Specific Performance
Cases
Bagnell v Edwards
(1876) IR 10 Eq 215
Chatterton V-C: I am of opinion that this suit cannot be maintained. It does not pray a dissolution of the partnership, but asks for a decree for the specific performance of the partnership contract in general terms. The only breach of that contract proved against the defendant is that he has not paid up his one-half of the presented capital, in which respect, I may observe the plaintiff is admittedly in the same position, not having paid his half of the 2000 into the Bank. The plaintiff has, in consequence of this default, been obliged to advance sums out of his own monies to pay the current expenses of the concerns, while the defendant has not paid anything. Such an event is contemplated by the partnership agreement, which by its 9th clause provides that a partner providing a larger share of the capital than his own moiety shall be repaid his advances by the defaulter with interest at 10 per cent per annum. The relief actually sought is nothing but the payment of money, for which an action at law can be maintained by one partner against the other, and the 9th clause measures the damages so to be recovered. The principle of this Court is not to decree specific performance in such a case. The allegations made about the refusal of the defendant to sign cheques show that these were only temporary objections yielded by the defendant soon after they were made, and no such default existed when the bill was filed.
I must, therefore, dismiss the bill, but as the defendant is by his own admissions in default, I shall do so without costs.
Smelter Corporation of Ireland Ltd v O Driscoll
[1977] IR 305
O Higgins CJ: This is an appeal brought by the plaintiffs from the decision and judgment of Mr Justice Butler refusing their claim for specific performance of an agreement entered into by the defendant for the sale to them of 55 acres 0 roods and 36 perches of land situate at Carrigrenan in the county of Cork.
The plaintiffs are a limited liability company formed for the purpose of establishing in Ireland a smelter or base-metal reduction plant. At the time of the agreement sought to be enforced, the plaintiffs were engaged in the acquisition of land as a suitable site for such a plant in the Little Island area of Cork. The defendant is the owner of the land which is the subject of the agreement, but the negotiations in relation to the agreement were conducted on her behalf by her husband, Michael O Driscoll, and later by her solicitor who has since died. The agreement necessarily took the form of an option to purchase, and was dated the 25th November 1969.
Under the agreement the plaintiffs, in consideration of the payment of 7,000, were given for 12 months an option to purchase at a price to be determined by Mr Owen MacCarthy (the well-known arbitrator to the Land Values Reference Committee) on an arbitration specially held for that purpose. Provision was made for the extension of the option for a further period of six months on the payment of a further sum of 3,250 and there were other clauses which are not relevant to the issues raised in this appeal. In the event of the option being exercised, it was provided that the option payments should be credited against the purchase money and, if the option was not exercised for any of the three grounds set out in clause 9, it was provided that one-half of such sums should be returned to the plaintiffs and that, in the meantime, such one-half should be secured on deposit. On the 10th January 1970, Mr Owen MacCarthy determined in his arbitration award that the purchase price of the land should be at the rate of 1,500 per acre, which resulted in a purchase price of 82,837.50.
By letter dated the 23rd November 1970, the plaintiffs took a second option for six months for the sum of 3,250 which was thereupon paid to the defendant s solicitor. A third option for six months was then purchased by the plaintiffs as a result of negotiations between the auctioneer acting for the plaintiffs, Mr Ahern, and the defendant s solicitor. The consideration for this option was also 3,250, but this sum was not to be credited against the purchase money should the plaintiffs exercise the option. At the expiration of the third option, a fourth was negotiated as is evidenced by a letter dated the 24th November 1971, from the defendant s solicitor to the plaintiffs. This option was for a further six months for a nominal consideration but on the terms that the option monies paid under the original option should now be freed to the defendant and should not be credited against the purchase money in the event of the option being exercised. In effect, this arrangement constituted the ground of a fresh option to purchase for a fixed price of 93,087.50 being 82,837.50 as fixed by Mr MacCarthy, plus the 10,250 paid in respect of the options under the agreement of 25th November 1969. By letter dated 15th May 1972, the plaintiffs purported to exercise this final option. The defendant was unwilling and refused to complete and these proceedings were commenced by the plaintiffs seeking specific performance of the agreement to sell, and associated relief.
The defence to the plaintiffs claim is based on two main grounds. In the first place it is contended at paragraph 3 of the defence that the option or options to purchase were given by the defendant:
subject to a condition precedent that a smelter plant otherwise a base metal reduction plant would be built on the said lands and that the said lands would be used for no other purpose but the plaintiffs do not propose to build or utilise a smelter plant or base metal reduction plant on the said lands and the said condition precedent to the exercise of the said option has not been fulfilled and will not be fulfilled and the plaintiff is thereby debarred from exercising the said or any option.
At paragraph 4 of the defence it is also contended with regard to the option that:
the same was obtained from the defendant under duress and coercion whereby the plaintiffs caused or permitted a local authority to clearly give her to understand that if she did not sell the said lands or give an option over the same to the plaintiffs for the purpose of a smelter plant or base metal reduction plant, then the said lands would be acquired by compulsory acquisition by the said local authority and given to the plaintiffs for the stated purpose, and the defendant believed that this threat would be carried out to her damage and it was further represented to the defendant that she had a national and patriotic duty to permit employment on a large scale to be afforded by the plaintiffs at the said smelter plant or base metal reduction plant and it was in those circumstances and only on the understanding and pre-condition, express or implied, as hereinbefore indicated, that the defendant afforded such option to the plaintiffs.
To assess the validity of these two grounds of defence or of either of them, regard must be had to the evidence adduced at the trial before the learned High Court judge. Apart from the documents already referred to which relate to evidence of the option arrangements entered into between the parties, it appears that much happened before these arrangements became possible. The plaintiffs had engaged Mr Ahern (the principle of Marsh & Co, auctioneers) to conduct negotiations on their behalf with local land owners including the defendant.
On behalf of the plaintiffs Mr Ahern interviewed the defendant s husband and offered 800 per acre for the land which was subsequently the subject of the options. Believing that the Cork County Council as the planning authority had power under s 77 of the Local Government (Planning and Development) Act 1963, to acquire these lands compulsorily for the development contemplated by the plaintiffs, and further believing that, as a matter of probability, this power would be exercised, Mr Ahern so informed the defendant s husband. He did this in good faith, as the learned trial judge has found, believing his statement to represent the reality of the situation facing the defendant. Mr Ahern followed up this verbal statement with a letter dated the 11th August 1969, which was written to the solicitor acting for the defendant. In this letter he again made an offer of 800 per acre but added: We are suggesting that, since the probability of a compulsory purchase order being made is admitted, the necessity of having the order made be dispensed with and that the value of the land be submitted to an independent arbitrator acceptable to both parties, and that both parties be bound by his decision. This letter was a clear indication of Mr Ahern s view, as the negotiator on behalf of the plaintiffs, that if the 800 per acre was not acceptable the defendant ought to agree to the price being determined by an independent arbitrator in order to avoid a compulsory purchase order.
It seems clear that the defendant s solicitor did not doubt for a moment the soundness of the view expressed by Mr Ahern, and that subsequent negotiations were conducted on the basis that, if agreement was not possible, compulsory purchase would be the next step.
It appears that Mr Filer, the managing director of the plaintiffs, was made aware of the manner in which Mr Ahern was negotiating with the defendant, and of the arguments and representations he used and made. This appears from the fact that at the end of August 1969, Mr Filer was given Mr Ahern s complete file of correspondence which included the letter of the 11th August.
Despite the efforts of Mr Ahern, the defendant, through her husband, could not be persuaded to sell although the offer made on behalf of the plaintiffs was substantially increased.
By the 9th October 1969, all negotiations had come to an end and the possibility of the plaintiffs securing the defendant s lands by agreement seemed remote in the extreme. On that date a number of people, representing the plaintiffs, called to the County Hall in Cork which is the headquarters of the Cork County Council. These included Mr Filer, the managing director and Mr Ahern, the auctioneer. They there met the county manager, Mr Conlon, the chairman of the County Council, Mr Michael Pat Murphy, the vice-chairman, Mr Denis O Sullivan, and the development officer, Mr David Murphy. There appears to have been some slight conflict in the evidence at the trial as to the immediate purpose of this meeting. However, it is clear that following this meeting the county manager, the chairman, the vice-chairman, Mr Ahern and the development officer went in a body to see the defendant s husband for the purpose of urging him to resume negotiations with the plaintiffs for the sale of the land. There was again a conflict in the evidence at the trial as to what was said at this interview with the defendant s husband. The defendant s husband maintained that it was made clear to him by the gentlemen who called to see him that, if he was not willing to sell, the lands would be acquired compulsorily by the County Council. This was disputed by the County Council witnesses. However, the learned trial judge was satisfied that at this interview there had been a reference to the compulsory purchase of the lands and that this, coupled with what had previously been said and written by Mr Ahern, operated on the mind of the defendant s husband. This, of course, is a finding of fact by the learned trial judge which is binding on this Court.
On the following day the defendant s husband telephoned the development officer to say that he was prepared to negotiate with the plaintiffs, and the agreement was executed on the 25th November 1969.
At the trial it was made clear by the county manager when he gave evidence that the belief held and expressed by Mr Ahern was incorrect. The county manager made it perfectly clear in his evidence that there was no question of the County Council acquiring these lands for the plaintiffs. Whatever views he may have had as to the Council s powers in this respect, he said that such an exercise of compulsory acquisition had never been attempted and certainly was neither planned nor contemplated in this case. From this it follows that all suggestions made to the defendant s husband, to the effect that if the lands were not sold voluntarily they would be acquired compulsorily, were ill-founded.
I now turn to the grounds relied on by the defendant for resisting the order for specific performance claimed in this case. I wish to say at once that I find no substance in the first ground of objection. In my view, the purpose for which the plaintiffs sought to purchase lands or the use to which they intended to put them in no way affected the transaction. I can see no basis for suggesting that the proposed acquisition of the defendant s lands depended on the smelter project proceeding.
However, the second objection must be viewed in a different light. Specific performance is a discretionary remedy. The discretion to grant or refuse the relief must be exercised in a manner which is neither arbitrary nor capricious but which has regard to the essential fairness of the transaction involved. In effect, it is here suggested that the defendant was coerced or forced into granting the option or options to the plaintiffs by the threat of compulsory purchase. It does not seem to me on the evidence that a threat, as such, was ever used. At the same time it seems perfectly clear that the defendant was at a serious disadvantage.
The defendant s husband, who acted for her throughout the negotiations, believed that if there was not a voluntary sale there would be a compulsory acquisition of the lands. He so believed because he was told this by the plaintiffs agent, Mr Ahern. It is quite clear that this view was repeated to him by the defendant s solicitor, and on the 9th October 1969, further corroboration was provided by those who came to see him and who represented Cork County Council. Believing this to be the situation, there was no real purpose in refusing to sell or to give an option once, as was suggested, the price was to be determined by an agreed arbitrator. To refuse in these circumstances meant acquisition anyway, and the determination of the price by an arbitrator in whose appointment the defendant might have no say. It now transpires that the situation was not as was intimated to the defendant s husband. It is now clear that, at the time that these negotiations were proceeding, the County Council had no plans whatsoever to interfere by way of the compulsory acquisition of the defendant s lands.
It is well established that the discretion to grant specific performance should not be exercised if the contract is not equal and fair. In this instance the defendant was under a fundamental misapprehension as to the true facts. This misapprehension was brought about by the plaintiffs agent, Mr Ahern. While Mr Ahern acted bona fide, this does not alter the situation which he created. He led the defendant s husband and her solicitor to believe that, if the defendant did not agree to sell, the lands would be acquired. It appears clear also that the plaintiffs managing director was aware of the true position so far as the compulsory acquisition was concerned. It is to be noted that he had Mr Ahern s file of correspondence and, therefore, should have been aware of the incorrect picture which Mr Ahern had painted. Nevertheless, the plaintiffs managing director allowed the negotiations to proceed.
In these circumstance it appears to me that there was a fundamental unfairness in the transaction. The defendant agreed to sell believing that she had no real option, and the plaintiffs accepted her agreement to sell knowing that this was not so. In my view it would create a hardship and would be unjust to decree specific performance in this case. I agree with the decision of the learned trial judge. I would refuse specific performance but would order that all monies paid to the defendant by the plaintiffs be returned to the plaintiffs by the defendant.
Kenny J: I agree.
Parke J: I agree.
Lyons v Thomas
[1986] IR 666
Murphy J:
The issues
The present case (and a vendor and purchaser summons between the same parties 1985/159Sp heard in conjunction with it) raises important questions with regard first, to the duty of a vendor with regard to the preservation of property pending the completion of a sale and secondly, the right of a vendor unilaterally to rescind a contract for sale.
The background
The premises known as Camlinn 62 Orwell Road, Rathgar, in the City of Dublin were built in the late 1920s pursuant to the building covenant in that behalf contained in an indenture of lease dated the 3 August 1927, made between Walter Parkinson of the one part and Emily Harris of the other part.
The premises at Orwell Road aforesaid were owned by a Mrs Farrell prior to her death in March 1982. She, together with one or more tenants or lodgers had occupied the premises for a number of years. It appears that Mrs Farrell was an elderly widow and that no member of her family resided with her. There was evidence, which I accept, that Mrs Farrell in her later years maintained a keen interest in the gardens adjoining the premises but did not have any comparable interest in keeping up or decorating the interior of the premises.
In May 1981, Mrs Farrell became ill and went to reside with relatives in County Roscommon. She was subsequently transferred to a nursing home where she died in March 1982. She had not returned to the premises at Orwell Road subsequent to leaving them in May 1981.
Under her will Mrs Farrell bequeathed the premises to her daughter Anne Thomas the defendant herein. Mrs Thomas is married and has resided for some years with her husband and family in West Sussex, England. A decision was made by Mrs Thomas to sell the house and accordingly she arranged to procure vacant possession from the tenant or lodger who was in occupation of one room therein. Some negotiations took place with a view to a sale with a Mr Ryan who was known to the vendor s family and had shown an interest in the house. It was Mr Ryan who introduced Thomas Lyons (the plaintiff herein) to Mrs Thomas and eventually a contract was entered into in January 1983, under which Mrs Thomas (to whom I shall refer as the vendor ) agreed with Mr Lyons (to whom I shall refer as the purchaser ) for the sale to him of the Orwell Road premises for the sum of 56,500. The contract provided that the closing date should be the 18th February 1983; that the deposit should be a sum of 14,125 and that interest, where payable, should be at the rate of 24% per annum. Save as aforesaid the contract contained no special conditions and was comprised exclusively of the general conditions of sale (1978 edition) published by the Incorporated Law Society of Ireland.
These proceedings involve in particular a consideration of clauses 10 and 26 of the contract for sale. Those clauses which are respectively entitled rescission and insurance provide as follows :
10.If the purchaser shall make and insist on any objection or requisition as to title, the assurance to him or any other matter relating to or incidental to this sale, which the vendor shall be, on the ground of unreasonable delay or expense, or other reasonable ground, unable or unwilling to remove or comply with, the vendor shall be at liberty (notwithstanding any intermediate negotiation or litigation or attempts to remove or comply with the same) by giving to the purchaser or his solicitor not less than seven days notice in writing to rescind the sale. In that case, unless the objection or requisition in question shall in the meantime have been withdrawn, the sale at the expiration of such notice shall be rescinded and the purchaser shall thereupon be entitled to a return of his deposit, but without interest, costs or compensation, on his returning to the vendor all documents and papers in his possession belonging to or furnished by the vendor relating to the sale, and procuring the cancellation discharge or release of any entry relating to the contract in the Land Registry or Registry of Deeds. The purchaser shall accept the sum so returned in full satisfaction of all claims, whether for interest, costs, damages or otherwise …
26.The property shall as to any damage from whatever cause arising after the date of the sale be at the sole risk of the purchaser and no claim shall be made against the vendor for any deterioration or damage unless occasioned by the vendor s wilful neglect or default.
On the 25th January 1983, the solicitors on behalf of the vendor forwarded to the solicitors on behalf of the purchaser one part of the contract for sale duly executed by the vendor. The solicitors on behalf of the purchaser then, with commendable dispatch, forwarded both his requisitions on title in duplicate and the draft assignment on the 31st January 1983, to the solicitors for the vendor. As no replies were received to the requisitions and the time for completion of the sale had been permitted to pass, the solicitors on behalf of the purchaser wrote a reminder to the solicitors on behalf of the vendor on the 11th April 1983. The reply to that communication though dated the 29th August 1983, was not dispatched to or received by the vendor until the 5th October 1983. The reply apparently included replies to the requisitions on title.
Apart from any question of delay involved on the part of the vendor the first indication of the problems which were the subject matter of these proceedings is contained in a letter from the solicitor on behalf of the purchaser to the solicitor on behalf of the vendor dated the 13th October 1983. In that letter the purchaser s solicitors stated that the property for sale had been considerably vandalised and has also fallen into disrepair and asked the vendor to accept that she was responsible for the maintenance of the property pending the completion of the sale. The vendor was also requested to indicate the reduction in the purchase consideration which she would grant having regard to the deterioration. Later in the same month the solicitors on behalf of the purchaser raised certain rejoinders on title which are of no relevance to these proceedings but in a subsequent letter repeated the complaint that the premises were deteriorating. It was stated that a pipe had appeared to have burst in the premises and had been flowing for some time. In addition the vendor was put on notice that the property had been used by squatters. Finally – in this connection – the vendor was notified that fire insurance cover was no longer available to the purchaser as the property was vacant. Little appears to have happened in relation to the matter between November 1983, and May 1984. In the month of May 1984, a change occurred – as was explained in evidence – in the personnel dealing with the transaction in the firm of solicitors acting on behalf of the vendor. This change is apparent from reading the book of correspondence between the solicitors concerned. On behalf of the vendor there is a firm denial of any liability for deterioration or damage; there is a complaint that the purchaser failed to pay the agreed deposit; an accusation of delay on the part of the purchaser and a notice by the vendor fixing the 31st August 1984, as the date for completion and making time of the essence in that respect. Having taken this firm line the solicitors on behalf of the vendor then (by letter dated the 28th August 1984,) offered to close the sale immediately and to litigate subsequently the issue of liability for the damage or deterioration to the property and, for that purpose to reserve out of the purchase money a sum of 10,000 pending determination of the litigation. The purchaser declined to adopt this procedure. He insisted that he would only close if the property was restored to its original condition. From that point onwards the relationship between the parties and their respective solicitors deteriorated still further. It is perhaps significant that in their letter of the 18th September 1984, the solicitors on behalf of the vendor said:
It is perfectly clear that the purchaser had his own reasons for allowing the matter to continue as it undoubtedly did and we are satisfied that we will now be able to satisfy any court as to these.
This threat apparently arose from a suspicion which the solicitors on behalf of the vendor entertained that the purchaser did not have the finance with which to complete the purchase and the fact established in evidence, that the purchaser was a local authority employee with the Dublin Corporation attached to the planning section and that he had applied in his wife s maiden name and from an address which was not his or her permanent residence first for permission under s 4 of the Housing Act 1969, for the demolition of the premises numbered 62 Orwell Road (which was granted) and secondly on the 14th November 1983, for outline planning permission for a two-story mansard development containing ten apartments (which was refused). Presumably these are the facts which the vendor s solicitors had in mind when on the 21st September 1984, they wrote again as follows:
We are absolutely satisfied that that attitude which your client has adopted in regard to this transaction in particular since the dwelling-house was broken into indicates that he, his servants, agents or principals have had ulterior motives in regard to the property herein. We are in possession of clear, unequivocal evidence that your client, his servants, agents or principals are wholly unconcerned in reality about the condition of the dwelling-house. The nature of that evidence indicates to us that your client has been making points about the condition of the dwelling-house as an excuse for delaying the closing of this transaction and in the hope that other matters will in the interim occur.
In October 1984, the purchaser issued and served on the vendor the plenary summons herein claiming specific performance of the contract for sale dated the 14th January 1983. Such was the relationship between the parties at that stage that the vendor s solicitors declined to accept service of the summons and instead it was necessary for the purchaser to apply to the court for liberty to issue and serve the summons outside the jurisdiction of the court.
By letter dated the 14th November 1984, the vendor s solicitors gave notice to the purchaser s solicitors of the vendor s intention to invoke the rescission clause which I have recited above. In the absence of any reply to that letter the vendor s solicitors formally notified the purchaser s solicitors on the 26th November 1984, that the sale had been rescinded and returned a cheque for a sum of 3,500 which had been paid by the purchaser by way of deposit in connection with the contract. On the 7th March 1985, the vendor instituted proceedings by way of special summons in proceedings under the Vendor and Purchaser Act 1874, claiming a declaration that the contract made in January 1983, had been validly rescinded. However, as the claim of rescission was also an integral part of the vendor s defence to the specific performance proceedings it was convenient to deal with that issue in the plenary proceedings rather than on the vendor and purchaser summons.
The deterioration of the premises
There is little room for dispute as to the present condition of the premises. Over 70 photographs were put in evidence and these record pictures taken in every room in the house from a variety of different angles as well as a number of external views. It is clear that several windows were broken; paper has been torn from the walls; paint work has deteriorated; the copper cylinder and piping has been removed; rubbish has accumulated inside and outside the house; hand basins and other fittings have been broken; parts of ceilings have come down and indeed some floor boards have come up. In addition there are widespread and obvious marks of dampness under the ceilings, walls and floors in most of the rooms. As I say there is little room for dispute with regard to the present deplorable condition of the premises. The issue between the experts called on behalf of the vendor and the purchaser related first to the period when the deterioration occurred and secondly to the proper procedure (though not so much the cost) of making good the damage. As to the first of these issues the problem for the vendor was to establish the condition of the premises as at the date of the contract for sale. In this regard emphasis was placed on the fact that the premises were something over 50 years old at the date of the contract and that no effort had been made for many years before then to replace the original plumbing or electric fittings or to carry out routine repairs or decoration. General evidence to this effect was given by Mr Thomas, the husband of the vendor, who visited the premises once a year or so. More cogent evidence was given by a neighbour, Mr Keogh, who was a frequent visitor to the house during the life-time of Mrs Farrell. He was able to say that he himself had in fact patched the wall-paper from time to time rather than replace it. He pointed out that the fittings were old and it was clear that crude extensions had been made to the plumbing to convenience the tenant or lodger who resided there from time to time. Again some support for the poor state of the premises in January 1983, is to be found in the evidence of the valuers called on behalf of the vendor – Mrs Hargaden and Mr Broadhead, both of Messrs Lisney & Co. The effect of their evidence was that the premises in good condition in January 1983, would have been valued at a sum in the order of 66,000 rather than the sum of 56,500 which they fetched. Indeed there was a considerable measure of agreement between the valuers called on behalf of the vendor and those called on behalf of the purchaser. The value of the premises in 1983 as established by the sale was 56,500. Mr Gray, the valuer called on behalf of the purchaser, had in fact inspected the premises and reported upon them for a potential purchaser (Sean O Kelly) in December 1982, and he had at that stage valued the premises at a sum of 60,000. However, the valuers on behalf of both parties were agreed that the present value of the premises was 40,000. Mr Gray attributed the fall in value exclusively to the deterioration in the premises where the valuers called on behalf of the vendor attributed the fall to a general reduction in the price of properties which they say has occurred since the date of the contract. Whilst Mr Gray agrees that there has been a fall – perhaps a fall of 20% as suggested by Mrs Hargaden – he says that this fall has not applied to properties such as the house under consideration here which is an attractive house in the Dublin 6 district.
The principal witnesses on behalf of the purchaser maintained that the premises were in reasonably good condition in January 1983. The purchaser and his wife gave evidence to this effect as did Mr Ryan who was, as I have already mentioned, a potential purchaser at one stage. All confirmed the view expressed by Mr Gray that the premises were in January, 1983, in a reasonable state of repair.
In Bank of Ireland v Waldron [1944] IR 303 the question as to the party on whom the onus lies with regard to proving when or how deterioration of property occurred was dealt with by Overend J (at p 308) in the following terms :
When it is proved to the satisfaction of the Court that the property sold has been damaged between the date of sale and the time when the purchaser gets possession, the onus is shifted to the vendor, whose duty it was to preserve the property, and it is for him to establish, if he can, what portion of the damage pre-existed the sale and what portion could not have been prevented by the exercise of due care and forethought on his part.
Even accepting, as I do, that the principle aforesaid is applicable to the present case I am satisfied on the evidence that, having regard to the age of the premises and the lack of repair and maintenance during the years prior to the contract for sale, the plumbing and electric wiring in the premises were obsolete; the metal-framed windows had deteriorated and that the decoration of the interior was of a very low standard. Moreover, I accept that flooding had occurred in the premises on at least one occasion prior to the contract for sale and on balance I take the view that the dampness in the lower part of the wall of the livingroom is due to rising damp rather than the percolation of water through the ceiling. It is clear too that the dampness in the wall under the chimney-stack (which is reflected in a very high degree of dampness in the chimney breast in bedroom number 1) is due to an external defect not caused by the action of any vandal, squatter or other person residing in the premises. Mr Doyle, an engineer called on behalf of the purchaser, expressed the view that it was due to a broken flashing.
Mr Vincent Drum the quantity surveyor who gave evidence on behalf of the purchaser costed the repairs which he believes should be carried out at a sum of approximately 27,500. Mr Forrest the civil engineering consultant called on behalf of the vendor costed the works which he regarded as necessary to restore the premises to their condition in January 1983, at a sum of 2,480.
The law
Before considering further the conduct of the parties it may be convenient at this stage to examine the legal principles applicable to the matters in issue.
There is general agreement among the text book writers as to the nature of the obligations imposed on a vendor subsequent to the execution of a contract and before the completion of the sale. Such problems as exist in this regard relate not so much to the nature of the duty but as to its basis in law and its extent in practice.
A convenient statement as to the nature of the vendor s duties under an open contract is to be found in Clarke v Ramuz [1891] 2 QB 456 at p 459 by Lord Coleridge, CJ in the following terms:
It appears to be well established in equity that, in the case of a contract for the sale and purchase of land, although the legal property does not pass until the execution of the conveyance, during the interval prior to completion the vendor in possession is a trustee for the purchaser, and as such has duties to perform towards him, not exactly the same as in the case of other trustees, but certain duties, one of which is to use reasonable care to preserve the property in a reasonable state of preservation, and, as far as may be, as it was when the contract was made.
Counsel for the vendor properly drew attention to the decision of the Supreme Court in Tempany v Hynes [1976] IR 101 and to the fact that the majority decision in that case may cast some doubt upon the correctness of the assumption made by Lord Coleridge to the effect that a purchaser is entitled to the equitable estate in the property pending completion. In fact Kenny J (delivering the majority judgment) said at p 114 : He (the vendor) is not a trustee of the beneficial interest merely because he signs a contract.
It must be said at once (as counsel fully recognised) that the very sentence quoted follows immediately a statement by that learned judge in which he recognises and reiterates the duties of the vendor in the following terms:
A vendor who signs a contract with a purchaser for the sale of land becomes a trustee in the sense that he is bound to take reasonable care of the property until the sale is completed, but he becomes a trustee of the beneficial interest to the extent only to which the purchase price is paid.
In his judgment (the minority judgment) Henchy J at p 109 affirms the duty of the vendor in the following terms :
When a binding contract for the sale of land has been made, whether the purchase money has been paid or not, the law (at least in cases where the parties proceed to the stage of conveyance) treats the beneficial ownership as having passed to the purchaser from the time the contract was made: Gordon Hill Trust Limited v Segall [1941] 2 All ER 379. From then until the time of completion, regardless of whether the purchase money has been paid or not, the vendor, in whom the legal estate is still vested, is treated for certain purposes (such as the preservation of the property from damage by trespassers) as a trustee for the purchaser.
It would seem, therefore, that there is superficially, at any rate, a conflict between the authorities as to whether the duty to preserve imposed upon the vendor derives from the fact that he is a trustee for the purchaser or whether indeed the status of the vendor as trustee arises from the fact that such a duty is imposed upon him by law.
It seems to me that this conflict – which in any event is not of fundamental importance – is more apparent than real. In Tempany v Hynes [1976] IR 101 the Supreme Court was considering the nature of the interest retained by a vendor subsequent to the execution of a contract and in particular whether such interest could be captured, in the circumstances of that case, by a mortgage created under the provisions of the Judgment Mortgage (Ireland) Act 1850. What Kenny J concluded in his sentence at the end of the penultimate paragraph on p 114 of the judgment was that:
Until the whole of the purchase money is paid, the vendor has in my opinion a beneficial interest in the land which may be charged by a judgment mortgage.
In reaching that conclusion the learned judge was in fact recognising as had judges in many earlier cases that the trusteeship, if that is how it should be described, of a vendor is unorthodox in as much as he clearly has a significant beneficial interest perhaps with regard to occupation or interest as well as the potential right to have the property restored to him in the event of the contract being rescinded for one reason or another. In the circumstances it seems to me to be sufficient that subsequent to the execution of a contract, and whether or not all or part of the purchase price is paid, that the vendor has (subject to any particular bargain negotiated between the parties) the duty to use reasonable care to maintain the property in a reasonable state of preservation and that this duty, which is well established in law, derives from the fact that the purchaser has a significant interest in the property and is (I am assuming) precluded from the occupation and control of the property until actual completion.
The provisions of the contract in the present case and in particular the terms of what I have described as the insurance clause expressly provide that the property should be at the sole risk of the purchaser as to any damage from whatever cause arising after the date of the sale and that no claim should be made against the vendor for any deterioration or damage. Excepted from that exclusion is damage caused to the property occasioned by the wilful neglect or default of the vendor.
Whilst the words wilful neglect or default were traditionally used in contractual provisions dealing with the payment of interest and it is in that context that the expression has been subject to judicial scrutiny, I see no reason to conclude that the words should be interpreted differently merely because the action or inaction comprised therein would give rise to a different consequence when used in another context. Accordingly it seems to me that the comments of Bowen LJ in Young v Harston s Contract (1855) 31 Ch D 168 at p 174 are equally applicable to the present case:
What does wilful default mean in a contract like this? The term wilful default – though one in common use in such contracts – is not a term of art and to pursue authorities with a view to defining for all time what is its meaning in a contract like this appears to me to press citation far beyond the point at which it ceases to be useful. Default is a purely relative term, just like negligence. It means nothing more, nothing less, than not doing what is reasonable under the circumstances – not doing something which you ought to do, having regard to the relations which you occupy towards the other persons interested in the transaction. The other word which it is sought to define is wilful . That is a word of familiar use in every branch of law, and although in some branches of the law it may have a special meaning, it generally, as used in courts of law, implies nothing blameable, but merely that the person of whose action or default the expression is used, is a free agent, and that what has been done arises from the spontaneous action of his will. It amounts to nothing more than this, that he knows what he is doing, and intends to do what he is doing, and is a free agent.
In other words it seems to me that wilful default is no more and no less than a formula by which the courts of chancery describe an intentional (as opposed to an unconscious or accidental) negligent act or omission.
The other important question of law involved in these proceedings relates to the right of the vendor to rescind the contract. There is no doubt but that the rescission clause is expressed in wide terms and purports to confer extensive powers on the vendor. On the other hand it is settled law – and rightly accepted as such by counsel on behalf of the vendor – that there are restraints imposed on a vendor seeking to invoke a clause of this nature.
The most recent decision to which reference was made with regard to the construction and application of a clause of this nature was the judgment of Privy Council in Selkirk v Romar Investments Ltd [1963] 1 WLR 1415. In that case, which arose by way of an appeal from the Supreme Court of the Bahama Islands, a purchaser sought evidence of the devolution of the ownership from one person who appeared to be the owner of the property in question to another. That matter was raised by way of requisition on title and it is sufficient to say that the Privy Council was satisfied that the requisition was entirely proper. The issue in the case was whether the vendor for his part was entitled to invoke the contractual right of rescission which was included in the contract for the sale of the premises in question. The way the court posed the question was whether there was anything in the situation of the conduct of the parties to preclude the vendor from taking advantage of a contractual right which, ex facie, the contract had undoubtedly secured to him . Viscount Radcliffe delivering the judgment of their Lordships explained the position (at p 1422) as follows:
Now, on what can the appellant rest his claim to set aside the respondent s notice of rescission? It is plain enough that, so far as the terms of the contract go, the respondent is within its rights. Clause 3(3) [the rescission clause] is as much a part of the various undertakings and stipulations that make up the total nexus of the parties agreement as any other of its clauses, and it is in fact a stipulation that was included in the draft put forward by the purchaser. If a vendor, having stipulated for or been conceded such a right, is to be precluded from asserting it in any particular context, it must be by virtue of some equitable principle which enures for the protection of the purchaser; and it is not in dispute that courts of equity have on numerous occasions intervened to restrain or control the exercise of such a right of rescission in contract for the sale of land, despite what, on the face of the contract, its terms seem to secure for the vendor. It does not appear to their Lordships, any more than it did to the Judge who tried the action, that there is any room for uncertainty as to the nature of the equitable principle that is invoked in these cases. It has frequently been analysed, and frequently applied, by Chancery judges, and, although the epithets that described the vendor s offending action have shown some variety of expression, they are all related to the same underlying idea, and their variety is only due to the fact that, as each case is decided according to the whole context of its circumstances and the course of conduct of the vendor, one may illustrate more vividly than another some particular aspect of that idea. Thus, it has been said that a vendor, in seeking to rescind must not act arbitrarily, or capriciously, or unreasonably. Much less can he act in bad faith. He may not use the power of rescission to get out of a sale brevi manu since by doing so he makes a nullity of the whole elaborate and protracted transaction.
A similar view had previously been expressed by the Court of Appeal in England in Baines v Tweddle [1959] Ch 679 in which the conclusion was expressed by Lord Evershed MR (at p 688) in the following terms:
On the face of this condition [the rescission clause] the right appears to be unqualified; if a purchaser takes or makes any objection which the vendor is unable, or on the grounds of unreasonable expense, unwilling to remove, etc, then the vendor may rescind the contract. Naturally enough it has been the main burden of Mr Sparrow s argument for the vendor that this was the bargain which the purchaser made. It gave the vendor this apparently unqualified right of rescission and the purchaser must, accordingly, accept the consequences. I only venture, by way of comment on that, to remind the vendor that he on his part contracted to sell an unincumbered fee simple and nearly three weeks after doing so allowed the purchase money to be paid into the joint account. But this condition, which is one of considerable ancestry, though quite unqualified in terms, nevertheless has had a qualification undoubtedly imposed upon it by the decision of the Court.
Lord Evershed then went on to quote Henn Collins MR in In re Jackson and Haden s Contract [1906] 1 Ch 412 as follows :
As I have already said, numerous cases have been most carefully set before us, which I have had the opportunity of examining as they were read, and it seems to me that, in every case where the vendor was allowed to avail himself of a stipulation like this, there was always absent that element of shortcoming on his part which, though falling short of fraud or dishonesty, might be described as recklessness .
Lord Evershed then went to quote (indirectly) from the decision of Rigby LJ In re Deighton and Harris s Contract [1898] 1 Ch 458 at p 464 as follows :
It would not, in my opinion, be right here to enable a vendor to ride off upon a condition to rescind which was obviously not framed with reference to any such case as that which has arisen .
Again in Baines v Tweddle [1959] Ch 679 Romer LJ in his judgment also cited with approval from the judgment of Henn Collins MR in In re Jackson and Haden s Contract [1906] 1 Ch 412 the following passage at p 421:
Now what is the element that the Vice Chancellor is seeking for there which determines the case? It seems to me to be an element of something on the part of the vendor less than the law requires of him in such cases. It may stop short of fraud, it may be consistent with honesty; but, at the same time, there must be a falling short on his part – he must have done less than an ordinary prudent man, having regard to his relations to another person, when dealing with him, is bound to do.
As I say, counsel on behalf of the vendor properly recognises that a vendor does not have an absolute right to invoke the terms of a rescission clause. Instead it is argued on behalf of the vendor in the present case that his purported rescission was reasonable and that it was not arbitrary, capricious or based on any reckless conduct of the vendor or his legal advisers. In addition the vendor is entitled to distinguish the rescission clause in the present case from some of the earlier versions of that clause which did not afford a purchaser a locus poenitentiae. The clause in the present case coupled with the notice given by the vendor afforded the purchaser an opportunity to recant by withdrawing his insistence on a claim for damages.
The vendor relied on (among others) the decision in Duddell v Simpson (1867) 1 Eq 578 in which Turner LJ commented upon a rescission clause in the following terms:
I think that in a case where the vendor annuls the contract on the ground of unwillingness, he must show some reasonable ground for unwillingness; thus, for instance, he may show that if he proceeds to comply with a requisition, he will be involved in expenses far beyond what he ever contemplated, or be involved in litigation and expense which he never contemplated, and for avoiding which he reserved to himself the power of annulling the contract.
Again reference was made to Re Glenton and Saunders to Haden (1885) 53 LT 434 from which it may be convenient to cite in full the brief judgment of Bowen LJ as follows :
It seems to me that there are in this case two questions to be answered: (1) Did the purchaser insist on his requisitions? (2) Had the vendors a reason for refusing to comply? With regard to the insistence, it is plain to me that there was, on the part of the purchaser, an unequivocal adhesion to a demand which had been refused as, for instance, in the case of the plans. Then what kind of reason must lie at the bottom of non-compliance? It is a question which often arises, but not in every case. The authorities, ending with re Dames to Wood show that something is to be read into a contract of this kind. But here it is a matter of construction of the contract. Here the contract expressly states the reasons to be expense or any other reason. The question is not whether the purchaser was entitled to make these demands; but whether the vendors had honest and bona fide reasons for non-compliance. Mere caprice is not sufficient. But if there is a reason it need not be communicated by the vendor to the purchaser; that would be putting a new term into the contract. I agree therefore with the decision of the other Lords Justices, and I think that one good reason would be sufficient.
In the present case the point taken by the purchaser was not – in form at any rate – either an objection or a requisition whether as to title or as to assurance. Nor did it relate to any matter or thing existing at the date of the contract of sale. It was a complaint by the purchaser that the vendor had failed in the duty which she owed to him to maintain the property pending the completion of the sale. To that extent it may be said to be a complaint which was incidental to the sale. Nonetheless I would find it very hard to accept that a complaint relating to such a wrongdoing was within the contemplation of the parties when the rescission clause was framed and that conclusion of itself would (on the basis of the decision of Hall VC in Bowman v Hyland (1878) 8 Ch D 588) justify rejecting the vendor s contention herein.
However, as the case was fairly argued before me on behalf of the vendor that she had acted reasonably in her response to the conduct of the purchaser which was – in the circumstances as they developed – unreasonable, and that the purchaser effectively argued for the converse, I would prefer to decide the case by resolving that dispute.
It could hardly be suggested that a purchaser who insists upon a right to be compensated for damage to property in which he is interested is acting unreasonably. What is said on behalf of the vendor is that the purchaser acted unreasonably in failing (in all of the circumstances of the case) firstly, to specify or quantify the damages to the premises of which he complained and secondly, to co-operate in the solution ultimately proposed on behalf of the vendor, namely, that the contract would be completed without delay and the issue as to damages decided at a later date but on the basis that a substantial part of the purchase price would be set aside to meet any claim under that heading.
Whilst the proposal aforesaid made on behalf of the vendor was an eminently reasonable and practicable one there was no obligation on the purchaser to adopt it. There is no doubt but that the vendor and her legal advisers by the time the offer was made not merely suspected but had become convinced that the purchaser was not acting and had not acted in a bona fide manner and that his refusal to co-operate merely represented the culmination of an unhelpful approach to the problems facing the parties. The vendor suspected that the purchaser never had adequate finance with which to complete the purchase. Investigations by the solicitors on behalf of the vendor suggested that the purchaser did not intend to occupy the premises but sought to have the same demolished and the site cleared so that it could be developed as flats. There was a period during which an appeal was pending to the planning board and the vendor inferred that the purchaser was seeking to delay the transaction pending the decision of that body. It appears that the suspicions of the vendor with regard to the finances of the purchaser were unfounded. Convincing evidence was tendered at the trial as to the financial facilities available to the purchaser to enable him to complete the sale. On the other hand there is no doubt but that the purchaser sought permission to demolish the premises and applied for planning permission for their subsequent development and moreover caused these applications to be made under a name other than his own. However sinister such transactions might appear I cannot see that in any way they affected the rights of the vendor or in fact impinged upon the transaction between the parties. Moreover it must be recognised that if the vendor had become suspicious of the approach being taken by the purchaser, the purchaser for his part had every right to be concerned about the delay on the part of the vendor which had in fact occurred and it would not be surprising that the purchaser and his legal advisers would approach the proposals ultimately made on behalf of the vendor with some hesitation having regard to the context in which the same arose.
At the end of the day the position is this: under the terms of the contract for sale and in accordance with established legal principles the purchaser is entitled to be paid a substantial sum by the vendor by way of compensation for the vendor s wrongdoing. Whilst in my view it is entirely understandable that the vendor should wish to escape this liability I could not accept that it would be reasonable for a vendor to invoke a rescission clause so as to enable him to escape a liability which was caused by and indeed consisted of his or her wilful default.
In these circumstances I am satisfied that the rescission clause was not validly or effectively invoked.
A further point of law which arose in the course of the proceedings related to the Civil Liability Act 1961. It was pointed out on behalf of the vendor (and indeed accepted on behalf of the purchaser) that a wrong is defined in s 2 of the Civil Liability Act so as to include a tort breach of contract or breach of trust and accordingly that the damages otherwise recoverable by the vendor would fall to be reduced to the extent to which the same were caused by his own negligence or want of care. Whilst there was no dispute about the correctness of that proposition it is specifically adverted to as questions with regard to contributory negligence less frequently arise in relation to what are ordinarily described as chancery matters .
The conduct of the parties
The vendor took no steps to preserve or maintain the property. As already stated she lived with her immediate family at all times in England. It does not appear that the vendor retained the services of an estate agent to advise her in relation to the sale or the preservation of the property pending the completion thereof. Her solicitor carries on business from Longford so that he would not have had occasion to inspect the property (nor indeed would he have had any responsibility for so doing). The vendor did have a number of relatives who lived in or near Dublin and in giving evidence her husband (the vendor herself did not give evidence) did indicate that some of the relatives and neighbours might have been expected to keep an eye on the premises. It was quite clear, however, that the vendor did not specifically ask any particular person to inspect the premises and in fact Mr Thomas did recognise or explain that there was not a great deal that he or his wife could do. The extent to which the vendor and her husband were uninformed as to the position with regard to the premises was indicated by the fact that Mr Thomas was in the first instance under the impression that his sister-in-law who lived in Navan might have interested herself in the premises but he subsequently recognised that she was probably away from Ireland during the period when the premises were vacant.
Some cousins of the vendor did in fact visit the premises irregularly and a close neighbour – Mr Keogh – not only visited the premises from time to time, apparently on his own initiative, but did keep the premises under observation and in fact interested himself very much in the question as to how the premises might be developed by the intending purchaser. It is also clear that the vendor neglected to disconnect the public services. As it turned out it seems particularly unfortunate that she failed to disconnect the water, gas and electricity supply to the premises.
No doubt the conduct of the vendor may be seen in the context that she anticipated, and had in fact expressly provided, that the sale would be completed within a period of some four weeks. However, the delay in completion and the information which was undoubtedly communicated to her in the Autumn of 1983 that the premises had been vandalised did not result in any effective action being taken at this stage either. It is common case that damage continued thereafter and there appears to have been significant damage caused in the Autumn of the following year. Indeed it is clear from the photographs put in evidence that the final vandalisation of the plumbing and the theft of the copper cylinder occurred only in the months prior to the hearing of the action. Again it is common case that the premises were occupied by one or more squatters – apparently of a reasonably benign nature – over considerable periods. It does appear that the vendor or her agents did arrange to prevent further flooding: after the first report of damage all of the services were disconnected. In addition the vendor arranged to have some repairs carried out although the suitability and adequacy of those repairs was a matter of controversy between the parties.
Evidence was given by the estate agent and the solicitor on behalf of the purchaser (despite the objection on behalf of the vendor) as to the nature of the steps which should be taken to preserve property pending the completion of a sale. It was recommended that the vendor should where practicable continue to reside in the premises but that where that could not be done, steps should be taken to preserve the appearance of a house that is lived in. It was recommended that the post should be removed from the letter-box; the garden should be kept up; a car should be parked in the driveway from time to time; a timing device should be installed so as to switch on the lighting at intervals and above all the local garda should be informed of the fact that the house was being vacated. Mr Gray, the estate agent, went on to suggest that it might be desirable to retain the services of persons described as house minders to inspect the premises at regular intervals. He estimated the costs of that service at 2,000 per annum.
Whilst I would not accept that a vendor owes a purchaser the duty to engage professional house minders to protect vacant premises pending the completion of a sale (although this is an arrangement which the parties might be well advised to provide for in a special condition of sale in that behalf) it does seem to me that a vendor would be failing in the duty which he owes to the purchaser under conditions such as exist in the present case where first he fails to disconnect the public services which are an obvious source of danger and damage and secondly neglects to make arrangements to have the premises inspected at regular and frequent intervals (whether by a friend, relative or employee) to ensure that no damage has occurred and to take necessary remedial action if the premises are damaged.
In the circumstances the complaint that the vendor was guilty of wilful default has been fully established.
Perhaps a surprising feature of the case is the fact that the purchaser was a frequent visitor to the premises subsequent to the signing of the contract of sale. At an early stage he obtained the key from a relative of the vendor for the purpose of carrying out a brief inspection. That key was subsequently returned. However Mr Keogh, the neighbour to whom reference has already been made, gave evidence of having seen Mr Lyons entering the premises on a considerable number of occasions. Whilst Mr Lyons seemed slow to accept the evidence of Mr Keogh in that regard I have no doubt at all but that Mr Lyons was a constant visitor to the premises. He did admit that he entered the premises through the back door and that he had no trouble in gaining access to the premises and he left them in such a manner that any other person could enter the premises with equal ease.
I fully accept the argument made on behalf of the vendor that the purchaser too had an obligation to exercise reasonable care in his own interest to preserve the premises of which he was a beneficial or potential owner. From the vendor s point of view the difficulty is to establish what action the purchaser could have taken to protect the premises. It was suggested, for instance, that the purchaser should have insured the premises and maintained the insurance notwithstanding the problems which arise in obtaining cover for premises which are vacant. Again it was urged that the purchaser aggravated the problem by failing to define the work required to restore the premises to their pre-contract condition. And in general terms it was argued that the purchaser had failed to mitigate his loss, in particular by accepting the offer made by the vendor to complete the sale on the terms already mentioned.
The real difficulty in bringing home an allegation of contributory negligence to the purchaser is the fact that there is so little that the purchaser could do as a matter of law to the premises themselves. He was not in occupation of the premises and would not have been entitled to interfere with them. I would have had no hesitation in finding him guilty of negligence and apportioning a substantial part of the blame to him if knowing of the damage to the premises he had taken no steps to inform the vendor or her agents of it. But that is not the present case. However, in the peculiar circumstances of this case where the purchaser was, as I am satisfied he was, a frequent trespasser on the premises and took no steps whatever other than the recorded complaints which he made to the vendor I think he must bear some small degree of blame. Certainly it is an unusual situation but I take the view that as the purchaser was prepared to enter the premises without the authority of the vendor it was negligence on his part to leave the premises after such visits without taking any steps to secure the premises or at least to send a specific notification to the vendor or her solicitor of the particular fact that he had visited the premises and of the condition in which he had left them. In these circumstances I think it would be appropriate to find the purchaser guilty of contributory negligence and to apportion ten per cent of the blame to him and the remaining ninety per cent to the vendor.
The damage
As I have already mentioned there is a substantial difference between the vendor and the purchaser as to the cost of carrying out the necessary repairs. The purchaser measures the cost at 27,500 and the vendor at 2,480. I can say that I believe that Mr Forrest, the engineer on behalf of the vendor, was mistaken when he excluded from the schedule of repairs a number of items on the ground that the damage or deterioration had occurred prior to the date of the contract for sale. In particular I believe that the damage to the ceilings in many of the rooms was caused by flooding which occurred subsequent to the date of the contract. Again in this regard I prefer the evidence of Mr Drum to the effect that these ceilings will require to be replaced. On balance I was not convinced by Mr Forrest s evidence that the defects could be remedied by adopting a less expensive procedure. On the other hand I was not satisfied on the balance of probabilities that the present condition of the iron framed windows was due to a deterioration or damage which took place subsequent to the contract date. It seems to me that the greater part of this damage took place during the many years between the date when the same were first installed and the execution of the contract for sale. Another item to which specific attention may be drawn is a claim for the cost of reconnecting the public services. I would not regard this as an appropriate charge. In fact the evidence is, as I have indicated, that these services should be disconnected so that the reconnection is a charge which will properly fall on the purchaser.
Again, I have already recognised that there was a considerable conflict of evidence as to the extent and cause of the dampness which now affects the premises. I have already pointed out that I would accept that some of this dampness is attributable to rising damp for which the vendor has no responsibility and more is due to some defective lead flashing in respect of which no responsibility was brought home to the vendor. In those circumstances it would be wrong to lay the full cost of replastering work at the door of the vendor.
Finally, there is the matter of decoration. I accept that the premises were in a poor state of decorative repair at the date of the contract for sale and that the condition of the premises both as regards electric wiring and plumbing were such as one might expect in a fifty year old house which had not been renovated for many years. In those circumstances to allow as a valid claim the cost of redecoration in full would involve fixing the measure of damage at a sum which in the words of Henchy J in Munnelly v Calcon Limited [1978] IR 387 at p 401: … would enrich the plaintiff excessively and unnecessarily and would mulct the defendants unreasonably. I do not believe that it is practicable or desirable to review each of the items claimed on behalf of either party. I have already indicated that I would allow the cost of replacing the ceilings. In addition I would allow a substantial fraction of the cost of replastering. Effectively too the vendor must bear the cost of replacing the plumbing and the electric wiring. In addition some provision must be made for making good the works aforesaid. Having reviewed the figures submitted to me in the light of those conclusions it seems to me that the appropriate measure of damages is the sum of 12,700 (to include VAT) and then reducing this amount by ten per cent. On the apportionment of fault the total sum is reduced to 11,430.
Subject to any submissions to be made on behalf of the parties it would seem then there should be an order for a specific performance on terms that the purchase price should be reduced by the figure aforesaid.
O Brien v Kearney
[1995] 2 ILRM 232
McCracken J: This is an action arising from a contract dated 18 November 1993 and made between the plaintiff and the defendant whereby the defendant agreed to purchase from the plaintiff some 33 acres of land in County Westmeath together with the plaintiff s milk quota of 28,015 gallons net. In the events that happened the closing date was the 20th December 1993. The sale was not completed on the closing date and on the 2nd February 1994 the plaintiff served a completion notice on the defendant pursuant to general conditions 40 and 41 of the General Conditions of Sale. The service of such notice required the defendant to complete the sale within 28 days and in that respect time was to be of the essence of the contract. The defendant has refused to complete the sale and the plaintiff issued these proceedings seeking specific performance of the contract and damages. The defendant has counter-claimed for specific performance with an abatement of the purchase price, claiming that he is entitled to be compensated by reason of various defects in the land.
To fully understand the dispute between the parties, it is necessary to outline the nature and condition of these lands. They formed part of a very much larger holding, but their real value lay in the fact that there was a milk quota attached to them. There appears to be agreement that the value of the milk quota was about 2 per gallon, and accordingly 56,000 of the 105,000 purchase price was in respect of the milk quota, and the lands themselves were worth in the region of 50,000. The lands almost surrounded a large field which was not owned by the plaintiff and was not included in the sale. On the north-east and south-west of this field there was reasonably good grazing land but on the south-east and south the land fell away into a boggy marshy area, which ultimately, beyond the lands being sold, led into bog land. The field in the centre was owned by a Mr Colclough, and for convenience I will refer to it as the green lands, as that is how it is marked on the maps that were used in court. A track ran along the south-eastern side of the green lands and at the most southerly point of the green lands there was only a narrow passageway the width of the track included in the lands for sale. To the south of this was a further small field or paddock known as the bog garden, which was also in the ownership of Mr Colclough. I will refer to this field as the blue lands. There was an opening from this track into the green lands and also an opening into the blue lands some 30 yards further down the track.
The other relevant physical feature is that there was a laneway running along the north-western boundary of the lands sold, over which a right of way was granted, and on the far side of the laneway was a yard used by the plaintiff which contained a slatted house or cattle shed with a slurry pit and a large silo for holding silage. A ditch ran between the laneway and the lands being sold which ultimately crossed part of the lands being sold.
The lands were to be auctioned on 18 November 1993 and there was a considerable interest shown by a number of prospective purchasers, probably primarily due to the inclusion of the milk quota. On 16 November 1993 the defendant inspected the lands with the plaintiff and Mr Charles Smith of the auctioneers firm. There is a very serious conflict of evidence as to what took place in the course of this inspection, and also as to the condition of the property, and in particular of the track at the south-west of the green land at that time. The plaintiff, in evidence, stated that he had had the track cleared so that people could walk the land easily, and that when he came to the entrance to the green lands he pointed this out to the defendant, and then walked some 30 yards up the track to the blue lands, stepped into it and said that it was also excluded and that the same man owned both fields. He said that the gaps into the fields were quite obvious. On the other hand, the defendant says that he was told nothing about the blue lands, that the track was overgrown although it looked as if a tractor had passed over it, and that he did not see the gap into the green lands as it was also overgrown. His evidence is that he believed that the blue lands were included in the sale.
The matter is somewhat complicated by the fact that unfortunately the brochure issued by the auctioneers contained a map which was inaccurate, and which did in fact show the blue lands as being part of the lands being sold. It is clear that the defendant had never seen any other map before he walked the lands, and accordingly if the blue lands were not pointed out to him as being excluded, he had every reason to consider them as being included. There is evidence from two other witnesses which I will refer to later, and which is very relevant in resolving this dispute.
The auction duly took place on 18 November 1993 and was attended by the defendant and his brother-in-law, a Mr Murphy who is an engineer. The lands were knocked down to the defendant for 105,000 and the parties then went into another room to sign the contract documents. Both the defendant and Mr Murphy gave evidence that at this stage the defendant was in a very excitable and nervous state, and indeed I think it is quite possible that he thought he had paid too much for the lands. When the contract was produced, Mr Murphy saw that the blue lands were in fact excluded, but said nothing at the time. He did, however, point it out to the defendant a couple of days later. It should be said that the blue lands consist of just over two thirds of an acre of very poor land which one witness said may well be reclaimed bog.
In reply to the standard requisition as to whether there were any easements or rights affecting the property, the plaintiff s solicitors replied none save as appears from the documents of title furnished or on inspection of the property . They also confirmed that clear vacant possession of the entire property would be available and that no person was in adverse possession of the property or any part thereof. On 22 January 1994 the defendant inspected the lands with Mr Murphy. Mr Murphy s evidence is that he was asked to do so to check that everything was in order before closing, and in particular to check that the fencing was satisfactorily carried out in accordance with the contract. The plaintiff was not present during this inspection. In the course of the inspection Mr Murphy noticed a number of matters which concerned him, and went back to his car and got a camera and took a number of photographs which have been put in evidence. It is quite clear from these photographs that the openings to the green lands and the blue lands were very obvious, and that the track had been cleared to an extent that there would be no difficulty whatever walking along it, other than possibly the softness of the ground. The defendant s evidence is that the track was different from the first day he walked it in November. Following this inspection, Mr Murphy prepared a report setting out a number of matters which concerned him and this report was ultimately sent to the plaintiff s solicitors. The principal points are:
(1)That considerable effluent was emanating from the yard or from the silage, and flowing into the ditch which ultimately went across the lands being purchased.
(2)That the fencing had not been completed.
(3)That work was being carried out in the blue lands and that the presence of the gaps from the green lands and the blue lands onto the track showed that the track was being used as an access between the two portions of ground, while there was no reference to any right of way on any of the documents.
The defendant refused to complete the sale and there was some considerable further correspondence, some of which was in relation to the milk quota and some of which was in relation to the matters raised in Mr Murphy s report. The defendant did accept that the fencing would be carried out, but at various times refused to complete the sale because of the effluent, the possible right of way, and the absence of a letter from the vendor s co-operative agreeing to the transfer of the milk quota. The defendant claims that he was entitled to refuse to complete on one or more of these grounds, and indeed counter-claims for specific performance with an abatement of purchase price, while the plaintiff maintains that the defendant was in fact bound to complete whether or not he was entitled to an abatement.
In relation to the effluent there is certainly some evidence of spillages from the yard into the ditch, and indeed there is a photograph of a manure heap on the side of the ditch. However, there is not, in my view, any evidence of either a discharge of effluent which might amount to some form of right in the plaintiff to discharge water onto the lands, nor was there evidence of a sufficient discharge of effluent to affect the lands themselves. I do not believe that the defendant was entitled to refuse to complete on that basis.
With regard to the milk quota, the contract is quite specific in that it provides for a sale of the quota, and the only other provision is that there will be the approval of the Department of Agriculture and Food to the transfer of the milk quota to the purchaser. It is common case that in fact such approval was not necessary. The contract was not conditional on the receipt of any form of consent from the vendor s co-operative, and the fact that the purchaser may have wished to transfer the quota to a different co-operative is a matter which he was obliged to put in place himself, without the assistance of the vendor. The vendor, by simply transferring the quota, was doing all that was necessary under the contract.
Finally, there is the question of the purported right of way. I am faced with the very strange situation that there is clear evidence that the blue lands and the green lands were in common ownership, that on occasion the owner passed from one to the other over the track, but I have no evidence as to whether he claims a right of way. Neither party chose to call him as a witness, although it has to be accepted that the defendant made belated efforts to do so. On the evidence of the plaintiff, he made it quite clear to the defendant that the two plots of land were in common ownership and that it must have been quite clear to the defendant that the track may well have connected them, although the plaintiff was adamant that no right of way existed. The defendant denies that he was told anything about the blue lands, and indeed understood from the map which he had in his possession that it was part of the lands being sold to him. The serious conflict of evidence as to what occurred during the initial inspection in November must, in my view, be resolved in favour of the defendant. The evidence of two other witnesses would appear either to totally support his contention, or at least not to support the plaintiff s contention. Evidence was given by a Mr Powell that, prior to the auction, he was interested in buying the lands, and he walked the lands on the Saturday before the auction with the plaintiff. He also only had the brochure map. His evidence is that he was not told anything about the blue lands by the plaintiff, and when shown the photographs taken in January by Mr Murphy, he said that they did not represent what he saw in November and that the track was not cleared in that way. He also said that in buying land he would be very suspicious of any right of way.
Further support for the defendant s evidence comes, oddly enough, from the plaintiff s auctioneer who walked the lands with the plaintiff and the defendant in November. He accepted that the map on the brochure was wrong and that the blue lands appeared to be included in the lands in sale. He cannot recall the plaintiff saying that the blue lands were in the same ownership as the green lands and accepted in cross-examination that the defendant may have thought that the blue lands were included in the sale.
On balance, therefore, I am satisfied that the defendant was not made aware of the existence of the blue lands, or of the fact that they were in common ownership with the green lands, and therefore was not in any way alerted to the possibility of a right of way. As to whether a right of way does or does not exist, that is something which I am unable to determine in the absence of evidence from Mr Colclough, although again as a matter of probability, as it is acknowledged that the track has been used to gain access to the blue lands from the green lands, and has been so used for many years, a right of way may well exist.
Condition 40 of the General Conditions of Sale provides, inter alia:
(a)If the sale be not completed on or before the closing date either party may on or after that date (unless the sale shall first have been rescinded or become void) give to the other party notice to complete the sale in accordance with this condition, but such notice shall be effective only if the party giving it shall then either be able, ready and willing to complete the sale or is not so able, ready or willing by reason of the default or misconduct of the other party.
Condition 33 provides that a purchaser shall not be bound to accept property which differs substantially from the property agreed to be sold, but that apart from this provision no error should annul the sale or entitle the parties to be discharged. Condition 33(c) then provides:
The purchaser shall be entitled to be compensated by the vendor for any loss suffered by the purchaser in his bargain relative to the sale as a result of an error communicated to him by or on behalf of the vendor …
In my view, the failure of the plaintiff to disclose the possible existence of a right of way, and to disclose the fact that the only access which Mr Colclough had to the blue lands was along the track amounts to an error within the meaning of this condition, and accordingly the defendant is entitled to be compensated for any loss suffered by him as a result of this error.
It has been strenuously argued on behalf of the plaintiff that, even if such be the case, the defendant was bound to comply with the completion notice and close the sale, subject to his right to claim compensation. I do not accept this contention. The defendant was only obliged to comply with the completion notice if the plaintiff was ready, willing and able to complete the sale in accordance with the terms of the contract. There undoubtedly was an outstanding query raised on his behalf in relation to the use of the track, and this query had not been dealt with. In Horton v Kurzke [1971] 1 WLR 769, Goff J said at p 772:
It is a fundamental part of the vendor s obligations to prove his title, and the defendant is not, in my judgment, able to complete when she is not in a position to discharge that duty.
Now, when she served the notice, and when it expired, the position was that there was an adverse claim to the property which was either a question of fact or of mixed law and fact, the facts being … within the knowledge of the defendant and the claimant, and not that of the plaintiff. It seems to me therefore that it was the duty of the vendor to clear her title, either by a vendor and purchaser summons, or probably more aptly by awaiting the determination of the arbitration …
The position in the present case is very similar. There is an adverse claim, or at least the possibility of an adverse claim to the property which is within the knowledge of the plaintiff and of Mr Colclough, but not of the defendant. It was the duty of the plaintiff to clear the title of this possible adverse claim before he could serve a completion notice.
The matter is also dealt with by Barrington J in Keating v Bank of Ireland [1983] ILRM 295. This was a proceeding in which the specific issue of whether a vendor was entitled to insist on the closing of the sale before determining the dispute as to whether the plaintiff was entitled to compensation. Barrington J said at p 299:
It appears to me that if the plaintiffs are entitled to compensation at all they are entitled to it out of the purchase money and that they cannot be forced to close until such time as the amount of the compensation, if any, and therefore the amount of the balance of the purchase price has been ascertained. There may be many cases in which the sensible thing would be to leave the sum in dispute on joint deposit and to close the sale pending the resolution of the dispute. But it appears to me that it is one thing for the parties to make a supplementary agreement, however convenient and sensible, and quite another for one of the parties to be forced by the court to close a sale before the issue of whether he is or is not entitled to compensation under the original contract has been determined. It appears to me that the law is on the side of the plaintiffs in the present case.
It was argued on behalf of the plaintiff that the present case is distinguishable from the Keating case, in that there was a question of possible fraud involved in the Keating case. I do not consider this to be a valid distinction, as I think that the judge set out a general principle applicable to all cases where a purchaser is entitled to an abatement of the purchase price. Accordingly, in my view, the defendant was not obliged to complete the sale in accordance with the completion notice and the plaintiff s claim must fail.
The defendant has counter-claimed also for specific performance but with an abatement of the purchase price. While I do not feel in a position to determine whether a right of way actually exists, the probability of such a right of way is certainly a matter which affects the value of the land, and therefore would be a loss suffered by the defendant as contemplated by condition 33(c). I accept fully that the existence of even a possible claim to a right of way is a matter which would be considered of considerable importance to a purchaser of farm land, and which would, to some degree, reduce the value of the land. I have had evidence of valuers, although I do not find them greatly helpful in the present circumstances. It has to be said that the only part of this land affected by the possible right of way is the poorest portion of the lands, which has been valued at 500 an acre. It must also be remembered that, while the purchase price was 105,000, the price being paid for the lands, as opposed to the milk quota, was approximately 50,000. As by far the greater and more valuable portion of the lands would be totally unaffected by a possible right of way, I would assess the reduction in the value of the lands at 5%, that is the sum 2,500 and I would order specific performance with an abatement of the purchase price in that figure.
Finally, there is a counter-claim by the defendant for an injunction restraining the plaintiff, his servants or agents from causing or permitting his retained lands from being or becoming a source of nuisance to the lands acquired by the defendant and for damages for nuisance, breach of contract and breach of duty. I have already held that there may well have been some pollution of the drain from time to time, either from the farmyard itself or from the silo.
However, the evidence before me certainly does not establish that this pollution amounts to a nuisance in law, or indeed that it causes any damage to the lands being purchased by the defendant. I am satisfied the defendant is not entitled to any relief on foot of this part of the counter-claim.
Gorringe v Land Improvement Society
[1899] 1 IR 142
Porter MR: The plaintiff, a gentleman residing in England, is the owner in fee of the estate of Fintra, in County Donegal, on which he was desirous of effecting improvements at an outlay not exceeding 4000. In 1895 he conceived the idea of charging the money upon the lands under the provisions of the Improvement of Land Act 1864 (27 & 28 Vict, c 114). By that Act, s 25 it is provided that If the Commissioners (the Board of Works) shall find that the proposed improvements or any part thereof, whether with or without any alterations by them required or sanctioned, would effect a permanent increase of the yearly value of the lands proposed to be improved, or of any part thereof, exceeding the yearly amount proposed to be charged thereon, they shall sanction such improvements, or such part thereof as they shall think expedient, if under the preceding sections it shall be lawful for them so to do, by an Order under their hands and seal; and they shall by the same Order fix the rate of interest to be allowed on the cost of the sanctioned improvements, having regard to the market value of money at the time, but such interest shall never exceed five per cent per annum. The Order here referred to is the Provisional Order. Then s 26 provides:
The Commissioners shall from time to time prepare forms of Orders for sanctioning improvements, and shall also, whenever required by the landowner so to do, frame and entitle their said Orders under this Act in such manner that they may also be and operate as provisional, sanctioning, or other corresponding Orders under the respective Acts applying to any Company with which he may have contracted relating to the loan or improvements in question: Provided that every Order operating under this Act to sanction any improvements shall name the landowner to whom it is issued; shall express the greatest sum to be charged in addition to any cost, charges, and expenses under the fiftieth section hereof, and the rate of interest and term of years for the repayment thereof, the former not exceeding five per cent per annum, and the latter not exceeding twenty-five years; shall specify the lands on which such repayment is to be charged; and shall either express or refer to some contract or other document expressing the general scheme of the improvements to be executed.
And s 27 provides:
Every Order operating under this Act alone to sanction any improvement may be in the form set forth in Schedule (A) hereto, and shall be called a Provisional Order, and shall, subject to the following section hereof, create in favour of the landowner named therein the title to an absolute charge on the completion of the sanctioned improvements, which title such landowner may assign, either absolutely or by way of security, to any person; and such assignment may be made by endorsement on the Provisional Order.
The 49th, 50th and 51st sections provide for an absolute Order executing a charge on the completion of the works, or some part thereof, and the expenses of application and certain contracts may be included in the charge, the charges to be by way of rentcharge created by the absolute Order. Why Mr Gorringe, who was, as I have said, owner in fee and not a limited owner, preferred to have recourse to the machinery of this Act, instead of raising the money by an ordinary mortgage, does not appear. The defendants counsel say he is a rich man. I do not know how that is, nor does it affect the case.
The statutory rentcharge does not take effect (save provisionally) till the money is expended. Accordingly, as he wanted the money in the first instance, he applied to the defendant company, which is incorporated amongst other things for the purpose of making such advances, for an advance, to be repaid by means of rentcharge under Provisional Orders, and after some letter-writing (of which there is no lack in the case) the defendants agreed to advance not exceeding in all 4000, in sums of not less than 400 at a time, receiving 5 per cent commission, and being entitled to an assignment of the Provisional Order. I do not mean to read the letters, because owing to the course which the trial took, the existence of the contract was expressly admitted. A Provisional Order was, after great delay, obtained, dated 1st June 1896. It is as follows:
The Commissioners of Public Works in Ireland, in pursuance of The Improvement of Land Act 1864, and the Settled Land Acts 1882, to 1890, do by this Order under their seal sanction the proposed improvements expressed in an application made by said Thomas James Hamilton Gorringe, upon the terms and conditions that such improvements be executed in the manner mentioned or specified in the second schedule hereto, and which schedule expresses the general scheme of the improvements to be executed, and at an expense not exceeding the sum of 4000, and do hereby declare and provisionally order that it is right and proper, and for the benefit of the parties interested in the lands mentioned in the first schedule hereto, that the inheritance or fee of such lands should be charged with the said sum of 4000, together with the costs, charges, and expenses, preparatory or in relation to and consequent on the said application, and that the same should, to the whole amount of such respective moneys, be charged in the manner following, that is to say, by way of annuity, after the rate of 6 14s 11d per centum, per annum, payable by equal half-yearly payments for the period of twenty-five years.
By instrument under seal, and bearing the same date (1st June 1896), Mr Gorringe assigned this Provisional Order to the defendants. It was part of the agreement for the advance that both Mr Gorringe and Mr Guy, his agent, should enter into a bond with the defendants for the due expenditure of the money, and they did so. Money to the extent of 1500 was actually advanced from time to time by the defendants, and there is no question but that the whole of it, and a good deal more, was duly expended by the plaintiff in exact conformity with his obligation; and so matters continued till 10th February 1897, when the defendants insisted upon having an absolute Order from the Board of Works before making further advances (letter of February 10th 1897). The effect of this would be, of course, that the plaintiff would have to provide the money himself in the first instance, instead of the defendants. It is admitted that they had no right to this, and that their requirement was inconsistent with their contract. Thus the contract is admitted, and its breach is admitted, and the only question is, what is the plaintiff s remedy? The plaintiff claims specific performance by the defendants of their agreement. The defendants say, No; the remedy is damages merely, and the 50 paid into Court is more than sufficient legally to compensate the plaintiff for his loss. They say that he could have had no difficulty in raising the money elsewhere, and he ought to have done so. Had he taken this course he need not have been put to any loss at all, and in short all that he can claim is nominal damages merely.
If I thought that the plaintiff s remedy was confined to damages there would have to be an inquiry, for I am clearly of opinion that the case is not one for nominal damages. See Larios v Antonio Bonany y Gurety LR 5 PC 346 on the question of damages.
The plaintiff has incurred much trouble, inconvenience, and delay, besides some costs, in consequence of the defendants unjustifiable conduct. He had a number of workmen engaged at Fintra whom he had to dismiss, and whom it might not be easy to replace. He lost a whole season. If he had raised the money, as was suggested, from a bank, he would have raised it as a personal loan, and upon terms quite different from those on which the defendants bargained to provide it. If he desired, as he was entitled, to raise it on the same terms and in the same way as the defendants contracted to advance it, it is not shown who would have given it on those terms, nor at what outlay nor how soon. The defendants deliberately decided to break their agreement; and whatever amount the plaintiff could lawfully recover, I am quite clear it is idle to speak of it as a case for nominal damages. All the circumstances were within the defendants knowledge.
But the real question is, is it a case for damages only, or is the plaintiff entitled, if he chooses, to specific performance of the contract?
The defendants say no. The contract is one for the loan of money, and that only, and this Court never specifically performs such a contract. As a general proposition it is correct to say that a mere agreement to lend money, even upon security, will not be specifically performed. If money is lent, the lender may call it in again, and therefore specific performance would be futile. Money compensation in such a case affords an adequate, and, indeed, the best remedy, and goes nearer to a complete restitutio in integrum than the enforcement of a loan which the lender might straightaway proceed to require back, leaving the borrower in no better position after the interference of the Court. The very recent case of South African Territories (Limited) v Wallington [1895] App Cas 309 was relied on as decisive of the case on this point. That was an action by a joint-stock company against a person who had agreed to take sixteen debentures, if allotted to him, and had paid a deposit of part of the amount, but after allotment refused to pay up the remaining instalments. The company claimed specific performance, and the House of Lords decided against the claim. Some of the points mainly argued in the case do not arise here, but the views of their Lordships House on the question of specific performance, have to be noted and regarded. At page 312 Lord Halsbury C says: The applicant for debentures on the face of the instrument contracts to pay something, but the real nature of the whole transaction is an agreement by the applicant to lend money at certain interest, and the action in this case was in truth mainly, if not altogether, directed to compel the intending lender to perform his contract to lend, which undoubtedly he had refused and neglected to do. With respect to the claim for specific performance, a long and uniform course of decision has prevented the application of any such remedy, and I do not understand that any Court or any member of any Court has entertained a doubt but that the refusal of the learned Judge below to grant a decree for specific performance was perfectly right. To the same effect is the opinion of Lord Watson, stated at p 314, and that of Lord Herschell (p 315). And Lord MacNaghten says (p 318): It is quite plain that the contract made by the offer of these debentures, and the acceptance of that offer is nothing more or less than a contract to borrow and a contract to lend so much money payable by instalments. The essential character of the transaction is not altered either by the circumstance that the creditor in a certain event is to have the option of exchanging his position for that of a shareholder, or by the complicated nature of the arrangements made for the lender s security. That specific performance of a contract to lend money cannot be enforced is so well established, and obviously so wholesome a rule, that it would be idle to say a word about it. And Lord Morris states his concurrence at page 320.
These dicta do no more than state what the undoubted rule of law is. It must be a question in each case whether there are facts to which the rule can be applied. In Fry on Specific Performance the law is stated thus:
Again, the Court will specifically enforce a contract to execute a mortgage, and that even with an immediate power of sale where the money has been actually advanced either before or at the time of the contract; though it will not so enforce a mere agreement to lend, advance, or pay money (though the loan be one to be secured by mortgage), while it rests entirely unperformed either by the intended lender or by the intended borrower.
And again:
The Statute of Frauds does not apply to such a case. Therefore, if the Court has jurisdiction in such a case, any conversation may be made the subject of a suit for specific performance: thus if two friends are walking together and one says, will you lend me 100 at 5 per cent. for a year on good security? and the other says, I will, that conversation might be made the subject of a suit for specific performance in this Court if on the next day one friend should say, I do not want the money, or the other should say, I will not lend it. Nothing would be more difficult and more dangerous than the task which this Court would have to perform if it were to investigate cases of that description.
It will be observed that this is a guarded statement, and it will be found to be borne out by the cases cited. Take for instance Rogers v Challis 27 Beav 175, in which the law is stated with great clearness by the Master of the Rolls. He says:
The case cannot be put higher than this : that the defendant applies to the plaintiff for the loan of 1000 upon a security which he specifies, and the plaintiff assents to the proposal, but on the next day the defendant says, I have changed my mind, I do not require your 1000, I can get it upon better terms elsewhere. Is that a case in which a person can come to this Court for a specific performance, and say you, the defendant, are bound to let me advance the 1000 to you – it is true your circumstances may be altered, but you are bound to let me advance the money to you ?
He then puts the case quoted by Fry, LJ in his book. He continues:
This is not an agreement to purchase or sell anything, it is not the case of a contract to buy a particular debt upon certain terms, or a contract for the purchase of a certain quantity of goods, to be paid for by instalments and in a particular manner, in which case the Court has held, that these were circumstances which took the transaction out of the rule of this Court, that an ordinary contract for the sale or purchase of goods is not the proper subject of a suit for specific performance in this Court. It is nothing more than this: a proposal to borrow a certain sum of money, upon certain terms, for a certain time, which is accepted, and the borrower says two or three days afterwards, I do not want the money, and I have got it elsewhere, upon better terms. It certainly is new to me that this Court has ever entertained jurisdiction in a case where the only personal obligation created is, that one person says, if you will lend me the money I will repay it and give you good security, and the terms are settled between them. The Court has said, that the reason for compelling a specific performance of a contract is because the remedy at law is inadequate or defective. But by what possibility can it be said that the remedy here is inadequate or defective?
Hermann v Hodges LR 16 Eq 18 is no exception to the general rule: for there the plaintiff had advanced his money on a contract to have a mortgage, and a common law judgment instead might have been a very different remedy for its recovery.
I do not know of any case in which when there has been a substantial part performance so that the parties cannot be restored to their original position, the aid of the Court has been withheld.
But is the present case one of a mere contract to lend money? No doubt it is spoken of in the correspondence, and indeed for that matter in the plaintiff s pleading, as a loan; but that cannot shut out the consideration of what the real transaction was. The defendants were bound to advance money, which, when received by the plaintiff, was to be by him laid out in a specified manner in effecting certain defined and sanctioned improvements upon the lands. When completed these improvements must add to the value of the lands, and so provide part of the security for the advances which were to be repaid by a rentcharge, created by the Board of Works, and calculated so that principal and interest at 5 per cent would be wiped off in 25 years. The defendants were to become owners of the rentcharge. There was no covenant by the plaintiff, and no personal liability, to pay off the advances; and if there were any personal liability on the part of the plaintiff, it would at most be only in aid of or as security for the payment of the rentcharge. Thomas v Sylvester LR 8 QB 368 does not apply to this case. If there is anything plain it is that there was no loan in the ordinary sense. The defendants having advanced their 4000, and got their absolute order and rentcharge, would plainly have no right to go to the plaintiff and say, Now pay back our 4000. The answer would be, Your 4000 has been spent, as you contracted it should be spent, on land. I cannot, therefore, repay it. But it adds 4000 to the value of the estate; and you are entitled to get payment, not now, but spread over 25 years; not from me, but out of the land. It is an abuse of language to call that a loan. The rentcharge was not to be a security to the defendants for an advance. It was to be their own sole and absolute property. This is in substance a purchase of a rentcharge to be created in part by means of the purchase money to be paid for it.
Now, will a common law action for damages afford an adequate remedy for the breach of this agreement? The Provisional Order sanctions expenditure to the extent of 4000. That Order has been transferred to and is at this moment vested in the defendants. No doubt it might be made part of a decree in this Court, that the defendants should retransfer this Provisional Order or so much of it as would enable the plaintiff to try to get the rest of the money elsewhere. But what would be the position then? He would have to find another purchaser of a second rentcharge, puisne to the first. Could he get that on the same terms? I think it is impossible to suppose that a puisne rentcharge would bring as good a price as a prior one, even if a purchaser could be found for it at all. And besides this, the plaintiff would lose the benefit of his advantageous contract whereby the defendants were to take his bond in lieu of inspections of the works, and to waive all investigation of his title. No one else might be very easily and promptly found to make that arrangement; and inspections are very costly things, as the facts of this very case show.
I think that the defendants having proceeded so far with this bargain are bound to complete it. They cannot be permitted to say, we will stop short in the middle, having got the best part of the transaction: we will treat it as a contract to give us a rentcharge representing 1500; and you may go and look for someone to advance the 2500 remaining, on equally favourable terms, if you can find him. Had the plaintiff chosen to take a decree for damages, he would have been entitled to substantial and probably large damages. As he desires to have the contract carried out and completed, I think he is entitled to a decree on the ground that it would be inequitable to allow the defendants, under the circumstances proved, deliberately to violate their engagement by repudiating it in part while holding on to it so far as they considered it beneficial for themselves to do so, at the expense of plaintiff and his estate.
Rushbrooke v O Sullivan
[1908] 1 IR 232
Meredith MR: I do not see my way to make an order for specific performance in this case. The views of Courts of Equity as to enforcing covenants to build and covenants to repair have not always been consistent. In earlier days the Courts of Equity appear to have specifically enforced such covenants. Sir Edward Fry, in his book on Specific Performance, section 98 (4th ed), p 41 states that:
in some old cases, the Court of Chancery entertained suits in respect of building contracts: and what has been considered one of the earliest traces of the jurisdiction in specific performance is a dictum of Genney, J, in the 8 Edward 4, that a promise to build a house would be specifically enforced. Lord Hardwicke also maintained this view of the jurisdiction of the Court. But it is now clearly settled that, subject to certain exceptions, the Court will not specifically enforce contracts to build or repair, both because specific performance is decreed only where the party wants the thing in specie, and cannot have it any other way, and because such contracts are for the most part so uncertain that the Court would be unable to enforce its own judgment.
The case of Wolverhampton Corporation v Emmons [1901] 1 KB 515 gives judicial sanction to the statement of the eminent text writer, and, while recognizing the general rule, affords a notable illustration and example of the class of cases in which the Courts have recognized exceptions from the general rule.
What were the facts of that case? (The Master of the Rolls referred to the report and continued.) It is plain that the determining factor in the decision of that case was the subsequent agreement, the supplemental agreement, by which, as Cotton LJ, says (at page 524), the buildings to be erected were specifically defined in the particulars. This is plain from the judgments of the Master of the Rolls and the Lords Justices.
The Master of the Rolls says (at page 522):
The authorities to which reference has been made appear to me to show that, where there is a definite contract, by which a person, who has acquired land in consideration thereof, has agreed to erect on the land so acquired a building, of which the particulars are clearly specified, and the erection of which is of an importance to the other party which cannot adequately be measured by pecuniary damages, that is a case in which, according to the doctrine acted upon by Courts of Equity in relation to such matters, specific performance ought to be ordered.
Collins LJ, says (at page 524):
Whatever the exact principle of equity on the subject may be, I think it is clear on the authorities that the elements exist in this case which in previous cases of the kind have been held to justify the Court in making a decree for specific performance. In this case land was conveyed to the defendant by the plaintiffs, part of the consideration being the covenant by him to erect buildings on it: by the subsequent agreement the buildings to be erected were specifically defined in all particulars; and, having regard to the circumstances and the position of the plaintiffs, it appear to me that damages would not be an adequate compensation to the plaintiffs for the breach by the defendant of his contract. I think, therefore, that this is a case in which the Court has power to make an order for specific performance, and in which such an order ought to be made.
Romer LJ says (at page 524):
There is no doubt as a general rule the Court will not enforce specific performance of a building contract, but an exception from the rule has been recognized. It has, I think, for some time been held that, in order to bring himself within that exception, a plaintiff must establish three things. The first is that the building work, of which he seeks to enforce the performance, is defined by the contract: that is to say, that the particulars of the work are so far definitely ascertained that the Court can sufficiently see what is the exact nature of the work of which it is asked to order the performance. The second is that the plaintiff has a substantial interest in having the contract performed, which is of such a nature that he cannot be adequately compensated for the breach of contract by damages.
The present case does not fall within the class of exceptional cases. It fails because there are no plans, particulars, or specifications. The contract is within twelve months from the date of the agreement to expend the sum of 600 at the least in such substantial repairs and improvements as are mentioned in the second schedule hereto of and in the said messuage, hereditaments, and premises described in the first schedule hereto, and in such manner as the landlord or his architect or surveyor shall approve or direct, and shall prove such expenditure as aforesaid to the satisfaction of the landlord or his architect or surveyor. The repairs and improvements mentioned in the second schedule are these: To take down, rebuild, and repair such portion or portions of said premises as said architect shall direct under his directions and to his satisfaction. Where is there anything definite in that? Where is there any plan showing the particulars of the work to be done, such as was held to have been arranged and agreed upon in Wolverhampton Corporation v Emmons [1901] 1 KB 515? Could anything be less definite than this schedule? If the plaintiff s architect had before action brought made out his plans and specifications, and had said: There is what you must do: you must take down here; you must rebuild and repair there, then Wolverhampton Corporation v Emmons [1901] 1 KB 515 would apply; but personally I am not disposed to extend the class of exceptions further than it has been extended. I agree that the question is a most difficult one; it must often be a matter of the utmost delicacy for the Court to determine how far it will go in granting specific performance of a covenant to build or repair; but in the present case I am clear that the exact nature of the work to be done has not been so specifically defined or ascertained as to justify a decree for specific performance.
The plaintiff is entitled to judgment on the pleadings for the breach by the defendant of his covenant; but the remedy lies in damages and in damages only. There will be judgment for the plaintiff with costs, and an inquiry as to damages. I hope that the judgment of the Court will not be misinterpreted by the defendant; he is mistaken if he thinks he will escape his liability.
Wanze Properties (Ireland) Ltd v Five Star Supermarket
High Court, unrep, 24 October 1997
Costello P: In this case the defendant company hold the premises, the subject matter of these proceedings, under a lease which contains a covenant on the part of the lessee to use the demise premises for the purpose of the business of a supermarket and all business ancillary thereto only and without the landlord s consent in writing, it shall not be held reasonable to permit such property to be used for any other purpose. It also contains a covenant 11 of the tenant s covenant as follows:
To keep the demise premises, or such portion thereof as is normally open to the public, open for the purpose of the said trade during the usual hours of business appropriate to the tenant s business, at least unless required to close by law or trade union regulation.
There has been quite clearly a flagrant breach and a deliberate breach of this covenant. The defendant accepts that it breached the covenant and did so with his eyes open on the basis that it was prepared to pay damages. The defendants submit that the only remedy available to the plaintiffs for the loss which the plaintiffs sustained as a result of the breach is that the loss should be quantified and damages awarded and further submit that it is settled law that the plaintiff remedy which is also sought in these proceedings by the plaintiff – namely an order of injunction or specific performance is not available to the plaintiff.
Now, as stated by Mr O Neill, and as indeed expressly agreed by Mr Farrell on behalf of the defendant, I am not deciding today whether or not I should grant an order for specific performance or a mandatory injunction. This is only the interlocutory stage of the action. What I have to decide is whether or not there is a reasonable probability that such an order shall be made and indeed this case really turns on this legal point because the defendants are prepared to pay damages but claim that the Court has no jurisdiction to grant the relief sought.
I am aware that the Courts have in the recent past been developing the law both in the area of specific performance and in the area of injunctions and I have been referred by Mr O Neill to the decisions of the High Court in this country in which orders for specific performance have been granted where on previous occasions it seems to me it is unlikely that they would have been granted.
The Lift Manufacturers case ([1979] ILRM 277) was an order for the specific performance of a business contract. The Pharmacy Limited case was another case in which the defendant was forced to do business with the plaintiff company and I think some years ago such an order would not have been made. Similarly, in a more recent case, a decision of Mr Justice McCracken, the Court in that case directed the defendant to carry on certain business arrangements with the plaintiff. So that it does seem to me that there has been a development of the law in this area in this country which has not yet gone as far as that urged by Mr O Neill on behalf of the plaintiff. What has happened in England has been that in a case very analogous to the present case (Co-operative Insurance Society Ltd v Argyll Stores Holdings Ltd [1996] 3 All ER 934) the Court of Appeal in England reached a decision which was favourable to the plaintiff s case in the instant case. That is to say it was a case in which a shopping centre was owned by the plaintiffs and the Court ordered the defendant supermarket to continue business in the premises.
The House of Lords unanimously overruled the majority decision of the Court of Appeal and the House of Lords decision ([1997] 3 All ER 297) is one on which the defendants in this case strongly rely and what I have to decide is whether or not the plaintiffs in this case have made out a case that there is a reasonable probability that in the particular facts of this case, the Irish Courts would follow the decision of the House of Lords.
Now, it is clear from the headnote – and I think it is agreed that the headnote correctly summarises the judgment of the House of Lords – that the decision of the House of Lords indicated a rule of law which should be applied other than in exceptional circumstances. What the plaintiffs say in this case is that the facts of this case are different to the facts in the House of Lords case to which I have referred in one significant way. In the House of Lords case the defendant supermarket was running a business at a loss. The Court decided that it would not grant an order which would require the defendant company to continue carrying on that business even though it had agreed to do so in the terms of its lease and it is of interest to note that in the case to which Mr Farrell referred me of Mr Justice Slade, the defendant company in that case was also suffering a loss and desired to cease business in the premises because of that fact.
This case, the plaintiffs argue, is different. In this case the defendant company took a deliberate decision, a deliberate commercial decision that it would expand its business in a different area close by, 400 yards away, in a different shopping centre which was then being developed. This was, I am sure, taken after very careful consideration of the economic benefits to the defendant company in the move but there was a factor which had to be taken into account, namely that it had this lease under which for a further period of 12 years it had covenanted to remain in possession and carry on business in the Athlone Shopping Centre.
In my view it is open to the plaintiffs to argue, and it is certainly a strong arguable case, that the financial loss which the defendants would suffer as a result of being required to carry on business in the supermarket in the Athlone centre was brought on their own head by the defendants own action and this factor is a different factor to that contained in the House of Lords case and in the decision of Mr Justice Slade to which I have been referring.
In those circumstances it does seem to me that the plaintiffs have been able to satisfy me that they have a strong arguable case that at the hearing they will obtain the relief they seek. Now, I am not deciding today that I should so make the order but I am deciding that in the case at the trial of the action. I am merely deciding that they have made out a strong case that there is a reasonable probability that they would get the order that they seek.
So at the interlocutory stage, applying the well established principles on which the Court grants interlocutory relief, the plaintiffs have cleared the first hurdle. As to whether or not if the plaintiffs succeed in this action, damages would be an adequate remedy again I will decide in favour of the plaintiffs. I am quite satisfied that if the Court decides that it has power to grant an The legal owner need not be a mere trustee. He can be the holder of substantial rights in the land, for example, a life tenant or an order for specific performance, it would so do. It would not give damages in lieu because damages would be an entirely inadequate remedy.
The plaintiff company has made out a prima facie case that it is facing very serious financial loss, perhaps catastrophic loss, as a result of the defendants action and I do not think that if the Court came to a conclusion that it had a jurisdiction to grant the equitable relief, that it would not give damages instead of it.
As to the balance of convenience, again I think the plaintiffs have made out a case that on the balance of convenience the Court should grant the relief sought once it decides that the plaintiffs have made out a reasonable case on the law. Should it transpire that I wrongly refused today to grant the relief sought at the trial of the action it was quite clear that very, very serious injury would have been caused to the plaintiff by this wrongful decision and in some amount of time when this hearing is being held, it would be very difficult if not impossible for the Court to compensate the plaintiff for that loss.
Mulhall v Haren
[1981] IR 364
Keane J: The plaintiffs who live at No 89 Patrician Villa, Stillorgan in the county of Dublin were thinking of moving house in the summer of 1978. They eventually saw a house with which they were happy, ie, No 131 Upper Kilmacud Road, Stillorgan. This house was owned jointly by the defendants. It was on the books of a firm of estate agents called Hibernian Auctioneers Ltd The plaintiffs made an offer of 24,000 to Mr O Reilly of that firm; he communicated the offer to his clients, who wanted 25,000. Ultimately, the defendants agreed to accept 24,500 and the plaintiffs informed Mr O Reilly on the 10th July 1978, that this was acceptable to them. They agreed to a deposit of 25% of which 750 was to be paid immediately. On the 28th August the plaintiffs signed a contract for the sale of their own house and, as that contract provided for a closing date of the 29th September, the plaintiffs suggested that the 22nd September should be the closing date for the purchase of the defendants house. Both parties envisaged that the transaction would be completed in the normal way by solicitors acting on their behalf, and they each instructed firms of solicitors.
On the 20th July Mr McCarroll, on behalf of the plaintiffs, wrote to Hibernian Auctioneers as follows:
Re: 131 Upper Kilmacud Road.
Dear Sirs,
We are acting for Mrs Mulhall in the proposed purchase of the above property for the sum of 24,500 and we have received a bank draft in your favour for 750 and as the sale is subject to contract perhaps you would send us the contract.
On the same day Mr McCarroll wrote to Mrs Mulhall as follows:
Dear Mrs Mulhall,
We duly received yours of the 19th instant and by the same post we received a letter from the Bank of Ireland sending us bank draft for 750 in favour of Hibernian Auctioneers, 20 Main Street, Clondalkin, County Dublin, but needless to remark we will not part with this bank draft until we get the contract for sale and as soon as we do we will contact you as it will be necessary for you to sign the Contract.
On the 21st July Mr McCarroll wrote again to Hibernian Auctioneers as follows:
Re: 131 Upper Kilmacud Road, re: Mrs Valerie Mulhall
Dear Sirs,
With further reference to the above, we now enclose herewith bank draft for 750, which of course, is subject to contract, and we would be obliged if you would let us have the contract immediately.
On the 26th July Mr O Reilly wrote to Mr McCarroll as follows:
Re: Your client Mrs Valerie Mulhall. Premises: 131 Upper Kilmacud Road, Stillorgan, County Dublin.
Dear Sirs,
We acknowledge yours of 21st instant with bank draft enclosed in the sum of 750 as deposit on the above on behalf of your client Mrs Valerie Mulhall. We enclose receipt for same. We have written to the vendor s solicitors and no doubt you shall be hearing from them shortly. Thanking you.
The enclosed receipt was as follows:
Received from Mrs Valerie Mulhall the sum of 750 deposit on property at 131 Upper Kilmacud Road, Stillorgan, Co Dublin. Full purchase price 24,500. It is agreed that deposit would be refunded in full in event of cancellation due to inability to obtain loan or non-completion of sale due to any defect in lease on said premises.
On the 26th July Mr O Reilly wrote to Messrs MB O Cleirigh & Co the solicitors for the defendants, as follows:
Re: Your clients, Mr and Mrs John Haren Sale: 131 Upper Kilmacud Road, Stillorgan, County Dublin.
Dear Sirs,
On the instructions of Mr Haren, we would confirm having sold the above property for a sum of 24,500. This sum includes floor coverings, window coverings and light fittings excepting dining-room light fittings. The purchasers are Mr and Mrs Mulhall, 89, Patrician Villas, Stillorgan, who are represented by JH McCarroll and Company, solicitors, 4 Church Street, Wicklow who await contract. We would also confirm having received a booking deposit of 750 from Mrs Mulhall through her solicitor. Our fees agreed with Mr Haren are 490. We trust you will now be able to proceed in this matter.
That letter was acknowledged by Messrs O Cleirigh & Co on the 3rd August and they wrote to Messrs. McCarroll & Co on the 15th August as follows:
Haren and Another to Mulhall and Another, 131 Upper Kilmacud Road, Stillorgan, County Dublin.
Dear Sirs,
We understand that you are acting for the purchasers of the above premises and we enclose herewith contract in duplicate together with vouching documents for completion by your clients. A holding deposit of 750 has already been paid to Hibernian Auctioneers Limited and the balance of the deposit is 5,375. As you will see from the contract, we have inserted the 22nd September as a completion date. However, the final date for handing over possession is to be agreed between our respective clients. Please let us hear from you at your early convenience.
The contract was in the standard form of the Incorporated Law Society of Ireland and presented no unusual features. It was not returned by Mr McCarroll and on the 6th September O Cleirigh & Co wrote him a reminder. The reason it was not returned was that, while Mr McCarroll was satisfied that the necessary loan finance would be available to his clients to complete the purchase, they were not actually in funds. In order to save time, Mr McCarroll sent requisitions on title together with a draft assignment to O Cleirigh & Co on the 6th September 1978. His clients having been put in funds, he wrote again on the 20th September enclosing the contract executed by the plaintiffs together with a bank draft in favour of O Cleirigh & Co for 5,375 (the balance of the deposit).
On the 27th September O Cleirigh & Co wrote to McCarroll & Co stating that they had written to their clients regarding the signing of the contract. They wrote in those terms because Mrs Haren had informed them that certain marital problems which she was having with her husband, had come to a head and she was now unhappy about proceeding with the sale. Mr McCarroll, having heard nothing further, became naturally concerned with the lack of progress and, having been unable to make contact with Mr Lane (who was the solicitor in O Cleirigh & Co dealing with the matter), advised his client to call directly on Mrs Haren to find out what was holding up matters. Mrs Mulhall did so, and was told by Mrs Haren that she thought the deal was off. Mr McCarroll wrote on the 5th October to O Cleirigh & Co expressing his anxiety. There being no reply to his letter, he wrote again on the 11th October pointing out that the purchaser of Mrs Mulhall s premises was now threatening proceedings unless possession was given.
On the 13th October O Cleirigh & Co wrote to McCarroll & Co informing them that Mrs Haren had instructed a separate solicitor and was not at present prepared to sign the contract. They suggested that Mr McCarroll should get in touch with her solicitors, Messrs Gerard A Walsh, Harte & Co. McCarroll & Co replied on the 16th October pointing out the difficulties that this created and stating their intention, if necessary, of seeking compensation from Mrs Haren. On the same day they wrote to Gerard A Walsh, Harte & Co informing them of the position. There being no reply to that letter, they wrote again on the 20th October and threatened to institute proceedings. They wrote in similar terms on the 27th October, but that letter appears to have crossed a letter from Gerard A Walsh, Harte & Co in which they indicated that they were awaiting details of the transaction from O Cleirigh & Co in order to enable them to advise their client as to whether she was under any liability in contract to the plaintiffs. Gerard A Walsh, Harte & Co wrote again on the 2nd November stating that they had not received any further instructions and were not in a position to accept notice of any proceedings. They suggested that McCarroll & Co should get in touch again with Mr Lane of O Cleirigh & Co, which they did on the 6th November. On the 13th November 1978, O Cleirigh & Co wrote confirming that, as far as Mrs Haren was concerned, their instructions were withdrawn. They made it clear that, as far as Mr Haren was concerned, he was still prepared to proceed with the transaction.
The matter did not proceed any further in correspondence; but at some time early in 1979, the plaintiffs met Mr Haren in a licensed premises in Killorgan. When they enquired what the difficulty was, he said that, as it happened, his solicitor (Mr Lane) was also on the premises. He brought Mr Lane over and introduced him to Mr and Mrs Mulhall. There was some dispute as to the conversation that followed. Mr and Mrs Mulhall are under the impression that Mr Lane told them that Mrs Haren had signed the contract and that it had been posted to their solicitor. Mr Lane says that he told them that he had been informed by Mrs Haren that she was now prepared to sign the contract and was sending it to him for transmission to Mr McCarroll. I do not attach any significance to this difference in memory: I have no doubt that all concerned were honestly trying to give their recollection of the conversation to the best of their ability, but it does not touch on any issue which has to be resolved in these proceedings. The present proceedings for specific performance had already been commenced by the issue of a plenary summons on the 20th December 1978.
The only other matter of importance, as far as the facts are concerned, is that, although a completion date of the 22nd September had originally been typed on the contract, this was altered in ink to the 29th September. Both Mr McCarroll and Mrs Mulhall said that they had no recollection of making any such alteration, although Mr Lane was satisfied that the contract, as returned to him, contained the alteration.
The plaintiffs, in these circumstances, claim specific performance of an oral agreement which, they say, was entered into for the sale to them of the property. They say that the agreement is evidenced in writing by a memorandum or note contained in the letters dated the 20th July, 21st July, 26th July, 15th August, 20th September and 27th September 1978, and in the receipt dated the 27th July 1978, and the draft contract executed by Mrs Mulhall. The defendants resist the claim on the grounds, first, that there was no concluded oral agreement for the sale of the land; secondly, that if there was such an agreement, there was no memorandum or note thereof sufficient to satisfy the requirements of s 2 of the Statute of Frauds, 1695; and, thirdly, that if there was such a memorandum or note; the agreement is, nevertheless, void by virtue of the provisions of the Family Home Protection Act 1976.
In my opinion, there was a concluded oral agreement for the sale of the property. It is not disputed that Mr O Reilly was authorised by the defendants to accept an offer of 24,500 from the plaintiffs for the house. If an offer is made to an estate agent and if he communicates it to the owner and is authorised to accept it, or if the owner states that he will accept it, the agent has authority to make an open contract with the purchaser: see Law v Robert Roberts & Co [1964] IR 292 at p 302. There is no evidence that the words subject to contract were used by the parties at any stage in the course of the negotiations which led to this agreement. Nor is there any evidence that the agreement was conditional upon the plaintiffs obtaining the necessary loan finance or upon no defect being ascertained in the title, as stated in the receipt furnished by Mr O Reilly.
The second ground of defence relied upon, ie that there was no memorandum or note of the oral agreement sufficient to satisfy the Statute of Frauds, presents considerably more difficulty and I will return to it at a later stage in this judgment.
The third ground of defence is based upon s 3 sub-s 1, of the Act of 1976, which provides that: Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to subsections (2) and (3) and section 4, the purported conveyance shall be void. Section 1 sub-s 1, defines a conveyance as including … an enforceable agreement (whether conditional or unconditional) to make any such conveyance and states that the word convey shall be construed accordingly. Counsel for the second defendant submitted that, assuming there was an otherwise enforceable agreement for the sale of the house to which both defendants were parties, it was nonetheless void because the second defendant had not given her prior consent in writing to that agreement. In my opinion, the ground of defence is conclusively disposed of by the recent decision of the Supreme Court in Nestor v Murphy [1979] IR 326 to which I was referred. In that case, both the defendants (who were husband and wife) had signed a binding and enforceable contract for the sale of a house, which was a family home within the meaning of the Act of 1976. It was argued that the contract was void, since there had been no prior consent in writing by the wife, but that argument was unanimously rejected by the Supreme Court. In the course of his judgment, Mr Justice Henchy said at pp 328-9 of the report:
The provisions of s 3, sub-s 1, are directed against unilateral alienation by one spouse. When both spouses join in the conveyance , the evil at which the sub-section is directed does not exist. To construe the sub-section in the way proposed on behalf of the defendants would lead to a pointless absurdity. As is conceded by counsel for the defendants, if their construction of s 3, sub-s 1 is correct then either the husband or the wife could have the contract declared void because the other did not give a prior consent in writing. Such an avoidance of an otherwise enforceable obligation would be required for the protection of the family home when both spouses have entered into a contract to sell it. Therefore, it would be outside the spirit and purpose of the Act.
In my opinion, the reasoning in this passage is wholly applicable to the circumstances of the present case. I do not regard it as material that, on the assumptions I have made, the wife in the present case did not sign the contract, although she was party to it. The judgment of the Supreme Court is plainly based on the principle that a transaction to which both spouses are parties is not captured at all by the Act of 1976. In this context it is manifestly immaterial whether the spouse on whose behalf protection is claimed signs the contract herself or authorises someone to sign it on her behalf. If, for example, the evidence in Nestor v Murphy had established that the wife s solicitor had signed the contract as agent on her behalf with her full authority because she was away at the time, I do not believe that the decision would have been any different. It follows that this ground of defence fails.
There remains the defence under s 2 of the Statute of Frauds 1695, which provides:
No action shall be brought whereby to charge any executor or administrator upon any special promise, to answer damages out of his own estate, or whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person, or to charge any person upon any agreement made upon consideration of marriage, or upon any contract of sale of lands, tenements, or hereditaments, or any interest in or concerning them, or upon any agreement that is not to be performed within the space of one year from the making thereof, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized.
The section is in identical terms to s 4 of the (English) Statute of Frauds 1677. With regard to the Act of 1677, the italicised words were repealed in England and replaced by s 40 of the Law of Property Act 1925, which provides:
No action may be brought upon any contract for the sale, or other disposition of land or any interest in land, unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto by him lawfully authorised.
It has been held in England that s 40, sub-s 1, of the Act of 1925 is to be construed in the same manner as was applied to s 4 of the Statute of 1677 prior to 1926: see Tiverton Ltd v Wearwell Ltd [1975] Ch 146.
It was submitted on behalf of the plaintiffs that the letters to which reference has already been made, the receipt and the draft contract together constituted a memorandum or note sufficient to satisfy the Statute of 1695. It was submitted on behalf of the defendants that the use of the expression subject to contract in the letters which initiated the correspondence prevented that correspondence, and the documents incorporated therewith, from constituting a sufficient memorandum or note. As I understand this submission, it is based on the proposition that the memorandum or note to which the section refers must be a memorandum or note of the agreement sued upon and, accordingly, it must recognise, either expressly or by implication, the existence of that contract. Since the use of the words subject to contract is inconsistent with the existence of a concluded agreement (the argument runs), the use of that expression in the memorandum or note relied upon prevents it from being a sufficient memorandum or note for the purpose of the statute.
Had the question arisen prior to the decision of the English Court of Appeal in Law v Jones [1974] Ch 112, it would have been possible to resolve it with comparative ease. Indeed, I venture to think that, prior to that decision, very few members of either branch of the legal profession in England or Ireland would have thought that a writing which expressly stated that a sale of property was subject to contract could constitute a memorandum or note sufficient to satisfy the Statute of Frauds. I believe that the same view would have been taken of a letter from a solicitor which formed part of a chain of correspondence commencing with a letter containing the subject to contract stipulation. A series of authorities in both jurisdictions commencing with Winn v Bull (1877) 7 Ch D 29 had established beyond serious doubt the principle that an oral agreement for the sale of land which was stated to be subject to contract was not enforceable. As a result, it had become a common practice for solicitors, who were acting for parties who had entered into such oral agreements, to commence the correspondence with a letter stating that the sale was subject to contract. Their reasons for doing so were twofold. In the first place, they were conscious of the danger of committing their clients to an open contract for the sale of land by writing a letter which provided the necessary writing to satisfy the statute, a danger which was of particular significance having regard to the complexity of the law of real property. In the second place, they were alive to the possibility that disputes might arise as to the actual terms of the concluded bargain which could only result in expensive litigation.
But while this practice was common, it was by no means universal. Occasions arose, perhaps particularly in the sale of registered land, when the title was so abundantly clear as greatly to reduce the dangers to either party of an open title. There were also occasions on which solicitors, mindful of the fact that their clients had secured good bargains, avoided the use of the phrase subject to contract . In such cases, however, the solicitors frequently used language which indicated that the parties contemplated the execution of a formal agreement. Thus, a solicitor initiating the correspondence. while not stating that the sale was subject to contract , might use some expression such as please let us have draft contract for approval. In cases where a dispute arose as to whether, in such circumstances, an enforceable contract existed, the court had to undertake an enquiry as to what was the intention of the parties and, in particular, what was the significance of the fact that they contemplated the execution of a formal agreement. These cases must be carefully distinguished from the cases in which the documents stated that the sale was subject to contract . They are fully reviewed in the judgment of Mr Justice Kenny in Law v Robert Roberts & Co [1964] IR 292, which was unanimously upheld by the Supreme Court on appeal. They are also reviewed in detail in the judgment delivered by Mr Justice Costello on the 28th July 1977, in Arnold v Veale (No 3242P) [1979] IR 342n where the judge was at pains to draw the distinction between the two lines of authority.
One of the earliest statements of the principle that the use of the phrase subject to contract normally indicates that neither party to an arrangement intends to be bound by the terms of the arrangement until they are embodied in a form of contract is to be found in Winn v Bull (1877) 7 Ch D 29. In that case, the defendant agreed with the plaintiff to take a lease of a house for a certain term at a certain rent subject to the preparation and approval of a formal contract. No other contract was ever entered into between the parties. At p 30 of the report Jessel MR said:
Now with regard to the construction of letters which are relied upon as constituting a contract, I have always thought that the authorities are too favourable to specific performance. When a man agrees to buy an estate, there are a great many more stipulations wanted than a mere agreement to buy the estate and the amount of purchase-money that is to be paid. What is called an open contract was formerly a more perilous thing, and even now, notwithstanding the provisions of a recent Act of Parliament – the Vendor and Purchaser Act 1874 – no prudent man who has an estate to sell would sign a contract of that kind, but would stipulate that certain conditions should be inserted for his protection. When, therefore, you see a stipulation as to a formal agreement put into a contract, you may say it was not put in for nothing, but to protect the vendor against that very thing. Indeed, notwithstanding protective conditions, the vendor has not infrequently to allow a deduction from the purchase-money to induce the purchaser not to press requisitions which the law allows him to make. All this shows that contracts for purchase of lands should contain something more than can be found in the short and meagre form of an ordinary letter.
At p 32 Jessel MR said:
It comes, therefore, to this, that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what is says; it is subject to and is dependent upon a formal contract being prepared. When it is not expressly stated to be subject to a formal contract it becomes a question of construction, whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail. The result is, that I must hold that there is no binding contract in this case, and there must therefore be judgment for the defendant.
The latter passage was cited by Molony CJ in the leading Irish case: Thompson v The King [1920] 2 IR 365. In that case, the words used were subject contract and it was held that the agreement came within what might be called the subject to contract line of authorities as distinct from the line of authorities applied in Law v Robert Roberts & Co [1964] IR 292. Accordingly, the agreement was held to be unforceable. Gibson J put the matter thus at p 390 of the report: 2. Did this expression subject contract defer contractual obligation till a formal contract was settled, accepted, and executed; or does it mean that the purchase terms having been fully and finally settled, a further contract was only contemplated for the purpose of putting the bargain into legal shape, without substantial additions or alterations? I adopt the former construction.
In Lowis v Wilson [1949] IR 347 an attempt was made to distinguish Winn v Bull (1877) 7 Ch D 29 on the ground that the agreement signed by Lowis, the plaintiff purchaser, stated that it was subject to the preparation of a formal contract to be prepared by WO Armstrong, Solicitor for the vendor … Dixon J rejected the submissions that this rendered the case distinguishable from Winn v Bull. Recently in In re Hibernian Transport Co Ltd [1972] IR 190 Mr Justice Walsh said at p 202 of the report: … in the ordinary course of events an agreement for the sale or purchase of land subject to contract means nothing more than an agreement to enter into a contract for the sale of land and, as such, it is not enforceable as if it were a contract. It is right to say that this observation of the learned judge was probably obiter, but it is nonetheless noteworthy that no other member of the full Supreme Court who agreed with his judgment on the principal issue expressed any dissent from his view on this matter.
The same principle was applied in England in a number of cases subsequent to Winn v Bull (1877) 7 Ch D 29: see Sante F Land Co Ltd v Forestal Land Co Ltd (1910) 26 TLR 534, Coope v Rideout [1921] 1 Ch 291; Chillingworth v Esche [1924] 1 Ch 97; Locket v Norman-Wright [1925] Ch 56; Keppel v Wheeler [1927] 1 KB 577; Raingold v Bromley [1931] 2 Ch 307; George Trollope & Sons v Martyn Bros [1934] 2 KB 436 – that case was disapproved of by the House of Lords in Luxor (Eastbourne) Ltd v Cooper [1941] AC 108, but not on this subject to contract point – Spottiswoode, Ballantyne & Co v Doreen Appliances Ltd [1942] 2 KB 32 (per Lord Greene MR at p 35) and D Silva v Lister House Ltd [1971] Ch 17. It was also the view of a particularly strong Court of Appeal (consisting of Lord Greene MR, Cohen and Asquith LJJ) in Eccles v Bryant & Pollock [1948] Ch 93. In this latter case, indeed, it was made clear that, in England at all events, where parties enter into an agreement for the sale of real property subject to contract, the contract is not complete until the parties have exchanged their copies in accordance with ordinary conveyancing practice in that country. Accordingly, in that case, even though the vendor s solicitors had signed the contract, it was held that the fact that no exchange of contracts had taken place was sufficient to prevent an enforceable contract from coming into being. In this country, however, the practice of exchanging contracts is not so universally followed as in England, at all events outside Dublin, as is borne out by the evidence of Mr McCarroll, the very experienced solicitor for the plaintiffs. Subject to that qualification, however, the law in both jurisdictions on this topic was the same and, until recent years, was settled, in my view, by this massive body of authority beyond any serious doubt.
But while the law on this topic had the advantages of reasonable certainty, it was also capable of producing results which appeared harsh and unjust. The extraordinary volatile market in land which developed in England and Ireland during the 1970 s also led to a practice as unattractive as its name which is gazumping. A vendor of land who had shaken hands on a deal frequently found himself with a substantially more attractive offer for the property within days, or even hours. There were many vendors who, whatever the temptations, refused to resile from bargains freely entered into, whether they were legally enforceable or not. But there were also some who either accepted the higher offer or went back to their original purchaser and attempted to squeeze more money out of him. Where no shadow of a memorandum in writing existed, even the most resourceful of lawyers or courts were powerless to redress such inequities unless, indeed, the doctrine of part performance could be successfully invoked. But where anything which could conceivably be regarded as a memorandum existed considerable ingenuity was naturally expended upon bringing about the downfall of the gazumper . It was perhaps to be expected that, in that context, some attempt would be made to dislodge the well-entrenched subject to contract rule.
The first bridgehead was effected in Griffiths v Young [1970] Ch 675. The plaintiff in that case wished to buy a plot of land from the defendant, who was not anxious to complete the contract of sale immediately. In April 1963, the defendant asked the plaintiff to guarantee his bank overdraft and the plaintiff said that he was prepared to consider doing so if the defendant would agree to sell the land in question. The parties discussed all the terms of the contract of sale and subsequently visited their solicitors. On the 2nd May the plaintiff s solicitor wrote to the defendant s solicitor setting out all the terms of the agreement for the sale of the land, but the price was expressed to be subject to contract . On the 3rd May the defendants began pressing the plaintiff to provide the bank guarantee. The plaintiff got in touch with his solicitor, who telephoned the defendant s solicitor and informed him that if the defendant was to have the plaintiff s guarantee at once there must be a binding contract of sale at once, and that the reference to the arrangements being treated as subject to contract must be regarded as having been amended. Later on the same day, the defendant s solicitor replied to the letter of the 2nd May as follows: With reference to your letter of the 2nd instant, we confirm that we have received instructions from Mr Young (the defendant) to sell the property mentioned in your letter … for 3,500 with completion at Michaelmas 12 month … He signed the letter as agent for the defendant. On the 7th May the plaintiff gave the guarantee. In an action for specific performance of the agreement, the trial judge held that the letter of 2nd May amounted to an unconditional offer and the letter of 3rd May was an acceptance of this offer, and he granted a decree of specific performance. The defendant appealed on the ground that there was no sufficient memorandum or note of the agreement to satisfy s 40, sub-s 1, of the Act of 1925.
It was argued on behalf of the defendant that, while the two letters taken together constituted a memorandum, they could not constitute a memorandum of the agreement mentioned in s 40, since the first letter contained on its face an assertion (in the words subject to contract ) that no agreement had been concluded. It was argued on behalf of the plaintiff that the phrase subject to contract was not a term of the contract but merely referred to a suspensive condition which had been subsequently waived and could, accordingly, be ignored for the purpose of determining whether there was a sufficient memorandum or not of the agreement actually concluded. Widgery LJ, as he then was, thought the point a difficult one; but he appears to have accepted the general principle that a memorandum which, on its face, asserted that agreement had not been reached, could not be a memorandum for the purpose of s 40. He accepted the submission made on behalf of the plaintiff that this principle had no application where the only defect in the memorandum was a reference to a suspensive provision which had subsequently been waived. The other members of the Court (Russell and Cross LJJ) came to the same conclusion, but neither of them appear to have experienced the same difficulty which troubled Widgery LJ. They were both satisfied that the subsequent oral waiver of the suspensive condition cured any defect in the memorandum.
The far-reaching implications of the decision in Griffiths v Young [1970] Ch 675 soon became apparent when Law v Jones [1974] Ch 112 came before the same court – this time composed of Russell, Buckley and Orr LJJ. In that case there was an oral agreement on the 17th February 1972, for the sale by the defendant to the plaintiff of a certain property for 6,500. On the 18th February, the defendant s solicitors wrote to the plaintiff s solicitors referring to the plaintiff s proposed purchase of the above property for 6,500 subject to contract and stating that they would obtain the title deeds and submit a draft contract as soon as possible. On the 25th February, they wrote again referring to the earlier letter and enclosing the draft contract which contained all the essential terms of the agreement. On the 7th March the plaintiff s solicitors acknowledged receipt of both letters and draft contract. The defendant then sought a further 1,000 and on the 13th March the parties agreed orally to increase the price to 7,000. The trial judge accepted the plaintiff s evidence that on that occasion the defendant said to the plaintiff: I shall not go back on my word. My word is my bond. It is yours now: carry on and make all your arrangements. The defendant s solicitors wrote on the 17th March confirming that an increase in the purchase price to 7,000 had been agreed. A completion date of the 21st April 1972, was agreed. But on the 13th April the defendant wrote to the plaintiff informing him that, because of the upsurge in house prices, he had decided to put the property up for auction. It was as blatant and indefensible a piece of gazumping as could be imagined.
On this occasion, Russell LJ found himself in the minority. He said at p 119 of the report that the language of the writings prior to the letter dated the 17th March could not constitute a sufficient memorandum of the oral contract of the 17th February at the price of 6,500 because of the language of the first letter in the chain dated the 18th February, ie the reference to a proposed purchase … subject to contract. The letter of 17th March was, accordingly, no more than a written record of an agreed variation of a term in a contract which was still in the course of negotiation. He thought it unnecessary to decide whether the written memorandum had to point positively to an existing contract; it was clear, in his view, that at the very least, the language used must not negative the existence of a contract. He distinguished Griffiths v Young [1970] Ch 675 on the basis that in that case subject to contract was merely a suspensive condition which had been later orally agreed to be waived and was, therefore, to be treated as not incorporated in the letter of the 3rd May.
Buckley LJ considered that little turned on the use of the expression his proposed purchase in the letter of the 18th February 1972. Much of his judgment is devoted to considering the effect of the words subject to contract in the same letter. He accepted that a writing which denied the existence of a contract could not constitute a written memorandum or note for the purposes of the section: but he did not consider it necessary that the writing should positively acknowledge the existence of a contract. There was only one qualification, in his view, to the latter proposition. The qualification was that, where the writing denied liability under the contract, it was essential that the writing should also acknowledge the existence of the contract since, otherwise, it could only reasonably be read as a denial of its existence. In the instant case, an entirely new contract had been entered into on the 13th March, the terms of which had admittedly to be ascertained by reference to the earlier contract of the 17th February and the correspondence arising out of it, but in his view this did not mean that the letter of the 17th March acknowledging the new contract should be read as being qualified by the words subject to contract contained in the letter of the 18th February.
So far as the applicable law is concerned, the crucial passage from the judgment of Buckley LJ appears at p 124 of the report: But it is not, in my judgment, necessary that the note or memorandum should acknowledge the existence of a contract. It is not the fact of agreement but the terms agreed upon that must be found recorded in writing. In support of this far-reaching proposition, Buckley LJ cited a passage from the judgment of Lord Westbury LC in Chinnock v Ely (1865) 4 De GJ & Sm 638 which had also been cited with approval by Lord Cairns in Rossiter v Miller (1878) 3 App Cas 1124. He also referred to what he described as the well established law that an offer in writing, signed by or on behalf of the offeror, may serve as an effective memorandum or note in writing although accepted only orally; he said that in such a case the writing clearly could not record or acknowledge a contract existing at the time of writing. One other feature of Buckley LJ s judgment must be noted. He said at p 124 of the report: It is clear that where a principal has entered into a binding contract, neither he nor his solicitor can thereafter deprive it of its binding effect by unilaterally treating the transaction as subject to contract . . . He also appears to have taken the view that the solicitor in that case when using the phrase subject to contract had acted without authority.
Orr LJ agreed with Buckley LJ and, accordingly, the appeal in Law v Jones was dismissed.
In the words of Lord Denning MR at p 159 of the report of Tiverton Ltd v Wearwell Ltd [1975] Ch 146, the decision in Law v Jones (1974) Ch 112 sounded an alarm bell in the offices of every solicitor in England. I recall the decision being greeted with equal consternation in Ireland. In England, it prompted a leading article in the Solicitor s Journal (117 So Jo 293) and a lengthy correspondence from solicitors in the same periodical. The earliest possible opportunity was taken of questioning the correctness of the decision. The appeal from the order of Goulding J in Tiverton Ltd v Wearwell Ltd [1975] Ch 146 was heard by the Court of Appeal (Lord Denning MR, Stamp and Scarman LJJ) as a matter of urgency within a few months.
In the Tiverton Case the plaintiffs orally agreed on the 4th July 1973, on a sale of property in Stepney to the defendants for 190,000. All the terms of the contract were agreed. Each side agreed to instruct their solicitors to confirm the sale. The purchasers solicitors wrote on the same day to the vendors solicitors as follows :
Empire House
We understand that you act for the vendor in respect of the proposed sale of the above-mentioned property to our clients Wearwell Ltd at 190,000 leasehold subject to contract. We look forward to receiving the draft contract for approval together with copy of the lease at an early date.
On the next day the vendors wrote to the purchasers as follows:
This is to confirm my telephone conversation with you this morning when you agreed that the completion of the purchase of the property can take place as soon as possible.
On the 9th July the vendors solicitors wrote to the purchasers solicitors:
We refer to your letter dated July 4, upon which we have taken our client s instructions. We now send you draft contract for approval, together with a spare copy for your use, together with a copy of the lease dated October 30 1934, and photocopy entries on our client s land certificate. We await hearing from you.
On the 19th July the vendors solicitors wrote to the purchasers solicitors saying that they understood that the matter was not proceeding any further. The purchasers solicitors thereupon registered a caution at the Land Registry to prevent any dealings with the property by the vendors. The vendors thereupon issued proceedings claiming a declaration that there was no valid and enforceable contract, and asking for an order that the registration of the caution be vacated. Goulding J ordered that the caution be cancelled and the purchasers appealed to the Court of Appeal. The appeal was specially expedited because of the importance of the point.
Lord Denning, after a detailed review of the authorities, summed up his view of the law as follows at p 160 of the report:
I cannot myself see any difference between a writing which – (i) denies there was any contract; (ii) does not admit there was any contract; (iii) says that the parties are in negotiation; or (iv) says that there was an agreement subject to contract, for that comes to the same thing. The reason why none of those writings satisfies the statute is because none of them contains any recognition or admission of the existence of a contract.
He thought that Griffiths v Young [1970] Ch 675 could be distinguished. In his view, however, Law v Jones [1974] Ch 112 was not capable of being distinguished; it was wrongly decided and should be overruled. In the course of his judgment, Lord Denning expressed his disagreement with the view of Buckley LJ that authority for the proposition that the writing need not recognise the existence of a contract was to be found in a series of decisions dealing with offers in writing which were accepted by the other party by word of mouth or by conduct. He pointed out at p 158 of the report that these were decisions of common-law courts which did not recognise the doctrine of part performance and were, accordingly, necessary to meet the justice of the individual cases. It was accordingly held that a proposal made in writing but accepted verbally was capable of constituting a sufficient memorandum or note: see Reuss v Picksley (1866) LR 1 Exch 342. But Denning MR also cited a passage from the judgment of Bowen LJ in In re New Eberhardt Co (1889) 43 Ch D 118, in which he said that Reuss v Picksley had pushed the literal construction of the Statute of Frauds to a limit beyond which it would perhaps be not easy to go.
At p 162 of the report of the Tiverton Case [1975] Ch 146 Stamp LJ posed the question for decision as being:
… whether it is the law of England that a note or memorandum can satisfy the statute if, when read alone or with other documents which can properly be read with it, he who has signed it does not thereby recognise the existence of the contract upon which the other party seeks to make him liable.
He went on to say that the letter of 9th July 1973, whether read in isolation or together with the letter to which it was a reply, did not recognise the existence of a contract made orally on the 4th July or any contract. While he does not say so in so many words, I think it is an inescapable inference that it was the use of the phrase proposed sale … subject to contract in the letter of the 4th July which rendered that letter incapable of being read as recognising the existence of a contract. Having gone on to consider the authorities in detail, at p 168 of the report he summarised his view as follows: I consider that prior to the year 1970 it had been recognised by authorities binding upon this court (viz Buxton v Rust (1872) LR 7 Exch 279 and Thirkell v Cambi [1919] 2 KB 590) that to satisfy the requirements of the statute there must be in the note or memorandum of the contract upon which the action is brought something to indicate that the party signing it thereby acknowledges or recognises the existence of the contract. He also dealt with the offer cases and said that they did not assist the defendants since those cases proceeded on the basis that a proposal in writing, though prior in time, could be a memorandum or note of a contract brought into being by the oral acceptance. He said that in such cases the court, in so holding, was accepting that the memorandum must recognise the contract on which the party charged is sued.
At p 165 of the report of the Tiverton Case Stamp LJ quoted the succinct observation of Bowen LJ in In re Hoyle; Hoyle v Hoyle (1893) 1 Ch 84 that the court, in determining whether a document is a sufficient memorandum, is not in quest of the intention of the parties, but only of evidence under the hand of one of the parties to the contract that he has entered into it. At p 167 he also pointed out that in Buxton v Rust (which was not cited to the court in Law v Jones) Willes J and Lush J both clearly indicated that, in their view, it was necessary that the letter relied on should constitute a recognition of the contract sued upon. At p 170 he closely analysed the passage from Chinnock v Ely (1865) 4 De GJ & Sm 638, on which Buckley LJ had placed reliance, and concluded that it did not support the inferences drawn from it by Buckley LJ. He went on to express his view that Griffiths v Young, in so far as it decides the contrary, was in conflict with the earlier decisions to which he had referred in his judgment. Although accepting that Law v Jones was plainly in conflict with the view of the law which he considered had been established by earlier authorities, he did not consider that the court had jurisdiction to overrule it and simply preferred to follow earlier authorities.
Scarman LJ agreed with Stamp LJ. In the result, the appeal in the Tiverton Case was dismissed. Leave to appeal to the House of Lords was granted but the appeal, so far as I can ascertain, was never pursued.
There are two features of the Tiverton Case which are of cardinal importance. In the first place, it proceeded on the assumption that the evidence would establish, if the issue had to be resolved, that there was a concluded oral agreement for the sale of the property. In the second place, the letter containing the words subject to contract was written by the solicitors for the purchasers, ie the party who was seeking to enforce the oral agreement. The letter which was relied on as a memorandum did not contain those words, but it formed part of the same chain of correspondence. In its major features, accordingly, that case is indistinguishable from the present case.
Since the other members of the court did not share the view of Lord Denning that the Court of Appeal in England had jurisdiction to overrule its earlier decisions, the position in theory in England is that there are at least two conflicting decisions of the Court of Appeal and that the law in that jurisdiction cannot be regarded as certain beyond doubt. However, I think that it is more sensible to regard the forceful judgments of Lord Denning and Stamp LJ as representing the view of the law generally now held in England.
Buckley LJ in Daulia Ltd v Four Millbank [1978] Ch 231 had this to say about the two cases at p 250 of the report:
Law v Jones did not decide that a letter written subject to contract or forming part of a correspondence conducted subject to a subject to contract stipulation can constitute a note or memorandum of an oral agreement to which it relates sufficient to satisfy the Statute of Frauds, at any rate so long as the subject to contract stipulation remains operative. What it did decide was that, if the parties subsequently enter into a new and distinct oral agreement, the facts may be such that the earlier letter may form part of a sufficient note or memorandum of the later oral agreement notwithstanding that it was subject to contract in relation to the earlier bargain. It also, of course, decided the quite different point that a written note or memorandum to satisfy the statute need not acknowledge the existence of the contract, although it must record all its essential terms. In that respect Law v Jones and Tiverton Estates Ltd v Wearwell Ltd are undoubtedly in conflict.
The reconciliation by the court in the Tiverton Case of the offer cases was sharply criticised by Buckley LJ in the Daulia Case. But it also seems clear that the authority of Law v Jones must be significantly weakened by the fact that Buxton v Rust, a decision strongly in favour of the defendant, was not cited to the court.
The Tiverton Case was referred to in two subsequent English decisions. In Michael Richards Properties v St Saviour s Parish [1973] 3 All ER 416 Goff, J, (as he then was) treated the words subject to contract as meaningless where they appeared in a tender document which set out all the conditions which would normally appear in a standard contract of sale. He made it clear that his decision was not intended to cast any doubt on the meaning, effect and protection of the words subject to contract as used in the normal conveyancing practice of everyday life. In Munton v Greater London Council [1976] 1 WLR 649 the Court of Appeal (Lord Denning, Scarman and Goff LJJ) treated the earlier case as distinguishable. Lord Denning, in particular, treated it as a very special case which had been decided on its own facts. I may finally note that the opinion of academic commentators upon Law v Jones and the Tiverton Case appears to favour strongly the view taken in the latter case: see (1974) 90 LQR 1 and (1974) 37 MLR 695. I have come to the conclusion that I should follow the latter case unless, of course, it has been disapproved of in this country.
It appears to me that the wording of s 2 of the Statute of 1695 plainly envisages a writing which is evidence of a contract entered into by the party sought to be charged, and that this is not met by a writing which uses language inconsistent with the existence of a concluded contract. It also appears to mean that a long line of authorities has clearly established that the use of the words subject to contract is inconsistent with the existence of a concluded agreement, save in the most exceptional cases.
The post-1970 Irish decisions commence with Arnold v Veale [1979] IR 342n. That, as I have already indicated, was not a subject to contract case when it was heard and decided by Mr Justice Costello. However, prior to the hearing of the defendant s appeal, a letter came to light written by the plaintiff to the defendant s auctioneer; in the course of that letter it was stated that certain matters remained to be agreed and that the sale was subject to contract . The Supreme Court (the Chief Justice, Mr Justice Kenny and Mr Justice Parke) allowed the appeal. The main judgment of the Supreme Court was delivered ex tempore by Mr Justice Kenny and there is no written judgment available. However, it is clear from the judgment of Mr Justice Costello in the High Court that he found that there was a concluded oral agreement for the sale of the property. I appeared as counsel on the hearing of the appeal in the Supreme Court and my recollection is that it was not sought to disturb any finding of fact made by Mr Justice Costello and that the argument advanced on behalf of the defendant was that, in view of the plaintiff s letter to which I have referred, the correspondence could not constitute a sufficient memorandum to satisfy the requirements of the Statute of 1695. Accordingly, I take that decision as accepting, at least by implication, the principle that the writing relied on must acknowledge the existence of a concluded contract.
The next decision to which reference must be made is Kelly v Park Hall School [1979] IR 340. In that case the trial judge (Mr Justice Hamilton) found that there was a concluded oral contract for the sale of the land. Two documents were relied upon as constituting a sufficient memorandum. The first was a letter dated the 19th December 1977, from the auctioneers acting on behalf of the defendant vendors to the vendors property adviser in the following terms:
Hall School – Lands at Rere
Dear Michael,
Further to our telephone conversation this morning, I confirm that we have agreed terms, subject to contract, for the sale of these lands to Mr Paddy Kelly of Berkeley Homes Ltd, who were purchasers of the front lands. The principal terms to be included in the contract for sale are as follows:
Proposed purchaser: Hickey, Beauchamp, Kirwan & O Reilly (in trust).
Proposed price: 175,000. A non-refundable deposit of 35,000 to be paid on exchange of contracts, the balance to be paid not later than 6 months thereafter with interest at 12% from the contract date until the closing date. I am sending a copy of this letter to Mr Haugh of A&L Goodbody and perhaps you could kindly confirm instructions to him on behalf of the Committee.
The second writing relied on was a letter from the defendants solicitors to the plaintiffs solicitors dated the 13th January 1978, which enclosed a draft contract and concluded with the following sentence : On the instructions of our clients, this offer remains open for acceptance by your clients for a period of seven days only from the date of this letter and we are instructed that, if the contract is not back with us within the said period of time, duly executed, the offer is deemed to be withdrawn. In the High Court Mr Justice Hamilton held that this latter document was a sufficient memorandum, since it enclosed a draft contract containing all the material terms. On appeal to the Supreme Court (Mr Justice Henchy, Mr Justice Kenny and Mr Justice Parke) it was held that the letter from the auctioneers dated the 19th December 1977, was a sufficient memorandum, and the appeal was dismissed. Mr Justice Henchy said at p 352 of the report:
The case hangs on whether the letter of the 19th December 1977, which I have quoted, constitutes a sufficient memorandum for the purpose of the Statute of Frauds. In my opinion it does. It contains not only all the essential terms of the contract but also recognition that a contract had been made. It says: … we have agreed terms, subject to contract… Since the judge, having heard oral evidence, held that the oral agreement recorded in the letter was a completed agreement in the sense that nothing further was left to be negotiated, the words we have agreed terms subject to contract must be taken to mean that a contract had been made, subject to its being formalised in writing. Therefore, it constitutes a sufficient memorandum.
The words which I have reproduced in italics appear to indicate an acceptance by Mr Justice Henchy of the proposition that the memorandum must recognise the existence of a concluded contract. Moreover, if the situation were otherwise, I consider it inevitable that the Supreme Court in that case would have expressed their disapproval of the decision in the Tiverton Case. It is noteworthy that Mr Justice Henchy appears not to have shared the view of the High Court judge that the letter of 13th January 1978, was a sufficient memorandum – presumably because he did not consider that that letter recognised the existence of a concluded contract. I am fortified in arriving at this conclusion on the effect of the decision in the Park Hall Case by the fact that a similar view of its effect was taken by Mr Justice Hamilton in Mclnerney Properties Ltd v Roper (High Court – 31 July 1979).
While the decision in the Park Hall Case seems to have proceeded on the basis that the memorandum must contain a recognition that a contract has been made, it might on first reading appear to lend support to the proposition that the words subject to contract are not inconsistent with the existence of a concluded contract. If that were the effect of the decision, it would mean that the Supreme Court, by necessary implication, was disapproving of the decision in the Tiverton Case and, also by implication, was overruling or disapproving of the long line of authority on the subject to contract topic to which I have already referred. I doubt very much whether the Supreme Court intended to disapprove of the decision in the Tiverton Case or to disturb the authorities in question. Had that been their intention, I think it would have been made clear in the judgment of Mr Justice Henchy. It may be significant that the plaintiff in the Park Hall Case had already purchased the adjoining lands of the defendant and that, therefore, the title to the property being sold had been fully investigated by the plaintiff, so that the necessity for a formal contract had been significantly reduced. The actual wording used ( we have agreed terms, subject to contract ) was also treated as being of importance. I think that the Park Hall Case should properly be regarded as a special one decided on particular facts which do not arise in the present case and, as such, to be more akin to the St Saviour s Case [1975] 3 All ER 416 to which I have already referred.
The next case is Casey v Irish Intercontinental Bank [1979] IR 364. In that case also the High Court found that there had been a concluded oral contract for the sale of the lands and that, as in the Tiverton Case, the oral agreement had not been made expressly subject to contract. However, the writing relied on as a memorandum, so far as material, was in the following terms: I, Patrick Casey, Gurrane House, Donoughmore, agree to purchase Park House and lands for 110,000 subject to contract and title. I agree to pay 25,250 as deposit. Mr Justice Costello found in favour of the plaintiff. I believe that he did so in a written judgment but, as the text is not available in the Central Office, I cannot say what his reasons were for arriving at this conclusion. On appeal his decision was upheld by the Supreme Court (Mr Justice Henchy, Mr Justice Kenny and Mr Justice Parke). The main judgment in the Supreme Court (with which the other two judges agreed) was delivered by Mr Justice Kenny. The greater part of that judgment is taken up with a point which does not arise in the present case. The only reference to the fact that the writing relied on had used the phrase subject to contract and title is in the following passage from the judgment of Mr Justice Kenny at p 368 of the report:
The words subject to contract and title were not introduced into the transaction until the 2nd February when an oral contract for sale had already been made. Even if the reference to the contract and title is regarded as being incorporated in the contract, it does not make the execution of a contract a term of the agreement or a condition precedent to any contractual liability arising. I have already discussed this matter in the judgment which I gave, when I was a judge of the High Court, in Law v Robert Roberts & Co. That decision was affirmed by the Supreme Court and I do not intend to repeat what I said there.
Before preparing this judgment I read with the utmost care the judgment delivered by Mr Justice Kenny in Law v Robert Roberts & Co. In none of the letters to which reference is made in the statement of facts taken from that judgment (and appearing at pp 293-6 of the report) does the phrase subject to contract or subject to contract and title appear. Not merely are the letters in that case perfectly consistent with the existence of a concluded contract, but they go further. In his letter of the 7th November 1960, Mr Hamilton, who was the auctioneer acting on behalf of the defendant vendors, said: We confirm herewith that acting on the instructions of our clients, Messrs Robert Roberts, we have accepted your offer of 4,750 and fees at per cent for the above property … . Law v Robert Roberts & Co is in no sense a decision on the meaning of the words subject to contract. Nor is it an authority on the question as to whether a writing which does not acknowledge the existence of a concluded contract can be a sufficient memorandum. As the letter of the 7th November 1960 (and the other letters referred to in the judgment) recognised in the plainest terms the existence of a concluded contract, that question did not arise. In these circumstances, I confess to finding some difficulty in understanding the reference to the Roberts Case in the above passage from the judgment of Mr Justice Kenny in Casey s Case.
In the course of argument counsel suggested that Mr Justice Kenny, in delivering judgment in Casey s Case must have overlooked the fact that the Roberts Case was not an authority on the subject to contract issue. Whether that be so or not, I must apply the law as stated by the Supreme Court. If this passage has the effect contended for by counsel for the plaintiffs then, however that conclusion may have been arrived at, I am bound to apply the principle of law laid down. But it is stretching credibility too far for me to suppose that in this brief passage Mr Justice Kenny intended to overrule Winn v Bull and the other pre-1921 decisions on the subject to contract point, Thompson v The King and Lowis v Wilson; and to express his disapproval of the numerous English authorities since 1921 on the same topic culminating in the Tiverton Case. Since Casey s Case has not yet been reported, I do not know what arguments may have been advanced or what concessions made in the course of argument on either side. In these circumstances, I have come to the conclusion that I should not treat the decision as laying down any general principle of the nature contended for by counsel for the plaintiffs.
The last Irish case is Mclnerney Properties Ltd v Roper. In this case again the High Court (Mr Justice Hamilton) found as a fact that there was a concluded oral contract for the sale of the land. The writings relied on by the plaintiff as constituting a sufficient memorandum were two letters (each being headed subject to contract ) dated the 23rd March and the 17th April 1978, from the defendant s solicitors, and a draft contract which, it was claimed, was incorporated therewith. Mr Justice Hamilton, having considered the authorities and, in particular, Law v Jones, the Tiverton Case and the Park Hall Case, came to the conclusion that the letters were a sufficient memorandum. He summarised his conclusion as to the effect of the Tiverton Case as follows: Consequently, it appears to me that the decision in Tiverton Estates Ltd v Wearwell Ltd was based not on the fact that the words subject to contract were used but that the writings sought to be relied upon as a sufficient note or memorandum did not contain an admission or a recognition that a contract had in fact been entered into. That is a view which, with respect, I do not share. On the contrary, it seems to me that Lord Denning was at pains to emphasise that it was precisely the use of the words subject to contract which prevented the writings from constituting an acknowledgment of the existence of a contract.
From this analysis of the authorities, I think that the following conclusions emerge:
1.A memorandum or note cannot satisfy the Statute of Frauds if, when it is read alone or with other documents which can properly be read with it, it does not contain a recognition, express or implied, of the existence of the oral contract sought to be enforced.
2.A letter, which expressly states that a transaction is subject to contract cannot be sufficient note or memorandum, since the use of those words is normally inconsistent with the existence of a concluded contract. It is only in certain rare and exceptional circumstances such as arose in Kelly v Park Hall School and Michael Richards Properties v St Saviour s Parish that the words subject to contract can be treated as being of no effect.
3.In applying the two foregoing principles, it is immaterial whether the writing relied on itself contains the words subject to contract or is part of a chain of correspondence initiated by a letter which makes it clear that any oral agreement already arrived at is subject to contract .
It seems to me that the application of those principles to the present case is sufficient to dispose of the contention that the letters referred to can be treated as a sufficient note or memorandum.
It was urged on behalf of the plaintiffs that the words subject to contract had been inserted by Mr McCarroll when he was acting on his own initiative and without any authority from his clients and that, accordingly, they should be disregarded. If words which are clearly destructive of any recognition of a concluded contract appear in the memorandum, then it appears to me not to be a material consideration that they may have been inserted without authority. But altogether apart from that consideration I cannot agree with the suggestion that these words were inserted by Mr McCarroll without his clients authority. There was no question of his clients having expressly authorised him to use that expression; but I have not the smallest doubt that it was within his implied authority to do so. Any other view of the law would lead to the absurd consequences mentioned by Russell LJ in his dissenting judgment in Law v Jones. A solicitor who is instructed by a party who has entered into an oral agreement for the sale of land is perfectly entitled, in my view, to write a letter which expressly prevents his client from being committed to an open contract and ensures that his client will have the full protection of a formal contract of sale. I think that this view of the law is consistent with the leading Irish authorities, ie Cloncurry v Laffan; Kerns v Manning; Godley v Power and Black v Kavanagh. All of these cases emphasise that it is not part of a solicitor s function to alter the terms of an oral contract already entered into by his client. They also make it clear that a letter written by a solicitor for the purpose of carrying into effect an oral agreement already made may constitute a sufficient memorandum to satisfy the Statute of Frauds. But it would seem strange and illogical that a solicitor, whose function is not to alter the terms of the bargain or to indulge in further negotiations, but to embody the bargain already concluded in a formal contract which gives his client the maximum protection consistent with that bargain – as contrasted with an open contract – should be regarded as exceeding his authority when he seeks to ensure that his client has the protection of a formal contract.
I indicated at an earlier stage of this judgment that there may indeed be cases in which a solicitor may feel that it is positively advantageous to his client to commit him to an open contract. I am far from saying that in such cases the solicitor is in any sense acting in dereliction of his duty to his client. But in the everyday case of a sale of property, where the parties have shaken hands on price but trust their respective solicitors to do everything that is necessary to protect them against all the traps and pitfalls that still beset the completion of sales of real property, a solicitor, in my view, is acting fully within the scope of his authority by making it clear in his initial letter that any oral agreement already concluded must be treated as subject to contract. In so doing, he protects his client from the consequences of entering into an open contract. In the words of Lord Denning in the Tiverton Case at pp 159-160 of the report, he does it:
in the confidence that it protects his client. It means that the client is not bound by what has taken place in conversation. The reason is that, for over a hundred years, the courts have held that the effect of the words subject to contract is that the matter remains in negotiation until a formal contract is executed …
That seems to me to be both good law and good sense. Its practical application is indeed well illustrated by the present case. I have already said that the oral agreement in this case was plainly unconditional. The parties did not expressly say that their oral agreement was subject to contract. Nor did they say that it was subject to the plaintiffs obtaining the loan finance that they needed in order to complete the transaction; but Mr McCarroll refrained from sending the formal contract back to the defendants solicitors signed by his clients until such time as he was satisfied that they were in funds to complete the transaction. I have not the slightest doubt that the plaintiffs would have been appalled if, as a result of an unguarded letter written by Mr McCarroll in the early stages of the transaction they found themselves faced with serious financial consequences because, for some unforeseen reason, the offer of loan finance was suddenly withdrawn. If the plaintiffs case is well founded, it would mean that, in those circumstances, they would have had no answer to a decree for specific performance in circumstances where they would not have had the finance to complete the transaction. The reason why the plaintiffs did not expressly say to Mr O Reilly, or the defendants, that they regarded their oral agreement as subject to the obtaining of the necessary finance is obvious; they relied, as generations of house purchasers have relied, on the good sense and experience of their solicitor to protect them. If the submission made on behalf of the plaintiffs is well founded, it means that persons entering into property transactions of this nature have been deprived of a very important protection. For the reasons I have already given, I do not think that the Park Hall Case and Casey s Case would support so far-reaching a proposition. In so far as the proposition is supported by Law v Jones and Mclnerney Properties Ltd v Roper, I must respectfully decline to follow those decisions.
I should add that solicitors in search of guidance on this topic could not do better, in my view, than to follow the advice given in Wylie s Irish Conveyancing Law, the authority of which is, of course, substantially enhanced by the fact that the consultant editor for the Republic of Ireland is Mr Justice Kenny. At para 9.047 on p 364 Mr Wylie has this to say:
Thirdly, if explicit instructions have not been obtained, the greatest care should be taken in dealing with all correspondence relating to the transaction. If it is intended that the matter should be regarded as still subject to negotiation, ie in the pre-contract stage, this should be stated expressly in the correspondence, perhaps all correspondence, eg, by entering a note that the matter is still subject to contract .
And he adds in a foot-note: This will probably be enough to prevent the correspondence from being regarded as sufficient memorandum, ie, by denying the existence of an agreement … In this case, I think that Mr McCarroll achieved precisely that result by his prudence in making it clear in the initial letters that he wrote that the matter was still subject to contract. I am satisfied that the use of those words was sufficient to prevent any subsequent letter in that correspondence from being a valid memorandum or note for the purpose of the Statute of Frauds.
There is another feature of the writing relied upon which is also fatal, in my view, to its validity as a memorandum or note for the purpose of the statute. It is clear that the writing must contain all the material terms of the oral agreement: Hawkins v Price [1947] Ch 645 and per Lord Denning at p 161 of the Tiverton Case. In this case the letter from the defendants solicitors dated the 15th August 1978, expressly stated that the date for handing over possession remained to be agreed between the parties. In other words, one of the material terms was still in negotiation. Whether that statement correctly reflected the terms of the oral agreement is nihil ad rem; the fact remains that the writing relied upon expressly states that the closing date – a material item – remained to be agreed. There was, of course, no reference to the closing date in the other letters.
One cannot help feeling considerable sympathy for the plaintiffs in this case; but sympathy cannot determine the legal rights of the parties. I must apply the law as it appears to me to have been stated by courts of the highest authority in this country and in England. It follows that I must dismiss the plaintiffs claim for specific performance.
Boyle v Lee
[1992] 1 IR 555; [1992] ILRM 65
Finlay CJ: This is an appeal by the defendants against an order of the High Court made on 30 June 1989 by Barrington J determining certain issues placed before him in this action.
The plaintiff instituted proceedings by plenary summons issued on the 11th November 1988 claiming specific performance of an agreement of the 5th July 1988 made between the plaintiff and the defendants for the sale by the defendants to the plaintiff of the dwellinghouse and premises situate at 32 Elgin Road in the City of Dublin. By notice of motion dated the 27th February 1989 the defendants applied for an order in the action pursuant to O 19, r 28 of the Rules of the Superior Courts or, alternatively, in accordance with the court s inherent jurisdiction dismissing the plaintiff s claim on the grounds that it was frivolous or vexatious. In short, this motion was based on an affidavit made by the solicitor for the defendants setting out certain facts and contending that no agreement, enforceable or otherwise, had been reached between the plaintiff and the defendants for the sale of the premises. It was further submitted that in those circumstances the plaintiff had no reasonable prospect of success and that the proceedings were frivolous and vexatious.
By order of the 24th April 1989 made by Costello J, it was inter alia directed that certain issues should be tried between the parties so as to determine the motion then before the court. Those issues which were to be argued were as follows, when finally agreed between the parties:
(a)Whether prior to the 8th July 1988 there was a concluded oral agreement between the plaintiff as purchaser and the defendants as vendors for the sale by the defendants to the plaintiff of the premises No 32 Elgin Road in the City of Dublin, at the price of 90,000. On that issue the learned trial judge found the answer to be yes .
(b)If there was such a concluded oral agreement, what were the other terms thereof? The answer made by Barrington J in his order of the 30th June 1989 to that question was as follows.
(i)The vendors were Mrs Lee and Mrs Goyns.
(ii)The premises were 32 Elgin Road in the City of Dublin.
(iii)The purchasers were Eoin Boyle and Susan Boyle.
(iv)The purchase price was 90,000.
(v)The sale was to include the contents of the apartments.
(vi)The property was being sold subject to and with the benefit of the tenants.
(vii)The closing date was to be as soon as the legal formalities were completed.
(c)If there was such a concluded oral agreement, whether there was sufficient note or memorandum of the said oral agreement to satisfy the Statute of Frauds (Ireland) 1695, contained in the letter dated 8 July 1988 from Lisney & Son to PJ Walsh & Co, and to that issue the learned trial judge made the answer yes .
The facts
The plaintiff Eoin Boyle was a person who had experience of purchasing property and developing it. He was purchasing these premises as an investment property, the premises being let in a number of separate flats to separate tenants. His allegation was that the negotiations with regard to the purchase of the property took place orally between him and a Mr McManus who was a member of the staff of Lisney & Son, the auctioneers, and that as a result of those negotiations an agreement was reached for the sale by the defendants of the property to the plaintiffs for the sum of 90,000.
On the evidence of the first plaintiff, he was aware that the development which had so far taken place in the premises had not got full planning permission and was prepared to waive any difficulty in that context. He was also prepared to accept whatever the nature of the tenancies were and to buy subject to them on a representation made by Mr McManus that none of them were protected tenancies.
With regard to the question of a deposit, he stated, at question 66, as follows:
Q.Now did the question of a deposit ever arise, was the question of a deposit ever suggested to you?
A.I asked Mr McManus was it necessary to go ahead and give him a deposit there and then, and he said no, it was not. If he had looked for a deposit I would have given it to him there and then; but he said that that was a matter that would be dealt with between the solicitors, that that would be caught up in the terms of the contract and the like later on, that was part of the formalities afterwards.
Further, dealing with the same topic and the question of a closing date, the evidence of Mr McManus at questions 70 and 71 was as follows:
Q.But there was no agreement on the amount of the deposit?
A.No, there was no agreement on the amount of the deposit.
Q.No, and neither was there any agreement as to when the sale would close?
A.There was no specific date mentioned because it was apparent to both Mr McManus and myself that I was very anxious to close the sale as soon as possible …
It is not in dispute on the evidence that there had been a series of offers rejected by Mr McManus on behalf of the vendors and that subsequently when the offer of 90,000 was finally made by the plaintiff that Mr McManus got the express authority of his clients to accept that figure. It was further not in dispute that at some time immediately prior to the 8th July 1988 the plaintiff had satisfied himself as to the structural condition of the premises by the inspection of an architect and had arranged the entire finance for the immediate purchase of the premises.
On the 8th July 1988 Mr McManus wrote to Mr Patrick J Walsh, solicitor for the vendors, in the following terms:
Re: Mrs Maura Lee & Mrs EN Goyns, Premises 32 Elgin Road, Dublin 4
Dear Mr Walsh,
We refer to the recent negotiations in connection with the above property. I now write to confirm that we have received instructions from the vendors to accept an offer of IR90,000 subject to contract. I would be obliged if you would prepare, and forward the contract which should incorporate the following agreed terms.
Proposed purchasers:
Eoin Boyle & Susan Boyle, 165 Rathgar Road, Dublin 6.
Proposed purchase price:
IR 90,000 subject to contract.
Proposed purchaser s solicitors:
Patrick Clyne,
Martin E Marron & Co,
10 Northumberland Road, Dublin 4.
Contents:
Contents of the apartments are included in the sale price.
Tenants:
The property is being sold subject to, and with the benefits of the tenants
Closing date:
As soon as legal formalities can be completed.
I am sending a copy of this letter to Mrs Lee and Mrs Goyns for their information. In the meantime, you will appreciate that this letter is for information purposes only, and does not by itself, constitute part of a binding contract. I trust that the sale will proceed smoothly and satisfactorily and if I can assist you further at this stage, please let me know.
Yours sincerely,
Mr McManus had given evidence at the hearing in the High Court, firstly, that it was a fixed policy of the firm of auctioneers to which he belonged not to purport to bind any client with regard to the sale of a property by any writing made by a member of the firm and that it was for that reason and in accordance with that policy and his instructions that he inserted the phrase subject to contract in two separate places in the letter of the 8th July 1988. He stated that he believed he must have conveyed to the first plaintiff the fact that their negotiations were subject to contract, but he could not affirmatively state that he had used that particular expression. With regard to the question of a deposit, he had also given evidence that it was a fixed policy of his firm not under any circumstances to accept or fix the amount of a deposit in any sale in which they were dealing and that it was for that reason that he informed the plaintiff that that would have to be arranged between the solicitors. He maintained that at all stages he did not intend to bind the vendors. He did not purport to say that the vendors had in any way forbidden him to bind them, and agreed that on the same date as he wrote to Mr Walsh the letter which has just been quoted, he wrote to each of the vendors an identical letter in the following terms:
Re: 32 Elgin Road, Ballsbridge, Dublin 4
I enclose for your information a copy of the letter which I have this day sent to your solicitor, Mr Patrick J Walsh, in connection with the sale of your above property.
The survey has been carried out by the bank for the purchaser, and I would expect that the sale would now proceed without undue delay. I will keep you informed as to progress.
Yours sincerely,
The defendants did not pursue the sale of the premises any further with this purchaser, and no further documentation or facts arise which are relevant to this claim.
On those facts, the learned trial judge made the following findings in the ex tempore judgment which he delivered at the conclusion of the oral evidence in this case.
1.He stated that he was satisfied that the plaintiff and Mr McManus, both of whom had given evidence before him, were honest and candid witnesses and that he felt that no real conflict existed between their evidence, though, of course, there was considerable conflict about the weight to be placed upon the evidence.
2.Dealing with the negotiations, he stated as follows:
Finally, the first plaintiff made an offer of 90,000. Mr McManus put that offer before his clients and his clients accepted it. And Mr McManus informed the first plaintiff of that acceptance. Meanwhile the property had been examined by the first plaintiff s architect and his banker, and the property was being bought as an investment property. And the first plaintiff agreed to take over the sitting tenants. There was a conversation as to what kind of interest they had. It does not appear as if that was clarified with any great particularity as it could have been, but they weren t protected tenants, and apparently the first plaintiff was prepared to take his chance in relation to that, and it was also agreed that first plaintiff was to take over the contents of the property, this was to be included in the purchase price. And I have no doubt that at some date prior to the 8th July 1988 the parties were in agreement.
3.He then stated with regard to the deposit as follows:
The only question in relation to this, a difficulty arose through the fact that the first plaintiff offered to pay a deposit and Mr McManus said that he couldn t take a deposit, and there was apparently at that stage reference to the fact of solicitors preparing a contract. The first plaintiff understood that to mean that the solicitors were to reduce the deal to a formal contract. It may have been what Mr McManus had in his mind that there was no binding agreement until such time as a formal contract had been signed and executed, but he certainly didn t succeed in getting that reservation across to the first plaintiff, and he now cannot be sure of what he said.
4.Later on, the learned trial judge stated as follows, having dealt with the letter of the 8th July and its value as a note or memorandum to satisfy the Statute of Frauds:
And it appears to me that the reality of the situation is reflected by Mr McManus in his letters to his clients when he sent them a copy of this letter of the 8th July 1988. He added that he expected that the sale would now proceed without undue delay, and it appears to me that that letter is consistent with a concluded sale having previously been arrived at. It does not mention the question of a deposit, or the requesting of a deposit. So the question of a deposit doesn t appear to have had any real significance in this particular sale. It is obvious that the first plaintiff was at all times prepared to pay a deposit, even a substantial deposit, had it been accepted from him, and there was no problem in relation to the deposit, we know that. And the other matter was the question of a closing date, and it appears that the closing date can be as speedily as the legal formalities have been completed. So it doesn t appear that in the circumstances of this case that this is a term of any real significance. It appears to me that the memorandum is sufficient.
The reference in this quotation from the learned trial judge s ruling to this term of any real significance is a reference to the term subject to contract , which he had previously in his ruling referred to as nihil ad rem .
The grounds of appeal
The defendants appeal to this Court on two grounds.
(a)That the learned trial judge misdirected himself in law and on the facts in holding that the evidence supported or was capable of supporting a finding that prior to the 8th July 1988 there was a concluded oral agreement for the sale of the premises at 90,000.
(b)That the learned trial judge erred in law in holding that the letter dated the 8th July 1988 from Mr McManus to Messrs PJ Walsh & Co constituted a sufficient note or memorandum of an oral agreement to satisfy the Statute of Frauds 1695.
Defendants submissions on this appeal
With regard to the first ground it is contended on behalf of the defendants that the following matters, separately or together, made it impossible to conclude, even accepting in full the first plaintiff s evidence, that there was a concluded and complete agreement between the parties for the sale of the premises. They are:
(i)The absence of any agreement as to the amount of deposit to be paid by the purchaser, the time at which it was to be paid, or the terms under which it was to be held.
(ii)The absence of any agreement with regard to the closing date to be provided in the contract for sale.
(iii)The absence of any identification by schedule or otherwise of what were the contents of the house.
(iv)The absence of any information of a detailed nature as to the precise terms of each of the tenancies in the flats contained in the premises, so as to identify the burden and benefit of tenancies which were being undertaken by the plaintiffs.
With regard to the issue of whether the letter of the 8th July 1988 written to PJ Walsh, solicitor, could constitute in law a sufficient note or memorandum for the purpose of the Statute of Frauds 1695, the defendants submissions were:
(i)That the true legal test applicable to the sufficiency of the letter of the 8th July as a note or memorandum under the Statute of Frauds is to be found in a summary of the legal position appearing in the judgment of Keane J in Mulhall v Haren [1981] IR 364, at p 386, where he stated as follows:
It appears to me that the wording of s 2 of the Statute of 1695 plainly envisages a writing which is evidence of a contract entered into by the party sought to be charged, and that this is not met by writing which uses language inconsistent with the existence of a concluded contract. It also appears to me that a long line of authorities has clearly established that the use of the words subject to contract is inconsistent with the existence of a concluded agreement, save in the most exceptional cases.
(ii)That this conclusion is not inconsistent with the decision of this Court in Kelly v Park Hall School Ltd [1979] IR 340, and in Casey v Irish Intercontinental Bank Ltd [1979] IR 364, both of which should be considered as exceptional cases within this statement of principle.
(iii)That this fact is confirmed in the course of the judgment of Henchy J in McCarthy v O Neill [1981] ILRM 443.
(iv)In the alternative, it was submitted on behalf of the defendants that if this Court should conclude that the decisions in either Kelly v Park Hall School or Casey v Irish Intercontinental Bank were inconsistent with the principle above set out, and taken from the judgment of Keane J in Mulhall v Haren, that this Court should review those two decisions and should not now follow them.
Submissions on behalf of the plaintiffs
On behalf of the plaintiffs it was submitted:
(1)With regard to the conclusion of an oral contract:
(a)that the learned trial judge found as a primary fact that a completed oral contract had been made, that there was evidence to support such a finding and that this Court cannot interfere with that finding.
(b)that for a concluded contract for sale to have been made orally, as was alleged in this case, it was not necessary that every term of it should have been spelt out, but only that the important or major terms, as viewed by the parties, should be concluded.
Having regard to that it was submitted that the failure to reach agreement on the amount of deposit in a case where it was agreed that the concluding of the sale should be as soon as possible and, where the purchaser was aware of the usual provision for deposit, and in a position to pay it, was unimportant and irrelevant. It was further submitted that the evidence supported the finding of the learned trial judge that there was an agreement that the closing date should be as soon as possible after the completion of legal formalities which was a sufficiently precise closing date for a validly concluded contract.
With regard to issues such as the tenancies and the contents of the house it was submitted that, as far as the purchaser was concerned, he was clearly, on his evidence, prepared to take them as they were, whether they should be particularly advantageous or not, and that if he was prepared so to do, it could not lie in the vendors to assert that there was not a concluded contract because the purchaser had not pursued some matter which would have been peculiarly to his own advantage. With regard to the closing date, an alternative submission was also made that, in particular, in a case where an investment property was being sold that the necessity for a very specific closing date was nothing like as great or plausible as would occur in the sale of a residential property which a purchaser was going to occupy, or, with the sale of a shop or public house as a going concern.
(2)With regard to the question of the note or memorandum, it was submitted as follows:
(a)that once the learned High Court judge had concluded that a completed oral contract had been reached between the parties that the letter of the 8th July 1988 was incapable of being distinguished on any point of principle from the letter found by this Court to be a sufficient note or memorandum in Kelly v Park Hall School and that that was a decision which this Court should follow. In the course of this submission it was pointed out that in considering the two letters the following was evident:
(i)each was written by an authorised agent who confirmed that he had agreed terms with the contracting party.
(ii)each set out the agreed terms.
(iii)each referred to a proposed purchaser .
(iv)each stated the agreement was subject to contract, a phrase unilaterally introduced in each case by the author of the letter and not part of the oral agreement which had been concluded.
(v)each recorded all the essential terms which had been agreed.
Furthermore, in this context it is submitted that the decision in Mulhall v Haren [1981] IR 364, though it purports to be applied to a case where the learned trial judge was satisfied that a concluded oral agreement was in existence which was complete, in fact, fails to distinguish two wholly separate methods of establishing an enforceable contract for the sale of land, having regard to the provisions of the Statute of Frauds 1695.
Such an enforceable contract can arise from an agreement in writing, all the terms of which are contained in the writing and which is signed by the party to be charged therewith, or a person lawfully by him authorised to do so. In such an instance, it is submitted, of course the document must directly recognise or acknowledge the existence of an agreement, because the submission being made is that it constitutes the agreement. On the other hand an enforceable agreement, it is submitted, for the sale of land under the Act of 1695 can consist either of a wholly oral, concluded agreement, or an agreement partly oral and partly in writing, concluded and complete, in which instance all that is necessary is that the person to be charged therewith, or his agent, shall have written down in a document the essential terms of the concluded oral, or partly oral, agreement. In that instance, it is submitted, no express or implied recognition of the existence of a contract is necessary, the purpose of s 2 of the Act of 1695 being evidential only.
In support of these contentions, in effect, the respondents submitted that Mulhall v Haren [1981] IR 364 must be interpreted as being a decision on the failure of proof of a concluded oral agreement, and not a decision as to the inadequacy of the note or memorandum under s 2 of the Act of 1695, and if it is otherwise to be interpreted it is incorrectly decided.
In short, the contention between the parties with regard to s 2 of the Act of 1695, apart from a consideration of the Irish cases to which I have referred, is to a large extent dependent on whether the views expressed by the Court of Appeal in Law v Jones [1974] Ch 112, or the diametrically contradictory views expressed by the same court in Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146, are correct.
The decision
Completed oral contract
In the course of his judgment the learned trial judge stated that he believed both of the witnesses to be honest and candid in their evidence. His findings on the question as to whether an oral contract for sale had been made, and completely made, between the first plaintiff and Mr McManus is based not, therefore, on the acceptance of the truth of one witness and the rejection of the truth or accuracy of another, but rather on inferences which he drew from the evidence. In particular, his finding that the failure of the parties to reach any agreement on the question of a deposit was irrelevant since it was of no importance in the contract, is a mixed finding of law and fact.
In my view, this finding was in error. The amount of a deposit to be made, even if a purchaser is willing to make a deposit of the appropriate amount, or the usual amount then experienced in transactions in Dublin, is too important a part of a contract for the sale of land in the large sum of 90,000 to be omitted from a concluded and complete oral agreement unless the parties in such an agreement had agreed that no deposit would be paid. In this case the evidence irresistibly leads to the conclusion that both the first plaintiff and Mr McManus agreed that there had to be a deposit, but left it over to be agreed between the solicitors when the formal contract was being settled as to its amount and form. In my view, that evidence, which was not in contest, must lead to a conclusion that there was not a complete contract made orally between the first plaintiff and Mr McManus before the 8th July 1988.
That conclusion would determine this appeal, but since both parties have made the most careful and detailed submissions to this Court on the legal questions arising with regard to the sufficiency of the note or memorandum, consisting of the letter written by Mr McManus to Mr Walsh, and since the submissions so made raise in question the meaning and effect of previous decisions of this Court, I am satisfied that I should express a view on the questions thus raised.
Adequacy of the note or memorandum
Section 2 of the Irish Statute of Frauds of 1695, in so far as its provisions are
relevant to the issues in this action, is as follows:
… no action shall be brought whereby to charge … any person … upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them … unless the agreement upon which such action shall be brought, or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorised.
I have carefully considered this section, and leaving aside for the moment the strength or weakness of contending decisions, it appears clear that the section required that the agreement with which the person concerned was to be charged, had either to be in writing and signed by the party to be charged, or to be evidenced by some memorandum or note in writing, signed by the party to be charged. This must, it seems to me, inevitably lead to the conclusion that such of the decisions as speak of the necessity for the terms to be evidenced by a note or memorandum, or for the important terms, or necessary terms, to be so evidenced are, strictly speaking, incorrect.
It is obvious that in certain instances a total recital of all the necessary ingredients of a contract for the sale of land, that is to say, the names of the purchaser and the vendor, the exact description of the property and such other terms as would be considered essential, namely, the price, deposit, closing date, resume of the title, etc, could without any other expression indicating an acknowledgement of a binding or completed contract, necessarily imply the existence of such a contract.
Where, however, on the other hand, a document which contains a recital of certain terms, obviously relevant to a purchase and sale of land, purports to deny the existence of a completed or concluded contract, or makes use of expressions specially adapted to exclude the existence of a completed or concluded contract, it does not seem to me that as a matter of first principle the terms of s 2 of the Act of 1695 could be complied with.
The argument largely put against this strict interpretation, which is, of course, an acceptance of the broad statement of principle to which I have already referred, and which is contained in the judgment of Keane J in Mulhall v Haren [1981] IR 364, is that a party to an orally concluded agreement which is complete and intended to be complete, should not be permitted by the unilateral insertion into a note or memorandum in writing which he makes of the terms of that agreement, of a denial of it, or of a provision such as the phrase subject to contract which is inconsistent with it, to escape on his own behalf or on behalf of his principal, from the enforcement of the contract.
To advance that argument is, of course, attractive but, in my view, it necessarily involves the precise mischief which the Statute of Frauds of 1695 was intended to avoid, and that is that it invites the court to amend by deletion, or by ignoring one of its terms, the note or memorandum relied upon by the plaintiff and signed by the defendant, such amendment or deletion depending on the finding by the court on oral evidence as to what was the agreement between the parties.
Such a principle clearly puts the oral evidence as superseding the only written evidence that is available. In broad terms, it is the clearest possible purpose of the Statute of Frauds 1695 to put the written evidence as dominant and superseding any oral evidence.
It is possible, without much difficulty, to see on consideration of the cases to which we have been referred, that the many instances which occurred of the making of contracts orally for the sale of land the existence of which and the complete nature of which is not even denied in subsequent litigation, has led courts to view with considerable disfavour the defence of non-enforceability due to a want of sufficient note or memorandum under the Statute of Frauds. It does not seem to me, however, that it can be justified, having regard to the obligation of the courts in the implementation of a plain statutory provision, to introduce into the interpretation of s 2 of the Act of 1695 clauses or provisos which are not consistent with its plain meaning. Furthermore, all one s experience of the massive losses and inconvenience which can be suffered by prospective purchasers or vendors of land from non-completion of what they believe to be a contract, and the subsequent delays and difficulties arising from complicated litigation concerning it, indicates that the requirements of justice are that the law applicable to the formation of contracts for the purchase of land should be as certain as it is possible to make it. In modern times, probably the most important legal transaction a great number of people make in their lifetimes is the purchase or sale of their home. The avoidance of doubt and, therefore, the avoidance of litigation concerning such a transaction must be a well worthwhile social objective, as far as the law is concerned. To that end, certainty in the question of what is or is not a sufficient note or memorandum is a desirable aim. In my view, the very definite statement that a note or memorandum of a contract made orally is not sufficient to satisfy the Statute of Frauds unless it directly or by very necessary implication recognises, not only the terms to be enforced, but also the existence of a concluded contract between the parties, and the corresponding principle that no such note or memorandum which contains any term or expression, such as subject to contract can be sufficient, even if it can be established by oral evidence that such a term or expression did not form part of the originally orally concluded agreement achieves that certainty. The existence of such a rule or provision would not, in my view, allow for the exceptional cases mentioned by Keane J in the decision in Mulhall v Haren [1981] IR 364.
The decision in Kelly v Park Hall School Ltd [1979] IR 340, in so far as it appears to amend by deletion the note or memorandum in writing, signed on behalf of the vendor, by reference to the evidence of the oral agreements which had previously been arrived at between the parties, with great reluctance, is not a decision which I think this Court can and should follow.
Similar considerations may, it seems to me, apply to the decision of this Court in Casey v Irish Intercontinental Bank [1979] IR 364, though a decision on the validity of the concept of oral waiver of a suspensory condition in the writings which were part of the formation of the contract, is not a question at issue in this case. I would, therefore, allow this appeal and answer the questions raised in the issue: no to question (a) and no to question (c); question (b) does not therefore arise. The action must therefore be dismissed.
Hederman J: I agree with the judgment of the Chief Justice.
McCarthy J: The facts of this matter are set out in the judgment of the Chief Justice.
The oral agreement
The contention that there was no concluded oral agreement was detailed in the defendants (appellants ) written submissions as follows:
3.On the occasion of making his first offer for the property on the 21st June 1988 the first plaintiff offered a deposit but this was refused by Mr McManus.
4.No specific closing date for the sale was agreed between Mr McManus and the first plaintiff.
5.An inquiry was made by the first plaintiff as to the nature of the tenancies in the premises and Mr McManus who did not possess detailed information about the tenancies confirmed only that none of the tenants had statutory protection and that as far as he was aware they were normal tenancies meaning one year leases.
The plaintiffs (respondents), in their written submission, answer:
4. (c) The closing date was not an essential term. However, the evidence established that it was envisaged that the sale would be completed when the legal formalities were completed and it is submitted that it was an implied term of the oral agreement that the completion of the legal formalities would take place within a reasonable time.
5. (a) The final details in relation to the tenancies did not remain outstanding. The evidence of both the said Arthur McManus and the respondent is coercive that the respondent agreed to take the property subject to and with the benefit of the then existing tenancies therein.
3. (b) The payment of a deposit was not an essential term of the particular bargain and would not be an essential term of this type of transaction. However, the evidence established that it was envisaged that the usual deposit would be paid by the purchaser in the usual manner when the concluded oral agreement was formalised in writing.
The Chief Justice has cited the conclusion of the trial judge on each of these issues which appear to be the only questions raised in this aspect of the case. The judge concluded that:
(a)the closing date was intended to be as speedily as the legal formalities could be completed;
(b)the purchaser was prepared to take his chance in regard to taking over the sitting tenants;
(c)the question of a deposit did not appear to have had any real significance in the particular sale; the purchaser was at all times prepared to pay a substantial deposit and there was no problem in relation to it.
It is a feature of property transactions in Ireland that they are often made with a minimum of formality, the circumstances, including the venue, of such bargains not being always conducive to the dusty purlieus of the law . (Tennyson, In Memoriam, lxxxix.) If parties are agreed on the terms which they regard as essential, it is not for others to evaluate with a different result. The first plaintiff was prepared to accept the tenancies; so what did it matter to Mr McManus? The first plaintiff offered a substantial deposit but Mr McManus said that that was a matter that would be dealt with between the solicitors and there would have been no problem about it. So also, both parties were anxious to close the sale and that would have been taken care of by the solicitors. As the first plaintiff said, (Q 76) What he in fact said was, we had done a deal, and the solicitors would have to take care of the formalities . The fact that one party says that there had been a deal would not make it so, if it were not in fact so. Equally, the fact that someone believes that no deal has been done would not make that necessarily so. In my view, Barrington J was entitled to come to the conclusion that the parties had done a deal, the formalities to be cleared up by the solicitors. It may have been a highly informal deal; it may have omitted a variety of details that would be high in a lawyer s list of priorities, and Mr McManus may well have thought that there was no enforceable deal, but, in my judgment, there was a deal that contained all that the parties deemed essential. Mr McManus caution, however, was to prove valuable.
The Statute of Frauds
The Statute of 1695 (7 Will III c XII) provides, so far as relevant:
No action shall be brought whereby to charge any person upon any contract or sale of land, tenements, or hereditaments, or any interest in or concerning them unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorised.
There was similar wording in the English Statute of Frauds 1677. In the three centuries since, this simple provision has provided the feedstock for a vast display of legal semantics, both academic and judicial. The Act as passed called for prevention of many fraudulent practices which are commonly endeavoured to be upheld by perjury and subornation of perjury . It did not always have this desirable effect; genuine bargains could not be enforced because of the absence of the note or memorandum or some inadequacy in it. The section came to be construed as liberally as possible – seeking to find the necessary evidence once the bargain was proved until, as appears to me to be the case, a note or memorandum which necessarily denied the existence of a bargain became itself evidence to support its enforcement. In my judgment, that is what happened here. Mr McManus wrote a letter to his client s solicitors, sending a copy to each of his clients, the vendors, recounting his instructions to accept the offer of 90,000 subject to contract , a phrase repeated in the context of the proposed purchase price. He went on to say in the meantime, you will appreciate that this letter is for information purposes only, and does not by itself, constitute part of the binding contract . It identified the agreed terms including price, the benefits of the tenants (sic) and a closing date such as I have instanced. It made no reference to a deposit, because there was no agreement as to deposit save that there might be one. Mr McManus had no intention of evidencing an agreement; it was contrary to the fixed policy of his firm. If the letter to the solicitors is to be held to provide the required compliance with s 2 of the statute, it means that the note itself has to be disregarded wherever it conflicts with the findings of fact made in respect of the oral agreement, and yet be used as the necessary evidence to support an action to enforce that agreement. In short, it means that the words subject to contract do not mean what they say. In Mulhall v Haren [1981] IR 364, Keane J made an exhaustive analysis of the Irish and English case law and concluded that Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146 correctly represented the law of England and should be followed unless it had been disapproved of in Ireland. He said (p 386):
It appears to me that the wording of s 2 of the statute of 1695 plainly envisages a writing which is evidence of a contract entered into by the party sought to be charged, and that this is not met by a writing which uses language inconsistent with the existence of a concluded contract. It also appears to me that a long line of authorities has clearly established that the use of the words subject to contract is inconsistent with the existence of a concluded agreement, save in the most exceptional cases.
In Mulhall, Keane J sought to distinguish Kelly v Park Hall School [1970] IR 340 and Casey v Irish Intercontinental Bank [1979] IR 364, the one as being a special case decided on particular facts and the other as not laying down any general principle in support of using a subject to contract note as sufficient for the statute. I find it difficult so to distinguish these two cases. No particular set of facts surrounding the making of the contract itself can relieve a plaintiff from giving the necessary evidence in writing; I find it impossible not to read Casey s case as other than holding that the words subject to contract in the memorandum did not mean what they said. It follows that in my view neither case should be followed. It may well be thought that this rigidity of construction will result in genuine bargains not being enforced and that a court should, as I believe it has in the past to do a great right, do a little wrong (Merchant of Venice, IV i 215). It is reasonable to assume that the writing requirement is well known to owners and buyers of land; Portia s rule of construction is the preferred alternative.
Conclusion
It follows that part of the deal between the parties was that the deal itself was subject to contract; in that sense, the deal was incomplete. As I understand it, the law does not recognise as enforceable a contract to enter into a contract. In any event, whatever be the exact nature of the deal, the terms of Mr McManus letter cannot be used to meet the requirements of the Statute of Frauds.
I would allow the appeal, set aside the order of the High Court, and answer the questions posed in the manner set out in the judgment of the Chief Justice; and dismiss the action.
O Flaherty J: This is an appeal from the order and judgment of the High Court (Barrington J) of the 30th June 1989 whereby, on issues directed to be tried before him, the learned trial judge held that there was in existence a contract binding on the defendants to sell to the plaintiffs the premises 32 Elgin Road, Dublin, at the price of 90,000 and which agreement he ordered to be specifically performed.
Background
Mr Arthur McManus, a member of the Dublin auctioneering firm of Lisney & Son, was given the task of selling the premises 32 Elgin Road, Dublin. The premises had been let in flats in breach of the planning regime in that there was permission for five flats only whereas there had been a conversion of the premises into seven flats; Mr McManus also gave evidence that there was no bye law approval and that the premises did not comply with the fire regulations; in a word, as it was put in the course of the case there was a big planning question hanging over the house . Mr McManus knew the number of tenants in the premises and the rental income and that they were not rent controlled tenancies but were what he called normal tenancies . He did not have any knowledge of what terms the various tenants held under. It emerged, in due course, that there was a tenant who had a three year tenancy with an option to renew for a further three years. This agreement was made on the 16th June 1988, at around the time that the first plaintiff became interested in the premises.
The first plaintiff was in the business of property development; he had previous dealings with the purpose of developing property and, indeed, had experienced disappointment in the fairly recent past in regard to another property that he had sought to buy. So, it can be said of him, that he did not come to the market place as a novice, but was one who was reasonably experienced in the procedures that surround the buying and selling of property.
On the 13th June 1988 Mr McManus and the first plaintiff met and Mr McManus showed him over three properties in all, including 32 Elgin Road. Mr McManus and the first plaintiff met again on the 21st June; on this occasion the first plaintiff was accompanied by his banker and the first plaintiff made an offer (having inspected the property for a second time) to buy it for 85,000. That offer was not accepted and, the next day, the first plaintiff phoned with an increased offer of 87,500; Mr McManus told him that would not be acceptable but, nonetheless Mr McManus put it to his clients, the defendants, one of whom was in England and the other in Spain.
Around this time it appears there was a discussion about the tenants; Mr McManus was not in a position to say more than that they were normal tenancies , (by which both parties seem to have understood that they were short term tenancies of not more than a year); that they were not rent controlled but other than that, and, indeed to the date of trial, he could not give further details. He was able to give an indication of the rental income. When the question of a deposit was mentioned, it is common case that the first plaintiff offered to pay a deposit but Mr McManus said that it was company policy not to accept a deposit (except in very exceptional circumstances). At the mention of a deposit, Mr McManus made it clear that this was a matter for the solicitors.
One thing is clear and that was that Mr McManus never intended to enter a binding agreement with the first plaintiff; his disposition was that the matter of a contract should be left to the solicitors. It is equally clear that the first plaintiff was anxious to bring matters to a conclusion, and to that end, he increased his offer to one of 90,000; this was on the 29th June. Mr McManus indicated to the first plaintiff that this was acceptable to his clients (he had taken his clients instructions in the meantime) and, according to Mr McManus, the first plaintiff said that he would have to have the house surveyed for the bank. This inspection was carried out on the 5th July and then, shortly after that, the first plaintiff contacted Mr McManus and said he was prepared to proceed. Again, it is common case that while the first plaintiff was anxious to have the sale closed as soon as possible that Mr McManus was making clear that it was the job of the solicitor for the vendors to draw up a contract which would deal with that.
Trial judge s conclusion
On this aspect of the case, the learned trial judge concluded, with specific reference to the offering and declining of a deposit, that the first plaintiff understood that to mean that the solicitors were to reduce the deal to a formal contract. The learned trial judge said:
The first plaintiff understood that to mean that the solicitors were to reduce the deal to a formal contract. It may have been what Mr McManus had in his mind that there was no binding agreement until such time as a formal contract had been signed and executed, but he certainly didn t succeed in getting that reservation across to the first plaintiff, and he now cannot be sure of what he said. So, it appears to me, looking at the matter objectively, that the first plaintiff was entitled to draw the conclusion that a deal had been arrived at, and an agreement had been entered into.
In my judgment this summary does not do full justice to Mr McManus. Not only was it the policy of his firm not to make a binding agreement on behalf of clients without reference to their solicitors, it was his clear recollection that he brought this home to the first plaintiff. The only fault in his recollection is that he was not sure whether he used the phrase subject to contract . What both parties were clear about, however, is that the sale was subject to the drawing up of a formal contract. This is exemplified by the reply that the first plaintiff gave in direct examination in relation to the closing date when he said: Well, there wasn t a specific closing date mentioned. I had said I was in a position to close the sale straight away, and I would have been most anxious to do so quickly. Mr McManus said that it was Mr Walsh s (the vendors solicitor) job to draw up the contract, that was the formal contract, obviously . If there was a failure on the first plaintiff s part to understand that there was no binding agreement until a formal contract had been drawn up, then I think it is due to a vincible form of misapprehension on his part; I do not think the blame for this can be laid on Mr McManus.
Basic contract law
During the hearing of the appeal, we have had the benefit of elaborate arguments by both sides on the concept of subject to contract . This incantation has no talismanic property.
Before examining this phrase at all, it is necessary to go back to the rudiments of the law of contract and find out whether there was an offer and acceptance and an intention to create legal relations. That there was an agreement on price, offer and acceptance, there is no doubt. But beyond that, in my judgment, there was much to be sorted out. For a start, the matter of the tenancies was not resolved. It was easy for the first plaintiff to say at the trial that he was prepared to take the property subject to the tenancies whatever kind they were – but one of his answers suggested that he might have had to engage in litigation because of what he felt was a misrepresentation in relation to a tenant who had, in effect, a six-year tenancy. It is common case that Mr McManus left him under the impression that they were all short tenancies, meaning thereby not more than one year. Then, there was no closing date agreed.
Mr McManus expressly declined to take a deposit believing that there was a matter proper to be put into the formal contract. So, it appears to me, that there was no consensus ad idem. There was, at the most, an agreement to agree. Further, Mr McManus s disposition was that he did not regard himself as an agent to bind his principals. He was their agent to get the best price that he could for the house and to conclude an agreement in honour to sell it at that price, but, prudently as I believe, he did not think that he should be involved any further. I am puzzled as to how anyone can be anyone else s agent without taking on expressly the burden of such agency. (I leave aside special cases where through operation of law an agency may arise.) I use the word burden advisedly because, to take this case, there was so much that could have gone wrong with this sale if one were to assume that what passed between the first plaintiff and Mr McManus amounted to an agreement. I am leaving aside the Statute of Frauds point for the moment and I am prepared to assume that the agreement was capable of being proved. To what was Mr McManus exposing his firm? He certainly had not found out enough about the tenancies either to safeguard himself or bind the first plaintiff. The planning situation was another potential nightmare. In a word, Mr McManus had truly bound his principals in the circumstances of this case, he was very likely preparing a bed of nails for himself and his firm and would open up the prospect of being sued in negligence by both principals and by the first plaintiff.
On this aspect of the case, therefore, I reach the conclusion that there was no binding contract entered into between the first plaintiff and Mr McManus. The matter was subject to a formal contract being drawn up and, in any event, all the essential terms of the agreement had not been finalised.
Further, in the chronology which I have so far sketched, there was no enforceable agreement because there was nothing in writing.
Statute of Frauds
However, on the 8th July 1988, Mr McManus wrote to the defendants solicitor, Mr Patrick J Walsh, as follows:
Dear Mr Walsh,
We refer to the recent negotiations in connection with the above property. I now write to confirm that we have received instructions from the vendors to accept an offer of 90,000 subject to contract. I would be obliged if you would prepare, and forward the contract which should incorporate the following agreed terms.
Proposed purchasers:
Eoin Boyle & Susan Boyle
165 Rathgar Road,
Dublin 6.
Proposed purchase price:
90,000 subject to contract
Proposed purchasers solicitors:
Patrick Clyne,
Martin E Marron & Co
10, Northumberland Road, Dublin 4
Contents:
Contents of the apartments are included in the sale price.
Tenants:
The property is being sold subject to and with the benefits of the tenants.
Closing date:
As soon as legal formalities can be completed
I am sending a copy of this letter to Mrs Lee and Mr Goyns for their information. In the meantime, you will appreciate that this letter is for information purposes only, and does not by itself, constitute part of a binding contract. I trust that the sale will proceed smoothly and satisfactorily and if I can assist you further at this stage, please let me know.
Yours sincerely,
Arthur McManus MIAVI
Lisney & Son
On this aspect of the case, the question to be posed is whether this document constitutes a sufficient memorandum or note of an agreement to satisfy the Statute of Frauds. The Irish Statute of Frauds 1695 ( An Act for prevention of frauds and perjuries ) sets out in its preamble that it is an Act for prevention of many fraudulent practices which are commonly endeavoured to be upheld by perjury and subornation of perjury . By s 2 it is enacted that no action shall be brought to charge any person, or upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, … unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorised .
For the purpose of examining the submissions that were made on this aspect of the case, I leave aside the point that all the terms had not been agreed at the time that this letter was written and I am prepared to assume that they were all agreed and I also leave aside the question of Mr McManus s authority to bind his principal since that point was argued neither before the High Court nor before us.
Subject to contract
And so I turn to a consideration of the subject to contract cases. The phrase is used twice in the letter of the 8th July and, in addition, Mr McManus made clear that the letter was written for information purposes only and did not by itself constitute part of a binding contract.
I cannot conceive of any language that could more clearly express the denial of the existence of a binding contract short of saying: Existence of contract denied . The historic purposes of the phrase subject to contract or some similar phrase, was to keep negotiations in train and to allow either party to resile from the agreement made. That was the position for over a hundred years until in the nineteen seventies property prices both in England and here became volatile. This led to the practice of gazumping and since it is regarded as an odious thing, in the spirit of examining anything that may be said in defence of it, I put forward the views of Farrand, Contract and Conveyance (Fourth Edition 1983) at p 17:
This established ability to resile led eventually to the imaginatively named and much maligned sub-practice of gazumping ie, of potential vendors increasing the agreed price of property (especially houses) sold subject to contract and the ignominy seems to extend also to selling at an increased price to a different purchaser. The original prospective purchaser will nowadays have a tendency to flaunt his disappointment and indignation – for one thing he will likely enough have been hit in the pocket (eg, surveyor s fees) and for another he may not be willing or able to pay more. Is the potential vendor to be blamed? It is true that most solicitors and many clients will say that they regard an agreement subject to contract as morally, if not legally, binding (see, eg, Pimms Ltd v Tallow Chandlers in the City of London [1964] 2 QB 547 at p 552). Yet much more worthy of notice is Sachs J s penetrating judgment on: this hybrid type of subject to contract transaction which is so often referred to as a gentleman s agreement but which experience shows is only too often a transaction in which each side hopes the other will act like a gentleman and neither intends so to act if it is against his material interests (Goding v Frazer [1967] 1 WLR 286, at p 293).
And, for example, the duty of trustees to sell only at the best price reasonably obtainable will override commercial morality, ie, on receiving a higher offer before exchange, they must gazump . This is subject, of course, to the dictates of proper prudence which would permit trustees to pray in aid the common sense rule underlying the old proverb: A bird in the hand is worth two in the bush (per Wynn-Parry J, in Buttle v Sunders [1950] 2 All ER 193 at p 195). Nevertheless, the current state of the housing market must surely lead even common prudence to speak in almost all cases for the better price.
The foundation case on this topic is Chinnock v Marchioness of Ely (1865) 4 De GJ & Sm 638. The facts of that case bear a certain resemblance to the facts of the present case in that the Marchioness of Ely had purchased a house which was the subject of very special conditions of sale and she was advised by her solicitor that she could not sell with safety without the sale being subject to the same or similar stipulations. The estate agent was so instructed and kept strictly to his instructions and made clear that he was not entitled to enter a binding agreement on behalf of his principal. But then after a certain hiatus in negotiations the vendor s solicitor wrote a letter to the plaintiff as follows at p 644:
We have been instructed by the Marchioness of Ely to proceed with the sale to you of these premises. The draft contract is being prepared, and will be forwarded to you for approval in a few days.
The submission made was that these words were a clear recognition of the fact that there had been a complete sale to the plaintiff and, at all events, amounted to a distinct acceptance of the terms stated by the plaintiff. Lord Westbury LC said that the words we are instructed to go on were written with reference to the fact that the former proceedings had been interrupted by a temporary change of purpose on the part of the marchioness, but whether the words are taken in the one sense or the other, they cannot be severed from the rest of the letter, which describes the manner in which the sale was to be proceeded with, namely, by the preparation of a draft contract, which should be forwarded to the plaintiff for approval. Lord Westbury LC said at pp 645-646:
I entirely accept the doctrine contended for by the plaintiff s counsel … that if there had been a final agreement, and the terms of it are evidenced in a manner to satisfy the Statute of Frauds, the agreement shall be binding although the parties may have declared that the writing is to serve only as instructions for a formal agreement, or although it may be an express term that a formal agreement shall be prepared and signed by the parties. As soon as the fact is established of the final mutual assent of the parties to certain terms, and those terms are evidenced by any writing signed by the party to be charged or his agent lawfully authorized, there exist all the materials, which this Court requires, to make a legally binding contract.
But if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of this stipulation.
That decision was followed in Winn v Bull (1877) 7 Ch D 29. The agreement in that case was made subject to the preparation and approval of a formal contract .
Jessel MR said at pp 30-31:
I am of the opinion there is no contract. I take it the principle is clear. If in the case of a proposed sale or lease of an estate two persons agree to all the terms and say, We will have the terms put into form , then all the terms being put into writing and agreed to, there is a contract.
If two persons agree in writing that up to a certain point the terms shall be the terms of the contract, but that the minor terms shall be submitted to a solicitor, and shall be such as are approved of by him, then there is no contract, because all the terms have not been settled.
Now with regard to the construction of letters which are relied upon as constituting a contract, I have always thought that the authorities are too favourable to specific performance. When a man agrees to buy an estate, there are a great many more stipulations wanted than a mere agreement to buy the estate and the amount of purchase money that is to be paid. What is called an open contract was formerly a most perilous thing, and even now, notwithstanding the provisions of a recent Act of Parliament – the Vendor and Purchaser Act 1874 – no prudent man who has an estate to sell would sign a contract of that kind, but would stipulate that certain conditions should be inserted for his protection. When, therefore, you see a stipulation as to a formal agreement put into a contract, you may say it was not put in for nothing, but to protect the vendor against that very thing. Indeed, notwithstanding protective conditions, the vendor has not unfrequently to allow a deduction from the purchase money to induce the purchaser not to press requisitions which the law allows him to make.
All this shows that contracts for purchase of lands should contain something more than can be found in the short and meagre form of an ordinary letter.
In the House of Lords decision of Rossiter v Miller (1878) 3 App Cas 1124 Lord Cairns LC at p 1139 said in relation to Lord Westbury s judgment:
… I entirely acquiesce in what he says, that if you find, not an unqualified acceptance of a contract, but an acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfilled no contract is to arise, then undoubtedly you cannot, upon a correspondence of that kind, find a concluded contract.
Now it is important to recall, I think, that most of these subject to contract cases deal with correspondence passing inter partes. We have not that here. All that we have here is a letter sent by the estate agent to the clients solicitor informing him, in broad outline, what had been agreed, but making clear that no binding agreement had been entered into.
Conclusions
In the circumstances, I do not think it necessary to traverse the ground that was so ably covered by Keane J in the course of his judgment in Mulhall v Haren [1981] IR 364.
While I appreciate that it would be possible to confine my judgment within a narrow ambit, out of deference to the elaborate arguments that were advanced before us, I feel I should give my conclusions as fully as possible. They are:
(1)The letter of the 8th July 1988 does not satisfy the Statute of Frauds in that it makes clear that while there has been a measure of agreement reached, matters remain in a state of suspension pending the execution of a formal contract; in other words the negotiations have not been concluded. In addition, as I have already pointed out, the letter did not contain all the terms that the parties intended should be part of their bargain and which they intended would find expression in the formal contract.
(2)In order to satisfy the Statute of Frauds, the actual contract must be in writing or there must be some memorandum or note thereof. The agreement must be one where there is an intention to create legal relations and the writing must contain all the essential terms which had been agreed.
(3)The expression subject to contract or subject to a formal contract being drawn up or the like is prima facie a strong declaration that a concluded agreement does not exist. I would hold that there must be cogent evidence of a contrary intention before such a phrase is put to one side. I would equate it to existence of contract denied . In this regard, the decisions of this Court in Kelly v Park Hall School [1979] IR 340 and Casey v Irish Intercontinental Bank [1979] IR 364 must be regarded as exceptional and confined to the peculiar facts found in each case and as properly confined to the era in which they were decided. I do not regard them as reversing the principles laid down in the 19th century decisions to which I have referred.
(4)Even if an oral agreement is concluded, and it is not itself made subject to contract or the like nevertheless if the initiating correspondence thereafter contains that or a similar phrase, this involves that there is not a recognition, express or implied, of the existence of an oral agreement in the sense of one meant to be a binding contract.
(5)The written offer accepted orally position is anomalous but is explained, I think, by the fact that once there is an oral acceptance of a written offer it is at that moment that a contract comes into existence and, therefore, the note or memorandum becomes relevant. See Colgrave v Upcot (1707) 2 Eq Cas Abr 45, pl 9 and Reuss v Picksley (1886) LR 1 Ex 342 and the discussion of this topic in the cases of Law v Jones [1974] Ch 112; Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146 and Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231. See, too, Mulhall v Haren [1981] IR 364 at p 383 et seq.
I wish to conclude my judgment by making the following observations. The Statute of Frauds was enacted to prevent perjury and subornation of perjury as well as other fraudulent practices. In due course, equity made sure that the invocation of the statute should not be used to bring about fraud and, thus, was developed the doctrine of part performance. However, it seems to me that equity has now done its work and the statute should be looked at again because what it is now necessary to prevent is the burgeoning of actions based on subtleties and niceties to get around the clear wording of the statute. For my part, I would advocate that the statute should be amended so as to provide that all contracts for the sale of land should be in writing. This is because life has not got any less complicated over the intervening centuries; nowadays, as this very case illustrates, there are often planning aspects to a sale; there is finance to be arranged; there is the tax end of matters to be sorted out (in this case there was the question of certain furnishings being part of the sale and no apportionment had been made in relation to them); family law legislation may often have some relevance, and, further, there is the fact that the boundaries of negligence in relation to people involved in the buying and selling of property have been widened over the last number of decades. In these circumstances, I would rather the occasional gazumper go unbound than that people should be involved in needless uncertainty leading often to long drawn out litigation.
I think such a law would accord with the view the average person not versed in the mysteries of conveyancing law – would take who knows that when he buys a dwellinghouse or other property in the normal course of events it is necessary to have a proper contract executed to bind both parties.
In the circumstances, I would answer the questions posed: that there was no concluded oral agreement in the month of July 1988, and, even if there were, that the memorandum or note thereof relied upon is not sufficient to satisfy the Statute of Frauds.
I would allow the appeal.
Egan J: The plaintiffs in this case are husband and wife. The plaintiff Eoin Boyle at all material times acted on his own behalf and on behalf of his wife, Susan Boyle. The defendants are sisters who reside outside the jurisdiction. On or about the 23rd May 1988 Mr Arthur McManus, a member of the auctioneering firm of Lisney & Son, received instructions to put on the market for sale by private treaty premises owned by the sisters which were situate at 32, Elgin Road, Ballsbridge, Dublin. The premises had been converted into flats and there were seven units in all despite the fact that there was only planning permission for five. In effect, therefore, there was no proper planning permission and there was no bye-law approval. The evidence also suggested that the property was not in good repair.
On or about the 13th June 1988 the first plaintiff was shown over the premises by Mr McManus and he saw the premises again on about the 21st June on which occasion he made an offer of 85,000 for the property. This offer was not accepted and on the day following he increased his offer to 87,500 which was also rejected. The tenancies in relation to the flats had been discussed but Mr McManus stated that he had never seen the actual tenancy agreements and all he could say to the first plaintiff was that they were not protected by any rent control legislation. The first plaintiff was also informed of the problem which existed as regards planning permission. He made it clear, however, that he would be prepared to buy the property even with the planning defect and that he was satisfied to accept the existing tenancies. There does not appear to have been any particular discussion about the contents of the house which were to be included in any sale.
Some days later (the first plaintiff and Mr McManus are not agreed as to the precise date) an offer of 90,000 was made for the property and contents. Mr McManus put this offer to his clients and the two ladies agreed to accept it. Mr McManus informed the first plaintiff that the offer had been accepted. There had been discussion in relation to a deposit but Mr McManus informed the first plaintiff that his firm, Messrs Lisney & Son, did not accept deposits. There was no detailed conversation about a closing date but the first plaintiff indicated that he would like the sale to go through quickly and was led to believe that it was just a matter for the formalities to be completed.
On the 8th July 1988 Mr McManus wrote to Mr Patrick Walsh, solicitor for the defendants, in the terms following:
Re Mrs Maura Lee & Mrs EN Goyns, premises 32 Elgin Road, Dublin 4
Dear Mr Walsh
We refer to recent negotiations in connection with the above property. I now write to confirm that we have received instructions from the vendors to accept an offer of IR 90,000 subject to contract. I would be obliged if you would prepare and forward the contract which should incorporate the following agreed terms:
Proposed purchasers:
Eoin Boyle & Susan Boyle
165 Rathgar Road,
Dublin 6.
Proposed purchase price:
90,000 subject to contract
Proposed purchasers solicitors:
Patrick Clyne,
Martin E Marron & Co
10, Northumberland Road, Dublin 4
Contents:
Contents of the apartments are included in the sale price.
Tenants:
The property is being sold subject to and with the benefits of the tenants.
Closing date:
As soon as legal formalities can be completed
I am sending a copy of this letter to Mrs Lee and Mrs Goyns for their information. In the meantime, you will appreciate that this letter is for information purposes only, and does not by itself, constitute part of a binding contract. I trust that the sale will proceed smoothly and satisfactorily and if I can assist you further at this stage, please let me know.
Yours sincerely,
Arthur McManus
Requests were made by the solicitors for the plaintiffs requesting contracts for sale and title documents but same were not furnished and eventually on the 18th October 1988 the solicitors for the defendants wrote to the solicitors for the plaintiffs stating that there was no contract in existence and that they had no instructions at that stage to deal with the property or prepare any contract. Finally on the 11th November 1988 proceedings for specific performance were issued on behalf of the plaintiffs.
On the 30th June 1989 the High Court directed that the following issues should be tried:
(a)Whether prior to the 8th July 1988 there was a concluded oral agreement between the plaintiffs, as purchasers, and the defendants, as vendors, for the sale by the defendants to the plaintiffs of the premises No 32 Elgin Road in the City of Dublin at the price of IR 90,000?
(b)If there was such a concluded oral agreement, what were the other terms thereof?
(c)If there was such a concluded oral agreement, whether there was sufficient note or memorandum of the said oral agreement to satisfy the Statute of Frauds (Ireland) 1695 contained in the letter dated the 8th July 1988 from Lisney & Son to PJ Walsh & Co?
The hearing took place on the 30th June 1989 and the questions were answered as follows:
(a)Yes.
(b)
(i)The vendors were Mrs Lee and Mrs Goyns.
(ii)The premises were 32 Elgin Road in the City of Dublin.
(iii)The purchasers were Eoin Boyle and Susan Boyle.
(iv)The purchase price was IR90,000.
(v)The sale was to include the contents of the apartments.
(vi)The property was being sold subject to and with the benefit of the tenants.
(vii)The closing date was to be as soon as the legal formalities were completed.
(c)Yes.
The court ordered that the above agreement should be specifically performed and from this order the defendants have appealed to this Court.
The grounds of the appeal are:
(a)There was no concluded oral agreement.
(b)Even if there was such an agreement, there was no sufficient note or memorandum thereof to satisfy the requirements of s 2 of the Statute of Frauds 1695.
(a) In regard to whether or not there had been a concluded oral agreement the learned trial judge inter alia stated as follows:
A difficulty arose through the fact that the first plaintiff offered to pay a deposit and there was apparently at that stage reference to the fact of solicitors preparing a contract. The first plaintiff understood that to mean that the solicitors were to reduce the deal to a formal contract. It may have been that Mr McManus had in mind that there was no binding agreement until such time as a formal contract had been signed and executed, but he certainly did not succeed in getting that reservation across to the first plaintiff, and he now cannot be sure what he said. So it appears to me, looking at the matter objectively, that the first plaintiff was entitled to draw the conclusion that a deal had been arrived at and an agreement had been entered into.
The learned judge s finding has been challenged in so far as it implies that all the essential terms had been agreed upon between the parties. It is submitted that certain terms remained outstanding and these would include the closing date, the deposit and final details in relation to the tenancies. It should be emphasised that I am now dealing only with the question as to whether or not there was a concluded oral agreement. The wording of the memorandum dated the 8th July 1988 is irrelevant in relation to this question. I will deal with the terms which are alleged to be outstanding :
1. The tenancies
It is abundantly clear on the evidence that the plaintiff agreed to accept the tenancies as they stood even though he knew that they did not conform with the planning permission.
2. The closing date
The learned trial judge was satisfied on the evidence that the closing date was to be as speedily as the legal formalities have been completed and that it did not appear in the circumstances of the case to be a term of any real significance. It has long been established that where no time for performance is agreed the law implies an undertaking by each party to perform his part of the contract within a time which is reasonable having regard to the circumstances of the case: Simpson v Hughes (1896) 66 LJ Ch 143. Words such as as soon as possible would also be construed by reference to what would be reasonable in the circumstances: Hydraulic Engineering Co Ltd v McHaffie Goslett & Co (1878) 4 QBD 670 (CA).
It is clear, therefore, that words which mean as speedily as the legal formalities have been completed are not so uncertain in their meaning as to negative the existence of an oral agreement.
3. The deposit
In regard to this the learned trial judge stated that it was obvious that the first plaintiff was at all times prepared to pay a deposit, even a substantial deposit, had it been accepted from him, and there was no problem in relation to the deposit .
Again, in my view, the absence of specific agreement in relation to the payment of a deposit or the amount thereof does not negative the existence of an oral agreement. It is usual to have a deposit in the case of sales of land but it is not essential in law. In any event, having regard to the construction put on the evidence by the learned trial judge, it would be unrealistic to hold that failure to pinpoint a specific rate or sum for a deposit would, in the circumstances of this case, oblige the court to rule that there was no oral agreement.
Having regard to the foregoing matters, therefore, I am satisfied that the learned trial judge was justified in his finding that there had been a concluded oral agreement.
(b) The Statute of Frauds
Section 2 provides that no action shall be brought … to charge any person … upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them … unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorised .
The agreement itself need not be in writing. A note or memorandum of it is sufficient, provided that it contains all the material terms of the contract.
The circumstances of each case need to be examined to discover if any individual term has been deemed material by the parties; and, if so, it must be included in the memorandum: Hawkins v Price [1947] Ch 645; Scott v Bradley [1971] 1 Ch 850.
Can it be said that all material terms of the oral agreement were included in the letter of the 8th July 1988? The closing date is described as as soon as legal formalities can be completed and this represents fairly what was agreed to. There is no mention of the requirement of a deposit but, there was no definite parol agreement and, in the circumstances of this case, the parties did not regard the question of a deposit as being of any significant or necessary materiality. See Black v Kavanagh (1973) 108 ILTR 91.
A more serious matter arises in relation to the tenancies. The evidence disclosed that there was a breach of planning permission and that it was a continuing breach. The first plaintiff gave evidence to the effect that he would accept the tenancies as they stood, even though there was a breach. In my opinion, this was an important and material term. It meant that if the sale went through he could be compelled by the corporation to take steps to remedy the breach and that these steps might be difficult and costly. He was prepared to face up to this position but there was nothing in the note or memorandum to exonerate the vendors from any liability towards the purchasers in this event. For this reason alone, I hold that the note or memorandum was not sufficient to satisfy the requirements of the statute.
Having regard to the foregoing, it is not strictly necessary for me to deal with the legal effect of the words subject to contract which are included twice in the memorandum relied upon and also the sentence which reads: In the meantime you will appreciate that this letter is for information purposes only and does not by itself constitute part of a binding contract . Nothing could be clearer than the intention of the writer and the meaning, in particular, of the sentence quoted. Is this an answer to the problem in the sense of meaning that there can be no binding contract until a formal contract is entered into? It is consistent with the plain view of one of the parties but not necessarily of the other party. If the words are to be construed with reference to the parol agreement it could be argued that a finding to the effect that there had been a concluded agreement should mean that one party could not unilaterally negative the existence of such agreement. It has been held that the court, in determining whether a document is a sufficient memorandum is not in quest of the intention of the parties, but only of evidence under the hand of one of the parties to it, that he has entered into it : In re Hoyle [1893] 1 Ch 84.
In England the balance of authority suggests that any alleged memorandum which purports to deny the existence of a contract cannot constitute a sufficient note or memorandum for the purpose of the Statute of Frauds, even though the parties themselves have actually reached a concluded agreement and parol evidence can be produced to prove this: Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146.
The entire history of the law in relation to the expression subject to contract was reviewed exhaustively by Keane J in Mulhall v Haren [1981] IR 364 in which he held inter alia that a letter which expressly states that a transaction is subject to contract cannot be a sufficient note or memorandum, since the use of those words is normally inconsistent with the existence of a concluded contract. He held that it was only in certain rare and exceptional circumstances such as arose in Kelly v Park Hall School Ltd [1979] IR 340 and Michael Richards Properties Ltd v Corporation of Wardens of St Saviour s Parish [1975] 3 All ER 416 that the words subject to contract could be treated as being of no effect. It is true that the Park Hall decision was that of the Supreme Court but the qualification or explanation of it given by Keane J was subsequently accepted by Henchy J in McCarthy v O Neill [1981] ILRM 443 when he impliedly approved of the decision in Mulhall v Haren. I similarly approve.
I would allow the appeal and would answer the questions as follows:
(a)Yes.
(b)As found by the learned trial judge.
(c)No.
Lowry v Reid
[1927] NI 142 (Court of Appeal)
The facts are set out in the judgments.
Moore LCJ: This was an action by William Lowry, upon a contract made between his deceased mother, Mary Lowry, and himself on or about April 28th 1916, under which the plaintiff, at the request of his mother, transferred his farm of forty-eight acres to his brother Andrew, and in return Mary Lowry undertook to plaintiff that she would by will devise and bequeath to him at her death her own farm of seventy-four acres and twenty-six perches.
Two years before her death, on 1st May 1923, Mary Lowry revoked the previous will which she had made in pursuance of the contract above stated, and left the plaintiff a life interest merely in said farm, and (after limitations not now material) the ultimate interest to her grandson, Thomas Carlisle Reid, Junior, one of the defendants.
Wilson J at the trial held, as appears both from his spoken judgment and the order, that the contract alleged by the plaintiff was in fact made, but that it could not be enforced as against the representatives of Mary Lowry, inasmuch as it was a contract relating to land, and there was no sufficient note or memorandum in writing signed by Mary Lowry as required by the Statute of Frauds, and that there had not been any sufficient part performance of the contract by Mary Lowry to take the contract out of the provisions of that statute. On these grounds he dismissed the action so far as it related to the lands, and from this judgment William Lowry has appealed.
Counsel for the defendant, however, have admitted that they cannot sustain the order of the learned judge on this ground, and it is admitted before us that if there is part performance by the party seeking to enforce a contract that is sufficient to bind both, and acts by the person to be charged are not in themselves evidence of acts of part performance. See Caton v Caton LR 1 Ch 137.
But counsel for the respondents have attempted to put the case on a different ground based on certain dicta in the judgment of Lord Selborne in Maddison v Alderson 8 AC 457. They say that evidence of the parol contract cannot be admitted unless it is first established that the alleged acts of part performance unequivocally established the existence of some such contract. If I have correctly stated this proposition, I can only say that I do not accept it. I think it is an inversion of the principle which should obtain. In my opinion, we must at some stage consider the contract and its effect, before we are in a position to judge, whether or not the acts relied on to take the case out of the statute are acts of part performance of the contract.
If such acts are not unequivocally referable to the performance of the contract, in whole or part, then the evidence as to them is irrelevant and the necessary proof of part performance fails. Lord Selborne s speech in Maddison v Alderson 8 AC 457 lays it down that the doctrine of part performance is applicable to any case in which a court of equity would before the statute have decreed specific performance. These are the words of Palles CB, in Crowley v Sullivan [1900] 2 IR 478, at p 492. In this case, therefore, I take the parol contract and I find it proved as set out in paragraph 5 of the statement of claim. What facts do we find as proving acts of part performance unequivocally referable to this contract? First of all as to the status ante quo – (a) That on 16th August 1902, Mary Lowry was possessed of two farms one of which was subsequently divided into two. (b) That on 21st August 1902, she made a will whereby she left the 74 acres at Drumhirk to Andrew (I omit the charges for legacies) and the 115 acre farm at Ballykeigle to William and Hugh jointly. (c) That the Ballykeigle farm, at Mary Lowry s wish, in 1905 was divided between Hugh and William, and William became registered owner of 48 acres of it, and Hugh of the balance leaving Mary Lowry in possession of the Drumhirk farm of 74 acres. This was the position except for one further factor immediately prior to the parol contract of April 1916, of which specific performance is sought in the present action. That further factor was that William was about to get married, and, as he had no house on his farm at Ballykeigle, he was about to sell it and buy another elsewhere.
At this stage then the mother, being anxious to keep William at home and also to provide for her son Andrew, who had been invalided from the Great War, makes a new arrangement in the nature of a re-settlement. (I purposely omit all references to legacies, chattels, etc.) She said to William, in effect, if you will now give up possession of your 48 acres of land to Andrew, and come and live with your wife with me and help me to work my 74 acres, I will leave you the 74 acres at my death. Now has there been such part performance of that contract as would entitle William to succeed in equity in a suit for specific performance? Would it be a fraud on the part of Mary Lowry to take advantage of the fact that there was no contract in writing pursuant to the statute?
With this in mind, let us see what occurred. William, immediately after the contract, puts Andrew in possession of his 48 acres, and with his wife retires to live with his mother on her farm. Mary Lowry on her part makes a will leaving her farm to William pursuant to the arrangement. This is not relied on as an act of part performance but as an act corroborating the making of the parol contract. William, having transferred his own farm, lives on with his mother who ultimately dies, leaving him only a limited interest; the learned judge says he has been defrauded and that for him there is no relief. In my judgment there is relief for him, because on the facts of the case, having given up his own property to his own detriment, on the faith of his mother s representations, this is a parol contract for the specific performance of which he is entitled in equity to a decree to carry those representations into execution, and if he is entitled to such a decree, he is equally entitled to rely on the doctrine of part performance to take the case out of the statute, Crowley v O Sullivan [1900] 2 IR 492.
In my opinion, the plaintiff, William Lowry, is entitled to judgment in the terms of his notice of appeal, and in that respect the judgment of Wilson J should be reversed and altered accordingly. The plaintiff, who should have succeeded in the court below, is entitled to his costs of the action there as well as the costs of this appeal, to be paid by the executor and his co-defendant.
Andrews LJ: I entirely agree with Wilson J in the conclusion of fact at which he arrived in this case, namely, that in the year 1916 a valid verbal contract was entered into between Mary Lowry and her sons, Andrew and William, by which Mary Lowry agreed that she would leave to William at her death her two farms of land in Drumhirk, subject to certain legacies, and also her furniture and household effects, and that the residue, including all stock, crop and outside effects, should be divided between William and Andrew in equal shares. In return for and as the consideration for this undertaking William Lowry agreed to convey his farm of 48 acres in Ballykeigle to Andrew Lowry and to pay him the sum of 200.
We are not concerned on this appeal with the variation in terms of this agreement which found expression in the codicil of 10th January 1920, as it only affected that portion of the contract which related to the stock, crop and outside effects. The appeal relates to the rights of the rival claimants to the lands in Drumhirk; and the only assistance which we derive from further reference to that portion of the contract which contained the proposed disposition of the stock, crop and outside effects, is that the defendants have not challenged Wilson J s decision of that part of the action in the plaintiff s favour, and must, therefore, be taken to have acquiesced in his view as to the existence of a valid contract affecting such stock, crop, and outside effects. The attitude of the defendants concerning this part of the agreement confirms the opinion at which I have independently arrived, that the agreement between the mother and her sons extended to the lands of Drumhirk. The only question therefore, to be determined is whether it is an agreement which is capable of being legally enforced at the plaintiff s suit.
I further agree with Wilson J that there is no sufficient note or memorandum of this parol agreement to satisfy the provisions of the Statute of Frauds; and, accordingly, the plaintiff must fail unless there has been a sufficient part performance of the contract to take the case out of the statute. Wilson J held that the performance by William Lowry is complete. I agree. William conveyed all his estate and interest in the 48 acre Ballykeigle Farm to Andrew, who forthwith entered into and remained in possession until he sold it to his brother Hugh in 1920. William also paid Andrew the 200 agreed upon. But Wilson J held that it was necessary that there should also be a part performance of the contract by Mary Lowry, and that the making of the will of 19th April 1916, and her allowing William to bring his wife to live at Drumhirk did not amount to such part performance.
When one considers the principle upon which the doctrine of part performance is based, it becomes, in my opinion, clear that no such performance on her part is required. In Bond v Hopkins 1 Sch & L 413 at 433 Lord Redesdale said:
The Statute of Frauds says that no action or suit shall be maintained on an agreement relating to lands which is not in writing, signed by the party to be charged with it; and yet the court is in the daily habit of relieving, where the party seeking relief has been put into a situation which makes it against conscience in the other party to insist on the want of writing so signed, as a bar to his relief.
Thus the doctrine is a purely equitable one. Its underlying principle is, that the Court will not allow a statute which was passed to prevent fraud to be made itself an instrument of fraud. In other words the court disregards the absence of that formality which the statute requires when insistence upon it would render it a means of effecting, instead of a means of averting, fraud. The question in each case is, whether the plaintiff has an equity arising from part performance which is so affixed upon the conscience of the defendant that it would amount to a fraud on his part to take advantage of the fact that the contract is not in writing. The right to relief rests not so much on the contract as on what has been done in pursuance or in execution of it. Under the statute the note or memorandum of the contract must be signed by the party to be charged. Under the doctrine of part performance the equity must be possessed, not by the party to be charged, but by the plaintiff – the person who seeks relief; and this equity arises from his part performance of the contract. This view is not only recognized by all the leading text book writers on the subject, but it has also been enunciated in the clearest terms by Lord Cranworth, C., in the English Court of Appeal in the case of Caton v Caton LR 1 Ch 137 at 147-8, in terms which were approved of by the House of Lords in the same case LR 2 HL, 127. the preparing and executing of the will, said Lord Cranworth C, at p 148, caused no alteration in the position of the lady (ie, the plaintiff), and I presume it will not be argued that any consequence can be attached to acts of part performance by the party sought to be charged. In the House of Lords the plaintiff s counsel did not challenge this view of the law; and, abandoning any argument based on alleged part performance, they sought, unsuccessfully as it proved, to establish that a certain paper constituted a contract within the statute. In his speech Lord Chelmsford, however, left no room for doubt that he entirely concurred in Lord Cranworth s judgment. If, he says at p 136, the same questions had been raised on the argument upon this appeal I should have had no difficulty in agreeing with the judgment of my noble and learned friend (Lord Cranworth) ; and at p 145 Lord Westbury expresses the same opinion when he says My Lords, I would only add that I entirely concur with my noble and learned friend, the Lord Chancellor, in overruling the grounds on which the Vice-Chancellor s judgment appears to have proceeded … I agree entirely in the ground upon which my noble and learned friend rested his judgment in the court below.
It is clear from both the written judgment of Wilson J and also from two consecutive recitals in the formal judgment of the court, that the grounds on which he dismissed the plaintiff s action were the absence of a sufficient note or memorandum of the contract, and the absence of sufficient part performance by Mary Lowry. For the reasons I have given this latter ground is, in my opinion, unsustainable; and it was virtually abandoned by the defendants counsel on the arguments in this court.
Mr McGonigal endeavoured, however, to support Wilson J s judgment on the ground that the acts of part performance of the contract by the plaintiff which have been relied upon are insufficient to take the case out of the statute, not being, he contends, unequivocally referable to the contract. The acts of part performance by the plaintiff which were relied upon consist mainly of the conveyance of the farm of 48 acres in Ballykeigle to Andrew Lowry followed by the giving up of possession to him; and he submits that the equity can only arise from acts of part performance relating to the lands which form the subject matter of the suit. In support of this argument he contends that the terms of the parol agreement can only be looked at after unequivocal acts of part performance have been proved; and that in the present case without the parol agreement there is no connexion between the lands of Drumhirk and those of Ballykeigle. He, therefore, concludes that acts to Ballykeigle cannot be regarded as part performance of a contract relating to Drumhirk. The argument, though plausible, is in my opinion unsustainable. The fallacy which underlies it is that, though the subject matter of the action is the farm in Drumhirk, the subject matter of the contract is the farms both in Drumhirk and Ballykeigle. I see no reason in principle, nor has any authority been cited to us to show, why a party who seeks contractual relief in regard to certain lands cannot rely as acts of part performance upon his own acts to other lands in furtherance of the same contract. Let me give two illustrations. A agrees verbally to sell Whiteacre and Blackacre to B for, say, 1,000. Delay arises in completing the conveyance; and B, being anxious to get immediate possession of Whiteacre for building purposes, pays the 1,000 to A, is allowed into possession of Whiteacre and proceeds to erect buildings thereon. A subsequently refuses to convey Blackacre, and, when sued, pleads the Statute of Frauds. In my opinion B s acts in relation to Whiteacre constitutes a valid part performance which takes the case out of the statute, for both lands form the subject matter of the contract, and B s acts to Whiteacre are, therefore, a part performance of the contract. The other illustration I put during the argument to Mr McGonigal: A, the owner of Whiteacre agrees verbally to exchange it for Blackacre, which belongs to B If the latter executes a conveyance of Blackacre to A, how can it be contended that this is not such an act of part performance by B as may be relied upon by him in an action to compel A to perform his part of the contract by conveying Whiteacre to him? Unless the doctrine of part performance finds no place in the law relating to a contract for the exchange of lands, B s conveyance must be a sufficient act of part performance; and, in my opinion, there could be no foundation for the suggestion that the doctrine does not apply to contracts for the exchange of lands, as in my judgment the doctrine applies to all contracts which, before the Judicature Act, a Court of Equity would have granted specific performance if the alleged contract had been in writing; and these are not confined to contracts for the sale of land, (See Maddison v Alderson 8 AC 467, 474 and McManus v Cooke 35 Ch D 681, at 697 (approved of by Palles CB, in Crowley v O Sullivan [1900] 2 IR 478, at 490 & 492)) but include contracts for the exchange of lands. Seton 7th Edit 1228.
I would add that I can find no authority to support Mr McGonigal s contention that it is not permissible even to consider the terms of the parol agreement until it is clearly established that the acts of part performance refer unequivocally to the contract relied upon, and to that alone. Indeed, it would be, in my opinion impossible to apply the proposition as so stated in practice; for how, I ask, could it be said that the acts of part performance referred unequivocally to an agreement of the terms of which were ex hypothesi not known, unless, indeed, they were acts of such a clear, cogent, and conclusive character that they embodied and themselves proved the actual terms of the agreement, in which case it would be wholly unnecessary for the plaintiff to make any reference to or to rely in any way upon the parol agreement. In support of his contention Mr McGonigal referred us to a passage in Lord O Hagan s judgment in Maddison v Alderson 8 AC 467, at 483, where he said:
Next, assuming that the action must be considered maintainable, if at all, for the purpose of enforcing a parol contract, partly performed, the course of the argument appears to me to have been further erroneous in this, that, instead of seeking to establish primarily such a performance as must necessarily imply the existence of the contract, and then proceeding to ascertain its terms, it reversed the order of the contention. The Court was asked, from the findings of the jury and the testimony supporting them, to say there was a contract; and then to discover in the conduct of the parties acts of performance sufficient to validate the bargain so previously ascertained.
If these words are to be taken literally, and to be construed as deciding that the acts of performance must in themselves necessarily imply the existence of the contract, that is, the precise contract pleaded, I am not prepared to accept them as containing a correct statement of the law, being, as they are, at variance with the terms of the classical judgment of the Earl of Selborne C., in the same case, and, indeed, as it seems to me, with other passages of Lord O Hagan s own judgment. Thus in the central paragraph on page 485, he says:
It (ie, the act which shall amount to a part performance) must be sufficient of itself, and without any other information or evidence, to satisfy a court, from the circumstances it has created and the relations it has formed, that they are only consistent with the assumption of the existence of a contract, the terms of which equity requires, if possible, to be ascertained and enforced (The italics are my own).
It may be said that in the next paragraph of his judgment Lord O Hagan again reverts to the principle that the acts must, of necessity, imply the existence of the agreement pleaded; but this portion of his judgment follows and is inconsistent with the passage from the judgment of Sir William Grant in Frame v Dawson 14 Ves 387, which he cited with approval on p 484: The principle of the cases is, that the act must be of such a nature, that if stated, it would of itself infer the existence of some agreement, (again the italics are my own); and then parol evidence is admitted to show what the agreement is.
I have referred to the Earl of Selborne s judgment, from which I shall only make two extracts – the first, the passage at p 476, to which Mr Murphy referred us in his very forcible reply: It is not arbitrary or unreasonable to hold that when the statute says that no action is to be brought to charge any person upon a contract concerning land, it has in view the simple case in which he is charged upon the contract only, and not that in which there are equities resulting from res gestae subsequent to and arising out of the contract. So long as the connexion of those res gestae with the alleged contract does not depend upon mere parol testimony, but is reasonably to be inferred from the res gestae themselves, justice seems to require some such limitation of the scope of the statute. The second passage is taken from page 479, where the learned Lord Chancellor summarises the effect of the cases in the following terms: All the authorities show that the acts relied upon as part performance must be unequivocally and in their own nature referable to some such agreement as that alleged. These words some such agreement are also adopted as his own by Lord Fitzgerald in his judgment in the same case at p 491.
I would like to refer to one other case of recognized authority, Morphett v Jones 1 Swanston 181, where Sir T Plumer, referring to the equitable doctrine, says that Admission into possession, having unequivocal reference to the contract, has always been considered an act of part performance. The acknowledged possession of a stranger in the land of another is not explicable except on the supposition of an agreement, and has, therefore, constantly been received as evidence of an antecedent contract, and as sufficient to authorise an inquiry into the terms. In the opinion, therefore, of this eminent authority the sole requisite preliminary to inquiry into and proof of the terms of the parol agreement is the establishment of an act which is only explicable on the basis of the existence of some contract.
I make no apology for citing, in conclusion, as a correct summary of the law a passage from Fry on Specific Performance, 5th Edit. 292, where the editor states that the true principle of the operation of acts of part performance seems only to require that the acts in question be such as must be referred to some contract, and may be referred to the alleged one; that they prove the existence of some contract, and are consistent with the contract alleged. As Mr Murphy pointed out, this paragraph gains special weight from the fact that it appeared in precisely the same form in the 2nd Edition of the book, for which the learned author was himself responsible, published in 1881. The decision in Maddison v Alderson 8 AC 467 necessitated no alteration in the test.
When I apply these principles to the facts of the present case. I have no difficulty in holding that such facts have been proved as take it entirely outside the statute. The transfer by William to Andrew, followed by the latter s taking over possession, must be referred to some contract, and may be referred to the alleged contract; for though it would appear from the folio that this transfer was stated to be made in consideration of the sum of two hundred and fifty pounds, it is well settled that a receipt for money, even though contained in an instrument under seal, is not conclusive that the money was in fact paid, and parol evidence may be given to prove that the whole or part of it was not paid. Mr McKee s evidence as to the non-payment of the money is supported by the evidence of the other witnesses; and this part of their evidence remains, even if it be admitted, as it must be, that there is difficulty in justifying the admission of that other portion of their evidence which appears directly to contradict the transfer.
As I look at the res gestae and other proved circumstances of the case, and, particularly, at the contemporaneous will of Mary Lowry of 29th April 1916, in which she left to William her farms in Drumhirk, which she had by previous wills devised to Andrew; as I bear in mind the fact that William was then about to get married, and consider the evident natural desire of the mother that the home farms at Drumhirk should remain in possession of the Lowry family; as I consider the subsequent residence of William and his wife on the farms with his mother; his work upon the farms; the handing over of the surplus profits to him by his mother, the disposition by the same will of 1916 of the stock, crop, and outside effects to Andrew and William in equal shares; the subsequent parol agreement of January 1920, whereby the mother agreed with William that in consideration of his paying Andrew 250 she would leave him the entire of the stock, crop and outside effects; as I bear in mind that that agreement, though clearly indicated in the letter of instruction for codicil of 10th January 1920, and given effect to by that instrument, was similarly ignored by the will of 1st May 1923, but enforced by the order of Wilson J unappealed from this action – as I think of all these matters, I feel I have not merely ample corroboration of the agreement deposed to in evidence by the plaintiff, his brothers, James and Hugh, and the family solicitor, Mr McKee, but I have also in certain of them such evidence of part performance as enables this court, whilst acting within the principles of established authority, to do justice, and to prevent the perpetration on the plaintiff of what I, like Wilson J, would consider a great fraud. The appeal must be allowed with costs.
Best LJ: I have had an opportunity of perusing the judgments of the Lord Chief Justice and Lord Justice Andrews. I agree with the conclusions arrived at, for the reasons stated.
Mackey v Wilde
Supreme Court, unrep, 17 December 1997 (50/92)
Barron J: The plaintiff and the first-named defendant were at all material times the owners of a joint fishery on stretches of the Finn river and the Reelan river in County Donegal. These rights accrued to them as the owners of the Glenmore estate and the Cloghan estate respectively. The respective rights of the owners of the fishery are set out in an indenture of the 29th March nineteen hundred and twenty and in particular in the Third Schedule thereto. The terms of the Third Schedule were as follows:
Arrangement as to the joint fishing of Glenmore and Cloghan, the river Finn as between the respective owners:
Only three rods each to be permitted. Beat number l from Galwollie Pool to the railway bridge below the red bridge (inclusive).
Beat number 2 from railway bridge above mentioned to the stepping stones at Tornan Catholic Chapel inclusive (but excepting the exclusive fishing belonging to Cloghan).
Glenmore to have number 1 beat on Mondays, Wednesdays and Fridays and number 2 beat on Tuesdays, Thursdays and Saturdays.
Cloghan to have number 1 beat on Tuesdays, Thursdays nod Saturdays and number 2 beat on Mondays, Wednesdays and Fridays.
Trout fishing not restricted but not to interfere with well-known salmon pools. Sundays, no restrictions on either part.
The main body of the conveyance also provided that these arrangements might from time to time be changed by agreement in writing between the owners.
By agreement between the then owners in the 1960s the remaining stretches of the fishery were divided into four further beats and a similar arrangement to that contained in the deed operated in relation to these further beats. Such arrangement continued between the respective owners up to the year 1971. Thereafter for various reasons mainly because the then owner of the Cloghan estate showed little interest in the fishery and also because of serious illegal fishing the arrangement broke down. The history of the fishery leading to the present dispute commences with the purchase of the Cloghan estate by the first-named defendant in November 1983. The plaintiff was then the owner of the Glenmore estate. He or his father before him had been owners of that estate going back to the year 1956 or 1957.
The plaintiff and the first-named defendant met sometime in the month of February 1984 when they agreed to run the fishery as a joint fishery in accordance with a set of rules drawn up by the first-named defendant. There does not appear to have been any particular agreement as to the number of persons who might be entitled to receive licences whether annual or daily, but it does appear that the rota system set out in the Third Schedule to the deed of 1920 was allowed to lapse. For the year 1985 there appears to be some evidence that the parties agreed to limit tickets to twenty-five each. In any event the plaintiff who had up to that time being issuing a small number of tickets to friends on a gratuitous basis indicated that he would not go beyond such persons and that he would send anybody else seeking a licence to the first-named defendant who should issue the licence and retain the fee to help in meeting his expenses in watching the river.
The plaintiff appears to have been unhappy at the number of people being permitted to use the river during the year 1985 and on the 11th October 1985 he wrote a letter to the first-named defendant in which he suggested that the arrangement under the 1920 deed was too restrictive and that they might legally agree a new agreement. He suggested changing the existing agreement and proposed twenty-five rods per house maximum, making a total of fifty rods per season on the river. These twenty-five rods each were to be made up partially by annual tickets and partially by day tickets.
A meeting took place between the plaintiff and the first-named defendant sometime before 15th January 1986 at which the plaintiff claimed that an agreement was reached to limit the number of licences to twenty-five annual licences and a few daily tickets. Following that meeting the plaintiff issued a circular to persons to whom he had in the past issued tickets in which he indicated that for the year 1986 it was proposed to limit the number of annual rods to twenty-five for each fishery, and that there would also be some daily tickets sold.
Although the evidence indicated that the parties met at the end of each season there is no evidence of any meeting at the end of the 1986 season. The next piece of evidence in relation to the numbers fishing on the river is that contained in a letter of the and .July 1987 sent by the plaintiff to the first-named defendant The material part is as follows:
The legal agreement between the two houses is that three rods will be on the Ivan Bridge beat and three rods on the Anock beat at any one time, and that these beats would alternate between the two houses.
I discussed with you last year having the arrangement of twenty-five annual tickets per side, with a few day tickets to cover people arriving and looking for fishing. I would have anticipated approximately five to eight of these per day.
For the next two to three years there was correspondence between the plaintiff and the first-named defendant in which the plaintiff was seeking to obtain a written agreement limiting numbers.
As no agreement could be reached proceedings were ultimately brought by the plaintiff to establish a binding agreement that there should be only twenty-five rods per side. These proceedings were heard by Costello P who held that there was a concluded agreement entered into at the end of 1985 or early in January 1986 that each party would restrict the number of annual tickets to twenty-five and would also be at liberty to issue a few day tickets. Notwithstanding that the pleadings did not refer to the additional day tickets he was satisfied that a term relating to additional day tickets had been included and held that this entitled each party to issue up to ten day tickets. Accordingly, the defendant was restrained from issuing more than twenty-five annual licences and ten day tickets. From that judgment the defendants have appealed to this Court.
It was submitted on behalf of the defendants that the learned trial judge was wrong to find a concluded agreement in that the evidence showed only some element of agreement. It was also submitted that there were no sufficient acts of part performance to make the agreement enforceable.
It is submitted that there are three matters upon which no agreement was reached and without which no agreement could have been concluded.
These were:
(1)the meaning of the word few;
(2)whether the agreement was for the year 1986 or into the future; and
(3)whether either party would be entitled to split the times at which holders of season tickets would be entitled to exercise the licence granted to them.
So far as the latter ground is concerned, it was not argued at the trial. There must be many agreements where the parties do not cover every eventuality because such question does not occur to them. When the question arises, it must be answered in the light of the proper construction of the contract. Here, there were to be annual tickets and day tickets. There was no evidence to suggest that the period covered by either class of ticket might be split and, if so, in what manner. I would reject the suggestion of uncertainty upon this ground.
The second ground relates to the period of the contract. In a contract of this nature, it is reasonable to expect that the agreement is to continue until the parties agree to alter it or circumstances change. In the instant case, it would, having regard to what the plaintiff wrote in the circular which he issued following the meeting at the end of 1985, have been open to regard the arrangement as being for one year only and reviewable at the end of that year. This view would have been supported by subsequent correspondence and the absence of any effort to have the arrangement reduced to writing. Nevertheless, the learned trial judge has found, as a matter of primary fact and on his assessment of the witnesses, that the agreement was a continuing one. It cannot be said that there was no evidence to support such a conclusion.
The remaining ground is one of law and is whether it is open to the Court to give a precise meaning to the word few . There have been many cases in which the full terms of the contract are not set out precisely, but which have been found to be valid binding agreements. Examples are where a term is implied, where there is a formula for determining the apparent uncertainty with precision or where the term is to be determined upon the basis of what is reasonable or by reference to custom or trade usage. Even in some cases, when none of these means can be operated, the agreement will still be upheld where the Court is satisfied that the term which is still to be settled is a subsidiary one and the parties intended to be bound in any event by the main agreement.
The essential question is whether the parties have left over some matter to be determined which can only be determined by themselves. So an agreement to enter into an agreement is not a concluded contract.
In the instant case, the agreement was not capable of being saved by any of the means available to the Court to which I have referred. The parties did not intend to be limited to twenty-five annual licences without any day tickets. Nor could the number be determined by what is reasonable. Reasonableness in law is an expression capable of certainty. But there can be no certainty here. The learned trial judge has held that the ten day tickets would be reasonable. But equally any other number between two and ten would have been said also to have been reasonable. When an apparently uncertain term is saved on the basis of what is reasonable, it is because this is imparting certainty, something which cannot be done by choosing which of several reasonable answers is the correct one. In other words, the Court cannot make the agreement for the parties by saying this is reasonable. In the instant case what the parties have left over, what is meant by the word few , is something which only they can settle. It follows that there was no concluded agreement.
Turning to the question of part performance. it is submitted that the plaintiff permitted the defendant to make greater use of the two beats the use of which was restricted by the 1920 deed. If the defendants records were correct, and the evidence suggested that they may not have been, then he did issue 50 per cent more day tickets in 1986 than in 1985, but as against that the number of season tickets was reduced to twenty-five per cent of those issued in the previous year.
The nature of the doctrine is comprehensively stated in the judgment of Lord Simon of Glaisdale in Steadman v Steadman [1976] AC 536 at p 558 as follows:
… almost from the moment of passing of the Statute of Frauds, it was appreciated that it was being used for a variant of unconscionable dealing, which the statute itself was designed to remedy. A party to an oral contract for the disposition of an interest in land could, despite performance of the reciprocal terms by the other party, by virtue of the statute disclaim liability for his own performance on the ground that the contract had not been in writing. Common law was helpless. But equity, with its purpose of vindicating good faith and with its remedies of injunction and specific performance, could deal with the situation. The Statute of Frauds did not make such contracts void but merely unenforceable; and, if the statute was to be relied on as a defence, it had to be specifically pleaded.
Where, therefore, a party to a contract unenforceable under the Statute of Frauds stood by while the other party acted to his detriment in performance of his own contractual obligations, the first party would be precluded by the Court of Chancery from claiming exoneration, on the ground that the contract was unenforceable, from performance of his reciprocal obligations; and the Court would, if required, decree specific performance of the contract. Equity would not, as it was put, allow the Statute of Frauds to be used as an engine of fraud . This became known as the doctrine of part performance – the part performance being that of the party who had, to the knowledge of the other party, acted to his detriment in carrying out irremediably his own obligations (or some significant part of them) under the otherwise unenforceable contract.
The basis of this principle was that the contract by reason of its part performance passed from being a purely executory contract and might create equities which would justify the Court enforcing it specifically, something it would not have done while it remained purely executory because of the absence of writing to satisfy the statute.
It is not surprising therefore that the older authorities require evidence of part performance before considering the terms of the agreement. In Maddison v Alderson 8 App Cas 467 Lord O Hagan said at p 483:
The alleged agreement regarded an interest in lands and the statute nullified it for the purpose of the action. Per se, it was of no account and could have no value given to it unless, in the first instance, it was evidenced by acts to be accounted the only on the supposition of its existence. The allegation of it could not be made floe subject of judicial consideration as founding any right of suit, in the absence of such acts, satisfactorily ascertained.
Later on p 484 he said:
The previous question as to the sufficiency of the part performance must be settled before the construction and operation of the unwritten contract can be legitimately approached. The principle of the case is, says Sir William Grant, that the act must be of such a nature that, if stated, it would of itself infer the existence of some agreement; and then parol evidence is admitted to show what the agreement is. Then, but not till then.
As regards the nature of the acts which could be relied upon as part performance, the Earl of Selbourne LC, with whom Lord O Hagan and Lord Fitzgerald concurred, said at p 479:
All the authorities show that the acts relied upon as part performance must be unequivocally, and in their own nature, referable to such agreement as that alleged …
At p 485 Lord O Hagan said:
But there is no conflict of judicial opinion, and in mind no ground for reasonable controversy as to the essential character of the act which shall amount to a part performance, in one particular. It must be unequivocal. It must have relation to the one agreement relied upon, and to no other. It must be such, in Lord Hardwicke s words, as could be done with no other view or design than to perform that agreement . It must be sufficient of itself, and without any other information or evidence, to satisfy the Court from the circumstances it has created and the relations it has formed that they are only consistent with the assumption of the existence of a contract the terms of which equity requires, if possible, to be ascertained and enforced.
While these passages appear to indicate that the terms of the contract could be investigated by the Court, it seems that it was generally taken that the acts of part performance had to relate unequivocally to the actual contract. This was disapproved by Andrews LJ in Lowry v Reid [1927] NI 142 who after analysing various passages from the judgments in Maddison v Alderson and having indicated that he was not prepared to follow such strict rules said:
I make no apology for citing, in conclusion, as a correct summary of the law a passage from Fry on Specific Performance, 5th edit 292, where the editor states that the trite principle of the operation of acts of part performance seems only to require that the acts in question be such as must be referred to some contract, and may be referred to the alleged one; that they prove the existence of some contract, and are consistent with the contract alleged.
The learned judge then pointed out that the paragraph from Fry on Specific Performance of which he approved was in the same form as that in the edition published in 1881 which was before the decision in Maddison v Alderson and that that decision necessitated no alteration in the text.
It is still necessary to show that the other party was aware of what was being done whether by standing by and not doing anything or by more active participation. An example of the latter is to be seen in Lowry v Reid where Moore LCJ at p 152 referred to the facts of that case as follows:
In my judgment there is relief for him, because on the facts of the case having given up his own property to his detriment, on the faith of his mother s representations, this is a contract for the specific performance of which he is entitled in equity to a decree to carry those representations into execution, and if he is entitled to such a decree, he is equally entitled to rely on the doctrine of part performance to take the case out of the statute …
It must not be forgotten that ultimately the Court is seeking to ensure that a defendant is not, in relying upon the statute, breaking faith with the plaintiff, not solely by refusing to perform the oral contract, but in the manner contemplated from the passage from the judgment of Lord Simon of Glaisdale to which I have referred.
The doctrine is based upon principles of equity. There are three things to be considered:
(1)The acts on the part of the plaintiff said to have been in part performance or of concluded agreement;
(2)the involvement of the defendant with respect to such acts;
(3)the oral agreement itself.
It is obvious that these considerations only relate to a contract of a type which the courts will decree ought to be specifically performed.
Each of the three elements is essential. In my view, it does not matter in which order they are considered. Ultimately what is essential is that
(1)there was a concluded oral contract;
(2)that the plaintiff acted in such a way that showed an intention to perform that contract;
(3)that the defendant induced such acts or stood by while they were being performed; and
(4)it would be unconscionable and a breach of good faith to allow the defendant to rely upon the terms of the Statute of Frauds to prevent performance of the contract.
If the terms of the contract cannot be considered until the acts of the plaintiff have been found capable of being acts of part performance, there is the possibility, admittedly not a very strong one, that the acts might well have been inconsistent with the terms of a contract and in fact not carried out in pursuance of it, but for a different reason. I do not suggest that in such circumstances, the Court would still accept that there had been part performance. But it does show that it is more logical to find out what the parties agreed since, in the absence of a concluded agreement, there is no point in seeking to find acts of part performance. The Court can only then begin its determination whether the behaviour of the parties justifies the application of the equitable doctrine to modify the legal rule.
In the result it seems to me that while the passage from Fry on Specific Performance cited by Andrews LJ in Lowry v Reid expresses the law, the different approach requires the statement of principle to be altered. It would then read: What is required is that the acts relied upon as being acts of part performance be such that on examination of the contract which has been found to have been concluded and to which they are alleged to refer show an intention to perform that contract.
In all the earlier cases, it was assumed that the acts of part performance must necessarily relate to and affect land: see the judgment of Lord Fitzgerald in Maddison v Alderson at p 491. Nothing which I have said should be taken to suggest a modification of that position.
There is no evidence in the instant case that the plaintiff issued any more or any less licences than he had the previous year nor that the defendant was aware of how many he was issuing. The plaintiff had never complained during the season that too many tickets were being issued by the defendant and in that regard there was nothing different in his behaviour as between 1985 and 1986. The detriment to the plaintiff which is alleged is presumably the lessening in value of the fishery by over-fishing. But the detriment to the plaintiff must be the result of what the plaintiff does with the defendant standing by and not detriment to the plaintiff as a result of what the defendant does with the plaintiff standing by. There was nothing in what was alleged which would in any way be a breaking of faith by the defendant with the plaintiff for the defendant to plead the statute. Even, if there had been a concluded oral agreement as claimed, there were no acts on the part of the plaintiff which show an intention to perform that contract.
I would allow the appeal and refuse the relief sought.
Lonergan v McCartney
[1983] NI 129 (High Court)
The facts are set out in the judgment.
Gibson LJ: This is an action for specific performance of an agreement under which the defendant is alleged to have given the plaintiff an enforceable option to purchase premises situate at 36 Rossmore Avenue, Belfast. The question whether that is so was raised as a preliminary issue upon agreed facts.
The history of the matter is that by agreement dated the 12th May 1975 the defendant let to the plaintiff the premises in question for use only as a builders yard. The lease was due to expire on the 30th April 1981. The annual rent reserved was 1,250, but was stated to be subject to revision on the 1st May 1978. It was a full repairing lease with a prohibition against alterations or improvements without the lessor s consent. There are two further terms to which I must refer. By clause (viii) it was provided this agreement shall incorporate the additional clauses endorsed hereon ; and by clause (xi) any dispute in relation to the interpretation application effect or otherwise arising on foot of the provisions hereof was to be determined by an independent person nominated by the parties or in default by the chairman of the Northern Ireland branch of the Royal Institution of Chartered Surveyors.
The document was on a printed form in which the blanks had been filled in and certain alterations and deletions made. The additional clauses printed in the form lettered (a) and (b) respectively had been deleted. Following that deletion and immediately above the signatures to the lease was the following typed addendum:
It is further agreed between the two parties that the tenant shall have the option to purchase the premises at 1 May 1978 at the then current market value. Such price to be mutually agreed between the tenant and the Landlord s Agent.
A letter dated the 17th October 1977 to the defendant s agents, Messrs Blessington Fair & Company, was in the following terms:
Builders Yard, 36 Rossmore Avenue.
With reference to my rental agreement on the above property which is due for revision on the 1st May 1978. I would like to exercise my option to purchase the above property as agreed.
I look forward to hearing from you in due course.
Yours faithfully, for Deramore Developments Limited E. A. Lonergan
The reply from the landlord s agents dated the 24th October 1977 addressed to the plaintiff noted that he wished to exercise the option and indicated that this had been communicated to the defendant. Since then no relevant step has been taken apart from the issue of these proceedings.
Clause (vii) of the lease provided:
This Agreement shall be binding upon the heirs executors administrators and permitted assigns or other successors in title of the Landlord and Tenant respectively.
Clause (xiv) prohibited the lessee from assigning or parting with possession of the premises without consent such consent not to be unreasonably withheld.
Clearly Deramore Developments Limited were assigns of the plaintiff and I have not been told of any consent to that assignment. But no point has been taken about this and the reply referred to indicates that the defendant s agents regarded the plaintiff and his company as one. Though clause (vii) only purports to bind assigns of the parties and not to confer rights on them, I propose to deal with the matter as though the right to exercise the option did pass to the Company as if it was an assignee of the plaintiff. Further I treat the words I would like to exercise my option as amounting to an actual exercise of the option and not as a mere expression of the plaintiff s state of mind. The option did not specify when the right was to be exercised or in what manner and the latter exercising the option did not indicate the date when the purchase should apply. Though it is a well-established rule that the exercise of options is to be strictly and narrowly construed, I see no ground for questioning the competence of the letter on any such account as I have mentioned.
I turn now to the arbitration clause with a view to deciding whether it is to be regarded as applicable to resolution of the price on exercise of the option followed by lack of agreement as to price. I note that it is limited to cases where any dispute exists and cannot be resolved between the parties . The failure of two persons to agree does not always connote a dispute. There may be a dispute; or, short of that, there may be a difference of opinion; or short of that again there may merely be a lack of agreement. This last state of affairs was the position when the letter of the 24th October 1977 was written; but for present purposes I assume that, as the matter has advanced to the stage of litigation, there is a dispute. Moreover the dispute, if it is to be referable to arbitration under clause (xi), must be a dispute arising on foot of the provisions hereof . Does hereof refer only to the lease or the printed document, or does it extend also to the typed addition? Again, in favour of the plaintiff, I would accept that it applies to the option.
Having decided or assumed all these matters in favour of the plaintiff, the way is now prepared to enable me to deal with the crunch question which is whether the option clause in that context is a contract which is enforceable by the court with or without amendment. The whole history of the litigation on the topic has been so fully examined in the recent case of Sudbrook Trading Estate Limited v Eggleton that I do not consider it is necessary to embark on an independent review of the earlier authorities. The judgment of the Court of Appeal reported at [1981] 3 All ER 105 analysed all the relevant decisions from 1807 to the present day and deduced and applied the consistent judicial opinion that if in an agreement one term (in this case the price) is left to be determined either by agreement of the parties, which is not forthcoming, or by determination of some other person or persons, and the procedure designated has failed or the persons designated have failed to reach a conclusion, the agreement is not enforceable. As against that long-accepted view the majority of the House of Lords decided that though the machinery for fixing the price had proved inoperable it was in the circumstances of the case to be disregarded, thus enabling the court to give effect to the intention of the parties which was that the sale should be carried out at a fair and reasonable price. The question which I have to answer is whether the decision in the House of Lords reported at [1982] 3 All ER 1 has swept away the accumulation of centuries at one fell swoop and imposed a new criterion for deciding such cases; and, if so, what is the test now to be accepted.
In order to appreciate the scope and effect of the decision of the House of Lords it is necessary to set out the important facts. By various leases between the parties the lessee was given a right after part of the term has expired to exercise an option to purchase the lessor s reversion at such price as may be agreed upon by two valuers one to be nominated by the lessor and the other by the lessees or in default of such agreement by an umpire appointed by the said valuers subject to certain conditions which specified precisely the terms and conditions upon which the sale was to be carried out. The option was duly exercised but the lessor refused to nominate a valuer and resisted a suit for specific performance.
The general legal principles applicable prior to the decision of the House of Lords were correctly summarised by Templeman LJ at page 1141 as follows:
The principles which emerge from the authorities may be summarised thus. First, in ascertaining the essential terms of a contract, the court will not substitute machinery of its own for machinery provided by the parties, however defective that machinery may prove to be. Second, where machinery is agreed for the ascertainment of an essential term, then until the agreed machinery has operated successfully, the court will not decree specific performance, since there is not yet any contract to perform. Third, where the operation of the machinery is stultified by the refusal of one of the parties to appoint a valuer or an arbitrator, the court will not by way of partial specific performance, compel him to make an appointment. All three of these principles stem from one central proposition that where the agreement on the face of it is incomplete until something else has been done, whether by further agreement between the parties or by the decision of an arbitrator or valuer, the court is powerless because there is no complete agreement to enforce.
That is to say, the traditional view was that where the parties had taken the trouble to write into the contract a specifically designated way of reaching the purchase price and that method had failed to achieve its purpose, the court could not strike out the machinery provided and direct another way of reaching a conclusion as to the proper price, for this would be to write a new contract for the parties which was not in accordance with their agreement. This refusal to interfere with the agreed terms applied to the exercise of an option contained in a lease as well as to an agreement for sale where there had been no pre-existing relationship between the parties. It applied also even though the failure of the machinery was due to the default of one of the parties, and even though that default amounted to a breach of contract on his part (unless the breach could be remedied by an injunction, as where the owner of the property had refused right of entry to a valuer). It also applied whether or not the contract provided that the price was to be the market value or any similar standard. The designated machinery for reaching that value was treated as incapable of achievement by order of the court save in the manner stipulated.
If the law had stood, therefore, where it did when the Court of Appeal in the Sudbrook case delivered its judgment, the plaintiff in this action would clearly have no case, for the price has not been determined by the persons indicated in the contract.
I now turn to the decision of the House of Lords to see how far it has eroded those long-standing rules which, it would appear, had been widely accepted throughout that part of the world which is governed by the English system of law. I cannot say the common law, for this is a matter of equity; but the established rules which I have set out seem to have been universally accepted not only in the United Kingdom but also in the United States of America and Canada and also in Australia and New Zealand. However that may be, I would, of course, regard myself as bound by the reasoning of the House of Lords.
Lord Diplock started from the proposition that a just and rational system of law ought not to countenance a situation where in the case of such an option clause the grantee s legal rights could be frustrated by the simple expedient of the grantor refusing to appoint a valuer. He pointed to the very detailed provisions in the agreement as to the period during which the option could be exercised, the manner in which it was to be exercised and the other elaborate and carefully drafted provisions which showed clearly that both parties intended the clause to have legal effect. He emphasised that the option when exercised created rights and imposed duties on both parties. There was the immediate obligation to appoint a valuer, and, when appointed, the obligation to instruct him in his duties. By refusing to appoint a valuer the lessor was regarded as having waived his contractual right to have the price assessed by the machinery provided in the lease; and as the lessees had agreed to waive their rights in the matter, the way was open to the court to lay down an alternative procedure for ascertaining the fair and reasonable price, which was the implied purpose of the clause. The intention of the clause was deemed to be to indicate a procedure whereby a fair and reasonable price could be determined and that very end could be accomplished by the appropriate officer of the court fixing the price. Lord Diplock expressed himself as being in agreement with the reasons given by Lord Fraser. Briefly these reasons were that all earlier decisions had erred in invariably treating the machinery for ascertaining the price as an essential part of the agreement. He regarded the valuation of property as nowadays much nearer to a science than heretofore, so that the same result is likely to be achieved regardless of who performs the function of valuing. The proper method for determining in any case whether the agreed machinery could be abandoned was stated at page 10e (and in this Lord Scarman agreed at page 13f) to be whether the mode of ascertaining the price is an essential term of the contract or whether the mode of ascertainment, though indicated in the contract, is subsidiary and non-essential.
How then does the present situation measure up to the standards indicated and the reasons which induced their Lordships to come down against the lessor? I am not sure whether this is a case of any default by the lessor. The letter of the 24th October 1977 is indeterminate on the matter; but at least it is clear that the failure to operate the option clause rests either with the defendant or his agent. Unlike the clause in the Sudbrook case the present option is bare in the extreme. The only things which are specified are the date when the option is to take effect; the price is to be current market value, and it is to be determined by two designated persons, namely the tenant and the landlord s agent. What is to happen if, as would be not unlikely, they were to disagree is not suggested unless one can call in aid the arbitration clause which when printed was not intended to cover such an addendum? The fact that the price is to be current market value would suggest an objective test; but the choice of the lessee and the lessor s agent would point the other way. One of the important considerations in Sudbrook s case was that the valuers and the umpire were not named and were not indicated as having any association with either party. This it could be said that they would all be approaching the matter from the same detached, professional point of view applying the objective standards used by valuers. While the lessor s agent would have that professional knowledge and experience he would be appointed not as an independent person but as the lessor s representative. On the other side would be the lessee who would be unencumbered by either professional skill or knowledge and would be approaching the matter solely with his own interest in view. In Sudbrook s case it was largely the fact that the valuers who were not named would be actuated by no personal motives and guided only by professional, objective standards which enabled the House to say that any other objective method of valuing would be likely to achieve the same result. On this point I would refer to the speech of Lord Diplock at page 6h.
Another factor which helped the members of the House of Lords to reach their conclusion was, as I have indicated, that there were immediately imposed on each party, once the option was exercised, primary obligations to appoint a valuer and to instruct him, so that the option clause did have immediate legal consequence. Not so in this case, for the persons to perform the task are already appointed by the lease and if there should be a failure on their part to discuss price or to agree it, the fault cannot in the absence of evidence be attributed to the defendant. So that may be another distinction between this case and Sudbrook s.
Turning to more general aspects of the case, I confess that a valuer would be faced with considerable problems as to what he was expected to value. The subject of the valuation is stated to be the premises which means the builders yard. It is not, as, for instance, in Sudbrook s case the reversion of the lease. So is the price to be the full value of the premises or only of the landlord s interest? One would think as that is all the landlord could sell that the reversion was what ought to have been intended, but it is not what was stated. Again, assuming it is the reversion only which is to be valued, is one to look at the tenant s interest as being only the residue of his contractual term, or is one to take into account the fact that, as it is a business tenancy, he would have a statutory right of successive renewals? And what about improvements which the plaintiff may have made? Are they to be taken into reckoning in every case or only where made with the lessor s consent, there being a covenant not to make alterations without consent? And in valuing the reversion, what is the rent which the tenant is deemed to be liable to pay, because, as I have pointed out, there was to be a rent revision operative as from the very day when the option to purchase is claimed to apply? And, assuming that the reversion is to be subjected to an extended lease under the Business Tenancies Act, at what rent are the premises to be regarded as subject during the period after expiry of the lease at the fixed rent and any revised rent which would cease to be applicable when the term of the contractual lease expired? For the greater the rent receivable by the lessor the greater will be the value of the reversion; but presumably the longer the term of the tenancy the less will be the value of the reversion.
The conclusion which I have reached is that the present option clause does not, for the reasons I have indicated, fall within the reasoning enunciated in Sudbrook s case and so justify me in saying that the choice of negotiators in this case was not essential to the acceptance of the clause by both parties. Moreover, the whole question of valuation would be so shrouded in doubt and ambiguities that it would be quite inappropriate for the court to seek to enforce the contract which the parties have left so vague. Clearly they had not thought the matter out even in the most fundamental matters as instanced by the fact that there was no agreement between counsel as to whether the clause contemplated sale of the premises with vacant possession or only a sale of the lessor s interest.
I, therefore, give judgment for the defendant, as it was agreed by counsel that my determination of this matter would inevitably resolve the action one way or the other.
Aga Khan v Firestone
[1992] ILRM 31 (High Court)
The facts are set out in the judgment.
Morris J: By order of the High Court made by consent it was ordered that the two above entitled actions be heard together. This order was made because of the fact that the two actions are interrelated one to the other and the reliefs obtained by the plaintiff in one affect the rights of the other.
In the first of the above entitled actions, that is the claim brought by his Highness the Aga Khan (hereinafter referred to as the Aga Khan) he claims that on the 27th November 1989 (not the 28th as stated in the pleadings) his agent Mr Henry Carnegie entered into a contract with Mr and Mrs Firestone s agent Mr Philip Broughton whereby it was agreed that Mr and Mrs Firestone would sell to the Aga Khan for the sum of 14.2 million dollars a stud farm known as Gilltown and certain other lands (hereinafter referred to as Gilltown). The Aga Khan claims that by letter dated 1 December 1989 amended as to p 2 thereof by letter dated 4 December 1989 and signed by the defendants agent a sufficient note or memorandum to satisfy the Statute of Frauds was created. In the circumstances he seeks specific performance of the verbal contract and an injunction to restrain the sale of the lands to Mr Akazawa.
As an alternative to this claim the Aga Khan says that the aforesaid letter of 4 December 1989 constituted an offer to sell lands which offer was accepted by him by way of a letter dated 20 December 1989 written by Mr Carnegie on the Aga Khan s behalf. A further claim was made. This was not pleaded and it emerged at a late stage in the trial. In this claim the Aga Khan claimed that the letter of 4 December 1989 constituted an offer which, he says, he assented to and it was accordingly accepted. This concept of assent arises by virtue of a letter written on behalf of Mr and Mrs Firestone by their agent Mr Broughton dated 22 December 1989 in which the assumption is made by him that the Aga Khan assented to these terms. Objection was not taken to this case being made even though it was not pleaded subject to the comment that it only arose at a very late stage in the trial.
Mr and Mrs Firestone essentially raise three points in their defence. They deny in the first place that there was any agreement reached on 27 November 1989. They say secondly that if there was such an agreement the letter of 4 December 1989 does not constitute a sufficient note or memorandum to satisfy the Statute of Frauds and they say that at no stage was the letter of 4 December 1989 any more than an offer to treat. Thirdly they say that the letter of 4 December 1989 did not constitute an offer to sell but if it did it was at all stages subject to an option in favour of Mr Akazawa. This option has been described as a first refusal option over the lands. This plea is not raised in relation to the Aga Khan s primary claim namely the alleged verbal contract of 27 November 1989. It is only raised in relation to the second claim which is that the letter of 4 December 1989 was an offer which was subsequently accepted by letter of 20 December 1989.
The position of the plaintiff in the second case, Mr Akazawa, is as follows. In his statement of claim he claims against Mr and Mrs Firestone that on or about 3 October 1989 in consideration of his agreeing to buy certain other property (comprising bloodstock and real estate in America) Mr and Mrs Firestone afforded him the right of first refusal to purchase from them the property known as Gilltown on such terms and conditions as in any offer received by them from any other party which Mr and Mrs Firestone were prepared to accept. (The first refusal document was in fact signed on 5 October 1989 but no point arises on the date). Mr Akazawa in his statement of claim goes on to allege that in December of 1989 they, Mr and Mrs Firestone, entered into a contract for the sale of the property with the Aga Khan for the price of 14.2 million dollars and he, Mr Akazawa, on 9 January 1990 executed his option to purchase the lands at that figure. He alleges that on 12 January 1990 the parties executed a contract for the sale and Mr Akazawa duly paid a deposit on that sale. Mr Akazawa alleges a breach of contract on the part of Mr and Mrs Firestone in that they have failed to complete that sale and claims a declaration that in pursuance of the agreement of 3 October 1989 (the first refusal option) he, Mr Akazawa, is entitled to seek specific performance of the agreement and claims an injunction to restrain Mr and Mrs Firestone from disposing of the property by completing the sale with the Aga Khan. In the alternative he claims damages for breach of contract.
The circumstances in which the transaction on 27 November 1989 between the Aga Khan and Mr and Mrs Firestone arose are as follows: It would appear that prior to 1970 the lands which are the subject-matter of these proceedings were owned by the Aga Khan s grandfather. However in 1970 or 1971 the lands were sold to Mr and Mrs Firestone. This left the Aga Khan with two significant holdings in Ireland, namely Sheshoon and Ballymany. In 1975 by reason of the construction of the Naas bypass it became necessary for the Aga Khan to consider the acquisition of additional land in Ireland. He had a particular affection for the lands at Gilltown and was particularly interested in acquiring them. He became aware of the fact that Mr and Mrs Firestone were contemplating selling Gilltown and accordingly directed his lawyer Mr Carnegie to open negotiations for their acquisition. These negotiations came to nothing. Again in 1987 there were new negotiations. These progressed a stage further and indeed progressed to the stage where a contract for the sale was drawn up by the lawyers for the respective parties and was signed by the Aga Khan. However at that stage for his own reasons Mr Firestone did not wish to proceed with the sale and the sale fell through. That contract would have envisaged the acquisition of not only the lands but also the bloodstock on the lands. In the process of negotiating that sale and carrying it through to the stage of contract every detail of the contract was examined and agreed to by the American lawyers acting on behalf of the parties and also the Irish lawyers.
These two sets of negotiations having come to nought the matter lay dormant until the month of September 1989. At that stage Mr Carnegie received a call from Mr Broughton, an American attorney acting on behalf of Mr and Mrs Firestone and as a result of that call Mr Carnegie returned the call to Mr Broughton. Mr Carnegie was aware at that time, as was the Aga Khan, of rumours circulating that Gilltown might be coming onto the market. Contact was made between the two lawyers and Mr Carnegie was informed by Mr Broughton that the Firestones were contemplating selling Gilltown. At the time it had not been decided whether the bloodstock was to be included in the sale and he, Mr Carnegie, was invited to re-open negotiations for the acquisition of the land. He informed Mr Broughton that the Aga Khan wanted to be in at the beginning of the negotiations . He did not want to be involved in a bidding war but that he was prepared to buy as much bloodstock as was necessary to ensure the acquisition of the land. The lawyers agreed eventually to meet at Mr Broughton s office on 16 October 1989. This meeting was altered to a breakfast meeting on 16 October 1989 which in fact took place in the Plaza Hotel in New York. At this meeting Mr Broughton indicated that the bloodstock would not be included in the transaction and the price for the land was to be around 15,000,000 dollars . He also indicated that two houses, namely the Muldoon s house and the Donnelly s house, would be excluded from the sale. Mr Carnegie confirmed that all the above matters were acceptable to the Aga Khan but stressed that he did not want to be one of a number of persons in negotiation for the acquisition of the land. Nothing came of that meeting save that it was pointed out that certain personal assets were not to be included in the sale such as the Waterford glass chandelier and art works which were of particular interest to the Firestone family. This did not present any problem as they had been identified during the course of the previous negotiations and were known to both parties.
The next step in the negotiations was a telephone call from Mr Carnegie to Mr Broughton who, having ascertained the price of land in Ireland, offered to begin to talk at the level of 11,000,000 dollars . Also in that conversation Mr Carnegie brought to Mr Broughton s attention the fact that there were rumours that Japanese interests had purchased certain lands which Mr and Mrs Firestone had owned in America known as the Big Sink Farm and he asked Mr Broughton to confirm that the Japanese had not in fact bought Gilltown. Mr Broughton confirmed that they had not bought Gilltown but said that they had purchased certain bloodstock in Ireland. There was no mention of a right of first refusal in favour of the Japanese interest at that time.
At the time of this telephone conversation which would have been around 18 or 20 October 1989 both lawyers knew that they would be meeting on 4 November 1989 at Gulf Stream Park, a racecourse in Florida, at which the Breeders Cup Racemeeting was to be held on that date. They agreed to see each other on that occasion. They did in fact meet as did Mr Firestone and the Aga Khan. At the brief meeting between Mr Firestone and the Aga Khan I accept that Mr Firestone said words to the effect, to the Aga Khan, that all things being equal I would like you to have the property … Another brief meeting took place between Mr Carnegie and Mr Broughton when vague arrangements were made to discuss the matter further but no confirmed appointment was made.
The next step in the negotiations was that shortly before 17 November Mr Carnegie again telephoned Mr Broughton and from Mr Broughton s secretary got the number at which he could be contacted in Connecticut and he called him there immediately prior to Thanksgiving. In the course of that conversation Mr Carnegie became aware that there was Japanese interest in the lands but so far no offer had been made. Arrangements were made between the two lawyers to meet at Mr Broughton s office on 27 November 1989. This is the meeting at which the discussion took place at which it is alleged by the Aga Khan that an oral contract was made and it is alleged by Mr Firestone that no more than discussions were held.
The foregoing constitutes no more than a broad summary of the way in which the two lawyers came to meet on 27 November 1989 in Mr Broughton s office. Mr Broughton in his evidence differs somewhat in his recollection of the events but I do not believe that anything material turns on the differences of recollection and I think that the only material fact that emerges from the foregoing is the fact that in the course of the prior negotiations for the acquisition of the land both of the lawyers became thoroughly familiar with all the circumstances surrounding the transaction and had in fact negotiated a contract for the sale inter alia of these lands and both they and the parties Irish solicitors had worked through this contract line by line and agreed it. There were therefore no pitfalls or problems in the way of entering into a new contract.
The evidence of what transpired at the meeting of 27 November 1989 is given firstly by Mr Carnegie, secondly by Mr Broughton and corroborated to a greater or lesser extent by the Aga Khan and Mr Firestone. Mr Carnegie says that having exchanged preliminary remarks he, Mr Carnegie, offered 13,000,000 dollars for the property. At that stage for the first time Mr Broughton indicated that when the Japanese interest had purchased the bloodstock on Gilltown they had also been given some form of first refusal option over the lands. He indicated that the nature of the option was such that an offer in writing would trigger the first refusal option. However Mr Broughton said that he felt that an offer of 14,000,000 dollars was what would be required to buy the lands. However for this sum the Aga Khan would also be acquiring Mr Firestone s shareholding in Goffs Bloodstock Sales because Mr Firestone was severing his connection with Ireland and was disposing of this shareholding also. Mr Carnegie says that Mr Broughton also indicated that the Muldoon and Donnelly houses would be part of the transaction and would be included in the deal. At that stage Mr Carnegie says that he indicated that he was no longer prepared to be one of a number of people negotiating for this property and that he would require Mr Broughton to ascertain from Mr Firestone exactly the terms upon which the property could be bought and he required a description of what was included in the sale. Mr Carnegie says that he asked Mr Broughton to find out exactly what Mr Firestone s terms were and that when he, Mr Carnegie, knew these terms, he would get instructions from the Aga Khan and let Mr Broughton know within one week if the Aga Khan was interested in acquiring the property on those terms. Mr Broughton agreed to contact Mr Firestone on the phone there and then and Mr Carnegie says that this he duly did. He says that Mr Broughton left his office for a period of approximately 15 to 20 minutes and then came back into the office and said that he had been speaking to Mr Firestone and indicated that Mr Firestone was prepared to sell the property to the Aga Khan for the sum of 14.2 million dollars and this would include the Gilltown lands, the Martin Farm and the two houses and would also include the personal property with the exception of items which were to be agreed to which were of personal interest to Mr and Mrs Firestone. He also said that it would be necessary for the Aga Khan to take over the leases of certain equipment on the lands which included the station wagon and the computer and he said that vacant possession would be given but that all moneys that had to be paid by Mr and Mrs Firestone to the employees terminating their employment would be chargeable against the Aga Khan and that the shareholding in Goffs held by Mr Firestone would be included in the sale. He said that the agreement was to be closed on 31 January 1990 insofar as the lands were concerned and the end of March insofar as the transfer of the shares in Goffs Bloodstock Sales was concerned. Mr Carnegie says that Mr Broughton indicated to him that Mr Firestone had placed a time limit of one hour within which the Aga Khan could accept the deal in that form.
Mr Carnegie says that having obtained the details as set out above he then asked for permission to telephone the Aga Khan. He says that he got this permission and he was brought from the main office into a conference room where he used the telephone. He says he was given a dial code by Mr Broughton and this enabled him to get an outside line. He says that he spoke to the Aga Khan in France, that he told him of the conditions as outlined by Mr Broughton and told the Aga Khan that he had one hour within which to make up his mind. He says that the Aga Khan instructed him and authorized him there and then to accept the contract as it stood. He was told not to attempt to negotiate but simply to accept. He says that he returned to Mr Broughton and he accepted the deal as set out above. He asked Mr Broughton to confirm the transaction in writing and the respective lawyers agreed that they would contact Irish lawyers for the purpose of preparing the necessary documentation. During the previous negotiations the Aga Khan had used the services of Messrs JG O Connor & Co, solicitors and Mr and Mrs Firestone had used the services of Messrs A & L Goodbody. This concluded the transaction.
In his evidence Mr Broughton dealt with his recollection of the various steps which led up to the meeting of 27 November 1989 in his office. I do not think that they materially conflict with the recollection of Mr Carnegie. They vary in detail. However I formed the opinion that Mr Broughton s recollection was not as clear as Mr Carnegie s and insofar as any difference emerges in their respective accounts I prefer Mr Carnegie s account.
With regard to the meeting in Mr Broughton s office of 27 November 1989 Mr Broughton agrees that it did in fact take place. He says that it happened at approximately 3 pm. He is in agreement that discussions took place and they covered matters such as the termination of the employment of the employees, vacant possession of the property, the fact that the Goffs shares would be included in the transaction and broadly his recollection of the meeting does not conflict with Mr Carnegie s until one comes to the question of price. Mr Broughton s recollection is that at no stage did he Mr Broughton state a specific price at which the property would be brought. He says that his information at that time was that Mr Akazawa had bid 14,000,000 dollars for the property and that he had been told that Mr Akazawa would not go any higher than that. He, Mr Broughton, suggested to Mr Carnegie that he should put some decent amount over the 14,000,000 dollars such as 14.2 million dollars to Mr Firestone and that it might be acceptable to Mr Firestone . He says that at that stage he had never discussed with Mr Firestone directly what price he would take and made it clear that the 14.2 million dollars was no more than a suggestion on his part as to what he thought the figure might be that Mr Firestone would take. The second head-on conflict of fact which emerges between the two lawyers is the question of telephone calls during that meeting. Mr Broughton denies categorically that he telephoned Mr Firestone during the meeting and insofar as Mr Carnegie making a telephone call is concerned he said that he did not recall it happening. Not only did Mr Broughton deny that any such call was made, in the terms set out above, but tendered as evidence a computer read-out created by his automatic telephone system which recorded telephone calls made from his office and purported to demonstrate with the aid of these read outs that no such call was made to the Aga Khan from his office on that day.
The significance of this evidence is that if no such telephone call was made then clearly there cannot have been an acceptance of the terms by the Aga Khan and accordingly Mr Broughton s version of what occurred at that meeting would be correct namely that the parties did no more than have a broad discussion as to the outline terms upon which the property might be bought.
The Aga Khan gave evidence of receiving a telephone call from Mr Carnegie on 27 November 1989 at which, he says, Mr Carnegie recounted to him the exact terms upon which the property could be bought and informed him of the fact that he had one hour within which to accept. He said that he specifically instructed Mr Carnegie to accept the terms as they stood and directed him to do so. In his evidence he fully supported the evidence of Mr Carnegie. Mr Firestone gave evidence on this point and I am bound to say that his evidence on this, as on other aspects of the case, was far from clear or convincing. He was unable to confirm that he knew that a meeting was taking place on 27 November 1989 between his lawyer and Mr Carnegie but did say that any time such a meeting took place he would be aware of it. He was asked if he recollected being telephoned and he said that he did not recall speaking to Mr Broughton at that meeting at all. I feel that my reaction to Mr Firestone s evidence on this aspect of the case can be best left by saying that I do not consider that Mr Broughton is able to look to it in corroboration of his own account. On the other hand I feel that the Aga Khan s evidence was entirely reliable and acceptable.
With regard to the print-outs delivered by the computerised telephone it emerged during the course of cross-examination that the print-outs depend for their validity upon the person placing the call, whether the caller or the telephone operator, entering the appropriate code for the client so that the call will be charged to the client s account and that it is only if this occurs that the call will show on the account. In the course of cross-examination it was demonstrated that work done for Mr Firestone on the telephone in a number of other instances failed to find its way onto Mr Firestone s account. I am in no way surprised that given that Mr Carnegie was placing the call that it was not charged to Mr Firestone s account. Moreover it transpired that the system in Mr Broughton s office was that large clients such as Mr Firestone might have a number of different accounts chargeable to different companies or indeed even different aspects of their business. It might well be therefore that a transaction for Mr Firestone relevant to Gilltown might find its way onto another account payable by Mr Firestone.
I find no corrobation whatever for Mr Broughton s evidence of the fact that the telephone call to the Aga Khan does not appear on the telephone computer read out tendered to the court.
In his cross-examination, Mr Broughton was pressed on a number of specific points by counsel for the Aga Khan. Specifically when asked if he was positively saying that no such telephone call was made he replied I don t deny it. I don t recall it . Again when he was asked if Mr Carnegie was shown into a private conference room and left alone there he replied I don t recall it happening. It could well have happened. I don t recall it .
Mr Broughton remained adamant that at no stage during the meeting did he telephone Mr Firestone. He says that having reviewed his documentation he believes that Mr Firestone telephoned him at 9.30 on the evening of the meeting and that he, Mr Broughton had not yet arrived home and that he called Mr Firestone back on his arrival home.
On this clear issue of fact I have formed the view that I should prefer the evidence of Mr Carnegie corroborated by the evidence of the Aga Khan. I find Mr Carnegie s evidence to be clear and acceptable. During the course of the hearing and while Mr Carnegie was under cross-examination two minor issues of fact arose. Mr Carnegie was challenged on these two issues. He never varied on the account which he gave and in each of these issues it was subsequently confirmed that he was accurate. I would be satisfied to accept his evidence alone. Confirmed, as it is, by the evidence of the Aga Khan, which again I found to be entirely accurate and correct, I have no doubt that terms were offered to Mr Carnegie by Mr Broughton which he, having received the Aga Khan s instructions, accepted. I am therefore satisfied that a verbal contract for the sale of the lands and the shares was entered into in Mr Broughton s office on 27 November 1989.
It is next necessary to determine the circumstances in which the letter of 4 December 1989 came into existence.
Mr Carnegie has said that at the conclusion of the agreement he requested Mr Broughton to write to him setting out the terms of the agreement. He says that after he had returned to France and when no letter confirming the agreement had arrived he telephoned Mr Broughton on either 29 or 30 November and was assured by Mr Broughton that he had drafted a document which he had submitted to Mr Firestone and that on receipt of it from Mr Firestone he would fax it to Mr Carnegie. Mr Carnegie said that on the following Monday morning he received a letter by fax dated 1 December 1989. He says that on reading the letter he realized that it did not contain any mention of the shares in Goffs Bloodstock Sales and during that afternoon he telephoned Mr Broughton who had apparently also observed the omission and agreed to send a new second page. This page duly arrived dated 4 December 1989 which in fact contained the reference to the shares.
Mr Broughton s recollection of what occurred is different. He said that at the end of the meeting Mr Carnegie had left to take up various issues with his client and that he was to go back to Mr Firestone to talk to him about the price of 14.2 million dollars. The next thing that happened, as he recollects it, was that Mr Carnegie telephoned him and asked him to write down in a letter the various points that they had discussed at the meeting so that he could show the points to his client and that as a result of that he Mr Broughton wrote the letter on the 1st December. He says that he did this only to identify the points that had been discussed at the meeting which he thinks Mr Firestone would probably have accepted if the Aga Khan was agreeable to them.
On this issue I prefer the evidence of Mr Carnegie. I think it is singularly unlikely that a lawyer of Mr Carnegie s status would require Mr Broughton to compile something in the nature of a minute of their meeting. I am of the opinion that the letter was of far more significance than attributed to it by Mr Broughton. If it were merely a minute of the meeting it would have been entirely unnecessary to add the last paragraph which was to the effect that Mr Firestone had read and approved the transaction as outlined in the letter. I therefore hold as a fact that it was agreed between the lawyers on 27 November 1989 that a letter would be sent detailing the terms discussed and not, as Mr Broughton says, requested in a telephone call subsequent to the meeting.
Counsel for Mr and Mrs Firestone in disputing that any such agreement was made on 27 November 1989 draws attention to a number of points relating to the conduct of Mr Carnegie after that date which he says are inconsistent with such an agreement having been reached. He points out, for instance, that one would normally expect a lawyer in Mr Carnegie s position to require another lawyer to, there and then, prepare and sign a document to demonstrate that an agreement had in fact been reached which he could show to his client to confirm that there was such an agreement. He points out that at a time when the existence of this contract was being denied, never at any stage did Mr Carnegie draw attention to the fact that there was a contract in existence but on the contrary made an offer to increase the consideration for the property and offered to enter into fresh and renewed negotiations. He draws attention to the fact that while Mr Carnegie claims that he made a note of the terms of the contract when they were being given to him, which he says he read over on the phone to the Aga Khan, he never even had these rough notes initialled by Mr Broughton nor, he points out, did he discover them in his affidavit of discovery as a document which had been in his possession but which he had destroyed. I recognise the strength of these points. However in the final analysis one has to weigh these points against the witnesses and the manner in which they gave their evidence and the degree to which he was contradicted and his general demeanour in the witness-box. It is my belief that Mr Carnegie and Mr Broughton conducted their business on the basis of two colleagues who had a genuine rapport and trust in one another. At this meeting they had achieved an agreement which at least had brought to an end, by the mutual consent of their clients confirmed over the telephone, a period of fencing and uncertainty as to whether or not there was going to be a sale. Given that they had at last reached a consensus it would in my view be an unnecessary irritant to require that any document be executed at that time by Mr Broughton. I have had, during the currency of the case, an insight into the informality with which transactions of this nature are conducted, which I shall be referring to further when I come to deal with the case of Mr Akazawa and his transaction with Mr Firestone, and viewed in this light I would see nothing strange in not requiring a document confirming the agreement at that time. I accept that it had been agreed, between the parties, at the conclusion of the meeting that a letter of confirmation would be transmitted.
With regard to the subsequent behaviour of Mr Carnegie in not standing on his rights by demanding the performance of the verbal agreement when it was in the process of collapsing, he has given the reply that he was well aware that the Aga Khan wished to acquire Gilltown and not, as he put it, a law suit and for him at that stage to have dug in his heels and stand on his verbal agreement would, in his view, have inevitably resulted in litigation. I accept this as an entirely reasonable approach. I can readily appreciate that if an increase in the purchase price would have resulted in the acquisition of the property then that was, to his client, infinitely preferable than protracted litigation and it was the course favoured by the Aga Khan. I see nothing inconsistent in this. Weighing the clear wish of the Aga Khan to acquire the property against his ability to pay an increased price I would accept that Mr Carnegie in offering to renegotiate and increase the consideration was acting in accordance with his client s wishes.
With regard to the destruction of his notes and the fact that they do not appear in the discovery, I am informed by counsel and it is agreed, that prior to the commencement of the hearing it was brought to the defendants attention that such notes did at one time exist but that they had been destroyed and because they were no longer in existence they had been overlooked when the affidavit of discovery was prepared. An offer was made on behalf of the Aga Khan to file a supplemental affidavit of discovery. However Mr Firestone s advisers did not require this and accepted the informal notification. In my opinion the fact that these notes were identified as having existed before the hearing commenced and before they materialised as an issue in the case confirms in my mind the fact that Mr Carngegie did have such notes and I accept that he destroyed them as being of no value once he received from Mr Broughton his letter of 4 December 1989.
Accordingly I am of the opinion that the parties did enter into a verbal contract as alleged.
The next issue then to determine is whether the letter of 4 December 1989 constitutes a sufficient note or memorandum to satisfy the Statute of Frauds.
I have read the authorities upon which Keane J based his judgment in Mulhall v Haren [1981] IR 364 and I have read Keane J s judgment in which he comprehensively reviews the authorities and I am in complete agreement with the views which he expresses in the course of his judgment and in particular the conclusions which he says emerge from the authorities. At p 391 he says:
From this analysis of the authorities, I think that the following conclusions emerge:
1.A memorandum or note cannot satisfy the Statute of Frauds if, when it is read alone or with other documents which can properly be read with it, it does not contain a recognition, express or implied, of the existence of the oral contract sought to be enforced …
While this conclusion has never been expressly approved by the Supreme Court I believe that the decision has at least the tacit approval of the court as a result of the comments made in Carthy v O Neill [1981] ILRM 443.
That being so it is necessary to consider whether the letter not only contains the terms agreed but also recognizes the existence of the oral contract.
With regard to the first of these provisions and given that I have held as a matter of fact that an agreement was reached, as opposed to a mere discussion of the terms, it appears to me that there can be no dispute but that the letter reflects in full the contract.
With regard to the second of these two points, counsel for Mr Firestone has argued that the wording and phraseology of the letter is such that it would be singularly inappropriate to regard it as recognizing the existence of the agreement. What he argues in the first place is that a letter acknowledging a contract would not use words such as would and would not refer to discussions but would refer to a deal or agreement or contract . He says in effect that what this letter is is no more than an offer to treat and that in having it written Mr Firestone was doing no more than doing what he was perfectly entitled to do, namely achieve the maximum price for his property. I pause there to comment that criticism has been levelled at Mr Firestone for the manner in which he acted in relation to this transaction. I see nothing whatsoever wrong with the way in which Mr Firestone carried on his negotiations. He had an extremely valuable property and two extremely wealthy gentlemen interested in acquiring it. It would in my view have been an act of gross folly for him to do otherwise than to attempt to achieve the maximum price by playing one against the other.
In answer to the arguments addressed by counsel for Mr Firestone, counsel for the Aga Khan points out what are, to my mind, two features of the letter which clearly recognize the existence of the contract. The first and of lesser importance, is the use of words confirm and terms in the first paragraph. In my opinion unless there was a concluded contract there would be nothing to confirm. Moreover the use of the words terms is singularly inappropriate if what was being discussed were no more than proposals.
Coupled with this, and of far more importance are, in the concluding paragraph, the words Mr Firestone has read and approved the transaction as outlined above . The words transaction would in my view be quite inappropriate if all that had been discussed was the possibility of an agreement. Transaction can only relate to a concluded and agreed deal. If it were a matter still to be negotiated it could not, in my opinion, be the transaction. It could be no more than a transaction.
While obviously it is undesirable to paraphrase a document of this nature I am left in no doubt on reading it that it does recognize the existence of the prior verbal contract and does accordingly satisfy the Statute of Frauds in the respect identified by Keane J in Mulhall v Haren.
Counsel for Mr Firestone criticised that document on a number of further grounds and I turn now to deal with these:
(1)He makes the point that if there be a contract then it is defective in that the document does not contain all the essential provisions of the contract. He points to the fact that on previous occasions when the parties had negotiated and almost concluded an agreement express provision was made for obtaining permission under the Mergers, Takeovers and Monopolies (Control) Act 1978 which would have been necessary by reason of the Aga Khan s holdings in Ireland. Moreover he points out that the necessary approval under s 45 of the Land Act 1965 would have been required and was not provided for in the agreement. He argues that these were manifestly required in a contract such as this. I have the evidence of Mr Philip O Connor who is an experienced conveyancing solicitor whose qualifications in this regard have not been brought into question. He has given evidence, in relation to this contract, which I accept. In summary he has informed the court that the contract, as evidenced by the letter of 4 December 1989, was in a form which was possible to carry through. He has confirmed, as an experienced conveyancing solicitor, that the fundamental terms of the contract existed and while procedural matters would have to be followed the contract could nevertheless be carried through to completion. He contrasted the present contract with the previous contract and expressed the view that in his opinion Land Act consent and ministerial permission would be forthcoming. In summary I accept the evidence of Mr O Connor that the performance of the contract as set out in the letter was a practical proposition and, short though it was, it contained all the necessary elements of a contract.
(2)Counsel for Mr and Mrs Firestone next argues that the circumstances of the case are such that there clearly was an implied term of the contract that the transaction would be carried through by means of a formal contract to be executed by the parties. More specifically that such a term should be implied into the contract on the basis of the principle in The Moorcock (1889) 14 PD 64. He is in effect saying, as Bowen LJ said in The Moorcock, that I should presume that it was the intention of the parties that this provision should be in the contract with the object of giving the transaction such efficacy as both parties must have intended that at all events it should have . In reply counsel for the Aga Khan has pointed out, in my view correctly, that the effect of making such an assumption or implying the existence of such a term would be to destroy the contract and far from giving efficacy to it, would in effect prevent its operation. I am satisfied that The Moorcock principle only applies where, through mischance, such a term as is sought to be implied has been omitted from the contract and is necessary in order to give the contract efficacy and to prevent the failure of the contract. To imply such a term into this contract would have the contrary effect. It would be to defeat it. It cannot in my view be logical to ask the court to imply into a contract a term so as to give it business efficacy when it would have the contrary effect. I do not accept this argument.
(3)Finally on this aspect of the case counsel for Mr and Mrs Firestone has submitted that the note or memorandum does not accurately reflect the contract made because in fact there was not one but two contracts made. He argues that one contract was for the sale of the lands at Gilltown to be completed on one date and the second contract was for the sale of Goffs shares to be completed on a subsequent date. He argues that not all the consideration reflected in the letter related to the lands but a significant part thereof related to the Goffs shares and therefore the document is defective in not setting out this allocation. In my view this argument does not accurately reflect the transaction between the parties. From the point of view of Mr and Mrs Firestone they were divesting themselves of their assets in Ireland as they had lost interest in their Irish enterprise. They were selling off the lands, the personal property and their Goffs shares. The shares were no more than one element in the sale. They were in no way identified as a separate aspect of the sale. They were in my opinion being added to the sale of Gilltown in the same way as any of the chattels on the property. It is true that in the discussion between the lawyers a separate valuation was placed on the shares but in my opinion this was only done because there was a separate closing date (which is referred to in the letter of 4 December) but the fact that part of the overall consideration was being allocated to the shares does not in my opinion in any way take from the overall contract which was being made between the parties. I view the shares in the same light as one would view the sale of a house and contents. The fact that a sum may be allocated towards the value of the contents in no way, in my opinion, takes from the overall contract made between the parties. I accept the evidence of Mr Carnegie in relation to this part of the transaction. I am satisfied that at no stage was the allocation of this sum of 1.2 million dollars towards the Goffs shares a term of the contract. Mr Carnegie describes how he and Mr Broughton, between themselves and for the purposes of the mechanics of the transaction allocated this sum towards the Goffs shares. I accept the evidence of Mr Carnegie that the Aga Khan would have been willing to pay the full amount of the purchase price of 14.2 million dollars for the land alone. The allocation of a sum towards the shares was not a matter material to the contract.
I am accordingly of opinion that the letter of 4 December 1989 constitutes a valid note or memorandum to satisfy the Statute of Frauds and accordingly there existed a valid and enforceable contract between the Aga Khan and Mr and Mrs Firestone as of 4 December 1989.
Turning next to consider Mr Akazawa s position in this transaction. Mr Akazawa is, like the Aga Khan and Mr Firestone, an immensely wealthy gentleman. He has extensive business interests in Japan. Mr Akazawa s father became interested in bloodstock about 25 or 30 years ago and Mr Akazawa personally became involved in bloodstock about two or three years ago. Through Mr Muldoon, Mr Firestone s general manager and partner in some enterprises, Mr Akazawa made contact with Mr Firestone s bloodstock operations and in September of 1989 Mr Muldoon visited Mr Akazawa in Japan. Discussions followed between them concerning the possible sale by Mr Firestone of his bloodstock operation in Europe which would have included Gilltown. These discussions developed into negotiations and ultimately culminated in a meeting which took place on 5 October 1989 in Tokyo in the Okura Hotel. Present at that meeting were Mr Firestone, Mr Broughton, Mr Conor Donnolly who is an associate of Mr Firestone and Mr Muldoon. Mr Akazawa senior and junior were also in attendance. The meeting took place in Mr Firestone s room and it appears from the evidence of Mr Akazawa that documents which had been prepared in New York in Mr Broughton s office were faxed out to Tokyo and brought to Mr Firestone s room. These documents were executed by Mr Akazawa and they were identified as being the agreement for the purchase of Big Sink Farm, American bloodstock and Irish bloodstock. At the same time Mr Akazawa and Mr Firestone executed a first refusal option on the lands at Gilltown. By the terms of that document Mr and Mrs Firestone agreed that if they should receive an offer for Gilltown on or before 20 December 1989, they would notify Mr Akazawa in writing and he would have first refusal to purchase the property on the same terms as contained in the offer. Mr Akazawa being notified of an offer of 14.2 million dollars by the Aga Khan, on 8 January 1990 purported to exercise his rights of first refusal and on the following day entered into a contract with Mr and Mrs Firestone for the sale to him of Gilltown for 14.2 million dollars. It is this contract in respect of which he seeks specific performance.
The issue that arises between the parties in these circumstances can be summarised as follows. It is contended by counsel for Mr Akazawa that this first refusal agreement is a valid and binding contract which was entered into on 5 October 1989 and accordingly Mr and Mrs Firestone were not free to negotiate with or enter into a contract with the Aga Khan on 27 November 1989 in respect of the lands of Gilltown as, it is argued, the contract of 5 October 1989 takes priority over any such contract.
The first issue that develops in relation to the agreement of 5 October 1989 is whether the agreement is supported by consideration or is purely a voluntary and unenforceable agreement. In these circumstances and in order to determine this issue it is necessary to consider in more detail the circumstances in which the document of 5 October 1989 came into existence and was executed.
It would appear that the central figure in all of these negotiations with Mr Akazawa was Mr Muldoon. His evidence would, in my opinion, have been of the utmost importance. However he has not given evidence. That being so one has to rely on Mr Akazawa and on Mr Firestone for a description of what transpired at the meeting in Tokyo and prior thereto. Mr Akazawa appears to have approached this transaction with the most extraordinary degree of trust. He attended at the meeting on 5 October 1989 for the purpose of acquiring property and bloodstock to the value of 19.1 million dollars. Insofar as legal advice is concerned he had a few conversations with his lawyer but he was not deeply involved in the transaction. He had not, insofar as he could remember, ever seen any previous drafts of any of the contracts he was proposing to execute. He had not carried out any inspection of the bloodstock he was acquiring. He had not had any veterinary inspection. He accepted Mr Muldoon s word and depended upon it that everything was okay . So far as we know his only knowledge of the Big Sink Farm was that he had visited it. He had not met Mr Firestone or Mr Broughton before the meeting of 5 October 1989. He depended entirely on Mr Muldoon who he knew as a partner of Mr Firestone. He accepted the contracts and, insofar as he could remember, he made no changes to any of them but signed them without amendment. He could not remember having received any legal advice in relation to the contracts.
It was in those circumstances that the first refusal document came to be signed. When Mr Akazawa was asked about how this document came about he said that he asked Mr Firestone for first refusal on Gilltown because he was purchasing the bloodstock on the farm and to have moved the bloodstock would have been inconvenient. He would have had to find an alternative farm. At no stage did Mr Akazawa ever suggest that the acquisition of the American farm or the bloodstock was in any way conditional upon his receiving this right of first refusal. He did make the case quite clearly that the acquisition of the farm was of importance to him and in fact he mentioned it as being crucial but nowhere in his evidence can I find any suggestion that the balance of the sale was contingent on this right. On the contrary if one turns to consider Mr Firestone s evidence, it would appear that the contrary was the case. It was suggested to Mr Firestone as follows I suggest to you that the agreement on the first refusal formed part and parcel of the deal as a whole. Mr Akazawa was keen to preserve an option over Gilltown, to get Gilltown property if he was going to buy the European bloodstock .
Mr Firestone did not agree. He said I don t recall that he had. We had given him a right of first refusal. It wasn t conditional. He had asked for the right of first refusal .
Later in his evidence Mr Firestone makes it perfectly clear that Mr Akazawa was a good customer and a friend of his. He gave him the first refusal not because of any legal obligation but because he liked doing business with him and he hoped to do business with him in the future. This in fact proved to be correct because subsequently he sold further livestock to Mr Akazawa. I have come to the conclusion that the document of first refusal is unsupported by any consideration, that it was a voluntary document given by Mr Firestone in the hope of cementing business relationships. Nowhere in the evidence can I find any suggestion of it forming part of the overall deal notwithstanding the fact that it was signed contemporaneously with the other three contracts. I believe Mr Akazawa s approach to the entire transaction to be inconsistent with requiring the granting of the right of first refusal as a condition to the execution of the other contracts.
Accordingly it follows that the agreement being a voluntary agreement is unenforceable.
A further point arises in relation to this document. It is submitted by counsel for the Aga Khan that the right of first refusal acquired by Mr Akazawa on 5 October 1989 was a personal obligation imposed on Mr and Mrs Firestone and undertaken by them. It is submitted that this obligation did not constitute an interest in the lands the subject-matter of these proceedings such as would affect Mr and Mrs Firestone s capacity to enter into a contract for the sale of the lands to a third party. It is submitted that whilst such a contract might expose Mr and Mrs Firestone to a claim for damages for breach of contract or some similar relief it did not represent an impediment to his entering into a valid contract for the sale of the lands.
In support of this argument counsel has referred to Manchester Ship Canal Company v Manchester Racecourse Company [1901] 2 Ch 37 in which the Court of appeal had to consider this among other points. In that case an agreement between a racecourse company and a canal company contained a clause that if the racecourse should be at any time proposed to be used for dock purposes the racecourse company should give the canal company the first refusal therefor. The relevant part of the clause in question read as follows:
If and whenever the lands and hereditaments belonging to the racecourse company, and now used as a racecourse, shall cease to be used as a racecourse or should be aforesaid lands and hereditaments be at any time proposed to be used for dock purposes, then and in either of such cases the racecourse company shall give to the canal company the first refusal of the aforesaid lands and hereditaments en bloc …
In dealing with this clause the judgment of the court delivered by Vaughan Williams LJ stated:
Then it was objected that clause 3 could not be enforced against the Trafford Park Company who are only alienees on the land. Farwell J thought that clause 3 created an interest in land and that this objection could be thus answered. We do not think that clause 3 does create an interest in land …
That judgment was referred to in Murray v Two Strokes Ltd [1973] 3 All ER 357. In the course of his judgment Goulding J said at p 361:
Nonetheless I have there a judgment of the court not merely an observation of an individual Lord Justice, overruling no less a master of property than Sir George Farwell, and delivered, as the passage which I have read above shows, after consideration of the authorities. The judgment was also a reserved judgment. It has not been suggested that there is any subsequent authority or statute which weakens the force of what Vaughan Williams LJ said, nor am I able on any material point to distinguish the right given in the 1960 agreement from the right of first refusal which the Manchester Ship Canal Co had. I must accordingly hold that the contractual rights of the defendant company do not constitute an interest in land.
Based on the foregoing authorities I am of the opinion that the most that Mr Akazawa could have acquired in this case was no more than a contract binding Mr and Mrs Firestone which required them to give him an option to purchase the land in accordance with the agreement. It did not constitute an interest in the land.
A number of additional arguments were addressed to me on this aspect of the case which I do not need to consider having regard to my findings above.
On behalf of Mr Akazawa, counsel assembled two arguments in support of Mr Akazawa s contract of 9 January 1990 executed pursuant to the rights which he considered he had under the first refusal option. However, both of these arguments rely for their validity on the assumption that the first refusal contract of 5 October is a valid and binding contract supported by consideration. Having found that it is not, I find it unnecessary to deal with the first two arguments.
The third argument advanced by counsel for Mr Akazawa can be summarised as follows. He says that in fact Mr Akazawa is the only genuine purchaser for value without notice. He says that on the completion of his contract he paid a deposit of 1.2 million dollars, that he is the only person who has parted with value and that he did so without any prior notice of any contract on the part of the Aga Khan. He accordingly argues that since the Aga Khan has not parted with any consideration the equities are not equal and that his contract of 9 January should prevail. I find myself unable to accept this argument. Finding as I do that Mr Carnegie and Mr Broughton entered into a valid binding contract the one agreeing to purchase and the other agreeing to sell on behalf of their principals there clearly was an exchange of consideration and accordingly Mr Akazawa, notwithstanding the fact that he has actually parted with money, is in no stronger position in relation to consideration.
It follows from my findings that in the first of the above entitled actions the Aga Khan is entitled to an order for the specific performance of his contract of 27 November 1989. That being so Mr and Mrs Firestone cannot make title to Mr Akazawa and his claim for specific performance must fail.
With regard to the date for the closing of the contract I would, in the ordinary way, fix a closing date with the same interval as originally agreed by the parties to the original contract. However, Mr Akazawa is in occupation of the lands and must have time to vacate the lands. I therefore fix the closing date as six months from today s date.
With regard to Mr Akazawa s contract, he is entitled to damages in lieu of his claim for specific performance. On the assumption that he wishes to proceed with this claim I will give him liberty to mention the matter, on notice to Mr and Mrs Firestone, to have a date fixed for the hearing of that issue.
The Aga Khan is entitled to the costs of his action against Mr and Mrs Firestone, to be taxed in default of agreement.
The costs of Mr Akazawa of this hearing will be awarded at the conclusion of his assessment of damages against Mr and Mrs Firestone.
There will be a stay on my order in each case for 21 days, the stay to continue in the event of the service of notice of appeal, on condition that if the appeal is unsuccessful the appellants pay interest upon the costs if the costs are, in the final result, awarded against them.
Fennelly v Anderson
(1851) 1 Ir Ch R 706; 4 Ir Jur (os) 33
Brady LC: This case comes before me under circumstances raising a question of importance, which in the present state of authorities I cannot say that I am prepared to decide so as to preclude the further maintenance of the suit.
The contract, being one for the sale of real estate of married women has been entered into by them and their husbands, and is specific in its terms, and not alleged to be in any respect, unreasonable or improper. The objection raised on behalf of the respondent is that this contract cannot be enforced against him, inasmuch as he could not enforce it against the married women. It is conceded that there is not any case deciding that such an agreement could not be enforced at the suit of the husband and wife. Formerly it was the doctrine of Courts of Equity that such a contract might be enforced against the husband. Decrees have more than once required the husband to procure the wife to levy a fine, or that he should stand by the consequences if she refused. So long as that was the rule of the Court I apprehend that such an objection as the present would have been unsustainable, because it rests upon the absence of mutuality of remedies for enforcement of the contract, viz., that as the petitioners could not have been compelled to perform it. the respondent cannot be so compelled.
But it is said that according to the modern authorities, the rule appears to have been changed, and that the Court will not compel the husband to procure the concurrence of his wife if she refuse to join him. And that I apprehend is now well settled, notwithstanding any fluctuation of opinion which may have taken place on the point. But still the question remains, whether the chance of the doctrine of the Court in that particular involves a change in another; whether although the Court will not enforce the contract against the husband, it will do so against the other party to the agreement, he being competent to perform it, and being aware of the position of the vendors. The only case which by analogy bears upon the point is Flight v Bolland 4 Russ 298, where Sir John Leach MR, held that an infant cannot sustain a suit for the specific performance of a contract, because the remedy is not mutual. Such undoubtedly was the decision; but it is worthy of note, that Counsel for the plaintiff there said:
If a husband seised jure uxoris were to contract for the sale ot his wife s estate, the husband and wife could enforce the contract against the purchaser; yet if the purchaser were to file a bill against the husband and wife for specific performance, and the husband were to swear in his answer that the wife would not consent, a Court of Equity would not now interfere; it would neither decree the wife to join in the conveyance, nor would it order the husband to procure her concurrence. and send him to prison until that concurrence was obtained.
This tends to show that the opinion of the profession is, that the contract might be enforced by the husband and wife, notwithstanding the want of mutuality. The only answer attempted there by Counsel for the defendant was:
No case has occurred, or at least none has occurred since the time when it was settled that the Court will not decree a husband, who has contracted for the sale of his wife s estate, to procure her to join in making a good conveyance, in which such a contract has been enforced against the purchaser.
The question does not appear to have been adverted to in the judgment of the Court.
The next case in which this point appears to have been alluded to is Salisbury v Hatcher 2 Y & CCC 54, where Knight Bruce VC in the progress of the argument, puts this question: Suppose husband and wife, seised in fee in the wife s right. to contract to sell: is there any case which decides that they cannot by bill enforce the contract? Counsel for the defendant did not venture to say that there was such a decision, but assuming the position to be inconvertible, replies: In that case the purchaser buys the estate subject to the chance of the wife repudiating the contract. But if the contract of sale states the property to be the husband s and, in the course of the negotiation it turns out to be the wife s, the vendors cannot compel a sale. The Vice-Chancellor did not again mention the point, but he decreed specific performance of the contract, which was one for the sale of an estate in fee-simple, in favour of a vendor who at the time of entering into the contract was tenant for life only, the purchaser not having rejected the purchase as soon as he had ascertained the real interest of the vendor, and the latter being able, by the consent of parties interested, in remainder, to make a good prima facie title to the fee-simple at the hearing. So far, therefore, as regards the modern authorities, since the change in the rule as to enforcing the contract against the husband, no decision has occurred; but to the extent to which the opinion of the Profession at Westminster Hall has been expressed in reference to it, when casually mentioned, that opinion would appear to be in support of the suit in such a case as the present.
Returning to the earlier authorities, I find that in Daniel v Adams Ambler 495, 497, which was a suit by a purchaser for the specific performance of an agreement for the sale of real estate by a husband and wife, Counsel for the plaintiff, of whom Mr Ambler, the reporter, was one, arguendo, said, that if a bill had been brought by the husband and wife for performance of the agreement, the purchaser could not have made the objection, and therefore the husband and wife ought not to be permitted to do it on the bill brought by the purchaser. Sir Thomas Sewell, MR dismissed the bill, but said that the argument that both or neither should be bound does not hold in all cases. At all events Mr Ambler s position was not denied by the Court.
That the objection of want of mutuality of remedy to enforce the contract does not in all cases prevail, is manifested by cases decided under the Statute of Frauds, where it has been held that the plaintiff may obtain a decree for specific performance of a contract signed by the defendant but not signed by the plaintiff. The reason of this doctrine is, that the plaintiff by filing his bill submits to perform his part of the contract; and of the plaintiff s non-signature the other party is not allowed to avail himself, because although he could not have compelled the plaintiff to complete the contract, yet he (the defendant) has, by signing, thought proper to run the chance of the plaintiff performing his part, which, if he do not rely upon the Statute of Frauds, the Court will decree him to perform. True it may be, however, that these decisions rest upon the particular language of that statute.
But in the present case the married women are willing to join in the conveyance, and I am not aware of any precedent for holding that the Court will not enforce a contract against a husband and wife where it appears that the wife is willing to concur in performing her part of the contract, if the Court be of opinion that it is a proper contract and one to the benefit of which the plaintiff would irrespectively of the question of the wife s competency be entitled. Nor will the Court, as I am yet aware, on the other hand decline to entertain a suit by the husband and wife, merely on the ground of the wife s incompetency to contract. Pending the negotiation these married women might have validated the contract by acknowledging it under the statute 4 & 5 W 4, c 92. The success of every suit for specific performance of contracts with regard to real estate is contingent upon the ability of the plaintiffs to make out title (unless the contract be a qualified one), and upon this question I must deem that this suit is so contingent; therefore if the petitioners cannot or will not convey, there cannot be any relief: but in this respect the case of the parties here is not in my opinion in any greater infirmity than any other case. I can easily imagine instances in which it would be very beneficial to married women that the contracts entered into by them and their husbands should be carried out. On the whole, there are difficulties in coming to the conclusion that they cannot; and I should not feel justified in introducing a restriction which may not be a wise one, and which I no where find already established. I therefore shall not, upon the ground of non-mutuality, dismiss this petition.
The next question is one depending on the particular terms of the contract. viz, what is the extent to which the petitioners are bound to make out title to the property? They insist that the contract is a qualified one, and excludes accordingly the ordinary rule that the vendors must show their lessor s title. The contract does not contain any reservation in direct terms as to the extent of title to be made out. The lease is recited to be one for three lives with a covenant for perpetual renewal, and in the conclusion of the contract there is an agreement on the part of the vendors to allow the vendee out of the purchase money the sum of 15 for the costs to be by him incurred in obtaining from the owner of the fee-simple in the lands a grant thereof in fee-farm under the statute 12 & 13 Vic c 105; so that it is virtually a contract for the sale of lands in fee-farm. It recites an agreement by the petitioners with the respondent to convey to him all their interest in the said lands for the sum of 1000. What is their interest? It is a lease for lives renewable for ever, and having regard to the Renewable Leasehold Conversion Act, it is an estate in fee-farm. The petitioners then covenant that they will at their own expense make out and deliver within a given time an abstract of their title to the lessee s interest in said recited lease of the 20th day of December 1813 of said lands and premises . The words their title to the lessee s interest have been relied on as showing that the compact was merely for the sale of such title as they have to the interest of the lessee, whatever that may have been. Perhaps that passage may only refer to the title deducible from the lessee to the petitioners. But I do not think that it excludes the necessity of proving the title fully. I do not think that it protects them from showing that the lease is one conveying a valid interest. Then comes a covenant by the petitioners that, on payment of the purchase money they will well and sufficiently grant, release, convey or otherwise assure, not the lease or their interest in it, but all and singular the said lands and premises with the timber, &c, to the use of the respondent, his heirs and assigns, free from all incumbrances, except the rent, renewal fines and covenants contained in the original lease. There is not a phrase from the beginning to the end of this instrument which imports that the sale was one of a limited interest only. To hold that such a limitation exists here would, it seems to me, almost be rescinding altogether the salutary rule which requires the vendor to prove his title to the property which he affects to sell.
I cannot distinguish this case from Anderson v Higgins 1 Jo & Lat 718, where, by an agreement reciting that the vendor was then seised and possessed of certain premises in as full, ample and beneficial a manner as the same were held by him under a lease thereof made to him by the Earl of Lucan, for lives renewable for ever; and that the vendee had agreed with the vendor for the actual purchase of his right, title and interest in and to said lease, and the premises thereby demised. upon clear title being made out to him, for the sum of 1250; and that it appeared that several judgments had been confessed and remained unsatisfied by the vendor, in consequence whereof and until same were satisfied or paid off, a clear title could not be made to the vendee: it was witnessed that the vendee should cause the judgments, and any other encumbrances that might affect the premises, to be satisfied so as that the vendee should have a clear and marketable title thereto. And in a subsequent part of the agreement the vendor covenanted with the vendee, to make out a clear title to the premises. free and discharged from all incumbrances whatsoever. Sir Edward Sugden there said:
Upon the part of the vendor it is contended that the contract was for a sale of the interest in the lease in question, whatever it might be, and that the parties, when speaking in their contract of a good title being made out, only meant that it should be free from incumbrances. But whatever ambiguity there may be in the first part of the contract there is none in the latter part; for there is an express agreement that the seller shall make out a good and marketable title, free from incumbrances, no doubt; but these words were emphatically introduced, because it was anticipated that delay in completing the sale would arise from paying off the incumbrances. Therefore the contract was not only that a good title should be made out. but also that it should be free from incumbrances. I think it clear upon this contract that the seller was bound to make out a good title.
Now I do not think that was even so strong a case against the vendor as the present, because here the contract is to convey, not the title to the lease, but the lands and premises, and contemplates the conversion of the vendor s interest into a fee-farm grant procurable under the statute.
Undoubtedly there are cases which show that if the party mean to sell such interest only as he may happen to have, the contract may be so limited. It is unnecessary that I should now go through those authorities, as I have recently stated my opinion upon them in the case of Leathem v Allen, to which I still adhere. By merely using the words all their interest in the said lands, I do not think the vendors have guarded themselves against the production of their lessor s title.- (His Lordship here referred to the broad manner in which the general rule that the vendor of a leasehold must show his title, as laid down by Richards, CB, in Purvis v Rayer 9 Price 488, 525, and to the observations of Rolfe, B, in Sellick v Trevor 11 M & W 722, 729) – I have no hesitation in holding that the petitioners have not, by the terms of their contract, protected themselves from the operation of the general rule; and that they must show that the original lease is a valid instrument, conveying a good title to an estate for lives renewable for ever. I cannot make any declaration limiting the title, which they are bound to make out.
There is nothing in the case warranting me in saying that there was a waiver of the production of title. The very first question put by Counsel for the respondent was, whether and when the lease was registered? – a very pertinent question; if registered at one time the lease might be good, and vice versa.
Leggett v Crowley
Hardship
[2019] IEHC 182 (27 March 2019)
O’Connor J
Introduction
1. The defendant has been in possession of his home in Kilsallaghan, Co. Dublin since it was built in 2003 and more significantly, since the closing date of 4th March, 2014, for its sale to the plaintiff and the prosecution of these proceedings seeking specific performance which were commenced in June 2014.
Background History
2. According to the defendant, he has been involved in the construction industry from his early days. He bought land which is now comprised in Folio 49441F, Co. Dublin (” folio “) in 2002, when he was about 21 years of age. The defendant resides with his partner and his father in the home which was built on the lands comprised in the folio. The defendant also gave evidence that the total construction cost for his home was approximately €600,000 to which the defendant’s father contributed a significant sum.
3. Notification of grant of approval issued in July 2003 to the defendant and a retention permission for a sunroom was granted in March 2004. An additional extension, referred to as “granny flat” during the course of the trial, has not been the subject of any specific permission.
Loan from Bank of Scotland Ireland
4. In May 2006, the defendant accepted an offer of an interest-only home loan of €725,000 with the ” Basis of Interest Rate “: 1% ” over ECB Main Refinancing operations rate ” from Bank of Scotland Ireland Ltd (” BOS “). The loan was secured by:-
(i) a first legal mortgage over his home, which was then valued at €1,500,000;
(ii) an assignment of a mortgage protection life policy on the defendant; and
(iii) an assignment of a life policy for the 40-year term of the loan with a note that BOS “does not in any way represent or warrant that the surrender or maturity value thereof will be sufficient to discharge the principal of the loan”.
5. In March 2008, the defendant accepted an ” offer of further advance loan ” in the sum of €250,000 to be repaid over 38 years at ” 0.83% plus the ECB main refinancing operation rate.”
6. The defendant testified that he did not repay the contribution made by his father to the building of the home because his father was content for the defendant to remain in the construction and property industry.
7. The collapse of the Irish property market caused BOS to appoint receivers over all of the properties belonging to the defendant which he had acquired with other loans advanced by BOS.
8. By letter dated 4th October, 2012, solicitors for BOS advised the defendant that he then owed BOS €997,482.02, pursuant to the loan facilities granted in May 2006 and March 2008, by reason of his failure to adhere to the repayment terms.
9. A further letter from solicitors for BOS dated 11th December, 2012, requested possession of the house and lands comprised in the folio (” the property “) within seven days in order to avoid the commencement of proceedings.
10. Eamonn Greene & Company (” Greenes “), then solicitors for the defendant, in a reply telefaxed on 20th December, 2012, referred to the property as the principal residence of the defendant when expressing an understanding that the defendant was paying €1,000 per month and that the property was for sale. The defendant had discussed with BOS that the defendant himself should sell the property.
11. Up to this point, there is little controversy. Thereafter, the defendant recounts a story to the effect that he was prepared to enter into a contract for sale of the property with the plaintiff and release the proceeds of the sale to BOS in exchange for BOS releasing him from any further liability to BOS and for the defendant to obtain from the plaintiff a cash payment of €50,000 (later increased to €65,000). It is noted that not one professional adviser or any other witness called to give evidence testified that there was an intention for the defendant to obtain such a cash payment which lies at the heart of many allegations made by the defendant.
Release of Property as Security
12. The circumstances leading to the short letter from BOS to Greenes dated 18th February, 2014, and which reads as follows: “You must provide cleared funds in the sum of €445,887.20 to Bank of Scotland plc (‘the bank’) in order for the bank to release the secured property from its mortgage and charge”, are at the centre of the dispute to be resolved in the context of the claim for specific performance of the contract which is the subject of these proceedings.
Leading up to the Contract
The First Viewing
13. The plaintiff gave evidence that he viewed the property with his partner and their young son on 22nd October, 2013, while the defendant and a Mr. O’Reilly (an auctioneer engaged by the defendant) were in attendance. The defendant alleged at trial that the plaintiff inquired about the mortgage on the property and that the defendant informed the plaintiff about his negative equity in the property. The defendant further alleged that he informed the plaintiff that he could not enter into a binding agreement until he had a binding agreement with BOS. The plaintiff denied these exchanges during the viewing and asserted his intention and commitment to negotiate with the auctioneer only.
The Second Viewing
14. On 23rd October, 2013, the plaintiff attended at the property again. He said that he had mentioned this intention to Mr. O’Reilly because they were unable to view the granny flat while the tenant was present on 22nd October. The defendant alleged that the plaintiff attended unannounced when the defendant and his father were at home. The plaintiff insisted that he never met the defendant’s father until these proceedings came on for trial originally in October 2017.
Initial sale price
15. The defendant’s auctioneer, by letter dated 24th October, 2013, confirmed to Greenes that he had accepted an offer for the sale of the property for €475,000 from the plaintiff who had furnished a booking deposit of €10,000. This supports the plaintiff’s evidence that he negotiated with Mr. O’Reilly exclusively and it is what one would expect when an auctioneer is involved. The asking price in the brochure produced by Mr. O’Reilly was €525,000. The defendant did not allege that Mr. O’Reilly was instructed not to negotiate with the plaintiff; rather the defendant alleged that the plaintiff was informed by the defendant about achieving a binding agreement with BOS.
Revised Sale Price
16. The plaintiff and Mr. O’Reilly testified that they renegotiated the sale price down to €460,000, which was confirmed by the standard typed letter sent by Mr. O’Reilly to Greenes dated 6th November, 2013. The plaintiff was looking at similar properties and it was apparent that the market at that stage was one which suited buyers as there were few then. The plaintiff remarked that his original offer was ” a bit of a stretch ” and that he had actually paid a booking deposit for another house. He preferred the property and that was his reason for pursuing a reduction in the price.
Defendant’s claims regarding the sale price
17. The defendant claimed during the trial that at the second viewing the plaintiff had come to the property with a proposal. The defendant said that he had explained to the plaintiff the situation with BOS: that the property was mortgaged for over €1 million and that a binding agreement with BOS was required. He surprised the plaintiff and the solicitors who gave evidence at trial with his allegations that he informed the plaintiff at the second viewing about a boundary dispute. The defendant also referred to his father’s interest in the house due to his financial contribution to the construction of the house.
18. The defendant alleged under oath, which was denied vehemently by the plaintiff, that the plaintiff offered to pay the asking price of €525,000 of which €50,000 would be in cash. That would mean that BOS and the Revenue would be informed of a sale price of €475,000 whereas the true price was the asking price of €525,000. The defendant’s allegations about the plaintiff referring to having untaxed cash from his business and realised properties in Spain and Eastern Europe were denied calmly, but firmly by the plaintiff.
19. There was not a shred of corroborating evidence to support these serious allegations. In fact, all of the solicitors who gave evidence said that any knowledge or suggestion of such an arrangement would have obliged them and the late Maurice Leahy, a solicitor by all accounts with impeccable professional standards, to cease their involvement with the parties.
20. The defendant’s explanation for the sale price reduction to €460,000, further persuades this Court that the defendant will stop at nothing to hinder the plaintiff from completing his purchase of the property. The defendant alleged that he received a phone call from the plaintiff on 25th October, 2013, during which the plaintiff allegedly offered a further €15,000 in cash in exchange for a corresponding reduction in the price to be recorded in the contract. The Court accepts the plaintiff’s evidence that the only conversation which he had with the plaintiff, during which the defendant was loquacious, concerned the closing of the sale as quickly as possible.
21. The plaintiff testified that he only discussed the closing of the sale with the defendant and he did not renegotiate the price with the defendant at any stage. The plaintiff mentioned the ramblings of the defendant in calls which lasted between 22 minutes and 32 minutes on 25th October, 7th November and 18th November, according to mobile account statements produced in the discovery process.
22. The defendant consistently fails to appreciate that the plaintiff is entitled to rely on an executed contract and that it does not permit for pre-contractual beliefs or understandings which he may have had to be part of the equation. No matter how many conversations, misunderstandings or reinventions of the facts which the defendant puts forward for consideration, a written contract for the sale of land has legal effect.
Boundary Dispute
23. This Court accepts that the plaintiff only became aware of a possible and unpursued boundary dispute after the defendant’s newly appointed solicitor mentioned same in November 2017. The plaintiff quite reasonably explained that if he had been aware of a boundary dispute in 2013, he “would have stopped right there … who would buy a house with a boundary issue?”.
Execution of the Contract
24. Mr. Jeff Greene of Greenes gave evidence that the defendant came in to sign the contract for the sale of the property to the plaintiff on or around 24th or 25th February, 2014, and that he witnessed the signature of the defendant. Greenes forwarded the contract for sale to the plaintiff’s solicitor by letter dated 25th February, 2014, and enclosed a copy of the letter from BOS dated 18th February, 2014, which lies at the heart of the dispute to be resolved. Mr. Greene confirmed that replies to requisitions on title were given in accordance with instructions and that there was no boundary dispute to be notified. Further, there was no litigation pending or threatened in relation to the property and no other person had any direct or indirect interest in the property according to Mr. Greene and his then instructions from the defendant.
25. The defendant originally alleged that he did not sign the contract but does not now deny his actual signature on the execution of the contract. He claimed that the first time that he became aware of the signed contract was when it was emailed to him by his auctioneer on 5th March, 2014. The then very irate state of the defendant is not disputed by Mr. Greene who produced an attendance by a secretary dated 7th March, 2014, concerning the alleged execution by the defendant of the contract. The defendant advised in this call that he was going to An Garda Síochána and the Law Society about the conduct of Greenes in proceeding with the sale which he had not authorised.
26. Mr. Greene denied that the defendant had repeatedly given instructions to him not to send the contractual documents until the BOS situation and the cash payment had been sorted. Mr. Greene was emphatic that he would have immediately stopped acting for the defendant if the defendant had told him about an ” under the table ” cash payment.
27. The defendant’s allegation that the now deceased Maurice Leahy, solicitor with the plaintiff’s solicitors, knew of the cash payment is further evidence of the level to which he will stoop. Mr. Fran Mulligan, solicitor with the plaintiff’s solicitors at the time, assured this Court that the late Mr. Leahy would not have countenanced such a cash payment. It does the defendant little credit to impugn the professional reputation of a deceased professional in the way that he has done, whether to secure his home or whatever arrangement he wants to achieve with BOS.
28. In the context of these proceedings, this Court does not need to consider whether the defendant has committed perjury, is delusional or suffers from a memory alteration due to strained circumstances. The balance of probabilities is the relevant standard of proof. The defendant is a poor and self-serving historian with little consideration for the effects on others as a result of his story telling.
Discovery
29. The defendant’s failure or omission to complete discovery, as directed by Gilligan J. on 4th April, 2017, assisted the obfuscation which has occurred in these proceedings. The correspondence from BOS and particularly the letters of 18th February, 2014, is crucial to a consideration of the factual matrix. This Court does not have to consider whether the defendant has a claim against Greenes and refrains deliberately from commenting further because Greenes are not a party to these proceedings although the evidence of Mr. Greene is particularly relevant. The alleged difficulties which the defendant had with various firms of solicitors is not a matter of concern for the plaintiff; the defendant has the primary duty to complete discovery.
30. Ultimately, the plaintiff and the Court got access to copies of relevant communications including copies of the facility letters with BOS mentioned earlier in this judgement. This Court does not condone the failure or omission of the defendant to understand or comply with the order for discovery. The defendant’s conduct in this regard does not assist him in persuading the Court that he should be believed in respect of the crucial facts where there is a conflict of evidence. The conclusion of the Court about the inadequacies of the discovery undertaken by the defendant is that the Court does not need to rely on those inadequacies in order to determine the crucial facts on the balance of probabilities.
Failure to Call the Father of the Defendant
31. The plaintiff submitted that the Court should take into account the fact that the defendant failed to call his father to give evidence in this case. This failure was significant according to Counsel because:-
(i) the defendant maintained that his father was present at both viewings and was a witness to the discussions involving an ” under the counter ” payment, both allegations being denied by the plaintiff; and
(ii) the plaintiff was precluded from cross-examining the defendant’s father in relation “to the circumstances in which he came to issue proceedings claiming an interest in the property (and registering a lis pendens ) … [in circumstances where the defendant] instead received an indefinite loan from his father”.
32. The plaintiff submitted that the Court should take an adverse inference from the failure to call the defendant’s father to corroborate this part of the defendant’s defence.
33. In Crofter Properties Limited v. Genport Limited [2002] 4 I.R. 73, McCracken J. held that “[t] here is certainly ample authority that the failure to call a witness is something which the court may take into account .” (p. 85). He referred to the decision of the House of Lords in R. v. IRC ex parte T.C. Coombs & Co . [1991] 2 A.C. 283, where Lord Lowry stated that:-
“In our legal system generally, the silence of one party in the face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party, may be either reduced or nullified.” (p. 300 at p. 85 of Crofter).
34. Having considered Lord Lowry’s dicta above, Brooke L.J. in Wiszniewski v. Central Manchester Health Authority [1998] PIQR P324 (also known as Wisniewski ) derived the following principles to be applied where there is an absence of a witness:-
“(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
(2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.
(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
(4) If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.” (p. 340)
35. These principles were applied by Kelly J. (as he then was) in Smart Mobile Limited v. Commission for Communications Regulation [2006] IEHC 338, (unreported, High Court, 31st October, 2006) (pp. 96-97).
Conclusion
36. The decision not to call the defendant’s father, even though it had been indicated that he would testify to support the defendant’s version of events of the two controversial viewings of the property by the plaintiff in October 2013, was understandable when one considers the alleged ill-health of the defendant’s father. Nevertheless, the defendant cannot expect this Court to assume that the defendant’s father would have assisted the defendant in his version of events. Therefore, the Court is not drawing any inference adverse to or in favour of the defendant arising from the decision not to call the defendant’s father. The Court is willing to accept in the absence of evidence to the contrary that the defendant was assisted financially by his father. This does not mean that this alleged fact was made known to the plaintiff or any of the professionals who denied knowledge of the alleged interest of the defendant’s father in the property.
Legal Submissions on the Claim
37. The plaintiff seeks specific performance of the contract that was concluded on 25th February, 2014. The defendant relies on two separate defences. First, he argued that there was never any agreement as he did not recollect signing the contract. The situation now is that no one disputes the existence of the written contract. Second, he claimed that specific performance should not be granted for the following reasons:-
(i) it was an illegal contract;
(ii) impossibility; and
(iii) hardship.
38. The plaintiff submitted that an award of damages in lieu of specific performance will be worthless as there is little, if any, chance of such an award ever being satisfied by the defendant, given the extent of his known indebtedness.
Illegal Contract
39. The defendant alleged that the contract for sale was unenforceable because it was an illegal contract due to the cash payment that was agreed between the parties with the intention of defrauding the Revenue. As noted above, the defendant alleged that the plaintiff wished to use untaxed income from either his restaurant business or his properties. The plaintiff argued that the issue of illegality did not arise because he did not agree to make an additional cash payment to the defendant.
40. The burden of proving an illegal contract lies with the party alleging the illegality. This is clear from the case of Whelan v. Kavanagh [2001] IEHC 14, (unreported, High Court, 29th January, 2001), where Herbert J. stated that:-
“… a party who has executed a contract required by Law to be evidenced in writing and which is regular and lawful on its face, and whose execution of that contract has been witnessed by his or her Solicitor should not lightly be permitted to impugn that contract, particularly to his or her own advantage, by pleading illegality as a defence to a claim for specific performance. The onus of proving such alleged illegality lies firmly with the party raising it and the burden of proof is the same as in all civil actions.” (pp. 11-12)
41. Murphy J. reiterated in Kavanagh v. Caulfield [2002] IEHC 67, (unreported, High Court, 19th June, 2002) that it was “… clear that the onus of proving illegality of a contract is, in this case, on the Defendant. The Defendant must prove an illegal intention on the part of the Plaintiff. ” (para. 7.1).
Conclusion
42. This Court, applying the relevant standard of proof (balance of probabilities), has already found that the defendant did not agree to cash payments in addition to the final contract price of €460,000, (the balance of the 10% deposit, after accounting for the earlier booking deposit of €10,000 given to the auctioneer, was paid by an AIB bank draft dated 17th January, 2014, and forwarded to Greenes by letter from the plaintiff’s solicitor dated 24th January, 2014). The defendant, therefore, cannot rely on illegality as a ground of defence.
Impossibility
43. The defendant argued that specific performance should not be granted where the defendant is unable to extinguish the interest of a third party in the land. The defendant referred to an alleged ongoing trespass onto the lands of the adjoining owner. Proceedings were issued, Glynn v. Crowley [2004 No. 18384 P.] on 27th July, 2004. They were set down for trial on 27th May, 2005, and came on for hearing on 20th June, 2006, when the proceedings were adjourned generally. A notice of intention to proceed was issued on 13th September, 2012, but since then nothing has occurred in those proceedings. The defendant argued that the Court cannot make an order for specific performance which would result in the plaintiff trespassing on Ms. Glynn’s property, thereby adversely affecting the property rights of a party who was not before the Court.
44. The defendant further referred to the ” unascertained position ” of Start Mortgages, the successor of BOS. On 18th February, 2014, BOS wrote to the defendant’s solicitors confirming that it was willing to accept the net proceeds of sale in order to release the security of BOS over the property. This offer was dependent on the defendant executing a short settlement agreement and providing the funds within 30 days of the letter. The defendant gave evidence that he did not sign any short settlement agreements. Start Mortgages issued proceedings claiming a sum in excess of €1 million as monies due by the defendant. Proceedings ( Start Mortgages DAC v. Crowley [2016 No. 2025 S.]) were issued on 28th October, 2016, and came into the list of the Master of the High Court as a motion for summary judgment on 11th January, 2019, when it was adjourned until 15th February, 2019. At that stage, it was transferred to the Common Law Motion List for hearing on 29th April, 2019. The defendant gave evidence that the loan was an interest-only loan and while there were arrears of repayments, he was confident that he could pay them. The defendant argues that in light of these developments, it was unlikely that Start Mortgages feels itself bound to accept the originally agreed net proceeds of sale to the plaintiff.
45. In O’Regan v. White [1919] 2 I.R. 339, a statutory tenant sold a portion of his holding without the consent of the landlord. The plaintiff purchaser sought specific performance of the contract but, notwithstanding the efforts of the defendant, the consent of the landlord could not be obtained. O’Connor L.J., in the Court of Appeal, noted that “[e] very plaintiff in an action for specific performance has to face the possibility of his eventually being unable to obtain it, owing to the incapacity of the defendant, for one reason or another, to perform it” (p. 387).
46. In Wroth v. Tyler [1974] 1 Ch. 30, an English case, the defendant entered into an agreement to sell his home, where he lived with his wife and grown-up daughter, to the plaintiffs with vacant possession. Subsequently, the defendant’s wife entered on the Land Register a notice of her rights of occupation, namely a right not to be evicted, under s. 1(1) of the Matrimonial Homes Act 1967. The defendant tried unsuccessfully to persuade her to remove the notice so that the agreement could be completed. He then informed the plaintiffs that he was unable to complete and offered to pay damages. The plaintiffs sued seeking specific performance.
47. Megarry J. in the High Court held that if the plaintiffs were entitled to specific performance of the contract with vacant possession, the form of order sought would require the defendant to make an application to the court under the 1967 Act to terminate the rights of occupation of his wife which became a charge on the estate of the defendant.
48. He noted that where a third party has some rights over the property, there are three possibilities:-
“First, there are those cases where the vendor is entitled as of right to put an end to the rights of the third party, or compel his concurrence or co-operation in the sale. Second, and at the other extreme, there are cases where the vendor has no right to put an end to the third party’s rights, or compel his concurrence or co-operation in the sale, and can do no more than to try to persuade him to release his rights or to concur in the sale. An example of the first category would be the vendor’s rights, as mortgagor, to pay off a mortgage, or his right, as a mortgagee, to obtain possession from the mortgagor. An example of the second category would be when the third party is entitled to an easement over the lands.
In between those two categories there is a third category, namely, where the vendor cannot as of right secure the requisite discharge or concurrence, but if it is refused he can go to the court, which has power, upon a proper case being shown, to secure the release or concurrence. …” (pp. 47-48)
49. Megarry J. held that the defendant fell into the third category and noted that he had endeavoured to persuade his wife but had failed. In those circumstances, it was stated that the Court should be slow to grant a decree of specific performance which would require a husband to take his wife to court, especially while they are still living together. He held that it would be ” highly unreasonable to make such a decree if there is any other form of order that could do justice …” (p. 51). He awarded damages to the plaintiff.
50. In the case of Watts v. Spence & Anor [1976] Ch. 165, the first defendant signed a contract to sell the family home to the plaintiff. The wife of the first named defendant was a joint owner of the house and never gave her husband authority to sell the house on her behalf. She refused to join in the sale and the plaintiff sued for specific performance. Graham J. refused to order specific performance as the first defendant’s wife, a third party interested in the property, would be seriously prejudiced. The plaintiff was awarded damages.
51. In Lehmann v. McArthur [1868] L.R. 3 Ch. App. 496, there was a covenant in a lease which required that the lessee could not assign without licence. The lessor covenanted not to refuse his licence unreasonably or vexatiously. The lessee contracted to assign his lease to the plaintiff subject to the landlord’s approval. The lessee applied for a licence but it was refused by the lessor because he wished to buy up the lease in order to rebuild the premises. The Court of Appeal in Chancery held that the defendant lessee was not obliged to take legal proceedings to oblige the lessor to give his licence. It was sufficient that he had used all reasonable efforts to induce the lessor to consent. Specific performance was refused.
52. In Aranbel Ltd v. Darcy & Ors [2010] 3 IR 769; [2010] IEHC 272, (” Aranbel Ltd “) Clarke J. (as he then was) stated that “… equity will not act in vain. A court should, therefore, be reluctant to make an equitable order where there is no reasonable prospect of the order concerned being complied with .” (para. 7). However, Clarke J. noted that “[t] here obviously may be cases where persons may simply decline to obey an order of the court. The fact that a party might be most unlikely to obey a court order could not, in my view, be a reason for the court not making the order in the first place.” (para. 7).
Conclusion
53. This Court will indeed not act in vain but it can fashion a remedy to ensure that the rule of law and justice applies. This Court is not satisfied that Smart Mortgages, the successor to BOS, is entitled to retract its position about receiving the net proceeds from the sale of the property which will cause the release of its security on the property. No one from BOS or Start Mortgages was called on behalf of the plaintiff. BOS issued a letter dated 18th February, 2014, to the defendant’s solicitors which confirmed the provision of €445,887.20 for the release of the relevant security on the property. In a separate letter of the same date addressed to the defendant, care of Greenes (the receipt of which by the defendant was put in doubt by the defendant in evidence) stated in the fifth paragraph of the first page:-
“Therefore the bank is willing to accept €445,887.20 (being the net proceeds of sale) in accordance with the repayment terms of the shortfall balance as set out in short settlement agreement but strictly without prejudice to your liability to discharge in full the total debt due under the mortgage account.”
54. It was submitted on behalf of the defendant that the third paragraph of the second page of that letter dated 18th February, 2014, which read:-
“This contractual agreement shall only be concluded when the bank is in receipt of the following:-
(i) one part executed and dated short settlement agreement;
(ii) [unconditional contract for sale];
(iii) agreed amount in cleared funds.”
means that Smart Mortgages cannot be foisted with the sale.
55. The defendant is effectively relying on a possibility that Smart Mortgages may not accept the net proceeds while not adducing any evidence that Smart Mortgages will do that. The defendant cannot rely on his own default with a third party such as BOS (now Smart Mortgages) without establishing on the balance of probabilities that Smart Mortgages will not release its security at the closing of the sale to the plaintiff. As mentioned, the order to be made by this Court will afford Smart Mortgages, or the current owner of the relevant charge, the opportunity to seek all necessary orders and directions. It is noted that the Court was informed that Start Mortgages had a representative in Court (albeit without a right of audience) when settlement was mentioned following the commencement of the plenary hearing in October 2017.
56. With regard to the rights of the neighbour and the boundary dispute there is no evidence of a continuing dispute. The plaintiff is aware of this risk and accepts the disclosure for the closing of the sale.
Hardship
57. McCarthy J. in the Supreme Court in Roberts v. O’Neill [1983] I.R. 47 held that it is well established that a court “… will not enforce the specific performance of a contract the result of which would be to impose great hardship on either of the parties to it.” (p. 55)
58. The hardship must exist at the time of the execution of the contract (Roberts v. O’Neill, p. 56). Quoting Budd J. in Lavan v. Walsh [1964] 1 I.R. 87, McCarthy J. stated that the ” … exceptions to the general rule appear very rare. ” (p. 55). He further noted that it:-
“… requires a strong case to be made out before one should accede to a plea for the exercise of judicial discretion in a quite unusual way, that is, by reason of hardship arising subsequently to the contract, and, the onus being on the defendant to satisfy me of the existence and genuineness of the alleged hardship on her, the proof of it should be strong and above suspicion.” (p. 103 at p. 56 in Roberts v. O’Neill ).
59. McCarthy J. concluded:-
” While recognising that there may be cases in which hardship arising after the date of the contract is such that to decree specific performance would result in great injury, there must be few such cases and, in my view, they should not include ordinarily cases of hardship resulting from inflation alone. To permit, as an ordinary rule, a defence of subsequent hardship, would be to add a further hazard to the already trouble-strewn area of the law of contracts for the sale of land .” (p. 56).
60. In Patel v. Ali [1984] 1 Ch. 283 the English High Court allowed the defence of hardship where the circumstances of the defendant-vendor had changed dramatically. Goulding J. held that:-
“The important and true principle, in my view, is that only in extraordinary and persuasive circumstances can hardship supply an excuse for resisting performance of a contract for the sale of immovable property. A person of full capacity who sells or buys a house takes the risk of hardship to himself and his dependents, whether arising from existing facts or unexpectedly supervening in the interval before completion .” (p. 288).
61. The Court found that in the four-year delay between the date of the contract and the hearing of the action for specific performance, the defendant had suffered from ill-health, had one leg amputated, and had two more children. If forced to sell the property she would have to move from the area and lose the support of family and friends. The Court noted as important that the delay was not attributable to the defendant’s conduct.
62. In Aranbel Ltd the defendants had entered into contracts for the purchase of apartments in late 2006 and by March 2008 they were legally obliged to complete the sale. In the meantime, the value of the properties had significantly dropped. The plaintiff-vendor sought an order for specific performance. The defendants argued that they were no longer in a position to complete the sale and as such, specific performance should not be ordered. Although Clarke J. considered the case under impossibility rather than hardship he noted that if the purchaser had to sell their family home in order to complete the purchase of an investment property, “… such a course of action on the individual concerned might amount to a hardship and the court might have to consider whether, in all the circumstances, in exercise of the court’s equitable jurisdiction, it was appropriate to impose such a course of action on the person concerned.” (para. 14).
63. In obiter remarks, Clarke J. stated:-
“I would wish to defer to a future, more suitable case, in which the issue was determinative, any definitive ruling on the way in which the hardship jurisprudence might be said to apply in cases where a defendant purchaser could complete, but only by disposing of assets such as a family home or business assets, which action would have significant practical consequences. There would be an obvious reluctance on the party of a court to require such a course of action. On the other hand, the court also has to take into account the fact that an inevitable consequence of the court not ordering specific performance is that an award in damages would be likely to be made which damages will, of course, ultimately be able to be charged on any relevant property of the defendant concerned. It seems to me that it is likely that any such case would require careful analysis to ascertain the consequences of an award of damages; for the relevant defendant may be equally badly off as a result of a significant award of damages as from a decree of specific performance, particularly if a reasonable period of time was afforded for completion .” (para. 35).
64. The defendant sought to rely on Clarke J.’s obiter comments and argued that ” if hardship is to be considered in the light of the loss of a family home it hardly matters if that home is lost by the Defendant acting as a vendor as opposed to a purchaser. ” This is a forced argument. The defendant entered into a contract for the sale of his family home and is now arguing that an order for specific performance would cause him hardship due to the loss of said family home. The hardship that is alleged must be external to the contract to preclude performance of the contract. It is also unclear if the defendant is alleging that this hardship existed at the time of the execution of the contract for sale or whether the hardship has subsequently arisen.
65. The defendant claimed that his father had made a contribution of €50,000 to the defendant for the home and in the circumstances where his father also lives in the property, granting specific performance will operate an exceptional hardship as he will lose his home and receive no compensation.
66. The plaintiff submitted that there is no basis for the claim that an order for specific performance will cause hardship for the following reasons:-
(i) This claim arose for the first time during the hearing of the action and was never pleaded or articulated in advance of the trial;
(ii) The defendant did not identify how he will suffer hardship as:
a. The completion of the contract and the payment of the purchase price will result in a substantial reduction of the debt owed by the defendant;
b. The defendant at all relevant times contemplated the sale of his home. This case is to be contrasted with a claim for hardship where a party might be forced to sell their family home to complete some other transaction.
Conclusion
67. The defendant entered into the contract willingly and in an effort to deal with BOS. The defendant’s own evidence indicated even at the height of his case that he was prepared to sell his home in 2014. The issue about moving home was never discussed even on his version of events. The law is that the Court looks at matters at the time of the contract save in exceptional circumstances which do not arise here.
Summary
68. The Court has set out above its conclusions on the appropriate facts and has applied the law as it has determined to be relevant to the issues arising. The Court will now set a date for the parties to consider and make further submissions if necessary on the proposed order for specific performance which is now circulated. In the meantime, the Court requests the solicitors for the plaintiff to copy this judgment to the owners of the charge on the folio along with a copy of the proposed order so that representations, if necessary, can be made on the adjourned date for finalisation of orders.
Appendix
Chronological Summary of Prosecution
1. For the sake of completeness, the following is a chronological summary of the prosecution of and the events occurring in these proceedings in case any party or the Court needs to consider the alteration of the proposed order for specific performance when this matter returns to Court for the making of final orders or at some early date in the future:-
24/01/2014 Contracts for sale were signed by the plaintiff and these, along with a bank draft for €36,000, were sent to the then solicitors for the defendant.
25/02/2014 The defendant’s solicitors returned one part of contract for sale duly executed by the defendant which had a closing date of 4th March, 2014.
06/03/2014 The plaintiff’s solicitors contacted the then solicitors for the defendant requesting that the transaction be completed.
07/03/2014 The defendant’s solicitors contacted the plaintiff’s solicitor informing them that their instructions had been revoked and that they no longer acted on behalf of the defendant.
10/03/2014 The defendant’s solicitors wrote to the plaintiff’s solicitors attempting to refund the deposit of €36,000. The plaintiff’s solicitors also registered a caution on the folio.
11/03/2014 The plaintiff’s solicitors rejected the attempt to refund the deposit and stated that the solicitors were contractually bound to hold the deposit as stakeholders.
12/03/2014 The plaintiff’s solicitors served a completion notice on the then solicitors for the defendant.
20/06/2014 The plenary summons herein was issued.
28/07/2014 An order for substituted service on the defendant was granted.
21/08/2014 The plenary summons and statement of claim were served on the defendant.
19/09/2014 A new firm of solicitors entered an appearance on behalf of the defendant.
20/11/2014 A defence was delivered.
18/05/2015 An order for discovery was made by Gilligan J.
10/03/2016 The plaintiff issued a motion seeking to strike out the defence for failure to comply with the discovery order.
23/06/2016 The Master of the High Court struck out the defence of the defendant.
28/06/2016 A motion was issued on behalf of the defendant to discharge the order of the Master.
21/03/2017 A notice of change of solicitors was filed and served.
04/04/2017 Gilligan J. set aside the order of the Master and ordered that the defendant file an affidavit within seven days in compliance with the order for discovery and listed the proceedings for trial on 10th October, 2017.
06/04/2017 An affidavit in purported compliance with the order of Gilligan J. was sworn by the defendant.
24/05/2017 The plaintiff requested particulars arising from the defence.
02/10/2017 The defendant delivered replies to the particulars sought.
10/10/2017 The proceedings came on before this Court for hearing and on the second day, following the adducing of evidence, the case was adjourned on the suggestion that a settlement was imminent.
27/10/2017 The matter came before this Court for mention and it was stated that Start Mortgages did not get a financial statement from the defendant.
08/11/2017 The matter again came before this Court for mention when the outstanding financial statement requested by Start Mortgages was mentioned again while the then legal team for the defendant was granted liberty to issue a motion to come off record.
14/11/2017 The defendant served a notice of discharge of his solicitors.
22/11/2017 These proceedings came before the Court for mention when the plaintiff elected to continue with the hearing of the case without having a legal team.
15/12/2017 The matter came before the Court again for directions and the 21st-23rd March, 2018, were provisionally allocated for the hearing of the balance of the trial.
23/02/2018 The matter came before the Court for mention in anticipation of the provisional hearing date and the Court recommended the defendant to obtain the services of solicitors and counsel.
15/03/2018 A new firm of solicitors came on record for the defendant when the matter came before the Court for mention only. An order was granted allowing the solicitors to take up the Digital Audio Recording of the evidence heard on 10th October, 2017, and the proceedings were adjourned to get a date for hearing.
10/04/2018 The proceedings came before this Court for mention and a hearing date of 17th July, 2018 was allocated.
29/06/2018 The matter was listed for mention before the Court because the Court had other assignments for July 2018 and the proceedings were put back into the Chancery List to get a date for hearing.
04/12/2018 The matter resumed hearing on 5th, 6th, 12th and 18th December, 2018.
06/03/2019 Oral submissions were made on behalf of the parties in relation to written submissions that had been delivered and which had not afforded the other side an opportunity to address.
Embourg Ltd. v. Tyler Group Ltd
., unreported March 5, 1996,
BLAYNEY J: [Nem. Diss.]
1. This is an appeal by the plaintiffs/appellants (to whom I shall refer as the plaintiffs) against the decision of the President of the High Court dismissing the plaintiffs’ claim for specific performance of a contract alleged to have been entered into by the plaintiffs for the purchase of No 55 Mary Street in the city of Dublin, which is the property of the defendant.
The facts are not in dispute and are as follows. Carmel McLoughlin is a property developer and in September 1994 she was interested in purchasing No 55 Mary Street. On the 20 September 1994 agreement on price was reached between Hugh Markey of Lisney and Son, acting on behalf of the defendant, and Brendan Herlihy, an accountant acting on behalf of Mrs McLoughlin. Mr Markey sent the following letter to Mr Herlihy referring to the agreement:-
“20 September 1994
SUBJECT TO CONTRACT
Re: 55 Mary Street, Dublin 1.
Dear Mr Herlihy
I refer to our discussions and confirm that I understand that our clients are prepared, subject to contract, to proceed with the sale of the above property on the basis briefly outlined below.
Property
The entire property, No 55 Mary Street, Dublin 1 with full vacant possession.
Proposed purchase price
£170,000 payable by a deposit of £5,000 with the balance to be paid on completion of the sale.
Closing date
Six months from exchange of contracts.
Proposed purchaser:
Mrs Carmel McLoughlin c/o Kevans, solicitors, 34 Fitzwilliam Place, Dublin 2.
Solicitors:
For the vendor — Hooper and Company, 97 Upper George’s Street, Dun Laoghaire, Co Dublin.
For the proposed purchaser:
Kevans, 24 Fitzwilliam Place, Dublin 2 (Mrs Jim Heaney)
I trust that matters will proceed satisfactorily from this stage, but in the interim you will appreciate that neither our negotiations to date, nor this letter, can form part of nor create, any binding contract between the parties, which must await the formal execution of the appropriate legal documentation by both sides.
Yours sincerely
Hugh Markey”
On the following day Mrs McLoughlin sent a cheque for the deposit of £5,000 to the defendant’s solicitors and this was acknowledged by them in a letter sent to Mrs McLoughlin c/o her solicitors. The letter from the defendant’s solicitors stated:
“Please note that no binding contract is to be deemed to exist until such time as a contract herein has been executed by all parties. We do not have authority to bind our client.
To confirm the booking deposit is accepted subject to contract.
On the 28 September 1994 Mrs McLoughlin’s solicitors sent the following letter to the defendant’s solicitors:
“Subject to contract/contract denied
Re: Our client: Mrs Carmel McLoughlin purchaser of 55 Mary Street, Dublin 1
Dear Sirs
We understand that you act for the vendors in this regard.
We await contract in duplicate with supporting title documentation.
Please note that we have no authority to enter into a contract on behalf of our client and that no binding contract shall be deemed to exist between the parties until contracts have been executed and exchanged.
Yours faithfully
Kevans, solicitors”.
On the 3 October 1994 the defendant’s solicitors sent to the plaintiffs’ solicitors two copies of a detailed contract incorporating the Law Society’s General Conditions of Sale (1991 edition). The covering letter concluded with the following paragraph:
“Please note that we have no authority to bind our client and no binding contract shall be deemed to exist until such time as the contracts herein in all cases have been executed by all parties and the full deposits accepted by you (sic).”
On the 25 January 1995 the plaintiffs’ solicitors returned both parts of the contract which had been signed by Mrs McLoughlin in trust for Embourg Limited. In their letter they raised six queries in regard to the title. Messrs Hooper and Co replied on the 1 February 1995. In the first paragraph of their letter they said:
“We thank you for yours of the 25 January 1995 enclosing contracts duly executed by your client and confirm we are arranging to have same executed by our client.”
The rest of the letter was concerned with replying to the six title queries raised in the plaintiffs’ solicitors letter of the 25 January 1995.
Nothing further happened until the 25 April 1995. On that date Messrs Hooper wrote to Messrs Kevans returning the deposit of £5,000 as the defendant was not proceeding with the sale. Their letter crossed with the following letter from Messrs Kevans:
“Tyler Group Limited to Carmel McLoughlin
Premises: 55 Mary Street, Dublin 1.
Dear Sirs
We presume that the contracts have now been duly completed by your clients and have been returned from England. We would be obliged if you would let us have one part of the contract without further delay, in order that we may proceed with our requisitions on title.
Yours faithfully
Kevans, solicitors.”
A plenary summons in which Embourg Limited was named as the sole plaintiff was issued on the 27 Aprll 1995 and a statement of claim was delivered on the 14 June 1995. The claim made in the statement of claim was that there was a written agreement between the parties for the sale of No 55 Mary Street and that the agreement was contained in correspondence between the parties and their respective solicitors and in particular an open letter from the plaintiffs’ solicitors to the defendant’s solicitors dated the 25 day of January 1995 enclosing a contract duly executed by the plaintiff and the reply of the defendant’s solicitors thereto dated the 1 day of February 1995.
In its defence delivered on the 20 June 1995 the defendant in effect denied that any enforceable contract had ever come into existence.
The defendant brought a motion for security for costs which resulted in Mrs McLoughlin being joined as a plaintiff. The parties then agreed that the case could be heard on affidavit and it came before the President of the High Court on the 3 July 1995.
Prior to the date of the hearing one of the directors of the defendant, Michael J Smith, swore an affidavit in which he stated that the defendant had never authorised its solicitors Messrs Hooper and Co, to bind it to any contract for the sale of No 55 Mary Street without the defendant’s written authority and that no authority of any kind had ever been given by the defendant to its solicitors. His affidavit included the following paragraph which was heavily relied upon by the plaintiffs in the course of their submissions.
“4. I say that on the 7 day of February 1995 I, by telephone, instructed Mr John Hooper of Hooper and Company that I had on the 6 day of February sent to him copies of the formal documentation for a sale to the present plaintiff executed on behalf of the dependant but that he Mr Hooper was not to send or communicate the same to the plaintiff herein unless or until he had my prior written authority in that regard. No authority of a kind was ever subsequently given to him or anyone in his firm to do so.”
The President of the High Court dismissed the plaintiffs’ claim in an ex tempore judgment. The following extract from counsel’s note of the judgment, as approved by the President, sets out the grounds of his decision:-
“It is common for solicitors to write “subject to contract/contract denied” on their letters and to state in their letters that they do not have authority to bind their clients until such time as the contracts have been executed. The courts must give effect to these caveats. I must also give effect to the intentions of the parties in this case. There is a certain discrepancy between the letters written by the solicitors for the purchaser and the letters written by the solicitors for the vendor. There has been no contract executed and exchanged. There has however been an execution by the purchaser and there has in turn been an execution by the vendor in the circumstances set out in the affidavits. I do not think that the signature by the director of the defendant was a valid execution as contemplated by the contract. I do not think therefore that any legal obligation arose in this case and find that there was no execution of the contract. It was convenient for the director of the defendant company which is a foreign company, to sign the contracts and sent them back to their solicitors whereupon it was held in escrow. The intention was therefore that the contract was not to have legal effect until such time as it was delivered to the plaintiffs’ solicitors. I do not think therefore that the contract was executed and accordingly the claim must fail. The vendor is therefore not bound to complete the sale to the purchaser. I direct that the lis pendens be vacated.”
A notice of appeal was served on the 4 July 1995 setting out numerous grounds but most of these were not pursued. The main case made by Mr Salafia on behalf of the plaintiffs was that there was a binding enforceable contract because the two copies of the contract sent to the plaintiffs’ solicitors had been signed by Mrs McLoughlin in trust for Embourg Limited and had also been signed by Mr Smith on behalf of the defendant. Mrs Salafia accepted that the solicitors on both sides had made it clear that they had no authority to contract on behalf of their clients and that no binding contract would be deemed to exist until such time as the contract had been executed by all parties, but he claimed that this had happened since the defendant had signed as well as the plaintiffs and accordingly there was a binding contract in existence. He argued that Mrs Smith was not entitled to say that when he signed he did not intend to bind the company. The position had to be looked at objectively, and judging objectively there was a binding contract.
On behalf of the defendant, Mr Durcan submitted that this was not a case about a note or memorandum sufficient to satisfy the Statute of Frauds. The issue was whether there was in existence an enforceable contract. He asked where was it to be found, and submitted that it must be either in the correspondence, or must have arisen by reason of Mr Smith having signed both parts of the contract on behalf of the defendant. He dealt first with the possibility of there being a contract in the correspondence. This was the case that had been made in the statement of claim. It was not pursued by Mr Salafia and for a very good reason. In my opinion it was unstateable. Apart from the fact that the defendant’s solicitors had no authority to enter into a contract, at no time had they done anything which could be construed as an acceptance of the offer to purchase which came into being when Mrs McLoughlin signed the two parts of the contract, and her solicitors returned them to the defendant’s solicitors. So the possibility of a contract concluded by correspondence can be totally ruled out.
On the question of whether the defendant had become bound by Mr Smith signing the two parts of the contract, Mr Durcan advanced two submissions. Firstly, he argued that there was no contract because no acceptance of the plaintiffs’ offer to purchase on the terms of the detailed contracts had ever been communicated to the plaintiffs’ solicitors, and communication of the acceptance was essential to the formation of a contract. Secondly, he submitted that it was clearly the intention of the parties that there should be no binding contract until contracts had been exchanged, and this had never occurred. He referred to the fact that in Mr Markey’s letter of the 20 September 1994 to Mrs McLoughlin’s accountant, the closing date was stated to be “six months from exchange of contracts” and the plaintiffs’ solicitors, in their letter of the 28 September 1994 had stated:
“Please note that we have no authority to enter into a contract on behalf of our client and that no binding contract shall be deemed to exist between the parties until contracts have been executed and exchanged.”
Mr Salafia’s response to this was that the question of exchange of contracts was a red herring. There was no evidence about it, and it was not a feature of conveyancing practice in Ireland. He submitted that it had been improper for Mr Smith to have concealed the fact that he had executed one part of the contract on behalf of the defendant.
Having carefully considered the submissions of both sides I am satisfied that those put forward by Mr Durcan are well-founded and should be accepted.
This is not a case in which it was claimed by the plaintiffs that there was ever an oral agreement for the sale of the property. The case made in the statement of claim was that there was a written agreement contained in correspondence, and the case made at the hearing was that a contract came into being as a result of Mr Smith executing the contract on behalf of the defendant. So what has to be considered is whether there is in existence a written contract to which both parties bound themselves. I have already held that there is no such contract in the correspondence. It only remains to be considered whether the contract signed by both parties is such a contract.
As I indicated earlier in this judgment, two copies of the detailed contract were sent by the defendant’s solicitors to the plaintiffs’ solicitors on the 3 October 1994. The despatch of these two copies could not be construed as an offer to sell to the purchaser on the terms stated in the contracts. What the defendant’s solicitors were doing was indicating to the plaintiffs that these were the terms on which the defendant was prepared to negotiate with them. And that a binding contract could not be brought into existence by the plaintiffs signing the contracts was made absolutely clear by the last paragraph of the letter.
“Please note that we have no authority to bind our client and no binding contract shall be deemed to exist until such time as the contracts herein in all cases have been executed by all parties and the full deposits accepted by you (sic).”
The two parts of the contract duly completed by the plaintiffs were returned to the defendant’s solicitors on the 25 January 1995 with a request to return one part duly completed by their clients in early course. The return of the two contracts duly completed was clearly an offer by the plaintiffs to purchase on the terms set out in the contracts. That offer could have been accepted by the defendant by communicating their acceptance of it to the plaintiffs’ solicitors. And the form of that communication would have been the sending to the plaintiffs’ solicitors of one part of the contract duly executed on behalf of the defendant. But the offer was never in fact accepted. Neither part of the contract signed on behalf of the defendant was ever sent to the plaintiffs’ solicitors, so the two parts of the contract signed by the plaintiffs continued to be no more than offers. In the absence of a communicated acceptance no contract ever came into being.
In the leading case of Carlill v Carbolic Smokeball Company [1893] 1 QB 256 Lindley LJ said in the course of his judgment:-
“Unquestionably, as a general proposition, when an offer is made, it is necessary in order to make a binding contract, not only that it should be accepted, but that the acceptance should be notified.”
Since the defendant never communicated to the plaintiffs an acceptance of the plaintiffs’ offer to purchase, no contract ever came into existence and so there is no contract of which the plaintiffs could claim specific performance.
It follows that the plaintiffs’ appeal must be dismissed on the grounds that there was never any contract between the plaintiffs and the defendant.
In my opinion it must also be dismissed on the second ground urged by Mr Durcan, namely, that no binding agreement came into existence because contracts had never been exchanged.
Mr Salafia contended that the exchange of contracts was an English practice and was not a feature of Irish conveyancing practice. Accordingly, it had no relevance to the issue before the Court. The first part of this contention would appear to be correct but, having regard to the special facts in this case, not the conclusion drawn from it. In Mulhall v Horan [1981] IR 364 Keane J said in his judgment at p 377/378 in commenting on the case of Eccles v Bryant and Pollock [1948] I Ch 93:-
“In this latter case, indeed, it was made clear that, in England at all events, where parties enter into an agreement for the sale of real property “subject to contract”, the contract is not complete until the parties have exchanged their copies in accordance with ordinary conveyancing practice in that country. Accordingly, in that case, even though the vendor’s solicitors had signed the contract, it was held that the fact that no exchange of contracts had taken place was sufficient to prevent an enforceable contract from coming into being. In this country, however, the practice of exchanging contracts is not so universally followed as in England, at all events outside Dublin, as is borne out by the evidence of Mr McCarroll, the very experienced solicitor for the plaintiffs.”
It is clear from this passage that the practice of exchanging contracts is a well-established feature of conveyancing practice in England and, while not universally followed in this country “at all events outside Dublin”, it is obviously a practice which would be well-known to members of the legal profession, particularly those practising in Dublin. This is a very relevant consideration in the present case because the Court is not being asked to decide in the abstract if the English practice should be followed. The issue is whether in the light of the negotiations between the parties, and their conduct, it was their intention that it should be.
The importance of the intention of the parties when, as here, negotiations were being conducted “subject to contract”, was stressed by Lord Greene MR in Eccles v Bryant and Pollock [1948] 1 Ch 93. He said in his judgment at p 99:
“When parties are proposing to enter into a contract, the manner in which the contract is to be created so as to bind them must be gathered from the intentions of the parties express or implied. In such a contract as this, there is a well-known common and customary method of dealing; namely, by exchange, and anyone who contemplates that method of dealing cannot contemplate the coming into existence of a binding contract before the exchange takes place.”
In that case the intention of the parties was ascertained from the existence of a method of dealing which was well-known to both parties, namely, that the manner in which parties bound themselves in connection with a sale of land was by an exchange of contracts. In the present case, the intention of the parties has to be gathered from the correspondence between them and their conduct and I am satisfied that when these are examined they establish that their intention was that no contract should come into existence until contracts had been exchanged.
In the first letter sent by Mr Markey to Mr Herlihy, there was a reference to the completion date being “six months from exchange of contracts.” This letter was no doubt given to the plaintiffs’ solicitors and there was no objection to the clear implication from this that the contract was to be finalised by an exchange of contracts. On the contrary, the plaintiffs’ solicitors stipulated in their letter of the 28September 1994 that “no binding contract shall be deemed to exist between the parties until contracts have been executed and exchanged.” What happened subsequently was consistent with the parties intention being as I have indicated. In their letter of the 28 September 1994 the plaintiffs’ solicitors stated: “We await contracts in duplicate with supporting title documents”. The defendant’s solicitors then prepared the contract in duplicate and sent both copies to the purchaser’s solicitors and they returned them executed on behalf of the purchaser. No doubt it would have been more strictly in accord with the English practice if the vendor’s solicitors had sent one copy only of the contract to the purchaser’s solicitors and retained the other copy for execution by the vendor, but this deviation did not prevent the situation from being that until the vendor had executed one of the two copies which had been returned by the purchaser’s solicitors, and sent it to the purchaser’s solicitors, there was no exchange of contracts. And until that had been done no binding contract came into existence.
The usual practice adopted in this country in regard to the execution of a contract for the sale of land is described as follows in Wylie’s “Irish Conveyancing Law” at p 377:-
“Normally what happens is that the purchaser’s solicitor gets its client to sign the contract, as approved, first and sends this signed copy to the vendor or his solicitor for “acceptance”. This may be accompanied by a letter from the purchaser’s solicitor to the effect that his client will not regard himself as bound by the contract until the vendor has signed the contract.”
This was clearly not the practice adopted in the present case as two copies of the contract were sent to the purchaser’s solicitors and it was clearly the intention of the parties that one of the copies returned signed by the purchaser would be signed by the vendor and sent back to the purchaser’s solicitors. This would have effected the intended exchange of contracts and as this was never done no binding contract came into existence.
It should be noted that the conclusion I have reached was determined by the special facts of this case. It does not follow that whenever there is a sale subject to contract no binding contract comes into existence until contracts have been exchanged. Each case must be decided on its own facts.
I would affirm the order of the learned President of the High Court and dismiss this appeal.
Supermac’s Ireland Ltd v. Katesan (Naas) Ltd, High Court, March 15, 1999
JUDGMENT of Mrs Justice Macken delivered the 15th day of March 1999.
1. The Defendants seek by the motion dated the 20th October, 1998 to have the Plaintiffs’ Statement of Claim struck out in its entirety. They seek this order pursuant to the provisions of Order 19 Rule 28 of the Rules of the Superior Courts and under the inherent jurisdiction of this Court.
2. Order 19 Rule 28 reads as follows:
“The Court may order any pleading to be struck out, on the grounds that it discloses no reasonable cause of action or answer and in any such case or in cases of the action or defence being shown by the pleadings to be frivolous or vexatious, the Court may order the action to be stayed or dismissed, or Judgment to be entered accordingly, as may be just”.
3. Quite apart from this rule, the Court also has an inherent jurisdiction to stay proceedings if they are frivolous or vexatious or if they put forward a claim which must fail. It is this inherent jurisdiction which has been relied on to some considerable extent by the Defendants in this application, although I propose to deal with the application pursuant to the rules and pursuant to the Court’s inherent jurisdiction.
4. Insofar as concerns the principles applicable to the Court exercising its jurisdiction on the basis of its inherent powers, the principles have been considered in a number of cases, and the starting point is almost invariably the case of Barry -v- Buckley (1981) IR 306 in which Costello J. said (at p. 308):
“The principles on which the Court exercises this jurisdiction are well established. Basically, its jurisdiction exists to ensure that an abuse of the process of the Courts does not take place. So, if the proceedings are frivolous or vexatious they will be stayed. They will also be stayed if it is clear that the Plaintiff’s claim must fail; per Buckley LJ in Goodson -v- Grierson , 1908 1 KB 761 at 765.
This jurisdiction should be exercised sparingly and only in clear cases; but it is one which enables the Court to avoid injustice, particularly in cases whose outcome depends on the interpretation of a contract or agreed correspondence”.
5. The matter arose again in the case of Sun Fat Chan -v- Osseous Limited (1992) 1 IR 425 where, in the Supreme Court, it was stated by McCarthy J (at p. 428):
“Generally the High Court should be slow to entertain an application of this kind and grant the reliefs sought. Experience has shown that the trial of an action will identify a variety of circumstances perhaps not entirely contemplated at earlier stages in the proceedings; often times it may appear that the facts are clear and established but the trial itself will disclose a different picture. With that qualification, however, I recognise the enforcement of a jurisdiction of this kind as a healthy development in our jurisprudence and one not to be disowned for its novelty though there may be a certain sense of disquiet at its rigour”.
6. Again the issue arose in D.K. -v- A.K. (1993) ILRM 710 in which Costello J. again enunciated the principles which he had previously stated in Barry -v- Buckley, in the following terms:
“What I am required to consider therefore is whether any of the claims against all or any of the Defendants is so clearly unsustainable that I should strike it out”.
7. The matter was again considered in the Supreme Court in O’Neill -v- Ryan (1993) ILRM 557, when that Court approved expressly the approach adopted by Costello J. in the case last cited.
8. All of these cases were considered and the principles again applied more recently by the High Court in Ennis -v- Butterly (1997) 1 ILRM 28.
9. Dealing first with the application made pursuant to Order 19 Rule 28, the plenary summons issued on the 25th May, 1998 and seeks, effectively, two reliefs namely a declaration that by virtue of a recited agreement the Plaintiffs are beneficially entitled to the property set out in the schedule and an order for specific performance of the agreement (dated 7th November, 1997) for the sale by the Defendants to the Plaintiff of the property which is set out in the schedule. The statement of claim was delivered on the 25th November, 1998 and after the appropriate recitals pleads in the following terms:
“5. At all material times up to 7th November, 1997 the first and/or second named Defendants and/or Katesan Limited operated Supermac’s franchised fast food outlets at various locations throughout the country including Rosrea, Thurles, Loughrea, Tullamore and Kilkenny.
6. By an agreement in writing and/or evidenced in writing dated 7th November, 1997 (hereinafter referred to as “the agreement”) and varied in or about 14th November, 1997 and made between the second named Defendant, acting on his own behalf and on behalf of the first named Defendant and Katesan Limited, of the one part and the second named Plaintiff acting on his own behalf and/or on behalf of the first named Plaintiff of the other part, the second named Defendant agreed to, inter alia, sell to the first and/or second named Plaintiffs the various fast food outlets identified in paragraph 5 hereof, the businesses pertaining thereto and the premises for an aggregate consideration of £4,000,000″
10. The Plaintiff pleaded that they were at all times ready, willing and able to complete the purchase of the premises, (or more particularly the outstanding premises) for a consideration which the Plaintiff claims was £370,000. The significance of the difference between £370,000 on the one hand and the £4,000,000 referred to at paragraph 6 of the Statement of Claim is that the Defendants had already sold to the Plaintiffs the several other properties mentioned in paragraph 5 for the sum of £3,630,000.
11. The premises in question are those premises known as 6 South Main Street, Naas in the County of Kildare, as well as part of the lands situated off South Main Street in the town and parish of Naas comprising 85 sq. metres or thereabouts. I mention these as a brief shorthand manner of describing the property.
12. There is, of course, no defence delivered to the claim because the Defendants have quite properly moved as soon as possible after the delivery of the statement of claim, to strike out the claim.
13. In considering whether or not to accede to an application based on Order 19 Rule 28 the Court should consider the pleadings only, ignoring for the purposes of this Rule of the Superior Courts, any affidavit evidence filed. To succeed under this Order, it must be established from the pleadings that the claim is vexatious or frivolous; see Cavern Systems (Dublin) Ltd. -v- Clontarf Residents Association (1984) ILRM 24. From a consideration of the pleadings it seems to me impossible to suggest that the Defendants could be certain that a Court would not accede to the order sought by the Plaintiffs. All the ingredients which would entitle the Plaintiffs to have an order on the statement of claim, absent any evidence or any defence, are such as to justify a Plaintiff moving for Judgment. I am of the view that a Court would be entitled to grant an order both as to the declaration sought and as to the specific performance, if one were to rely on the pleadings alone.
14. In these circumstances I find that the Defendants have not made out a case insofar as Order 19 Rule 28 is concerned.
15. Turning now to the question as to whether or not the Defendants are entitled to have their relief relying on the inherent jurisdiction of the Court, when one is considering a claim of this nature based on the inherent jurisdiction of the Court, it is permissible for affidavit evidence to be filed. A number of affidavits have been filed, and although there are several conflicting elements in the affidavits there are certain principles which Mr Buttenshaw has correctly acknowledged and conceded, including the fact that I must assume:
(a) That every fact pleaded by the Plaintiffs in their statement of claim is correct and can be proved at trial; and
(b) that every fact asserted by the Plaintiffs in their affidavits is likewise correct and can be proved at trial.
16. This particular approach which is adopted as being the correct approach in all of the cases in which affidavit evidence has been adduced, does mean that, insofar as there may be conflict between matters averred to by the Plaintiffs and the Defendants in their respective affidavits, such conflicts must be, at least for the purposes of this application, resolved in favour of the Plaintiff.
17. Having regard to the foregoing I now consider the claim and the affidavit evidence which has been adduced.
18. The facts and the events leading up to the commencement of the proceedings can be summarised fairly simply. The first Defendant runs a fast food restaurant and restaurant franchising business and over a period of years had entered into franchise agreements with various individuals to operate fast food restaurants under the name “Supermac’s”. Before 1997 Katesan Limited, an associated company of the first named Defendant, operated a number of these restaurants from premises which were owned by that company in Loughrea, Thurles, Roscrea, Tullamore and Kilkenny. That company is owned at least partly by the second named Defendant. In about early 1997 negotiations commenced between second named Plaintiff and the second named Defendant with a view to the second named Plaintiff purchasing these restaurant properties as going concerns. At that time the second named Plaintiff was also interested in buying the property the subject matter of these proceedings and the second named Defendant was keen to sell. That property had not previously been operated as a restaurant. It did however, have planning permission to do so. The negotiations were conducted also through the second named Plaintiff and his Solicitors with the second named Defendant and his Solicitors.
19. In late September, 1997 the second Defendant invited a Michael Chambers, (former bank manager and at present a professional mediator) to see whether he might act as a mediator between himself and the second Plaintiff and he agreed to do so. Mr Chambers agreed that he would act as mediator only if both the second Plaintiff and the second Defendant agreed to this arrangement. They did.
20. Mr Chambers then made arrangements for a meeting to be held on the 26th September, 1997 which was held. At the meeting of 26th September, 1997 it seems it was agreed between the second Plaintiff and the second Defendant that the Plaintiff would purchase all five properties which had been operated as “Supermac” outlets and which were owned by the second Defendant or by Katesan Limited, as well as the property at Naas which had planning permission for use as a restaurant. According to the affidavit sworn by Mr Chambers at that meeting the second Defendant informed the second Plaintiff that the property had a sitting tenant and that there was a Court case pending in relation to that. As a result of this difficulty Mr Chambers says that a sum of money was agreed between the parties to accommodate the possibility or eventuality of permitting this property to fall out of the arrangement. He says “in other words figures were agreed for either five properties or alternatively for six properties.”
21. Some exchanges of correspondence took place between the Plaintiffs’ Solicitors and the Defendants’ Solicitors and heads of agreement were finally reduced to writing on the 7th November, 1997. These heads of agreement were reached after detailed negotiations in particular in relation to the appropriateness or otherwise of including within the normal property transfer contract matters involving insurance, take-over of staff, etc. It is said by Mr Chambers in his affidavit in relation to the heads of agreement, that the document was prepared by him on the 7th November, 1997 at the end of a day of negotiations between the parties and their Solicitors, at his house, and that these negotiations had continued for about 11 hours with few breaks. He averred to the fact that during the course of the negotiations it became apparent that the Solicitors for the Plaintiffs did not believe it wholly appropriate to include various matters such as insurance, equipment, fixtures, stock and other matters in the draft contracts for sale and that it would be more appropriate that these be dealt with in a separate agreement. He said that for the purposes of allowing for progress to be made on the issue of contracts for sale he, as mediator, agreed to record the areas in which agreement in broad terms had been reached. The heads of agreement which were executed on the 7th November were executed by Mr Chambers only, but not by the second named Plaintiff or the second named Defendant.
22. I now recite the headings of agreement in so far as they are pertinent to the application under consideration, but before doing so I mention that there was an amendment to the agreement, which was recorded on 13th November, 1997, which amendment document is not executed by any of the parties nor by Mr Chambers.
23. The 7th November agreement which is headed up “Paddy McSweeney and Pat McDonagh – Headings of Agreement” and under the heading “Agreement” it says “Paddy has agreed to sell his freehold premises at Roscrea, County Tipperary, Thurles County Tipperary, Loughrea, County Galway and Naas, Co Kildare together (with) his leasehold premises at Tullamore, County Offaly and Kilkenny, County Kilkenny to Pat McDonagh”. Thereafter there is a consideration listed in the following terms:
“Property only £1,940,000
Leasing £70,000
Equipment all as itemised £300,000
Goodwill relating to business created £1,390,000
Consultant’s fee to be paid to
Paddy Sweeney/Katesan Limited
to ensure smooth transfer of business £300,000”
24. The headings of agreement go on to deal with certain staff issues, the franchises, the insurance, litigation (if any), equipment, stock, services, alarms and so forth. It finishes in the following terms:
“This is a note of the points agreed by Pat and Paddy. The agreement has been reached with mutual respect and regard, to help with the smooth transfer of the property and business and to expedite the completion of the sale of contract”.
25. It will be noted that under the consideration when one totals the purchase price it comes to £4,000,000. Turning to the headings of the agreement which are dated 13th November, 1997, this records as follows:
“Agreement: Total Sale Price £4,000,000 (Four million pounds Irl).
Paddy has agreed to sell as follows: Roscrea £600k, Loughrea £600k
Thurles £855k, Tullamore £200k, Kilkenny £250k also Naas £370k. This is regarding the property only”.
“Consideration: Property only £2,875,000
Equipment all as itemised £475k including £70k of leasing
Goodwill relating to business created £350k
Consultant’s fee to be paid to
Paddy Sweeney/Katesan Limited to ensure
smooth transfer of business £400k up front, but to
cover a period of two years”.
26. The balance of the matters arising appear to be similar to the note on the 7th November and indeed the second page of the headings of agreement dated the 13th November, which was exhibited, is in fact dated 7th November. When one totals the consideration provided for it comes to the sum of £2,875,000 which when added to the figures for equipment, goodwill and consultant’s fees equals £4,000,000 (four million pounds). It would therefore appear clear that what happened between 7th November and 13th November was twofold, namely that a specific sum was allocated to the individual properties out of the total sum involved, and an adjustment was made to the amount itemised for equipment, for goodwill relating to the business and for the consultant’s fees, but that the overall figure of £4,000,000 for the sale of all the properties together with the business and the equipment going with the business remained the same.
27. There are substantial exchanges of affidavits, and significant bundles of exhibits, and it is clear that from the beginning when there were exchanges of correspondence between the Solicitors that each party included the standard clause which one sees in all Solicitors’ correspondence dealing with properties, namely, that no contract is deemed to come into existence until both parties have executed the standard form Law Society Contract.
28. It is equally clear from the exchanges of correspondence that when it came to the actual sale of each of the properties individual contracts were drafted. A factual matter to be considered, at least at the end of the day if not for the purposes of this application is that each and every one of the properties intended to be sold, with the exception of the property in Naas, was in fact sold by the Defendants to the Plaintiffs. However, some time during the course of requisitions, the second named Defendant’s Solicitors indicated that the exchanges in relation to the sale of the property in Naas were not proceeding further.
29. It is contended for by the Defendant that the claim of the Plaintiffs for specific performance cannot succeed. The basis upon which this claim is made under two main headings and the facts supporting those contentions are varied in nature. Essentially the Defendants say:
(a) There was no concluded oral agreement between the second Defendant and the second Plaintiff;
(b) That even if there was a concluded oral agreement between the second Defendant and the second Plaintiff, that such an agreement is unenforceable because there is no sufficient note or memorandum of that oral agreement which would satisfy the provisions of the statute of frauds.
30. In support of the first contention that there was no concluded oral agreement between the parties, the Defendants say that prior to 7th November neither party had any intention of binding themselves to a contract. The Defendants also say that while the headings of agreement is a record by Mr Chambers of matters on which the parties had reached agreement in principle, it was intended that that agreement would be no more than that. The Defendants say that it is clear that this was the understanding and intention of the Plaintiff because the Plaintiff through their Solicitors by letter dated 18th November, 1997 stated:
“The heads of agreement prepared by Michael Chambers are just that, heads of agreement, and obviously as our client was a party to the drafting thereof he is satisfied with same. However, they need to be fleshed out into an agreement and this agreement must be approved prior to signing contracts”.
31. The Defendants also say that that letter which notified the view of the second Plaintiff was headed “subject to contract/contract denied” and had in the final paragraph the standard form of denial that any contract exists.
32. The Defendants also say that if one looks at the headings of agreement viewed in isolation, that the headings do not constitute and are not capable of constituting a binding and enforceable contract, that it was never intended to record the terms of a binding or enforceable contract, that there is no attempt in the document to allocate purchase prices to each of the properties, and that there is no reference to the fact that the particular property in question in Naas was at the time occupied by a sitting tenant who had claimed certain statutory rights. Nor, the Defendants say, is there any mention in the document of when the agreement to sell was to be completed or what deposit was to be paid.
33. In relation to the amended agreement the Defendants suggest that as of 13th November the purchase price of the subject property had not been agreed and that the Plaintiffs’ Solicitors wrote on the 6th November asking what the purchase price was. However, it seems clear that, of the overall purchase price, agreement had been reached as of the 13th November that the purchase price for this particular property would be £370,000.
34. It is the Defendants’ contention that as of 7th November all matters such as the payment of a deposit, the completion of the sale, the question of vacant possession etc. were outstanding matters remaining to be negotiated.
35. On the second point namely that even if there had been a concluded oral agreement between the second Plaintiff and the second Defendant, there is no note or memorandum which is sufficient to satisfy the statute of frauds. The Defendants draw the Court’s attention to the correspondence between the parties’ respective Solicitors, to the fact that the heading of agreement does not record all the essential terms of a contract for sale of the premises and finally that in any event the agreement is not recorded by or on behalf of either Defendant.
36. It is said finally on behalf of the Defendants that the particular property the subject matter of these proceedings was always viewed in a different light from the several restaurant properties and did not form a necessary part of the overall deal. In support of this the Defendants say that an asset purchase agreement which excluded this property was drawn up and the sale of all the other properties proceeded to completion.
37. The Plaintiffs in response to the motion state that there was a concluded oral agreement between the parties, that this was sufficiently recorded in writing for the purposes of the Statute of Frauds, and insofar as the Statute of Frauds is concerned, they say that the document was signed by Mr Chambers as an agent on behalf of the second Defendant. The Plaintiffs submit that Mr Chambers was introduced by the second Defendant for the specific purpose of seeking to reach an agreement in relation to the properties, that the document itself was drawn up following a detailed meeting in the house of Mr Chambers, and that the matters listed in the document were the culmination of two or three previous meetings at which details of the properties to be sold were discussed. The Plaintiffs say that the document was drafted by Mr Chambers (with which Mr Chambers agrees), as a result of the meetings and the Plaintiffs say that it accurately reflects the overall agreement which was that a company on behalf of the Plaintiffs would purchase the premises at Loughrea, Thurles, Roscrea, Tullamore, Kilkenny and Main Street, Naas. It is said by the Plaintiffs that the document was subsequently circulated to the parties.
38. It has been the Plaintiffs’ contention that the second named Defendant entered into the agreement on the basis that he was authorised on behalf of the company which had title to the premises to enter into the negotiations and reach an agreement. The Plaintiff says that although the Naas premises were not at the time operating as a restaurant, the premises had the benefit of planning permission for a restaurant and that this was why it formed part and parcel of the overall agreement. The Plaintiffs point out that the Defendants did not have a Supermac’s branch in Naas and that this was a particularly suitable premises to develop as a fast food restaurant premises.
39. The Plaintiffs also say that the agreement which was drawn up was not just an agreement in principle but that as of the dates in question there was a fully formed agreement on the premises to be sold, the total purchase price for those premises together with fixtures, fittings and goodwill. The Plaintiff’s say that the Defendants wished the transaction to be completed in a “tax efficient manner” and for that reason there was some alteration to the manner in which the purchase price for the individual components making up the entire agreement was allocated, within an overall total consideration which remained at £4,000,000. The Plaintiffs say that insofar as a sitting tenant existed in the Naas premises the agreement reached between them was that the second named Defendant would secure or seek to secure vacant possession of the premises and would be responsible for the cost of doing so. This contention on the part of the Plaintiffs appears to be borne out by the averments made by Mr Chambers in his affidavit where he says that insofar as this aspect of the matter is concerned it was agreed between Mr McDonagh and Mr Sweeney that a sum of money was fixed to accommodate the eventuality of allowing the property to fall out of the deal, having regard to the fact that vacant possession was not then available. Mr Chambers says “in other words figures were agreed for either five properties or alternatively for six properties”. It is acknowledged by the second named Defendant that he has now secured vacant possession of the premises in question. The Defendants had contended that no provision was made for what would happen if vacant possession was not available.
40. In any event the Plaintiffs say that there was adequate part performance of the Agreement.
41. I do not have to decide at this stage whether or not a concluded oral agreement existed. What I have to conclude is whether or not at this time I am in a position to say that the arrangements which were reached between the parties could not possibly constitute an oral agreement concluded between the second named Defendant and the second named Plaintiff. As was stated in Lac Minerals -v- Chevron Corporation (1995) ILRM 161
“A judge acceeding to an application to dismiss must be confident that, no matter what may arise on discovery or at the trial of the action, the course of the action will be resolved in a manner fatal to the Plaintiff’s contention”.
42. I am not confident, that the facts and matters contended for by the Plaintiffs are likely to result in the Court finding at the end of the day that no concluded oral agreement was reached between the parties.
43. In the event that a concluded oral agreement is found to have existed between the parties, I still have to consider whether that concluded oral agreement, is unenforceable by virtue of the contention on the part of the Defendants, that it does not satisfy the provisions of the Statute of Frauds.
44. The first matter to be considered in this context is the claim made on the part of the Plaintiffs that Mr Chambers was acting as an agent for the second named Defendant in reaching the agreement which is recorded in the headings of agreement dated 7th November, as varied (insofar as purchase price is concerned) by the headings of agreement the first page of which is dated 13th November.
45. At this stage it is acknowledged that I have to assume that the Plaintiffs will be in a position to establish to the satisfaction of the Court that Mr Chambers was acting as an agent for the Defendants. That being so it seems to me at this stage that I cannot conclude that the written note, on that basis alone, could be rejected so as not to constitute a note or memorandum for the purposes of the Statute of Frauds.
46. The next contention is that, even if it were the position that Mr Chambers was the agent of the Defendant, an examination of the agreement itself (and even allowing for the variation) would show that its terms inherently fail to satisfy the Statute of Frauds, in particular because it does not contain within it a sufficient degree of detail so as comply with the Statute of Frauds. In that regard it is contended by the Defendant that the purchase price had not been agreed, the property had not been agreed, there was no agreement as to the deposit to be paid, there was no closing date, and there were no provisions made for the special conditions attaching to these premises, namely the fact that there was a sitting tenant. It is contended for by the Plaintiffs, and again I have to accept that they will be in a position to establish this, that what was being sold pursuant to the agreement was an overall package, namely, that in consideration of the payment of the sum of £4,000,000, a series of properties were being sold together with fixtures, fittings, goodwill and equipment, together with provision for a consultancy arrangement between the Plaintiffs and the second named Defendant.
47. The fact that five of the six properties were sold pursuant to standard form contracts in the Law Society format does not in my view satisfy me that there was insufficient identification of the properties or the price. All other things being equal, it seems to me to be eminently proper and appropriate that where there are several properties within an overall agreement, each of the properties might well be sold – also by reference to the Law Society standard form contract which provides for standard form information, for special conditions to be inserted, for general conditions to apply across the board, and for specific arrangements to be made in respect of any peculiarities attaching to each individual property. It is also sensible to approach the sale in this way because each of the properties may well have differing requirements as to the appropriate requisitions to be raised, and differing requirements as to the degree to which title may need to be examined. And finally of course where there is a sale of a number of properties pursuant to an overall agreement, it may be prudent to provide for individual contracts in standard form in anticipation of the possibility that at a future date some or other of the individual properties will be sold on without the others. For convenience in relation to any future potential sale it seems to me clear that it would be tidier, neater and altogether more manageable that the properties should be sold by reference to individual contracts, transfers, etc. So on the contention of the Defendants that support is to be found for the non-existence of a binding agreement in the fact that each of the other properties sold were sold pursuant to Law Society standard form contracts, at this time I do not think that this is conclusive evidence of the non-existence of the overall agreement contended for, or the alleged insufficiency of identification of the properties, or price.
48. I now turn to the matters which the Defendants contend would have to be included in a valid note or memorandum, namely details of the deposit to be paid in respect of each of the properties and details as to vacant possession. It is quite clear that the agreement does not indicate what deposit is to be paid. It is submitted on the part of the Defendants that not only was no deposit agreed but that there was no evidence to support any contention that the parties had agreed that no deposit would be paid, and that in the absence of provision for a deposit it was essential that there should be an indication that the parties had agreed there would in fact be no deposit. In the case of Boyle -v- Lee (1992) 1 IR 555 the principle in relation to a note or memorandum to satisfy the Statute of Frauds was considered, namely, that to be effective, one should be able to establish what are sometimes referred to as the four “Ps”, that is to say the parties, the property, the price and any other essential provisions. Of course that was an appeal from a full hearing, unlike the present application. The parties are I believe, sufficiently identified , although it is true that the actual party holding the interest in the property the subject matter of these proceedings is an associated company of the company which held the title to all the other properties being transferred. However, since the negotiations were carried on by the second named Defendant, I think at the present stage it is sufficient to find that that Defendant negotiated on behalf of whatever party held the title to the several properties in question. As to the properties, they too are sufficiently described in the memorandum. As to the price I think the overall price is adequately described in the memorandum and as to the other essential provisions the law makes it clear that provided the first three elements are present, the fourth element is something to be agreed between the parties. The most that can be said in relation to Boyle -v- Lee as applied to this case is that the absence of a reference to what most parties would regard as an important element in an ordinary agreement namely, the deposit to be paid, raises the question whether the parties reached a concluded agreement in this case. However, that is not a matter upon which I can come to a final decision in this stage in the proceedings, since it will depend at the end of the day on the evidence to be presented and on what appears on discovery and also on the fact that the negotiations were in respect of seveval properties. On this aspect, as well as many others, it is clear that the facts are hotly contested.
49. On the other aspect, namely the absence of a closing date, again I think this falls into the same category as the deposit. What has been said on the part of the Plaintiff is that the second Defendant wished to have an early closing, but the mere absence of a specified date for closing does not mean that the note or memorandum is thereby vitiated.
50. On the final matter which Counsel on behalf of the Defendants contends would have been included, namely the position relating to the tenancy agreement and the fact that there were proceedings in being between the second Defendant and that a sitting tenant at the time of the negotiations, this too falls into the same category as the deposit or closing date. The evidence before the Court at present is that Mr Chambers indicated the parties had made provision for precisely that arrangement, although it is abundantly clear that the provision itself is not recited in the headings of agreement dated 7th November.
51. The Plaintiffs contend further however, that even if the memorandum does not satisfy the Statute of Frauds for the reasons put forward by the Defendants, nevertheless the Court would grant specific performance at the hearing because, the Plaintiffs say, there has been part performance of the agreement. This contention turns on the correct status to be ascribed to the arrangements entered into between the Plaintiffs and the Defendants. If it is found at the end of the day that the arrangement which was entered into constituted a single overall package then it is abundantly clear that much, indeed the vast part of that overall arrangement has been performed by both parties. And if it is the case that an overall package was agreed then I am satisfied that a Court could hold on the evidence presented to date, that there had been sufficient part performance on the part of the Plaintiffs. If however, at the end of the day, (and this is not a matter that lends itself to a conclusion at this time), the Court holds that such arrangements as were entered into, which are of a binding nature, were individual separate and discrete arrangements in respect of several different properties having their binding element in the several individual contracts executed in a format provided for by the Law Society then it seems to me that the claim to part performance is less tenable.
52. It is contended for by the Defendants that the correct interpretation of the arrangements is that these were, in fact, several separate and individual agreements reached in accordance with the standard form contracts of the Law Society, but they make an alternative claim namely that the several other contracts were inter-dependent upon each other and that each was also in turn dependent on the parties executing an asset sale agreement, in contra-distinction to the single arrangement which was being negotiated in respect of the property in Naas the subject matter of these proceedings. However, it seems to me that again this apparent division does not bring home the Defendants’ case at this time. Because of the arrangements which existed between the parties prior to the negotiations it is the case that all of the goodwill, fixtures, fittings, staff, plant, equipment and the consultancy agreement followed on logically from the established franchise arrangement which existed in respect of the five properties. It is not the case that the fixtures fittings or staff could ever have been associated with the separate property in Naas because it had never been the subject matter of the franchise arrangements. No goodwill could possibly attach to any business carried on there (since there was no business carried on there), no staff existed in relation to that property, and so forth. So it seems to me that the existence of five formal contracts in respect of the other properties, their inter dependence one upon the other, and their overall inter dependence on the asset sale agreement does not mean that an overall agreement in respect of six properties had never been entered into.
53. In the circumstances I hold that it would not be appropriate to strike out the proceedings at this point in time. I bear in mind in particular the fact that the Supreme Court has stated that while the facility to strike out a case in limine on the grounds that it cannot possibly succeed is one from which the Court should not shirk, it is equally the case that the Supreme Court has stated it is a remedy which ought to be applied sparingly, and in general ought to be applied only to circumstances where there are undisputed facts. The very last thing that can be said about these proceedings is that there is any area in which there are undisputed facts.
54. I find against the Applicants both under the Rules of the Superior Courts and under the Court’s inherent jurisdictions.
Duffy v Ridley Properties [2008] I.E.S.C. 23 Judgment of Mr Justice Finnegan delivered on the 30th day of April 2008
By an Agreement for Sale dated the 7th May 2003 made between Ridley Properties Limited (“the Vendor”) of the one part and the respondent (“the Purchaser”) of the other part the Vendor agreed to sell and the Purchaser agreed to purchase lands (hereinafter “the lands”) being part of the lands comprised in Folio 12382 of the Register County Longford therein described as follows:-
“ALL THAT AND THOSE part of the property of the townland of Edgesworthtown in the Barony of Ardagh and County of Longford being part of the property described in Folio 12382 of the Register of the County of Longford comprising 2.05 acres or thereabouts statute measure being the property shown shaded green on the attached map hereto held by the Vendor in fee simple.”
The Agreement for Sale was in the Law Society of Ireland form of General Conditions of Sale 2001 edition. The following Special Conditions are relevant:-
“Special Condition 6
The Vendor shall grant a right of way to the Purchaser on completion over the access road at present being constructed by the Vendor. The grant of said right of way shall be incorporated into the transfer to the Purchaser. The access road shall be completed to the satisfaction of the Purchaser’s architect prior to completion.
Special Condition 7
The Vendor shall arrange for a wall to be constructed on the area marked red on the map attached hereto prior to completion and the construction of the said wall, the dimensions and materials used shall be agreed with the Purchaser’s architect before the commencement of the said works.”
The map attached to the Agreement for Sale was a photocopy of the Land Registry map marked as indicated. It contained the following legend:-
“Area shaded green 2.05 acres excl. public road”.
The legend was signed Mary O’Hara B.E. M.I.E.I., Mary O’Hara and Co. Limited, Civil Engineering Consultants, Market Street, Ballaghaderreen. The purchase price was €520,000 with a deposit of €52,000. The closing date was two weeks from the date of the Agreement for Sale. The interest rate specified was 12% per annum.
On the 2nd September 2003 the Vendor issued a completion notice requiring completion of the purchase within a period of 28 days after service of the notice and making time of the essence. In circumstances which I will detail hereafter the purchase was not completed in accordance with that notice. The Vendor issued the present proceedings on the 25th November 2003 seeking specific performance of the Agreement for Sale and damages in lieu of or in addition to specific performance. In February 2004 the Purchaser became aware that an Agreement for Sale had been entered into in respect of the same or substantially the same lands between the Vendor and the second named defendant. That Agreement for Sale was dated the 10th November 2003. The second defendant completed that purchase on the morning of the 28th November 2003.
Progress of the Transaction between the Vendor and the Purchaser
Kilrane O’Callaghan & Company Solicitors acted for the Vendor and Collins Crowley & Company Solicitors for the Purchaser. Prior to returning the executed Agreement for Sale Collins Crowley & Company obtained confirmation that the wall mentioned in Special Condition 7 would be constructed by Mr Kane (the Purchaser of an adjoining plot) and that the right of way provided for in Special Condition 6 would be coloured and identified clearly on a map. Both Special Conditions were the subject of discussion between the parties after which it was agreed that the Purchaser would be free to connect to the access road when completed and that the wall was to be between two and three metres in height. On the 15th May 2003 the Purchaser’s solicitors raised requisitions on title and submitted a draft transfer for approval. The Vendor’s solicitors replied to the requisitions on title on the 16th May 2003 and promised to forward a map showing the right of way duly marked in the coming days and this was done on the 21st May 2003. However the map furnished also contained a legend signed by Mary O’Hara which referred to the area to be transferred as 2.2 acres rather than 2.05 acres as provided for in the Agreement for Sale. By letter dated 3rd June 2003 the Purchaser’s solicitors queried this. By letter dated 4th June 2003 the Vendor’s solicitors explained that the measurement in the Agreement for Sale excluded the public roadway whereas the second map provided included one half the roadway adjoining the lands agreed to be sold. The Purchaser’s solicitors submitted the map to an architect for approval and a digital survey was carried out by him. His conclusion was that the area as marked on the second map excluding the roadway comprised 1.95 acres and including one half the roadway 2.031 acres: there was also a difference in the boundaries along the western side of the lands agreed to be sold between the two maps. The Vendor’s solicitors responded by letter dated 15th August 2003 in the following terms:-
“The map attached to the contract entered into between our respective clients was for identification purposes only. The discrepancy arises from the fact that the map furnished with the contracts was a copy map only which resulted in the dimensions of the map being distorted.
The map furnished with a letter of 21st May is also a copy of the original map file plan which may explain the discrepancies. In any event, a digital survey of any property will reveal discrepancies as between the boundaries and the file plan and those on the ground.
Notwithstanding the above our client is prepared to accommodate your client insofar as the corner points of ‘plot C’ is concerned and amend the corner points accordingly.”
There was delay in replying to the letter of 15th August 2003 as the solicitor dealing with the matter in the Purchaser’s solicitors’ office was on holiday and on the 2nd September 2003 the notice to complete was served. On the 3rd September 2003 the Purchaser’s solicitors did reply in the following terms:-
“We refer to your letter of 15th August last in response to our letter of 4th July 2003 and confirm that we have forwarded a copy of the same to our clients architects Messrs J.P. McHugh & Company and requested a further report from them as a matter of urgency.
Our client has, however, requested us to point out to you that Special Condition No. 7 of the contract for sale has not yet been complied with. We understand that the wall has been completed but does not comply with the condition as the dimensions and materials used in the wall were never agreed directly with the Purchaser and his architect J.P. McHugh & Company. The wall itself is not plastered. It is of varying heights ranging from metre to 1.75 metres. There are also pillars constructed protruding on to the proposed site. The wall should be 3 metres high in order to conceal the rear of the adjoining premises.”
The Vendor’s solicitors replied by letter dated 5th September 2005 in the following terms:-
“We refer to yours of the 3rd September. The issue of the wall cannot hold up closing of this sale as this is the first time we have heard from your client in relation to this specific requirement regarding the wall. In any event, we note he now requires a 3 metre high wall. We have informed our clients of this and they have stated that this wall will be in place by Monday 8th September. We therefore wait hearing from you as a matter of urgency regarding closing and in that regard our client still intends to rely on the completion notice served herein.”
A further survey by the Purchaser’s architect disclosed that the area to be transferred as shown on the second map comprised 1.95 acres resulting in a shortage of .10 of an acre. There was an offer by the Purchaser to complete the purchase on the basis of a pro rata reduction in the purchase price of €25,366. The Vendor’s solicitors replied that the lands to be sold were clearly defined on the ground at all times: the lands to be sold comprised 2.05 acres or thereabouts. Further that it is not a valid exercise to rely on digitally generated maps which will differ from Land Registry maps based on Ordnance Survey Sheets. The suggestion of an abatement in the purchase price was rejected. Correspondence continued between the parties without prejudice to the completion notice but there was no resolution on the matters in issue. On the 31st October 2003 the Vendor’s solicitors wrote that his client was relying on the completion notice served and proceeding accordingly. On the 6th November 2003 the Purchaser’s solicitor wrote that counsel had been briefed to draft High Court proceedings. By the 11th November 2003 the Purchaser believed that the Vendor was in the course of re-selling the lands. The plenary summons herein was issued on the 25th November 2003 and a lis pendens was registered on the 27th November 2003.
It appears from affidavits filed in the matter that the Vendor entered into an agreement with the second named defendant to purchase the Lands on the 10th November 2003 at a purchase price of €465,000. Requisitions on Title were raised on the 12th November 2003 and replied to on the same day. The requisitions were in the Law Society of Ireland standard form 2001 edition and included the following requisitions:-
14.4 Is there any litigation pending or threatened or has any Court Order been made in relation to the property or any part of it or the use thereof or has any adverse claim thereto been made by any person.
14.5a Has any person other than the Vendor made any direct or indirect financial contribution or being the beneficiary of any agreement or arrangement whereby that person has acquired an interest in the property or any part of it.
b If so furnish now details of the interest acquired or claimed.
The Purchaser registered a lis pendens on the 27th November 2003. The defendant completed his purchase on the 28th November 2003 having carried out searches on the afternoon of the 27th November at 4 p.m. which did not disclose the lis pendens. The defendant’s dealing was lodged in the Land Registry on the 10th February 2004 and registration of the same has now been completed.
Findings of Fact
The learned trial judge heard evidence over three days. Evidence was given by the Purchaser, two directors of the Vendor, the second named defendant, the solicitors for the Purchaser, the solicitors for the Vendor, the Purchaser’s architect and the Vendor’s engineer. The learned trial judge made findings of fact as follows:
1. The lands the subject matter of the Agreement for Sale form part of Folio 12382 of the Register County Longford and are situate on the main road from Edgesworthtown to Longford and close to Edgesworthtown.
2. The Vendor, a development company, owned an adjacent site upon which it proposed to build houses. Planning permission for that development required the use of portion of Folio 12382 of the Register County Longford for an access road and footpath and open space. Prior to entering into the Agreement for Sale the Vendor sold a small portion of Folio 12382 to Mr. Kane who owned an adjacent garage business.
3. The lands comprised in the folio are the site of the old Mart in Edgesworthtown and the Mart buildings remained on the site.
4. From 2001 to April 2003 the lands were on offer for sale. In April 2003 the second named defendant entered into negotiations to purchase the same. At that time there were no physical features to indicate the proposed boundary of the site on the south-western, western and north-western sides (“the western boundary”). The boundary of the small portion sold to Mr. Kane was not identified on the lands. Yellow markings had been placed at certain points to roughly identify the western boundary.
5. The purchase price of €480,000 was agreed with the second named defendant and a deposit paid. Before a contract was signed the Vendor withdrew as a result of a dispute between its directors.
6. The Purchaser is a supermarket owner operating a supermarket in Edgesworthtown. The Purchaser commenced negotiations for the lands on 14th April 2003 with the Vendor’s auctioneer but concluded the terms of an agreement directly with the Vendor. He was informed by the Vendor’s auctioneer that the lands comprised 2.3 acres, was made aware that the Vendor was retaining a portion of the Mart site for the purposes of an access road, footpath and green area but was not made aware of the yellow markings.
7. Prior to signing the contract the Purchaser was aware of the area of the site being sold and had seen the yellow markings on site but was not told that they were definitive boundary marks.
8. The Agreement for Sale was signed and matters proceeded between solicitors as hereinbefore detailed.
9. There were two site meetings as follows:-
(a) On the 6th May 2003 the Purchaser, his architect Mr. McHugh and Mr. Groarke a director of the Vendor attended on site.
(b) On 5th June 2003 the same persons together with Ms O’Hara the Vendor’s engineer attended on site. There was a conflict in the evidence and the learned trial judge made the following findings in relation to the meetings. There are thirteen findings of fact in relation to these meetings.
(i) Prior to the first meeting Mr. McHugh had been instructed by the Purchaser that he was purchasing 2.05 acres excluding the public road.
(ii) Mr. Groarke confirmed that the area being transferred was 2.05 acres.
(iii) At the first meeting there were yellow markings on the walls of the Mart and elsewhere and Mr. Groarke indicated that he had put on those marks as a rough guidance of the proposed western boundary. Further the marks could not be relied upon to properly determine that boundary. The Purchaser did not suggest that the marks had previously been given to him as definitive markings.
(iv) Mr. Groarke, at Mr. McHugh’s request, agreed that he would have his engineer mark definitive points from which the western boundary of the site could be deduced.
(v) The purpose of Mr. McHugh attending the site was to advise the Purchaser as to the area he was obtaining by reference to the actual western boundary marked on the ground.
(vi) There was considerable uncertainty at the first meeting as to what was the accurate line for the western boundary. In particular it was pointed out by Mr. McHugh that on the map attached to the contract the western boundary was a straight line whereas on the ground it was “meandering somewhat”.
(vii) At all times Mr. Groarke made clear that his main concern was that he would have enough space between the western boundary of the property being sold and the western boundary of the lands comprised in the folio to construct a road and footpath to serve the housing development which the Vendor proposed to commence at the rear of the Lands.
(viii) On 5th June 2003 Ms. O’Hara met with Mr. Groarke at the site prior to meeting with the Purchaser and Mr. McHugh.
(ix) Ms. O’Hara was the person who had prepared the map attached to the Agreement for Sale and the second map. The maps had been prepared by her reference to a map used in the application for the planning permission for the housing development at the rear of the Lands. Her instructions were to include in the property for sale that portion not required for the access road footpath and green space as per the planning permission. She prepared the maps by indicating a boundary which she considered excluded those requirements.
(x) There were no physical features on the western boundary which identified the boundary of the site being sold as marked on the map. The fact that part of the old Mart building went through the proposed boundary line at certain points made identifying and marking the boundary line on the ground more difficult. Ms. O’Hara and a colleague identified certain physical features such as a bridge on the road and a drain at the north-eastern point which she considered were identifiable from the copy folio map and from those points scaling back the maps had been prepared. She attempted to mark with red paint appropriate points to identify the intended boundary line on the ground. Certain of these were on the old Mart building. Others were on the ground, a wall and one on a sheet of galvanised iron.
(xi) Ms. O’Hara has no recollection of using a ranging rod. Mr. McHugh was clear in his evidence that a ranging rod was there and appeared to him to have been used as a marker. The learned trial judge concluded on balance that a ranging rod was used by Ms. O’Hara and her colleague as a marking point on the site. On 5th June 2003 when Mr. McHugh and the plaintiff arrived Ms. O’Hara indicated the points marked. She did not give to Mr. McHugh any dimensions she had used. Mr. McHugh identified the marks on that day.
(xii) Mr. McHugh returned to the site a third time a few days later and carried out a digital survey using electronic equipment known as a total station and data logger. He measured the total area enclosed by the site now identified with red markings as 1.95 acres. Mr. McHugh sent to the Purchaser’s solicitors a report dated 27th June 2003 following this survey. Whilst an attempt was made at the hearing to explain the difference in area by reference to the possibility of the red mark on the galvanise sheet having been moved the learned trial judge concluded as a matter of probability it was not so caused.
The learned trial judge made a number of findings in relation to the evidence as to what transpired between the solicitors. The following which are relevant:-
1. The Vendor maintained that it was entitled to rely upon the completion notice. The Purchaser at all times asserted that it was an invalid completion notice.
2. The Purchaser’s solicitor continued to seek a meeting on site between the Vendor’s engineer and the Purchaser’s architect. This was resisted by the Vendor’s solicitors. The Purchaser’s solicitors as a ground for contending that the completion notice was invalid maintained that there remains substantial uncertainty as to the identity on the ground of the Lands.
3. On receipt of a letter from the Vendor’s solicitors dated 31st October 2003 informing them that the Vendor was relying on the completion notice the Purchaser’s solicitors proceeded to instruct counsel and instituted the present proceedings on the 25th November 2003 and the registered a lis pendens on the 27th November 2003.
4. The second named defendant’s purchase was completed on the morning of the 28th November 2003.
Proceedings before the High Court
On the pleadings the issues arising between the Vendor and the Purchaser are as follows.
1. Was the completion notice valid?
2. If the completion was not valid should the court exercise its equitable jurisdiction and refuse an order for its specific performance.
As to the validity of the completion notice it was contended on behalf of the Purchaser that at the date of service of the same the Vendor was not ready willing and able to complete for two reasons:-
1. Special Condition 7 had not been complied with as the boundary wall had not been built.
2. In relation to the identity of the lands agreed to be sold the Purchaser could not be certain of the identification on the ground of the Lands.
It was not in dispute that the wall had not been built. Equally it was not in dispute that the Purchaser had not given the Vendor his specifications and requirements for the wall and that no request had been made by the Vendor to the Purchaser for such specifications. On this ground the learned trial judge was satisfied that the Vendor was not ready, willing and able to complete the Agreement for Sale on 2nd September 2003 the date of the completion notice and accordingly she held the completion notice to be invalid. In relation to the second reason the learned trial judge held that the Vendor was not ready, willing and able to complete the sale to the Purchaser of the lands as the Purchaser could not be certain of the identify on the ground of the lands. On this ground also the learned trial judge held the completion notice is invalid. The particulars in the Agreement for Sale refer to 2.05 acres as did the map attached to the same, the latter clarifying that this area excluded the public road. The second map differed from the map attached to the Agreement for Sale at the western boundary and it is not possible to determine with certainty where the western boundary is located. A discrepancy of 0.10 of an acre might be considered to be insignificant and covered by the words “or thereabouts” in the particulars and accordingly there was no uncertainty as to the area to be transferred. The area shown on the second map intended to be attached to the transfer is shown as 2.22 acres. The learned trial judge found that the area of the land to be transferred as shown on the second map excluding the public road was 1.9 acres and that it was obvious to the naked eye that there were differences in the location of certain of the corner points on the western boundary between the map attached to the Agreement for Sale and the second map intended to be attached to the transfer. There was no agreement as of the 2nd September 2003 as to the identity on the ground of the lands to be transferred. The learned trial judge went on to find as follows:-
“There was no Special Condition included in the contract as to how the new western boundary was to be identified on the ground. Having regard to the evidence of Ms. O’Hara as to the nature of the map used for the contract I have concluded that it was not possible to identify in accordance with any general condition in the contract the western boundary of the site to be sold by reference to the map attached to the contract”.
The learned trial judge continued:
“Counsel for the first named defendants submitted that even if there were what was considered to be a significant difference in the area enclosed by the red markings and that agreed to be sold in accordance with the particulars of a contract, that such matter could be dealt with under Condition No. 33 of the General Conditions of Sale. It does not appear to me that on the facts herein having regard to the uncertainty surrounding exactly the lands agreed to be sold that condition 33 applies. However even if it does so, in accordance with the decisions of the High Court in Keating v. Bank of Ireland [1983] I.L.R.M. 295 and O’Brien v. Carney [1995] 2 I.L.R.M. 232 (with which I agree) a Purchaser is not obliged to comply with a completion notice where the question of compensation for mis-description has not been settled”.
Accordingly the learned trial judge found that the completion notice was invalid.
The learned trial judge then proceeded to consider whether or not applying equitable principles the remedy of specific performance being discretionary she should order specific performance of the Agreement for Sale. She referred to Farrell Irish Law Specific Performance at p. 223 where the author stated:-
“The relief may be withheld as an exercise of that discretion even where a plaintiff proves a valid contract and no particular defence or ground for refusal is established.”
The Vendor contended that specific performance should not be granted for reasons of the uncertainty surrounding the lands to be transferred under the contract. While this case was made in written and oral submissions no such plea was contained in the defence. The submission was only made at the end of the evidence and the learned trial judge concluded that it would be an unfair procedure to the Purchaser if she were to entertain a submission at that stage of the proceeding that the uncertainty was such to render the contract invalid. In the alternative the Vendor relied upon a further passage in Farrell Irish Law of Specific Performance at p. 7 where it is stated:-
“If a contract is ‘completely uncertain’ it is equally void at law and in equity. Occasionally there is a degree of uncertainty which will lose the right to specific performance without also destroying remedies at law. As Lord Redesdale pointed out in 1805
‘If it is certain to a degree, but doubtful as to the extent, equity would, I think would act infinitely more wisely in leaving the party to the old remedy by action for damages, than to run the hazard of doing injustice, in doing what is said to be more complete justice, by decreeing a specific performance’.
The burden is on the plaintiff to satisfy a court of an agreement, the terms of which ‘are sufficiently certain to justify a decree for specific performance’. He may expect to fail if he does not satisfy the court of the certainty of the material terms even though it may believe that some complete and binding agreement was reached”.
On this submission the learned trial judge found as follows:-
“For the reasons which I have already set out above I have concluded that the contract for sale of the 7th May 2003, between the plaintiff and the first named defendant did not desribe with certainty the lands to be transferred herein nor did it include either in the general conditions nor by way of a Special Condition a mechanism by which the western boundary of the plot to be transferred was to be identified on the ground.
I have concluded that this is a case where the uncertainty surrounding the determination on the ground of the plot to be transferred is such that the court should depart from the normal rule and should now exercise its discretion to refuse an order for specific performance and to award the plaintiff damages in lieu thereof. I am reinforced in that view by reason of the attitude of the plaintiff as demonstrated in the correspondence sent on his behalf by his solicitor in the month of September and first half of October 2003. At that time, following the service of the alleged completion notice, as already stated there was at the time, what on the first defendant’s side were “without prejudice” offers as to the terms on which the sale might be completed. For much of the month of September 2003 at least it appears that both parties were genuinely interested in completing the sale but yet no agreement could be reached as to the terms according to which the sale would be completed. In September 2003 the plaintiff was both seeking a reduction in the purchase price and a meeting between respective engineers the purpose of which was to attempt to agree new boundaries from those marked with the red paint on the site. The plaintiff at this stage was resisting any attempt to compel him to complete the transaction and the solicitor stated in the letter of the 23rd September 2003 ‘no court would compel our client to close a transaction where the land to be transferred to him has not yet been definitively identified’.
At no stage throughout this correspondence did either party suggest that the contract provided a mechanism for determining the boundary of the lands which were to form part of the sale. Even when, in October 2003, agreement appears to have been reached upon a reduced purchase price the solicitor for the plaintiff was maintaining as in the letter of the 22nd October 2003, that the boundaries are not adequately defined.
By this point in time the solicitors for the plaintiff had introduced the requirement of the lending institution and created, whether unwittingly or not, what appears to have been a justifiable apprehension on the part of the defendant as to the plaintiff’s then enthusiasm for completing the transaction.
I wish to make clear that the behaviour of the plaintiff in September and early October 2003 simply confirms me in the view which I have formed. It of itself is not the primary reason for which I have determined the court should refuse an order for specific performance. It hardly seems equitable to grant an order for specific performance in favour of a party who has resisted completing a contract for sale upon the basis that the boundaries are not adequately defined when the contract itself does not provide any mechanism or Special Condition as to how those boundaries should be defined. Such definition in a manner acceptable to both parties remains dependant upon agreement being reached between the parties or their respective engineers or architects. The court has no power to compel such an agreement.”
The learned trial judge went on to hold that the Purchaser was entitled to damages in lieu of specific performance.
The learned trial judge having so decided an issue arose in the following circumstances. The statement of claim sought damages for breach of contract in the following terms:-
“Further, or in the alternative, damages for breach of contract and/or negligence against the first defendant, its servants or agents.”
The learned trial judge asked the Purchaser’s counsel on the opening of the case if the claim being pursued was for specific performance only. The effect of counsel’s reply was that the Purchaser was pursuing a claim for specific performance with the alternative of damages in respect of the damage, loss and expense sustained by the plaintiff by reason of the wrongful repudiation of the Agreement for Sale. In the course of the exchanges counsel said:-
“I am asking basically for an affirmation of the contract, My Lord, and a decree of specific performance.”
The learned trial judge understood that the Purchaser was seeking specific performance but was not seeking any special damages; rather general damages were being sought on the basis that the proposed development of the lands by the Purchaser had been delayed. No evidence was given to support a claim for special damages as to the difference in value of the site between May 2003 and the date of the hearing. At the conclusion of the Purchaser’s evidence counsel on behalf of the Vendor asked that the Purchaser should then elect as to the remedy he was seeking. It was submitted that if the Purchaser elected to seek specific performance he is not entitled to damages. As a result of exchanges it was quite clear that the Purchaser was seeking specific performance but if for whatever reasons that relief were not granted he was seeking damages in lieu of specific performance. Further if specific performance should be granted the Purchaser was seeking damages in addition thereto for the delay in completion. In relation to damages in addition to specific performance counsel said that he was not seeking special damages but general damages for delay for the loss of business opportunity. Accordingly the Purchaser’s claim for damages encompassed the following:
1. In the event that specific performance is not awarded, damages in lieu of specific performance.
2. In the event that specific performance is granted, damages in addition thereto by way of general damages for delay and the resulting loss of business opportunity. The Purchaser’s evidence had been that he proposed building a new supermarket on the lands which would be twice as big as the one which he operated and would have resulted in a natural expansion of the business and that that has been delayed.
The learned trial judge decided to leave over the hearing of further evidence should that be necessary in relation to damages in lieu of specific performance. She then made the following ruling:-
“Notwithstanding this ruling I have concluded that it is necessary for me in order to determine the appropriate amount of damages to which the plaintiff is entitled against the first named defendant to obtain further evidence in relation to the following matters only:-
(a) Whether the solicitor’s for the first named defendant still retain the deposit paid by the plaintiff pursuant to the contract. If so the amount of interest earned thereon to date. If not, the date upon which the same was paid to the first named defendant.
(b) Whether any fees were paid by the plaintiff to Mr McHugh or are due and owing by the plaintiff to Mr McHugh for the work done by Mr McHugh for the plaintiff in connection with the contract in 2003.
(c) Whether any fees have been paid or are due and owing by the plaintiff to his solicitor in connection with the work done in connection with the contract up until the 22nd October 2003.”
Having determined that an order for specific performance should be refused it was unnecessary for the learned trial judge to consider the claim against the second named defendant.
The damages hearing and the award of damages
When the matter was re-listed in relation to the time and mode for taking of the additional evidence referred to in the learned trial judge’s judgment counsel for the Purchaser informed the court that the learned trial judge had misunderstood the plaintiff’s position in relation to his claim for damages in lieu of specific performance and that it had been the intention of the plaintiff at all times to pursue a claim for loss of bargain based on the increased value of the property since the date of the contract in the event that specific performance should be refused. He sought to adduce evidence of the current value of the lands. Counsel for the Vendor objected to the admission of any evidence other than that referred to in the judgment of the learned trial judge. The learned trial judge had understood from counsel for the Purchaser that he was not making any claim for special damages whether in relation to a claim for damages in addition to specific performance or in relation to damages in lieu of specific performance. Counsel for the Purchaser informed the court that in dealing with the questions raised as to the nature of the claim for damages he was addressing only the claim for damages in addition to specific performance. The additional evidence which the learned trial judge directed in her judgment of the 7th July 2005 was so directed on the basis of her misunderstanding of what she had been told by counsel for the Purchaser that no claim for special damages was being made. She had understood counsel to have informed her that no claim was being made, that the lands had increased in value between May 2003 and the date of the hearing. The learned trial judge carefully re-considered the transcript of the exchanges which took place on the second day of the hearing. No order had been made up on foot of the learned trial judge’s ruling. The learned trial judge determined that in the circumstances she was entitled to alter the ruling which she had given.
The learned trial judge proceeded to hear evidence of valuation. In relation to the deposit of €52,000 she held that the Purchaser was entitled to the return of the same together with interest earned thereon. The Purchaser’s valuer placed a valuation on the lands as at the 7th July 2005 of €2,000,000. The Vendor’s valuer placed a valuation on the lands at that date of €900,000. The learned trial judge held that the 7th July 2005 was the appropriate date by reference to which the loss of bargain should be calculated. The learned trial judge determined that the value of the lands as at the relevant date was €1,400,000 and the measure of damages for loss of bargain was accordingly €880,000. She refused to assess damages at an earlier date on the basis of the Vendor’s submission that the proceedings ought to have been heard and determined in July 2004 and also refused to take into account that the Vendor had not been enriched by the second transaction the same having been at the reduced price of €485,000.
The Notice of Appeal and Notice to Vary
The vendor in its Notice of Appeal relies upon the following grounds:-
1. The learned trial judge erred in law in determining that the plaintiff was entitled to an award of damages in lieu of specific performance.
2. The learned trial judge erred in law in awarding damages in lieu of specific performance where it was determined that the court did not have the power to compel the Agreement by reason of the fact that the contract did not describe with certainty the lands to be transferred and did not contain a mechanism by which the boundaries were to be defined.
3. Since the reason why the learned High Court judge refused to grant specific performance was that the alleged contract neither specified the lands to be sold nor provided a mechanism for those lands to be ascertained it followed that there was no binding contract between the plaintiff and the first defendant and consequently there could be no breach of that alleged contract by the first defendant, so that it was inappropriate to award the plaintiff damages for breach of contract by the first defendant.
4. The learned trial judge erred in law in awarding damages in lieu of specific performance when the logic of the judgment required a finding that there was not a binding contract between the plaintiff and the first defendant.
5. The learned trial judge erred in law in awarding damages in lieu of specific performance when specific performance could not have been decreed because no valid or enforceable contract existed between the plaintiff and the first defendant.
6. Since the learned trial judge could not have decreed specific performance it was not open to her to award damages in lieu of specific performance.
7. The learned trial judge erred in law in not finding that there was no concluded contract between the plaintiff and the first defendant.
8. The learned trial judge erred in law in allowing the plaintiff adduce evidence of loss of bargain after the issues had been determined and judgment handed down on the 7th day of July 2005.
9. The learned trial judge erred in law in measuring damages for loss of bargain.
10. The learned trial judge erred in law in not assessing damages for loss of bargain by reference to the current market price at the date of the judgment. (sic)
11. The learned trial judge erred in law in not assessing the quantum of damages by reference to a date earlier than the date of judgment.
12. The learned trial judge erred in the method of assessment of the current market value of the said property.
13. The measurement of damages by reference to current property values where there has been a dramatic increase in those values is unfair and inequitable and does an injustice to the first defendant.
14. The learned trial judge ought to have taken into account the finding that there was a justifiable apprehension on the part of the first defendant as to the plaintiff’s enthusiasm for completing the transaction when measuring damages herein.
15. The amount of the award of damages was excessive and amounts to a windfall profit for the plaintiff.
The Purchaser’s notice to vary challenges the learned High Court judgment insofar as she refused specific performance and granted damages in lieu and seeks an order for specific performance.
The following grounds are relied upon:-
1. The finding of the learned trial judge that there was uncertainty in relation to the identity of the property to be sold when the respondent agreed to purchase the property is not borne out by the weight of the evidence.
2. The learned trial judge failed to take account of the fact that the appellant altered the boundaries of the lands to be sold after the initial agreement with the respondent.
3. The learned trial judge was mistaken in fact in finding that the respondent was not told that the yellow markings on the site where definitive boundary marks.
4. The learned trial judge was mistaken in fact and in law in failing take account of the fact that the appellant by agreeing to take a reduced purchase price had acknowledged that it had reduced the size of the property to be sold from that originally offered to the respondent.
5. The learned trial judge was mistaken in fact and in law in holding that the uncertainty, if any, in relation to determining the lands to be transferred was such as to deprive the respondent of his entitlement to a decree for specific performance.
6. The learned trial judge was mistaken in fact and in law in holding that the uncertainty if any in relation to the western boundary of the lands to be transferred was such as to deprive the respondent of his entitlement to a decree for specific performance.
7. The learned trial judge was mistaken in fact and in law in holding that the uncertainty, if any, in relation to determining the lands to be transferred was such as to justify her exercising her discretion to refuse a decree to a specific performance.
8. The learned trial judge was mistaken in fact and in law in failing to take any or any sufficient account of the fact that the appellant having conceded that the corner points of the boundaries should be adjusted failed to take any further steps in that regard notwithstanding the repeated requests of the respondent that the respective engineers meet on site for that purpose.
9. The learned trial judge was mistaken in fact in finding that the appellant had justifiable apprehension as to the respondent’s enthusiasm for completing the transaction.
10. The learned trial judge was mistaken in fact in holding that the respondent had any reasons other than his justifiable requirement that the boundaries of the lands be properly defined on the ground for not completing the transaction.
11. The learned trial judge was mistaken in fact and in law in finding that the contract should have included a mechanism for the finding the western boundary of the lands.
12. The learned trial judge erred in law when, having found that there was a validly subsisting contract and that the twenty eight day completion notice served by the appellant was invalid and of no effect failed to exercise her discretion by granting specific performance.
13. The learned trial judge erred in failing to take cognisance of the fact that the appellant had subsequently constructed boundaries around the lands the subject matter of the contract and that the lands enclosed by the said boundaries comprised just short of 2.05 acres resulting in the removal of the uncertainty, if any, in
relation to the identity of the lands to be sold.
14. The learned trial judge erred in not taking any or any sufficient cognisance of the conduct of the appellant purporting to enter into a contract with the second named defendant for the sale of the said lands when there was already an existing contract with the respondent.
15. The learned trial judge erred in not taking any or any sufficient cognisance of the fact that the appellant in purporting to enter into a contract with the second named defendant was prepared to accept a purchase price which as €55,000 less than that in the contract with the respondent for the same lands a reduction of 10.5% in rising market.
16. The learned trial judge erred in not taking any or any sufficient cognisance of the conduct of the appellant in giving false and misleading replies to requisitions to the second named defendant in which they knew to be false and misleading in order to avoid disclosing the existence of the prior contract with the respondent.
17. The learned trial judge erred in not taking any or any sufficient cognisance of the conduct of the appellant in giving false and misleading replies to requisitions and which they knew to be false and misleading in denying that there was any dispute or any litigation pending in order to avoid disclosing that another party had an existing interest in the property.
On the hearing before this court the Vendor’s grounds of appeal were reduced and consolidated to four grounds as follows:-
1. That the learned trial judge was in error in determining that the plaintiff was entitled to an award of damages in lieu of specific performance.
2. That the learned trial judge was in error in allowing the plaintiff to adduce evidence of loss of bargain after the issues had been determined.
3. The learned trial judge was in error as to the relevant date for assessing damages.
4. That the learned trial judge was in error in the method of assessing valuation.
I propose dealing with each of these submissions in turn.
1. That the learned trial judge was in error in determining that the plaintiff was entitled to an award of damages in lieu of specific performance.
The learned trial judge found that that there was a subsisting contract, the notice to complete being invalid. Nonetheless she found that it was not possible to identify the Lands on the ground in accordance with any general condition in the contract, in particular the western boundary of the Lands, nor was it possible by reference to the map attached to the contract. Further she found that the general and special conditions of the Agreement for Sale did not provide a mechanism whereby the western boundary of the Lands to be transferred was to be identified on the ground. On this basis she concluded that the uncertainty surrounding the identity on the ground of the Lands is such that the court should depart from the normal rule and should exercise its discretion and refuse an order for specific performance. In the course of her judgment she said:-
“It hardly seems equitable to grant an order for specific performance in favour of a party who has resisted completing a contract for sale upon the basis that the boundaries are not adequately defined when the contract itself does not provide any mechanism or special condition as how those boundaries should be defined. Such definition in a manner acceptable to both parties remains dependant upon agreement being reached between the parties or their respective engineers. The court has no power to compel such an agreement.”
The Vendor sought to point to an apparent inconsistency between the finding that there remained in existence a subsisting contract and the finding of uncertainty as to the boundaries of the Lands on the ground and argued that by reason of that uncertainty there could be no concluded agreement. This issue arose at the trial and the learned judge found that while the case had been made in written and oral submissions that there was no concluded agreement, no plea to that effect was contained in the defence. The submission was made at the end of the evidence and the learned trial judge concluded that it would be an unfair procedure to the Purchaser if she were to entertain a submission at that stage of the proceedings that the uncertainty was such as to render the contract invalid.
On behalf of the Vendor it is also submitted that notwithstanding the existence of a concluded and still subsisting Agreement for Sale the court had no jurisdiction to award damages in lieu of specific performance. Firstly, it is submitted, that specific performance could not be granted because of lack of mutuality. A Court of Equity will not grant a decree for specific performance of an agreement unless at the time the agreement was entered into it might have been enforced by either of the parties against the other. By reason of the uncertainty as found by the learned trial judge neither party was entitled to specific performance of the Agreement for Sale they contended for and accordingly neither would be entitled to damages in lieu. As I understand it this is merely to restate the argument that there was no concluded agreement in the first place. In any event mutuality is a matter to be considered in relation to the exercise of the court’s discretion as opposed to a bar on the award of specific performance: Price v Strange [1978] Ch. 337. Again it is submitted that Lord Cairn’s Act section 2 conferred upon the court jurisdiction to award damages in lieu of specific performance only where it had jurisdiction to grant specific performance. Reliance is placed on Ferguson v Wilson [1866] 2 Ch. App. 77 where Lord Cairn’s held that the Act:-
“did not in any way give the court a power where it had no jurisdiction to decree specific performance for want of the subject matter whereon its decree would operate to give damages by reason of some antecedent breach of contract.”
Again in Lavery v Purcell [1866] 39 Ch. D. 508:-
“The jurisdiction to give damages in substitution or in addition to specific performance has not been extended to cases where specific performance could not possibly have been directed.”
I have no difficulty in accepting that this is undoubtedly the law.
For the Purchaser it is submitted that the learned trial judge having found that there was a subsisting contract exercised her discretion in refusing to decree specific performance and instead under Lord Cairn’s Act to award damagers in lieu. She relied on a passage in Farrell, Irish Law of Specific Performance at page 7: 1.11:-
“If a contract is ‘completely uncertain’ it is equally void at law and in equity. There is a degree of uncertainty which will lose the right to specific performance without also destroying remedies at law. As Lord Redesdale pointed out in 1805 (Harnett v Yielding [1805] 2 Schoales & Lefroy 549):-
‘…if it is certain to a degree, but doubtful as to the extent, equity would, I think, act infinitely more wisely in leaving the party to the old remedy by action for damages, than to run the hazard of doing injustice, in doing what is said to be more complete justice, by a decree of specific performance.’
The burden is on the plaintiff to satisfy a court of an agreement, the terms of which ‘are sufficiently certain to justify a decree of specific performance (Williams v Kenneally) [1912] 46 I.L.T.R. 292 at 294.) He may expect to fail if he does not satisfy the court of the certainty of the material terms even though it may believe that some complete and binding agreement was reached.”
In this case the learned trial judge had found a completed and subsisting agreement and her refusal to order specific performance was merely an exercise of her discretion. The power to award damages in any event existed at common law and was not dependant on Lord Cairn’s Act.
I am satisfied that it was no part of the Vendor’s case that the contract was uncertain. That case was not pleaded nor was it canvassed in evidence. No application was made to amend the pleadings. In those circumstances I am satisfied that it was within the learned trial judge’s discretion to refuse to allow that issue to be raised. Quite apart from this insofar as the learned trial judge held that there was a subsisting contract I am satisfied that she was correct in so doing. It is the experience of conveyancers’ that there are very many contracts for the sale of registered land where the lands to be sold are identified by reference to a Land Registry Map. For the entire of the folio this would generally give rise to no difficulty notwithstanding that Land Registry Maps are not conclusive as to boundaries. Where part of a folio is being sold almost invariably a photocopy folio of the Land Registry Map is marked and even if there are boundaries ascertainable on the ground by way of hedges and ditches there remains the difficulty identified in the course of the evidence in this case that scaling from such a map onto the ground cannot be conducted with complete accuracy: the same is true of an original Ordnance Survey Sheet. Such sales are in general completed without difficulty and where difficulty is encountered it can be resolved. The reason for this is the obligation which the law places on the parties to a contract for the sale of land as identified by Costello J. in Northern Bank Limited & Ors v Duffy [1981] I.L.R.M. 309. He cited with approval a passage from Bayley-Worthington and Cohen’s Contract [1909] 1 Ch. 648 in the context of a default by a party to a contract as a result of which it was not completed but it is clear from the passage which I now cite that it is of wider application. The passage cited by Costello J. with approval is the following:-
“Default must, I think, involve either not doing what you ought or doing what you ought not, having regard to your relations with the other parties concerned in the transaction; in other words it involved the breach of some duty you owe to another or others. It refers to personal conduct and is not the same thing as breach of contract. If A contracts that B shall do something by a certain day and B does not do it by the day named A commits a breach of contract; but if the question arises whether delay be due to A’s default, A’s personal conduct has to be considered, and the question will be whether he has committed some breach of his duty towards B. So in contracts for the sale of real estate providing for completion at a certain date and containing provisions as what is to happen if completion be delayed beyond that date by or without the default, or wilful default, of either party, the conduct of that party has to be considered; and if he has been guilty of no breach of duty he will not, I think be in default within the meaning of the contract. Of course, the duties of each party towards the other must be determined by all the circumstances, including the nature of the contract and its provisions; and in determining these duties the complexities of the English law of real property must be borne in mind. The duties of, at any rate, the Vendor under contract for sale of real estate cannot be gauged by the standards applicable to other contracts, for example the sale of goods.”
Costello J. remarked:-
“Just as a Purchaser owes a duty to his Vendor in the course of the implementation of a contract for sale so does a Vendor owe a duty to the Purchaser. The nature and extent of that duty will, of course, be different as the sale progresses.”
A consequence of this is that there is a duty on a Vendor to deal with the reasonable requisitions and objections of a Purchaser. Failure to do so would, as in this case, prevent a Vendor from relying on a Completion Notice. In the present case it was common case that the map attached to the Agreement for Sale and the map proffered by the Vendor to be attached to the transfer did not admit of the western boundary being accurately delineated on the ground. There was a difference in area between the two maps. There was a difference in the configuration of the western boundary of the Lands. I am satisfied that notwithstanding the provisions of General Condition 14 the Purchaser was entitled to an accurate map to be attached to the transfer from which boundaries could be accurately ascertained most likely by accurate dimensions marked thereon or alternatively to have delineated on the ground those lands which the Purchaser proposed to transfer in performance of the Agreement for Sale: see Lindsay & Forder’s Contract [1895] 72 L.T. 832 where a plan attached to Particulars of Sale had endorsed thereon a note “this plan is simply prepared as a guide to intending Purchasers, and its accuracy in regard to area, measurement, abuttals, or otherwise is in no way guaranteed” and it was held that the map formed part of the contract and the Purchaser was entitled to a conveyance of the whole of the lands coloured thereon. The precise boundary in this case was a matter of considerable importance to the Vendor who required access to other lands and to ask the Purchaser to complete in the circumstances which prevailed at the date of service of the notice to complete was to invite the Purchaser to run the risk of future disputes and litigation. The Purchaser’s insistence in having the lands marked on the ground was reasonable and appropriate in the absence of a plan from which the Lands could be scaled. In the event that a dispute then existed the Special Conditions provide an appropriate and well tested remedy in General Condition 33 for any discrepancy that might result between the lands as delineated on the map attached to the Agreement for Sale, the second map and the lands as marked out on the ground. If the discrepancy was of trifling materiality no compensation shall be paid. No compensation is payable in relation to any error in a plan furnished for identification only as here. However under General Condition 33 the Vendor cannot be required to accept property which differs substantially from the property agreed to be sold whether in quantity, quality, tenure or otherwise. If the Purchaser will be prejudiced materially by reason of any such difference the Agreement for Sale provides that the applicability of General Condition 33 and the amount of any compensation shall be determined by arbitration. Neither party sought to invoke General Condition 33. Even if the contract contained no provision to deal with discrepancies the court will resolve any difficulty and may award specific performance with an abatement and where appropriate will direct an inquiry as to the amount of the abatement: Barnes v Wood 8 Eq. 424. It is well settled that where an issue as to compensation arises the Vendor may not rely upon a notice to complete: Keating & Ors v Bank of Ireland [1983] I.L.R.M. 295.
Upon the basis that the court had no jurisdiction to grant specific performance there being no concluded agreement the Vendor argues that the court likewise had no jurisdiction to grant damages in lieu of specific performance. If the premise were correct in this case, that there was no concluded agreement, the court would have no jurisdiction to award damages in lieu of specific performance. However the issue as defined in the pleadings and as presented to the court was whether there being a concluded agreement that agreement had been determined by a notice to complete. Where there is a concluded agreement but the court in its discretion refuses to grant specific performance the court has jurisdiction to award damages.
Having regard to the ruling of the learned trial judge, which in my opinion was correct, it is not open to the Vendor on this appeal to argue that there was no completed agreement.
The award of a decree of specific performance is discretionary. The award of damages whether at common law for breach of contract or under Lord Cairn’s Act in lieu of a decree for specific performance arises where there is a breach of a concluded subsisting agreement. It is a matter for the plaintiff to seek whichever remedy he wishes. The circumstances in which the court will exercise its discretion and refuse to award specific performance are myriad. Both of the cases referred to in Farrell in the passage cited above require some scrutiny. In Williams v Kenneally Barton J. held that there was a binding agreement for a lease of the exclusive right of fishing on the River Lee where it passed through the lands of the defendant. There was no memorandum and the plaintiff relied on part performance. The plaintiff alleged that the agreement was for a term of five years for the season 1909 and the following four seasons. The plaintiff entered into possession in January 1909 and again in January 1910. The learned trial judge found that there was uncertainty as to the date from which the Agreement was to run, whether 1909 or 1910 and as to liability for rates. He purported to follow Harnett v Yielding and on the basis of that uncertainty dismissed the action without costs. The decision appears at variance with the well established law that an agreement for a lease is enforceable only if the parties, the property, the length of term, the rent and the date of commencement are fixed. I do not regard it as correct in law.
The brief head note in Harnett v Yielding reads as follows:-
“Equity will not decree specific execution upon a contract, the terms of which are uncertain as to its extent.
Nor will equity decree specific execution against a party not lawfully competent to execute the contract.
Nor, where it is doubtful whether the party meant to contract to the extent that he is sought to be charged.”
The facts were as follows. The defendant demised lands to the plaintiff’s father for a term of twenty one years. The lease contained a covenant by the defendant “for and during the term of his life to renew the said lease for the said D.H., his executor’s administrators and assigns, by giving unto him or them a lease for twenty one years of said demised premises when applied to by him or them so to do.” The lease contained a break clause which the lessee exercised. The defendant then agreed with a third party to grant to him a lease of the lands and attended at the lands to accept the surrender of the original lessee and to give possession to the third party. The third party did not appear and the defendant entered into an agreement for a fresh lease to the original lessee and an endorsement was made on the original lease as follows:-
“I promise and agree to perfect a fresh lease to Mr Daniel Harnett, at any time he shall demand the same at £5 a year less than the within mentioned rent.”
The endorsement was duly signed and the lessee continued in possession for a further seventeen years paying the reduced rent but without having a new lease executed. He assigned the lease to his son, the plaintiff, and when the term granted was close to expiration the plaintiff applied for renewal which the defendant refused. On behalf of the defendant it was argued:-
1. That the endorsement did not import an agreement for any more than one term of twenty one years.
2. That he was tenant for life with a power to demise for twenty one years only in possession at the best improved rent.
The plaintiff indicated that he would accept a lease for twenty one years commencing on the expiration of the original lease. The court construed the endorsement and expressed it clear and effectual to grant a term of twenty one years but that it did not import into the endorsement the provisions of the original lease providing for renewal. Having construed the endorsement the court refused to grant specific performance of the agreement as that agreement was beyond the powers of the defendant as a tenant for life and this being known to the plaintiff. The conclusion of the judgment reads as follows:-
“…nothing can be more mischievous than to permit a person who knows that another has only a limited power, to enter into a contract with that other person, which if executed, would be a fraud on the power; and when that is objected to, to say ‘I will take the best you can give me’. A Court of Equity ought to say to persons coming before it in such a way ‘make the best of your case with a jury’.
On the whole, I think, (though I have had considerable doubts) that this Bill ought to be dismissed. If the plaintiff shall think fit to waive any action at law against the defendant, I will dismiss it without costs; if otherwise, with costs. This is frequently being done in cases of this kind to put an end to litigation.”
The judgment must be seen in its historical context. Equity did not award damages although in certain circumstances it would award compensation. A party seeking damages for breach of a contract for the sale of lands had his remedy at common law or as Redesdale L.C. said “make the best of your case with a jury”. The ruling on costs equally recognise that an action lay at common law for damages for breach of a contract for the sale of lands where specific performance was refused. This action predated Lord Cairn’s Act (Chancery Amendment Act 1858) and the Judicature Acts which empowered courts of chancery to award damages. Specifically Harnett v Yielding is a case involving a concluded subsisting Agreement where in exercise of its discretion the court refused to order specific performance of the same, such performance being in excess of the powers of the defendant as a tenant for life but also on the grounds that from the circumstances it was doubtful whether the defendant meant to contract to the extent that the court found him liable. It recognised the entitlement of the plaintiff to damages at common law where the court in its discretion refused specific performance: after Lord Cairn’s Act and the Judicature Act it is not necessary for two separate actions to be brought. It does not support the vendor’s contention that the court has no power to award damages where it refuses to order specific performance.
2. That the learned trial judge was in error in allowing the plaintiff to adduce evidence of loss of bargain after the issues had been determined.
In outlining proceedings at the trial I have dealt with the misunderstanding between counsel for the Purchaser and the learned trial judge as to whether the Purchaser was maintaining a claim for damages in lieu of specific performance should the learned trial judge in her discretion refuse to grant specific performance. No evidence was led in relation to such damages. The claim for damages in lieu was not dealt with in the Purchaser’s written submissions in the High Court. The Vendor submits that once the judgment of the court was given it was not open to the Purchaser to pursue a claim for damages: reliance was placed on the judgment of the Supreme Court in McMullan v Clancy [2002] IESC 45 and In the Matter of Greendale Developments Limited (in liquidation) [2000] 2 I.R. 514.
It is customary in the indorsement of claim and statement of claim in an action for specific performance, as here, to claim damages in addition to or in lieu of specific performance but also to claim as a relief if necessary an inquiry as to title and an inquiry as to damages. It is not necessary to do so. Special damages should be claimed and particularised in the Statement of Claim. Prior to Lord Cairn’s Act the Court of Chancery in refusing to grant specific performance of a concluded agreement did so without prejudice to the right of the plaintiff to bring an action at common law for damages. After Lord Cairn’s Act the Court of Chancery and after the Judicature Act the High Court in refusing specific performance will proceed to consider the question of damages even where such question is not raised by the pleadings. See Daniell’s Chancery Practice 10th edition page 1134 and cases there cited. In recent times at least, the common practice for the court in refusing to award specific performance is to direct an inquiry as to damages: see In the Matter of Greendale Developments Limited (in liquidation). In this case the learned trial judge found that the Purchaser had not in opening the case waived its claim to damages in lieu of specific performance. She was entitled to so find and I would not interfere with that finding. Accordingly on refusing to award a decree of specific performance the learned trial judge was entitled under Rules of the Superior Courts, Order 36 Rule 38 and well established practice to adjourn the case for further consideration before her. Both McMullan v Clancy and In the Matter of Greendale Developments Limited (in liquidation) have no application here the former concerning amendments to an erroneous order and the latter the setting aside by the Supreme Court of an earlier order. The learned trial judge was clearly entitled to proceed as she did.
3. The learned trial judge assessed damages for loss of bargain as of the date of the judgment. Thus damages were calculated on the basis of the difference between the value of the lands on that date and the contract price.
The general common law rule as to damages for breach of contract is that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with regard to damages, as if the contract had been performed. The general rule accordingly was that damages should be assessed as at the date of breach. Thus in a contract for the sale of generic goods should the seller fail to deliver, the buyer can at once spend his money in purchasing like goods from another and can recover any increased price as damages. In Wroth v Tyler [1970] 1 Ch. 30 the court considered the position in relation to contracts for the sale of land. In that case the contract price was £6,000 and the value of the house at the date of breach was £7,500. By the date of hearing the value of the house was £11,500. Megarry J. at p.57 in reference to these circumstances said:-
“How, then, it may be asked, would the award today of £1,500 damages place them in the same situation as if the contract had been performed? The result that would have been produced by paying £1,500 damages at the date of the breach can today be produced only by paying £5,500 damages, with in each case the return of the deposit. On facts such as these, the general rule of assessing damages at that the date of the breach seems to defeat the general principle rather than carry it out.”
He considered the terms of Lord Cairn’s Act section 2 which provides as follows:-
“In all cases in which the Court of Chancery has jurisdiction to entertain an application for an injunction against a breach of any covenant, contract or agreement, or against the commission or continuance of any wrongful act, or for the specific performance of any covenant, contract, or agreement, it shall be lawful for the same court if it shall think fit, to award damages to the party injured either in addition to or in substitution for such injunction or specific performance, and such damage may be assessed in such manner as the court shall direct.”
In the course of his judgment at p.58 Megarry J. said:-
“On the wording of the section the power ‘to award damages to the party injured,…in substitution for such…specific performance’ at least envisages that the damages awarded will in fact constitute a true substitute for specific performance. Furthermore, the section is speaking of the time when the court is making its decision to award damages in substitution for specific performance, so that it is at that moment that the damages must be a substitute. The fact that a different amount of damages would have been a substitute if the order had been made at the time of the breach must surely be irrelevant….A choice between the inadequate and the equivalent it seems to me to be no real choice at all.”
He concluded:-
“In my judgment, therefore, if under Lord Cairn’s Act damages are awarded in substitution for specific performance, the court has jurisdiction to award such damages as would put the plaintiffs into as good a position as if the contract had been performed, even if to do so means awarding damages assessed by reference to a period subsequent to the date of the breach.”
He proceeded to award the plaintiff damages as of the date of hearing.
Wroth v Tyler was followed in this jurisdiction in O’Connor v McCarthy & Ors [1982] I.L.R.M. 201 where however it was accepted by counsel that damages should be assessed at the date of judgment.
It is submitted on behalf of the Vendor that it is open to the court in awarding damages in lieu of specific performance to fix a date other than the date of breach or the date of judgment and I accept that this was held by Megarry J. at page 60 and that that represents the law in this jurisdiction also.
The Vendor relies on Suleman v Savari & Ors [1989] 2 All. E.R. 460. In that case damages were assessed as at the date of the judgment. While not material it is to be noted that that was a claim against the solicitor for a vendor who signed a contract without the authority of the vendor and the measure of damages in these circumstances would be the same as in an action against a vendor. In the course of his judgment Andrew Parke Q.C. summarised his conclusions on the cases as follows:-
(a) A purchaser who loses his purchase is entitled to damages at common law as well as to damages in lieu of specific performance under Lord Cairn’s Act.
(b) The usual measure of damages at common law has in the past been the difference between the contract price and the price at completion plus interest from completion until judgment.
(c) This is not an absolute rule of law, and damages may be assessed by reference to the value at a different date if it would be more just to do so.
(d) Where, as often in recent years, there have been dramatic changes in property values, it may be more just to assess damages at a different date.
(e) This is particularly so where the innocent party reasonably continues to try to have the contract completed: in such a case it is logical and just to assess damages as at the date when (otherwise than by his default) the contract is lost.
On behalf of the Vendor it is argued that in the present case the Vendor comes within paragraph (e) above. At the hearing on damages it was submitted on behalf of the Vendor that by reason of the delay of the plaintiff in prosecuting the proceedings that the damages for loss of bargain should be assessed by reference to the market value of the property at a date earlier than the date of judgment, the 24th July 2004 being suggested, that being the date when the proceedings ought to have been heard and determined. It was further submitted that the court should take into account the attempts by the vendor to complete the sale at a reduced price in the autumn of 2003 and the fact that the Vendor sold the property to the second defendant for £485,000, that is less than the purchase price and the Agreement for Sale with the plaintiff, and as a result has not been enriched. Neither of these submissions found favour with the learned trial judge. No submission was made to the learned trial judge on the basis of Suleman v Savari & Ors. Again in this court the Vendor argued that the present case can be distinguished from Wroth v Tyler. In that case damages were measured on the basis that the plaintiff should be put in a position to purchase a replacement or alternative property of an equivalent nature: in the present case the evidence was that the lands represented a once-off or unique site and therefore the approach in Wroth v Tyler was not appropriate.
The purchaser relies on Wroth v Tyler as authority for the damages being assessed as of the date of the judgment.
I am satisfied that damages were correctly assessed as of the date of the judgment and that Wroth v Tyler represents the law in this jurisdiction. I am not satisfied that either of the earlier dates suggested by the Vendor are appropriate. The chronology of the proceedings is as follows:-
Chronology
1. 31st October 2003 theVendor’s solicitor notified Purchaser’s solicitors that the Vendor would rely on the Notice to Complete.
2. 23rd November 2003 plenary summons issued.
3. 2nd January 2004 the Vendor entered appearance.
4. 19th February 2004 the Purchaser delivered statement of claim.
5. 8th April 2004 the Purchaser issued motion to join second named defendant.
6. 30th April 2004 the purchaser issued motion for judgment in default of defence.
7. 4th May 2004 the Vendor delivered defence.
8. 2nd November 2004 second named defendant joined.
9. 6th December 2004 second named defendant delivered defence.
10. 24th February 2005 the Purchaser served notice of trial.
11. 26th April 2005 hearing commenced.
12. 7th July 2005 judgment delivered on liability issue.
13. 28th November 2005 hearing on damages.
14. 7th October 2005 judgment delivered on damages.
I am not satisfied that this chronology discloses any material delay on the part of the purchaser. I do not see that the resale at a lower price is relevant. If, as the Vendor argues, the lands are unique then it should be recalled that underlying the remedy of specific performance in contracts for the sale of lands is the notion that each property is unique. The availability of similar properties will assist the court in arriving at the measure of damages as the price at which such properties can be acquired be relevant. Where there are no similar properties available the court must have regard to expert evidence as with the case here. To apply the test postulated in Suleman v Savari & Ors at (e) above will not avail the Vendor. In that case damages were assessed at the date at which the plaintiff lost his purchase with interest thereon. The earliest date at which the purchaser could be said to have lost his purchase in this case is the date of judgment when specific performance was refused. Even at that date, however, the possibility of being awarded specific performance on appeal remained and that possibility was only lost when in the period between the hearing in the High Court and the hearing of the appeal the second named defendant became registered as full owner of the Lands. In these circumstances I am satisfied that in assessing damages the learned trial judge correctly had regard to the value of the lands at the date of judgment. The Vendor was only ever willing to complete on its own terms: no satisfactory map was offered and the Vendor was unwilling to mark boundaries on the ground.
4. That the learned trial judge was in error in the method of assessing valuation.
The Purchaser’s valuer relied on two comparators and placed a valuation on the Lands as of the date of judgment of €2,000,000. The Vendor’s valuer placed a valuation of €900,000 on the Lands. The learned trial judge held that the comparator the latter relied on was less relevant. Faced with such a conflict of expert evidence the learned trial judge discounted the evidence of the Purchaser’s valuer and concluded that the value of the lands at the date of judgment was €1.4 million. In Wroth v Tyler the valuers on each side did not give evidence but agreed a graph which showed the value of the premises in question on successive dates and which graph was agreed between counsel. It was submitted on behalf of the Vendor that a similar exercise ought to have been carried out in the present case looking at the increase in property values by reference to independent indicators such as the Consumer Price Index, rates of inflation and so forth in the country generally and in the area in which the Lands are situate and the likely effect of Rural Renewal Tax Incentive. Finally it is submitted that the dramatic increase in the value of the Lands worked an injustice on the Vendor who no longer owns the property and did not benefit from the increased and enhanced value.
I am satisfied that the learned trial judge was entitled to adopt the approach which she did. She dealt with the matter on the basis of the evidence which the parties chose to adduce. She rationalised clearly the basis upon which she assessed the evidence of the valuers each of whom gave oral evidence and were cross-examined. This court should not interfere with her finding.
Where specific performance is refused and damages for loss of bargain awarded in lieu the difference in value as of the date of judgment and the date of contract as the measure of loss requires adjustment to arrive at the correct measure of damages. The object of an award of damages is to give the claimant compensation for the damage, loss or injury he has suffered. The question to be asked is what if the plaintiff lost and not what the defendant ought fairly and reasonably to pay: General Tire and Rubber Company v Firestone Tyre and Rubber Company [1975] 1 W.L.R. 819. In In re Daniell [1917] 2 Ch. 405 it was held that a Purchaser awarded damages in lieu of specific performance cannot claim his conveyancing costs as these would have been incurred if the contract had been completed: no such claim as made here. From this, however, it logically follows that the Vendor could claim to deduct from the damages costs, expenses and stamp duty which the Purchaser would have paid had the transaction been completed: see Court of Appeal in Ridley v Geerts [1945] 2 All E.R. 654. Applying these principles to the present case has the following effects:-
1. The transaction had proceeded to the point of completion and the Purchaser has incurred liability for his solicitors’ fees. Accordingly it differs from a case where a contract having been entered into the Vendor takes no steps to complete and accordingly no conveyancing fees or minimal conveyancing fees are incurred by the Purchaser. In these circumstances the Vendor is not entitled to a deduction in respect of solicitors fees.
2. Had specific performance been ordered the Purchaser would have incurred stamp duty on the consideration passing. As the transaction did not proceed to completion he is saved this expense. It is accordingly appropriate that the Vendor should receive credit against the difference in value at the date of contract and the date of judgment for the amount of the same.
3. Had the purchase been completed the Purchaser, if in funds, would have been at the loss of the balance of the purchase price from the contractual date of completion up to the date at which damages are assessed. If not in funds he would have incurred borrowing costs. While it is clear from the evidence that the Purchaser proposed to borrow this is the extent of the information available. To reflect loss of use of funds or borrowing costs which would have been incurred by the Purchaser it is appropriate that a deduction be made from the difference in value at the contract date and date of judgment. In the absence of evidence this allowance should be the amount calculated at Courts Act rate on the balance of the purchase price from the completion date to the date of judgment that is on the sum of €468,000 from the 21st May 2003 to the 7th July 2005. In the Matter of Fuller and Company Limited (in liquidation) [1982] I.R. 161 the vendor claimed a similar deduction and was unsuccessful. That case concerned urban property and the ratio for the refusal is that had the contract been completed by the vendor the purchaser would have had the rents and profits of the lands: in this case the court is concerned with development lands and no claim was advanced by the Purchaser that he was at the loss of rents and profits. It will be possible for the parties to compute and agree the sum which would have been payable by the Purchaser for stamp duty and the amount of interest calculated at Courts Act rate on the balance of the purchase money for the period which I mention.
Conclusion
For the reasons set out above I would dismiss the appeal and affirm the order of the High Court save and except that the award of damages would be adjusted as hereinbefore indicated by the deduction of the amount of stamp duty which would have been incurred by the Purchaser and a sum equal to interest at Courts Act rate on the balance of the purchase price from the 21st May 2003 to the 7th July 2005.
Roberts v O Neill
Hardship
[1983] IR 47; [1983] ILRM 206
O Higgins CJ: I agree with the judgment of Mr Justice McCarthy.
Hederman J: I also agree with that judgment.
McCarthy J: This is an action for specific performance of a contract dated the 17th January 1978 made between the plaintiff (in trust) and the defendants for the sale by the defendants to the plaintiff of The Silver Tassie , a licensed premises at Loughlinstown, Co Dublin. In the High Court McWilliam J granted the order sought for specific performance and awarded damages measured at bank interest on the sum of 30,000 paid as deposit on the signing of the contract, up to the date of judgment. The first-named defendant, who is the husband of the second-named defendant, has appealed against the order for specific performance seeking, in effect, an order that the plaintiff be compensated in damages only, so that he, that defendant and his wife may retain the licensed premises. For the reasons that I shall state, in my judgment, the appeal fails.
The Facts
It is desirable to set out, in some detail, the sequence of events.
In 1973, the defendants bought the Silver Tassie, for an undisclosed sum, and, thereafter, remained joint owners. In November 1977, their daughter was coshed in a burglary at their home which is a bungalow adjoining the Silver Tassie. Because of this, Mr O Neill became increasingly worried and thought it might be better to sell the premises, a view not shared by his wife who wanted their son, then aged 13, to continue in the business. What one might call the O Neill experience in the public house business only began in 1973. During the weekend before the 16th January 1978, discussions took place between Corry Buckley, acting on behalf of one Gerard Carthy, the O Neills, and Gerard Black who was their solicitor, arising from which discussions it was subsequently maintained by Carthy that there was an enforceable contract for the purchase by him of the premises for 190,000. On the 16th January the plaintiff, who is, in effect, a nominee for the Madigan Group, owners of a chain of public houses, learnt of the possibility that the premises might be on the market and called there on that night. His son-in-law, Mr Madigan, contacted Mr Moore, the agent for the O Neills. The next day, a formal contract in the printed form authorised and issued by the Incorporated Law Society of Ireland, suitably completed as to amount, closing date, deposit and details of title was executed by the plaintiff personally, and by Mr Black, solicitor as agent for the O Neills. The closing date was fixed for the 17th February upon which date, in fact, the plaintiff s solicitors sent a draft conveyance to the O Neill s solicitors. On the 21st February, in a letter to the plaintiff s solicitors, Mr Black stated:
6.Since formally replying to your requisitions on title herein we have been notified by another firm of solicitors that a client of theirs may institute proceedings against the vendor. Such proceedings were in fact issued against the wrong party (not our client) about three weeks ago but we returned same to the said solicitors indicating that the proceedings were not in order. To-date neither we nor our clients have received any amended or new summonses.
On the 28th February, Mr Black wrote to the plaintiff s solicitors enclosing herewith memorandum and Index relating this matter .
On the 6th March, the plaintiff s solicitors wrote to Mr Black:
In order to protect our clients interest, we have registered the contract for sale dated the 17th January 1978 and in order to protect our clients interests further, we feel that a Lis Pendens must be registered. This means that proceedings must be commenced and we will be issuing plenary summons in this regard tomorrow. Please let us know what steps your clients intend to take to have the Lis Pendens in the Carthy action removed as obviously while this is still on the record we cannot advise our client to complete.
On the 7th March 1978, a plenary summons was issued by the plaintiff but no reply to the observation about the Lis Pendens appears to have been received at any time.
On the 7th June a statement of claim was delivered claiming an order for specific performance of the agreement and damages.
On the 19th July a joint defence and counterclaim delivered on behalf of the defendants pleading, essentially, that because of Carthy s action, the defendants were unable to complete and pleading, in particular:
4.If, contrary to the defendant s (sic) contention, the contract for sale was not conditional upon the said Gerard Carthy not succeeding in claiming that he had entered into a binding contract for the sale of the said premises to him, the contract is in any event impossible of performance until the determination of the said proceedings, and, in the event of the said proceedings being determined in favour of the defendants, they are ready and willing to complete the sale to the plaintiff. (emphasis added)
The action by Carthy against O Neill was heard on the 4th and 5th July 1979 by Gannon J and judgment was delivered in October, when the learned Judge held that the Carthy contract was legally enforceable, and joined Mrs O Neill as a defendant to that action. The O Neills appealed and in its judgment of the 30th January 1981, the Supreme Court allowed the appeal and dismissed Carthy s action.
On the 2nd March 1981, the plaintiff s solicitors called upon the defendants, through their solicitors, forthwith to complete the sale and indicated a claim for damages for delay.
On the 19th March, Mr Black informed the plaintiff s solicitors that we will be applying on behalf of the first named defendant to amend the defence as it is the first named defendant s contention that this is not a proper case for specific performance. Mr Black had ceased to act on behalf of Eileen O Neill, the second defendant. The terms of the amended defence were sent sometime towards the end of March 1981 to the plaintiff s solicitors, and an amended defence by Eileen O Neill, in which she denied Mr Black s authority, was filed on the 5th of May 1981. This contention of Mrs O Neill was rejected by the trial Judge, and no appeal has been brought against that finding.
On the 6th May 1981, an amended defence and counterclaim was filed on behalf of Michael O Neill, the first defendant, and the material portion of this was to strike out the words to which I have added emphasis in the original defence and counterclaim at paragraph 4 and add a plea to this effect:
In the period between the making of the contract for sale to the plaintiff in these proceedings and the delivery of the judgment (of the Supreme Court in Carthy v O Neill) the value of the said premises had greatly increased as has the value of licensed premises generally. The first named defendant is a publican and it would be grossly unjust if the defendants were obliged to sell said premises to the plaintiff at the contract price, which would now be a gross undervalue and whereby the plaintiff would be unjustly enriched. Accordingly, the Court in its discretion should refuse to grant an order of specific performance.
Up to that date, from the delivery of the original defence and counterclaim on the 19th July 1978, the attitude expressly maintained on behalf of both defendants insofar as an examination of the Court record would disclose was that the sole bar to the closing of the sale to the plaintiff was the existence of the Carthy v O Neill proceedings.
The adjourned hearing of the action took place before McWilliam J on the 4th and 5th June, and on the 3rd July 1981, he delivered judgment in which he rejected the defendants contention that specific performance should not be granted and that damages in lieu thereof was the appropriate remedy.
The Appeal
The first defendant, the husband, has appealed, by a notice of appeal dated the 5th August 1981 against the order for specific performance, without stating in the notice of appeal what it is suggested is the alternative order, but, on the hearing of this appeal, counsel for the first defendant has limited the appeal to seeking a finding that the order of specific performance would cause excessive hardship to the defendants and should, therefore, be refused, and that, in lieu thereof, damages, to be assessed in the High Court, should be awarded to the plaintiff in accordance with Lord Cairns Act. It is fair to say that ground 6 of the grounds of Appeal contains this essential matter and that no argument was advanced on any other of the grounds of appeal. During the course of the argument, Hederman J drew attention to the absence of any appeal by the second defendant and postulated the question as to what the situation would be if the Court were to allow the first defendant s appeal whilst an order for specific performance remained in existence against the second defendant. It was indicated that the second defendant was prepared to join in the appeal if necessary; having regard, however, as to my view on the substantial matter raised in the appeal, it is unnecessary to consider this aspect of the case further. There would appear to be adequate powers under O 58 r 8 to deal with such a situation.
The Argument
As I understand the argument advanced on behalf of the first defendant, and which I accept as being appropriate to be considered as if advanced on behalf of the second defendant the case may be stated as follows:
1.An order of specific performance is an equitable remedy and, accordingly, discretionary in all cases.
2.There may be cases of real hardship caused by the grant of an order for specific performance.
3.The time to test or measure the degree of hardship is not as of the date of the contract sought to be specifically performed, but rather at the date of the trial.
4.In the instant case, a circumstance over which neither plaintiff nor defendant had control – the Carthy action – prevented the closing of the sale until after the judgment of this Court in Carthy v O Neill and Anor on the 30th January 1981, by which time the original purchase price was but half of the then current value because of the huge increase in the value of licensed premises, national in character and, in part at least, related to the high inflationary trends at the time.
5.This is a circumstance over which none of the parties had any control; it effects a great hardship on the defendants because they cannot now afford to buy an alternative public house such as would cater for their plans to have their son continue in that business; the only hardship on the plaintiff, and it is, perhaps, a nominal one only, since he appears to have been buying in trust, is the very fact of not obtaining specific performance and having to settle for damages.
The plaintiff s answer is a short one – any hardship that has arisen is subsequent to the date of the contract and/or the date for completion; the plaintiff has, in no way, caused or added to that hardship – he is wholly innocent; in addition, it might be added that the defendants had been in receipt of all the profits of the business since the original intended date for closing and are still in receipt of these profits. A further comment is made that, initially, at least the first named defendant wanted to get out of the public house business because of the unhappy burglary incident. Neither the High Court nor this Court has any information as to the purchase price paid by the defendants in 1973 and, consequently, cannot assess the degree of hardship necessitated by having to pay Capital Gains Tax.
The Law
Mr Fennelly has argued that the correct approach is to measure the hardship as of the date of the hearing; this argument is unsupported by authority and is, indeed, contradicted by Lavan v Walsh [1964] IR 87 in which Budd J at p 102 said:
The defendant in this case also relies on the plea that enforcement of the contract in this case would cause grave hardship on her. It is pointed out that the order is a discretionary one and it is strongly urged that the Court in the exercise of a proper judicial discretion should not grant the relief of specific performance because of the special facts of the case which I will deal with later. Again, however, I must refer to a matter of law. The Court, it is well established, will not enforce the specific performance of the contract the result of which would be to impose great hardship on either of the parties to it. It is conceded, however, that the question of the hardship of a contract is generally to be judged at the time it is entered into. Change of circumstances taking place later, making the contract less beneficial to one party, are immaterial as a rule unless it is brought about by the action of the other party. It is stated, however, in Fry on Specific Performance (6th ed, at p 200): It cannot, however, be denied that there are cases in which the Court has refused its interference by reason of events subsequent to the contract. From an examination of the cases of The City of London v Nash and Costigan v Hastler it appears that this is so, but exceptions to the general rule appear very rare I must, however, approach the consideration of these matters dispassionately and exercise what I conceive to be the proper judicial discretion. In the first place, as I have pointed out, it is undoubtedly the position in law save in exceptional cases only a matter of hardship existing at the time of the contract can be taken into consideration. Hardship existing at the time of the contract is out of the case. It thus requires a strong case to be made out before one should accede to a plea for the exercise of judicial discretion in a quite unusual way, that is, by reason of hardship arising subsequently to the contract, and the onus being on the defendant to satisfy me of the existence and genuineness of the hardship on her, that proof of it should be strong and above suspicion.
Whilst, as Budd J says, the relevant time issue appears to have been conceded, I do not overlook the quite exceptional standing as a lawyer in which the late Mr Roger O Hanrahan SC (counsel who made the concession) was held by Bench and Bar alike. Further, although Budd J refers to the matter as being conceded, without reference to such concession he expresses his own view in the most positive terms. Mr Fennelly has suggested that there is an illogicality in taking the date of the contract as the relevant one, since it was unlikely that there would be any contract if the hardship were then known. This very argument perhaps answers the problem – hardship is permitted to defeat specific performance where an existing hardship was not known at the relevant time – the date of the contract. While recognising that there may be cases in which hardship occurring later is such that to decree specific performance would result in great injury, such cases must be few and far between and, in my view, would not, ordinarily, include cases of hardship resulting from inflation alone. To permit, as an ordinary rule, a defence of subsequent hardship, would be adding a further hazard to the already trouble strewn area of the law of contracts for the sale of land.
The Application of the law
An examination of the evidence, including the summary at the commencement of this judgment, throws doubt upon the reality of the alleged claim for hardship. At all material times the defendants knew that they would have to complete a sale of the premises to somebody – either Carthy or Roberts. The original motivation to leave the particular type of business was because of personal hazards; at no time from February 1978 to March 1981 was it ever suggested to the plaintiff or his advisers, who showed meticulous care to make the plaintiffs position clear and, indeed, readily accepted that they could not press for completion until the Carthy case was resolved, that there was any doubt about the eventual completion, assuming a satisfactory result to the first action; at no time did the defendants embark on any inquiry as to a substitute public house in order that their son might pursue what was alleged to be their wish for his career; Mrs O Neill, having dispensed with the service of her original solicitor, embarked upon a spurious defence of the absence of authority and now seeks to join her husband in criticising the plaintiff, a 76 year old vehicle builder, without any other connection with the licensed trade save that his daughter is married to one of the Madigans, because he assented, in evidence, to an extract from a letter dated 29th July 1979, written by his solicitors to Mr Black in which 4 items of alleged damages were specified including, at item 4 the difference in value between the premises as they are valued at the date of the hearing and their value at which we purchased them. It is to be noted that this letter, to which, incidentally, there appears to have been no reply, was written after the hearing before Gannon J and before judgment was delivered. I know little of what transpired at that hearing save for some extracts from the transcript of it which were used in evidence in the trial of this case but it does not appear that Mrs O Neill did not give evidence at that hearing, apparently because she would have supported Mr Carthy s claim.
The Result
It may be that there are other circumstances surrounding the alleged hardship but I think I have cited the salient ones. In my judgment, they fall far short of establishing the type of case in which the Court should intervene to deny the ordinary remedy to one of the contracting parties in what was, at the time, a perfectly fair and proper transaction. There may be cases in which the Court should intervene or, to put it more crudely, interfere with the express wording of a contract – the duty to do justice may override strictly legal principles and the well recognised procedures of the courts of equity. Such is not the case here – indeed, justice here demands that the contract be specifically performed.
I have not overlooked the observations of the learned trial Judge in respect of the balancing of the hardship to the defendants themselves whether or not the specific performance is granted; in no way, do I dissent from his views as so expressed, but I prefer to rest my judgment as I have endeavoured to explain.
Dublin Laundry Company Ltd v Clarke
[1989] ILRM 29 (High Court)
The facts are set out in the judgment.
Costello J: The contract which has given rise to these proceedings relates to lands at Clonbeg, Milltown, Co Dublin. These lands are not far off the Dundrum Road from Milltown Bridge and are in the County Council area.
The agreement between the parties was for the payment of a purchase price of 130,000 with a deposit of 5,000. Draft contracts relating to the lands were sent by the plaintiff company s solicitors to the defendant s solicitors on the 14th December 1982. Prior to this date, however, the parties had been in negotiation concerning the lands, that is to say Malachy Clarke, the defendant in these proceedings, and the plaintiff company, in the early part of 1982. At that time agreement had virtually been reached but for reasons to be explained later the negotiations fell through.
Later in 1982 discussions took place between the auctioneer dealing with the lands and Mr Malachy Clarke, as a result of which an agreement was reached which was then passed on the parties solicitors for formalising. The draft contracts were not returned by the defendant s solicitors until the 11th February 1983 notwithstanding certain reminders in the meantime. On that date, however, the draft contracts were returned with the deposit and requisitions on title. The contracts were then executed by the plaintiff company and one of them was returned in the ordinary way to the defendant s solicitors on the 3rd March 1983.
I should now refer briefly to certain requisitions that were raised. In the requisitions sent by the defendant s solicitors and replied to on the 20th April 1983, requisition 18 referred to judgments against the lands. Requisition 62.4 referred to a problem concerning a certificate under the Family Home Protection Act, and requisition 62.17 referred to a statutory declaration by Mr Denis R Peart, solicitor, concerning the property and its title. These matters were dealt with by the plaintiff company s solicitors and a rejoinder was made on the 3rd May 1983 in which the defendant s solicitors repeated the point raised in requisition 62.4, stating that they would accept a certificate concerning the Family Home Protection Act. They also raised in requisition 18 the question in relation to judgments on the lands and stated that any judgments affecting the property would have to be discharged prior to closing. In relation to requisition 62.17 they stated that they were considering the matter and would come back at a later date.
The plaintiff company s solicitor replied to the rejoinders on the 2nd September 1983 and stated that the judgments would be discharged on an undertaking to do so out of the proceeds of the sale. These requisitions are referred to now because the points that are raised in them arise later in the defendant s defence to which I will refer in a moment. Before doing so, however, I must refer to another aspect of the conveyance which had given rise to further points of defence, that is to say, the incumbrances on the lands.
At the time of the sale the plaintiff company owned three parcels of lands: (a) lands at Clonbeg, Milltown; (b) a site at Milltown on which the laundry owned by the plaintiff company had stood; (c) a private house in Greystones known as Beaconsfield .
The evidence of Mr Guilfoyle, the liquidator of the company, established that when the company went into liquidation on the 13th May 1983 the statement of affairs valued the three properties at 360,000, and it appears that this valuation was not an unreasonable one in the events that have happened.
There were two incumbrances on the company s lands including the Clonberg lands. Allied Irish Banks has an equitable mortgage on all these three properties. Its total debt at the time of liquidation was 84,000. It also had a debenture over the company s assets including its lands dated the 12th July 1968. There was a second incumbrancer, however, the Revenue. By virtue of a judgment mortgage for 86,523.83p, which was registered early in 1983, and which was valid notwithstanding the liquidation, the Revenue were second incumbrancers on the lands of Clonberg.
I can record what happened as follows: The Milltown site and the Greystones site have since been sold. The Greystones dwellinghouse was sold in 1984 for 55,000 and the Milltown site was sold later, not in January 1985 when the completion notice was served, but later that year, for 110,000.
It is clear, therefore, and was clear to the liquidator at the time of the completion notice that the properties owned by the plaintiff company were sufficient to discharge the two incumbrances. I am also satisfied from the liquidator s evidence that the two incumbrances themselves were satisfied that the plaintiff company s properties would discharge their incumbrances in the priority to which they were entitled.
I must now deal with an aspect of the sale which has given rise to the problems in this case, in particular to the delay which occurred in closing. It was part of the conditions under which planning permission was obtained for the development of the lands that an arrangement would be made with the county council for the exchange of what I will call the green lands, shown on the map annexed to the agreement, for what I will call the blue lands. The blue lands were then owned by the county council but the council wished to obtain the green lands for the purpose of widening the Dundrum Road. I am quite satisfied that the plaintiff company s solicitors were diligent in trying to get the council to effect this exchange and that the delay which occurred in relation to it was not the fault of the plaintiff company s solicitors. Firstly, the council was not registered, and under the provisions of s 23 of the 1964 Act the council was required to be registered but registration occurred on the 22nd April 1983.
Thereafter further delay occurred but on the 13th December 1983 the council indicated to the plaintiff company s solicitors that the Deed of Exchange had been executed. But is was not, however, yet ready for passing on to the plaintiffs company s solicitors, and this did not occur until the 14th June 1984. On that date the plaintiff company s solicitors wrote to the defendant s solicitors stating that the Deed of Exchange had been completed and calling on the defendant to close the sale within five days. I can say in parenthesis that the five-day notice was, it is now accepted, given in error, as it had originally been included in the special conditions but had been by consent excluded. It is also accepted that the plaintiff company was not then in a position to give a completion notice because, in fact, a further problem arose. The plaintiff company obtained the blue lands from the council by the exchange but was not then registered as owner of the blue lands, and by letter of 2 August 1984 the defendant s solicitors objected to the title on the grounds that the plaintiff company was not then registered as owners and so the plaintiff company had to set about obtaining registration.
It is also of relevance that the defendant sought at that time to obtain renegotiation of the price. The plaintiff company s solicitors took immediate steps to get the blue lands registered and this occurred, and on the 23rd January 1985 they wrote to the defendant s solicitors stating that they were now registered as owners and requesting the closing on the 18th February 1985. This completion notice was not strictly in accordance with the conditions of the contract but no point is taken on it, and it is not now suggested that the notice was defective because the full 28 days required by the condition were not given.
The second problem to which this exchange of land had given rise was that, the green lands having been exchanged for the blue lands, the site was technically landlocked and so it was obvious that an agreement with the council would have to be obtained to allow access to the site from the Dundrum Road until such time as it was widened. The plaintiff company s solicitors thought that this should be done by a deed, either in the Deed of Exchange or by a separate deed, and the point was raised in the requisitions.
What is of significance is this: the plaintiff company s solicitors wrote to the council about this matter and by letter of 12 July 1983 from the Development Section of the council to the Law Section of the council it was stated that access would be given to the vendor s property until the road widening works had been completed but that a formal deed was unnecessary. This letter was sent to the defendant s solicitors on 31 August 1983. No objection was taken to this manner of carrying out the contractual obligations undertaken in the contract and no objection was taken to the fact that the right-of-way and the ancillary rights necessary to obtain access for services was given by letter and not by deed until these proceedings were instituted.
I come to consider the defence to the plaintiff company s claim for specific performance. It was pleaded and urged by Mr McCann on behalf of the defendant, until finally and correctly abandoned by him, that the claim failed because of the delays and laches on the plaintiff company s part. As I have said, this is no longer relied on and I need not delay in considering it, but it is of some significance to point out that the defendant himself was not ready to close this sale on the completion date in the contract, that is to say, April 1983.
Through an associated company the defendant, Mr Malachy Clarke, had sought planning permission for a new development rather than the existing development. This planning permission had been obtained but an appeal to An Bord Plean la had been taken and this was not determined until the Summer of 1984 and determined in favour of Mr Clarke and his associated company. At this stage, however, the defendant, Mr Clarke, wished to renegotiate the contract price, and it is quite clear from the evidence that by the Summer of 1984 the defendant wished to get out of the contract if a renegotiated price could not be brought about. During all this long delay there was not one letter of complaint from the defendant s solicitors about the delay and at no time did the defendant make time the essence of the contract. This meant that the defendant could not rely on the plaintiff company s delay as a defence, time not having been of the essence of the contract without the provision of a notice, nor could the defendant rely on the doctrine of laches because the plaintiff company had no right to claim specific performance until January 1985, a claim on which the plaintiff company moved immediately.
I turn now to what I think is the principal defence to this claim for specific performance, which is a title point. It is said that at the date of the completion notice, that is to say January 1985, the plaintiff company had not good marketable title and that, accordingly, the completion notice was invalid. Four points are raised in relation to this matter: (1) It is said that no arrangements had been made for the release of the charges in favour of AIB and the Revenue. (2) It is said that the plaintiff company failed to comply with its contractual obligation to have the right-of-way over the green land obtained from the council. (3) It is said that there was failure on the plaintiff company s part to have the statutory declaration referred to in the requisitions completed by Mr Peart. (4) It is said that there was failure to have the certificate completed by Mr Peart in relation to the Family Home Protection Act.
My conclusions are as follows: Firstly, I accept Mr Guilfoyle s evidence. It satisfies me that he had been in touch with the incumbrancers, actively in touch with them, about the discharge and release of their incumbrances. Mr Guilfoyle is a very experienced accountant and liquidator. The situation in which he found himself and in which the incumbrancers found themselves was by no means an abnormal one. The realisation of the assets of the plaintiff company was in the interests of the incumbrancers, and I am quite convinced and satisfied that Mr Guilfoyle had arranged with them that they would release their charges to enable the assets of the plaintiff company to be realised. I am quite satisfied that Mr Guilfoyle could have obtained these releases on the date fixed for closing. It was in the interests of the two incumbrancers to release the properties, and I am quite satisfied that they knew, just as Mr Guilfoyle knew, that the properties were more than sufficient to discharge the two incumbrances.
A point was taken in the course of the case but was not urged in closing by Mr McCann and I need not deal with it in any detail. There was correspondence from the Bank relating to a claim by architects for fees but it is quite clear that this was a claim not against the Bank but against the plaintiff company and that the claim did not affect in any way the charge of the Bank. The correspondence to which I have referred should not to my mind be interpreted as meaning that there was any bar on the release of the Bank s security over the Clonberg lands in January 1985.
The defendant, however, relies on a decision of the Supreme Court delivered on the 6th May 1986 in the case of Viscount Securities Ltd v Kennedy Supreme Court 1985 No 1689, the 6th May 1986. The judgments of the Supreme Court were to the effect that because the plaintiff could not give vacant possession of the lands on the date on which the completion notice was served, a considerable amount of spoil being on the lands, the notice was invalid under condition 28, the same condition as in issue in the present case, even though vacant possession could have been given on the expiration of the completion notice.
I do not think that the Supreme Court s decision is to be construed as meaning that if a vendor has not got releases of incumbrances available on the date of the service of the completion notice but could have had them on the date of its expiration that the completion notice is invalid.
In my view the plaintiff company in this case was able, ready and willing to complete the sale on the date of the completion notice. Assuming the defendant was required to produce an engrossed assurance of the property and fix a date for closing, and had he done so, I am satisfied that the releases of the securities or letters which would enable undertakings to be given to discharge the incumbrances out of the sale price would have been obtained.
Accordingly, I am satisfied that the point in relation to the charges was not a valid one and did not affect the title which the plaintiff company was in a position to give at the date of the completion notice.
It was then suggested on the defendant s behalf that the title was defective because the matter of the right-of-way had not been satisfactorily concluded. I reiterate the point which I made earlier. No objection was taken by the defendant s solicitor to the letter of the 12th July 1983 which was sent on to the defendant s solicitor. In my view the defendant must be taken as having acquiesced in this particular method of giving the defendant rights over the green portion of the lands, either under condition 9 of the contract or under the general principles of contract law.
A further point was taken by counsel on behalf of the defendant. It was pointed out that by virtue of s 23 of the Registration of Title Act 1964 the council should have registered the green lands they obtained by the deed of exchange; that they had failed to do so in the six-month period provided for so they had not got any estate in the green lands and so it is suggested that the right-of-way obtained by the letter of the 12th July 1983 is invalid. Had this point been raised, for example, by vendor and purchaser summons, I do not think it would be answered in the way suggested by Mr McCann on behalf of the defendant.
In my view the council cannot prohibit the defendant from acting on the letter of 12 July 1983 merely because they had failed to obtain registration as required by the statute. If they were not registered they could not claim any estate which would entitle them to stop the defendant entering upon the land. If they had obtained registration subsequently, the registration dates back and they are bound by the terms of their letter.
In my view the events that happened in relation to the right-of-way do not constitute a defect in the plaintiff company s title or suggest that it is not a good marketable title.
The third and fourth points I can deal with briefly. Mr Peart s statutory declaration and the certificate under the Family Home Protection Act had not been executed on the date the completion notice was served. This is true; indeed, they were not completed until some time after the sale had fallen through. But I am quite satisfied as a matter of probability that these documents could have been obtained without any difficulty if the contract for sale had been completed on the defendant s part and had the defendant s solicitor submitted a Deed of Exchange and fixed a date for closing. The form of certificate and form of declaration had been agreed and it was only a matter of having these documents signed by Mr Peart, and the plaintiff company would be able to produce these documents at the time at which closing would take place so the failure to have these documents on the actual date of the notice does not invalidate it.
I turn now to the final submission made on the defendant s behalf by Mr McCann. It is now pleaded and urged that the plaintiff company has no cause of action against the defendant because the defendant entered into the contract in a representative capacity and I can briefly indicate the facts which I find in relation to this matter.
The defendant, Mr Malachy Clarke, and an associate, Mr Anglin, had been engaged together for a number of years in the development of building lands, particularly in relation to the building of apartments. Loosely, they can be referred to as having been in partnership.
Technically they engaged in their joint venture through limited liability companies. At the date of the contract they were shareholders in and directors of a company known as Arven Homes Limited. In addition Mr Anglin was a shareholder in and a director of a company called Elmland Builders Ltd and also of a company called Devonwood Development Ltd which had been incorporated on 28 May 1981. Mr Clarke was not then a member of or a director of Devonwood Developments Ltd. When the contract was signed it was Mr Clarke s intention that he would undertake the venture of the development of the lands the subject matter of the sale in partnership with Mr Anglin through the medium of a company. When the contact was signed, however, he did not know whether there would be a new company formed or whether an existing company would be utilised.
It is of some relevance to note that after the contract was signed an application for a new planning permission was made by Arven Homes Ltd, and under the 1977 regulations, Article 18, an applicant is required to give particulars of his interest in the lands to which the application relates and presumably Arven Homes indicated an interest in the Clonbeg lands. However, at the same time an application was made in April to Lombard and Ulster for finance for the development in another company s name – Devonwood Developments Ltd.
The first issue which I have to consider is whether, in fact, the defendant entered into the contract in a representative capacity, that is to say, as the agent for a principal. The defendant s evidence, as I have pointed out, is that he intended that a company would carry out the development, that is, obtain finance, take a conveyance of the lands and build. When Mr Clarke, the defendant, signed the contract he did not know what company would carry out the development. Mr Clarke indicated that he would take his accountant s advice; that it might be a new company. It was necessary, he stated in evidence, to obtain what he called a clean company, one which had not already traded. Arven Homes Ltd was a possibility but his brother was a director of this company and that might not do. Devonwood Developments Ltd was another possibility but Mr Anglin was a shareholder and director of that company and Mr Clarke was neither.
It seems to me that this is not a case of a person entering into a contract on behalf of a principal whose name has not been disclosed. The defendant had no principal at the time of the contract and he did not enter into it in a representative capacity. It is the case of a person with the intention that the obligations and benefits would be taken over by a third party, a limited company, which might not yet be in existence. In these circumstances condition 5 of the conditions of contract have no application to the facts of this case and it seems to me that even if the defendant had signed as agent he could not now claim to avoid a personal liability on the contract if he was not an agent, as I have found. Therefore, I think the pleas in the defence have not been established.
Para 1 of the defence states:
The defendant, entering into the said Agreement as agent for and on behalf of Devonwood Developments Ltd of 36 Waterloo Road in the City of Dublin, and such Agency being known to the plaintiff and the identity of the said Devonwood Developments Ltd having been disclosed to the plaintiff all (if any) liability of the defendant (which is denied) on foot of the said Agreement thereupon terminated in accordance with the provisions thereof.
The defendant did not enter into the agreement as agent of Devonwood Developments Ltd and the agency was not known to the plaintiffs at the time the contract was entered into.
Para 2 reads:
The defendant entered into the alleged Agreement for Sale as Agent and later disclosed to the plaintiff that his Principal was Devonwood Developments Ltd as a result whereof his personal liability on foot of the said Agreement for Sale terminated.
The defendant did not enter into the agreement as an agent and he did not disclose that his principal was Devonwood Developments Ltd until well after the institution of the proceedings.
I should, perhaps, express my view on the alternative situation which might exist if, in fact, I am wrong in the view that I have come to: that the defendant was not acting in a representative capacity. If a view could be taken on the facts of this case contrary to the view which I have taken, that Mr Clarke, the defendant, signed the contract as agent, I do not think the contract could be construed as meaning that Mr Clarke was signing in a representative capacity. The principles that arise in situations such as this have been stated by Budd J in Lavan v Walsh [1964] IR 87 at 96, where he stated:
The question as to whether an agent is to be deemed to have contracted personally in the case of a contract in writing depends on the intention of the parties as appearing from the terms of the written agreement as a whole. The construction of the document is a matter of law for the Court.
In this case an extremely confusing situation had occurred. In my view, and on the authority of the judgment to which I have referred, the onus is on a person in Mr Clarke s position to establish his representative capacity and I do not think he has discharged the onus assuming that he was an agent. The contract document is, at best, ambiguous. Mr Clarke is named personally in the title of the contract as purchaser and no reference to agency occurred in it. Two persons signed the document as the purchaser – Mr Anglin, whose name did not appear as purchaser in the title, and Mr Clarke. In one of the two documents sent by the plaintiff company s solicitors to the defendant s solicitors the words as agents were entered in but not on the other document and not in the title of the contract.
In my view, whatever the intention of Mr Clarke may have been, the court s task is to construe the document as a whole. Even if Mr Clarke was an agent, I cannot hold that the intention of the parties as appears from the document could be that Mr Clarke was executing the document in a representative capacity. For these reasons I think the defence fails and the plaintiff company is entitled to the relief claimed, either by way of specific performance or otherwise.
I will hear counsel later as to the form of order I should make.
Haire-Foster v McIntee
(1889) 23 LR Ir 529; 24 ILTR 44
Monroe J: The plaintiff in this equity civil bill alleges that in the month of December 1882, the defendant, who was his tenant from year to year of a farm of land, at a rent of 24 6s 8d, entered into an agreement to fix a fair rent on the holding under the Land Act of 1881, at the sum of 20 per annum, and that the plaintiff was to prepare and send him the usual form for his signature. The plaintiff alleges that he filled up the form and left it at the defendant s residence; that in pursuance of the agreement the rent was taken at the reduced rent of 20; that the plaintiff was always ready and willing to execute the agreement and have same filed, pursuant to the rules of the Land Commission, but that the defendant refused to execute it. The plaintiff therefore seeks to have specific performance of the agreement.
The defendant by his answer denies the agreement. He denies that any form was ever left at his house. He alleges that the rent was reduced, not in pursuance of the alleged agreement, but as a mere temporary abatement, owing to agricultural depression. He relies on the Statute of Frauds, and the absence of any acts of part performance, and he alleges that the plaintiff has been guilty of such delay in these proceedings as to disentitle him to relief.
On the question of fact, as to whether the alleged agreement was entered into, I believe, as the County Court Judge who heard the evidence believed, that the plaintiff s version is correct. The defendant admits he had a conversation with the plaintiff in November 1882, about the Land Act of 1881, at a time when nearly all tenants in his townland had served originating notices. He does not say what that conversation was. He alleges that the plaintiff spoke to him about requiring a judicial agreement, though he states this conversation to have taken place in the month of June 1883, when he refused to comply with the landlord s suggestion. The plaintiff, on the other hand, gives particulars of the interview: how the extent of the proposed reduction was discussed and agreed upon, and how the tenant mentioned the names of the persons before whom he would get the execution of the agreement by him witnessed, as required by the rules which were then in existence. The County Court Judge heard the evidence of both, given before him in Court, and had no difficulty in believing the plaintiff. I concur in his opinion. I am also of opinion that the form of agreement was left at the tenant s house. The plaintiff alleges that he filled up the form (No 33) in duplicate, adding thereto a clause reserving his right to the game; that he kept one, which he produced in Court, signed by himself, but undated; that he left one at the defendant s house with a woman whom he did not identify or appear to know. The defendant, while he produced his wife and only daughter to prove that no document was ever given to either of them by the plaintiff, did not himself deny that he had received it, or that it had come to his hands. The County Court Judge believed the statement of the plaintiff, and I am of the same opinion. I must, therefore, take it that the defendant, whose rent up to that time was 24 6s 8d, verbally agreed, in December 1882, to sign an agreement for a judicial rent, as contained in the form sent to him, the rent in future to be 20 per annum. No rent appears to have been paid after the date of the agreement until the 2nd April 1884. The tenant produced a receipt of that date for the sum of 20, being one year s rent, due the 1st November 1882. Another half-year s rent of 10, up to the 1st May 1883, was paid on the 1st August 1884. Further rent was paid at the same rate, and in proceedings by ejectment, taken by the landlord in March 1886, the rent was treated in the civil bill as a rent of 20.
Under these circumstances several objections were raised on the part of the defendant to the decree for specific performance pronounced by the County Court Judge. The jurisdiction of the Court to grant such a decree upon proper evidence was not seriously questioned, having regard to the two cases decided by the Vice-Chancellor, of Kelly v Enright 11 LR Ir 379, and Beauclerk v Hanna 23 LR Ir 144. It was, however, urged that a decree could not be given, inasmuch as neither in the parol agreement, nor in the form which was left with the defendant, was there any date for the commencement of the lease. In my opinion this argument cannot prevail. Once the agreement sought to be enforced has been executed and filed in the prescribed manner, it is by the 8th section, sub-sect 6, Land Law (Ireland) Act 1881, to have the same effect and consequence in all respects as if the rent so agreed on were a judicial rent fixed by the Court under the provisions of the Act. The rent so fixed (sub-sect 2) is to be deemed to be the rent payable by the tenant as from the period commencing at the rent-day next succeeding the decision of the Court. The gale-days of the defendant were May and November, so that in the case of a judicial agreement filed in the month of December 1882, or at any time between that date and the 1st May following, the new rent, and the judicial term, would commence from the 1st May 1883. The Act of Parliament specifies the date, in reference to which the contract was silent.
It was further contended that there was no act of part performance to get rid of the Statute of Frauds. Mere decrease in the rent paid was not, it was said, an act of part performance which could be relied on. It was not shown to be referable to the agreement, and there was no proof to corroborate the plaintiff s statement, which was entirely denied by the defendant. The authorities are quite clear to the effect that the payment of an increased rent satisfactorily proved to be referable to a parol agreement is an act of part performance: Nunn v Fabian LR 1 Ch 35, Archbold v Lord Howth Ir R 1 CL 621; Conner v Fitzgerald 11 LR Ir 106. So also payment of a decreased rent, proved to be referable to a parol agreement, had been held to be an act of part performance: Beauclerk v Hanna 23 LR Ir 144. But clear and specific proof should be given to satisfy the Court that the increased or decreased rent was referable to an alleged parol agreement, and that it could not reasonably be attributed to anything else. I confess I should have had great difficulty in saying the evidence on this point was satisfactory if the tenant had told one consistent story and the landlord another, and that there was nothing in the circumstances of the case to corroborate either. This would be, in fact, to accept doubtful and unsatisfactory parol evidence of an act of part performance, the very class of evidence which the Statute of Frauds was intended to get rid of. Here, however, the case of the tenant is most unsatisfactory. He pleads one thing and swears another. In his defence he alleged that the rent was reduced merely temporarily, owing to agricultural depression. In his evidence he contradicts this statement altogether, and alleges that the landlord of a holding containing 20 A 3 R 20 p , at a rent of 24 6s 8d, reduced the rent to 20, merely because the tenant alleged that he had less land, by an acre and fifteen perches, than he was paying rent for. The case sworn to was palpably false; and I have no hesitation, on the particular facts of this case, in arriving at the conclusion that the reduced rent taken by the plaintiff, and sued for by civil bill, corresponding as it did with that set out in the form of agreement left for the tenant s signature, was a rent reduced by reason of, and in accordance with, the terms of the parol agreement.
There is but one other matter which was also strongly urged by the defendant, viz that the plaintiff has been guilty of such laches in this case as to deprive him of the relief which he seeks. The facts relied on are these: The alleged agreement was made in December 1882; the form was never signed by the tenant. He was sued for rent in April 1885; he was then asked would he sign the agreement; he positively refused, and repudiated the agreement altogether. Still the landlord took no step to enforce it. In the month of October 1887, the tenant served the landlord with an originating notice, stating his then rent to be 24 6s 8d. The landlord even then took no step, until he filed the equity civil bill for specific performance on the 16th May 1889.
I know of no case in which a plaintiff has ever succeeded in getting a decree for the specific performance of an agreement six years and a-half after it is alleged to have been entered into, four years after it had been repudiated in open Court, and nearly two years after the defendant had himself instituted proceedings entirely inconsistent with the existence of such a contract. If the plaintiff had instituted proceedings within a reasonable time after the contract was made – if he had shown himself, in the language of the cases, ready, prompt, and eager to carry out the contract for the execution of a statutory agreement – I think he would have been entitled to a decree. The County Court Judge was stated at the bar to have held that the tenant was not at liberty to rely on the landlord s laches so long as he enjoyed the benefit of the alleged contract. I cannot go to this length at all. The continuance by the tenant in possession at the lower rent referable to the agreement may, to a certain extent, explain why the landlord did not at once insist on the execution of the agreement. But there is no excuse for the delay after the tenant had repudiated its existence, though he paid only the reduced rent which the landlord demanded. I must therefore reverse the decree of the County Court Judge, and dismiss the equity civil bill.
Smelter Corporation v. O’Driscoll
Innocent Misrepresentation
[1977] IR 306
O’Higgins C.J.
29th July, 1977
This is an appeal brought by the plaintiffs from the decision and judgment of Mr. Justice Butler refusing their claim for specific performance of an agreement entered into by the defendant for the sale to them of 55 acres 0 roods and 36 perches of land situate at Carrigrenan in the county of Cork. The plaintiffs are a limited liability company formed for the purpose of establishing in Ireland a smelter or base-metal reduction plant. At the time of the agreement sought to be enforced, the plaintiffs were engaged in the acquisition of land as a suitable site for such a plant in the Little Island area of Cork. The defendant is the owner of the land which is the subject of the agreement, but the negotiations in relation to the agreement were conducted on her behalf by her husband, Michael O’Driscoll, and later by her solicitor who has since died. The agreement necessarily took the form of an option to purchase, and was dated the 25th November, 1969.
Under the agreement the plaintiffs, in consideration of the payment of £7,000, were given for 12 months an option to purchase at a price to be determined by Mr. Owen MacCarthy (the well-known arbitrator to the Land Values Reference Committee) on an arbitration specially held for that purpose. Provision was made for the extension of the option for a further period of six months on the payment of a further sum of £3,250 and there were other clauses which are not relevant to the issues raised in this appeal. In the event of the option being exercised, it was provided that the option payments should be credited against the purchase money and, if the option was not exercised for any of the three grounds set out in clause 9, it was provided that one-half of such sums should be returned to the plaintiffs and that, in the meantime, such one-half should be secured on deposit. On the 10th January, 1970, Mr. Owen MacCarthy determined in his arbitration award that the purchase price of the land should be at the rate of £1,500 per acre, which resulted in a purchase price of £82,837.50.
By letter dated the 23rd November, 1970, the plaintiffs took a second option for six months for the sum of £3,250 which was thereupon paid to the defendant’s solicitor. A third option for six months was then purchased by the plaintiffs as a result of negotiations between the auctioneer acting for the plaintiffs, Mr. Ahern, and the defendant’s solicitor. The consideration for this option was also £3,250, but this sum was not to be credited against the purchase money should the plaintiffs exercise the option. At the expiration of the third option, a fourth was negotiated as is evidenced by a letter dated the 24th November, 1971, from the defendant’s solicitor to the plaintiffs. This option was for a further six months for a nominal consideration but on the terms that the option monies paid under the original option should now be freed to the defendant and should not be credited against the purchase money in the event of the option being exercised. In effect, this arrangement constituted the ground of a fresh option to purchase for a fixed price of £93,087.50 being £82,837.50 as fixed by Mr. MacCarthy, plus the £10,250 paid in respect of the options under the agreement of 25th November, 1969. By letter dated 15th May, 1972, the plaintiffs purported to exercise this final option. The defendant was unwilling and refused to complete and these proceedings were commenced by the plaintiffs seeking specific performance of the agreement to sell, and associated relief.
The defence to the plaintiffs’ claim is based on two main grounds. In the first place it is contended at paragraph 3 of the defence that the option or options to purchase were given by the defendant “subject to a condition precedent that a smelter plant otherwise a base metal reduction plant would be built on the said lands and that the said lands would be used for no other purpose but the plaintiffs do not propose to build or utilise a smelter plant or base metal reduction plant on the said lands and the said condition precedent to the exercise of the said option has not been fulfilled and will not be fulfilled and the plaintiff is thereby debarred from exercising the said or any option.”
At paragraph 4 of the defence it is also contended with regard to the option that “the same was obtained from the defendant under duress and coercion whereby the plaintiffs caused or permitted a local authority to clearly give her to understand that if she did not sell the said lands or give an option over the same to the plaintiffs for the purpose of a smelter plant or base metal reduction plant, then the said lands would be acquired by compulsory acquisition by the said local authority and given to the plaintiffs for the stated purpose, and the defendant believed that this threat would be carried out to her damage and it was further represented to the defendant that she had a national and patriotic duty to permit employment on a large scale to be afforded by the plaintiffs at the said smelter plant or base metal reduction plant and it was in those circumstances and only on the understanding and pre-condition, express or implied, as hereinbefore indicated, that the defendant afforded such option to the plaintiffs.”
To assess the validity of these two grounds of defence or of either of them, regard must be had to the evidence adduced at the trial before the learned High Court judge. Apart from the documents already referred to which relate to evidence of the option arrangements entered into between the parties, it appears that much happened before these arrangements became possible. The plaintiffs had engaged Mr. Ahern (the principal of Marsh & Co., auctioneers) to conduct negotiations on their behalf with local land owners including the defendant.
On behalf of the plaintiffs Mr. Ahern interviewed the defendant’s husband and offered £800 per acre for the land which was subsequently the subject of the options. Believing that the Cork County Council as the planning authority had power under s. 77 of the Local Government (Planning & Development) Act, 1963, to acquire these lands compulsorily for the development contemplated by the plaintiffs, and further believing that, as a matter of probability, this power would be exercised, Mr. Ahern so informed the defendant’s husband. He did this in good faith, as the learned trial judge has found, believing his statement to represent the reality of the situation facing the defendant. Mr. Ahern followed up this verbal statement with a letter dated the 11th August, 1969, which was written to the solicitor acting for the defendant. In this letter he again made an offer of £800 per acre but added: “We are suggesting that, since the probability of a compulsory purchase order being made is admitted, the necessity of having the order made be dispensed with and that the value of the land be submitted to an independent arbitrator acceptable to both parties, and that both parties be bound by his decision.” This letter was a clear indication of Mr. Ahern’s view, as the negotiator on behalf of the plaintiffs, that if the £800 per acre was not acceptable the defendant ought to agree to the price being determined by an independent arbitrator in order to avoid a compulsory purchase order.
It seems clear that the defendant’s solicitor did not doubt for a moment the soundness of the view expressed by Mr. Ahern, and that subsequent negotiations were conducted on the basis that, if agreement was not possible, compulsory purchase would be the next step.
It appears that Mr. Filer, the managing director of the plaintiffs, was made aware of the manner in which Mr. Ahern was negotiating with the defendant, and of the arguments and representations he used and made. This appears from the fact that at the end of August, 1969, Mr. Filer was given Mr. Ahern’s complete file of correspondence which included the letter of the 11th August.
Despite the efforts of Mr. Ahern, the defendant, through her husband, could not be persuaded to sell although the offer made on behalf of the plaintiffs was substantially increased.
By the 9th October, 1969, all negotiations had come to an end and the possibility of the plaintiffs securing the defendant’s lands by agreement seemed remote in the extreme. On that date a number of people, representing the plaintiffs, called to the County Hall in Cork which is the headquarters of the Cork County Council. These included Mr. Filer, the managing director and Mr. Ahern, the auctioneer. They there met the county manager, Mr. Conlon, the chairman of the County Council, Mr. Michael Pat Murphy, the vice-chairman, Mr. Denis O’Sullivan, and the development officer, Mr. David Murphy. There appears to have been some slight conflict in the evidence at the trial as to the immediate purpose of this meeting. However, it is clear that following this meeting the county manager, the chairman, the vice-chairman, Mr. Ahern and the development officer went in a body to see the defendant’s husband for the purpose of urging him to resume negotiations with the plaintiffs for the sale of the land. There was again a conflict in the evidence at the trial as to what was said at this interview with the defendant’s husband. The defendant’s husband maintained that it was made clear to him by the gentlemen who called to see him that, if he was not willing to sell, the lands would be acquired compulsorily by the County Council. This was disputed by the County Council witnesses. However, the learned trial judge was satisfied that at this interview there had been a reference to the compulsory purchase of the lands and that this, coupled with what had previously been said and written by Mr. Ahern, operated on the mind of the defendant’s husband. This, of course, is a finding of fact by the learned trial judge which is binding on this Court.
On the following day the defendant’s husband telephoned the development officer to say that he was prepared to negotiate with the plaintiffs, and the agreement was executed on the 25th November, 1969.
At the trial it was made clear by the county manager when he gave evidence that the belief held and expressed by Mr. Ahern was incorrect. The county manager made it perfectly clear in his evidence that there was no question of the County Council acquiring these lands for the plaintiffs. Whatever views he may have had as to the Council’s powers in this respect, he said that such an exercise of compulsory acquisition had never been attempted and certainly was neither planned nor contemplated in this case. From this it follows that all suggestions made to the defendant’s husband, to the effect that if the lands were not sold voluntarily they would be acquired compulsorily, were ill-founded.
I now turn to the grounds relied on by the defendant for resisting the order for specific performance claimed in this case. I wish to say at once that I find no substance in the first ground of objection. In my view, the purpose for which the plaintiffs sought to purchase lands or the use to which they intended to put them in no way affected the transaction. I can see no basis for suggesting that the proposed acquisition of the defendant’s lands depended on the smelter project proceeding.
However, the second objection must be viewed in a different light. Specific performance is a discretionary remedy. The discretion to grant or refuse the relief must be exercised in a manner which is neither arbitrary nor capricious but which has regard to the essential fairness of the transaction involved. In effect, it is here suggested that the defendant was coerced or forced into granting the option or options to the plaintiffs by the threat of compulsory purchase. It does not seem to me on the evidence that a threat, as such, was ever used. At the same time it seems perfectly clear that the defendant was at a serious disadvantage.
The defendant’s husband, who acted for her throughout the negotiations, believed that if there was not a voluntary sale there would be a compulsory acquisition of the lands. He so believed because he was told this by the plaintiffs’ agent, Mr. Ahern. It is quite clear that this view was repeated to him by the defendant’s solicitor, and on the 9th October, 1969, further corroboration was provided by those who came to see him and who represented Cork County Council. Believing this to be the situation, there was no real purpose in refusing to sell or to give an option once, as was suggested, the price was to be determined by an agreed arbitrator. To refuse in these circumstances meant acquisition anyway, and the determination of the price by an arbitrator in whose appointment the defendant might have no say. It now transpires that the situation was not as was intimated to the defendant’s husband. It is now clear that, at the time that these negotiations were proceeding, the County Council had no plans whatsoever to interfere by way of the compulsory acquisition of the defendant’s lands.
It is well established that the discretion to grant specific performance should not be exercised if the contract is not equal and fair. In this instance the defendant was under a fundamental misapprehension as to the true facts. This misapprehension was brought about by the plaintiffs’ agent, Mr. Ahern. While Mr. Ahern acted bona fide, this does not alter the situation which he created. He led the defendant’s husband and her solicitor to believe that, if the defendant did not agree to sell, the lands would be acquired. It appears clear also that the plaintiffs’ managing director was aware of the true position so far as compulsory acquisition was concerned. It is to be noted that he had Mr. Ahern’s file of correspondence and, therefore, should have been aware of the incorrect picture which Mr. Ahern had painted. Nevertheless, the plaintiffs’ managing director allowed the negotiations to proceed.
In these circumstances it appears to me that there was a fundamental unfairness in the transaction. The defendant agreed to sell believing that she had no real option, and the plaintiffs accepted her agreement to sell knowing that this was not so. In my view it would create a hardship and would be unjust to decree specific performance in this case. I agree with the decision of the learned trial judge. I would refuse specific performance but would order that all monies paid to the defendant by the plaintiffs be returned to the plaintiffs by the defendant.
Kenny J.
I agree.
Parke J.
I agree.
Lift Manufacturers Ltd v Irish Life Assurance Co. Ltd and John Sisk Son Ltd
Building Contract
1979 No. 7312 P
High Court
21 December 1979
[1979] I.L.R.M. 277
(McWilliam J)
McWILLIAM J
delivered his judgment on 21 December 1979 saying: These proceedings have been commenced by the plaintiff for specific performance by the defendants of an agreement contained in correspondence and other documents written, executed or submitted between 2 June 1978, and 4 January 1979.
The first-named defendant is the developer and the second-named defendant, hereinafter called Sisk, is the builder or main contractor of a substantial complex at Moore Street, Dublin. The plaintiff carries on the business of the manufacture and installation of lifts and lifting machinery. The contract alleged is for the supply and installation of lifts at the complex for the sum of 119,915.78.
By letter of 2 June 1978, the plaintiff was, with 13 other companies, invited to tender for the work. The plaintiff forwarded its tender on 26 June 1978. The form of tender commenced with the following statement:
Having examined the drawings, general conditions of contract for the main contract, specifications and drawings for the above-mentioned sub-contract works, we undertake to carry out and complete the whole of the said sub-contract works in conformity with the said drawings, specifications and sub-contract obligations pursuant to the main contract for the sum given below.
It included the following cause:
We agree that this offer shall remain open for a period of ten weeks from the date of this tender and shall be conditional upon the terms of a sub-contract being agreed with the Main Contractor within this period.
By letter of 4 January 1979, Sisk wrote to accept the tender subject to certain conditions, the first of which was: *279
1. That you will enter into a sub-contract agreement based on and modified in accordance with the conditions of the Main Contract.
Condition 16 of the main contract provided as follows:
(a) No nominated sub-contractor shall be employed upon or in connection with the works against whom the contractor shall make reasonable objections or (save where the architect and contractor shall otherwise agree) who will not enter into a sub-contract which shall indemnify the contractor against the same obligations in respect of the sub-contract as those for which the contractor is liable in respect of this contract.
The plaintiff alleges that the main contract was not furnished to it.
Although it is not stated in the condition as such, the letter of 4 January 1979, also stated that the standard form of sub-contract would be amended to reflect a change in the basis upon which the insurances for the works had been arranged. It was also stated in the letter that a questionnaire regarding insurances other than the foregoing was enclosed and it was requested that this should be completed and returned. The letter concluded We would be obliged it you would acknowledge receipt of this letter. There is no averment in the affidavits that this questionnaire was enclosed and I have not been furnished with a copy of it. It appears that there was no reply from the plaintiff.
A postal strike intervened at some stage and there is a dispute about the receipt by the plaintiff of a letter of 8 February 1979, from Sisks contracts surveyor, stating that it would be necessary for the plaintiff to furnish a contract guarantee bond before the sub-contract documents could be completed. Whether this letter was received or not it is clear that there were discussions during the Spring and Summer of 1979 about the provision of a guarantee bond and the plaintiff was prepared to provide one. Owing, however, to a delay in auditing the plaintiffs accounts, the plaintiffs insurance company would not issue the bond.
Sisk insisted on being furnished with a bond before completing the sub-contract and continued to call for it throughout the summer. By a short formal letter of 13 June 1979, the plaintiff confirmed that a bond was being obtained. On July 1979, Sisk wrote to give 14 days to obtain an indemnity in accordance with clause 16 subs. (a) of the main contract, and the plaintiff replied explaining the circumstances of the delay and referred to the fact that the starting date for the contract was planned for September 1980, and that no inconvenience would be caused by not having the bond until September 1979.
By letter of 3 September 1979, the architects wrote to say that they had no alternative but to make a new nomination of contractors for the work, and, on 5 October, they wrote to say that they had made a new nomination. In the event, the plaintiff obtained confirmation of the issue of a bond on 3 October 1979.
Other than the letter from the plaintiff of 2 August 1979, I have not been referred to any document confirming or denying the accuracy of the statement that the starting time for the contract was planned for September 1980. The form of tender stated: We undertake to begin the works at such time as the Main Contractor may reasonably require. The main contract provided for a period of insurance from 4 September 1978 to 20 June 1981, and it was anticipated that the works would be formally handed over on 30 June 1981. These references do not give me any assistance.
*280
On these facts it is clear that a number of difficult questions will be raised in the action but I am not concerned with these other than to be satisfied that the plaintiff has a genuine claim and I accept that he has.
The plaintiff has now applied for an interlocutory injunction to restrain the defendants from nominating another sub-contractor to do the work. The defendants oppose the application on the ground that there is no foundation for the action because specific performance of a contract for services cannot be decreed and, in any event, that damages would be an adequate remedy.
As to the first objection, I have been referred to Hounslow London Borough Council v Twickenham Garden Development Ltd [1971] Ch 233; Garrett v Barnstead Epsom Downs Railway Co (1864) 4 De G.J. Sm. 462 and Cork Corporation v Rooney (1881) 7 IR Ir 191 which indicate that the rule is not rigid and that where there is a genuine claim an injunction may be granted. The basis for the rule is that the court cannot oversee the performance of the services and it seems to me that, where there does not appear to be any reason for the court to oversee such performance, the rule is not applicable.
I have been referred to Educational Co. of Ireland Ltd v Fitzpatrick [1961] IR 323 and American Cyanamid Co v Ethicon Ltd [1975] AC 396. In the former the judgment of Lavery J, at p. 337, and in the latter the speech of Lord Diplock described the circumstances in which an interlocutory injunction will be granted. Lord Diplock said at p. 407:
The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he would not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; but the plaintiffs need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiffs undertaking in damages if the uncertainty were resolved in the defendants favour at the trial. The court must weigh one need against the other and determine where the balance of convenience lies.
In the present case, it appears to me that the balance of convenience lies in granting the injunction. The plaintiff has stated the grounds on which it would not be adequately compensated by damages but there is no averment on behalf of the defendants that any immediate time schedule was involved with regard to the lift contract or what are the actual consequences anticipated from further delay, or how, having regard to the statement in the plaintiffs letter of 2 August, the delay in the plaintiffs work affects the current or future progress of the main work.
Joan Vandeleur & Nesta Moore v James Dargan
Damages in Lieu
1979 No. 5678P
High Court
28 April 1981
[1981] I.L.R.M. 75
McWILLIAM J
delivered his judgment on 28 April 1981 saying: … By an agreement in writing dated 5 June 1979, the defendant agreed to buy Wardenstown House and 99 acres of land for the sum of £320,000. The defendant was depending on a sale of his own lands to enable him to complete the purchase. Unfortunately the market for land collapsed shortly afterwards and the defendant was unable to sell his land for a price which would enable him to complete the purchase from the plaintiffs. The deposit paid by the defendant was only £20,000 and the plaintiffs issued proceedings for specific performance on 12 September 1979. On 7 October 1980, I made an order for specific performance of the contract. The date for completion named in the contract was 5 September 1979, and I ordered interest at 18% per annum, as was provided by the contract, to be paid from that date until completion. The defendant has not complied with the order and the plaintiffs now seek damages in lieu of specific performance.
I have been referred to the case of Johnson v Agnew [1980] AC 367; [1979] 2 WLR 487; in which the House of Lords considered the question of damages in lieu of specific performance where an order for specific performance made against him has not been carried out by a purchaser. A full review of the authorities was made by Lord Wilberforce who stated five propositions with regard to contracts for the sale of land which purchasers fail to complete. Of these, the fourth and fifth are relevant to the present case. At page 492 of the report in WLR *77 Lord Wilberforce said: ‘Fourthly, if an order for specific performance is sought and is made, the contract remains in effect and is not merged in the judgment for specific performance’. At page 493 he said:
Fifthly, if the order for specific performance is not complied with by the purchaser, the vendor may either apply to the court for enforcement of the order, or may apply to the court to dissolve the order and ask the court to put an end to the contract. This proposition is as stated in Austins of East Ham Ltd v Macey (1941) Ch 338 (and see Singh (Sudagar) v Nazeer [1978] 3 WLR 789, 790 per Megarry, VC) and is in my opinion undoubted law, both on principle and authority. It follows, indeed, automatically from the facts that the contract remains in force after the order for specific performance and that the purchaser has committed a breach of it of a repudiatory character which he has not remedied, or as Megarry VC puts it [1978] 3 WLR 785, 790, that he is refusing to complete.
Lord Wilberforce continued:
These propositions being, as I think they are, uncontrovertible, there only remains the question whether, if the vendor takes the latter course, i.e. of applying to the court to put an end to the contract, he is entitled to recover damages for breach of contract. On principle one may ask ‘Why ever not?’ If, as is clear, the vendor is entitled, after, and notwithstanding that an order for specific performance has been made, if the purchaser still does not complete the contract, to ask the court to permit him to accept the purchaser’s repudiation and to declare the contract to be terminated, why, if the court accedes to this, should there not follow the ordinary consequences, undoubted under the general law of contract, that on such acceptance and termination the vendor may recover damages for breach of the contract?
Having then considered, in considerable detail, the arguments said to support a negative answer, Lord Wilberforce came to the conclusion at page 498 that ‘The vendors should have been entitled, upon discharge of the contract, on grounds of normal and accepted principle, to damages appropriate for a breach of contract.’ And he decided that, as the vendors acted reasonably in pursuing the remedy of specific performance, the date at which that remedy became aborted (not by the vendor’s fault) should logically be fixed as the date on which damages should be assessed. In the present case, this must be the date of the application to dissolve the order for specific performance on the ground of non-compliance with it by the defendant.
No argument has been advanced which persuades me that the plaintiffs are not entitled to damages once the order for specific performance has been dissolved but the way in which damages should be measured has been keenly contested.
The plaintiffs claim damages arising in three different ways. First, they claim the difference between the contract price of £320,000 and the present value which they say is £155,000. Then they claim interest on the balance of £300,000 from the date fixed for completion by the contract until the date for completion under the order for specific performance, that is to say, from 5 September 1979, until 7 November 1980. This has been calculated at £63,344.00. Finally, they claim that, because the difference between the contract price and the present value will be awarded as damages, there will be a very much heavier liability *78 to capital gains tax which their accountant has calculated to be £16,788.
With regard to the first ground on which damages are claimed, an accountant giving evidence on behalf of the defendant prepared an elaborate set of figures to establish that, if the plaintiffs had completed the original sale at £320,000 and purchased another farm, as they had hoped to do but had no contract for the purpose, they would not sustain any loss if they now sold for the present value which the defendant’s valuer puts on the lands and purchased the property they intended to purchase for the reduced value which the defendant’s valuer assesses that other property now to be worth. I cannot take a hypothetical situation such as this into consideration as there is no evidence to justify the assumption of the possibility of the purchase of the alternative property, indeed the only evidence is to the contrary, and I do not accept the valuation of the property sold adopted for the purpose of the calculations.
There is a conflict of evidence as to the present value of the property sold. Mr Ganly, on behalf of the plaintiffs, has put a value of £155,000 on the property while Mr Carey, on behalf of the defendant has valued it at £220,000. Both auctioneers agree that there is no market for this type of property at the moment and neither of them has sold such a property recently. Mr Ganly has made his valuation purely on the basis of long experience and his knowledge of the state of the market. Mr Carey has based his estimate on sales, in which he was not personally engaged, of various properties not resembling the property in question and situate in various localities between Dundalk and Limerick. In this difficult situation I perfer the estimate of Mr Ganly but I do not think I would be doing any injustice to the plaintiffs in the present uncertain state of the market if I were to add a sum of £15,000 to Mr Ganly’s estimate and adopted a sum of £170,000 as the present value of the property. The difference between this sum and the price agreed is £150,000.
I have not been referred to any authority on the claim for interest except the judgment of Finlay P, in the case of The Northern Bank Finance Corporation Ltd v Charlton delivered on 18 June 1979, in which the President allowed interest at the rate of 6% per annum in respect of money which had been wrongfully obtained or expended as a result of a fraudulent misrepresentation. It does not appear to me that that case has any relevance to the present case. The general principle for the assessment of damages is compensatory, so that the innocent party may be placed in so far as is possible in the same position as though the contract had been performed. Had this contract been performed on 7 November 1980, as provided by the order of the court the plaintiffs would have been paid the balance of the purchase price, £300,000, together with interest thereon at the rate of £18 per cent per annum from 5 September 1979. No argument has been addressed to me with regard to the position between 7 November 1980, and the date of the order dissolving the decree for specific performance. I will allow the interest at 18% per annum for the period claimed.
The third ground on which the plaintiffs claim damages arises from the provisions of the Capital Gains Tax Acts, 1975 and 1978. The accountant who gave evidence on behalf of the plaintiffs estimated the tax payable, had the sale for £320,000 been completed, at a sum of £32,262.08. Taking the present value of *79 the land as £155,000, he made a calculation on the basis of the difference in value of £165,000 and, assuming damages to be this figure, he calculated a figure of £49,050.00 for tax on it, thus arriving at the conclusion that there is an extra sum of £16,788.00 payable on damages of £165.000 than there would have been payable on a purchase price of £320,000. Such a conclusion appears unsatisfactory on the face of it as each liability relates to an aspect of the same sale of one farm of land. It requires to be examined. As I understand the argument of the accountant, which was not elaborated by counsel, it is that damages awarded for breach of a contract of sale are capital sums within the meaning of s.8(2)(a)(i) of the Capital Gains Tax Act, 1975, and therefore none of the deductions allowable on an ordinary sale of land can be allowed. In addition, it is argued that the calculation for tax in respect of the consideration on a sale of land is made at the rate of 25.5% under the provisions of s.4 of the Capital Gains Tax (Amendment) Act, 1978, whereas the calculation in respect of damages must be made at the rate of 30% under the provisions of s.2 of the 1978 Act, presumably on the basis that the provisions of s.4 of the 1978 Act also do not apply to an award of damages.
The accountant who gave evidence on behalf of the defendant agreed with the computation of tax payable on the basis of the due completion of the sale for £320,000 but the remainder of his calculations are made on a different basis to those of the accountant for the plaintiffs. Amongst other assumptions, he assumes that the lands can be and will be sold for a sum of £220,000 and makes calculation of tax on this basis. This evidence does not assist me with regard to the incidence of capital gains tax in regard to damages.
In considering the validity of the argument advanced on behalf of the plaintiffs, it is necessary to refer to some of the provisions of the statutes.
S.3(1) of the 1975 Act provides that ‘Tax shall be charged in accordance with this Act in respect of capital gains, that is, in respect of chargeable gains computed in accordance with this Act and accruing to a person on the disposal of assets.’
S.11 of the 1975 Act provides as follows: (1) The amount of the gains accruing on the disposal of assets shall be computed in accordance with Part I of Schedule 1, and subject to the further provisions in Part II of schedule 1 and in Schedules 2 and 3: (2) Every gain accruing on or after 6 April 1974 shall, except in so far as otherwise expressly provided by this Act, be a chargeable gain, but subject to the provisions of Part II of Schedule 1 (which restrict the amount of chargeable gains accruing on the disposal of assets owned on 6 April 1974).
S.8 of the 1975 Act provides as follows:
(1) For the purposes of this Act
(a) references to the disposal of an asset include, except where the context otherwise requires, references to a part disposal of an asset, and
(b) there is a part disposal of an asset where an interest or right in or over the asset is created by the disposal, as well as where it subsists before the disposal, and generally, there is a part disposal of an asset where, on a person making a disposal any description of property derived from the asset remains undisposed of.
(2) (a) Subject to s.s. (4) and to the exceptions in this Act, there is for the purposes of this Act, a disposal of assets by their owner where any capital is derived from assets *80 notwithstanding that no asset is acquired by the person paying the capital sum, and this paragraph applies in particular to — (i) capital sums received by way of compensation for any kind of damage or injury to assets or for the loss, destruction or dissipation of assets or for any depreciation or risk of depreciation of an asset, (iii) capital sums received in return for forfeiture or surrender of rights, or for refraining from exercising rights.
The effect of these sections is that the damages to be awarded constitutes capital derived from assets and a part disposal of assets and, therefore, a disposal within the meaning of the Acts of assets chargeable with capital gains tax.
Tax would also have been chargeable on the entire purchase price had the original contract been carried out. As the property includes a dwellinghouse, the plaintiffs would, under the provisions of s.25 of the 1975 Act, have been entitled to relief from tax on so much of the purchase price as was applicable to the dwellinghouse. Under paragraph 6 of Schedule 1 the cost of acquiring the asset, in this case, under the provisions of s.(3)(2) of the 1978 Act, the market value of the property on 6 April 1974, and also certain expenditure incurred in enhancing the value of the property would have been allowable as deductions from the taxable purchase price. Under the same section of the 1978 Act these figures are adjusted by reference to the consumer price index for the relevant year of expenditure. As the property was in the ownership of the plaintiffs for more than three years the tax would, under s.4 of the 1978 Act, have been chargeable at the rate of 25.5% instead of the general rate of 30%, as provided by s.3 of the 1975 Act as amended by s.2 of the 1978 Act.
It is argued by the accountant for the plaintiffs that none of these allowances are applicable to the tax payable on the damages to be awarded but I have not been referred to any provision in the Acts which provides or indicates that compensation for the loss or destruction of assets or capital sums received in return for forfeiture or surrender of rights or for refraining from exercising rights are to be excluded from the foregoing reliefs in the computation of tax.
What s.8 of the 1975 Act provides is that a part disposal of an asset shall be taxable in the same way as the complete disposal of an asset and subsection (7) appears to apply to a part disposal the exclusions under Part I of Schedule 1. In addition, paragraphs 6 and 7 of Part I of Schedule 1 expressly provide for apportionment of deductions where there is a part disposal of assets or if there is a disposal of assets derived from other assets.
The Revenue Commissioners are not parties to this case and it is quite possible that other arguments might be put forward on their behalf. It is sufficient for me to say that on the arguments put before me in this case, I am not prepared to increase the damages on the basis of a possible increased liability to capital gains tax.
Accordingly, I will award damages in the sum of £213,344.
Fitzsimons v Value Homes Ltd
[2006] I.E.H.C. 144,JUDGMENT of Mr. Justice Clarke delivered on the 12th day of May, 2006
1. Introduction
1.1 This action concerns a contract for the building and sale of what is known as affordable housing. The proceedings have had an unusual procedural history and it is necessary, in that context, to refer to the fact that the defendants (“Value Homes”) were in significant default in filing their defence. The plaintiff (“Ms. Fitzsimons”) brought a motion for judgment which came before O’Donovan J. on 4th July, 2005. By consent the court ordered a two week extension of time. The defendant failed to comply with the obligation to file a defence within that extended time and the matter came before the court again on 24th October, 2005, when Butler J. made an order in the following terms:-
“IT IS ORDERED AND ADJUDGED that the Plaintiff to recover against the Defendant such amount as the Court may assess in respect of the Plaintiff’s claim herein for damages on the cost of suit and taxation such cost to include the costs of this Motion and of the assessment and that such assessment be had before a Judge without a jury and be set down for a hearing accordingly.”
1.2 Value Homes brought an application seeking an order setting aside that judgment together with an order extending the time for delivery of a defence. That matter came before me on 13th March, 2006. At that stage I came to the view that the level of default in pleading on the part of the defendant was such that it would not be appropriate to set aside the judgment and I therefore confirmed same for reasons which I expressed in more detail in an ex tempore judgment on that day.
1.3 However, a further difficulty became apparent by virtue of the fact that the order of Butler J. (the operative part of which I have set out in full above) provided simply for an assessment of damages whereas Ms. Fitzsimons had originally sought and wished to pursue a claim for specific performance. In those circumstances I indicated that I would be prepared to hear an application on behalf of Ms. Fitzsimons for an order for specific performance. Having declined Value Homes the opportunity to put in a defence, the role played by Value Homes at the hearing of the application for specific performance was, necessarily, limited. However, without objection on the part of Ms. Fitzsimons, counsel for Value Homes was permitted to cross examine Ms. Fitzsimons for the purposes of clarifying any issues of fact and was also permitted to make submissions.
2. The Role of Value Homes in the Application
2.1 Having regard to the fact that specific performance is an equitable remedy and having regard to the fact that an order of specific performance should only be made by the court in circumstances where it is appropriate, in all the circumstances of the case, to make such an order, it seemed to me that the above course of action was appropriate. While the absence of a defence would not, in my view, permit a defendant to raise controversy as to the facts, there is no reason in principle why a defendant should not be able to clarify the facts. In relation to this case there does not appear to have been any significant controversy on the facts in any event. Furthermore, where it is appropriate for the court to make an order only where the factual and legal basis for same has been established it is also, it seems to me, permissible to permit the defendant to draw to the courts attention any aspect of the case made on behalf of the plaintiff which, it might be argued, reveals circumstances, whether legal, factual, or a mixture of both, which ought lead the court either to refuse the relief or to make an order other than that sought.
2.2 The hearing, therefore, proceeded on the above basis with participation by counsel on behalf of Value Homes in the manner which I have outlined.
3. The Facts
3.1 The facts are relatively straight forward. Value Homes had originally been set up to build affordable housing for persons primarily working in Dublin Airport or companies based there. Value Homes has an association with a Credit Union operating within a similar base. Value Homes entered into a contract to build and sell a property known as apartment number 77, Geraldstown Woods at Santry Avenue in Co. Dublin in favour of Ms. Fitzsimons. That apartment was, as its number implies, one of a significant number of apartments under construction as part of the affordable homes project. The original purchase price was IR £111,350 which when converted into Euro was €141,385.34. Condition 6 of the building agreement provided for the possibility of an increase in the price in certain circumstances by an amount not exceeding Ir£1,000. It is accepted that those eventualities occurred and thus the original price was increased to €142,655.07 (being the original price together with the Euro equivalent of Ir£1,000). There is thus no doubt that the starting position for a consideration of the issues which now arise is that there was contractual relations between Value Homes and Ms. Fitzsimons whereby Value Homes had agreed to build the relevant apartment and to convey same to Ms. Fitzsimons on foot of a long lease for the sum of €142,655.07. In that context Ms. Fitzsimons paid the agreed deposit of IR £10,000 or €12,697.38.
3.2 It should also be noted that clause 2 of the original building agreement provided for completion within a period of 18 months from the date of the agreement. The agreement would, therefore, have been due for completion in February, 2003.
3.3 It would appear that difficulties were encountered by Value Homes in being in a position to complete the development contemplated at the prices with which it had contracted with the various purchasers. In those circumstances there would appear to have been an attempt to renegotiate the contract.
3.4 In evidence in chief Ms. Fitzsimons accepted that she signed a document in the early part of 2003 which had the effect of agreeing that the contract price should be varied by the provision of an increase in the sum of €20,000 to make a new total of €162,655.07 and further agreeing that the completion date was to be extended to 13th November 2003.
(“The variation agreement”).
Ms. Fitzsimons indicated that it was her understanding that the reason why the renegotiation was sought on behalf of Value Homes was because of the financial difficulties encountered to which I have referred. Subject to a number of issues raised on her behalf by counsel it seems to me that such an arrangement is, in principle, binding and valid. If, as appears to be the case, the company was not in a position to complete the development then serious consequences could, potentially, have arisen for Ms. Fitzsimons. As noted above she had paid a deposit. In the event that the company became insolvent it would, of course, be the case that the company would be in breach of its contractual obligations to her including, depending on the course of action she decided to adopt, an obligation to repay the deposit. The practicalities of the situation were such that it might well have been the case that she would not have been able to recover all, or indeed any, of the sum that might theoretically be due and owing to her. In those circumstances it seems to me that the variation offered provided a potential advantage to Ms. Fitzsimons in the sense that she agreed to pay an increased price as a quid pro quo for ensuring that the development would be completed. However, in that context it seems to me that significant regard also has to be had to the fact that in the variation agreement Value Homes committed itself to a completion in November, 2003.
4. Is the Variation Agreement Binding and was it Breached?
4.1 A number of points were raised by counsel on behalf of Ms. Fitzsimons to suggest that the signed document did not alter the legal relations between the parties.
4.2 Firstly attention is drawn to the fact that the witness to the signature of Ms. Fitzsimons would not appear to have been present at the time when Ms. Fitzsimons signed. However, the purpose of a witness to a signature is simply to prevent disputes arising as to whether a document has, in fact, been signed by the person concerned. Ms. Fitzsimons accepts that she signed the document and, indeed, that she did so having taken advice from the solicitor then acting for her. It does not seem to me that any failing in relation to the proper witnessing of her signature is, therefore, relevant.
4.3 Secondly attention is drawn to the fact that Value Homes does not appear to have executed the document. Again it does not seem to me that that materially effects the relations between the parties. These proceedings were commenced because Value Homes sought to place reliance upon the document. In such circumstances Value Homes are, necessarily, estopped from denying the validity of the document including those obligations as to completion placed upon it by clause 3 of the variation agreement.
4.4 In all the circumstances of the case it does not appear to me that any of the matters raised go to the validity of the variation agreement. If there is to be specific performance of the agreement then it seems to me that, in equity, Ms. Fitzsimons is entitled to specific performance but only on the basis of the contract as so varied.
4.5 However, the matter does not end there. The reality is that Value Homes failed to complete the building within the extended period of time agreed in the variation. It seems to me that Value Homes can not be seen to have it both ways. Part of the quid pro quo for the purchase price increase was a commitment on the part of Value Homes to complete by 13th November, 2003. This was not done. Instead Value Homes would appear to have sought a further variation which would, if agreed, have increased the purchase price to €180,162.96 and have extended the completion date to 25th June, 2004. There does not appear to be any suggestion that Ms. Fitzsimons ever agreed to that variation. However, the sought for further variation evidences the fact that Value Homes were in breach of their contractual obligations even in relation to the contract as originally varied in that the company was not in a position to complete at the varied sum and on the varied date.
4.6 I am mindful of the fact that at or about the time when these proceedings were commenced, Value Homes did offer to complete at the price as originally varied. However by that time, that is to say the earlier part of 2005, Value Homes was well in excess of a year beyond the extended completion date to which it had committed in the variation agreement. In those circumstances it does not appear to me that it was open to Value Homes to comply with its contractual obligations by a completion, at a very belated date, of the original contract as varied in relation to price but without having regard to the fact that it was in breach of its obligations (under the variation agreement upon which it, itself, relied to justify the increased price) to complete at a much earlier date.
4.7 While time was not expressed as being of the essence of the original completion period it seems to me that the only reasonable inference to draw from the variation agreement is to the effect that Value Homes entered into a binding commitment to complete and deliver the property within the extended completion period and that it was, necessarily, in breach of contract by failing so to do.
5. Is Specific Performance Available?
5.1 Counsel for Value Homes also drew attention to the fact (which appears to be common case) that Ms. Fitzsimons did not cause to be served a completion notice in accordance with the terms of the standard form contract used by the parties in this case. If a party not guilty of delay wishes to seek specific performance against a delaying party it seems to me that the innocent party can apply as soon as the delay occurs because it is settled that the remedy of specific performance (unlike many other remedies relating to failure to perform contracts in respect of land) does not depend on a breach of contract but upon the equitable duty to perform the contract Marks v. Lilley (1959) 1 WLR 749 at 753 (per Vaisey J.).
5.2 Therefore it seems to me that Ms. Fitzsimons is, in principle, entitled to specific performance. There is ample evidence to support her contention that she is ready and willing to close the sale. However for the reasons indicated above it does not seem to me that it would be equitable to permit her to obtain a decree of specific performance at a purchase price other than one that reflected the variation agreement. However, again for the reasons set out above, it seems to me that the variation agreement must be reflected in full and that while, on the one hand, there was an agreement that the purchase price should be increased by €20,000 there was also a clear commitment on the part of Value Homes to complete by November 2003. It is now some 30 months later and it must inevitably be the case that Ms. Fitzsimons has suffered loss by reason of the failure of Value Homes to complete within the extended time frame provided for in the variation agreement. In those circumstances it seems to me that it would equally be inequitable for Value Homes to insist on obtaining the aspect of the variation agreement favourable to them (that is to say the uplift in the purchase price) without also making provision for the losses suffered by Ms. Fitzsimons by virtue of the failure of Value Homes to comply with its part of the bargain contained in the variation agreement. In those circumstances it seems to me that the uplift agreed must be abated by the extent of any losses suffered by Ms. Fitzsimons.
6. Conclusions
6.1 I would therefore propose putting the matter in for a further brief hearing in early course for the purposes of ascertaining those losses. Value Homes will be entitled to play the same role in respect of that assessment hearing as was played in respect of the hearing leading to this judgment (the details of which I have outlined above).
6.2 Finally it should be noted that while the losses attributable to failure to close will, undoubtedly, have increased from the time of the commencement of these proceedings, I am satisfied that Value Homes was, as of that time, in breach of its obligations by insisting on a closure with the uplift of €20,000 in the purchase price and without offering any abatement in respect of its failure to complete by November 2003.
6.3 Subject, therefore, to the calculation of the amount of the abatement, as of the date of assessment, I would propose making a decree of specific performance in a sum calculated having regard to that abatement.
6.4 For the avoidance of doubt I should also indicate that the original contract would have entitled Ms. Fitzsimons to possession of an entirely new apartment with entirely new white goods. There is evidence of some form of occupation of the apartment, the nature of which does not seem to me to be material. It should be emphasised that the obligation of Value Homes is to put the apartment into a state equivalent to a new apartment and, in particular, to ensure that the apartment is equipped with appropriate new white goods prior to the closing of the sale on foot of the decree of specific performance which, I have indicated, I intend to make.
Kelly v Simpson
[2008] I.E.H.C. 374,1. The fundamental ingredients in a contract for the sale of land require that the parties be identified as vendor and purchaser, that the land should be identified with substantial precision and that the price should be agreed. Of these three, the price of the land is the most common variable, it being dependant on many factors; among these are the state of the property, its location, the buoyancy of the market and the legal restrictions that are likely on development. Normally, the motivation for any person selling or buying land is irrelevant to any consideration of the validity of such a contract. In his application for a specific performance order, however, it seems to me to be crucial. I am being asked to exercise the equitable jurisdiction of the court in order to compel the defendant to purchase the plaintiff’s property at a value agreed between the parties that is only referable to their motives in purchasing and disposing of it.
The Contract
2. The property in question is at Coosheen, Schull in County Cork. It consists of about 2.5 acres perched above the town, on which there is an existing bungalow together with an old stone ruin. On the eastern side of the property there was a wooded area with scrub undergrowth. The site enjoys an elevated view over the town of Schull and the Atlantic islands of Sherkin and Oileán Chléire. The plaintiff says that he bought this property in December 2006 through Martin Swanton, an auctioneer who trades under the name of Swanton Properties. He bought it to sell it. He thought that the site would be capable of development and put it on the market as such. As his agent Mr Swanton presented the property to the defendant, it was its development potential that attracted the potential purchaser’s interest. But for that, I am convinced, the price agreed would not have been offered. That potential was of fitting two more houses onto the site and demolishing the existing bungalow and building a substantial replacement in the shape of an ‘executive residence’. In the sale advice note, which was drawn up subsequent to the negotiations that fixed the price between the plaintiff as vendor and the defendant as purchaser, the selling agent is identified as Martin Swanton. Therefore, for the purposes of what follows, he was at all times the agent of the plaintiff, as vendor. In that context, I would infer that Mr. Swanton had kept the plaintiff informed as to all interest concerning the site.
3. Because Mr. Swanton knew the defendant, he approached him with a view to seeing if he was interested in purchasing the property. On 20th May, 2007 the defendant and a friend viewed the property and was told that the price was to be €1,500,000.00. There was no assent by the defendant to that price and, as of that stage, no contract was entered into. The defendant was anxious not to pay a 5% booking deposit and nor was he anxious to pay a 10% deposit on the signing of a contract of sale. When he later agreed to buy the property, payment of a deposit of €150,000.00 was deferred to an unspecified date prior to the sale closing, provided the plaintiff as vendor assented. As it turned out, the deposit was never sought by the plaintiff as vendor, because he regarded the business reputation of the defendant as sufficient proof of his intent. The defendant became interested in buying the property for the price of €1,500,000, however, and signed a form by way of registering an interest the next day: this is the booking advice form. I will return to the issue of why he was prepared to pay so much.
4. The sales advice note dated 21st May, 2007 gives the name and address and telephone number of both the vendor and the purchaser and also gives particulars of the legal representatives of both the plaintiff and the defendant. It specifies the purchase price and recites that:-
“No agreement shall be deemed to be enforced or binding on the parties until a formal contract has been signed by both parties and a full deposit duly paid…”
The document states that a booking deposit had already been paid and sets out a provisional closing date of 31st July, 2007. No such deposit had been paid. This document was copied to both the vendor and the purchaser.
5. On 29th May, 2007 the vendor sent a contract for sale in duplicate to the purchaser. In the printed form, this specified the closing date as being 31st July, 2007 as had originally been envisaged. In the meantime, the defendant as purchaser had proposed that a certain number of trees should be cut down on the site with a view to facilitating a digital survey of the contours of the property. This was done with a view to making an application for planning permission for two dwellings, in addition to the one already present on the site, to the local authority.
6. On 11th July, 2007 an architect’s report relevant to planning was received by the defendant as purchaser. This recites that the Cork County Development Plan had set out a strategy for settlement in this rural area that sought to focus development into towns while providing for “the genuine needs of locals wishing to live in the rural area in which they were brought up”. The report indicates that the site is located within a scenic amenity zone where the development plan envisaged the preservation of the natural beauty of those areas and to preserve the character of the views and prospects from existing roads. A further restriction on planning was noted in the context of the capacity of coastal areas to absorb additional houses. The report from the architect mentions that the county development plan provides specific guidance on ruinous dwellings in the countryside, noting that it was not the intention of the planning authority to prevent renovation “in appropriate cases”. It remained possible that the planning authority might consider that there was sufficient upstanding remains of a ruin to grant permission “subject to appropriate design and general proper planning and development considerations”. The report concludes:-
“The subject site is located in a sensitive coastal location. The area is both highly scenic and also located within the greenbelt area for Schull village. It is therefore considered that any development of the site should take a place on an individual basis by locals who meet the qualifying criteria for rural housing. It is considered that one additional dwelling may be permitted on the site.”
7. It is contended in this case that a contract was not entered into between the plaintiff as vendor and the defendant as purchaser because of issues concerning the closing date. As has been noted, the original closing date was that specified in the contract which was the same as on the sale advice form. After some negotiation, the contract was returned to the vendor by the purchaser with the closing date, as originally specified on 31st July 2007, crossed out and with the date of 18th September 2007 substituted by the defendant as purchaser. This was, apparently, to give the defendant more time to raise the considerable finance needed. On 19th June 2007 the plaintiff, as vendor, sought in correspondence to complete the transaction no later than 20th July, 2007. Matters were left to her in abeyance in consequence of what appears to have been the holiday period. It is claimed that the parties later agreed 18th September as the closing date. In any event, on 29th August, 2007 the vendor returned to the purchaser a copy of the signed contract with the completion date of 18th September 2007 unchanged. A further period for completion was sought by the purchaser and this was agreed by the vendor as being 18th October. Closing dates being put back for various reasons are the norm, rather than the exception, in land and house sales. This sale, however, did not close. A completion notice was served on 9th January 2008 and, for the sake of certainty, another one was served on 26th February 2008.
8. Were it not for what follows, I would be satisfied that the plaintiff and the defendant had entered into an otherwise enforceable contract for the sale of this property.
Equity
9. A court exercising a jurisdiction in equity to grant a remedy such as the specific performance of a contract must look beyond the legal form of transactions to the elements of conscience that may impact on whether it is fair to grant the remedy. The responsibility to do equity is that of the court. If one party, for instance, has taken advantage of the distress or recklessness of the other, such an unconscionable dealing should be left without a remedy should a court order be sought. Similarly, parties are not entitled to come to equity seeking a remedy that will enable them to profit through their bad faith. If there is, to take another example, something in a contract which restricts the purchaser’s right to investigate a title, this may have the consequence of suppressing a fair enquiry and result in a court refusing equitable relief. There may also be exceptional cases where hardship requires a court to override legal principles even though the contract was, at that time of its formation, fair and proper but where to enforce it would cause unusual and exceptional hardship; Roberts v. O’Neill, [1983] I.R. 47 @ 57.
10. In John Farrell – Irish Law of Specific Performance, (Dublin, 1994) at paras. 9.3.5 and 9.3.7 the following passages appear:-
“If a court applying equitable principles is truly to act as a court of conscience it must consider the conduct of the parties with particular regard to whether it unjust or unfair and it must consider the consequences and the justice of those consequences from both side’s points of view… The court will not assist unfair dealings or allow a party to profit by his bad faith…
Judges in specific performance actions sometimes refer to the maxims of equity. These aphorisms have played an important role in the development of a number of features of equitable jurisdiction… The plaintiff must come into court ‘with clean hands’ and, if he fails to do, equitable relief sought by him will normally be refused. The obligation to come to court with clean hands relates only to matters affecting the parties and not to dealings with third parties. Failure to have clean hands may jeopardise a person’s position in many other areas. For example, a decision of an owner of an equitable interest in property to stay silent when a mortgage is being effected with the intention of asserting it later when the mortgagee sought to realise his security would be conduct of which a court administering equity could not possibly approve and could leave that owner open to a charge of coming to court with hands which were not clean. A husband who puts land into his wife’s name, to avoid a substantial stamp duty will not be allowed to take advantage of his own dishonesty and succeed in a claim that she holds in trust for him”.
11. I must now refer to the conduct of the vendor and purchaser. This was put before the court without any attempt to qualify it, much less to deny it. It concerns the manner at which the price of approximately €300,000 per half acre was regarded an appropriate sale value in this scenic part of rural Ireland. There is nothing to suggest to me that the solicitors on either side knew anything of what follows as to the negotiations in May and June 2007 leading to that price between the plaintiff as vendor, through his agent Martin Swanton, and the defendant as purchaser.
12. I have to look to the supporting documentation for the purpose of verifying how this price came about. No booking deposit or legal deposit on signing the contract was ever paid by the defendant as purchaser. However, one cheque passed between the parties. The sum of €1,800 was paid by the defendant to Mr. Swanton, the agent of the plaintiff, in consequence of an instruction following on the site visits of June 2007. The evidence of the defendant, which is crucial to the issue of the appropriateness of the court exercising an equitable remedy, was never contradicted or challenged. It is as follows:-
“On Sunday May 20th, 2007 I viewed the site and discussed a number of possibilities in relation to its development. [Mr. Swanton] told me that the local authority planner for the area had said that she would allow three houses on the site. He then went on to outline his proposal for developing the site which was broadly:
(1) To replace the roof on the ruin, thereby rendering it suitable as a redevelopment building in the eyes of the planner.
(2) To redevelop the existing residence for a 2000 plus sq foot executive residence.
(3) To apply for planning for a residence on the site area covered by trees in the name of suitable qualified local person, which he said he would provide.
In relation to values he reasoned that site no. 1 above would costs approximately €250k to redevelop and would yield approximately 1 m in a sale. In relation to site no. 2 he reasoned that it would costs approximately €450k to redevelop and would yield approx 1.8 m in a sale. In relation to site no. 3 he reasoned that it would cost approximately €300k to develop but it would take approx 5 years to sell on this due to planning restrictions”.
13. The architect acting on behalf of the defendant gave the following account, unchallenged, of his attendance with the defendant and the plaintiff’s agent Mr Swanton at the site meeting on 9th June, 2007:-
“I met Martin Swanton whom I had known previously and who was introduced to me by John Simpson as the agent selling the property. Martin Swanton stated that he had met with the local planner for the area and asserted that three residential units could be developed on the site. His reasoning for this was that the existing dwelling could be replaced with a larger and more elaborate structure. He stated that if the roof on the ruined dwelling were replaced that this would allow for a second house to be built. He also said that the portion of the site to the east could be developed by a local qualified person with a housing need. During the discussion I indicated that a survey of the lands would need to be carried out and that if the site to the east were to be developed, then a number of trees and scrub would need to be removed. Martin Swanton stated that he could arrange for the removal of the trees and scrub and the replacement of the old roof on the ruin. He also stated that an associate of his could carry out a digital survey, [but] this was never provided to us. John Simpson requested me to carry out a planning appraisal on the property which my firm subsequently provided”.
14. There is no doubt that the selling agent on behalf of the plaintiff, Mr Swanton, was very well aware from the first meeting with the defendant as potential purchaser, of the planning restrictions in this area. The price at this high monetary level was achieved through inducing the defendant to partially transform an old ruin. This was with the intention of making it appear to the planning authorities that it was a substantial roofed and ruined, although uninhabited, dwelling. A conflict of fact arises here. The defendant claims he never asked Mr. Swanton to replace the roof on this ruin. Mr. Swanton said that he did and that the plan was to use special old timbers and cover them with corrugated iron so as to achieve the desired antiquarian effect. I have a problem with the evidence of Mr Swanton. In 2008 he did something extraordinary. He wrote to the solicitors for the defendant asking them for instructions as to how to dispose of this property, unequivocally asserting that it was the property of their client, at a time when he knew that the issue of whether the defendant had entered into a valid contract was in dispute. As is clear from the reply, the solicitors for the defendant were amazed by this letter. It suffices to say that I do not accept Mr Swanton’s evidence that he could not have otherwise contacted the defendant: I note the relevant name and address in the booking form from 21 May 2007 and the frequent telephone contact and email exchanges between them subsequently. In respect the roofing issue, exercising appropriate caution, I accept the evidence of Mr. Swanton. The defendant also denies any instruction to cut down trees on the property, notwithstanding that he later paid Mr. Swanton a cheque for €1,800 requesting the removal of the trees. He did so instruct the plaintiff’s agent and again I accept the evidence of Mr. Swanton.
15. Upon receiving the defendant’s architect’s appraisal on 11th July, 2007, two relevant emails were exchanged between the parties. Both are dated the 18th July, 2007. At 12.19 hours, the defendant wrote to Martin Swanton, the selling agent on behalf of the plaintiff, in the following terms:-
“I am attaching the planning report from F.H.L. Architects in relation to this. It does not make for great reading. However, I think on balance if you can pull north of €2m for the centre house we just might make it work. Have you had any luck finding a local applicant for the third site? What are your thoughts on this? F.H.L. require the digital survey ‘minus the trees’ to advance a design concept for the site.”
16. This same email was replied to by the selling agent for the plaintiff in the following terms:-
“I don’t see a problem with selling the middle house, (existing house) once I have some kind of sketch/drawing to show them. I am aware of all the jargon in the development plan but I attended a meeting this morning with… [the] county Manager and I can’t really see any problem in the tree house on this site…
P.S. I think I have local for the adjoining site.”
Discretion
17. Where an equitable remedy is sought, the court shall always remember that the parties are subject to human folly before dismissing a claim on the grounds of conscience. Temptations may arise which may be unwisely succumbed to. Where on the balance of all competing interests, it may be regarded as fair for the court to grant an order to a plaintiff of specifically performing a valid contract, the court should make that order. In McGrath v Stewart [2008] IEHC 348, at heading 4, Murphy J. stated the relevant principle on the exercise of this equitable remedy in this way:
“Specific performance is, of course, a discretionary remedy, though that discretion “must be exercised in a manner which is neither arbitrary nor capricious” (Smelter Corporation v. O’Driscoll [1977] IR 305 at 310-311). In Curust Financial Services Ltd. v. Loewe Lack-Werk [1994] 1 IR 450, Finlay C. J. with whom O’Flaherty J. and Egan J. agreed, said (at 467):
“I accept that, the granting of an injunction being an equitable remedy, the court has a discretion, where it is satisfied that a person has come to the court, as it is so frequently expressed, otherwise than “with clean hands”, by that fact alone to refuse the equitable relief of an injunction. It seems to me, however, that this phrase must of necessity involve an element of turpitude and cannot necessarily be equated with a mere breach of contract.”
Although that case concerned an application for an injunction, the principle applies equally to specific performance because, as the Chief Justice noted, the discretion derives from the equitable nature of both remedies (see Kavanagh v. Caulfield (Unreported, High Court, Murphy J. 19th June 2002)). Accordingly, the court must consider whether, in relation to this transaction, the plaintiff comes to equity with clean hands.”
18. Most of the case law on this issue has focussed on the rights of the individuals involved in the transaction. That is not the only consideration. The community is also entitled to be protected. In Post v Marsh (1880) XVI Ch. 395, specific performance was refused for an agreement to write a literary work where the plan was to publish it as having been edited by a respected author who had, in fact, had nothing to do with the book in question and was merely lending his name as a commercial device. The plan was for the proposed book to appear as “Kenny’s Illustrated London”, that author having previously produced other guide books, but not this one. Fry J. refused any relief as to do so would be to assist in the deception of the public.
19. The planning code exists for the purpose of ensuring that one of our most valuable economic resources, the Irish countryside, should be maintained, as to what is left of it, in its attractiveness so as to allow it to continue as a draw for tourist revenues for generations to come. Drawing a distinction between settlement areas and rural areas makes sense from traffic safety and energy considerations as well. I cannot comment on any individual plan as it is within the sphere of government. Courts are not there to formulate policy to foster or protect our resources. Where the Oireachtas has formulated a legislative policy on planning, and local government has exercised devolved powers to set out a county plan on how the countryside is to be developed, the courts are bound to respect it. It is part of the legal order. Apart from preserving economic and natural resources, the planning code exists to ensure that neighbours are not taken by surprise through developments which might impact upon them and to minimise the inevitable disputes that would then arise. Even in that context, a misrepresentation in applying for planning permission in terms of the description of proposed changes, or how they are to be effected, or the undertakings that can often be given in a letter to the planning authority in support of the application can be regarded as disturbing as it undermines trust.
20. Planning legislation does not exist as a fig leaf that can be treated with disregard by anyone of its fundamental purpose in preserving natural assets and ensuring that the development of our habitat takes place by a transparent process. If approaches to the planning process are not honest, then is it fundamentally undermined. Such attitudes are destructive of the rule of law. Though planning, an area can change its character from being, for instance, industrial to light industrial, or rural to suburban or suburban to urban. In Lanigan v. Barry and South Tipperary County Council, [2008] IEHC 29 at para. 22 I said the following:-
“…the wider question as to how an area is to develop is to be determined in accordance with the Planning and Development Act, 2000. The legislation is an example of the application of democratic principle to the important question as to how the area in which a citizen lives, or carries on his or her business, may change. In essence, the Act requires that any development of a site, including a material intensification of its use, should be subject to an application for planning permission to the local authority. This application can only be made through lodging detailed plans which indicate precisely what those effected by the development may reasonable expect. The entire community is given notice of the essence of what is proposed through newspaper advertisements and site notices. People may then inspect the plans. Representations may be made to the local authority as to why planning permission should not be granted and these will be primarily directed towards the effect any proposed development may have on the neighbourhood or area. Those who have made observations for an application for planning permission may appeal to An Bord Pleanála and those who have failed to make observations but who were directly affected, by reason of the immediate proximity of the proposed development, may also appeal. Were the legal mechanism of the scrutiny of planning permission not to exist and were it not the case that notice must now be given in a direct manner though what is in effect an advertisement as to what may happen at the site of a proposed development, then persons might feel aggrieved at being taken by surprise when a factory, set of apartments or some house extensions, suddenly spring up beside them. The legal mechanism is there, however, to allow participation in decisions which may effect the environment, the value of property and the nature of such quiet and comfort as may be the settled expectation of people in any particular area”.
21. The effect of a planning decision can be that what would have been a nuisance because of the intrusion on the quiet, comfort and enjoyment of those occupying the area, as it was prior to the lawful grant a development through planning permission, may be changed in something which those living in the area will simply have to tolerate; see the approach of Buckley J. in Gillingham Borough Council v. Medway (Chatham) Dock Co. Ltd. [1993] Q.B. 343 at 595. Those who are elected to fulfil the role of the local planning authority can be hoped to a take a longer term view as to how the development of their area could best be effected through fitting in housing and industry within an appropriate setting and without ruining the economic draw of an area. Those applying for planning permission must fulfil elaborate criteria so as to ensure that proper scrutiny takes place. All of this is undermined if people feel themselves entitled to be less than honest. Regrettably, there is no avoiding the meaning of the uncontested evidence and the clear import of the correspondence in this case.
22. Essential to the formulation of any valid contract for the sale of the land is, as I have said, the price. I have no doubt that the price in this instance would never have been achieved by the plaintiff, through his agent, had the defendant not been induced to consider it as being more valuable than it in fact was by specific representations designed to undermine the planning code and the entitlement of the local planning authority to properly control planning in this area. This is an instance that the court cannot ignore. The parties have sought to avoid the issue as to the appropriateness of an equitable remedy by arguing this issue as if the court were dealing with an illegal contract. I make no ruling on that issue, even though, on the case law, the court is entitled to intervene even in the absence of a specific pleading in that regard. Rather, this case concerns the duty of the court not to grant an equitable remedy where the effect of specific performance will be to require a purchaser to take property at a price that was only achieved due to an agreed scheme to undermine the planning code decided on by the Oireachtas and local government in specific form and which depends for its effectiveness on honest dealing. The price here would never have been achieved but for the plan to rebuild a ruin with suitably ancient timbers and, worse than that, the other scheme to find a person from the Schull area with housing needs and to do some kind of a deal with him or her to pretend to apply for planning permission as if he or she were to be permanently housed in the site, whereas the reality would have been as set out in the correspondence and evidence quoted.
Kavanagh v Caulfield
Illegality
, unreported, High Court, Murphy J., June 19, 2002
1. PLAINTIFF’S CLAIM
1 The Plaintiff seeks an Order for specific performance for an agreement in writing entered into on the 3rd of November, 1998 between herself as purchaser and the Defendant as vendor for the sale of premises known as 59, Clonliffe Road, Dublin 3 for an agreed consideration of £145,000 less the deposit already paid by her of £14,500 to the Plaintiff.
She also seeks an injunction restraining the Defendant from disposing of the said dwelling house and an Order directing the Defendant to reply to requisitions arising from the said agreement and to give all proper replies in respect of statutory notices.
2 In her statement of claim delivered the 10th of August, 2000 she says that on or before the date of the said contract the Defendant required by way of inducement to enter into the contract that the Plaintiff pay over £7,500 to a charity nominated by the vendor known as “The Marion Work of Atonement”. The Plaintiff claims that she did so and that the Memorandum of Agreement dated the 3rd of November, 1998 was duly entered into by the parties.
3 By Notice of Motion dated the 11th of December, 2000 the Plaintiff sought judgment in default of defence pursuant to Order 27 Rule 9.
The grounding Affidavit was that of Lorna Shannon sworn the 7th of November, 2000 in which Ms. Shannon, a Solicitor in the firm of Gaffney Halligan, acting for the Plaintiff, referred to the Memorandum of Agreement and the payment of the deposit aforesaid. An appearance was entered into on behalf of the Defendant on the 19th of October, 1999. A twenty one day warning letter was sent on the 2nd of October, 2000 consenting to late filing of defence which was exhibited.
2. DEFENCE
1 A defence was delivered on the 20th of November, 2000 denying the agreement and the deposit of £14,500 and claimed that, without prejudice, if an agreement was made, the same was an illegal and unenforceable contract by reason of the fact that did not reflect the true purchase price paid by the Plaintiff in respect of the premises. In particular, it was agreed between the parties that the additional sum of £7,500 would be paid to a charity by the Plaintiff with the intention of not being disclosed to the Revenue Commissioners.
2 Moreover, the defence continued, the Plaintiff through her Solicitors by letter dated the 8th of June, 1999 expressly denied the existence of any contract. Consequently the Plaintiff is now estopped from seeking to enforce the contract.
3. PARTICULARS
1 Notice of Particulars dated the 7th of February, 2001 requested particulars of the Defendant’s connection with the charity and whether it received the £7,500 paid on the nomination of the Defendant. Following an order of the Court, the Defendant replied on the 29th of May that the charity is known as “The Association of the Order of Saint Charbel” of which the Defendant is a founding member. The Plaintiff’s son, Mr. Alan Kavanagh, gave the sum of £7,500 to the Defendant who gave those moneys to the treasurer of the association who lodged it in the bank account of the Association.
2 The Court was furnished with three statements in respect of the Bank of Ireland account 24982168 which would appear to have been opened in November, 1997 under the name of “Marion Work of Atonement” – Carmel Biddulp. The fourth statement dated the 10th of March, 1998 disclosed a credit balance of £471.16.
The fifth statement dated the 9th of April, 1998 with a slightly larger balance, was in the name of “The Order of Saint Charbel”.
Significantly, statements number two and three covering the period in which the payment of £7,500 was alleged to have been made, were not available.
4. CONTRACT FOR SALE
1 Eventually a contract was signed on the 3rd of November, 1998 whereby the Defendant agreed to sell to the Plaintiff alone the premises for the sum of £145,000 less the deposit referred to. Reference to a closing date of the 24th of November, 1997 was crossed out.
2 One year previously the Plaintiff and her son, Alan Kavanagh, had arranged a commercial loan in the amount of £125,000 from ACC Bank in respect of the residential property at 59, Clonliffe Road, Dublin 3.
3 The contract contained the following special condition:
“6 The purchasers are furnished with statutory declarations of Bernard Kavanagh dated the 7th of July, 1983 and the 15th of July, 1983 in respect of the division of the property into a number of self contained units. The vendor shall not be obliged to furnish any other evidence that the premises was divided into a number of units prior to the operative date of the Planning Act, 1963 and in this regard general condition number 36 shall be deleted in respect of the division of the property into several units. No other evidence, declarations, planning permissions or certificates in respect of the division of the property into several units will be furnished.”
4 On the same date the 3rd of November, 1998 a cheque withdrawal form in the amount of £7,500 from the Plaintiff’s account was made payable to “The Marion Work of Atonement.”
5. POST CONTRACTUAL ISSUES
1 Difficulty arose relating to the service of notice by the local authority and the costs of remedying the same.
2 Considerable difficulty arose with regard to the works dividing the property, the subject matter of Condition 6 of the special conditions and the inclusion or otherwise of a shed to the rear. These matters, in themselves, raise a doubt with regard to the premises the subject matter of the contract. Reference in the Auctioneers sheet referred to a double garage at the rear with a potential income of £80 (per month). A dispute arose in relation to whether this was included and that vacant possession would be given.
3 Correspondence between the party’s Solicitors proceeded on an open basis in relation to Fire Safety Notices and copy planning permission. A Fire Services Act, Section 20(2)(b) notice had been served on the 26th of August, 1986 and was enclosed by the Defendant’s Solicitor on the 28th of May, 1999. That notice referred to the premises being a potentially dangerous building. The schedule to the notice prohibited the use of the premises as flats, bedsitters or multiple dwelling until the precautions specified in Part 2 of the Schedule were taken to the satisfaction of the Corporation of Dublin.
4 On receipt of that letter, Solicitors for the Plaintiff wrote “subject to contract/contract denied” on the 8th of June, 1999 requesting a reduction in the purchase price of approximately £10,000 in respect of the carrying out of works as indicated in the Fire Safety Notice. In reply, on the 14th of June, 1999 the Defendant’s Solicitor’s, subject to contract/contract denied, returned the deposit cheque and indicated that the property would be placed on the market once more.
5 The Defendant’s Solicitor wrote on the 16th of June, 1999 an open letter returning the cheque noting that it was the purchaser’s prerogative to elect whether or not to rescind and that no such election had taken place.
A completion notice was served on the 21st July, 1999. A lis pendens was registered as notified to the Defendant’s Solicitor on the 7th of October, 1999.
6 General condition number 35 relating to the disclosure of notices provides as follows:
“35 Where prior to the sale
(a) Any closing, demolition or clearance Order
or
(b) Any notice (not being of the contents of the Development Plan other than an actual or proposed designation of all or any part of the subject property for compulsory acquisition) made or issued by or at the behest of a Competent Authority in respect of the subject property and affecting same at the date of sale has been notified or given to the Vendor (whether personally or by advertisement of posting on the subject property or in any other manner) or is otherwise known to the Vendor or where the subject property is at the date of the sale affected by any award or grant which is or may be repayable by the Vendor’s successor and title then if the Vendor fails to show
(i) that, before the sale, the Purchaser received notice or was aware of the matter in question
or
(ii) that same is no longer applicable or material
or
(iii) that the same does not prejudicially affect the value of the subject property
or
(iv) that the subject thereof can and will be dealt with fully in the Apportionment Account
The Purchaser may by notice given to the Vendor rescind the sale.”
7 This general condition was referred to in the purchaser/Plaintiff’s letter of the 8th of June, 1999 as follows:
“ As you are aware general condition number 35 of the contract executed by our respective clients deals specifically with notices serviced by Local Authorities in respect of premises. As your client is not prepared or not in a position to furnish an Architect’s certificate of compliance in relation to the notice furnished our instructions are to request a reduction in the purchase price of approximately £10,000 noting our client’s Architect’s estimate it will cost approximately that amount to carry out the works as indicated in the notice of the 26th of August, 1986. We have written to our clients lending institution in order to ascertain their requirements in relation to the matter and as soon as we receive a response we will revert.
In the meanwhile, we would be obliged if you would take your clients’ instructions regarding a reduced purchase price in this instance noting that our clients reserves the right to rescind the contract pursuant to general condition number 35 in this instance.
In the meantime please not (sic) we have no authority expressed or implied to bind our clients to contracts in this instant and no contract should be deemed to exist between our mutual clients until all matters pertaining to the contract, in particular general condition 35, have been dealt with.
Yours faithfully”.
9 The Defendant’s Solicitors replied on the 14th of June, 1999 in relation to the last paragraph states as follows:
“ … We are instructed to inform you that our client takes the view that since you contend that there is no contract in existence he does not intend to proceed with the sale of the property to your clients and we are instructed therefore to return your clients deposit. Please find enclosed our clients account cheque in the sum of the deposit paid to us.”
10 Miscellaneous receipts totalling some £1,600 were claimed by the Defendant to have been paid in respect of the property which relate to furnishings and carpets. Some do not have the customers name.
Almost all relate to purchases made after the 8th of June, 1999, the alleged date of the Plaintiff allegedly denying the existence of the contract.
11 In the circumstances an issue arises in relation to the entitlement of the plaintiff/purchaser to enforce the contract.
CASE LAW
1 In Starling Securities Limited -v- Woods and Others, unreported judgment of the 24th of May, 1977, McWilliams J. refused an application for a specific performance on the basis of what the trial judge held to be an incomplete contract. The only interpretation he could put on the peculiar method adopted to conduct the transactions was that both parties were trying to conceal from the Revenue Authorities the true nature of the transactions. On the basis of Millar -v- Klinski (1945) TLR 85 and Alexander -v- Rayson (1936) 1 KB 169 he found he was not entitled to countenance such attempted frauds on the Revenue by enforcing the performance of contracts at the instance of either party.
2 In Whitecross Potatoes (International) Limited -v- Raymond Coyle (1978) ILRM 31 at 33 Finlay P said as follows:
“I am satisfied that the legal principles applicable to this conflict of evidence are relatively straightforward. If there was a contract which, on the apparent intention of the parties at the time of its formation, could be and would be carried out in a legal fashion even though one of the parties, namely the Defendant, in reality intended to carry it out in an illegal fashion it is enforceable. If, on the other hand, the acknowledged and accepted intention of both the parties at the time of the formation of the contract was that in the event of this export or import control being imposed the contract would be carried out by a smuggling operation, it is unenforceable and is contrary to public policy and cannot be upheld by the Court.”
Judgment was given against the Defendant for breach of contract on the basis that the onus of proving the illegality of the contract is on the party alleging it and that the Defendant had not proved an illegal intention on the part of the Plaintiffs.
3 In Curust Financial Services Limited and Another -v- Lowe – Lackwerk (1994) 1 IR 450 at 467 Finlay C.J. with whom O’Flaherty and Egan J.J. agreed held:
“I accept that, the granting of an injunction being an equitable remedy, the Court has a discretion, where it is satisfied that a person has come to the Court, as is so frequently expressed, otherwise than “with clean hands”, by that fact alone to refuse the equitable relief of an injunction. It seems to me, however, that this phrase must of necessity involved an element of turpitude and cannot necessarily be equated with a mere breach of contract.”
This reasoning echoes that of the House of Lords in Tinsley -v- Milligan (1994) 1 AC 340 at 353 F, 354 F and 359 B per Lord Goff of Chieveley. The underlying principle is the so called public conscience test. The Court must weigh, or balance, the adverse consequences of granting relief against the adverse consequences of refusing relief. The ultimate decision calls for value judgment (see Nicholas L. J. in Tinker -v- Tinker (1970) 1 All ER 540.
Lord Goff referred to the basic principle of Lord Mansfield C. J. in Holman -v- Johnson (1775) 1 COWP. 341, 343:
“The objection, that a contract is immoral or illegal as between Plaintiff and Defendant, sounds at all times very ill in the mouth of the Defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the Defendant has the advantage of, contrary to real justice, as between him and the Plaintiff, by accident, if I may say so. The principle of public policy is this: ex dolo malo non oritur actio. No Court will then give aid to a man who founds his cause of action upon an immoral or an illegal act.”
THE DECISION
1 The Court must look at the quality of the illegality relied upon by the Defendant. The Court must also look at all the surrounding circumstances.
Three questions need to be answered:. First, whether there has been an illegality of which the Court should take notice and, second, whether in the circumstances it would be an affront to the public conscience if by affording him the relief sought the Court were seen to be indirectly assisting or encouraging a criminal act. Thirdly, the Court must be satisfied that the contract has not been otherwise rendered ineffective.
It is clear that the onus of proving illegality of a contract is, in this case, on the Defendant. The Defendant must prove an illegal intention on the part of the Plaintiff.
It seems to me from the agreed facts of the case that the request to pay money to an alleged charity did, indeed, induce the contract. It does not follow that that, in itself, rendered the contract illegal or unenforceable. It was the Defendant who described the payee as a charity. While the cheque was given by the Plaintiff’s son to the Defendant it was in the name of the charity. There is no evidence of an intention of the Plaintiff to defraud.
This was a contract which, on the apparent intention of the parties at the time of its formation, could be and would be carried out in a legal fashion. There does not seem to me to be evidence sufficient to prove that the Plaintiff intended to carry it out in an illegal fashion. This is so despite the plea in defence by the Defendant. Accordingly, I find that there is no illegality such as to render the contract unenforceable. Moreover, no conveyance resulted for an undervalued consideration such as would defraud the revenue in relation to stamp duty.
2 If I am wrong in this finding it does not seem to me whatever unintentional irregularity there might have been is not such as to deprive the Plaintiff of the right to enforce the contract if the contract still subsisted.
3 In relation to the relief of specific performance sought, which is an equitable remedy, the Court has a discretion to refuse such relief where the applicant comes otherwise than “with clean hands”. That phrase must, of necessity, involve an element of turpitude. I can find no turpitude on the part of the Plaintiff.
However that does not dispose of the matter.
4 The issue which remains is whether the closing paragraph of the Plaintiff’s Solicitors letter of 8th June, 1999 at 5.7 above amounts to a recision of the contract. Their letter refers to general condition 35 that is to notices served by the local authorities and to an abatement of the price in respect of compliance with such notices.
The closing paragraph states that
(a) the Solicitors have no authority to bind the purchaser, and
(b) no contract should be deemed to exist between “our mutual clients” until all matters pertaining to the contract, in particular general conditions 35 have been complied with.
5 It would seem that this closing paragraph is not an exercise of the option to rescind but rather an attempt to protect the purchaser. The reply of 14th June, 1999: “we are instructed to inform you that our client takes the view that since you contend that there is no contract in existence he does not intend to proceed with the sale ….” to my mind is to ignore the context of the letter from the Plaintiff’s Solicitor. A contract existed. The Plaintiff had the option of rescinding under condition 35. Negotiations were in being to resolve the issue of notices. The option of the Plaintiff was not exercised.
6 Accordingly, the Court will allow the Plaintiff’s application and hear Counsel as to necessary orders required.
UK Cases
Australian Hardwoods v Commisioner of Railways
Privy Council [1961) 1 W.L.R. 425; [1961) 1 All E.R. 737; 105 S.J. 176
LoRD RADCLIFFE: It follows, therefore, that if the appellant had fallen into default through breaches of the agreement and by so doing had brought down upon itself the notice of termination, the respondent was by that fact discharged from compliance with a clause such as clause 9 (c) which was essentially part of a working scheme that had by then become abortive.
The appellant’s position is, to say the least, none the stronger if it is judged as an applicant for specific performance and its claim for this special relief is tested by the equitable principles that apply to such a claim. It might be a difficult task to enumerate all the separate aspects in which the claim is liable to be defeated on grounds of equity. It is sufficient for the decision of this case to identify two of them. A plaintiff who asks the court to enforce by man datory order in his favour some stipulation of an agreement which itself consists of interdependent undertakings between the plaintiff and the defendant cannot succeed in obtaining such relief if he is at the time in breach of his own obligations. The case of Measures Brothers Ltd. v. Measures ([ 1910] 2 Ch. 248) is a familiar instance of this principle. The appellant in this case has not been able to deny or, at any rate, has not denied that it was in default in several respects at the time when the respondent served upon it the notice of termina tion. Secondly, where the agreement is one which involves continuing or future acts to be performed by the plaintiff, he must fail unless he can show that he is ready and willing on his part to carry out those obligations, which are, in fact, part of the consideration for the undertaking of the defendant that the plaintiff seeks to have enforced. Here the appellant could never show that it was ready and willing to perform its share of the agreement of 1956; for its breaches had brought upon it the notice of determination which precluded it for good from doing anything more in furtherance of that agreement.
It was sought in argument to withdraw the appellant’s case from what was said to be the full vigour of these equitable considerations by saying that the specific relief asked for in respect of clause 9 (c) was not specific performance “proper,” on the ground that that phrase ought to be confined to the specific performance of agreements which were not intended in their nature to be the final instrument regulating the mutual relations of the parties. Now it is true that on one occasion Lord Selborne L.C. did advert to such a distinction, stating that ” the common expression ‘ specific performance’ as applied to suits known by that name, presupposes an executory as distinct from an executed agreement, something remaining to be done, such as the execution of a deed or a conveyance, in order to put the parties in the position relative to each other in which by the preliminary agreement they were intended to be placed” (see Wolverhampton and Walsall Railway Co. v. London and North Western Railway Co. (1873) L.R. 16 Eq. 433, 439). The same decision has been adverted to in a case in the High Court of Australia-f. C. Williamson Ltd. v. Lukey ( (1931) 45 C.L.R. 282).
Their Lordships are of opinion, however, that this distinction between execu tory and executed agreements (to adopt Lord Selborne’s nomenclature for this occasion) in connection with the jurisdiction to grant specific performance does not suggest any line of argument that can be of assistance to this appellant. The distinction certainly cannot be taken as warrant for the idea that the jurisdiction to give specific relief by ordering the performance of particular acts is confined, to the enforcement of agreements that are executory in this sense; nor can it mean that when a court is invited to order specific performance of an agreement which is not executory, or some part of that agreement, it should not pay attention to considerations as to the conduct and position of the plaintiff which are similar to those it attends to in the ” proper ” cases. Lord Selborne, in the passage referred to, made only the broad distinction between the class of execu tory agreements, such as agreements for the sale of land and marriage articles, and the principles applicable to specific performance of them on the one hand, and on the other a very different class of agreement, which he described as “ordinary agreements for work and labour … hiring and service and things of that sort.” Such a division leaves uncategorised a great many agreements of various kinds which are not inherently unsuitable for specific performance in the sense that contracts for work and labour, hiring and service are normally regarded as being by their very nature so unsuitable. As to this intermediate class it does not appear to their Lordships that there is any obvious reason why, even if their terms do not call for the execution of a further instrument regu lating the rights of the parties, the equitable right to specific relief in respect of them should be tried by principles which are in any way different from those applicable to executory agreements “proper.”
The most that the appellant’s argument could amount to was that since it was not asking for specific performance ” proper ” in seeking the enforcement of clause 9 (c), the defaults attributable to it need not necessarily be fatal to its right to relief. The only answer that that can receive is that, unless the court is to ignore equitable principles altogether in considering the right to specific relief in the present case, the relief sought cannot be granted.
Beswick v Beswick
House of Lords [1967] 3 W.L.R. 932; (1967] 2 All E.R. 1197
LoRD PEARCE: My Lords, if the annuity had been payable to a third party in the lifetime of Beswick, senior, and there had been default, he could have sued in respect of the breach. His administratrix is now entitled to stand in his shoes and to sue in respect of the breach which has occurred since his death. It is argued that the estate can recover only nominal damages and that no other remedy is open, either to the estate or to the personal plaintiff. Such a result would be wholly repugnant to justice and commonsense. And if the argument were right it would show a very serious defect in the law. In the first place, I do not accept the view that damages must be nominal. Lush, L.J., jn Uoyd’s v. Harper ( (1880) 16 Ch.D. 290, 321) said: “Then the next question which, no doubt, is a very important and substantial one, is, that Lloyds, having sustained no damage themselves, could not recover for the losses sustained by third parties by reason of the default of Robert Henry Harper as an underwriter. That, to my mind, is a startling and alarming doctrine, and a novelty, because I consider it to be an established rule of law that where a contract is made with A for the benefit of B, A can sue on the contract for the benefit of B, and recover all that B could have recovered if the contract had been made with B himself.” (See also Drimmie v. Davies ([1889] l LR. 176).) I agree with the comment of Windeyer, J., in Bagot’s Executor and Trustee Co., Ltd. v. Coulls ( (1967) (un reported)) in the High Court of Australia that the words of Lush, L.J. ( (1880) 16 Ch.D. 290, 321), cannot be accepted without qualification and regardless of context, and also with his statement: ” I can see no reason why in such cases the damages which A would suffer upon B’s breach of his contract to pay C $500 would be merely nominal: I think that in accordance with the ordinary rules for the assessment of damages for breach of contract they could be substantial. They would not necessarily be $500; they could I think be less or more.”
In the present case I think that the damages, if assessed, must be substantial. It is not necessary, however, to consider the amount of damages more closely, since this is a case in which, as the Court of Appeal rightly decided ([1966] 3 All E.R. l; [1966] Ch. 538), the more appropriate remedy is that of specific performance.
The administratrix is entitled, if she so prefers, to enforce the agreement rather than accept its repudiation, and specific performance is more convenient than an action for arrears of payment followed by separate actions as each sum falls due. Moreover, damages for breach would be a less appropriate remedy since the parties to the agreement were intending an annuity for a widow; and a lump sum of damages does not accord with this: and if (contrary to my view) the argument that a derisory sum of damages is all that can be obtained be right, the remedy of damages in this case is manifestly useless. The present case presents all the features which led the equity courts to apply their remedy of specific performance. The contract was for the sale of a business. The appellant could on his part clearly have obtained specific performance of it if Beswick senior or his administratrix had defaulted. Mutuality is a ground in favour of specific performance. Moreover, the appellant on his side has received the whole benefit of the contract and it is a matter of conscience for the court to see that he
now performs his part of it. Kay, J., said in Hart v. Hart ( (1881) 18 Ch.D. at p. 685): ” . . . when an agreement for valuable consideration . . . has been partially performed, the court ought to do its utmost to carry out that agreement by a decree for specific performance.”
What, then, is the obstacle to granting specific performance? It is argued that, since the respondent personally had no rights which she personally could enforce, the court will not make an order which will have the effect of enforcing those rights. I can find no principle to this effect. The condition as to payment of an annuity to the widow personally was valid. The estate (though not the widow personally) can enforce it. Why should the estate be barred from exer cising its full contractual rights merely because in doing so it secures justice for the widow who, by a mechanical defect of our law, is unable to assert her own rights? Such a principle would be repugnant to justice and fulfil no other object than that of aiding the wrongdoer. I can find no ground on which such a principle should exist.
In Hohler v. Aston ([1920] 2 Ch. 420) Sargant, J., enforced a contract ([1920] 2 Ch. at p. 426) relating to the purchase of a house for the benefit of third parties. The third parties were joined as plaintiffs, but the relief was given to the plaintiff who had made the contract for their benefit ([1920] 2 Ch. at p. 425): ” The third parties, of course, cannot themselves enforce a contract made for their benefit, but the person with whom the contract is made is entitled to enforce the contract “.
In Keenan v. Handley ( (1864) 12 W.R. 930) the court enforced an agreement providing the benefit of an annuity in favour of a mother who was a party to the agreement and, after her death, to her child, who was not a party to it.
In Drimmie v. Davies ([1889] 1 LR. 176) the Court of Appeal in Ireland ordered specific performance of an agreement whereby annuities were provided for third parties. Holmes, L.J., there said ([1889] 1 LR. at p. 190): “In this case Davies, junior, covenanted for valuable consideration with Davies, senior, that in certain events he would pay certain annuities to the children of the latter. If such annuities had become payable in the life of the covenantee, and they were not paid, what legal obstacle would there be to his suing the covenantor? Indeed, I believe that it is admitted that such an action would lie, but that it would only result in nominal damages. A result more repugnant to justice, as well as to legal principle, I can hardly imagine. The defendant would thereby escape from paying what he had undertaken to pay by making an illusory payment never contemplated by either party. Well, if Davies, senior, would have been entitled to sue in his lifetime if the annuities were then payable, his execu tors would have the same right of action after his death. As I have already said, the question is elementary.”
Recently in Bagot’s case ( (1967), infra, p. 88) the chief justice of Australia, Garfield Barwick, C.J., in commenting on the report of the Court of Appeal’s decision in the present case ([1966] 3 All E.R. 1; [1966] Ch. 538), said : ” I would myself, with great respect, agree with the conclusion that where A promises B for a consideration supplied by B to pay C that B may obtain specific performance of A’s promise, at least where the nature of the consideration given would have allowed the debtor to have obtained specific performance. I can see no reason whatever why A in those circumstances should not be bound to perform his promise. That C provided no part of the consideration seems to me irrelevant.”
Windeyer, J., in that case said: “It seems to me that contracts to pay money or transfer property to a third person are always, or at all events very often, contracts for breach of which damages would be an inadequate remedy-all the more so if it be right (I do not think it is) that damages recoverable by the promisee are only nominal. Nominal or substantial, the question seems to be the same, for when specific relief is given in lieu of damages it is because the remedy, damages, cannot satisfy the demands of justice. ‘The court’, said Lord Selborne, L.C., ‘ gives specific performance instead of damages only when it can by that means do more perfect and complete justice’: Wilson v. Northamp_ton and Banbury Junction Ry. Co. ( (1874) L.R. 9 Ch.App. 279, 284). Lord Erskme, L.C., in Elley v. Deschamps ((1806) 13 Ves. 225, 227) said of the doctrine of specific performance: ‘ This court assumed the jurisdiction upon this simple principle; that the party had a legal right to the performance of the contract; to which right the courts of law, whose jurisdiction did not extend beyond damages, had not the means of giving effect.’ Complete and perfect justice to a promisee may well require that a promisor perform his promise to pay money or transfer property to a third party. I see no reason why specific performance should not be had in such cases-but of course not where the promise was to render some personal service. There is no reason to-day for limiting by particular categories, rather than by general principle, the cases in which orders for specific perform ance will be made. The days are long past when the common law courts looked with jealousy upon what they thought was a usurpation by the chancery court of their jurisdiction.” He continued later: ” It is, I think, a faulty analysis of legal obligations to say that the law treats the promisor as having a right to elect either to perform his promise or to pay damages. Rather, using one sentence from the passage from Lord Erskine’s judgment which I have quoted above ( (1806) 13 Ves. 225, 227) the promisee has ‘a legal right to the performance of
the contract’. Moreover we are concerned with what Fullagar, J., once called ‘a system which has never regarded strict logic as its sole inspiration’. Tatham v. Huxtable ( (1950) 81 C.L.R. 639, 649).” I respectful1y agree with these observations.
It is argued that the court should be deterred from making the order, because there will be technical difficulties in enforcing it. In my opinion, the court should not lightly be deterred by such a consideration from making an order which justice requires, but I do not find this difficulty. R.S.C., Ord. 45, r. 9 provides under the heading ” Execution by or against a person not being a party”: “9 (1) Any person, not being a party to a cause or matter, who obtains any order or in whose favour any order is made, shall be entitled to enforce obedience to the order by the same process as if he were a party.” This would appear by its wide terms to enable the widow for whose benefit the annuity is ordered to enforce its payment by the appointment of a receiver, by writ of fi. fa., or even by judgment summons. I see no reason to limit the apparent meaning of the words of the rule, which would appear to achieve a sensible purpose. Moreover, I see no objection in principle to the estate enforcing the judgment, receiving the fruits on behalf of the widow and paying them over to the widow, just as a bailee of goods does when he recover damages which should properly belong to the true owner of the goods.
It is contended that the order of the Court of Appeal ( [1966) 3 All E.R. at p. 15; [1966) Ch. at p. 567) is wrong and there should be no specific perform ance because the condition that the appellant should pay off two named creditors has been omitted, and there can be no enforcement of part of the contract; but the assumption, since we have no evidence on the matter, is that the creditors have both already been paid off. Even if they have not, a party is entitled to waive a condition which is wholly in his favour; and its omission cannot be used by the appellant as a ground for not performing his other parts of the contract. It is unnecessary, therefore, to consider in what circumstances a contract may be enforced in part. In my opinion, the respondent as administratrix is entitled to a decree of specific performance. . . .
LordUpjohn: . . . This again shows the extent of the power of equity to assist the common law, limited only by the canons of common sense and the practical limitation of the power to oversee and administer specific performance decrees.
So the power and indeed duty, in proper cases, of the court of equity to make specific performance orders in favour of third parties at the instance of one of the contracting parties is not in doubt.
When A dies and his rights pass to Al, it is said, however, that the remedy of specific performance is no longer appropriate against C. The argument was first that the estate of A suffered no damage by reason of C’s failure to pay B; so Al is entitled to nominal damages, but as she is not otherwise interested in the agreement as such it would be wrong to grant specific performance; for that remedy is available only where damages be an inadequate remedy. Here nominal damages are adequate. Further, it was argued, to do so would really be to confer on B a right which she does not have in law or equity to receive the annuity. Then, secondly, it was said that if the remedy of specific performance is granted it might prejudice creditors of A so that the parties ought to be left to their strict rights at law. Thirdly, it is said that there are procedural difficulties in the way of enforcing an order for specific performance in favour of a third party. I will deal with these points, though in reverse order.
As to procedural difficulty, I fear that I do not understand the argument. The point, if valid, applies to an action for specific performance by A just as much as by Al, yet in the authorities which I have quoted no such point was ever taken; in Drimmie v. Davies ([ 1889] 1 LR. 176) indeed the action was by executors. Further, it seems to me that if C fails to obey a four-day order obtained by Al, B could enforce it under the clear and express provisions of R.S.C., Ord. 45, r. 9 (formerly R.S.C., Ord. 42, r. 26). Alternatively Al could move for and obtain the appointment of a receiver of the business on which the annuity is charged and the receiver would then be directed by the court to pay the annuity to B out of the profits of the business. Finally Al could issue a writ of fi. fa. under R.S.C., Ord. 45, r. 1, but as Al would then be enforcing the contract and not modifying or compromising it the court would obviously in executing its order compel her to carry out the contract in toto and hand the proceeds of execution to B. This point is entirely without substance.
Then as to the second point. Let me assume (contrary to the fact) that A died with substantial assets but also many creditors. The legal position i that prima facie the duty of Al is to carry out her intestate’s contracts and compel C to pay B; but the creditors may be pressing and the agreement may be con sidered onerous; so it may be her duty to try and compromise the agreement with C and save something for the estate even at the expense of B. See Ahmed Angullia Bin Hadjee Mohamed Sal/eh Angullia v. Estate & Trust Agencies (1927), Ltd. ([1938] 3 All E.R. 106, 110; [1938] A.C. 624,632), per Lord Romer.
So be it, but how can C conceivably rely on this circumstance as a defence by him to an action for specific performance by Al? Of course not; he, C, has no interest in the estate; he cannot plead a possible jus tertii which is no concern of his. It is his duty to fulfil his contract by paying C. Al alone is concerned with the creditors, beneficiaries or next-of-kin of A, and this point therefore can never
be a defence by C if Al in fact chooses to sue for specific performance rather than to attempt a compromise in the interests of the estate. This point seems to me misconceived. In any event on the facts of this case there is no suggestion that there are any unpaid creditors and B is sole next-of-kin, so the point is academic.
Then as to the first point. On this question we were referred to the well known dictum of Lush, L.J., in Uoyds v. Harper ( (1880) 16 Ch.D. at p. 321): ” . . . I consider it to be an established rule of law that where a contract is made with A for the benefit of B, A can sue on the contract for the benefit of B, and recover all that B could have recovered if the contract had been made with B himself.”
While in the circumstances it is not necessary to express any concluded opinion thereon, if the learned lord justice was expressing a view on the purely common law remedy of damages I have some difficulty in going all the way with him. If A sues for damages for breach of contract by reason of the failure _to pay B he must prove his loss; that may be great or nominal according to circumstances. l,do not see how A can in conformity with clearly settled principle in assessing damages for breach of contract rely at common law on B’s loss. I agree with the observations of Windeyer, J., in the as yet unreported case of Bagot’s Executor and Trustee Co. v. Coulls ( (1967), infra, p. 88) in the High Court of Australia. But I note, however, that in LJoyd’s v. Harper ( (1880) 16 Ch.D. 290) James and Cotton, L.JJ., treated A as trustee for B ( (1880) 16 Ch.D. at pp. 315, 317) and I doubt whether Lush, L.J., thought otherwise.
However, I incline to the view that on the facts of this case damages are
nominal for it appears that A died without any assets save and except the agree ment which he hoped would keep him and then his widow for their lives. At all events let me assume that damages are nominal. So it is said nominal damages are adequate and the remedy of specific performance ought not be granted. That is with all respect wholly to misunderstand that principle. Equity will grant specific performance when damages are inadequate to meet the justice of the case. I have already quoted the observations of Plunket, L.C., (in Swift v. Swift (1841) 31 Eq.R. at pp. 275, 276) on this point which completely cover it. In any event, however, quantum of damages seldom affects the right to specific performance. If X contracts with Y to buy Blackacre or a rare chattel for a fancy price because the property or chattel has caught his fancy, he is entitled to enforce his bargain and it matters not that he could not prove any damage. In this case the court ought to grant a specific performance order all the more because damages are nominal. C has received all the property; justice demands that he pay the price and this can only be done in the circumstances by equitable relief. It is a fallacy to suppose that B is thereby obtaining additional rights; Al is entitled to compel C to carry out the terms of the agreement.•..
N
Ryan v Mutual Tintine Wastmestminister Chambers Association
Court of Appeal [1893] I Ch. 116; 62 L.J.Ch. 252; 67 L.T. 820; 41 W.R. 146; 2 R. 156
Counsel FOR THE DEFENDANTS: . . . This is, in effect, a contract for personal services. It is, in substance, a contract that the Plaintiff shall have the benefit of the performance of certain services by the porter. It is a well-established rule that a Court of Equity will not interfere, either by way of injunction or by decree for specific performance, to compel performance of such a contract…. Thcaeses shew that the Court will not order the specific performance of con tracts the execution of which would require such supervision as the Court is necessarily unable to give. The Court cannot undertake to supervise the performance by the porter of his duties….
Another reason against granting an injunction or specific performance is, that there is an adequate remedy by action for damages. The case of W olver hampton and Walsall Railway Company v. London and North Western Railway Company ( (1873) L.R. 16 Eq. 433), upon which reliance was placed in the Court below, has really no analogy to the present case.
Counsel FOR THE PLAINTIFF : . . . The Court is not asked to decree per formance by the porter of the services mentioned in the lease;. and wheth_er the Court would interfere if, after a proper porter had been appomted,. he did not perform the services specified, is not now in question. The co’.1-tract 1s sever ble. It is, in effect, two contracts, or a contract for two separate thmgs. There 1s an agreement to appoint a porter to perform certain services, and an ag_reement that when appointed he shall perform them. In such a case, the Court, m order to do justice, can separate the two parts of the contract, and compel perfor ance of the agreement to appoint a proper porter: Rigby v. Great Western Railway Company ( (1846) 15 L.J.Ch. 266; 2 Ph. 44)….
Secondly, this case comes within the principle of the cases, in which the Court has, by injunction, compelled a raifway company which has taken land on condition of performing certain works to do such works. In such cases Courts of Equity, in order to do justice where damages would have been an inadequate remedy, have moulded the principles on which they act to meet the exigencies of the particular case. They have treated these cases as exceptions to the rule that the Court will not supervise the execution of works, . . . The equitable jurisdiction of the Court to compel performance of a contract is, after all, discretionary, and ought not to be bound by absolutely rigid rules. It must depend on the circumstances of the case. This is a new case, and in order to do justice the Court ought to treat it as an exceptional case, like the railway cases which have been referred to.
Lorsd Esher MR. : . . . It seems to me that this case comes within one or the other, according to the point of view from which it is regarded, of two well-recognised rules of Chancery practice, which prevent the application of the remedy by compelling specific performance. I do not myself put this case as coming within any rule as to contracts to perform personal services. It is not necessary for me therefore to express any opinion as to such a rule. The contract sought to be enforced here is not a contract with a person employed as a servant. It is a contract between a person who has to employ a servant and a person for whose benefit the employment of such a servant is to take place. It is a contract between a landlord and his tenant, by which the former undertakes to employ a porter to perform certain services for the benefit of the latter. The contract, therefore, is not merely that the landlord shall employ a porter, but that he shall employ a porter who shall do certain specified work for the benefit of the tenant. That is, in my opinion, one indivisible contract. The performance of what is suggested to be the first part of the contract, viz., the agreement to employ a porter, would be of no use whatever to the tenant unless he performed the services specified. The right of the tenant under the contract is really an entirety, viz., to have a porter employed by whom these services shall be performed; and the breach of the contract substantially is that these services were not performed.
The contract is that these services shall be performed during the whole term of the tenancy; it is therefore a long-continuing contract, to be performed from day to day, and under which the circumstances of non-performance might vary from day to day. I apprehend, therefore, that the execution of it would require that constant superintendence by the Court, which the Court in such cases has always declined to give. Therefore, if the contract is regarded as a whole, there is good ground for saying that it is not one of which the Court could compel specific performance. It was contended that the Court could grant specific performance of the Defendants’ obligation to appoint a porter. But then the case is brought within another rule, viz., that, when the Court cannot compel specific perform ance of the contract as a whole, it will not interfere to compel specific performance of part of a contract. That clearly appears to be a rule of Chancery practice on the subject. Therefore, if it is urged that what the Judge has ordered to beperformed is merely the obligation to appoint a porter, the case falls within that rule, and on that ground his decision must be reversed. It was argued that the case of Rigby v. Great Western Railway Company shewed that a contract such as this might be severed, and that performance of part of it could be enforced. But that is not what the case appears to have decided. It decided that, where in one contract there were really several wholly independent stipula tions, the Court could grant specific performance of one of them. It is no authority for the proposition that the Court can separate part of what is really one single indivisible contract and grant specific performance of that part. Then it was said that this case fell within the exception which has been established in the railway cases. That is admitted to be an exception grafted upon the Chancery jurisdiction by decisions, in which the Court, for the reasons stated, treated cases where railway companies had land on condition of doing works as exceptional, and granted specific performance. But being admittedly exceptions, these cases do not do away with the general rule, which appears to be applicable to the case before us.
Lopes L.J.: … Another ground on which the Plaintiff fails, in my opinion, is this. The Court will not compel specific performance when there is another adequate remedy. Here there is such a remedy, viz., by compensation in damages for breach of the contract. The Judge has found 25!. to be adequate damages in respect of the breach of the contract up to the time of action brought. But there does not appear to be anything to prevent the Plaintiff from bringing fresh actions for future breaches of the covenant, and obtaining in this way an adequate remedy.
Carpenters Estates Limited v Davies
Chancery Division [1940] Ch. 160; [1940] 1 All E.R. 13
FARWELL J.: . . . It is true to say that generally speaking this Court does not grant specific performance of a contract to build. The matter has been considered in various authorities, and one of them to which I have been referred is the case Wolverhampton Corporation v. Emmons ([1901] 1 K.B. 515). I must consider the judgment of Romer L.J. (ibid. pp. 524-525). At the beginning of his judgment he stated the question in this way: “The question, which is not free from difficulty, is whether, under the circumstances of this case, an order for
specific performance should be made in favour of the plaintiffs. There is no doubt that as a general rule the Court will not enforce specific performance of a building contract, but an exception from the rule has een r cogmse . _It has, I think for some time been held that, in order to bnng himself w1thm that excepti;n, a plaintiff must establish three things. Th first is that the building work, of which he seeks to enforce the performance, 1s defined the cont:act; that is to say, that the particulars of the work are so far defirutely ascertamed that the Court can sufficiently see what is the exact nature of the work of which it is asked to order the performance. The second is that the plaintiff has a substantial interest in having the contract performed, which is of such a nature that he cannot adequately be compensated for breach of the contract by damages. The third is that the defendant has by the contract obtained possession of land on which the work is contracted to be done. The rule on this subject is stated by Fry L.J. in his work on Specific Performance, 3rd ed., pp. 44, 45, in substantially the same terms as those in which I have just stated it.” Then he proceeded to consider whether the plaintiff in the case before him had brought himself within the exception.
The only exception which, with great respect, I venture to take to what the learned Lord Justice there said is in respect of his statement that the third matter which it is necessary for the plaintiff to establish to bring himself within the exception is ” that the defendant has by the contract obtained possession of land on which the work is contracted to be done.” I would rather put it in this way, that what the plaintiff has to establish is that the defendant is in possession of the land on which the work is contracted to be done. Obviously, if the defen dant is not in possession of the land, it may be impossible for him to carry out the contract, and, of course, in such a case as that the Court would not grant specific performance. But if, as in the present case, the defendant is in possession of the land, and there is no difficulty about her carrying out the obligation under which she has put herself and if the other two requirements are satisfied, namely, that the particulars of the work are sufficiently clear and defined and that it is a case in which the plaintiff has a substantial interest in having the contract per formed which cannot be adequately compensated for by damages; in such a case as this, the Court can in my judgment, grant specific performance….
Ithink that this portion of the judgment of Romer L.J. is perhaps too widely stated so far as the last requirement is concerned. In my view it is not neces sarily a complete bar to the granting of specific performance that the defendant has not obtained by the contract possession of the land on which the work is to be done. In the present case the defendant has contracted to do the work on her own land in consideration of the purchase price of other land belonging to her, and if the other two conditions are fulfilled, I am unable to see why the Court should be debarred from granting relief by way of specific performance. I am not prepared to accept the statement of Romer L.J. as completely exhaustive so as to prevent my granting specific performance if I think it right to do so in the present case.
Now, the nature of the work which the defendant has undertaken to do seems to me in this case to be sufficiently clearly defined. She must completely finish accommodation roads which are clearly defined in the plan attached to the transfer and must construct certain sewers and drains which are also defined in the contract. That has to be done within three months to the requirements and satisfaction of the local or other authority. In my judgment there is nothing whatever in the contract itself which prevents the Court from granting specific performance.
The Court however will not grant specific performance in a case of this kind unless it is sarisfied that there is no sufficient remedy by way of damages. In the present case the plaintiffs have, in my judgment, a substantial interest in having the contract performed, and so long as it remains unperformed, they may find it impossible, or extremely difficult, to deal with their land in any way. Moreover, it is, in my judgment, a case in which they cannot be compensated by damages. The position is that their only prospect of making an advantageous use of the land in question was and is to erect upon it buildings of which they can dispose either by sale or lease at a profit…. Itmay be that the plaintiffs are really better off, as things have turned out, in having saved the money which they would have expended than they would have been had they erected these buildings. It may be, on the other hand, that if they had been very fortunate, they could have found tenants quickly and could have made a profit, but the whole matter is so speculative that I feel it impossible to assess any sum as representing the compensation to which the plaintiffs are entitled for the failure by the defendant to carry out her contract, especially having regard to the fact that it is not possible to say that all the damage, whatever it may be, which they think they may have suffered is wholly due to the defendant’s failure to carry out her contract. It is to some extent due to the fact that the plaintiffs themselves have not done what they might have done in erecting the houses and shops.
In all the circumstances, this is a case, in my judgment, in which the only adequate remedy for the plaintiffs is by way of specific performance. I am not oppressed with the difficulty of seeing that an order for specific performance is obeyed, and I feel that if I were not in a position to make such an order, I could not give the plaintiffs any adequate remedy. In fact, it would be a case where the plaintiffs, having a perfectly good covenant which had been broken, and being entitled prirna facie to have that covenant performed, would be deprived of a remedy because, if I took the view that I could not grant specific performance, they would get no adequate compensation.
Fry
Lord Justice Fry’s Treatise on Specific Performance :
“A contract to be specifically enforced by the court must, as a general rule, be mutual,-that is to say, such that it might, at the time it was entered into, have been enforced by either of the parties against the other of them. Whenever, therefore, whether from personal incapacity to contract, or the nature of the contract, or any other cause, the contract is incapable of being enforced against one party, that party is equally incapable of enforcing it against the other, though its execution in the latter way might in itself be free from the difficulty attending its execution in the former.”
And yet the truth of the following eight propositions, each one of which is at variance with the statement just quoted, will be generally admitted:
(1) A bilateral contract between a fiduciary and his principal is often enforced
in favor of the principal, although not enforceable against him.
(2) A similar contract procured by the fraud or misrepresentation of one of the parties may be enforced against him, although not by him.
(3) In England, one who, after making a voluntary settlement, has entered into a contract to sell the settled property, may be compelled to convey, although he cannot force the buyer to accept a conveyance.
(4) A vendor, whose inability to make a perfect title debars him from obtaining a decree against the buyer, may in many cases be forced by the buyer to convey with compensation.
(5) Notwithstanding the opinions of Lord Redesdale and Chancellor Kent to the contrary, a party to a bilateral contract, who has signed a memorandum of it, may be compelled to perform it specifically, although he could not maintain a bill against the other party who had not signed such a memorandum.
(6) A contract between an infant and an adult may be enforced against the adult after the infant comes of age, although no decree could be made against the plaintiff.
(7) A plaintiff who has performed his part of the contract, although he could not have been compelled in equity to do so, may enforce specific performance by the defendant.
(8) One who has contracted to sell land not owned by him, and who, there fore,.could not be cast in a decree, may, in many cases, by acquiring title before the time fixed for conveyance, compel the execution of the contract by the buyer.
Flight v Bollard
Chancery (1828) 4 Russ. 298
Sir JOHN LEACH M.R. : No case of a bill filed by an infant for the specific performance of a contract made by him has been found in the books. It is not disputed, that it is a general principle of courts of equity to interpose only where the remedy is mutual. The Plaintiff’s counsel principally rely upon a supposed analogy afforded by cases under the statute of frauds, where the plaintiff may obtain a decree for specific performance of a contract signed by the defendant, although not signed by the plaintiff. It must be admitted that such now is the settled rule of the Court, although seriously questioned by Lord Redesdale upon the ground of want of mutuality. But these cases are supported, first, because the statute of frauds only requires the agreement to be signed by the party to be charged; and next, it is said that the plaintiff, by the act of filing the bill, has made the remedy mutual. Neither of these reasons apply to the case of an infant. The act of filing the bill by his next friend cannot bind him; and my opinion therefore is, that the bill must be dismissed with costs, to be paid by the next friend.
Hoggart v Scott
Chancery (1830) 1 Russ. & M. 293; Tami. 500; 9 L.J.(o.s.)Ch. 54
LEACH M.R.: . . . The objection must be overruled. The Defen dant, if he had thought fit, might have declined the contract as soon as he discovered that the Plaintiffs had no title and he was not bound to wait until they had acquired a title; but, he having not taken that course, it is enough that at the hearing a good title can be made.
Halkett v Earl of Dudley
Chancery [1907] 1 Ch. 590; 76 L.J.Ch. 330; 96 L.T. 539
PARKER J.: Now I think it is reasonably clear on the authorities quoted to me that, before decree, a purchaser who becomes aware of a defect in the vendor’s title, which defect cannot be removed without the concurrence of a third party whose concurrence the vendor has no power to require, may (except possibly in the case of trifling matters which the Court would at the vendor’s instance treat as matters of compensation or abatement of purchase money) repudiate his contract, and that such repudiation will be a bar to any relief being subsequently given by way of specific performance at the vendor’s instance, even though the defect has been removed before trial. I do not think that this right is more than an equitable right affecting the equitable remedy by way of specific performance. If a vendor contracts that he will at a future date convey to a purchaser land which does not at the date of the contract belong to him, but to which he acquires title before the day upon which, according to the contract, the purchase is to be completed, I do not see why, in principle, he should not be able to recover damages for breach of contract if the purchaser fail to complete at the date fixed for completion. If this be so, the right of repudiation in question must be distinguished from the common law right of rescission, and arises out of that want of mutuality which, unless waived, is generally fatal to relief by way of specific performance. The point is touched on, though it is left open, in the case of Bellamy v. Debenham ([1891] 1 Ch. 412); and the case of Salisbury v. Hatcher ( (1842) 2 Y. & C.Ch. 54), to which I will refer presently, is further material on the point; but it is in my opinion equally clear that this right of repudiation, whatever be its true nature, must be exercised, if it is to be exercised at all, as soon as the defect is ascertained. If, after ascer taining the defect, the purchaser still treats the contract as subsisting he does not retain the right to repudiate at any subsequent moment he may choose….
Thcase to which I have referred is Salisbury v. Hatcher. In that case the head-note is as follows : ” Specific performance of a contract for sale of an estate in fee simple decreed in favour of a vendor who at the time of the contract was tenant for life only; the purchaser not having rejected the purchase as soon as he had ascertained the real interest of the vendor, and the vendor being able by means of the consent of the parties interested in remainder to make a good prima facie title to the fee simple at the hearing.” In that case the Vice Chancellor commences his judgment in the following manner: ” In cases of specific performance the want of mutuality is a consideration generally material, but it is contrary to principle and authority to say that perfect mutuality is requisite in order to call a Court of Equity into action. There are cases in which plaintiffs have had a decree for specific performance against defendants, who, when the bill was filed, were not in a condition to enforce specific performance in their own favour. Where no legal invalidity affects the contra:::t, the enforce ment of it in this Court is matter of judicial discretion. In this case it has not been contended that there is any legal invalidity. Suppose Mrs. Salisbury to have obtained a legal conveyance of the fee before the time fixed for completion of the contract, and to have done and tendered all other things requisite to be done and tendered. If this were done in sufficient time, she would, I appre hend, have been entitled to recover, at law, on the contract. The contrary, indeed, has not been argued, and I do not understand that on that point the counsel for the defendant desire a case for the opinion of a Court of law. If so, this becomes a case for the judicial discretion of the Court of Equity to which application for specific performance is made.” I read that passage primarily because it appears to me to be relevant on the point as to what is the nature of this right of repudiation on which the purchaser in the present case relies, and it really points to the fact that it has nothing to do with the legal right of
rescission; it is merely an equitable right arising out of want of mutuality, such as may possibly form the ground of a defence to the peculiar relief given by Courts of Equity, namely, relief by way of specific performance. The Vice Chancellor then goes on to explain the various circumstan es of the case, and later on in his judgment he says this: ” In this stat o t mgs I a asked, on the ground of want of mutuality, to say that the plamt1ff 1s not entitled to any relief. I should be trampling on all principle and authority, if I were to accede to such an argument. Even if the rule of mutuality, as_it as been calle1, could be carried so far as it has been attempted to be earned m a case of this description, which I do not say, still the conduct of the purchaser has be_en amply sufficient to exclude him from the benefit of any such argument. W th full notice of the state of the title, he pursues the investigation of it, and obtams the fulfilment of a requisition made by himself, and founded on the very state of the title. In my opinion, therefore, to relieve him from the contract would, as I have already said, be contrary to all principle and authority, and discredit able to a Court of justice.” It will be seen that the decision in the case, or rather the principle of the decision, rests really upon a waiver of the want of mutuality in the contract….
Now hitherto I have assumed that the decree for specific performance did not affect the purchaser’s right of repudiation; but I have come to the conclusion that, after a decree of specific performance, a defendant purchaser cannot repu diate the title or the contract without the leave of the Court. Repudiation as a defence to specific performance, arising as I think it does out of the doctrine of mutuality, is, strictly speaking, out of the question after a decree for specific performance has been made, and even if repudiation is treated as a rescission of the contract founded on some doctrine of law, I do not think that a Court of Equity would allow rescission without application to itself for leave so to do. The proper course for the purchaser, on discovery of a defect of title such as might, but for the decree, give rise to a right of repudiation, is to move to be discharged from the contract. Even if he does so move I do not think he would be entitled to be discharged as a matter of course. A decree for specific performance enures for the benefit of both parties, and on the reference as to title a vendor is not confined to shewing such title as he had at the date of the decree, much less to such title as he had at the date of the contract, but may perfect his title at any time before certificate. On the other hand, the purchaser is not confined to objections taken by him before or at the hearing. Even if the certificate be adverse to the title, an application by the purchaser to be relieved may be refused if, at the hearing of the application, the vendor has perfected his title; and the same rule applies to the further hearing of the action upon the certificate. In each case it seems to me that the Court will consider the circum stances, and grant the relief, or refuse relief, as may appear to be equitable.
Duncuft v Albrecht
Chancery (1841) 12 Sim. 189
SHADWELL V.-C.: . . . Then the only question is whether there has been any decision, from whence you can extract a conclusion that the Court will not decree a specific performance of an agreement for the sale of such shares? Now, I agree that it has been long since decided that you cannot have a bill for the specific performance of an agreement to transfer a certain quantity of stock. But, in my opinion, there is not any sort of analogy between a quantity of 3 per cents. or any other stock of that description (which is always to be had by any person who chooses to apply for it in the market), and a certain number of railway shares of a particular description; which railway shares are limited in number, and which, as has been observed, are not always to be had in the market. And, as no decision has been produced to the contrary, my opinion is that they are a subject with respect to which an agreement may be made which this Court will enforce.
Pooley v Budd
Rolls Court (1851) 14 B. 3-1
SrirJOHN ROMILLY M.R.: It is contended by the Defendants, that the Plaintiff seeks to enforce specific performance against the Defendants, the Ystalyfera Iron Company, of a contract entered into between the company and Scale, and that he seeks this relief, by virtue of a lien for valuable consideration, which the Plaintiff has obtained upon that contract.
The Plaintiff, on the other hand, disclaims all interest in the contract, and contends that the case as made by the bill represents that the Defendant Scale is owner of some iron of which the Ystalyfera Iron Company have become trustees, and in which they have no interest. The Plaintiff asserts, that he is interested in that iron, by reason of a lien, for valuable consideration, created in his favour by Scale, the owner of the iron, and that he, the Plaintiff, is entitled to enforce that lien against the company, who held it after they had ceased to have any interest in it.
The principles affecting these cases are now well settled in Courts of Equity. On the one hand, it is and has long been the law of this Court, that it will not lend its assistance to enforce the specific performance of ordinary contracts for the sale and purchase of personal chattels, unless, as in the case of Buxton v. Lister ( (1746) 3 Atk. 383), there be something very special in the nature of the contract. On the other hand, if a trust be created, the circumstance that the subject-matter to which the trust is attached is a personal chattel, will not prevent this Court from enforcing the due execution of that trust.
For instance, if a man about to contract marriage, and possessed of a large and valuable quantity of iron, lead, or copper ore, assigned that ore to the trustees of the settlement, in trust to sell and invest the proceeds, and hold the proceeds, when invested, upon the trusts of the settlement, there can be no question, but that this Court would, before the sale, compel the possessor of the ore and the trustees of the settlement to fulfil every part of the trust, which one had undertaken to constitute and the other had undertaken to execute-in this case, there would be no doubt.
Trusts, however, may be constituted not merely by direct declaration of trust, but also by constructive operation of the consequence flowing from the acts of the persons themselves. Thus, equity will not merely enforce the execution of a trust against the trustees themselves, but against all persons who obtain posses sion of the property affected by the trust, provided they had notice of the trust. So if, in this case, Scale had been the agent of the Plaintiff, and had paid for the iron with the Plaintiff’s money, this Court would have held Scale to be the trustee of the iron for the Plaintiff, and would have compelled him to deliver the iron to him, or make him account for the proceeds of the sale of it, if it had been disposed of; and it would, in like manner, have compelled any person to do the same, who had acquired the property from Scale, if that person had been aware of the circumstances under which Scale had himself obtained possession of the property in the first instance.
It does not, therefore, in my apprehension, make any difference in this respect, that the property is real or personal property. It is true, that when a contract is entered into for the sale of real property, the vendor is a trustee of the estate for the purchaser, and the vendee is a trustee of the purchase-money for the seller from the moment that the contract is concluded (see Wall v. Bright (1820) 1 Jae. & W. 494; Green v. Smith (1738) 1 Atk. 572; and Toft v. Stephenson (1848) 7 Hare 1), and it is also true, that if a contract for the sale of a personal chattel is entered into, no such relation between vendor and vendee arise . And this is, because equity has jurisdiction to enforce the specific performance of a contract for sale in one case and not in the other; and as equity treats the parties to a contract enforcible here, as being in the same situation as if they had actually done that which equity considers them bound to do, and will compel them to do so, the relation of trustee and cestui que trust springs from the contract only, in those cases in which equity will compel the specific performance of it.
It is therefore important to bear in mind, in this case, that as equity would not enforce the specific performance of the contract ior the sale and delivery of the iron, the relation of trustee and cestui que trust cannot spring merely from the contract, and that, if it exists at all, it must be shewn to exist from some thing beyond the mere contract entered into between the company and Scale for the sale and delivery of iron. At the same time, if the contract were complete so far as the company were concerned-that is to say, if they had been paid every penny they were entitled to, and if they had no claim upon or interest in the iron arising from the contract, and the contract only remained unperformed to this extent, that the iron had not been delivered to the purchaser-I should entertain no doubt, but that the company would, then and thereby, become mere trustees of the iron sold, for the benefit of the real purchaser or the person entitled to claim it under him.
Fells v Read
Chancery (1796) 3 Yes.Jun. 71
Lord Loughborought: I am sorry this cause has come into this Court: but the regret I feel is no other than that, one always feels, that litigation and expence should have been occasioned by the peevishness and obstinacy of the parties. The value I cannot measure. The Pusey horn, the Patera of the Duke of Somerset, were things of that sort of value, that a jury might not give two-pence beyond the weight. It was not to be cast to the estimation of people, who have not those feelings. In all cases where the object of the suit is not liable to a compensation by damages, it would be strange if the law of this country did not afford any remedy. It would be great injustice if an individual cannot have his property without being liable to the estimate of people, who have not his feelings upon it. But this has very particular circumstances: for if no such cases as those cited had occurred, if this had come here originally, it is impossible, that I should not have permitted the suit to stand. In the case of the Pusey horn in Vernon it does not appear, how the Defendant got it. In the case of the Duke of Somerset the Patera was in the possession of a goldsmith, who bought it in the way of trade with notice of the claim of the Duke of Somerset. But in this case the possession is by a qualified title. It was delivered upon an express trust to keep it and produce it at the meetings of the club, and at the expiration of his office to deliver it over to the senior churchwarden, in order that he might give it to the next overseer. He accepts it upon that condition. Had he then any right to retain this possession against the terms, upon which it was delivered to him? He was a depository upon an express trust; and he does not perform the trust. Upon the common ground of equity there was a right in the Plaintiffs to have called upon him, in the first place during the term to have used it according to the trust. That would be a small subject of a suit in Equity:
but if he had not produced it at the meeting, I must have compelled it; so, if he retains it after the expiration of the term. I must compel him to use it according to the trust.
Dowling v Betjemann
DOWLING v. BETJEMANN
Chancery (1862) 2 J. & H. 544; 6 L.T. 512; 26 J.P. 531; 8 Jur.(N.s.) 538; 10 W.R. 574
SIR W. PAGE WOOD V.-C.: This case involves some points of considerable interest; but from the first it has appeared to me that the great difficulty on the part of the Plaintiff was in making out the jurisdiction of this Court to interpose in a case so circumstanced as the present. That the Court has jurisdiction to order the delivery of a specific chattel of a peculiarly valuable kind, such as a picture, I have never entertained a doubt; but the observations in Fells v. Read ((1796) 3 Ves. 70) and cases of that class apply only to chattels of which the value cannot be properly ascertained by a jury. They would very pointedly apply to the case of an artist insisting that the value of his picture should not be left to the estimate of a jury. But the difficulty which has weighed on my mind throughout the case is that the bill is framed, not by any slip, but advisedly and of necessity, on this principle: the Plaintiff has agreed to sell his picture, at a given time and under certain circumstances, for the sum of £300; he has graJ!.ted the right of engraving the picture and of exhibiting it for a fixed sum for £150, at the end of which he agrees to part with the picture itself for the payment of the further sum of £150. . . . It is clear that the Plaintiff retained the property in the picture during this interval. I cannot for a moment entertain the argument that the property passed to Messrs. Betjemann immediately on the execution of the agreement. The terms of the contract are quite conclusive on that point. The rights of the parties under the agreement are plain. The Plaintiff agrees to sell at a given future time, and in the meantime to allow the exhibition and engraving of the picture without parting with the property.
Then the bill is framed on this principle: it claims the property subject to the agreement. The first paragraph of the prayer asks a declaration that the picture is the property of the Plaintiff until payment, and until the picture shall have been duly exhibited and engraved (this last condition being founded on a mistaken view of the agreement). Then the prayer goes on to claim a lien for the unpaid purchase-money, and that the agreement may be cancelled unless the same is paid and the picture duly exhibited and engraved. It was, moreover, admitted at the Bar that the payment of the £300 would dispose of the whole question in the suit. That is the fair view of the case which is made by the bill. Upon this an insuperable difficulty arises in the way of the jurisdiction which this Court exercises to order the delivery of a specific chattel of a peculiar value, as in the Pusey Horn Case (Pusey v. Pusey (1684) I Vern. 272). In such a case as this it appears to me that it would be an innovation on the practice of the Court, to say that a jury could not adequately estimate by damages the non-payment of a price fixed, as it is here, by the agreement of the parties.
The bill might possibly have been framed on this footing. It might have said, ” You have broken the agreement, and I insist that it shall be cancelled, and that my picture shall be restored.” I do not say that that contention might not have prevailed. But upon the bill as it stands the Plaintiff says he is quite satisfied with the agreed price of £300, and it is only in the event of that not being paid that he asks for the restoration of the picture. That reduces the contest to a mere money demand. The Plaintiff has bound himself to sell for
£300. He says the Defendants have attempted to cheat him out of the price, and comes, not primarily to have the chattel returned on the ground of its intrinsic value, but to have the contract performed. The same considerations which dispose of the claim to have the picture returned also displace the right to have a vendor’s lien on the picture enforced in this Court.
The Plaintiff may get the value he has himself put upon his picture from the verdict of a jury. o doubt has been suggested as to Gotto’s solvency, and very strong arguments have been urged to shew that Gotto would have no defence to an action of trover. According to his own arguments, the Plaintiff will get at law the £300, which is all that he asks by this bill. The difficulty in this Court is that he does not found his bill on the right to have a specific chattel restored, but on his title to be paid the price of £300, with which he still professes to be content.