Termination of Lease
Forfeiture Cases
Baroness Annaly v Margaret Harrington and Others
High Court.
7 December 1927
[1928] 62 I.L.T.R 13
Sullivan P., O’Byrne J.
.
Sullivan, P. (in the course of his judgment), said:—We do not need a reply from Mr, *13 Connolly. The plaintiff’s claim in this case was based on forfeiture for breach of covenant to repair. There is a maxim that “the law abhors forfeitures.” Accordingly the tenant is entitled to have the law interpreted strictly in her favour. As the landlord was not the original lessor, she was bound to prove her title. She might do so either by tracing the assignments from the original lessor to herself or by relying on s. 24 of Deasy’s Act by showing that she had been in receipt of one year’s rent (or that her predecessor-in-title had been in receipt of the rent for one year within the three years immediately prior to the conveyance to the present landlord). In this case the landlord elected to use the latter method. White had collected these rents for years, but not as Lady Annaly’s agent until six months or so prior to the alleged forfeiture. Accordingly, on strict law, the plaintiff’s action must fail and should be dismissed.
O’Byrne, J.
I agree for the reasons stated.
The appeal was allowed with costs.
Wallace v. Daly & Co. Ltd.
[1949] IR 358
Supreme Court.
MAGUIRE C.J. :
30 July
I have read the Judgment which Mr. Justice O’Byrne is about to deliver. I agree with it and I have nothing to add to it.
MURNAGHAN J. :
The Circuit Court, established by the Courts of Justice Act, 1924, is a new Court and it is also a Court of Record. As it is a Court of Record, there is room for the application of a doctrine of the common law, viz., that a tenant for a term of years who denies by entry on the Court Record his landlord’s title forfeits his term of years.
This rule of the common law and some explanation of its origin will be found in Bacon’s Abridgment, 6th Ed., Vol. 2, (title: Estate for Life and Occupancy), at p. 570, as follows:”Another way of forfeiture in a court of record is, by claiming a greater estate than he had by the feudal donation, or by affirming the reversion to be in any other person than his lord. This seems to be grounded on a rule in the old feudal law, that if a vassal denied that he held the feud of his lord, and it was proved against him, such denial was a forfeiture. Now this denial may be when the vassal claims the reversion himself, or accepts a gift of it from a stranger, or acknowledges the reversion to be in a stranger; for in all these cases he denies that he holds the fend from his lord: but, as by the feudal law, the vassal was to be convicted of this denial, so in our law these acts which- plainly amount to a denial must be done in a court of record, to make them a forfeiture; for such act of denial appearing on record is equivalent and equally conclusive as a conviction upon solemn trial; and all other denials, that might be used by great lords for trepanning their tenants, and for a pretence to seize their estates, by our law were rejected, for such convictions might be made by such great lords where there was no just cause: but the denial of the tenure upon record could never be counterfeit, or be abused to any injustice; and therefore this notorious and solemn act of the tenant was retained as a just cause of forfeiture by our law.”
There is, however, another rule of the common law analogous to forfeiture by denial on the record, but which is quite distinct, and in reading the decided cases this difference should be remembered. In ejectment against a tenant from year to year the tenant who had by conduct denied his landlord’s title before the bringing of the ejectment could not insist upon the necessity of a notice to quit. Authority for these propositions of law will be found in many cases, but I shall refer to two only. In Rees d.Powell v. King and Morris (1) the Court is reported as saying “a parol surrender cannot do away a lease in writing” and in Doe d. Graves v. Wells (2) Patteson J.. at p. 436, said:”No case has been cited where a lease for a definite term has been forfeited by mere words,”and Lord Denman C.J. speaks of cases “either of disclaimer upon record, which admit of no doubt as to the nature of what is done, or of leases from year to year, in speaking of which the nature of the tenancy has been sometimes lost sight of, and the words, ‘forfeiture’ and ‘disclaimer’ have been improperly applied.” As regards tenancies from year to year, Patteson J. said:”It is sometimes said that a tenancy from year to year is forfeited by disclaimer: but it would be more correct to say that a disclaimer furnishes evidence in answer to the disclaiming party’s assertion that he has had no notice to quit; inasmuch as it would be idle to prove such a notice where the tenant has asserted that there is no longer a tenancy.”
In a Court of Record, the pleadings of the parties are part of the record, and it is from inspection of this record that it must be ascertained whether the record contains a denial by the tenant of his landlord’s title. The Rules of the Circuit Court permit a plaintiff bringing ejectment on the title to use a Form No. 2c prescribed by the Rules. This form does not require the plaintiff to state the title upon which he founds his claim. The form of pleading in the Circuit Court is in this respect different from the procedure in the High Court. Accordingly, the plaintiff’s endorsement of claim was as follows:”The plaintiff’s claim is for the recovery of possession of All That and Those the stable and archway constituting the ground floor of the house known as Na. 3 Henry Street situate in the Parish of St. Michael and City of Limerick which is the property of the plaintiff and possession whereof the defendants wrongfully withhold.”
From this summary form of pleading a defendant is not informed upon what ground of title the plaintiff claims, and, if the defendant is a tenant for years, he does not know whether the plaintiff’s claim is or is not hostile to the title of his lessor. Order VII, r. 3, of the Circuit Court Rules requires the defendant to send to the plaintiff or his solicitor and lodge with the County Registrar a notice in writing setting forth briefly the grounds upon which he intends to defend. Order VII, r. 4, prescribes that the notice of defence shall state the precise grounds upon which the defendant disputes the plaintiff’s claim and that no defence shall be admitted to defeat the claim or any part thereof unless in the opinion of the Court it could fairly have been inferred from the particulars given in the notice of defence. It is easy enough to understand this latter Rule when the pleading is in answer to a claim which has been precisely formulated; but if it is to be applied to cases of ejectment on the title, pleaded in conformity with the prescribed Form 2c it obliges the defendant to admit the plaintiff’s title without knowing under what title the claim is made or otherwise to deny that the subject-matter of the suit is the property of the plaintiff. At the common law a person made defendant in ejectment on the title could plead that he was in possession, and this plea obliged the plaintiff to satisfy the Court that he was entitled to possession, and it enabled the defendant to raise any defence open at common law. Order XXXII, r. 9, of the Rules of the Circuit Court, reads:”Every defendant in a civil ejectment process shall be entitled to set up every defence which he might have had in law or in equity.” This Rule of Court, which deals specially with defence to a civil ejectment process was, I think, intended to retain the common law defence arising from the plea of possession. on consideration, I am of opinion that it is not possible to harmonise Or. VII, r. 4, as applied to a defence in ejectment, with the provisions of Order XXXII, r. 9, and that Order XXXII, r. 9, must be held to be a rule dealing with a particular subject-matter which overrules the generality of Or. VII, r. 4, in relation to defence in ejectment.
Owing to the contradictory nature of the Rules of Court, it is easy to understand in what difficulty the defendants’ pleader was placed, and he attempted to comply with Or. VII, r. 4, and, at the same time, to avail of the common law defence open under Order XXXII, r. 9. The defence, dated the 13th April, 1946, is in the form following:
“The defendants refer to the plaintiff’s claim in the civil bill served herein to which an appearance was entered on the 12th day of April, 1946. The defendants will contest the said claim on the grounds:1, the defendants are in possession of the premises sought to be recovered; 2, the defendants deny that the stable mentioned in the indorsement of claim forms part of No. 3 Henry Street, Limerick, as alleged, or at all; 3, the said stable is not the property of the plaintiff; 4, the plaintiff’s right and title (if any) to the said premises have been extinguished by the Statutes of Limitation.”
By an Order of the Court, dated the 11th May, 1946, by consent the indorsement of claim in the civil bill was amended by deleting therein the words, “the stable constituting part of the ground floor,” and, instead thereof, substituting the words, “the stable and archway constituting the ground floor,” and it was also ordered by consent that the defendants’ statement of defence should be amended by including the words, “and archway,” immediately after the word,”stable,” where same occurs in the said defence.
Question (1) of the Case Stated is:”Has the said lease of the 3rd February, 1906, so far as it relates to the said stable and archway, been forfeited by reason of the pleas contained in the defence herein, dated the 13th April, 1946?”
The lease mentioned in the question was a lease for a term of 853 years from the 29th September, 1895, of considerable premises, described as a bake-house and yard, together with the stable and archway in question, at a rent of £26. The lessor was James Joseph Desmond Carmody, a minor, by Archibald Murray, his guardian ad litem., and the lessees wore Mary Carmody and Agnes Dorothy Carmody. The parcels in the lease and the map referred to make it certain that the stable and the archway were portion of the premises demised. By various assignments the lessees’ interest in this lease passed to John Daly and, under his will, to Madge Daly. By an indenture of conveyance, dated the 24th August, 1931, between James Joseph Desmond Carmody, of the one part, and Madge Daly, of the other part, made in pursuance of a recited agreement for sale, dated the 28th July, 1930, the premises comprised in the lease already referred to were conveyed to Madge Daly, her heirs and assigns. The map referred to in this deed includes the stable and there is a note attached stating that “Stable ‘A.’ consists of stable only on ground floor. The upper floor forms part of adjoining premises.” Madge Daly continued in possession, paying no rent; and on the 17th April, 1945, conveyed the bake-house, yard, and premises as described on the map indorsed on the conveyance of the 24th August, 1931, to the defendants.
There may have been some confusion as to the title to the fee of the premises in Henry Street or there may have been confusion for some other cause. Whatever the reason, by an indenture, dated the 14th November, 1930, made between The Commercial Union Assurance Company, of the first part, James Joseph Desmond Carmody, of the second part, and Michael Wallace, the plaintiff, of the third part,”All That and Those the dwelling-house shop and premises now known as Numbers 2 and 3 Henry Street, situate in the parish of St. Michael and City of Limerick” were conveyed to Michael Wallace in fee simple. This conveyance and the conveyance of the same premises (in part) to Madge Daly were signed by the same attorney on behalf of James Joseph Desmond Carmody. The same vendor thus conveyed the fee simple in the stable and archway to two different purchasers, and as the deed of the 14th November, 1930, was first registered, it takes priority. There was no mention in this deed of the lease of the 3rd February, 1906, but in contemplation of law the conveyance was subject to this lease.
If the position had been properly understood, the plaintiff had no right to enter into possession. His advisers, however, seized upon the defence as creating a forfeiture of the lease, relying principally upon tho English case of Kisch v. Hawes Bros., Ltd. (1).
At the hearing in Court on the 11th May, 1946, when the conveyances referred to and the lease of the 3rd February, 1906, were given in evidence, application was made on behalf of the defendants for an adjournment, with a view to having the defence amended. On the 20th June, 1946, the following, order was made:”. . . And on reading the defendants’ notice of motion herein, dated the 18th day of May, 1946, for liberty to amend the defence filed herein on the 13th day of April, 1946, and the plaintiff by his counsel offering to consent to the said amendments upon terms that the defendants would admit that the said amendments did not cure any forfeiture of the said lease of the 3rd day of February, 1906, and the defendants by their counsel accepting the said offer and so admitting the Court doth order that the defence be amended as follows:”
“1, by the addition to paragraph 1 of the said defence of the following words, ‘under an indenture of lease, dated the 3rd day of February, 1906, and made between James Joseph Desmond Carmody, a minor, acting by Archibald Murray, of the one part, and Mary Carmody and Agnes Dorothy Carmody, of the other part, whereby certain premises therein described, including the said stable sought to be recovered, were demised to the said Mary Carmody and Agnes Dorothy Carmody (the lessees therein named) their executors administrators and assigns together with the exclusive use and enjoyment for the said lessees their executors administrators and assigns of the covered entrance passage or bow-way (being the archway sought to be recovered) leading from Henry street to the premises thereby demised for the term of 853 years from the 29th September, 1895, subject to the yearly rent thereby reserved and to the covenants and conditions therein contained. The lessees’ interest under the said lease is now vested in the defendants for the residue of the term thereby granted’; 2, by the deletion of paragraphs 2, 3, and 4 of the said defence.”
Under this order, in my opinion, the original defence disappears and the record stands in the amended form. Counsel for the defendants who obtained this order studiously refrained from contending that the original defence had ceased to stand in its original terms. They probably felt that the amendment had been made on the basis that the defendants would admit that the said amendments did not cure any forfeiture and they limited their arguments to a contention that the original defence did not create a forfeiture. But matter of record does not depend upon undertakings or agreements. The amendment was either not made at all, in which case the original defence stands, or the amended defence supersedes the original defence, in which case there is no forfeiture by matter appearing on the record. How can the original record be altered in part, and deleted in part and yet remain in whole in its original form? If the plaintiff desired to insist on a forfeiture he should have opposed any amendment of the pleas which he alleged caused the forfeiture. He cannot, in my opinion, consent that pleas be altered or deleted on the understanding that they remain on record in the original form. Order XLI of the circuit Court Rules, r. 11, reads:”The Court, at any stage of the proceedings, may permit either party to amend or alter any document or may disallow any amendment of a civil bill or counterclaim already made or may amend any defect or error in any process, and all consequential necessary amendments shall be made for the purpose of determining the real question or issue raised by or depending on the proceedings.” The very idea of amendment is that the original document is withdrawn and is superseded by the document in the amended form; it does not allow of the existence of two documents each different from the other. In my opinion the Court has by amendment removed the original defence and substituted the defence in its amended form. If the plaintiff’s advisers made a mistake in consenting to an amendment it is the record which determines whether there has been a forfeiture. In recent years the leaning of the Court is against the harshness of forfeitures and the plaintiff should not be aided in such a matter any further than strict law entitles him.
Kisch v. Hawes Bros., Ltd . (1), before Farwell J., was relied upon by the plaintiff. In his judgment Farwell J. said, at p. 106:”The plaintiff, in her statement of claim, pleads her title to the property as tenant for life, and claims possession and mesne Profits Since October 9, 1933, that is to say, since the death of the prior tenant for life.”Farwell J. held that the defendant by pleading possession had denied the plaintiff’s title. Order XXI, r. 21, of the Rules of the Supreme Court, 1883, makes this plea have the effect that “it shall be taken to be implied in such statement that he” (the defendant) “denies, or does not admit, the allegations of fact contained in the plaintiff’s statement of claim.” Farwell J. had allowed an amendment, viz., that the defendants were in possession “under the lease hereinafter referred to,” but was of opinion, notwithstanding the amendment granted, that the unamended defence created a forfeiture. No authority was cited for treating an amendment in this way, and I can only say that I know of none and it appears to me clearly contrary to tho idea and purpose of amendment. Farwell J. might well have refused the amendment, but his judgment nullifies the amendment which he had granted. In my opinion, the record, as it stands, does not dolly the plaintiff’s title.
Owing to the course taken by counsel for the defendants, I think I ought to state my opinion whether the original defence created a forfeiture.
Mr. Ryan sought to rely upon a passage in Bacon’s Abridgment, 6th Ed., Vol. 4, p. 219, for the proposition that there cannot be a forfeiture by denial upon record unless the plaintiff’s ejectment is grounded on the lease and the defendant resists his lessor’s demand under the grant of a higher interest in the land. In cases where the plaintiff makes the lease his basis of claim a denial of the lease may certainly work a forfeiture, but decided cases have not been cited to support the proposition made by Mr. Ryan. On the other hand, all the cases cited for the plaintiff appear to be cases, not of forfeiture of a term of years by denial on the record, but of disclaimer of a tenancy from year to year before action brought, which rest on a different ground.
As in the Circuit Court, a plaintiff in an action for ejectment on the title need not state the grounds of his claim, and as these grounds of claim might be hostile to the title of the defendant’s lessor, general denials in a defence should not, in my opinion, be construed as a denial of the lessor’s title. When, however, the parties at the hearing give a preciseness to these general pleas, the pleas should be interpreted in the light of the contentions put forward. The plaintiff claimed as the grantee of the lessor of the plaintiff. The defendant did not deny the lease, but similarly claimed as a grantee of his lessor. If the plaintiff had in his pleading relied upon his conveyance, and the defendant had pleaded his lease and the conveyance from his lessor, would such pleading have worked a forfeiture? In an anonymous case in Godbolt 105, pl. 124, referred to by Littledale J. in Doe d. Gravesv. Wells (1), Justices Walmesly and Fenner said:” Where he” (a tenant) “claims in fee generally, and it is found against him, there perhaps he shall forfeit his estate; but where he shews a special conveyance, which rests doubtful in law it is no reason that his estate thereby should be forfeited, although it be found against him.” These observations appear to me to apply directly to the facts of this case.
In the case of Rees d. Powell v. King and Morris (2) which was ejectment on the title against King and Morris, his sub-tenant, King, who was tenant under a lease for twenty-one years, refused to pay rent, claiming that he had purchased his lessor’s interest. Counsel for the plaintiff thereupon argued:”Having once set up the title of a purchaser, he has relinquished his claim under the lease, and thereby destroyed the relation of landlord and tenant; which he cannot restore by any act of his.” But the Court said:”The defendants object to the payment of rent, that one of them has an equitable claim to the property of the demised premises: that may or may not turn out to be a legal claim: this, therefore, does not incapacitate them from holding under the lease, as they have not absolutely abandoned the relation of landlord and tenant.” These cases seem to show that a lessee for years can, without incurring a forfeiture, claim that he has purchased the interest of his lessor. In my opinion Questions (1) and (2) should be answered in the negative
GEOGHEGAN J. :
I concur with the judgment which Mr. Justice Murnaghan has just delivered.
O’BYRNE J. :
This is a Case Stated by Black J., sitting as an additional Judge of the High Court on Circuit. The action was brought to recover possession of a stable and archway, situate at Henry Street, in the City of Limerick. The material facts, as found by the learned trial Judge, are as follows:
By lease, dated the 3rd February, 1906, and made between James Joseph Desmond Carmody, of the one part, and Mary Carmody and Agnes Dorothy Carmody, of the other part, the said James Joseph Desmond Carmody demised unto the said Mary Carmody and Agnes Dorothy Carmody, the premises therein described, including the said stable and archway, for a term of 853 years from the 29th September, 1895, at the rent and subject to the covenants on the part of the lessees therein mentioned.
By conveyance, dated the 14th November, 1930, and made between the Commercial Union Assurance Company, Ltd., of the first part, the said James Joseph Desmond Carmody, of the second part, and the plaintiff, of the third part, the premises therein described, including the said stable and archway, were conveyed to the plaintiff in fee simple.
In and prior to the year, 1931, the lessee’s interest in the said lease, and in the premises thereby demised, had become and was vested in one Madge Daly. In the year, 1931, she purchased the fee simple of the said premises and same was conveyed to her by conveyance, dated the 24th August, 1931, and made between the said James Joseph Desmond Carmody, of the one part, and the said Madge Daly, of the other part. The latter conveyance purports to convey to Madge Daly in fee simple the said stable, which had previously been conveyed to the plaintiff. By conveyance, dated the 17th April, 1945, all the estate and interest of the said Madge Daly under the said lease and the said conveyance of the 24th August, 1931, became vested in the defendants.
The defendants were, prior to these proceedings, and still are, in possession of the said stable and archway. No rent has been paid by the defendants to the plaintiff in respect of the stable and archway and the plaintiff was ignorant of the defendants’ title to the said premises.
On the 10th April, 1946, the plaintiff issued an ejectment civil bill on the title against the defendants to recover possession of the said stable. The defendants entered an appearance on the 12th April, 1946, and by their defence, dated the 13th April, 1946, and duly filed in the action, the defendants pleaded as follows:1, the defendants are in possession of the premises sought to be recovered; 2, the defendants deny that the stable mentioned in the indorsement of claim forms part of No. 3 Henry Street, Limerick, as alleged, or at all; 3, the said stable is not the property of the plaintiff; 4, the plaintiff’s right and title (if any) to the said premises have been extinguished by the Statutes of Limitation.
By notice of motion, dated the 30th April, 1946, the plaintiff gave notice that he would apply, on the hearing of the ejectment, for liberty to amend the civil bill by deleting the words, “the stable constituting part of the ground floor,”and substituting therefor the words, “the stable and archway constituting the ground floor.”
The action came before the Court on the 11th May, 1946, when, by consent, the indorsement of claim was amended in accordance with the said notice of motion and, also by consent, the defence was amended by including the wards,”and archway,” immediately after the word, “stable,” where same occurs in the said defence.
The Circuit Court Judge then proceeded with the hearing of the action upon the pleadings as so amended and certain evidence was produced, including the said lease and the said indentures of conveyance. At this stage, the further hearing of the action was adjourned until the 20th June, 1946, on the application of the defendants, so as to enable the defendants to serve a notice of motion for liberty to amend their defence.
On the 18th May, 1946, the defendants served notice of motion for liberty to amend their defence.
The adjourned hearing of the action came before the Court on the 20th June, 1946. At the commencement of this adjourned hearing, the defendants got leave to amend their defence in accordance with the said notice of motion, but this amendment was given upon express terms, viz., that the amendment did not cure any forfeiture of the said lease of the 3rd February, 1906. These terms were accepted by the defendants and appear on the face of the order. The order as made by the Court is that the defence be amended as follows:”1, by the addition to paragraph 1 of the said defence of the following words, ‘under an indenture of lease, dated the 3rd day of February, 1906, and made between James Joseph Desmond Carmody, a minor, acting by Archibald Murray, of the one part, and Mary Carmody and Agnes Dorothy Carmody, of the other part, whereby certain premises therein described, including the said stable sought to be recovered, were demised to the said Mary Carmody and Agnes Dorothy Carmody (the lessees therein named) their executors administrators and assigns together with the exclusive use and enjoyment for the said lessees their executors administrators and assigns of the covered entrance passage or bow-way (being the archway sought to be recovered) leading from Henry Street to the premises thereby demised for the term of 853 years from the 29th September, 1895, subject to the yearly rent thereby reserved and to the covenants and conditions therein contained. The lessees’ interest under the said lease is now vested in the defendants for the residue of the term thereby granted’; 2, by the deletion of paragraphs 2, 3, and 4 of the said defence.”
The further hearing of the action was then proceeded with, whereupon the Circuit Court Judge held that the said lease of the 3rd February, 1906, had suffered a forfeiture and an order was made that the plaintiff do recover possession of the said stable and archway.
The defendants appealed against the said ejectment order and, on the hearing of that appeal, Black J. stated the Case for the determination of this Court of the following questions, viz.:
(1) Has the said lease of the 3rd February, 1906, so far as it relates to the said stable and archway, been forfeited by reason of the pleas contained in the defence therein, dated the 13th April, 1946?
(2) If the said lease has been forfeited, is the plaintiff entitled to an order for possession of the said stable and archway in these proceedings?
No amendment was, in fact, made in the pleadings, as they appear on the files of the Circuit Court, in pursuance of the said orders of the 11th May, 1946, and the 20th June, 1946; but I propose to deal with the case upon the basis that the permitted amendments were, in fact, made, or else that the orders are to be construed as effecting the amendments which they authorised.
There was a suggestion, during the hearing before us that the effect of the amendment of the defence was to wipe out the original pleas in toto and to put the case in the same position as if these pleas had never been placed on the files of the Court. It is only right to say that this case was not made by Counsel for the defendants. In my view, there is no basis for this suggestion. Plaintiff, by his counsel, consented to the amendment “upon terms that the defendants would admit that the said amendments did not cure any forfeiture of the said lease of the 3rd day of February, 1906.”It appears on the face of the order that the defendants, by their counsel, accepted these terms and it was in these terms that the amendment was granted. Counsel for the defendants have scrupulously adhered to these terms and did not seek to rely upon this point. In my view, they could not successfully do so. The Case has been stated for the purpose of determining the effect on the relationship of the parties of the original pleas and, in my opinion, we are bound to deal with the case on this basis. This was, obviously, the intention of all the parties and of the Court when the order for amendment was made. Were it not for these express terms, it is highly probable that the order for amendment would not have been made.
Considerable argument was addressed to this Court as to the effect of a plea of possession. In my view, it is unnecessary in this case to deal with this matter. This was not a case of a simple plea of possession. There were also the pleas that the premises, sought to be recovered, were not the property of the plaintiff and that the plaintiff’s right and title (if any) to the said premises had been extinguished by the Statutes of Limitation.
I, therefore, proceed to deal with the case upon the pleadings as they stood prior to the amendment of the 20th June, 1946. On these pleadings the plaintiff sought to recover possession of the stable and archway by ejectment on the title. By way of defence to that claim, the defendants pleaded (a) that they were in possession of the premises; (b) that the premises were not the property of the plaintiff; and (c) that the plaintiff’s right and title (if any) to the said premises had been extinguished by the Statutes of Limitation. The net question, then, arises whether this defence effects a forfeiture of the lease.
In Bacon’s Abridgment, Vol. 4, at p. 219, it is stated:”Here it is to be observed, that any act of the lessee by which he disaffirms or impugns the title of his lessor, occasions a forfeiture of his lease. For to every lease the law tacitly annexeth a condition, that if the lessee do any thing that may affect the interest of his lessor, the lease shall be void, and the lessor may re-enter. Besides, every such act necessarily determines the relation of landlord and tenant; since . . . to affect to hold under a lease, and at the same time to destroy that interest out of which the lease ariseth, would be the most palpable inconsistency.”
“A lessee may thus incur a forfeiture of his estate by actin pais, or by matter of record. By matter of record where . . . in an action by his lessor grounded upon the lease he resists the demand under the grant of a higher interest in the land . . .”
Mr. Ryan, on behalf of the defendants, relied upon the foregoing passage, and contended that, as between lessor and lessee, a forfeiture could arise only when the proceedings were expressly founded upon the lease. It appears, however, from subsequent authorities that this contention is not well founded and that the principle has been applied, in cases such as this, where proceedings were brought upon the title.
The principle has been recognised in the Courts of this country for a considerable period. In the case of Hunter, Lessee of Doran v. Kehoe (1), decided in the year 1794, the plaintiff sued in ejectment. The defendant put the plaintiff upon strict proof of title and, when the plaintiff overcame this difficulty, the defendant attempted to make the case that he was tenant to the plaintiff’s lessor and that he had paid rent and received a receipt therefor subsequent to the institution of the ejectment proceedings. The receipt was not produced in evidence and a verdict was found for the plaintiff. An appeal by the defendant to the Court of King’s Bench was dismissed. Per Chamberlain J.: “The defendant disclaimed in the outset, the title of the plaintiff, and put him adversely upon the proof of a strict title; when he found these difficulties overcome, then he changes his course and says, ‘well and true it is, the plaintiff has a title, but I am his tenant, not a trespasser’therefore I think the justice of the case is with the verdict, and I approve of that rule, that a man, disclaiming the title of his landlord, shall not be permitted to shew himself a tenant afterwards.”
In Doe d. Calvert v. Frowd (2) defendant, who held under a tenant for life, received, on her death, a letter from the lessor of the plaintiff, claiming as heir, and demanding rent. Defendant replied that he held the premises as tenant to one, Smallpiece, that he had never considered plaintiff’s lessor as his landlord, that he would be ready to pay his rent to anyone who should be proved to be entitled to it; but that, without disputing the pedigree of the plaintiff’s lessor, he must decline taking upon himself to decide upon his claim without more satisfactory proof. Held, that this was a disclaimer of the title of plaintiff’s lessor. Per Best C.J.: ” . . . the defendant says, ‘I will not pay, I am tenant to Smallpiece’; and at the trial puts the lessor of the plaintiff to prove his title. If this be not disclaimer, what is ?”
In Vivian v. Moat (1), the plaintiffs, who claimed to be landlords of certain tenements, gave notice to the defendants, as their tenants, that the rent of the tenements would be raised. The defendants thereupon wrote a letter stating that they disputed the right of the plaintiffs to raise the rent, but that they were willing to pay the customary rent of 11s. a year, being all that they were liable to pay. Held, that this was a repudiation of the relation of landlord and tenant and that the plaintiffs, on proving their title, were entitled to eject without proving a valid notice to quit. In giving judgment, Fry J. quotes the language used by Parke B. in Doe d. Gray v. Stanion (2) “In order to make a verbal or written disclaimer sufficient, it must amount to adirect repudiation of the relation of landlord and tenant; or to a distinct claim to hold possession of the estate, upon a ground wholly inconsistent with the existence of that relation, which by necessary implication is a repudiation of it.” Fry J. then proceeds: “Applying that principle to the present case, I ask myself whether that letter does not come within it. It appears to me that it is a distinct repudiation of the relation of landlord and tenant as ordinarily understood, and an assertion of a right to hold the property upon payment of a customary rent, which is inconsistent with that relation.”
In Congested Districts Board v. Connor (3), Kenny J., on the hearing of a civil bill appeal, stated a Case for the decision of the King’s Bench Division. It appeared from the Case Stated that, under a marriage settlement, Lord Ventry was tenant for life of the lands in question. In the year, 1884, Lord Ventry obtained a decree for possession for non-payment of rent against the tenant, one Batt Connor. No action was taken on the decree and Connor remained on in possession, without payment of rent or acknowledgment of title. In the year 1913 the plaintiffs purchased the Ventry Estate under the provision of s. 79 of the Irish Land Act, 1903 and same was vested in them by a vesting order made by the Irish Land Commission. Lord Ventry died in the year 1914, and, on his death, the defendants, who had succeeded to the interest of the said Batt Connor, claimed to be owners in fee of the holding. The plaintiffs thereupon brought proceedings, by way of ejectment on the title, to recover possession of the holding. The County Court Judge having granted a decree for possession, the defendants appealed and the Case was stated by Kenny J. on the hearing of this appeal. The question for determination was whether, in the circumstances, the plaintiffs were entitled to maintain the ejectment. The King’s Bench DivisionMadden, Boyd and Dodd JJ.held that they were so entitled. In giving the judgment of the Court, Madden J. says, at p. 615:”It is said that Connor’s representatives were not served with a notice to quit or demand of possession. If a position is taken up which is inconsistent with the existence of a tenancy, no notice to quit is required. The defendant asserts rights wholly inconsistent with his being a tenant, for he claims the fee simple. This position was not taken up by him after action brought. Though the letter referred to in the case was written after action brought, it is only evidence of the position which was taken up by him throughout.”
The case of Kisch v. Hawes Bros., Ltd. (1) seems to me to be, in principle, wholly indistinguishable from the present case. In that case a tenant for life by deed granted a lease of certain premises to the defendants to take effect more than twelve months after its date. The grantor died and her successor sued for possession of the premises. The defendants pleaded possession, to which the plaintiff at once replied that this denied her title and was a ground of forfeiture of the lease. At the trial, before Farwell J., the trial Judge allowed the defence of possession to be amended by the addition of the words, “under the lease hereinafter referred to.” It is unnecessary to refer to that portion of the judgment in which Farwell J. deals with the effect of a plea of possession under Or. XXI, r. 21, of the English Rules of Court. No similar difficulty arises in this case, having regard to the pleas contained in paragraphs 3 and 4 of the original defence. Having dealt with the effect of the said plea, Farwell J. proceeds, at p. 107:
“On that the plaintiff submits that she is entitled to re-enter on the ground that the first paragraph of the defence amounts to a denial of the plaintiff’s title, and that a denial of the plaintiff’s title by a tenant is a ground upon which a lessor is entitled to forfeit the lease. When the case was opened before me, the defendants sought leave to amend their defence by adding to the end of the first paragraph the words ‘under the lease hereinafter referred to,’ and with some hesitation I permitted the defence to be amended accordingly; but in my judgment, notwithstanding the amendment, the defendants cannot escape from the result of their own plea. As soon as the defence was delivered on July 13, 1934, the plaintiff became entitled to forfeit the lease, and she made it plain on July 18, when the reply was delivered, that she was claiming the right to re-enter on that ground, and it is impossible in my judgment by amendment now to destroy the effect of what was done as soon as the defence was delivered. Accordingly, on that short ground, the plaintiff, in my judgment, is entitled to possesion of the property, and to payment of the rent of £160 a year under the then existing lease down to the forfeiture. As from that date the defendants have been in possession as trespassers . . . ”
The foregoing cases seem to me to be sufficient illustrations of the application of a principle which has been recognised and applied from very early times. The principle, as I understand it, is thiswhere a person brings proceedings for recovery of possession of premises against a person who is, in fact, his tenant, and the latter, by his defence, instead of relying on his tenancy, disputes the plaintiff’s title and puts him on proof thereof, there is a forfeiture, by record, of the tenancy, and the defendant becomes a trespasser. It was urged upon us in argument that this operates harshly upon tenants. It may be, but our function is to ascertain and administer the law as we find it. Laws may be changed by the legislative organ of the State. The Courts have no power to effect such a change, nor have they any right to refuse to give effect to the law merely because in a particular case it may work hardship on an individual.
In the present case nothing could be more inconsistent with the relation of landlord and tenant than the original defence, which, in my view, immediately occasioned a forfeiture of the lease, as far as the stable is concerned, and had the effect of making the defendants trespassers. On the 11th May, 1946, when the civil bill and defence were amended so as to include the archway, the same principle applied to the archway, So the matter stood until the hearing on the 20th June, 1946. It was then, in my opinion, too late for the defendants to rely upon their lease. They had already taken up an attitude inconsistent with the existence of the lease and a forfeiture was thereby effected.
For these reasons, I am of opinion that both questions submitted to us should be answered in the affirmative.
BLACK J. :
I stated this Case in the hope that my colleagues in this Court would solve its problem for me, and now, in view of the even division of their opinions, I am back where I started and, in effect, must decide it for myself.
The plaintiff’s case depends upon the doctrine of forfeiture created, as is alleged, by disclaimer by the defendants of their landlord’s title in their defence. This doctrine is a remnant of feudal principles. Other contracting parties than landlords and tenants can plead the most conflicting matters in defence alternatively with complete impunity; but, in contracts of tenancy, the once all-important landlord enjoys the benefit of a doctrine which, though in some cases fair enough, in others may work out in a way which I think subversive of all modern ideas of fairness between man and man. Now that law reform is in the airat least, in the airperhaps this archaic doctrine, at any rate in its unqualified form, may be swept away along with other cobwebs from the structure of modern law; but, for. the present, it holds the field, and every Court must give effect to it wherever the facts make it applicable.
Some of the cases most relied on to support the plaintiff’s contention appear to me dangerously calculated to mislead in the present case. Such cases are Doe d. Calvert v. Frowd (1); Doe d. Gray v. Stanion (2) and Vivian v. Moat (3). I say this because these were cases of a tenancy from year to year where the tenant had made statements claiming that he was himself entitled to property in respect of which he was only the plaintiff’s tenant. This disclaimer by matterin pais was held to entitle the landlord to eject without serving notice to quit. As was pointed out in the judgments in Doe d. Graves v. Wells (4), though such a disclaimer creates what is sometimes called a forfeiture, “it would be more correct,” as Patteson J, said, “to say that a disclaimer furnishes evidence in answer to the disclaiming party’s assertion that he has had no notice to quit, inasmuch as it would be idle to prove such a notice where the tenant has asserted that there is no longer any tenancy.” Further, Doe d. Graves v. Wells (4), like Rees d. Powell v. King and Morris (5) and Doe d. Dillon v. Parker (6), shows that in the case of a tenant for a term of years, such as the present defendants, a disclaimer of the landlord’s title must be a matter of record in order to create a forfeiture. The alleged disclaimer in the present case is, however, matter of record; for it is contained in the defence as originally entered.
The first disclaimer relied upon is said to be involved in the plea of possession. In the High Court this plea would amount to a traverse of the plaintiff’s whole claim in an action to recover possession of land. It would thus be a disclaimer by record of the plaintiff’s title, but it is said that this is not so now in the Circuit Court, since Or. VII, r. 4 of the Circuit Court Rules requires the defendant to state clearly in his defence the precise grounds upon which he disputes the plaintiff’s claim, and provides that no defence shall be admitted to defeat that claim or any part of it unless, in the opinion of the Court, it could fairly have been inferred from the particulars given in the notice of defence. It is said that the plea of possession does not fulfil this requirement. On the other hand, Or. XXXII which deals specifically with ejectments, by r. 9, provides that “every defendant in a civil ejectment process shall be entitled to set up every defence which he might have had in law or in equity.” Mr. Justice Murnaghan has felt unable to reconcile Or. VII, r. 4 and Or. XXXII, r. 9, except by treating the latter as overriding the generality of the former in relation to defence in ejectment. I should agree with this explanation, if necessary, but I might, perhaps, express it in an alternative way. We see that Or. XXXII, r. 9, entitles a defendant in an ejectment to set up every defence which he might have had in law. Now, one of the defences which he might have had in law was a bare plea of possession. When r. 9 entitles him still to set up that defence, it is reasonable to infer that the rule contemplates that such a plea still is a defence, and that it is still to involve the same implications which it previously had in law and which make it a defence. Otherwise, there would be no point in providing that a defendant may set it up, which the rule clearly does, since it entitles the defendant to set up every defence which he might have had in law, and, therefore, entitles him to set up a plea of possession, that being a defence which he might have had in law.
No doubt or. VII, r. 4, requires the defendant to state his precise grounds of defence; but, if the effect of Or. XXXII, r. 9, is to make a bare plea of possession equivalent, as it formerly was, and in the High Court still is, to a denial of every allegation in the plaintiff’s claim, then such a plea would in effect be in itself a statement of the precise grounds on which the defendant disputes the plaintiff’s claim, so far as those grounds consist of denying the plaintiff’s allegations, for the plea of possession would be equivalent to express traverses of all those allegations.
The Rules of the Supreme Court, 1905, furnished a partial analogy on this subject. Thus, Or. XIX, r. 4, requires that”every pleading shall contain . . . a statement in a summary form of the material facts on which the party pleading relies for his claim or defence, as the case may be,” and r. 14 provides that “every allegation of fact in any pleading, not being a petition or summons, if not denied specifically or by necessary implication, or stated to be not admitted in the pleading of the opposite party, shall be taken to be admitted . . .” Yet, although these rules require the defendant to state in his defence all the material facts on which he relies and to deny specifically, or by necessary implication, every allegation of fact in the claim which he does not admit, nevertheless, Or. XXI, r. 23, permits him in ejectments on the title to confine his defence to a plea of possession simpliciter, and deems this to deny all the plaintiff’s allegations of fact. There seems little more difficulty in reading Or. VII, r. 4, of the Circuit Court Rules consistently with, and, in ejectments on the title, subject to, Or. XXXII, r. 9, than in reading Or. XIX, rr. 4 and 14, of the Rules of the Supreme Court consistently with, and in the like cases subject to, Or. XXI, r. 23. However, it is unnecessary to decide this point now, because the original defence contained other pleas, besides possession, which appear to me manifestly to disclaim the plaintiff’s title to the premises in question. It alleged that these premises are not the property of the plaintiff and that his title thereto (if any) has been extinguished by the Statutes of Limitation.
Mr. Ryan, for the defendants, contended that the disclaimer involved in those pleas created no forfeiture because, as he maintained, a disclaimer of the title of one’s lessor only creates a forfeiture in ejectments arising out of the relations of landlord and tenant, and grounded on a lease or contract of tenancy, while the present ejectment upon the title is not of that character. I gathered that this contention, strenuously argued, was the gist of Mr. Ryan’s case. I am afraid, however, I must agree that it is not supported by the authorities and must fail. That being so, if this case is to be decided in the defendants’ favour, it can only be so decided on some ground other than any ground seriously relied on by the defendants’ counsel; for I cannot think they could suggest that the pleas in the original defence do not disclaim the plaintiff’s title.
Another ground for the view that there has been no forfeiture has been taken by two members of the Court, namely, that if there was any disclaimer of title in the original defence, it disappeared when that defence was amended by taking out of it every plea that could possibly be a disclaimer of any title. This view was not put forward by defendants’ counsel for an obvious and honourable reason, namely, that they had obtained the plaintiff’s consent to the amendment of the defence by agreeing to admit that the amendment would not cure any forfeiture of the lease already incurred by reason of the defence as it stood before the amendment. Naturally, counsel felt that in view of this, they could not contend now that even if the original defence created a forfeiture the amended defence did not. Hence, they loyally abstained from putting forward any such contention. The question then arises whether, in spite of the fact that counsel for the defendants felt that they could not put forward that contention, this Court must treat it as if it had been put forward, and must hold, whether it likes it or not, that, as a matter of law, once the defence was amended so as to leave no disclaimer of title in the record before the Court, no undertaking by counsel, however it might bind their action, could alter the legal effect of the record as it now stands. Although, as will be seen later, this question is immaterial, so far as my individual judgment is concerned, I have thought it my duty to examine it, because Mr. Justice Murnaghan has done so, and has, I think, made his conclusion upon it a major ground of his judgment.
Now, the only disclaimer relied on was that contained in the original defence and, when the Circuit Court Judge came to decide the case, the amended defence, and therefore the only defence then before him, contained no disclaimer. Does that mean that, even if there would have been a forfeiture by reason of the disclaimer in the original defence, the original defence is to be treated after amendment as if it had never existed? I have felt that I could not accept or reject that view without trying to find some test. I have sought to test it, whether rightly or not I cannot say, by asking myself in what circumstances and at what point of time does a forfeiture by disclaimer as matter of record become irrevocable? I do not think it becomes irrevocable the moment the disclaimer appears on the recordbecause the plaintiff who is entitled to rely on it can always waive it. I need not cite authority for that. On the other hand I do not know of any other way of getting rid of the forfeiture by disclaimer as matter of record except by its waiver by the plaintiff who is entitled to rely on it. I have come to the conclusion that the point of time at which a forfeiture created by such disclaimer becomes irrevocable is the moment when the plaintiff elects to take advantage of it. Moreover, if one may argue by analogy, my impression would be that it then becomes irrevocable by either party, and that even a plaintiff landlord who has once elected to take advantage of the forfeiture cannot make a second election not to do so. If, for instance, he once elected to take advantage of the forfeiture, and for some reason the case was not decided by the Court until after some gale day of the former tenancy following the date of his election, my impression would be that he could not recover anything, as rent, in respect of any period subsequent to such election, but could only sue for mesne rates in respect of such period. The analogy on which I base that impression is furnished by the following three cases: Grimwood v. Moss (1); Jones v. Carter (2); and Serjeant v. Nash, Field & Co. (3). Those were cases where a forfeiture had clearly been incurred by breach of covenant, and, after the landlord had started ejectment proceedings he sought to recover, or in one case distrained for, rent accruing due after starting the ejectment proceedings. It was held that by starting those proceedings for the forfeiture he had irrevocably exercised his option to rely upon the forfeiture. In the present case it is my opinion that before, and at the time when, the amendment of the defence was sought, the plaintiff’s counsel had made it clear that the plaintiff had decided to rely upon the alleged forfeiture. Hence, in my view, before the amendment was granted, the plaintiff had irrevocably elected to rely upon the forfeiture, and, if that election and the forfeiture to which it related were unalterable by the plaintiff himself, I think a fortiorithey were unalterable by any act of the defendants, or even by the Court. In other words, if the original defence in this case would, had it not been amended, have created a forfeiture, I should have to agree with those members of the Court who hold that no subsequent amendment of the defence, whatever might he the terms on which counsel agreed to it, could affect the forfeiture which, on the assumption made, would have been already an accomplished fact and an unalterable legal effect of the entering of the original defence combined with the plaintiff’s election to treat it as a forfeiture.
For me, then, the decisive question in the case is this:”Would the defence, if it had never been amended, have created a forfeiture?”; for, if the answer is in the affirmative I should feel bound to hold that the forfeiture has taken place, notwithstanding, the amendment of the defence and the terms on which it was granted. This raises the distinction between a tenant’s disclaimer of the title of the landlord who put him into possession at the time of the demise and a challenge of the derivative title of such landlord’s successor. In Woodfall’s Landlord and Tenant, 24th ed.; at p. 16, it is said:”The rule that a tenant may not dispute his landlord’s title applies only to the title of the landlord who let him in.” So, in Everest on Estoppel, 2nd ed., at p. 275, it is put this way:”A tenant is not estopped from disputing the title of a person from whom he did not actually receive possession of the premises.”
It does not seem right on principle that a tenant should forfeit his tenancy for disputing something which he is not estopped from disputing, bearing in mind that the doctrine of forfeiture by disclaimer has more than once been said to depend upon a principle of estoppel. The subject is somewhat obscure. As the learned editor of Woodfall’s Landlord and Tenant, 24th ed., says, at p. 989:&LDASH;”It is difficult, if not impossible, to reconcile all the cases on this point.”Mr. Justice Wightman in Cuthbertson v. Irving (1) used the same identical words on the same subject in regard to the cases in his day nearly a century ago. The position seems to have gained nothing in clarity since that time.
However, my opinion is that while a disclaimer in the original defence which would create a forfeiture could not be cured, once the plaintiff elected to take advantage of it, by any subsequent amendment, this is immaterial, because there was no ground of forfeiture created by the original defence. In that defence there was no disclaimer of the title of the defendants’ original lessor, but only a repudiation of the alleged derivative title of the original lessor’s successor in title. It seems quite clear that the defendants are not estopped from disputing that derivative title, though they would be estopped from denying the title of their own original lessor. As I think the doctrine of forfeiture by disclaimer is based on a principle of estoppel, and as there would be no estoppel of the defendants from disputing the plaintiff’s purely derivative title, I do not think the defendants can be held to have forfeited their tenancy because they disputed in their defence a derivative title which they were not estopped from disputing. This view is my sole ground for thinking that the first question I submitted for the opinion of this Court should be answered in tho negative, and it is based on the distinguishing factor that the title disputed in the defence was not the title of the defendants’ original lessor, but only an alleged derivative title of his successor. This distinguishing factor is noted by Mr. Justice
Murnaghan in his judgment; but as he devoted a major part of it, I think, to the other contention with which I am not in agreement, namely, that there could be no forfeiture by record because no disclaimer of title exists in the defence as amended, I have sought to satisfy myself that the view on which alone I base my judgment is also part of the ratio decidendi of the majority of the Court, and I understand that it is. It cannot be helped if it is irreconcilable with Kisch v. Hawes Bros., Ltd. (1) in so far as in that case a lessee’s disclaimer by record of the plaintiff’s title, though it was only derivative, was treated as creating a forfeiture.
McIlvenny v McKeever
Court of Appeal.
10 March 1931
[1931] 65 I.L.T.R 147
Andrews, Best L.JJ., Brown J.
March 10, 1931
Andrews, L.J.
This is an action for possession of certain premises grounded on alleged forfeiture by breach of covenant. The plaintiff also claims damages. The defendant’s answer to the claim is threefold:—(1) That the plaintiff waived the forfeiture by acceptance of rent; (2) That the notice served under section 14 of the Conveyancing Act, 1881, was bad; and (3) That prior to the assignment by the plaintiff to the defendant’s predecessor in title of the leasehold interest in the premises such interest had merged in the reversion, that the defendant held as a mere tenant from year to year from the plaintiff, and was not bound by the covenants in the lease. This lease dated October 8, 1913, demised the premises together with the goodwill of the business of a grocer and spirit grocer and beer retailer and the licences attached to the premises for the term of 9997 at a yearly rent of £35; and the lessee covenanted to use the premises as a spirit grocery and beer retailer’s establishment only; not to do or suffer any act whereby the licenses for using the premises as a spirit grocer’s and beer retailer’s establishment might be liable to forfeiture or to have a conviction recorded thereon or the renewal thereof withheld; and as all times during the term to apply for or endeavour to procure a renewal of the necessary licenses for using and keeping the premises open as a spirit grocer’s and beer retailer’s establishment.
After the passing of the Intoxicating Liquor Act (N I.) 1923, which made it unlawful for any licensed person to carry on any other trade on the premises, the defendant clected to carry on the trade of a grocer. He thereupon applied for compensation under the Act for loss of his licence which was assessed at £1,621.
Dealing first with the defence of waiver, it is well recognised that Courts of law have always leant against forfeitures (per Lord Mansfield in Goodright d Walter v. Davids, 2 Cowp. 803 at p. 805). They have accordingly, readily held that an alleged forfeiture has been waived if the lessor, with full knowledge of the breach of covenant or condition relied upon, has by some positive unequivocal act recognised the continued existence of the tenancy at a period subsequent to such breach. Acceptance of rent accruing due after the forfeiture, an action for same and even an unqualified demand for such rent have been held to constitute such waiver notwithstanding the lessor’s protest that he was acting without prejudice to his right to insist on a prior forfeiture; Davenport v. Queen, 3 A. C 115.
To this general proposition regarding waiver of forfeiture there are, however, at least two exceptions or qualifications. The first is that when once a landlord has definitely exercised his option of relying upon the forfeiture, and has shown a final and unequivocal determination to take advantage of it by instituting proceedings in ejectment no subsequent act, whether receipt of rent or otherwise, will be held to operate a waiver. Evans v. Enever, [1920], 2 K. B. 315; and Civil Service Co-Operative Society, Ltd. v. Trustee McGrigor, [1923], 2 Ch. 347, may be referred to as two recent authorities in which this principle was fully recognised and applied.
The second is that where the breach is, as in the present case, of a continuing character, waiver of the forfeiture up to a particular day cannot be relied upon as a *149 defence to an action for ejectment in respect of a subsequent breach. The reason for this is simply that, as there is a continually recurring cause of forfeiture, a new right arises each day that the breach continues, and the landlord’s waiver of a prior right cannot prejudice him or preclude him from taking advantage of a new and subsequent right. It has further been held—and this is material on the facts of the present case—that the mere acceptance of rent which becomes due pending a notice to repair is no waiver of a subsequent forfeiture occasioned by noncompliance with such notice, Doc d. Rankin v. Brindley, 4 B. & Ad. 84. Doc d. Baker v. Jones, 5 Ex. 498, 505; and Penton v. Barnett, [1898], 1 Q. B. 276, decided that in the case of a continuing breach a second notice need not be given in respect of nonrepair existing after the expiration of the time specified in the notice, for the breaches during the latter period are the same as those in respect of which the notice was given.
In my opinion these considerations are sufficient to determine the issue of waiver in the present case in favour of the plaintiff. Each day that the defendant continues to use the premises in any other manner than as provided in the lease a new breach arises, and, accordingly, a new right of forfeiture. Thus, even if it be admitted that acceptance of the rent due on May 1, 1930, amounted in law to a waiver of the plaintiff’s rights up to that date, a new right had arisen and existed when the writ was issued in this action on May 6 This right was not prejudiced by the plaintiff’s subsequent acceptance of rent on August 1, and November 1, as he had made his definite election to enforce the forfeiture on May 6.
It would not be right, however, that I should pass from this question of waiver without referring to the fact that independently of the above considerations, the plaintiff’s counsel relied strongly on the provisions of section 43 of Deasy’s Act (23 & 24 Vict. C. 154) as a complete answer to the allegation of waiver. This, he contended, is a statutory enactment applicable to all leases (such as the lease in the present case) made after Jan. 1. 1861, which provides that there can be no waiver unless it be in writing To this the defendant’s counsel made a twofold reply. In the first place he relied upon the observation of Palles, C.B, made during the course of the argument in Foott v. Benn, 18 Ir. L. T. R. 91, in which, as reported, he undoubtedly suggests that section 43 applies merely to a waiver of the covenant generally, and that a receipt of rent after the breach, with knowledge of it, would still waive all rights of the landlord arising from that particular breach although it would not amount to a dispensation of the covenant. It is strange that this limited operation of the section does not seem to have been considered in any subsequent reported case; but a passage in the judgment of Cherry, L.J., in Midleton v. Wallis, [1914], 1 I. R. 35 (at p. 42) though not specifically referring to it appears to be at variance with it. See also the judgment of Whiteside, L.C.J., in Earl of Donoughmore v. Forrest, I. R. 5 C. L. 443 (at p. 474-5), and Taylor on Evidence. It is unnecessary, however, to determine in the present case whether the restricted operation of the section suggested by the Lord Chief Baron is well founded, as that view admits the necessity for writing in the case of a general waiver or dispensation of a covenant and nothing short of such general waiver would avail the defendant in the present case, because of the continuing nature of the covenant and of its breach already referred to.
The defendant’s second answer to section 43 is Rex v. Paulson, [1921] 1 A. C. 271. It was there held by the Privy Council that the principle that a lessor who accepts rent, knowing that there has been a breach of a covenant in the lease, thereby irrevocably elects to treat the lease as subsisting and is precluded from claiming a forfeiture, applies even though the lease provides that no waiver by the lessor shall take effect unless it is in writing.
As it is unnecessary for me to do so I refram from expressing any opinion as to whether the principle underlying that decision could be extended from the provisions of a lease so as to permit the waiver of the requirements of a public statute.
The validitv of the notice required by section 14 of the Conveyancing Act, 1881, specifying the breach of covenant complained of is challenged on several grounds. In the first place, it is said to be bad because, in addition to the breach regarding the licence, it specified breaches of covenant to repair and to keep the premises insured which were not made the subject of complaint in the present proceedings.
A passage from the Court of Appeal judgment of Lord Russell, C J, in Horsey Estate Ltd v. Steiger, [1899] 2 Q. B. 79 (at p. 92) is relied upon in support of the argument; but this passage is explained by Buckley, J, in Pannell v. City of London Brewery Co., [1900] 1 Ch. 496 (at p. 502-3). *150 If there is any conflict between the two cases I unhesitatingly accept the reasoning of the latter case in which it was held in the clearest terms that a notice under section 14 referring to several breaches is not invalidated in toto because some of them never took place and have to be abandoned. I am fully justified in preferring the judgment of Buckley, J., to the decision of the Court of Appeal, by the fact that Lord Buckmaster, L.C., in Fox v. Jolly, [1916], 1 A. C. 1 (at p. 15), after referring to Pannell’s case, said that he regarded this view as the correct interpretation of the section.
It is further submitted on the authority of Fletcher v. Nokes, [1897], 1 Ch. 271, that the notice is defective because particulars of all the breaches complained of are not specified. This case is also interpreted and must be read in the light of the judgment of Lord Buckmaster, L.C., in Fox v. Jolly, [1916], 1 A. C. 1 (at p. 13); and when so viewed there can be no doubt in my opinion as to the sufficient particularity of the notice.
Lastly, it was contended that the notice was defective as three weeks was an insufficient time in which to require the breaches to be remedied and compensation made. I dealt with this question in Walsh v. Wightman, [1927], N. I. 1 (at p. 11) and need not repeat what I there stated as to the necessity for giving a reasonable time; but in my opinion there is nothing unreasonable in the present case when it is borne in mind that the breaches of covenant in regard to the licence were incapable of being remedied as the licence was gone and could not be renewed; and a period of three weeks was quite a fair and reasonable time in which to negotiate for payment of compensation. All the points raised against the validity of the notice accordingly fail.
On the question of merger I have no difficulty. The Lord Chief Justice told the jury that merger was a question of intention and that the lessee’s interest was treated as alive The jury were, accordingly, asked if it was intended that the two estates should be merged, to which they answered “No.” Was there anything either in the learned judge’s charge or in the finding of the jury which cannot be supported?
At law when two estates—a greater and a less—become vested in the same person and in the same right without any intermediate estate between them, the lesser estate merged, as a necessary consequence, in the greater wholly irrespective of any question of intention. But equity has long since relaxed the rigour of the law and has looked to the intention, either actual or presumed of the person in whom the interests have been united. The Judicature Act (Ir.) 1877, section 28 (4) removed the legal and equitable conflict by providing that there should not, after the commencement of that Act, be any merger by operation of law only of any estate the beneficial interest in which would not be deemed to be merged or extinguished in equity. This enactment is identical in terms with the English Judicature Act, 1873, section 25 (4) which has been considered in several cases, but in my opinion it is unnecessary to refer to more than two. The Capital and Counties Bank, Ltd. v. Rhodes, [1903] 1 Ch. 631, laid it down in the clearest terms that the equitable rule that merger depends upon intention applies to the merger of estates as well as to the merger of charges. In his judgment Cozens-Hardy. L.J., (at p. 652), after pointing out that Courts of equity had regard to the intention of the parties, states that in the absence of any direct evidence of intention such Courts presumed that merger was not intended if it was to the interest of the party or only consistent with the duty of the party that merger should not take place. The same learned Judge, then Master of the Rolls, in In re Fletcher: Reading v. Fletcher, [1917], 1 Ch. 339 (at p. 341-2), cited the above passage and continued “But it was not the law of the Courts of Equity that merger took place only if an intention could be established that it should take place. The common law doctrines prevailed if nothing more was known. Intention might be established by means of an expressed intention at the time. The declaration of intention might be verbal. If not substantially at the time, what would be the effect of a declaration made some time afterwards, say twelve months afterwards? Such a declaration could not be rejected as inadmissible, though its weight might be slight. On the facts the Master of the Rolls held that a recital in a mortgage of October, 1915, as to the then existence of separate interests and the general form of the deed was admissible as evidence not only that the mortgagors then believed there was no merger but that such was their intention in the previous December. when, being already owners of the reversion in fee, they took an assignment of the leasehold interest.
When we look at the deeds in the present case it seems to me that the same conclusion as to intention against merger is irresistible The assignment of June 13, 1918, under which the plaintiff acquired the lessor’s interest, contains no reference to the lease of *151 October 8, 1913, and there is accordingly no declaration of intention that the leasehold interest should merge in the reversion. More important still is the fact that eight months later, on February 11, 1919, the plaintiff in consideration of the sum of £400 assigned the premises to one, Edward McConville, for the residue then unexpired of the 1st term of 9997 years created by the lease of October 8, 1913, which was recited as a validly subsisting lease. Subsequently on April 10, 1920, McConville, by an assignment of a similar form, sold the same leasehold interest to the defendant for the sum of £1,250. I cannot understand how in face of these documents and in the absence of any evidence to the contrary it can be seriously contended by the defendant that he does not hold under the lease of October 8, 1913. His submission that he holds the premises under some sort of yearly tenancy free from all covenants in regard to the licence is not founded on any legal principle and is in my opinion utterly untenable.
(On the question of defendant’s application by way of counterclaim for relief against forfeiture, his lordship said that whilst he saw difficulty in granting relief upon the principles laid down in Rose v. Spicer, [1911], 2 K. B. 234, and Hyman v. Rose, [1912], A. C. 623, his colleagues were so clearly of opinion that relief should be given that he would not dissent. His lordship concluded that the defendant must pay the costs of the trial and appeal, and the damages awarded.)
Best, L.J.
The grounds of appeal are that on the admitted facts as to waiver, judgment should have been entered for the defendant, that the learned Lord Chief Justice misdirected the jury on the question of merger that the finding of the jury in answer to that question was without evidence and against the weight of evidence, and further that the Lord Chief Justice misdirected himself in point of law in holding that the notice served by the plaintiff under the Conveyancing and Law of Property Act, 1881, section 14, was a good notice; and defendant also asks that judgment should be entered for him on the counterclaim, in which he sought relief from forfeiture if it should be held that he had committed any breach of the covenant.
(His Lordship here referred to the facts and the pleadings).
I think it convenient to deal with the questions in the following order, viz, merger, notice and waiver.
On the subject of merger the following question was put to the jury:—
Francis McIlvenny got the lessee’s interest on November 2, 1915. He got the lessor’s interest (his mother’s) on June 13, 1918. Was it intended that the two estates should be merged? Answer: No.
It may be stated here that the only other question submitted was: Damages, if any? and the answer was £237 10s. 0d.
On the 2nd day of November, 1915, the lessee’s interest in the lease of the 8th day of October, 1913, was assigned to plaintiff, and on the 13th day of June, 1918, Frances Sarah McIlvenny conveyed to plaintiff (inter alia) the premises, the subject matter of this action, to hold the same unto and to the use of the said plaintiff, his heir and assigns for ever.
Defendant contends that the effect of these two transactions was to merge the former interest in the latter and that the merger was of full force and effect on the 11th day of February, 1919.
By Indenture of that date made between plaintiff of the one part and Edward McConville of the other part, after reciting the lease of the 8th day of October, 1913, made between Frances Sarah MeIlvenny and Hugh Maguire, and reciting the assignment of the 2nd day of November, 1915, already mentioned whereby the premises comprised in the lease were assigned to the plaintiff, the plaintiff as beneficial owner assigned unto the said Edward McConville the hereditaments and premises comprised in and demised by the said Indenture of lease of the 8th day of October, 1913, to hold unto the said Edward McConville, his executors, etc., for the residue unexpired of the said term of nine thousand nine hundred and ninety-seven years from the first day of August, one thousand nine hundred and thirteen, subject to the payment of the yearly rent of thirtyfive pounds reserved by and to the performance and observance of the covenants on the part of the lessee and conditions contained in said Indenture of lease and henceforth to be paid, performed and observed, and there are the usual covenants by the said Edward McConville to pay the rent and observe the other covenants and to indemnify and save harmless the plaintiff from the breach or non-performance of any such covenants.
It appears to me that plaintiff in the most explicit manner possible in this Indenture of February 11, 1919, recognised the existence of the lease of October 8, 1913, and treated it as a subsisting lease and regarded the *152 estate created by it as separate from and wholly independent of the estate that had been vested in him by the Indenture of the 13th day of June, 1918.
Lord Cozens-Hardy, M.R., in the case of In re Fletcher, Reading v. Fletcher, [1917], 1 Ch. 339, at p. 341 of the Report says: “A Court of Equity had regard to the intention of the parties and to the duties of the parties. In the absence of direct evidence of intention, the Court presumed that merger was not intended if it was to the interest of the party, or only consistent with his duty, that merger should not take place. But it was not the law of the Courts of Equity that merger took place only if an intention could be established that it should take place. The common law doctrines prevailed if nothing more was known.”
The Judicature Act, section 28, sub-section 4, provides that there is no merger in law if not in equity, and merger in equity is based on intention, and it is only in cases where the intention cannot be discovered that the question is determined by duty or interest.
In my opinion the actions of the plaintiff in his dealings with the lease of the 8th day of October, 1913, afford ample proof of his intention that merger should not take place. The answer of the jury to question No. 1 is, accordingly, I think, fully justified.
The next point taken for the defendant is on the notice of the 3rd day of April, 1930, which specified the breaches then complained of, and Mr. Murphy contends that it is bad because, whilst three different sets of breaches are specified, only one is subsequently sued for, and this proposition appears to be that a notice specifying various breaches is bad unless in the proceedings which may be taken and which are based upon the notice, reliance is placed on each and every breach which has been inserted in the notice. As authority for this proposition he relies on the case of Horsey Estate Ltd. v. Steiger, [1899] 2 Q. B. 79. In the notice served in this case two breaches—one of non-repair and the other that the Company had gone into liquidation—were specified and the learned Lord Chief Justice (Russell) says he thinks on the whole that the notice was not good but he goes on to say that only two days’ notice was given before action brought and that this could not be said to be a reasonable notice in the circumstances. I think the real ground of the decision as to the sufficiency of the notice was not the fact that two breaches were complained of and only one—the liquidation—was made the subject of proceedings, but that insufficient time was given to allow of amends being made by the defendant.
This appears to be the view of the case taken by Buckley, J., in Pannell v. City of London Brewery Co., [1900], 1 Ch. 496, which decides that a notice under section 14 referring to several distinct alleged breaches of covenant is not invalidated in toto because it turns out that, although some of the alleged breaches have occurred, the others have never taken place.
If want of repair had been insisted on and sued for in the present action, a question might in that event have been properly raised on the sufficiency of the notice as it did not specify any particulars of non-repair. On the whole I am satisfied that in the circumstances of this case the notice was good.
The breaches of the lessee’s covenants complained of are:—(1) failure to use the demised premises as a spirit grocer’s and beer retailer’s establishment only and the use of them for other purposes; and (2) the not applying for or obtaining a renewal of the necessary licences for using and keeping the premises open as such spirit grocer’s and beer retailer’s establishment, with the consequent forfeiture of such licences.
Failure to use the premises as “a spirit grocer’s and beer retailer’s establishment only” began when in January, 1924, the necessary licences were not renewed, and that failure has continued up to the present moment. There is accordingly a continuing breach of the covenant to use the premises as such establishment notwithstanding the fact that it is no longer in the power of the defendant so to use them. Without deciding, therefore, what the effect of the receipt of rent by the landlord up to 30th April, 1930, has had upon his rights, I am of opinion that he can take advantage of the breach of this covenant on each of the days between that date and the 6th day of May, 1930, when the writ was issued.
The bringing of the action for ejectment is an unequivocal act by which the lessor has expressed his election to treat the lease as determined, and the subsequent receipt by him of the gales of rent due on July 31 and October 31, 1930, cannot operate as a waiver so as to revive the lease: Jones v. Carter, 15 M. & W. 718. Those gales of rent are expressed to be received “without prejudice” and in my view their acceptance does not get rid of the election which plaintiff made by bringing action. Having arrived at this *153 conclusion, it becomes unnecessary for me to express any opinion on the construction of section 43 of Deasy’s Act (23 & 24 Vic c. 154) or as to the soundness of the dictum of Palles, L.C.B., in Foott v. Benn, 18 Ir. L. T. R. 91, and I refrain from doing so.
Having regard to all the circumstances and particularly to the fact that the lessor lay by for upwards of six years after the breach of the covenant to renew the licences had occurred, which breach made it impossible for defendant to perform the covenant as to the use of the premises, and in conformity with the principle that the Courts lean strongly against forfeiture, this is a case in which in my judgment the Court should exercise its discretion in favour of the defendant, and grant him relief from the forfeiture.
The defendant will, of course, have to pay the costs of the trial and the damages awarded as well as the costs of the appeal.
Brown, J. (His Lordship referred to the facts and the pleadings, etc.).
The case has been argued by counsel on both sides under these heads: Waiver, Notice, Merger, and Relief, and I propose to deal with these points in the same order.
It is admitted that after full knowledge of the breach, the landlord continued to receive the rent and it is submitted by the defendant that there is, therefore, a waiver of the breach. In England I think this submission would be sound; but in Ireland a change was made in the law by the forty-third section of Deasy’s Act. This section is twofold in its application, (1) to a dispensation with a covenant, and (2) to a waiver in respect of any breach of a covenant, and provides that such dispensation or such waiver must be signified by the landlord or his authorised agent in writing. In Foott v. Benn, 18 Ir. L. T. R. 91, Palles, L.C.B., is reported to have expressed the view that receipt of rent by a landlord with full knowledge of the breach would still be a waiver of that particular breach.
In 1924 the defendant elected to lose his spirit licence rather than carry on an offlicence trade only.
He failed to obtain an off-licence and so committed a breach of his covenant which was a breach for all time. It was not a mere temporary breach that could be remedied at any later time. The licence was irrevocably gone. To consent to such a position the landlord would have to have dispensed with the covenant altogether. The mere waiver of a single isolated breach seems to me to be in quite a different category from the waiver of a breach which wipes the covenant out altogether. The waiver of such a breach as the latter is really a general waiver. This seems to me to be the present case and in my opinion it is covered by the section. The expression of opinion by the Lord Chief Baron has not therefore any application to the present case.
Mr. Murphy relies on The King v. Paulson, [1921], 1 A. C. 271, where there was a provision in the lease that waiver of a breach shall not be operative unless expressed in writing. That case seems to have been decided in special circumstances.
“The landlord cannot by receiving twelve months’ rent detrmine that the lease was a subsisting lease while that rent was accruing and in the middle of that period determine that it no longer subsists.”
Section 43 is a statutory provision in aid of the landlord enabling him to receive his rent as it accrues due even while he is awaiting the result of his proceedings for forfeiture. I am of opinion that section 43 governs this case and that there has been no waiver.
The defendant also submits that the notice required by sub-section 1 of section 14 of the Conveyancing Act, 1881, was defective. The section requires that the notice shall specify the particular breach. The notice in this case specified several breaches, two of which were non-existent or of which no evidence was given at the trial. The breach really relied on was the failure to maintain the licence. The three weeks given by the notice was sufficient time to deal with the questions of repairs and insurance. The other breach, the real crux of the case, was incapable of remedy, but three weeks was sufficient time for the lessee to make offer of compensation. In Pannell v. City of London Brewery Co., [1900], 1 Ch. 496, the question of a notice containing more than one breach was fully considered and I have no hesitation in following the decision in that case. I am, therefore, satisfied that the notice in this case was a good notice within the section.
Merger depends on intention—a question of fact, and the jury have answered this question of fact in favour of the plaintiff. Was there evidence on which they could so find? I think there was. The plaintiff got the lessor’s interest on June 13, 1918. Eight months later he assigned the lessee’s interest to defendant’s predecessor which, in my *154 opinion, following In re Fletcher, [1917], 1 Ch. 339, was sufficient evidence to justify the jury’s finding.
Finally, the defendant says that in view of all the circumstances he is entitled to be relieved from the forfeiture. Sub-section 2 of section 14 of the Conveyancing Act of 1881, says that the Court may grant or refuse relief as the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of the section and to all the other circumstances, thinks fit. This section travels far beyond the old equitable principles upon which alone prior to the statute relief was granted. The widest discretion is now given to the Court. The guiding authority in this question of relief seems to me to be the case of Rose v. Spicer, [1911], 2 K. B. 234, and the same case in the House of Lords, Hyman v. Rose, [1912], A. C. 623. In Rose v. Spicer, certain principles are laid down by Cozens-Hardy, M.R. and Fletcher Moulton, L.J., which should guide the Court in the exercise of its discretion. Some of these principles have been pressed upon us on behalf of the plaintiff as reasons for not granting the relief sought. In Hyman v. Rose, Loreburn, L.C., while recognising the utility of such principles, says, “It ought to be distinctly understood that there may be cases in which any or all of them may be disregarded. If it were otherwise the free discretion given by the statute would be fettered by limitations which have nowhere been enacted.” The Court in every case has “a free hand.” The “discretion given by the section is very wide. The Court is to consider all the circumstances and the conduct of the parties.”
Let us see what happened in this case On February 11, 1919, the plaintiff assigned to the defendant’s predecessor the residue of a terin of nine thousand nine hundred and ninety-seven years from the year 1913 in certain premises at 447 Falls Road, Belfast, used as a spirit grocery, and subject to a rent of thirty-five pounds per annum, for the sum of four hundred pounds. Plaintiff had at that time acquired the interests of both lessor and lessee in these premises. Plaintiff had now parted with these premises and his only interest in them was to see that his reserved rent was duly paid. His security for this rent was the fabric of the premises plus the licence and goodwill of a spirit grocery. On April 10, 1920, the defendant bought the lessee’s interest for one thousand two hundred and fifty pounds. A spirit grocery was a money-making business. Profits were large. The Intoxicating Liquor Act, 1923, of Northern Ireland, dealt a fatal blow to spirit groceries. The defendant had now to elect whether he would continue the trade in liquor only as an ordinary “offlicence” or whether he would forfeit the licence and carry on a non-licensed trade. Compensation was offered to those who decided to let the licence go and the defendant received by way of compensation for “loss of profits” the sum of one thousand six hundred and twenty-one pounds.
The plaintiff was also entitled to claim compensation for the injury to his reversion by the loss of the licence but failed to do so. The premises are now let as a green-grocers at a rent of sixty-four pounds and taxes. The defendant was guilty of a breach of his covenant in not maintaining the off-licence on his premises, (Maguire v. Day, [1926], N. I. p. 80). He evidently considered that an ordinary off-licence without the privilege of selling grocery goods on the same premises would not be very profitable for him. There was also the lure of “compensation for loss of profits.” His view seems to have been shared by the great majority of the spirit grocers in Belfast. The defendant has broken his covenant to maintain the licence. It is a breach which he cannot remedy. If he is to have relief, it cannot be on terms that he should perform the terms of the covenant in the future. The licence is irrevocably gone. What is the plaintiff’s position? As pointed out already, his only interest in the premises is security for the rent of thirty-five pounds reserved. His original security was the premises plus the licence and goodwill of a spirit grocery. The jury in this case have awarded him two hundred and thirty-seven pounds ten shillings damages for breach of the covenant to maintain the licence. The defendant must pay these damages. The plaintiff will then have security for his rent, not the building plus a licence, but the building plus two hundred and thirty-seven pounds ten shillings, the damage which he has suffered by the loss of the licence. A spirit grocery was never a gilt-edged security According to evidence given on behalf of the plaintiff, the premises are still good security for a rent of twenty-five pounds. I think the plaintiff is not in any worse position than he was before the breach. In Hyman v. Rose, Lord Loreburn found that the defendant in that case was forbidden to carry on certain trades on the premises concerned, but that there was nothing to prevent any other trade being carried on. In this case the covenant is specific and the defendant is permitted to carry on the *155 licensed trade only. The defendant has broken that covenant and the licence is now gone. The defendant cannot now renew the licence, and if the plaintiff were to recover possession of the premises he could not renew the licence. The premises must continue to be non-licensed premises. The plaintiff has been compensated in damages for this breach. I think this is a case in which the discretion of the Court ought to be exercised in favour of the defendant and that when he pays the damages assessed for his breach of covenant he ought to be granted relief. I am of opinion that the defendant ought to bear the costs both here and in the Court below, and also must pay the damages awarded.
Ferguson & Co. v. Ferguson.
[1924] IR 25
Appeal. (N. I.)
MOORE L.J. :
8 Nov.
I formed a very clear view during the argument of this case, and it is not necessary now that I should say much.
Mrs. Jane Ferguson, on 12th November, 1917, made a lease to the plaintiff company of 37 acres 2 roods of the lands of Slatt, situate in the County of Antrim, with the factory, houses, buildings thereon, and water power, for a term of fifty years, at the yearly rent of £150. It was inter alia provided by this lease that if the plaintiff company should thereafter enter into liquidation, whether compulsory or voluntary, it should be lawful for the lessor to re-enter upon the premises, and that thereupon the term created should absolutely determine.
The shareholders in the company consisted solely of the lessor and her sons and daughters. On the 11th April, 1922, after nearly five years’ trading, pursuant to resolution, the company went into voluntary liquidation. Mr. Hugh Boyd was appointed liquidator; and in order to realize the effects of the company he put the premises under the lease up for sale by auction, and same were provisionally sold to Mr. Samuel M’Cord for £3,500, the provisional element being relied upon in these proceedings. The lessor served notice on 9th February, 1923, purporting to determine the lease under the proviso for re-entry on the liquidation of the company, which, if lawful, left the liquidator nothing to sell so far as the leasehold interest was concerned.
The present action is brought to restrain the defendant from determining the lease, or, alternatively, for relief on conditions. Reading the statement of claim, it appears that some sort of equity is claimed against the defendant by reason of the fact that being lessor she was also a shareholder in the company which became lessee; but this was not persisted in at the hearing before us, and in my view rightly not. At the same time I take leave to say that notwithstanding the law as to the status of incorporated companies as distinguished from their shareholders, I think it is not a meritorious course of conduct for this lady, having been so largely concerned in a limited concern which has defaulted to the extent of £30,000, to rely on her rights as lessor in order to defeat the claims of the other creditors of the company, the company consisting of herself and her family; but if the law permits her to do so, this Court cannot interfere.
There is no doubt, any equitable case against her having disappeared, that she can determine the lease under the foregoing proviso for re-entry, unless she is prevented by the operation of the Conveyancing Act of 1881, sect. 14, as extended by the amending Act of 1892. Therefore the first question is: do these Acts, or any of them, apply? Sect. 2, sub-s. 2, of the amending Act of 1892 for the first time gave a lessee company in a liquidation relief under the Act of 1881, sect. 14, subject to two qualifications: 1 (here of importance), that the relief is to apply only within twelve months after the liquidation; and, 2, only where within that time the lessee’s interest has been sold. Sect. 2, sub-s. 3, however, excludes altogether a lease of agricultural or pastoral land from the operation of the last-mentioned sub-section. Is the present lease a lease of agricultural land within the meaning of the sub-section? I agree with counsel on both sides that the clause is somewhat difficult to construe. Mr. Babington has urged on us two considerations: (a) that a lease of agricultural land (I omit “pastoral”) means a lease of agricultural land exclusively, and therefore that the inclusion of the factory premises in the present lease prevents the lease being regarded as a lease of agricultural land; (b) that if this contention be not correct, the meaning of the section is a lease of lands of which the main or substantial purpose was
agricultural, and that in the present case the main or substantial purpose was for the use of the factory, and that the lease is therefore not to be regarded as a lease of agricultural land within the true meaning of this sub-section.
Giving the matter the best consideration I can, I am of opinion that (a) fails. I can find nothing in words or by implication in either statute to suggest that the lease must be of agricultural land exclusively. I think that (b) also fails. I can find nothing in words or by implication in either statute to suggest the idea that the main or substantial purpose of the letting, as apart from the nature or quality of the lands demised, is to be considered. I therefore think as regards (b) that decisions under our Irish Land Acts have no application. There”the character” of the holding was in question. No authorities on the precise construction of the sub-section of the Act of 1892 on this point have been cited to us. There remains only a third alternative, which gives the words their natural and prima facie meaning, which I am accordingly driven to adopt, viz., that a lease of any agricultural or pastoral land, irrespective of whether or not it includes other non-agricultural or non-pastoral lands or buildings, is what the section was intended to include. I am far from holding that the principle of de minimis may not be used in construction in a proper case under sect. 14 as amended by the Act of 1892, but no one could say that it applied in the present circumstances, where thirty-seven and a half acres, only less the mill site and surroundings, were steadily farmed.
This conclusion is really sufficient to dispose of the case; but as there has been a good deal of argument upon the effect of sect. 2, sub-s. 2, “provided the lessee’s interest be not sold within one such year,” I think I should also give my opinion on that. I think “sold” there means either conveyed or transferred as the result of a contract for purchase and sale, or at any rate that the expression “sold” does not apply to a conditional agreement for sale and purchase, such as that in the present case. I base this opinion on the definitions of “purchaser” and per contra of”sale” in the Conveyancing Act of 1881, sect. 2, sub-s. viii. This sub-section is as follows:
“Purchaser, unless a contrary intention appears, includes a lessee or mortgagee, and an intending purchaser, lessee, or mortgagee, or other person who, for valuable consideration, takes or deals for any property; and purchase, unless a contrary intention appears, has a meaning corresponding with that of purchaser; but sale means only a sale properly so called.”
I am glad that by so deciding we can observe the comity of Courts, including Courts of first instance, by agreeing with the views already expressed on this question in England by Joyce J. in Mitchell v. Castle (1) and by Russell J. in Civil Service Co-operative Society, Ltd., v. Trustee of Sir J. R. D. M’Grigor, Bart. (2), whether, as contended, they are to be merely regarded as obiter dicta or not.
Three questions have been very fully debated before us. The first two affect the right of the companyor, shall I say, of the liquidator?to obtain any relief from the forfeiture, which has admittedly occurred; whilst the third relates to the terms upon which such relief should, if at all, be granted.
The first answer which the defendant makes to the plaintiffs’ claim is that the lease of 12th November, 1917, was a “lease of agricultural or pastoral land” within sect. 2, sub-s. 3 (a), of the Conveyancing Act, 1892, to which class of lease the provisions of sect. 14, sub-s. 2, of the Conveyancing Act, 1881, enabling the Court to grant relief against forfeiture, do not apply. It would be difficult to conceive more inartistic draftsmanship than the forfeiture clauses of these two Acts. Exception is grafted on exception in the most bewildering fashiona system which necessarily leaves the rights of the parties somewhat vague and indeterminate. The relevant portions of the enactments may, however, be briefly summarised thus: sub-ss. 1 and 2 of sect. 14 of the Act of 1881 provide for relief against forfeiture. Sub-s. 6 (i) of sect. 14, however, excepts from the operation of this section breaches of conditions for forfeiture on the bankruptcy of the lessee; and by sect. 2, sub-s. 15, the term”bankruptcy” includes liquidation by arrangement. If, therefore, the Act of 1881 stood alone, the plaintiff company would obviously have no right to relief. How, then, is the position affected by sect. 2, sub-s. 2, of the Act of 1892? This sub-section extends the provisions for relief given by sect. 14 to the case of forfeiture on the bankruptcy of the lessee, but for the period of one year only from the date of the bankruptcy, unless the lessee’s interest be sold within that time. If the lessee’s interest be so sold, the provisions for relief are made generally applicable. Sect. 2, sub-s. 3, however, provides that sect. 2, sub-s. 2, is not to apply to certain specified leases, the first of which is a “lease of agricultural or pastoral land.” If, therefore, the lease of 12th November, 1917, is a lease of this character, the provisions of sect. 2, sub-s. 2, of the Act of 1892 do not apply, and the plaintiff company are thrown back upon the Act of 1881, under which no relief can, in the circumstances, be obtained.
What is a “lease of agricultural or pastoral land” within the section? We get no aid in its interpretation from the nature of the subject-matter of the other leases referred to in this clause of exceptions, as it is impossible to find any universal principle underlying all. We have been referred to various sections of the Irish Land Acts of 1870, 1876, 1881, and 1896, in which references to “holdings which are not agricultural or pastoral in their character” and other similar expressions occur. I agree with Mr. Murphy, however, that judicial dicta and decisions on such phrases in our Irish land code afford no guide to the interpretation of the words of the Conveyancing Act of 1892, if only because one refers to “holdings,” whilst the other refers to”leases.” Mr. Babington’s contention is not so much that the expression, “a lease of agricultural or pastoral land,” is confined to a lease of what is exclusively such, but rather that it is, as he puts it, “a question of degree in every case,” or, as I understand his argument, that its true character is dependent on whether or not the agricultural or pastoral lands predominate. I cannot accept this view, for I find no words in the section to justify it. When once it is held, as in my opinion it must be held, that a lease may be a “lease of agricultural or pastoral land,” though it be not a lease of such lands exclusively, I consider that the words of the section are satisfied if any substantial portion of the premises comprised in it are of that character. If so, no one can deny that the lease of 1917, comprising a farm of some thirty-seven and a half acres, which was worked, as one of the plaintiffs’ witnesses admitted, in the ordinary rotation of crops, was such a lease as falls within the section referred to. I am of opinion, therefore, that on this ground alone the plaintiff company must fail in their action.
The second question is one of some nicety. Sub-s. 2 of sect. 2 of the Act of 1892 applies sect. 14, sub-s. 6, of the Act of 1881 to a condition for forfeiture on the bankruptcy of the lessee only after the expiration of one year from the date of the bankruptcy, and provided the lessee’s interest be not sold within such one year. It is therefore necessary to determine whether the lessee’s interest was “sold” within the year. The resolution for voluntary liquidation was passed on 11th April, 1922. On 12th February, 1923, a contract for sale of the premises was entered into between the plaintiff company in liquidation by Mr. Hugh Boyd, the liquidator, and a Mr. Samuel M’Cord, at the sum of £3,500. The ninth clause of the conditions of sale referred expressly to the forfeiture clause in the lease and to the lessor’s notice, and the sale was made subject to the granting of relief to the vendors. In other words, the contract of sale was conditional, not absolute, in character. It has, of course, not been completed by conveyance, pending the result of these proceedings, and more than a year has now elapsed since the liquidation resolution was passed.
Does the contract referred to amount to a sale within the section? The Act of 1892 contains no definition of the term”sale,” but such a definition is to be found in sect. 2, sub-s. 8, of the Act of 1881. This section contains a very wide definition of the word “purchaser,” including a lessee or mortgagee and an intending purchaser, with a corresponding meaning for the term”purchase.” The section concludes with the words: “But sale means only a sale properly so called.” The contrast is clear. As the term “purchase” includes intended purchase, one would naturally expect that the term “sale” would include intended sale. The contrary is the case. The definition of “sale” is introduced by the arrestive conjunction “but,” which clearly conveys that the word does not bear that meaning which would be expected to follow from the definition of “purchase,” which immediately precedes. It is not sufficient, therefore, to satisfy the expression “sale” that premises should be intended to be sold, as are the premises in this case, if the Court grants the necessary relief against forfeiture. There must be a sale completed by conveyance, or at least an unconditional contract capable of being enforced by a decree for specific performance. Nothing less than this could, in my opinion, be described as “a sale properly so called.”
I prefer to base my judgment upon this point on the words of this definition section rather than on authority which is somewhat inconclusive. Mr. Murphy laid great stress for the defendant upon the case of Re Henry Castle & Sons, Mitchell v.Henry Castle & Sons (1), where a conditional contract was held by Joyce J. not to amount to a sale within sect. 2, sub-s. 2, of the Act of 1892. But there the sale was entered into merely as an arrangement for the purpose of obtaining the benefit of the provisions in the Acts against forfeiture. The agreement clearly shows that it was not contemplated by either party that the named purchaser should be the ultimate purchaser. He was little, if anything, more than the Receiver’s nominee, bound to transfer the premises on merely recoupment terms to the purchaser of the business if the Receiver should succeed in selling it within one year from the date of the agreement. That decision, though useful, does not govern this case.
Mr. Murphy also referred us to the recent decision of Russell J. in Civil Service Co-operative Society, Limited, v.Trustee of Sir J. R. D. M’Grigor, Bart. (2). At p. 355 of his judgment the learned Judge says: “In my opinion the operation of sect. 2, sub-s. 2, of the Act of 1892 is this: the right of entry or forfeiture on bankruptcy of the lessee, or on taking in execution of the lessee’s interest, is fettered; if the lessee’s interest be not sold within the one year, the fetter is removed at the end of the year; if the lessee’s interest be sold within the one year, the fetter is not removed, but continues. In the present case the lessee’s interest has not been sold; a conditional contract for sale has been entered into conditional upon the defendant succeeding in the present action.” Here is the clear and unambiguous statement of Russell J.’s view of the true construction of the section, namely, that the premises could not be said to be “sold” merely because a conditional contract for sale had been entered into within the specified period. Its weight is only detracted from by the fact that it must be regarded merely as a dictum of the learned Judge, as no argument appears to have been directed to the point, and nowhere else in the report is any mention made of the conditional contract to which he refers. Regarded, however, as a dictum, it is, in my opinion, an expression of sound law.
For these reasons this second question must also be decided against the plaintiffs; and in the circumstances I find it unnecessary, and accordingly decline to indulge in what would be merely academic speculation as to the terms upon which the plaintiffs should have received relief against the forfeiture had they succeeded in establishing a legal right to it.
The appeal must be dismissed with costs.
Smallman, Ltd. v. Castle.
[1931] IR 294
Sullivan P.
:
The plaintiffs are mortgagees of the premises in question under an indenture, dated the 28th April, 1930, whereby Realty Trust, Ltd., demised the premises to the plaintiffs for the residue of a term of 250 years from the 20th January, 1930, save the last three days thereof, by way of mortgage to secure the payment of money advanced. The mortgagors remained in possession, and by indenture of under-lease, dated the 20th February, 1931, they demised the premises to the defendant for a term of 7 years from 1st January, 1931, at the yearly rent of £300, payable quarterly, on the 25th March, 24th June, 29th September, and 25th December, the first payment to be made on the 25th March, 1931. By deed dated 26th February, 1931, the plaintiffs appointed Mr. Peterson Receiver over the said premises. The defendant did not pay to Mr. Peterson any of the rent due under the under-lease. On the 10th February, 1932, the said Receiver was discharged, and on the same day the plaintiffs, by notice in writing, required the defendant to pay to them as mortgagees the rent due under the under-lease. The defendant having failed to do so, the plaintiffs brought the action to recover possession of the premises for non-payment of one year’s rent due and ending the 25th December, 1931. The defendant, in his affidavit, states that the quarter’s rent due on the 25th March, 1931, was paid to the mortgagors, Realty Trust, Ltd., on the 20th February, 1931, and accordingly that one year’s rent is not due; and the only question I have to decide is whether the payment so made on the 20th February was a valid payment of the rent due on the 25th March.
On this question Mr. Newett has referred me to the opinions of Willes J. and Swinfen Eady L.J. In De Nicholls v. Saunders (1), Willes J. says: “Payment of rent before it is due is not a fulfilment of the obligation imposed by the covenant to pay rent, but is, in fact, an advance to the landlord, with an agreement that on the day when the rent becomes due such advance shall be treated as a fulfilment of the obligation to pay rent.” In Lord Ashburton v. Nocton (2), Swinfen Eady L.J. says (at p. 290): “A legal mortgage carries with it the right to the accruing rent, if the mortgagee intervenes and claims the rent before it has been paid to the mortgagor, after the due date, and a prepayment to the mortgagor before the due date is not valid against a legal mortgagee.”
I accept these opinions as correct, and it follows that the payment made by the defendant on the 20th February, 1931, was not a valid payment of the rent due on the 25th March, 1931. The plaintiffs are, therefore, entitled to judgment.
Bank of Ireland v Lady Lisa Ireland Ltd
[1993] ILRM 235, O’Hanlon J
he plaintiff is the landlord of business premises at No. 44 Henry Street, Dublin 1, which were demised to the defendant (then named Poltobe Services Ltd) for a term of 35 years from 14 November 1986.
The plaintiff contends that the defendant has been very remiss in payment of the rent reserved by the lease, and has consistently been late in making payment of the quarterly instalments of rent, so that proceedings have had to be instituted in times past on a number of occasions to compel payment of the amounts due.
Ultimately, the plaintiff grew tired of allowing time, and caused a notice of re-entry for non-payment of rent to be served on the defendant on 12 December 1991. It was headed ‘notice of re-entry and forfeiture’; it recited that the quarter’s rent due on 1 October 1991, had not been paid, and it concluded:
AND NOW TAKE NOTICE that pursuant to the terms of the said lease and the proviso for re-entry therein contained, as agent for the lessor we give notice that the lessor hereby exercises its right to determine the lease for failure to pay the said rent and requires you to yield up possession of the said premises this 11 December 1991.
The notice was signed by the solicitors for the landlord.
The rent was payable quarterly in advance. I understand that the arrears of rent up to the date of the service of the notice of re-entry have since been paid up and accepted by the plaintiff, and that the balance of the quarterly rent for the quarter in question has been tendered and accepted by the plaintiff as mesne rates. Nevertheless, the plaintiff has elected to continue with the proceedings for possession commenced by summary summons issued on 19 December 1990 in accordance with O. 1, r. 3 of the Rules of the Superior Courts.
While the facts of the case, as alleged by the plaintiff, are not in dispute, the defendant contends that the procedure adopted by the plaintiff was ineffectual to achieve a re-entry on the part of the landlord, in accordance with the terms of the lease, and further contends that the procedure by way of summary summons is inappropriate when an order for possession is claimed in reliance on re-entry for alleged breach of covenant.
I have considered the helpful submissions of counsel on both sides of the case and I have come to the conclusion that I should hold in favour of the defendant on both the issues of law which arise for consideration.
Where a landlord proposes to forfeit a lease in reliance on a proviso in the lease giving a right of re-entry for non-payment of rent or breach of other covenant in the lease, it has been held that the ‘re-entry’ involved may only be effected in one of two ways — either by physical re-entry or by the issue and service of proceedings for recovery of possession of the premises.
In Serjeant v Nash, Field & Co. [1903] 2 KB 304, Collins MR observed as follows at p. 310:
There is a final determination of a tenancy under a lease when the lessor, by some final and positive act which cannot be retracted, treats a breach of covenant by the lessee as constituting a forfeiture …. The only question is whether the lessor had availed herself of the breach of covenant in a final manner. I think that she had done so, for, except by taking physical possession of the premises, she had done the only thing that she could do to indicate her intention to put an end to the lease …. It is clear that the writ in the action to recover possession was a conclusive election to treat the act of the lessee … as creating a forfeiture.
In the present case it was submitted that the notice served on behalf of the lessor was a ‘final and positive act treating a breach of covenant by the lessee as constituting a forfeiture’ within the meaning of the expression as used by Collins MR in that judgment, but this contention is inconsistent with the decision of Warrington J in Moore v Ullcoats Mining Co. Ltd [1908] 1 Ch 575 where notice in writing had been given purporting to determine the lease, and a further notice was served demanding possession of the mines.
Warrington J said at p. 587: *238
Then the plaintiffs contend that if the writ was not an unequivocal demand there was a previous expression of their election contained in the two notices of April 29 and May 3, to which I have already referred. I am of opinion upon the authorities … that where the condition in the lease is that the landlord may re-enter he must actually re-enter, or he must do that which is in law equivalent to re-entry, namely, commence an action for the purpose of obtaining possession.
The statement of the law in modern times is repeated in similar terms in Halsbury, Laws of England , 4th ed., vol. 27, para. 428:
The terms of a proviso for re-entry require that if the landlord elects to determine the lease for a forfeiture he must do so by re-entry, which the landlord may effect by physically entering upon the premises with the intention of determining the tenancy or by the issue and service of proceedings for the recovery of possession of the premises.
I conclude that the notice served on the lessee in the present case was not an effective exercise of the power of re-entry for non-payment of rent referred to in the lease.
This need not be fatal to the plaintiff’s case if the procedure followed thereafter was effective of itself to forfeit the lease and set in motion a valid claim for an order of possession.
The proceedings were brought by way of summary summons under O. 2, r.1 of the Rules of the Superior Courts. This procedure may be adopted:
(2) In actions where a landlord seeks to recover possession of land, with or without a claim for rent or mesne profits—
(a) against a tenant whose term has expired or has been duly determined by notice to quit; or
(b) for non-payment of rent.
The rule has remained unchanged as compared with the earlier 1962 Rules (SI No. 72 of 1962), and O. 3 of the Rules of the High Court and Supreme Court 1926, and is essentially the same as the provision in the 1905 Rules (O.3, r.6) which permitted the use of the so-called ‘specially-indorsed writ’:
(F) in actions for the recovery of land, with or without a claim for rent or mesne profits, by a landlord against a tenant whose term has expired or has been duly determined by notice to quit; or in actions for the recovery of land for non-payment of rent ….
The reference in these various rules to the action for the recovery of land for *239 non-payment of rent must be taken as referring to the special procedure arising under s. 52 of Deasy’s Act (Landlord and Tenant Law Amendment (Ireland) Act 1860) permitting ejectment proceedings to be brought without further notice whenever a year’s rent shall be in arrear in respect of lands held under the form of tenure therein referred to, for recovery of possession of the said lands.
In the case of Keating v Mulcahy [1926] IR 214 the former Supreme Court expressed the view that the specially-indorsed writ was inappropriate in a case where the landlord’s claim to possession was based on forfeiture.
Kennedy CJ said at p. 220 of the report:
It was decided by the English Court of Appeal [in Arden v Boyce [1894] 1 QB 796] that the plaintiff should not be allowed to have summary judgment for recovery of the premises on the ground that, though the plaintiff relied on the determination of the tenancy by a notice to quit, the claim was really based on a forfeiture, and the court held that, according to established practice, summary judgment would not be granted in actions for the recovery of land based on forfeiture. Lord Esher MR and Lopes LJ held that O. 3, r. 6, did not apply to a case of forfeiture, with which view, on the words of the rule alone, I respectfully agree …
I am of opinion … that if the determination of the tenancy be not in substance a forfeiture (except in the case of ejectment for non-payment of rent) [it] may be the subject of an application for summary judgment for possession under O.14, r. 1.
Fitzgibbon J said at p. 232:
Of course, if a tenancy is determined by the forfeiture itself, the case is excluded by the very letter of O. 3, r. 6; there the notice to quit is only the intimation by the landlord of his election to take advantage of the forfeiture, and to treat the tenancy as having been determined by it ….
The matter was taken a stage further by the decision of O’Byrne J in Meares v Connolly [1930] IR 333, which applied the earlier decision in Keating v Mulcahy.
In that case a notice to quit had been given in pursuance of a proviso that the tenancy could be determined by notice to quit when the rent was in arrear.
It was held that procedure by summary summons is not applicable in an action for the recovery of premises founded on a notice to quit, where the right to give the notice depends upon the happening of a contingency. It was further held that the court had no power to amend the summary summons and allow the action to proceed as if commenced by a plenary summons and accordingly the case must be struck out, with costs.
As the rules which were under consideration in that case were in all relevant respects on all fours with the rules which have application in the present case, *240 and as I concur in the manner in which the rules were interpreted in the cases referred to, I have to dismiss the present claim of the plaintiff.
Moffat v Frisby,
High Court, Laffoy J.
March 20, 2007; [2007] I.E.H.C. 140
By a lease dated 16th August, 1999 made between Green Property Plc of the one part and the plaintiff of the other part (the Lease) Unit No. 22C, being part of Waterford Shopping Centre situate as Lisduggan, Waterford, was demised to the plaintiff for the term of twenty years from and including 1st July, 1999 at the initial rent, after the first six months, of €15,000 per annum. The lease contained provision for the review of the rent at five-yearly intervals. The first review period commenced on 1st July, 2004. The rent review clause provided for measures whereby the revised rent for a review period might be agreed between the lessor and the lessee. It also provided that, in default of agreement, the ascertainment of the “deemed market rental value” should be referred to the arbitration of a single arbitrator. The mechanism for appointment of the arbitrator provided for in default of agreement between the lessor and the lessee was that he or she was to be nominated on the joint application of the lessor and the lessee, or, if either of them should neglect within seven days on being requested so to do to concur in such application, then on the sole application of the other, by the chairman for the time being or acting chairman of the Society of Chartered Surveyors in Ireland (the Society).
By letter dated 30th June, 2003 from A & L Goodbody, solicitors, the plaintiff was notified that Waterford Shopping Centre had been sold to the first defendant, who thereby became entitled to the reversion on the Lease and the plaintiff’s landlord.
Hamilton Osborne King (HOK), Estate Agents, Auctioneers and Valuers, acted for the first defendant in connection with the first rent review of Unit No. 22C. The rent review procedure in accordance with the lease was set in train by a Rent Notice served by HOK on the plaintiff on 13th January, 2004. The Rent Notice referred to the Lease and suggested that the landlord’s interest was vested in “Frisby Construction”. This error was repeated in subsequent notices, applications and correspondence. The plaintiff has characterised the error as a “false misrepresentation” and has submitted that it somehow adversely impacted on the efficacy of what the various documents were intended to achieve. While the first defendant’s agents should have described him properly in the documents required under the rent review clause in the Lease, the fact is that the plaintiff has at all material times known the true identity of his landlord and that his landlord is the first defendant. In the circumstances, I consider the submission made by the plaintiff as being specious.
Through 2004 and 2005 despite negotiations the plaintiff and the first defendant’s agents did not succeed in agreeing the revised rent. At the beginning of September, 2005 HOK asked the plaintiff to concur in an application to the Society to have an arbitrator appointed. On 20th September, 2005 the first defendant issued ejectment proceedings on title in the Circuit Court (South Eastern Circuit, County Waterford) (Record No. 534/05) against the plaintiff claiming, inter alia, to recover possession of Unit No. 22C. On 26th September, 2005 the plaintiff wrote to HOK stating that this effectively stopped the review until such time as the Circuit Court proceedings were finalised.
On 10th November, 2005 HOK applied to the Society to appoint an arbitrator. On the application form the name of the lessor was given as “Frisby Construction”. The plaintiff has taken issue in relation to that description and he also has taken issue with the negative response to a question on the application form querying whether there were any issues, apart from the amount of the rent, which were in dispute and were likely to be raised. The existence of the ejectment proceedings was not disclosed. By letter dated 15th November, 2005 the Arbitration Officer of the Society wrote to the plaintiff, sending him a copy of the application form as submitted by HOK and enclosing a form for him to complete, which, if he had completed it, would have given him the opportunity to name individuals he considered to be unsuitable for appointment as arbitrator because of conflict of interest. The plaintiff did not return the form, but he contacted the office of the Arbitration Officer by telephone. He has averred that, in her absence, he left a detailed message on her voice mail advising her that the title was in dispute, that ejectment proceedings were before the Circuit Court and that, therefore, he was not in a legal position to proceed with an arbitration.
On 23rd November, 2005 the President of the Society appointed the second named defendant as arbitrator to determine the revised rent on Unit No. 22C in accordance with the provisions of the Lease. Subsequent to his appointment the second defendant endeavoured to carry out his duties as arbitrator. The plaintiff resisted those attempts, contending that his appointment was void because of the misdescription of the lessor and relying also on the existence of the ejectment proceedings. Eventually, after the second defendant had directed that the matter be dealt with by way of oral hearing, the plaintiff initiated these proceedings.
The proceedings
In these proceedings, which were initiated by special summons which issued on 20th April, 2006, the plaintiff claims the following reliefs:
(1) an order setting aside the appointment of the second defendant as arbitrator under the Arbitration Act, 1954 (the Act of 1954); and
(2) an injunction restraining the first defendant from making further application to the Society in respect of Unit No. 22C pending the trial of –
(a) the first defendant’s ejectment proceedings (Record No. 534/05), and
(b) proceedings initiated by the plaintiff on 12th May, 2005 in the Circuit Court (South Eastern Circuit, County Waterford, Record No. 242/05) by way of Landlord and Tenant Civil Bill, in which, as amended pursuant to an order of the Circuit Court made on 12th October, 2005, the plaintiff claimed, inter alia, relief against forfeiture, the first defendant having, at the time of the amendment, served three forfeiture notices dated 15th March, 2005, 12th May, 2005 and 29th July, 2005 respectively.
The grounds on which the plaintiff seeks the reliefs sought in the special summons, insofar as they can be gleaned from the special summons, are that the first defendant’s contention that the Lease has been validly forfeited and no longer exists precludes him from relying on the lease and, in particular, on the rent review provision and the alleged “false misrepresentations” made to the Society in the first defendant’s agent’s application for the appointment of an arbitrator. In view of what I have stated earlier in relation to the misdescription of the lessor, it will be clear that I consider the latter ground to be lacking in merit and I do not propose to consider it further.
Interlocutory application
On 2nd May, 2006 the plaintiff issued a notice of motion seeking an interlocutory injunction pending the trial of these proceedings restraining the defendant from holding a hearing in relation to the arbitration for fixing the revised rent. On foot of that application this Court made an order on 15th May, 2006 in which the plaintiff’s undertaking on oath as to damages was noted and it was ordered that pending the hearing of these proceedings the second defendant be restrained from acting as arbitrator in the arbitration. However, the second defendant was relieved from taking any further part in these proceedings.
The Circuit Court Proceedings
When the substantive proceedings came on for hearing in summary the position in relation to the Circuit Court proceedings was as follows:
(1) There was a motion pending before the Circuit Court in the first defendant’s ejectment proceedings (Record No. 534/05) seeking leave to discontinue the ejectment proceedings pursuant to the Rules of the Circuit Court and an order striking out the defence and counterclaim. The position adopted by the first defendant in this Court was that the defence and counterclaim for relief against forfeiture did not have to be pursued by the plaintiff in these proceedings because the first defendant in these proceedings was conceding that the Lease had not terminated by the forfeiture notices of 15th March, 2005, 12th May, 2005 or 29th July, 2005.
(2) In relation to the plaintiff’s Landlord and Tenant Civil Bill (Record No. 242/05) those proceedings were still pending in the Circuit Court. However, the civil bill appears to have been amended after the initiation of these proceedings on 16th June, 2006, pursuant to an order dated 22nd May, 2006, and an amended defence and counterclaim thereto had been delivered on 22nd September, 2006. In the amended defence and counterclaim the first defendant asserted that the lease was forfeited as a result of the service of a forfeiture notice, which I understand to be the forfeiture notice of 8th February, 2006 referred to later, and that the defendant was entitled to possession of Unit No. 22C. A declaration was sought that the plaintiff was not entitled to relief against forfeiture and, if necessary, an order for possession was sought.
This Court has been inundated with copies of pleadings, amended pleadings, notices of motion, affidavits, including affidavits of discovery, and exhibits relating to the two Circuit Court actions. As I understand the position, in particular on the basis of the affidavit sworn by the first defendant in these proceedings on 4th May, 2006, the position of the first defendant is that his ejectment proceedings (Record No. 534/05) were founded on forfeiture notices (the notices of 15th March, 2005, 12th May, 2005 and 29th July, 2005) which have been “waived” because of the contention of the plaintiff in these proceedings that when the forfeiture notices were served there were ongoing negotiations between the parties in relation to the revision of the rent, which the plaintiff contended amounted to a recognition of the Lease. The intention of the first defendant, as intimated in a letter of 20th January, 2006 to the plaintiff, was that his ejectment proceedings would be struck out by the Circuit Court on 7th February, 2006, but that did not happen because of the existence of the plaintiff’s counterclaim seeking relief against forfeiture. The concession made by the first defendant is that prior to 8th February, 2006 the Lease had not been terminated by forfeiture because he has “waived” his entitlement. However, a fresh forfeiture notice was served on 8th February, 2006 and it is in respect of that forfeiture notice that the plaintiff seeks relief in his amendment to Landlord and Tenant Civil Bill dated 16th June, 2006 and, as I understand it, it is on foot of that forfeiture notice that the first defendant asserts that the Lease no longer exists.
I think it is important to emphasise that the Circuit Court has seisin, and is the arbiter, of all issues arising in the Circuit Court proceedings. I have striven in this judgment not to trespass on the jurisdiction of the Circuit Court and nothing in this judgment is to be taken as the expression of any view in relation to any such issues.
The core issue
Against that background, the core issue is whether, given that the first defendant asserts that the Lease is forfeited and that the plaintiff is not entitled to relief against forfeiture, and proceedings are pending in the Circuit Court to enforce the contended for forfeiture (Record No. 242/05), as a matter of law, the first defendant is entitled to operate the rent review clause to determine what the rent due from 1st July, 2004 should or would be. It was submitted on behalf of the first defendant that he is so entitled because the quantum of the revised rent is relevant whether the Circuit Court enforces the forfeiture or not. If the forfeiture is not enforced, it is relevant in the context of the continued existence of the Lease. If the forfeiture is enforced, it is relevant to the determination of the mesne rates to which the first defendant is entitled in respect of the plaintiff’s continued occupation of Unit No. 22C since 1st July, 2004.
The plaintiff, who appeared in person, submitted that the first defendant was and is not entitled to pursue the revision of the rent in accordance with the Lease while seeking to enforce the forfeiture of the Lease.
The law: the parties’ submissions
In the context of discussing the circumstances in which a lessee will be granted relief against forfeiture, the status of a lease in the period between the commencement of a lessor’s action for possession and the determination of that action, and, in particular, the determination as to whether the lessee is entitled for relief against forfeiture, is considered in Wyle on Landlord and Tenant Law, 2nd Edition at para. 24.22 in the following passage which was relied on by counsel for the first defendant:
“It is true that the issue of proceedings for recovery of possession technically determines the lease, so that thereafter the landlord cannot claim any further rent, but rather mesne profits, but in reality the operation of the lease is suspended only, depending on the outcome of any claim for relief by the tenant. If relief is refused the lease is treated as determining from the issue of possession proceedings and a claim for mesne profits to cover occupation by the tenant (in effect as a trespasser) from then until the landlord recovers actual possession can be maintained. If, on the other hand, relief is granted, the lease is treated as restored and so the rent and other payments under it can be claimed as if no forfeiture had occurred.”
Counsel for the first defendant referred the court to a number of authorities, some of which are referred to in the footnotes in Wylie, as supporting the proposition set out in that passage. I propose considering the authorities chronologically.
The earliest is Dendy v. Evans [1910] 1 K.B. 263. There a head lessor issued a writ against the lessee to recover possession on the grounds that the head lease had been forfeited for breach of a covenant by the lessee to repair. The lessee had created an underlease. The assignee of the lessee had obtained relief against forfeiture of the head lease under s. 14(2) of the Conveyancing Act, 1881. The plaintiff assignee then brought an action against the defendant under-lessee for rent due under the underlease subsequent to the issue and service of the writ to recover possession by the head lessor. Having outlined the provisions of sub-s. (2) of s. 14, Cozens-Hardy M.R. stated as follows (at p. 269):
“The ground on which the plaintiff sought relief has been disposed of by the order made by the Court under section 14. For all purposes, and as between all parties, rights and liabilities are absolutely unaffected by the circumstance that there was a breach of covenant and that there was a writ issued not followed by judgment or entry, and I cannot listen for one moment to the suggestion that the effect of this is merely to resuscitate the lease from the date of the order or to grant a new lease from the date of the order, leaving the underlease to perish, although the original cause of mischief, namely, the forfeiture by the lessee, has been absolutely and entirely got rid of. In my opinion that would be an unreasonable and unnatural construction, and I think Darling J. was quite right when he said in effect that the lease continued for all purposes; it is the original lease which continues, not a new lease; and, that being so, the derivative lease which was created out of the original lease has not ceased to exist, but is still a valid lease in respect of which the defendants are liable to the plaintiffs on the covenants.”
The decision in Dendy v. Evans was followed by the Court of Appeal in Driscoll v. Church Commissioners for England [1957] 1 Q.B. 330. There the appellant tenant held a number of houses from the Church Commissioners under leases which restricted the use to a private dwelling house save with the written consent of the lessor. In 1949 the tenant applied to the Lands Tribunal pursuant to a statutory provision for an order discharging or modifying the restrictions. In 1952 the Church Commissioners issued writs claiming forfeiture for breaches of covenant. At the hearing of the landlord’s action in July, 1956 the tenant appellant was granted relief on forfeiture subject to certain conditions. Prior to that, in May, 1956, the Lands Tribunal had refused the tenant’s application. The tenant appealed that decision. On the appeal, the Court of Appeal had to consider a point taken on behalf of the Church Commissioners that the tenant had no locus standi in May, 1956 because of the existence of the writs for forfeiture. Denning L.J. dealt with this point in the following passage in his judgment at (p. 338):
“I will mention one point at once, a technical point taken by Mr. Lamb on behalf of the Church Commissioners. He raised it by cross-notice under the new Rules which is, I think, open to him. He said that because of those writs for forfeiture being issued, Mr. Driscoll had no locus standi to apply for these restrictions to be modified at all in regard to six of these leases. He said that the issue of a writ for forfeiture is an unequivocal election by the landlords to determine the leases, and in consequence the leases had gone and the covenants had gone, and that there was nothing left to modify. I do not agree with that argument, for this reason: that, although a writ is an unequivocal election, nevertheless, until the action is finally determined in favour of the landlord, the covenant does not cease to be potentially good. For instance, the forfeiture may not be established; or relief may be granted, in which case the lease is re-established as from the beginning. That appears from the case of Dendy v. Evans … . It seems to me that so long as the covenant is potentially good, Mr. Driscoll, or anyone in like position, has a locus standi to apply to the Tribunal for a modification of the covenant. So I think that Mr. Driscoll is not defeated on any technical point.”
In Meadows v. Clerical Life Assurance [1981] 1 Ch. 70, the issue Sir Robert Megarry V.-C. was concerned with was whether the plaintiff tenant could pursue a claim for a new tenancy under a statutory provision against the defendant head lessor in circumstances where his underlease, though subject to forfeiture in proceedings by the underlessor, was the subject of a subsisting application for relief in those proceedings when he issued his originating summons for a new tenancy under the relevant statute. In the following passage (at p. 75) the Vice-Chancellor considered the status of a forfeited lease while an application for relief against forfeiture is pending:
“There are, of course, curiosities in the status of a forfeited lease which is the subject of an application for relief against forfeiture. Until the application has been decided, it will not be known whether the lease will remain forfeited or whether it will be restored as if it had never been forfeited. But there are many other instances of such uncertainties. When the validity of a notice to quite is in dispute, until that issue is resolved it will not be known whether the tenancy has ended or whether it still exists. The tenancy has a trance-like existence pendente lite; none can assert with assurance whether it is alive or dead. The status of a forfeited underlease which is the subject of an application for relief seems to me to be not dissimilar; at least it cannot be said to be dead beyond hope of resurrection.”
Later, at p. 76, the Vice-Chancellor stated that the right of a tenant to apply for relief is part of the process of forfeiture, and until that process is complete, he did not think the tenancy had come to an end within the meaning of the relevant statutory provision, so that the plaintiff was entitled to apply for a new tenancy.
The most recent of the authorities relied on by the first defendant is a decision of the Court of Appeal in Maryland Estates Limited v. Bar-Joseph and Anor. [1998] 2 All E.R. In that case the Court of Appeal was concerned with a provision in a statute governing forfeiture of a lease in the County Court. The sub-section in issue provided that, where the court at the trial was satisfied that the lessor was entitled to enforce the right of re-entry of forfeiture, the court should make an order that possession be given to the lessor within four weeks, unless within that period the lessee should pay into court “all the rent in arrear” and the costs of the action. At first instance, the expression “all the rent in arrear” had been interpreted as meaning the arrears of rent due at the date of the service of the writ. Beldam L.J. stated (at p. 201) that, in his view, it was not straining the interpretation of the language to hold that all rent in arrears meant the rent in arrears at the time when the court making its order assumes the payment of that rent will result in the lease continuing for all purposes. I have adverted to this decision for the sake of completeness. As it turned on the interpretation of the words of a U.K. statute I do not consider it to be particularly helpful in the resolution of the issues before the court and I do not propose to consider it further.
The plaintiff made his main points on the application of the law on the relationship of landlord and tenant to the issues in these proceedings by reference to the following:
(a) A statement in the Law Reform Commission Report on Consolidated Landlord and Tenant Acts (LRC 28. 2003) in the following terms:
“The general rule is that a valid forfeiture operates to determine the tenancy in full and thereafter deprives the landlord of any remedies based on the continuance of the lease.”
(b) The decision of the Supreme Court in O’Reilly v. Gleeson [1975] I.R. 258.
(c) Paragraph 24.25 of Wylie and the reference there to Rainey Bros. Ltd. v. Kearney [1990] N.I. 18.
The passage in the judgment of Henchy J. in O’Reilly v. Gleeson which the plaintiff highlighted concerned the effect of the conduct of the tenant, rather than the landlord, on the landlord and tenant relationship. Henchy J. stated as follows (at p. 272):
“It is fundamental to the relationship of landlord and tenant that the tenant is estopped from denying (i.e. disclaiming) his landlord’s title. That is to say, he cannot assert the rights of a tenant and at the same time say, in effect, that there is no tenancy because the landlord has not title to grant the tenancy, or because the title is in himself or in someone else. He cannot have it both ways. If what he does is a repudiation of the relationship of landlord and tenant, then in the case of a periodic tenancy terminable by notice to quit, he is debarred from insisting on the necessity for a notice to quit if the landlord chooses to eject him without serving one. The reason is that a notice to quit is necessary only where there is an admitted tenancy, so when the tenant repudiates the existence of a tenancy he thereby admits that there is nothing to terminate and that a notice to quit is unnecessary. However, as I have pointed out, in the case of a lease for a fixed term not terminable by notice to quit, the estate of the lessee in the land is not defeasible by mere disclaimer of title on his part.”
Another aspect of the decision of Henchy J. in O’Reilly v. Gleeson opens the commentary on the effect of forfeiture contained in para. 24.25 in Wylie: the general rule is that a forfeiture operates in toto, i.e. there is no question of it affecting part only of the premises demised by the lease or tenancy, citing a passage from the judgment of Henchy J. at p. 274. The commentary continues as follows:
“Since, as Henchy J. explained, the effect of a forfeiture is to render the lease or tenancy void ‘in every respect’, it follows that the landlord can no longer rely upon it. By electing for the remedy of forfeiture he thereafter deprives himself of remedies based upon the continued existence of the lease or tenancy. He cannot sue, therefore, for rent accruing due after the forfeiture has been effected, though he can sue the tenant or any guarantor for rent accruing due up to that time. The same applies to enforcement of other provisions in the lease, such as covenants for repair. Since forfeiture involves, as again Henchy J. explained, an election by the landlord for a particular remedy, it would seem to follow that he cannot use this election to found a claim against the tenant in respect of matters which are a consequence of that election.”
Wylie cites G.S. Fashions Ltd. v. B & Q [1995] 4 all E.R. 899, following Jones v. Carter (1846) 15 M & W 718, as authority for those propositions.
Wylie’s commentary continues with a consideration of the decision of the Court of Appeal in Northern Ireland in Rainey Bros. Ltd. v. Kearney, where the Court of Appeal held that a lessor who terminates a lease for non-payment of rent may recover damages to compensate him for the loss of rent which would have been payable under the lease. The damages which the plaintiff lessor in that case recovered compensated him for the loss of rent during the void period between the termination of the lease and the commencement of the re-letting and the lower rent achieved on the re-letting of the demised premises (interestingly located in Letterkenny, County Donegal). The rationale of the decision, as I understand it, is that the defendant tenant’s liability to damages arose from a breach of contract prior to re-entry.
The law: conclusions
In my view, the invocation by the first defendant of the propositions set out in Wylie at para. 24.21 and the authorities which I have outlined above misses the point. All of the authorities are concerned with the status or efficacy of an action by the tenant: in Dendy v. Evans, the creation of an underlease before the forfeiture; in Driscoll v. Church Commissioners, an application to the Lands Tribunal before the forfeiture; and in Meadows v. Clerical Life Assurance, an application for a statutory new tenancy after forfeiture. It is also noteworthy that in the first two cases the court’s determination as to the efficacy of the actions of the tenant having regard to the status of the lease during the limbo between the forfeiture and the determination of the application for relief against forfeiture arose after the limbo period had ceased. In the third case, the outcome turned on the construction and application of a statutory provision.
This case is concerned with the actions of the lessor. Just as the tenant cannot have it both ways, neither can the landlord. As is stated by Wylie at para. 24.25, by electing for the remedy of forfeiture, the lessor thereafter deprives himself of remedies based on the continued existence of the lease or tenancy. In the authority cited by Wylie, G.S. Fashions Ltd. v. B & Q Plc, Lightman J. quoted (at p. 904) what he described as the classic statement of Parke B. in Jones v. Carter (at p. 726) to the following effect:
“… The bringing of an ejectment for forfeiture, and serving it on the lessee in possession, must be considered as the exercise of the lessor’s option to determine the lease; and the option must be exercised once and for all … for after such an act, by which the lessor treats the lessee as a trespasser, the lessee would know that he was no longer to consider himself as holding under the lease, and bound to perform the covenants contained in it; and it would be unjust to permit the landlord again to change his mind, and hold the tenant responsible for the breach of duty, after that time.”
Lightman J. continued:
“The words of Parke B. were uttered in the context where the breaches of covenant by the lessee and the entitlement of the lessor to forfeit were established. The words and the same principle have been applied in cases where, after the service of the writ, the lessee has challenged the lessor’s right to forfeit or claimed relief from forfeiture. In such situation the validity of the forfeiture must await to be determined either by the court or by agreement of the parties. In the meantime there is inevitably a twilight period of some uncertainty. During this period the lessor is, on the principle stated by Parke B., precluded from treating the terms of the lease or the covenants in the lease as on foot as against the lessee; but the lessee who has not elected to determine the lease can seek to rely on and enforce the covenants in the lease against the lessor …”
In my view, the legal position is that when a lessor serves a forfeiture notice and seeks to enforce it by ejectment proceedings or, alternatively, by counterclaiming in the lessee’s action seeking relief against forfeiture for a declaration that the lessee is not entitled to such relief, thereafter the lessor is not entitled to treat the terms of the lease as binding the lessee. This means that the lessor is not entitled to invoke the rent revision procedure in the lease with a view to either the quantification of the arrears of rent due by the lessee or the quantification of the mesne profits to which the lessor will be entitled, if the court enforces the forfeiture, or what will be the passing rent, if the lease continues, the lessee having been granted relief against forfeiture.
Apart from the fundamental principle that, once he has elected for forfeiture, the lessor cannot rely on the provisions of the lease going forward, there is another reason why the argument of the first defendant that the implementation of the rent review procedure during the limbo period before determination of the lessee’s claim for relief against forfeiture has necessary relevance is incorrect. If it is determined against the lessee at the urging of the lessor, the lessor’s monetary entitlement from the date of the termination of the lease will be to mesne profits. As is pointed out in Wylie at para. 27.17, formerly there was a rule of thumb that mesne profits would be assessed at the same rate as the former rent no matter how long that rent had operated. However, modern courts tend to assess a fair market rent or thereabouts though this may be affected by factors such as the short-term nature of an overholding period in most cases and that the tenant is departing at the end of the period. Thus the quantification of mesne profits may or may not take account of revised rent determined in accordance with the rent review provisions of the lease. That is a matter for the trial judge. The important point is that the fact that an assessment of mesne profits may have to be made in the proceedings in the Circuit Court (Record No. 242/05) is not a basis for concluding that implementation of the rent review is of necessary or any relevance.
Application of the law to the facts
When the first defendant applied to the Society to appoint an arbitrator pursuant to the provisions of the Lease, the Lease was already the subject of three forfeiture notices and the first defendant had commenced ejectment proceedings on title (Record No. 534/05) in the Circuit Court to enforce the forfeiture. In those circumstances, the first defendant was not entitled to invoke the rent revision provision of the Lease or seek to have an arbitrator appointed. His attempts to do so were wholly ineffective. The “waiver” by the first defendant of the three forfeiture notices served in 2005 in January, 2006 could not have given those actions retrospective efficacy.
As regards the current position, even if the first defendant’s ejectment proceedings (Record No. 534/05) no longer exist, the first defendant served a forfeiture notice on the plaintiff on 8th February, 2006. Before these proceedings commenced, the first defendant’s solicitors wrote to the plaintiff on 12th April, 2006 referring to that forfeiture notice and confirming that the Lease was validly forfeited and is no longer in existence. In the amended defence and counterclaim delivered by the first defendant on 22nd September, 2006 in the Circuit Court proceedings (Record No. 242/05), as I have already recorded, the first defendant claims a declaration that the plaintiff is not entitled to relief against forfeiture and seeks possession of the property, if necessary, and also seeks mesne rates. In the circumstances, the first defendant is not entitled to pursue the review of the rent initiated in 2005. If it transpires that the plaintiff is granted relief against forfeiture, the first defendant will be entitled to invoke the rent review provisions in the Lease de novo.
The position of the Society/second defendant
I think it is only fair to record that I consider that it is entirely understandable that neither the Society nor the second defendant appreciated the implications of the actions which the lessor had taken both before and after the application to have an arbitrator appointed on the status of the Lease.
As the reality of this case is that the invocation of the rent review procedure by the first defendant at the time he invoked it was a nullity, I consider that the appropriate course is to make an order to the effect that the appointment of the second defendant as arbitrator was null and void, rather than an order setting aside the appointment under the Act of 1954, which, in my view, never had any application to the relationship of the parties hereto.
Orders
There will be an order declaring that the appointment of the second defendant as arbitrator was null and void. There will also be an injunction in the terms of para. 2 of the prayer on the endorsement of claim on the special summons.
Approved: Laffoy J.
Foley & Anor v Mangan
[2009] IEHC 404
Judgment of Miss Justice Laffoy delivered on the 24th day of August, 2009.
The Proceedings
In these proceedings, which were initiated by plenary summons which issued on 28th July, 2006, the plaintiffs claim a declaration that a lease dated 12th October, 2004 (the lease) made between the plaintiffs and the defendant has been terminated by forfeiture. They also claim an order for possession of the lands demised by the lease, together with arrears of rent and mesne rates. The simplicity of the case pleaded by the plaintiffs belies the complex nature of the transactions between the parties, of which the lease was only one element. It is necessary to consider the underlying transactions before considering the case as pleaded.
The underlying transactions
The factual background to the underlying transactions is that prior to 2004 both the defendant and the plaintiffs were engaged in farming and grain production in North County Dublin. The plaintiffs were seeking to expand their operations and were looking for suitable lands for that purpose. At the time, the defendant, who owned a farm, which included a grain storage facility, in the Garristown area of North County Dublin, was under financial pressure and was interested in selling the lands. The parties were introduced by a Mr. J. J. Sullivan, who facilitated negotiations between them, the outcome of which was an agreement that the defendant would sell the lands to the plaintiffs, but there would be a lease back in favour of the defendant for a period of four years and nine months and the defendant would also have an option to re-purchase the land during the term of the lease. The composite agreement between the parties was formalised in three documents, namely:
(1) a contract for sale dated 1st October, 2004 (the sale contract);
(2) the lease; and
(3) an option agreement dated 12th October, 2004 (the option agreement).
It is necessary to consider the three documents in some detail. The parties had separate legal representation in relation to the composite agreement.
The sale contract was in the standard form General Conditions of Sale (2001 Edition) published by the Law Society. By virtue of the sale contract the defendant agreed to sell to the plaintiffs for €4,000,000 certain lands registered on three County Dublin folios, which I will refer to as “the sold lands”, which comprised 205 acres. The special conditions in the contract which are of relevance for present purposes are:
(a) special condition 12, which was in the following terms:
“This Contract is conditional upon the parties hereto (sic) entering into a four year nine month Letting Agreement with the [defendant] in the terms of the draft Agreement annexed hereto. The commencement date for which shall be the day of closing of this transaction (sic). The granting of the Letting Agreement by the [plaintiffs] shall be conditional upon the [defendant] making available to the [plaintiffs] an alternative bank of land for tillage purposes amounting to no less than 205 acres at a location or locations of the [defendant’s] choosing within the vicinity of the property in sale for the duration of the Letting Agreement”
and
(b) special condition 13, which provided that the contract was conditional upon the parties entering into an Option Agreement in the terms of the draft annexed thereto.
A further special condition, special condition 14, which provided that the sale included “agricultural entitlements” referable to approximately 204 acres and that €100,000 of the purchase price was attributable to those entitlements, has been the subject of separate summary proceedings in this Court, which apparently were settled. The issues which arose between the parties out of that special condition, in my view, are relevant to the issues with which the Court is now concerned only to a very limited extent.
The sale was closed on 12th October, 2004 and the lease was entered into on that day, as was the option agreement.
The lease created a demise of all of the sold lands together “with all buildings, sheds, cattle yards, stores, etc.” but with the exception of two grain stores and an area of hard standing. It provided for shared access to and use of a weigh bridge. I will refer to the premises demised to the defendant as “the demised premises”. The term created was four years and nine months from 11th October, 2004 to 10th July, 2009. The rent reserved by the lease was set out in clause 3 and was €67,500 per annum, payable in two halves on 25th March and 25th September in each year. It was “divided” between, or apportioned to, distinct parts of the demised premises as follows:
(i) €25,000 per annum was apportioned to the lands and what was described as “the old yard”; and
(ii) the balance, €42,500, was apportioned to what was described as “the new yard, grain stores, weigh bridge, etc.”.
An important factor, which does not appear on the face of the documentation, but which it is common case was agreed between the parties, was that the apportioned rent of €25,000 in respect of the lands would be discharged by the defendant complying with his obligation under special condition 12 of the sale contract to make available to the plaintiffs an alternative bank of land amounting to no less than 205 acres. The intention of the parties was that the defendant would take land on conacre from landowners in the vicinity and pay for it and make it available to the plaintiffs. It was never intended that the defendant would pay a money rent of €25,000 to the plaintiffs in respect of the land and old yard.
The other provisions of the lease which are invoked in these proceedings are as follows:
(a) clause 6 under which the defendant undertook to work and cultivate the lands in a good and workmanlike manner and in accordance with proper methods of husbandry and to keep the lands free from the growth of thistles and other noxious weeds;
(b) clause 7 under which the defendant agreed that he would “not commit or suffer any waste, spoil or destruction on the said lands or do or suffer to be done thereon anything which may be or become a nuisance or annoyance to the [plaintiffs] or the occupiers of adjoining land”;
(c) clause 9 under which the tenant agreed to –
“take out and maintain public liability and employers’ liability insurance covering any liability, loss, claim or proceedings in respect of the Farm with cover of not less than €10,000,000.00 on any one claim …”; and
(d) clause 10, which, in addition to a statement that the lease was strictly personal to the defendant and could not be assigned or sub-let, contained a proviso for re-entry in the following terms:
“… in the event of any instalment of the rents mentioned in Paragraph 3 hereof being in arrears for twenty one days after becoming due or if there be any breach or non-performance by the [defendant] of any of the terms and conditions of this Lease, the [plaintiffs] shall be entitled to re-enter upon the said lands or any part thereof in the name of the whole and thereupon this agreement shall immediately terminate”.
In the Option Agreement it was agreed that the defendant would have the option of purchasing the sold lands, excluding a five acre plot immediately adjoining the yard. The option was exercisable by giving at least twelve months’ notice and paying a non-refundable deposit of €100,000 on any of four specified dates, the last of which was 11th July, 2008. The option price varied depending on when the option was exercised and the sale closed. If it was exercised on 11th July, 2008 to close in July 2009 the option price was to be €5,850,000 together with the plaintiffs’ legal costs, VAT and outlays. The important provision of the Option Agreement for present purposes is clause 7 which provides as follows:
“This Option shall only be exercisable in the event that the [defendant] has paid the rent provided for under the [lease] … and that the [lease] has not been terminated”.
Events subsequent to 12th October, 2004 and prior to the initiation of these proceedings
The defendant continued in occupation of the demised premises after 12th October, 2004. The first moiety of the rent was due on 25th March, 2005. On 14th March, 2005 the plaintiffs (as Liam Foley & Sons, Agricultural Contractor) sent an invoice directly to the defendant claiming €21,250, being a moiety of the rent of €42,500 due in respect of the new yard on 25th March, 2005. The covering letter expressly stated that there would be no rent due for the lease of the land, as the defendant had provided the plaintiffs with two hundred acres elsewhere. The defendant duly paid the sum of €21, 250. Despite that clear and unequivocal statement, the evidence of the second plaintiff was that the defendant had not complied with his obligation under special condition 12 in the sale contract at the time.
Up to the summer of 2005 the defendant was continuing to conduct his grain business in the new yard and the plaintiffs were using the grain stores, hard standing and use of the weigh bridge excepted out of the lease for the purposes of their grain business. During the summer, negotiations took place between the defendant and the plaintiffs for the sale by the defendant of his grain business to the plaintiffs. Once again, Mr. Sullivan facilitated the negotiations. Ultimately, an Asset Sale Agreement dated 20th July, 2005 (the Asset Sale Agreement) was executed by the defendant and the plaintiffs. The plaintiffs’ solicitors, but not the defendant’s solicitors, were involved in this transaction, the defendant’s evidence being that he decided not to involve his own lawyers because he felt it was a straightforward, simple agreement. In broad terms, the Asset Sale Agreement provided for the sale by the defendant to the plaintiffs of his grain business, his customers database and general goodwill of the business and the equipment and machinery, which was itemised in a schedule, at a price of €326,000. It was also provided that the meal and grain in the sheds, the property of the defendant, would be weighed and paid for separately at the standard rate. The Asset Sale Agreement was a complex document and, as one would expect in a contract for the sale of a business as a going concern, it contained warranties and indemnities by the defendant as vendor and he entered into restrictive covenants with the plaintiffs. At a more basic level, there was even a specific provision that the plaintiffs would make available to the defendant at a nominal rent of €100 per annum, and a contribution of €500 per annum towards electricity, a small section of the grain shed for the defendant’s own cattle feed for a period of two years.
The Asset Sale Agreement was duly completed around 1st August, 2005. Its completion had a number of consequences which are relevant in the context of these proceedings. First, on completion the defendant surrendered to the plaintiffs the portion of the demised premises to which the apportioned rent of €42,500 per annum attached, that is to say, “the new yard, grain stores, weigh bridge, etc.”. It is common case that after 1st August, 2005 the defendant had no continuing liability for the apportioned rent of €42,500 per annum payable under the lease in respect of the new yard. Secondly, there is a dispute as to whether the defendant remained liable for the rent which had accrued in respect of the new yard between 25th March, 2005 and 1st August, 2005. The plaintiffs contend that he did, whereas the defendant says that, as part of the Agreement in relation to the sale of the business, it was agreed that the accrued rent would be waived, as the defendant put it, “rolled up in the agreement”. Both sides have put the rent outstanding at 1st August, 2005 at €10,625, representing three months’ rent, although almost ten months had elapsed from the commencement of the lease to 1st August, 2005 and the rent had only been paid in respect of a half year on 21st March, 2005.
It seems to me to be highly improbable that, in a context in which the plaintiffs paid €12,500 by way of deposit on 20th July, 2005 and €313,500 on completion of the Asset Sale Agreement and a further agreed sum, which according to the defendant’s evidence was €12,000 or thereabouts, later in the month of August, 2005 in respect of the defendant’s grain, the defendant was left with outstanding liability to the plaintiffs for rent of €10,625 at the conclusion of this complex transaction. The plaintiffs point to the fact that the rent was not mentioned in the Asset Sale Agreement. That is true, but, more significantly, the surrender of the leasehold interest in the new yard, grain store and weigh bridge was not addressed at all in the Asset Sale Agreement, but rather the surrender was effected by act of surrender, that is to say, by the defendant vacating, and the plaintiffs assuming possession, of the premises. Mr. Sullivan, the facilitator, who was nominated as an arbitrator by both parties in the sale contract to determine “all disputes concerning the operation of ‘the lease’ on the basis that his decision would be binding on both sides”, testified that he was involved in the negotiations leading to the Asset Sale Agreement and that his recollection is that there was to be a clean break – that the deal that was struck was that the defendant would owe the plaintiffs nothing. I think it is probable that the basis on which the deal was concluded was that the plaintiffs would get the business, the moveable assets and the surrender of the leasehold interest in the new yard and grain stores for the agreed price and would pay an additional amount at an agreed rate for the grain and that the defendant would be discharged from liability for the rent which had accrued under the lease in respect of the new yard and grain stores. I so find.
The next event which is documented is a letter of 14th December, 2005 from the plaintiffs’ solicitors directly to the defendant in which it was stated that, the defendant having “failed, refused or neglected to pay the second instalment of rent due on 25th September, 2005 pursuant to the terms of the lease”, without specifying the amount outstanding, the plaintiffs were entitled to terminate the lease and enter upon the demised lands. It was also stated that the option to buy back was no longer exercisable by virtue of clause 7 of the Option Agreement. There was no allegation of any other breach of covenant. I surmise that it is of significance that approximately contemporaneously with that letter a third party had obtained a conditional order of garnishee which prevented the plaintiffs receiving payment from the Department of Agriculture and Food on foot of the sale of the “entitlements” referred to in special condition 14 of the sale contract, which was also alluded to in the letter of 14th December, 2005. The defendant responded through his solicitors, by a letter of 4th January, 2006, that he was not in any way in breach of the terms of the lease and that the lease and the Option Agreement remained valid and binding on the parties. There followed a letter of 18th January, 2006 from the plaintiffs’ solicitors to the defendant’s solicitors, which made no reference to the defendant’s solicitors’ response but complained that the land being provided by the defendant in satisfaction of his obligation under special condition 12 in the sale contract was short by in or about 65 acres. That complaint did not elicit any response from the defendant’s solicitors and it was not followed up by the plaintiffs’ solicitors. The issue of the shortfall was dealt with by the parties themselves.
What has been relied on by the plaintiffs as constituting , and was stated therein to be, a forfeiture notice within the meaning of s. 14 of the Conveyancing Act 1881 (the Act of 1881) is a letter of 2nd March, 2006 from the plaintiffs’ solicitors directly to the defendant. In that letter the defendant was given notice of the following alleged breaches of the lease:
(1) a breach of clause 3, in that it was contended that the defendant owed €31,875 representing nine months’ rent “on the new yard etc.”, which “became due in September 2005” and remained outstanding – a claim which was patently incorrect and was not persisted in, it being the plaintiffs’ case at the hearing that the outstanding rent in respect of the new yard is €10,625;
(2) a breach of clause 8 (this should obviously refer to clause 7), in that it was alleged that the defendant permitted waste by keeping cattle in the sheds and allowing slurry to escape into the yard and waterways over an extended period of time; and
(3) a breach of clause 9, in that it was alleged that the defendant had failed to take out and maintain public liability and employers’ liability insurance cover.
The defendant was called upon to discharge the rent due and to remedy the other breaches of covenant within three weeks of the date of the receipt of the notice, on pain of the plaintiffs having no option but to exercise their right under clause 10 of the lease to forfeit the same for breach of covenant, if he failed to do so.
The response of the defendant’s solicitors to that notice, in their letter of 24th March, 2006, was as follows:
(a) It was stated that it was the defendant’s understanding that as part of the deal involved in the Asset Sale Agreement all rental payments in respect of the yard for the period from the commencement of the lease to that date were considered discharged in full.
(b) As regards clause 7, it was contended that it referred to “waste of the lands” and did not refer to the cattle yard. Apart from that, it was contended that there was no escape of slurry from the yard and that the defendant had not allowed slurry into the adjoining waterways at any time.
(c) In relation to clause 9, it was stated that the defendant did have public and employers’ liability insurance cover in place. In fact, with an earlier letter of 10th March, 2006, the defendant’s solicitors had furnished a letter from FBD Insurance confirming that there was employers’ liability and public liability insurance in place for the demised premises, with the limit of indemnity for public liability being €2,600,000, any one accident being unlimited in any one period of insurance, and the limit of indemnity for employers’ liability being €13,000,000, any one occurrence being unlimited.
Two aspects of that response elicited no reaction from the plaintiffs’ solicitors. First, they did not address the defendant’s solicitors’ contention that there was no rent due in respect of the new yard, although invited to clarify the position and furnish invoices. Secondly, no question was raised as to the adequacy of the insurance cover. It was not until the hearing of the action that an issue was made that the lease required cover of not less than €10,000,000 on any one claim in respect of public liability and employers’ liability. In March 2008 the plaintiffs’ solicitors were furnished with a copy of the relevant policy, which was in conformity with the letter of 10th March, 2006, which covered the period from 10th March, 2008 to 9th March, 2009. A copy of a similar policy for the period 10th March, 2007 to 9th March, 2008 had been furnished to the plaintiffs’ solicitors on 27th September, 2007.
In relation to the remaining matter raised in the notice of 2nd March, 2006, the question of waste, subsequently, by letter dated 26th June, 2006, the plaintiffs’ solicitors sought a copy of a notice (the statutory notice) under s. 12 of the Local Government (Water Pollution) Act 1977, as amended by the Local Government (Water Pollution) (Amendment) Act 1990, which they understood (incorrectly as it transpired) had been served on the defendant on 27th April, 2004 in relation to the demised premises. The response of the defendant’s solicitor by letter dated 27th June, 2006 was that no such notice had been served. A notice dated 27th April, 2006 had been served in relation to the demised premises, but it had been addressed to and, presumably, served on the defendant’s brother, Raymond Mangan, who, according to the defendant’s evidence, managed the defendant’s herd at the time and also mixed in animals from his own herd with the plaintiffs’ herd, in the yard and sheds on the demised premises. The notice required certain measures to be taken, namely:
(i) all soiled water originating on the farmyard was to be stored in suitably sized storage tanks and spread on the land as per the guidelines in the Nitrates Directive (91/676/EEC), because, it was stated, the current soiled water/slurry storage facilities on the farmyard were not sufficient for the anticipated volumes that were being generated in the farmyard;
(ii) all silage harvested for the 2006 season was to be bailed and stored in a suitable location on the farmyard, and specifically no unbailed silage was to be stored in the existing silage bay, due to the poor condition of the concrete base and the inadequate storage and collection system for silage effluent; and,
(iii) as of midnight on Friday, 28th April, 2006 no animals were to be housed or over wintered in the farmyard until such time as Fingal County Council was satisfied that there was adequate soiled water/slurry storage facilities installed and all uncontaminated water, i.e. roof drainage, discharged separately to the adjacent watercourse.
The notice stipulated that the foregoing measures were to be taken by 12:00 midnight on Friday 28th April, 2006.
Apart from a letter of 28th June, 2006 from the plaintiffs’ solicitors, asserting that the defendant had told the plaintiffs that he had received a notice from Fingal County Council, no further correspondence passed between the parties’ respective solicitors prior to the plenary summons issuing on 28th July, 2006.
The case as pleaded
As I stated at the outset, the case as pleaded is simple. Alleged breaches of the obligation to pay rent and of clauses 7 and 9 of the lease are pleaded in the statement of claim delivered on 21st August, 2006, as is the proviso for re-entry in the lease (clause 10) and the notice of 2nd March, 2006 and that the defendant failed to remedy the breaches alleged in it within three weeks or the extension for a further three weeks of that period. It is also pleaded that the plaintiffs were thereby terminating the lease pursuant to clause 10. There is also an allegation, which was not the subject of a prior complaint, and does not require to be addressed further, that the defendant had failed to comply with his obligations under clause 6 and keep the lands free from thistles and other noxious weeds.
The total arrears of rent alleged to be due and owing by the defendant according to the statement of claim was €50,625. As clarified by the plaintiffs’ solicitors’ replies to a notice for particulars delivered on behalf of the defendant, €31,875 of the total sum was alleged to be due in respect of the rent which fell due in respect of the new yard, grain stores and weigh bridge. That allegation was incorrect to the extent, as was admitted, that the sum alleged to be due and unpaid on 25th March, 2005, €21,250, had in fact been paid. As regards the balance of €10,625, I have already made a finding that it was not due on 25th September, 2005, because I have found that whatever sum would have been outstanding on 1st August, 2005 was subsumed in the consideration for the Asset Sale Agreement. The remainder of the total, €18,750, was claimed as arrears of rent in respect of the land and the old yard, which it was alleged fell due in respect of the period from November, 2004 to July, 2005 and became payable on 20th July, 2005. That was patently incorrect, in that it was clearly and unequivocally acknowledged in the letter of 14th March, 2005 that there was no rent due for the land for the first year of the term of the lease.
Although it was not pleaded at all, part of the plaintiffs’ case at the hearing, and a time consuming aspect of the case, was that the defendant was in default in relation to his obligation to pay rent under the lease by reason of the fact that the land which had been made available by him throughout the remainder of the term after the first year did not fulfil his obligations under special condition 12 in the sale contract. I will return to this aspect of the matter.
The sum claimed by the plaintiffs in their pleadings for arrears of rent is €50,625.00 together with mesne rates from the date of issue of the plenary summons, 28th July, 2006.
In the defendant’s defence, which was not delivered until 18th June, 2007, which demonstrates a certain leisurely approach on all sides to the matters which provoked these proceedings, it is denied that there was any rent due under the lease, on the basis that the price paid by the plaintiffs on foot of the Asset Sale Agreement was calculated on the basis, and it was expressly agreed that, the rent payable in respect of the new yard up to the date of completion of that Asset Sale Agreement was considered to have been paid in full. It is also denied that there was any breach of clause 7 or clause 9 of the lease. While admitting the service of the notice dated 2nd March, 2006, it is denied that it was a valid or effective notice for the purposes of s. 14 of the Act of 1881. It is also alleged that the notice was not motivated by any bona fide desire to ensure compliance with the covenants in the lease but sought to contrive a forfeiture in the hope of forfeiting the defendant’s rights under the option agreement. There is a denial of the entitlement of the plaintiffs to forfeit the lease. There is also an assertion that, since the proceedings had issued, the plaintiffs had waived the forfeiture by accepting the provision of alternative land in lieu of rent. Finally, without prejudice to the defence, the defendant seeks relief against forfeiture.
The plaintiffs in their reply have joined issue with all of the assertions of the defendant in his defence.
The issues raised on the pleadings
Against the factual background which I have outlined, the issues raised on the pleadings which the Court has to determine are as follows:-
(1) Whether there was a default by the defendant in his obligation to pay rent under the lease, so as to give rise to an entitlement on the part of the plaintiffs to re-enter under the terms of the lease or a common law.
(2) Whether there was a breach of either clause 7 or clause 9 of the lease prior to the service of the notice of 2nd March, 2006.
(3) If there was a breach of the defendant’s obligation under either clause, whether the notice of 2nd March, 2006 was a valid forfeiture notice for the purpose of s. 14 of the Act of 1881.
(4) If the defendant was in breach of either clause 7 or clause 9, and if the notice of 2nd March, 2006 was a valid forfeiture notice, whether the defendant had remedied the alleged breach or breaches prior to the initiation of the proceedings.
(5) If the initiation of the proceedings effected a forfeiture, was the forfeiture waived by the conduct of the plaintiffs subsequently.
(6) Alternatively, if the plaintiffs were entitled to forfeit the lease when these proceedings were initiated, whether the defendant is entitled to relief against forfeiture, either equitable relief against forfeiture or statutory relief under s. 14 of the Act of 1881.
I will deal with each of the issues, either singly, or, where appropriate, in conjunction with others.
Default in obligation to pay rent?
Having found that there was no default in relation to payment of the part of the rent attributable to the new yard and grain stores in respect of the term up to the time of the surrender of the lease in relation to that part of the demised premises on 1st August, 2006, the issue of fact which remains is whether there was default in payment of the rent in kind attributable to the land by discharge of the obligations of the defendant pursuant to special condition 12 of the sale contract.
In respect of the first year of the lease from October 2004 to October 2005, on the basis of the clear and unequivocal acknowledgement in the letter of 14th March, 2005 that special condition 12 had been complied with, I find that there was no default in that year, so that there was no default whatsoever in relation to rent when the plenary summons issued.
As I have already indicated, in the second year from October 2005 to October 2006 there was a complaint in the letter of 18th January, 2006 that the defendant was short by about 65 acres in making available alternative land. The defendant’s evidence was that land comprising 47 acres at Kilmartin was offered in December 2005 or early January 2006 to the plaintiffs and was accepted by the plaintiffs. The second plaintiff’s evidence was that the land was not acceptable. Having regard to the fact that the complaint in the plaintiffs’ solicitors’ letter of 18th January, 2006 was not followed up, I accept the evidence of the defendant that the land at Kilmartin was accepted by the plaintiffs as fulfilling the defendant’s obligation in respect of rent in relation to the lands. Having made that finding, it is necessary to refer to a distinction which the plaintiffs made on the evidence as to the exploitability of the land to which they were entitled under special condition 12. The distinction was between –
(1) land in respect of which the plaintiffs were only able to claim Area Aid from the Department of Agriculture and Food, in respect of which the plaintiffs were able to claim €155 per acre, but which land was unsuitable for tillage, and;
(2) land which was additionally croppable or sowable, in the sense that the plaintiffs could use it for sowing winter wheat, as was their intention, which, on their case, would have netted them a further return of €200 profit per acre.
As a matter of construction of special condition 12, I conclude that, as the wording expressly indicates, what was intended was that the plaintiffs would get 205 acres which were suitable for tillage, not merely that they would get 205 acres in respect of which they could claim Area Aid. However, as I have found, the fact is that in the second year of the term of the lease the plaintiffs accepted the land proffered and did not make any formal complaint that the rent due under the lease was in arrears by reason of the plaintiffs not having been provided by the defendant with 205 acres all of which were suitable for tillage. Nor was any formal demand made for the rent in kind alleged to have been in arrears.
There was a considerable amount of interaction between the parties in relation to the compliance by the defendant with his obligation to furnish the alternative 205 acres of land for tillage in the third year of the term, that is to say, the year from October 2006 to October 2007, which covered the 2007 harvest. Some of the correspondence was directly between the parties and some was channelled through their solicitors, although, it is only fair to record that the involvement of the parties’ solicitors in relation to the practicalities of fulfilment of special condition 12 was sporadic. Neither strain of correspondence is conclusive. In particular, the correspondence between the solicitors, which concluded with the defendant’s solicitors’ letter of 5th February, 2007, and which seemed to be heading towards some consensus, had proceeded on the basis of an assumption that a certain area comprising 72 acres was available to the plaintiffs. It subsequently transpired that the assumption was erroneous. The defendant continued through April and May 2007 to proffer alternative parcels of land to the plaintiffs. However, the plaintiffs neither accepted nor rejected the defendant’s offers in writing. There was a conflict of evidence between the second plaintiff and the defendant as to whether the defendant had fulfilled his obligation. The defendant’s evidence was that he had made available a greater acreage than he was obliged to, 251 acres, whereas it was the second plaintiff’s evidence that only 198 acres had been made available, of which 128 acres had been proffered late in the season and was not of a quality suitable for tillage. Once again, there was no formal demand made by the plaintiffs for the rent in kind alleged to have been in arrears.
In the following year of the term, from October 2007 to October 2008, covering the 2008 harvest, there was no complaint in writing from the plaintiffs as to the quality of the lands proffered by the defendant. There was a conflict of evidence, in that it was the evidence of the second plaintiff that the plaintiffs received only 175 acres, whereas the defendant’s evidence was that they were given 202 acres and contemporaneous documentary evidence corroborated the defendant’s version. There was no formal demand from the plaintiffs for the rent in kind alleged to have been in arrears.
In the final nine month period of the term from October 2008 to July 2009, which was still running at the time of the hearing, there were complaints from the plaintiffs as to the quality of the land being proffered. The final position prior to the hearing is reflected in a letter dated 16th October, 2008 from the defendant to the plaintiffs confirming acceptance of four parcels comprising 230 acres and agreement that one of the parcels would be limed at the expense of the defendant. Despite that letter, to which there was apparently no response from the plaintiffs; the evidence of the second plaintiff was that only 190 acres had been made available.
Even though there were conflicts on the oral evidence between the second plaintiff and the defendant as to the croppable acreage which the plaintiffs received for the 2007 harvest, the 2008 harvest and the 2009 harvest, I am satisfied that the defendant made every effort to comply with his obligation under special condition 12 of the sale contract. I am also satisfied that the ultimate outcome in relation to each season was that the plaintiffs accepted the land made available by the defendant as satisfying his obligation in relation to the payment of the rent in kind reserved by the lease in respect of the land and the old yard. It was acknowledged by the first plaintiff that, as he put it, “at the end of the day” the plaintiffs had to accept the land made available. The absence of any sustained formal complaints by the plaintiffs or any formal demand for compliance by the defendant with his obligation to pay rent in respect of the land by compliance with special condition 12 of the sale contract must be regarded as amounting to acceptance by the plaintiffs of compliance on the part of the defendant. I so find.
Although forfeiture for non-payment of rent is expressly excluded from the operation of s. 14 of the Act of 1881, even if the plaintiffs had got less alternative land suitable for tillage than they bargained for, having regard to the manner in which they conducted their dealings with the defendant over the term of the lease, they would have an insoluble problem in translating the defendant’s failure in that regard into a breach of the defendant’s obligations under the lease, which would have given the plaintiffs a right at common law or under contract of re-entry on the demised premises and forfeiture of the lease. As is pointed out in Wylie on Landlord and Tenant Law (2nd Ed.,) at para. 24.09, at common law the rule was that a landlord had to make a formal demand for the rent before he could invoke a right of re-entry. However, this was usually dispensed with, as a matter of contract, by an express provision in the re-entry clause – by words such as “whether formally demanded or not”. As will be clear from clause 10 of the lease, the relevant portion of which I have quoted earlier, it contained no such express provision which would have excluded the necessity for a formal demand. Not only was there no formal demand by the plaintiffs on the defendant, but at no stage, either before these proceedings were initiated or in the course of the proceedings, were the alleged arrears of rent for the second and subsequent years of the term at any time quantified in money terms by the plaintiffs. That would have been theoretically possible by identifying the alleged shortfall in the acreage provided by the defendant against his contractual obligations and multiplying it by €121.95 (€25,000 ÷ 205), the notional rent per acre or, indeed, €125.00 per acre, which the defendant utilised consistently in demonstrating compliance in his correspondence with, and in invoices issued to, the plaintiffs.
In summary, I have found that, when the notice of 2nd March, 2006 was served and the plenary summons issued, the defendant did not owe any rent in respect of the new yard and the grain stores for any period prior to the surrender of those premises to the plaintiffs. Nor did the defendant owe any rent to the plaintiffs in respect of the land and old yard, as pleaded in the statement of claim or at all. For those reasons, the plaintiffs’ case for forfeiture as pleaded, based on alleged arrears of rent, is not sustainable. Furthermore, the case made for the first time at the hearing on behalf of the plaintiffs, which was not pleaded, that the failure of the defendant to comply with his obligation under special condition 12 of the sale contract post the commencement of these proceedings has given rise to a right of re-entry for non-payment of rent, even if such failure was established, which I am satisfied is not the case, is misconceived, in the absence of a formal demand for rent.
Accordingly, the plaintiffs’ claim that they have forfeited the lease for non-payment of rent fails.
Breach of clause 7 or clause 9?
Unlike the position in relation to forfeiture for non-payment of rent, which by virtue of subs. (8) thereof is expressly excluded from the operation of s. 14 of the Act of 1881, that section restricts forfeiture for breach of any covenant such as a covenant of the types contained in clause 7 and clause 9. Section 14(1) provides as follows:
“A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and, in any case, requiring the lessee to make compensation in money for the breach, and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.”
The only notice relied on by the plaintiffs in this case as constituting a notice for the purposes of s. 14(1) is the notice of 2nd March, 2006. Therefore, as regards the alleged breaches by the defendant of his obligations under clauses 7 and 9, the first issue is whether the defendant was in breach of either prior to 2nd March, 2006. If he was, then the issue whether the notice of 2nd March, 2006 complied with s. 14(1) arises in relation to that breach. If it did, then the final issue as to the enforceability of the right of forfeiture is whether, when the plenary summons issued on 28th July, 2006, the defendant had been allowed a reasonable time in which to remedy the breach and whether he had done so.
Different considerations apply to the application of s. 14 to clause 7 and to clause 9. Accordingly, I propose to consider them separately.
Clause 7
To recapitulate, under clause 7 the defendant agreed not to commit or suffer any waste or to do or suffer anything which might be or become a nuisance or annoyance to the plaintiffs or adjoining occupiers. The breach alleged by the plaintiffs in the notice of 2nd March, 2006 was that the defendant had permitted waste by keeping cattle in the sheds and allowing slurry to escape into the yard and waterways over an extended period of time. The argument made on behalf of the defendant in response – that in referring to “the said lands” clause 7 was not referring to activities in the yard – was wholly specious. Clause 7 clearly refers to all of the demised premises.
As I understand the evidence, the plaintiffs’ complaint was not so much that the defendant was over-wintering cattle in the sheds which he held under the lease but rather the complaint was that, having regard to the numbers of cattle involved and the manner in which they were housed and the state and condition of the sheds and the ancillary facilities, the yard and the surrounding areas were being polluted because of the escape of slurry.
On behalf of the plaintiffs, evidence in relation to waste and pollution was given by the second named plaintiff, two members of the firm of Philip Farrelly & Company, Agricultural Consultants, namely, Freda Salley and Philip Farrelly, and Seamus Phelan of Teagasc. Philip Farrelly & Company were clearly instructed after these proceedings were commenced. Ms. Salley inspected the locus on 25th January, 2007, on 1st June, 2007 and on 22nd October, 2008. Mr. Farrelly visited the locus with Ms. Salley on 1st June, 2007. A comprehensive report dated 22nd August, 2008 of Philip Farrelly & Company was put in evidence. Counsel for the defendant objected to the evidence of the witnesses from Philip Farrelly & Company on the basis that it did not relate to the condition of the farm on the date of the purported forfeiture. While the evidence was admitted de bene esse, I am satisfied that it is pertinent to the issues which have to be decided arising out of the allegation that clause 7 was breached by the defendant and that the breach was not remedied.
No expert evidence was adduced on behalf of the defendant. The defendant himself gave evidence, which was vague and imprecise. Indeed, apart from Mr. Sullivan, he was the only witness for the defence. In general, I formed the view that he demonstrated quite a cavalier approach to his obligations under clause 7.
On the basis of the evidence of the second named plaintiff, which I accept as being accurate on this issue, I am satisfied that there was inadequate slurry and pollution control on the demised premises during the period from the commencement of the lease to 2nd March, 2006 due to the manner in which the cattle were housed, the state of repair of the housing, the absence of proper drainage and storage facilities for contaminated runoff in the animal housing sheds, dungsteads, manure pits, the silage pits and so forth. I am satisfied that what Ms. Salley and Mr. Farrelly observed in 2007 was happening in 2006, perhaps with more serious consequences in 2006. I am also satisfied that the plaintiffs had received complaints from occupiers of land in the vicinity of the farmyard and in turn made complaints to the defendant to no avail. Because of their concern, the plaintiffs retained Mr. Phelan to conduct water sampling, which he did on 1st February, 2006 and subsequently. An analysis of samples he took from a drain running along the farmyard on 1st February, 2006 disclosed coliforms above the accepted level, which was evidence of faecal contamination of the water. I am satisfied that the defendant’s farming activities and his use and the condition of the farmyard were the source of the contamination.
While no witness was called from Fingal County Council, the statutory notice dated 27th April, 2006 served in relation to the farmyard corroborates the plaintiffs’ evidence. The defendant took issue with some of the evidence adduced on behalf of the plaintiffs. For instance, he was adamant that there was a slurry tank which was covered over by cement slabs but served by a manhole located outside the yard gate, which was pumped out from time to time when the need arose. Neither Ms. Salley or Mr. Farrelly observed this tank and both were implicitly critical of its location and efficacy, if it existed. When the concept of waste was being explored with the defendant during cross-examination, he accepted that allowing pollution to run across the demised lands should not have happened. He implicitly accepted that it did happen. His evidence was that he tried to prevent and reduce it.
On the totality of the evidence I am satisfied that the defendant’s farming activities and use of the demised premises prior to 2nd March, 2006 had given rise to the escape of slurry and consequential pollution and contamination, which affected the plaintiffs and had the potential to affect occupiers of land in the vicinity of the demised premises. Accordingly, I am satisfied that the defendant had committed waste within the meaning of clause 7 and was in breach of clause 7.
In arriving at that conclusion, I have not ignored the submissions made on behalf of the defendant that the conduct on the part of the defendant complained of does not constitute waste. Counsel for the defendant correctly pointed out that there are two limbs to clause 7, one being a commitment not to commit or suffer waste and the other being a commitment not to do or suffer conduct which would amount to a nuisance or annoyance to the landlord or adjoining occupiers. It was submitted that the notice of 2nd March, 2006 invoked the first limb only and the conduct complained of could not constitute waste. In support of this submission, counsel for the defendant relied on a passage in Halsbury’s Laws of England (4th Ed., Re-issue) at para. 345 in volume 27(1) to the following effect:
“Waste consists of any act or omission which causes a lasting alteration to the nature of the land in question to the prejudice of the person who has the remainder or reversion of the land”.
It is clear from the next sentence that what the editors of Halsbury are addressing there is the liability of a tenant at common law, because they point out that the obligation not to commit waste is an obligation in tort, and is independent of contract or implied covenant. What the Court is concerned with here is not whether there is liability at common law or under an implied covenant; rather it is the interpretation of clause 7 and the application of the notice of 2nd March, 2009 to it. Apart from that, in advancing the argument that neither the escape of slurry from sheds to a yard nor the escape of slurry from the demised premises into waterways outside the demised premises, as opposed to into waterways within the demised premises, can constitute waste, the underlying assumption seems to be that damage to the reversion means physical damage to the land or buildings on the land. In my view, it would be absurd to construe a covenant in an occupation lease for a term of less than five years of farmland, farm buildings and a farmyard created in the first decade of the 21st century, under which lessee covenants not to commit or suffer any waste, as not being contravened where the lessee engages in conduct which results in the accumulation and escape of slurry, pollution and contamination, as not damaging the reversion, when the lessor may be faced with proceedings under statutory provisions governing waste management by public authorities and, perhaps, actions in nuisance or negligence by adjoining occupiers, which necessitate the taking of remedial action or the payment of compensation when the lease expires. To put it another way, the type of conduct of which the plaintiffs complain has the effect of increasing the burden on the reversion and, in my view, does constitute waste within the meaning of clause 7.
Turning to the adequacy of the notice of 2nd March, 2006 for the purposes of s. 14 of the Act of 1881, while it outlined the breach of clause 7 complained of in general terms, nonetheless, I am satisfied that it did adequately specify the particular breach complained of. As is pointed in Wylie (op. cit.) at para. 24.14, the notice need not go into specific details of the breach, e.g., in respect of repairs not done, so long as it indicates to the lessee what is required to effect a remedy. In my view, it is quite clear what was necessary to remedy the breach of clause 7 complained of: it was to take the appropriate steps in relation to the housing of cattle and the conduct of the farming operations so as to prevent slurry escaping into the yard and into the waterways. I am satisfied that, as regards the breach of clause 7, the notice was adequate as regards its content.
As regards identifying the time span allowed to the defendant in which to remedy the breach of clause 7 complained of by the plaintiffs with a view to determining whether it was reasonable, counsel for the defendant took issue with what counsel for the plaintiffs suggested was the proper interpretation and application of s. 14. The position adopted by counsel for the plaintiffs was that s. 14 does not require a time limit to be specified in the forfeiture notice itself, but the right of re-entry or forfeiture is not enforceable unless and until the lessee fails “within a reasonable time” after the service of the notice to remedy the breach complained of. Citing the decision of Browne-Wilkinson V.C., delivering the judgment of the Court of Appeal in Billson v. Residential Apartments Ltd., (No. 1) [1991] 3 All ER 265, it was submitted on behalf of the plaintiffs that the crucial period is the time which has elapsed between the service of notice and the initiation of the legal proceedings, in this case, the period from 2nd March, 2006 to 28th July, 2006. Counsel for the defendant took issue with that proposition, submitting that, where, as here, the lessor has stipulated a period of time in the forfeiture notice, the lessor is bound by it and it is that period which must be reasonable. Counsel for the defendant was unable to refer to any authority for that proposition but pointed out that in Campus and Stadium Ireland Development Ltd. v. Dublin Waterworld [2006] IEHC 200, in which judgment was delivered by Gilligan J. on 21st March, 2006, the issue had been canvassed but did not have to be decided. The passage in the judgment of Gilligan J. to which the Court was referred was in the following terms:
“The second aspect is the question of the period of time that was allowed to the tenant to comply with the notice of forfeiture and remedy the alleged breaches. Whether the time period was 28 days or 39 days, and taking into account all the circumstances of this case and bearing in mind that at all times since the commencement of dealings between the parties the defendant had the benefit of legal advisors, I do not believe that there was any real difficulty in the defendant, as tenant, complying with the requirements made of it in the notice of forfeiture.”
The reference in that passage to 28 days was the period stipulated in the forfeiture notice and the period of 39 days was the period which elapsed from the service of the forfeiture notice to the initiation of the proceedings by plenary summons.
In the Billson case Browne-Wilkinson V.C., in the relevant passage (at p. 273), noted that the forfeiture notice in that case did not limit a time within which the breach was to be remedied and continued:
“All that the statute requires is that a reasonable time to remedy the breach must elapse between the service of the notice and the exercise of the right of re-entry or forfeiture. If the actions of the lessee make it clear that he is not proposing to remedy the breaches within a reasonable time, or indeed any time, in my judgment a reasonable time must have elapsed for remedying the breaches once it is clear that they are not proposing to take the necessary steps to remedy the breach but are committing further breaches. If this were not the case, what would the landlord’s rights be if the defendant continues to commit the very breaches complained of by the section 146 notice after the date of its service? If he were to take proceedings to restrain further breaches of covenant, he would subsequently be faced with the contention ….. that the landlord had waived his right to forfeit by seeking to enforce the covenants. The only effective remedy of a landlord, faced with intransigent behaviour such as that of the defendant’s in the present case, must be to forfeit the lease on the grounds that whatever time was allowed the defendant was showing no intention of remedying the breach at all.”
The reference to s. 146 in that passage is to s. 146 of the Law of Property Act 1925, which is the analogue in England and Wales in s. 14 of the Act of 1881.
The basis on which counsel for the defendant argued that a lessor who stipulates a short time for remedying an alleged breach of covenant in a s. 14 notice should be bound by that period of time and its reasonableness or otherwise was that, if the lessor stipulates a period within which it is impossible to remedy the breach, the lessee is put at a disadvantage because he will see no point in starting something that he cannot finish in the stipulated time. In that hypothetical situation it is always open to the lessee to inform the lessor that the stipulated time is not sufficient and to seek an extension of it. If the lessor does not accede to the request, then he runs the risk of the stipulated time being held to be unreasonable in due course. However, the factual situation in this case is more akin to what happened in the Billson case than that hypothetical situation. As I have outlined, by his solicitor’s letter of 24th March, 2006, which was on the cusp of the three weeks period allowed in the notice of 2nd March, 2006, the defendant denied that there was any breach of clause 7. It seems to me that, accordingly, the rationale of the passage from the judgment of Browne-Wilkinson V.C. quoted earlier equally applies in this case. That denial and the subsequent conduct of the defendant suggested that the defendant had no intention of remedying the breach at all.
On that basis, for the purposes of the application of s. 14(1), the question is whether the period from 2nd March, 2006 to 28th July, 2006 represented a reasonable time within which to require the defendant to remedy the breach of clause 7. Having regard to the evidence of the second plaintiff, and to the evidence of Ms. Salley and Mr. Farrelly as to what required to be done I consider that it was, even though the evidence of the experts did not specifically address the length of time which would reasonably be involved in adopting the measures they recommended to remedy the breach. A period of almost five months elapsed between the 2nd March, 2006 and 28th July, 2006. As a matter of common sense, I have come to the conclusion that that was an ample period within which, if he was minded to do so, the defendant could have taken all the steps necessary to prevent waste and pollution from his farming operations in the farmyard and the farm buildings, subject, of course, to compliance with the requirements of Fingal County Council in the statutory notice.
It remains to consider what steps, if any, were taken by the defendant to comply with the notice requiring him to remedy the breach of clause 7 complained of within that period or at all.
Of course, within about six weeks of receipt of the notice of 2nd March, 2006, the defendant was faced with the statutory notice dated 27th April, 2006. Insofar as he took steps, it was with a view to complying with that notice. His evidence was that he took the following steps:
(1) There was a reduction of cattle numbers to comply with the statutory notice. The defendant’s evidence was that for the end of the calendar years 2006, 2007 and 2008 the numbers of animals housed in the wintertime had been drastically reduced and he supported this evidence by computer generated herd records. While I accept there was a reduction, it did not solve the problem. While the defendant took issue with Ms. Salley’s evidence that the defendant was crowding cattle in the sheds and testified that his enterprise had been passed by An Bord Bia as regards food quality assurance every year, no expert evidence was adduced on his behalf to contradict the evidence of Ms. Salley and Mr. Farrelly.
(2) In response to the statutory notice, he ceased using the silage pit as theretofore and baled his silage from 2006 onwards. His evidence was that the pit was covered with a sheet of black polyethylene to prevent overflow. Mr. Farrelly’s evidence was that there was still hay in the pit when he visited the locus. Mr. Farrelly’s evidence was that compacted silage in a silage pit is the most toxic pollutant material. I consider that the run off from the silage pit, which continued, comes within the complaint in relation to the escape of slurry.
(3) Generally, he kept the place clean and tidy and the tanks pumped out, but, of course, it is clear from the evidence that the defendant was only at the demised premises at weekends.
(4) Following a visit from official of Fingal County Council in January 2008, a list of repairs was attended to: covering an open drain outside the gate; repair of drains in the yard; and repair of guttering. The list was a verbal list, not a written list. When the work was completed the official, whom he named, returned and inspected the work and said “that’s fine”. On her subsequent visit, Ms. Salley did not find the condition and use of the farm buildings and the farmyard as being “fine”.
There is one other aspect of the defendant’s evidence which is of relevance in this context. The defendant stated that he applied for grant aid under the Farm Waste Management Control Scheme and a grant, which was intended to fund putting in waste facilities, was approved by the Department of Agriculture. He also got planning permission for the intended improvements. Like all of the defendant’s evidence this was very vague, but Mr. Phelan cast some light on the matter, because, prior to being retained by the plaintiffs to take the water samples, apparently, he had advised the defendant’s brother, Raymond Mangan, in connection with an application for an agricultural grant to upgrade the facilities to the Nitrates Directive standard. It was clear from the defendant’s evidence that no action was going to be taken on foot of the grant approval or the planning permission until these proceedings had been resolved.
Taking an overview of the evidence, I am satisfied that the defendant had not remedied the breach of clause 7 when the plenary summons was issued on 28th July, 2006 and it was not remedied subsequently prior to the hearing. The defendant’s evidence, as I have stated, was very vague. That is understandable, as he made it clear that during the relevant years he was not running the farming enterprise on the demised premises, but was involved in business in the United Kingdom and he was also running a business in France. His brother, Raymond Mangan, was running the farming enterprise on the demised premises. However, Raymond Mangan was not called as a witness and, if he had been, I think that it is improbable that he could have contradicted the evidence that the enterprise is being run in a manner and without adequate measures being in place to prevent slurry escaping and consequential pollution occurring.
Clause 9
The defendant acknowledged that, due to an oversight, he did not put public liability and employers’ liability insurance in place when the term of the lease commenced in October 2004. His evidence was that the insurance was put in place in 2005. I suspect that is not correct and that the insurance was put in place for the first time in March 2006 following the service of the notice of 2nd March, 2006. In any event, the defendant did put in place insurance which provided substantial cover against public liability and employers’ liability and, even though it did not match the specific requirements of clause 9 in relation to cover, that fact alone could not form the basis of the forfeiture of the lease. This is particularly so as the details of the policy and the cover were furnished to the plaintiffs’ solicitors in 2006 and in each succeeding year and no issue was raised by the plaintiffs as to the level of cover until the hearing of the action.
I consider it unnecessary to consider clause 9 further because, insofar as there was a breach of clause 9, I am satisfied it was remedied by the defendant putting in place insurance with an appropriate insurer which provided, on any objective assessment, adequate cover. Allied to that is the fact that there was no suggestion that any claim was made during the term of the lease which involved or may involve invoking the cover provided by the insurer.
Waiver?
It is common case that it is established law that “a notice under s. 14 referring to several breaches is not invalidated in toto because some of them never took place and have to be abandoned” (per Andrews L.J. in McIlvenny v. McKeever [1931] N.I. 161). On the basis of the findings I have made above, the only breach of the defendant’s obligations under the lease on which the plaintiffs are entitled to rely for forfeiture is the breach of clause 7. The plaintiffs exercised their right of forfeiture under the lease by issuing and serving these proceedings on the defendant. Despite a rather limp argument of counsel for the defendant to the contrary, the acceptance of service by the defendant’s solicitor on his behalf had the same legal consequence as service directly on him would have had.
It is also well settled that the defence of waiver may preclude a lessor from exercising his right of re-entry or forfeiture. The defence was explained in the following passage in the judgment of Andrews L.J. in McIlvenny v. McKeever (at p. 172):
“Dealing first with the defence of waiver, it is well recognised that Courts of law have always leant against forfeitures …. They have, accordingly, readily held that an alleged forfeiture has been waived if the lessor, with full knowledge of the breach of covenant or condition relied upon, has by some positive unequivocal act recognised the continued existence of the tenancy at a period subsequent to such breach. Acceptance of rent accruing due after the forfeiture, an action for the same, and even an unqualified demand for such rent have been held to constitute such waiver notwithstanding the lessor’s protest that he was acting without prejudice to his right to insist on a prior forfeiture …”.
However, Andrews L.J. went on to set out two exceptions or qualifications to that general proposition, the first of which is of particular relevance here, stating:
“The first is that when once a landlord had definitely exercised his option of relying upon the forfeiture, and has shown a final and unequivocal determination to take advantage of it by instituting proceedings in ejectment, no subsequent act, whether receipt of rent or otherwise, will be held to operate a waiver.”
In arguing that the defence of waiver applies, the defendant has ignored the existence of that exception or qualification. The defendant did not point to any demand for rent by the plaintiffs between the 2nd March, 2006 and 28th July, 2006 when these proceedings were commenced. The defendant’s position was that, following the initiation of the proceedings, the second named plaintiff, in direct correspondence with the defendant by letter of 17th August, 2006 indicated that the plaintiffs were ready to start sowing in early September and sought clarity in relation to the availability of 90 acres of alternative land. The defendant’s argument is premised on that request, and the provision of alternative land to the plaintiffs, as being the equivalent of a request for, and payment of, rent. That premise is the agreed position of the parties. The defendant submitted, correctly in my view, that similar arrangements were made for the remainder of the term of the lease. The existence of the arrangements which are the equivalent of the payment of rent, it was submitted, indicated that the defendant was to continue to consider himself bound by the terms of the lease irrespective of what “the legal papers”, presumably, meaning the pleadings and inter partes correspondence, stated.
That argument, in my view, ignores the reality of the situation. I have found that there was a breach of clause 7 of the lease, that the plaintiffs served a valid notice under s. 14 of the Act of 1881 and allowed a reasonable time for compliance with the notice before electing to forfeit the lease. By issuing these proceedings on 28th July, 2006 the plaintiffs finally and unequivocally determined to rely on the forfeiture. They persisted in that position at all times thereafter, in that they have prosecuted these proceedings to conclusion. Even if the plaintiffs had wished to waive the forfeiture after 28th July, 2006, they could only do so by agreement with the defendant. As I stated in Moffat v. Frisby [2007] 4 I.R. 572 (at p. 583), citing Wylie (op. cit.) at para. 24.25, “by electing for the remedy of forfeiture, the lessor thereafter deprives himself of remedies based on the continued existence of the lease or tenancy”. That has been the position for centuries, as the following statement of Parke B. in Jones v. Carter (1846) 15 M. & W. 718 at p. 726 illustrates:
“… the bringing of an ejectment for a forfeiture, and serving it on the lessee in possession, must be considered as the exercise of the lessor’s option to determine the lease; and the option must be exercised once for all … for after such an act, by which the lessor treats the lessee as a trespasser, the lessee would know that he was no longer to consider himself as holding under the lease, and bound to perform the covenants contained in it.”
As was explained by Lightman J. in G.S. Fashions Ltd. v. B. & Q. Plc. [1995] 1 WLR 1088, that statement of Parke B. was made in the context of the breaches of covenant by the lessee and the entitlement of the lessor to forfeit having been established. Lightman J. went on to explain the position where the lessee in the court proceedings has put in issue the lessor’s right to forfeit or claimed relief against forfeiture prior to determination by the Court. Lightman J. stated (at p. 1093):
“The words [of Parke B.] and the same principles have been applied in cases where, after the service of the writ, the lessee has challenged the lessor’s right to forfeit or claimed relief from forfeiture. In such a situation the validity of the forfeiture must await to be determined either by the Court or by agreement of the parties. In the meantime there is inevitably a twilight period of some uncertainty. During this period the lessor is on the principle stated by Parke B. precluded from treating the terms of the lease or the covenants in the lease as on foot as against the lessee; but the lessee who has not elected to determine the lease can seek to rely on and enforce the covenants in the lease against the lessor …”
In this case, the defendant elected not to treat the lease as forfeited. On the contrary the defendant defended the proceedings on the basis that there had been no breach and no forfeiture, and, in the alternative, he has sought to be relieved against any forfeiture found to be established. Consistently with that approach, the defendant discharged the rent in kind for which he was liable under the lease. If he had taken a different stance and treated the lease as forfeited he could have lawfully resisted the plaintiffs’ claim for rent in kind. Counsel for the plaintiffs need not have sought to have the plaintiffs exonerated from waiver on the basis of the principle of the plaintiffs being obliged to mitigate their loss, as he did. Once the plaintiffs had elected to treat the lease as forfeited by issuing ejectment proceedings, assuming they were entitled so to do, the lease was terminated. Their only entitlement was to mesne profits thereafter.
On the basis of the foregoing interpretation of the respective positions of the parties, there was no waiver of the forfeiture in this case and, accordingly, the controversy which arose between the parties as to whether s. 43 of the Landlord and Tenant Law Amendment Act, Ireland, 1860 (Deasy’s Act) has application to the situation which has arisen here is academic. As is pointed out in Wylie (op. cit) at para. 24.27, there is a major limitation of the operation of the doctrine of waiver in Ireland, as was recognised in the McIlvenny case, in that under s. 43 a waiver is ineffective between landlord and tenant unless it is signified by the landlord or his authorised agent “in writing under his hand” in the case of a lease granted after 1860. Section 43 provides as follows:
“Where any lease made after the commencement of this Act shall contain or imply any condition, covenant, or agreement to be observed or performed on the part of the tenant, no act hereafter done or suffered by the landlord shall be deemed to be a dispensation with such condition, covenant, or agreement, or a waiver of the benefit of the same in respect of any breach thereof, unless such disposition or waiver shall be signified by the landlord or his authorised agent in writing under hand.”
Because of a reported observation by Palles C.B. in Foott v. Benn (1884) 18 ILTR 90, in the past doubts have arisen as to the scope of s. 43 and, in particular, whether it applies only to a “general” waiver of the covenant as a whole, the position suggested by Palles C.B., but also to waiver of a particular breach of covenant. In Crofter Properties Ltd. v. Genport Ltd. (Unreported, High Court, 15th March, 1996), McCracken J. addressed the controversy. Having stated his view that the suggestion of Palles C. J. was not correct, he concluded:
“The wording of the section is quite clear, and relates to ‘any breach thereof’, which I think can only be reasonably interpreted as meaning that there cannot be a waiver of any specific breach unless that waiver is in writing.”
Counsel for the defendant took issue with that conclusion. While I agree with the construction put on s. 43 by McCracken J., I consider that s. 43 is of no relevance to the issues in this case for two reasons. The first is that what the defendant is attempting to set up is waiver of the fact of forfeiture by the act of receiving rent in kind after the commencement of these proceedings, which, not only on the authority of the McIlvenny case he clearly cannot do, but also on the basis of first principle, as enunciated by Parke B. The second is that, as happened in the McIlvenny case, the breach at issue here is of a continuing character. The second exception or qualification in the McIlvenny case applies to such a circumstance. As Andrews L.J. explained:
“… waiver of the forfeiture up to a particular day cannot be relied upon as a defence to an action for ejectment in respect of a subsequent breach. The reason for this is simply that, as there is a continually recurring cause of forfeiture, a new right arises each day that the breach continues, and the landlord’s waiver of a prior right cannot prejudice him or preclude him from taking advantage of a new and subsequent right. It has further been held … that the mere acceptance of rent which becomes due pending a notice to repair is no waiver of a subsequent forfeiture occasioned by non-compliance with such notice …”.
On the controversy arising from the observation of Palles C.B. as to the application of s. 43, Andrews L.J. stated later:
“It is unnecessary, however, to determine in the present case whether the restricted operation of the section suggested by the Lord Chief Baron is well-founded, as the view admits the necessity for writing in the case of a general waiver of dispensation of a covenant and nothing short of such a general waiver would avail the defendant in the present case because of the continuing nature of the covenant and its breach already referred to.”
In the McIlvenny case, the plaintiff’s landlord had accepted rent after the service of the s. 14 notice but before the writ of summons had issued, which did not happen in this case, and after the service of the writ on a “without prejudice” basis. It was held that the plaintiff had not waived the forfeiture by acceptance of rent.
Relief against forfeiture?
Having found that the plaintiffs are entitled to forfeit the lease for breach of the covenant by the defendant in clause 7 of the lease, such entitlement as the defendant has to seek relief against forfeiture is a statutory entitlement under s. 14(2) of the Act of 1881. That sub-section, which entitles a lessee to apply to Court for relief against forfeiture where the lessor is seeking to enforce his right of re-entry or forfeiture by action or otherwise, gives the Court a broad discretion when dealing with that application. The Court may grant or refuse relief as it thinks fit “having regard to the proceedings and the conduct of the parties under the foregoing provisions of this section, and to all other circumstances”. Further, the Court may grant relief “on such terms, if any, as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court, in the circumstances of each case, thinks fit”. It is suggested in Wylie (op. cit.) at para. 24.21 that, although the relief is granted under statutory powers, it seems clear from the wording of the sub-section that the jurisdiction is discretionary and is to be exercised largely on the same principles as the general equitable jurisdiction to afford relief which may be invoked in cases of forfeiture for non-payment of rent.
The nature of the Court’s discretion in considering whether to grant relief against forfeiture when dealing with substantial commercial transactions was considered by the Supreme Court in Cue Club Ltd. & Ors. v. Navaro Ltd. (Unreported, 23rd October, 1996). In his judgment, Murphy J. stated as follows:
“The nature of the discretion exercised by the Courts of Equity in granting relief against forfeiture is hardly applicable or applicable to the same extent, at any rate where the Court is dealing with substantial commercial transactions in which the lessor and the lessee are on equal terms. In Sweeney v. Powerscourt Shopping Centre Ltd. [1984] I.R. 501, Ms. Justice Carroll recognised the injustice which could be caused to the owner of a shopping centre by a tenant who failed to pay promptly the rent due by him….
Ms. Justice Carroll was not then dealing with the right to relief against forfeiture. In the case before her such relief had not been sought. Reference is made to her decision only for the recognition which it gives the commercial realities which might properly [be] taken into account by a Judge in dealing with the question of forfeiture where that issue does arise.”
More recently in the Campus and Stadium Ireland case Gilligan J. considered the nature of the discretion in the context of an occupation lease of the National Aquatic Centre at Abbotstown, County Dublin. In his judgment, Gilligan J., having stated that from his perusal of the authorities he was of the view that the Courts in general strive not to place rules or restrictions on the exercise of judicial discretion in relation to relief against forfeiture, quoted from the judgment of Earl Loreburn L.C. in Hyman & Anor. v. Rose [1912] AC 623 (at p. 630) in which it was stated appropos of relief under s. 14(2):
“I desire in the first instance to point that the discretion given by the section is very wide. The Court is to consider all the circumstances and the conduct of the parties. Now it seems to me that when the Act is so express to provide a wide discretion, meaning, no doubt, to prevent one man from forfeiting what in fair dealing belongs to someone else, by taking advantage of a breach from which he is not commensurately and irreparably damaged, it is not advisable to lay down any rigid rules for guiding that discretion.”
Gilligan J. also had regard to the observations of Murphy J. in the Cue Club case, which I have quoted. He then set out his approach to dealing with the issue before him as follows:
“I take the overall view that in order to exercise my discretion fairly, I must take into account the conduct of the parties, the wilfulness of any breach by the tenant, the general circumstances particular to the issue, the nature of the commercial transaction the subject matter of the lease, whether the essentials of the bargain can be secured, the value of the property, the extent of equality between the parties, the future prospects of their relationship, the fact that even in cases of wilful breaches it is not necessary to find an exceptional case before granting relief against forfeiture and then apply general equitable principles in reaching a conclusion.”
The lease at issue in the Cue Club case was a lease of unit in a shopping centre and the “commercial realities” adverted to by Murphy J., by reference to the judgment of Carroll J., were the implications for the commercial viability of a shopping centre of non-payment of rent and service charges by a tenant or tenants. The lease at issue in the Campus and Stadium Ireland case was a lease of a major national sports facility, which had been sponsored by the State. While a lease of a farm and farm buildings in North County Dublin on its own might be regarded as in a different category, nonetheless, the position here is that the lease is only part of the composite transaction which, in reality, must be considered to be a major commercial transaction.
The situation which prevails at the time of delivery of this judgment is that the term created by the lease has expired by effluxion of time. Accordingly, the position is that, if the lease was a stand alone transaction, irrespective of whether the defendant is entitled to relief against forfeiture, the plaintiffs would be entitled to possession of the demised premises and the question of relief against forfeiture would be moot. However, the lease is part of the composite agreement, which includes the option agreement. As the validity of the exercise by the defendant of the option is conditional on the lease not having been terminated, whether the defendant is entitled to relief against forfeiture, and, if so, on what terms, is a live issue.
A relevant issue in considering how the Court’s discretion should be granted is whether, as the defendant contended, the plaintiffs in seeking to forfeit the lease were not motivated by any bona fide desire to ensure compliance with the covenants in the lease, but sought to contrive a forfeiture of the lease in the hope of forfeiting the defendant’s rights under the option agreement. The plaintiffs’ position, which was not contradicted, was that the defendant had given an assurance in 2004 that he would not want to exercise the option to buy back. It was put to the second named plaintiff during cross-examination that this action was brought in 2006 to stop the defendant from exercising his option. It was also put to him that from at least 2006 the plaintiffs have known that the defendant intended to exercise the option. Finally, it was put to him that if the defendant exercises the option, he will get the farm back if the lease is not forfeited (Transcript Book 2, page 39). The second named plaintiff answered all of those questions in the affirmative. Although it was not the only motive for pursuing the defendant for breach of clause 7 of the lease, I am satisfied that precluding the defendant from exercising the option was a major aspect of the motivation on the part of the plaintiffs in prosecuting these proceedings. That conclusion is informed by the approach adopted by the plaintiffs in relation to what, given the nature and scope of the insurance which the defendant had put in place, was no more than a technical breach of clause 9, which was clearly of no concern to the plaintiffs.
I have already addressed the submission of counsel for the defendant that the failure to comply with clause 7 does not involve damage to the plaintiffs’ reversion. The burden which the defendant’s failure to deal with the escape of slurry and pollution created adheres to the ownership and possession of the demised premises. Therefore, if the defendant is allowed to complete the re-acquisition of the demised premises on foot of the exercise of the option, the plaintiffs will avoid that burden, which will fall on the defendant.
In assessing the conduct of the parties, even though the second named plaintiff acknowledged that the plaintiffs were motivated by the prospect of preventing the defendant exercising the option, I am satisfied that they also had genuine concerns about the effects of the failure of the defendant to deal with slurry and waste in accordance with his obligations under the lease and in accordance with the law and about the implications of that failure for them. I am satisfied that they took appropriate action to deal with the matter. The defendant, who was obviously aware of the deficiencies in the facilities in the farm buildings and the farm sheds, having pursued an application for a grant from the Department and having obtained planning permission, postponed taking any definitive action until the outcome of these proceedings would be determined, as he was entitled to do. However, he also failed to take other steps to comply with his obligation under the lease, which he was not entitled to do. Counsel for the defendant submitted that the farm buildings and farmyard were in the same condition at the commencement of the term of the lease as they were during the term. That may be the case, but, in the lease, the defendant undertook to use the demised premises in a certain way, but the manner in which the farming enterprise was conducted during the term was not in accordance with those obligations. As I have already commented, I consider that the defendant took a cavalier attitude to his obligations, which cannot be ignored.
Therefore, I have come to the conclusion that, applying equitable principles, the proper approach to take is to preclude the plaintiffs from achieving their ulterior motive of frustrating the option agreement, while ensuring that the defendant is required to give redress for his conduct. Therefore, subject to conditions, I propose to grant the defendant relief against forfeiture. In summary, the conditions are as follows:
(1) The first condition relates to the timely completion of the sale on foot of the exercise of the option in the option agreement.
(2) The second condition is that the defendant gives a personal undertaking to the Court that during his ownership of the demised premises, whether in his own name or through the medium of a company, he will observe all statutory regulations in force in relation to waste management, pollution and contamination in relation to the demised premises, the undertaking to be for the benefit of the plaintiffs during their ownership of the new yard and the adjoining lands purchased under the sale contract but which were excluded from the lease and the option agreement.
(3) The final condition is that the defendant is liable for the costs of the issue of the notice of 2nd March, 2006 and the costs of these proceedings.
I will elaborate on the first and third conditions in turn.
In relation to the first condition, the defendant was cross-examined by counsel for the plaintiffs as to his ability to pay the deposit of €100,000 payable under the option agreement and the balance of the purchase monies. The defendant’s evidence was that, a cheque for the deposit of €100,000 having been rejected by the plaintiffs’ solicitors, the sum of €100,000 is held in the defendant’s solicitor’s client account. The defendant’s evidence was that, in relation to the balance of the purchase money (€5,750,000), he has a bank which will back him and he has “the letter of offer”. He named the lender in question. He described the letter of offer as a “standard loan offer”.
Under the option agreement the closing date was to be twelve months following the exercise of the option. That date has passed. As a condition to giving relief against forfeiture, the defendant must pay the deposit of €100,000 to the plaintiffs’ solicitors not later than 31st August, 2009 and must prove to the Court when the matter is next listed at the vacation sitting on 23rd September, 2009 that the financial arrangements are in place to complete the sale not later than 30th September, 2009. The proof should be in the form of an unconditional loan approval exhibited in an affidavit of the solicitor for the defendant. The defendant’s solicitor should confirm in the affidavit that the requirements of the lending institution can be met.
To enable those matters to be dealt with, the action will be adjourned until 23rd September, 2009, to ascertain whether there is, and will be, compliance with this condition. If not, an order for possession will be made in favour of the plaintiffs.
In relation to the third condition the plaintiffs will be entitled to their costs of these proceedings against the defendant on a party and party basis. The rare sighting of an exclamation mark in a footnote in a Professor Wylie text (in this case – op. cit., footnote 141 to para. 24.22) has prompted the precise terms of this condition. In the text, Wylie states that it has been suggested that an order should not be made against the applicant for relief against forfeiture for costs on an indemnity basis as this offers no inducement to the landlord to compromise the dispute. The footnote adds that it is also said “to encourage lawyers and surveyors and other advisers to charge large fees!”, referring to the speech of Lord Templeman in Billson v. Residential Apartments Ltd. [1992] 1 All ER 141 at p. 150. In any event, I consider it to be a proper exercise of the Court’s discretion under s. 14(2) that the costs be on a party and party basis.
No entitlement to arrears of rent or mesne rates on the part of the plaintiffs has been established.
Orders
I have indicated in broad terms the orders I propose to make in accordance with my decision. I will, of course, hear any further submissions which the parties wish to make as to the actual terms of the orders.
Minister for Communications etc v Figary Watersports Development Ltd
[2015] IESC 74
Judgment of Ms. Justice Laffoy delivered on 30th day of July, 2015
A – Introduction
Background to appeal
1. The High Court proceedings which are the subject of this appeal, in which the appellant (the Minister) was plaintiff and the respondent (Figary) was defendant, were commenced by plenary summons which issued on 10th October, 2005. As initiated, the objective of the proceedings was to enforce Figary’s obligations as lessee under a foreshore lease granted by the Minister, as lessor, in exercise of the power vested in him by s. 2 of the Foreshore Act 1933 (the Act of 1933) or, alternatively, to obtain possession of the foreshore the subject of that lease. In its defence and counterclaim delivered on 26th April, 2006 in the High Court proceedings, Figary opposed the claims of the Minister either to enforce the lease against Figary or, alternatively seeking possession. In addition, Figary counterclaimed for –
(a) injunctive relief to compel the Minister to remedy what it alleged were breaches by the Minister of his obligations qua lessor to Figary;
(b) damages for alleged breach of covenant and breach of contract and misrepresentation by the Minister; and
(c) damages for alleged breach of statutory duty.
2. In essence, the bases of the claim by the Minister against Figary and of the counterclaim of Figary against the Minister were founded on the following:
(a) the landlord and tenant relationship between the Minister and Figary arising from the foreshore lease; and
(b) the respective rights and obligations of the parties under a grant application made by Figary for funding under the European Structural Funds 2000 – 2006, in particular, under Interreg IIIA Programme for Ireland and Northern Ireland 2000 – 2006 (the Interreg IIIA Programme) in aid of a project which involved the development by way of expansion of a marina on the foreshore the subject of the foreshore lease at Fahan, County Donegal (the Marina), in respect of which the Minister’s Department had the role of implementing agent under a very complex scheme structure for the regulation and administration of the Interreg IIIA Programme.
3. The matter having been heard in the High Court before McKechnie J. over sixteen days, judgment, primarily on issues of liability, was delivered on 3rd September, 2010 ([2010] IEHC 541) (the First Judgment). Subsequently, on 19th January, 2012, McKechnie J. delivered a further judgment ([2012] IEHC 601) (the Second Judgment) in which he determined the remaining issues as to the reliefs to which the Minister was entitled on the claim and Figary was entitled on the counterclaim. That resulted in an order of the Court dated 27th January, 2012, which was perfected on 12th June, 2012. In summary, the perfected order, the detail of which will be considered later, ordered as follows:
(a) in relation to the Minister’s claim –
(i) for enforcement of Figary’s obligations under the foreshore lease, that the Minister is entitled to judgment in the sum of €226,847.77 against Figary, and
(ii) for possession, that Figary is entitled to relief against forfeiture of the foreshore lease subject to terms and conditions imposed on Figary;
(b) in relation to Figary’s counterclaim for damages, that Figary is entitled to judgment in the sum of €2,045,000 against the Minister, representing damages for breach of statutory duty in relation to the grant application; and
(c) in relation to costs –
(i) that Figary pay the Minister’s costs of the claim measured at 4 days of hearing, and
(ii) that the Minister pay Figary’s costs of the counterclaim.
4. Notice of appeal was filed on behalf of the Minister on 25th June, 2012 against some parts only of the judgments and the order of the High Court. Specifically, the Minister –
(a) appealed against the dismissal of the Minister’s claim for possession as against Figary and sought in lieu thereof an order for possession against Figary,
(b) appealed against the granting of judgment to Figary on its counterclaim in the sum of €2,045,000 and sought instead an order dismissing the counterclaim, and
(c) appealed against the award of four day’s costs of the proceedings in the High Court as against the Minister and sought instead an order awarding all costs to the Minister.
The appeal: general observations
5. A significant feature of the appeal which it is important to stress even at the outset is that, consequent apparently on a deliberate decision to that effect, there was no cross-appeal or notice to vary served on behalf of Figary in relation to various issues which arose on the claim and on the counterclaim and which were determined in a manner favourable to the Minister and unfavourable to Figary. Accordingly, in broad terms, what this Court is concerned with on the appeal in relation to the issues arising from the landlord and tenant relationship of the Minister and Figary is whether the Minister is entitled to possession of the foreshore demised to Figary, rather than the relief in relation to the demised foreshore in the form of conditionality attached to Figary’s entitlement to relief against forfeiture which was given in the High Court, which will be outlined in detail later. In relation to Figary’s counterclaim in respect of the grant application under the Interreg IIIA Programme, the Court has to decide whether the Minister is liable for the wrong alleged and, if so, the appropriate quantum of damages.
6. It is suggested that each of the parties has shifted position in the course of the judicial process.
7. That is certainly true in the case of the Minister. The relief he sought in the plenary summons and in the statement of claim was primarily injunctive relief. For instance, the first relief sought by the Minister was a mandatory order directing Figary to take all steps and do all things forthwith for the purposes of constructing and completing the Marina upon the demised premises. The third relief sought was an order directing Figary to pay and discharge all arrears of rent which had accrued due to the Minister. It was only at item 14 in the prayer for relief that the Minister sought possession in the following terms:
“Without prejudice to the foregoing, in the alternative the [Minister] seeks an Order for possession by virtue that the aforesaid Lease stands forfeited pursuant to Forfeiture Notice dated the 12th of June 1998 of the premises described in the Schedule hereto hitherto held by [Figary] as Tenant to the [Minister] on foot of the aforesaid Lease . . ., which said possession is sought pursuant to Section 52 of the Landlord and Tenant Amendment Act, Ireland, 1860, there being a sum in excess of one year’s rent in arrears at the date of the institution of these proceedings.”
The Landlord and Tenant Amendment Act, Ireland, 1860 referred to is commonly known as “Deasy’s Act”. In the First Judgment the position of the Minister in relation to the relief which he wished to obtain in the High Court was summarised as follows (at para. 87):
“However, it has been indicated to the Court that although the [Minister] was originally seeking [Figary] to perform various works and in the alternative was seeking possession, the present situation is such that the primary relief now sought is possession; [Figary] has done very little despite persistent calls and is effectively a ‘bad tenant’ whom the [Minister] wants out. Furthermore, at this stage [Figary] still owes €206,749 in rent, although it has, on four occasions since May 2006, paid €136,080 to the [Minister] in consideration of such rent.”
8. It is suggested on behalf of the Minister that a shift in position on the part of Figary has occurred on the appeal. In its counterclaim Figary pleaded that the Minister had wrongfully, and in breach of covenant and in breach of statutory duty, frustrated Figary in its endeavours to develop and operate the Marina and to carry out agreed ancillary works under and in accordance with the terms of the lease and its obligations in law. Various alleged breaches of covenant were particularised which, in broad terms, were based on the contention that the Minister had unreasonably withheld and delayed furnishing consents and permissions sought by Figary and had insisted upon the imposition of unreasonable conditions. The allegations of Figary are dealt with in the First Judgment (at paras. 130 to 156) and the findings of the High Court are summarised in the Second Judgment (at para. 5). Of five allegations summarised, the High Court found that the Minister acted unreasonably in relation to two allegations: the removal of dredged material; and in imposing requirements in relation to the plaintiff’s obligation to put an insurance bond in place. Those findings will be explained later in the context of consideration of the party’s landlord and tenant relationship. Nothing arises on the appeal in relation to the findings of the High Court on the other allegations of breach of covenant.
9. The alleged breach of statutory duty as particularised (albeit in a most generalised manner) in the counterclaim which remains an issue is based on the contention that the Minister –
“prevented [Figary] from securing and/or failed to reasonably assist [Figary] in securing funding under the relevant EU structural funds”.
The reference there to the “relevant EU structural funds” was to the Interreg IIIA Programme. In response to a request in a notice for particulars from the Chief State Solicitor for details of each and every alleged “prevention” attributed to the Minister in relation to securing EU structural funds, the specific conduct on the part of the Minister relied on by Figary was that the Minister “declined to present [Figary’s] application for grant funding to the Interreg Steering Committee that met in January 2005”. In response to a similar request for details of each and every alleged assistance Figary asserts the Minister should provide in relation to EU structural funds, the response of Figary was:
“. . . same and no less assistance than any other applicant for funding”, giving “a sample”, by reference to correspondence Figary had received from the Minister in 2004, of what it had been led to expect. Figary was not asked to, and did not, identify what statutory obligation on the part of the Minister was alleged to have been breached in relation to Figary’s grant application under the Interreg IIIA Programme.
10. The suggested shift in position on the part of Figary on the appeal was pointed to in the submissions made on behalf of the Minister in this Court in reply to the submissions made on behalf of Figary. It was submitted that in the High Court Figary had argued that the Minister’s failure to progress its application for grant funding under the Interreg IIIA Programme to the Steering Committee was a breach of statutory duty, in that the Interreg IIIA Programme was governed by a regulatory framework the breach of which might give rise in appropriate cases to an action for breach of statutory duty. However, the argument made in this Court was that the failure of the Minister to progress Figary’s application constituted a breach of EU law intended to confer a benefit or right on an identifiable group, including Figary. It was pointed out on behalf of the Minister that the judgments in the High Court did not, in terms, involve any analysis of the regulatory framework of the Interreg IIIA Programme. That is true and it is also true that the range of decisions of the Court of First Instance and the European Court of Justice which were relied on by Figary on the appeal were obviously not addressed in the submissions in the High Court. Having said that, it is appropriate to record that in the summary of the findings on the claim of breach of statutory duty against the Minister in the First Judgment (at para. 177), which is quoted later, it was noted that a breach of a duty under European law will give rise to an action for damages as if it were a breach of statutory duty. In my view, it was open to Figary to pursue the claim for damages for breach of statutory duty on the basis on which it was pursued in the Court.
11. Even though some of the issues which arose in the High Court do not have to be addressed on the appeal, there remains an element of overlap between the remaining issues on the claim and the counterclaim. Nonetheless, I am satisfied that it is possible to address all of those issues under two headings, namely:
(a) the landlord and tenant relationship of the parties; and
(b) the grant application under the Interreg IIIA Programme, which, while giving rise to a separate and distinct claim by Figary against the Minister, cannot be wholly divorced from the landlord and tenant relationship.
That is the course I propose to adopt.
B. – Landlord and Tenant Relationship
Core factual issues
12. The history of the landlord and tenant relationship between the Minister and Figary is comprehensively outlined in the First Judgment. Therefore, it is only necessary to outline the core factual circumstances which are likely to inform the decision on the appeal.
13. The landlord and tenant relationship was created by a lease dated 26th April, 1993 made between the Minister (then the Minister for the Marine) of the one part and Figary of the other part (the Foreshore Lease), which created a demise of part of the foreshore situate in the Townland of Fahan, Barony of Inishowen West and County of Donegal comprising ten hectares, as depicted on the map annexed thereto for the term of ninety nine years from the 1st January, 1993 at the yearly rent specified, which was subject to remission during the first five years and was subject to review at five yearly intervals thereafter, and which was also subject to the covenants and conditions therein contained. Despite what has transpired over the last two decades Figary remains in possession of the foreshore demised by the Foreshore Lease. The relevant provisions of the Foreshore Lease and, in particular, the covenants on the part of Figary, qua lessee, are outlined in detail in the First Judgment. Probably the most important obligation imposed on Figary in the lessee’s covenants was the obligation to construct a marina on the demised premises in accordance with the terms and conditions set out in the second schedule to the Foreshore Lease. Those terms and conditions, which were headed “Technical Specifications”, were to some extent very general in terms. However, it was provided that the structure comprising the marina was to be erected on the foreshore in conformity with plans and drawings to be submitted and approved by the Minister and it was stipulated that Figary would provide the Minister with certain information, for example, detailed cross-sections of the breakwater. It was also provided that Figary was required to submit technical specification of the proposed works for the approval of the Minister prior to the commencement of the development. There followed some detail in relation to sanitary facilities, litter and pump out facilities. There were also general provisions in relation to the provision of safe navigational access to and from the marina.
14. As is pointed out in the First Judgment (at para. 8), despite the terms of the Foreshore Lease, no work was carried out on the project prior to 1998. In the first half of 1998 there was some interaction between the then Minister and the representatives of Figary, which did not resolve the differences between the parties. Eventually, on 12th June, 1998, the Chief State Solicitor, on behalf of the Minister, served a forfeiture notice under s. 14 of the Conveyancing Act 1881 (the Act of 1881) on Figary. The forfeiture notice recited many of the covenants on the part of Figary contained in the Foreshore Lease. It also recorded the proviso for forfeiture contained in the Foreshore Lease to the effect that, if the rent or any part thereof should be unpaid for twenty one days after the same should become due (whether demanded or not), or in the event of any breach or non-performance of any of the covenants or conditions therein contained and on the part of Figary to be observed and performed, then the term thereby created should cease and determine and the Minister might re-enter into and upon the demised premises and repossess the same without prejudice to any remedy of the Minister under any covenant by the lessee contained in the Foreshore Lease. Of course, it was recognised that, as a matter of law, the proviso for forfeiture was subject to the provisions of s. 14(1) of the Act of 1881 and was not enforceable for breach of covenant, other than the covenant to pay rent, unless and until the Minister served a forfeiture notice on Figary specifying the particular breach complained of and, if the breach was capable of remedy, requiring Figary to remedy the breach, and, in any case requiring Figary to make compensation in money for the breach. Accordingly, the forfeiture notice then set out the various breaches alleged on the part of Figary: non-payment of rent, the total arrears at the time being IR£72,000; failure to construct the marina in accordance with the terms and conditions set out in the second schedule to the Foreshore Lease; failure to obtain prior consent for the excavation, removal and stockpiling of beach material and to comply with prohibitory notices which had been served by the Minister upon Figary pursuant to s. 7 of the Act of 1933, as amended; breach in relation to the construction of a breakwater and the excavation of beach materials; failure to procure a bond; certain alleged breaches of the planning code; and failure to keep the demised premises in good and proper state of repair and free from all defects injurious to navigation or the adjacent land or public interest.
15. Matters between the parties seem to have stalled thereafter, with little progress of consequence until 2000. There was further interaction between the parties in the first half of 2000, which is outlined in the First Judgment. It culminated in a number of letters between the Minister’s Department and Michael Galbraith Associates (Galbraith), the architects and surveyors retained by Figary. The chronological sequence of the correspondence was as follows:
(i) By letter dated 19th May, 2000, the Minister’s Department, on behalf of the Minister, informed Galbraith that Figary was authorised to commence the works on the site subject to immediate written confirmation of its acceptance of the following conditions:
(a) the acceptance and clearance of the design and specifications of the marina and of a schedule of works which were to be agreed between the Minister’s Department and the engineering consultants to the project, namely, Ove Arup Engineering Consultants (Arup), within the following seven days;
(b) the provision of a performance bond of suitable duration specifying the cover of all of the works set out in the schedule of works to be agreed;
(c) the provision within seven days of confirmation by the engineering consultants to the project that all of the works set out in the schedule would be carried out under their direction and supervision and in accordance with the design and specifications to be agreed; and
(d) that in the event of an agreement not being reached between Arup and the Minister’s Department within seven days all works on the site should be suspended and would not re-commence until such agreement was reached.
The letter then stated:
“Subject to receipt of the above written confirmation the Department will affirm in writing that the lease is active.”
(ii) In Galbraith’s response of the same day, 19th May, 2000, which it would seem was sent by facsimile transmission, Galbraith confirmed on behalf of their client, Figary, its acceptance of the four conditions contained in the Department’s letter. The Department was asked to confirm by return its authorisation for the work on site forthwith and affirmation that the Foreshore Lease was active.
(iii) The Minister’s Department on the same day responded to Galbraith’s response referred to at (ii) and to Figary’s acceptance of the conditions in the Department’s letter referred to at (i) above. It was then stated:
“On foot of this undertaking, your clients are hereby authorised to commence works on the site forthwith. As indicated in the concluding paragraph of my letter, the Department confirms that the lease is active.
The position of the Minister in the High Court, as recorded in the First Judgment (at para. 36), was that subsequently Figary had failed to meet the four requirements contained in the first letter of 19th May, 2000 and, in those circumstances, the forfeiture notice had not been waived.
16. The project was then embarked on by Figary and the marina was constructed. As is recorded in the First Judgment (at para. 39), in September 2002 the Marina at Fahan was opened and became operational, although, at that stage, it was still only partially complete. Throughout 2001 and 2002 there was ongoing acrimony between the Minister and Figary, mainly in relation to how dredge sand, which the Minister alleged had been dumped on the foreshore, was to be treated. In that period and in 2003, as is recorded in the First Judgment (at para. 41), the Minister continued to have concerns about the operation of the Marina and the failure by Figary to comply with its obligations under the Foreshore Lease, for example, the obligation to pay rent. The interaction between the Minister’s Department and Figary, mainly in correspondence, through those years and into 2004 and 2005 is comprehensively outlined in the First Judgment. By late 2005 another issue had arisen between the parties, in that an official of the engineering section of the Minister’s Department had carried out a survey of the development and had discovered that Figary had extended beyond the demised premises and had encroached on foreshore and had, effectively, trespassed on State foreshore. That situation still persisted when the matter was before the High Court. As has been stated at the outset, the proceedings were initiated in October 2005.
Outline of findings in the First Judgment on the landlord and tenant relationship issues/relevant grounds of appeal.
17. Having outlined the provisions of s. 14(1) and (2) of the Act of 1881, and a number of relevant authorities, it was held in the First Judgment that the forfeiture notice was valid when it was issued. However, a question was raised whether, given the intervening events and the significant time between the issue of the forfeiture notice (12th June, 1998) and the initiation of the proceedings (10th October, 2005), the Minister could still rely upon it. The conduct of the parties after the service of the forfeiture notice was considered in the First Judgment (at para. 119), where it was stated that it was clear from looking at the correspondence subsequent to the service of the forfeiture notice that the parties were actively engaged in attempting to gain compliance with the covenants contained in the Foreshore Lease and that the Minister had continually sought to rely on those covenants. Having referred to the correspondence of 19th May, 2000, it was stated:
“Whatever the [Minister’s] intention: the wording of its correspondence and [Figary’s] acceptance of the stipulated conditions are clear: on and from the 19th May, 2000, the lease was active: the Forfeiture Notice as such ceased. It is thus clear that the Department considered that, by this stage at least, the lease was active and enforceable. However, I would note that, notwithstanding such express admission, and independent of it, I would still be inclined by virtue of the overall dealings between the parties, to infer that the lease was active, and the Notice effectively abandoned by consent of the parties.”
18. The circumstances in which relief against forfeiture may be granted having been addressed earlier in the First Judgment, the question of relief in the prevailing circumstances was considered (at para. 120), where it was stated:
“Even if it could not be held that the Notice ceased to have legal effect, I would be disposed to grant relief against forfeiture having regard to general equitable principles as applied to the most unusual, even unique, circumstances of this case. It has long been established that delay defeats equity . . ..”
In summarising his conclusions in the First Judgment (at para. 194) the trial judge stated that the Minister could not rely on the forfeiture notice because it was abandoned by agreement, either express or inferred. Alternatively, even in the absence of agreement, he would grant relief against forfeiture. He deferred the determination of the terms and conditions on which it would be appropriate to grant relief against forfeiture until he would hear further submissions (at para. 195). Subsequently he dealt with those terms and conditions in the Second Judgment.
19. In summary, the grounds on which the Minister appealed the decision of the trial judge on the forfeiture issue were that –
(a) he erred in law and on the facts in holding that the Minister could not rely on the forfeiture notice;
(b) he erred in fact and/or law in concluding that the forfeiture notice had been abandoned by agreement, either express or to be inferred;
(c) he erred on the facts in holding that the Minister had continually sought to rely upon the terms of the Foreshore Lease after service of the forfeiture notice and that, accordingly, it could be inferred that there was some agreement between the parties that the Foreshore Lease, and the covenants therein contained, continue to be active;
(d) he erred in law and on the facts in construing that the contents of the letter dated 19th May, 2000 from the Minister meant that Figary’s acceptance of the conditions stipulated in that letter, as opposed to its compliance with the said conditions, constituted an agreement pursuant to which the forfeiture notice was abandoned and the Foreshore Lease treated as being active and in force from that point on; and
(e) he erred in determining that the forfeiture had been waived without taking any proper account of the evidence of the Minister to the effect that any reinstatement of the Foreshore Lease, if accepted, was conditional on Figary meeting the conditions set out in the first letter of 19th May, 2000, which conditions were never met.
20. On the appeal it was also contended that the trial judge erred in exercising his discretion to grant relief against forfeiture to Figary, notwithstanding clear evidence of multiple breaches of covenant on the part of Figary and that, in particular, he erred in granting relief where –
(a) no rent had been paid under the Foreshore Lease until very shortly before the commencement of the trial;
(b) Figary had not completed the works required to be carried out under the terms of the Foreshore Lease; and
(c) Figary had carried out works on the site without any permission of the Minister to do so, as required under the terms of the Foreshore Lease.
It was also contended that the trial judge had erred in having regard to the equitable principles of laches and delay in the consideration of the discretion to grant relief against forfeiture.
21. The counterclaim by Figary against the Minister for damages for breach of contract and breach of covenant arose out of the parties’ landlord and tenant relationship. The ultimate outcome of this aspect of the counterclaim was that the trial judge found that the Minister was not liable in damages to Figary for any of the alleged breaches. However, the Minister has appealed certain findings of the trial judge and those findings and the relevant grounds of appeal will be considered insofar as it is necessary to do so after the issues in relation to forfeiture and relief against forfeiture and the Minister’s claim for possession under s. 52 of Deasy’s Act have been addressed.
22. The first issue which arises for consideration by this Court in relation to the landlord and tenant relationship is whether the forfeiture notice was waived or abandoned.
Status of forfeiture notice when proceedings initiated and consequences
23. The starting point in considering the subsequent effect of the forfeiture notice is the finding in the High Court that at the time of its issue it was a valid notice. In reaching that conclusion the trial judge identified the various requirements of s. 14(1) of the Act of 1881 and he was satisfied that they were complied with. I did not understand Figary to take issue with that finding. The trial judge went on to state that there was no question in his mind that, had the Minister sought repossession of the demised foreshore on foot of the forfeiture notice in the months following its receipt by Figary, in circumstances where the breaches of the covenants in the Foreshore Lease had not been remedied, the Minister could have validly relied on the forfeiture notice. As has already been noted, he raised a question as to whether, given the intervening events and lapse of time, the Minister could still rely on it.
24. It is important in this context to emphasise that the finding and the remarks of the trial judge in relation to the forfeiture notice related to a right of re-entry or forfeiture which was governed by, and subject to the restrictions stipulated, in s. 14 of the Act of 1881. Accordingly, it related to a right of re-entry or forfeiture under the forfeiture proviso in the Foreshore Lease for breach of covenant, other than non-payment of rent. By virtue of subs. (8) of s. 14 that section does not affect the law relating to re-entry or forfeiture or relief in the case of non-payment of rent. What compliance with subs. (1) of s. 14 does is to give the lessor the right to enforce, by action or otherwise, the right of re-entry or forfeiture. Accordingly, as was remarked by the trial judge, the Minister within a reasonable time after Figary failed to remedy the breaches of the covenants in the Foreshore Lease could have enforced the right of re-entry or forfeiture by action or otherwise. Of course, had the Minister done so, Figary would have been entitled to claim relief against forfeiture under subs. (2) of s. 14.
25. In outlining the legal position which prevails following compliance with the requirements of s. 14(1) of the Act of 1881, the trial judge stated (at para. 111):
“Once the above requirements are complied with by the lessor and the lessee fails to remedy the breach, the former is entitled to re-enter the premises peaceably (Bank of Ireland v. Lady Lisa Ireland Ltd. [1992] 1 I.R. 404), or else issue proceedings for ejectment.”
That, in my view, is a correct statement of the law. It is well settled that after the requirements of subs. (1) of s. 14 are complied with, in order to enforce the right to forfeit and thus determine the lease, the lessor must either effect forfeiture by physically entering upon the demised premises with the intention of determining the tenancy or by issuing and serving proceedings for the recovery of possession of the demised premises.
26. Counsel for the Minister were correct in emphasising the distinction between the entitlement of a lessor to bring a lease to an end in reliance upon the lessee’s non-compliance with a valid forfeiture notice, on the one hand, and forfeiture itself, on the other hand. That was recognised by the trial judge in the passage from his judgment quoted in the next preceding paragraph and, in particular, his reference to the decision of the High Court (O’Hanlon J.) in Bank of Ireland v. Lady Lisa Ireland Limited.
27. What counsel for the Minister did not allude to, however, is that it is well settled law that a lessor, in electing to determine the lease for forfeiture, must do so unequivocally. In Bank of Ireland v. Lady Lisa Ireland Limited (at p. 408), O’Hanlon J. quoted what he referred to as the statement of the law in modern times to that effect from Halsbury, Laws of England, 4th Ed., Volume 27 at para. 428. In that same paragraph, the editors of Halsbury made it clear that, if the writ for possession contains an unequivocal demand for possession, the service of the writ operates as a final election to determine the term, whether judgment is obtained or not. The decision of the English High Court (Buckley J.) in Calabar Properties Ltd. v. Seagull Autos Ltd. [1968] 1 All E.R. 1 was cited in Halsbury as authority for the proposition that where the writ contains a claim for a permanent injunction, it is not an unequivocal election by the landlord to determine the lease on the grounds of forfeiture, following an earlier decision in Moore v. Ullcoates Mining Co. Ltd. [1908] 1 Ch. 575. O’Hanlon J. also followed that latter decision in Bank of Ireland v. Lady Lisa Ireland Ltd., although not in the context in which it was considered by Buckley J., namely, whether the writ was “an unequivocal claim for possession”. In the case before Buckley J., the plaintiffs had issued a writ claiming possession of premises. They also claimed, without prejudice to the foregoing, injunctions restraining the defendants from doing certain acts, which apparently would have been in breach of covenants in the lease. The plaintiffs then moved for injunctions pending the trial. On the defendants’ objection that, as the plaintiffs were claiming possession, they were not at the same time entitled to relief on the footing that the lease still subsisted, Buckley J. stated (at p.5):
“In my judgment, the relief which is claimed in this action is such that it cannot be said that the landlords have unequivocally decided to determine the lease and seek relief solely on the footing that the lease has come to an end. It would be open to them at the trial of the action to abandon their claim for possession and proceed with their claim for relief on the footing that the lease is still on foot. Accordingly, I think that the case is one which falls within the reasoning of Moore v. Ullcoates Mining Co. Ltd. . . ..”
28. The necessity for an unequivocal election by the lessor to issue and serve proceedings for possession in order to give rise to the termination of the lease by forfeiture, is also highlighted in another of the authorities referred to by the trial judge: the decision of the Court of Appeal of Northern Ireland in McIlvenny v. McKeever [1931] N.I. 165. There, having addressed the defence of waiver, Andrews L.J. pointed out that there were two exceptions or qualifications to the general proposition which he had set out in relation to waiver of forfeiture, which will be outlined later. The first exception was outlined by Andrews L.J. as follows (at p. 172):
“The first is that when once a landlord has definitely exercised his option of relying upon the forfeiture and has shown a final and unequivocal determination to take advantage of it by instituting proceedings in ejectment, no subsequent act, whether receipt of rent or otherwise, will be held to operate as a waiver.”
29. That first exception did not arise in these proceedings. The issue and service of the plenary summons could not have been treated as the election by the Minister to unequivocally seek possession of the demised foreshore so as to determine the Foreshore Lease by forfeiture. As has been pointed out at the outset, the primary reliefs sought by the Minister were of an injunctive nature seeking orders directing Figary to comply with the provisions of the Foreshore Lease, which claims must have been founded on the premise that the Foreshore Lease would continue. As the terms of the claim for an order of possession, as quoted above, make clear, it was expressly stated that the claim was to be on a without prejudice basis. Accordingly, the initiation of the proceedings could not be treated as a final and unequivocal election to determine the Foreshore Lease for forfeiture in October 2005. However, that observation is peripheral to the core issue on this aspect of the appeal.
30. The core issue on this aspect of the appeal is whether the Minister’s contention that the trial judge erred in finding that the forfeiture notice had been abandoned by agreement, either express or to be inferred, and that the Foreshore Lease was treated as being active and in force from 19th May, 2000 onwards was correct. It was submitted on behalf of the Minister that the correspondence of 19th May, 2000 must be considered in the context of the wider factual matrix that then existed between the parties and the evidence which was before the High Court. It was submitted that a proper analysis of what occurred leads to the conclusion that the Minister intended, and Figary agreed, that it would assume an obligation to actually perform all of the four conditions set out in the Department’s first letter of 19th May, 2000 as a condition precedent to the Foreshore Lease being revived. It was further submitted that the evidence before the Court established that no real effort was made by Figary to comply with those conditions. Counsel for the Minister relied on evidence adduced in the High Court in support of that contention.
31. Counsel for Figary submitted that the construction of the Department’s first letter of 19th May, 2000 contended for by the Minister was contradicted by its plain terms. Further, counsel for Figary reminded the Court of its limited jurisdiction in relation to findings of fact made and inferences drawn from evidence at first instance, as outlined in the judgment of McCarthy J. in Hay v. O’Grady [1992] 1 I.R. 210 (at pp. 217 – 218).
32. The judgment of Andrews L.J. in McIlvenny v. McKeever referred to earlier contains a useful summary of how the defence of waiver operates in answer to a claim for possession of demised property on the basis that the lease has been forfeited, although the facts underlying the issue in that case are totally dissimilar to the facts underlying the defence of Figary that the forfeiture notice in this case has been abandoned or waived. Andrews L.J. stated (at p. 172):
“Dealing first with the defence of waiver, it is well recognised that Courts of Law have always leant against forfeiture. . . . They have, accordingly, readily held that an alleged forfeiture has been waived if the lessor, with full knowledge of the breach of covenant or condition relied upon, has by some positive unequivocal act recognised the continued existence of the tenancy at a period subsequent to such breach. Acceptance of rent accruing due after the forfeiture, an action for the same, and even an unqualified demand for such rent, have been held to constitute such waiver, notwithstanding the lessor’s protest that he was acting without prejudice to his right to insist on a prior forfeiture. . . ..”
As recorded earlier, Andrews L.J. identified at least two exceptions or qualifications to that general proposition. In relation to the second exception he stated:
“The second is that where the breach is, as in the present case, of a continuing character, waiver of the forfeiture up to a particular day cannot be relied upon as a defence to an action for ejectment in respect of a subsequent breach. The reason for this is simply that, as there is a continually recurring cause of forfeiture, a new right arises each day that the breach continues, and the landlord’s waiver of a prior right cannot prejudice him or preclude him from taking advantage of a new and subsequent right. It has further been held . . . that the mere acceptance of rent which becomes due pending a notice to repair is no waiver of a subsequent forfeiture occasioned by non-compliance with such notice.”
Andrews L.J. then cited three authorities which he stated had –
“. . . decided that in the case of a continuing breach a second notice need not be given in respect of non-repair existing at the expiration of the time specified in the notice, for the breaches during the latter period are the same as those in respect of which the notice was given.”
33. As is noted in Wylie on Landlord and Tenant Law, 3rd Ed., at para. 24.27, there is one major limitation on the operation of the doctrine of waiver in Ireland, as was recognised in the McIlvenny case, and that is that by virtue of s. 43 of Deasy’s Act a waiver is ineffective between a landlord and tenant unless it is signified by the landlord or his authorised agent “in writing under his hand” in the case of a lease granted after 1860. Wylie states that, notwithstanding the doubts which have been expressed in the past as to the scope of this provision, there seems to be no reason why on its wording the section should not apply to both a “general” waiver of the covenant as a whole and a waiver of a particular breach of covenant, citing judgment of McCracken J. in Crofter Properties Ltd. v. Genport (High Court, Unreported, 15th March, 1996). That limitation is of no relevance here because, whatever its true construction, the first letter of 19th May, 2000 was written by the authorised agent of the Minister.
34. Even though the first letter of 19th May, 2000 from the Minister’s Department made no reference to the forfeiture notice, it seems to me that it is implicit in it that the forfeiture notice was being overridden, given that the actual notice given by the Minister in the forfeiture notice was that, unless the breaches of covenant itemised in the forfeiture notice which were capable of remedy were remedied within a reasonable time of service of the notice and compensation paid to the Minister, the Minister would exercise his right of re-entry and forfeit the Foreshore Lease. The first letter of 19th May, 2000 authorised Figary to commence works on the demised foreshore forthwith subject to immediate written confirmation by it of acceptance of the four conditions set out in the letter. It defies reason and credibility that it could have been the understanding of the Minister and his agents that Figary would undertake the obligations to be imposed by the four conditions stipulated, not to mention incurring the expenditure involved in commencing and implementing the works on the demised foreshore, if the forfeiture notice was to remain in place and was to hang over Figary “like a sword of Damocles”, as an official of the Minister’s Department testified in the High Court. The acceptance by Figary of the four conditions stipulated by the Minister was immediately confirmed by Galbraith and immediately thereafter the Minister’s Department reiterated that, on foot of that undertaking, Figary was authorised to commence works on the site forthwith and it was confirmed that the Foreshore Lease was active. The only sensible interpretation of the statement that the Foreshore Lease was active is that it was not at risk of forfeiture in the future in consequence of any previous breach of covenant by Figary, which had been the subject of the forfeiture notice, whether continuing or otherwise.
35. This is not a case in which the Court was asked to infer from the conduct of the parties that the forfeiture notice had been waived or abandoned, nor is it a case in which the Court is required to consider whether a continuing breach of covenant, for example a breach of covenant which is not remedied, would keep alive a forfeiture notice, notwithstanding acceptance of rent by the lessor. This is a case in which on 19th May, 2000 both the Minister and Figary committed in writing to new terms in relation to what counsel for the Minister correctly recognised as the dominant purpose of the Foreshore Lease, that is to say, the construction and operation on the demised foreshore of a marina. In so doing, the Minister recognised, through his authorised agent in writing, that the Foreshore Lease was “active”, which can only mean that it had not been determined and it was not at risk of being determined in consequence of past events. That does not mean, of course, that circumstances could not arise in the future which would give rise to an entitlement on the part of the Minister to invoke the proviso for forfeiture in the Foreshore Lease in the event of a breach of covenant by Figary. However, in such circumstances, the Minister would be required by subs. (1) of s. 14 to serve a new forfeiture notice on Figary, which complied with the requirements of that sub-section.
36. Having regard to the foregoing, I have no doubt that, as and from 19th May, 2000, the forfeiture notice had ceased to affect the landlord and tenant relationship of the Minister and Figary and that the trial judge was correct in finding that the Minister could not rely on it to seek to determine the Foreshore Lease by forfeiture and obtain possession of the demised foreshore as the Minister, relying on what was very much a “fallback” position in these proceedings as initiated in October 2005, subsequently sought to do. Accordingly, I am satisfied that, in consequence, the Minister was not entitled to an order for possession on the basis that the Foreshore Lease had been forfeited when the proceedings were initiated, nor is he entitled to an order for possession on that basis now.
37. On the basis of the conclusions that the forfeiture notice ceased to have effect in May 2000 and that the Foreshore Lease has not been determined by forfeiture on foot of the forfeiture notice, the question whether Figary is entitled to relief against forfeiture under s. 14(2) of the Act of 1881 does not arise. However, as has been noted, the trial judge did indicate that, even if it could not be held that the forfeiture notice ceased to have effect, he would have been disposed to grant relief against forfeiture having regard to general equitable principles. Before considering the plaintiff’s claim under s. 52 of Deasy’s Act, it is convenient to set out in summary form the terms upon which in the Second Judgment the trial judge considered it appropriate that Figary should be granted relief against forfeiture. Those terms, as set out at para. 79 and reiterated at para. 101(3), were as follows:
(a) that Figary pay all rent due and owing to the Minister, together with interest, in the total sum of €212,909.65 (the calculation of which sum will be explained later), with such liability being subject to set-off against any sum due by the Minister to Figary under the counterclaim;
(b) that Figary provide an updated Schedule of Works and detailed drawings, plans and technical specifications with regard to the breakwaters and the marina facilities, all by reference, inter alia, to a new clause to be inserted in the lease, the text of which is set in para. 70 of the Second Judgment;
(c) that Figary would retain Consulting Engineers of suitable speciality and skill, such as Arup, at whose direction and under whose supervision the remaining works necessary to fully complete the marina were to be carried out; and,
(d) that Figary would apply and lay out the sum of €1,545,000 awarded to it on the counterclaim, the quantification of which will be explained later, or its equivalent, solely and exclusively in satisfactorily completing the Marina in accordance with the parties’ contractual relationship with each other.
In the interests of clarity, it should be recorded that the conditions for relief against forfeiture as set out in the final perfected order of the High Court dated 27th January, 2012 vary somewhat from the foregoing, in that there is included a condition that Figary “procure a bond . . . in accordance with the agreement of 19th May 2000”, the terms of which were stipulated. Such inclusion would appear to be a mistake, in that the requirement to procure a bond was pursuant to a separate and distinct order provided for at para. 101(4) of the Second Judgment. It will be necessary to consider later to what extent the foregoing terms should be applied as a condition to Figary avoiding an order for possession under s. 52 of Deasy’s Act.
Claim for order for possession under Section 52 of Deasy’s Act
38. The Minister’s claim for an order for possession has been quoted earlier (at para. 7). Notwithstanding the actual wording of the claim, my understanding is that the claim for possession was on two separate grounds:
(a) that the Minister was entitled to enforce forfeiture of the Foreshore Lease for breach of covenant; and/or
(b) that the Minister was entitled to possession pursuant to s. 52 of Deasy’s Act.
The Minister’s claim under Deasy’s Act is addressed at paras. 121 to 129 of the First Judgment. Insofar as it is relevant for present purposes, s. 52 provides as follows:
“Whenever a year’s rent shall be in arrear in respect of lands held under any . . . lease . . ., it shall be lawful for the landlord immediately thereon, and before the expiration of the time, if any, limited for re-entry thereupon in any lease . . ., to proceed by ejectment for the recovery of the possession of the said lands . . ..”
Obviously, the first question which arises on the application of s. 52 is whether there was a year’s rent under the Foreshore Lease in arrear when proceedings were initiated in October 2005. In the statement of claim it was pleaded that up to and including 1st June, 2005 rent aggregating €251,460 remained due and owing to the Minister and that the arrears were continuing. In the defence it was denied that the said sum or any part thereof was due and owing to the Minister. It was also pleaded that, by reason of a variety of circumstances, Figary had no liability for rent. For example, it was pleaded that in or about February 1998 the Minister had entered into an agreement with Figary to remit and/or waive the rent. An alternative assertion was that the Minister had represented and warranted to Figary that he would remit and/or waive the rent and that, because Figary relied on the asserted representations or warranties to its detriment, the Minister was estopped from asserting that there was rent due. Those matters are addressed at para. 123 of the First Judgment. The conclusion of the trial judge was that the rent began to be due under the Foreshore Lease from 1993. There is no cross-appeal against that finding.
39. The build up of the calculation of the sum of €212,909.65 referred to in paras. 79 and 101(3) of the Second Judgment is to be found in para. 58 of the Second Judgment, where it is set out in tabular format. Based on a portion of a table, which had been submitted on behalf of the Minister, it is clear that the figure of €212,909.65 was calculated on the following bases:
(a) that, when the proceedings were initiated in October 2005 the rent due prior to 1st January, 1999 was statute-barred, so that the rent payable was calculated from 1st January, 1999 up to and including 1st January, 2011 at the yearly rate of €22,855.29, making in total €297,118.77;
(b) that of the amount payable over that period, a balance of €161,038.71 remained outstanding, the remainder of the rent payable from 1st January, 1999 having been paid by Figary to the Minister prior to the commencement of the hearing in the High Court in 2009; and
(c) that the additional amount of €51,870.94 represented interest at the rate of 8% per annum, that is to say, at the statutory court rate, on payments outstanding over that period, having given credit for the payments made.
40. The trial judge addressed the issue as to whether the Minister was entitled to interest on outstanding rent and, if so, at what rate in the Second Judgment (at paras. 59 to 62). His conclusion was that the question of interest would be more appropriately dealt with in the context of the forfeiture issue. Later in the Second Judgment (at para. 78) it was determined that it was appropriate to provide for interest on the outstanding rent at the rate of 8%, the only rate which had been suggested, in the context of determining the conditions on which Figary would get relief against forfeiture.
41. As I understand the position, although Figary has retained possession of the foreshore demised by the Foreshore Lease, it has paid no rent to the Minister since the determination of the proceedings in the High Court. On the basis of the tables furnished to this Court, there is due to the Minister in respect of arrears of rent up to and including 1st January, 2014 the sum of €229,604.64. This Court was informed that simple interest calculated at 8% per annum on the cumulative amount outstanding comes to €98,670.65. Accordingly, the sum due for rent under the Foreshore Lease and interest thereon, as calculated in the same manner as the figure of €212,909.65 was arrived at in the Second Judgment, is €328,275.29 based on arrears due at 1st January, 2014. As that calculation obviously requires to be updated, on the same basis, but for illustrative purposes only, I calculate the amount due as at 1st January, 2015 at €369,498.95, made up of –
(a) the sum of €252,459.93 in respect of arrears of rent over the period from 1st January, 1999; and
(b) the sum of €117,039.02 in respect of interest at the statutory court rate of 8% on the said arrears.
42. There is no doubt but that a year’s rent was in arrears when the proceedings were initiated. The Minister, again as a “fallback”, had sought an order for possession under s. 52 of Deasy’s Act. Accordingly, the following issues require to be addressed:
(a) whether the doctrine of equitable relief against forfeiture applies when a landlord is otherwise entitled to recover possession of premises under s. 52 of Deasy’s Act, when a year’s rent is in arrears, and
(b) if so, the application of the doctrine to the position of Figary in this case, given the conclusion that the issue of statutory relief against forfeiture under s. 14(2) of the Act of 1881 does not arise.
43. As is pointed out in Wylie on Landlord and Tenant (3rd Ed.) at para. 24.20, where forfeiture (i.e. contractual forfeiture based on a proviso for re-entry in the lease) is based upon non-payment of rent, there is equitable jurisdiction to grant relief against forfeiture. As is pointed out in footnote 159, statutory relief against forfeiture provided for in s. 14 of the Conveyancing Act 1881 does not apply in the case of forfeiture for non-payment of rent, because, as already noted, s. 14(8) provides that s. 14 “shall not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent”.
44. Section 52 of Deasy’s Act provides for a special action for ejectment for non-payment of rent whenever a year’s rent shall be in arrear. In Deale on The Law of Landlord and Tenant in Ireland, it is pointed out (at p. 262) that “non-payment of rent” in s. 14(8) of the Act of 1881 means the contractual right to forfeit for failure to pay rent, and not the right to eject for non-payment of rent under Deasy’s Act, section 52.
45. Wylie deals with proceedings under s. 52 in Chapter 27 (op. cit.) in some detail. He observes (at para. 27.19) that an ejectment for non-payment of rent is primarily a proceeding to enforce payment of rent under a tenancy which still exists, but with the possibility that an order for possession will be made, if the rent is not forthcoming. At para. 27.31 he deals with s. 60 of Deasy’s Act, which provides that the proceedings are stayed, if the defendant pays the amount of rent claimed plus costs, to the plaintiff or his agent within ten days from the service of the proceedings. He points out that apart from that, at any time before service of notice of trial or judgment, the defendant can pay the sum for rent into court, with an undertaking to pay costs, and thereafter the plaintiff proceeds “at his peril” (s. 62 of Deasy’s Act). Wylie also points out (at para. 27.32) that, even where judgment has been given against the defendant, he may obtain a stay of execution by tendering at any time before execution the rent stated as due in the decree, plus costs and any expenses incurred towards execution. Wylie deals with ss. 70 and 71 of Deasy’s Act in paras. 27.33 to 27.38. The effect of those provisions is that the tenant may obtain “restitution”, i.e. an order restoring him to possession of the demised premises, if he tenders or lodges in court the arrears of rent, plus full costs, within six months after execution of the order for possession granted to the landlord. It is pointed out that the application should be made to the Court which made the order for possession.
46. Under the heading “Equitable Relief”, Wylie states (at para. 27.37) that, according to s. 71 of Deasy’s Act, the Court hearing the application may “give such relief therein as a court of equity might have done”. He observes that it seems clear, therefore, that the Court should exercise its discretion on usual equitable principles for giving relief against forfeiture and he refers to his earlier commentary (at para. 24.20). He goes on to state that, thus, the conduct of the parties may be relevant, e.g. the landlord’s refusal of a tender of rent, which necessitated an application for relief, may result in him being deprived of his costs. He also states that the form of order is usually that the tenant is to be restored to possession on the basis that he accounts to the landlord for the rent and costs and the landlord accounts for any profits he has made during his interim possession following execution of the original order for possession. Once made, the order for restitution is final.
47. Deale (op. cit) (at p. 260) emphasises that a proviso for re-entry if rent is unpaid should not be confused with the statutory right to eject for non-payment of rent which is a year or more in arrear contained in Deasy’s Act, s. 52. The statutory right exists “without any need for a proviso thereabout in the contract”. Such an ejectment is not a forfeiture. In relation to the provision in s. 71, which provides that it shall be lawful for the Court “to give such relief therein as a court of equity might have done”, Deale states in the notes on s. 71:
“Such relief would include an account of the landlord’s profits during the dispossession . . . , but the tenant may, unless he stipulates otherwise, find that an unconditional payment of rent and costs has waived such an account . . ..”
48. Having regard to the foregoing, I consider that the jurisdiction of a court under s. 71 to “give such relief therein as a court of equity might have done” in a situation where the tenant has continued in possession of the demised premises relates to ensuring that the balance of fairness and justice is maintained between the landlord and the tenant in relation to the landlord’s monetary entitlements and the tenant’s monetary liabilities in respect of unpaid rent, i.e. arrears of rent and costs, and possibly interest on the arrears. Where, as in this case, the landlord contends that the tenant is in breach of certain covenants in the lease, on foot of which forfeiture is governed by s. 14 of the Act of 1881, but the Court concludes that the circumstances are such that the landlord is not entitled to forfeit under s. 14, for example, because, as has happened here, the forfeiture notice has been waived, I am of the view that the Court does not have jurisdiction to make it a condition of the tenant avoiding an order for possession under s. 52 that, in addition to paying the rent in arrears and perhaps interest on the arrears of rent and costs, the tenant is obliged to remedy the breaches of covenant which come within the ambit of s. 14. If it were otherwise, the landlord could totally ignore the requirements of s. 14 and proceed for ejectment under s. 52 in the hope of not only recovering the rent arrears but also having the breaches of covenant remedied.
49. For the foregoing reasons, given the conclusion that the forfeiture notice had ceased to affect the landlord and tenant relationship of the parties prior to the initiation of the proceedings, so that the Minister is not entitled to forfeit the Foreshore Lease and relief against forfeiture under s. 14(2) of the Act of 1881 does not arise in these proceedings, I consider that it is not open to the Court to impose the requirements set out in the Second Judgment at para. 101(3), namely, –
(a) at sub-paragraph (ii), providing an updated schedule of works,
(b) at sub-paragraph (iii), retaining consulting engineers, such as Arup,
(c) at sub-paragraph (iv), applying any award of damages under the Interreg IIIA claim in completing the Marina,
as conditions to refusing the Minister’s claim for possession under s. 52 and allowing Figary to continue in possession for the residue of the term subject to the provisions of the Foreshore Lease.
50. If Figary discharges the arrears of rent and, if the Court concludes that it should do so, interest on the arrears of rent and the costs in relation to the s. 52 application, the correct outcome on foot of the s. 52 claim is that an order for possession under that statutory provision is not made and the lease continues to exist. That gives rise to the following considerations:
(a) In relation to arrears of rent, as the objective of proceedings under s. 52 is primarily to enforce payment of the rent due by the lessee to the lessor, whether the reference to rent in the various provisions of Deasy’s Act which are designed to avoid an order for possession or to restore the lessee to the demised premises (for example, the reference to “the rent, arrears and costs” in s. 71) should be construed as referring to all arrears of rent, whether statute-barred or not, due when the proceedings were commenced and arrears of rent which have accrued since the proceedings were initiated. As the statutory remedy provided for in s. 52 envisages all outstanding rent being discharged in order for the tenant to avoid the making of an order for possession against him, the proper application of principles of fairness and justice does seem to require that rent which is statute-barred when the proceedings are initiated should be paid in order to achieve that end. My calculation, again for illustrative purposes only, of the arrears of rent for the period from the commencement of the term of the Foreshore Lease to 1st January, 1999 is that they amount to €76,055. 29.
(b) In relation to interest on arrears of rent, the Court has not been referred to any authority in which payment of interest at the statutory court rate on the arrears was imposed on the defaulting lessee as a condition to avoiding an order for possession under s. 52. Nonetheless, the proper application of the principles of fairness and justice does seem to require that Figary should pay interest at the statutory court rate, that is to say, 8%, on arrears of rent which are not statute-barred. In my view, it is appropriate for the Court to exercise its discretion in this manner because Figary has continued in possession of the Marina without paying the outstanding rent as it became due for such possession to the Minister. If the Court was, for example, giving judgment in summary proceedings for the arrears of rent due to the Minister, in my view, it would be appropriate to award pre-judgment interest under s. 22 of the Courts Act 1981 to the Minister. The Minister’s case for interest at the statutory court rate is even stronger, where the Court is giving Figary relief in the nature of avoidance of an order for possession.
(c) On the calculations set out in para. 31 and at (a) above, there is due by Figary to the Minister as at 1st January, 2015 the following sums:
(i) €76,055.29 in respect of statute-barred arrears of rent up to 1st January, 1999;
(ii) €252,459.93 in respect of arrears of rent from 1st January, 1999 to 1st January, 2015; and
(iii) interest in the sum of €117,039.02 on the arrears of rent which are not statute-barred.
The total amount due for arrears of rent and interest, therefore, is €445,554.24. As stated previously, those updating calculations have been done for illustrative purposes only. Obviously, in the event of any dispute as to the accuracy of the calculations, the Court will hear submissions from the parties and also as to any further updating as may be necessary.
(d) In relation to the costs of the Minister’s claim under s. 52, that claim being one component only of these very complex proceedings, the relevant measure of costs will be considered after hearing further submissions from the parties.
Provided Figary discharges the arrears of rent to date, interest at the statutory court rate of 8% on the arrears of rent which are not statute-barred, and the s. 52 claim for possession component of the costs of the proceedings as measured, the Minister will not be granted an order for possession under s. 52 of Deasy’s Act.
Other issues arising from landlord and tenant relationship: general approach
51. The issues which remain on the appeal arising from the landlord and tenant relationship of the Minister and Figary arise from the findings of the trial judge on certain claims made by Figary in its counterclaim against the Minister on the basis of alleged breaches of covenant by the Minister, which breaches it was asserted constituted a breach of implied term not to derogate from the grant, and in respect of which Figary claimed damages. The simplest way of dealing with those issues is by reference to the Minister’s grounds of appeal and to subsume them under the headings suggested by counsel for the Minister. Accordingly, the Court will consider those issues under the following headings:
(a) the liability of the Minister to assist Figary in relation to the development of the marina;
(b) the liability of the Minister for alleged unreasonable withholding of consent in relation to removal of sand; and
(c) liability of the Minister for alleged unreasonable withholding of consent by the Minister in relation to the performance bond.
While the trial judge found that there was liability on the part of the Minister to Figary under the foregoing headings, following a very thorough analysis of the law and the facts, he concluded that the Minister was not liable in damages to Figary for the breaches he found on the part of the Minister. In short, Figary was not awarded any relief against the Minister on the counterclaim under those headings. However, on the appeal, the Minister has taken issue with one aspect of the reasoning of the High Court in determining whether damages would be recoverable by Figary against the Minister for breach of covenant. In addressing the issues raised by the Minister as outlined at (a), (b) and (c) above, the basis on which it was submitted that they are of significance, and not merely theoretical, will be outlined.
52. Finally, in addressing many of the issues arising from the parties’ landlord and tenant relationship, counsel for the Minister emphasised the fact that the Foreshore Lease was a lease of foreshore granted pursuant to s. 2 of the Act of 1933. It was submitted that sufficient consideration was not given by the trial judge to the public interest aspect of the landlord and tenant relationship arising from the legislation governing the State’s ownership of foreshore and the powers of the Minister to act in a manner proper or desirable in the public interest. That issue will be considered separately.
Liability of the Minister to assist Figary in relation to the development of the marina
53. In the First Judgment, before considering individually the allegations of breach of covenant made by Figary against the Minister, the trial judge took an overview of Figary’s case for breach of covenant against the Minister. Figary, while not having admitted that it was in breach of covenant, asserted that any such breach was due in whole or in part to the conduct on the part of the Minister, in particular, the Minister having unreasonably withheld its consent or otherwise placed unreasonable conditions upon its receipt. It was recorded, however, that no provision in the Foreshore Lease stated expressly that the Minister’s consent “would not be unreasonably withheld”. The trial judge, nonetheless, continued his overview on the premise that the Minister may not rely on breaches of covenant by Figary, which have occurred in whole or in part due to the Minister’s wrongful actions, such as unreasonably withholding consent, to effect ejectment and, further, that Figary may have an entitlement to damages in consequence thereof. It is appropriate to reiterate at this juncture that this Court has concluded that the Minister is not entitled to eject Figary. Further, the High Court found that Figary was not entitled to any damages for breach of covenant or of contract on its counterclaim against the Minister.
54. In taking an overview of Figary’s contention of breach of covenant on the part of the Minister, the trial judge (at para. 141) recognised that the parties’ relationship was somewhat fraught. He made the following observation in relation to the position of the Minister:
“. . . it is clear from correspondence that the positive assistance expected of and from the [Minister] ceased, and this assistance itself declined and also ceased (in fact it becoming negative). Further the [Minister] at times put in place barriers to the completion or continuance of the project, and it took an approach to its dealings with [Figary] which, on one reading, was obstructionist, or at the very least unhelpful.”
55. The Minister in his grounds of appeal contends that the trial judge erred in law and on the facts in concluding that –
(a) the Minister was obliged to give positive assistance to Figary in the context of Figary’s obligations to comply with the various covenants provided for under the Foreshore Lease: and
(b) the Minister at times put in place barriers to the completion or continuance of the construction of the Marina as required by the terms of the Foreshore Lease and/or took an approach to his dealings with Figary which was obstructionist or unhelpful in the context of Figary’s obligations under the Foreshore Lease.
56. Counsel for Figary submitted that the findings the subject of the challenge at (b) in the next preceding paragraph are findings of primary fact and/or inferences of fact based on credible evidence, including, in particular, relevant correspondence, in respect of which the principles laid down by this Court in Hay v. O’Grady [1992] 1 I.R. 210 apply. While acknowledging that the findings at the end of para. 141, which have been quoted above, were introductory in character and were qualified as being “on one reading of events”, counsel for Figary submitted that they ought not be set aside by this Court on appeal.
57. The reality of the situation is that the trial judge only upheld two of Figary’s allegations of breach of covenant against the Minister. In the circumstances, it seems to me that the proper course for this Court to take is to consider, in relation to each of those covenants, the basis on which it was found that the Minister was in breach.
Liability of the Minister for unreasonable withholding of consent in relation to removal of sand
58. In dealing with the refusal of the Minister to consent to the removal of sand, the trial judge (at para. 143) identified the relevant covenant on the part of Figary in the Foreshore Lease as covenant No. 10 in which Figary covenanted:
“To obtain the written consent of the [Minister] for the excavation, removal and stockpiling of beach material and the [Minister] shall specify the terms and conditions under which such excavation, removal and stockpiling will be permissible.”
The trial judge concluded (at para. 143), having reviewed the correspondence, that ultimately such consent was unreasonably withheld by the Minister. The trial judge rationalised that conclusion in that paragraph and in the succeeding paragraph and he identified the consequence of the refusal of consent by the Minister to allow the removal of sand as being that Figary was entitled to such damages as were appropriate in the circumstances and resultant thereon. In the event, in the Second Judgment, it was held that Figary was not entitled to damages and there is no cross-appeal against that finding.
59. The grounds on which the Minister challenges those findings are that the trial judge erred in law and on the facts –
(a) in concluding that the Minister had unreasonably withheld his consent under covenant No. 10 of the Foreshore Lease for the removal of beach material/sand;
(b) in determining that it was not for the Minister and/or that it was unreasonable for the Minister to require Figary to produce evidence of appropriate permits or licences for the removal and/or transportation of sand or beach material before giving its consent for the purposes of covenant No. 10 of the Foreshore Lease;
(c) in determining that it would have been sufficient for Figary to undertake to the Minister to obtain relevant licences and/or permits in respect of the removal and transportation of sand or beach material for a consent to be provided for the purposes of covenant No. 10 of the Foreshore Lease; and
(d) in determining that the Minister was in any way in breach of covenant in unreasonably withholding consent for Figary to move sand off the site for use elsewhere.
60. In their submissions in this Court, counsel for the Minister pointed to the Minister’s statutory obligations under the Act of 1933, as amended, and, in particular, the public interest in relation to the grant of leases of foreshore. It was also pointed out that covenant No. 10 was only one of the covenants among the covenants on the part of Figary in the Foreshore Lease which addressed the issue of waste in the context of the construction and the operation of the Marina. They pointed to courses of action which could have been, but were not, taken by Figary to deal with beach material.
61. Counsel for Figary’s response is that the findings made by the trial judge are findings of primary fact and/or inference of fact based on extensive and credible evidence which were correct.
62. There was extensive evidence, both oral evidence and contemporaneous documentary evidence, before the High Court in relation to the interaction between Figary, qua lessee, and the Minister, qua lessor, in relation to the excavation and disposal of sand and beach material. Given that notwithstanding the finding that the Minister, qua lessor, acted unreasonably, and further, given that the finding of the trial judge resulted in no remedy in favour of Figary against the Minister, so that this aspect of the counterclaim can have no practical impact on the outcome of the appeal, and having regard to the limited function of this Court under the Hay v. O’Grady principles in this area, it would serve no useful purpose to review the evidence with a view to determining whether the conclusions of the trial judge were incorrect on the bases alleged on behalf of the Minister. Therefore, I consider that it is neither necessary nor appropriate to consider these grounds of appeal any further.
Liability of the Minister for unreasonable withholding of consent in relation to the performance bond
63. If anything, the issues raised in relation to the bond to be provided by Figary in accordance with its obligation under the Foreshore Lease and the Minister’s treatment of the endeavours of Figary to fulfil its obligation are even more complex than the removal of sand problem. The covenant by Figary in the Foreshore Lease under which the obligation to produce a bond arose was covenant No. 12 under which Figary undertakes as follows:
“To restore the foreshore to its former condition to the satisfaction of the [Minister] in the event of the premature termination or abandonment of the works specified in the Second Schedule. To ensure that [Figary] will be in a position to comply with this condition it shall, if so required by the [Minister] procure a Bond from an Insurance Office of repute carrying on business in Ireland in the sum of £250,000 for the due performance by [Figary] of the said restoration in the event of such premature termination of the works or in the event of the unsatisfactory completion or abandonment of the said works, such Bond shall be in favour of [Figary] and shall be assigned to the [Minister] if so required. [Figary] will furnish such Bond to the [Minister] for inspection, if required.”
A factor which complicates the bond issue is that, as has been outlined earlier, one of the conditions imposed upon and accepted by Figary in the correspondence dated 19th May, 2000 referred to earlier was –
“the provision of a performance bond of suitable duration which specifies the cover of all of the works set out in the schedule of works to be agreed.”
As the trial judge pointed out in the First Judgment (at para. 146), the “performance bond” envisaged in that correspondence was of an entirely different nature to the bond envisaged in covenant No. 12 which, it was stated might be termed a “remedial” or “restorative” bond. The trial judge concluded that the requirement of covenant No. 12 was modified by the correspondence of 19th May, 2000 in relation to which, in the course of the parties’ interaction, the Minister required that the bond be payable on demand and that there be no recourse to arbitration in the event of a call for payment. It was insistence on those two requirements that the trial judge (at para. 149 of the First Judgment) found to be unreasonable, on the basis that it would be impossible to obtain a bond embodying these terms.
64. The outcome of the counterclaim in relation to the bond issue was that in the Second Judgment (at para. 101(4)), the trial judge indicated that he would make an order in the following terms:
“An Order directing [Figary] to procure a Bond in favour of the [Minister], in accordance with the agreement of the 19th May 2000, in the sum of €317,434.52, of suitable duration and which covers all works set out in the Schedule of Works to be agreed, the general terms of which are to reflect existing commercial construction norms.”
As indicated earlier in the interests of clarification, in the perfected order of the High Court that direction is made a condition of the granting of relief against forfeiture, which would appear to be a mistake in the order. Counsel for the Minister, both as a ground of appeal, and in their submissions, challenged the determination that the two requirements insisted upon by the Minister were unreasonable and that the Minister was in breach of covenant in unreasonably withholding consent in relation to the bond. However, as in the case of the finding of a breach of covenant No. 10, given that the finding of the trial judge was that this breach did not give rise to an entitlement to damages and that relief against forfeiture is not being granted on this appeal, the finding has no practical implications, subject to one qualification. Accordingly, I consider that it is neither necessary nor appropriate to consider this ground of appeal further.
65. The qualification is that, while the direction to procure the bond quoted in the next preceding paragraph is expressed as a condition of granting relief against forfeiture in the perfected order of the High Court, the reference to an order directing Figary to obtain a bond in para. 101(4) of the Second Judgment appears to be a standalone direction, rather than a condition of relief against forfeiture. If one assumes that the perfected order is correct, then that the direction to procure the bond will fall away on relief against forfeiture ceasing to be relevant. However, if the perfected order is not correct in this regard, the Court will have to hear further submissions from the parties as to how it is to be dealt with in the order of this Court. It is hoped that the parties will reach consensus on the approach to be taken.
Whether the Minister is liable for damages for breach of covenant/breach of contract
66. In the Second Judgment, in addressing the issue of damages arising from his finding of breach of covenant by reference to unreasonable withholding of consent and/or placement of unreasonable conditions on such consent, the trial judge considered an argument advanced on behalf of the Minister that, as a matter of legal principle, on the authority of the decision of this Court in Meagher v. Luke J. Healy Pharmacy Ltd. [2010] 3 IR 743 (Meagher), no cause of action sounding in damages had been established. Having considered the nature of the landlord and tenant relationship arising between the parties under the Foreshore Lease, the trial judge concluded in the Second Judgment (at para. 36) that, given its nature, the Meagher decision had no application to the covenants and conditions in the Foreshore Lease with which he was concerned, namely, covenant No. 10 in relation to removal of sand and covenant No. 12 in relation to the provision of a bond. On the basis of further analysis of those provisions of the Foreshore Lease, he concluded (at para. 38) that covenant No. 10, which on its face is a covenant by Figary qua lessee, includes a positive covenant on the part of the Minister qua lessor by reference to his obligation to “specify the terms and conditions under which such excavation, removal and stockpiling will be permissible”, the breach of which positive covenant in principle is actionable in damages. By contrast, he found that the unreasonable conduct on the part of the Minister in relation to the procurement of the bond, which he considered constituted a breach of contract, did not give rise to any entitlement to damages. However, even though he found that the breach of covenant No. 10 in principle was actionable in damages, as has been outlined earlier, ultimately, the trial judge awarded no damages whatsoever to Figary for the Minister’s breach of covenant in relation to the removal of sand. Although he expressed the view in the Second Judgment (at para. 54) that he was satisfied that the conduct of the Minister “might have given rise to some loss of earnings post-2005”, he was of the view that any such loss was more properly attributable to the inability of Figary to access funds under the Interreg IIIA Programme. Therefore, he stated (at para. 55) that any damages for loss of earnings would be dealt with under Figary’s counterclaim in connection with the Interreg IIIA Programme.
67. The Minister has challenged the findings the trial judge made on the issue of damages for breach of covenant in two respects. First, it is the Minister’s position that the trial judge erred in determining that the position of this Court in Meagher was distinguishable from the circumstances of the present case and that damages were recoverable by Figary for breach of covenant on the part of the Minister. Secondly, it is the Minister’s position that the trial judge erred in his interpretation of covenant No. 10 as giving rise to a positive obligation on the part of the Minister and not a mere refinement of the obligations of Figary (so as to inform Figary of what was required of it in relation to its obligations under the Foreshore Lease).
68. Again, neither of the challenged findings ultimately gave rise to an award of damages in favour of Figary against the Minister, nor did either have any implications in relation to the overall outcome of the proceedings in the High Court. Moreover, there is no cross-appeal by Figary against the determination that no damages should be awarded to Figary for breach of covenant. In the circumstances, it is not necessary, and it would be a futile exercise, for this Court to consider the damages issue any further.
Public interest issue
69. A theme which runs through the submissions made on behalf of the Minister in relation to the issues arising under the landlord and tenant relationship of the parties is that the trial judge failed to have sufficient regard to the public interest nature of the Minister’s position. In particular, one ground of appeal relied on by the Minister is framed as an assertion that the trial judge erred in treating the relationship between the Minister and Figary as an ordinary commercial landlord and tenant relationship and in treating the obligations of Figary under the Foreshore Lease as being similar to obligations under a building contract and, in so doing, failing to take proper account of the statutory role of the Minister in relation to foreshore under the Act of 1933, as amended, particularly the requirements for leases of the foreshore to be granted in the public interest.
70. In relation to that ground, it seems to me that one must assume that, in granting the Foreshore Lease to Figary, the Minister considered that it was in the public interest to grant a lease of the demised foreshore to Figary and that he was also satisfied that the terms of the Foreshore Lease complied with the statutory requirement of the protection of the public interest. In this context, counsel for the Minister made some sweeping assertions as to how a court should treat the landlord and tenant relationship in the context of a lease of foreshore made on the authority conferred by the Act of 1933, as amended. The primary target of those assertions is the circumstance that the trial judge was prepared to grant relief against forfeiture on certain conditions. Having found that the Foreshore Lease has not been forfeited, that aspect of the outcome in the High Court decision is no longer effective. In all those circumstances, the submissions made on behalf of the Minister as to the impact of the public interest aspect of leases of the foreshore on relief against forfeiture address a hypothetical situation. The issues they raise are for another day.
Summary of conclusions on the landlord and tenant relationship
71. The Minister is not entitled to an order for possession for recovery of the demised foreshore on the basis that he is entitled to enforce forfeiture of the Foreshore Lease under the proviso for forfeiture in the event of breach of covenant in the Foreshore Lease. Accordingly, the question of granting relief against forfeiture does not arise.
72. Provided Figary discharges the arrears of rent due to the Minister and interest thereon at the statutory court rate calculated on the basis outlined earlier and the costs of the Minister related to the claim for possession under s. 52 of Deasy’s Act, the basis of quantification of which will be subject to further submissions, the Minister shall not be entitled to an order for possession of the demised foreshore under s. 52 of Deasy’s Act. Of course, assuming compliance by Figary with those conditions, the landlord and tenant relationship of the Minister and Figary will continue to exist unless and until the Foreshore Lease is terminated. The obligations of Figary, qua lessee, and of the Minister, qua lessor, in accordance with the terms of the Foreshore Lease will continue. One would hope that a more common-sense approach is adopted on each side in the future in relation to performance of their respective obligations under the Foreshore Lease.
Claim for trespass
73. Although this aspect of the Minister’s claim does not strictly speaking arise out of the landlord and tenant relationship, it is convenient to deal with it at this juncture.
74. As has been recorded earlier, it was pleaded in the statement of claim that Figary effected an encroachment beyond the demised foreshore in the construction of the Marina. It was also pleaded that Figary proposed effecting other works outside the demised foreshore. It was pleaded that the works in question amounted to an unauthorised act creating a permanent trespass by encroachment. Specific injunctive reliefs were sought by the Minister against Figary in relation to that alleged trespass: prohibitory injunctions restraining Figary from carrying on any works otherwise than within the boundaries of the demised foreshore and from encroaching on adjoining foreshore. The Minister also sought a mandatory injunction demanding Figary to remove and take away all structures as project beyond the boundaries of the demised foreshore. There was also a claim for damages for trespass. In its defence Figary denied trespass and it pleaded that it had taken meticulous steps to remain within the boundaries of the demised foreshore.
75. The trial judge found in the First Judgment (at para. 157) that there had been a technical trespass. The trial judge then went on to explain the position he proposed adopting (at para. 158) as follows:
“In the event of such a finding the Plaintiff says that ‘it is open to the Court to deal with the matter in the overall context of a determination of the issues between the parties’. I propose to adopt that approach. Therefore, in tandem with the lease, the Defendant should obtain similar title to the encroached lands. The consideration therefor (sic) should be agreed, or, in default of agreement, determined by this Court.”
76. The quantification of damages for trespass is addressed in the Second Judgment (at paras. 80 to 86). In relation to the historical trespass over an area of approximately 0.484 hectares of foreshore, the trial judge calculated the damages for trespass, to include interest at 8% per annum, in the amount of €13,938.12. He recorded at para. 86 that the plaintiff had agreed that the encroached on area should be demised to Figary on the same terms and conditions as the Foreshore Lease, subject to increased rent calculated pro rata on the existing rent. The trial judge calculated the new composite yearly rent at €23,961.49. In the perfected order of the Court, having recorded that it was ordered that Figary was entitled to relief against forfeiture, it was ordered that the Minister –
“is required to enter a new Lease on the same terms as the previous Lease which is to cover an increased area of demise, the full extent of which is now outlined in red on the drawing attached herewith, and which is demised on the basis of an increased rent of €23,961.49 per annum (to cover both the original area of demise in addition to the extra area of .484 Ha included in the said drawing) . . ..”
77. None of the findings or determinations of the High Court in relation to the claim for trespass and encroachment are the subject of the appeal. They are outlined in this judgment purely for the purpose of completeness and emphasising that they remain in effect. However, having heard further submissions from the parties, the Court will have to give consideration as to how the orders made by the High Court in relation to these matters are to be dealt with in the order of this Court and, in particular, to what extent the orders of the High Court need to be varied or vacated. For instance, it is ordered in the final order of 27th January, 2012 that the Minister enter into a new lease in favour of Figary to include the encroached on area of the foreshore, the proposed new demised area being depicted by reference to a map annexed to the order, subject to Figary being liable for an increased rent of €23,961.49 per annum. It is hoped that the parties will reach consensus as to continuing status or otherwise of that order.
C – Grant application under Interreg IIIA Programme Issues
Figary’s claim arising from the grant application
78. To recapitulate, Figary has included in its counterclaim a claim for damages for breach of statutory duty on the ground that the Minister wrongfully frustrated Figary in its endeavours to develop the Marina, the relevant wrongful conduct being particularised as preventing Figary from seeking funding under the Interreg IIIA Programme and failing to reasonably assist Figary in obtaining such funding. In order to put Figary’s application for the grant in issue and the manner in which it was processed into its legislative context, both under European Union law and under Irish law, and to understand the administrative framework within which it was submitted, it is necessary to outline the EU and national legislative and the administrative structure applicable to the Interreg IIIA Programme as it operated in this jurisdiction and, in particular, the elements of it relied on by counsel for Figary.
Legislative/administrative structure
EU legislation: Council Regulations
79. At the apex of the structure, although below the relevant Treaty provisions, is Council Regulation (EC) No. 1260/1999 of 21st June, 1999 (the General Regulation) laying down general provisions on the Structural Funds. As is predicted in the recitals therein, no less than fifty nine in number, the General Regulation is very broad ranging in its objective and scope. The focus for the purposes of the issues which arise on this appeal is on the provisions governing implementation.
80. In Article 8, having provided that Community actions shall complement or contribute to corresponding national operations and that the “partnership” between the Commission and the Member State, together with authorities and bodies designated by the Member State within the framework of national rules, shall cover the preparation, financing, monitoring and evaluation of assistance, it is provided in Article 8(3):
“In application of the principle of subsidiarity, the implementation of assistance shall be the responsibility of the Member States, at the appropriate territorial level according to the arrangements specific to each Member State, and without prejudice to the powers vested in the Commission, notably for implementing the general budget of the European Communities.”
The word “assistance” is defined in Article 9, the definition Article, as meaning “the forms of assistance provided by the Funds”, including operational programmes.
81. Programming is dealt with in Title II and “Operational programmes” are dealt with in Article 18. Article 18(1) provides that assistance covered by a Community support framework shall as a general rule be provided in the form of an integrated operational programme by region, as defined in Article 9. The expression “operational programme” is defined in Article 9(f) as meaning the document approved by the Commission to implement the Community support framework and the definition elaborates on the nature of the document. The prescribed contents of each operational programme are set out in Article 18(2). It contains provisions for implementing an operational programme, which it is stipulated shall include, inter alia, –
(a) the designation by the Member State of a managing authority within the meaning of Article 9(n) for managing the operational programme in accordance with Article 34; and
(b) a description of the systems for monitoring and evaluating, including the role of the Monitoring Committee.
Article 9(n) defines “managing authority” as meaning any public or private authority or body at national, regional or local level designated by the Member State, or the Member State when it is itself carrying out this function, to manage assistance for the purposes of the General Regulation. It is provided that, if the Member State designates a managing authority other than itself, it shall determine all the modalities of its relationship with the managing authority and of the latter’s relationship with the Commission. Article 34 elaborates on the role of the managing authority in the context of monitoring. It provides that, without prejudice to Article 8(3), the managing authority as defined in Article 9(n), shall be responsible “for the efficiency and correctness of management and implementation”. Detailed particulars of the matters for which the managing authority bears responsibility follow in Article 34.
82. Article 18 also makes provision for a “programme complement”, which is defined in Article 9(m) as meaning –
“the document implementing the assistance strategy and priorities and containing detailed elements at measure level, as set out in Article 18(3), drawn up by the Member State or managing authority and revised as necessary in accordance with Article 34(3). It is sent to the Commission for information;”
The prescribed contents of the programme complement are set out in Article 18(3).
83. Various articles mandate the Commission to publish guidelines, for example, Article 10 and Article 15, and also Article 21(1), which is of relevance here and is referred to later. It is convenient to refer at this juncture to Article 15, which is headed “Preparation and approval”, in which the provisions in Article 18 in relation to operational programmes and programme complements are anticipated and which is the subject of a decision of the European Court of Justice relied on by the Minister and considered later (Italian Republic v. The Commission). In Article 15 it is provided that the Commission shall appraise the proposed operational programmes submitted by the Member States to determine whether they are consistent with the aims of the corresponding Community support framework and compatible with other Community policies (Article 15(4)). It is also provided that the Member State or the management authority shall adopt the programme complement defined in Article 9(m) and a time limit is stipulated for the Member State sending the programme complement to the Commission for information (Article 15(6)). It is clear from Article 15 that the Commission has a different function in relation to operational programmes, which it appraises, and programme complements, which are sent to it for information, a difference which is highlighted because of the Minister’s reliance on the decision in Italian Republic v. The Commission.
84. Article 20(1) provides that Community initiatives shall cover the four fields specified in that Article, the first of which is –
“cross-border, transnational and interregional cooperation intended to encourage the harmonious, balanced and sustainable development of the whole of the Community area”,
and is classified as “Interreg”, being a reference to interregional.
85. Article 21(1) provides that the Commission shall lay down guidelines describing for each initiative the aims, scope and appropriate method of implementation and that those guidelines shall be published in the Official Journal of the European Communities.
86. Commission Regulation (EC) No. 438/2001 of 2nd March, 2001, was the implementing regulation which was in force at the time relevant to the issues on this appeal. In Article 1 its function was stated as to lay down “detailed rules for the implementation of [the General Regulation] as regards the management and control systems for the assistance granted under the Structural Funds that is administered by The Member States”. It envisaged “intermediate bodies”, which were defined in Article 2(2) as meaning “all public or private bodies or services acting under the responsibility of managing or paying authorities or performing tasks on their behalf”. The provisions in relation to management and control systems outlined in Article 2 et seq. imposed on each Member State responsibilities not only in relation to managing authorities, but also in relation to intermediate bodies. While this regulation was, as counsel for Figary submitted, of significance in the present context, its significance was as part of the overall scheme.
National legislation
87. At national law level, the apex of the structure is the British-Irish Agreement Act 1999 (the Act of 1999), which gave effect to the Belfast Agreement of 10th April, 1998. Section 22 thereof identified a body known as “The Special EU Programmes Body” (the SEUPB), with the attributes of a body corporate, as the “implementation body for special European Union programmes”. Section 23 provided that the functions of the SEUPB would be the functions specified in Part 4 of Annex 1 to the Belfast Agreement. Part 4, the text of which is set out in Annex 1 to the Act of 1999, inter alia, provided that, in relation to post-1999 Structural Funds, the SEUPB would have grant-making and other managerial functions in respect of Interreg III. In effect, the SEUPB thereby became the managing authority.
SEUPB Operational Programme
88. The operational programme which is of relevance for present purposes is Interreg IIIA Programme 2000 – 2006 Ireland/Northern Ireland (the SEUPB Operational Programme). The SEUPB Operational Programme was adopted by the SEUPB and approved of by the Commission.
89. Chapter 13 dealt with managing and implementing provisions, being, as stated in para. 13.1, the provisions required under Community and national arrangements, including the General Regulation and Regulation 438/2001, and also the Guidelines for Interreg IIIA produced by the European Commission, to which reference is made below. The succeeding provisions of Chapter 13 were very detailed. Paragraph 13.4 provided that the SEUPB was to be the managing authority carrying out the functions laid down in Article 34 of the General Regulation. It was provided that the SEUPB would put in place adequate and appropriate procedures and arrangements to ensure compliance with the regulations referred to above and the relevant national requirements. Provision was also made for various bodies, apart from the managing authority, within the regulatory framework: the Joint Technical Secretariat (JTS), for which the managing authority (i.e. the SEUPB) would be responsible; the Programme Monitoring Committee; and the Steering Committee. It was also provided that a document setting out in detail “the Programme Strategy and Priorities”, that is to say, the Programme Complement, would be prepared by the SEUPB, as the managing authority, and submitted to the Programme Monitoring Committee for its approval and that it would also be submitted to the European Commission “for approval” (sic). Its contents were to be as defined in Article 18(3) of the General Regulation.
90. Chapter 13 also provided that the SEUPB, as managing authority, might delegate certain of its functions in relation to management of the assistance to implementing (sometimes referred to as implementation) bodies and it was provided that, in the event of such delegation, the implementing bodies would take reasonable steps to ensure that separate units within the organisation would carry out implementing functions and delegated functions. As regards project selection, it was provided that joint project development, assessment and selection processes would be established and set out in the Programme Complement. As regards project selection, while it was envisaged that there would be an arrangement for the processing of applications through technical appraisal by the implementing body set out in the Programme Complement, the clear intention expressed in para. 13.34 was that the end of the process as set out in the Programme Complement would be the “final decision by the Steering Committee”.
Commission Guidelines
91. The guidelines for the Interreg IIIA Programme produced by the European Commission referred to in Chapter 13 of the SEUPB Operational Programme, which governed Interreg III at the time of the controversy in relation to Figary’s grant application, were contained in the document entitled Communication from Commission to Member States of 2nd September, 2004, laying down guidelines for a Community initiative concerning trans-European co-operation intended to encourage harmonious and balanced development of the European Territory – Interreg III (2004/C226/02)(the Guidelines). These consolidated guidelines replaced earlier guidelines.
92. Certain provisions of the Guidelines, which expressly related back to Article 20 of the General Regulation, are of particular relevance for present purposes. Point 25 dealt with the contents of the operational programme to be put in place, for example, the inclusion of provisions for implementing the programme, such as the designation of a management authority within the meaning of Article 9(n) and Article 34 of the General Regulation, which contents were reflected in the provisions of the SEUPB Operational Programme. It was also provided at point 27 that each programme would be supplemented by a Programme Complement as defined in Article 9(m) and described in Article 18(3) of the General Regulation. Point 29 provided that joint selection of operations and the co-ordinated monitoring of their implementation would be carried out by the Steering Committee. Further, as counsel for Figary emphasised, under Point 40 it was provided that the operations and projects would be selected on the basis of their eligibility for Interreg III by the Steering Committee. The requirements of point 29 and point 40 were reflected in para. 13.34 of the SEUPB Operational Programme.
SEUPB Programme Complement
93. The Programme Complement for the Interreg IIIA Programme post-dated, and was intended to be read in conjunction with, the SEUPB Operational Programme. It stated in Chapter 2 that the Programme would be implemented in a manner consistent with “the national and Structural Funds regulatory framework” and would ensure compliance with “Community policies and Interreg IIIA Guidelines”. Specific reference was made to the General Regulations and the guidance provided by the European Commission. Chapter 2 also addressed the responsibilities of an implementing agent (sometimes referred to as the implementation agent), one of whose core tasks would include receiving, processing and assessing applications “against Measure level Criteria” (sic). Chapter 4 dealt with project application and selection. In Clause 4(2) it was provided as follows:
“Responsibility for the selection of operations rests with the Steering Committee, in accordance with point 29 of the Interreg guidelines.”
While the Programme Complement envisaged an application process involving, inter alia, the implementing agent and the JTS, whose functions and powers were outlined in the subsequent paragraphs of Chapter 4, what is clear beyond question is that it was the Steering Committee which was “responsible for approving all grant offers based on acceptance of project applications” (Clause 4(6)).
SEUPB Procedures Manual
94. In January 2004 the SEUPB produced a document entitled “Procedures Manual for Implementing Agents” under the Interreg IIIA Programme. As is disclosed in the document, there were a number of different implementing agents responsible for administering the various measures under the Interreg IIIA Programme, including Government departments. The object of the manual was to set out the operating procedures for applications, such as Figary’s application for grant assistance, under the Interreg IIIA Programme. The Minister’s Department was, in fact, the relevant implementing agent.
95. The Procedures Manual is a useful document in that it dealt comprehensively with evaluation of applications for grant assistance in a format against which what happened in relation to Figary’s application can be readily identified and understood. It stipulated the form and content of applications for grant assistance and provided for a six stage assessment process of the applications as follows:
(a) Stage (1) involved the initial eligibility screenings and was to be carried out by the staff of the implementing agent;
(b) Stage (2) involved scoring applications and was to be carried out by an Assessment Panel;
(c) Stage (3) was approval by the JTS, which was to be conducted in accordance with Clause 2.4.5 quoted below;
(d) Stage (4), as outlined in Clause 2.4.6, was the Steering Committee evaluation, which could result in, inter alia, approval or rejection of the application;
(e) Stage (5) involved communicating the decision of the Steering Committee to the applicant; and
(f) Stage (6) involved economic appraisal, if the Steering Committee had in principle approved of the application, which, in the case of an application for funding in excess of €400,000, was put out to independent consultants to be identified via a tender process.
In fact, the application of Figary in issue on this appeal did not get beyond Stage (3).
96. Clause 2.4.5 of the Procedures Manual provided:
“All projects are forwarded to the . . . JTS . . . in Monaghan who will assess against Programme-wide Criteria and quality-proof the assessment process and papers. Each Implementing Agent must forward the following to the JTS:
• the Assessment Report (which includes a summary of the application form);
• full Part B Application Form;
• all relevant papers; and
• all relevant notes on scoring and assessment. . . .
Following its assessment, the JTS collates all applications (including recommended rejections) for presentation to the Steering Committee. The JTS aims to send all papers to the Steering Committee within fifteen days of the meeting. Therefore the Implementing Agents should forward all papers to the JTS at least three weeks before a Steering Committee meeting.”
While the duty imposed on the Minister’s Department in the role of implementing agent in the last sentence of that clause is at the core of Figary’s complaint against the Minister, it is important to emphasise that it was giving effect to Clause 4.2 of the Programme Complement and point 29 of the Commission guidelines in conformity with the requirements of the SEUPB Operational Programme.
History of processing of Figary’s application
97. The history of the submission and processing of the application by Figary for funding for the construction and management of the Marina project on the foreshore at Fahan is outlined in the first judgment (at para. 65 et seq.). In summary, what happened, by reference to the stages outlined in the Procedures Manual, was as follows:
(a) The original grant application form, which was in the standard form, was signed by John J. McDaid and Michael McDaid on behalf of Figary and dated 15th September, 2003. At this point in time, the Minister’s Department was the implementing agent for the purposes of the SEUPB Operational Programme and the Programme Complement and the application was submitted to it. On its face, the application was for funding in the sum of €2,460,070 from the Interreg IIIA Programme. However, an issue arose in the High Court as to the total amount of funding which Figary expected to get and that issue will be addressed later.
(b) Having got through Stage (1), the initial eligibility screening stage, the application came before an Assessment Panel, where it passed the score threshold for Stage (2).
(c) The application also obtained JTS approval at Stage (3).
(d) The next step in the process was that the application went before the Steering Committee, but it did not get through Stage (4) in December 2003 because of lack of a cross-border element to the project. Figary successfully appealed that decision to a Review Panel. However, the initial application did not proceed further.
(e) As is recorded in the First Judgment (at para. 66), Figary obtained a partner from Northern Ireland in order to satisfy the cross-border element and submitted an amended application to the Minister’s Department as implementing agent. Thereafter, in September 2004, at the request of the Minister’s Department, Figary submitted additional information. Eventually, the amended application came before an Assessment Panel in December 2004 and once again the application got over the score threshold. The Assessment Panel recommended that the application be forwarded to the Steering Committee for consideration. At that stage the Commission guidelines 2004/C226/02 were in place.
(f) The amended application also went through the JTS process successfully.
(g) Figary was then informed by the Minister’s Department of the positive recommendation of the Assessment Panel and that the amended application would be sent to the Steering Committee. Figary expected the Steering Committee to assess the amended application at its scheduled meeting in late January 2005. That did not happen, because the Minister’s Department, as implementing agent, did not forward the application to the Steering Committee, despite having been advised by the SEUPB that it should do so.
(h) By letter dated 23rd March, 2005, the Chief State Solicitor, on behalf of the Minister, informed Figary’s solicitors that the amended application would not be progressed further due to outstanding issues.
98. Figary subsequently made a complaint to the European Commission that its application had not been submitted by the Minister to the Steering Committee. The history of the processing of the complaint, which extended through 2005, 2006, 2007 and into 2008, is set out in some detail in the First Judgment (at paras. 71 to 76). What emerges is that the outstanding issues relied on by the Minister’s Department arose out of the Minister’s dispute with Figary in relation to alleged breaches of the terms and conditions of the Foreshore Lease, the position of the Minister’s Department being that the breaches gave rise to legal issues in respect of which it was likely that legal proceedings would be instituted against Figary.
99. Ultimately, the conclusion of the Directorate General for Regional Policy at the Commission on Figary’s complaint was set out in correspondence to SEUPB on 29th May, 2008. The conclusion is quoted in the First Judgment (at para. 76) as follows:
“(i) that the reason why the complainant’s application was not resubmitted to the programme’s Steering Committee was not communicated clearly to the complainant;
(ii) that the original objection by the Steering Committee (the project did not meet the cross-border criteria) had been remedied;
(iii) that the further objections raised by the Department above should have been signalled to the Steering Committee for it to take a decision to approve/reject the project;
(iv) in effect, the Department has assumed to itself the decision of the Steering Committee.”
It was also recorded that the Director General had noted that, unfortunately, it was too late for Figary to re-submit its application. Even before that time, as is recorded by the trial judge in the First Judgment (at para. 73), it was too late for Figary to avail of any remedy under the Interreg IIIA Programme, since the window for funding had closed and Figary could no longer apply. Moreover, it was not open to Figary to apply under the Interreg IV Scheme, because it had a different focus and did not apply to marine infrastructure.
Findings in the First Judgment on liability for breach of statutory duty in relation to grant application
100. The trial judge considered whether the Minister, through the medium of the actions of his Department, was liable for breach of statutory duty to Figary for failure to progress the grant application to the Steering Committee in the First Judgment (at paras. 162 to 179). Because of the suggested shift in the position of Figary in relation to this aspect of the counterclaim on the appeal, it is necessary to consider the analysis and findings of the trial judge in some depth.
101. The trial judge first considered the circumstances in which an administrative action which is ultra vires will found an action for damages, doing so by reference to the decision of this Court in Pine Valley Developments Ltd. v. Minister for the Environment [1987] I.R. 23, quoting the “clear summary” from Wade on Administrative Law, 5th Ed., 1982 quoted by Finlay C.J. at p. 36. He also considered that question by reference to the decision of this Court in Glencar Exploration Plc v. Mayo County Council (No. 2) [2002] 1 IR 84, stating (at para. 166) that, in order for a statutory duty to be actionable, “it is clear that the provision[s] relied upon must have been created for the protection or benefit of a specific person, or class of persons, rather than the public at large”. He also considered the commentary on the “tort of misfeasance in public office”, or, put another way, the liability of a public body for ultra vires actions, by Fennelly J. in the Glencar case (at pp. 148 – 149), although he had earlier remarked that no claims for misfeasance in public office or wrongful interference with constitutional rights had been made by Figary. Following on from the foregoing analysis, he stated (at para. 169):
“I would immediately note that in the present case, although it would seem to be accepted that the Department acted wholly ultra vires, judicial review of that decision would, at this time, afford no comfort to [Figary] herein. This Court cannot remedy through injunction or declaration the damage which the refusal to send forward the application to the Steering Committee is alleged to have caused.”
That remains the position. The trial judge also considered the provisions and duties invoked by Figary in the context of the principles established in the Pine Valley case and the Glencar case, stating (at para. 170):
“Furthermore in the present case, leaving aside the question of whether the provisions and duties in question could be considered as ‘statutory’ for this purpose, it is clear that they are not of a public nature. They do not impose duties or powers in relation to the public at large, but instead are directed at a very focussed group; namely those making applications under the Interreg IIIA Scheme. This is, by all accounts, a very narrow and defined group. This can be contrasted very sharply with the duties considered in both Pine Valley (planning decisions) and Glencar (development plans). There were no wider considerations in the public interest to be taken account, nor was any duty owed by the Department to the public in the discharge of its duties under the Scheme; their duty was owed only to those applying for a grant thereunder.”
102. Immediately following on from those remarks, the trial judge referred to observations in the Glencar case in relation to the decision of the European Court of Justice in Francovich v. Italy (Case C – 6/90 & C – 9/90) [1991] ECR 1 – 5357 (Francovich). He observed (at para. 171) that Keane C.J. in Glencar had suggested, albeit obiter, that the decision in Francovich –
“[W]as to the effect that an action for damages would lie against a public authority in a member state which had acted in breach of European Community Law where damage had been sustained as a result.”
The trial judge also noted that, in the Glencar case, Fennelly J. too had “considered Francovich” and he quoted the following passage from his judgment:
“The first condition enunciated by the Court of Justice is that the Community act which is invoked – in that case a directive – ‘should entail the grant of rights to individuals’ (para. 40 of the judgment). A duty imposed by statute on a public body will not be held to create a right to damages for its breach unless it can be shown to have within the scope of its intendment a reasonably identifiable protective purpose and identifiable class intended to benefit.”
103. The trial judge then noted (at para. 172) that up to that point there had not been consideration of “whether or not the Interreg Scheme could be said to impose ‘statutory duties’.” He noted that the Minister had urged that the system is not based on any statute, and is in fact an ad hoc arrangement, which is not of a sufficient nature to give rise to “direct effect”, so as to be enforced against the State, so that a breach of “the Scheme”, if found, could not be said to be a breach of a statutory duty.
104. The trial judge then (at paras. 173 and 174) considered the decision of this Court in Emerald Meats Limited v. Minister for Agriculture (No. 2) [1997] 1 I.R. 1 (Emerald Meats (No. 2)). The trial judge noted that, in that case, this Court had found that the Minister for Agriculture had been wrong, as a matter of law, not to forward an application of the plaintiff for an import licence under certain EEC Regulations to the Community. The trial judge focused on the passage from the judgment of Blayney J. in which he dealt with the claim on behalf of Emerald Meats Limited that it was entitled to damages by reason of the breach by the Department of Agriculture of its obligations under the Commission Regulation 4024/89. In the passage quoted, Blayney J. stated that the case made on behalf of Emerald Meats Limited in reliance on the decision in Francovich was correct. He emphasised that it was not an action against the Community, but rather an action against a Member State. In the passage quoted by the trial judge, Blayney J. stated that the decision in the Pine Valley case was distinguishable on the following basis:
“What was in issue there was whether damages were recoverable in respect of damage resulting from an ultra vires planning decision made by the Minister for the Environment. The action was not for a breach of statutory duty which is in effect the present case.”
The trial judge also noted that Blayney J. had “cited with approval” paragraphs 31 to 37 of the decision of the Court of Justice in Francovich. The trial judge then quoted those paragraphs (at para. 174).
105. The trial judge then stated (at para. 175):
“From the above it is therefore clear that where obligations are placed on a Member State, or an organ thereof, the Courts of that Member State must ensure that those obligations are enforceable. It is a principle of Union law that where an organ of the State can be held responsible for loss or damage caused by a breach of those obligations that the affected individual must be able to recover damages therefor.”
In relation to that paragraph, counsel for Figary acknowledged that it does not embody the test or set out the conditions by reference to which it is to be determined whether an organ of the State should be held so responsible, which will be addressed later, but submitted that the statement is correct. Further, as to whether there is State responsibility for breach of EU law in this case, it was submitted that this case is indistinguishable from Emerald Meats (No. 2).
106. The trial judge then set out the following summary of his conclusions (at para. 177):
“(i) A breach of statutory duty will be actionable where the duty is intended to protect or benefit a particular individual or confined group of individuals, subject to the remoteness and foreseeability of the damage inflicted;
(ii) If the duty imposed is one which is imposed for the benefit of the public, the breach is not actionable unless:-
(a) it involves the commission of a recognised tort,
(b) it is actuated by malice,
(c) the authority knew it did not possess the power it purported to exercise;
(iii) Breach of a duty under European law will give rise to an action for damages as if it were a breach of statutory duty;
(iv) Damages for breach of duty under European law will give rise to both general and special damages.”
On the hearing of the appeal it was suggested by counsel for Figary that the principle set out at (iii), in particular, the “as if” component of it, suggested that the decision of the High Court must be based on the application of European Union law. It was suggested that the trial judge had applied European Union law, but in a “slightly disguised” way.
107. The foregoing principles were then applied by the trial judge (at paras. 178 and 179). He stated in para. 178:
“Having regard to the foregoing, and having considered the Interreg Scheme as a whole, it is clear to me that it placed obligations upon the Department to convey applications to the Steering Committee, and assist in their processing. I would not second guess the comments of the Commission in this regard; it is clear that in refusing to forward [Figary’s] application to the Steering Committee the Department was illegally usurping the Steering Committee’s position. There is thus no question but that the Department acted in an ultra vires manner. The duties under the Scheme were expressly directed towards the applicants of that Scheme, of which [Figary] was one. This duty could not be said to be of a public nature and in that regard both Glencar and Pine Valley are different on their facts.”
The trial judge then stated (at para. 179) that he was satisfied that the duty in question was one which was owed directly to Figary, and that it was entirely foreseeable that, in failing to forward its application to the Steering Committee, loss of chance would be suffered by Figary. On that basis he found that Figary was entitled to damages as a breach of statutory duty. In so doing, it seems to me that he was applying the principles enunciated at (i) and (iii) in the passage in his judgment (at para. 177) quoted above, rather than the principles summarised at (ii) derived from the Pine Valley and Glencar decisions.
Grounds of appeal on liability
108. The grounds set out in the Minister’s notice of appeal on which he contests the finding of liability on his part for breach of statutory duty which were pursued on the hearing of the appeal were primarily the following:
(a) that the trial judge had erred in law in determining that Article 34 of the General Regulation did not impose duties or powers in relation to the public at large, but instead was directed at a very focused group, namely those making applications under the Interreg IIIA Programme; and
(b) that the trial judge erred in fact and/or in law in concluding that Figary was entitled to damages as against the Minister in respect of the Minister’s management of Figary’s application for grant aid under the Interreg IIIA Programme.
While the ground at (b) above is ex facie very broad in scope, for completeness it is appropriate to record that it was contended on behalf of the Minister that –
(i) the trial judge had erred in holding, as he appeared to have done, that it was accepted by the Minister that he had acted ultra vires in carrying out the management functions in respect of the Interreg IIIA Programme, and
(ii) the trial judge erred in fact or in law in failing to take any proper account of the fact that Figary had not at any stage sought to bring proceedings by way of judicial review challenging the alleged ultra vires action.
Although I do not consider it necessary to specifically address those grounds, they have not been overlooked. Having regard to what it is suggested is a shift in the position of Figary on this aspect of the appeal, I consider that the practical approach is to outline Figary’s arguments on liability first, and then to outline the Minister’s response. In fairness to the parties, it is appropriate to do so in some detail, because the arguments on each side are more expansive than those considered in the First Judgment and the Second Judgment.
Figary’s submissions on liability
109. The position adopted by Figary on the appeal was that the breach of duty which grounds Figary’s claim against the Minister is a breach of duty imposed by European Union law. It is a breach of duty in respect of which the general principles established by the European Court of Justice in Francovich v. Italy (Case C – 69/90) ([1991] E.C.R 1 – 5357) apply. According to those principles a Member State is obliged to make good damage caused to individuals by breaches of Community law for which it can be held responsible, as laid down by the European Court of Justice in its judgment at para. 37, which was quoted in the judgment of the trial judge. Further, it was submitted that three conditions for State liability, as elaborated on in the decision of the Court of Justice in Brasserie du Pêcheur v. Germany (Case C – 46/93) [1996] E.C.R I – 1029 (Brasserie du Pêcheur) are met by Figary. These conditions are set out by the Court of Justice in its judgment as follows (at para. 51):
“. . . Community law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties.”
Counsel for Figary relied in particular on paragraphs 55 to 57 of the judgment of the Court of Justice in Brasserie du Pêcheur in which the application of the second condition was specifically addressed. The Court of Justice stated:
“55. As to the second condition, as regards both Community liability . . . and Member State liability for breaches of Community law, the decisive test for finding that a breach of Community law is sufficiently serious is whether the Member State or the Community institution concerned manifestly and gravely disregarded the limits on its discretion.
56. The factors which the competent court may take into consideration include the clarity and precision of the rule breached, the measure of discretion left by that rule to the national or Community authorities, whether the infringement and the damage caused was intentional or involuntary, whether any error of law was excusable or inexcusable, the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law.
57. On any view, a breach of Community law will clearly be sufficiently serious if it has persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case-law of the Court on the matter from which it is clear that the conduct in question constituted an infringement.”
110. As regards the first condition, that the rule of law was intended to confer rights on individuals, in demonstrating that this condition has been met, counsel for Figary conducted an in-depth analysis of the legislative and administrative structure on which the Interreg IIIA Programme was founded, which the Court has followed in outlining the legislative and administrative structure above. It was submitted, on the basis of the analysis, that, quite apart from the express duty in para. 2.4.5 of the Procedures Manual, the duty to duly forward completed applications to the Steering Committee was an integral element of the scheme deriving from the General Regulation and from the express provisions of the implementing measures, in particular, the Commission guidelines and the specific measures in the SEUPB Operational Programme, which derive from the General Regulation itself. If an implementing agent such as the Minister’s Department, were to usurp or trespass on the decision making roles of the managing authority or the Steering Committee or ultimately the Commission, the provisions of the General Regulation, it was submitted, would be rendered nugatory or at least to some extent redundant. It was further submitted that Article 8 of the General Regulation does not mean that a Member State can arrogate to itself functions that are conferred on partnership bodies and/or the Commission under the General Regulation, because to do so would undermine the operation of the General Regulation. Counsel for Figary relied on the finding of the trial judge that the obligation of the Minister’s Department, as implementing agent, to forward Figary’s application to the Steering Committee, which counsel characterised as a highly specific and targeted duty, was a duty expressly directed towards the applicants under the Interreg IIIA Programme, of which Figary was one. On that basis it was submitted that the first condition had been met, in that the Minister, through the medium of his Department, had infringed a Community rule which was intended to confer individual rights on persons in the position of Figary, applicants under the Interreg IIIA Programme.
111. Turning to the second condition, whether the breach is a serious breach, in reliance on the “decisive test” outlined by the Court of Justice in Brasserie du Pêcheur, which is quoted above, it was submitted on behalf of Figary that there was a serious breach by the Minister. It was submitted that the Minister’s Department, as implementing agent, had no discretion whatsoever in relation to sending forward Figary’s grant application to the Steering Committee. Further, its failure in the course of the investigation of the complaint to the Commission, to identify any provision of the scheme which could have justified its position, rendered the error made inexcusable. Counsel for Figary also placed some reliance on the fact that the Minister’s Department ignored advice which it had been given in unequivocal terms in August 2004 and in January 2005 by the SEUPB that the application should be forwarded to the Steering Committee.
112. As regards the third condition, namely, that there should be a direct causal link between the breach of obligation by the Minister and the damage sustained by Figary, the failure of the Minister’s Department to forward Figary’s application to the Steering Committee, it was submitted, was the direct cause of Figary losing the opportunity to obtain the grant. Moreover, it was submitted that the damage which resulted was very substantial and was irreversible in that, by the time Figary’s complaint to the Commission had been investigated, the relevant funding had ceased.
113. On the hearing of the appeal, counsel for the Minister referred this Court to a recent decision of the Court of Justice (Second Chamber) delivered on 3rd September, 2014 on a request for a preliminary ruling under Article 267 TFEU from a court in Lithuania in proceedings entitled Case C – 410/13 ‘Baltlanta’ UAB v. Lietuvos valstybë (‘Baltlanta’). Counsel for Figary also addressed this authority, which concerned the interpretation of a provision of the General Regulation, Article 38. Article 38(1) provides that, without prejudice to the Commission’s responsibility for implementing the general budget of the European Communities, Member States shall take responsibility in the first instance for the financial control of assistance. There are then outlined the measures which the Member States shall take to that end including, at paragraph (e) –
“preventing, detecting and correcting irregularities, notifying these to the Commission, in accordance with the rules, and keeping the Commission informed of the progress of administrative and legal proceedings”.
114. In the main proceedings, ‘Baltlanta’ was suing the Ministry of Agriculture, representing the Lithuanian State, for compensation on the basis that the Ministry, by its failure to act, wrongfully prevented ‘Baltlanta’ from receiving financial assistance for the permanent withdrawal of a fishing vessel from fishing activity. ‘Baltlanta’ had submitted the request for financial assistance in March 2007 but its application had been rejected by the National Agency. ‘Baltlanta’ appealed that decision to the administrative court in Vilnius and was successful, in that the decision of the National Agency was annulled. That decision was confirmed by the Supreme Administrative Court of Lithuania by a judgment in May 2012. In January 2012 the Ministry of Agriculture had informed ‘Baltlanta’ that its application could not be processed further on a number of grounds, including that the assistance agreements under the relevant measure for granting assistance from European Union Structural Funds had to be concluded by 1st July, 2008. The allegation of wrongdoing by ‘Baltlanta’ against the Ministry of Agriculture was that it failed to take all the measures possible in good time to inform the Commission that the question of eligibility of its application for assistance was the subject of court proceedings, to establish an assistance scheme, and to provide funds for the period following that period when the question concerning the grant of assistance had been settled. ‘Baltlanta’ contended that the inaction by the Ministry of Agriculture thereby caused it damage. In essence, the Court of Justice found that Article 38(1)(e) of the General Regulation was not applicable to the dispute in the main proceedings.
115. What is of significance for present purposes is that the Court gave consideration to Commission guidelines which had addressed matters such as projects which were unfinished and non-operational at the time of closure. In relation to the guidelines the Court stated (at para. 64 and 65):
“64. . . . with regard to Sections 6 and 7 of the Commission guidelines, it should be noted, first, that, even if those guidelines are not intended to produce binding effects, the national courts are bound to take them into consideration in order to decide disputes submitted to them, in particular where they cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding European Union provisions . . .
65. It should be noted, secondly, that those guidelines must be interpreted in accordance with the binding European Union provisions which they seek to supplement, namely Regulation No 1260/1999.”
While, importantly, those paragraphs do give guidance as to how a national court should treat Commission guidelines, as counsel for Figary acknowledged, in reality, the actual decision in ‘Baltlanta’ does not advance Figary’s case. On the other hand, it is not adverse to Figary’s position as to the application of the General Regulation, as was suggested by counsel for the Minister in reply. Rather it is a decision as to the interpretation of a specific provision of the General Regulation, and other regulations, and of clauses of Commission guidelines which are not in issue here.
The Minister’s response on liability
116. The general thrust of the written submissions originally filed on behalf of the Minister on the issue of liability was that the Interreg IIIA Programme was designed to stimulate co-operation between Member States of the European Union by providing funding to projects throughout the European Union with a cross-border element. The objective of the General Regulation was to promote cohesion. The Interreg IIIA Programme was in the interest, and for the benefit, of the public at large. It was submitted that in concluding that “the duties under the Scheme were expressly directed towards the applicants of that Scheme, of which [Figary] was one”, the trial judge fell into serious error. It was pointed out that no attempt was made by the trial judge, or indeed by Figary, to identify any basis for an alleged individual duty said to be owed. It was also asserted that Figary had singularly failed to identify the relevant statutory provision or duty that the Minister was alleged to have breached. It is perhaps worth recalling, as stated at the outset, that, in the course of the pleading process, Figary was not asked to identify the relevant statutory provision. That Article 34 of the General Regulation could give rise to an enforceable statutory duty on the part of the Minister, breach of which would give rise to a claim for damages, was wholly disavowed.
117. In essence, the Minister adopted a similar position in response to the submissions made on behalf of Figary on the appeal. The Minister’s position remained that the answer to Figary’s contention that the failure of the Minister to progress Figary’s application constituted a breach of European Union law continued to be that the grant application process under Interreg IIIA did not have a European Union rule of law or a statutory basis, but was an ad hoc arrangement. Further, the Minister continued to focus on the first condition of the Francovich test. Overall, the answer, it was submitted, was that the framework for the Interreg IIIA Programme, which derives from the General Regulation, did not have as its intendment the conferral of any rights on individuals, the breach of which might give rise to a damages claim against the Minister. In particular, Figary was not an affected person or body which was entitled to invoke what were described as Francovich rights.
118. Counsel for the Minister helpfully produced further written submissions in response to the written and oral submissions made on behalf of Figary on the liability issue on the appeal. In those submissions the scope of the liability of a Member State for breach of European Union law in the light of the case law and of commentary in the academic authorities relied on by Figary, in particular, “Public Liability in EU Law, Brasserie, Bergaderm and Beyond” by Pekka Aalto (2011, Oxford and Portland, Oregon) is considered. What follows in the submissions is an interesting commentary on the evolution of the law on the liability of a Member State for reparation to an individual for breach of European Union law. The discussion culminates in an analysis of one of the most recent cases relied on by counsel for Figary: the decision of the Court of First Instance in Case T – 415/03, Cofradia de Pescadores de San Pedro [2005] ECR II – 4355 (Cofradia). In its judgment, the Court of First Instance having, at para. 85, observed in a passage relied on by counsel for Figary, that it is unimportant whether or not the rule of law infringed constitutes a higher-ranking rule of law, stated as follows (at para. 86):
“Further, it has been held in case-law that a rule of law is intended to confer rights on individuals where the infringement concerns a provision which gives rise to rights for individuals which the national courts must protect, so that it has direct effect (Joined Cases C – 46/93 and C – 48/93 Brasserie du Pêcheur and Factortame [1996] ECR I – 1029, paragraph 54), a provision which creates an advantage which could be defined as a vested right (see, to that effect, Case T- 113/96 Dubois et Fils v Council and Commission [1998] ECR II – 125, paragraphs 63 to 65), a provision which is designed for the protection of the interests of individuals (Joined Cases 83/76, 94/76, 4/77, 15/77 and 40/77 HNL and Others v Council and Commission [1978] ECR 1209, paragraph 5), or a provision which entails the grant of rights to individuals, the content of those rights being sufficiently identifiable (Joined Cases C – 178/94, C179/94, C – 188/94 to C – 190/94 Dillenkofer and Others [1996] ECR I – 4845, paragraph 22).”
119. On the basis of their analysis of the categories of rules of law intended to confer rights on individuals identified in Cofradia, it is urged by counsel for the Minister that the duty on the Minister which is alleged to have been breached in this case does not fall within any of those categories. First, it is observed that it is striking that in each of the cases cited in para. 86 that the relationship between the rights conferred and direct effect is readily identifiable. Secondly, it is submitted that Figary’s case based on alleged breach of duty is wholly different from the authorities identified or, indeed, from any formulation of a European Union rule of law. Thirdly, addressing the legislative and administrative structure governing the Interreg IIIA Programme, it is submitted that it is not sufficient to identify any provision of the Programme Complement which has not been complied with in order to elevate such provision into a right under European Union law, the breach of which entitles Figary to pursue a claim for damages. On the contrary, it is submitted that, consistent with the case law, there must be a direct relationship between the contended for right and the applicable European Union framework, citing a statement in Aalto (op cit.) that, “a person claiming responsibility for damage must first identify the rule of law said to have been breached”. It is submitted that what is contended for as the “rule of law” breached by the Minister’s Department is not provided for in the General Regulation or any of the subsidiary provisions thereof. On the contrary, on the basis that it could only be by reference to the Programme Complement, and “the modalities of its relationship with the Managing Authority”, that it could conceivably be said that the Minister, as implementing agent, derived any delegated functions from the General Regulation, it is contended that there is nothing in the General Regulation to support the view that its provisions were intended to confer rights on any specific group or individual. That is the nub of the Minister’s argument in response to Figary’s claim under the Interreg IIIA Programme and it brings one back to the Minister’s principal contention that the objective of the General Regulation was cohesion and it was intended to be in the interest of the public at large.
120. Finally, counsel for the Minister directed the Court’s attention to two decisions of the European Union courts, which it is suggested support the Minister’s argument, each of which involved issues which came within the framework of the General Regulation.
121. The first, chronologically, was the decision of the Court of First Instance (Fourth Chamber) of 15th March, 2004 in Case T – 139/02 Idiotiko Institouto . . . and Others v. The Commission. There the Court was concerned with an application for the annulment of a decision of the Commission not to bring to an end alleged discrimination between public and private vocational training bodies in Greece with regard to their access to the financing from the structural funds under an operational programme in Greece. The application was found to be inadmissible. Counsel for the Minister rely on the following passage in the judgment of the Court of First Instance at para. 44:
“The implementation and monitoring of assistance are above all a matter for the Member States in accordance with the principle of subsidiarity. Thus, the programme complement, as adjusted and amended by the Monitoring Committee, to which the applicants refer and which gives priority to national education, constitutes a national measure concerning the application of strategy and priorities and not a measure adopted by a Community body, against which an action for annulment may be brought before the Community Courts.”
As is clear from that quotation, the context in which the Programme Complement was in issue was in relation to “the application of strategy and priorities”. The status of the Programme Complement in that context is further addressed in the following passage of the judgment (at para. 66):
“Under Article 18(3) of the [General Regulation] the types of ‘final beneficiary’ of those measures, which, under Article 9(1) of that regulation, may include bodies and ‘public or private’ firms responsible for commissioning operations, are defined in the programme complement drawn up by the Member State concerned or by the managing authority designated by that State to manage the operational programme in question. That document is used in implementing the strategy and priorities of the assistance and contains the detailed aspects of the measures, as provided for in Article 18(3) of the [General Regulation], which include, in particular, the ‘definition of the types of final beneficiary of measures’. The same document, adjusted as necessary in accordance with Article 34(3) . . . and approved by the Monitoring Committee, is sent to the Commission for information and not for approval. The Commission intervenes in that field only in so far as the information contained in the decision on the contribution from the Funds, such as the total amount of the contribution from the Funds granted in respect of the priority concerned or the specific objectives of that priority, may be amended by the programme complement or its adjustments.”
While the decision of the Court is enlightening in relation to the status of the Programme Complement, in my view, the decision is not of relevance to Figary’s claim, which is not concerned with the application of strategies and priorities and is not simply based, or reliant, on the provisions of the Programme Complement. Further, Figary’s claim, being a claim against the Minister representing the State, not against a European Union institution, it is distinguishable.
122. In the later case, – Case C – 301/03 Italian Republic v. Commission of the European Communities – the Court of Justice (Second Chamber) in a judgment delivered on 15th September, 2005 held that the application by the Italian Republic to annul certain notes and a document sent by the Commission to Italy, which, in broad terms, related to the operation of an operational programme and a programme complement, was inadmissible. The gravamen of the Court’s decision was that neither the notes nor the contested document were intended to have legal effect. Counsel for the Minister, apart from relying on certain passages from the opinion of the Advocate General, relies on the following passage from the judgment of the Court (at para. 30):
“While the contested document and notes may have the effect of informing the Member States that they are running the risk of Community financing being refused for some of the expenditure incurred, in accordance with a different interpretation of the same [General Regulation], this is none the less a mere consequence of fact and not a legal effect the contested document and notes are intended to have . . .”
Earlier the Court had stated as follows (at para. 28):
“As was pointed out by the Advocate General at paragraph 59 of his Opinion, it is clear from Articles 15(6), 34(3) and 35 of the [General Regulation], read together, that, in such a procedure, the Commission has a mere consultative role and is not empowered to adopt any legally binding act, except where any amendments relate to the elements contained in the decision on the contribution of the Structural Funds within the meaning of Article 34(3) of the [General Regulation].”
Once again, in my view, the decision of the Court of Justice is of no relevance to the issue of the Minister’s liability to Figary. In this case, Figary is relying on the duties imposed in the Commission guidelines in relation to selection of operations, in particular, point 29 and point 40, by which an implementing agent is bound, not on a note or a document of the Commission which has no legal effect.
123. As has been noted above, the nub of the Minister’s answer to Figary’s claim on liability is that the Minister could not be considered liable as implementing agent for a breach of European Union law by reference to the duties imposed on him by the provisions of the Programme Complement. Apart from that, as regards Figary’s invocation of Article 34 of the General Regulation, the point is made on behalf of the Minister that Article 34 refers to the role and responsibilities of “the Managing Authority” as defined in Article 9(n) of the regulation. The role of the Minister in relation to the Interreg IIIA Programme was as “implementing agent”, which role it is suggested was a creature of the Programme Complement only, and is a role in respect of which there is no reference in the General Regulation or in any regulation. As has been pointed out earlier, Regulation 438/2001 clearly envisaged intermediate bodies, such as implementing agents, being part of the legislative and administrative framework. Having regard to the definition of “managing authority” in the General Regulation and, in particular, the requirement that, if the Member State designates a managing authority other than itself, it shall determine all the modalities of its relationship with the Managing Authority and of the latter’s relationship with the Commission, it is suggested that the General Regulation “divorces” from European Union law how the processes or procedures to be operated in respect of the General Regulation are to be operated. It is suggested, for example, that the relationship between the managing authority and the implementing authority are to be determined by the Member State. Further, it is submitted that this is consistent with the argument that there is nothing in the Commission guidelines which can change the scope of the rights or obligations arising under the General Regulation.
124. The approach of the Minister to the interpretation of the legislative and administrative framework as outlined above, in my view, wholly fails to adopt the proper approach to consideration of the relevant provisions of the legislative and administrative structures in failing to consider them in the round.
Conclusion on liability: general approach
125. The first step in considering whether the Minister is liable for breach of duty as alleged by Figary, in my view, is to take an overview of all of the relevant provisions of the legislative and administrative structures which govern the establishment and implementation of the Interreg IIIA Programme and to analyse the interconnection between similar provisions in the different structures, and across the structures, and at different levels within the structures. The objective of that exercise is to determine whether it is appropriate to find that the Minister, acting through the medium of his Department, in preventing the forwarding of Figary’s grant application to the Steering Committee was in breach of a rule of European Union law which imposed an obligation on the Minister to do so. If there is a positive finding against the Minister on that point, the issue which remains is whether the breach of the duty under European Union law gives rise to an action for damages against the Minister, which, broadly speaking, involves the application of the principles established in Francovich and elaborated on in Brasserie du Pêcheur.
Overview of legislative/administrative structures
126. As the history of the processing of Figary’s application demonstrates, the amended application did not go beyond Stage (3) of the process. The wrongdoing alleged against the Minister is that his Department, as implementing agent, prevented Figary from getting access to grant assistance by –
(a) contravening Clause 2.4.5 of the Procedures Manual, in preventing Figary’s application going to the Steering Committee in January 2005, and
(b) contravening the SEUPB Programme Complement on the same basis. While Clause 2.4.5 of the Procedures Manual, which mandated the implementing agent to ensure that the relevant documents would be forwarded to the Steering Committee, was at the base of the national administrative structure, as emphasised earlier, it gave effect to the Programme Complement, which, although part of the national administrative structure, was derived from the General Regulation. Accordingly, an overview of the legislative and administrative structures demonstrates that the relevant provisions of the Programme Complement interlocked with measures provided for higher up the chain of those structures. For example, Clause 4.2 in Chapter 4 of the Programme Complement, to which Clause 2.4.5 of the Procedures Manual gave effect, itself actually gave effect to point 29 of the Commission guidelines. Chapter 4 of the Programme Complement in turn, reflected the clear intention manifest in para. 13.34 of the SEUPB Operational Programme that the final decision on a grant application would be the decision of the Steering Committee, which was prescribed by the SEUPB on the basis of the statutory authority given to it by the Act of 1999. It was also prescribed with the approval of the Commission pursuant to the General Regulation.
127. For the purpose of determining whether non-compliance by the Minister’s Department, as implementing agent, with the requirement of Clause 2.4.5 of the Procedures Manual, or of Clause 4.2 of Chapter 4 of the SEUPB Programme Complement, could give rise to a wrong actionable at the suit of Figary on the basis that it constituted a breach of statutory duty, the obligation of the Minister’s Department in that capacity cannot be assessed merely by consideration of the Procedures Manual on its own, or of the SEUPB Programme Complement on its own or of both in conjunction. Rather, it must be assessed in the context of the entire legislative and administrative structures from which the power and authority of the SEUPB was derived. Accordingly, the question which arises, when considering the effect of the various elements of the legislative and administrative structures, is whether, taking an overview of all of the instruments outlined above it, is clear that the Minister’s Department, as implementing agent, had a mandatory duty under European Union law in relation to a grant application, such as the application of Figary, to forward it to the Steering Committee.
128. As regards the question posed in the next preceding paragraph, in my view, the answer is clear. The Minister, as implementing agent, did have a mandatory duty under European Union law to forward Figary’s grant application to the Steering Committee for “final decision”. The overview of the legislative and administrative structures outlined above clearly demonstrates the interconnection between the different structures and the interlocking nature of the various levels of the structures. In particular, having regard to the paragraphs from the judgment in Baltlanta quoted earlier, this Court is bound to take the Commission guidelines into consideration in determining this question. The relevant Commission guidelines unquestionably cast light on the interpretation of the national measures adopted to implement them, particularly, the Programme Complement. They are also clearly designed to supplement binding European Union provisions, being specifically provided for in the General Regulation. As was made clear in Baltlanta they must be interpreted in accordance with the General Regulation.
129. The relevant provisions of the Commission guidelines clearly provide that project selection under the Interreg IIIA Programme is the function of the Steering Committee. The national measures from the SEUPB Operational Programme downwards all provide that the Steering Committee has the “final decision” on selection and that is clearly consistent with the Commission guidelines. As the trial judge found, in reality the Minister’s Department, in the role of implementing agent, illegally usurped that function of the Steering Committee. By that action, the Minister was not only in breach of the national measures put in place by the SEUPB on the basis of the authority conferred on it by the Act of 1999, but also breached the Commission guidelines and ultimately the requirements of the General Regulation. Accordingly, I am satisfied that there has been a breach of a rule of European Union law on the part of the Minister in his Department failing to forward Figary’s amended application to the Steering Committee.
130. It is perhaps worth recording that counsel for Figary also placed some reliance on an agreement entitled Interreg IIIA Service Level Agreement between the SEUPB and the Implementing Departments. In addition, counsel for Figary referred this Court to Circulars issued by the Department of Finance to other Government Departments in relation to responsibilities under the General Regulation and Regulation 438/2001. In particular, this Court was referred to Circular 34/2001 of 27th July, 2001, in which the addressees were informed that conformity with the Circular and with the relevant EU Regulations was obligatory. However, the conclusion reached that the Minister’s obligation, as implementing agent under the Interreg IIIA Programme, arises under European Union law is not informed by those matters. They do, however, compound the absurdity of the proposition that the role and duty of the implementing agent in the enormously complex legal and administrative structures derived from the General Regulation employed in the implementation of the Interreg IIIA Programme could be seen as being an ad hoc arrangement.
Application of Francovich/ Brasserie du Pêcheur test
131. That the three conditions stipulated by the Court of Justice in its judgment in Brasserie du Pêcheur are met, in my view, is absolutely clear. First, the rule of law infringed was part of the European Union legal structure governing Community action through the Structural Funds. While, of course, the Interreg IIIA Programme was public in nature and was intended to be in the interest and for the benefit of the public at large, as regards the rule of law infringed by the Minister, it related specifically to the implementation of the provisions contained in the Interreg IIIA Programme instruments governing selection of operations and projects for grant assistance. As such, it was a rule which was intended to confer rights on individuals, that it to say, a person or a corporation which applied to participate in the Interreg IIIA Programme, and it clearly was not a rule imposed for the benefit of the public at large. Secondly, the breach was sufficiently serious to confer a right to reparation against the State on the injured individual. It undoubtedly met the “decisive test”, in that the Minister “manifestly and gravely disregarded the limits” on his discretion as implementing agent in relation to the processing of grant applications. In fact, as was submitted on behalf of Figary, his Department had no discretion as to whether Figary’s grant application should be sent forward to the Steering Committee. Thirdly, there is a direct causal link between the Minister’s breach and such damage as was sustained by Figary by not having its grant application processed.
The Minister’s liability for damages
132. Notwithstanding that the trial judge did not expressly apply the Brasserie du Pêcheur test to the circumstances which gave rise to Figary’s claim under the Interreg IIIA Programme, it is quite clear that he concluded that there was a breach of duty on the part of the Minister which was actionable in Irish law. In doing so, he followed the decision of this Court in Emerald Meats (No. 2), in which it was accepted that the right to recover damages from a Member State for the breach of an obligation imposed by European Union law is clearly recognised in the decision of the Court of Justice in Francovich (per Blayney J. at p. 16). Further, the trial judge, again following the decision of this Court in the Emerald Meats (No. 2), held that the action for damages gave rise to an entitlement to both general damages and special damages.
133. On this appeal, having regard to the findings on the application of the Brasserie du Pêcheur test set out above, I am satisfied that the Minister is liable in damages to Figary, for both general damages and special damages. The measure of damages must now be considered. As part of that exercise, it is necessary to address the controversy alluded to earlier concerning the amount of the grant sought by Figary and it is convenient to address it at this juncture.
Amount of grant funding sought by Figary
134. That controversy is addressed by the trial judge in the First Judgment (at para. 161). As I have noted, on its face, the grant application stated that the amount of funding which Figary was seeking was €2,460,070. Earlier in the First Judgment (at para. 65), it had been recorded that the position of Figary was that the application submitted in September 2003 was “for funding of €2.46 million, plus a top up from the State of €630,000 (although the [Minister] now contends that the latter amount was included in the former)”. Returning to what he referred to as “one issue of fact” (at para. 161), the trial judge recorded that in the Minister’s submissions it was alleged that the €2.46 million was inclusive of a top up from the State of €630,000, rather than in addition to it. Having made some observations in relation to the evidence before him, the trial judge said that he was proceeding “on the assumption that the grant applied for was for €2.46 million with an additional top up from the Department of €630,000”. One of the grounds advanced by the Minister on the appeal was that the trial judge erred on the facts in proceeding on that assumption, when, in fact, the figure of €2.46 million was inclusive of the said sum of €630,000. Counsel for the Minister referred this Court to the relevant portions of the grant application form. In section E of the form, the response of Figary to the question which inquired how much funding Figary was seeking for the project from the Interreg IIIA Programme was that it was €2,460,070. On the next page of the form that sum is set out in a table which gives details of all sources of funding relating to the project. It is clear from the table, under the heading “Co-funding”, that the sum of €2,460,070 was expected to come from “EU & Government”. In the definitions below that table, “Co-funding”, as shown in the table, is defined as follows:
“Is the amount applied for in this application and normally contains 75% EU and 25% Central Government or other sources of statutory funding.”
135. I am satisfied that counsel for the Minister have demonstrated that the oral evidence upon which the trial judge relied and based his finding as to the amount of grant funding for which Figary applied for was wholly unsatisfactory. Further, it was not borne out by the application form, which plainly contradicted it. Therefore, I am satisfied that the trial judge’s finding as to the amount of the grant funding sought by Figary was incorrect. I am satisfied that the total amount of the grant for which Figary applied, rounded, was €2.46 million and that included the element of co-funding for which the State was liable, namely, €630,000. Indeed, when the issue was raised in the course of submissions on the last day of the hearing in the High Court before the First Judgment was delivered, counsel for Figary effectively acknowledged that the sum of €630,000 was not a top up but was included in the sum of €2.46 million. It is recorded in the transcript of 27th October, 2009, Day 16, page 30, that in the course of the closing submissions counsel for the Minister submitted:
“The claim, in fact, in monies is misconstrued in that the defendant seems to assert that they had potentially a grant claim of 2.4 million, together with 630,000, but that’s not correct.”
At that stage counsel for Figary intervened and stated that he accepted that and that there had been an error. However, it is only fair to record that, on the hearing of the appeal, when counsel for Figary was asked by the Court whether Figary was persisting in the “top-up” argument, it was not conceded that it was not.
136. In any event, I am satisfied that the starting point for the assessment of the damages for which the Minister is liable is that the Minister by his actions prevented Figary’s application for a total grant in the sum of €2.46m being considered by the Steering Committee. Some general observations in relation to the assessment are appropriate.
Assessment of damages: general observations
137. Because of the similarity of the consequences of the breach of statutory duty which gave rise to the entitlement of Emerald Meats Limited to damages as was held in Emerald Meats (No. 2) and of the breach of statutory duty which has given rise to the claim by Figary for damages against the Minister, it is appropriate to consider the manner in which this Court ultimately dealt with the damages to which Emerald Meats Limited was entitled. The decision of this Court in the final stage of the Emerald Meats Limited saga, which will be referred to as Emerald Meats (No. 3), was the judgment of O’Donnell J. ([2012] IESC 48), with which the other members of this Court concurred, which was delivered on 30th July, 2012. It was a judgment on an appeal from a judgment of the High Court (Feeney J.) which was delivered on 8th October, 2007 ([2007] IEHC 331) on the assessment of damages following remission by this Court to the High Court in Emerald Meats (No. 2). The object of such consideration is to assess whether there is a similarity between the factual matrix in which damages were assessed by this Court in Emerald Meats (No. 3) and the factual basis of Figary’s claim to damages against the Minister. In reality there is no such similarity. The major factual difference is that, in the period after the State had been in breach of statutory duty to Emerald Meats Limited, as a result of which Emerald Meats Limited was deprived of a licence to import meat for the year 1990, Emerald Meats Limited had effectively ceased trading in the meat business, which meant, as was stated in the judgment of O’Donnell J. (at para. 2), that its claim, which was for loss of profits from business which was not carried on over the succeeding years, was “a necessarily speculative exercise”. In this case, on the other hand, Figary had been in possession of the foreshore demised by the Foreshore Lease, had developed the Marina at Fahan, which was operational from 2002, and was conducting a business in connection with it before the breach of duty by the Minister in early 2005. Moreover, Figary continued in possession and continued to operate the business at the Marina thereafter. Therefore, in this case the Court should not be faced with the type of difficulty in assessing damages which the High Court and the Supreme Court encountered in Emerald Meats (No. 3), where the circumstances were such that it was recognised that in such circumstances a court can only do the best it can. In contrast, to use expressions drawn by counsel in this case from the judgment of O’Donnell J. in Emerald Meats (No. 3), the circumstances here are not such that it is necessary to resort to an “almost back of the envelope calculation”. Nor is it a situation where “rough and ready” calculations or “crude” adjustments are acceptable in assessing damages.
138. Another distinguishing feature of the approach necessitated by the factual circumstances in Emerald Meats (No. 3) is addressed in para. 39 of the judgment of O’Donnell J. Having recorded that the nature of the issue for the Court there was the assessment of damages which had been described by the Supreme Court in Emerald Meats (No. 2) as “general damages”, and having stated that, taking a broad view, it was “the assessment of the disruption to Emerald’s business and its relationship with other traders caused by failure to obtain the quota”, O’Donnell J. stated that it was accepted that the Court was engaged in the assessment of general damages, which in the words of Martin B. in Prehn v. Royal Bank of Liverpool (1870) L.R.M. 5 Ex 92:
“[a]re such as the jury may give when the judge cannot point out any measure by which they are to be assessed, except the opinion and judgment of a reasonable man.”
Further, O’Donnell J. referred to McGregor on Damages (London: Sweet & Maxwell, 15th Edn. 1988 14), where it was stated:
“The claim in this case is without doubt one for pecuniary losses ‘difficult to estimate’ and for which there is no measure but the opinion and judgment of a reasonable judge. In my view the court was not here concerned with the precise calculation of special damages, particularly once it was obliged to reject the primary (and indeed to some extent the secondary and tertiary) bases of calculation proffered by the parties.”
Given the different factual context in this case, in my view, the approach adopted in Emerald Meats (No. 3) would not be justified in this case. While undoubtedly, the High Court was, and this Court is, faced with a problem in calculating with precision the damages to which Figary is entitled, that is not caused by any inherent difficulty in calculating damages of the type concerned, but rather because of the undoubted failure of Figary to present adequate evidence.
139. The trial judge in the Second Judgment (at para. 92), having commented that the principle of restitutio in integrum still applies, notwithstanding evidential difficulties, quoted the following passage from the judgment of O’Flaherty J. in Callinan and Deane v. VHI (Unreported, Supreme Court, O’Flaherty J., 28th July, 1994), which had been referred to in the judgment of the High Court in Emerald Meats (No. 3). O’Flaherty J. stated:
“A party who suffers damage is required to be put in the same position as he would be if he did not suffer the damage: restitutio in integrum. It is obviously not the case that the Plaintiffs are in the same position as if the wrong had not been done to them; therefore, they must be entitled to damages. The fact that the actual figure to which they maybe entitled may not have been presented to the satisfaction of the judge does not mean that the Plaintiffs should not get any damages at all under this heading.”
The trial judge also quoted a passage from McGregor op cit. (at para. 344) in the last sentence of which it was remarked that “if absolute certainty were required as to the precise amount of loss that the Plaintiff had suffered, no damages would be recovered at all in the great number of cases”. While those quotations reflect one side of the coin, there is another side to the coin. It is that it would be to ignore the requirements of the burden of proof to give any benefit of the doubt to a plaintiff who deprives the Court of the opportunity to do a proper calculation, with whatever level of precision might be available in all the circumstances, by not presenting evidence which might reasonably have been expected. To do otherwise, would give rise to a real risk that a party would benefit by their failure to present such evidence. That is a factor of significance in assessing the damages for breach of duty in this case, which fall to be considered under two headings:
(a) the loss of opportunity to obtain the grant; and
(b) loss of profits deriving from what Figary contended was the potentially expanded level of business which might have been conducted had the grant been obtained, so that the Marina project would have been implemented, and such an expanded business would have become operational.
Findings of the trial judge on assessment of damages for breach of statutory duty
140. The trial judge addressed the first heading, which he referred to as loss of chance, in the First Judgment at para. 189 et seq. He recorded that there was agreement between the parties as to the relevant principles in relation to assessing damages for loss of chance, but that it was the correct application of the principles to the facts which was in dispute between them. Having cited two authorities of United Kingdom courts and stated that they identified the correct approach, the trial judge outlined that approach (at para. 191) as follows:
“(i) A claimant must show that it had, on the balance of probabilities, a real and substantial chance of success, not merely a speculative one;
(ii) This extends to showing that there were not actions which, on the balance of probabilities, would have prevented that chance from being real and substantial;
(iii) Once this is done, the Court will assess the quantum of damages based on the likelihood of that chance.”
141. The trial judge then went on to consider whether Figary would have been successful on the grant application. It will be recalled that the breach of duty found on the part of the Minister was the prevention of Figary’s application advancing to stage (4), that is to say, the Steering Committee evaluation, which could result in either an approval or a rejection of the application. The trial judge (at para. 192) stated that he was satisfied on the evidence that Figary’s application, had it been presented to the Steering Committee, would have been successful. Although counsel for the Minister took issue with that finding, emphasising the landlord and tenant relationship problems which existed, which it was suggested put Figary’s entitlement to remain as lessee of the Marina under the Foreshore Lease in jeopardy, nonetheless, I am satisfied that there was ample evidence to allow the trial judge to conclude that the Steering Committee would, in principle, have approved the application. Of course, that would then lead to Stage (6), which would have involved an independent economic appraisal. As to the likely outcome of that stage of the process, the view of the trial judge, as expressed in para 192, was as follows:
“I am also satisfied that despite the alleged inconsistencies contained in [Figary’s] application, there was a real and substantial chance that the independent assessor performing the investment appraisal would have determined that the project was capable of being undertaken by [Figary], and that subsequently [Figary] would have become entitled to draw monies down.”
The trial judge rejected an argument on behalf of the Minister that the project would not, in any event, have been able to proceed within the timeframe envisaged in the application because of the disputes between the parties in relation to the Foreshore Lease, which ultimately became the subject of this litigation. In the light of this Court’s decision on the Minister’s claim for possession, in my view, such rejection was the correct approach. However, in making the finding that Figary would have become entitled to draw monies down following the independent economic assessment, the assumption made by the trial judge was that such entitlement would have related to the entire grant application sought, not just part of it. Further, the trial judge’s finding as to the total amount of the grant applied for by Figary was that it was €3,090,000 (rounded from €3,090,070), made up of €2,460,000 and a “top-up” of €630,000 from the State. As has been found earlier, that assumption was incorrect; the amount of grant funding sought by Figary, rounded, was €2.46m.
142. The trial judge then went on (at para. 193) to evaluate the chance, stating:
“With regards to the quantum, I think that a reasonable assessment, having regard to all of the above, in particular my consideration of the working practice of [Figary] in the construction of the marina to date, and bearing in mind the difficulty of drawing any exact conclusions upon hypothetical cases, that a figure of 50% with regards to loss of chance is a reasonable one.”
Therefore, he assessed loss of chance at €1,545,000, although there was a typographical error in para. 193 where the relevant figure given was €1,045,000. The trial judge reserved his decision as to general damages pending further submissions.
143. In order to outline the factual context, reference to some of the narrative earlier in the First Judgment is apt at this juncture. The trial judge had recorded (at para. 59) that, as of 21st April, 2006, the construction of the Marina had cost Figary over €2.8m. It would be necessary to carry out substantial works in order to provide safe and appropriate breakwaters and restore portions of the foreshore and the estimated cost of completing the Marina properly was somewhere in the region of €2.7m, inclusive of VAT, although that did not include construction supervision costs or any costs attached to removal of sand off site. Since becoming operational in 2002 the Marina had generated the following profits: €308.00 to the end of March 2003; €1,204 to the end of March 2004; and €1,793 to the end of March 2005. The trial judge also recorded (at para. 64) that, if the grant application was successful, the monies paid to Figary would be a percentage, in this case 26%, of the expenditure to be actually incurred on the Marina project. On the basis of the grant application form submitted in September 2003, as completed on behalf of Figary, the estimated total project cost was €9,433,239.00. Counsel for the Minister relied on the foregoing matters and other evidence in urging this Court to find that the assessment of loss of chance at 50% was not supported by the evidence. The question as to whether Figary had a reasonable or substantial chance of being awarded a grant in the amount claimed, as found by the trial judge, will be considered later.
144. The second component of the claim of damages for breach of duty, that is to say, loss of profits, was dealt with by the trial judge in the Second Judgment. In reviewing what had transpired up to the time of delivery of the Second Judgment, the trial judge observed (at para. 21) that the Minister complained that, despite directions of the Court that further material and information with regards to reports by an accountancy firm, McCambridge Duffy, which had been put before the Court be provided to the Minister “which might have shed some light on the claim” for loss of earnings, this was not done. The trial judge then stated:
“Such failings bring [Figary’s] position entirely outside that of the Plaintiff in Emerald. Ultimately the evidence for loss presented by [Figary] was entirely unsatisfactory and incomplete with regards to the basis of the claim, the calculation of the alleged loss of earnings and/or missed trading opportunities; the deficiency, therefore, is not just a matter of imprecise quantum.”
145. The trial judge considered whether Figary is entitled to damages for loss of earnings it has suffered as a consequence of the Minister’s breach of statutory duty at para. 87 et seq. of the Second Judgment. In that paragraph he recorded that the sum claimed, based on a report of McCambridge Duffy, was €1,558,221. He then recorded some of the criticisms of the evidence called on behalf of Figary which were made by an expert witness called on behalf of the Minister, Kieran Wallace, Accountant of KPMG. He went on to state (at para. 89) that having considered the report of McCambridge Duffy, he was prepared to accept some of the criticisms which Mr. Wallace had directed toward the report. He stated that it was likely that the projected loss of earnings was overstated and, therefore, he was not prepared to grant special damages for loss of earnings in the amount claimed under the report. Nonetheless, he considered that he must grant some damages for loss of earnings, notwithstanding those reservations about the report. Further, having conducted the analysis of, inter alia, the passage from the judgment in Callinan and Deane v. VHI quoted earlier, the trial judge stated (at para. 93):
“In the present case, it is quite clear that the McCambridge Duffy report does not represent a satisfactory basis for calculating the loss of earnings as made. Nonetheless, as noted in Callinan and in Emerald Meats, the fact that a party has not sufficiently proved the actual quantum of damage caused should not deny it compensation where it is clear that the wrongful party’s actions have actually occasioned loss. The measure of that loss must be such that it will place the relevant party back in the position it would have been, but for the tortious conduct; restitutio in integrum. Since a breach grounding damages has been found by this Court and since I am satisfied that loss has been occasioned as a result, which loss has not been compensated for adequately by the award previously made, I should not refuse relief merely because of the Defendant’s inappropriate and unsatisfactory way of calculating such loss.”
The trial judge (at para. 94) went on to note that any calculation of loss of earnings at that stage would be subject to innumerable imponderables, upon which no particular evidence, actuarial or otherwise, had been presented, giving by way of example, the recent recession. Therefore, he decided to proceed on the basis that the actual figure to be granted under the heading of loss of profits would be “a general sum granted for compensation”.
146. The general sum which the trial judge arrived at for loss of profits was €500,000. It was premised on the basis that, if Figary had got grant funding for the Marina project and had expanded the Marina as contemplated in the project, the number of berths at the Marina would have increased from 164 to 396. It would have taken eighteen months to complete the construction of the extended Marina. However, by 2007 the additional berths should be available. The trial judge presumed that occupancy of the berths, once completed, would be 90%, which he acknowledged was a relatively generous presumption. As to the duration of the loss, it would be incurred over the period from 2007 to when the Marina will actually be constructed. Given that he was giving judgment in 2012, he assumed that that would not happen until after 2013 and, accordingly, he determined that he should compensate for loss of profits from 2007 to 2013, that is to say, for seven years. He calculated the loss on the basis of accounts of Figary referred to in the McCambridge Duffy report and, in particular, Figary’s turnover on the basis of 164 berths for the period from 2005 to 2009. He also factored in increased costs associated with the enlarged Marina, using the figure of €100,000 per annum, rather than the figure of €73,000 per annum suggested by McCambridge Duffy, as representing the increased costs. The bottom line was that the calculation of loss of earnings was €132,000 per annum, which over seven years would have amounted to a total loss of profit of €924,000, which figure was adopted as a guideline of the general damages for breach of statutory duty. It was acknowledged that those damages must also be reduced by 50% in line with the loss of chance damages reduction. The resulting figure was rounded to €500,000 and it was added to the figure awarded for damages for loss of chance. Accordingly, the total damages for breach of duty under Interreg IIIA to which Figary was held to be entitled being stated to be €2,045,000. If that figure was adjusted in line with the finding above that the correct amount of grant funding sought by Figary was €2.46m, the total damages awarded would amount to €1,730,000.
Conclusions on damages issues
Damages for loss of chance
147. Having expressed the view above that there was ample evidence to allow the trial judge to conclude that Figary would have received approval in principle from the Steering Committee, it is now necessary to consider what would have been the probable outcome of the subsequent independent economic appraisal of Figary’s application at Stage (6). There were three possible outcomes – that Figary’s application would be granted more or less in full; that Figary’s application would be refused; or that, on the basis of the economic assessment, Figary would qualify for a grant in a lesser sum than the amount sought. The trial judge did not consider that last possibility in the context of the hypothetical situation which was being assessed. Aside from that, in my view, consideration of the likely outcome of the independent economic assessment gives rise to very considerable difficulty, some features of which will be referred to.
148. First, a question arose on the evidence before the High Court as to the source of the expenditure which had already been incurred in relation to the Marina prior to the making of the grant application. On the evidence, that expenditure was not reflected at all in Figary’s accounts in any manner. Even to the extent that the evidence suggested that the expenditure was, in fact, incurred by other companies connected to Figary, Figary’s accounts did not reflect either the expenditure or whatever arrangements might have been entered into by Figary with those connected companies. Moreover, there was no evidence to establish what legal mechanism might be adopted to ensure that Figary got the benefit of that expenditure without being exposed to a corresponding obligation. It might be asked whether the connected companies could have made a voluntary transfer of their interests, whatever they were, to Figary and, if so, whether such transaction would have tax implications. None of these matters were explored and none of the questions resolved. That evidential deficit must be laid at Figary’s door. In the circumstances just outlined, there must be a significant doubt about the extent to which a proper independent economic assessment would have regarded the treatment of the expenditure on the works carried out prior to the grant application in the accounts of Figary as satisfactory. That unsatisfactory feature would likely lead to legitimate doubts on the part of the independent economic assessor as to the suitability of Figary for grant funding for the future Marina project.
149. Secondly, there was a significant paucity of evidence as to the exact cost of bringing the Marina up to the level contemplated in the project the subject of the grant application. While figures are given in the grant application, it is reasonable to assume that those figures would have been subjected to in-depth scrutiny in the independent economic assessment. Unfortunately, there is very little evidence available from which any conclusion could be reached as to the likely result of such appraisal. Once again, that evidential deficit must be laid at Figary’s door.
150. Finally, and significantly, it is by no means clear on the evidence that an independent economic assessor would have taken the view that a project of the scale of the Marina project contemplated was economically justified. In particular, differing reports on the likely demand for berths in the enlarged Marina were put in evidence in the High Court. On balance, those reports did not suggest that a marina on the scale which was under contemplation in the grant application might be justified. In short, it is impossible to come to any definitive conclusion as to what the result of the independent economic appraisal would have been, based on the materials and information available at the relevant time. Accordingly, there must be significant doubt as to whether the independent assessor would have concluded that the full scale of expansion which was contemplated by the grant application would have been justified.
151. Having regard to the foregoing matters, it seems to me that, in assessing, on the basis of the evidence before the High Court, the probable outcome of the independent economic assessment of Figary’s grant application, it is necessary not only to factor in a significant risk that the grant application would have been refused, but also a very significant risk that, even if it was allowed, the total amount of the grant which would ultimately have been approved would have been considerably less than the amount sought on the application. In all the circumstances it seems that the only conclusion on the evidence was that the chance of obtaining the full grant would have been extremely slight.
152. In the light of that conclusion, I consider that there was an error in the manner in which the assessment and calculation of the loss of chance of Figary receiving the grant sought was approached in the High Court judgment. While it is open to find that there was sufficient evidence to sustain a conclusion that there was probably a 50/50 chance of getting some grant, assuming that it is probable that there was some momentum in favour of allowing grant funding from Structural Funds for projects in the area in question, there was a complete failure to factor in the significant risk that, even if a grant was approved, the probability is that it would have been for less, and probably a lot less, than the amount of the grant sought by Figary.
153. Bearing in mind the general observation made earlier as to the risk inherent in adopting a soft policy to enforcing compliance with the applicable legal principles in relation to the burden of proof, one must ask whether it is appropriate that Figary should get the benefit of the doubt in respect of any area of uncertainty in the calculation of the loss of chance risk, which stems from its own failure to put adequate reliable evidence before the Court. The answer, in my view, is that it is not, having regard not only to that factor, but also to all of the other factors outlined above. Given the lack of adequate reliable evidence, it is not possible to be confident that, even if the ultimate outcome would have been that Figary would have received a grant, it would have been equivalent to the amount sought by Figary. On the contrary, it seems probable on the evidence that, on the basis of an independent economic assessment conducted in the first half of 2005, the amount of the grant would have been in the range of €800,000 to €1m. That assessment would have been conducted on the basis of the accounts of Figary and other material available in relation to the content of those accounts at the time of the assessment. That evidence is what must inform this Court as to the approach which would have been adopted in the independent economic assessment. The evidence suggests that the assessor would have been unlikely to conclude that Figary would have had the ability to match funding of €2.4m, which on the basis of Figary being liable for 74% of the total project cost, would be in the region of €7m. Indeed, it is perhaps being generous to Figary to conclude that it would be able to match grant funding within the range of €800,000 to €1m.
154. Accordingly, on the basis of a 50/50 chance of getting some grant and on the basis that that grant would be, at most, in the region of €800,000 to €1m, I have come to the conclusion that the proper measure of damages for loss of chance is between €400,000 and €500,000 and should be fixed at €450,000.
Damages for loss of profit/earnings
155. It will be recalled that the award of general damages in the sum of €500,000 made by the trial judge was premised on the Marina project being implemented by Figary and the additional berths being available for use by 2007, if Figary’s grant application had been successfully processed to conclusion, so that Figary’s earnings from the business conducted would have increased in the seven years after March 2007. The fundamental question on this aspect of the claim is whether there was adequate evidence to support that premise. In my view, there was not. By way of general observation, the failure of Figary to provide adequate evidence to support its claim for damages for loss of profits or earnings is a more serious category of failure than the paucity of evidence in relation to the probability of the grant application being successful. Given that Figary had been conducting business at the Marina in Fahan for approximately three years when the grant application fell for consideration in early 2005 and continued to trade thereafter, it is not possible to justify a “back of envelope” approach to assessing what loss of profit Figary has suffered after 2007 by reason of the expanded Marina not having been developed.
156. To pose an obvious question as to the viability of the premise underlying the assessment of the general damages by the trial judge, it is whether there was evidence to support the probability that the expanded Marina would be in use by 2007. As has been outlined above, even if Figary obtained the full grant sought, €2.46m, that would only represent 26% of the total cost of implementing the Marina project, so that Figary would have to put in the region of €7m into the project itself. That raises the question as to how Figary would fund that expenditure. This aspect of the evidence was wholly unsatisfactory. It is true that it was suggested in the evidence that promoters behind Figary were wealthy men. However, there was a complete lack of adequate evidence to identify where the significant sums which would have been required to carry out the project were to come from and, not least, whether some or all of them would have to have been borrowed. In that latter event, a significant interest charge would have been incurred on the cost of implementing the development and expanding the Marina, which clearly would be a material factor in assessing Figary’s profit, or even perhaps loss, on a current account basis. Accordingly, on the evidence adduced, it is by no means clear that an expanded Marina funded by significant borrowing would necessarily have been more profitable than the Marina as it was in 2005. In order for it to have been more profitable, any additional income less any additional operating expenses would have to have been sufficient to outweigh any likely interest charges. There was simply no evidence before the Court on which one could reach that conclusion. In the circumstances, it seems to me that the Court must conclude that Figary has failed to discharge the burden of proving that it has suffered loss of profit in consequence of the expansion of the Marina not having been carried into effect by reason of its failure to obtain the grant funding it sought.
157. Apart from that, observing Figary’s trading history at the Marina in Fahan up to 2005 and Figary’s profit as recorded in the First Judgment (at para. 59), one might ask, albeit at a very trite level, how would doubling, or even trebling, the number of berths have given rise to a profit of €132,000 per annum in 2007 and subsequent years, when the profit in the year up to March 2005 was merely €1,793.
158. In general, there are serious deficiencies in the evidence adduced by Figary to support its claim for additional damages for loss of profits. Not only that, but as is recorded in the Second Judgment (at para. 21), Figary failed to comply with the directions of the High Court that further material and information in relation to the McCambridge Duffy reports be provided to the plaintiff. The consequence is that, hovering in the background of Figary’s claim for damages for loss of profits, there are possible realistic scenarios as regards the likely increase in business as a result of the expansion of the Marina and the corresponding increase in overheads and interest charges on funds borrowed to effect the development, which, if they would have materialised, would not reveal any extra profit, if the development had been implemented. In order to disregard those realistic scenarios, it would be necessary for the Court to conclude that it was more probable that a more beneficial scenario would have pertained. The onus was on Figary to produce the evidence to satisfy the Court of that likelihood. Its failure to do so means that it did not discharge the burden of proof as to loss of profit. Accordingly, no damages are awarded under this heading.
Total award of damages
159. The total award of damages is the sum of €450,000, representing damages for loss of chance.
D – Summary of core determinations
160. As regards the Minister’s claim for possession of the Marina demised by the Foreshore Lease, I have reached the following conclusions. The Minister is not entitled to an order for possession on the basis that the Foreshore Lease has been forfeited for breach of covenant by Figary. On the other hand, the Minister has prima facie established an entitlement to an order for possession under s. 52 of Deasy’s Act, but, subject to compliance by Figary with the conditions stipulated, no order for possession shall issue or be executed, the conditions being that Figary discharge and pay to the Minister within a time period to be stipulated in the order of the Court –
(a) all arrears of rent, including rent which is statute-barred, due by Figary to the Minister,
(b) interest on the arrears of rent which are not statute-barred at the statutory court rate from the respective dates on which the same became due, and
(c) the costs of the Minister related to the claim for possession under s. 52 of Deasy’s Act, the basis of quantification to be stipulated in the order of the Court following further submissions from the parties.
161. As regards Figary’s counterclaim against the Minister for damages for breach of statutory duty, Figary has established that the Minister was in breach of statutory duty, being a breach of the rule of European Union law, in preventing the processing of Figary’s claim for grant funding under the Interreg IIIA Programme to a final decision. In consequence, Figary is entitled to be awarded damages for the loss it has incurred consequential on such breach. The said damages are quantified at €450,000.
162. Obviously, provision will require to be made for setting off one against the other –
(a) the monies due to the Minister by Figary as a condition of Figary getting relief from an order for possession under s. 52 of Deasy’s Act, and
(b) the damages awarded against the Minister in favour of Figary on Figary’s counterclaim.
163. As has been outlined in the course of the judgment, the Court will have to hear further submissions from the parties in relation to the form of order to be made by this Court and, in particular, the extent to which the orders of the High Court require to be varied, or as the case may be, vacated.
Foley & Anor -v- Mangan
[2009] IEHC 404
Laffoy J.
The Proceedings
In these proceedings, which were initiated by plenary summons which issued on 28th July, 2006, the plaintiffs claim a declaration that a lease dated 12th October, 2004 (the lease) made between the plaintiffs and the defendant has been terminated by forfeiture. They also claim an order for possession of the lands demised by the lease, together with arrears of rent and mesne rates. The simplicity of the case pleaded by the plaintiffs belies the complex nature of the transactions between the parties, of which the lease was only one element. It is necessary to consider the underlying transactions before considering the case as pleaded.
The underlying transactions
The factual background to the underlying transactions is that prior to 2004 both the defendant and the plaintiffs were engaged in farming and grain production in North County Dublin. The plaintiffs were seeking to expand their operations and were looking for suitable lands for that purpose. At the time, the defendant, who owned a farm, which included a grain storage facility, in the Garristown area of North County Dublin, was under financial pressure and was interested in selling the lands. The parties were introduced by a Mr. J. J. Sullivan, who facilitated negotiations between them, the outcome of which was an agreement that the defendant would sell the lands to the plaintiffs, but there would be a lease back in favour of the defendant for a period of four years and nine months and the defendant would also have an option to re-purchase the land during the term of the lease. The composite agreement between the parties was formalised in three documents, namely:
(1) a contract for sale dated 1st October, 2004 (the sale contract);
(2) the lease; and
(3) an option agreement dated 12th October, 2004 (the option agreement).
It is necessary to consider the three documents in some detail. The parties had separate legal representation in relation to the composite agreement.
The sale contract was in the standard form General Conditions of Sale (2001 Edition) published by the Law Society. By virtue of the sale contract the defendant agreed to sell to the plaintiffs for €4,000,000 certain lands registered on three County Dublin folios, which I will refer to as “the sold lands”, which comprised 205 acres. The special conditions in the contract which are of relevance for present purposes are:
(a) special condition 12, which was in the following terms:
“This Contract is conditional upon the parties hereto (sic) entering into a four year nine month Letting Agreement with the [defendant] in the terms of the draft Agreement annexed hereto. The commencement date for which shall be the day of closing of this transaction (sic). The granting of the Letting Agreement by the [plaintiffs] shall be conditional upon the [defendant] making available to the [plaintiffs] an alternative bank of land for tillage purposes amounting to no less than 205 acres at a location or locations of the [defendant’s] choosing within the vicinity of the property in sale for the duration of the Letting Agreement”
and
(b) special condition 13, which provided that the contract was conditional upon the parties entering into an Option Agreement in the terms of the draft annexed thereto.
A further special condition, special condition 14, which provided that the sale included “agricultural entitlements” referable to approximately 204 acres and that €100,000 of the purchase price was attributable to those entitlements, has been the subject of separate summary proceedings in this Court, which apparently were settled. The issues which arose between the parties out of that special condition, in my view, are relevant to the issues with which the Court is now concerned only to a very limited extent.
The sale was closed on 12th October, 2004 and the lease was entered into on that day, as was the option agreement.
The lease created a demise of all of the sold lands together “with all buildings, sheds, cattle yards, stores, etc.” but with the exception of two grain stores and an area of hard standing. It provided for shared access to and use of a weigh bridge. I will refer to the premises demised to the defendant as “the demised premises”. The term created was four years and nine months from 11th October, 2004 to 10th July, 2009. The rent reserved by the lease was set out in clause 3 and was €67,500 per annum, payable in two halves on 25th March and 25th September in each year. It was “divided” between, or apportioned to, distinct parts of the demised premises as follows:
(i) €25,000 per annum was apportioned to the lands and what was described as “the old yard”; and
(ii) the balance, €42,500, was apportioned to what was described as “the new yard, grain stores, weigh bridge, etc.”.
An important factor, which does not appear on the face of the documentation, but which it is common case was agreed between the parties, was that the apportioned rent of €25,000 in respect of the lands would be discharged by the defendant complying with his obligation under special condition 12 of the sale contract to make available to the plaintiffs an alternative bank of land amounting to no less than 205 acres. The intention of the parties was that the defendant would take land on conacre from landowners in the vicinity and pay for it and make it available to the plaintiffs. It was never intended that the defendant would pay a money rent of €25,000 to the plaintiffs in respect of the land and old yard.
The other provisions of the lease which are invoked in these proceedings are as follows:
(a) clause 6 under which the defendant undertook to work and cultivate the lands in a good and workmanlike manner and in accordance with proper methods of husbandry and to keep the lands free from the growth of thistles and other noxious weeds;
(b) clause 7 under which the defendant agreed that he would “not commit or suffer any waste, spoil or destruction on the said lands or do or suffer to be done thereon anything which may be or become a nuisance or annoyance to the [plaintiffs] or the occupiers of adjoining land”;
(c) clause 9 under which the tenant agreed to –
“take out and maintain public liability and employers’ liability insurance covering any liability, loss, claim or proceedings in respect of the Farm with cover of not less than €10,000,000.00 on any one claim …”; and
(d) clause 10, which, in addition to a statement that the lease was strictly personal to the defendant and could not be assigned or sub-let, contained a proviso for re-entry in the following terms:
“… in the event of any instalment of the rents mentioned in Paragraph 3 hereof being in arrears for twenty one days after becoming due or if there be any breach or non-performance by the [defendant] of any of the terms and conditions of this Lease, the [plaintiffs] shall be entitled to re-enter upon the said lands or any part thereof in the name of the whole and thereupon this agreement shall immediately terminate”.
In the Option Agreement it was agreed that the defendant would have the option of purchasing the sold lands, excluding a five acre plot immediately adjoining the yard. The option was exercisable by giving at least twelve months’ notice and paying a non-refundable deposit of €100,000 on any of four specified dates, the last of which was 11th July, 2008. The option price varied depending on when the option was exercised and the sale closed. If it was exercised on 11th July, 2008 to close in July 2009 the option price was to be €5,850,000 together with the plaintiffs’ legal costs, VAT and outlays. The important provision of the Option Agreement for present purposes is clause 7 which provides as follows:
“This Option shall only be exercisable in the event that the [defendant] has paid the rent provided for under the [lease] … and that the [lease] has not been terminated”.
Events subsequent to 12th October, 2004 and prior to the initiation of these proceedings
The defendant continued in occupation of the demised premises after 12th October, 2004. The first moiety of the rent was due on 25th March, 2005. On 14th March, 2005 the plaintiffs (as Liam Foley & Sons, Agricultural Contractor) sent an invoice directly to the defendant claiming €21,250, being a moiety of the rent of €42,500 due in respect of the new yard on 25th March, 2005. The covering letter expressly stated that there would be no rent due for the lease of the land, as the defendant had provided the plaintiffs with two hundred acres elsewhere. The defendant duly paid the sum of €21, 250. Despite that clear and unequivocal statement, the evidence of the second plaintiff was that the defendant had not complied with his obligation under special condition 12 in the sale contract at the time.
Up to the summer of 2005 the defendant was continuing to conduct his grain business in the new yard and the plaintiffs were using the grain stores, hard standing and use of the weigh bridge excepted out of the lease for the purposes of their grain business. During the summer, negotiations took place between the defendant and the plaintiffs for the sale by the defendant of his grain business to the plaintiffs. Once again, Mr. Sullivan facilitated the negotiations. Ultimately, an Asset Sale Agreement dated 20th July, 2005 (the Asset Sale Agreement) was executed by the defendant and the plaintiffs. The plaintiffs’ solicitors, but not the defendant’s solicitors, were involved in this transaction, the defendant’s evidence being that he decided not to involve his own lawyers because he felt it was a straightforward, simple agreement. In broad terms, the Asset Sale Agreement provided for the sale by the defendant to the plaintiffs of his grain business, his customers database and general goodwill of the business and the equipment and machinery, which was itemised in a schedule, at a price of €326,000. It was also provided that the meal and grain in the sheds, the property of the defendant, would be weighed and paid for separately at the standard rate. The Asset Sale Agreement was a complex document and, as one would expect in a contract for the sale of a business as a going concern, it contained warranties and indemnities by the defendant as vendor and he entered into restrictive covenants with the plaintiffs. At a more basic level, there was even a specific provision that the plaintiffs would make available to the defendant at a nominal rent of €100 per annum, and a contribution of €500 per annum towards electricity, a small section of the grain shed for the defendant’s own cattle feed for a period of two years.
The Asset Sale Agreement was duly completed around 1st August, 2005. Its completion had a number of consequences which are relevant in the context of these proceedings. First, on completion the defendant surrendered to the plaintiffs the portion of the demised premises to which the apportioned rent of €42,500 per annum attached, that is to say, “the new yard, grain stores, weigh bridge, etc.”. It is common case that after 1st August, 2005 the defendant had no continuing liability for the apportioned rent of €42,500 per annum payable under the lease in respect of the new yard. Secondly, there is a dispute as to whether the defendant remained liable for the rent which had accrued in respect of the new yard between 25th March, 2005 and 1st August, 2005. The plaintiffs contend that he did, whereas the defendant says that, as part of the Agreement in relation to the sale of the business, it was agreed that the accrued rent would be waived, as the defendant put it, “rolled up in the agreement”. Both sides have put the rent outstanding at 1st August, 2005 at €10,625, representing three months’ rent, although almost ten months had elapsed from the commencement of the lease to 1st August, 2005 and the rent had only been paid in respect of a half year on 21st March, 2005.
It seems to me to be highly improbable that, in a context in which the plaintiffs paid €12,500 by way of deposit on 20th July, 2005 and €313,500 on completion of the Asset Sale Agreement and a further agreed sum, which according to the defendant’s evidence was €12,000 or thereabouts, later in the month of August, 2005 in respect of the defendant’s grain, the defendant was left with outstanding liability to the plaintiffs for rent of €10,625 at the conclusion of this complex transaction. The plaintiffs point to the fact that the rent was not mentioned in the Asset Sale Agreement. That is true, but, more significantly, the surrender of the leasehold interest in the new yard, grain store and weigh bridge was not addressed at all in the Asset Sale Agreement, but rather the surrender was effected by act of surrender, that is to say, by the defendant vacating, and the plaintiffs assuming possession, of the premises. Mr. Sullivan, the facilitator, who was nominated as an arbitrator by both parties in the sale contract to determine “all disputes concerning the operation of ‘the lease’ on the basis that his decision would be binding on both sides”, testified that he was involved in the negotiations leading to the Asset Sale Agreement and that his recollection is that there was to be a clean break – that the deal that was struck was that the defendant would owe the plaintiffs nothing. I think it is probable that the basis on which the deal was concluded was that the plaintiffs would get the business, the moveable assets and the surrender of the leasehold interest in the new yard and grain stores for the agreed price and would pay an additional amount at an agreed rate for the grain and that the defendant would be discharged from liability for the rent which had accrued under the lease in respect of the new yard and grain stores. I so find.
The next event which is documented is a letter of 14th December, 2005 from the plaintiffs’ solicitors directly to the defendant in which it was stated that, the defendant having “failed, refused or neglected to pay the second instalment of rent due on 25th September, 2005 pursuant to the terms of the lease”, without specifying the amount outstanding, the plaintiffs were entitled to terminate the lease and enter upon the demised lands. It was also stated that the option to buy back was no longer exercisable by virtue of clause 7 of the Option Agreement. There was no allegation of any other breach of covenant. I surmise that it is of significance that approximately contemporaneously with that letter a third party had obtained a conditional order of garnishee which prevented the plaintiffs receiving payment from the Department of Agriculture and Food on foot of the sale of the “entitlements” referred to in special condition 14 of the sale contract, which was also alluded to in the letter of 14th December, 2005. The defendant responded through his solicitors, by a letter of 4th January, 2006, that he was not in any way in breach of the terms of the lease and that the lease and the Option Agreement remained valid and binding on the parties. There followed a letter of 18th January, 2006 from the plaintiffs’ solicitors to the defendant’s solicitors, which made no reference to the defendant’s solicitors’ response but complained that the land being provided by the defendant in satisfaction of his obligation under special condition 12 in the sale contract was short by in or about 65 acres. That complaint did not elicit any response from the defendant’s solicitors and it was not followed up by the plaintiffs’ solicitors. The issue of the shortfall was dealt with by the parties themselves.
What has been relied on by the plaintiffs as constituting , and was stated therein to be, a forfeiture notice within the meaning of s. 14 of the Conveyancing Act 1881 (the Act of 1881) is a letter of 2nd March, 2006 from the plaintiffs’ solicitors directly to the defendant. In that letter the defendant was given notice of the following alleged breaches of the lease:
(1) a breach of clause 3, in that it was contended that the defendant owed €31,875 representing nine months’ rent “on the new yard etc.”, which “became due in September 2005” and remained outstanding – a claim which was patently incorrect and was not persisted in, it being the plaintiffs’ case at the hearing that the outstanding rent in respect of the new yard is €10,625;
(2) a breach of clause 8 (this should obviously refer to clause 7), in that it was alleged that the defendant permitted waste by keeping cattle in the sheds and allowing slurry to escape into the yard and waterways over an extended period of time; and
(3) a breach of clause 9, in that it was alleged that the defendant had failed to take out and maintain public liability and employers’ liability insurance cover.
The defendant was called upon to discharge the rent due and to remedy the other breaches of covenant within three weeks of the date of the receipt of the notice, on pain of the plaintiffs having no option but to exercise their right under clause 10 of the lease to forfeit the same for breach of covenant, if he failed to do so.
The response of the defendant’s solicitors to that notice, in their letter of 24th March, 2006, was as follows:
(a) It was stated that it was the defendant’s understanding that as part of the deal involved in the Asset Sale Agreement all rental payments in respect of the yard for the period from the commencement of the lease to that date were considered discharged in full.
(b) As regards clause 7, it was contended that it referred to “waste of the lands” and did not refer to the cattle yard. Apart from that, it was contended that there was no escape of slurry from the yard and that the defendant had not allowed slurry into the adjoining waterways at any time.
(c) In relation to clause 9, it was stated that the defendant did have public and employers’ liability insurance cover in place. In fact, with an earlier letter of 10th March, 2006, the defendant’s solicitors had furnished a letter from FBD Insurance confirming that there was employers’ liability and public liability insurance in place for the demised premises, with the limit of indemnity for public liability being €2,600,000, any one accident being unlimited in any one period of insurance, and the limit of indemnity for employers’ liability being €13,000,000, any one occurrence being unlimited.
Two aspects of that response elicited no reaction from the plaintiffs’ solicitors. First, they did not address the defendant’s solicitors’ contention that there was no rent due in respect of the new yard, although invited to clarify the position and furnish invoices. Secondly, no question was raised as to the adequacy of the insurance cover. It was not until the hearing of the action that an issue was made that the lease required cover of not less than €10,000,000 on any one claim in respect of public liability and employers’ liability. In March 2008 the plaintiffs’ solicitors were furnished with a copy of the relevant policy, which was in conformity with the letter of 10th March, 2006, which covered the period from 10th March, 2008 to 9th March, 2009. A copy of a similar policy for the period 10th March, 2007 to 9th March, 2008 had been furnished to the plaintiffs’ solicitors on 27th September, 2007.
In relation to the remaining matter raised in the notice of 2nd March, 2006, the question of waste, subsequently, by letter dated 26th June, 2006, the plaintiffs’ solicitors sought a copy of a notice (the statutory notice) under s. 12 of the Local Government (Water Pollution) Act 1977, as amended by the Local Government (Water Pollution) (Amendment) Act 1990, which they understood (incorrectly as it transpired) had been served on the defendant on 27th April, 2004 in relation to the demised premises. The response of the defendant’s solicitor by letter dated 27th June, 2006 was that no such notice had been served. A notice dated 27th April, 2006 had been served in relation to the demised premises, but it had been addressed to and, presumably, served on the defendant’s brother, Raymond Mangan, who, according to the defendant’s evidence, managed the defendant’s herd at the time and also mixed in animals from his own herd with the plaintiffs’ herd, in the yard and sheds on the demised premises. The notice required certain measures to be taken, namely:
(i) all soiled water originating on the farmyard was to be stored in suitably sized storage tanks and spread on the land as per the guidelines in the Nitrates Directive (91/676/EEC), because, it was stated, the current soiled water/slurry storage facilities on the farmyard were not sufficient for the anticipated volumes that were being generated in the farmyard;
(ii) all silage harvested for the 2006 season was to be bailed and stored in a suitable location on the farmyard, and specifically no unbailed silage was to be stored in the existing silage bay, due to the poor condition of the concrete base and the inadequate storage and collection system for silage effluent; and,
(iii) as of midnight on Friday, 28th April, 2006 no animals were to be housed or over wintered in the farmyard until such time as Fingal County Council was satisfied that there was adequate soiled water/slurry storage facilities installed and all uncontaminated water, i.e. roof drainage, discharged separately to the adjacent watercourse.
The notice stipulated that the foregoing measures were to be taken by 12:00 midnight on Friday 28th April, 2006.
Apart from a letter of 28th June, 2006 from the plaintiffs’ solicitors, asserting that the defendant had told the plaintiffs that he had received a notice from Fingal County Council, no further correspondence passed between the parties’ respective solicitors prior to the plenary summons issuing on 28th July, 2006.
The case as pleaded
As I stated at the outset, the case as pleaded is simple. Alleged breaches of the obligation to pay rent and of clauses 7 and 9 of the lease are pleaded in the statement of claim delivered on 21st August, 2006, as is the proviso for re-entry in the lease (clause 10) and the notice of 2nd March, 2006 and that the defendant failed to remedy the breaches alleged in it within three weeks or the extension for a further three weeks of that period. It is also pleaded that the plaintiffs were thereby terminating the lease pursuant to clause 10. There is also an allegation, which was not the subject of a prior complaint, and does not require to be addressed further, that the defendant had failed to comply with his obligations under clause 6 and keep the lands free from thistles and other noxious weeds.
The total arrears of rent alleged to be due and owing by the defendant according to the statement of claim was €50,625. As clarified by the plaintiffs’ solicitors’ replies to a notice for particulars delivered on behalf of the defendant, €31,875 of the total sum was alleged to be due in respect of the rent which fell due in respect of the new yard, grain stores and weigh bridge. That allegation was incorrect to the extent, as was admitted, that the sum alleged to be due and unpaid on 25th March, 2005, €21,250, had in fact been paid. As regards the balance of €10,625, I have already made a finding that it was not due on 25th September, 2005, because I have found that whatever sum would have been outstanding on 1st August, 2005 was subsumed in the consideration for the Asset Sale Agreement. The remainder of the total, €18,750, was claimed as arrears of rent in respect of the land and the old yard, which it was alleged fell due in respect of the period from November, 2004 to July, 2005 and became payable on 20th July, 2005. That was patently incorrect, in that it was clearly and unequivocally acknowledged in the letter of 14th March, 2005 that there was no rent due for the land for the first year of the term of the lease.
Although it was not pleaded at all, part of the plaintiffs’ case at the hearing, and a time consuming aspect of the case, was that the defendant was in default in relation to his obligation to pay rent under the lease by reason of the fact that the land which had been made available by him throughout the remainder of the term after the first year did not fulfil his obligations under special condition 12 in the sale contract. I will return to this aspect of the matter.
The sum claimed by the plaintiffs in their pleadings for arrears of rent is €50,625.00 together with mesne rates from the date of issue of the plenary summons, 28th July, 2006.
In the defendant’s defence, which was not delivered until 18th June, 2007, which demonstrates a certain leisurely approach on all sides to the matters which provoked these proceedings, it is denied that there was any rent due under the lease, on the basis that the price paid by the plaintiffs on foot of the Asset Sale Agreement was calculated on the basis, and it was expressly agreed that, the rent payable in respect of the new yard up to the date of completion of that Asset Sale Agreement was considered to have been paid in full. It is also denied that there was any breach of clause 7 or clause 9 of the lease. While admitting the service of the notice dated 2nd March, 2006, it is denied that it was a valid or effective notice for the purposes of s. 14 of the Act of 1881. It is also alleged that the notice was not motivated by any bona fide desire to ensure compliance with the covenants in the lease but sought to contrive a forfeiture in the hope of forfeiting the defendant’s rights under the option agreement. There is a denial of the entitlement of the plaintiffs to forfeit the lease. There is also an assertion that, since the proceedings had issued, the plaintiffs had waived the forfeiture by accepting the provision of alternative land in lieu of rent. Finally, without prejudice to the defence, the defendant seeks relief against forfeiture.
The plaintiffs in their reply have joined issue with all of the assertions of the defendant in his defence.
The issues raised on the pleadings
Against the factual background which I have outlined, the issues raised on the pleadings which the Court has to determine are as follows:-
(1) Whether there was a default by the defendant in his obligation to pay rent under the lease, so as to give rise to an entitlement on the part of the plaintiffs to re-enter under the terms of the lease or a common law.
(2) Whether there was a breach of either clause 7 or clause 9 of the lease prior to the service of the notice of 2nd March, 2006.
(3) If there was a breach of the defendant’s obligation under either clause, whether the notice of 2nd March, 2006 was a valid forfeiture notice for the purpose of s. 14 of the Act of 1881.
(4) If the defendant was in breach of either clause 7 or clause 9, and if the notice of 2nd March, 2006 was a valid forfeiture notice, whether the defendant had remedied the alleged breach or breaches prior to the initiation of the proceedings.
(5) If the initiation of the proceedings effected a forfeiture, was the forfeiture waived by the conduct of the plaintiffs subsequently.
(6) Alternatively, if the plaintiffs were entitled to forfeit the lease when these proceedings were initiated, whether the defendant is entitled to relief against forfeiture, either equitable relief against forfeiture or statutory relief under s. 14 of the Act of 1881.
I will deal with each of the issues, either singly, or, where appropriate, in conjunction with others.
Default in obligation to pay rent?
Having found that there was no default in relation to payment of the part of the rent attributable to the new yard and grain stores in respect of the term up to the time of the surrender of the lease in relation to that part of the demised premises on 1st August, 2006, the issue of fact which remains is whether there was default in payment of the rent in kind attributable to the land by discharge of the obligations of the defendant pursuant to special condition 12 of the sale contract.
In respect of the first year of the lease from October 2004 to October 2005, on the basis of the clear and unequivocal acknowledgement in the letter of 14th March, 2005 that special condition 12 had been complied with, I find that there was no default in that year, so that there was no default whatsoever in relation to rent when the plenary summons issued.
As I have already indicated, in the second year from October 2005 to October 2006 there was a complaint in the letter of 18th January, 2006 that the defendant was short by about 65 acres in making available alternative land. The defendant’s evidence was that land comprising 47 acres at Kilmartin was offered in December 2005 or early January 2006 to the plaintiffs and was accepted by the plaintiffs. The second plaintiff’s evidence was that the land was not acceptable. Having regard to the fact that the complaint in the plaintiffs’ solicitors’ letter of 18th January, 2006 was not followed up, I accept the evidence of the defendant that the land at Kilmartin was accepted by the plaintiffs as fulfilling the defendant’s obligation in respect of rent in relation to the lands. Having made that finding, it is necessary to refer to a distinction which the plaintiffs made on the evidence as to the exploitability of the land to which they were entitled under special condition 12. The distinction was between –
(1) land in respect of which the plaintiffs were only able to claim Area Aid from the Department of Agriculture and Food, in respect of which the plaintiffs were able to claim €155 per acre, but which land was unsuitable for tillage, and;
(2) land which was additionally croppable or sowable, in the sense that the plaintiffs could use it for sowing winter wheat, as was their intention, which, on their case, would have netted them a further return of €200 profit per acre.
As a matter of construction of special condition 12, I conclude that, as the wording expressly indicates, what was intended was that the plaintiffs would get 205 acres which were suitable for tillage, not merely that they would get 205 acres in respect of which they could claim Area Aid. However, as I have found, the fact is that in the second year of the term of the lease the plaintiffs accepted the land proffered and did not make any formal complaint that the rent due under the lease was in arrears by reason of the plaintiffs not having been provided by the defendant with 205 acres all of which were suitable for tillage. Nor was any formal demand made for the rent in kind alleged to have been in arrears.
There was a considerable amount of interaction between the parties in relation to the compliance by the defendant with his obligation to furnish the alternative 205 acres of land for tillage in the third year of the term, that is to say, the year from October 2006 to October 2007, which covered the 2007 harvest. Some of the correspondence was directly between the parties and some was channelled through their solicitors, although, it is only fair to record that the involvement of the parties’ solicitors in relation to the practicalities of fulfilment of special condition 12 was sporadic. Neither strain of correspondence is conclusive. In particular, the correspondence between the solicitors, which concluded with the defendant’s solicitors’ letter of 5th February, 2007, and which seemed to be heading towards some consensus, had proceeded on the basis of an assumption that a certain area comprising 72 acres was available to the plaintiffs. It subsequently transpired that the assumption was erroneous. The defendant continued through April and May 2007 to proffer alternative parcels of land to the plaintiffs. However, the plaintiffs neither accepted nor rejected the defendant’s offers in writing. There was a conflict of evidence between the second plaintiff and the defendant as to whether the defendant had fulfilled his obligation. The defendant’s evidence was that he had made available a greater acreage than he was obliged to, 251 acres, whereas it was the second plaintiff’s evidence that only 198 acres had been made available, of which 128 acres had been proffered late in the season and was not of a quality suitable for tillage. Once again, there was no formal demand made by the plaintiffs for the rent in kind alleged to have been in arrears.
In the following year of the term, from October 2007 to October 2008, covering the 2008 harvest, there was no complaint in writing from the plaintiffs as to the quality of the lands proffered by the defendant. There was a conflict of evidence, in that it was the evidence of the second plaintiff that the plaintiffs received only 175 acres, whereas the defendant’s evidence was that they were given 202 acres and contemporaneous documentary evidence corroborated the defendant’s version. There was no formal demand from the plaintiffs for the rent in kind alleged to have been in arrears.
In the final nine month period of the term from October 2008 to July 2009, which was still running at the time of the hearing, there were complaints from the plaintiffs as to the quality of the land being proffered. The final position prior to the hearing is reflected in a letter dated 16th October, 2008 from the defendant to the plaintiffs confirming acceptance of four parcels comprising 230 acres and agreement that one of the parcels would be limed at the expense of the defendant. Despite that letter, to which there was apparently no response from the plaintiffs; the evidence of the second plaintiff was that only 190 acres had been made available.
Even though there were conflicts on the oral evidence between the second plaintiff and the defendant as to the croppable acreage which the plaintiffs received for the 2007 harvest, the 2008 harvest and the 2009 harvest, I am satisfied that the defendant made every effort to comply with his obligation under special condition 12 of the sale contract. I am also satisfied that the ultimate outcome in relation to each season was that the plaintiffs accepted the land made available by the defendant as satisfying his obligation in relation to the payment of the rent in kind reserved by the lease in respect of the land and the old yard. It was acknowledged by the first plaintiff that, as he put it, “at the end of the day” the plaintiffs had to accept the land made available. The absence of any sustained formal complaints by the plaintiffs or any formal demand for compliance by the defendant with his obligation to pay rent in respect of the land by compliance with special condition 12 of the sale contract must be regarded as amounting to acceptance by the plaintiffs of compliance on the part of the defendant. I so find.
Although forfeiture for non-payment of rent is expressly excluded from the operation of s. 14 of the Act of 1881, even if the plaintiffs had got less alternative land suitable for tillage than they bargained for, having regard to the manner in which they conducted their dealings with the defendant over the term of the lease, they would have an insoluble problem in translating the defendant’s failure in that regard into a breach of the defendant’s obligations under the lease, which would have given the plaintiffs a right at common law or under contract of re-entry on the demised premises and forfeiture of the lease. As is pointed out in Wylie on Landlord and Tenant Law (2nd Ed.,) at para. 24.09, at common law the rule was that a landlord had to make a formal demand for the rent before he could invoke a right of re-entry. However, this was usually dispensed with, as a matter of contract, by an express provision in the re-entry clause – by words such as “whether formally demanded or not”. As will be clear from clause 10 of the lease, the relevant portion of which I have quoted earlier, it contained no such express provision which would have excluded the necessity for a formal demand. Not only was there no formal demand by the plaintiffs on the defendant, but at no stage, either before these proceedings were initiated or in the course of the proceedings, were the alleged arrears of rent for the second and subsequent years of the term at any time quantified in money terms by the plaintiffs. That would have been theoretically possible by identifying the alleged shortfall in the acreage provided by the defendant against his contractual obligations and multiplying it by €121.95 (€25,000 ÷ 205), the notional rent per acre or, indeed, €125.00 per acre, which the defendant utilised consistently in demonstrating compliance in his correspondence with, and in invoices issued to, the plaintiffs.
In summary, I have found that, when the notice of 2nd March, 2006 was served and the plenary summons issued, the defendant did not owe any rent in respect of the new yard and the grain stores for any period prior to the surrender of those premises to the plaintiffs. Nor did the defendant owe any rent to the plaintiffs in respect of the land and old yard, as pleaded in the statement of claim or at all. For those reasons, the plaintiffs’ case for forfeiture as pleaded, based on alleged arrears of rent, is not sustainable. Furthermore, the case made for the first time at the hearing on behalf of the plaintiffs, which was not pleaded, that the failure of the defendant to comply with his obligation under special condition 12 of the sale contract post the commencement of these proceedings has given rise to a right of re-entry for non-payment of rent, even if such failure was established, which I am satisfied is not the case, is misconceived, in the absence of a formal demand for rent.
Accordingly, the plaintiffs’ claim that they have forfeited the lease for non-payment of rent fails.
Breach of clause 7 or clause 9?
Unlike the position in relation to forfeiture for non-payment of rent, which by virtue of subs. (8) thereof is expressly excluded from the operation of s. 14 of the Act of 1881, that section restricts forfeiture for breach of any covenant such as a covenant of the types contained in clause 7 and clause 9. Section 14(1) provides as follows:
“A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and, in any case, requiring the lessee to make compensation in money for the breach, and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.”
The only notice relied on by the plaintiffs in this case as constituting a notice for the purposes of s. 14(1) is the notice of 2nd March, 2006. Therefore, as regards the alleged breaches by the defendant of his obligations under clauses 7 and 9, the first issue is whether the defendant was in breach of either prior to 2nd March, 2006. If he was, then the issue whether the notice of 2nd March, 2006 complied with s. 14(1) arises in relation to that breach. If it did, then the final issue as to the enforceability of the right of forfeiture is whether, when the plenary summons issued on 28th July, 2006, the defendant had been allowed a reasonable time in which to remedy the breach and whether he had done so.
Different considerations apply to the application of s. 14 to clause 7 and to clause 9. Accordingly, I propose to consider them separately.
Clause 7
To recapitulate, under clause 7 the defendant agreed not to commit or suffer any waste or to do or suffer anything which might be or become a nuisance or annoyance to the plaintiffs or adjoining occupiers. The breach alleged by the plaintiffs in the notice of 2nd March, 2006 was that the defendant had permitted waste by keeping cattle in the sheds and allowing slurry to escape into the yard and waterways over an extended period of time. The argument made on behalf of the defendant in response – that in referring to “the said lands” clause 7 was not referring to activities in the yard – was wholly specious. Clause 7 clearly refers to all of the demised premises.
As I understand the evidence, the plaintiffs’ complaint was not so much that the defendant was over-wintering cattle in the sheds which he held under the lease but rather the complaint was that, having regard to the numbers of cattle involved and the manner in which they were housed and the state and condition of the sheds and the ancillary facilities, the yard and the surrounding areas were being polluted because of the escape of slurry.
On behalf of the plaintiffs, evidence in relation to waste and pollution was given by the second named plaintiff, two members of the firm of Philip Farrelly & Company, Agricultural Consultants, namely, Freda Salley and Philip Farrelly, and Seamus Phelan of Teagasc. Philip Farrelly & Company were clearly instructed after these proceedings were commenced. Ms. Salley inspected the locus on 25th January, 2007, on 1st June, 2007 and on 22nd October, 2008. Mr. Farrelly visited the locus with Ms. Salley on 1st June, 2007. A comprehensive report dated 22nd August, 2008 of Philip Farrelly & Company was put in evidence. Counsel for the defendant objected to the evidence of the witnesses from Philip Farrelly & Company on the basis that it did not relate to the condition of the farm on the date of the purported forfeiture. While the evidence was admitted de bene esse, I am satisfied that it is pertinent to the issues which have to be decided arising out of the allegation that clause 7 was breached by the defendant and that the breach was not remedied.
No expert evidence was adduced on behalf of the defendant. The defendant himself gave evidence, which was vague and imprecise. Indeed, apart from Mr. Sullivan, he was the only witness for the defence. In general, I formed the view that he demonstrated quite a cavalier approach to his obligations under clause 7.
On the basis of the evidence of the second named plaintiff, which I accept as being accurate on this issue, I am satisfied that there was inadequate slurry and pollution control on the demised premises during the period from the commencement of the lease to 2nd March, 2006 due to the manner in which the cattle were housed, the state of repair of the housing, the absence of proper drainage and storage facilities for contaminated runoff in the animal housing sheds, dungsteads, manure pits, the silage pits and so forth. I am satisfied that what Ms. Salley and Mr. Farrelly observed in 2007 was happening in 2006, perhaps with more serious consequences in 2006. I am also satisfied that the plaintiffs had received complaints from occupiers of land in the vicinity of the farmyard and in turn made complaints to the defendant to no avail. Because of their concern, the plaintiffs retained Mr. Phelan to conduct water sampling, which he did on 1st February, 2006 and subsequently. An analysis of samples he took from a drain running along the farmyard on 1st February, 2006 disclosed coliforms above the accepted level, which was evidence of faecal contamination of the water. I am satisfied that the defendant’s farming activities and his use and the condition of the farmyard were the source of the contamination.
While no witness was called from Fingal County Council, the statutory notice dated 27th April, 2006 served in relation to the farmyard corroborates the plaintiffs’ evidence. The defendant took issue with some of the evidence adduced on behalf of the plaintiffs. For instance, he was adamant that there was a slurry tank which was covered over by cement slabs but served by a manhole located outside the yard gate, which was pumped out from time to time when the need arose. Neither Ms. Salley or Mr. Farrelly observed this tank and both were implicitly critical of its location and efficacy, if it existed. When the concept of waste was being explored with the defendant during cross-examination, he accepted that allowing pollution to run across the demised lands should not have happened. He implicitly accepted that it did happen. His evidence was that he tried to prevent and reduce it.
On the totality of the evidence I am satisfied that the defendant’s farming activities and use of the demised premises prior to 2nd March, 2006 had given rise to the escape of slurry and consequential pollution and contamination, which affected the plaintiffs and had the potential to affect occupiers of land in the vicinity of the demised premises. Accordingly, I am satisfied that the defendant had committed waste within the meaning of clause 7 and was in breach of clause 7.
In arriving at that conclusion, I have not ignored the submissions made on behalf of the defendant that the conduct on the part of the defendant complained of does not constitute waste. Counsel for the defendant correctly pointed out that there are two limbs to clause 7, one being a commitment not to commit or suffer waste and the other being a commitment not to do or suffer conduct which would amount to a nuisance or annoyance to the landlord or adjoining occupiers. It was submitted that the notice of 2nd March, 2006 invoked the first limb only and the conduct complained of could not constitute waste. In support of this submission, counsel for the defendant relied on a passage in Halsbury’s Laws of England (4th Ed., Re-issue) at para. 345 in volume 27(1) to the following effect:
“Waste consists of any act or omission which causes a lasting alteration to the nature of the land in question to the prejudice of the person who has the remainder or reversion of the land”.
It is clear from the next sentence that what the editors of Halsbury are addressing there is the liability of a tenant at common law, because they point out that the obligation not to commit waste is an obligation in tort, and is independent of contract or implied covenant. What the Court is concerned with here is not whether there is liability at common law or under an implied covenant; rather it is the interpretation of clause 7 and the application of the notice of 2nd March, 2009 to it. Apart from that, in advancing the argument that neither the escape of slurry from sheds to a yard nor the escape of slurry from the demised premises into waterways outside the demised premises, as opposed to into waterways within the demised premises, can constitute waste, the underlying assumption seems to be that damage to the reversion means physical damage to the land or buildings on the land. In my view, it would be absurd to construe a covenant in an occupation lease for a term of less than five years of farmland, farm buildings and a farmyard created in the first decade of the 21st century, under which lessee covenants not to commit or suffer any waste, as not being contravened where the lessee engages in conduct which results in the accumulation and escape of slurry, pollution and contamination, as not damaging the reversion, when the lessor may be faced with proceedings under statutory provisions governing waste management by public authorities and, perhaps, actions in nuisance or negligence by adjoining occupiers, which necessitate the taking of remedial action or the payment of compensation when the lease expires. To put it another way, the type of conduct of which the plaintiffs complain has the effect of increasing the burden on the reversion and, in my view, does constitute waste within the meaning of clause 7.
Turning to the adequacy of the notice of 2nd March, 2006 for the purposes of s. 14 of the Act of 1881, while it outlined the breach of clause 7 complained of in general terms, nonetheless, I am satisfied that it did adequately specify the particular breach complained of. As is pointed in Wylie (op. cit.) at para. 24.14, the notice need not go into specific details of the breach, e.g., in respect of repairs not done, so long as it indicates to the lessee what is required to effect a remedy. In my view, it is quite clear what was necessary to remedy the breach of clause 7 complained of: it was to take the appropriate steps in relation to the housing of cattle and the conduct of the farming operations so as to prevent slurry escaping into the yard and into the waterways. I am satisfied that, as regards the breach of clause 7, the notice was adequate as regards its content.
As regards identifying the time span allowed to the defendant in which to remedy the breach of clause 7 complained of by the plaintiffs with a view to determining whether it was reasonable, counsel for the defendant took issue with what counsel for the plaintiffs suggested was the proper interpretation and application of s. 14. The position adopted by counsel for the plaintiffs was that s. 14 does not require a time limit to be specified in the forfeiture notice itself, but the right of re-entry or forfeiture is not enforceable unless and until the lessee fails “within a reasonable time” after the service of the notice to remedy the breach complained of. Citing the decision of Browne-Wilkinson V.C., delivering the judgment of the Court of Appeal in Billson v. Residential Apartments Ltd., (No. 1) [1991] 3 All ER 265, it was submitted on behalf of the plaintiffs that the crucial period is the time which has elapsed between the service of notice and the initiation of the legal proceedings, in this case, the period from 2nd March, 2006 to 28th July, 2006. Counsel for the defendant took issue with that proposition, submitting that, where, as here, the lessor has stipulated a period of time in the forfeiture notice, the lessor is bound by it and it is that period which must be reasonable. Counsel for the defendant was unable to refer to any authority for that proposition but pointed out that in Campus and Stadium Ireland Development Ltd. v. Dublin Waterworld [2006] IEHC 200, in which judgment was delivered by Gilligan J. on 21st March, 2006, the issue had been canvassed but did not have to be decided. The passage in the judgment of Gilligan J. to which the Court was referred was in the following terms:
“The second aspect is the question of the period of time that was allowed to the tenant to comply with the notice of forfeiture and remedy the alleged breaches. Whether the time period was 28 days or 39 days, and taking into account all the circumstances of this case and bearing in mind that at all times since the commencement of dealings between the parties the defendant had the benefit of legal advisors, I do not believe that there was any real difficulty in the defendant, as tenant, complying with the requirements made of it in the notice of forfeiture.”
The reference in that passage to 28 days was the period stipulated in the forfeiture notice and the period of 39 days was the period which elapsed from the service of the forfeiture notice to the initiation of the proceedings by plenary summons.
In the Billson case Browne-Wilkinson V.C., in the relevant passage (at p. 273), noted that the forfeiture notice in that case did not limit a time within which the breach was to be remedied and continued:
“All that the statute requires is that a reasonable time to remedy the breach must elapse between the service of the notice and the exercise of the right of re-entry or forfeiture. If the actions of the lessee make it clear that he is not proposing to remedy the breaches within a reasonable time, or indeed any time, in my judgment a reasonable time must have elapsed for remedying the breaches once it is clear that they are not proposing to take the necessary steps to remedy the breach but are committing further breaches. If this were not the case, what would the landlord’s rights be if the defendant continues to commit the very breaches complained of by the section 146 notice after the date of its service? If he were to take proceedings to restrain further breaches of covenant, he would subsequently be faced with the contention ….. that the landlord had waived his right to forfeit by seeking to enforce the covenants. The only effective remedy of a landlord, faced with intransigent behaviour such as that of the defendant’s in the present case, must be to forfeit the lease on the grounds that whatever time was allowed the defendant was showing no intention of remedying the breach at all.”
The reference to s. 146 in that passage is to s. 146 of the Law of Property Act 1925, which is the analogue in England and Wales in s. 14 of the Act of 1881.
The basis on which counsel for the defendant argued that a lessor who stipulates a short time for remedying an alleged breach of covenant in a s. 14 notice should be bound by that period of time and its reasonableness or otherwise was that, if the lessor stipulates a period within which it is impossible to remedy the breach, the lessee is put at a disadvantage because he will see no point in starting something that he cannot finish in the stipulated time. In that hypothetical situation it is always open to the lessee to inform the lessor that the stipulated time is not sufficient and to seek an extension of it. If the lessor does not accede to the request, then he runs the risk of the stipulated time being held to be unreasonable in due course. However, the factual situation in this case is more akin to what happened in the Billson case than that hypothetical situation. As I have outlined, by his solicitor’s letter of 24th March, 2006, which was on the cusp of the three weeks period allowed in the notice of 2nd March, 2006, the defendant denied that there was any breach of clause 7. It seems to me that, accordingly, the rationale of the passage from the judgment of Browne-Wilkinson V.C. quoted earlier equally applies in this case. That denial and the subsequent conduct of the defendant suggested that the defendant had no intention of remedying the breach at all.
On that basis, for the purposes of the application of s. 14(1), the question is whether the period from 2nd March, 2006 to 28th July, 2006 represented a reasonable time within which to require the defendant to remedy the breach of clause 7. Having regard to the evidence of the second plaintiff, and to the evidence of Ms. Salley and Mr. Farrelly as to what required to be done I consider that it was, even though the evidence of the experts did not specifically address the length of time which would reasonably be involved in adopting the measures they recommended to remedy the breach. A period of almost five months elapsed between the 2nd March, 2006 and 28th July, 2006. As a matter of common sense, I have come to the conclusion that that was an ample period within which, if he was minded to do so, the defendant could have taken all the steps necessary to prevent waste and pollution from his farming operations in the farmyard and the farm buildings, subject, of course, to compliance with the requirements of Fingal County Council in the statutory notice.
It remains to consider what steps, if any, were taken by the defendant to comply with the notice requiring him to remedy the breach of clause 7 complained of within that period or at all.
Of course, within about six weeks of receipt of the notice of 2nd March, 2006, the defendant was faced with the statutory notice dated 27th April, 2006. Insofar as he took steps, it was with a view to complying with that notice. His evidence was that he took the following steps:
(1) There was a reduction of cattle numbers to comply with the statutory notice. The defendant’s evidence was that for the end of the calendar years 2006, 2007 and 2008 the numbers of animals housed in the wintertime had been drastically reduced and he supported this evidence by computer generated herd records. While I accept there was a reduction, it did not solve the problem. While the defendant took issue with Ms. Salley’s evidence that the defendant was crowding cattle in the sheds and testified that his enterprise had been passed by An Bord Bia as regards food quality assurance every year, no expert evidence was adduced on his behalf to contradict the evidence of Ms. Salley and Mr. Farrelly.
(2) In response to the statutory notice, he ceased using the silage pit as theretofore and baled his silage from 2006 onwards. His evidence was that the pit was covered with a sheet of black polyethylene to prevent overflow. Mr. Farrelly’s evidence was that there was still hay in the pit when he visited the locus. Mr. Farrelly’s evidence was that compacted silage in a silage pit is the most toxic pollutant material. I consider that the run off from the silage pit, which continued, comes within the complaint in relation to the escape of slurry.
(3) Generally, he kept the place clean and tidy and the tanks pumped out, but, of course, it is clear from the evidence that the defendant was only at the demised premises at weekends.
(4) Following a visit from official of Fingal County Council in January 2008, a list of repairs was attended to: covering an open drain outside the gate; repair of drains in the yard; and repair of guttering. The list was a verbal list, not a written list. When the work was completed the official, whom he named, returned and inspected the work and said “that’s fine”. On her subsequent visit, Ms. Salley did not find the condition and use of the farm buildings and the farmyard as being “fine”.
There is one other aspect of the defendant’s evidence which is of relevance in this context. The defendant stated that he applied for grant aid under the Farm Waste Management Control Scheme and a grant, which was intended to fund putting in waste facilities, was approved by the Department of Agriculture. He also got planning permission for the intended improvements. Like all of the defendant’s evidence this was very vague, but Mr. Phelan cast some light on the matter, because, prior to being retained by the plaintiffs to take the water samples, apparently, he had advised the defendant’s brother, Raymond Mangan, in connection with an application for an agricultural grant to upgrade the facilities to the Nitrates Directive standard. It was clear from the defendant’s evidence that no action was going to be taken on foot of the grant approval or the planning permission until these proceedings had been resolved.
Taking an overview of the evidence, I am satisfied that the defendant had not remedied the breach of clause 7 when the plenary summons was issued on 28th July, 2006 and it was not remedied subsequently prior to the hearing. The defendant’s evidence, as I have stated, was very vague. That is understandable, as he made it clear that during the relevant years he was not running the farming enterprise on the demised premises, but was involved in business in the United Kingdom and he was also running a business in France. His brother, Raymond Mangan, was running the farming enterprise on the demised premises. However, Raymond Mangan was not called as a witness and, if he had been, I think that it is improbable that he could have contradicted the evidence that the enterprise is being run in a manner and without adequate measures being in place to prevent slurry escaping and consequential pollution occurring.
Clause 9
The defendant acknowledged that, due to an oversight, he did not put public liability and employers’ liability insurance in place when the term of the lease commenced in October 2004. His evidence was that the insurance was put in place in 2005. I suspect that is not correct and that the insurance was put in place for the first time in March 2006 following the service of the notice of 2nd March, 2006. In any event, the defendant did put in place insurance which provided substantial cover against public liability and employers’ liability and, even though it did not match the specific requirements of clause 9 in relation to cover, that fact alone could not form the basis of the forfeiture of the lease. This is particularly so as the details of the policy and the cover were furnished to the plaintiffs’ solicitors in 2006 and in each succeeding year and no issue was raised by the plaintiffs as to the level of cover until the hearing of the action.
I consider it unnecessary to consider clause 9 further because, insofar as there was a breach of clause 9, I am satisfied it was remedied by the defendant putting in place insurance with an appropriate insurer which provided, on any objective assessment, adequate cover. Allied to that is the fact that there was no suggestion that any claim was made during the term of the lease which involved or may involve invoking the cover provided by the insurer.
Waiver?
It is common case that it is established law that “a notice under s. 14 referring to several breaches is not invalidated in toto because some of them never took place and have to be abandoned” (per Andrews L.J. in McIlvenny v. McKeever [1931] N.I. 161). On the basis of the findings I have made above, the only breach of the defendant’s obligations under the lease on which the plaintiffs are entitled to rely for forfeiture is the breach of clause 7. The plaintiffs exercised their right of forfeiture under the lease by issuing and serving these proceedings on the defendant. Despite a rather limp argument of counsel for the defendant to the contrary, the acceptance of service by the defendant’s solicitor on his behalf had the same legal consequence as service directly on him would have had.
It is also well settled that the defence of waiver may preclude a lessor from exercising his right of re-entry or forfeiture. The defence was explained in the following passage in the judgment of Andrews L.J. in McIlvenny v. McKeever (at p. 172):
“Dealing first with the defence of waiver, it is well recognised that Courts of law have always leant against forfeitures …. They have, accordingly, readily held that an alleged forfeiture has been waived if the lessor, with full knowledge of the breach of covenant or condition relied upon, has by some positive unequivocal act recognised the continued existence of the tenancy at a period subsequent to such breach. Acceptance of rent accruing due after the forfeiture, an action for the same, and even an unqualified demand for such rent have been held to constitute such waiver notwithstanding the lessor’s protest that he was acting without prejudice to his right to insist on a prior forfeiture …”.
However, Andrews L.J. went on to set out two exceptions or qualifications to that general proposition, the first of which is of particular relevance here, stating:
“The first is that when once a landlord had definitely exercised his option of relying upon the forfeiture, and has shown a final and unequivocal determination to take advantage of it by instituting proceedings in ejectment, no subsequent act, whether receipt of rent or otherwise, will be held to operate a waiver.”
In arguing that the defence of waiver applies, the defendant has ignored the existence of that exception or qualification. The defendant did not point to any demand for rent by the plaintiffs between the 2nd March, 2006 and 28th July, 2006 when these proceedings were commenced. The defendant’s position was that, following the initiation of the proceedings, the second named plaintiff, in direct correspondence with the defendant by letter of 17th August, 2006 indicated that the plaintiffs were ready to start sowing in early September and sought clarity in relation to the availability of 90 acres of alternative land. The defendant’s argument is premised on that request, and the provision of alternative land to the plaintiffs, as being the equivalent of a request for, and payment of, rent. That premise is the agreed position of the parties. The defendant submitted, correctly in my view, that similar arrangements were made for the remainder of the term of the lease. The existence of the arrangements which are the equivalent of the payment of rent, it was submitted, indicated that the defendant was to continue to consider himself bound by the terms of the lease irrespective of what “the legal papers”, presumably, meaning the pleadings and inter partes correspondence, stated.
That argument, in my view, ignores the reality of the situation. I have found that there was a breach of clause 7 of the lease, that the plaintiffs served a valid notice under s. 14 of the Act of 1881 and allowed a reasonable time for compliance with the notice before electing to forfeit the lease. By issuing these proceedings on 28th July, 2006 the plaintiffs finally and unequivocally determined to rely on the forfeiture. They persisted in that position at all times thereafter, in that they have prosecuted these proceedings to conclusion. Even if the plaintiffs had wished to waive the forfeiture after 28th July, 2006, they could only do so by agreement with the defendant. As I stated in Moffat v. Frisby [2007] 4 I.R. 572 (at p. 583), citing Wylie (op. cit.) at para. 24.25, “by electing for the remedy of forfeiture, the lessor thereafter deprives himself of remedies based on the continued existence of the lease or tenancy”. That has been the position for centuries, as the following statement of Parke B. in Jones v. Carter (1846) 15 M. & W. 718 at p. 726 illustrates:
“… the bringing of an ejectment for a forfeiture, and serving it on the lessee in possession, must be considered as the exercise of the lessor’s option to determine the lease; and the option must be exercised once for all … for after such an act, by which the lessor treats the lessee as a trespasser, the lessee would know that he was no longer to consider himself as holding under the lease, and bound to perform the covenants contained in it.”
As was explained by Lightman J. in G.S. Fashions Ltd. v. B. & Q. Plc. [1995] 1 WLR 1088, that statement of Parke B. was made in the context of the breaches of covenant by the lessee and the entitlement of the lessor to forfeit having been established. Lightman J. went on to explain the position where the lessee in the court proceedings has put in issue the lessor’s right to forfeit or claimed relief against forfeiture prior to determination by the Court. Lightman J. stated (at p. 1093):
“The words [of Parke B.] and the same principles have been applied in cases where, after the service of the writ, the lessee has challenged the lessor’s right to forfeit or claimed relief from forfeiture. In such a situation the validity of the forfeiture must await to be determined either by the Court or by agreement of the parties. In the meantime there is inevitably a twilight period of some uncertainty. During this period the lessor is on the principle stated by Parke B. precluded from treating the terms of the lease or the covenants in the lease as on foot as against the lessee; but the lessee who has not elected to determine the lease can seek to rely on and enforce the covenants in the lease against the lessor …”
In this case, the defendant elected not to treat the lease as forfeited. On the contrary the defendant defended the proceedings on the basis that there had been no breach and no forfeiture, and, in the alternative, he has sought to be relieved against any forfeiture found to be established. Consistently with that approach, the defendant discharged the rent in kind for which he was liable under the lease. If he had taken a different stance and treated the lease as forfeited he could have lawfully resisted the plaintiffs’ claim for rent in kind. Counsel for the plaintiffs need not have sought to have the plaintiffs exonerated from waiver on the basis of the principle of the plaintiffs being obliged to mitigate their loss, as he did. Once the plaintiffs had elected to treat the lease as forfeited by issuing ejectment proceedings, assuming they were entitled so to do, the lease was terminated. Their only entitlement was to mesne profits thereafter.
On the basis of the foregoing interpretation of the respective positions of the parties, there was no waiver of the forfeiture in this case and, accordingly, the controversy which arose between the parties as to whether s. 43 of the Landlord and Tenant Law Amendment Act, Ireland, 1860 (Deasy’s Act) has application to the situation which has arisen here is academic. As is pointed out in Wylie (op. cit) at para. 24.27, there is a major limitation of the operation of the doctrine of waiver in Ireland, as was recognised in the McIlvenny case, in that under s. 43 a waiver is ineffective between landlord and tenant unless it is signified by the landlord or his authorised agent “in writing under his hand” in the case of a lease granted after 1860. Section 43 provides as follows:
“Where any lease made after the commencement of this Act shall contain or imply any condition, covenant, or agreement to be observed or performed on the part of the tenant, no act hereafter done or suffered by the landlord shall be deemed to be a dispensation with such condition, covenant, or agreement, or a waiver of the benefit of the same in respect of any breach thereof, unless such disposition or waiver shall be signified by the landlord or his authorised agent in writing under hand.”
Because of a reported observation by Palles C.B. in Foott v. Benn (1884) 18 ILTR 90, in the past doubts have arisen as to the scope of s. 43 and, in particular, whether it applies only to a “general” waiver of the covenant as a whole, the position suggested by Palles C.B., but also to waiver of a particular breach of covenant. In Crofter Properties Ltd. v. Genport Ltd. (Unreported, High Court, 15th March, 1996), McCracken J. addressed the controversy. Having stated his view that the suggestion of Palles C. J. was not correct, he concluded:
“The wording of the section is quite clear, and relates to ‘any breach thereof’, which I think can only be reasonably interpreted as meaning that there cannot be a waiver of any specific breach unless that waiver is in writing.”
Counsel for the defendant took issue with that conclusion. While I agree with the construction put on s. 43 by McCracken J., I consider that s. 43 is of no relevance to the issues in this case for two reasons. The first is that what the defendant is attempting to set up is waiver of the fact of forfeiture by the act of receiving rent in kind after the commencement of these proceedings, which, not only on the authority of the McIlvenny case he clearly cannot do, but also on the basis of first principle, as enunciated by Parke B. The second is that, as happened in the McIlvenny case, the breach at issue here is of a continuing character. The second exception or qualification in the McIlvenny case applies to such a circumstance. As Andrews L.J. explained:
“… waiver of the forfeiture up to a particular day cannot be relied upon as a defence to an action for ejectment in respect of a subsequent breach. The reason for this is simply that, as there is a continually recurring cause of forfeiture, a new right arises each day that the breach continues, and the landlord’s waiver of a prior right cannot prejudice him or preclude him from taking advantage of a new and subsequent right. It has further been held … that the mere acceptance of rent which becomes due pending a notice to repair is no waiver of a subsequent forfeiture occasioned by non-compliance with such notice …”.
On the controversy arising from the observation of Palles C.B. as to the application of s. 43, Andrews L.J. stated later:
“It is unnecessary, however, to determine in the present case whether the restricted operation of the section suggested by the Lord Chief Baron is well-founded, as the view admits the necessity for writing in the case of a general waiver of dispensation of a covenant and nothing short of such a general waiver would avail the defendant in the present case because of the continuing nature of the covenant and its breach already referred to.”
In the McIlvenny case, the plaintiff’s landlord had accepted rent after the service of the s. 14 notice but before the writ of summons had issued, which did not happen in this case, and after the service of the writ on a “without prejudice” basis. It was held that the plaintiff had not waived the forfeiture by acceptance of rent.
Relief against forfeiture?
Having found that the plaintiffs are entitled to forfeit the lease for breach of the covenant by the defendant in clause 7 of the lease, such entitlement as the defendant has to seek relief against forfeiture is a statutory entitlement under s. 14(2) of the Act of 1881. That sub-section, which entitles a lessee to apply to Court for relief against forfeiture where the lessor is seeking to enforce his right of re-entry or forfeiture by action or otherwise, gives the Court a broad discretion when dealing with that application. The Court may grant or refuse relief as it thinks fit “having regard to the proceedings and the conduct of the parties under the foregoing provisions of this section, and to all other circumstances”. Further, the Court may grant relief “on such terms, if any, as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court, in the circumstances of each case, thinks fit”. It is suggested in Wylie (op. cit.) at para. 24.21 that, although the relief is granted under statutory powers, it seems clear from the wording of the sub-section that the jurisdiction is discretionary and is to be exercised largely on the same principles as the general equitable jurisdiction to afford relief which may be invoked in cases of forfeiture for non-payment of rent.
The nature of the Court’s discretion in considering whether to grant relief against forfeiture when dealing with substantial commercial transactions was considered by the Supreme Court in Cue Club Ltd. & Ors. v. Navaro Ltd. (Unreported, 23rd October, 1996). In his judgment, Murphy J. stated as follows:
“The nature of the discretion exercised by the Courts of Equity in granting relief against forfeiture is hardly applicable or applicable to the same extent, at any rate where the Court is dealing with substantial commercial transactions in which the lessor and the lessee are on equal terms. In Sweeney v. Powerscourt Shopping Centre Ltd. [1984] I.R. 501, Ms. Justice Carroll recognised the injustice which could be caused to the owner of a shopping centre by a tenant who failed to pay promptly the rent due by him….
Ms. Justice Carroll was not then dealing with the right to relief against forfeiture. In the case before her such relief had not been sought. Reference is made to her decision only for the recognition which it gives the commercial realities which might properly [be] taken into account by a Judge in dealing with the question of forfeiture where that issue does arise.”
More recently in the Campus and Stadium Ireland case Gilligan J. considered the nature of the discretion in the context of an occupation lease of the National Aquatic Centre at Abbotstown, County Dublin. In his judgment, Gilligan J., having stated that from his perusal of the authorities he was of the view that the Courts in general strive not to place rules or restrictions on the exercise of judicial discretion in relation to relief against forfeiture, quoted from the judgment of Earl Loreburn L.C. in Hyman & Anor. v. Rose [1912] AC 623 (at p. 630) in which it was stated appropos of relief under s. 14(2):
“I desire in the first instance to point that the discretion given by the section is very wide. The Court is to consider all the circumstances and the conduct of the parties. Now it seems to me that when the Act is so express to provide a wide discretion, meaning, no doubt, to prevent one man from forfeiting what in fair dealing belongs to someone else, by taking advantage of a breach from which he is not commensurately and irreparably damaged, it is not advisable to lay down any rigid rules for guiding that discretion.”
Gilligan J. also had regard to the observations of Murphy J. in the Cue Club case, which I have quoted. He then set out his approach to dealing with the issue before him as follows:
“I take the overall view that in order to exercise my discretion fairly, I must take into account the conduct of the parties, the wilfulness of any breach by the tenant, the general circumstances particular to the issue, the nature of the commercial transaction the subject matter of the lease, whether the essentials of the bargain can be secured, the value of the property, the extent of equality between the parties, the future prospects of their relationship, the fact that even in cases of wilful breaches it is not necessary to find an exceptional case before granting relief against forfeiture and then apply general equitable principles in reaching a conclusion.”
The lease at issue in the Cue Club case was a lease of unit in a shopping centre and the “commercial realities” adverted to by Murphy J., by reference to the judgment of Carroll J., were the implications for the commercial viability of a shopping centre of non-payment of rent and service charges by a tenant or tenants. The lease at issue in the Campus and Stadium Ireland case was a lease of a major national sports facility, which had been sponsored by the State. While a lease of a farm and farm buildings in North County Dublin on its own might be regarded as in a different category, nonetheless, the position here is that the lease is only part of the composite transaction which, in reality, must be considered to be a major commercial transaction.
The situation which prevails at the time of delivery of this judgment is that the term created by the lease has expired by effluxion of time. Accordingly, the position is that, if the lease was a stand alone transaction, irrespective of whether the defendant is entitled to relief against forfeiture, the plaintiffs would be entitled to possession of the demised premises and the question of relief against forfeiture would be moot. However, the lease is part of the composite agreement, which includes the option agreement. As the validity of the exercise by the defendant of the option is conditional on the lease not having been terminated, whether the defendant is entitled to relief against forfeiture, and, if so, on what terms, is a live issue.
A relevant issue in considering how the Court’s discretion should be granted is whether, as the defendant contended, the plaintiffs in seeking to forfeit the lease were not motivated by any bona fide desire to ensure compliance with the covenants in the lease, but sought to contrive a forfeiture of the lease in the hope of forfeiting the defendant’s rights under the option agreement. The plaintiffs’ position, which was not contradicted, was that the defendant had given an assurance in 2004 that he would not want to exercise the option to buy back. It was put to the second named plaintiff during cross-examination that this action was brought in 2006 to stop the defendant from exercising his option. It was also put to him that from at least 2006 the plaintiffs have known that the defendant intended to exercise the option. Finally, it was put to him that if the defendant exercises the option, he will get the farm back if the lease is not forfeited (Transcript Book 2, page 39). The second named plaintiff answered all of those questions in the affirmative. Although it was not the only motive for pursuing the defendant for breach of clause 7 of the lease, I am satisfied that precluding the defendant from exercising the option was a major aspect of the motivation on the part of the plaintiffs in prosecuting these proceedings. That conclusion is informed by the approach adopted by the plaintiffs in relation to what, given the nature and scope of the insurance which the defendant had put in place, was no more than a technical breach of clause 9, which was clearly of no concern to the plaintiffs.
I have already addressed the submission of counsel for the defendant that the failure to comply with clause 7 does not involve damage to the plaintiffs’ reversion. The burden which the defendant’s failure to deal with the escape of slurry and pollution created adheres to the ownership and possession of the demised premises. Therefore, if the defendant is allowed to complete the re-acquisition of the demised premises on foot of the exercise of the option, the plaintiffs will avoid that burden, which will fall on the defendant.
In assessing the conduct of the parties, even though the second named plaintiff acknowledged that the plaintiffs were motivated by the prospect of preventing the defendant exercising the option, I am satisfied that they also had genuine concerns about the effects of the failure of the defendant to deal with slurry and waste in accordance with his obligations under the lease and in accordance with the law and about the implications of that failure for them. I am satisfied that they took appropriate action to deal with the matter. The defendant, who was obviously aware of the deficiencies in the facilities in the farm buildings and the farm sheds, having pursued an application for a grant from the Department and having obtained planning permission, postponed taking any definitive action until the outcome of these proceedings would be determined, as he was entitled to do. However, he also failed to take other steps to comply with his obligation under the lease, which he was not entitled to do. Counsel for the defendant submitted that the farm buildings and farmyard were in the same condition at the commencement of the term of the lease as they were during the term. That may be the case, but, in the lease, the defendant undertook to use the demised premises in a certain way, but the manner in which the farming enterprise was conducted during the term was not in accordance with those obligations. As I have already commented, I consider that the defendant took a cavalier attitude to his obligations, which cannot be ignored.
Therefore, I have come to the conclusion that, applying equitable principles, the proper approach to take is to preclude the plaintiffs from achieving their ulterior motive of frustrating the option agreement, while ensuring that the defendant is required to give redress for his conduct. Therefore, subject to conditions, I propose to grant the defendant relief against forfeiture. In summary, the conditions are as follows:
(1) The first condition relates to the timely completion of the sale on foot of the exercise of the option in the option agreement.
(2) The second condition is that the defendant gives a personal undertaking to the Court that during his ownership of the demised premises, whether in his own name or through the medium of a company, he will observe all statutory regulations in force in relation to waste management, pollution and contamination in relation to the demised premises, the undertaking to be for the benefit of the plaintiffs during their ownership of the new yard and the adjoining lands purchased under the sale contract but which were excluded from the lease and the option agreement.
(3) The final condition is that the defendant is liable for the costs of the issue of the notice of 2nd March, 2006 and the costs of these proceedings.
I will elaborate on the first and third conditions in turn.
In relation to the first condition, the defendant was cross-examined by counsel for the plaintiffs as to his ability to pay the deposit of €100,000 payable under the option agreement and the balance of the purchase monies. The defendant’s evidence was that, a cheque for the deposit of €100,000 having been rejected by the plaintiffs’ solicitors, the sum of €100,000 is held in the defendant’s solicitor’s client account. The defendant’s evidence was that, in relation to the balance of the purchase money (€5,750,000), he has a bank which will back him and he has “the letter of offer”. He named the lender in question. He described the letter of offer as a “standard loan offer”.
Under the option agreement the closing date was to be twelve months following the exercise of the option. That date has passed. As a condition to giving relief against forfeiture, the defendant must pay the deposit of €100,000 to the plaintiffs’ solicitors not later than 31st August, 2009 and must prove to the Court when the matter is next listed at the vacation sitting on 23rd September, 2009 that the financial arrangements are in place to complete the sale not later than 30th September, 2009. The proof should be in the form of an unconditional loan approval exhibited in an affidavit of the solicitor for the defendant. The defendant’s solicitor should confirm in the affidavit that the requirements of the lending institution can be met.
To enable those matters to be dealt with, the action will be adjourned until 23rd September, 2009, to ascertain whether there is, and will be, compliance with this condition. If not, an order for possession will be made in favour of the plaintiffs.
In relation to the third condition the plaintiffs will be entitled to their costs of these proceedings against the defendant on a party and party basis. The rare sighting of an exclamation mark in a footnote in a Professor Wylie text (in this case – op. cit., footnote 141 to para. 24.22) has prompted the precise terms of this condition. In the text, Wylie states that it has been suggested that an order should not be made against the applicant for relief against forfeiture for costs on an indemnity basis as this offers no inducement to the landlord to compromise the dispute. The footnote adds that it is also said “to encourage lawyers and surveyors and other advisers to charge large fees!”, referring to the speech of Lord Templeman in Billson v. Residential Apartments Ltd. [1992] 1 All ER 141 at p. 150. In any event, I consider it to be a proper exercise of the Court’s discretion under s. 14(2) that the costs be on a party and party basis.
No entitlement to arrears of rent or mesne rates on the part of the plaintiffs has been established.
Orders
I have indicated in broad terms the orders I propose to make in accordance with my decision. I will, of course, hear any further submissions which the parties wish to make as to the actual terms of the orders.
Governor and Company of the Bank of Ireland v Lady Lisa Ireland Ltd
[1993] I.L.R.M. 235
(O’Hanlon J)
28 May 1992
The plaintiff is the landlord of business premises at No. 44 Henry Street, Dublin 1, which were demised to the defendant (then named Poltobe Services Ltd) for a term of 35 years from 14 November 1986.
The plaintiff contends that the defendant has been very remiss in payment of the rent reserved by the lease, and has consistently been late in making payment of the quarterly instalments of rent, so that proceedings have had to be instituted in times past on a number of occasions to compel payment of the amounts due.
Ultimately, the plaintiff grew tired of allowing time, and caused a notice of re-entry for non-payment of rent to be served on the defendant on 12 December 1991. It was headed ‘notice of re-entry and forfeiture’; it recited that the quarter’s rent due on 1 October 1991, had not been paid, and it concluded:
AND NOW TAKE NOTICE that pursuant to the terms of the said lease and the proviso for re-entry therein contained, as agent for the lessor we give notice that the lessor hereby exercises its right to determine the lease for failure to pay the said rent and requires you to yield up possession of the said premises this 11 December 1991.
The notice was signed by the solicitors for the landlord.
The rent was payable quarterly in advance. I understand that the arrears of rent up to the date of the service of the notice of re-entry have since been paid up and accepted by the plaintiff, and that the balance of the quarterly rent for the quarter in question has been tendered and accepted by the plaintiff as mesne rates. Nevertheless, the plaintiff has elected to continue with the proceedings for possession commenced by summary summons issued on 19 December 1990 in accordance with O. 1, r. 3 of the Rules of the Superior Courts.
While the facts of the case, as alleged by the plaintiff, are not in dispute, the defendant contends that the procedure adopted by the plaintiff was ineffectual to achieve a re-entry on the part of the landlord, in accordance with the terms of the lease, and further contends that the procedure by way of summary summons is inappropriate when an order for possession is claimed in reliance on re-entry for alleged breach of covenant.
I have considered the helpful submissions of counsel on both sides of the case and I have come to the conclusion that I should hold in favour of the defendant on both the issues of law which arise for consideration.
Where a landlord proposes to forfeit a lease in reliance on a proviso in the lease giving a right of re-entry for non-payment of rent or breach of other covenant in the lease, it has been held that the ‘re-entry’ involved may only be effected in one of two ways — either by physical re-entry or by the issue and service of proceedings for recovery of possession of the premises.
In Serjeant v Nash, Field & Co. [1903] 2 KB 304, Collins MR observed as follows at p. 310:
There is a final determination of a tenancy under a lease when the lessor, by some final and positive act which cannot be retracted, treats a breach of covenant by the lessee as constituting a forfeiture …. The only question is whether the lessor had availed herself of the breach of covenant in a final manner. I think that she had done so, for, except by taking physical possession of the premises, she had done the only thing that she could do to indicate her intention to put an end to the lease …. It is clear that the writ in the action to recover possession was a conclusive election to treat the act of the lessee … as creating a forfeiture.
In the present case it was submitted that the notice served on behalf of the lessor was a ‘final and positive act treating a breach of covenant by the lessee as constituting a forfeiture’ within the meaning of the expression as used by Collins MR in that judgment, but this contention is inconsistent with the decision of Warrington J in Moore v Ullcoats Mining Co. Ltd [1908] 1 Ch 575 where notice in writing had been given purporting to determine the lease, and a further notice was served demanding possession of the mines.
Warrington J said at p. 587: *238
Then the plaintiffs contend that if the writ was not an unequivocal demand there was a previous expression of their election contained in the two notices of April 29 and May 3, to which I have already referred. I am of opinion upon the authorities … that where the condition in the lease is that the landlord may re-enter he must actually re-enter, or he must do that which is in law equivalent to re-entry, namely, commence an action for the purpose of obtaining possession.
The statement of the law in modern times is repeated in similar terms in Halsbury, Laws of England , 4th ed., vol. 27, para. 428:
The terms of a proviso for re-entry require that if the landlord elects to determine the lease for a forfeiture he must do so by re-entry, which the landlord may effect by physically entering upon the premises with the intention of determining the tenancy or by the issue and service of proceedings for the recovery of possession of the premises.
I conclude that the notice served on the lessee in the present case was not an effective exercise of the power of re-entry for non-payment of rent referred to in the lease.
This need not be fatal to the plaintiff’s case if the procedure followed thereafter was effective of itself to forfeit the lease and set in motion a valid claim for an order of possession.
The proceedings were brought by way of summary summons under O. 2, r.1 of the Rules of the Superior Courts. This procedure may be adopted:
(2) In actions where a landlord seeks to recover possession of land, with or without a claim for rent or mesne profits—
(a) against a tenant whose term has expired or has been duly determined by notice to quit; or
(b) for non-payment of rent.
The rule has remained unchanged as compared with the earlier 1962 Rules (SI No. 72 of 1962), and O. 3 of the Rules of the High Court and Supreme Court 1926, and is essentially the same as the provision in the 1905 Rules (O.3, r.6) which permitted the use of the so-called ‘specially-indorsed writ’:
(F) in actions for the recovery of land, with or without a claim for rent or mesne profits, by a landlord against a tenant whose term has expired or has been duly determined by notice to quit; or in actions for the recovery of land for non-payment of rent ….
The reference in these various rules to the action for the recovery of land for *239 non-payment of rent must be taken as referring to the special procedure arising under s. 52 of Deasy’s Act (Landlord and Tenant Law Amendment (Ireland) Act 1860) permitting ejectment proceedings to be brought without further notice whenever a year’s rent shall be in arrear in respect of lands held under the form of tenure therein referred to, for recovery of possession of the said lands.
In the case of Keating v Mulcahy [1926] IR 214 the former Supreme Court expressed the view that the specially-indorsed writ was inappropriate in a case where the landlord’s claim to possession was based on forfeiture.
Kennedy CJ said at p. 220 of the report:
It was decided by the English Court of Appeal [in Arden v Boyce [1894] 1 QB 796] that the plaintiff should not be allowed to have summary judgment for recovery of the premises on the ground that, though the plaintiff relied on the determination of the tenancy by a notice to quit, the claim was really based on a forfeiture, and the court held that, according to established practice, summary judgment would not be granted in actions for the recovery of land based on forfeiture. Lord Esher MR and Lopes LJ held that O. 3, r. 6, did not apply to a case of forfeiture, with which view, on the words of the rule alone, I respectfully agree …
I am of opinion … that if the determination of the tenancy be not in substance a forfeiture (except in the case of ejectment for non-payment of rent) [it] may be the subject of an application for summary judgment for possession under O.14, r. 1.
Fitzgibbon J said at p. 232:
Of course, if a tenancy is determined by the forfeiture itself, the case is excluded by the very letter of O. 3, r. 6; there the notice to quit is only the intimation by the landlord of his election to take advantage of the forfeiture, and to treat the tenancy as having been determined by it ….
The matter was taken a stage further by the decision of O’Byrne J in Meares v Connolly [1930] IR 333, which applied the earlier decision in Keating v Mulcahy.
In that case a notice to quit had been given in pursuance of a proviso that the tenancy could be determined by notice to quit when the rent was in arrear.
It was held that procedure by summary summons is not applicable in an action for the recovery of premises founded on a notice to quit, where the right to give the notice depends upon the happening of a contingency. It was further held that the court had no power to amend the summary summons and allow the action to proceed as if commenced by a plenary summons and accordingly the case must be struck out, with costs.
As the rules which were under consideration in that case were in all relevant respects on all fours with the rules which have application in the present case, *240 and as I concur in the manner in which the rules were interpreted in the cases referred to, I have to dismiss the present claim of the plaintiff.
F. G. Sweeney Ltd v Powerscourt Shopping Centre Ltd
[1985] I.L.R.M. 442
Carroll J
The defendants are lessors and the plaintiffs lessees of Unit 22L of Powerscourt Shopping Centre. The premises are let under a lease dated 14 January 1982 for the term of 33 years from 1 April 1981 at the initial yearly rent of £11,160.00 by equal quarterly payments. There is a liability also for service charges under the lease. There is a re-entry clause for (inter alia) non-payment of rent and breach of covenant.
On 19 April 1984 the plaintiffs owed the defendants £14,661.00 arrears of rent and £3,308.00 service charges (total: £17,969.00). The defendants’ solicitors sent a letter dated 19 April 1984 expressed to be a notice under s. 14 of the Conveyancing and Law of Property Act 1881 (‘The Conveyancing Act 1881’) calling on the plaintiffs to pay arrears of rent and service charges within 14 days of the date thereof. Following that letter there were some negotiations but the money was not paid.
On 6 May 1984 the defendants re-entered the premises by using a master key which opens several similar locks in the centre. The re-entry took place on a Sunday when no one was present in the shop.
The plaintiffs obtained an interim injunction on the grounds that the lease had not been lawfully determined and legal proceedings had not been instituted by the defendants. The matter comes before me to decide whether or not an interlocutory injunction should be granted.
In my opinion the authorities support the proposition that a lessor who has a valid re-entry clause for non-payment of rent and/or breach of covenant may, after serving a valid notice under s. 14 of the Conveyancing Act 1881, re-enter peaceably and forfeit the lease.
S. 14 of the Conveyancing Act 1881 clearly contemplates re-entry or forfeiture by means other than by action.
Sub-section (1) mentions that a right of re-entry or forfeiture shall not be enforceable ‘by action or otherwise ’ unless or until … etc. Sub-section (2) refers to where a lessor is proceeding ‘by action or otherwise ’ to enforce such a right *444 etc. and, again in the same sub-section, that the lessee may, in the lessor’s action ‘if any’ or in any action brought by himself, apply to the court … etc.
It was held in Re Riggs [1901] 2 KB 16 that the phrase ‘or otherwise’ means ‘peaceable entry’.
Judge Deale in his book ‘The Law of Landlord and Tenant in the Republic of Ireland’ at p. 261 puts it as follows:
If the lessee does not give up possession peaceably, the lessor may re-enter. He may not use force, for this is a criminal offence. What is required is an unequivocal act showing the lessor’s intention to re-enter for the breach of covenant and to determine the lease by forfeiture: Serjeant v Nash, Field and Co [1903] 2 KB at 310.
I am satisfied that what was done by the defendants in regaining possession was peaceable entry. They had served a notice under s. 14 of the Conveyancing Act 1881 which appears to me to be sufficient. The plaintiffs made no move to claim relief against forfeiture. The defendants then chose to re-enter peaceably instead of suing for possession in the Circuit Court.
At the present time the amount of rent payable for prime city locations is very high and the arrears owed here are very large. The commercial viability of a shopping centre may well depend on all the tenants paying their rents and service charges promptly and, no doubt, the defendants have financial commitments in relation to the development or the acquisition thereof, which must be paid.
Why should a lessee have a ‘free ride’ as far as rent and service charges are concerned for as long as it takes a lessor to bring an action in the Circuit Court and then wait for an appeal to the High Court? The undertaking as to damages given by the plaintiffs is meaningless in this case as the damages will be equivalent to the rent and service charges for which liability exists anyway.
In my opinion a lessor is not obliged to go to court. He may re-enter peaceably under a valid re-entry clause for a valid cause after service of a valid notice under s. 14 of the Conveyancing Act 1881. The lessee’s rights are fully protected by being able to apply to court for relief against forfeiture under s. 14 (2) of that Act. In this case I would not be surprised if the reason why no relief against forfeiture has been sought is because the court might enquire when the lessee would be able to pay the arrears of rent and service charges.
In my opinion the lessors have validly exercised their right of peaceable reentry. I therefore refuse the interlocutory injunction. Since the plaintiffs have been allowed back into possession on foot of the interim injunction, I will also make an order for possession in favour of the defendants.
The Mercers Company v M’Kerfrey
[1896] 30 I.L.T.R 41
Sir Peter O’Brien, Bart C.J., O’Brien, Gibson JJ.
Sir Peter O’Brien, Bart., C.J., after stating the facts as above, continued:—The question is this, whether or not, having regard to the provisions in the agreement that the defendant will not carry on the business of a dealer in spirituous liquors, and to the provision for re-entry, the plaintiffs are entitled to maintain ejectment on the title for these premises. It is argued, first, that the defendant was tenant from year to year, and the provision as to carrying on a trade in spirituous liquors is not incorporated, and, second, if it is incorporated it comes under the Conveyancing Act, and no proper notice under the Act has been given. Now, in the first instance, does the lease or what was intended for a lease cover what is complained of? The defendant got his spirit grocer’s licence and sold spirits. In my judgment, apart from authorities, I think it is quite plain that the covenant covers this particular case.
There is first the expression “licensed victualler,” that is a publican. A spirit grocer with a spirit grocer’s licence is, in common understanding, a “dealer in spirituous liquors,” and if we were to interpret its meaning as a publican we should then regard these words as surplusage. I think if it stood per se“dealer in spirituous liquors,” would be appropriate to a licensed grocer, a fortiori when we have the context of “licensed victualler” in the same sentence and where it would be surplusage. I think the plain meaning of the language is what I say. It is the apt word to describe a spirit grocer. If it were a lease, and if the Conveyancing Act were out of the way, there is no doubt whatsoever that there was a breach of the covenant and a right of re-entry, because the right of reentry was co-extensive with the covenant.
But no lease was executed. The question is, whether the covenant is incorporated in the yearly tenancy? In my judgment I think it is clear it is. I say that independent of any authority. But the case of Thompson v. Amey (12 Ad. & E. 476) seems to be completely conclusive.
It is said there is a distinction—that the lease was only to be executed on certain conditions, the conditions have not been fulfilled, the right to the lease did not arise, and therefore the defendant was in as a tenant from year to year irrespective of the lease. I cannot accept that proposition. I think he was in under the terms of the lease so far as it was co-existent with a yearly tenancy. This provision would be imported into a yearly tenancy, and the lessor would be entitled to recover if there was nothing else in the case. Is there anything else? Does the Conveyancing Act apply? By its language the fourteenth section applies to the breach of any covenant or condition, and then came the Act of 1892, section 5, which provides that *42 “lease” shall include an agreement for a lease where the lessee has become entitled to have his lease granted. My impression is, the defendant does not come within that at all. He got the spirit grocer’s licence, he was served with notice not to continue the business, and, notwithstanding, he persisted obstinately to violate the provisions of the agreement. Is it to be argued that he is to have specific performance of an agreement which he persistently disregarded? He has not built the wall, and he carries on the business in disregard of the notice, and he does not come within the relief given by the section. There is the important case of Swaine v. Ayres, where it was mooted by the judges, but not decided, that the lessee was entitled to specific performance. In my opinion this provision was introduced into the Act of 1892 to meet the difficulty of the judges in that case. It appears to me the defendant would not be entitled in a Court of Equity to specific performance. But assuming that he was entitled to specific performance of the lease, we have here the notice. It does not ask compensation to be made. But all the substantial requirements of the Act are found here. It points out the breach and the obligation. I am clearly of opinion that the plaintiffs are entitled to succeed.
O’Brien and Gibson, JJ., concurred.
Barnaton Investments Ltd v O’Leary
[2004] IEHC 155
Judgment of Mr. Justice Michael Peart delivered the 30th day of July 2004:
The plaintiff is currently the owner of an investment property in Cork, having by Deed of Assignment dated 31st May 2002 acquired same from an associated company,
Blasco Properties Limited which by Indenture of Lease dated 4th August 1999 had
leased portion thereof on the Ground Floor to two persons, namely Seamus O’Connell and John Magee, who in turn executed a Deed of Assignment in respect of their interest to the second named defendant company which is presently in occupation. It appears that Messrs. O’Connell and Magee, with others, were co-sponsors with the first named defendant of the second named defendant company at the time the lease was entered into in August 1999, and the reason why the assignment to the company took place was that Messrs O’Connell and Magee had ceased to be involved in the company, and it was thought best to have the leasehold interest transferred to the company. The company operated a restaurant business in the premises. There are other tenants of the plaintiff in other areas of the building.
Central to the facts of this application is the fact that for some reason not conclusively ascertained, but presumably through some oversight, it appears that the landlord’s consent to the assignment by Messrs O’Connell and Magee of the lease to the company was never obtained, and of course there is the usual covenant in that regard contained in the lease at clause 39 thereof. That clause reads:
“Not to assign, sublet or part with or share possession or permit the occupation by a licensee of the demised premises (or suffer any person to occupy the demised premises as licensee or concessionaire) without the prior consent in writing of the lessor, such consent not to be unreasonably withheld and not to assign, underlet or part with or share possession or permit the occupation by a licensee of part of the demised premises under any circumstances whatsoever.”
Clause 32 is also of relevance to this application, and it reads as follows:
“Not without the consent in writing of the Lessor first obtained, nor except in accordance with plans and specifications previously submitted to the satisfaction of the Lessor to erect or suffer to be erected any new building or erection on the demised premises, or make any alterations or additions whatsoever either externally or internally in or to the demised premises or any building or erection which may be erected thereon.
The restaurant traded over the past couple of years since the lease was granted. But it closed down recently and considerable works have been carried out to the interior of these restaurant premises in recent times by the company, and a full Restaurant Cerificate has now been obtained with a full Publican’s licence attached. Therefore the plaintiff has now in occupation without his consent a limited liability company which has carried out extensive internal work, and some exterior, in respect of which no plans and specifications were submitted for approval. The plaintiff in these circumstances seeks the reliefs set forth in the notice of Motion herein dated 2nd July 2004 as follows:
1. An order directing the defendants to vacate forthwith the premises known as Unit 3, 27-29 Courthouse Chambers, Washington Street, Cork pending the determination of these proceedings.
2. An order directing the defendants or either of them to cease the works being carried on by them or either of them within and on the said premises Unit 3 aforesaid and Unit 9, Courthouse Chambers aforesaid, affecting the structures of the premises Courthouse Chambers as a whole and the said units 3 and 9 aforesaid, pending the determination of these proceedings.
On the 2nd July 2004, injunctive relief was granted to the plaintiffs on an interim basis in terms similar to number 2 above- in other words to cease work on the premises. The matter is now before this court by way of motion seeking interlocutory relief in respect of paragraphs 1 and 2 set forth above. Put briefly, the plaintiffs want the defendants to vacate the premises because they have no title to be there since there was no consent to the assignment of the lease to the company either before the assignment was made. Neither has it been either granted or sought subsequently.
Before this Court also is an application on behalf of the plaintiff to be permitted to amend the claim by the addition of two reliefs, the first being for an order that the defendants cease trading in the premises pending the determination of these proceedings and until such time as a Fire Safety Certificate has issued in respect of the altered premises, and the second being for an order that the defendants remove all items affixed by them to the exterior of the premises, to include four chiller units and a satellite television dish. These latter items have been attached to one of the outside walls of the premises, again without any consent and contrary to clause 32 of the lease.
It is important to point out again, as I stated at the commencement, that the present landlord of the premises, the plaintiff, acquired its interest from an associated company, and the current property manager, William O’Mahoney had previously fulfilled that role for Blasco. The present occupier of the premises, Radius Pie Limited took an assignment from two of its own original promoters. For all practical purposes there has been no change of personnel, other than in name, on both sides of this matter. The same people have been dealing with each other on the ground so to speak. I will return to that aspect later.
I should also point to another relevant background matter – that is that there is rent claimed to be owing by the tenants in the sum of €43,308.03. In fact this appears to be owing not to the plaintiff in these proceedings but to the plaintiff’s predecessor in title, Blasco Properties Limited, since the dates in respect of which the rent is due predates the assignment of the landlord’s interest to the plaintiff company. However, the defendants say that it is not owing in fact, and that it is a sum which is disputed since there was some arrangement that a reduced rent would be payable at the outset of the term, while the business got off the ground and that this matter has not been agreed as yet with the landlord. However these arrears of rent have been referred to in submissions on behalf of the plaintiff company.
The defendants’ architect has sworn an affidavit in which he has averred that the works being carried out in the restaurant premises constitute a “re-fit” of the restaurant and that nothing of a structural nature is being undertaken. In effect, he says, what used to be an open plan interior is now broken up into sections by the use of partitioning. This partitioning is not load-bearing and provides no structural support. He says that the premises continue to operate as a restaurant. He avers that the works which have been carried out have not increased the size of the kitchen or the seating capacity of the restaurant area. The plaintiff’s consultant engineer on the other hand says that some work has been done to the external structural walls to facilitate the installation of what is described as chiller pipework, and he is of the view that all the works in the premises constitute material alterations and that they should not have taken place until the necessary fire safety certificate approval is issued.
The first named defendant has sworn a replying affidavit on behalf of both defendants. He says he has known the said William O’Mahoney for the past three years since he took over the running of the restaurant. He says that William O’Mahoney has visited the premises on many occasions – at least once a week, and that all his dealings with both the plaintiff company and its predecessor, Blasco, have
been made through him. He says that the second named defendant, Radius Pie Limited is a company that was formed in 1999 for the purpose of running the restaurant. He names eight individuals who were involved in the company, including Seamus O’Connell and James Magee who he describes as “the cheque signatories”. Those two individuals are the named tenants on the lease entered into at that time. He goes on to say that he himself provided the finance by way of a loan to the company in order to fit out the restaurant. He says that in 2001 Seamus O’Connell and James Magee and others left the company, at which stage he himself was owed a sum of about €340,000, and that he took over the running of the company and the restaurant. It was in these circumstances that the assignment of the lease from Seamus O’Connell and James Magee to Radius Pie Limited took place on the 21st November 2002. He also says that he believed that the landlord had consented to the assignment as he was aware that the company’s then solicitor had been in touch with Messrs Arthur Cox, solicitors for Blasco about such consent, and he also states that he has recently become aware of discussions and correspondence between his solicitor and Mr Frank Murphy, solicitor of Gleeson, McGrath, Baldwin, solicitors now acting for the plaintiff company. He also says that Messrs O’Connell and Magee have had no involvement with the restaurant since 2001 and that Mr O’Mahoney the property manager has been aware of this fact. He says that since that time he has dealt with all matters with the landlord related to the restaurant, and that Radius Pie Limited has paid the rent, rates and service charges, and that he himself has been the signatory on the company’s cheques. He says also that it is well known to Mr O’Mahoney and the plaintiff company that these payments have not been made on behalf of Messrs O’Connell and Magee. Relevant to that assertion is the fact that Mr O’Mahoney has exhibited in his affidavit a copy of what purports to be a letter dated 22nd July 2002 from a Mr Tony Leonard, Managing Director of the plaintiff company addressed to the said John Magee in which it is stated:
“I refer to our meeting last week with Billy O’Mahoney in Cork. You confirmed the position with the lease that yourself and Seamus O’Connell are the lessees of the above and that the monies we are receiving are being paid to us on your behalf. As discussed, I hope to be in Cork again shortly and if you wish to meet up you can contact me at the above number.
As requested, through Billy, I attach copy of statement of account for the
above.”
Mr. O’Leary says that he is a stranger to that letter, but if what appears in that letter represents reality at that time in July 2002, it certainly contradicts what Mr O’Leary has stated in relation to those persons having no involvement with the company or the restaurant since 2001 and that Mr O’Mahoney is aware of that fact. However I cannot resolve that issue of fact at this stage.
Mr O’Leary sets out at paragraph 7 of his affidavit a number of matters which he says indicate that Mr O’Mahoney is fully aware of the fact that Messrs O’Connell and Magee are no longer involved since 2001. He also states that he has kept Mr O’Mahoney fully informed with regard to the alterations to the premises, and the recent licensing application. He even goes so far as to state that the works which have been carried out have been consented to by the plaintiff company. I presume that this is a reference to Mr O’Mahoney being aware of what was happening, rather than that there was an application for such consent in writing and a furnishing of such consent in the usual way.
Mr O’Leary says that it is not the intention of the second named defendant to change the business from that of a restaurant. He says that a full licence was sought for the purpose of providing a fuller service to patrons in order to attract more customers. He acknowledges that some advertising material describes the new operation as a “Lounge Bar Restaurant” but says that this was for advertising purposes and in fact the premises is a restaurant with a full bar licence. He says that the seating capacity is the same and the number of employees is unchanged at 32, with 75% of these being engaged in relation to food. He says that if the injunction is granted to the plaintiff irreparable damage will be suffered by the company, and its reputation, and that damages would not be an adequate remedy. He also says that the rent and service charges are being paid as fall they due, and that there is no loss to the plaintiff company, and that the balance of convenience lies with refusing the relief sought pending the determination of the issues arising in the case.
Mr O’Mahoney has sworn a further affidavit in which he states that it is clear from Mr. O’Leary’s affidavit that he was well aware that the lease was in the name of Messrs O’Connell and Magee and that no consent had been obtained to the assignment to the company, and that it is not credible for him to say that he was not aware that the plaintiff company had not consented to the assignment. He also says that there is very good reason why consent to the assignment was not sought, and that is because Mr O’Leary was well aware that there was €43,308.03 owing in respect of arrears of rent.
Mr O’Mahoney says that the first discussion between him and Mr O’Leary about the works to the restaurant was on 24th June 2004, and that it was on that date that the plaintiff’s solicitors wrote to the defendants to cease the work. He says that prior to that date the defendants had closed the restaurant, and that prior to the 24th June 2004 there was no indication that works were to be carried out, and no consent was sought.
Further affidavits have been filed but there is no need for me to detail the contents. They deal with matters that are clearly relevant but as far as this application for interlocutory relief is concerned, I believe that I have set forth any facts which are material to the decision as to whether an interlocutory injunction ought to be granted pending the determination of these proceedings.
Clearly there are issues to be determined in these proceedings, such as whether the works carried out are in the nature of structural works and/or whether they are works in respect of which the landlord’s consent is required in advance under the terms of the lease. In addition there is an issue as to whether the failure to obtain the landlord’s consent to the assignment to the company in advance and in writing renders the assignment void, or whether that lacuna simply gives rise to other remedies. Linked to that issue, I suppose, would be whether if consent had been applied for, there are any circumstances whereby it would have been reasonable for that consent to have been refused, such as the outstanding rent due to Blasco, or the fact that the assignee is a limited company and not an individual. That latter point could be addressed by the requirement of a personal guarantee from Mr O’Leary or another suitable person, but that is not a matter for now. There is also an issue as to whether the chiller units and the satellite dish are additions to the exterior of the premises such as are caught by the prohibition against affixing any items to the outside walls. So there is no difficultly in the court coming to a conclusion that there is a fair issue to be tried, and the resolution of these issues will certainly require oral evidence, and no doubt some discovery of documents.
The question which next arises is whether damages are an adequate remedy for the plaintiff. On this question it is difficult for me to see what their loss is. If they are correct in their assertion that the assignment to the company is void because no consent was given or even sought, then the lease to Messrs O’Connell and Magee is still extant, and I have no evidence that those persons are not a mark for what would be their liability for the rent, and service charges. In fact the rent and charges are currently being paid by the defendant company, and in the event that no interlocutory injunction is granted the probability is that this rent will continue to be paid in the present fashion by the second named defendant.
If the injunction is granted, and it turns out that it ought not to have been granted, then the defendants can benefit from the undertaking as to damages given by the plaintiff, and again there is no suggestion that the plaintiff is not a mark for any damages which may arise on foot of that undertaking such undertaking. Of course damages which could arise can be difficult to quantify where they arise due to an ability on the part of the defendants to trade in the newly renovated restaurant. It is safe to assume that in that regard that the new fit out and renovation of the premises was carried out with a view to increasing the turnover and therefore the profit from the operation, when compared to the level of business carried out historically. Historic figures would not be an accurate guide for the purpose of assessing future loss, and if the new premises has never had the opportunity of trading, on what basis would the defendants’ damages be measured? That is a question relevant to the question of whether the balance of convenience nevertheless favours the refusal of relief at this stage.
If the plaintiff is correct that the second named defendant has no right or entitlement to be in occupation of the premises in the absence of a consent to the assignment to them, they will no doubt be entitled to an order directing them to vacate, and presumably to restore the premises to the state which preceded their unlawful occupation. That means that instead of receiving rent from Radius Pie Limited, they will be able to receive rent from Messrs O’Connell and Magee, who presumably will on the facts as known to the Court be none too willing to discharge same since they have apparently ceased to have any involvement in the company. It may be that in that event they would have some come-back against Mr O’Leary and/or Radius Pie Limited on foot of whatever agreement was entered into at the time of the severance of their relationship with the company.
It seems to me that commonsense, if not the law, would dictate that what should happen in the present situation is that the plaintiff company ought to consent to the assignment to Radius, but on condition that a personal guarantee is given by Mr O’Leary, and provided that at least an agreement is reached in relation to the arrears of rent, if any, due to Blasco, so that the company’s occupancy of the restaurant is regularised, and that thereupon approval should be given in respect of the works which have been carried out, so that the plaintiff can then continue to receive its rent from the actual operator of the restaurant, rather than revert to the previous lessee in that regard. Radius Pie Limited can then trade out of the restaurant in respect of which it has expended no doubt a significant sum of money.
All that of course would be on the basis that the works which have been carried out meet all Fire Safety and other building regulations, if any, and provided that the business being carried out or to be carried out in the newly refurbished premises will not be such as to cause the plaintiff to be in breach of any covenant which it has with other tenants in their premises.
However when litigants meet head to head, it is sometimes difficult, for all sorts of reasons, for the concept of commonsense to prevail. There may well be some background to this case which has not yet emerged. However I need not say any more for the moment, but I feel compelled to make some comment, as I have, about the desirability as I see it, of taking a long term view of the practicalities in this case.
I have listened carefully to the submissions made on behalf of the plaintiff by Mr Felix McEnroy SC, and on behalf of the defendants by Mr Hugh O’Neill SC. I will not summarise these submissions in this judgment. I have reached the conclusion firstly that there is a fair issue to be tried, and I have no difficulty in deciding that any loss which the plaintiff may suffer (although as I have said I find it difficult to see how they could be at a loss for the reasons I have identified already) can be adequately compensated for in damages. But I am equally satisfied that even if I am wrong in that and have overlooked something, the balance of convenience clearly and easily lies in favour of refusing the relief sought so that this restaurant can trade while these proceedings are brought to trial and determined.
It seems to me that the worst that can happen as far as the plaintiff is concerned is that they win the case at hearing, succeed in getting vacant possession of the premises from the second named defendant, and revert to the earlier situation of having Messrs O’Connell and Magee in occupation of a premises which they do not want, and collecting rent from them. That situation might well result in those parties then applying for consent to a fresh assignment to Radius Pie Limited, and unless it was reasonable to refuse such consent, everybody would be back in the positions which they occupy at the moment.
That may be a somewhat nonsensical result bearing all the facts and realities of this case in mind, but from a legal point of view that could well be the result. To grant the relief sought would also inevitably result in the second named defendant company ceasing to trade with the consequent lay off of 32 staff members, and all the other financial consequences which do not have to be spelled out in this judgment. That is a further consideration, though one which if it were the only one, might not be sufficient to justify the refusal of the order sought.
I therefore refuse the relief sought in the plaintiff’s Notice of Motion dated 2nd July 2004.
In relation to the plaintiff’s second motion seeking leave to amend their claim by the addition of reliefs related to the absence of a Fire Safety Certificate, and for an order for the removal of items fixed to the exterior of the premises, I suspect that there is no need to make any order on that motion. Firstly it appears that a Fire Safety Certificate has now issued, and in relation to the other relief, I presume that any amendment can be achieved in the Statement of Claim which no doubt can be delivered speedily, but I will hear the parties in that regard.
Approved by Mr. Justice Michael Peart.
Forfeiture Relief Cases
The Minister for Local Government and Public Health v Richard J. Kenny
High Court.
30 July 1940
[1941] 75 I.L.T.R 26
Gavan Duffy J.
Gavan Duffy, J.:
By indenture of lease, dated 23rd July, 1934, the plaintiff, acting for the State under the State Lands (Workhouses) Act (No. 9 of 1930), demised to the defendant for 99 years, at the yearly rent of £50, the greater part of the buildings of the Ballinasloe Workhouse, standing upon some six acres of land included in the demise; the buildings of immense size had become seriously dilapidated through neglect, following misuse during military occupation, and their valuation was only £30.
The place seems to have been under the local control, subject to the Minister for Local Government and Public Health, of the Co. Galway Board of Health and Public Assistance as a result of the now statutory Galway County Scheme of 1921, and I hold that in the circumstances of this case the defendant, after the making of the lease, was entitled to regard the Board, which I shall call the Board of Health, as being for most purposes the agent of the Minister. The plaintiff is the present Minister, suing in his statutory capacity as a corporation sole.
By the lease the defendant covenanted not to carry on or commit, or permit to be carried on or committed, any offensive business, trade or occupation, or nuisance, but to use the property solely for the purposes of wool scouring and kindred industries, and not to assign, underlet or part with the possession of the demised premises or any part thereof, without the consent in writing of the lessor. I shall refer to the use of the property for the purposes of wool scouring and kindred industries as the sanctioned user. The lease contained a proviso for re-entry for breach of covenant. The nearest approach to a covenant against waste was a covenant to keep the demised premises in good condition and repair and so to yield them up on the determination of the term.
The defendant has not used the place for wool scouring, but has made some use of parts of it for collecting and grading and storing wool. It is not contended that this user was any breach of covenant, and a contention that it was a breach not to use the *27 property for wool scouring or a kindred industry at all times is now given up.
The defendant had taken some preliminary steps towards setting up a wool scouring factory with a view to exporting wool to Germany, when, in March, 1935, the Minister for Agriculture put an end to the free market in wool by an Order (S. R. & O. No. 57 of 1935) restricting the export of wool to Germany; the defendant states that, as a consequence of this Order, wool could no longer be sent to Germany without a licence and that he was unable to obtain a licence to export in quantities sufficient to justify the very large expenditure necessary to buy the machinery required for his proposed factory; and I have had some evidence that the defendant had good prospects of securing the necessary financial backing when this Order changed the position.
The Order remained in force for three years until it was revoked in April, 1938, by another Order (S. R. & O. No. 68 of 1938); the suggestion is that the grave uncertainty in the international situation at this time and the lapse of three years had grievously altered, or nullified, the prospects of carrying to success the plans for which the defendant had taken the lease. The defendant claims to have spent nearly £2,000 on or in connection with the property, but he has made no attempt to prove that expenditure in this Court.
Though the defendant did try somewhat informally and quite unsuccessfully to obtain the consent of the Minister to an alteration of the covenant for the sanctioned user, the statutory right of a lessee to insist that consent to an alteration of user shall not be withheld unreasonably and the question whether that right, if it applies, can be invoked against the Minister acting as statutory agent for the State have not, so far as I know, been raised between the parties, nor have they been discussed at all in this action.
The main purpose of this action is to enforce, on behalf of the State, a forfeiture of the lease on the ground of alleged breaches of covenant by the defendant. He has paid rent under his lease up to the 1st of June, 1935; I understand from Mr. Moloney for the Minister that any tender of rent for any later period would have been refused; the reason is that acceptance would have looked like waiver of the breaches.
On 1st May, 1936, the Minister wrote to the defendant stating that he deemed the lease to be at an end by reason of his breaches of covenant in sub-letting. The defendant does not seem to have asserted any claim to get the Minister’s consent under the Landlord and Tenant Act (No. 55 of 1931). The Minister then sued the defendant in the Circuit Court, as an overholding tenant, whose tenancy had expired on 8th May, 1936; the action was dismissed. On 13th October, 1937, the Minister sued the defendant in the High Court, claiming possession for sub-letting by the defendant in breach of covenant; this action was transferred to the Circuit Court and on 15th October, 1938, was dismissed, as also was a counterclaim by the defendant for damages on the ground that part of the demised premises had been withheld from him.
The first step towards the present action was taken when, on 26th January, 1939, the Minister caused a notice of specific breaches of covenant to be served on the defendant, in pursuance of section 14 of the Conveyancing Act, 1881, with a view to regaining possession. That notice was an essential preliminary in this case to any forfeiture, except a forfeiture for sub-letting, and it required the defendant to remedy certain specified alleged breaches of covenant within three months.
On 13th January, 1940, nearly a year later, this action was begun; the Minister’s claim is to forfeit the lease for specified breaches of the lessee’s covenants and alternatively to have an injunction, supported by a declaration as to the obligations of the defendant, to restrain the defendant from using the property otherwise than for the sanctioned user; and there is a claim for damages for breach of covenant; the Minister also claims damages for waste.
The statement of claim alleges that the defendant has not complied with the terms of the notice, that he persists in the breaches of covenant set forth in that notice and that he has committed further breaches, since the service of the notice, by using the property for purposes contrary to his covenant for the sanctioned user; the claim also complains of underletting in breach of covenant by the defendant; and it gives particulars of the waste which he is alleged to have committed.
As an answer to the claim for forfeiture based on a wrongful underletting the Minister is met with the defence that the dismiss in 1938 of his action in the Circuit Court for possession is an estoppel, preventing him from relitigating the claims based on subletting; as to this plea I need only say that I find no estoppel by record here.
At the trial the defendant has further claimed to be relieved from any forfeiture *28 that he may have incurred; except as to forfeiture for underletting, the defendant is entitled to make this claim, and he is entitled to make it at the trial (Mitchison v Thompson, 1 Cab. & Ell. 72).
I have allowed the claim for relief to be made in an informal kind of way so far, because the defendant, though his defence was settled by counsel, has conducted his case here in person; by so doing he has obtained some unsatisfactory concessions, rather, 1 fear, to the embarrassment of counsel for the Minister. The defendant is within his rights in not instructing counsel to appear; it is another question whether he was wise to dispense, in so complex a case as this, with legal knowledge and experience, in the hope that the Judge would fill the inevitable gaps in his personal conduct of the case.
I shall consider first the claim to forfeiture for underletting in breach of covenant; there can be no question of relief from forfeiture, for I have no jurisdiction to relieve, if the Minister establishes a breach of covenant by underletting without consent; a prayer for relief can be entertained only in connection with the other breaches alleged.
In my opinion, the Minister has failed to prove the alleged sub-lettings contrary to the covenant. As to the first underlease alleged, I find that the defendant allowed one, James MacDonnell, with his wife, to have certain rooms in the demised premises from 1935 to 1938 (or early 1939) and that the man and his wife lived there; he was also allowed to have the exclusive use of a large workroom, free of charge. On the evidence both MacDonnell and the defendant appear to have had keys for those rooms and for the workroom, but I need not decide how far this particular evidence is true, since the defendant has succeeded in avoiding both underletting and parting with possession in breach of covenant by reducing his agreement with MacDonnell to writing. It turns out to be a caretaker’s agreement for the rooms, dated 21st June, 1935, under which MacDonnell got the rooms as a caretaker and free of rent; and that agreement was no breach of that covenant.
Then it is averred that the defendant sublet to a member of the Garda Siochana. I cannot so hold, for, though I am not sure that he did not, I am not satisfied that he did. In a letter of 31st January, 1936, to the Board of Health, which was communicated to the Minister, the defendant mentioned having invited a detective to live in the place for its protection against looting. I do not know why the Minister did not at once write to the defendant objecting, if he objected and regarded the arrangement as-a breach of covenant.
I find that in October, 1935, the defendant let certain rooms verbally to the Garda at a weekly rent of 10/-, that the Garda brought his furniture there in the following July and lived there with his wife and children until the ensuing autumn. I find that the arrangement was a matter of temporary convenience; the Garda wanted the rooms while he was looking round for a house in the town and the defendant was glad to have him, because he had suffered from the depredations of thieves. But at this distance of time precise and accurate evidence as to the exact agreement is hard to obtain.
The defendant has a long lease and the proper construction of the covenant in question, as applied to this alleged breach, is not free from difficulty. I find that the learned Judge in the Circuit Court held that there was no underletting in breach of the covenant; he considered, as I understand, that the arrangement was merely a licence to occupy. At this distance of time and on the rather scanty evidence before me I do not feel justified in differing from the learned Judge. If the learned Judge was wrong as a matter of law, the Minister had a ready means of redress by appealing to the High Court; he did not appeal. Not only did he abstain from appealing, but he submitted to judgment against him in the action with costs, taxed at £74 14s. 9d. Further comment would be superfluous.
The forfeiture of a substantial property demised for a term of 99 years is no trivial matter and, as the idea of forfeiture is abhorrent, the law always requires a plaintiff in forfeiture to prove his case strictly. Apart from underletting, the Minister’s grounds for forfeiture must be found specifically—and when I say “must” I mean must —in the statutory notice served upon the defendant, setting out the breaches complained of; other breaches cannot afford him a ground of forfeiture in this action, however useful they may be to illuminate the attitude and conduct of the lessee, as a petitioner for relief from a forfeiture incurred.
Formerly the jurisdiction to give relief from forfeiture to a lessee was narrow, even in Equity; and it was found necessary to relieve the resultant hardships by statute. The statute imposed certain salutary restrictions upon the right of a landlord to forfeit for breach of covenant. I have no authority to relax those restrictions; on the contrary, *29 it is my duty to maintain them, quite apart from my opinion of the merits or demerits of any particular landlord or tenant.
The statute recognised an important distinction between remediable and irremediable breaches of covenant. The distinction is real and in no way subtle, but it is apt to be disregarded. Had it been appreciated by the Minister he would have circumvented one of the more formidable difficulties confronting him in a very troublesome action.
Section 14 of the Conveyancing Act, 1881, prevents the Minister from enforcing a breach of covenant (apart from underletting) by the forfeiture of the lease, unless and until he serves on the defendant a notice specifying the particular breach complained of and, if the breach is capable of remedy, requiring the defendant to remedy the breach, and unless and until the defendant fails within a reasonable time to remedy the breach; there is also a provision as to a money compensation.
The Minister served a notice on the defendant accordingly on 26th January, 1939. The object of the notice was clear and I pass over minor defects in it, which cannot have misled the defendant. I read the notice as containing a warning to the defendant to cease residing on the property and to cease using it otherwise than for the sanctioned user; but its main and direct purpose was to give him notice under section 14 of particular breaches set forth in a schedule.
Six of the scheduled breaches were abandoned at the trial; they were mainly concerned with the user of part of the property by local clubs at the wish of the Board of Health which had given them facilities before the lease was made; as to this and as to the defendant’s residence in the place since before the date of the lease, the Minister, no doubt, felt that his acquiescence must preclude a forfeiture. Acquiescence is a material factor upon defendant’s prayer for relief from any forfeiture which he may have incurred, although there is no plea of acquiescence in the defence.
I have no doubt that it is for the same reason that the forfeiture notice (as I shall call it for convenience) is silent as to public dances held by the defendant in the demised premises; the place had become one of the recognised dancing places of Ballinasloe; a very large number of dances had been held there and the defendant had obtained a succession, of licences for them from the District Justice; the Board of Health had been notified of applications for licences and, though the Minister made an objection on the first application, he stood by for years without protest of any kind, probably at the instance of the Board of Health, which had asked the defendant to let the clubs have the use of a hall for dancing. In view of the publicity given to this aspect of the case it is bare justice to the defendant to record the fact that the Minister’s forfeiture notice, setting out in detail his complaints against the defendant in January, 1939, says not one word about the public dancing, which had been going on for over three years.
There remain three breaches, and only three, scheduled to the forfeiture notice, upon which the Minister is entitled to rely, but only within the terms of section 14. Two of them present no difficulty. One is a charge against the defendant of having, in breach of covenant, taken in boarders and lodgers upon the demised property; the other is an allegation that the defendant, in breach of covenant, allowed James MacDonnell, a builder, to use part of the property as a residence, as a carpenter’s shop and for the manufacture of building blocks. I hold that both these breaches are proved.
Now the clear intention of section 14 is that there shall be no forfeiture, if the defendant obeys the injunction in the forfeiture notice to remedy the particular breaches complained of; the remedy indicated in the forfeiture notice was to cease committing the particular breaches; and he has done so. The last of his regular lodgers left in March, 1939, and the carpenter went to reside elsewhere and set up his business elsewhere shortly before or very soon after the notice was served. There can, therefore, be no forfeiture for these particular breaches.
It is true that the carpenter retains one large room as a store room for timber and tools, but this breach, trivial in itself, is a different breach from the particular breaches that the defendant was required to remedy. It is also true that the defendant gave board and lodging to the Galway Gaelic Football team in July, 1939, and made a small profit on the transaction, which lasted for less than a fortnight. He had desisted from his offence, as required by the Minister, but broke out again some four months afterwards. This was, I think, a new and casual breach of covenant, different from that which the notice required him to remedy; and the consequence is that the Minister cannot use it as a ground of forfeiture without serving another notice of breach, founded on this particular breach.
The fact is, in my opinion, that the Minister has misconstrued the section by treating *30 as remediable breaches that could not be remedied; the defendant has been quick to seize the loophole opened out for him, when the Minister told him, in effect, that he could avoid a forfeiture for the two specified breaches by ceasing to commit them. This question is one of far-reaching importance and will merit a little further examination.
Before I develop the matter let me mention the third breach specified in the schedule to the forfeiture notice. The defendant was charged with breach of covenant by using the property otherwise than for the sanctioned user; that charge will not do for a forfeiture notice, because it fails to specify “the particular breach complained of”; and the Minister’s advisers recognised that it would not do, by proceeding to specify the particular breaches committed in connection with the boarders and the carpenter’s shop. (Cp. Re Serle [1898] 1 Ch. 652).
The Minister’s grounds for forfeiture under section 14 of the Act of 1881 are thus reduced to the two which the defendant has remedied in obedience to the terms of the forfeiture notice; the result is that the whole claim to a forfeiture is gone, since I have rejected the only other head of forfeiture, that based on underletting.
Now the covenant, more fully set out above, was a covenant not to carry on any offensive business, but to use the property solely for the sanctioned user. Incidentally it has not been argued that the negative opening words cut down the apparent scope of the covenant. The gist of the covenant (for my present purpose) was the undertaking not to use the place otherwise than for the sanctioned user, so that the lessor would have been justified in assimilating it, in the application of section 14, to a negative covenant, which, if broken by the lessee, is broken once and for all.
That is, in my view, what the Minister ought to have done. Then he would have given a statutory notice in respect of breaches of the covenant particularly specified in the notice, but his notice would carefully have refrained from requiring the lessee to remedy those breaches; he would have taken the stand that those breaches were irremediable on the very simple ground of plain common sense that what is done cannot be undone. So long as the Minister continues to require the defendant to remedy breaches which he might reasonably and justly treat as being irremediable, so long is he likely to find himself bogged, stymied and baulked by a quandary from which there is no issue in his perplexing quest for a forfeiture.
This aspect of the matter is put with admirable clarity by MacKmnon, J., in Rugby School v. Tannahill [1934] 1 K. B. at p. 701. A landlord who accepts and acts upon the view that a breach of a negative covenant can be cured simply by desisting from the breach puts himself in a quite impossible position; he gives notice complaining of a particular breach, requiring the tenant to desist; thereupon the offender stops offending and the force of the notice is spent; the tenant may then offend again and again and the landlord, giving a similar notice upon every successive breach, will find his remedy gone every time upon the tenant’s compliance with each successive notice. So the Minister on his present tack looks like chasing a recurring decimal, unless his problem can be solved by the alternative claim to an injunction, without any forfeiture.
It may be said that the issue which I decide for the defendant is not raised by his defence; the answer is that the Minister must prove his case and fails because he has not done so; besides the issue is, if necessary, open on the defendant’s claim to relief from forfeiture.
I have allowed the defendant, appearing in person, to call some evidence in support of a claim to relief from forfeiture on the ground that the State cannot be allowed at the same time to approbate and reprobate, in order to see whether there was any case for the State to meet under this head of the claim to relief. I need express no opinion on this matter, since there is no forfeiture; it is enough to say that I find that, if there had been a case for forfeiture, I could not have shut out this contention, but would have required the defendant to formulate this particular claim to relief in black and white, so that the Minister should have a full opportunity of meeting it. This claim is uncommon and it is interesting. It is a claim to an equity against the State, entitling the defendant to relief from forfeiture, on the ground that the sanctioned user was made impracticable by the Order, whereby the export of wool was severely restricted by the Minister for Agriculture eight months after the lease was made by his colleague. Cp. Cornewall v. Dawson, 24 L. T. 664, and Craig v. Greer [1899] 1 I. R. 258.
I come to the Minister’s claims for a declaration and injunction. I see no need for any declaration. The injunction sought is an injunction to restrain the defendant from using the property otherwise than for the sanctioned user, and this is a claim which the Minister, in his capacity of lessor, is entitled to make. Having regard to the *31 defendant’s inveterate cacoethes for covenant-breaking, I have no hesitation in granting this injunction to the Minister, the injunction to endure so long as the lease and the covenant in question subsist; the order will prohibit any other user without the consent of the Minister.
The following breaches of the covenant, relied upon in the claim, have been proved, and the later breaches might have been material to consider on a claim to relief from forfeiture:—
(1) Taking boarders and lodgers;
(2) Allowing a carpenter’s shop and builder’s office on the property;
(3) Hire of hall and four rooms (including supper room and bar for the sale of liquor) for one week by a Carnival Committee, which held public dances and paid the defendant £22 10s. 0d. for the hire; this occurred in June-July, 1939, long after the service of the forfeiture notice in the previous January;
(4) Board and lodging provided for some 20 members of the Galway Gaelic Football Club (as it is known in English) at 28/- per man per week, in July, 1939, the defendant receiving a total sum of £44;
(5) Hire of hall on 30th July, 1939, to Mental Hospital Staff and others, at the price of £4, for a dance; and provision of supper at 1/6 a head, the defendant receiving £14 5s. for catering. Though expressly warned, the defendant continued to reside on the property in defiance of the Minister after receipt of the forfeiture notice; this breach and the last three incidents look to me like deliberate breaches of the covenant by the defendant with his eyes open.
The Minister claims £300 for damages for the defendant’s breaches of covenant; the Minister has a legal right to insist upon the defendant’s observance of a subsisting covenant, but the damages are imaginary, and the nominal damage suffered by the Minister will be fully compensated by the sum of one shilling, which I award.
As to waste, the Minister has made a primâ facie case for an inquiry. I shall exclude any damage resulting from the breaking down of the first wall broken at one extreme end of the building facing the road, on one’s right hand side as one approaches the building, since Mr. Moloney admits that this breach was justified as a way of necessity.
I shall also exclude from the inquiry any damage alleged to have been caused by the removal of a partition wall between the chapel of the workhouse and the dining room, since the evidence is that the defendant needed a very large hall for his wool scouring factory and obtained that hall by combining the two rooms; I shall also exclude the claim for damage by removal of part of the floor of the present hall, where a wooden floor has now been laid; this is a lease for 99 years and this claim founded on waste is premature; nor am I satisfied that the inheritance has been damaged by these works; but this exclusion will be without prejudice to any claim that the Minister may have in respect of these matters, when the lease terminates, by effluxion of time or by forfeiture or surrender or otherwise.
The inquiry will be confined to the damage occasioned to the reversion by the taking down of other walls. It will, if the deferdant so desires, include the question whether he was justified by any reasonable necessizy in taking down any one or more of these walls, regard being had to the sanctioned user and to the length of his term, and there will be no damages in any case where he is found to have been so justified. I grant the inquiry only because the Minister asks for it, as he is entitled to do, and not because. I think he has suffered any very substantial damage; but some of the waste seems to have been of a rather audacious character.
I wish to say nothing to prejudge the question whether the removal of old walls has injured the reversion to any serious extent; and possibly they or some of them could be suitably replaced by railings; I do not know. As I understand the evidence, the structural value of the place, its utility and its attractiveness (if any) have not suffered by the defendant’s acts of waste; possibly it has suffered to some degree; in its present condition, in the matter of letting value.
The inquiry must have regard to the shocking state of dilapidation of the demised premises at the date of the lease. It is by no means to be assumed, as the statement of claim suggests, that the true measure of damage is the cost of restoration of the walls. The main purpose of the inquiry will be to ascertain what damage has been done to the reversion by the waste alleged in paragraph 11 of the statement of claim, the excluded items excepted; the State is entitled to recover that damage, but nothing more.
I have no doubt that by far the most convenient forum for the inquiry will be the Circuit Court, as local evidence will be required and it is possible that the place may have to be viewed by the learned Judge. I propose, therefore, to transfer this part of *32 this action to the Circuit Court and the costs of the inquiry in the Circuit Court will be in the discretion of the learned Circuit Court Judge.
The decree should include any expenses which may be found to have been properly incurred by the plaintiff in detecting or verifying the damage done, besides expenses which would normally be included in a bill of costs as witnesses’ expenses. The order made in the High Court will cover the witnesses’ expenses in attending in the High court.
One further question remains to be decided before I can give effect to so much of this judgment as concerns waste, and that is whether the Minister is the proper plaintiff; a similar question would have arisen, had I be about to give judgment for a forfeiture.
As Meredith, J., pointed out in Doyle v. Griffin [1937] I. R. at p. 100, a defendant need not plead that a statement of claim discloses no cause of action, because the plaintiff cannot succeed unless it does. It does not necessarily follow from the fact that a reversion is not requisite under our law to constitute the relation of landlord and tenant that a lessor can sue for voluntary waste (at common law and apart from covenant) where there exists an immediate reversioner other than the lessor.
If the position is that the Minister has no estate in the lands, the reversion whereof belongs to the State, he may have a difficulty in sustaining the rôle of plaintiff. This question may involve a careful examination of the constitutional provisions and adaptations and the legislation concerning State Lands, including the anomalous section 8 of the Local Government (Temporary Provisions) Act, No. 9 of 1923, and the statutes coverning the position of Ministers of State The question is important and may arise under more than one enactment. I am not willing to dispose of it without argument.
There is also quite a minor difficulty, which, however, I am prepared to overlook. The plaintiff, who is a statutory corporation sole entrusted with the execution of public trusts under the present Constitution, avers in the statement of claim that the demise was made by the plaintiff in 1934, at a date when the plaintiff was still unborn. Perhaps this mistake, if mistake it be, is cured by section 4 of the Consequential Provisions Act, No. 40 of 1937; but, if not, I should not hesitate to allow the necessary amendment in view of the implied admission in the defence that the demise was made by the plaintiff. My attention was drawn to the matter by the omission in the claim of any averment that the plaintiff sues as successor of the Minister who in fact made the lease; but I need not pursue this matter.
The whole question of costs must stand over till final judgment can be given; but there is no reason why the Minister should not at once have his injunction, as to which no technical difficulty arises, and I shall give him an order accordingly in the terms that I have already indicated I wish the defendant to understand that he is liable to find himself in very serious trouble if he disregards the injunction. So long as the covenant remains to use the demised premises solely for the purposes of wool scouring and kindred industries, the effect of this injunction is to prohibit him from using them or any part of them for any other purpose; he must cease residing there; he must take no more boarders; he must allow no one to carry on a different business in the place; he must not let the hall for dances nor for any other purpose; nor conduct any catering business; nor allow a bar in the place; in a word he must not use it for any purposes whatever other than those allowed by the lease, unless he first gets the consent of the Minister for Local Government and Public Health. But he would be well advised to take advice as to the possible application to his case of section 57 of the Landlord and Tenant Act, No. 55 of 1931, which concerns the alteration of “covenants restrictive of user,” if he cannot come to a reasonable arrangement with the Minister.
I can dispose of this case at once if the Minister thinks proper to abandon his claim in waste.
Monument Creameries Ltd. v. Carysfort Estates Ltd.
Teevan J.
[1967] IR 463
T
This case gives me no difficulty whatever. The proviso to Clause 9 of the Lease was obviously drawn for the protection of the lessor, his rights under his contract, and his interest in the premises. The lessor’s interest in his reversion in leasehold premises might be very seriously endangered by a liquidation in certain circumstances, and consequently it became the custom to include conditions, such as that with which I am concerned, in leases in order to protect lessors against the insolvency of their lessees; and to give the widest possible protection the phrase “either compulsory or voluntary liquidation” was invariably used. Now prior to the statutes cited by Mr. Matheson (his interpretation of which is accepted by Mr. Walsh), no relief whatever could have been accorded by the courts to an incorporated lessee going into liquidation, either compulsorily or voluntarily. This is a voluntary liquidation and consequently at one time, in such an event, the lease would have been forfeitable and the plaintiff company would have been without relief. However, s. 14 of the Conveyancing Act, 1881, provided relief against forfeiture in certain cases, but sub-s. 6 of that section expressly excluded forfeiture for bankruptcy of the lessee from this relief. The legislature apparently came to the conclusion that this was unjust to the creditors of bankrupt lessees and accordingly provided by sub-s. 2 of s. 2 of the Conveyancing Act, 1892, that s. 14, sub-s. 6, of the Act of 1881 “is to apply to a condition for forfeiture on bankruptcy of the lessee, or on taking in execution of the lessee’s interest only after the expiration of one year from the date of the bankruptcy, or taking in execution, and provided the lessee’s interest be not sold within such one year, but in case the lessee’s interest be sold within such one year, subsection 6 shall cease to be applicable thereto.” Bankruptcy is defined in s. 2 of the Act of 1881 to include liquidation and, accordingly, since the passing of the Act of 1892 relief against forfeiture is available to incorporated lessees going into voluntary liquidation.
Now I accept the law as stated by Lord Hanworth M.R. in the case, cited by Mr. Matheson, of Gee v. Harwood (1)at p. 736:”Then comes the question whether the Company is entitled to relief from forfeiture. In the Conveyancing Act, 1881, no relief was given against the right of re-entry on bankruptcy, that being a case in which the operation of s. 14 was expressly excluded by sub-s. 6; but by s. 2, sub-s. 2, of the Conveyancing Act, 1892, it is provided that sub-s. 6 of s. 14 of the Act of 1881 ‘is to apply to a condition for forfeiture on bankruptcy of the lease, or on taking in execution of the lessee’s interest only after the expiration of one year from the date of the bankruptcy, or taking in execution, and provided the lessee’s interest be not sold within such one year.’ The effect of that sub-section, stated affirmatively, was to bring a right to relief from forfeiture on bankruptcy within s. 14 of the Act of 1881 under circumstances limited in time as expressed in the sub-section. The sub-section then went on to provide: ‘but in case the lessee’s interest be sold within one year, sub-section six shall cease to be applicable thereto.’ When s. 146 of the Law of Property Act, 1925, was passed, the limitation of the right of relief to the period of a year when there was no sale, and the right to relief, unrestricted in point of time, when there was a sale within a year was set out in two sub-Clauses.” I do not think I need read the rest of the passage which expounds the underlying legislative purpose. At the bottom of p. 736 he says:”It may often happen in the case of a liquidation that the company may be in possession of a lease which is of saleable value. It may not be easy to disentangle the affairs of the company or to ascertain the rights within a short time, and still less may it be possible to effect a sale of the lease within a short time; and, as I read the sub-section, its purpose is to give a twelve months’ period during which the liquidator can apply for relief and, further, in the case where there is a sale effected (it may be towards the end of the twelve months’ period), to ensure that the liquidator should not find himself brought up against a time limit which would imperil the success of his realization of the assets. I think therefore, that Russell J., as he then was, rightly interpreted in Civil Service Co-operative Society Ltd. v. McGrigor’s Trustee (1) the provisions for which s. 146 is substituted.”Now the latter case was referred to by Johnston J. in Re Drew (2) which was also cited to me. In Gee v. Harwood (3)we find the Master of the Rolls affirming the decision of Russell J. in that case and we find this in turn justified and taken over as authoritative by our own High Court in Re Drew (2).I have not considered the latter case fully but, from the citation opened by Mr. Matheson, it might well be said that so far as the facts in the Drew Case (2) were concerned it was probably obiter. But nevertheless s. 146 of the English Law of Property Act, 1925, is given the like interpretation as the earlier Acts of 1881 and 1892, and I accept the interpretation accorded to the earlier Acts given in those two cases.
Obviously this legislation was intended to give relief in cases such as the present and it is a relief conferred by statute on lessees placed in the situation of the plaintiff in the present case, and the defendants must therefore have good grounds for excluding the plaintiff company from the relief that the legislature allows me to grant in a proper case. I asked Mr. Walsh for the grounds upon which he says this is not a proper case for the granting of that relief. I asked him to tell me what factors or principles the Court should take into consideration in deciding to exclude a particular lessee from the relief provided by statute and he pithily submits, by deduction from a passage in the Simmonds edition of Halsbury’s Law of England (3rd Ed., Vol. 23, p. 677) that I ought to have regard to two matters, the conduct of the parties and all the other circumstances of the case. Now I interpret that in this way. I look to see if there is anything in the conduct of the plaintiff company to disentitle them to this statutory relief and I can find nothing, no hint, no least suggestion that there has been conduct on their part which would disentitle them.
As I said at the beginning, a condition such as is contained in this lease is for the protection of the landlord’s right. The landlord’s rights might still be in jeopardy in this particular case. A year is given by statute in which the proper matters can be investigated, the financial condition of the company, the state of the winding up and so forth, but in the present case I am quite satisfied that there is not the slightest hint or possibility, not to speak of probability, of any damnification being caused to this lessor by the liquidation. It is as healthy a liquidation on the evidence of the liquidator, so far as solvency is concerned, as if it were a mere reconstruction liquidation. In any event the plaintiff company has applied in due time for the relief and there has been nothing, if I may repeat myself, no conduct or no act or attitude on the part of the plaintiff company to disentitle them to this relief and consequently I would grant the relief claimed in the summons. In fact the plaintiff company has sold the property and the defendants have the further protection that assignment in pursuance of the sale is subject to their consent. There is no danger of an insolvent or worthless assignee being foisted on them. Now the summons sought to impeach the Notice served on the ground of its insufficiency or inadequacy and I am inclined to accept Mr. Walsh’s argument on that but I have not to give a ruling on it in view of the decision I have just pronounced.
As to costs, in my view all the merits are on the side of the plaintiff company which has succeeded in a High Court action and is entitled to the costs of the action. The situation is distinguishable from the cases where the landlord instituted the proceedings.
Laurence Ennis v Elizabeth Rafferty
14 January 1938
[1938] 72 I.L.T.R 56
Judge Shannon
Trial of Action.
The facts have been summarised in the head-note and are fully set out in the plaintiff’s Indorsement of Claim in the civil bill and the defence entered.
The civil bill was issued by Laurence Ennis against Elizabeth Rafferty on the 23rd of October, 1937, and in the Indorsement of Claim the plaintiff averred
1. By an Indenture of Lease dated the 8th day of April, 1929, and made between *56 Mrs. Mary Ennis of the first part, James Ennis and Mrs. Elizabeth Rafferty (the defendant herein) of the second part, and Laurence Ennis (the plaintiff herein) of the third part, the dwelling-house, shop and premises known as No. 70 Summerhill, in the City of Dublin, with the yards and outhouses belonging thereto, were demised to the plaintiff for the term of 100 years from the 8th day of March, 1929, at the yearly rent of £65 0s. 0d., subject to the weekly tenancy of one Daniel Doyle in the upper portion of the said premises, who was then and still is in possession thereof.
2. Upon the making of the said lease the plaintiff went into and still is in possession of the said premises.
3. The plaintiff sub-let the lower portion of the said premises, viz., the shop, store and yard to one, James Butler, who is still in possession thereof under the said sub-letting.
4. The said lease contained a covenant on the part of the plaintiff to pay the said rent by equal half-yearly payments on the 8th day of March and the 8th day of September in every year. The said lease also contained a clause entitling the lessors to re-enter upon the said premises in case the said rent or any part thereof was more than 21 days in arrear whether legally demanded or not.
5. The defendant is the assignee of all the lessors’ interest under the said lease.
6. There was due and payable to the defendant by the plaintiff on the 8th March, 1937, the sum of £28 11s. 0d. of the said rent.
7. The said sum of £28 11s. 0d. remaining unpaid by the plaintiff on the 15th day of April, 1937, the defendant instituted proceedings wherein she claimed possession of the said premises from the plaintiff by reason of the plaintiff’s non-payment of the said rent.
8. The hearing of the said proceedings took place in the Dublin Circuit Court on the 20th day of July, 1937, before His Honour Judge Davitt, who gave the defendant a decree for possession and ordered the plaintiff to pay the said defendant’s costs of the proceedings.
9. Since the date of the said decree the defendant has been in receipt of the rents formerly paid to the plaintiff by the said Daniel Doyle and the said James Butler.
10. On the 26th day of July, 1937, by a letter from the plaintiff’s solicitor to Brendan P. McCormack, solicitor for the defendant in the said ejectment proceedings, the plaintiff offered to pay the defendant the amount of the rent found to be due by the learned Circuit Court Judge and the costs of the said proceedings if the plaintiff were restored to his tenancy and given an account of the rents and profits received by the defendant. By a letter dated 29th day of July, 1937, from the said Brendan P. McCormack to the plaintiff’s solicitor, the said offer was refused by the defendant. On the 23rd day of August, 1937, the plaintiff tendered to the said Brendan P. McCormack, on behalf of the defendant, the sum of £42 4s. 0d. for the said rent and costs.
12. On the 3rd of September the defendant’s costs of the said ejectment proceedings were taxed by the County Registrar to the sum of £14 4s. 0d.
13. On the 13th of September, 1937, the plaintiff’s agent, Mrs. Elizabeth Dalton, on behalf of the plaintiff, tendered to the said Brendan P. McCormack, on behalf of the defendant, the said sum of £42 15s. 0d. The said tender was refused.
14. On the 21st day of October the plaintiff in person tendered to the defendant in person the sum of £42 15s. 0d. for the said rent and costs and the defendant refused the said tender and informed the plaintiff that she required possession of the said premises.
15. The Poor Law Valuation of the said premises does not exceed the sum of £60 0s. 0d., and the same are situated in the County of the City of Dublin.
16. The plaintiff is now able, ready and willing to pay to the defendant the amount of the said rent and costs and all rent which would have since accrued due but for the said decree made by His Honour Judge Davitt.
The plaintiff claims:—
(1) An order giving him liberty to pay the said sum of £42 15s. 0d. into Court; and that thereupon the said lease may stand redeemed from eviction or alternatively the defendant may be ordered to make a new lease of the said premises to plaintiff with the same terms and conditions as those in the said lease and subject to the same rent
(2) An order restraining the defendant from issuing execution on foot of the said decree for possession of the 20th day of July, 1937.
(3) An account of the rent and costs due to the defendant.
(4) An account of all sums received in respect of the premises by the defendant by way of rent or otherwise.
(5) Payment by the defendant to the plaintiff of the amounts found due to the plaintiff upon a balance of such accounts.
(6) Further or other relief.
(7) The costs of the proceeding.
The defence was as follows:—
(1) With reference to paragraph 2 of the *57 civil bill herein the defendant denies that the plaintiff was, prior to the hearing of the ejectment proceedings mentioned in paragraphs 7 and 8, in actual possession of the premises the subject of this action. The defendant further says that, since the decree for possession which was given by His Honour Judge Davitt in the Dublin Circuit Court on the 20th day of July, 1937, as set out in paragraph 8, the tenancy of the plaintiff and all his estate and interest in the said premises was determined and put an end to, and that the defendant is hereby lawfully in receipt of the rents formerly paid to the plaintiff by the said Daniel Doyle and the said James Butler.
(2) The defendant admits the tenders of rent and costs set out in paragraphs 11 and 13.
(3) In answer to the plaintiff’s claim the defendant avers as follows:—
(a) On the 8th of September, 1937, there accrued due and payable by the plaintiff to the defendant the sum of £32 10s. 0d., being one half-year’s rent of the said premises reserved by the lease dated the 8th of April, 1929, referred to in paragraph 1 of the particulars in the said civil bill. The plaintiff has not paid, or tendered, or offered to pay, nor has he any means of paying the said sum of £32 10s. 0d. or any part thereof, and the entire of the said sum is due and owing by the plaintiff to the defendant over and above the sum of £42 15s. 0d. rent and costs referred to in paragraphs 13 and 14 of the said particulars.
(b) The plaintiff is guilty of a continuing breach of the first covenant in the said lease that he would, during the continuance of the term thereby granted, pay the yearly rents thereby reserved and made payable on the days and in the manner stipulated in the said lease and without any deduction except as therein provided.
(c) By the said lease the plaintiff covenanted that he would from time to time and at all times during the said term well and substantially repair, preserve, uphold and maintain and keep the said demised premises and all buildings and erections which then were or might at any time during the said term, be erected on and all additions made to the demised premises and the fixtures therein, and the painting, papering and decorations thereof in good and sufficient tenantable repair, order and condition internally and externally.
(d) The plaintiff has broken and failed to perform the said last mentioned covenant and has suffered the said premises to fall into and be, and the same now are, in a state which is not a state of good or sufficient tenantable repair, order or condition internally or externally.
The defendant submits and will contend that by reason of the circumstances set out in the civil bill and of the matters and facts in this paragraph pleaded, the plaintiff is not entitled at law or in equity to and ought not to be given the relief claimed or any part thereof.
The Trial of the Action took place before Judge Shannon on 29th November, 1937, when evidence in support of the averments in the civil bill and in the defence was given.
John Hooper for the plaintiff. The right to redemption under Landlord and Tenant (Ir.) Act, 1860 (23 & 24 Vic., c. 154), Sections 52 to 71, does not apply to an ejectment based on a breach of the covenant to pay rent. Tenant is left to his old equitable right to relief against forfeiture on payment of rent and costs. Chartres v. Muldoon (57 Ir. L. T. R. 102); Bowser v. Colby (1 Hare 125); Whipp v. Mackey [1927] I. R. 372. There is no specific time required for tender of outstanding rents and the costs of ejectment procedure as 4 Geo. 1, c. 5, s. 3, and 11 Anne, c. 2. s. 2, are repealed by Landlord and Tenant (Ir.) Act, 1860 (23 & 24 Vic., cap. 154), Section 104, and Schedule B. The only question which the Court is concerned with is whether the payment of money puts the landlord back in the same position as if the covenant for payment had not been broken. Whipp v. Mackey, [1927] I. R. 372 per Kennedy, C.J., at page 385: “Generally speaking where the forfeiture is only for securing payment and where there is no injury from the delay in payment or only such injury that payment for a sum for interest and—if needs be—costs will be a full compensation for it equitable relief will not be refused.” The Court is not entitled to consider the tenant’s future financial ability to pay the rent and perform the covenants. Breaches of other covenants such as that for repair are not sufficient to disentitle the tenant to relief. Newenham v. Mahon (3 Ir. Eq. R. 304); Mulloy v. Goff (1 Ir. C. R. 27). Equitable relief will not be refused if money and costs are full compensation. Whipp v. Mackey (supra); Bowser v. Colby (supra); Canny v. Hodgens (Hay and J. 769). As regards costs of this action the question of breach of covenant for non-repair was first raised in the defence. It is an endeavour to get round the provisions of the Conveyancing Act, 1881 (44 and 45 Vic., cap. 41), sect. 14. Up to the time the defence was filed plaintiff had done everything necessary to entitle him to relief. Plaintiff should be either given *58 the costs of this action or should at least be relieved from any responsibility for defendant’s costs.
William Black, S.C. (with him Edward Fahy ). The granting of equitable relief against forfeiture is a matter for the exercise of judicial discretion. Whipp v. Mackey, [1927] I. R. 372, at page 385. The Court can consider the conduct of the tenant in relation to the premises and other breaches of covenant. (Bowser v. Colby (1 Hare 125). Berney v. Moore (2 Ridg. P. C. 323). The plaintiff should bear all costs of this action. Newenham v. Mahon (3 Ir. Eq R. per Chief Baron at p. 313); MacDougall v. Nolan (15 Ir. L. T. R. 48). There should be in this case no restitution order because of the breach of the covenant to repair. The Court will not make any restitution order unless accrued rent is paid or provided for. In Blake v. Hogan (67 Ir. L. T. R. 237; see also 67 I. L. T. & S. J. 98 and 333) the Court refused to grant relief where the tenant had been twice in default as the conduct of the tenant was deliberate and contumacious. The tenant in this action is contumacious as he had more than £150 per annum from the property. He has no money and no means of raising the necessary moneys to execute the requisite repairs or to continue paying rent. Relief should not therefore be granted. Whipp v. Mackey, [1927] I. R. 372.
At the conclusion of the argument Judge Shannon decided to adjourn the case to give plaintiff an opportunity of raising the necessary moneys to execute the requisite repairs. The case was adjourned to 6th December, 1937, and again to the 14th January, 1938, when
John Hooper for the plaintiff intimated that the plaintiff, on relief being granted, would be in a financial position to carry out the repairs.
Judge Shannon
The order which will go from this Court is that the lease of the 8th of April, 1929, do stand redeemed and discharged from the decree of ejectment granted in the Dublin Circuit Court on July the 20th, 1937, upon fulfilment of all the following terms and conditions:—
1. That plaintiff within 10 days from to-day’s date do pay defendant £14 4s. 0d., costs of said decree.
2. That the plaintiff do within the said time pay the sum of £61 1s. 0d. the arrears of rent due by the plaintiff to the defendant on foot of said lease to the 8th day of September, 1937, less such sum (if any) as may be found in accordance with directions hereinafter contained to be due by the defendant to the plaintiff.
3. That plaintiff do within a reasonable time put the premises comprised in and demised by the said lease into good and sufficient tenantable repair, order and condition in accordance with the terms in that behalf contained in the lease of the 8th April, 1929.
4. That, the parties so consenting, the certificate in writing of Mr. John J. Robinson, Architect, as to the compliance or non-compliance with the previous condition be final and binding on both parties.
5. That plaintiff do pay to Mr. Robinson his fees of and in connection with the foregoing matters.
6. That plaintiff do pay to the defendant her costs with counsel of and incidental to these proceedings when taxed and ascertained by the County Registrar.
7. That if necessary an account of all moneys received by the defendant out of the rents and profits of the said premises since the 20th day of July, 1937, be taken and that the defendant do allow the plaintiff credit for such sum against said sums of £61 1s. 0d. and £14 4s. 0d. and do pay the excess (if any) to the plaintiff.
Either party will have liberty to apply to the Court as they may be so advised.
Breaden v. Fuller and Son, Ltd.
[1949] IR 291
Davitt J.
The defendant Company is in possession of the lands the subject-matter of this action since late 1946, or early 1947, ultimately under an indenture of lease, dated the 3rd November, 1947, made between the plaintiff, of the one part, and the defendant Company of the other part. The term was five hundred years from the 1st January, 1947. The lease contains, inter alia, a covenant by the defendants to build sixty-five dwelling-houses, of a value of £2,000 each, at least, within a period of four years from the date thereof. These houses were to be built according to plans and specifications to be approved by the plaintiff. It also contains covenants that the houses would be built as follows, viz., ten houses in the first year of the term; twenty-five houses in the second year; fifteen houses during the third year; and a final fifteen houses during the fourth year. In point of fact the period for building the first ten houses was extended by consent until the 30th June, 1948. No building was possible save with the licence of the Department of Industry and Commerce and the approval of the Town Planning Authorities of the Dublin County Council. The necessary licence and approval were forthcoming at an early stage, and the only obstacle of any potential reality to securing the final approval of the County Council was the occupation of a cottage on the site by a Mr. O’Riordan under a tenancyprima facie protected by the Rent Acts. The construction of the type of house required by the plaintiff became virtually illegal on and from the 17th January, 1949, but the defendants had the whole period from early 1947, at latest, until January, 1949, to secure the necessary licences (which they did in October, 1947) and to build the houses in compliance with their covenant. They have not in fact built a single house. They did prepare the ground for the erection of the entire number of houses covenanted to be built. In doing this, I think they displayed a serious lack of discretion. It was a costly enterprise, and, in my opinion, had something to do with their subsequent failure to build. They would have been better advised to have restricted their preparations to what was necessary for compliance with their immediate obligations under the covenant. That they have failed to perform their covenant is unquestioned, but they attempt to excuse their failure on a number of grounds, and ask for relief against forfeiture. In my opinion there is no reality in their excuses. I am satisfied that they could have complied with this covenant, despite the difficulties which arose. There were difficulties to be overcome, but where there’s a will there’s a way. In this case it was the will that was lacking. I do not believe that the defendants wanted to comply with their covenants. I believe that the reasons why they failed to do so were, first, that they did not proceed with the initial work in a sensible fashion, thereby involving themselves in considerable outlay; secondly, that they realised that the type of houses they had agreed to build was not readily saleable and that they would not make the profit which they had expected on those houses; and thirdly, that, by reason of the second matter just referred to, they were anxious to try to arrange to have the covenant altered so that they could build a cheaper type of house which would qualify for a free grant from the Government. They made no genuine effort to build, and did not intend to do so.
There are two matters upon which the defendants placed strong reliance as excusing their conduct and I will deal with them in more detail. First, it is suggested that, by reason of the fact that a dwelling situated on the lands in question was in the occupation of a man called O’Riordan, the defendants could not proceed to build until he had vacated, and that as he could successfully rely upon the protection of the Rent Restrictions Act, 1946, it was impossible to get clear possession until he left voluntarily in June, 1948, which explained the whole delay and the present position. I do not regard this as a genuine excuse for the breach of covenant to build. The defendants were fully aware of O’Riordan’s occupation when they entered into this agreement, and they were presumably advised in the matter by their then solicitor who, to the knowledge of the Court, is particularly experienced in such matters. Furthermore, if the matter of O’Riordan’s occupation of the cottage had been a severeobstacle to the performance of their covenant by the defendants, I would have expected Mr. Fuller to have given some evidence as to the efforts to secure possession from O’Riordan. Mr. Fuller did not, however, although he was in Court, elect to give evidence, and in my opinion the excuse that the presence of O’Riordan made it impossible for the defendants to build in compliance with their covenant is not convincing. I do not believe that any genuine effort was made to persuade O’Riordan to leave.
The defendants also rely on the fact that, by reason of the policy of the Government as regards erection of houses at present, they cannot now obtain a licence to build houses of the required type, and they argue that as they cannot lawfully comply with the covenant they should be relieved from the terms thereof and allowed to build another type of house, whilst paying compensation to the plaintiff. Whilst it is true that they are now unable to get a licence to build houses of the type required by their covenant, I do not consider that this fact would justify my granting relief against forfeiture. That state of affairs is entirely a consequence of the defendants’ own action, or, rather, inaction. At the time of the service of the notice under the Act of 1881 it was within their power to comply with it, and they failed to do so. The licence which they received for this purpose lapsed through their own default. In my view, owing to delay which was mainly, if not wholly, wilful, the defendants now find themselves in the position that they cannot legally fulfil their covenant. They are now. in my view, seeking relief, not merely against forfeiture, but against the very terms of the covenant with which they have failed to comply. They cannot build the type of house which the plaintiff requires; they wish, however, to continue to have the benefit of the lease, and, through the assistance of the Court, to compel the plaintiff to alter his requirements as to the type of house to be built, on being paid compensation. Let me say, generally, as to the matter of compensation, that no assistance upon the matter was offered to the Court by either side.
The usual terms on which relief would be granted in a case of this kind are that the defendants should be allowed a certain period within which to comply with their covenant upon payment of compensation to the plaintiff for any loss incurred by him. This solution of the difficulty is not now possible. Owing, as I have said, to the defendants’ wilful default the covenant cannot now be complied with legally. In these circumstances I do not think this is a case in which relief against the forfeiture should be granted. I will,
accordingly, enter judgment for the plaintiff on his claim for possession and dismiss the defendants’ counterclaim.
As regards the claim for damages, if the covenant had been complied with, thirty-five houses would have been completed by the 31st December, 1948. In respect of twenty-five of these the plaintiff would have been in receipt of an additional rent of eleven guineas per house. These rents would have been payable half-yearly on the 23rd March, 1949, and the 25th September, 1949. I must consider these rents as accruing de die in diem and on that basis, to the date of hearing, I allow a sum of £153 13s. 6d., for which amount I enter judgment.
Eleanor Mary Dickeson v Abraham Lipschitz
17 November 1967
[1972] 106 I.L.T.R 1
His Honor Judge Wellwood
Judge Wellwood:
This is an action in which the plaintiff, who is the lessor of the demised premises, claims an order for possession of the premises, and damages for breach of covenant, against the defendant who is the lessee for the residue of a term of ninety-nine years from the 1st November, 1907, created by an indenture of lease of the 24th September, 1908 Under the terms of that indenture of lease, there is a covenant whereby the original lessee covenanted, for himself his executors, administrators and assigns, to repair the said premises, and to keep the same in repair in accordance with the terms of the covenant in the said Indenture.
On the 21st November, 1963, the plaintiff served on the defendant a notice under section 14 of the Conveyancing Act, 1881, in which full particulars of the alleged breach of covenant on the part of the defendant in failing to repair, and to keep in repair, the premises are set out, and requiring him to remedy the said breaches, and to pay £50 compensation to the plaintiff. The defendant was given a resonable time of three months in which to carry out the repairs to the satisfaction of the plaintiff’s architect.
Under section 14(2) of the Conveyancing Act, 1881, a lessee may apply to the Court for relief against forfeiture for breach of covenant. The Court is empowered under that sub-section to grant, or refuse, relief, as, having regard to the proceedings and conduct of the parties, and to all other circumstances, it thinks fit; and in case the Court grants relief, it may do so on such terms, if any, as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future as the Court, in the circumstances of each case, thinks fit.
I am satisfied that the service of the notice by the plaintiff was justified as the premises were in a bad state of repair, and, for a considerable period prior to that, no repairs had been done by the defendant as required by the covenant in the lease. The ruinous condition of the premises was due partly to age and partly to the failure of the defendant to comply with the covenant to repair the premises, and to keep them in repair. If the defendant had carried out periodical repairs to the premises, as he was required to do since he obtained possession in 1946, this would have considerably lengthened the life of the fabric.
A lengthy correspondence took place between the solicitors for the respective parties from which it appears clear that the attitude of the plaintiff was reasonable from the start and, even at a late stage in the correspondence, the plaintiff was willing to compromise with the defendant in having the matter settled by purchase of the lessor’s interest The defendant, on the other hand, delayed in doing anything positive in the matter, and eventually forced the plaintiff to commence proceedings.
In these circumstances how is the Court to grant equitable relief when the fundamental conditions for the granting of such relief have not been complied with by the defendant?
I will not exercise my discretion in favour of the defendant. The plaintiff is claiming possession of the premises on the grounds of forfeiture due to breach of covenant by the defendant, and the plaintiff also claims £50 damages for breach of covenant to repair.
I will allow the plaintiff £20 damages which is the amount proved in Court by which the value of the plaintiff’s reversion has been diminished. I will also give a decree for possession and refuse the defendant’s counterclaim for relief against forfeiture. I will also allow such costs to the plaintiff as will be allowed on taxation
O’Reilly v. Gleeson
[1975] IR 260
Butler J.
By lease dated the 16th August, 1895, Patrick O’Reilly (the grandfather and predecessor in title of the plaintiff) demised to Richard F. Tobin the premises which are the subject matter of these proceedings; the term was 20 years from the 15th July, 1895, and the lease reserved a yearly rent of £125. The demised premises are described in the lease as @”. . . the dwellinghouse garden and yard stable coach house and premises known as Number 60 on the east side of Stephen’s Green in the Parish of St. Peter and County of the City of Dublin which said house and premises are bounded . . . on the east by Leeson Lane . . . which said premises are more particularly described on the map hereunto annexed.”# There was also granted to the lessee a right of way by a door from Leeson Lane along a passage leading into the yard of the premises and there was reserved to the lessor a like right of way over portion of the yard which was enclosed by a newly built wall. The map clearly shows the stable opening directly out on Leeson Lane and. alongside it, the passage and gate or door referred to. By an endorsement dated the 19th June, 1903, the term granted by the lease of 1895 was extended for a period of 30 years from the expiration of the term originally granted, i.e., from the 15th July, 1915. In 1916 the Irish Sisters of Charity acquired the lessee’s interest in the lease and the premises have since been used by them in conjunction with, and as part of, the former St. Vincent’s Hospital.
On the 29th August, 1946, the plaintiff made a further lease of the premises to six lessees as joint tenants. The term was 30 years from the 15th July, 1945the date of expiration of the extended term of the lease of 1905. The lessees were nominees of the Sisters of Charity and the defendant is the sole survivor. It is recited that the lease is granted by way of renewal of the earlier lease pursuant to an application made under the provisions of the Landlord and Tenant Act, 1931. In reciting the lease of 1895, the lease of 1946 refers to the premises as @”therein and hereinafter further demised.”# There can be no doubt, therefore. that the premises intended to be demised by the lease of 1946 were the same as those comprised in the lease of 1905. In the lease of 1946 the premises are described as:@”. . . the dwellinghouse, garden, yard, garage, shed and premises known as Number Sixty on the east side of Saint Stephen’s Green in the Parish of Saint Peter and County of the City of Dublin which said dwellinghouse and premises are more particularly described on the map endorsed hereon and thereon coloured red.”# The map again clearly shows the garage opening directly in Leeson Lane and the passage over which other buildings had apparently been erected.
From the statements of the parcels in both leases and from both maps, it is clear beyond any question that the premises demised by the lease of 1946 extended to and was bounded by Leeson Lane and comprised the garage and the buildings over the original right of way. During the hearing this was (for the first time) admitted to be so on behalf of the defendant.
In 1971 the Sisters of Charity put the premises up for sale as part of the former St. Vincent’s Hospital. Conditions of sale, a tender form and a guide plan of the entire property for sale were prepared, published and circulated on behalf of the vendors. The guide plan shows the premises demised by the lease of 1946 in two portions: one portion was coloured brown and comprised the area of the house, the garden and portion at least of the original yard, the other portion was coloured blue and comprised the area of the stable or garage and possibly portion of the stable yard.
There are a number of references to the premises in the particulars and conditions of sale. First, Lot B of the property for sale is described as @”All That And Those the premises known as Number 60 St. Stephen’s Green in the City of Dublin as indicated on the plan annexed to these conditions and thereon coloured brown.”# The garage and the frontage to Leeson Lane are, therefore, excluded from the description. The premises are stated to be held under the lease of 1946 with the exception of a small hatched area which appears to correspond to the portion of the stable yard which was excluded from the lease of 1895. This portion is stated to be held in fee simple free of rent.
Secondly, Lot A of the property for sale is described as @”All That And Those the premises known as St. Vincent’s Hospital in the City of Dublin consisting of the premises Numbers 55, 56, 57, 58 and 59 St. Stephen’s Green and premises on the West side of Leeson Lane as indicated on the plan annexed to these Conditions and thereon coloured red and blue respectively.”# The premises on the west side of Leeson Lane (i.e., those coloured blue) are stated to be held under a lease dated the 12th July, 1933, from the Earl of Pembroke and Montgomery to Honoria O’Connor and others for the term of 10,000 years from the 29th September, 1936, at the yearly rent of one peppercorn.
Thirdly, clause 4 of the special conditions relating to Leeson Lane states:@”The purchaser’s particular attention is drawn to the map annexed to the lease dated 29th day of August, 1946 (in Lot B) made between Patrick O’Reilly of the one part and Mary Carew and others of the other part for a term of 30 years from 15th day of July, 1945, at the yearly rent of £295. Upon the map (which refers to the leasehold portion of No. 60 St. Stephen’s Green) a small portion of Leeson Lane premises which is
hatched on the plan annexed hereto is shown as being demised by the said lease. The purchaser shall be bound to assume and admit that the said map on the lease is erroneous in this respect and no objection or requisition shall be taken or made in respect of such error.” These three references constitute a clear and unambiguous statement that the plaintiff is not entitled to the lessor’s interest in that portion of the premises demised by the lease of 1946 which is shown coloured blue and hatched on the guide plan and that. on the contrary, the Sisters of Charity hold the premises under the 10,000 year lease from the Pembroke Estate.
On the 17th September, 1971, the defendant’s solicitors sent a copy of the conditions of sale and guide plan to the plaintiff for his information. The plaintiff was immediately concerned at the references which sought to exclude the Leeson Lane frontage from his property and consulted his solicitors. On the 24th September the plaintiff’s solicitors wrote to the defendant’s solicitors protesting at this denial of the plaintiff’s title; stating that clearly there had been no error in the map on the 1946 lease; pointing out that the disclaimer seriously depreciated the value of his property while appreciating that of the vendors; asking the defendant’s solicitors to indicate as a matter of urgency the future attitude of their clients in the circumstances; and, finally, pointing out that the plaintiff’s consent to any sale of the property would only be given if it comprised the whole of the property demised by the lease.
There followed a long correspondence characterised on the part of the defendant’s solicitors by continuing repetition of the defendant’s claim of title adverse to the plaintiff’s and by what I can only describe as a blustering arrogance which combined threats of an action for substantial damages, should the proposed sale be delayed or impeded, with the imputation that the plaintiff and his solicitors were deliberately putting forward a claim which they knew to be false for the purpose of causing the vendors the maximum amount of embarrassment and with the object of monetary advantage to the plaintiff.
The plaintiff finally took counsel’s advice and, acting on it, commenced these ejectment proceedings on the title. The claim is based on the plaintiff’s right to forfeit the lease for the defendant’s breach of condition in denying the plaintiff’s title. The question to be determined is whether the plaintiff was entitled to forfeit the lease and re-enter the premises.
At common law a denial or disclaimer of the title of him of whom land was held gave rise to a forfeiture of the tenant’s interest in the land. The rule is stated in Bacon’s Abridgement (6th ed., vol. 4, p. 219) as follows:”Here it is to be observed, that any act of the lessee by which he disaffirms or impugns the title of his lessor, occasions a forfeiture of his lease. For to every lease the law tacitly annexeth a condition, that if the lessee do any thing that may affect the interest of his lessor, the lease shall be void. and the lessor may re-enter. Besides, every such act necessarily determines the relationship of landlord and tenant; since . . . to affect to hold under a lease, and at the same time to destroy that interest out of which the lease ariseth, would be the most palpable inconsistency. A lessee may thus incur a forfeiture of his estate by act in pais, or by matter of record. By matter of record . . . where in an action by his lessor grounded upon the lease he resists the demand under the grant of a higher interest in the land . . .”#
The law has always recognised that the rule might operate harshly and inequitably, and that it could be used unconscionably by a landlord to deprive the tenant of possession. Hence proof of the terms and intent of the disclaimer had to be strict and unambiguous. Furthermore, apart from one or two cases which have since been disapproved or which are peculiar to their own facts, the disclaimer had to go further than mere denial of title. It was necessary that it expressly or impliedly sought to set up an adverse title in the tenant or some other person. or otherwise to affect adversely the landlord’s interest.
Thus denial of title by conduct had to be in writing and had to amount to an adverse claim. Putting the denial on the record was always regarded as a sufficiently solemn and unambiguous act of disclaimer. As has been pointed out by Lord Denning at p. 312 of the report of Warner v. Sampson 1,in early times a mere disclaimer on the record, even without setting up an adverse claim, forced the landlord to bring a writ of right to prove his title. This was not always possible or convenient and, in the meantime, the landlord was deprived of his feudal services and the remedies therefor. Consequently, in early times such mere denial of title did work a forfeiture. However. with the loosening of feudal ties and the disappearance or commutation of feudal services, a mere denial on the record ceased to be sufficient and it became necessary, as in the case of act in pais, that it be accompanied by a claim of adverse title. However, there are cases in the books in which statements applicable to one class of case have frequently been cited and sought to be applied to the other, so that a certain confusion has arisen. There are statements which unless properly understood, would seem to indicate that forfeiture for denial of title is no longer part of the law, or alternatively, that it is confined to cases of disclaimer on the record.
An example of this is Warner v. Sampson 2 which was strongly relied upon by Mr. Keane in his submissions on behalf of the defendant. The passage upon which Mr. Keane relied is in Lord Denning’s judgment and commences at p. 315 of the report:
@”So ends the medieval law as to forfeiture by matter of record. Thenceforward it seems to have fallen into disuse for over 300 years. . . . It is a pity that it was not left in oblivion, for it is quite inappropriate at the present day. All the circumstances which gave rise to this medieval law have now disappeared; and with their passing the old law has gone too. A tenant for years does not owe homage to his landlord. He does not take an oath of fealty. He is under no duty to defend the interest of the reversioner. His rights and duties are defined by the lease; and there is no room for any implied condition that he is not to dispute the landlord’s title, either on the record or off it. The landlord is sufficiently protected by the rule that the tenant is estopped from denying his landlord’s title. This rule ensures that no denial of title is of any avail to the tenant except in those cases where he may properly put the landlord to proof. To go further and say that the denial involves a forfeiture would be a punishment on the tenant which cannot be justified.”#
This sounds very clear until it is realized that Lord Denning is speaking, not of denial on the record accompanied by a claim to set up an adverse title, but of a bare (and in that case formal and inadvertent) denial of the landlord’s plea that he was landlord. To say that forfeiture by matter of record fell into disuse for over 300 years is plainly nonsense if it is sought to cover every class of case. Instances of such forfeiture occur in every series of reports down to the present day. What did fall into disuse was the rule that a mere denial of the landlord’s title worked a forfeiture. Lord Denning rightly points out there is no instance of such forfeiture between 1590 and the case of Kisch v. Hawes Brothers Ltd. 3 in 1934. That the rule as to forfeiture in its mitigated form survives is clear from the fact that Lord Denning (also at p. 315 of the report of Warner v. Sampson 2) states in reference to Coke on Littleton (Vol. 2, s. 251b):@”Throughout his discourse it is plain that a disclaimer by a tenant in a court of record does not give rise to a forfeiture unless it amounts, expressly or impliedly, to an assertion or affirmance by the tenant of title in himself or in a stranger. His analysis of the law on the subject has been accepted by all who have followed him . . .”# This reference I construe as acceptance by Lord Denning and approval of the rule therein stated.
Furthermore, Ormerod L.J., who agreed with Lord Denning in Warner v. Sampson 4 says at p. 323 of the report:@”The question has been considered recently by this court in Wisbech St. Mary Parish Council v. Lilley 5,when Lord Evershed M.R. cited a passage from the judgment of Lord Lyndhurst C.B. in Doe d. Ellerbrock v. Flynn 6 as follows: ‘I think that the jury, upon the facts proved at the trial, came to a right conclusion. If the tenant sets up a title hostile to that of his landlord, it is a forfeiture of his term: and it is the same if he assists another person to set up such a claim. Whether he does the act himself, or only colludes with another to do it, it is equally a forfeiture.’ Lord Evershed M.R. then went on to say: ‘Of course, the conception of the relation of landlord and tenant has undergone many changes since that case was decided in 1834. The rule asserted was founded upon the feudal law, as counsel in the case pointed out. Still, if the facts were strictly brought within the scope of the decision in Doe d. Ellerbrock v. Flynn 6 I do not doubt that even today the court would follow it.’ Romer L.J. said: ‘I accept Mr. Bridges’ submission that even now, if a tenant does in fact deliberately assert a title in himself adverse to his landlord. or if he lets a stranger into possession with the intention of enabling him to set up a title adverse to the landlord, then that amounts to a repudiation of the landlord’s title.’ We were referred to numerous authorities, many of them very old, but it seemed to me that Doe d. Williams & Jeffery v. Cooper 7 stated the position clearly, when Tindal C.J. said: ‘To constitute a disclaimer, there must be a renunciation by the party of his character of tenant, either by setting up the title of a rival claimant, or by asserting a claim of ownership in himself.'”#
Warner v. Sampson 4 is the most modern relevant English case and from it and the authorities in general it is, I think, clear that where a tenant, whether on or off the record, clearly and unambiguously denies his landlord’s title in a manner which may adversely affect the landlord’s estate or reversion, the landlord is entitled to forfeit the lease in respect of the property (being the whole or part of the demised premises) to which the denial extends. So far as I am aware, no case, in which the matter was considered, suggests either that this never was the law or that it has ceased to be the law. It is, of course, true that the rule has its origin in feudal times but, even in Bacon, the rule is stated in terms which are not in conflict with the modern contractual relationship of landlord and tenant. Thus Bacon speaks of an implied condition annexed to the lease, and of the inconsistency of affecting to hold under the lease and at the same time destroying the interest out of which it arises. This is equivalent to the contractual rule that a man cannot at the same time seek to approbate and reprobate his contract.
Mr. Keane also relied on the case of Wallace v. Daly & Co. Ltd. 8 That was a case in which the matter to be decided was whether there had been a denial of the landlord’s title on the record of the Circuit Court where the original defence, which might have amounted to a denial, had been amended to a form which contained no denial. In the Supreme Court Murnaghan J., with whom Geoghegan J. concurred, held that only the amended pleading could be considered and hence there was no disclaimer. O’Byrne J., with whom Maguire C.J. concurred, held that the record as a whole must be looked at and hence there was a disclaimer and a forfeiture. Black J. agreed that the record as a whole should be looked at but held that, as there was a denial not of the lease but of the plaintiff’s derivitive title, there had been no forfeiture. I think Mr. Keane cited that case for the following passage in the judgment of Black J. at p. 374 of the report: @”Further, Doe d. Graves v. Wells 9, like Rees d. Powell v. King 10 and Doe d. Dillon v. Parker 11, shows that in the case of a tenant for a term of years, such as the present defendants, a disclaimer of the landlord’s title must be a matter of record in order to create a forfeiture.”# Although it is clear that this observation is merely obiter and did not touch on anything which was at issue in the case, I would have the greatest respect for anything which the learned judge gave as his opinion as being the law. However, on looking at the cases referred to, I do not find that they support the proposition stated. They are authority for the undoubted requirement that in order to incur the forfeiture of a term of years, a disclaimer must be in writing. This rule appears in many cases; for example, in Doe d. Phillips v. Rollings 12 Maule J. states:@”Where a term of years is vested in a party it is contrary to the statute of frauds to allow the term to be divested out of him by matter of parol.”#
For the sake of completeness I should perhaps mention that at a relatively late date a special application of the forfeiture rule came to be recognised, viz., that where a tenant from year to year disclaimed the title of his landlord he could be ejected without the necessity of serving a notice to quit. The cases exemplifying this special application of the rule contain dicta which are again confusing when applied to other cases of forfeiture. There is, however, nothing in any of these cases that invalidates my conception of the law as set out earlier in this judgment.
If I am correct in my view of the law, its application in the present case presents no difficulty. The defendant has clearly and unambiguously and in writing denied the plaintiff’s title as lessor in respect of the portion of the demised premises coloured blue and hatched on the guide plan. She has stated that the vendors hold this portion of the premises under the lease of 1933 from the Pembroke Estate, and she seeks to bind the purchaser of the premises to assume and admit that the map on the plaintiff’s lease is erroneous. This denies the plaintiff’s title and sets up an adverse title. It is also calculated to cause the plaintiff the practical difficulty of getting a purchaser under these conditions of sale to accept the plaintiff as landlord during the continuance of the term, and as reversioner at its termination. Accordingly, the plaintiff was entitled to forfeit the defendant’s interest in the premises and is entitled to possession.
In feudal law such a forfeiture would have extended to the whole lease. Because the modern relationship of landlord and tenant is merely contractual, the forfeiture extends only to the portion of the demised premises in respect of which there has been a disclaimer of the plaintiff’s title, namely, that portion of the premises demised by the lease of 1946 which is coloured blue and hatched on the guide map or plan mentioned in the conditions of sale.
The defendant appealed to the Supreme Court from the judgment and order of the High Court. The appeal was heard on the 18th and 19th June, 1974. by FitzGerald C.J., Henchy and Griffin JJ.
R. Keane S.C. (with him P. J. Geraghty) for the defendant:
A tenant is estopped from disputing his landlord’s title in ejectment proceedings, but the interest of a lessee for a term of years can only be forfeited by the lessee’s specific denial of the lessor’s title appearing on the record of the court: Gowrie Park Utility Society Ltd. v. Fitzgerald 13; Wallace v. Daly & Co. Ltd. 14 [He also referred to Doe d. Graves v. Wells 15] It is not sufficient to ground a forfeiture to show that the tenant has merely put the landlord on proof of his title; the tenant must positively and deliberately assert an adverse title: Warner v. Sampson 16; Wisbech St. Mary Parish Council v. Lilley 17; Doe d. Ellerbrock v. Flynn 18 [He also referred to Rees d.
Powell v. King 19; Doe d. Dillon v. Parker 20; Doe d. Whitehead v. Pittman 21; Doe d. Phillips v. Rollings 22; Doe d. Lewis v. Cawdor 23; Hunt v. Allgood 24; Jones v. Mills 25, Doe d. Calvert v. Frowd 26; Doe d. Gray v. Stanion 27; Doe d. Williams v. Cooper 28; Ackland v. Lutley 29; Throgmorton v. Whelpdale 30; Doe d. Williams v. Pasquali 31; Doe d. Jefferies v. Whittick 32; Doe d. Davies v. Evans 33; Doe d. Lansdell v. Gower 34; Vivian v. Moat 35; Doe d. Grubb v. Grubb 36; Doe d. Price v. Price 37 and the Conveyancing and Law of Property Act, 1881, s. 14]
G. E. Gill S.C. (with him J. N. Garland ) for the plaintiff:
The medieval doctrine that the denial by a lessee of his lessor’s title involved a forfeiture was modified in the 18th century when the chancery courts granted relief against forfeiture in cases where the lessor’s title was denied only in the sense of being put to proof. In this case there was not a mere technical denial of that type but the plaintiff’s title to the land coloured blue on the map was repeatedly denied and the defendant’s title to that land was asserted unequivocally. These are sufficient to ground a forfeiture even though the denial was directed only to part of the lands demised. [He referred to Doe d. Phipps v. Gowen 38; Doe d. Maddock v. Lynes 39; Wisbech St. Mary Parish Council v. Lilley 40; Warner v. Sampson 41: Wallace v. Daly & Co. Ltd. 42; Doe d. Graves v. Wells 43: and Furlong on Landlord and Tenant (1869) Vol. 1, p. 578]
Cur. adv. vult.
The Chief Justice died on the 17th October, 1974, without having delivered judgment. The parties agreed to be bound by the judgments of the other two members of the Court.
Henchy J.
20th January 1975
In 1971 the Irish Sisters of Charity put up for sale the complex of buildings constituting St. Vincent’s Hospital, St. Stephen’s Green, Dublin. Those buildings had become vacant when the hospital moved to new premises. It was decided that the sale would be by tender. A brochure was printed and circulated and it gave particulars of the property and set out the general conditions of sale. Amongst the people to whom the brochure was sent was the plaintiff. It was sent to him as a matter of courtesy because he owns the fee simple estate in No. 60 St. Stephen’s Green, one of the buildings being sold, and it was thought that he might be interested in tendering for the leasehold estate which was being sold.
The defendant’s interest in No. 60 arises under a lease of the 29th August, 1946. By that lease the plaintiff demised the property known as No. 60 St. Stephen’s Green (as more particularly delineated on a map endorsed on the lease) to six lessees for the term of 30 years from the 15th July, 1945, at the yearly rent of £295. The lessees were apparently trustees of the Irish Sisters of Charity and the defendant, as the sole survivor of them, has become entitled to the lessees’ interest.
When the plaintiff got the brochure, he noticed that it was intended that the purchaser would be bound to accept that the map endorsed on the lease of 1946 was wrong. The brochure said, in effect, that a piece of ground, measuring some 30′ by 50′ and situated at the back of No. 60 St. Stephen’s Green, was erroneously included in the lease of 1946, and that the vendors held that piece of ground under a lease of the 12th July, 1933, from the Earl of Pembroke for the term of 10,000 years at the yearly rent of one peppercorn. The plaintiff’s solicitor took the matter up forthwith; he claimed that his client’s title as lessor was being disclaimed and he threatened proceedings unless the vendors dropped their claim to hold the questioned piece of ground under the lease from the Earl of Pembroke. An acrimonious and unyielding correspondence followed, resulting in the present proceedings in which the plaintiff claims, primarily, possession of the whole of the property demised by the lease of 1946 and, alternatively, possession of the piece of ground which the defendant says was erroneously included in the map endorsed on the lease of 1946. The basis of the claim is that the defendant has worked a forfeiture by disclaiming her lessor’s title. The claim succeeded in the High Court, for Mr. Justice Butler held that there had been such a disclaimer and that it had effected a forfeiture; but he limited the forfeiture to the disputed piece of ground. From that order the defendant now appeals to this Court.
It goes without question that the defendant, through her agents, has clearly and repeatedly asserted in writing, and has sought to bind a purchaser to the same conclusion, that the plaintiff erroneously included the disputed area in the lease of 1946. While that conduct may possibly not damnify the plaintiff during the currency of the lease, it is calculated to put part of the property demised outside the reach of the plaintiff’s reversion. It is an unequivocal denial of the plaintiff’s title to part of the property demised. Furthermore, although made bona fide, it would seem to be an unjustified denial: but it would be wrong to express a concluded opinion to that effect in the absence of the Earl of Pembroke who may possibly wish to claim, under the lease of 1933, a reversion in the disputed area.
Where a lessee for a term of years asserts in writing that the lessor erroneously included a particular area in the property demised, does such denial of the lessor’s title work a forfeiture of the lease? That is the central question in this case.
The legal rules governing forfeiture of a lease by disclaimer of the lessor’s title derive from the feudal law of medieval England. It is said that forfeiture of this kind may be occasioned by act in pais (i.e., an act done without legal proceedings) or by matter of record. The legal history of forfeiture by matter of record is summarised in the judgment of Lord Denning M.R. in Warner v. Sampson. 44 Forfeiture by the record does not arise in this case, so there is no need to consider which version of the law on that kind of forfeiture should now be accepted as correct by this Court in the light of the conflicting judgments in both Warner v. Sampson 44 and Wallace v. Daly & Co. Ltd. 45
The law of forfeiture by act in pais does not always appear clear or coherent in either the text-books or the cases. This is largely due to a failure to appreciate that the law has distinguished tenancies for fixed terms from periodic tenancies for the purpose of this kind of disclaimer. In the case of a periodic tenancy, if the tenant impugns the landlord’s title he runs the risk that the landlord may proceed to have him ejected without notice to quit, on the ground that the tenant’s disclaimer of title is to be treated as a determination of the tenancy: per Lord Denman C.J. in Doe d. Graves v. Wells 46 and per Sir Raymond Evershed in Wisbech St. Mary Parish Council v. Lilley. 47 But as to leases for a term certain, whatever the law of forfeiture by act in pais may have been in its feudal origins, the only reported case in modern times of forfeiture of a term of years by actin pais is Doe d. Ellerbrock v. Flynn 48 which turned on the fraud of the tenant in delivering up the possession of the premises and of the lease to a person claiming under a hostile title: see Doe d. Graves v. Wells 49; perBlack J. at p. 374 of the report of Wallace v. Daly & Co. Ltd. 50; and De Moleyns’s Landowner’s and Agent’s Practical Guide (8th ed., vol. I, p. 460). Indeed, Lord Denning M.R. went so far as to say in Warner v. Sampson 51 at p. 316 of the report that @”there is no room for any implied condition that (the tenant) is not to dispute the landlord’s title, either on the record or off it.”# Leaving aside forfeiture by the record (because it does not arise in this case), I agree that there is no room in the modern law of landlord and tenant for forfeiture of a lease by act in pais. No example of it is to be found in the reports since at least 1834 when Doe d. Ellerbrock v. Flynn 52 was decided. In that case a forfeiture was held to have been effected, but the case can be justified in its result as one where the lessee, by his fraudulent conduct in passing possession of the property and of the lease to a person who was asserting a title adverse to the lessor, was held to have thereby determined the term.
In Doe d. Graves v. Wells 49 at p. 435 of the report Lord Denman C.J. said of Doe d. Ellerbrock v. Flynn 52:
@”There it was thought that the tenant had betrayed his landlord’s interest by an act that might place him in a worse condition: if the case went farther than that, I should not think it maintainable. The other instances are cases either of disclaimer upon record, which admit of no doubt as to the nature of what is done, or of leases from year to year, in speaking of which the nature of the tenancy has been sometimes lost sight of, and the words ‘forfeiture’ and ‘disclaimer’ have been improperly applied. It may be fairly said, when a landlord brings an action to recover the possession from a defendant who has been his tenant from year to year, that evidence of a disclaimer of the landlord’s title by the tenant is evidence of the determination of the will of both parties, by which the duration of the tenancy, from its particular nature, was limited. But no case, I think, goes so far as the present: and I feel the danger of allowing an interest in law to be put an end to by mere words.”#
Furthermore, it was stated in Doe d. Graves v. Wells 49 by Patteson J. at p. 436 of the report that @”No case has been cited where a lease for a definite term has been forfeited by mere words.”# The reason for the absence of such cases would seem to be that even in the heyday of feudal tenures, mere words, whether spoken or written, would not have produced a forfeiture of a lease for a term certain. The only example of forfeiture by act in pais given in Bacon’s Abridgment (7th ed., vol. 4, p. 884) is where the tenant alienates the fee; and he says that even then forfeiture will not result if the conveyance is for any reason ineffective to convey the fee. This means that even if a repudiation of the lessor’s title appeared from the recitals or the habendum of the ineffective conveyance, a forfeiture would not be caused. Elsewhere (7th ed., vol. 3, p. 196) Bacon makes the position clear when he says:@”in our law these acts which plainly amount to a denial must be done in a court of record, to make them a forfeiture . . . and all other denials, that might be used by great lords for trepanning [i.e., ensnaring] their tenants, and for a pretence to seize their estates, by our law were rejected, for such convictions might be made by such great lords where there was no just cause.”# That is to say, forfeiture by mere words could arise only by matter of record, and the only recognized forfeiture by act in pais was by a tortious feoffment, whereby the tenant for years could convey the fee. With the abolition of tortious feoffments by s. 4 of the Real Property Act, 1845, there has been no place in the modern law of leaseholds for the operation of forfeiture by acts in pais.
Whatever may be the result of a disclaimer of the lessor’s title in pleadings (as to which I express no opinion), leases are now held by the courts to be terminated at the instance of a lessor on the ground of forfeiture only when the forfeiture arises from a provision expressly incorporated in the lease: per Lord Russell of Killowen (with whom Lord Goddard agreed) in Cricklewood Property & Investment Trust Ltd. v. Leighton’s Investment Trust Ltd. 53
Therefore, I would hold that the defendant’s conduct, even if it amounted to a disclaimer of the lessor’s title, would not have worked a forfeiture of the lease for there is no provision in the lease which could be relied on to support a forfeiture on that ground.
Even if a lease could be forfeited by mere disclaimer of the lessor’s title by the lessee, the question would arise whether what the defendant did in this case amounted to a disclaimer.
It is fundamental to the relationship of landlord and tenant that the tenant is estopped from denying (i.e., disclaiming) his landlord’s title. That is to say, he cannot assert the rights of a tenant and at the same time say, in effect, that there is no tenancy because the landlord had no title to grant the tenancy, or because the title is in himself or in someone else. He cannot have it both ways. If what he does is a repudiation of the relationship of landlord and tenant, then in the case of a periodic tenancy terminable by notice to quit, he is debarred from insisting on the necessity for a notice to quit if the landlord chooses to eject him without serving one. The reason is that a notice to quit is necessary only when there is an admitted tenancy, so when the tenant repudiates the existence of a tenancy he thereby admits that there is nothing to terminate and that a notice to quit is unnecessary. However, as I have pointed out, in the case of a lease for a fixed term not terminable by notice to quit, the estate of the lessee in the land is not defeasible by mere disclaimer of title on his part.
But even if a lease for a fixed term could be forfeited by disclaimeror if a notice to quit, in the case of a periodic tenancy, is rendered unnecessary because of a disclaimerthe disclaimer must be not of some particular aspect of the landlord’s title but of the landlord’s whole title as landlord.If it were otherwise, the tenant could question, only at the peril of forfeiture or ejectment, any error, large or small, in the extent of the land leased or let, or in the terms of the lease or tenancy, or in the extent of the rights or duties (such as the use of furniture, or trading restrictions) incorporated in the lease or tenancy. The landlord could question such mistakes with impunity and have them rectified, whereas the lessee or tenant would imperil his leasehold or tenancy if he raised them. If that were the law, it would be unequal and oppressive.
In my opinion, the law is correctly stated in Woodfall on Landlord and Tenant (27th ed., para. 2058) as follows:@”In order to make either a verbal or written disclaimer sufficient, it must amount to a direct repudiation of the relation of landlord and tenant, or to a distinct claim to hold possession of the estate upon a ground wholly inconsistent with that relation, which by necessary implication is a repudiation of it. A disclaimer, as the word imports, must be a renunciation by the party of his character of tenant. either by setting up a title in another or by claiming title in himself.”# What the lessee in the present case did was much less than that. What she wrote, through her agents, amounted to this:@”I acknowledge the plaintiff as my lessor under the lease of 1946 but I say that the lease erroneously included a piece of ground in the area intended to be demised: and I shall require the purchaser of my leasehold interest to accept that the lease is erroneous in that respect.”# That was far from being a repudiation of the relationship of landlord and tenant. It was in fact an affirmation of that relationship coupled with a proviso as to an error in the area demised.
It does not follow from this conclusion that a lessor is without remedy if the lessee groundlessly questions or repudiates some aspect of the lease. He may have the true position asserted and protected by bringing proceedings for a declaration or for an injunction or, in an appropriate case, for damages.
However, in the present case this aspect need not be looked at further since the plaintiff does not claim to have suffered any loss and since the defendant has given an undertaking to this Court not to repeat, during the currency of the lease of 1946, the allegation of error in that lease.
Two further points need to be made.
First, the authorities show that if the defendant’s conduct had produced a forfeiture it would have been a forfeiture of the lease in toto. The only case cited in which there was a forfeiture of part of the property held by the lessee was Doe d. Phipps v. Gowen 54, but in that case the piece of ground held to have been forfeited was not demised by the lease but was acquired by the lessee by adverse possession. There cannot be a forfeiture of part of the property demised; this follows as a matter of principle as well as of practicalities. The theory behind recovery of possession on the ground of forfeiture is that the lessor has elected to treat as void the lease which became voidable as a result of the lessee’s conduct. Once the court treats that election as legally effective. it treats the lease as being void in every respect. A partial avoidance of the lease is not possible. In practice it would involve a re-writing of the lease in terms of the area demised and, therefore, in terms of rent, covenants, conditions etc.thus producing a contractual relationship and a leasehold estate different from that envisaged by the parties and expressed in the lease.
Secondly, I think it right to point out that, unfortunately, some of the authorities on which this judgment is based were not opened by counsel in the High Court: if they had been, the judgment given in that court might well have been different.
I would allow the defendant’s appeal against the order for possession made in the High Court.
Griffin J.
I agree.