Rent Obligations
Land and Conveyancing Law Reform Law Act 2009
Review of rent in certain cases.
132.- (1) This section applies to a lease of land to be used wholly or partly for the purpose of carrying on a business.
(2) Subsection (1) shall not apply where-
(a) the lease concerned, or
(b) an agreement for such a lease,
is entered into prior to the commencement of this section.
(3) A provision in a lease to which this section applies which provides for the review of the rent payable under the lease shall be construed as providing that the rent payable following such review may be fixed at an amount which is less than, greater than or the same as the amount of rent payable immediately prior to the date on which the rent falls to be reviewed.
(4) Subsection (3) shall apply-
(a) notwithstanding any provision to the contrary contained in the lease or in any agreement for the lease, and
(b) only as respects that part of the land demised by the lease in which business is permitted to be carried on under the terms of the lease.
Cases
Reox Holdings plc v Cullen & Anor
[2012] IEHC 299
Judgment of Mr Justice Charleton delivered on the 26th day of July 2012
1. With the unsupportable inflation in property prices that characterised the decade to 2007, rents for business premises inexorably climbed. Reviews of rent in leases typically occur at five yearly intervals. On leasing premises during those years, landlords insisted that such review covenants were worded so that a review could only allow for an increase in rent; so-called upwards-only review clauses. With the deflation that has beset property prices from 2008, the Oireachtas intervened by providing that any rent review clause in any new lease, or any agreement for such a lease, no matter how such a covenant was worded, would be construed so to allow both an increase and a decrease upon a review. That change was brought about by section 132 of the Land and Conveyancing Law Reform Act 2009. The section was commenced on 28 February 2010 by SI 471 of 2009 and provides as follows:
(1)This section applies to a lease of land to be used wholly or partly for the purpose of carrying on a business.
(2) Subsection (1) shall not apply where –
(a) the lease concerned, or
(b) an agreement for such a lease,
is entered into prior to the commencement of this section.
(3) A provision in a lease to which this section applies which provides for the review of the rent payable under the lease shall be construed as providing that the rent payable following such review may be fixed at an amount which is less than, greater than or the same as the amount of rent payable immediately prior to the date on which the rent falls to be reviewed.
(4) Subsection (3) shall apply –
(a) notwithstanding any provision to the contrary contained in the lease or in any agreement for the lease, and
(b) only as respects that part of the land demised by the lease in which business is permitted to be carried on under the terms of the lease.
2. The issue that now arises for decision is whether that section applies to a situation whereby a lease with a guarantee was entered into before the law commenced, but on the collapse of the business of the tenant after the law commenced, the guarantee provides that the landlord has the option to require the guarantor to step into the shoes of the tenant on the same terms, especially the term as to upwards-only rent reviews. In other words, when exercised, is such an option under a guarantee “an agreement for … a lease”?
Facts
3. The plaintiff is a public limited company having its registered office in Cork city. The first named defendant is a Dublin businessman. He is the owner of the premises, the subject of the dispute between the parties, at Unit 17, Barrow Valley Retail Park, Sleaty Road/North Relief Road, Carlow. He is the landlord. The premises were formerly used as a do-it-yourself retail shop. The second named defendant was appointed as receiver of the premises by Ulster Bank Ireland Limited on 22 July 2011. The lease in question is dated 16 April 2007 and was made between the first named defendant as landlord, 4 Home Wholesale Services Limited as tenant and the plaintiff as the guarantor of the performance of the covenants in the lease by the tenant. The premises were demised to 4 Home Wholesale Services Limited for a term of 25 years from 18 August 2006 for use as a retail unit.
4. By clause 4.1 of the lease, 4 Home Wholesale Services Limited covenanted to pay the rents specified in clause 3. This required the payment of a stepped rent for the first five years of the term with a provision for upwards-only rent reviews every five years from the commencement of the term in accordance with the provisions of the fourth schedule to the lease. Clause 2 of the fourth schedule to the lease is headed “Upwards only rent review”. This provides:
The rent first reserved by this Lease shall be reviewed at each Review Date in accordance with the provisions of this Schedule and, from and including each Review Date, the rent shall equal the higher of either the rent contractually payable immediately before the Relevant Review Date or the open market rent on the Relevant Review Date, as agreed or determined pursuant to the provisions of this Schedule.
5. By clause 6.1 of the lease, the plaintiff, as guarantor, covenanted with the first named defendant, as landlord:
That the Tenant or the Guarantor shall at all times during the Term (including any continuation or renewal of this Lease) duly perform and observe all the covenants relating to financial obligations on the part of the Tenant contained in this Lease, including the payment of the rents and all other sums payable under this Lease in the manner and at the times herein specified and all sums which may be due to the Landlord for mesne rates or as payment for the use and occupation of the Demised Premises, and the Guarantor hereby indemnifies the Landlord against all claims, demands, losses, damages, liability, costs, fees and expenses whatsoever sustained by the Landlord by reason of or arising in any way directly or indirectly out of any default by the Tenant in the performance and observance of any of its financial obligations or the payment of any rent and other sums arising before or after the expiration or termination of this Lease.
6. By clause 6.7 of the lease, the plaintiff as guarantor further covenanted that if:
(i) a liquidator or Official Assignee shall disclaim or surrender this Lease; or
(ii) this Lease shall be forfeited; or
(iii) the Tenant shall cease to exist
THEN the Guarantor shall, if the Landlord by notice in writing given to the Guarantor within twelve months after such disclaimer or other event so requires, accept from and execute and deliver to the Landlord a new lease of the Demised Premises subject to and with the benefit of this Lease (if the same shall still be deemed to be extant at such time) for a term commencing on the date of the disclaimer or other event and continuing for the residue then remaining unexpired of the Term, such new lease to be at the cost of the Guarantor and to be at the same rents and subject to the same covenants, conditions and provisions (other than clause 6) as are contained in this Lease;
7. By clause 6.7.2 it was further provided that:
… if the Landlord does not require the Guarantor to take a new lease, the Guarantor shall nevertheless upon demand pay to the Landlord a sum equal to the rents and other sums that would have been payable under this Lease but for the disclaimer, forfeiture or other event in respect of the period from and including the date of such disclaimer, forfeiture or other event until the expiration of twelve months therefrom or until the Landlord has granted a lease of the Demised Premises to a third party (whichever shall first occur).
8. On or about 11 November 2009, the tenant 4 Home Wholesale Services Limited changed its name to Wholeserve Limited. On 23 December 2010, a resolution was passed for the voluntary winding up of Wholeserve Limited and the appointment of a liquidator. On the same day, the liquidator wrote to the receiver giving notice that he was disclaiming the lease; thereby terminating the lease under clause 6.7. By letter dated 11 January 2011, the first named defendant as landlord gave notice to the plaintiff as guarantor that he had elected to exercise the entitlement conferred under the lease to require the plaintiff as guarantor to accept from and execute and deliver to him a new lease of the premises. Enclosed with that letter was a draft of the new lease which contained an upwards-only rent review clause in identical terms to that contained in clause 2 of the fourth schedule to the original lease. By letter dated 20 January 2011, the plaintiff as guarantor confirmed to the first named defendant that it was agreeing to enter into the new lease for a term commencing on 23 December 2010 subject to the same terms, covenants, conditions and provisions as contained in the original lease; but also stated explicitly that this agreement was subject to the application of section 132 of the Land and Conveyancing Law Reform Act 2009.
9. The second defendant, having been appointed as receiver of the premises by Ulster Bank Ireland Limited, on or about 22 July 2011, by letter dated 10 November 2011, through his solicitors, wrote to the solicitors for the plaintiff as guarantor requesting confirmation that the plaintiff would accept from and deliver to the receiver a new lease of the premises for the residue of the expired term; such new lease to be at the same rents, and subject to the same covenants and provisions as were contained in the original lease. By letter dated 15 November 2011, the solicitors for the plaintiff as guarantor informed the solicitors for the receiver that the plaintiff had already agreed to enter into a new lease; the terms of which lease had already been set out in correspondence and that it had paid rent under that new lease. Notwithstanding this, the solicitors for the plaintiff as guarantor agreed to forward a draft of the new lease. By letter dated 16 November 2011, the solicitors for the receiver sought confirmation that the plaintiff would accept that the new lease would contain an upwards-only rent review provision. The plaintiff as guarantor declined to provide that confirmation and, instead, reiterated an earlier argument that the law had changed.
10. On 21 November 2011, on the application of the liquidator of Wholeserve Limited, an order was made by the High Court granting him liberty to disclaim the lease pursuant to the provisions of section 290(1) of the Companies Act 1963, as amended. These proceedings were then commenced whereby the plaintiff as guarantor sought a declaration that, in the situation outlined, the law requiring rent review covenants in leases must be construed in accordance with the 2009 Act as providing for both upwards and downwards rent reviews.
11. The defendant receiver also claims that, if the plaintiff as guarantor is entitled to the benefit of the 2009 Act, then notwithstanding the option exercised by the receiver to require the plaintiff as guarantor to take a new lease, he is nevertheless entitled to a full indemnity for any loss on a downward rent review; a right secured, the defendant receiver claims, by clause 6.1 of the lease. The relevant clauses in the lease are quoted above.
12. Further, the defendant receiver claims under clause 6.2 which provides that the plaintiff as guarantor and the tenant are jointly and severally liable “whether before or after any disclaimer by a liquidator” for the tenant’s obligations under the lease.
Construction
13. It is unnecessary in this judgment to reiterate the principles whereby commercial contracts are construed. The task of the court is to decide what the intention of the parties was, having regard to the language used in the contract itself and the surrounding circumstances; Kramer v Arnold [1997] 3 IR 43 at 55. Where the contract is concerned with commerce, the court should give to that agreement the construction which accords with the ordinary sense of business people; Irish Bank Resolution Corporation Limited v Cambourne Investments Inc & ors [2012] IEHC 262. The law on the construction of a commercial agreement seems to me to be beside the point. It is clear that all of the parties to the original lease and contract of guarantee, the landlord, the tenant and the guarantor, anticipated that future property prices would be unlikely to decrease and that the tenant would never obtain a rent reduction. That background does not matter. The prevailing economic circumstances have intervened and the law has changed for all new leases or agreements for such a lease; but is the law applicable?
14. In JC Savage Supermarket Ltd & Anor v An Bord Pleanála [2011] IEHC 488, this Court reiterated many of the basic principles of statutory construction in concise form. Of these, the most fundamental canon is that restated by Denham J in DB v Minister for Health and Children [2003] 3 IR 12 at 21:
In construing statutes, words should be given their natural and ordinary meaning. The approach taken by the courts to the construction of statutes was described by Blayney J. in Howard v. Commissioners of Public Works [1994] 1 I.R. 101. He emphasised that the cardinal rule for the construction of statutes was that they be construed according to the intention expressed in the acts themselves. If the words of the statute are precise and unambiguous then no more is necessary than to give them their ordinary sense. When the words are clear and unambiguous they declare best the intention of the legislature. If the meaning of the statute is not plain, then a court may move on to apply other rules of construction; it is not the role of the court to speculate as to the intention of the legislature. In that case I held also that statutes should be construed according to the intention expressed in the legislation and that the words used in the statute declare best the intent of the Act.
15. A refinement applicable here is that in referring to a lease and to an agreement for such a lease, the Oireachtas used a technical term which, as such, must be construed in that sense; Inspector of Taxes v. Kiernan [1981] I.R. 117 at p. 122. It is clear that the guarantee as invoked by the receiver is not a lease. At issue is whether the terms of that guarantee constitute an agreement for such a lease. That term is not defined in the 2009 Act. Whereas the defendant receiver submits that an agreement for such a lease is not a term of art but, rather, means simply any agreement to enter into a lease, this Court cannot agree. In Cosmoline Trading Ltd v Burke & Son Ltd & Anor [2006] IEHC 38, the issue arose as to whether there was an agreement for the lease by the defendants of premises to the plaintiff. Finnegan P commented as follows:
It is well settled that to create an enforceable contract for the grant of a lease the following matters must be agreed –
(i) The parties …
(ii) The premises …
(iii) The term …
(iv) The commencement date …
(v) The rent …
16. A useful definition of an agreement for a lease is to be found in Halsbury’s Laws of England (2006 reissue) volume 27(1) at paragraph 75:
An instrument which only binds one party to create and the other to accept a lease in the future is an agreement for a lease. Moreover, an instrument is construed as an agreement for a lease and not as a lease, notwithstanding that it contains words of present demise, if the provisions to be inserted in the lease are not finally ascertained; … or where certain things have to be done by the landlord before the lease is granted, such as the completion or repair or improvement of the premises, or by the tenant, such as the obtaining of sureties …
17. The defendant receiver argues that once the guarantee by the plaintiff was entered into, an agreement for a lease was thereby created. That agreement was, however, contingent in its operation on the occurrence of other factors and upon the exercise by the landlord of a choice of options. The lease contended for might never be entered into. It was dependant upon the occurrence of one of three conditions, namely the disclaimer or forfeiture of the lease or the tenant ceasing to exist. It was also dependant upon the defendant landlord exercising an option within twelve months to require the guarantor to enter into a lease as opposed to, in the alternative, seeking an indemnity of up to 12 months for lost rent. Such an agreement does not appear to this Court to carry the characteristics of a lease or of an agreement for such a lease. Whereas it can often be futile to cross-compare statutes, most especially Irish and foreign legislation, it is to be noted that similar provisions in England and Wales in the form of the Law of Property (Miscellaneous Provisions) Act 1989 are specifically worded so as to capture situations of contingent options.
18. Much more significantly to this decision, it is impossible to state that as of the date of coming into force of the 2009 Act the guarantor and the landlord had an agreement for a lease. One of the characteristics of such an agreement is that it is specifically enforceable; on the basis that an agreement for a lease is, in equity, as good as a lease. In this instance, until the occurrence of the contingency that gave rise to the entitlement of the landlord to make a choice between either requiring the guarantor to step into the tenant’s shoes and hold the lease or seeking lost rent instead, and the option was exercised by the landlord to require the guarantor to become the tenant, no agreement for a lease existed. The availability of that mere contingency cannot be construed as a lease between the guarantor and the landlord and nor can it be construed as an agreement for such a lease.
19. In Active Estates Ltd v Parnass and another [2002] 3 EGLR 13 at issue was whether a series of changes in tenant, including one to an entity called Jointport, with the consent of the landlord, entitled the guarantor to disavow an obligation under contract to take a new lease for the residue of the disclaimed term of the lease. This Court is drawn to the reasoning of Neuberger J that it was upon the exercise of the option by the landlord to request the guarantor to take up the lease for the remainder of the term that an immediately enforceable contract arose. An agreement for a lease is, of course, a contract to enter into a lease that binds both parties and is enforceable as such. The judge relied on the earlier decision of Chadwick LJ as to the effect of such a notice in Bausch v Steckel [2001] L&TR 1. At page 11 of his decision, Neuberger J stated:
So far as principle is concerned, I would refer to Basch [v Steckel], where, at para 26, Chadwick LJ said:
The effect of the notice, if valid, is to bring into existence a contract under which the [guarantors] are obliged to take a grant. When they take a grant the landlord will, under the terms of that grant, be required to deliver possession; but he will not be required to deliver vacant possession until the grant is taken. By serving a notice the landlord asserts that he is ready, willing and able to give vacant possession at the time when the grant is taken.
In other words, in this case, the claimant must be in a position to give possession to the defendants when the lease is granted. Neither the claimant nor the defendants sought to force the issue of the grant of the new lease while Jointport was in occupation. If Jointport had been in occupation, and the claimant had not been able to exclude Jointport at the time the defendants sought to take the lease, then the claimant may have had a problem. But Jointport has now vacated and no problem, to my mind, therefore arises for the claimant in this connection.
20. In United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 the House of Lords was concerned with the rule that conditions for the exercise of an option, including stipulations as to time, must be strictly complied with. In the course of his speech, Lord Simon at 945-946 commented, as follows, on the relation of the parties upon an option being called into force in accordance with a contract:
… the parties, on the exercise of the option, are brought into a new legal relationship. It was argued … that the rent review clauses were also such unilateral terms. I cannot agree. The operation of the rent review clauses does not at all change the relationship of the parties, which remains that of landlord and tenant throughout the currency of the lease whether or not the machinery of the rent review clauses is operated.
21. Similarly, at 961 Lord Fraser contrasted a rent review clause with an option to renew a lease upon expiry of an initial term:
Options to purchase property or to renew a lease are both true options and their important characteristic for the present purpose is that, if they are exercised, they create a new contract between the parties. But when a rent review clause is operated it merely varies one term in a continuing contract.
22. That view was also taken by Lord Salmon at 951 where he said that:
Options to determine or to renew are not agreements to determine or renew. They are no more than irrevocable offers (kept open for good consideration) to do so providing the tenant complies with certain conditions usually before a certain date.
23. It is argued that a decision that a guarantee option is a contingency interferes with existing rights; consequently it is submitted on behalf of the defendant receiver that the Act of 2009 should be construed so as to avoid any retrospective effect. A statute is deemed to be retrospective when it takes away or impairs any vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect to transactions or considerations already past; Hamilton v Hamilton [1982] IR 466 at 473-474. The same case is authority for the proposition that there is a presumption at common law that legislation is not intended to have retrospective effect. To the extent that the 2009 Act interferes with a pre-existing arrangement which the parties had entered into on the basis of their view on the state of the law, the Court is not entitled to rearrange the balance of rights that arises from a decision of the Oireachtas to amend the law. Once the balance struck is reasonable no issue of unconstitutionality can arise; and indeed no claim that the section of the 2009 Act is contrary to the Constitution is pleaded in this case. As this court has stated previously in JC Savage Supermarket Ltd & Anor v An Bord Pleanála [2011] IEHC 488, at para 3.7:
Where two interpretations of a statute are possible, one of which is in conformity with the Constitution and the other of which is not, the courts must opt for the constitutional interpretation; McDonald v. Bord na gCon [1965] 1 I.R. 217 at p. 239. A strained interpretation is not to be forced onto the wording of a statute, however, in order to keep its effect within constitutional boundaries: Colgan v Independent Radio and Television Commission [2000] 2 IR 490. A partial severance of words from an enactment in order to bestow constitutional conformity on it, should not be undertaken where the result is that the courts are in effect legislating – bringing into force a provision that the Oireachtas never intended; Maher v. Attorney General [1973] I.R. 140 at p. 147.
24. The obligation of constitutional interpretation does not permit the re-arrangement of a scheme designated by the Oireachtas, provided the terms of the legislation are clear; McDonald v Bord na gCon [1965] 1 IR 217 at 239. The 2009 Act addresses the tension which arises between the unfortunate situation of retail tenants within our economy, which is in a state of marked deflation since 2008 because disposable income has been reduced, on the one hand, and, on the other, the situation of landlords who may have paid an inflated price for the real estate already let at the large rents then current or who, alternatively, may have obtained a handsome return by way of rent for a property purchased years before at a reasonable price. That balance was resolved by the Oireachtas in not interfering in either leases existing in February 2009 or in agreements for such leases. The legislation, however, establishes a general rule that in any other situation outside of these two exceptions, rent reviews should be both upwards and downwards. In particular, the terms of the legislation do not apply to any situation where a guarantor had previously agreed to step into the shoes of a tenant upon an event of default under a lease occurring and upon the landlord exercising a contractual option in that regard as that landlord saw fit as between alternatives.
25. Fundamentally, the situation of a guarantor is not covered by the 2009 Act. The situation of a guarantor who, at the option of the landlord, may be required to either pay up to a year’s rent or to take over the lease is even more remote from the wording of the 2009 Act. There is not, furthermore, anything either obscure or ambiguous about the application of the legislation and nor is the wording of the section in its literal interpretation in any way absurd so as to invoke s 5 of the Interpretation Act 2005; see generally JC Savage Supermarket Ltd & Anor v An Bord Pleanála [2011] IEHC 488. This Court is not entitled to extend the law outside the boundaries set by the legislation.
26. Finally, the landlord having taken the option of requiring the guarantor to step into the shoes of the tenant, the general provision as to indemnity in clause 6.1 of the lease does not arise. That provision would entitle the landlord to seek arrears of rent up to the exercise of the option of the landlord as between seeking a new tenant, rent lost up to a certain level, or to require the guarantor to step into the shoes of the tenant. Upon the exercise of the later option, the entitlement to arrears of rent from the guarantor does not arise, as the clause ceases to be applicable. It is upon the exercise of the option in question in this case that a new situation provided for in contract comes about and governs the rights of the parties; in general see Hewden Tower Cranes Limited v Yarm Road Limited & anor [2003] EWCA Civ 1127.
27. An argument can arise as to the interaction between clauses 6.1, 6.2, 6.7 and 6.7.2 of the lease. The landlord argues that he is entitled to the indemnity under 6.1 in addition to exercising the option created under 6.7. In Welch v Bowmaker (Ir) Ltd [1980] 1 IR 251, at 254-255, Henchy J dealt with the question of the correct approach to the interpretation of contracts in circumstances where two contractual provisions dealt with a situation, one generally and one specifically. The following passage summarises the relevant law:
The relevant rule of interpretation is that encapsulated in the maxim generalia specialibus non derogant. In plain English, when you find a particular situation dealt with in special terms, and later in the same document you find general words used which could be said to encompass and deal differently with that particular situation, the general words will not, in the absence of an indication of a definite intention to do so, be held to undermine or abrogate the effect of the special words which were used to deal with the particular situation. This is but a commonsense way of giving effect to the true or primary intention of the draftsman, for the general words will usually have been used in inadvertence of the fact that the particular situation has already been specially dealt with.
28. The lease offers the landlord two specific options in clauses 6.7 and 6.7.2 which may be exercised in the event that the tenant ceases to exist or where the lease is surrendered or disclaimed, as occurred here. This specific provision is therefore not detracted from by the general indemnity contained under clause 6.1. In accordance with the maxim quoted by Henchy J, the court must seek to give effect to the intention parties as reflected in the wording of the lease and was to have a particular situation dealt with in a specific manner. The applicability of the general indemnity in those circumstances is therefore ousted by the occurrence of a specified event. The terms of the lease merely clarify that the act of disclaiming the lease does not release either the tenant or the guarantor of their respective liabilities under the agreement up to that point. Similarly, the options under 6.7 and 6.7.2 are also mutually exclusive as one, but not both, may be exercised by the landlord. Clause 6.1 may operate to preserve entitlements already existing, to back rent for example, were the option to require the guarantor to step into the shoes of the tenant exercised.
Result
29. It follows that the plaintiff guarantor is entitled to a declaration that section 132 of the Land and Conveyancing Law Reform Act 2009 providing for upwards and downwards rent reviews applies to any new lease entered into by that guarantor with the landlord upon the exercise of the landlord of an option to require the plaintiff guarantor to step into the shoes of the defaulting tenant upon the occurrence of an event of default.
Hynes Ltd v O’Malley Property Ltd
[1989] ILRM 619
FINLAY CJ
(Walsh and Griffin JJ concurring) delivered his judgment on 31 January 1989 saying: This is an appeal against an order made in the High Court on 14 December 1987 on a case stated to the High Court at the request of the parties by an arbitrator, pursuant to the provisions of the Arbitration Acts 1954 to 1980.
Hynes Ltd are the lessees, and O’Malley Property Ltd are now the owners of the lessor’s interest in premises situate in the City of Galway which were demised by predecessors in title of O’Malley Property Ltd to Hynes Ltd by indenture of lease dated 29 March 1972 for the term of 99 years from 1 January 1972. The premises concerned were commercial premises and the rent provided for in the lease was subject to review at seven-yearly intervals in accordance with detailed terms provided in the lease itself, the review in the absence of agreement to be determined by arbitration.
The parties failed to agree on the rent payable as and from 1 January 1986 by reason of the review then falling due, and submitted the dispute thus arising to the determination of a sole arbitrator, namely, John F. Mulcahy, a fellow of the Royal Institute of Chartered Surveyors.
In the course of the hearing before the said arbitrator, differences arose between the parties as to the proper interpretation of the rent review clause contained in the lease, and as a result he stated a case submitting three questions for the determination of the High Court. After hearing the parties to the case stated, Gannon J reserved judgment in the High Court and delivered his reserved judgment on 30 November 1987.
That judgment is in the form of guidance to the arbitrator in regard to the questions raised by him as distinct from express answers to each question. The guidance given by the learned trial judge with regard to the first two questions raised *621 by the arbitrator has been accepted by both the parties and is not the subject matter of any appeal before this Court. The guidance afforded by the judgment in relation to the third question raised is the only issue which was before this Court and was the subject matter of an appeal brought by the lessees.
That third question is in the following form:
1. Whether upon the proper construction of the lease and the rent review clause contained in the lease the market rental value of the premises, as of 1 January 1986, should be determined taking into account any improvements lawfully made by the lessee (otherwise than in pursuance of an obligation under the lease).
In short, the judgment of the learned trial judge was to the effect that the obligation of the arbitrator was to determine the market rental value of the premises as they were on 1 January 1986, including any improvements which had lawfully been made by the lessee thereto, without allowance or deduction to the lessee. It is against that decision that the lessee has appealed to this Court.
Rent review clause in the lease
The relevant portion of the rent review clause in the lease reads as follows:
… such arbitration shall fix the amount of the new rent at a sum equal to whichever of the following shall be the greater:
(1) The then existing rent payable hereunder, or
(2) A sum equal to the yearly rent which, having regard to the terms of this lease, (other than the amount of the rent reserved) might then reasonably be expected on a letting of the demised premises, with vacant possession, on an open market by a willing lessor to a willing tenant for a term equivalent to the residue then remaining unexpired of the term hereby created, without having regard to the effect on the letting value of the trade or business then carried on thereat (except in respect of that portion of the demised premises in the actual occupation of the lessee itself) and without having regard to any improvements lawfully made by the lessee (otherwise than in pursuance of any obligation under this lease) provided that in respect of these parts of the demised premises lawfully sublet by the lessee the rent shall be assessed having regard to the rent recoverable by the lessee, including any restrictions on such rent imposed by the Landlord and Tenant Acts and also to the lessee’s responsibility for maintenance, repairs and the other outgoings not recoverable under the subleases.
Clauses 5 and 7 of the lease impose obligations on the lessee to paint, repair and maintain the premises, and clause 10 imposes an obligation in a usual form to yield up at the expiration or sooner determination of the term the premises so painted, repaired, cleansed, maintained, etc. Clause 15 provides as follows:
Not without the consent in writing of the lessor first obtained, nor except in accordance with plans and specifications previously submitted to and approved by the lessor nor, except to the satisfaction of the lessor, to erect or suffer to be erected any new building or erection on the demised premises or make any alteration or addition whatsoever, either externally or internally in or to the demised premises or any building or erection which may be erected thereon provided always that the lessor shall not unreasonably withhold its consent to any improvement within the meaning of the Landlord and Tenant Acts 1931 to 1958 or any amendment thereof.
It was agreed by counsel that the reference to improvements lawfully made in the rent review clause already quoted would, having regard to the provisions of clause 15, be properly construed as to be interpreted as a reference to improvements *622 within the meaning of the Landlord and Tenant Acts 1931 to 1958 and that if any such purported improvements had been carried out without the consent of the lessor they would not be deemed to have been lawfully made.
The submissions of the parties
On behalf of the lessees it was contended that the proper interpretation of the rent review clause was that it provided for a clear ‘disregard’ by the arbitrator of improvements lawfully done by the lessee, and that accordingly in determining the market rental under the review clause the arbitrator would have to make allowance in favour of the lessee in respect of the rental value of any improvements lawfully done by him. This contention was based on two alternative submissions. The first was that the terms of the lease itself provided in a clear and unambiguous manner for such a consequence.
The second submission was that if contrary to that first submission there were any ambiguity in the terms of the lease dealing with the question of improvements lawfully made by the lessee it should be interpreted by the court, on the principles applicable, on the assumption that the parties to the lease were likely to have shared a commercial intention which would be contrary to the concept of a windfall to the lessor. Such a windfall it was urged would arise were the improvements lawfully made by the lessee to be included in any review of rent.
On behalf of the lessor it was contended that the fundamental obligation imposed on the arbitrator pursuant to clause D 3(ii) of the lease was to determine the rent which might then reasonably be expected on a letting of the demised premises with vacant possession on an open market by a willing lessor to a willing tenant. Such a fundamental obligation, it was said, could only be complied with if the arbitrator valued from a rental point of view the premises as they actually were at the time of the review of rent. If, it was urged, the arbitrator was valuing the premises as they were, then of necessity he was disregarding the distinction between any contribution made to their rental value by reason of improvements carried out by the lessee and any contribution arising from any other factor. Having regard to that fundamental construction of the clause it was urged that the special provision contained in it concerning improvements lawfully made by the lessee must be construed that the arbitrator was to ignore the special category of such improvements and, in effect, not to make any allowance to the lessee in respect of them.
This Court was referred to a number of authorities concerning the interpretation of different clauses in leases with regard to rent review. I have appended as a schedule to this judgment a note of the authorities submitted.
In the course of his judgment, Gannon J having reviewed with great care a number of the authorities which were submitted to him, stated as follows:
while the foregoing quotations indicate that there are many matters which might arise for consideration on an arbitration of this nature which have not specifically been raised on this case stated, they also demonstrate that this Court can be of assistance to the arbitrator only in so far as it can afford guidance by construing the agreement as expressed in the lease between the lessor *623 and the lessee and so presenting to him for application by him the directions, as the court construes them, which are set out by the parties in the lease.
I would find myself in complete agreement with this succinct exposition of what the function of the court is on the determination of this case stated.
The first function then is to look at the terms of the lease itself and if it is possible from those terms to arrive at a conclusion that there is an unambiguous provision with a certain effect concerning the question of improvements made by the lessee, then that provision must be given its unambiguous effect, and it would neither be appropriate nor necessary to consider decisions on other cases or principles which might be applicable to instances where clauses were ambiguous or deficient in some provision.
The really vital words contained in clause D (3)(ii) of the review clause in the lease are:
Without having regard to any improvements lawfully made by the lessee (otherwise than in pursuance of any obligation under this lease).
The improvements here dealt with have, it would seem to me three characteristics, that is to say:
(a) They are improvements made by the lessee.
(b) They are improvements lawfully made and, as I have indicated this would involve improvements made otherwise than in breach of the terms of the lease.
(c) They are improvements other than those made by the lessee lawfully in pursuance of any obligation under the lease.
If one applies to improvements carrying these three characteristics the construction of this portion of the clause contended for on behalf of the lessee one arrives at a wholly logical result. That result may thus be summarised.
1. If a lessee having duly notified and obtained the consent of the lessor carries out an improvement to the premises which will on the termination of the term be to the advantage of the lessor, he will not be damnified by having to pay an increase in his rent on review which is referable to that improvement.
2. If, however, notwithstanding the fact that an improvement of this description is carried out by the lessee and was to the advantage of the lessor on the final termination of the term, it was at the time when the lease was created part of the burden which the lease imposed on the lessee as distinct from imposing them on the lessor he would not be freed from having to pay an extra amount of rent in respect of an increased rental value due to that improvement. To do so would be to relieve him to some extent of a burden which the general provisions of the lease had imposed upon him, or to put the matter in another manner would be to deprive the lessor of an advantage which he had obtained from the obligations on the part of the lessee contained in the original lease.
3. Improvements made in breach of the lease would involve no allowance to the lessee making them.
If, however, one applies to the clause which I have outlined and sought to analyse the construction contended for on behalf of the lessor, a wholly unsatisfactory *624 situation would appear to be effected.
Firstly, it would constitute an express provision that the lessee should not be relieved of any increase in the rent due to improvements lawfully carried out by him. Such a provision which, whilst it may be unusual, would certainly be logical and sensible, and if it was the agreement of the parties would have to be implemented by the court. The characteristics of the improvements mentioned in the clause which I have outlined raise two complete anomalies in the further interpretation of this part of the clause in accordance with the lessor’s contention. The first would appear to be that if the lessee lawfully made an improvement he would have to pay for its value, but if he had made it unlawfully or in breach of the terms of the lease he would not. Secondly, it would seem to suggest that whereas the value of an improvement made lawfully and voluntarily by the lessee would be payable for by him as a factor in the increase of his rent where it was made by him under obligation in the lease he would not have to pay for it. There is an element of absurdity in these two consequences and that very absurdity might make a court lean against so interpreting the clause. If it does not have that effect, however, it would appear that the two qualifications, namely, with regard to lawfully made improvements and with regard to improvements arising from an obligation contained in the lease on the lessor’s submitted interpretation become superfluous.
I have no doubt that the proper construction of this clause must give, as far as possible, to each part of it a logical effect and consequence. It seems to me that that contended for by the lessee, namely, that it excludes from the calculation in the increase of rent a factor arising from improvements lawfully made is, in these circumstances, the correct one.
Having regard to that view, arising from the interpretation of the lease itself, I do not consider it appropriate nor find it necessary to reach any decision on the other issues raised of general principle in the hearing before us. I would therefore allow the appeal and vary the order made in the High Court so as to answer the third question raised on the case stated to the effect that the arbitrator should allow to the lessee a reduction of any portion of the rent to be fixed on the arbitration which he is satisfied, on the evidence, is solely attributable to an improvement lawfully made by the lessee otherwise than under an obligation imposed by the lease.
Irish Life Assurance Plc v Quinn
[2009] IEHC 153
. JUDGMENT of Ms. Justice Dunne delivered on the 31st day of March, 2009
The plaintiff herein has sued the defendant herein on foot of a guarantee entered into between the plaintiff of the one part and the defendant of the other part. The plaintiff is the landlord of a limited liability company called L’Avenue Decleor Limited which is the tenant of premises at Irish Life Mall, Irish Life Centre, Dublin 1. The sum of €73,263.60 is alleged to be due and owing by the defendant to the plaintiff on foot of the said guarantee in respect of arrears of rent and service charges.
A summary summons was issued on behalf of the plaintiff to recover the said sum. Following the entry of an appearance on behalf of the defendant, an application was made to the Master of the High Court for liberty to enter final judgment. Following the exchange of affidavits, the matter was adjourned to the judge’s list for hearing. The matter came before me from hearing on 20 March, 2009.
In essence, there was no dispute in relation to the amount alleged to be due in respect of rent. There was some dispute in respect of the calculation of the figures due in respect of the sum claimed by way of service charge. In that regard, it was submitted on behalf of the defendant that there was no entitlement to look for the service charge until such time as the amount of the service charge was certified annually by a certificate signed by the auditors of the landlord. It was claimed that the certificate for the years 2006 and 2007 had not been provided. That is correct. Since the commencement of the proceedings, the certificate for 2006 has been supplied. The certificate for 2007 is still awaited. In regard to this argument, reliance was placed on the provisions of the lease. The issue of the service charge is dealt with in the lease at clause 3.2. It provides under the tenant’s covenants:
“To pay the landlord without any deduction by way of further and additional rent
(a)… a reasonable percentage of the expenses and outgoings incurred by the landlord in the repair maintenance, renewal and insurance of the common parts of the areas and buildings from time to time designated by the landlord as the “centre” and the provisions therein and the other heads of expenditure set out in part one of the second schedule…
(b)… a reasonable percentage of the expenses and outgoings incurred by the landlord in the repair, maintenance, renewal and insurance of the areas and buildings from time to time designated by the landlord as the “mall” and the provision of services they are in and the other heads of expenditure set out in part two of the second schedule…”
The lease continues that the payment of the service charges is subject to the following terms and provisions:
“(i) the amount of the service charge shall be ascertained and certified annually by a certificate (hereinafter called the “certificate”) signed by the auditors of the landlord so soon after the end of the landlord’s financial year as may be practicable and shall relate to such here in manner hereinafter mentioned.”
Relying on the provisions set out above, counsel on behalf of the defendant argued that the plaintiff herein could not issue proceedings in respect of the amount of the service charge claimed until such time as the certificate signed by the auditors of the landlord had been made available to the defendant. I have to say that that argument seems to me to be untenable in the light of the provisions of clause 3.2 (vii) which provides that:
“On every gale day of every year during the term the tenant shall pay to the landlord such a sum (hereinafter called the “advance payment”) in advance and on account of the service charge for the quarter thence next ensuing as the landlord or its agents shall from time to time specify at its or their discretion to be fair and reasonable provided that subject and without prejudice to the foregoing provisions the amount of the advance payment for the quarter current at the date of the grant thereof shall be such amount as shall be certified by the landlord or its agents as fair and reasonable in all the circumstances.”
Clause 3.2 (ix) provides:
“It is hereby agreed and declared that the landlord shall not be entitled to re-enter under the provisions in that behalf hereinafter contained by reason only of non-payment by the tenant of any advance payment of the service charge as aforesaid prior to the signature of the certificate but nothing contained in this clause or these presents shall disable the landlord from maintaining an action against the tenant in respect of non-payment of any such advance payment notwithstanding that the certificate had not been signed at the time of the proceedings subject nevertheless to proof in such proceedings by the landlord that the advance payment demanded and unpaid is of a fair and reasonable amount having regard to the prospective service charge ultimately payable by the tenant.”
It is clear from the above provisions of the lease herein that the landlord is entitled to pursue a claim for the service charge notwithstanding that the animal certificate has not been signed by the auditors. I am satisfied therefore that there is no merit in the argument that the amount due in respect of the service charge cannot be the subject of proceedings until such time as the certificate has been provided. The amount in respect of the service charge is subject to verification of the precise amount due in respect of the year 2006, having regard to the certified amount.
The second issue raised by the defendant is an allegation that the plaintiff is in breach of its obligations of good estate management. The gist of the complaint is that the anchor tenant in the centre left and was not replaced by a tenant of similar quality and that one third of the other units are vacant. Thus, it is claimed that the business of the tenant suffered, thereby causing a loss. The level of the loss is not quantified in any way. On this basis, the defendant claims to be entitled to counterclaim for such loss and to set off the loss against the sums claimed herein.
A number of points were made on behalf of the plaintiff about this issue. The first point made is that the lease expressly stipulates that the payment of rent and service charge shall be made “without any deduction”. Reliance was also placed on the provisions of s. 48 of the Landlord and Tenant Amendment Ireland Act 1860 (Deasy’s Act) which provides:
“All claims and demands by any landlord against his tenant in respect of rent shall be subject to deduction or set off in respect of all just debts due by the landlord to the tenant.”
The provisions of Deasy’s Act and in particular s. 48 were considered in the case of MacCausland and Kimmitt v. Carroll and Dooley, [1938] 72 I.L.T.R. 158, at p. 159 where Maguire P. stated as follows:
“It seems to me that that rule taken with the wording of section 48 of the Landlord and Tenant (Ireland) Act 1860, makes it clear that the right of set off in an action for rent is limited to where a liquidated sum is due by the landlord. That that is so appears clear from the wording of the rules and it seems it is only a claim for a liquidated amount that can be set off, as the rules says the defendant must lodge money in court at the time of entering his defence. Therefore the tenant here in proceedings for the rent would not be allowed to set off any Counterclaim from damages for Breach of contract based on the failure of the landlord to carry out the repairs.”
By way of response to the plaintiff’s arguments, it was contended that the defendant did not seek to rely on the statutory right of set-off contained in s. 48 of Deasy’s Act but relied on the equitable right of set-off.
Reliance was placed on the decision in the case of Moohan and Anor. v. S & R Motors (Donegal) Ltd., (Unreported, High Court, Clarke J., 14th December, 2007). In the course of his judgment in that case, Clarke J. referred to the judgment in Prendergast v. Biddle, (Unreported, Supreme Court, 21st July, 1957), saying:
“It is clear from Prendergast v. Biddle (Unreported, Supreme Court, 21st July, 1957, Kingsmill Moore J.), that the test as to whether a cross claim gives rise to a defence in equity, depends on whether the cross claim stems from the same set of facts (such as the same contract) as gives rise to the primary claim. If it does, then an equitable set off is available so that the debt arising on the claim will be disallowed to the extent that the cross claim may be made out.
On the other hand if the cross claim arises from some independent set of circumstances then the claim (unless it can be defended on separate grounds) will have to be allowed, but the defendant may be able to establish a counterclaim in due course, which may in whole or in part be set against the claim. What the position is to be in the intervening period creates difficulty as explained by Kingsmill Moore J., in Prendergast v. Biddle in the following terms: —
‘On the one hand it may be asked, why a plaintiff with a proved and perhaps uncontested claim should wait for a judgment or execution of judgment on this claim because the defendant asserts a plausible but improved (sic) and contested counterclaim. On the other hand it may equally be asked why a defendant should be required to pay the plaintiff’s demand when he asserts and may be able to prove that the plaintiff owes him a larger amount.’
The court’s discretion as to be exercised on the basis of the principles set out by Kingsmill Moore J. later in the course of the same judgment in the following terms:-
‘It seems to me that a judge in exercising his discretion may take into account the apparent strength of the counterclaim and the answer suggested to it, the conduct of the parties and the promptitude with which they have asserted their claims, the nature of their claims and also the financial position of the parties. If, for instance, the defendant could show that the plaintiff was in embarrassed circumstances it might be considered a reason why the plaintiff should not be allowed to get judgment, or execute judgment on his claim, until after the counterclaim had been heard, for the plaintiff having received payment might use the money to pay his debts or otherwise dissipate it so that judgment on the counterclaim would be fruitless. I mention only some of the factors which a judge before whom the application comes may have to take into consideration in the exercise of his discretion.’
It seems to me that it also follows that a court in determining whether a set off in equity may be available, so as to provide a defence to the claim itself, also has to have regard to the fact that the set-off is equitable in nature and, it follows, a defendant seeking to assert such a set-off must himself do equity.”
I accept that the defendant herein is not entitled to a right of set-off by reason of s. 48 of Deasy’s Act. However, it appears that the defendant may be entitled to a set-off in equity in relation to a cross claim arising out of the same contract. I do not accept that the phrase “without any deduction” means that the defendant contracted out of the right to an equitable set-off.
In those circumstances, the question arises as to whether the defendant in this case has done equity such that he is entitled to an equitable set-off. I propose therefore to assess the cross claim in this case having regard to the decision of Kingsmill Moore J. in Prendergast v. Biddle and Clarke J. in Moohan and Anor. v. S & R Motors (Donegal) Ltd.
The defendant herein in his grounding affidavit stated as follows:
“I say that the company … runs a hair and beauty salon from the premises. I say that the company entered into the lease with the plaintiff on the basis that the plaintiff would run a high end shopping mall with anchor tenants and full occupancy of the retail units so as to bring in large numbers of customers or “footfall”. I say that the plaintiff has totally failed in this regard in relation to its obligation of good estate management. By way of example I say that one of the main anchor tenants Iceland Food Ltd the frozen foods supermarket chain has been allowed to vacate its premises in the mall and rather than replacing it with another anchor tenant of a similar nature, the plaintiff has replaced it with a chemist shop. In addition I say that a number of the units are totally empty. I say that for the last number of years at any one time only about 10 of the 15 units are occupied. I say that the impact this is having on the company’s business is devastating as the foot fall of customers into the mall is now extremely low. I say that it is obvious that allowing the anchor tenant to vacate its premises and allowing one third of the units to be empty means that there is no incentive for members of the public to attend at the mall. I say and believe that the plaintiff is in breach of its obligation of good estate management in this regard. As set out above the lease was entered into on behalf of the company on the basis that the mall would continue to have a substantial anchor tenant and full occupancy of its units so as to attract customers, unfortunately the plaintiff has failed to ensure that this is the case and as a result the company and other tenants are suffering losses and financial hardship.
In addition to this I say that the plaintiff is in breach of its obligations as set out in the second schedule of the lease. I say that the quality of the flooring and lighting in the common areas of the mall is very poor and results in the mall looking very shabby and uninviting to customers. This again has resulted in very poor customer numbers attending the mall.”
There is no evidence before this Court to suggest that the issue now complained of by the defendant had been put forward previously as a basis for the non-payment of rent and service charges. There is very little evidence on affidavit to assist the court as to the strength of the cross claim. There is little in the way of evidence to suggest that such a claim would succeed. There is no attempt to quantify the loss alleged. There is no suggestion that following the demand for payment herein that the defendant engaged in any attempt to raise the issue of a breach of the obligation of the plaintiff of good estate management as a defence to the plaintiff’s claim. It appears to be very much a last ditch effort on the part of the defendant to avoid his obligations under the terms of the guarantee entered into by him in respect of the company. Obviously, if this had been an issue raised in correspondence prior to the issue of these proceedings, one would attach more weight to the matter.
Clarke J. in the Moohan case referred to above also commented on the lack of any meaningful attempt to quantify the claim in that case:
“The most striking feature of the cross claim now put forward by S & R Motors is the extent to which it has only been formulated with any precision in very recent times indeed. It was only on the filing of an affidavit of 29 November, 2007 (just a few days before the motions came on for hearing) that any attempt to establish that the cross claim might be such as would extinguish the claim was attempted.”
In the present case, it is the position that the defendant has failed to make any effort whatsoever to attempt to quantify the claim. Accordingly there is no evidence of any kind whatsoever before this Court to suggest that the amount of any cross claim would be such as to meet and extinguish the plaintiff’s claim herein. That being so, it is difficult to see why the plaintiff should not be entitled at this point in time to judgment for an amount to which it is clearly entitled and in respect of which, there is no bona fide defence.
Bearing in mind the fact that the issue of good estate management does not appear to have arisen prior to the affidavit sworn herein by the defendant, the fact that it is not clear on the evidence that the defendant has any reasonable prospect of success in the cross claim and that there has been no attempt whatsoever to quantify the cross claim, I do not think it would be appropriate to delay the plaintiff in entering judgment in circumstances where it is clear that there is no bona fide defence to the claim. The defendant is not precluded in any way from pursuing a claim that the plaintiff herein is in breach of its obligations under the lease in respect of good estate management. However, I do not think that in equity the defendant is entitled to do so in the course of these proceedings. In those circumstances, I am satisfied that the plaintiff is entitled to judgment in the amount claimed herein subject to verification of the figures having regard to the amounts set out in the certificate for the year 2006.
Watters v Creagh and Nolan
Circuit Court
11 December 1957
[1958] 92 I.L.T.R 196
Judge, Deale
Judge Deale
The plaintiff in these actions was the landlord and the defendants were her tenants of the premises consisting of a yard, shed and offices at rere of Seapoint Stores, Bray, Co. Wicklow. In one action she claims damages for breach of a condition in the tenancy agreement for the repair of the premises, in the other she claims arrears of rent from the 31st December, 1954, to 31st July, 1956.
The plaintiff let the premises to the defendants under an agreement in writing dated 14th August, 1953, which created a term of three years from 1st August, 1953. It contained an unusual provision, clause 4 of the agreement, which I must interpret, for upon it depends the outcome of the action for rent, and, to some extent, of the action for damages.
Clause 4 is as follows:—“It is hereby agreed that in the event of the tenants’ business not prospering they may terminate this agreement at any time during the term by giving the landlord three months’ notice in writing on any gale day”
Two questions arise on the true meaning of this clause, namely (1) what is meant by the words “the tenants’ business not prospering” and (2) what is the gale day?
The business was that of coal, timber and general fuel merchants, no other general business having been carried on. It was a new business, and I am satisfied on the evidence of the defendants and of their accountant that for the period 1st August 1953, to 31st August, 1954, the business lost money. Much evidence was gone into on this question which I need not set out, and the only comment called for is that the books and records kept by the defendants were sketchy. Nevertheless, the final picture is clear and I am satisfied that the business made no profit in that period.
Dr. Baker submitted that a period of thirteen months was insufficient to test whether a new business could be said to prosper, and referred me to the accountant’s evidence that a test period of two or three years would be required before it could be said that a new business did not prosper. This submission, which as a general proposition may be valid, is, I think, disposed of in this case by the fact that the parties obviously had in mind a shorter test period since clause 4 entitled the tenants to terminate the agreement at any time during the three years term. Whilst a period of a month or two might be much too short even on the wording of clause 4, I am of opinion that thirteen months was more than sufficient as a test.
The words “the tenants’ business not prospering” mean, in my opinion, simply *198 that the business would not have prospered if after a reasonable time—less than three years—it failed to produce a reasonable net profit for those engaged in it, and I have already found that it produced a loss in a reasonable period. I am of opinion, accordingly, that the business did not prosper within the meaning of clause 4.
The defendants served two notices on the plaintiff pursuant, as they believed, to clause 4 The first one was dated 8th July, 1954, and gave three months’ notice of termination, expiring on the 9th October, a Saturday, the second one was dated the 30th September, and gave three months’ notice, expiring on the 31st December, a Friday The tenants quitted the premises in November, 1954. The question is was either notice served on a gale day?
Clause 1 of the agreement provides that the letting is to be for a term of three years from the 1st August, 1953, a Saturday “at the weekly rent of £2 5s 0d, such rent to be paid two months in advance, the first payment to be made on the signing hereof” On the signing of the agreement eight weeks’ rent was paid, and the parties appear to have treated the period of two months as being really eight weeks as a matter of convenience in calculating the amount of rent which was to be paid in advance. Dr. Baker says that this provision means that the day for payment of each instalment of rent in advance was every eighth Saturday— therefore the gale day was every eighth Saturday. If he is right in this submission, the two notices are bad, and the tenancy continued in fact for the full term of three years, and the action for rent succeeds.
In my opinion, this submission is not valid for two reasons. Firstly the term of the tenancy is three years, that is, one hundred and fifty-six weeks. If the gale day is every eighth Saturday, there are gale days for only one hundred and fifty-two weeks (nineteen multiplied by eight), nineteen gale days in all But there is no gale day in respect of the last four weeks of the term. There is something wrong here obviously, for there should be a gale day for every payment of rent throughout the term.
Mr. Geraghty’s submission supplies the other reason. He points out that the rent is a weekly rent, not a two-monthly or eight-weekly rent. The only reference to the two-monthly period is the payment of rent in advance for that period Accordingly, after the first advance payment had been made on the signing of the agreement, the tenants, if they had chosen, could have paid a weekly rent on the 8th August, and on every succeeding Saturday, and by doing this would have always been eight weeks in advance with the rent. The alternative method was also open to them, and this in fact they adopted, of paying the eight weeks rent in advance in one sum in every eighth week. But if they had chosen to make the payments weekly, it is clear that the first day for such payments was the 8th August, a Saturday, and that the gale day was a Saturday.
In my opinion, the gale day was a weekly one, a Saturday, and the second notice of surrender by the tenants was therefore good, and the tenancy was determined on the 31st December, 1954. All rent due to that date was paid and, accordingly, the action for rent fails, and I dismiss it with costs.
The action for non-repair claims damages in respect of the state of the premises up to the 1st August, 1956, but as I have held that the tenancy determined on the 31st December, 1954, the plaintiff can only recover in respect of such damages as relate to the state of the premises on the latter date.
Clause 2 (b) of the agreement provides that the tenants agree “to repair at their own expense the main gates leading to the main road from the said yard and to keep the said yard, the shed and office and approach to said yard in a good state of repair and to deliver it up in that good and proper repair and condition at the termination of this tenancy”.
When the defendants took the premises they were not in good repair. The shed and gates were old, and the latter were in serious need of repair The shed was in what I think may reasonably be described as adequate repair, but no more. However, it sufficed for the purpose of the defendants’ business. But a storm in 1954 caused roof damage which the defendants were bound to make good. They failed properly to repair it, sending one of their employees to the premises with inadequate materials for the purpose. If the work had been properly done then I think some of the subsequent damage would not have occurred; but it is difficult to relate the condition on 31st December, 1954, since the architect did not examine the premises between 1951 and January, 1957, and the evidence of the parties on the condition of the shed on 31st December, 1954, is conflicting and lacking in precision. *199
The gates were in a bad way when the tenancy began, and were put into working order by the defendants. They are now as bad as ever, or worse, but I do not know what their condition was in December, 1954. However, they have been in use for many years and have long since passed their useful life.
In considering this matter, I must have regard to the nature of these premises—a coal yard with a shed and office on it—and their age, which is considerable. I think the defendants have some liability in respect of the gates, but it is not high. New gates would cost £40 to £42 approximately. I think a sum of £10 would be reasonable for this item.
The shed is a more substantial item. But here again the plaintiff cannot prove with any degree of precision what damage is fairly attributable to the defendants’ breach of contract, and what damage is due to the combined effects of age, and neglect by the plaintiff of the premises since 31st December, 1954, when the tenancy ended. She appears to have done nothing to the property since, and the wind and weather have disimproved it. The architect’s evidence relates to a full repair of the shed and if the defendants were liable for this—which they are not—the cost would be about £70 or £80.
I think a sum of £25 would be a reasonable allowance for the defendants’ liability for non-repair.
Accordingly, I give a decree for £35 with costs.
Ronan McNamee and Jacqueline
Castletown Foundation Ltd. v Magan
[2018] IEHC 653
Judgment of Mr. Justice Robert Haughton delivered on the 21st day of November, 2018
Paragraph Title
1 Introduction
2 Background facts
16 The Jersey Proceedings
22 The Bermuda Proceedings
24 Notices of Termination
31 Reference to the Residential Tenancies Board
38 Proceedings under the Landlord and Tenant (Amendment) Act 1980
42 Plaintiff’s Motion for Summary Judgment in Respect of Arrears of Rent
52 Counterclaim for Maintenance/Upkeep
68 Counterclaim for Damages/Aggravated Damages
73 Conclusion on Application for Summary Judgment
74 The Defendant’s Application to Dismiss
81 Validity of Second Termination Notice
87 The Claim for a Declaration that the Defendant is Not Entitled to a New Tenancy
104 Discussion
109 Urgency
112 Conclusion
114 Summary
Introduction
1. This judgment relates to two applications in these proceedings which were commenced by plenary summons dated 3rd July, 2018, and admitted to the Commercial Court by my order made on 9th July, 2018. The proceedings concern a property known as Castletown Cox House and Estate, County Kilkenny. In the first application the plaintiff seeks summary judgment against the defendant in the sum of €571,893 together with interest pursuant to statute in respect of arrears of rent. In a cross motion issued on 20th July, 2018 the defendant seeks orders dismissing, or placing a permanent stay on, the proceedings pursuant to the inherent jurisdiction of the court, or pursuant to O. 19 r. 28 of the Rules of the Superior Courts, on the basis that there is no jurisdiction, or that they are frivolous and vexatious, or an abuse of the process and bound to fail.
2. At the outset counsel for the defendant confirmed that the defendant was not maintaining a claim that the High Court did not have jurisdiction to hear the plaintiff’s claim for arrears of rent, but would argue that it had a bona fide defence by way of counterclaim and entitlement to equitable set off such that the application for summary judgment should be refused.
3. As there was significant overlap in terms of background, relevant facts and affidavit evidence, I determined that both motions should be heard together. Separate written legal submissions were filed in respect of each motion by both sides, and were considered along with the affidavit evidence. Oral argument in respect of both motions was heard on 25th October, 2018. The hearing of a third motion – the defendant’s application for discovery – was postponed pending the delivery of this judgment.
Background Facts
4. In or about 1991 the defendant, who is a life peer, purchased Castletown House, also known as Castletown Cox, through Castletown Estates Ltd (“CEL”). Through the 1990s he purchased the surrounding farmlands resulting in a total acquisition, to include the house, of 513 acres, through a company Castle Farms Ltd. Castletown House is one of Ireland’s few surviving great Georgian houses, having been built in or about 1776. Since 1999 significant sums have been spent on refurbishment and modernisation of Castletown House.
5. The defendant arranged for the transfer of Castletown House and Estate into a trust – Eaglehill Trust – for two of his children, Henrietta Black (nee Magan) and Edward Magan. The current trustee – having been appointed on 4th April, 2013 – is Yew Tree Trustees Ltd (formerly DW Trustees Ltd). The trust is administered in Jersey. The plaintiff is a limited liability company registered in the British Virgin Islands, and is the actual owner of Castletown Cox House and Estate, but it is a company owned and controlled by the trustee, Yew Tree Trustees Ltd. CEL is a management company that manages Castletown Cox House on behalf of the Eaglehill Trust.
6. Of tangential relevance is that the same trustee operates a separate trust, which is settled by the defendant for the benefit of his third child, Patrick Magan. That trust is known as the Clonearl trust and has other holdings in the United Kingdom and elsewhere.
7. While the defendant has a place of residence in London, Castletown Cox has been a secondary home for the Magan family. The defendant also variously describes himself as Lord Magan of Castletown/Baron Magan of Castletown.
8. By Letting Agreement dated 15th December, 2010 the plaintiff let “Castletown House on lands consisting of 53.61 acres statute measure at Castletown Demesne in the County of Kilkenny as shown delineated on the map annexed hereto” for a term from 13th December, 2010 to 12th December, 2013 at a rent of €100,000 per annum together with VAT, payable by monthly instalments (“the Letting Agreement”). The Letting Agreement appears to have replaced an existing business tenancy concluded between the parties in 2004. The terms of the Letting Agreement are central to both applications, and certain clauses are particularly relevant:-
• Under Clause 2.1 the defendant agreed “to pay the rent at the time and in the manner specified, the first payment being made on the date of this agreement.”
• In Clause 2.7 the defendant agreed “not to reduce any payment of rent by making any deductions from it or by setting any sum off against it.”
• In Clause 2.17 the defendant agreed that “to use the property as a residence only for the named tenant and his dependants.”
• Clause 4, insofar as relevant reads:
“4. The parties agree:
4.1 whenever the tenant:
4.1.1 is seven days late in paying any rent, even if it was not formally demanded:…
4.2 the landlord may end this tenancy. He must first give the Tenant not less than 4 weeks written notice ending on any day. This tenancy shall end on that day but this will not cancel any outstanding obligations which the Tenant owes the Landlord.”
• In Clause 3.2 the landlord agrees “to do the repairs to the property which the Housing (Standards for Rented Houses) Regulations, 1993 and Section 12(i)(b) of the Residential Tenancies Act, 2004 require.”
Notwithstanding Clause 2.17, the plaintiff did not register the tenancy with the Residential Tenancy Board (“RTB”) under the Residential Tenancies Act, 2004.
9. It is common case that on the expiry of the term of the Letting Agreement on 12th December, 2013 the defendant continued in occupation under the terms of the Letting Agreement on foot of a tenancy from year to year, arising by implication.
10. The last payment or contribution to rent made by the defendant was in July 2012, nothing has been paid since the plaintiff was appointed trustee in April 2013. The principal grounding affidavit sworn by Mr. Jonathan Richard Benford, director of the plaintiff, on 4th April, 2018 shows accumulated arrears of rent due at 12th April, 2018 in the total sum of €571,893 exclusive of interest. There is no express provision in the Letting Agreement in relation to the payment of interest on arrears of rent. These figures are not disputed by the defendant.
11. Castletown Cox also has a world class collection of fine art, paintings and furniture. Most of these are owned by a separate trust, the subject matter of a separate Chattels Agreement dated 9th March, 2011 between the plaintiff and the defendant which is a licence which provides for the safekeeping by the defendant in Castletown House subject to a fee from time to time. A sum of GBP £1,626,496.80 is claimed by the plaintiff to be due by the defendant under the Chattels Agreement, and is the subject matter of another dispute, and the plaintiff has a further claim against the defendant for GBP £1,996,124 in respect of loans granted by the plaintiff to the defendant to meet personal creditors and expenditure unrelated to Castletown Cox.
12. Against this background the running expenses of Castletown Cox are significant, being in the order of €500,000 per annum. The defendant asserts at para. 5 of his replying affidavit sworn on 31st August, 2018 that the parties entered into an agreement for the upkeep and maintenance of Castletown House in 2005. Mr. Benford in his second affidavit sworn on 21st September, 2018 describes it as “an understanding with Castletown Estates Ltd (a company controlled by the defendant) that both the plaintiff and the defendant would contribute to [CEL] for the upkeep and maintenance of the property”, but Mr. Benford adds (at para. 15) that:
“There was never any suggestion that the plaintiff was obliged to reimburse the defendant in relation to his contribution.”
13. The defendant avers that the plaintiff has failed to pay any sum in respect of upkeep and maintenance from June 2017 onwards, whereas during that period he has paid €361,167.72, and he has raised a counterclaim for breach of contract in respect of this amount.
14. Due to the trustee’s financial concerns, a process of consultation with the defendant and beneficiaries started in mid-2015. The backdrop was that the primary lender to the trust, Sancus, was, according to Mr. Benford, expressing serious concern in respect of accumulating debt, and indicated that unless a resolution was found, it would call in the security held, namely Castletown Cox estate.
15. Following these consultations, on 3rd October, 2016 the defendant in a letter addressed to the then trustees informed them that “arrangements are being progressed whereby the Castletown Estate would be acquired at fair market value out of the present Trust ownership; in most likelihood through a financing of the Irish Heritage Preservation Trust (IHPT).” He went on to state:
“It is assumed that through these arrangements the assets of the IHPT would be available as collateral, namely the Castletown Estate itself, the fine art collection of the IHPT, and the significant private equity investment held in the IHPT. It is the intention that these financing arrangements should be completed by Easter 2017, i.e. by Good Friday 14th April, 2017 – if not earlier.
If by Friday 14th April, 2017 the sale of the Castletown Estate on the basis outlined above has not been concluded, I recognise that in all probability, and in the absence of other more creative refinancing proposals, that the Trustees would need to seek a sale to a third party.
I also recognise that, if a sale of the Castletown Estate, by whatever means, has not been concluded by mid-April 2018, then in all probability the Trustees would need, as an alternative strategy, to secure a third party sale of the Ellesmeere Estate.”
The Jersey Proceedings
16. The Easter 2017 deadline passed without refinancing, but the defendant and one of the beneficiaries, his son Edward Magan, wished the plaintiff to proceed with an alternative option of selling certain UK real estate instead of Castletown Cox. The plaintiff did not agree with this stance and, in the light of the foregoing, brought proceedings in the Royal Court of Jersey, Record No. 2017/164, seeking approval in principle for a sale of Castletown Cox. Those proceedings were heard on 4th July, 2017, and the defendant and Edward Magan were both represented. The court ordered as follows:
“1. In respect of the Jurisdiction Challenge, declared that this Court has jurisdiction and is clearly the most convenient forum for Representations;
2. Approved the decision of Representor not to retire from both or either of the Clonearl Trust or the Eaglehill Trust;
3. Ordered that the Representor shall remain as trustee of the said trusts until further order of this Court;
4. Approved the decision of the Representor to market Castletown Cox (“the property”);
5. Ordered that the Settlor and the Convened Beneficiaries shall take all reasonable steps within their power to facilitate the marketing of the property and to take all reasonable steps within their power to allow access to the property when reasonably required by the Representor and/or the appointed agents for that purpose;
6. Ordered that the Representor’s costs of the proceedings shall be paid from the trust funds on the usual trustee indemnity basis, with payment apportioned at two/thirds from the Eaglehill Trust and one/third from the Clonearl Trust; and
7. Otherwise adjourned the said Representation with liberty to apply.”
17. Two days later Mr. Edward Magan instituted proceedings in the Irish High Court seeking to restrain the marketing and sale of Castletown Cox, entitled Magan v DW Trustees Ltd [2017] No. 6369 P. Those proceedings were initially stayed pending mediation which took place in London, and led to a mediation agreement on 26th September, 2017. This allowed the plaintiff to continue marketing, but gave Mr. Edward Magan (and the defendant) the opportunity to put forward for consideration any refinancing proposal on the basis that the property would not be sold until any such proposal had been considered.
18. On the basis that no realistic refinancing proposal was forthcoming, in October 2017 the plaintiff again applied to the Royal Court of Jersey in proceedings 2017/164 to approve a sale. At that point in time the indebtedness charged on Castletown Cox was St£11,500,000 and was due for repayment on 21st December, 2017, and the running costs were in the order of St£500,000 per annum. Having satisfied itself that all appropriate parties were represented or on notice (all the adult beneficiaries were on notice; the settlor – the defendant herein – and his elder son were represented and opposed) the court made the following order on 31st October, 2017:
“1. Blessed the decision of the Representor as recorded in its resolution dated the 25th October, 2017, and as amended on the 31st October, 2017, namely that:-
(i) The said property be sold at a price not less than €19 million and;
(ii) The Representor shall exercise its powers, as sole shareholder of Castletown Foundation Ltd, to procure that the Representor enters into an agreement to sell the property for the best price that the directors of the Representor considers obtainable, in excess of €19 million, upon an offer satisfying that condition being received;
2. Ordered that the Representor’s costs of the proceedings shall be paid from the trust funds on the usual trustee indemnity basis, with payment apportioned at two/thirds from the Eaglehill Trust and one/third from the Clonearl Trust, and
3. Adjourned the hearing of the said Representation.”
19. In November 2017 the plaintiff agreed to heads of term for a sale in principle to a third party for a price in excess of €19 million. Mr. Benford avers in his principal affidavit (para. 38) that “this was vital because Sancus had provided a final deadline of 21 December, 2017 for the repayment of the loan if a sale had not been agreed”.
20. The injunction proceedings brought by Mr. Edward Magan were set for hearing on 6th December, 2017, but did not proceed, and have not advanced since then.
21. It should be noted that on 5th October, 2017 the Royal Court of Jersey delivered a full reasoned judgment on jurisdiction, explaining its order of 10th July, 2017, and rejecting the defendant’s application for a stay. Commissioner Clyde-Smith held that the following factors justified the conclusion that “Jersey was the most appropriate forum”:
• The trustee was resident in Jersey;
• The trust was administered in Jersey;
• Four out of five of the trustee’s directors were resident in Jersey;
• The majority of beneficiaries and the settlor were U.K. domiciled;
• There were no assets in Bermuda;
• The relief sought by the Trustee was directions as to its own conduct;
• Requiring the Trustee to litigate in Bermuda at its own initial expense would impose an unfair additional cost burden;
• The only connection with Bermuda was the proper law of the trust.
The Bermuda Proceedings
22. Notwithstanding the order of the Jersey court of 10th July, later in July 2017 the defendant initiated proceedings in Bermuda seeking to remove the plaintiff as trustee, and seeking to set aside the decision by the plaintiff to sell Castletown Cox. The court had first to decide whether the Bermudian courts had jurisdiction and if so whether it was the appropriate forum. The Supreme Court of Bermuda in its ruling of 13th November, 2017 (Chief Justice Ian R.C. Kawaley) held that while it had jurisdiction to remove the trustee it would be an abuse of the process for the defendant to relitigate in Bermuda issues which had already been determined by the Jersey court following inter partes hearings, and inconsistent with comity for the Bermudian court to permit its processes to be used to undermine the exercise by the Jersey court of its lawful supervisory personal jurisdiction over trustee’s resident within its jurisdiction. The chief justice stated at para. 24:
“The [Magans] have identified no coherent (and legitimate) juridical advantages which they would gain from having the removal issue determined in Bermuda while it is obvious that the Trustee would be disadvantaged in costs terms. It is also obvious that keeping the Bermuda proceedings alive would potentially undermine the efficacy of the Jersey court’s orders in relation to the Property by creating unfounded legal doubts as to the Trustee’s authority to sell the Property under the proper law of the E Trust. In these circumstances I am bound to find that the further prosecution of the present action would be an abuse of the process of this Court. It follows that the Order of July 20, 2017 granting leave to serve out should be set aside as regards the removal of trustee head of relief as well and that the Writ should be struck out in its entirety.”
23. Following this on 7th March, 2018 the plaintiff was authorised by the trustee to exchange contracts for the sale of Castletown Cox for a price in excess of €19 million. The contract for sale was not exhibited for commercially sensitive reasons, and this was not challenged in the present applications. Mr. Benford avers (para. 44 of his principle affidavit) that the plaintiff was obliged to complete and deliver up vacant possession of the property by August 2018.
Notices of Termination
24. By Notice of Termination dated 22nd December, 2017 served by the plaintiff on the defendant, the plaintiff gave notice that – “the tenancy of the dwelling at Castletown House, Carrick-on-Suir, Co. Kilkenny will terminate of 3 August, 2018. You must vacate and give up possession of the dwelling on or before the termination date.”
25. The reason given for termination was “the fact that the landlord intends to enter into a binding contract for sale within three months of the termination of the tenancy”. The notice ended – “Any issue as to the validity of this notice or the right of the landlord to serve it, must be referred to the Residential Tenancies Board under Part 6 of the Residential Tenancies Act, 2004 to 2016 within 28 days from the date of receipt of it.” The defendant has not sought to challenge the validity of that notice before the RTB within the requisite 28 days or at all (the RTB has jurisdiction to extend time, but no application in that regard has been made).
26. On 21st March, 2018 the plaintiff served a notice headed “14 Day Warning Notice – Failure to Pay Rent – Notice served pursuant to Section 67(3) of the Residential Tenancies Act, 2004”. This reminded the defendant of his failure to pay rent, stating that arrears were now €568,559.90 as of 13th March, 2018, and indicating that if he failed to pay the rent within fourteen days the landlord “is permitted to terminate the tenancy giving 28 days’ notice and by serving a notice of termination on you”.
27. The notice was served “entirely without prejudice to the Notice dated 22 December 2017 served on you pursuant to Section 34(4) of the Residential Tenancies Act, 2004…”.
28. On 12th April, 2018 the plaintiff served a second Notice of Termination for “failure to pay rent”. This stated:
“Your tenancy …will terminate on Friday 11 May 2018.
You must vacate and give up possession of the Property on or before the termination date.
The reason for the termination of the tenancy is due to the breach of tenancy obligations in that you have failed to pay rent on the dates it fell due for payment.
You have the whole of the 24 hours of the termination date to vacate and give up possession of the above dwelling.
Any issue as to the validity of this notice or the right of the landlord to serve it, must be referred to the Residential Tenancies Board under Part 6 of the Residential Tenancies Acts 2004 to 2015 within 28 days from the date of receipt of it.”
29. It is not contested that the arrears of rent as of 12th April, 2018 totalled €571,893. In a letter sent on 9th May, 2018 by the defendant’s then solicitors Ivor Fitzpatrick & Co. to the plaintiff’s solicitors A & L Goodbody, there is an acknowledgement that the defendant was “faced with a Notice of Termination expiring this Friday, 11th May, 2018”.
30. The plaintiff makes the case that the Letting Agreement was validly terminated by the second Termination Notice on 11th May, 2018.
Reference to the Residential Tenancies Board
31. It subsequently transpired that the defendant’s solicitors had, without notice to the plaintiff, referred a dispute concerning the validity of the second Termination Notice to the RTB on 10th May, 2018. Neither the defendant nor his solicitors nor the RTB put the plaintiff or its solicitors on notice of the referral of the dispute prior to 24th May, 2018. The referral notice alleges that the second notice of termination was invalid on a number of grounds including that –
• Rent was not due or there was a dispute as to the amount.
• Insufficient notice was given.
• Uncertainty of the notice because it was expressed to be without prejudice to the previous termination notice with a termination date of 3rd August, 2018.
• That the landlord has not paid substantial sums due, in respect of which the tenant is issuing separate High Court proceedings claiming damages in excess of €600,000.
32. In a letter dated 15th May, 2018 Ivor Fitzpatrick solicitors wrote on the defendant’s behalf to the RTB referring to the dispute form lodged on the 10th May and stating –
“Please note that the said dispute was lodged without prejudice to our client’s assertion that the Landlord and Tenant Act, 1980 applies to our client and the subject property. We would request the RTB defer from further processing the dispute until such time as the Landlord and Tenant issues under the 1980 Act are resolved.”
33. On the morning of Wednesday 23rd May, 2018 the plaintiff through its agents re-entered and recovered possession of Castletown Cox and the lands the subject of the Letting Agreement, at a time when there were no members of the Magan family in occupation. There is no evidence before the court to suggest that the plaintiff or its solicitors had any notice of the dispute referenced to the RTB at the time of repossession, and Mr. Benford’s averments to the effect that the plaintiff had no notice are not contested. The defendant asserts that the repossession was unlawful, and further that under the Residential Tenancies Act, 2004 the plaintiff was precluded by the dispute referral from taking any further action pursuant to the second notice of termination until such time as the matter had been assessed and determined by the RTB.
34. When one considers the extent of the correspondence between the parties’ respective solicitors during the period 10th May – 23rd May, including five letters from Ivor Fitzpatrick solicitors, albeit that most of this correspondence related to files and documents requested by them from A & L Goodbody, it is remarkable that not once is there any mention of the filing of the dispute reference in relation to the second Termination Notice with the RTB. Ivor Fitzpatrick did write promptly on 24th May, 2018 protesting on the defendant’s behalf at the “unauthorised and unlawful entry by your servants or agents onto the Castletown Demesne and into Castletown House early yesterday morning”. That letter asserts that the defendant’s employee witnessed “a number of men using electronic cutting equipment to cut a metal chain which was securing the inner gate entrance to the property” to allow the ingress of vehicles and a group of men. The letter goes on to refer to the submission by them of the requisite form to the RTB dated 10th May, 2018 (submitted electronically on that date and followed by a letter to the RTB on 15th May, 2018). That letter called upon the plaintiff, its servants or agents, to leave the property, and requested an undertaking that the plaintiff would abide by the procedures of the RTB “in accordance with the Notice of Terminations heard on 11th April, 2018”. The penultimate paragraph stated –
“Should you refuse to grant the undertakings sought above in writing by 5pm today, 24 May 2018, our client will have no choice but to make an application to the High Court and we will rely on this letter to fix you with the costs of such an application.”
35. On 25th May, 2018 A & L Goodbody responded at some length and asserted that the defendant was engaged in an abuse of process. Reserving its position as to the defendant’s demand for an undertaking, A & L Goodbody on the plaintiff’s behalf proposed that the defendant and his family be permitted to stay at Castletown Cox until 3rd August, 2018 on the basis of certain terms including a written acknowledgment of the termination of their Chattels Agreement and a return of all items, and “a written undertaking to refrain from entering the property after 3rd August, 2018”.
36. This proposal was not accepted by the defendant. Further correspondence ensued, but the defendant did not bring proceedings seeking an injunction to restrain the alleged trespass by the plaintiff. The plaintiff asserts, through its solicitors and averments from Mr. Benford, that it was a peaceable re-entry and the steps that it took were appropriate and proportionate and undertaken in a manner to cause the least inconvenience.
37. By Notice of Intention to Claim Relief dated 14th June, 2018 the defendant served notice on the plaintiff of his intention to claim a new tenancy under Part II of the Landlord and Tenant (Amendment) Act, 1980 in respect of Castletown House and 53.61 acres, and in the alternative €10 million compensation for disturbance, and compensation for improvements. The Schedule in which details of improvements are to be set out states “details to be provided”.
Proceedings under the Landlord and Tenant (Amendment) Act 1980
38. After the requisite period of at least 28 days had elapsed, the defendant issued proceedings by Landlord and Tenant Civil Bill dated 19th July, 2018 entitled ” The Circuit Court County of Kilkenny between George Magan Plaintiff and Castletown Foundation Ltd Defendant. ” This seeks an order “determining the matters to which the [Notice of Intention to Claim Reliefs] relate”, an Order declaring that the plaintiff is entitled to a new tenancy in the property and fixing the terms of same, and alternatively compensation for improvements and/or disturbance, and consequential orders. The Indorsement of Claim at para. 3 pleads that the plaintiff has occupied the premises “continuously since 1991 and continuously since 1996 when the premises were demised to the plaintiff by Castletown Estates Ltd”. The following further pleas are then made:-
“4. Title to the Premises was subsequently transferred to the Defendant in 2004 and at the request of the Defendant, the Plaintiff executed a lease of the premises from the Defendant by way of “business letting agreement” dated 24th December, 2004.
5. By Lease dated 15th December 2010 (“the Lease”) the Plaintiff [ this is clearly intended to refer to Castletown Foundation Ltd ] herein demised the Premises to the Defendant [ this is a further error and clearly refers to George Magan ], together with the furniture and equipment thereon covered by the insurance policy arranged for the parties hereto (“the Tenement”).
6. The Plaintiff now holds the Premises under a yearly tenancy (still subsisting) at an annual rent of €100,000 arising on the expiry of a fixed term tenancy created by the Lease.
7. The Tenement is a tenement within the meaning of section 5 of the Landlord and Tenant (Amendment) Act of 1980 (as amended) (“the Act”).
8. The Premises has been continuously in the occupation of the Plaintiff within the meaning of the Landlord and Tenant Amendment Act of 1980 (as amended) and further, the Premises has bona fide been used, partly for the purpose of carrying on a business within the meaning of the Act.
9. By notice dated the 22nd December, 2017 the Defendant purported to terminate the tenancy held by the Plaintiff in the Premises as of 3rd August, 2018. By a further notice dated 12th April, 2018 expressly stated to be served pursuant to s. 67(2)(b)(ii) of the Residential Tenancies Act, 2004 the Defendant purported to terminate the tenancy held by the Plaintiff in the Premises upon the expiry of a notice period of one month pursuant to the provisions of the 2004 Act. It is expressly pleaded that the said notices are wholly invalid and have no lawful effect.
10. On or about 23rd May 2018, the Defendant its servants or agents unlawfully and in breach of the terms of the tenancy under which the Premises is held forcibly re-entered the Premises.
11. By Notice of Intention to Claim Relief dated 14th June 2018 …duly served on the Defendant the Plaintiff sought relief pursuant to the provisions of the Act.
12. The Plaintiff is entitled to a new tenancy in the Premises in accordance with the provisions of Part II of the Act and in particular s. 13 thereof.”
39. Section 13 of the Landlord and Tenant (Amendment) Act, 1980 as amended (“the 1980 Act”) provides for the right to a new tenancy in respect of a “tenement” in three situations – the first is a new business tenancy based on five years bona fide use wholly or partly for the purposes of carrying on a business, secondly a long occupation tenancy where there has been continuous occupation for a period of twenty years, and thirdly where there have been improvements such that not less than one half of the letting value of the tenement is attributable to the improvements. At hearing, counsel for the defendant clarified that his claim is not based on long possession or improvements, but is based on the first limb i.e. business user. Although not particularised in the Circuit Court proceedings, counsel indicated that the business user relied upon is touched on in para. 9 of the affidavit of the defendant where he states –
“9. Throughout, I carried out extensive refurbishment of the Property, the surrounding properties and the estate gardens. Castletown House and Estate is one of Ireland’s few surviving great houses and estates and has been used as a residence for our family since 1991. I regularly hold events for international Georgian Societies and Horticultural Societies at Castletown House & Estate such is the quality and standard of the refurbishment work carried out. …”
Counsel pointed out that s. 3 of the 1980 Act defines “business” to mean “any trade, profession or business, whether or not it is carried on for gain or reward, any activity for providing cultural, charitable, educational, social or sporting services …” (emphasis added). Castletown Foundation Ltd has yet to raise particulars or deliver a defence in respect of the Landlord and Tenant Civil Bill.
40. It will be noted that there is a tension between the claim for a new business tenancy, and the covenant at Clause 2.17 of the Letting Agreement “to use the property as a residence only for the named tenant and his dependants.”
41. By letter dated 24th September, 2018 sent by the trustee to inter alia the defendant, notification of a change in the sale contract was given in the following terms:
“As you may know, last Friday (September 21) was the deadline for repayment of the Sancus loans. Sancus had formally warned that enforcement would follow in the event of non-payment. The effect of default with Sancus would have been to cause the loans from Barclays Bank and Falcon to fall into default also, under the cross – default provisions in the security documents, as well as raising the prospect of Sancus instructing an insolvency practitioner to realise trust assets.
I am therefore pleased to report that Sancus was paid this afternoon with a loan at 0% interest from the purchaser of the property. The loan is subject to retrospective repricing if the sale of Castletown does not complete in a timely manner.”
This was followed up with a letter of 2nd October, 2018 from A&L Goodbody solicitors for the plaintiff to Ivor Fitzpatrick explaining that “…there was a very real risk that Sancus would enforce its security to the severe detriment of the beneficiaries interests…” if this new agreement had not been reached. They further advised that these proceedings would be pursued “with vigour”, and that the purchaser had taken security over Castletown Cox “…and is in a position to exercise control over the asset upon short notice”.
Plaintiff’s Motion for Summary Judgment in Respect of Arrears of Rent
42. The principles to be applied by the court in determining whether or not to grant summary judgment, or refer on the issue to plenary hearing, were not in dispute. Per Ackner L.J. in Banque de Paris v de Naray [1984] 1 Lloyd’s Law Reports 21, at p. 23, approved by Murphy J. in First National Commercial Bank Plc v Anglin [1996] 1 IR 75, at p. 79, the essence of the test is: “Is there a fair or reasonable probability of the defendants having a real or bona fide defence?”.
43. This test was endorsed by the Supreme Court by Hardiman J. in Aer Rianta cpt v Ryanair Limited [2001] 4 IR 607 where he stated at p. 623:-
“In my view, the fundamental questions to be posed on an application such as this remain: is it “very clear” that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
44. The principles to be applied by the court in determining whether to grant judgment or give leave to defend were subsequently addressed by McKechnie J. in the High Court in Harrisgrange Limited v Michael Duncan [2003] 4 IR 1, at p. 7.
“9. From these cases it seems to me that the following is a summary of the present position:-
(i) the power to grant summary judgment should be exercised with discernible caution;
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case, there being several ways in which this may best be done;
(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff, being mindful at all times of the unavoidable limitations which are inherent on any conflicting affidavit evidence;
(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;
(v) where however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;
(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;
(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, “is what the defendant says credible?”, which latter phrase I would take as having as against the former an equivalence of both meaning and result;
(viii) this test is not the same as and should be not elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;
(ix) leave to defend should be granted unless it is very clear that there is no defence;
(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;
(xi) leave should not be granted where the only relevant averment in the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;
(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”
45. Counsel for the defendant emphasised the first of these principles, arguing that the court should proceed with particular caution because of the consequences that summary judgment would have on possibly affording the plaintiff a defence to the defendant’s claim for a new tenancy, by reason of s. 17(1)(a)(i) of the 1980 Act, which provides:-
“A tenant shall not be entitled to a new tenancy under this Part if—
(i) the tenancy has been terminated because of non-payment of rent, whether the proceedings were framed as an ejectment for non-payment of rent, an ejectment for overholding or an ejectment on the title based on a forfeiture…”
It was pointed out that Mr. Fanning, counsel for the plaintiff, had frankly stated the plaintiff’s real concern in seeking summary judgment was to deliver a “knock out blow” to the defendant’s claim to be entitled to a new tenancy, thus facilitating the completion of the sale.
46. While having regard to this submission in principle it seems to me that the court should not have regard to the consequences for a particular defendant of granting summary judgment where such is the plaintiff’s entitlement. Nor can I see why harbouring another motive for seeking summary judgment, provided it is not unlawful, could afford a reason in itself for refusing summary judgment in respect of a proven liquidated debt where it is clear that no bona fide defence is shown. These factors might however have a bearing on whether, in the exercise of the court’s discretion, a stay on the judgment should be granted. It is also noteworthy that in a submission made by the defendant’s other senior counsel in support of the motion to dismiss, counsel argued that the plaintiff is not in any event entitled to rely on s. 17(1)(a)(i) because there are no ejectment proceedings in being.
47. In para. 5 of his replying affidavit, the defendant raises three suggested bona fides defences. Two of these were not pursued and may be dealt with summarily.
48. The first was that the High Court has no jurisdiction to consider the arrears of rent in claim because it was “currently the subject of a referral to the [RTB].” This is a reference to the referral dated 10th May, 2018 mentioned above. However, this jurisdictional point is disposed of by s. 182(1) of the Residential Tenancy Act, 2004, which provides: –
“On and from the commencement of Part 6, proceedings may not be instituted in any court in respect of a dispute that may be referred to the Board for resolution under that Part unless one or more of the following reliefs is being claimed in the proceedings—
(a) damages of an amount of more than €20,000,
(b) recovery of arrears of rent or other charges, or both, due under a tenancy of an amount, or an aggregate amount, of more than €60,000 or such lesser amount as would be applicable in the circumstances concerned by virtue of section 115(3)(b) or (c)(ii).”
49. Assuming for present purposes – and this is also the subject of contention – that the 2004 Act applies to the Letting Agreement, it is quite clear that the High Court has jurisdiction by virtue of s. 182(1)(b) to hear and determine the claim for rent, which far exceeds the threshold of €60,000.
50. Secondly the defendant asserted that where rents were paid directly to a person whose usual place of abode is outside of Ireland (and the plaintiff is a BBI registered company) the claimant is obliged to deduct income tax at the standard rate from the payment (s. 104 of the Taxes Consolidation Act, 1997) (as amended) – the standard rate of withholding taxes is currently 20%. Although withholding tax is payable, this was withdrawn as a ” bona fide defence” in the defendant’s written submissions.
51. The defendant relied on two further matters:-
(1) The “agreement” for the upkeep and maintenance of Castletown House reached in 2005, and payments which he avers that he expended in the sum of €361,167.72 in the period June, 2017 to date, which he counterclaims.
(2) The claims for damages, including aggravated/exemplary damages, for trespass/ “forcible entry” on and since 23rd May, 2018.
Counterclaim for Maintenance/Upkeep
52. The factual basis for this is dealt with at paras. 12 – 21 in the defendant’s replying affidavit. He relies on an exhibited document “Castletown Estates Split of Irish expenses year ended 31st December, 2005” which he asserts sets out the percentages that each of the “parties hereto” were to make towards the maintenance and upkeep of Castletown Estate since 2005. It is far from clear precisely what agreement this affected, or between whom. However, there is other evidence to support an agreement such as the defendant suggests existed. In his second affidavit Mr. Benford states –
“15. As the Defendant himself concedes, the Plaintiff had an understanding with Castletown Estates Limited (a company controlled by the Defendant) that both the Plaintiff and the Defendant would contribute to Castletown Estates Limited … for the upkeep and maintenance of the property. There was never any suggestion that the Plaintiff was obliged to reimburse the Defendant in relation to his contribution.”
53. Notwithstanding this response, the defendant did not file any further affidavits to suggest that he, as opposed to CEL, has a counterclaim under this heading against the plaintiff.
54. At para. 14 of his affidavit, the defendant avers to certain payments that he made towards some maintenance and upkeep of Castletown -since 2010 (€56,201.59 plus VAT), and further contributions of €265,397.97 plus VAT since 2004. It is not clear whether these were the defendant’s payments, or in fact meant to refer to payments by the plaintiff, because two paragraphs further on the defendant states: “16. I am advised that payments made by me towards the upkeep and maintenance of Castletown House from 2010 to date amount to the sum of €1,612,563.65.”
55. None of these payments are broken down by subject matter or date, nor is there any vouching exhibited.
56. Mr. Benford at para. 82 of his principal affidavit accepted that the trustee had an agreement with the defendant and that it would contribute to CEL to help him in the maintenance and preservation of Castletown Cox, including the payment of wages of staff connected with the property. This suggests some form of collateral agreement such that the defendant may be entitled in law to sue/counterclaim directly against the plaintiff (or perhaps the trustee, who is not a party to the proceedings) in respect of breach of contractual commitment to CEL.
57. However, Mr. Benford indicates that the defendant’s annual contribution was to be in order of €475,000, made up of €100,000 rent and €375,000 to the related costs of running Castletown Cox. In an exhibited ‘Schedule of Payments’, the plaintiff claims that it has spent in excess of €22.5 million in acquisitions and significant refurbishments in assembling, modernising and improving Castletown Cox since 1999. At para. 84(c) Mr. Benford avers –
“From April, 2008 to April, 2017, the defendant’s proportion of the expenses owed to Castletown Estates Limited for distribution to staff and other third parties who provided services was €3,646,847. The Trustee’s records indicate that the Defendant has only made contributions of €1,121,564 for this period although it is acknowledged that it is unclear to the Trustee whether any payments were made by the Defendant in 2008 and 2009.”
58. Returning to this theme in para. 17 of his second affidavit, Mr. Benford notes that the defendant did not refute this in his replying affidavit, and he adds –
“17.1.2 the defendant has substantially failed to cover his share of expenses. In my previous affidavit I pointed out that the defendant had only paid €1,121,564 of a total of €3,646,847. The Defendant has not meaningfully refuted this. Rather according to paras. 14 and 16 of his affidavit, he has contributed a total of €1,934,163.20. Even if it is accepted that the defendant did make a contribution in the sum claimed (and that is denied by the plaintiff) it is still substantially short of the €3,646,847 total due from the defendant.
17.1.3 The Plaintiff has made contributions to [CEL] (in the manner particularised in my grounding Affidavit in para. 83) in excess of what the plaintiff’s obligation was pursuant to the understanding between the plaintiff and CEL by an amount of €872,696 as at 5th April, 2017. That is a sum which CEL, controlled by the defendant, owed to the plaintiff at that date (and I refer to para. 84 of my grounding affidavit in that regard).
17.1.4 Rents were paid by the owners of cottages and other premises in Castletown Cox to CEL in the amount of €527,310 for the period 2008-2017 that should have been remitted to the plaintiff as the owner of Castletown Cox – but were not.”
59. It is significant that the defendant has not filed any further affidavit refuting Mr. Benford’s averments. This is surprising because it seems inevitable that if the counterclaim in respect of these contributions went to plenary hearing, the court would be required to consider evidence covering contributions made, not just since June 2017, but going back to 2008 and possibly further to 2005, in order to determine the dispute.
60. While the court should not encourage trial by affidavit, and must be mindful of the limitations inherent in the exchange of affidavits, it cannot ignore the significance of Mr. Benford’s evidence in two affidavits, and the absence of any coherent or persuasive response. The Court is left with uncontested evidence of contributions by the plaintiff towards maintenance that far exceed those that may have been made by the defendant over time. In the absence of any meaningful response by the defendant the averments in his affidavit as to his contributions carry little weight and are reduced to the point of being “mere assertions”. Thus while it is arguable the defendant could rely on a collateral contract as the legal basis for a counterclaim against the plaintiff (as opposed to CEL or the trustee), I am not satisfied that there is any evidential basis for any bona fide defence or counterclaim under this heading.
61. There is a second and separate reason for coming to this view, even if the defendant could show a bona fide counterclaim for maintenance payments. The defendant claims that such a counterclaim would entitle him to an equitable set off. In written submissions Counsel refers to McGrath v O’Driscoll [2007] 1 ILRM 203 in which Clarke J. (as he then was) held –
“Two separate questions appear to arise. The first is as to whether the counterclaim can be said to amount to a defence. It is clear from Prendergast v Biddle and also from Axel Johnson Petroleum A.B. v Mineral Grou p [1992] 1 WLR 270, that where a counterclaim arises out of circumstances which are sufficiently connected to a claim, a set off in equity arises because it would be inequitable to allow the plaintiff’s claim without taking the defendant’s cross claim into account.”
In Moohan v S.& R. Motors (Donegal) Ltd [2008] 3 IR 650, at para. 4.6, Clarke J. elaborated on the approach the court should take:
“4.6 On that basis the overall approach to a case such as this (involving, as it does, a cross-claim) seems to me to be the following: –
(a) it is firstly necessary to determine whether the defendant has established a defence as such to the plaintiff’s claim. In order for the asserted cross-claim to amount to a defence as such, it must arguably give rise to a set off in equity and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendant’s case, it would not be inequitable to allow the asserted set off;
(b) if and to the extent that a prima facie case for such a set off arises, the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an appropriate proportion of) the claim (or have same, in a case such as that with which I am concerned, referred to arbitration);
(c) if the cross-claim amounts to an independent claim, then judgment should be entered on the claim but the question of whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast v Biddle.”
A question arose in that case as to whether equitable set off was excluded by the terms of the contract between the parties. A similar question arises in the present case. Clarke J. approached this as follows: –
“5.6 it seems to me, therefore, that the overall test is as to whether, as a matter of construction of the contract taken as whole, it can properly be said that the parties have agreed that there can be no set off.”
62. First, I am not satisfied that the asserted counterclaim arises out of “the same set of circumstances as give rise to the claim”, or that it is “sufficiently connected” (per Clarke J. in McGrath v O’Driscoll ). The claim to arrears of rent, which is in effect not disputed, arises under the Letting Agreement agreed between the parties in 2010. By contrast the counterclaim for maintenance and upkeep arises under an agreement pleaded as being entered into in 2005. Moreover, the uncontested affidavit evidence from Mr Benford indicates that such “arrangement” was not made directly between the defendant and the plaintiff or the trustee, but rather was made between the defendant and CEL.
63. Secondly clause 2.7 of the Letting Agreement contains an agreement by the tenant “not to reduce any payment of rent by making any deductions from it or by setting any sum off against it.”
64. Counsel for the defendant argued that equitable set off of the counterclaim is not expressly excluded by clause 2.7, and reliance was placed on a passage from Wylie’s Landlord and Tenant Law , 3rd Edition (2014) where the author, after drawing the distinction between a counterclaim which is “in substance a separate action” and a right to deductions or set off, states “It is, therefore, wise for a landlord seeking to exclude such rights so far as possible in law to refer to all categories, e.g. by having the tenant covenant to pay all rent “without any set/off, counterclaim or deductions whatsoever”.
Professor Wylie in a footnote to this sentence references Laffoy J., Irish Conveyancing Precedents . While it may be prudent to adopt such wording, this does not assist the court in construing clause 2.7.
In the next sentence Prof Wylie states: “The courts have made it clear that if a lease refers only to “deductions” this does not include a right of set-off.” The footnoted authorities for this are Irish Life Assurance Plc. v Quinn [2009] IEHC 153; Westpark Investments Limited v Leisureworld Limited [2012] IEHC 343; Connaught Restaurants Limited v Indoor Leisure Limited [1994] 4 ALL ER 934 and Sheridan Millennium Limited v Village Theatres Limited [2008] NI Ch 9.
65. These authorities were not opened to the court, but having checked all except Sheridan , I find that they are concerned only with express clauses preventing a tenant from making “deductions”. In Irish Life Assurance Plc , Dunne J. was concerned with the deduction of service charges by a tenant, and stated (at pg 7): “I do not accept that the phrase “without any deductions” means that the defendant contracted out of the right to an equitable set-off.”
In Westpark , Hogan J. was concerned with alleged breach by the plaintiff of car park arrangements in respect of which the defendant raised a counterclaim, and he held that the phrase “without any deductions” was not necessarily inconsistent with the right to equitable set-off. Similarly in Connaught , the UK court was asked to construe a clause containing the words “without any deductions”, and found that it was ambiguous and insufficient to exclude a right to claim set off.
These authorities do not assist the defendant because they did not concern any clauses expressly excluding “set – off”.
66. The first rule of contractual construction requires that -“the words of a contract should be interpreted in their grammatical and ordinary sense in context, except to the extent that some modification is necessary to avoid absurdity, inconsistency or a pregnancy.”(See Bywater Properties Investments LLP v Oswestry Town Council [2014] EWHC 310 (Ch)).
67. In my view the words “by setting any sum off against it” in clause 2.7 by their plain and ordinary meaning clearly refer to any set – off, and are unambiguous. In this context I cannot discern any material difference between a set-off that a defendant is entitled to make at law e.g. under an express contract term, and a right to equitable set- off arising from a cross-claim. If they are to be differentiated it may be said that the defendant with a contractual right to set off should be in a stronger position than the defendant relying on an equitable set – off. Moreover, use of the word “any” shows the intention of the parties was that the tenant would not be entitled to rely on any set – off, regardless of the basis for such set – off. It must therefore be concluded that clause 2.7 precludes the defendant from equitable set off in respect of his cross-claim for maintenance/upkeep contributions.
Counterclaim for Damages/Aggravated Damages
68. I am satisfied that this also does not give rise to any bone fide defence to the claim for arrears of rent for a number of reasons.
69. First, insofar as the claim to damages might give rise to an equitable set – off, as with the claim for maintenance/upkeep contributions, this is expressly precluded by clause 2.7. It can only be raised as an independent counterclaim.
70. Secondly the Particulars pleaded in the Counterclaim base the claim on a wrongful taking of possession occurring at a time when the defendant had referred the validity of the second Termination Notice to the RTB. However the plaintiff was not put on notice of the referral until 24th May, 2018, one day after the repossession.
71. Thirdly the defendant has not particularised in the Defence/Counterclaim, or on affidavit, any special damages or losses said to have been caused by the alleged trespass, and no attempt has been made to quantify the claim to damages. This may not be that surprising as none of the Magan family were in occupation at the time of repossession, and the defendant has a residence in London.
72. I also bear in mind the open offer made by the plaintiff’s solicitors on 25th May 2018 allowing the defendant and his family to stay at Castletown Cox from then until 3rd August 2018, albeit on the basis that they would then vacate in order to allow the sale of the property to be completed, and on foot of certain related undertakings. Acceptance of this would have minimised the defendant’s losses (if any), and arguably would not have prevented or prejudiced the claim subsequently made by the defendant for a new tenancy under the 1980 Act.
Conclusion on Application for Summary Judgment
73. For the reasons given above the plaintiff is entitled to summary judgment against the defendant in respect of the arrears of rent up to and including 12th April 2018 in the sum of €571,893. I will hear counsel further in relation to –
(a) the framing of the order to reflect the obligation of the defendant to withhold and remit to the Collector General 20% by way of Withholding Tax;
(b) the claim to interest pursuant to the Courts Act 1981;
(c) whether there should be any stay on the judgment.
The Defendant’s Application to Dismiss
74. The defendant seeks to have dismissed all of the plaintiff’s claim as pleaded in the general indorsement of claim on the plenary summons (and as similarly pleaded in the Statement of Claim), with the exception of two reliefs sought (which will be addressed shortly), as follows:-
“General Indorsement of Claim
1. A declaration that the tenancy entered into between the Plaintiff and the Defendant dated 15 December 2010 (the Letting Agreement) in relation to the Property (more particularly described in the schedule hereto) has been validly terminated for, inter alia , the failure of the Defendant to pay rent due and owing thereunder.
2. A declaration that the Defendant is not entitled to seek a new tenancy or other relief pursuant to Part Il of the Landlord and Tenant Act, 1980 as amended by virtue of section 17 thereof including, but without limitation, because the Letting Agreement has been terminated because of non-payment of rent and/or breach of covenant
3. A declaration that the Defendants intended application to court for relief for a new tenancy pursuant to Part II of the Landlord and Tenant Act 1980 (as amended) is an abuse of process.
4. An injunction restraining the Defendant from applying to the Court to seek relief in relation to a new tenancy of the Premises pursuant to sections 20 and 21 of the Landlord and Tenant Act 1980 (as amended) on the grounds that same constitutes an abuse of process.
5. An injunction restraining the Defendant, his servants or agents, from entering the Property without the consent of the Plaintiffs and/or otherwise interfering with, obstructing, hindering or frustrating the sale of the Property and/or in dealing with same.
6. If necessary, an injunction, pending the arbitration of a dispute between the parties, restraining the Defendant, his servants or agents, from interfering with, obstructing, hindering or frustrating the Plaintiff in dealing with the objects and chattels at or in the Property.
7. Judgment in the sum of €571,1393, not including interest, representing arrears of rent due and owing prior to the termination of the Letting Agreement.
8. Damages for breach of contract.
9. Damages for unlawful interference with the Plaintiffs economic interests and contractual relations.
10. Damages for the tort of abuse of process.
11. Interest pursuant to the provisions of the Courts Act 1981, as amended.
12. Such further or other orders as this Honourable Court may deem fit.
13. Costs.”
75. The defendant did not pursue the relief sought at 7 above, accepting that the High Court had jurisdiction to hear and determine the claim in respect of rent. Counsel also did not seek to dismiss the relief sought at 6 above, which relates to matters pleaded at paras. 26 – 30 of the Statement of Claim in relation to the “Chattels Agreement”. In essence, the plaintiff claims that the defendant is in arrears in respect of monies due under the Chattels Agreement, and the dispute in relation to that, and whether the Chattels Agreement is valid, has been referred to arbitration, and the continued pursuit of this relief is dependent on the outcome of that arbitration.
76. The essence of the defendant’s argument in respect of the balance of the claim is, first, that the issue in relation to the validity of the second Termination Notice has been referred to the RTB and is a matter for it to decide, and, secondly, as the Circuit Court has exclusive jurisdiction to determine the defendant’s entitlement to a new tenancy pursuant to Part II of the Landlord and Tenant Act 1980, that is not a matter for the High Court – and the defendant argues that all these claims (and related reliefs) are, therefore, an abuse of the process.
77. In further support of this legal contention, counsel relies on what it asserts was a “forcible entry” in the “dawn raid” by the plaintiff’s agents on 23rd May, 2018, which it is suggested amounted to a criminal offence, and the continuing refusal to restore possession. It also relies on the failure of the plaintiff to register the defendant’s tenancy under the 2004 Act; that the trustee is in breach of fiduciary duty by enhancing the power of the purchaser to the detriment of the defendant and beneficiaries in allowing the purchaser to take over the Sancus security; and the absence of any replying affidavit to the grounding affidavit of Mr. Ivor Fitzpatrick sworn on 20th July, 2018.
78. This last point is nihil ad rem , because the plaintiff’s solicitor in a letter dated 5th September, 2018, indicated that the plaintiff would be relying on Mr. Benford’s affidavit sworn on 4th July, 2018, and the other affidavits sworn in the context of the plaintiff’s application for summary judgment, the pleadings and legal submissions. I am satisfied that this was an appropriate approach to take, being efficient and cost saving, and that the plaintiff can rely on those affidavits sworn, as they are, within the same proceedings.
79. As to the failure of the plaintiff to register the Letting Agreement as a residential tenancy – and assuming that it was indeed a residential tenancy for the purposes of the 2004 Act (a matter that is disputed) – pursuant to the obligation to register it arising under s. 134 of the 2004 Act, this would seem to have no real relevance. It has the effect, so far as a landlord is concerned, that s. 83(2) of the 2004 Act applies, and this simply provides that “…the Board shall not deal with a dispute in relation to a tenancy referred to it under this Part by the landlord of the dwelling concerned if the tenancy is not registered under Part 7”. However, no dispute between the parties has ever been referred by the plaintiff to the RTB.
80. As to the purchaser discharging the Sancus debt and acquiring the security, on a consideration of the evidence as a whole, including the judgment and orders of the Royal Court of Jersey where the defendant had an opportunity to be heard, I accept the plaintiff’s evidence that this arrangement had a legitimate objective namely to preserve the trust assets. In particular it was reasonable, having regard to the expressed concern that Sancus would foreclose, that the sale would be lost and the trust assets would have been at risk of being diminished if a “fire sale” ensued. For the purposes of this application I find that this new arrangement was properly undertaken for the preservation of the trust assets and with the best interests of the beneficiaries in mind.
Validity of Second Termination Notice
81. With regard to the defendant’s contention that the RTB is seised of the dispute over the validity of the second Termination Notice, the issue is whether, from the plaintiff’s perspective, it is arguable that this is not so, leaving it open to the High Court to determine the validity of the purported termination.
82. I am satisfied that if the second Termination Notice dispute has been properly referred to the RTB and falls within its jurisdiction, section 86(1)(c) of the 2004 Act has the effect that “a termination of the tenancy concerned may not be effected”. While subsection (2) does disapply s.86(1)(c) in certain circumstances, it in turn does not apply to a s.86(3) “dispute relating to the validity of the notice of termination”, which is therefore covered by s.86(1)(c).
83. The plaintiff however argues that this dispute has not been validly referred to the RTB, or that the RTB cannot adjudicate on it. The plaintiff relies on s.3 of the 2004 Act, which is concerned with the application of that Act. The basic provision is s.3(1):
“(1) Subject to subsection (2), this Act applies to every dwelling, the subject of a tenancy (including a tenancy created before the passing of this Act).”
Subsection (2) then lists tenancies to which the 2004 Act does not apply, and so far as relevant provides:
“(2) Subject to section 4(2), this Act does not apply to any of the following dwellings:
(a) a dwelling that is used wholly or partly for the purpose of carrying on a business, such that the occupier could, after the tenancy has lasted 5 years, make an application under section 13(1)(a) of the Landlord and Tenant (Amendment) Act 1980 in respect of it,
…
(i) a dwelling the subject of a tenancy granted under Part II of the Landlord and Tenant (Amendment) Act 1980 or under Part III of the Landlord and Tenant Act 1931 or which is the subject of an application made under section 21 of the Landlord and Tenant (Amendment) Act 1980 and the court has yet to make its determination in the matter.”
84. Notwithstanding that the Letting Agreement has an express user covenant providing that Castletown House be used as a residence only for the defendant and his dependants, the defendant’s claim to new tenancy is firmly based on a business user and qualification under section 13(1)(a) of the 1980 Act. If that claim is established it follows that the 2004 Act simply does not apply, and the High Court has jurisdiction to determine the issue of validity of the second Termination Notice.
85. But if there is any doubt about that, it is arguable that the dis-application of the 2004 Act is put beyond dispute by section 3(2)(i). In particular the second limb of that provision, from the word “or” onwards, arguably has the effect that the moment the defendant filed the Landlord and Tenant Civil Bill dated 18 July 2018 bringing an application under Part II of the 1980 Act for a new tenancy in the property, the 2004 Act ceased to apply to his tenancy.
86. While a determination on this is a matter for the trial judge, the plaintiff has made out an arguable case. It follows therefore, and I so determine, that the plaintiff’s claims in these proceedings related to the purported termination of the letting agreement, and related reliefs such as those sought at no’s 1 and 5 in the Plenary Summons, should not be struck out or dismissed on any of the grounds raised by the defendant.
The Claim for a Declaration that the Defendant is Not Entitled to a New Tenancy
87. Turning to the defendant’s second jurisdictional point, this is of more substance. Section 3 of the Landlord and Tenant (Amendment) Act 1980 designates the Circuit Court as the court having statutory jurisdiction to determine the right to a new tenancy to which a tenant may be entitled under Part II of the Act. It is not disputed that the defendant’s Notice of Intention to Claim Relief was served under s. 20 of the Act, and that the application for relief in the form of the Landlord and Tenant Civil Bill has been properly served “not less than one month” after the Notice of Intention to Claim Relief. These provisions all fall within Part II of the 1980 Act and it is not disputed that the Circuit Court has exclusive jurisdiction to grant relief under that Act in the form of a new tenancy, or compensation, such as compensation for improvements or for disturbance. Moreover, only the Circuit Court can fix the terms of any new tenancy in the absence of agreement.
88. It was confirmed at hearing that the defendant’s application in the Landlord and Tenant Civil Bill is for a new business tenancy arising under s. 13(1)(a) of the 1980 Act. This requires that the defendant must establish that – “the tenement was, during the whole of the period of five years ending at that time, continuously in the occupation of the person who was a tenant immediately before that time or of his predecessors in title and bona fide used wholly or partly for the purposes of carrying on a business…”.
89. It is no surprise that the defendant relies on a business equity because s.192(2) of the 2004 Act provides that “…on and from the fifth anniversary of the relevant date, Part II of the Act of 1980 shall not apply to a dwelling to which this Act applies.” This means that from 1st September, 2009 i.e. five years on from the commencement of the 2004 Act under S.I. No. 505 of 2004, residential tenancies to which the 2004 Act applies could no longer qualify for a new tenancy under Part II of the 1980 Act, whether on the basis of business use or long possession (20 years occupation). Only if the tenancy falls outside the 2004 Act can there be an entitlement. This does mean that any arguments that the defendant pursued before this court based on a valid and subsisting reference to the RTB of the dispute as to validity of the second Termination Notice are fundamentally inconsistent with the defendant’s claim to be entitled to a new business tenancy.
90. While no particulars are given in the Landlord and Tenant Civil Bill, and no Notice for Particulars has yet been raised, counsel for the defendant indicated that the business user relied upon by the defendant is that summarised in para. 9 of the affidavit which he swore on 31st August, 2018, namely the regular holding of “events for International Georgian Societies and Horticultural Societies at Castletown House & Estate…”.
91. It will be recalled that the second relief sought by the plaintiff in these proceedings is:-
“A declaration that the defendant is not entitled to seek a new tenancy or other relief pursuant to Part II of the Landlord and Tenant Act 1980, as amended by virtue of s. 17 thereof including, but without limitation, because the Letting Agreement has been terminated because of non-payment of rent and/or breach of contract.”
The third, fourth and fifth reliefs seek related declarations and an injunction. These four reliefs are replicated at paragraphs 32 – 35 of the Statement of Claim.
92. Section 17, which falls within Part II of the 1980 Act, so far as it is relevant provides:-
“(1)(a) A tenant shall not be entitled to a new tenancy under this Part if—
(i) the tenancy has been terminated because of non-payment of rent, whether the proceedings were framed as an ejectment for non-payment of rent, an ejectment for overholding or an ejectment on the title based on a forfeiture, or
(ii) the tenancy has been terminated by ejectment, notice to quit or otherwise on account of a breach by the tenant of a covenant of the tenancy, or
(iii) the tenant has terminated the tenancy by notice of surrender or otherwise, or
(iiia) if section 13(1)(a) (as amended by section 3 of the Landlord and Tenant (Amendment) Act 1994) applies to the tenement, the tenant has renounced in writing, whether for or without valuable consideration, his or her entitlement to a new tenancy in the tenement and has received independent legal advice in relation to the renunciation, or
(iiib) if section 13(1)(b) applies to the tenement (and the tenement is one to which the Residential Tenancies Act 2004 applies), the tenant had completed and signed, whether for or without valuable consideration, a renunciation of his or her entitlement to a new tenancy in the tenement and has received independent legal advice in relation to such renunciation, or
(iv) the tenancy has been terminated by notice to quit given by the landlord for good and sufficient reason, or
(v) the tenancy terminated otherwise than by notice to quit and the landlord either refused for good and sufficient reason to renew it or would, if he had been asked to renew it, have had good and sufficient reason for refusing.
(b) In this subsection ‘good and sufficient reason’ means a reason which emanates from or is the result of or is traceable to some action or conduct of the tenant and which, having regard to all the circumstances of the case, is in the opinion of the Court a good and sufficient reason for terminating or refusing to renew (as the case may be) the tenancy.
(2)(a) A tenant shall not be entitled to a new tenancy under this Part where it appears to the Court that—
(i) the landlord intends or has agreed to pull down and rebuild or to reconstruct the buildings or any part of the buildings included in the tenement and has planning permission for the work, or
(ii) the landlord requires vacant possession for the purpose of carrying out a scheme of development of property which includes the tenement and has planning permission for the scheme, or
(iii) the landlord being a planning authority, the tenement or any part thereof is situate in an area in respect of which the development plan indicates objectives for its development or renewal as being an obsolete area, or
(iv) the landlord, being a local authority for the purposes of the Local Government Act, 1941, will require possession, within a period of five years after the termination of the existing tenancy, for any purpose for which the local authority are entitled to acquire property compulsorily, or
(v) for any reason the creation of a new tenancy would not be consistent with good estate management.
(b) In the case of certain dwellings and business premises to which this subsection applies the tenant is entitled to compensation for disturbance under Part IV.”
93. It should be noted that the plaintiff in its pleadings does not limit its claim that the defendant is disentitled under s.17(1)(a) (termination for non-payment of rent). Disentitlement is pleaded based on s.17 “without limitation”. It may transpire, for instance, that s.17(2)(a) (creation of new tenancy not consistent with good estate management) may have relevance in circumstances where the Royal Court of Jersey was persuaded to order a sale because of financial prudence (it took into account the “commercial realities faced by the [trustee]”) and in the best interests of the beneficiaries. At paragraph 54 of its Judgment dated 9th November, 2017 that court stated:
“54. In the view of the Court, the [trustee] was acting responsibly in very difficult circumstances. Its decision that the country house should be sold was both rational and honest and one which any reasonable trustee properly instructed could have arrived at. It was a decision that merited the support of the Court.”
94. Both counsel addressed jurisprudence which suggests that in certain circumstances the High Court may determine whether a tenant could be entitled to a new tenancy under the 1980 Act. Counsel for the defendant argued that this only applied to a case where there was urgency, and then only in respect of a clear-cut failure by a tenant to qualify for a “threshold” statutory requirement such as ‘five years business user’.
95. Counsel for the plaintiff on the other hand argued that under its residual jurisdiction the High Court could determine, at least in a clear case, exclusions under section 17, and contended that this could be viewed as an urgent case.
96. In Kenny Homes Co Ltd v Leonard and Lecorn Limited (unreported High Court, Costello P., and unreported Supreme Court, 18 June, 1998), Costello P. on a preliminary issue held that the exclusive jurisdiction of the Circuit Court did not deprive the High Court of the jurisdiction to grant an injunction against the defendant trespasser who was occupying a filling station/garage on foot of an expired license agreement from Shell, even though the occupier had claimed entitlement to a new tenancy under the 1980 Act. Reference to this preliminary issue appears in the subsequent judgment of Costello P. ([1997] IEHC 230) where he states:
“I concluded that (a) the Circuit Court had exclusive jurisdiction under the 1980 Act to hear and determine claims for a new tenancy, (b) that the present proceedings were for injunctive relief based on a claim that the defendants were trespassers (c) that the 1980 Act did not deprive this court of jurisdiction to hear such a claim, (d) that ordinarily, where a right to a new tenancy under the 1980 Act was contested on the ground that a “tenancy” did not exist or that the premises were not a “tenement” these issues should be determined in the Circuit Court and this Court should stay proceedings in which these issues were raised, that (e) because of the particular urgency in this case the court should not decline jurisdiction, that (f) should the court decide that (i) the agreement of the 1 October, 1994 constituted a “tenancy” and (ii) the site constituted a “tenement” within the meaning of the Act then section 28 of the Act applied and Lecorn would be entitled to retain possession pending the determination in the Circuit Court of the application for a new tenancy, and I would accordingly dismiss these proceedings. I therefore decided to hear oral evidence and determine these two issues. Should I decide them in Lecorn’s favour, the Circuit Court would then be required to determine whether or not a new tenancy should be granted in light of the plaintiff’s intended use of the site and perhaps the issue of compensation.”
97. Costello P., having heard the evidence, determined that Mr Leonard did not hold the site under a lease or contract of tenancy, and accordingly that neither he nor Lecorn had the right to a new tenancy under the 1980 Act. He further held that the premises was not a “tenement” in circumstances where a portion of the land was not covered by buildings and he was unconvinced by the defendant’s assertion that “the parking area is ancillary and subsidiary to the buildings associated with the filling station building”.
98. The Supreme Court (Lynch J.) affirmed Costello P. in respect of the preliminary issue, stating: –
“I agree with these views and in doing so I have regard to Articles 34 Section 3(1) of the Constitution, the decision of the former Supreme Court in the case of Walpoles (Ireland) Ltd v Dixon [1935] 69 I LTR 232 and the decisions of the High Court in R v R [1984] IR 296 and O’R v O’R [1985] IR 367. Accordingly the appeal insofar as it relates to the preliminary issue fails and must be dismissed.”
The Supreme Court also affirmed the High Court in respect of its substantive findings.
99. In Walpoles (a decision affirmed by the Supreme Court) the landlord had sought ejectment in the High Court in circumstances where the tenant had made an application for a new tenancy to the Circuit Court under the Landlord and Tenant Act 1931. In rejecting an application for the High Court proceedings to be adjourned pending the outcome of the circuit court proceedings, O’Byrne J. stated ( at p.233): “I would certainly take that course of action if I thought there was any substantial grounds on which such application might be granted, but in my opinion, having regard to the facts of the case… Such an application could not possibly succeed.”
In the penultimate paragraph of his judgment O’Byrne J. stated: “The difficulty which arises on the threshold of this case, from the point of view of [the tenant]… Is that the premises with which we are concerned do not seem to me to come within the definition of a tenement.”
Both Kenny Homes and Walpole were cases where the court decided that the threshold for entitlement to a new tenancy was not met.
100. It is also worth noting the submissions of counsel in Kenny Homes as to the urgency of the High Court/Supreme Court determining the issue of entitlement in that case. These were first, that his clients “were not insured in respect of the risks inherent in the presence of a filling station on the premises”; and second, “time limits that applied to the premises regarding their status as part of a designated area, the Respondents stood to incur very substantial losses if they were unable to avail within those time limits of the planning permission which they had obtained for the development of the premises.”
101. Kenny Homes was recently considered by Barrett J. in Cuprum Properties Limited (Acting by its Joint Receivers and Managers) v Murray [2017] IEHC 699. There, a publican sought to exercise his rights to seek a new tenancy under the 1980 Act. The plaintiff receivers brought proceedings to restrain the publican from exercising his rights in circumstances where he had in fact executed a deed of renunciation of his right to a new tenancy and was therefore not entitled to a new tenancy by virtue of section 17(1)(a)(iiia). The plaintiffs asserted that delay to a proposed development caused by the publican exercising his rights under the 1980 Act would result in losses amounting to millions of Euro, and that the High Court should therefore accept and exercise jurisdiction.
102. Barrett J. seems to have regarded Kenny Homes as meaning that the High Court could only in urgent cases determine the threshold for entitlement under the 1980 Act. At paragraph 26 he states: –
“26. To paraphrase what Costello P. is a saying in the last-quoted text is “If I decide that Lecorn is a tenant and if I decide that I am confronted with a tenement, then I have no jurisdiction to go any further”. There is, with every respect, no intellectually respectable argument which could persuade the court that Kenny Homes means anything other than that.”
Barrett J. also rejected the idea that simply because a case has been admitted into the Commercial Court that there is some “free-standing urgency” ground on which the comprehensive provisions of the Act of 1980 can in effect be side-stepped in proceedings such as those now presenting “fast – track” through the Commercial Court” (para. 25). He concluded that “having particular regard to the decision of the Supreme Court in Kenny Homes , the court is coerced as a matter of law into concluding that the within proceedings must now be dismissed for want of jurisdiction.” (Para. 28).
103. The other recent decision is that of Emo Oil Limited v Oil Rig Supplies [2017] IEHC 594, where McDermott J. was content to proceed to determine an interlocutory injunction application as to whether the plaintiff should be entitled to vacant possession notwithstanding that the defendant had issued a claim for statutory relief for a new tenancy in the Circuit Court. That was also the case in which the plaintiff relied, inter alia , on a deed of renunciation executed by the tenant. However, unlike Kenny Homes which Costello P. treated as the trial of the action, it was only an interlocutory hearing. No question appears to have arisen as to the High Court’s jurisdiction to grant an interlocutory injunction, which was granted but stayed so long as the defendant paid a monthly equivalent of the rent. The possibility of the High Court not having jurisdiction because of the existence of Circuit Court proceedings it is not considered in the judgment.
Discussion
104. Clearly the Circuit Court, and that court alone, has original jurisdiction to grant a new tenancy, or to determine and grant compensation for disturbance or improvements, where such entitlements are proven to exist under the 1980 Act. However, as the Supreme Court noted by its reliance in Kenny Homes on Article 34.3.1, the High Court is invested with full original jurisdiction. This entitles the High Court in appropriate cases to determine issues concerning a claimed entitlement to a new tenancy.
105. It is difficult to discern as a matter of principle why such matters should be limited to determining whether a premises is a “tenement” or whether it is held under a “contract of tenancy”. The definition of “tenement” is contained in section 5(1) of the 1980 Act, and it is worthwhile reproducing this because it indicates the extent of the conditions that must be satisfied: –
“5. (1) In this Act “tenement” means –
(a) premises complying with the following conditions:
(i) they consist either of land covered wholly or partly by buildings or of a defined portion of a building;
(ii) if they consist of land covered in part only by buildings, the portion of the land not so covered is subsidiary and ancillary to the building;
(iii) they are held by the occupier thereof under a lease or other contract of tenancy express or implied or arising by statute;
(iv) such contract of tenancy is not a letting which is made and expressed to be made for the temporary convenience of the lessor or lessee and (if made after the passing of the Act of 1931) stating the nature of the temporary convenience; and
(v) such contract of tenancy is not a letting made for or dependent on the continuance in any office, employment or appointment of the person taking the letting;
or
(b) premises to which section 14 or 15 applies.”
Section 14 relates to premises which, prior to 1960, were subject to the Rent Restrictions Act 1946 provided they were not letting for temporary convenience, or dependent on the continuance of the tenant in any office or employment.
Section 15 relates to “a dwelling, being a house or a separate and self-contained flat, which immediately before the passing of the Rent Restrictions (Amendment) Act, 1967, was a controlled dwelling” subject to certain rateable valuation requirements of some complexity.
106. These provisions raise many potential issues which Kenny Homes suggests can be determined by the High Court in an appropriate case. It is notable that in that case Costello P. at full trial determined not only the question of whether there was a contract of tenancy, but also whether land not covered by buildings was subsidiary and ancillary to the filling station.
107. While these issues have been described as “threshold” issues, in my view they are better characterised as issues related to conditions that must be satisfied for a tenant to have an entitlement to claim a new tenancy. Why then should the High Court be excluded, even in an urgent case, from determining whether a tenant is disentitled to a new tenancy by virtue of section 17, or at any rate by virtue of one of the circumstances provided for in section 17(1) or (2) where no discretion is vested in the Circuit Court? I cannot discern any difference in principle between issues raised by section 5 and disentitlement issues raised in section 17. This question of principle does appear to have been addressed in Cuprum , and with the greatest of respect to Barrett J. I do not accept that the decision of Costello P. in Kenny Homes is as narrow in effect as he suggests in paragraph 26 of his judgment. Section 17 sets out restrictions on entitlement which could equally be regarded as circumstances or conditions which prevent a tenant having an entitlement. The drafters of the legislation and the Oireachtas cannot have intended that issues arising under section 5 could be determined by the High Court in an urgent case, but issues arising under section 17 could not.
108. What does emerge clearly from the jurisprudence is that the High Court should only determine issues of entitlement under the 1980 Act where there is urgency. This is very important in light of the statutory jurisdiction of the Circuit Court which this court should respect.
Urgency
109. In my view the case for urgency is not made out by the plaintiff, or at any rate does not survive either or both of (1) the purchaser taking over the Sancus debt and security, and (2) this court’s decision to grant summary judgment in respect of the arrears of rent.
110. So far as the court and the parties have been informed, the trustee’s loan interest obligations have now reduced to 0%, although “the loan is subject to retrospective repricing if the sale of Castletown does not complete in a timely manner.” (Trustees letter by email of 24th September, 2018). Although the purchaser “is in a position to exercise control over the asset upon short notice” (A & L Goodbody letter of 2nd October, 2018), there is no evidence to suggest that this is imminent or will even happen in the medium term or within an agreed timeframe. Nor is there any evidence that the plaintiff and purchaser cannot await the determination of the defendant’s claim to a new tenancy in the Circuit Court, or that the plaintiff or trustee are not in a position to preserve and maintain Castletown Cox over the period of time within which it may be anticipated the Circuit Court will determine the Landlord and Tenant Civil Bill – in respect of which the plaintiff herein has yet to seek particulars or deliver a defence. By comparison there was real urgency in Kenny Homes (lack of public liability insurance and the running of “designated area” time limits).
111. However while the issue of entitlement to a new tenancy should proceed in the normal way in the Circuit Court, I am of the view that the plaintiff should not be precluded from litigating section 17 issues in the High Court if, before a trial is reached in the Circuit Court, there is genuine and supervening urgency that justifies the High Court exercising its jurisdiction. This is not to be taken as a licence for the plaintiff to prompt the purchaser into actions that bring matters to a head, and should the High Court be asked to try the section 17 issues “as a matter of urgency” it will be incumbent on this court to scrutinise the relationship and correspondence between the plaintiff and the purchaser in its entirety before acceding to any such request.
Conclusion
112. Accordingly rather than striking out the reliefs sought at numbers 2, 3, 4 and 5 in the Plenary Summons – being the reliefs at numbers 32 – 35 inclusive in the Statement of Claim, and related pleas – I will grant a stay on the plaintiff pursuing those reliefs pending the final determination of the Landlord and Tenant Civil Bill, but I will grant the plaintiff liberty to apply.
113. While I have already determined that the plaintiff is entitled to pursue its claim in relation to the validity or otherwise of the purported termination of the Letting Agreement for non-payment of rent, I am of the view that it would not be an efficient or cost saving exercise for that issue to be determined in isolation by this court. Rather it should be determined by the Circuit Court because it will inevitably arise as an issue that falls to be determined under section 17. In conclusion absent compelling urgency these issues should be determined in a timely fashion at the trial of the Landlord and Tenant Civil Bill proceedings. While I will hear the parties further in relation to this, I propose to apply the stay to this issue also.
Summary
114. There will be summary judgment against the defendant in respect of the arrears of rent up to and including 12th April, 2018 in the sum of €571,893. I will hear counsel further in relation to –
(a) the framing of the order to reflect the obligation of the defendant to withhold and remit to the Collector General 20% by way of Withholding Tax;
(b) the claim to interest pursuant to the Courts Act 1981;
(c) whether there should be any stay on the judgment.
115. The court declines to strike out or dismiss the plaintiff’s claims in these proceedings related to the purported termination of the Letting Agreement dated 15th December, 2010, and related reliefs such as those sought at no.s 1 and 5 in the Plenary Summons, on any of the grounds raised by the defendant. I will hear the parties further in relation to staying the plaintiff’s claims to these reliefs in these proceedings pending the determination in the Circuit Court of issues that may arise as to the validity of the purported termination of the Letting Agreement.
116. The court declines to strike out the reliefs sought at numbers 2, 3, 4 and 5 in the Plenary Summons – being the reliefs at numbers 32 – 35 inclusive in the Statement of Claim, and related pleas, on any of the grounds raised by the defendant.
However, a stay will be granted on the plaintiff pursuing those reliefs in these proceedings pending the final determination of the defendant’s application for a new tenancy in the Landlord and Tenant Civil Bill proceedings, but in respect of this stay the plaintiff will have liberty to apply.
.
Hynes Ltd v O’Malley Property Ltd
1988 No. 25
Supreme Court
31 January 1989
[1989] I.L.R.M. 619
(Finlay CJ, Walsh, Griffin JJ)
FINLAY CJ
(Walsh and Griffin JJ concurring) delivered his judgment on 31 January 1989 saying: This is an appeal against an order made in the High Court on 14 December 1987 on a case stated to the High Court at the request of the parties by an arbitrator, pursuant to the provisions of the Arbitration Acts 1954 to 1980.
Hynes Ltd are the lessees, and O’Malley Property Ltd are now the owners of the lessor’s interest in premises situate in the City of Galway which were demised by predecessors in title of O’Malley Property Ltd to Hynes Ltd by indenture of lease dated 29 March 1972 for the term of 99 years from 1 January 1972. The premises concerned were commercial premises and the rent provided for in the lease was subject to review at seven-yearly intervals in accordance with detailed terms provided in the lease itself, the review in the absence of agreement to be determined by arbitration.
The parties failed to agree on the rent payable as and from 1 January 1986 by reason of the review then falling due, and submitted the dispute thus arising to the determination of a sole arbitrator, namely, John F. Mulcahy, a fellow of the Royal Institute of Chartered Surveyors.
In the course of the hearing before the said arbitrator, differences arose between the parties as to the proper interpretation of the rent review clause contained in the lease, and as a result he stated a case submitting three questions for the determination of the High Court. After hearing the parties to the case stated, Gannon J reserved judgment in the High Court and delivered his reserved judgment on 30 November 1987.
That judgment is in the form of guidance to the arbitrator in regard to the questions raised by him as distinct from express answers to each question. The guidance given by the learned trial judge with regard to the first two questions raised *621 by the arbitrator has been accepted by both the parties and is not the subject matter of any appeal before this Court. The guidance afforded by the judgment in relation to the third question raised is the only issue which was before this Court and was the subject matter of an appeal brought by the lessees.
That third question is in the following form:
1. Whether upon the proper construction of the lease and the rent review clause contained in the lease the market rental value of the premises, as of 1 January 1986, should be determined taking into account any improvements lawfully made by the lessee (otherwise than in pursuance of an obligation under the lease).
In short, the judgment of the learned trial judge was to the effect that the obligation of the arbitrator was to determine the market rental value of the premises as they were on 1 January 1986, including any improvements which had lawfully been made by the lessee thereto, without allowance or deduction to the lessee. It is against that decision that the lessee has appealed to this Court.
Rent review clause in the lease
The relevant portion of the rent review clause in the lease reads as follows:
… such arbitration shall fix the amount of the new rent at a sum equal to whichever of the following shall be the greater:
(1) The then existing rent payable hereunder, or
(2) A sum equal to the yearly rent which, having regard to the terms of this lease, (other than the amount of the rent reserved) might then reasonably be expected on a letting of the demised premises, with vacant possession, on an open market by a willing lessor to a willing tenant for a term equivalent to the residue then remaining unexpired of the term hereby created, without having regard to the effect on the letting value of the trade or business then carried on thereat (except in respect of that portion of the demised premises in the actual occupation of the lessee itself) and without having regard to any improvements lawfully made by the lessee (otherwise than in pursuance of any obligation under this lease) provided that in respect of these parts of the demised premises lawfully sublet by the lessee the rent shall be assessed having regard to the rent recoverable by the lessee, including any restrictions on such rent imposed by the Landlord and Tenant Acts and also to the lessee’s responsibility for maintenance, repairs and the other outgoings not recoverable under the subleases.
Clauses 5 and 7 of the lease impose obligations on the lessee to paint, repair and maintain the premises, and clause 10 imposes an obligation in a usual form to yield up at the expiration or sooner determination of the term the premises so painted, repaired, cleansed, maintained, etc. Clause 15 provides as follows:
Not without the consent in writing of the lessor first obtained, nor except in accordance with plans and specifications previously submitted to and approved by the lessor nor, except to the satisfaction of the lessor, to erect or suffer to be erected any new building or erection on the demised premises or make any alteration or addition whatsoever, either externally or internally in or to the demised premises or any building or erection which may be erected thereon provided always that the lessor shall not unreasonably withhold its consent to any improvement within the meaning of the Landlord and Tenant Acts 1931 to 1958 or any amendment thereof.
It was agreed by counsel that the reference to improvements lawfully made in the rent review clause already quoted would, having regard to the provisions of clause 15, be properly construed as to be interpreted as a reference to improvements *622 within the meaning of the Landlord and Tenant Acts 1931 to 1958 and that if any such purported improvements had been carried out without the consent of the lessor they would not be deemed to have been lawfully made.
The submissions of the parties
On behalf of the lessees it was contended that the proper interpretation of the rent review clause was that it provided for a clear ‘disregard’ by the arbitrator of improvements lawfully done by the lessee, and that accordingly in determining the market rental under the review clause the arbitrator would have to make allowance in favour of the lessee in respect of the rental value of any improvements lawfully done by him. This contention was based on two alternative submissions. The first was that the terms of the lease itself provided in a clear and unambiguous manner for such a consequence.
The second submission was that if contrary to that first submission there were any ambiguity in the terms of the lease dealing with the question of improvements lawfully made by the lessee it should be interpreted by the court, on the principles applicable, on the assumption that the parties to the lease were likely to have shared a commercial intention which would be contrary to the concept of a windfall to the lessor. Such a windfall it was urged would arise were the improvements lawfully made by the lessee to be included in any review of rent.
On behalf of the lessor it was contended that the fundamental obligation imposed on the arbitrator pursuant to clause D 3(ii) of the lease was to determine the rent which might then reasonably be expected on a letting of the demised premises with vacant possession on an open market by a willing lessor to a willing tenant. Such a fundamental obligation, it was said, could only be complied with if the arbitrator valued from a rental point of view the premises as they actually were at the time of the review of rent. If, it was urged, the arbitrator was valuing the premises as they were, then of necessity he was disregarding the distinction between any contribution made to their rental value by reason of improvements carried out by the lessee and any contribution arising from any other factor. Having regard to that fundamental construction of the clause it was urged that the special provision contained in it concerning improvements lawfully made by the lessee must be construed that the arbitrator was to ignore the special category of such improvements and, in effect, not to make any allowance to the lessee in respect of them.
This Court was referred to a number of authorities concerning the interpretation of different clauses in leases with regard to rent review. I have appended as a schedule to this judgment a note of the authorities submitted.
In the course of his judgment, Gannon J having reviewed with great care a number of the authorities which were submitted to him, stated as follows:
while the foregoing quotations indicate that there are many matters which might arise for consideration on an arbitration of this nature which have not specifically been raised on this case stated, they also demonstrate that this Court can be of assistance to the arbitrator only in so far as it can afford guidance by construing the agreement as expressed in the lease between the lessor *623 and the lessee and so presenting to him for application by him the directions, as the court construes them, which are set out by the parties in the lease.
I would find myself in complete agreement with this succinct exposition of what the function of the court is on the determination of this case stated.
The first function then is to look at the terms of the lease itself and if it is possible from those terms to arrive at a conclusion that there is an unambiguous provision with a certain effect concerning the question of improvements made by the lessee, then that provision must be given its unambiguous effect, and it would neither be appropriate nor necessary to consider decisions on other cases or principles which might be applicable to instances where clauses were ambiguous or deficient in some provision.
The really vital words contained in clause D (3)(ii) of the review clause in the lease are:
Without having regard to any improvements lawfully made by the lessee (otherwise than in pursuance of any obligation under this lease).
The improvements here dealt with have, it would seem to me three characteristics, that is to say:
(a) They are improvements made by the lessee.
(b) They are improvements lawfully made and, as I have indicated this would involve improvements made otherwise than in breach of the terms of the lease.
(c) They are improvements other than those made by the lessee lawfully in pursuance of any obligation under the lease.
If one applies to improvements carrying these three characteristics the construction of this portion of the clause contended for on behalf of the lessee one arrives at a wholly logical result. That result may thus be summarised.
1. If a lessee having duly notified and obtained the consent of the lessor carries out an improvement to the premises which will on the termination of the term be to the advantage of the lessor, he will not be damnified by having to pay an increase in his rent on review which is referable to that improvement.
2. If, however, notwithstanding the fact that an improvement of this description is carried out by the lessee and was to the advantage of the lessor on the final termination of the term, it was at the time when the lease was created part of the burden which the lease imposed on the lessee as distinct from imposing them on the lessor he would not be freed from having to pay an extra amount of rent in respect of an increased rental value due to that improvement. To do so would be to relieve him to some extent of a burden which the general provisions of the lease had imposed upon him, or to put the matter in another manner would be to deprive the lessor of an advantage which he had obtained from the obligations on the part of the lessee contained in the original lease.
3. Improvements made in breach of the lease would involve no allowance to the lessee making them.
If, however, one applies to the clause which I have outlined and sought to analyse the construction contended for on behalf of the lessor, a wholly unsatisfactory *624 situation would appear to be effected.
Firstly, it would constitute an express provision that the lessee should not be relieved of any increase in the rent due to improvements lawfully carried out by him. Such a provision which, whilst it may be unusual, would certainly be logical and sensible, and if it was the agreement of the parties would have to be implemented by the court. The characteristics of the improvements mentioned in the clause which I have outlined raise two complete anomalies in the further interpretation of this part of the clause in accordance with the lessor’s contention. The first would appear to be that if the lessee lawfully made an improvement he would have to pay for its value, but if he had made it unlawfully or in breach of the terms of the lease he would not. Secondly, it would seem to suggest that whereas the value of an improvement made lawfully and voluntarily by the lessee would be payable for by him as a factor in the increase of his rent where it was made by him under obligation in the lease he would not have to pay for it. There is an element of absurdity in these two consequences and that very absurdity might make a court lean against so interpreting the clause. If it does not have that effect, however, it would appear that the two qualifications, namely, with regard to lawfully made improvements and with regard to improvements arising from an obligation contained in the lease on the lessor’s submitted interpretation become superfluous.
I have no doubt that the proper construction of this clause must give, as far as possible, to each part of it a logical effect and consequence. It seems to me that that contended for by the lessee, namely, that it excludes from the calculation in the increase of rent a factor arising from improvements lawfully made is, in these circumstances, the correct one.
Having regard to that view, arising from the interpretation of the lease itself, I do not consider it appropriate nor find it necessary to reach any decision on the other issues raised of general principle in the hearing before us. I would therefore allow the appeal and vary the order made in the High Court so as to answer the third question raised on the case stated to the effect that the arbitrator should allow to the lessee a reduction of any portion of the rent to be fixed on the arbitration which he is satisfied, on the evidence, is solely attributable to an improvement lawfully made by the lessee otherwise than under an obligation imposed by the lease.
Coley O’Farrell and Patrick Joseph Geraghty v. Henry Marc Cochrane
[1991] 2 IR 513
Murphy J.
18th October 1991
In this case the plaintiffs, the trustees of Woodbrook Golf Club, (“the club”)claim a declaration that the arbitrator, John Cooke S.C., in his award made in November, 1989, erred as a matter of law in seeking to fix the rent payable by the plaintiffs to their landlord, Mr. Henry Marc Sursoc Cochrane, the respondent herein.
The award is brief in its terms. It determines what is described as the fair annual rent of the lands comprised in the lease of the golf club for the following 15 years at £36,000. The plaintiffs contend that in arriving at that figure the arbitrator erred in law in his interpretation of clause 6 of the schedule to the lease which in turn adopted the provisions contained in s. 6 of the Landlord and Tenant (Amendment) Act, 1971. It is the plaintiffs’ contention that in fixing what is described as “a fair rent” under the lease of the property for the purposes of the game of golf, the arbitrator should have disregarded and failed to disregard any increase in the value of the lands and buildings concerned, brought about by or resultant upon additions and improvements which the club made to the buildings and lands at its own expense.
The origin of this dispute is to be found in one sense in s. 6 of the Landlord and Tenant (Amendment) Act, 1971, which gave certain rights of renewal to what are described therein as “sporting leases”. Section 6 of the Act directed how the rent under such leases was to be determined and it did so in the following terms:
“6. (1) Where the rent under a sporting lease is to be determined by the Court, the Court shall fix a fair rent for the grant of a lease of the property for the purpose of carrying on the sport.
(2) In fixing the rent the Court shall have regard to the general intention of this Act in relation to sports clubs which is the advancement of outdoor sports, games and recreations and the preservation of open spaces for the common good and, without prejudice to such other considerations as it considers relevant, may take into account the rent or other sum previously paid for the property by the sports club and any covenants and conditions under which it was so paid, to the rent paid by other sports clubs of the same kind in the same or a comparable locality, to the contribution made by the sports club to the enhancement of the property, and to the price paid by any person who is a necessary party to the granting of the lease in the acquisition of his estate or interest.”
In the present case, of course, the court is not being asked to fix the rent or to exercise the powers conferred upon this or any other court by the Act. The present issue arises from the fact that the lease dated the 8th November, 1974, between the respondent and the then trustees of the club incorporated the provisions contained in s. 6 of the Act as the means of determining the rent on a revision thereof at the expiration of 15 years from the term thereby granted. So what were statutory terms under the Act became contractual terms under the 1974 lease.
The lease itself is of immense importance, for the crucial covenants contained therein which require that the lands thereby demised and the premises erected thereon should be used as a golf course. The covenant in restraint of assignment expressly provides that the club may be sold or assigned only to another golf club, and that a members’ club to be used for the purpose of playing golf. Effectively it follows that the commercial value of the lands is enormously depleted, but it is not my task to determine the rent. The issue on the present summons is whether the arbitrator erred in adopting the particular approach which he did.
What the trustees (the plaintiffs in the present case) contended before the arbitrator and contend in this court is that the provisions contained in s. 6 of the Act, as adopted and incorporated in the schedule to the 1974 lease, require the arbitrator, or the parties determining the revised rent, to have regard in an effective way to the contribution made by the club to the enhancement of the property. It seems to me that, effectively, what was contended before the arbitrator was that no part of the revised rent of the premises comprised in the lease should be attributable to what were in effect improvements made to the demised premises by the lessees subsequent to the date of the lease. That issue was recited in the award of the arbitrator and he sets out the arguments made to him in relation to it and in the operative part of the award deals with it as follows:
“I accordingly accepted the submission made on behalf of the claimant (that is to say, the landlord) to the effect that the revised rent might include an appropriate element attributable to an increased value of the property brought about by the tenants’ contribution towards the enhancement of the property but subject to the qualification that the respondents were entitled to require that the contribution towards enhancement of the property which their expenditure on improvements had made be taken into account as a factor . . .”
For the moment I stop there.
In so far as that was the issue between the parties I believe that the interpretation by the arbitrator placed on the clause was entirely correct. If he erred at all, perhaps he might have expressed or placed greater emphasis on the rights of the landlord in the passage which I have quoted. It seems to me that the arbitrator was correct. Indeed, both parties rightly concede that under the general law a landlord is entitled to the benefit of all improvements, permanent improvements made to property even though paid for by the lessee. Harsh though it may seem, that is the unquestioned law of the land. Accordingly, it seems to me that it might be more appropriate for the arbitrator to have said that the revised rent should or must include an appropriate element of the increased value of the property in the interests of the landlord instead of the words “it might include”.
Dealing, then, with the position of the respondents to the arbitration, that is to say, they were entitled to require that the contribution which they made towards enhancement of the property be taken into account, to my mind that reflects precisely the terms of the original section and the terms of the Act. Indeed, it seems to me that it would be impossible logically to have regard to the contribution made by the lessees or by the members of the club to the improvements unless one first assumes that the landlord would otherwise have the benefit thereof. So to that extent it seems to me that there was no error in the arbitrator’s award. The more controversial aspect of the award is in the final three lines of the same paragraph which go on to say:
“. . . which would serve to reduce the full open market rental value of the property which might otherwise be fixed in its enhanced condition.”
What is objected to here is the statement by the arbitrator that the extent of the interest to be allocated to the lessee is to be determined by a deduction from the full open market rental value and that this represented a serious error and a fatal flaw in the award.
The plaintiffs (the trustees) say that the full open market rental value has no relevance whatsoever in a case of this nature and that the function of the arbitrator in applying the provisions contained originally in s. 6 of the Act was to ascertain a fair rent. In that connection counsel on behalf of the trustees referred to two interesting English cases which dealt with the expressions “reasonable rent” or “reasonable rent for the demised premises”. They are Cuff v. J. & F. Stone Property Co. Ltd. (Note) [1979] A.C. 87 and Ponsford v. H.M.S. Aerosols Ltd. [1979] A.C. 63 and very impressive judgments they were. In Ponsford the learned Law Lords made it clear that they did not feel constrained to limit the concept of “reasonable rent” to an objective examination of the premises themselves but held that such a term or words would in their view include an examination of the circumstances of the case and the activities of the parties, in particular the activity of the lessee in paying for improvements which had been carried out to the premises.
Interesting though those judgments are, I do not think that the trustees were obliged to rely on them in the present case for the purposes of the argument made to this court because s. 6 does not limit itself to two or three words which might be ambiguous in their construction if taken alone, that is to say, the words “fair rent”. “Fair rent” could mean a variety of things, depending at whose conduct one was looking or the circumstances to be taken into account and whether one was to consider the interests of the lessee, the landlord or the public. Section 6 goes on to define to a large extent what is meant and to give very helpful guidance as to how the objective should be achieved.
First of all, the duty imposed on the court by the section was to fix a fair rent for the granting of a lease of the property for the purpose of carrying on a sport. As I have already mentioned (and I am sure there could be no debate about it) the grant of a lease of property for the purpose of carrying on sporting activities would differ materially from the open market value of almost any other property. In addition to that specific statement, the guidance given by s. 6, sub-s. 2 is to direct the court to have regard to the general intention of the Act in relation to sports clubs and the advancement of outdoor sports, recreations and the preservation of open spaces. Clearly, these are factors which would significantly diminish the type of rent one might hope to achieve. Having so provided, the Oireachtas directed that the court might take into account certain other factors which are specified. These include (1) the rent or other sums previously paid by a club; (2) the rent paid by other clubs of the same kind in the same or comparable localities; (3) the contribution made by the club to the enhancement of the property, and (4) the price paid by any party to the granting of the lease.
The Oireachtas did not quantify the effect of these considerations. In directing that they should be taken into account, however, it did indicate the general approach which the court was to take and the factors which should influence it. I do not accept that it would be mandatory on the court, having regard to the terms of the section, or mandatory on the arbitrator, having regard to the terms of the lease, to follow slavishly each of these considerations. It seems to me that both the arbitrator and the court would be bound to have regard to them but might well dismiss them for good and sufficient reason. But even where these factors are properly taken into account there must be considerable difficulty in determining the weight and value to be given to each such factor.
As I have already said, I am satisfied that the third of the factors which I have identified from s. 6 (that is, the contribution made by the club to the enhancement of the property) is a factor to be taken into account where appropriate as reducing the rent which would otherwise be payable. But if the arbitrator had understood and acted in the belief that his only task was to ascertain the full market rental value of the premises and then made a calculation in respect of one factor (that is, the additions made by the members of the club since the date of the lease and the appropriate element of those improvements which should be attributed to the landlord and the deduction which should be allowed to the lessee in respect thereof) and decided that this should be deducted from the open market value and that the balance would be a fair rent, clearly the arbitrator would have been in grave error. I do not believe that that was the view of the arbitrator. Of course, it may be said that in paragraph 2 of his award he appears to have said something close to this, but it does not stand up to serious analysis. That view could only be founded on a precise analysis of the award and by approaching it as if it were an Act of the Oireachtas itself.
It seems inconceiveable that the distinguished arbitrator, particularly having had the benefit of the argument of learned leading counsel, could have so misconceived his function as to think it was his task to determine the open market rental and to deduct from that one item and that this would give a fair rent. He must have known that he was seeking to conclude a fair rent and that is precisely what he purported to award. Having before him s. 6 and/or its translation into the lease, he knew full well that he was fixing the fair rent of a lease of property for the carrying on of a sport. He had the terms of the lease and comparable rents in relation to other leases of sporting venues before him and the matter was thrashed out before him. Indeed, the figures put before the arbitrator for an open market rental bear little resemblance to the figure which he ultimately determined.
I conclude, therefore, that what the arbitrator was seeking to express was the manner in which one dealt with the particular issue in relation to which the parties were at odds, namely, whether or not the landlord obtained, in the first instance at any rate, the benefit of the improvements made by the lessees subject to the duty of the court or the arbitrator to have regard to the fact that these improvements were made at the expense of the lessee. And it seems to me that that is the point which the arbitrator was underscoring at the particular request of the parties and that that alone was what he was doing, because he did not refer in his award to the other factors which manifestly he considered: the fact that it was a lease of a sporting club and that other rents were referred to and that presumably his attention was drawn to the rents previously payable under the same lease, even though they were paid at a time when inflation had not achieved the heights which it subsequently achieved, as counsel for the plaintiffs pointed out.
It may be that the arbitrator was merely seeking to say that the contribution of the lessees should be taken into account as a deduction from the rent otherwise payable, or it may be that he was making a computation in relation to the element for which he would make allowance by reference to some other factor. If he did, I do not think that that is a fault either. There must be room for a very wide approach to this problem. The rents to be fixed and the weight to be attached to different factors and the allowance to be made must leave room for a wide range of interpretation. If it is merely a question of the arbitrator having regard to the members’ contribution in relation to the effect which that would have on an open market rental simply for the purpose of giving him a figure, I do not think that that in itself would be an error. The error would be if the arbitrator believed that his task was to start with the open market rental value and make one or two deductions from that and ignore his overall task of determining a fair rent for the carrying on of the sport. I do not believe that the arbitrator fell into that obvious trap. I believe that in paragraph 1 of his award he was dealing with the issue which he was expressly invited to deal with as a method of solving the dispute. He was solving the dispute and he was ruling, in my view correctly, on the interpretation of the third factor in the second part of s. 6, sub-s. 2 of the Act. He was effectively saying that improvements made by lessees must, in the ordinary course of law, benefit the landlord in the first instance but that the lessees were entitled under the particular provisions to require the arbitrator to look at their contribution and make a deduction in respect of it.
I believe that that is what the arbitrator did and I believe that the plaintiffs have not therefore demonstrated that there is an error in the award. Accordingly, I refuse the declaration sought.
The Governor and Company of the
Bank of Ireland v Gregory Fitzmaurice
LARDNER J
delivered his judgment on 28 July 1988 saying: The plaintiffs’ claim in this action is for £32,646.10 as the balance of two quarters rent due by the defendant on 1 June 1986 and 1 September 1986 out of premises consisting of the ground, first, second and third floors of No. 9 and the ground floor of No. 10 Barron Strand Street in the City of Waterford under an indenture of lease dated 2 November 1982 and made between the plaintiffs and the defendant. Numbers 9 and 10 Barron Strand Street were initially two of several properties in Barron Strand Street owned by Coads Ltd, a company carrying on the business of retail sale of shoes. Two brothers, Messrs Kenneth and Geoffrey Coad inherited this business and the share capital of the company on the deaths of their father and their uncle. Shortly after this some of the properties previously used for the business by the company were let on leases and Mr Kenneth Coad withdrew from the business. Mr Colin Chapman who was solicitor to the company and for Mr Coad said that at the time of the lettings it was not clear whether the company might not require later to recover possession of these premises but that in any case the company wished to obtain rents which would be equivalent to the commercial return which might have been earned by using them in the shoe business.
In 1977 the defendant, who was a schoolmaster and was minded to establish the business of a stationery and book shop, purchased from Pendulum Boutique their interest in the ground floor of No. 9 Barron Strand Street, taking an assignment of a lease dated 13 January 1977 and made between Coads Ltd and Pendulum Ltd for a term of 18 years from 1 January 1975. This lease provided for an initial rent of £2,048 per annum and for periodic increases of rent at successive periods of two years by a process of indexation and then multiplication. The lessees’ consent to the assignment was negotiated by the defendant with Mr Kenneth Coad. In the summer of 1978 the defendant leased the first, second and third floors of No. 9 by lease dated 1 August 1978 made by Coads Ltd. This lease was negotiated directly *454 with Mr Kenneth Coad and was for a term of 15 years from 1 January 1978 at an initial rent of £1,500 with provision for increase every two years by way of indexation and multiplication as in the Pendulum lease. Subsequently the defendant acquired by assignment the lease of No. 10 Barron Strand Street, again obtaining the lessors’ consent from Mr Coad and also negotiating with him and obtaining their consent to the removal of a dividing wall between Nos. 9 and 10. This lease contained similar provisions to the other two leases with regard to rent reviews. In evidence the defendant said that in each case he had read the clauses in the leases relating to the rent and understood them. In each lease it was provided that for the second and third periods of two years of the term the rent should be increased by reference to the ‘Consumer Price Index published by the Central Statistics Office….’ In respect of the fifth and sixth periods of two years provision was made for similar increases by reference to this index and then for the resultant figure to be multiplied by a multiplier of four.
At some date in the 1970’s, which has not been established by the evidence Mr Kenneth Coad having executed a deed of settlement dated 21 September 1973 which appointed the plaintiffs to be trustees and created certain discretionary trusts in favour of his children and other relatives, then transferred to the trustees upon these trusts a certain portion of the ordinary share capital in Coads Ltd which he owned. Subsequently in 1978 or 1979 Coads Ltd was put into liquidation by its shareholders and the lessors’ interest in Numbers 9 and 10 Barron Strand Street became vested in the plaintiffs upon the trusts of the settlement. Prior to vesting in the plaintiffs Mr Kenneth Coad had discussed with the defendant the sale of these properties to him and when this did not take place had urged the defendant to surrender the three leases I have referred to and to take in lieu a new composite lease. These negotiations and discussions I will refer to in more detail later in the judgment. They resulted in the defendant taking a new lease of Number 9 and the ground floor of Number 10 Barron Strand Street from the plaintiffs dated 2 November 1982 for a term of 18 years from 1 June 1981 at the rent provided for in the sixth schedule which is in the following terms:
15.01 The yearly rent payable hereunder shall be as follows:
(i) In respect of the first period of the term hereby created which shall consist of two years ending on 31 May 1983 the sum of £12,600 per annum without any deductions whatsoever together with such additional sum or sums as may from time to time be payable hereunder by way of further or additional rent as set out in clause 15.01 (viii) hereof.
(ii) In respect of the second and third periods of the term hereby created which shall consist respectively of two years and one year ending on 31 May 1985 and 31 May 1986 the rent shall be calculated on the termination of the preceding period of this demise in the following manner:
(a) The sum payable as rent during the second and third periods hereinbefore provided shall be calculated by reference to the proportion which the rent payable at the commencement of the immediately preceding period bore to the Cost of Living Index published by the Central Statistics Office in the Republic of Ireland (hereinafter called the ‘Index’) at the commencement of such period by comparison with the index at the commencement of the new period so that the new figure then arrived at shall be in the same proportion to the said index figure at such commencement as the rent payable at the commencement of the preceding period bore to the then index figure.
(b) The index figure shall be calculated as the index figure representing the average monthly *455 index figure published in each of the twelve preceding months to the date of commencement of such period whether preceding or commencing as may be required.
(c) The new figure arrived at in accordance with the said foregoing paragraphs (a) and (b) together with such additional sum or sums by way of further or additional rent as made from time to time be payable as set out in clause 15.01 (viii) hereof shall be the rent for the second and third periods.
(iii) In respect of the fourth period of the term hereby created which shall consist of two years ending on 31 May 1988 and the sum payable as rent shall be calculated in the manner prescribed in clause 15.01 (ii) paragraphs (a) and (b) hereof as if such paragraphs were incorporated in this sub-clause and the words fourth period substituted for the words second and third periods and the new figure then arrived at together with such additional sum or sums by way of further or additional rent as made from time to time be payable as set out in clause 15.01 (viii) hereof shall then be multiplied by four and the figure arrived at after such multiplication shall be the rent for the fourth period of two years.
(iv) In respect of the fifth and sixth periods of the term hereby created which shall consist of two years each ending respectively on 31 May 1990 and 31 May 1992 the sum payable as rent shall be calculated in the manner prescribed in clause 15.01 (ii) paragraphs (a) and (b) hereof as if such paragraphs were incorporated in this sub-clause and the words fifth and sixth substituted for the words second and third and the new figure then arrived at together with such additional sum or sums by way of further or additional rent as may from time to time be payable as set in clause 15.01 (viii) hereof shall be the rent for the fifth and sixth periods of two years each.
(v) In respect of the seventh period of the term hereby created which shall consist of two years ending on 31 May 1994 the sum payable as rent shall be calculated in the manner prescribed in clause 15.01 (ii) paragraphs (a) and (b) hereof as if such paragraphs were incorporated in this sub-clause and the words seventh period substituted for the words second and third periods and the new figure then arrived at together with such additional sum or sums by way of further or additional rent as may from time to time be payable as set out in clause 15.01 (viii) hereof shall then be multiplied by four and the figure arrived at after such multiplication shall be the rent for the seventh period of two years.
(vi) In respect of the eighth and ninth periods of the term hereby created which shall consist of two years each ending respectively on 31 May 1996 and on 31 May 1998 the sum payable as rent shall be calculated in the manner prescribed in clause 15.01 (ii) paragraphs (a) and (b) hereof as if such paragraphs were incorporated in this sub-clause and the words ‘eighth’ and ‘ninth’ substituted for the words ‘second’ and ‘third’ and the new figures then arrived at together with such additional sum or sums by way of further or additional rent as may from time to time be payable as set in clause 15.01 (viii) hereof shall be the rent for the eighth and ninth periods of two years each.
(vii) In respect of the tenth period of the term hereby created which shall consist of one year ending on 31 May 1999 the sum payable as rent shall be calculated in the manner prescribed in clause 15.01 (ii) paragraphs (a) and (b) hereof as if such paragraphs were incorporated in this sub-clause and the words ‘tenth period’ substituted for the words ‘second and third periods’ and the new figure then arrived at together with such additional sum or sums by way of further or additional rent as may from time to time be payable as set out in clause 15.01 (viii) hereof shall then be multiplied by four and the figure arrived at after such multiplication shall be the rent for the tenth period of two years.
(viii) Such sum or sums by way of further or additional rent from time to time shall be equal to the expenditure by the lessor in effecting and maintaining the insurance of the demised premises in the full reinstatement value thereof in accordance with the lessors’ covenant in that behalf contained in the eighth schedule hereto including architects’ and quantity surveyors’ fees, planning requirements and other incidental expenses, against loss or damage by fire, explosions, storm or tempest (including lightning) and other such risks as the lessor may from time to time reasonably deem it desirable to insure against (hereinafter together referred to as the insured risks) such sum or sums to be paid without deduction on the gale day next ensuing after the expenditure thereof. 15.02 All the rent throughout the entire of the term hereby created shall be paid in quarterly payments in advance on the first working day in March, June, September and December in each *456 year respectively without any deduction, the first of such payments being a proportionate payment to be made on the execution hereof.
The rent due under these provisions has been paid since the commencement of the term up to 31 May 1986. In respect of the quarters rent due on 1 June and 1 September 1987 which were in the first period in which the multiplier in clause 15.01 (iii) became operable, the defendant has failed to pay the increased rent attributable to the multiplier and it is in respect of the balance of the rent for these quarters that the present claim arises. By his defence the defendant contests on a number of grounds that the balance claimed is due.
Firstly, it is alleged that the provisions of clause 15.01 (iii) of the lease insofar as they purport to quadruple the rent payable from 1 June 1986 constitute a device to force the defendant to surrender the tenancy as is permitted by clause 18 of the lease and so avoid the provisions of the Landlord and Tenant (Amendment) Act 1980 and clause 15.01 (iii) is therefore in contravention of s. 85 of the Act of 1980 and is void and unenforceable against the defendant. Secondly, it is alleged that the plaintiffs are estopped from enforcing the rent multiplier in clause 15.01 (iii) by reason of representations made to the defendant by Mr Kenneth Coad prior to the execution of the lease and it is said Mr Coad was allowed by the plaintiffs to act as their agent in this respect. Thirdly, as a result of an amendment of the defence made by consent after the commencement of the trial (which had been sought by a letter from the defendant’s solicitors dated 8 March 1988) it was pleaded that, insofar as clause 15 of the sixth schedule of the lease provided for periodic indexation of the rent by reference to ‘the Cost of Living Index published by the Central Statistics Office’, it was incapable of being operated because no such index has at any material time been published by the Central Statistics Office or any other source.
In regard to this last matter evidence has been given that the Central Statistics Office publishes an index called ‘The Consumer Price Index’ and also a wholesale index described as a Price Index of Industrial Commodities. The index called ‘The Consumer Price Index’ is based on percentage changes of a fixed basket of household goods and services. An index of this kind has been produced since 1922. It’s basis has been revised several times over the years. Until 1953 it was known as ‘The Cost of Living Index’. In 1953 its title was changed to ‘The Consumer Price Index’. Doctor Anton Murphy, an economist who gave evidence for the defendant, said that in his view the Consumer Price Index was a measure of the change in the level of prices of a range of household goods purchased over the year. He thought there had been a substantial change in its composition in 1953 when ‘The Consumer Price Index’ replaced ‘The Cost of Living Index’ but that it did not include and never had included a number of elements necessary to any complete cost of living index, such as payments for pensions, mortgages, the cost of houses, rents, social insurance contributions and income tax, which would all be relevant to the cost of living. The second objection of the defendant is that ‘The Consumer Price Index’ has never been produced or published on a monthly basis but only on a quarterly basis and that it is impossible to give effect to the provisions of clause 15 (ii)(b).
It seems to be established by the evidence that the Central Statistics Office does *457 not and has never published an index which in fact measured the cost of living and has not since 1953 published an index called ‘The Cost of Living Index’. The plaintiffs submit that both parties understood what was referred to and that the reference in clause 15 (ii)(a) to ‘The Cost of Living Index published by the Central Statistics Office’ should be construed as referring to ‘The Consumer Price Index’ and that this is an appropriate case for the application of the maximim falsa demonstratic non nocet cum de corpore constat . I am unable to accept this submission. The basis for the application of this maxim does not exist. The plaintiffs chose to use the phrase ‘The Cost of Living Index’ in the lease and it is not open to them to substitute an alternative phrase. In my view having regard to the plain meaning of the words ‘The Cost of Living Index published by the Central Statistics Office’ and the reference in clause 15 (ii)(b) to ‘the average monthly index figure published’, they cannot properly be construed as meaning ‘The Consumer Price Index’ which is and always has been published quarterly. Further, as clause 15 (ii)(b) requires that ‘The index figure shall be calculated as the figure representing the average monthly index figure published in each of the twelve preceding months’, I find that it is impossible to make this calculation and that the clause is inoperable for this reason.
I now turn to consider the defence of estoppel. In the period after the defendant had taken the assignments and a lease of the properties to which I have referred and prior to vesting of the properties in the plaintiffs, Mr Kenneth Coad on behalf of Coads Ltd dealt with this property and with Mr Fitzmaurice concerning it. He gave the consent of the landlord for the demolition of a wall and he also gave consent to the original assignments to the defendant. Later he proposed that the defendant should take a new composite lease of the properties comprised in the three earlier leases — the new lease to be in similar terms, including the rent multiplier clause. Mr Fitzmaurice was not averse to a composite lease but was concerned at the inclusion of the multiplier clause. He asked could it be omitted. Mr Coad refused and said its purpose was in case Coads should wish to sell the block but that in the event of a sale being contemplated Mr Fitzmaurice would be given the first option to purchase. Mr Fitzmaurice asked what would happen in five years when the multiplier clause became operative. Mr Coad said it would not be enforced and that Mr Fitzmaurice would be offered a new lease. Mr Fitzmaurice said he assumed from this that the lease would continue subject to the indexation clause but without the multiplier. He felt happier having received this assurance from Mr Coad. Mr Coad, being, it is said, in hospital at the time of the trial, did not give evidence.
The circumstances disclosed by the evidence, which are really not in dispute, are that prior to the liquidation of this family company, Mr Kenneth Coad in his relations with Mr Fitzmaurice always acted as if he had the full authority to deal with this property. He expressed the company’s consent to the three assignments and to a substantial alteration of the premises. He collected the rents and the insurance premiums as they fell due and he discussed a sale to the defendant. All the evidence supports the conclusion that at this period Mr Fitzmaurice, when dealing with Mr Coad, was led to believe that Mr Coad was in control of these *458 matters or had full authority to deal with them. Indeed as not infrequently occurs in small family companies controlled by one or two members of the family the strong probability is that this was the fact. The solicitors to the company at all relevant times were Messrs Kenny Stephenson and Chapman, (of which firm Mr Colin Chapman was a senior partner), who advised the company and Mr Coad during the period of the leases, the liquidation and the settlement of property made by Mr Kenneth Coad, under which the present plaintiffs became trustees. After the transfer of the properties to the trustees of the settlement the same solicitors subsequently advised and acted for the plaintiffs. I am satisfied by the evidence that, after the company had gone into liquidation and the property had been transferred to the trustees of the settlement, Mr Kenneth Coad continued to act in regard to the property in the same way as when it was in the company’s ownership. He continued to collect the rent and insurance premiums. The rent was paid directly into his bank account and it appears that he applied it for the beneficiaries of the settlement as he thought proper and only afterwards rendered an account to the plaintiffs of what had been done. He also continued to discuss and negotiate with Mr Fitzmaurice in relation to the composite lease. Probably until the spring of 1986 Mr Fitzmaurice did not learn of the transfer to the plaintiffs. He said in evidence he did not think it made any difference to Mr Coad’s position. It seems to me as a matter of strong probability that these matters were known to Mr Chapman and through him to the trustees and that they allowed this to continue up to the time when there was a meeting at Mr Chapman’s office with Mr Fitzmaurice and Mr Coad and discussions took place concerning proposals for a further new lease to replace the lease of 2 November 1982, after the claim for rent under the multiplier clause in 1986 was first made and had been contested by Mr Fitzmaurice. Then for the first time Mr Chapman made it clear to Mr Fitzmaurice that Mr Coad did not have any power to negotiate on behalf of the plaintiffs and these discussions did not result in any agreement. Until that time I think the plaintiffs allowed Mr Coad to represent himself as having authority and to negotiate in regard to the property and to manage it. If Mr Kenneth Coad was the lessor seeking to enforce this rent clause, I should have no doubt that the plea of estoppel must succeed. The evidence I have just referred to satisfies me that he gave the defendant a clear assurance that the clause in the new lease would not be enforced against him. This was intended to reassure the defendant and on the strength of it the defendant entered into a new lease containing this clause. Mr Coad’s assurance can only affect the trustees if he was their authorised agent or if (while not having any actual authority) he was held out as their agent by being allowed to appear as agent when he was not. See Re Henry Bentley and the Yourkshire Breweries: ex parte Harrison (1893) 69 L.T. 204. I think he was allowed to appear as agent when he was not. In my view the trustees are now estopped from denying Mr Kenneth Coad’s assurance to Mr Fitzmaurice that the multiplier clause would not be enforced against him.
I turn now to the third submission made on behalf of the plaintiffs in regard to s. 85 of the Landlord and Tenant Act 1980. S. 85 provides:
So much of any contract, whether made before or after the commencement of this Act, as provides *459 that any provision of this Act shall not apply in relation to a person or that the application of any such provision shall be varied, modified or restricted in any way in relation to a person shall be void.
Has this section any application to the lease in the present case? For the plaintiffs it is said that s. 85 is concerned only with what the ‘contract’ between the parties ‘provides’: that the clause complained of by the tenant, namely, clause 15 does not go beyond providing for the payment of a rent to be calculated in an agreed way: that, even if this rent exceeds the going commercial rate, the 1980 Act does not prohibit excessive rents: and if the parties agreed to such a rent it is not unlawful. Finally on this matter it is submitted that s. 85 only applies to contracts which directly provide that any provision of the Act shall be restricted in any way in relation to a person and that here no such direct provision exists.
It is well settled that the words of a section should be construed in their ordinary and natural meaning and in the light of their context and this includes not only the particular phrase or section in which they occur but also the other parts of the statute. (See Halsbury 4th Ed. Vol. 44 para. 872 and the cases there cited). The Landlord and Tenant (Amendment) Act 1980 seems to me to have had the purpose or intention of conferring (subject to certain conditions not material to the issues in this case) the following rights:
(a) It gives a tenant whose lease expires and who comes within s. 16 a right to a new tenancy in his tenement.
(b) It allows the landlord and tenant in such circumstances to negotiate and agree the terms of the new tenancy including rent, reviews of rent and the term but subject to the proviso that in default of agreement on the terms the Court shall fix the terms in accordance with certain guidelines specified inter alia by s. 23 — viz that the term should be for 35 years or such less term as the tenant may nominate; that the rent should be the rent which in the opinion of the Court a willing lessee not already in occupation would give and a willing lessor would take for the tenement, in each case on the basis of vacant possession being given, and having regard to the other terms of the tenancy and to the letting values of tenements of a similar character to the tenement and situate in a comparable area without regard to any goodwill which may exist in respect to the tenement.
(c) A tenant who surrenders his lease is by s. 17(1)(a)(iii) excluded from the right to claim a new tenancy.
S. 24 provides in the case of a tenancy the terms of which are fixed by the court that the landlord or the tenant shall be entitled to apply to the court for a review of the rent at any time after the expiration of five years from the date on which the terms are fixed. And there is then provision for further reviews of rent at any time after the expiration of five years from the first or any subsequent review.
These guidelines require that a rent determined by the court thall be related to what may be described in general terms as the going open market rent. They are bound to influence what rent a landlord and tenant will be disposed to offer or to take or agree upon when negotiations are taking place in regard to the terms of a new tenancy. Each party will be aware that upon a failure to agree, the Court may *460 be asked to fix the rent in accordance with the guidelines. In my opinion the intention of the legislature as expressed by these provisions was to give a tenant in the circumstances prescribed the security of tenure of a new tenancy upon the terms I have mentioned.
Does clause 15 of the lease, which contains the multiplier clause, provide that any provision of the 1980 Act shall not apply in relation to a person or does it provide that the application of any such provision shall be varied, modified or restricted in any way in relation to a person? In respect of the quarters’ rent due on 1 June 1986 and 1 September 1986, after the previous years rent has been recalculated in accordance with the multiplier clause, i.e., multiplied by four, a rent far in excess of the current open market commercial rents is arrived at. On the evidence it exceeds by more than 300% the then current commercial rent for comparable premises. I am satisfied that this rent was intended by the plaintiff and was designed to exercise a compelling pressure on the defendant to surrender his tenancy in order to escape liability for the increased rent. This pressure was likely to be increased by the provision that the increased rent will during the remainder of the term be subject to two further fourfold multiplications viz for the two years ending on 31 May 1994 and for the period of one year ending on 31 May 1999. The position then is that, if the defendant succumbing to this pressure, surrenders his lease he excludes himself from any right to claim a new tenancy under s. 17(1)(a)(iii) of the 1980 Act: any negotiations which may then take place between the plaintiff and the defendant in regard to a new lease will be free from the provision that in default of agreement the court will fix the terms of any new lease and will not be affected by the guidelines which should be applied by the court in fixing such terms. And lastly the compelling pressure to surrender exercised by the multiplier clause restricts and reduces the lessees security of tenure which it is one of the purposes of the Act to confer. In my judgment clause 15 of the lease is and was designed as an ingenious method of circumventing the provisions of the 1980 Act to which I have referred and it does this by putting the defendant under compelling pressure to surrender and thereby exclude himself from the benefits of Part II of the 1980 Act. I think this can properly be regarded as a provision which, in effect, restricts the application of the provisions of the Act in relation to the defendant in this case.
One further point arises. It was contended by the plaintiffs that the words of s. 85 only invalidate contracts which directly ‘provide that any provision of this Act shall not apply in relation to a person or that the application of any such provision shall be varied, modified or restricted in any way in relation to a person’ and that here no such direct provision exists. I am unable to accept this submission. In my judgment on its true construction in the section the word ‘provides’ means ‘has the effect that’.
In these circumstances the plaintiffs’ claim for £32,646.10, the balance of two quarters rent due on 1 June 1986 and 1 September 1986 fails and must be dismissed.
Mills v. Healy
[1937] IR 437
SULLIVAN P. :
I have come to the conclusion, not without some doubt, that this appeal must be allowed.
This is an action to recover a deposit paid under an agreement in writing, dated the 25th October, 1930, whereby the plaintiff agreed to purchase certain premises from the defendant for the sum of £280. The date fixed in that agreement for closing the sale was the 24th November, 1930. Negotiations between the respective solicitors as to the vendor’s title continued to a date long subsequent to the date fixed for completion, and accordingly the time fixed by the agreement was no longer binding.
There has been extraordinary delay, not only in bringing this matter to trial, but throughout the negotiations between the solicitors, and the Circuit Judge pointed out one difficulty in deciding the case, namely, the uncertainty whether there were conversations between the solicitors supplementing the correspondence.
However, on the 22nd December, 1931, the vendor’s solicitors wrote the purchaser’s solicitors as follows:”We beg to refer you to previous correspondence herein and particularly to a copy of the agreement to purchase signed by your client on the 25th October, 1930. If you will refer to this agreement you will observe that the contract should have been completed on the 24th November, 1930, but up to the present no serious effort has been made to carry it out, therefore we give you notice that the deposit of £50 is now forfeited and our client is about to resell the premises.”
There can be no doubt as to the legal position of the parties at the time that letter was written. As negotiations had continued after the date fixed for completion, before either party could terminate the contract on the ground of delay notice should have been served fixing a reasonable time for completion, and that time should have expired. No notice fixing a time for completion had been served prior to the letter of 22nd December. The legal position of the parties after that letter was received was this: The purchaser could have accepted that letter as a repudiation of the contract, and brought an action to recover his deposit and damages. Instead of taking that course, his solicitors wrote the letter of the 24th December, 1931: “In reply to your letter, you cannot declare a forfeiture in this matter and you still have not replied to our requisitions as to the licence.”
There is no doubt as to the meaning of that letter. It is that the purchaser’s solicitors took up the position that the vendor had no right to forfeit the deposit and that the contract was still in existence. A week after that the vendor’s solicitors replied as follows:”We are in receipt of your letter, dated the 24th inst., and refer you to your requisitions on title with our replies, dated 10th December, 1930, from which you will observe that our client was then in a position to hand over clear possession. On the 26th February, 1931, you submitted to us a deed of assignment for execution by our client and on the 28th of that month you wrote stating that you would call to our office and definitely complete this sale, but since then you have been putting us off with different excuses, so that our client’s patience has now become exhausted and we have nothing further to add to ours of the 22nd instant.”
The meaning of that letter is equally clear. The vendor’s solicitors are adhering to the position that the vendor was entitled to rescind, and to forfeit the deposit, and had done so by the letter of the 22nd December.
I now turn to the letter from the purchaser’s solicitors to the vendor’s solicitors, dated 26th September, 1932. What had happened between January, 1932, and September, 1932, we do not know. The letter of the 26th September, 1932, is as follows:”We enclose herewith notice of rescission in this matter. Kindly acknowledge receipt of same.” The notice enclosed with the letter stated:”Take notice that the purchaser hereby rescinds the contract of sale entered into by him in this matter on the 25th day of October, 1930, with Patrick Healy for the purchase by him of a certain house and premises situate in Newport, County of Mayo, and hereby requires the return to him, or to the undersigned solicitors, of the sum of £50 (Fifty pounds) deposit paid on foot of said contract.”
The same objection is made on behalf of the vendor to the validity of that notice as was made on behalf of the purchaser to the validity of the notice of 22nd December, 1931, given by the vendor’s solicitorsthat the contract could not be rescinded until a notice had been served fixing a reasonable time for completion, and that time had expired.
The Circuit Judge held that as the contract was repudiated by the vendor in December, 1931, the purchaser was not bound to fix a time for completion before he could rescind the contract on the ground of the vendor’s delay, and he held that the plaintiff was entitled to recover his deposit.
I do not take that view. I think that the contract was never legally terminated and is still existing. I must, therefore, hold that the decision of the Circuit Judge was wrong, and that this appeal should be allowed.
O’BYRNE J. :
The agreement in writing in this case fixed the 24th November, 1930, as the date for the completion of the sale, but by reason of the negotiations which continued long after that date in regard to the requisitions on the title it is now common case that that date ceased to be binding on the parties. Accordingly, we have a contract for the sale of certain premises with no fixed date for completion. There were lengthy negotiations between the parties, and, finally, on the 22nd December, 1931, the defendant’s solicitors served notice purporting to rescind the contract. It is common case now that that notice was inoperative for the purpose for which it was served, and there is no dispute as to what were the rights of the purchaser when that was served. He was entitled to adopt one of two courses: 1, he could have treated the notice as a repudiation of the contract by the vendor, and have then sought recovery of his deposit, and damages for breach of contract; or 2, he could have treated the notice as being ineffective to rescind the contract, and treated the contract as still subsisting. The only difficulty which I had was in determining which option the purchaser really decided to take.
On the 24th December, 1931, the solicitors for the purchaser wrote in reply:”In reply to your letter you cannot declare a forfeiture in this matter and you still have not replied to our requisitions as to the licence.” So far it is obvious that the purchaser was treating the contract as still subsisting. On the 30th December the vendor’s solicitors wrote in reply to that letter:”We are in receipt of your letter, dated the 24th inst., and refer you to your requisitions on title with our replies, dated 10th December, 1930, from which you will observe that our client was then in a position to hand over clear possession. On the 26th February, 1931, you submitted to us a deed of assignment for execution by our client, and on the 28th of that month you wrote stating that you would call to our office and definitely complete this sale, but since then you have been putting us off with different excuses, so that our client’s patience has now become exhausted, and we have nothing further to add to ours of the 22nd instant.”
On the 8th January, 1932, the purchaser’s solicitors wrote as follows:”In reply to your letter in this matter, you have not at any time produced the Excise licence paper to us, and the engrossment was submitted to you subject to this, and arrangements were made for the closing, subject to this. We cautioned the auctioneer against parting with the deposit, as clearly your client is unable to keep his part of the contract.” That letter is rather ambiguous. In so far as it purports to express any view as to the existence of the contract, it appears to treat it as still in existence. It seems to me to call for the production of the licence paper, but it is not very clear.
After that letter of the 8th January there is a long gap, and so far as the evidence is concerned it is not explained by the next letter, of the 26th September, 1932, from the purchaser to the vendor enclosing the purported notice of rescission. That notice is in the following form:”Take notice that the purchaser hereby rescinds the contract of sale entered into by him in this matter on the 25th day of October, 1930, with Patrick Healy for the purchase by him of a certain house and premises situate in Newport, County of Mayo, and hereby requires the return to him, or to the undersigned solicitors, of the sum of £50 (Fifty pounds) deposit paid on foot of said contract.”
If anything is clear it is that that notice contemplates that the contract is still in existence, and the notice was intended to put an end to the contract.
As I have already said, the purchaser had the option either of treating the contract as repudiated by the vendor, or of treating it as still in existence. He was bound to adopt one or other course, and I have come to the conclusion that he decided to treat it as still subsisting. That being so, it is clear that the notice served by the purchaser was inoperative to rescind the contract, for before the purchaser could rescind it was necessary for him to fix a reasonable date for completion.
Accordingly I am of opinion that, after the 26th September, 1932, there was, and still is, a subsisting contract for sale. That being so, I am of opinion that the decision of the Circuit Judge must be reversed.
H. E. H. C.
The plaintiff applied to the Supreme Court (1), by way of appeal from the judgment and order of the High Court, for an order that the said judgment and order be reversed and discharged and that in lieu thereof the decree of the Circuit Court be affirmed.
FITZGIBBON J. :
There is no question of law involved in this case, once the facts have been clearly ascertained, but it is difficult to arrive at a clear decision upon facts which depend upon the interpretation of a desultory correspondence between parties who were at cross purposes and, it seems to me, labouring under mutual misapprehensions and dim recollections of negotiations which had taken place nearly four years before the hearing of the action. In these circumstances it is not a matter for surprise that different minds have arrived at different conclusions.
The agreement for sale was dated October 25th, 1930, and by it the purchase was to be completed on November 24th, 1930, and time was declared to be of the essence of the contract.
That this stipulation was waived by both parties almost from the date of the agreement is beyond question, the documents to vouch title were not furnished by the vendor until after the date fixed for completion had passed, the draft assignment was not submitted for approval until February 11, 1931, and was actually returned approved on February 21st. It appears to have been the intention of both parties to close the sale early in March, when a mistake or misunderstanding arose which has caused all the trouble and confusion in the case. It is impossible to say who was to blame in the first instance, but in my opinion the reason why no real attempt was made to straighten out the tangle was the firm conviction of Mr. Garvey, the vendor’s solicitor, that the purchaser had not the money to complete the purchase, and had never seriously intended to do so. He knew that the purchaser had been a commercial traveller, but was out of employment at the time and had no means of his own, and he was unaware that the purchase was to be financed by the purchaser’s brother, who is stated to be a well-to-do merchant and to have promised to advance the purchase money to the plaintiff.
The misunderstanding arose in this way. Before completing, the purchaser’s solicitors desired an inspection of the publican’s certificate attached to the premises, and they wrote to the vendor’s solicitors on March 5th, 1931, asking that it should be sent to them for inspection. A certificate was in fact sent to them next day. They replied on March 18th: “The licence as submitted to us is out of date; please let us know if there is a publican’s licence current. The licence is returned herewith.” Now, whether the licence sent to Messrs. Kelly & Byrne and returned by them was in fact the expired licence for the previous year which was sent in error cannot now be ascertained, but there is no doubt that a valid licence was in existence. Messrs. Kelly and Byrne wanted to see it, Messrs. Garvey and Smith insisted that they had sent it and that it had been returned to them, but either they were in error in thinking that they had sent the current licence, or Messrs. Kelly and Byrne were in error in thinking that the licence which had been sent to them was out of date. No one can now say which was right. On October 17th, 1931, Messrs. Kelly and Byrne wrote again to Messrs. Garvey and Smith asking them to comply with their requisitions in the matter. It is common case that the only requisition to which this letter can refer was the request for a loan and inspection of the current licence which Garvey believed he had sent on the 6th of March, and which Byrne believed had never been submitted to him.
Nothing more was done till December 22nd, 1931, when Messrs. Garvey and Smith wrote to Messrs. Kelly and Byrne, referring to previous correspondence and the agreement to purchase, dated October 25th, 1930, and concluding:”If you refer to this agreement you will observe that the contract should have been completed on the 24th November, 1930, but up to the present no serious effort has been made to carry it out, therefore we give you notice that the deposit of £50 is now forfeited and our client is about to re-sell the premises.”
The attitude taken up by the vendor’s solicitors in this letter is wholly untenable. Once the time fixed for completion had passed and the stipulation that time was of the essence of the contract had been waived, neither party was entitled to insist upon mere delay as a ground for treating the contract as at an end until he had by notice fixed a reasonable time within which the other party was required to complete the contract and that time had expired. The purchaser’s solicitors replied at once: “You cannot declare a forfeiture in this matter, and you still have not replied to our requisitions as to the licence.” The vendor’s solicitors instead of abandoning the untenable position they had taken up on December 22nd, and serving a notice requiring completion within a stated and reasonable period, or even trying to clear up the misunderstanding about the licence, adhered to their declaration of December 22nd, that the contract was at an end, the deposit was forfeited, and that the vendor was about to resell the premises. In my opinion the purchaser was entitled to treat this announcement, from which the vendor never receded, as a repudiation of the contract by the vendor, and the purchaser has not lost his right to elect so to treat it by writing the letter of January 8th, 1932, in which he reiterated his protest that the licence had never been produced. I regard the notice of rescission which was served on September 26th, 1932, by the purchaser’s solicitor as an intimation, perhaps formally irregular, of his election to rely upon the vendor’s conduct as a repudiation of the contract and to demand the return of his deposit. I cannot agree with the decision of the High Court that a contract which has been clearly and emphatically repudiated by both parties, still is “a subsisting contract of sale,” especially after the vendor had actually put the premises up for sale again and had entered into a fresh contract with a different purchaser.
Furthermore, if the contract be still subsisting and enforceable by either party, it is difficult to understand a decree which declares the money paid into Court on foot of the deposit to be the property of the vendor, who presumably might yet make default in completion.
In our opinion the purchaser is entitled to the return of the amount of his deposit, together with the sum awarded to him by the Circuit Judge for interest, costs or expenses, and we therefore decide that the order of the High Court should be discharged and that the decree granted by the Circuit Judge should be affirmed. The plaintiff will get a decree for £59 15s., with costs of proceedings in the Circuit Court as awarded by Judge Wyse Power, the costs of the appeal to the High Court, and of this appeal.
MEREDITH J. :
I entirely agree, but I desire to add a few words, as, at the hearing, I inclined to the view that the principle adopted in Howe v. Smith (1) might be applied to this case.
However the letter of 22nd December, 1931, from the vendor’s solicitors to the solicitors for the purchaser is interpreted, the vendor entirely misconceived the position. If he was relying on non-completion on the date originally fixed, then completion on that date had clearly been waived. If he was relying on unreasonable delay after that date he should have served notice fixing a new date. This he did not do. If, however, his point was, as I think it was, that the purchaser had on the 22nd December, 1931, been guilty of such delay as amounted to a constructive repudiation of the contract, then he should have alleged such repudiation in his defence. But he neither alleges nor proves any such repudiation. The vendor, therefore, was not in a position to rescind, or treat the contract as rescinded, on the 22nd December, 1931.
Then, as to what happened subsequently, he never put himself into a position to enable him to rely on the subsequent delay or on any constructive repudiation occurring after the 22nd December, 1931, for he never attempted to withdraw from the position he took up in the letter of that date. Consequently, in his defence he does not, and could not, rely on any such subsequent repudiation. That is what distinguishes the facts of this case from those in Howe v. Smith (1), as summarised by Cotton L.J. at p. 96. It may well be that from a date not long after 22nd December, 1931, the purchaser was never ready and willing to complete. But that is immaterial, since the vendor never gave him the option. Consequently, all the purchaser has done is to be somewhat dilatory in bringing his action for the return of his deposit.
But although the letter of 22nd December, 1931, was wholly ineffectual so far as concerns its purpose, however conceived, I cannot regard it as a nullity from every point of view. The vendor purported to treat the deposit as forfeited, and declared his intention to resell the premises. The purchaser was then entitled to treat the letter as a repudiation of the contract, and both the learned Judges in the High Court so held, and the right so to elect is not disputed. But it may be contended that the right is always lost unless it is promptly exercised. But that is only so in the sense that if the right to elect is not promptly exercised subsequent events and occurrences may readily cause a loss of the right. The vendor may be enabled to mend his hand and restore and revert to the original position. But so long as the vendor maintains the position that gives the right of election so long he preserves and keeps alive the purchaser’s right.
The vendor has never retreated from the position taken up in the letter of 22nd December, 1931, but has repeatedly reaffirmed it in the correspondence, and has finally done so in this action. With the election unmistakeably left open the purchaser has made his election. The contract is therefore terminated.
In Howe v. Smith (1), Bowen L.J. said: “The question as to the right of the purchaser to the return of the deposit money must, in each case, be a question of the conditions of the contract.” Under this contract the only condition of forfeiture of the deposit was on the purchaser’s failure to complete on the date fixed. That condition was waived and no new date fixed. The vendor cannot retain the deposit in the face of his own wrongful repudiation of the contract, just because there may be ground for suspecting that if he had at a subsequent date said to the purchaser:”Very well, I withdraw my letter of 22nd December, the title is accepted, I give you till to complete,” the purchaser would have been unable or unwilling so to do.
GEOGHEGAN J. :
I also agree with the judgment just delivered by Mr. Justice FitzGibbon.
Gordon v Phelan
27 April 1881
[1881] 15 I.L.T.R 70
Fitzgerald, Dowse BB.
Fitzgerald, B.
[The relation of landlord and tenant must subsist with its incidents, or it is nothing, or an unintelligible thing. According to your view I do not see what would continue except the relations established by the Act of 1860 itself. Pluck v. Digges (2 Bli. 31, 2 D. & Cl. 180), and that class of cases, having established that the statutes relating to landlord and tenant could not apply unless there were tenure and service, the intention of the Act of 1860 seems to have been to maintain the known relation of landlord and tenant with its incidents, even though there were neither tenure nor service to support it, provided there was a contract to create the relation.]
Fitzgerald, B.—Section 3 of the Landlord and Tenant (Ir.) Act, 1860, shows an intention that something there called the relation of landlord and tenant should continue to exist, but that from that time it was to continue, not as founded on tenure, but as founded on the contract of the parties. This being so, I am of opinion that the relation must continue with the incidents it had before. The defendant was, therefore, entitled to distrain the day after the rent was due.
As to the second point, the statement of claim contains the material allegation that the defendant broke open the outer door of the house. The plea undertakes to justify this. This it cannot do, and the demurrer must therefore be allowed on this ground.
Dowse, B.
I am of the same opinion as my learned brother as to the meaning and effect of section 3 of the Landlord and Tenant (Ireland) Act, 1860.
As to the other matters, I shall merely add that the plea admits the material allegation that the defendant broke open the onter door, and it is therefore bad. It is urged that the defendant may refer to the traverse contained in paragraph 2 to show that there is no such admission, and Nathan v. Batchelor is relied on for this. But that case merely decided that the first paragraph did not there constitute the whole defence. I would be inclined to follow it in a like instance. Here, however, paragraph 4 is a plea in confession and avoidance, and must stand or fall by itself, and cannot be helped by the traverse, which is an independent defence.