Types of Term

Cases

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

[1961] EWCA Civ 7

Diplock LJ.

“ Every synallagmatic contract contains in it the seeds of the problems In what event will a party be relieved of his undertaking to do that which he has agreed to do but has not yet done? The contract may itself expressly define some of these events, as in the cancellation clause in a charter-party; but, human prescience being limited, it seldom does so exhaustively and often fails to do so at all. In some classes of contracts such as sale of goods, marine insurance, contracts of affreightment evidenced by bills of lading and those between parties to tills of exchange, Parliament has defined by statute some of the events not provided for expressly in individual contracts of that class; but where an event occurs the occurrence of which neither the parties nor Parliament have expressly stated will discharge one of the parties from further performance of his undertakings it is for the court to determine whether the event has this effect or not.

The test whether an event has this effect or not has been stated in a number of metaphors all of which I think amount to the same things Does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings?

This test is applicable whether or not the event occurs as a result of the default of one of the parties to the contract, but the consequences of the event are different in the two cases. Where the event occurs as a result of the default of one party the party in default cannot rely upon it as relieving himself of the performance of any further undertakings on his part and the innocent party, although entitled to, need not treat the event as relieving him of the performance of his own undertakings. This is only a specific application of the fundamental legal and moral rule that a man should not be allowed to take advantage of his own wrong. Where the event occurs as a result of the default of neither party each is relieved of the further performance of his own undertakings and their rights in respect of undertakings previously performed are now regulated by the Law Reform (Frustrated Contracts) Act 1943.

This branch of the common law has reached its present stage by the normal process of historical growth, and the fallacy in Mr. Ashton Roskill’s contention that a different test is applicable when the event occurs as a result of the default of one party from that applicable in cases of frustration where the event occurs as a result of the default of neither party lies, in my view, from a failure to view the cases in their historical context. The problems in what event will a party to a contract be relieved of his undertaking to do that which he has agreed to do but has not yet done? has exercised the English Courts for centuries, probably ever since assumpsit emerged as a form of action distinct from covenant and debt and long before even the earliest cases which we have been invited to examine; but until the rigour of the rule in Paradine v Jane[5] was mitigated in the middle of the last century by the classic judgments of Mr Justice Blackburn in Taylor v Caldwell [6] and Baron Bramwell in Jackson v Union Marine Insurance [7] it was, in general, only events resulting from one party’s failure to perform his contractual obligations that were regarded as capable of relieving the other party from continuing to perform what he had undertaken.

In the earlier cases before the Common Law Procedure Act 1852, the problem tends to be obscured to modern readers by the rules of pleading peculiar to the relevant forms of action-covenant, debt and assumpsit, and the nomenclature adopted in the judgments, which were mainly on demurrer, reflects this. It was early recognised that contractual undertakings were of two different kinds; those collateral to the main purpose of the parties as expressed in the contract and those that were mutually dependent so that the non-performance of an undertaking of this class was an event that excused the other party from the performance of his corresponding undertakings. In the nomenclature of the eighteenth and early nineteenth centuries undertakings of the latter class were called “conditions precedent” and a plaintiff under the rules of pleading had to aver specially in his declaration his performance or readiness and willingness to perform all those contractual undertakings on his part that constituted conditions precedent to the defendant’s undertaking for non-performance of which the action was brought. In the earliest cases such as Pordage v Cole[8] and Thorpe v Thorpe[9] the question whether an undertaking was a condition precedent appears to have turned upon the verbal niceties of the particular phrases used in the written contract and it was not until 1773 that Lord Mansfield, in the case, which is a legal landmark, Boone v Eyre,[10] swept away these arid technicalities. “The distinction”, he said,

“is very clear. Where mutual covenants go to the whole of the consideration on both sides they are mutual conditions, the one precedent to the other. But where they go only to a part, where a breach may be paid for in damages, there the defendant has a remedy on his covenant and shall not plead it as a condition precedent”.

This too was a judgment on demurrer but the principle was the same when the substance of the matter was in issue. Other phrases expressing the same idea were used by other judges in the cases which have already been cited by Lord Justice Sellers, and I would only add to his comments upon them that when it is borne in mind that until the latter half of the nineteenth century the only event that could be relied upon to excuse performance by one party of his undertakings was a default by the other party no importance can be attached to the fact that in occasional cases, and there may be others besides Freeman v. Taylor (1831) 8 Bingham page 124 , the Court has referred to the object or purpose of the party not in default rather than to the object or purpose of the contract, for the relevant object or purpose of the party not in default is that upon which there has been a consensus ad idem of both parties as expressed in the words which they have used in their contract construed in the light of the surrounding circumstances.

The fact that the emphasis in the earlier cases was upon the breach by one party to the contract of his contractual undertakings, for this was the commonest circumstance in which the question arose, tended to obscure the fact that it was really the event resulting from the breach which relieved the other party of further performance of his obligations; but the principle was applied early in the nineteenth century and without analysis to cases where the event relied upon was one brought about by a party to a contract before the time for performance of his undertakings arose but which would make it impossible to perform those obligations when the time to do so did arrive: for example, Short v Stone;[11] Ford v Tiley;[12] Bowdell v Parsons.[13] It was not, however, until Jackson v. Union Marine Insurance (1874) 10 Common Pleas page 125, that it was recognised that it was the happening of the event and not the fact that the event was the result of a breach by one party of his contractual obligations that relieved the other party from further performance of his obligations. “There are the cases”, said Baron Bramwell (at page 147. of the report in 10 Common Pleas)

“which hold that, where the shipowner has not merely broken his contract, but has so broken it that the condition precedent is not performed, the charterer is discharged. Why? Not merely because the contract is broken. If it is not a condition precedent, what matters it whether it is unperformed with or without excuse? Not arriving with due diligence or at a day named is the subject of a cross-action only. But not arriving in time for the voyage contemplated, but at such a time that it is frustrated is not only a breach of contract, but discharges the charterer. And so it should though he has such an excuse that no action lies”.

Once it is appreciated that it is the event and not the fact that the event is a result of a breach of contract which relieves the party not in default of further performance of his obligations two consequences follow. (1) The test whether the event relied upon has this consequence is the same whether the event is the result of the other party’s breach of contract or not, as Mr. Justice Devlin pointed out in Universal Cargo Carriers Corporation v Citati.[14] (2) The question whether an event which is the result of the other party’s breach of contract has this consequence cannot be answered by treating all contractual undertakings as falling into one of two separate categories: “conditions” the breach of which gives rise to an event which relieves the party not in default of further performance of his obligations, and “warranties” the breach of which does not give rise to such an event.

Lawyers tend to speak of this classification as if it were comprehensive, partly for the historical reasons which I have already mentioned and partly “because Parliament itself adopted it in the Sale of Goods Act, 1893, as respects a number of implied terms in contracts for the sale of goods and has in that Act used the expressions “condition” and “warranty” in that meaning. But it is by no means true of contractual undertakings in general at common law.

No doubt there are many simple contractual undertakings, sometimes express but more often because of their very simplicity (“It goes without saying”) to be implied, of which it can be predicated that every breach of such an undertaking must give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract. And such a stipulation, unless the parties have agreed that breach of it shall not entitle the non-defaulting party to treat the contract as repudiated, is a “condition”. So too there may be other simple contractual undertakings of which it can be predicated that no breach can give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and such a stipulation, unless the parties have agreed that breach of it shall entitle the non-defaulting party to treat the contract as repudiated, is a “warranty”.

There are, however, many contractual undertakings of a. more complex character which cannot be categorised as being “conditions” or “warranties” if the late nineteenth century meaning adopted in the Sale of Goods Act, 1893, and used by Lord Justice Bowen in Bensen v Taylor Sons & Co[15] be given to those terms. Of such undertakings all that can be predicated is that some breaches will and others will not give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and the legal consequences of a breach of such an undertaking, unless provided for expressly in the contract, depend upon the nature of the • event to which the breach gives rise and do not follow automatically from a prior classification of the undertaking as a “condition” or a “warranty”. For instance, to take Baron Bramwell’s example in Jackson v. Union Marine Insurance itself (at page 142), breach of an undertaking by a shipowner to sail with all possible dispatch to a named port does not necessarily relieve the charterer of further performance of his obligation under the charter-party, but if the breach is so prolonged that the contemplated voyage is frustrated it does have this effect.

In 1874 when the doctrine of frustration was being foaled by “impossibility of performance” out of “condition precedent” it is not surprising that the explanation given by Baron Bramwell should give full credit to the dam by suggesting that in addition to the express warranty to sail with all possible dispatch there was an implied condition precedent that the ship should arrive at the named port in time for the voyage contemplated. In Jackson v Union Marine Insurance there was no breach of the express warranty; but if there had been, to engraft the implied condition upon the express warranty would have been merely a more complicated way of saying that a breach of a shipowner’s undertaking to sail with all possible dispatch may, but will not necessarily, give rise to an event which will deprive the charterer of substantially the whole benefit which it was intended that he should obtain from the charter. Now that the doctrine of frustration has matured and flourished for nearly a century and the old technicalities of pleading “conditions precedent” are more than a century out of date, it does not clarify, but on the contrary obscures, the modern principle of law where such an event has occurred as a result of a breach of an express stipulation in a contract, to continue to add the now unnecessary colophon “therefore it was an implied condition of the contract that a particular kind of breach of an express warranty should not occur.” The common law evolves not merely by breeding new principles but also, when they are fully grown, by burying their ancestors.

As my “brethren have already pointed out, the shipowner’s undertaking to tender a seaworthy ship has, as a result of numerous decisions as to what can amount to “unseaworthiness”, become one of the most complex of contractual undertakings. It embraces obligations with respect to every part of the hull and machinery, stores and equipment and the crew itself. It can be broken by the presence of trivial defects easily and rapidly remediable as well as by defects which must inevitably result in a total loss of the vessel.

Consequently the problem in this case is, in my view, neither solved nor soluble by debating whether the shipowner’s express or implied undertaking to tender a seaworthy ship is a “condition” or a “warranty”. It is like so many other contractual terms an undertaking one breach of which may give rise to an event which relieves the charterer of further performance of his undertakings if he so elects and another breach of which may not give rise to such an event but entitle him only to monetary compensation in the form of damages. It is, with all deference to Mr. Ashton Roskill’s skilful argument, by no means surprising that among the many hundreds of previous cases about the shipowner’s undertaking to deliver a seaworthy ship there is none where it was found profitable to discuss in the judgments the question whether that undertaking is a “condition” or a “warranty”; for the true answer, as I have already indicated, is that it is neither, but one of that large class of contractual undertakings one breach of which may have the same effect as that ascribed to a breach of “condition” under the Sale of Goods Act and a different breach of which may have only the same effect as that ascribed to a breach of “warranty” under that Act. The cases referred to by Lord Justice Sellers illustrate this and I would only add that in the dictum which he cites from Kish v. Taylor (1912 Appeal Cases page 604, at page 617) it seems to me from the sentence which immediately follows it as from the actual decision in the case and the whole tenor of Lord Atkinson’s speech itself that the word “will” was intended to be “may”.

What the learned judge had to do in the present case as in any other case where one party to a contract relies upon a breach by the other party as giving him a right to elect to rescind the contract, was to look at the events which had occurred as a result of the breach at the time at which the charterers purported to rescind the charter-party and to decide whether the occurrence of those events deprived the charterers of substantially the whole benefit which it was the intention of the parties as expressed in the charter-party that the charterers should obtain from the further performance of their own contractual undertakings.

One turns therefore to the contract, the Baltime 1939 Charter, of which Lord Justice Sellers has already cited the relevant terms. Clause 13, the “due diligence” clause, which exempts the shipowners from responsibility for delay or loss or damage to goods on board due to unseaworthiness unless such delay or loss or damage has been caused by want of due diligence of the owners in making the vessel seaworthy and fitted for the voyage, is in itself sufficient to show that the mere occurrence of the events that the vessel was in some respect unseaworthy when tendered or that such unseaworthiness had caused some delay in performance of the charter-party would not deprive the charterer of the whole benefit which it was the intention of the parties he should obtain from the performance of his obligations under the contract – for he undertakes to continue to perform his obligations notwithstanding the occurrence of such events if they fall short of frustration of the contract and even deprives himself of any remedy in damages unless such events are the consequence of want of due diligence on the part of the shipowner.

The question which the learned judge had to ask himself was, as he rightly decided, whether or not at the date when the charterers purported to rescind the contract, namely 6th June, 1957, or when the shipowners purported to accept such rescission, namely 8th August, 1957, the delay which had already occurred as a result of the incompetence of the engine room staff, and the delay which was likely to occur in repairing the engines of the vessel and the conduct of the shipowners “by that date in taking steps to remedy these two matters, were, when taken together, such as to deprive the charterers of substantially the whole benefit which it was the intention of the parties they should obtain from further use of the vessel under the charter-party.

In my view, in his judgment – on which I would not seek to improve – the learned judge took into account and gave due weight to all the relevant considerations and arrived at the right answer for the right reasons.”

Dorene Ltd. v. Suedes (Ireland) Ltd.

[1981] IR 312

Costello J. H.C.

Was there a contract?

What was the legal position when the proceedings were instituted? It was suggested on Dorene’s behalf in counsel’s closing submissions (contrary, it should be said, to an earlier written and verbal opinion of Dorene’s leading counsel) that a concluded bargain had been reached between the parties. It was urged that Dorene had not pressed for the rent-free period as required in the letter of the 18th July and that agreement on the commencement date of the lease had been reached. As to the other conditions laid down by Dorene in the letter of 18th July (i.e., the approval of I.D.A. and the approval of Doreen Holdings), it was said that these should be regarded as conditions subsequent in a concluded contract. It is, of course, important to make a distinction between a condition which must be satisfied before any legally binding contract comes into operation (a condition precedent) and a condition which is a part of a legally binding contract which, if not fulfilled, can result in the contract ceasing to be binding (a condition subsequent): see Wylie’s Irish Conveyancing Lawpara. 9.069 at pp. 383-4. Dorene’s counsel suggested that these conditions were conditions subsequent and were analogous to a case in which a purchaser agrees to buy a house “subject to me getting an advance on the property”a condition which did not prevent a binding contract for sale coming into operation in Rooney v. Byrne. 12 He also suggested, as an alternative argument, that in any event the evidence established that these conditions had been waived by Dorene. He said that Dorene could enforce the concluded bargain which the parties had made even though the final terms of the lease had not been agreed, as the Court would itself fix them in default of agreement.

I find myself unable to agree with these propositions. Dorene, as I have said, made an offer to take a lease but made the offer subject to certain conditions which had to be fulfilled before they could be legally bound. The situation was in no way similar to that of a purchaser who agrees to buy a property but safeguards himself by providing that he may avoid the bargain if, for example, he fails to obtain a loan or fails to obtain planning permission. Even if the condition relating to the date of commencement was agreed and the condition relating to the rent-free period tacitly dropped, and even if the conditions relating to grant aid from I.D.A. and main-board approval had been waived (and I will deal in a moment with this point), there still remains an insurmountable obstacle in the way of specific performance proceedings because Suedes had made it abundantly clear that they too wished to keep their options open and because their acceptance of Dorene’s offer was on the basis that Suedes would not be contractually bound to grant a lease until its terms had been finally agreed. This never happened. On the 9th October, 1979, the parties were still in negotiation. Therefore, it seems to me that there was no legally binding agreement to grant a lease when Dorene’s proceedings were launched and, in my opinion, they were instituted without reasonable or probable cause.

Quite a lot of time was taken up at the hearing on the suggestion that Dorene had waived the conditions in their letter of the 18th July relating to I.D.A. approval and main-board approval. As I have already pointed out, even if they had been waived Suedes’ acceptance of the offer was itself a conditional one. But the evidence does not satisfy me that any waiver in fact took place. There is no evidence that Dorene’s board met and decided that they would take a lease from Suedes even if they had not obtained the approval of the holding company and even if they had not obtained a decision from I.D.A. to grant financial assistance. In the absence of a formal board meeting, there is no evidence of any such decision being taken by any director or group of directors. I note that after a consultation which was held on the 11th October Dorene’s solicitor made no attempt to obtain any information from Dorene’s directors on this point and that, in an opinion written after a consultation on the 13th December, counsel wrote with reference to these conditions:”Of course these conditions could have been waived or satisfied before the defendant sought to withdraw but as far as I can see neither of these things happened. In his statement Mr. Harrington does not suggest that he ever withdrew these conditions.” I am satisfied that Dorene’s offer to take a lease remained a conditional one throughout all the negotiations up to the time that Suedes called them off.

O’Connor v. Coady

[ [2005] 1 ILRM 256, [2004] IESC 54 THE SUPREME COURT

McCracken J

The Nature of the Condition

Both before the learned trial Judge and at the hearing of this appeal there was considerable discussion as to whether the condition relating to planning permission was a condition precedent or a condition subsequent. The distinction may at times be of considerable importance, in that if there is a condition precedent, then no contract comes into existence unless the condition is fulfilled, while if there is a condition subsequent, there is a valid contract in being, but it is not enforceable unless the condition is fulfilled. However, the distinction does not seem to me to be relevant in the present case. The real issue in this case is not whether a contract ever existed, but whether the terms of the contract can be enforced once the time for compliance with the condition has passed.

Effect of the Condition

The important features of this condition are, firstly that it relates to a planning application which was already in existence, secondly there was a fixed period for compliance with the condition and thirdly time was not made of the essence of the contract in relation to that period. The general principles relating to conditional contracts were laid down expressly and succinctly by Lord Jenkins giving the judgment of the Privy Council in Aberfoyle Plantations Ltd v. Cheng [1960] AC 115. After pointing out that the intention of the parties as expressed in the contract ought to be implied from the language used therein was all important, he said at page 124:-

“But, subject to this overriding consideration, their Lordships would adopt as warranted by authority and manifestly reasonable in themselves, the following general principles: (I) Where a conditional contract of sale fixes a date for the completion of the sale, then the condition must be fulfilled by that date; (II) Where a conditional contract of sale fixes no date for completion of the sale, then the condition must be fulfilled within a reasonable time; (III) Where a conditional contract of sale fixes (whether specifically or by reference to the date fixed for completion) the date by which the condition is to be fulfilled, then the date so fixed must be strictly adhered to, and the time allowed is not to be extended by reference to equitable principles.”

While that case did not refer to a planning condition, nevertheless the principles enunciated have since been adopted as being applicable to planning conditions.

The condition in the present case clearly comes within the principles set out at (III) cited above.

In an earlier case, cited in the Aberfoyle Plantations Limited case, somewhat similar views were expressed by Maugham J. In In Re Sandwell Park Colliery Company [1929] 1 CH 277 a contract was subject to what was admittedly clearly a condition precedent, namely the approval of the Court. At page 282 Maugham J stated as a general principle:-

“Courts of equity, in dealing with actions for specific performance relating to land, have been accustomed to give effect to the real intention rather than to the precise words fixing the date for completion. The effect is that a clause fixing the date for completion is equivalent to a clause stating that completion shall be on that date or within a reasonable time thereafter. But there is no ground for a similar construction in the case of a condition upon which the validity of the contract as one of sale depends. The distinction is obvious. In the first case both parties are bound, and a moderate delay in completion is thought not to injure either. In the latter, the very existence of the mutual obligations is dependent on the performance of the condition. The purchasers do not know in the first instance if their purchase money will ever be required. In general, and in the present case, there is no promise or undertaking by the vendor that the condition will be fulfilled. Equity has, I think, never applied its liberal views as to time to such a condition. If a date is mentioned, the condition must be exactly complied with. If a date is not mentioned, the condition must be fulfilled within a reasonable time; there is no difference between the views of law and equity in considering what is a reasonable time, and the uncertain position of the purchaser must be bore in mind.”

While that case concerned a condition precedent and concerned a condition to be performed by the vendor rather than the purchaser, in my view the same principles apply to the present case. Whether this is a condition precedent or a condition subsequent, the existence of the mutual obligations, or their enforcement, is dependant on the performance of the condition. There is no undertaking by the purchaser in this case that the condition will be fulfilled, and the vendor does not know whether he will ever get his money.

The effect of a conditional contract has been considered in several Irish cases since the Aberfoyle Plantations Limited case. In O’Mullane v. Riordan [1978] ILRM 73 McWilliam J implicitly refused to accept that a planning condition was a condition precedent to the coming into operation of a contract, and said at page 77:-

Similarly in Maloney v. Elf Investments Ltd (Unreported 7th December 1979) McWilliam J expressly rejected the argument that by analogy with the date fixed for closing, the time fixed in a contract for performance of a condition in relation to planning should be regarded in equity as the date fixed in the contract or a reasonable time thereafter unless time had been made of the essence of the contract. He expressly approved the third proposition in the Aberfoyle Plantations Limited case.

In Sepia Ltd & Anor v. M & P Hanlon Ltd & Anor [1979] ILRM 11 the effect of a planning condition was also considered. The facts of the case were somewhat complicated by the fact that there were two contracts involved, but the first contract contained a special condition which read:-

That there was no specific date by which the planning permission was to be complied with but condition 8 expressly made time of the essence of the contract in relation to the completion of the sale. In considering the effect of this, Costello J said at page 24:-

“In the first contract the parties had expressly made time of the essence of the contract when they provided that the sale was to be closed on 1 May 1975. Condition 11 relating to planning permission must be interpreted in the light of the necessity strictly to observe the date set for closing. The result is, in my opinion, that if the plaintiffs had failed to obtain planning permission by 1 May 1975 and if the closing date was not extended by mutual agreement then the defendants were entitled to treat the contract as at an end if the plaintiffs refused to complete: the absence of planning permission would not have excused the non performance by the plaintiffs of the contract.”

This was a case which came within the first proposition in the Aberfoyle Plantations Limited case, and is in accordance with that decision.

Finally, in the Northern Ireland case of McKillop v. McMullen [1979] NI 85 the Aberfoyle Plantation Limited case was expressly approved.

Strangely enough, there does not appear to be any case in which the Aberfoyle Plantations Limited decision was considered by this Court. However, it has been approved and followed in England, Australia and New Zealand. It appears to me to be a correct analysis of the legal position of conditions inserted in a contract which postpone the enforceability of the contract, be they conditions precedent or conditions subsequent. These propositions are clearly particularly applicable to conditions relating to the obtaining of planning permission, and indeed to any condition to where the time required for its performance is uncertain. Particularly in contracts for the sale of land, certainty is important to both parties. I am quite satisfied that the effect of the contract in the present case is that at the expiration of the four month period for obtaining planning permission the condition had not been fulfilled and the time allowed for its fulfilment could not be extended by reference to equitable principles.

The Effect of Non Compliance

Somewhat surprisingly the Appellant has not sought to argue that the contract came to an end immediately on the expiration of the four month period allowed for fulfilment of the condition. Indeed, the wording of the questions in the summons seems to make it clear that the Appellant considers that the failure to comply with the condition rendered the contract voidable rather than void. In my view there is certainly an argument to be made that where there is a fixed date by which there must be completion of a condition, the contract automatically becomes void on the failure to comply with the time limit. However, that is not an argument which this Court has been asked to consider, nor is it one raised on the pleadings, and accordingly, expressly without deciding the point, for the purposes of this decision I am assuming that the contract became voidable.

The letter of 12th September 2002 from the vendor’s solicitors did not opt to avoid the contract in express terms. It did state, rightly or wrongly, the belief and contention of the Appellant’s solicitor at the time that the contract had lapsed “and is at an end”. It offered to enter into negotiations for a new contract and it purported to return the deposit. Perhaps more importantly it was headed “Subject to Contract/ Contract Denied”. In my view this letter in unequivocal terms notified the Respondent solicitor that the Appellant was treating the contract as being at an end. In the absence of any express contractual provision, the rescission of a voidable contract does not have to be in any particular form. What is required is a clear notification that the relevant party is treating the contract as at an end. In my view this letter clearly complies with that requirement.

The only question, therefore, is whether the Appellant’s right to avoid the contract became lost due to the passage of time, either by reason of the Appellant’s delay in taking any action or by reason of the waiver of the condition by the Appellant. There is no doubt that there are many cases of this nature in which a condition inserted for the benefit of one party, in this case the Respondent, can be waived by that party, but that requires some positive act by that party. The fact that the Respondent in the present case continued his planning application and made no attempt to notify the Appellant that he was prepared to complete without the condition being fulfilled, seems to me to make it quite clear that the Respondent always considered that the condition remained. Indeed, the Respondent’s solicitor’s letter of 3rd September, which brought matters to a head, was written on the basis that the condition remained, but was shortly going to be complied with. Accordingly, in my view no question of waiver can arise.

The question of the Appellant’s delay might have been very serious had she done anything to encourage the Respondent to believe that she was not going to enforce the time limit attached to the condition. It could then possibly be argued that the situation amounted to an estoppel. However, there is no suggestion of anything of that nature in the present case. The Appellant simply did nothing until the Respondent notified her solicitor that the planning permission was shortly going to issue. The most that could be said is that her solicitor held the deposit, which of course belonged to the Respondent. On the other hand, the Respondent never requested the return of the deposit, and there is no suggestion that the Appellant personally benefited in any way from it being held by her solicitor. In those circumstances, I do not consider that the delay in any way effected the Appellant’s right to avoid the contract.

Conclusion

In the circumstances of this case I would allow the appeal. I am doing so on the basis that the contract became voidable on the expiration of the four month period for compliance with the planning condition, that the letter of 12th September 2002 constituted a valid rescission of the contract, and that this rescission took place before the planning condition had been fulfilled and in the absence of any waiver on the part of the Respondent.

I would therefore answer the questions in the summons as follows:-

1 The Plaintiff/ Appellant was entitled to rescind the contract dated 31st May following the failure of the Defendant to comply with the special condition on obtaining planning permission by 30th September 2001.

2 The Plaintiff/ Appellant did in fact validly rescind the said contract by the letter of 12th September 2002.

3 Whether the Plaintiff/ Appellant was entitled to regard the said contract as being at an end when the provisions in relation to the obtaining of planning permission within the time limit prescribed were not complied with, was not argued before this Court.

4 In view of the findings at (2) above, the question of whether it was incumbent on the Plaintiff/ Appellant to notify the Defendant/ Respondent that the contract was at an end does not arise.

5 The Plaintiff/ Appellant did not either expressly or by implication do any act or thing as would have indicated to the purchaser that she was waiving the requirement of compliance with the said condition or otherwise indicating that she was treating the said contract as unconditional.

6 The Defendant/ Respondent was not entitled to assume in the absence of the said condition being fulfilled as therein provided that the Plaintiff/ Appellant had waived the said condition or that the contract had otherwise become unconditional or otherwise unenforceable.

Geoghegan J

Returning to the case at hand, the position, as I see it, is that although a helpful book of authorities has been furnished to the court none of the cases are directly in point to the precise questions that arise here. It is important, however, to note that whatever answers may be arrived at by this court to the questions raised in the summons it does not necessarily follow that they can be transported to some other future case in which a planning permission condition or some similar condition is inserted. In every case, as to what is to happen in the event of a condition not being fulfilled is first and foremost a matter for agreement between the parties. The courts will uphold any lawful agreement in this connection. Such agreement may be expressed or implied. If, however, there are no express provisions and if there are no concrete outside circumstances which would raise particular implications there are principles which a court can lay down as applicable in interpreting what the implied agreement of the parties is.

The important principles in this connection were in fact laid down by the Privy Council in Aberfoyle Plantations Limited v.Cheng cited above, principles which in whole or in part have been referred to in Irish cases as well as Australia, New Zealand, Northern Ireland and other English cases. Lord Jenkins (who sat with Lord Denning and the Rt. Hon. L.M.D. de Silva) in giving the advice of the Board laid down the following principles as applicable subject of course to different arrangements having been agreed between the parties.

“(i) Where a conditional contract of sale fixes a date for completion of the sale, then the condition must be fulfilled by that date;

(ii) Where a conditional contract of sale fixes no date for completion of the sale then the condition must be fulfilled within reasonable time;

(iii) Where a conditional contract of sale fixes (whether specifically or by reference to the date fixed for completion) the date by which the condition is to be fulfilled, then the date so fixed must be strictly adhered to and the time allowed is not to be extended by reference to equitable principles.”

The decision of the Privy Council in Aberfoyle has always been controversial but only in one respect. On one interpretation of the opinion delivered by Lord Jenkins (I put it this way because there are hugely varying interpretations as to what he did in fact mean) the condition in that case was treated as a condition precedent in the sense of a condition precedent to the coming into existence of the contract. But as far as I can understand from the case law both in this jurisdiction, in Northern Ireland, in England, in Australia and New Zealand there is no judicial controversy as to the principle that if a time limit is specified in such a condition, then, in the absence of agreement to the contrary it is non-extendable. Not only was this principle accepted by Costello J. in Sepia as referred to above but it was also acknowledged by McWilliam J. in Maloney v. Elf Investments Limited (unreported judgment in the High Court delivered 7th December, 1979). Speaking in the context of waiver of the condition which of course does not apply here, McWilliam J. at p. 8 of the judgment said that he was of opinion that “in the absence of any other authority, that the decision in the Aberfoyle case as to the necessity for exact compliance with the date mentioned in the condition means that there can be no question of waiver after that date has passed.” Again in reliance on Aberfoyle Murray J. in the Northern Ireland case of McKillop v. McMullan [1979] N.I. 85 at 92 appears to endorse the view that where there was a specified completion date and the contract was subject to planning permission that date had to be adhered to for fulfilment of the condition. In this non-controversial respect Aberfoyle has been followed also in judgments delivered in the High Court of Australia in Perri v.Coolangatta Investments Property Limited (1982) 149 CLR 537. In relation to all aspects of this case I have gained considerable assistance from the judgments in that Australian case and I will be returning to them. It is of some passing interest to note that the five judge court comprised three judges all of whom are now former Chief Justices of the High Court of Australia and each of whom delivered written judgments. The court consisted of Gibbs C.J., Stephen, Mason, Wilson and Brennan JJ.

The judgment of Kenny J. in Healy v. Healy (unreported judgment 3rd December, 1973) deals with the question of waiver and is not of any real assistance in this case except that by way of obiter dicta Kenny J. throws out the suggestion that where, as in this case, the closing date is fixed by reference to the grant of the planning permission under the condition and where no planning permission has in fact issued by the date the so called contract without the obligation to comply with the condition might be void for uncertainty. It would seem to me that a court would be slow to come to that conclusion unless it was absolutely compelled to do so. Fortunately the question does not arise to be determined on this Vendor and Purchaser summons.

I am of the view, for the reasons which I have indicated, that once the date mentioned in the condition had passed without the planning permission being available there was an entitlement to bring the contract to an end. I put it that way because I do not accept (and it is clear from the judgment of Carroll J. that counsel for the appellant in the High Court was in agreement on this) that the contract automatically came to an end. It was capable of being brought to an end by notification from one party to the other. I cannot agree with the learned High Court judge that a twenty eight day notice under the contract would have to be served. Indeed the clause in the form of Law Society contract used requiring in certain circumstances a twenty eight day notice is not drafted so as to cover the situation which arose here.

There is no doubt that the condition was not fulfilled within the prescribed time but the question is, did the appellant effectively bring the contract to an end?

It is at this point that it is helpful and relevant to summarise the relevant facts. The relevant condition read as follows:

It is that “special condition” which rendered the contract a “conditional contract” an expression to which I will return. A subsequent “special condition” read as follows:

…….

Referring to a passage in a judgment of Isaacs J. in another Australian case Maynard v. Goode (1926) 37 CLR at 540 he agrees with Isaacs J. in pointing out that

He goes on to refer to other cases in which it was pointed out the problems of making any relevant distinction between condition precedent and condition subsequent. Mason J. deals with the topic in similar vein in his judgment. He points out that generally speaking the court will tend to favour the construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of the contract. He points out that in most cases it is artificial to say in the face of the details settled upon by the parties that there is no binding contract unless the event in question happens. This view exactly corresponds with the view expressed by McWilliam J. in O’Mullane v. Riordan [1978] I.L.R.M. 73 at 77 where he said the following:

“The price of the land has increased astronomically since May 1972 and it has been argued that, as this contract was subject to a condition (i.e. the obtaining of planning permission) there was no contract until the planning permission had been obtained and that this is the time at which I have to ascertain the value of the land for the purpose of establishing the fairness of the bargain. I was referred in this context to the case of Aberfoyle Plantations Limited v. Kajw Bien Cheng [1960] AC 115. I cannot accept this argument. The fact that a contract is subject to a condition has the effect of making it unenforceable until the condition is fulfilled, but it does not mean that there is no contract at all and the case cited decided that the purchaser was entitled to recover his deposit under a term of the agreement. A conditional contract is one which becomes enforceable provided the condition is fulfilled within the time provided by the contract or if no time is provided within a reasonable time.”

I think that this was the view adopted also by Murray J. in the Northern Ireland case of McKillop cited above notwithstanding the adverse views on that case expressed by the learned High Court judge.

Returning to the Perri case and moving to the judgment of Wilson J. he refers to a passage in the judgment of the well known New Zealand judge, Cooke J., in a case called

Hunt v. Wilson (1978) 2 NZLR 261 at 267 in which that judge said the following:

“I venture to think that the ambiguous labels precedent and subsequent when applied to conditions are seldom of real help in solving issues in this branch of contract law. Certainly they can be positively misleading unless the meaning of what has been said is made specific by explaining to what the condition in question is seen as precedent or subsequent”.

Wilson J. goes on to agree with that view and to point out that the special condition in the Perri case could be described with accuracy as either a condition subsequent to the formation of the contract or is a condition precedent to an obligation in either party to proceed to completion. These views as to the respective meanings of “condition precedent” and “condition subsequent” and as to their frequent overlap were endorsed in the judgment of Brennan J. with which Stephen J. agreed.

In my view, the more helpful terminology is the distinction between a “conditional contract” and an “unconditional contract”. As we all know, by a strange quirk of the law, ordinary terms of an unconditional contract if they are of sufficient importance will themselves be described as “conditions” but that does not mean that the contract is conditional. Normally, a conditional contract will not mean a contract which only comes into existence upon fulfilment of the condition but rather a contract which can only be enforced upon fulfilment of the condition. That is what this contract was.

As I have explained, it has already been conceded that the contract did not automatically lapse upon the breach of condition. Although not all of the views of the judges in the Perri case on this point fully coincided, I think that the case can be read as supporting that concession. But if the contract does not automatically “lapse” to use the terminology contained in the letter from the solicitors for the appellant, how does it come to an end? That is the question which now has to be explored in more detail and on that question also there was no real assistance to be gained from any of the authorities in the book of authorities but I did find assistance from the judgments in the Perri case. Gibbs C.J. in paragraph 10 of his judgment said the following:

“For these reasons I consider that when the time has elapsed for performance of a condition which is not a promissory condition, but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived and that it is not necessary first to give a notice calling on the party in default to complete the contract or fulfil the condition.”

Later in the same paragraph the same judge says the following:

“Although in Aberfoyle Plantations Limited v. Cheng … an erroneous view may have been taken of the nature of the condition there considered, nevertheless, in my respectful opinion, it was correct to hold that the time fixed by the contract for performance of the condition was not to be extended by reference to equitable principles, …”

But in paragraph 11 the same judge also observes:

I should point out that these views expressed by Gibbs C. J. were in the context of his approving similar views expressed in other Australian cases and in particular the following passage expressed in a case of Gange v. Sullivan (1966) 116 CLR 441:

Mason J. also makes it clear that, in his view, the time clause would not be self-executing and that the party relying on it would have to rescind. Indeed, that appears to have been the view of all the judges. As there is no authority requiring this court to hold otherwise, I have likewise taken the same view as the Australian courts endorsed in English cases also that non-fulfilment of the condition within the time stipulated renders the contract voidable rather than void. This would seem to me to be especially sensible in the Irish context. I think that two Irish solicitors dealing with each other on a sale would naturally assume that if one was going to treat the contract as at an end because of the breach of the condition he would so inform the other and that it is reasonable to imply such an obligation. This observation is necessarily obiter as the question was not argued in the light of counsel’s concession.

I would allow the appeal. I would answer the questions in the manner suggested by McCracken J. in his judgment.

Lombard & Ulster Banking -v- Mercedes- Benze Finance Ltd

[2006] IEHC 168 (11 January 2006)

JUDGMENT delivered the 11th day of January, 2006 by Mr. Justice John MacMenamin
1. It might well have been thought in this era of mediation and alternative dispute resolution that an action between two substantial finance houses regarding the financing of a hire purchase transaction of three rather elderly second hand Mercedes tractor truck units would be more redolent of litigation of another era; the more so when the sum originally at stake was just in excess of the lower end of the High Court money jurisdiction. The fallacy of such a presumption is demonstrated by the instant case which was fought out with tenacity and vigour over three days in the High Court. The reasons therefor emerge in the course of this judgment. Put simply, each side firmly believed in the moral and legal correctness of their actions. (For ease of reference in this judgment Mercedes-Benz Finance Ltd will (save in the next paragraph) be hereafter be referred to as ‘the defendant’).
2. On one view, the relevant events in issue can be measured in a two month time-span. In or about August 1998 Vincent Hughes, the second named defendant (who is no longer concerned in these proceedings), approached the plaintiffs and stated that he wished to buy three second hand Mercedes trucks from the first named defendant in England and wished to obtain finance of STG £40,000 for this transaction. In the ordinary way the structure of the finance would be a series of three hire purchase agreements, one in respect of each of the three trucks.
3. The contract was made between the plaintiff and the defendant. The transaction was handled in the plaintiff company by Aidan Carolan. At the time of this transaction he was a Manager of the plaintiff company in its Cavan branch. He is now Area Manager in the same branch. He testified that in August 1998 he received a telephone call from a salesperson in Westwood Garage in Strokestown to the effect that the second named defendant was minded to purchase one single new Scania truck from that garage. Mr. Carolan went to meet Mr. Hughes. The nature of this transaction was to be a hire purchase agreement. It is unnecessary to deal any further with this transaction as it did not proceed.
4. Mr. Carolan testified that he personally had no previous experience of dealing with Mr. Hughes. Mr. Hughes had however engaged in transactions with Lake Leasing who are an associated company of the plaintiff. While the latter company carry on their own leasing business, Lombard and Ulster Finance collect funds on their behalf by way of direct debit. The plaintiffs do not share the same information and databanks as Lake Leasing.
5. A short period later Mr. Carolan received a further telephone call from a sales executive of Lombard and Ulster in Sligo. That executive was Gareth Heavey. Mr. Heavey informed Mr. Carolan that Mr. Hughes was then purchasing three second hand Mercedes trucks from Mercedes in England and that this information had come to him through Lake Leasing. Lake themselves were not in the business of financing trucks. Their main business related to the financing of cars. Mr. Carolan’s understanding was that Lombard and Ulster would be dealing with Mercedes Benz Sales. He contacted Mr. Hughes and asked him about his intentions. He was informed that Mr. Hughes was purchasing three trucks from Mercedes Benz. As Mr. Carolan was going through Carrick-on-Shannon (where Mr. Hughes lives) he stated that he would call to see him. At that meeting Mr. Carolan was told that Mr. Hughes was purchasing three trucks for a total value of approximately STG £62,000 and that he required finance of STG £40,000 from the plaintiffs and that he wished to pay the deposit.
6. Mr. Carolan knew no more about the trucks at that stage. He put the proposal forward to his head office and the arrangement was approved in principle.
7. The next step in the transaction was to seek a pro forma invoice from the defendant. Mr. Carolan contacted a Mr. Kevin Segar in that company. He told Mr. Segar that Mr. Hughes was purchasing three trucks from the defendant and that he wished to obtain an invoice. The plaintiff was going to finance the purchase. Mr. Segar indicated that he would arrange for a draft invoice which he did. Mr. Carolan testified that he informed Mr. Segar that the plaintiffs were to finance STG £40,000. The total consideration for the three trucks was STG £62,667.56. In error Mr. Segar sent an invoice to Mr. Carolan dated 11th September for the sum of £64,667.56. It will be seen therefore that the error was in the sum of an additional sum of STG £2,000.
8. To avoid further confusion Mr. Carolan laid out a draft invoice as the plaintiffs would require it. He forwarded this to a Stuart Lowther in the defendant company to make up the invoice. Mr. Carolan stated that he was not surprised to find that the seller of the trucks was Mercedes Benz Finance Ltd (a UK Company) rather than Mercedes Benz Sales Ltd. This was attributable to the fact that the plaintiffs financed trucks and various pieces of equipment which might have been repossessed by finance companies such as the defendant. Equally the defendant could wish to sell contract hire vehicles which had been repossessed. Such a transaction therefore, even from the defendant which is a United Kingdom registered company would not be uncommon. Ultimately, on 14th September an invoice emanated from the defendants. The only distinction which can be seen on the face of the draft as opposed to the actual sales invoice of 14th September was the sequence in which the trucks were dealt with, and some lack of definition to the valuation figures which were attributable to each of the three trucks. Mr. Hughes signed the hire purchase contract on the requisite form for the transaction on 15th September. Mr. Carolan contacted a sales support person in the plaintiffs Dublin office to carry out a credit bureau check, known as an ‘ICB check’ to ascertain whether the goods were the subject of any hire purchase or loan agreement. Nothing adverse was disclosed. Thereafter Mr. Carolan instructed the plaintiff’s head office to carry out the credit transfer of STG £40,000 to the defendant company.
9. No information was disclosed to the plaintiff, nor did any discussions take place between Mr. Carolan and the defendant as to the provenance or whereabouts of the trucks. Mr. Carolan said that he proceeded on the basis that they were in the possession of the defendants, and in storage in England.
10. The sales invoice relating to the three trucks from the defendants contained a number of terms which are of importance. The first of these was: “no warranty given or implied”. The second: “any distance recorded on the above vehicle cannot be guaranteed in any way”. The third: “as seen and approved by Mr. V. Hughes”. Finally it was stipulated: “all goods remain the property of the vendor until cleared or received in full”. The total consideration of STG £62,667.56 was set out. Below that there was recited: “less cash deposit due from Mr. Hughes STG £22,667.56”, leaving a balance due of STG £40,000.
11. On its face then, this is a relatively straightforward hire purchase transaction conducted perhaps rather too speedily and certainly informally.
In order to obtain a fuller picture one must then turn to the history of the tractor truck units. Each of them had previously been registered in Northern Ireland. The oldest was previously registered OJI5287. It chassis number was WDB65592. It was the subject matter of a hire purchase agreement made between Mercedes-Benz Finance Ltd and Agnew Commercials, a Northern Ireland concern on 30th March, 1996. The cash price paid for the vehicle was STG £23,500. This was financed as to an initial payment of STG £5,000 by way of deposit and further finance to a total sum of STG £18,500 payable for 36 months at the sum of STG £606.65.
This vehicle was subsequently re-registered in this jurisdiction as 91 LM 674. The second vehicle was originally registered RJI4221. It too, had been the subject matter of a hire purchase agreement between the first named defendant and Agnew Commercials. This purchase was effected on 23rd October, 1996. The total cash price was £36,013.74, financed as to an initial deposit payment of STG £15,363.75 and additional finance of £20,650 repayable over 36 months at £684.24. The chassis number of this vehicle was WDB65593.
The third vehicle was registered MIL9639 in Northern Ireland. It was subsequently re-registered 96 LM 828. It chassis number was WDB655912. It had been the subject matter of a hire purchase agreement made between Mercedes-Benz Finance Ltd and Agnew Commercials for a total cash price of £69,795 structured as to an initial payment on deposit of £20,395 and financed as to a total sum of £49,400 payable over 60 months at £656.05 per month.
But the hire purchase agreements of each of these three vehicles had been terminated on the 18th June, 1998 by reason of failure on the part of the customer to effect repayments as stipulated. The first vehicle had been repossessed on 21st July, 1998. The second and third vehicles mentioned were still in the possession of the customer and remained so until the 6th July, 1999 and 9th April, 1999 respectively. However Mr. Carolan did not know (a) that the previous customer who had entered into this hire purchase agreement with Mercedes-Benz Finance Ltd was none other than Mr. Vincent Hughes. Mr. Carolan was not informed or aware that only one of the vehicles had been repossessed, and the other two remained in Mr. Hughes possession, and continued to be so for another year. Additionally Mr. Carolan states that he was entirely unaware that the transaction that he had entered into was a refinancing of an existing deal rather than a straightforward series of hire purchase transactions.
Mr. Carolan testified that ten days later he heard from a Mr. Ralph who was one of the credit controllers in the defendant company. Mr. Ralph telephoned Mr. Carolan to indicate that the deposit from Vincent Hughes had not been paid. Mr. Ralph then informed Mr. Carolan that the trucks in question had, at the time of the transaction in issue actually been on hire purchase from the defendant company by Mr. Vincent Hughes. Mr. Carolan was taken aback by this information as he said the plaintiffs would not re-finance goods for anybody, whether in the Republic of Ireland or from England. He testified that he said to Mr. Ralph that he was surprised that the defendants had the trucks “on finance” with Mr. Hughes. No discussion took place at that stage as to who had possession of the trucks. After this telephone call Mr. Carolan in turn contacted Mr. Hughes in order to persuade him to furnish the deposit to the defendant. In response to a query as to why Mr. Carolan felt it was his responsibility to contact Mr. Hughes rather than that of the defendant company, Mr. Carolan said that he did so in order to expedite the transaction. On a number of subsequent occasions in the year 1998 and 1999 Mr. Carolan contacted Mr. Hughes in an effort to persuade him to complete the deal.
12. On 26th November, 1998 the plaintiffs received a letter from the defendants in which it was asserted that three trucks were the property of Mercedes Benz Finance Limited and calling upon the plaintiffs to ensure that the totality of the payment of the transaction i.e. the STG £62,667.56 was payable.
13. Mr. Carolan denied that there was any overlap of information between the plaintiff and Lake Leasing. Consequently any information which might have been available to the latter company about transactions which they had entered into previously with Mr. Hughes would not have been available to the plaintiff. Further, when Mr. Hughes spoke to Mr. Carolan in early September he stated that he was buying the trucks from Mercedes. Mr. Carolan said that the only checks customarily carried out in this jurisdiction were those known as the ‘ICB’ check i.e. those carried out under the aegis of the Irish Credit Bureau. This is of some relevance in that the trucks in question were previously registered in the United Kingdom. Lombard and Ulster did not carry out a credit check in that jurisdiction prior to the hire purchase transaction until the 15th or 16th September at which point it emerged that the vehicles in question were registered with the defendant company. Mr. Carolan was insistent that if he had known that what was in issue was a refinancing transaction the plaintiffs would never have considered engaging in it at all. Furthermore he insisted that the contract that he entered into on behalf of the plaintiff was purely for the sum of STG £40,000 and was in no way as surety or guarantor for the totality of the purchase price of the three trucks. He stated that any arrangement made regarding the repayment of the STG £22,000 deposit was between Mr. Hughes and the defendant company.
14. Not the least unusual aspect of the transaction is that apparently, on the 30th September, the plaintiff credited Mr. Hughes account with a deposit on the transaction of IR £26,465.33. Mr. Carolan stated that he thought that that sum must be there for tax purposes so that when Mr. Hughes was carrying out his audited accounts he would be shown that this was part of the transaction which he had effected, and that he would be taking a capital allowance write off of 20% against his accounts from moneys having been paid out on a hire purchase agreement.
Mr. Carolan also said that he was unfamiliar with any credit check agencies known as Experian or Ecuifax which provide information on UK vehicles. They were not used by his company in Ireland.
15. One issue which arose which was never completely clarified was whether, on the 15th or 16th September the plaintiff contacted Mr. Segar in Mercedes Benz with a view to obtaining “clearance” either on Mr. Hughes and/or on the vehicles, and whether as he said, Mr. Segar refused point blank to give any such clearance unless the totality of the debt in question was paid. It was further suggested that this Lombard and Ulster representative, who was unidentified, ultimately was dissatisfied with Mr. Segar’s response, and was put through to Ms. Kaye McDougall of the defendant company. Neither any representative from the plaintiff nor Ms. McDougall gave evidence.
A number of direct debits were presented to Mr. Hughes’ bank in the month of October and November 1998 and went unpaid. Mr. Carolan stated however that the question of dealing with such matters would be for the collection department in Dublin.
16. Between November and March 1999 both Mr. Carolan and a Brian Carey, also senior official of the plaintiff, visited Mr. Hughes on a number of occasions seeking to persuade him to pay the deposit. . An elapse of time between November and the following April of 1999 occurred prior to any response emanating from the plaintiff. However this was considered unremarkable. Mr. Carolan specifically denied that any conversation had taken place between himself and Mr. Segar of the defendant wherein it was suggested that the transaction was for the refinancing of trucks on behalf of Mr. Hughes.
17. Second to testify on behalf of the plaintiff was Mr. Brian Carey, currently head of regulatory risk and compliance with the plaintiff company. He was formerly collections manager. Having reiterated the evidence as to the relationship between the plaintiff company and Lake Finance he stated that his understanding of the invoice in question was that having paid the sum of £40,000 the plaintiff company had acquitted itself of its responsibilities in the transactions. The core of the problem, as far as he was concerned was that Mr. Hughes had failed to pay his deposit to the dealer. He did not however consider that this matter was of direct consequence to the plaintiff in terms of the trucks. He was satisfied that having paid the invoice amount in full (referring to the sum of £40,000), the invoice made clear there was an amount due from Mr. Hughes which he said in the normal course would have been the responsibility of the defendant to collect. In January 1999 he had it in mind to commence proceedings by way of injunctive relief against Mr. Hughes. He was not concerned about the assertion of the claim made by the defendant company in their letter of 26th November, 1998 in that the defendant company had received the STG £40,000, had failed to collect the deposit, and at that stage he assumed that they had released possession of the goods without receiving their deposit. Ultimately therefore he considered that the problem lay with the defendant. In the light of the previously good relationship between the plaintiff and the defendant company he had suggested to Mr. Carolan that he might go to Mr. Hughes and see what he could do in order to see that Mr. Hughes fulfilled his side of the bargain. Mr. Carey added that the plaintiff company subsequently adopted a procedure of profiling accounts which gave further of information regarding the conduct and performance of each account with finance companies on a monthly basis. However in 1998 the breadth of information which is now obtainable was not available to the plaintiff. While ‘ICB’ and other checks were available in this jurisdiction such checks did not cover transactions in Northern Ireland, nor do they cover transactions in the United Kingdom. Mr. Carey testified that because Mr. Hughes had an Irish address he did not consider that it was either reasonable or necessary to carry out checks either in Northern Ireland or in England. No information was available to the plaintiff company to indicate that the plaintiff had a previous history of transacting business in Northern Ireland. This was so despite the fact that in a number of previous transactions with (reflected in discovered documents) Mr. Hughes apparently had furnished an address of his company at 25 Crumlin Park, Crumlin, Co. Antrim. Neither Mr. Carey nor anybody else within the plaintiff company had notice of Mr. Hughes having transacted business in Northern Ireland. He accepted that not alone had the plaintiff been misled by Mr. Hughes in relation to the nature of the transaction, but also it was profoundly mistaken in the view on which it had proceeded that the defendant company was actually in possession of the trucks at the time that the invoice was paid, and they would not have released the trucks until they received the deposit. Referring to a plaintiffs record of 17th September, 1998 known as a “document log” which stated
“Terms of acceptance: Aidan Carolan.
Booking Reference No: 1391
Rate: 0.8565
Transferred by financial control.
Deposit paid to Mercedes.”
He stated that this conveyed to him that it was Mr. Carolan’s belief, and that of the plaintiff that the deposit had been paid. When asked why he did not seek thereafter to repossess the trucks, he responded that he considered that Mr. Hughes had the financial capacity to carry out repayments, that he was present in the jurisdiction and appeared to have a substantial house and car on which he was apparently carrying out payments. He had no reason to believe that he would not ultimately pay the deposit on the trucks.
19. The Defence Evidence
First to testify on behalf of the defendant was Mr. Raj Rajagoupal who was then an account controller. He said that the first contact that he had with Mr. Hughes was when he attended at the defendants offices in England seeking to induce them to reinstate the contracts which had by then been terminated. These discussions took place in the summer of 1998, but prior to any involvement of the plaintiff. Mr. Hughes discussed with Mr. Hughes methods of payment which he might adopt and how he was going to resolve each of the contracts. As soon as soon as the contract was terminated, no further direct debits were accepted through their bank system. However this would not prevent a customer sending in payments in the form of a cheque or paying into a bank. Any funds received after the termination of a contract would be put towards the account. After termination the truck was normally sold at auction in an effort to seek to mitigate the customers loss. The witness informed Mr. Hughes that the contracts had been terminated and that the defendants were actively seeking to repossess the vehicles. Each of the contracts relating to each of the trucks was terminated on 8th June, 1998. Prior to that date, in April 1998 he had considered the repossession of the trucks and had ordered keys for that purpose. He was in contact with repossession agents, named Anglo Irish Professional Repossession. This contact commenced on 20th April, 1998 where a Mr. Murphy of that firm indicated to the defendants that he had identified the trucks and could seize them if this was desired.
20. With regard to the 1991 truck the witness accepted that Mr. Hughes paid the payments promptly for six months after 30th March, 1996 with Mercedes Benz Finance. The latter two trucks, that is the 1993 and 1996 truck were both purchased on 23rd October, 1996. Mr. Rajagoupal testified that when a customer is two payments ‘down’ in relation to any one truck the contract is terminated. The 1991 truck was seized on 21st July, 1998. At the time of seizure it was accepted that the customer immediately became liable to pay all outstanding instalments. He quoted Mr. Hughes a settlement figure of £6,384.89 on the 1991 truck. This was made up of £5,384.89 for arrears and £1,000 added on for the cost of repossession.
It seems clear this total sum of £6,384.89 was paid by Mr. Hughes to the defendant on or about 7th August, 1998 by way of bank draft. Despite the fact that the outstanding sums on the 1991 truck were repaid, the defendant retained possession of that truck. It was ultimately sold on 16th January, 1999 at Garryduff Auctions in Northern Ireland for the sum of STG £4,935. Mr. Rajagoupal contended that despite the fact of £6,384.89 had been paid by Mr. Hughes in August 1998 it was still the property of the defendant. He stated that what was set out in the invoice of 14th September, 1998 were not truck sale prices but settlement figures. He accepted that the implication of the reservation of title clauses was that the defendants owned each of the three trucks. After the date of termination he accepted Mercedes Benz had a money claim against Mr. Hughes and also had ownership of the trucks entitling them to sell the trucks for a fair price. He further accepted that when the defendants received the STG £40,000 the plaintiffs appear to have thought they were buying the trucks. In the course of cross examination by Mr. Senan Allen S.C. on behalf of the plaintiff the following exchange took place from question 136, day three onwards:-
“Q: So when you got the £40,000 it was plainly you could infer, that Lombard thought they were buying the trucks?
A: An assumption could be made on that basis, yes.
Q: No other assumption could be made I suggest to you?
A: You’ve got to understand here in this instance we were not party to any agreement between Mr. Hughes and Lombard, we were completely an innocent party. We had three trucks to sell. The three trucks owed us a certain amount of money. All we wanted to do was sell the trucks and get the money in.
Q: You are not prepared to sell them for £40,000?
A: We certainly would not be able to sell them for £40,000.
Q: Lombard was not prepared to pay any more than £40,000?
A: Then nothing would have happened Sir, we would not have passed title on the trucks at all.
Q: Exactly, so you give them their money back?
A: That is a decision which has to be made by the manager of the department at the end of the day.
Further at question 143:-
Q: If you pay money for something and do not get it, do you not get your money back?
A: Well, it’s a decision which is not made by me, but by somebody senior above me who decides that.”
The witness did not accept that the transaction between the plaintiff and the defendant resembled in all relevant particulars the earlier transactions which the defendant itself had carried out with Agnew Commercials again subject to retention of title clauses. Mr. Rajagoupal was unable satisfactorily to explain the full nature of the transaction relating to the 1991 truck, especially having regard to payment of the outstanding sum thereon as on 7th August, 1998. Nor was he in a position to explain why the cash deposit, stated to be due in the invoice of 14th September, of £22,667.56, made no allowance for the payment by Mr. Hughes on 7th August, of the sum of £6,384.89.
A further incongruity which appeared is that, in a memo from Kaye MacDougall of 17th September, 1998, relating to “chaps receipts” (a form of inter finance house bank payment) and sent by email, the sum of £40,000 received by the defendants from the plaintiff on 16th September was allocated to two accounts. The first of these was stated to be account no 9126885298. The second account was numbered 9146732700. The first of these account numbers was, curiously, the invoice number for the entirety of the three trucks as set out in the invoice of 14th September, 1998. The latter invoice number would appear to relate only to the 1991 truck which had been the subject matter of apparently full repayment made in August, 1998. Mr. Rajagoupal, having been on holiday was not in a position to deal with the manner in which the defendants chose to treat the £40,000 paid by the plaintiffs. The relevant witness on this issue would appear to have been Ms. MacDougal, who did not testify.
21. Mr. Kevin Segar also testified on behalf of the defendant company. At the time he was passenger car asset controller. However, in the absence of others on holidays he also had to involve himself in commercial vehicles transactions. On 11th September he was contacted by Mr. Hughes stating that he had managed to obtain finance from the plaintiffs and requesting that he produce an invoice based on a copy which would be sent over to him reciting the three vehicles, their chassis numbers, engine numbers and registration numbers in accordance with the template invoice to be sent by the plaintiffs. Mr. Segar accepted that the draft invoice sent over on 11th September, 1998, was incorrect. The corrected invoice was sent out on 14th September. On the following day he received a telephone call from a person whom he believed to be called Carolyn from the plaintiff company requesting clearance in the vehicles. To this he responded that he could not possibly give clearance, that the defendants had not received all the monies due on this account and therefore they would not be passing “clearance” or giving letters of “clearance”. The witness stated that the reaction of the representative from Lombard & Ulster was “fairly muted”, and that she then wanted to speak to a supervisor at which point she was passed over to Kaye MacDougall who was in a different part of the office. When the £40,000 came in from the plaintiffs he was surprised to see it arrive before the deposit came in. He did not accept that the first right of appropriation of a debt was that of the customer. The defendants’ policy would be to appropriate the funds across all three transactions. Mr. Ralph was not disposed to accept that there was any analogy which might be drawn between the transactions which the defendant company effected with Agnew Commercial Motors in 1996. He was of the view that what was in question here was a refinancing deal rather than a simple hire purchase transaction. Mr. Ralph was insistent on the proposition that in order for the plaintiffs to obtain full title to the three trucks a total sum on foot of the contract must be paid. However, he denied that the sum of £40,000 which had been paid by the plaintiff had, been effectively treated as a deposit. At question 403 on day three he was asked by counsel for the plaintiffs in reference to the deposit:-
“Q: When the £22,000 failed to materialise you forfeited the £40,000?
A: In my view they paid £40,000 which is what the invoice that is requested from Lombard to raise, they paid and they kept their first part of the bargain in paying us the £40,000. The rest of the balance was due.
Q: What did they get from (sic) the £40,000?
A: I can’t comment. They had a contact with Mr. Hughes which they wrote on the same day that I sent the fax or that the fax was sent over on 14th. They already had a hire purchase agreement with Mr. Hughes and they had three payments from Mr. Hughes as it turned out.
Q: That was later. Never mind about that. How can they hire the goods to Mr. Hughes if they do not own them?
A: On the documentation that they started on 14th, they’d already signed Mr. Hughes up. It was already entered into agreement surely before they sent us the money”.
In Mr. Ralph’s view the plaintiffs were engaging in a refinancing agreement which had nothing to do with straight forward hire purchase. In hindsight he considered that the plaintiff and the defendant did not have the same understanding as to the nature of the transaction at all.
22. Third to testify on behalf of the defendant company was David Ralph, again an employee of the defendant at the time. He stated that his recollection, was at a time that he could not remember, he had contact with the plaintiffs. The plaintiffs sought details as to Mr. Hughes history as a customer. In response to this the witness stated he indicated that the plaintiffs might want to carry out sufficient checks on Mr. Hughes to establish his credit worthiness. However, he did not say that his conversation went outside the standard industry norm that anyone would say to anyone else. He considered that Mr. Hughes was a very “slippery sort of character” with an unfortunate and chequered history with the defendant company. He confirmed having written the letter of 26th November demanding payment of the total sum of £62,667.56. He left the defendant company on 25th January, 1999. The witness was unable to account for the fact that the deposit stipulated in the contract of £22,667.56 did not apparently take into account the sum paid on 7th August, 1998, by Mr. Hughes of £6,384.89, which was a settlement on the 1991 truck.
23. When the witness was asked as to the meaning of his letter of 26th November, he accepted that it meant that in his view the plaintiffs were liable to pay the balance of the total sum outstanding that is that they were liable for the additional sum of £22,667.56. He contended it was a refinancing agreement.
I am unclear as to how this testimony could completely be reconciled with the description on the invoice of 14th September, 1998, as being a “Sales Invoice”.
At question 616 Day 3 the witness was asked whether, in his view, the payment of the sum of STG £6,384 would have entitled Mr. Hughes to the ownership of the 1991 truck. His response was-
“I must be honest, on the face of it, yes, it would look that way.”
24. Consideration
The central case put forward (with much panache) by Mr. Michael Byrne S.C. on behalf of the defendants was that the plaintiffs took on the risk as to whether or not Mr. Hughes would pay the deposit. Further, that at all stages as owners the defendants were entitled to assert the reservation of title clause and that the defendants remained owners of the vehicles. The position did not alter by virtue of the fact that the plaintiffs “took on the risk of Mr. Hughes”. The defendants did not owe any greater duty of disclosure as a consequence of this position. Mr. Byrne further submitted that if the plaintiffs failed to carry out sufficient checks in relation to the credit worthiness of Mr. Hughes that was a matter for them. There was no need to imply terms into the contract unless to give business efficacy thereto. Here there was a straight forward invoice contract between two finance houses containing a retention of title clause clear on its face which, states that if all monies were not paid no title passed. Why then Mr. Byrne asked rhetorically did the plaintiffs not respond to the letter of 26th November? Why did Mr. Carolan resort to Mr. Hughes, on occasion in the company of Mr. Carey, seeking to induce him to pay up the deposit? Counsel further submitted that even if there was a breach of a condition precedent, or a lack of consensus ad idem there was approbation or adoption of the contract by the conduct of the plaintiff in November or thereafter. The arrangement entered into between the plaintiff and Mr. Hughes was one collateral to the contract in issue in these proceedings regarding the payment. Regarding the payment of £6,384 in August, 1998, counsel submitted that such payment, although undoubtedly intended to discharge the indebtedness relating to the 1991 truck, did not have that effect. It was a matter for the defendants to allocate that payment along with other payments in discharge of the general indebtedness owed on foot of the three trucks.
In his succinct submission on behalf of the plaintiff, Mr. Senan Allen S.C. submitted that, on any objective basis, what was in contemplation between the parties was sale of three trucks. The prices for such vehicles were set out in the sales invoice. In its substance and execution the transaction entered into between the plaintiff and the defendant was not different from those entered into by the defendant with Agnew Commercials who supplied the vehicles to the defendant in 1996. Mr. Allen pointed to the acceptance by Mr. Rajagoupal that the payment of a deposit was a matter between the dealer and the customer, not a matter for the finance house. He submitted that whether the transaction was a finance or refinancing transaction, the title to ownership of the trucks by the plaintiff was a condition precedent. Absent the fulfilment of any such condition there could have been no contract. Here the defendants did not have possession of two of the trucks. This was not disclosed. Mr. Allen S.C. rejected any contention to the effect that the mention of the “deposit” sum of £22,667.56 in the invoice meant that the plaintiffs already had possession thereof. On its face it clearly meant that it was the contractual duty of Mr. Hughes to pay the deposit. Mr. Allen specifically pointed out that there was evidence from the defendants side that they were surprised to see the sum of £40,000 arriving from the plaintiffs in the absence of the payment of the deposit. Counsel pointed to what he contended were three fundamental difficulties in relation to the case advanced by the defendant.
These were:
(a) the status of the payment of the £40,000 in the absence of the deposit
(b) the mistaken belief on the part of the plaintiff that the defendant had possession of all three trucks it was purporting to sell
(c) the fact that the defendant did not at the time own the 1991 truck by reason of the payment of £6,384, which consisted not only of the redemption figure but also seizure costs. The failure to respond to the letter of 26th November was not a relevant or material consideration in the interpretation of the contract. As of the 14th September, 1998 the defendant had two trucks (or possibly three) and their personal claim against Mr. Hughes. As of 15th September they had the same trucks, the same liabilities against Mr. Hughes, but in addition the sum of £40,000 received from the plaintiff which was unlawfully appropriated by the defendant as a deposit between all three trucks.
In relation to the three trucks Mr. Allen pointed to the fact that the defendants found themselves in a position where it was they who had by dint of resale made additional profits of STG £3,800 in relation to the 1991 truck; £5,924 the 1993 truck, and STG £10,331 the 1996 truck. It was inconsistent for the defendants to assert continuing ownership over the trucks on the one hand and on the other to assert that they are entitled to retain the sum of £40,000 paid over to them by the plaintiffs.
26. The Law
Where one contracting party has not received any part of that contracted for there has been a total failure of consideration. Here ‘consideration’ acquires a narrower meaning than that imputed for the purpose of determining whether a contract has been formed. In Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Limited [1943] A.C. 32 Lord Simon summarised the legal position thus:
“In the law relating to the formation of contract the promise to do a thing may often be the consideration, but when one is considering the law of failure of consideration and of the quasi contractual right to recover money on that ground, it is generally speaking not the promise which is referred to but the performance of the promise.”
27. Thus if there is defective performance by one contracting party in circumstances entitling the other party to rescind the contract (for example breach of an express or implied condition) the injured party may pursue whatever contractual remedies are available, or elect instead to claim restitution. If, however, there has not been a total failure of consideration, the quasi contractual remedy will not be available. If the defendant has a valid defence in contract to the plaintiffs action the plaintiff may not have any financial remedy at all. If a plaintiff receives some tangible benefit it does not follow that a court will be constrained to hold that there was no total failure of consideration. (See the leading English on this issue, Rowland v. Divall [1923].
The Irish case of Chartered Trust Ireland Limited v. Healy and Commins (Barron J. Unreported, High Court, 10 December, 1995) equally illustrates this point. In that case the first named defendant hired a truck on hire purchase terms. The transaction was financed by the plaintiff finance company. It later transpired that the truck was illegally brought into the State and was not in fact the vehicle it was represented to be. Barron J. held that the contract was null and void and awarded the first named defendant the return of all moneys paid by way of hire purchase instalments and all other payments made in pursuance of the agreement. The fact that Healy had used the truck for over a year did not mean that he had received any part of the consideration; in contracts of sale title to the property and in hire purchase cases the option to purchase are seen are the consideration.
28. Similar considerations informed the decision of the Supreme Court in the case of United Dominions Trust (Ireland) Limited v. Shannon Caravans Limited [1976] IR 225. In that case a third party wished to obtain approximately £3,300 in order to pay for a mobile caravan which he had bought and which had been delivered to him. The third party approached a junior employee of the plaintiff, a hire purchase company, and the employees suggested that the defendant, a dealer in caravans should purport to sell the mobile caravan to the plaintiff for £3,300 and that the third party should then purport to purchase the caravan from the plaintiff under a hire purchase agreement between the plaintiff and the third party. The scheme was put into operation and the plaintiff paid the defendant £3,300 as the purchase price of the caravan and then executed a hire purchase agreement with the third party. The defendant who did not profit by the transaction immediately paid £3,300 to the third party. When the third party had paid the plaintiff 8 of the 36 monthly instalments under the hire purchase agreement the third party became insolvent and the plaintiff’s senior executive became aware of the true facts. The plaintiff’s junior employee was the only employee of the plaintiff who knew of the scheme. He was not authorised to accept hire purchase business for the plaintiff and the plaintiff’s executive officer who authorised the payment of £3,300 by the plaintiff and the execution of the hire purchase agreement was not then aware of the true facts. In an action in the High Court for money paid to the defendant for consideration which it wholly failed the plaintiff recovered judgment for £3,300 less the amount of the hire purchase instalments received from the third party. It was held by the Supreme Court (O’Higgins C.J., Henchy J. and Griffin J.) in disallowing the appeal:
1. That as the plaintiff’s junior employee was privy to an act of deceit against the plaintiff the knowledge that the employee could not be imputed to the plaintiff
2. There had been a total failure of the consideration for the sum of £3,300.
In the course of his judgment (at p. 232) Griffin J. relied on Rowland v. Divall [1923] 2 KB 500 and quoted Lord Justice Atkin at p. 506 of the report to this effect
“It seems to me that in this case there has been a total failure of consideration, that is to say the buyer has not got any part of that for which he paid the purchase money. He paid the money in order that he might get the property, and he has not got it. It is true that the seller delivered to him the de facto possession but the seller had not got the right to possession and consequently could not give it to the property … There can be no sale at all of goods which the seller has no right to sell. The whole object of a sale is to transfer property from one person to another … can it make any difference that the buyer had used the car before he found out that there was a breach of the condition? To my mind it makes no difference at all. The buyer accepted the car in the representation of the seller that he had a right to sell it, and in as much as the seller had no such right he is not entitled to say that the buyer has enjoyed a benefit under the contract. In fact the buyer has not received any part of that which he contracted to receive, namely the property and right to possession – and that being so there has been a total failure of consideration.
30. The principles thus set out so clearly by Irish authority and otherwise are applicable in the instant case. Here I find the plaintiffs were entitled to assume that the defendants were owners of each of the three trucks. I do not accept on the facts as found that the defendants were the rightful owners of the 1991 truck.
The plaintiffs were entitled to assume that the defendants had the three trucks in their possession. As it transpired the only truck in their possession that was the 1991 truck to which they had no title. The other two trucks were actually held in the possession of Mr. Vincent Hughes. Those two trucks were later repossessed only on the 18th June, 1998.
There is yet a further paradox in the position adopted by the defendant. It is entirely unclear, having regard to the circumstances, as to why the sum of £6,384.89 was not deducted from the sum of £22,667.56 identified as being the ‘deposit’ payable.
I further accept that the plaintiffs were unaware of the fact that the trucks in question had been previously purchased by the defendants in March and October 1996 from Agnew Commercials in Northern Ireland.
In common with the authorities cited there must be a strong suggestion, and I will put it no further, that there were intentional failures of disclosure which may well be tantamount to deceit on the part of Mr. Hughes in relation to the transaction as a whole.
While it may have been that the plaintiffs could have taken further steps to check Mr. Hughes history this in my view does not affect the fundamental legal issue which arises in this case: that is the clear failure of disclosure of material facts, and further breach of material conditions as identified. For the reasons set out above I consider this is a contract where the consideration has wholly failed. The plaintiffs are entitled to recession thereof.
Even if I am wrong on this finding it seems to me that the contract made between the plaintiff and the defendant is one where the background history of the relationship between Vincent Hughes and the defendant should have been disclosed by Mercedes-Benz Finance. Even if the defendants were correct in their argument, the plaintiffs were effectively placed in the position of a surety on behalf of Mr. Hughes. In the circumstances therefore the defendants were in possession of particular information which made the risk to which the plaintiffs were exposed an unusual one or a risk materially different in nature to that which the plaintiff would normally expect. In Levitt v. Barclays Bank [1995] 2 All E.R. p. 615 a contract was set aside where the plaintiff who had put up treasury stock as security, was not told of arrangements between the debtor and the bank whereby the security would be used to repay the loan. Here, the defendants were in possession of particular information regarding Mr. Hughes’s credit record, the previous transactions in relation to the trucks, the fact that two of them were in Mr. Hughes’s possession that only the third had been repossessed from him which truck was lawfully the property of Mr. Hughes. All of these facts should, in the circumstances, have been disclosed in the making of this agreement.
Alternatively even a court were to hold that if the contract was conditional, it is clear that a condition precedent was the payment of the sum due by way of deposit (CF Lowis v. Wilson [1949] I.R. 347]. This condition was unfulfilled.
In either instance it seems to me the plaintiffs are entitled to rescind the contract.
On the basis of these findings I consider that the plaintiff is entitled to recession of the contract. I will hear counsel on the issue of damages and costs.

O’Connor v. Coady

[2004] IESC 54 (21 October 2004)
THE SUPREME COURT
McGuinness J.
Geoghegan J.
McCracken J.

[Judgments delivered by Geoghegan J. & McCracken J.; McGuinness J. concurred with both.]

JUDGMENT of Mr. Justice Geoghegan delivered the 21st day of October 2004
The background to this appeal is that the appellant sold certain property to the respondent subject to the obtaining of planning permission within four months and with no specific closing date but with the provision that the sale was to be closed within seven days of the granting of the permission. The planning permission was not granted until more than a year after the date of the contract. When the four month period had expired without the permission being granted, neither party initially gave any notice to the other indicating that he or she was treating the contract as at an end. At a time, however, when it appeared that planning permission was shortly going to issue the respondent became active and through his solicitor made suggestions as to how the sale would proceed. This letter was responded to by the solicitors for the appellant in a letter headed “subject to contract/contract denied”. They expressed surprise at the contents and asserted that the contract had lapsed after the four months period. The same solicitors suggested that there was, therefore, no longer any contract but that their client would be willing to renegotiate a new contract at a new price. The respondent displayed indignation at this response on the alleged basis that all the indications had been that the appellant was treating the contract as still alive and indeed the deposit had never been returned. The respondent, accordingly, launched specific performance proceedings in the Circuit Court. The appellant thereupon instituted these proceedings in the High Court under the Vendor and Purchaser Act, 1874. The special endorsement of claim on the Special Summons sought clarification from the court on three questions (the third of which is not now regarded as relevant). That special endorsement of claim subsequently became amended by the addition of further questions. In its original form the two relevant questions were as follows:

1. Was the plaintiff entitled to rescind the contract dated the 31st May following the failure of the defendant to comply with the special condition on obtaining planning permission by the 30th September, 2001?

2. Did the plaintiff in fact validly rescind said contract of the 31st May, 2001?

For reasons which I will be developing further in this judgment, I believe that those were the relevant questions and that it is somewhat unfortunate that unnecessary confusion was introduced into the case by the additional questions in the amended special endorsement of claim. Those additional questions were as follows:

“3. Was the plaintiff under the said contract entitled to regard the said contract as being at an end when the provisions in relation to the obtaining of planning permission within the time limit prescribed were not complied with, in that the said planning permission did not issue?
4. Was it incumbent upon the plaintiff, being the vendor under the said contract, to notify the defendant, being the purchaser, that the said contract was at an end?
5. The said contract being conditional upon the said issue of planning permission did the plaintiff, being the vendor under the same, either expressly or by implication do any act or thing as would have indicated to the purchaser that they were waiving the requirement of compliance with the said condition or otherwise indicating that she was treating the said contract as unconditional?
6. Was the defendant, being the purchaser under a conditional contract entitled to assume in the absence of the said condition being fulfilled as therein provided that the plaintiff being the vendor, had waived the said condition or that the contract had otherwise become unconditional or otherwise enforceable.”
The case came for hearing before Carroll J. and she delivered a reserved judgment on the 12th November, 2003. The effect of the answers which she gave to the questions was that the respondent succeeded in his contention that there was still a subsisting contract.

It would seem to me that the reasoning of Carroll J. was based on the arguments and agreed parameters of the case put before her by counsel which were more or less repeated at the hearing of the appeal before this court. For instance, the learned trial judge states in her judgment that the vendor submitted firstly that the condition about planning permission was a condition precedent, “in which case no contract came into existence”. It would seem to me that to quite an extent, even before this court, counsel on both sides accepted that there was a relevant issue as to whether the condition was a “condition precedent” or a “condition subsequent”. For reasons which I will elaborate on, I do not consider that that distinction is either particularly relevant or particularly helpful.

Of the many cases included in the book of authorities the one which the learned trial judge found most relevant was Sepia Limited v. M. and P. Hanlon Limited [1979] I.L.R.M. 11, a decision of Costello J. I would respectfully differ from the learned trial judge in the degree of relevance that she attached to that case which would seem to me to be quite different in a number of respects. In the Sepia case there had been a contract of sale subject to the granting of planning permission. There was no time limit on the condition as to planning permission but there was a specified closing date in connection with which it had been made clear that time was of the essence and in the context that the planning permission had to be obtained before the closing date. A second contract was then entered into relating to separate property and containing no condition as to planning permission but amending also the first contract the end result of which was that there was a common closing date in respect of which for the reasons given by Costello J. time was not of the essence. Since there was only a non-essential closing date and no express time limit on the planning condition, clearly the only relevant date could be a date created by a notice making time of the essence. Costello J., however, pointed out at p. 24 of the report that in the case of the first contract if the purchaser did not waive the special condition relating to planning permission that contract “would come to an end at the expiration of the notice (the condition relating to planning permission not having been complied with)” and the learned judge cites Smith v. Butler [1900] 1 Q.B. 694; and Aberfoyle Plantation Limited v. Cheng [1960] AC 115 (a case relied on by the appellant on this appeal). If anything, that sentence, in my opinion, is more helpful to the appellant than to the respondent but I do not think that Costello J’s words should be interpreted as his having expressed any view as to whether in the case of a conditional contract, if the condition fails there is a self-executing termination of the contract or on the other hand if one of the parties has to indicate that he or she is treating it as at an end. It will emerge later in this judgment that I favour the latter view and in so doing, I am satisfied that I am in no way differing from any views expressed by Costello J. I do not think that he addressed that question at all as it did not arise.

The important principles in this connection were in fact laid down by the Privy Council in Aberfoyle Plantations Limited v. Cheng cited above, principles which in whole or in part have been referred to in Irish cases as well as Australia, New Zealand, Northern Ireland and other English cases. Lord Jenkins (who sat with Lord Denning and the Rt. Hon. L.M.D. de Silva) in giving the advice of the Board laid down the following principles as applicable subject of course to different arrangements having been agreed between the parties.

“(i) Where a conditional contract of sale fixes a date for completion of the sale, then the condition must be fulfilled by that date;
(ii) Where a conditional contract of sale fixes no date for completion of the sale then the condition must be fulfilled within reasonable time;
(iii) Where a conditional contract of sale fixes (whether specifically or by reference to the date fixed for completion) the date by which the condition is to be fulfilled, then the date so fixed must be strictly adhered to and the time allowed is not to be extended by reference to equitable principles.”
The decision of the Privy Council in Aberfoyle has always been controversial but only in one respect. On one interpretation of the opinion delivered by Lord Jenkins (I put it this way because there are hugely varying interpretations as to what he did in fact mean) the condition in that case was treated as a condition precedent in the sense of a condition precedent to the coming into existence of the contract. But as far as I can understand from the case law both in this jurisdiction, in Northern Ireland, in England, in Australia and New Zealand there is no judicial controversy as to the principle that if a time limit is specified in such a condition, then, in the absence of agreement to the contrary it is non-extendable. Not only was this principle accepted by Costello J. in Sepia as referred to above but it was also acknowledged by McWilliam J. in Maloney v. Elf Investments Limited (unreported judgment in the High Court delivered 7th December, 1979). Speaking in the context of waiver of the condition which of course does not apply here, McWilliam J. at p. 8 of the judgment said that he was of opinion that “in the absence of any other authority, that the decision in the Aberfoyle case as to the necessity for exact compliance with the date mentioned in the condition means that there can be no question of waiver after that date has passed.” Again in reliance on Aberfoyle Murray J. in the Northern Ireland case of McKillop v. McMullan [1979] N.I. 85 at 92 appears to endorse the view that where there was a specified completion date and the contract was subject to planning permission that date had to be adhered to for fulfilment of the condition. In this non-controversial respect Aberfoyle has been followed also in judgments delivered in the High Court of Australia in Perri v. Coolangatta Investments Property Limited (1982) 149 CLR 537. In relation to all aspects of this case I have gained considerable assistance from the judgments in that Australian case and I will be returning to them. It is of some passing interest to note that the five judge court comprised three judges all of whom are now former Chief Justices of the High Court of Australia and each of whom delivered written judgments. The court consisted of Gibbs C.J., Stephen, Mason, Wilson and Brennan JJ.

There is no doubt that the condition was not fulfilled within the prescribed time but the question is, did the appellant effectively bring the contract to an end?

It is at this point that it is helpful and relevant to summarise the relevant facts. The relevant condition read as follows:

“The contract herein is subject to the purchaser, his servants or agents obtaining Final Grant of Planning Permission for the residential development applied for by him, his servants or agents on the property at sale herein and after conclusion of all appeals (if any) within 4 months of the date hereof.”
It is that “special condition” which rendered the contract a “conditional contract” an expression to which I will return. A subsequent “special condition” read as follows:

“The closing date herein shall be 7 days after issue of the Final Grant of Planning Permission referred to at special condition 4 above.”
It is clear from the correspondence exhibited that the contract had been drawn up about two months before it was actually signed and had originally inserted a six month period which because of the delay was altered to four months. The closing date suggested by the purchaser of four weeks after the issue of the planning permission was altered to seven days on the insistence of the respondent. The only significance of those negotiations is that they clearly negative any suggestion that the time limit on the condition was not intended to be essential. There is quite clearly nothing therefore to negative the general law on this as enunciated in Aberfoyle.

The subsequent events were in many ways strange and remain unexplained. A perfectly sensible letter was written on the 23rd August, 2001 by Patrick Tallan and Co., solicitors for the appellant to Richard Dennehy and Co. the solicitors for the respondents. The letter noted that the solicitors for the vendor had not heard from the other solicitors for some time in relation to the planning application and asked for information as to the status thereof and as to when the purchaser would be in a position to complete. The affidavit of the appellant states that that letter elicited no reply or information. However, this is disputed in a replying affidavit of the respondent in which he says that it is incorrect to assert that the appellant received no reply or information from the respondent regarding that query contained in the letter. He says that he is instructed by his solicitor that the solicitor telephoned the appellant’s firm in or about 19th September, 2001 and advised Ms. Brenda Rushe of that firm that he was not in a position to confirm the planning application as he had difficulties contacting his clients who were out of the country on business at that time and further advised her that he was not in a position to confirm matters in writing due to a family bereavement. It is stated that the solicitors suggested to Ms. Rushe that she should request her clients to call into the offices of C. and M. Holdings Limited in Ashbourne to speak to either a Mr. Gerard Foran or himself as to the current status of the planning permission. In the event, whether this happened or not is not particularly relevant because it appears that no further correspondence passed between the parties until September, 2002. The first such letter came from Richard Dennehy and Co. to Patrick Tallan and Co. and was dated the 3rd September, 2002. It read as follows:

“Dear Sirs
We refer to the above and our recent conversation regarding the same.
We now understand that planning permission issued in June of this year. However an appeal was lodged and this appeal is pending hearing in September or October of this year.
Our clients are confident that the appeal will not cause difficulty to them.
Further to the same and to enable completion can you please reply to our requisitions on title which were forwarded on the 26th June, of last year and confirm that our draft transfer deed is approved.
Yours faithfully”
There was a follow up letter of the 11th September requiring a Residential Property Tax Clearance Certificate and a Capital Gains Tax Clearance Certificate but nothing turns on that since the letter of the 3rd September was replied to by Patrick Tallan & Co. by a letter of the 12th September, 2002. It is important that I should quote this letter in full. It reads as follows:

“Subject to contract/contract denied
Re: Your client: Patrick Coady
Our client: Mary O’Connor, lands at Castle Street,
Ashbourne, Co. Meath
Dear Sirs
We acknowledge receipt of your letter of the 3rd inst. And were most surprised at the contents. As you are aware, under the terms of the contract, this contract has lapsed and is at an end.
Without prejudice, however, our clients will be prepared to renegotiate terms for the sale of the property and if your client wishes to make an offer perhaps you would let us hear from you at your earliest possible convenience.
In order to finalise matters we return herewith deposit in the sum of €57,138.21 (£45,000).
In the meantime, of course, we have no authority to bind our clients in this or any related correspondence and they will not be so bound until formal contracts have been executed by them and a full deposit paid. We are not agents within the meaning of the Statute of Frauds.
Yours faithfully”
A number of points are worth noting from this letter. First of all it is not a letter expressly purporting to rescind the contract. On the face of it, it is simply expressing surprise on the basis that the contract had lapsed once the date on the condition had passed. It is necessary, however, to look at the substance and not the mere form of the letter. There is no doubt that the letter is making clear that the vendor does not regard herself as bound by the contract. The denial of contract at the head of the letter copper fastens that view. Once the condition was not fulfilled within the correct time either party was entitled to treat the contract as at an end but was bound to notify the other party that he or she was so treating it. Once such notification in whatever form took place there was no longer a contract unless the party purporting to treat the contract as at an end had in fact expressly or impliedly affirmed the contract. Mere lapse of time would not necessarily constitute such affirmation, there would have to be some positive indication that the party otherwise entitled to rescind was treating the contract as still in being. Although time was allowed to elapse in this case no such affirmation took place and, therefore, this voidable contract was effectively avoided or rescinded by the letter of the 12th September, 2002.

As I have already pointed out, counsel for the appellant has not argued in either court that the contract automatically came to an end. On one view this concession was surprising in the light of the terms of the letter of the 12th September, 2002 in which the case of automatic lapse was made. I agree with the views of McCracken J. that the issue of automatic lapse does not arise but, for reasons which I will be indicating, my present view at any rate, would be that such a conditional contract is voidable and not void on the non-fulfilment of the condition.

The second point to be noted from the letter of the 12th September, 2002 is the phrase “in order to finalise matters” preceding a statement that they were returning the deposit. The deposit was not in fact enclosed. However, as McCracken J. points out in his judgment it appears to be accepted that this was an oversight. The non-return of the deposit therefore is not inconsistent with the rescission.

If I am right in my view that the time limit on the condition would not be self-executing and that an act of rescission would be required, the basis for such requirement must be considered as flowing from the implied agreement of the parties. Obviously such rescission cannot be effective after a positive affirmation of the contract.

In fairness to the parties on both sides of this case and their legal advisers, the questions raised are not without difficulty and have not really been considered before by the Irish courts. Analogous questions, however, have been considered in the Australian case of Perri referred to above. I do not intend to go into the facts of that case in too much detail. The condition involved was not a planning permission condition though other Australian cases involving such a condition are considered throughout the judgments in the context of their relevance. The condition in the Perri case was that the contract was being entered into subject to the purchasers completing a sale of certain other properties. No express time limit was fixed for the performance of the condition but it was held, as would be held in these courts, that it had to be complied with within a reasonable time. Nor was there an express completion date. Despite the differences in the factual background the observations of the judges were in many instances highly relevant to this case. First of all, a number of the judgments dealt with the distinction between condition precedent and condition subsequent. Both counsel in this case and, I think by implication, the learned trial judge considered that distinction relevant. But the Australian judgments and references to other cases and articles contained therein dealing with that distinction have convinced me that it is not really a helpful one. On the hearing of the appeal before this court, counsel for the appellant, Mr. O’Dwyer, S.C. and counsel for the respondent, Mr. Ralston, S.C. seemed to assume that the expression “condition precedent” necessarily and exclusively refers to a condition the effect of non-compliance with which means that no contract of any kind comes into existence. They seemed to take the view that every other kind of a condition that might be said to render the contract “conditional” was a condition subsequent. Gibbs C.J. in the Perri case considered that the completion of the sale of the other property was a “condition precedent to the performance of certain of the obligations of the parties under the contract including the obligation of the respondent to complete the sale.” He goes on to make the following observation:

“It has sometimes proved difficult to decide whether a particular condition of a contract should be classified as a condition precedent or a condition subsequent, and as Professor Stoljar has pointed out in ‘the contractual concept of condition’ Law Quarterly Review Volume 69 (1953) 485 at p. 506 if the words ‘precedent’ and ‘subsequent’ are to make sense they must be connected with a definite point of reference since they express a relationship in time, the question which must be asked is ‘precedent to what? Subsequent to what?’. However, provided the effect of a condition is clearly understood, its classification may be merely a matter of words. The condition in the present case was not a condition precedent to the formation of a binding contract (my emphasis). It is clear that a binding contract came into existence immediately upon signature, and that the parties to it were from that moment subject to certain obligations.”
Referring to a passage in a judgment of Isaacs J. in another Australian case Maynard v. Goode (1926) 37 CLR at 540 he agrees with Isaacs J. in pointing out that

“In one sense the stipulation might be a condition precedent to the performance of a particular term of the contract, while in another sense it was a condition subsequent in relation to the whole contract, since the failure of the stipulation would have entitled the vendor to retire from the transaction altogether.”
He goes on to refer to other cases in which it was pointed out the problems of making any relevant distinction between condition precedent and condition subsequent. Mason J. deals with the topic in similar vein in his judgment. He points out that generally speaking the court will tend to favour the construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of the contract. He points out that in most cases it is artificial to say in the face of the details settled upon by the parties that there is no binding contract unless the event in question happens. This view exactly corresponds with the view expressed by McWilliam J. in O’Mullane v. Riordan [1978] I.L.R.M. 73 at 77 where he said the following:

Returning to the Perri case and moving to the judgment of Wilson J. he refers to a passage in the judgment of the well known New Zealand judge, Cooke J., in a case called

Hunt v. Wilson (1978) 2 NZLR 261 at 267 in which that judge said the following:
“I venture to think that the ambiguous labels precedent and subsequent when applied to conditions are seldom of real help in solving issues in this branch of contract law. Certainly they can be positively misleading unless the meaning of what has been said is made specific by explaining to what the condition in question is seen as precedent or subsequent”.
Wilson J. goes on to agree with that view and to point out that the special condition in the Perri case could be described with accuracy as either a condition subsequent to the formation of the contract or is a condition precedent to an obligation in either party to proceed to completion. These views as to the respective meanings of “condition precedent” and “condition subsequent” and as to their frequent overlap were endorsed in the judgment of Brennan J. with which Stephen J. agreed.

“In the view that I have formed, it was then open to the respondent to avoid the contract without first giving any notice limiting a reasonable time for completion. By instituting the proceedings, before the condition had been either fulfilled or waived the respondent sufficiently evidenced its election to avoid the contract.”
I should point out that these views expressed by Gibbs C. J. were in the context of his approving similar views expressed in other Australian cases and in particular the following passage expressed in a case of Gange v. Sullivan (1966) 116 CLR 441:

“Whilst the effect of a condition must in every case depend upon the language in which it is expressed and a decision upon the meaning of one condition cannot determine the meaning of a different condition, the authorities cited do show a disposition on the part of the courts to treat non-fulfilment of a condition such as that here under consideration as rendering a contract voidable rather than void in order to forestall a party to a contract from gaining some advantage from his own conduct in securing or contributing to the non-fulfilment of a condition bringing the contract to an end. Accordingly … we are prepared to treat the non-fulfilment of the condition as rendering the contract voidable rather than void.”
Mason J. also makes it clear that, in his view, the time clause would not be self-executing and that the party relying on it would have to rescind. Indeed, that appears to have been the view of all the judges. As there is no authority requiring this court to hold otherwise, I have likewise taken the same view as the Australian courts endorsed in English cases also that non-fulfilment of the condition within the time stipulated renders the contract voidable rather than void. This would seem to me to be especially sensible in the Irish context. I think that two Irish solicitors dealing with each other on a sale would naturally assume that if one was going to treat the contract as at an end because of the breach of the condition he would so inform the other and that it is reasonable to imply such an obligation. This observation is necessarily obiter as the question was not argued in the light of counsel’s concession.

I would allow the appeal. I would answer the questions in the manner suggested by McCracken J. in his judgment.

Judgment of Mr Justice McCracken delivered the 21st day of October 2004
___________________

The Contract
By a contract in writing dated 31st May 2001 and made between the Appellant as vendor and the Respondent as purchaser the Respondent agreed to purchase the lands comprised in Folio 35939F of the Register of Freeholders County Meath for the sum of £450,000. The contract was subject to a number of special conditions, two of which are relevant to the present dispute. They are:-

“3. The contract herein is subject to the purchaser, his servants or agents obtaining final grant of planning permission for the residential development applied for by him, his servants or agents on the property at sale herein and after conclusion of all appeals (if any) within four months of the date hereof.”
“6. The closing date herein shall be seven days after the issue of the final grant of planning permission referred to at special condition four above.”
Quite clearly the reference in the latter special condition ought to be to special condition three as quoted above.

The general conditions of the contract were those contained in the Incorporated Law Society of Ireland General Conditions of Sale (1995) edition. These contained a provision regarding completion notices, the relevant portions of which are:-

“40. Save where time is of the essence in respect of the closing date, the following provisions shall apply:-
(a) If the sale be not completed on or before the closing date either party may on or after that date (unless the sale shall first have been rescinded or become void) give to the other party notice to complete the sale in accordance with this condition, but such notice shall be effective only if the party giving it shall then either be able, ready and willing to complete the sale or is not so able, ready or willing by reason of the default or misconduct of the other party.

(b) Upon service of such notice the party upon whom it shall have been served shall complete the sale within a period of twenty-eight days after the date of such service (as defined in condition 49 and excluding the date of service), and in respect of such period time shall be of the essence of the contract but without prejudice to any intermediate right of rescission by either party.”

Subsequent Actions of the Parties
At the date of the contract the Respondent had already applied for planning permission, which application included both the lands in sale and other adjoining lands the property of the Respondent, however no planning permission issued within the four month period referred to in special condition (3). By letter dated 23rd August 2001 the Appellant solicitor inquired as to the status of the planning application and as to when the Respondent expected to be in a position to complete the contract. There is some dispute as to whether there was a verbal response to this letter but that is not really relevant to these proceedings, and it is common case that no further correspondence took place on either side until over a year later, long after the four month period had expired.

On 3rd September 2002 the Respondent solicitor wrote to the Appellant solicitor in the following terms:-

“Re: Your client Mary O’Connor
Our client Patrick Coady
Lands at Castle Street, Ashbourne, County Meath
Dear Sirs
We refer to the above and our recent conversation regarding the same.
We now understand that Planning Permission issued in June of this year. However an Appeal was lodged and this Appeal is pending hearing in September or October of this year.
Our clients are confident that the Appeal will not cause difficulty to them.
Further to the same and to enable completion can you please reply to our requisitions on title which were forwarded on the 26th June of last year and confirm that our Draft Transfer Deed is approved.”
This was replied to by the Appellant’s solicitors by letter of 12th September 2002 headed “SUBJECT TO CONTRACT/ CONTRACT DENIED”.

The letter read:-

“Re: Your client Patrick Coady
Our client May O’Connor
Lands at Castle Street Ashbourne County Meath.
Dear Sirs
We acknowledge receipt of your letter of the 3rd inst. and were most surprised at the contents. As you are aware, under the terms of the Contract, this Contract has lapsed and is at an end.
Without prejudice, however, our clients would be prepared to re-negotiate terms for the sale of the property and if your client wishes to make an offer, perhaps you would let us hear from you at your earliest possible convenience.
In order to finalise matters, we return herewith deposit in the sum of €57,138.21 (IR£45,000).
In the meantime, of course, we have no authority to bind our clients in this or any related correspondence and they will not be so bound until former contracts have been executed by them and a full deposit paid. We are not agents within the meaning of The Statute of Frauds.
Yours faithfully”
Due to what appears to be accepted as an oversight the deposit was not in fact enclosed with that letter, but was returned shortly afterwards. On 20th September 2000 the Respondent lodged a caution in the Land Registry. Planning Permission was ultimately granted by An Bord Pleanala on 4th October 2002. On 19th November 2002 the Respondent issue specific performance proceedings in the Circuit Court. These present proceedings were issued by the Appellant on 11th November 2002.

The Relief Sought
The initial special summons issued by the Appellant sought the decision of the Court pursuant to the provisions of the Vendor and Purchaser Act 1874 of the following matters:-

“Was the plaintiff entitled to rescind the contract dated 31st May following the failure of the defendant to comply with the special condition on obtaining planning permission by the 30th September 2001.
Did the plaintiff in fact validly rescind the said contract of the 31st May 2001.

Is the defendant entitled to register the said caution in the Land Registry.”

The latter point did not in fact become an issue in these proceedings, but the special summons was subsequently amended by the addition of the following queries:-

“Was the plaintiff under the said contract entitled to regard the said contract as being at an end when the provision in relation to the obtaining of planning permission within the time limit prescribed was not complied with, in that the said planning permission did not issue?
Was it incumbent upon the plaintiff, being the vendor under the said contract, to notify the defendant, being the purchaser, that the said contract was at an end?

The said contract being conditional upon the said issue of planning permission, did the plaintiff, being the vendor under the same, either expressly or by implication to any act or thing as would have indicated to the purchaser that they were waiving the requirement of compliance with the said condition or otherwise indicating that she was treating the said contract as unconditional?

Was the defendant, being the purchaser under a conditional contract entitled to assume in the absence of the said condition being fulfilled as therein provided that the plaintiff, being the vendor, had waived the said condition or that the contract had other wise become unconditional or otherwise enforceable?”

Decision of the High Court
The summons came for hearing before Carroll J and by her judgment dated 12th November 2003 she answered the queries raised in the amended summons as follows:-

“1 The plaintiff was entitled to rescind the contract following the failure of the defendant to obtain planning permission by 30th September 2001 provided she served a completion notice under clause 40 of the General Conditions of Sale and if the defendant failed to comply with the notice.
2 The plaintiff did not in fact validly rescind the contract of 31st May 2001.

3 The plaintiff was not entitled to regard the contract as being at an end when the planning permission was not obtained within the time prescribed by the contract.

4 The plaintiff was not entitled to notify the defendant that the contract was at an end when planning permission was not obtained within the time prescribed by the contract.

5 & 6 The plaintiff did not indicate to the defendant that she was waiving the requirement of compliance with the condition relating to the issue of planning permission. It was the defendant who had the right to waive this condition not the plaintiff. The contract did not become unconditional or otherwise unenforceable.”

In her judgment the learned trial Judge partially relied on the decision of Costello J (as he then was) in Sepia Ltd and Opal Ltd v. M & P Hanlon Ltd and Seaborn Ltd [1979] ILRM 11. Having quoted a passage from the judgment in that case, she said at page six of her judgment:-

“In my view the construction given by Costello J to the first contract must equally be applied to the contract in this case. Time was not made of the essence of the contract when the closing date was fixed. After the purchaser was in default in closing the sale on the day fixed, then in order to bring finality to the contract the vendor would have to serve a notice making time of the essence of the contract under clause 40 of the General Condition of Sale. At the end of the period of 28 days provided for in clause 40, if planning permission had been obtained, the purchaser was bound to complete. If planning permission had not been obtained, the purchaser could waive the provision and complete the sale. If the purchaser did not waive the condition then the contract would come to an end at the expiration of the notice.
The vendor was not entitled to say in this case that the contract was at an end and return the deposit, just because the planning permission had not then come through within the time limited by the contract.
It was essential that a completion notice under clause 40 of the general conditions be served and that the time fixed by the notice should have elapsed without completion, before the vendor could treat the contract as at an end.”
I am afraid I cannot agree with this construction of the contract. Clause 40 of the General Conditions of Sale relates expressly to the completion of the sale and not to compliance with a condition. In fact, under that clause a 28 day notice cannot be served until after the closing date has passed. Under the present contract the closing date was seven days after the granting of planning permission, and therefore it is clear that no notice could be served until after the condition had been complied with and planning permission had been granted. However, it is true to say that in relation to the time limit for compliance with the condition, there was no express provision that time should be of the essence of the contract. It is therefore arguable that, after the time limit had expired, it was necessary for the Appellant to serve a notice making time of the essence of the contract, and giving a reasonable period within which the condition was to be complied with.

The Nature of the Condition
Both before the learned trial Judge and at the hearing of this appeal there was considerable discussion as to whether the condition relating to planning permission was a condition precedent or a condition subsequent. The distinction may at times be of considerable importance, in that if there is a condition precedent, then no contract comes into existence unless the condition is fulfilled, while if there is a condition subsequent, there is a valid contract in being, but it is not enforceable unless the condition is fulfilled. However, the distinction does not seem to me to be relevant in the present case. The real issue in this case is not whether a contract ever existed, but whether the terms of the contract can be enforced once the time for compliance with the condition has passed.

Effect of the Condition
The important features of this condition are, firstly that it relates to a planning application which was already in existence, secondly there was a fixed period for compliance with the condition and thirdly time was not made of the essence of the contract in relation to that period. The general principles relating to conditional contracts were laid down expressly and succinctly by Lord Jenkins giving the judgment of the Privy Council in Aberfoyle Plantations Ltd v. Cheng [1960] AC 115. After pointing out that the intention of the parties as expressed in the contract ought to be implied from the language used therein was all important, he said at page 124:-

The condition in the present case clearly comes within the principles set out at (III) cited above.

“The fact that a contract is subject to a condition has the effect of making it unenforceable until the condition is fulfilled, but it does not mean that there is no contract at all and the case cited (the Aberfoyle Plantations Ltd case) decided that the purchaser was entitled to recover his deposit under a term in the agreement. A condition contract is one which becomes enforceable provided the condition is fulfilled within the time provided by the contract or, if no time is provided, within a reasonable time.”
Similarly in Maloney v. Elf Investments Ltd (Unreported 7th December 1979) McWilliam J expressly rejected the argument that by analogy with the date fixed for closing, the time fixed in a contract for performance of a condition in relation to planning should be regarded in equity as the date fixed in the contract or a reasonable time thereafter unless time had been made of the essence of the contract. He expressly approved the third proposition in the Aberfoyle Plantations Limited case.

“(11) The contract is subject to the purchaser obtaining planning permission to develop the property the subject matter of the sale, which permission the purchaser shall apply for and take all proper steps to obtain with all reasonable speed, but nothing herein shall be deemed to effect the provisions of special condition number 8 herein.”
That there was no specific date by which the planning permission was to be complied with but condition 8 expressly made time of the essence of the contract in relation to the completion of the sale. In considering the effect of this, Costello J said at page 24:-

Finally, in the Northern Ireland case of McKillop v. McMullen [1979] NI 85 the Aberfoyle Plantation Limited case was expressly approved.

The Effect of Non Compliance
Somewhat surprisingly the Appellant has not sought to argue that the contract came to an end immediately on the expiration of the four month period allowed for fulfilment of the condition. Indeed, the wording of the questions in the summons seems to make it clear that the Appellant considers that the failure to comply with the condition rendered the contract voidable rather than void. In my view there is certainly an argument to be made that where there is a fixed date by which there must be completion of a condition, the contract automatically becomes void on the failure to comply with the time limit. However, that is not an argument which this Court has been asked to consider, nor is it one raised on the pleadings, and accordingly, expressly without deciding the point, for the purposes of this decision I am assuming that the contract became voidable.

Conclusion
In the circumstances of this case I would allow the appeal. I am doing so on the basis that the contract became voidable on the expiration of the four month period for compliance with the planning condition, that the letter of 12th September 2002 constituted a valid rescission of the contract, and that this rescission took place before the planning condition had been fulfilled and in the absence of any waiver on the part of the Respondent.

I would therefore answer the questions in the summons as follows:-

2 The Plaintiff/ Appellant did in fact validly rescind the said contract by the letter of 12th September 2002.

4 In view of the findings at (2) above, the question of whether it was incumbent on the Plaintiff/ Appellant to notify the Defendant/ Respondent that the contract was at an end does not arise.

Lynch -v- Duffy & Anor

[2009] IEHC 59 (12 February 2009)

Judgment of Mr. Justice Roderick Murphy delivered the 12th day of February, 2009.

1. Background

Agreement
By memorandum of agreement made 4th April, 2007, between the plaintiff as vendor and the defendants as purchasers. It was agreed that the vendor would sell and the purchasers purchase two lots of land in the townland of Lisnasaran, Cootehill, Co. Cavan, being lands comprised in folios 5895F and 19786 of the register of Co. Cavan and of the leasehold interest in part of the property formerly known as the Cootehill Workhouse. The purchase price was €4,000,000.00. A deposit of €400,000.00 was paid on the date of the agreement. Payment was made in two instalments: €50,000.00 on 23/8/2006 and the balance of €350,000.00 early in 2007. According to special condition 5 the contract was, accordingly, binding on the vendor.

The special conditions also provided that the agreement superseded all previous agreements and that the purchaser bought with full knowledge of the property. The purchaser was obliged to purchase lot 2 regardless as to whether the vendor, who was to use his best endeavours, bought out the fee simple interest.

The special condition in regard to planning permission is central to the issue between the parties.

The contract was subject to the issue of planning permission for the construction of private residential dwelling houses of the subject property.

The purchaser was to apply for such planning permission by 26th February, 2007, (notwithstanding the agreement being made five weeks previously on 4th April, 2007). The condition, however, stated that the purchaser should apply by that earlier date “following the exchange of this contract and time shall be of the essence in that regard. The application shall be lodged on foot of plans and specifications agreed between the parties prior to the exchange hereof”.

The memorandum had, according to the evidence, been drafted in autumn 2006. Indeed the executed memorandum of agreement has 2007 handwritten over the typed 2006.

The provision in the special conditions that the memorandum of agreement supersede all prior agreements, arrangements and understandings between the parties and that it constitutes the entire agreement between the parties relating to the subject matter thereof does not allow the court to take into account the drafting date which, in any event, cannot bind the parties until the contract was signed by the vendor pursuant to special condition 5.

The resolution of the illogicality of a prior date is resolved by the deletion of the words “by the 26th February, 2007” which, accordingly, requires the purchaser to apply for planning permission following the exchange of the contract.

Special condition 10 at the third paragraph requires the purchaser to use all reasonable endeavours to ensure that the application for planning permission be successful and that planning permission be obtained as soon as possible. The issue then becomes whether the purchaser did, in fact, use all reasonable endeavours in that regard.

The 6th paragraph of the special condition 10 provided that where the planning authority were to issue a decision to refuse permission and that no appeal against the decision was made within the statutory period or An Bord Pleanála decided to refuse such permission then the contract would be at an end. A further provision required that the appeal should first be approved in writing by the vendor who could not unreasonably withhold or delay such approval. But the purchaser should not appeal any decision of the planning authority to grant permission or any conditions attaching to any such decision.

Paragraph 9 of the Special Condition 10 provided that, in the event that no permission had issued by 30th June following, then the purchaser should be liable to pay interest to the vendor on the balance of the purchase moneys at a rate of 5% per annum up to the completion date. In the event that planning permission did not issue by 31st October, 2007, then either party may at any time thereafter by service of notice in writing terminate the contract and time should be of the essence in that regard. In the event that the termination of the agreement pursuant to the special condition regarding the planning authority or An Bord Pleanála refusing permission or that planning permission did not issue by 31st October, 2007, the purchaser should be refunded his deposit without deduction and without interest, costs or compensation.

Finally, special condition 10 provided that the closing date should be the date, 21 days after the issue of the grant of permission.

The evidence in the case was that there were delays in applying for planning permission. A planning application was made, initially, in July, 2007 and recorded on 1st August, 2007, accompanied by the requisite cheque to the planning authority. This cheque was not honoured and, accordingly, there was no valid application. On 28th August, 2007, the planning authority notified the defendants that if the appropriate fee was not paid with three days, the application would be rejected. (The defendants were on holiday at this time). On 13th September, 200, the planning authority wrote to the defendants agents to this effect and the application was returned to the defendants for the non-payment of fee. A new planning application was made on 24th October, 2007, which was one week before the date provided in special condition 10, paragraph 9, which would allow either party to serve a notice in writing terminating the contract.

On 26th October, 2007, the defendants wrote to the plaintiff saying that planning permission would not issue and requested the return of the deposit. The terms of that letter were as follows:-

“please note that my client’s application for planning permission has not issued in relation to the above property and it is not anticipated the same will issue on or before 31st October. As per the terms of the contract my clients hereby notify you that they will not be proceeding with the purchase of the property and you might kindly therefore arrange for their deposit to be refunded in early course.”

Leaving aside the issue of whether this was a notice in writing terminating the contract (the word is not used) it is clear that such right could only arise after 31st October, 2007.
The defendant’s solicitors wrote, following some correspondence which was not exhibited, some three weeks later on 15th November, 2007. That letter referred to the defendants planning application being lodged in July, 2007, though not validated by the planning office until 1st August, 2007. It referred to it being “quite a complicated planning application that necessitated employing specific engineers, archaeologists and architects.” It pointed out that they had worked on putting together the planning application from the start of the current year, even before the contract was signed and having spent approximately €190,000.00 on getting the application together. The letter referred to the clients being on holidays for two weeks and that it was therefore October before the planning application was resubmitted on 24th October, 2007, including a copy draft in the sum of €6,763.00.

The letter further stated that the clients had acted in a most reasonable manner and without any undue delay. Having spent a lot of money on the planning application it would not make sense for them to deliberately delay the process especially where they were liable to pay interest of 5% from 30th June, 2007, until closing. Reference was made to the letter of 26th October, which stated:-

“my clients do not now wish to proceed to purchase the property and I therefore request you to return my clients deposit in the sum of €400,000.00 by return as per the terms of the contract.”

The letter does not formally notify the termination of the contract in those terms. In referring to the letter of 26th October, the vendor’s solicitor would seem to rely on that as notification to terminate.
A further letter from the defendant’s solicitors dated 18th December, 2007, alleged that it was the vendor who frustrated the application in the first instance in that he was seeking unrealistic sums to facilitate the original entrance and the plans then to be redrawn with a new entrance within the site. The letter first states that the defendants were fully aware of the fact that the time limits on the contract were very strict and did all they could to ensure that the papers were lodged and all matters dealt with as soon as reasonably possible and called upon the plaintiff’s solicitor to return the defendant’s deposit. Otherwise they would have to apply to the court to seek redress and interest on the moneys held since the date that they were entitled to the return of same.

2. Issues arising
The court is asked to provide an answer to the following three questions:-

(a) Are the defendants in breach of special condition number 10, paragraph 3 of the contract for sale made between the parties on 4th April, 2007?
That condition provides that the purchaser “shall use all reasonable endeavours to ensure that the application for planning permission is successful and that planning permission is obtained as soon as possible”.

(b) In the event that the answer to the previous question is in the affirmative, are the defendants thereby precluded from relying on the right of termination provided for by special condition 10, paragraph 9 of the contract for sale which provides that in the event that planning permission does not issue by 31st October, 2007, then either party may at any time thereafter by service of notice in writing terminate this contract, and time shall be of the essence in that regard.

(c) In the event that the answer to the previous question is in the affirmative, is the plaintiff entitled to rely on the provisions of general condition 41 of the contract for sale to forfeit the deposit and resell the property.

3. Evidence of plaintiff
Mr. Thomas Lynch said that in March, 2007, the defendants came to his house requesting the removal of a ditch on his property adjoining the property the subject matter of the contract. He refused to sign some piece of paper that they had. A figure of €180,000.00 had been mentioned to his brother who is not an owner. He refused at any price. He would not give them a sight line as they needed privacy. He said from that time onwards there was not cooperation. He did not know why his solicitor wrote to the defendants on 7th March, asking if they wanted a sight line.
Mr. Lynch’s evidence with regard to whether he had seen or approved the planning application was not clear. He said that no plans were brought by the defendants to him in June, 2007 but agreed that they came on a couple of occasions and that he told them to deal with his solicitor and other adviser whom he had engaged: with Mr. Crosby and Mr. Morgan. He said he had approved no plans. He admitted that there may have been 88 houses in respect of which planning permission was applied for but that Mr. Duffy did not have plans with him.

An application was made to adduce evidence from Mr. Duffy by way of direct examination notwithstanding that only a notice of cross examination was served. This was opposed by counsel on behalf of the plaintiff who said that the evidence was closed and no request had been made.

The application was not proceeded with and counsel for the plaintiff made submissions.

The case was a simple one in that the defendant undertook the obligation with regard to planning pursuant to para. 3 of special condition 10. Though the contract was not signed until 4th April, 2007, it had been returned signed by the defendants in January, 2007, at a time when the defendant did not have the money for the deposit.

The plans at the latest were ready in June, 2007, when the invoice in the sum of €190,000.00 was submitted by the defendant’s advisers in respect of work that purported to have been done.

There was no explanation of why planning was not lodged at this stage. The letters from the plaintiffs solicitor pointing out that interest would run from the end of June, 2007, were not replied to. The first application received by the planning authority on 1st August, 2007, was not proceeded with as the cheque in relation to the fees was not honoured. It was not accepted that the holiday period indicated could explain the delay until 24th October, 2007, when planning was applied for together with draft payment.

The law in relation to the matter was clear. Any right that the defendant had was subject to an express obligation to make bona fide application. In making an application all formal requirements such as the payment of fees were necessary. The planning authority on 28th August, 2007, requested payment but the application was not properly before them until 24th October.

Counsel referred to Farrell on specific performance, para. 3.26, to Costelloe v. K.N. Maharaj Krishna Properties (Ireland) Ltd (High Court) 10th July, 1975 and to Jolley v. Carroll (2000) States Gazette.

Counsel on behalf of the defendants submitted that there was no evidence of default or undue delay. He agreed with counsel on behalf of the plaintiff regarding the obligation of the buyer under special condition 10 which provided that planning be applied for before 26th February, 2007, at a time when the contract was not signed by the vendor until 4th April. Paragraph 3 of clause 10 could not stand on its own, it was linked to paragraph 2.

The defendants on 31st January had given post dated cheques when the contract was signed by the defendants as purchasers. A bank draft was sent on 4th April.

Counsel for the defendants submitted that it was not in dispute that the defendant had paid €190,000.00 in respect of the planning application. In his affidavit of 9th April, 2008, Brian Morgan suggested in evidence the invoice for that sum had been paid.

He further submitted that while the contract could not have been terminated before 31st October, 2007, that the solicitor on behalf of the defendant had sent a letter of 15th November, 2007, purporting to terminate the contract.

It was the plaintiff’s duty to prove the case on the balance of probabilities.

He submitted that the special condition required all reasonable endeavours and not best endeavours.

In reply, counsel on behalf of the plaintiff said that any delay was attributable to the defendant. There was no delay by the plaintiff. All the case law pointed to an implied obligation. There was an express obligation in the present case.

Moreover, the planning application was not doomed to failure: there was no evidence that it would not have been granted. Thus the court should not speculate on what the planning authority would or would not have done.

4. Decision of the court
Special condition 10, drafted in autumn of 2006, signed by the defendants as purchasers in January, 2007, envisaged application for planning permission being made before 26th February, 2007. The purchasers being unable to pay the deposit at the time of signing, signed post dated cheques and, eventually, gave a bank draft on 4th April, 2007, when the plaintiff, as vendor, executed this contract. Clearly, at that stage and due to the non payment of the deposit in relation to which there was a clear obligation under the special condition before the contract became effective, the purchaser was unable to apply for planning permission on or before 26th February, 2007.

The court finds that the impossibility to comply with this was known to the defendants and their advisers. Being a term which was impossible the court rules that that date is ineffective and should be deleted from the contract.

What is left is a clear obligation to use all reasonable endeavours to ensure that the application for planning permission was successful and that planning permission was obtained as soon as possible pursuant to para. 3 of special condition 10.

Notwithstanding that and, the delays attributable to the defendants, there was a delay of over five months before an effective planning application was made. Moreover this being made on 24th October, a week before the ultimate date agreed for the application at the end of that month it was clearly not practical that planning would issue.

This prompted solicitors on behalf of the defendants to write two days after the planning application was made on 26th October, 2007, demanding the return of the deposit.

It was not a formal notice to terminate because such right could not have arisen at that date and, moreover, it did not purport, in strict terms, to terminate the contract.

The subsequent letter of 15th November, 2007, was not a fresh letter attempting to terminate as it referred back to the letter of 26th and, moreover, did not strictly comply with nor use the term, notice to terminate.

The court has considered the evidence of the plaintiff in relation to the defendants requiring a site line or the removal of a ditch on lands outside the subject matter of the contract. This meeting took place some time in March after the defendants had signed the contract and, clearly, before the deposit was paid and the plaintiff had executed the contract on receipt of the deposit.

While Mr. Lynch’s evidence in some regards was not all that clear in relation to his knowledge of the planning application, it is clear that he would not accede to the request and left it to his advisers. The court finds that the defendants did not raise the issue and, moreover, accepts the evidence of Mr Duffy that the matter did not take more than a week.

No reply was received from the plaintiff’s solicitor’s letters in June, 2007, regarding the interest on the outstanding balance due after the end of that month.

The court finds that the defendants did not comply with their obligations under the special conditions and can accordingly answer the first question in the special endorsement of claim as follows:-

“(a) The defendants are in breach of special condition number 10(iii) of the contract for sale made between the parties hereto on 4th April, 2007.”

The right of termination in para. 9 of special condition 10, apart from the 5% on the balance of purchase moneys after 30th June, 2007, allowed either party to terminate the contract by “service of notice in writing” in the event that planning permission did not issue by 31st October, 2007. Time was of the essence in that regard.
Compliance with this condition must necessarily be linked to the previous conditions regarding the obligation of the purchaser to use all reasonable endeavours and is fortified by the requirement that the purchaser should apply for planning permission following the exchange of the contract in respect of which time was also of the essence. Even with the deletion of the date of 26th February, 2007, it was clear that application should have been made after a reasonable time following the exchange of the contract on 4th April, 2007, which was signed on that date but returned to the defendant’s solicitors on 16th April, 2007.

In any event, it is clear from the invoice from the defendant’s agents that considerable work had been done, to the extent of €190,000.00 in relation to the planning application by June, 2007. While there is no evidence that this sum was paid, nor is it necessary for the court to decide on that issue, it is clear that the defendant’s case is that very extensive work had been done by that date. No evidence was given as to why planning application was made later than the date on which that work had been done. The court does not have to decide on whether the application made towards the end of July and received by the planning authority on 1st August, 2007, complied with the obligation to use all reasonable endeavours to ensure that the application for planning permission was successful and that planning permission was obtained as soon as possible. There is no doubt that the application made on 24th October, being only one week prior to the deadline set out in contract, was lodged too late to comply with the obligation to use reasonable endeavours to obtain planning permission. Accordingly, the court can answer the second question as follows:-

“(b) the defendants are precluded from relying on the right of termination provided for by special condition number 10(IX) of the contract for sale.”

The general conditions of the 2001 edition of the Conditions of Sale of the Law Society of Ireland apply, save where the context otherwise requires or implies or the text thereof expresses to the contrary pursuant to the first special condition.
There is no special condition dealing with the forfeiting of the deposit in the re-sale of the property. Accordingly, general condition 41 of the contract for sale applies.

The court can, accordingly, answer the third, and ultimate, question posed in the special endorsement of claim as follows:-

“(c) the plaintiff is entitled to rely on the provisions of general condition 41 of the contract for sale to forfeit the deposit and to re-sell the property.”

The court will so order.

Hynes Ltd. v. Independent Newspapers

McWilliam J. [1980] IR 207
H.C.

16th January 1980

The facts in this case are simple and are not in dispute. The plaintiff holds premises in Galway from the defendant for a term of 99 years from the 1st January, 1972, at the yearly rent of £42,000 and such increased rent as may be payable under the provisions of the indenture creating the term. The issue has arisen in respect of the following provision:
“D.3 The Lessor shall be entitled at any time before the first day of October in the seventh year of the term hereby created and in every subsequent seventh year thereafter during the said term to serve notice (hereinafter called ‘A Revised Rent Notice’) on the Lessee requiring a review of the rent payable hereunder and specifying in such notice the sums which the Lessor claims should be the new rent to become payable hereunder and on the service of any such notice and so often as the same shall happen the following consequences shall ensue.”
The indenture then contained provisions for disputing the increase claimed by the defendant and for determining the new rent, whether fixed by agreement or by arbitration, and providing that the new rent should be payable from the seventh anniversary of the commencement of the term. The year 1978 was the seventh year of the term and the 1st January, 1979, was the seventh anniversary of the commencement of the term. The defendant served a revised rent notice on the 17th November, 1978, and the sole issue before me is the validity and effectiveness of this notice as it was served more than six weeks after the time for service specified in the indenture.
On behalf of the plaintiff it is urged that the time for service by the defendant of the revised rent notice was of the essence of the contract, and that the failure of the defendant to serve the notice within the specified time deprives the defendant of the right to a review of the rent. On behalf of the defendant reliance is placed on the decision of the House of Lords in the cases of United Scientific Holdings v. Burnley Borough Council 1 and Cheapside Land Development Co. v. Messels Service Co .2 which were heard together. In these cases five judges in the House of Lords gave very full judgments reviewing the earlier decisions and the principles of law applicable. The decision of the House of Lords was that in this type of case the essence of the transaction is that the parties, having had regard to the expectation of continuing inflation, have agreed to a procedure for fixing the rent to be paid during the term and that, in operating such procedure, time should not be treated as of the essence of the contract unless some surrounding circumstances or an express term of the agreement show that this was intended.
On behalf of the plaintiff I have been referred to the observations of Viscount Dilhorne at pp. 938-9 of the report where he said: “The parties to these leases thus agreed that there should be rent reviews at fixed intervals. Leases which so provide are in my opinion to be distinguished from those which provide for a rent review only if one is initiated by the lessor . . . While, as I have said, the question whether time was of the essence in relation to the lessors’ notice does not have to be decided in this appeal, I differ from my colleagues in that I think that where a rent review has to be initiated by a lessor and is not automatic, then time is of the essence when it is provided that that notice initiating the review has to be given by a certain date.”
Clause D.3 of the indenture does make the initiation of the rent review the responsibility of the defendant and does not make it automatic but I do not think it is necessary for me to enter upon the exhaustive examination of the law which was undertaken by the judges in the House of Lords. It is sufficient for me to adopt and apply the following passage from Halsbury’s Laws of England (4th ed., vol. 9, para. 481) which was approved by Lord Simon of Glaisdale and Lord Fraser of Tullybelton at pp. 944 and 958 respectively of the report of the Burnley Case. 1 That passage states:
“The modern law, in the case of contracts of all types, may be summarised as follows. Time will not be considered to be of the essence unless: (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence; or (3) a party who has been subjected to unreasonable delay gives notice to the party in default making time of the essence.”
Neither the first nor the third of these exceptions is applicable to the present case, and no circumstances indicating an intention that time should be of the essence or any prejudice to the plaintiff have been shown to arise. Accordingly, I am of opinion that I should treat the notice as valid and effective. I should add that other considerations could well arise if the delay was very long and not a matter of weeks, as in this case.

Supreme Court
The plaintiff appealed against the judgment and order of the High Court and the appeal was heard by the Supreme Court on the 20th June, 1980.

O’Higgins C.J.
19th November 1980

This is an appeal by the plaintiffs against the judgment and order of Mr. Justice McWilliam in the High Court dismissing their claim for a declaration that a rent review notice served by the defendants was ineffective as being out of time. The action was heard by Mr. Justice McWilliam, without oral evidence, but having regard to the provisions of a lease dated the 29th March, 1972, and made between Sisk Properties Ltd. of the one part and the plaintiffs of the other part under which the plaintiffs hold certain premises in Galway from the defendants (the successors of Sisk Properties Ltd.), and having regard to certain facts which were urged in the pleadings and were admitted. These facts can be set out shortly and succinctly but the issue which arises thereon cannot be disposed of so easily.
On the 29th March, 1972, Sisk Properties Ltd. demised to the plaintiffs certain premises in St. Augustine Street and Merchant’s Road, Galway, for a term of 99 years commencing on the 1st January, 1972. The rent reserved was the yearly rent of £42,000 but provision was made1 for a rent review in the seventh year and at seven-year intervals thereafter. The lease went on to provide that, if the lessee wished to dispute the amount of the proposed new rent, he should within six weeks of the service upon him of the revised rent notice serve upon the lessor a notice of dispute and that, thereupon, the amount of the new rent would be determined by arbitration in the manner provided.
It was further provided as follows: “But if no such Notice of Dispute is so served by the Lessee then the sums specified by the Lessor in such Revised Rent Notice shall become and be the yearly rent payable hereunder as from the seventh anniversary of the commencement of the term hereby created and for the residue then unexpired of the term hereby granted until varied by virtue of any further Revised Rent Notice that may be served by the Lessor pursuant to the provisions hereinbefore contained.” The reddendum in the lease had earlier provided in the following terms: “Yielding and Paying therefor during the said term unto the Lessor the yearly rent of £42,000 and such increased rent as may from time to time be payable hereunder as hereinafter provided . . .”
On the 17th November, 1978, the defendants (as lessors) served on the plaintiffs a revised rent notice claiming an increased or new rent of £160,000 p.a. While this notice was served in the seventh year of the term created by the lease, it was so served some six weeks later than the date specified in paragraph D.3 of the lease, namely, the 1st October. By letter dated the 14th December, 1978, the plaintiffs’ solicitors indicated on behalf of the plaintiffs that the notice was out of time and ineffective and also, as a precaution, they gave notice of dispute. The plaintiffs then commenced these proceedings in which they claim a declaration that the defendants’ notice was ineffective to require a rent review. Having lost in the High Court, the plaintiffs have brought this appeal to this Court.
The plaintiffs’ claim raises the question whether, in relation to the effectiveness of the rent review notice, observance by the defendants of the time limited for such service was or was not essential. In holding in the High Court that such observance was not essential, Mr. Justice McWilliam was guided by his view that, since there was no express stipulation making time of the essence, neither the nature of the subject matter of the contract nor the surrounding circumstances showed that time should be of the essence. In applying this test he followed the recent decision of the House of Lords in United Scientific Holdings v. Burnley Borough Council 1 and Cheapside Land Development Co. v. Messels Service Co. 2 (together referred to as the Burnley Case 1 ). The burden of the plaintiffs’ appeal to this Court is that Mr. Justice McWilliam was wrong in so doing and that the decision of the House of Lords in the Burnley Case 1 ought not to be followed in our courts.
As this matter is of considerable importance both to practitioners and to those involved in the property market, it is necessary to make a few general observations about rent review clauses. Having done so, I propose to examine the manner in which the observance of time in such clauses was regarded, certainly in the English courts, prior to the decision in the Burnley Case .1 Then I propose to consider the reasoning behind the Burnley Case 1 and whether it is appropriate that that decision be followed in our courts.
Over the past two decades, in both the United Kingdom and Ireland, the prevalence of inflation in the property market has led to the introduction of some provision for rent review if the term being negotiated is for any significant number of years. Lessors, faced with constantly changing money and property values, have not been prepared to lease their property for a long period without providing for a periodic revision or adjustment of rent. Such rent review clauses vary in form and content. In some cases the rent review may be initiated only by the lessor, in others it may be initiated by either the lessor or the lessee. In some cases a rent review clause may be associated with a “break clause” which entitles a lessee to surrender the demised premises if he is unwilling or unable to pay the increased rent. In other cases the lease clearly contemplates periodic revisions of the rent and the lessee undertakes to pay the original rent and also any revised rent coming into operation during the term. Whatever form such clauses take, in general they specify a procedure for the determination of the revised rent and a time-table for the taking of the necessary steps in that procedure which, when followed, leads to the declaration of the new rent not later than the review date.
The question which has arisen in this case is whether the failure to observe the stipulated time-table has deprived the defendants of the review they seek; that question has not previously arisen in our courts. However, as indicated, it has arisen in a number of reported cases in England, the latest of these is the decision of the House of Lords in the Burnley Case. 1 In order to consider whether that decision ought to be followed, I find it necessary not only to examine the reasoning which led to it but also the basis upon which the earlier decisions (many of which it expressly overruled) were decided. Therefore, it seems convenient to consider the earlier decisions first.
In Samuel Properties Ltd. v. Hayek 3 the Court of Appeal in England held that, where the words of the rent review clause import an option or privilege for the lessor to increase the rent which would otherwise be payable, any conditions as to time must be strictly observed and that, accordingly, the time specified for the exercise of the option must be treated as inflexible and mandatory. In that case particular attention was paid to the reddendum in the lease and in the course of his judgment Russell L.J. said at p. 1301 of the report: “The language of the reddendum indicates that the basic rent is to remain unchanged throughout the term unless it be increased by compliance with those provisions. Clause 1 of the fourth schedule in terms confers an option on the lessor to require rent review in the manner thereafter provided. The process thereafter laid down in clause 2 uses the language of a condition precedent in requiring a notice in writing with an express time requirement.”Having considered Eaton v. Lyon 6 , Harries v. Bryant 7 , Reid v. Blagrave 8 and Barrow v. Isaacs & Son 9 (and particular passages from the judgments therein) on the question of equitable relief where the time requirement for the exercise of the option was not observed, Russell L.J. said at p. 1305 of the report: “I am not prepared to extend those comments to a case such as the present. They are relevant to a case where a failure to comply with a covenanted obligation has exposed a person to the danger of forfeiture of a lease or other estate. I decline to extend them to a case such as the present, in which the party is given an option to improve his financial position if he chooses to take particular steps laid down.”
Edmund Davies L.J. in his judgment in Samuel Properties Ltd. v. Hayek 3 drew a similar distinction about equitable relief against forfeiture; at p. 1307 of the report he said: “The circumstances in which relief against forfeiture is granted are widely different from those under present consideration. In the former, a right of forfeiture is expressly reserved or implied by law in order to ensure the performance by the lessee of his obligations, and the court will grant relief if terms can be imposed which will ensure due protection for the lessor. But the power of a lessor on due notice to increase rent involves, in effect, the making of a new contract between the parties, subject in the present case to compliance by the lessor with a condition precedent. It resembles options and these are undoubtedly required to be exercised in strict conformity with the terms by which they were created: see Hinds v. Randall 10 and Peeling v. Guidice .11 If this is not done, relief will in general be granted only where, by unconscionable conduct by the proposed recipient of the notice to exercise the option, the other party has been led to believe that strict adherence to its terms will not be insisted upon.”
A similar conclusion had been reached earlier by Goulding J. in C. Richards & Son Ltd. v. Karenita Ltd .12 In both those cases the significant feature was that there was a fixed rent throughout the whole term with a provision granting an option or saying that the rent should be subject to increase or should be increased if the landlord took certain steps in accordance with the time-table laid down. However, where the terms of the lease were such as to express or imply on the part of the lessee an obligation to pay not only the original rent but also a revised rent, and the actual review provisions were merely machinery provisions for implementing the agreement, failure on the part of the lessor to act in time was not regarded as fatal to a review sought by him. This distinction was established in Kenilworth Sites Ltd. v. Little & Co. 13 and Accuba Ltd. v. Allied Shoe Repairs .5 The result was that until the Burnley Case 1 the courts in England, in deciding in relation to such review clauses whether time was or was not of the essence, looked to see whether what the lessor sought to do was in purported exercise of an”option” or “privilege” or whether it was being done pursuant to an obligation already accepted by the lessee and as part of the machinery for implementing what was already agreed. In the former case time was presumed to be of the essence, while in the latter the presumption was to the contrary. This dichotomy between “option” on the one hand and”obligation” or “machinery” on the other continued until the leases involved in the Burnley Case 1 became the subject of litigation.
In the Burnley Case 1 proper a Court of Appeal (Buckley, Roskill and Browne L.JJ.) discarded the distinction between “option” clauses and”obligation” or “machinery” clauses. A different and new test was applied. The court held that the commercial character of the contract contained in a lease incorporating a rent review clause raised the presumption that the parties intended time to be of the essence of the contract in respect of each step to be taken by the lessor in order to obtain a determination of any increased rent under a rent review clause. In Cheapside Land Development Co.v. Messels Service Co. 2 another Court of Appeal (Stamp, Scarman and Goff L.JJ.) also discarded the “option” or “machinery” test. The court concluded that time was of the essence, prima facie, in all rent review clauses. Its view was not based on the presumed intentions of the parties arising from the suggested commercial nature of the transaction, but upon the ground that in its legal nature a rent review clause is a grant of a unilateral right to the lessor and that equity would not have granted relief to the grantee of such a right for failure to perform any of the conditions of the grant timeously.
Appeals were taken against both decisions and the appeals were heard together by the House of Lords. As already indicated, I have referred to both decisions as the Burnley Case .1 The issue which arose for decision was stated thus by Lord Diplock in his speech at pp. 923-4 of the report:
“What the Court of Appeal have decided is that the commercial nature of the contract and/or the legal nature of the right granted to the landlord by a rent review clause raises a presumption that time specified in such a clause for anything that needs to be done by him is of the essence; and that this presumption will prevail unless there are strong contra-indications in the actual wording of the clause . . . My Lords, the reason why these two appeals have been heard together in the House although the two rent review clauses that are in question differ widely in their wording, is to obtain a ruling whether the presumption as to the construction and effect of rent review clauses is as the Court of Appeal held it to be, or whether it is the contrary presumption, viz. that time is not of the essence.”
In considering this issue the Law Lords were concerned with the application of equitable principles. This arose initially because of the provisions of s. 25(7) of the Supreme Court of Judicature Act, 1873, to the effect that stipulations in contracts as to time which would not before the passing of that Act have been deemed to be, or to have become, of the essence in a court of equity should receive in all courts the same construction as they would have theretofore received in equity. There was also the general provision in that Act that in case of conflict between the rules of equity and the rules of common law, the rules of equity should prevail.

I think it is clear from the report that, in considering the application of equitable principles or rules, the general view of the House of Lords was that neither the Act of 1873 nor the later and similar provisions of s. 41 of the Law of Property Act, 1925, placed any ban upon further development of equitable rules by judicial decision: see per Lord Diplock at p. 926 and Lord Fraser at p. 957 of the report.
It is not necessary to examine in any detail the careful, long and detailed speeches of the Law Lords who participated in the Burnley Case .1 It is sufficient to say that, with one reservation, they were prepared to regard the inclusion in a lease of a rent review clause as an acceptance by the tenant of an obligation to pay to the landlord a rent so determined and, further, that this acceptance was an inseverable part of the whole consideration for the landlord’s grant of the terms of years for the length agreed. The majority view was to this effect even when the right to initiate or to “trigger” the rent review was exclusively that of the landlord. It was recognised that there could be exceptions as where a break-clause was included in the lease entitling the tenant to surrender if the rent were increased.
Viewed in this light, the time-table for the review or determination of the new rent was regarded by the court as subsidiary to an obligation already accepted by the tenant and as mere machinery for carrying into effect the real intention of the parties that periodic increases of rent should take place. In particular, the majority view was that the unilateral right of the landlord to initiate or to commence a rent review was not a right to create a new relationship or contract between landlord and tenant but was merely a power or right to determine the amount of a new rent already agreed to. It merely altered a term in a continuing contract. In this respect it differed from an option under which one party was empowered to create a new and binding contract with the other. Accordingly, the House of Lords adopted and applied to such rent review clauses, when considered in relation to the observance of time limits, the following rule which appears in Halsbury’s Laws of England (4th ed., vol. 9, para. 481):
“Time will not be considered to be of the essence unless: (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence . . .”
The result was that, in the absence of any contra indication in the lease itself, the House of Lords in the Burnley Case 1 ruled that there is a presumption (stemming from the application of equitable principles) that in all rent review clauses time should not be regarded as essential to the initiation or operation of the rent review, even if the right to review is unilateral.
I have considered very carefully the reasoning which led to the decision in the Burnley Case .1 It is based on the assertion that such leases for long terms would not be granted or concluded without acceptance by the tenant of rent reviews and that, as a consequence, it would be unfair and inequitable that such a tenant should be allowed to repudiate an obligation he had accepted merely because, in carrying out what was agreed, a time clause was not observed. I find this reasoning compelling. I accept that there may be circumstances in which delay has been extreme or where, because of it, other factors have arisen which alter the equities. However, in the ordinary case where the payment of an increased rent is expressly envisaged and accepted, and where the failure to observe the requirements of a time clause is due to mere inadvertence and is not prolonged and in no way alters obligations already undertaken, I see no reason for saying that the equitable rule as to time in contracts should not apply. This is not to say that failure by the landlord to act in time may not be a breach of contract for which he may be liable in damages, if damage is caused. However, his failure in this respect should not be regarded as such a breach as would entitle the tenant to repudiate obligations which under the contract he has already accepted.
In Ireland the fusion of common-law and equitable rules was initiated by the Supreme Court of Judicature Act (Ireland), 1877, which contains similar provisions2 in s. 28(7) to those already noted in the English Acts, and was completed by the Courts of Justice Act, 1924, and the Courts (Establishment and Constitution) Act, 1961.
In the circumstances existing in this appeal, it seems to me that the reasoning in the Burnley Case 1 applies. The wording of the reddendum indicates that the plaintiffs accepted an obligation to pay not only the initial rent but also “such increased rent as may from time to time be payable hereunder.” The lease contains no break clause or anything which would distinguish it from a lease under which the lessee accepts the normal obligation of periodic reviews of rent. It appears to me that the rent review clause amounts to machinery for the implementation of what was accepted from the commencement of the lease, that is to say, a review of the rent at the stipulated periods. In these circumstances, I am of the view that observance by the defendants of the time prescribed for the implementation of the agreed rent review was not of the essence and that, accordingly, the decision of the High Court judge to this effect was correct. Therefore, I would dismiss this appeal.

Kenny J.
This is an important case to the parties. If the plaintiffs’ argument is correct, they will hold property in Galway from the defendants until the 1st January, 1985, at an annual rent of £42,000 while, if the defendants’ contention is right, the rent payable until the same date may be £160,000. It is important also because the plaintiffs’ counsel has submitted that we should not follow the decision of the House of Lords in United Scientific Holdings v.Burnley Borough Council 1 as, he says, it is not a correct statement of the law in this State in relation to rent review clauses in leases.
By a lease dated the 29th March, 1972, Sisk Properties Ltd. (whose estate as lessors has been assigned to the defendants) let property in Galway to the plaintiffs for a term of 99 years from the 1st January, 1972, “yielding and paying therefor during the said term unto the Lessor the yearly rent of £42,000 and such increased rent as may from time to time be payable hereunder as hereinafter provided.” The rent is payable by equal quarterly payments in advance on the 1st January and the 1st April, July and October in every year.
[The judge here referred to the terms3 of clause D.3 of the lease, and continued] On the 17th November, 1978, the defendants gave notice to the plaintiffs “pursuant to the provisions of the lease . . . that we intend to review the rent payable under the said lease in accordance with the terms thereof with effect that as and from the first day of January, 1979, the annual rent payable will be £160,000 and we hereby call upon you to agree this amount with us.” The plaintiffs’ solicitors replied to this notice pointing out that the revised rent notice should have been served before 1st October, 1978, and that the notice sent by the defendants was out of time and ineffective. This contention was not accepted and the plaintiffs brought this action on the 22nd February, 1979, in which they claimed declarations that the notice of 17th November, 1978, was ineffective to require a review of the rent payable under the lease and that the rent payable under it remained unchanged at £42,000. The action was dismissed by Mr. Justice McWilliam, who followed the decision in United Scientific Holdings v. Burnley Borough Council 1 , and the plaintiffs have appealed.
There are some features about the lease to which I wish to refer. The first is that the premises were demised for a term of 99 years and there was no provision under which the lessees could surrender or determine the lease, even if they were dissatisfied with the rent fixed by the arbitrator or even considered it exorbitant. The second is that the lease was made subject to a number of sub-leases which were made for business purposes for, although this is not stated, the sub-tenants included Radio TelefÃs Eacute;ireann and the Minister for Posts and Telegraphs. The lease was obviously made to the plaintiffs for business purposes; the demised premises are in the commercial centre of Galway. In 1972, leases of commercial properties for lengthy terms of years invariably contained rent review clauses as a protection for the lessors’ interest in a period in which an annual, recurring and high inflation rate was then, as it is now, a feature of our life.
Section 28 of the Supreme Court of Judicature Act (Ireland), 1877, provides:
“And whereas it is expedient to take occasion of the union of the several Courts whose Jurisdiction is hereby transferred to the said High Court of Justice to amend and declare the law to be hereafter administered in Ireland as to the matters next hereinafter mentioned: Be it enacted as follows . . .
(7) Stipulations in contracts, as to time or otherwise, which would not before the commencement of this Act have been deemed to be or to have become of the essence of such contracts in a Court of Equity, shall receive in all Courts the same construction and effect as they would have heretofore received in equity.”
Equity was a gloss on or an improvement and reform of the common law and different constructions were placed in the common-law and chancery courts on stipulations in contracts as to time. So it is necessary to deal with the rules applied in the common-law courts as to such stipulations. In the common-law courts, when a contract provided that certain things were to be done within a certain time or on a specified date, the party who sought to sue on the contract had to plead and prove that he had complied with the stipulation as to time and was ready and willing to perform any other parts of the contract which remained unperformed (see the notes to Cutter v. Powell 14 in Smith’s Leading Cases). This rule resulted in such injustice that the common-law judges worked out a number of exceptions to it. The history of these is dealt with in the judgment of Diplock L.J. (as he then was) in Hong Kong Fir Shipping Co. v. Kawasaki Kisen Kaisha .15 In the courts of equity (where the ideas summarised in the maxim “Equity looks to the intent, not to the form” were applied and developed) relief would be given against failure to comply with a stipulation as to time in a contract, unless time was of the essence of the contract. A plaintiff or defendant who had not complied with a stipulation as to time in a contract could succeed on his claim or defence unless it was established that time was of the essence of the contract.
There is a happy summary of the position in Ireland in the judgment of Lord Redesdale, the Lord Chancellor, in Lennon v. Napper 16 ; the decision is also helpful in that it shows that this doctrine had become established in Ireland in 1802, while the decision in Dyas v. Rooney 17 indicates that it continued to be applied. At p. 684 of the report of Lennon v. Napper 16 Lord Redesdale said:
“Courts of equity have therefore enforced contracts specifically, where no action for damages could be maintained; for at law, the party plaintiff must have strictly performed his part, and the inconvenience of insisting upon that in all cases, was sufficient to require the interference of courts of equity. They dispense with that which would make compliance with what the law requires oppressive: and in various cases of such contracts, they are in the constant habit of relieving the man who has acted fairly, though negligently. Thus in the case of an estate sold by auction, there is a condition to forfeit the deposit, if the purchase be not completed within a certain time, yet the court is in the constant habit of relieving against the lapse of time: and so in the case of mortgages, and, in many instances, relief is given against mere lapse of time, where lapse of time is not essential to the substance of the contract.”
When is time of the essence of the contract? There have been such a number of cases (both Irish and English) on this matter that I do not intend to review them because the law is, I believe, correctly stated in a text-book of high authority in a passage which has been judicially approved on a number of occasions. The passage appears at p. 502 of the 6th edition of Fry on Specific Performance:
“Time is originally of the essence of the contract, in the view of a Court of Equity, whenever it appears to have been part of the real intention of the parties that it should be so, and not to have been inserted as a merely formal part of the contract. As this intention may either be separately expressed, or may be implied from the nature or structure of the contract, it follows that time may be originally of the essence of a contract, as to any one or more of its terms, either by virtue of an express condition in the contract itself making it so, or by reason of its being implied.”

The provisions in the lease as to the service of a revised rent notice do not state that time is to be of the essence of the contract and, indeed, there is no reference to time being of the essence of the contract anywhere in the lease.
On many occasions counsel for the plaintiffs referred to the lessors’ option to serve a revised rent notice. In my opinion, the use of the word”option” to describe the lessors’ right to serve such a notice is both incorrect and apt to mislead. In most cases the specified dates within which an option may be exercised are of the essence. An option gives a right to acquire property usually at a specified price and within a named time. Its exercise creates the relationship of vendor and purchaser or of landlord and tenant. In the instant case neither the plaintiffs nor the defendants acquire any property by the service of a revised rent notice. When it is served, the plaintiffs continue to hold for the term created by the lease and on its terms: the only change is that a term of the lease (which is a contract) is altered.
Then it was said that the nature of the lease showed that time was of the essence in relation to the date for the service of the revised rent notice. The argument was that the provision for service of the notice before the 1st October was inserted so that the plaintiffs would know before the 1st January of the following year the amount of the higher rent, and so that they could dispose of their interest as lessees if the new rent were so high that it would be uneconomic to retain the premises. If that were the purpose of the insertion of the 1st October as the material date, one would expect a provision requiring the arbitrator to give his award within a specified period, but there is no such provision. Moreover, an assignment of the premises by the plaintiffs would require considerable time to complete and the new rent would be fixed (even if the revised rent notice was late) long before a sale of the premises by the plaintiffs could be negotiated and completed.
I think that the nature of the clause in the lease shows that time is not of the essence for the purpose of the service of the revised rent notice. If the new rent is fixed after the 1st January, the plaintiffs will have the use of the money which represents the rent until the rent is determined though when it is fixed they will have to pay it from the 1st January. They suffer no disadvantage if the rent is fixed after the 1st January and they get some advantage. However, if we hold that time is of the essence, the defendants will have to continue until 1985 to receive a rent which was fixed in 1972. During the last three years there has been an inflation of between 15% and 20% in each year and it is clear that one of the main purposes of the relevant clause in the lease was to prevent the rent remaining constant at the 1972 amount if the high rate of inflation continued.
Then it was said that service of the revised rent notice before the 1st October, 1978, was a condition precedent to any revision of the rent for the second seven years of the term and that it had not been complied with. Service of the notice before 1st October would have been a condition precedent in the common-law courts before 1877 but its service before that date was a stipulation as to time in a contract and the Court of Chancery would, before 1877, have relieved the lessor from his failure to serve the notice in time. The result of the Act of 1877 is that the law which was applied in the Court of Chancery before 1877 now prevails.
Counsel for the plaintiffs gave us, very diffidently, a reference to an article in the Law Quarterly Review which is relevant to the issues in this case: P. V. Baker, The Future of Equity (1977) 93 L.Q.R. 529. Counsel said that he knew that he should not cite the article in this Court. I disagree as strongly as I can with the view of counsel that articles in reputable legal periodicals should not be cited in this Court. Speaking for myself, I am always glad when such articles are referred to as they are of considerable assistance to me when I am making up my mind what my final judgment should be. Mr. Baker was a joint author (with the Vice-Chancellor, Mr. Justice Megarry) of the latest editions of that legal classic, Snell’s Principles of Equity, which is frequently cited in this Court. I do not understand why his views in an article should not be cited while a text-book for which he is responsible is frequently referred to in this Court without any objection from any of its members. I may add that last year I attended as an auditor (giving that word its original meaning of one who listens) at a sitting of the Judicial Committee of the House of Lords and counsel arguing the case referred to many articles in reputable legal periodicals without any objection from any of the five Law Lords who sat.
In that article Mr. Baker wrote that the decision in United Scientific Holdings v. Burnley Borough Council 1 was “new doctrine.” I do not agree with this. It is new in the sense that the Judicial Committee overruled the decision of the English Court of Appeal in Samuel Properties Ltd. v. Hayek 3 and many other decisions of the Court of Appeal and of the High Court; but those decisions had ignored or overlooked the principles developed in the Court of Chancery two hundred years ago. I regard the decision in the Burnley Case 1 as a restoration of a fundamental equitable principle which, unfortunately, has tended to be ignored in many recent decisions.

After the argument in this case had concluded, I became aware (through the medium of a note in the Law Quarterly Review) that the Burnley Case 1 had been discussed by the House of Lords in Raineri v. Miles .18 In that case a third party agreed to sell his house in Guildford to the defendant and contracted to deliver possession of the property to the defendant on the 12th July, 1977. the defendant had agreed to sell his house in Ealing to the plaintiff and had agreed to deliver possession to the plaintiff on the 12th July, 1977. The third party failed to complete the sale of his house (for reasons other than matters of title) on the date specified but did complete it on the 11th August, 1977, and delivered possession to the defendant on that date. The plaintiff, being unable to obtain possession of the defendant’s house on the 12th July, was compelled to find alternative accommodation for himself and his family until the 11th August when he obtained possession of the defendant’s house. The plaintiff recovered damages against the defendant and the latter sought to recover the amount of such damages from the third party. The third party contended, on the authority of the Burnley Case 1 , that his obligation under his contract with the defendant was to complete his sale on the 12th July or within a reasonable time thereafter. This contention was rejected. I mention the case to show that I have not overlooked it, and so that I may state that I do not agree with the explanation by Lord Edmund Davies of the principle on which the Burnley Case 1 was decided. In my opinion the decision of the House of Lords in the Burnley Case 1 was correct and so we should follow it. I think that the judgment of the High Court in the instant case was correct and should be affirmed. It follows that, in my opinion, this appeal should be dismissed.

Parke J.
I agree with the judgments which have been delivered.

Ochre Ridge Ltd -v- Cork Bonded Warehouses Ltd & Anor

[2006] IEHC 107 (28 January 2006)
JUDGMENT OF MR. JUSTICE T.C. SMYTH DELIVERED THE 28TH DAY OF FEBRUARY 2006.

In these proceedings the Plaintiff claims against the
1st Defendant specific performance of a contract for
sale dated 8th October 1999 (and a range of
declaratory reliefs claimed to arise out of the
contract). There is also claimed – and the claims
were pursued at the hearing – for damages for
(a) breach of contract and (b) conspiracy.

The property in suit is an old bonded warehouse
situated at the top end of an island of land in
Cork City, which is divided by the river.
The premises is effectively owned by the
2nd Defendant, which has a lease thereof of
999 years, and carved out of that interest is a
99 year lease made between the 2nd Defendant and the
1st Defendant.

The contract is conditional (inter alia) upon:-

a) The Plaintiff concluding negotiations to its
satisfaction with the 2nd Defendant regarding the
development of the premises;

b) The consent by the 2nd Defendant to assignment and
change of use; and

c) The obtaining by the Plaintiff of an opinion from
Senior Counsel to the effect that the 2nd Defendant
is not a “State Authority”.

This latter provision (Special Condition 13) relating
to the status of the 2nd Defendant, being not a State
Authority, was established and accordingly this
condition is of no relevance to the proceedings.
The Completion date of the Contract was 10th April
2000 in respect of which time was of the essence
(Special Condition 9(b), which further provides
that:-
“It is agreed that if, for whatever
reason, the purchaser fails to complete
on the Completion Date, this contract
shall automatically be at an end and
the Purchaser’s deposit, less the
Non-Refundable Element (herein defined)
shall be returned to the Vendor’s
Solicitor in exchange for all copy
title documents furnished in connection
with this agreement.”

The Plaintiffs’ case is that the consent of the
2nd Defendant both as to assignment and change of use
was wrongfully withheld and furthermore that the
Defendants conspired together to ensure that the
contract fell or would be frustrated.
The Plaintiff is a private limited company and was
the ‘vehicle’ used, by one Mr. Tim Tallent, with a
view to carrying out an intended scheme of
development. Mr. Tallent was not a property
developer. His business was in ‘packaging’, a family
business of which he had become, over time, the
Managing Director. His family roots were in the Cork
area, but he has spent the greater part of his
business life in England. In his career in the
packaging business he had been in some property
transactions, buying or selling, leasing or letting
premises for the packaging business. Without
detracting from such experience, it could be fairly
described as modest dealings in property.

Prior to the Plaintiff and the 1st Defendant entering
into the contract of 8th October 1999 the
2nd Defendant had served on the 1st Defendant a
Schedule of Dilapidations in relation to the premises
which had been seen by the Plaintiff. This fact was
expressly referred to in Special Condition (5) which
then noted:-
“The Vendor has not carried out any of
the works referred to therein, nor does
it intend to do so prior to completion.
The Purchaser shall take the premises
subject to the said Schedule of
Dilapidations and subject to the
obligations to comply with same.
Following execution of this Agreement,
the Vendor shall write to the Landlord,
informing it of the existence of the
Agreement and requesting the Landlord
to hold the Schedule of Dilapidations
in abeyance, pending the outcome of
negotiations in relation to the
premises to be conducted between the
Purchaser and the Landlord.
If the Landlord refuses to agree to
this course of action, the Vendor shall
negotiate with the Landlord in good
faith to agree a Schedule of
Dilapidations. The Vendor shall
consult with the Purchaser before
agreeing such schedule with the
Landlord. The Vendor shall endeavour
to postpone commencement of the works
to be carried out under the Schedule to
date after the Completion Date.”

The evidence established to my satisfaction that the
Plaintiff, prior to entering into the contract with
the 1st Defendant, had in March 1999 suggested to the
2nd Defendant that it issue a Schedule of
Dilapidations on the 1st Defendant. Furthermore, the
Plaintiff wished to be informed by the 2nd Defendant
as to, if and when such Schedule would issue before
fixing on a purchase price and terms of contract with
the 1st Defendant. A Schedule of Dilapidations
(which was quite extensive) was served on the
1st Defendant in June 1999. Subsequent to the
execution of the Contract, the 1st Defendant by
letter dated 14th October 1999 sought consent to the
assignment of the lease and change of use of the
premises. This was not a defeatist application,
truthful information was given by the 1st to the 2nd
Defendant and the case is clearly distinguishable
from Costello -v- Krishna Props (Ir) Ltd. & McVeagh
(unreported 10/7/1975 Finlay, P.) The letter
recorded the understanding (confirmed by the evidence
of the 1st Defendant) that Mr. Tallent would contact
the 2nd Defendant to discuss the matter of the

dilapidations with them. The letter concluded:-
“In relation to the Schedule of
Dilapidations, I understand that
Mr. Tallent intends to redevelop the
property and that these redevelopment
works, would, on the whole, render
unnecessary the works required under
the Schedule of Dilapidations.
Accordingly, I would be grateful if you
would confirm that the schedule may be
left in abeyance pending the outcome of
discussions between Port of Cork
Company and Mr. Tallent. “

The letter seeking the consents drew a refusal from
the 2nd Defendant and in the clearest terms signalled
that such would not be forthcoming “until such time
as effective arrangements have been put in place to
comply with the Schedule of Dilapidations.” I am
satisfied that both Mr. Tallent and the 1st Defendant
realised that there was little point in going to the
trouble and expense of carrying out the repairs in
the Schedule of Dilapidations if the property was to
be re-developed. The contract had expressly given
the power Mr. Tallent to negotiate with the
2nd Defendant on this issue. While the 1st Defendant
did from time to time carry out works of repair to
maintain the integrity of the building during the
building of the Cork Main Drain and some such could
coincide with items of dilapidations, they did so on
the advice of their own engineer – not in purported
compliance with the entire Schedule of Dilapidations,
or the Schedule of Dilapidations at all.
Indeed, Mr. Tallent immediately on learning of the
position of the 2nd Defendant contacted Mr. O’Mahony
of the 1st Defendant and agreed on presenting a
united front to the 2nd Defendant. Furthermore,
Mr. Tallent was organising full surveys –
structural, dimensional and historical, which would
be required in any event to submit to the Planning
Authority. Mr. Tallent’s telefax of 9th November
1999 copied to Mr. O’Mahony concluded:-
“Therefore, whilst Cork Bonded
Warehouse and Ochre Ridge accept that
the Schedule is in place there seems
little point in complying with it until
both the reassignment and change of use
are granted and the overall scheme is
put before the planners as a concise
conservation package.”

Later that month, on 23rd November 1999, Mr. Tallent
wrote to Mr. Pat Keenan, the Secretary Or Chief
Executive Officer of the 2nd Defendant, with
reference to the surveys stating:-
“On receipt of these reports Scott
Tallon Walker will be in a position to
advise the way forward in both
architectural and heritage terms, at
which stage I will copy you with our
proposals. At that time, I shall
contact you again so that we can
arrange to meet and discuss further the
redevelopment of the site, and
demonstrate how our proposals meet or
exceed the schedule currently in
place…”

Mr. Tallent carried forward his intended enterprise
and informed Mr. O’Mahony of his intention to meet

with Mr. Keenan after consulting surveyors and
architects. Furthermore, Mr. Tallent informed
Mr. Keenan that as soon as he consulted his
advisors:-

“I will contact you to arrange a
meeting to address both the
Dilapidations Schedule and Port of
Cork’s consent to the change of use.
I have advised Mr. Liam O’Mahony at
that Cork Bonded Warehouse Limited
should apply to Port of Cork for
consent to assign their interest in the
lease so that it can be dealt with by
your Board. “

Why this latter matter was raised in this way in the
light of Mr. Tallent clearly knowing on 9th November
1999 that consent had been refused was not made
clear. In the events, Mr. Keenan by letter dated
11th January 2000 made it quite clear to Mr. Tallent
that such an application had been made, was refused
and “this was a very definite decision, unanimously
taken, and it is most unlikely that it will be
overturned.”

While the contract made it clear that the 1st
Defendant did not intend to carry out any of the
works in the Schedule of Dilapidations and that it
would endeavour to postpone any such works being
carried out before April 2000, (the completion date)
– the problem with the consents had not been resolved
by February 2000. Mr. Tallent knew that while there
was little point in carrying out the works in the
Schedule of Dilapidations, however if the
2nd Defendant would grant consent to the assignment
and change of use – his company (the Plaintiff) would
as part of its re-development of the property – agree
to carry out all of the relevant works included in
the Schedule of Dilapidations and reinstate the roof
without seeking any part of the contribution of the
2nd Defendant towards the reinstatement cost of the
roof (which was a joint obligation between landlord
and tenant under the lease). This proposal was put
and supported by the 1st Defendant. The response of
the 2nd Defendant was unequivocal in a letter of
24th March 2000 from Mr. Keenan to Mr. O’Mahony:-

“….I can confirm that there is no
change in the position of the Port of
Cork company in relation to any
proposed assignment of the lease of the
property now occupied by Cork Bonded
Warehouses Limited. The Port of Cork
Company will not agree to any
assignment which involves the change of
use for the premises.”

The day before (i.e. 23rd February 2000) Mr. Keenan
had written to Mr. O’Mahony in (inter alia) the
following terms:
“Lest there be any misunderstanding
about the contents of my letter of the
19th October, my Board decided that
complying with the Schedule of
Dilapidations was a matter of necessity
and we have spoken about this since.
I would not wish you to have the idea
that it was ‘essentially a precondition

to the Board giving its consent’ to
your request to assign the lease
because this is not necessarily so.”

I am satisfied and find as a fact that events at that
time and since left Mr. O’Mahony with the opinion
that it would make no difference to the 2nd Defendant
who an intended assignee might be – a refusal to
consent was probable and that the 2nd Defendant
(as Landlord) would ‘sit out the remainder of the
term of the lease.’

In the course of cross-examination of Mr. O’Mahony,
it was put to him that he ought to have challenged
the refusal to consent in litigation. Altogether
from there being no contractual obligation to do so,
not only had the 1st Defendant put Mr. Tallent’s
proposal forward, it had also sought and obtained
Counsel’s opinion. It was not at all clear that a
legal challenge would succeed and furthermore the
1st Defendant, very understandably, did not wish to
weaken any bargaining position it might have in the
future by attracting an unfavourable Court Order.

Furthermore, General Condition 10(d) of the contract
dealing with consent to assignment of a lease
provides (inter alia) that-
“… the Vendor shall not be required
to institute legal proceedings to
enforce the issue of any such consent
or otherwise as to the withholding of

the same. If such consent shall have
been refused or shall not have been
procured and with written evidence of
the same furnished to the purchaser on
or before the closing date, or if any
such consent is issued subject to a
condition, which the purchaser shall on
reasonable grounds refuse to accept,
either party may rescind the sale by
seven days’ prior notice to the other.”
At all material times, what was envisaged under the
Contract was a consent to assignment and change of
use. It was only when the response of the
2nd Defendant was unfavourable that Mr. Tallent
considered that perhaps he could accept consent to
assignment or change of use. But he made it clear in
his fax of 24th January 2000 to Mr. O’Mahony that
they should be not treated as separate issues. That
the consents would not be decoupled is clear from the
letter of 24th March 2000 from the 2nd Defendant
(earlier referred to).

It is clear from both oral and written evidence that
the 2nd Defendant had a sense of the time frame of
the contract between the Plaintiff and the
1st Defendant. I am satisfied and find as a fact
that Mr. O’Mahony did not discuss with Mr. Keenan the
contract with the Plaintiff during its currency and
that the 1st and 2nd Defendant did not conspire to
deprive the Plaintiff of the benefits of the intended
fruits of the contract of 8th October 1999.

Of all material matters in the evidence where there
is a conflict between that of Mr. Tallent and
Mr. O’Mahony, I prefer the evidence of Mr. O’Mahony
as being more reliable, notwithstanding that on
occasion he could not recollect some details of
meetings or events. I found him a reliable and
forthcoming witness.
I am further satisfied and find as a matter of fact
and as a matter of law that the sale was not
completed by the 10th April 2000 but that this was
not because of any failure by the 1st Defendant to
comply with its contractual obligations.
Notwithstanding it being suggested that the
1st Defendant did not pursue the 2nd Defendant on
receipt of the refusal to the consents. Mr. Tallent
made it perfectly clear and it is clearly agreed
between himself and Mr. O’Mahony that Mr. Tallent,
who was the person (or whose company) was going to
carry out scheme of redevelopment with the Port of
Cork Company, was going to make the running and bring
about whatever arrangement would best suit himself.
I reject as unfounded and unwarranted by the evidence
that there was any lack of good faith on the part of
the 1st Defendant in seeking to give effect to the
terms of the contract or that the 1st or 2nd
Defendants conducted themselves in a manner motivated
by the fact that there was an element of
non-refundability of the deposit or that it might be
more convenient and beneficial for them later to
contract with the 2nd Defendant. Furthermore, in each
of the separate cases the relationship was
contractual not fiduciary, therefore no obligation of
good faith arises.
I am satisfied that the contract entered into between
the Plaintiff and the 1st Defendant is a conditional
contract and was understood by both parties. An
understanding and applicability of the law in this
regard is as set out in Aberfoyle Plantations Limited
-v- Cheng [1960] AC 115 at p.124/5 viz (i) where a
conditional contract of sale fixes a date for the
completion of the sale then the condition must be
fulfilled by that date; and more particularly (iii)
where a conditional contract of sale fixed (whether
specifically or by reference to the date fixed for
completion) the date by which the condition is to be
fulfilled, then the date so fixed must be strictly
adhered to, and the time allowed is not to be
extended by reference to equitable principles. The
contract read as a whole and in particular Special
Condition 9(a) – approval of a scheme, Special
Condition (14) – the obtaining of consents and
General Condition 10(d) indicated its conditional
character and the parties proceeded and regarded
compliance with these provisions as necessary
ingredients to give force to the contract. Further,
there was a mutuality of benefit in the contractual
conditions (Maloney -v- Elf Investments Limited
[1997] ILRM 253) Special Condition 9(b) is quite
specific.

“It is agreed that if, for whatever
reason, the purchaser fails to complete
on the completion date, this contract
shall automatically be at an end….”

That is what the parties agreed – they agreed not to
be bound after 10 a.m. on 10th April 2000: No
interest existed under the Contract thereafter.
I am satisfied and find as a matter of fact and of
law that the 1st Defendant was not in breach of
Contract. Insofar as it is pertinent I am not
satisfied that there was any sound credible
convincing evidence upon which damages could be
awarded. Even if consents were unreasonably
withheld, it is the tenant who may claim damages (if
proven) Meagher -v- Luke J. Healy Pharmacy Ltd.
[2005] 1 EHC 120, Murphy, J. citing Kelly -v- Cussen
(88 I.L.T.R 97) For completeness, I was unconvinced
to a probability on adequate and imprecise evidence
that the Plaintiff was in funds at the appropriate
time such as to be able, ready and willing to
complete the sale.
A great deal of the trouble that arose in this case
had its origin in the instigation of the Plaintiff to
have the 2nd Defendant prepare and serve the Schedule
of Dilapidations to assist in its negotiating a price
with the 1st Defendant. The Plaintiff did not
disclose this fact prior to the contract to the
1st Defendant. In opening the case, considerable
emphasis was laid on the candour and up front
approach of Mr. Tallent. The words of Goulding J. in
O’May -v- City of London Real Property Co. Ltd.
(1979) 245 E.G. 1065 at 1069 have a particular
resonance. “After all, the purpose of legal contracts
is to reduce the mutual dependence of parties on one
another’s morality.”
I refuse the Plaintiff any relief against the
1st Defendant.

The relationship between the Plaintiff and the
1st Defendant is based on the contract of 8th October
1999 that of the Defendants inter se by the terms of
the lease of 22nd March 1918. There is no legal
relationship between the Plaintiff and the
2nd Defendant. Undoubtedly the Plaintiffs sought to
negotiate a business arrangement with the 2nd
Defendant, but those negotiations bore no fruit and
no concluded agreement ever arose. Notwithstanding
the initial overture made by the Plaintiff to offer
15% of the benefit of the scheme of redevelopment
being rejected by the 2nd Defendant, the Plaintiff
thereafter entered into the contract of 8th October
1999 with the 1st Defendant. This was a commercial
decision made by Mr. Tallent. I am satisfied and
find as a fact that no support was given to
Mr. Tallent by the 2nd Defendant to enter into the
contract of 8th October 1999. Mr. Tallent may have
assumed that because he was minded to enter into a
form of agreement to redevelop the site/premises at
some time in the future with the 2nd Defendant that
the 2nd Defendant would grant the consents required
under the lease. In my judgement, there was no
warrant or legal basis upon which he could rely or
make such assumption. In my judgement, there can
have been no legitimate expectation that his intended
or hoped for agreement with the 2nd Defendant would
be realised in October 1999 because his offer had
been rejected. Nothing in the evidence provided a
base either for such belief. The first task of the
Court is always to construe the particular words of
the particular contract against the factual
background known to the parties at or before the date
it is entered into (Charter Reinsurance Co. Ltd. -v-
Fagan (CA)[1997] AC 313 per Nourse J. At 394)

The Plaintiff in its legal submission contended that
both Rice and Kenny V Dublin Corporation [1947] IR
425 and W&L Crowe Ltd. & Anor -v- Dublin Port and
Docks Board [1962] IR 294 were authority for the
proposition that a Plaintiff as a proposed assignee
is entitled to bring an action (based on a breach of
an implied term in a contract between the proposed
assignor and the proposed assignee) against the
proposed assignor’s landlord under S.67 of the
Landlord and Tenant(Amendment) Act 1980 for the
withholding of consent to assignment or change of
use. The cases do not support such contention.
Furthermore, the instant case is site and
circumstances specific, unlike Rice’s case – where
the decision of refusal was a blanket policy
decision.
The privity of contract in this case between the
Plaintiff and the 1st Defendant is wholly separate
and distinct and apart from the privity created by
the lease between the 1st and 2nd Defendant (Ashworth
Frazer Ltd. -v- Gloucester City Council [2001] 1 WLR
2180 at p.2183 per Lord Bingham of Cornhill). I am
satisfied and find as a fact and as a matter of law
that even if the 2nd Defendant did act unreasonably –
and I make no such finding: good estate management to
retain a port related use as a Bonded Warehouse may
be a consideration within the terms of the lease.
Indeed in the course of his judgement in Crowe’s
case, Haugh J. stated:
“In Lloyd & Anor -v- Earl of Pembroke &
Anor 89 I.L.T.R 40 at p.44, Mr. Justice
Dixon has said:- “In considering for
themselves” [the landlords] “whether
they would or would not give consent,
they are entitled to take everything
affecting the position into account,
including considerations of their own
estate management and including
questions of their own interests.”
In Rice -v- Dublin Corporation [1947]
IR 425 at p.436 Maguire C.J.,says:-
“….I am of opinion that while it is
the duty of the Court to consider each
case upon its merits, there is no
reason why a landlord may not properly
base a refusal of consent upon grounds
of general policy in relation to the
management of his estate.”

The instant case is distinguishable from Crowe’s case
in (inter alia) in that case both plaintiffs were
applicants for the consent sought – that is not the
position in the instant case. Even if the
reasonableness or otherwise of the consents withheld
required determination, ‘the onus is on the tenant to
establish that the landlord is unreasonably
withholding its consent.’ [OHS Ltd. -v- Green
Property Company Limited [1986] IR 39 – in my
judgement, the evidence does not prove that the
refusal of consents by the 2nd Defendant was
unreasonable. The Plaintiff in this case seeks
declaratory relief – such is a matter of discretion,
in this case even if there was a supporting
evidential basis for doing so, I would refuse to
exercise my discretion in favour of the Plaintiff for
a variety of reasons arising from some unsatisfactory
features of the evidence and more particularly
because the Plaintiff by instigating the preparation
and service of the Schedule of Dilapidations without
disclosure to the 1st Defendant and by this
generation putting the 1st Defendant at a
disadvantage before the contract and inhibiting the
1st Defendant in dealing with the property afterwards
and agreeing that the agreement would automatically
be at an end” as of 10th April 2000, by registering a
lis pendens. The latter in my judgement was wholly
unwarranted. I am satisfied and find as a fact on
the evidence and as a matter of law that there was no
case in estoppel resting against either Defendant.
I dismiss the Plaintiffs’ case.

END OF JUDGMENT

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Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd

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