser.
Nevertheless, counsel for the defendant submitted that the plaintiff could not have acquired an interest in the property greater than that which was to be conveyed to Mr. Black. The situation, he argued, was consistent with the plaintiff having stepped into Mr. Black’s shoes and becoming a nominee of Mr. Black as the original intended purchaser. Accordingly, it was submitted, neither Mr. Black nor the plaintiff could enlarge the interest passing to the plaintiff because neither could free the party in the position of purchaser from the limitations originally imposed on Mr. Black. I cannot accept this submission. Although the plaintiff became aware of the properties through the intervention of Mr. Black and Mr. Maher, he did not contract with them. He contracted with the defendant to purchase his interest in the property, not the qualified interest subject to tenancies that Mr Black would have acquired, in line with his discussions with the defendant and Mr Kelly, had he purchased the property. The agreement was that he would purchase the properties with vacant possession. The contractual documents are consistent only with the interpretation that the plaintiff was to acquire vacant possession. I am satisfied that it was not until after he entered into the contract that he was informed of the expectation that he would take the properties subject to the existing tenancies. Accordingly, he contracted not for a title subject to tenancies but for the acquisition of all three properties without tenants.
3. Mistake
Another issue was raised as to whether the parties had ever reached a consensus ad idem, and thus whether they had entered into a valid contract. I have reservations in relation to the consideration of this question, since the issue was not pleaded. However, in my view the submission is not well-founded in any event. Counsel relied on the decision of the Supreme Court in Mespil Ltd. v. Capaldi [1986] ILRM 373. There a written settlement agreement was understood by the defendants as a final resolution of all causes of action the plaintiff might have against the defendants, while the plaintiff considered it a settlement only of those issues which arose in the proceedings in being at the time. Henchy J. delivering the judgment of the court, held (at 376):-
“In those circumstances of latent ambiguity and mutual misunderstanding, it must be held that there was no real agreement between the parties. The two counsel who negotiated the settlement were understandably at cross purposes. The result was that the seeming agreement expressed in the written consent was in fact no agreement. There was a fundamental misunderstanding as to the basis of the settlement.”
He concluded (at 377):-
“Objectively viewed, the situation justified the misapprehension on each side. The result is that, for want of correspondence between offer and acceptance, no enforceable contract was made.”
In contrast however, in O’Neill v. Ryan (No. 3) [1992] 1 I.R. 166 Costello J. was faced with a settlement agreement which the defendants considered a final disposal of both sets of proceedings the plaintiff had instituted against them. The plaintiff understood that only one of those actions was within the scope of the agreement, largely because the heading to the letter of settlement gave the record number of one set only. Costello J. agreed with the plaintiff’s interpretation. He held that there was no such latent ambiguity as to make it impossible reasonably to impute an agreement between the parties, or to prefer one or other interpretation as the more probable. Accordingly, the contract was valid and binding.
The decision in Ferguson v. Merchant Banking Ltd. [1993] 1 ILRM 136 is in a similar vein. There the defendant agreed to sell property to the plaintiff, mistakenly including a site with development potential. On discovering the error the defendant refused to complete the transaction. Murphy J. accepted the defendant had not intended to include the site in the agreement, but held that the property to be sold was clearly defined in the contractual documentation and no material provision had been neglected or overlooked. Accordingly, the contract was not vitiated by an absence of consensus ad idem or by the doctrine of mistake.
As already stated, in this case the written agreement was perfectly clear. It was open to one interpretation; that the property was to be conveyed with vacant possession. As in O’Neill and Ferguson the parties may have differed in their understanding of the transaction but they freely entered into an unambiguous written agreement. If anything the present case is a fortiori the decision in Ferguson, since in that case the mistake was much greater and more far-reaching, concerning as it did not the terms on which the property was to be conveyed but the question of what lands were being acquired. In the present case there is no latent ambiguity on the face of the agreement as in Mespil. Taking an objective view of the circumstances it cannot be said that the defendant’s mistaken understanding of the agreement was justified.
4. He who comes to equity must come with clean hands
I am satisfied that the parties entered into a valid contract for the sale of the three properties with vacant possession. However, that is not sufficient to resolve the matter. Specific performance is, of course, a discretionary remedy, though that discretion “must be exercised in a manner which is neither arbitrary nor capricious” (Smelter Corporation v. O’Driscoll [1977] IR 305 at 310-311). In Curust Financial Services Ltd. v. Loewe Lack-Werk [1994] 1 IR 450, Finlay C. J. with whom O’Flaherty J. and Egan J. agreed, said (at 467):
“I accept that, the granting of an injunction being an equitable remedy, the court has a discretion, where it is satisfied that a person has come to the court, as it is so frequently expressed, otherwise than “with clean hands”, by that fact alone to refuse the equitable relief of an injunction. It seems to me, however, that this phrase must of necessity involve an element of turpitude and cannot necessarily be equated with a mere breach of contract.”
Although that case concerned an application for an injunction, the principle applies equally to specific performance because, as the Chief Justice noted, the discretion derives from the equitable nature of both remedies (see Kavanagh v. Caulfield (Unreported, High Court, Murphy J. 19th June 2002)). Accordingly, the court must consider whether, in relation to this transaction, the plaintiff comes to equity with clean hands. It was submitted that the circumstances prevailing at the time the contract was entered into pointed to the conclusion that he had acted otherwise than in good faith. The plaintiff was said to have acted in an opportunistic manner. He failed to take certain steps that a prudent purchaser should take. Specifically he did not inspect the property before entering into the contract, nor did he contact Mr. Black, Mr. Kelly or the defendant to discuss the transaction. Mr. Black asserted in evidence that the contract price was so far below the market value of the properties at that time that any purchaser must have realised they were not to be conveyed with vacant possession. All this was set against a backdrop in which the parties were contracting at arms’ length, the plaintiff was not familiar with the defendant, and he knew he was not the originally intended purchaser. In fact, his name was inserted on the contract after Mr. Black’s had been erased with Tipp-ex.
I am mindful of these considerations and I accept that a prudent purchaser, in order to satisfy himself as to the nature and quality of what he was to receive under the contract, might have taken the steps whose absence here has been emphasised. However, I cannot accept that the plaintiff’s omission to take these steps involved any element of moral turpitude. I have already noted that the contract provided for vacant possession; that this was confirmed by the defendant’s own office; and that the common law imposed a duty on the vendor to disclose the existence of any tenancies. The plaintiff did not mislead the defendant, either knowingly or otherwise, to induce him to enter into the contract. I accept that the properties were to be sold at an undervalue. However, that was not sufficient to alert the plaintiff to the existence of tenancies, particularly when 13 Summerhill Place, the only vacant propety of the three, was to be sold for £22,500, a price lower than what had been contracted for in respect of the other two. Even if this had not been the case, in view of the contractual assurances the plaintiff had received he had no cause for suspecting the properties were tenanted, or that they would be tenanted on completion.
5. Laches
The defendant also invoked the doctrine of laches in his defence. The criteria which must be satisfied in order for that defence to be successful appear from the judgment of Keane J. in JH v. WJH (Unreported, High Court, Keane J, 20th December 1979) at page 35:
“I have no doubt that the interval of time which elapsed before the proceedings were issued in the present case could properly be described as substantial. That, however, is not sufficient…there must also be circumstances which render it inequitable to enforce the claim after such a lapse of time. I must accordingly consider the circumstances in which the defendant will now find himself if the plaintiff’s claim is allowed, as contrasted with the circumstances in which he would have found himself if the plaintiff had successfully prosecuted proceedings in 1973 or earlier.”
In that case the plaintiff had entered into an agreement with the defendant, her son, whereby she waived her legal right share in her husband’s estate in exchange for periodic payments from the defendant. The agreement was made in January 1969. In 1973 however, the plaintiff’s solicitors, in a letter to those acting for the defendant, asserted the plaintiff’s legal right share and threatened litigation. The matter was left to rest until 1976, at which point her solicitors repeated the assertion. After a further year her solicitors advised those acting for the defendant that they believed the agreement was invalid. In November 1977 they instituted proceedings seeking to have the agreement set aside. Keane J. held that he would have used his equitable jurisdiction to set aside the agreement had it not been for the long delay rendering it inequitable to enforce the plaintiff’s claim. The defence of laches succeeded on two grounds. Firstly, the plaintiff had not instituted proceedings until some eight years after learning of her legal rights in relation to the matter. Secondly, there had been a huge increase in the value of agricultural land in the years leading up to the inititiation of proceedings. Accordingly, had the plaintiff acted several years earlier, as she could reasonably have been expected to, the financial burden that the defendant would have faced in satisfying her claim to a legal right share of the estate would have been considerably less. The court held that she should have instituted proceedings either on learning of her rights in 1969 or at the latest by November 1973. As she had delayed for years afterward, equitable relief was refused.
In the present case this court is confronted with a delay of lesser duration, but a substantial delay nonetheless. The contract was entered into in 1998. It became clear later that year that the defendant did not intend to convey the property otherwise than subject to existing tenancies, and in 1999 Mr. Kelly, the beneficial owner of the property, stated the same position. The completion date specified in the contract was 23rd July 1998 and the defendant was in breach from that date in failing to complete. Unlike in JH, it cannot be doubted that at the time of the breach the plaintiff must have been aware that his legal rights had been infringed. It was, at least from his perspecive, a simple case of breach of contract. However, the present proceedings were not instituted until July of 2004.
Where the defendant has indicated an intention not to perform the contract, either by express repudiation or otherwise, the plaintiff is expected to pursue his claim with greater expedition. The same is true where, during the period of delay, the plaintiff knew of the manner in which the defendant would be prejudiced by his failure to act expeditiously (Spry, Equitable Remedies, 5th Ed, 1997, p 232-233). Both of these circumstances arise here. The plaintiff, an experienced property dealer in the local area, must have been well aware of the steadily increasing value of the properties and the consequent prejudice to the defendant. In addition, the defendant closed the sale of the vacant property but did not complete in respect of the other two, and the following year the beneficial owner of the properties indicated his own rejection of the agreed transaction. The defendant made a statutory declaration in relation to all three properties, but it bore no relation to the issue of vacant possession and cannot be construed as an indication of the defendant’s intention to convey the properties with vacant possession. This is so not merely because the declaration makes no reference to the issue, but because the defendant closed the sale of the vacant property only. The defendant did not agree to the joint deposit proposal, and by the time the statutory declaration was made it was clear to the plaintiff that the defendant had not intended to convey otherwise than subject to tenancies. As the court has indicated this is not sufficient to release the defendant from his contractual obligations, but it does mean it must have been clear in the circumstances that the defendant did not intend to close the sale with vacant possession. Finally, successive letters in 1998, 1999 and 2000 were all ignored. The cumulative import of these circumstances is clear: the defendant would not go ahead with otherwise than subject to tenancies. This must have been clear to the plaintiff.
The explanation advanced for the delay is that, because Mr. Kelly allegedly approached the plaintiff aggressively at the latter’s office on 30th April 1999, he was intimidated to such an extent that he refrained from enforcing his legal rights. It may be that the defence of laches fails if the court finds that the delay has been explained (Horgan v. Deasy [1979] ILRM 71). That said, however, the explanation must surely be a plausible one if it is to defeat an otherwise well-founded defence. I cannot conclude that this is so in this case. I accept that Mr. Kelly may have acted in an intemperate manner on the occasion referred to, and that the plaintiff may have felt intimidated as a consequence. However, that sense of intimidation cannot have been operative in the mind of the plaintiff for nearly so long as to account for the length of the delay at issue here. In addition, a period of over nine months had already elapsed before the meeting with Mr. Kelly and after the agreed closing date.
I turn now to consider whether the circumstances are such as to render an order for specific performance inequitable. The circumstances are similar to those which arose in JH, in that, owing to increases in the value of property, the defendant would suffer greater financial hardship if the claim were enforced now than he would have in the event of enforcement at the time of breach or soon after. This case is not precisely analogous to JH. There the defendant would have been compelled to choose between selling a farm in which he had invested 10 years’ work and assuming the burden of a substantial loan. The defendant’s difficult position in that regard was held to constitute a further circumstance making enforcement inequitable. However, Keane J. had already concluded, before reaching that point in his judgment, that the defence of laches was made out by virtue of the added financial burden that resulted from the massive increase in market value. This circumstance applies here also, and indeed applies to a greater extent. The contract price was fixed at £25,000 for each of the tenanted properties and £22,500 for the vacant one. Mr. Black suggested their true value was between £35,000 and £40,000. Expert evidence was given at the trial of this action to the effect that the value was now somewhere between €250,000 and €270,000. Even in the uncertain climate currently prevailing in the property market, the defendant could not hope to acquire equivalent properties for a sum equivalent to the contract price agreed in 1998. Accordingly, I am satisfied that to make an order of specific performance against the defendant would be inequitable.
6. Decision
The defence of laches must therefore, in my view, succeed. The delay of nearly six years between the closing date and the institution of these proceedings has resulted in the value of the properties generally and in the present case escalating. It is not equitable that a purchaser can delay to such an extent and expect to benefit from a rising market, any more than a vendor could delay in a falling market.
Accordingly, the decree of specific performance should be refused on the ground of laches. However, even if I am wrong in that conclusion, it has been established that where a decree of specific performance is sought, damages can be awarded in lieu thereof where a delay such as to make damages more appropriate has occurred, even where the defence of laches has not been established (White v. McCooey [1976-77] ILRM 72).
7. Damages
Even where a plaintiff has sought a decree of a specific performance in circumstances where he had no right to do so, it is open to the court to award damages in lieu of a decree (Duggan v. Allied Irish Building Society (Unreported, High Court, Finlay J., 4th March 1976)). The plaintiff has sought such damages in the event of the refusal of a decree and the court must now consider how they are to be quantified.
In Holohan v. Ardmayle Estates (Unreported, Supreme Court, 1st May 1967), Walsh J, with whom Budd J. and Fitzgerald J. agreed, held (at page 4):
“when the facts of the case are such that the trial judge is of opinion that he could make an order for specific performance but in his discretion does not do so but awards damages in lieu thereof, he must take into account in assessing the damages not merely such items as the loss of bargain and other loss which flows from the breach but the out of pocket expenses and other money laid out by the plaintiff which would naturally include any part of the purchase money already paid.”
There the plaintiff purchaser was awarded the difference between the contract price and the market value realised on resale of the property by the defendants to a third party, together with the deposit paid. The court also held that a sum equal to the auctioneers’ fees and the costs of investigating title could have been awarded had it been claimed. Where damages are awarded in lieu of specific performance the general rule is that the courts assess the market value of the property at the time of judgment and subtract from it the contract price (White v. McCooey [1976-77] ILRM 72; O’Connor v. McCarthy [1982] ILRM 201; Roberts v. O’Neill [1983] IR 47). However, only White was concerned with delay. There Gannon J. rejected the defence of laches, holding that there was no evidence before him either indicating an intention to abandon the claim or disclosing any injurious affect on the defendant’s position as a consequence of the limited delay that had occurred. In that case approximately one year had elapsed between the date on which the agreement was entered into and the institution of proceedings. The value of the property with which that decision was concerned had risen, and damages in lieu were nonetheless assessed according to the normal rule. In White the delay was not so great that the prejudice to the defendant could properly be attributed to it. In my view the result would have been different had the delay been much greater, in which case the court could readily have inferred that the prejudice to the defendant was attributable to that delay. This conclusion draws support from the decision in JH.
Here a decree of specific performance would compel the defendant to part with the two properties in question for a sum which today would be regarded as almost minuscule by comparison to how that same sum would have been regarded in 1998, a sum which also represents only a small fraction of the current market value of the properties. The plaintiff would also be permitted to profit from his own delay by acquiring them at a gross undervalue.
It might be pointed out that the defendant would have suffered financially in this regard even if proceedings had been instituted in a timely fashion. In such a case, specific performance would have been ordered despite the financial hardship to the defendant, as happened in Roberts. McWilliam J. indicated in that case that even if the defence of hardship had succeeded, the defendant would have had to pay damages assessed according to the normal measure outlined above. However, the defence of hardship does not depend for its success on the presence of any fault on the part of the plaintiff. It is logical then that in such cases the defence of hardship should not generally succeed on the ground of inflation even where it affords the plaintiff purchaser something of a windfall.
Different considerations apply in relation to laches, since that defence is contingent on a delay attributable to the plaintiff. If the same principle were applied in relation to laches in a case such as the present as applies in the context of the defence of hardship, the court would be impelled to a conclusion of dubious rationality. While acknowledging the fault on the part of the purchaser in the form of a substantial and harmful delay attributable to him, the court would nevertheless be forced to ignore this in the assessment of damages. Having concluded that a dramatic rise in market value rendered the award of specific performance inequitable, it would then be required to ignore this inequity in the assessment of damages, producing an outcome which is for all practical purposes equally inequitable. For this result to follow in where the court has already found that the plaintiff is at fault in delaying the bringing of this action would appear untenable. In my view the authorities which expressly consider the questions of delay and laches are more instructive in the assessment of damages in lieu of specific performance in cases such as this, where the plaintiff is at fault and specific performance is refused for economic reasons.
At page 37 of his judgment in JH, Keane J, in refusing the equitable relief sought on the ground of laches, contrasted the financial harm to the defendant which would flow from the grant of the relief with the great benefit to the plaintiff. He noted the incongruity of allowing the plaintiff to “obtain a significant financial windfall as a result of her dilatoriness in prosecuting her claim”. The same inequitable result would follow in the present case were damages to be assessed according to the normal measure, with the plaintiff profiting substantially from his own failure to act promptly.
In Malhotra v. Choudhury [1980] 1 Ch 52, the plaintiff had been awarded specific performance of an option to purchase premises from which he and the defendant had carried on a medical practice. The Court of Appeal had set aside this decree and awarded in its place a declaration that the plaintiff was entitled to exercise the option. The defendant refused to convey and the plaintiff sought damages. The Court of Appeal allowed the plaintiff’s appeal on the quantum of damages awarded. Cumming-Bruce L.J., with whose judgment Stephenson L.J. agreed, held (at p 79) that the damages to be awarded in equity should be quantified according to common law principles:
“So I am satisfied that equity is following the law if in relation to an award of damages in substitution for an order for specific performance of a contract of sale of real property, it awards damages assessing the value of the realty at date of judgment and not at the date of breach.”
However, the defendant argued that, if the market value of property rose during the period in which the plaintiff delayed, and the plaintiff could have avoided such a windfall by acting more expeditiously in pursuing the proceedings, his damages should not be enhanced by his own delay. In response, Cumming-Bruce LJ recognised that the plaintiff had been grappling with complex issues of law, but concluded (at p 81):
“Nonetheless, when all is said and done, it is unfair to the defendant that the deliberation with which the plaintiff moved from the middle of 1975 until he issued the present proceedings in January 1977 should be allowed to enhance the damage which the defendant has to pay the plaintiff if the price level of real property has risen during that period. For my part I would think that justice is done between them by holding that the plaintiff did not sufficiently mitigate his damage by proceeding with greater celerity in the various and difficult legal convolutions that he has been forced to undergo.”
Accordingly, the court found that the material date for the assessment of damages was 21st October 1976, one year before the date of judgment.
In Malhotra the original proceedings for specific performance had been instituted in 1973, within months of the breach of the obligation to comply with the option. The delay of a year and a half referred to in the passage just quoted refers to a delay not in the institution of the second set of proceedings, but in the carriage of those proceedings once instituted. In the court’s view that principle applies a fortiori where, as in the present case, there is a delay in instituting proceedings at all: where proceedings have been instituted, the defendant is at least aware that the plaintiff intends to hold him to his contract.
In the present case there was a period of nine months between the agreed closing date, which would constitute the date of breach since the properties were not conveyed on that date, and the date of the meeting with Mr. Kelly. As already indicated, I do not accept that his behaviour on that occasion produced an inhibiting effect on the plaintiff which remained operative for such a time as to adequately explain the delay in instituting the present proceedings. For the reasons noted above, the circumstances in this case justified an expectation that the plaintiff should act quickly. He should have instituted proceedings early in 2001 at the very latest. This action instead commenced in the middle of 2004. It therefore seems appropriate to assess the date for the relevant date for the assessment of damages as being three and a half years preceding the date of judgment in this action. While I accept that this exact date cannot be grounded on any precise basis, the same could have been said in Malhotra. In addition, it appears to provide a solution in accord with equitable principle, in that it makes allowance for the delay of the plaintiff but also exhibits a degree of indulgence toward him, countenancing a more than reasonable lapse of time in recognition of the defendant’s breach and the plaintiff’s fair expectation of performance.
In O’Connor, Costello J. followed the long-established rule that the damages payable for a breach of contract should be such as may fairly and reasonably be considered as arising according to the usual course of things from the breach or such as may reasonably be supposed to have been in the contemplation of both parties when they entered into the contract as the probable result of its breach. Costello J. reviewed the authorities and concluded that the plaintiff should not be permitted to succeed in his claim for loss of profits, or for the cost of reconstruction of new premises, on the ground that these losses constituted special circumstances which had not been communicated to the vendor at or before the time of contracting. He had not been informed of the purpose for which the plaintiff had intended to use the premises.
Similarly, in this case the evidence does not indicate that the defendant was informed of the purpose for which the plaintiff intended to use the property. Evidence has not been adduced as to any loss of rental income, or as to any intention on the part of the purchaser to lease the premises. Indeed, the evidence indicates that he wished, at least initially, to have vacant possession of the property. In these circumstances it has not been shown that a loss of rental income was within the contemplation of both parties, nor that it flows naturally from the breach.
The current market value of the properties with which the court is concerned is not clear. The estimate of €250,000 to €270,000 which is a current valuation was put forward. This estimate was based on an external inspection only, but expert evidence was given to the effect that the internal condition of the properties would not have substantially affected their value, unless they were derelict which did not appear to be the case. It is now necessary to assess the market value of the properties as at mid 2005 with the proviso that if that should exceed the current market value then damages should be quantified by reference to the date of this judgment. If it were otherwise, the order of the court would enable the plaintiff to profit to a greater extent because of his delay than he would have done if confined to the normal rule, notwithstanding that the departure from the normal rule in this case is justified only because of that very delay for which the plaintiff is at fault.
From the market value as at mid 2005 (or the date of judgment if the latter is a lesser figure) will be subtracted the contract price of the properties. In light of the decision of the Supreme Court in Holohan, the plaintiff is also entitled to the return of the deposit paid in respect of the two properties. The total arrived at is to be calculated according to this method in respect of each property. The resulting total in respect of 14 Rutland Street is awarded to the plaintiff, while the figure in respect of 9 Summerhill Place is awarded to the plaintiff to be held in trust for his brother, the second plaintiff in the action concerning the latter property. This is because the plaintiff contracted to purchase that property in trust for him.
There is no evidence before the court as to any further losses which might be compensated in damages.
O’Hara v Flint
Aidan O’Hara v Graham W.Flint, Troika Ltd and Hamburg Investment Company
1978 No. 73
Supreme Court
31 July 1979
[1979] I.L.R.M. 156
KENNY J
(Griffin and Parke JJ concurring) delivered his judgment on 31 July 1979 saying: In 1971, Pierse Francis Hayes (‘Mr Hayes’) was the owner of a family estate consisting of Crosshaven House and about 100 acres of surrounding lands which were known as the lands of Knocknagore. In 1972 he decided to sell the lands for development. By a written contract of 7 December 1972 he agreed with Graham W Flint (‘Mr Flint’) for the sale to him for £33,000 of Crosshaven House and 15 acres. As there was no public water supply to the house or lands, the contract was necessarily a very complicated one. The 1968 edition of the conditions of sale issued by the Incorporated Law Society of Ireland was used but the special conditions were the important ones. The solution of the problem in this case is not made easier by the bad and confused drafting of the special conditions and by the fact that though the lands are referred to by reference to a map which has a number of colours on it, the copies of the map furnished to us are photostat only and do not show any colours. I trust for the future that solicitors will remember that, when preparing books of appeal for this court, photostat copies of plans with colours on them are worthless. The clause in the agreement of December 1972 which has led to this litigation is No. 6 in the second schedule and reads:
The vendor is retaining certain adjoining lands which he proposes to develop for housing and it appears that for the purpose of the more conveniently developing of these lands it might become desirable to demolish the messuages on the premises hatched blue whether for the purpose of erecting a roadway thereon or for the purpose of allowing a reasonable line of vision for an adjoining road at its junction with the existing Church Bay Road. In these circumstances the vendor and the purchaser have agreed that the vendor may re-acquire the premises coloured blue on the map if it is not reasonably practicable for him or the actual developer of the said adjoining land to carry out the development without demolishing the said messuages. It shall not be deemed practicable for the vendor to carry out the said development if the additional cost involved in retaining the said messuages would be disproportionate to the value of the development land to the vendor, and provided that if the vendor should become entitled to exercise his rights under this condition and does so exercise them, then he shall erect a substantial boundary wall to the remainder of the messuages at his own cost and expense and provided that in the event of any dispute arising as to the interpretation of this clause then such dispute shall be referred to an arbitrator to be agreed between the parties or in default of agreement to two arbitrators and an umpire in accordance with the provisions of the Arbitration Act, 1954.
The sale to Mr Flint was completed by a conveyance of 8 October 1973 on which the land which Mr Hayes might re-acquire were shown coloured blue (in the pleadings and in this judgment called ‘the reserved lands’). There are *158 buildings on the reserved lands which have some archaeological interest and there is an old winnowing machine in one of the buildings.
After Mr Hayes had agreed to sell Crosshaven House and the surrounding lands to Mr Flint, he agreed to sell 70 acres adjoining the lands which he had agreed to sell to him to Mr Leonard Dovey and these lands were conveyanced to Mr Dovey by deed on 5 June 1973. Mr Dovey subsequently conveyed the lands he had purchased to Troika Ltd (‘Troika’) but remained a director of that company. Mr Hayes had applied to the planning authority for outline planning permission for development of the lands and had obtained that, but full planning permission for the development had not yet been granted.
By a deed of 31 December 1974 Mr Hayes assigned his rights in relation to the reserved lands to Troika.
By an agreement made in 1974 between Mr Flint and the plaintiff, Mr Flint agreed to sell part of the lands included in the deed of 8 October 1973 to the plaintiff. The part sold consisted of the stable yards and lands shown on a map attached to the agreement. The buildings on this abut on to a road and were probably the outhouses for Crosshaven House in more prosperous days. Before the plaintiff made the agreement with Mr Flint, he was told that Mr Hayes had, under his contract with Mr Flint, a right to acquire the reserved lands and the sale to the plaintiff was made subject to clause 6 of the special conditions in the agreement with Mr Flint. The whole of clause 6 was set out in full in the special conditions attached to the contract between Mr Flint and the plaintiff. The plaintiff purchased the property for the purpose of conveying the barn on the lands into a residence and obtained planning permission to do this. The lands purchased by the plaintiff included the reserved lands. The sale by Mr Flint to the plaintiff has not yet been completed.
For the purpose of developing the lands acquired by Troika, they were anxious to get a conveyance by Mr Flint to them of the reserved lands which they claim to be entitled to as the assignees of Mr Hayes. Mr Flint delayed in conveying the lands and on 4 December 1974 Troika and a company called Hamburg Investment Company began proceedings against Mr Flint and Mr Hayes to prevent Mr Flint selling the reserved lands to anyone except them and for specific performance of the agreement of 7 December 1972 in so far as it related to the reserved lands by the conveyance of these lands to Troika. Troika and Mr Flint settled their differences and by a consent order made by the High court on 1 July 1975 which was stated to be in settlement of the action (1974 No. 3959 P) Mr Flint was restrained from selling the reserved lands until he conveyed them to Troika, and the Court declared that the agreement of 7 December 1972 in so far as it related to the reserved lands ought to be specifically performed. On 18 July 1975 the reserved lands were conveyed to Troika by Mr Flint.
The plaintiff heard that Troika were about to demolish the buildings on the reserved lands and on 14 July 1975 issued these proceedings in which he claims an injunction restraining Mr Flint, Troika and the Hamburg Investment Company from demolishing or damaging any of the buildings on the reserved lands. By order made on 21 February 1977 the third-named defendants, Hamburg Investment Company, were struck out of the action. Mr Flint, having made his *159 profit, has left the country and did not enter an appearance to these proceedings. Interlocutory injunctions were granted restraining Mr Flint and Troika from demolishing the buildings until the hearing of the action.
The case came before McWilliam J in the High Court and he dismissed the plaintiff’s claim against Troika and he made no order ‘at present’ against Mr Flint and gave the plaintiff liberty to re-enter the matter against him. A considerable volume of evidence was given in the High Court as to whether it was possible to develop the lands owned by Troika without building a road on the reserved lands. The architect retained by Troika gave positive evidence that any entry to the lands to be developed would be very dangerous unless the public roads were widened by acquiring parts of the reserved lands. The plaintiff has now appealed to this court against the dismiss of his action against Troika.
The first matter debated was whether the plaintiff having a contract only for the purchase of the lands which include the reserved lands but not having a conveyance can maintain this action for an injunction. There is authority that a purchaser who has not obtained a conveyance may get an injunction restraining the vendor to him from selling to another person or from demolishing the buildings on the lands agreed to be sold. (Echliff v Baldwin (1809) 16 Ves Jun 267; Curtis v The Marquis of Buckingham (1814) 3 Ves and B. 168 and Spiller v Spiller (1819) 3 Swan. 556). The trial judge was not referred to these authorities. In so far as the question is whether the plaintiff, who has a contract only, can maintain the proceedings, I think he can as against Mr Flint on the authority of these cases. But counsel for Troika have argued that as they have a conveyance of the reserved lands made under a court order, the plaintiff’s remedy is not against them but against Mr Flint only. The claim of Troika arises under the conveyance to them of the lands, under the clause in the agreement of 7 December 1972 and the conveyance of 8 October 1973. The plaintiff entered into the contract with Mr Flint with full notice of that agreement. Mr Flint could waive the condition that the acquisition of the reserved lands was to be made only when it was proved that it was not reasonably practicable for him or the developer to carry out the development without demolishing the building on the reserved lands and acquiring the lands. The plaintiff had endeavoured to be added as a party to the action in which the order for specific performance was made but his application was refused. Even if he had been allowed to take part in those proceedings, his claim under the contract made in 1974 was later in point of time to that arising under the agreement of 7 December 1972. I agree with the trial judge that the plaintiff’s remedy is against Mr Flint only because Troika’s right as assignees of Mr Hayes’s rights ranks before that of the plaintiff (see the advice of the Privy Council in Assaf v Fuwa [1954] 3 WLR 552). In addition to being prior in date of creation, Troika’s rights have been perfected and vested by the conveyance to them of the reserved lands by the conveyance of 18 July 1975.
It was also argued on behalf of the plaintiff that the rights of Mr Hayes to acquire the reserved lands were personal to him. I do not accept this argument. The use of the words ‘or the actual developer of the lands’ shows that the parties contemplated that the lands might be developed not only by Mr Hayes but by other developers and the clause relates to lands and do not create a right personal *160 to Mr Hayes only. Counsel for the plaintiff also argued that the clause in relation to the acquisition of the reserved lands was void for uncertainty. I am convinced that the first two sentences relating to acquisition are not void for uncertainty.
The issue whether it is reasonably practicable to develop the lands without acquiring any part of the buildings on the reserved lands does not arise because Troika are the owners of them. Moreover, the ultimate decision as to whether the road should be widened by acquiring any part of the reserved lands is ultimately one for the planning authority but even if the planning authority decided that it is not necessary to demolish the buildings on the reserved lands, Troika are the legal owners of them and their claim to them prevails over that of the plaintiff. I cannot see any ground on which the plaintiff can succeed against Troika.
In my opinion, the order made by McWilliam J was correct. I would not vary it in any way in so far as Troika is concerned and I would dismiss this appeal.
Irish Life Assurance Company Ltd v Dublin Land Securities Ltd
1986 WJSC-HC 935, [1986] IR 332, [1986] IR 332 (Digest), [1986] 5 JIC 0201
Court: High Court (Ireland)
Judge: Keane, J.In summary, I am satisfied that the evidence establishes:-
(1) It was at all times the intention of the Plaintiffs to exclude the lands the subject matter of the two Compulsory Purchase Orders together with the adjoining land acquired by agreement at Palmerstown and the houses at Turret Road from the contract.
(2) Mr Nowlan on behalf of the Plaintiffs informed Mr White, who was then acting as the agent of Mr Frederick, that a significant holding of land the subject of a Compulsory Purchase Order at Palmerstown was to be excluded from the sale at the meeting of the 23rd May 1981.
(3) The lands at Palmerstown the subject of the two Compulsory Purchase Orders, the adjoining lands acquired by agreement and the houses in Turret Road were included in the contract of the 23rd December 1981 because of an oversight in the legal department of the Plaintiffs.
(4) Neither Mr Miley nor Mr Frederick was aware of the mistaken inclusion of the Palmerstown lands or its significance until late May 1982. Mr White had not said anything to Mr Frederick about their exclusion from the sale and, while Mr Miley received the letter of the 23rd March 1982 from Mr Devlin, he did not appreciate its significance at the time and had forgotten about it until he was reminded of its existence at the meeting in November 1982.
The Plaintiffs say that, in these circumstances, the contract of the 23rd December 1981, was drawn up and signed under a mutual mistake of fact and that they are accordingly entitled to rectification of the contract so that it carries out the actual intentions of the parties. It was submitted by Mr Keane on their behalf that it was not necessary for the Plaintiffs to establish that there had been an antecedent agreement enforceable in law: all that was required was that there had been a common continuing intention in regard to the particular provision of the agreement which had found expression in outward agreement together with convincing proof that the concluded instrument did not represent the parties’ common intention. He relied in this context on the decisions of the Court of Appeal in Joscelyne .v. Nissen (1970) 2 Q.B. 86and of the Northern Ireland Court of Appeal in Rooney and McParland .v. Carlin (1981) N.I. 138. He submitted that both the Plaintiffs and Mr White, as the agent of the Defendants, intended to exclude the lands at Palmerstown, and had manifested that intention at the meeting of 23rd May 1981. Since that common continuing intention had not found expression in the written contract, the Plaintiffs were entitled to have it rectified so as to give effect to that common intention.
Mr Farrell submitted on behalf of the Defendants that there was no mistake in the contract of 23rd December 1981: the Plaintiffs intended to sell and the Defendants intended to purchase the properties set out in the schedules whatever they might be. While accepting that it was not necessary that there should have been an enforceable antecedent agreement, he argued that there must at least have been a concluded antecedent agreement certain in its terms. He submitted that the reference by Mr Nowlan at the meeting of the 23rd May to a “significant holding of land the subject of a C.P.O. at Palmerstown” was so lacking in precision that the parties could not be said to have reached a concluded agreement in regard to this particular matter which was certain in its terms. It was not clear, he said, whether the reference was to the lands included in both the Compulsory Purchase Orders or one or other of them. Moreover, not all the lands which the Plaintiffs were now seeking to exclude from the agreement were in fact the subject of either Compulsory Purchase Order: some of the adjoining land had been sold to the County Council by agreement. Nor had there been any reference to the houses at Turret Road which it was now sought to exclude.
Mr Farrell further submitted that this was in truth a case of unilateral mistake, even though not pleaded as such. He submitted that there could be no rectification where the mistake is merely unilateral, as where one party (in this instance Mr Frederick) had never even heard of the terms sought to be inserted, and that this would be so even if Mr White could be regarded as being Mr Frederick’s agent, since Mr White had never told him of the term in question. Mr Farrell relied in support of this latter proposition on Farlow .v. Scottish Equitable Life Insurance Society, 98 L.J. Ch 225. He submitted that the present case fell within none of the established exceptions to the principle that the Court will refuse rectification in such cases of unilateral mistake.
The conditions which must be satisfied before a Court will order rectification of a written contract on the ground of mutual mistake were defined as follows by Lord Lowry LCJ in Rooney and McParland .v. Carlin at p. 146:-
2 “1. There must be a concluded agreement antecedent to the instrument which is sought to be rectified; but
2. The antecedent agreement need not be binding in law… nor need it be in writing: such incidents merely help to discharge the heavy burden of proof;
3. A complete antecedent concluded contract is not required, so long as there is prior accord on a term of a proposed agreement, outwardly expressed and communicated between the parties, as in Joscelyne .v. Nissen.”
It had been held by Dixon J. in Monaghan County Council .v. Vaughan (1948) IR 306 adopting the view of the law taken by Clauson J. in Shipley UDC .v. Bradford Corporation (1936) Ch 375 that, in the case of mutual mistake, the power of the Court to order rectification did not depend on the existence of an antecedent agreement capable of being enforced: it was sufficient that there was such an agreement, whether enforceable or not. Joscelyne .v. Nissen and Rooney and McParland .v. Carlin make it clear that one additional element is required, namely, that the antecedent agreement or “common continuing intention”, to use the phrase preferred by Russell LJ in Joscelyne .v. Nissen and Lord Lowry LCJ, has been reflected in some outward expression of accord. In addition, these later decisions place renewed emphasis on the heavy burden of proof which lies upon a Plaintiff in such cases and which was referred to by Haugh J. in Nolan .v. Graves and Hamilton ( 1946 IR 376 at p.389) as “a very onerous burden”.
It is, I think, clear that the principles to which I have referred, supported as they are by eminent authority, represent the law in this jurisdiction. Accordingly, if the Plaintiffs had discharged the heavy burden of proof which lies upon them and established that there was a common continuing intention on the part of Mr Frederick and the Plaintiffs to exclude the lands at Palmerstown from the sale which was mistakenly not embodied in the contract but was outwardly expressed and communicated between the parties thereto, the Plaintiffs would be entitled to rectification of the contract in accordance with the legal principles to which I have referred.
I have already found that Mr Frederick was unaware until May 1982 of the intention of the Plaintiffs to exclude the lands at Palmerstown. The Plaintiffs, of course, rely on the fact that the intention to exclude the lands had been communicated by Mr Nowlan to Mr White as Mr Frederick’s agent and say that the knowledge thus obtained by Mr White must be imputed to Mr Frederick.
The law is stated as follows in Bowstead on Agency, 15th Edition, at p.412:-
“When any fact or circumstance, material to any transaction, business or matter in respect of which an agent is employed, comes to his knowledge in the course of such employment, and is of such a nature that it is his duty to communicate it to his principal, the principal is deemed to have notice thereof as from the time when he would have received such notice if the agent had performed his duty, and taken such steps to communicate the fact or circumstance as he ought reasonably to have taken; provided that where an agent is party or privy to the commission of a fraud upon or misfeasance against his principal, his knowledge of such fraud or misfeasance, and of the facts and circumstances connected therewith, is not imputed to the principal.”
While this is no doubt a correct statement of the law, it does not of itself lend support to a further proposition which is an inherent part of the Plaintiffs’ case. The learned editors do not say that where such knowledge takes the form of the agent’s awareness that a particular term is to be included in a proposed contract, the principal is not merely deemed to have notice of the proposed term but is also deemed to have assented to its inclusion in the proposed contract and to be bound by it, even where it is omitted from the contract because of a mistake by the party seeking to rely on it. No authority has been cited for that proposition and such authority as there is appears to be against it.
It is of course an important feature of the efficient conduct of business that parties should be able to rely on notice to an agent as adequate notice to his principal within the limitations to which I have already referred. But in a case such as the present, those considerations may have to yield place to a principle of fundamental importance, viz., that the Courts will not reform a contract in writing save on convincing proof that the contract, as the result of a mistake, has failed to give effect to the common intention of the parties previously manifested in outward accord. The authorites eloquently underline the anxiety of the Courts to ensure that uncertainty is not introduced into freely negotiated commercial transactions by the successful invocation of rectification except within these strict constraints.
Thus, in Shipley Urban District Council .v. Bradford Corporation, Clauson J. remarked that many, perhaps even most, rectification cases dealt with the reforming of a final instrument such as a conveyance or a settlement, so as to accord with a previous instrument, such as a contract for sale or articles for a settlement. He added that the high standard of mutual mistake which the Court requires made cases where mutual mistake could be proved, in the absence of any previous written instrument “very rare”. Within this framework, it seems contrary to principle that, in a case such as the present, the Court should infer from the knowledge of the agent of the disputed term the assent of the principal to its inclusion in the contract, where the principal had no actual knowledge of the omitted term and the omission was due to a mistake by the party seeking to rely on it.
In this context, the circumstances of the present transaction must constantly be borne in mind. Mr Frederick was not simply making an investment which would yield him a fixed income. He was buying the ground rents portfolio in the knowledge that it would contain at least some opportunities for profitable exploitation of vacant sites and short reversions. It was wholly impractical for him or anyone acting on his behalf to conduct a detailed investigation of all the properties comprised in the folio with a view to establishing how worthwhile such opportunities were within the time scale insisted on by the Plaintiffs. He was, in short, taking a calculated business risk in the hope that it would yield him a substantial bonus above and beyond the fixed income which would be singularly unattractive to most investors in these times. The Palmerstown lands were not, as I have already said, the only property which the Plaintiffs intended to exclude from the sale although technically forming part of their ground rents portfolio. The evidence establishes that a list of these properties was furnished by Mr Nowlan to Mr Devlin’s department with a view to ensuring that they were excluded from the contract. Accordingly, when it came to signing the contract, Mr Miley found himself in a position where he had to advise his client that he was not at that stage satisfied that the contract proposed by the Plaintiffs included all the properties to which Mr Frederick might have thought himself entitled. Mr Frederick was nonetheless prepared to take the risk that the contract would still prove commercially attractive from his point of view. To conclude in these circumstances that there had been a prior concluded agreement between Mr Frederick and the Plaintiffs that the Palmerstown lands should be excluded which by a mistake common to both parties was not embodied in the written contact seems to me wholly unreal and I would be reluctant to come to such a conclusion, unless I were coerced so to do by authority.
The law is stated as follows in Snell’s Principles of Equity(28th Edition) at p.614:-
“The general rule is that there can be no rectification where the mistake is merely unilateral, as where one party had never even heard of the term sought to be inserted because his agent had not told him of it.”
Mr Farrell conceded that the only authority cited in the text for this proposition (Farlow .v. Scottish Equitable Life Insurance Society) did not support the statement of law in the wide terms in which it appears in the text. But the case does afford an interesting example of the reluctance of the Courts to allow rectification on the ground of common mistake where one of the parties has never heard of the proposed term.
In that case, R. and K. who carried on business as merchants in the City of London agreed to give credit to T.H. Since he lived abroad and had no property in England, R. and K. decided to effect a policy of insurance on his life and to that end negotiations were conducted between K. and C., the London Agent of the Defendants. H, in the course of his business, was in the habit of visiting ports in the Mediterranean and on the coasts of Africa and of Asia and it was made clear by him and K. to C. that the policy should not be vitiated by reason of his visiting ports out of Europe. In fact, however, the policy as executed by the Defendants contained a clause which only entitled H. to visit ports within the Mediterranean. H, in the course of his business, visited Casa Blanca on the Atlantic Coast of Morocco and died there. The assignee of R. and K. brought proceedings claiming rectification of the policy to give effect to what was alleged to be the real agreement. Their claim was rejected by Stuart V.C. and, in the course of his judgment, he had this to say:-
“One of the contracting parties to the instrument which is now sought to be reformed confessedly never heard of that which is said to be the real agreement. The result, upon the whole, is plain, that the agent in London agreed to something which he never communicated to his principals. The agent in London communicated that which was a mistaken proposal. K, who made the agreement with the London agent, never intended to be bound by the stipulation which he himself framed in a mistaken form. The result is that there is no agreement at all. That being so, the Plaintiffs seem entirely to have mistaken their remedy…”
He accordingly declined to order rectification, but ordered that the premiums which they had paid should be refunded to the Plaintiffs and the policy delivered up to the Defendants. I observe in passing that the Plaintiffs in the present proceedings have at all times confined their claim to one of rectification and this is a point to which I shall return at a later stage.
I am satisfied that the present is also a case of unilateral mistake rather than common or mutual mistake. Even if Mr White’s knowledge could be treated as an adequate basis for Mr Frederick’s notional assent to the inclusion of the disputed term, the difficulty remains as to what that term is alleged to have been. Mr Nowlan went no further than saying to Mr White that there was a significant holding of land at Palmerstown subject to a C.P.O. which was not included in the sale of the portfolio. He did not specify – and, of course, is not to be criticised in the slightest for not specifying – whether he was referring simply to the lands in the County Council C.P.O. or those in the Corporation C.P.O. or both. Nor did he indicate whether the exclusion was confined to the C.P.O. lands or included those portions which were ultimately transferred to the local authority by agreement. Nor was there any reference, at least so far as the evidence goes, to the houses in Turret Road which were also mistakenly included in the contract and which it is now sought to exclude. So far as the vacant lands at Palmerstown are concerned, I think there is no doubt that it was Mr Nowlan’s intention to exclude them all, whichever C.P.O. they were in and indeed whether they were in a C.P.O. or not. But he did not say so, and understandably so since he had no reason to suppose that the written instructions which were in due course conveyed to the legal department to exclude them would not be implemented, and such uncertainty can only be fatal to a Plaintiff seeking to discharge the heavy burden of proof in a case such as this.
I am satisfied accordingly that the Plaintiffs have failed to discharge the onus of proof that lies upon them of establishing that the exclusion of the Palmerstown lands in the contract was the result of a common or mutual mistake which entitles them to rectification. It was at one time thought to be the law that rectification could not be granted to a party on the ground of unilateral mistake and that his remedy, if any, was rescission: see Gun .v. McCarthy, 13 LR (Ir.) 301. Later authority suggests, however, that rectification may be granted in cases of unilateral mistake, provided that there has been some element of fraud or sharp practice on the part of the person against whom the relief is sought; or, to put it at its lowest, where it would be inequitable in the circumstances to allow that person to retain a benefit derived from the mistake. Since the Defendants take no point on the absence of any plea of unilateral mistake, I have considered whether those authorities lend any support to the Plaintiffs’claim for rectification.
In approaching this question, it is necessary for me to emphasise that there was not the slightest element of fraud, dishonesty or even sharp practice, in Mr Frederick’s conduct during this transaction. He was wholly unaware of the mistake until long after the contract which it is sought to rectify had been executed. Nor would it be proper to impute anything amounting to sharp practice to Mr White simply because he did not report the conversation with Mr Nowlan to Mr Frederick. It may be that Mr White considered that this was a matter which in any event would have to be sorted out by the Solicitors in due course and that Mr Miley, as a prudent and experienced Solicitor, would let his client know of any significant exclusions in the contract before it was signed. But it is not for me to speculate as to what Mr White’s reasons may have been for not communicating the substance of this conversation to Mr Frederick, since he was not called by either party.
The first of the later decisions is A. Roberts and Company Limited & Anor .v. Leicestershire County Council (1961) Ch 555. In that case, the Plaintiff Company had put in a tender with the Defendants for the erection of a school specifying that the works would be completed within eighteen months. The tender was accepted, but two officers of the Council altered the period for completion to thirty months. This alteration was for their benefit and not for the benefit of the company: the lower price at which the works were tendered for related to the eighteen month period. The company were unaware of the alterations when the contract was executed and, although one of the officers knew that they (the company) were under a mistaken impression as to the period for completion, he did nothing to draw their attention to the mistake. In an action for rectification, Pennycuick J held that the company was entitled to rectification. In the course of his Judgment, he says (at p.570):-
“The second ground (of the Plaintiffs’ claim) rests upon the principle that a party is entitled to rectification of a contract upon proof that he believed a particular term to be included in the contract, and that the other party concluded the contract with the omission or a variation of that term in the knowledge that the first party believed the term to be included. (Counsel) for the Council formulated the principle in slightly different terms, as follows, viz., the plaintiff must show that his intention was that the term sought to be introduced by rectification should be included in the contract and (so far as now relevant) that the omission of the term was occasioned by the dishonest conduct of the defendant in acceptance of the formation of the contract without the term in the knowledge that the plaintiff thought the term was included. (Counsel) thus introduces into his formulation of the principle the word “dishonest”, but he accepts that such conduct by the defendant in his formulation is of its nature dishonest, so that the word “dishonest” appears to carry the matter no further. I do not think that there is any substantial disagreement as to the scope of the principle.”
He also cited the following passage from the 25th Edition of Snell
“By what appears to be a species of equitable estoppel, if one party to a transaction knows that the instrument contains a mistake in his favour but does nothing to correct it, he (and those claiming under him) will be precluded from resisting rectification on the ground that the mistake is unilateral and not common.”
He adds the following comment:-
“The exact basis of the principle appears to be in some doubt. If the principle is correctly rested upon estoppel it seems to me that it is not an essential ingredient of the right of action to establish any particular degree of obliquity to be attributed to the defendants in such circumstances. If, on the other hand, the principle is rested on fraud, obviously dishonesty must be established. It is well established that a party claiming rectification must prove his facts beyond reasonable doubt, and I think this high standard of proof must equally apply where the claim is based on the principle indicated above.”
It may be that this passage puts the burden of proof on the Plaintiff at too high a level (See the observations of Brightman L.J. in Thomas Bates and Son Limited .v. Wyndham’s (Lingerie) Limited (1981) 1 ALL E.R. 1077 at p.1090). It is of more relevance in the present context, however, to note that in that case there was the clearest evidence that the Defendants, through their officer, executed the contract in the knowledge that it contained a term which the Plaintiffs never intended to include and refrained from drawing their attention to it. The facts are, accordingly, clearly distinguishable from the facts as found by me in the present case.
The next decision is Riverlate Properties Limited .v. Paul (1975) Ch 133. In that case, the Plaintiff Company made a lease of a maisonette to the Defendant. As executed, the lease imposed the entire responsibility for the exterior and structural repairs of the building on the lessors. It was, however, the lessors’ intention that the lessee should contribute to those costs, but neither the lessee nor her Solicitor appreciated that that was the case. It was not the lessee’s Solicitor’s intention that the lessee should be liable for such a contribution, but when he was examining the draft lease he did not appreciate that the clauses which relieved her of that liability were the result of erroneous draftsmanship. The lessor brought an action in which it was claimed, inter alia, that there had been a unilateral mistake of such a character as to entitle the lessor to rescission of the lease, subject to the lessee being put to her election whether or not to retain the lease but rectified so as to impose on her the appropriate contribution originally intended by the lessor. Templeman J., dismissed the action and his decision was upheld unanimously by the Court of Appeal. Delivering the Judgment of the Court, Russell L.J., said (at p.140):-
“It may be that the original conception of reformation of an instrument by rectification was based solely upon common mistake: but certainly in these days rectification may be based upon such knowledge on the part of the lessee: see, for example, A. Roberts and Company Limited .v. Leicestershire County Council. Whether there was in any particular case knowledge of the intention and mistake of the other party must be a question of fact to be decided upon the evidence. Basically it appears to us that it must be such as to involve the lessee in a degree of sharp practice.”
The judgment goes on to deal with the claim for rescission, Because that claim has not been made in the present proceedings, it is unnecessary to consider in any detail whether it would lie in the circumstances of the present case. The observations of Russell, L.J., on the merits of such a claim are, however, peculiarly apposite, in my view, in the present context. He says at p.141:-
“Is the lessor entitled to rescission of the lease on the mere ground that it made a serious mistake in the drafting of the lease which it put forward and subsequently executed, when (a) the lessee did not share the mistake, (b) the lessee did not know that the document did not give effect to the lessors intention, and (c) the mistake of the lessor was in no way attributable to anything said or done by the lessee? What is there in principle, or in authority binding upon this Court, which requires a person who has acquired a leasehold interest on terms upon which he intended to obtain it, and who thought when he obtained it that the lessor intended him to obtain it on those terms, either to lose the leasehold interest, or, if he wished to keep it, to submit to keep it only on the terms which the lessor meant to impose but did not? In point of principle, we cannot find that this should be so. If reference be made to principles of equity, it operates on conscience. If conscience is clear at the time of the transaction, why should equity disrupt the transaction? If a man may be said to have been fortunate in obtaining a property at a bargain price, or on terms that make it a good bargain, because the other party unknown to him has made a miscalculation or other mistake, some high minded men might consider it appropriate that he should agree to a fresh bargain to cure the miscalculation or mistake, abandoning his good fortune. But if equity were to enforce the views of those high minded men, we have no doubt that it would run counter to the attitudes of much the greater part of ordinary mankind (not least the world of commerce), and would be venturing upon the field of moral philosophy in which it would soon be in difficulties.”
He goes on to review a number of older decisions which were cited as authority for the proposition that the Plaintiff was entitled to rescission of the lease on the ground of mere unilateral mistake or, at the least, to put the Defendant to her election. The judgment concludes that, insofar as the cases lent support to such a proposition, they were wrongly decided, but, as I have already indicated, since no such claim is made in the present proceedings, it is unnecessary to say anything further on this aspect of the case.
The final case in the series is Thomas Bates and Son Limited .v. Wyndham’s (Lingerie) Limited. In that case, there was omitted from a rent review clause in a lease a provision for arbitration in the event of the parties failing to agree the rent. The omission of the arbitration clause was due to a mistake on the part of the managing director of the lessors and it is also clear that when the lessees executed the lease they were aware of the omission and did not draw the lessors’ attention to it. However, in the Court of Appeal, Buckley, L.J. declined to associate himself with the strictures passed by the trial Judge on the conduct of the then lessees’ Managing director. He nonetheless upheld the finding of the trial Judge that the Plaintiff was entitled to rectification. Having referred to one of the passages which I have already cited from the judgment of Russell L.J., in Riverlate Properties Limited .v. Paul, he says (at p.1086 ab):-
“In that case the lessee against whom the lessor sought to rectify a lease was held to have had no such knowledge as would have brought the doctrine into play. The reference to “sharp practice” may thus be said to have been an obiter dictum. Undoubtedly I think in any such case the conduct of the defendant must be such as to make it inequitable that he should be allowed to object to the rectification of the document. If this necessarily implies “some measure” of sharp practice, so be it; but for my part I think that the doctrine is one which depends more on the equity of the position. The graver the character of the conduct involved, no doubt the heavier the burden of proof may be; but, in my view, the conduct must be such as to affect the conscience of the party who has suppressed the fact that he has recognised the presence of a mistake.”
It is perhaps somewhat over fastidious to shrink from applying the description of “sharp practice” to the conduct of a party who recognises that the other party to the contract is executing it under a mistake which can only be detrimental to him and deliberately suppresses his recognition of that fact. But it is unnecessary to consider such fine distinctions any further in the present case, because it is clear that Mr Frederick was not aware that a mistake was being made in the execution of the contract and there was accordingly neither “sharp practice” on his part nor anything in his conduct prior to or at the time of the execution of the contract which rendered it unconscionable for him to take his stand on the contract as it was executed by both the parities. It follows that the Plaintiffs in my opinion are not entitled to rectification on the ground of unilateral mistake.
One further matter remains to be noticed. Notices to Treat in respect of the lands comprised in the Dublin County Council Compulsory Purchase Order were served on the 25th September 1980. In the case of the lands comprised in the Dublin Corporation Compulsory Purchase Order, the Notice to Treat was not served until the 5th April 1984. It was submitted on behalf of the Plaintiffs that, in the case of the land comprised in the Dublin County Council Compulsory Purchase Order, the Plaintiffs had ceased to be the owners of the land as of the date of service of the Notice to Treat and that, accordingly, it would in any event be impossible for them to comply with any decree of specific performance in relation to those lands. In support of this submission, Mr, Keane relied on the decision of the Supreme Court in re Green Dale Building Company Limited (1977) I.R. 256. I am satisfied, however, that the service of the Notice to Treat did not of itself vest any estate or interest in the land in Dublin County Council. This is made clear by the following passage in the judgment of Henchy, J., in re Green Dale Building Company Limited:-
“The service of the notice to treat does not, of itself, pass any estate or interest in the land to the acquiring authority, nor does it constitute a contract; but it creates a relationship which ripens into an enforceable contract when the compensation has been either agreed by the parties or assessed by the arbitrator.”
Accordingly, when the contract was executed on December 23rd 1981 the legal and equitable estate in the C.P.O. lands was vested in the Plaintiffs. This they had agreed to convey to the Defendants in the present proceedings and the Defendants thereupon became entitled in equity to the lands or to any compensation that might be paid by the County Council, whether as a result of agreement or by arbitration: see also Hillingdon Estates Limited .v. Stonefield Estates Limited (1952) Ch.627.
Tola Capital Management Llc v Joseph Linders
and Another (No.2)
[2014] IEHC 324
Reported In: [2014] 6 JIC 2603
Judge: Mr. Justice Cregan In Giles v. Brady [1974] I.R. 462, Kenny J. considered the nature and history of the lis pendens in Ireland and in England. He first considered the Judgments (Ireland) Act 1844, but noted that that Act provided a system of registration but did not alter the nature of a lis pendens. As he stated at p. 463:-
“Therefore, it is necessary to deal with the earlier authorities to discover what a lis pendens is and how it evolved.”
In the 18th and 19th centuries, Chancery suits often continued for many years and, as most of them related to land, the position of a purchaser, lessee or mortgagee of the property to which the action related presented a difficult problem. If a person acquired his interest from a defendant without notice of the proceedings, did he take it subject to the rights to which the plaintiff was subsequently declared to be entitled in the suit, which might have been started many years before? The answer given in Ireland and England was, that a person who acquired an estate or interest in relation to which a suit had been started when he got his title, took it subject to the rights and liabilities which might be declared in the suit whether he had notice of it or not. This was based originally on the remarkable view that everyone knew of all the actions which were pending in the courts, and so took his interest with notice of them…”
64. Kenny J. also stated as follows at p. 466 of the report:-
“Before I deal with the Act of 1844 it is necessary to refer to Bellamy v. Sabine (1857) De G & J 566, which, though decided in 1857, related to the effect of a bill filed in 1830…Lord Cranworth in the course of his judgment said at p. 578 of the report:-”
‘It is scarcely correct to speak of lis pendens as affecting a purchaser through the doctrine of notice, though undoubtedly the language of the Courts often so describes its operation. It affects him not because it amounts to notice, but because the law does not allow litigant parties to give to others, pending the litigation, rights to the property in dispute, so as to prejudice the opposite party. Where a litigation is pending between a plaintiff and a defendant as to the right to a particular estate, the necessities of mankind require that the decision of the court in the suit shall be binding, not only on the litigant parties, but also on those who derive title under them by alienations made pending the suit, whether such alienees had or had not notice of the pending proceedings. If this were not so, there could be no certainty that the litigation would ever come to cm end. A mortgage or sale made before final decree to a person who had no notice of the pending proceedings would always render a new suit necessary, and so interminable litigation might be the consequence … The language of the Court in these cases [ Culpepper v. Aston; and Sorrell v. Carpenter], as well as in Worsley v. The Earl of Scarborough, certainly is to the effect that lis pendens is implied notice to all the world. I confess, I think that is not a perfectly correct mode of stating the doctrine. What ought to he said is, that, pendente lite, neither party to the litigation can alienate the property in dispute so as to affect his opponent.'”
65. Kenny J. then observed that s. 10 of the Judgments (Ireland Act) 1844, was passed to deal with this problem by providing that no lis pendens shall bind or affect a purchaser or mortgagee without express notice thereof unless a memorandum containing all the relevant details of the lis is registered.
66. A further issue which arose in the Brady case was that counsel for the defendants (who were seeking to vacate the lis pendens) argued that the Lis Pendens Act 1867 gave the court power to vacate a lis pendens before the termination of the action, even if the party who had registered it was opposed to this.
67. Kenny J. reviewed the Lis Pendens Act 1867, which contains only two sections. The main operative section is s. 2 which provides as follows:-
“Whereas a registered lis pendens cannot be vacated without the consent of the person by whom it was registered and such consent is sometimes withheld, although the suit or proceedings is at an end or is not being bona fide prosecuted: for remedy whereof be it enacted that the court before whom the property sought to be bound is in litigation may, upon the determination of the lis pendens, or during the pendency thereof where the court shall be satisfied that the litigation is not prosecuted bona fide make an order if it shall see fit for the vacating of the registration without the consent of the parly who registered it…”
68. In that case Kenny J. was of the view that the Lis Pendens Act 1867, did not apply to Ireland and, therefore, in his view there was no jurisdiction to vacate a lis pendens against the will of the person who registered it.
69. He also considered the provisions of the Judgment Registry (Ireland) Act 1871, but concluded that s. 21 of this Act also did not give the court jurisdiction to order a vacate of a lis pendens during the course of the action when this was opposed by the party who registered it. Thus, he concluded that the court had no jurisdiction to order that a lis pendens be vacated against the will of the party who registered it until the suit had been determined.
70. This view, however, was overruled by the Supreme Court in Flynn v. Buckley [1980] I.R. 423. O’Higgins C.J. giving the decision of the unanimous Supreme Court stated as follows at p. 428:-
“As to the first matter, it seems to me to be necessary, in view of the conflict of judicial decision, for this Court to decide authoritatively whether or not the Act of 1867 did apply to Ireland.”
71. Having considered the arguments O’Higgins C.J. stated:-
“I have come to the conclusion that the general rule operates and that the Act of 1867 was intended to apply to Ireland and did operate satisfactorily on the provision of appropriate machinery for registering vacates under the Act of 1871. [the Judgments Registry (Ireland) Act 1871]”
72. In the circumstances, the Supreme Court was of the view that it had jurisdiction to vacate a lis pendens without the consent of the party who registered it if the court was satisfied that the litigation was not being prosecuted bona fide. (The court also held that although it did have that jurisdiction pursuant to the statute, it would not exercise that jurisdiction on the facts of that case.)
73. In AS v. GS & AIB [1994] 2 ILRM 68, Geoghegan J. considered the issue of whether a claim for a property adjustment order amounted to a lis pendens. In the course of his judgment he set out some of the above quotations from Kenny J. in Giles v. Brady and, in particular, Lord Cran worth’s explanation of the effect of a lis pendens in Bellamy v. Sabine. He then stated at p. 73:-
“It would seem that the rule was a public policy rule and had nothing to do with the ordinary rules of acquiring equitable interests linked to the doctrine of notice. Again, as Kenny J. points out, the purpose of the 1844 Act was to provide a system of registration hut not to alter the nature of the lis pendens. From and after the passing of the 1844 Act, purchasers and mortgagees deriving title from a defendant did not take subject to rights declared in the litigation if they had no actual notice of the litigation and the proceeding was not registered as a lis pendens under the Act.”
74. This review of the legislative history and the judicial interpretation of it is relevant because the provisions of the Land and Conveyancing Law Reform Act 2009, appear to re-enact, albeit with amendments, some of the provisions of the previous legislation. (See sidenotes to s. 121 – 125 of the Act)
75. In the UK, the common law concept of a lis pendens appears to have been replaced by the statutory concept of a “pending land action” which was defined in the Land Charges Act 1972. Section 17(1) of the said Act defines a “pending land action” as any claim or proceeding pending in court relating to land or any interest in or charge on land. (See Halsbury “Laws of England” (5 th Ed.) 2012 Vol. 87, p. 536, para. 739, footnote 2). It is also stated at footnote 1:-
“The doctrine of lis pendens rests upon the foundation that it would plainly be impossible that any action or suit could he brought to a successful conclusion if alienations pendente lite were permitted to prevail. Bellamy v. Sabine per Turner L.J.”
76. Likewise, footnote 2 of Halsbury states:-
“The purpose of the phrase “pending land action” is to put prospective purchasers on notice that there is a dispute which might affect the title to land; in order for cm action to fall within that definition the claimant has to show a genuine interest in the outcome of the litigation. Godfrey v. Torpey [2006] EWHC 1423 … A claim or proceeding may be registered as a pending land action only if some proprietary right or interest in land is claimed; it is not sufficient merely to claim that the owner should be restrained from exercising his powers of disposing of land… The purpose of registration is to prevent disposition of land so that in Taylor v. Taylor [1968] 1 All ER 843 the registration of a suit demanding that land be disposed of was ordered to be vacated.” (Emphasis added)
77. At para. 745 of Halsbury (dealing with vacation of registration) it is stated as follows:-
“Upon the determination of proceedings or during them if the court is satisfied they are not prosecuted in good faith, the court may if it thinks fit make an order vacating the registration of the pending action and direct the party on whose behalf it was made to pay all or any of the costs and expenses occasioned by the registration and by its vacation. The court has a general jurisdiction under the Land Charges Act 1972, to make an order pursuant to which any registration including a pending action may be vacated. In other cases vacation may be ordered under the court’s inherent jurisdiction. See Haywood v. BDC Properties Ltd [1964] 2 All ER 702; Taylor v. Taylor [1968] 1 All ER 843; Calgary & Edmonton Land Co Ltd v. Dobinson [1974] CH 102 [1974] 1 All ER 484 and Norman v. Hardy [1974] 1 All ER 1170.”
78. In Haywood, the Court of Appeal held that even where it had no statutory jurisdiction under the Land Charges Act 1925, to vacate the registration of a charge, it nevertheless had an inherent jurisdiction to vacate such a charge. At p. 704 of the decision Harman L.J. stated as follows:-
“What does arise is this: has the court any jurisdiction under the section to vacate the registration? Ploughman J. thought that he had not; and I think that he was perfectly right. The section does not provide for doing anything of the kind in circumstances of this sort. This is a lis pendens registration which ought never to have been made …nevertheless although the plaintiffs have chosen to direct themselves entirely under a statutory jurisdiction, and although as I have said that is not available, the court must not, as the judge did, let an abuse of this sort go on. I think that the court has an inherent jurisdiction to protect itself from that sort of thing and that where as here the registration on the file is wrongfully there and ought never to have been there and the defendants refuse to take it off, the plaintiffs though they do not ask for it in the proper way, should have the relief to which a consideration of the matter entitles them and should have their title cleared of a smear which ought never to have been fixed on it. I would accordingly order that the lis pendens be vacated as though that relief had been prayed on a motion invoking the general jurisdiction of the court.”
79. In Taylor v. Taylor [1968] 1 All ER 843, the Court of Appeal held that the registration of a lis pendens should be vacated because the wife had no interest in the legal estate of the property but only had an undivided share of the disputed amount of the proceeds of sale of the property which was held by her husband on a statutory trust of sale and, therefore, the proceedings were not proceeding relating to “land”.
80. Russell L .J. in his judgment at p. 848 stated:-
“The lis, the dispute is not about any land but about what is the entitlement to the beneficial interest in the land and therefore the proceeds of such sale. The purpose of registration of a lis pendens is to prevent effective disposition of the land pendente lite. How can a suit which demands that the land be disposed of be properly registerable? …If one is going to find out what the lis is, one can look only at the formal document which contains the contention or claim of the claimant.”
81. Thus, the court held that the wife’s claim was not registerable as a lis pendens.
82. In Calgary & Edmonton Land Co. Ltd v. Dobinson [1974] 1 All E.R. 484, the liquidator of the company entered into contracts for the sale of some of the company’s lands and also into an agreement to sell the remainder subject to contract. The defendant who was a contributory to the company and also claimed to be a shareholder issued a summons in the Companies Court seeking an order to restrain the liquidator from disposing of any of the company’s lands. Subsequently, the defendant registered a pending land action in respect of the company’s lands. The company issued a motion to vacate the pending land action.
83. The court held that what was registerable as a “pending land action” within s. 17(1) of the 1972 Land Charges Act was an action or proceeding which claimed some proprietary right in the land and not an action merely claiming that the owner should be restrained from exercising his powers of disposition.
84. As McGarry J. stated at p. 486:-
“The main question in this motion is the meaning of the term “lis pendens” or to put it more accurately and in more modern language the term “a pending land action” which is registerable as a “pending action” under the Land Charges Act 1872.”
85. He then noted that s. 17(1) of the Land Charges Act 1972, defined a “pending land action” as “any action or proceeding pending in court relating to land or any interest in or charge on land”. The question then was what was meant by the phrase “relating to land”. Me Garry J. continued at p. 487:-
“Plainly there are some actions which although in one sense relating to land are not within any reasonable meaning of the term “pending land action “. Thus, an action to restrain a nuisance alleged to emanate from X’s land is in some senses an action “relating to X’s land”. However, no contention that such an action would be within the statutory definition has been put before me and I do not think that I need to say any more about it. However much counsel for the defendant differed from counsel for the company in other matters, he had concurred with him in accepting that some restriction must be placed on what would otherwise be the great width of the words “relating to The question is what the restriction should be.”
86. In that case counsel for the company submitted that in the statutory context the words “relating to” land meant cases where some proprietary claim is made against the owner of the land. Thus, if a party commenced proceedings claiming that the land is his or that he had some interest in it, then those proceedings could be registered as pending land actions because they were asserting proprietary actions in the land, but if no proprietary interest in the land was asserted, then there would be no pending land action even though the action would or might affect the land.
87. McGarry J. stated at p. 489:-
“It seems to me that the soundness of counsel for the company’s view not only appears from the authorities that I have mentioned but also from the earlier cases on lis pendens and also on more general considerations. Of the earlier cases I need only mention Bellamy v. Sabine, Re Barned’s Banking Co and Wigram v. Buckley. In Barned Banking Co. [1967] 2 Ch. App at 171, Cairns L.J. said that “lis pendens” always implied a claim of right or a claim to charge some specific property”. In Wigram v. Buckley [1894] 3 Ch. at 486 Chitty J. said “Now, the doctrine of lis pendens applies not to every suit but to a suit the object of which is to recover or to assert title to a specific property”…
As for more general considerations, it seems to me that once it is accepted (as it has been) that some restriction must be placed on the wide statutory language, the question becomes one of what restriction is most consonant with the language and general purposes of the statute and with commonsense and practicability. The rights made registerable under the Land Charges Act 1972, as under the Land Charges Act 1975, are, in general, substantive rights in the land… What is protected is some substantive right adverse to the owner rather than a mere fetter on the owner’s right of disposition. That being so, it is not surprising that an expression as wide and general in its literal meaning as “any action or proceeding pending in court relating to land or any interest in or charge on land” should be given a narrower meaning more in conformity with the generality of rights registerable under the Act. What is registerable as a pending land action is an action or proceeding which claims some proprietary right in the land and not an action merely claiming that the owner should be restrained from exercising his powers of disposition. Accordingly, on authority both ancient and modern and on principle, I hold that the defendant’s proceedings in the company court do not constitute a “pending land action” within the meaning with the Land Charges Act 1872.” (Emphasis added)
88. In Cunnane v. Shannon Foynes Port Company (Unreported, Supreme Court, 8 th July, 2002) Murphy J. (giving the decision of the unanimous court) considered an application by the defendant to vacate a lis pendens. Murphy J. reviewed the authorities in Ireland and in England and at p. 8 of his judgment stated as follows:-
“It would seem to me that what the authorities in both jurisdictions establish is that to be registerable as a lis pendens an action must claim an interest in land but that the interest claimed need not be in existence at the date in which the proceedings are instituted. If not such interest is claimed, the proceedings are not registerable.”
89. At p. 10 Murphy J. stated that the authorities also establish that if a claim is successful but would not result in an estate or interest in the land, then the lis could not be registerable.
90. In Dan Morrissey (Ireland) Ltd & Ors v. Donal Morrissey & Ors [2008] 3 I.R. 752, the High Court (Clarke J.) held that a plaintiff was entitled to register a lis pendens in the Central Office of the High Court provided the proceedings were being prosecuted bona fide. Clarke J. also held that the jurisdiction to vacate a lis pendens was grounded on whether the cause of action was being prosecuted bona fide. But the lis which was registered in that case was, in his view, appropriate because the plaintiff was claiming a proprietary estate or interest in the defendant’s lands.
91. In Gannon v. Young [2009] IEHC 511, Laffoy J. considered an application that a lis pendens registered by the defendant should be vacated. In the course of her judgment at p. 9 she stated:-
“The test on this application is whether in the changed circumstances, the defendants are now bona fide prosecuting their claim against the plaintiff in the plenary proceedings. Clearly if the claim is doomed to failure, they are not.”
(On the pleadings, however, Laffoy J. concluded that she could not make a finding that the defendants were not bona fide prosecuting their claim against the plaintiff and declined to vacate the lis pendens).
92. In Kelly v. IBRC [2012] IEHC 401, Ryan J. held that the proceedings insofar as they asserted an interest in land such as to justify the registration of a lis pendens, were an abuse of process. In this case the defendant had already issued ejectment proceedings against the plaintiffs; these were settled on consent and the plaintiffs agreed to an order for possession subject to a stay on terms. Subsequently, the terms were not honoured by the plaintiffs and the bank obtained possession of the property. (The plaintiff then issued another set of proceedings against the bank and registered a lis pendens).
93. The other recent authority which is of assistance in this matter is Moorview Development Ltd & Ors v. First Active Plc & Ray Jackson & Ors (High Court, Clarke J., 5 th February, 2010). In this case Mr. Jackson was appointed as a receiver to certain companies within the Cunningham Group. Thus, he had an entitlement to cause any of the companies to sell any of the properties which it owned which were captured by any relevant mortgage debenture. Mr. Jackson was appointed as a receiver to the companies which owned the relevant properties. He argued that he did not have an interest in the relevant lands so that the proceedings, at least insofar as they related to him, did not involve a claim as against him relating to any interest in the lands concerned.
94. The plaintiffs had registered a lis pendens against Mr. Jackson and also First Active Plc. Mr. Jackson applied for an order vacating the lis pendens as far as he was concerned.
95. As Clarke J. stated at para. 3.2 of his judgment under the heading “Preliminary Points”:-
2 “3.2 Second, it is true to say that part of the basis put forward on behalf of Mr. Jackson for seeking to have the lis pendens vacated was that he was, he asserted, somewhat impaired in his personal dealings by having a lis pendens registered against his name. There was a debate at the hearing before me as to whether such an assertion was factually correct. However, that consideration seems to me to be irrelevant. Either the lis pendens is properly registered, in which case it must remain in place, or it is not properly registered, in which case it should he vacated. Mr. Jackson is entitled to have the lis pendens vacated if it is not properly registered irrespective of whether its registration has any affect on him. The test is not similar to the consideration which a court may have to give in the case of an interlocutory injunction, where the court needs to balance the interests of the parties concerned. There either is or is not a sufficient piece of litigation in place as against Mr. Jackson to warrant the continuance of a lis pendens. If there is not, then Mr. Jackson is, in my view, entitled to a vacation of that lis pendens as of right.
3 3.4 It follows that it seems to me that I should now decide the issue of principle which arises between the parties as to whether the connection which Mr. Jackson may have to the relevant property justifies the registration of a lis pendens against him. I now turn to that question.”
4. Analysis
2 4.1 Neither counsel was able to find any direct authority on the point. In those circumstances it seems to me that the matter must be determined from first principles. A lis pendens is designed to give notice of the fact that proceedings relating to land are pending before the court. Insofar as a lis pendens is registered against a named individual, then it seems to me that its purpose must be to bring to the attention of any interested party, the fact that there are proceedings in being against the person concerned which relate to the ownership of property or an interest in properly. It may be that there is contained within the one set of proceedings a number of claims against a number of defendants in circumstances where not all of the claims are pursued against all of the defendants. It seems to me that, as a matter of first principle, it could never be the case that a defendant who happened to be properly joined in a set of proceedings in relation to some relief that did not relate directly to land in which the relevant defendant had an interest, could properly be the subject of a lis pendens. There would, in those circumstances, be no lis pending in relation to the ownership of land or an interest in land in respect of the person concerned. The underlying rationale behind the registration of a lis pendens is as was noted by Geoghegan J. in A.S. v. G.S. [1994] 1 I.R. 407. In the course of his judgment in that case Geoghegan J. noted with approval the explanation by Lord Cranworth in Bellamy v. Sabine [1957] 1 De. G. & J. 566. The relevant passage speaks of “litigation…pending between a plaintiff and a defendant as to the right to a particular estate…”.
3 4.2 That quote seems to me to express the fundamental proposition. The issue between the parties must relate to the ownership of some interest in land. Where there is more than one defendant in the proceedings, then in order that a lis pendens be validly registered in respect of a particular defendant, then the issues which arise on the pleadings and which are being bona fide pursued by the plaintiff insofar as the relevant defendant is concerned, must relate to the ownership of some interest in land.
4 4.3 In those circumstances, it does not seem to me that the position of a receiver or agent is captured. A receiver does not own any interest in lands which are properly described as being owned by the company to which the receiver has been appointed. The lands remain owned by the company (in receivership). The fact that the receiver may well be entitled, provided that all necessary formalities are complied with, to execute a deed of transfer of a relevant interest in property in the name of the company does not alter that fact. It is the company which transfers the property. The receiver is simply entitled, by virtue of the debenture in favour of the relevant lender, and his appointment, to cause the company to effect the transfer. There is a real sense in which the receiver’s position in this regard is no different than that of the directors of a solvent company who are, of course, entitled to act on behalf of the company, to sell its property, and, within the articles of association and the law generally, to fix the company seal to any relevant deed of assurance. The fact that, in different circumstances, it may he the receiver rather than the directors who can cause the company to execute a deed of assurance, does not make the receiver any more a person with an interest in the land owned by the company than the directors were persons with an interest in the land owned by the company.
5 4.4 Therefore, it seems to me that, insofar as a plaintiff may wish to contest the ownership of land held by a company in receivership, then it is that company in receivership who is the proper defendant to that aspect of any relevant proceedings rather than the receiver himself. If a party wishes to obtain injunctive or similar relief against the receiver then that is, of course, possible, but such a claim is not a claim relating to an interest in land but rather is a claim to an injunction.
6 4.5 In those circumstances, it does not seem to me that a receiver has a sufficient interest in any land purportedly owned by the company to which the receiver has been appointed so as to warrant the registration of a lis pendens against the receiver arising out of proceedings relating to those lands. In an appropriate case there is no reason why a lis pendens cannot be registered against a company in receivership.
5. Conclusions
2 5.1 In those circumstances, it seems to me that Mr. Jackson is entitled to an order vacating the lis pendens registered as against him on the 10th August, 2007.”
The Provisions of the Land and Conveyancing Law Reform Act 2009
96. The relevant provisions of the Act which relate to the registration and vacation of a lis pendens are ss. 121 and 123.
97. Section 121 provides as follows:-
2 “121.-(1) A register of lis pendens affecting land shall be maintained in the prescribed manner in the Central Office of the High Court.
(2) The following may be registered as a lis pendens:
(a) any action in the Circuit Court or the High Court in which a claim is made to an estate or interest in land (including such an estate or interest which a person receives, whether in whole or in part, by an order made in the action) whether by way of claim or counterclaim in the action; and
(b) any proceedings to have a conveyance of an estate or interest in land declared void.
(3) Such particulars as may be prescribed shall be entered in the register.”
98. Section 123, which has as its side note “Court order to vacate lis pendens” provides as follows:-
2 “123.- Subject to section 124, a court may make an order to vacate a lis pendens on application by-
(a) the person on whose application it was registered, or
(b) any person affected by it, on notice to the person on whose application it was registered-
(i) where the action to which it relates has been discontinued or determined, or
(ii) where the court is satisfied that there has been an unreasonable delay in prosecuting the action or the action is not being prosecuted bona fide.”
99. Section 3 is the interpretation section and sets out the legal definitions of certain terms. The term “lis pendens” is, however, not defined in the Act.
100. The phrase “estate or interest in land” is not specifically defined in the Act.
101. However, the phrase “legal estate” is defined in the interpretation section as having the meaning given to it by s. 11(1).
102. Likewise, the phrase “legal interest” as defined in the interpretation section as having the meaning given to it by s. 11 (4) of the Act.
103. Section 10(1) of the Act provides that:-
“The concept of an estate in land is retained and, subject to this Act, continues with the interests specified in this part to denote the nature and extent of land ownership.”
104. Section 11(1) of the Act provides that:-
“The only legal estates in land which may be created or disposed of are the freehold and leasehold estates specified by this section.”
105. Section 11(4) of the Act sets out the only legal interests in land which may be created or disposed of and this includes “an incumbrance”. The term “incumbrance” is defined in s. 3 as including, inter alia, an annuity, charge, lien and mortgage.
Issues in this Application
106. The first issue which arose as between the parties in this application was whether the defendants could seek to rely on s. 121(2) and s. 123(b)(ii) (as the defendant maintained) or as the plaintiff maintained s. 123(b)(ii) alone.
107. Counsel for the defendants submitted that his argument was in two parts:-
1. Firstly, he claimed that the lis pendens which had been registered by the plaintiff was not a proper lis pendens within the meaning of s. 121 (2)(a) and, therefore, the lis pendens should be vacated on the grounds that it should never have been registered in the first place.
2. Secondly, he submitted that the court could make an order to vacate a lis pendens under s. 123(b)(ii) where the court was satisfied that the action was not being prosecuted bona fide, which he submitted was the case in the present proceedings.
108. Counsel for the plaintiff, on the other hand, submitted that the lis pendens had been properly registered and that, therefore, the only issue which the court could consider was whether the lis pendens could be vacated by the court if it came within s. 123(b)(ii) i.e. if the court was satisfied that the action was not being prosecuted bona fide.
109. In my view, the answer to this question is clear. Section 121 (2) of the Land and Conveyancing Law Reform Act 2009, provides that only certain matters may be registered as a lis pendens, i.e. those matters that fall within the precise terms of s. 121(2)(a) and (b). If a lis which has been registered as a lis pendens does not fall within the statutorily permissible type of action which can be registered as a lis pendens, then it follows that the lis should not have been registered as a lis pendens in the first place. Thus, the court may consider whether the lis pendens was properly registered at all. It is only if the court is satisfied that the lis pendens was properly registered that the court goes on to consider whether to vacate the lis pendens on the grounds set out in s. 123 of the Act.
110. As set out above the relevant part of s. 121(2)(a) provides that the following may be registered as a lis pendens:-
“Any action in the High Court in which a claim is made to an estate or interest in land (including such an estate or interest which a person receives whether in whole or in part by an order made in the action) whether by way of claim or counterclaim in the action.”
111. Therefore, in order to come within the relevant statutory section, a person seeking to register a lis pendens must show:-
(a) That there is an action in the High Court (or Circuit Court)
(b) In which a claim is made to an estate or interest in land.
(c) By way of claim in the action.
112. However, in the light of the authorities which I have set out above, in order to come within the statutory definition set out in s. 121 (2)(a) a party seeking to register a lis pendens has to establish:-
(a) That the plaintiff is claiming a proprietary estate or interest in land.
(b) That the defendant has an estate or interest in the land in which the plaintiff is claiming an estate or interest.
(c) That the proceedings themselves make a claim to a proprietary estate or interest in the said lands.
113. I now propose to consider each of these issues.
Is the Plaintiff Claiming an Estate or Interest in the Lands?
Healy v Healy
1965 WJSC-HC 2095
KENNY J.
By an agreement in writing made on the 20th of March 1972 between the plaintiff, Nora Healy and the defendant, Daniel Healy on whose behalf Messrs. McKeever & Son, Solicitors signed, the plaintiff agreed to sell part of the lands of Ballymorris Bray Country Wicklow with the house thereon for £67,350. The lands to be sold were shown outlined in red on the map attached to the contract and the gate lodge was excluded. The form of agreement used was that which has been issued by the Incorporated Law Society of Ireland. It contains a number of general conditions and schedules for the documents of title, searches and special conditions. The memorandum which incorporated the general conditions and schedules provided that the vendor should sell and the defendant should purchase the property described in the attached particulars upon and subject to the attached conditions of sale. A deposit of £2,000 was paid on the signing but opposite the word “deposit” was typed the words “see Special Conditions” and opposite the words “closing date” was typed the words “see Special Conditions”. The contract was in a very unusual form and the amount of the deposit was far less than usual.
Clause 4 of the Special Conditions in the second schedule read:
“4 This contract is subject to the purchaser obtaining full planning permission for residential development in respect of the property at a density of not less than seven houses to the acre within 17 months of the date of this contract. In the event of such planning permission not being obtained within such period, this contract shall determine and the purchaser shall be entitled to the return of the deposits hereinafter referred to less the sum of £100 for each month which has elapsed from the date of the contract to the date of its determination as aforesaid. The vendor shall also be entitled to the interest earned on the deposits.”
Clause 5 of the Special Conditions read:
“5 The purchaser shall pay a deposit of £2,000 on the signing of this contract which deposit shall be placed on deposit at interest with Ansbacher & Co. Ltd. in the names of Cartan, O’Meara & Kieran and McKeever & Son.”
Clause 6 read:
“6 If full planning permission for the residential development of the property sold as mentioned in clause 4 hereof has not been obtained within eight months of the signing of this contract the purchaser shall pay a further deposit of £2,000 which deposit shall likewise be placed on deposit at interest with Ansbacher & Co. Ltd, in accordance with clause 5 hereof.”
“7 The sale of the part of the property coloured blue on the map attached hereto shall be closed within two months of notification being received by the purchaser that full planning permission has been granted for the residential development of the property sold. The portion of the purchaser money to be paid to the vendor on the closing of the sale of such part of the property shall be the sum of £57,350 and the sum or sums on deposit shall not be included in this sum but shall remain on deposit until the sale has been closed in respect of the remainder of the property.”
“8 The sale of the remainder of the property shall be closed within six months of the notification being received by the purchaser that the said full planning permission has been granted, when the balance of the purchase money including the said deposit or deposits shall be paid to the vendor. Interest earned by the said deposit or deposits shall belong to the vendor and shall not be treated as being part of the purchase money”.
5 “9 On the final completion of the said sale the purchaser shall pay to the joint auctioneers Messrs. James Adams & Sons and Messrs. H.J. Byrne & Co. Ltd. Auctioneers fees at the rates of 5 per cent of the purchase price of £67,350.”
On the 16th of August 1973 Messers. McKeever & Son wrote to the plaintiff’s solicitors”
“We refer to the contract for sale herein dated the 20th of March 1972 and in particular to paragraph 4 of the Special Conditions in the seemed schedule thereof.
“Our client instructs us that he has not yet obtained full planning permission in respect of the property and would not have this permission by the 19th instant when the time limited by the contract expires. He is however, prepared to waive this paragraph of the contract inserted for his protection and to treat the contract as absolute. He suggests that completion take place two months from the date of this letter. Please therefore let us have copy documents of title and since a portion of the property is being retained by your client, sub-division consent will be necessary and you might also let us have an application form for completion by our client.”
On the 23rd of August 1973 the plaintiff’s solicitors wrote to acknowledge that they had received the letter of the 16th but they could not agree that the defendant was entitled to treat the contract as absolute. They expressed the view that the contract had determined. The plaintiff issued a special summons in which she claimed a declaration that the contract had determined on the 20th of August 1973 being the date 17 months from its signature. The parties agreed that this summons should be treated as being one under the Vendor and Purchaser Act 1874 for a determination whether the contract had determined. Counsel for the plaintiff argued that while a party may waive performance of a term of a contract inserted solely for his benefit, he cannot waive performance of a condition and that clause 4 of the Special Conditions created a condition. Counsel for the defendant said that his client was prepared to close the sale of all the property immediately and that the clause about the plaintiff obtaining full planning permission was solely in his client’s interest and so he could waive it. No authorities on this obscure branch of the law of contract were cited by either party.
On principle it seems to me that when a clause in a contract (whether it is a condition or a term) is inserted solely for the benefit of one party and is severable from the other clauses and when the other party on completion will get everything that he contracted for, the party for whose benefit the clause was inserted may waive performance of the clause and insist on completion despite the non-performance of the condition or term. This view is, I think, supported by the few reported cases on the matter.
In Hawksley v. Outram (1892) 3 Ch. 359 Benjamin Outram and a number of others had traded in partnership under the name of Benjamin Outram and Co. as Dyers and were entitled to the real and personal estate employed in the business. Benjamin Outram lived in the United States of America and gave a power of attorney to Edmund Outram which authorised him to sell or concur in selling the property in such manner as he should think fit. The business got into financial difficulties and by an agreement between the partners and a purchaser, a complicated method of sale of the business was agreed. Edward Outram signed the agreement as attorney for Benjamin and on his own behalf. The agreement contained a clause by which the vendors contracted that they would not carry on any business of dyeing within 50 miles of the place where the business was carried on or be connected with such a business. The vendors subsequently repudiated the agreement and, when an action for specific performance was brought, one of the defences was that the attorney had no power to make an agreement on behalf of his principal that he (the principal) would not carry on business as a dyer within the radius of 50 miles of the place where the business was carried on. At the trial the purchaser offered to waive this clause. The action was dismissed in the High Court but succeeded on appeal. In the course of his judgment Lord Justice Lindlay said: “I cannot conceive a wider power than that; and looking at this as a power of attorney given by one partner to another to sell, or concur in selling his property in any way the attorney thinks best I am not at all prepared to say that would not include a power to sell the good will of the business to the best advantage in a business way; and we know as a matter of business, that in order to get a good price for the good will of a business it is necessary that the vendor shall undertake not to compete with a purchaser in the same business. I am, therefore, disposed to think that under such a power as this a stipulation not to compete with a purchaser might be entered into, though I think the point is a little doubtful. The purchaser however says: “A doubt being raised whether the power of attorney authorises the giving a purchaser power to carry on the business in the name of the old firm, which might expose the old partners to liability or authorises the binding the vendors not to carry on the same business, I will waive those stipulations. That appears to me to remove all difficulty because it is quite obvious that those two clauses are inserted simply and purely for the benefit of the purchaser; and if there is any doubt whether they are binding upon the vendors, and the purchaser waives them, what have the vendors to complain of? what conceivable difficulty remains if that is done? I can set none. Of course, if those clauses were inextricably mixed up with other parts of the transaction that they could not be severed, there might be a difficulty but they are not. They are perfectly severable. The attorney has got power to sell the business and says: “I agree to sell the business”. He also says: “I agree further that the vendors shall not carry on business in competition with you within a radius of 50 miles”. The validity of that further agreement is doubtful. The purchaser says: “If that is doubtful, I give it up.” Where is the difficulty in enforcing specific performance of the other stipulation which is not tainted with any doubt or effected by any difficulty?” Lord Justice Lopes in the course of his judgment said: “However Mr. Neville has though fit, and I have no doubt in the exercise of his sound discretion to relinquish his rights with regard to the insertion of those two provisions. Now, it is perfectly clear that they are provisions intended solely for the benefit of the purchaser; the purchaser therefore, is at liberty to relinquish them and if he does so it is immaterial whether he could have successfully insisted on them.”
North v. Loomes (1919) 1 Ch. 378 was an action for specific performance. There was considerable discussion about the purchase price between the parties and it was ultimately agreed that it should be £590 but that the defendant would pay the Plaintiffs (the vendors) costs and his own; these were estimated at £10. This arrangement about the costs did not appear in the written memorandum of the agreement and the Statute of Frauds was pleaded. In the course of his judgment Mr. Justice Younger said: “In this view of the case it becomes unnecessary for me to deal with the question of far more general interest which emerged from the facts in the course of the agreement viz., whether, where a provision in a contract for the rule of land solely for the benefit of one of the parties to it, is emitted from the memorandum, because to neither of the parties it would seem of sufficient importance to be referred to, the defendant who gains by the omission can, in an action on the contract in which the stipulation is not asserted against him, claim that the memorandum of the contract is insufficient by reason of the omission. It is a question on which no authority has been cited. I can see that much may be argued on either side of it. I will only here say that it is not in my opinion resolved by reference to such a case as Goss v. Lord Nugent. The gist of that and all like cases is that in them an attempt was made to enforce the omitted term against the defendant. Here the memorandum contains every provision benefiting the defendant, the omission is the omission of a burden on him and he has not been asked to bear it, May not, in the circumstances the omission be cured by the plaintiff’s waiver of the claim? That is a question which will have to be dealt with on some other occasion. There must be the usual decree for specific performance, with costs.
Since writing this judgment I have found two cases which appear to have a very material bearing on the point last therein referred to. They are Martin v Pycroft (1852) 2 De G. M. & G. 785 and Vouillon .v. States (1856) 25 L.J. Ch. 785. In the first of these cases many of the arguments of the defendant’s counsel here are anticipated and disposed of. Together they would appear to establish in principle there is nothing in the Statute of Frauds to prevent a plaintiff in an action on the contract waiving as against the defendant a stipulation exclusively for his own benefit which form part of the arrangement between himself and the defendant although embodied in no memorandum of it signed by or on behalf of the defendant. In other words the Statute of Frauds would not appear to prevent the application of the principle laid down in Hawksley v Outram”
The calculated case of Gordon v Gordon (1951) I. R. 501 was an action for specific performance of an agreement made between counsel for the compromise of an action for divorcea mensa et thoro. The note of compromise endorsed on counsel’s brief included this clause: “Petitioner to pay respondent £9 per week nett (i.e. without deduction of tax) for her life from the 4th of July 1950 same to be secured by a charge on his property or otherwise.” At the trial the defendant contended that the words “or otherwise” made the agreement void for uncertainty. In the course of his judgment Mr. Justice Kingsmill Moore said: “The uncertainty on which Mr. Liston, for the husband relies, is to be found in the words “same to be secured by a charge on his property or otherwise.” He says, and I think says correctly, that the words can fairly be interpreted as meaning either reasonably secured or fully secured and that there is no way of deciding the extent of a security required. Mr. McGonagal for the wife, while not accepting that there is any uncertainty, yet offers to waive this provision and asks for specific performance of the agreement with this provision left out. It is a severable provision and one which is entirely in favour of the wife and I am of opinion that he is entitled to waive it and ask for specific performance of the rest of the agreement: Hawksley .v. Outram per Lindlay L.J. at p. 376 per Lopes L. J. at p. 378; North .v. Loomes per Younger J. at page 386.)”
The provision that the planning permission was to be obtained by the defendant indicated that he was the person whom the parties contemplated would apply for it, who would prepare the necessary plans and would do the development. If the defendant completes the sale the plaintiff gets everything she stipulated for because her interest lies in getting payment of the purchase money. True, if the sale was not completed, she was entitled to £100 per month from the date of the contract up to the date of the determination but this was to be paid out of the deposit, the balance of which was to go to the defendant and not, as is usual in sales, to the vendor.
Clause 7 made the date of completion depend on the grant of full planning permission in so far as the lands coloured blue were concerned while clause 8 specified a later date which was also calculated from the same date. The effect of this was not discussed in argument but it seems to me that there is much to be said for the view that the contract was void for uncertainty because the date for completion was to be calculated by reference to the grant of full planning permission and so if this was not granted, there was no way of ascertaining the date for completion. The effect of clause 4 was that the defendant had 17 months from the date of the contract within which he was to apply for and get planning permission and so if the defendant indicated that he was prepared to complete the sale on the date 17 months after the contract or before then, the uncertainty was removed and the plaintiff secured the full purchase price. With some doubt I have come to the conclusion that the effect of the defendant’s offer to complete the sale, even though he had not got full planning permission, on a date which was before the expiry of the period of 17 months from the date of the contract, was to make clauses 4 and 8 severable from the rest of the contract. It is true that when the contract was signed the date of completion depended entirely on the day when full planning permission was obtained and so the completion date was dependent on the grant of planning permission but when the defendant offered to complete before the expiry of the period within which he was to get planning permission, the uncertainty disappeared.
In my view clauses 4, 7 and 8 are severable from the rest of the contract in the events which happened and were solely for the benefit of the defendant who may waive them and insist on completion of the contract now.
It follows that the contract did not determine on the 20th of August 1973 and that the summons must be dismissed.